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CARELLA, BYRNE, CECCHI, OLSTEIN, BRODY & AGNELLO, P.C. James E. Cecchi Lindsey H. Taylor Donald A. Ecklund 5 Becker Farm Road Roseland, New Jersey 07068 Telephone: (973) 994 -1700 Counsel for Plaintiffs Stephen and June Vitiello [Additional Counsel on Signature Page] UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY Case No.: CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS JURY TRIAL DEMANDED STEPHEN AND JUNE VITIELLO, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. BED BATH & BEYOND INC., MARK J. TRITTON, MARY A. WINSTON, and ROBYN M. D’ELIA, Defendants. Plaintiffs Stephen and June Vitiello (“Plaintiffs”), individually and on behalf of all others similarly situated, by and through their attorneys, alleges 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 Bed Bath & Beyond Inc. (“Bed Bath & Beyond” 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 Bed Bath & Beyond; and (c) review of other publicly available information concerning Bed Bath & Beyond. NATURE OF THE ACTION AND OVERVIEW 1. This is a class action on behalf of persons and entities that purchased or otherwise acquired Bed Bath & Beyond securities between October 2, 2019 and February 11, 2020, inclusive (the “Class Period”). Plaintiff pursues claims against the Defendants under the Securities Exchange Act of 1934 (the “Exchange Act”). 2. Bed Bath & Beyond is a retailer that sells a wide variety of domestics merchandise and home furnishings. It operates under many brand names including Christmas Tree Shops, Harmon, buybuy BABY, and Cost Plus World Market. 3. On January 8, 2020, Bed Bath & Beyond withdrew its fiscal 2019 guidance, purportedly due to pressures on sales and profitability, as well as a new strategic plan for the Company’s operations. 4. On this news, the Company’s share price fell $3.20, or over 19%, to close at $13.4 per share on January 9, 2020, thereby injuring investors. 5. On February 11, 2020, Bed Bath & Beyond issued a press release announcing preliminary fourth-quarter 2019 financial results. Therein, the Company disclosed “a 5.4% decline in comparable sales driven primarily by store traffic declines combined with inventory management issues,” including that “inventory within certain key categories in the Bed Bath & Beyond assortment was too low or out-of-stock during the period.” 6. On this news, the Company’s share price fell $3.06 per share, or over 20%, to close at $11.79 per share on February 12, 2020, on unusually heavy trading volume. 7. 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, due to “aggressive disposition of inventory,” the Company lacked sufficient inventory in key categories to support holiday sales; (2) that the Company’s internal control over inventory levels and financial reporting was not effective; (3) that, as a result of the foregoing, the Company was likely to experience reduced sales; and (4) 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. 8. 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 9. 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). 10. 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). 11. 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. 12. 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 13. Plaintiff Stephen Vitiello, as set forth in the accompanying certification, incorporated by reference herein, purchased Bed Bath & Beyond 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. Plaintiffs Stephen and June Vitiello, as set forth in the accompanying certification, incorporated by reference herein, purchased Bed Bath & Beyond securities during the Class Period as trustees of their revocable living trust, and suffered damages as a result of the federal securities law violations and false and/or misleading statements and/or material omissions alleged herein. 14. Defendant Bed Bath & Beyond is incorporated under the laws of Delaware with its principal executive offices located in Union, New Jersey. Bed Bath & Beyond’s common stock trades on the NASDAQ exchange under the symbol “BBBY.” 15. Defendant Mark J. Tritton (“Tritton”) has been the Company’s Chief Executive Officer (“CEO”) since November 2019. 16. Defendant Mary A. Winston (“Winston”) was the Company’s Interim CEO from May 2019 to November 2019. 17. Defendant Robyn M. D’Elia (“D’Elia”) was the Company’s Chief Financial Officer (“CFO”) at all relevant times. 18. Defendants Tritton, Winston, and D’Elia (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 19. Bed Bath & Beyond is a retailer that sells a wide variety of domestics merchandise and home furnishings. It operates under many brand names including Christmas Tree Shops, Harmon, buybuy BABY, and Cost Plus World Market. Materially False and Misleading Statements Issued During the Class Period 20. The Class Period begins on October 2, 2019. On that day, Bed Bath & Beyond announced its second quarter 2019 financial results in a press release, stating in relevant part: For the fiscal 2019 second quarter, the Company reported a net loss of $(1.12) per diluted share ($(138.8) million), which included an unfavorable impact of approximately $1.46 per diluted share from charges related to the first wave of transformation initiatives including, severance costs associated with the corporate workforce reduction and decision to outsource certain functions, and an inventory write down. . . . Net sales for the fiscal 2019 second quarter were approximately $2.7 billion, a decrease of approximately 7.3% compared to the prior year period. Comparable sales in the fiscal 2019 second quarter declined approximately 6.7%. * * * Fiscal 2019 Updated Financial Outlook Fiscal 2019 full-year results continue to be in line with the Company's most recent guidance and assumes current investment plans to drive top-line performance in the back half, as well as its comp sales trends year to date, and excludes goodwill and other impairments, severance costs, shareholder activity costs, the inventory write down, and any incremental impact from tariffs. Fiscal 2019 full-year net sales are estimated to be around $11.4 billion and net earnings per diluted share are estimated to be between $2.08 and $2.13. 21. During a conference call held the same day to discuss these results, defendant Winston stated that “[t]o further drive holiday sales, we are adding marketing and promotional support for Bed Bath & Beyond in the back half of the year.” Moreover, regarding the inventory writedown disclosed in the press release, defendant Winston stated: As we mentioned in the recent shareholder letter, we have plans to aggressively reduce up to $1 billion of inventory at retail over the next 18 months. As a result of the decision, we took $194 million inventory writedown in the second quarter. We believe this aggressive disposition of inventory will enable us to more quickly reset inventory levels in both our Bed Bath & Beyond stores and distribution centers to allow for a faster refresh of our assortment, as well as to enable us to refocus store labor activity to better support our customers and drive sales. In the short term, more than approximately $350 million of inventory at retail will be removed from our stores before the 2019 holiday season. This will be accomplished through a series of markdowns and clearance events, as well as with the assistance of the independent liquidator, all to be managed thoughtfully to prevent cannibalization of sales. 22. On October 9, 2019, Bed Bath & Beyond filed its quarterly report for the period ended August 31, 2019, affirming the previously reported financial results. Regarding inventory levels, the report stated, in relevant part: Retail inventory, which includes inventory in the Company’s distribution facilities for direct to customer shipments, was approximately $2.3 billion at August 31, 2019, a decrease of 17.8% compared to retail inventory at September 1, 2018. The Company continues to focus on its inventory optimization strategies. 23. In the same report, Bed Bath & Beyond stated that its CEO and CFO had “concluded that the Company’s current disclosure controls and procedures are effective.” 24. The above statements identified in ¶¶ 20-23 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, due to “aggressive disposition of inventory,” the Company lacked sufficient inventory in key categories to support holiday sales; (2) that the Company’s internal control over inventory levels and financial reporting was not effective; (3) that, as a result of the foregoing, the Company was likely to experience reduced sales; and (4) 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. 25. The truth began to emerge on January 8, 2020 when Bed Bath & Beyond withdrew its fiscal 2019 guidance. In a press release announcing its third quarter 2019 financial results and withdrawing its fiscal 2019 guidance, the Company stated, in relevant part: Fiscal 2019 Third Quarter Results For the fiscal 2019 third quarter, the Company reported a net loss of $(0.31) per diluted share ($(38.6) million), which included a net benefit of $0.07 from the favorable impact from an adjustment to the incremental inventory reserve for future markdowns associated with its inventory initiative, that was partially offset by a non-cash charge for the impairment of certain store-level assets. This compares to net earnings of $0.18 per diluted share ($24.4 million) for the fiscal 2018 third quarter, which included the favorable impact of $0.16 per diluted share from the gain on the sale of a building. Excluding these net favorable impacts in both periods, the Company reported an adjusted net loss of $(0.38) per diluted share ($(46.9) million) for the fiscal 2019 third quarter, compared to adjusted net earnings of $0.02 per diluted share ($2.7 million) for the fiscal 2018 third quarter. Net sales for the fiscal 2019 third quarter were $2.8 billion, a decrease of 9.0% compared to the prior year period. Comparable sales in the fiscal 2019 third quarter declined 8.3%. The Company’s fiscal 2019 third quarter was significantly impacted by the calendar shift of the Thanksgiving holiday this year resulting in one less week of holiday sales compared to the prior year period. Adjusting for this calendar shift to include Thanksgiving and Cyber Monday weeks in both periods, comparable sales for the fiscal 2019 third quarter declined 3.6%. During the key five-day shopping period from Thanksgiving to Cyber Monday for both this year and last year, comparable sales on a shifted basis increased 7.1%. * * * Outlook The Company expects its sales and profitability to remain pressured during the fiscal 2019 fourth quarter. Considering these headwinds reflected in the Company’s results to date, and the ongoing work by recently appointed President & CEO Mark Tritton to assess the business and finalize the details of the Company’s go-forward strategic plan as well as the extensive senior leadership changes within the past month, the Company believes it is appropriate to withdraw its fiscal 2019 full year financial guidance. 26. On this news, the Company’s share price fell $3.20, or over 19%, to close at $13.4 per share on January 9, 2020, on unusually heavy trading volume. 27. On January 9, 2020, Bed Bath & Beyond filed its quarterly report on Form 10-Q for the period ended November 30, 2019, affirming the previously reported financial results. Regarding inventory levels, the Company stated: Retail inventory, which includes inventory in the Company’s distribution facilities for direct to customer shipments, was approximately $2.5 billion at November 30, 2019, a decrease of 15.6% compared to retail inventory at December 1, 2018. The Company continues to focus on its inventory optimization strategies. 28. In the same report, Bed Bath & Beyond stated that its CEO and CFO had “concluded that the Company’s current disclosure controls and procedures are effective.” 29. The above statements identified in ¶¶ 25-28 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) that, due to “aggressive disposition of inventory,” the Company lacked sufficient inventory in key categories to support holiday sales; (2) that the Company’s internal control over inventory levels and financial reporting was not effective; (3) that, as a result of the foregoing, the Company was likely to experience reduced sales; and (4) 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 February 11, 2020, Bed Bath & Beyond issued a press release announcing preliminary fourth-quarter 2019 financial results. Therein, the Company disclosed “a 5.4% decline in comparable sales driven primarily by store traffic declines combined with inventory management issues,” including that “inventory within certain key categories in the Bed Bath & Beyond assortment was too low or out-of-stock during the period.” Specifically, Bed Bath & Beyond stated, in relevant part: Bed Bath & Beyond Inc. (Nasdaq: BBBY) today reported preliminary, unaudited financial performance data for the first two months of the fiscal 2019 fourth quarter (December 2019 and January 2020), including a 5.4% decline in comparable sales driven primarily by store traffic declines combined with inventory management issues, and increased promotional activity and markdowns. The Company is providing this update today to provide visibility into the current pressures on the business, which the Company’s new management has been reviewing to ascertain insights and key learnings. Mark J. Tritton, President and CEO of Bed Bath & Beyond, said, “We are experiencing short-term pain in our efforts to stabilize the business, including the pressures of store traffic trends coupled with our own executional challenges. However, we did achieve a notable positive shift in sales in our digital channels during this period, with growth of approximately 20%. I believe we can solidify this growth, while also addressing the broader stabilization of our business.” * * * Fiscal December 2019/January 2020 Comparable Sales For the first two months of the fiscal 2019 fourth quarter (December 2019 and January 2020), the Company’s comparable sales declined 5.4%, reflecting a low-double-digit percentage decrease in transactions in stores, partially offset by a mid-single-digit percentage increase in the average transaction amount. On a directional basis, comparable sales from stores declined nearly 11%, while comparable sales from digital channels grew approximately 20%. Comparable sales include the shift of the Cyber Monday holiday week, which is in the Company’s fiscal fourth quarter this year versus the fiscal third quarter of last year. Adjusting for the calendar shift to exclude Cyber Monday week in both periods, comparable sales for the first two months of the fiscal 2019 fourth quarter declined 13%. Product availability leading into the holiday period was also a contributing factor, as inventory within certain key categories in the Bed Bath & Beyond assortment was too low or out-of-stock during the period. The Company is immediately reforming its internal planning and inventory management procedures to master the fundamentals. (Emphases added.) 31. On this news, the Company’s share price fell $3.06 per share, or over 20%, to close at $11.79 per share on February 12, 2020, on unusually heavy trading volume. CLASS ACTION ALLEGATIONS 32. 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 Bed Bath & Beyond securities between October 2, 2019 and February 11, 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. 33. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, Bed Bath & Beyond’s common 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 Bed Bath & Beyond 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 Bed Bath & Beyond 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. 34. 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. 35. Plaintiffs 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. 36. 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 Bed Bath & Beyond; and (c) to what extent the members of the Class have sustained damages and the proper measure of damages. 37. 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 38. The market for Bed Bath & Beyond’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, Bed Bath & Beyond’s securities traded at artificially inflated prices during the Class Period. Plaintiffs and other members of the Class purchased or otherwise acquired Bed Bath & Beyond’s securities relying upon the integrity of the market price of the Company’s securities and market information relating to Bed Bath & Beyond, and have been damaged thereby. 39. During the Class Period, Defendants materially misled the investing public, thereby inflating the price of Bed Bath & Beyond’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 Bed Bath & Beyond’s business, operations, and prospects as alleged 40. 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 Bed Bath & Beyond’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 41. Defendants’ wrongful conduct, as alleged herein, directly and proximately caused the economic loss suffered by Plaintiffs and the Class. 42. During the Class Period, Plaintiffs and the Class purchased Bed Bath & Beyond’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 43. 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 Bed Bath & Beyond, their control over, and/or receipt and/or modification of Bed Bath & Beyond’s allegedly materially misleading misstatements and/or their associations with the Company which made them privy to confidential proprietary information concerning Bed Bath & Beyond, participated in the fraudulent scheme alleged herein. APPLICABILITY OF PRESUMPTION OF RELIANCE (FRAUD-ON-THE-MARKET DOCTRINE) 44. The market for Bed Bath & Beyond’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, Bed Bath & Beyond’s securities traded at artificially inflated prices during the Class Period. On December 18, 2019, the Company’s share price closed at a Class Period high of $17.72 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 Bed Bath & Beyond’s securities and market information relating to Bed Bath & Beyond, and have been damaged thereby. 45. During the Class Period, the artificial inflation of Bed Bath & Beyond’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 Bed Bath & Beyond’s business, prospects, and operations. These material misstatements and/or omissions created an unrealistically positive assessment of Bed Bath & Beyond 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. 46. At all relevant times, the market for Bed Bath & Beyond’s securities was an efficient market for the following reasons, among others: (a) Bed Bath & Beyond 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, Bed Bath & Beyond filed periodic public reports with the SEC and/or the NASDAQ; (c) Bed Bath & Beyond 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; (d) Bed Bath & Beyond 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. 47. As a result of the foregoing, the market for Bed Bath & Beyond’s securities promptly digested current information regarding Bed Bath & Beyond from all publicly available sources and reflected such information in Bed Bath & Beyond’s share price. Under these circumstances, all purchasers of Bed Bath & Beyond’s securities during the Class Period suffered similar injury through their purchase of Bed Bath & Beyond’s securities at artificially inflated prices and a presumption of reliance applies. 48. 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 49. 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 Bed Bath & Beyond 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 50. Plaintiffs repeat and re-allege each and every allegation contained above as if fully set forth herein. 51. 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 Bed Bath & Beyond’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. 52. 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 Bed Bath & Beyond’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. 53. 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 Bed Bath & Beyond’s financial well-being and prospects, as specified herein. 54. 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 Bed Bath & Beyond’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 Bed Bath & Beyond 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. 55. 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. 56. 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 Bed Bath & Beyond’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. 57. 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 Bed Bath & Beyond’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 Bed Bath & Beyond’s securities during the Class Period at artificially high prices and were damaged thereby. 58. 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 Bed Bath & Beyond was experiencing, which were not disclosed by Defendants, Plaintiffs and other members of the Class would not have purchased or otherwise acquired their Bed Bath & Beyond 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. 59. By virtue of the foregoing, Defendants violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. 60. 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 61. Plaintiffs repeat and re-allege each and every allegation contained above as if fully set forth herein. 62. Individual Defendants acted as controlling persons of Bed Bath & Beyond 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. 63. 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 64. As set forth above, Bed Bath & Beyond 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; (c) Awarding Plaintiffs 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 Plaintiffs hereby demand a trial by jury. Dated: April 14, 2020 By: s/ Donald A. Ecklund CARELLA, BYRNE, CECCHI, OLSTEIN, BRODY & AGNELLO, P.C. James E. Cecchi Lindsey H. Taylor Donald A. Ecklund 5 Becker Farm Road Roseland, New Jersey 07068 Telephone: (973) 994 -1700 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 LAW OFFICES OF HOWARD G. SMITH Howard G. Smith 3070 Bristol Pike, Suite 112 Bensalem, PA 19020 Telephone: (215) 638-4847 Facsimile: (215) 638-4867 Counsel for Plaintiffs Stephen and June Vitiello

securities

-0Qg_YgBF5pVm5zYHoXa

LIONEL Z. GLANCY (#134180) ROBERT V. PRONGAY (#270796) LESLEY F. PORTNOY (#304851) CHARLES LINEHAN (#307439) PAVITHRA RAJESH (#323055) GLANCY PRONGAY & MURRAY LLP 1925 Century Park East, Suite 2100 Los Angeles, California 90067 Telephone:(310) 201-9150 Facsimile: (310) 201-9160 Email: info@glancylaw.com Attorneys for Plaintiff UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA '19CV0958 LL JM Case No. CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS JURY TRIAL DEMANDED MAX MORRIS HARARI, Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. PRICESMART, INC., JOSE LUIS LAPARTE, JOHN M. HEFFNER, and MAARTEN O. JAGER, Defendant. Plaintiff Max Morris Harari (“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 PriceSmart, Inc. (“PriceSmart” 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 PriceSmart; and (c) review of other publicly available information concerning PriceSmart. NATURE OF THE ACTION AND OVERVIEW 1. This is a class action on behalf of persons and entities that purchased or otherwise acquired PriceSmart securities between October 26, 2017 and October 25, 2018, inclusive (the “Class Period”), seeking to pursue remedies under the Securities Exchange Act of 1934 (the “Exchange Act”). 2. PriceSmart owns and operates membership-shopping warehouse clubs in Central America, the Caribbean, and Colombia. 3. On October 25, 2018, the Company disclosed poor operating results for the fourth quarter and year ended August 31, 2018. The Company also announced that its Chief Executive Officer had resigned, and also disclosed that certain financial statements would be restated to correct a balance sheet misclassification of certain assets. 4. On this news, the Company’s share price fell $12.41, or more than 15%, to close at $69.16 per share on October 26, 2018, on unusually heavy trading volume. 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 the Company’s omni-channel business strategy had failed to reach key operating goals; (2) that the Company’s South America distribution strategy had failed to realize key cost saving goals; (3) that the Company had invested Trinidad and Tobago dollars into certificates of deposits with financial institutions; (4) that these investments had been improperly classified as cash and cash equivalents; (5) that the relevant corrections would materially impact financial statements; (6) that there was a material weakness in the Company’s internal controls over financial reporting; (7) that increasing competition negatively impacted the Company’s revenue and profitability; and (8) 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, Plaintiff 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 located 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. Plaintiff Max Morris Harari, as set forth in the accompanying certification, incorporated by reference herein, purchased PriceSmart 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 PriceSmart is incorporated under the laws of Delaware with its principal executive offices located in San Diego, California. PriceSmart’s common stock trades on the NASDAQ exchange under the symbol “PSMT.” 13. Defendant Jose Luis Laparte (“Laparte”) was the President, Chief Executive Officer, and a Director of the Company at all relevant times. 14. Defendant John M. Heffner (“Heffner”) was the Chief Financial Officer of the Company from 2004 to April 24, 2018. 15. Defendant Maarten O. Jager (“Jager”) has been the CFO of the Company since April 24, 2018. 16. Defendants Laparte, Heffner, and Jager, (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 17. PriceSmart owns and operates membership-shopping warehouse clubs in Central America, the Caribbean, and Colombia. Materially False and Misleading Statements Issued During the Class Period 18. The Class Period begins on October 26, 2017. On that day, the Company filed its annual report for the period ended August 31, 2017 (the “2017 10-K”). Therein, the Company reported $3.0 billion revenue and $90.7 million net income. 19. The 2017 10-K also discussed that the Company experienced a lack of availability of U.S. dollars in certain markets, including Trinidad. The report stated, in relevant part: From time to time we have experienced a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity). This impedes our ability to convert local currencies obtained through warehouse sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products, increasing our foreign exchange exposure to any devaluation of the local currency relative to the U.S. dollar. During fiscal year 2017 and continuing into fiscal year 2018, we experienced this situation in Trinidad (“TT”). We have been and continue to work with our banks in Trinidad to source tradable currencies (including Euros and Canadian dollars), but until the central bank in Trinidad makes more U.S. dollars available, this illiquidity condition is likely to continue. During part of the first half of fiscal year 2017 we limited shipments of merchandise to Trinidad from our distribution center in Miami to levels that generally aligned with our Trinidad subsidiary’s ability to source U.S. dollars to pay for thatmerchandise. This resulted in a reduced level of shipments, which negatively affected sales in the second quarter, particularly December, although by less than our initial estimate. These actions did not impact the level of merchandise we obtain locally in Trinidad. Starting in the third quarter of fiscal year 2017, we were able to improve our sourcing of tradeable currencies, which, in addition to other steps we took, allowed for a more normalized flow of imported merchandise during the third and fourth fiscal quarters. As of August 31, 2017, our Trinidad subsidiary had net U.S. dollar denominated assets of approximately $4.0 million. However, the illiquidity situation remains in the Trinidad market, and we could face similar issues in sourcing U.S. dollars during the first and second quarters of fiscal year 2018, which may require us to limit shipments from the U.S. to Trinidad in line with our ability to exchange Trinidad dollars for tradeable currencies to manage our exposure to any potential devaluation. 20. On January 4, 2018, the Company filed its quarterly report on Form 10- Q for the period ended November 30, 2017. Therein, the Company reported $767.1 million revenue, $22.5 million net income, and $129.18 million cash and cash equivalents. 21. On April 5, 2018, the Company filed its quarterly report on Form 10-Q for the period ended February 28, 2018. Therein, the Company reported $839.6 million revenue, $14.1 million net income, and $152.13 million cash and cash equivalents. 22. On July 5, 2018, the Company filed its quarterly report on Form 10-Q for the period ended May 31, 2018. Therein, the Company reported $782.2 million revenue, $18.7 million net income, and $141.16 million cash and cash equivalents. 23. The above statements identified in ¶¶18-22 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 the Company’s omni-channel business strategy had failed to reach key operating goals; (2) that the Company’s South America distribution strategy had failed to realize key cost saving goals; (3) that the Company had invested Trinidad and Tobago dollars into certificates of deposits with financial institutions; (4) that these investments had been improperly classified as cash and cash equivalents; (5) that the relevant corrections would materially impact financial statements; (6) that there was a material weakness in the Company’s internal controls over financial reporting; (7) that increasing competition negatively impacted the Company’s revenue and profitability; and (8) 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 24. On October 25, 2018, the Company announced fourth quarter and full year 2018 results. The Company disclosed total revenues of $777.9 million, operating income of $27.2 million, compared to operating income of $30.8 million from the prior year. The Company also announced the resignation of Chief Executive Officer Jose Luis Laparte, and further disclosed that certain financial statements would be restated to correct a balance sheet misclassification of certain assets. The Company stated: During the preparation process for the 2018 Annual Report on Form 10-K for PriceSmart, Inc. (the “Company”), a balance sheet misclassification (with no impact on earnings per share, revenue, operating income, net income, cash flow from operations, total assets or total current assets) within current assets was identified involving the Company’s presentation of short-term investments as cash and cash equivalents in its previously issued unaudited interim consolidated financial statements for fiscal year 2018; specifically, the three, six and nine month periods ended November 30, 2017, February 28, 2018, May 31, 2018 (collectively, the “Relevant Periods”). In the past, the Company has disclosed a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity), which impedes our ability to convert local currencies obtained through merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products. Also, as we have previously disclosed, during fiscal year 2017 and fiscal year 2018, we experienced this situation in Trinidad. We are working with our banks in Trinidad to source tradeable currencies (including Euros and Canadian dollars), but until the central bank in Trinidad makes more U.S. dollars available, this condition is likely to continue. As part of the actions taken in Trinidad, the Company began investing the excess Trinidad and Tobago (TT) dollars into Certificates of Deposit or similar time-based deposits with financial institutions (referred to collectively herein as “CDs”) with terms of three months or less, which the Company correctly presented as Cash and cash equivalents on the consolidated balance sheet. As the Company’s balance of TT dollars increased, the Company began investing in CDs with terms of four months and up to twelve months. The Company entered into these four to twelve month CDs to gain priority with the respective financial institutions to make more U.S. dollars available for conversion of TT dollars, as well as in order to take advantage of the higher interest rates on these CDs for cash that was not otherwise needed for operations, capital commitments or debt service. During the first three quarters of fiscal 2018, the Company presented these four to twelve month CDs as Cash and cash equivalents in its consolidated balance sheet. However, in accordance with generally accepted accounting principles, these four to twelve month CDs should have been presented as Short-term investments. The correction of the misclassification of these investments within the Total current assets section of the consolidated balance sheets also requires the Company to disclose in the Cash provided by (used in) investing activities section of the consolidated statements of cash flows the cash used in Investments in and Settlements of short-term investments. On October 24, 2018, the Audit Committee of the Company’s Board of Directors met and determined that, as a result of the misclassification described above, the financial statements included in the Company’s Quarterly Reports on Form 10-Q for the Relevant Periods should no longer be relied upon. The required restatements will be included in a footnote to the Company’s timely filed Form 10-K as of and for the year ended August 31, 2018, which the Company expects to file after the close of the market on October 25, 2018. The Company also expects to include in this Form 10-K a conclusion that there was a material weakness in internal controls over financial accounting related to this misclassification. However, as stated above, there was no impact on earnings per share, revenue, operating income, net income, cash flow from operations, total assets or total current assets as a result of this misclassification. (Emphases added.) 25. On this news, the Company’s share price fell $12.41, or more than 15%, to close at $69.16 per share on October 26, 2018, on unusually heavy trading volume. CLASS ACTION ALLEGATIONS 26. 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 PriceSmart securities between October 26, 2017 and October 25, 2018, 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, PriceSmart’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 PriceSmart 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 PriceSmart 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. 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. 29. 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. 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 PriceSmart; 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 PriceSmart’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, PriceSmart’s securities traded at artificially inflated prices during the Class Period. Plaintiff and other members of the Class purchased or otherwise acquired PriceSmart’s securities relying upon the integrity of the market price of the Company’s securities and market information relating to PriceSmart, and have been damaged thereby. 33. During the Class Period, Defendants materially misled the investing public, thereby inflating the price of PriceSmart’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 PriceSmart’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 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 PriceSmart’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 35. Defendants’ wrongful conduct, as alleged herein, directly and proximately caused the economic loss suffered by Plaintiff and the Class. 36. During the Class Period, Plaintiff and the Class purchased PriceSmart’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 PriceSmart, their control over, and/or receipt and/or modification of PriceSmart’s allegedly materially misleading misstatements and/or their associations with the Company which made them privy to confidential proprietary information concerning PriceSmart, participated in the fraudulent scheme alleged herein. APPLICABILITY OF PRESUMPTION OF RELIANCE (FRAUD-ON-THE-MARKET DOCTRINE) 38. The market for PriceSmart’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, PriceSmart’s securities traded at artificially inflated prices during the Class Period. On June 25, 2018, the Company’s share price closed at a Class Period high of $93.83 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 PriceSmart’s securities and market information relating to PriceSmart, and have been damaged thereby. 39. During the Class Period, the artificial inflation of PriceSmart’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 PriceSmart’s business, prospects, and operations. These material misstatements and/or omissions created an unrealistically positive assessment of PriceSmart 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. 40. At all relevant times, the market for PriceSmart’s securities was an efficient market for the following reasons, among others: (a) PriceSmart 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, PriceSmart filed periodic public reports with the SEC and/or the NASDAQ; (c) PriceSmart 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) PriceSmart 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 PriceSmart’s securities promptly digested current information regarding PriceSmart from all publicly available sources and reflected such information in PriceSmart’s share price. Under these circumstances, all purchasers of PriceSmart’s securities during the Class Period suffered similar injury through their purchase of PriceSmart’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 PriceSmart who knew that the statement was false when made. FIRST CLAIM FOR RELIEF (Violation of Section 10(b) of the Exchange Act and Rule 10b-5 Promulgated Thereunder) Against All Defendants 44. Plaintiff repeats and re-alleges 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 Plaintiff and other Class members, as alleged herein; and (ii) cause Plaintiff and other members of the Class to purchase PriceSmart’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 PriceSmart’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 PriceSmart’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 PriceSmart’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 PriceSmart 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 PriceSmart’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 PriceSmart’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 PriceSmart’s securities during the Class Period at artificially high prices and were damaged thereby. 52. 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 PriceSmart was experiencing, which were not disclosed by Defendants, Plaintiff and other members of the Class would not have purchased or otherwise acquired their PriceSmart 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, 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 FOR RELIEF (Violation of Section 20(a) of the Exchange Act) Against the Individual Defendants 55. Plaintiff repeats and re-alleges each and every allegation contained above as if fully set forth herein. 56. Individual Defendants acted as controlling persons of PriceSmart 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. 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 same. 58. As set forth above, PriceSmart 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 22, 2019 GLANCY PRONGAY & MURRAY LLP By: s/ Lesley F. Portnoy Lionel Z. Glancy Robert V. Prongay Lesley F. Portnoy Charles Linehan Pavithra Rajesh 1925 Century Park East, Suite 2100 Los Angeles, California 90067 Telephone: (310) 201-9150 Facsimile: (310) 201-9160 Email: info@glancylaw.com Attorneys for Plaintiff Max Morris Harari SWORN CERTIFICATION OF PLAINTIFF PRICESMART, INC. SECURITIES LITIGATION I, MaxMorris Harari individually, and/or in my capacity as trustee and/or principal for 2/20/2019 accounts listed on Schedule A, certify that: 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 the PriceSmart, 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 PriceSmart, 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. ________________ _________________________________________ Date MaxMorris Harari Max Morris Harari's Transactions in PriceSmart, Inc. (PSMT) Date Transaction Type Quantity Unit Price 07/09/2018 Bought 700 $80.9500

securities

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IN THE UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA JACKSONVILLE DIVISION THE OKAVAGE GROUP, LLC on behalf of itself and all others similarly situated, Plaintiff, CASE NO. UWM HOLDINGS CORPORATION, and MAT ISHBIA, individually, Defendants. ________________________________________/ CLASS ACTION COMPLAINT Plaintiff, The Okavage Group, LLC, (“The Okavage Group” or “Plaintiff”), on behalf of itself and all others similarly situated, by and through their attorneys, file this complaint against Defendants, UWM Holdings Corporation (“UWM”) and Mat Ishbia (“Ishbia”), and state as follows: INTRODUCTION 1. This is a class action brought by Plaintiff on behalf of all mortgage brokers (“the Class” or “Class Members”) that currently are or have been clients of mortgage lenders UWM and either Fairway Independent Mortgage (“Fairway Mortgage”) or Rocket Pro TPO (a division of Rocket Mortgage) and have been affected by Defendants’ ultimatum (the “Ultimatum”) requiring them to cease doing business with Fairway Mortgage and Rocket Pro TPO, or face termination of their business relationship with UWM and/or exorbitant and unconscionable monetary penalties in the minimum amount of $50,000 imposed by UWM. 2. Plaintiff and Class Members are mortgage brokers who currently are and/or have been clients of UWM and Fairway Mortgage and/or Rocket Pro TPO. 3. Within the market for residential mortgage lending in the United States, the relevant sub- market for this case is the market for wholesale lending for mortgages sold through mortgage brokers. UWM is a “Wholesale Mortgage Lender.” Wholesale mortgage lenders offer mortgage loans through independent third parties, such as mortgage brokers. As such, wholesale mortgage lenders do not work directly with consumers/borrowers until after a loan has been funded, if at all. Wholesale mortgage lenders generally fund and, in some instances, service loans, including collecting payments after funding. 4. By comparison, a “Retail Mortgage Lender” deals directly with consumers/prospective borrowers from the beginning, including providing loan applications and collecting completed loan applications, performing income verification and collecting other required documentation, as well as quoting interest rates. 5. For wholesale lending, third parties, such as mortgage brokers, provide loan applications to the consumer/prospective borrower, collect completed loan applications, perform income verification and collect other required documentation. Additionally, mortgage brokers advise the customer of available interest rates and loan terms and select the wholesale mortgage lender to submit the loan application and other documentation in order to find the best mortgage loan product and pricing for their client, the consumer/prospective borrower. The center pillar of the mortgage broker business is independence – the ability of the broker to choose from a variety of wholesale lenders to select the mortgage product and experience that best matches the specific needs of the broker’s client. 6. As of March 31, 2020, mortgage lending originated through independent brokers controlled 15.8% of residential mortgage loan originations in the U.S., while direct-to-buyer lending represented 57.5%. (See UWM Holdings Corporation Prospectus, Registration No. 333-252422, https://sec.report/Document/0001193125-21-032462/ (“UWM Prospectus”)), at Risk Factors, p. 14). UWM is the largest Wholesale Mortgage Lender, with approximately 34% market share of the wholesale market. Id. at Summary of the Prospectus, p. 1. 7. Fairway Mortgage offers retail mortgage lending through its retail mortgage lending division, as well as wholesale mortgage lending through its Fairway Wholesale Lending division. 8. Rocket Mortgage offers retail mortgage lending through its retail mortgage lending division. Rocket Mortgage also offers wholesale mortgage lending through its wholesale mortgage lending division, Rocket Pro TPO. 9. As UWM competes exclusively in the wholesale mortgage lending market, UWM recognizes its growth in market share is dependent on growth in the market share controlled by the wholesale channel. (See UWM Prospectus, Summary of the Prospectus, at p. 14). UWM also recognizes that active competition for mortgage brokers “who are not contractually obligated to sell [its] products and who may also sell or promote competitors’ loan products” was a risk to its ability to maintain its market share. Id. 10. On January 22, 2021, UWM became a publicly traded company on the New York Stock Exchange. Since that time, UWM’s share price has been declining, and its competitors in the wholesale lending market, including Fairway Mortgage and Rocket Pro TPO, have expanded their market share in wholesale mortgage lending, including offering better pricing and lower rates to mortgage brokers, which in turn led to lower rates for consumers/prospective borrowers. 11. To mitigate its acknowledged risk of losing market share in the wholesale mortgage lending channel, and in a desperate attempt to stifle competition, on March 4, 2021, UWM publicly announced its Ultimatum via a video by UWM’s President/CEO Ishbia, posted on UWM’s Facebook page. (See https://www.facebook.com/97640871999/videos/845176203005957 12. To implement the Ultimatum and enforce a boycott of Fairway Mortgage and Rocket Pro TPO, Defendants advised their broker clients who also did business with Fairway Mortgage and Rocket Pro TPO that they were required to consent to a contract addendum (“Addendum”). The Addendum sent to the mortgage brokers provided, in pertinent part: United Mortgage Whole, LLC (“UWM”) is amending its broker, correspondent and financial institution agreements by adding a representation and warranty that its clients will not submit loans to either Rocket Mortgage or Fairway Independent Mortgage. Client acknowledges and agrees, that until client provides written notice terminating its agreement with UWM, client and its employees will not submit mortgage loan applications or mortgage loans to either Rocket Mortgage or Fairway Independent Mortgage for review, underwriting, purchase and/or funding (unless such loan was locked with Rocket Mortgage or Fairway Independent Mortgage prior to March 15, 2021). If client or client’s employees breach this representation and warranty, client agrees to pay liquidated damages to UWM of: (i) Five Thousand Dollars ($5,000.00) per loan closed with UWM, or (ii) Fifty Thousand Dollars ($50,000.00), whichever is greater. Defendants engaged in a contract, combination, or conspiracy in restraint of trade to jointly boycott Fairway Mortgage and Rocket Pro TPO to suppress competition in the relevant markets. The Addendum is a per se antitrust violation expressly inviting or engaging mortgage brokers to boycott Fairway Mortgage and Rocket Pro TPO and restrain competition. Defendants’ illegal scheme is pernicious, or manifestly anticompetitive, because, regardless of whether any broker agreed to the Ultimatum, it limits the choice of lending options available to brokers, and ultimately the loan options available to consumers, in the relevant market. 13. The Ultimatum is further unlawful, and its penalties are unenforceable inasmuch as the Ultimatum is: A. Adhesionary, because the Ultimatum required, as part of its implementation, acquiescence to a unilateral contract amendment imposed by UWM upon Plaintiff and the Class Members based on UWM’s superior bargaining strength and the Class Members’ inability to make a free and fair decision to adhere to, reject or modify it; B. Procedurally unconscionable, because the Ultimatum is oppressive due to unequal bargaining power and the exorbitant penalties for non-compliance; and C. Substantively unconscionable because the Ultimatum provides overly harsh, one-sided results to UWM, illegally restrains trade, violates anti-steering statutes and attempts to monopolize the wholesale mortgage lending market, all of which go against public policy. PARTIES, JURISDICTION AND VENUE 14. Plaintiff, The Okavage Group, LLC (“The Okavage Group”), is, and at all times relevant hereto has been, a Florida limited liability company organized under the laws of the State of Florida, with its principal place of business in St. Augustine, Florida. 15. The Okavage Group, LLC’s sole member is Daniel Okavage, who is a citizen of Florida, thereby making The Okavage Group, LLC a citizen of Florida. 16. Defendant, UWM, is a corporation organized under the laws of Delaware with its principal place of business in the State of Michigan. During all times relevant hereto, UWM has conducted and continues to regularly conduct business in, and with mortgage brokers located in the State of Florida. 17. Defendant, Ishbia, is a citizen of the State of Michigan. During all times relevant hereto, Ishbia has conducted and continues to regularly conduct business in and with mortgage brokers located in the State of Florida. 18. Defendant, Ishbia, knowingly and intentionally directed communications announcing the unlawful Ultimatum and false statements to mortgage brokers in order to justify and convince mortgage brokers to acquiesce to and not contest the Ultimatum, including Plaintiff and Class Members located in the State of Florida. 19. Defendant, Ishbia’s, communications announcing the unlawful Ultimatum and false statements were received by mortgage brokers, including Plaintiff and Class Members located in the State of Florida. 20. Plaintiff brings this action under Section 16 of the Clayton Act, 15 U.S.C. §§ 15 and 16, for violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2. This Court has subject matter jurisdiction over this claim pursuant to 28 U.S.C. §§ 1331 and 1337. 21. Plaintiff also brings this action under the Florida Antitrust Act, Fla. Stat. § 542, et seq., and Florida’s Unfair and Deceptive Trade Practices Act, Fla. Stat. § 501.201, et seq., to obtain restitution, statutory damages and injunctive relief. This Court has supplemental jurisdiction over these pendant Florida state law claims under 28 U.S.C. §§ 1332(d) and 1367 because the claims arise from the same nucleus of operative facts as the federal antitrust law claims, and as such, are so related that they form the same case or controversy. 22. The Court has subject matter jurisdiction over Plaintiff’s class claims pursuant to the Class Action Fairness Act, 28 U.S.C. § 1332(d) because the combined claims of the proposed class members exceed $5 million, Defendants and Plaintiff are citizens of different states, and there are at least 3,000 members of the putative class. Further, in determining whether the $5 million amount in controversy requirement of 28 U.S.C. § 1332(d)(2) is met, the claims of the putative class members are aggregated. 28 U.S.C. § 1332(d)(6). 23. This Court has personal jurisdiction over the Defendants because they regularly conduct business in this District. 24. Venue is proper in this District pursuant to: (1) 28 U.S.C. § 1391(b)(2) in that a substantial part of the events or omissions giving rise to Plaintiff’s claims occurred in this District; and (2) 28 U.S.C. § 1391(b)(3) in that Defendants are subject to personal jurisdiction in this District. 25. All conditions precedent to this action have occurred, been performed, or have been FACTUAL BACKGROUND A. Common Allegations 26. UWM regularly accepts and processes mortgage loan applications submitted by Plaintiff and each of the Class Members. Additionally, UWM regularly funds mortgage loans based on such mortgage loan applications. 27. On March 4, 2021, Defendants issued the Ultimatum, and Ishbia exclaimed “if you work with them (Fairway Mortgage and Rocket Pro TPO), you can’t work with UWM, effective immediately.” Ishbia further made the astonishing admission that UWM is “not trying to be the best priced.” (See https://www.facebook.com/97640871999/videos/845176203005957 at 5 min; 27 second mark and 11 min; 27 second mark.) 28. Ishbia falsely accused Fairway Mortgage and Rocket Pro TPO of undermining mortgage brokers, and the wholesale mortgage market overall, and used such false statements as the justification for the Ultimatum and to convince mortgage brokers to acquiesce to and not contest the Ultimatum, and to boycott Fairway Mortgage and Rocket Pro TPO. 29. Ishbia falsely accused Fairway Mortgage of acting unfairly toward mortgage brokers and converting them to loan officers under onerous restrictions. 30. Ishbia falsely accused Rocket Mortgage of paying real estate agents to cut out competing brokers and instead refer clients to Rocket Mortgage. Additionally, Ishbia falsely accused Rocket Mortgage of soliciting mortgage brokers’ past clients and dissuading them from working with those mortgage brokers. 31. Inasmuch as Fairway Mortgage and Rocket Pro TPO consistently offer better-suited and/or lower priced mortgage loans in connection with mortgage loan applications submitted by mortgage brokers as compared to UWM, Defendants’ Ultimatum limits the ability of Plaintiff and Class Members to offer to their clients (consumers/prospective borrowers) the best-suited mortgage loan products to fit their clients’ (consumers/prospective borrowers) needs, thereby restraining trade and limiting competition. 32. Plaintiff and Class Members were advised that they had until 11:59 P.M. on March 15, 2021 to accept Defendants’ Ultimatum or face termination of their business relationship with 33. In a further effort to pressure and induce mortgage brokers to accept Defendants’ Ultimatum, UWM’s Account Executives, whose job involves communicating with mortgage brokers, contacted Plaintiff and other Class Members and falsely asserted that that mortgage broker was the only one who had not yet accepted Defendants’ Ultimatum. 34. After the Ultimatum deadline of March 15, 2021 passed, UWM, through its Account Executives, communicated false statements to mortgage brokers, including Plaintiff and/or Class Members, that Rocket Mortgage “was stealing rate locks from mortgage brokers and transferring them to realtors” and it “literally STOLE the lock and pricing from my broker so the Realtor’s loan would work.” 35. UWM, through its Account Executives, communicated to mortgage brokers, including Plaintiff and Class Members that Rocket Mortgage “was lying to them,” and “is not to be believed.” 36. UWM, through its Account Executives, communicated to mortgage brokers, including Plaintiff and Class Members, false statements that denigrated Rocket Mortgage corporate officers and even went so far as to denigrate Rocket Mortgage Chairman, Dan Gilbert’s, health. 37. The statements referenced in Paragraphs 28-36 will be referred to collectively hereinafter as “the Misrepresentations”. 38. After the unilaterally-imposed deadline passed for accepting Defendants’ Ultimatum, the Class Members who had not acknowledged acceptance of Defendants’ Ultimatum received notice from UWM that their UWM Wholesale Lending Agreement was terminated or that the mortgage broker was suspended from doing business with UWM. 39. Inasmuch as a large percentage of Class Members did not acknowledge acceptance of Defendants’ Ultimatum, UWM Account Executives continued to contact mortgage brokers and made additional false and misleading statements in an effort to pressure and coerce the mortgage brokers to accept the Ultimatum, and Ishbia continued to make additional false and misleading statements publicly to put additional pressure on mortgage brokers. B. Plaintiff’s Experiences Resulting from the Ultimatum 40. The experience of the named Plaintiff is representative of the uniform nature of Defendants’ unlawful business practices as to the Class. 41. The Okavage Group is a mortgage brokerage company that advises and assists clients (consumers/prospective borrowers) with applying for and obtaining residential mortgages. Like Class Members, The Okavage Group has had a business relationship of submitting mortgage loan applications on behalf of clients to UWM and Fairway Mortgage and/or Rocket Pro TPO since approximately October 2018. 42. The Okavage Group has brought a substantial number of clients to UWM, Fairway Mortgage and/or Rocket Pro TPO. 43. Subsequent to March 15, 2021, after refusing to accept Defendants’ Ultimatum, UWM advised The Okavage Group that its UWM Wholesale Lending Agreement was being terminated because it did not sign the Addendum CLASS ACTION ALLEGATIONS 44. Plaintiff brings this action individually and as representative of all similarly situated mortgage brokers, pursuant to Federal Rule of Civil Procedure Rule 23, on behalf of the below- defined Class: All mortgage brokers who were subject to Defendants’ Ultimatum requiring them to cease doing business with Fairway Mortgage and Rocket Pro TPO and imposing financial penalties for submitting any loan application to Fairway Mortgage or Rocket Pro TPO, or in the alternative, face termination of their business relationship with UWM. 43. Excluded from the above-defined Class are Defendants and its officers, directors, and employees; any entity in which the Defendants have a controlling interest, Defendants’ affiliates, legal representatives, attorneys, heirs or assigns; Defendants’ immediate family members; any federal, state, or local government entity, any judge, justice, or judicial officer presiding over this matter, the members of their immediate families, their judicial staffs, persons whose claims in this matter have been finally adjudicated on the merits or otherwise released, Plaintiff’s counsel and Defendants’ counsel, and the legal representatives, successors, and assigns of any such excluded person. 45. Plaintiff reserves the right to modify or amend the definition of the proposed class and/or sub-classes before the Court determines whether certification is appropriate. 46. Cases such as this, which involve one ultimatum made to a group, are particularly well- suited for class treatment because the Class Members face the same common questions of fact and law which include, but are not limited to: a. Whether Defendants’ actions and Ultimatum are violative of federal and state antitrust acts, including the Sherman Act and The Florida Antitrust Act; b. Whether Defendants’ actions and Ultimatum tortiously interfered with business relationships; c. Whether Defendants’ actions and Ultimatum are violative of various consumer protection acts and/or deceptive and unfair trade practices acts; d. Damages, including whether Defendants’ violations allow Plaintiff and Class Members to recover treble damages, punitive damages and attorneys’ fees. 47. Upon information and belief, Defendants have utilized the same, identical form Addendum as the document Defendants demanded brokers, including Plaintiff and Class Members, accept as part of the Ultimatum. 48. Plaintiff’s claims are typical of the claims of other Class Members. The factual and legal bases of Defendants’ liability to Plaintiff and the other Class Members are the same inasmuch as Defendants violated the Sherman Act, the Florida Antitrust Act, the Florida Deceptive and Unfair Trade Practices Act and tortiously interfered with Plaintiff’s and Class Members’ business relationships with known third parties as further described herein. 49. Plaintiff will fairly and adequately protect the interests of the Class Members. 50. Class action treatment is superior to the alternatives for the fair and efficient application 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 individual actions would entail. There are, on information and belief, thousands of Class Members such that joinder of all Class Members is impracticable. The precise number of Class Members and their addresses are presently unknown to Plaintiff, but may be reasonably ascertained from UWM’s records and files. Similarly, Class Members 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. As such, class action is the more efficient procedure for determining liability and damages in a case such as this, where each Class Member acquiesced or refused to acquiesce to the same Ultimatum and where damages can be determined formulaically. 51. Defendants engaged in a common course of conduct giving rise to the legal rights sought to be enforced by Plaintiff, on behalf of itself and the other Class Members. Similar or identical violations, business practices, and injuries are involved, and the contractual rights involve uniform, objective questions of fact and law, both for the prosecution and for the defense. The common questions of fact and law existing as to all Class Members predominate over questions affecting only individual Class Members. Such common questions of fact and law include, but are not limited to, the proper interpretation of the Ultimatum; whether Defendants can unilaterally enforce the provisions thereof; and whether Plaintiff is entitled to damages and other monetary relief and, if so, in what amount. Individual questions, if any, pale by comparison, both in quality and quantity, to the numerous common questions that predominate in this action. Thus, the elements of commonality and predominance are both met. 52. 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. 53. Typicality exists inasmuch as class representatives who, in their role as mortgage brokers, have been forced to accept Defendants’ Ultimatum to cease doing business with Fairway Mortgage and Rocket Pro TPO, or face financial penalties imposed by UWM or termination of their business relationship with UWM. Furthermore, Plaintiff’s claims are typical of those of the members of the Class because, among other things, all Class Members have been comparably injured through Defendants’ common course of unlawful conduct and seek the same kind of relief. 54. To be sure, there are no defenses available to Defendants that are unique to the Plaintiff. The injury and causes of actions are common to the Class Members as all arise from the same 55. Certification of Plaintiff’s claims for class-wide treatment is appropriate because Plaintiff can prove the elements of its claims on a class-wide basis using the same evidence as would be used to prove those elements in individual actions alleging the same claims. 56. Defendants have acted and failed to act on grounds generally applicable to Plaintiff and other Class Members, thereby making relief appropriate with respect to the Class Members as a whole. Prosecution of separate actions by individual Class Members, should they even realize that their rights have been violated, would likely create the risk of inconsistent or varying adjudications with respect to individual Class Members. 57. Plaintiff will adequately represent the Class. It has no interests that are in conflict with those of the Class. In addition, it has retained counsel competent and experienced in complex, as well as class action litigation, and it will prosecute this action vigorously. The interests of the Class will be fairly and adequately protected by Plaintiff and its counsel. 58. In the event unforeseen issues preclude class certification under Fed.R.Civ.P. 23(b)(3), the case is still appropriate for class certification under Fed.R.Civ.P. 23(c)(4), as to the particular issues of liability. COUNT I RESTRAINT OF TRADE IN VIOLATION OF 15 U.S.C. § 1 (SECTION 1 OF THE SHERMAN ACT - UNLAWFUL_RESTRAINT OF TRADE) 59. Plaintiff repeats and realleges paragraphs 1 through 58 of this Complaint as though fully set forth herein. 60. Defendants have engaged in unlawful acts that have caused an unreasonable restraint of interstate trade and commerce, in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, including imposing the Ultimatum upon and making the false and misleading Misrepresentations to Plaintiff and other Class Members, designed to force them to acquiesce to and join Defendants’ group boycott and cease doing business with Fairway Mortgage and Rocket Pro TPO, or face exorbitant and unconscionable penalties imposed by UWM or termination of their business relationship with UWM. (See attached Exhibit A) 61. Defendants’ acts have eliminated the ability of Plaintiff and other members of the Class to offer better-suited and/or lower-priced mortgage loan products to their clients (consumers/prospective borrowers) compared to often-times ill-suited and/or higher-priced mortgage loan products offered by UWM. 62. At all times UWM has had market power to force and coerce Plaintiff and other Class Members to include UWM in their product offerings to clients (consumers/prospective borrowers) as UWM is, by its market share, the dominant wholesale lender in the U.S. for mortgages sold through mortgage brokers. 63. Defendants’ Ultimatum implemented a naked horizontal conspiracy and restraint of trade that is per se illegal under antitrust law, regardless of Defendants’ justification. Alternatively, Defendants’ Ultimatum as implemented is so likely to have anticompetitive effects that an observer with even rudimentary understanding of economics could conclude harm to customers and the wholesale mortgage market, warranting this Court to condemn Defendants’ anticompetitive conduct under a “quick-look” review. However, if this Court applies the rule-of-reason approach, Defendants’ Ultimatum achieves no legitimate efficiency benefits to counterbalance their express and demonstrated anticompetitive effects, including the obstruction of competition from UWM’s competitors, Fairway Mortgage and Rocket Pro TPO, who have had significant market share in the wholesale lending market. 64. As a result of the Ultimatum, Plaintiff and Class Members have been forced and coerced to make application for and obtain non-competitive mortgage loan products from UWM at non- competitive prices instead of making application for and obtaining better-suited and/or lower- priced mortgage loan products from Fairway Mortgage and Rocket Pro TPO on behalf of their 65. The ability of Plaintiff and Class Members to utilize better-suited and/or lower-cost non- UWM mortgage loan products has been restricted and/or obstructed by Defendants’ anticompetitive acts. 66. The ability of Plaintiff and Class Members to effectively offer their clients (consumers/prospective borrowers) access to the best-suited and/or best priced mortgage loan products has been substantially reduced, limited and/or foreclosed. 67. Defendants’ Ultimatum has been designed to substantially reduce, limit and/or foreclose competing mortgage loan products in the wholesale lending market. 68. As a direct and proximate result of Defendants’ violation of Section 1 of the Act, Plaintiff and Class Members have been injured in their business and property in the millions of dollars prior to trebling. 69. Plaintiff, and by definition the Class, are persons who are entitled to commissions lost and/or refunds of any financial penalties imposed by Defendants. 70. As a direct and proximate result of Defendants’ violation of Section 1 of the Act, Plaintiff and Class Members have suffered, and will continue to suffer damages in the future, including compensatory and consequential damages, plus interest, in an amount in excess of $75,000. 71. Plaintiff, and Class Members, are entitled to recover treble damages and attorneys’ fees pursuant to statute in an amount to be determined, as provided for by 15 U.S.C. §15(a). COUNT II RESTRAINT OF TRADE IN VIOLATION OF 15 U.S.C. § 1 (SECTION 1 OF THE SHERMAN ACT - UNLAWFUL STEERING) 72. Plaintiff repeats and realleges paragraphs 1 through 58 of this Complaint as if fully set forth 73. Defendants have engaged in unlawful acts that have caused an unreasonable restraint of interstate trade and commerce, in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, including forcing Plaintiff and Class Members to steer their clients (consumers/prospective borrowers) away from what are often-times better-suited and/or lower-priced mortgage loan products offered by Fairway Mortgage and Rocket Pro TPO and/or forcing and coercing Plaintiff and the Class Members to steer their clients to often-times ill-suited and/or higher-priced mortgage loan products offered by UWM. (See attached Exhibit A) 74. At all times, UWM has had market power to force mortgage brokers to steer their clients (consumers/prospective borrowers) away from what are often-times better-suited and/or lower- priced mortgage loan products offered by Fairway Mortgage and Rocket Pro TPO and/or forcing and coercing Plaintiff and the Class Members to steer their clients to often-times ill-suited and/or higher-priced mortgage loan products offered by UWM. 75. The continued use of the anti-steering provisions achieves no legitimate efficiency benefits to counterbalance their demonstrated anticompetitive effects, including the foreclosure of competition from UWM’s competitors, Fairway Mortgage and Rocket Pro TPO, who have had significant market share in the wholesale lending market. 76. The Plaintiff and Class Members have been forced to steer their clients (consumers/prospective borrowers) to often-times ill-suited and/or higher-priced mortgage loan products offered by UWM and/or prevented from steering to often-times better-suited and/or lower-priced mortgage loan products offered by Fairway Mortgage and Rocket Pro TPO. 77. The ability of Plaintiff and Class Members to have their clients (consumers/prospective borrowers) access better-suited and/or lower-cost, non-UWM mortgage loan products has been restricted, obstructed and/or foreclosed. 78. The ability of Plaintiff and Class Members to effectively offer their clients (consumers/prospective borrowers) access to the best-suited and/or best priced mortgage loan products has been substantially reduced, limited and/or foreclosed. 79. As a direct and proximate result of Defendants’ violation of Section 1 of the Act, Plaintiff and Class Members have been injured in their business and property in the millions of dollars prior to trebling. 80. As a direct and proximate result of Defendants’ violation of Section 1 of the Act, Plaintiff and Class Members have suffered, and will continue to suffer damages in the future, including compensatory and consequential damages, plus interest, in an amount in excess of $75,000. 81. Plaintiff, and Class Members, are entitled to recover treble damages and attorneys’ fees pursuant to statute in an amount to be determined, as provided for by 15 U.S.C. §15(a). COUNT III RESTRAINT OF TRADE IN VIOLATION OF 15 U.S.C. § 2 (SECTION 2 OF THE SHERMAN ACT - ATTEMPTED MONOPOLY) 82. Plaintiff repeats and realleges paragraphs 1 through 58 of this Complaint as if fully set forth 83. In violation of Section 2 of the Sherman Act, 15 U.S.C. § 2, Defendants have willfully, knowingly and with specific intent, attempted to monopolize the wholesale mortgage market. 84. This attempt to monopolize the wholesale mortgage market has been effectuated by overt exclusionary acts, including imposing Defendants’ Ultimatum and making false and misleading Misrepresentations to Plaintiff and Class Members, designed to force and coerce the Plaintiff and Class Members to steer clients (consumers/prospective borrowers) away from often-times better- suited and/or lower-priced mortgage loan products offered by Fairway Mortgage and Rocket Pro TPO to often-times ill-suited and/or higher-priced mortgage loan products offered by UWM. (See attached Exhibit A) 85. There exists a dangerous probability that UWM will monopolize the wholesale mortgage 86. Defendants’ exclusionary practices achieve no legitimate efficiency benefits to counterbalance their demonstrated anticompetitive effects, including the restriction and obstruction of competition from UWM’s competitors, Fairway Mortgage and Rocket Pro TPO, who have had significant market share in the wholesale lending market. 87. Plaintiff and Class Members have been forced and coerced to make application for and obtain non-competitive mortgage loan products from UWM at non-competitive prices instead of making application for and obtaining better-suited and/or lower-priced mortgage loan products from Fairway Mortgage and Rocket Pro TPO on behalf of their clients (consumers/prospective borrowers). 88. Defendants’ exclusionary conduct has restricted and obstructed competition with significant competitors of UWM in the wholesale mortgage market. 89. As a direct and proximate result of Defendants’ violation of Section 2 of the Act, Plaintiff and Class Members have been injured in their business and property in the millions of dollars prior to trebling. 90. As a direct and proximate result of Defendants’ violation of Section 2 of the Act, Plaintiff and Class Members have suffered, and will continue to suffer damages in the future, including compensatory and consequential damages, plus interest, in an amount in excess of $75,000. 91. Plaintiff, and Class Members, are entitled to recover treble damages and attorneys’ fees pursuant to statute in an amount to be determined, as provided for by 15 U.S.C. §15(a). COUNT IV RESTRAINT OF TRADE IN VIOLATION OF FLA. STAT. § 542.18 (FLORIDA ANTITRUST ACT - UNLAWFUL RESTRAINT OF TRADE) 92. Plaintiff repeats and realleges paragraphs 1 through 58 this Complaint as if fully set forth 93. Defendants have knowingly engaged in unlawful acts that have caused an unreasonable restraint of interstate trade and commerce, in violation of the Florida Antitrust Act, Fla. Stat. § 542.18, including imposing the Ultimatum upon and making the false and misleading Misrepresentations to Plaintiff and other Class Members, designed to force them to acquiesce to and join Defendants’ group boycott and cease doing business with Fairway Mortgage and Rocket Pro TPO, or face exorbitant and unconscionable financial penalties imposed by UWM, or face termination of their business relationship with UWM. (See attached Exhibit A) 94. Defendants’ acts have eliminated the ability of the Plaintiff and other members of the Class to offer better-suited and/or lower-priced mortgage loan products to their clients (consumers/prospective borrowers) compared to often-times ill-suited and/or higher-priced mortgage loan products offered by UWM. 95. At all times UWM has had market power to force and coerce Plaintiff and other Class Members to include UWM in their product offerings to clients (consumers/prospective borrowers) as UWM is, by its market share, the dominant wholesale lender in the U.S. for mortgages sold through mortgage brokers. 96. Defendants’ Ultimatum implemented a naked horizontal conspiracy and restraint of trade that is per se illegal under antitrust law, regardless of Defendants’ justification. Alternatively, Defendants’ Ultimatum as implemented is so likely to have anticompetitive effects that an observer with even rudimentary understanding of economics could conclude harm to customers and the wholesale mortgage market, warranting this Court to condemn Defendants’ anticompetitive conduct under a “quick-look” review. However, if this Court applies the rule-of-reason approach, Defendants’ Ultimatum achieves no legitimate efficiency benefits to counterbalance their express and demonstrated anticompetitive effects, including the obstruction of competition from UWM’s competitors, Fairway Mortgage and Rocket Pro TPO, who have had significant market share in 97. As a result of the Ultimatum, Plaintiff and Class Members have been forced and coerced to make application for and obtain non-competitive mortgage loan products from UWM at non- competitive prices instead of making application for and obtaining better-suited and/or lower- priced mortgage loan products from Fairway Mortgage and Rocket Pro TPO on behalf of their clients (consumers/prospective borrowers). 98. The ability of Plaintiff and Class Members to utilize better-suited and/or lower-cost non- UWM products has been restricted and/or obstructed by Defendant’s anticompetitive acts. 99. The ability of Plaintiff and Class Members to effectively offer their clients (consumers/prospective borrowers) access to the best-suited and/or best-priced mortgage loan products has been substantially reduced, limited and foreclosed. 100. Defendants’ Ultimatum has been designed to substantially reduce, limit and/or foreclose competing mortgage loan products in the wholesale lending market. 101. As a direct and proximate result of UWM’s violation of Fla. Stat. § 542.18, Plaintiff and Class Members have been injured in their business and property in the millions of dollars prior to trebling. 102. Plaintiff, and by definition the Class, are persons who are entitled to commissions lost and/or or refunds of any financial penalties imposed by Defendants. 103. As a direct and proximate result of Defendants’ violation of Fla. Stat. § 542.18, Plaintiff and Class Members have suffered, and will continue to suffer damages in the future, including compensatory and consequential damages, plus interest, in an amount in excess of $75,000. 104. Plaintiff, and Class Members, are entitled to recover treble damages and attorneys’ fees pursuant to statute in an amount to be determined, as provided for by Fla. Stat. § 542.22. COUNT V RESTRAINT OF TRADE IN VIOLATION OF FLA. STAT. § 542.18 (FLORIDA ANTITRUST ACT - UNLAWFUL STEERING) 105. Plaintiff repeats and realleges paragraphs 1 through 58 of this Complaint as if fully set forth 106. Defendants have knowingly engaged in unlawful acts that have caused an unreasonable restraint of interstate trade and commerce, in violation of the Florida Antitrust Act, Fla. Stat. § 542.18, including forcing Plaintiff and the Class Members to steer their clients (consumers/prospective borrowers) away from what are often-times better-suited and/or lower- priced mortgage loan products offered by Fairway Mortgage and Rocket Pro TPO and/or forcing and coercing Plaintiff and the Class Members to steer their clients to often-times ill-suited and/or higher-priced loan products offered by UWM. (See attached Exhibit A) 107. At all times, UWM has had market power to force mortgage brokers to steer their clients (consumers/prospective borrowers) away from what are often-times better-suited and/or lower- priced mortgage loan products offered by Fairway Mortgage and Rocket Pro TPO and/or forcing and coercing Plaintiff and the Class Members to steer their clients to often-times ill-suited and/or higher-priced mortgage loan products offered by UWM. 108. The continued use of the anti-steering provisions achieves no legitimate efficiency benefits to counterbalance their demonstrated anticompetitive effects, including the obstruction of competition from UWM’s competitors, Fairway Mortgage and Rocket Pro TPO, who have had significant market share in the wholesale lending market. 109. The Plaintiff and Class Members have been forced to steer their clients (consumers/prospective borrowers) to often-times ill-suited and/or higher-priced mortgage loan products offered by UWM and/or prevented from steering to often-times better-suited and/or lower-priced mortgage loan products offered by Fairway Mortgage and Rocket Pro TPO. 110. The ability of Plaintiff and Class Members to have their clients (consumers/prospective borrowers) access better-suited and/or lower-cost, non-UWM mortgage loan products has been restricted and obstructed. 111. The ability of Plaintiff and Class Members to effectively offer their clients (consumers/prospective borrowers) access to the best-suited and/or best priced mortgage loan products has been substantially reduced, limited and/or foreclosed. 112. As a direct and proximate result of Defendants’ violation of Fla. Stat. § 542.18, Plaintiff and Class Members have been injured in their business and property in the millions of dollars prior to trebling. 113. As a direct and proximate result of Defendants’ violation of Fla. Stat. Fla. Stat. § 542.18, Plaintiff and Class Members have suffered, and will continue to suffer damages in the future, including compensatory and consequential damages, plus interest, in an amount in excess of $75,000. 114. Plaintiff, and Class Members, are entitled to recover treble damages and attorneys’ fees pursuant to statute in an amount to be determined, as provided for by Fla. Stat. § 542.22. COUNT VI RESTRAINT OF TRADE IN VIOLATION OF FLA. STAT. § 542.19 (FLORIDA ANTITRUST ACT - ATTEMPTED MONOPOLY) 115. Plaintiff repeats and realleges paragraphs 1 through 58 of this Complaint as if fully set forth 116. In violation of the Florida Antitrust Act, Fla. Stat. § 542.19, Defendants have willfully, knowingly and with specific intent, attempted to monopolize the wholesale mortgage market. 117. This attempt to monopolize the wholesale mortgage market has been effectuated by overt exclusionary acts, including imposing Defendants’ Ultimatum and making false and misleading Misrepresentations to Plaintiff and Class Members, designed to force and coerce the Plaintiff and Class Members to steer clients (consumers/prospective borrowers) away from often-times better- suited and/or lower-priced mortgage loan products offered by Fairway Mortgage and Rocket Pro TPO to often-times ill-suited and/or higher-priced mortgage loan products offered by UWM. (See Exhibit A) 118. There exists a dangerous probability that UWM will monopolize the wholesale mortgage market as a result of these overt acts. 119. Defendants’ exclusionary practices achieve no legitimate efficiency benefits to counterbalance their demonstrated anticompetitive effects, including the restriction and obstruction of competition from UWM’s competitors, Fairway Mortgage and Rocket Pro TPO who have had significant market share in the wholesale lending market. 120. Plaintiff and Class Members have been forced and coerced to make application for and obtain non-competitive mortgage loan products from UWM at non-competitive prices instead of making application for and obtaining better-suited and/or lower-priced mortgage loan products from Fairway Mortgage and Rocket Pro TPO on behalf of their clients (consumers/prospective borrowers). 121. Defendants’ exclusionary conduct has restricted and obstructed competition with significant competitors of UWM in the wholesale mortgage market. 122. As a direct and proximate result of Defendants’ violation of Fla. Stat. § 542.19, Plaintiff and Class Members have been injured in their business and property in the millions of dollars prior to trebling. 123. As a direct and proximate result of Defendants’ violation of Fla. Stat. § 542.19, Plaintiff and Class Members have suffered, and will continue to suffer damages in the future, including compensatory and consequential damages, plus interest, in an amount in excess of $75,000. 124. Plaintiff, and Class Members, are entitled to recover treble damages and attorneys’ fees pursuant to statute in an amount to be determined, as provided for by Fla. Stat. § 542.19. COUNT VII TORTIOUS INTERFERENCE WITH BUSINESS RELATIONSHIPS 125. Plaintiff repeats and realleges paragraphs 1 through 58 of this Complaint as if fully set forth 126. Plaintiff and Class Members had a business relationship with Fairway Mortgage and/or Rocket Pro TPO. 127. Defendants knew of the business relationships between Plaintiff and Class Members and Fairway Mortgage and/or Rocket Pro TPO. 128. Defendants maliciously, intentionally and knowingly engaged in wrongful, unlawful, and/or fraudulent acts designed to interfere with Plaintiff’s and Class Members’ business relationships and expectancies with Fairway Mortgage and/or Rocket Pro TPO, including Defendants’ Ultimatum imposed upon and the false and misleading Misrepresentations made to Plaintiff and Class Members. (See attached Exhibit A) 129. Defendants intentionally and knowingly communicated the false and misleading Misrepresentations to Plaintiff and Class Members. 130. Defendants intended that the Plaintiff and Class Members rely on the false and misleading Misrepresentations. 131. Plaintiff and Class Members justifiably relied on the false and misleading Misrepresentations, to their detriment. 132. Defendants’ false and misleading Misrepresentations were knowingly and maliciously used to fraudulently induce Plaintiff and Class Members into signing the Addendum, which Defendants knew would interfere with the business relationships and expectancies with Fairway Mortgage and/or Rocket Pro TPO. 133. Defendants’ knowingly and intentionally have, or have attempted to, coerce Plaintiff and Class Members into signing the Addendum, which Defendants knew would interfere with the business relationships and expectancies with Fairway Mortgage and/or Rocket Pro TPO by virtue of the fact that the Addendum would not be voluntarily executed, and thus not as a choice of free will and that UWM exerted improper and coercive conduct over Plaintiff and Class Members in order to force them to sign the addendum. 134. Defendants’ wrongful, unlawful and/or fraudulent acts are/were designed to interfere with Plaintiff’s and Class Members’ business relationships and expectancies with Fairway Mortgage and/or Rocket Pro TPO in fact do/did interfere with such business relationships and expectancies. 135. As a direct and proximate result of Defendants’ actions, Plaintiff and Class Members have been injured in their business and property with millions of dollars in losses. 136. As a direct and proximate result of Defendants’ actions, Plaintiff and Class Members have suffered, and will continue to suffer damages in the future, including compensatory and consequential damages, plus interest, in an amount in excess of $75,000. 137. Plaintiff, and Class Members, are entitled to recover damages as a result of Defendants’ actions. 138. Defendants’ actions were willful, knowing and intentional, entitling Plaintiff and Class Members to punitive damages. COUNT VIII VIOLATION OF FLA. STAT § 501.201 (FLORIDA’S DECEPTIVE AND UNFAIR TRADE PRACTICES ACT) 139. Plaintiff repeats and realleges paragraphs 1 through 58 of this Complaint as if fully set forth 140. Plaintiff and Class Members are “consumers” as defined under Florida’s Deceptive and Unfair Trade Practices Act, Fla. Stat. § 501.203(7) which term is broadly defined to include business entities: “Consumer means an individual; … business; firm; association; joint venture; partnership; estate; trust; business trust; syndicate; fiduciary; corporation; any commercial entity, however denominated; or any other group or combination.” (emphasis added). 141. Fla. Stat. § 501.202 provides as follows: 501.202 Purposes; rules of construction.—The provisions of this part shall be construed liberally to promote the following policies: (1) To simplify, clarify, and modernize the law governing consumer protection, unfair methods of competition, and unconscionable, deceptive, and unfair trade practices. (2) To protect the consuming public and legitimate business enterprises from those who engage in unfair methods of competition, or unconscionable, deceptive, or unfair acts or practices in the conduct of any trade or commerce. (3) To make state consumer protection and enforcement consistent with established policies of federal law relating to consumer protection. 142. Fla. Stat. § 501.204 provides as follows: 501.204 Unlawful acts and practices.— (1) Unfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful. (2) It is the intent of the Legislature that, in construing subsection (1due consideration and great weight shall be given to the interpretations of the Federal Trade Commission and the federal courts relating to s. 5(a)(1) of the Federal Trade Commission Act, 15 U.S.C. s. 45(a)(1) as of July 1, 2017. 143. Fla Stat. § 501.211 provides in part as follows: 501.211 Other individual remedies.— (1) Without regard to any other remedy or relief to which a person is entitled, anyone aggrieved by a violation of this part may bring an action to obtain a declaratory judgment that an act or practice violates this part and to enjoin a person who has violated, is violating, or is otherwise likely to violate this part. (2) In any action brought by a person who has suffered a loss as a result of a violation of this part, such person may recover actual damages, plus attorney’s fees and court costs as provided in s. 501.2105. 136. Defendants have engaged in unlawful and unfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct with any trade or commerce within the scope of Fla. Stat. § 501.204(1) by among other things: (A) Imposing the Ultimatum upon Plaintiff and Class Members unlawfully restraining trade in violation of the Sherman Antitrust Act, unlawfully pressuring and forcing Plaintiff and Class Members to steer their clients to UWM in violation of the Sherman Antitrust Act, unlawfully attempting to create an illegal monopoly in the wholesale mortgage market in violation of the Sherman Antitrust Act, unlawfully restraining trade in violation of the Florida Antitrust Act, unlawfully pressuring and forcing Plaintiff and Class Members to steer their clients to UWM in violation of the Florida Antitrust Act, and unlawfully attempting to create an illegal monopoly in the wholesale mortgage market in violation of the Florida Antitrust Act; and (B) Intentionally, maliciously and knowingly making the false Misrepresentations to Plaintiff and Class Members. 144. To remedy these violations, it is requested that this Court award damages for the injuries and losses sustained by Plaintiff and Class Members as a result of Defendants’ unlawful, deceptive and unfair trade practices and reasonable attorneys’ fees pursuant to Florida’s Deceptive and Unfair Trade Practices Act. 145. As a direct and proximate result of Defendants’ violation of Fla. Stat. § 501.204(1), Plaintiff and Class Members have been injured in their business and property in the millions of dollars. 146. As a direct and proximate result of Defendants’ actions, Plaintiff and Class Members have suffered, and will continue to suffer damages in the future, including compensatory damages, plus interest, in an amount in excess of $75,000. 147. Plaintiff, and Class Members, are entitled to recover damages and attorneys’ fees pursuant to statute in an amount to be determined, as provided for by Fla. Stat. § 501.211(2). COUNT IX (DECLARATORY RELIEF, 28 U.S.C. §§ 2201-2202) Plaintiff, and Class Members, seek declaratory relief against Defendants and allege: 148. Plaintiff repeats and realleges paragraphs 1 through 58 this Complaint as if fully set forth 149. An actual controversy now exists between Plaintiff and UWM regarding the validity and enforceability of Defendants’ Ultimatum, its implementing Addendum, and rights and liabilities related thereto. 150. Defendants have, or have threatened to, terminate or suspend the business relationships with Plaintiff and Class Members who refuse to accept Defendants’ Ultimatum and/or impose exorbitant and unconscionable financial penalties for Plaintiff and Class Members who accept the Ultimatum but subsequently submit a client’s (consumer/prospective borrower) mortgage loan application to Fairway Mortgage or Rocket Pro TPO. 151. The exorbitant and unconscionable financial penalties called for in connection with Defendants’ Ultimatum have been labelled by Defendants as “Liquidated Damages” and have been described by Defendants as a “penalty” for failing to acquiesce to the Ultimatum and comply with the boycott against Fairway Mortgage and Rocket Pro TPO. 152. The Liquidated Damages provided for in the Addendum are clearly designed as a penalty that bears no relationship to actual damages that may be incurred by UWM even if the Addendum itself was enforceable (which it is not). The Liquidated Damages were arbitrarily and solely determined by Defendants and are admittedly penalties. (See attached Exhibit A) 153. Plaintiff requests: 1) a declaration that the Ultimatum and implementing Addendum are per se illegal under federal antitrust law; 2) a declaration that the Addendum is unlawful and unenforceable; 3) a declaration that the rights and obligations under the Addendum for those who did not acknowledge acceptance of it as unenforceable; and 4) a declaration that the Liquidated Damages provision in the Addendum is a penalty and is therefore unenforceable by law. PRAYER FOR RELIEF WHEREFORE, Plaintiff and the Class Members pray for relief and judgment as follows: A. For an order certifying the Class, appointing Plaintiff as representative for the Class, and appointing Plaintiff’s counsel as Class counsel; B. That Defendants bear the cost of any notice sent to the Class; D. For an order awarding Plaintiff and the Members of the Class treble damages; E. For an order awarding Plaintiff and the Members of the Class punitive damages; F. For an order awarding Plaintiff and the Members of the Class pre- and post-judgment interest and attorney fees; G. For an order declaring the Addendum to be unlawful and unenforceable; H. For an order declaring that the rights and obligations under the Addendum for Plaintiff and Class Members who did not acknowledge acceptance of the Addendum to be unenforceable; I. For an order declaring that the Liquidated Damages provision in the Addendum is a penalty and is therefore unenforceable by law; J. For an order awarding attorneys' fees and costs of suit, including experts' witness fees as permitted by law; and K. Such other and further relief as this Court may deem just and proper. DEMAND FOR JURY TRIAL Plaintiff demands a trial by jury. Respectfully Submitted, PARRISH & GOODMAN, PLLC /s/ Robert H. Goodman _______________ ROBERT H. GOODMAN Florida Bar No.: 1008059 13031 McGregor Blvd., Suite 8 Fort Myers, Florida 33919 Phone: (813) 643-4529 Facsimile: (813) 315-6535 Primary: rgoodman@parrishgoodman.com Secondary: admin@parrishgoodman.com AND JOSEPH E. PARRISH Florida Bar. No: 690058 Primary: jparrish@parrishgoodman.com Secondary: admin@parrishgoodman.com Counsel for Plaintiff

antitrust

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Robert J. Gralewski, Jr. (#196410) Kirby McInerney LLP 600 B Street, Suite 1900 San Diego, CA 92101 Telephone: (619) 398-4340 Email: bgralewski@kmllp.com Counsel for Lead Plaintiff Eric Blackwell [Additional Counsel on Signature Page] UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA Case No. 3:18-cv-01772-VC AMENDED CLASS ACTION COMPLAINT JURY TRIAL DEMANDED KETANKUMAR SHAH, individually and on behalf of all others similarly situated, Plaintiff, v. A10 NETWORKS, INC., LEE CHEN, GREG STRAUGHN, SHIVA NATARAJAN, and TOM CONSTANTINO, Defendants. TABLE OF CONTENTS I.  NATURE OF THE ACTION .................................................................................................... 1  II.  JURISDICTION AND VENUE .............................................................................................. 10  III.  PARTIES ................................................................................................................................. 10  A.  Plaintiffs ...................................................................................................................... 10  B.  Defendants ................................................................................................................... 11  IV.  FACTUAL BACKGROUND ................................................................................................. 12  A.  A10’s Business ............................................................................................................ 12  B.  A10’s Financial Results were Materially Misleading and Violated Applicable GAAP, SEC Rules, and Its Own Stated Policies ......................................................... 21  C.  The Company’s Violation of Disclosure Obligations Imposed by GAAP and SEC Regulations ................................................................................................... 25  V.  DEFENDANTS’ FALSE AND/OR MISLEADING STATEMENTS DURING THE CLASS PERIOD ............................................................................................................ 36  A.  False and Misleading Statements in the February 9, 2016 Fourth Quarter and Year-End 2015 Earnings Press Release and Conference Call .............................. 36  B.  False and Misleading Statements in the 2015 Annual Report ..................................... 38  C.  False and Misleading Statements in the April 28, 2016 First Quarter 2016 Earnings Press Release and Conference Call .............................................................. 43  D.  False and Misleading Statements in the First Quarter 2016 Form 10-Q ..................... 44  E.  False and Misleading Statements in the July 28, 2016 Second Quarter 2016 Earnings Press Release and Conference Call .............................................................. 46  F.  False and Misleading Statements in the Second Quarter 2016 Form 10-Q ................ 48  G.  False and Misleading Statements in the October 27, 2016 Third Quarter 2016 Earnings Press Release and Conference Call ..................................................... 51  H.  False and Misleading Statements in the Third Quarter 2016 Form 10-Q ................... 54  I.  False and Misleading Statements in the February 9, 2017 Fourth Quarter and Year-End 2016 Earnings Press Release and Conference Call .............................. 57  J.  False and Misleading Statements in the 2016 Annual Report ..................................... 60  K.  False and Misleading Statements in the April 27, 2017 First Quarter 2017 Earnings Press Release and Conference Call ..................................................... 64  L.  False and Misleading Statements in the First Quarter 2017 Form 10-Q ..................... 65  VI.  THE TRUTH BEGINS TO EMERGE THROUGH PARTIAL CORRECTIVE DISCLOSURES WHILE DEFENDANTS CONTINUE TO ISSUE FALSE AND MISLEADING STATEMENTS ............................................................................................. 67  A.  False and Misleading Statements in the July 13, 2017 Preliminary Second Quarter 2017 Earnings Press Release ............................................................. 67  B.  False and Misleading Statements in the July 27, 2017 Second Quarter 2017 Earnings Press Release and Conference Call .............................................................. 69  C.  False and Misleading Statements in the Second Quarter 2017 Form 10-Q ................ 71  D.  False and Misleading Statements in the September 28, 2017 Preliminary Third Quarter Earnings Press Release ......................................................................... 74  E.  False and Misleading Statements in the October 26, 2017 Third Quarter 2017 Earnings Press Release and Conference Call ..................................................... 75  F.  False and Misleading Statements in the Third Quarter 2017 Form 10-Q ................... 77  G.  False and Misleading Statements in the January 16, 2018 Preliminary Fourth Quarter and Year-End 2017 Earnings Press Release ....................................... 80  VII.  THE TRUTH IS REVEALED ................................................................................................ 81  VIII.  LOSS CAUSATION ............................................................................................................... 82  A.  The July 13, 2017 Partial Disclosure ........................................................................... 83  B.  The January 16, 2018 Partial Disclosure ..................................................................... 84  C.  The January 30, 2018 Corrective Disclosure .............................................................. 85  IX.  ADDITIONAL FACTUAL ALLEGATIONS FURTHER SUPPORTING SCIENTER .............................................................................................................................. 87  A.  The Individual Defendants’ Hands-On Involvement in A10’s “Core Operations” During the Class Period ................................................................ 87  B.  Executive Turnover ..................................................................................................... 96  C.  Individual Defendants’ Accounting Expertise ............................................................ 97  D.  A10 and Individual Defendants Failed to Maintain Effective Controls ...................... 99  E.  A10’s Code of Business Conduct and Ethics and Financial Reporting Obligations of Senior Officers ................................................................................... 106  F.  Corporate Scienter ..................................................................................................... 108  X.  POST-CLASS PERIOD DISCLSOURES ............................................................................ 108  XI.  CLASS ACTION ALLEGATIONS ...................................................................................... 110  XII.  APPLICABILITY OF THE FRAUD-ON-THE-MARKET AND AFFILIATED UTE PRESUMPTIONS OF RELIANCE ...................................................... 111  XIII.  NO SAFE HARBOR ............................................................................................................. 113  XIV.  COUNTS ............................................................................................................................... 113  XV.  PRAYER FOR RELIEF ........................................................................................................ 117  XVI.  JURY TRIAL DEMANDED ................................................................................................ 117  Court-appointed Lead Plaintiff Eric Blackwell (“Lead Plaintiff” or “Blackwell”) and Additional Plaintiff Robert Kraszewski (“Additional Plaintiff” or “Kraszewski”) (collectively, “Plaintiffs”), by and through their attorneys, allege the following against Defendants A10 Networks, Inc. (“A10” or the “Company”), A10’s founder and Chief Executive Officer (“CEO”) Lee Chen (“Chen”), A10’s former Chief Financial Officer (“CFO”) Greg Straughn (“Straughn”), A10’s former interim CFO Shiva Natarajan (“Natarajan”), A10’s current CFO Tom Constantino (“Constantino”), and Ray Smets (“Smets”), A10’s former Executive Vice President (“EVP”) of Worldwide Sales. Plaintiffs’ allegations concerning their own transactions are based upon their individual personal knowledge. All other allegations are based upon Plaintiffs’ counsel’s investigation, which includes without limitation: (a) review and analysis of regulatory filings made by A10 with the United States Securities and Exchange Commission (the “SEC”); (b) review and analysis of press releases and media reports issued and disseminated by A10; and (c) review of other publicly available information concerning A10, including reports on A10 authored by securities analysts. Plaintiffs believe that substantial additional evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery. I. NATURE OF THE ACTION 1. This is a federal securities class action against A10 and certain of its officers for violations of the federal securities laws. Plaintiffs bring this action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and SEC Rule 10b-5 promulgated thereunder, on behalf of itself and all similarly situated purchasers of A10 securities during the period from February 9, 2016 through January 30, 2018, both dates inclusive (the “Class Period”). 2. A10, a publicly-traded Delaware corporation headquartered in San Jose, California, provides software and hardware solutions in the United States and internationally. A10’s securities trade on the New York Stock Exchange (“NYSE”) under the ticker symbol “ATEN.” A10 is a Secure Application Services™ company, that offers a range of high-performance application networking solutions that help organizations ensure that their data center applications and networks remain highly available, accelerated and secure. 3. During the Class Period, Defendants fraudulently disseminated numerous financial statements that reported artificially inflated revenue and earnings. Defendants employed these materially false financial statements for the purpose of managing A10’s quarterly revenue and earnings to satisfy market expectations and present the illusion of consistent financial performance. 4. Finally dispelling that illusion, on January 30, 2018, A10 issued a press release announcing that it was postponing its Q4’17 and full year earnings release and conference call because its Audit Committee and outside counsel were conducting an investigation into the Company’s revenue recognition practices from the fourth quarter of 2015 through the fourth quarter of 2017, inclusive, as well as reviewing its internal controls. On August 29, 2018, A10 filed its Form 10-K (the “Restatement 10-K”) with the SEC which contained a restatement (the “Restatement”), confirming that its Annual Report on Forms 10-K for the fiscal years ended December 31, 2015 and December 31, 2016, and the Quarterly Report on Forms 10-Q for each quarter from the quarters ended March 31, 2016 through September 30, 2017 were materially false. 5. The Restatement was an admission that A10’s previously-issued financial results were materially inaccurate. The Restatement also revealed to the investing public the likelihood that the Company had been improperly recognizing revenue when payment was contingent on resale and/or the transactions included extended payment terms beyond the Company’s customary terms, consistent with a practice of channel stuffing. During the Class Period, these accounting violations allowed the Company to exceed revenue expectations, and to maintain the illusion that it had reversed a trend of non-GAAP operating losses and had reached non-GAAP profitability in Q3’16 and was increasingly profitable in Q4’16.1 To the contrary, the Restatement indicated that: (i) Q4’15 revenues had in fact missed the consensus expectations at a time when the market was questioning whether the Company was sufficiently diversified to weather a decline in enterprise IT spending; (ii) the Company had not successfully reached its goal of non-GAAP profitability and 1 “GAAP” refers to Generally Accepted Accounting Principles in the United States of America. non-GAAP EPS did not breakeven in Q3’16;2 but instead, continued operating at a non-GAAP loss; and (iii) the Company continued operating at a non-GAAP net loss in Q4’16, revenues were below consensus guidance rather than at the midpoint, and product revenues were improperly inflated by $3 million, more than 5%. NON-GAAP Financial Measures ($M, except EPS) Q1’16 Q2’16 Q3’16 Q4’16 Operating Income (Loss) – As Previously Reported $(4.0) $(1.9) $0.3 $4.7 Net loss – As Previously Reported $(4.1) $(1.1) $0.2 $2.3 Net income (loss) per share – As Previously Reported $(0.06) ($0.02) $0.00 $0.03 Operating Income (Loss) – As Restated $(2.9) $(1.3) $(0.23) $2.1 Net Loss – As Restated $(3.1) $(.5) $(0.37) $(0.26) Net income (loss) per share – As Restated $(0.05) $(0.01) $(0.01) $(0.00) 6. Pursuant to GAAP and SEC guidance, revenue cannot be properly recognized if the fee is not fixed or determinable or if collectibility is not reasonably assured. Defendants have admitted that A10 improperly recognized revenue during the Class Period when the price was not fixed or determinable and for which collectibility was not reasonably assured because: (i) During the year ended December 31, 2015,3 revenue on certain sale transactions was recognized prematurely, as it was determined that there was an oversight of facts that indicated collectability was not reasonably assured, because the reseller’s or distributor’s payment to the Company was contingent on resale of the product or the transaction included extended payment terms beyond the Company’s customary terms. (ii) During the year ended December 31, 2016, revenue was recognized prematurely at the time, as it was determined that there was an oversight or misuse of facts which indicated that the reseller’s or distributor’s price was not fixed or determinable, or that collectability was not reasonably assured, because the reseller’s or distributor’s payment to the Company was contingent on resale of the product or the transaction included extended payment terms beyond the Company’s customary terms. 7. For Q4’15, the adjustment reduced total revenue by more than $2.6 million, whereas the Company had previously reported exceeding consensus by $2.2 million, thus indicating that the 2 The announcement that A10 achieved non-GAAP profitability offset the negative disclosure that the it missed Q3’16 revenue guidance, which resulted in the stock price declining 17%. 3 The Company stated in its Restatement 10-K that the investigation “principally focused on certain revenue recognition matters from the fourth quarter of 2015 through the fourth quarter of 2017 inclusive,” and since the Restatement 10-K does not provide quarterly data for 2015 errors, Plaintiffs must assume that the FY’15 errors were in Q4’15. Company failed to meet expectations. For Q3’16, the Company initially reported it had achieved non-GAAP net income of $0.2 M or break even on a per share basis, compared with a loss of $0.07 per share in last year’s third quarter, yet the Restatement showed the Company was operating at a non-GAAP net loss and had negative non-GAAP net income per share. For Q4’16, A10 reported quarterly revenue of $64 million, exceeding consensus estimates by 5%, yet the restated revenue was below the $61 million consensus. Further, the Company’s Q4’16 non-GAAP net income of $2.3 million was restated to a loss of $0.3 million, and non-GAAP EPS went from $0.03, which was above the midpoint of the Company’s guidance, to $0.00, at the bottom of the guidance range. 8. Importantly, A10 has admitted that in 2015 “revenue on certain sale transactions was recognized prematurely” and “collectability was not reasonably assured.” The Company also admitted that in 2016 “revenue was recognized prematurely at the time” because “the reseller’s or distributor’s price was not fixed or determinable,” or that “collectability was not reasonably assured.” Further, Plaintiffs allege numerous additional facts that raise a strong inference that Defendants intentionally or recklessly misstated A10’s financial results in violation of GAAP and the Exchange Act. 9. A10’s core business was highly concentrated, with purchases from its ten largest customers accounting for approximately 32% of revenue in 2015, 36% of revenue in 2016, and 35% of revenue in 2017. In addition, during 2016, a single distribution channel partner accounted for 14% of A10’s total revenue. Because of this concentrated customer base, A10’s senior management was able to closely monitor its business. 10. During the Class Period, the Individual Defendants (defined herein), including Chen, consistently provided detailed guidance regarding current period and projected customer purchases and revenue recognition during earnings calls. In addition, A10 described Chen as the Company’s “chief operating decision maker” and noted that, in addition to his operational responsibilities, conducted in-depth reviews of the Company’s financial performance. 11. On the Company’s FY’16 earnings call held on February 9, 2017, it was announced that Straughn, the Company’s CFO, had resigned which was effective upon the filing of the Company’s Form 10-K, although Straughn would remain with the Company until April 2017. Natarajan, A10’s Vice President and Controller, was appointed interim CFO effective upon the effectiveness of Straughn’s resignation until A10 found a replacement. In June 2017, Constantino took over the role as CFO. Shortly after, the Company announced its Q2’17 results, indicating it had missed its guidance due to 12 deals being pushed out. In a press release issued July 27, 2017 discussing Q2’17 financial results, Chen stated, “We are disappointed with our second quarter results as a number of opportunities in our pipeline did not close in the quarter, which impacted our revenue. We are implementing a number of cross-functional actions to improve our execution, increase the effectiveness of our go-to-market activities and support growth for our expanding product portfolio.” 12. Constantino reportedly conducted a thorough review of A10’s processes and put in place improved sales enablement processes to improve pipeline execution and weekly sales committee meetings. Shortly after, in September 2017, the Company announced the departure of Smets, EVP of Worldwide Sales, who had been with the Company since 2013 and was a member of A10’s six-person Executive Team. Constantino assumed oversight of Worldwide Sales following Smets’ departure, on an interim basis. 13. On January 30, 2018, A10 announced that it was postponing of its financial results for Q4’17 and FY 2017 because “the Company determined that a mid-level employee within its finance department had violated the Company’s Insider Trading Policy and Code of Conduct,” and, as a result, its Audit Committee and outside counsel “determined that further review and procedures relating to certain accounting and internal control matters should be undertaken.” The Company further disclosed that the investigation was “principally focused on certain revenue recognition matters from the fourth quarter of 2015 through the fourth quarter of 2017 inclusive.” In reaction to the January 30, 2018 announcement, during the next trading day, A10’s share priced declined 12%, erasing millions of dollars of shareholder value. 14. On July 2, 2018, the Company issued a press release announcing that the internal investigation was complete and “errors in the company’s financial statements were identified relating to the recognition of revenue in a limited number of sale transactions between the company and its resellers.” It went on to explain: “The principal factors that contributed to the company prematurely recognizing revenue on these transactions were incorrect assessment of resellers’ ability or intent to pay the company before they received a purchase order or payment from their end customers, and some of the facts and circumstances of certain transactions not being fully communicated to accounting personnel at the time of the transaction.”4 The press release went on to state that A10’s “Annual Report on Form 10-K for the fiscal year ended December 31, 2016, and its condensed consolidated financial statements contained in its Quarterly Report on Forms 10-Q for the quarters ended September 30, 2016 and March 31, 2017 should no longer be relied upon and should be restated.” 15. The press release also indicated that the Company expected to report one or more material weaknesses in internal control over financial reporting related to this matter and that its disclosure controls and procedures were not effective. Nevertheless, it asserted that “The company’s Board of Directors continues to have the utmost confidence in the company’s current officers, none of whom were implicated in any misconduct or caused any of the errors identified in the investigation. The Audit Committee notes management’s assistance and helpful cooperation with all aspects of the investigation.” This finding is directly contradicted by the finding that management failed to maintain adequate internal controls. 16. Nearly seven months later, after an extensive investigation, the full extent of Defendants’ accounting fraud was disclosed to the market on August 29, 2018, when A10 finally issued its restated financial statements. The Restatement 10-K stated, “our Chief Executive Officer and Chief Financial Officer, as our principal executive officer and principal financial officer, respectively, concluded that our disclosure controls and procedures were not effective as of December 31, 2017, due to the material weaknesses in our internal controls over financial reporting.” It noted, “Our internal control over financial reporting is designed by, and under the supervision of our principal executive officer and principal financial officer and effected by the Company’s Board of Directors, management, and others.” 17. The Restatement 10-K detailed the material weaknesses identified: 4 All emphasis is added unless otherwise noted herein. Control Environment and Monitoring Activities - We did not maintain an effective control environment. Specifically, our control environment, which sets the tone of our organization, and influences the control consciousness of employees, did not consistently ensure that the Company’s policies relating to revenue recognition and standards of conduct were affirmatively understood and followed and that deviations therefrom were consistently identified and corrected in a timely manner or hold certain individuals accountable for their internal control responsibilities in the pursuit of Company objectives. Further, at certain levels within certain functions, there were insufficient monitoring activities to determine certain components of internal control were present and functioning. The control environment material weaknesses contributed to the revenue recognition material weaknesses described below. Revenue Recognition - We identified the following material weaknesses with respect to revenue recognition: • Certain personnel in our credit and accounting functions did not have the adequate expertise to design and operate certain internal controls, to formalize certain appropriate policies and procedures, or to communicate matters relevant to revenue recognition. Certain personnel in our sales and sales operations functions did not have the adequate expertise to identify and communicate to accounting personnel certain information relevant to revenue recognition. • Certain policies and procedures were not sufficiently detailed to establish expectations for and to support effective design and operation of internal controls in our sales, credit, and accounting functions to consistently determine whether our reseller’s or distributor’s price was fixed or determinable, or that collectability was reasonably assured in every case, and that once determined, adequate documentation was maintained. The material weaknesses described above resulted in errors that led to the restatement of the Company’s annual consolidated financial statements for the years ended December 31, 2016 and 2015. Furthermore, these control deficiencies could have resulted in other misstatements in financial statement accounts and disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that might not have been prevented or detected. 18. As admitted by the Company, Individual Defendants Chen, Straughn, Natarajan, and Constantino were responsible for ensuring that the Company maintained adequate internal controls. The weaknesses identified above clearly reflect their failure to do so. It is management’s duty to maintain an effective control environment and to set the tone for the organization, and as admitted, the Individual Defendants failure to do so resulted in the revenue recognition material weakness. The Individual Defendants were responsible for ensuring the Company’s policies relating to revenue recognition and standards of conduct were understood and followed, as well as, ensuring that sufficient monitoring activities were in place. Additionally, the Individual Defendants were responsible for ensuring personnel had adequate expertise and, critically, that effective policies and procedures were in place to determine whether a reseller’s or distributor’s price was fixed or determinable, that collectability was reasonably assured, and that adequate documentation was maintained. 19. The Restatement 10-K also detailed various remediation actions taken to address these material weaknesses, further reflecting the Individual Defendants failure to implement and maintain adequate internal controls during the Class Period:  Executive Management Communications to Reinforce Compliance - The Company’s Chief Executive Officer and Chief Financial Officer, at the direction of the Company’s Board of Directors, have in communications to personnel reinforced the importance of adherence to the Company’s policies and procedures regarding ethics and compliance and the importance of identifying misconduct and raising and communicating concerns.  Changes to Our Executive Management and Sales Personnel - The Company has hired new personnel, who have enabled improved lines of communication across business functions and increased expertise.  Training Practices - The Company has initiated development of a comprehensive training program relating to revenue recognition and contract review.  Credit Policies and Procedures - The Company has evaluated its practices regarding extension of credit to customers and evaluation of customer creditworthiness and has begun implementing improvements in those practices.  Revenue Recognition Policies and Procedures - The Company has evaluated its revenue recognition policies and procedures and has begun implementing improvements, including: (i) the development of more comprehensive revenue recognition policies and improved procedures to ensure that such policies are understood and consistently applied; (ii) better communication among functions involved in the sales process, including credit, accounting, sales, and sales operations; (iii) increased standardization of contract documentation and revenue analyses for individual transactions, including increased oversight of revenue opportunities and contract review by personnel with the requisite accounting knowledge; (iv) the development of a more comprehensive review process for, and monitoring controls over, customer contracts to ensure accurate revenue recognition, and the preparation of accounting memoranda to document the foregoing; (v) the development of more comprehensive policies and procedures for product shipment and delivery documentation; (vi) the adoption of enhancements of policies and procedures for approval of non-standard revenue arrangements with reseller and distributor customers; and (vii) the adoption of revised documentation, including the Company’s sales quotations, to identify additional information relevant to revenue recognition.  Implementation and Enhancement of Entity Level Controls - The Company intends to implement additional controls in its quarterly/annual financial reporting process, including enhanced sub-certifications by all sales personnel and with specific documentation related to the identification of nonstandard revenue arrangements. The Company also intends to enhance its insider trading policy and related communications to employees. 20. Executive turnover during the Class Period indicates that the Company terminated multiple executives whose positions suggest their responsibility for the revenue recognition and internal control issues later admitted. 21. The Restatement 10-K disclosed that in March 2018, the SEC began a private investigation into any securities law violations by A10 or persons currently or formerly affiliated with A10, including possible violations of the following:  Section 17(a) of the Securities Act of 1933;  Section 10(b) of the Securities and Exchange Act of 1934;  Section 13(a) of the Securities and Exchange Act of 1934;  Section 13(b) of the Securities and Exchange Act of 1934;  Rule 10b-5 of the Securities and Exchange Act of 1934;  Rule, 12b-20 of the Securities and Exchange Act of 1934;  Rule, 13a-1 of the Securities and Exchange Act of 1934;  Rule 13a-11of the Securities and Exchange Act of 1934;  Rule 13a-13of the Securities and Exchange Act of 1934;  Rule 13a-14 of the Securities and Exchange Act of 1934;  Rule 13a-15 of the Securities and Exchange Act of 1934; and  Rule 13b2-1 of the Securities and Exchange Act of 1934. The Company stated that it was cooperating with the SEC investigation but was “unable to predict the duration, scope or outcome of the investigation, but an adverse outcome is reasonably possible.” 22. A10 continues to address its accounting issues. On August 10, 2018, A10 filed a notification that quarterly reports for Q1 and Q2’18 would be submitted late, but that the Company expected to submit the filings “in the third quarter of 2018.” On September 24, 2018, A10 filed its Q1’18 Form 10-Q with the SEC. As of October 4, 2018, A10 still has not filed its Form 10-Q for Q2’18. II. JURISDICTION AND VENUE 23. 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). 24. 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). 25. 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)). A10 is headquartered in this Judicial District, and substantial acts in furtherance of the alleged fraud or the effects of the fraud have occurred in this Judicial District. 26. In connection with the acts, transactions, and conduct alleged herein, Defendants directly and indirectly used the means and instrumentalities of interstate commerce, including the U.S. mail, interstate telephone communications, and the facilities of a national securities exchange. III. PARTIES A. Plaintiffs 27. Lead Plaintiff Eric Blackwell (previously defined as “Blackwell”) purchased A10 common stock during the Class Period, as was detailed in his sworn certification, and suffered damages as a result of the federal securities law violations and false and/or misleading statements and/or material omissions alleged herein. See ECF No. 57-2. 28. Additional Plaintiff Robert Kraszewski (previously defined as “Kraszewski”) purchased A10 common stock during the Class Period, as was detailed in his sworn certification, and suffered damages as a result of the federal securities law violations and false and/or misleading statements and/or material omissions alleged herein. See ECF No. 59-2. B. Defendants 29. Defendant A10 Networks, Inc. provides software and hardware solutions in the United States and internationally. A10 is a Secure Application Services™ company, providing a range of high-performance application networking solutions that help organizations ensure that their data center applications and networks remain highly available, accelerated and secure. The Company is incorporated in Delaware and its principal executive offices are located at 3 West Plumeria Drive, San Jose, California 95134. A10’s securities trade on the NYSE under the ticker symbol “ATEN.” 30. Defendant Lee Chen is the founder and has been the CEO and a director of A10 at all relevant times. Prior to founding A10, Chen was the co-founder vice president of engineering at Foundry Networks. 31. Defendant Greg Straughn was A10’s CFO from the beginning of the Class Period until February 9, 2017. Prior to joining A10 in 2011, Straughn had prior experience serving as a CFO, including at Kabira Technologies, Inc., a provider of high-performance software products to the telecommunications and financial services market. Straughn holds a B.S. in Finance from the University of California at Berkeley. 32. Defendant Shiva Natarajan served as A10’s interim CFO from February 2017 until June 2017. Prior to being appointed Interim CFO, he served as the Company’s Vice President and Controller and was responsible for global accounting operations. Prior to joining A10 Networks in September 2015, Natarajan served as vice president, controller, and chief accounting officer at Fluidigm Corporation. Subsequent to being employed as Senior Manager of Assurance and Advisory Business Services at Ernst & Young and prior to joining A10, Natarajan held senior corporate finance and accounting roles at other companies. 33. Defendant Tom Constantino has been A10’s CFO since June 2017. Constantino holds a B.S. in Business Administration from San Jose State University and began his career in public accounting at PricewaterhouseCoopers. Prior to joining A10, Constantino served as Vice President of Accounting and Finance Operations with Western Digital as well as CFO of its HGST subsidiary. 34. Defendant Ray Smets was the EVP of Worldwide Sales from November 2016 until October 2017, and was Vice President of Worldwide Sales from July 2013 to November 2016. 35. Defendants Chen, Straughn, Natarajan, Constantino, and Smets are sometimes referred to herein as the “Individual Defendants.” 36. Defendant A10 and the Individual Defendants are collectively referred to as “Defendants.” The Individual Defendants, because of their positions with the Company, possessed the power and authority to control the content of A10’s reports to the SEC, press releases, and presentations to securities analysts, money and portfolio managers, and institutional investors, i.e., the market. Each Individual Defendant was 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, each of these 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, as those statements were each “group-published” information, the result of the collective actions of the Individual Defendants. IV. FACTUAL BACKGROUND A. A10’s Business 37. A10 provides software and hardware solutions in the United States and internationally. A10 is a secure application services solutions and services company, enabling its customers to secure and optimize the performance of their data center and cloud applications and secure their users, applications and infrastructure from internet, web and network threats at scale. These solutions are designed to give customers the visibility, performance, and security their applications need across both on-premise and cloud environments to produce greater agility for their businesses. A10’s customers include cloud providers, web-scale companies, service providers, government organizations and enterprises. 38. During the Class Period, A10’s product portfolio consisted of six advanced application delivery and security products. During the Class Period, the Company’s product revenues declined from 69.5% in 2015 to approximately 67% in 2016 and down to 64.7% in 2017. A10’s products are offered in a variety of form factors, such as optimized hardware appliances, bare metal software, virtual appliances, and cloud-native software. With the exception of Lightning ADS, A10’s products are built on its Advanced Core Operating System (“ACOS”) platform and leverage its performance optimization and security features. ACOS’ high- performance design enables A10’s products to address a wide range of performance-driven networking challenges. The flexible software design of ACOS allowed A10 to apply its portfolio to a variety of markets for a variety of needs, such defending against the rising volume of large- scale, sophisticated Distributed Denial of Service (“DDoS”) attacks. 39. A10 also offers a broad range of support services including installation, phone support, repair and replacement, software updates, online tools, consulting and training services. All customers receive standard warranty support for 90 days with purchase of A10 products. Greater than 95% of A10 customers purchase one of its maintenance offerings, which entitles them to the support provided by A10’s global support team. Maintenance contracts may be purchased with products in 12 month increments up to five years. The average maintenance contract term is approximately 18 months. A10 invoices its channel partners or customers directly for maintenance contracts at the time of hardware purchase. All maintenance contracts are non-cancellable and are generally renewed through the same channel as originally purchased. During the Class Period, service revenues accounted for 30.5%, 33%, 36.3% of its total revenues in 2015, 2016, and 2017, respectively. 40. A10’s geographic concentration was a concern for investors during the Class Period. During the years ending December 31, 2017, 2016 and 2015, the Company derived 49%, 52%, and 54% of its total revenue from the United States and 22%, 23%, 18% of its total revenue from Japan, respectively. Geographic diversification was particularly important in 2015 when the Yen suffered a drastic decline in value compared to the dollar, impacting the Company’s Japanese revenues and making the Company more reliant on North America and other regions. 41. A10’s customer concentration was another concern for investors during the Class Period. Purchases from its ten largest end-customers accounted for 35%, 36% and 32% of total revenue during the years ended December 31, 2017, 2016 and 2015, respectively. In 2016, one distribution channel partner accounted for 14% of its total revenue, yet no customer accounted for more than 10% of its total revenue in 2015 or 2017. As of December 31, 2015, two customers accounted for 27% and 11% of A10’s gross accounts receivable, and three customers accounted for 15%, 13% and 11% of gross accounts receivable as of December 31, 2016; however, no customer accounted for over 10% of A10’s gross accounts receivable as of December 31, 2017. Sales to these large end-customers were typically characterized by large but irregular purchases with long sales cycles. The Company noted that the timing of these purchases and the delivery of the purchased products are difficult to predict. 42. To lessen the risk associated with its geographic and customer concentration, the Company made efforts to diversify its revenue base through channel partners (resellers and distributors). The Company fulfills nearly all orders globally through its distribution channel partners, which include distributors, value added resellers and system integrators. Revenue fulfilled through its distribution channel partners accounted for 86%, 85% and 81% of total revenue for the years ended December 31, 2017, 2016 and 2015, respectively. The Company launched its Affinity channel program in 2014 in North America, and it was rolled out globally in 2015. 43. During the May 4, 2015 Q1’15 earnings call, Chen observed, “It has been close to one year since we launched our affinity channel program, and we have seen a nice uptick in the channel-led closed and initiated deals compared with this time last year. Additionally, our channel pipeline has grown over 75%.” During the same call, Smets described how the affinity channel program was one of two factors driving North American growth: From the North American perspective, really the underpinning of North America’s success was really two key factors. The first one was enterprise growth, without a doubt. Obviously that was helped with the significant Fortune 50 win we had. But also we’ve been making this investment in building our channel, the affinity channel program for A10 Networks, and that channel was actually working quite well for us. As Lee mentioned in his prepared remarks, we saw an uptick in channel closed deals as well as channel pipeline development for us in North America, and we saw that as a positive. So despite some of the challenge we saw – the headwind, I would say, we saw in deal size on the service provider side, it was enterprise and channel investment that really helped. 44. Likewise, a May 19, 2015 J.P. Morgan report discussed the Company’s channel strategy, stating: A10’s total channel partner count remained unchanged Y/Y at 650. However, within this base, the company eliminated ~100 lower performing channel partners while adding 100 new partners. The company plans to grow its channel presence in EMEA this quarter and following that expects to expand channel presence in APAC. A10 modified its channel partners incentive plan to reward product sales somewhat more than maintenance services sales. 45. Smets noted on the Company’s Q2’15 earnings call that Affinity was “targeted specifically to the ADC, and very, very much so targeted into the enterprise.” Dougherty & Company LLC’s (“Dougherty & Company”) July 31, 2015 report indicated that A10’s strong enterprise performance in Q2’15 was driven by security sales with “smaller regional [Value Added Resellers] in the banking vertical” and that “[m]anagement indicated the Affinity channel program progress supported an uptick in deal registration as well as an increase in the number of deals coming through the channel.” 46. On October 26, 2015, the Buckingham Research Group issued a report stating that A10 had introduced “a new channel program with an emphasis on security” and noted “a push into federal earlier in the year.” 47. Heading into 2016, the market was experiencing a decline in enterprise IT spending, yet A10’s high-end security products and focus on the channel was thought to insulate it from these market issues allowing the Company reported record enterprise sales from Q2’15 to Q1’16. The Company began telling the market it would reach non-GAAP profitability in 2016. 48. On February 9, 2016, the beginning of the Class Period, A10 announced its Q4’15 earnings, reporting its third straight quarter of record sales with product revenue at an all-time high driven by sales of the Company’s security solution to enterprise and service provider customers. J.P. Morgan issued a report that same day stating, “A10 Networks reported a solid beat and raise in spite of slowing enterprise IT spending. The company generated record bookings as it saw a broad-based increase in demand across products and verticals.” Buckingham Research Group also issued a report the following day, noting, “The company did have a large service provider customer in the quarter, accounting for ~20% of 4Q sales, driving average deal sizes higher but also increasing customer concentration. Note that ex-the-large-customer, bookings in 4Q were still a record high, and better 1Q guidance implies improving visibility without a ‘gap’ following recognition of the large deal – a positive, in our view.” 49. A10 again slightly surpassed revenue and EPS expectations in Q1’16. Oppenheimer’s April 28, 2016 report noted, “With a tough macro backdrop and rising competitive pressures, the company is executing well and seeing strong demand for its security solutions (TPS DDoS), continued expansion of its enterprise customer base (now ~60% of revenue), and a recovery in Japan (up 23% YoY).” 50. On May 17, 2016, Dougherty & Company issued a report summarizing a recent investor meeting with CFO Straughn where he discussed the efforts to diversify and grow demand in the channel: Our key takeaways are as follows: (1) The company’s pipeline remains strong. Healthy backlog should flow through to the top-line during the year. In Q1’16, management noted they maintained a similar backlog figure to their record-high $10.5M recorded in Q4’15. (2) A10 has significantly diversified their customer base in recent years. The company now has a wider set of revenue generating clients, thus results are no longer as dependent on spending from a few number of concentrated customers as it has been in the past. (3) The company is quickly approaching profitability. Management reiterated their expectation to have their first profitable quarter in FY’16, a key milestone for their progress going forward. * * * Straughn highlighted two key dynamics in the channel: 1) Smaller deals in the range of $30K are growing in size and 2) they are also moving upmarket through larger resellers such as Ingram Micro, Westcon and Dimension Data. This continues to be indicative of a general trend of improvement in the channel program that has appeared over the last several quarters. This change dates back to Q3’15, when management noted a shift in terms of opportunities, as that quarter represented an inflection point where A10’s channel was presenting more opportunities to the company as opposed to the company providing lead generation to the channel. 51. The Company’s enterprise revenue began to decline in North America in Q2’16, yet revenue from Japan began to recover, growing 83% compared to Q2’15 and the Company issued a better than expected outlook increasing the market’s anticipation of the Company reaching non- GAAP profitability. In addition, the Company increased its inventory reserve for older product. During the Q2’16 earnings call, Smets explained: So from an enterprise perspective, we actually saw good performance year-over- year and quarter-over-quarter, so we’re actually pretty satisfied with that approach. I’d say one of the strongest headlines in the quarter is really strong performance in our run rate business, which is primarily made up by enterprise. So we’ve invested in a channel program. We call it Affinity channel and it is delivering, I think very, very nicely to our strategy to growth, so we saw some good stability there. 52. On July 29, 2016, Dougherty & Company issued a report stating, “Management provided for solid guidance on the call, which implies the company could become profitable during the next period if they hit the top-end of their revenue range. In general, Q2 was solid, but not spectacular results, as revenues from JAPAN/APAC compensated for weakness in the EMEA region and the sequential decrease in enterprise revenue.” A July 29, 2016 Morgan Stanley report noted: A10 had a difficult year post-IPO as customer and geographic concentration created significant volatility in results. While the company still has a 10% customer in many quarters, they have made investments to grow their channel as well as expand their product platform (e.g. security products like TPS, SSLi and CFW) that have increased predictability as well as helped the company maintain growth rates meaningfully higher than the industry. Service providers still make up a majority of revenue, however, geographic and product concentration has been reduced (e.g. Japan is less than 20% of revenue today from ~40% at the IPO). 53. In Q3’16, the Company missed the mid-point of its guidance range by $3.9 million, reporting that a handful of deals slipped, primarily in North America; however, disciplined expense management drove operating income and the Company achieved break-even non-GAAP EPS. An October 28, 2016 report from Dougherty & Company stated, “Management cited that these were not lost to a competitor, but timing challenges. On an encouraging note, the company has met a key milestone and posted earlier-than-expected non-GAAP profitability.” 54. The Company appeared to bounce back in Q4’16, reporting record product revenue, security revenue, U.S. revenue, bookings, and deferred revenue, and notably a 13% revenue contribution from a single cloud provider believed to be Microsoft Azure (“Microsoft”). A10 also announced on its February 9, 2016 earnings call that CFO Straughn had resigned and would be replaced in the interim by Natarajan, until a successor was found. 55. The Company reported in line 1Q’17 results on April 27, 2017, benefitting from the continued fulfillment of the large cloud order placed in Q4’16 believed to be Microsoft, while the Company’s enterprise business was weak as a result of softer sales in North America due to the end-of-sale for their entry-level appliances. Shortly after the Company released its Q1’17 results, in May 2017 the Company announced it had hired Constantino as its new CFO. 56. Dougherty & Company issued a report on April 28, 2017 stating: Management noted that they had one cloud customer that contributed 12% of revenue during Q1. We believe this is continued fulfillment of a large order that was placed by Microsoft Azure at the end of Q4 (Microsoft contributed 13% of revenue in that period). We believe the company will continue to pull-through revenue from this order over the next quarter. As a whole, A10 Networks generated $33.0M or ~55% of total Q1 revenue from enterprise customers. In-line with our checks, apart from Microsoft the company's enterprise business was relatively weak, which management attributed to softer sales in North America due to the end-of-sale for their entry-level appliances. 57. A10 pre-announced its Q2’17 results on July 13, 2017, showing revenues 15% below previous guidance. A Morgan Stanley report issued the same day posited “[h]iccup likely due to CFO transition.” KeyBanc Capital Markets also issued a report that same day, stating, “Demand appears to have weakened primarily in North America and, to a degree, in Japan, where the Company has historically driven a majority of its service provider (SP) business.” Oppenheimer’s July 14, 2017 report noted, “The dip back below profitability comes after three straight quarters of positive net income (albeit marginal in 3Q16).” 58. Later on July 27, 2017, the Company held an earnings call to discuss Q2’17 results and explained that 12 deals got pushed out from Q2 primarily in the U.S. and to a lesser extent in Japan, but it had already closed some of these deals in Q1. Chen stated: We have commenced a thorough review and analysis of our performance this quarter, and we are taking action to improve our execution and support growth for our expanding product portfolio. As Tom will discuss further in a few minutes, some of the initial changes we are making include improving the effectiveness of our go-to-market activities and implementing cross-functional measures to drive accountability. In looking at the dynamics within our customer base, it is taking longer to get large deals closed. Within service provider customers, where we believe we have a stronghold, deals can be large but timing of when the order is received can be unpredictable and fluctuate from quarter-to-quarter. Constantino stated: We are increasing our focus to improve our go-to-market efficiency and effectiveness, which includes evaluating our sales enablement engine to ensure we have dedicated the focus and resources necessary to penetrate deeper into our markets, including security. We are also implementing a number of cross- functional actions to increase accountability and improve our performance analytics. In addition to helping improve our execution, we believe these actions will also help drive greater visibility. Smets commented: So, just commenting on those deals that slipped, we’ve actually initiated a pretty thorough review analysis to try to really get under this. If the deals that we’re closing there are fairly complex in nature and, like I had mentioned earlier, their complex for a number of different reasons, some things we can control and some things we can’t. So, we’ve identified some initial actions that we want to take some action around to improve execution. One area is around making sure that our sales organization is more trained to sell in this particularly increasingly complex environment. And we’re also looking at ways to improve cross-functional measures to improve the products and create a more simplified product, so that we can sell. 59. An analyst on the call asked whether the deals were factored into the next quarter guidance, and Chen and Constantino gave different answers, with Constantino offering a more sober outlook: <Q - Mark Kelleher>: So, it’s an increased sales cycle. That’s kind of the issue, it’s taking longer to close these complicated deals? And you’re factoring that again into the next quarter guidance, is that correct? <A - Lee Chen>: Yes. Yes. <A - Tom Constantino>: Yeah. I don’t see – I would say – this is Tom. The timing of when those deals may close is definitely not determined. And so, we may not see those in the quarter. But as we set guidance we looked across all other deals, we try to take a very measured approach to what we could expect in terms of conversion rate of our pipeline and we added an extra level of caution when we prepared our guidance taking that into consideration. 60. A10 followed the disappointing Q2’17 with revenue out-performing Street expectations in Q3’17 due to revenue from large service provider customers. On the Q3’17 earnings call, Constantino attributed the results to the Company’s accountability improvements: Overall, we delivered a strong third quarter and we are pleased with the initial progress we are seeing from the actions we took to improve execution. More specifically, we improved our forecasting processes and sales performance analytics which led to improved sales execution. We also improved our focus on accountability and performance management. Similarly, we have taken steps to improve our cross-functional collaboration in support of sales in delivering the quarter. While we have more work to do, as mentioned by Lee, we believe we are on the right track and that our efforts helped us deliver a strong finish to the quarter. 61. On December 20, 2017, Dougherty & Company issued a report following investor meetings with Constantino and Directors of Product Management Tom Guerrette, Kishore Inampudi, and Yasir Liaqatullah. The report stated, “Management indicated they have more work to do, but in the short term they are seeing improvement in sales velocity through the implementation of sales enablement tools, project management, and cross-functional organization cooperation/communication.” 62. On January 16, 2018, the Company pre-announced negative Q4’17 results with revenue roughly $9.5 million below Street estimates, causing the stock to fall 22% after market close. Dougherty & Company’s report issued the following day noted, “Management attributed the revenue miss to weak seasonal demand trends in North America. Typically, Q4 is a strong quarter for A10, but our recent North American enterprise checks suggest a roll-up of regional partners may have impacted A10 sales in the period.” 63. On this news, shares of A10 fell $0.99 per share, or over 13%, from its previous closing price to close at $6.32 per share on January 17, 2018, damaging investors. 64. Weeks later, on January 30, 2018, the Company announced it was conducting an internal investigation into revenue recognition issues from the fourth quarter of 2015 through the fourth quarter of 2017 inclusive and would be postponing the release of its Q4’17 and FY’17 financial results. On this news, shares of A10 fell $0.86 per share, or over 12%, from its previous closing price to close at $6.13 per share on January 31, 2018, damaging investors. 65. On August 10, 2018, A10 filed a notification that its quarterly reports for the Q1 and Q2’18 would submitted late, and it expected to submit the filings “in the third quarter of 2018.” As described herein, A10 did not release its Restatement until August 29, 2018, nearly seven months after it announced the internal investigation. The Company did not file its Q1’18 Form 10-Q until September 24, 2018 and, as of October 4, 2018, A10 still has not filed its Form 10-Q for Q2’18. Additionally, the Q1’18 Form 10-Q indicated that the Company is still cooperating with the SEC investigation into any securities laws violations by A10 or persons currently or formerly affiliated with A10. B. A10’s Financial Results were Materially Misleading and Violated Applicable GAAP, SEC Rules, and Its Own Stated Policies 66. As alleged herein, A10’s financial statements filed with the SEC, including the Company’s Annual Report on Forms 10-K for FY’15 and FY’16, as well as the Company’s Quarterly Report on Forms 10-Q for Q1’16 through Q3’17, were materially false and/or misleading when made because these financial statements violated GAAP, applicable SEC rules, and the Company’s stated accounting policies. 1. Obligations Imposed by the Securities Laws and GAAP 67. The Financial Accounting Standards Board (“FASB”) is the designated private sector organization for establishing standards of financial accounting that govern the preparation of financial statements. GAAP are those principles recognized by the accounting profession as the conventions, rules and procedures necessary to define accepted accounting practice at a particular time. Rules and interpretive releases of the SEC under authority of the federal securities laws are also sources of authoritative GAAP for SEC registrants. In addition to rules and interpretive releases, the SEC issues Staff Accounting Bulletins that represent practices followed by the staff in administering SEC disclosure requirements, and Staff Announcements and Observer comments at Emerging Issues Task Force meetings to publicly announce its views on certain accounting issues for SEC registrants. ASC 105-10-05-1. 68. As set forth in FASB Statement of Concepts (“Concepts Statement”) No. 8, one of the fundamental objectives of financial reporting is that it provide financial information about the reporting entity that is useful to existing and potential investors, lenders, and other creditors in making decisions about providing resources to the entity.5 Concepts Statement No. 8, states: Information about a reporting entity’s financial performance helps users to understand the return that the entity has produced on its economic resources. Information about the return the entity has produced provides an indication of how well management has discharged its responsibilities to make efficient and effective use of the reporting entity’s resources. Information about the variability and components of that return also is important, especially in assessing the uncertainty of future cash flows. Information about a reporting entity’s past financial performance and how its management discharged its responsibilities usually is helpful in predicting the entity’s future returns on its economic resources. 69. Regulation S-X (17 C.F.R. § 210.4-01(a)(1)) states that financial statements filed with the SEC that are not prepared in compliance with GAAP are presumed to be misleading and inaccurate. Regulation S-X requires that interim financial statements must also comply with GAAP, with the exception that interim financial statements need not include disclosures that would be duplicative of disclosures accompanying annual financial statements. 17 C.F.R. § 210.10-01(a). 2. The Company Systematically Violated its Own Revenue Recognition Policy as well as GAAP Revenue Recognition Principles 70. Throughout the Class Period, the Company’s revenue recognition policy remained consistent. A10’s 2015 and 2016 Forms 10-K, in relevant part, state: We derive revenue from two sources: (i) products revenue, which includes hardware and perpetual software license revenue; and (ii) services revenue, which include post contract support (“PCS”), professional services, and training. A substantial portion of our revenue is from sales of our products and services through distribution channel partners, such as resellers and distributors. Revenue is recognized, net of applicable taxes, when all of the following criteria are met: 5 FASB Statements of Financial Accounting Concepts broadly cover financial reporting concepts. FASB publishes these documents to provide a general overview of accounting concepts, definitions, and ideas guiding recognition and measurement for financial reporting purposes. persuasive evidence of an arrangement exists, delivery or performance has occurred, the sales price is fixed or determinable, and collection is reasonably assured. We define each of the four criteria above as follows: Persuasive evidence of an arrangement exists. Evidence of an arrangement consists of a purchase order issued pursuant to the terms and conditions of a master sales agreement. Delivery or performance has occurred. We use shipping documents or written evidence of customer acceptance, when applicable, to verify delivery or performance. We recognize product revenue upon transfer of title and risk of loss, which primarily is upon shipment to customers. We do not have significant obligations for future performance, such as customer acceptance provisions, rights of return, or pricing credits, associated with our sales. The sales price is fixed or determinable. We assess whether the sales price is fixed or determinable based on payment terms and whether the sales price is subject to refund or adjustment. Standard payment terms to customers range from 30 to 90 days. Collection is reasonably assured. We assess probability of collection on a customer-by-customer basis. Our customers are subjected to a credit review process that evaluates their financial condition and ability to pay for products and services. PCS revenue includes arrangements for software support and technical support for our products. PCS is offered under renewable, fee-based contracts, which include technical support, hardware repair and replacement parts, bug fixes, patches, and unspecified upgrades on a when-and-if available basis. Revenue for PCS services is recognized on a straight-line basis over the service contract term, which is typically one year, but can be up to five years. Unearned PCS revenue is included in deferred revenue. Professional service revenue primarily consists of the fees we earn related to installation and consulting services. We recognize revenue from professional services upon delivery or completion of performance. Professional service arrangements are typically short term in nature and are largely completed within 30 to 90 days from the start of service. 71. In these filings, the Company conveyed that it recognized revenue in accordance with Staff Accounting Bulletin No. 101 (“SAB 101”), as amended by Staff Accounting Bulletin No. 104 (“SAB 104”) (codified in ASC 605-10-S99). SAB 104, Topic 13, Revenue Recognition, as amended, and SAB 101, Revenue Recognition in Financial Statements, clearly state that revenue is realized or realizable and earned only if and when all of the following criteria are met: (a) “Persuasive evidence of an arrangement exists,” with the term “arrangement” meaning the final understanding between the parties as to the specific nature and terms of the agreed-upon transaction; (b) “Delivery has occurred or services have been rendered;” (c) “The seller’s price to the buyer is fixed or determinable;” and (d) “Collectibility is reasonably assured.” SAB 101(A)(1). 72. Additionally, FASB Concepts Statement No. 5, Recognition and Measurement in Financial Statements of Business Enterprises, articulates that revenues and gains should not be recognized in financial statements until they are realizable: (a) “Realized or realizable. Revenues and gains generally are not recognized until realized or realizable. Revenues and gains are realized when products (goods or services), merchandise, or other assets are exchanged for cash or claims to cash. Revenues and gains are realizable when related assets received or held are readily convertible to known amounts of cash or claims to cash [FASB Statement of Concepts No. 5, 83a].” 73. Contrary to the Company’s revenue recognition policy, as the Company acknowledged in the Restatement 10-K: (i) During the year ended December 31, 2015, revenue on certain sale transactions was recognized prematurely, as it was determined that there was an oversight of facts that indicated collectability was not reasonably assured, because the reseller’s or distributor’s payment to the Company was contingent on resale of the product or the transaction included extended payment terms beyond the Company’s customary terms. (ii) During the year ended December 31, 2016, revenue was recognized prematurely at the time, as it was determined that there was an oversight or misuse of facts which indicated that the reseller’s or distributor’s price was not fixed or determinable, or that collectability was not reasonably assured, because the reseller’s or distributor’s payment to the Company was contingent on resale of the product or the transaction included extended payment terms beyond the Company’s customary terms. 74. Defendants’ premature recognition of revenue for these sales was improper and Defendants failed to make required disclosures of those transactions in A10’s SEC filings. Defendants knowingly recognized revenue improperly for sales to resellers or distributors where payment was contingent on resale or the transaction included extended payment terms, and thus the price was not fixed or determinable and/or collectibility was not reasonably assured. 75. Defendants failed to apply basic accounting principles – improperly recognizing millions of dollars of revenue on its channel sales in violation of GAAP, SEC guidance, and its stated revenue recognition policy. As a result of these fraudulent accounting practices, Defendants publicly disseminated numerous financial statements that reported artificially inflated revenue and earnings figures. The Restatement would ultimately reveal that A10’s annual financial statements for FY’15 and FY’16, and all of its quarterly financial statements filed on Form 10-Q for the quarters Q1’16 through Q3’17, were materially misstated. 76. During the Class Period, A10’s financial statements and its comments about the Company’s financial results were false and misleading, as this financial information was not prepared in conformity with GAAP, nor was the financial information a fair presentation of the Company’s operations due to the Company’s improper accounting and disclosures about its revenues, in violation of GAAP rules. 77. The fact that A10 restated its annual financial statements on Forms 10-K for FY’15 and FY’16, and its condensed consolidated financial statements contained in its Quarterly Report on Forms 10-Q for each quarter from the quarters ended March 31, 2016 through September 30, 2017, and informed investors that these financial statements should not be relied upon, is an admission that they were false and misleading when originally issued. APB No. 20, 7-13; SFAS No. 154, 25. 78. Additionally, A10’s financial statements were false and misleading when originally issued since they violated the Company’s stated revenue recognition policy and GAAP, including SABs 101 and 104, and FASB Concepts Statement No. 5. C. The Company’s Violation of Disclosure Obligations Imposed by GAAP and SEC Regulations 79. A10’s improper recognition of revenue when payment was contingent on resale and/or when transactions included extended payment terms beyond the Company’s customary terms was consistent with a practice of improper “channel stuffing.” Channel stuffing has been defined by the American Institute of Certified Public Accountants (“AICPA”) as: [A] marketing practice that suppliers sometimes use to boost sales by inducing distributors to buy substantially more inventory than they can promptly resell. Inducements to overbuy may range from deep discounts on the inventory to threats of losing the distributorship if the inventory is not purchased.6 80. The SEC describes channel stuffing as: [T]he pulling forward of revenue from future fiscal periods by inducing customers – through price discounts, extended payment terms or other concessions – to submit purchase orders in advance of when they would otherwise do so.7 81. The Company admitted in the Restatement 10-K that revenue was recognized prematurely at the time, as it was determined that the Company had an oversight or misuse of facts which indicated that the reseller’s or distributor’s price was not fixed or determinable, or collectibility was not reasonably assured because the reseller’s or distributor’s payment to the Company was contingent on resale of the product or the transaction included extended payment terms beyond the Company’s customary terms. 82. Material channel stuffing of products at the end of a quarter distorts a company’s results of operations, and when undisclosed, causes a company’s financial reporting to be misleading. Defendants failed to disclose that reseller’s or distributor’s payment was contingent on resale and/or that transactions included extended payment terms beyond the Company’s customary terms, consistent with a practice of channel stuffing, as required to prevent investors from being misled. In addition, A10’s accounting treatment for its sale transactions was improper, as described above. 83. Thus, in SAB 104, the SEC referred to the requirements under Financial Reporting Release (“FRR”) No. 36,8 which noted that the following practices – which is analogous to channel stuffing as applied by A10 – must be disclosed in the Management Discussion and Analysis (“MD&A”) section in Forms 10-K and 10-Q: 6 1999 AICPA Indicators of Improper Revenue Recognition, at 4. 7 In the Matter of Sunbeam Corp., Securities Act Release No. 7976, Exchange Act Release No. 44305, Accounting and Auditing Enforcement Act Release No. 1393, File No. 3-10481, 2001 SEC LEXIS 931, at *4 n.4 (May 15, 2001). 8 SAB 104, referring to FRR No. 36 (§ 501), Management’s Discussion and Analysis of Financial Condition and Results of Operations; Certain Investment Company Disclosures.  Shipments of product at the end of a reporting period that significantly reduce customer backlog and that reasonably might be expected to result in lower shipments and revenue in the next period.  Granting of extended payment terms that will result in a longer collection period for accounts receivable (regardless of whether revenue has been recognized) and slower cash inflows from operations, and the effect on liquidity and capital resources. (The fair value of trade receivables should be disclosed in the footnotes to the financial statements when the fair value does not approximate the carrying amount.)  Changing trends in shipments into, and sales from, a sales channel or separate class of customer that could be expected to have a significant effect on future sales or sales returns. 84. Defendants also failed to prepare A10’s financial statements in accordance with the following fundamental accounting principles: (a) The principle that financial reporting should “provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. Those decisions involve buying, selling, or holding equity and debt instruments and providing or settling loans and other forms of credit.” (b) The principle that “financial reports provide information about the financial position of a reporting entity, which is information about the entity’s economic resources and the claims against the reporting entity . . . the effects of transactions and other events that change a reporting entity’s economic resources and claims.” (c) The principle that “[i]nformation about a reporting entity’s past financial performance and how its management discharged its responsibilities usually is helpful in predicting the entity’s future returns on its economic resources.” (d) The principle that “[i]nformation about a reporting entity’s financial performance helps users to understand the return that the entity has produced on its economic resources. Information about the return the entity has produced provides an indication of how well management has discharged its responsibilities to make efficient and effective use of the reporting entity’s resources.” (e) The principle that financial reporting should be useful. “If financial information is to be useful, it must be relevant and faithfully represent what it purports to represent. The usefulness of financial information is enhanced if it is comparable, verifiable, timely, and understandable.” (f) The principle of relevance, which means that it is “capable of making a difference in the decisions made by users. Information may be capable of making a difference in a decision even if some users choose not to take advantage of it or already are aware of it from other sources.” (g) The principle of faithfulness, which means “complete, neutral, and free from error….A complete depiction includes all information necessary for a user to understand the phenomenon being depicted, including all necessary descriptions and explanations. …A neutral depiction is without bias in the selection or presentation of financial information. …Free from error means there are no errors or omissions in the description of the phenomenon, and the process used to produce the reported information has been selected and applied with no errors in the process.” FASB Concepts Statement No. 8. 85. Defendants’ misstatements of revenue, non-GAAP net operating income(loss), non- GAAP net loss, and non-gap EPS caused by A10’s improper sales practices and unreliable accounting in the Company’s Annual Report on Forms 10-K for FY’15 and FY’16, as well as the Quarterly Report on Forms 10-Q for Q1’16 through Q3’17, were material. The SEC clarified the principles of materiality in SAB 99, reaffirming long-accepted concepts expressed in auditing and accounting literature. It also provides interpretive guidance to ensure those concepts are properly applied. 86. Among the most important of SAB 99’s principles are that: (a) Registrants and auditors may not rely solely on quantitative criteria to evaluate an item’s materiality; (b) The materiality of items can be determined reliably only if they are evaluated both individually and collectively; and (c) An intentional misstatement may be illegal even if the item it concerns is immaterial. 87. According to SAB 99, “quantifying, in percentage terms, the magnitude of a misstatement is only the beginning of an analysis of materiality; it cannot appropriately be used as a substitute for a full analysis of all relevant considerations. Materiality concerns the significance of an item to users of a registrant’s financial statements. A matter is ‘material’ if there is substantial likelihood that a reasonable person would consider it important.” 88. In addition, SAB 99 states that there are several ways in which a “quantitatively small” misstatement may be material:  Whether the misstatement masks a change in earnings or other corporate trends.  Whether the misstatement hides a failure to meet analysts’ consensus expectations for the business.  Whether the misstatement changes a loss into income or vice versa. 89. To the extent that registrants intentionally misstate immaterial items, they potentially violate provisions of the Exchange Act, which mandates the use of accurate and reasonably detailed records as the basis for financial statements. The improper recognition of revenue when payment was contingent on resale and/or when transactions included extended payment terms beyond the Company’s customary terms, consistent with a practice of channel stuffing was material because A10 and the Individual Defendants knew it was improper. Not only did it mask a trend of continued non-GAAP losses contrary to having achieved profitability, the magnitude of those transactions was critical to A10’s ability to meet its own guidance, it changed losses into income, and “there is substantial likelihood that a reasonable person would consider [the improper transactions to be] important.” 90. Moreover, by failing to disclose the improper recognition of revenue and the impact it would have on the Company’s future sales and growth, the Company’s Quarterly Report on Forms 10-Q and Annual Report on Forms 10-K, filed with the SEC during the Class Period, failed to comply with the disclosure obligations imposed on Defendants under Item 303 of Regulation S- K. Item 303 requires the disclosure of known trends that will affect future revenue, specifically: “known trends . . . that have had or that the registrant reasonably expects will have a material . . . favorable impact on . . . revenues.” 17 C.F.R. § 229.303(a)(3)(ii). 91. GAAP regulation ASC 275-1 similarly requires that a company disclose risks and uncertainties that could significantly affect the amounts reported in financial statements in the near term and particularly calls for disclosure if the volumes of business transacted with particular customers could be severely impacted in the near term. 92. Accordingly, as the SEC has repeatedly emphasized, the “specific provisions in Item 303 [as set forth above] require disclosure of forward-looking information.” See Management’s Discussion and Analysis of Fin. Condition and Results of Operation, S.E.C. Release No. 6835, 1989 WL 1092885, at *3 (May 18, 1989). Indeed, the SEC has stated that disclosure requirements under Item 303 is “intended to give the investor an opportunity to look at the company through the eyes of management by providing both a short and long-term analysis of the business of the company” and “a historical and prospective analysis of the registrant’s financial condition . . . with particular emphasis on the registrant’s prospects for the future.” Id. at *3, *17. Thus, “material forward-looking information regarding known material trends and uncertainties is required to be disclosed as part of the required discussion of those matters and the analysis of their effects.” See Commission Guidance Regarding Management’s Discussion and Analysis of Fin. Condition and Results of Operations, S.E.C. Release No. 8350, 2003 WL 22996757, at *11 (Dec. 19, 2003). 93. Disclosure of known trends and forward-looking information concerning the registrant’s revenue are required by Item 303 “where a trend, demand, commitment, event or uncertainty is both presently known to management and reasonably likely to have material effects on the registrant’s financial condition or results of operations.” See Management’s Discussion, S.E.C. Release No. 6835, 1989 WL 1092885, at *4. 1. Defendants Knowingly and/or Recklessly Improperly Recognized Revenues to Meet Market Expectations in Q4’15 94. Defendants engaged in accounting fraud for the purpose of managing A10’s quarterly revenue and earnings to satisfy the market’s expectations. In Q4’15 the market was concerned with the impact a slowdown in enterprise IT customer spending would have on A10.9 A10 seemingly had bucked the trend reporting record bookings in the enterprise segment and product revenue at an all-time high resulting in the Company’s third straight quarter of record sales. Straughn explained that these results were achieved in large part due to “a large win with an existing service provider customer in the quarter that when combined with other orders and ongoing purchases from this customer, accounted for 19.7% of total revenue in the fourth quarter.” J.P. Morgan issued a report on February 9, 2016 noting, “A10 reported Q4 revenues of $57M, beating our estimate by 3% and consensus by 4%.” 95. The Restatement 10-K revised the Company’s Q4’15 revenue downward by a material amount of approximately $2.67 million, which would have caused the Company to miss consensus expectations. In addition, products revenue was restated downward by a material amount of approximately $3.4 million. The Restatement 10-K expressly stated that revenue was “recognized prematurely” as “collectability was not reasonably assured” due to the fact that “the reseller’s or distributor’s payment to the Company was contingent on resale of the product or the transaction included extended payment terms beyond the Company’s customary terms.” 9 See, e.g., February 9, 2016 J.P. Morgan report “Q4’15 Preview: Cautious on guide due to concerns over enterprise IT spending slowdown.” GAAP Year Ended December 31, 2015 Products Revenue – Restated 134,931 Products Revenue – As Previously Reported 138,301 Products Revenue - Error (3,370) Total Revenue – Restated 196,285 Total Revenue – As Previously Reported 198,955 Total Revenue Error (2,670) 96. By recognizing revenue when payment was contingent on resale or when the transaction included extended payment terms, A10 expressly violated SABs 101 and 104, and the SEC Codification of Staff Accounting Bulletin, Topic 13 criterion as discussed above in Section IV.B.2 ¶71, and admitted by the Company in the Restatement 10-K. 97. Additionally, the Company violated FASB Concepts Statement No. 5’s principle that “revenues and gains generally are not recognized until realized or realizable” because reseller’s or distributor’s payment was contingent on resale or the transactions included extended payment terms beyond the Company’s customary terms, the revenues were not actually realized in this quarter. 98. Defendants intentionally ignored these basic and long-standing accounting rules and principles and, in doing so, improperly recognized revenue in Q4’15. 99. The Company’s revenue recognition policy specifically required Defendants to “assess probability of collection on a customer-by-customer basis” to determine if recognition of revenue was appropriate. If the Individual Defendants conducted this assessment, they would have known that payment was contingent on resale and/or that extended payment terms had been granted; and therefore, the Individual Defendants knew or were deliberately reckless in not knowing that recognizing revenue was improper. 2. Defendants Knowingly and/or Recklessly Improperly Recognized Revenues to Meet Market Expectations in Q3’16 100. On October 27, 2016, the Company held an earnings call to discuss its Q3’16 financial results. Chen stated, “We reported revenue of $55.1 million, up 8% year-over-year and below our guidance of $58 million to $60 million. Our continued focus on driving leverages through our operating structure led to a significant improvement in EPS. For the quarter, we reached non-GAAP breakeven, which was at the high end of our guidance.” Chen attributed the revenue shortfall to “receiv[ing] a couple orders too late in the quarter to ship and some deals slipped into future quarters,” assuring investors “we expect these transactions to be closed in either Q4 or Q1.” 101. The Company’s announcement that it had reached its goal of non-GAAP profitability and non-GAAP breakeven EPS were critical indicators of financial success to investors, reversing a trend of operating losses that helped to offset the negative news that A10 had missed its revenue guidance.10 On October 28, 2016, following A10’s release of its Q3’16 results, Dougherty & Company reported, “The Company hit a key milestone and was able to achieve non- GAAP profitability and above the high-end of their guided range of ($0.02)-($0.00).” NON-GAAP Financial Measures ($M, except EPS) Q1’16 Q2’16 Q3’16 Operating Income (Loss) $(4.0) $(1.9) $0.3 Net income (loss) per share $(0.06) ($0.02) $0.00 102. The Restatement 10-K expressly stated that revenue during the year ended December 31, 2016 was “recognized prematurely” as there was an “oversight or misuse of facts which indicated that the reseller’s or distributor’s price was not fixed or determinable, or that collectability was not reasonably assured, because the reseller’s or distributor’s payment to the Company was contingent on resale of the product or the transaction included extended payment terms beyond the Company’s customary terms.” 103. The restated non-GAAP income showed a Q3’16 loss of $0.2 million rather than net income of $0.3 million, and non-GAAP EPS was a loss of $0.01 rather than breakeven $0.00. The Restatement indicated that in Q3’16, the Company’s non-GAAP operating income and net income per share had been artificially inflated by improperly recognizing revenue and other accounting errors, and in fact, the Company’s financial condition in Q3’16 was materially different than previously stated as it continued to operate at a non-GAAP loss and had not reached non-GAAP profitability. 10 In Q3’16, non-GAAP net income was $0.2 million, while non-GAAP EPS broke even at $0.00. ($M, except EPS) Q3’16 GAAP – Previously Reported Q3’16 GAAP – Restate Q3’16 NON-GAAP – Previously Reported Q3’16 NON-GAAP - Restated Income (loss) from operations $(4.6) $(5.1) $0.3 $(0.2) Net loss $(4.7) $(5.2) $0.2 $(.4) Net loss per share - Basic and diluted $(0.07) $(0.08) $0.0 ($0.01) 104. As explained above in Section IV.B.2 ¶72, Defendants additionally violated an overarching accounting principle in Q3’16 that revenues and gains should not be recognized in the financial statements until they are realized or realizable. Because the reseller’s or distributor’s payment was contingent on resale or the transactions included extended payment terms beyond the Company’s customary terms, the revenues were not actually realized in this quarter. FASB Concepts Statement No. 5. 105. Additionally, as explained in Section IV.B.2 ¶71, SABs 101 and 104 and the SEC Codification of Staff Accounting Bulletin, Topic 13 require that “collectibility is reasonably assured” and “the seller’s price to the buyer is fixed or determinable” in order to recognize revenue. However, as A10 subsequently admitted, “During the year ended December 31, 2016, revenue was recognized prematurely at the time” because “collectibility was not reasonably assured” and the “reseller’s or distributor’s price was not fixed or determinable” due to the fact that “reseller’s or distributor’s payment to the Company was contingent on resale of the product or the transaction included extended payment terms beyond the Company’s customary terms.” 106. Defendants intentionally ignored these basic and long-standing accounting rules and principles and the Company’s revenue recognition policy, and, in doing so, improperly recognized revenue in Q3’16. 107. The Company’s revenue recognition policy also specifically required the Individual Defendants to “assess whether the sales price is fixed or determinable based on payment terms and whether the sales price is subject to refund or adjustment” and to “assess probability of collection on a customer-by-customer basis” to determine if recognition of revenue was appropriate. If the Individual Defendants conducted these assessments, they would have known that payment was contingent on resale and/or that extended payment terms had been granted; and therefore, the Individual Defendants knew or were deliberately reckless in not knowing that recognizing revenue was improper. 3. Defendants Knowingly and/or Recklessly Improperly Recognized Revenues to Meet Market Expectations in Q4’16 108. On February 9, 2017, the Company held an earnings call to discuss its FY’16 and Q4’16 financial results. Chen stated, “Revenue grew 13% year-over-year to reach a record $64 million, and exceeded the high-end of our guidance. Our continued focus on driving leverage through our operating structure led to a significant improvement in our operating results and margin. On the bottom line, we delivered $0.03 in non-GAAP EPS, which was within our guidance range.” The Company’s Q4’16 non-GAAP EPS guidance range was between break-even and $0.04, indicating the initially reported non-GAAP EPS was in fact at the high-end of its guidance. A10 reported non-GAAP net income of $2.3 million and “record product revenue of $43.5 million, up 23% over Q3 and 10% over the last year.” Following the release of A10’s Q4’16 results, J.P. Morgan issued a report stating, “A10 reported Q4 revenues of $64m, beating consensus by 5%.” 109. The Restatement 10-K expressly stated that revenue during the year ended December 31, 2016 was “recognized prematurely” as there was an “oversight or misuse of facts which indicated that the reseller’s or distributor’s price was not fixed or determinable, or that collectability was not reasonably assured, because the reseller’s or distributor’s payment to the Company was contingent on resale of the product or the transaction included extended payment terms beyond the Company’s customary terms.” 110. The Restatement indicated that its Q4’16 results were materially different than initially presented, showing the Company’s Q4’16 revenues were approximately $60.7 million, falling short of the $61 million consensus rather than exceeding it by 5%. Product revenues in Q4’16 were also inflated by $3 million, more than 5%, due to the undisclosed improper revenue recognition. The Restatement also changed Q4’16 positive non-GAAP net income of $2.3 million to a loss of approximately $0.3 million, and non-GAAP EPS went from $0.03, which was above the midpoint of the Company’s guidance to $0.00, which was at the bottom of the guidance range. The Restatement wiped out the Company’s previously reported trend of increasing non-GAAP profitability and revealed that the Company’s record of consistent financial performance was an illusion. ($M, except EPS) Q4’16 GAAP – Previously Reported Q4’16 GAAP – Restated Q4’16 NON-GAAP – Previously Reported Q4’16 NON-GAAP - Restated Revenue – Product $43.5 $40.5 Total Revenue $64.0 $60.8 $64.0 $60.8 Income (loss) from operations $0.6 $(2.0) $4.7 $2.2 Net loss $(1.8) $(4.4) $2.3 $(0.3) $(0.03) $(0.06) $0.03 $(0.00) Net income (loss) per share - Basic and diluted 111. As explained above in Section IV.B.2 ¶72, in Q4’16, Defendants additionally violated an overarching accounting principle that revenues and gains should not be recognized in the financial statements until they are realized or realizable. Because the reseller’s or distributor’s payment was contingent on resale or the transactions included extended payment terms beyond the Company’s customary terms, the revenues were not actually realized in this quarter. FASB Concepts Statement No. 5. Additionally, as explained in ¶71, SABs 101 and 104 and the SEC Codification of Staff Accounting Bulletin, Topic 13 require that “collectibility is reasonably assured” and “the seller’s price to the buyer is fixed or determinable” in order to recognize revenue. However, as A10 subsequently admitted, “During the year ended December 31, 2016, revenue was recognized prematurely at the time” because “collectibility was not reasonably assured” and the “reseller’s or distributor’s price was not fixed or determinable” due to the fact that “reseller’s or distributor’s payment to the Company was contingent on resale of the product or the transaction included extended payment terms beyond the Company’s customary terms.” 112. Defendants intentionally ignored these basic and long-standing accounting rules and principles and the Company’s revenue recognition policy, and, in doing so, improperly recognized revenue from the Q4 2016 transactions during the Class Period. 113. The Company’s revenue recognition policy also specifically required the Individual Defendants to “assess whether the sales price is fixed or determinable based on payment terms and whether the sales price is subject to refund or adjustment” and to “assess probability of collection on a customer-by-customer basis” to determine if recognition of revenue was appropriate. If the Individual Defendants conducted these assessments, they would have known that payment was contingent on resale and/or that extended payment terms had been granted; and therefore, the Individual Defendants knew or were deliberately reckless in not knowing that recognizing revenue was improper. V. DEFENDANTS’ FALSE AND/OR MISLEADING STATEMENTS DURING THE CLASS PERIOD A. False and Misleading Statements in the February 9, 2016 Fourth Quarter and Year-End 2015 Earnings Press Release and Conference Call 114. On February 9, 2016, the first day of the Class Period, A10 issued a press release announcing its fourth quarter and year-end 2015 financial results (the “February 2016 Press Release”), stating in relevant part: Fourth Quarter 2015 Financial Highlights • Record revenue of $56.6 million, up 25 percent year-over-year • Record product revenue of $39.5 million, increasing 22 percent year-over-year • Added over 200 new end-customers in the quarter, reaching over 4,700 total end-customers “The fourth quarter was a strong close to the year and we are pleased with our momentum driven by our continued execution and innovation,” said Lee Chen, president and chief executive officer of A10 Networks. “Revenue in the fourth quarter exceeded our guidance and we achieved our third consecutive quarter of record revenue, while significantly improving our bottom line year-over-year. Our results this quarter were driven by a broad-based increase in demand across our ADC, CGN and TPS solutions. For the full year we added over 800 new customers, continued to expand our market opportunities and widened our technology leadership with innovations and industry firsts that map directly to some of the fastest growing networking and security market trends.” Total revenue for the fourth quarter grew to a record $56.6 million, up 25 percent when compared with $45.2 million in the fourth quarter of 2014. Total revenue for the year 2015 was $199.0 million, an increase of 11 percent, compared with $179.5 million reported for the year 2014. On a GAAP basis, A10 Networks reported a net loss for the fourth quarter 2015 of $7.4 million or $0.12 per share, compared with a net loss of $16.0 million or $0.26 per share in the fourth quarter of 2014. The company reported GAAP net loss attributable to common shareholders of $40.0 million or $0.64 per share for the year 2015, compared with a GAAP net loss attributable to common stockholders of $35.9 million or $0.74 per share for the year 2014. Non-GAAP net loss for the fourth quarter of 2015 was $3.7 million or $0.06 per share, compared with a non-GAAP net loss of $12.0 million or $0.20 per share in the fourth quarter of 2014. Non-GAAP net loss for 2015 was $22.5 million or $0.36 per share, compared with a Non-GAAP net loss of $29.3 million or $0.51 per share for the year 2014. A reconciliation between GAAP and non-GAAP information is contained in the financial statements below. 115. On the same day, the Company held an investor conference call to discuss A10’s fourth quarter and year-end 2015 financial results. Defendants Chen and Straughn repeated the same false and misleading revenue and net loss numbers for Q4’15 and FY’15 as reported in the February 2016 Press Release. Defendant Chen stated that the Company had “generated record bookings,” attributing revenue growth to “our continued execution and innovation.” 116. Defendant Straughn also stated: We expect gross margin to remain in the range of 75% to 77% and operating expenses to be between $45 million and $47 million. For modeling purposes, please note that we are currently planning modest sequential increases in OpEx throughout 2016, and we remain committed to achieving our stated goal of reaching non-GAAP operating income profitability during 2016. 117. Analysts and investors reacted favorably to this news. A10’s stock price rose from a closing price of $4.92 per share on February 9, 2016 to close at $5.66 per share on February 10, 2016 on heavy trading volume of over 1.6 million. Dougherty & Company reiterated its Buy rating, stating: “Overall, we believe A10’s Q4 result represents more evidence of improved execution by the company.” 118. The above statements were materially false and/or misleading when made because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, financial results and prospects, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that they had admittedly: (i) overstated revenue for the Q4’15 and FY’15 by prematurely recognizing revenue; (ii) understated net loss for the Q4’15 and FY’15; (iii) violated A10’s stated revenue recognition policies; (iv) as, a result of (i) – (iii) the Company’s business and prospects were worse than represented; and, (v) Defendants’ public statements were materially false and misleading at all relevant times. B. False and Misleading Statements in the 2015 Annual Report 119. On March 1, 2016, A10 filed its Annual Report on Form 10-K with the SEC for the year-ended December 31, 2015 (the “2015 Annual Report”) which was signed and certified by Defendants Chen and Straughn. 120. The 2015 Annual Report falsely represented that A10 recognized revenue as follows: Revenue Recognition We derive revenue from two sources: (i) products revenue, which includes hardware and perpetual software license revenue; and (ii) services revenue, which include post contract support (“PCS”), professional services, and training. A substantial portion of our revenue is from sales of our products and services through distribution channel partners, such as resellers and distributors. Revenue is recognized, net of applicable taxes, when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery or performance has occurred, the sales price is fixed or determinable, and collection is reasonably assured. We define each of the four criteria above as follows:  Persuasive evidence of an arrangement exists. Evidence of an arrangement consists of a purchase order issued pursuant to the terms and conditions of a master sales agreement.  Delivery or performance has occurred. We use shipping documents or written evidence of customer acceptance, when applicable, to verify delivery or performance. We recognize product revenue upon transfer of title and risk of loss, which primarily is upon shipment to customers. We do not have significant obligations for future performance, such as customer acceptance provisions, rights of return, or pricing credits, associated with our sales.  The sales price is fixed or determinable. We assess whether the sales price is fixed or determinable based on payment terms and whether the sales price is subject to refund or adjustment. Standard payment terms to customers range from 30 to 90 days.  Collection is reasonably assured. We assess probability of collection on a customer-by-customer basis. Our customers are subjected to a credit review process that evaluates their financial condition and ability to pay for products and services. PCS revenue includes arrangements for software support and technical support for our products. PCS is offered under renewable, fee-based contracts, which include technical support, hardware repair and replacement parts, bug fixes, patches, and unspecified upgrades on a when-and-if available basis. Revenue for PCS services is recognized on a straight-line basis over the service contract term, which is typically one year, but can be up to five years. Unearned PCS revenue is included in deferred revenue. Professional service revenue primarily consists of the fees we earn related to installation and consulting services. We recognize revenue from professional services upon delivery or completion of performance. Professional service arrangements are typically short term in nature and are largely completed within 30 to 90 days from the start of service. 121. The 2015 Annual Report also included the following additional statements pertaining to A10’s revenue recognition policies: As a result of end-customer buying patterns and the efforts of our sales force and distribution channel partners to meet or exceed their sales objectives, we have historically received a substantial portion of purchase orders and generated a substantial portion of revenue during the last few weeks of each quarter. We can recognize such revenue in the quarter received, however, only if all of the requirements of revenue recognition, especially shipment, are met by the end of the quarter. * * * Our products revenue primarily consists of revenue from sales of our hardware appliances upon which our software is installed. Such software includes our ACOS software platform plus one of our ADC, CGN, TPS or CFW solutions (which we expect to start shipping in the first quarter of 2016). Purchase of a hardware appliance includes a perpetual license to the included software. We recognize products revenue at the time of shipment, provided that all other revenue recognition criteria have been met. 122. The 2015 Annual Report reported total revenue for the fourth quarter and year-end 2015 as $56.6 million and $199 million, respectively, and a net loss of $7.4 million and $40 million, respectively. 123. According to the 2015 Annual Report, the increase in total revenues was attributable to the following: During 2015, $106.8 million, or 54% of total revenue was generated from the United States, which represents a 25% increase compared to 2014. This increase was primarily attributable to increased product revenue from service provider customers as well as higher PCS sales in connection with our increased installed customer base. 124. The 2015 Annual Report also falsely represented that “[t]he accompanying consolidated financial statements have been prepared in accordance with [GAAP]” and that A10 maintained adequate internal controls over the Company’s financial reporting, stating in relevant part: Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as required by Rule 13a-15(b) under the Securities Exchange Act of 1934 as of December 31, 2015. * * * Based upon our management’s evaluation of our disclosure controls and procedures as of December 31, 2015, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management’s Report On Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on the assessment, our management has concluded that its internal control over financial reporting was effective as of December 31, 2015 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. 125. The 2015 Annual Report included certifications signed by Defendants Chen and Straughn pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, representing that the financial statements did not contain any material misrepresentations or omissions and that disclosure controls and procedures were adequate, stating: 1. I have reviewed this Annual Report on Form 10-K of A10 Networks, Inc. for the year ended December 31, 2015; 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)) 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 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(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. 126. Certifications pursuant to 18 U.S.C. § 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, signed by Defendants Chen and Straughn, were also included with the 2015 Annual Report, stating: In connection with the Annual Report on Form 10-K of A10 Networks, Inc. (the “Company”) for the period ended December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lee Chen, President and Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 127. The above statements were materially false and/or misleading when made because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, and financial results, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that they had admittedly: (i) overstated revenue for the Q4’15 and FY’15 by prematurely recognizing revenue; (ii) understated net loss for the Q4’15 and FY’15; (iii) violated A10’s stated revenue recognition policies; (iv) lacked effective internal controls; and (v) as a result of (i) – (iv), A10’s financial statements were not in compliance with GAAP. C. False and Misleading Statements in the April 28, 2016 First Quarter 2016 Earnings Press Release and Conference Call 128. On April 28, 2016, A10 issued a press release announcing its first quarter 2016 financial results (the “April 2016 Press Release”), stating in relevant part: First Quarter 2016 Financial Highlights • Revenue of $53.8 million, up 22 percent year-over-year • Record enterprise revenue of $32.2 million, increased 29 percent year-over-year • Strong product revenue of $36.4 million, up 19 percent year-over-year • Record total deferred revenue of $74.8 million, increased 25% year-over-year • Cash and marketable securities increased to $107.5 million, up from $85.6 million at March 31, 2015 “The first quarter was a strong start to the year as we continued to build on our solid momentum,” said Lee Chen, president and chief executive officer of A10 Networks. “Our high-end security product portfolio and cloud-based solutions continue to gain traction with customers and partners and this is contributing to our success in growing the business. Additionally, with our continued topline growth and disciplined approach to managing costs, we improved our bottom line by 55% year- over-year and generated strong cash flow from operations. We are pleased with our execution and strong first quarter results and are encouraged by our progress as we enter the second quarter.” Total revenue for the first quarter grew to $53.8 million, up 22 percent when compared with $44.0 million in the first quarter of 2015. On a GAAP basis, A10 Networks reported a net loss for the first quarter 2016 of $9.5 million, or $0.15 per share, compared with a net loss of $13.7 million, or $0.22 per share, in the first quarter of 2015. Non-GAAP net loss for the first quarter of 2016 was $4.1 million, or $0.06 per share, compared with a non-GAAP net loss of $9.1 million, or $0.15 per share, in the first quarter of 2015. A reconciliation between GAAP and non-GAAP information is contained in the financial statements below. 129. Later that day, Defendants held the Q1’16 earnings conference call where Defendants Chen and Straughn repeated the false and misleading revenue numbers for Q1’16as reported in the April 2016 Press Release. 130. Following this Q1’16 earnings report, J.P. Morgan commented that “A10 bucked the generally rough tech reporting season with an inline report and guide. . . . Overall, A10 continues to execute well and benefit from stable customers/projects.” 131. The above statements were materially false and/or misleading when made because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, financial results and prospects, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that they had admittedly: (i) misstated revenue due to improper revenue recognition practices; (ii) violated A10’s stated revenue recognition policies; and, (iii) as a result, Defendants’ public statements were materially false and misleading at all relevant times. D. False and Misleading Statements in the First Quarter 2016 Form 10-Q 132. On May 5, 2016, the Company filed its quarterly report on Form 10-Q for the quarter ended March 31, 2016 (the “First Quarter 2016 Form 10-Q”) with the SEC, which was signed and certified by Defendants Chen and Straughn. 133. The First Quarter 2016 Form 10-Q included false and misleading statements regarding A10’s revenue recognition practices as follows: Our products revenue primarily consists of revenue from sales of our hardware appliances upon which our software is installed. Such software includes our ACOS software platform plus one of our ADC, CGN, TPS or CFW solutions. Purchase of a hardware appliance includes a perpetual license to the included software. We recognize products revenue at the time of shipment, provided that all other revenue recognition criteria have been met. As a percentage of revenue, our products revenue may vary from quarter to quarter based on, among other things, the timing of orders and delivery of products, cyclicality and seasonality, changes in currency exchange rates and the impact of significant transactions with unique terms and conditions. * * * As a result of end-customer buying patterns and the efforts of our sales force and distribution channel partners to meet or exceed their sales objectives, we have historically received a substantial portion of purchase orders and generated a substantial portion of revenue during the last few weeks of each quarter. We can recognize such revenue in the quarter received, however, only if all of the requirements of revenue recognition, especially shipment, are met by the end of the quarter. 134. The First Quarter 2016 Form 10-Q reported total revenue for the first quarter 2016 of $53.8 million. 135. According to the First Quarter 2016 Form 10-Q, the increase in total revenues from the U.S. “was primarily attributable to increased product revenue from enterprise customers as well as higher PCS sales in connection with our increased installed customer base.” The increase in total revenues from Japan was “primarily due to higher products revenue from service provider customers.” And, the increase in total revenues from Asia Pacific regions (excluding Japan) was “primarily due to significant increases in both products and services revenue resulting from our efforts to continue expanding our presence in these regions.” 136. The First Quarter 2016 Form 10-Q falsely represented that “[t]he accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and following the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting” and that A10 maintained adequate internal controls over the Company’s financial reporting, stating in relevant part: Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of March 31, 2016. * * * Based upon our management’s evaluation of our disclosure controls and procedures as of March 31, 2016, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 137. The First Quarter 2016 Form 10-Q also contained certifications signed by Defendants Chen and Straughn pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 identical to, or substantially similar to, those in the 2015 Annual Report stated above in ¶125, representing that the financial statements did not contain any material misrepresentations or omissions and that disclosure controls and procedures were adequate. 138. Certifications pursuant to 18 U.S.C. § 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, identical to, or substantially similar to, those in the 2015 Annual Report stated above in ¶126, signed by Defendants Chen and Straughn, were also included with the First Quarter 2016 Form 10-Q. 139. The above statements were materially false and/or misleading when made because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, and financial results, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that they had admittedly: (i) misstated revenue; (ii) violated A10’s stated revenue recognition policies; (iii) lacked effective internal controls; and (iv) as a result of (i) – (iii), A10’s financial statements were not in compliance with GAAP. E. False and Misleading Statements in the July 28, 2016 Second Quarter 2016 Earnings Press Release and Conference Call 140. A10 issued a press release on July 28, 2016 announcing its second quarter 2016 financial results (the “July 2016 Press Release”), stating in relevant part: Second Quarter 2016 Financial Highlights • Record revenue of $57.1 million, up 20 percent year-over-year • Enterprise revenue of $32.0 million, increased 16 percent year-over-year • Product revenue of $38.8 million, up 16 percent year-over-year • Cash and marketable securities increased to $113.7 million, up from $96.2 million at June 30, 2015 “We delivered record revenue as our high-end security and cloud-ready Thunder solutions continued to drive growth,” said Lee Chen, president and chief executive officer of A10 Networks. “We also significantly improved our bottom- line results and we believe we are on track to meet our financial goals for the year. In addition to our strong performance in the quarter, we took a strategic step to accelerate the A10 Harmony vision and expand our addressable market with the acquisition of Appcito. Appcito is a cloud-native subscription service that maximizes the agility and improves the visibility and security of enterprise applications deployed in the cloud. Appcito fits into our vision to become the most comprehensive secure application services company in the industry and helps customers become more secure and agile as they bridge traditional and cloud application environments.” Total revenue for the second quarter grew to $57.1 million, up 20 percent when compared with $47.5 million in the second quarter of 2015. On a GAAP basis, A10 Networks reported a net loss for the second quarter 2016 of $4.9 million, or $0.08 per share, compared with a net loss of $10.0 million, or $0.16 per share, in the second quarter of 2015. Non-GAAP net loss for the second quarter of 2016 was $1.1 million, or $0.02 per share, compared with a non-GAAP net loss of $5.3 million, or $0.09 per share, in the second quarter of 2015. A reconciliation between GAAP and non-GAAP information is contained in the financial statements below. 141. On the same day, Defendants held a conference call discussing the second quarter 2016 earnings where Defendants Chen and Straughn repeated the false and misleading revenue numbers for Q2’16 as reported in the July 2016 Press Release. 142. Defendant Straughn continued on to state: Moving on to our outlook, we currently expect third quarter revenue to be in the range of $58 million to $60 million. At the mid-point, this represents 16% year- over-year revenue growth and 19% growth for the nine-month period. We expect gross margin to remain in the 75% to 77% range and operating expenses to be between $45 million and $4 6million which includes a full quarter of expenses from the addition of Appcito. We expect our non-GAAP bottom-line results to be between breakeven and a net loss of $0.02 per share using approximately 66 million shares on a basic and diluted basis. For modeling purposes, I’d like to note that in the event non-GAAP operating income is positive in Q4, the non-GAAP fully diluted share count would be approximately 73 million shares. 143. On the call, Defendant Smets attributed the “good performance year-over-year and quarter-over-quarter,” in part to the channel program, stating: “So we’ve invested in a channel program. We call it Affinity channel and it is delivering, I think very, very nicely to our strategy growth, so we saw some good stability there.” 144. Dougherty & Company responded to the earnings report, reiterating its Buy rating and raising its price target from $8 to $9. Morgan Stanley increased its price target from $6 to $8, stating, “[c]onsistency and growth have improved, meaning profitability next step to generating increase to shareholder value.” 145. The above statements were materially false and/or misleading when made because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, financial results and prospects, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that they had admittedly: (i) misstated revenue due to improper revenue recognition practices; (ii) violated A10’s stated revenue recognition policies; (iii) as a result of (i) – (ii), the Company’s business and prospects were worse than represented because as discussed at ¶¶100-107, meeting the break-even earnings could only be accomplished through improper revenue recognition practices; and, (iv) Defendants’ public statements were materially false and misleading at all relevant times. F. False and Misleading Statements in the Second Quarter 2016 Form 10-Q 146. On August 5, 2016, the Company filed its quarterly report on Form 10-Q for the quarter ended June 30, 2016 (the “Second Quarter 2016 Form 10-Q”) with the SEC, which was signed and certified by Defendants Chen and Straughn. 147. The Second Quarter 2016 Form 10-Q included false and misleading statements regarding A10’s revenue recognition practices as follows: Our products revenue primarily consists of revenue from sales of our hardware appliances upon which our software is installed. Such software includes our ACOS software platform plus one of our ADC, CGN, TPS or CFW solutions. Purchase of a hardware appliance includes a perpetual license to the included software. We recognize products revenue at the time of shipment, provided that all other revenue recognition criteria have been met. As a percentage of revenue, our products revenue may vary from quarter to quarter based on, among other things, the timing of orders and delivery of products, cyclicality and seasonality, changes in currency exchange rates and the impact of significant transactions with unique terms and conditions. * * * As a result of end-customer buying patterns and the efforts of our sales force and distribution channel partners to meet or exceed their sales objectives, we have historically received a substantial portion of purchase orders and generated a substantial portion of revenue during the last few weeks of each quarter. We can recognize such revenue in the quarter received, however, only if all of the requirements of revenue recognition, especially shipment, are met by the end of the quarter. 148. The Second Quarter 2016 Form 10-Q reported total revenue for the Q2’16 of $57.1 million. 149. According to the Second Quarter 2016 Form 10-Q, revenue increases were attributable to the following: During the second quarter of 2016, $31.3 million, or 55%, of total revenue was generated from the United States, which represents a 14% increase compared to the second quarter of 2015. During the first half of 2016, $60.9 million, or 55%, of total revenue was generated from the United States, which represents a 21% growth compared to the first half of 2015. These increases were primarily attributable to an overall increase in products revenue as well as higher PCS sales in connection with our increased installed customer base. During the second quarter of 2016, $11.0 million, or 19%, of total revenue was generated from Japan, which represents a 66% increase compared to the second quarter of 2015, primarily due to higher products revenue from enterprise customers and to a less extent an increase in PCS sales in connection with the increased customer base. During the first half of 2016, $21.8 million, or 19%, of total revenue was generated from Japan, which represents a 41% increase compared to the first half of 2015. This increase was primarily due to an overall increase in products revenue as well as higher PCS sales in connection with our increased installed customer base. In addition, total revenue from Japan during the second quarter and the first half of 2016 was increased by $0.9 million and $1.3 million, respectively, due to favorable currency exchange rates between the Japanese yen against the U.S. dollar compared to the same periods in 2015. Total revenues from Asia Pacific regions, excluding Japan, increased by $2.2 million, or 40% and $4.3 million, or 43% in the second quarter and the first half of 2016 compared to the same periods in 2015. These increases were primarily due to significant increase in products revenue resulting from our efforts to continue expanding our presence in these regions as well as higher PCS sales in connection with our increased installed customer base. Total revenue from EMEA decreased by $1.0 million, or 14%, and $2.1 million or 16%, in the second quarter and the first half of 2016 compared to the same periods in 2015. These decreases were primarily attributable to decreases in products revenue resulting from reduced sales and weakness in the EMEA market overall partially offset by an increase in services revenue. 150. The Second Quarter 2016 Form 10-Q falsely represented that “[t]he accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and following the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting” and that A10 maintained adequate internal controls over the Company’s financial reporting, stating in relevant part: Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of June 30, 2016. * * * Based upon our management’s evaluation of our disclosure controls and procedures as of June 30, 2016, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 151. The Second Quarter 2016 Form 10-Q also contained certifications signed by Defendants Chen and Straughn pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 identical to, or substantially similar to, those in the 2015 Annual Report stated above in ¶126, representing that financial statements did not contain any material misrepresentations or omissions and that disclosure controls and procedures were adequate. 152. Certifications pursuant to 18 U.S.C. § 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, identical to, or substantially similar to, those in the 2015 Annual Report stated above in ¶126, signed by Defendants Chen and Straughn, were also included with the Second Quarter 2016 Form 10-Q. 153. The above statements were materially false and/or misleading when made because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, and financial results, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that they had admittedly: (i) misstated revenue; (ii) violated A10’s stated revenue recognition policies; (iii) lacked effective internal controls; and (iv) as a result of (i) – (iii), A10’s financial statements were not in compliance with GAAP. G. False and Misleading Statements in the October 27, 2016 Third Quarter 2016 Earnings Press Release and Conference Call 154. On October 27, 2016, A10 issued a press release announcing its third quarter 2016 financial results (the “October 2016 Press Release”), stating in relevant part: Total revenue for the third quarter grew to $55.1 million, up 8 percent when compared with $50.8 million in the third quarter of 2015. On a GAAP basis, A10 Networks reported a net loss for the third quarter 2016 of $4.7 million, or $0.07 per share, compared with a net loss of $9.0 million, or $0.14 per share, in the third quarter of 2015. Non-GAAP net income for the third quarter of 2016 was $0.2 million, or $0.00 per share, compared with a non-GAAP net loss of $4.4 million, or $0.07 per share, in the third quarter of 2015. A reconciliation between GAAP and non-GAAP information is contained in the financial statements below. “We reported third quarter revenue of $55.1 million, which was below our guidance and reflects a shortfall in North America where we received a couple orders too late in the quarter to ship and some deals slipped into future quarters,” said Lee Chen, president and chief executive officer of A10 Networks. “While we are disappointed with our topline performance, we continued to drive leverage in our operating model, significantly improve our bottom-line results and invest in key areas of our business to foster long-term growth. The share repurchase authorization announced today reflects our confidence in our market opportunities and ability to meet our financial objectives.” 155. On the same day, Defendants held a conference call to discuss the third quarter 2016 earnings. Defendants Chen and Straughn repeated the false and misleading revenue and net loss/income numbers for the Q3’16 as reported in the October 2016 Press Release. Defendant Chen stated that for the quarter the Company had “reached non-GAAP breakeven.” 156. Defendant Straughn stated: Moving on to our outlook, we currently expect fourth quarter revenue to be in the range of $59 million to $63 million. At the mid-point, this represent 8% year- over-year revenue growth for the quarter and 16% growth for the full year. We expect gross margin to remain in the 75% to 77% range, and operating expenses to be between $44.5 million and $45.5 million. We expect our non-GAAP bottom- line results to be between breakeven and earnings of $0.04 per share using approximately 75.1 million shares on a basic and diluted basis. 157. Defendant Chen ascribed the disappointing revenue results to “lower than expected product bookings in North America, where we received a couple orders too late in the quarter to ship and some deals slipped into future quarters. These deals were both in our enterprise and service provider customer verticals and remain in our pipeline.” Chen buttressed his comments, stating that the Company was “closely engaged with these customers and we expect these transactions to be closed in either Q4 or Q1.” Defendant Straughn confirmed this, stating: “As Lee mentioned, the revenue shortfall was primarily in North America where product bookings came in lower than we had expected.” 158. Analysts asked pointed questions regarding the “couple orders” resulting in the low revenues for the quarter: <Q - Dariush Ruch-Kamgar>: Questions on the deal push outs, wondering are these customers that typically purchase every quarter or two, so does this -- and what I’m trying to ask is, does this represent slower total growth for next couple of quarters? And are there any similarities between the customers that you’re seeing or why they pushed out orders? <A - Greg Straughn>: Hi, Dariush, this is Greg. So first of all, all of the deals that we saw that moved out of the quarter were with existing customers. And so they are customers where we have ongoing relationships and I won’t go so far to say they buy every quarter, but they are usual suspects for us. And so, we know pretty well what deals are going to close but it’s the time that becomes the issue and that's ‘what we saw this quarter. So, I don’t think this points to any kind of larger trend for us. It was an isolated group of customers and I don’t think there’d be any common thread we can point to as to either why they pushed out or what they were buying or what they were, I guess, the process they were going through. * * * <Q - Ryan M. Flanagan>: Hi, thanks guys. It’s Ryan on for [ph] Ro (31:43). I’d a question on the guidance. It looks like the little bit of wider range than normal. Does that imply any sort of variability on pipeline visibility or some uncertainty around closing these deals, any color on the rationale behind that? Thanks. <A - Greg Straughn>: Sure, this is Greg. I think that certainly coming off of a quarter in Q3 where we had some deals into the quarter that didn’t cross the line as we expected, leads you to think about how you do Q4 as well. And so, I think we just want to give ourselves a little bit flexibility in dealing with that variability. Q4 has traditionally been a big quarter for us. And so, we want to give ourselves room to exceed but also have to be realistic on what we saw in Q3 and factor that in. * * * <Q>: Hey guys, this is [ph] RK (37:05) again. I just wanted to check with you, could you give us any color on the magnitude of the two push-outs you saw this quarter and also to what extent is that they are reflected in your guidance for Q4? <A - Greg Straughn>: So the magnitude of the push outs and to the extent they’re projected into guidance. So on the magnitude, kind of in two different reactions. One is that from a deal size, they tended to be $0.5 million to $1.5 million deals. So not small deals but not mega deals that we sometimes run across. And there a handful of them. So, there were a very clearly identifiable group of accounts that were we focused on. When we look at guidance for Q4, ultimately we go through the same process that we go through every quarter. I’ve talked few times about the layer cake that we build up starting with the services that we know are coming in, looking at our backlog, looking at deals that work, and then going to our evaluation process. So these deals go through that same analysis. I mean, they likely have a higher probability because we are closer on them than are some of the others. But they kind of go into that same analysis that we look at. They don’t get special treatment necessarily. So, we would expect to think as we said, some of them -- most in the close in Q4, may be one or two goes to Q1 but they're factored in, we think appropriately to Q4. 159. On this news, A10’s stock price fell almost 17% from a closing price of $8.99 per share on October 27, 2016 to close at $7.47 per share on October 28, 2016 on heavy trading volume of over 3.7 million shares. 160. Analysts accepted Defendants’ reasons for the weak quarter and false and misleading “non-GAAP breakeven.” Buckingham Research Group maintained its rating and price target, stating: “ATEN delivered 3Q revenue miss on a handful of slipped deals, however, disciplined expense management drove operating income and breakeven EPS.” J.P. Morgan similarly stated: “A10 reported a weak quarter and guide as management indicated a handful of unrelated customer order delays in North America. However, the company achieved EBIT breakeven as promised. . . . We continue to believe that the company has solid growth prospects.” 161. The above statements were materially false and/or misleading when made because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, financial results and prospects, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that they had admittedly: (i) overstated revenue for the Q3’16 by prematurely recognizing revenue; (ii) overstated the non-GAAP operating income, net income for the Q3’16 changing a loss into income; (iii) violated A10’s stated revenue recognition policies; (iv) as, a result of (i) – (iii) the Company’s business and prospects were worse than represented because as discussed at ¶¶100-113, meeting the break-even earnings could only be accomplished through improper revenue recognition practices; and, (v) Defendants’ public statements were materially false and misleading at all relevant times. H. False and Misleading Statements in the Third Quarter 2016 Form 10-Q 162. On November 3, 2016, the Company filed its quarterly report on Form 10-Q for the quarter ended September 30, 2016 (the “Third Quarter 2016 Form 10-Q”) with the SEC, which was signed and certified by Defendants Chen and Straughn. 163. The Third Quarter 2016 Form 10-Q included false and misleading statements regarding A10’s revenue recognition practices as follows: Our products revenue primarily consists of revenue from sales of our hardware appliances upon which our software is installed. Such software includes our ACOS software platform plus one of our ADC, CGN, TPS, and CFW solutions. Purchase of a hardware appliance includes a perpetual license to the included software. We recognize products revenue at the time of shipment, provided that all other revenue recognition criteria have been met. As a percentage of revenue, our products revenue may vary from quarter to quarter based on, among other things, the timing of orders and delivery of products, cyclicality and seasonality, changes in currency exchange rates and the impact of significant transactions with unique terms and conditions. * * * As a result of end-customer buying patterns and the efforts of our sales force and distribution channel partners to meet or exceed their sales objectives, we have historically received a substantial portion of purchase orders and generated a substantial portion of revenue during the last few weeks of each quarter. We can recognize such revenue in the quarter received, however, only if all of the requirements of revenue recognition, especially shipment, are met by the end of the quarter. 164. The Third Quarter 2016 Form 10-Q reported total revenue of $55.1 million and a net loss of $4.7 million for the third quarter 2016. 165. The Third Quarter 2016 Form 10-Q also falsely represented that “[t]he accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and following the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting” and that A10 maintained adequate internal controls over the Company’s financial reporting, stating in relevant part: Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of September 30, 2016. * * * Based upon our management’s evaluation of our disclosure controls and procedures as of September 30, 2016, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended September 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 166. The Third Quarter 2016 Form 10-Q contained certifications signed by Defendants Chen and Straughn pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, identical to, or substantially similar to, those in the 2015 Annual Report stated above in ¶125, representing that the financial statements did not contain any material misrepresentations or omissions and that disclosure controls and procedures were adequate. 167. Certifications pursuant to 18 U.S.C. § 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, identical to, or substantially similar to, those in the 2015 Annual Report stated above in ¶126, signed by Defendants Chen and Straughn, were also included with the Third Quarter 2016 Form 10-Q. 168. The above statements were materially false and/or misleading when made because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, and financial results, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that they had admittedly: (i) overstated revenue for the Q3’16 by prematurely recognizing revenue; (ii) understated net loss for the Q3’16; (iii) violated A10’s stated revenue recognition policies; (iv) lacked effective internal controls; and (iv) as a result of (i) – (iv), A10’s financial statements were not in compliance with GAAP. I. False and Misleading Statements in the February 9, 2017 Fourth Quarter and Year-End 2016 Earnings Press Release and Conference Call 169. On February 9, 2017, A10 issued a press release announcing its fourth quarter and year-end 2016 financial results and disclosing that Defendant Straughn would be stepping down as CFO (the “February 2017 Press Release”), stating in relevant part: Fourth Quarter 2016 Financial Summary • Record revenue of $64.0 million, grew 13 percent year-over-year • GAAP net loss of $1.8 million or $0.03 per share • Non-GAAP net income of $2.3 million or $0.03 per share Year 2016 Financial Summary • Record revenue of $230.0 million, grew 16 percent over 2015 • GAAP net loss of $20.9 million or $0.32 per share • Non-GAAP net loss of $2.7 million or $0.04 per share • Deferred revenue grew 28 percent year-over-year to reach $92.9 million • Ended the year with $114 million in cash, cash equivalents and marketable securities, an increase of $16 million from last year A reconciliation between GAAP and non-GAAP information is contained in the financial statements below. “The fourth quarter was a strong close to the year with revenue exceeding guidance and growing 13 percent year-over-year to reach $64 million. Our record performance was driven by strong demand for our security solutions and continued expansion with cloud provider, service provider and web-scale customers,” said Lee Chen, president and chief executive officer of A10 Networks. “We also continued to drive leverage through our operating structure to make significant improvements in our bottom-line results, while at the same time, investing in key areas of our business.” Management Transition A10 Networks announced that Greg Straughn has decided to step down from the role of CFO effective as of the filing of the company’s 10-K. Straughn will remain with the company as an advisor until April to help facilitate a smooth transition. The board of directors has appointed Shiva Natarajan as the company’s interim CFO effective upon Straughn’s resignation. The company has initiated a search for a successor to Straughn. 170. Also on February 9, 2017, the Company held an investor conference call to discuss A10’s fourth quarter and year-end 2016 financial results. Defendants Chen and Straughn repeated the same false and misleading revenue and net loss/income numbers for the fourth quarter and year-end 2016 as reported in the February 2017 Press Release. Defendant Chen stated: Across the board, the A10 team executed and reached several new records including: record product revenue of $43.5 million, up 23% over Q3 and 10% over last year. Record security revenue, record revenue in the U.S., which grew 38% over Q3 and 6% year-over-year to reach $33.5 million. Record bookings, which led to the highest backlog in our history, and record deferred revenue of $92.9 million, which grew 28% year-over-year. Our record performance was driven by continued expansion within cloud provider, service provider and web-scale customers, as well as strong demand for our security solutions, including our recently launched Thunder 14045 security appliance. * * * In short, our strategy is working. For the full-year, we grew revenue 16% to reach $230 million. We exceeded our goal for security product revenue in this year. And we expect our security product revenue to be over 20% of our total product revenue in 2017. We achieved these results while driving leverage through our model and significantly improving our bottom line. We reduced our non-GAAP net loss by 88% and met our goal to deliver a profit in the fourth quarter. With the top-line growth and continued focus on financial discipline, we expect to expand our profitability in 2017, and we remain committed to reach our target operating model by 2019. 171. Defendant Straughn reiterated the revenue break-downs and went on to explain the following: We achieved non-GAAP net income of $2.3 million or $0.03 per diluted share, which was at the high-end of our guided range of breakeven to $0.04 of earnings. In the fourth quarter, we incurred a $2.4 million expense, or $0.03 per share, due to the unexpected, post-election movement in the yen to dollar exchange rate. This expense is reflected in the other expense line in our income statement. Our net income performance this quarter represents a significant improvement from a net loss of $3.7 million in Q4 of last year, bringing our full year bottom line improvement to 88% on a per share basis. Diluted weighted shares used for computing EPS for the fourth quarter were approximately 73.1 million shares, while basic shares outstanding for computing the net loss for the 2016 year were 65.7 million shares. 172. Analyst Ittai Kidron of Oppenheimer questioned the Individual Defendants on the source of their successful quarter and year-end: <Q - Ittai Kidron>: Hi, guys. Congrats on good numbers and Greg, sorry to see you leave. Maybe you could talk a little bit about the outperformance, how much of it in the quarter was really the deals that got delayed, that closed, I mean your master capture, what kind of slipped through last quarter versus the upside driven by new business transactions, if you can give us some color, that will be great. <A - Greg Straughn>: Sure. Of the deals that we had talked about at the end of the Q3, some of those did close in Q4, some of those are in the pipeline and we would expect to close in Q1. But I think the key thing to note is that we had massively strong bookings within the quarter. I mean we talked about a $90 million backlog, which is well beyond anything we’ve seen before. And so, the traction within the quarter was where the quarter was made. So some of those deals are in revenue, but the real story for our business traction is the record bookings and have that contributed to backlog. <Q - Ittai Kidron>: When you look at that backlog, are there large deals in there that are making the jump like this or is it pretty widely distributed? <A - Greg Straughn>: There is a combination. I mean there it’s not all small deals. There are some good-sized transactions in there and that backlog will likely come into revenue, not all Q1, there will be some spread to it, but we’re really very, very pleased with the quantity and the quality of that backlog. <Q - Ittai Kidron>: Got it. And then, Lee – go ahead. <A - Lee Chen>: The backlog is from many customers. 173. As expected, analysts and investors reacted favorably to the Defendants’ earnings report. The Company’s stock price increased from a closing price of $8.60 per share on February 9, 2017 to close at $9.52 per share on February 10, 2017 on heavy trading volume of over 1.7 million shares. 174. Dougherty & Company called A10’s results “surprisingly strong,” concluding: “Ultimately, the company significantly outperformed expectations and we believe traction with their higher-end appliance bodes well for future periods.” J.P. Morgan increased its revenue estimates “driven by the beat in the quarter as well as the solid guidance.” 175. The above statements were materially false and/or misleading when made because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, financial results and prospects, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that they had admittedly: (i) overstated revenue for the Q4’16 and FY’16 by prematurely recognizing revenue; (ii) understated GAAP operating losses, net loss, and net loss per share for the FY’16 and Q4’16; and(iii) overstated non-GAAP operating income, net income, and net income per share for the Q4’16 and FY’16, changing an operating loss, net loss, and net loss per share into income for Q4’16; (iv) violated A10’s stated revenue recognition policies; (iv) as, a result of (i) – (iv) the Company’s business was worse than represented; and, (v) Defendants’ public statements were materially false and misleading at all relevant times. J. False and Misleading Statements in the 2016 Annual Report 176. On February 24, 2017, the Company filed its Annual Report on Form 10-K with the SEC for the year-ended December 31, 2016 (the “2016 Form 10-K”) which was signed and certified by Defendants Chen and Straughn. 177. The 2016 Form 10-K falsely represented that A10 recognized revenue as follows: Revenue Recognition We derive revenue from two sources: (i) products revenue, which includes hardware and perpetual software license revenue; and (ii) services revenue, which include post contract support (“PCS”), professional services, and training. A substantial portion of our revenue is from sales of our products and services through distribution channel partners, such as resellers and distributors. Revenue is recognized, net of applicable taxes, when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery or performance has occurred, the sales price is fixed or determinable, and collection is reasonably assured. We define each of the four criteria above as follows: • Persuasive evidence of an arrangement exists. Evidence of an arrangement consists of a purchase order issued pursuant to the terms and conditions of a master sales agreement. • Delivery or performance has occurred. We use shipping documents or written evidence of customer acceptance, when applicable, to verify delivery or performance. We recognize product revenue upon transfer of title and risk of loss, which primarily is upon shipment to customers. We do not have significant obligations for future performance, such as customer acceptance provisions, rights of return, or pricing credits, associated with our sales. • The sales price is fixed or determinable. We assess whether the sales price is fixed or determinable based on payment terms and whether the sales price is subject to refund or adjustment. Standard payment terms to customers range from 30 to 90 days. • Collection is reasonably assured. We assess probability of collection on a customer-by-customer basis. Our customers are subjected to a credit review process that evaluates their financial condition and ability to pay for products and services. PCS revenue includes arrangements for software support and technical support for our products. PCS is offered under renewable, fee-based contracts, which include technical support, hardware repair and replacement parts, bug fixes, patches, and unspecified upgrades on a when-and-if available basis. Revenue for PCS services is recognized on a straight-line basis over the service contract term, which is typically one year, but can be up to five years. Unearned PCS revenue is included in deferred revenue. Professional service revenue primarily consists of the fees we earn related to installation and consulting services. We recognize revenue from professional services upon delivery or completion of performance. Professional service arrangements are typically short term in nature and are largely completed within 30 to 90 days from the start of service. 178. The 2016 Form 10-K also included the following additional statements pertaining to A10’s revenue recognition policies: As a result of end-customer buying patterns and the efforts of our sales force and distribution channel partners to meet or exceed their sales objectives, we have historically received a substantial portion of purchase orders and generated a substantial portion of revenue during the last few weeks of each quarter. We can recognize such revenue in the quarter received, however, only if all of the requirements of revenue recognition, especially shipment, are met by the end of the quarter. * * * Our products revenue primarily consists of revenue from sales of our hardware appliances upon which our software is installed. Such software includes our ACOS software platform plus one of our ADC, CGN, TPS, SSLi or CFW solutions. Purchase of a hardware appliance includes a perpetual license to the included software. We recognize products revenue at the time of shipment, provided that all other revenue recognition criteria have been met. 179. The 2016 Form 10-K reported total revenue for the fourth quarter and year-end 2016 as $64 million and $230 million, respectively, and a GAAP net loss of $1.8 million and $20.9 million, respectively. 180. According to the 2016 Form 10-K, the increase in total revenues was attributable to following: During 2016, $118.8 million, or 52%, of total revenue was generated from the United States, which represents an 11% increase in revenue as compared to 2015. The increase was primarily due to higher products revenue as well as higher PCS sales in connection with our increased installed customer base. During 2016, $53.0 million, or 23%, of total revenue was generated from Japan, which represents a 49% increase in revenue as compared to 2015. The increase was primarily due to higher revenue from service provider customers and expansion to new customers in Japan. In addition, the favorable currency exchange impact of the Japanese yen on products revenue was $4.5 million during 2016. During 2016, $29.8 million, or 13%, of total revenue was generated from the Asia Pacific regions excluding Japan, which represents a 25% increase in revenue as compared to 2015. The increase was primarily due to higher products revenue resulting from our continuous efforts in expanding our presence in these regions as well as higher PCS sales in connection with our increased installed customer base. During 2016, $23.1 million, or 10%, of total revenue was generated from EMEA, which represents a 15% decrease in revenue as compared to 2015. The decrease was primarily due to lower products revenue as a result of overall economic weakness and uncertainty in the EMEA markets as well as personnel turnover in our Middle East operations, partially offset by an increase in services revenue. 181. A10 also reported that revenue fulfilled through distribution channel partners accounted for 85% of the total revenue for 2016. 182. The 2016 Form 10-K falsely represented that “[w]e have prepared the accompanying consolidated financial statements in accordance with [GAAP] and pursuant to the rules and regulations of the [SEC]” and that A10 maintained adequate internal controls over the Company’s financial reporting, stating in relevant part: Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as required by Rule 13a-15(b) under the Securities Exchange Act of 1934 as of December 31, 2016. * * * Based upon our management’s evaluation of our disclosure controls and procedures as of December 31, 2016, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on the assessment, our management has concluded that its internal control over financial reporting was effective as of December 31, 2016 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Our independent registered public accounting firm, Deloitte & Touche, LLP, is not required to and has not issued a formal attestation report as of December 31, 2016 and will not be required to do so until the year following the date that we are no longer an emerging growth company as defined in the JOBS Act. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the quarter ended December 31, 2016 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 183. The 2016 Form 10-K included certifications signed by Defendants Chen and Straughn, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, identical to, or substantially similar to, those in the 2015 Annual Report stated above in ¶125, representing that financial statements did not contain any material misrepresentations or omissions and that disclosure controls and procedures were adequate. 184. Certifications pursuant to 18 U.S.C. § 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, identical to, or substantially similar to, those in the 2015 Annual Report stated above in ¶126, signed by Defendants Chen and Straughn, were also included with the 2016 Form 10-K. 185. The above statements were materially false and/or misleading when made because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, and financial results, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that they had admittedly: (i) overstated revenue for the Q4’16 and FY’16 by prematurely recognizing revenue; (ii) understated GAAP operating losses, net loss, and net loss per share for the Q4’16 and FY’16; (iii) violated A10’s stated revenue recognition policies; (iv) lacked effective internal controls; and (v) as a result of (i) – (iv), A10’s financial statements were not in compliance with GAAP. K. False and Misleading Statements in the April 27, 2017 First Quarter 2017 Earnings Press Release and Conference Call 186. On April 27, 2017, A10 issued a press release announcing its first quarter 2017 financial results (the “April 2017 Press Release”), stating in relevant part: First Quarter 2017 Financial Summary • Revenue of $60.3 million, grew 12 percent year-over-year • GAAP net loss of $3.9 million or $0.06 per share • Non-GAAP net income of $0.7 million or $0.01 per share A reconciliation between GAAP and non-GAAP information is contained in the financial statements below. “The first quarter was a solid start to the year with revenue growth driven by our security and cloud-focused solutions gaining momentum among cloud provider, service provider and web-scale customers,” said Lee Chen, president and chief executive officer of A10 Networks. “We believe the cloud presents a long-term growth opportunity for A10, and we are focused on bringing new solutions to market that give customers the visibility, agility, flexibility and security they need for their cloud deployments.” 187. Later that same day, Defendants hosted an earnings conference for analysts and investors where Defendants Chen and Natarajan repeated the same false and misleading revenue numbers for the Q1’17 as reported in the April 2017 Press Release. 188. The above statements were materially false and/or misleading when made because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, financial results and prospects, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that they had admittedly: (i) misstated revenue due to improper revenue recognition practices; (ii) violated A10’s stated revenue recognition policies; and, (iii) as a result, Defendants’ public statements were materially false and misleading at all relevant times. L. False and Misleading Statements in the First Quarter 2017 Form 10-Q 189. On May 5, 2017, A10 filed its quarterly report on Form 10-Q for the quarter ended March 31, 2017 (the “First Quarter 2017 Form 10-Q”) with the SEC, which was signed and certified by Defendants Chen and Natarajan. 190. The First Quarter 2017 Form 10-Q included false and misleading statements regarding A10’s revenue recognition practices as follows: Our products revenue primarily consists of revenue from sales of our hardware appliances upon which our software is installed. Such software includes our ACOS software platform plus one of our ADC, CGN, TPS, SSLi or CFW solutions. Purchase of a hardware appliance includes a perpetual license to the included software. We recognize products revenue at the time of shipment, provided that all other revenue recognition criteria have been met. As a percentage of revenue, our products revenue may vary from quarter to quarter based on, among other things, the timing of orders and delivery of products, cyclicality and seasonality, changes in currency exchange rates and the impact of significant transactions with unique terms and conditions. * * * As a result of end-customer buying patterns and the efforts of our sales force and distribution channel partners to meet or exceed their sales objectives, we have historically received a substantial portion of purchase orders and generated a substantial portion of revenue during the last few weeks of each quarter. We can recognize such revenue in the quarter received, however, only if all of the requirements of revenue recognition, especially shipment, are met by the end of the quarter. 191. The First Quarter 2017 Form 10-Q reported total revenue for the first quarter 2017 of $60.3 million. 192. Revenue was attributed to the following: During the first quarter of 2017, $30.7 million, or 51% of total revenue, was generated from the United States, which represents a 4% increase as compared to the same period of 2016. The increase was primarily due to higher services revenue attributable to the increase in PCS sales in connection with our increased installed customer base. During the first quarter of 2017, $13.1 million, or 22% of total revenue, was generated from Japan, which represents a 20% increase as compared to the same period of 2016. The increase was primarily due to higher products revenue and higher services revenue from PCS sales in connection with renewals. During the first quarter of 2017, $10.2 million, or 17% of total revenue, was generated from Asia Pacific regions excluding Japan, which represents a 52% increase as compared to the same period of 2016. The increase was primarily due to higher products revenue. During the first quarter of 2017, $5.2 million, or 8% of total revenue, was generated from EMEA, which represents a 3% increase as compared to the same period of 2016. The increase was primarily due higher services revenue, partially offset by lower products revenue as a result of overall economic weakness and uncertainty in the EMEA markets. 193. The First Quarter 2017 Form 10-Q also falsely represented that A10 “prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the [SEC]” and that the “condensed consolidated financial statements are prepared in accordance with U.S. GAAP.” The First Quarter 2017 Form 10-Q claimed that A10 maintained adequate internal controls over the Company’s financial reporting, stating in relevant part: Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Interim Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of March 31, 2017. * * * Based upon our management’s evaluation of our disclosure controls and procedures as of March 31, 2017, our Chief Executive Officer and Interim Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Interim Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the quarter ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 194. The First Quarter 2017 Form 10-Q also contained certifications signed by Defendants Chen and Natarajan, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, identical to, or substantially similar to, those in the 2015 Annual Report stated above in ¶125, representing that financial statements did not contain any material misrepresentations or omissions and that disclosure controls and procedures were adequate. 195. Certifications pursuant to 18 U.S.C. § 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, identical to, or substantially similar to, those in the 2015 Annual Report stated above in ¶126, signed by Defendants Chen and Natarajan, were also included with the First Quarter 2017 Form 10-Q. 196. The above statements were materially false and/or misleading when made because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, and financial results, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that they had admittedly: (i) misstated revenue due to improper revenue recognition practices; (ii) violated A10’s stated revenue recognition policies; (iii) lacked effective internal controls; and (iv) as a result of (i) – (iii), A10’s financial statements were not in compliance with GAAP. VI. THE TRUTH BEGINS TO EMERGE THROUGH PARTIAL CORRECTIVE DISCLOSURES WHILE DEFENDANTS CONTINUE TO ISSUE FALSE AND MISLEADING STATEMENTS A. False and Misleading Statements in the July 13, 2017 Preliminary Second Quarter 2017 Earnings Press Release 197. On July 13, 2017, A10 uncharacteristically issued a press release announcing preliminary second quarter 2017 financial results, stating in relevant part: A10 Networks expects total revenue in the second quarter 2017 to be between $52.5 million and $53.5 million, below its prior guidance of $62.0 million to $64.0 million. The company expects to report a GAAP net loss between $0.12 and $0.13 per share. On a non-GAAP basis, the company expects to report a net loss between $0.05 and $0.06 per share, using approximately 69.8 million basic shares, which is below the previous guidance for non-GAAP net income of $0.01 to $0.03 per share, using approximately 76.6 million diluted shares. A preliminary reconciliation between GAAP and non-GAAP information is contained in the financial statements below. “We are disappointed with our preliminary results. Revenue came in below our guidance as a number of opportunities in our pipeline did not close primarily in North America and to a lesser degree in Japan. Key deals remain in our pipeline and we are diligently working to improve our execution,” said Lee Chen, president and chief executive officer of A10 Networks. “We remain confident that our investments in security and cloud will serve as a strong foundation to penetrate these faster-growing segments of our market.” These are preliminary results and remain subject to the completion of the company’s customary quarterly close and review procedures. Material adjustments may arise between the date of this press release and the dates on which A10 Networks announces its full second quarter 2017 results and files its Form 10-Q for the period with the SEC. 198. On this news, A10’s stock price fell 16% from a closing price of $8.24 per share on July 13, 2017 to close at $6.92 per share on July 14, 2017 on heavy trading volume of over 5.3 million shares. As set forth herein, artificial inflation in A10’s stock price was removed when concealed risks materialized and/or the truth about the material misrepresentations and omissions was partially revealed to the public on July 13, 2017. See Section VIII.A, infra. 199. While analysts reacted to A10’s disappointing results, once again Defendants’ false assurances hit their mark. Dougherty & Company reduced its price target from $10.50 to $8.50, but remained positive: “While purchase delays are concerning, the company has a well-established install base in large-scale environments . . . where revenue tends to be lumpy. . . . We believe the company has a few deals in the pipeline that will pull though [sic] by year end and therefore, maintaining our Buy rating.” 200. Despite disclosing revenue guidance shortfalls, the above statements continued to be materially false and/or misleading when made because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, financial results and prospects, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that they had admittedly: (i) understated revenue due to improper revenue recognition practices; (ii) violated A10’s stated revenue recognition policies; and, (iii) as a result, Defendants’ public statements were materially false and misleading at all relevant times. B. False and Misleading Statements in the July 27, 2017 Second Quarter 2017 Earnings Press Release and Conference Call 201. On July 27, 2017, A10 issued a press release announcing its final second quarter 2017 financial results (the “July 27, 2017 Press Release”), stating in relevant part: Second Quarter 2017 Financial Summary  Revenue of $53.7 million, compared with $57.1 million in second quarter 2016  GAAP net loss of $8.3 million or $0.12 per basic share  Non-GAAP net loss of $3.1 million or $0.04 per basic share A reconciliation between GAAP and non-GAAP information is contained in the financial statements below. “We are disappointed with our second quarter results as a number of opportunities in our pipeline did not close in the quarter, which impacted our revenue. We are implementing a number of cross-functional actions to improve our execution, increase the effectiveness of our go-to-market activities and support growth for our expanding product portfolio,” said Lee Chen, president and chief executive officer of A10 Networks. “A10 has a deep heritage in ultra-high- performance networks that we are leveraging to expand into new markets - cloud and security. With our marquee customer base and continued innovation, we believe we are establishing a strong foundation to penetrate these faster-growing markets and drive growth and shareholder value.” 202. On the same day, Defendants participated in an earnings conference call to discuss A10’s final second quarter 2017 financial results. Defendants Chen and Constantino repeated the same false and misleading revenue numbers for the Q2’17 as reported in the July 27, 2017 Press Release. 203. Defendant Chen attributed the disappointing results to “a number of opportunities in all pipeline . . . not clos[ing] in the quarter” adding that the Company “ha[s] commenced a thorough review and analysis of our performance this quarter, and we are taking action to improve our execution and support growth for our expanding product portfolio.” 204. Not surprisingly, analysts questioned the source of A10’s revenue weakness: <Q>: And then following-up on that. If your win rates remained strong, I’m just trying to understand what drove the weakness. You mentioned that some of the deals did not close and you’re commencing a total review. I just wanted to make sure I get some clarity on that. Can you give more – can you be more specific there on what exactly are you reviewing? Did you find some problems with your sales engineering team or you don’t have enough – right resources or the right processes to respond to the [ph] RFPs? (22:49) Can you give us more specifics around that, please? <A>: Lee Chen>: Yes, I think we have [ph] B2B (22:55) through approximately a dozen sizable deals. We thought it will close in the quarter and they did not, right. We also realized we need to improve our execution and taking action to do that. So, they are viewing each of our key regions but mostly in the U.S. and Japan. They’re including both service provider and enterprise customers across our product line. I think Ray you can add more color. <A>: Raymond J. Smets>: Yes, happy to [ph] Ashwin. (23:23) So, just referring back to the deals, there are a handful of deals that we’re tracking in the quarter that we didn’t close, although we expected them to close. And all of the deals had their own particular characteristics. So, there was not anyone reason why we saw these deals move from Q2 into Q3. The good news is we have closed them in the current quarter and most of those remain in the pipeline, also actively and diligently working to be closed in the current quarter as well. But many of our large deals are highly complex and obviously are quite technical in nature that have to go through POX in order to close. This is very, very typical in the kind of market that we’re dealing with. And as we’re tracking these deals, we try to estimate as to when they may come in. But, once again, they all have their own characteristics. Some of the characteristics are issues that we run into or out our control. Some of them are in our control and the areas where we can do better is exactly where we’re focused on. * * * <Q>: Mark Kelleher>: Okay. And you talked about a number of deals, a handful of deals that flipped out. Are you seeing that hesitancy continue into Q3? Are there deals that you factored into your guidance that you think have flipped from Q3 to Q4? <A>: Lee Chen>: Yes, we absolutely are factoring into the longer sales cycle. We’re definitely expecting to for our guidance. But Ray probably can provide more of these. <A>: Raymond J. Smets>: Yes. So, just commenting on those deals that slipped, we’ve actually initiated a pretty thorough review analysis to try to really get under this. If the deals that we’re closing there are fairly complex in nature and, like I had mentioned earlier, their complex for a number of different reasons, some things we can control and some things we can’t. So, we’ve identified some initial actions that we want to take some action around to improve execution. One area is around making sure that our sales organization is more trained to sell in this particularly increasingly complex environment. And we’re also looking at ways to improve cross-functional measures to improve the products and create a more simplified product, so that we can sell. But one of the benefits we have as a small company is we’re very nimble. We can take and implement these actions very, very quickly and maybe even faster than some large companies. And we’re pretty optimistic that the deals that sit in the pipeline are convertible in this quarter and beyond. <A>: Lee Chen>: Yes. I think the good thing is most remain in the pipeline and we already closed out the deal. <Q>: Mark Kelleher>: So, it’s an increased sales cycle. That’s kind of the issue, it’s taking longer to close these complicated deals? And you’re factoring that again into the next quarter guidance, is that correct? <A>: Lee Chen>: Yes. Yes. <A>: Tom Constantino>: Yeah. I don’t see – I would say – this is Tom. The timing of when those deals may close is definitely not determined. And so, we may not see those in the quarter. But as we set guidance we looked across all other deals, we try to take a very measured approach to what we could expect in terms of conversion rate of our pipeline and we added an extra level of caution when we prepared our guidance taking that into consideration. 205. The above statements were materially false and/or misleading when made because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, financial results and prospects, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that they had admittedly: (i) understated revenue due to improper revenue recognition practices; (ii) violated A10’s stated revenue recognition policies; and, (iii) as a result, Defendants’ public statements were materially false and misleading at all relevant times. C. False and Misleading Statements in the Second Quarter 2017 Form 10-Q 206. On August 3, 2017, A10 filed its quarterly report on Form 10-Q for the quarter ended June 30, 2017 (the “Second Quarter 2017 Form 10-Q”) with the SEC, which was signed and certified by Defendants Chen and Constantino. 207. The Second Quarter 2017 Form 10-Q included false and misleading statements regarding A10’s revenue recognition practices as follows: Our products revenue primarily consists of revenue from sales of our hardware appliances upon which our software is installed. Such software includes our ACOS software platform plus one of our ADC, CGN, TPS, SSLi or CFW solutions. Purchase of a hardware appliance includes a perpetual license to the included software. We recognize products revenue at the time of shipment, provided that all other revenue recognition criteria have been met. As a percentage of revenue, our products revenue may vary from quarter to quarter based on, among other things, the timing of orders and delivery of products, cyclicality and seasonality, changes in currency exchange rates and the impact of significant transactions with unique terms and conditions. * * * As a result of end-customer buying patterns and the efforts of our sales force and distribution channel partners to meet or exceed their sales objectives, we have historically received a substantial portion of purchase orders and generated a substantial portion of revenue during the last few weeks of each quarter. We can recognize such revenue in the quarter received, however, only if all of the requirements of revenue recognition, especially shipment, are met by the end of the quarter. 208. The Second Quarter 2017 Form 10-Q reported total revenue for the second quarter 2017 of $53.7 million. 209. Revenue changes were attributed to the following: During the second quarter of 2017, $28.6 million, or 53% of total revenue, was generated from the United States, which represents a 9% decrease as compared to the same period of 2016. During the first half of 2017, $59.3 million, or 52% of total revenue, was generated from the United States, which represents a 3% decrease as compared to the same period of 2016. The decrease was primarily due to lower products revenue, partially offset by higher services revenue attributable to the increase in PCS sales in connection with our increased installed customer base. During the second quarter of 2017, $8.4 million, or 16% of total revenue, was generated from Japan, which represents a 23% decrease as compared to the same period of 2016. During the first half of 2017, $21.5 million, or 19% of total revenue, was generated from Japan, which represents a 2% decrease as compared to the same period of 2016. The decrease was primarily due to lower products revenue, partially offset by higher services revenue from PCS sales in connection with our increased installed customer base. During the second quarter of 2017, $8.7 million, or 16% of total revenue, was generated from Asia Pacific regions excluding Japan, which represents a 12% increase as compared to the same period of 2016. During the first half of 2017, $18.9 million, or 17% of total revenue, was generated from Asia Pacific regions excluding Japan, which represents a 31% increase as compared to the same period of 2016. The increase was primarily due to higher products revenue and to a lesser degree higher services revenue from PCS sales in connection with our increased installed customer base. During the second quarter of 2017, $6.8 million, or 13% of total revenue, was generated from EMEA, which represents a 16% increase as compared to the same period of 2016. During the first half of 2017, $12.0 million, or 10% of total revenue, was generated from EMEA, which represents a 10% increase as compared to the same period of 2016. The increase was primarily due to higher products revenue and higher services revenue from PCS sales in connection with our increased installed customer base. 210. The Second Quarter 2017 Form 10-Q falsely represented that A10 “prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the” SEC and that the “condensed consolidated financial statements are prepared in accordance with U.S. GAAP.” The Second Quarter 2017 Form 10-Q also claimed that A10 maintained adequate internal controls over the Company’s financial reporting, stating in relevant part: Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of June 30, 2017. * * * Based upon our management’s evaluation of our disclosure controls and procedures as of June 30, 2017, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the quarter ended June 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 211. The Second Quarter 2017 Form 10-Q also contained certifications signed by Defendants Chen and Constantino, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, identical to, or substantially similar to, those in the 2015 Annual Report stated above in ¶125, representing that financial statements did not contain any material misrepresentations or omissions and that disclosure controls and procedures were adequate. 212. Certifications pursuant to 18 U.S.C. § 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, identical to, or substantially similar to, those in the 2015 Annual Report stated above in ¶126, signed by Defendants Chen and Constantino, were also included with the Second Quarter 2017 Form 10-Q. 213. The above statements were materially false and/or misleading when made because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, and financial results, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that they had admittedly: (i) misstated revenue; (ii) violated A10’s stated revenue recognition policies; (iii) lacked effective internal controls; and (iv) as a result of (i) – (iii), A10’s financial statements were not in compliance with GAAP. D. False and Misleading Statements in the September 28, 2017 Preliminary Third Quarter Earnings Press Release 214. On September 28, 2017, A10 issued a press release announcing preliminary third quarter 2017 financial results, stating in relevant part: SAN JOSE, Calif., Sept. 28, 2017 – A10 Networks, Inc. (NYSE: ATEN), a Secure Application Services™ company, today announced that it expects revenue for its third quarter 2017 to exceed management’s prior outlook provided on July 27, 2017. A10 Networks currently expects revenue to be between $59 million and $60 million, above its prior guidance of $53 million to $57 million. The company also expects to report a profit on a non-GAAP basis. The company also announced the departure of Ray Smets, EVP of worldwide sales, effective in the fourth quarter. The company has initiated a search for a new worldwide sales leader, and during the interim, Tom Constantino, CFO of A10 Networks, will assume responsibility of the sales organization. “We expect to deliver a strong third quarter, led by sales into our marquee service provider customers. We look forward to discussing our full results on our conference call in October,” said Lee Chen, president and chief executive officer of A10 Networks. “Ray has been a key contributor to A10, including building a strong sales team. We thank Ray for his service and wish him all the best in his future endeavors. We have considerable talent within A10 and are confident in our ability to manage a smooth transition.” 215. The above statements continued to be materially false and/or misleading when made because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, financial results and prospects, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that they had admittedly: (i) understated revenue due to improper revenue recognition practices; (ii) violated A10’s stated revenue recognition policies; and, (iii) as a result, Defendants’ public statements were materially false and misleading at all relevant times. E. False and Misleading Statements in the October 26, 2017 Third Quarter 2017 Earnings Press Release and Conference Call 216. On October 26, 2017, A10 issued a press release announcing its final third quarter 2017 financial results (the “October 26, 2017 Press Release”), stating in relevant part: Third Quarter 2017 Financial Summary  Revenue of $61.4 million, compared with $55.1 million in third quarter 2016  GAAP net loss of $2.7 million, or $0.03 per basic share  Non-GAAP net income of $2.1 million, or $0.04 per diluted share A reconciliation between GAAP and non-GAAP information is contained in the financial statements below. “We delivered a strong third quarter and are pleased with the team’s execution. Revenue exceeded our initial and revised guidance and increased 12% year-over- year to reach $61.4 million. Our top-line performance was driven by solid demand and the team’s improved execution as we began to see the initial progress from some of the recent changes we implemented in the quarter,” said Lee Chen, president and chief executive officer of A10 Networks. “We are making solid progress, but still have a lot of work ahead of us in order to continue to capitalize on the fast-growing areas of our market. The share repurchase authorization announced today reflects our confidence in our market opportunities and our commitment to enhancing shareholder value.” 217. On the same day, Defendants held an earnings conference to discuss the Company’s final third quarter 2017 financial results. Defendants Chen and Constantino repeated the same false and misleading revenue numbers for the Q3’17 as reported in the October 26, 2017 Press Release. 218. Defendant Constantino followed up on A10’s second quarter 2017 proposed accountability improvements, stating in relevant part: Overall, we delivered a strong third quarter and we are pleased with the initial progress we are seeing from the actions we took to improve execution. More specifically, we improved our forecasting processes and sales performance analytics which led to improved sales execution. We also improved our focus on accountability and performance management. Similarly, we have taken steps to improve our cross-functional collaboration in support of sales in delivering the quarter. While we have more work to do, as mentioned by Lee, we believe we are on the right track and that our efforts helped us deliver a strong finish to the quarter. 219. Analysts questioned the quick turn-around from the previous disappointing quarters: <Q - Tal Liani>: So, sorry, I’m taking too much time, but I have one last question. If I look back a few quarters, there were some disappointment and now you’re starting to show solid momentum. What changed? What drove – was it really just sales execution or timing of projects? I’m trying to understand how much of today’s momentum or strength is a reflection of something you fixed in the business, maybe go-to-market or anything and how much of it is products and the offerings and what changed now versus before? <A - Lee Chen>: It’s really a combination of both. Why this is due to the fact we have a lot of the marquee customer in service provider, their business can be lumpy from quarter-to-quarter. But if we look at annually, we still – I think we are in the good trajectory, but on a quarter-to-quarter basis, it’s the timing of the project. The second is really [indiscernible] (30:20) sales execution. I think we improved our sales execution last quarter. We still have a lot of work to do and we are working diligently to improve our go-to-market sales enablement and also sales execution and also alignment among sales, marketing and engineering. We are working on all of that. We still have a long way to go. 220. The above statements were materially false and/or misleading when made because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, financial results and prospects, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that they had admittedly: (i) understated revenue due to improper revenue recognition practices; (ii) violated A10’s stated revenue recognition policies; and, (iii) as a result, Defendants’ public statements were materially false and misleading at all relevant times. F. False and Misleading Statements in the Third Quarter 2017 Form 10-Q 221. On November 2, 2017, the Company filed its quarterly report on Form 10-Q for the quarter ended September 30, 2017 (the “Third Quarter 2017 Form 10-Q”) with the SEC, which was signed and certified by Defendants Chen and Constantino. 222. The Third Quarter 2017 Form 10-Q included false and misleading statements regarding A10’s revenue recognition practices as follows: Our products revenue primarily consists of revenue from sales of our hardware appliances upon which our software is installed. Such software includes our ACOS software platform plus one of our ADC, CGN, TPS, SSLi or CFW solutions. Purchase of a hardware appliance includes a perpetual license to the included software. We recognize products revenue at the time of shipment, provided that all other revenue recognition criteria have been met. As a percentage of revenue, our products revenue may vary from quarter to quarter based on, among other things, the timing of orders and delivery of products, cyclicality and seasonality, changes in currency exchange rates and the impact of significant transactions with unique terms and conditions. * * * As a result of end-customer buying patterns and the efforts of our sales force and distribution channel partners to meet or exceed their sales objectives, we have historically received a substantial portion of purchase orders and generated a substantial portion of revenue during the last few weeks of each quarter. We can recognize such revenue in the quarter received, however, only if all of the requirements of revenue recognition, especially shipment, are met by the end of the quarter. 223. The Third Quarter 2017 Form 10-Q reported total revenue for the third quarter 2017 of $61.4 million. 224. The Third Quarter 2017 Form 10-Q attributed revenue increases and decreases to the following: During the third quarter of 2017, $28.8 million, or 47% of total revenue, was generated from the United States, which represents a 19% increase as compared to the same period of 2016. The increase is primarily due to higher products revenue. During the first nine months of 2017, $88.1 million, or 50% of total revenue, was generated from the United States, which represents a 3% increase as compared to the same period of 2016. The increase is primarily due to higher services revenue attributable to the increase in PCS sales in connection with our increased installed customer base. During the third quarter of 2017, $16.6 million, or 27% of total revenue, was generated from Japan, which represents a 4% increase as compared to the same period of 2016. The increase is primarily due to higher services revenue from PCS sales in connection with our increased installed customer base. During the first nine months of 2017, $38.1 million, or 22% of total revenue, was generated from Japan, which represents a 1% increase as compared to the same period of 2016. The increase is primarily due to higher services revenue from PCS sales in connection with our increased installed customer base, partially offset by lower products revenue. During the third quarter of 2017, $6.7 million, or 11% of total revenue, was generated from Asia Pacific regions excluding Japan, which represents a 10% decrease as compared to the same period of 2016. The decrease is primarily due to lower products revenue, partially offset by higher services revenue from PCS sales in connection with our increased installed customer base. During the first nine months of 2017, $25.6 million, or 15% of total revenue, was generated from Asia Pacific regions excluding Japan, which represents a 17% increase as compared to the same period of 2016. The increase was primarily due to higher products revenue and to a lesser degree higher services revenue from PCS sales in connection with our increased installed customer base. During the third quarter of 2017, $6.1 million, or 10% of total revenue, was generated from EMEA, which represents a 1% increase as compared to the same period of 2016. The increase is primarily due to higher services revenue from PCS sales in connection with our increased installed customer base, partially offset by lower products revenue. During the first nine months of 2017, $18.1 million, or 10% of total revenue, was generated from EMEA, which represents a 7% increase as compared to the same period of 2016. The increase was primarily due to higher services revenue from PCS sales in connection with our increased installed customer base. 225. The Third Quarter 2017 Form 10-Q falsely represented that A10 “prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the [SEC]” and that the “condensed consolidated financial statements are prepared in accordance with U.S. GAAP.” The Third Quarter 2017 Form 10-Q also claimed that Defendants maintained adequate internal controls over the Company’s financial reporting, stating in relevant part: Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of September 30, 2017. * * * Based upon our management’s evaluation of our disclosure controls and procedures as of September 30, 2017, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 226. The Third Quarter 2017 Form 10-Q also contained certifications signed by Defendants Chen and Constantino, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, identical to, or substantially similar to, those in the 2015 Annual Report stated above in ¶125, representing that financial statements did not contain any material misrepresentations or omissions and that disclosure controls and procedures were adequate. 227. Certifications pursuant to 18 U.S.C. § 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, identical to, or substantially similar to, those in the 2015 Annual Report stated above in ¶126, signed by Defendants Chen and Constantino, were also included with the Third Quarter 2017 Form 10-Q. 228. The above statements were materially false and/or misleading when made because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, and financial results, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that they had admittedly: (i) misstated revenue; (ii) violated A10’s stated revenue recognition policies; (iii) lacked effective internal controls; and (iv) as a result of (i) – (iii), A10’s financial statements were not in compliance with GAAP. G. False and Misleading Statements in the January 16, 2018 Preliminary Fourth Quarter and Year-End 2017 Earnings Press Release 229. On January 16, 2018, A10 issued a press release announcing the Company’s preliminary fourth quarter 2017 financial results. This press release revealed that the Company expected revenue for Q4’17 under its previously issued guidance, stating in relevant part: SAN JOSE, Calif., Jan. 16, 2018 - A10 Networks, Inc. (NYSE: ATEN), a Secure Application Services™ company, today announced preliminary results for the fourth quarter ended Dec. 31, 2017. A10 Networks expects total revenue in the fourth quarter 2017 to be between $55.5 million and $56.0 million, below its prior guidance of $64.0 million to $67.0 million. The company expects to report GAAP net income in the range of break-even to $0.01 per share. On a non-GAAP basis, the company expects to report net income between $0.05 and $0.06 per share, using approximately 74.6 million diluted shares, which is within the previous guidance for non-GAAP net income of $0.01 to $0.07 per share, using approximately 74.0 million shares on a diluted basis. GAAP and non-GAAP net income results include a benefit from performance-based variable compensation. A preliminary reconciliation between GAAP and non-GAAP information is contained in the financial statements below. “We are disappointed with our revenue results for the quarter, which were below our guidance primarily due to a shortfall in North America sales as we experienced lower than expected seasonal demand trends in the region. Despite this shortfall, we increased our cash and cash equivalents by $6.6 million, and continued to see strength for our security solutions,” said Lee Chen, president and chief executive officer of A10 Networks. “Over the past two quarters, we have implemented a number of changes across the organization to help improve our execution and expand our presence in security to drive growth. We are making progress on these initiatives and continuing to work to align our sales and enablement engine with the growth opportunities in our market. As part of these initiatives, we have brought in Chris White to lead our global sales team, effective January 2, 2018. Chris is an accomplished sales executive with a long career in the cybersecurity industry, and his expertise in sales and channel leadership will be a solid asset to A10.” 230. On this news, A10’s share price plummeted by $0.99 per share, or over 13%, from its previous closing price of $7.31 on January 16, 2018 to close at $6.32 per share on January 17, 2018 on unusually heavy trading volume of over 2.9 million shares, causing damage to investors. As set forth herein, artificial inflation in A10’s stock price was removed when concealed risks materialized and/or the truth about the material misrepresentations and omissions was partially revealed to the public on January 16, 2018. See Section VIII.B, infra. 231. The above statements continued to be materially false and/or misleading when made because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, financial results and prospects, which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that they had admittedly: (i) misstated revenue due to improper revenue recognition practices; (ii) violated A10’s stated revenue recognition policies; and, (iii) as a result, Defendants’ public statements were materially false and misleading at all relevant times. VII. THE TRUTH IS REVEALED 232. On January 30, 2018, the Company issued a press release announcing the postponement of the Q4’17 and FY’17 financial results and revealing that A10’s Audit Committee was investigating the Company’s revenue recognition practices for the fourth quarter of 2015 through the fourth quarter of 2017, stating in relevant part: In the fourth quarter of 2017, the Company determined that a mid-level employee within its finance department had violated the Company’s Insider Trading Policy and Code of Conduct. As a result, the Company, with the assistance of outside counsel, conducted an email review and additional procedures to ensure the accuracy of its reporting of financial information for 2017. Such review and procedures did not identify matters that required material adjustments to be made. Nonetheless, the Company’s Audit Committee determined that further review and procedures relating to certain accounting and internal control matters should be undertaken. The Audit Committee’s investigation, which is being conducted with the assistance of outside counsel, is principally focused on certain revenue recognition matters from the fourth quarter of 2015 through the fourth quarter of 2017 inclusive. The investigation is in its early stages. The Company is not able to provide a date as to when it will be completed, nor provide any assurance that the Company will not determine that material adjustments to its past financial statements are appropriate. At the conclusion of the Audit Committee’s investigation, the Company will announce the scheduling of a conference call to discuss full financial results for the 2017 fourth quarter and full year. 233. Upon this news, the price of A10 stock declined over 12% from a closing share price of $6.99 on January 30, 2018 to $6.13 at close on January 31, 2018, on heavy trading volume of over 1.4 million shares, thereby damaging investors. 234. On March 16, 2018, A10 announced that the Company’s FY’17 Form 10-K filing would officially be delayed. Specifically, the Company indicated that it would not expect to file the Form 10-K within the 15 day extension period and that it was presently uncertain as to when the Company would be able to file a Form 10-K or Form 10-Q in the foreseeable future. 235. On March 23, 2018, Dougherty & Company report issued a report titled, “Throwing in the Towel, with 10-K Delayed the Future Remains Uncertain; Downgrading to Neutral,” which discussed how A10’s disappointing financial and operational results, in addition to future uncertainty, prompted a rating downgrade and a price target suspension. The report specifically noted, “A10 is fresh off a major revenue miss and has not been able to formally address investor concerns. The company will not be able to release a 10-K until the investigation is concluded, which presents significant uncertainty for at least one more quarter.” This report also went on to criticize the Company’s recent sales performance, commenting specifically on sales execution and poor communication with the reseller community: The company has taken the right steps to bring in a new head of sales while realigning and focusing the sales organization. We expect it may take a quarter or two for the new sales team to develop a broader base of customers. Additionally, conversations over the past year with the reseller community suggest the company has a history of being inconsistent (changes in personnel) which has provided a window of opportunity for competitors to slide in, develop relationships, and take advantage of opportunities in different regions. We view some of the on-again, off-again communication can be attributed to not having a robust security portfolio. 236. As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of A10’s securities, Plaintiffs and other Class members have suffered significant losses and damages. VIII. LOSS CAUSATION 237. As detailed herein, during the Class Period, Defendants engaged in a scheme to deceive the market by taking a course of action that artificially inflated the price of A10 common stock and operated as a fraud or deceit on Class Period purchasers of A10 common stock by failing to disclose and misrepresenting the adverse facts detailed herein. When Defendants’ prior misrepresentations and fraudulent conduct were disclosed and became apparent to the market, the price of A10 common stock declined significantly as the prior artificial inflation came out of the Company’s stock price. 238. As a result of their purchases of A10 common stock during the Class Period, Plaintiffs and the Class suffered damages under the federal securities laws. Defendants’ omissions and false and misleading statements had the intended effect and caused A10 common stock to trade at artificially inflated levels throughout the Class Period, trading as high as $10.77 per share on October 3, 2016. A. The July 13, 2017 Partial Disclosure 239. Artificial inflation in A10’s stock price was removed when concealed risks materialized and/or the truth about the material misrepresentations and omissions was partially revealed to the public on July 13, 2017. Following the close of trading, the Company issued a press release regarding the Company’s preliminary revenue for the second quarter of 2017. Specifically, A10 disclosed that revenue for the second quarter 2017 would be between $52.5 and $53.5 million, more than 15% below the Company’s prior guidance of $62.0 and $64.0 million. The disclosures made on this day revealed on a piecemeal basis the true nature and extent of the Company’s improper recognition of revenue, sales execution issues, and accounting practices. 240. As discussed above, these disclosures reduced the amount of inflation in the price of A10’s publicly traded securities, causing economic injury to Additional Plaintiff Kraszewski and other members of the Class. See Section VI.A, supra. Specifically, following this disclosure, on the next trading day, the price of A10 shares declined by $1.32, or approximately 16%, on significant trading volume of 5,334,043 shares, or approximately 11 times the average daily trading volume during the Class Period. 241. The July 13, 2017 disclosure was not sufficient on its own to fully remove the inflation from A10’s stock price because each of them only partially revealed the conditions, risks, and trends that had been concealed from investors. The corrective impact of the disclosures alleged herein was tempered by Defendants’ continued misstatements and omissions about A10’s improper recognition of revenue, sales execution issues, and accounting practices. These misrepresentations and omissions inflated and maintained the prices of A10’s publicly traded stock at levels that were artificially inflated, inducing Class members to continue purchasing A10 stock even after the truth began to partially enter the market. B. The January 16, 2018 Partial Disclosure 242. Artificial inflation in A10’s stock price was removed when concealed risks materialized and/or the truth about the material misrepresentations and omissions was partially revealed to the public on January 16, 2018. Following the close of trading, the Company issued a press release regarding the Company’s preliminary revenue for the Q4’17. Specifically, A10 disclosed that revenue for Q4’17 would be between $55.5 million and $56.0 million, or more than 13% below its prior guidance of $64.0 million to $67.0 million. The disclosures made on this day revealed on a piecemeal basis the true nature and extent of the Company’s improper recognition of revenue, sales execution issues, and accounting practices 243. As more particularly described above (see Section VI.G, supra), these disclosures reduced the amount of inflation in the price of A10’s publicly traded securities, causing economic injury to Plaintiffs and other members of the Class. Specifically, following this disclosure, on the next trading day, the price of A10 shares declined by $0.99, or approximately 13.5%, on significant trading volume of 2,911,722 shares, or approximately 6 times the average daily trading volume during the Class Period. 244. The January 16, 2018 disclosure was not sufficient on its own to fully remove the inflation from A10’s stock price because each of them only partially revealed the conditions, risks and trends that had been concealed from investors. The corrective impact of the disclosures alleged herein was tempered by Defendants’ continued misstatements and omissions about A10’s improper recognition of revenue, sales execution issues, and accounting practices. These misrepresentations and omissions inflated and maintained the prices of A10’s publicly traded stock at levels that were artificially inflated, inducing members of the Class to continue purchasing A10 stock even after the truth began to partially enter the market. C. The January 30, 2018 Corrective Disclosure 245. The truth was fully revealed on January 30, 2018, when, as alleged above, the Company issued a press release following the market close announcing the postponement of the fourth quarter 2017 and full year earnings release and conference call. As discussed above (see Section VII, supra), the Company’s Audit Committee determined that further review and procedures relating to certain accounting and internal control matters should be undertaken prior to the release of the Q4’17 and FY’17 financial results. The Company also announced that the investigation was principally focused on certain revenue recognition matters from the Q4’15 through the Q4’17, inclusive. 246. Following this disclosure, the price of A10 shares fell from $6.99 at the close of trading on January 30, 2018 to $6.13 at the close of trading on January 31, 2018. This decline of $0.86, or approximately 12%, occurred on significant trading volume of 1,444,787 shares, or approximately 6 times the average daily trading volume during the Class Period. In the days that followed, A10’s stock continued to decline, sinking to $5.77 by February 5, 2018. The market’s negative reaction to A10’s January 30, 2018 revelations is demonstrated by the following chart: Changes in A10 Share Price and Trading Volume Post- Disclosure 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 - $5.40 $5.60 $5.80 $6.00 $6.20 $6.40 $6.60 $6.80 $7.00 $7.20 1/30/2018 1/31/2018 2/1/2018 ATEN (Vol.) ATEN ($) 247. The timing and magnitude of A10’s stock price decline from January 30, 2018 through January 31, 2018 negates any inference that the losses suffered by Plaintiffs and the Class were caused by changed market conditions, macroeconomic or industry factors, or by Company- specific facts unrelated to Defendants’ fraudulent conduct. This point is evidenced by the chart below, which demonstrates the clear divergence of daily returns between A10 stock and the Russell 2000 Index, an index reflective of broader market trends, as the revelation of the truth became known to the market: Comparison of A10 and Russell 2000 Daily Price Returns 2.00% 0.00% -2.00% -4.00% -6.00% -8.00% -10.00% -12.00% -14.00% ATEN (%) RTY (%) 248. By concealing the adverse facts detailed above, Defendants presented a misleading picture of A10’s business and future financial prospects. When the truth about the Company was revealed to the market, the price of A10 common stock fell significantly. The declines in the price of A10 common stock detailed herein removed the inflation therefrom, causing real economic loss to investors who purchased A10 common stock during the Class Period. 249. In addition, as described above, analysts and investors directly attributed this price decline to A10’s announcement that the Company would have to adjust and/or restate its financial statements for the periods between the Q4’15 through the Q4’17. See Section VII, supra. 250. The declines in the price of A10 common stock following the corrective disclosures were a direct result of the nature and extent of Defendants’ fraudulent misrepresentations being revealed to the market. The timing and magnitude of the price declines in A10 common stock negate any inference that the loss suffered by Plaintiffs and the other Class members was caused by changed market conditions, macroeconomic or industry factors, or Company-specific facts unrelated to Defendants’ fraudulent conduct. 251. The damages suffered by Plaintiffs and the Class are a direct result of Defendants’ fraudulent scheme to artificially inflate the price of A10 common stock, and the subsequent significant declines in the value of A10 common stock when Defendants’ prior misrepresentations and other fraudulent conduct were revealed. IX. ADDITIONAL FACTUAL ALLEGATIONS FURTHER SUPPORTING SCIENTER 252. Defendants acted with scienter by virtue of their (i) awareness of improper recognition of revenue practices, (ii) awareness of sales execution issues, (iii) departure from established accounting practices relating to internal controls over financial reporting, and/or (iv) their ultimate responsibility to ensure the accuracy of such statements and their reckless failure to do so. 253. Defendants acted knowingly or in such a deliberately reckless manner as to constitute a fraud upon Plaintiffs and the Class. Defendants knew or were deliberately reckless in disregarding the materially false or misleading nature of the information they caused to be disseminated to the investing public. Defendants also knew or were deliberately reckless in disregarding that the material misrepresentations and omissions contained in the Company’s public statements would adversely affect the integrity of the market for the Company’s stock and would cause the price of A10 shares to be artificially inflated. An inference of scienter is further supported by the following considerations. A. The Individual Defendants’ Hands-On Involvement in A10’s “Core Operations” During the Class Period 254. The improper business practices at issue in this case were all part of the Company’s core operations, such as sales forecasts, inventory management, and customer and distributor relationships. Consequently, Defendants’ scienter concerning such core operations may be reasonably inferred based on the preceding allegations in addition to the following considerations. 1. A10 Senior Executives were Hands-On Throughout the Class Period 255. During the Class Period, A10 was a relatively small company. As disclosed in the Company’s 2016 Form 10-K, “A10 had 837 full-time employees, including 410 engaged in research and development and customer support, 348 in sales and marketing, and 79 in general and administrative and other activities.” 256. Because the Individual Defendants were the CEO, CFOs, and EVP of Worldwide Sales of A10 during the Class Period, they had day-to-day operational control over and thorough knowledge of these core operations. Indeed, Chen, Straughn, Natarajan, Constantino, and Smets demonstrated an acute hands-on approach to customer relations and sales in connection with SEC filings, investor calls, and presentations. 257. The Company consistently portrayed Chen as a hands-on CEO who took an active role in the sales and financial reporting processes. For example, in the 2015 Form 10-K filed with the SEC on March 1, 2016, A10 described Chen as the “chief operating decision maker” and described his detailed oversight of financial reporting: Segment Information Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by our chief operating decision maker in deciding how to allocate resources and assessing performance. Our chief operating decision maker is our Chief Executive Officer. Our Chief Executive Officer who reviews financial information presented on a consolidated basis, accompanied by disaggregated information about revenue by geographic region for purposes of allocating resources and evaluating financial performance. Accordingly, we have a single reportable segment and operating segment structure 258. Chen also consistently touted his insight into A10’s customer base and the attribution of the Company’s revenue to specific customers during each quarter. Chen’s participation in the Q4’15 and FY’15 Earnings Call is representative. As discussed above (see Section IV.C.1, supra), A10 restated its financial statements for the Q4’15. During the earnings call, Chen observed: I would like to highlight a few recent customer win examples: A global cloud hosting provider that has been an A10 ADC customer for over five years chose our TPS solution with our aGalaxy management system to help secure their infrastructure and sell DDoS as a service to their global customers. A large U.S. service provider customer expanded their Thunder TPS deployment in three additional data centers to help ward off volumetric DDoS attacks on their public cloud. A leading Japanese service provider placed follow-on orders for our Thunder TPS solution that were more than double their initial early-2015 deployment. * * * Furthermore, we have a strong brand and relationships with the very companies that are investing in and building public and private cloud infrastructures, as well as software as a service and Web 2.0 providers. In fact, 19 of our 20 top booking customers in 2015 were in one of these categories. Furthermore, half of the companies in the leaders and visionary section of Gartner’s 2015 Cloud Infrastructure as a Service magic quadrant are A10 customers. 259. Beyond restricting comments to prepared remarks, during earnings calls, Chen provided analysts with detailed descriptions of quarterly customer activity in response to questions. The following exchange is representative: <Q - Brent Bracelin>: Thanks here. Greg, maybe a couple questions if I could on the return to 20% growth here. Bright spot in the U.S. looks like it was – a bright spot this quarter looks like it was the U.S. up over 50%. Walk us through the drivers there. It sounds like you did have a large U.S., I believe, service provider customer in the quarter that helped drive that growth, question one. And then question two, as you think about the guide up here looking for another quarter of north of 20% growth, what's giving you the confidence? Is it the continuation of trends in the U.S.? Are you seeing international bookings strengthen? Any color on what's given you confidence in sustaining 20%- plus growth here in Q1 would be helpful as well. <A - Lee Chen>: Brett, this is Lee. Let me answer the questions first, maybe Greg can add some color to it. I think we are, even without the single largest 19% revenue customer, it would still be a record booking for Q4. So we believe we are very well positioned in the area where our customer are investing – a pubic cloud, private cloud, Web 2.0, and software as a service, and we created a high-end market where functionality and performance are important for customers. I think the service provider is our sweet spot. The power ACOS platform position A10 well for the SP market. And we enter the Q1 with very strong backlog and we use the same methodology – we look at the pipeline, applying the same methodology come up with a Q1 forecast and we are very comfortable with our Q1 forecast. Greg? 260. In addition to commenting on prior performance, Chen provided detailed responses concerning future guidance, and notably how customer orders would impact performance going forward. Consider the following exchange from the October 26, 2017 Earnings Call: <A - James E. Faucette>: Okay, great. And then, in your guidance, what are your expectations for large deals there? Just wondering how you try to net those out as you’re formulating your guidance and what the opportunity for even more upside might be, if some of the lumpy deals come through, how do you incorporate that into your guidance formulation. Thanks. <A - Lee Chen>: Shall I go first? <A - Tom Constantino>: Sure. <A - Lee Chen>: Yeah. So, our guidance will really be based on historical trend, based on pipeline, based on the backlog and based on the customer engagement we have. So, it really did not particularly count a lot of large deal coming in. So, if we had the several large deal I expect to come in, they can potentially provide upside, but we are not counting on that. 261. Like Chen, Straughn, in his capacity as A10’s CFO, consistently discussed the Company’s sales and financial performance during earnings calls and investment presentations. In a February 10, 2017 research report issued after Straughn’s departure was announced, Dougherty & Company explained how Straughn was through-line to A10’s evolution as a public company, “Mr. Straughn was instrumental in taking the company public and has been a key spokesperson to the investor community for the firm over the past six years.” 262. In connection with his role as a “spokesperson” on earnings call, Straughn demonstrated an intimate familiarity with specific customer orders and how individual transactions would impact whether or not A10 would meet earnings expectations. Consider the following example from the Q3’16 earnings call: <Q - Alex Kurtz>: Okay, and that didn’t change sequentially it sounds like. Just back to these two transactions in the U.S., I just want to clarify, both of them were in the service provider or one was in service provider, one was in enterprise? <A - Greg Straughn>: You say the two transactions, are you talking about the ones that we said were – that did not ship? <Q - Alex Kurtz>: Yes. <A - Greg Straughn>: Yes. So those were both in – no, those were actually, there is one of each in that environment. And so just to clarify, these were deals that came in and what we saw was that in the quarter just ended, we saw a backlog that was larger than we had anticipated in the quarter and larger than what we had seen coming out of Q3 last year. And interestingly, the addition to backlog, if it had shipped and shippable as we would have expected, that would have put us into the lower end of our range for the quarter. 263. During earnings calls, Straughn demonstrated a facility with describing how specific transactions recognized during a quarter impacted the Company’s overall performance. In addition, Straughn demonstrated an ability and willingness to provide guidance on the Company’s future performance. The following excerpts from the Fourth Quarter and Year-End 2015 Earnings Call are representative: <Q - Ittai Kidron>: Thanks. Hi, guys and congrats on a good quarter. I wanted to dig in into this large customer and kind of get your perspective on whether the upside in the quarter came from that customer or it came from others. I’m just trying to get a better understanding of how much visibility you had into that customer and how much you will spend into December. And also what are your working assumptions with regards to that customer or any other 10% customer in March? Is there a 10% customer expected? What I’m hoping to avoid is a situation where there’s a big gap to kind of fill in somewhere in the mid-year. <A - Greg Straughn>: Thanks for the note there. As it pertains to this particular customer, I want to call it a couple of things. One is that it wasn’t a 19% deal with the customer or they were 19% customer. So the large deal did not represent that entire amount. Secondly is that as we went into our guidance, we had pretty good visibility on this transaction. So there is really nothing about it that was a surprise. So the upside as we move to the quarter, was primarily driven by what I mentioned earlier which was the consistent strong bookings across a lot of products and lot of regions. And so, it’s kind of cumulative effect as opposed to this deal dropping in to the quarter. And then when we look at whether this creates a hole in Q1, if you recall back in Q2, we had a large deal as well and there was concern that will create a hole in Q3, and it did not. And so, the same thing is true here with a strong backlog going into Q1, strong sales momentum, good confidence in the pipeline. And so, we don’t feel like we are stepping out[indiscernible] (31:26) ahead of ourselves on the Q1 guidance. We are confident that all elements that we have together in business will make that number a reality. * * * <Q - Ashwin X. Kesireddy>: Over how many quarters do you think you’ll continue to recognize revenue from the deal? <A - Greg Straughn>: Well, the product piece of it was all shipped and recognized within Q4. And then the maintenances related to that will be recognized over a year. So that particular deal has most of it in Q4 and it will have some services piece over the next, I think it’s 12 month. 264. Similarly, during earnings calls, Constantino also demonstrated an ability to opine on the quarterly purchasing activity of existing customers and the Company’s acquisition strategy. <Q - Mark Kelleher>: Does the low-hanging fruit, [ph] let’s call it, around (17:58) the service provider side take sales force attention away from the enterprise? Is there any of that going on? <A - Tom Constantino>: I don’t think that’s the case. I mean, the large deals that we win on the service provider side and those are deals that have been in the works for a while. They take a lot of continued focus by our teams, but that doesn’t distract from others who are concentrating more on the enterprise side. So, I don't think that's the case, Mark. *** <Q - Tal Liani>: You do have also enterprise exposure. How are the trends in the enterprise segment? <A - Tom Constantino>: I think overall if you look at quarter-by-quarter, we acquire between 150 to 200 new enterprise customers. And in this quarter, we also acquired several new logo. One good thing we observe about our security offering is half of our security customers are new to A10. 265. In the event that the Company’s CEOs and CFOs were unaware of the individual transactions from which revenue was improperly recognized, this ignorance constitutes acting in such a deliberately reckless manner as to constitute fraud and deceit upon Plaintiffs and other Class members. However, the most reasonable inference from the materiality of the revenue recognition issues to A10’s financial results during the Class Period is that the Individual Defendants were aware that the Company improperly recognized revenue when payment was contingent on resale and/or when transactions included extended payment terms beyond the Company’s customary terms during the Class Period. 2. A10 Deployed Software Solutions that Provided Real-Time Insight into Sales Execution and Financial Management 266. Sales enablement generally refers to process of providing the sales organization with the information, content, and tools that help sales people sell more effectively. As described by Salesforce, a leading sales and customer relations management (“CRM”) software company, “[s]ales enablement software and sales enablement tools like Salesforce CRM are important but the way the system is rolled out and the way the company views their roles with the new system is paramount.”11 A10’s executive team implemented a variety of software solutions to ensure that sales and finance teams could capitalize on information in real time in order to improve operational and sales execution performance. And at A10, the Company’s senior most financial officers took a hands-on approach to driving sales enablement. 267. In a July 31, 2017 Dougherty & Company analyst report, one of Constantino’s initial goals as the new A10 CFO was to enact “improved sales enablement processes to improve operational efficiency” with the goal of “improv[ing] pipeline execution.” Moreover, during the Q2’17 earnings call, Constantino explained: Before we move to our outlook for the third quarter, I would like to discuss some of the initial actions we are taking to improve our execution and support growth for our expanding product line. We are increasing our focus to improve our go-to-market efficiency and effectiveness, which includes evaluating our sales enablement engine to ensure we have dedicated the focus and resources necessary to penetrate deeper into our markets, including security. We are also implementing a number of cross-functional actions to increase accountability and improve our performance analytics. In addition to helping improve our execution, we believe these actions will also help drive greater visibility. 268. The cross-functional actions that Constantino described flowed from data that was captured and presented to senior A10 executives on a real time basis. Specifically, prior to and during the Class Period, A10 implemented enterprise software solutions that ensured that executives had access to real time information concerning the sales pipeline and forecasted revenue, as described in the following paragraphs. 269. Prior to its initial public offering, A10 transitioned from QuickBooks to the Oracle E-Business Suite (EBS) Financials for enterprise resource planning, which also integrated into A10’s SalesForce CRM solution.12 By integrating the Company’s ERP and CRM systems, A10 11 See “Sales Enablement is a Lifestyle: Strategies for Sales Enablement Solutions,” Salesforce, https://www.salesforce.com/hub/sales/sales-enablement-software/ (last visited Oct. 4, 2018). 12 See “CRM and ERP Integrated in the Cloud,” Dell: Boomi, https://boomi.com/customer/crm- and-erp-integrated-in-the-cloud/ (last visited Oct. 5, 2018). was able to ensure the seamless flow and integration of data between these two systems while controlling head count and operational costs. 270. A10 also implemented other software solutions that leveraged data captured by its CRM and ERP systems. For example, Eric Kwok, currently Senior Director Worldwide Support & Logistics, worked with a consulting firm to implement a cloud-based customer service solution that enabled the sales team “to view and manage expiring service contracts and gain full visibility into customer issues.”13 Agents can remain within a single user interface, which allows them to communicate better and solve customer issues faster and more effectively.” Kwok noted that the software improved oversight over employees: “We can now motivate our teams with real time recognition and coach individuals to meet key metrics and desired behaviors.” And critically, “[c]omprehensive dashboards and reports provide management real-time insights into support metrics from any device. Departments are now able to configure their reports and dashboards without IT help. A10 Networks Managers are excited that they can quickly customize reports to improve and accelerate business decisions. They receive notifications when metrics reach specific thresholds.”14 271. In addition, A10 recognized the need to leverage its available customer data to develop comprehensive performance assessments for its budgeting and planning. Accordingly, the Company turned to Adaptive Insights, which “provided much needed insight into metrics, and the subsequent results—accelerated processes, detailed visual analytics, and nimble forecasting— brought about a more thorough approach to data management.”15 Commenting on this software, Zoby Shaikh, A10 Director – Finance & Analytics, observed the with this solution, “we’re able to 13 See “Networking Leader Deploys Salesforce Service Cloud Globally,” West Coast Consulting Group, https://westcoastconsulting.com/customers/a10-networks/ (last visited Oct. 5, 2018. 14 Id. 15 “Technology Leader Adopts the Adaptive Suite to Keep Pace With Growth - Data Integration and Automation Build Forecasting Accuracy at A10 Networks,” Adaptive Insights, https://www.adaptiveinsights.com/anz/customer-stories/a10-networks (last visited Oct. 5, 2018). create much more accurate financial forecasts by employing real-time data analysis on key business trends, and then ascertain what those trends mean for our business.”16 272. Similarly, A10 turned to Impartner’s Partner Relationship Management solution to automate channel operations and to drive channel growth by expanding upon the off-the-shelf SalesForce customer-relationship management software. Specifically, Lisa Varnell, A10 channel marketing programs manager, explained how the enhanced SalesForce solution enabled the Company to grow its channel sales business: I have to say, Impartner makes my job easier. It allows the channel team to focus on the right channel partner at the right time. To have a successful partner program for any partner organization, you need to be able to actively engage with your partners in real time, you need to know what your partners are doing, and you need to have insights into your partners’ pipeline for your solutions. It is critical to your organization’s success. . . . I work in our portal every day, but the data is integrated into Salesforce, so our channel and field sales organizations can view what the channel partners are submitting without having to learn a new interface.17 273. Accordingly, A10 employed technical systems that provided management with real time access to customers and sales reports that enabled them to make intra-quarter pivots to account for trends in customer demand. This information translated directly into the Company’s forecasts and financial performance. By way of example, during the Q2’17 earnings call, Chen explained how A10 was tracking “approximately a dozen sizable deals” that they thought would “close in the quarter” and Smets went on to explain how he and others at A10 were actively “tracking” those deals, in addition to the deals’ unique characteristics and expected closing dates. 274. Accordingly, the technical solutions described in the preceding paragraphs (¶¶269- 72) provided the cadre of A10 executives with the ability to dynamically track the Company’s customer and sales execution performance. 16 Id. 17 “A10 Network Extends its Salesforce CRM to the Channel with Impartner to Accelerate Indirect Revenue.” PR Newswire, https://www.prnewswire.com/news-releases/a10-networks-extends-its- salesforce-crm-to-the-channel-with-impartner-to-accelerate-indirect-revenue-300363920.html (last visited Oct. 4, 2018. B. Executive Turnover 275. Scienter is further supported by the frequent and abrupt executive departures throughout the Class Period. During the Class Period, A10 cycled through three different CFOs and experienced the departure of two other members of A10’s six person “Executive Officer” slate, as described in the Proxy Statements filed with the SEC during the Class Period. 276. On February 9, 2017, the Company announced that Defendant Straughn decided to step down as CFO of the Company, effective upon the date of filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. During his tenure as CFO, Straughn served as a member of A10’s Executive Officer team. Pursuant to a formal transition agreement filed with the SEC, on February 23, 2017, Straughn voluntarily resigned as CFO from A10 but agreed to facilitate a “successful transition of the CFO role” through April 1, 2017. No further explanation was provided for Straughn’s resignation. 277. Following Straughn’s departure, Defendant Natarajan, who joined A10 in September 2015 as Vice President and Controller with global responsibility for global accounting operations, served as Interim CFO during the period between February 2017 until June 2017 and left A10 in November 2017. During his abbreviated tenure as Interim CFO, Natarajan served as a member of A10’s Executive Officer team. Defendant Constantino subsequently joined A10 as CFO and an Executive Officer in June 2017. 278. In addition to the finance organization, senior A10 executives involved in sales and marketing turned over during the Class Period. For example, Sanjay Kapoor served as A10’s Vice President of Global Marketing starting in March 2015. In the Proxy filed with the SEC on April 24, 2015, Kapoor was listed as one of A10’s six Executive Officers. During the Q1’15 Earnings Call held on May 4, 2015, Chen noted that “Sanjay is well recognized for developing global marketing programs that help accelerate growth and increase brand awareness at some of the most well-known technology companies.” As noted in the Company’s April 7, 2015 press release, Kapoor reported directly to Chen. However, approximately one year later, Kapoor separated from A10 effective March 18, 2016 and received a severance package equivalent to nine-months salary and the early vesting of 25% of restricted stock units. No further explanation was provided for Kapoor’s separation from A10. 279. Defendant Smets was another member of A10’s Executive Team that departed prior to the end of the Class Period. Smets served as EVP of Worldwide Sales since November 2016 and as Vice President of Worldwide Sales from July 2013 to November 2016. Pursuant to Smets’ offer letter filed with the SEC, Smets reported directly to Chen. As A10’s senior sales executive, Smets participated in earnings calls and investor presentations throughout the Class Period, and provided guidance regarding the Company’s efforts to develop and retain customer relationships. On September 28, 2017, the Company announced the departure of Smets; however, a formal separation agreement filed with the SEC indicated that Smets’ resignation was effective October 31, 2017. Following Smets’ departure, Constantino, A10’s CFO, assumed responsibility of the Company’s sales organization on an interim basis. 280. The Company signaled that Smets’ departure did not stem from a material disagreement with the Company regarding its operations, policies, or practices. No further explanation was provided for Smet’s resignation. However, in a January 16, 2018 research report, Morgan Stanley “largely suspect[ed]” that the 3Q’17 earnings “miss may have been in part due to [Smets’] departure” as opposed to A10’s attribution of “lower than expected seasonal demand.” Morgan Stanley also noted that “ahead of the Q4 call” it planned to “seek further insight into the degree to which execution issues from leadership transition affected the shortfall.” 281. Accordingly, during the approximate two year Class Period, A10’s most senior finance, marketing, and sales executives turned over. C. Individual Defendants’ Accounting Expertise 282. Scienter is further supported by the Individual Defendants’ accounting experience and expertise. 283. Defendants repeatedly touted Defendant Chen’s deep involvement in the financial reporting process. For example, in the 2015 Form 10-K, the Company described Chen’s hands-on involvement in the financial reporting process: Our Chief Executive Officer who reviews financial information presented on a consolidated basis, accompanied by disaggregated information about revenue by geographic region for purposes of allocating resources and evaluating financial performance. Accordingly, we have a single reportable segment and operating segment structure 284. Defendant Straughn, A10’s CFO from the beginning of the Class Period until February 9, 2017, holds a B.S. in Finance from the University of California at Berkeley. Prior to joining A10 in 2011, Straughn had prior experience serving as a CFO, including at Kabira Technologies, Inc., a provider of high-performance software products to the telecommunications and financial services market. 285. Defendant Natarajan, A10’s Interim CFO from February 2017 until June 2017, is a Certified Public Accountant and holds a Bachelor of Science from the University of Calcutta. Prior to being appointed Interim CFO, he served as the Company’s Vice President and Controller and was responsible for global accounting operations. Prior to joining A10 Networks in September 2015, Natarajan served as vice president, controller and chief accounting officer at Fluidigm Corporation. Subsequent to being employed as Senior Manager of Assurance and Advisory Business Services at Ernst & Young and prior to joining A10, Natarajan held senior corporate finance and accounting roles at other companies. 286. Defendant Constantino, A10’s CFO since June 2017, holds a B.S. in Business Administration from San Jose State University and began his career in public accounting at PricewaterhouseCoopers. Prior to joining A10, Constantino served as Vice President of Accounting and Finance Operations with Western Digital as well as CFO of its HGST subsidiary. 287. The Individual Defendants’ above-detailed higher education and degrees (respectively, in Accounting and Finance), and their extensive accounting and finance experience gained from serving as technology company CFOs and senior finance executives for decades, indicate that: a. the Individual Defendants were long- and well-familiar with GAAP; b. the Individual Defendants had a deep understanding of A10’s significant accounting policies, including its stated revenue recognition policies; and hence c. the Individual Defendants’ actual knowledge that recognition of such revenues contravened both GAAP and the Company’s stated revenue recognition policies; or d. the Individual Defendants’ reckless indifference to such facts. D. A10 and Individual Defendants Failed to Maintain Effective Controls 288. Defendants failed to comply with their obligations imposed by the SEC to maintain books and records in sufficient detail to reflect the transactions of the Company and to prepare financial statements in accordance with GAAP. Section 13(b)2 of the Exchange Act, entitled Periodical and Other Reports, states the following with respect to books and records and internal controls: Every issuer which has a class of securities registered pursuant to (780(d)) and (781 on WL) section 12 and every issuer which is required to file reports pursuant to section 15(d) shall: A. make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer; B. devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that– i. transactions are executed in accordance with management’s general or specific authorization; ii. transactions are recorded as necessary (I) to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and (II) to maintain accountability for assets; iii. access to assets is permitted only in accordance with management’s general or specific authorization; and iv. the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences[.] 289. A good system of internal controls helps management achieve its objectives related to the effectiveness and efficiency of its operations, the reliability of its financial reporting, and compliance with applicable laws and regulations. It is management’s responsibility to develop and implement internal controls necessary to ensure that it maintains adequate books and records. This is made clear in SEC regulations and in a report prepared by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), Internal Control – Integrated Framework (the “COSO Report”).18 290. The COSO Report defines internal control as a process that is “designed to provide reasonable assurance regarding the achievement of objectives” related to the effectiveness and efficiency of operations, the reliability of financial reporting, and compliance with applicable laws and regulations. More broadly, a system of internal control also includes the actions taken by a company’s board of directors, management at all levels, and employees in running the business. 291. Indeed, A10’s management and advisors directly assessed the Company’s internal control failings under the COSO framework, as described in the Restatement 10-K. 292. The COSO Report requires that financial statements prepared for external purposes be fairly presented in conformity with GAAP and regulatory requirements. To prepare financial statements in conformity with GAAP, management’s responsibility is acknowledged in a set of standards known as generally accepted auditing standards (“GAAS”). COSO Report, Executive Summary. GAAS outlines the responsibilities of an auditor, but also explains that management is responsible for its own financial reporting: The financial statements are management’s responsibility. The auditor’s responsibility is to express an opinion on the financial statements. Management is responsible for adopting sound accounting policies and for establishing and maintaining internal control that will, among other things, initiate, record, process, and report transactions (as well as events and conditions) consistent with management’s assertions embodied in the financial statements. The entity’s transactions and the related assets, liabilities, and equity are within the direct knowledge and control of management. The auditor’s knowledge of these matters and internal control is limited to that acquired through the audit. Thus, the fair presentation of financial statements in conformity with generally accepted accounting principles is an implicit and integral part of management’s responsibility. AU § 110.03 18 Generally accepted auditing standards codified in AU § 319, Consideration of Internal Control in a Financial Statement Audit, is based on the internal control framework described in the COSO Report. The COSO report was issued in September 1992 as a four-volume set. Additional modifications and updates of the framework have been issued with the most recent Integrated Framework being issued in 2013 as a three-volume set. 293. Borrowing from generally accepted auditing standards, the COSO Report defines fair presentation as the following:  the accounting principles selected and applied have general acceptance;  the accounting principles are appropriate in the circumstances;  the financial statements are informative of matters that may affect their use, understanding and interpretation; and  the financial statements reflect the underlying transactions and events in a manner that presents the financial position, results of operations and cash flows stated within a range of acceptable limits, that is, limits that are reasonable and practical to attain in financial statements.19 294. The COSO Report defines five components of an internal control framework that are needed to enable a business to achieve its objectives: (1) the control environment, (2) risk assessment, (3) control activities, (4) information and communications, and (5) monitoring. 295. A10’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. 296. The term “reliable” as used in the COSO Report requires that financial statements prepared for external purposes be fairly presented in conformity with GAAS and regulatory requirements. Reliability of financial reporting applies to published financial statements, including interim and consolidated financial statements, and selected financial data, such as earnings releases, derived from these financial statements. 297. Internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, is a process designed by, or under the supervision of, the CEO and CFO and is effected by the Board, management and other personnel to provide reasonable assurance 19 See COSO Report, Chapter 3; see also Statement on Auditing Standards No. 69, The Meaning of “Present Fairly in Conformity With Generally Accepted Accounting Principles” in the Independent Auditor’s Report (New York: AICPA, 1992). regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that: a. pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; b. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that the receipts and expenditures of the Company are being made only in accordance with appropriate authorization of management and the board of directors; and c. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. 298. Everyone in an organization has responsibility for internal controls. However, the chief executive officer sets the “tone at the top” that affects integrity, ethics, and other factors of a positive control environment. “In any organization, ‘the buck stops’ with the chief executive. He or she has ultimate ownership responsibility for the internal control system. . . . The influence of the CEO on an entire organization cannot be overstated.” COSO Report, Chapter 8, p. 84. The chief executive fulfills this duty by providing leadership and direction to senior managers and reviewing the way they are controlling the business. 299. The Addendum to the COSO Report makes it clear that the Company’s chief financial officers – in this case, Defendants Straughn, Natarajan, and Constantino, were the principal accounting and financial officers during the Class Period – play a critical role with respect to the internal control system. 300. Specifically, Defendants Straughn, Natarajan, and Constantino failed to comply with SEC regulations and the requirements of COSO. As described herein, there was a material weakness in the internal controls at A10 that were necessary to prepare accurate financial statements and ensure compliance with regulatory filing requirements applicable to public companies. A material weakness is defined by the SEC as “a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements will not be prevented or detected on a timely basis[.]” A10’s internal control system failed to live up to the standards as set forth in the five elements of the internal control framework described above in ¶297. Defendants failed to maintain an effective control environment that focused on achieving consistent application of accounting policies and procedures and strict adherence to GAAP, “because a material weakness in internal control over financial reporting related to ineffective controls within the Company’s financial close process existed” during the Class Period. 301. In each of A10’s 2015 Form 10-K and 2016 Form 10-K, and intervening Form 10- Qs, A10, through Individual Defendants Chen, Straughn, Natarajan, and Constantino, stated that A10’s controls over financial reporting were effective. Furthermore, in each of A10’s 2015 Form 10-K and 2016 Form 10-K, in addition to the quarterly Forms 10-Qs for Q1’16 through Q3’17, A10, through Individual Defendants Chen, Straughn, Natarajan, and Constantino, certified that each of the following were disclosed: (i) “any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter . . . that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;” (ii) “[a]ll 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 (iii) “[a]ny 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.” 302. These statements were false and materially misleading when made, as admitted by A10 in issuing its Restatement. 303. In particular, Defendants omitted to disclose that the Company “did not maintain an effective control environment” and that “[t]he control environment material weaknesses contributed to the revenue recognition material weaknesses.” Specific revenue recognition issues identified during the internal investigation included the following:  Certain personnel in our credit and accounting functions did not have the adequate expertise to design and operate certain internal controls, to formalize certain appropriate policies and procedures, or to communicate matters relevant to revenue recognition. Certain personnel in our sales and sales operations functions did not have the adequate expertise to identify and communicate to accounting personnel certain information relevant to revenue recognition.  Certain policies and procedures were not sufficiently detailed to establish expectations for and to support effective design and operation of internal controls in our sales, credit, and accounting functions to consistently determine whether our reseller’s or distributor’s price was fixed or determinable, or that collectability was reasonably assured in every case, and that once determined, adequate documentation was maintained. 304. A direct result of these internal control deficiencies was that A10’s revenue recognition policies were flouted in a manner that allowed the Company to management earnings. Specifically, improperly recognized revenue meant the difference between meeting and falling below market expectations in the Q4’15, Q3’16, and Q4’16. 305. In addition, as a result of the material internal control weaknesses described above, Defendants failed to comply with SEC regulations and the requirements of COSO. The Company failed to “ensur[e] that a proper, consistent tone is communicated throughout the organization,” and “to ensure strict compliance with [GAAP]” “through the implementation of process and controls.” 306. As part of the Restatement, A10 committed to implementing a series of remediation measures to address the material weaknesses identified during the protracted internal investigation relating to the Class Period breakdown of internal controls: the specific remediation measures that A10 indicated it would adapt include the following: Remediation Actions Relating to Material Weaknesses in Internal Control over Financial Reporting At the conclusion of its investigation, the Audit Committee recommended to management a number of remediation actions. With the oversight of the Audit Committee, management is committed to the planning and implementing of these remediation actions to address the material weaknesses identified, as well as to foster continuous improvement in the Company’s internal controls. The Company has implemented or is in the process of implementing various initiatives intended to address the identified material weaknesses and strengthen our overall internal control environment. In this regard, some of our key remedial initiatives include:  Executive Management Communications to Reinforce Compliance - The Company’s Chief Executive Officer and Chief Financial Officer, at the direction of the Company’s Board of Directors, have in communications to personnel reinforced the importance of adherence to the Company’s policies and procedures regarding ethics and compliance and the importance of identifying misconduct and raising and communicating concerns.  Changes to Our Executive Management and Sales Personnel - The Company has hired new personnel, who have enabled improved lines of communication across business functions and increased expertise.  Training Practices - The Company has initiated development of a comprehensive training program relating to revenue recognition and contract review.  Credit Policies and Procedures - The Company has evaluated its practices regarding extension of credit to customers and evaluation of customer creditworthiness and has begun implementing improvements in those practices.  Revenue Recognition Policies and Procedures - The Company has evaluated its revenue recognition policies and procedures and has begun implementing improvements, including: (i) the development of more comprehensive revenue recognition policies and improved procedures to ensure that such policies are understood and consistently applied; (ii) better communication among functions involved in the sales process, including credit, accounting, sales, and sales operations; (iii) increased standardization of contract documentation and revenue analyses for individual transactions, including increased oversight of revenue opportunities and contract review by personnel with the requisite accounting knowledge; (iv) the development of a more comprehensive review process for, and monitoring controls over, customer contracts to ensure accurate revenue recognition, and the preparation of accounting memoranda to document the foregoing; (v) the development of more comprehensive policies and procedures for product shipment and delivery documentation; (vi) the adoption of enhancements of policies and procedures for approval of non-standard revenue arrangements with reseller and distributor customers; and (vii) the adoption of revised documentation, including the Company’s sales quotations, to identify additional information relevant to revenue recognition.  Implementation and Enhancement of Entity Level Controls - The Company intends to implement additional controls in its quarterly/annual financial reporting process, including enhanced sub-certifications by all sales personnel and with specific documentation related to the identification of nonstandard revenue arrangements. The Company also intends to enhance its insider trading policy and related communications to employees. 307. The breadth of A10’s extensive internal control remediation program underscores the depth and severity of the material breakdown in internal controls during the Class Period. E. A10’s Code of Business Conduct and Ethics and Financial Reporting Obligations of Senior Officers 308. During the Class Period, A10 maintained a Code of Business Conduct and Ethics, effective as of March 4, 2014 (the “Code”). The Code applied to all directors, officers, and employees of A10 and its subsidiaries. The Code was designed to guide “honest and ethical” conduct in the course of A10 business, including inter alia, “full, fair, accurate, timely and understandable disclosure in reports and documents we file with or submit to the U.S. Securities and Exchange Commission and in our other public communications.” 309. The Code’s “Financial Reporting” provided specific guidance regarding for A10’s employees, officers and directors concerning their financial reporting obligations: Overview As a public Company, we are required to follow strict accounting principles and standards, to report financial information accurately and completely in accordance with these principles and standards, and to have appropriate internal controls and procedures to ensure that our accounting and financial reporting complies with law. The integrity of our financial transactions and records is critical to the operation of our business and is a key factor in maintaining the confidence and trust of our employees, security holders and other stakeholders. 310. The Code’s “Financial Reporting” guidance also provided specific guidance for emphasizing the importance of complying with applicable rules and control procedures in addition to the accuracy of records and reports – while highlighting the specific application to senior executives and those responsible for discharging the Company’s financial reporting obligations: Compliance with rules, controls and procedures It is important that all transactions are properly recorded, classified and summarized in our financial statements, books and records in accordance with our policies, controls and procedures, as well as all generally accepted accounting principles, standards, laws, rules and regulations for accounting and financial reporting. If you have responsibility for or any involvement in financial reporting or accounting, you should have an appropriate understanding of, and you should seek in good faith to adhere to, relevant accounting and financial reporting principles, standards, laws, rules and regulations and the Company’s financial and accounting policies, controls and procedures. If you are a senior officer, you should seek to ensure that the internal controls and procedures in your business area are in place, understood and followed. Accuracy of records and reports It is important that those who rely on records and reports—managers and other decision makers, creditors, customers and auditors—have complete, accurate and timely information. False, misleading or incomplete information undermines the Company’s ability to make good decisions about resources, employees and programs and may, in some cases, result in violations of law. Anyone involved in preparing financial or accounting records or reports, including financial statements and schedules, must be diligent in assuring that those records and reports are complete, accurate and timely. Anyone representing or certifying as to the accuracy of such records and reports should make an inquiry or review adequate to establish a good faith belief in their accuracy. Even if you are not directly involved in financial reporting or accounting, you are likely involved with financial records or reports of some kind—a voucher, time sheet, invoice or expense report. In addition, most employees have involvement with product, marketing or administrative activities, or performance evaluations, which can affect our reported financial condition or results. Therefore, the Company expects you, regardless of whether you are otherwise required to be familiar with finance or accounting matters, to use all reasonable efforts to ensure that every business record or report with which you deal is accurate, complete and reliable. 311. The Code also specifically prohibited the intentional misrepresentation of the financial performance and any attempt to compromise the integrity of the Company’s reports, records, policies and procedures. This included specific prohibitions relating to the misclassification and timing of revenue recognition:  enter into any transaction or agreement that accelerates, postpones or otherwise manipulates the accurate and timely recording of revenues or expenses;  intentionally misclassify transactions as to accounts, business units or accounting periods, 312. The Code further created an affirmative “[o]bligation to investigate and report potential violations,” including inter alia, “financial results that seem inconsistent with underlying business performance;” “transactions that appear inconsistent with good business economics;” and “the absence or weakness of processes or controls.” 313. Relatedly, the Code imposed specific responsibilities on the CEO and senior financial officers such as the CFO and the Controller with respect to their financial reporting obligations. The Audit Committee plays an important role in ensuring the integrity of our public reports. If you believe that questionable accounting or auditing conduct or practices have occurred or are occurring, you should notify the Audit Committee of the Board. In particular, the CEO and senior financial officers such as the CFO and the Controller should promptly bring to the attention of the Audit Committee any information of which he or she may become aware concerning, for example:  the accuracy of material disclosures made by the Company in its public filings;  material weaknesses or significant deficiencies in internal control over financial reporting;  any evidence of fraud that involves an employee who has a significant role in the Company’s financial reporting, disclosures or internal controls or procedures; or  any evidence of a material violation of the policies in this Code regarding financial reporting F. Corporate Scienter 314. Individual Defendants Chen, Straughn, Natarajan, and Constantino were among a handful of employees responsible for signing financial statements. The Individual Defendants acted with apparent authority to speak on behalf of the Company and their statements were made with the imprimatur of the Company that selected them to speak on its behalf. Moreover, Defendant Chen, as CEO, and Defendants Straughn, Natarajan, and Constantino, as CFO and Controller/Interim CFO, were highly involved in the preparation, review, finalization, and issuance of the Company’s financial statements, and investors relied on their honesty and integrity. 315. Based on the foregoing, the Individual Defendants’ actions and scienter are imputable to A10 at all times during the Class Period. Each of the Individual Defendants acted as an agent of A10, both with respect to the SEC filings that they signed and also with respect to the SEC filings and earnings releases that they assisted in preparing and/or that he oversaw or participated in the accounting for. Therefore, the Individual Defendants’ states of mind are imputable to A10 for all of the challenged statements in this Complaint, whether or not he personally signed those statements. X. POST-CLASS PERIOD DISCLSOURES 316. On July 2, 2018, A10 issued a Form 8-K announcing that the Audit Committee of its Board of Directors has completed the internal investigation previously disclosed on January 30, 2018. Specifically, the Company disclosed that the Audit Committee identified accounting errors relating to the premature recognition of revenue on certain transactions due to the incorrect assessment of resellers’ ability or intent to pay the company before they received a purchase order or payment from their end customers. The Company also disclosed that it was evaluating the impact of these errors on its internal control over financial reporting and disclosure controls and procedures, and expected to report one or more material weaknesses in internal control over financial reporting related to this matter and that its disclosure controls and procedures were not effective. In addition, the Company disclosed that previously issued financial statements and information contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2016, and its condensed consolidated financial statements contained in its Quarterly Report on Forms 10-Q for the quarters ended September 30, 2016 and March 31, 2017 should no longer be relied upon and should be restated. 317. On August 29, 2018, A10 issued the 2017 Form 10-K, approximately seven months after the Company announced that the filing would be delayed and five months after it was due. A number of the key disclosures provided in the 2017 Form 10-K are summarized at ¶¶79-114, supra. Selected excerpts from the 2017 Form 10-K are attached hereto as Exhibit A to this Complaint and are incorporated by reference, as if fully stated herein. The Restatement 10-K further disclosed that in March 2018, the SEC began a private investigation into any securities laws violations by A10 or persons currently or formerly affiliated with A10. The Company stated that it was cooperating with the SEC investigation, but was “unable to predict the duration, scope or outcome of the investigation, but an adverse outcome is reasonably possible.” 318. On the following day, the Company issued a press release regarding preliminary financial results for the quarter and six months ended June 30, 2018. The Company also announced that it planned to file quarterly reports for Q1’18 and Q2’18 during September 2018. 319. On April 3, 2018, the Company received a notice form the NYSE indicating that it was not in compliance with the NYSE’s listing requirements under the timely filing criteria outlined in Section 802.01E of the NYSE Listed Company Manual as a result of its delay in filing A10’s Annual Report on Form 10-K. Even though A10 filed its Form 10-K within the NYSE’s six-month period to cure filing deficiencies, the Company’s failure to file a Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 subjects it to the risk of delisting. 320. On September 24, 2018, the Company filed its Form 10-Q for Q1’18. As of October 4, 2018, the Company still has not filed its Form 10-Q for Q2’18. The Q1’18 10-Q indicated that the Company is still cooperating with the SEC investigation into any securities laws violations by A10 or persons currently or formerly affiliated with A10. XI. CLASS ACTION ALLEGATIONS 321. Plaintiffs bring this action as a class action pursuant to Federal Rule of Civil Procedure 23(a) and 23(b)(3) on behalf of a class consisting of all persons and entities that acquired the common stock of A10 during the Class Period, seeking to pursue remedies under the Exchange Act (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 any of the Defendants have or had a controlling interest. 322. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, A10 stock was actively traded on the NYSE. 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 hundreds or thousands of members in the proposed Class. Millions of A10 shares were traded publicly during the Class Period on the NYSE. As of December 31, 2017, the Company had 71.7 million shares outstanding, and during the Class Period, average daily trading volume in A10 shares was approximately 481,390 shares during the Class Period. Record owners and other members of the Class may be identified from records maintained by A10 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. 323. Plaintiffs’ claims are typical of the claims of Class members, who were all similarly affected by Defendants’ wrongful conduct in violation of federal securities laws that is complained of herein. Further, Plaintiffs will fairly and adequately protect the interests of Class members and has retained counsel competent and experienced in class and securities litigation. 324. 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’ conduct alleged herein; b) whether statements made by Defendants to the investing public during the Class Period omitted or misrepresented material facts about the business, operations, results of operations and prospects of A10; c) whether Defendants acted with scienter; and d) to what extent Class members have sustained damages and the proper measure of damages. 325. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy because joinder of all members is impracticable. Further, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation makes it impossible for many of the 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. XII. APPLICABILITY OF THE FRAUD-ON-THE-MARKET AND AFFILIATED UTE PRESUMPTIONS OF RELIANCE 326. The market for A10 common stock was open, well-developed, and efficient at all relevant times. As a result of Defendants’ materially false or misleading statements and material omissions, the Company’s stock traded at artificially inflated prices during the Class Period. On October 3, 2016, the Company’s stock closed at a Class Period high of $10.77 per share. Plaintiffs and other members of the Class purchased or otherwise acquired the Company’s shares relying on the integrity of the market price of such securities and on publicly available market information relating to A10, and have been damaged thereby. 327. During the Class Period, the artificial inflation of the value of A10’s shares was caused by the material misrepresentations and omissions alleged in this Complaint, thereby causing the damages sustained by Plaintiffs and other Class members. As alleged herein, during the Class Period, Defendants made or caused to be made a series of materially false or misleading statements about the Company’s business, prospects, and operations, causing the price of the Company’s stock to be artificially inflated at all relevant times. When the truth was disclosed, it drove down the value of the Company’s stock, causing Plaintiffs and other Class members that had purchased the stock at artificially inflated prices to be damaged as a result. 328. At all relevant times, the market for A10 stock was efficient for the following reasons, among others: a) A10’s stock met the requirements for listing, and it was listed and actively traded on the NYSE, a highly efficient market; b) A10 had 71.7 million shares of common stock outstanding (as of September 17, 2018) and, during the Class Period, an average daily trading of 481,390 shares per day; c) As a regulated issuer, A10 filed periodic public reports with the SEC and/or the NYSE; d) A10 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 e) A10 was followed by securities analysts employed by brokerage firms – including, but not limited to, (1) the Buckingham Research Group, (2) Dougherty & Company, (3) J.P. Morgan, (4) Keybanc Capital Markets, (5) Morgan Stanley, and (6) Oppenheimer – who wrote reports about the Company, which reports were distributed to the sales force and certain customers of their respective brokerage firms and were made publicly available. 329. Based on the foregoing, during the Class Period, the market for A10 stock promptly digested information regarding the Company from all publicly available sources and impounded such information into the price of A10 stock, as is further and concretely evidenced by the market reactions to A10’s announcements and disclosures of July 13, 2017, January 16, 2018, and January 30, 2018. Under these circumstances, the market for A10 stock was efficient during the Class Period and, therefore, investors’ purchases of A10 stock at artificially inflated market prices give rise to a class-wide presumption of reliance under the fraud-on-the-market doctrine. 330. In the alternative, the Affiliated Ute presumption of reliance applies to the extent that Defendants’ statements during the Class Period involved omissions of material facts. XIII. NO SAFE HARBOR 331. The statutory safe harbor provided for forward-looking statements under certain circumstances does not apply to any of the statements alleged to be false or misleading herein that relate to then-existing facts and conditions, nor does it apply to any material omissions alleged herein. To the extent that statements alleged to be false or misleading are characterized as forward- looking, the statutory safe harbor does not apply to such statements because they were not sufficiently identified as “forward-looking statements” when made, there were no meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statements, and Defendants had actual knowledge that the forward-looking statements were materially false or misleading at the time each such statement was made. XIV. COUNTS FIRST COUNT Violation of Section 10(b) of The Exchange Act and Rule 10b-5 Promulgated Thereunder (Against All Defendants) 332. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. This claim is asserted against all Defendants. 333. 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 A10 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. 334. 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 A10 stock 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. 335. 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 A10’s business, operations, management, and prospects, as specified herein. 336. Defendants employed devices, schemes, and artifices to defraud, while in possession of material adverse nonpublic information and engaged in acts, practices, and a course of conduct as alleged herein in an effort to assure investors of A10’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 about A10 and its operations and financial results, 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. 337. 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 or recklessly disregarded was materially false and misleading. 338. 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 material misrepresentations and/or omissions were done knowingly or recklessly and for the purpose and effect of concealing A10’s business, operations, management and prospects from the investing public and supporting the artificially inflated price of its securities. As demonstrated by misstatements throughout the Class Period, Defendants, if they did not have actual knowledge of the misrepresentations and 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. 339. 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 A10 stock 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 A10 stock during the Class Period at artificially high prices and were damaged thereby. 340. 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 about A10’s collectibility concerns that gave rise to revenue recognition issues, specifically that reseller’s or distributor’s payment was contingent on resale and/or that transactions included extended payment terms beyond the Company’s customary terms, which were not disclosed by Defendants, Plaintiffs and other members of the Class would not have purchased or otherwise acquired their A10 stock, 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. 341. By virtue of the foregoing, Defendants have violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. 342. 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 COUNT Violation of Section 20(a) of the Exchange Act (Against the Individual Defendants) 343. Plaintiffs repeat and reallege each and every allegation contained above as if fully set forth herein. 344. The Individual Defendants acted as controlling persons of A10 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/or intimate knowledge of the false statements filed by the Company with the SEC and 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 Company, including the content and dissemination of the various statements which Plaintiffs contend are false and misleading. The 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. 345. In particular, each of these Defendants had direct and supervisory involvement in the day-to-day operations of the Company and, therefore, is 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. 346. As set forth above, A10 and the Individual Defendants each violated Section 10(b) and Rule 10b-5 by their acts and/or omissions as alleged in this Complaint. 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, Plaintiffs and other members of the Class suffered damages in connection with their purchases of the Company’s securities during the Class Period. XV. 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 all 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 d) Such other and further relief as the Court may deem just and proper. XVI. JURY TRIAL DEMANDED Plaintiffs hereby demand a trial by jury. DATED: October 5, 2018 KIRBY McINERNEY LLP /s/ Robert J. Gralewski, Jr. Robert J. Gralewski, Jr. (#196410) 600 B Street, Suite 1900 San Diego, CA 92101 Telephone: (619) 398-4340 Email: bgralewski@kmllp.com - and - Daniel Hume (admitted pro hac vice) Ira M. Press Thomas W. Elrod (admitted pro hac vice) 825 Third Avenue, 16th Floor New York, NY 10022 Telephone: (212) 371-6600 Email: dhume@kmllp.com ipress@kmllp.com telrod@kmllp.com BRAGAR EAGEL & SQUIRE, P.C. Lawrence P. Eagel (admitted pro hac vice) Marion C. Passmore (#228474) Melissa A. Fortunato (#319767) 885 Third Avenue, Suite 3040 New York, NY 10022 Telephone: (212) 308-5858 Email: eagel@bespc.com passmore@bespc.com fortunato@bespc.com Counsel for Lead Plaintiff Eric Blackwell and the Proposed Class GLANCY PRONGAY & MURRAY LLP Lionel Z. Glancy (#134180) Robert V. Prongay (#270796) Christopher R. Fallon (#235684) 1925 Century Park East, Suite 2100 Los Angeles, CA 90067 Telephone: (310) 201-9150 Email: lglancy@glancylaw.com rprongay@glancylaw.com cfallon@glancylaw.com Counsel for Additional Plaintiff Robert Kraszewski

securities

-uNHEYcBD5gMZwczN8nI

CV 12- 5239 Plaintiff, -against- ROSS, J. SCANLON, M.J. Defendant. CLASS ACTION COMPLAINT INTRODUCTION -1- (a) Leaving telephonic voice messages for consumers, which fail to provide meaningful disclosure of Defendant's identity; (b) Leaving telephonic voice messages for consumers, which fail to disclose that the call is from a debt collector; and (c) Leaving telephonic voice messages for consumers, which fail to disclose the purpose or nature of the communication (i.e. an attempt to collect a debt). -2- The FDCPA applies to lawyers regularly engaged in consumer debt-collection litigation. Heintz V. Jenkins, 514 U.S. 291 (1995); Goldman V. Cohen, 445 F.3d 152, 155 (2d Cir. -3- failure by debt collectors to disclose in subsequent oral communications with consumers that the communication is from a debt collector, 15 U.S.C. § 1692e(11). PARTIES At all times relevant to this lawsuit, Plaintiff is a citizen of the State of New York who JURISTICTION & VENUE -4- FACTS PARTICULAR TO MENDEL GRATT $1692a(5). -5--6- Districts Courts within the State of New York -- uniformly hold that the FDCPA -7- Failing to provide meaningful disclosure of Viking Client Services, Inc.'s identity; and Failing to disclose that the call is from a debt collector; and Failing to disclose the purpose or nature of the communication, i.e. an attempt to collect a debt. -8- CLASS ALLEGATIONS -9-Excluded from the Plaintiff's Class are the Defendants and all officers, members, -10- (a) Numerosity: The Plaintiff is informed and believes, and on that basis alleges, that the Plaintiff's 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's Class and those questions predominate over any questions or issues involving only individual class members. The principal issues are whether the Defendant's telephonic voice messages, such as the above said messages violate 15 U.S.C. §§ 1692d(6), 1692e(10), and 1692e(ll). (c) Typicality: The Plaintiff's claims are typical of the claims of the class members. Plaintiff and all members of the Plaintiff's Class defined in this complaint have claims arising out of the Defendant's 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. -11- 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 Certification of a class under Rule 23(b)(1)(A) of the Federal Rules of Civil Procedure is appropriate because adjudications with respect to individual members create a risk of inconsistent or varying adjudications which could establish incompatible standards of conduct for Defendants who, on information and belief, collect debts throughout the United States of America. -12- FIRST CAUSE OF ACTION Violations of the Fair Debt Collection Practices Act brought by Plaintiff on behalf of himself and the members of a class, as against the Defendant. (a) Engaging in conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt in violation of 15 U.S.C. § 1692d; -13-(b) Placing telephone calls without providing meaningful disclosure of Viking Client Services, Inc.'s identity as the caller in violation of 15 U.S.C. § 1692d(6); (c) Leaving telephonic voice messages which fail to disclose the purpose or nature of the communication (i.e., an attempt to collect a debt), in violation of 15 U.S.C. $1692d(6); (d) Using a false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer, which constitutes a violation of 15 U.S.C. § 1692e(10); (e) Failing to disclose in its initial communication with the consumer, when that communication is oral, that Defendant, Viking Client Services, Inc. was attempting to collect a debt and that any information obtained will be used for that purpose, which constitutes a violation of 15 U.S.C. § 1692e(11); and (f) Failing to disclose in all oral communications that Viking Client Services, Inc. is a debt collector in violation of 15 U.S.C. $1692e(11). PRAYER FOR RELIEF -14- and (b) Attorney fees, litigation expenses and costs incurred in bringing this action; and (c) Any other relief that this Court deems appropriate and just under the circumstances. Law Offices of David Palace (DP 3855) 383 Kingston Ave. #113 Brooklyn, New York 11213 Telephone: 347-651-1077 Facsimile: 347-464-0012 David Palace esq. (DP 3855) -15-

consumer fraud

nkP6_IgBF5pVm5zYFTR1

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA MIAMI DIVISION Case No. 1:14-cv-23258-MGC ____________________________________ ) PIERRE ANES DARVILMAR and ) GENSILIA JOSEPH, ) individually and on behalf of ) all other persons similarly situated, ) ) Plaintiffs, ) ) COMPLAINT - CLASS ACTION vs. ) ) IMPACT STAFF LEASING, INC., ) ) Defendant. ) ____________________________________) AMENDED COMPLAINT FOR DAMAGES, DECLARATORY RELIEF, INJUNCTIVE RELIEF, COSTS OF LITIGATION AND ATTORNEY’S FEE PRELIMINARY STATEMENT 1. This is an action by two seasonal farmworkers to secure and vindicate rights afforded to them by the Migrant and Seasonal Agricultural Worker Protection Act, 29 U.S.C. §§1801, et seq. ("AWPA"), the minimum wage provisions of the Fair Labor Standards Act, 29 U.S.C. §§201, et seq. ("FLSA"), and the minimum wage provisions of the Florida Constitution. 2. The Plaintiffs also seek relief on behalf of their co-workers for the Defendant’s violations of the recordkeeping, wage statement and wage payment provisions of the AWPA. 3. The Plaintiffs complain of the unlawful employment practices of Defendant Impact Staff Leasing, Inc. during the 2012-13 bean harvest in south Miami-Dade County, Florida, extending from approximately October, 2012 through May, 2013. Throughout this period, Defendant Impact Staff Leasing, Inc. violated the AWPA's provisions relating to recordkeeping, wage statements and payment of wages when due. The Plaintiffs were paid less than the federally-mandated minimum wage levels established by the FLSA and the Florida Constitution for their work picking beans. 4. The Plaintiffs seek an award of money damages, declaratory relief, and injunctive relief to make them whole for damages each of them suffered due to the Defendant’s violations of law, and to ensure that they and other farmworkers will not be subjected by the Defendant to similar illegal conduct in the future. JURISDICTION 5. Jurisdiction is conferred upon this Court by 29 U.S.C. §1854(a), this action arising under the AWPA; by 29 U.S.C. §216(b), this action arising under the FLSA; by 28 U.S.C. §1331, this action arising under the laws of the United States; and by 28 U.S.C. §1337, this action arising under Acts of Congress regulating commerce. This Court has supplemental jurisdiction over the claims arising under state law pursuant to 28 U.S.C. §1367(a), because these claims are so related to the federal claims that they form part of the same case or controversy. 6. This Court is empowered to grant declaratory relief pursuant to 28 U.S.C. §§2201 and -2- VENUE 7. Venue is proper in this district pursuant to 28 U.S.C. §1391(b) and 29 U.S.C. §1854(a). The cause of action arose in this district and the Defendant is headquartered in this PARTIES 8. The Plaintiffs are residents of Miami-Dade County, Florida. At all times relevant to this action, each of the Plaintiffs was a seasonal agricultural worker within the meaning of the AWPA, 29 U.S.C. §1802(10)(A), and its attendant regulations, 29 C.F.R. §500.20(r), in that he or she was employed in agricultural employment of a seasonal nature performing field work harvesting beans in south Miami-Dade County. At all times relevant to this action, the Plaintiffs were employed in the production of goods for sale in interstate commerce. 9. Defendant Impact Staff Leasing, Inc. is a closely-held Florida corporation based in Jupiter, Florida. At all times relevant to this action, Impact Staff Leasing, Inc. was registered and acted as a farm labor contractor within the meaning of the AWPA, 29 U.S.C. §1802(7), in that, in exchange for valuable consideration, it employed the Plaintiffs and other seasonal agricultural workers for agricultural employment harvesting beans in south Miami-Dade County. CLASS ACTION ALLEGATIONS 10. All claims set forth in Counts I and III are brought by the Plaintiffs on behalf of themselves and all other similarly situated persons pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure. 11. The Plaintiffs seek to represent a class consisting of: -3- All migrant and seasonal agricultural workers, as defined by the AWPA, employed hand-harvesting beans during the 2012-13 Miami-Dade County bean harvest employed by Impact Staff Leasing, Inc. as members of a crew harvesting beans on the operations of Impact Staff Leasing client number 1183, believed to be JNJ Growers, Inc. 12. The precise number of individuals in the class is known only to the Defendant. The class is believed to include over 200 individuals. The class is comprised of indigent migrant and seasonal farmworkers. The class members are not fluent in the English language, and instead speak Haitian Creole. The relatively small size of the individual claims and the indigency of the class members makes the maintenance of separate actions by each class member economically infeasible. Joinder of members of the classes is impracticable. 13. There are questions of fact common to the class. With respect to Count I, these common questions include whether Impact Staff Leasing, Inc. failed to pay the Plaintiffs and other class members wages promptly when due, as required by law and whether the Defendant kept payroll records and issued wage statements to the Plaintiffs and the other members of the class as required by the AWPA. With respect to Count III, the common factual questions include whether the Defendant paid minimum wages as required by the Florida Constitution and the Florida Minimum Wage Act. 14. There are questions of law common to the class. With respect to the claims set out in Count I, these common legal questions include whether Impact Staff Leasing, Inc. operated as a farm labor contractor within the meaning of the AWPA with respect to the employment of the Plaintiffs and the other members of the class during the 2012-13 bean harvest, whether the payroll records made and kept by the Defendant and the wage statements provided by the Defendant conformed to the requirements of the AWPA, and whether the violations of the -4- AWPA’s recordkeeping, wage statement and wage payments were intentional within the meaning of that statute. With respect to the claims set out in Count III, the common legal questions include whether the Defendant employed the Plaintiffs and the other members of the putative class within the meaning of the minimum wage provisions of the Florida Constitution. 15. The claims of the named class representatives are typical of those of the other class members, and these typical, common claims predominate over any questions affecting only individual class members. The Plaintiffs have the same interests as do other members of the class and will vigorously prosecute these interests on behalf of the class. 16. The Plaintiffs’ counsel is experienced in litigation under the AWPA and has handled numerous class actions in the federal courts, including class actions under the AWPA and the minimum wage provisions of the Florida Constitution. The Plaintiffs’ counsel has served as principal counsel in several class actions before this Court brought by bean pickers and presenting claims similar to those contained in the Plaintiffs’ complaint. The Plaintiffs’ counsel is prepared to advance litigation costs necessary to vigorously litigate this action and to provide notice to the class members under Rule 23(b)(3). . 17. A class action under Rule 23(b)(3) is superior to other available methods of adjudicating this controversy, inter alia: a. The common issues of law and fact, as well as the relatively small size of the individual class members’ claims, substantially diminish the interest of members of the class in individually controlling the prosecution of separate actions; b. Many members of the class are unaware of their rights to prosecute these claims and lack the means and resources to secure legal assistance; c. There has been no litigation already commenced by the members of the class to -5- determine the questions presented with respect to the Defendant; d. It is desirable that the claims be heard in this forum since the Defendant is headquartered and based in this district and the cause of action arose in this district; and e. A class action can be managed without undue difficulty because the Defendant regularly committed the violations complained of herein, and was required to maintain detailed records concerning each member of the class. -6- COUNT I (MIGRANT AND SEASONAL AGRICULTURAL WORKER PROTECTION ACT) (CLASS CLAIMS) 18. This count sets forth a claim by Plaintiffs Pierre Anes Darvilmar and Gensilia Joseph, on behalf of themselves and the other members of the class, for damages, declaratory relief and injunctive relief with respect to the Defendant’s violations of the AWPA and its attendant regulations during the 2012-13 bean harvest in Miami-Dade County, Florida. 19. Prior to the outset of the 2012-13 bean harvest, Defendant Impact Staff Leasing, Inc. entered into agreements with various farm operators and farm labor contractors to serve as the employer, recordkeeper and paymaster for bean pickers employed in the south Miami-Dade County area. 20. The Plaintiffs and the other class members worked with a bean-harvesting crew employed on a farm operated by an agricultural employer designated by Impact Staff Leasing, Inc. as “Client 1183.” Under the terms of its agreement with Client 1183, Defendant Impact Staff Leasing, Inc. identified itself as the employer of the members of Client 1183's bean- harvesting crew and assumed responsibility for maintaining payroll records on the crew, paying the crewmembers their wages and providing them wage statements regarding their earnings, maintaining worker’s compensation insurance on the crewmembers, and paying all employment taxes due on the earnings of the crewmembers as members of Client 1183's crew. It is believed that Client 1183 is farm operator JNJ Growers, Inc. 21. At various points during the 2012-13 bean harvest, the Plaintiffs and the other members of the class worked hand-harvesting beans in south Miami-Dade County on the operations of Client 1183. Impact Staff Leasing, Inc. paid the Plaintiffs and the other members -7- of the class their wages for their work on Client 1183's operations during the 2012-13 south Miami-Dade County bean harvest. Impact Staff Leasing, Inc. also issued wage statements to the Plaintiffs and the other class members with their weekly wages. 22. Defendant Impact Staff Leasing, Inc. failed to make, keep and preserve records as required by the AWPA, 29 U.S.C. §§1821(d)(1) and 1831(c)(1), and its attendant regulations, 29 C.F.R. §500.80(a), regarding the work of Plaintiffs Pierre Anes Darvilmar, Gensilia Joseph and the other members of the class with respect to their labor hand-harvesting beans on the operations of Client 1183 during the 2012-13 bean harvest season. Among other things, the records regarding the labor of Plaintiffs Pierre Anes Darvilmar, Gensilia Joseph and the other members of the class failed to accurately report the number of compensable hours worked by these individuals. 23. In violation of the AWPA, 29 U.S.C. §§1821(d)(2) and 1831(c)(2), and its attendant regulations, 29 C.F.R. §500.80(d), Defendant Impact Staff Leasing, Inc. failed to provide to Plaintiffs Pierre Anes Darvilmar, Gensilia Joseph and the other members of the class on each payday a written statement showing the actual hours worked and the employer's address and Internal Revenue Service identification number. 24. In violation of the AWPA, 29 U.S.C. §§1822(a) and 1832(a), and its implementing regulations, 29 C.F.R. § 500.81, Defendant Impact Staff Leasing, Inc. failed to pay Plaintiffs Pierre Anes Darvilmar, Gensilia Joseph and the other members of the class their wages when due for work performed during the 2012-13 harvest on the operations of Client 1183. Among other things, the Defendant failed to pay Plaintiffs Pierre Anes Darvilmar, Gensilia Joseph and the other members of the class the sums due to them under the minimum wage provisions of the Fair Labor Standards Act and the minimum wage provisions of the Florida Constitution, as -8- implemented through the Florida Minimum Wage Act. The bean pickers were paid only their piece-rate earnings, which often failed to equal or exceed the applicable state or federal minimum wage for the number of compensable hours they worked in each workweek. 25. The violations of the AWPA and its attendant regulations as set forth in this count were the natural consequences of the conscious and deliberate actions of Defendant Impact Staff Leasing, Inc. These violations occurred as a result of the regular business practices of Defendant Impact Staff Leasing, Inc. As a result, the violations of the AWPA and its attendant regulations as set out in this count were intentional within the meaning of the AWPA, 29 U.S.C. §1854(c)(1). 26. As a result of the Defendant’s violations of the AWPA and its attendant regulations as set forth in this count, Plaintiffs Pierre Anes Darvilmar, Gensilia Joseph and the other members of the class have suffered damages. COUNT II -9- (FAIR LABOR STANDARDS ACT) 27. This count sets forth a claim for declaratory relief and damages by Plaintiffs Pierre Anes Darvilmar and Gensilia Joseph for the Defendant’s violations of the minimum wage provisions of the Fair Labor Standards Act during the 2012-13 south Miami-Dade County bean 28. In violation of Section 6(a) of the Fair Labor Standards Act, 29 U.S.C. §206(a), the Defendant failed to pay Plaintiffs Pierre Anes Darvilmar and Gensilia Joseph at least $7.25 for every compensable hour of labor each of them performed during 2012-13 bean harvest on the operations of Client 1183. 29. The violations of the Fair Labor Standards Act's minimum wage provisions as set out in Paragraph 28 resulted in part from the Defendant’s failure to supplement the piece-rate wages of Plaintiffs Pierre Anes Darvilmar and Gensilia Joseph so as to raise their workweek wages to a rate equal to or exceeding the FLSA minimum wage. Throughout the period they were employed on Client 1183's operations during the 2012-13 bean harvest, Plaintiffs Pierre Anes Darvilmar and Gensilia Joseph were paid only their piece-rate earnings, which fell substantially short of the minimum wages due them under the FLSA. 30. The violations of the Fair Labor Standards Act's minimum wage provisions as set out in Paragraph 28 resulted in part from the Defendant’s failure to credit Plaintiffs Pierre Anes Darvilmar and Gensilia Joseph with all hours worked. No accurate record was made of the compensable hours worked by Plaintiffs Pierre Anes Darvilmar and Gensilia Joseph. Instead, the hours worked as recorded for the Plaintiffs were fabricated to reflect compliance with federal and state minimum wage laws. 31. As a result of the Defendant’s violations of the Fair Labor Standards Act described in -10- this count, Plaintiffs Pierre Anes Darvilmar and Gensilia Joseph are each entitled to recover the amount of unpaid minimum wages due him or her and an additional amount as liquidated damages, in accordance with Section 16(b) of the Act, 29 U.S.C. §216(b). -11- COUNT III (MINIMUM WAGE PROVISIONS OF FLORIDA CONSTITUTION) (CLASS CLAIMS) 32. This count sets forth a claim for damages by Plaintiffs Pierre Anes Darvilmar and Gensilia Joseph, on behalf of themselves and the other members of the class, for damages for the Defendant’s violations of the minimum wage provisions of the Florida Constitution, as implemented through the Florida Minimum Wage Act. 33. Throughout the period Plaintiffs Pierre Anes Darvilmar and Gensilia Joseph and the other members of the class were employed on the operations of Client 1183 during the 2012-13 south Miami-Dade County bean harvest, the Defendant failed to pay the Plaintiffs and the other class members in compliance with the minimum wage provisions of the Florida Constitution, Article X §24. Among other things, the Defendants failed to supplement the piece-rate earnings of the Plaintiffs and the other members of the class so as to boost them to Florida minimum 34. Plaintiffs Pierre Anes Darvilmar and Gensilia Joseph have performed all conditions precedent required to present their claims under the Florida Minimum Wage Act. By a letter to the Defendant on August 11, 2014, the Plaintiffs demanded payment of the unpaid wages due them, but the Defendant has failed to pay the wages demanded. 35. As a result of the Defendant’s violations of the minimum wage provisions of the Florida Constitution as described in this count, Plaintiffs Pierre Anes Darvilmar and Gensilia Joseph and each of the other members of the class are entitled to recover the amount of his or her unpaid minimum wages, and an equal amount as liquidated damages, pursuant to Art. X §24 (e) of the Florida Constitution. -12- PRAYER FOR RELIEF WHEREFORE, the Plaintiffs pray that this Court will enter an order: a. Certifying this case as a class action in accordance with Rule 23(b)(3) of the Federal Rules of Civil Procedure with respect to the claims for violations of the AWPA’s recordkeeping, wage statement and wage payment provisions set forth in Count I; b. Certifying this case as a class action in accordance with Rule 23(b)(3) of the federal Rules of Civil Procedure with respect to the claims for violations of the minimum wage provisions of the Florida Constitution, as set out in Count III; c. Declaring that the Defendant Impact Staff Leasing, Inc. has intentionally violated the Migrant and Seasonal Agricultural Worker Protection Act and its attendant regulations as set forth in Count I; d. Declaring that the Defendant Impact Staff Leasing, Inc. has violated the minimum wage provisions of the Fair Labor Standards Act as set forth in Count II; -13- e. Granting judgment in favor of Plaintiffs Pierre Anes Darvilmar and Gensilia Joseph and the other members of the class and against the Defendant on the claims under the recordkeeping, wage statement and wage payment provisions of the Migrant and Seasonal Agricultural Worker Protection Act as set forth in Count I, and awarding each of them $500 in statutory damages for the recordkeeping violation, $500 in statutory damages for the wage statement violation and his or her actual damages for the Defendant’s failure to pay wages when due; f. Granting judgment tin favor of Plaintiffs Pierre Anes Darvilmar and Gencilia Joseph and against the Defendant on the Plaintiffs’ Fair Labor Standards Act claims as set forth in Count II and awarding each of the Plaintiff the amount of his or her unpaid minimum wages, along with an equal amount as liquidated damages; g. Granting judgment in favor of Plaintiffs Pierre Anes Darvilmar, Gencila Joseph and the other members of the class and against the Defendant on the claims for unpaid minimum wages as set out in Count III and awarding the -14- Plaintiffs and each member of the class the amount of his or her unpaid minimum wages due under Florida law, along with an equal amount as liquidated damages; h. Permanently enjoining the Defendant from further violations of the Migrant and Seasonal Agricultural Worker Protection Act and its attendant regulations; i. Awarding the Plaintiffs the costs of this action; j. Awarding the Plaintiffs a reasonable attorney's fee with regard to their claim under the Fair Labor Standards Act; k. Awarding the Plaintiffs a reasonable attorney's fee with respect to their claims for the Defendant’s violations of the wage payment provisions of the Migrant and Seasonal Agricultural Worker Protection Act, in accordance with Florida Statutes §448.08; l. Awarding the Plaintiffs a reasonable attorney’s fee with respect to their claims for the Defendant’s violations of the minimum wage provisions of the Florida Constitution; and -15- m. Granting such other relief as this Court deems just and equitable. Respectfully submitted, /s/ Gregory S. Schell Gregory S. Schell Florida Bar Number 287199 MIGRANT FARMWORKER JUSTICE PROJECT 508 Lucerne Avenue Lake Worth, Florida 33460-3819 Telephone: (561) 582-3921 Facsimile: (561) 582-4884 e-mail: Greg@Floridalegal.Org Attorney for Plaintiffs DATED: September 22, 2014 -16-

employment & labor

UAjjFYcBD5gMZwcz-eFh

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MISSOURI ) ) ) ) ) ) ) ) Plaintiffs, ) CASE NO. ) ) ) ) ) ) ) JURY TRIAL DEMANDED ) ) ) ) ) ) Defendants. ) CLASS ACTION COMPLAINT Plaintiffs Kirbi Pemberton, Jazzie's K9 Kutz and Kamp, LLC, Melissa Wilfong, 1 Introduction 1. The Bridgeton Landfill is currently undergoing a subsurface oxidation event. This event bears a disturbingly close resemblance to an underground fire, consuming waste products ranging from a few feet to over a hundred feet deep. No one knows for sure how long the subsurface oxidation event will burn, but estimates range from 3 years to over a decade. The odor released from the burning heap of waste overpowers, and can be smelled for at least 3 miles. 2. Plaintiffs bring these claims under Missouri state law only against Defendants seeking redress for their unreasonable negligence and nuisance based on a noxious, offensive, putrid odor and other emissions emanating from the landfill, caused by the subsurface oxidation event. Parties 3. Plaintiff Kirbi Pemberton is an owner and occupier of property located at 2393 Westford, Maryland Heights, MO 63043 within three miles of the landfill. 4. Plaintiff Melissa Wilfong is an owner and occupier of property located at 12070 Glenrose Dr. Maryland Heights, MO 63043 within three miles of the landfill. 5. Plaintiff Janice Japa rents her primary residence located at 12062 Glenrose Dr. Maryland Heights, MO 63043 within three miles of the landfill. 2 6. Plaintiff Jazzie's K9 Kutz and Kamps, LLC is a Missouri Corporation with its principle place of business located at 12273 Natural Bridge Bridgeton, MO 63044 within three miles of the landfill. 7. Plaintiff Prestige Electronics, LLC is a Missouri Corporation with its principle place of business located at 11977 St. Charles Rock Rd. Bridgeton, MO 63044 within three miles of the landfill. 8. Plaintiff Cornell Sparks is an employee of Hussman Corporation, located at 12999 St. Charles Rock Road, Bridgeton, MO 63044 within three miles of the landfill. 9. Defendant Republic Services, Inc. is a Delaware Corporation, with its 10. Defendant Allied Services, LLC, d/b/a Republic Services of Bridgeton, is 3 11. Defendant Bridgeton Landfill, LLC, is a Delaware limited liability company 12. Defendants have owned and/or operated the Bridgeton Landfill for all 13. Upon information and belief Defendant Bridgeton Landfill, LLC is the owner of Class Allegations 14. Plaintiffs bring this action for themselves individually and as representatives 15. Plaintiffs initially define the real property owner class as: All persons and legal entities who presently own an interest in real property, including mortgages and other security interests, within a 3 mile radius measured from the center of the quarry containing the Bridgeton Landfill. 16. Plaintiffs initially define the tenant/occupant class as: All persons who are legal tenants and who reside or resided on real property within a within a 3 mile radius of the center of the quarry containing the Bridgeton/ Landfill at any time from 2010 through the present. 17. Plaintiffs initially define the business owner class as: 4All legal entities having a place of business within a 3 mile radius of the center of the quarry containing the Bridgeton Landfill. 18. Plaintiffs initially define the workers class as: All persons who are employed by and work at businesses within the three mile radius of the center of the quarry containing the Bridgeton Landfill. 19. Excluded from the classes above are the Defendants, the Defendants' 20. Plaintiffs reserves the right to amend or modify the class definitions and/or 21. The classes are sufficiently numerous that joinder of all members of the 22. There are questions of fact and law common to the classes, which common a. whether Defendants' conduct caused the subsurface oxidation event 5 b. whether Defendants negligently operated the landfill in such a way C. whether Defendants' failure to stop the subsurface oxidation event or d. whether the subsurface oxidation event at the landfill has caused e. whether Defendants operated the landfills in a manner, or permitted f. identification of the precise dates and geographical areas affected by g. whether Defendants' misconduct, violations of the law, and/or h. whether Defendants were grossly negligent; i. whether Plaintiffs are entitled to punitive damages; and j. the measure and amount of damages, if any, to which Plaintiffs and 23. The claims of the representative plaintiffs in each class are typical of the 6 24. Plaintiffs can and will fairly and adequately represent the interests of their 25. The class action is an appropriate method for the fair and efficient a. common questions of fact and law predominate over any individual questions that may arise, such that the class action mechanism is superior to other available means for the fair and efficient adjudication of this dispute; b. there will be enormous economies to the Court and the parties litigating the common issues in a class action instead of through multiple claims; C. class treatment is required for optimal and efficient resolution of this matter and for limiting the court-awarded reasonable legal expenses incurred by class members; d. if the size of individual class members' claims are small, their aggregate volume, coupled with the economies of scale in litigating similar claims on a common basis, will enable this case to be litigated as a class 7 action on a cost-effective basis, especially when compared with the cost of individual litigation; e. the trial of this case as a class action will be fair and efficient because questions of law and fact which are common to the classes predominate over any individual issues that may arise. Jurisdiction and Venue 26. This Court has original jurisdiction over this matter pursuant to 28 U.S.C. § 27. Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391(b)(2) COUNT I: Negligence under Missouri State Law 28. Plaintiffs incorporate by reference the preceding paragraphs herein. 29. Republic owe(d) a duty to use reasonable care to avoid causing injury to30. Defendants owe(d) this duty to Plaintiffs. 8 31. Based on the proximity of Plaintiffs and/or their property to the Bridgeton 32. Defendants breached their duty to Plaintiffs by acts and/or omissions, 33. The foregoing negligent acts and/or omissions by Defendants are the 34. Further, a subsurface oxidation event does not ordinarily occur in the 35. The Bridgeton Landfill is controlled by Defendants. 36. Defendants possess superior knowledge regarding what specifically caused 37. Plaintiffs and members of the classes have been injured by Defendants' 38. Defendants' conduct was outrageous because it showed reckless 9 39. Plaintiffs seek punitive damages. WHEREFORE, Plaintiffs respectfully pray that this Court certify the classes COUNT II: Nuisance under Missouri State Law 40 Plaintiffs incorporate by reference the preceding paragraphs herein. 41. Defendants unreasonably interfered with the use and enjoyment of the 42. Noxious, offensive, putrid odor, pollution, and/or fugitive emissions 43. The odor, pollution, and/or emissions emanating from the subsurface 10 44. The odor, pollution, and/or emissions emanating from the subsurface 45. The continued subsurface oxidation event at the Bridgeton Landfill, and 46. Plaintiffs have been injured by Defendants' nuisance as described above. 47. Defendants knowingly and willfully permitted the nuisance to continue. 48. Plaintiffs seek punitive damages against Defendants for the willful and 50. As a proximate result of Defendants' negligent, grossly negligent, or willful 11 WHEREFORE, Plaintiffs respectfully pray that this Court certify the classes Respectfully submitted, FINNEY LAW OFFICE, LLC /s/ Daniel P. Finney, Jr. Daniel P. Finney, Jr. MOED #10476Daniel P. Finney III MOED # 5202538 Christopher J. Finney MOED # 62888MO 1735 S. Big Bend Blvd. St. Louis, MO 63117 (314) 646-0300 Attorneys for Plaintiffs 12

products liability and mass tort

3aarCYcBD5gMZwczGnn9

Michael Grinblat (4159752) Law Offices of Michael Grinblat 817 Broadway, Fourth Floor New York, NY 10003 Tel: (347) 796-0712 Fax: (212) 202-5130 michael.grinblatesq@gmail.com 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-1644 THREE STARS, CORP., S.I. BAY JURY DEMANDED REALTY, CO., INC., 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 THREE STARS, CORP., S.I. BAY REALTY, CO., INC., JOHN DOE 1-X, persons yet unknown, Limited Liability Companies, Partnerships, Corporations 1-X, entities yet unknown (collectively, 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, and at all times material to this litigation has been, a resident of Monmouth County, New Jersey. 7. 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. 8. 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, Tony’s Brick Oven Pizzeria, and the adjacent parking lot, which is provided for the use of the restaurant’s customers. 9. The aforementioned restaurant, Tony’s Brick Oven Pizzeria, and the adjacent parking lot (collectively, the “Subject Facility”) are the subjects of this lawsuit. 10. The Subject Facility is located at 1140 Bay Street, Staten Island, NY 10305. 11. Upon information and belief, THREE STARS, CORP. d/b/a Tony’s Brick Oven Pizzeria (“THREE STARS CORP”) 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 Tony’s Brick Oven Pizzeria. 12. Upon information and belief, THREE STARS CORP 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 Tony’s Brick Oven Pizzeria, which is provided for the use of its customers. 13. Upon information and belief, THREE STARS CORP 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 Tony’s Brick Oven Pizzeria, which is provided for the use of its customers. 14. THREE STARS CORP is an American for-profit corporation organized under the laws of the State of New York. 15. THREE STARS CORP is licensed to conduct business in State of New York by the New York State Department of State (“NYS DOS”). 16. NYS DOS maintains entity information for THREE STARS CORP in its Corporation and Business Entity Database. 17. The corporate record for THREE STARS CORP shows no registered agent. 18. The corporate record also shows that THREE STARS CORP can receive service of process at 1140 Bay Street, Staten Island, NY 10304, when service is 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 S.I. BAY REALTY, CO., INC. (“S.I. BAY REALTY”). 20. S.I. BAY REALTY is an American for-profit corporation organized under the laws of the State of New York. 21. S.I. BAY REALTY is licensed to conduct business in New York State by the New York State Department of State (“NYS DOS”). 22. NYS DOS maintains entity information for S.I. BAY REALTY in its Corporation and Business Entity Database. 23. The NYS DOS corporate record shows that S.I. BAY REALTY can receive service of process in care of Daniel C. Marotta / Gabor & Marotta LLC at 1878 Victory Boulevard, Staten Island, NY 10314, when service is accepted by the Secretary of State on behalf of the corporation. 24. The NYS DOS corporate record further shows that S.I. BAY REALTY has a chief executive officer, Sergio Scala, with principle executive office at 129 Hunter Avenue, Staten Island, NY 10306. 25. Upon information and belief, S.I. BAY REALTY owns the Subject Facility. 26. Upon information and belief, S.I. BAY REALTY 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, and/or operates, and at all relevant times operated, the parking lot adjacent to the restaurant Tony’s Brick Oven Pizzeria. 27. Upon information and belief, S.I. BAY REALTY leases the Subject Facility to THREE STARS CORP. 28. 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). 29. 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 THREE STARS CORP. 30. 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. 31. 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, Tony’s Brick Oven Pizzeria, which is provided for the purpose of enabling customers of the restaurant to park at and visit the Subject Facility. 32. 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, Tony’s Brick Oven Pizzeria, which is part of the Subject Facility. 33. 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. 34. The Defendants are jointly and severally liable for the design, construction, maintenance, management, control, alteration and/or operation of the restaurant, Tony’s Brick Oven Pizzeria, which is part of the Subject Facility. CLASS ACTION 35. 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. 36. 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. 37. 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. 38. 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. 39. 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. 40. 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. 41. 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. 42. 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. 43. 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. 44. References to the Plaintiff shall be deemed to include the named Plaintiff and each member of the class, unless otherwise indicated. STATUTORY SCHEME 45. 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. 46. 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) 47. 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) 48. 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. 49. 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). 50. 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. 51. 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. 52. 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). 53. 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. 54. 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. 55. 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). 56. 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. 57. 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. 58. 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 59. 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. 60. 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. 61. 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 62. 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). 63. 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. 64. The parking lot of the Subject Facility has 22 parking spaces. 65. 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 international symbol of accessibility painted on the ground. 66. The parking lot of the Subject Facility has one access aisle. 67. The parking lot of the Subject Facility has no van-accessible parking space. 68. In March 2020, the Plaintiff came to the Subject Facility by car with his son. 69. The Plaintiff and his son parked in the accessible parking space in its parking lot. 70. The Plaintiff’s son placed the wheelchair in the access aisle. 71. The wheelchair rolled down the steep slope of the access aisle. 72. When the Plaintiff was transferring from the car to the wheelchair, he barely avoided falling on the steep surface of the access aisle. 73. The Plaintiff was then not able to move the wheelchair by rotating its wheels, because the access aisle is too steep. 74. Consequently, the Plaintiff had to rely on his son’s assistance to prevent the wheelchair from rolling down the access aisle of the Subject Facility. 75. On the way from the parking lot to the restaurant, Tony’s Brick Oven Pizzeria, the Plaintiff was not able to ascend the steep ramp, which led from the parking lot to the walkway, located in between the parking lot and the building’s wall, by rotating the wheels of his wheelchair. 76. Consequently, he had to rely on his son’s assistance to push him, in his wheelchair, up the ramp. 77. Inside of the restaurant, Tony’s Brick Oven Pizzeria, the Plaintiff was not able to use the toilet stall, because it did not have grab bars. 78. Inside of the restaurant, Tony’s Brick Oven Pizzeria, when the Plaintiff was paying for the item 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. 79. As a result, the Plaintiff had to rely on his son’s assistance to hand his debit card to the cashier. 80. On the way back from the restaurant, Tony’s Brick Oven Pizzeria, the Plaintiff was not able to descend down the steep ramp from the walkway to the parking lot by holding on to the wheels of his wheelchair. 81. Consequently, the Plaintiff had to rely on his son’s assistance in descending down the ramp from the walkway to the parking lot. 82. Also, 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 access aisle is impermissibly steep. 83. Consequently, the Plaintiff had to rely on his son’s assistance to ride to the car’s door. 84. When the Plaintiff was transferring from the wheelchair to the car in the access aisle, he barely avoided falling on its steep surface. 85. Frustrated, disappointed and humiliated, the Plaintiff left the Subject Facility’s parking lot. 86. The Subject Facility’s parking lot was designed by the Defendants, who did not have in mind the Plaintiff and his needs, and needs of others similarly situated, to accommodate him and facilitate his access to the Subject Facility. 87. 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. 88. The parking lot of the Subject Facility was not designed to accommodate the needs of the Plaintiff, and other similarly situated individuals. 89. 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 90. The Subject Facility is located on the North Shore of Staten Island, along the way from the Plaintiff’s home to his son’s home. The Plaintiff enjoys visiting that area of Staten Island and comes there often. 91. 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 92. The Plaintiff has difficulties gaining access to the Subject Facility, because of the unlawful architectural barriers, and therefore has suffered an injury in fact. 93. 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. 94. 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. 95. 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. 96. Because the Subject Facility is a public accommodation, the Defendants are responsible for complying with ADA 28 C.F.R. §36.304. 97. The numerous architectural barriers to access the Subject Facility have endangered the Plaintiff’s safety. 98. The Subject Facility violates 42 U.S.C. §12181, §12182, §12183, §12204 of the ADA, 28 C.F.R. §36.302 and §36.304. 99. 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. 100. 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. 101. “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. 102. The Defendants have failed to hang a single solitary accessible parking space identification sign in the parking lot of the Subject Facility. 103. “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. 104. The Defendants have failed to designate a van-accessible parking space in the parking lot of the Subject Facility. 105. The Defendants failed to paint markings on the pavement and designate any van- accessible signage in the parking lot of the Subject Facility. 106. “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. 107. The designated accessible parking space at the Subject Facility’s parking lot is less than 110 inches wide. 108. The parking space at the Subject Facility designated as an accessible parking space does not comply with the minimum width requirements for a van-accessible parking space. 109. “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. 110. “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. 111. 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. 112. The Defendants grossly violated §502.4 of 2010 Standards. 113. The designated accessible parking space has a slope of 5.5%, which is equivalent to the slope steepness of 1:18.18. 114. The designated accessible access aisle has a slope of 7.3%, which is equivalent to the slope steepness of 1:13.7. 115. “General. Ramps on accessible routes shall comply with 405.” 2010 Standards §405.1. 116. “Slope. Ramp runs shall have a running slope not steeper than 1:12.” “EXCEPTION: In existing sites, buildings, and facilities, ramps shall be permitted to have running slopes steeper than 1:12 complying with Table 405.2 where such slopes are necessary due to space limitations.” 2010 Standards §405.2. 117. A slope “steeper than 1:12 but not steeper than 1:10” must not have a maximum rise greater than 6 inches (150 mm). 2010 Standards Table §405.2. Maximum Ramp Slope and Rise for Existing Sites, Buildings, and Facilities. 118. A slope “steeper than 1:10 but not steeper than 1:8” must not have a maximum rise greater than 3 inches (75 mm). 2010 Standards Table §405.2. Maximum Ramp Slope and Rise for Existing Sites, Buildings, and Facilities. 119. “A slope steeper than 1:8 is prohibited.” 2010 Standards Table §405.2. Maximum Ramp Slope and Rise for Existing Sites, Buildings, and Facilities. 120. The ramp, leading from the parking lot to the walkway of the Subject Facility has a slope of 18.9%, which is equivalent to slope steepness of 1:5.29. 121. The ramp, leading from the parking lot to the walkway of the Subject Facility, has a rise of at least 5 inches. 122. “Toilet Compartments. Wheelchair accessible toilet compartments shall meet the requirements of 604.8.1 and 604.8.3.” See 2010 Standards §604.8. 123. “Wheelchair Accessible Compartments. Wheelchair accessible compartments shall comply with 604.8.1.” See 2010 Standards §604.8.1. 124. “Size. Wheelchair accessible compartments shall be 60 inches (1525 mm) wide minimum measured perpendicular to the side wall, and 56 inches (1420 mm) deep minimum for wall hung water closets and 59 inches (1500 mm) deep minimum for floor mounted water closets measured perpendicular to the rear wall.” See 2010 Standards §604.8.1.1. 125. “Water Closets. Where water closets are provided, at least one shall comply with 604.” See 2010 Standards §213.3.2. 126. “Grab Bars. Grab bars for water closets shall comply with 609. Grab bars shall be provided on the side wall closest to the water closet and on the rear wall.” See 2010 Standards §604.5. 127. The toilet stall at the Subject Facility does not satisfy the minimum size requirements of 2010 Standards §604.8.1.1. 128. No grab bars are provided on the side wall closest to the water closet. 129. No grab bars are provided on the rear wall of the water closet. 130. “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. 131. Knee and toe spaces are not provided under the counter in the restaurant at the Subject Facility. 132. 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. 133. 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). 134. 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. 135. The Subject Facility has not been designed, constructed, altered, or maintained in compliance with the accessibility standards of Title III of the ADA. 136. 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. 137. 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. 138. 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. 139. 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. 140. It was not structurally impracticable for the Defendants to make the Subject Facility accessible. 141. Removal of all architectural barriers existing at the Subject Facility was, and is, readily achievable by the Defendants. 142. The Defendants may, should and are required to make reasonable accommodations at the Subject Facility and their making them would be readily achievable. 143. 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. 144. 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. 145. 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. 146. 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. 147. The Subject Facility is not accessible to, or readily usable by, individuals with disabilities. 148. 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. 149. 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. 150. 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 151. The Plaintiff re-alleges, and incorporates, by this reference, all the allegations set forth in this complaint, as if fully set forth herein. 152. 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) 153. The Subject Facility is a place of public accommodation, as defined in New York State Human Rights Law §292(9). 154. The Defendants have further violated the New York State Human Rights Law by being in violation of the rights provided under the ADA. 155. 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. 156. The Defendants do not provide the Plaintiff, and others similarly situated, with equal opportunity to use their public accommodation. 157. 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). 158. 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. 159. The Defendants have not provided the Plaintiff, and others similarly situated, with evenhanded treatment in violation of New York State Human Rights Law §296. 160. The Defendants’ direct, or indirect, unequal treatment of the Plaintiff, and others similarly situated, was demonstrated when he was discriminated against. 161. 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. 162. The Defendants have demonstrated that the patronage, or custom, of the Plaintiff, and other similarly situated individuals, is unwelcome, unwanted, undesirable, unacceptable and objectionable. 163. In violation of the New York State Human Rights Law, the Defendants and their agents discriminated against the Plaintiff. 164. 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. 165. 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 166. The Plaintiff re-alleges, and incorporates by this reference, all the allegations set forth in this complaint, as if fully set forth herein. 167. The Defendants have violated the Plaintiff’s civil rights on the basis of his disability. 168. 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. 169. Pursuant to New York State Civil Rights Law §40-d, the Defendants are guilty of a class A misdemeanor. 170. 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 171. The Plaintiff re-alleges, and incorporates by this reference, all the allegations set forth in this complaint, as if fully set forth herein. 172. 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) 173. 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). 174. In violation of the New York City Administrative Code, the Defendants have unlawfully discriminated against the Plaintiff and all others similarly situated. 175. 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. 176. 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. 177. 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. 178. 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. 179. 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. 180. 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. 181. 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 182. 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 183. 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) 184. 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 185. 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 186. 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 187. 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. 188. The Plaintiff requests the Court to issue a permanent injunction enjoining the Defendants from disability discrimination. 189. 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. 190. 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. 191. 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 192. 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 michael.grinblatesq@gmail.com Attorney for the Plaintiff

civil rights, immigration, family

5KNXCYcBD5gMZwczUdgf

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA Ralph Lamones, Jr., individually and ) Case No. as a representative of the classes, ) ) ) ) CLASS ACTION ) COMPLAINT Plaintiff, ) v. ) ) Human Resource Profile, Inc. ) Jury Demand ) ) Defendant. ) Ralph Lamones, Jr. (“Plaintiff”), by and through his attorneys, on behalf of himself and the Classes set forth below, brings this Complaint against Human Resource Profile, Inc. (“Defendant” or “HR Profile”). PRELIMINARY STATEMENT 1. Recognizing that employers, lenders, and landlords use consumer reports to deny people jobs, credit, and housing, Congress has chosen to regulate the content of these reports through the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681, et. seq. 2. Defendant, a consumer reporting agency, has systematically and willfully violated the FCRA by unlawfully reporting adverse information, other than records of convictions of crimes, which antedates the report by more than seven years. 3. Defendant’s practice of disseminating protected information has harmed Plaintiff and the putative class members by, among other things, prejudicing their prospects of employment, damaging their reputations, and invading their privacy interests. 4. Based on Defendant’s pattern and practice of related violations, Plaintiff asserts FCRA claims on behalf of himself and the Classes. On behalf of himself and the Classes, Plaintiff seeks statutory damages, punitive damages, attorneys’ fees, litigation expenses, costs, and all available other appropriate relief. THE PARTIES 5. Individual and representative Plaintiff Ralph Lamones, Jr. is a resident of Lakeland, Florida. 6. Defendant is an Ohio corporation with its principal office in Cincinnati, Ohio. 7. Defendant provides consumer reports for employment purposes. 8. Among other things, Defendant provides background checks to employers who use these reports to make important decisions, such as whether to hire, terminate, or promote the consumers who are the subjects of the reports. The background checks Defendant provides are consumer reports, and Defendant is a consumer reporting agency. JURISDICTION AND VENUE 9. This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331 because this action involves a federal question. 10. Venue is proper in this District because Defendant regularly conducts business in this District and a substantial portion of the acts or omissions at issue occurred in this District. STATUTORY BACKGROUND 11. Enacted in 1970, the FCRA’s passage was driven in part by three related concerns. First, consumer reports were playing a central role in people’s lives at crucial moments, such as when they applied for a job or credit, and when they applied for housing. Second, the provision of consumer reports invaded consumers’ privacy and confidentiality. Third, despite their importance, consumer reports were unregulated and often presented an inaccurate picture of the individual who was the subject of the report. 2 12. Congress was particularly concerned about the use of criminal background reports in the employment context, and therefore defined the term “consumer reports” to include background reports procured for employment purposes. See 15 U.S.C. § 1681a(d)(1)(B). 13. To ensure that consumer report information is used in a manner that is “fair and equitable to the consumer,” and “with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information,” Congress limited consumer reporting agencies’ ability to lawfully report old, adverse information—i.e., “obsolete information.” 14. Congress’s goal in prohibiting the reporting of obsolete information was to ensure that the information contained in the report remained relevant and fair to the consumer. See 115 Cong. Rec. 2414-15 (1969) (statement of Sen. Proxmire). Reporting obsolete information could paint an inaccurate picture of an individual who has changed his or her ways. Congress believed that when enough time has passed after an event that reflects negatively on a consumer, it would be “unfair to burden a consumer for life” when the individual has rehabilitated his or her record. 115 Cong. Rec. 33,410 (1969) (statement of Sen. Proxmire). 15. Specifically, 15 U.S.C § 1681c(a) prohibits consumer reporting agencies from reporting the following items of obsolete information: (2) Civil suits, civil judgments, and records of arrest that from date of entry, antedate the report by more than seven years or until the governing statute of limitations has expired, whichever is the longer period. . . . . (5) Any other adverse item of information, other than records of convictions of crimes which antedates the report by more than seven years. 16. To ensure that the seven-year rule against reporting this information was effective, the FCRA also requires credit reporting agencies to adopt reasonable procedures to avoid reporting such obsolete information. Specifically, 15 U.S.C. § 1681e(a) provides: “Every consumer reporting agency shall maintain reasonable procedures designed to avoid violations of 3 section 1681c of this title . . .” 17. Section 1681e(a) thus requires consumer reporting agencies to adopt and maintain procedural safeguards to prevent the reporting of obsolete information in violation of § 1681c(a). See, e.g., FTC, 1990 Commentary on the Fair Credit Reporting Act, App. to Pt. 600, cmt. 607-1. ALLEGATIONS RELATING TO PLAINTIFF 18. In May 2016, Plaintiff applied to work for Intelligrated Systems, LLC (“Intelligrated”). 19. Plaintiff was interviewed over the phone and offered a job by Intelligrated to fill a position as a millwright at a distribution center in Dundee, Florida, contingent on the successful completion of a background check. 20. On May 17, 2016, Plaintiff received a new-hire packet that purported to include an authorization to procure a consumer report. 21. In connection with Plaintiff’s application, Intelligrated procured a consumer report on Plaintiff from a consumer reporting agency called HR Profile. HR Profile’s report on Plaintiff was completed on June 3, 2016. 22. HR Profile’s report on Plaintiff unlawfully included adverse information about criminal charges which did not result in a conviction, even though the charges were dismissed more than seven years previously and it was apparent from the face of the report that these adverse items of information were not records of convictions of crimes. 23. Page 2 of the report that was completed in June of 2016 lists charges for “Attempt Burglary” and “Resist/Obstruct Officer Without Violence” and describes the “Charge Type” as “Felony.” However, the report lists the disposition of the charges as “Dropped” and lists the date of disposition as April 15, 1996—more than 20 years ago. The items of information pertaining to 4 these old, dismissed charges were not records of convictions of crimes. 24. Page 2 of the report lists a charge for felony “Aggravated Assault with Firearm.” Page 2 states, however, that Plaintiff pleaded guilty to a lesser, misdemeanor offense and lists the disposition date as August 31, 1998. The felony charge for aggravated assault was amended to a misdemeanor charge, meaning that Plaintiff was never convicted of the felony charge. Thus, the information on the report pertaining to the old, dismissed felony charge for “Aggravated Assault with Firearm” was not a record of conviction of a crime. 25. Page 3 of the report lists a misdemeanor charge for “Use or Possess Drug Paraphernalia” and lists the “Charge Type” as “Felony.” This charge was brought in Florida in Polk County. The disposition for the paraphernalia charge was listed as “No Action.” The date of disposition for the charge was listed as June 2, 2000. This disposition is not a criminal conviction and therefore this old charge listed on the report is not a record of conviction of a crime. 26. Page 3 of the report lists felony charges for “Armed Robbery” and “Carrying Concealed Weapon.” The disposition for both of these charges was “Nolle Prossed,” and the disposition date was January 19, 2005. Neither of these charges resulted in a criminal conviction and therefore these old charges listed on the report are not records of convictions of crimes. 27. After receiving and reviewing Plaintiff’s HR Profile report, Intelligrated decided not to hire Plaintiff based on the information in the report. 28. In a letter dated June 7, 2016, which is attached as Exhibit 1, Intelligrated informed Plaintiff that it would not be hiring him because of HR Profile’s consumer report. HR PROFILE’S ILLEGAL BUSINESS PRACTICES & WILLFUL VIOLATIONS 29. Defendant sells criminal background checks to employers that run background checks on job applicants and employees. Defendant’s background checks bear on a consumer’s 5 “character, general reputation, personal characteristics, or mode of living” and are consumer reports under the FCRA. 15 U.S.C. § 1681a(d). 30. Defendant is a consumer reporting agency because it “for monetary fees . . . regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer report to third parties.” 15. U.S.C. § 1681a(f). 31. As a consumer reporting agency, Defendant is required to comply with all provisions of the FCRA. 32. Defendant systematically and willfully violates the FCRA by reporting adverse information, other than criminal convictions, that antedates the report by more than seven years and by failing to adopt and maintain reasonable procedures to ensure that this obsolete information does not make its way into the consumer reports it provides to its customers. 33. As a result of Defendants’ conduct, job applicants such as Plaintiff appear to be worse job candidates than they would be if Defendant only reported information it is allowed to report under the law. This greatly increases the risk that Plaintiff and members of the proposed classes will be denied job opportunities or will suffer other forms of adverse action due to the reporting of illegal adverse information in their background reports. 34. Defendant’s inclusion of illegal and protected information in its reports has caused Plaintiff and members of the proposed classes to suffer concrete injuries in the form of income loss, loss of benefits, delay in employment, and/or other adverse employment action. 35. Defendant’s inclusion of illegal and protected information in its reports also has caused Plaintiff and members of the proposed classes to experience emotional distress, and to be concerned about the prospect of additional incorrect and unreportable information continuing to 6 be disseminated about him. 36. Defendant’s dissemination of protected, obsolete information in its reports also damages Plaintiff’s and proposed class members’ reputations and invades their privacy. 37. Defendant’s failure to maintain reasonable procedures to avoid inclusion of obsolete information in its report directly resulted in the inclusion of obsolete information in Plaintiff and class members’ reports, which in turn resulted in the above injuries. 38. In the FCRA, 15 U.S.C. § 1681c(a), Congress bestowed upon Plaintiff and members of the proposed classes a substantive right not to have obsolete adverse information, such as old dismissed criminal charges, disclosed in their consumer reports. Defendant injured Plaintiff and the proposed class members by infringing on this substantive right. 39. Defendant routinely reports old criminal charges that have been dismissed, dropped, or abandoned by the prosecution (e.g., charges with a disposition of “dismissed,” “dropped,” “nolle prossed,” or “no action”). 40. Defendant routinely reports old felony and other criminal charges even when the charge was later amended and the accused was ultimately convicted only of a lesser offense. 41. It is Defendant’s standard pattern and practice to report, as it did for Plaintiff, dismissed, dropped, or abandoned charges, or other adverse items of information other than convictions of crimes, that antedate the report by seven years. 42. Consumer reporting agencies are clearly permitted to report records of criminal “convictions” beyond seven years. 15 U.S.C. § 1681c. But it is equally clear from the face of the same statutory provision that “arrests” and any “other adverse item of information” cannot be reported beyond seven years. See 15 U.S.C. §§ 1681c(a)(2) and 1681c(a)(5). Defendant failed to comply with this clear statutory directive. 7 43. Defendant’s practice of reporting adverse items of information that are not criminal convictions, that antedate the report by more than seven years, violates a fundamental protection afforded to consumers under the FCRA, is contrary to the unambiguous language of the statute, and is counter to longstanding judicial and regulatory guidance. 44. Defendant has both the practical capability and the legal obligation to remove outdated arrest records and criminal charges that are dismissed, dropped, abandoned, or otherwise do not result in a conviction. 45. It is standard practice for consumer reporting agencies to write filters and algorithms to filter out obsolete credit information. 46. Defendant, consistent with standard industry practices, could have written an algorithm or filter to ensure that all of its reports would exclude non-conviction criminal dispositions older than seven years. But Defendant failed to implement such an algorithm or 47. Defendant also could have ensured that the sources of information contained in its reports did not report obsolete information. Defendant failed to do so. 48. It is also standard in the consumer reporting industry for consumer reporting agencies to have a purge date for information in their system that has become outdated. See Gillespie v. Trans Union Corp., 482 F.3d 907, 908 (7th Cir. 2007). By failing to utilize a purge date for outdated information, Defendant’s practices and procedures fall far below industry standards and constitute recklessness. 49. Defendant also failed to have Plaintiff and class members’ reports properly reviewed by an individual who was trained in the FCRA, and specifically, in the requirements of 8 15 U.S.C. § 1681c(a). Had Defendant had a properly trained individual review its reports, the problems would have been easily detected. 50. Instead, however, Defendant places its business interests above the rights of consumers and unlawfully reports obsolete information for improper motives. 51. Defendant reports obsolete information because it is cheaper for Defendant to produce reports containing information that is not lawfully reportable than it is for Defendant to weed this information out of reports prior to their being provided to Defendant’s customers. 52. Defendant also unlawfully reports such information because the practice of unlawfully reporting such information allows Defendant to produce voluminous reports, which creates the impression that the reports contain more information than competitors’ reports when in fact, they report illegal information. Indeed, Defendants’ website touts the fact that its reports contain more information than competitors’ and even claims it can find more background information than an FBI criminal background check. According to its website, Defendant is “one of America’s Best nationwide Employment Screening companies,” because Defendant “find[s] 30-60% more information than any of [its] competitors.” Defendant’s website states that its background checks are “the most thorough . . . employment checks available.” 53. Defendant knows that its practice of selling background reports without sufficient procedures in place to ensure outdated information is weeded out violates the clear mandates of 15 U.S.C. § 1681c(a) and 15 U.S.C. § 1681e(a). Indeed, Defendant touts itself as a leader in FCRA compliance. Defendant frequently blogs on the FCRA, provides webinars related to FCRA compliance, and even claims to offer “the most . . . FCRA compliant employment checks available.” 54. Defendant’s officers are well aware of the FCRA’s requirements yet still fail to 9 ensure that they are followed. Defendant retains a full-time, dedicated compliance officer on staff that is well versed in the FCRA and FTC guidelines. Defendant’s founder and president, Mark Owens, purports to be renowned for his FCRA expertise. Defendants’ website also falsely claims that its background checks are “the most . . . FCRA compliant employment checks available.” Clearly, Defendant is well aware of its obligations under the FCRA yet still fails to abide by them. 55. Defendant’s illegal practices also persist despite its membership in the National Association of Professional Background Services,1 an organization that instructs its members not to report arrests and other adverse information that occurred more than seven years prior to the date of the consumer report.2 56. Plaintiff’s report further demonstrates Defendant’s awareness of the seven-year rule because it labels the relevant portion of the background search as a “7 year felony and misdemeanor search.” 57. Defendant has been selling background checks since 1991. Defendant has had 25 years to achieve compliance with the FCRA, but has failed to do so. 58. Defendant’s practices violate a fundamental protection afforded to employees under the FCRA, are contrary to the unambiguous language of the FCRA, and are counter to longstanding judicial3 and regulatory4 guidance. 1 See Helping You Find the Best CRA, https://www.hrprofile.com/documents/Articles/HRProfile-CRA- Checklist.pdf (last visited July 26, 2016). 2 See, e.g., Pamela Q. Devata, et. al., Safe Screening, Safe Hiring, HR Advisor, July/August 2009, at 12-18, made available for its clients by NAPBS at https://portal.napbs.com/files/public/Consumer_Education/Resources/HR%20Magazine%20Article%208-28-09.pdf (last visited Apr. 29, 2013). 3 See, e.g., Avila v. NOW Health Grp., Inc., No. 14 C 1551, 2014 WL 3537825, at *3-*4 (N.D. Ill. July 17, 2014) (holding that the “express language of the FCRA” mandates that “a consumer reporting agency may not include any adverse item of information other than a ‘record of conviction’ not a ‘record of dismissed charges’”); Haley v. Talentwise, Inc., 9 F. Supp. 3d 1188, 1192 (W.D. Wash., April 2, 2014) (finding that under the “plain language” of the FCRA, a “dismissed charge from over seven years ago is both a ‘record of arrest’ and ‘adverse’ information that 10 CLASS ACTION ALLEGATIONS 59. Plaintiff asserts his claim on behalf of a Class defined as follows: Obsolete Information Class: All individuals who were the subjects of background reports prepared by Defendant in the two years predating the filing of this Complaint, continuing through the date the class list is prepared, whose reports contain records of criminal arrest, charge, information, indictment, or other adverse items of information, other than records of criminal convictions, that antedate the report by more than seven years. 60. In addition, Plaintiff asserts his claim on behalf of the following subclass: Charges Subclass: All individuals who were the subjects of background reports prepared by Defendant in the two years predating the filing of this Complaint, continuing through the date the class list is prepared, whose reports contain information about dismissed, abandoned, or dropped charges, or charges that were amended to lesser offenses, that antedate the report by more than seven years. 61. Ascertainability: The Classes can be identified. Defendant maintains copies of consumer reports for at least two years after they are provided to end-users. The reports are maintained in text which can be electronically and/or manually searched to identify charges which pre-date the date of the report by more than seven years and corresponding dispositions. [a consumer reporting agency] is prohibited from including in [a] consumer report”) (citing Serrano v. Sterling Testing Syst., 557 F. Supp. 2d 688, 693 (E.D. Pa. 2008)); Dunford v. Am. DataBank, LLC, No. C 13-03829 WHA, 2014 WL 3956774, at *14 (N.D. Cal. Aug. 12, 2014) (“In light of the remedial purpose of the Act, this order now holds that only the actual convictions may be reported and stale dismissed counts must be combed out and go unreported.”); King v. Gen. Info. Servs., Inc., 903 F.Supp.2d 303 (E.D. Pa. 2012) (FCRA’s requirement excluding obsolete records of arrest comported with commercial speech doctrine); Dowell v. Gen. Info. Servs., Inc., 13-CV- 02581-L-BGS, Memorandum of the United States of America in Support of the Constitutionality of § 1681c of the Fair Credit Reporting Act, at 17 (S.D. Cal. Feb. 20, 2014) (stating that dismissed charges, even if associated with a conviction, may not be reported under the FCRA); Serrano v. Sterling Testing Sys., Inc., 557 F. Supp. 2d 688 (E.D. Pa. 2008) (holding the FCRA prohibits even alluding to existence of unreportable adverse information). 4 See, e.g., FTC, Forty Years of Experience with the Fair Credit Reporting Act, An FTC Staff Report with Summary of Interpretations, July 2011, at 55, https://www.ftc.gov/sites/default/files/documents/reports/40-years-experience- fair-credit-reporting-act-ftc-staff-report-summary-interpretations/110720fcrareport.pdf (last visited July 26, 2016) (“Even if no specific adverse item is reported, a CRA may not furnish a consumer report referencing the existence of adverse information that predates the times set forth in this subsection.”); id. at 65 (explaining that § 1681e(a) requires CRAs to adopt “procedural safeguards” to avoid the reporting of obsolete information in violation of 15 U.S.C. § 1681c(a)); FTC, 1990 Commentary on the Fair Credit Reporting Act, Appendix to Part 600, cmts. 607-1A, -1B. 11 The reports can be searched to identify non-conviction dispositions using commonly used terms to describe them, such as “dismissed,” “nolle prossed,” “no action,” or “dropped.” The search terms can be refined during the course of discovery as needed to ensure that any terms specific to Defendant’s reporting practices are incorporated. 62. Numerosity: The Classes are so numerous that joinder of all class members is impracticable. Defendant has provided millions of background checks to more than 3000 clients. It regularly includes adverse information, other than criminal convictions, that predates the report by more than seven years. Given the volume of Defendant’s business, hundreds or thousands of consumers likely satisfy each class definition. 63. Typicality: Plaintiff’s claims are typical of the members of the Classes. Defendant typically reports adverse information, other than criminal convictions, that antedates the report by more than seven years, and Defendant’s procedures for reporting this obsolete information are standard as to all class members. The FCRA violations suffered by Plaintiff are typical of those suffered by other class members, and Defendant treated Plaintiff consistent with other class members, in accordance with its standard policies and practices. 64. Adequacy: Plaintiff will fairly and adequately protect the interests of the Classes and has retained counsel experienced in complex class action litigation generally, and in FCRA litigation in particular. 65. Commonality: Common questions of law and fact exist as to all members of the Classes, including but not limited to: a) Whether Defendant’s practice of reporting charges that antedate the report by more than seven years that resulted in a disposition other than a conviction violates the FCRA; b) Whether Defendant’s practices of reporting charges more than seven years old 12 that were later amended to a lesser offense violates the FCRA; c) Whether Defendant failed to maintain reasonable procedures to avoid reporting adverse information, other than criminal convictions, that antedates the report by more than seven years; d) Whether Defendant’s violations were willful; e) The proper measure of statutory damages; and f) The proper measure of punitive damages. 66. Class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because the questions of law and fact common to the Classes predominate over any questions affecting only individual members of the Classes, and because a class action is superior to other available methods for the fair and efficient adjudication of this litigation. Defendant’s conduct described in this Complaint stems from common policies and practices, resulting in common violations of the FCRA. Class certification will also preclude the need for unduly duplicative litigation that might result in inconsistent judgments concerning Defendant’s practices. 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 forum. 67. Plaintiff intends to request notice to all members of the Classes to the extent required by Fed. R. Civ. P. 23. The names and addresses of the class members are available from Defendant’s records. COUNT I Reporting Outdated Information 15 U.S.C. § 1681c(a) On Behalf of Plaintiff and the Classes 68. Defendant violated the FCRA by including in Plaintiff’s report adverse 13 information, other than criminal convictions, that antedated the report by more than seven years. See 15 U.S.C. § 1681c(a). 69. The foregoing violations were willful. Defendant acted in knowing, deliberate, or reckless disregard of its obligations and the rights of Plaintiff and other class members. 70. Defendant’s willful conduct is reflected by, inter alia, the following: a) Defendant has been in the background-screening business for approximately 25 years and has had plenty of time to become compliant with the FCRA. b) Defendant specializes in furnishing consumer reports for employment purposes, has access to legal advice through its own compliance officer and outside counsel, and purports to be an expert on the FCRA. Yet there is no contemporaneous evidence that Defendant determined that its conduct was lawful. c) Defendant’s conduct is inconsistent with the FTC’s longstanding regulatory guidance, judicial interpretation, and the plain language of the statute. d) Defendant knows that it cannot report adverse information, other than criminal convictions, that antedates the report by more than seven years and for which the statute of limitations has run, yet it reports this information anyway. e) Defendant knew or had reason to know from its communications with the National Association of Professional Background Screeners that its conduct violates the FCRA. f) Defendant’s similarly situated competitors have adopted policies of not reporting adverse information, other than criminal convictions, that antedates 14 the report by more than seven years and for which the statute of limitations has run. g) Despite the pellucid statutory text and there being a depth of guidance, Defendant adopted a policy of systematically reporting adverse information, other than criminal convictions, that antedates the report by more than seven years and for which the statute of limitations has run. By adopting such a policy, Defendant voluntarily ran a risk of violating the law that is substantially greater than the risk associated with a reading that was merely careless, and did so in order to avoid the costs of compliance and achieve an edge over its competitors. h) Defendant includes a notation on its reporting indicating that the seven-year limitation on information is applicable, yet fails to exclude all adverse non- conviction information that antedates the report by more than seven years. i) Defendant repeatedly committed the violations alleged herein, reporting antedated information about Plaintiff, and engaging in the same practice as to other members of the Classes. 71. Plaintiff and the Classes 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). 72. Plaintiff and the Classes are also entitled to punitive damages and appropriate equitable relief for these violations, pursuant to 15 U.S.C. § 1681n(a)(2). 73. Plaintiff and the Classes are further entitled to recover their costs and attorneys’ fees, pursuant to 15 U.S.C. § 1681n(a)(3). 15 COUNT II Failure to Adopt Reasonable Procedures 15 U.S.C. § 1681e(a) On Behalf of Plaintiff and the Classes 74. Defendant violated the FCRA by failing to maintain reasonable procedures to avoid violations of 15 U.S.C. § 1681c(a), in violation of 15 U.S.C. § 1681e(a). 75. Defendant’s failure to maintain reasonable procedures was the direct cause of injury to the class members because it resulted in the reporting of obsolete, adverse information. 76. The foregoing violations were willful. Defendant acted in knowing, deliberate, or reckless disregard of its obligation to maintain reasonable procedures. 77. Defendant’s willful conduct is reflected by, inter alia, the following: j) Defendant has been in the background-screening business for approximately 25 years and has had plenty of time to become compliant with the FCRA. k) Defendant specializes in furnishing consumer reports for employment purposes, has access to legal advice through its own compliance officer and outside counsel, and purports to be an expert on the FCRA. Yet there is no contemporaneous evidence that Defendant determined that its procedures were lawful. l) Defendant’s conduct is inconsistent with the FTC’s longstanding regulatory guidance, judicial interpretation, and the plain language of the statute. m) Defendant knows that it has an obligation to put in place and utilize procedural safeguards to prevent the reporting of adverse information, other than criminal convictions, that antedates the report by more than seven years, yet it knowingly failed to do so. n) Defendant’s similarly situated competitors have adopted reasonable 16 procedures to avoid reporting adverse information, other than criminal convictions, that antedates the report by more than seven years. Yet Defendant has not done so. o) Despite the pellucid statutory text and there being a depth of guidance, Defendant adopted a policy of systematically reporting adverse information, other than criminal convictions, that antedates the report by more than seven years. By adopting such a policy, Defendant voluntarily ran a risk of violating the law that is substantially greater than the risk associated with a reading that was merely careless, and did so in order to avoid the costs of compliance and to achieve an edge over its competitors. p) The extent of illegal information included in Plaintiff’s report—which referenced no less than eight obsolete charges that never resulted in criminal convictions—indicates that Defendant did not have even a semblance of reasonable or adequate procedures in place to avoid the reporting of obsolete information, which constitutes, at the very least, recklessness. 78. Plaintiff and the Classes 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). 79. Plaintiff and the Classes are also entitled to punitive damages and appropriate equitable relief for these violations, pursuant to 15 U.S.C. § 1681n(a)(2). 80. Plaintiff and the Classes are further entitled to recover their costs and attorneys’ fees, pursuant to 15 U.S.C. § 1681n(a)(3). PRAYER FOR RELIEF 17 81. WHEREFORE, Plaintiff, on behalf of himself and the Classes, prays for relief as follows: a) determining that this action may proceed as a class action under Federal Rule of Civil Procedure 23; b) designating Plaintiff as representative for the Classes and designating Plaintiff’s counsel as counsel for the Classes; c) issuing proper notice to the Classes at Defendant’s expense; d) declaring that Defendant committed multiple, separate violations of the FCRA; e) declaring that Defendant acted willfully, in deliberate or reckless disregard of Plaintiff’s rights and its obligations under the FCRA; f) awarding statutory and punitive damages as provided by the FCRA; g) awarding reasonable attorneys’ fees and costs as provided by the FCRA; and h) granting further relief, in law or equity, as this Court may deem appropriate and just as provided by the FCRA. DEMAND FOR A JURY TRIAL 82. Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, Plaintiff and the Classes demand a trial by jury. Respectfully submitted, Date: August 19, 2016 /s/John Yanchunis John Yanchunis FL Bar No. 324681 MORGAN & MORGAN COMPLEX LITIGATION GROUP 201 North Franklin Street, 7th Floor Tampa, FL 33602 Telephone: (813) 223-5505 Fax: (813) 223-5402 jyanchunis@forthepeople.com 18 Anna P. Prakash MN Bar No. 0351362* Eleanor Frisch MN Bar No. 0397776* NICHOLS KASTER, PLLP 4600 IDS Center 80 South 8th Street Minneapolis, MN 55402 Telephone: 612-256-3200 Facsimile: 612-338-4878 aprakash@nka.com efrisch@nka.com * pro hac vice motions forthcoming ATTORNEYS FOR PLAINTIFF 19

products liability and mass tort

4vH3EocBD5gMZwcz3WIL

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK DANIEL M. SOFIA, Individually and on Behalf of all Others Similarly Situated, 17 Civ. 4898 COMPLAINT JURY DEMAND Plaintiff - against - DELAWARE NORTH ISLANDIA PROPERTIES LLC, Defendant Plaintiff, Daniel M. Sofia, complaining through his attorneys from the Law Offices of James E. Bahamonde, respectfully alleges against Defendant: NATURE OF THE CASE 1. In violation of well-settled, two-decade old law, Defendant has chosen a policy not to remove several unlawful architectural barriers which exist at its public accommodation. Instead, Defendant has chosen to exclude Plaintiff and all other disabled persons, who use wheelchairs and scooters, from having access to and use of many parts in features of Defendant’s public accommodation. 2. Plaintiff files this action for himself and as an action for those similarly situated, complaining of violations of Title III of the Americans with Disabilities Act, 42 U.S.C. § 12182 (hereinafter "ADA"), New York State Civil Rights Law § 40-c and 40-d, and New York State Human Rights Law § 296 et seq. 3. Plaintiff seeks damages, declaratory and injunctive relief, as well as fees and costs against the Defendant. 1 VENUE AND JURISDICTION 4. The Court has jurisdiction over this action pursuant to 28 U.S.C. §§ 1331 and 1343, as this action involves federal questions regarding the deprivation of Plaintiff’s rights under the 5. The Court has supplemental jurisdiction over Plaintiff’s allegations arising from Defendant’s 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 a substantial part of the events or omissions giving rise to this action, alleged herein, occurred in this district. 7. The jurisdiction of this court is invoked pursuant to 28 U.S.C. Sections 1331 and 2201 and through the Americans with Disabilities Act, 42 U.S.C. § 12181 et seq. PARTIES 8. That at all times hereinafter mentioned, Plaintiff is now, and at all times mentioned in this complaint, a resident of Suffolk County, New York. 9. Defendant DELAWARE NORTH ISLANDIA PROPERTIES LLC is a foreign limited liability company authorized by the Secretary of the State of New York to do business in New York State with its principal County of business designated as New York County. 10. Defendant DELAWARE NORTH ISLANDIA PROPERTIES LLC is the owner of the commercial property which houses a public accommodation named Jake's 58 Hotel & Casino located at 3635 Express Drive North, Islandia, NY. 11. Upon information and belief, Defendant DELAWARE NORTH ISLANDIA PROPERTIES LLC owns, operates, and manages a public accommodation named Jake's 58 Hotel & Casino located at 3635 Express Drive North, Islandia, NY. 2 CLASS ACTION 12. Plaintiff brings this suit for declaratory and injunctive relief and, as a class action for all those similarly situated, who, as persons who must use wheelchairs by reason of various disabilities, and who use or desire to use the services and accommodations offered to the public by Defendant, are protected by, and are beneficiaries of the ADA and New York State Human Rights Law. 13. Plaintiff, complaining for himself and all others similarly situated residents in Suffolk County and State of New York hereby alleges: (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 parties are typical of the claims or defenses of the class; (d) the representative parties 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. 14. References to “Plaintiffs” shall be deemed to include the individually named Plaintiffs, and each member of the Class, unless otherwise indicated. STATUTORY SCHEME 15. The 2010 United States Census indicates that more than 56.6 million persons in the United States have a disability. The 2010 US Census also indicates that more than 1.39 million New Yorkers have a mobility disability. 16. The ADA and New York State Human Rights Law recognize individuals with disabilities 3 as a protected class. 17. The ADA and New York State Human Rights Law recognize individuals with disabilities as a protected class. 18. It is unlawful for a private entity which owns, leases to or operates a place of public accommodations to discriminate against an individual with a disability. 19. The ADA and New York State Human Rights Law requires a public accommodation to be readily accessible to and usable by a disabled individual. 20. Defendant is required to remove all readily achievable barriers which denies a disabled individual with the opportunity to participate in or benefit from services or accommodations on the basis of disability. 21. Failure to remove all readily achievable architectural barriers is defined as disability discrimination in violation of the ADA and New York State Human Rights Law. 22. The ADA requires a public accommodation to make reasonable modifications to the policies, practices, or procedures to afford access to persons with disabilities that is equal to the access afforded to individuals without disabilities. 23. 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. 24. The landlord and owner of a property which houses a public accommodation are liable for their tenant’s failure to comply with the ADA and New York State Human Rights Law. Property leases which contain contradictory language is superseded by the ADA. 25. Discriminatory intent is not required to establish liability under ADA and New York State Human Rights Law. 4 26. Discriminatory intent is not required to establish liability under ADA and New York State Human Rights Law. FACTUAL BACKGROUND 27. Plaintiff has been diagnosed with cerebral palsy and cannot walk. As a result, he uses a wheelchair for mobility. 28. Defendant DELAWARE NORTH ISLANDIA PROPERTIES LLC owns or leases the commercial property which houses the public accommodation named Jake's 58 Hotel & Casino located at 3635 Express Drive North, Islandia, NY (hereinafter ‘facility’). 29. Defendant owns or operates the public accommodation named Jake's 58 Hotel & Casino located at 3635 Express Drive North, Islandia, NY. 30. In 2016/2017, Defendant purchased and substantially renovated the commercial property located at 3635 Express Drive North, Islandia, New York. A significant amount of the renovations were to the areas which affects or could affect access to or usability of its place of public accommodation. 31. In 2017, Plaintiff has gone to Defendant’s public accommodation several times. Each time, Plaintiff encountered several inaccessible slot machines. 32. Each inaccessible slot machines has an affixed seat. The affixed seat prevents Plaintiff and all others similarly situated from accessing the slot machine. 33. Defendant provides complementary self-serve soft drinks to its patrons. However, the self-serve soft drink machine is at an inaccessible height and cannot be reached by plaintiff and all others similarly situated. 34. The operable parts of Defendant’s self-service soft drink machine are more than 48 5 inches high. Consequently, Plaintiff, an individual who uses a wheelchair, cannot reach the soft drink machine. 35. Plaintiff has the intention to patronize Defendant’s public accommodation when it becomes readily accessible to and usable. 36. The removal of existing architectural barriers is readily achievable. 37. To date, Defendant has failed to remove the architectural barriers. FIRST CAUSE OF ACTION (Violations of the Americans with Disabilities Act) (Injunctive Relief) 38. Defendant’s facility named Jake's 58 Hotel & Casino located at 3635 Express Drive North, Islandia, NY is a public accommodation within the meaning of Title III of the ADA, 42 U.S.C. § 12181; 28 C.F.R. § 36.104. 39. Defendant has failed to make adequate accommodations and modifications to its public accommodation named Jake's 58 Hotel & Casino located at 3635 Express Drive North, Islandia, 40. Defendant has failed to remove all architectural barriers and communication barriers that are structural in violation of 42 U.S.C. § 12182(b)(2)(A)(iv). 41. There exist readily achievable modifications which would make Defendant’s public accommodation accessible and readily usable by Plaintiff and all others similarly situated. 42. Defendant failed to make the necessary readily achievable modifications to its public accommodation. 43. Upon information and belief, since 1992, Defendant’s facility has undergone alterations to the areas which affects or could affect access to or usability of its place of public accommodation. 6 44. It is not impossible for Defendant to remove the architectural barriers which exist at its facility. 45. Defendant’s public accommodation was first occupied after January 26, 1993. (new construction requirements). 46. Defendant failed to design and construct its facility that is readily accessible to and usable by Plaintiff in violation of 42 U.S. Code § 12183(a)(1). 47. It is not structurally impracticable for Defendant’s facility to be accessible. 48. Defendant failed to alter its facility to the maximum extent feasible in violation of 42 U.S. Code § 12183(a)(2). 49. Defendant’s facility is not fully accessible to, or readily useable by individuals with disabilities. 50. Features of Defendant’s public accommodation inaccessible to Plaintiff, and others similarly situated, are including but not limited to: a. There is insufficient clear floor space in front of each slot machine in violation of the ADA Accessibility Guidelines, 36 C.F.R. Part 1191 Appendix D §309. b. Defendant does not provide a minimum number of accessible parking in violation of the ADA Accessibility Guidelines, 36 C.F.R. Part 1191 Appendix B § 208. c. The handicap parking spaces are in violation of the ADA Accessibility Guidelines, 36 C.F.R. Part 1191 Appendix D § 502. d. Defendant does not provide sufficient number of accessible parking spaces in violation of the ADA Accessibility Guidelines, 36 C.F.R. Part 1191 Appendix B § 208. e. Defendant does not provide van accessible parking in violation of the ADA Accessibility Guidelines, 36 C.F.R. Part 1191 Appendix D § 502.2. f. The existing access aisles have incorrect dimensions can do not provide access to individuals who use wheelchairs in violation of the ADA Accessibility Guidelines, 36 C.F.R. Part 1191 Appendix D § 502.3 and New York State Building Code. g. The side flares of the curb ramps are steeper than 1:10. Consequently, the sidewalk/walkway has incorrect dimensions at each place where the curb ramp meets the sidewalk/walkway. 7 h. Upon information and belief, the grab bars in Defendant’s bathrooms are of incorrect dimensions and in violation of the ADA Accessibility Guidelines, 36 C.F.R. Part 1191 Appendix D § 604.5. i. Upon information and belief, the Defendants lavatories and sinks are inaccessible in violation of the ADA Accessibility Guidelines, 36 C.F.R. Part 1191 Appendix D § 606. 51. Defendant has discriminated against Plaintiff, and all others similarly situated, on the basis of disability, in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of its public accommodation in violation of 42 U.S. Code § 12182(a). 52. Defendant has subjected Plaintiff, and all others similarly situated, on the basis of disability, directly, or through contractual, licensing, or other arrangements, denial of opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages, or accommodations of Defendant in violation of 42 U.S. Code § 12182(b)(1)(A)(i). 53. Defendant has not afforded Plaintiff, and all others similarly situated, on the basis of disability, 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 in violation of 42 U.S. Code § 12182(b)(1)(A)(ii).. 54. Defendant has provided Plaintiff, and all others similarly situated, on the basis of disability, directly, or through contractual, licensing, or other arrangements with a good, service, facility, privilege, advantage, or accommodation that is different and separate from that provided to other individuals in violation of 42 U.S. Code § 12182(b)(1)(A)(ii). 8 55. Defendant has not afforded plaintiff, and all others similarly situated, the goods, services, facilities, privileges, advantages, and accommodations in the most integrated setting appropriate in violation of 42 U.S. Code § 12182(b)(1)(B). 56. Defendant has denied Plaintiff, and all others similarly situated, the opportunity to participate in such program or activities that is not separate or different in violation 42 U.S. Code § 12182(b)(1)(C). 57. Defendant has imposed or applied an eligibility criteria that screened out or tended to screen out Plaintiff, and all others similarly situated, from fully and equally enjoying any goods, services, facilities, privileges, advantages, or accommodations being offered in violation of 42 U.S. Code § 12182(b)(2)(A)(i). 58. Defendant has failed to make reasonable modifications in their policies, practices, or procedures, when such modifications are necessary to afford such goods, services, facilities, privileges, advantages, or accommodations to Plaintiff in violation of 42 U.S. Code § 12182(b)(2)(A)(ii). 59. Defendant should have achieved accessibility by January 26, 1992. 60. The barriers to access Defendant’s facility continue to exist. 61. Reasonable accommodations exists which do not impose an undue hardship on the operation of the Defendant’s program or activity. 62. Reasonable accommodations could be made which do not fundamentally alter the nature of the Defendant’s program or activity. 9 SECOND CAUSE OF ACTION (Violations of New York State Human Rights Law) (Injunctive Relief and Damages on Behalf of Plaintiffs) 63. Plaintiff realleges and incorporates by this reference all of the allegations set forth in this Complaint as if fully set forth herein. 64. Defendant’s facility named Jake's 58 Hotel & Casino located at 3635 Express Drive North, Islandia, NY is a public accommodation within the meaning of New York State Human Rights Law § 292(9). 65. Defendant has not provided Plaintiff and others similarly situated with evenhanded treatment in violation of New York State Human Rights Law § 296. 66. Defendant’s direct or indirect unevenhanded treatment of Plaintiff and others similarly situated is demonstrated when he was segregated from all other customers. 67. Defendant has, because of Plaintiff’s disability, directly or indirectly, refused, withheld from or denied Plaintiff any of the accommodations, advantages, facilities or privileges of their public accommodation. 68. Defendant has demonstrated that the patronage or custom thereat of Plaintiff and others similarly situated, is unwelcome, objectionable or not acceptable, desired or solicited. 69. Defendant and its agents discriminated against Plaintiff in violation of New York State Human Rights Law § 296. 70. Defendant discriminated in against Plaintiff by creating, fostering, and otherwise failing to prevent or remedy the discrimination against Plaintiff, in violation of New York State Human Rights Law § 296. 71. As a direct and proximate result of Defendant unlawful discrimination in violation of the New York State Human Rights Law, Plaintiff has suffered and continues to suffer mental 10 anguish and emotional distress. THIRD CAUSE OF ACTION (Violations of New York State Civil Rights Law) (Statutory Damages on Behalf of Plaintiffs) 72. Plaintiff realleges and incorporates by this reference all of the allegations set forth in this Complaint as if fully set forth herein. 73. On the basis of Plaintiff’s disability, Defendant has violated his Civil Rights. 74. Consequently, Plaintiff is entitled to recover the penalty prescribed by Civil Rights Law § 40-c and 40-d, in the amount of $500 for each and every violation. 75. Pursuant to NY Civil Rights law, Defendant is guilty of a class A misdemeanor. 76. Notice of the action has been served upon the Attorney-General as required by Civil Rights Law § 40-d. FOURTH CAUSE OF ACTION (Declaratory Relief) 77. Plaintiff realleges and incorporates by this reference all of the allegations set forth in this Complaint as if fully set forth herein. 78. Plaintiff is entitled to a declaratory judgment concerning the violations committed by Defendant specifying the rights of Plaintiff and other persons similarly situated as to the policies, practices, procedures, facilities, goods and services provided by Defendant. INJUNCTIVE RELIEF 79. Issue a permanent injunction enjoining Defendant from disability discrimination. 80. Issue a permanent injunction ordering Defendant to alter its facility to make such facility readily accessible to and usable by individuals with disabilities. 81. Issue a permanent injunction requiring Defendant to make all necessary modifications 11 to Defendant’s policies or practices so that Plaintiff and other persons similarly situated will not be subject to further unlawful discrimination. PRAYER FOR RELIEF WHEREFORE, Plaintiff requests the following relief from the Court: A. Certify this case as a class action; A. Issue a permanent injunction 1) proscribing disability discrimination, 2) requiring Defendant to alter its facility making such facility readily accessible to and usable to individuals with disabilities, and 3) compelling Defendant to make all necessary modifications to Defendant’s policies or practices so that Plaintiff will not be subject to further discriminationin accordance with New York State Human Rights Laws and Title III of the B. Enter declaratory judgment, specifying the violations of the ADA and New York state law and declaring the rights of Plaintiff and other persons similarly situated as to Defendant’s policies, practices, procedures, facilities, goods and services offered to the public. C. Pursuant to New York State Civil Rights Law § 40-c and 40-d, hold Defendant liable for $500 for each and every violation. D. Pursuant to New York State Civil Rights Law § 40-d, find Defendant guilty of a class A misdemeanor for violating New York State civil rights law. E. The court retain jurisdiction over the Defendant until the court is satisfied that the Defendant’s unlawful practices, acts and omissions no longer exist and will not reoccur. F. Award Plaintiff compensatory damages in the amount of $10,000 for Defendant’s discrimination in violation of New York State Human Rights Law. G. Award Plaintiff punitive damages in the amount to be determined at trial for 12 Defendant’s violation of New York State Human Rights Laws. H. Find that Plaintiffs are a prevailing party in this litigation and award reasonable attorney fees, costs and expenses, and such other and further relief, at law or in equity, to which the Plaintiff and other persons similarly situated may be justly entitled. I. For such other and further relief, at law or in equity, to which the Plaintiff and other persons similarly situated may be justly entitled. Dated: August 19, 2017 LAW OFFICES OF JAMES E. BAHAMONDE, P.C. X________________________________ JAMES E. BAHAMONDE, ESQ. Attorney for the Plaintiff(s) Tel: (646) 290-8258 Fax: (646) 435-4376 E-mail: James@CivilRightsNY.com 13

civil rights, immigration, family

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UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK MARIACRISTINA BONILLA on behalf of herself and all others similarly situated, No. Plaintiff, CLASS ACTION COMPLAINT DEMAND FOR JURY TRIAL AMAZON.COM, INC, Defendant. Plaintiff Mariacristina Bonilla (“Plaintiff”) brings this class action on behalf of herself and all others similarly situated against defendant Amazon.com, Inc. The allegations are based upon the investigations of counsel, personal knowledge with respect to Plaintiff, and information and belief. Plaintiff alleges the following: I. INTRODUCTION 1. Defendant Amazon.com, Inc. (“Amazon”) operates the world’s largest online retail platform. Online sales by Amazon account for nearly half of all retail e-commerce in the United States1 and in particular it has accounted for 76% of all digital book sales in the United States.2 2. The five largest book publishing companies that dominate the publishing industry are Hachette Book Group; Simon & Schuster, Inc. and Simon & Schuster Digital Sales, Inc.; HarperCollins Publishers L.L.C.; Penguin Random House LLC; and Macmillan Publishing Group, LLC (collectively known as the “Big Five”). The Big Five produce “trade books,” which include 1 Amazon Now Has Nearly 50% of US Ecommerce Market, Emarketer (Jul. 16, 2018), https://www.emarketer.com/content/amazon-now-has-nearly-50-of-us-ecommerce-market. 2 Jeffrey A. Trachtenberg and Dana Mattioli, Connecticut Investigating Amazon’s EBook Business, Wall Street Journal (Jan. 13, 2021). “general interest fiction and non-fiction books,” as opposed to “‘non-trade’ books such as academic textbooks, reference materials, and other texts.”3 The Big Five make up 80% of domestic trade book sales.4 3. Plaintiff and Class members are consumers who frequently shop for electronic books (“eBooks”) published by the Big Five through online retailers such as Amazon, Kobo, Apple Books, and Barnes & Noble. The Big Five sell their books through these platforms under an “agency model” in which every sales transaction occurs directly between the publisher and retail consumer while the online platform serves as the publisher’s sales agent taking a commission on each book sold.5 4. Plaintiff and Class members purchased one or more eBooks directly from the Big Five through a retail platform other than Amazon’s. Plaintiff alleges that Amazon and the Big Five agreed to price restraints that cause Plaintiff and Class members to pay supracompetitive prices for eBooks purchased from the Big Five through a retail platform other than Amazon.com. 5. Since 2011, the United States and European antitrust authorities have continuously investigated eBook prices. The European Commission (“EU Commission”) first investigated potential collusion between the Big Five and Apple in 2011.6 Additionally, the Department of Justice (“DOJ”) along with the Attorneys General from at least 33 states filed a civil action against Apple and the Big Five in 2012.7 The EU Commission as well as the U.S. District Court presiding 3 United States v. Apple Inc., 952 F. Supp. 2d 638, 648 n.4 (S.D.N.Y. 2013). 4 Constance Grady, Milo Yiannopoulos’s book deal with Simon & Schuster, explained, Vox (Jan. 3, 2017), https://www.vox.com/culture/2017/1/3/14119080/milo-yiannopoulos-book- dealsimon-schuster-dangerous-boycott. 5 Grady, CASE AT.40153 EBook MFNs and related matters (Amazon), https://ec.europa.eu/competition/antitrust/cases/dec_docs/40153/40153_4392_3.pdf (“5.4.2017 EU Commission Decision”) at 8. 6 5.4.2017 EU Commission Decision at 8. 7 House Report at 333; 5.4.2017 EU Commission Decision at 8. 2 over the DOJ and AG’s lawsuit determined that the Big Five had colluded with Apple to raise retail eBook prices.8 The agreement between the parties was to shift from a wholesale model (where the eBook retailer sets retail prices) to an agency model (where the publisher sets retail prices and the eBook retailer acts merely as its agent).9 The Big Five entered into most favored nations (“MFN”) clauses with Apple requiring that the Big Five sell their eBooks at the same prices via Apple’s online store as well as all other eBook retailers (including Amazon) as a part of their conspiracy.10 6. In 2012 and 2013 respectively, the U.S. District Court entered consent decrees against the Big Five while the EU Commission entered settlements as well.11 Both the consent decrees and the settlements required the Big Five to cease from colluding with one another, to refrain from MFNs in any of their agreements with eBook retailers for five years, and to allow eBook retailers to implement their own discounts to retail prices on the Big Five’s eBooks for two 7. As a result, the Big Five’s eBook prices decreased dramatically from 2013-2014 while the decrees were in effect. In 2015, prices rose after the Big Five renegotiated their agency agreements with Amazon and the Big Five have since continued to maintain supracompetitive 8 Apple Inc., 952 F. Supp. 2d at 648; 5.4.2017 EU Commission Decision at 8. 9 Id. 10 Id. 11 See U.S. v. Apple Inc., et al., Department of Justice, https://www.justice.gov/atr/case/us- vapple-inc-et-al; 5.4.2017 EU Commission Decision at 8 n.11. 12 5.4.2017 EU Commission Decision at 8; see, e.g., Final Judgment as to Defendants The Penguin Group, a Division of Pearson PLC, and Penguin Group (USA), United States v. Apple Inc., Case No. 12-cv-02826-DLC (S.D.N.Y.), Docket No. 259 (“Final Judgment Penguin”), at 8 https://www.justice.gov/atr/case-document/final-judgment-defendants-penguin-group- divisionpearson-plc-and-penguin-group-usa. 3 8. Amazon publicly stated that it was negotiating with the Big Five with the expectation of continuing to discount eBook prices after the two-year period required by the consent decree; however, this did not happen, and the Big Five increased eBook prices. Co- conspirator Penguin raised its eBook prices by 30.4%, co-conspirator HarperCollins by 29.3%, co- conspirator Simon & Schuster by 15.8%, co-conspirator Hachette Book Group by 8.3%, and co- conspirator Macmillan by 10.7% after announcing their respective agency contracts with Amazon. 9. The Big Five co-conspirators boosted prices by increasing the price point for new releases and reducing the number of price ranges into which the consolidated eBook prices would be placed. During the Big Five’s conspiracy with Apple, eighty percent of their eBooks fell within four price ranges. During the DOJ consent decrees this number doubled; however, after entering into agreements with Amazon once the decrees were lifted, the Big Five reverted back to using three or four price ranges by 2018 and through the present. 10. In 2014, the Big Five’s eBook prices were at their most varied point during the decrees. When adjusted for inflation, eBook prices sat around $12 and only about five percent of titles sold around $15. Conversely in 2020, fifty-five percent of titles were sold for around $15 and less than five percent were sold for about $12. 11. If Amazon and the Big Five co-conspirators exclusively raised prices for Amazon eBooks, consumer would be free to shop for competitively-priced eBooks on other online retail platforms. Instead, Amazon and its co-conspirators agreed to price restraints that would prevent that from happening. 12. The EU Commission opened another investigation into eBook pricing in June 2015 and determined that Amazon used MFNs in its agreements with the Big Five co-conspirators, despite them being precluded from agreeing to MFNs by their earlier settlements with the EU 4 Commission.13 EU Commission found these provisions between Amazon and the Big Five to be much too analogous to the previous issues causing anticompetitive effects.14 A settlement was reached in 2017 prohibiting Amazon from enforcing MFNs and other similar provisions for five years.15 This settlement did not cover Amazon’s agreements with the Big Five in the United States. 13. In 2019, the House Judiciary Committee began investigating Amazon as a part of a broader investigation into competition in digital markets.16 The Committee concluded that Amazon’s use of MFN provisions in its agreements with book publishers harms competition in the retail book market, including in particular the eBook market.17 The House Report found that “Amazon’s dominance in e-books and its anticompetitive application of price parity clauses to its business relationships in this market eliminates the ability of rivals or new entrants to gain any meaningful competitive advantage relative to Amazon.”18 14. The Big Five received subpoenas in 2019 pursuant to another investigation in Connecticut that also focuses on Amazon’s relationships with publishers.19 15. Consumers do not significantly benefit from the cost reductions that result from low printing and distribution expenses associated with eBooks as opposed to print books. Amazon charges high commissions and other fees to publishers, including the Big Five, which substantially raises retail prices for eBooks sold by Amazon.20 Amazon raises the cost of selling eBooks by 13 5.4.2017 EU Commission Decision at 4-5. 14 Id. at 20-38, 43. 15 Id. at 39, 41-42. 16 House Judiciary Committee, Investigation of Competition in Digital Markets, Oct. 5, 2020, at 6, https://judiciary.house.gov/uploadedfiles/competition_in_digital_markets.pdf (“House Report”). 17 Id. at 295. 18 Id. at 296. 19 See Trachtenberg and Mattioli, supra n.2. 20 Letter from Maria A. Pallante, Pres. & CEO, Ass’n of Am. Publishers, Mary E. Rasenberger, Exec. Dir., Authors Guild, Allison K. Hill, CEO, Am. Booksellers Ass’n, to Hon. David. N. 5 tying its distribution services (giving consumers their desired books on Amazon’s retail platform, processing payments, distributing the purchased eBooks) to its marketing and advertising services, which are designed to strategically place advertisements for consumers on its online platform.21 Furthermore, Amazon increases the Big Five’s selling costs by manipulating eBook “discovery tools to make a publisher’s books difficult to find without the purchase of advertising or refuses distribution unless the publisher also purchases advertising.”22 16. Through Amazon’s required MFNs, Amazon is granted pricing, terms, and conditions equal to or better than those offered to Amazon’s competitors, and Amazon requires sellers to notify Amazon about such terms, thereby restricting discounts to consumers, and stifling innovation in the trade eBook market.23 17. In a competitive market, the Big Five could sell eBooks at lower prices on their own online platforms or via Amazon’s competitors that offer lower commissions and fees. Nonetheless, they have agreed with Amazon to not do that. This restrains Amazon’s competitors from expanding their shares of the market and minimizes the incentive for new competitors to enter the market.24 Defendant Amazon and the Big Five co-conspirators entered into these anticompetitive agreements with the purpose and effect of injuring consumers by eliminating competitive pricing that Amazon would otherwise face, and increasing eBook prices sold through Amazon’s retail competitors above competitive levels. Cicilline, Chairman, Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm. on the Judiciary, 3 (Aug. 17, 2020), https://publishers.org/wp-content/uploads/2020/08/Joint- Letterto-Rep-Cicilline-081720.pdf. 21 Id. at 2. 22 Id. at 3. 23 Id. at 7. 24 House Report at 295. 6 18. Since Amazon and the Big Five co-conspirators have not made the exact terms of their agreements public, Plaintiff relies on public disclosures and investigations including news reports, submissions to the House Judiciary Committee and the findings of the EU Commission and House Judiciary Committee. These reports describe generally the contractual arrangements that Amazon uses in its agreements with publishers to prohibit competition from other eBook retailers. 19. MFN agreements usually entitle a buyer to pricing and/or terms that are equal or better than those a seller offers to any other buyer. Amazon’s contracts with the Big Five are instead a hybrid of MFNs and the agency model. The Big Five co-conspirators depend on the agency model to sell eBooks, therefore Amazon is not a buyer and the Big Five are not its suppliers. “Amazon,” the House Judiciary Committee observes, “has a history of using MFN clauses to ensure that none of its suppliers or third-party sellers can collaborate with an existing or potential competitor to make lower-priced or innovative product offerings available to consumers.”25 20. While Amazon has abstained from using the term “most favored nation,” the Judiciary Committee concluded that Amazon has continuously imposed on book publishers contract provisions that effectively function as MFNs, despite the current agency model.26 Amazon uses these stipulations to prevent “publishers from partnering with any of Amazon’s competitors” and to strengthen “Amazon’s ‘stranglehold’ and ‘control’ over book distribution.”27 Due to Amazon’s market power in the retail eBook market, these contractual requirements prevent Amazon’s actual and potential retail competition from implementing alternative business models, 7 offering promotional advantages, or offering customers lower pricing on their own.28 The House Judiciary Committee’s findings are consistent with the previous conclusions of the EU Commission.29 21. The EU Commission’s findings regarding Amazon’s MFN practices divided them into five separate categories. 22. First, the EU Commission found that Amazon uses “business model parity clauses” in its contracts with the Big Five and other eBook publishers.30 These clauses require the Big Five to alert Amazon of the distribution of their eBooks through other business models, and offer Amazon the same material terms and conditions, even if the competing online retailer operates under a different business model.31 Different business models include subscriptions, streaming, rentals, book clubs, bundling eBooks with print books, and reduced pricing for partial downloads.32 This clause causes a debilitating disincentive for the Big Five to support or invest in innovative business models that might result in greater competition and lower prices.33 Additionally, it disincentivizes Amazon’s eBook competitors from developing such models.34 It can even prevent the entry of new eBook retailers or the expansion of existing competitors, which in turn reduces competition in the eBook retail market, and strengthens Amazon’s dominant position.35 23. Second, Amazon implemented, and the Big Five co-conspirators agreed to, “selection parity clauses.”36 Because of Amazon’s eBook market dominance, its retail competitors 28 Id. at 295-296. 29 5.4.2017 EU Commission Decision. 30 Id. at 9, 12, 22-26. 31 Id. at 9, 22. 32 Id. at 9. 33 Id. at 22. 34 Id. at 9. 35 Id. 36 Id. at 27-31. 8 need to provide additional value to consumers, for example in the form of differentiated content or early releases of eBooks because even temporarily offering content that is unavailable on Amazon would increase competition in the retail distribution of eBooks.37 In a competitive market, the Big Five would have a financial incentive to incur the added investment cost of developing innovative products for exclusive release by Amazon’s retail competitors or to offer them exclusive early releases, so that Amazon’s competitors would gain market share and weaken Amazon’s bargaining power over the Big Five.38 These clauses force the Big Five to offer Amazon parity with its competitors with respect to: (i) any eBook available within a particular geographic territory; (ii) any particular date and time for an eBook’s release; and (iii) any feature, functionality, usage rule, element or content for one of more eBooks.39 24. The EU Commission determined such clauses posed serious threats to market competition in a number of ways.40 They minimized any incentive for Amazon’s competitors to develop and innovate features and functionalities of eBooks.41 They also thwarted development and innovation in eBooks and eReaders.42 Amazon’s selection parity clauses harm consumers by eliminating publishers’ incentive to develop new eBook functionalities.43 It hurts retail competition because it stifles a significant avenue for retailers to compete with Amazon by supporting such functionalities.44 37 Id. at 30. 38 Id. at 29-30. 39 Id. at 27. 40 Id. at 27-31. 41 Id. at 27. 42 Id. at 28-29. 43 Id. 44 Id. at 31. 9 25. Third, Amazon required “retail price parity” provisions in the agency contracts with the Big Five.45 These price parity clauses required: (i) the agency price parity clause; (ii) the discount pool provision; and (iii) the promotion parity clause.46 When the Big Five renegotiated their contracts with Amazon in approximately 2015, the consent decrees prevented them from having MFNs in their eBook contracts. Until about 2017, while they were still subject to this prohibition, Amazon and the Big Five agreed to notification provisions that served the same function as the prohibited MFN provisions (i.e., Amazon’s agency price parity, promotion price parity, discount pool, wholesale price parity and agency commission parity provisions discussed 26. The agency price parity clause required the Big Five to set retail pricing on Amazon that is no higher than the pricing charged by Amazon’s competitors.47 27. The promotion parity clause prohibited the possibility that the Big Five co- conspirators might temporarily set lower retail prices on the platform of any Amazon eBook competitor, unless they offered an equivalent promotion to Amazon.48 28. Similarly, the discount pool provision provides Amazon the ability to set discounted prices that are equal or less than the cheapest retail price of any eBook distributed by a publisher to Amazon’s competitors.49 29. The EU Commission found that Amazon’s retail price parity provisions in the contracts with the Big Five limited the ability of Amazon’s competitors “to attract buyers by offering lower retail prices than those on Amazon. This may discourage competing E-book 45 Id. at 32. 46 Id. 47 Id. 48 Id. 49 Id. 10 Retailers from entering in the first place.”50 The Commission found that these arrangements were likely to reduce competition between eBook online retailers by reducing the incentive of Amazon’s eBook competitors to compete by offering lower rates of agency commission.51 In fact, such arrangements actually incentivize Amazon to charge higher commission rates, as eBook suppliers have no ability to draw customers away from Amazon to its competitors based on commission or retail price.52 30. Amazon’s retail price parity provisions functioned like MFNs in that they allowed Amazon to prevent its competitors from undercutting the Big Five’s eBook pricing on Amazon.53 When Amazon is alerted that one of its co-conspirators’ eBooks is available at a lower price, Amazon usually requests to be charged the same price on Amazon.54 Should a publisher not comply, Amazon would retaliate or threaten to retaliate by disabling purchases of the publisher’s eBooks on its platform, by excluding the publisher from any promotional or discount activity, eliminating the pre-order buttons from the publisher’s eBooks, or by increasing advertising for another publisher’s eBooks.55 Ultimately, the Big Five were forced to stop entering into promotions with Amazon’s competitors.56 These parity provisions are anticompetitive as they eliminate any incentive for the Big Five co-conspirators to offer better pricing or terms to Amazon’s competitors or future competitors.57 50 Id. at 33. 51 Id. at 34. 52 Id. 53 Id. at 36. 54 Id. 55 Id. at n.55. 56 Id. at 37. 57 Id. 11 31. The conclusion of the EU Commission’s investigation resulted in an agreement for Amazon not to enforce MFNs or other similar provisions for five years. One Commissioner stated this would “open the way for publishers and [booksellers] to develop innovative services for e- books, increasing choice and competition to the benefit of European consumers.”58 32. Amazon and the Big Five continue to use MFNs and other similar anticompetitive provisions in the United States. Despite multiple investigations and censures, the conspiracy to fix, raise, maintain, or stabilize the prices of eBooks in violation of Section 1 of the Sherman Act has not halted between Amazon and the Big Five. From about 2017 through the present, the consent decrees no longer prohibited MFNs in the Big Five contracts. Rather than relying on the notification provisions, it is believed that Amazon and the Big Five agreed to some or all of Amazon’s MFN provisions (i.e., Amazon’s agency price parity, promotion price parity, discount pool provision, wholesale price parity and agency commission parity provisions discussed below).59 33. Agency price parity: Currently and since at least 2015, in the United States the Big Five have agency agreements with Amazon.60 The EU Commission reports that Amazon’s contracts with publishers that operate under the agency model include an agency price parity provision.61 The agency price is the price the Big Five publisher sets or, if discounting is permitted, the discounted price charged by an eBook retailer for the sale of an eBook to a consumer under an agency agreement.62 The agency price parity provision requires the Big Five to set the eBook price 58 Id. 59 See House Report at 295 (“Although Amazon has changed the name and specific mechanisms over the years, it appears that the company continues to impose contract provisions that effectively function as MFNs on book publishers.”). 60 See infra n.5. 61 5.4.2017 EU Commission Decision at 32. 62 Id. at 10 n.17. 12 for books they sell through Amazon no higher than the eBook price charged on eBook retail platforms that compete with Amazon.com. This clause harms consumers by increasing Amazon’s dominance as the platform for the Big Five’s eBook sales and raising the Big Five’s eBook prices. If this clause did not exist, the Big Five would have a financial incentive to lower their eBook prices on rival platforms that charge lower commissions than Amazon and steer more sales to those platforms, thereby increasing the publishers’ overall revenues and profits and evading Amazon’s “stranglehold” over them.63 The Big Five co-conspirators also have an agency commission parity clause that requires the Big Five to provide Amazon a commission that is equal to or greater than the commission the Big Five pay to Amazon’s retail competitors, so conversely the Big Five cannot diversify their distribution channels by offering Amazon’s competitors a better commission.64 34. Promotion price parity: Agency agreements also include a promotion price parity clause that requires the Big Five to provide Amazon any promotional agency price, promotional wholesale price, or promotional content that they offer to any other eBook retailer. The clause is anticompetitive because it gives the Big Five an incentive to prohibit Amazon’s retail rivals from offering promotional eBook prices.65 35. Discount pool: The discount pool clause provides Amazon yet another way to enforce its MFN whenever a competing eBook retailer offers a lower retail price than the publisher’s price on Amazon.com.66 The clause relates to a “pool” of credits that Amazon may use at its discretion. If any eBook the publisher sells triggers this clause, Amazon may discount the 63 Id. at 34; House Report at 295. 64 Id. at 11. 65 Id. at 32. Amazon also has a wholesale price parity clause with publishers that sell at wholesale. This clause ensures that the publisher cannot offer Amazon the same title on the same date for a higher wholesale or retail price. Id. at 30. However, the Big Five have agency agreements with Amazon. 66 Id. at 35 n.54. 13 agency price for that title or any other eBook title the publisher sells on Amazon.com.67 Defendant calculates the pool based on the differences between the agency prices the Big Five charge for their eBooks on Amazon.com and any lower prices available through any other eBook retailer.68 It then multiplies the difference in price by the number of units sold through Amazon for the duration of the time that the price on Amazon exceeded the competitor’s price.69 This clause is anticompetitive because it prevents Amazon’s retail rivals from competing on price and eliminates the discounts that would otherwise be available to consumers. 36. Amazon and the Big Five’s agreements is an unreasonable restraint of trade that prevents competitive pricing, limits innovation, and imposes overcharges on Plaintiff and other Class members when they purchase the Big Five’s eBooks from one of Amazon’s online eBook competitors. Plaintiff therefore seeks, in addition to compensatory damages, injunctive relief under the Clayton Act to prevent Amazon and the Big Five from enforcing these restraints. 37. Amazon also maintains monopoly power in the market for domestic retail trade eBooks. Amazon has willfully obtained that monopoly power through anticompetitive conduct, fixing the pricing of trade eBooks at supracompetitive levels on both its own platform and the platforms of its competitors. Such conduct is an abuse of monopoly power in violation of Section 2 of the Sherman Act. 38. Plaintiffs seek injunctive relief and monetary recovery under the Clayton Act for all overcharges incurred by the Class. 67 Id. at 32. 68 Id. 69 Id. at 35. 14 II. PARTIES 39. Mariacristina Bonilla is a resident of Norwalk, Connecticut. Ms. Bonilla purchased numerous books published by the HarperCollins, Penguin, and Macmillan from Barnes & Noble during the proposed class period. 40. Defendant Amazon is an online retailer with its principal place of business in Seattle, Washington with facilities and employees operating throughout the United States. Amazon is vertically integrated and is active upstream as a publisher, with its own imprints, but also downstream as an eBook retailer. Amazon sells eBooks and eBook read subscriptions to its retail consumers in New York and throughout the United States through its Amazon.com platforms. Amazon also owns Amazon Publishing, which publishes books and competes with the Big Five publishers. Co-Conspirators 41. Co-conspirator Hachette Book Group, Inc. (“Hachette”) is a Delaware corporation with its principal place of business in New York, New York. It is a subsidiary of Lagardère Group, a French conglomerate. Its imprints include, among others: Center Street; FaithWords; Grand Central Publishing (formerly Warner Books); Little, Brown and Company; Orbit; Perseus Books; and Worthy. 42. Co-conspirator HarperCollins Publishers L.L.C. (“HarperCollins”) is a Delaware corporation with its principal place of business in New York, New York. It is a subsidiary of News Corporation. Its imprints include, among others: Avon; Caedmon; Ecco; Harlequin Books; Walden Pond Press; and William Morrow. 43. Co-conspirator Macmillan Publishing Group, LLC (“Macmillan”) is a New York corporation with its principal place of business in New York, New York. It is a subsidiary of Holtzbrinck Publishing Group, a German conglomerate. Macmillan operates eight divisions in the 15 United States: Celadon Books; Farrar, Straus and Giroux; Flatiron Books; Henry Holt and Company; Macmillan Audio; Macmillan Children’s Publishing Group; St. Martin’s Press and Tor/Forge. 44. Co-conspirator Penguin Random House LLC (“Penguin”) is a Delaware corporation with its principal place of business in New York, New York. It is a subsidiary of Bertelsmann SE, a German conglomerate. Its imprints include: Alfred A. Knopf; DK; Doubleday; Penguin; Putnam; Random House; Viking Books; and Vintage Books. 45. Co-conspirator Simon & Schuster, Inc (“Simon & Schuster”) is a New York corporation with its principal place of business in New York, New York. It is a subsidiary of ViacomCBS Inc. Its imprints include: Beyond Words Publishing; Folger Editions; Gallery Books; MTV Books; Pocket Books; and Scribner. On November 25, 2020, ViacomCBS Inc. announced plans to sell Simon & Schuster to Bertelsmann SE, Penguin’s parent company. The proposed transaction “would create a publishing behemoth accounting for about a third of all books sold in the U.S.”70 III. JURISDICTION 46. This Court has federal question jurisdiction pursuant to the federal antitrust laws invoked herein, including the Sherman Act and Clayton Antitrust Act, 28 U.S.C. § 1331, 28 U.S.C. § 1337(a), and 15 U.S.C. § 15(a). 47. This Court has personal jurisdiction over Defendant under Section 12 of the Clayton Act, because Amazon resides in this District or may be found or transact business in this District. Amazon has over 8,000 employees in its New York City work force, including many who 70 Benjamin Mullin and Jeffrey A. Trachtenberg, Penguin Random House Parent to Buy Simon & Schuster From ViacomCBS, Wall Street Journal (Nov. 25, 2020). 16 work at its Manhattan office space.71 It has five warehouses in New York, including two in Manhattan.72 It also owns and operates four Amazon Books stores and eight cashier-free Gostores in locations throughout Manhattan.73 Amazon has eight office properties in Manhattan, most of which are clustered in Midtown, including the iconic Lord & Taylor building on Fifth Avenue.74 48. Exercising personal jurisdiction is also appropriate under Section 302(a) of New York’s long-arm statute because Amazon transacts business in the State of New York, directly or through agents, such that it has sufficient minimum contacts with New York. In addition to business it transacts in New York City, Plaintiff avers on information and belief that Amazon’s sales to its customers in New York State represent at least 5% of Amazon’s U.S. sales and therefore rise to the level of substantial solicitation necessary to satisfy the minimum contacts required to support this Court’s exercise of personal jurisdiction over Amazon. 71 Ed Shanahan, Amazon Grows in New York, Reviving Debate Over Abandoned Queens Project, NYT (Dec. 9, 2019), https://ww, w.nytimes.com/2019/12/06/nyregion/amazon- hudsonyards.html. 72 https://en.wikipedia.org/wiki/List_of_Amazon_locations#United_States ; Ben Fox Rubin, Why Amazon built a warehouse inside a Midtown Manhattan office tower, CNET (Dec. 21, 2015), https://www.cnet.com/news/why-amazon-built-a-warehouse-inside-a-midtownmanhattan- office-tower/. 73 Where are Amazon Go stores located in New York?, Bing, https://www.bing.com/maps?q=where+are+amazon+go+stores+in+new+york&qs=NW&pq=wh ere+are+amazon+go+stores+in+new+&sc=5- 34&cvid=29EA099E9F8E4797A844A8DCA5842069&FORM=QBLH&sp=1&ghc=1; Where are Amazon Books stores located in New York?, Bing, https://www.bing.com/maps?q=where+are+amazon+books+stores+located+in+new+york%3F& cvid=1f533e8508ec4a378125b0ed5e3fc0cb&FORM=ANAB01&PC=U531. 74 Matthew Haag, Manhattan Emptied Out During the Pandemic. But Big Tech Is Moving In. NYT (Nov. 9, 2020), https://www.nytimes.com/2020/10/13/nyregion/big-tech-nyc- officespace.html. 17 IV. VENUE 49. Venue is proper under 28 U.S.C. § 1391(b)(1) and (2) because the Big Five reside in this judicial district and a substantial part of the events or omissions giving rise to the claims occurred in this judicial district. Venue is proper in this District under 28 U.S.C. §§ 1391 and 1400. V. CLASS ACTION ALLEGATIONS 50. Pursuant to Federal Rules of Civil Procedure 23(a), (b)(2) and (b)(3), Plaintiff brings this action on behalf of herself and the members of a Class defined as follows: All persons in the United States who, on or after January 14, 2017 purchased one or more eBooks sold by the Big Five publishers through any other online retail platform in the United States other than the Amazon.com platform. 51. Excluded from the Class are the Defendant and its officers, directors, management, employees, subsidiaries, or affiliates. Also excluded are the judge presiding over this action; his/her law clerks and spouse; any persons within three degrees of relationship to those living in his/her household; and the spouses of all such persons. 52. Numerosity: Members of the class are so numerous that joinder is impracticable. Plaintiff believes that the Class is numerous and geographically dispersed throughout the United States such that joinder of all Class members is impracticable. Further, the class is readily identifiable from information and records maintained by Defendant’s co-conspirators. 53. Typicality: Plaintiff’s claims are typical of the claims of the Class members. Plaintiff’s interests are not antagonistic to the claims of the other Class members, and there are no material conflicts with any other member of the Class that would make class certification inappropriate. Plaintiff and Class members were damaged by the same wrongful conduct of Defendant. 18 54. Adequate representation: Plaintiff will fairly and adequately protect and represent the interests of the Class. The interests of the Plaintiff are coincident with, and not antagonistic to, those of the Class. 55. Plaintiff is 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 alleged violations of antitrust law. 56. Commonality: Questions of law and fact common to Class members predominate over questions that may affect only individual Class members because the Defendant and its co- conspirators have acted on grounds generally applicable to the entire Class, thereby determining damages with respect to the class as a whole is appropriate. Such generally applicable conduct is inherent in Defendant’s and its co-conspirators’ wrongful conduct. 57. The common legal and factual questions, which do not vary from Class member to Class member and that may be determined without reference to individual circumstances of any Class member, include, but are not limited to, the following: i. Whether Amazon and its co-conspirators unlawfully conspired to unreasonably restrain trade in violation of federal antitrust laws; ii. whether Amazon has unlawfully monopolized the domestic retail eBook market, including by way of the conduct described herein; iii. whether competition in the domestic retail eBook market has been restrained and harmed by Amazon’s monopolization of the market; iv. injury suffered by Plaintiff and members of the Class; v. damages suffered by Plaintiff and members of the Class; 19 vi. whether Amazon has acted or refused to act on grounds generally applicable to members of the Class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to members of the Class as a whole; and vii. the nature and scope of injunctive relief necessary to restore a competitive market. 58. Class action treatment is a superior method for the fair and efficient adjudication of the controversy. Class treatment will permit a larger 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, and expense that numerous individual actions would engender. The benefits of proceeding through the class mechanism, including providing injured persons or entities a method for obtaining redress on claims that could not practicably be pursued individually, substantially outweigh any potential difficulties in management of this class action. 59. Plaintiff knows of no specific difficulty that would preclude the maintenance of this case as a class action. VI. FACTUAL ALLEGATIONS A. The Big Five’s Dominance in the Market for Trade Book Publication 60. The market in eBook trade books is defined by the trade publishers that produce them. The Big Five publish many of the most popular authors and books in fiction and non-fiction, including a large majority of the New York Times bestsellers.75 Their dominance is attributable 75 United States v. Apple Inc., 791 F.3d 290, 298 (2d Cir. 2015). 20 primarily to a long history of mergers and acquisitions that has resulted in their acquiring subsidiary publishers or “imprints,” as described in the charts below76: Penguin77: 76 Peter Lee, Reconceptualizing the Role of Intellectual Property Rights in Shaping Industry Structure, 72 Vand. L. Rev. 1197, 1259-1263 (May 2019). 77 0 The Big Five US Trade Book Publishers, Almossawi (June 20, 2016), https://almossawi.com/big-five-publishers [https://perma.cc/W49V-PEGP]. 21 HarperCollins78: Macmillan79: Simon & Schuster80: 22 Hachette81: 61. HarperCollins began as J. and J. Harper in 1817 before eventually becoming Harper & Row.82 Hachette began in America as Little, Brown and Company in 1837.83 During the 1920s, Penguin acquired numerous independent publishers such as Viking and Putnam.84 In 1924, Simon 81 Id. 82 Peter Lee, Reconceptualizing the Role of Intellectual Property Rights in Shaping Industry Structure, 72 Vand. L. Rev. 1197, 1259 (2019). 83 Id. 84 Id. at 1259-60. 23 & Schuster was established and has been owned by a variety of companies including Viacom and CBS Corporation.85 Publishing was then scaled down to a few powerhouses by the 1950s.86 62. Consolidation of publishing companies has continued over the years and spiked in the 1980s, during which there were fifty-seven major publishing acquisitions just between November 1985 and November 1986.87 By 2006, the six largest U.S. trade book publishers (currently the Big Five) combined for ninety percent of total sales.88 After the merger of Penguin and Random House in 2013, the combined group controls an estimated twenty-five percent of the English-language publishing market.89 63. Trade publishers continue to lose business and are unable to compete with the Big Five. Houghton Mifflin is now considering the sale of its trade publishing division, potentially to Macmillan or Hachette.90 On November 25, 2020, Penguin announced plans to acquire Simon & Schuster. The proposed merger would create a single publishing house representing approximately a third of all trade books published.91 News Corp Chief Executive Robert Thomson said in a 85 Id.; Alexandra Alter and Edmund Lee, Penguin Random House to Buy Simon & Schuster, NYT (Nov. 25, 2020), https://www.nytimes.com/2020/11/25/books/simon-schuster- penguinrandom-house.html. 86 Supra Lee. 87 Id. 88 Id. 89 Id. at 1262. 90 See supra, Alter & Lee. 91 AG Statement on Proposed Sale of Simon & Schuster and Its Ramifications for Authors, The Authors Guild, https://www.authorsguild.org/industry-advocacy/ag-statement-on-proposedsale- of-simon-schuster-and-its-ramifications-for-authors/; Frank Jordans and Hillel Italie, Penguin to buy Simon & Schuster, create publishing giant, Associated Press (Nov. 25, 2020, https://apnews.com/article/stephen-king-publishing-john-irving-media-jonathan- karp89ec475bd7783fea199a378c60261f8b. 24 statement. “This literary leviathan would have 70% of the U.S. literary and general fiction market.”92 B. Amazon’s Dominance in the Market for the Retail Sale of Trade Books 64. Amazon continues to sell more books than any single retailer in history.93 Before Amazon entered the eBook market, there were roughly 4,000 independent bookstores in the United States.94 That number has now decreased to less than two thousand, and Amazon’s market power has increased accordingly.95 Barnes & Noble, the second largest retail bookseller, has closed 150 outlets over the last ten years.96 Additionally, Borders Group, Inc. was forced to cease operations after operating nearly 700 retail outlets.97 65. Amazon’s rise in the book industry is even more pronounced in the eBook market, where it enjoys nearly 90% of the market and its closest competitor, Apple, has a distant 6% share.98 One way Amazon separates itself from its competition is by appealing to a client’s existing or analytically predicted needs or desires.99 Codex Group, a marketing research firm, found that consumers browsing a traditional bookstore discover new books they would like to read at around 92 Jordans & Italie. 93 Porter Anderson, US Publishers, Authors, Booksellers Call Out Amazon’s ‘Concentrated Power’ in the Market, Publishing Perspectives (Aug.17, 2020), https://publishingperspectives .com/2020/08/us-publishers-authors-booksellers-call-out-amazons-concentrated-power- inthebook-market/. 94 George Packer, Cheap Words, New Yorker (Feb.17 & 24, 2014), https://www.newyorker.com/ magazine/2014/02/17/cheap-words. 95 Amy Watson, Number of Independent Bookstores in the U.S. 2009-2019, Statista (Oct. 29, 2019), https://www.statista.com/statistics/282808/number-of-independent-bookstores-in-the-us/. 96 Larry Light, The Barnes & Noble Buyout: A Godsend for Book Readers and Investors, Forbes (Jun. 24, 2019), https://www.forbes.com/sites/lawrencelight/2019/06/24/the-barnes-noblebuyout- a-godsend-for-book-readers-and-investors/?sh=70936407ef8f. 97 Associated Press, Borders Seeks to Liquidate All Stores, Toledo Blade (July 18, 2011). 98 Supra Day and Gu. 99 Matt Day and Jackie Gu, The Enormous Numbers Behind Amazon’s Market Reach, Bloomberg (Mar. 27, 2019), https://www.bloomberg.com/graphics/2019-amazon-reach- acrossmarkets/ (estimating that Amazon controls 88.9% of the eBooks market). 25 three times the rate compared when they are shopping on Amazon.100 Although Amazon is dominating the book market, it only accounts for around seven percent of new book discovery, while, alternatively, local bookstores are still holding on to twenty percent of new discoveries.101 66. Certainly this is by design, as Amazon founder and former hedge fund manager, Jeff Bezos, did not simply start an online bookstore out of a passion for books. Shel Kaphan, Bezos’s former deputy, expressed that Mr. Bezos’s decision to start Amazon as a bookstore “was totally based on the property of books as a product.”102 Books are durable for the shipping industry and there are way too many of them, in and out of print, to sell even a fraction of them at any physical store.103 67. Amazon’s eBook model could be classified as “a gateway drug.”104 Amazon saw online book sales as a way to gather consumer data from educated shoppers much like what we see from Google today. Former chief executive of Macmillan, John Sargent, explained that Amazon was never just a bookstore: “Books were going to be the way to get the names and the data. Books were [Amazon’s] customer-acquisition strategy.”105 Amazon would now be able to 100 Stacy Mitchell and Olivia LaVecchia, Report: Amazon’s Monopoly, ILRS (Nov 29. 2016), https://ilsr.org/amazons-monopoly/ at 27. 101 Id. 102 Supra Packer. 103 Id. 104 Id. 105 Id. 26 figure out how to sell everything else based on the data of millions of their book-based customers.106 C. EBooks Disrupted the Trade Publishing Industry 68. Amazon Kindle became the first e-reader to gain widespread commercial acceptance after its 2007 launch, and even became the market leader in the sale of eBooks and eBook readers.107 By 2009, Amazon was selling almost ninety percent of all eBooks. Amazon charged $9.99 for numerous new release and bestselling eBooks, forcing other eBook retailers to also charge $9.99 or less for eBook titles.108 69. The Big Five was threatened by Amazon dictating the price point of eBooks. Specifically, publishers worried that the low prices of eBooks would influence book consumers to outgrow the pricing of hardcover books, which were usually priced at thirty dollars or more. Further, the Big Five feared Amazon would begin negotiating directly with authors and literary agents for rights.109 Ultimately, the Big Five concluded they needed to force Amazon to abandon its discounted pricing model. Hachette stated that they needed keep Amazon’s “wretched $9.99 price point [from] becoming a de facto standard.”110 Macmillan called Amazon’s pricing standards “book devaluation to $9.99” and Simon & Schuster claimed it was the “basic problem: how to get Amazon to change its pricing” and to move away from the $9.99 price point.111 70. The Big Five publishers each reached out to Amazon in hopes of changing the low $9.99 price point. During February 2009, Penguin expressed to Amazon that the pricing model 106 Id. 107 Apple Inc., 952 F. Supp. 2d at 649. 108 Id. at 649. 109 Id. 110 Id. at 650, 653. 111 Id. at 650. 27 was “not a good sustainable one.”112 HarperCollins told Amazon that it was “seriously considering changes to our discount structure and our digital list prices for all retailers.”113 Additionally, Simon & Schuster warned Amazon that the price point was “a mistake” that was “terrible for the business.”114 Finally in December 2009, Hachette explained that if Amazon would raise eBook prices by only a dollar or so, it would “solve the problem.”115 71. When the Big Five could not get Amazon to budge on its pricing, they looked to Apple and the iPad that Apple would be launching in 2010.116 The iPad would be a unique addition to the e-reader market because instead of simple black and white display screens, the iPad would offer illustrations and photographs in color as well as audio and video capabilities to enhance the eBook reading experience.117 72. During late 2009 and early 2010, the Big Five and Apple entered an agreement wherein the Big Five would have to adopt the agency model to raise retail prices while Apple would receive a 30% commission for facilitating the sales. Apple also included an MFN clause in the agreements that required the Big Five to price their eBooks on Apple at or below the lowest price available in the market. Apple thus enabled the Big Five to set the retail prices of their books, while at the same time guaranteeing that it would never have to compete on price.118 73. They ultimately agreed to cap eBook prices at $12.99 for New Release titles with hardcover list prices of $30 or under, and set a $14.99 price tier cap for New Release titles with hardcover list prices above $30, with incremental price tier increases for every $5 increase in the 112 Id. 113 Id. 114 Id. 115 Id. 116 Id. at 654-655. 117 Id. at 655. 118 Id. at 658-62. 28 hardcover list price above $30. For books other than New Releases, the price cap was set at $9.99.119 Notably, the revenue the Big Five would receive per eBook sold through the Apple store was substantially less than what they were currently receiving under their wholesale arrangements. But Apple played to Big Five’s long-term interests in raising eBook prices to protect the prices of print books.120 74. Amazon was then forced to accept the agency model, otherwise the Big Five threatened to withhold their eBooks for seven months following the release of the printed versions.121 Amazon filed a complaint with the FTC122; however, it still entered into agency agreements with the Big Five by mid-2010. In these agreements, Amazon was given the option to return to the wholesale model should a publisher agree to the model with any other eBook retailers. Ultimately, the Big Five entered into agency model agreements with both Google and Barnes & Noble for sale of eBooks. 75. EBook prices increased and Apple gained as much as 22% of the retail eBooks market within the first couple of months of this new sales platform.123 Although the Big Five actually lost eBook revenue, they were able to raise to price of print books, which made up for the decline.124 76. In 2011,however, a price-fixing class action was filed by consumers in this District and the EU Commission simultaneously opened its own investigation. Within a year, the DOJ and numerous Attorneys General filed enforcement actions. The Big Five entered into consent decrees 119 Id. at 667. 120 Id. at 665. 121 Id. at 679-680. 122 Id. at 680-681. 123 Marco Tabini, Apple grabs 22 percent of e-book market with iBooks Macworld (Jun. 7, 2010), https://www.macworld.com/article/1151813/ibooks.html. 124 Apple Inc., 952 F. Supp. 2d at 683. 29 with the DOJ, which required them to end their agreements with Apple and other retailers that restricted the eBook retailers’ ability to discount eBooks.125 Conversely, Apple proceeded to trial in this District and the Court found that Apple and the Big Five co-conspirators had carried out a per se illegal horizontal price-fixing scheme to eliminate price competition in the eBook market.126 A $450 million judgment was entered against Apple. 77. During a two-year period, the consent decrees required the Big Five to permit eBook retailers to discount prices and offer promotions encouraging consumers to purchase eBooks. Further, the Big Five would not be able to enter into agreements with eBook retailers that contained MFN clauses governing prices for a period of five years.127 Similar provisions were also agreed to in the European proceeding. 78. Subsequently, competitive pricing prevailed between 2013 and 2015; however, prices rose again as soon as the publishers renewed their agency agreements with Amazon. D. Amazon Benefits from Inflated EBook Prices as a Trade Publisher 79. In part due to the friction between itself and the Big Five, Amazon established Amazon Publishing, which it now touts as “a leading publisher of commercial and literary fiction, nonfiction, and children’s books.”128 80. Amazon claims that at least 36 of its authors have sold at least a million books.129 Best-selling author Dean Koontz has a five-book deal with Amazon Publishing.130 One of 125 See, e.g., Final Judgment Penguin, at 8-9. 126 Apple Inc., 952 F. Supp. 2d at 694. 127 Final Judgment Penguin, at 11, 18. 128 Amazon Publishing, https://amazonpublishing.amazon/about-us.html. 129 Id. 130 Porter Anderson, Dean Koontz’s Jump to Amazon Publishing: Will Other Authors Follow?, Publishing Perspectives (July 22, 2019), https://publishingperspectives.com/2019/07/bestsellerdean-koontz-jumps-to-amazon-publishing- fiveBook-deal-plus-stories/. 30 Amazon’s imprints, Amazon Crossing, is the largest publisher of translated fiction in the United States.131 Amazon currently operates sixteen imprints and has nine offices around the world.132 81. Amazon thus benefits from the Big Five’s high prices, which enable Amazon to charge higher prices for its own eBooks. E. Amazon Adopts Anticompetitive Restraints to Protect its Platform from the Disadvantages of the Big Five’s Inflated eBook Prices 82. By virtue of its dominance of the retail market for eBooks, Amazon maintains substantial bargaining power with the Big Five. It could have maintained its ability to discount their eBooks, but instead agreed to let them set supracompetitive retail prices in exchange for high commissions and a guarantee that Amazon could not be undersold by its competitors. 83. According to the House Judiciary Committee, Amazon has at all times used MFNs or their equivalents in its agreements with trade publishers.133 The EU Commission determined that even when the Big Five were nominally prohibited from having MFNs in their contracts, they evaded that restriction in dealing with Amazon by using notification provisions that had the same effect.134 84. No matter the means, Amazon’s objective has always been to prevent “publishers from partnering with any of Amazon’s competitors” and to reinforce “Amazon’s ‘stranglehold’ and ‘control’ over book distribution.”135 Amazon has acquired and maintained its monopoly power in large part through these restraints.136 Its competitors lack any incentive to offer promotional 131 Ed Nawotka, Translations Pay off For Amazon, (Nov. 8, 2019) Publisher’s Weekly, https://www.publishersweekly.com/pw/by-topic/industry-news/publisher-news/article/81707- translations-pay-off-for-amazon.html. 132 Amazon Publishing. 133 House Report at 295-296. 134 5.4.2017 EU Commission Decision at 11. 135 House Report at 295-296. 136 Id. 31 advantages or alternative business models to gain market share because Amazon requires that the Big Five grant it whatever opportunities they offer to Amazon’s competitors.137 The result is reduced innovation and supracompetitive retail prices.138 F. Amazon is Under Government Investigation for Possible Antitrust Violations 85. The EU Commission investigated Amazon’s contracts with eBook publishers between 2015 and 2017. The Commission cited numerous issues relating to Amazon’s MFNs and notification clauses, finding that Amazon used these clauses to restrain its competitors’ market shares and discourage potential competitors from entering the market. 86. The House Judiciary Committee began an investigation in 2019 that entailed seven hearings on digital markets, addressed to issues including data privacy, innovation, free speech, and competition. Pursuant to that investigation, the Committee requested documents and information regarding Amazon’s market share and competitors in numerous markets.139 87. The Committee issued a report in October 2020. It concluded that Amazon “serves as a gatekeeper over a key channel of distribution,” the domestic online retail market,140 and that by controlling access to that market, it abuses its tremendous power “by charging exorbitant fees, imposing oppressive contract terms, and extracting valuable data from the people and businesses that rely on” it.141 It also “uses its gatekeeper position to maintain its market power and “to further 137 5.4.2017 EU Commission Decision at 20-38, 43. 138 Id. 139 Letter from U.S. House of Representatives Committee on the Judiciary to Jeff Bezos, Amazon CEO (Sept. 13, 2019), https://judiciary.house.gov/sites/democrats.judiciary.house.gov/files/documents/amazon%20rfi% 20-%20signed.pdf. 140 House Report at 6, 15. 141 Id. at 6. 32 entrench and expand” its dominance.142 The Committee compared Amazon’s conduct to “the kinds of monopolies we last saw in the era of oil barons and railroad tycoons.”143 88. Amazon also faces an investigation by the Federal Trade Commission and antitrust scrutiny by state attorneys general offices in California, Washington, and New York,144 in addition to the recently-disclosed Connecticut investigation addressed strictly to eBooks. VII. ANTITRUST IMPACT 89. Amazon’s and its co-conspirators’ conduct described herein has substantially impaired competition in the retail eBook market. 90. Amazon’s and its co-conspirators’ conduct described herein lacks any procompetitive justification. Moreover, the harm to competition and the resulting antitrust injury suffered by Plaintiff and Class members more than offsets any purported procompetitive justifications Amazon may offer. VIII. ANTITRUST INJURY 91. Amazon increases the prices of eBooks offered by its competitors, restrains consumer choice, and otherwise causes antitrust injury to retail eBook purchasers in the form of overcharges. Plaintiff and Class members have sustained, and continue to sustain, significant losses from overcharges directly attributable to Amazon’s anticompetitive activity. Plaintiff will calculate the full amount of such overcharge damages after discovery and upon proof at trial. Unless Amazon’s anticompetitive conduct is enjoined, Plaintiff and Class members will continue 142 Id. 143 Id. 144 House Report at 253; Press Release, Fed. Trade Comm’n, FTC to Examine Past Acquisitions by Large Technology Companies (Feb. 11, 2020), https://www.ftc.gov/news- events/pressreleases/2020/02/ftc-examine-past-acquisitions-large-technology-companies. 33 to incur overcharges in their direct purchases of the Big Five’s eBooks from Amazon’s competitors. 92. Plaintiff and Class members are direct purchasers who purchase the Big Five’s eBooks through retail platforms that compete with Amazon, at prices inflated by Amazon and its co-conspirators’ agreements detailed herein. 93. Because of the agency model, Plaintiff and Class members overpay whether they buy the Big Five’s eBooks directly from the Big Five on their own websites, or through retail eBook platforms that compete with Amazon. As required by the MFNs and similar clauses described herein, the Big Five sell at retail prices that are equal to or higher than the prices at which they sell their eBooks on Amazon. It is in the Big Five co-conspirators’ independent economic self-interests to expand their market shares of retail sales and diversify their distribution. It would serve their independent interests to allow Amazon’s competitors to develop alternative business models that benefit both consumers and the Big Five. Offering Amazon’s competitors special edition or enhanced eBooks would attract new customers, increase sales, reduce the Big Five’s dependency on Amazon, and limit Amazon’s market power. But Amazon and the Big Five do not consider those options, so as to preserve the supracompetitive prices of the Big Five’s eBooks. Plaintiff and Class members who purchase directly from the Big Five through Amazon’s competitors are harmed because they pay prices raised, fixed, maintained, or stabilized by Amazon and the Big Five, without the benefit of discounts, promotions, and potentially lower-cost alternative business models that would exist in a competitive market. 94. Because Amazon continues to enforce its anticompetitive MFNs and similar restrictive provisions, Plaintiff and Class members will continue to incur overcharges for the Big 34 Five’s eBooks. Both the actual harm and the threat of future harm are cognizable antitrust injuries directly attributable to Amazon’s violations of antitrust laws as alleged herein. IX. INTERSTATE TRADE AND COMMERCE 95. During the relevant time period, Defendant facilitated the sale of the Big Five’s eBooks across, and without regard to, state lines. The Big Five co-conspirators also sell their eBooks throughout the United States in interstate trade and commerce. Defendant’s acts as alleged in this complaint were within the flow of, and substantially affected, interstate commerce. X. MARKET DEFINTION 96. The antitrust injuries alleged herein, including harm to consumers, have occurred in the United States retail market for trade eBooks. Amazon and its co-conspirators agreed upon price restrains that unreasonably restrain these markets. Plaintiff seeks relief on behalf of herself and on behalf of other retail purchasers who purchase trade eBooks from one or more of the Big Five co-conspirators through electronic platforms other than Amazon.com. 97. Amazon’s restraints on competition directly impact the United States retail market for trade eBooks. 98. Trade books comprise a product market distinct from non-trade books, such as reference and academic books.145 The trade book market can also be distinguished from self- published books. Whereas a self-published author incurs all the costs and is responsible for content and marketing, trade publishers receive the rights to sell authors’ books in exchange for editing, publishing, marketing, and distributing those books.146 Trade publishers are extremely selective. They do not read roughly 95% of the manuscripts they receive and publish only about 1% of the 145 Apple Inc., 952 F. Supp. 2d at 648 n.4. 146 Leigh Shine, Calculating the Odds of Getting a Traditional Publisher, Medium (Dec. 22, 2016), https://medium.com/publishizer/calculating-the-odds-of-getting-a-traditional- publisher798b1c7b94b0. 35 manuscripts they do review.147 The selection, editing, and promotional process is expensive, and trade books reflect a publisher’s investment in that process. 99. Within the trade book market, there is also a distinct product market for the retail sale of trade eBooks that is separate from the retail sale of trade print books and trade audio books.148 100. Products’ functional interchangeability typically depends on their physical characteristics.149 EBooks are digital products for visual reading. Their physical characteristics differ from those of print books. They are also different from audio books, which may be physical or digital but are made for listening, and not visual reading. These distinctive characteristics place print books and audiobooks outside of the markets for eBooks.150 101. From a supply side and demand side analysis, trade print books and trade audiobooks are not sufficiently strong substitutes to warrant inclusion in the same product market as trade eBooks.151 102. The EU Commission determined that consumers are unlikely to switch from eBooks to print versions in the case of a 5-10% increase in the retail of eBooks, because eBooks would still generally be priced significantly lower than print books.152 The EU Commission’s investigation of the eBook market revealed that consumers will purchase eBooks instead of a print version for reasons including the following: (i) eBooks are easier to carry when traveling than print 147 Odds of Being Published - Fiction Writer’s Mentor, http://www.fiction- writersmentor.com/odds-of-being-published. 148 Apple Inc., 952 F. Supp. 2d at 694 n.60 (defining the relevant market as trade eBooks in the United States); 5.4.2017 EU Commission Decision at 14. 149 2 Federal Antitrust Law § 10.2 (2020). 150 5.4.2017 EU Commission Decision at 14. 151 Id. 152 Id. 36 books; (ii) eBooks have functionalities not available in print books, such as the ability to change the type and size of fonts; (iii) eBooks can support interactive features including video or music add-ons, dictionaries, and links to information regarding the text or author; and (iv) eBook can be purchased and downloaded for immediate use at any time.153 The EU Commission also added that a substantial amount of titles are only, or more readily, available in the eBook format.154 103. To find significant supply-side substitutability, print book retailers and eBook retailers would have to be able to enter each other’s markets quickly and easily. The EU Commission determined this was not possible. The distribution of print books entails substantial investments in warehousing and logistics, whereas eBook distribution requires establishment and maintenance of an online distribution platform.155 A standard print bookstore cannot switch from selling print books to eBooks without acquiring significant tangible and intangible assets incurring additional investments and making significant strategic decisions. The same holds true for eBook retailers switching to print sales.156 104. The EU Commission found that audio books are distinct from both print books and eBooks, notably in terms of (i) pricing at wholesale and retail level and (ii) their typical end consumer and mode of consumption.157 Because print books and audio books are not reasonable substitutes, the retail eBook market is a distinct market. 105. The Big Five co-conspirators sell their eBooks throughout the United States. The relevant geographic market is the United States. 37 XI. CLAIM ONE VIOLATION OF SECTION 1 OF THE SHERMAN ACT, 15 U.S.C. § 1 106. Plaintiff incorporates and re-alleges, as though fully set forth herein, each of the paragraphs set forth above. 107. Plaintiff brings this claim on her own behalf and on behalf of the proposed Class described above. Plaintiff seeks damages and injunctive relief. 108. In violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, Amazon and the Big Five Co-conspirators engaged in various anticompetitive MFNs and anticompetitive provisions that functioned the same as MFNs, thereby fixing and raising the prices of trade eBooks. 109. Such anticompetitive agreements have an open and obvious adverse effect on competition. They ensure that Amazon.com faces no competition in the price or availability of trade eBooks, no competition from other competing business models, and no competition from retailers that support enhanced eBooks that have features unavailable to Amazon’s Kindle eReaders. By restraining Amazon’s eBook competitors from offering superior products or superior prices, Defendant increases the market price of the Big Five’s eBooks and limits the potential choices retail consumers have in the sale of these eBooks. 110. Defendant and its co-conspirators’ anticompetitive agreements have actual detrimental effects including less competitive pricing and great product conformity. 111. Defendant and its co-conspirators did not act unilaterally or independently, or in their own economic interests, when entering into these agreements, which substantially, unreasonably, and unduly restrain trade in the relevant market, and harmed Plaintiff and Class members thereby. There is no legitimate, pro-competitive business justification for Defendant’s anticompetitive agreements or any justification that outweighs their harmful impact. Even if there 38 were some conceivable justification, the agreements are broader than necessary to achieve such a purpose. 112. Plaintiff and Class members have been injured and will continued to be injured by paying more for the Big Five’s trade eBooks than they would have paid or will pay in the future if it were not for Amazon’s unlawful acts. Plaintiff and Class members are entitled to injunctive relief to terminate the ongoing violations alleged in this complaint and to recover three times the amount of their overcharge damages caused by Amazon’s unreasonable restraint of trade. XII. CLAIM TWO VIOLATION OF SECTION 2 OF THE SHERMAN ACT, 15 U.S.C. § 2 113. Plaintiff incorporates and re-alleges, as though fully set forth herein, each of the paragraphs set forth above. 114. Plaintiff brings this claim on her own behalf and on behalf of the proposed Class described above. Plaintiff seeks damages and injunctive relief. 115. Amazon conspired with the Big Five co-conspirators to monopolize the United States retail market for trade eBooks. 116. Defendant possesses market power in the relevant market, where it controls about 90% of trade eBook sales. That Defendant has market power is also evident from its power to raise trade eBook prices above those that would be charged in a competitive market. 117. By conspiring with the Big Five, Amazon has been able to maintain its monopoly power in the relevant market through unlawful and improper means such as preventing retail rivals from obtaining market share and preventing potential rivals from entering the market. Amazon entered into anticompetitive agreements with the Big Five co-conspirators with the intent and effect of (i) guaranteeing that the Big Five’s eBooks sold through Amazon’s eBook rivals were 39 sold at prices at least as high as Amazon’s prices; (ii) preventing Amazon’s current and potential eBook competitors from offering price promotions or early releases; (iii) eliminating Amazon’s current and potential eBook retailer competitors’ ability and incentives to develop and differentiate their eBook offerings through new and innovative business models; (iv) eliminating Amazon’s current and potential eBook retailer competitors’ ability and incentives to develop innovative eBook products with greater functionality, such as illustrations. 118. Plaintiffs and Class members are direct purchasers because they directly purchase eBooks from the Big Five co-conspirators through a U.S. ecommerce retail channel that competes with the Amazon.com platform. 119. Plaintiffs and the Class members have been injured and will continue to be injured in their businesses and property by paying more for the Big Five co-conspirators’ eBooks than they would have paid or will pay in the future in the absence of Defendant’s unlawful acts. 120. Plaintiffs and the Class are entitled to an injunction that terminates the ongoing violations alleged in this Complaint. XIII. PRAYER FOR RELIEF WHEREFORE, Plaintiff and proposed Class pray for relief as set forth below: 1. Certification of the Class pursuant to Federal Rule of Civil Procedure 23, and appointment of Plaintiff as Class Representative for the Class; 2. That acts alleged herein be adjudged and decreed to be per se unlawful restraints of trade in violation of the Sherman Act, 15 U.S.C. § 1; 3. That acts alleged herein be adjudged and decreed to be unlawful monopolization in violation of the Sherman Act, 15 U.S.C. § 2; 4. That judgment be entered against Defendant 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; 40 5. That Defendant be enjoined from continuing the anticompetitive practices described herein;; 6. That Plaintiff and members of the Class be awarded 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; 7. That Plaintiff and the Class be awarded the costs of this suit, including attorneys’ fees; and 8. Such other and further relief as the Court deems just and proper. DEMAND FOR JURY TRIAL Plaintiff, on behalf of herself and all others similarly situated, hereby requests a jury trial, pursuant to Federal Rule of Civil Procedure 38, on all claims so triable. DATED: February 10, 2021 _____ Neil L. Glazer William E. Hoese Douglas A. Abrahams Zahra R. Dean KOHN, SWIFT & GRAF, P.C. 1600 Market Street, Suite 2500 Philadelphia, PA 19103 Telephone: (215) 238-1700 Facsimile: (215) 238-1968 nglazer@kohnswift.com whoese@kohnswift.com dabrahams@kohnswift.com zdean@kohnswift.com Michael L. Roberts Morgan Hunt ROBERTS LAW FIRM US, PC 1920 McKinney Avenue, Suite 700 Dallas, TX 75204 Telephone: (501) 821-5575 Facsimile: (501) 821-4474 mikeroberts@robertslawfirm.us morganhunt@robertslawfirm.us 41 Gary M. Klinger MASON LIETZ & KLINGER, LLP 227 W. Monroe Street, Suite 2100 Chicago, IL 60630 Telephone: (202) 429-2290 Facsimile: (202) 429-2294 gklinger@masonllp.com Counsel for Plaintiff 42

antitrust

SgjaFYcBD5gMZwczCZDF

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION Holly Chernak, n/k/a Clancy, ) individually, and on behalf of all others ) similarly situated, ) ) Plaintiff, ) ) v. ) No. 13 C 2538 ) Professional Recovery Services, Inc., ) d/b/a Echelon Recovery, Inc., a New ) Jersey corporation, The Bureaus, Inc., ) an Illinois corporation, and Bureaus ) Investment Group Portfolio No. 16, LLC, ) an Illinois limited liability company, ) ) Defendants. ) Jury Demanded CLASS ACTION COMPLAINT Plaintiff, Holly Chernak, n/k/a Clancy, individually, and on behalf of all others similarly situated, brings this action under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. ("FDCPA"), for a finding that Defendants’ form debt collection letter violated the FDCPA, and to recover damages for Defendants’ violations of the FDCPA, and alleges: JURISDICTION AND VENUE 1. This Court has jurisdiction pursuant to § 1692k(d) of the FDCPA, and 28 U.S.C. § 1331. 2. Venue is proper in this District because: a) the acts and transactions occurred here; b) Plaintiff resides here; and, c) Defendants reside and transact business PARTIES 3. Plaintiff, Holly Chernak, n/k/a Clancy ("Chernak"), is a citizen of the State of Illinois, residing in the Northern District of Illinois, from whom Defendants attempted to collect a delinquent consumer debt that she allegedly owed for a HSBC credit card. 4. Defendant, Professional Recovery Services, Inc., d/b/a Echelon Recovery, Inc. (“Echelon”), is a New Jersey corporation that acts as a debt collector, as defined by § 1692a of the FDCPA, because it regularly uses the mails and/or the telephone to collect, or attempt to collect, delinquent consumer debts. Defendant Echelon operates a nationwide debt collection business and attempts to collect debts from consumers in virtually every state, including consumers in the State of Illinois. In fact, Defendant Echelon was acting as a debt collector as to the delinquent consumer debt it attempted to collect from Plaintiff. 5. Defendant, The Bureaus, Inc. (“Bureaus”), is an Illinois corporation that acts as a debt collector, as defined by § 1692a of the FDCPA, because it regularly uses the mails and/or the telephone to collect, or attempt to collect, directly or indirectly, delinquent consumer debts. Defendant Bureaus operates a nationwide debt collection business and attempts to collect debts from consumers in virtually every state, including consumers in the State of Illinois. In fact, Defendant Bureaus was acting as a debt collector, as that term is defined in the FDCPA, as to the delinquent consumer debt it attempted to collect from Plaintiff. 6. Defendant, Bureaus Investment Group Portfolio No. 16, LLC (“BIG 16”), is an Illinois limited liability company that acts as a debt collector, as defined by § 1692a of the FDCPA, because it regularly uses the mails and/or the telephone to collect, or attempt to collect, directly or indirectly, delinquent consumer debts. Defendant BIG 16 operates a nationwide debt collection business and attempts to collect debts from consumers in virtually every state, including consumers in the State of Illinois. In fact, Defendant BIG 16 was acting as a debt collector, as that term is defined in the FDCPA, as to the delinquent consumer debt it attempted to collect from Plaintiff. 7. Defendants Bureaus and BIG 16 are sister corporations. Defendant BIG 16 is a bad debt buyer that buys up portfolios of defaulted consumer debts for pennies on the dollar, and Defendant Bureaus manages the collections of the debts that BIG 16 8. Defendants are each authorized to conduct business in Illinois, and maintain registered agents here, see, records from the Illinois Secretary of State, attached as Group Exhibit A. In fact, all Defendants conduct business in Illinois. 9. Moreover, Defendants are each licensed as collection agencies in Illinois, see, records from the Illinois Division of Professional Regulation, attached as Group Exhibit B. In fact, all Defendants act as collection agencies in Illinois. FACTUAL ALLEGATIONS 10. Ms. Chernak fell behind on paying her bills. At some point in time after a debt she allegedly owed for an HSBC account became delinquent, it was allegedly sold to a bad debt buyer – either Bureaus or BIG 16, who then tried to collect upon it by having Echelon send Ms. Chernak an initial form collection letter, dated November 20, 2012. This collection letter twice stated that Echelon’s “Client” was “THE BUREAU [sic] INC” and that the debt was owed to it as the “creditor”. A copy of Defendants’ letter is attached as Exhibit C. 11. In fact, although BIG 16 was likely the “creditor to whom the debt” was then owed, it was nowhere mentioned in Defendants’ letter. Rather, it only mentioned Defendant Bureaus, who likely was managing the collection of this account for BIG 16 and had likely placed the debt with Defendant Echelon for collection. 12. Defendants’ collection actions complained of herein occurred within one year of the date of this Complaint. 13. Defendants’ collection communications are to be interpreted under the “unsophisticated consumer” standard. See, Gammon v. GC Services, Ltd. Partnership, 27 F.3d 1254, 1257 (7th Cir. 1994). COUNT I Violation Of § 1692g(a)(2) Failure To Identify Effectively The Current Creditor 14. Plaintiff adopts and realleges ¶¶’s 1-13. 15. Section 1692g of the FDCPA requires that, within 5 days of Defendants’ first communication to a consumer, they have to provide the consumer with an effective validation notice, containing, among other disclosures, “(2) the name of the creditor to whom the debt is owed;” see, 15 U.S.C. § 1692g(a)(2). 16. Defendants’ form collection letter violates § 1692g(2) of the FDCPA because it failed to identify, in any way, that Defendant BIG16 was the creditor to whom the debt was then owed. See, Braatz v. Leading Edge Recovery Solutions, LLC, et al., 2011 U.S. Dist. LEXIS 123118 (N.D. Ill. 2011); Walls v. United Collection Bureau, Inc, et al., 2012 U.S. Dist. LEXIS 68079 (N.D. Ill. 2012). 17. Defendants’ violation of § 1692g of the FDCPA renders them liable for statutory damages, costs, and reasonable attorneys’ fees. See, 15 U.S.C. § 1692k. COUNT II Violation Of § 1692e Of The FDCPA -- Making A False Statement Of The Name Of Creditor 18. Plaintiff adopts and realleges ¶¶’s 1-13. 19. Section 1692e of the FDCPA prohibits a debt collector from using any false and/or any deceptive or misleading representation or means in connection with the collection of a debt. See, 15 U.S.C. § 1692e. 20. Defendants violated § 1692e of the FDCPA by falsely stating, in their collection letter (Exhibit C), that the debt was owed to the “The Bureau [sic]”, when, in fact, the debt was owed to BIG 16. 21. Defendants’ violation of § 1692e of the FDCPA renders them liable for statutory damages, costs, and reasonable attorneys’ fees. See, 15 U.S.C. § 1692k. CLASS ALLEGATIONS 22. Plaintiff Chernak brings this action individually and as a class action on behalf of all persons similarly situated in the State of Illinois from whom Defendants attempted to collect a delinquent consumer debt, via the same form collection letter (Exhibit C), that Defendants sent to Plaintiff, which did not correctly identify BIG 16 as the creditor to whom the debt was then owed, from one year before the date of this Complaint to the present. This action seeks a finding that Defendants’ form collection letter violates the FDCPA, and asks that the Court award damages as authorized by § 1692k(a)(2) of the FDCPA. 23. Defendants regularly engage in debt collection, using the same form collection letter they sent Plaintiff Chernak, in their attempts to collect delinquent consumer debts from other consumers. 24. The Class consists of more than 40 persons from whom Defendants attempted to collect delinquent consumer debts by sending other consumers the same form collection letter they sent Plaintiff Chernak. 25. Plaintiff Chernak’s claims are typical of the claims of the Class. Common questions of law or fact raised by this class action complaint 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. This class action is superior to other available methods for the fair and efficient adjudication of this controversy. 26. 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. 27. Plaintiff Chernak will fairly and adequately protect and represent the interests of the Class. The management of the class action proposed is not extraordinarily difficult, and the factual and legal issues raised by this class action complaint will not require extended contact with the members of the Class, because Defendants’ conduct was perpetrated on all members of the Class and will be established by common proof. Moreover, Plaintiff Chernak has retained counsel experienced in class action litigation, including class actions brought under the FDCPA. PRAYER FOR RELIEF Plaintiff, Holly Chernak, n/k/a Clancy, individually and on behalf of all others similarly situated, prays that this Court: 1. Certify this action as a class action; 2. Appoint Plaintiff Chernak as Class Representative of the Class, and her attorneys as Class Counsel; 3. Find that Defendants’ form collection letter violates the FDCPA; 4. Enter judgment in favor of Plaintiff Chernak and the Class, and against Defendants, for statutory damages, costs, and reasonable attorneys’ fees as provided by § 1692k(a) of the FDCPA; and, 5. Grant such further relief as deemed just. JURY DEMAND Plaintiff, Holly Chernak, n/k/a Clancy, individually, and on behalf of all others similarly situated, demands trial by jury. Holly Chernak, n/k/a Clancy, individually, and on behalf of all others similarly situated, By: /s/ David J. Philipps________ One of Plaintiff’s Attorneys Dated: April 4, 2013 David J. Philipps (Ill. Bar No. 06196285) Mary E. Philipps (Ill. Bar No. 06197113) Angie K. Robertson (Ill. Bar No. 06302858) Philipps & Philipps, Ltd. 9760 S. Roberts Road Suite One Palos Hills, Illinois 60465 (708) 974-2900 (708) 974-2907 (FAX) davephilipps@aol.com mephilipps@aol.com angiekrobertson@aol.com

consumer fraud

ChECF4cBD5gMZwczFeHl

BARSHAY SANDERS, PLLC 100 Garden City Plaza, Suite 500 Garden City, New York 11530 Tel: (516) 203-7600 Fax: (516) 706-5055 Email: ConsumerRights@BarshaySanders.com Attorneys for Plaintiff Our File No.: 118601 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON TACOMA DIVSION Hwang Myong, individually and on behalf of all others similarly situated, Plaintiff, Docket No: CLASS ACTION COMPLAINT vs. JURY TRIAL DEMANDED Mid-Minnesota Management Services, Inc. d/b/a Collection Resources, Defendant. Hwang Myong, 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 Mid-Minnesota Management Services, Inc. d/b/a Collection Resources (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 Washington. PARTIES 5. Plaintiff Hwang Myong is an individual who is a citizen of the State of Washington residing in King County, Washington. 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 Mid-Minnesota Management Services, Inc. d/b/a Collection Resources, is a Minnesota Corporation with a principal place of business in Stearns County, Minnesota. 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). ALLEGATIONS SPECIFIC TO PLAINTIFF 14. Defendant alleges Plaintiff owes a debt (“the alleged Debt”). 15. 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. 16. The alleged Debt does not arise from any business enterprise of Plaintiff. 17. The alleged Debt is a “debt” as defined by 15 U.S.C. § 1692a(5). 18. At an exact time known only to Defendant, the alleged Debt was assigned or otherwise transferred to Defendant for collection. 19. At the time the alleged Debt was assigned or otherwise transferred to Defendant for collection, the alleged Debt was in default. 20. In its efforts to collect the alleged Debt, Defendant contacted Plaintiff by letter (“the Letter”) dated August 21, 2019. (A true and accurate copy is annexed hereto as “Exhibit 1.”) 21. The Letter conveyed information regarding the alleged Debt. 22. The Letter is a “communication” as defined by 15 U.S.C. § 1692a(2). 23. The Letter was the initial written communication Plaintiff received from Defendant concerning the alleged Debt. 24. The Letter was received and read by Plaintiff. 25. 15 U.S.C. § 1692g protects Plaintiff's concrete interests. Plaintiff has the interest and right to receive a clear, accurate and unambiguous validation notice, which allows a consumer to confirm that he or she owes the debt sought to be collected by the debt collector. As set forth herein, Defendant deprived Plaintiff of this right. 26. 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. 27. The deprivation of Plaintiff's rights will be redressed by a favorable decision herein. FIRST COUNT Violation of 15 U.S.C. § 1692g(a)(2) 28. Plaintiff repeats and realleges the foregoing paragraphs as if fully restated herein. 29. 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. 30. As relevant here, 15 U.S.C. § 1692g(a)(2) requires the written notice provide “the name of the creditor to whom the debt is owed.” 31. To comply with 15 U.S.C. § 1692g(a)(2), a statement of “the name of the creditor to whom the debt is owed” must clearly convey, from the perspective of the least sophisticated consumer, the actual name of the creditor to whom the debt is owed. 32. To comply with 15 U.S.C. § 1692g(a)(2), a statement of “the name of the creditor to whom the debt is owed” must accurately convey, from the perspective of the least sophisticated consumer, the actual amount of the debt. 33. To comply with 15 U.S.C. § 1692g(a)(2), a statement of “the name of the creditor to whom the debt is owed” must convey without ambiguity, from the perspective of the least sophisticated consumer, the name of the creditor to whom the debt is owed. 34. Even if a debt collector conveys the required information, the debt collector nonetheless violates the 15 U.S.C. § 1692g(a)(2) if it conveys that information in a confusing or contradictory fashion so as to cloud the required message with uncertainty in the eyes of the least sophisticated consumer. 35. Merely naming an entity without specifically identifying the entity as “the creditor to whom the debt is owed” is not sufficient to comply with 15 U.S.C. § 1692g(a)(2). 36. The Letter fails to identify by name and label any entity as “creditor,” “original creditor,” “current creditor, “or “account owner.” 37. The Letter states “Re:”, followed by the name of an entity. 38. The Letter demands payment be made to Defendant. 39. The Letter fails to indicate whether the “Re:” refers to the owner of the alleged 40. The Letter fails to indicate whether the “Re:” refers to Plaintiff's creditor. 41. The Letter fails to indicate whether the “Re:” refers to Plaintiff's current creditor. 42. The Letter fails to indicate whether the “Re:” refers to Plaintiff's original creditor. 43. The Letter fails to indicate whether the “Re:” refers to the creditor to whom the alleged Debt is owed. 44. As a result of such failures, Defendant did not clearly convey, from the perspective of the least sophisticated consumer, the owner of the alleged Debt as required by 15 U.S.C. § 1692g(a)(2). 45. As a result of such failures, the least sophisticated consumer would likely be confused as to the owner of the alleged Debt. 46. As a result of such failures, the least sophisticated consumer would likely be uncertain as to owner of the alleged Debt. 47. As a result of such failures, Defendant did not clearly convey, from the perspective of the least sophisticated consumer, the creditor to whom the alleged Debt is owed as required by 15 U.S.C. § 1692g(a)(2). 48. As a result of such failures, Defendant did not accurately convey, from the perspective of the least sophisticated consumer, the creditor to whom the alleged Debt is owed as required by 15 U.S.C. § 1692g(a)(2). 49. As a result of such failures, Defendant did not convey without ambiguity, from the perspective of the least sophisticated consumer, the creditor to whom the alleged Debt is owed as required by 15 U.S.C. § 1692g(a)(2). 50. For the foregoing reasons, Defendant violated 15 U.S.C. § 1692g(a)(2) and is liable to Plaintiff therefor. SECOND COUNT Violations of 15 U.S.C. §§ 1692e and 1692e(10) 51. Plaintiff repeats and realleges the foregoing paragraphs as if fully restated herein. 52. 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. 53. 15 U.S.C. § 1692e(10) prohibits the use of any false representation or deceptive means to collect or attempt to collect any debt. 54. 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. 55. 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. 56. A collection letter also violates 15 U.S.C. § 1692e if it is reasonably susceptible to an inaccurate reading by the least sophisticated consumer. 57. 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. 58. The owner of a debt must be clearly conveyed from the perspective of the least sophisticated consumer. 59. The owner of a debt must be accurately conveyed from the perspective of the least sophisticated consumer. 60. The owner of a debt must be conveyed without ambiguity from the perspective of the least sophisticated consumer. 61. The identity of the owner of a debt is a material piece of information to a consumer. 62. Knowing the identity of the owner of a debt affects how a consumer responds to a debt collector's attempts to collect the debt. 63. Defendant failed to explicitly state the owner of the alleged Debt. 64. Defendant failed to clearly state the owner of the alleged Debt. 65. The least sophisticated consumer would likely be confused as to the owner of the alleged Debt. 66. The least sophisticated consumer would likely be uncertain as to owner of the alleged Debt. 67. 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. 68. 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. 69. The least sophisticated consumer would likely be deceived by the Letter. 70. The least sophisticated consumer would likely be deceived in a material way by the 71. For the foregoing reasons, Defendant violated 15 U.S.C. §§ 1692e and 1692e(10) and is liable to Plaintiff therefor. THIRD COUNT Violation of 15 U.S.C. § 1692f 72. Plaintiff repeats and realleges the foregoing paragraphs as if fully restated herein. 73. 15 U.S.C. § 1692f(1) prohibits the collection of any amount, including any fee or charge incidental to the debt unless such amount is expressly authorized by the agreement creating the debt or permitted by law. 74. Pursuant to RCW 62A. 3-515 the maximum fee allowed for a returned check cannot exceed $40.00 or the face amount of the check, whichever is less. 75. The Letter states that Defendant charges $30.00 for returned checks. 76. Defendant’s threat to collect a fee of $30.00 for a returned check is a violation of RCW 62A. 3-515. 77. Defendant’s attempt to collect a fee of $30.00 for a retuned check when the maximum amount allowed in Washington State cannot exceed $40.00 or the face amount of the check, is a violation of 15 U.S.C. § 1692f(1). 78. For the foregoing reasons, Defendant violated 15 U.S.C. § 1692f and is liable to Plaintiff therefor. FOURTH COUNT Violation of 15 U.S.C. § 1692e 79. Plaintiff repeats and realleges the foregoing paragraphs as if fully restated herein. 80. 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. 81. 15 U.S.C. § 1692e(2)(A) prohibits the false representation of the character, amount, or legal status of any debt. 82. Defendant’s threat to impose a fee of $30.00 for a returned check when the maximum amount cannot exceed $40.00 or the face amount of the check, whichever is less in Washington State, is a false representation of the character, amount, or legal status of any debt, in violation of 15 U.S.C. § 1692e(2)(A). 83. 15 U.S.C. § 1692e(2)(B) prohibits the false representation of any services rendered or compensation that may be lawfully received by any debt collector for the collection of a debt. 84. Defendant’s threat to impose a fee of $30.00 for a returned check when the maximum amount cannot exceed $40.00 or the face amount of the check, whichever is less in Washington State, is a false representation of any services rendered or compensation that may be lawfully received by any debt collector for the collection of a debt, in violation of 15 U.S.C. § 1692e(2)(B). 85. 15 U.S.C. § 1692e(5) prohibits the threat to take any action that cannot legally be taken or that is not intended to be taken. 86. Defendant’s threat to impose a fee of $30.00 for a returned check when the amount cannot exceed $40.00 or the face amount of the check, whichever is less in Washington State, is a threat to take action that cannot legally be taken or that is not intended to be taken, in violation of 15 U.S.C. § 1692e(5). 87. 15 U.S.C. § 1692e(10) prohibits the use of any false representation or deceptive means to collect or attempt to collect any debt. 88. Defendant’s statement that it is entitled to collect a fee of $30.00 for a returned check when the maximum amount cannot exceed $40.00 or the face amount of the check, whichever is less in Washington State, is a false representation or deceptive means to collect or attempt to collect any debt, in violation of 15 U.S.C. § 1692e(10). 89. Defendant violated the aforementioned sections of the FDCPA and is liable to Plaintiff therefor. CLASS ALLEGATIONS 90. Plaintiff brings this action individually and as a class action on behalf of all persons similarly situated in the State of Washington. 91. 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 stating that Defendant was entitled to charge $30.00 for a returned check, which letter was sent on or after a date one year prior to the filing of this action to the present. 92. 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. 93. The Class consists of more than thirty-five persons. 94. 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. 95. 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. 96. 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 JURY DEMAND 97. 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: April 2, 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 csanders@barshaysanders.com Attorneys for Plaintiff Our File No.: 118601

consumer fraud

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UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS No. 1:17-cv-12137 STEVEN EMERSON, Individually and on Behalf of All Others Similarly Situated, CLASS ACTION Plaintiff, v. COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS GENOCEA BIOSCIENCES, INC., WILLIAM D. CLARK, and JONATHAN POOLE, DEMAND FOR JURY TRIAL Defendants. Plaintiff Steven Emerson (“Emerson” or “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 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 Genocea Biosciences, Inc.’s (“Genocea” or “the Company”) press releases, Securities and Exchange Commission (“SEC”) filings, analyst reports, media reports, and other publicly disclosed reports and information about the Defendants. Plaintiff believes that substantial additional evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery. NATURE AND SUMMARY OF THE ACTION 1. This is a securities class action on behalf of Plaintiff and all other persons or entities, except for Defendants, who purchased or otherwise acquired Genocea securities between May 5, 2017 and September 25, 2017, inclusive (the “Class Period”). This action is brought on behalf of the Class for violations of §§10(b) and 20(a) of the Securities Exchange Act of 1934 (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. 2. Genocea is headquartered in Cambridge, Massachusetts. Genocea’s common stock trades on the NASDAQ Capital Market (“NASDAQ”) under the ticker symbol “GNCA.” 3. Genocea is a biopharmaceutical company that discovers and develops vaccines and immunotherapies. 4. At all relevant times, Genocea’s genital herpes immunotherapy product GEN-003 was the Company’s lead product candidate. 5. 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) the Company’s finances were insufficient to support Phase 3 trials of GEN-003; (ii) accordingly, Genocea had overstated the prospects for GEN-003; and (iii) as a result of the foregoing, Genocea’s public statements were materially false and misleading at all relevant times. 6. On September 25, 2017, after the market closed, Genocea disclosed that it was halting spending and activities on GEN-003 and exploring strategic alternatives for the drug. The Company also announced that it was cutting 40% of its workforce. 7. On this news, the Company’s share price fell $4.08, or 76.5%, to close at $1.25 on September 26, 2017. 8. 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 9. 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 by the SEC (17 C.F.R. §240.10b-5). 10. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §1331 and §27 of the Exchange Act (15 U.S.C. §78aa). 11. Venue is proper in this District pursuant to §27 of the Exchange Act and 28 U.S.C. §1391(b). Genocea’s principal executive offices are located within this District. 12. 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 13. Plaintiff is a citizen of North Carolina. As set forth in the attached Certification, he acquired Genocea securities at artificially inflated prices during the Class Period and was damaged upon the revelation of the alleged corrective disclosures. 14. Defendant Genocea is incorporated in Delaware, with principal executive offices located at 100 Acorn Park Drive, Cambridge, Massachusetts 02140. Genocea shares trade on the NASDAQ under the ticker symbol “GNCA.” 15. Defendant William D. (“Chip”) Clark (“Clark”) has served at all relevant times as the Company’s President and Chief Executive Officer (“CEO”). 16. Defendant Jonathan Poole (“Poole”) has served at all relevant times as the Company’s Chief Financial Officer (“CFO”). 17. The Defendants referenced above in ¶¶15-16 are sometimes referred to herein as the “Individual Defendants.” SUBSTANTIVE ALLEGATIONS 18. Genocea develops novel vaccines and immunotherapies to address diseases with significant unmet needs. The Company uses its proprietary discovery platform, ATLAS™, to design vaccines and immunotherapies that act, in part, through T cell (or cellular) immune responses, in contrast to approved vaccines and immunotherapies, which are designed to act primarily through B cell (or antibody) immune responses. 19. At all relevant times, until September 26, 2017, Genocea’s genital herpes immunotherapy product GEN-003 was the Company’s lead product candidate. Materially False and Misleading Statements Issued During the Class Period 20. On May 5, 2017, Genocea filed its 10-Q for the period ending March 31, 2017 (the “2017 1Q 10-Q”). In the 2017 1Q 10-Q, the Company stated, in part: The Company expects that existing cash, cash equivalents and investments are sufficient to support operating expenses, capital expenditure requirements, and debt obligations into the first quarter of 2018, without assuming any receipt of proceeds from potential business development partnerships or equity financings. This guidance assumes the Company commences a Phase 3 clinical trial for GEN- 003 for genital herpes around the end of 2017 . . . ; however, it is the Company’s strategy to secure additional sources of financing in advance of starting GEN-003 Phase 3 clinical trials. Our lead program is GEN-003, a Phase 2 candidate therapeutic vaccine, or immunotherapy, that we are developing to treat genital herpes infections. We have completed two positive clinical trials and have a third clinical trial currently underway which has also demonstrated positive interim efficacy results. … In December 2015, a Phase 2b clinical trial was initiated as our first study testing potential Phase 3 endpoints with a Phase 3-ready formulation of GEN-003, manufactured with commercially-scalable processes. … In September 2016, we announced positive viral shedding rate reductions from the ongoing Phase 2b study. The study achieved its primary endpoint . . . . … In January 2017, we announced further positive clinical results from the ongoing Phase 2b clinical trial. … Around the end of the first quarter of 2017, we had a successful end-of-Phase 2 meeting with the FDA, the outcome of which was aligned with our previously disclosed Phase 3 design expectations. We continue to expect that GEN-003 will be Phase 3-ready in the fourth quarter of 2017. We plan to commence a clinical trial exploring the potential additive effects of GEN-003 on top of daily administration of valacyclovir in parallel with the Phase 3 program. We retain all rights to GEN-003 and if GEN-003 successfully completes clinical development and is approved, we believe it would represent an important new treatment option for patients with genital herpes. 21. On July 24, 2017, the Company issued a press release entitled, “Genocea Reports Positive Top-Line 12-Month Phase 2b Data for GEN-003 in Genital Herpes,” gave a presentation to investors regarding the positive clinical results for the 12-month analysis of the Company’s Phase 2b trial of GEN-003, and filed an 8-K attaching the press release and presentation as exhibits. In the press release, the Company stated in part: In this 131-subject Phase 2b clinical trial, GEN-003 reduced the median genital lesion rate (or percent days with genital lesions) versus placebo by 49 percent (p=0.01) over the 12 months’ post dosing at the 60 µg per antigen / 50 µg of adjuvant dose. Importantly, these results were achieved at the Phase 3 dose and expected Phase 3 primary endpoint. Other clinical endpoints for this dose improved or were consistent with previously reported positive data. No changes were observed to the previously established safety profile of GEN-003. 22. On August 9, 2017, Genocea filed its 10-Q for the period ending June 30, 2017 (the “2017 2Q 10-Q”). In the 2017 2Q 10-Q, the Company stated, in part: In June and September 2016, the Company entered into new statements of work under the agreement with Fujifilm for the manufacture and supply of antigens for the Company’s Phase 3 clinical trials for GEN-003. … In July 2017, we announced positive clinical results from the Phase 2b trial. At twelve months after dosing, GEN-003 demonstrated statistically significant improvements versus placebo in both the median genital lesion rate and across multiple clinical endpoints. Importantly, these results were achieved at the Phase 3 dose and expected Phase 3 primary endpoint. … In our planned Phase 3 trial, we expect to have a much larger sample size from the hundreds of patients from whom we plan to collect viral shedding samples, and we believe that this larger sample size may lead to greater differentiation in viral shedding in GEN-003 subjects versus placebo. … Around the end of the first quarter of 2017, we had a successful end-of-Phase 2 meeting with the U.S Food and Drug Administration or FDA, the outcome of which was aligned with our previously disclosed Phase 3 design expectations. The Truth Emerges 23. On September 25, 2017, after the market closed, Genocea issued a press release entitled, “Genocea Announces Strategic Shift to Immuno-oncology and the Development of Neoantigen Cancer Vaccines.” In the press release, the Company stated, in part, that “it is exploring strategic alternatives for GEN-003, its Phase 3-ready investigational immunotherapy for the treatment of genital herpes. Consequently, Genocea is ceasing GEN-003 spending and activities and is reducing its workforce by approximately 40 percent.” 24. On this news, the Company’s share price fell $4.08, or 76.5%, to close at $1.25 on September 26, 2017. 25. 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 26. 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 Genocea securities 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. 27. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, Genocea 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 thousands of members of the proposed Class. The members of the proposed 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 customary forms of notice that are commonly used in securities class actions. 28. 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. 29. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class action and securities litigation. Plaintiff has no interest, antagonism, or conflict with the members of the Class. 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 misrepresented material facts about the business, operations, and management of Genocea; c. whether the Individual Defendants caused Genocea to issue false and misleading financial statements during the Class Period; d. whether Defendants acted knowingly or recklessly in issuing false and misleading financial statements; e. whether the prices of Genocea securities during the Class Period were artificially inflated because of Defendants’ conduct complained of herein; and f. whether the members of the Class have sustained damages and, if so, what is 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 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. 32. 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. Genocea securities are traded in an efficient market; d. the Company’s shares were liquid and traded with moderate to heavy volume during the Class Period; e. the Company traded on the NASDAQ 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; and g. Plaintiff and members of the Class purchased, acquired, and/or sold Genocea securities between the time Defendants failed to disclose, or misrepresented material facts, and the time the true facts were disclosed, without knowledge of the omitted or misrepresented facts. 33. Based upon the foregoing, Plaintiff and the members of the Class are entitled to a presumption of reliance upon the integrity of the market. 34. 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 Utah v. United States, 406 U.S. 128 (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 §10(b) of the Exchange Act and Rule 10b-5 Promulgated Thereunder Against All Defendants 35. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. 36. This Count is asserted against Defendants and is based upon §10(b) of the Exchange Act, 15 U.S.C. §78j(b), and Rule 10b-5 promulgated thereunder by the SEC. 37. 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 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 Genocea securities; and (iii) cause Plaintiff and other members of the Class to purchase or otherwise acquire Genocea securities and options at artificially inflated prices. In furtherance of this unlawful scheme, plan, and course of conduct, Defendants, and Individual Defendants, took the actions set forth herein. 38. 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 Genocea 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 Genocea’s finances and business prospects. 39. By virtue of their positions at Genocea, 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. 40. 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 Genocea, the Individual Defendants had knowledge of the details of Genocea’s internal affairs. 41. 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 Genocea. 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 Genocea’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 Genocea securities was artificially inflated throughout the Class Period. In ignorance of the adverse facts concerning Genocea’s business and financial condition which were concealed by Defendants, Plaintiff and the other members of the Class purchased or otherwise acquired Genocea 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. 42. During the Class Period, Genocea 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 Genocea 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 Genocea securities was substantially lower than the prices paid by Plaintiff and the other members of the Class. The market price of Genocea securities declined sharply upon public disclosure of the facts alleged herein to the injury of Plaintiff and Class members. 43. By reason of the conduct alleged herein, Defendants knowingly or recklessly, directly or indirectly, have violated §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, acquisitions, and sales of Genocea’s securities during the Class Period, upon the disclosure that the Company had been disseminating misrepresented financial statements to the investing public. COUNT II Violations of §20 of the Exchange Act Against the Individual Defendants 45. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. 46. During the Class Period, the Individual Defendants participated in the operation and management of Genocea, and conducted and participated, directly and indirectly, in the conduct of Genocea’s business affairs. Because of their senior positions, they knew the adverse non-public information alleged herein. 47. 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 Genocea’s financial condition and operations, and to correct promptly any public statements issued by Genocea which had become materially false or misleading. 48. 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 Genocea disseminated in the marketplace during the Class Period concerning Genocea’s results of operations. Throughout the Class Period, the Individual Defendants exercised their power and authority to cause Genocea to engage in the wrongful acts complained of herein. The Individual Defendants therefore, were “controlling persons” of Genocea within the meaning of §20(a) of the Exchange Act. In this capacity, they participated in the unlawful conduct alleged which artificially inflated the market price of Genocea securities. 49. Each of the Individual Defendants, therefore, acted as a controlling person of Genocea. By reason of their senior management positions and/or being directors of Genocea, each of the Individual Defendants had the power to direct the actions of, and exercised the same to cause Genocea to engage in the unlawful acts and conduct complained of herein. Each of the Individual Defendants exercised control over the general operations of Genocea 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. 50. By reason of the above conduct, the Individual Defendants are liable pursuant to §20(a) of the Exchange Act for the violations committed by Genocea. PRAYER FOR RELIEF WHEREFORE, Plaintiff demands judgment against Defendants as follows: A. Declaring 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 Plaintiff and the other members of the Class compensatory damages C. Awarding Plaintiff and the other members of the Class pre-judgment and post- judgment interest, as well as reasonable attorneys’ fees, expert witness fees, and other costs and disbursements; and D. Awarding Plaintiff and the other members of the Class such other and further relief as the Court may deem just and proper. JURY TRIAL DEMANDED Plaintiff hereby demands a trial by jury. DATED: October 31, 2017 BLOCK & LEVITON, LLP /s/ Jason M. Leviton Jason M. Leviton (BBO# 678331) 155 Federal Street, Suite 400 Boston, MA 02110 Telephone: 617-398-5600 Facsimile: 617-507-6020 Email: jason@blockesq.com Thomas L. Laughlin IV Rhiana L. Swartz SCOTT+SCOTT, ATTORNEYS AT LAW, LLP The Helmsley Building 230 Park Avenue, 17th Floor New York, NY 10169 Telephone: 212-223-6444 Facsimile: 212-223-6334 Email: tlaughlin@scott-scott.com rswartz@scott-scott.com Attorneys for Plaintiff Steven Emerson 7/24/2017 900 $5.6500 7/25/2017 200 $6.3500 7/25/2017 500 $6.3499 7/25/2017 300 $6.3450 7/31/2017 1,000 $5.6899 8/3/2017 500 $5.1840 8/9/2017 1,000 $4.6062 Purchases: 7/21/2017 100 $4.9599 Schedule A GENOCEA BIOSCIENCES INC Ticker: GNCA Cusip: 372427104 Class Period: 05/05/2017 to 09/25/2017 Steven Emerson DATE SHARES PRICE

securities

YNO7QYoBcOMgZ5QmHXbD

Dm MEDoe, Meg eSRulis é on SESOR2g IN THE COURT OF COMMONPLEAS OF ALLEGHENY COUNTY, PENNSYLVANIA ARBITRATION DIVISION SETH DELLINGER, ARBITRATION DIVISION Plaintiff, No. ARIS- 495| v. COMPLAINTIN ARBITRATION Code 011 ROBIN HAAS,d/b/a RHAAS PRODUCTS, Defendant. Filed on behalf of PLAINTIFF Counsel of Record for this Party: Mark Gordon, Esquire PA LD. #25561 John R. Brumberg, Esquire PA LD. #311352 PIETRAGALLO GORDON ALFANO BOSICK & RASPANTI, LLP »We One Oxford Centre 38" Floor Pittsburgh, PA 15219 (412) 263-2000 yn OPS$THARRO! 10-20-2015 1h:4144 AR-15.00495) IN THE COURT OF COMMONPLEAS OF ALLEGHENY COUNTY, PENNSYLVANIA ARBITRATIONDIVISION SETH DELLINGER, ) ARBITRATION DIVISION Plaintiff, No. V. 5 HEARING DATE ROBIN HAAS,d/b/a RHAAS PRODUCTS, Defendant. ) NOTICE TO DEFEND YOU HAVEBEEN SUEDIN COURT.If you wish to defend against the claims set forth in the following pages, you must take action within TWENTY (20) days after this complaint and notice are served, by entering a written appearance personally or by attorney andfiling in writing with the court your defenses or objections to the clamsset forth against you. You are warned that if you fail to do so the case may proceed without you and a judgment maybe entered against you by the court without further notice for any money claimed in the complaint or for any other claim or relief requested by the plaintiff. You may lost moneyor property or other rights important to you. YOU SHOULD TAKE THIS PAPER TO YOUR LAWYERAT ONCE.IF YOU DO NOT HAVE A LAWYER OR CANNOT AFFORD ONE, GO TO OR TELEPHONE THE OFFICE SET FORTH BELOW.THIS OFFICE CAN PROVIDE YOU WITH INFORMATION ABOUT HIRING A LAWYER. IF YOU CANNOT AFFORD TO HIRE A LAWYER, THIS OFFICE MAY BE ABLE TO PROVIDE YOU WITH INFORMATION ABOUT AGENCIES THAT MAY OFFER LEGAL SERVICES TO ELIGIBLE PERSONS AT A REDUCED FEE OR NO FEE. LAWYER REFERRAL SERVICE, The Allegheny County Bar Association 11th Floor Koppers Building, 436 Seventh Avenue Pittsburgh, Pennsylvania 15219 Telephone: (412) 261-0518 HEARING NOTICE YOU HAVE BEEN SUED IN COURT. The above Notice to Defend explains what you must do to dispute the claims made against you. If you file the written response referred to in the Notice to Defend, a hearing before a board ofarbitrators will take place in Room 523 of the Allegheny County Courthouse, 436 Grant Street, Pittsburgh, Pennsylvania, on , at 9:00 A.M. IF YOU FAIL TO FILE THE RESPONSE DESCRIBED IN THE NOTICE TO DEFEND, A JUDGMENT FOR THE AMOUNTCLAIMEDIN THE COMPLAINT MAY BE ENTERED AGAINST YOU BEFORE THE HEARING. DUTY TO APPEAR AT ARBITRATION HEARING If one or more of the parties is not present at the hearing, THE MATTER MAY BE HEARD AT THE SAME TIME AND DATE BEFORE A JUDGE OF THE COURT WITHOUT THE ABSENT PARTY OR PARTIES. THERE JIS NO RIGHT TO A TRIAL DE NOVO ON APPEAL FROM A DECISION ENTERED BY A JUDGE. NOTICE: YOU MUST RESPOND TO THIS COMPLAINT WITHIN TWENTY (20) DAYS OR A JUDGMENT FOR THE AMOUNT CLAIMED MAY BE ENTERED AGAINST YOU BEFORE THE HEARING. IF ONE OR MORE OF THE PARTIES IS NOT PRESENT AT THE HEARING, THE MATTER MAY BE HEARD IMMEDIATELY BEFDORE A JUDGE WITHOUT THE ABSENT PARTY OR PARTIES. THERE IS NO RIGHT TO A TRIAL DE NOVO ON APPEAL FROM A DECISION ENTERED BY A JUDGE. IN THE COURT OF COMMONPLEAS OF ALLEGHENY COUNTY, PENNSYLVANIA ARBITRATION DIVISION SETH DELLINGER, ) ARBITRATION DIVISION ) Plaintiff, ) No. ) v. ) ) ROBIN HAAS,d/b/a RHAAS PRODUCTS, ) ) Defendant. ) COMPLAINT AND NOW,comesthe Plaintiff, Seth Dellinger, by and through his attorneys, Pietragallo Gordon Alfano Bosick & Raspanti, LLP, and files this complaint, averring in support, as follows: 1. This Complaint seeks damages against Defendantarising from breach of contract and the resulting harm that occurred to Seth Dellinger (“Dellinger”or “Plaintiff’). Parties and Venue 2. Plaintiff Seth Dellinger is a natural person whoresides at 2392 Schellsburg Road, Queen, PA 16670. 3. Defendant Robin Haas, d/b/a Rhaas Products (the “Defendant”), has a business address of310 N 2™Street, Bay St. Louis, Mississippi, 39520. 4. Venueis proper in Allegheny County andjurisdiction is proper in Pennsylvania because the defendant Robin Haas does business throughout Pennsylvania by mail order and internetsales. Background 5. This lawsuit arises from the purchase and subsequent failure of the Defendant’s jet ski motor mounts. 6. Dellinger bought the motor mounts for his jet ski from the Defendant for which the Defendant charged $169.61. 7. Prior to the purchase, Dellinger spoke by telephone to the Defendant, or one of the Defendant’s agents, to ask questions about the motor mounts. 8. Defendant confirmed that the motor mounts were appropriate for use on Dellinger’s jet ski. 9. Dellinger then bought the discussed motor mounts from Defendant’s website, which website did not require Dellinger’s assent to any terms by meansof a clickwrap agreement or otherwise. 10. Dellinger and the Defendant entered into a contract because there was 1) an offer, 2) acceptance ofthe offer, and 3) Dellinger paid the Defendant consideration. 11. The Defendant then shipped the motor mounts to Dellinger’s residence in Pennsylvania. 12. Dellinger properly inserted the Defendant’s motor mountsinto hisjet ski. 13. During use of the jet ski, the Defendant’s motor mounts failed, causing severe damageto the jet ski and almost seriously injuring orkilling Dellinger. 14. The costs to repair the jet ski to useable condition total $2,445.00, but the damages sustained by Dellinger are significantly greater than that amount, because the jet ski sustained a large crack on the outside of the hull when the engine broke loose and hit the hull upon the failure of the Defendant’s motor mounts. This large crack cannot be fixed or repaired and will affect any sales price Dellinger could obtain for the jet ski. 15.| The required repairs and new parts for the jet ski included: a. Drive shaft; b. Air filters; c. Fuellines; d. Waterlines; e. Spark plug; f. Gasket; g. Dampener; h. Coupler; i. Pumpbearing; and j. 30 hourslabortime. COUNT I SETH DELLINGER V. ROBIN HAAS,d/b/a RHAAS PRODUCTS Breach of Contract 16. Plaintiff incorporates by reference the preceding paragraphs of this Complaint as if set forth more fully herein. 17. The Defendantbreachedits contract with Dellinger in the following particulars: a. In failing to deliver the motor mounts in a condition fit for the use for which they are intended and for which Dellinger paid consideration 18. As of a result of the Defendant’s breach of contract and defective product, Dellinger suffered harm, and in the following particulars: a. Severe emotional distress at almost sustaining catastrophic injuries; b. Loss of $2,445.00 in repair costs to make repairs to the jet ski; c. Loss of additional significant monies because of the jet ski’s lessened worth due to the unfixable crack on the outside ofthe jet ski’s hull; d. Failing to receive the benefit of the contract that he made with the Defendant; and e. All other damages permitted by law. WHEREFORE,Plaintiff Seth Dellinger demands judgment in his favor and against Defendant Robin Haas, d/b/a Rhaas Products not in excess of the arbitration limits and for such otherrelief as this Honorable Court deems just and appropriate, including all damages, whether compensatory, consequential, or otherwise, pre- and post-judgmentinterest, punitive damages, and fees, penalties and damages duly awardable under Pennsylvania law. COUNT II SETH DELLINGER V. ROBIN HAAS, d/b/a RHAAS PRODUCTS Breach of Implied Warranty of Merchantability 19. _ Plaintiff incorporates by reference the preceding paragraphs of this Complaint as if set forth more fully herein. 20. The Defendant breached the contract and the implied warranty of merchantability in the following particulars: a. Failing to provide goods that would pass without objection in the trade; b. Failing to provide goodsof a fair average quality within the description; c. Failing to provide goods which are fit for the ordinary purposes for which such goodsare used; and d. Failing to provide goods that conform to the promises or affirmations made about such goods by the Defendant. 21. As of a result of the Defendant’s breach of contract and defective product, Dellinger suffered harm, and in the followingparticulars: a. Severe emotional distress at almost sustaining catastrophic injuries; b. Loss of $2,445.00 in repair costs to make repairs to the jet ski; c. Loss of additional significant monies because ofthe jet ski’s lessened worth due to the unfixable crack on the outside of the jet ski’s hull; d. Failing to receive the benefit of the contract he made with the Defendant; and e. All other damagesavailable underlaw. Defendant Robin Haas, d/b/a Rhaas Products not in excess of the arbitration limits and for such WHEREFORE,Plaintiff Seth Dellinger demands judgment in his favor and against other relief as this Honorable Court deems just and appropriate, including all damages, whether compensatory, consequential, or otherwise, pre- and post-judgmentinterest, punitive damages, and fees, penalties and damages duly awardable under Pennsylvania law. COUNT It SETH DELLINGER V. ROBIN HAAS,d/b/a RHAAS PRODUCTS Negligence 22. Plaintiff incorporates by reference the preceding paragraphs ofthis Complaint as if set forth more fully herein. 23. The Defendant had a legal duty to provide motor mounts that would function properly as they were advertised and sold. 24. The Defendant breached this duty by providing Dellinger deficient motor mounts that did not function properly. Instead, those motor mounts malfunctioned. 25. The Defendant’s breach caused the property damage to Dellinger’s jet ski as well as the emotional damage suffered by Dellinger due to the accident sustainedin his jet ski. 26. Asof a result of the Defendant’s negligence, Dellinger suffered harm, and in the followingparticulars: a. Severe emotionaldistress at almost sustaining catastrophic injuries; b. Loss of $2,445.00 in repair costs to makerepairsto the jet ski; c. Loss of additional significant monies because ofthe jet ski’s lessened worth due to the unfixable crack on the outside ofthe jet ski’s hull; d. Failing to receive a non-defective product from the Defendant; and e. All other damages available under law. WHEREFORE,Plaintiff Seth Dellinger demands judgment in his favor and against Defendant Robin Haas, d/b/a Rhaas Products not in excess of the arbitration limits and for such other relief as this Honorable Court deems just and appropriate, including all damages, whether compensatory, consequential, or otherwise, pre- and post-judgment interest, punitive damages, and fees, penalties and damages duly awardable under Pennsylvania law. Respectfully submitted, PIETRAGALLO GORDON ALFANO BOSICK BY: ordon, Esqui {D. # 25561 & RASPANTI, LLP John R. Brumberg, Esquire PA LD. #311352 Counsel for Plaintiff VERIFICATION I, SETH DELLINGER,have read the foregoing COMPLAINT. The averments of fact made therein are true and correct based on knowledge, information and belief. I understand that false statements herein are made subject to penalty of 18 Pa. Cons. Stat. Ann. § 4904 relating to unsworn falsification to authorities. Date: G-29- 157 Seth Dellinger Tee : Supreme Couift:o: Pennsylvania The information collected on this form is used solely for court administration purposes. This form does not supplement or replace thefiling and service ofpleadings or otherpapers as required by law or rules ofcourt. Commencementof Action: [7] Transfer from Another Jurisdiction FE] Complaint LE) writ of Summons F1 Petition F-] Declaration of Taking Lead Defendant’s Name: Lead Plaintiff's Name: Robin Haas, d/b/a Rhaas Products Seth Dellinger Dollar Amount Requested: &]within arbitration limits [1 No Are money damages requested? [J Yes (check one) [outsidearbitration limits Is this a Class Action Suit? fYes &] No Is thisan MDJAppeal? Yes [J No NameofPlaintiff/Appellant’s Attorney: John R. Brumberg, Esq. E) Check here if you have noattorney (are a Self-Represented [Pro Se] Litigant) Nature of the Case: Place an “X”to the left of the ONE case category that most accurately describes your PRIMARYCASE. (\f you are making more than onetype of claim, check the onethat you consider most important. TORT(do not include Mass Tor?) CONTRACT(do not include Judgments) | CIVIL APPEALS [7] Buyer Plaintiff E] Debt Collection: Credit Card [7] Debt Collection: Other Administrative Agencies [7] Board of Assessment L] Board ofElections {"] Dept. of Transportation [J Statutory Appeal: Other [1 Intentional [1] Malicious Prosecution [1 Motor Vehicle (] Nuisance [7] Premises Liability [7] EmploymentDispute: mass tort) Discrimination 1] Zoning Board 7] EmploymentDispute: Other F] Slander/Libel/ Defamation C) Other: C1) Other: MASS TORT 7] Other: REAL PROPERTY MISCELLANEOUS [1] Asbestos I] Tobacco [1] Toxic Tort - DES (7) Toxic Tort - Implant [1] Toxic Waste [7] Other: [7] Common Law/Statutory Arbitration (7) Declaratory Judgment [[] Mandamus FJ] Non-Domestic Relations PROFESSIONAL LIABLITY Restraining Order Quo Warranto Replevin Other: CO) Dental C7) Legal CO Medical [[] Other Professional: FE] Product Liability (does not include [1] Ejectment [7] Eminent Domain/Condemnation [1] Ground Rent [7] Landlord/Tenant Dispute [7] Mortgage Foreclosure: Residential [7] Mortgage Foreclosure: Commercial [l] Partition [1] Quiet Title [7] Other:

products liability and mass tort

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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK ---------------------------------------------------------------X SHEIK SHAKUR, on Behalf of Himself and All Others Similarly Situated, COLLECTIVE AND CLASS ACTION Plaintiffs, COMPLAINT WITH JURY DEMAND -vs.- LASERTONE CORP., SUPPLYTEK INTERNATIONAL LLC, ISAAC DEUTSCH, and MICHAEL SCHLESINGER, Defendants. --------------------------------------------------------------X Plaintiff Sheik Shakur, individually and on behalf of all others similarly situated, by his attorneys, Law Offices of William Cafaro, respectfully alleges as follows upon information and NATURE OF THE ACTION 1. This is a collective and class action brought by Class Representative Plaintiff Sheik Shakur (“Shakur”) on behalf of himself and all members of the proposed collective and class, as defined below (collectively, “Plaintiffs”) who work or have worked for LASERTONE CORP. (“LaserTone”) and SUPPLYTEK INTERNATIONAL LLC (“SupplyTek”) (collectively, LaserTone and SupplyTek are the “Corporate Defendants”) within the applicable time frames. 2. The Corporate Defendants are owned and operated by Defendants Isaac Deutsch (“Deutsch”) and Michael Schlesinger (“Schlesinger”) (collectively, Corporate Defendants Deutsch and Schlesinger are the “Defendants”). The Defendants are involved in the wholesale distribution of office supplies. 3. Despite operating under different corporations, the Defendants have been part of a single integrated enterprise that has jointly employed the Plaintiffs. The enterprise is centrally controlled by Defendants Deutsch and Schlesinger, who own, manage, and oversee operations. 4. Plaintiffs were employed by Defendants as warehouse workers who were paid on an hourly basis and whose duties included, but were not limited to, filling and packaging preapproved orders for transport and loading defendants’ customers’ trucks (“Warehouse Workers”). 5. Warehouse Workers perform similar job duties, are subject to the same employment policies, practices and procedures, and are directed by Defendants on how to perform their work. 6. Plaintiff Shakur brings this action on behalf of himself and all similarly situated current and former Warehouse Workers who elect to opt-in to this action pursuant to the FLSA, 29 U.S.C. §§ 201, et seq., and specifically the collective action provision of 29 U.S.C. §216(b), to remedy violations of the wage and hour provisions of the FLSA by Defendants that have deprived Plaintiff Shakur and all similarly situated employees of their lawful earned wages. 7. Plaintiff Shakur brings this action on behalf of himself and all similarly situated current and former Warehouse Workers who are members of the putative class set forth herein pursuant to Federal Rule of Civil Procedure 23 to remedy violations of the NYLL, Article 6 §§ 190 et seq. and Article 19, §§650 et seq. and the supporting New York State Department of Labor Regulations. THE PARTIES Plaintiff Sheik Shakur 8. Shakur is an individual who resides in Queens County, New York. 9. At all times herein pertinent, and in the course of his duties, Shakur regularly handled products which had been moved in commerce, including, but not limited to, printer toners, drums, rollers, and cleaning blades. 10. Shakur was employed by the Defendants as an Warehouse Worker, from in or about October 2003 until on or about September 9, 2016. 11. Shakur is a covered employee within the meaning of the FLSA and NYLL. 12. A written consent form for Shakur is being filed with this Collective and Class Action Complaint. Defendants 13. At all times herein pertinent, the Defendants, and each of them, were engaged in an industry having an affect on commerce within the meaning of 29 U.S.C. § 203. 14. Defendants have employed and/or jointly employed the Mr. Shakur and similarly situated employees at all times herein pertinent. 15. Defendants Deutsch and Schlesinger have had substantial control over the Mr. Shakur’s as well as similarly situated employees’ working conditions, and over the unlawful policies and practices alleged herein. Lasertone Corp. 16. Defendant LaserTone was and is a domestic business corporation whose principal place of business is located at 10203 Avenue D, Brooklyn, New York 11236. 17. LaserTone is owned and operated by defendants Deutsch and Schlesinger. 18. When the Named Plaintiff and similarly situated employees were paid via check, LaserTone is one of the entity names that usually appeared on the paystubs. 19. LaserTone is a covered employer within the meaning of the FLSA and the NYLL, and, at all times herein pertinent, has employed the Named Plaintiff and similarly situated employees. 20. At all times herein pertinent, LaserTone maintained control, oversight, and direction over the Named Plaintiff and similarly situated employees, including timekeeping, payroll and other employment practices applied to them. 21. LaserTone has applied the same employment policies, practices, and procedures to all its Warehouse Workers who performed the tasks enumerated herein, including policies, practices, and procedures with respect to payment of wages, and overtime compensation. 22. Upon information and belief, for the calendar year 2013, the annual gross volume of sales made or business done of LaserTone was not less than $500,000.00. 23. Upon information and belief, for the calendar year 2014, the annual gross volume of sales made or business done of LaserTone was not less than $500,000.00. 24. Upon information and belief, for the calendar year 2015, the annual gross volume of sales made or business done of LaserTone was not less than $500,000.00. 25. Upon information and belief, for the calendar year 2016, the annual gross volume of sales made or business done of LaserTone will not be less than $500,000.00. SupplyTek International LLC 26. Defendant SupplyTek was and is a domestic limited liability company whose principal place of business is located at 10203 Avenue D, Brooklyn, New York 11236. 27. SupplyTek is owned and operated by defendants Deutsch and Schlesinger. 28. When the Named Plaintiff and similarly situated employees were paid via check, SupplyTek is and was one of the entity names that usually appeared on the paystubs. 29. SupplyTek is a covered employer within the meaning of the FLSA and the NYLL, and, at all times herein pertinent, has employed the Named Plaintiff and similarly situated employees. 30. At all times herein pertinent, SupplyTek maintained control, oversight, and direction over the Named Plaintiff and similarly situated employees, including timekeeping, payroll and other employment practices applied to them. 31. SupplyTek has applied the same employment policies, practices, and procedures to all its Warehouse Workers who performed the tasks enumerated herein, including policies, practices, and procedures with respect to payment of wages, and overtime compensation. 32. Upon information and belief, for the calendar year 2013, the annual gross volume of sales made or business done of SupplyTek was not less than $500,000.00. 33. Upon information and belief, for the calendar year 2014, the annual gross volume of sales made or business done of SupplyTek was not less than $500,000.00. 34. Upon information and belief, for the calendar year 2015, the annual gross volume of sales made or business done of SupplyTek was not less than $500,000.00. 35. Upon information and belief, for the calendar year 2016, the annual gross volume of sales made or business done of SupplyTek will not be less than $500,000.00. Isaac Deutsch 36. Upon information and belief, Deutsch is a resident of the State of New York and has an actual place of business located at 10203 Avenue D, Brooklyn, New York 11236. 37. Upon information and belief, at all times herein pertinent, Defendant Deutsch has been a member of SupplyTek. 38. Upon information and belief, at all times herein pertinent, Deutsch has been an officer and director of LaserTone. 39. Upon information and belief, and at all times pertinent herein, Deutsch has signed contracts on behalf of SupplyTek and LaserTone and listed himself as either Principal and/or Officer. 40. The fraudulent conduct complained of herein was caused, suffered, permitted and allowed by Deutsche to be perpetrated for the purpose of avoiding full payment of the sums due to the Named Plaintiff and those similarly situated for their lawful wages. 41. At all relevant times, Deutsch has had power over personnel decisions at SupplyTek and LaserTone, including the power to hire and fire employees, set their wages, and otherwise control the terms and conditions of their employment. 42. At all relevant times, Deutsch has had power over payroll decisions at SupplyTek and LaserTone, including the power to retain time and/or wage records. 43. At all relevant times, Deutsch has been actively involved in managing the day to day operations of SupplyTek and LaserTone. 44. At all relevant times, Deutsch has had the power to stop any illegal pay practices that harmed the Named Plaintiff and similarly situated employees. 45. At all relevant times, Deutsch has had the power to transfer the assets and/or liabilities of SupplyTek and LaserTone. 46. At all relevant times, Deutsch has had the power to enter into contracts on behalf of SupplyTek and LaserTone. 47. At all relevant times, Deutsch has had the power to close, shut down, and/or sell SupplyTek and LaserTone. 48. Deutsch is a covered employer within the meaning of the FLSA and the NYLL, and at all relevant times, has employed and/or jointly employed the Named Plaintiff and similarly situated employees. Michael Schlesinger 49. Upon information and belief, Schlesinger is a resident of the State of New York and has an actual place of business located at 10203 Avenue D, Brooklyn, New York 11236. 50. Upon information and belief, at all times herein pertinent, Defendant Schlesinger has been a member of SupplyTek. 51. Upon information and belief, at all times herein pertinent, Schlesinger has been an officer and director of LaserTone. 52. Upon information and belief, and at all times pertinent herein, Schlesinger has signed contracts on behalf of SupplyTek and LaserTone and listed himself as either Principal and/or Officer. 53. The fraudulent conduct complained of herein was caused, suffered, permitted and allowed by Schlesinger to be perpetrated for the purpose of avoiding full payment of the sums due to the Named Plaintiff and those similarly situated for their lawful wages. 54. At all relevant times, Schlesinger has had power over personnel decisions at SupplyTek and LaserTone, including the power to hire and fire employees, set their wages, and otherwise control the terms and conditions of their employment. 55. At all relevant times, Schlesinger has had power over payroll decisions at SupplyTek and LaserTone, including the power to retain time and/or wage records. 56. At all relevant times, Schlesinger has been actively involved in managing the day to day operations of SupplyTek and LaserTone. 57. At all relevant times, Schlesinger has had the power to stop any illegal pay practices that harmed the Named Plaintiff and similarly situated employees. 58. At all relevant times, Schlesinger has had the power to transfer the assets and/or liabilities of SupplyTek and LaserTone. 59. At all relevant times, Schlesinger has had the power to enter into contracts on behalf of SupplyTek and LaserTone. 60. At all relevant times, Schlesinger has had the power to close, shut down, and/or sell SupplyTek and LaserTone. 61. Schlesinger is a covered employer within the meaning of the FLSA and the NYLL, and at all relevant times, has employed and/or jointly employed the Named Plaintiff and similarly situated employees. JURISDICTION AND VENUE 62. Jurisdiction is based upon 28 U.S.C. § 1331, insofar as it involves a statute of the United States, specifically, the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201 et seq., and Plaintiff relies upon 28 U.S.C. § 1367 to invoke supplemental jurisdiction with respect to the state law claims which form another basis for recovery upon the same factual nexus. 63. This Court also has jurisdiction over the Plaintiffs’ claims under the FLSA pursuant to 29 U.S.C. § 216(b). 64. The Court is empowered to issue a declaratory judgment pursuant to 28 U.S.C. §§ 2201 and 2202. 65. Venue is based upon 28 U.S.C. § 1391 (b)(2) insofar as a substantial part of the events giving rise to the within causes of action occurred in this Judicial District. COLLECTIVE ACTION ALLEGATIONS 66. Named Plaintiff seeks to bring this suit to recover overtime compensation and liquidated damages from Defendants under the applicable provisions of the FLSA, 29 U.S.C. §216(b), on their own behalf as well as on behalf of those in the following collective: FLSA Collective: Current and former employees of Defendants who, at any time within three years prior to filing date of this Collective and Class Action Complaint through the date of final disposition (“Collective Period”), worked for the Defendants as non-exempt Warehouse Workers and were subject to Defendants’ policy and pattern or practice of failing to properly pay premium overtime compensation for all hours worked beyond 40 per week and who elect to opt into this litigation. 67. Defendants are liable under the FLSA for, inter alia, failing to properly compensate the Named Plaintiff and the putative FLSA Collective Members (“Collective Members”). 68. Consistent with Defendants’ policy and pattern or practice, the Named Plaintiff and the Collective Members have not been paid any premium overtime compensation for hours worked beyond 40 in any single work week. 69. All of the work that the Named Plaintiff and the Collective Members have performed involved tasks that have been assigned by Defendants, and/or Defendants have been aware of all of the work that they have performed. 70. Defendants have exercised sufficient supervision, direction and control over the Plaintiff and Collective Members by, inter alia, (1) assigning them job duties and responsibilities; and (2) controlling all of the terms and conditions of their employment, including their compensation, as well as policies and practices they were required to follow. 71. As part of their regular business practices, Defendants have intentionally imposed unlawful policies and practices upon the Named Plaintiff and the Collective Members, which include, but are not limited to: a) willfully failing to pay them premium overtime wages for all hours worked in excess of 40 hours per workweek; and b) willfully failing to record all of the time that they have worked for the benefit of the Defendants; and c) willfully directing the preparation and distribution of paystubs omitting the number of hours that each employee worked during the pay period; and d) deducting some time each week from the number of hours actually worked by each employee, and then multiplying that number of hours by the straight time rate. 72. Defendants’ unlawful conduct pled herein constitutes a corporate policy or practice of minimizing labor costs by failing to properly compensate the Named Plaintiff and the Collective Members for the overtime hours they have worked. 73. Defendants are aware or should have been aware that Federal law required them to pay the Named Plaintiff and the Collective Members overtime premiums for all hours worked in excess of 40 per workweek. 74. The Named Plaintiffs and the Collective Members perform or performed the same or similar primary duties. 75. Defendants’ unlawful conduct has been systematic, widespread, repeated, and consistent. 76. There are many similarly situated current and former employees who have been denied overtime compensation in violation of the FLSA who would benefit from the issuance of a court-supervised notice of this lawsuit and the opportunity to join it. This notice should be sent to the Collective Members pursuant to 29 U.S.C. § 216(b). 77. Those similarly situated employees are known to Defendants, are readily identifiable, and can be located through Defendants’ records. CLASS ALLEGATIONS 78. The Named Plaintiff brings this action as a Class action, pursuant to Rule 23 of the Federal Rules of Civil Procedure, on behalf of themselves and the following defined Classes: “Rule 23 Class”: Warehouse Workers employed by the Defendants at any time within six years prior to the filing date of this Class action complaint through the date of final disposition (“Class Period”) of this action and who were subject to Defendants’ policy and pattern or practice of (i) manually reducing their hours, thereby denying them overtime premiums for all of the hours they worked in excess of 40 hours per week; and/or (ii) improperly paying them at straight time for overtime hours; (iii) failing to provide proper wage notices and keep proper records as required by the NYLL; and/or (iv) failing to provide annual wage notices as required by the NYLL.. 79. Excluded from the Rule 23 Class are Defendants, Defendants' legal representatives, officers, directors, assigns, and successors, or any individuals who have, or who at any time during the class period had, a controlling interest in Defendants, and all persons who shall submit timely and otherwise proper requests for exclusion. 80. The Members of the Rule 23 Class are so numerous that joinder of all Members is impracticable. Upon information and belief, the size of the Rule 23 Class is over 50 individuals. Although the precise number of such employees is unknown, the data necessary to ascertain this with precision is within the exclusive possession and control of the Defendants. 81. Defendants have acted or have refused to act on grounds generally applicable to the Rule 23 Class, thereby making final injunctive relief appropriate or corresponding declaratory relief with respect to the Rule 23 Classes as a whole. 82. Common questions of law and fact exist as to the Rule 23 Class that predominate over any questions only affecting them individually and include, but are not limited to, the following: a. Whether Defendants unlawfully required Members of the proposed class to work off the clock, thereby denying them overtime premiums under the NYLL; b. Whether Defendants unlawfully reduced the number of hours the Members worked in their own payroll system; c. Whether Defendants unlawfully failed to pay appropriate overtime compensation to Members of the proposed class in violation of NYLL; d. Whether Defendants employed Plaintiff and the proposed class within the meaning of New York law; e. Whether Defendants failed to keep true and accurate time and pay records for all hours worked by the Named Plaintiff and the proposed class; f. Whether Defendants failed to furnish the Named Plaintiff and the proposed class with annual wage notices, as required by the NYLL; g. Whether Defendants failed to furnish the Named Plaintiffs and the proposed class Members with proper wage statements with every payment of wages, as required by the NYLL; h. Whether Defendants’ policy of failing to pay the Named Plaintiffs and Class Members was instituted willfully or with reckless disregard of the law; and i. The nature and extent of class-wide injury and the measure of damages for those injuries. 83. The claims of the Named Plaintiff is typical of the claims of the Rule 23 Class he seeks to represent. Named Plaintiff and all of the Rule 23 Class Members work, or have worked, for Defendants as Warehouse Workers. The Named Plaintiff and the Rule 23 Class Members enjoy the same statutory rights under the NYLL, including the right to be appropriately compensated for all hours worked, to be paid overtime compensation, and to receive legally required wage notices. The Named Plaintiff and the Rule 23 Class Members have all sustained similar types of damages as a result of Defendants' failure to comply with the NYLL. The Named Plaintiff and the Rule 23 Class Members have all been injured in that they have been uncompensated or undercompensated due to Defendants' common policies, practices, and patterns of conduct. 84. The Named Plaintiff will fairly and adequately represent and protect the interests of the Members of the Rule 23 Class; understands that as Class representative, he assumes a fiduciary responsibility to the Class to represent its interests fairly and adequately; recognizes that as Class representative, he must represent and consider the interests of the Class just as he would represent and consider his own interests; understands that in decisions regarding the conduct of the litigation and its possible settlement, he must not favor his own interests over those of the Class; recognizes that any resolution of a Class action must be in the best interests of the Class; and understands that in order to provide adequate representation, he must be informed of developments in litigation, cooperate with Class counsel, and testify at depositions and/or trial. The Named Plaintiff has retained counsel competent and experienced in complex Class actions and employment litigation. There is no conflict between the Named Plaintiff and the Rule 23 Class Members. 85. A Class action is superior to other available methods for the fair and efficient adjudication of this litigation. The Members of the Rule 23 Class have been damaged and are entitled to recovery as a result of Defendants' violations of the NYLL, as well as their common and uniform policies, practices, and procedures. Although the relative damages suffered by individual Rule 23 Class Members are not de minimis, such damages are small compared to the expense and burden that this litigation will require. The individual Plaintiff lacks the financial resources to conduct a thorough examination of Defendants' timekeeping and compensation practices and to vigorously prosecute a lawsuit against Defendants to recover such damages. In addition, class litigation is superior because it will obviate the need for unduly duplicative litigation that might result in inconsistent judgments with respect to Defendants' practices. 86. This action is properly maintainable as a class action under Federal Rule of Civil Procedure 23(b)(3). PLAINTIFF’S FACTUAL ALLEGATIONS 87. Consistent with their policies and patterns or practices as described herein, Defendants harmed the Named Plaintiff, individually, as follows: Sheik Shakur 88. Defendants did not pay Shakur the proper overtime compensation for all of the time that he was suffered or permitted to work each workweek. 89. Throughout the duration of his employment with Defendants, Shakur received weekly paychecks accompanied by paystubs from Defendants that did not show the number of hours he worked during the pay period. 90. Throughout his employment with the Defendants, Plaintiff Shakur worked Monday through Thursday, inclusive, from 6:00AM until 6:00PM, and Friday from 6:00AM until 2:00PM. 91. For years now, the Defendants paid Plaintiff Shakur on a biweekly basis, and “shaved” no less than one hour each week time from the total number of hours Shakur had worked. 92. From the beginning of the statutory period until on or about December 31, 2013 Plaintiff Shakur was paid $18.00 per work hour. 93. From on or about January 1, 2014, until the end of his employment relationship with the Defendants, Plaintiff Shakur was paid $20.00 per work hour. 94. Defendants suffered or permitted Shakur to work not less than 54 hours per week. During such workweeks, Defendants failed to compensate Shakur for any overtime premium of one and one half his regular rate of pay, and did not even pay all of his hours at straight time. 95. Throughout the duration of his employment Shakur received paystubs from Defendants which did not show any of the hours he worked. 96. Upon information and belief, Defendants failed to keep accurate records of wages earned or of the hours worked by Shakur. 97. Defendants failed to furnish Shakur with proper annual wage notices, as required by the NYLL. 98. Defendants failed to furnish Shakur with proper wage statements with every payment of wages, as required by the NYLL. AS AND FOR A FIRST CAUSE OF ACTION FEDERAL FAIR LABOR STANDARDS ACT AGAINST THE DEFENDANTS, AND EACH OF THEM (FAILURE TO PAY OVERTIME) 99. The Named Plaintiff hereby incorporates all preceding paragraphs of this complaint with the same force and effect as if fully set forth at length. 100. The overtime wage provisions set forth in the FLSA, 29 U.S.C. §§ 201 et seq., and the supporting federal regulations, apply to Defendants and protect the Named Plaintiff and the Members of the FLSA Collective. 101. Defendants have failed to pay the Named Plaintiff and the Members of the FLSA Collective overtime wages to which they have been entitled under the FLSA - at a rate of 1.5 times their regular rate of pay - for all hours worked in excess of 40 per workweek. 102. Defendants' unlawful conduct, as described in this Collective and Class Action Complaint, has been willful and intentional. Defendants were aware or should have been aware that the practices described in this Collective and Class Action Complaint were unlawful. Defendants have not made a good faith effort to comply with the FLSA with respect to the compensation of the Named Plaintiff and the Members of the FLSA Collective. 103. Because Defendants' violations of the FLSA have been willful, a three-year statute of limitations applies, pursuant to 29 U.S.C. § 255. 104. As a result of Defendants' violations of the FLSA, Named Plaintiff and the Members of the FLSA Collective have been deprived of overtime compensation in amounts to be determined at trial, and are entitled to recovery of such amounts, liquidated damages, prejudgment interest, attorneys' fees, costs, and other compensation pursuant to 29 U.S.C. § AS AND FOR A SECOND CAUSE OF ACTION NEW YORK STATE LABOR LAW AGAINST THE DEFENDANTS, AND EACH OF THEM (FAILURE TO PAY OVERTIME) 105. The Named Plaintiff hereby incorporates all preceding paragraphs of this complaint with the same force and effect as if fully set forth at length. 106. At all times herein pertinent, Named Plaintiff and Members of the Rule 23 Class were employees of Defendants within the meaning of the New York Labor Law. 107. Defendants are joint employers of the Named Plaintiff and Members of the Rule 23 Class within the meaning of the New York Labor Law. 108. The overtime wage provisions of Article 19 of the New York Labor Law and its supporting regulations apply to Defendants. 109. Defendants have failed to pay the Named Plaintiff and the Rule 23 Class Members the overtime wages to which they were entitled under the New York Labor Law. 110. By Defendants’ failure to pay the Named Plaintiff and the Rule 23 Class Members’ premium overtime wages for hours worked in excess of 40 hours per week, they have willfully violated the New York Labor Law Article 19, §§ 650 et seq., and the supporting New York State Department of Labor Regulations. 111. Due to Defendants’ violations of the New York Labor Law, Plaintiff and the Rule 23 Class Members are entitled to recover from Defendants their unpaid overtime wages, liquidated damages, reasonable attorneys’ fees and costs of the action, and pre-judgment and post-judgment interest. AS AND FOR A THIRD CAUSE OF ACTION NEW YORK STATE LABOR LAW AGAINST THE DEFENDANTS, AND EACH OF THEM (FAILURE TO PROVIDE PROPER ANNUAL WAGE NOTICES) 112. The Named Plaintiff hereby incorporates all preceding paragraphs of this complaint with the same force and effect as if fully set forth at length. 113. Upon information and belief, Defendants have willfully failed to furnish the Named Plaintiff and the Rule 23 Class Members with annual wage notices as required by NYLL, Article 6, § 195(1), in English or in the language identified by each employee as their primary language, at the time of hiring, and on or before February first of each subsequent year of the employee's employment with the employer, a notice containing: the rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission, or other; allowances, if any, claimed as part of the minimum wage, including tip, meal, or lodging allowances; the regular pay day designated by the employer in accordance with NYLL, Article 6, § 191; the name of the employer; any "doing business as" names used by the employer; the physical address of the employer's main office or principal place of business, and a mailing address if different; the telephone number of the employer; plus such other information as the commissioner deems material and necessary. 114. Through their knowing or intentional failure to provide Named Plaintiffs and the Rule 23 Class Members with the annual wage notices required by the NYLL, Defendants have willfully violated NYLL, Article 6, §§ 190 et seq., and the supporting New York State Department of Labor Regulations. 115. Due to Defendants' willful violations of NYLL, Article 6, § 195(1), Named Plaintiff and the Rule 23 Class Members are entitled to statutory penalties of fifty dollars for each work day that Defendants failed to provide Plaintiffs with proper annual wage notices, or a total of five thousand dollars each, reasonable attorneys' fees, costs, and injunctive and declaratory relief, as provided for by NYLL, Article 6, § 198(1-b). AS AND FOR A FOURTH CAUSE OF ACTION NEW YORK STATE LABOR LAW AGAINST THE DEFENDANTS, AND EACH OF THEM (FAILURE TO PROVIDE PROPER WAGE STATEMENTS) 116. The Named Plaintiff hereby incorporates all preceding paragraphs of this complaint with the same force and effect as if fully set forth at length. 117. Defendants have willfully failed to furnish Named Plaintiff and the Rule 23 Class members with statements with every payment of wages as required by NYLL, Article 6, § 195(3), listing: 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; net wages; the regular hourly rate or rates of pay; the overtime rate or rates of pay; and the number of regular and overtime hours worked. 118. Through their knowing or intentional failure to provide Plaintiff and the Rule 23 Class members with the wage statements required by the NYLL, Defendants have willfully violated NYLL, Article 6, §§ 190 et seq., and the supporting New York State Department of Labor Regulations. 119. Due to Defendants' willful violations of NYLL, Article 6, § 195(3), Named Plaintiff and the Rule 23 Class Members are entitled to statutory penalties of two hundred fifty dollars for each work day that Defendants failed to provide Plaintiffs with proper wage statements, or a total of five thousand dollars each, reasonable attorneys' fees, costs, and injunctive and declaratory relief, as provided for by NYLL, Article 6, § 198(1-d). JURY DEMAND 120. Plaintiff demands a trial by jury as to all issues so triable. PRAYER FOR RELIEF WHEREFORE, the Named Plaintiff, on behalf of himself and all Members of the Proposed Collective and Class, pray for relief as follows: A. That, at the earliest possible time, the Named Plaintiff be allowed to give notice of this collective action, or that the Court issue such notice, to all Warehouse Workers who are presently working at, or who have worked at any time during the six years immediately preceding the filing of this suit, up through and including the date of this Court’s issuance of court-supervised notice. Such notice shall inform the Warehouse Workers that this civil action has been filed, of the nature of the action, and of their right to join this lawsuit if they believe they were denied proper wages; B. Unpaid overtime compensation, and an additional and equal amount as liquidated damages pursuant to the FLSA and the supporting US Department of Labor Regulations; C. Certification of this case as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure; D. Designation of the Named Plaintiff as representative of the Rule 23 Class; E. Designation of undersigned counsel as Class Counsel; F. Payment of a service award to the Named Plaintiff in recognition of the services he has rendered and will continue to render to the FLSA Collective and Rule 23 Class; G. Issuance of a declaratory judgment that the practices complained of in this Collective and Class Action Complaint are unlawful under the NYLL, Article 6 §§ 190 et seq., NYLL, Article 19, §§ 650 et seq., and the supporting New York State Department of Labor Regulations; H. Unpaid overtime compensation and liquidated damages permitted by law pursuant to the NYLL and the supporting New York State Department of Labor Regulations; I. Statutory penalties of fifty dollars for each work day that Defendants failed to provide Named Plaintiff and the Members of the Rule 23 Class with proper annual wage notices, or a total of five thousand dollars for each Class Member, as provided for by NYLL, Article 6 § J. Statutory penalties of two hundred fifty dollars for each work day that Defendants failed to provide Named Plaintiff and the Members of the Rule 23 Class with proper wage statements, or a total of five thousand dollars each, as provided for by NYLL, Article 6 § 198; K. Prejudgment and post-judgment interest; L. An injunction requiring Defendants to pay all statutorily required wages and cease the unlawful activity described herein pursuant to the NYLL; M. Reasonable attorneys' fees and costs of the action; and N. Such other and further relief, in law or equity, as this Court may deem appropriate and just. Dated: New York, New York November 21,2016 26 Attorneys for the Named Plaintiff and the Proposed FLSA Collective and Rule 23 Class To: LASERTONE CORP. 10203 Avenue D Brooklyn, New York 11236 SUPPLYTEK INTERNATIONAL LLC, 10203 Avenue D Brooklyn, New York 11236 ISAAC DEUTSCH, 10203 Avenue D Brooklyn, New York 11236 MICHAEL SCHLESINGER 10203 Avenue D Brooklyn, New York 11236 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK ---------------------------------------------------------------X SHEIK SHAKUR, on Behalf of Himself and All Others Similarly Situated, Plaintiffs, -vs.- LASERTONE CORP., SUPPLYTEK INTERNATIONAL LLC, ISAAC DEUTSCH, and MICHAEL SCHLESINGER Defendants. --------------------------------------------------------------X COLLECTIVE AND CLASS ACTION COMPLAINT WITH JURY DEMAND William Cafaro (WC2730) Law Offices of William Cafaro 108 West 39th Street, Suite 602 New York, NY 10018 Tel. (212)583-7400 Attorneys for the Named Plaintiffs and the Proposed FLSA Collective and Rule 23 Class

employment & labor

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS Civil Action No.: 4:13-cv-2014 DON GENTRY, Individually and on Behalf of All Other Persons Similarly Situated, Plaintiff, JURY TRIAL DEMANDED v. LINNCO, LLC, LINN ENERGY, LLC, MARK E. ELLIS, KOLJA ROCKOV, DAVID B. ROTTINO, GEORGE A. ALCORN, DAVID D. DUNLAP, TERRENCE S. JACOBS, MICHAEL C. LINN, JOSEPH P. MCCOY, JEFFREY C. SWOVELAND, BARCLAYS CAPITAL INC., CITIGROUP GLOBAL MARKETS INC., RBC CAPITAL MARKETS, LLC, WELLS FARGO SECURITIES, LLC, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, CREDIT SUISSE SECURITIES (USA) LLC, RAYMOND JAMES & ASSOCIATES, INC., UBS SECURITIES LLC, GOLDMAN, SACHS & CO., J.P. MORGAN SECURITIES LLC, ROBERT W. BAIRD & CO., INCORPORATED, BMO CAPITAL MARKETS CORP., CREDIT AGRICOLE SECURITIES (USA) INC., CIBC WORLD MARKETS CORP., HOWARD WEIL INCORPORATED, MITSUBISHI UFJ SECURITIES (USA), INC. Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CLASS ACTION COMPLAINT Plaintiff Don Gentry (“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 upon 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, review and analysis of (a) regulatory filings made by LinnCo, LLC (“LNCO” or the “Company”) and Linn Energy, LLC (“Linn”), with the United States Securities and Exchange Commission (“SEC”); (b) press releases and other public statements published and disseminated by LNCO and Linn; (c) transcripts of earnings calls conducted by officers of LNCO and Linn after the announcement of quarterly earnings; (d) media reports about LNCO and Linn and their management; and (e) review of other publicly available information concerning LNCO and Linn and their management. 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 LNCO shares between October 12, 2012 and July 1, 2013, both dates inclusive (the “Class Period”), and/or who acquired LNCO shares pursuant or traceable to LNCO’s false and misleading Registration Statement and Prospectus in connection with its October 12, 2012 initial public offering (“IPO”), seeking to recover damages caused by defendants’ violations of the federal securities laws and to pursue remedies under §§ 11 and 15 of the Securities Act of 1933 (“1933 Act”), and 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. LNCO is a Delaware limited liability company whose sole purpose is to own units representing limited liability company interests (“units”) in Linn. Linn is an independent natural gas exploration and production company whose units trade on NASDAQ under the symbol “LINE.” 2 3. On October 12, 2012, LNCO filed its Prospectus for the IPO, which forms part of the Registration Statement that became effective on October 11, 2012. Pursuant to the IPO, 34,787,500 shares of LNCO were sold at a price of $36.50 per share, raising approximately $1.2 billion in net proceeds for the Company after underwriting discounts, commissions, and fees. LNCO used the net proceeds from the IPO to acquire units in Linn equal to the number of shares sold in the IPO. 4. As set forth in the Prospectus, LNCO has no significant operations or assets other than its ownership of units in Linn, and its cash flow consists exclusively of distributions from Linn. Accordingly, LNCO’s ability to pay dividends to its shareholders is entirely dependent upon the ability of Linn to make distributions to its unitholders. 5. However, as described further below, unbeknownst to LNCO investors at the time of the IPO, Linn had been overstating the cash flow available for distributions to its unitholders, and engaging in improper accounting practices, including without limitation, improperly accounting for its hedging strategies. 6. On February 20, 2013, Linn and LNCO announced an agreement to merge with Berry Petroleum Company (“Berry”) by issuing LNCO shares to Berry shareholders. Under the terms of the deal, Linn would then acquire the operating assets of Berry from LNCO in exchange for additional units of Linn. 7. However, in two articles published in February 2013 (just prior to the announcement of the transaction with Berry) and in May 2013, Barron’s questioned Linn’s aggressive accounting practices. Among other things, Barron’s criticized Linn for using non- GAAP accounting to mask considerable weakness in its distributable cash flows, thus calling into question the sustainability of its dividend. Further, Barron’s questioned Linn’s accounting 3 for its derivative contracts by, for example, excluding the cost of its puts from its cash flow, while including the gains. As a result of these issues, in its May 2013 article, Barron’s labeled Linn “the country’s most overpriced large energy producer.” 8. Following the May 2013 Barron’s article, Linn units declined 7%, to close at $35.75 per unit on May 6, 2013. In turn, LNCO shares dropped nearly 8% to close at $39.24 per share on May 6, 2013. 9. On July 1, 2013, Linn and LNCO disclosed that the SEC had opened an informal inquiry into LNCO’s proposed merger with Berry, as well as Linn and LNCO’s hedging strategies and use of non-GAAP financial measures (the same accounting issues for which Linn and LNCO had been criticized by Barron’s). 10. On this news, Linn units declined $10.50 per unit, or 31.5%, within two trading sessions, to close at $22.79 per unit on July 3, 2013. In turn, LNCO shares dropped $10.12 per share, or 27.3%, within two trading sessions, to close at $26.95 per share on July 3, 2013. 11. As further detailed below, throughout the Class Period, Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about LNCO's business and financial condition. Specifically, Defendants made false and/or misleading statements and/or failed to disclose to LNCO investors that: (1) Linn was overstating the cash flow available for distribution to Linn unitholders such as LNCO by, among other things, excluding the cost of certain hedging transactions from its calculation of adjusted EBITDA, and understating maintenance capital expenditures; (2) Linn’s production from its oil and natural gas properties (as measured in million cubic feet equivalent per day (“MMcfe/d”)) had flattened out and started decreasing, despite heavy capital expenditures; and (3) as a result of the foregoing, LNCO’s financial statements were materially false and misleading at all relevant times. 4 12. As a result of Defendants' false and/or misleading statements, LNCO shares traded at inflated prices during the Class Period. However, after disclosure of Defendants’ false and/or misleading statements, LNCO’s shares suffered a precipitous decline in the market value, thereby causing significant losses and damages to Plaintiff and other Class members. JURISDICTION AND VENUE 13. The claims asserted herein arise under and pursuant to §§11 and 15 of the 1933 Act [15 U.S.C. §§77k and 77o], and §§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]. 14. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §1331, §22 of the 1933 Act, and §27 of the Exchange Act. 15. Venue is proper in this District pursuant to 28 U.S.C. § 1391(b) because defendants maintain an office in this District, and many of the acts and omissions complained of herein occurred in substantial part in this District. 16. 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 a national securities exchange. PARTIES 17. Plaintiff, as set forth in the attached certification, purchased LNCO shares at artificially inflated prices during the Class Period and has been damaged thereby. 18. Defendant LNCO is a Delaware limited liability company formed on April 30, 2012, under the Delaware Limited Liability Company Act. Its principal executive offices are 5 located at 600 Travis, Suite 5100, Houston, TX 77002. LNCO’s shares trade on the NASDAQ Global Select Market (“NASDAQ”) under the ticker symbol “LNCO.” 19. Defendant Linn is a Delaware corporation, with its principal place of business located at 600 Travis, Suite 5100, Houston, TX 77002. Linn’s units trade on the NASDAQ Stock Market (“NASDAQ”) under the ticker symbol “LINE.” 20. Defendant Mark E. Ellis (“Ellis”) is, and was at all relevant times, the Chairman, President, and Chief Executive Officer of LNCO and Linn. Ellis signed the false and misleading Registration Statement. 21. Defendant Kolja Rockov (“Rockov”) is, and was at all relevant times, the Chief Financial Officer and Executive Vice President of LNCO and Linn. Rockov signed the false and misleading Registration Statement. 22. Defendant David B. Rottino (“Rottino”) is, and was at all relevant times, the Chief Accounting Officer and Senior Vice President at LNCO and Linn. Rottino signed the false and misleading Registration Statement. 23. Defendant George A. Alcorn (“Alcorn”) serves as a director of LNCO. Alcorn signed or authorized the signing of the false and misleading Registration Statement. 24. Defendant David D. Dunlap (“Dunlap”) served as a director of LNCO from at least August 2, 2012 to February 19, 2013 (when Dunlap resigned as a director of LNCO in connection with the proposed transaction with Berry). Dunlap signed or authorized the signing of the false and misleading Registration Statement. 25. Defendant Terrence S. Jacobs (“Jacobs”) serves as a director of LNCO. Jacobs signed or authorized the signing of the false and misleading Registration Statement. 6 26. Defendant Michael C. Linn (“Mr. Linn”) serves as a director of LNCO. Mr. Linn signed or authorized the signing of the false and misleading Registration Statement. 27. Defendant Joseph P. McCoy (“McCoy”) serves as a director of LNCO. McCoy signed or authorized the signing of the false and misleading Registration Statement. 28. Defendant Jeffrey C. Swoveland (“Swoveland”) served as a director of LNCO from at least August 2, 2012 until February 19, 2013 (when Swoveland resigned as a director of LNCO in connection with the proposed merger with Berry). Swoveland signed or authorized the signing of the false and misleading Registration Statement. 29. The defendants named in ¶¶ 20-22 above are sometimes referred to herein as the “Officer Defendants.” 30. The defendants named in ¶¶ 23-28 above are sometimes referred to herein as the “Director Defendants,” and are named as defendants solely for violations of the 1933 Act. 31. Defendant Barclays Capital Inc. (“BCI”) is a British-based global investment bank, and a division of Barclays PLC. BCI acted as an underwriter for LNCO’s IPO, helping to draft and disseminate the offering documents. 32. Defendant Citigroup Global Markets Inc. (“CGMI”) is the brokerage and securities arm of Citigroup, Inc., and provides investment banking services to corporate, institutional, government, and retail clients. CGMI acted as an underwriter for LNCO’s IPO, helping to draft and disseminate the offering documents. 33. Defendant RBC Capital Markets, LLC (“RBC”) is a Canadian-based global investment bank, and a part of Royal Bank of Canada. RBC acted as an underwriter for LNCO’s IPO, helping to draft and disseminate the offering documents. 7 34. Defendant Wells Fargo Securities, LLC (“WFS”) is a provider of capital markets and investment banking services, and a division of Wells Fargo & Company. WFS acted as an underwriter for LNCO’s IPO, helping to draft and disseminate the offering documents. 35. Defendant Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) is a registered broker-dealer and investment adviser and a wholly-owned subsidiary of Bank of America Corporation. Merrill Lynch acted as an underwriter for LNCO’s IPO, helping to draft and disseminate the offering documents. 36. Defendant Credit Suisse Securities (USA) LLC (“CSS”) provides investment banking services in the United States, and is a subsidiary of Credit Suisse (USA), Inc. CSS acted as an underwriter for LNCO’s IPO, helping to draft and disseminate the offering documents. 37. Defendant Raymond James & Associates, Inc. (“RJA”) is a diversified financial services holding company engaged primarily in investment and financial planning, investment banking and asset management. RJA acted as an underwriter for LNCO’s IPO, helping to draft and disseminate the offering documents. 38. Defendant UBS Securities LLC (“UBS”) is a leading global investment banking and securities firm, and one of the largest global asset managers. UBS acted as an underwriter for LNCO’s IPO, helping to draft and disseminate the offering documents. 39. Defendant Goldman, Sachs & Co. (“Goldman”) is a full-service global investment banking and securities firm. Goldman acted as an underwriter for LNCO’s IPO, helping to draft and disseminate the offering documents. 40. Defendant J.P. Morgan Securities LLC (“JPM”) is a leading financial services firm, and an affiliate of JPMorgan Chase Bank, N.A. JPM acted as an underwriter for LNCO’s IPO, helping to draft and disseminate the offering documents. 8 41. Defendant Robert W. Baird & Co. Incorporated (“Baird”) is a wealth management, capital markets, asset management and private equity firm. Baird acted as an underwriter for LNCO’s IPO, helping to draft and disseminate the offering documents. 42. Defendant BMO Capital Markets Corp. (“BMO”) is a leading, full-service North American financial services provider offering, among other services, equity and debt underwriting, and is a member of BMO Financial Group (formerly known as the Bank of Montreal). BMO acted as an underwriter for LNCO’s IPO, helping to draft and disseminate the offering documents. 43. Defendant Credit Agricole Securities (USA) Inc. (“CAS”) is a full service institutional broker/dealer, and a U.S. non-bank subsidiary of the Credit Agricole CIB. CAS acted as an underwriter for LNCO’s IPO, helping to draft and disseminate the offering documents. 44. Defendant CIBC World Markets Corp. (“CIBC”) is the investment banking subsidiary of the Canadian Imperial Bank of Commerce, and provides a variety of financial services, including investment banking advisory services. CIBC acted as an underwriter for LNCO’s IPO, helping to draft and disseminate the offering documents. 45. Defendant Howard Weil Incorporated (“Howard Weil”) is an energy investment boutique that provides investment banking services, and is a part of Scotia Capital (USA) Inc., which, in turn, is owned by Toronto-based Scotiabank. Howard Weil acted as an underwriter for LNCO’s IPO, helping to draft and disseminate the offering documents. 46. Defendant Mitsubishi UFJ Securities (USA), Inc. (“Mitsubishi”) provides investment banking and brokerage products and services to institutional clients, and is a member of the Mitsubishi UFJ Financial Group, Inc., a global Japan-based financial services company. 9 Mitsubishi acted as an underwriter for LNCO’s IPO, helping to draft and disseminate the offering documents. 47. The defendants named in ¶¶ 31-46 above are sometimes referred to herein as the “Underwriter Defendants.” 48. Defendant LNCO and the Officer and Director Defendants who signed the Registration Statement are strictly liable for the false and misleading statements incorporated into the Registration Statement. The Underwriter Defendants drafted and disseminated the offering documents and were paid more than $45 million in connection therewith (not including an additional structuring fee equal to 0.375% of the gross proceeds of the IPO, up to a cap of $5,000,000, payable to BCI). The Underwriter Defendants’ failure to conduct an adequate due diligence investigation was a substantial factor leading to the harm complained of herein. SUBSTANTIVE ALLEGATIONS Background 49. As noted, the sole purpose of LNCO is to own units of Linn. Linn is one of the largest publicly-traded, U.S.-focused, independent oil and natural gas exploration companies, and is the largest publicly-traded upstream oil and natural gas company that is treated as a partnership for U.S. federal income tax purposes. Linn is focused on the development and acquisition of long-life oil and natural gas properties. Among its assets are oil and natural gas properties in the following operating regions: Mid-Continent, the Hugoton Basin, the Green River Basin, the Permian Basin, Michigan/Illinois, California, the Williston/Powder River Basin, and East Texas. 50. Because Linn is treated as a partnership for tax purposes, it created LNCO to enhance Linn’s ability to raise additional equity capital to execute on its acquisition and growth 10 strategy. Specifically, because LNCO is taxed as a corporation, it appeals to investors that would like to invest in a dividend-paying oil and natural gas exploration and production company such as Linn, but would not otherwise invest in Linn units due to various undesirable tax consequences and onerous tax reporting requirements that come with owning securities of an entity taxed as a partnership. 51. As of March 31, 2013, LNCO owned approximately 15% of Linn’s outstanding units. Because LNCO’s sole asset is Linn units, its success is entirely dependent upon the operation and management of Linn, and its ability to pay dividends to its shareholders is entirely dependent upon the ability of Linn to make distributions to its unitholders. Reflecting this reality, all of LNCO’s quarterly and annual financial reports since the IPO have included the equivalent quarterly and annual financial reports of Linn as an exhibit, which was incorporated by reference into the relevant LNCO report. 52. LNCO shareholders have the right to vote on any matter submitted by Linn to a vote of its unitholders (including the annual election of the Linn board of directors) insofar as LNCO will vote the Linn units it holds in the same manner as its shareholders vote on those matters. However, LNCO shareholders do not have the right to elect the LNCO board of directors. Instead, Linn holds the sole voting share in LNCO with the right to elect the LNCO board of directors. 53. LNCO has no employees, and has an agreement with Linn to provide it with all of its necessary services and support. LNCO’s senior executives are identical to those of Linn, and until recently (due to the pending merger with Berry), its directors were also identical to those of Linn. LNCO’s principal executive offices are at the same address as those of Linn. 11 Defendants’ Materially False and Misleading Statements Made In Connection with the IPO and Issued During the Class Period 54. On or about October 2, 2012, LNCO and Linn 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 LNCO shares, and the deemed offer and sale of Linn units to be acquired by LNCO with the proceeds of its IPO. The Registration Statement was negligently prepared and, as a result, contained untrue statements of material facts or omitted to state other facts necessary to make the statements made not misleading, and was not prepared in accordance with the rules and regulations governing its preparation. 55. On or about October 12, 2012, LNCO filed its Prospectus for the IPO, which forms part of the Registration Statement that became effective on October 11, 2012. The Registration Statement and Prospectus (collectively, the “Offering Documents”) indicated that “[o]n April 24, 2012, [Linn’s] Board of Directors approved an increase in the quarterly cash distribution from $0.69 per unit to $0.725 per unit with respect to the first quarter of 2012, representing an increase of 5%,” and that [o]n July 24, 2012, [Linn’s] Board of Directors declared a cash distribution of $0.725 per unit with respect to the second quarter of 2012.” Annualized to $2.90 per unit, the yield on Linn’s units as of the date of the IPO was over 7%. LNCO was thus positioned as a stock for investors seeking income, and value of its shares was tied primarily to the likelihood that Linn would continue to pay substantial and increasing distributions to its unitholders. 56. With respect to Linn’s capacity to pay distributions to unitholders, the Offering Documents described “Adjusted EBITDA” as “a measure used by [Linn] management to evaluate cash flow and Linn’s ability to sustain or increase distributions.” For the six months 12 ended June 30, 2012, the Offering Documents reported that Linn’s “Adjusted EBITDA” was $621 million, up from $473 million for the six months ended June 30, 2011. However, while that Adjusted EBITDA number included realized gains on Linn’s derivative contracts, there was no deduction for the cost of those contracts. As per the February 2013 article in Barron’s cited above, Linn’s failure to deduct the cost of financial derivatives from its realized gains on hedging activities in calculating Adjusted EBITDA overstated the cash flow available for distributions to Linn unitholders during the relevant reporting period. 57. Finally, the Offering Documents painted a picture of substantially increasing production from Linn’s oil and natural gas properties from 218 MMcfe/d in 2009, to 265 MMcfe/d in 2010, to 369 MMcfe/d in 2011. The Offering Documents further reported production of 550 MMcfe/d for the six months ended June 30, 2012, as compared to 335 MMcfe/d for the six months ended June 30, 2011. 58. The LNCO IPO on October 12, 2012 was a major success for LNCO and the Underwriter Defendants. 34,787,500 shares of LNCO were sold at a price of $36.50 per share, raising approximately $1.2 billion in net proceeds for the Company after underwriting discounts, commissions, and fees, while the Underwriter Defendants received more than $45 million (not including an additional structuring fee equal to 0.375% of the gross proceeds of the IPO, up to a cap of $5,000,000, payable to BCI). 59. On October 25, 2012, Linn issued a press release announcing financial results for the third quarter ended September 30, 2012. Among other things, the release stated that Linn had increased average daily production to 782 MMcfe/d during 3Q 2012, as compared to 379 MMcfe/d during 3Q 2011. 13 60. During a conference call on October 25, 2012, to discuss Linn’s 3Q 2012 results, Defendant Ellis stated that “current production” from Linn’s oil and natural gas properties had increased from 425 MMcfe/d at the start of the year to “more than 800 MMcfe/d.” 61. On October 26, 2012, LNCO filed its Form 10-Q (“October 2012 Form 10-Q”) for the period ended September 30, 2012. The October 2012 Form 10-Q was signed by Defendant Rottino, and contained signed certifications pursuant to SOX by Defendants Ellis and Rockov, representing that the financial information contained in the Form 10-Q did not contain any untrue or misleading statements of a material fact, and fairly presented in all material respects the financial condition of LNCO for the relevant reporting period. 62. The October 2012 Form 10-Q reported that, on October 23, 2012, Linn’s Board had declared a cash distribution of $0.725 per unit with respect to Linn’s third quarter of 2012, and that the cash dividend payable to LNCO shareholders, on account of LNCO’s interest in Linn, would equal $0.71 per share (after deducting a small income tax reserve). 63. Attached to the October 2012 Form 10-Q as an exhibit, and incorporated therein by reference, was the Form 10-Q filed by Linn for the third quarter ended September 30, 2012 (“Linn 3Q Form 10-Q”). The Linn 3Q Form 10-Q reported Adjusted EBITDA of over $1 billion for the nine months ended September 30, 2012, but once again, while this figure included realized gains on Linn’s derivative contracts, the costs of such contracts was not deducted, thereby overstating the cash flow available for distributions to unitholders during the relevant reporting period. 14 64. On February 15, 2013, Linn filed a presentation with the SEC addressing the question of how it accounted for its hedging activity. The presentation quoted Defendant Ellis as stating: Since our IPO, hedging our oil and natural gas production has always been an important strategy for the company and our investors. Our hedge strategy has served LINN and our investors well through a variety of commodity price cycles . . . Hedging will continue to be an integral part of LINN’s strategy. 65. The presentation further represented that Linn “is confident in the validity and accuracy of its audited financial statements,” “generates sufficient cash flow to cover its distributions,” and “considers the cost of puts as a ‘capital’ investment,” and therefore, in Linn’s opinion, properly excluded from Adjusted EBITDA in the same way that Adjusted EBITDA is not reduced by depreciation expense. 66. On February 21, 2013, Linn, LNCO and Berry announced the signing of a definitive merger agreement pursuant to which Linn and LNCO agreed to acquire all of Berry’s outstanding shares for total consideration of $4.3 billion, including the assumption of debt. 67. Also on February 21, 2013, Linn issued a press release announcing financial results for the fourth quarter and full year ended December 31, 2012. Among other things, the release stated that Linn had “increased” average daily production to 800 MMcfe/d during 4Q 2012, as compared to 425 MMcfe/d during 4Q 2011. However, as compared to the “more than 800 MMcfe/d” cited by Defendant Ellis as “current production” during the 3Q 2012 conference call in October 2012, production had actually remained flat from the 3Q 2012 to 4Q 2012. 68. During a conference call on February 21, 2013, to discuss the full year 2012 results, Defendant Ellis stated that “[t]he midpoint of guidance indicates average production of approximately 827 MMcfe/d for the first quarter of 2013,” and “an average of 985 MMcfe/d for the full year 2013.” During the same call, Defendant Rockov also projected that, as a result of 15 anticipated synergies from the merger with Berry, management would recommend to Linn’s and LNCO’s boards a 6.2% increase in Linn’s distribution rate and an 8.5% increase in LNCO’s dividend rate. 69. On February 28, 2013, LNCO filed its Form 10-K (“February 2013 Form 10-K”) for the period ended December 31, 2012. The February 2013 Form 10-K was signed by, among others, Defendants Ellis, Rockov, and Rottino, and contained signed certifications pursuant to SOX by Defendants Ellis and Rockov, representing that the financial information contained in the Form 10-K did not contain any untrue or misleading statements of a material fact, and fairly presented in all material respects the financial condition of LNCO for the relevant reporting 70. The February 2013 Form 10-K reported that, on January 24, 2013, Linn’s Board had declared a cash distribution of $0.725 per unit with respect to Linn’s fourth quarter of 2012, and that the cash dividend payable to LNCO shareholders, on account of LNCO’s interest in Linn, was $0.71 per share (after deducting a small income tax reserve). 71. Attached to the February 2013 Form 10-K as an exhibit, and incorporated therein by reference, was the Form 10-K filed by Linn for the fourth quarter and full year ended December 31, 2012 (“Linn 2012 Form 10-K”). The Linn 2012 Form 10-K reported Adjusted EBITDA of over $1.4 billion for the twelve months ended December 31, 2012, but once again, while this figure included realized gains on Linn’s derivative contracts, the costs of such contracts was not deducted, thereby overstating the cash flow available for distributions to unitholders during the relevant reporting period. 16 72. On April 25, 2013, Linn issued a press release announcing financial results for the first quarter ended March 31, 2013. Among other things, the release stated that Linn had “increased” average daily production to 796 MMcfe/d during 1Q 2013, as compared to 471 MMcfe/d during 1Q 2012. However, the production figure for 1Q 2013 represented (i) a decline from the 800 MMcfe/d during 4Q 2012, and the “more than 800 MMcfe/d” cited by Defendant Ellis as “current production” during the 3Q 2012 October 2012 conference call, and (ii) fell substantially short of the 827 MMcfe/d projected by Defendant Ellis for the first quarter of 2013 during the 4Q 2012/year end February 2013 conference call. 73. On April 29, 2013, LNCO filed its Form 10-Q (“April 2013 Form 10-Q”) for the period ended March 31, 2013. The April 2013 Form 10-Q was signed by Defendant Rottino, and contained signed certifications pursuant to SOX by Defendants Ellis and Rockov, representing that the financial information contained in the Form 10-Q did not contain any untrue or misleading statements of a material fact, and fairly presented in all material respects the financial condition of LNCO for the relevant reporting period. 74. The April 2013 Form 10-Q reported that, on April 23, 2013, Linn’s Board had declared a cash distribution of $0.725 per unit with respect to Linn’s first quarter of 2013, and that the cash dividend payable to LNCO shareholders, on account of LNCO’s interest in Linn, was $0.725 per share (due to the absence of any income tax reserve). 75. Attached to the April 2013 Form 10-Q as an exhibit, and incorporated therein by reference, was the Form 10-Q filed by Linn for the first quarter ended March 31, 2013 (“Linn 1Q Form 10-Q”). The Linn 1Q Form 10-K reported Adjusted EBITDA of $356 million for the three months ended March 31, 2013, which was lower than the $379 million reported for 4Q 2012, and the $402 million reported for 3Q 2012. Once again, the Adjusted EBITDA figure included 17 realized gains on Linn’s derivative contracts, but the costs of such contracts was not deducted, thereby overstating the cash flow available for distributions to unitholders during the relevant reporting period 76. The statements above were materially false and/or misleading because they misrepresented and failed to disclose the following adverse facts, which were known to Defendants or recklessly disregarded by them, including that: (1) Linn was overstating the cash flow available for distribution to Linn unitholders such as LNCO by, among other things, excluding the cost of certain hedging transactions from its calculation of adjusted EBITDA, and understating maintenance capital expenditures; (2) Linn’s production from its oil and natural gas properties (as measured in million cubic feet equivalent per day (“MMcfe/d”)) had flattened out and started decreasing, despite heavy capital expenditures; and (3) as a result of the foregoing, LNCO’s financial statements were materially false and misleading at all relevant times. THE TRUTH BEGINS TO EMERGE 77. On February 16, 2013, Barrons published an article entitled “Drilling Into the Numbers.” The article stated the following in relevant part: Linn (ticker: LINE) hedges all of its oil and natural-gas output with financial derivatives, the better to provide a steadily growing level of income to unit holders. The company pays an annualized distribution—the MLP equivalent of a dividend—of $2.90 per unit, which equates to a yield of 8%, based on its current share price of $36. That yield has attracted investors, but they could be overpaying. Linn's units trade for 10 times 2012 pretax cash flow, roughly double the valuation of energy exploration and production companies such as Apache (APA), Devon Energy (DVN), and Canada's Suncor Energy (SU), and in excess of valuations accorded smaller energy producers structured as MLPs. Moreover, Linn may be overstating the cash flow available for distribution, by not deducting the cost of financial derivatives—mainly put options—from its realized gains on hedging activities in its quarterly results. Bears argue that funds invested in derivatives should be treated as an expense, and at least one of 18 Linn's major competitors follows that approach. Linn says its energy derivatives are an integral part of its corporate strategy and amount to an asset, much like an oil and gas property. The value of such assets typically gets depreciated over their useful life. 78. Following the May 2013 Barron’s article, Linn units declined 7%, to close at $35.75 per unit on May 6, 2013. In turn, LNCO shares dropped nearly 8% to close at $39.24 per share on May 6, 2013. 79. On June 4, 2013, in connection with the proposed acquisition of Berry Petroleum, Linn filed a Form S-4/A that disclosed the following explanation of its mark-to-market (gains) losses on commodity derivatives and the cost of contracts on which gains or losses were realized during the relevant period: Represent changes in fair value of the derivative contracts from period to period and include the premiums associated with put option contracts over time. Linn considers the cost of premiums paid for put options as an investment related to its underlying oil and natural gas properties only for the purpose of calculating the non-GAAP measures of adjusted EBITDA and DCF. The premiums paid for put options that settled during the three months ended March 31, 2013 and March 31, 2012 and during the years ended December 31, 2012, 2011 and 2010 were approximately $43 million, $26 million, $148 million, $88 million and $94 million, respectively. 80. Along with the above disclosure, Linn reconciled its calculation of Adjusted EBITDA with distributable cash flow (a metric used to determine how much cash is available to pay distributions to Linn unitholders by subtracting cash interest expense and maintenance capital expenditures back to EBITDA). The calculations revealed that, contrary to the impression that Linn had given earlier in the year, the impact of the cost of Linn’s puts on the cash available for distributions was, and remains significant. For example, during the first quarter, the cost of puts that settled in that period was $43 million, or nearly 30% of the company's reported distributable cash flow of $150 million. Moreover, the calculations showed that Linn didn’t cover its first-quarter distribution of 72.5 cents per unit out of distributable cash even before 19 factoring in the put cost, and that including the put cost, the coverage ratio was just 63%. Similarly, while for the full year ended December 31, 2012, Linn’s distributable cash flow covered its distributions, when the $148 million in premiums paid for put options that settled in 2012 were factored in, distributions exceeded distributable cash flow by approximately $65 million. 81. The disclosures in the June 4, 2013 Form S-4/A also validated the suspicions voiced in the May 2013 Barron’s article concerning the amounts designated by Linn as “maintenance capital expenditures” in calculating distributable cash flow. As defined by Linn, “maintenance capital” is a non-GAAP forward-looking 12-month calculation of the amount of capital required to approximately hold production and reserves flat. However, as noted, beginning in the 4Q 2012, production from Linn’s oil and natural gas properties flattened, and then decreased. Since the numbers used for “maintenance capital expenditures” in the June 4, 2013 Form S-4/A disclosure do not represent the total capital expenditures for the relevant periods, it appears that Linn understated “maintenance capital expenditures” in calculating distributable cash flow for those periods (and in fact, a greater percentage of the total capital expenditures were “maintenance capital expenditures,” as argued in the Barron’s article). 82. On June 15, 2013, following the disclosure in the June 4, 2013 Form S-4/A, Barrons published a third article entitled “Linn Comes Clean on Derivative Costs.” The article stated the following in relevant part: A surprise disclosure from Linn Energy (ticker: LINE), buried in a recent regulatory filing related to its planned merger with Berry Petroleum (BRY), supports the view put forth in Barron's that the oil and natural-gas producer's distributable cash flow is overstated and doesn't cover its distributions to investors. One of the key controversies surrounding Linn, which is structured like a master limited partnership, is the accounting for its energy derivatives in its distributable 20 cash flow, a key financial measure for MLPs. Distributable cash flow (DCF) is the basis for Linn's distribution, the MLP equivalent of a dividend. Linn has a market value of $7.5 billion, plus $6 billion of debt. Linn has realized above-market prices for its natural gas due to its use of derivatives, including in-the-money put options. This has allowed the company to get more than $5 per million British thermal units for its gas when the market price has been $4 or lower. Linn argues that the put options amount to a capital investment, so their cost shouldn't be deducted from distributable cash flow. The company has leeway in computing DCF because the measure isn't governed by generally accepted accounting principles. Barron's view is that Linn's accounting is aggressive, because the company wants to recognize the financial benefits of the puts, but not the costs ("Twilight of a Stock Market Darling," May 6). In its GAAP-compliant net income, it recognizes its derivative expense. "It's the gain or loss from the derivative transaction that must be reflected in pre- tax accounting income, not merely the proceeds derived from the sale or disposition of the derivative," says New York tax expert Robert Willens. "I can't think of an accounting principle or theory that would permit recording only the proceeds from the derivative while ignoring the cost." Accounting issues, plus a flattening in Linn's energy output and concerns that Linn's merger with Berry may get derailed, all have weighed on Linn units. They fell 8% last week to $31, down from $38 at the time of our May article. Based in part on analysis from Hedgeye Risk Management, an independent research firm, we argued that Linn units are worth no more than book value, or about $17 per unit. Support for Linn units comes from a 9% yield. The Berry deal, which needs shareholder approval, is expected to close in the third quarter, later than originally forecast. Until the recent disclosure in a footnote on page 257 of a revised proxy for the deal, it wasn't possible to calculate the impact of the puts on Linn's distributable cash. And contrary to the impression the company has given this year in presentations aimed at thwarting short-sellers, that expense is significant. During the first quarter, the cost of puts that settled in that period was $43 million, or nearly 30% of the company's reported distributable cash flow of $150 million. Linn didn't cover its first-quarter distribution of 72.5 cents per unit even before factoring in the put cost. Including the put cost, the coverage ratio was just 63%. Some investors have said Linn is covering its distribution by selling equity 21 and debt. The company disputes this, maintaining the funds come from free cash flow. Linn says it expects to fully cover its distribution for the full year. The drop in Linn units could imperil the Berry deal. Linn will pay for Berry with shares of LinnCo (LNCO), a corporation created by Linn that holds Linn units. LinnCo trades at $37, a six-point premium to Linn, but there is reason to believe the price of the less-liquid LinnCo shares will converge with the price of the Linn units, making the deal unattractive to Berry holders. LinnCo's current premium could reflect the difficulty of shorting the stock. What's more, there could be adverse tax consequences from the Berry deal for LinnCo holders, starting in 2016. Hedgeye's Kevin Kaiser argues that LinnCo shares probably should trade at a discount to Linn units because of the tax liability. Linn cites an opinion from an independent financial advisor that found the Berry deal fair to LinnCo holders, "including the deferred tax liability." Berry investors might want to think hard about approving the Linn merger, considering Linn's aggressive accounting and the potential tax hit. Linn units may be headed lower, and that could happen quickly if the Berry deal, considered important to Linn's financial outlook, collapses. 83. On July 1, 2013, Linn and LNCO disclosed that the Securities and Exchange Commission ("SEC") had open an informal inquiry into LNCO’s proposed merger with Berry, as well as Linn and LNCO’s hedging strategies and use of non-GAAP financial measures (the same accounting issues for which Linn and LNCO had been criticized by Barron’s). 84. On this news, Linn units declined $10.50 per unit, or 31.5%, within two trading sessions, to close at $22.79 per unit on July 3, 2013. In turn, LNCO shares dropped $10.12 per share, or 27.3%, within two trading sessions, to close at $26.95 per share on July 3, 2013. PLAINTIFF’S CLASS ACTION ALLEGATIONS 85. 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 or entities who acquired LNCO shares during the Class Period and/or pursuant or traceable to the Company’s false and misleading Registration Statement for its IPO, and who were damaged thereby (the “Class”). Excluded from the Class are Defendants, the officers and directors of LNCO, members of the 22 Officer Defendants’ and Director Defendants’ immediate families and their legal representatives, heirs, successors or assigns and any entity in which Officer or Director Defendants have or had a controlling interest. 86. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, LNCO units 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, if not thousands of members in the proposed Class. 87. 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. 88. 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. 89. 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 1933 Act and/or the Exchange Act 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 financial condition, business, and prospects of LNCO;  whether defendants’ public 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  whether the defendants caused LNCO to issue false and misleading financial statements during the Class Period; 23  whether defendants acted knowingly or recklessly in issuing false and misleading financial statements;  whether the prices of LNCO shares 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. 90. 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. 91. Plaintiff will rely, in part, upon the presumption of reliance established by the fraud-on-the-market doctrine in that:  LNCO shares met the requirements for listing, and were listed and actively traded on the NASDAQ Global Select Market, a highly efficient and automated market;  As a public issuer, LNCO filed periodic public reports with the SEC and the NASDAQ;  LNCO regularly communicated with public investors via established market communication mechanisms, including through the regular dissemination of press releases via major newswire services and through other wide-ranging public disclosures, such as communications with the financial press and other similar reporting services; and  LNCO was followed by a number of securities analysts employed by major brokerage firms who wrote reports that were widely distributed and publicly available. 24 92. Based on the foregoing, the market for LNCO shares promptly digested current information regarding LNCO from all publicly available sources and reflected such information in the prices of the shares, and Plaintiff and the members of the Class are entitled to a presumption of reliance upon the integrity of the market. COUNT I For Violation of §11 of the 1933 Act (Against All Defendants) 93. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein, except as set forth below in Paragraph 95. 94. This Count is brought pursuant to §11 of the 1933 Act, 15 U.S.C. §§77k, on behalf of the Class, against all defendants. 95. This Count does not sound in fraud. All of the preceding allegations of fraud or fraudulent conduct and/or motive are specifically excluded from this Count. Plaintiff does not allege that the Officer Defendants, the Director Defendants, or the Underwriter Defendants had scienter or fraudulent intent with respect to this Count, insofar as scienter or fraudulent intent are not elements of a §11 claim. 96. The Registration Statement for the IPO was inaccurate and misleading, contained untrue statements of material facts, omitted to state other facts necessary in order to make the statements not misleading, and omitted to state material facts required to be stated therein. 97. LNCO is the registrant for the IPO. The other defendants named herein were responsible for the contents and dissemination of the Registration Statement. 98. As the issuer of the shares, LNCO is strictly liable to Plaintiff and the Class for any misstatements or omissions in the Registration Statement. 25 99. None of the 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/or without omissions of any material facts, were not misleading. 100. By reason of the conduct alleged herein, each defendant violated, and/or controlled a person who violated, §11 of the 1933 Act. 101. Plaintiff acquired LNCO shares pursuant and/or traceable to the Registration Statement for the IPO. 102. Plaintiff and the Class have sustained damages. The value of LNCO stock has declined substantially subsequent to and due to defendants’ violations. 103. At the time of their purchases of LNCO shares, Plaintiff and the other members of the Class were without knowledge of the facts concerning the wrongful conduct alleged herein and could not have reasonably discovered those facts prior to July 1, 2013. Less than one year has elapsed from the time that plaintiff discovered or reasonably could have discovered the facts upon which this complaint is based, to the time that Plaintiff filed this complaint. Less than three years elapsed between the time that the securities upon which this Count is brought were offered to the public, and the time Plaintiff filed this complaint. COUNT II For Violation of §15 of the 1933 Act (Against LNCO, Linn, the Officer Defendants and the Director Defendants) 104. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein, except as set forth below in paragraph 106. 105. This Count is brought pursuant to §15 of the 1933 Act against LNCO, Linn, the Officer Defendants, and the Director Defendants. 26 106. This Count does not sound in fraud. All of the preceding allegations of fraud or fraudulent conduct and/or motive are specifically excluded from this Count. Plaintiff does not allege that the Officer Defendants or the Director Defendants had scienter or fraudulent intent with respect to this Count, insofar as scienter or fraudulent intent are not elements of a §15 107. The Officer Defendants and the Director Defendants each were control persons of LNCO and Linn by virtue of their positions as a director and/or senior officer of LNCO and Linn. The Officer Defendants and the Director Defendants each had a series of direct and/or indirect business and/or personal relationships with other directors and/or officers and/or major shareholders of LNCO and Linn. LNCO and Linn controlled the Officer Defendants, and the Director Defendants. 99. Defendants each were culpable participants in the violations of §11 of the 1933 Act alleged in the prior Count above, based on their having signed or authorized the signing of the Registration Statement and having otherwise participated in the process which allowed the IPO to be successfully completed. COUNT III For Violations of Section 10(b) And Rule 10b-5 Promulgated Thereunder (Against LNCO, Linn and the Officer Defendants) 108. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. 109. This Count is asserted against LNCO, Linn and the Officer 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. 27 110. During the Class Period, LNCO, Linn and the Officer 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. 111. LNCO, Linn and the Officer 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; 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 LNCO common stock during the Class Period. 112. LNCO, Linn and the Officer Defendants acted with scienter in that they knew that the public documents and statements issued or disseminated in the name of LNCO 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 LNCO and Linn, their control over, and/or receipt and/or modification of LNCO’s and Linn’s allegedly materially misleading statements, and/or their associations with the Company and Linn which made them privy to confidential proprietary information concerning LNCO and Linn, participated in the fraudulent scheme alleged herein. 28 113. Officer Defendants, who are the senior officers of the Company and Linn, 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 LNCO and Linn personnel to members of the investing public, including Plaintiff and the Class. 114. As a result of the foregoing, the market price of LNCO and Linn common stock was artificially inflated during the Class Period. In ignorance of the falsity of LNCO’s, Linn’s and the Officer 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 LNCO securities during the Class Period in purchasing LNCO common stock at prices that were artificially inflated as a result of LNCO’s, Linn’s and the Officer Defendants’ false and misleading statements. 115. Had Plaintiff and the other members of the Class been aware that the market price of LNCO common stock had been artificially and falsely inflated by LNCO’s, Linn’s and the Officer Defendants’ misleading statements and by the material adverse information which LNCO’s, Linn’s and the Officer Defendants did not disclose, they would not have purchased LNCO common stock at the artificially inflated prices that they did, or at all. 116. 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. 117. By reason of the foregoing, LNCO, Linn and the Officer Defendants have violated Section 10(b) of the 1934 Act and Rule 10b-5 promulgated thereunder and are liable to 29 the plaintiff and the other members of the Class for substantial damages which they suffered in connection with their purchase of LNCO common stock during the Class Period. COUNT IV Violations of Section 20(a) of the Exchange Act (Against the Officer Defendants) 118. Plaintiff repeats and realleges each and every allegation contained in the foregoing paragraphs as if fully set forth herein. 119. During the Class Period, the Officer Defendants participated in the operation and management of LNCO and Linn, and conducted and participated, directly and indirectly, in the conduct of LNCO’s and Linn’s business affairs. Because of their senior positions, they knew the adverse non-public information about LNCO’s and Linn’s misstatement of income and expenses and false financial statements. 120. As officers and/or directors of a publicly owned company, the Officer Defendants had a duty to disseminate accurate and truthful information with respect to LNCO’s and Linn’s financial condition and results of operations, and to correct promptly any public statements issued by LNCO and Linn which had become materially false or misleading. 121. Because of their positions of control and authority as senior officers, the Officer Defendants were able to, and did, control the contents of the various reports, press releases and public filings which LNCO and Linn disseminated in the marketplace during the Class Period concerning LNCO’s and Linn’s results of operations. Throughout the Class Period, the Officer Defendants exercised their power and authority to cause LNCO and Linn to engage in the wrongful acts complained of herein. The Officer Defendants therefore, were “controlling persons” of LNCO and Linn within the meaning of Section 20(a) of the Exchange Act. In this 30 capacity, they participated in the unlawful conduct alleged which artificially inflated the market price of LNCO and Linn units. 122. By reason of the above conduct, the Officer Defendants are liable pursuant to Section 20(a) of the Exchange Act for the violations committed by LNCO and Linn. 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 17, 2013 ABRAHAM, WATKINS, NICHOLS, SORRELS, AGOSTO & FRIEND By: /s/ Sammy Ford IV Sammy Ford IV Federal Bar Number: 950682 Texas Bar Number: 24061331 800 Commerce Street Houston, TX 77002 Telephone: 713-222-7211 Facsimile: 713-225-0827 31 POMERANTZ GROSSMAN HUFFORD DAHLSTROM & GROSS LLP Jeremy A. Lieberman Lesley F. Portnoy 600 Third Avenue, 20th Floor New York, New York 10016 Telephone: (212) 661-1100 Facsimile: (212) 661-8665 jalieberman@pomlaw.com lfportnoy@pomlaw.com POMERANTZ GROSSMAN HUFFORD DAHLSTROM & GROSS LLP Patrick V. Dahlstrom Ten South LaSalle Street, Suite 3505 Chicago, Illinois 60603 Telephone: (312) 377-1181 Facsimile: (312) 377-1184 pdahlstrom@pomlaw.com WOHL & FRUCHTER LLP J. Elazar Fruchter Ethan Wohl 570 Lexington Avenue, 16th Floor New York, New York 10022 Telephone: (212) 758-4000 Facsimile: (212) 758-4004 jfruchter@wohlfruchter.com ewohl@wohlfruchter.com Attorneys for Plaintiff 32

securities

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UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION W. CURTIS SHAIN, SCOTT IRWIN, ROBERT SPILLMAN, CEDRIC MYLES, and ANTHONY CALABRO, on behalf of themselves and all others similarly situated, Plaintiffs, v ADVANCED TECHNOLOGIES GROUP, LLC and SANDISK CORPORATION, Defendants. Case No. Hon. CLASS ACTION JURY TRIAL DEMAND CLASS ACTION COMPLAINT AND JURY DEMAND Plaintiffs W. Curtis Shain, Scott Irwin, Robert Spillman, Cedric Myles, and Anthony Calabro, by their undersigned attorneys, bring this complaint against defendants Advanced Technologies Group, LLC (“ATG”) and SanDisk Corporation (“SanDisk”) (collectively “Defendants”). Plaintiffs’ allegations are based upon information and belief. Plaintiffs’ information and belief is based upon, among other things, an extensive investigation undertaken by their attorneys. NATURE OF THE ACTION 1. Plaintiffs bring this class action on behalf of themselves and all similarly situated persons, asserting claims for violations of Sections 1 and 2 of the Sherman Antitrust Act (15 U.S.C. §§ 1 and 2), breach of the implied covenant of good faith and fair dealing, unjust enrichment, conversion, unconscionability, and violations of state consumer protection laws. 2. Plaintiffs and the members of the classes they seek to represent are all released inmates of institutions run by the Federal Bureau of Prisons (“BOP”) and all current inmates of institutions run by the BOP, located throughout the United States, who purchased MP3 players and music downloads (and other audio files) from ATG while incarcerated and were harmed by Defendants’ unlawful, unfair, and deceptive conduct. 3. Plaintiffs, on behalf of themselves and all other similarly situated individuals, seek to recover damages and other forms of monetary relief in an amount to be determined at trial. In addition, Plaintiffs seek injunctive relief of, inter alia, an order directing: (a) cessation of Defendants’ wrongful, anticompetitive, and deceptive practices; (b) implementation of administrative changes designed to remedy Defendants’ current and future wrongful, anticompetitive, and deceptive practices; and (c) improved disclosure by Defendants to incarcerated customers and potential customers. JURISDICTION AND VENUE 4. The Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. §§ 1331 and 1337 because Plaintiffs allege violations of federal law, namely, Sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1 and 2) and seeks treble damages pursuant to Section 4 of the Clayton Act (15 U.S.C. § 15). In addition, Plaintiffs seek injunctive relief pursuant to Section 16 of the Clayton Act (15 U.S.C. § 26). 5. The Court has supplemental subject matter jurisdiction over the pendent state law claims pursuant to 28 U.S.C. § 1367. 6. The Court also has jurisdiction over this matter pursuant to 28 U.S.C. 1332(d), in that this is a class action in which the matter or controversy exceeds the sum of $5,000,000, exclusive of interest and costs, and in which some members of the proposed Class are citizens of a state different from Defendants. 7. This Court has personal jurisdiction over ATG and SanDisk because ATG and SanDisk continually and systematically transact business within the State of Michigan. 8. Venue is proper in the Eastern District of Michigan under 28 U.S.C. 1391(b) and (c) and 15 U.S.C. §§ 15 and 22 because: (a) ATG and SanDisk transact business and/or committed an illegal or tortious act in this District; and (b) a substantial portion of the affected interstate trade and commerce described below has been carried out in this District. PARTIES 9. Plaintiff W. Curtis Shain (“Shain”) is an individual residing in Louisville, Kentucky. From March 2010 through February 2014, Shain was an inmate at FCI Elkton in Lisbon, Ohio. Prior to his incarceration, Shain resided in Louisville, Kentucky. While incarcerated and following his release, Shain was subjected to the unlawful conduct alleged herein and has suffered damages. 10. Plaintiff Scott Irwin is an individual residing in Belleville, Michigan. From July 2013 through April 2015, Irwin was an inmate at FCI Elkton in Lisbon, Ohio. Prior to his incarceration, Irwin resided in Brownstown, Michigan. While incarcerated and following his release, Irwin, was subjected to the unlawful conduct alleged herein and has suffered damages. 11. Plaintiff Robert Spillman is an individual residing in Columbus, Ohio. From May 2008 through December 2014, Spillman was an inmate at FCI Morgantown in Morgantown, West Virginia. Prior to his incarceration, Spillman resided in Columbus, Ohio. While incarcerated and following his release, Spillman, was subjected to the unlawful conduct alleged herein and has suffered damages. 12. Plaintiff Cedric Myles is an individual residing in Indianapolis, Indiana. From May 2010 through March 2014, Myles was an inmate at FCI Elkton in Lisbon, Ohio. Prior to his incarceration, Myles resided in Indianapolis, Indiana. While incarcerated and following his release, Myles, was subjected to the unlawful conduct alleged herein and has suffered damages. 13. Plaintiff Anthony Calabro is an individual residing in Staten Island, New York. From August 2011 to June 2012, Calabro was an inmate at MDC Brooklyn. In June 2012, Calabro was transferred to FCI Fort Dix in Fort Dix, New Jersey, where he was an inmate until October 2013. Prior to his incarceration, Calabro resided in Staten Island, New York. While incarcerated and following his release, Calabro, was subjected to the unlawful conduct alleged herein and has suffered damages. 14. Defendant ATG is organized as a Missouri Limited Liability Company with its principal office in Des Moines, Iowa. 15. Defendant SanDisk is a Delaware corporation with its principal office in Milpitas, California. ADDITIONAL PERSON 16. BOP is a United States federal law enforcement agency. A subdivision of the U.S. Department of Justice, BOP is responsible for the administration of the federal prison system. BACKGROUND 17. BOP is responsible for the custody and care of more than 200,000 federal inmates confined in facilities operated and/or managed by BOP (“BOP Facilities”). 18. BOP maintains 142 facilities throughout the United States, with locations in the territory of Puerto Rico (1) and 38 states: Alabama (4), Arizona (4), Arkansas (1), California (13), Colorado (4), Connecticut (1), Florida (8), Georgia (7), Hawaii (1), Illinois (6), Indiana (1), Kansas (2), Kentucky (5), Louisiana (2), Massachusetts (1), Maryland (3), Michigan (2), Minnesota (5), Missouri (2), Mississippi (2), New Hampshire (1), New Jersey (2), New Mexico (1), New York (5), North Carolina (3), Ohio (3), Oklahoma (3), Oregon (1), Pennsylvania (10), South Carolina (4), South Dakota (1), Tennessee (2), Texas (19), Utah (1), Virginia (2), Washington (2), Wisconsin (1), and West Virginia (6). 19. Studies have shown that keeping prisoners occupied with positive leisure- time activities, such as listening to music, benefits both prisoners and the prison system. 20. According to BOP spokeswoman Traci Billingsley, “[t]he MP3 program is intended to help inmates deal with issues such as idleness, stress and boredom associated with incarceration.” Others have emphasized the importance of music for prisoners to maintain a connection to life on the outside and eventual re-entry into society. 21. BOP allows federal prisoners to purchase MP3 music players. For security reasons, these devices are sold with certain features disabled, such as the external memory slot and the integrated microphone (“Prison-Restricted MP3 Players”). The Prison-Restricted MP3 Players are not connected to the Internet, but instead, can be used to download approved songs through BOP’s secure computer interface known as the Trust Fund Limited Inmate Computer System (“TRULINCS”). 22. TRULINCS allows inmates to, among other things: (a) send and receive secure electronic messages with BOP employees; (2) process inmate trust account transactions; (3) communicate with approved members of the public using a secured electronic messaging interface (monitored by BOP staff); (4) purchase and download various copyrighted music (all music purchases are processed through the inmate’s trust account; the purchased copies and licenses do not expire and remain on the inmate’s interface); and (5) manage an inmate’s contacts. FACTUAL ALLEGATIONS RELEVANT TO ANTITRUST CLAIMS 23. In 2012, ATG signed a $5.15 million contract with BOP, which gave ATG the exclusive right to supply Prison-Restricted MP3 Players and MP3 music and audio files to inmates in BOP Facilities (the “Exclusivity Agreement”). 24. The Exclusivity Agreement was renewed and/or extended, such that ATG is, and at all relevant times has been, the exclusive supplier of Prison-Restricted MP3 Players and MP3 audio files to inmates in BOP Facilities. 25. As explained above, the Prison-Restricted MP3 Players that ATG sells to inmates in BOP Facilities include security features to limit the functionality of the MP3 audio player in certain respects. 26. Buyers of Prison-Restricted MP3 Players must register their devices in the TRULINCS system every two weeks – otherwise, the Prison-Restricted MP3 Player becomes inoperable. 27. By agreement between ATG and SanDisk, only one brand and model of MP3 music player is available for sale as a Prison-Restricted MP3 Player: SanDisk’s Sansa Clip+. 28. In or around 2012, SanDisk and ATG agreed that SanDisk would be the exclusive supplier of Prison-Restricted MP3 Players to ATG. Pursuant to this agreement, SanDisk places physical and technological locks and restrictions on the MP3 players it supplies, with the specific knowledge and/or intent that those Prison-Restricted MP3 Players are sold by ATG to inmates in BOP Facilities. 29. Inmates pay a substantially higher price for SanDisk’s Sansa Clip+ than the retail price outside of prison – approximately double (or more). ATG sells the SanDisk Prison-Restricted MP3 Player to inmates at a cost of approximately $70 to $90 (depending on the BOP facility). 30. Consumers of SanDisk Prison-Restricted MP3 Players bought from ATG can purchase as many as 1,500 songs to download and play on a SanDisk Prison- Restricted MP3 Player, but only through TRULINCS. 31. Songs can be purchased through TRULINCS for download onto ATG’s SanDisk Prison-Restricted MP3 Player at a per-song cost of $0.80, $1.20, or $1.80, depending on the song. Accordingly, a purchaser of a SanDisk Prison-Restricted MP3 Player could spend between $1,200 and $2,700 on music to download the maximum capacity of songs onto a SanDisk Prison-Restricted MP3 Player. MP3 audio books can also be purchased and downloaded through TRULINCS and onto a SanDisk Prison- Restricted MP3 Player at a price per download that is significantly higher than the per download price for song files. 32. According to data released by ATG, it has sold Prison-Restricted MP3 Players and MP3 audio files to populate those players to approximately forty percent (40%) of all federal inmates. 33. The average number of inmates released from BOP Facilities each year exceeds 50,000 inmates. Based on ATG’s sales of Prison-Restricted MP3 Players to approximately forty percent (40%) of inmates in BOP Facilities, approximately 20,000 inmates released each year from BOP Facilities purchased a SanDisk Prison-Restricted MP3 Player from ATG prior to release from prison (“Released Purchasers”). 34. There are many different MP3 audio players available for sale on the open market outside of prison from a variety of manufacturers, for different prices, with different memory capacities, and with various features and software options – such as, for example, the SanDisk Sansa Clip+, the Sony Walkman MP3 player, and the Apple iPod Nano, among others. 35. In the market for the sale of MP3 audio players to Released Purchasers (“Post-Release MP3 Players”), Released Purchasers in theory have the option of purchasing any one of many MP3 audio players available for purchase on the open market. Released Purchasers, just like other consumers of MP3 players outside of prison, should be able to rely on any number of motivating factors engendered by competition in the marketplace to determine which Post-Release MP3 Player to purchase, including price, memory capacity, software capabilities, design, compatibility with other devices (like computers), ease of downloading songs, ease of transferring files between devices, and other factors. 36. Unlike members of the general public seeking to purchase an MP3 player, Released Purchasers are subject to a distinct disadvantage: unless they purchase Post- Release MP3 Players from ATG, they will not have access to any of the songs or other audio files that they purchased during their incarceration (“Purchased Music Collection”) – songs or other audio files they previously paid for in amounts that could total as much as $2,700. 37. As explained further below, not only does ATG fail to disclose this material fact (among others) to inmates before or at the time that they purchase both Prison-Restricted MP3 Players and song and audio files from ATG, the disclosures that are first made to inmates after they purchase the Prison-Restricted MP3 Players are deceptive, misleading, and inadequate. 38. In addition, this ATG-imposed requirement represents a virtually complete barrier to entry into the market for Post-Release MP3 Players because the expense of replacing a Released Purchaser’s entire Purchased Music Collection in order to populate a Post-Release MP3 Player purchased from a source other than ATG constitutes a cost- prohibitive switching cost. The result is an impermissible tie of the purchase of a SanDisk Post-Release MP3 Player from ATG to the initial purchase of the Released Purchaser’s SanDisk Prison-Restricted MP3 Player and the purchase of the Released Purchaser’s Purchased Music Collection. 39. SanDisk, in addition to being ATG’s exclusive supplier of Prison- Restricted MP3 Players, is also ATG’s exclusive supplier of Post-Release MP3 Players. Pursuant to the continuing agreement between ATG and SanDisk, which began in 2012, SanDisk provides Post-Release MP3 Players to ATG with the specific knowledge and/or intent that they be sold to Released Purchasers as a requirement for those Released Purchasers being able to retain their Purchased Music Collections. 40. ATG accomplishes its impermissible tie by forcing the Released Purchaser to buy a SanDisk Post-Release MP3 Player – one that will operate outside a BOP facility and does not include security features that limit certain functions of Prison-Restricted MP3 Players (but not the ability to listen to music) – from ATG as a condition of a Released Purchaser’s ability to keep or use any of the Purchased Music Collection after his or her release from prison. As a result of a technological “lock” that is included in SanDisk Prison-Restricted MP3 Players purchased from ATG, the only way for a Released Purchaser to retain and use his or her Purchased Music Collection after release from prison is to purchase a SanDisk Post-Release MP3 Player from ATG. 41. ATG misleadingly describes its sale (and the Released Purchaser’s purchase) of a SanDisk Post-Release MP3 Player from ATG as “deinstitutionalization,” which is nothing more than ATG’s sale of a SanDisk Post-Release MP3 Player under the guise of a security procedure that is not necessary to enable Released Purchasers to keep their Purchased Music Collection. ATG accomplishes this by charging Released Purchasers to either: (a) “convert” an inmate’s SanDisk Prison-Restricted MP3 Player into a SanDisk Post-Release MP3 Player; or (b) provide a new SanDisk Post-Release MP3 Player that is loaded with the Released Purchaser’s Purchased Music Collection if an inmate’s SanDisk Prison-Restricted MP3 Player is missing, not working, or out of warranty. 42. ATG charges Released Purchasers up to $110 to purchase these SanDisk Post-Release MP3 Players, on top of both the $70 to $90 that they initially paid while incarcerated to purchase the SanDisk Prison-Restricted MP3 Player and the up to $2,700 that they paid while incarcerated to purchase the Purchased Music Collection. ATG knows it is extremely unlikely that any inmate would make the expensive initial outlay of $70 to $90 for a Prison-Restricted MP3 Player capable of holding 1,500 songs without then purchasing a substantial Purchased Music Collection to populate that MP3 player. 43. The fact that ATG can easily transfer a Released Purchaser’s Purchased Music Collection to a brand new device that never had any “security” features installed on it demonstrates that the so-called process of “deinstitutionalization” of a SanDisk Prison-Restricted MP3 Player is a sham and anticompetitive. 44. ATG does not allow a Released Purchaser to retain copies of the Purchased Music Collection through any method other than the purchase of a SanDisk Post-Release MP3 Player from ATG. ATG’s “Post Release Deinstitutionalization Terms of Service for MP3 Player” (“Post-Release Terms”) states that “ATG will not restore any content to a third party player,” thereby establishing a refusal to deal with Released Purchasers who desire to purchase Post-Release MP3 Players from a retailer other than ATG. 45. In addition, ATG further coerces Released Purchasers into buying ATG’s SanDisk Post-Release MP3 Player by limiting the period during which the Released Purchaser may recover the Purchased Music Collection: if a Released Purchaser does not buy a SanDisk Post-Release MP3 Player from ATG within one (1) year of release from prison, the Released Purchaser will forever be foreclosed from regaining ownership and possession of his Purchased Music Collection. 46. ATG’s message to Released Purchasers is clear: purchase your SanDisk Post-Release MP3 Player from ATG, and do it quickly, or lose your entire Purchased Music Collection, which could be as much as $2,700 – far more than the approximate cost of the ATG/SanDisk Post-Release MP3 Player itself. 47. ATG’s “deinstitutionalization” procedure enables ATG to hold hostage a Released Purchaser’s Purchased Music Collection until the Released Purchaser makes the required purchase of a SanDisk Post-Release MP3 Player from ATG. 48. ATG holds Plaintiffs’ and class members’ Purchased Music Collections hostage, leaving Plaintiffs and class members with only one economic and realistic choice to retrieve their music: a Released Purchaser must purchase a SanDisk Post- Release MP3 Player from ATG. The cost of switching to a Post-Release MP3 Player purchased from any source other than ATG – to wit, the cost of replacing the entire Purchased Music Collection – is so high that the Released Purchasers are “locked-in” to purchasing ATG’s SanDisk Post-Release MP3 Player after they are released. 49. The relevant geographic market is the United States in as much as ATG does business throughout the United States, including, without limitation, by virtue of ATG’s contractual relationship with BOP, which is responsible for the custody and care of the approximately 200,000 federal inmates confined in BOP Facilities throughout the United States, to whom ATG markets and sells Prison-Restricted MP3 Players. 50. ATG’s business activities that are the subject of this action were within the flow of, and substantially affected, interstate trade and commerce. 51. At all relevant times, ATG transacted business in a continuous and uninterrupted flow of interstate commerce throughout the United States. FACTUAL ALLEGATIONS RELEVANT TO ALL OTHER CLAIMS Defendants Fail to Disclose Material Facts to Inmates Before or at the Time of Purchase 52. ATG offers SanDisk Prison-Restricted MP3 Players for sale by including the item on the BOP-operated facility’s “Commissary List” of items for sale, which also lists other items available for purchase by inmates such as toothpaste, stamps, snacks, pens, and clothing, among others. The Commissary List, however, does not disclose the existence of terms associated with the SanDisk Prison-Restricted MP3 Players being offered for sale. 53. Purchasers of SanDisk Prison-Restricted MP3 Players are not provided with warranty information – set forth in the “SanDisk Manufacturer’s Limited Warranty” (“Warranty”), “End-User License Agreement,” and “Warranty Process and Card” (collectively, “Agreements”) – until after purchasing and receiving the Prison-Restricted MP3 Player. 54. Purchasers of SanDisk Prison-Restricted MP3 Players are also not provided with ATG’s Post-Release Terms (see supra at ¶ 44) – informing them of the material fact that if, when they become Released Purchasers, they do not purchase their SanDisk Post-Release MP3 Players from ATG, “ATG will not restore any content to a third party player” (or, that they will lose access to their Purchased Music Collection) – until after they purchase and receive the SanDisk Prison-Restricted MP3 Player. Defendants’ Deceptive Disclaimer and Modification of Warranty Coverage 55. SanDisk’s Warranty, given with the SanDisk Prison-Restricted MP3 Player and expressly incorporated by reference into ATG’s Post-Release Terms, is a one- year limited warranty providing as follows: SanDisk warrants to the end-user that this product, excluding content and/or software supplied with or on the product, will be free from material defects in manufacture, will conform to SanDisk’s published product specifications and be fit for normal use during the Warranty Period on the table commencing on the date of purchase provided that the product is legally placed on the market. To make a warranty claim please follow the process defined in section Warranty Process and Card. 56. ATG, on behalf of itself and its “supplier,” SanDisk, also uses its Post- Release Terms to unconscionably and deceptively modify and disclaim the one-year product warranty that comes with SanDisk Prison-Restricted and Post-Release MP3 Players. 57. The Post-Release Terms state that “ATG’s liability under any legal theory for any loss or damage in any way related to this product shall in no event exceed the sales price of the MP3 Player and any claims for loss or User Data is excluded.” 58. The Post-Release Terms further state: ATG AND ITS SUPPLIERS DISCLAIM ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, OR OTHERWISE WITH RESPECT TO THE PRODUCT OR SERVICES AND ACCOMPANYING WRITTEN MATERIALS INCLUDING, WITHOUT LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. THERE IS NO WARRANTY OF NON- INFRINGEMENT, TITLE OR QUIET ENJOYMENT. IF APPLICABLE LAW IMPLIES ANY WARRANTIES WITH RESPECT TO THE PRODUCT, ALL SUCH WARRANTIES ARE LIMITED IN DURATION TO SIXTY (60) DAYS FROM THE DATE OF SERVICE. NO ORAL OR WRITTEN INFORMATION OR ADVICE GIVEN BY ATG, ITS DISTRIBUTORS, AGENTS OR EMPLOYEES SHALL CREATE A WARRANTY OR IN ANY WAY INCREASE THE SCOPE OF THIS WARRANTY. 59. In other words, ATG and its suppliers (including SanDisk) purport to revoke the balance of the one-year warranty, disclaim the manufacturer’s warranty altogether, and/or shorten the duration of the implied warranty of merchantability to a period of only sixty (60) days from the date of “deinstitutionalization.” 60. SanDisk’s website includes information about, and links to, the Post- Release Terms and other documents and information corroborating SanDisk’s and ATG’s agreement to revoke, disclaim and modify SanDisk’s manufacturer’s warranty in connection with so-called “deinstitutionalization” (http://kb.sandisk.com/ app/answers/detail/a_id/12839/~/atg-mp3-player-deinstitutionalization-and warranty- processing). 61. In addition, ATG misleadingly and deceptively fails to disclose at the time of purchase that it will revoke, shorten, and/or disclaim the warranty and implied warranties in connection with MP3 Player “deinstitutionalization.” Defendants’ Disclosures are Inadequate and Unconscionable 62. Even if the disclosures described above were adequate (which they are not) and not deceptive or misleading (which they are), by the time inmates receive the Agreements and Post-Release Terms, the disclosures cannot be considered by an inmate in deciding whether or not to purchase a SanDisk Prison-Restricted MP3 Player because, as a matter of prison policy, inmates cannot return any items purchased at the Commissary unless the item is physically defective. For that purpose, therefore, the “disclosures” are meaningless. 63. In addition, the material fact that inmates will lose access to their Purchased Music Collection unless they purchase SanDisk Post-Release MP3 Players from ATG is not disclosed to inmates prior to an inmate’s purchase of both: (a) a SanDisk Prison-Restricted MP3 Player; and (b) music and audio files. 64. The Agreements and Post-Release Terms, which are single-spaced documents containing impermissibly tiny and ambiguous terms, are wholly inadequate and ineffective for members of the putative Classes, as about 41 percent of the nation’s incarcerated have less than a high school education.1 65. The Agreements and Post-Release Terms are procedurally and substantively unconscionable and unenforceable under the laws of the states in which ATG does business in that, inter alia, to the extent that they may be deemed contracts, they are contracts of adhesion in that they are standardized forms, imposed and drafted by ATG, which is a party of vastly superior bargaining strength, and presented to inmate- consumers on a “take it or leave it” basis and because it leads to overly harsh results for inmate-consumers. 66. From March 2010 through February 2014, Plaintiff Shain was incarcerated within the BOP at FCI Elkton in Lisbon, Ohio. 67. Prior to his incarceration, Shain resided in Louisville, Kentucky. 68. From July 2013 through April 2015, Plaintiff Irwin was incarcerated within the BOP at FCI Elkton in Lisbon, Ohio. 69. Prior to his incarceration, Irwin resided in Brownstown, Michigan. 70. From May 2008 through December 2014, Plaintiff Spillman was incarcerated within the BOP at FPC Morgantown in Morgantown, West Virginia. 1 Hawlow, Caroline Wolf, Education and Correctional Populations, U.S. Department of Justice, Bureau of Justice Statistics Special Report, January 2003. 71. Prior to his incarceration, Spillman resided in Columbus, Ohio. 72. From May 2010 through March 2014, Plaintiff Myles was incarcerated within the BOP at FCI Elkton in Lisbon, Ohio. 73. Prior to his incarceration, Myles resided in Indianapolis, Indiana. 74. From August 2011 through October 2013, Plaintiff Calabro was incarcerated within the BOP at MDC Brooklyn and FCI Fort Dix. 75. Prior to his incarceration, Calabro resided in Staten Island, New York. 76. During their incarceration, Plaintiffs and all members of the class purchased SanDisk Prison-Restricted MP3 Players from ATG. 77. The Plaintiffs and all members of the class were not given the Agreements related to their purchases until after they purchased and received their SanDisk Prison- Restricted MP3 Players. 78. During their incarceration, Plaintiffs and all members of the class also purchased MP3’s and other audio files, constituting their Purchased Music Collection. 79. The Plaintiffs and all members of the class were also not provided with ATG’s Post-Release Terms – and were not informed of the material fact that if, when they are released, they do not purchase a SanDisk Post-Release MP3 Player from ATG, “ATG will not restore any content to a third party player” (or, in other words, that they will lose access to their Purchased Music Collection) – until after they purchased and received the SanDisk Prison-Restricted MP3 Player. 80. The Plaintiffs and all members of the class have been deprived of their Purchased Music Collection by Defendants. 81. The Plaintiffs and all members of the class have sustained economic injury as a result of Defendants’ wrongdoing. CLASS ACTION ALLEGATIONS 82. This is a class action which seeks to: (1) enjoin Defendants’ violations of federal antitrust law; (2) enjoin Defendants’ violations of state consumer protection statutes and common law; and (3) award any and all relief and damages available for Defendants’ wrongful acts. 83. Plaintiffs bring this action pursuant to Fed. R. Civ. P. 23(a) and 23(b)(2) and (b)(3) on behalf of themselves and on behalf of all other similarly situated individuals and seek to represent the following classes and subclasses (collectively “Classes” unless specified): (a) All released inmates of institutions run by the Federal Bureau of Prisons located throughout the United States who purchased MP3 players and music and audio files while incarcerated (the “Released Purchaser National Class”); (b) All current inmates of institutions run by the Federal Bureau of Prisons located throughout the United States who purchased MP3 players and audio files while incarcerated (the “Incarcerated National Class”); (c) All current and released inmates of institutions run by the Federal Bureau of Prisons located throughout the United States who purchased MP3 players and music while incarcerated and who resided in the State of Michigan prior to their incarceration (the “Michigan Subclass”); (d) All current and released inmates of institutions run by the Federal Bureau of Prisons located throughout the United States who purchased MP3 players and music while incarcerated and who resided in the State of Kentucky prior to their incarceration (the “Kentucky Subclass”); (e) All current and released inmates of institutions run by the Federal Bureau of Prisons located throughout the United States who purchased MP3 players and music while incarcerated and who resided in the State of Ohio prior to their incarceration (the “Ohio Subclass”); (f) All current and released inmates of institutions run by the Federal Bureau of Prisons located throughout the United States who purchased MP3 players and music while incarcerated and who resided in the State of Indiana prior to their incarceration (the “Indiana Subclass”); and (g) All current and released inmates of institutions run by the Federal Bureau of Prisons located throughout the United States who purchased MP3 players and music while incarcerated and who resided in the State of New York prior to their incarceration (the “New York Subclass”). 84. The Class Period is defined as the time period applicable under the claims to be certified. 85. Excluded from the Classes are Defendants, their assigns, successors, legal representatives, and any entities in which Defendants have a controlling interest. 86. Plaintiffs reserve the right to revise these class definitions and to add additional subclasses as appropriate based on facts learned as the litigation progresses. 87. Numerosity: The Classes are sufficiently numerous that joinder of all members is impracticable. The exact number and addresses of the members of the proposed Classes is unknown and is not available to Plaintiffs at this time, however, according to ATG, more than forty percent (40%) of inmates in BOP Facilities (i.e., thousands of inmates) have purchased SanDisk Prison-Restricted MP3 Players. The number and identity of class members is readily definable and one that can easily be determined from the records maintained by the BOP, ATG, SanDisk, and/or their agents. The disposition of their claims in a class action will be of benefit to the parties and to the Court. 88. Commonality: Numerous questions of law and fact are common to the claims of Plaintiffs and the members of the proposed Classes. These include, but are not limited to, whether: a. ATG, aided by SanDisk, impermissibly ties the purchase of a SanDisk Post-Release MP3 Player from ATG to the initial purchase of the Released Purchaser’s SanDisk Prison-Restricted MP3 Player; b. ATG, aided by SanDisk, impermissibly ties the purchase of a SanDisk Post-Release MP3 Player from ATG to the initial purchase of MP3 music and audio files that make up Released Purchasers’ Purchased Music Collections; c. ATG has appreciable economic power in the market for Prison-Restricted MP3 Players; d. SanDisk impermissibly benefits from ATG’s appreciable economic power in the market for Prison-Restricted MP3 Players, and through its relationship with ATG, SanDisk also has appreciable economic power in the market for Prison-Restricted MP3 Players. e. ATG has appreciable economic power in the market for the sale of MP3 music and other audio files to inmates in BOP Facilities; f. ATG has monopoly power in the market for Post-Release MP3 Players; g. ATG violates Sections 1 and 2 of the Sherman Antitrust Act; h. SanDisk violates Sections 1 and 2 of the Sherman Antitrust Act; i. ATG, aided by SanDisk, fails to disclose to inmates before or at the time that they purchase SanDisk Prison-Restricted MP3 Players that unless Released Purchasers purchase their SanDisk Post-Release MP3 Players from ATG within one year of their release, they will permanently lose all of the MP3 music and audio files in their Purchased Music Collection; j. Defendants unconscionably modify and disclaim the product warranty that comes with SanDisk Prison-Restricted MP3 Players; k. Defendants fail to disclose the existence or terms of any warranty associated with the SanDisk Prison-Restricted MP3 Players being offered for sale until after inmates purchase and receive the SanDisk Prison-Restricted MP3 Player; l. Defendants violated the consumer protection statutes applicable to each subclass; m. ATG, aided by SanDisk, converts the MP3 music and audio file downloads purchased by Plaintiffs and the members of the Classes; n. Defendants breach the implied covenant of good faith and fair dealing with Plaintiffs and all others similarly situated by, inter alia, engaging in the acts and practices alleged herein; o. Defendants’ form contracts entered into with Plaintiffs and the members of the Classes, or any of the terms therein, are void and unenforceable; p. Defendants are being unjustly enriched by engaging in the acts and practices alleged herein; q. Plaintiffs and members of the Classes have been and continue to be damaged by Defendants’ alleged misconduct and, if so, the proper measure of their damages; and r. Defendants engage in practices that warrant equitable and injunctive relief. 89. Typicality: Plaintiffs’ claims are typical of the claims of all members of the proposed Classes. Plaintiffs and all members of the proposed Classes were damaged by the same wrongful conduct of Defendants as alleged herein and the relief sought is common to the proposed Classes. The claims of Plaintiffs and all other members of the proposed Classes arise out of the same alleged unlawful conduct. 90. Adequacy of Representation: Plaintiffs are committed to the vigorous prosecution of this action. Plaintiffs will fairly and adequately protect the interests of the members of the proposed Classes, and Plaintiffs’ interests are coincident with and not antagonistic to the other members of the proposed Classes who they seek to represent. Plaintiffs have retained counsel competent and experienced in class action, antitrust, consumer, and other complex litigation. 91. Predominance and Superiority: Questions of law common to the members of the Classes predominate over any questions affecting only individual members with respect to some or all issues presented in this Complaint. A class action is superior to other available methods for the fair and efficient adjudication of this controversy. Individual litigation of the claims of all members of the Classes is impracticable because the cost of litigation would be prohibitively expensive for each member of the Classes and would impose an immense burden upon the courts. However cumulatively, the amount of potential damage is significant and injunctive relief is required to preclude the Defendants’ ongoing wrongful conduct. 92. Prevention of Inconsistent or Varying Adjudications: 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 and legal issues. By contrast, the conduct of this action as a class action, with respect to some or all of the issues presented in this Complaint, presents fewer management difficulties, conserves the resources of the parties and of the court system, and is the only means to protect the rights of all members of the Classes. 93. Defendants have acted and will act on grounds generally applicable to the Classes as a whole, and Plaintiffs seek, inter alia, equitable remedies including final injunctive relief with respect to the Classes as a whole. 94. The likelihood that individual members of the Classes will prosecute separate actions is remote due to the time and expense necessary to conduct such litigation. Plaintiffs are not likely to be able to vindicate and enforce their rights unless this action is maintained as a class action. 95. Plaintiffs’ counsel, who are highly experienced in class actions, foresee little difficulty in the management of this case as a class action. COUNT I Violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1: Unlawful Tying: Per Se (Prison-Restricted MP3 Players) (On Behalf of the Released Purchaser National Class) 96. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 97. ATG’s conduct in requiring Released Purchasers to purchase SanDisk Post-Release MP3 Players from ATG as a condition to the ability to keep or use any of the Released Purchaser’s Purchased Music Collection after his or her release from prison constitutes a tying arrangement in per se violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, which has directly and proximately caused economic injury to Plaintiffs in an amount to be proven at trial. 98. The tying product is the SanDisk Prison-Restricted MP3 Player, which ATG has the exclusive right to sell to inmates in BOP Facilities throughout the United States as a result of its Exclusivity Agreement with the BOP. 99. The Exclusivity Agreement constitutes a complete barrier to entry for potential competitors for the sale of Prison-Restricted MP3 Players, giving ATG appreciable economic power in the market for sale of Prison-Restricted MP3 Players to inmates in BOP Facilities. ATG imposes on such purchasers an undisclosed (and, thus, unforeseeable) restriction upon their access to a necessary by-product of their purchases after release from prison – their Purchased Music Collection. 100. The tied product is the SanDisk Post-Release MP3 Player, which ATG markets to Released Purchasers and which ATG requires Released Purchasers to buy in order to retain ownership and possession of the MP3 music and other audio files that the Released Purchasers bought prior to release from prison and that make up their Purchased Music Collections, consisting of up to 1,500 songs, or up to approximately $2,700.00 worth of MP3 files. 101. Prison-Restricted MP3 Players, which are subject to the physical and technological restrictions and modifications described above, are separate and distinct products from Post-Release MP3 Players, which are not subject to those physical and/or technological restrictions. 102. ATG’s unilaterally imposed requirement that Released Purchasers purchase SanDisk Post-Release MP3 Players from ATG is an unlawful exploitation of ATG’s control over the tying product to restrain trade in the market for the tied product by forcing the Released Purchasers into the purchase of a tied product (a SanDisk Post- Release MP3 Player) from ATG, regardless of the fact that the Released Purchaser might have preferred to purchase a Post-Release MP3 Player elsewhere on different terms, as evidenced by, among other things, the fact that purchasers of the tying product who are subsequently released from prison (Released Purchasers) are thereafter permanently deprived of their up to $2,700 worth of MP3 audio files (i.e., their Purchased Music Collection) unless they first purchase the tied product from ATG within one year of their release. 103. In other words, ATG and SanDisk’s imposition of a technological lock, making purchase of the tied product from ATG (as opposed to any of ATG’s many competitors in the tied product market) a prerequisite to a Released Purchaser’s ability to retain ownership and possession of his or her Purchased Music Collection, means that a Released Purchaser’s only economically viable option is to purchase both the tying and the tied product. 104. ATG’s actions associated with the tying of SanDisk Prison-Restricted MP3 Players to the purchase of SanDisk Post-Release MP3 Players have affected a not insubstantial amount of interstate commerce in the market for the tied products. Among other things, based on ATG’s sales of SanDisk Prison-Restricted MP3 Players to approximately forty percent (40%) of inmates in BOP Facilities, approximately 20,000 inmates released each year from BOP Facilities purchased a Prison-Restricted MP3 Player from ATG prior to release from prison. Each of those Released Purchasers, upon his or her release, is faced with the “Hobson’s Choice” of purchasing a SanDisk Post- Release MP3 Player from ATG or forfeiting up to $2,700 worth of audio content in his or her Purchased Music Collection (representing many millions of dollars). 105. Each and every member of the Released Purchaser National Class has been damaged by ATG’s anticompetitive and unlawful tying arrangement. 106. Purchases of SanDisk Post-Release MP3 Players from ATG are ordered and fulfilled through the mail and, in most cases, across state lines. Purchases of audio files comprising the Purchased Music Collections are made over TRULINCS (which operates throughout BOP’s nation-wide system of institutions) and, therefore, are also concluded across state lines. 107. Pursuant to 15 U.S.C. § 15, in addition to actual damages, Plaintiffs and all other members of the Released Purchaser National Class are entitled to recover from ATG treble damages and attorney’s fees for the above-described per se violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. COUNT II Violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1: Unlawful Tying: Rule of Reason (Prison-Restricted MP3 Players) (On Behalf of the Released Purchaser National Class) 108. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 109. Alternatively, the above-described actions of ATG associated with the tying of SanDisk Prison-Restricted MP3 Players to the purchase of SanDisk Post-Release MP3 Players constitute a tying arrangement in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1 under a Rule of Reason analysis, which has directly and proximately caused economic injury to Plaintiffs in an amount to be proven at trial. 110. The tying product is the SanDisk Prison-Restricted MP3 Player, which ATG has the exclusive right to sell to inmates in BOP Facilities throughout the United States as a result of its Exclusivity Agreement with the BOP. 111. The Exclusivity Agreement constitutes a complete barrier to entry for potential competitors for the sale of Prison-Restricted MP3 Players, giving ATG appreciable economic power in the market for sale of Prison-Restricted MP3 Players to inmates in BOP Facilities. ATG imposes on such purchasers an undisclosed (and, thus, unforeseeable) restriction upon their access to a necessary by-product of their purchases after release from prison – their Purchased Music Collection. 112. The tied product is the SanDisk Post-Release MP3 Player, which ATG markets to Released Purchasers and which ATG requires Released Purchasers to buy in order to retain ownership and possession of the MP3 music and other audio files that the Released Purchasers bought prior to release from prison and that make up their Purchased Music Collections, consisting of up to 1,500 songs, or up to approximately $2,700.00 worth of MP3 files. 113. Prison-Restricted MP3 Players, which are subject to the physical and technological restrictions and modifications described above, are separate and distinct products from Post-Release MP3 Players, which are not subject to any physical and/or technological restrictions. 114. ATG’s unilaterally imposed requirement that Released Purchasers purchase SanDisk Post-Release MP3 Players from ATG is an unlawful exploitation of ATG’s control over the tying product to restrain trade in the market for the tied product by forcing the Released Purchasers into the purchase of a tied product (a SanDisk Post- Release MP3 Player) from ATG, regardless of the fact that the Released Purchaser might have preferred to purchase a Post-Release MP3 Player elsewhere on different terms, as evidenced by, among other things, the fact that purchasers of the tying product who are subsequently released from prison (Released Purchasers) are thereafter permanently deprived of their up to $2,700 worth of MP3 audio files (i.e., their Purchased Music Collection) unless they first purchase the tied product from ATG within one year of their release. 115. In other words, ATG and SanDisk’s imposition of a technological lock, making purchase of the tied product from ATG (as opposed to any of ATG’s many competitors in the tied product market) a prerequisite to a Released Purchaser’s ability to retain ownership and possession of his or her Purchased Music Collection, means that a Released Purchaser’s only economically viable option is to purchase both the tying and the tied product. 116. ATG’s actions associated with the tying of SanDisk Prison-Restricted MP3 Players to the purchase of SanDisk Post-Release MP3 Players have affected a not insubstantial amount of interstate commerce in the market for the tied products. Among other things, based on ATG’s sales of SanDisk Prison-Restricted MP3 Players to approximately forty percent (40%) of inmates in BOP Facilities, approximately 20,000 inmates released each year from BOP Facilities purchased a SanDisk Prison-Restricted MP3 Player from ATG prior to release from prison. Each of those Released Purchasers, upon his or her release, is faced with the “Hobson’s Choice” of purchasing a SanDisk Post-Release MP3 Player from ATG or forfeiting up to $2,700 worth of audio content in his or her Purchased Music Collection (representing many millions of dollars). 117. In light of the substantial investment that purchasers of SanDisk Prison- Restricted MP3 Players make in their Purchased Music Collections, ATG’s imposition of an unforeseeable restriction of the ability to access the Purchased Music Collection after release from prison has put all rational buyers in the market for Post-Release MP3 Players in the position of having only one economically viable option – the purchase from ATG of both the tying product (a SanDisk Prison-Restricted MP3 Player) and the tied product (a SanDisk Post-Release MP3 Player). The result is that all of ATG’s competitors in the market for Post-Release MP3 Players are excluded from sales to Released Purchasers, constituting an unreasonable restraint on competition in the market for Post-Release MP3 Players. 118. Each and every member of the Released Purchaser National Class has been damaged by ATG’s anticompetitive and unlawful tying arrangement. 119. Purchases of SanDisk Post-Release MP3 Players from ATG are ordered and fulfilled through the mail and, in most cases, across state lines. Purchases of audio files comprising the Purchased Music Collections are made over TRULINCS (which operates throughout BOP’s nation-wide system of institutions) and, therefore, are also concluded across state lines. 120. Pursuant to 15 U.S.C. § 15, in addition to actual damages, Plaintiffs and all other members of the Released Purchaser National Class are entitled to recover from ATG treble damages and attorney’s fees for the above-described violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. COUNT III Conspiracy to Violate Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1: Unlawful Tying: Per Se (Prison-Restricted MP3 Players) (On Behalf of the Released Purchaser National Class) 121. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 122. ATG and SanDisk’s conduct in requiring Released Purchasers to purchase SanDisk Post-Release MP3 Players from ATG as a condition to the ability to keep or use any of the Released Purchaser’s Purchased Music Collection after his or her release from prison constitutes a conspiracy to effect a tying arrangement in per se violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, which has directly and proximately caused economic injury to Plaintiffs in an amount to be proven at trial. 123. ATG and SanDisk agreed and conspired to violate Section 1 of the Sherman Act, 15 U.S.C. § 1, through this unlawful tying arrangement, as evidenced by, among other things (i) the continuing agreement, beginning in or about 2012, between ATG and SanDisk that only SanDisk’s Sansa Clip+ would be available for sale as a Prison-Restricted MP3 Player, (ii) the continuing agreement, beginning in or about 2012, between ATG and SanDisk to place physical and technological locks and restrictions on all Prison-Restricted MP3 Players with the specific knowledge and intent that those Prison-Restricted MP3 Players would be sold by ATG to inmates in BOP Facilities, (iii) ATG’s and SanDisk’s joint disclaimer and modification, in the Post-Release Terms, of the one-year product warranty that comes with SanDisk Prison Restricted MP3 Players, (iv) the continuing agreement, beginning in or about 2012, between ATG and SanDisk that SanDisk would be the exclusive supplier of Post-Release MP3 Players to ATG with the specific knowledge and/or intent that they be sold to Released Purchasers as a requirement for those Released Purchasers being able to retain their Purchased Music Collection, and (v) SanDisk’s inclusion on its website of information about, and links to, the Post-Release Terms and other documents and information concerning the so-called “deinstitutionalization” process. 124. The tying product is the SanDisk Prison-Restricted MP3 Player, which ATG has the exclusive right to sell to inmates in BOP Facilities throughout the United States as a result of its Exclusivity Agreement with the BOP. 125. The Exclusivity Agreement constitutes a complete barrier to entry for potential competitors for the sale of Prison-Restricted MP3 Players, giving ATG appreciable economic power in the market for sale of Prison-Restricted MP3 Players to inmates in BOP Facilities. ATG imposes on such purchasers an undisclosed (and, thus, unforeseeable) restriction upon their access to a necessary by-product of their purchases after release from prison – their Purchased Music Collection. 126. The tied product is the SanDisk Post-Release MP3 Player, which ATG markets to Released Purchasers and which ATG requires Released Purchasers to buy in order to retain ownership and possession of the MP3 music and other audio files that the Released Purchasers bought prior to release from prison and that make up their Purchased Music Collections, consisting of up to 1,500 songs, or up to approximately $2,700.00 worth of MP3 files. 127. Prison-Restricted MP3 Players, which are subject to the physical and technological restrictions and modifications described above, are separate and distinct products from Post-Release MP3 Players, which are not subject to those physical and/or technological restrictions. 128. Because ATG only sells physically and technologically locked SanDisk MP3 players to inmates in BOP Facilities, SanDisk’s supply of MP3 players to ATG enables ATG’s appreciable economic power in the market for the sale of Prison- Restricted MP3 Players, which also enables ATG to tie the purchase of SanDisk Post- Release MP3 Players. Through this arrangement, SanDisk functionally also has appreciable market power in the market for sale of Prison-Restricted MP3 Players and improperly benefits from the tying of those products to the purchase of SanDisk Post- Release MP3 Players. 129. ATG’s unilaterally imposed requirement that Released Purchasers purchase SanDisk Post-Release MP3 Players from ATG is an unlawful exploitation of ATG’s control over the tying product to restrain trade in the market for the tied product by forcing the Released Purchasers into the purchase of a tied product (a SanDisk Post- Release MP3 Player) from ATG, regardless of the fact that the Released Purchaser might have preferred to purchase a Post-Release MP3 Player elsewhere on different terms, as evidenced by, among other things, the fact that purchasers of the tying product who are subsequently released from prison (Released Purchasers) are thereafter permanently deprived of their up to $2,700 worth of MP3 audio files (i.e., their Purchased Music Collection) unless they first purchase the tied product from ATG within one year of their release. 130. In other words, ATG and SanDisk’s imposition of a technological lock, making purchase of the tied product from ATG (as opposed to any of ATG’s many competitors in the tied product market) a prerequisite to a Released Purchaser’s ability to retain ownership and possession of his or her Purchased Music Collection, means that a Released Purchaser’s only economically viable option is to purchase both the tying and the tied product. 131. SanDisk’s exclusive supply of Post-Release MP3 Players to ATG enables ATG’s tying and restraint of trade in the market for Post-Release MP3 Players. SanDisk improperly benefits from its contribution to the above-described tying arrangement through ATG’s exclusive, market-restrained sales of SanDisk Post-Release MP3 Players. 132. ATG and SanDisk’s actions associated with the tying of Prison-Restricted MP3 Players to the purchase of Post-Release MP3 Players have affected a not insubstantial amount of interstate commerce in the market for the tied products. Among other things, based on ATG’s sales of SanDisk Prison-Restricted MP3 Players to approximately forty percent (40%) of inmates in BOP Facilities, approximately 20,000 inmates released each year from BOP Facilities purchased a SanDisk Prison-Restricted MP3 Player from ATG prior to release from prison. Each of those Released Purchasers, upon his or her release, is faced with the “Hobson’s Choice” of purchasing a SanDisk Post-Release MP3 Player from ATG or forfeiting up to $2,700 worth of audio content in his or her Purchased Music Collection (representing many millions of dollars). 133. Each and every member of the Released Purchaser National Class has been damaged by ATG and SanDisk’s anticompetitive and unlawful tying arrangement. 134. Purchases of SanDisk Post-Release MP3 Players from ATG are ordered and fulfilled through the mail and, in most cases, across state lines. Purchases of audio files comprising the Purchased Music Collections are made over TRULINCS (which operates throughout BOP’s nation-wide system of institutions) and, therefore, are also concluded across state lines. 135. Pursuant to 15 U.S.C. § 15, in addition to actual damages, Plaintiffs and all other members of the Released Purchaser National Class are entitled to recover from ATG and SanDisk treble damages and attorney’s fees for the above-described per se violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. COUNT IV Conspiracy to Violate Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1: Unlawful Tying: Rule of Reason (Prison-Restricted MP3 Players) (On Behalf of the Released Purchaser National Class) 136. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 137. Alternatively, the above-described actions of ATG and SanDisk associated with the tying of SanDisk Prison-Restricted MP3 Players to the purchase of SanDisk Post-Release MP3 Players constitute a conspiracy to effect a tying arrangement in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1 under a Rule of Reason analysis, which has directly and proximately caused economic injury to Plaintiffs in an amount to be proven at trial. 138. ATG and SanDisk agreed and conspired to violate Section 1 of the Sherman Act, 15 U.S.C. § 1, through this unlawful tying arrangement, as evidenced by, among other things (i) the continuing agreement, beginning in or about 2012, between ATG and SanDisk that only SanDisk’s Sansa Clip+ would be available for sale as a Prison-Restricted MP3 Player, (ii) the continuing agreement, beginning in or about 2012, between ATG and SanDisk to place physical and technological locks and restrictions on all Prison-Restricted MP3 Players with the specific knowledge and intent that those Prison-Restricted MP3 Players would be sold by ATG to inmates in BOP Facilities, (iii) ATG’s and SanDisk’s joint disclaimer and modification, in the Post-Release Terms, of the one-year product warranty that comes with SanDisk Prison Restricted MP3 Players, (iv) the continuing agreement, beginning in or about 2012, between ATG and SanDisk that SanDisk would be the exclusive supplier of Post-Release MP3 Players to ATG with the specific knowledge and/or intent that they be sold to Released Purchasers as a requirement for those Released Purchasers being able to retain their Purchased Music Collection, and (v) SanDisk’s inclusion on its website of information about, and links to, the Post-Release Terms and other documents and information concerning the so-called “deinstitutionalization” process. 139. The tying product is the SanDisk Prison-Restricted MP3 Player, which ATG has the exclusive right to sell to inmates in BOP Facilities throughout the United States as a result of its Exclusivity Agreement with the BOP. 140. The Exclusivity Agreement constitutes a complete barrier to entry for potential competitors for the sale of Prison-Restricted MP3 Players, giving ATG appreciable economic power in the market for sale of Prison-Restricted MP3 Players to inmates in BOP Facilities. ATG imposes on such purchasers an undisclosed (and, thus, unforeseeable) restriction upon their access to a necessary by-product of their purchases after release from prison – their Purchased Music Collection. 141. The tied product is the SanDisk Post-Release MP3 Player, which ATG markets to Released Purchasers and which ATG requires Released Purchasers to buy in order to retain ownership and possession of the MP3 music and other audio files that the Released Purchasers bought prior to release from prison and that make up their Purchased Music Collections, consisting of up to 1,500 songs, or up to approximately $2,700.00 worth of MP3 files. 142. Prison-Restricted MP3 Players, which are subject to the physical and technological restrictions and modifications described above, are separate and distinct products from Post-Release MP3 Players, which are not subject to any physical and/or technological restrictions. 143. Because ATG only sells physically and technologically locked SanDisk MP3 players to inmates in BOP Facilities, SanDisk’s supply of MP3 players to ATG enables ATG’s appreciable economic power in the market for the sale of Prison- Restricted MP3 Players, which also enables ATG to tie the purchase of SanDisk Post- Release MP3 Players. Through this arrangement, SanDisk functionally also has appreciable market power in the market for sale of Prison-Restricted MP3 Players and improperly benefits from the tying of those products to the purchase of SanDisk Post- Release MP3 Players. 144. ATG’s unilaterally imposed requirement that Released Purchasers purchase SanDisk Post-Release MP3 Players from ATG is an unlawful exploitation of ATG’s control over the tying product to restrain trade in the market for the tied product by forcing the Released Purchasers into the purchase of a tied product (a SanDisk Post- Release MP3 Player) from ATG, regardless of the fact that the Released Purchaser might have preferred to purchase a Post-Release MP3 Player elsewhere on different terms, as evidenced by, among other things, the fact that purchasers of the tying product who are subsequently released from prison (Released Purchasers) are thereafter permanently deprived of their up to $2,700 worth of MP3 audio files (i.e., their Purchased Music Collection) unless they first purchase the tied product from ATG within one year of their release. 145. In other words, ATG and SanDisk’s imposition of a technological lock, making purchase of the tied product from ATG (as opposed to any of ATG’s many competitors in the tied product market) a prerequisite to a Released Purchaser’s ability to retain ownership and possession of his or her Purchased Music Collection, means that a Released Purchaser’s only economically viable option is to purchase both the tying and the tied product. 146. SanDisk’s exclusive supply of Post-Release MP3 Players to ATG enables ATG’s tying and restraint of trade in the market for Post-Release MP3 Players. SanDisk improperly benefits from its contribution to the above-described tying arrangement through ATG’s exclusive, market-restrained sales of SanDisk Post-Release MP3 Players. 147. ATG’s actions associated with the tying of SanDisk Prison-Restricted MP3 Players to the purchase of SanDisk Post-Release MP3 Players have affected a not insubstantial amount of interstate commerce in the market for the tied products. Among other things, based on ATG’s sales of SanDisk Prison-Restricted MP3 Players to approximately forty percent (40%) of inmates in BOP Facilities, approximately 20,000 inmates released each year from BOP Facilities purchased a SanDisk Prison-Restricted MP3 Player from ATG prior to release from prison. Each of those Released Purchasers, upon his or her release, is faced with the “Hobson’s Choice” of purchasing a SanDisk Post-Release MP3 Player from ATG or forfeiting up to $2,700 worth of audio content in his or her Purchased Music Collection (representing many millions of dollars). 148. In light of the substantial investment that purchasers of SanDisk Prison- Restricted MP3 Players make in their Purchased Music Collections, ATG’s imposition of an unforeseeable restriction of the ability to access the Purchased Music Collection after release from prison has put all rational buyers in the market for Post-Release MP3 Players in the position of having only one economically viable option – the purchase from ATG of both the tying product (a SanDisk Prison-Restricted MP3 Player) and the tied product (a SanDisk Post-Release MP3 Player). The result is that all of ATG’s competitors in the market for Post-Release MP3 Players are excluded from sales to Released Purchasers, constituting an unreasonable restraint on competition in the market for Post-Release MP3 Players. 149. Each and every member of the Released Purchaser National Class has been damaged by ATG and SanDisk’s anticompetitive and unlawful tying arrangement. 150. Purchases of SanDisk Post-Release MP3 Players from ATG are ordered and fulfilled through the mail and, in most cases, across state lines. Purchases of audio files comprising the Purchased Music Collections are made over TRULINCS (which operates throughout BOP’s nation-wide system of institutions) and, therefore, are also concluded across state lines. 151. Pursuant to 15 U.S.C. § 15, in addition to actual damages, Plaintiffs and all other members of the Released Purchaser National Class are entitled to recover from ATG and SanDisk treble damages and attorney’s fees for the above-described violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. COUNT V Violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1: Unlawful Tying: Per Se (Purchased Music Collection) (On Behalf of the Released Purchaser National Class) 152. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 153. ATG’s conduct in requiring Released Purchasers to purchase SanDisk Post-Release MP3 Players from ATG as a condition to the ability to keep or use any of the Released Purchaser’s Purchased Music Collection after his or her release from prison constitutes a tying arrangement in per se violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, which has directly and proximately caused economic injury to Plaintiffs in an amount to be proven at trial. 154. The tying products are the MP3 music and other audio files making up the Purchased Music Collection, which ATG has the exclusive right to sell to inmates in BOP Facilities throughout the United States as a result of its Exclusivity Agreement with the BOP. 155. The Exclusivity Agreement constitutes a complete barrier to entry for potential competitors for the sale of MP3 music and other audio files to inmates in BOP Facilities, giving ATG appreciable economic power in the market for sale of the tying products to inmates in BOP Facilities. 156. The tied product is the SanDisk Post-Release MP3 Player, which ATG markets to Released Purchasers and which ATG requires Released Purchasers to buy in order to retain ownership and possession of the MP3 music and other audio files that the Released Purchasers bought prior to release from prison and that make up their Purchased Music Collections, consisting of up to 1,500 songs, or up to approximately $2,700.00 worth of MP3 files. 157. MP3 music and other audio files are separate and distinct products from Post-Release MP3 Players. 158. ATG’s unilaterally imposed requirement that Released Purchasers purchase SanDisk Post-Release MP3 Players from ATG is an unlawful exploitation of ATG’s control over the tying product to restrain trade in the market for the tied product by forcing the Released Purchasers into the purchase of a tied product (a SanDisk Post- Release MP3 Player) from ATG, regardless of the fact that the Released Purchaser might have preferred to purchase a Post-Release MP3 Player elsewhere on different terms,, as evidenced by, among other things, the fact that purchasers of the tying products who are subsequently released from prison (Released Purchasers) are thereafter permanently deprived of their up to $2,700 worth of MP3 audio files (i.e., their Purchased Music Collection) unless they first purchase the tied product from ATG within one year of their release. 159. In other words, ATG and SanDisk’s imposition of a technological lock, making purchase of the tied product from ATG (as opposed to any of ATG’s many competitors in the tied product market) a prerequisite to a Released Purchaser’s ability to retain ownership and possession of his or her Purchased Music Collection, means that a Released Purchaser’s only economically viable option is to purchase both the tying and the tied product. 160. ATG’s actions associated with the tying of the MP3 music and other audio files making up the Purchased Music Collection to the purchase of SanDisk Post-Release MP3 Players have affected a not insubstantial amount of interstate commerce in the market for the tied products. Among other things, based on ATG’s sales of Prison- Restricted MP3 Players to approximately forty percent (40%) of inmates in BOP Facilities, approximately 20,000 inmates released each year from BOP Facilities purchased a the MP3 music and other audio files making up the Purchased Music Collection from ATG prior to release from prison. Each of those Released Purchasers, upon his or her release, is faced with the “Hobson’s Choice” of purchasing a SanDisk Post-Release MP3 Player from ATG or forfeiting up to $2,700 worth of audio content in his or her Purchased Music Collection (representing many millions of dollars). 161. Each and every member of the Released Purchaser National Class has been damaged by ATG’s anticompetitive and unlawful tying arrangement. 162. Purchases of SanDisk Post-Release MP3 Players from ATG are ordered and fulfilled through the mail and, in most cases, across state lines. Purchases of audio files comprising the Purchased Music Collections are made over TRULINCS (which operates throughout BOP’s nation-wide system of institutions) and, therefore, are also concluded across state lines. 163. Pursuant to 15 U.S.C. § 15, in addition to actual damages, Plaintiffs and all other members of the Released Purchaser National Class are entitled to recover from ATG treble damages and attorney’s fees for the above-described per se violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. COUNT VI Violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1: Unlawful Tying: Rule of Reason (Purchased Music Collection) (On Behalf of the Released Purchaser National Class) 164. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 165. Alternatively, the above-described actions of ATG associated with the tying of MP3 music and other audio files making up the Purchased Music Collection to the purchase of SanDisk Post-Release MP3 Players constitute a tying arrangement in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1 under a Rule of Reason analysis, which has directly and proximately caused economic injury to Plaintiffs in an amount to be proven at trial. 166. The tying products are the MP3 music and other audio files making up the Purchased Music Collection, which ATG has the exclusive right to sell to federal inmates in BOP Facilities throughout the United States as a result of its Exclusivity Agreement with the BOP. 167. The Exclusivity Agreement constitutes a complete barrier to entry for potential competitors for the sale of MP3 music and other audio files to inmates in BOP Facilities, giving ATG appreciable economic power in the market for the tying products to inmates in BOP Facilities. 168. The tied product is the SanDisk Post-Release MP3 Player, which ATG markets to Released Purchasers and which ATG requires Released Purchasers to buy in order to retain ownership and possession of the MP3 music and other audio files that the Released Purchasers bought prior to release from prison and that make up their Purchased Music Collections, consisting of up to 1,500 songs, or up to approximately $2,700.00 worth of MP3 files. 169. MP3 music and other audio files are separate and distinct products from Post-Release MP3 Players. 170. ATG’s unilaterally imposed requirement that Released Purchasers purchase SanDisk Post-Release MP3 Players from ATG is an unlawful exploitation of ATG’s control over the tying product to restrain trade in the market for the tied product by forcing the Released Purchasers into the purchase of a tied product (a SanDisk Post- Release MP3 Player) from ATG, regardless of the fact that the Released Purchaser might have preferred to purchase a Post-Release MP3 Player elsewhere on different terms, as evidenced by, among other things, the fact that purchasers of the tying products who are subsequently released from prison (Released Purchasers) are thereafter permanently deprived of their up to $2,700 worth of MP3 audio files (i.e., their Purchased Music Collection) unless they first purchase the tied product from ATG within one year of their release. 171. In other words, ATG and SanDisk’s imposition of a technological lock, making purchase of the tied product from ATG (as opposed to any of ATG’s many competitors in the tied product market) a prerequisite to a Released Purchaser’s ability to retain ownership and possession of his or her Purchased Music Collection, means that a Released Purchaser’s only economically viable option is to purchase both the tying and the tied product. 172. ATG’s actions associated with the tying of MP3 music and other audio files to the purchase of SanDisk Post-Release MP3 Players have affected a not insubstantial amount of interstate commerce in the market for the tied products. Among other things, based on ATG’s sales of Prison-Restricted MP3 Players to approximately forty percent (40%) of inmates in BOP Facilities, approximately 20,000 inmates released each year from BOP Facilities purchased MP3 music and other audio files making up the Purchased Music Collection from ATG prior to release from prison. Each of those Released Purchasers, upon his or her release, is faced with the “Hobson’s Choice” of purchasing a SanDisk Post-Release MP3 Player from ATG or forfeiting up to $2,700 worth of audio content in his or her Purchased Music Collection (representing many millions of dollars). 173. In light of the substantial investment that purchasers of MP3 music and other audio files make in their Purchased Music Collections, ATG’s imposition of an unforeseeable restriction of the ability to access the Purchased Music Collection after release from prison has put all rational buyers in the market for Post-Release MP3 Players in the position of having only one economically viable option – the purchase from ATG of both the tying products (MP3 music and other audio files) and the tied product (a SanDisk Post-Release MP3 Player). The result is that all of ATG’s competitors in the market for Post-Release MP3 Players are excluded from sales to Released Purchasers, constituting an unreasonable restraint on competition in the market for Post- Release MP3 Players. 174. Each and every member of the Released Purchaser National Class has been damaged by ATG’s anticompetitive and unlawful tying arrangement. 175. Purchases of SanDisk Post-Release MP3 Players from ATG are ordered and fulfilled through the mail and, in most cases, across state lines. Purchases of audio files comprising the Purchased Music Collections are made over TRULINCS (which operates throughout BOP’s nation-wide system of institutions) and, therefore, are also concluded across state lines. 176. Pursuant to 15 U.S.C. § 15, in addition to actual damages, Plaintiffs and all other members of the Released Purchaser National Class are entitled to recover from ATG treble damages and attorney’s fees for the above-described violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. COUNT VII Conspiracy to Violate Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1: Unlawful Tying: Per Se (Purchased Music Collection) (On Behalf of the Released Purchaser National Class) 177. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 178. ATG and SanDisk’s conduct in requiring Released Purchasers to purchase SanDisk Post-Release MP3 Players from ATG as a condition to the ability to keep or use any of the Released Purchaser’s Purchased Music Collection after his or her release from prison constitutes a conspiracy to effect a tying arrangement in per se violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, which has directly and proximately caused economic injury to Plaintiffs in an amount to be proven at trial. 179. ATG and SanDisk agreed and conspired to violate Section 1 of the Sherman Act, 15 U.S.C. § 1, through this unlawful tying arrangement, as evidenced by, among other things (i) the continuing agreement, beginning in or about 2012, between ATG and SanDisk that only SanDisk’s Sansa Clip+ would be available for sale as a Prison-Restricted MP3 Player, (ii) the continuing agreement, beginning in or about 2012, between ATG and SanDisk to place physical and technological locks and restrictions on all Prison-Restricted MP3 Players with the specific knowledge and intent that those Prison-Restricted MP3 Players would be sold by ATG to inmates in BOP Facilities, (iii) ATG’s and SanDisk’s joint disclaimer and modification, in the Post-Release Terms, of the one-year product warranty that comes with SanDisk Prison Restricted MP3 Players, (iv) the continuing agreement, beginning in or about 2012, between ATG and SanDisk that SanDisk would be the exclusive supplier of Post-Release MP3 Players to ATG with the specific knowledge and/or intent that they be sold to Released Purchasers as a requirement for those Released Purchasers being able to retain their Purchased Music Collection, and (v) SanDisk’s inclusion on its website of information about, and links to, the Post-Release Terms and other documents and information concerning the so-called “deinstitutionalization” process. 180. The tying products are the MP3 music and other audio files making up the Purchased Music Collection, which ATG has the exclusive right to sell to inmates in BOP Facilities throughout the United States as a result of its Exclusivity Agreement with the BOP. 181. The Exclusivity Agreement constitutes a complete barrier to entry for potential competitors for the sale of MP3 music and other audio files to inmates in BOP Facilities, giving ATG appreciable economic power in the market for sale of the tying products to inmates in BOP Facilities. 182. The tied product is the SanDisk Post-Release MP3 Player, which ATG markets to Released Purchasers and which ATG requires Released Purchasers to buy in order to retain ownership and possession of the MP3 music and other audio files that the Released Purchasers bought prior to release from prison and that make up their Purchased Music Collections, consisting of up to 1,500 songs, or up to approximately $2,700.00 worth of MP3 files. 183. MP3 music and other audio files are separate and distinct products from Post-Release MP3 Players. 184. Because ATG only sells physically and technologically locked SanDisk MP3 players to inmates in BOP Facilities in order for them to listen to their Purchased Music Collections, SanDisk’s supply of those MP3 players to ATG enables ATG’s appreciable economic power in the market for the sale of MP3 music and other audio files to inmates in BOP Facilities, which also enables ATG to tie the purchase of SanDisk Post-Release MP3 Players. 185. ATG’s unilaterally imposed requirement that Released Purchasers purchase SanDisk Post-Release MP3 Players from ATG is an unlawful exploitation of ATG’s control over the tying product to restrain trade in the market for the tied product by forcing the Released Purchasers into the purchase of a tied product (a SanDisk Post- Release MP3 Player) from ATG, regardless of the fact that the Released Purchaser might have preferred to purchase a Post-Release MP3 Player elsewhere on different terms, as evidenced by, among other things, the fact that purchasers of the tying products who are subsequently released from prison (Released Purchasers) are thereafter permanently deprived of their up to $2,700 worth of MP3 audio files (i.e., their Purchased Music Collection) unless they first purchase the tied product from ATG within one year of their release. 186. In other words, ATG and SanDisk’s imposition of a technological lock, making purchase of the tied product from ATG (as opposed to any of ATG’s many competitors in the tied product market) a prerequisite to a Released Purchaser’s ability to retain ownership and possession of his or her Purchased Music Collection, means that a Released Purchaser’s only economically viable option is to purchase both the tying and the tied product. 187. SanDisk’s exclusive supply of Post-Release MP3 Players to ATG enables ATG’s tying and restraint of trade in the market for Post-Release MP3 Players. SanDisk improperly benefits from its contribution to the above-described tying arrangement through ATG’s exclusive, market-restrained sales of SanDisk Post-Release MP3 Players. 188. ATG’s actions associated with the tying of the MP3 music and other audio files making up the Purchased Music Collection to the purchase of SanDisk Post-Release MP3 Players have affected a not insubstantial amount of interstate commerce in the market for the tied products. Among other things, based on ATG’s sales of Prison- Restricted MP3 Players to approximately forty percent (40%) of inmates in BOP Facilities, approximately 20,000 inmates released each year from BOP Facilities purchased a the MP3 music and other audio files making up the Purchased Music Collection from ATG prior to release from prison. Each of those Released Purchasers, upon his or her release, is faced with the “Hobson’s Choice” of purchasing a SanDisk Post-Release MP3 Player from ATG or forfeiting up to $2,700 worth of audio content in his or her Purchased Music Collection (representing many millions of dollars). 189. Each and every member of the Released Purchaser National Class has been damaged by ATG and SanDisk’s anticompetitive and unlawful tying arrangement. 190. Purchases of SanDisk Post-Release MP3 Players from ATG are ordered and fulfilled through the mail and, in most cases, across state lines. Purchases of audio files comprising the Purchased Music Collections are made over TRULINCS (which operates throughout BOP’s nation-wide system of institutions) and, therefore, are also concluded across state lines. 191. Pursuant to 15 U.S.C. § 15, in addition to actual damages, Plaintiffs and all other members of the Released Purchaser National Class are entitled to recover from ATG and SanDisk treble damages and attorney’s fees for the above-described per se violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. COUNT VIII Conspiracy to Violate Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1: Unlawful Tying: Rule of Reason (Purchased Music Collection) (On Behalf of the Released Purchaser National Class) 192. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 193. Alternatively, the above-described actions of ATG and SanDisk associated with the tying of MP3 music and other audio files making up the Purchased Music Collection to the purchase of SanDisk Post-Release MP3 Players constitute a conspiracy to effect tying arrangement in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1 under a Rule of Reason analysis, which has directly and proximately caused economic injury to Plaintiffs in an amount to be proven at trial. 194. ATG and SanDisk agreed and conspired to violate Section 1 of the Sherman Act, 15 U.S.C. § 1, through this unlawful tying arrangement, as evidenced by, among other things (i) the continuing agreement, beginning in or about 2012, between ATG and SanDisk that only SanDisk’s Sansa Clip+ would be available for sale as a Prison-Restricted MP3 Player, (ii) the continuing agreement, beginning in or about 2012, between ATG and SanDisk to place physical and technological locks and restrictions on all Prison-Restricted MP3 Players with the specific knowledge and intent that those Prison-Restricted MP3 Players would be sold by ATG to inmates in BOP Facilities, (iii) ATG’s and SanDisk’s joint disclaimer and modification, in the Post-Release Terms, of the one-year product warranty that comes with SanDisk Prison Restricted MP3 Players, (iv) the continuing agreement, beginning in or about 2012, between ATG and SanDisk that SanDisk would be the exclusive supplier of Post-Release MP3 Players to ATG with the specific knowledge and/or intent that they be sold to Released Purchasers as a requirement for those Released Purchasers being able to retain their Purchased Music Collection, and (v) SanDisk’s inclusion on its website of information about, and links to, the Post-Release Terms and other documents and information concerning the so-called “deinstitutionalization” process. 195. The tying products are the MP3 music and other audio files making up the Purchased Music Collection, which ATG has the exclusive right to sell to federal inmates in BOP Facilities throughout the United States as a result of its Exclusivity Agreement with the BOP. 196. The Exclusivity Agreement constitutes a complete barrier to entry for potential competitors for the sale of MP3 music and other audio files to inmates in BOP Facilities, giving ATG appreciable economic power in the market for the tying products to inmates in BOP Facilities. 197. The tied product is the SanDisk Post-Release MP3 Player, which ATG markets to Released Purchasers and which ATG requires Released Purchasers to buy in order to retain ownership and possession of the MP3 music and other audio files that the Released Purchasers bought prior to release from prison and that make up their Purchased Music Collections, consisting of up to 1,500 songs, or up to approximately $2,700.00 worth of MP3 files. 198. MP3 music and other audio files are separate and distinct products from Post-Release MP3 Players. 199. Because ATG only sells physically and technologically locked SanDisk MP3 players to inmates in BOP Facilities in order for them to listen to their Purchased Music Collections, SanDisk’s supply of those MP3 players to ATG enables ATG’s appreciable economic power in the market for the sale of MP3 music and other audio files to inmates in BOP Facilities, which also enables ATG to tie the purchase of SanDisk Post-Release MP3 Players. 200. ATG’s unilaterally imposed requirement that Released Purchasers purchase SanDisk Post-Release MP3 Players from ATG is an unlawful exploitation of ATG’s control over the tying product to restrain trade in the market for the tied product by forcing the Released Purchasers into the purchase of a tied product (a SanDisk Post- Release MP3 Player) from ATG, regardless of the fact that the Released Purchaser might have preferred to purchase a Post-Release MP3 Player elsewhere on different terms, as evidenced by, among other things, the fact that purchasers of the tying products who are subsequently released from prison (Released Purchasers) are thereafter permanently deprived of their up to $2,700 worth of MP3 audio files (i.e., their Purchased Music Collection) unless they first purchase the tied product from ATG within one year of their release. 201. In other words, ATG and SanDisk’s imposition of a technological lock, making purchase of the tied product from ATG (as opposed to any of ATG’s many competitors in the tied product market) a prerequisite to a Released Purchaser’s ability to retain ownership and possession of his or her Purchased Music Collection, means that a Released Purchaser’s only economically viable option is to purchase both the tying and the tied product. 202. SanDisk’s exclusive supply of Post-Release MP3 Players to ATG enables ATG’s tying and restraint of trade in the market for Post-Release MP3 Players. SanDisk improperly benefits from its contribution to the above-described tying arrangement through ATG’s exclusive, market-restrained sales of SanDisk Post-Release MP3 Players. 203. ATG’s actions associated with the tying of MP3 music and other audio files to the purchase of SanDisk Post-Release MP3 Players have affected a not insubstantial amount of interstate commerce in the market for the tied products. Among other things, based on ATG’s sales of Prison-Restricted MP3 Players to approximately forty percent (40%) of inmates in BOP Facilities, approximately 20,000 inmates released each year from BOP Facilities purchased MP3 music and other audio files making up the Purchased Music Collection from ATG prior to release from prison. Each of those Released Purchasers, upon his or her release, is faced with the “Hobson’s Choice” of purchasing a SanDisk Post-Release MP3 Player from ATG or forfeiting up to $2,700 worth of audio content in his or her Purchased Music Collection (representing many millions of dollars). 204. In light of the substantial investment that purchasers of MP3 music and other audio files make in their Purchased Music Collections, ATG’s imposition of an unforeseeable restriction of the ability to access the Purchased Music Collection after release from prison has put all rational buyers in the market for Post-Release MP3 Players in the position of having only one economically viable option – the purchase from ATG of both the tying products (MP3 music and other audio files) and the tied product (a SanDisk Post-Release MP3 Player). The result is that all of ATG’s competitors in the market for Post-Release MP3 Players are excluded from sales to Released Purchasers, constituting an unreasonable restraint on competition in the market for Post- Release MP3 Players. 205. Each and every member of the Released Purchaser National Class has been damaged by ATG and SanDisk’s anticompetitive and unlawful tying arrangement. 206. Purchases of SanDisk Post-Release MP3 Players from ATG are ordered and fulfilled through the mail and, in most cases, across state lines. Purchases of audio files comprising the Purchased Music Collections are made over TRULINCS (which operates throughout BOP’s nation-wide system of institutions) and, therefore, are also concluded across state lines. 207. Pursuant to 15 U.S.C. § 15, in addition to actual damages, Plaintiffs and all other members of the Released Purchaser National Class are entitled to recover from ATG and SanDisk treble damages and attorney’s fees for the above-described violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. COUNT IX Violation of Section 2 of the Sherman Antitrust Act, 15 U.S.C. § 2: Unlawful Monopolization (On Behalf of the Released Purchaser National Class) 208. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 209. Pursuant to its Exclusivity Agreement, which constitutes a complete barrier to entry for potential competitors for the sale of Prison-Restricted MP3 Players and MP3 music and audio files, ATG is the only seller of Prison-Restricted MP3 Players and MP3 music and audio files to inmates in BOP Facilities. 210. ATG utilizes its Exclusivity Agreement to impose upon all purchasers of (1) its SanDisk Prison-Restricted MP3 Players and (2) its MP3 music and audio files making up the Purchased Music Collection an unforeseeable restriction of Released Purchasers’ ability to retain ownership and possession of their Purchased Music Collection after release from prison unless they purchase a SanDisk Post-Release MP3 Players from ATG. These acts have had exclusionary and anti-competitive effects with respect to the market for sales of Post-Release MP3 Players, constituting ATG’s willful acquisition and maintenance of monopoly power in the market for Post-Release MP3 Players. 211. ATG’s utilization of its Exclusivity Agreement to deprive Released Purchasers of their Purchased Music Collections unless they purchase a SanDisk Post- Release MP3 Player from ATG imposes prohibitive switching costs upon any Released Purchaser who desires to purchase a Post-Release MP3 Player from any source other than ATG, thereby harming competition generally in the market for Post-Release MP3 Players and enabling ATG to maintain a monopoly in the market. 212. ATG’s willful and unlawful exercise of its monopoly power over the market for Post-Release MP3 Players has excluded all suppliers of MP3 players, other than ATG, from sales of Post-Release MP3 players to Released Purchasers. 213. Plaintiffs and the Released Purchaser National Class have been injured in fact by ATG’s unlawful monopolization because they have been deprived of the choice of purchasing lower cost and/or better quality alternatives to ATG’s SanDisk Post- Release MP3 Players. 214. ATG’s conduct associated with the sale of Post-Release MP3 Players constitutes unlawful monopolization in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2, which has directly and proximately caused economic injury to Plaintiffs and the Released Purchaser National Class in an amount to be proven at trial. 215. Pursuant to 15 U.S.C. § 15, Plaintiffs and all other members of the Released Purchaser National Class are entitled to recover from ATG treble damages and attorney’s fees for the above-described violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. COUNT X Violation of Section 2 of the Sherman Antitrust Act, 15 U.S.C. § 2: Unlawful Attempted Monopolization (On Behalf of the Released Purchaser National Class) 216. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 217. Alternatively, ATG has engaged in exclusionary, predatory, and anticompetitive conduct with a specific intent to monopolize the market for Post-Release MP3 Players. 218. Specifically, ATG has attempted unlawfully to acquire monopoly power in the market for Post-Release MP3 Players by imposing upon all purchasers of (1) its SanDisk Prison-Restricted MP3 Players and (2) its MP3 music and audio files making up the Purchased Music Collection, through utilization of its Exclusivity Agreement, an unforeseeable restriction of Released Purchasers’ ability to retain ownership and possession of their Purchased Music Collections after release from prison unless they purchase SanDisk Post-Release MP3 Players from ATG. These acts have had exclusionary and anti-competitive effects with respect to the market for sales of Post- Release MP3 Players, on which ATG is capitalizing in an attempt to monopolize the market for Post-Release MP3 Players. 219. ATG is attempting to monopolize the market for Post-Release MP3 Players through its anticompetitive, willful, and unlawful actions, utilizing its Exclusivity Agreement to deprive Released Purchasers of their Purchased Music Collections unless they purchase a SanDisk Post-Release MP3 Player from ATG. This imposes prohibitive switching costs upon any Released Purchaser who desires to purchase a Post-Release MP3 Player from any source other than ATG, thereby harming competition generally in the market for Post-Release MP3 Players by excluding all suppliers of MP3 players, other than ATG, from sales of Post-Release MP3 players to Released Purchasers. 220. ATG does not have a legitimate business justification for its exclusionary, predatory, and anticompetitive conduct. 221. ATG’s anticompetitive actions have created a dangerous probability that ATG will achieve monopoly power in the market for Post-Release MP3 Players because ATG has already unlawfully achieved an economically significant degree of market power in that market and has effectively foreclosed new and potential entrants from entering the market or gaining their naturally competitive market shares. 222. ATG’s anticompetitive actions have created substantial barriers to entry by competitors into the market for Post-Release MP3 Players – namely, the prohibitive switching costs imposed upon Released Purchasers desiring to purchase a Post-Release MP3 Player from any source other than ATG. 223. Plaintiffs and the Released Purchaser National Class have been injured in fact by ATG’s unlawful attempted monopolization because they have been deprived of the choice of purchasing lower cost and/or better quality alternatives to ATG’s SanDisk Post-Release MP3 Players. 224. ATG’s conduct associated with the sale of Post-Release MP3 Players constitutes unlawful attempted monopolization in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2, which has directly and proximately caused economic injury to Plaintiffs and the Released Purchaser National Class in an amount to be proven at trial. 225. Pursuant to 15 U.S.C. § 15, Plaintiffs and all other members of the Released Purchaser National Class are entitled to recover from ATG treble damages and attorney’s fees for the above-described violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. COUNT XI Conspiracy to Violate Section 2 of the Sherman Antitrust Act, 15 U.S.C. § 2: Unlawful Monopolization (On Behalf of the Released Purchaser National Class) 226. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 227. ATG and SanDisk agreed and conspired to violate Section 2 of the Sherman Act, 15 U.S.C. § 2, through unlawful monopolization, as evidenced by, among other things (i) the continuing agreement, beginning in or about 2012, between ATG and SanDisk that only SanDisk’s Sansa Clip+ would be available for sale as a Prison- Restricted MP3 Player, (ii) the continuing agreement, beginning in or about 2012, between ATG and SanDisk to place physical and technological locks and restrictions on all Prison-Restricted MP3 Players with the specific knowledge and intent that those Prison-Restricted MP3 Players would be sold by ATG to inmates in BOP Facilities, (iii) ATG’s and SanDisk’s joint disclaimer and modification, in the Post-Release Terms, of the one-year product warranty that comes with SanDisk Prison Restricted MP3 Players, (iv) the continuing agreement, beginning in or about 2012, between ATG and SanDisk that SanDisk would be the exclusive supplier of Post-Release MP3 Players to ATG with the specific knowledge and/or intent that they be sold to Released Purchasers as a requirement for those Released Purchasers being able to retain their Purchased Music Collection, and (v) SanDisk’s inclusion on its website of information about, and links to, the Post-Release Terms and other documents and information concerning the so-called “deinstitutionalization” process. 228. Pursuant to its Exclusivity Agreement, which constitutes a complete barrier to entry for potential competitors for the sale of Prison-Restricted MP3 Players and MP3 music and audio files, ATG is the only seller of MP3 music and audio files to inmates in BOP Facilities and in conjunction with SanDisk is the only seller of Prison- Restricted MP3 Players to inmates in BOP Facilities. 229. ATG and SanDisk utilize ATG’s Exclusivity Agreement to impose upon all purchasers of (1) its SanDisk Prison-Restricted MP3 Players and (2) its MP3 music and audio files making up the Purchased Music Collection an unforeseeable restriction of Released Purchasers’ ability to retain ownership and possession of their Purchased Music Collection after release from prison unless they purchase a SanDisk Post-Release MP3 Players from ATG. These acts have had exclusionary and anti-competitive effects with respect to the market for sales of Post-Release MP3 Players, constituting ATG’s willful acquisition and maintenance, with the aid and support of SanDisk, of monopoly power in the market for Post-Release MP3 Players. 230. ATG’s and SanDisk’s utilization of ATG’s Exclusivity Agreement to deprive Released Purchasers of their Purchased Music Collections unless they purchase a SanDisk Post-Release MP3 Player from ATG imposes prohibitive switching costs upon any Released Purchaser who desires to purchase a Post-Release MP3 Player from any source other than ATG, thereby harming competition generally in the market for Post- Release MP3 Players and enabling ATG to maintain a monopoly in the market. 231. Because ATG only sells physically and technologically locked SanDisk MP3 players to inmates in BOP Facilities and also only sells SanDisk MP3 players to Released Purchasers, SanDisk’s supply of MP3 players to ATG enables ATG’s scheme and monopolization of the market for Post-Release MP3 Players. 232. ATG’s willful and unlawful exercise of its monopoly power over the market for Post-Release MP3 Players has excluded all suppliers of MP3 players, other than ATG, from sales of Post-Release MP3 players to Released Purchasers. 233. SanDisk’s exclusive supply of Post-Release MP3 Players to ATG enables ATG’s monopoly in the market for Post-Release MP3 Players. SanDisk improperly benefits from its contribution to ATG’s monopoly through ATG’s exclusive, market- restrained sales of SanDisk Post-Release MP3 Players. 234. Plaintiffs and the Released Purchaser National Class have been injured in fact by ATG’s unlawful monopolization because they have been deprived of the choice of purchasing lower cost and/or better quality alternatives to ATG’s SanDisk Post- Release MP3 Players. 235. ATG and SanDisk’s conduct associated with the sale of Post-Release MP3 Players constitutes unlawful monopolization in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2, which has directly and proximately caused economic injury to Plaintiffs and the Released Purchaser National Class in an amount to be proven at trial. 236. Pursuant to 15 U.S.C. § 15, Plaintiffs and all other members of the Released Purchaser National Class are entitled to recover from ATG and SanDisk treble damages and attorney’s fees for the above-described violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. COUNT XII Conspiracy to Violate Section 2 of the Sherman Antitrust Act, 15 U.S.C. § 2: Unlawful Attempted Monopolization (On Behalf of the Released Purchaser National Class) 237. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 238. Alternatively, ATG and SanDisk have engaged in exclusionary, predatory, and anticompetitive conduct with a specific intent to monopolize the market for Post- Release MP3 Players. 239. ATG and SanDisk agreed and conspired to violate Section 2 of the Sherman Act, 15 U.S.C. § 2, through unlawful attempted monopolization, as evidenced by, among other things (i) the continuing agreement, beginning in or about 2012, between ATG and SanDisk that only SanDisk’s Sansa Clip+ would be available for sale as a Prison-Restricted MP3 Player, (ii) the continuing agreement, beginning in or about 2012, between ATG and SanDisk to place physical and technological locks and restrictions on all Prison-Restricted MP3 Players with the specific knowledge and intent that those Prison-Restricted MP3 Players would be sold by ATG to inmates in BOP Facilities, (iii) ATG’s and SanDisk’s joint disclaimer and modification, in the Post-Release Terms, of the one-year product warranty that comes with SanDisk Prison Restricted MP3 Players, (iv) the continuing agreement, beginning in or about 2012, between ATG and SanDisk that SanDisk would be the exclusive supplier of Post-Release MP3 Players to ATG with the specific knowledge and/or intent that they be sold to Released Purchasers as a requirement for those Released Purchasers being able to retain their Purchased Music Collection, and (v) SanDisk’s inclusion on its website of information about, and links to, the Post-Release Terms and other documents and information concerning the so-called “deinstitutionalization” process. 240. Specifically, ATG and SanDisk have attempted unlawfully to establish ATG’s monopoly power in the market for Post-Release MP3 Players by imposing upon all purchasers of (1) SanDisk Prison-Restricted MP3 Players and (2) MP3 music and audio files making up the Purchased Music Collection, through utilization of ATG’s Exclusivity Agreement, an unforeseeable restriction of Released Purchasers’ ability to retain ownership and possession of their Purchased Music Collections after release from prison unless they purchase SanDisk Post-Release MP3 Players from ATG. These acts have had exclusionary and anti-competitive effects with respect to the market for sales of Post-Release MP3 Players, on which ATG and SanDisk are capitalizing in an attempt to have ATG monopolize the market for Post-Release MP3 Players. 241. By depriving Released Purchasers of their Purchased Music Collections unless they purchase a SanDisk Post-Release MP3 Player from ATG, ATG and SanDisk impose prohibitive switching costs upon any Released Purchaser who desires to purchase a Post-Release MP3 Player from any source other than ATG, thereby harming competition generally in the market for Post-Release MP3 Players by excluding all suppliers of MP3 players, other than ATG, from sales of Post-Release MP3 players to Released Purchasers. 242. Because ATG only sells physically and technologically locked SanDisk MP3 players to inmates in BOP Facilities and also only sells SanDisk MP3 players to Released Purchasers, SanDisk’s supply of MP3 players to ATG enables ATG’s scheme and attempted monopolization of the market for Post-Release MP3 Players. 243. ATG’s willful and unlawful exercise of its market power over the market for Post-Release MP3 Players has excluded all suppliers of MP3 players, other than ATG, from sales of Post-Release MP3 players to Released Purchasers. 244. ATG does not have a legitimate business justification for its exclusionary, predatory, and anticompetitive conduct. 245. ATG’s and SanDisk’s anticompetitive actions have created a dangerous probability that ATG will achieve monopoly power in the market for Post-Release MP3 Players because ATG has already unlawfully achieved an economically significant degree of market power in that market and has effectively foreclosed new and potential entrants from entering the market or gaining their naturally competitive market shares. 246. SanDisk’s exclusive supply of Post-Release MP3 Players to ATG enables ATG’s attempted monopoly in the market for Post-Release MP3 Players. SanDisk improperly benefits from its contribution to ATG’s attempted monopoly through ATG’s exclusive, market-restrained sales of SanDisk Post-Release MP3 Players. 247. ATG’s and SanDisk’s anticompetitive actions have created substantial barriers to entry by competitors into the market for Post-Release MP3 Players – namely, the prohibitive switching costs imposed upon Released Purchasers desiring to purchase a Post-Release MP3 Player from any source other than ATG. 248. Plaintiffs and the Released Purchaser National Class have been injured in fact by ATG’s unlawful attempted monopolization because they have been deprived of the choice of purchasing lower cost and/or better quality alternatives to ATG’s SanDisk Post-Release MP3 Players. 249. ATG and SanDisk’s conduct associated with the sale of Post-Release MP3 Players constitutes unlawful attempted monopolization in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2, which has directly and proximately caused economic injury to Plaintiffs and the Released Purchaser National Class in an amount to be proven at trial. 250. Pursuant to 15 U.S.C. § 15, Plaintiffs and all other members of the Released Purchaser National Class are entitled to recover from ATG and SanDisk treble damages and attorney’s fees for the above-described violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. COUNT XIII Conversion (On Behalf of the Released Purchaser National Class) 251. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 252. Plaintiffs and all other members of the Released Purchaser National Class had the right to possess the music downloads that they had purchased while incarcerated at the time that they were released from incarceration. 253. Through their actions, ATG and SanDisk, have wrongfully exercised dominion and control over the music downloads and have willfully and intentionally denied Plaintiffs and all other members of the Released Purchaser National Class possession of, and the right to use and enjoy, their property. Plaintiffs and the Released Purchaser National Class have been damaged as a result of ATG and SanDisk’s conversion, as they have been deprived of the value, use, and enjoyment of their property. 254. ATG and SanDisk’s actions have caused Plaintiffs and all other members of the Released Purchaser National Class loss of their property and, as a result, Plaintiffs and all other members of the Released Purchaser National Class have been damaged in an amount to be determined at trial. COUNT XIV Unconscionability (On Behalf of the Released Purchaser National Class and the Incarcerated National Class) 255. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 256. ATG’s policies and practices alleged herein are procedurally and substantively unconscionable. 257. Considering the great business acumen and experience of ATG in relation to Plaintiffs, the Released Purchaser National Class, and the Incarcerated National Class, the great disparity in the parties’ relative bargaining power, the inconspicuousness, incomprehensibility, and/or omission of the contract terms at issue, the oppressiveness of the terms, the commercial unreasonableness of the contract terms, the purpose and effect of the terms, the allocation of the risk between the parties, and similar public policy concerns, these terms are unconscionable and, therefore, unenforceable as a matter of law. 258. In addition, the imposition of the charges alleged herein, including, inter alia, deinstitutionalization fees, is itself unconscionable, as such charges are not reasonably related to ATG’s cost of deinstitutionalizing the MP3 players. 259. In addition, ATG’s policy and practice of denying released inmates possession of their Purchased Music Collection (i.e., up to $2,700 worth of MP3 audio files) unless they first purchase the SanDisk Post-Release MP3 Player from ATG within one year of their release, is unconscionable. 260. Plaintiffs and the members of the Released Purchaser National Class and the Incarcerated National Class have sustained damages as a result of ATG’s unconscionable policies and practices as alleged herein in an amount to be determined at trial. COUNT XV Breach of the Implied Covenant of Good Faith and Fair Dealing (On Behalf of the State Subclasses) 261. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 262. Implied into every contract is a covenant of good faith and fair dealing that requires the parties to act in good faith in their dealings with each other. This is especially true of the party that is in a stronger position and has the ability to exercise discretion. That discretion is required to be exercised in good faith. 263. Defendants have a duty to exercise good faith and fair dealing when selling Prison-Restricted MP3 Players to consumers, including Plaintiffs and all other members of the State Subclasses. 264. Defendants violated the implied covenant of good faith and fair dealing by engaging in the misleading and deceptive acts and practices described above, and thus deprived Plaintiffs and all other members of the State Subclasses of the benefit of their bargain. 265. As a consequence of the foregoing, Defendants are liable to Plaintiffs and all other members of the State Subclasses for damages in an amount to be determined at trial. COUNT XVI Unjust Enrichment (On Behalf of the Released Purchaser National Class and the Incarcerated National Class) 266. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 267. As set forth above, Defendants have engaged in improper, unlawful, and/or unjust acts, all to the harm and detriment of Plaintiffs and all other members of the Released Purchaser National Class and Incarcerated National Class. 268. When Plaintiffs and all other members of the Released Purchaser National Class and the Incarcerated National Class paid Defendants, they reasonably believed that they were legally obligated to make such payments based on Defendants’ improper, unlawful, and/or unjust acts. 269. Defendants have been enriched at the expense of Plaintiffs and all other members of the Released Purchaser National Class and the Incarcerated National Class by virtue of the payments made to which Defendants were not entitled, which constitute a benefit that Defendants voluntarily accepted notwithstanding their improper, unlawful, and unjust scheme. 270. But for Defendants’ wrongful conduct, they would not have received and continue to receive payments from Plaintiffs and all other members of the Released Purchaser National Class and the Incarcerated National Class. 271. Defendants’ retention of the payments violates fundamental principles of justice, equity, and good conscience. 272. By virtue of the foregoing, Defendants have been unjustly enriched in an amount to be determined at trial. COUNT XVII Michigan Consumer Protection Act, MCL § 445.901, et seq. (On Behalf of the Michigan Subclass) 273. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 274. The Michigan Consumer Protection Act prohibits “Unfair, unconscionable, or deceptive methods, acts, or practices in the conduct of trade or commerce.” MCL § 445.903. 275. Plaintiff Scott Irwin and members of the Michigan Subclass purchased “goods or services primarily for personal, family or household purposes” as alleged herein. 276. Defendants engaged in unfair, false, misleading, or deceptive acts or practices through the unlawful conduct alleged herein. 277. As a result of Defendants’ unfair, false, misleading, or deceptive acts or practices alleged herein, Plaintiff Scott Irwin and the members of the Michigan Subclass have suffered an ascertainable loss of money or property in an amount to be determined at trial. COUNT XVIII Michigan Statutory Conversion, MCL § 600.2919a (On Behalf of the Michigan Subclass) 278. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 279. Plaintiff Scott Irwin and all other members of the Michigan Subclass, at all relevant times, owned and had the right to possess the music downloads that they had purchased while incarcerated at the time that they were released from incarceration. 280. Through their actions, ATG and SanDisk have wrongfully exercised dominion and control over the music downloads and have willfully and intentionally denied Plaintiff Scott Irwin and all other members of the Michigan Subclass possession of, and the right to use and enjoy, their property. Plaintiff Scott Irwin and the Michigan Subclass have been damaged as a result of ATG and SanDisk’s conversion as they have been deprived of the value, use, and enjoyment of their property. 281. ATG and SanDisk concealed, embezzled, or converted the property of Plaintiff Scott Irwin and the Michigan Subclass for their own use in violation of MCL § 600.2919a. 282. ATG and SanDisk’s conduct as alleged herein constitutes a conversion of the music downloads of Plaintiff Scott Irwin and the Michigan Subclass. 283. By reason of ATG and SanDisk’s conversion, Plaintiff Scott Irwin and the Michigan Subclass have incurred substantial damages in the form of the value of the music downloads in their Purchased Music Collections, plus all consequential damages flowing from ATG and SanDisk’s conversion. 284. As a result of ATG and SanDisk’s conversion, and pursuant to MCL § 600.2919a, Plaintiff Scott Irwin and all other members of the Michigan Subclass are entitled to recovery of three times the amount of the actual damages, plus costs and reasonable attorneys’ fees, in addition to any other available rights or remedies. COUNT XIX Kentucky Consumer Protection Act, KRS §§ 367.110 et seq. (On Behalf of the Kentucky Subclass) 285. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 286. The Kentucky Consumer Protection Act prohibits “[u]nfair, false, misleading, or deceptive acts or practices in the conduct of any trade or commerce.” 287. Plaintiff W. Curtis Shain and members of the Kentucky Subclass purchased “goods or services primarily for personal, family or household purposes” as alleged herein. 288. Defendants engaged in unfair, false, misleading, or deceptive acts or practices through the unlawful conduct alleged herein. 289. As a result of Defendants’ unfair, false, misleading, or deceptive acts or practices alleged herein, Plaintiff W. Curtis Shain and the members of the Kentucky Subclass have suffered an ascertainable loss of money or property in an amount to be determined at trial. COUNT XX Indiana Deceptive Consumer Sales Act, Ind. Code §§ 24-5-0.5-1 et seq. (On Behalf of the Indiana Subclass) 290. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 291. Defendants’ practices alleged herein of selling MP3 players and music downloads (and other audio files) constitute a “consumer transaction” within Ind. Code Ann. § 24-5-0.5-2(a)(1), as it is “a sale … assignment, award by chance, or other disposition of an item of personal property … to a person for purposes that are primarily personal, familial, charitable, agricultural, or household, or a solicitation to supply any of these things.” 292. Each defendant is a “supplier” within § 24-5-0.5-2(3), because it is a “seller … who regularly engages in or solicits consumer transactions …. The term includes a manufacturer, wholesaler, or retailer, whether or not the person deals directly with the consumer.” 293. Defendants engaged in “deceptive acts” within § 24-5-0.5-3 generally and § 24-5-0.5-3(a)(1) and (10) specifically by making the representations and omissions alleged herein. 294. Defendants’ actions were “incurable” within the meaning of § 24-5-0.5- 2(a)(8), since it is “a deceptive act done by a supplier as part of a scheme, artifice, or device with intent to defraud or mislead …” 295. The Court may increase damages for a willful deceptive act in an amount that does not exceed the greater of three times the actual damages of the consumer suffering the loss or $1,000. § 24-5-0.5.4(a)(1) and (2). 296. Plaintiff Cedric Myles and the members of the Indiana Subclass are entitled to damages, together with interest, costs and attorney’s fees pursuant to § 24-5- 0.5.4(a)(1) and (2). COUNT XXI Violation of the Ohio Consumer Sales Practices Act (“OCSPA”), Ohio Rev. Code Ann. § 1345.01, et seq. (On Behalf of the Ohio Subclass) 297. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 298. The CSPA is broad, applying to the sale of consumer goods “to an individual for purposes that are primarily personal, family, or household [uses].” § 1345.01(A). Accordingly, the conduct at issue falls within the scope of the CSPA. 299. The CSPA prohibits unfair, deceptive, and unconscionable practices in consumer sales transactions. § 1345.02(A). The CSPA further provides that “a consumer” has a private cause of action for violations of the statute, and expressly allows for class actions. § 1345.09. 300. Defendants have engaged in unfair, deceptive, and unconscionable practices by their misconduct alleged herein. 301. Defendants acted in the face of prior notice that their conduct was deceptive, unfair or unconscionable, as it is firmly established that material omissions and misrepresentations concerning a product constitute a violation of the CSPA. 302. As a direct and proximate result of Defendants’ violations of the CSPA, Plaintiff Robert Spillman and other members of the Ohio Subclass have been injured. COUNT XXII Violation of New York’s Consumer Protection Act New York General Business Law § 349 (On Behalf of the New York Subclass) 303. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 304. Through their misconduct described above, Defendants have engaged in acts and/or practices that are deceptive or misleading in a material way and that resulted in injury to Plaintiff Calabro and the other members of the New York Subclass. 305. By reason of the foregoing, Defendants have violated New York General Business Law § 349 and decisional law prohibiting deceptive trade practices and consumer fraud, is liable to Plaintiff Calabro and the other members of the New York Subclass for the damages that they have suffered as a result of Defendants’ actions, the amount of such damages to be determined at trial, plus attorneys’ fees. COUNT XXIII CIVIL CONSPIRACY REGARDING COUNTS XIII-XV and XVII-XXII 306. Plaintiffs repeat and reallege each and every allegation set forth above as if fully set forth herein. 307. As alleged more fully above, ATG and SanDisk have conspired to violate the rights of Plaintiffs and class members as described more fully in this Complaint and in counts XIII-XV and XVII-XXII above. 308. Defendants formed and operated an unlawful conspiracy to engage in conduct that violated the rights of the classes and sub-classes to this litigation. This conspiratorial conduct included, but is not limited to, conversion of plaintiffs’ property, imposing unconscionable contracts and contractual terms, violating express and implied warranties owed to Plaintiffs, and violating the consumer protection acts of Michigan, Kentucky, Indiana, Ohio, and New York. 309. ATG and SanDisk’s conduct described herein was malicious, willful, reckless, and/or wanton. 310. Plaintiffs and class members were damaged and continue to suffer damages as a result of the specific acts carried out by ATG and SanDisk pursuant to the conspiracy. PRAYER FOR RELIEF WHEREFORE, Plaintiffs respectfully requests the following relief: A. The the Court certify this case as a class action and that it appoint Plaintiffs as class representatives and their counsel as class counsel; B. That the Court award Plaintiffs and the proposed Classes all appropriate relief, including, but not limited to: i. injunctive relief requiring that Defendants cease the practices effected by their conduct described herein; ii. declaratory relief, adjudging such practices unlawful; iii. monetary relief, whether by way of restitution or damages, including treble, multiple, or punitive restitution or damages where mandated by law or otherwise available, as well as statutory interest where mandated by law, and recovery of their attorneys’ fees, costs, and expenses; iv. any civil penalties available pursuant to any remedy, including, but not limited to, State Consumer Protection Statutes and any attorneys’ fees, costs, and exemplary damages available pursuant to such statutes; v. any and all equitable, exemplary, and punitive damages; and vi. any and all available equitable relief, including, but not limited to, restitution and disgorgement. C. That the Court grant such additional orders or judgments as may be necessary to prevent the unlawful practices complained of herein; and D. That the Court award Plaintiffs and the proposed Classes such other, favorable relief as may be available and appropriate under federal or state law, or at equity. JURY DEMAND Plaintiffs hereby demand a trial by jury as those issues triable by jury. Respectfully submitted, Date: February 2, 2016 THE MILLER LAW FIRM, P.C. /s/ E. Powell Miller_______________ E. Powell Miller (P39487) Sharon S. Almonrode (P33938) Richard L. Merpi (P75255) 950 W. University Dr., Ste. 300 Rochester, MI 48307 Telephone: (248) 841-2200 epm@millerlawpc.com ssa@millerlawpc.com rlm@millerlawpc.com COHEN LAW GROUP, P.C. Brian S. Cohen, Esq. (pro hac vice forthcoming) Email: brian@cohenlg.com 10 East 40th Street, 46th Floor New York, NY 10016 Telephone: (212) 726-4436 ALL COUNSEL, P.C. Andrew L. Lee, Esq. (pro hac vice forthcoming) Email: alee@all-counsel.com 21 West 45th Street, Suite 301 New York, NY 10036 Telephone: (212) 541-2429 Counsel for Plaintiffs and the Putative Classes

antitrust

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Eric B. Swartz, ISB #6396 JONES & SWARTZ PLLC Landmark Legal GroupTM 623 West Hays Street Boise, Idaho 83702-5512 Telephone: (208) 489-8989 Facsimile: (208) 489-8988 Email: eric@jonesandswartzlaw.com Gary M. Klinger (pro hac vice forthcoming) KOZONIS & KLINGER, LTD. 4849 N. Milwaukee Ave., Ste. 300 Chicago, Illinois 60630 Phone: 312.283.3814 Fax: 773.496.8617 gklinger@kozonislaw.com Anthony I. Paronich (pro hac vice forthcoming) Paronich Law, P.C. 350 Lincoln Street, Suite 2400 Hingham, MA 02043 (508) 221-1510 anthony@paronichlaw.com Attorneys for Plaintiff and the Proposed Class UNITED STATES DISTRICT COURT DISTRICT OF IDAHO CASE NO. 1:19-cv-360 CLASS ACTION JURY TRIAL DEMANDED NAOMI LEGERE-GORDON, individually and on behalf all others similarly situated, Plaintiff, v. FIRSTCREDIT INCORPORATED, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) CLASS ACTION COMPLAINT Plaintiff, NAOMI LEGERE-GORDON, individually and on behalf of all others similarly situated, alleges on personal knowledge, investigation of her counsel, and on information and belief as follows: NATURE OF ACTION 1. This case involves activities conducted by Defendant FirstCredit, Inc. (“FCI”) in contacting individuals through the use of automated calls in violation of the Telephone Consumer Protection Act, 47 U.S.C. § 227 et seq., and the Federal Communications Commission (“FCC” or “Commission”) rules promulgated thereunder, 47 C.F.R. § 64.1200 (hereinafter referred to as the “TCPA”). 2. Plaintiff brings this action for injunctive relief and statutory damages, arising from the illegal activities of Defendant, who contacted the putative class members despite the fact that they had no relationship with the Defendant. 3. A class action is the best means of obtaining redress for the Defendant’s wide- scale illegal robocalling program 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. JURISDICTION AND VENUE 4. This matter in controversy exceeds $5,000,000, as each member of the proposed Class of thousands is entitled to up to $1,500.00 in statutory damages for each call that has violated the TCPA. Accordingly, this Court has jurisdiction pursuant to § 1332(d)(2). Further, Plaintiff alleges a national class, which will result in at least one Class member belonging to a different state. Therefore, both elements of diversity jurisdiction under the Class Action Fairness Act of 2005 (“CAFA”) are present, and this Court has jurisdiction. 2 5. This Court also has federal question jurisdiction pursuant to 28 U.S.C. § 1331. 6. This Court has personal jurisdiction over Defendant because the conduct at issue in this case occurred, among other locations, in Idaho, where Plaintiff received the calls and resides. 7. Venue is proper because a substantial portion of the events complained of occurred in this District. PARTIES 8. Plaintiff Naomi LeGere-Gordon is, and at all times mentioned herein was, an individual citizen of the State of Idaho residing in the City of Meridian. 9. Defendant FirstCredit, Inc. (“FCI”) is a professional corporation and citizen of the State of Ohio with its principal place of business at 3250 W. Market St., #304, Akron, Ohio THE TELEPHONE CONSUMER PROTECTION ACT OF 1991 (TCPA), 47 U.S.C. § 227 10. In 1991, Congress enacted the TCPA1 in response to a growing number of consumer complaints regarding certain telemarketing practices. 11. The TCPA regulates, among other things, the use of automated telephone equipment, or “autodialers.” 1 Telephone Consumer Protection Act of 1991, Pub. L. No. 102-243, 105 Stat. 2394 (1991), codified at 47 U.S.C. § 227 (TCPA). The TCPA amended Title II of the Communications Act of 1934, 47 U.S.C. § 201 et seq. 3 12. Specifically, the plain language of section 227(b)(1)(A)(iii) prohibits the use of autodialers to make any call to a wireless number in the absence of an emergency or the prior express consent of the called party. 13. The TCPA defines an “automatic telephone dialing system” 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.”2 14. This statutory language dictates that “the term ‘automatic telephone dialing system’ means equipment which has the capacity—(1) to store numbers to be called or (2) to produce numbers to be called, using a random or sequential number generator—and to dial such numbers automatically (even if the system must be turned on or triggered by a person).” Marks v. Crunch San Diego, LLC, 904 F.3d 1041, 1053 (9th Cir. 2018) (emphasis supplied).3 15. 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. The FCC also recognized that wireless customers are charged for incoming calls whether they pay in advance or after the minutes are used.4 2 47 U.S.C. § 227(b)(1)(A)(iii). 3 In the past, the FCC has held that this definition is satisfied when a dialing system has the capacity to call “a given set of numbers” or when “dialing equipment is paired with . . . a database of numbers.” In re Rules & Regulations Implementing the Telephone Consumer Protection Act of 1991, 18 FCC Rcd. 14,014, ¶ 133 (2003); see also In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 23 F.C.C. Rcd. 559, 566 (F.C.C. 2008) (rejecting argument that a dialing system “meets the definition of autodialer only when it randomly or sequentially generates telephone numbers, not when it dials numbers from customer telephone lists” and reasoning that “the teleservices industry had progressed to the point where dialing lists of numbers was far more cost effective”). 4 Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, CG Docket No. 02-278, Report and Order, 18 FCC Rcd 14014 (2003). 4 16. The 2003 FCC order defined a predictive dialer as “an automated dialing system that uses a complex set of algorithms to automatically dial consumers’ telephone numbers in a manner that ‘predicts’ the time when a consumer will answer the phone and a telemarketer will be available to take the call.”5 17. The FCC concluded that “[t]he basic function of such equipment . . . [is] the capacity to dial numbers without human intervention.”6 18. A 2008 Declaratory Ruling “affirm[ed] that a predictive dialer constitutes an automatic telephone dialing system and is subject to the TCPA’s restrictions on the use of autodialers.”7 And in yet another order issued in 2012, the FCC again reiterated that the TCPA’s definition of an ATDS “covers any equipment that has the specified capacity to generate numbers and dial them without human intervention regardless of whether the numbers called are randomly or sequentially generated or come from calling lists.”8 In 2018, a decision struck down portions of a 2015 FCC Order, but “the prior FCC Orders are still binding.”9 19. Courts have also held that, based on the TCPA’s statutory language, a predictive dialing system constitutes an ATDS under the TCPA. See, e.g., Marks, 904 F.3d at 1053 (“Although Congress focused on regulating the use of equipment that dialed blocks of sequential or randomly generated numbers—a common technology at that time—language in the statute indicates that equipment that made automatic calls from lists of recipients was also covered by 5 Id. at 14,143 n. 31. 6 Id. at 14,092. 7 In the Matter of Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991 (“2008 FCC Declaratory Ruling”), 23 F.C.C.R. 559, 23 FCC Rcd. 559, 43 Communications Reg. (P&F) 877, 2008 WL 65485 (F.C.C.) (2008). 8 In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 27 FCC Rcd. 15391, 15399 (2012). 9 Reyes v. BCA Fin. Servs., Inc., Case No. 16-24077-CIV, 2018 WL 2220417, at *11 (S.D. Fla. May 14, 2018). 5 the TCPA.”) (emphasis supplied); accord Soppet v. Enhanced Recovery Co., LLC, 679 F.3d 637, 638-39 (7th Cir. 2012). 20. Further, courts have long held that that a “called party” under the TCPA is the recipient of the call, not the party the caller was intending to reach.10 21. On January 4, 2008, the FCC released a Declaratory Ruling wherein it confirmed that autodialed and prerecorded message calls to a wireless number by a creditor (or on behalf of a creditor) are permitted only if the calls are made with the “prior express consent” of the called party.11 22. The FCC “emphasize[d] that prior express consent is deemed to be granted only if the wireless number was provided by the consumer to the creditor, and that such number was provided during the transaction that resulted in the debt owed.”12 23. In a portion unaffected by the D.C. Circuit, the 2015 FCC Order held that consumers may revoke consent through reasonable methods. Thus, consumers may revoke consent through any reasonable method, including orally: “[c]onsumers generally may revoke, for example, by way of a consumer-initiated call, directly in response to a call initiated or made by a caller, or at an in-store bill payment location, among other possibilities.”13 24. A single call using both a prerecorded voice and an autodialer constitutes two violations of the TCPA, even if both violations arose from the same call. See Lary v. Trinity Physician Fin. & Ins. Servs., 780 F.3d 1101 (11th Cir. 2015). FACTUAL ALLEGATIONS 10 See, e.g., Osorio v. State Farm Bank, F.S.B., 746 F.3d 1242, 1251 (11th Cir. 2014); Soppet v. Enhanced Recovery Co., LLC,, 679 F.3d 637, 638-39 (7th Cir. 2012). 11 2008 FCC Declaratory Ruling, 23 F.C.C.R. at 564-65 (¶ 10). 12 Id. 13 2015 Order at (¶ 64). 6 25. Plaintiff is, and at all times mentioned herein was, a “person” as defined by 47 U.S.C. § 153(39). 26. Beginning in or around April of 2018, Plaintiff began receiving numerous autodialed calls on her cellular phone ((XXX) XXX-9443) from FCI. 27. Upon answering the call, there was an immediate pause on the other end and a period of “dead air” before the phone call was connected with an FCI representative. 28. There was at least one number that appeared in Plaintiff’s caller ID for these calls: 800-871-1840. 29. This number is associated with FCI. Upon calling the number, a prerecorded message plays “Thank you for calling FCI….” 30. Plaintiff requested that the calls stop many times. Plaintiff is on the National Do-Not-Call Registry and updates her registry every six months. 31. FCI continued to call her cellular phone anyway. 32. FCI is, and at all times mentioned herein was, a “person”, as defined by 47 U.S.C. § 153(39). 33. In receiving unwanted and unsolicited calls on her cellular telephone, Plaintiff suffered concrete harm in the form of lost time spent fielding the unwanted calls and attempting to get FCI to stop the calls, loss of use of her cellular telephone as the calls came in, and the invasion of privacy and intrusion upon her seclusion. 34. Upon information and good faith belief, and in light of the frequency, number, nature, and character of the calls at issue, Defendant placed its calls to Plaintiff’s cellular telephone number by using an automatic telephone dialing system. 7 35. Upon information and good faith belief, and in light of the frequency, number, nature, and character of the calls at issue, Defendant placed its calls to Plaintiff’s cellular telephone number by using “equipment which has the capacity—(1) to store numbers to be called or (2) to produce numbers to be called, using a random or sequential number generator—and to dial such numbers automatically (even if the system must be turned on or triggered by a person).” Marks v. Crunch San Diego, LLC, 904 F.3d 1041, 1053 (9th Cir. 2018) 36. Upon information and good faith belief, and in light of the frequency, number, nature, and character of the calls at issue, Defendant placed its calls to Plaintiff’s cellular telephone number by using (i) an automated dialing system that uses a complex set of algorithms to automatically dial consumers’ telephone numbers in a manner that “predicts” the time when a consumer will answer the phone and a person will be available to take the call, or (ii) equipment that dials numbers and, when certain computer software is attached, also assists persons in predicting when a sales agent will be available to take calls, or (iii) hardware, that when paired with certain software, has the capacity to store or produce numbers and dial those numbers at random, in sequential order, or from a database of numbers, or (iv) hardware, software, or equipment that the FCC characterizes as a predictive dialer through the following reports and orders, and declaratory rulings: In the Matter of Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 17 FCC Rcd 17459, 17474 (September 18, 2002); In the Matter of Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 18 FCC Rcd 14014, 14092-93 (July 3, 2003); In the Matter of Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 23 FCC Rcd 559, 566 (Jan. 4, 8 37. Upon information and good faith belief, Defendant placed its calls to Plaintiff’s cellular telephone number for non-emergency purposes. 38. Upon information and good faith belief, Defendant placed its calls to Plaintiff’s cellular telephone number voluntarily. 39. Upon information and good faith belief, Defendant placed its calls to Plaintiff’s cellular telephone number under its own free will. 40. Upon information and good faith belief, Defendant had knowledge that it was using an automatic telephone dialing system to place its calls to Plaintiff’s cellular telephone number. 41. Plaintiff suffered actual harm as a result Defendant’s calls in that she suffered an invasion of privacy, an intrusion into her life, and a private nuisance. 42. Upon information and good faith belief, Defendant, as a matter of pattern and practice, uses an automatic telephone dialing system to place calls, absent prior express consent, to telephone numbers assigned to a cellular telephone service. Class Action Allegations 43. Plaintiff brings this action under Federal Rule of Civil Procedure 23, and as a representative of the following class: All persons throughout the United States (1) to whom FCI placed, or caused to be placed, a call, (2) directed to a number assigned to a cellular telephone service, but not assigned to the intended recipient of FCI’s calls, (3) by using an automatic telephone dialing system or an artificial or prerecorded voice, (4) within four years preceding the date of this complaint through the date of class certification. 44. Excluded from the class are Defendant, Defendant’s officers and directors, members of their immediate families and their legal representatives, heirs, successors, or assigns, and any entity in which Defendant has or had a controlling interest. 45. Upon information and belief, the members of the class are so numerous that joinder 9 of all of them is impracticable. 46. The exact number of the members of the class is unknown to Plaintiff at this time, and can be determined only through appropriate discovery. 47. The members of the class are ascertainable because the class is defined by reference to objective criteria. 48. In addition, the members of the class are identifiable in that, upon information and belief, their telephone numbers, names, and addresses can be identified in business records maintained by Defendant and by third parties. 49. Plaintiff’s claims are typical of the claims of the members of the class. 50. As it did for all members of the class, Defendant used an automatic telephone dialing system to place calls to Plaintiff’s cellular telephone number. 51. Plaintiff’s claims, and the claims of the members of the class, originate from the same conduct, practice, and procedure on the part of Defendant. 52. Plaintiff’s claims are based on the same theories as are the claims of the members of the class. 53. Plaintiff suffered the same injuries as the members of the class. 54. Plaintiff will fairly and adequately protect the interests of the members of the class. 55. Plaintiff’s interests in this matter are not directly or irrevocably antagonistic to the interests of the members of the class. 56. Plaintiff will vigorously pursue the claims of the members of the class. 57. Plaintiff has retained counsel experienced and competent in class action litigation. 58. Plaintiff’s counsel will vigorously pursue this matter. 59. Plaintiff’s counsel will assert, protect, and otherwise represent the members of the 10 60. The questions of law and fact common to the members of the class predominate over questions that may affect individual members of the class. 61. Issues of law and fact common to all members of the class are: a. Defendant’s conduct, pattern, and practice as it pertains to dialing wrong or reassigned cellular telephone numbers; b. Defendant’s violations of the TCPA; c. Defendant’s use of an automatic telephone dialing system as defined by the TCPA; and d. The availability of statutory penalties. 62. A class action is superior to all other available methods for the fair and efficient adjudication of this matter. 63. If brought and prosecuted individually, the claims of the members of the class would require proof of the same material and substantive facts. 64. The pursuit of separate actions by individual members of the class would, as a practical matter, be dispositive of the interests of other members of the class, and could substantially impair or impede their ability to protect their interests. 65. The pursuit of separate actions by individual members of the class could create a risk of inconsistent or varying adjudications, which might establish incompatible standards of conduct for Defendant. 66. These varying adjudications and incompatible standards of conduct, in connection with presentation of the same essential facts, proof, and legal theories, could also create and allow the existence of inconsistent and incompatible rights within the class. 11 67. The damages suffered by each individual member of the class may be relatively small, thus, the expense and burden to litigate each of their claims individually make it difficult for the members of the class to redress the wrongs done to them. 68. The pursuit of Plaintiff’s claims, and the claims of the members of the class, in one forum will achieve efficiency and promote judicial economy. 69. There will be little difficulty in the management of this action as a class action. 70. Defendant has acted or refused to act on grounds generally applicable to the members of the class, making final declaratory or injunctive relief appropriate. Count I Violation of 47 U.S.C. § 227(b)(1)(A)(iii) 71. Plaintiff repeats and re-alleges each and every factual allegation contained in paragraphs 1-70. 72. Defendant violated 47 U.S.C. § 227(b)(1)(A)(iii) by utilizing an automatic telephone dialing system to place calls to Plaintiff’s cellular telephone number without consent. 73. As a result of Defendant’s violations of 47 U.S.C. § 227(b)(1)(A)(iii), Plaintiff, and the members of the class, are entitled to damages in an amount to be proven at trial. Prayer for Relief WHEREFORE, Plaintiff prays for relief and judgment, as follows: a) Determining that this action is a proper class action; b) Designating Plaintiff as a class representative under Federal Rule of Civil Procedure 23; c) Designating Plaintiff’s counsel as class counsel under Federal Rule of Civil Procedure 23; d) Adjudging and declaring that Defendant violated 47 U.S.C. § 227(b)(1)(A)(iii); 12 e) Enjoining Defendant from continuing its violative behavior, including continuing to place calls to Plaintiff’s cellular telephone number, and to the cellular telephone numbers of members of the class; f) Awarding Plaintiff and the class damages under 47 U.S.C. § 227(b)(3)(B); g) Awarding Plaintiff and the members of the class treble damages under 47 U.S.C. § 227(b)(3); h) Awarding Plaintiff and the class reasonable attorneys’ fees, costs, and expenses under Rule 23 of the Federal Rules of Civil Procedure; i) Awarding Plaintiff and the members of the class any pre-judgment and post- judgment interest as may be allowed under the law; and j) Awarding such other and further relief as the Court may deem just and proper. Demand for Jury Trial Pursuant to Federal Rule of Civil Procedure 38(b), Plaintiff demands a trial by jury of any and all triable issues. 13 Dated: September 18, 2019 Respectfully submitted, NAOMI LEGERE-GORDON /s/Eric B. Swartz, Esq. Eric B. Swartz Jones & Swartz PLLC 623 W. Hays St. Boise, ID 83702 Ph. 208-489-8989 Fax 208-489-8988 www.jonesandswartzlaw.com KOZONIS & KLINGER, LTD. Gary M. Klinger (pro hac vice forthcoming) 4849 N. Milwaukee Ave., Ste. 300 Chicago, Illinois 60630 Phone: 312.283.3814 Fax: 773.496.8617 gklinger@kozonislaw.com Anthony I. Paronich Paronich Law, P.C. 350 Lincoln Street, Suite 2400 Hingham, MA 02043 (508) 221-1510 anthony@paronichlaw.com Attorneys for Plaintiff and the Proposed Class 14

privacy

GRDbFocBD5gMZwcz666a

E CEIVE 101 X MAY 09 2012 : : U.S.D.C. S.D. N.Y. : Civil Action No. CASHIERS Plaintiff, : : COMPLAINT V. : : Jury Trial Demanded : : : : : Defendants. : : X Kafele Walker ("Plaintiff"), by and through his counsel, Thompson Wigdor LLP, as and NATURE OF THE CLAIMS 1. Plaintiff brings this action to recover: (a) overtime and minimum wage 2. Plaintiff's claims under the FLSA are brought as a collective action, pursuant to 3. The FLSA Collective are similarly situated because they were all subject to 4. Plaintiff's claims under the NYLL are brought as a class action pursuant to 5. The New York Class are similarly situated because they were all subject to JURISDICTION AND VENUE 6. Pursuant to 28 U.S.C. §§1331 and 1343, the Court has subject matter jurisdiction 7. Pursuant to 28 U.S.C. $1391(a), venue is proper in this district because PARTIES 8. Plaintiff Kafele Walker is a resident of Queens, New York and has been 9. Defendants Andres Mier y Teran, Alfred Mier y Teran and Carlos Mier y Teran 10. Defendant VLC Nolita LLC ("Defendant Nolita") is a New York limited liability11. Defendant VLC Union Square LLC ("Defendant Union Square") is a New York 12. Defendant VLC Upper West LLC ("Defendant Upper West") is a New York 13. Defendant VLC West Village LLC ("Defendant West Village") is a New York 14. At all relevant times, the Corporate Defendants were an "employer" within the 15. At all relevant times, the Corporate Defendants were run as a single business 16. Defendants were joint employers of Plaintiff, the FLSA Collective and the New FACTUAL ALLEGATIONS 17. Defendants own and operate four restaurants in New York, New York, all named 18. The Corporate Defendants: (a) regularly share and/or interchange employees; (b) 19. Since approximately February 2012, Mr. Walker has been employed by 20. The primary job duty of a Crepe Maker is to make crepes for the public. 21. Crepe Makers are not assigned to work exclusively at only one of Defendants' 22. Crepe Makers are paid on an hourly basis. As a Crepe Maker, Defendants paid 23. Prior to the start of each workweek, Defendants regularly schedule Crepe Makers 24. During the course of the workweek, in addition to working on days they are 25. During the course of the workweek, Defendants regularly schedule and/or 26. However, Defendants do not pay Crepe Makers overtime at a rate of one and one- 27. Defendants also do not pay Crepe Makers the prevailing minimum wage for all 28. Defendants also do not pay Crepe Makers their straight-time wages for all hours FLSA COLLECTIVE ACTION ALLEGATIONS 29. Plaintiff brings his FLSA claims as a collective action pursuant to the FLSA on 30. The basic job duties of the FLSA Collective were/are the same as or substantially 31. The FLSA Collective, like Plaintiff, all have been subject to the same unlawful 32. During the FLSA Collective Period, Defendants were fully aware of the duties 33. As a result of Defendants' conduct as alleged herein, Defendants violated 29 34. As a result of Defendants' conduct as alleged herein, Defendants violated 2935. Defendants' violations of the aforementioned statutes were willful, repeated, 36. As a result of Defendants' conduct, Defendants are liable to Plaintiff and the 37. While the exact number of the FLSA Collective is unknown to Plaintiff at the 38. Plaintiff is currently unaware of the identities of the FLSA Collective. RULE 23 CLASS ACTION ALLEGATIONS 39. Plaintiff bring his NYLL claims as a class action pursuant to Federal Rule of Civil 40. The basic job duties of the New York Class were/are the same as or substantially 41. The New York Class, like Plaintiff, all have been subject to the same unlawful 42. During the New York Class Period, Defendants were fully aware of the duties 43. As a result of Defendants' conduct as alleged herein, Defendants violated the 44. Defendants' violations of the NYLL and/or its regulations were willful, repeated, 45. As a result of Defendants' conduct, Defendants are liable to Plaintiff and the New 46. Certification of the New York Class' claims as a class action is the most efficient 47. Plaintiff's claims raise questions of law and fact common to the New York Class. (a) Whether Defendants failed to pay Plaintiff and the New York Class the prevailing minimum wage for all hours worked during the New York Class Period; (b) Whether Defendants failed to pay Plaintiff and the New York Class overtime at a rate of one and one-half times their regular rate of pay for all hours worked in excess of 40 hours per workweek during the New York Class Period; (c) Whether Defendants failed to pay Plaintiff and the New York Class straight-time wages for all hours worked during the New York Class Period; (d) Whether Defendants' failure to pay the prevailing minimum wage to Plaintiff and the New York Class constitutes a violation of NYLL §650 et seq.; (e) Whether Defendants' failure to pay overtime to Plaintiff and the New York Class constitutes a violation of NYLL 650 et seq. and 12 N.Y.C.R.R 142.2-2; (f) Whether Defendants' failure to pay Plaintiff and the New York Class straight- time wages constitutes a violation of NYLL § 191; and (g) Whether Defendants' violations of the NYLL and/or its regulations were willful.48. These common questions of law and fact arise from the same course of events, 49. Plaintiff is a member of the New York Class that he seeks to represent. Plaintiff's 50. Plaintiff's interests are co-extensive with those of the New York Class that they 51. Defendants have acted or refused to act on grounds generally applicable to the 52. Injunctive and declaratory relief are the predominant relief sought in this case 53. The common issues of fact and law affecting Plaintiff's claims and those of the 54. A class action is superior to other available means for the fair and efficient 55. The cost of proving Defendants' violations of the NYLL and the supporting New 56. The New York Class is SO numerous that joinder of all members is impracticable. 57. Plaintiff is currently unaware of the identities of the New York Class.FIRST CLAIM FOR RELIEF (Failure to Pay Overtime in Violation of 29 U.S.C. $207) 58. Plaintiff, on behalf of himself and the FLSA Collective, hereby realleges and 59. The FLSA requires covered employers, such as Defendants, to pay all non- 60. During the FLSA Collective Period, Defendants knew that Plaintiff and the FLSA 61. As a result of Defendants' failure to pay Plaintiff and the FLSA Collective 62. The foregoing conduct of Defendants constitutes willful violations of the FLSA. 63. Defendants' violations of the FLSA has significantly damaged Plaintiff and the SECOND CLAIM FOR RELIEF (Failure to Pay Minimum Wage in Violation of 29 U.S.C. $206) 64. Plaintiff, on behalf of himself and the FLSA Collective, hereby realleges and 65. The FLSA requires covered employers, such as Defendants, to pay all non- 66. During the FLSA Collective Period, Defendants did not pay Plaintiff and the 67. As a result of Defendants' failure to pay Plaintiff and the FLSA Collective the 68. The foregoing conduct of Defendants constitutes willful violations of the FLSA. 69. Defendants' violations of the FLSA has significantly damaged Plaintiff and the THIRD CLAIM FOR RELIEF (Failure to Pay Overtime in Violation of NYLL §650 et seq. and 12 N.Y.C.R.R. 142-2.2) 70. Plaintiff, on behalf of himself and the New York Class, hereby realleges and 71. The NYLL and 12 N.Y.C.R.R. 142-2.2 require a covered employer, such as 72. During the New York Class Period, Defendants knew that Plaintiff and the New 73. As a result of Defendants' failure to pay Plaintiff and the New York Class 74. The foregoing conduct of Defendants constitutes willful violations of the NYLL 75. Defendants' violations of the NYLL and/or its regulations has significantly FOURTH CLAIM FOR RELIEF (Failure to Pay Minimum Wage in Violation of NYLL §650 et seq.) 76. Plaintiff, on behalf of himself and the New York Class, hereby realleges and 77. The NYLL requires covered employers, such as Defendants, to pay all non- 78. During the New York Class Period, Defendants did not pay Plaintiff and the New79. As a result of Defendants' failure to pay Plaintiff and the New York Class the 80. The foregoing conduct of Defendants constitutes willful violations of the NYLL. 81. Defendants' violations of the NYLL has significantly damaged Plaintiff and the FIFTH CLAIM FOR RELIEF (Failure to Pay Wages for All Hours Worked in Violation of NYLL $191) 82. Plaintiff, on behalf of himself and the New York Class, hereby realleges and 83. The NYLL requires covered employers, such as Defendants, to pay employees for 84. During the New York Class Period, Defendants did not pay Plaintiff and the New 85. As a result of Defendants' failure to pay Plaintiff and the New York Class their 86. The foregoing conduct of Defendants constitutes willful violations of the NYLL. 87. Defendants' violations of the NYLL has significantly damaged Plaintiff and the PRAYER FOR RELIEF WHEREFORE, Plaintiff, on behalf of himself, the FLSA Collective and the New York A. Declare that the practices complained of herein are unlawful under applicable B. Declare this action to be maintainable as a collective action pursuant to 29 U.S.C. C. Determine the damages sustained by Plaintiff and the FLSA Collective as a result D. Award Plaintiff and the FLSA Collective an additional equal amount as liquidated E. Declare this action to be maintainable as a class action pursuant to Fed. R. Civ. P. F. Designate Plaintiff as a representative of his respective class, and his counsel of G. Determine the damages sustained by Plaintiff and the New York Class as a result H. Award Plaintiff and the New York Class an additional amount as liquidated I. Award Plaintiff, the FLSA Collective and the New York Class their reasonable J. Grant Plaintiff, the FLSA Collective and the New York Class such other and JURY DEMAND Plaintiff, on behalf of himself and on behalf of all other similarly-situated persons, hereby New York, New York Respectfully submitted, THOMPSON WIGDOR LLP By: DIA Douglas H. Wigdor Shaffin A. Datoo Tanvir H. Rahman 85 Fifth Avenue New York, NY 10003 Telephone: (212) 257-6800 Facsimile: (212) 257-6845 dwigdor@thompsonwigdor.com sdatoo@thompsonwigdor.comtrahman@thompsonwigdor.com Attorneys for Plaintiff Exhibit A X : : : Civil Action No. Plaintiff, : : NOTICE OF CONSENT V. : : : : : : : Defendants. : : X I hereby consent to join as a party plaintiff in the above-captioned matter seeking Kafele Walker 216-05 113th Drive, Queens Village, New York 11429 May 4, 2012

employment & labor

qgYeM4cBD5gMZwcz5aRF

Jeff S. Westerman (SBN 94559) WESTERMAN LAW CORP. 16133 Ventura Blvd., Suite 685 Encino, CA 91436 Tel: (310) 698-7450 jwesterman@jswlegal.com Michael M. Buchman (pro hac vice forthcoming) Michelle C. Clerkin (pro hac vice forthcoming) Jacob O. Onile-Ere (pro hac vice forthcoming) MOTLEY RICE LLC 777 Third Avenue, 27th Floor New York, NY 10017 Tel: (212) 577-0050 mbuchman@motleyrice.com mclerkin@motleyrice.com jonileere@motleyrice.com Attorneys for Plaintiff and the Proposed Class [Additional Counsel listed on signature page] UNITED STATES DISTRICT COURT NORTHERN DISTRCT OF CALIFORNIA SAN FRANCISCO DIVISION Civil Action No. AGUSTIN CACCURI, on behalf of himself and all others similarly situated, Plaintiff, v. CLASS ACTION COMPLAINT DEMAND FOR JURY TRIAL SONY INTERACTIVE ENTERTAINMENT LLC, Defendant. Plaintiff Agustin Caccuri, on behalf of himself and all others similarly situated, brings this Class Action Complaint against Sony Interactive Entertainment LLC for violation of federal and state antitrust and unfair competition laws. Based upon personal knowledge, information and belief, and the investigation of counsel, Plaintiff alleges as follows: I. INTRODUCTION 1. This is an antitrust and unfair competition class action seeking damages and injunctive relief for violation of Section 2 of the Sherman Antitrust Act, 15 U.S.C. § 2, and the California Business and Professions Code § 17200, against Sony Interactive Entertainment LLC (“Sony” or “Defendant”). Plaintiff brings this action on behalf of himself and all other similarly situated Class members who purchased digital video games on Sony’s PlayStation Store (the “Class”) between April 1, 2019 and the present (the “Class Period”). 2. Sony manufactures the PlayStation, a line of video game consoles that launched in 1994 and has become one of the most popular video game systems in the world. Sony’s most recent model, the PlayStation 5, is expected to become the best-selling video game console of all time. PlayStation 5 launched on November 12, 2020, and by March 31, 2021, Sony had sold 7.8 million units.1 Despite record sales numbers, Sony has been unable to supply anywhere close to enough units to meet consumer demand.2 Sales are predicted to surpass 200 million units within the next five years.3 1 See Sam Byford, Sony has sold 7.8 million PS5 consoles, The Verge (Apr. 28, 2021), https://www.theverge.com/2021/4/28/22407195/sony-ps5-sales-numbers-q4-2020-earnings. 2 See N.F. Mendoza, PlayStation rakes in $2.6 billion in PS5 sales, TechRepublic (Feb. 25, 2021), https://www.techrepublic.com/article/playstation-rakes-in-2-6-billion-in-ps5-sales/. 3 Aernout van de Velde, PS5 Sales to Exceed 200 to 300 Million Units in 5 to 6 Years, Analyst Says; Could Terminate the Long-Running Console War, WCCF Tech (Oct. 17, 2020), https://wccftech.com/ps5-sales-200-300-million-700-console-war/; Lionel Sujay Vailshery, Forecast unit sales of the PlayStation 5 worldwide from 2020 to 2024 (Apr 12, 2021), https://www.statista.com/statistics/1124784/unit-sales-ps5-worldwide/. 3. Sony has used the console’s popularity to build PlayStation into a multinational and multifaceted digital entertainment brand4 which includes an online store for purchasing and downloading digital video games directly to the console (the PlayStation Store),5 a unified online multiplayer gaming and digital media delivery service (the PlayStation Network),6 a subscription-based digital video game streaming service (PlayStation Now)7, a digital movie and TV distribution service (PlayStation Video),8 and Sony’s video game development arm (PlayStation Studios).9 4. The bulk of the profits Sony derives from the PlayStation franchise come not from sales of its consoles, but from the digital video games and other digital content sold through the PlayStation Store and the PlayStation Network, which produced over $17 billion in revenues for Sony in the fiscal year ending March 31, 2021.10 5. The PlayStation Store launched in 2006 alongside the PlayStation 3 console, allowing users to purchase digital copies of PlayStation games and download them directly to the console as an alternative to buying physical disks and inserting them into the console’s disk drive. Since the launch of the original PlayStation in 1994, the games had been available only on disks. Now users can access the PlayStation Store from their console, purchase games, and 4 See About Us: We are PlayStation, Sony Interactive Entm’t, https://www.playstation.com/en- us/corporate/about-us/ (last visited Apr. 29, 2021). 5 See About PlayStation Store, Sony Interactive Entm’t, https://www.playstation.com/en- us/about-playstation-store/ (last visited Apr. 29, 2021). 6 See PlayStation Network, Sony Interactive Entm’t, https://www.playstation.com/en- us/playstation-network/ (last visited Apr. 29, 2021). 7 See PlayStation Now, Sony Interactive Entm’t, https://www.playstation.com/en-us/ps-now/ (last visited Apr. 29, 2021). 8 See PlayStation Video, Sony Interactive Entm’t, https://www.playstation.com/en- us/playstation-video/ (last visited Apr. 29, 2021). 9 See SIE PlayStation Studios, Sony Interactive Entm’t, https://www.playstation.com/en- us/corporate/playstation-studios/ (last visited May 3, 2021). 10 See Sony Corporation, Financial Statements and Consolidated Financial Results for the Fiscal Year Ended March 31, 2021 (Apr, 28, 2021), available at https://www.sony.com/en/SonyInfo /IR/library/presen/er/pdf/20q4_sony.pdf. Dollar figure based on the following exchange rate from April 28, 2021: 1 JPY = 0.0092 USD. download them directly to their console through the PlayStation Network. In 2020, digital downloads made up 62% of sales for PlayStation games, compared to only 43% in 2018.11 6. Until recently, consumers could also purchase download codes for digital PlayStation games from the same online and brick-and-mortar retailers who also sell physical games such as Amazon, GameStop, Best Buy, and Wal-Mart. The codes could be redeemed on the PlayStation Store for digital copies of PlayStation games. 7. On April 1, 2019, Sony eliminated retailers’ ability to sell download codes for digital PlayStation games. Because delivering digital content to PlayStation consoles requires access to Sony’s PlayStation Network, the new policy established the PlayStation Store as the only source from which consumers can purchase digital PlayStation games, and the only source to which video game publishers can sell digital PlayStation games. Sony also requires publishers who sell digital games on the PlayStation Store to relinquish full control over the retail price. As a result, the policy swiftly and effectively foreclosed any and all price competition in the retail market for digital PlayStation games. 8. Sony’s new restrictions established a monopoly over the sale of digital PlayStation games. Sony’s monopoly allows it to charge supracompetitive prices for digital PlayStation games, which are significantly higher than their physical counterparts sold in a competitive retail market, and significantly higher than they would be in a competitive retail market for digital games. 9. A comparison of prices for the most popular digital games on the PlayStation Store with prices for the same games available on disk from an array of retailers suggests prices on the PlayStation store are, on average, about 75% percent higher than those for games on disk, and in some cases closer to 175% higher.12 There is no legitimate reason digital games should be 11 Mustafa Mahmoud, 62% of all full PlayStation game sales were digital in 2020, Kitguru (Mar. 12, 202), https://www.kitguru.net/gaming/mustafa-mahmoud/62-of-all-full-playstation-game- sales-were-digital-in-2020/. 12 See ¶¶ 56-58 and Table 1, infra. more expensive than their physical counterparts. In fact, given the costs saved on packaging and distribution, prices for digital games in a truly competitive market would likely be lower than they are for games on disk. 10. Sony’s ability to maintain supracompetitive prices on the PlayStation Store while consumers continue to switch from disks to digital game in ever increasing numbers, along with Sony’s skyrocketing revenues from digital games, demonstrate that prices for digital games on the PlayStation store are not responsive to changes in prices for PlayStation games on disk. 11. The relevant product market in this case is the market for downloadable, digitally-delivered video game content that is compatible with a PlayStation console (“digital PlayStation games”). 12. As a direct and proximate result of Sony’s unlawful acquisition and maintenance of a monopoly over the sale of digital PlayStation games, Plaintiff and Class members have paid and will continue to pay significantly more for digital games than they would have absent Sony’s monopoly. Plaintiff seeks damages for himself and Class members equal to the amount they have already overpaid, treble damages, and injunctive relief to end to the overcharges they will continue to pay as long as Sony is allowed to keep its unlawful monopoly. II. THE PARTIES 13. Plaintiff Agustin Caccuri is an individual residing in Santa Monica, California. Plaintiff owns a PlayStation 5 Digital Edition console, has purchased digital video games on the PlayStation Store and downloaded them to his console during the Class period, and plans to purchase and download more digital games from the PlayStation Store in the future. 14. Defendant Sony Interactive Entertainment LLC (“Sony”) is a corporation organized and existing under the laws of California, with its headquarters and principal place of business at 2207 Bridgepointe Parkway, San Mateo, California. It is a wholly-owned subsidiary of the Japanese consumer electronics and media conglomerate Sony Corporation, and is the sole owner the PlayStation digital entertainment brand. III. JURISDICTION AND VENUE 15. This action arises, in part, under section 2 of the Sherman Act, 15 U.S.C. § 2. The Court has federal question jurisdiction pursuant to the Clayton Antitrust Act, 15 U.S.C. § 15, and pursuant to 28 U.S.C. §§ 1331 and 1337. 16. The Court also has jurisdiction over this action pursuant to 28 U.S.C. § 1332(d) because this is a class action in which the aggregate amount in controversy exceeds $5,000,000 and at least one member of the putative class is a citizen of a different state than the Defendant. 17. The Court has personal jurisdiction over Sony because Sony is headquartered in California. The Court also has jurisdiction pursuant to Cal. Code Civ. P. § 410.10, as a result of Sony’s substantial, continuous and systematic contacts with the State, and because Sony has purposely availed itself of the benefits and privileges of conducting business activities within the 18. Venue is proper in this District pursuant to 28 U.S.C. § 1391 because Class members purchased digital video games from Sony in this District, Sony has its principal place of business in this District, a substantial part of the events or omissions giving rise to Plaintiff’s claims occurred here, and Sony is a corporation subject to personal jurisdiction in this District and, therefore, resides here for venue purposes. IV. INTRADISTRICT ASSIGNMENT 19. Pursuant to N.D. Cal. Civ. L.R. 3-2(c), (d) & 3-5(b), this action is properly assigned to the San Francisco division because a substantial part of the events and omissions which give rise to the claim emanated from California and from San Mateo County in particular. V. FACTUAL ALLEGATIONS A. Industry Background 20. The video game market has grown substantially in recent years. Revenues in the video game industry reached $180 billion worldwide in 2020, exceeding those from movies and from the major North American sports leagues combined.13 21. Video games are played on one of several different electronic platforms, including: (i) smartphones and tablets; (ii) personal computers; (iii) video game consoles; and (iv) specialized handheld devices. This case concerns video games consoles, specifically the market for downloadable, digitally-delivered video game content that is compatible with a PlayStation console (“digital PlayStation games”). 22. For the past two decades, three companies have dominated the market for video game consoles: Sony, which manufactures the PlayStation console; Microsoft, manufacturer of the Xbox; and Nintendo. All three companies periodically release new models of their consoles, with updated hardware and software and new design features. 23. The original PlayStation launched in 1994, and Sony recently released the fifth iteration of that console.14 Microsoft has released eight versions of its Xbox since 2001, when it entered the market.15 Nintendo has the longest history of the three, having released seven console models since its 1985 debut.16 24. Games are not cross-compatible on different consoles, so once a consumer purchases a console, he or she must purchase games that are designed for that particular console. 13 Jordan Williams, Video game industry bigger than sports, movies combined: report, The Hill (Dec. 23, 2020), https://thehill.com/blogs/in-the-know/in-the-know/531479-video-game- industry-bigger-than-sports-movies-combined-report. 14 See Jimmy Thang, The Evolution of PlayStation Consoles, GameSpot (Sept. 7, 2020), https://www.gamespot.com/gallery/the-evolution-of-playstation-consoles/2900-899/. 15 See Gabe Gurwin, The History of the Xbox, Digital Trends (Mar. 16, 2021), https://www.digitaltrends.com/gaming/the-history-of-the-xbox/. 16 See Jeff Dunn and Kevin Webb, A visual history of Nintendo's video game consoles, Bus. Insider (May 16, 2019), https://www.businessinsider.com/nintendo-consoles-in-history-photos- switch-2017-1. The consoles are substantially differentiated, with distinctively designed controllers and other factors that lead to a different experience for the player, even where the same games are available on more than one console. Consumers, therefore, tend to prefer one console over the others, and are far more likely to continue buying the new models of one console than to switch to a different console entirely. 25. The supply chain for video games has historically been characterized by three players: (i) developers, who design and execute the creation of games and produce the software; (ii) publishers, who handle funding, marketing, and distribution to retailers; and (iii) retailers, who sell games to the console-owning public.17 26. The relationship between developers and publishers is akin to that between book authors and publishing houses. The author produces a manuscript and then relies on a publishing house to print and market the books, and deliver them to bookstores. Similar to the way that publishing houses often offer advances to authors who agree to write manuscripts for them, video game publishers also provide funding to developers. 27. The three major video game console manufacturers also develop and publish games for their consoles in-house, called “first-party games” which are often available exclusively on that company’s console. Nintendo relies heavily on first-party games, which make up about 85% of game sales for its Switch console.18 Most PlayStation games, on the other hand, are developed and published by third parties, with about 17% of game sales being first-party in 2020.19 17 See Intro to the Industry: The difference between game developers and publishers, Gaming Street (Sept. 18, 2019), https://gamingstreet.com/intro-to-the-industry-the-difference-between- game-developers-and-publishers/. 18 Ben Gilbert, Nintendo's recent success highlights a critical risk to the gaming giant's business, Bus. Insider (Feb. 4, 2019), https://www.businessinsider.com/nintendo-reliance-on-first-party- games-huge-risk-to-business-2019-2. 19 Sony Corporation, Supplemental Information for the Consolidated Financial Results for the Fourth Quarter Ended March 31, 2021 at 9 (Apr. 28, 2021), sony.com/en/SonyInfo/IR/library/ presen/er/pdf/20q4_supplement.pdf B. The Rise of Digital Video Games 28. Historically, video games were sold exclusively on disks that users inserted into the console. Games could be purchased or rented from a variety of online and brick-and-mortar retailers, including many that bought and sold used copies. The disks could also be traded and shared amongst friends. 29. More recent versions of all three consoles also allow users to purchase and download digital copies of games directly to the console, which connects to the internet, thereby avoiding the need for any physical disk. Sony, Microsoft, and Nintendo each operate their own virtual store where consumers can buy and download digital games directly on their console. 30. Sales of digital games for the three consoles exceeded sales of their physical counterparts for the first time in 2020, and the trend is likely to continue, with video game disks following the path taken by DVDs and CDs towards the history books.20 31. All three digital stores operate in a similar fashion: game publishers provide the game software to the digital store, which then makes the games available for purchase. The store collects payment, and facilitates digital delivery to users’ console. For their services maintaining the platform and the necessary infrastructure for delivering digital content, Sony, Microsoft, and Nintendo take a cut of every sale on their respective stores, remitting the balance to the publishers. 32. Sony’s PlayStation Store differs from both Microsoft and Nintendo’s digital stores, however, in that game developers must cede total control over the retail price to Sony.21 Microsoft and Nintendo, on the other hand, allow developers who sell games through their 20 See Dylan Warman, For the First Time, Digital Game Sales Outnumber Physical Sales, ScreenRant (Aug. 12, 2020), https://screenrant.com/digital-game-sales-consoles-outnumber- physical-first-time/ 21 See PlayStation Global Developer & Publisher Agreement ¶ 15.2.2 (effective Mar. 23, 2017) (“Each SIE Company has the sole and exclusive right to set the retail price to Users for Digitally Delivered Products sold or otherwise made available for purchase on or through [PlayStation Network].”), available at https://www.sec.gov/Archives/edgar/data/946581/00016282801700 5833/ex10-48.htm. platforms to set the retail price, and then take 30% of that price on each sale for platform fees.22 Sony follows a similar revenue sharing model with some publishers, and is reported to take the same 30% cut.23 With other publishers, however, Sony maintains agreements whereby it pays the publisher an agreed upon “wholesale price” for each game sold, with the full retail markup going to Sony.24 C. Competition in the Retail Market for Digital Video Games 33. In the retail market for digital video games, price competition occurs principally in one of two ways. First, where publishers maintain some control over the retail price, they compete with one another to gain market share by offering a lower price to consumers. Second, where download codes are available from outside retailers, the retailers compete amongst themselves and with the in-console stores to offer the best price. 34. For Xbox and Nintendo games, consumers can buy these download codes from the same retailers who sell games on disks, which they then use to download the games directly to their consoles. 35. PlayStation games were previously sold in the same manner, but as of April 1, 2019, Sony stopped allowing retailers to sell download codes for PlayStation games. As a direct and proximate result, the only place consumers can purchase digital copies of PlayStation games is directly from the PlayStation Store, where Sony has complete control over retail prices. D. The PlayStation 5 Launch 36. On November 12, 2020, Sony launched the PlayStation 5. As of March 31, 2021, Sony had sold over 7.8 million units, making the PlayStation 5 the fastest-selling console of all 22 See Frequently Asked Questions, Nintendo Developer Portal, https://developer.nintendo .com/faq (last visited Apr. 28, 2021); Microsoft Store App Developer Agreement, Version 8.6 (effective July 10, 2020), available at https://query.prod.cms.rt.microsoft.com/cms/api/am/ binary/RE4o4bH 23 See Tom Marks, Report: Steam's 30% Cut Is Actually the Industry Standard, IGN (Jan. 13, 2020), https://www.ign.com/articles/2019/10/07/report-steams-30-cut-is-actually-the-industry- standard. 24 PlayStation Global Developer & Publisher Agreement ¶ 15.2.1. time,25 but Sony has nevertheless been unable to meet demand for the console. Upon release, PlayStation 5 consoles were almost immediately sold out at every retailer. Today, it is still very difficult for consumers to get their hands on a PlayStation 5 gaming console, with inventory restocks at major retailers and on Sony’s website selling out almost instantaneously.26 PlayStation 5 sales are expected to eventually surpass 200 million units.27 37. The PlayStation 5 is available in two versions: the Base Model which is available for $499 retail, and the Digital Edition which is $100 less expensive at $399 retail. 38. The Base Model includes the previously-standard optical disk drive, allowing users to choose whether to purchase physical disk copies of games, available from retailers such as those mentioned above, or to buy digital copies and download directly to their console. The less expensive Digital Edition does not include a disk drive, so users can only purchase games in digital format at Sony’s monopoly prices. E. Sony Eliminates Retail Competition for Digital PlayStation Games 39. Until recently, consumers could purchase download codes for digital PlayStation games from the same array of retailers that sell physical games. This allowed PlayStation users to purchase a digital copy of a video game from their preferred retailer at the retailer’s chosen 40. However, starting on April 1, 2019, Sony implemented a new policy preventing retailers from selling digital download codes. Since access to Sony’s PlayStation Network is required to enable digital delivery of PlayStation games, the result of this scheme is that consumers can purchase digital games only through the PlayStation Store or not at all. For 25 See Andy Robinson, Sony reports 7.8m PS5s shipped in ‘PlayStation’s best year ever’, Video Games Chronicle (Apr. 28, 2021), https://www.videogameschronicle.com/news/sony-reports-7- 8m-ps5-sales-in-playstations-best-year-ever/. 26 See Kevin Webb, Sony’s PlayStation 5 remains hard to find months after its launch, Bus. Insider (Apr. 14, 2021), https://www.businessinsider.com/where-to-buy-ps5. 27 See See Aernout van de Velde, PS5 Sales to Exceed 200 to 300 Million Units in 5 to 6 Years, Analyst Says; Could Terminate the Long-Running Console War, WCCF Tech (Oct. 17, 2020), https://wccftech.com/ps5-sales-200-300-million-700-console-war/. owners of the PlayStation 5 Digital Edition, that means the only place they are able to purchase any video games for their console is through the PlayStation Store. 41. Sony, at all relevant times, retained exclusive control over the design, features and operating software for PlayStation consoles, and over the necessary software for delivering digital content to PlayStation consoles. 42. Sony specifically intended to and did eliminate price competition from other digital video game retailers. As a result, Sony has an unlawful monopoly over the market for digital PlayStation games, from which it derives supracompetitive profits. 43. Before the April 2019 policy changes, publishers could sell both physical PlayStation games and digital games, via download codes, through a variety of retailers. Retailers profit from markups on the final purchase price, but price competition among them puts downward pressure on retail price markups. Sony also charges a Platform Royalty Fee on each game sold by retailers for use on its gaming consoles, including PlayStation 5. On information and belief, Sony’s Platform Royalty Fee for physical games sold at external retailers is 11.5%. 44. By foreclosing retail competition for digital PlayStation games, Sony effectively takes the retail markup for itself in addition to its royalty fee. It also charges a higher total fee than the sum of both the retail markup and the Platform Royalty Fee for games sold by retailers. Consumers, limited to a single source for purchasing any digital PlayStation content, are forced to pay a higher price for digital PlayStation games than they would in a free and unrestrained competitive retail market. 45. Additionally, by taking complete control over retail prices for digital PlayStation games, Sony foreclosed price competition among video game publishers to a significant degree, because they can no longer execute a strategy of offering lower retail prices to gain a higher share of sales. Instead, Sony sets the price to maximize its own profits, and Sony’s interests in choosing a retail price strategy conflict with the interests of video game publishers. Because Sony is responsible for all the marginal costs associated with each sale, it is incentivized to set the price higher to obtain a greater margin on each sale. Publishers, who incur no additional costs with each additional game sold, would maximize their profits at a lower price point but greater sales volume, relative to Sony. 46. Sony owns, possesses or controls 100% of the PlayStation Store, maintains and operates the PlayStation Store with Sony employees or agents, and controls all of the sales, revenue collections and other business operations. 47. The revenue Sony generates through sales of digital video games has been increasing sharply since it established its monopoly on digital PlayStation games. In 2019, Sony made $12.48 billion through sales of digital PlayStation games and associated content.28 For the fiscal year ending March 31, 2021, that number was $17.32 billion.29 VI. MONOPOLY POWER IN THE RELEVANT MARKET 48. The relevant product market in this case is the market for downloadable, digitally- delivered video game content that is compatible with a PlayStation console (“digital PlayStation games”). The relevant geographic market is the United States, its territories, possessions, and the Commonwealth of Puerto Rico. 49. As discussed above, the market for video game consoles is dominated by three companies of roughly equal market share: Sony (PlayStation); Microsoft (Xbox); and Nintendo. The price for the consoles is generally between $300 and $600. Games are not cross-compatible on different consoles, so once a consumer purchases a console, he or she must purchase games that are designed for that particular console. 50. Due to the high cost of consoles, the differentiation among them, and the lack of cross-compatibility, each console creates a separate aftermarket for games that can be played on it. Games that cannot be played on the same console are not substitutable. A small but 28 Ravi Sinha, PlayStation Network Generated 2nd Highest Revenue Ever in 2019, GamingBolt (Feb. 2, 2020), https://gamingbolt.com/playstation-network-generated-2nd-highest-revenue-ever- in-2019 29 Sony Corporation, Financial Statements and Consolidated Financial Results for the Fiscal Year Ended March 31, 2021 (Apr., 28, 2021), available at https://www.sony.com/en/SonyInfo /IR/library/presen/er/pdf/20q4_sony.pdf. Dollar figure based on the following exchange rate from April 28, 2021: 1 JPY = 0.0092 USD. significant, non-transitory increase to the price of games for one console will not, therefore, cause a consumer to switch to one of the other consoles. 51. Prices for digital games on the PlayStation Store are not responsive to changes in prices for physical games available from other retailers, and physical games are not substitutes for digital games. A small but significant, non-transitory increase in price for digital PlayStation games will not cause a significant number of consumers to switch to buying physical copies of PlayStation games instead. 52. Historically, there was vigorous price competition among retailers and among publishers within the console-specific game markets. Retailers tried to offer the best prices to consumers and thereby gain a higher share of the market while maintaining profits. Publishers had an incentive to lower their wholesale prices so retailers could offer a better price in turn, resulting in pricing and sales volumes that maximized profits for both publishers and retailers. 53. By prohibiting sale of digital PlayStation games except through the PlayStation Store, Sony established a complete monopoly in the market for digital PlayStation games. Sony has a 100% market share in the relevant market, and complete control over retail prices in the relevant market. VII. ANTICOMPETITIVE EFFECTS 54. Sony’s acquisition and maintenance of a monopoly in the market for digital PlayStation games causes consumers to pay more for their digital PlayStation games than they would have in a competitive market. It has also resulted in reduced output of PlayStation games than would exist in a free and unrestrained competitive market. 55. The lack of a truly competitive environment has also led to reduced output and supply of PlayStation video games because publishers are barred from selling these games at prices below Sony’s chosen retail price. Under basic economic principles, lower prices would generate both increased demand and increased supply to meet that demand. Sony’s unlawful monopoly naturally restricts output. 56. Evidence of the anticompetitive price effect is already manifesting itself as demonstrated by the current price differences for PlayStation video games across different retailers. Table 1, below, reflects the prices of the first ten games listed on the PlayStation Store’s “Best-Seller” list30 as of this writing, along with the prices of the same games on disk from four prominent retailers. As shown, Sony’s prices on the PlayStation Store are between 12% and 171% higher for these games than the average prices for each across the other four retailers. Table 1 Game PS Store Wal-Mart GameStop Best Buy Amazon Non-PS Store Average Price ∆ on PS Store Madden NFL 21 $59.99 $19.98 $27.99 $19.99 $29.16 $24.28 +147% Ghost of Tsushima $59.99 $56.50 $37.99 $59.99 $59.99 $53.62 +12% NBA 2K21 $59.99 $29.72 $18.99 $19.99 $19.99 $22.17 +171% Watch Dogs Legion $59.99 $36.49 $49.99 $59.99 $30.00 $44.12 +36% Marvel's Avengers $39.99 $29.00 $22.99 $24.99 $24.99 $25.49 +57% MLB The Show 20 $19.99 $9.99 $8.99 $19.99 $16.97 $13.99 +43% Resident Evil 3 $59.99 $27.99 $34.99 $39.99 $25.50 $32.12 +87% NHL 21 $59.99 $28.89 $29.99 $19.99 $25.00 $25.97 +131% Average Price ∆ on PS Store: +74% 57. The market for video game on disk provides a helpful benchmark for what prices would look like in a competitive market for digital games. There is no legitimate reason digital games should be more expensive than their physical counterparts. In fact, given the costs saved on packaging and distribution, prices for games in a truly competitive market for digital games would likely be lower than they are for games on disk. The only plausible explanation for the stark price differences is Sony’s monopoly power in the market for digital PlayStation games. As video game disks go the way of CDs and DVDs before them, Sony has positioned itself to gain an ever-increasing share of, and eventually, a monopoly in the market for all PlayStation games. 30 See PlayStation Store: Best Sellers, Sony Interactive Entm’t, https://store.playstation.com/en- us/category/877e5ce2-4afc-4694-9f69-4758e34e58cd/1 (last visited May 4, 2021). 58. Sony made approximately $17 billion in revenue from the sale of digital PlayStation games in the fiscal year ending March 31, 2021.31 If the average price difference of +74% indicated by the above data is representative of the broader market, then overcharges resulting from Sony’s monopoly could be in the range of $7 billion per year as long as Sony’s monopoly continues. 59. The existence of supracompetitive pricing, reduced consumer choice among market alternatives, and reduced output and supply demonstrate that Sony’s monopolistic conduct has injured competition generally in the market for digital PlayStation games, precisely the type of harm the antitrust laws were intended to prevent. VIII. ANTITRUST INJURY 60. Plaintiff and Class members have been injured by Sony’s anticompetitive conduct because they paid more for digital PlayStation games than they would have paid in a competitive market. 61. Plaintiff and Class members have also been injured because Sony’s unlawful monopolization of the relevant market extinguished Plaintiff and Class members’ freedom of choosing between video games sold through the PlayStation Store and lower cost alternatives that would have been available had Sony not monopolized the market. IX. EFFECT ON INTERSTATE COMMERCE 62. During the relevant time period, Sony produced, marketed, sold, and delivered digital PlayStation games across state lines in an uninterrupted flow of interstate commerce. 63. During the relevant time period, Plaintiff and Class members purchased digital PlayStation games, other digital content, and related services from Sony and/or its agents. As result of Sony’s illegal and anticompetitive conduct, Plaintiff and Class members were 31 See Sony Corporation, Financial Statements and Consolidated Financial Results for the Fiscal Year Ended March 31, 2021 (Apr, 28, 2021), available at https://www.sony.com/en/SonyInfo /IR/library/presen/er/pdf/20q4_sony.pdf. Dollar figure based on the following exchange rate from April 28, 2021: 1 JPY = 0.0092 USD. compelled to pay, and did pay, artificially inflated prices for one or more of the aforementioned products and services. 64. During the relevant time period, Sony employed various instrumentalities of interstate commerce to effectuate the illegal acts alleged herein, including the United States mail, interstate and foreign travel, and interstate and foreign wire commerce. 65. Defendant’s conduct was within the flow of and was intended to have and did have a direct, substantial, and foreseeable effect on interstate commerce. 66. Sony’s conduct has also had substantial intrastate effects in that, among other things, consumers paid overcharges in each state. Sony’s conduct materially deprived the consuming public—including of purchasers in each state—of any choice to purchase more affordable digital PlayStation games from retailers other than Sony. The absence of competition for PlayStation 5 games has, and continues to, directly and substantially affect and disrupt commerce within each state. X. CLASS ACTION ALLEGATIONS 67. Plaintiff brings this action on behalf of himself and all others similarly situated as a class action under Federal Rules of Civil Procedure 23(a), (b)(2) and (3), seeking damages and injunctive relief on behalf of the following Class: All persons in the United States, exclusive of Sony and its employees, agents and affiliates, and the Court and its employees, who purchased any digital video game content directly from the PlayStation Store at any time from April 1, 2019 through the present. 68. Plaintiff and the Class seek damages for the overcharges they have paid since Sony monopolized the relevant market, and permanent injunctive relief to prevent or remedy the unlawful conduct alleged herein and thereby ensure competition in the relevant market. 69. Members of the Class are so numerous and geographically dispersed that joinder of all members is impracticable. Upon information and belief, there are at least ten million Class members, who reside in and have purchased digital PlayStation games in every state and territory throughout the United States. Moreover, given the costs of complex antitrust litigation, it would be uneconomic for many class members to bring individual claims and join them together. The Class is readily identifiable from information and records in the possession of Defendant. 70. Plaintiff is a member of the Class he seeks to represent, and his claims arise from the same factual and legal bases as those of the Class; he asserts the same legal theories as do all Class members. 71. Plaintiff’s claims are typical of the claims of Class members. Plaintiff’s claims arise out of the same course of anticompetitive conduct that gives rise to the claims of the other Class members. Plaintiff and all members of the Class were damaged by the same wrongful conduct: Sony’s monopolization of the retail market for digital PlayStation games. Plaintiff and all members of the Class paid supracompetitive prices for digital PlayStation games and were deprived of the benefits of retail competition as a result of Sony’s unlawful monopoly. 72. Plaintiff will fairly and adequately protect and represent the interests of the Class. The interests of Plaintiff are aligned with, and not antagonistic to, those of the other members of the Class. 73. Plaintiff is represented by counsel who are experienced and competent in the prosecution of class action antitrust litigation. 74. Questions of law and fact common to the members of the Class predominate over questions that may affect only individual Class members. Overcharge damages with respect the Class as a whole are appropriate because Sony acted on grounds generally applicable to the entirety of the Class. Such generally applicable conduct is inherent in Sony’s unlawful creation and maintenance of a monopoly in the market for digital PlayStation games. Questions of law and fact common to the Class include, but are not limited to: a) Whether Sony unlawfully created, maintained and continues to maintain monopoly power in the relevant market; b) Whether Sony’s unlawful monopoly has caused and continues to cause anticompetitive effects in the relevant market; c) Whether procompetitive justifications exist, and if they do, whether there were less restrictive means of achieving them; d) Whether Sony’s unlawful monopoly has substantially affected intrastate and/or interstate commerce; e) Whether Sony’s unlawful monopoly caused antitrust injury through overcharges to the business or property of Plaintiff and the members of the Class; f) Whether injunctive relief is warranted to restore competition in the relevant market; g) The quantum of overcharges paid by the Class in the aggregate. 75. The common questions of law and fact are identical for each and every member of the Class. 76. Plaintiff will thoroughly and adequately protect the interests of the Class, having obtained qualified and competent legal counsel to represent himself and those similarly situated. 77. The prosecution of separate actions by individual class members would create a risk of inconsistent adjudications and cause needless expenditure of judicial resources. 78. Plaintiff is typical of the Class in that his claims, like those of the Class, are based on the same anticompetitive business practices and the same legal theories. 79. Class action treatment is a superior method for the fair and efficient adjudication of the controversy. 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, or expense that numerous individual actions would engender. The benefits of proceeding through the class mechanism, including providing injured persons or entities a method for obtaining redress on claims that could not practicably be pursued individually, substantially outweighs potential difficulties in management of this class action. 80. Plaintiff knows of no special difficulty to be encountered in litigating this action that would preclude its maintenance as a class action. XI. CLAIMS FOR RELIEF FIRST CLAIM Monopolization Under Section 2 of The Sherman Act, 15 U.S.C. § 2 and Section 4 of the Clayton Act, 15 U.S.C. 4 81. Plaintiff realleges and incorporates the allegations elsewhere in the Complaint as if fully set forth herein. 82. Sony has willfully and unlawfully acquired, maintained, and continues to maintain monopoly power in the market for digital PlayStation video games. Specifically, Sony has unlawfully acquired monopoly power by: (i) establishing the PlayStation Store as the exclusive distributor of digital PlayStation games; and (iii) maintaining complete control over retail prices on the PlayStation Store. 83. Sony’s unlawful acquisition of monopoly power has reduced competition in the relevant market resulting in decreased output and supracompetitive prices for digital PlayStation 84. There is and was no legitimate, non-pretextual, procompetitive business justification for Sony’s conduct that outweighs its harmful effect. 85. Plaintiff and Class members have been injured by Sony’s unlawful monopolization because they have been: (a) deprived of lower cost alternatives for digital PlayStation games; (b) forced to pay supracompetitive prices for those games; and/or (c) subjected to a lower of those games. Plaintiff and Class members paid more for digital PlayStation games than they otherwise would have absent Sony’s unlawful monopolization of the digital PlayStation game market. 86. Plaintiff and Class members have suffered economic injury to their property as a direct and proximate result of Sony’s monopolization of the relevant market in violation of 15 U.S.C. § 2, and are, therefore, entitled to treble damages, costs, and attorneys’ fees in amounts to be proved at trial. 87. Plaintiff and Class members have suffered economic injury to their property as a direct and proximate result of Sony’s unlawful monopolization, and Sony is therefore liable for treble damages, costs, and attorneys’ fees in amounts to be proved at trial. SECOND CLAIM For Attempted Monopolization Under Section 2 of The Sherman Act, 15 U.S.C. § 2 and Section 4 of the Clayton Act, 15 U.S.C. 4 88. Plaintiff realleges and incorporates the allegations elsewhere in the Complaint as if fully set forth herein. 89. Sony has engaged in exclusionary, predatory and anticompetitive conduct with a specific intent to monopolize the market digital PlayStation games. Specifically, Sony has unlawfully attempted to acquire monopoly power by; (i) establishing the PlayStation Store as the exclusive distributor of digital PlayStation games; and (ii) maintaining complete control over retail prices on the PlayStation Store. 90. Sony’s attempted acquisition of monopoly power has reduced competition in the relevant market resulting in decreased output and supracompetitive prices for digital PlayStation 91. There is and was no legitimate, non-pretextual, procompetitive business justification for Sony’s conduct that outweighs its harmful effect. 92. Plaintiff has been injured by Sony’s unlawful attempted monopolization because they have been: (a) deprived of lower cost alternatives for digital PlayStation games; (b) forced to pay supracompetitive prices for those games; and (c) subjected to a lower output of those games. Plaintiff and Class members paid more for digital PlayStation games than they otherwise would have absent Sony’s unlawful monopolization of the digital PlayStation game market. 93. Plaintiff and Class members have suffered economic injury to their property as a direct and proximate result of Sony’s attempted monopolization of the relevant market in violation of 15 U.S.C. § 2, and are, therefore, entitled to treble damages, costs, and attorneys’ fees in amounts to be proved at trial. THIRD CLAIM Declaratory and Injunctive Relief Under Section 2 of The Sherman Act, 15 U.S.C. § 2 and Sections 2 and 16 of the Clayton Act, 15 U.S.C. § 26 94. Plaintiff realleges and incorporates the allegations elsewhere in the Complaint as if fully set forth herein. 95. Sony’s unlawful creation and maintenance of a monopoly in the digital PlayStation game market violates Section 2 of the Sherman Act, 15 U.S.C § 2. Its unlawful conduct is continuing and will continue unless it is permanently enjoined. The anticompetitive effects of Sony’s unlawful conduct in the relevant market are continuing and will continue absent an injunction. 96. Plaintiff and the Class have been injured in their business or property by reason of Sony’s antitrust violations alleged in this Count. These injuries will continue until Sony’s anticompetitive conduct ceases and competition is restored. FOURTH CLAIM Damages Under the California Unfair Competition Law Cal. Bus. & Prof. Code §§ 17200, et seq. 97. Plaintiff realleges and incorporates the allegations elsewhere in the Complaint as if fully set forth herein. 98. Sony’s monopolization of the market for digital PlayStation games locks consumers into purchasing digital PlayStation games from the PlayStation Store. This video game aftermarket restriction is unfair, immoral, unethical, unscrupulous, and substantially injurious to consumers and the utility of its conduct, if any, does not outweigh the gravity of the harm to its victims. 99. Sony’s monopolizing conduct is also unfair because it violates public policy as declared by specific constitutional, statutory or regulatory provisions, including the Sherman 100. Sony’s monopolizing conduct is also unfair because the consumer injury is substantial, is not outweighed by benefits to consumers or competition, and is not one consumers themselves could reasonably have avoided. FIFTH CLAIM Unjust Enrichment 101. Plaintiff realleges and incorporates the allegations elsewhere in the Complaint as if set forth in full herein. 102. As a result of Sony’s monopolization of the digital PlayStation video game market, Sony has been unjustly enriched at the expense of Plaintiff and Class members, who purchased digital PlayStation games from the PlayStation Store when they otherwise might not have, or spent more to purchase digital PlayStation games than they otherwise would have absent Sony’s wrongful acts described herein. 103. It would be inequitable for Sony to retain the profits, benefits, and other compensation obtained from its wrongful conduct. 104. As a result, Plaintiff seeks, on behalf of himself and other Class Members, restitution from Sony and an Order disgorging all of Sony’s inequitably-obtained revenue, profits, benefits, or other compensation. 105. Because the Court has broad discretion to find Sony was unjustly enriched, and because the Court has broad discretion to award appropriate relief, and because Sony may have been unjustly enriched in an amount different than the amount Plaintiff and Class Members were damaged, Plaintiff’s legal remedies are inadequate to fully compensate Plaintiff for all of Sony’s challenged behavior. XII. PRAYER FOR RELIEF WHEREFORE, Plaintiff, on behalf of himself and the proposed Class, prays for judgment against Sony as to each and every claim made herein and for the following relief: A. An Order determining that this action may be maintained as a class action pursuant to Rules 23(a), (b)(2) and (b)(3) of the Federal Rules of Civil Procedure, and directing that reasonable notice of this action, as provided by Rule 23(c)(2), be given to the Class, and appointing the Plaintiff as the named representative of the Class; C. Injunctive relief ensuring free and unrestrained competition in the market for digital PlayStation games, and preliminarily and permanently enjoining Sony from continuing the unlawful conduct alleged herein, and from engaging in similar or related conduct in the D. Monetary relief consisting of treble damages in an amount to be determined at trial; pre- and post-judgment interest; and costs, expenses, and reasonable attorneys’ fees; and G. Any other and further relief the case may require and the Court may deem just and proper under the circumstances. XIII. JURY DEMAND 106. Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiff, on behalf of himself and the proposed Class, demands a trial by jury on all issues so triable. Dated: May 5, 2020 Respectfully submitted, /s/ Jeff S. Westerman Jeff S. Westerman (SBN 94559) WESTERMAN LAW CORP. 16133 Ventura Blvd., Suite 685 Encino, CA 91436 Tel: (310) 698-7450 jwesterman@jswlegal.com Michael M. Buchman (pro hac vice forthcoming) Michelle C. Clerkin (pro hac vice forthcoming) Jacob O. Onile-Ere (pro hac vice forthcoming) MOTLEY RICE LLC 777 Third Avenue, 27th Floor New York, NY 10017 Tel: (212) 577-0050 mbuchman@motleyrice.com mclerkin@motleyrice.com jonileere@motleyrice.com Adrián N. D. Campos (pro hac vice forthcoming) THE LAW OFFICE OF ADRIAN CAMPOS 40 Bayscape Cardiff Marina Watkiss Way, Cardiff, CF11 0TA United Kingdom Tel: +44 7305 568951 mrcampos15@gmail.com Barrett Beasley (SBN: 194143) Robert L. Salim (pro hac vice forthcoming) SALIM-BEASLEY, LLC 1901 Texas Street Natchitoches, LA 71457 Tel: (318) 354-1043 Fax: (318) 354-1227 robertsalim@cp-tel.net John Alden Meade(pro hac vice forthcoming) MEADE YOUNG LLC 909 Poydras St., Suite 1600 New Orleans, LA 70112 Tel: (504) 799-3102 jam@meadeyoung.com Attorneys for Plaintiff and the Proposed Class Agustin Caccuri Sony Interactive Entertainment LLC Los Angeles #H$ 7]c\bg ]T GSaWRS\QS ]T ;W`ab AWabSR EZOW\bWTT 7]c\bg ]T GSaWRS\QS ]T ;W`ab AWabSR 8STS\RO\b "/3!9%7%!51'/38/,,!)'7+7!431<#! !"+;)+58!/3!9%7%!51'/38/,,!)'7+7#! CDI93 >C A5C8 7DC89BC5I>DC 75H9H% JH9 I=9 AD75I>DC D; I=9 IG57I D; A5C8 >CKDAK98' 5bb]`\Sga "/B!0GHOG#! #I$ 5bb]`\Sga ",DJF!3=FA$!'@@JAKK$!=G@!8AEAICHGA!3MF>AJ#! 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Civil Action No. SONY INTERACTIVE ENTERTAINMENT LLC Defendant(s) ) ) ) ) ) ) ) ) ) ) ) ) SUMMONS IN A CIVIL ACTION To: (Defendant’s name and address) Sony Interactive Entertainment LLC 2207 Bridgepointe Parkway San Mateo, California 94404 A lawsuit has been filed against you. Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if you are the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ. P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney, whose name and address are: Jeff Westerman 16133 Ventura Blvd., Suite 685 Encino, CA 91436 If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court. CLERK OF COURT Signature of Clerk or Deputy Clerk PROOF OF SERVICE (This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l)) This summons for (name of individual and title, if any) was received by me on (date) . " I personally served the summons on the individual at (place) on (date) ; or " I left the summons at the individual’s residence or usual place of abode with (name) , a person of suitable age and discretion who resides there, on (date) , and mailed a copy to the individual’s last known address; or " I served the summons on (name of individual) , who is designated by law to accept service of process on behalf of (name of organization) on (date) ; or " I returned the summons unexecuted because ; or " Other (specify): My fees are $ for travel and $ for services, for a total of $ . 0.00 I declare under penalty of perjury that this information is true. Server’s signature Printed name and title Server’s address Additional information regarding attempted service, etc:

antitrust

_AcwM4cBD5gMZwczLTD9

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NORTH CAROLINA Case No. 7:21-cv-47 COMPLAINT - CLASS ACTION DEMAND FOR JURY TRIAL JOSEPH McALEAR, individually and on behalf of all others similarly situated, Plaintiff v. nCINO, INC. and LIVE OAK BANCSHARES, INC., Defendants. Joseph McAlear, individually and on behalf of a class of similarly situated individuals, hereby states and alleges the following against Defendants nCino, Inc. (“nCino”) and Live Oak Bancshares, Inc. (“Live Oak Bank”) (collectively, “Defendants”). I. SUMMARY OF THE ACTION 1. This class action challenges an illegal agreement between nCino, Live Oak Bank, and non-party Apiture LLC (“Apiture”) to suppress competition for each other’s employees (the “No-Hire Agreement”). The No-Hire Agreement pertained to all employees of nCino and Apiture, and employees in the software engineering department of Live Oak Bank, employed in Wilmington, North Carolina. The express purpose of the No-Hire Agreement was to prevent the companies from having to pay competitive wages to attract and retain talent. 2. The No-Hire Agreement began as early as nCino’s founding in 2011, and has continued to the present. The No-Hire Agreement restrains competition in the labor market and is per se unlawful under federal and North Carolina law. Plaintiff seeks damages for violations of Section 1 of the Sherman Act, 15 U.S.C. § 1, and North Carolina General Statutes §§ 75-1 and 75-2. II. JURISDICTION AND VENUE 3. Plaintiff brings this action to recover 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, and North Carolina General Statutes §§ 75-1 and 75-2. 4. 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, 1337, and 1367. 5. Venue is proper in this judicial district pursuant to Section 12 of the Clayton Act (15 U.S.C. § 22) and 28 U.S.C. § 1391(b), (c), and (d) 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 Defendants reside in this District. III. THE PARTIES A. Plaintiff 6. Plaintiff Joseph McAlear is a citizen and resident of the State of North Carolina. Mr. McAlear is a former employee of Live Oak Bank and Apiture. He was injured in his business and property by reason of the violation alleged herein. B. Defendants 7. Defendant nCino is a publicly-owned financial technology company offering digital banking platforms to customers. It is headquartered and has its principal place of business in Wilmington, North Carolina. 8. Defendant Live Oak Bank is a publicly-owned bank with a financial technology division. It is headquartered and has its principal place of business in Wilmington, North Carolina. C. Unnamed Co-Conspirators 9. Apiture is a private financial technology company offering digital banking technology. It is a joint venture between Live Oak Bank and First Data Corporation. Apiture’s principal place of business is Wilmington, North Carolina. IV. CLASS ACTION ALLEGATIONS 10. Plaintiff brings this action on behalf of himself and all others similarly situated (the “Proposed Class”) pursuant to Federal Rule of Civil Procedure 23(a), 23(b)(2), and 23(b)(3). The Proposed Class is defined as follows: All natural persons employed by nCino or Apiture in Wilmington, North Carolina, and/or employed by Live Oak Bank’s financial technology division in Wilmington, North Carolina, at any time from March 22, 2018 through the present. Excluded from the Proposed Class are: members of the boards of directors; C-suite or executive-level managers; and any and all judges and justices and chambers’ staff assigned to adjudicate any aspect of this litigation. 11. Plaintiff does not, as yet, know the exact size of the Proposed Class because such information is in the exclusive control of Defendants. Based upon information and belief, there are at least seven hundred Class members. Joinder of all members of the Class, therefore, is not practicable. 12. The questions of law or fact common to the Class include but are not limited to: a. whether Live Oak Bank and nCino had a No-Hire Agreement between approximately 2011 and the present, which agreement expanded to include Apiture as of approximately 2017; b. whether Live Oak Bank, nCino, and Apiture concealed the existence of the No-Hire Agreement from members of the Proposed Class; c. whether Defendants’ conduct violated the Sherman Act; d. whether the No-Hire Agreement is a per se violation of the Sherman Act, or alternatively whether the No-Hire Agreement violates the rule of reason or “quick look” standards; e. whether Defendants violated N.C. Gen. Stat. §§ 75-1 and 75-2; f. whether the No-Hire Agreement is a per se violation of N.C. Gen. Stat. §§ 75-1 and 75-2, , or alternatively whether the No-Hire Agreement violates the rule of reason or “quick look” standards; g. whether the No-Hire Agreement restrained trade, commerce, or competition for employees between nCino and Live Oak Bank, and/or between nCino and Apiture; h. whether Plaintiff and the Proposed Class have suffered antitrust injury; and i. the difference between the total compensation Plaintiff and the Proposed Class received from nCino, Live Oak Bank, and Apiture, and the total compensation Plaintiff and the Proposed Class would have received from nCino, Live Oak Bank, and Apiture in the absence of the No-Hire Agreement. 13. These and other questions of law and fact are common to the Proposed Class, and predominate over any questions affecting only individual members of the Proposed Class. 14. Plaintiff’s claims are typical of the claims of the Proposed Class. 15. Plaintiff will fairly and adequately represent the interests of the Proposed Class and has no conflict with the interests of the Proposed Class. 16. Plaintiff has retained counsel experienced in antitrust and class action litigation to represent himself and the Proposed Class. 17. This class action is superior to the alternatives, if any, for the fair and efficient adjudication of this controversy. Prosecution 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. By contrast, prosecution of separate actions by individual members of the Proposed Class would create the risk of inconsistent or varying adjudications, and be inefficient and burdensome to the parties and the Court. V. FACTUAL ALLEGATIONS A. Trade and Commerce 18. Defendants and Apiture employed members of the Proposed Class in North Carolina, including in this judicial district. 19. Conduct by Defendants and Apiture has substantially affected interstate commerce throughout North Carolina and the United States, and has caused antitrust injury throughout North Carolina and the United States. B. Competition for Financial Technology Employees in Wilmington 20. Live Oak Bank, nCino, and Apiture are the leading employers for financial technology employees in Wilmington, North Carolina. All three are involved in the development of digital banking technology. There are no other peer financial technology companies in Wilmington. 21. In a properly functioning and lawfully competitive labor market, nCino, Live Oak Bank, and Apiture would compete for employees by recruiting and hiring from each other. The consequence of their geographic proximity on competition for employees is profound. To work for any other potential employer in the same industry would require an employee to move to another city – at minimum, to the Research Triangle, approximately 130 miles away. That involves significant costs to the employee, which may include moving a family, finding new schools for children, finding new places of worship, and finding alternative employment for a spouse. None of these costs would occur if an employee switched between Live Oak Bank, Apiture, or nCino. As a result, but for the No-Hire Agreement, Live Oak Bank, Apiture, and nCino would have been each other’s key competitor for employees, and their competition would have driven up employee pay. 22. Competition for employees via recruiting and lateral hiring has a significant impact on compensation in a variety of ways. First, when employers become aware of attractive outside opportunities for their employees, the threat of losing them to competitors encourages employers to preemptively increase compensation to increase morale and competitive positioning, and ultimately to retain their talent. If employers do not react to competition, their employees are likely to seek positions that offer more generous compensation and benefits elsewhere, or be receptive to recruiting by a rival employer. Once an employee has received an offer from a rival, retaining the employee may require a disruptive increase in compensation for that individual, if retention is possible at all. Employers therefore have an incentive to preemptively pay their employees well enough that they are unlikely to seek or pursue outside opportunities. Preemptive retention measures thus lead to increased compensation for all employees. 23. Second, the availability of desirable positions at competing employers forces employers to reactively increase compensation to retain employees who are likely to join a competitor institution. This can occur both when a particular individual or group of individuals becomes interested in switching employers and the current employer responds by offering a compensation increase to retain them, or when an employer responds to overall attrition rates by increasing compensation levels. In the former case, even a targeted increase designed to retain a certain group of employees will put upward pressure on the entire compensation structure. This is due to a foundational principle in compensation design called “internal equity,” which refers to the concept that employees want to be paid equitably with their peers. Targeted retention raises comes at a cost to the employer: after making those targeted raises, the well-known forces of internal equity will impact the broader pay structures, raising other employee pay as well. The misconduct alleged here prevented this competitive process from occurring, suppressing Class pay. 24. The positive compensation effects of hiring employees from competitors are not limited to the particular individuals who seek new employment, or to the particular individuals who would have been offered new positions but for the No-Hire Agreement. Instead, the effects of recruiting and hiring from competitors (and the effects of suppressing recruiting and hiring, pursuant to agreement) commonly impact all employees of the participating institutions. 25. If operating under competitive and lawful conditions, Live Oak Bank and nCino, and Apiture and nCino, would have recruited and hired employees from each other, driving employee pay up. The companies knew this and avoided such competitive wage pressure by entering into the No-Hire Agreement. C. Live Oak Bank, nCino, And Apiture Agree Not To Compete For Employees. 26. Live Oak Bank focuses on small business loans and deposits. It also maintains an active financial technology division. 27. In 2011 Live Oak Bank executives co-founded nCino to specialize in the development of online banking technology. Specifically, Live Oak Bank CEO James “Chip” Mahan and Live Oak Bank President Neil Underwood were co-founders of nCino and were members of its Board of Directors from 2011 until at least late 2017. They also participated in the search for and hiring of nCino CEO Pierre Naudeé. Upon information and belief, the executives of Live Oak Bank and nCino, including Mahan, Underwood, and Naudeé, entered into the No-Hire Agreement from the outset of nCino’s founding. 28. After nCino’s founding, Live Oak Bank continued to develop and invest in its own financial technology department. In 2017, Live Oak Bank and First Data Corporation (based in Austin, Texas) created Apiture as a joint venture, owned fifty percent by each company. Live Oak Bank’s financial technology department was largely transferred to Apiture and the employees working therein became Apiture employees. Chip Mahan and Neil Underwood serve on Apiture’s board of directors and have substantial day-to-day control over the company, including through their frequent direct communications with Apiture COO Christopher Cox. Mahan, Underwood, Cox, and others ensured that the No-Hire Agreement that Live Oak Bank had with nCino extended to include Apiture as well. 29. As Apiture and nCino evolved to compete more and more with each other in the digital banking market, tensions between the companies grew. In approximately late 2017 or 2018, nCino leadership removed Mahan and Underwood from its board of directors. However, despite fierce competition in the product market, the companies maintained their agreement not to compete in the labor market. The No-Hire Agreement continued unabated, as it continued to benefit the companies by eliminating competitive wage pressure. D. nCino Rejected Plaintiff McAlear’s Application Because Of The No- Hire Agreement 30. Plaintiff McAlear joined Live Oak Bank’s financial technology department as a Project Manager in April 2017. He was hired by and reported to Pete Underwood, brother of Neil Underwood. Mr. McAlear had been living in Wilmington for ten years, but he had been employed that entire time as a consultant to the federal government in Washington, D.C., working remotely from Wilmington. 31. When Mr. McAlear joined Live Oak Bank, several of his new colleagues expressed surprise that he was a Wilmington local. These colleagues explained that the company only hired from outside Wilmington, so it was remarkable for a new hire to be from the area. Mr. McAlear did not think too much about these comments until he needed to hire a new employee to report to him. Mr. McAlear conducted the interviews of prospective hires himself, but he needed to get Pete Underwood’s approval before he could even interview a candidate. Mr. McAlear noticed that Pete Underwood rejected every qualified local candidate that Mr. McAlear proposed to interview. Pete Underwood claimed that he knew every single proposed local person and that they were not good candidates, a claim which Mr. McAlear found implausible. His colleague, Geoff Gohs, explained to Mr. McAlear that Pete Underwood rejected all the local candidates because “we bring in everyone from outside.” 32. In October 2017, when the joint venture with First Data launched, Mr. McAlear became a Vice President at Apiture. Mr. McAlear is a specialist in agile software development, an approach that he advocated for at Apiture with mixed success. He was able to pursue an agile approach, but his managers were not themselves educated or invested in it. In April 2019 he attended the TriAgile conference in Raleigh, North Carolina. He met several representatives from nCino there, including recruiter Ren Yonker, all of whom were also very enthusiastic about agile software development. Mr. McAlear was thrilled to learn that there was another company in Wilmington that was invested in his area of expertise. Mr. McAlear went to the nCino website and found a job opening that matched his qualifications and submitted an application. A day or two later, he received the following email from recruiter Ren Yonker: I hope you had an enjoyable time at TriAgile on Tuesday, it was a pleasure meeting you. I talked to my Director of Recruiting and there is a “gentleman’s agreement” between our companies that we won’t recruit one another’s employees. With that being said, we will not be able to proceed with your candidacy on the Manager, Scrum Master role. I would very much enjoy to keep in touch and would be more than happy to help with coordinating an Agile Meetup group in the area. 33. Mr. McAlear was disappointed, but continued working for Apiture. Shortly thereafter, Mr. McAlear participated in a discussion with several Apiture managers where the No-Hire Agreement again came up. Apiture manager Matt Cook had an acquaintance at nCino who wanted to apply for a quality assurance job on the Apiture quality assurance team led by Dwayne Hill. Mr. Cook and Mr. Hill were discussing the nCino candidate right next to Mr. McAlear’s desk, when Chris Cox (then Apiture President and currently COO) came out from his office and joined the conversation. Mr. Cox informed them that he had spoken with his counterpart at nCino about hiring, and that if any employee of either company wanted to pursue a position with the other company, he or she had to inform their current manager first, and the companies collectively would decide whether the application could proceed. Mr. McAlear expressed his strong opposition to this policy, finding it to be collusive and unethical. Mr. Cox responded that this was the agreement between the companies, and made it clear it was not up for discussion. 34. Not long thereafter, Mr. Cox informed Mr. McAlear that Apiture had decided to eliminate his position. Mr. McAlear again applied to nCino but was rejected. To find employment within his skill set, Mr. McAlear had to move to the Research Triangle, which caused significant expense and disruption in his personal life. E. Defendant’s Conspiracy Suppressed The Mobility And Wages Of Plaintiff And The Proposed Class 35. As Plaintiff’s experience illustrates, Defendants reduced competition among themselves for employees by entering into the No-Hire Agreement alleged herein. Defendants and their co-conspirator entered into, implemented, and policed the No-Hire agreement with the intent and effect of suppressing the compensation of their employees at artificially low levels. 36. First, the No-Hire agreement eliminated competitive pressure for Defendants and their co-conspirator to preemptively raise the compensation of Plaintiff and members of the Proposed Class, because there was no threat of poaching by the competing institutions. The No-Hire Agreement thus artificially depressed compensation for Plaintiff and all members of the Proposed Class. 37. Second, because the agreement eliminated the primary competitors for lateral hires, Defendants and their co-conspirator were relieved from having to react to outside offers by offering higher pay, which would have increased the compensation of not just the person receiving the offer but all or nearly all Proposed Class Members, as the effects spread across the pay structure. 38. Third, because Defendants and their co-conspirator constitute the only established financial technology employers in Wilmington, the agreement drastically increased the costs for Plaintiff and others to seek or accept employment elsewhere. To change positions, Plaintiff and others similarly-situated would have to incur significant relocation costs to work at a peer company. Defendants and their co-conspirator were thus able to retain Plaintiff and members of the Proposed Class at artificially low compensation levels by increasing costs associated with changing employers. 39. Plaintiff and members of the Proposed Class were harmed by the No-Hire agreement alleged herein. The reduction of competition and suppression of compensation and mobility had a cumulative effect on all members of the Proposed 40. Without this class action, Plaintiff and the Proposed Class have been and will be unable to obtain compensation for the harm they suffered, and Defendants and their co-conspirator will retain the benefits of their unlawful conspiracy. FIRST CLAIM FOR RELIEF (Violation of the Sherman Act, § 1) 41. Plaintiff, on behalf of himself and all others similarly situated, realleges and incorporates herein by reference each of the allegations contained in the preceding paragraphs of this Complaint, and further alleges as follows. 42. Live Oak Bank and nCino entered into and engaged in unlawful agreements in restraint of the trade and commerce described above in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. Beginning no later than 2011 and continuing through the present, Live Oak Bank and nCino engaged in continuing trusts in restraint of trade and commerce in violation of Section 1 of the Sherman Act. Beginning no later than October 2017, Live Oak Bank and nCino extended this agreement to include Live Oak Bank’s new joint venture, Apiture. 43. Live Oak Bank and nCino’s agreements have included concerted action and undertakings among them with the purpose and effect of: (a) fixing the compensation of Plaintiff and the Class at artificially low levels; and (b) eliminating, to a substantial degree, competition between them for employees. 44. As a direct and proximate result of Live Oak Bank and nCino’s No-Hire Agreement, members of the Proposed Class have suffered injury to their property and have been deprived of the benefits of free and fair competition on the merits. 45. The unlawful No-Hire Agreement had the following effects, among others: a. competition between Live Oak Bank (including Apiture) and nCino for employees was suppressed, restrained, or eliminated; and b. Plaintiff and members of the Proposed Class have received lower compensation from Live Oak Bank, Apiture, and nCino than they otherwise would have received in the absence of the No-Hire Agreement, and, as a result, have been injured in their property and have suffered damages in an amount according to proof at trial. 46. The acts done by Live Oak Bank, Apiture, and nCino as part of, and in furtherance of, their contracts, combinations or conspiracies were authorized, ordered, or done by their respective administrators while actively engaged in the management of their affairs. 47. The No-Hire Agreement is a per se violation of Section 1 of the Sherman 48. Accordingly, Plaintiff and members of the Proposed Class seek three times their damages caused by Live Oak Bank, Apiture, and nCino’s violations of Section 1 of the Sherman Act, the costs of bringing suit, reasonable attorneys’ fees, and a declaration that such agreement is unlawful. SECOND CLAIM FOR RELIEF (Violation of N.C. Gen. Stat. §§ 75-1 & 75-2) 49. Plaintiff, on behalf of himself and all others similarly situated, realleges and incorporates herein by reference each of the allegations contained in the preceding paragraphs of this Complaint, and further alleges as follows. 50. Live Oak Bank and nCino entered into and engaged in unlawful agreements in restraint of the trade and commerce described above in violation of N.C. Gen. Stat. §§ 75-1 and 75-2. 51. Live Oak Bank and nCino’s agreements have included concerted action and undertakings among them with the purpose and effect of: (a) fixing the compensation of Plaintiff and the Class at artificially low levels; and (b) eliminating, to a substantial degree, competition between them for employees. 52. As a direct and proximate result of Live Oak Bank and nCino’s No-Hire Agreement, members of the Proposed Class have suffered injury to their property and have been deprived of the benefits of free and fair competition on the merits. 53. The unlawful No-Hire Agreement had the following effects, among others: a. competition between Live Oak Bank (including Apiture) and nCino for employees was suppressed, restrained, or eliminated; and b. Plaintiff and members of the Proposed Class have received lower compensation from Live Oak Bank, Apiture, and nCino than they otherwise would have received in the absence of the No-Hire Agreement, and, as a result, have been injured in their property and have suffered damages in an amount according to proof at trial. 54. The acts done by Live Oak Bank, Apiture, and nCino as part of, and in furtherance of, their contracts, combinations or conspiracies were authorized, ordered, or done by their respective administrators while actively engaged in the management of their affairs. 55. The No-Hire Agreement is a per se violation of N.C. Gen. Stat. §§ 75-1 and 75-2. 56. Accordingly, Plaintiff and members of the Proposed Class seek three times their damages caused by Live Oak Bank, Apiture, and nCino’s violations of N.C. Gen. Stat. §§ 75-1 and 75-2, the costs of bringing suit, reasonable attorneys’ fees, and a declaration that such agreement is unlawful. PRAYER FOR RELIEF WHEREFORE, Plaintiff prays that this Court enter judgment on his behalf and that of the Proposed Class by adjudging and decreeing that: A. This action may be maintained as a class action, with Plaintiff as the designated Class representative and their counsel as Class counsel; B. Live Oak Bank, Apiture, and nCino engaged in a trust, contract, combination, or conspiracy in violation of Section 1 of the Sherman Act and N.C. Gen. Stat. §§ 75-1 and 75-2, and that Plaintiff and the members of the Proposed Class have been damaged and injured in their business and property as a result of this violation; C. The alleged combinations and conspiracy be adjudged and decreed to be per se violations of the Sherman Act and N.C. Gen. Stat. §§ 75-1 and 75-2; D. Plaintiff and the members of the Proposed Class he represents recover threefold the damages determined to have been sustained by them as a result of the conduct of Live Oak Bank, Apiture, and nCino complained of herein, and that judgment be entered against Live Oak Bank and nCino for the amount so determined; E. Judgment be entered against Live Oak Bank and nCino in favor of Plaintiff and each member of the Proposed Class he represents, for restitution and disgorgement of ill-gotten gains as allowed by law and equity as determined to have been sustained by them, together with the costs of suit, including reasonable attorneys’ fees; F. For prejudgment and post-judgment interest; H. For equitable relief, including a judicial determination of the rights and responsibilities of the parties; I. For attorneys’ fees; J. For costs of suit; and K. For such other and further relief as the Court may deem just and proper. JURY DEMAND Pursuant to Federal Rule of Civil Procedure 38(b), Plaintiff demands a jury trial for all claims and issues so triable. Dated: March 12, 2021 Respectfully submitted, Dean M. Harvey (Notice of Special Appearance Forthcoming) C.A. State Bar No. 250298 Anne B. Shaver (Notice of Special Appearance Forthcoming) C.A. State Bar No. 255928 LIEFF CABRASER HEIMANN & BERNSTEIN, LLP 275 Battery Street, 29th Floor San Francisco, CA 94111-3339 Telephone: (415) 956-1000 Facsimile: (415) 956-1008 dharvey@lchb.com ashaver@lchb.com /s/Robert M. Elliot Robert M. Elliot N.C. State Bar No. 7709 ELLIOT MORGAN PARSONAGE, PLLC 426 Old Salem Rd. Brickenstein-Leinbach House Winston-Salem, NC 27101 Telephone: (336) 724-2828 Facsimile: (336) 724-3335 rmelliot@emplawfirm.com Local Civil Rule 83.1(d) Counsel for Plaintiff Counsel for Individual and Representative Plaintiff Joe McAlear

antitrust

J0gtA4kBRpLueGJZd55C

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. : : UNITED COLLECTION BUREAU, INC., : : Defendant. : -----------------------------------------------------x COMPLAINT – CLASS ACTION INTRODUCTION 1. Plaintiff Joseph White brings this action to secure redress regarding unlawful collection practices engaged in by Defendant United Collection Bureau, Inc. 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. Venue in this District is proper because Defendant’s collection letter was received here. PARTIES Plaintiff 5. Plaintiff Joseph White is a natural person residing in Brooklyn, New York. Defendant 6. Defendant United Collection Bureau, Inc., is an Ohio corporation which does business -1- in New York. Its principal place of business Is 5620 Southwyck Blvd., Toledo, Ohio 43614. Its registered agent and office is Corporation Service Company, 80 State Street, Albany, New York 12207-2543. 7. Defendant United Collection Bureau, Inc. 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 United Collection Bureau, Inc.’s resources are devoted to debt collection. 9. Upon information and belief, almost all of Defendant United Collection Bureau, Inc.’s revenue is derived from debt collection. 10. Upon information and belief, almost all of Defendant United Collection Bureau, Inc.’s expenses are related to debt collection. 11. Defendant United Collection Bureau, Inc., states that it “assists in the accounts receivable process for healthcare facilities, financial services businesses and government entities.” (https://ucbinc.com/) 12. Defendant United Collection Bureau, Inc. 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. 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 July 28, 2020, Defendant United Collection Bureau, Inc. caused a letter vendor to send Plaintiff the letter in Exhibit A. -2- 15. The letter bears markings that are characteristic of one generated by a letter vendor. In addition, public court filings indicate that United Collection Bureau, Inc. 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 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.” -3- 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 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. -4- CLASS ALLEGATIONS 31. Plaintiff brings this action on behalf of a class, pursuant to Fed.R.Civ.P. 23(a) and (b)(3). 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 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, 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. 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. -5- 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 (312) 419-0379 (FAX) courtecl@edcombs.com -6- NOTICE OF ASSIGNMENT Please be advised that all rights relating to attorney’s fees have been assigned to counsel. s/Abraham Kleinman Abraham Kleinman -7- EXHIBIT A

consumer fraud

WgIeFYcBD5gMZwcz7rAY

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI Civil Action No.: 4:19-cv-1189 Michael Duffy, on behalf of himself and all others similarly situated, Plaintiff, vs. Anheuser-Busch Companies, LLC, Defendant. CLASS ACTION COMPLAINT Plaintiff Michael Duffy, by and through his attorneys, on behalf of himself and all others similarly situated, based on personal knowledge with respect to his own circumstances and based upon information and belief pursuant to the investigation of his counsel as to all other allegations, alleges the following. INTRODUCTION 1. This is a class action against Anheuser-Busch Companies, LLC (“A-B”) concerning its failure to pay benefits under the Anheuser-Busch Companies Pension Plan (the “Plan”) in amounts that are actuarially equivalent to a single life annuity, as required by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. (“ERISA”). By not offering benefits that are actuarially equivalent to a single life annuity, A-B is causing retirees to lose part of their vested retirement benefits in violation of ERISA § 203(a), 29 U.S.C. § 1053(a). 2. Participants in the Plan accrue pension benefits in the form of a single life annuity (“SLA”) while they work for A-B, a payment stream that starts when they retire and ends when they die. When they retire, participants can receive their retirement benefits as a SLA or in other forms, including a joint and survivor annuity (“JSA”), which provides an annuity during the participant’s life and then an equal or reduced annuity to the participant’s spouse after the participant’s death, or a certain-and-life annuity (“CLA”), which provide a participant (and a beneficiary) benefits for the life of the participant but at least for a specified number of years, regardless of how long the participant lives. ERISA requires that these forms of benefit be “actuarially equivalent” to an SLA, meaning that the present value of the payment streams must be equal. See 29 U.S.C. § 1055(d)(1)(B) and (2)(A)(ii). 3. To calculate the present value of the various JSAs and CLAs offered under the Plan, A-B applies actuarial assumptions. These assumptions are based on a set of mortality tables and interest rates. The mortality table and interest rate together are used to calculate a “conversion factor” which is used to determine equivalence between the SLA and the optional benefit. The present value of the SLA must equal the present value of the optional benefit for the two forms of payment to be “actuarially equivalent.” 4. Mortality rates have generally improved over time with advances in medicine and better collective lifestyle habits. People who retired recently are expected to live longer than those who retired in previous generations. Older morality tables predict that people will die at a faster rate than current mortality tables. As a result, using an older mortality table to calculate a conversion factor decreases the present value of the optional benefit forms and—interest rates being equal—the monthly payment retirees receive under those benefit forms. 5. A-B calculates the conversion factor (and thus the values of the JSAs and CLAs using the 1984 Unisex Pension mortality table (“UP-84”). The UP-84 table was published in 1976, and was based on data from 1965-1970.1 Although the UP-84 table attempted to account for likely increases in life expectancy in each of the years between its date of publication and 1984 by extrapolating from increases in life expectancy for the period from 1957-1967, these projections ended up understating actual improvements in life expectancy from 1976-1984.2 6. Defendant’s use of the UP-84 table depresses the present values of the JSAs and CLAs offered under the Plan, resulting in benefits that are not actuarially equivalent to the SLA; rather, benefits under the JSAs and CLAs are materially lower than they would be if the Plan used reasonable, current actuarial assumptions. A-B uses outdated actuarial assumptions to pay benefits under the Plan even though it uses current, updated assumptions to calculate the benefits A-B expects to pay retirees. 7. By using outdated mortality assumptions, A-B caused Plaintiff, who worked for A- B for over 17 years, to forfeit part of his retirement benefits in violation of ERISA. This improper reduction causes Plaintiff to receive less each month than he should, reducing the present value of his benefits by more than $4,300. 8. Accordingly, Plaintiff seeks an Order from the Court reforming the Plan to conform to ERISA, payment of future benefits in accordance with the reformed Plan and, as required under ERISA, payment of amounts improperly withheld, and such other relief as the Court determines to be just and equitable. 1 Paul Jackson & William Fellers, The UP-1984 – A “Unisex” Mortality Table For Non- Insured Pension Plans, at 37 Table 10 (Aug. 26, 1976), available at https://www.actuaries.org/ IACA/Colloquia/Sydney1976/Vol_1/Jackson_Fellers.pdf (last viewed April 1, 2019). 2 See Society of Actuaries, San Francisco Annual Meeting, Session 39PD, at 2 (Record, Vol. 25, No. 3, Oct. 17-20, 1999). JURISDICTION AND VENUE 9. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1331 because it is a civil action arising under the laws of the United States, and pursuant to 29 U.S.C. § 1332(e)(1), which provides for federal jurisdiction of actions brought under Title I of ERISA. 10. This Court has personal jurisdiction over A-B because it is headquartered and transact business in, or resides in, and has significant contacts with, this District, and because ERISA provides for nationwide service of process. 11. Venue is proper in this District pursuant to ERISA § 502(e)(2), 29 U.S.C. § 1132(e)(2), because some or all of the violations of ERISA occurred in this District and A-B resides and may be found in this District. Venue is also proper in this District pursuant to 28 U.S.C. § 1391 because A-B does business in this District and a substantial part of the events or omissions giving rise to the claims asserted herein occurred within this District. PARTIES Plaintiff 12. Plaintiff Michael Duffy is a resident of St. Petersburg, Florida, and a Participant in the Plan. Mr. Duffy worked for Busch Entertainment Corporation from 1992 through 2009. He started receiving retirement benefits under the Plan on January 1, 2018, when he was 65. Mr. Duffy is receiving a joint and survivor annuity. Defendants 13. Defendant A-B is an American brewing company headquartered in St. Louis, Missouri. A-B is a subsidiary of Anheuser-Busch InBev SA/NV. A-B is the sponsor of the Plan. A-B is the Plan Administrator. APPLICABLE ERISA REQUIREMENTS Benefit Options 14. ERISA requires that benefits from a defined benefit plan be paid to married participants in the form of a qualified joint and survivor annuity (a “QJSA”) unless the participant, with the consent of his or her spouse, elects an alternative form of payment, making the QJSA the default benefit for employees who are married. See ERISA § 205(a) and (b), 29 U.S.C. § 1055(a) and (b). 15. A QJSA is an annuity for the life of the plan participant with a survivor benefit for the life of the spouse that is not less than 50%, and not greater than 100% of the annuity payable during the joint lives of the participant and the spouse. See ERISA § 205(d)(1), 29 U.S.C. § 1055(d)(1). For example, if a plan participant receives $1,000 per month under a 50% joint and survivor annuity, the spouse will receive $500 a month for the rest of the spouse’s life after the participant’s death. 16. For unmarried participants, the QJSA is an SLA. See 26 C.F.R. § 1.401(a)-20, Q&A 25. 17. Pension plans may also offer participants alternative forms of survivor annuities, known as qualified optional survivor annuities (“QOSA”). See ERISA § 205(d)(2), 29 U.S.C. § 1055(d)(2); see also 26 U.S.C. § 417(g). A common forms of a QOSA is a CLA. 18. ERISA also requires that defined benefit plans provide a qualified pre-retirement survivor annuity (“QPSA”). ERISA § 205(a)(2), 29 U.S.C. § 1055(a)(2). A QPSA is an annuity for the life of the participant’s surviving spouse (i.e. a beneficiary) if the participant dies before reaching the plan’s normal retirement age. See ERISA § 205(e), 29 U.S.C. § 1055(e) Benefit Options Must Be Actuarially Equivalent 19. A QJSA must be actuarially equivalent to a single life annuity (“SLA”). See 29 U.S.C. § 1055(d)(1); 26 U.S.C. § 417(b). 20. The Treasury regulations for the Internal Revenue Code (the “Tax Code”) provision corresponding to ERISA § 205 (26 U.S.C. § 401(a)(11)), similarly provide that a QJSA “must be at least the actuarial equivalence of the normal form of life annuity or, if greater, of any optional form of life annuity offered under the plan.”3 Indeed, a QJSA “must be at least as valuable as any other optional form of benefit under the plan at the same time.” 26 C.F.R. § 1.401(a)-20 Q&A 16. 21. Both ERISA and the Tax Code require that a QOSA be actuarially equivalent to an SLA. See 29 U.S.C. § 1055(d)(2); 26 U.S.C. § 417(g). 22. A QPSA must be actuarially equivalent to what the surviving spouse would have received under the plan’s QJSA and any QOSAs. See ERISA § 205(e)(1)(A), 29 U.S.C. § 1055(e)(1)(A). 23. ERISA does not require that pension plans offer lump sum distributions of vested benefits to retirees upon their retirement. See ERISA § 205(g), 29 U.S.C. § 1055(g). However, if plans offer a lump sum distribution as an optional benefit, ERISA § 205(g)(3), 29 U.S.C. § 1055(g)(3), requires that the present value of the lump sum be determined using the applicable mortality table (the “Treasury Mortality Table”) 4 and applicable interest rate (the “Treasury 3 26 C.F.R. § 1.401(a)-11(b)(ii)(2). The term “life annuity” includes annuities with terms certain in addition to single life annuities. As the Treasury regulations explain, “[t]he term ‘life annuity’ means an annuity that provides retirement payments and requires that survival of the participant or his spouse as one of the conditions for payment or possible payment under the annuity. For example, annuities that make payments for 10 years or until death, whichever occurs first or whichever occurs last, are life annuities.” 26 C.F.R. § 1.401(a)-11(b)(1)(i) 4 26 C.F.R. § 1430(h)(2)-1 Interest Rate”)5 (collectively, the “Treasury Assumptions”), which are set by the Secretary of the Treasury (the “Secretary”) pursuant to IRC §§ 417(e) and 430(h) which are based on current market rates and mortality assumptions. See 29 U.S.C. § 1055(g)(3)(B); 29 U.S.C. § 1083(h), 26 U.S.C. §§ 417(e) and 430(h). In other words, the lump sum distribution must be at least the actuarially equivalent of the QOSA, QJSA and QPSA. 24. ERISA § 203(a), 29 U.S.C. § 1053(a), provides that an employee’s right to the vested portion of his or her normal retirement benefit is non-forfeitable. ERISA § 204(c)(3), 29 U.S.C. § 1054(c)(3), provides that if an employee’s accrued benefit is in the form other than an SLA, the accrued benefit “shall be the actuarial equivalent” of an SLA. 25. The Treasury regulation for the Tax Code provision corresponding to ERISA § 203 (26 U.S.C. § 411), states that “adjustments in excess of reasonable actuarial reductions, can result in rights being forfeitable.” 26 C.F.R. § 1.411(a)-4(a). Reasonable Factors Must be Used When Calculating Actuarial Equivalence 26. “Two modes of payment are actuarially equivalent when their present values are equal under a given set of assumptions.” Stephens v. US Airways Group, Inc., 644 F.3d 437, 440 (D.C. Cir. 2011) (emphasis added).6 Actuarial equivalence should be “cost-neutral,” meaning that neither the Plan nor the participants should be better or worse off if the participant selects either the normal retirement benefit or an optional form of benefit. See Osberg v. Foot Locker, Inc., 138 F.Supp.3d 517, 540 (S.D.N.Y. 2015). 27. Under ERISA, “present value” means “the value adjusted to reflect anticipated events.” Such adjustments shall conform to such regulations as the Secretary of the Treasury may 5 26 C.F.R. § 1430(3)-1 6 “Equivalent” means “equal.” https://www.merriam-webster.com/dictionary/equivalent “Equal” means the “same.” https://www.merriam-webster.com/dictionary/equal prescribe.” ERISA § 3(27), 29 U.S.C. § 1002(27). The Secretary has prescribed numerous regulations describing how present value should reasonably reflect anticipated events, including: (a) The Treasury regulation concerning QJSAs provides that “[e]quivalence may be determined, on the basis of consistently applied reasonable actuarial factors, for each participant or for all participants or reasonable groupings of participants.” 26 C.F.R. § 401(a)- 11(b)(2) (emphasis added). (b) A plan must determine optional benefits using “a single set of interest and mortality assumptions that are reasonable . . . .” 26 C.F.R. § 1.417(a)(3)-1(c)(2)(iv) (emphasis added). (c) With respect to benefits under a lump sum-based formula, any optional form of benefit must be “at least the actuarial equivalent, using reasonable actuarial assumptions . . . .” 26 C.F.R. § 1.411(a)(13)-1(b)(3) (emphasis added). SUBSTANTIVE ALLEGATIONS I. THE PLAN 28. A-B established the Plan to provide retirement benefits to eligible employees. A- B sponsors the Plan and is the Plan Administrator. 29. The Plan is an “employee pension benefit plan” within the meaning of ERISA § 3(2)(A), 29 U.S.C. § 1002(a)(A). 30. The Plan is a defined benefit plan within the meaning of ERISA § 3(35), 29 U.S.C. § 1002(35). 31. The Plan is comprised of five sub-plans: (1) the Anheuser-Busch Salaried Employees’ Pension Plan (the “SEPP Sub-Plan”); (2) the St. Louis National Baseball Club, Inc. Pension Plan (the “BAS Sub-Plan”); (3) the Retirement Plan for Hourly Employees of Busch Entertainment Corporation Retirement Plan (the “BEC Sub-Plan”); (4) the Mancar Pension Plan (the “Mancar Sub-Plan”); and (5) the Campbell Taggart Retirement Plan (the “CTI Sub-Plan”) (collectively the “Sub-Plans”). Mr. Duffy is a participant in the BEC Sub-Plan. 32. Under each of the Sub-Plans, participants earn benefits in the form of an SLA based on their compensation and how many years they worked for A-B. In addition to the SLA, the Sub- Plans offer the following forms of benefits: a. The SEPP Sub-Plan: a 66 and 2/3% JSA, a five-year CLA (“5YCLA”) and a ten-year CLA (“10YCLA”); b. The BAS Sub-Plan: a 66 and 2/3% JSA and a 5YCLA; c. The BEC Sub-Plan: a 50% JSA, 75% JSA and a 10YCLA; d. The Mancar Sub-Plan: a 50% JSA and a 10YCLA; and e. The CTI Sub-Plan: a 50%, 75% and 100% JSA and 10YCLA.7 33. Participants receiving a JSA or a CLA under the SEPP Sub-Plan, the BAS Sub- Plan, BEC Sub-Plan, and the Mancar Sub-Plan have their benefits calculated using the UP-84 mortality table and a 6.5% interest rate. 34. Participants receiving a JSA or CLA under the CTI Sub-Plan have their benefits calculated using the UP-84 mortality table and a 7% interest rate. 7 The QJSA for the CTI Sub-Plan is the 50% JSA. The 75% JSA and the 100% JSA are QOPAs under ERISA § 205(d)(2) which, like the QJSA, must be “the actuarial equivalent of a single annuity for the life of a participant.” II. The JSAs and CLAs Are Not Actuarially Equivalent to the SLA Participants Earn Under the Plan. A. Converting a SLA to a JSA or a CLA. 35. As set forth above, ERISA requires that a QJSA, a QPSA and QOSAs be the “actuarial equivalent” of an SLA. See ERISA §§ 205(d)(1) and (2), 29 U.S.C. § 1055(d)(1) and 36. To convert a SLA retiree’s normal form of benefit into a JSA or a CLA, the present value of the aggregate (i.e. the total) future benefits that the participant (and, if applicable, the beneficiary) is expected to receive must be determined.8 The present values are then compared to determine the conversion factor. There are two main components of these present value calculations: an interest rate and a mortality table. 37. An interest rate is used to determine the present value of each future payment. This is based on the time value of money, meaning that money available now is worth more than the same amount in the future due to the ability to earn investment returns. The rate that is used is often called a “discount rate” because it discounts the value of a future payment. 38. As discussed above, the interest rate used by a defined benefit plan to calculate present value must be reasonable based on prevailing market conditions, which “reflect anticipated events.” See 29 U.S.C. § 1002(27). The interest rate may be broken into segments of short-term, medium-term, and long-term expectations pertaining to each future payment. See e.g. 29 U.S.C. §§ 1055(g)(3)(B)(iii), 1083(h)(2). 39. A mortality table is a series of rates which predict how many people at a given age will die before attaining the next higher age. 8 The conversion factor is easily calculated by a computer model. Defendants simply input the assumptions and the model instantaneously calculates the conversion factor. 40. More recent mortality tables are “two-dimensional” in that the rates are based not only on the age of the individual but the year of birth. The Society of Actuaries (“SOA”), an independent actuarial group, publishes the mortality tables that are the most widely-used by defined benefit plans when doing these conversions. The SOA published mortality tables in 1971 (the “1971 GAM”), 1983 (the “1983 GAM”), 1984 (the “UP-84”), 1994 (the “1994 GAR”), 2000 (the “RP-2000”), and 2014 (“RP-2014”) to account for changes to a population’s mortality experience. 41. Since at least the 1980s, the life expectancies in mortality tables have steadily improved as shown below: Source: Aon Hewitt, Society of Actuaries Finalizes New Mortality Assumptions: The Financial and Strategic Implication for Pension Plan Sponsors (November 2014), at 1. According to this paper, there have been “increasing life expectancies over time” and just moving from the 2000 mortality table to the 2014 table would increase pension liabilities by 7%. 42. Pursuant to Actuarial Standard of Practice No. 35, para. 3.5.3 of the Actuarial Standards Board,9 actuarial tables must be adjusted on an ongoing basis to reflect improvements in mortality.10 43. Accordingly, in the years between the publication of a new mortality table, mortality rates are often “projected” to future years to account for expected improvements in mortality. For example, in 2017, the Treasury Mortality Table was the RP-2000 mortality table adjusted for mortality improvement using Projection Scale AA to reflect the impact of expected improvements in mortality (the “2017 Treasury Mortality Table”). See IRS Notice 2016-50.11 In 2018, the Treasury Mortality Table was the RP-2014 mortality table projected to account for additional improvement in mortality rates that have occurred since 2014 (the “2018 Treasury Mortality Table”). See IRS Notice 2017-60.12 44. For purposes of the present value analysis under ERISA, the mortality table must be updated and reasonable “to reflect anticipated events.” 29 U.S.C. § 1002 (27). The Treasury Mortality Tables are updated and reasonable. See 26 C.F.R. § 1.417(a)(3)-1(c)(2)(iv). 45. Using the selected interest rate and mortality table, the present value of a SLA and a JSA or CLA can be compared to determine whether the amount of the JSA or SLA is actuarially equivalent to the SLA. 9 Courts look to professional actuarial standards as part of this analysis. See, e.g., Stephens v. US Airways Group, Inc., 644 F.3d 437, 440 (D.C. Cir. 2011) (citing Jeff L. Schwartzmann & Ralph Garfield, Education & Examination Comm. of the Society of Actuaries, Actuarially Equivalent Benefits 1, EA1–24–91 (1991)). 10Available at: http://www.actuarialstandardsboard.org/asops/selection-of-demographic- and-other-noneconomic-assumptions-for-measuring-pension-obligations/#353-mortality-and- mortality-improvement 11 Available at: https://www.irs.gov/pub/irs-drop/n-16-50.pdf 12 Available at: https://www.irs.gov/pub/irs-drop/n-17-60.pdf 46. Changes to interest rates or mortality assumptions can have dramatic effects on the conversion factor and the value of a JSA or CLA. Using an antiquated mortality table generates lower present values of future payments, and the amount of the monthly benefit under a JSA or a CLA decreases. 47. As discussed, plans must use reasonable interest rates and reasonable mortality tables to evaluate whether the present values of benefit options produce equivalent benefits for participants and beneficiaries. B. The Plan Does Not Use Reasonable Actuarial Factors for Participants Who Receive an Alternative Annuity Benefit. 48. The SEPP Sub-Plan, the BAS Sub-Plan, BEC Sub-Plan, and the Mancar Sub-Plan each use the UP-84 table and a 6.5% interest rate to convert the SLA that participants earned as a retirement benefit to a JSA or a CLA. The CTI Sub-Plan uses the UP-84 table and a 7% interest 49. Using the UP-84 table to calculate actuarially equivalent benefits is unreasonable because it is severely outdated and does not “reflect anticipated events” (i.e. the anticipated mortality rates of participants). 50. The UP-84 table is roughly 35 years out of date, and as such they overstate mortality rates. According to the Centers for Disease Control and Prevention, in 1984, a 65-year-old had an average life expectancy of 16.8 years in 1984).13 In 2010, a 65-year-old had a 19.1-year life expectancy, a 13% increase, which would result in an additional 28 months of annuity payments. Accordingly, by 2010, the average employee would have expected to receive, and the average 13 See https://www.cdc.gov/nchs/data/hus/2011/022.pdf employer would have expected to pay, benefits for a substantially longer amount of time than in 51. Using the UP-84 table decreases the values of the JSAs and CLAs relative to the SLA that participants earned, thereby materially reducing the monthly benefits that retirees and beneficiaries receive in comparison to the monthly benefits they would receive if the Plan used updated, reasonable mortality assumptions. 52. Defendant knew or should have known that the UP-84 table was outdated and unreasonable and that using it produced lower monthly benefits for participants and beneficiaries receiving a JSA or a CLA. 53. Under Generally Accepted Accounting Principles (“GAAP”), mortality assumptions “should represent the ‘best estimate’ for that assumption as of the current measurement date.”14 Importantly, Anheuser-Busch InBev SA/NA, the holding company that 14 As noted in a “Financial Reporting Alert” by Deloitte: Many entities rely on their actuarial firms for advice or recommendations related to demographic assumptions, such as the mortality assumption. Frequently, actuaries recommend published tables that reflect broad-based studies of mortality. Under ASC 715-30 and ASC 715-60, each assumption should represent the “best estimate” for that assumption as of the current measurement date. The mortality tables used and adjustments made (e.g., for longevity improvements) should be appropriate for the employee base covered under the plan. Last year, the Retirement Plans Experience Committee of the Society of Actuaries (SOA) released a new set of mortality tables (RP-2014) and a new companion mortality improvement scale (MP-2014). Further, on October 8, 2015, the SOA released an updated mortality improvement scale, MP-2015, which shows a decline in the recently observed longevity improvements. Although entities are not required to use SOA mortality tables, the SOA is a leading provider of actuarial research, and its mortality tables and mortality improvement scales are widely used by plan sponsors as a starting point for developing their mortality assumptions. Accordingly, it is advisable for entities, with the help of their actuaries, to (1) continue monitoring the owns Defendant and its affiliates, uses up-to-date actuarial assumptions when calculating pension plan costs in its audited financial statements that it prepares with the assistance of an independent auditor. It filed audited financial statements prepared in accordance with GAAP with the SEC in on Form 20-f (“20-f”) for the year ending December 31, 2014 which provides: Actuarial assumptions are established to anticipate future events and are used in calculating pension and other long-term employee benefit expense and liability. These factors include assumptions with respect to interest rates, rates of increase in health care costs, rates of future compensation increases, turnover rates, and life expectancy.15 54. Moreover, Anheuser-Busch InBev SA/NA used “weighted average assumptions…in computing the benefit obligations of the company’s significant plans at the balance sheet date” that the life expectancy for a 65-year old male in the United States was 85 years, and the life expectancy for a 65-year old female in the United States was 88 years,16 tracking the life expectancies in the RP-2014 mortality table released by the Society of Actuaries in 2014. 55. The UP-84 table, which is a unisex table, assumes that 65-year old males and females will live to only age 80. Accordingly, in the audited financial statements, Anheuser-Busch InBev SA/NA reasonably assumed that men would live 5 years longer and women would live 8 years longer than Defendant did in calculating the amount payable for Alternate Annuity Benefits. availability of updates to mortality tables and experience studies and (2) consider whether these updates should be incorporated in the current-year mortality assumption. See Deloitte, Financial Reporting Considerations Related to Pension and Other Postretirement Benefits, Financial Reporting Alert 15-4, October 30, 2015 at 3. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/audit/ASC/FRA/2015/us-aers- fra-financial-reporting-considerations-related-to-pension-and-other-postretirement-benefits- 103015.pdf 15 See Anheuser-Busch InBev SA/NV’s Form 20-f for year ending December 31, 2014 at F- 21, available at: https://www.ab-inbev.com/content/dam/universaltemplate/ab- inbev/investors/reports-and-filings/sec-filings/20F_24032015.pdf 16 Id. at F-47. 56. Anheuser-Busch InBev SA/NA used reasonable actuarial assumptions to report a greater liability for benefits than A-B was paying out using the unreasonable UP-84 table. There is no reasonable justification for A-B to use an old mortality table that presumes an early death and an early end to benefit payments in order to calculate an unfairly low annual benefit for participants, while at the same time using a reasonable mortality table to project a longer duration of these very same annual benefit payments for annual financial reporting. 57. Since these two analyses measure the length of the very same lives and the very same benefit streams, they should use the same mortality assumptions. “ERISA did not leave plans free to choose their own methodology for determining the actuarial equivalent of the accrued benefit; rather we stated, ‘If plans were free to determine their own assumptions and methodology, they could effectively eviscerate the protections provided by ERISA’s requirement of actuarial equivalence.’” Laurent v. Price WaterhouseCoopers LLP, 794 F.3d 272 (2d Cir. 2015) quoting, Edsen v. Bank of Boston, 229 F.3d 154, 164 (2d Cir. 2000). 58. Although A-B used updated mortality assumptions to calculate the present value of benefits under the Plan for its shareholders, A-B knowingly and wrongfully used the UP-84 table that is several decades out-of-date to convert the SLAs to JSAs and CLAs under the Plan. A-B has used the same actuarial assumptions since at least 2001 to calculate JSAs and CLAs even though the UP-84 fails to reflect the improvements in life expectancies. 59. A-B knowingly misrepresented to participants that the JSAs and CLAs were actuarially equivalent to the SLAs to reduce the amount of benefits they were obligated to pay retirees who selected a JSA or a CLA. 60. During the relevant period, A-B’s use of the UP-84 table to calculate JSAs and CLAs was unreasonable. 61. Had the Plan used reasonable actuarial assumptions, such as the Treasury Assumptions, Plaintiff and other participants and beneficiaries would have received, and would continue to receive, actuarially equivalent benefits that are greater than the benefits they currently receive. 62. The chart below compares the amount that a Plan participant who is 65-years old (with a 65-year-old spouse) who accrued an SLA of $1,000/month would receive per month if she elected to receive her benefits in the form of a 10YCLA or a 50% JSA, using the 2018 Treasury Assumptions and the Plan’s actuarial assumptions: UP-84/6.5% UP-84/7% 2018 Treasury Assumptions SLA $1,000 $1,000 $1,000 5YCLA $993.07 $973.85 $973.42 10 YCLA $972.62 $911.32 $911.12 50% JSA $926.67 $902.44 $904.74 100% JSA $863.36 $822.22 $826.05 63. While the amount of the differences between the 2018 Treasury Assumptions and the assumptions that A-B uses under the Plan will vary depending on the ages of the participant and the beneficiary, all participants and beneficiaries who receive a JSA or a CLA under the Plan are not receiving an actuarially equivalent form of benefit because the present value is not equal to that of the SLA that they earned. 64. Plaintiff retired at age 65 when his wife was 63 years and 11 months old and accrued a SLA in the amount of $1,021.64. He is receiving a 50% JSA under the BEC Sub-Plan in the amount of $916.31. If the applicable Treasury Assumptions were applied, Plaintiff’s benefit would be $940.92, or $24.61 more each month. By using the UP-84 and a 6.5% interest rate, A-B reduced the present value of Plaintiff’s benefits at the time of his retirement by $4,385.50. 65. Discovery will likely show that Defendant’s use of unreasonable actuarial assumptions deprived retirees and their spouses of tens of millions of dollars. 66. Because each of the Sub-Plans use a grossly outdated, unreasonable mortality table throughout the relevant time period, the benefits paid to participants and beneficiaries who receive, and continue to receive, JSAs and CLAs are not actuarially equivalent to what they would have received if they had selected an SLA, in violation of ERISA. § 205(d)(1)(B), 29 U.S.C. § 1055(d)(1)(B) and ERISA § 205(d)(2)(A), 29 U.S.C. § 1055(d)(2)(A). Rather, the benefits payable under JSAs and CLAs are much lower than they should be. CLASS ACTION ALLEGATIONS 67. Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure on behalf of himself and the class (the “Class”) defined as follows: All participants and beneficiaries of the Plan who are receiving a joint and survivor annuity or a life and certain annuity. Excluded from the Class are Defendant and any individuals who are subsequently to be determined to be fiduciaries of the Plan. 68. The members of the Class are so numerous that joinder of all members is impractical. Upon information and belief, the Class includes thousands of persons. 69. Plaintiff’s claims are typical of the claims of the members of the Class because Plaintiff’s claims and the claims of all Class members arise out of the same policies and practices as alleged herein, and all members of the Class are similarly affected by Defendant’s wrongful conduct. 70. There are questions of law and fact common to the Class and these questions predominate over questions affecting only individual Class Members. Common legal and factual questions include, but are not limited to: A. Whether the Plan’s formulae for calculating JSAs and CLAs provide benefits that are truly actuarially equivalent to those that would be paid under an SLA; B. Whether the Plan’s actuarial assumptions are reasonable; C. Whether the Plan should be reformed to comply with ERISA; and D. Whether Plaintiff and Class Members should receive additional benefits. 71. Plaintiff will fairly and adequately represent the Class and has retained counsel experienced and competent in the prosecution of ERISA class actions. Plaintiff has no interests antagonistic to those of other members of the Class. Plaintiff is committed to the vigorous prosecution of this action and anticipates no difficulty in the management of this litigation as a class action. 72. This action may be properly certified under either subsection of Rule 23(b)(1). Class action status is warranted under Rule 23(b)(1)(A) because prosecution of separate actions by the members of the Class would create a risk of establishing incompatible standards of conduct for Defendant. Class action status is warranted under Rule 23(b)(1)(B) because prosecution of separate actions by the members of the Class would create a risk of adjudications with respect to individual members of the Class that, as a practical matter, would be dispositive of the interests of other members not parties to this action, or that would substantially impair or impede their ability to protect their interests. 73. In the alternative, certification under Rule 23(b)(2) is warranted because Defendant has acted or refused to act on grounds generally applicable to the Class, thereby making appropriate final injunctive, declaratory, or other appropriate equitable relief with respect to the Class as a 74. In the alternative, certification under Rule 23(b)(3) is warranted because the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and a class action is superior to other available methods for the fair and efficient adjudication of the controversy. FIRST CLAIM FOR RELIEF Declaratory and Equitable Relief (ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3)) 75. Plaintiff re-alleges and incorporates herein by reference all prior allegations in this Complaint. 76. The Plan improperly reduces annuity benefits for participants who receive either a JSA or a CLA below the benefits that they would receive if those benefits were actuarially equivalent to a SLA as ERISA requires. 77. ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), authorizes a participant or beneficiary to bring a civil action to: “(A) enjoin any act or practice which violates any provision of this title or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this title or the terms of the plan.” 78. Pursuant to this provision, 28 U.S.C. §§ 2201 and 2202, and Federal Rule of Civil Procedure 57, Plaintiff seeks declaratory relief, determining that the Plan’s established methodologies for calculating actuarial equivalence of JSAs and CLAs violates ERISA because they do not provide actuarially equivalent benefits. By not providing actuarially equivalent benefits, Defendant has violated ERISA’s anti-forfeiture clause, ERISA § 203(a), 29 U.S.C. § 1053(a). 79. Plaintiff further seeks orders from the Court providing a full range of equitable relief, including but not limited to: (a) re-calculation and correction of benefits previously paid JSAs and CLAs; (b) an “accounting” of all prior benefits and payments; (c) a surcharge; (d) disgorgement of amounts wrongfully withheld; (e) disgorgement of profits earned on amounts wrongfully withheld; (f) a constructive trust; (g) an equitable lien; (h) an injunction against further violations; and (i) other relief the Court deems just and proper. SECOND CLAIM FOR RELIEF For Reformation of the Plan and Recovery of Benefits Under the Reformed Plan (ERISA § 502(a)(1), 29 U.S.C. § 1132(a)(1)) 80. Plaintiff re-alleges and incorporates herein by reference all prior allegations in this Complaint. 81. ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), authorizes a participant or beneficiary to bring a civil action to: “(A) enjoin any act or practice which violates any provision of this title or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this title or the terms of the plan.” 82. The Plan improperly reduces annuity benefits for participants who receive JSAs and CLAs below the benefits that they would receive if those benefits were actuarially equivalent to an SLA as ERISA requires. By not providing actuarially equivalent benefits, Defendant has violated ERISA’s anti-forfeiture clause, ERISA § 203(a), 29 U.S.C. § 1053(a). 83. Plaintiff is entitled to reformation of the Plan to require Defendant to provide actuarially equivalent benefits. 84. ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), authorizes a participant or beneficiary to bring a civil action to “recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” 85. Plaintiff seeks to recover actuarially equivalent benefits, to enforce his rights to the payment of past and future actuarially equivalent benefits, and to clarify his rights to future actuarially equivalent benefits, under the Plan following reformation. THIRD CLAIM FOR RELIEF Breach of Fiduciary Duty (ERISA §§ 1104 and 502(a)(3), 29 U.S.C. §§ 1104 and 1132(a)(3)) 86. Plaintiff re-alleges and incorporates herein by reference all prior allegations in this Complaint. 87. A-B is the Plan Administrator and the Plan’s named fiduciary of the Plan. 88. ERISA treats as fiduciaries not only persons explicitly named as fiduciaries under § 402(a)(1), 29 U.S.C. § 1102(a)(1), but also any other persons who in fact perform fiduciary functions. Thus, a person is a fiduciary to the extent “(i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.” ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A). This is a functional test. Neither “named fiduciary” status nor formal delegation is required for a finding of fiduciary status, and contractual agreements cannot override finding fiduciary status when the statutory test is met. 89. ERISA § 404(a)(1), 29 U.S.C. § 1104(a)(1), provides that a fiduciary shall discharge its duties with respect to a plan in accordance with the documents and instruments governing the plan insofar as the Plan is consistent with ERISA. 90. The Plan is not consistent with ERISA because it uses the outdated UP-84 mortality table to calculate JSAs and CLAs. As a result, the Plan’s calculation of JSAs and CLAs produces results that are not actuarially equivalent resulting in participants and beneficiaries illegally forfeiting and losing vested benefits in violation of ERISA. 91. In following the Plan, which did not conform with ERISA, A-B breached its fiduciary duties. 92. ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), authorizes a participant or beneficiary to bring a civil action to: “(A) enjoin any act or practice which violates any provision of this title or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this title or the terms of the plan.” 93. Pursuant to this provision, 28 U.S.C. §§ 2201 and 2202, and Federal Rule of Civil Procedure 57, Plaintiff seeks declaratory relief, determining that the Plan’s established methodologies for calculating actuarial equivalence of JSAs and CLAs violates ERISA because it does not provide an actuarially equivalent benefit. 94. Plaintiff further seeks orders from the Court providing a full range of equitable relief, including but not limited to: (a) re-calculation, correction, and payments of benefits actuarially equivalent to JSAs and CLAs; (b) an “accounting” of all prior benefits and payments; (c) a surcharge; (d) disgorgement of amounts wrongfully withheld; (e) disgorgement of profits earned on amounts wrongfully withheld; (f) a constructive trust; (g) an equitable lien; (h) an injunction against further violations; and (i) other relief the Court deems just and proper. PRAYER FOR RELIEF WHEREFORE, Plaintiff prays that judgment be entered against Defendant on all claims and requests that the Court awards the following relief: A. Certifying this action as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure; B. Declaring that the Plan fails to properly calculate and pay JSAs and CLAs that are actuarially equivalent to the SLA, in violation of ERISA; C. Ordering Defendant to bring the Plan into compliance with ERISA, including, but not limited to, reforming the Plan to bring it into compliance with ERISA with respect to calculating actuarially equivalent JSAs and CLAs; D. Ordering Defendant to correct and recalculate benefits that have been paid; E. Ordering Defendant to provide an “accounting” of all prior payments of benefits under the Plan to determine the proper amounts that should have been paid; F. Ordering Defendant to pay all benefits improperly withheld, including under the theories of surcharge and disgorgement; G. Ordering Defendant to disgorge any profits earned on amounts improperly withheld; H. Imposition of a constructive trust; I. Imposition of an equitable lien; J. Reformation of the Plan; K. Ordering Defendant to pay future benefits in accordance with ERISA’s actuarial equivalence requirements; L. Ordering Defendant to pay future benefits in accordance with the terms of the Plan, as reformed. M. Awarding, declaring, or otherwise providing Plaintiff and the Class all relief under ERISA § 502(a), 29 U.S.C. § 1132(a), or any other applicable law, that the Court deems proper, and such appropriate equitable relief as the Court may order, including an accounting, surcharge, disgorgement of profits, equitable lien, constructive trust, or other remedy; N. Awarding to Plaintiff’s counsel attorneys’ fees and expenses as provided by the common fund doctrine, ERISA § 502(g), 29 U.S.C. § 1132(g), and/or other applicable doctrine; O. Any other relief the Court determines is just and proper. Dated: May 6, 2019 Respectfully submitted, Mark G. Boyko Mark G. Boyko (MO Bar #57318) BAILEY & GLASSER LLP 8012 Bonhomme Ave., Suite 300 Clayton, MO 63105 Tel: (314) 863-5446 Fax: (314) 863-5483 Email: mboyko@baileyglasser.com BAILEY & GLASSER LLP Gregory Y. Porter (to be admitted pro hac vice) 1055 Thomas Jefferson Street, NW, Suite 540 Washington, DC 20007 Tel: (202) 463-2101 Fax: (202) 463-2103 fax Email: gporter@baileyglasser.com IZARD, KINDALL & RAABE LLP Robert A. Izard (to be admitted pro hac vice) Mark P. Kindall (to be admitted pro hac vice) Douglas P. Needham (to be admitted pro hac vice) Seth R. Klein (to be admitted pro hac vice) 29 South Main Street, Suite 305 West Hartford, CT 06107 Tel: (860) 493-6292 Fax: (860) 493-6290 Email: rizard@ikrlaw.com Email: mkindall@ikrlaw.com Email: dneedham@ikrlaw.com Email: sklein@ikrlaw.com Counsel for Plaintiffs

consumer fraud

CWhNrIkBzZV2kahMVvO_

Alex R. Straus (SBN 321366) MILBERG COLEMAN BRYSON PHILLIPS GROSSMAN PLLC 280 South Beverly Drive Beverly Hills, CA 90212 Tel.: (917) 471-1894 Fax: (310) 496-3176 Email: astraus@milberg.com Attorneys for Plaintiff Additional Counsel on Signature Page UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION WINFRED THOMAS and MICHELLE SIMS, on behalf of themselves and all others similarly situated, Plaintiffs, v. Case No.: __________________ CLASS ACTION COMPLAINT DEMAND FOR JURY TRIAL WELLS FARGO BANK, N.A., WELLS FARGO & COMPANY, Defendants. Plaintiffs allege upon personal knowledge as to themselves and their own actions, and upon information and belief, including the investigation of counsel, as follows: I. NATURE OF THE ACTION 1. Spurred in part by the COVID-19 pandemic, low interest rates allowed American homeowners to refinance their home mortgages at more favorable interest rates from 2019 through present (the “Class Period”). 2. Plaintiffs, and members of the putative Class (the “Class”), seek damages for Defendants’ -- Wells Fargo Bank, N.A. and Wells Fargo & Company (collectively, “Wells Fargo”) -- discriminatory practices in denying their applications to refinance their Wells Fargo mortgage loans in violation of the federal Fair Housing and Fair Lending acts, as well as state consumer protection laws. Indeed, according to recent investigations of Wells Fargo’s refinance activity during the Class Period that have been publicized in the media, Wells Fargo approved white applicants’ mortgage refinance requests at twice the rate of its approval of Black and Hispanic/Latino minority applicants’ refinance requests in numerous areas across the United States.1 Plaintiffs’ own analysis of Wells Fargo’s mortgage refinance rates bears this out. 3. This is no accident. For nearly two decades, Wells Fargo exploited the American dream of home ownership through discriminatory housing practices in violation of the FHA, including by making a disproportionately higher number of subprime and higher cost mortgage loans to minorities than to white borrowers, and then discriminatorily foreclosing on minority mortgage loans in higher minority concentration neighborhoods compared to white neighborhoods. Such reprehensible conduct has stripped many Wells Fargo minority customers of their single greatest asset – the equity value in their homes. 1 Shawn Donnan, Ann Choi, Hannah Levitt, and Christopher Cannon, “Wells Fargo Left Black Homeowners Behind in Pandemic Mortgage 4. To add further injury to the insult Wells Fargo’s minority customers have already sustained, Wells Fargo is now discriminatorily refusing to refinance minority higher cost mortgages. Such reprehensible conduct begs the question why any minority would ever bank with this institution. Indeed, as Wells Fargo’s CEO Charles Scharf has publicly acknowledged in Congressional testimony, Wells Fargo engaged in predatory and discriminatory mortgage lending and servicing practices, as well as fraudulent customer account practices.2 And, as CEO Scharf further admitted in relatively recent media reports, Wells Fargo has an institutional, discriminatory bias.3 5. Plaintiffs and members of the putative Class have suffered harm due to the discriminatory tactics used by the Defendants with respect to their rejections of minority and female homeowners seeking the ability to refinance their mortgages. Due to this conduct, Plaintiffs and members of the putative Class bring this Action under federal and state law against the Defendants for damages, injunctive relief, attorney’s fees, and any other relief this Court deems just and proper. II. JURISDICTION AND VENUE 6. This Court has federal question jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331, 1332(d), and 1343, because the Plaintiff asserts federal causes of action, because Plaintiffs assert civil rights causes of action, and because at least one member of the Class is a citizen of a different state than all Defendants, and because the amount in controversy exceeds $5,000,000. 2 Wells Fargo CEO Charles Scharf admitted these failings in congressional testimony. See https://financialservices.house.gov/uploadedfiles/chrg- 116hhrg428866.pdf at 9 (last visited Jan. 13, 2022) (testifying that he did not disagree with the Report’s findings, and that “the series of behavior that is described should have never happened at the company. The failures that are described a direct result of us not managing the company properly”); id. at 5 (“[W]e had a flawed business model in how the company was managed”). 3 See, e.g., https://www.businesswire.com/news/home/20200923005604/en/ (last visited March 19, 2022) (discussing CEO Scharf’s unconscious 7. Personal jurisdiction is appropriate over Defendants because Wells Fargo Bank, N.A. transacts business in the State of California and has its principal place of business in San Francisco, California. Wells Fargo Home Mortgage, Inc. originates loans to California customers from its California offices and maintains a systematic and continuous presence in the State. 8. Venue is proper in the Northern District of California pursuant to 28 U.S.C. § 1391(b) because Wells Fargo Bank, N.A. resides in this district, a substantial part of the events or omissions giving rise to the claim occurred in this district, and Wells Fargo Bank, N.A.’s principal place of business is in this district. INTRADISTRICT ASSIGNMENT 9. This action is properly assigned to the San Francisco Division of this District pursuant to N.D. Cal. L.R. 3-2, because Defendant Wells Fargo & Company is headquartered in San Francisco, California, which is served by the San Francisco Division. III. PARTIES 10. Plaintiffs. 11. Plaintiff Winfred Thomas is a minority homeowner who owns equity in a home located in Hogansville, Georgia. In December of 2020, Plaintiff Thomas applied for a Wells Fargo home refinance and his application was denied in 2021. Shortly thereafter, Plaintiff Thomas applied to refinance his Wells Fargo mortgage with Veteran’s United Home Loans. Plaintiff Thomas’s refinance application was approved by Veteran’s United Home Loans, receiving a mortgage interest rate of 3.2% less than the 5.5% existing mortgage rate Plaintiff Thomas was paying on his initial Wells Fargo mortgage. 12. Plaintiff Michells Sims is a minority homeowner who owns equity in a home located in Desoto, Texas. In December of 2021, Plaintiff Sims applied for a Wells Fargo home refinance and her application was denied in early 2022. 13. Defendants. 14. Defendant Wells Fargo Bank, N.A. is a nationally chartered bank with its principal place of business located in Sioux Falls, South Dakota and is chartered in Wilmington, Delaware. 15. Defendant Wells Fargo & Company is Defendant Wells Fargo Bank, N.A.’s parent company and is headquartered in San Francisco, California with its principal place of business located in Manhattan, New York, New York. IV. FACTUAL ALLEGATIONS A. Wells Fargo, the Home Mortgage Industry, and Home Mortgage Refinancing 16. Wells Fargo is one of the Country’s largest first and second lien mortgage lenders. Included within that line of business are its new mortgages derived from refinancing existing home mortgages. 17. Refinancing an existing mortgage allows a borrower to try to obtain better terms including, for example, a lower interest rate. A lower mortgage interest rate enables a borrower to save hundreds, if not thousands, of dollars per year on interest charges. As Wells Fargo explains on “Why Refinance a Mortgage” page on its website, refinancing a mortgage enables a borrower: (1) to tap into home equity (using the equity established in the home in order to get a cash-out refinance where the bank gives the borrower cash in exchange for that equity in order to pay other loans or credit card debt), (2) take advantage of lower [interest] rates (which reduce the monthly payments and the total interest paid out over the duration of the loan), (3) change your loan term (to shorten or lengthen the loan term length), and (4) to convert to an adjustable rate mortgage or a fixed-rate mortgage.4 18. Conversely, the denial of refinance applications means that a mortgage borrower must continue to pay higher mortgage costs. Brookings Institute senior fellow Andre Perry states that the inability of Black homeowners to refinance their home mortgage loans “means people have less resources to invest in their children, less resources to start businesses, less resources to renovate their homes, less resources to buy additional homes.”5 This, in the aggregate, widens the racial wealth gap in the United States. B. The Pandemic-induced Interest Rates Made Mortgage Refinancing Attractive to Homeowners 19. During the Class Period, interest rates dropped substantially due to economic pressures caused by the COVID-19 pandemic – this made refinancing more attractive for mortgage holders. 20. A study by the Federal Reserve Bank of Boston concluded the following: a. The typical refinance during the Class Period reduced borrowers’ monthly payments by $279 per month, leading to a total payment reduction of $5.3 billion per year in the United States for all households that refinanced.6 b. However, only $198 million, or 3.7% of the total payment reduction of $5.3 billion, went to Black households.7 c. This is especially problematic considering that Black households account for over 13% of the entire United States population and over 9% of all homeowners.8 d. Additionally, the study concluded that white homeowners were approved at twice the rate of Black homeowners with respect to mortgage refinancing during the Class Period.9 21. The study found that, “[c]ompared with white borrowers, Black borrowers on average have lower credit scores and higher loan-to-value ratios [which are] risk factors that can 5 Id. 6 Larry Bean, “Fed study: Minority borrowers bore the brunt of COVID-19’s impact on the mortgage market,” FEDERAL RESERVE BANK OF BOSTON (June 22, 2021), at https://www.bostonfed.org/news-and-events/news/2021/06/minority-borrowers-bear-brunt-of-covid-19-impact- on-mortgage-market.aspx. prevent someone from refinancing and reducing their monthly mortgage payments. However, when authors [of the study] control for these factors, they find that before the pandemic, Black and white borrowers were roughly equally likely to refinance. After the pandemic began and interest rates plummeted, Black homeowners were 40% less likely than white homeowners to finance, holding equal the risk factors for both groups.”10 22. Critically, the authors of the study concluded, “borrowers who could use the payment reductions the most moving forward may be the least likely to obtain them.”11 C. Due to the Discriminatory Conduct of the Defendants, Plaintiffs and the Members of the Putative Class Were Denied Refinancing Opportunities by Defendants’ Bank, Wells Fargo 23. Wells Fargo has engaged in discriminatory practices that disparately reduce the number of home mortgage refinance requests by minority applicants. With respect to minority applicants. these tactics, taken generally, are called “redlining.” 24. The term “redlining” has its roots in New Deal-era racism, which limited minority access to housing opportunities. Historically, the concept of redlining comes “from government maps that outlined areas where Black residents lived and therefore were deemed more risky [real estate] investments.”12 25. In the past, redlining took place through the use of mapping where Black neighborhoods were and consisted of coloring those neighborhoods “red” as to denote that they were high risk investments because of the populations that inhabited them. In the modern day, redlining takes place usually though an algorithmic bias which considers multiple factors tied to race (such as ZIP code, education, area code, census track, average home values, and other 10 Id. 11 Id. 12 Candace Jackson, “What is Redlining?,” NYTIMES (ONLINE) (Aug. 17, 2021), at https://www.nytimes.com/2021/08/17/realestate/what-is- factors) and uses them in the decision of whether to approve a home mortgage refinancing application. 26. For example, the refinancing calculator on Wells Fargo’s website, utilizes a digitized algorithmic tool that assesses creditworthiness and other factors to offer estimated refinance rates. The tool asks for inputs for factors that are proxies for minority homeowner status, such as geography (Wells Fargo notes: “[Refinancing] [r]ates can vary by location”)13 and credit score (to which Wells Fargo gives four options: Excellent, Good, Fair, or Poor/Limited).14 27. On its refinance applications, hosted by Blend Labs, Inc., the digitized algorithmic tool (which assesses creditworthiness and other factors to lock in a home mortgage refinance interest rate) also asks for information that can be proxies for race, including “demographic information,” employment and income information, real estate holdings by the applicant, and other information.15 28. Wells Fargo’s use of these factors has resulted in discrimination by disparately denying minority and female applicants’ refinance applications at rates far in excess of denial rates experienced by white borrowers. D. Due to the Discriminatory Conduct of the Defendants, Plaintiffs and the Members of the Putative Class Were Harmed 29. Plaintiffs and members of the putative Class were harmed because they were either denied the ability to refinance their home mortgages entirely due to Wells Fargo’s conduct described herein, or they were given less favorable terms than white borrowers who similarly refinanced their home mortgages through Wells Fargo. 13 https://www.wellsfargo.com/mortgage/mortgage-refinance/why-refinance/, (last accessed Mar. 7, 2022). 14 Id. 15 https://yourmortgageapp.wf.com/section/Getting%20Started/task/BORROWER/3652fd6a-b3e4-4308-bfa8-a92e9f4bbb83, (last accessed Mar. 30. Either way, Plaintiffs and members of the putative Class were harmed in the form of higher monthly payments on their home mortgage loan payments which could have been reduced but for Wells Fargo’s discriminatory conduct. 31. Indeed, an investigation by Bloomberg News further unveiled Wells Fargo’s discriminatory practices with respect to the mortgage refinancing industry.16 Statistics collected by Bloomberg show how wide Wells Fargo’s disparity in refinance approvals was in 2020 compared to all other mortgage lenders in the United States: 16 Shawn Donnan, Ann Choi, Hannah Levitt, and Christopher Cannon, “Wells Fargo Left Black Homeowners Behind in Pandemic Mortgage Refinancing Boom, Bloomberg (Online) (March 11, 2022), at https://www.bloomberg.com/graphics/2022-wells-fargo-black-home-loan- refinancing/. 32. For example, during the time period at issue here, JP Morgan (the largest U.S. bank in terms of assets) approved 81% of mortgage refinance applications from Black homeowners, Rocket Mortgage LLC approved nearly 80% of Black applicants, and Bank of America approved 66% of Black applicants. This is in stark contrast to Wells Fargo’s mere 47% approval rate of Black mortgage refinance applications. 33. Notably, Wells Fargo denied Black mortgage refinance applicants at significantly higher rates than White applicants that had significantly lower incomes: 34. According to Kristy Fercho, the Wells Fargo employee responsible for overseeing Wells Fargo’s home-lending line of business, lending decisions were “consistent across racial and ethnic groups” and that racial disparity in outcomes for refinancing in 2020 was the result of variables that Wells Fargo doesn’t control.18 That provides no excuse because Wells Fargo is not permitted by law to discriminate in its mortgage application process. V. CLASS ALLEGATIONS 35. Pursuant to F.R.C.P. Rule 23(b)(2) and (b)(3), as applicable, and (c)(4), Plaintiffs seek certification of a class of all first and second lien Wells Fargo minority mortgage refinance applicants from 2019-present (the “Class Period”) whose refinancing applications were discriminatorily denied (the “Class”.) 36. Excluded from the Class are Defendants, their subsidiaries, affiliates, officers, directors, and employees. 37. Numerosity: Federal Rule of Civil Procedure 23(a)(1). The members of the Class are so numerous and geographically dispersed that individual joinder of all Class members is impracticable. Plaintiffs are informed and believe — based upon the publicly-available information discussed herein — that there are tens of thousands of Class members, making joinder impracticable. Those individuals’ identities are available through Defendants’ records, and Class members may be notified of the pendency of this Action by recognized, Court-approved notice dissemination methods. 38. Commonality and Predominance: Federal Rules of Civil Procedure 23(a)(2) and 23(b)(3). Defendants have acted in a manner generally applicable to Plaintiffs and the other members of the proposed Class. There is a well-defined community of interest in the questions of law and fact involved, which affect all Class members. The questions of law and fact common to the Classes predominate over the questions that may affect individual Class members, including, inter alia: a. Whether Defendants systematically discriminated against Class members based upon their minority status; b. Whether minority Class members’ applications to refinance a first or second lien loan were denied where similarly situated non-minority applicants were approved; and, c. Whether the algorithms used by Defendants unfairly discriminated against minority Class members and contained algorithmic bias. 39. Typicality: Federal Rule of Civil Procedure 23(a)(3). Plaintiffs’ claims are typical of other Class members’ claims because Plaintiffs and Class members were subjected to the same allegedly unlawful conduct and damaged in the same way. 40. Adequacy of Representation: Federal Rule of Civil Procedure 23(a)(4). Plaintiffs are adequate class representatives because their interests do not conflict with the interests of Class members whom they seeks to represent, Plaintiffs have retained counsel competent and experienced in complex class action litigation, and Plaintiffs intend to prosecute this Action vigorously. The Class members’ interests will be fairly and adequately protected by Plaintiffs and their counsel. 41. Declaratory and Injunctive Relief: Federal Rule of Civil Procedure 23(b)(2). The prosecution of separate actions by individual Class members would create a risk of inconsistent or varying adjudications with respect to individual Class members that would establish incompatible standards of conduct for Defendants. Such individual actions would create a risk of adjudications that would be dispositive of the interests of other Class members and impair their interests. Defendants have acted and/or refused to act on grounds generally applicable to the Classes, making final, public injunctive relief or corresponding declaratory relief appropriate. 42. Injunctive relief, and specifically public injunctive relief, is necessary in this 43. The harm that Defendants impose on Plaintiffs and Class members cause ripple effects for the public-at-large and Plaintiffs seek injunctive relief forcing Defendants to cease and desist its discriminatory practices. 44. Superiority: Federal Rule of Civil Procedure 23(b)(3). A class action is superior to any other available means for the fair and efficient adjudication of this controversy, and no unusual difficulties are likely to be encountered in the management of this class action. The damages or other financial detriment suffered by Plaintiffs and Class members are relatively small compared to the burden and expense that would be required to individually litigate their claims against Defendants, so it would be impracticable for Plaintiffs and Class members to individually seek redress for Defendants’ wrongful conduct. Even if Plaintiff and Class members could afford individual litigation, the court system could not. Individualized litigation creates a 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 single adjudication, economies of scale, and comprehensive supervision by a single court. VI. CAUSES OF ACTION COUNT I VIOLATIONS OF THE FAIR HOUSING ACT 45. Plaintiffs, on behalf of themselves and all others similarly situated, reallege each previous paragraph as if fully alleged herein. 46. The Fair Housing Act, 42 U.S.C. § 3605(a), prohibits any entity whose business includes engaging in residential real estate-related transactions from discriminating against any person in making available such a transaction on the basis of race. 47. Defendants’ business includes engaging in residential real estate-related 48. As set forth above, Defendants maintain a nationwide set of uniform, discriminatory refinancing practices and engage in a pattern or practice of systemic discrimination against minority homeowners that constitute illegal, intentional discrimination and disparately impacts Black Americans and minorities in violation of the Fair Housing Act of 1968. 49. Plaintiffs and Class members were subjected to and harmed by Defendants’ systemic and individual discrimination. 50. On behalf of Plaintiffs and the putative Class, Plaintiffs seek the relief set forth below. COUNT II VIOLATIONS OF THE EQUAL CREDIT OPPORTUNITY ACT 47. Plaintiffs, on behalf of themselves and all others similarly situated, reallege each previous paragraph as if fully alleged herein. 48. The Equal Credit Opportunity Act, 15 U.S.C. § 1691 et seq., makes it unlawful for a creditor to discriminate against any applicant with respect to any aspect of a credit transaction on the basis of race. 49. As described above, Defendants are creditors because they regularly extend, renew, and continue credit, and Plaintiffs were applicants for credit. 50. Defendants maintain a nationwide set of uniform, discriminatory mortgage loan origination and underwriting practices and engaged in a pattern or practice of systemic race discrimination against minority mortgage loan applicants that constitute illegal intentional race discrimination in violation of the Equal Credit Opportunity Act. 51. Plaintiffs and Class members were subjected to and harmed by Defendants’ systemic and individual discrimination. 52. Defendants’ unlawful conduct resulted in considerable harm to Plaintiffs and all 53. On behalf of themselves and the Class they seeks to present, Plaintiffs request the relief set forth below. COUNT THREE VIOLATIONS OF CALIFORNIA’S UNFAIR COMPETITION LAW 54. Plaintiffs, on behalf of themselves and all others similarly situated, reallege each previous paragraph as if fully alleged herein. 55. California’s Unfair Competition Law (“UCL”) defines unfair competition to include any “unfair, unlawful, or fraudulent business practice and unfair, deceptive, untrue, or misleading advertising and any act prohibited by Chapter 1 of Part 3 of Division 7 of [California’s] Business and Professions Code.” 56. Defendants violated the UCL by engaging in unlawful and unfair business acts and practices. 57. Defendants are considered “person[s]” as defined by the statute. 58. Pursuant to the statute, Plaintiffs named herein, as well as the putative Class members, have suffered injury-in-fact and have lost money or property because of the unfair competition set forth herein. 59. In accordance with the liberal application and construction of the UCL, application of the UCL to all Class members is appropriate given that Defendants are headquartered in this District, have a forum selection clause specific to this District, and direct sales, marketing and advertising in this District. 60. Unlawful Prong. A business act or practice is unlawful pursuant to the UCL if it violates any other law or regulation. 61. Defendants’ conduct violates the Fair Housing Act and the Equal Credit Opportunity Act, and other applicable statutes which Plaintiffs may add upon amending this Complaint. 62. Unfairness Prong. A business act or practice is unfair pursuant to the UCL if it is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers. 63. Defendants’ unfair acts and practices include, but are not limited to: Plaintiffs and the Class are discriminated upon with respect to Defendants’ discriminatory denial of Plaintiffs’ and Class members’ refinance applications during the Class Period; Defendants’ denied Plaintiffs’ and Class members’ applications to refinance a first or second lien loan where similarly situated non-minority applicants were approved, and the algorithms used by Defendants unfairly discriminated against minority Class members and contained algorithmic bias. 64. Defendants’ conduct described herein caused Plaintiff and members of the putative Class to suffer frustration, anxiety, emotional distress, and financial hardship. 65. Defendants’ business practices are unfair because they offend public policy; they are immoral, unethical, oppressive, outrageous, unscrupulous, and substantially injurious. The injuries caused by this conduct and the harm to consumers outweigh the possible utility from these aforementioned practices. 66. There is no benefit to consumers or competition by allowing Defendants to engage in discriminatory denial of Plaintiffs’ and Class members’ refinance applications. 67. The gravity of the harm suffered by Plaintiffs and Class members resulting from Defendants’ conduct alleged herein outweighs any legitimate justification, motive or reason for the discrimination described. Accordingly, Defendants’ actions are immoral, unethical, unscrupulous and offend the established public policies as set out in federal regulations and are substantially injurious to Plaintiff and Class Members. 68. As a result of Defendants’ above unlawful and unfair practices, Plaintiffs and members of the putative Class, and as appropriate on behalf of the general public, seek all allowable damages under the UCL including injunctive relief ordering Defendants to transact in a timely manner. VII. PRAYER FOR RELIEF 69. WHEREFORE, Plaintiffs respectfully request that this Court find against the Defendants as follows: a. Certify this case as a class action; b. Designate Plaintiffs as Class Representatives and designate Plaintiffs’ counsel of record as Class Counsel; c. Declare that Defendants’ acts, conduct, policies and practices are unlawful and violate the Equal Credit Opportunity Act and the Fair Housing Act and were in violation of California’s UCL; d. Declare that Wells Fargo engaged in a pattern and practice of racial discrimination against minorities; e. Award Plaintiffs and all others similarly situated compensatory and punitive damages; f. Award Plaintiffs and all others similarly situated prejudgment interest and attorneys’ fees, costs and disbursements, as provided by law; g. Award Plaintiffs and all others similarly situated injunctive and legal relief as this Court deems just and proper to end the discrimination and fairly compensate Plaintiffs and all others similarly situated. h. Award Plaintiffs and all others similarly situated such other relief as this Court VIII. JURY TRIAL DEMAND 70. Jury trial demanded by Plaintiffs and members of the putative Class. DATED: March 25, 2022. Respectfully submitted, MILBERG COLEMAN BRYSON PHILLIPS GROSSMAN PLLC /s/ Alex R. Straus Alex R. Straus, Esq. (SBN 321366) 280 South Beverly Place Beverly Hills, CA 90212 Tel.: (917) 471-1894 Fax: (310) 496-3176 Email: astraus@milberg.com Jennifer Kraus Czeisler* MILBERG COLEMAN BRYSON PHILLIPS GROSSMAN, PLLC 100 Garden City Plaza, Suite 500 Garden City, New York 11530 Telephone: 212-594-5300 Email: jczeisler@milberg.com Sanford P, Dumain* MILBERG COLEMAN BRYSON PHILLIPS GROSSMAN, PLLC 100 Garden City Plaza, Suite 500 Garden City, New York 11530 Telephone: 212-594-5300 Email: sdumain@milberg.com James Evangelista* EVANGELISTA WORLEY 500 Sugar Mill Rd, Suite 245A Atlanta, GA 30350 Telephone: (404) 205-8400 Facsimile: (404) 205-8391 Email: jim@ewlawllc.com Attorneys for Plaintiffs and the Putative Class

discrimination

6eojEocBD5gMZwczrLYX

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Case no. Ty Kempton, individually and on behalf of all others similarly situated, Plaintiff, CLASS ACTION Zip Capital Group, LLC, a Delaware company, Defendant. CLASS ACTION COMPLAINT Plaintiff Ty Kempton (“Kempton” or “Plaintiff”) brings this Class Action Complaint and Demand for Jury Trial against Defendant Zip Capital Group, LLC (“Zip Capital Group” or “Defendant”) to stop Zip Capital Group from violating the Telephone Consumer Protection Act (“TCPA”) by making unsolicited, prerecorded calls to consumers without their consent, and to other obtain injunctive and monetary relief for all persons injured by Zip Capital Group’s conduct. Plaintiff, for his Complaint, 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 his attorneys. INTRODUCTION 1. Zip Capital Group is a capital advance/financing company based out of Irvine, California.1 2. In order to solicit business, Zip Capital Group utilizes many marketing methods including telemarketing using a prerecorded voice system. 3. In Plaintiff’s case, Zip Capital Group placed 4 prerecorded calls to his cellular phone without his prior written express consent to call him. 1 https://en.wikipedia.org/wiki/Power_Home_Remodeling_Group 4. In response to these calls, Plaintiff files this lawsuit seeking injunctive relief, requiring Defendant to cease placing unsolicited calls to consumers’ cellular telephone numbers using a prerecorded voice. PARTIES 5. Plaintiff Kempton is a Gilbert, Arizona resident. 6. Defendant Zip Capital Group is a California limited liability company headquartered in Irvine, California. Defendant conducts business throughout this District and the United States. JURISDICTION AND VENUE 7. This Court has federal question subject matter jurisdiction over this action under 28 U.S.C. § 1331, as the action arises under the TCPA. 8. This Court has personal jurisdiction over Defendant and venue is proper in this District under 28 U.S.C. § 1391(b) because Defendant does significant business in this District, and because the wrongful conduct giving rise to this case occurred in this District. COMMON ALLEGATIONS Zip Capital Group Markets its Services by Placing Prerecorded Calls to Consumers’ Cellular Phone Numbers Without Consent 9. As explained by the Federal Communications Commission (“FCC”) in its 2012 order, the TCPA requires “prior express written consent for all autodialed or prerecorded [solicitation] calls to wireless numbers and residential lines.” In the Matter of Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, CG No. 02-278, FCC 12-21, 27 FCC Rcd. 1830 ¶ 2 (Feb. 15, 2012). 10. Yet in violation of this rule, Defendant fails to obtain any express written consent prior to making prerecorded voice solicitation calls to cellular telephone numbers such as Plaintiff’s. 11. It’s not surprising to see that there are numerous complaints posted online about calls Zip Capital Group has been making to consumers and businesses, with blatant, sometimes angry references regarding the frustration consumers have felt in being unable to stop Zip Capital Group from calling. For example: • “Keeps f****** calling my business and I was never interested in their services. I’ve told them many times to take me of their list and they keep calling.”4 • “I answered one of these calls and found out that they’re coming from Zip Capital Group LLC, which is surprisingly in California, not Florida. They’re using a Florida phone number to cover their tracks—a sure sign of criminality… They’re using an automatic telephone dialing system to call you…”5 • “I received 2-4 calls a day from this phone number for several days and they never left a voicemail. I finally answered the phone, and the person on the line asked for the owner of our company. I said, ‘No and please remove us from your list.’ He said, ‘I’ll do that, you f*&king bit#h’.”7 • “Get this call at least once a day. When we answer, caller never says anything. We just hangup. Called the number back and got this number is not recognized or rings a long time and then comes up as unattainable.”8 • “calls repeatedly”9 • “I just got a call from this number to my cell phone.”10 • “Called my FAX machine 40 times since the beginning of the year. DUMB.”11 • “Calling about my ‘business’ to my private cell phone.”13 • “Calls EVERY DAY 10-20 times per day.”14 • “Whoever they are, they mask [their] number with a non-working number.”15 • “Over 30 Calls since the beginning of the year. They never give up. Harassment!”16 4 https://www.facebook.com/ZipCapitalGroup/ 5 https://800notes.com/Phone.aspx/1-954-204-0916/2 7 Id. 8 Id. 9 Id. 10 https://whocallsme.com/Phone-Number.aspx/9495554805 11 https://www.whitepages.com/phone/1-954-204-0916 13 Id. 14 Id. 15 Id. 16 Id. 12. On Whitepages alone, just on one spoofed phone number that Zip Capital Group uses 954-204-0916, there are over 500 spam reports. PLAINTIFF’S ALLEGATIONS Zip Capital Group Repeatedly Called Plaintiff’s Cell Phone Number Without Plaintiff’s Consent 13. On October 16, 2018 at 10:13 AM, Plaintiff received a phone call to his cell phone number from Defendant using phone number 480-653-8635. Phone number 480-653- 8635 is a spoofed phone number that Defendant uses to place telemarketing calls, and when called back it is not in service. 14. On October 17, 2018 at 10:04 AM, Plaintiff received another phone call to his cell phone number from Defendant, this time using phone number 480-343-2033. Phone number 480-343-2033 appears to be another spoofed phone number that Defendant uses to place telemarketing calls. When 480-343-2033 is dialed, it doesn’t ring at all. An automated messages states, “The wireless customer you are calling is not available.” 15. On October 18, 2018 at 10:57 AM, Plaintiff received a prerecorded call to his cell phone number from Defendant, again using phone number 480-653-8635. When Plaintiff answered the call, he heard a recorded voice message. 16. On October 19, 2018 at 3:52 PM, Plaintiff received a second prerecorded call to his cell phone number from Defendant, this time using phone number 480-462-5153. When Plaintiff answered the call, he heard the same prerecorded voice message he had heard the previous day. When he finally got through to a live agent, Plaintiff confirmed that the telemarketer is Zip Capital Group and was given the callback phone number 949-396-1159. 17. 949-396-1159 is a phone number that when dialed leads directly to an automated system identifying its owner as Zip Capital Group. On WhitePages Premium, 949-396-1159 is listed as being “Zcg Direct” which stands for Zip Capital Group. 17 18. Plaintiff has never had a relationship with Zip Capital Group and has never consented to any contact from Defendant. Simply put, Zip Capital Group did not obtain Plaintiff’s prior express written consent to place prerecorded solicitation telephone calls to him on his cell phone number. 19. The unauthorized telephone calls made by Zip Capital Group, as alleged herein, have harmed Plaintiff in the form of annoyance, nuisance, and invasion of privacy, and disturbed Kempton’s use and enjoyment of his phone, in addition to the wear and tear on the phones’ hardware (including the phones’ battery) and the consumption of memory on the phone. 20. Seeking redress for these injuries, Kempton, on behalf of himself and Class of similarly situated individuals, brings suit under the Telephone Consumer Protection Act, 47 U.S.C. § 227, et seq., which prohibits prerecorded telephone calls to cellular telephones. CLASS ALLEGATIONS Class Treatment Is Appropriate for Plaintiff’s TCPA Claims Arising From Prerecorded Voice Solicitation Calls Made by Zip Capital Group 21. Plaintiff brings this action pursuant to Federal Rule of Civil Procedure 23(b)(2) and Rule 23(b)(3) on behalf of himself and all others similarly situated and seeks certification of the following class: 17 https://premium.whitepages.com/phone/1-949-396-1159 Prerecorded No Consent Class: All persons in the United States who from four years prior to the filing of this action through class certification (1) Defendant (or an agent acting on behalf of Defendant) called, (2) on the person’s cellular telephone, (3) using a prerecorded message, (4) for substantially the same reason Defendant called Plaintiff, and (5) for whom Defendant claims it obtained prior express written consent to call in the same way it claims it obtained prior express written consent to call Plaintiff, or for whom it does not claim it obtained prior express written consent to call. 22. The following individuals are excluded from the Class: (1) any Judge or Magistrate presiding over this action and members of their families; (2) Defendant, its subsidiaries, parents, successors, predecessors, and any entity in which Defendant or its parents have a controlling interest and their current or former employees, officers and directors; (3) Plaintiff’s attorneys; (4) persons who properly execute and file a timely request for exclusion from the Class; (5) the legal representatives, successors or assigns of any such excluded persons; and (6) persons whose claims against Defendant have been fully and finally adjudicated and/or released. Plaintiff anticipates the need to amend the Class definitions following appropriate discovery. 23. Numerosity: On information and belief, there are hundreds, if not thousands of members of the Class such that joinder of all members is impracticable. 24. Commonality and Predominance: There are many questions of law and fact common to the claims of Plaintiff and the Class, and those questions predominate over any questions that may affect individual members of the Class. Common questions for the Class include, but are not necessarily limited to the following: (a) whether Defendant placed solicitation telephone calls to Plaintiff and members of the Class using a prerecorded voice; (b) whether Defendant placed prerecorded voice solicitation calls 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. 25. Adequate Representation: Plaintiff will fairly and adequately represent and protect the interests of the Class, and has retained counsel competent and experienced in class actions. Plaintiff has no interests antagonistic to those of the Class, and Defendant has no defenses unique to Plaintiff. Plaintiff and his counsel are committed to vigorously prosecuting this action on behalf of the members of the Class, and have the financial resources to do so. Neither Plaintiff nor his counsel has any interest adverse to the Class. 26. Appropriateness: This class action is also appropriate for certification because Defendant has acted or refused to act on grounds generally applicable to the Class and as a whole, thereby requiring the Court’s imposition of uniform relief to ensure compatible standards of conduct toward the members of the Class and making final class-wide injunctive relief appropriate. Defendant’s business practices apply to and affect the members of the Class uniformly, and Plaintiff’s challenge of those practices hinges on Defendant’s conduct with respect to the Class as wholes, not on facts or law applicable only to Plaintiffs. Additionally, the damages suffered by individual members of the Class will likely be small relative to the burden and expense of individual prosecution of the complex litigation necessitated by Defendant’s actions. Thus, it would be virtually impossible for the members of the Class to obtain effective relief from Defendant’s misconduct on an individual basis. A class action provides the benefits of single adjudication, economies of scale, and comprehensive supervision by a single court. Telephone Consumer Protection Act (Violation of 47 U.S.C. § 227) (On Behalf of Plaintiff and the Prerecorded No Consent Class) 27. Plaintiff repeats and realleges paragraphs 1 through 26 of this Complaint and incorporates them by reference. 28. Defendant and/or its agents transmitted unwanted solicitation telephone calls to Plaintiff and the other members of the Prerecorded No Consent Class using a prerecorded voice message. 29. These prerecorded voice calls were made en masse without the prior express written consent of Plaintiff and the other members of the Prerecorded No Consent Class. 30. Defendant has, therefore, violated 47 U.S.C. § 227(b)(1)(A)(iii). As a result of Defendant’s conduct, Plaintiff and the other members of the Prerecorded No Consent Class are each entitled to a minimum of $500 in damages, and up to $1,500 in damages, for each violation. PRAYER FOR RELIEF WHEREFORE, Plaintiff Kempton, individually and on behalf of the Class, prays for the following relief: a) An order certifying the Class as defined above; appointing Plaintiff as the representative of the Class; and appointing his attorneys as Class Counsel; b) An award of actual and/or statutory damages to be paid into a common fund for the benefit of Plaintiff and the Class, together with costs; c) An order declaring that Defendant’s actions, as set out above, violate the TCPA; d) An injunction requiring Defendant to cease all unsolicited calling activity, and to otherwise protect the interests of the Class; and e) Such further and other relief as the Court deems just and proper. JURY DEMAND Plaintiff requests a jury trial. Respectfully Submitted, TY KEMPTON, individually and on behalf of those similarly situated individuals Dated: March 4, 2019 /s/ Nathan Brown Nathan Brown Telephone: (602) 529-3474 Nathan.Brown@BrownPatentLaw.com Stefan Coleman* law@stefancoleman.com LAW OFFICES OF STEFAN COLEMAN, P.A. 201 S. Biscayne Blvd, 28th Floor Miami, FL 33131 Telephone: (877) 333-9427 Facsimile: (888) 498-8946 Avi R. Kaufman* kaufman@kaufmanpa.com KAUFMAN P.A. 400 NW 26th Street Miami, FL 33127 Telephone: (305) 469-5881 Attorneys for Plaintiff and the putative Class *Pro Hac Vice motion forthcoming

privacy

EI33GIkB9sM9pEmaZOXi

2013 () 0 EDL UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION C CV 13 2668 Plaintiff, CLASS ACTION COMPLAINT FOR DAMAGES FOR VIOLATION OF CONSUMER DEBT COLLECTION LAWS DEMAND FOR JURY TRIAL Defendant. / 15 United States Code § 1692 et seq. California Civil Code § 1788 et seq. I. INTRODUCTION 1. This action is brought to challenge Defendant's practices and procedures of 2. The violations alleged involve Defendant's collection letter ("Exhibit A") which PEDRO V. LINARES V. CAVALRY PORTFOLIO 3. Additionally, this action challenges Defendant's use of an alleged "Privacy 4. Consumer privacy is protected by 15 U.S.C. § 1692c(b) limiting the disclosure of ...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. 5. The Defendant's collection letter, Exhibit B, threatens to publicly disclose private We disclose information we collect to affiliated and non-affiliated third-parties... 6. This action will show that Defendant's violation of 15 U.S.C. § 1692c(b) also 7. Finally, Plaintiff will show that Defendant misstates the consumer's rights by II. JURISDICTION 8. Jurisdiction in this Court arises under 15 U.S.C. § 1692k(d), 28 U.S.C. § 1337, PEDRO V. LINARES V. CAVALRY PORTFOLIO 9. This action arises out of Defendants' violations of the Fair Debt Collection III. VENUE 10. Venue in this judicial district is proper pursuant to 28 U.S.C. § 1391(b), in that IV. PARTIES 11. Plaintiff is a consumer who resides in this district. 12. Defendant, Cavalry Portfolio Services, LLC, ("Cavalry") is located in the City of Hawthorne, State of New York. 13. Plaintiff is obligated or allegedly obligated to pay a consumer debt, and is a 14. Defendant Cavalry is a person who uses an instrumentality of interstate commerce 15. Defendant is an affiliate of Cavalry Investments, LLC and Cavalry SPVI, and V. FACTUAL ALLEGATIONS Facts Relating to Fresh Start Program 16. On or about November 16, 2012, Defendant sent Plaintiff in a single envelope a PEDRO V. LINARES V. CAVALRY PORTFOLIO 3 SERVICES, LLC17. Exhibits A and B sought to collect a debt allegedly incurred by Plaintiff for 18. Exhibit A in jumbo type states: FRESH START PROGRAM 19. Defendant's collection letter states that "Defendant recognizes the importance 20. Defendant's representations are false, deceptive and misleading in that paying 21. Paying down Defendant's debt will not improve Plaintiff's credit report which 22. Plaintiff paying down the debt will not result in a Fresh Start. Financially 23. At Exhibit B, attached, Defendant's privacy notice states: We collect Private Information about you from the following sources: Information we receive from you either directly or indirectly, such as information on applications or other forms, which may include your name, address, social security number and income. Information about your transactions with us or others, such as your account balance and payment history. Information we receive from consumer reporting agencies, such as your credit history and credit worthiness. 24. All of this information involves debt collection. 25. The privacy notice then states: DISCLOSURE OF PRIVATE INFORMATION PEDRO V. LINARES V. CAVALRY PORTFOLIO We only disclose information we collect to affiliated and non-affiliated third parties as permitted by the federal Fair Debt Collection Practices Act. We may disclose information we collect to: o Credit Bureaus The original creditor and entities that have had an ownership interest in your account Entities that provide mailing services on our behalf Entities that provide collection-related services on our behalf Others, such as third parties, when you direct us to share information about you o Affiliated and non-affiliated parties if not prohibited by the federal Fair Debt Collection Practices Act or by other applicable laws 26. Many of the uses listed are prohibited by the FDCPA, in that they are with persons 27. In addition, several of the listed uses amount to the publication of lists of persons 28. For example, debt collectors have been known to sell lists of persons who have 29. The privacy notice then states that if the consumer would "prefer that we not PEDRO V. LINARES V. CAVALRY PORTFOLIOVI. CLASS ALLEGATIONS 30. This matter is brought as a class action defined as (I) all persons with addresses 31. The class is SO numerous that joinder of all members is impractical. 32. There are questions of law and fact common to the class, which predominate over 33. There are no individual questions, other than whether a class member was sent a 34. Plaintiff will fairly and adequately protect the interests of the class. 35. Plaintiff has retained counsel experienced in handling class claims and claims 36. The questions of law and fact common to the class predominate over any issues 37. Plaintiff's claims are typical of the claims of the class, which all arise from the PEDRO V. LINARES V. CAVALRY PORTFOLIO 38. A class action is a superior method for the fair and efficient adjudication of this 39 As a result of Defendant's violations of the FDCPA and CA FDCPA, Plaintiff and VI. CAUSE OF ACTIONS FIRST CLAIM FOR RELIEF (Violation of the FDCPA) 40. Plaintiff incorporates the foregoing paragraphs as though fully set forth hereto. 41. The foregoing acts and omissions constitute violations of the FDCPA, including 42. As a result of each violation of the FDCPA, Plaintiff is entitled to statutory SECOND CLAIM FOR RELIEF (Violation of the CA FDCPA) 43. Plaintiff incorporates the foregoing paragraphs as though fully set forth hereto. 44. The foregoing acts and omissions constitute violations of the CA FDCPA 45. As a result of each violation of the CA FDCPA, Plaintiff is entitled to PEDRO V. LINARES V. CAVALRY PORTFOLIO VII. REQUEST FOR RELIEF WHEREFORE, Plaintiff respectfully prays that relief be granted as follows: A. An award of maximum statutory damages pursuant to the FDCPA; B. An award of costs of litigation and reasonable attorney's fees, pursuant C. An award of maximum statutory damages pursuant to CA FDCPA and D. An award of costs of litigation and reasonable attorney's fees, pursuant to L Irving L. Berg VIII. JURY DEMAND Plaintiff hereby demands that this case be tried before a jury. Ang Irving L. Berg THE BERG LAW GROUP 145 Town Center, PMB 493 Corte Madera, CA 94925 (415) 924-0742 (415) 891-8208 (Fax) ATTORNEY FOR PLAINTIFFPEDRO V. LINARES V. CAVALRY PORTFOLIO 107 00021192 202466 Phone: 866-873-5293 www.cavalryportfolioservices.com RE: Original Institution: HSBC Bank Nevada, N.A. Original Account No.: 6011380024055071 Cavalry Account No.: 14581053 Outstanding Balance: $3,087.05 PEDRO V LINARES 40728 SUNDALE DR FREMONT, CA 94538-3341 40% DISCOUNT PAY ONLY OR PAY ONLY 5 INSTALLMENTS OF $1,543.53 $370.45 THAT PURPOSE. THIS COMMUNICATION IS FROM A DEBT COLLECTOR. Make Checks and Money Orders Payable to Cavalry Portfolio Services, LLC. PLAINTIFF'S EXHIBIT A Cavalry Portfolio Services, LLC PO Box 27288 Tempe, AZ 85285-7288 Erivary Motice This notice andlies whether you are current or a PLAINTIFF'S EXHIBIT B 20004 Cavalry Services

consumer fraud

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No. CLASS ACTION COMPLAINT DEMAND FOR JURY TRIAL UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE KENNETH DAVID WEST and ROBERT TAYLOR, on behalf of themselves and all others similarly situated, Plaintiffs, vs. AMAZON.COM, INC., a Delaware corporation, Defendant. TABLE OF CONTENTS Page I. INTRODUCTION ............................................................................................................ 1 II. JURISDICTION ............................................................................................................... 6 III. VENUE ............................................................................................................................. 6 IV. PARTIES .......................................................................................................................... 6 A. Plaintiffs ................................................................................................................ 6 B. Defendant .............................................................................................................. 7 V. STATEMENT OF FACTS ............................................................................................... 7 A. Amazon Operates the Dominant Online Retail Sales Platform and Dominates the Online Retail Sales Market in The United States. ........................ 7 B. Amazon Imposes Most Favored Nation Requirements On Third- Party Merchants. ................................................................................................. 13 C. Amazon’s Pricing Policies Restrain Price Competition and Cause Consumers to Pay More. ..................................................................................... 20 D. Government Authorities Have Repeatedly Concluded That Amazon Has Harmed Competition Through the Use of Most Favored Nation Pricing Policies. ........................................................................ 21 VI. INTERSTATE TRADE AND COMMERCE ................................................................ 25 VII. RELEVANT MARKETS ............................................................................................... 25 VIII. CLASS ACTION ALLEGATIONS ............................................................................... 29 IX. ANTITRUST INJURY ................................................................................................... 31 X. CAUSES OF ACTION ................................................................................................... 32 FIRST CAUSE OF ACTION VIOLATION OF THE SHERMAN ACT (15 U.S.C. § 1) PER SE ......................................................................................................... 32 SECOND CAUSE OF ACTION VIOLATION OF 15 U.S.C. § 1 (ALTERNATIVE TO PER SE) ...................................................................................... 34 THIRD CAUSE OF ACTION VIOLATION OF THE SHERMAN ACT – MONOPOLIZATION (15 U.S.C. § 2) ........................................................................... 36 FOURTH CAUSE OF ACTION VIOLATION OF THE SHERMAN ACT – ATTEMPTED MONOPOLIZATION (15 U.S.C. § 2) .................................................. 37 JURY TRIAL DEMANDED ...................................................................................................... 38 PRAYER FOR RELIEF ............................................................................................................. 38 Plaintiffs allege the following on personal knowledge with respect to themselves and their acts, and on information and belief with respect to all other matters based on the investigation made by their attorneys. I. INTRODUCTION 1. Amazon.com, Inc. (“Amazon”) operates the largest online retail platform in the United States, which includes its website, applications for mobile devices, and voice-controlled devices (“Amazon’s platform”). Sales on Amazon’s platform make up between 50% and 70% of all online retail sales in the United States. By comparison, the shares of Amazon’s nine closest competitors range from 1.1% to 6.6% of that market. 2. Amazon operates as a retailer by selling directly to its customers. In this role, Amazon sells approximately 12 million products on its platform, encompassing a wide range of consumer goods. 3. Amazon has also designed its platform to be a marketplace where Amazon customers can buy products from other retailers (“third-party merchants”). Third-party merchants may register with Amazon Marketplace for consumers to buy their products on Amazon’s platform. When an Amazon customer buys an item listed by a third-party merchant, Amazon collects a fee for the use of its platform, which it deducts from the purchase price before remitting the remainder to the third-party merchant. Amazon therefore competes both with other online retail sales platforms, such as eBay, Walmart, and Wayfair, for the business of third-party merchants, and with third-party merchants who list their products on Amazon’s platform. 4. The overwhelming majority of third-party merchants selling on Amazon’s platform also sell on competing platforms, including their own websites and the platforms offered by companies like eBay, Walmart, and Wayfair. Amazon imposes significant fees for the use of its platform, including a subscription fee and percentage fees on the sale of each product (commissions that it calls “referral fees”). Amazon’s total fees are substantially higher than the fees charged by other platforms, especially platforms with no fees at all, such as the third-party merchants’ own websites. Third-party merchants incorporate Amazon’s fees into their pricing on Amazon’s platform. In a competitive market, third-party merchants would charge a total price on other platforms that is lower than the price charged on Amazon’s platform, because the other platforms take a lower fee. However, Amazon uses its market power to prohibit this form of price competition. 5. Every third-party merchant that registers to sell products on Amazon’s platform “agrees to the terms of the Amazon Services Business Solutions Agreement (BSA) and the policies incorporated in that agreement.”1 The BSA establishes rules for setting prices on Amazon’s platform. 6. Before March 2019, Amazon required its third-party merchants to agree to Amazon’s “Price Parity Clause.” The Price Parity Clause (also known as a “Most Favored Nations” clause or “MFN” clause) explicitly prohibited third-party merchants from offering consumers lower prices on any alternative online platform, including their own websites. An investigation by the Subcommittee on Antitrust, Commercial, and Administrative Law of the Committee on the Judiciary found that “Amazon has a history of using MFN clauses to ensure that none of its suppliers or third-party merchants can collaborate with an existing or potential competitor to make lower-priced or innovative product offerings available to consumers.”2 7. Amazon’s Price Parity Clause restricted and suppressed price competition in two 8. First, the Price Parity Clause prohibited third-party merchants from lowering their prices on other online retail sales platforms. But for Amazon’s MFN clause, Amazon’s 1 Declaration of Ella Irwin, Director of Marketplace Abuse at Amazon (Jul. 13, 2018), Kangaroo Mfg., Inc. v. Amazon.com, Case No. 17-cv-1806SPL (D. Ariz.), Dkt. No. 75 (“Irwin Decl.”), ¶ 4. Amazon also has a limited number of stand-alone agreements with certain third-party merchants, who are not subject to the Standard Business Agreement. For example, Amazon has a separate agreement with certain publishers to sell their eBooks directly to customers on Amazon’s platform. See Laura Owen, Macmillan, too, returns to agency pricing with Amazon, Gigaom (Dec. 18, 2014), https://gigaom.com/2014/12/18/macmillan-too-returns-to-agency-pricing-with-amazon/. Amazon’s anticompetitive agreements with these eBooks publishers is the subject of a separate class action. See Fremgen v. Amazon.com, Inc., Case No. 1:21-cv-351-GHW-DCF (S.D.N.Y. filed January 14, 2021). 2 Investigation of Competition in Digital Markets, Majority Staff Report and Recommendations (“House Report”), Subcommittee on Antitrust, Commercial, and Administrative Law of the Committee on the Judiciary (Oct. 6, 2020), available at https://kl.link/3jGISfK. higher fees would result in consumers paying a higher overall price on Amazon’s platform than on competing platforms. Competitive pressure would then have forced Amazon to lower its fees. By eliminating price competition across platforms, Amazon protected its ability to charge surpracompetitive fees for the use of its platform, keeping prices high on its platform and, therefore, across all online retail sales platforms. 9. Second, Amazon eliminated horizontal price competition between its own goods and the directly competing goods of the third-party merchants that would otherwise have been sold at lower prices, not only on competing online platforms and the merchants’ websites, but also on Amazon’s platform. Without the Price Parity Clause, Amazon would have had to offer lower prices for its own goods to compete with the lower-priced third-party-merchant goods. 10. In both cases, the anticompetitive contractual obligations that Amazon imposed on the third-party merchants increased the prices paid by Amazon customers for goods purchased on its platform. Those contractual restraints resulted in supracompetitive prices being charged on Amazon’s platform for the goods of both third-party merchants and Amazon— prices that could not have been sustained in the absence of anticompetitive contracts. 11. Multiple regulators have recognized the anticompetitive nature of Amazon’s MFN clause. In 2012, regulators in the U.K. and in Germany3 concurrently investigated the anticompetitive effect of Amazon’s MFN clause in the U.K. and German online retail sales markets.4 Concerned that Amazon’s MFN clause could drive up online prices for consumers, the U.K. regulators opened a formal investigation after receiving “numerous complaints” that Amazon prohibited third-party merchants from selling their products at lower prices through other online platforms, including the merchants’ own websites.5 Considering the “national market” for online retail sale platforms, the German regulators found that Amazon’s MFN 3 Specifically, the regulators were the U.K. Office of Fair Trading and regulators in Germany’s Federal Cartel Office, the Bundeskartellamt. 4 Dan Prochilo, UK May Drop Antitrust Probe into Amazon Pricing Policy, Law360(Aug. 29, 2013), https://www.law360.com/articles/468842/uk-may-drop-antitrust-probe-into-amazon-pricing-policy. OFT closed in 2014 and was succeeded by the newly created Competition and Markets Authority. 5 Id. clause amounted to a “horizontal price-fixing” agreement that acts as a “barrier[] to market entry for new competitors and hinder[s] the expansion of existing competitors in the market.”6 They further found that the MFN is “a hardcore restriction in that it limits price-setting behaviour, [which] cannot be seen either as an indispensable restriction, or as an appropriate way of involving consumers with regard to its price-raising effect.”7 In short, they concluded that the MFN clause has anticompetitive effects with respect to both third-party merchants and other retail sales platforms because it “results in safeguarding Amazon’s large own-account share of sales as a competitor and the extensive reach of amazon.de, which cannot be attacked by competing platforms.”8 12. Amazon continued to employ its MFN clause in the United States until March 2019. Under threat of a Federal Trade Commission (FTC) investigation, Amazon also officially withdrew its MFN clause in the United States. 13. But the withdrawal was merely sleight of hand. Amazon continues to enforce its price restraint under its so-called “Fair Pricing Policy.” The new policy states that, if a third- party merchant engages in pricing practices with regard to “a marketplace offer that harms customer trust,” Amazon may impose sanctions. According to Amazon, a third-party merchant commits a “pricing practice that harms consumer trust” if it sets a price for its goods on a competing online retail sales platform that is significantly below the price charged for the goods on Amazon’s platform. 14. The sanctions imposed on third-party merchants for charging consumers a lower price on a competing platform are severe: They include eliminating a product’s “Buy Box” button, which is a feature that makes a product the most visible on the product-detail page and the easiest for consumers to purchase; removing the third-party merchant’s offering from the Amazon Platform; suspending shipping options; and terminating or suspending the third-party merchant’s ability to have any goods sold on Amazon’s platform. 6 12.09.13 Bundeskartellamt Decision at 3. 7 Id. 8 Id. 15. Amazon uses the sanctions under its Fair Pricing Policy “as a way to penalize sellers that offer products at a lower price on competing sites.” House Report at 296. For example, the suspension of a third-party merchant’s account has “dire consequences for the seller” and was cited by the Congressional Investigation as an “egregious example” of Amazon’s bullying of third-party merchants. Id. And the elimination of the “Buy Box” button from the third-party merchant’s listing is devastating to the merchant’s business because 80% of the purchases on Amazon’s platform are made with the “Buy Box.” 16. Third-party merchants cannot afford to avoid the onerous conditions of Amazon’s Fair Pricing Policy because Amazon has massive and durable market power. Amazon’s “market power is at its height in its dealings with third-party merchants.” House Report at 15. As a result of Amazon’s market power, third-party merchants are “forced to be on Amazon” and believe they “don’t have a choice but to sell through Amazon.” House Report at 87, 270. 17. Amazon regularly and aggressively monitors the prices offered by its third-party merchants on other online platforms, routinely using computer software to scan the price listings of its third-party merchants on competing online websites. This is done to determine whether its third-party merchants are violating its euphemistically named “Fair Pricing Policy.” 18. The intent and effect of the Fair Pricing Policy is the same as the former Price Parity Clause. Under both policies, Amazon uses its market power to prevent third-party merchants from selling their products at lower prices on other online platforms. This, in turn, allows Amazon both to charge higher fees for the use of its platform and to charge higher prices for the Amazon products it sells on its platform. 19. Ultimately it is consumers who suffer harm by paying higher prices (1) for products purchased from third-party merchants through online retail sales platforms other than Amazon’s platform,9 (2) for products purchased from third-party merchants on Amazon’s platform, and (3) for purchases of Amazon’s own products. 9 See Frame-Wilson v. Amazon, Case No. 2:20-CV-00424-RAJ (W.D. Wash) (filed March 19, 2020). II. JURISDICTION 20. This Court has subject matter jurisdiction over Plaintiffs’ Sherman Act and Clayton Antitrust Act claims because they arise under federal law. See 28 U.S.C. §§ 1331, 1337; 15 U.S.C. §§ 1, 2, 15(a). 21. Plaintiffs are residents of Illinois and Connecticut. As described in this Complaint, Plaintiffs purchased consumer goods online through Amazon’s platform and suffered financial harm because of Amazon’s anticompetitive conduct. 22. This Court has personal jurisdiction over Amazon because Amazon has its principal headquarters in Washington, does business in Washington, and has registered with the Washington Secretary of State. III. VENUE 23. Venue is proper under 28 U.S.C. § 1391(b)(1) and (2) because Amazon’s principal place of business is in this judicial district, and a substantial part of the events giving rise to the claims occurred in this judicial district. IV. PARTIES A. Plaintiffs 24. Kenneth David West is a resident of Mount Prospect, Illinois. He has regularly shopped on Amazon’s platform, starting as early as 2006. For example, he made the following purchases on Amazon’s platform: on August 27, 2019, he purchased for $79.99 a HelloBaby video baby monitor with camera and audio B07MZ1J93Y, which was listed by Amazon’s co- conspirator, third-party merchant Jing Rui Mei; on March 20, 2020, he purchased for $27.90 an amplified HD digital TV antenna, which was listed by Amazon’s co-conspirator, third-party merchant Abask Tech; on November 2, 2020, he purchased for $33.94 an LG basket assembly part B00NAP58ZE, which was listed by Amazon’s co-conspirator, third-party merchant Part Supply House; on April 13, 2021, he purchased for $199.99 a Hunter sonic indoor ceiling fan B00FGM503O, which was listed by Amazon itself; and on December 8, 2020, he purchased for $249.99 a Little Tikes indoor/outdoor inflatable bouncer B08CXDCLD2, which was also listed by Amazon itself. Mr. West has been injured and will continue to be injured by paying more for products than he would have paid or would otherwise pay in the future in the absence of Amazon’s unlawful acts, as set forth herein. 25. Robert Taylor is a resident of New London, Connecticut. He regularly buys goods on Amazon’s platform. For example, he made the following purchases on Amazon’s platform: on December 30, 2017, he purchased for $589 a Rado Coupole men’s quartz watch R22625113, which was listed by Amazon’s co-conspirator, third-party merchant Imperial 123; on January 3, 2018, he purchased for $950 a Rado Coupole men’s watch R22531723, which was listed by Amazon’s co-conspirator, third-party merchant Promenadewatches; on June 20, 2019, he purchased for $919.09 Dolce e Gabbana men’s black leather sneakers CS1570AZ388HNF57, which was listed by Amazon’s co-conspirator, third-party merchant Dolce e Gabbana; on May 13, 2020, he purchased for $688.99 a Rado men’s Centrix diamond Swiss quartz watch, which was listed by Amazon’s co-conspirator, third-party merchant Global Precious Brands, LLC; on April 8, 2019, he purchased for $39.99 a CLI-281 black, cyan, magenta and yellow 4 ink pack, which was listed by Amazon itself. Mr. Taylor has been injured and will continue to be injured by paying more for products than he would have paid or would otherwise pay in the future in the absence of Amazon’s unlawful acts, as set forth herein. B. Defendant 26. Amazon is an online retail giant with its principal headquarters in Seattle, Washington. Amazon sells its own products directly to retail customers. Amazon also allows third-party merchants to sell products on its online retail sales platform. V. STATEMENT OF FACTS A. Amazon Operates the Dominant Online Retail Sales Platform and Dominates the Online Retail Sales Market in The United States. 27. Amazon operates the largest online retail sales platform in the United States. As the name implies, an online retail sales platform is a combination of websites and mobile applications that allow consumers to find and purchase products offered online by retailers. Sales on Amazon’s platform make up between 50% and 70% of all online retail sales in the United States. 28. Amazon operates as a retailer on its own platform by selling directly to its customers. In this role, Amazon sells approximately 12 million products on its platform, encompassing a wide range of consumer goods. 29. But Amazon has also designed its platform to be a marketplace where Amazon customers can buy products from other retailers (“third-party merchants”). Third-party merchants may register with Amazon Marketplace to sell products on Amazon’s platform. Amazon therefore competes both with other online retail sales platforms—such as eBay, Walmart, and Wayfair—for the business of third-party merchants, and with third-party merchants who sell their products on Amazon’s platform. 30. A third-party merchant’s relationship with Amazon begins with a $40 registration fee that allows it to reach 95 million unique visitors per month in the United States.10 But third-party merchants “have to play by Amazon’s rules, and Amazon.com isn’t just a marketplace, it’s also a seller.”11 Amazon deducts a commission (or “referral fee”) from the price of each item sold on its platform, typically around 15%.12 Optionally, and for an additional fee, third-party merchants may select Fulfillment by Amazon (FBA) for Amazon to store products, pack and ship orders, collect payments, and manage customer service and returns. Many third-party merchants enroll in FBA because it costs less to have Amazon handle these aspects of the business.13 Third-party merchants that enroll in FBA qualify for Amazon Prime and free-shipping-eligible orders; other third-party merchants that want the benefit of Amazon Prime must join a waitlist for Seller Fulfilled Prime, which commits third-party merchants to 10 Amazon Services Registration Page, https://services.amazon.com/semlanding. html?ref=pd_sl_2thvswwc79_b&hvdev=c&ld=SEUSSOABING- B20000SCD&hvadid=78615157546872&hvqmt=p&tag=mh0b-20&hvbmt=bb. 11 Leanna Zeibak, 7 Steps to Winning the Amazon Buy Box in 2019, Tinuitu (Aug. 14, 2018), https://tinuiti.com/blog/amazon/win-amazon-buy-box/. 12 David Hamrick, Amazon FBA Fees, How They Work, and How to Profit as a Seller, Jungle Scout (Feb. 7, 2020), https://www.junglescout.com/blog/amazon-fba-fees/. 13 Id. fulfilling orders with two-day deliveries at no additional charge to Prime customers.14 Accepting FBA services also greatly increases the likelihood that the third-party merchants’ products will be selected for the coveted Amazon Buy Box, which makes products most visible on the product-detail page and the easiest for consumers to purchase.15 31. Referral fees are not paid by third-party merchants to Amazon up-front; instead Amazon deducts them from customers’ payments before Amazon remits payments to the third- party merchants. 32. The overwhelming majority of third-party merchants selling on Amazon’s platform also sell on competing platforms, including their own websites and the platforms offered by companies like eBay, Walmart, and Wayfair. Amazon imposes fees for the use of its platform that are substantially higher than the fees charged by other platforms—especially third- party merchants’ own websites, which have no fees at all. In a competitive market, third-party merchants would charge a total price on other platforms that is lower than the price charged on Amazon’s platform, because the other platforms take a lower fee. However, Amazon uses its market power to prohibit this form of price competition. 33. Every third-party merchant that registers to sell products on Amazon’s platform “agrees to the terms of the Amazon Services Business Solutions Agreement (BSA) and the policies incorporated in that agreement.” The BSA establishes rules for setting prices on Amazon’s platform. 34. Amazon has monopoly power in the online retail sales market in the United States. As of 2018, 50% of online retail sales in the United States took place on Amazon’s 14 Reach hundreds of millions of Amazon customers worldwide-fast, Amazon Seller Central, https://sellercentral.amazon.com/; Sell products with the Prime badge directly from your warehouse, Amazon Seller Central, https://services.amazon.com/services/seller-fulfilledprime.html. 15 Supra Zeibak. platform.16 Amazon’s market share has been increasing over the past five years, as shown by the growth of its sales.17 35. Aided by its anticompetitive conduct, Amazon has increased its market share in the online retail sales to “65% to 70% of all U.S. online marketplace sales.”18 36. Those increases have largely been driven by third-party merchant sales, which account for the majority of sales on Amazon’s platform.19 16 Amazon Now Has Nearly 50% of US Ecommerce Market, Emarketer (Jul. 16, 2018), https://www.emarketer.com/content/amazon-now-has-nearly-50-of-us-ecommerce-market. 17 J. Clement, U.S. Amazon marketplace sales 2016-2019, Statista, Jun 12, 2019, https://www.statista.com/statistics/882919/amazon-marketplace-sales-usa/. 18 House Report at 255. 19 Laureen Thomas & Courtney Reagan, Watch out, retailers. This is just how big Amazon is becoming, CNBC, www.cnbc.com/2018/07/12/amazon-to-take-almost-50-percent-of-us-e-commerce-market-by-years-end.html. 37. Amazon’s monopoly power is further confirmed by its power to control the prices of a vast number of goods offered for sale in the U.S. online retail sales market. 38. Amazon has even greater monopoly power in the market for online retail sales platforms. In light of the volume of sales that takes place on Amazon’s platform, the overwhelming majority of retailers have no choice but to list their products on Amazon’s platform. Amazon’s power is reinforced by the fact that Amazon’s platform provides access to Amazon’s 147 million Prime members in the United States.20 To put that into perspective, more Americans have Amazon Prime accounts than go to church regularly or have a landline phone.21 Prime membership is a paid subscription service for Amazon’s retail customers that entitles them to several benefits, including free two-day shipping on Prime products. According to a survey, an estimated 20% of Amazon Prime members shopped on Amazon a few times per week, and 7% did so almost daily. Prime members in the United States spend an average of $1,400 per year on Amazon's platform. Another survey found that an astonishing 96% of all 20 https://www.digitalcommerce360.com/article/amazon-prime- membership/#:~:text=Amazon%20has%20147%20million%20Prime,to%20shareholders%20published%20April%2 015. 21 Margot Whitney, Complete Beginner’s Guide to Advertising on Amazon, Wordstream (Aug. 27, 2019), Prime members are more likely to buy products from Amazon’s platform than any other online retail sales platform.22 39. Amazon’s market power is further entrenched by the powerful network effects that shape online retail sales platforms. A network effect is the phenomenon by which the value or utility a user derives from a good or service depends on the number of users of the same good or service. An online retail sales platform is not valuable to consumers if no retailers list their products on it, and it is not valuable to retailers if no consumers shop there. Conversely, Amazon’s tremendous advantage in the number of retailers who list their products on the Amazon platform draws hundreds of millions of consumers to the platform, and this massive audience in turn compels retailers to list products there. As noted, third-party merchants consistently report that market realities “force[ them] to be on Amazon” and that they “don’t have a choice but to sell through Amazon.” Id. at 87, 270. 40. For example, Molson Hart, who sells toys on Amazon reports: “Were we to be suspended from selling on Amazon.com, it would probably take 3–6 months before we’d be bankrupt. We are not alone. This is typical for small to medium sized businesses which sell online today. In fact, most companies like our own, would probably go bust even faster.” 41. Amazon also has even greater monopoly power in specific submarkets of the online retail sales market. For example, Amazon currently enjoys an overwhelming share of the online retail sales market in the following categories of goods: home improvement tools (93%); men’s athletic shoes (74%), skin care (91%), batteries (97%), golf (92%), cleaning supplies (88%), and kitchen and dining (94%).23 22 Kiri Masters, 89% Of Consumers Are More Likely To Buy Products From Amazon Than Other E-Commerce Sites: Study, Forbes (Mar. 20, 2019), https://www.forbes.com/sites/kirimasters/2019/03/20/study-89-of-consumers- are-more-likely-to-buy-products-from-amazon-than-other-e-commerce-sites/#452623b04af1. 23 Amy Gresenhues, Amazon Owns More Than 90% Market Share Across 5 Different Product Categories [Report], Marketing Land (May 31, 2018), https://marketingland.com/amazon-owns-more-than-90-market-share- across-5-different-productcategories-report-241135. B. Amazon Imposes Most Favored Nation Requirements On Third-Party Merchants. 42. Amazon has achieved and maintained market dominance through the contractual controls it exercises over the prices its third-party merchants can offer on competing online retail sales platforms. 43. Before March 2019, Amazon required its third-party merchants to agree to Amazon’s “Price Parity Clause.” The Price Parity Clause (also known as a “Most Favored Nations” clause or “MFN”) explicitly prohibited third-party merchants from offering consumers lower prices on any alternative online platform including their own websites. 44. Amazon’s Price Parity Clause restricted and suppressed price competition in two 45. First, the Price Parity Clause prohibited third-party merchants from lowering their prices on other online retail sales platforms. But for Amazon’s MFN clause, Amazon’s higher fees would result in consumers paying a higher overall price on Amazon’s platform than on competing platforms. Competitive pressure would then have forced Amazon to lower its fees. By eliminating price competition across platforms, Amazon protected its ability to charge surpracompetitive fees for the use of its platform, keeping prices high on its platform and, therefore, across all online retail sales platforms. 46. Second, Amazon eliminated horizontal price competition between its own goods and the directly competing goods of the third-party merchants that would otherwise have been sold at lower prices, not only on competing online platforms and the merchants’ websites, but also on Amazon’s own platform. Without the Price Parity Clause, Amazon would have had to offer lower prices for its own goods to compete with the lower-priced third-party-merchant 47. Economic literature teaches that MFN clauses typically result in noncompetitive fees, because they discourage the entry of new platforms that would otherwise challenge the incumbents by offering sellers lower fees.24 Walmart, Amazon’s closest direct competitor, charges referral fees similar to Amazon’s across the same product categories. This synchronization of referral fees between Amazon and Walmart suggests that the higher-price structure imposed by Amazon has spread to competing online marketplaces: 48. Market analyst Simeon Siegel notes that “although every unit sold through 3P . . . comes at lower reported revenue[,] . . . the collected fees flow through at much higher margin rates,” meaning that Amazon’s gross margin continues to grow even when selling fewer of its own goods.25 For example, Amazon generated $43 billion in third-party merchant service revenues in 2018, which accounted for the second-largest revenue segment of the online retail platform, after Amazon’s own retail product sales.26 24 Andre Boik and Kenneth S. Corts, The Effects of Platform Most-Favored-Nation Clauses on Competition and Entry, The Journal of Law and Economics 59, no. 1 (February 2016): 105-134; UK Office of Fair Trading, Can “Fair” Prices Be Unfair? A Review of Price Relationship Agreements, Paper No. 1438 (Sept. 2012), https://www.jura.uniwuerzburg.de/fileadmin/02140600/Aktuelles/2012-10-24_-brit._Kartellbehoerde/OFT1438.pdf. 25 Supra Howland. 26 J. Clement, Percentage of paid units sold by third-party sellers on Amazon platform as of 4th quarter 2019, Statista (Jan. 31, 2020), https://www.statista.com/statistics/259782/third-partyseller-share-of-amazon-platform/. 49. Collectively, the third-party merchant fees Amazon charges are substantial and built into the prices its third-party merchants charge their customers for products purchased on Amazon’s platform. Because Amazon’s pricing policies do not permit its third-party merchants to sell at lower prices on other platforms, these fees are also baked into the prices they offer on other platforms, i.e., throughout the online retail sales market. 50. For example, retailer Molson Hart reports that a $150 item sold on Amazon would make his company the same profit as an item sold for approximately $40 less on his company website: We designed, manufactured, imported, stored, shipped the item, and then we did customer service. Amazon hosted some images, swiped a credit card, and got $40 [for a $150 toy]. This is the core problem. Were it not for Amazon, this item would be $40 cheaper. And this is how Amazon’s dominance of the industry hurts consumers.27 51. This is a direct consequence of Amazon’s price policies for its third-party merchants, i.e., its former MFN clause, the Price Parity Clause, and its current, nearly identical Fair Pricing Policy. And these policies are not merely theoretical but rather have been aggressively enforced. To ensure compliance with the MFN clause, Amazon’s “automated system continually check[ed] and inform[ed] the seller within 15 minutes if a violation has occurred.”28 If a third-party merchants was found in violation, it received a policy warning in the seller’s central account.29 Violations could result in removal of the third-party merchant’s product listing or suspension of the merchant’s account.30 It was reported that “Amazon even checks [the third-party merchant’s] listings for similar products that are differently described, by 27 Supra Hart. 28 Rupert Heather, The Little-Known Amazon Pricing Rule that Would Burn Your Business, Xsellco, https://www.xsellco.com/resources/amazon-pricing-rule-burn-business/. 29 Id. 30 Sarah Sayed, 5 Pricing Do’s and Don’ts on Amazon and Walmart Marketplace, Worldfirst Blog (Apr. 11, 2018), https://www.worldfirst.com/us/blog/selling-online/5-pricing-dos-dontsamazon-walmart-marketplace/. Amazon’s contracts with its third-party merchants are confidential. Plaintiffs therefore rely on publicly available third-party sources for their content. color or size, for example. In other words, there’s no hiding place.”31 As one advisor phrased it, “[I]f you get caught, Amazon won’t hold back from enforcing penalties or suspensions.”32 Jarvin Karnani, who has been selling on Amazon Marketplace for two years, told the FTC, “[I]f Amazon suspends you, it’s like a death knell . . . [W]hen Amazon shuts you off, they sit on your money for 90 days and there’s nothing you can do.”33 To ensure that they are in compliance with Amazon’s price policies, some third-party merchants have come to rely on an external service to replicate their prices across multiple marketplaces.34 52. “A staggering number (82%) of consumers cited price as a very important factor when buying a product on Amazon.”35 But Amazon’s MFN clause had the effect of reducing price competition. Third-party merchants, who would have sold their products for less, including on their own websites (e.g., by avoiding Amazon’s estimated 15% referral fee),36 were prevented from selling at lower prices.37 53. Amazon came under fire for its MFN clause in December 2018, when Senator Blumenthal called for an FTC investigation of the practice.38 Years earlier, Amazon withdrew this very practice in Europe under pressure from British and German regulators.39 In response to the Blumenthal letter, Amazon also quietly withdrew its MFN clause in the United States in March of last year.40 At the time, Dani Nadel, president of Feedvisor, a company that advises 31 Supra Heather. 32 Supra Sayed. 33 Supra Soper & Brody. 34 Supra Heather. 35 Catie Grasso, Amazon Pricing Strategy: How Much Should You Sell a Product For?, Feedvisor (Jan. 31, 2020), https://feedvisor.com/resources/marketplace-fees-policies/amazonpricing-strategy/. 36 What it costs to sell on Amazon in 2018, Xsellco, https://www.xsellco.com/resources/amazon-seller-fees- 2018/; supra Hart (“Amazon takes a 15% commission on every product we sell on their website. We don’t have this fee when we sell toys on our own website, so we could sell our products for 15% less and make roughly the same amount of money as we do on Amazon.”). 37 Letter from Senator Richard Blumenthal to Josephs Simons, Federal Trade Commission Chair (Dec. 19, 2018), https://www.blumenthal.senate.gov/imo/media/doc/12.19.18%20-%20DOJ%20-%20Price%20Parity.pdf. 38 Id. 39 Id. 40 Catherine Shu, Amazon Reportedly Nixes Its Price Parity Requirement for Third-Party Sellers in the U.S., Tech Crunch (Mar. 11, 2019), https://techcrunch.com/2019/03/11/amazonreportedly-nixes-its-price-parity- requirement-for-third-party-sellers-in-the-u-s/. Amazon third-party merchants, expected it to be a watershed moment that would lead “the greater e-commerce landscape” to be “much more dynamic.”41 Likewise, when he learned that Amazon was revoking its MFN clause, David Simnick, co-founder and CEO of Soapbox, a Washington, D.C.-based soap and shampoo maker that sells on Amazon, reported: “I almost did a back flip in the hotel gym.”42 54. But the watershed moment never came. Instead, Amazon continues to punish retailers, who price products lower on other sites.43 While Amazon withdrew its MFN clause, it continues to enforce its Fair Pricing Policy, which has the same effect as its former MFN clause.44 Whereas the MFN clause specifically prohibited third-party merchants from offering cheaper deals through competing online retail sales platforms, the Fair Pricing Policy prohibits pricing that “harms consumer trust,” which Amazon then interprets to impose the same requirements. Failure to comply with this interpretation results in stiff penalties, such as Amazon removing the “Buy Box” from the relevant product page, suspending shipping options, and even terminating the third-party merchant’s selling privileges.45 55. The “Buy Box” is the white box on the right side of the product details page where shoppers can click “Add to Cart” or “Buy Now.” It is a critical listing benefit for third- party merchants: Buy Box products are the most visible to consumers and the easiest for them to purchase. Over 80% of Amazon purchases made on desktops are done via the Buy Box, and due to the smaller screen size of mobile devices, an even higher percentage of mobile Amazon purchases are made through the Buy Box.46 41 Supra Howland. 42 Supra Gonzalez. 43 Supra Hart; supra Gonzalez. 44 Supra Gonzalez. 45 Id. 46 Conor Bond, Why You Need the Amazon Buy Box and How to Get It, Ecommerce Strategy, https://www.wordstream.com/blog/ws/2018/10/03/amazon-buy-box; Meyers Soap entry on Amazon, www.amazon.com/Mrs-Meyers-Clean-Day-Lavender/dp/B01N1N6FMZ (retrieved March 9, 2020). 56. Eligibility for the Buy Box depends on a number of factors, including the third- party merchant’s reputation, price, efficiency, and whether the merchant is selling its product for a lower price through competing online retail sales platforms.47 When users click the “Add to Cart” button on Amazon’s platform, they are buying from one merchant and one merchant only—the Buy Box winner.48 Similarly, when a user selects the “Buy Now” button, that will also lead to the Buy Box owner.49 Over 90% of sales occur using the Buy Box.50 57. Having the Buy Box provides tremendous value to third-party merchants. For example, retailer David Simnick reports that his sales plunge as much as 40 or 50 percent in a single day when his listings lose the Buy Box because of pricing products for less on alternative platforms. He is able to reclaim the Buy Box only if he changes product pricing so that he is no longer offering a lower price on other online retail platforms than on Amazon.51 Despite the 47 Leanna Zeibak, 7 steps to Winning the Amazon Buy Box in 2019, Tinuiti (Aug. 14, 2018), https://tinuiti.com/blog/amazon/win-amazon-buy-box/. 48 Id. 49 Id. 50 Id. 51 Supra Gonzalez. official withdrawal of Amazon’s MFN clause, Amazon continues to strip his listing of the Buy Box if products are sold elsewhere for even $1 less than on Amazon.52 58. Molson Hart, whose company Viahart sells toys online, says that 98% of its sales come from Amazon’s platform and that other platforms like eBay and Walmart account for less than 2% of his company’s revenue. Supra Soper & Brody. He also found that even after Amazon officially ended its MFN clause, it continued to punish third-party merchants who list prices on other websites for less than the price on Amazon: “If we sell our products for less on channels outside Amazon and Amazon detects this, our products will not appear as prominently in search and, if you do find them, they will lose their prime check mark and with that, their sales.”53 59. Amazon is not just an online retailer, it is also a data aggregator. It compiles a massive set of consumer data based on its retail customers’ shopping information, including minutiae such as how long a consumer considers a product.54 Former Amazon employees have reported that the internal data Amazon compiles is much more sophisticated than the information available in the public domain, or any third-party tools built for third-party merchants.55 This massive data collection has helped Amazon evolve into a giant among online retail stores by collecting, storing, processing, and analyzing personal information from its retail customers to determine how they are spending their money.56 This data advantage also allows it to extract maximum profit from consumers by setting the price of its products and platform fees to leverage its market power. 52 Id. 53 Supra Hart. 54 Amazon Privacy Notice, https://www.amazon.com/gp/help/customer/display.html?nodeId=201909010#GUID-1B2BDAD4-7ACF-4D7A- 8608-CBA6EA897FD3__SECTION_87C837F9CCD84769B4AE2BEB14AF4F01. 55 Krystal Hu, Revealed: How Amazon uses third-party seller data to build a private label juggernaut, Yahoo Finance (Sept. 27, 2019). 56 Jennifer Wills, 7 Ways Amazon Uses Big Data to Stalk You (AMZN), Investopedia (Oct. 20, 2018), https://www.amazon.com/gp/help/customer/display.html?nodeId=201909010#GUID-1B2BDAD4-7ACF-4D7A- 8608-CBA6EA897FD3__SECTION_87C837F9CCD84769B4AE2BEB14AF4F01. 60. Amazon regularly uses it massive data aggregations capabilities to monitor the prices that other online retail sales platforms offered to U.S. customers both by its external competitors and its third-party merchants,57 and it regularly enforces its MFN Clause, often within 15 minutes of discovering a price differential. The enforcement and threat of enforcement has regularly prevented its third-party merchants from offering lower prices through competing platforms.58 C. Amazon’s Pricing Policies Restrain Price Competition and Cause Consumers to Pay More. 61. Amazon’s price policies have an anticompetitive effect because they eliminate price competition from third-party merchants across the U.S. online retail sales market. Selling on Amazon Marketplace is not cheap, so to make up for the fees, third-party merchants must increase prices on Amazon’s platform.59 And Amazon’s price policies require third-party merchants to sell at these elevated prices on other online retail sales platforms, as well, which results in reduced price competition and higher online prices for consumers. 62. Absent Amazon’s anticompetitive price policies, third-party merchants would set lower prices on platforms with lower fees than Amazon’s. Price is highly material factor for consumers shopping on online retail platforms. Therefore, Amazon would face significant competitive pressure if retailers were allowed to consistently offer lower prices on competing platforms. That competitive pressure would force Amazon to lower the referral fees it charges, which are currently set higher than the market would have allowed in the presence of full competition. Had Amazon charged a competitive referral fee rather than a supracompetitive referral fee, consumers would have paid less to purchase products from third-party merchants on Amazon’s platform. Market forces would also have forced Amazon to lower the prices it charges for its own products in response to the lower prices being charged by competing retailers both on and off the Amazon platform. 57 Supra Sayed, Amazon Pricing Strategy: How Much Should You Sell a Product For?. 58 Supra Heather. 59 See, e.g., supra Hart. 63. Consumers who purchased products offered by Amazon’s third-party merchants on other platforms were also injured because they purchased the products at prices artificially inflated by Amazon’s anticompetitive price policies. For example, a customer, who purchased a $150 toy on Viahart.com (the same price concurrently offered on Amazon’s platform) paid approximately $40 more for the toy than if the third-party merchant had not had to abide by Amazon’s price policies requiring price parity; the third-party merchant could have sold the product for $40 less on its own website while making the same profit.60 Amazon’s Fair Pricing Policy has a broad reach, encompassing virtually all consumer products. Consumers who make purchases on competing online retail sales platforms of any of the hundreds of millions of products concurrently offered on Amazon’s platform are likely to be injured in the future by Amazon’s current Fair Pricing Policy. D. Government Authorities Have Repeatedly Concluded That Amazon Has Harmed Competition Through the Use of Most Favored Nation Pricing Policies. 64. Last summer, the Subcommittee on Antitrust, Commercial, and Administrative Law of the Committee on the Judiciary conducted an extensive investigation of Amazon’s pricing policies governing third-party merchants. The resulting House Report concluded that “Amazon has a history of using MFN clauses to ensure that none of its suppliers or third-party merchants can collaborate with an existing or potential competitor to make lower-priced or innovative product offerings available to consumers.” 65. The House Report rejected Amazon’s claims that it competes with retailers outside the online retail sales market, explaining that “[t]his approach is inconsistent with evidence gathered by Subcommittee staff, conventional antitrust analysis of relevant product markets, and common sense.”61 The House Report further noted the FTC’s recent conclusion that a “relevant market may be divided by channel of sale, resulting in separate markets for brick-and-mortar sales and online sales.”62 60 Id. 61 Id. at 255. 62 Id. 66. Referring to the online retail sales market, the House Report further concluded that “Amazon functions as a gatekeeper for ecommerce.”63 Further, “Amazon has monopoly power” over most third-party merchants who feel they “cannot turn to alternative marketplaces, regardless of how much Amazon may increase their costs of doing business or how badly they are treated.”64 67. The House Report further found that “Amazon also enjoys significant market power over online consumers” that “is durable and unlikely to erode in the foreseeable future.”65 This durable market power reflects significant barriers to entry that include: “(1) network effects, which make it difficult for another marketplace to achieve a comparable number of buyers and sellers; (2) switching costs associated with consumers shopping outside of the Amazon ecosystem; and (3) the steep costs of building a logistics network comparable in size and scope to Amazon’s massive international footprint in fulfillment and delivery.”66 68. The German antitrust authority—the Bundeskartellamt—has already found that Amazon’s PMFN clause harms consumers with anticompetitive overcharges. 69. In Germany, Amazon was a less commanding market leader, with a relatively low 30-40% share of the market for the online sales of goods. Nevertheless, the German antitrust authority took action against Amazon for the PMFN clause at issue here: “the so-called price parity clause,” which “largely prevented sellers on Amazon’s Marketplace platform from offering their goods elsewhere online at a lower price,” whether on “other e-commerce platforms” or on their “own online shops.” 70. Upon investigation, the German authority concluded that “Amazon and the third- party retailers are direct competitors” in e-commerce, that “[t]he price parity clause is a hardcore restriction which is not indispensable for Marketplace efficiencies and does not allow consumers a fair share of the resulting benefit,” and that “[t]he agreement of a price parity 63 Id. at 256. 64 Id. 65 Id. at 260. 66 Id. clause constitutes horizontal price-fixing.” The German authority further concluded that the scope of that horizontal price-fixing agreement was market-wide: because “[a] general competitive relationship exists between Amazon and the third-party sellers in the retail markets in all product categories,” “the price parity clause is a hardcore restriction in all product categories.” 71. The German authority also found that Amazon’s PMFN clause had the stark anticompetitive effect economic literature predicts: reduced competition and higher prices. Because Amazon’s PMFN restriction ensures a uniform all-in price to the end consumer, the “[p]rice parity clauses thus act as barriers to market entry for new competitors and hinder the expansion of existing competitors in the market” by “neutrali[zing]” the “major competitive parameter – the fees for platform services – . . . more favourable fees cannot be translated into more favourable prices for final customers.” The inevitable result is higher prices. “According to a poll of 2,500 online retailers carried out by the Bundeskartellamt, [the price parity clause] has also resulted in significant price increases to e-commerce.” 72. As a result of the German authority’s findings, as well as coordinated efforts by other EU competition authorities, Amazon ultimately abandoned its PMFN clause on an EU- wide basis. 73. Last summer, the Washington Post reported that the FTC planned to investigate Amazon as part of a broad investigation into the large technology companies.67 This followed an earlier announcement that the FTC had established a special task force to monitor the big tech companies and to investigate “any potential anticompetitive conduct in those markets, and tak[e] enforcement actions when warranted.”68 According to Gene Kimmelman, the president of Public Knowledge, a Washington-based consumer advocacy group: “This should be a wake-up 67 Tony Romm, Amazon could face heightened antitrust scrutiny under a new agreement between U.S. regulators, Wash. Post (Jun. 1, 2019) https://www.washingtonpost.com/technology/2019/06/02/amazon-could-face- heightenedantitrust-scrutiny-under-new-agreement-between-us-regulators/. 68 Id. call to both Google and Amazon to behave themselves because it at least shows that the Justice Department and FTC are thinking about them.”69 74. Vox reported that the FTC started questioning some of Amazon’s competitors last summer about its business practices, according to someone briefed on the discussions.70 75. Bloomberg reported that FTC investigators began interviewing Amazon’s third- party merchants last fall as part of a sweeping probe to determine whether Amazon is using its market power to hurt competition.71 Reportedly, several attorneys and an economist have been conducting interviews that typically last about 90 minutes.72 According to Michael Kades, who spent 20 years at the FTC, the length of the interviews and the manpower devoted to examining Amazon point to a serious inquiry rather than investigators merely responding to complaints and going through the motions: “Early in an investigation, that’s a sign of staff doing a serious job,” Kades said. “They’re spending lots of time with witnesses and trying to really understand what they’re saying.”73 Reportedly, regulators are skeptical that shoppers and suppliers have real alternatives to Amazon.74 76. Jennifer Rie, an analyst at Bloomberg Intelligence who specializes in antitrust litigation, offered the opinion that FTC investigators are “in a background phase,” when they are “trying to learn as much as they can about the industry from people who aren’t the target of their investigation.”75 77. Diana Moss, president of the American Antitrust Institute, a nonprofit that advocates for aggressive antitrust enforcement says that “the central question in an inquiry like this” is whether “merchants are so reliant on Amazon for sales that they are unwilling to offer 69 Id. 70 Jason Del Rey, Amazon may soon face an antitrust probe. Here are 3 questions the FTC is asking about it., Vox (Jun. 4, 2019), https://www.vox.com/recode/2019/6/4/18651694/amazon-ftc-antitrust-investigation-prime. 71 Supra Soper & Brody. 72 Id. 73 Id. 74 Id. 75 Id. better prices on other platforms like Walmart and EBay” and whether that can hurt competition.76 78. The Free & Fair Markets Initiative, likewise, applauded the FTC’s efforts: “It is welcome news to see that regulators are finally getting serious about taking on the unfair advantage Amazon has staked out on its Platform,” said Robert B. Engel, a spokesperson for the group, in a statement.77 79. The Attorney General for the District of Columbia filed a sovereign enforcement action against Amazon for violations of the District of Columbia Antitrust Act, D.C. Code §§ 28-4501, et seq.78 Like Plaintiffs, the Attorney General for the District of Columbia alleges that Amazon restrains third-party merchants from offering their products on any other online retail sales platform— including third-party merchants’ own platforms—at prices lower, or on better terms, than they offer their products on Amazon’s online retail sales platform, and that this conduct causes prices to consumers across the online retail sales market to be higher than they would be otherwise. VI. INTERSTATE TRADE AND COMMERCE 80. Amazon’s activities as alleged in this complaint were within the flow of, and substantially affected, interstate commerce. Amazon sells goods on its own behalf and as a platform for its third-party merchants across, and without regard to, state lines. VII. RELEVANT MARKETS 81. Amazon has monopoly power in the market for online retail platforms in the United States and uses this power to restrain prices, resulting in injuries to consumers. Amazon further has monopoly power market in the market for online retail sales in the United States, as well as the following submarkets of the online retail sales market: (a) home improvement tools, 76 Id. 77 Ben Fox Rubin, FTC investigation into Amazon reportedly gearing up, C/net (Sept. 11, 2019), https://www.cnet.com/news/ftc-investigation-into-amazon-reportedly-gearing-up/. 78 District of Columbia v. Amazon.com, Inc., No. _____, Superior Court of the District of Columbia, Civil Division, filed May 25, 2021). (b) men’s athletic shoes, (c) skin care, (d) batteries, (e) golf, (f) cleaning supplies, and (g) kitchen and dining products (collectively the “Identified Sub-markets”). 82. As multiple authorities have recognized, the online retail sales market is separate and distinct from the physical, brick-and-mortar retail sales market. The FTC has recognized that a relevant market may be divided by channel of sale resulting in separate markets for brick- and-mortar sales and online sales. The House Report concluded that the online retail sales market was a distinct market and that Amazon controlled 70% of it. House Report at 255. The U.S. Department of Commerce tracks online retail sales as a separate category, acknowledging its distinction from physical retail sales. 83. Economists agree that the “[i]nternet represents a fundamentally different environment for retailing from traditional retailing.”79 An online channel has distinct characteristics from a physical channel.80 Yale economist Fiona Scott Morton notes that “[d]igital platforms combine economies of scale, low marginal costs, economies of scope through data and an installed base of users, network effects, multi-sidedness, and sometimes a global reach.”81 The combination of these attributes “tend to generate concentrated markets, or market structures containing few firms,” and, “with the addition of inertial (or ‘sticky’) consumers these markets feature high entry barriers which make it difficult for new firms to enter the market to create competition.”82 79 Forsythe, S.M., & Shi, B. (2003). Consumer patronage and risk perceptions in Internet shopping. Journal of Business Research 56, 867–875 at 874. 80 Katawetawaraks, C., & Wang, C. H. (2011). Online Shopper Behavior: Influences of Online Shopping Decision. Asian Journal of Business Research, 1(2), 66-74. 81 Testimony of Fiona M. Scott Morton, Ph.D., House Judiciary Committee (Mar. 7, 2019), https://docs.house.gov/meetings/JU/JU05/20190716/109793/HHRG-116-JU05-Wstate-ScottMortonF-20190716.pdf. 82 Id. 84. Furthermore, U.S. retailers also agree that the online retail sales market is separate from the physical, brick-and-mortar retail sales market. Only 28% of small businesses sell online.83 Established large brick-and-mortar retailers, e.g., Walmart, Target, and Costco, have an online presence, but focus their efforts overwhelmingly on their physical stores. For example, in 2017, ecommerce accounted for only 5.5% of revenue for Target,84 4% for Costco,85 and 3% for Walmart.86 Online retailers commonly advertise only online, whereas store retailers advertise both on and offline.87 Unlike brick-and-mortar stores, online retailers do not have a way to take payment by cash or checks.88 Brick-and-mortar stores typically provide customer service in-store to respond to questions about product offerings, whereas customer service for online retail sales is typically less comprehensive or effective.89 85. Finally, U.S. consumers distinguish between online retail and brick-and-mortar retail. As a practical matter, the online retail sales market requires access, usually through a personal computer, smart phone or tablet, and most, but not all U.S. consumers have that access.90 According to a Pew Research Center study in 2016, 64% of U.S. consumers prefer shopping in physical stores, and when purchasing something for the first time, 84% of U.S. consumers found it important to be able to ask questions about what they are buying or to buy 83 Jia Wertz, How Brick-And-Mortar Stores Can Compete With E-Commerce Giants, Forbes, May 17, 2018, https://www.forbes.com/sites/jiawertz/2018/05/17/how-brick-and-mortar-stores-can-compete-with-e-commerce- giants/#4be14a943cc0. 84 Nat Levy, Target’s digital sales grew 10X faster than in-store sales in 2018, as retailer adjusts to battle Amazon, Geekwire, Mar. 5, 2019, https://www.geekwire.com/2019/targets-digital-sales-grew-10x-faster-store-sales- 2018-retailer-adjusts-battle-amazon/. 85 Trefis Team, How Much Of Wal-Mart’s Revenue Will Come From E-Commerce In 2020?, Forbes, Nov. 27, 2017, https://www.forbes.com/sites/greatspeculations/2017/11/27/how-much-of-wal-marts-revenue-will-come- from-e-commerce-in-2020/#454ed14359f2. 86 Ecommerce accounts for 4% of Costco’s sales and is growing 12%, https://www.digitalcommerce360.com/2017/03/06/e-commerce-accounts-4-costcos-sales-growing-12/. 87 Anna Johansson, 6 Fundamental Differences Between E-Commerce & Brick-and-Mortar Stores, RetailNext, https://retailnext.net/en/blog/6-fundamental-differences-between-e-commerce-brick-and-mortar-stores/. 88 Id. 89 Id. 90 Aaron Smith and Monica Anderson, Online Shopping and E-Commerce, Pew Research Center, Dec. 19, 2016, https://www.pewresearch.org/internet/2016/12/19/online-shopping-and-e-commerce/. from sellers they are familiar with, and 78% think it is important to be able to try the product out in person, where physical stores have an advantage over ecommerce.91 86. Indeed, Amazon appears to concede this distinction between online retail and brick-and-mortar retail. Tellingly, Amazon’s MFN clauses only dictate what third-party merchants can do on other online retail sales platforms, but do not apply to physical retail sales. 87. Amazon’s restraints on competition directly impact each of the markets stated above. Amazon harms consumers by imposing a price floor condition on its two million third- party merchants that results in supracompetitive prices for goods sold on other online retail sales platforms. While harming consumers and competition, Amazon itself benefits from its pricing policies. By avoiding head-to-head competition from lower priced products on competing online retail sales platforms, Amazon is able to prop up the supracompetitive referral fees it charges for use of its platform. Amazon’s price restraints also allow Amazon to prop up the prices it can charge for products Amazon itself sells on its platform. 88. Plaintiffs seek relief on behalf of themselves and other purchasers of products on Amazon’s platform. 89. Eliminating Amazon’s anticompetitive pricing policies would not lead to any discernible negative effects on either third-party merchants or consumers. For example, unlike credit-card transaction platforms, allowing third-party merchants to compete on price through competing online retail sales platforms would not reduce the money available to pay rebates or rewards to consumers because Amazon does not pay rebates or rewards to its retail customers. 90. Amazon’s price policies are also not needed to prevent free riding from third- party merchants, from whom Amazon already collects substantial fees. Nor are they needed to combat free riding from consumers. Many regular Amazon customers already pay substantial fees for their Prime membership, and Amazon dominates consumers’ online searches of retailer websites, creating an “information bottleneck” that prevents many consumers from ever receiving competitive price information from other sources. 91 Id. 91. Amazon can point to no legitimate considerations that countervail the propriety of the monetary and injunctive relief that Plaintiffs seek. VIII. CLASS ACTION ALLEGATIONS 92. Plaintiffs bring this action on behalf of themselves, and as a class action under the Federal Rules of Civil Procedure, Rule 23(a), (b)(2) and (b)(3), seeking damages and injunctive relief pursuant to federal law and pursuant to various state antitrust, unfair competition, unjust enrichment, and consumer protection laws of the states listed below on behalf of the members of the following Class: All persons who on or after May 26, 2017, purchased one or more products through Amazon’s platform. 93. Excluded from the Class are the Defendant and its officers, directors, management, employees, subsidiaries, or affiliates. Also excluded from the class are the district judge or magistrate judge to whom this case is assigned, as well as those judges’ immediate family members, judicial officers and their personnel, and all governmental entities. Further excluded from the class are individuals who are already pursuing antitrust claims based on Amazon’s MFN clause on their individual behalf in arbitration before the American Arbitration Association. 94. The identity of all Class members are readily identifiable from information and records maintained by Defendant. 95. Numerousity: Members of the Class are so numerous that joinder is impracticable. Plaintiffs believe that there are more than a hundred million members of the Class (if not more), geographically dispersed throughout the United States, such that joinder of all class members is impracticable. 96. Typicality: Plaintiffs’ claims are typical of the claims of the other Class members. The factual and legal bases of Defendant’s liability are the same and resulted in injury to Plaintiffs and all other members of the proposed Class. 97. Adequate representation: Plaintiffs will represent and protect the interests of the proposed Class both fairly and adequately. They have retained counsel competent and experienced in complex class-action litigation. Plaintiffs have no interests that are antagonistic to those of the proposed Class, and their interests do not conflict with the interests of the proposed Class members they seek to represent. 98. Commonality: Questions of law and fact common to the members of the Class predominate over questions that may affect only individual Class members because Defendant has acted on grounds generally applicable to the Class and because Class members share a common injury. Thus, determining damages with respect to the Class as a whole is appropriate. The common applicability of the relevant facts to claims of Plaintiffs and the proposed Class are inherent in Defendant’s wrongful conduct, because the overcharge injuries incurred by Plaintiffs and each member of the proposed Class arose from the same anticompetitive conduct alleged 99. There are common questions of law and fact specific to the Class that predominate over any questions affecting individual members, including: (a) Whether Defendant and its third-party merchants unlawfully contracted, combined, or conspired to unreasonably restrain trade in violation of section 1 of the Sherman Act by agreeing under Amazon’s former MFN clause that third-party merchants would not sell their products to buyers through competing online retail sales platforms at a price lower than what they offered on Amazon’s platform; (b) Whether Defendant and its third-party merchants unlawfully contracted, combined, or conspired to unreasonably restrain trade in violation of section 1 of the Sherman Act by agreeing that third-party merchants would be penalized under Amazon’s current “fair pricing” policy if they offered their products to buyers through competing online retail sales platforms at a lower price than what they offered on Amazon’s platform; (c) Whether Defendant has unlawfully monopolized, or attempted to monopolize, the U.S. online retail sales market, including by way of the contractual terms, policies, practices, mandates, and restraints described herein; (d) Alternatively, whether Defendant has unlawfully monopolized the Identified Submarkets within the U.S. online retail sales market, i.e., U.S. online retail sales of home improvement tools, men’s athletic shoes, skin care, batteries, golf, cleaning supplies, and kitchen and dining products; (e) Whether competition in the U.S. online retail sales market or any of the Identified Submarkets has been restrained and harmed by Amazon’s monopolization, or attempted monopolization, of these markets; (f) Whether consumers and Class members have been damaged by Defendant’s conduct; (g) The amount of any damages; and (h) The nature and scope of injunctive relief necessary to restore a competitive market. 100. Injunctive relief: By way of its conduct described in this complaint, Defendant has acted on grounds that apply generally to the proposed Class. Accordingly, final injunctive relief is appropriate respecting the Class as a whole. 101. Predominance and superiority: This proposed class action is appropriate for certification. Class proceedings on behalf of the Class members are superior to all other available methods for the fair and efficient adjudication of this controversy, given that joinder of all members is impracticable. Resolution of the Class members’ claims through the class action device will present fewer management difficulties, and it will provide the benefit of a single adjudication, economies of scale, and comprehensive supervision by this Court. IX. ANTITRUST INJURY 102. During the Class Period, Plaintiffs and Class members directly purchased products on Amazon’s Platform. Because of Defendant’s anticompetitive conduct, Plaintiffs and Class members were forced to pay more for those products than they would have if Amazon had permitted its third-party merchants to engage in price competition outside Amazon’s Platform. Defendant therefore has caused Plaintiffs and Class members to suffer overcharge damages. Because Defendant continues to enforce its anticompetitive “fair pricing” policy, Plaintiffs and Class members are reasonably likely to incur future overcharges when they purchase products on Amazon’s platform. Both the actual harm and the threat of future harm are cognizable antitrust injuries directly caused by Defendant’s violations of federal antitrust laws, including its anticompetitive agreement with its third-party merchants, its monopolization, or its attempted monopolization of the relevant markets, as alleged herein. The full amount of such overcharge damages will be calculated after discovery and upon proof at trial. X. CAUSES OF ACTION FIRST CAUSE OF ACTION VIOLATION OF THE SHERMAN ACT (15 U.S.C. § 1) PER SE 103. Plaintiffs repeat and re-make every allegation above as if set forth herein in full. 104. Plaintiffs bring this federal law claim on their own behalf and on behalf of each member of the proposed Class described above. 105. Defendant’s third-party merchants are its direct competitors in the online retail sales market in the United States. As a participant in the online retail sales market, Defendant directly offers for sale a broad range of goods on Amazon’s Platform. On information and belief, all products offered by third-party merchants on Amazon’s Platform are reasonably interchangeable with one or more products that Amazon directly sells on its Platform, such that there is cross-elasticity of demand between Defendant’s products and the products that its third- party merchants offer on Amazon’s Platform. Stated otherwise, all the products sold by third- party merchants on Amazon’s Platform compete with one or more of Amazon’s own products that it also sells on its Platform. 106. The products sold by third-party merchants are therefore reasonably interchangeable with products sold directly by Defendant on Amazon’s Platform, such that there is cross-elasticity of demand between Defendant’s products and the products of third-party merchants. 107. Because Defendant has engaged in horizontal price-fixing, which is a per se violation of the Sherman Act, no relevant market need be defined to establish liability under the Sherman Act. To the extent a market definition is required, the relevant market is the online retail sales market in the United States. 108. In violation of Section 1 of the Sherman Antitrust Act, Defendant entered into a horizontal agreement with its two million third-party merchants on Amazon Marketplace concerning the price they were allowed to sell their products in the United States. Specifically, Defendant and its contractual partners unlawfully agreed under Amazon’s former MFN clause that third-party merchants will not offer their products to their customers in the U.S. online retail sales market at a price lower than the price they offer them on Amazon’s Platform, and under Amazon’s current Fair Pricing Policy, Amazon and its contractual partners unlawfully agree that any third-party merchant, who offers its products to its customers at a price lower than the price it offers them on Amazon’s Platform, will be subject to severe penalties, including rendering the merchant’s products ineligible for Amazon’s Buy Box or suspending or terminating the merchant’s account with Amazon. These unlawful agreements have unreasonably restrained price competition among retailers for online sales of consumer goods and had the effect of establishing a floor price for sales of products offered on Amazon’s platform. This combination is per se unlawful price-fixing. 109. Plaintiffs and the Class members have been injured and will continue to be injured in their businesses and property by paying more for consumer products than they would have paid or would pay in the future in the absence of Defendant’s unlawful acts. 110. Plaintiffs and Class members are direct purchasers because they directly purchase products on Amazon’s platform and directly pay Amazon’s referral fees. 111. Plaintiffs and the Class are entitled to an injunction that terminates the ongoing violations alleged in this Complaint. SECOND CAUSE OF ACTION VIOLATION OF 15 U.S.C. § 1 (ALTERNATIVE TO PER SE) 112. Plaintiffs repeat and re-make every allegation above as if set forth herein in full. This Count is brought in the alternative if the agreement between Amazon and its co- conspirator, third-party merchants is determined to be a vertical price restraint and the conduct at issue is not a per se violation. 113. Plaintiffs bring this federal law claim on his own behalf and on behalf of each member of the proposed nationwide Class described above. 114. Defendant’s MFN and “fair pricing” policy have an open and obvious adverse effect on competition. They raise prices and act as barriers to market entry for new competitors and hinder the expansion of existing competitors in the market. This is because the major competitive parameter – the fees for platform services – is neutralized by the PMFN and “fair pricing” policy, since more favorable fees cannot be translated into more favorable prices for final customers. This raises market prices and prevents competitors from establishing a greater 115. Amazon’s MFN and “fair pricing” have actual detrimental effects. They cause prices to be higher in each of the markets alleged above than they would have been in the absence of Amazon’s price restraints. These anticompetitive agreements further exclude the entry and growth of competitor platforms in the online retail market and decrease innovation and consumer choice in the relevant markets. 116. A straightforward application of fundamental economic principles shows that the arrangements in question would have an anticompetitive effect on customers and the relevant market. 117. Defendant and its co-conspirator, third-party merchants did not act unilaterally or independently, or in their own economic interests, when entering into the agreements. The agreements, and their enforcement substantially, unreasonably, and unduly restrain trade in the relevant market, and harmed Plaintiffs and the Class thereby. 118. Defendant is liable for the creation, maintenance, and enforcement of the agreements under a “quick look” or rule of reason standard. 119. Defendant possesses market power. In 2018, for example, retail sales on the Amazon platform represented 49% of all sales in the online retails sales market in the United States. Ebay, the next largest competitor, had less than 7%. Today, Amazon controls between 65% and 70% of online retail sales market in the United States. That Amazon has market power is evident from the power it has to raise prices above those that would be charged in a competitive market. 120. Amazon also has unique advantages that allow it to exercise market power. It controls 66% of all online product searches for first time purchases and 74% for goods previously purchased. It has a much larger inventory than any of its competitors. It has a vast digital advantage over its competitors, having amassed detailed consumer preferences and behavior over decades from its 200 million unique monthly customers. 121. Amazon’s relationship with its co-conspirator, third-party merchants is further evidence of its market power. It has the power to dictate and arbitrarily change the rules by which its co-conspirator, third-party merchants have access to the Amazon.com platform, e.g., extending the amount of time business buyers have to pay its co-conspirator, third-party merchants, deciding what products they can sell and whether they can participate as vendors or third-party merchants, and bends the rules to give itself the advantage in the Buy Box and in the sponsored advertising. Amazon charges them exorbitant fees that give Amazon a competitive advantage over its co-conspirator, third-party merchants and uses their supplier information to contract directly with the supplier and their customer information to decide what areas to focus its retail or product developments. 122. There is no legitimate, pro-competitive business justification for Amazon’s MFN and fair pricing agreements or any justification that outweighs their harmful effect. Even if there were some conceivable justification, the agreements are broader than necessary to achieve such a purpose. 123. Plaintiffs and members of the Class were injured in their business or property by paying higher prices for products purchased on the Amazon platform than they would have paid in the absence of Defendant’s unlawful conduct. THIRD CAUSE OF ACTION VIOLATION OF THE SHERMAN ACT – MONOPOLIZATION (15 U.S.C. § 2) 124. Plaintiffs repeat and re-make every allegation above as if set forth herein in full. 125. Plaintiffs bring this federal law claim on their own behalf and on behalf of each member of the proposed nationwide Class described above. 126. The relevant market is the online retail sales market in the United States. 127. Defendant obtained monopoly power in the online retail sales market in the Unites States, as demonstrated by its power to set the prevailing prices of virtually every good offered for sale in in that market. 128. Alternatively, the relevant markets are the following sub-markets, in which Defendant, inclusive of its third-party merchants, holds the following market share: home improvement tools (93%); men’s athletic shoes (74%), skin care (91%), batteries (97%), golf (92%), cleaning supplies (88%), and kitchen and dining (94%).92 129. Defendant obtained and exercises monopoly power in the identified sub-markets, as demonstrated by its power to set the prevailing prices of virtually every good offered for sale in each of these markets. 92 Amy Gresenhues, Amazon Owns More Than 90% Market Share Across 5 Different Product Categories [Report], Marketing Land (May 31, 2018), https://marketingland.com/amazon-owns-more-than-90-market-share- across-5-different-productcategories-report-241135. 130. Amazon has gained and maintains monopoly power in the applicable markets by improper and unlawful means. 131. Defendant has willfully acquired its monopoly power in the applicable markets in part through its enforcement of its former MFN clause and its current Fair Pricing Policy. These provisions establish a price floor based on the third-party merchant’s price listing on Amazon’s Platform. By requiring its two million third-party merchants to apply a price floor on all other online retail sales platforms, Defendant largely immunizes these products from competitive pricing in the relevant market and causes the products on Amazon’s platform to be sold at supracompetitive prices. 132. Plaintiffs and Class members are direct purchasers because they directly purchase products on Amazon’s platform and directly pay Amazon’s referral fees. 133. Plaintiffs and the Class members have been injured and will continue to be injured in their businesses and property by paying more for products on Amazon’s platform than they would have paid or would pay in the future in the absence of Defendant’s unlawful acts. 134. Plaintiffs and the Class are entitled to an injunction that terminates the ongoing violations alleged in this Complaint. FOURTH CAUSE OF ACTION VIOLATION OF THE SHERMAN ACT – ATTEMPTED MONOPOLIZATION (15 U.S.C. § 2) 135. Plaintiffs repeat and re-make every allegation above as if set forth herein in full. 136. Plaintiffs bring this federal law claim on their own behalf and on behalf of each member of the proposed nationwide Class described above. 137. If Defendant does not already have a monopoly in the online retail sales market in the United States or the submarkets identified above, it has attempted to monopolize these markets. 138. Amazon’s MFN clause and its current Fair Pricing Policy demonstrate Amazon’s intent to control online prices of virtually every consumer good offered in the relevant market. 139. Through its enforcement of its MFN clause and its current Fair Pricing Policy, Defendant has furthered its goal of controlling prices of virtually every consumer good offered in the applicable markets. 140. There is a dangerous probability that Defendant will succeed in monopolizing the applicable markets. Defendant, inclusive of its third-party merchants, already accounts for 50% to 70% of the online retail sales market in the United States. 141. Plaintiffs and the Class members have been injured and will continue to be injured in their businesses and property by paying more for products on Amazon’s platform than they would have paid or would pay in the future in the absence of Defendant’s unlawful acts. 142. Plaintiffs and Class members are direct purchasers because they directly purchase products on Amazon’s platform and directly pay Amazon’s referral fees. 143. Plaintiffs and the Class are entitled to an injunction that terminates the ongoing violations alleged in this Complaint. JURY TRIAL DEMANDED 144. Plaintiffs hereby demand a trial by jury of all the claims asserted in this Complaint. PRAYER FOR RELIEF WHEREFORE, Plaintiffs pray for judgment against Defendant as follows: A. 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, appoint Plaintiffs as Class Representative and their counsel of record as Class Counsel, and direct that notice of this action, as provided by Rule 23(c)(2) of the Federal Rules of Civil Procedure, be given to the Class, once certified; B. Adjudication that the acts alleged herein constitute unlawful restraints of trade in violation of the Sherman Act, 15 U.S.C. § 1; C. Adjudication that the acts alleged herein constitute monopolization or attempted monopolization in violation of the Sherman Act, 15 U.S.C. § 2; D. Adjudication that the acts alleged herein violate the state laws alleged herein; E. Actual damages, statutory damages, punitive or treble damages, and such other relief as provided by the statutes cited herein; F. Pre-judgment and post-judgment interest on such monetary relief; G. Equitable relief in the form of restitution and/or disgorgement of all unlawful or illegal profits received by Defendant as a result of the anticompetitive conduct alleged herein; H. Equitable relief requiring that Amazon cease the abusive, unlawful, and anticompetitive practices described herein (including pursuant to federal antitrust law: see, e.g., 15 U.S.C. § 26), as requested he therein; I. The costs of bringing this suit, including reasonable attorneys’ fees; and J. All other relief to which Plaintiffs and members of the Class may be entitled at law or in equity. DATED: May 26, 2021 Respectfully submitted, HAGENS BERMAN SOBOL SHAPIRO LLP By /s/Steve W. Berman Steve W. Berman (WSBA No. 12536) By /s/ Barbara A. Mahoney Barbara A. Mahoney (WSBA No. 31845) 1301 Second Avenue, Suite 2000 Seattle, WA 98101 Telephone: (206) 623-7292 Facsimile: (206) 623-0594 steve@hbsslaw.com barbaram@hbsslaw.com KELLER ROHRBACK L.L.P. By /s/ Derek W. Loeser Derek W. Loeser (WSBA No. 24274) 1201 Third Avenue, Suite 3200 Seattle, WA 98101-3052 Telephone: (206) 623-1900 Facsimile: (206) 623-3384 Dloeser@kellerrohrback.com Zina Bash (pro hac vice to be filed) KELLER LENKNER LLC 501 Congress Avenue, Suite 150 Austin, TX, 78701 Telephone: (512) 620-8375 zina.bash@kellerlenkner.com Warren D. Postman (pro hac vice to be filed) Albert Y. Pak (pro hac vice to be filed) KELLER LENKNER LLC 1300 I Street N.W., Suite 400E Washington DC, 20005 Telephone: (202) 749-8334 wdp@kellerlenkner.com albert.pak@kellerlenkner.com Attorneys for Plaintiffs and the Proposed Class AMAZON.COM, INC., a Delaware corporation KENNETH DAVID WEST and ROBERT TAYLOR, on behalf of themselves and all others similarly situated Cook, IL (b) County of Residence of First Listed Plaintiff County of Residence of First Listed Defendant (EXCEPT IN U.S. PLAINTIFF CASES) (IN U.S. PLAINTIFF CASES ONLY) NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE TRACT OF LAND INVOLVED. (c) Attorneys (Firm Name, Address, and Telephone Number) Attorneys (If Known) Steve W. Berman, Hagens Berman Sobol Shapiro LLP 1301 Second Avenue, Suite 2000, Seattle, WA 98101 (206) 623-7292 ✖ II. BASIS OF JURISDICTION (Place an “X” in One Box Only) III. CITIZENSHIP OF PRINCIPAL PARTIES (Place an “X” in One Box for Plaintiff and One Box for Defendant) (For Diversity Cases Only) 1 U.S. Government 3 Federal Question PTF DEF PTF DEF Plaintiff (U.S. Government Not a Party) Citizen of This State 1 1 Incorporated or Principal Place 4 4 of Business In This State 2 U.S. Government 4 Diversity Citizen of Another State 2 2 Incorporated and Principal Place 5 5 Defendant (Indicate Citizenship of Parties in Item III) of Business In Another State Citizen or Subject of a 3 3 Foreign Nation 6 6 Foreign Country IV. NATURE OF SUIT (Place an “X” in One Box Only) Click here for: Nature of Suit Code Descriptions. CONTRACT TORTS FORFEITURE/PENALTY BANKRUPTCY OTHER STATUTES INTELLECTUAL ✖ 110 Insurance PERSONAL INJURY PERSONAL INJURY 625 Drug Related Seizure 422 Appeal 28 USC 158 375 False Claims Act 120 Marine 310 Airplane 365 Personal Injury - of Property 21 USC 881 423 Withdrawal 376 Qui Tam (31 USC 130 Miller Act 315 Airplane Product Product Liability 690 Other 28 USC 157 3729(a)) 140 Negotiable Instrument Liability 367 Health Care/ 400 State Reapportionment 150 Recovery of Overpayment 320 Assault, Libel & Pharmaceutical PROPERTY RIGHTS 410 Antitrust & Enforcement of Judgment Slander Personal Injury 820 Copyrights 430 Banks and Banking 151 Medicare Act 330 Federal Employers’ Product Liability 830 Patent 450 Commerce 152 Recovery of Defaulted Liability 368 Asbestos Personal 835 Patent - Abbreviated 460 Deportation Student Loans 340 Marine Injury Product New Drug Application 470 Racketeer Influenced and (Excludes Veterans) 345 Marine Product Liability 840 Trademark Corrupt Organizations 153 Recovery of Overpayment Liability PERSONAL PROPERTY LABOR 880 Defend Trade Secrets 480 Consumer Credit of Veteran’s Benefits 350 Motor Vehicle 370 Other Fraud 710 Fair Labor Standards Act of 2016 (15 USC 1681 or 1692) 160 Stockholders’ Suits 355 Motor Vehicle 371 Truth in Lending Act 485 Telephone Consumer 190 Other Contract Product Liability 380 Other Personal 720 Labor/Management SOCIAL SECURITY Protection Act 195 Contract Product Liability 360 Other Personal Property Damage Relations 861 HIA (1395ff) 490 Cable/Sat TV 196 Franchise Injury 385 Property Damage 740 Railway Labor Act 862 Black Lung (923) 850 Securities/Commodities/ 362 Personal Injury - Product Liability 751 Family and Medical 863 DIWC/DIWW (405(g)) Exchange Medical Malpractice Leave Act 864 SSID Title XVI 890 Other Statutory Actions REAL PROPERTY CIVIL RIGHTS PRISONER PETITIONS 790 Other Labor Litigation 865 RSI (405(g)) 891 Agricultural Acts 26 USC 7609 6 Multidistrict Litigation - Transfer 8 Multidistrict Litigation - Direct File 210 Land Condemnation 440 Other Civil Rights Habeas Corpus: 791 Employee Retirement 893 Environmental Matters 220 Foreclosure 441 Voting 463 Alien Detainee Income Security Act FEDERAL TAX SUITS 895 Freedom of Information 230 Rent Lease & Ejectment 442 Employment 510 Motions to Vacate 870 Taxes (U.S. Plaintiff Act 240 Torts to Land 443 Housing/ Sentence or Defendant) 896 Arbitration 245 Tort Product Liability Accommodations 530 General 871 IRS—Third Party 899 Administrative Procedure 290 All Other Real Property 445 Amer. w/Disabilities - 535 Death Penalty IMMIGRATION Act/Review or Appeal of Employment Other: 462 Naturalization Application Agency Decision 446 Amer. w/Disabilities - 540 Mandamus & Other 465 Other Immigration 950 Constitutionality of Other 550 Civil Rights Actions State Statutes 448 Education 555 Prison Condition 560 Civil Detainee - Conditions of Confinement V. ORIGIN (Place an “X” in One Box Only) 1 Original Proceeding 2 Removed from State Court 3 Remanded from Appellate Court 4 Reinstated or Reopened 5 Transferred from Another District (specify) Cite the U.S. Civil Statute under which you are filing (Do not cite jurisdictional statutes unless diversity): 15 U.S.C. § 1 VI. CAUSE OF ACTION Brief description of cause: Violation of the Sherman Act ✖ ✖ JURY DEMAND: Yes No VII. REQUESTED IN COMPLAINT: CHECK IF THIS IS A CLASS ACTION UNDER RULE 23, F.R.Cv.P. DEMAND $ CHECK YES only if demanded in complaint: Richard A. Jones 2:20-CV-00424-RAJ VIII. RELATED CASE(S) IF ANY (See instructions): JUDGE DOCKET NUMBER DATE SIGNATURE OF ATTORNEY OF RECORD 5/26/2021 /s/ Steve W. Berman AO 440 (Rev. 06/12) Summons in a Civil Action UNITED STATES DISTRICT COURT for the Western District of Washington __________ District of __________ KENNETH DAVID WEST and ROBERT TAYLOR, on behalf of themselves and all others similarly situated Plaintiff(s) v. Civil Action No. AMAZON.COM, INC., a Delaware corporation Defendant(s) ) ) ) ) ) ) ) ) ) ) ) ) SUMMONS IN A CIVIL ACTION To: (Defendant’s name and address) Amazon.com, Inc. c/o Corporation Service Company 300 Deschutes Way SW, Suite 208 MC-CSC1 Tumwater, WA 98501 A lawsuit has been filed against you. Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if you are the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ. P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney, whose name and address are: Steve W. Berman Hagens Berman Sobol Shapiro LLP 1301 Second Avenue, Suite 2000 Seattle, WA 98101 If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court. CLERK OF COURT Date: Signature of Clerk or Deputy Clerk PROOF OF SERVICE (This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l)) This summons for (name of individual and title, if any) was received by me on (date) . � I personally served the summons on the individual at (place) on (date) ; or � I left the summons at the individual’s residence or usual place of abode with (name) , a person of suitable age and discretion who resides there, on (date) , and mailed a copy to the individual’s last known address; or � I served the summons on (name of individual) , who is designated by law to accept service of process on behalf of (name of organization) on (date) ; or � I returned the summons unexecuted because ; or � Other (specify): My fees are $ for travel and $ for services, for a total of $ . 0.00 I declare under penalty of perjury that this information is true. Date: Server’s signature Printed name and title Server’s address Additional information regarding attempted service, etc:

antitrust

3Be2F4cBD5gMZwczp43Y

IN THE UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TEXAS BEAUMONT DIVISION Jessica Reyes and Gissela Lopez, On § CIVIL ACTION NO: _______________ Behalf of Themselves and Similarly § Situated Employees § § Plaintiffs, § § VS. § JURY DEMANDED § § Bona 1372, Inc., Bona 1900, Inc., § and Hnreck Nazarian a/k/a § Nazarian Enterprises d/b/a IHOP § (“International House of Pancakes”) § § Defendants. § JUDGE ___________________________ ORIGINAL COMPLAINT – COLLECTIVE ACTION Plaintiffs Jessica Reyes and Gissela Lopez, on behalf of themselves and similarly situated employees, bring this collective action lawsuit against Defendants Bona 1372, Inc., Bona 1900, Inc. and Hnreck Nazarian a/k/a Nazarian Enterprises d/b/a IHOP (“International House of Pancakes”) (“Defendants”), seeking all available relief under the Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. § 201, et seq. Plaintiffs assert their FLSA claims as a collective action under 29 U.S.C. § 216(b). JURISDICTION AND VENUE 1. This Court has jurisdiction over Plaintiffs’ FLSA claims pursuant to 29 U.S.C. § 216(b) and 28 U.S.C. § 1331. 2. Venue in this Court is proper pursuant to 28 U.S.C. § 1391. PARTIES 3. Plaintiffs Reyes and Lopez were at all relevant times individuals residing in Jefferson County, Texas. 4. Defendant Bona 1372, Inc. is a corporation organized and existing under the laws of the State of Texas, with its principal place of business located at 3830 College Street, Beaumont, Texas 77701. Defendant Bona 1372, Inc. may be served with process by serving Hnreck Nazarian, its registered agent for service, at 10894 Shadow Wood Drive, Houston, Texas 77043-2864. 5. Defendant Bona 1900, Inc. is a corporation organized and existing under the laws of the State of Texas, with its principal place of business located at 5875 Eastex Freeway, Beaumont, Texas 77706. Defendant Bona 1900, Inc. may be served with process by serving Hnreck Nazarian, its registered agent for service, at 10894 Shadow Wood Drive, Houston, Texas 77043-2864. 6. Defendant Hnreck Nazarian may be served with process at 10894 Shadow Wood Drive, Houston, Texas 77043-2864. 7. Defendant Hnreck Nazarian a/k/a Nazarian Enterprises owns or controls multiple IHOP (International House of Pancakes) Restaurants in the Houston and Beaumont, Texas, areas, including Bona 1372, Inc. and Bona 1900, Inc. 8. Through his website http://nazarianent.wix.com/nazarian-enterprises-2#! Defendant Hnreck Nazarian represents that he does business as Nazarian Enterprises, which Nazarian describes as a “leading franchisee in the IHOP community … [w]ith locations throughout the Houston and Beaumont areas … “. Hnreck Nazarian’s above website represents to the public that Nazarian Enterprises operates at least seven (7) separate IHOP Restaurant locations, as follows: (1) 5875 Eastex Freeway, Beaumont, TX 77706; (2) 197 Greens Road, Houston, TX 77060; (3) 3830 College Street, Beaumont, TX 77701; (4) 23861 Church Street, Porter, TX 77365; (5) 202 E. State Highway 332, Lake Jackson, TX 77566; (6) 6759 S. Highway 6, Houston, TX 77083; and (7) 5001 Garth Road, Baytown, TX 77521. 9. On information and belief, and per the above representations made by Hnreck Nazarian, Plaintiffs would show that the entities through which the IHOP Restaurants described in the above paragraph are operated constitute the alter egos of Defendant Hnreck Nazarian and of each other. 10. Defendants employ or employed individuals, including Plaintiffs, who engage in interstate commerce or in the production of goods for commerce and/or handling, selling, or otherwise working on goods or materials that have been moved in or produced in commerce by a person. 11. Defendants are employers covered by the record-keeping, minimum wage, and overtime pay requirements of the FLSA. FACTS 12. At relevant times between 2005 and approximately December 19, 2015, Defendants employed Plaintiff Reyes. At relevant times from 2011 through late 2016, Defendants employed Plaintiff Lopez. Although Plaintiffs were at times labelled as “managers” by Defendants, Plaintiffs were in fact non-exempt employees under the Fair Labor Standards Act. 13. On numerous occasions during their respective periods of employment, Plaintiff Reyes and Plaintiff Lopez were required to work hours in excess of 40 hours per week, for which they were not paid lawful overtime wages. Although both plaintiffs were assigned titles and paid a fixed salary by Defendants in an effort to create the illusion of a managerial or executive exemption, neither plaintiff qualified for any exemption from FLSA overtime requirements. 14. To avoid the payment of overtime, Defendants paid Plaintiff Reyes for hours in excess of 40 hours per week by requiring her to work under another name when she worked over 40 hours per week and by issuing her checks made payable under a pseudonym and under a social security number not issued to her. Such payments did not include wages at the overtime rate. 15. Plaintiff Lopez was classified by Defendants as a salaried employee; however, her work was not primarily of a nature sufficient to qualify her as an exempt employee under the FLSA. Plaintiff Lopez regularly worked in excess of 40 hours per week and was never paid overtime wages by Defendants. 16. Defendants’ conduct in attempting to avoid the payment of overtime wages was conscious, willful, and intentional, and was not the result of mistake or of any reasonable interpretation of 17. Upon information and belief, Defendants used practices such as those described above and including: (1) the use of dual identities and social security numbers for a single employee and (2) misclassification of employees, to deny overtime wages to other employees. COLLECTIVE ACTION ALLEGATIONS 18. Plaintiffs bring this action on behalf of all persons formerly or presently employed by Defendants who have been denied lawful overtime pay. The members of this putative class are referred to as “Collective Action Members”. 19. Plaintiffs pursue their FLSA claims on behalf of any Collective Action Members who opt- in to this action pursuant to 29 U.S.C. § 216(b). 20. Plaintiffs and the Collective Action Members are “similarly situated,” as that term is defined in 29 U.S.C. § 216(b), because, on information and belief, they have been subjected to Defendants’ policies of avoiding the payment of overtime wages, as described above. 21. Defendants are liable under the FLSA for failing to properly compensate Plaintiffs and the Collective Action Members. Accordingly, notice of this matter and of the opt-in procedures should be sent through a Court Supervised Notice procedure to all persons presently or formerly employed in all of Defendants’ various IHOP restaurant locations, including those operated under Bona 1900, Inc., Bona 1372, Inc., and all other corporate entities under which Hnreck Nazarian operates IHOP restaurants. Such persons to which notice of this matter should be provided are readily identifiable through the Defendants’ records. COUNT I (Alleging Violations of the FLSA) 22. All previous paragraphs are incorporated as though fully set forth herein. 23. Plaintiffs and the Collective Action Members are employees entitled to the FLSA’s protections. 24. Defendants are employers covered by the FLSA. 25. The FLSA entitles employees to overtime compensation at the rate of 1.5 times their regular hourly rate of pay for all work in excess of 40 hours per week. 26. Through policies implemented by the Defendants, such as those policies described herein, Defendants have deprived Plaintiffs and other employees of their lawful overtime pay in violation of the FLSA. 27. Plaintiffs and Collective Action Members are entitled to the recovery of their unpaid overtime wages. 28. In violating the FLSA, Defendants acted intentionally and willfully and with reckless disregard of clearly applicable FLSA provisions, such that Plaintiffs and Collective Action Members are entitled to the recovery of statutory liquidated damages under the FLSA. JURY TRIAL DEMAND Plaintiffs demand a jury trial as to all claims so triable. PRAYER FOR RELIEF WHEREFORE, Plaintiffs, on behalf of themselves and other Collective Action Members, request that Court Supervised Notice of this lawsuit be ordered to apprise the putative Collective Action Members of this lawsuit and of the procedures to opt-in, and that Plaintiffs and the Collective Action Members be awarded the following relief: A. All unpaid wages and overtime wages; B. Prejudgment interest; C. Liquidated Damages; D. Litigation Costs, expenses, and attorneys’ fees; and E. Such other and further relief as the Court deems just and proper. Date: January 17, 2017 Respectfully Submitted, WALDENREYNARD, P.L.L.C. /s/ David D. Reynard, Jr. T. LYNN WALDEN State Bar No. 20674800 DAVID D. REYNARD, JR. State Bar No. 00784836 Post Office Box 7486 Beaumont, Texas 77726 (409) 833-0202 Telephone (409) 832-3564 Telecopier ATTORNEYS FOR PLAINTIFFS JESSICA REYES AND GISSELA LOPEZ, ON BEHALF OF THEMSELVES AND SIMILARLY SITUATED EMPLOYEES

securities

Zgn_FYcBD5gMZwczBrr2

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK Civil Action 19-CV-___( - ) CLASS ACTION COMPLAINT AND JURY DEMAND MONICA DECRESCENTIS and GWYNETH GILBERT, on behalf of themselves and the Putative Class, Plaintiffs, v. LANDS’ END,INC., Defendant. Plaintiffs, by their attorneys, Nagel Rice LLP and Cerasia & Del Rey-Cone LLP, on behalf of themselves and all others similarly situated, make the following allegations on personal knowledge and information and belief: I. NATURE OF THE ACTION 1. Plaintiffs bring this action on behalf of themselves and all similarly-situated individuals (the “Class”) who are frontline employees – flight attendants and gate agents – working for Delta Air Lines (“Delta”) who have been required to wear Passport Plum uniforms manufactured by Lands’ End, Inc. and Lands’ End Business Outfitters (herein collectively referred to as “Lands’ End” or “Defendant”). 2. Wearing these uniforms has resulted in employees, including the Plaintiffs, suffering from skin rashes, headaches, fatigue, breathing difficulties, hair loss, low white blood cell counts and nausea. Additionally, the uniforms are not colorfast and result in crocking and bleeding, both staining the wearer and their possessions purple. The purple dye comes off on the wearer’s skin and then stains the bathtub when they try to wash it off. The dyes in the fabric ‘bleed’ onto the wearers sheets and towels and permanently stain their possessions. 3. As Delta flight attendants are non-union, at-will employees, many are reluctant to complain about the problems with their uniforms and suffer in silence and other flight attendants wear undergarments or long underwear to protect themselves from new uniforms. 4. A total of approximately 24,000 flight attendants and approximately 40,000 gate agents are required to wear these uniforms while working for Delta. 5. Plaintiffs and the Class seek actual damages, injunctive relief, attorneys’ fees, costs, and all other relief available to Plaintiffs and the Class. II. PARTIES 6. Plaintiff, Monica DeCrescentis, is a New York citizen who resides in New York, New York. 7. Plaintiff, Gwyneth Gilbert, is a Georgia citizen who resides in Sandy Springs, Georgia. 8. Defendant, Lands’ End, Inc., is a Delaware corporation with its headquarters at 1 Lands’ End Way, Dodgeville, Wisconsin. 9. At all relevant times, Defendant was engaged in the business of manufacturing, marketing, advertising, distributing, selling, and warranting Lands’ End products, including the uniforms manufactured for Delta, specifically for Delta’s Flight attendants and gate agents, throughout the United States of America. III. JURISDICTION AND VENUE 10. This Court has subject matter jurisdiction over this action under 28 U.S.C. § 1331. This Court also has subject matter jurisdiction pursuant to the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d)(2), as the Class contains more than 100 members, at least one of whom maintains citizenship in a state diverse from Defendant, and seeks in the aggregate more than Five Million Dollars ($5,000,000.00), exclusive of costs and interest. 11. Defendant is amenable to personal jurisdiction in New York. A substantial portion of the wrongdoing alleged to have occurred took place in New York, and Lands’ End conducts business within the state to be sufficient to be considered present in New York. 12. Venue is proper in this district pursuant to 28 U.S.C. § 1391 because Plaintiff DeCresentis is a citizen and resident of this judicial district, a substantial part of the events giving rise to the claims set forth herein occurred and emanated from this district, and Defendant’s conduct has injured members of the Class residing in this district. Accordingly, this Court has jurisdiction over this action, and venue is proper in this judicial district. IV. FACTUAL BACKGROUND A. Delta Decides to Provide New Employee Uniforms from Lands’ End 13. On its website, Lands’ End describes itself as “a leading multi-channel international retailer of casual clothing, accessories . . . legendary for high-quality products at an exceptional value, plus a commitment to world-class customer service and an unconditional guarantee.” Business Outfitters by Lands’ End is described as a trusted brand partner providing “quality, high-value apparel and promotional products.” 14. In 2016, Delta selected Lands’ End to provide new employee uniforms designed by Zac Posen of Bravo’s Project Runway. This line of uniforms, which are bright purple, technically known as “Passport Plum,” consist of various articles of clothing, including a v-neck signature dress, a skirt and blouse, a mock turtleneck, vest and a sweater set (herein collectively referred to as the “Uniform”). 15. The Uniform, which is to be worn by approximately 24,000 flight attendants and approximately 40,000 gate agents, was designed to turn Delta employees into walking advertisements for the airline and Delta encouraged its flight attendants to promote the new Uniforms on their social media pages. 16. The official launch of the new Uniforms occurred on May 29, 2018, and Plaintiffs understand that Delta is planning a one- year anniversary party to celebrate the Uniforms. 17. Delta describes the Uniforms as high stretch, wrinkle- and stain-resistant, waterproof, anti-static and deodorizing. Various chemical additives and finishes are required to ensure these characteristics. 18. Once the Uniforms became available, flight attendants and gate agents had to go to a “fit clinic” to get measured for the new Uniforms. Delta offered a kit consisting of certain pieces which were “purchased” with Delta “points” provided by Delta, rather than cash. If an employee wanted additional pieces, such as the sweater set, it could be purchased by the employee directly from Lands’ End using the employee’s own funds. 19. Female flight attendants have several articles to choose from for a Uniform: a v-neck dress, IFS Signature dress, skirt, pants, blouse, vest or blazer. Female gate agents have a color- block dress with an accent of Cruising Cardinal, and flight attendants and gate agents get a warming sweater. Male flight attendants wear a three-piece suit in Groundspeed Graphite with a thistle pink button-up shirt with a tie, sweater, or a cardigan and mock turtleneck. Delta Employees Experience About Adverse Health Reactions 20. Shortly after the Uniforms were introduced, some female flight attendants said that they started getting sick, reporting skin rashes, shortness of breath, heart palpitations and hair loss. 21. As reported in an article in The Guardian dated April 4, 2019: “On a private Facebook group used by over 2,000 flight attendants viewed by the Guardian, hundreds of flight attendants have complained of health problems as a result of wearing the new uniforms... The health concerns over the uniforms are serious enough that some doctors have instructed Delta flight attendants to bring EpiPens to work in case they break out in rashes.” See https://www.theguardian.com/business/2019/apr/03/delta-flight- attendants-uniforms-rash-claims 22. One flight attendant interviewed by the Guardian stated: “I noticed right away after I put the uniforms on that I had shortness of breath and I have been a runner my whole life . . .I don’t smoke or anything like that, so when I couldn’t get up the stairs without being extremely winded, I know there was some sort of problem.” Id. 23. Another flight attendant said she noticed huge rashes all over her body that made it impossible for her to sleep. The rash looked alike chemical burns and took weeks for it to go away. She had to take antibiotic because a patch of the rash got infected. Id. 24. According to the Guardian article, many doctors believe that formaldehyde and Teflon chemical finishing put on the uniforms to make them stain resistant and durable are likely the culprit. 25. In March 2019, Delta informed some flight attendants that if they did not want to wear the new Uniforms, they would need to request a disability job accommodation with the option of going on short-term disability leave. Under short-term disability leave, they would only make two-thirds of their pay and would have to either return to their jobs or quit after a year. 26. Because Delta flight attendants are non-union, many flight attendants are afraid to complain about the adverse health consequences they are experiencing from the new Uniforms. 27. It has been reported that the National Institute of Occupational Safety and Health (NIOSH), which is part of the Center for Disease Control (CDC), is expected start an official inquiry into the Passport Plum Uniforms in the near future. Plaintiffs’ Experiences 28. Plaintiff, Monica DeCrescentis, is a Delta flight attendant who has experienced skin reactions, headaches and a low white blood cell count during the past year when she has been required to wear the Uniform. 29. Additionally, Ms. DeCrescentis has experienced dye transfer issues, both onto her body and her possessions, including her sheets and towels, pantyhose, white robe, white tee shirt, clear hangars and her bathtub, as shown below: White sheets still stained purple after soaking them 24hrs in Oxi-clean. Stains in bathtub. 30. On January 30, 2019, Delta contacted Ms. DeCrescentis and asked her if she would agree to have her dress tested for chemicals, and she agreed to such testing. On February 1, 2019, Lands’ End and Delta jointly called Ms. DeCrescentis and told her to wash her Uniform pieces five times in a washer and dry them in a dryer, and that she cannot hand wash or line-dry them. Promptly thereafter, Lands’ End sent her a shipping kit to pack her dress, which included a plastic bag and tin foil, along with a UPS return label. She packed up the dress and shipped it to Lands’ End on February 5, 2019. She has followed up repeatedly with Lands’ End over the past 3 months, but has received no response. 31. In March 2019, Ms. DeCrescentis spoke about the Uniform and her concerns to Rob Wissell, Director IFS Communications, Employee Engagement & Uniforms. He responded that passengers love the purple Uniforms and that Delta was getting positive feedback. Delta wanted her to try the v-neck dress, blouse and sweater set, but she declined because these items are giving employees rashes, heart palpitations and respiratory flu like symptoms. 32. On May 3, 2019, Ms. DeCresentis called Lands’ End about a new, untreated Uniform that was going to be released in June 2019, but she was told that she could not order an untreated Uniform. On May 4, 2019, Ms. DeCrescentis filed an on-the-job injury report (i.e., workers’ compensation claim) with Delta. She filed that report because she was told that only employees who make such a filing will be considered for an untreated Uniform that might be released shortly. On May 6, 2019, Mr. Wissell informed Ms. DeCresentis that only a “very limited supply” of untreated Uniforms would be released. To date, Ms. DeCresentis has been required to wear her current Uniform while working as a flight attendant at Delta. 33. Plaintiff, Gwyneth Gilbert, is a Delta flight attendant who has experienced rashes and skin irritations from wearing the Uniforms. Ms. Gilbert’s kit included two dresses and a pant suit. Additionally, she purchased a sweater set directly from Lands’ 34. As early as June or July 2018, Ms. Gilbert found that wearing the mock turtleneck caused a rash on her skin. Then, in September and through the fall of 2018, she wore the pants and blouse part of the Uniform and she broke out in a rash. 35. The rash which caused irritation on the back of Ms. Gilbert’s neck, the collarbone area and chest was red and painful to the touch. She experienced a burning sensation, which made it difficult for her to complete her normal job duties due to the pain. 36. Ms. Gilbert contacted Lands’ End about these symptoms and Lands’ End promised to send her a “custom” replacement shirt, which was allegedly “untreated.” The replacement shirt was worse, making her skin feel as though she had experienced a burn. 37. A photo of Ms. Gilbert’s rash appears below: 38. In late fall to December 2018, Ms. Gilbert wore the Plum dress, resulting in sore throats, headaches, body aches and fatigue. She had these symptoms each time she worked a flight wearing the Uniform. 39. In January 2019, Ms. Gilbert contacted Delta’s Uniform Committee, which advised her to file an on-the-job injury report (i.e., workers’ compensation claim), which she filed in January 2019. 40. On February 25, 2019, Ms. Gilbert was sent to a dermatology center in Atlanta for “patch” testing by Sedgwick, the worker’s compensation administrator, and she had to stay out of work for the whole week. She became sick after the patch test, developing a sore throat, headache and body aches, which lasted almost two weeks. A copy of a photo of Ms. Gilbert while the patch test was being administered is set forth below. 41. On March 1, 2019, the dermatologist who conducted the patch test on Ms. Gilbert using her Uniform concluded that she is highly allergic to the “disperse dyes” and Formaldehyde in the Uniform. The dermatologist recommended that her uniform be changed. 42. Ms. Gilbert was placed on short-term disability leave by Delta from March 5 through April 2, 2019. While on short-term disability leave, she was required to use her “certified time” in order to receive her pay. 43. Ms. Gilbert returned to work on April 3, 2019 and is now allowed to wear a black pants suit and white blouse, rather than the Passport Plum Uniform. Since then, she has experienced no physical symptoms. V. CLASS ACTION ALLEGATIONS 44. Plaintiffs brings this action on behalf of themselves and all other persons similarly situated, pursuant to Rules 23(b)(2) and 23(b)(3) of the Federal Rules of Civil Procedure on behalf of the following Class: All flight attendants and gate agents employed by Delta in the United States who were required to wear Passport Plum uniforms manufactured by Defendant. Excluded from the Class Excluded from the Class are: (a) Defendant, any entity in which Defendant has a controlling interest, and its legal representatives, officers, directors, employees, assigns, and successors; (b) the judge to whom this case is assigned and any member of the judge’s immediate family. 45. Numerosity/Impracticability of Joinder/Ascertainability: The members of the Class are so numerous that joinder of all members would be impracticable. The Class is believed to include approximately 64,000 members. The Class is composed of an easily ascertainable, self-identifying set of individuals and entities that work or have worked for Delta and were or are required to wear the Passport Plum Uniforms. Lands’ End has the contact information for each class member, who were or are required to select among the several items manufactured by Defendant. The precise number of Class members can be ascertained by reviewing documents in Defendant’s possession, custody, and control. 46. Commonality and Predominance: There are common questions of law and fact that predominate over any questions affecting only individual members of the Class. These common legal and factual questions, include, but are not limited to, the following: a. Whether the Uniforms caused serious adverse health reactions to Class Members; b. Whether the Uniforms bleed and crock resulting in purple coloring leaching into Class Members skin, staining their clothing and other possessions, resulting in permanent damage to their possessions that come in contact with the Uniforms. c. Whether the conduct of Lands’ End violates warranty laws, and other laws as asserted herein; d. Whether the conduct of Lands’ End was negligent; e. Whether Lands’ End should be strictly liable for producing dangerous uniforms; f. Whether Class Members are entitled to monetary and equitable relief from Lands’ End. 47. Typicality: Plaintiffs’ claims are typical of the claims of the members of the Class. Plaintiffs and the other members of the Class have suffered similar injury by the same wrongful practices by Lands’ End. The claims of Plaintiffs and the other members of the Class all arise from the same wrongful practices and course of conduct, and are based on the same legal and remedial theories. 48. Adequacy Of Representation: Plaintiffs will fully and adequately assert and protect the interests of the members of the Class, and have retained class counsel who are experienced and qualified in prosecuting class actions. Neither Plaintiffs nor their attorneys have any interests that are contrary to or conflicting with the members of the Class. 49. Superiority Of Class Action And Impracticability Of Individual Actions: 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 not economically feasible and is procedurally impracticable. While the aggregate damages sustained by the members of the Class are in the millions of dollars, and are no less than five million dollars, upon information and belief, the individual damages incurred by each member of the Class resulting from Lands’ End’s wrongful course of conduct are too small to warrant the expense of individual suits. The likelihood of individual members of the Class 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. Plaintiffs know of no difficulty to be encountered in the management of this action that would preclude its maintenance as a class action. In addition, Lands’ End has acted or refused to act on grounds generally applicable to the members of 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. VI. CLAIMS FOR RELIEF FIRST COUNT (NEGLIGENCE) 50. Plaintiffs on behalf of themselves and all others similarly situated, incorporate by reference the allegations contained in the preceding paragraphs of this Complaint. 51. This claim is brought on behalf of Plaintiffs and the Class. 52. Defendant owes a duty to individuals, including Plaintiffs and the Class, to use reasonable care in designing, manufacturing, marketing, labeling and selling the Uniforms. 53. Defendant was negligent in failing to use reasonable care in designing, manufacturing, marketing, labeling and selling the Uniforms. Defendant breached their aforementioned duty by: a. Failing to design the Uniforms so as to avoid an unreasonable risk of harm to Delta flight attendants and gate agents bringing the Uniforms into their homes and wearing the Uniforms, including the Plaintiffs; b. Failing to use reasonable care in the testing of the Uniforms so as to avoid unreasonable risk of harm to Delta flight attendants and gate agents bringing the Uniforms into their homes and wearing the Uniforms, including the Plaintiffs; c. Failing to use reasonable care in inspecting the Uniforms so as to avoid an unreasonable risk of harm to Delta flight attendants and gate agents bringing the Uniforms into their homes and wearing the Uniforms, including the Plaintiffs; d. Failing to use reasonable care in collecting and/or analyzing adverse event reports by Delta flight attendants and gate agents reporting issues with the Uniforms; e. Otherwise negligently or carelessly designing, manufacturing, marketing and selling the Uniforms. 54. As a direct and proximate result of Lands’ End’s negligence, Plaintiffs and the Class have suffered and/or in the future will suffer personal injuries, pain and suffering, severe emotional distress, financial or economic loss, including but not limited to, medical services and expenses, lost income and other damages. WHEREFORE, Plaintiffs demand judgment against Defendant for compensatory and injunctive relief, together with interest, costs of suit, attorneys’ fees, and such other relief as the Court deems proper. SECOND COUNT (DESIGN DEFECT) 55. Plaintiffs on behalf of themselves and all others similarly situated, incorporate by reference the allegations contained in the preceding paragraphs of this Complaint. 56. This claim is brought on behalf of Plaintiffs and the Class. 57. At all times material to this action, Defendant was responsible for designing, developing, manufacturing, testing, promoting, packaging, marketing, distributing and selling the Uniforms. 58. The Uniforms are defective and unreasonably dangerous to Plaintiffs and the members of the Class. 59. The Uniforms are defective in their design or formulation in that it they are not reasonably fit, suitable, or safe their intended purpose and/or its foreseeable risks exceed the benefits associated with their design and formulation. 60. At all times material to this action, the Uniforms were not safe and were not suited for the purposes for which Defendant, directly and indirectly, advertised, marketed, and promoted them at the time Defendant designed, manufactured, distributed, and sold the Uniforms and placed the Uniforms in the stream of commerce. 61. The Uniforms were defective and unreasonably dangerous when they left control of Defendant in one or more of the following manners: a. The risk associated with wearing the Uniforms far outweighed the utility derived from wearing them; b. Defendant failed to provide adequate warnings regarding the hazards associated with wearing the Uniforms; c. Defendant’s Uniforms were defectively designed and unreasonably dangerous in design and composition in that other products could achieve similar results without the risks presented by the Uniforms; d. The Uniforms failed to comply with the implied warranty that the product was safe when used for its intended purpose. 62. At the time the Uniforms left the control of Defendant, there were practical and feasible alternative designs that would have prevented and/or significantly reduced the risk to the Plaintiffs’ and the class members of injuries without impairing the reasonably anticipated or intended function of the Uniforms. These safer alternative designs were economically and technologically feasible, and would have prevented or significantly reduced the risk of injuries to Plaintiffs and the Class Members without substantially impairing the Uniforms’ utility. 63. As a direct and proximate result of the Uniforms’ defective design, the Plaintiffs and Class Members suffered severe adverse health reactions and physical injuries, as well as damage to personal property in the form of clothing and furniture permanently stained purple. 64. As a direct and proximate consequence of Lands’ End’s defectively designed Uniforms, Plaintiffs and the Class Members sustained personal injuries and related losses as detailed more fully herein. WHEREFORE, Plaintiffs demand judgment against Defendant for compensatory damages and injunctive relief, together with interest, costs of suit, attorneys’ fees, and such other relief as the Court deems proper. THIRD COUNT (MANUFACTURING DEFECT) 65. Plaintiffs on behalf of themselves and all others similarly situated, incorporate by reference the allegations contained in the preceding paragraphs of this Complaint. 66. This claim is brought on behalf of Plaintiffs and the Class. 67. The Uniforms manufactured by Lands’ End, which Plaintiffs and the Members of the Class were required to wear during working hours, were not reasonably safe for their intended use and were defective as a matter of law with respect to their manufacture. 68. As a direct and proximate result of the Uniforms’ aforementioned defects, Plaintiffs and the members of the Class were caused to suffer and /or in the future will be caused to suffer adverse health consequences, pain and suffering, emotional distress, financial or economic loss, including but not limited to, obligations for medical services and expenses, lost income and other damages. 69. Defendant is strictly liable to Plaintiffs and the members of the class for designing, manufacturing, marketing, labeling, packaging and selling defective Uniforms. WHEREFORE, Plaintiffs demand judgment against Defendant for compensatory damages and injunctive relief, together with interest, costs of suit, attorneys’ fees, and such other relief as the Court deems proper. FOURTH COUNT (FAILURE TO WARN) 70. Plaintiffs on behalf of themselves and all others similarly situated, incorporate by reference the allegations contained in the preceding paragraphs of this Complaint. 71. This claim is brought on behalf of Plaintiffs and the Class. 72. The Uniforms manufactured by Lands’ End to be worn by Plaintiffs and all Delta Flight attendants and gate agents were not reasonably safe for their intended use and were defective as a matter of law due to their lack of appropriate and necessary warnings. 73. Defendant had a duty to warn Plaintiffs and the members of the Class of the risks and/or defects about which it knew or should have known. 74. Defendant failed to adequately warn Plaintiffs and the members of the Class that the Uniforms were unreasonably dangerous and defective because they could result in severe adverse health effects, including, but not limited to, rashes and skin irritations, headache and fatigue, and nausea. 75. At all times relevant hereto, Defendant intended the Delta flight attendant and gate agents, including Plaintiffs, to wear the Uniforms and knew or should have known that the Uniforms were defective and dangerous. 76. The Uniforms were used/worn by Plaintiffs and the Class members in a reasonably anticipated and foreseeable manner, and in the manner for which the Uniforms were intended. 77. At all relevant times hereto, Defendant was situated in the chain of commerce and transferred, sold, marketed, advertised, or distributed the Uniforms in the regular course of business. 78. At all times relevant hereto, the Uniforms were in the same or substantially the same, defective and unreasonably dangerous condition when put to its reasonably anticipated and foreseeable use. 79. Defendant knew or should have known of the risk of injury from the Uniforms, but failed to provide adequate warning to users/wearers of the product, failed to immediately recall the Uniforms and continued to sell the Uniforms to be worn by Delta flight attendants and gate agents. As a direct result, the Uniforms manufactured and/or supplied by Defendant were defective due to inadequate post marketing warnings or instructions. 80. Had Defendant adequately warned Plaintiffs and the Class members they would have been alerted to the problem and would have taken steps to avoid the adverse health consequences before they occurred. 81. As a direct and proximate consequence of Defendant’s defectively designed product, Plaintiffs and the members of the Class sustained serious personal injuries and injuries to property and losses as detailed more fully herein. WHEREFORE, Plaintiffs demand judgment against Defendants for compensatory damages and injunctive relief, together with interest, costs of suit, attorneys’ fees, and such other relief as the Court deems proper. FIFTH COUNT (BREACH OF EXPRESS WARRANTY) 82. Plaintiffs on behalf of themselves and all others similarly situated, incorporate by reference the allegations contained in the preceding paragraphs of this Complaint. 83. This claim is brought on behalf of Plaintiffs and the Class. 84. Defendant made assurances to Delta and Delta’s employees that the Uniforms would be safe and comfortable and reasonably fit for their intended purpose. 85. Plaintiffs and the Class are the intended third party beneficiaries of Lands’ End’s warranties because there is a valid and binding contract between Delta and Lands’ End, the contract was intended for the benefit of Delta’s flight attendants and gate agents who would be required to wear the Uniforms, and the benefit to the flight attendants and gate agents is sufficiently immediate, rather than incidental, to indicate the assumption by the contracting parties of a duty to compensate the Delta employees if the benefit of the warranty is lost. Consequently, Plaintiffs and the Class are in privity with Defendant. 86. Accordingly, Lands’ End made express warranties under state law. 87. Plaintiffs and the Class reasonably relied upon Lands’ End’s express warranties and guarantees that the Uniforms were safe, merchantable, and reasonably fit for their intended purpose. 88. Defendant breached their express warranties by selling to Delta and the Plaintiffs and the Class unreasonably dangerous and defective Uniforms jeopardizing the health and safety of Plaintiffs and the Class and resulting in the permanent staining of their clothes and other products. 89. Plaintiffs notified Lands’ End of the breach. Lands’ End was on notice of the breach of warranty well before Plaintiffs began this litigation. 90. As a direct and proximate result of Lands’ End’s breach of its express warranties, Plaintiffs and the Class have suffered personal injuries, pain and suffering, damage to property, emotional distress, financial and economic loss, including obligations for medical services and expenses, lost income, and other damages. WHEREFORE, Plaintiffs demand judgment against Defendant for compensatory damages and injunctive relief, together with interest, costs of suit, attorneys’ fees, and such other relief as the Court deems proper. SIXTH COUNT (BREACH OF IMPLIED WARRANTY) 91. Plaintiffs on behalf of themselves and all others similarly situated, incorporate by reference the allegations contained in the preceding paragraphs of this Complaint. 92. This claim is brought on behalf of Plaintiffs and the Class. 93. Plaintiffs and the Class are the intended third party beneficiaries of Lands’ End’s warranties because there is a valid and binding contract between Delta and Lands’ End, the contract was intended for the benefit of Delta’s flight attendants and gate agents who would be required to wear the Uniforms, and the benefit to the flight attendants and gate agents is sufficiently immediate, rather than incidental, to indicate the assumption by the contracting parties of a duty to compensate the Delta employees if the benefit of the warranty is lost. Consequently, Plaintiffs and the Class are in privity with Defendant. 94. The Lands’ End Uniforms are “goods” under the Uniform Commercial Code (“UCC”). 95. Lands’ End is a “merchant” under the UCC. 96. Lands’ End made numerous implied warranties to Delta and Plaintiffs and the members of the Class about the merchantable quality of the Uniforms and that they were fit for the ordinary purpose for which Uniforms are intended. 97. Plaintiffs and the Class relied upon Lands’ Ends’ implied warranties of merchantability in wearing and purchasing the Uniforms. 98. Defendant breached the implied warranties of merchantability because the Uniforms were neither merchantable nor suited for their intended use as warranted. 99. Defendant breached the implied warranties by selling to Delta and the Plaintiffs and the Class unreasonably dangerous and defective Uniforms jeopardizing the health and safety of Plaintiffs and the class and resulting in the permanent staining of their clothes and other products. 100. As a direct and proximate result of Lands’ End’s breach of its express warranties Plaintiffs and the Class have suffered personal injuries, pain and suffering, damage to property, emotional distress, financial and economic loss, including obligations for medical services and expenses, lost income, and other damages. WHEREFORE, Plaintiffs demand judgment against Defendant for compensatory damages and injunctive relief, together with interest, costs of suit, attorneys’ fees, and such other relief as the Court deems proper. SEVENTH COUNT (VIOLATIONS OF THE MAGNUSON-MOSS WARRANTY ACT, 15 U.S.C. § 2301 et. seq.) 101. Plaintiffs on behalf of themselves and all others similarly situated, incorporate by reference the allegations contained in the preceding paragraphs of this Complaint. 102. This claim is brought on behalf of Plaintiffs and the Class. 103. Plaintiff and the Class are “consumers” within the meaning of the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301(3). 104. Lands’ End is a “supplier[]” and “warrantor[]” within the meaning of 15 U.S.C. §§ 2301(4)-(5). 105. The Lands’ End Uniforms are “consumer products” within the meaning of 15 U.S.C. § 2301(1). 106. Defendant’s written affirmations of fact, promises, and descriptions as alleged created a “written warranty” as to the Uniforms. There was an implied warranty for the sale of such product within the meaning of the MMWA. Such warranties were further described in the express and implied warranty counts above. 107. As detailed herein, Defendant breached these express and implied warranties, as the Uniforms were not fit for their intended use, were not defect free, and were harmful to Plaintiffs and the Class. 108. The defects existed when the Uniforms left the Defendant’s control. 109. Despite reasonable opportunity to honor its disclosure and remedy obligations, Lands’ End violated these obligations under the Magnuson-Moss Act, causing injury to the Plaintiffs and the Class. 110. The amount in controversy with respect to the Class Plaintiff’ individual claims meets or exceeds the sum or value of $25. There are more than 100 individuals in the Class. In addition, the amount in controversy meets or exceeds the sum or value of $50,000 (exclusive of interest and costs) computed on the basis of all claims to be determined in this suit. 111. As a direct and proximate result of Lands’ End’s breach of warranty, Plaintiffs and the members of the Class sustained damages and other losses in an amount to be determined at trial. WHEREFORE, Plaintiffs demand judgment against Defendant for compensatory damages, together with interest, costs of suit, attorneys’ fees, and such other relief as the Court deems proper. VII. PRAYER FOR RELIEF WHEREFORE, Plaintiffs on behalf of themselves and on behalf of the Class, prays for judgment against Lands’ End granting the following relief: 1. Certification of the proposed Class, and appointing Plaintiffs to represent the Class and Plaintiffs’ co-counsel as co-lead class counsel; 2. All recoverable compensatory, statutory and other damages sustained by Plaintiffs and the other members of the Class; 3. Injunctive and declaratory relief; 4. Statutory pre-judgment and post-judgment interest on the Class damages; 5. Payment of reasonable attorneys’ fees and costs as may be allowable under applicable law; and 6. Such other relief as the Court may deem just and proper. VIII. DEMAND FOR JURY TRIAL Plaintiffs demand a trial by jury on all causes of action so triable. Dated: May 22, 2019 NAGEL RICE, LLP Attorneys for Plaintiffs and the Putative Class By: /s/ Bruce H. Nagel Bruce H. Nagel (To Be Admitted Pro Hac Vice) Randee M. Matloff (To Be Admitted Pro Hac Vice) 103 Eisenhower Parkway Roseland, New Jersey 07068 973-618-0400 bnagel@nagelrice.com rmatloff@nagelrice.com -and- CERASIA & DEL REY-CONE LLP Attorneys for Plaintiffs and the Putative Class By: /s/ Edward Cerasia II Edward Cerasia II 150 Broadway, Suite 1517 New York, New York 10038 646-525-4231 ed@cdemploymentlaw.com

products liability and mass tort

NejeEYcBD5gMZwcz0Y2k

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x JOSUÉ PAGUADA, on behalf of himself and all others similarly situated, CLASS ACTION COMPLAINT Plaintiffs, AND v. DEMAND FOR JURY TRIAL LIGHTING BY JARED, INC., : : : : : : : : : : : : Defendant. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x INTRODUCTION 1. Plaintiff JOSUÉ PAGUADA, on behalf of himself and others similarly situated, asserts the following claims against Defendant LIGHTING BY JARED, INC. as follows. 2. 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 2016 report, approximately 420,000 visually impaired persons live in the State of New York. 3. 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. 4. 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. 5. 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”). 6. Because Defendant’s website, www.lightingnewyork.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 7. 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. 8. 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. 9. 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. 10. 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 in this District. A substantial part of the acts and omissions giving rise to Plaintiff’s claims occurred in this District: 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. 11. This Court is empowered to issue a declaratory judgment under 28 U.S.C. §§ 2201 and 2202. THE PARTIES 12. Plaintiff JOSUÉ PAGUADA, at all relevant times, is and was a resident of Astoria, New York. 13. 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., and NYCHRL. 14. Defendant is and was at all relevant times a New York Corporation doing business in New York. 15. 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 16. 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. 17. 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. 18. 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. NonVisual Desktop Access, otherwise known as “NVDA” is a popular, screen-reading software program available for a Windows computer. 19. 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. 20. 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. STATEMENT OF FACTS 21. Defendant is an expert lighting company that owns and operates the website, www.lightingnewyork.com (its “Website”), offering features which should allow all consumers to access the goods and services which Defendant ensures the delivery of throughout the United States, including New York State. 22. Defendant’s Website offers its 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 using a screen-reader. 24. Plaintiff most recently visited Defendant’s website in August of 2020 to browse and potentially make a purchase. Despite his efforts, however, Plaintiff was denied a user 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 enjoy the privileges and benefits of Defendant’s public accommodation. 25. For example, 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 contain a proper 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 was 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 was a problem for Plaintiff because in certain instances the screen reader failed 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 contains 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. 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. The Website does not provide a text equivalent for every non-text element; b. The purpose of each link cannot be determined from the link text alone or from the link text and its programmatically determined link context; c. Web pages lack titles that describe their topic or purpose; d. Headings and labels do not describe topic or purpose; e. Keyboard user interfaces lack a mode of operation where the keyboard focus indicator is visible; f. The default human language of each web page cannot be programmatically determined; g. The human language of each passage or phrase in the content cannot be programmatically determined; h. Labels or instructions are not always provided when content requires user input; i. Text cannot be resized up to 200 percent without assistive technology so that it may still be viewed without loss of content or functionality; j. A mechanism is not always available to bypass blocks of content that are repeated on multiple web pages; k. A correct reading sequence is not provided on pages where the sequence in which content is presented affects its meaning; l. In content implemented using markup languages, elements do not always have complete start and end tags, are not nested according to their specifications, may contain duplicate attributes, and IDs are not always unique; and m. The name and role of all UI elements cannot be programmatically determined; things 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. 30. These access barriers effectively denied Plaintiff the ability to use and enjoy Defendant’s website the same way sighted individuals do. 31. 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. 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. If the Website were equally accessible to all, Plaintiff could independently navigate the Website and complete a desired transaction as sighted individuals do. 34. 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. 35. 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. 36. Defendant therefore uses standards, criteria or methods of administration that have the effect of discriminating or perpetuating the discrimination of others, as alleged herein. 37. 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). 38. Upon information and belief, because LIGHTING BY JARED, INC.’s Website has never been accessible and because LIGHTING BY JARED, INC. does not have, and has never had, an adequate 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: a. that LIGHTING BY JARED, INC. retain a qualified consultant acceptable to Plaintiff (“Mutually Agreed Upon Consultant”) who shall assist it in improving the accessibility of its Website so the goods and services on them may be equally accessed and enjoyed by individuals with vision related disabilities; b. that LIGHTING BY JARED, INC. work with the Mutually Agreed Upon Consultant to ensure that all employees involved in website development and content development be given web accessibility training on a periodic basis, including onsite training to create accessible content at the design and development stages; c. that LIGHTING BY JARED, INC. work with the Mutually Agreed Upon Consultant to perform an automated accessibility audit on a periodic basis to evaluate whether its Website may be equally accessed and enjoyed by individuals with vision related disabilities on an ongoing basis; d. that LIGHTING BY JARED, INC. work with the Mutually Agreed Upon Consultant to perform end-user accessibility/usability testing on a periodic basis with said testing to be performed by individuals with various disabilities to evaluate whether its Website may be equally accessed and enjoyed by individuals with vision related disabilities on an ongoing basis; e. that LIGHTING BY JARED, INC. work with the Mutually Agreed Upon Consultant to create an accessibility policy that will be posted on its Website, along with an e-mail address and tollfree phone number to report accessibility- related problems; and f. that Plaintiff, their counsel and its experts monitor Defendant’s Website for up to two years after the Mutually Agreed Upon Consultant validates it is free of accessibility errors/violations to ensure it has adopted and implemented adequate accessibility policies. 39. 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 disabled individuals. 40. 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. 41. 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. 42. 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 43. 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. 44. 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. 45. 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 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. 46. 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. 47. 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. 48. 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. 49. 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. 50. Plaintiff, on behalf of himself and the Class Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 51. 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). 52. 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. 53. 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). 54. 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). 55. 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). 56. 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. 57. 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 58. 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. 59. 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.” 60. Defendant’s Website is a sales establishment and public accommodations within the definition of N.Y.C. Admin. Code § 8-102(9). 61. 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). 62. 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. 63. 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). 64. 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. 65. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 66. 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. 67. Defendant’s actions were and are in violation of the NYCHRL and therefore Plaintiff invokes his right to injunctive relief to remedy the discrimination. 68. 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. 69. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 70. 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 71. 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. 72. 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., and N.Y.C. Admin. Code § 8-107, et seq. prohibiting discrimination against the blind. 73. 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: Queens, New York August 19, 2020 MARS KHAIMOV LAW, PLLC By: /s/ Mars Khaimov Mars Khaimov, Esq. marskhaimovlaw@gmail.com 10826 64th Avenue, Second Floor Forest Hills, New York 11375 Tel: (929) 324-0717 Attorneys for Plaintiff

civil rights, immigration, family

hsM5DYcBD5gMZwcz1h_Y

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TENNESSEE MEMPHIS DIVISION MICHAEL KUTZBACK, individually on behalf Of themselves and other similiarly situated, Plaintiff, CASE NO.: v. JURY DEMAND LMS INTELLIBOUND, LLC., a Foreign Limited Liability Company and CAPSTONE LOGISTICS, LLC., a Domestic Limited Liability Company Defendants. _________________________________________/ COMPLAINT AND DEMAND FOR JURY TRIAL Plaintiff, Michael Kutzback (“Plaintiff”), on behalf of himself and other employees and former employees similarly situated, by and through their undersigned counsel, files this Complaint against Defendant, LMS INTELLIBOUND, LLC., a Foreign Limited Liability Company (“LMS”), and CAPSTONE LOGISTIS, LLC., a Domestic Limited Liability Company (“CL”), and in support thereof states as follows: JURISDICTION 1. Jurisdiction in this Court is proper as the claims are brought pursuant to the Fair Labor Standards Act, as amended (29 U.S.C. §201, et seq., hereinafter called the “FLSA”) to recover unpaid back wages, an additional equal amount as liquidated damages, obtain declaratory relief, and reasonable attorneys’ fees and costs. 2. The jurisdiction of the Court over this controversy is based upon 29 U.S.C. §216(b). PARTIES 3. At all times material hereto, Plaintiff was a resident within the jurisdiction of the Western District of Tennessee. 4. At all times material hereto, LMS was, and continues to be a Georgia Limited Liability Company, engaged in business in Tennessee. 5. At all times material hereto CL was a Domestic Limited Liability Company, engaged in business in Tennessee. 6. At all times material hereto, Plaintiff was “engaged in commerce” within the meaning of §6 and §7 of the FLSA. 7. At all times material hereto, Plaintiff was an “employee” of Defendants within the meaning of FLSA. 8. At all times material hereto, Defendants were the “employer” within the meaning of FLSA. 9. Defendant, LMS, was, and continues to be, the “employer” within the meaning of FLSA. 10. Defendant, CL, was, and continues to be, the “employer” within the meaning of FLSA. 11. At all times material hereto, Defendants were, and continue to be, an “enterprise engaged in commerce” within the meaning of the FLSA. 12. At all times material hereto, Defendants were, and continue to be, an enterprise engaged in the “production of goods for commerce” within the meaning of the FLSA. 13. Based upon information and belief, the annual gross revenue of Defendants are and were in excess of $500,000.00 per annum for all relevant time periods. 14. At all times material hereto, Defendants, had more than two employees handling, selling, or otherwise working on goods or materials that had been moved in or produced for commerce. Specifically, Defendants had employees who regularly handled and unloaded items including produce, canned goods, dog food, baked goods, garden tools, household products, and cleaning products that had previously travelled through interstate commerce. 15. At all times material hereto, Plaintiff was “engaged in commerce” and subject to individual coverage of the FLSA. 16. At all times material hereto, Plaintiff was engaged in the “production of goods for commerce” and subject to the individual coverage of the FLSA. 17. The additional persons who may become Plaintiffs in this action are/were “Unloader” employees for Defendants, who held similar positions to Plaintiff and who worked in excess of forty (40) hours during one or more work weeks during the relevant time periods but who did not receive pay at one and one-half times their regular rate for their hours worked in excess of forty (40) hours. 18. At all times material hereto, the work performed by Plaintiff were directly essential to the business performed by Defendants. STATEMENT OF FACTS 19. Defendants are third-party warehouse servicers and provide a full range of logistic services for companies in the warehouse, distribution, and manufacturing industries. 20. Defendants hired Plaintiff to work as non-exempt “Unloader” or “Lumper” (hereinafter “Unloader”) in or about June 2011. Thereafter, Plaintiff worked as an Unloader from June 2011 to August 2012. It is solely during this period of time during which Plaintiff’s claims accrued. 21. Throughout the time period in which Plaintiff was employed by Defendant as an “Unloader,” Plaintiff’s primary duty was unloading products from trucks. 22. At all times relevant to the claim, Plaintiff was employed by Defendant as an “Unloader,” and was compensated on a commission basis, determined by the number and weight of the trucks unloaded. 23. During times relevant to the claim, Plaintiff worked in excess of forty (40) hours within a workweek. 24. However, Plaintiff was not properly compensated for all his overtime hours worked for that period. 25. Instead, Defendants systematically paid, and continues to pay, Plaintiff and other similarly situated “Unloaders” for substantially fewer hours than they actually worked. 26. At various material times throughout the duration of Plaintiff’s employment as an “Unloader” for Defendants, Defendants failed to compensate Plaintiff at a rate of one and one-half times Plaintiff’s regular rate for all hours worked in excess of forty (40) hours in a single work week. Plaintiff should be compensated at the rate of one and one-half times Plaintiff’s regular rate for those hours that Plaintiff worked in excess of forty (40) hours per week as required by the FLSA. 27. Defendants have violated Title 29 U.S.C. §207 from, at a minimum, June 2011 to present in that: a. Plaintiff worked in excess of forty (40) hours per week in at least some weeks during his period of employment as an Unloader with Defendants; b. No payments, and provisions for payment, have been made by Defendants to properly compensate Plaintiff at the statutory rate of one and one-half times Plaintiff’s regular rate for all those hours worked in excess of forty (40) hours per work week while Plaintiff worked as an Unloader for Defendants and as provided by the FLSA; and c. Defendants have failed to maintain proper time records as mandated by the FLSA. 28. Plaintiff has retained the law firm of MORGAN & MORGAN, P.A., to represent Plaintiff in the litigation and have agreed to pay the firm a reasonable fee for its services. 29. Prior to filing suit, Plaintiff, through counsel, demanded his rightful wages due under the FLSA. However, Defendants have refused to pay Plaintiff his lawful wages. COLLECTIVE ACTION ALLEGATIONS 30. Plaintiff and the class members are/were all non-exempt “Unloaders” or “Lumpers” of Defendants and performed the same or similar job duties as one another. 31. All of these non-exempt individuals were and are paid in the same manner, on a commission basis. 32. Thus, the class members are owed overtime wages for the same reasons as Plaintiff. 33. Defendants’ failure to compensate its “Unloaders” and other employees employed in similar positions for hours worked in excess of forty (40) hours in a workweek as required by the FLSA results from a policy or practice applicable to all of Defendants’ non-exempt “Unloaders” and employees employed in similar positions nationwide. 34. This policy or practice was applicable to Plaintiff and the class members. Application of this policy or practice does/did not depend on the personal circumstances of Plaintiff or those joining this lawsuit. Rather, the same policy or practice which resulted in the non-payment of overtime to Plaintiff applied and continues to apply to all class members. Accordingly, the class members are properly defined as: All commission-only “Unloaders” or “Lumpers” who worked for Defendants, nationwide, within the last three years, who worked in excess of 40 hours in one or more workweeks and were not compensated at one and one-half times their regular rate of pay for all hours worked in excess of 40 hours in one or more workweeks. 35. Defendants knowingly, willfully, or with reckless disregard carried out their illegal pattern or practice of failing to pay overtime compensation with respect to Plaintiff and the class members. 36. Defendants did not act in good faith or reliance upon any of the following in formulating their pay practices: (a) case law, (b) the FLSA, 29 U.S.C. § 201, et seq., (c) Department of Labor Wage & Hour Opinion Letters or (d) the Code of Federal Regulations. 37. During the relevant period, Defendants violated the FLSA by employing employees in an enterprise engaged in commerce or in the production of goods for commerce within the meaning of the FLSA, as aforesaid, for one or more workweeks without compensating such employees for their work at a rate of at least one and one-half times their regular rate of pay for all hours worked in excess of forty (40) hours in a workweek. 38. Defendants have acted willfully in failing to pay Plaintiff and the class members in accordance with the law. 39. Defendants have failed to maintain accurate records for Plaintiff and the class members’ work hours in accordance with the law. COUNT I VIOLATION OF 29 U.S.C. §207 OVERTIME COMPENSATION 40. Plaintiff realleges and reincorporate paragraphs 1 through 39 as if fully set forth herein. 41. From approximately June 2011 to August 2012 and for the period of time in which Plaintiff was employed by Defendant as an “Unloader,” Plaintiff worked in excess of forty (40) hours per week. 42. From approximately June 2011 to August 2012 and for the period of time in which Plaintiff was employed by Defendant as an “Unloader,” Plaintiff was not properly compensated at the statutory rate of one and one-half times their regular rate of pay for the hours he worked in excess of forty (40) hours each work week. 43. Plaintiff was, and is, entitled to be paid at the statutory rate of one and one-half times Plaintiff’s regular rate of pay for those hours worked in excess of forty (40) hours while Plaintiff was employed by Defendant as an “Unloader.” 44. At all times material hereto, Defendants failed, and continue to fail, to maintain proper time records as mandated by the FLSA. 45. Defendants’ actions were willful and/or showed reckless disregard for the provisions of the FLSA as evidenced by its failure to compensate Plaintiff at the statutory rate of one and one-half times Plaintiff’s regular rate of pay for the hours worked in excess of forty (40) hours per week when it knew, or should have known, such was, and is due for Plaintiff’s work as an Unloader. 46. Defendants have failed to properly disclose or apprise Plaintiff of Plaintiff’s rights under the FLSA. 47. Due to the intentional, willful, and unlawful acts of Defendants, Plaintiff suffered, and continue to suffer, damages and lost compensation for time worked over forty (40) hours per week, plus liquidated damages. 48. Plaintiff is entitled to an award of reasonable attorneys’ fees and costs pursuant to 29 U.S.C. §216(b). 49. At all times material hereto, Defendants failed to comply with Title 29 and United States Department of Labor Regulations, 29 C.F.R. §§516.2 and 516.4, with respect to those similarly situated to the named Plaintiff by virtue of the management policy, plan or decision that intentionally provided for the compensation of such employees at a rate less than time and one half for their overtime hours. 50. Based upon information and belief, the employees and former employees of Defendants similarly situated to Plaintiff are/were not paid proper overtime for hours worked in excess of forty (40) in one or more workweeks, because Defendants have failed to properly pay Plaintiff, and those similarly situated to him, proper overtime wages at time and one half their regular rate of pay for such hours. 51. Plaintiff demands a trial by jury. COUNT II DECLARATORY RELIEF 52. Plaintiff realleges and reincorporate paragraphs 1 through 51 as if fully set forth herein. 53. Plaintiff and Defendants have a Fair Labor Standards Act dispute pending, which the Court has jurisdiction to hear pursuant to 28 U.S.C. § 1331, as a federal question exists. 54. The Court also has jurisdiction to hear Plaintiff’s request for declaratory relief pursuant to the Declaratory Judgment Act. 28 U.S.C. §§ 2201-2202. 55. Plaintiff may obtain declaratory relief. 56. Defendants employed Plaintiff. 57. Defendants are an enterprise. 58. Plaintiff was individually covered by the FLSA. 59. Plaintiff is entitled to overtime compensation pursuant to 29 U.S.C. §207(a)(1). 60. Defendants did not keep accurate time records pursuant to 29 U.S.C. §211(c) and 29 C.F.R. Part 516. 61. Defendants did not rely on a good faith defense in its failure to abide by the provisions of the FLSA. 62. Plaintiff is entitled to an equal amount of liquidated damages. 63. It is in the public interest to have these declarations of rights recorded. 64. Plaintiff’s declaratory judgment action serves the useful purpose of clarifying and settling the legal relations at issue. 65. The declaratory judgment action terminates and affords relief from uncertainty, insecurity, and controversy giving rise to the proceeding. 66. Plaintiff demands a trial by jury. WHEREFORE, Plaintiff respectfully requests that judgment be entered in his favor against Defendants: a. Awarding Plaintiff overtime compensation in the amount due to him for Plaintiff’s time worked in excess of forty (40) hours per work week while employed as an Unloader; b. Awarding Plaintiff liquidated damages in an amount equal to the overtime award; c. Awarding Plaintiff pre-judgment interest; d. Granting Plaintiff an Order, on an expedited basis, allowing them to send Notice of this action, pursuant to 216(b) and/or FRCP 23, to those similarly situated to Plaintiff; e. Declaring, pursuant to 29 U.S.C. §§2201 and 2202, that the acts and practices complained of herein are in violation of the overtime wage provisions of the FLSA; Defendants failed to keep accurate time records, Defendants have a legal duty to pay Plaintiff overtime pursuant to the FLSA, Defendants failed to prove a good faith defense, and Plaintiff is entitled to overtime wages, liquidated damages, and reasonable attorneys’ fees pursuant to the FLSA; f. Ordering any other further relief the Court deems just and proper. JURY DEMAND Plaintiff demand trial by jury on all issues so triable as a matter of right by jury. DATED this 2nd day of October, 2013. Respectfully Submitted, s/ MICHAEL HANNA MICHAEL HANNA, Esquire Florida Bar No.: 85035 ANDREW FRISCH, Esquire Florida Bar No.: 27777 Morgan & Morgan, P.A. 600 N. Pine Island Rd., Suite 400 Plantation, FL 33324 Telephone: (954) 318-0268 Facsimile: (954) 333-3515 Email: MHanna@forthepeople.com E-mail: AFrisch@forthepeople.com Trial Counsel for Plaintiff

employment & labor

bkiJ_YgBF5pVm5zYwTCl

UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT MARC A. FRESA : CIVIL ACTION: : : Plaintiff : : CLASS ACTION : COMPLAINT v. : : ROBINHOOD FINANCIAL LLC, ROBINHOOD : SECURITIES LLC, and ROBINHOOD MARKETS : INC. : : : Defendants : January 29, 2021 PRELIMINARY STATEMENT 1. Plaintiff brings this Class action for damages and injunctive relief against Defendants for tampering and interfering with retail stock trading and investment opportunities. Defendants foreclosed small retail investor access to the stock market by removing and/or restricting access to various stocks, and thereafter limiting stock purchases from their online trading platforms including, but not limited to, Gamestop “GME,” Blackberry “BB,” AMC Entertainment “AMC,” Bed Bath and Beyond “BBBY,” Express “EXPR,” Naked Brand “NAKD,” and/or Nokia “NOK.” (hereinafter referred to as “blocked stocks”). 2. While small retail investors were denied access to said blocked stocks and were prevented from protecting their investments or profiting from blocked stock fluctuation and trending, larger hedge-fund and other non-retail institutional investors continued to enjoy buy and sell privileges. 3. At all material times, the Defendants were aware that preventing access to the blocked stocks would have a negative economic effect on its customers. Moreover, the Defendants have also benefitted economically from data that they sold to non-retail investors and hedge-funds, thereby advantaging these larger outlets to the detriment of Defendants’ smaller retail investors to whom fiduciary and fair dealing duties were owed. The conduct of the Defendants, or any of them, constitutes Breach of Contract, Breach of Trust, Breach of the Covenant of Good Faith and Fair Dealings, Negligence and/or one or more violations of the Connecticut Unfair Trade Practices Act. JURISDICTION 4. This Court has subject matter jurisdiction over this action: (1) under 28 U.S.C. § 1332(a)(1), since there is diversity of citizenship between Plaintiff and Defendants, and the amount in controversy (exclusive of interest and costs) exceeds the sum of seventy five thousand dollars ($75,000.00); and (2) pursuant to 28 U.S.C. § 1332(d)(2) since this action is a Class action and the aggregate claims of the proposed class(es) exceed $5,000,000.00 excluding costs and interests, and the putative class will exceed 100 persons from Connecticut and/or a combination of at least 100 persons from Connecticut and other States. 5. This Court has personal jurisdiction since Defendants regularly conduct business and avail themselves of the market in the State of Connecticut and throughout the entire United States including, but not limited to, by selling, advertising and marketing services to retail investors and/or selling its customer data to Connecticut based investment companies, brokers and/or hedge funds, and by otherwise allowing its application(s) and web platform(s) to be distributed, used and/or downloaded in the State 2 of Connecticut, said conduct constituting sufficient minimum contacts with this State. VENUE 6. Venue is proper in the District of Connecticut under U.S.C. § 1391(b), in that claims and causes of action arise in this Jurisdiction and substantial acts and/or omissions which give rise to the claims asserted in this Complaint occurred in the District of Connecticut. JURY DEMAND 7. Plaintiff respectfully demands a Trial by Jury pursuant to Fed. R. Civ. P. 38(b). PARTIES 8. At all times material hereto, MARC FRESA was a citizen of the State of Connecticut. 9. At all times material hereto, Defendant ROBINHOOD MARKETS INC. (hereinafter “RM INC.”), was a corporation duly formed and incorporated under the laws of the State of Delaware with a principal place of business registered and/or located at 85 Willow Road, Menlo Park, California. 10. At all times material hereto, Defendant ROBINHOOD FINANCIAL LLC (hereinafter “RF”) was a corporation duly formed and incorporated under the laws of the State of Delaware with a principal place of business registered and/or located at 85 Willow Road, Menlo Park, California. 11. At all times material hereto, Defendant RF was registered with the U.S. Securities & Exchange Commission (hereinafter “SEC”) as a “broker-dealer,” and was a wholly owned subsidiary of RM INC.. 3 12. At all times material hereto, ROBINHOOD SECURITIES, LLC (hereinafter “RS”) was a corporation duly formed and incorporated under the laws of the State of Delaware with a principal place of business registered and/or located at 500 Colonial Center Parkway, Suite 100, Lake Mary, Florida. 13. At all times material hereto, Defendant RS was registered with the SEC as a “broker-dealer,” and was a wholly owned subsidiary of RM INC.. 14. At all material times RM INC., RF and RS (collectively referred to hereinafter as “ROBINHOOD”), were affiliates engaged in trade or business for the purpose of making a profit and at all times material to the Complaint acted individually and/or in concert, one with any one or more of the others. 15. At all material times ROBINHOOD was responsible for the acts and/or omissions of its agents, servants, employees and/or other representatives. FACTUAL ALLEGATIONS 16. ROBINHOOD is an internet-based brokerage and financial service, where small retail investors can enjoy “commission free” stock trading and investment opportunities utilizing its application and/or electronic trading platforms. 17. Its website (www.robinhood.com) claims that ROBINHOOD is “on a mission to democratize finance for all, and invites prospective clients to use its service to “make unlimited commission-free trades in stocks, ETFs, and options with Robinhood Financial, as well as buy and sell cryptocurrencies with Robinhood Crypto” (https://robinhood.com/us/en/). 4 18. On its “about us” page at https://robinhood.com/us/en/about-us/, the firm introduces its founders as visionaries focused on building “a financial product that would enable everyone-not just the wealthy—access to financial markets.” 19. ROBINHOOD explains the manner in which it generates its own profit at https://robinhood.com/us/en/about-us/how-we-make-money/, where it posts the following explanation and flow chart: 20. Upon information and belief what is described by ROBINHOOD is a “payment for order flow” (hereinafter “PFOF”) or similar arrangement where ROBINHOOD receives fees from electronic market makers for passing along customer orders; essentially, ROBINHOOD sends its retail clients’ orders to institutional trading giants and receives fees in return (the PFOF), and the trading giants then complete ROBINHOOD user trades generating their own profit. 21. ROBINHOOD sells order information to non-retail investors including hedge funds for profit, and these funds then use the information to bolster their own 5 trading strategies and make investments. 22. Prior to January 27, 2021, ROBINHOOD permitted its clients to use its services and platform(s) to purchase stocks including the aforementioned blocked stocks. 23. Upon information and belief, a popular uprising by day traders and smaller retail investors appears to have caused volatility and massive rises in the value of one or more blocked stocks by January 27, 2021. 24. On or about January 27, 2021, in response to the massive increase in blocked stock prices, ROBINHOOD prevented its predominantly small retail investors/customers from using its services and platform to search/research, invest and/or trade one or more of the blocked stocks. 25. ROBINHOOD prevented its predominantly small retail investors from using its services and platforms to trade the blocked stocks without prior and/or sufficient notice or warning. 26. On January 28, 2021, the Plaintiff attempted to utilize ROBINHOOD’s services and platforms to trade one or more of the blocked stocks, but he was prevented from doing so due to ROBINHOOD’s ban on trading the same. 27. Throughout the day on January 28, 2021, the Plaintiff and presumably many other similarly situated users identified multiple opportunities to profit from trading one or more of the blocked stocks in which Plaintiff was already invested, however, he was prevented and prohibited from effecting trades/investment using funds in his ROBINHOOD account. 6 28. At all times material hereto, ROBINHOOD foreclosed its small retail investors from using its services and platforms without notice and/or other valid legal basis. 29. Upon information and belief, ROBINHOOD intentionally kept its customer base from trading the blocked stocks in order to deflate and/or slow their rise in value. 30. By completely foreclosing its small retail investors from using its platforms and services to trade and/or invest in the blocked stocks, ROBINHOOD has deprived its customers of the ability to profit from continuing investment, protecting their investments and/or otherwise managing existing investments, in manners both promised and advertised by ROBINHOOD and contemplated by users of its services and/or platforms. 31. Upon information and belief, ROBINHOOD prevented trading of the blocked stocks on its platforms in order to benefit larger financial institutions to the economic detriment of its own smaller retail investors. 32. Upon information and belief, ROBINHOOD communicated its intent to bar its users from trading or investing in the blocked stocks to one or more institutional traders and/or hedge funds who used the information to their own economic advantage, and who constitute ROBINSHOOD’s existing or potential institutional investors. 33. Upon information and belief, ROBINSHOOD’s aforementioned conduct violates FINRA rule 5310 which compels firm efforts to promptly “execute marketable customer orders.” 7 34. Upon information and belief, ROBINSHOOD’s conduct was undertaken to the detriment of the Plaintiff and many other of its users similarly situated. CLASS ACITON ALLEGATIONS 35. Plaintiff brings the within claims and causes of action on behalf of himself and pursuant F.R.C.P. 23 permitting class actions on behalf of all other ROBINHOOD users in Connecticut and/or elsewhere in the United States, who were intentionally prohibited from investing and/or trading one or more of the aforementioned blocked stocks via ROBINSHOOD’s application and/or web-based investment/trading platforms. 36. Pursuant to F.R.C.P. 23, the within claims are appropriately brought in the manner of a Class action. 37. NUMEROSITY REQUIREMENT: While the exact size of the proposed Class is unknown, the Plaintiff alleges upon information and belief that members of the proposed class are so numerous that joinder of individual claims would be impractical. Upon further information and belief, ROBINHOOD has ten million (10,000,00) or more subscribers making it likely that thousands of members would constitute the Class, with thousands more likely to constitute various subclasses. Class members would be easily and/or readily identifiable via discovery, advertisement and/or other means. 38. COMMONALITY REQUIREMENT: Numerous questions of law and fact are common as between claims of the Plaintiff and the proposed Class and/or sub- class(es), and said questions predominate over those affecting any individual member of the class including, but not limited to: (A) whether ROBINHOOD breached its agreement(s) with its small retail investors; 8 (B) whether ROBINHOOD failed to give its users adequate notice of halting blocked stock purchasing/trading on its application and/or platforms; (C) whether ROBINHOOD breached fiduciary duties to its users; (D) whether ROBINHOOD communicated its intention to halt blocked stock purchasing/trading, to institutional investor clients and/or prospective clients prior to halting the same; (E) whether ROBINHOOD was paid for information about its intention to halt blocked stock trading by any institutional investor clients or prospective clients; (F) whether ROBINHOOD exercised the requisite duty of care in preventing foreseeable risks of harm to its users, when it intentionally halted blocked stock trading; (G) whether and to what extent ROBINHOOD’s conduct in halting blocked stock trading subordinated the financial interests of its small retail investors to its own, or any other third party clients including, but not limited to institutional investors who were not prevented from trading blocked stocks; (H) whether ROBINHOOD’s conduct violates FINRA rule 5310 and or any other state or federal securities law or regulation; (I) whether ROBINSHOOD’s conduct violated any state or federal criminal laws; (J) whether ROBINSHOOD’s conduct violated any state or federal licensing requirements; (K) whether and to what manner and extent ROBINHOOD’s conduct in halting and or limiting blocked stock trading should be enjoined; (L) whether ROBINHOOD conspired with any third party including, but not limited to its existing and/or potential institutional clients to manipulate the market to the detriment of its small retail investors and/or for its own pecuniary gain; (M) whether ROBINSHOOD’s conduct in intentionally halting blocked stock trading constitutes a false and deceptive practice under the Connecticut Unfair Trade Practices Act and/or other state or federal consumer protection law; (N) whether damages suffered by Class members due to ROBINHOOD’S halting and/or limiting blocked stock trading should be awarded and to what 9 extent appropriate damage measures should include punitive, exemplary and other heightened statutorily permissible damages; 39. TYPICALITY REQUIREMENT: Plaintiff’s claims are typical of proposed class members inasmuch as Plaintiff had a user agreement related to financial investment services and trading upon its ROBINHOOD’s platform, but was not permitted to trade one or more blocked stocks in order to maximize, manage and/or protect his financial investments as a result of ROBINHOOD’s unlawful and illegal halting of blocked stock trading absent warning and/or reasonable notice of its intention to engage in such conduct. 40. ADEQUATE REPRESENTATION REQUIREMENT: Plaintiff is a fair and adequate representative of the Class, and he is represented by competent and experienced litigation counsel who can and will pursue Class litigation vigorously. 41. PREDOMINANCE AND SUPERIORITY REQUIREMENTS: Questions of law and/or fact common to Class members predominate over questions affecting individual members given claims and the nature of evidence that might be presented at a trial and Plaintiff damages and/or injuries, along with causation and/or other elements of the claims asserted can be readily proven. The Class action is superior and preferable and would serve to provide individual members, who might not otherwise be able to pursue and assert individualized claims, the opportunity to avail themselves of a remedy that is economically feasible. The Class action will achieve economies of time effort and expense for class members similarly situated in light of anticipated damages suffered by small retail stock investors and is the most fair and efficient means of ensuring a just and efficient adjudication of claims whicht, if pursued individually, would 10 undermine judicial economy and risk inconsistent judgments. Given the nature of the claims, the Class action is manageable and superior to individual claims. FIRST COUNT (Breach of Contract as to all Defendants) 42. Paragraphs one (1) through forty-one (41) are realleged and incorporated in this FIRST COUNT as if the same were set forth fully herein. 43. At all times material to this Complaint the Plaintiff used ROBINHOOD’s services and/or platforms for small retail trading, pursuant to a User and/or Customer Agreement drafted by ROBINHOOD; said agreement was non-negotiable and all users were required to enter into the same prior to utilizing ROBINHOOD’s applications and/or platforms. 44. In exchange for ROBINHOOD’s using and/or selling its users’ trade information and/or otherwise profiting from users trading upon its platform, the Plaintiff and other similarly situated retail users were permitted to trade “commission free” upon ROBINHOOD’s platforms. 45. At all material times the Plaintiff and others performed their contractual obligations by allowing ROBINHOOD to utilize their trade information for profit in the course of executing an otherwise commission free trade on behalf of said users. 46. At all times material hereto the Plaintiff and other ROBINHOOD retail investors relied upon access and ability to trade upon ROBINHOOD’s platform in order to profit from, manage and/or otherwise protect their investments. 47. On or about January 27, 2021, ROBINHOOD unilaterally, randomly, abruptly, without notice or warning, and absent lawful excuse, authority or permission, 11 failed its performance obligations to Plaintiff and other users or Class members with whom it had a User and/or Customer Agreement. 48. ROBINHOOD’s conduct prevented Plaintiff and other users or Class members from executing timely trades and/or investments upon ROBINHOOD’s trading platforms. 49. On January 27, 2021, the Plaintiff’s portfolio included one or more of the blocked stocks. 50. On January 27, 2021, the Plaintiff’s attempts and/or requests to trade blocked stocks were prohibited and/or refused, in spite of ROBINHOOD’s contractual and other legal obligations to honor such requests. 51. Due to the blocked stock trade ban by ROBINHOOD, Plaintiff and other users or Class members were unable to further invest, trade, manage and/or otherwise protect or maximize their own economic interests by using the platform they relied upon to make their investments. 52. ROBINHOOD’s conduct disadvantaged the Plaintiff and other smaller retail investors by failing to permit blocked stock trading on its platform, while other institutional investors were not foreclosed from similar trading. 53. ROBINHOOD’s conduct in halting blocked stock trading on its platform constituted a unilateral and material breach of its User and/or Customer Agreement. 54. At all times material hereto ROBINHOOD’s breach was intentional and caused foreseeable damages and economic harm to the Plaintiff and other users or Class members. 12 55. As a direct and proximate result of ROBINHOOD’s breach and failure to perform the Plaintiffs and other users or Class members will continue to suffer damages. SECOND COUNT (Implied Covenant of Good Faith and Fair Dealings: as against all Defendants) 1-46. Paragraphs one (1) through forty-six (46) of the FIRST COUNT are realleged and incorporated in this SECOND COUNT as if the same were set forth fully herein. 47. At all times material hereto, ROBINHOOD maintained a special and/or confidential broker-client relationship with Plaintiffs, and other users or class members from which a duty of good faith and fair dealings arose. 48. At all times material hereto, the relationship between ROBINHOOD and the Plaintiff and other users or Class members was characterized as one of unequal bargaining power favoring ROBINHOOD who, among other things, controlled all means of trading blocked stocks on its platform, the same giving rise to a duty of good faith and fair dealings. 49. At all times material hereto, the Plaintiff and other ROBINHOOD users traded on ROBINHOOD’s platform with a reasonable expectation that they could continue to trade blocked stocks and they continued to perform all obligations under the User and/or Customer Agreement. 50. The Plaintiff and other users or Class members were invested in blocked stocks on January 27, 2021 and had a good faith expectation they would be able to trade blocked stocks and/or otherwise manage and protect their investments using ROBINHOOD’s platform. 13 51. At all times material hereto ROBINHOOD was obligated to provide trading services and use of its platform to the Plaintiff and other users or class members. 52. ROBINHOOD’s failure and/or refusal to permit Plaintiff and other users or class members to trade blocked stocks on its platform without warning, unfairly preventing them from managing and protecting their small retail investments in the same. 53. At all material times ROBINHOOD’s conduct was undertaken intentionally and recklessly in bad faith, inasmuch as ROBINHOOD benefitted economically along with other institutional clients and/or potential clients to the economic detriment of the Plaintiff and other smaller retail users and class members. 54. At all material times ROBINHOOD failed to disclose its own pecuniary interest in halting investments in blocked stocks by Plaintiff and other users or Class members. 55. Upon information and belief, ROBINHOOD disclosed its intention to halt blocked stock trading to other institutional customers and potential customers, all to the detriment of the Plaintiff and other users or Class members. 56. Upon information and belief, ROBINHOOD failed to comply with FINRA Rule 5310 and/or other state and federal laws and regulations when it halted trading and/or trade requests by Plaintiff and other users or Class members on or before January 27, 2011. 57. The aforementioned conduct by ROBINHOOD constitutes a breach of the duty of good faith and fair dealings toward Plaintiff and other users or Class members. 14 58. As a direct and proximate result of ROBINHOOD’s breach of the duty of good faith and fair dealings, the Plaintiff and other users or Class Members have and will continue to suffer damages. THIRD COUNT (Breach of Fiduciary Duty) 1-56. Paragraphs one (1) through fifty-six (56) of the SECOND COUNT are realleged and incorporated in this THIRD COUNT as if the same were set forth fully herein. 57. At all times material thereto, ROBINHOOD’s license and legal authority to provide financial services and/or act as a broker for the Plaintiff and its other users or Class members, imposed upon ROBINHOOD a fiduciary duty requiring it to exercise the highest degree of professional integrity and honesty in relation to providing financial services to them. 58. The aforementioned conduct by ROBINHOOD in halting trading and trade requests related to blocked stocks, failure to warn its users of the same, failing to disclose its own pecuniary interests in halting blocked stock trading, failing to allow the Plaintiff and other users or Class members to trade blocked stocks on its platform to permit timely trading and protection and management of their small retail investments, failing to comply with licensing and/or other regulatory, state and/or other federal laws pertaining to financial service provider and/or disclosing its intention to halt blocked stock trading to institutional customers or potential customers to the financial detriment of the Plaintiff and its user or other Class members, constitutes a breach of fiduciary duty by ROBINHOOD. 15 59. As a direct and proximate result of ROBINHOOD’s breach of the fiduciary duty owed to Plaintiff and other users or Class members, the same have and will continue to suffer damages. FOURTH COUNT (Negligence) 1-52. Paragraphs one (1) through fifty-two (52) of the FIRST COUNT are realleged and incorporated in this FOURTH COUNT as if the same were set forth fully herein 53-55. Paragraphs fifty-four (54) through fifty-six (56) of the SECOND COUNT are realleged and incorporated in this FOURTH COUNT as if the same were set forth fully herein. 56. In addition to other duties owed to the Plaintiff and other users or Class members, ROBINSHOOD owed them a duty of ordinary and reasonable care. 57. At all times material hereto, ROBINHOOD owed Plaintiff and other users or Class members a duty to protect them against foreseeable risks of harm. 58. At all times material hereto, ROBINHOOD owed Plaintiff and other users or Class members a duty to exercise ordinary and reasonable care in providing financial services and permitting stock trading and investments upon its platforms. 59. At all times material hereto, ROBINHOOD owed Plaintiff and other users or Class members a duty of care expected from other institutions similarly situated and operating in open and free financial markets in the United States. 60. ROBINHOOD breached its duties of care to Plaintiff and other users or Class members in one or more of the following ways including, but not limited to: i) halting trading and trade requests related to blocked stocks on its platform(s); 16 ii) failing to provide reasonable forewarning of its intention to halt trading of blocked stocks on its trading platforms; iii) failing to permit timely trading upon request as required by FINRA Rule 5310 and/or other regulatory and/or state or federal laws; iv) failing to disclose its own pecuniary interests in halting blocked stock trading; v) failing to permit reasonable opportunity to trade blocked stocks and otherwise permit management and protection of small retail investments; vi) failing to prevent economic harm and detriment to its users in favor of actual or potential institutional clients with whom it shared economic and/or pecuniary interests; vii) disclosing its intention to halt trading of blocked stocks to institutional investors or potential investors to the detriment of its users; and/or viii) engaging in conduct falling far below and inconsistent with financial industry norms for brokers and financial service providers in an open and free market. 61. ROBINHOOD’s conduct was and continues to be a substantial factor in producing economic and/or other losses and damages to the Plaintiff other users and Class members 62. As a direct and proximate result of ROBINHOOD’s careless and negligent conduct the Plaintiff and other users or Class members have and will continue to suffer economic and/or other losses and damages. COUNT FIVE (Connecticut Unfair Trade Practices as to all Defendants) 1-57. Paragraphs one (1) through fifty-seven (57) of COUNT TWO are realleged and incorporated into COUNT FIVE as if the same were more fully set forth herein. 17 58-59. Paragraphs fifty-seven (57) and fifty-eight (58) of COUNT THREE are realleged and incorporated into COUNT FIVE as if the same were more fully set forth herein. 60-64. Paragraphs fifty-six (56) to sixty (60) of COUNT FOUR are realleged and incorporated into COUNT FIVE as if the same were more fully set forth herein 65. At all relevant times herein, ROBINHOOD was engaged in trades or businesses as those terms are defined in C.G.S. §42-110(a), in the State of Connecticut. 66. Upon information and belief, ROBINHOOD failed to register as a Foreign Corporation conducting business in the State of Connecticut contrary to the laws of the State of Connecticut, in spite of having conducted business in the State of Connecticut. 67. The aforesaid conduct, actions and omissions by ROBINHOOD including, but not limited to its (1) failure to register as a Foreign Corporation doing business in the State of Connecticut, (2) breach of contract, (3) breach of the implied covenant of good faith and fair dealings, (4) breach of fiduciary duty and/or (5) negligence, as set forth elsewhere and specifically in in COUNTS ONE through FOUR of this Complaint, constitute violations of the Connecticut Unfair Trade Practices Act, C.G.S. §42-110(b). 68. ROBINHOOD’s conduct violates the Connecticut Unfair Trade Practices Act §42-110(b), because such conduct constitutes unfair and deceptive acts and/or practices in the conduct of a trade, or business, for one or more of the following reasons: i) Defendant’s acts and/or practices were deceptive, in that they had a tendency and capacity to deceive persons such as the Plaintiff other users or Class members; 18 ii) Defendants’ acts and/or practices violated public policy as it has been established by statute, common law, or otherwise; iii) Defendants’ acts and/or practices were immoral, unethical, oppressive or unscrupulous; and/or iv) Defendants’ acts and/or practices have caused substantial injury to persons such as the Plaintiff other users or Class members. 69. As a direct and proximate result of the deceptive acts and/or practices, ROBINHOOD has caused Plaintiffs and other users or Class members to suffer damage and distress including, but not limited to, ascertainable loss of money, property, and/or other harm. 70. ROBINHOOD has engaged in more than isolated instances of such deceptive business practices causing ascertainable loss to consumers such as the Plaintiff other users or Class members. 71. A copy of this Complaint was delivered to the Connecticut Attorney General. WHEREFORE, the Plaintiff, prays this Court grants: 1. Class Certification; 2. Compensatory Damages; 3. Punitive damages; 4. Attorney’s fees; 5. Costs of this Action; 6. Punitive damages pursuant to C.G.S. §42-110g(a); 7. Attorney’s fees pursuant to C.G.S. §42-110g(g); 8. Prejudgment and post-judgment interest; 19 9. That this Court permit the service of the Complaint, associated motion papers, and any Court order upon Defendants and their legal representatives by email and FedEx pursuant to Federal Rule of Civil Procedure 4(f)(3); and/or 10. Such other relief as this Honorable Court may deem just and proper. THE PLAINTIFF MARC A FRESA BY: ___________________________ Stephan Seeger, Esq. (19234) Law Offices: Stephen J. Carriero 810 Bedford Street, Suite#3 Stamford, CT 06901 Tel: (203) 273-5170 Fax: (203) 357-0608 Seegerkid2@aol.com 20

products liability and mass tort

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John N. Poulos Joseph LoPiccolo POULOS LOPICCOLO PC John N. Poulos 1305 South Roller Rd. Ocean, New Jersey 07712 732-757-0165 poulos@pllawfirm.com Bruce H. Nagel Diane E. Sammons NAGEL RICE, LLP 103 Eisenhower Parkway Roseland, New Jersey 07068 973-618-0400 dsammons@nagelrice.com bnagel@nagelrice.com Attorneys for Plaintiff UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY MARIUSZ KUZIAN, On Behalf of Himself and All Other Persons Similarly Situated, Case No.: Plaintiff, COMPLAINT -against- JURY TRIAL DEMANDED ELECTROLUX HOME PRODUCTS, INC., Defendant. Plaintiff, by his attorneys, Nagel Rice LLP, and Poulos LoPiccolo PC, on behalf of himself and all others similarly situated, make the following allegations on personal knowledge and information and belief: I. IDENTIFICATION OF PARTIES (Local Rule 10.1) 1. The names and addresses of the named parties to this action are (i) Plaintiff Mariusz Kuzian, 41 Poplar Ave., Egg Harbor, New Jersey 08234 and (ii) Electrolux Home Products, Inc. 10200 David Taylor Dr., Charlotte, NC 28262. II. INTRODUCTION 2. Plaintiff brings this action for actual damages, equitable relief, including restitution, injunctive relief, and disgorgement of profits, and all other relief available on behalf of themselves and all similarly-situated individuals and entities (the “Class” or “Class Members”) who own or have owned refrigerators sold by the Defendant, Electrolux Home Products, Inc. (“Electrolux” or “Defendant”) containing defects that cause the refrigerators’ ice makers to stop producing ice (despite advertising that one can have “ice at your fingertips”). The defective ice makers then leak water causing damage to (1) other parts of the refrigerators as well as the structures and substructures below the refrigerators, (2) the electrical components, including the electronic display panel in front of the refrigerators, and (3) the refrigerators’ main function of keeping food at appropriate and safe temperatures (the “Defect”). The complaints also contend that the refrigerators require numerous service calls, repairs, and upgrades without correcting the Defect. Upon information and belief, the Defect exists in the Electrolux Icon French Door and Side-by-Side Refrigerators, including, but not limited to model numbers EI28BS56IS, EW28BS71IS, EI23BC56IS, EW23BC711S, and E23BC78IPS (the “Refrigerators”). 3. All of the claims asserted herein arise out of Electrolux’s design, manufacture, warranting, advertising and selling of the Refrigerators. 4. Upon information and belief, Electrolux began designing, manufacturing, warranting, marketing, advertising and selling the Refrigerators to thousands of consumers throughout the United States, commencing in or around 2008 - 2009. 5. The Refrigerators are designed and manufactured with a uniform and inherent design defect that causes the Refrigerators to stop producing ice, leak water and damage other features of the Refrigerator, including its main function of keeping food at appropriate temperatures. Further, the water leaks cause floor and, if above another floor, ceiling damage and wall damage. 6. Electrolux knew, or was reckless in not knowing, at or before the time it sold the first unit, that the Refrigerators contained the Defect and that the Refrigerators would fail prematurely due to the Defect. Electrolux had sole and exclusive possession of this knowledge. 7. Notwithstanding this knowledge, Electrolux made uniform and material misrepresentations and uniformly concealed material information in its marketing, advertising, and sale of the Refrigerators, which Electrolux knew to be defective, both at the time of sale and on an ongoing basis. 8. At all times, in every communication, Electrolux made uniform written misrepresentations to and/or uniformly concealed from Plaintiff and everyone in the chain of distribution the Defect in Plaintiff’s Refrigerator, and failed to remove Plaintiff’s Refrigerator from the marketplace or take adequate remedial action. Instead, Electrolux sold and serviced Plaintiff’s Refrigerator even though it knew, or was reckless in not knowing, that his Refrigerator was defectively designed, would fail prematurely, and would ultimately result in Plaintiff’s inability to use his icemaker, and consequently, his Refrigerator, for its intended purpose during the time Plaintiff reasonably expected he would have use of the Refrigerator and ice maker. 9. The Refrigerators have in fact failed prematurely, whether within or outside of applicable warranty periods. 10. As a consequence of Electrolux’s false and misleading statements and active and ongoing concealment of the Defect, Plaintiff and the Class Members purchased and currently own defective Refrigerators and have incurred damages. 11. Plaintiff asserts claims on behalf of himself and the Class Members under the New Jersey Consumer Fraud Act, N.J.S.A. § 56:8-2, et seq. (the “CFA”). Plaintiff also asserts claims on behalf of himself and the Class for fraudulent concealment/nondisclosure, breach of implied and express warranties, and negligent misrepresentation under New Jersey law. 12. Plaintiff seeks actual damages, injunctive relief, restitution and/or disgorgement of profits, statutory damages, attorneys’ fees, costs, and all other relief available to the Class. III. PARTIES 13. Plaintiff Mariusz Kuzian resides in Egg Harbor, New Jersey. In or about November 2009, he purchased a new Electrolux French Door Bottom Freezer / Refrigerator (model number EI28BS56ISO) containing the Defects from Sears for approximately $3,000.00. 14. At all times, Plaintiff followed the use and care instructions that were included with his Refrigerator. 15. Plaintiff’s freezer stopped producing ice less than one year after he purchased it. 16. Plaintiff notified Sears of the defect numerous times and Sears attempted to repair the ice maker but six months later, the ice maker completely stopped working again and the electronic display on the front of his Refrigerator also stopped functioning. 17. Plaintiff also complained to Electrolux concerning the defects but the defects continue to remain. In fact, Plaintiff complained to an Electrolux executive, Ms. Tither, on the phone at 1-888-266-4043. He also was contacted by a Mrs. Wilson, Correspondence Specialist of Electrolux. 18. In addition to the defective ice maker and faulty display, Plaintiff noticed the light in the Refrigerator stays on while the door is closed. Because of this defect, the interior of the Refrigerator has cracked and melted and for nearly four months now, the Refrigerator’s temperature also stays at unsafe temperatures to refrigerate food. Plaintiff has suffered over $500 in damages for lost groceries as a result of this defect. 19. To this date, Plaintiff’s Refrigerator does not function properly. 20. On or about May 30, 2012, Plaintiff contacted the undersigned counsel. 21. Electrolux is incorporated in Delaware, with its principal place of business in Charlotte, North Carolina. IV. JURISDICTION AND VENUE 22. This court has subject matter jurisdiction over this action pursuant to the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d)(2), exclusive of interest and costs, and because at least one class member is of diverse citizenship from the Defendant; there are more than 100 class members nationwide; and the aggregate amount in controversy exceeds $5,000,000. 23. Jurisdiction is also proper in this Court because of Electrolux’s many and important contacts with the State of New Jersey. Defendant conducts substantial business in New Jersey, has had systematic and continuous contacts with New Jersey, promotes its products in New Jersey, and puts its refrigerators into the stream of commerce in New Jersey and has agents and representatives that can be found in New Jersey. Defendant also has a registered agent authorized to accept service in the State of New Jersey. 24. Venue is proper in this District under 28 U.S.C. § 1391(b)(1). For purposes of venue under 29 U.S.C. § 1391(b), Electrolux, a corporation, is deemed to reside in any judicial district, including this one, in which Electrolux is subject to personal jurisdiction at the time this action is commenced, according to 28 U.S.C. § 1391(c). Electrolux is subject to personal jurisdiction in this judicial district because Electrolux regularly does business in, generates substantial revenues and profits in New Jersey and can be found in this judicial district. Venue is also proper in this judicial district under 28 U.S.C. § 1391(c) because a a substantial portion of the events or omissions giving rise to the Class Plaintiffs’ claims took place in this judicial district. Electrolux conducts business within the state sufficient to be considered present in New Jersey. IV. FACTUAL BACKGROUND 25. Electrolux is one of the world’s leading manufacturers of refrigerators and other appliances. Electrolux has designed, manufactured, warranted, marketed, advertised and sold several product lines of refrigerators. Electrolux sells high-end refrigerators through major retail stores such as Sears, Best Buy and Lowes to consumers throughout the United States. Electrolux refrigerators are available in three varieties: (1) French door with bottom freezer, (2) side-by-side, and (3) the “all refrigerator” style, with retail prices ranging from $1,900 to over $3,600. 26. On information and belief, Electrolux uniformly markets its refrigerators as highly-rated, top-of the-line appliances. For example, Electrolux describes its refrigerators as featuring unique patented features such as “IQ-TouchTM Controls”, “Luxury-Glide Cool ZoneTM Drawer” and the “PureAdvantage® Filtration System” which “keeps clean filtered air circulated throughout to prevent odor transfer and keeps fresh clean water and ice at your fingertips.” See Product Overview of Counter-Depth French Door Refrigerator with IQ Touch Control at http://www.electroluxappliances.com/kitchen-appliances/refrigeration/french-door/ei23bc56is (emphasis added). Consequently, consumers are willing to pay more for Electrolux products than those offered by competitors, even when those products have similar features and consumers have come to expect that Electrolux brand products will be of high quality, durable and reliable. The Defect 27. The Refrigerators fail to perform as advertised, because their ice makers stop producing ice only months after purchase and start leaking water in and around the Refrigerator causing damage to other parts of the Refrigerators and surrounding areas. 28. The Defect renders the Refrigerators unusable because they (1) fail to produce ice, (2) leak water in and around the Refrigerators causing damage to food, flooring, walls and any other personal property around the Refrigerators, and (3) as a result of the leaks, cause electrical components of the Refrigerators to short rendering such functions as the “IQ-TouchTM Controls” to malfunction and become unusable. Further, as a result of the electrical malfunctions, the Refrigerators become unable to keep the food and other products in it cool at appropriate and safe temperatures. 29. Electrolux failed to adequately design, manufacture, and/or test the Refrigerators to ensure they were free from defects at the time of sale. 30. At all relevant times, Plaintiff has used his Refrigerator in a foreseeable manner and in the manner in which they were intended to be used. 31. The Defect, which manifests during the expected useful life of the Refrigerators, both within and outside applicable warranty periods, is substantially likely to prevent the Refrigerators from performing their essential function, making it impossible for Plaintiff to use his Refrigerator as intended during its expected useful life. 32. The Defect rendered the Refrigerators unfit for the ordinary purpose for which refrigerators are sold at the time they were sold to Plaintiff and members of the Class. 33. The Defect has necessitated and will continue to necessitate replacement of and/or costly repairs to the Refrigerators. 34. The Refrigerators have a uniform design defect that causes the appliances to stop producing ice, leak water, cause electrical malfunctions which causes the Refrigerator to fail to keep food at appropriate and safe temperatures. Plaintiff and Class Members’ Reasonable Expectations 35. In purchasing the Refrigerator, Plaintiff legitimately expected the Refrigerator to operate in accordance with all of its intended purposes – including the production of ice. 36. Upon information and belief, consumers reasonably expect that refrigerators like the Refrigerators at issue here will function properly for at least 10 years. The Association of Home Appliance Manufacturers has found that the life expectancy of refrigerators is 14 years for side-by-side models, and 17 years for bottom freezer models. 37. Plaintiff and the Class Members reasonably expected the Refrigerators to effectively produce ice, not leak and have all electrical components function properly during the Refrigerators’ expected useful lives. 38. Plaintiff and the Class Members reasonably expected Electrolux to disclose the existence of a defect that was known to Electrolux at the time of sale, namely that the Refrigerators would not produce ice, were prone to water leaks, electrical malfunctions and would not keep food at acceptable temperatures. 39. Because of the Defect, Plaintiff’s Refrigerator failed during its expected useful life, within or outside applicable warranty periods. 40. As a result of the Defect alleged herein, Plaintiff has experienced failure of his Refrigerator, did not get what he paid for, and has incurred actual damages. Electrolux was Aware of the Defect 41. Before it sold the Refrigerators, Electrolux knew, or was reckless in not knowing, that the Refrigerators contained a defect that would cause the Refrigerators to stop producing ice, leak water, cause electrical malfunctions and fail to keep food at acceptable and safe temperatures. 42. Electrolux did not implement a plan to properly address the Defect and instead manufactured and sold subsequent models that contained the same Defect. 43. Electrolux customers have indicated that beginning as early as 2008 they notified and complained to Electrolux that their Refrigerators were not producing ice, the display panel shorted, the Refrigerator temperature could not keep food at acceptable temperatures and were leaking water due to the malfunctioning ice maker. 44. Upon information and belief, the Defect was a known issue to Electrolux at or about the time it began distributing Refrigerators with the components containing the Defect. 45. Consumers, including Plaintiff, have complained repeatedly to Electrolux about this Defect, but Electrolux refuses to properly address and rectify the problem and has failed and refused to reimburse customers for lost groceries or repairs, citing expired warranty periods. 46. In fact, Chris Polk, as Escalation Specialist for Electrolux and later as Online Outreach Specialist for Electrolux, has been a member of the my3cents community website since February 25, 2008. As a member he has commented on approximately 100 posts related to issues surrounding Electrolux / Frigidaire products generally. See http://community.my3cents.com/userBlog.cgi?id=60563#comments and http://community.my3cents.com/userBlog.cgi?id=147551. Of these posts, numerous complaints related to the Defect. In fact, the first complaint related to the Defect was raised as early as June 12, 2008. Chris Polk of Electrolux responded to this complaint “on behalf of Electrolux Major Appliances in relation to your posting on My3cents.com.” 47. Even on Electrolux’s Facebook page at http://www.facebook.com/Electrolux/posts/10150570991198002, Mr. Polk responds to aggrieved Electrolux owners regarding their defective ice makers stating Electrolux is “sorry to hear you're having issues with your refrigerator and we would like to learn more. Please email Chris.Polk@Electrolux.com with your contact information and product serial number. Thank 48. Electrolux also maintains a Facebook page entitled Kelly Confidential by Electrolux. See http://www.facebook.com/KellyConfidential. One of the posts dated May 3, 2012 identifies 16 comments to a “Status” of “We love Kelly’s sunshine yellow dress – what summer staple can’t you wait to break out” wherein posters, inter alia, respond as follows: a. Kendra Haden. Wish I loved me Electrolux fridge.... Be careful when buying the French door like picture... Ice maker doesn't work... I have been having mine worked on for TWO years and they keep replacing parts. Still the same problem... No ice!!!!!!May 3 at 8:38pm · b. Penny Clark. Two yrs.? I would have returned it! May 3 at 9:37pm · c. Kelly Confidential by Electrolux. Hi Kendra Haden, We would like to learn more about your refrigerator issue. Please email Chris.Polk@Electrolux.com with your product serial number and contact information for assistance. Thanks! May 4 at 9:15am. d. Thomas Ricci. Other people within the Electrolux compnay have been notified including the likes of Chris Polk at CHRIS.POLK@ELECTROLUX.COM; and nothing has been done about it. When is anyone one within Electrolux going to escalate this matter to a manager with authority and get the appliance replaced????????????? The servicemen from Elite Appliace have made some sort of repairs to the appliance today, and the appliance is still leaking!!!!!!!!!!!!!!!!!!!! this is wrong!!!!!!!!! what is Electrolux going to do something about it? https://www.facebook.com/photo.php?fbid=10150721287915547&set=a.10150246114820547.325970 .46329370546&type=1&theater. 49. Moreover, Electrolux was or should have been aware at the time it sold the Refrigerators that they were defective since they had a representative – Chris Polk – monitoring the internet commenting on complaints about the Defect. The following is a small sample of consumer complaints regarding the Defect and Electrolux’s refusal to properly address it, as detailed on http://www.consumeraffairs.com/homeowners/electrolux.html: a. karen of South Lyon, MI on April 13, 2012. We have had our French door/freezer on the bottom refrigerator since January 2011. We started having issues with the ice maker. It stopped producing ice. We called the repair man. He came out, replaced a board and said that they were having issues with this particular fridge. Then, it still was not working. So he came out a third time and it still was not producing ice. He replaced valves. Now, we are noticing cracks developing in the ceiling near the back over the light. The plastic appears to be melting and opening up! I am worried it might cause a fire! Please contact me ASAP. b. karen of stafford, VA on March 4, 2012. The product is the french door refrigerator. The ice maker does not work after doing the quick fix reported on the net. I shut down the ice maker and turn it back on for a good year. There are so many reports on this. In addition to it not working, the ice maker leaks and makes a puddle by the water dispenser. Everyone complains about the ice maker. This being the case, it is probably a bad engineering design. You would think the company would be ethical and back the product and do a recall and fix the problem but no recalls! There should be. I would like to see a class action suit against Electrolux to force them to do a recall and pay to fix the problem. I would love to talk to anyone willing to do this. c. Lesley of Los Angeles, CA on January. 23, 2012. Electrolux refrigerator exhibiting serious problems after the one year manufacturer warranty was up. I had purchased an extended warranty (not through manufacturer) however, when I called Electrolux to report my issues - possibly having a lemon, too many problems for a new fridge, etc. - they were completely disinterested and took no responsibility for their product. They said it was a dealer problem if I wanted any comeback! I spoke to a supervisor Jennifer. How can companies take no responsibility for a product? Specifically ice maker problems, digital display and water dispenser. d. jennifer of Belivdere, NJ on December. 15, 2011. The ice maker stopped working in the French door fridge, after 3 months. The fridge is now leaking water throughout unit, and onto the floor. I made 4 repair calls, and still no ice. I'm not getting what I paid for. I had to take 4 days off work, to wait for repair the repairman, and the issue is still not resolved. e. Donald of Riva, MD on November. 30, 2010. Chris, I am writing this to tell you how dissatisfied we are with our Electrolux Refrigerator. We purchased the refrigerator 1/8/2010 for $3099, Model # EW28BS71IS and Serial # 4A94901207 from Appliance Land, Annapolis, MD. We also purchased a dishwasher, dual fuel range and a microwave. Thankfully, we have not had any problems with these three appliance yet! From what I read on the internet and what our service people tell us, I don't know just matter of time. Anyway, with our refrigerator, we have had it for almost 1 year now and it has made ice probably only 3-4 weeks off and on out of the past year. For over 3000 dollars, I expect more! I just called Electrolux for the 5th time for no ice today. And I have to take more time off of work. We had the ice maker basically rebuilt, had three ice maker computer boards put in and two front door display boards replaced. Below is a summary of our problems and contacts between Electrolux and myself. The response from Electrolux is unconscionable. We have had this unit for almost a year and it does not work! I am an electrical engineer and we design military telemetry equipment and I can tell you the problem is the design. It is a very poor design, shoddily manufactured, and the company does not care at all! These appliances are not worth the money that is charged for them. We have an $800 refrigerator in the basement that is over 15 years old and it makes more ice than we can use! If I had my way, I would get a full refund for all the appliances and purchase some other brand. I am exploring our options. Best Regards, Donald ** **@L- 3com.com **@comcast.net Here is a history list of my complaints: 1/8/2010 Purchased refrigerator ($3099) Model # EW28BS71IS and Serial # 4A94901207 from Appliance Land, Annapolis, MD 6/2010 - called Electrolux, no ice. They will send an upgrade kit to the house. When it arrives, call VIA Repair Service to have them install it. 6/9/10 - VIA replaced upgrade kit (board in back and ice mold with new thermostat) 8/30/2010 called Electrolux again, second time for no ice. Ice maker making ticking noise. Also, front panel display missing segments on display. They said to call VIA. 9/2010 VIA came out to diagnose. They will order new motor and front panel board. 9/7/10 VIA replaced motor and front board for missing LED segments. Had to break ice bin and motor arm to get out. Said will order and come back. 9/22/10 Via service tech replaced ice bin and motor arm. 9/28/10 - Called Electrolux 3rd time to report ice maker not working. Electrolux said to call service company and have them call Electrolux Tech support 9/29/10 - Called VIA they are coming out Oct 1 to look at it and call tech support. Oct 1, 2010 - VIA came out and tech found interference with small plastic cover so removed it temporarily. He called tech support they said they will send new plastic cover, spacer for ice mold pin and new board with 8.0 version software. seems to be working fine without the plastic cover! Oct 6, 2010 - New parts came to house. Oct 7, 2010 - Called VIA to set up appointment for tech to install new parts. They will install new parts on Oct 12th. Oct 12, 2010 - VIA installed new version 8.0 board, plastic cover and spacer for mold pin still seems to be working fine! Oct 25, 2010 - Called Electrolux 4th time: no water; no ice; red alarm lit; power failure lit; several touch panel functions inoperative, i.e. can't turn off alarm light (alarm sound went off by itself), can't turn power off; several other lights partially illuminated, water light is totally out. I told them the front door board is bad. Oct 25, 2010 Called VIA. They will be out on Thursday, Oct. 28 to diagnose. They called Oct. 28 and said they won't be out but will order display board and overnight to house. Oct 29, 2010 Received board and installed. Front panel display is working just fine. Nov 30, 2010 - Called Electrolux 5th time: no ice; Clicking sound, large build up of ice up in ice maker ice mold hitting block of ice - reason for clicking sound! Electrolux called VIA while I was on phone. Here is a letter I sent to Electrolux on 10-25-2010: We purchased a French Door refrigerator, Model EW28BS71IS, on 1.8.2010 and so far it has been nothing but problems. No Ice, no water, water leaking, front panel not working. We have had ice only maybe 2-3 weeks over the past year. So far, the ice maker board was replaced twice, the front panel board once, other ice maker components several times. The service company has been at the house 6 times. I reported to Electrolux at least 4 times, and today, I had to call both again for inoperative front panel. This refrigerator is junk and I want to know how many times do I have to call for service to get it replaced or my money refunded (over $3000!) I am currently contacting the Better Business Bureau and several class action attorneys. Here was Electrolux response: Thank you for contacting Electrolux Major Appliances. We sincerely, apologize for the inconvenience. Our refrigerator is cover under a one year manufactures warranty. The appliance will need service, if the appliance was non-repairable, only then we would proceed with reviewing the file. Again, we apologize for the inconvenience. Again, thank you for contacting Electrolux Major Appliances. Here was my response back to Electrolux (with no further response from them!): We haven't been able to use the refrigerator fully operational for the last 9 months that we have had it. The ice maker has not worked properly and we have had to wipe up water off the floor in the past 9 months as well. Spending $3100 on a refrigerator that is non-functional is more than an inconvenience! It is unconscionable. And for that much money and your reputation at stake, a one year warranty is a disgrace. So what you are saying if we keep having service until the warranty runs out we are out of luck! I want to remind you, that we will get this resolved. I am currently in talks with several attorneys. We are also going to contact the US Attorney General, as this type of behavior constitutes fraud. f. Malisa of San Diego, CA on Sept. 26, 2010. From the day we purchased our French Door Refrigerator in October of 2009, we have had continuous problems with the ice maker. To date, the problems continue and we are going on our 9th repair with 5 different repair companies. At this point the ice maker has a broken part due to incompetence of the technicians and the issue has not been resolved. Every time a repair is made, the doors are kept open long enough to warm the food in the refrigerator and I have to throw out any food I feel could have been affected. g. Laura of Marietta, GA on April 10, 2010. I purchased an Electrolux French door fridge and right away the ice maker died. It was fixed and then died again. I was told that it would take 6 parts to fix it but then waited over a month for parts. Finally, Electrolux ordered a whole new fridge for me. Believe it or not, this ice maker is now not working either. It is filled with a giant block of ice! I was told that there are many problems with the ice maker. Help! I keep taking days off work to unload my fridge and to meet with repairmen. This has been going on for almost a year. h. Patricia of Destrehan, LA on Dec. 11, 2009. My brand new Electrolux refrigerator is going nuts. First the main board was going berserk so they sent someone out to replace the board. Upon doing this the entire refrigerator died. Now I'm without a refrigerator until they get back on next Thursday and hopefully solve the problem. I think I have a lemon with Electrolux. Shouldn't have thought the name was the same as it was 50 years ago, because it's not. Don't buy Electrolux until they get all the kinks out. i. Tom of Durant, OK on Nov. 12, 2008. purchased 6 electrolux kitchen appliances and 2 were defective out of the box. Icemaker will not make ice and the Gas cooktop on burner would not light. 50. Regarding Plaintiff’s Refrigerator, on Amazon.com, numerous Electrolux customers complain of the same exact defects Plaintiff complains of here related to the same model number. See http://www.amazon.com/Electrolux-EI28BS56IS-French-Door-Refrigerator- Stainless/product- reviews/B002OBTC20/ref=cm_cr_pr_btm_link_3?ie=UTF8&showViewpoints=0&pageNumber =3&sortBy=bySubmissionDateDescending. Complaint dates range from May 2010 through May 26, 2012 where the poster, Dave, complains “One star is too many for this fridge/filter and the whole thing. The most expensive piece of junk i have ever owned. DO NOT BUY ELECTROLUX!!!!!!!!!!!!!!! Leaks, or just doesnt work right. My service guy told me that they have 100% failure rate! 100%.” 51. Some consumers have even posted videos on YouTube detailing the problems they have been experiencing with the Refrigerators. See e.g., http://www.youtube.com/watch?v=_a3w-oMz4Eo. 52. As discussed above, Chris Polk of Electrolux monitored the internet and contacting aggrieved customers related to the Defects since 2008. As detailed by the small sample of consumer complaints described herein, consumers continued to complain from 2008 to the days leading up to the filing of this complaint. Electrolux was aware of the Defect in the Refrigerators well before Plaintiff and the Class Members purchased the Refrigerators. 53. For those Refrigerators that have failed within the applicable warranty period, Electrolux has provided repairs that do not address the underlying Defect and do nothing to prevent subsequent failure. Instead, Electrolux has merely replaced parts to no avail. Electrolux was aware, had reason to know, or was reckless in not knowing that its warranty repairs would not cure or rectify the Defect but would instead merely delay the impact of the Defect which caused reoccurring failures. By providing such ineffective warranty repairs, Electrolux merely postponed the failure of the Refrigerators until after the expiration of applicable warranties. 54. The repairs that Electrolux recommends do not address the underlying Defect and do nothing to prevent subsequent failure in the Refrigerators. 55. Electrolux knew that the repairs it recommended would not cure the Defect. Nonetheless, it refuses to refund all customers or replace the Refrigerators with ones that function properly. Electrolux’s Omissions and Misrepresentations 56. Electrolux failed to adequately design, manufacture, and/or test the Refrigerators to ensure that they were free from the Defect, and/or knew, had reason to know, or was reckless in not knowing of the Defect when it uniformly warranted, advertised, marketed and sold the Refrigerators to Plaintiff and the Class. 57. Electrolux did not disclose to its customers the fact that the Defect existed at the time of sale and that the Defect would render the Refrigerators unable to perform their essential function well before the end of their expected useful lives. Nor did Electrolux disclose that warranty or the recommended post-warranty repairs would not cure or rectify the Defect and would only, at best, briefly delay the impact of the Defect and thereby postpone failure in the Refrigerators. 58. Instead, in its uniform marketing and advertising, Electrolux falsely represented that the Refrigerators were free from defects and that they would produce ice. Electrolux uniformly markets its refrigerators as featuring unique patented features such as “IQ-TouchTM Controls”, “Luxury-Glide Cool ZoneTM Drawer” and the “PureAdvantage® Filtration System” which “keeps clean filtered air circulated throughout to prevent odor transfer and keeps fresh clean water and ice at your fingertips.” (emphasis added) 59. Electrolux knew that consumers were unaware of the latent defect and that they reasonably expected the Refrigerators to produce ice and not leak water inside and outside the Refrigerator. Electrolux also knew that customers expected Electrolux to disclose a defect that would prevent the Refrigerators from performing their function long before the end of their expected useful lives, and that such disclosure would impact consumers’ decision whether to purchase the Refrigerators. Electrolux knew and intended for consumers to rely on its material omissions with regard to the Defect when purchasing the Refrigerators. 60. As a result of Electrolux’s uniform omissions and misrepresentations in its marketing and advertising, Plaintiff believed that the Refrigerator he purchased would operate without defects, and Plaintiff purchased an Electrolux Refrigerator in reliance on that belief. 61. Electrolux’s representations that the Refrigerators were free of defects and would adequately produce ice were not true. Electrolux knew or was reckless in not knowing when it sold the Refrigerators that the Defect would manifest long before the end of the Refrigerators’ expected useful lives, rendering the Refrigerators unable to produce ice and function properly. 62. Electrolux had the capacity to, and did, deceive consumers into believing that they were purchasing refrigerators that were free from defects and could be used safely and practically to produce ice, keep food cold and not cause damage to surrounding floors and walls and to the electrical components of the Refrigerator as a result of water leaks. 63. Electrolux actively concealed from and/or failed to disclose to Plaintiff, the Class, and everyone, the true defective nature of the Refrigerators, and failed to remove the Refrigerators from the marketplace or take adequate remedial action. Electrolux represented that the Refrigerators were free of defects even though it knew or was reckless in not knowing when it sold the Refrigerators that they contained a defect that would render the Refrigerators unusable. Furthermore, Electrolux sold and serviced the Refrigerators even though it knew, or was reckless in not knowing, that the Refrigerators were defective and that Plaintiff and Class members would be unable to use the Refrigerators for their intended purpose for the duration of their expected useful life. 64. To this day, Electrolux continues to misrepresent and/or conceal material information from Plaintiff, the Class and the public about the Defect in the Refrigerators. Fraudulent Concealment Allegations 65. Plaintiff’s claim arises in part out of Electrolux’s fraudulent concealment of the Defect. To the extent that Plaintiff’s claims arise from Electrolux’s fraudulent concealment, there is no one document or communication, and no one interaction, upon which Plaintiff bases his claim. He alleges that at all relevant times, including specifically at the time he purchased his Refrigerator, Electrolux knew, had reason to know, or was reckless in not knowing, of the Defect; Electrolux was under a duty to disclose the Defect based upon its exclusive knowledge of it, its representations about its products, and its concealment of the Defect; and Electrolux never disclosed the Defect to the Plaintiff or anyone at any time or place or in any manner. 66. Plaintiff makes the following specific fraud allegations with as much specificity as possible absent access to the information necessarily available only to Electrolux: a. Who: Electrolux concealed the Defect from Plaintiff, the Class, and everyone in the chain of distribution. Plaintiff is unaware of, and therefore unable to identify, the true names and identities of those individuals at Electrolux responsible for such decisions. b. What: Electrolux knew, or had reason to know, at the time it sold the Refrigerators, or was reckless in not knowing, the fact that an existing defect in the Refrigerators would cause the Refrigerator to stop producing ice and leak water and cause electrical malfunctions and thereby render the Refrigerators unable to perform an essential purpose before the end of their expected useful lives, within or outside the applicable warranty periods. Indeed, as detailed above, Chris Polk, an Electrolux representative, began responding to complaints posted on the internet about the defective Refrigerators as early as 2008. c. When: Beginning no later than 2008, Electrolux concealed this material information at all times with respect to the Refrigerators, including before the time of sale, on an ongoing basis, and continuing to this day. d. Where: Electrolux concealed this material information in every communication it had with Plaintiff, the Class, and everyone in the chain of distribution. Plaintiff is aware of no document, communication, or other place or thing, in which Electrolux disclosed this material information to anyone outside of Electrolux. Such information appears in no sales documents, no displays, no advertisements, no warranties, no owner’s manual, nor on Electrolux’s website. e. How: Electrolux concealed this material information by not disclosing it to Plaintiff, the Class, or anyone in the chain of distribution at any time or place or in any manner, even though it knew this information and knew that it would be important to a reasonable consumer, and even though its omissions with regard to the Defect and consequent premature failures of the Refrigerators were contrary to its representations about the Refrigerators. f. Why: Electrolux concealed this material information for the purpose of inducing Plaintiff and Class members to purchase the defective Refrigerators at full price rather than purchasing competitors’ refrigerators or paying Electrolux less for the Refrigerators, given their limited utility. Had Electrolux disclosed the truth, Plaintiff (and reasonable consumers) would not have bought the Refrigerator, or would have paid less for them. V. TOLLING Discovery Rule 67. The causes of action alleged herein accrued upon discovery of the defective nature of the Refrigerators. Because the Defect is latent, and Electrolux concealed it, Plaintiff and members of the Class did not discover and could not have discovered the Defect through reasonable and diligent investigation. Reasonable and diligent investigation into the cause of the Defect did not and could not reveal a factual basis for a cause of action based on Electrolux’s concealment of the Defect. Fraudulent Concealment 68. Any applicable statutes of limitation have been tolled by Electrolux’s knowing and active and ongoing concealment and denial of the facts as alleged herein. Plaintiff and the Class have been kept ignorant by Electrolux of vital information essential to the pursuit of these claims, without any fault or lack of diligence on their part. Plaintiff and members of the Class could not reasonably have discovered the true, latently defective nature of the Refrigerators. Estoppel 69. Electrolux was and is under a continuing duty to disclose to the Plaintiff and the Class the true character, quality, and nature of the Refrigerators. Electrolux knowingly, affirmatively, and actively concealed the true character, quality, and nature of the Refrigerators, and the concealment is ongoing. Plaintiffs reasonably relied upon Electrolux’s knowing, affirmative, and/or active and ongoing concealment. Based on the foregoing, Electrolux is estopped from relying on any statutes of limitation in defense of this action. VI. NEW JERSEY’S SUBSTANTIVE LAW APPLIES TO THE PROPOSED NATIONWIDE CLASS 70. Plaintiff incorporates the foregoing paragraphs as if fully restated herein. 71. New Jersey’s substantive laws may be constitutionally applied to the claims of Plaintiff and the Class under the Due Process Clause, 14th Amend., § 1, and the Full Faith and Credit Clause, art. IV., § 1, of the U.S. Constitution. New Jersey has significant contact, or significant aggregation of contacts, to the claims asserted by Plaintiffs and all Class Members, thereby creating state interests that ensure that the choice of New Jersey state law is not arbitrary or unfair. 72. The application of New Jersey’s laws to each of the claims alleged by the Class is also appropriate under New Jersey’s choice of law rules. In particular, New Jersey law applies to the CFA claim under the most significant relationship test, and New Jersey law applies to the remaining claims under either the most significant relationship test or the government interest test. 73. New Jersey has significant contacts and/or a significant aggregation of contacts to the claims asserted by Plaintiff and all Class Members. 74. Specifically, New Jersey’s interest in this case and in regulating conduct under its laws arise from, among other things, the fact that Defendant conducts substantial business in New Jersey and Plaintiff and other members of the Proposed Class resides and/or purchased the Refrigerators in New Jersey. VII. CLASS ACTION ALLEGATIONS 75. Plaintiff brings this action on behalf of himself and all other persons similarly situated, pursuant to Rule 23(b)(2) and 23(b)(3) of the Federal Rules of Civil Procedure. 76. The Class that Plaintiff seeks to represent is defined as follows: All persons or entities residing in the United States who own, or have owned, Electrolux refrigerator models EI28BS56IS, EW28BS71IS, EI23BC56IS, EW23BC711S, E23BC78IPS and/or any other Electrolux refrigerator model containing a defect that causes the refrigerator’s ice maker to stop producing ice and to leak water. Excluded from the Class are (a) Electrolux, any entity in which Electrolux has a controlling interest, and its legal representatives, officers, directors, employees, assigns, and successors, (b) the United States government and New Jersey agency or instrumentality thereof; (c) the judge to whom this case is assigned and any member of the judge’s immediate family; and (d) individuals with claims for personal injury, wrongful death and/or emotional distress. Numerosity/Impracticability of Joinder: 77. The Proposed Class Members are so numerous that the individual joinder of all its members, in this or any action, is impracticable. The exact number or identification of the members of the proposed Class is presently unknown to Plaintiff, but it is believed to comprise thousands, if not tens of thousands, of individuals and entities, thereby making joinder impractical. 78. The proposed Class is composed of an easily ascertainable, self-identifying set of individuals and entities that purchased Electrolux Refrigerators with the defects described herein. Commonality and Predominance: 79. There are common questions of law and fact that predominate over any questions affecting only individual members of the Class. These common legal and factual questions, include, but are not limited to, the following: a. Whether Defendant Electrolux’s Refrigerators were defectively designed, manufactured, marketed, distributed and sold; b. When Defendant Electrolux first became aware (or should have become aware) that its Refrigerators were defectively designed and/or manufactured; c. Whether the existence of the Defect in the Refrigerators is a material fact reasonable purchasers would have considered in deciding whether to purchase a refrigerator; d. Whether Defendant Electrolux knowingly concealed the defective nature of the Refrigerators; e. Whether Defendant Electrolux intended that consumers be misled; f. Whether Defendant Electrolux intended that consumers rely on its non- disclosure of the Defect in the Refrigerators; g. Whether Defendant Electrolux misrepresented the durability and usefulness of the Refrigerator; h. Whether, by the misconduct set forth herein, Defendant Electrolux violated consumer protection statutes and/or false advertising statutes and/or state deceptive business practice statutes; i. Whether the Refrigerators are of merchantable quality; j. Whether, by the misconduct set forth herein, Defendant Electrolux violated expressed and implied warranty statutes; k. Whether, by the misconduct set forth herein, Defendant Electrolux violated the common laws of negligent misrepresentation; l. Whether Defendant Electrolux’s false and misleading statements of facts and concealment of material facts regarding the defective Refrigerators were likely to deceive the public; m. Whether the Refrigerators pose a health and/or safety risk; n. Whether consumers have suffered an ascertainable loss; o. The nature and extent of damages and other remedies entitled to the class members; p. Whether Electrolux’s acts and omissions violated the New Jersey Consumer Fraud Act, N.J.S.A. § 56:8-2, et seq.; Typicality: 80. Plaintiffs’ claims are typical of the claims of members of the proposed Class because they purchased the same Refrigerators and were exposed to the same uniform non- disclosures. 81. The factual bases of Electrolux’s misconduct are common to the members of the Class and represent a common thread of fraudulent misconduct, deceptive trade practices, and breach of warranty resulting in injury to all proposed Class Members. Plaintiff is asserting the same rights, making the same claims, and seeking the same relief for themselves and all other members of the proposed Class. Adequacy: 82. Plaintiff is an adequate representative of the proposed Class because he is a member of the proposed Class and does not have interests that conflict with those of the proposed Class members he seeks to represent. 83. Plaintiff is represented by experienced and able counsel who have litigated numerous class action lawsuits, and Plaintiff’s counsel intend to prosecute this action vigorously for the benefit of the proposed Class. Plaintiff and his counsel can fairly and adequately protect the interests of the members of the proposed Class. Superiority: 84. 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 not economically feasible and is procedurally impracticable. While the aggregate damages sustained by the Class are in the millions of dollars, and are no less than five million dollars upon information and belief, the individual damages incurred by each Class member resulting from Electrolux’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, Electrolux 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. VIII. CLAIMS FOR RELIEF FIRST COUNT (Violations of New Jersey’s Consumer Fraud Act, N.J.S.A. § 56:8-2, et seq.) 85. Plaintiff incorporates by reference the allegations contained in the preceding paragraphs of this Complaint. 86. Plaintiff and other members of the Class are “consumers” within the meaning of the CFA. 87. The Refrigerators are “goods” within the meaning of the CFA. 88. At all relevant times material hereto, Electrolux conducted trade and commerce in New Jersey and elsewhere within the meaning of the CFA. 89. The CFA is, by its terms, a cumulative remedy, such that remedies under its provisions can be awarded in addition to those provided under other remedies 90. Electrolux has engaged in deceptive, unconscionable, unfair, fraudulent and misleading commercial practices in the marketing and sale of refrigerators it knew to be defective. 91. Electrolux had exclusive knowledge of the Defect at the time of sale. The Defect is latent and not something that Plaintiff or Class members could, in the exercise of reasonable diligence, have discovered independently prior to purchase. 92. Electrolux represented that its goods, merchandise or services had characteristics, uses, benefits, or quantities that they did not have, and that its goods, merchandise and services were of a particular standard, quality or grade that they were not. 93. In its marketing and sale of the Refrigerators, Electrolux undertook active and ongoing steps to conceal the Defects and has consciously withheld material facts from Plaintiff and other members of the Class with respect to the Defect in the Refrigerators. 94. Plaintiff is aware of nothing in Electrolux’s advertising, publicity, or marketing materials that discloses the truth about the Defect, despite Electrolux’s awareness, or reckless unawareness, of the problem. 95. Electrolux’s conduct was objectively deceptive and had the capacity to deceive reasonable consumers under the circumstances. The fact that a defect in the Refrigerators would cause Refrigerators to stop producing ice (despite advertising that one can have “ice at your fingertips”), leak water that damages other parts of the Refrigerators as well as the structures and substructures below the Refrigerators, cause the electrical components, including the electronic display panel in front of the Refrigerators, to malfunction, and fail to keep food at appropriate and safe temperatures, was a material fact that a reasonable and/or unsophisticated consumer would attach importance to at the time of purchase. This fact would influence a reasonable consumers’ choice of action during the purchase of their refrigerators. 96. Electrolux intended that Plaintiff and the other members of the Class to rely on its acts of concealment and omissions by purchasing the Refrigerators at full price rather than paying less for them or purchasing competitors’ refrigerators. 97. Had Electrolux disclosed all material information regarding the Defect to Plaintiff and other members of the Class, they would not have purchased the Refrigerators, or they would have paid less for them. 98. Electrolux’s conduct had an impact on the public interest because the acts were part of a generalized course of conduct affecting numerous consumers. 99. As a result of the foregoing acts, omissions, and practices, Plaintiff and other members of the Class have suffered an ascertainable loss by purchasing defective refrigerators that are unable to perform their essential function of producing ice and keeping food cool for their expected useful life and that present a risk to the safety of Plaintiff and members of the Class, including through risk of food-borne illness. Plaintiff has also incurred additional costs to repair and/or replace the Refrigerators, and/or losses and damages from food spoilage. Plaintiff is entitled to recover such damages, together with appropriate penalties, including treble damages, attorneys’ fees, and costs of suit. 100. Application of the CFA to all Class members, regardless of their state of residence, is appropriate as described herein and because, inter alia, the facts and circumstances of this case reflect numerous contacts with the State of New Jersey so as to create a state interest in applying the CFA to Electrolux, thereby making application of New Jersey law to the entire Class appropriate. SECOND COUNT (Fraudulent Concealment/Nondisclosure) 101. Plaintiff incorporates by reference the allegations contained in the preceding paragraphs of this Complaint. 102. Electrolux knew or was reckless in not knowing at the time of sale that the Refrigerators’ ice makers are defective in that they are substantially certain to fail well in advance of their anticipated useful life. 103. Electrolux fraudulently concealed from and/or intentionally failed to disclose to Plaintiff, the Class, and all others in the chain of distribution the true defective nature of the Refrigerators’ ice maker and that it routinely malfunctioned, rendering it unusable and inoperable. 104. Electrolux had exclusive knowledge of the Defect at the time of sale. The Defect is latent and not something that Plaintiff or Class Members could, in the exercise of reasonable diligence, have discovered independently prior to purchase. 105. Electrolux had the capacity to, and did, deceive consumers into believing that they were purchasing refrigerators that could be used to produce ice safely and practically without causing damage. 106. Electrolux undertook active and ongoing steps to conceal the Defect because Electrolux knew or should have known that it alone could alert consumers to the presence of the Defect, yet Electrolux chose not to do so. 107. Plaintiff is aware of nothing in Electrolux’s advertising, publicity, or marketing materials that discloses the truth about the Defect, despite Electrolux’s awareness of the problem. 108. The facts concealed and/or not disclosed by Electrolux to Plaintiff and the Class are material facts in that a reasonable person would have considered them important in deciding whether or not to purchase (or to pay the same price for) a refrigerator. 109. If the facts concealed and/or not disclosed by Electrolux to Plaintiff and the proposed Class had been disclosed to Plaintiff, the Plaintiff would not have purchased his refrigerator or would only have purchased it for a reduced price. 110. Electrolux had a duty to disclose the fact that a defect existed at the time of sale by virtue of the fact that consumers would reasonably expect disclosure of the Defect. 111. Electrolux had a duty to disclose the fact that the Refrigerator Defect existed after sale, but before the Defect manifested, because consumers would reasonable expect disclosure of the Defect. 112. Electrolux intentionally concealed and/or failed to disclose the problems with the Refrigerator for the purpose of inducing Plaintiff and the Class to act thereon. 113. Plaintiff and the Class justifiably acted or relied upon the concealed and/or non-disclosed facts to their detriment, as evidenced by their purchase of the Refrigerators and/or replacement parts for the Refrigerators and its ice maker. 114. As a direct and proximate cause of Electrolux’s misconduct, Plaintiff and Class Members have suffered actual damages in that they bought and own Refrigerators that contain an inherent defect and that have prematurely failed or are substantially certain to prematurely fail within and outside applicable warranty periods, and they will be required to incur costs to repair and/or replace the defective components or the Refrigerators as a whole. 115. Electrolux’s conduct has been and is wanton and/or reckless and/or shows a reckless indifference to the interests of others. 116. Electrolux has acted with malice by engaging in conduct that was and is intended by Electrolux to cause injury to the Plaintiff and the Class. 117. Electrolux has committed fraud through its concealment of material facts known to Electrolux with the intent to cause injury to the Plaintiff and the Class. 118. Plaintiff, on behalf of themselves and all others similarly situated, demand judgment against Electrolux for actual and punitive damages for themselves and each member of the Class, plus attorneys’ fees for the establishment of a common fund, interest, and costs. THIRD COUNT (Breach of Implied Warranties) 119. Plaintiff incorporates the above allegations by reference as if fully set forth 120. Electrolux sold and promoted the Refrigerators and ice makers, which it placed into the stream of commerce. Defendant knew or had reason to know of the specific use for which the Refrigerators and ice makers were purchased, and it impliedly warranted that the Refrigerators and their ice makers were of merchantable quality and fit for such use. 121. Plaintiff and Class members reasonably relied upon the expertise, skill, judgment, and knowledge of Defendant Electrolux and upon its implied warranty that the Refrigerator and its ice maker were of merchantable quality and fir for such use. 122. Through the conduct alleged herein, Electrolux has breached the implied warranty of fitness for a particular purpose. The defectively designed Refrigerator and ice maker were not fit for the particular purpose for which they were purchased by Class Members to perform. The Class Members purchased the Refrigerators with the ice makers for a particular purpose of being able to produce and consume ice. Electrolux knew that the Class Members were purchasing the Refrigerator and ice maker for this purpose and marketed the produces for this particular purpose even advertising that one can have “ice at your fingertips”. 123. Plaintiff and Class Members relied on Defendant’s misrepresentations by purchasing the Refrigerators. 124. Defendant knew or had reason to know that Plaintiff and Class Members were influenced to purchase the Refrigerator through Defendant’s expertise, skill, judgment and knowledge in furnishing the products for their intended use. 125. The Refrigerators were not of merchantable quality and were not fit for their particular intended use because the design and/or manufacturing defects alleged herein render them incapable of producing ice and preventing water leakage which causes damages to other parts of the Refrigerators, including the electronic display panel in front of the Refrigerators, as well as the structures and substructures below the Refrigerators, and of keeping food at appropriate and safe temperatures. 126. Defendant’s actions, as complained of herein, breached their implied warranty that the Refrigerators were of merchantable quality as fit for such use, in violation of the Uniform Commercial Code (UCC § 2-314 and § 2-3154) and the common law of this State, as well as the common law and statutory laws of the other states. 127. Plaintiff and the Class Members have incurred damage as described herein as a direct and proximate result of the failure of Defendant to honor its implied warranty. In particular, Plaintiff and Class Members would not have purchased the Products had they known the truth about their defects; nor would they have suffered the collateral effects and damages associated with these defects. FOURTH COUNT (Breach of Express Warranties) 128. Plaintiff incorporates the above allegations by reference as if fully set forth 129. Defendant warranted that all of the Refrigerators that had ice makers were free from defects in material or workmanship at a time when it knew that the Refrigerators and ice makers suffered from serious defects and nevertheless, continued to market and sell these Refrigerators with this express warrant. 130. Defendant has breached its express warranties, as set forth above, by supplying the Refrigerator and its ice maker in a condition which does not meet the warranty obligations undertaken by Electrolux and by failing to repair or replace the defective Refrigerator and its ice maker or defective parts. 131. Defendant has received sufficient and timely notice of the breaches of warranty alleged herein. Despite this notice and Electrolux’s knowledge, Electrolux refuses to honor its warranty, even though it knows of the inherent defect in the Refrigerator and its ice maker. 132. In addition, Electrolux has received, upon information and belief, hundreds if not thousands of complaints and other notices from its customers nationwide advising it of the Defects complained of herein. 133. Plaintiff has given Defendant a reasonable opportunity to cure its failures with respect to its warranties, and Defendant failed to do so. 134. Defendant has failed to provide Plaintiff or the Class Members, as a warranty replacement, a product that conforms to the qualities and characteristics that Electrolux expressly warranted when it sold the Refrigerator and its ice maker to Plaintiff and the Class. 135. As a result of Electrolux’s breach of warranty, Plaintiff and the Class have suffered damage in the amount to be determined at trial. FIFTH COUNT (Negligent Misrepresentation) 136. Plaintiff repeats and realleges the allegations contained in the preceding paragraphs as if fully set forth herein. 137. Defendant Electrolux made a series of misrepresentations and material omissions, as alleged herein, and including misrepresentations in its standard written warranty and otherwise that it would repair defective Refrigerators. Defendant’s statements were material, false, deceptive, and misleading and omitted material facts necessary to make the statements not misleading; such material misrepresentations and omissions were the result of the Defendant’s negligence. 138. Defendant owed a duty to Plaintiff and members of the proposed Class to exercise reasonable care in making representations about the Refrigerators. 139. Plaintiff and the proposed Class Members relied (or should be presumed to have relied) on Defendant’s material representations and omissions in purchasing the Refrigerators. As a result of their justifiable reliance, Plaintiff and members of the Class were induced to and did purchase the Refrigerators. Plaintiff’s reliance and the Class Members’ reliance were reasonably foreseeable by Defendant (and in fact, that is why the Defendant made the misrepresentations that it did). 140. As a direct and proximate result of the negligent misrepresentations made by Defendant, Plaintiff and the Proposed Class Members have been damaged. IX. PRAYER FOR RELIEF WHEREFORE, Plaintiff on behalf of himself and the Class Members, pray for judgment against Electrolux granting the following relief: 1. An order certifying this case as a class action and appointing Plaintiff to represent the Class and Plaintiff’s counsel as Class counsel; 2. All recoverable compensatory and other damages sustained by Plaintiff and the 3. Restitution and disgorgement of all amounts obtained by Electrolux as a result of its misconduct, together with interest thereon from the date of payment, to the victims of such violations; 4. Actual and/or statutory damages for injuries suffered by Plaintiff and the Class in the maximum amount permitted by applicable law, including mandatory treble damages pursuant to the New Jersey Consumer Fraud Act; 5. An order (i) requiring Electrolux to immediately cease its wrongful conduct as set forth above; (ii) enjoining Electrolux from continuing to conceal material information and conduct business vial the unlawful, unfair and deceptive business act and practices complained of herein; and (iii) requiring Electrolux to refund to Plaintiff and all Class Members the funds necessary to repair or replace the Refrigerators as appropriate and/or refund to Plaintiff and all Class Members the funds paid to Electrolux for the defective Refrigerators; 6. Statutory pre-judgment and post-judgment interest on the Class damages; 7. Payment of reasonable attorneys’ fees and costs as may be allowable under applicable law; and 8. Such other relief as the Court may deem just and proper. X. DEMAND FOR JURY TRIAL Plaintiff demands a trial by jury on all causes of action so triable. DATED: June 1, 2012 POULOS LOPICCOLO PC By: /s/ John N. Poulos John N. Poulos Joseph LoPiccolo 1305 South Roller Rd. Ocean, New Jersey 07712 732-757-0165 poulos@pllawfirm.com Bruce H. Nagel Diane E. Sammons NAGEL RICE, LLP 103 Eisenhower Parkway Roseland, New Jersey 07068 973-618-0400 dsammons@nagelrice.com bnagel@nagelrice.com

consumer fraud

CbxdDIcBD5gMZwczBS4i

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x PAMELA WILLIAMS, on behalf of herself and all others similarly situated, Plaintiffs, v. CLASS ACTION COMPLAINT AND DEMAND FOR JURY TRIAL 1:20-cv-3974 HERON PRESTON CREATIVE, INC., Defendant. : : : : : : : : : : : : - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x INTRODUCTION 1. Plaintiff PAMELA WILLIAMS, on behalf of herself and others similarly situated, asserts the following claims against Defendant HERON PRESTON CREATIVE, 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 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.heronpreston.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 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 PAMELA WILLIAMS, at all relevant times, is and was a resident of Kings 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 New York Corporation 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 clothing, shoe, and accessories company that owns and operates www.heronpreston.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, inquire about pricing, 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 May of 2020, Plaintiff visited Defendant’s website, www.heronpreston.com, to make a purchase. Despite her 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 her 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 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 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 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, during the relevant statutory period. 42. Plaintiff, on behalf of herself 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 herself 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 herself 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 her 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 herself 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 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 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 May 22, 2020 STEIN SAKS, PLLC By: /s/ David P. Force David P. Force, Esq. dforce@steinsakslegal.com 285 Passaic Street Hackensack, NJ 07601 Tel: (201) 282-6500 Fax: (201) 282-6501 ATTORNEYS FOR PLAINTIFF

civil rights, immigration, family

-_DbEocBD5gMZwczxIAJ

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA JOHN J. MULVANEY, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. THE GEO GROUP, INC., GEORGE C. ZOLEY, and BRIAN R. EVANS, Defendants. Case No. COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS CLASS ACTION DEMAND FOR JURY TRIAL ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CLASS ACTION COMPLAINT Plaintiff John J. Mulvaney (“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 The GEO Group, Inc. (“GEO” 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. 1 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 GEO securities between March 1, 2012, and August 17, 2016, 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. GEO provides government-outsourced services specializing in the management of correctional, detention, and re-entry facilities, and the provision of community based services and youth services in the United States, Australia, South Africa, the United Kingdom, and Canada. The Company operates through four segments: U.S. Corrections & Detention, GEO Community Services, International Services, and Facility Construction & Design. 3. GEO was founded in 1984 and is headquartered in Boca Raton, Florida. The Company’s shares trade on the New York Stock Exchange (“NYSE”) under the ticker symbol “GEO.” 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) GEO’s facilities lacked adequate safety and security standards and were less efficient at offering correctional services than the Federal Bureau of Prisons’ (“BOP”) facilities; (ii) GEO’s rehabilitative services for inmates were less effective than those provided by BOP; (iii) consequently, the U.S. Department of Justice (“DOJ”) was unlikely to renew and/or extend its contracts with GEO; and (iv) as a result of the foregoing, GEO’s public statements were materially false and misleading at all relevant times. 2 5. On August 18, 2016, Deputy Attorney General Sally Yates (“Yates”) announced the DOJ’s decision to end its use of private prisons, including those operated by GEO, after officials concluded that the facilities are both less safe and less effective at providing correctional services than those run by the federal government. In a memorandum addressed to the Acting Director of the Federal Bureau of Prisons, entitled “Reducing our Use of Private Prisons,” Deputy Attorney General Yates stated, in part: Private prisons served an important role during a difficult period, but time has shown that they compare poorly to our own Bureau facilities. They simply do not provide the same level of correctional services, programs, and resources; they do not save substantially on costs; and as noted in a recent report by the Department’s Office of Inspector General, they do not maintain the same level of safety and security. The rehabilitative services that the Bureau provides, such as educational programs and job training, have proved difficult to replicate and outsource—and these services are essential to reducing recidivism and improving public safety. For all these reasons, I am eager to enlist your help in beginning the process of reducing—and ultimately ending—our use of privately operated prisons. As you know, all of the Bureau’s existing contracts with private prison companies are term- limited and subject to renewal or termination. I am directing that as each contract reaches the end of its term, the Bureau should either decline to renew the contract or substantially reduce its scope in a manner consistent with law and the overall decline of the Bureau’s inmate population. 6. On this news, GEO’s share price fell $12.78, or 39.58%, to close at $19.51 on August 18, 2016. 7. On, August 19, 2016, pre-market, GEO issued a press release announcing that the Federal Bureau of Prisons had extended its contract for the D. Ray James Correctional Facility in Georgia, operated by GEO, through September 30, 2018. That same day, less than three hours later, GEO issued another press release announcing that the Federal Bureau of Prisons had rescinded its extension of the D. Ray James Correctional Facility contract. 3 8. 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 9. 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 by the SEC (17 C.F.R. §240.10b-5). 10. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §§ 1331 and 1337, and Section 27 of the Exchange Act, 15 U.S.C. § 78aa. 11. Venue is proper in this District pursuant to §27 of the Exchange Act and 28 U.S.C. §1391(b), as defendant GEO is headquartered within this District. 12. 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 13. Plaintiff, as set forth in the attached Certification, acquired GEO securities at artificially inflated prices during the Class Period and was damaged upon the revelation of the alleged corrective disclosures. 14. Defendant GEO is incorporated in Florida, and the Company’s principal executive offices are located at 621 Northwest 53rd Street, Suite 700, Boca Raton, Florida 33487. GEO’s common stock trades on the NYSE under the ticker symbol “GEO.” 4 15. Defendant George C. Zoley (“Zoley”) has served at all relevant times as the Company’s Chairman and Chief Executive Officer. 16. Defendant Brian R. Evans (“Evans”) has served at all relevant times as the Company’s Chief Financial Officer and Senior Vice President. 17. The defendants referenced above in ¶¶ 15-16 are sometimes referred to herein as the “Individual Defendants.” SUBSTANTIVE ALLEGATIONS Background 18. GEO provides government-outsourced services specializing in the management of correctional, detention, and re-entry facilities, and the provision of community based services and youth services in the United States, Australia, South Africa, the United Kingdom, and Canada. The Company operates through four segments: U.S. Corrections & Detention, GEO Community Services, International Services, and Facility Construction & Design. Materially False and Misleading Statements Issued During the Class Period 19. The Class Period begins on March 1, 2012, when GEO 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, 2011 (the “2011 10-K”). For the quarter, GEO reported net income of $18.63 million, or $0.30 per diluted share, on revenue of $406.85 million, compared to net income of $23.05 million, or $0.36 per diluted share, on revenue of $374.4 million for the same period in the prior year. For 2011, GEO reported net income of $77.46 million, or $1.23 per diluted share, on revenue of $1.61 billion, compared to net income of $63.47 million, or $1.13 per diluted share, on revenue of $1.27 billion for 2010. In the 2011 10-K, GEO advised investors that: We currently derive, and expect to continue to derive, a significant portion of our revenues from a limited number of governmental agencies. Of our governmental 5 clients, four customers accounted for over 50% of our consolidated revenues for the year ended January 1, 2012. In addition, three federal governmental agencies with correctional and detention responsibilities, the Bureau of Prisons, ICE, and the U.S. Marshals Service, accounted for 39.9% of our total consolidated revenues for the year ended January 1, 2012, with the Bureau of Prisons accounting for 16.0% of our total consolidated revenues for such period, ICE accounting for 13.4% of our total consolidated revenues for such period, and the U.S. Marshals Service accounting for 10.5% of our total consolidated revenues for such period. 20. In the 2011 10-K, GEO further stated, in part: We operate each facility in accordance with our company-wide policies and procedures and with the standards and guidelines required under the relevant management contract. For many facilities, the standards and guidelines include those established by the American Correctional Association, or ACA. The ACA is an independent organization of corrections professionals, which establishes correctional facility standards and guidelines that are generally acknowledged as a benchmark by governmental agencies responsible for correctional facilities. Many of our contracts in the United States require us to seek and maintain ACA accreditation of the facility. We have sought and received ACA accreditation and re-accreditation for all such facilities. We achieved a median re-accreditation score of 99.8% as of January 1, 2012 . . . Competitive Strengths . . . Long-Term Relationships with High-Quality Government Customers We have developed long-term relationships with our federal, state and other governmental customers, which we believe enhance our ability to win new contracts and retain existing business. We have provided correctional and detention management services to the United States Federal Government for 25 years . . . . . . . Business Concentration Except for the major customers noted in the following table, no other single customer made up greater than 10% of our consolidated revenues, excluding discontinued operations, for these years. Customer 2011 2010 2009 Various agencies of the U.S Federal Government: 40% 35% 31% 6 (Emphases added) 21. The 2011 10-K contained signed certifications pursuant to SOX by Defendants Zoley and Evans, stating that the financial information contained in the 2011 10-K was accurate and disclosed any material changes to the Company’s internal control over financial reporting. 22. On May 10, 2012, GEO filed a Quarterly Report on Form 10-Q with the SEC, announcing the Company’s financial and operating results for the quarter ended April 1, 2012 (the “Q1 2012 10-Q”). For the quarter, GEO reported net income of $15.06 million, or $0.25 per diluted share, on revenue of $412.34 million, compared to net income of $16.38 million, or $0.26 per diluted share, on revenue of $391.77 million for the same period in the prior year. 23. The Q1 2012 10-Q contained signed certifications pursuant to SOX by Defendants Zoley and Evans, stating that the financial information contained in the Q1 2012 10-Q was accurate and disclosed any material changes to the Company’s internal control over financial reporting. 24. On August 9, 2012, GEO filed a Quarterly Report on Form 10-Q with the SEC, announcing the Company’s financial and operating results for the quarter ended July 1, 2012 (the “Q2 2012 10-Q”). For the quarter, GEO reported net income of $22.47 million, or $0.37 per diluted share, on revenue of $412.35 million, compared to net income of $21.16 million, or $0.33 per diluted share, on revenue of $396.8 million for the same period in the prior year. 25. The Q2 2012 10-Q contained signed certifications pursuant to SOX by Defendants Zoley and Evans, stating that the financial information contained in the Q2 2012 10-Q was accurate and disclosed any material changes to the Company’s internal control over financial reporting. 26. On November 8, 2012, GEO 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, 2012 (the “Q3 2012 10-Q”). For the quarter, GEO reported net income of $14.73 million, or $0.25 7 per diluted share, on revenue of $411.52 million, compared to net income of $21.29 million, or $0.34 per diluted share, on revenue of $395.68 million for the same period in the prior year. 27. The Q3 2012 10-Q contained signed certifications pursuant to SOX by Defendants Zoley and Evans, stating that the financial information contained in the Q3 2012 10-Q was accurate and disclosed any material changes to the Company’s internal control over financial reporting. 28. On March 1, 2013, GEO 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, 2012 (the “2012 10-K”). For the quarter, GEO reported net income of $39.31 million, or $1.32 per diluted share, on revenue of $378.73 million, compared to net income of $47.29 million, or $0.30 per diluted share, on revenue of $354.47 million for the same period in the prior year. For 2012, GEO reported net income of $133.9 million, or $2.37 per diluted share, on revenue of $1.48 billion, compared to net income of $62.79 million, or $1.11 per diluted share, on revenue of $1.41 billion for 2011. In the 2012 10-K, GEO advised investors that: We currently derive, and expect to continue to derive, a significant portion of our revenues from a limited number of governmental agencies. Of our governmental clients, four customers accounted for 50% of our consolidated revenues for the year ended December 31, 2012. In addition, three federal governmental agencies with correctional and detention responsibilities, the Bureau of Prisons, ICE, and the U.S. Marshals Service, accounted for 45.8% of our total consolidated revenues for the year ended December 31, 2012, with the Bureau of Prisons accounting for 17.0% of our total consolidated revenues for such period, ICE accounting for 17.3% of our total consolidated revenues for such period, and the U.S. Marshals Service accounting for 11.4% of our total consolidated revenues for such period. 29. In the 2012 10-K, GEO further stated, in part: Competitive Strengths . . . Long-Term Relationships with High-Quality Government Customers 8 We have developed long-term relationships with our federal, state and other governmental customers, which we believe enhance our ability to win new contracts and retain existing business. We have provided correctional and detention management services to the United States Federal Government for 26 years, the State of California for 25 years, the State of Texas for approximately 25 years, various Australian state government entities for 21 years and the State of Florida for approximately 19 years. These customers accounted for approximately 64.4% of our consolidated revenues for the fiscal year ended December 31, 2012. The acquisitions of Cornell and BI have increased our business with our three largest federal clients: the Federal Bureau of Prisons, U.S. Marshals Service and ICE. . . . We operate each facility in accordance with our company-wide policies and procedures and with the standards and guidelines required under the relevant management contract. For many facilities, the standards and guidelines include those established by the American Correctional Association, or ACA. The ACA is an independent organization of corrections professionals, which establishes correctional facility standards and guidelines that are generally acknowledged as a benchmark by governmental agencies responsible for correctional facilities. Many of our contracts in the United States require us to seek and maintain ACA accreditation of the facility. We have sought and received ACA accreditation and re-accreditation for all such facilities. We achieved a median re-accreditation score of 99.6% as of December 31, 2012. . . . Business Concentration Except for the major customer noted in the following table, no other single customer made up greater than 10% of the Company’s consolidated revenues for the following fiscal years. Customer 2012 2011 2010 Various agencies of the U.S Federal Government: 47 % 40% 35 % (Emphasis added.) 30. The 2012 10-K contained signed certifications pursuant to SOX by Defendants Zoley and Evans, stating that the financial information contained in the 2012 10-K was accurate and disclosed any material changes to the Company’s internal control over financial reporting. 9 31. On May 10, 2013, GEO filed a Quarterly Report on Form 10-Q with the SEC, announcing the Company’s financial and operating results for the quarter ended March 31, 2013 (the “Q1 2013 10-Q”). For the quarter, GEO reported net income of $23.44 million, or $0.33 per diluted share, on revenue of $377.03 million, compared to net income of $15.06 million, or $0.25 per diluted share, on revenue of $360.04 million for the same period in the prior year. 32. The Q1 2013 10-Q contained signed certifications pursuant to SOX by Defendants Zoley and Evans, stating that the financial information contained in the Q1 2013 10-Q was accurate and disclosed any material changes to the Company’s internal control over financial reporting. 33. On August 8, 2013, GEO filed a Quarterly Report on Form 10-Q with the SEC, announcing the Company’s financial and operating results for the quarter ended June 30, 2013 (the “Q2 2013 10-Q”). For the quarter, GEO reported net income of $34.22 million, or $0.48 per diluted share, on revenue of $381.65 million, compared to net income of $22.48 million, or $0.37 per diluted share, on revenue of $371.17 million for the same period in the prior year. 34. The Q2 2013 10-Q contained signed certifications pursuant to SOX by Defendants Zoley and Evans, stating that the financial information contained in the Q2 2013 10-Q was accurate and disclosed any material changes to the Company’s internal control over financial reporting. 35. On November 8, 2013, GEO 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, 2013 (the “Q3 2013 10-Q”). For the quarter, GEO reported net income of $29.91 million, or $0.42 per diluted share, on revenue of $379.84 million, compared to net income of $14.73 million, or $0.33 per diluted share, on revenue of $369.12 million for the same period in the prior year. 10 36. The Q3 2013 10-Q contained signed certifications pursuant to SOX by Defendants Zoley and Evans, stating that the financial information contained in the Q3 2013 10-Q was accurate and disclosed any material changes to the Company’s internal control over financial reporting. 37. On March 3, 2014, GEO 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, 2013 (the “2013 10-K”). For the quarter, GEO reported net income of $27.63 million, or $0.38 per diluted share, on revenue of $383.55 million, compared to net income of $81.61 million, or $1.32 per diluted share, on revenue of $378.73 million for the same period in the prior year. For 2013, GEO reported net income of $115.2 million, or $1.64 per diluted share, on revenue of $1.52 billion, compared to net income of $133.9 million, or $2.37 per diluted share, on revenue of $1.48 billion for 2012. In the 2013 10-K, GEO advised investors that: We currently derive, and expect to continue to derive, a significant portion of our revenues from a limited number of governmental agencies. Of our governmental clients, four customers, through multiple individual contracts, accounted for 48.6% of our consolidated revenues for the year ended December 31, 2013. In addition, three federal governmental agencies with correctional and detention responsibilities, the Bureau of Prisons, ICE, and the U.S. Marshals Service, accounted for 44.6% of our total consolidated revenues for the year ended December 31, 2013 through multiple individual contracts, with the Bureau of Prisons accounting for 16.8% of our total consolidated revenues for such period, ICE accounting for 16.7% of our total consolidated revenues for such period, and the U.S. Marshals Service accounting for 11.1% of our total consolidated revenues for such period; however, no individual contract with these clients accounted for more than 5.0% of our total consolidated revenues. 38. In the 2013 10-K, GEO further stated, in part: We operate each facility in accordance with our company-wide policies and procedures and with the standards and guidelines required under the relevant management contract. For many facilities, the standards and guidelines include those established by the American Correctional Association, or ACA. The ACA is an independent organization of corrections professionals, which establishes correctional facility standards and guidelines that are generally acknowledged as a benchmark by governmental agencies responsible for correctional facilities. Many of our contracts in the United States require us to seek and maintain ACA 11 accreditation of the facility. We have sought and received ACA accreditation and re-accreditation for all such facilities. We achieved a median re-accreditation score of 99.7% as of December 31, 2013. Approximately 91.4% of our 2013 U.S. Corrections & Detention revenue was derived from ACA accredited facilities for the year ended December 31, 2013. In January 2012, we also received accreditation at our Blackwater River Correctional Facility and at Hudson Correctional Facility. We have also achieved and maintained accreditation by The Joint Commission (TJC), at three of our correctional facilities and at nine of our youth services locations. We have been successful in achieving and maintaining accreditation under the National Commission on Correctional Health Care, or NCCHC, in a majority of the facilities that we currently operate. The NCCHC accreditation is a voluntary process which we have used to establish comprehensive health care policies and procedures to meet and adhere to the ACA standards. The NCCHC standards, in most cases, exceed ACA Health Care Standards and we have achieved this accreditation at six of our U.S. Corrections & Detention facilities and at two youth services locations. Additionally, B.I. Incorporated (“BI”) has achieved a certification for ISO 9001:2008 for the design, production, installation and servicing of products and services produced by the Electronic Monitoring business units, including electronic home arrest and domestic violence intervention monitoring services and products, installation services, and automated caseload management services. . . . Competitive Strengths . . . Long-Term Relationships with High-Quality Government Customers We have developed long-term relationships with our federal, state and other governmental customers, which we believe enhance our ability to win new contracts and retain existing business. We have provided correctional and detention management services to the United States Federal Government for 27 years, the State of California for 26 years, the State of Texas for approximately 26 years, various Australian state government entities for 22 years and the State of Florida for approximately 20 years. These customers accounted for approximately 62.7% of our consolidated revenues for the fiscal year ended December 31, 2013. . . . Business Concentration Except for the major customers noted in the following table, no other single customer made up greater than 10% of our consolidated revenues, excluding discontinued operations, for these years. 12 Customer 2013 2012 2011 Various agencies of the U.S Federal Government: 45 % 47% 40 % (Emphasis added) 39. The 2013 10-K contained signed certifications pursuant to SOX by Defendants Zoley and Evans, stating that the financial information contained in the 2013 10-K was accurate and disclosed any material changes to the Company’s internal control over financial reporting. 40. On May 6, 2014, GEO filed a Quarterly Report on Form 10-Q with the SEC, announcing the Company’s financial and operating results for the quarter ended March 31, 2014 (the “Q1 2014 10-Q”). For the quarter, GEO reported net income of $27.99 million, or $0.39 per diluted share, on revenue of $393.14 million, compared to net income of $23.44 million, or $0.33 per diluted share, on revenue of $377.03 million for the same period in the prior year. 41. The Q1 2014 10-Q contained signed certifications pursuant to SOX by Defendants Zoley and Evans, stating that the financial information contained in the Q1 2014 10-Q was accurate and disclosed any material changes to the Company’s internal control over financial reporting. 42. On August 8, 2014, GEO filed a Quarterly Report on Form 10-Q with the SEC, announcing the Company’s financial and operating results for the quarter ended June 30, 2014 (the “Q2 2014 10-Q”). For the quarter, GEO reported net income of $38.9 million, or $0.54 per diluted share, on revenue of $412.84 million, compared to net income of $34.22 million, or $0.48 per diluted share, on revenue of $381.65 million for the same period in the prior year. 43. The Q2 2014 10-Q contained signed certifications pursuant to SOX by Defendants Zoley and Evans, stating that the financial information contained in the Q2 2014 10-Q was accurate and disclosed any material changes to the Company’s internal control over financial reporting. 13 44. On November 10, 2014, GEO 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, 2014 (the “Q3 2014 10-Q”). For the quarter, GEO reported net income of $38.97 million, or $0.54 per diluted share, on revenue of $457.9 million, compared to net income of $29.91 million, or $0.42 per diluted share, on revenue of $379.84 million for the same period in the prior year. 45. The Q3 2014 10-Q contained signed certifications pursuant to SOX by Defendants Zoley and Evans, stating that the financial information contained in the Q3 2014 10-Q was accurate and disclosed any material changes to the Company’s internal control over financial reporting. 46. On February 26, 2015, GEO 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, 2014 (the “2014 10-K”). For the quarter, GEO reported net income of $27.63 million, or $0.38 per diluted share, on revenue of $383.55 million, compared to net income of $40.52 million, or $1.32 per diluted share, on revenue of $437.08 million for the same period in the prior year. For 2014, GEO reported net income of $143.84 million, or $1.98 per diluted share, on revenue of $1.69 billion, compared to net income of $115.2 million, or $1.61 per diluted share, on revenue of $1.52 billion for 2013. In the 2014 10-K, GEO advised investors that: We currently derive, and expect to continue to derive, a significant portion of our revenues from a limited number of governmental agencies. Of our governmental clients, four customers, through multiple individual contracts, accounted for 42.5% of our consolidated revenues for the year ended December 31, 2014. In addition, three federal governmental agencies with correctional and detention responsibilities, the Bureau of Prisons, ICE, and the U.S. Marshals Service, accounted for 41.9% of our total consolidated revenues for the year ended December 31, 2014 through multiple individual contracts, with the Bureau of Prisons accounting for 15.8% of our total consolidated revenues for such period, ICE accounting for 15.6% of our total consolidated revenues for such period, and the U.S. Marshals Service accounting for 10.5% of our total consolidated revenues for such period; however, no individual contract with these clients accounted for more than 5.0% of our total consolidated revenues. 14 47. In the 2014 10-K, GEO further stated, in part: We operate each facility in accordance with our company-wide policies and procedures and with the standards and guidelines required under the relevant management contract. For many facilities, the standards and guidelines include those established by the American Correctional Association, or ACA. The ACA is an independent organization of corrections professionals, which establishes correctional facility standards and guidelines that are generally acknowledged as a benchmark by governmental agencies responsible for correctional facilities. Many of our contracts in the United States require us to seek and maintain ACA accreditation of the facility. We have sought and received ACA accreditation and re-accreditation for all such facilities. . . . Competitive Strengths . . . Long-Term Relationships with High-Quality Government Customers We have developed long-term relationships with our federal, state and other governmental customers, which we believe enhance our ability to win new contracts and retain existing business. We have provided correctional and detention management services to the United States Federal Government for 28 years, the State of California for 27 years, the State of Texas for approximately 27 years, various Australian state government entities for 23 years and the State of Florida for approximately 21 years. These customers accounted for approximately 66.2% of our consolidated revenues for the fiscal year ended December 31, 2014. . . . Business Concentration Except for the major customers noted in the following table, no other single customer made up greater than 10% of our consolidated revenues, excluding discontinued operations, for these years. Customer 2014 2013 2012 Various agencies of the U.S Federal Government: 42% 45% 47% (Emphasis added) 15 48. The 2014 10-K contained signed certifications pursuant to SOX by Defendants Zoley and Evans, stating that the financial information contained in the 2014 10-K was accurate and disclosed any material changes to the Company’s internal control over financial reporting. 49. On May 7, 2015, GEO filed a Quarterly Report on Form 10-Q with the SEC, announcing the Company’s financial and operating results for the quarter ended March 31, 2015 (the “Q1 2015 10-Q”). For the quarter, GEO reported net income of $28.76 million, or $0.39 per diluted share, on revenue of $427.37 million, compared to net income of $27.99 million, or $0.39 per diluted share, on revenue of $393.14 million for the same period in the prior year. 50. The Q1 2015 10-Q contained signed certifications pursuant to SOX by Defendants Zoley and Evans, stating that the financial information contained in the Q1 2015 10-Q was accurate and disclosed any material changes to the Company’s internal control over financial reporting. 51. On August 7, 2015, GEO filed a Quarterly Report on Form 10-Q with the SEC, announcing the Company’s financial and operating results for the quarter ended June 30, 2015 (the “Q2 2015 10-Q”). For the quarter, GEO reported net income of $28.25 million, or $0.38 per diluted share, on revenue of $445.95 million, compared to net income of $38.9 million, or $0.54 per diluted share, on revenue of $412.84 million for the same period in the prior year. 52. The Q2 2015 10-Q contained signed certifications pursuant to SOX by Defendants Zoley and Evans, stating that the financial information contained in the Q2 2015 10-Q was accurate and disclosed any material changes to the Company’s internal control over financial reporting. 53. On November 6, 2015, GEO 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, GEO reported net income of $38.29 million, or $0.52 16 per diluted share, on revenue of $469.87 million, compared to net income of $38.97 million, or $0.54 per diluted share, on revenue of $457.9 million for the same period in the prior year. 54. The Q3 2015 10-Q contained signed certifications pursuant to SOX by Defendants Zoley and Evans, 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. 55. On February 26, 2016, GEO 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, GEO reported net income of $27.63 million, or $0.38 per diluted share, on revenue of $383.55 million, compared to net income of $27.63 million, or $0.38 per diluted share, on revenue of $383.55 million for the same period in the prior year. For 2015, GEO reported net income of $139.32 million, or $1.88 per diluted share, on revenue of $1.84 billion, compared to net income of $143.84 million, or $1.98 per diluted share, on revenue of $1.69 billion for 2014. In the 2015 10-K, GEO advised investors that: We currently derive, and expect to continue to derive, a significant portion of our revenues from a limited number of governmental agencies. Of our governmental partners, four customers, through multiple individual contracts, accounted for 45.5% of our consolidated revenues for the year ended December 31, 2015. In addition, three federal governmental agencies with correctional and detention responsibilities, the Bureau of Prisons, ICE, and the U.S. Marshals Service, accounted for 44.9% of our total consolidated revenues for the year ended December 31, 2015 through multiple individual contracts, with the Bureau of Prisons accounting for 15.6% of our total consolidated revenues for such period, ICE accounting for 17.7% of our total consolidated revenues for such period, and the U.S. Marshals Service accounting for 11.6% of our total consolidated revenues for such period; however, no individual contract with these clients accounted for more than 5.0% of our total consolidated revenues. 56. In the 2015 10-K, GEO further stated, in part: We operate each facility in accordance with our company-wide policies and procedures and with the standards and guidelines required under the relevant management contract. For many facilities, the standards and guidelines include those established by the American Correctional Association, or (“ACA”). The ACA 17 is an independent organization of corrections professionals, which establishes correctional facility standards and guidelines that are generally acknowledged as a benchmark by governmental agencies responsible for correctional facilities. Many of our contracts in the United States require us to seek and maintain ACA accreditation of the facility. We have sought and received ACA accreditation and re-accreditation for all such facilities. We achieved a median re-accreditation score of 99.8% as of December 31, 2015. Approximately 79.5% of our 2015 U.S. Corrections & Detention revenue was derived from ACA accredited facilities for the year ended December 31, 2015. We have also achieved and maintained accreditation by The Joint Commission at four of our correctional facilities and at nine of our youth services locations. We have been successful in achieving and maintaining accreditation under the National Commission on Correctional Health Care, or (“NCCHC”), in a majority of the facilities that we currently operate. The NCCHC accreditation is a voluntary process which we have used to establish comprehensive health care policies and procedures to meet and adhere to the ACA standards. The NCCHC standards, in most cases, exceed ACA Health Care Standards and we have achieved this accreditation at nine of our U.S. Corrections & Detention facilities and at two youth services locations. Additionally, BI has achieved a certification for ISO 9001:2008 for the design, production, installation and servicing of products and services produced by the electronic monitoring business units, including electronic home arrest and electronic monitoring technology products and monitoring services, installation services, and automated caseload management services. . . . Business Concentration Except for the major customers noted in the following table, no other single customer made up greater than 10% of our consolidated revenues, excluding discontinued operations, for these years. Customer 2015 2014 2013 Various agencies of the U.S Federal Government: 45% 42% 45% 57. The 2015 10-K contained signed certifications pursuant to SOX by Defendants Zoley and Evans, 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. 58. On May 3, 2016, GEO filed a Quarterly Report on Form 10-Q with the SEC, announcing the Company’s financial and operating results for the quarter ended March 31, 2016 (the “Q1 2016 10-Q”). For the quarter, GEO reported net income of $32.37 million, or $0.44 per 18 diluted share, on revenue of $510.19 million, compared to net income of $28.76 million, or $0.39 per diluted share, on revenue of $427.37 million for the same period in the prior year. 59. The Q1 2016 10-Q contained signed certifications pursuant to SOX by Defendants Zoley and Evans, stating that the financial information contained in the Q1 2016 10-Q was accurate and disclosed any material changes to the Company’s internal control over financial reporting. 60. On August 5, 2012, GEO filed a Quarterly Report on Form 10-Q with the SEC, announcing the Company’s financial and operating results for the quarter ended June 30, 2016 (the “Q2 2016 10-Q”). For the quarter, GEO reported net income of $23.16 million, or $0.31 per diluted share, on revenue of $548.35 million, compared to net income of $28.25 million, or $0.38 per diluted share, on revenue of $445.95 million for the same period in the prior year. 61. The Q2 2016 10-Q contained signed certifications pursuant to SOX by Defendants Zoley and Evans, stating that the financial information contained in the Q2 2016 10-Q was accurate and disclosed any material changes to the Company’s internal control over financial reporting. 62. The statements referenced in ¶¶ 19-61 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) GEO’s facilities lacked adequate safety and security standards and were less efficient at offering correctional services than BOP facilities; (ii) GEO’s rehabilitative services for inmates were less effective than those provided by BOP; (iii) consequently, the DOJ was unlikely to renew and/or extend its contracts with GEO; and (iv) as a result of the foregoing, GEO’s public statements were materially false and misleading at all relevant times. The Truth Emerges 19 63. On August 18, 2016, Deputy Attorney General Yates announced the DOJ’s decision to end its use of private prisons, including those operated by GEO, after officials concluded that the facilities are both less safe and less effective at providing correctional services than those run by the federal government. In a memorandum addressed to the Acting Director of the BOP, entitled “Reducing our Use of Private Prisons,” Deputy Attorney General Yates stated, Private prisons served an important role during a difficult period, but time has shown that they compare poorly to our own Bureau facilities. They simply do not provide the same level of correctional services, programs, and resources; they do not save substantially on costs; and as noted in a recent report by the Department’s Office of Inspector General, they do not maintain the same level of safety and security. The rehabilitative services that the Bureau provides, such as educational programs and job training, have proved difficult to replicate and outsource—and these services are essential to reducing recidivism and improving public safety. For all these reasons, I am eager to enlist your help in beginning the process of reducing—and ultimately ending—our use of privately operated prisons. As you know, all of the Bureau’s existing contracts with private prison companies are term- limited and subject to renewal or termination. I am directing that as each contract reaches the end of its term, the Bureau should either decline to renew the contract or substantially reduce its scope in a manner consistent with law and the overall decline of the Bureau’s inmate population. (Emphases added) 64. As a result of this news, GEO’s share price fell $12.78, or 39.58%, to close at $19.51 on August 18, 2016. 65. 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. Post-Class-Period Disclosures 66. On August 19, 2016, pre-market, GEO issued a press release announcing that the Federal Bureau of Prisons had extended its contract for the D. Ray James Correctional Facility 20 through September 30, 2018. That same day, less than three hours later, GEO issued another press release announcing that the Federal Bureau of Prisons had rescinded its extension of the D. Ray James Correctional Facility contract. PLAINTIFF’S CLASS ACTION ALLEGATIONS 67. 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 GEO 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. 68. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, GEO 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 GEO 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. 69. 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. 21 70. 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. 71. 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 GEO;  whether the Individual Defendants caused GEO 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 GEO 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. 72. 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. 73. Plaintiff will rely, in part, upon the presumption of reliance established by the fraud- on-the-market doctrine in that: 22  defendants made public misrepresentations or failed to disclose material facts during the Class Period;  the omissions and misrepresentations were material;  GEO 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 GEO 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. 74. Based upon the foregoing, Plaintiff and the members of the Class are entitled to a presumption of reliance upon the integrity of the market. 75. 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 10(b) And Rule 10b-5 Promulgated Thereunder) 76. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. 77. 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. 23 78. 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 GEO securities; and (iii) cause Plaintiff and other members of the Class to purchase or otherwise acquire GEO 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. 79. 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 GEO 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 GEO’s finances and business prospects. 80. By virtue of their positions at GEO, 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 24 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 81. Defendants were personally motivated to make false statements and omit material information necessary to make the statements not misleading in order to personally benefit from the sale of GEO securities from their personal portfolios. 82. 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 GEO, the Individual Defendants had knowledge of the details of GEO’s internal 83. 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 GEO. 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 GEO’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 GEO securities was artificially inflated throughout the Class Period. In ignorance of the adverse facts concerning GEO’s business and financial condition which were concealed by defendants, Plaintiff and the other members of the Class purchased or otherwise acquired GEO securities at 25 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. 84. During the Class Period, GEO 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 GEO 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 GEO securities was substantially lower than the prices paid by Plaintiff and the other members of the Class. The market price of GEO securities declined sharply upon public disclosure of the facts alleged herein to the injury of Plaintiff and Class members. 85. 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. 86. 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 26 COUNT II (Violations of Section 20(a) of the Exchange Act Against The Individual Defendants) 87. Plaintiff repeats and realleges each and every allegation contained in the foregoing paragraphs as if fully set forth herein. 88. During the Class Period, the Individual Defendants participated in the operation and management of GEO, and conducted and participated, directly and indirectly, in the conduct of GEO’s business affairs. Because of their senior positions, they knew the adverse non-public information about GEO’s misstatement of income and expenses and false financial statements. 89. 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 GEO’s financial condition and results of operations, and to correct promptly any public statements issued by GEO which had become materially false or misleading. 90. 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 GEO disseminated in the marketplace during the Class Period concerning GEO’s results of operations. Throughout the Class Period, the Individual Defendants exercised their power and authority to cause GEO to engage in the wrongful acts complained of herein. The Individual Defendants therefore, were “controlling persons” of GEO 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 GEO securities. 91. Each of the Individual Defendants, therefore, acted as a controlling person of GEO. By reason of their senior management positions and/or being directors of GEO, each of the Individual Defendants had the power to direct the actions of, and exercised the same to cause, 27 GEO to engage in the unlawful acts and conduct complained of herein. Each of the Individual Defendants exercised control over the general operations of GEO 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. 92. 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 GEO. 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: August 25, 2016 Respectfully submitted, POMERANTZ LLP /s/ Jayne A. Goldstein Jayne A. Goldstein (FL Bar No.: 144088) 1792 Bell Tower Lane, Suite 203 Weston, Florida 33326 Telephone: (954) 315-3454 28 Facsimile: (954) 315-3455 Email: jagoldstein@pomlaw.com POMERANTZ LLP Jeremy A. Lieberman J. Alexander Hood II Marc C. Gorrie 600 Third Avenue, 20th Floor New York, New York 10016 Telephone: (212) 661-1100 Facsimile: (212) 661-8665 Email: jalieberman@pomlaw.com ahood@pomlaw.com mgorrie@pomlaw.com POMERANTZ LLP Patrick V. Dahlstrom 10 South La Salle Street, Suite 3505 Chicago, Illinois 60603 Telephone: (312) 377-1181 Facsimile: (312) 377-1184 Email: pdahlstrom@pomlaw.com BRONSTEIN, GEWIRTZ & GROSSMAN, LLC Peretz Bronstein 60 East 42nd Street, Suite 4600 New York, NY 10165 Telephone: (212) 697-6484 Facsimile (212) 697-7296 Email: peretz@bgandg.com Attorneys for Plaintiff 29 CERTIFICATION PURSUANT TO FEDERAL SECURITIES LAWS I. I, 40 h,>v' J.f mwivOA1~ , make this decla ration pursuant to Section 27(0)(2) ~e securities(iOf 1933 ("Securities Act") ":ilfor Section 2lD( 0)(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 The GEO Group, Inc. ("GEO" or the "Company") and authorize the filing of a comparable complaint on my behalf. 3. I did not purchase or acquire GEO securities at the direction of plaintiffs' counselor 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 behalfofa Class of investors who purchased or acquired GEO 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 GEO securities during the Class Period as specified in the Complaint. 6. During the three-year period preceding the date on which this Certification is signed, 1have 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 behalf of the class as set forth in the Complaint, beyond my pro rata share of any recovery, except such reasonable costs and expenses directly relating to the representation of the class as ordered or approved by the Court. 8. I declare under penalty of perjury that the foregoing is true and correct. Executed Auc; lz- 2-o/~ (Date) THE GEO GROUP, INC. (GEO) Mulvaney, John J. LIST OF PURCHASES AND SALES PURCHASE NUMBER OF PRICE PER DATE OR SALE SHS/UTS SH/UT 7/12/2016 Purchase 500 $34.3900

securities

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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK --------------------------------------------------------- RUBEN CRUZ on behalf of himself and all other similarly situated consumers Plaintiff, -against- DIVERSIFIED CONSULTANTS, INC. D/B/A DIVERSIFIED CONSULTANTS INTERNATIONAL Defendant. ----------------------------------------------------------- CLASS ACTION COMPLAINT Introduction 1. Plaintiff Ruben Cruz seeks redress for the illegal practices of Diversified Consultants, Inc. d/b/a Diversified Consultants International ("Diversified"), concerning the collection of debts, in violation of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (“FDCPA”). Parties 2. Plaintiff is a citizen of the State of New York who resides within this District. 3. Plaintiff is a consumer as that term is defined by Section 1692(a)(3) of the FDCPA, in that the alleged debt that Defendant sought to collect from Plaintiff is a consumer debt. 4. Upon information and belief, Defendant’s principal place of business is located in Jacksonville, Florida. 5. Defendant is regularly engaged, for profit, in the collection of debts allegedly owed by consumers. 6. Defendant is a “debt collector” as that term is defined by the FDCPA, 15 U.S.C. § 1692(a)(6). Jurisdiction and Venue 7. This Court has federal question jurisdiction under 15 U.S.C. § 1692k(d) and 28 U.S.C. § 1331. 8. Venue is proper in this district pursuant to 28 U.S.C. § 1391(b), as the acts and transactions that give rise to this action occurred, in substantial part, in this district. Allegations Particular to Ruben Cruz 9. Upon information and belief, on a date better known by Defendant, Defendant began to attempt to collect an alleged consumer debt from the Plaintiff. 10. The debt was purportedly owed to T-Mobile. 11. The Plaintiff never had such an account with T-Mobile. 12. After being contacted by T-Mobile regarding this debt, Plaintiff informed T-Mobile that the account was not his. 13. Plaintiff nevertheless agreed to make payments towards this fraudulent debt, simply in order to prevent it from "hitting" his credit. 14. Yet, despite making payments on an account that was not even his, the account was ultimately assigned to Defendant Diversified for collections and subsequently reported by the Defendant to the credit bureaus. 15. The balance that Defendant was seeking to collect was therefore non-existent; the Defendant made the Plaintiff believe that he in fact owed such an amount to T-Mobile when it was not the case.1 1 Vangorden v. Second Round, L.P., 897 F.3d 433 (2d Cir. 2018). Consumer stated a claim under §§ 1692e(2), 1692e(10), and 1692f(1) when she alleged that a collection letter falsely stated that she owed a debt and then requested payment on the alleged debt. Rejecting an argument by 16. The Defendant deceptively engaged in the collection of an invalid debt purportedly owed by the Plaintiff. 17. Section 1692e of the FDCPA states: “A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section: (2) The false representation of -- (A) the character, amount, or legal status of any debt.” 18. Section 1692(f) of the FDCPA states: “A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section: (1) The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” 19. Defendant Diversified misrepresented the legal status of the alleged debt, as the debt was not owed by the Plaintiff.2 the collector that § 1692g shielded it from liability, the Second Circuit held that “nothing in the text of the FDCPA suggests that a debtor’s ability to state a § 1692e or § 1692f claim is dependent upon the debtor first disputing the validity of the debt in accordance with § 1692g.” Finally, the court concluded that a letter misstating “the very existence” of a debt can mislead the least sophisticated consumer regardless of the intent of the collector. 2 See Lee v. Kucker & Bruh, LLP, 2013 U.S. Dist. LEXIS 110363, 2013 WL 3982427 (S.D.N.Y. Aug. 2, 2013). ("Defendants argue that they are not liable for violating the FDCPA because they did not know that they were misrepresenting that Mr. Lee's account was delinquent. ([Footnote 1] Defendants rely on the decision in Stonehart v. Rosenthal, No. 01 Civ. 651, 2001 U.S. Dist. LEXIS 11566, 2001 WL 910771, at *6 (S.D.N.Y. Aug. 13, 2001) (holding that to "state a claim under § 1692e(2) of the FDCPA, [the plaintiff] must show that [the debt collector] knowingly misrepresented the amount of the debt"), and similar district court cases inside and outside this circuit. These cases, however, are at odds with binding Second Circuit precedent.), See also Goldman v. Cohen, No. 01 Civ. 5952, 2004 U.S. Dist. LEXIS 25517, 2004 WL 2937793, at *10, n.11 (S.D.N.Y. Dec. 17, 2004), aff'd on other grounds, 445 F.3d 152 (2d Cir. 2006). (concluding that analysis in Stonehart contradicts the plain language of 1692k(c) and the law as stated by the Second Circuit). This argument is contrary to binding Second Circuit precedent. The Defendants here are strictly liable for their violation of § 1692e. This Court holds that the misrepresentation in the Three Day Notice, the Verification and the Petition for summary nonpayment eviction of a debt supposedly owed by Mr. Lee for rent and fuel charges, when in fact he was current on his payments, is a violation of § 1692e(2)(A)."), Arias v. Gutman, Mintz, Baker & Sonnenfeldt LLP, No. 16-2165-cv, 2017 BL 407422 (2d Cir. Nov. 14, 2017). ("[S]ection 1692f contains a non-exhaustive list of unfair practices, including the collection of an invalid debt.")) 20. Defendant Diversified further misrepresented the legal status of the alleged debt by furnishing the national credit bureaus with a statement, that the account had been “assigned to attorney.” (see attached Exhibit) 21. Such language is a misrepresentation that an attorney is involved in the collection of the Plaintiff’s account in violation of 15 U.S.C. § 1692e(3), and a false threat of legal action in violation of 15 U.S.C. § 1692e(5). 22. Section 1692e(3) forbids “The false representation or implication that any individual is an attorney or that any communication is from an attorney.” 23. Section 1692e(5) forbids “The threat to take any action that cannot legally be taken or that is not intended to be taken.” 24. Defendant Diversified violated 15 U.S.C. §§ 1692e(2)(A), 1692e(3), 1692e(5), 1692e(8), 1692e(10) and 1692f(1) of the FDCPA for the false representation of the character, amount, or legal status of the debt, and for collecting on a debt which was not expressly authorized by the agreement creating the debt or permitted by law. 25. Plaintiff suffered injury in fact by being subjected to unfair and abusive practices of the Defendant. 26. Plaintiff suffered actual harm by being the target of the Defendant’s misleading debt collection communications. 27. Defendant violated the Plaintiff’s right not to be the target of misleading debt collection communications. 28. Defendant violated the Plaintiff’s right to a truthful and fair debt collection process. 29. Defendant used materially false, deceptive, misleading representations and means in its attempted collection of Plaintiff’s alleged debt. 30. Defendant’s communications were designed to cause the debtor to suffer a harmful disadvantage in charting a course of action in response to Defendant’s collection efforts. 31. The FDCPA ensures that consumers are fully and truthfully apprised of the facts and of their rights, the act enables them to understand, make informed decisions about, and participate fully and meaningfully in the debt collection process. The purpose of the FDCPA is to provide information that helps consumers to choose intelligently. The Defendant’s false representations misled the Plaintiff in a manner that deprived him of his right to enjoy these benefits, these materially misleading statements trigger liability under section 1692e of the Act. 32. These deceptive communications additionally violated the FDCPA since they frustrate the consumer’s ability to intelligently choose his or her response. 33. As an actual and proximate result of the acts and omissions of the Defendant, Plaintiff has suffered including but not limited to, fear, stress, mental anguish, emotional stress and acute embarrassment for which he should be compensated in an amount to be established by a jury at trial. AS AND FOR A CAUSE OF ACTION Violations of the Fair Debt Collection Practices Act brought by Plaintiff on behalf of himself and the members of a class, as against the Defendant. 34. Plaintiff re-states, re-alleges and incorporates herein by reference, paragraphs one (1) through one thirty-three (33) as if set forth fully in this cause of action. 35. This cause of action is brought on behalf of Plaintiff and the members of a class. 36. The class consists of all persons whom Defendant’s records reflect resided in the State of New York who communicated with Defendant’s representatives within one year prior to the date of the within complaint up to the date of the filing of the complaint; (a) Defendant attempted to collect on a non-existent/fraudulent debt; and (b) when reporting the debt with the national credit bureaus, Defendant failed to report the disputed debt as disputed; and (c) the Defendant made false statements in violation of 15 U.S.C. §§ 1692e(2)(A), 1692e(3), 1692e(5), 1692e(8), 1692e(10) and 1692f(1). 37. Pursuant to Federal Rule of Civil Procedure 23, a class action is appropriate and preferable in this case because: A. The class is so numerous that joinder of all members is impracticable, though the precise number of class members may be known only to the Defendant. Plaintiff estimates that each class has thousands of members. B. There are questions of law and fact common to the class and these questions predominate over any questions affecting only individual class members. The principal question presented by this claim is whether the Defendant violated the FDCPA. C. The only individual issue is the identification of the consumers who observed such language in their credit reports, furnished by the Defendant to the credit bureaus (i.e. the class members), a matter capable of ministerial determination from the records of Defendant. D. The claims of the Plaintiff are typical of those of the class members. All are based on the same facts and legal theories. E. The Plaintiff will fairly and adequately represent the class members’ interests. The Plaintiff has retained counsel experienced in bringing class actions and collection-abuse claims. The Plaintiff's interests are consistent with those of the members of the class. 38. A class action is superior for the fair and efficient adjudication of the class members’ claims. Congress specifically envisions class actions as a principal means of enforcing the FDCPA. 15 U.S.C. § 1692(k). The members of the class are generally unsophisticated individuals, whose rights will not be vindicated in the absence of a class action. Prosecution of separate actions by individual members of the classes would create the risk of inconsistent or varying adjudications resulting in the establishment of inconsistent or varying standards for the parties and would not be in the interest of judicial economy. 39. If the facts are discovered to be appropriate, the Plaintiff will seek to certify a class pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure. 40. Collection attempts, such as those made by the Defendant are to be evaluated by the objective standard of the hypothetical “least sophisticated consumer.” Violations of the Fair Debt Collection Practices Act 41. The Defendant’s actions as set forth above in the within complaint violates the Fair Debt Collection Practices Act. 42. Because the Defendant violated the Fair Debt Collection Practices Act, the Plaintiff and the members of the class are entitled to damages in accordance with the Fair Debt Collection Practices Act. WHEREFORE, Plaintiff, respectfully requests preliminary and permanent injunctive relief, and that this Court enter judgment in his favor and against the Defendant and award damages as follows: A. Statutory and actual damages provided under the FDCPA, 15 U.S.C. § 1692(k); B. Attorney fees, litigation expenses and costs incurred in bringing this action; C. Any other relief that this Court deems appropriate and just under the circumstances. Dated: Woodmere, New York June 8, 2020 /s/ Adam J. Fishbein___________ Adam J. Fishbein, P.C. (AF-9508) Attorney at Law Attorney for the Plaintiff 735 Central Avenue Woodmere, New York 11598 Telephone: (516) 668-6945 Email: fishbeinadamj@gmail.com Plaintiff requests trial by jury on all issues so triable. /s/ Adam J. Fishbein___ Adam J. Fishbein (AF-9508) Collections DIVERSIFIED CONSULTANT 831704XX  ACCOUNT DETAILS CONTACT INFORMATION Account Name DIVERSIFIED CONSULTANT Account # 831704XX 10550 DEERWOOD PARK BLVD JACKSONVILLE, FL 32256 (904) 247-5500 Original Creditor TMOBILE PAYMENT HISTORY 2020 Company Sold - Jan Feb Mar Apr N Account Type COLLECTION May Jun Jul Aug Date Opened Jun 25, 2019 Sep Oct Nov Dec Account Status! - Payment Status Seriously past due date / assigned to attorney, collection N Negative Data Unavailable agency, or credit grantor&apos;s internal collection department Status Updated Jun 01, 2019 Balance $1,663 Mar 08, 2020 Original Balance $1,963 - $1,663 Highest Balance - Terms 1 Month Responsibility Individual Your Statement - Comments -

consumer fraud

S0yaA4kBRpLueGJZsW41

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK Case No. CATHY MOONEY, individually and on behalf of all others similarly situated, CLASS ACTION COMPLAINT Plaintiff, v. WE LEND, LLC, a Delaware company, Defendant, DEMAND FOR JURY TRIAL CLASS ACTION COMPLAINT Plaintiff Cathy Mooney (“Plaintiff” or “Mooney”) brings this Class Action Complaint, and Demand for Jury Trial against Defendant We Lend, LLC (“Defendant” or “We Lend”) to stop the Defendant from violating the Telephone Consumer Protection Act by making pre-recorded telemarketing calls to consumers without consent. Plaintiff also seeks injunctive and monetary relief for all persons injured by Defendant’s conduct. Plaintiff Mooney, for this Complaint, 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. PARTIES 1. Plaintiff Cathy Mooney is a resident of Woodland Hills, California. 2. Defendant We Lend is a New York limited liability company. Defendant We Lend conducts business throughout this District, New York, and the US. JURISDICTION AND VENUE 3. This Court has federal question subject matter jurisdiction over this action under 28 U.S.C. § 1331, as the action arises under the Telephone Consumer Protection Act, 47 U.S.C. §227 (“TCPA”). 4. This Court has personal jurisdiction over the Defendant because the Defendant has its headquarters in this District and conducts business in and from this District. 5. Venue is proper in this District under 28 U.S.C. § 1391(b) because Defendant resides in this District and because the wrongful conduct giving rise to this case was directed from this District. INTRODUCTION 6. 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.” Barr v. Am. Ass'n of Political Consultants, No. 19-631, 2020 U.S. LEXIS 3544, at *5 (U.S. July 6, 2020). 7. When Congress enacted the TCPA in 1991, it found that telemarketers called more than 18 million Americans every day. 105 Stat. 2394 at § 2(3). 8. By 2003, due to more powerful autodialing technology, telemarketers were calling 104 million Americans every day. In re Rules and Regulations Implementing the TCPA of 1991, 18 FCC Rcd. 14014, ¶¶ 2, 8 (2003). 9. The problems Congress identified when it enacted the TCPA have only grown exponentially in recent years. 10. Industry data shows that the number of robocalls made each month increased from 831 million in September 2015 to 4.7 billion in December 2018—a 466% increase in three years. 11. According to online robocall tracking service “YouMail,” 3.9 billion robocalls were placed in January 2022 alone, at a rate of 126.3 million calls per day. www.robocallindex.com (last visited February 2, 2022). 12. The FCC also has received an increasing number of complaints about unwanted calls, with 150,000 complaints in 2016, 185,000 complaints in 2017, and 232,000 complaints in 2018. FCC, Consumer Complaint Data Center, www.fcc.gov/consumer-help-center-data. 13. “Robocalls and telemarketing calls are currently the number one source of consumer complaints at the FCC.” Tom Wheeler, Cutting off Robocalls (July 22, 2016), statement of FCC chairman.1 14. “The FTC receives more complains about unwanted calls than all other complaints combined.” Staff of the Federal Trade Commission’s Bureau of Consumer Protection, In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, Notice of Proposed Rulemaking, CG Docket No. 02-278, at 2 (2016).2 COMMON ALLEGATIONS 15. Defendant We Lend is a private money lending company.3 16. Defendant We Lend makes cold calls to prospective consumers to solicit their financial services. 1 https://www.fcc.gov/news-events/blog/2016/07/22/cutting-robocalls 2 https://www.ftc.gov/system/files/documents/advocacy_documents/comment-staff-ftc-bureau- consumer-protection-federal-communications-commission-rules- regulations/160616robocallscomment.pdf 3 https://www.welendllc.com/about-us/ 17. Defendant We Lend uses pre-recorded voice message calls, despite having never obtained the necessary consent required to place the calls. 18. For example, in Plaintiff Mooney’ case, the Defendant placed multiple pre- recorded calls to Plaintiff’s cell phone number despite the fact that Plaintiff never consented to receive such calls. 19. In response to these calls, Plaintiff Mooney files this lawsuit seeking injunctive relief requiring the Defendant to cease from violating the Telephone Consumer Protection Act, as well as an award of statutory damages to the members of the Class and costs. PLAINTIFF MOONEY’S ALLEGATIONS 20. Plaintiff Mooney registered her residential phone number on the DNC on December 14, 2004. 21. Plaintiff’s number is for personal use and not associated with a business. 22. On November 2, 2021, at or around 6:00 AM, Plaintiff received a call from the phone number 347-213-6689 to her cell phone. Plaintiff did not answer the call and the caller left a pre-recorded voicemail which was from Richard from We Lend, on behalf of Guy Shmuel. The call was soliciting mortgage options and provided a call back number of 347-704-2948. 23. On December 9, 2021, at or around 10:45 AM, Plaintiff received another call from the phone number 347-213-6689 to her cell phone. Plaintiff did not answer the call and the caller left the same pre-recorded voicemail as the last one. 24. On December 9, 2021, at or around 10:45 AM, Plaintiff received a text message from the same phone number (347-213-6689) to her cell phone, with materially the same message which was left on the voicemail: “Hi! This is Richard from We Lend reaching out to you on behalf of Guy Shmuel. We are now offering a 30-year permanent refinance starting at 3.875% and our fix and flip rates start at 8.75%! Please feel free to call Guy @ (347) 704-2948 or E-mail him @ guy.s@welendllc.com if you have any questions or deals to discuss!! Thanks!” 25. On February 2, 2022, at about 10:50 AM, Plaintiff received another pre-recorded voicemail which was exactly same as the two voicemails she received earlier, followed by a text message at 10:54 AM from the Defendant soliciting refinancing options to the Plaintiff using the same phone number 347-213-6689, which was again materially the same as the voicemail: “Hi! This is Richard from We Lend reaching out to you on behalf of Guy Shmuel. We are now offering a 30-year permanent refinance starting at 4% and our fix and flip rates start at 8.49%! Please feel free to call Guy @ (347) 704-2948 or E-mail him @ guy.s@welendllc.com if you have any questions or deals to discuss!!” 26. On calling the phone number 347-213-6689, it is answered by Guy Shmuel, an employee of Defendant We Lend.4 27. The call back number provided to Plaintiff in the unsolicited telemarketing calls and text message, 347-704-2948, also belongs to the Defendant’s employee Guy Shmuel. 5 28. Plaintiff was not looking for a loan or mortgage options or any related financial products or services and did not give consent to Defendant to call her. 29. The unauthorized solicitation telephone calls that Plaintiff received from or on behalf of Defendant have harmed Plaintiff Mooney in the form of annoyance, nuisance, and 4 https://www.linkedin.com/in/guy-shmuel-6ba28b140/ 5 https://twitter.com/welendllc/status/1402332624740364293?lang=en invasion of privacy, occupied her phone line, and disturbed the use and enjoyment of her phone, in addition to the wear and tear on the phone’s hardware (including the phone’s battery) and the consumption of memory on the phone. 30. Seeking redress for these injuries, Plaintiff Mooney, on behalf of herself and Classes of similarly situated individuals, brings suit under the TCPA. CLASS ALLEGATIONS 31. Plaintiff Mooney brings this action pursuant to Federal Rules of Civil Procedure 23(b)(2) and 23(b)(3) and seeks certification of the following Classes: Pre-recorded No Consent Class: All persons in the United States who from four years prior to the filing of this action through class certification (1) Defendant, or an agent calling on behalf of the Defendant, called on their cellular telephone number (2) using the same or a substantially similar artificial or pre-recorded voice message used to call the Plaintiff. Do Not Call Registry Class: All persons in the United States who from four years prior to the filing of this action through class certification (1) Defendant, or an agent on behalf of the Defendant, called more than one time, (2) within any 12-month period, (3) where the person’s cell phone number had been listed on the National Do Not Call Registry for at least thirty days (4) for a similar purpose as Plaintiff was called. 32. The following individuals are excluded from the Classes: (1) any Judge or Magistrate presiding over this action and members of their families; (2) Defendant, its subsidiaries, parents, successors, predecessors, and any entity in which either Defendant or their parents have a controlling interest and their current or former employees, officers and directors; (3) Plaintiff’s attorneys; (4) persons who properly execute and file a timely request for exclusion from the Classes; (5) the legal representatives, successors or assigns of any such excluded persons; and (6) persons whose claims against the Defendant have been fully and finally adjudicated and/or released. Plaintiff anticipates the need to amend the Class definition following appropriate discovery. 33. Numerosity and Typicality: On information and belief, there are hundreds, if not thousands of members of the Classes such that joinder of all members is impracticable, and Plaintiff is a member of the Classes. 34. Commonality and Predominance: There are many questions of law and fact common to the claims of the Plaintiff and the Classes, and those questions predominate over any questions that may affect individual members of the Classes. Common questions for the Classes include, but are not necessarily limited to the following: (a) whether Defendant or its agents placed pre-recorded voice message calls to Plaintiff and members of the Pre-recorded No Consent Class without first obtaining consent to make the calls; (b) whether Defendant placed multiple calls to Plaintiff and members of the Do Not Call Registry class without first obtaining consent to make the calls; (c) whether the calls constitute a violation of the TCPA; (d) whether Class members are entitled to an injunction against Defendant preventing it from making unsolicited prerecorded calls; and (e) whether members of the Classes are entitled to treble damages based on the willfulness of Defendant’s conduct. 35. Adequate Representation: Plaintiff Mooney will fairly and adequately represent and protect the interests of the Classes, and has retained counsel competent and experienced in class actions. Plaintiff Mooney has no interests antagonistic to those of the Classes, and the Defendant has no defenses unique to Plaintiff. Plaintiff Mooney and her counsel are committed to vigorously prosecuting this action on behalf of the members of the Classes, and have the financial resources to do so. Neither Plaintiff Mooney nor her counsel have any interest adverse to the Classes. 36. Appropriateness: This class action is also appropriate for certification because the Defendant has acted or refused to act on grounds generally applicable to the Classes and as a whole, thereby requiring the Court’s imposition of uniform relief to ensure compatible standards of conduct toward the members of the Classes and making final class-wide injunctive relief appropriate. Defendant’s business practices apply to and affect the members of the Classes uniformly, and Plaintiff’s challenge of those practices hinges on Defendant’s conduct with respect to the Classes as wholes, not on facts or law applicable only to Plaintiff Mooney. Additionally, the damages suffered by individual members of the Classes will likely be small relative to the burden and expense of individual prosecution of the complex litigation necessitated by Defendant’s actions. Thus, it would be virtually impossible for the members of the Classes to obtain effective relief from Defendant’s misconduct on an individual basis. A class action provides the benefits of single adjudication, economies of scale, and comprehensive supervision by a single court. FIRST CLAIM FOR RELIEF Telephone Consumer Protection Act (Violation of 47 U.S.C. § 227) (On Behalf of Plaintiff Mooney and the Pre-recorded No Consent Class) 37. Plaintiff repeats and realleges the prior paragraphs of this Complaint and incorporates them by reference herein. 38. Defendant We Lend and/or its agents transmitted unwanted telephone calls to Plaintiff Mooney and the other members of the Pre-recorded No Consent Class using a pre- recorded voice message. 39. These pre-recorded voice calls were made en masse without the prior express written consent of the Plaintiff Mooney and the other members of the Pre-recorded No Consent 40. The Defendant has, therefore, violated 47 U.S.C. § 227(b)(1)(A)(iii). As a result of Defendant’s conduct, Plaintiff Mooney and the other members of the Pre-recorded No Consent Class are each entitled to a minimum of $500 in damages, and up to $1,500 in damages, for each violation. SECOND CAUSE OF ACTION Telephone Consumer Protection Act (Violations of 47 U.S.C. § 227) (On Behalf of Plaintiff Mooney and the Do Not Registry Class) 41. Plaintiff repeats and realleges paragraphs 1 through 36 of this Complaint and incorporates them by reference. 42. 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 her 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.” 43. 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). 44. Defendant violated 47 C.F.R. § 64.1200(c) by initiating, or causing to be initiated, telephone solicitations to telephone subscribers such as the 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. 45. 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. 46. 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. PRAYER FOR RELIEF WHEREFORE, Plaintiff, individually and on behalf of the Class, prays for the following a) An order certifying this case as a class action on behalf of the Classes as defined above; appointing Plaintiff as the representative of the Classes; and appointing her attorneys as Class Counsel; b) An award of actual and/or statutory damages and costs; c) An order declaring that Defendant’s actions, as set out above, violate the TCPA; d) An injunction requiring Defendant to cease all unsolicited calling activity, and to otherwise protect the interests of the Class; and e) Such further and other relief as the Court deems just and proper. JURY DEMAND Plaintiff Mooney requests a jury trial. CATHY MOONEY, individually and on behalf of all others similarly situated, DATED this 13th day of February, 2022. By: /s/ Stefan Coleman Stefan Coleman law@stefancoleman.com LAW OFFICES OF STEFAN COLEMAN, P.A. 11 Broadway, Suite 615 New York, NY 10001 Telephone: (877) 333-9427 Avi R. Kaufman kaufman@kaufmanpa.com KAUFMAN P.A. 237 South Dixie Highway, Floor 4 Coral Gables, FL 33133 Telephone: (305) 469-5881 Attorneys for Plaintiff and the putative Class

privacy

0faME4cBD5gMZwczqw9e

BRODSKY & SMITH, LLC Evan J. Smith, Esquire Ryan P. Cardona, Esquire 9595 Wilshire Boulevard, Suite 900 Beverly Hills, CA 90212 Phone: (877) 534-2590 Facsimile: (610) 667-9029 esmith@brodskysmith.com rcardona@brodskysmith.com Attorneys for Plaintiff IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA MANISHA SHAH, individually and on behalf of all others similarly situated, Plaintiff, v. AIMMUNE THERAPEUTICS, INC., JAYSON DALLAS, GREG BEHAR, PATRICK ENRIGHT, KATE FALBERG, BRETT HAUMANN, MARK IWICKI, MARK MCDADE, and STACEY D. SELTZER, Civil Action No. ______________ CLASS ACTION COMPLAINT FOR BREACH OF FIDUCIARY DUTIES AND VIOLATIONS OF SECTIONS 14(e), 14(d), AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934 JURY TRIAL DEMAND Defendants. Plaintiff Manisha Shah (“Plaintiff”), by her attorneys, on behalf of herself and those similarly situated, files this action against the defendants, and alleges upon information and belief, except for those allegations that pertain to her, which are alleged upon personal knowledge, as follows: SUMMARY OF THE ACTION 1. Plaintiff brings this stockholder class action on behalf of herself and all other public stockholders Aimmune Therapeutics, Inc. (“Aimmune” or the “Company”), against Aimmune and the Company’s Board of Directors (the “Board” or the “Individual Defendants,” and collectively with Aimmune, the “Defendants”), for violations of Sections 14(e) and 20(a) of the Securities and Exchange Act of 1934 (the “Exchange Act”) and for breaches of fiduciary duty as a result of MergerSub, Inc. (“Merger Sub,” and collectively with Parent, “Nestlé”) as a result of an unfair process for an unfair price, and to enjoin an upcoming tender offer on a proposed all cash transaction valued at approximately $2.6 billion (the “Proposed Transaction”). 2. The terms of the Proposed Transaction were memorialized in an August 30, 2020, 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, a subsidiary of Nestlé will commence a tender offer to acquire all of the outstanding shares of Aimmune’s common stock at a price of $34.50 per share in cash. As a result of the Proposed Transaction, Aimmune stockholders will be frozen out of any interest in the surviving 3. Thereafter, on September 14, 2020, Aimmune filed a Solicitation/Recommendation Statement on Schedule 14D-9 (the “Recommendation Statement”) with the SEC in support of the Proposed Transaction. 4. The Proposed Transaction is unfair and undervalued for a number of reasons. Significantly, the Recommendation Statement describes an insufficient process in which the Board rushed through an inadequate “sales process” with the sole goal of a sale to Nestlé, who already owns approximately 19% of the Company. 5. 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 Aimmune 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 the Nestlé without regard for Aimmune’s public stockholders. Accordingly, this action seeks to enjoin the Proposed Transaction and compel the Individual Defendants to properly exercise their fiduciary duties to Aimmune stockholders. 6. In further breach of their fiduciary duties, on September 14, 2020, Defendants caused to be filed the materially deficient Recommendation Statement with the SEC in an effort Recommendation Statement is materially deficient, deprives Aimmune stockholders of the information they need to make an intelligent, informed and rational decision of whether to tender their shares in favor of the Proposed Transaction, and is thus in breach of the Defendants fiduciary duties. As detailed below, the Recommendation Statement omits and/or misrepresents material information concerning, among other things: (a) the sales process leading to the Proposed Transaction; (b) the financial projections for Aimmune, provided by Aimmune to the Independent Board Members’ financial advisors J.P. Morgan Securities LLC (“J.P. Morgan”) and Lazard Frères & Co. LLC (“Lazard”); and (c) the data and inputs underlying the financial valuation analyses, if any, that purport to support the fairness opinions from J.P. Morgan and Lazard to the Independent Board Members. 7. 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 8. Plaintiff is a citizen of Canada and, at all times relevant hereto, has been an Aimmune stockholder. 9. Defendant Aimmune a clinical-stage biopharmaceutical company that develops and commercializes product candidates for the treatment of peanut and other food allergies. Aimmune is incorporated under the laws of the State of Delaware and has its principal place of business at 8000 Marina Blvd., Suite 300, Brisbane, California 94005. Shares of Aimmune common stock are traded on the NasdaqGS under the symbol “AIMT.” 10. Jayson Dallas ("Dallas") has been a Director of the Company at all relevant times. In addition, Dallas serves as the Company’s President and Chief Executive Officer (“CEO”). 11. Defendant Greg Behar ("Behar") has been a director of the Company at all relevant times. relevant times. 13. Defendant Kate Falberg ("Falberg") has been a director of the Company at all relevant times. In addition, Falberg serves as the Chair of the Audit Committee of the Company. 14. Defendant Brett Haumann ("Haumann") has been a director of the Company at all relevant times. 15. Defendant Mark Iwicki (“Iwicki”) has been a director of the Company at all relevant times. 16. Defendant Mark McDade (“McDade”) has been a director of the Company at all relevant times. In addition, McDade serves as the Company’s Chairman of the Board. 17. Defendant Stacey D. Seltzer (“Seltzer”) has been a director of the Company at all relevant times. 18. Defendants identified in ¶¶ 10 - 17 are collectively referred to as the “Individual Defendants.” 19. Non-Defendant Nestlé together with its subsidiaries, operates as a food and beverage company. Nestlé was founded in 1866 and is headquartered in Vevey, Switzerland. Parent common stock is traded on the OTC US Exchange (“OTC”) under the ticker symbol “NSRGY.” 20. Non-Defendant Merger Sub is a wholly owned subsidiary of Parent created to effectuate the Proposed Transaction. JURISDICTION AND VENUE 21. 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(e) 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. 22. 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 District as to render the exercise of jurisdiction over defendant by this Court permissible under traditional notions of fair play and substantial justice. 23. Venue is proper in this District pursuant to 28 U.S.C. § 1391, because Aimmune has its principal place of business is located in this District, and each of the Individual Defendants, as the Company officers or directors, has extensive contacts within this District. CLASS ACTION ALLEGATIONS 24. Plaintiff brings this action pursuant to Federal Rule of Civil Procedure 23, individually and on behalf of the stockholders of Aimmune 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. 25. This action is properly maintainable as a class action because: a. The Class is so numerous that joinder of all members is impracticable. As of July 24, 2020, there were more than 65 million common shares of Aimmune stock outstanding. The actual number of public stockholders of Aimmune 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 S-4; 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. 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 26. By reason of the Individual Defendants’ positions with the Company as officers and/or directors, said individuals are in a fiduciary relationship with Aimmune and owe the Company the duties of due care, loyalty, and good faith. 27. By virtue of their positions as directors and/or officers of Aimmune, the Individual Defendants, at all relevant times, had the power to control and influence, and did control and influence and cause Aimmune to engage in the practices complained of herein. 28. 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: 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. 29. In accordance with their duties of loyalty and good faith, the Individual Defendants, as directors and/or officers of Aimmune, 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. connection with the Proposed Transaction, violated, and are violating, the fiduciary duties they owe to Aimmune, Plaintiff and the other public stockholders of Aimmune, including their duties of loyalty, good faith, and due care. 31. As a result of the Individual Defendants’ divided loyalties, Plaintiff and Class members will not receive adequate, fair or maximum value for their Aimmune common stock in the Proposed Transaction. SUBSTANTIVE ALLEGATIONS Company Background 32. Aimmune, a clinical-stage biopharmaceutical company, develops and commercializes product candidates for the treatment of peanut and other food allergies. 33. The Company’s lead Characterized Oral Desensitization ImmunoTherapy (CODIT) product candidate is AR101, an investigational biologic, which is in Phase III clinical trial for the treatment of patients with peanut allergy. The Company also engages in the research and development of AR201, a CODIT product candidate for the treatment of egg allergy in pediatric and young adult patients; and other CODIT product candidates targeting food allergies, such as cow's milk allergy. The Company aims to treat potentially life-threatening food allergies by reducing the severity of reactions, including anaphylaxis. Aimmune’s marquee treatment Palforzia, is the first therapy approved by the U.S. Food and Drug Administration (FDA) for peanut allergies. 34. Aimmune has a strategic collaboration with an affiliate of Nestle Health Science US Holdings, Inc. for the advancement of food allergy therapeutics; and clinical collaboration agreement with Regeneron Ireland Unlimited Company and Sanofi Biotechnology SAS to study AR101 with adjunctive dupilumab in peanut-allergic patients in a Phase II trial. 35. In a March 16, 2020 Press Release after the January approval of the treatment, Defendant CEO Dallas commented, “We are pleased that peanut-allergic children are being treated with PALFORZIA just six weeks after its FDA approval. Our anticipation of and preparedness for the REMS program allowed for a swift and smooth implementation of those requirements. In available… Since our REMS website went live on February 21, well over 600 allergists are certified and ready to prescribe PALFORZIA to their patients. Our field team is continuing to meet with allergists to provide direction and information on the REMS process to help additional physicians and practices become certified and provide training on how to safely incorporate PALFORZIA into their practices.” 36. According to the Company’s June 8, 2020 Press Release, patients were highly satisfied after nine months of daily treatments, “We are encouraged to see the majority of participants completing the nine-month ARTEMIS trial reported high global satisfaction with daily treatment with PALFORZIA, high confidence in the treatment, and moderate-to-high satisfaction with the convenience of the treatment… Hearing from patients directly is important for us to better understand the effects this treatment can have on their lives. The study participants felt treatment with PALFORZIA in the ARTEMIS trial was effective, which may help them better manage their peanut allergy and live their lives more confidently. Our hope is that these data will reassure families who may be considering treatment with PALFORZIA to help them make important shared treatment decisions with their allergists.” 37. An August 31, 2020 Fierce Pharma article on the Proposed Transaction commented on Palforzia’s financial potential, “Early in its launch, Palforzia has been stricken with slow uptake given widespread lockdowns around COVID-19, Piper Sandler analysts wrote in a note to clients after the deal was announced. However, once allergy clinics start running at full speed, Palforzia could make the Nestlé's rich premium look like a steal in the long run. ‘While we understand the uncertainty that COV(ID)-19 disruption presents, we also think as pandemic-related disruption recedes and Palforzia’s true demand begins to manifest, it will be deemed that Nestle got itself a bargain here,’ the analysts wrote.” 38. Clearly, based upon the positive outlook, the Company is likely to have tremendous future success with Palforzia and additional pipeline treatments, it should command a much higher consideration than the amount contained within the Proposed Transaction. enter into the Proposed Transaction for insufficient consideration. The Flawed Sales Process 40. As detailed in the Recommendation Statement, 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 Nestlé, who is already the largest single stockholder of the Company, owning approximately 19% of Aimmune’s outstanding stock. 41. The Recommendation Statement does not indicate why it was necessary to engage J.P. Morgan as an additional financial advisor after Lazard had already been engaged to serve as a financial advisor to the Independent Directors regarding the sales process. Moreover, the Recommendation statement fails to indicate, why Lazard could not accomplish the tasks necessary of it as a financial advisor. Such information is relevant considering J.P. Morgan and Lazar stand to make over $19 million and $17 million for their services rendered as financial advisors in relation to the Proposed Transaction. 42. The Recommendation Statement is also unclear as to the existence or nature of any non-disclosure agreement entered into between Aimmune and any potentially interested third party, including Nestlé, as part of the sales process, and if the terms of any such agreements included “don’t-ask, don’t-waive” provisions or standstill provisions, and if so, the specific conditions, if any, under which such provisions would fall away. 43. 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 44. On August 31, 2020, Aimmune issued a press release announcing the Proposed Transaction. The press release stated, in relevant part: Brisbane, CA, August 31, 2020 – Aimmune Therapeutics Inc. (Nasdaq: AIMT), a biopharmaceutical company developing and commercializing treatments for potentially life-threatening food allergies, today announced that it has entered into a definitive agreement for Sociétés des Produits Nestlé, S.A. to acquire Aimmune for $34.50 per share in an all-cash transaction, implying a fully-diluted equity value of $2.6 billion. Sociétés des Produits Nestlé, S.A. is a part of Nestlé Health Science (NHSc) and a wholly owned subsidiary of Nestlé S.A. The agreement was unanimously approved by all of the independent members of the Board of Directors of Aimmune. Greg Behar, CEO of Nestlé Health Sciences and an Aimmune Director, abstained due to his position with Nestlé Health Science. “The agreement with Nestlé recognizes the value created by years of commitment and dedication to our mission by the team at Aimmune. Delivering PALFORZIA, the world’s first treatment for food allergy, is a game-changing proposition in the bio pharmaceutical industry and is transformative for the lives of millions of people living with potentially life-threatening peanut allergy,” said Jayson Dallas, MD, President and Chief Executive Officer of Aimmune. “This acquisition provides strong value for our shareholders and ensures a level of support for PALFORZIA and our pipeline that will further enhance their potential for patients around the world living with food allergies. Aimmune appreciates the continued strong collaboration with Nestlé Health Science dating back to 2016 through their support as a shareholder and board member, as well as through their consumer/nutrition strength and experience. Their extensive capabilities and global reach, as well as their alignment with our vision of pioneering treatments and solutions for food allergies, are a strong fit for our company.” “This transaction brings together Nestlé’s nutritional science leadership with one of the most innovative companies in food allergy treatment,” said Nestlé Health Science CEO Greg Behar. “Together, we will be able to create a world leader in food allergy prevention and treatment and offer a wide range of solutions that can transform the lives of people around the world living with food allergies.” The transaction is expected to close in the fourth quarter of 2020, pending the satisfaction of all conditions to the completion of the tender offer. Until that time, Aimmune will continue to operate as a separate and independent company. Transaction Details Under the terms of the merger agreement, Nestlé S.A.’s wholly-owned subsidiary, Société des Produits Nestlé S.A. (SPN), will commence a cash tender offer to acquire all outstanding shares of Aimmune common stock that are not already owned by NHSc for $34.50 per share in cash, and Aimmune agreed to file a recommendation statement containing the unanimous recommendation of the independent members of the Aimmune board that Aimmune stockholders tender their shares to SPN. Following the completion of the tender offer, Nestlé expects to promptly consummate a merger of Aimmune with a subsidiary of SPN, in which shares of Aimmune that have not been tendered in the tender offer will be acquired by SPN and converted into the right to receive the same cash price per share as paid in the tender offer. The closing of the tender offer is subject to customary closing conditions, including the tender of a majority of outstanding Aimmune shares on a fully diluted basis which shall include the shares of Aimmune common stock currently held by Nestlé and its affiliates and the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and antitrust approvals in Germany. The merger agreement includes customary termination provisions for both Aimmune and Nestlé. The Inadequate Merger Consideration 45. Significantly, the Company’s financial prospects and opportunities for future growth, and synergies with Nestlé establish the inadequacy of the merger consideration. 46. First, the compensation afforded under the Proposed Transaction to Company stockholders significantly undervalues the Company and does not adequately reflect the intrinsic value of the Company. Moreover, the valuation does not adequately take into consideration the Company’s potential financial success with its launch of Palforzia in January 2020 and its phase two pipeline egg allergy treatment and their potential growth. 47. Aimmune’s future success is extremely likely, given the innovation of novel drugs in a highly prevalent population of affected patients. Obviously, the opportunity to invest in such a company on the rise is a great coup for Nestlé, however it undercuts the investment of Plaintiff and all other public stockholders.” 48. To be more specific, Biotechnology news source, Endpoints News, released an article about the Proposed Transaction, noting, “Baird’s Brian Skorney estimated that the new cash, along with their credit facility with KKR, should give Aimmune a $450 million reservoir and resolve any questions about whether they’ll have the capacity to commercialize Palforzia. It ‘is more than enough to fund the launch of Palforzia and get to a point that settles the bull/bear launch debate,’ he wrote in a note to investors. Separately, Aimmune announced an exclusive, $10 million licensing agreement for Xencor’s XmAb7195, a humanized antibody designed to treat the underlying mechanisms behind allergic reaction. Aimmune’s value has increased by over a third since Nestlé’s initial investment, in large part thanks to Palforzia’s success.” Such promise is likely to translate into strong financial success. 49. Finally, the Proposed Transaction represents a significant synergistic benefit to Nestlé, which operates in the complementary industry as Aimmune, and will use the new portfolio, operational capabilities, and brand capital to bolster its own position in the market. Specifically, in the August 24, 2020 Fierce Pharma article mentioned above, commented on Aimmune’s benefits to Nestlé, “Bringing Aimmune on board will add some heft to Nestlé's health sciences only approved peanut allergy therapy on the market, with Evaluate Pharma pegging its 2024 sales at roughly $1.28 billion.” 50. Clearly, while the deal will be beneficial to Nestlé it comes at great expense to Plaintiff and other public stockholders of the Company. 51. Moreover, post-closure, Aimmune stockholders will be frozen out of any future benefit from their investment in Aimmune’s bright future. 52. It is clear from these statements and the facts set forth herein that this deal is designed to maximize benefits for Nestlé at the expense of Aimmune stockholders, which clearly indicates that Aimmune stockholders were not an overriding concern in the formation of the Proposed Transaction. Preclusive Deal Mechanisms 53. The Merger Agreement contains certain provisions that unduly benefit Nestlé by making an alternative transaction either prohibitively expensive or otherwise impossible. Significantly, the Merger Agreement contains a termination amount provision that is especially onerous and impermissible. Notably, in the event of termination, the merger agreement requires Aimmune to pay $85 million to Nestlé, if the Merger Agreement is terminated under certain circumstances. Moreover, under one circumstance, Aimmune must pay this termination fee even if it consummates any competing company Takeover Proposal (as defined in the Merger Agreement) within 12 months following the termination of the Merger Agreement. The termination amount will make the Company that much more expensive to acquire for potential purchasers. The termination amount in combination with other preclusive deal protection devices will all but ensure that no competing offer will be forthcoming. 54. The Merger Agreement also contains a “No Solicitation” provision that restricts Aimmune from considering alternative acquisition proposals by, inter alia, constraining Aimmune’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 “Superior Proposal” as defined in the Merger Agreement. 55. Moreover, the Merger Agreement further reduces the possibility of a topping offer from an unsolicited purchaser. Here, the Individual Defendants agreed to provide Nestlé information in order to match any other offer, providing Nestlé 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 Nestlé. 56. 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. 57. Accordingly, the Company’s true value is compromised by the consideration offered in the Proposed Transaction. Potential Conflicts of Interest 58. The breakdown of the benefits of the deal indicate that Aimmune 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 Aimmune. 59. Certain insiders stand to receive significant 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, as follows: Number of Shares Implied Cash Consideration for Name of Executive Officer or Director Beneficially Owned(1) Shares Dr. Jayson D.A. Dallas 28,764 $ 992,358 Greg Behar 10,192 $ 351,624 Patrick G. Enright(2) 6,183,695 $ 213,337,478 Kathryn E. Falberg 135,086 $ 4,660,467 Brett Haumann 6,250 $ 215,625 Mark T. Iwicki 39,567 $ 1,365,062 Mark D. McDade 26,852 $ 926,394 Stacey D. Seltzer 10,221 $ 352,625 Dr. Daniel C. Adelman 4,952 $ 170,844 Andrew Oxtoby 4,765 $ 164,393 Douglas T. Sheehy 14,982 $ 516,879 Narinder Singh 0 $ 0 All of our current executive officers and non-employee directors as a group (13 persons) 6,486,257 $ 223,775,867 60. 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, as follows: Number of Unvested Company Value of Vested Number of Unvested Company Options Value of Unvested Company Options Number of Vested Company Options RSUs Value of Unvested Company RSUs Company Options (#) ($)(1) (#) (#) ($)(2) Name ($)(1) Executive Officers Dr. Jayson D.A. Dallas 466,667 3,898,418 293,333 1,840,382 92,550 3,192,975 Dr. Daniel C. Adelman 122,814 1,147,490 297,186 5,165,397 24,763 854,324 Eric H. Bjerkholt 164,532 1,743,502 296,718 3,797,123 26,325 908,213 Andrew Oxtoby 149,688 1,769,633 67,812 835,942 22,670 782,115 Douglas T. Sheehy 145,313 1,316,077 192,936 2,397,489 39,295 1,355,678 Narinder Singh 150,000 2,571,000 — — 4,285 147,833 Directors Greg Behar 15,398 267,771 75,942 843,228 7,840 270,480 Patrick G. Enright 15,398 267,771 174,457 4,582,495 7,840 270,480 Kathryn E. Falberg 15,398 267,771 56,187 841,253 7,840 270,480 Brett Haumann 23,332 405,743 2,121 36,884 13,313 459,299 Mark T. Iwicki 15,398 267,771 195,976 4,956,274 7,840 270,480 Mark D. McDade 15,398 267,771 161,029 4,141,469 7,840 270,480 Stacey D. Seltzer 15,398 267,771 108,608 2,320,206 7,840 270,480 61. Moreover, certain employment agreements with certain Aimmune executives, entitle such executives to severance packages should their employment be terminated under certain circumstances. These ‘golden parachute’ packages are significant, and will grant each director or officer entitled to them millions of dollars, compensation not shared by Aimmune common stockholders, and will be paid out as follows Perquisites/ Named Executive Officer Cash ($)(1) Equity ($)(2) Benefits ($)(3) Total ($) Dr. Jayson D.A. Dallas $ 1,800,000 7,091,393 $ 56,244 $ 8,947,637 Dr. Daniel C. Adelman $ 785,696 2,001,814 $ 23,559 $ 2,811,069 Eric H. Bjerkholt $ 773,312 2,651,715 $ 39,192 $ 3,464,219 Andrew Oxtoby $ 751,296 2,551,748 $ 31,410 $ 3,334,454 Douglas T. Sheehy $ 728,248 2,671,755 $ 37,496 $ 3,437,499 62. Thus, while the Proposed Transaction is not in the best interests of Aimmune’s stockholders, it will produce lucrative benefits for the Company’s officers and directors. 63. On September 14, 2020, the Aimmune Board caused to be filed a materially misleading and incomplete Recommendation Statement with the SEC that, in violation 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 Process Leading to the Proposed Transaction 64. Specifically, the Recommendation Statement fails to provide material information concerning the process conducted by the Company and the events leading up to the Proposed Transaction. In particular, the Recommendation Statement fails to disclose: a. The Recommendation Statement fails to adequately explain why the engagement of J.P. Morgan was necessary, why Lazard could not accomplish the tasks provided by J.P. Morgan, or why Lazard was engaged given it required the aid of an additional financial advisor to serve as the Independent Board Members’ financial advisor; and b. The Recommendation Statement is also unclear as to the nature of the non- disclosure agreement entered into between Aimmune and any potentially interested third party, including Nestlé, as part of the sales process, and if the terms of any such agreements included “don’t-ask, don’t-waive” provisions or standstill provisions, and if so, the specific conditions, if any, under which such provisions would fall away Omissions and/or Material Misrepresentations Concerning Aimmune’s Financial Projections 65. The Recommendation Statement fails to provide material information concerning financial projections provided by Aimmune’s management and relied upon by J.P. Morgan and Lazard in their analyses. The Recommendation Statement discloses management-prepared Statement indicates that in connection with the rendering of J.P Morgan’s fairness opinion, J.P. Morgan reviewed, “certain internal financial analyses and forecasts prepared by the management of the Company relating to its business.” 66. In addition, the Recommendation Statement indicates hat in connection with the rendering of Lazard’s fairness opinion, Lazard reviewed, “various financial forecasts and other data provided to it by the Company relating to the business of the Company.” 67. Accordingly, the Recommendation Statement should have, but fails to provide, certain information in the projections that Aimmune management provided to the Board, the Independent Board Members, J.P. Morgan, and Lazard. 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). 68. With respect to the “Company Management Projections,” the Recommendation Statement fails to provide material information concerning the financial projections prepared by Aimmune management. Specifically, the Recommendation Statement fails to disclose material line items for the following metrics: a. EBIT, including the included line items of operating expenses, which includes stock-based compensation expense; b. Unlevered Free Cash Flow, including the included line items of taxes, expected working capital requirements, depreciation, amortization and capital expenditures. 69. Additionally, the Recommendation Statement provides non-GAAP financial metrics, including EBIT and Unlevered Free Cash Flow, but fails to disclose a reconciliation of all non-GAAP to GAAP metrics. 70. Further, the Recommendation Statement provides, on pp. 46-47, as follows: In creating the Early Long-Term Projections, Company management made various assumptions, including the impact of COVID-19 on PALFORZIA, the probability of success of the Company’s product candidates, timing for clinical trial completion and commercial launch, as well as estimated operational costs, including sales & marketing, research & development, manufacturing, and general & administrative, and other market and financial conditions and other future events, the results of which are reflected in the tables below. 71. Despite this statement, the Recommendation Statement fails to provide the risk adjustments that were made to the Company’s projections, nor does the Recommendation Statement provide the un-risked projections so Aimmune stockholders can evaluate the financial impact the Company’s risk-adjustments had on the projections. 72. 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. 73. Without accurate projection data presented in the Recommendation Statement, Plaintiff and other stockholders of Aimmune are unable to properly evaluate the Company’s true worth, the accuracy of J.P. Morgan and Lazard’s financial analyses, or make an informed decision whether to tender 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 Recommendation Statement. Omissions and/or Material Misrepresentations Concerning the Financial Analyses by J.P. Morgan 74. In the Recommendation Statement, J.P. Morgan 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. 75. With respect to the Selected Transactions Analysis, the Recommendation Statement fails to disclose the following: b. The date on which each selected precedent transaction closed. 76. With respect to the Discounted Cash Flow Analysis, the Recommendation Statement fails to disclose the following: a. The specific inputs and assumptions used to calculate the perpetual growth rate range of negative 40% to negative 20%; b. The specific inputs and assumptions used to calculate the discount rate range of 10.0% to 14.0%; c. The Company’s weighted average cost of capital; d. The Company’s net cash as of June 30, 2020; and e. The Company’s number of outstanding, fully-diluted shares. 77. These disclosures are critical for stockholders to be able to make an informed decision on whether to tender their shares in favor of the Proposed Transaction. 78. Without the omitted information identified above, Aimmune’s public stockholders are missing critical information necessary to evaluate whether the proposed consideration truly maximizes stockholder value and serves their interests. Moreover, without the key financial information and related disclosures, Aimmune public stockholders 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 Recommendation Statement. Omissions and/or Material Misrepresentations Concerning the Financial Analyses by Lazard 79. In the Recommendation Statement, Lazard 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. Statement fails to disclose the following: a. The specific inputs and assumptions used to calculate the discount rate range of 10.0% to 12.0%; b. The Company’s weighted average cost of capital; c. The specific inputs and assumptions used to calculate the negative terminal growth rate range of negative 40% to negative 20%; d. The Company’s estimated net cash as of September 30, 2020; and e. The Company’s number of outstanding, fully-diluted shares, as of August 26, 2020. 81. With respect to the Selected Public Companies Analysis, the Recommendation Statement fails to disclose the multiples and metrics for each selected company. 82. With respect to the Selected Precedent Transactions Analysis, the Recommendation Statement fails to disclose the following: a. The multiples and metrics for each selected precedent transaction; b. The value of each selected precedent transaction; and c. The date on which each selected precedent transaction closed 83. With regards to the Research Analysts Price Targets the Recommendation Statement fails to provide the individual price targets analyzed and source thereof. 84. With regards to the Premia Paid Analysis the Recommendation Statement fails to provide the specific premiums in each observed analysis. 85. These disclosures are critical for stockholders to be able to make an informed decision on whether to tender their shares in favor of the Proposed Transaction. 86. Without the omitted information identified above, Aimmune public stockholders are missing critical information necessary to evaluate whether the proposed consideration truly maximizes stockholder value and serves their interests. Moreover, without the key financial information and related disclosures, Aimmune’s public stockholders cannot gauge the reliability of the fairness opinion and the Board’s determination that the Proposed Transaction is in their best information in the Preliminary Stockholders. FIRST COUNT Claim for Breach of Fiduciary Duties (Against the Individual Defendants) 87. Plaintiff repeats all previous allegations as if set forth in full herein. 88. The Individual Defendants have violated their fiduciary duties of care, loyalty and good faith owed to Plaintiff and the Company’s public stockholders. 89. 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 Aimmune. 90. 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 Aimmune by entering into the Proposed Transaction through a flawed and unfair process and failing to take steps to maximize the value of Aimmune to its public stockholders. 91. Indeed, Defendants have accepted an offer to sell Aimmune 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. 92. 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 vote on whether to approve the Merger. 93. The Individual Defendants dominate and control the business and corporate affairs of Aimmune, and are in possession of private corporate information concerning Aimmune’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 Aimmune which makes it inherently unfair for them to benefit their own interests to the exclusion of maximizing stockholder value. 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. 95. 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 Aimmune’s assets and have been and will be prevented from obtaining a fair price for their common stock. 96. 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. 97. 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 Aimmune) 98. Plaintiff incorporates each and every allegation set forth above as if fully set forth 99. Defendant Aimmune, knowingly assisted the Individual Defendants’ breaches of fiduciary duty in connection with the Proposed Transaction, which, without such aid, would not have occurred. 100. 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. 101. Plaintiff and the members of the Class have no adequate remedy at law. Violations of Section 14(e) of the Exchange Act (Against All Defendants) 102. Plaintiff repeats all previous allegations as if set forth in full herein. 103. Defendants have disseminated the Recommendation Statement with the intention of soliciting stockholders to vote their shares in favor of the Proposed Transaction. 104. Section 14(e) of the Exchange Act provides that in the solicitation of shares in a tender offer, “[i]t shall be unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading[.]. 105. The Recommendation Statement was prepared in violation of Section 14(e) 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 Recommendation Statement is materially misleading and omits material facts that are necessary to render them non-misleading. 106. The Individual Defendants had actual knowledge or should have known of the misrepresentations and omissions of material facts set forth herein. 107. The Individual Defendants were at least negligent in filing a Recommendation Statement that was materially misleading and/or omitted material facts necessary to make the Recommendation Statement not misleading. 108. The misrepresentations and omissions in the Recommendation Statement are material to Plaintiff and the Class, and Plaintiff and the Class will be deprived of its entitlement to decide whether to tender its shares on the basis of complete information if such misrepresentations and omissions are not corrected prior to the expiration of the tender offer period regarding the Proposed Transaction. 109. Plaintiff and the members of the Class have no adequate remedy at law. Violations of Section 14(d)(4) of the Exchange Act and SEC Rule 14d-9 (Against All Defendants) 110. Plaintiff repeats and realleges all previous allegations as if set forth in full herein. 111. Defendants have disseminated the Recommendation Statement with the intention of soliciting stockholders to tender their shares in favor of the Proposed Transaction. 112. Section 14(d)(4) requires Defendants to make full and complete disclosure in connection with a tender offer. 113. SEC Rule 14d-9 requires a Company’s directors to, furnish such additional information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not materially misleading. 114. Here, the Recommendation Statement violates both Section 14(d)(4) and SEC Rule 14d-9 because it because it is materially misleading in numerous respects, omits material facts, including those set forth above and Defendants knowingly or recklessly omitted the material facts from the Recommendation Statement. 115. The misrepresentations and omissions in the Recommendation Statement are material to Plaintiff and the Class, and Plaintiff and the Class will be deprived of its entitlement to decide whether to tender their shares on the basis of complete information if such misrepresentations and omissions are not corrected prior to the expiration of the tender offer period regarding the Proposed Transaction. 116. Plaintiff and the members of the Class have no adequate remedy at law. FIFTH COUNT Violations of Section 20(a) of the Exchange Act (Against all Individual Defendants) 117. Plaintiff repeats all previous allegations as if set forth in full herein. 118. 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 connection therewith. Because of their possession of such information, the Individual Defendants knew or should have known that the S-4 was materially misleading to the Company stockholders. 119. 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 S-4 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 S-4. The Individual Defendants were provided with copies of, reviewed and approved, and/or signed the S-4 before its issuance and had the ability or opportunity to prevent its issuance or to cause it to be corrected. 120. The Individual Defendants also were able to, and did, directly or indirectly, control the conduct of Aimmune’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 S-4 was misleading. As a result, the Individual Defendants are responsible for the accuracy of the S-4 and are therefore responsible and liable for the misrepresentations contained herein. 121. The Individual Defendants acted as controlling persons of Aimmune 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 Aimmune to engage in the wrongful conduct complained of herein. The Individual Defendants controlled Aimmune and all of its employees. As alleged above, Aimmune is a primary violator of Section 14 of the Exchange Act and SEC Rule S-4. By reason of their conduct, the Individual Defendants are liable pursuant to section 20(a) of the Exchange Act. 122. Plaintiff and the members of the Class have no adequate remedy at law.

securities

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IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION JUAN VANZZINI, § AND ALL OTHERS § SIMILARLY SITUATED, § Plaintiffs, § v. § CIVIL ACTION § FILE NO: 4:11-cv-4173 § § § JURY DEMANDED ACTION MEAT DISTRIBUTORS, INC § and J.FRED CRAMM § § Defendants § _________________________________________________________________________ PLAINTIFF’S ORIGINAL COMPLAINT TO THE HONORABLE JUDGE OF SAID COURT: NOW COMES, PLAINTIFFS, JUAN VANZZINI, and all others similarly situated, and complain of Defendants ACTION MEAT DISTRIBUTORS, INC. and J. FRED CRAMM (hereinafter collectively referred to as “Defendants”) and for cause of action would show the Court as follows: I. INTRODUCTION 1. This is a collective action suit to recover unpaid overtime wages brought under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq. 2. This action seeks equitable relief, compensatory and liquidated damages, attorney’s fees, taxable costs of court, and post-judgment interest for Defendants’ willful failure to pay overtime pursuant to 29 U.S.C. § 216(b) for Plaintiff JUAN VANZZINI , and all others similarly situated, in the course of their employment with the Defendants. PLAINTIFF’S ORIGINAL COMPLAINT 3 .JUAN VANZZINI and all others similarly situated demand a jury trial on all issues that may be tried to a jury. 4. This action is authorized and instituted pursuant to the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. and state common law. II. JURISDICTION AND VENUE 5. Plaintiff JUAN VANZZINI, on behalf of himself and the Plaintiff class, brings this action to recover unpaid overtime compensation from the Defendants pursuant to the Fair Labor Standards Act 29 U.S.C. § 201 et seq. 6. This Court also has jurisdiction of these claims pursuant to 28 U.S.C. § 1331 and 29 U.S.C. § 201 et seq. 7. Venue is proper in the Southern District of Texas under 28 U.S.C. § 1441(a). III. PARTIES 8. Plaintiff Juan Vanzzini is a resident of Harris County, Texas. 9. Members of the “Plaintiff Class” are current and former employees of Defendants who work, or have worked, at one or more of Defendants’ meat and grocery distribution facilities in 10. Defendant Action Meat Distributors, Inc. is a validly existing Texas corporation that may be served with summons and complaint by serving its Registered Agent Fred J. Cramm at 1920 S. Starpoint ,Houston Texas 77032, or at any other address where they conduct business. 11. Defendant J. Fred Cramm is a resident of Texas and may be served with summons and complaint at 30 Gentlewind Place, The Woodlands, Texas 77381. 12. Whenever in this complaint it is alleged that the named Defendant committed any act or omission, it is meant that Defendant’s officers, directors, vice-principals, agents, servants, or PLAINTIFF’S ORIGINAL COMPLAINT employees committed such act or omission and that at the time such act or omission was committed, it was done in the routine normal course and scope of employment of Defendant’s officers, directors, vice-principals, agents, servants or employees. 13. At all material times, Defendant has been an employer within the meaning of 3(d) of the FLSA 29 U.S.C. § 203(r). 14. At all material times, Defendants has been an enterprise within the meaning of 3(r) of the FLSA 29 U.S.C. § 203(r). 15. At all material times, Defendant has been an enterprise in commerce or in the production of goods for commerce within the meaning of 3(s) (1) of the FLSA because they have had employees engaged in commerce. 29 U.S.C. § 203(s) (1). 16. At all material times, Plaintiff was an individual employee who was engaged in commerce of in the production of goods for commerce as required by 29 U.S.C. §§ 206-207. 17. Defendant is Plaintiff’s “employer” within the meaning of Section 3(d) of the FLSA, 29 U.S.C. § 203(d). IV. CLASS ALLEGATIONS 18. Plaintiff JUAN VANZZINI files this case as an “opt in” collective action, as it is specifically allowed by 29 U.S.C. § 216(b). 19. The class that Plaintiff JUAN VANZZINI seeks to represent may be described as follows: All current and former employees of any of the facilities owned or operated by Defendant in Texas who 1) worked at any business located in Texas that was owned, operated, controlled and/or acquired by Defendants during the class period, and 2) claims that he or she was either (a) deliberately misclassified as being exemptfrom the overtime pay provisions of 29 U.S.C., et.seq. or (b) failed to receive all or his or her overtime pay, in violation of 29 U.S. C., et.seq.and seeks payment for PLAINTIFF’S ORIGINAL COMPLAINT such lawfully earned.overtime pay. 20. Plaintiff, JUAN VANZZINI, seeks to represent only those members of the above- described group who, after appropriate notice of their ability to opt into this action, have provided consent in writing to be represented by counsel for Plaintiff Juan Vanzzini as required by 29 U.S.C. § 21. Those persons who choose to opt in, referred to as the “Plaintiff’s class”, will be listed on subsequent pleadings and copies of their written consents to sue will be filed with the Court. 22. Plaintiff JUAN VANZZINI contends that this action is appropriate for collective action status because each named Defendant herein has acted in the same manner with regard to all members of the Plaintiff’s class. V. FACTS 23. At all times relevant to this action, Defendant has been subject to the requirements of the Fair Labor Standards Act 29 U.S.C. 201 et.seq. 24. For purposes of this action, the “relevant period” is defined as such period commencing on the date that is three years prior to the filing of this action, and continuing thereafter. 25. Defendants employed Plaintiff JUAN VANZZINI from June, 2005 until December,, 2010 at various locations of Defendant’s facilities in Houston, Texas. 26. During the period of employment that, Plaintiff worked for Defendant, Plaintiff was classified as a “Puller”. 27. During his employment and in the routine performance of his day-to-day job duties., Plaintiff has performed non-exempt work, during a significant period of most days, as classified by the Act,because the performance of Plaintiff’s job required it and because Defendant management PLAINTIFF’S ORIGINAL COMPLAINT required the performance of those non-exempted job duties, as a condition of Plaintiff’s continued employment. 28. In particular, Plaintiff stocked inventory, filled orders, and performed routine maintenance duties for Defendant’s business. 29. During Plaintiff’s employment, while working for the Defendant, Plaintiff was required to work overtime hours in excess of 40 hours worked during each seven-day workweek. 30. Further, during these hours worked, Plaintiff has performed the function of his job, which included the performance duties typically performed by “hourly” paid non-exempt employees because the job required it and the Defendants’ management required it, as a condition of Plaintiff’s continued employment. 31. Plaintiff routinely worked in excess of 40 hours per week during his employment with the Defendant. 32. Plaintiff’s normal work schedule was to work between eight and eleven hours during each workday.. 33. Defendants required Plaintiff and all others similarly situated to perform all necessary work to include the performance of those duties otherwise typically performed by “hourly” employees which routinely required Plaintiff and other similarly situated employees to work “overtime” hours as defined by 29 U.S.C. § 201 et seq., for which they failed to receive overtime compensation as required by the Act. VI. FIRST CLAIM FOR RELIEF (Unpaid overtime compensation under the FLSA) 34. Each and every allegation contained in the foregoing paragraphs is re-alleged as if fully written herein. PLAINTIFF’S ORIGINAL COMPLAINT 35. Plaintiff JUAN VANZZINI and all others similarly situated are considered non- exempt employees under the statutory provisions of the Fair Labor Standards Act, 29 U.S. C. 201, et seq., as well as by the administrative regulations used to interpret the Act. 36. Plaintiff JUAN VANZZINI and all others similarly situated are entitled to receive overtime pay for all hours they have worked in excess of 40 during each seven-day workweek. 37. Defendants failed to compensate Plaintiff and all others similarly situated, their entitled pay (including overtime pay) for those hours they worked in excess of 40 per week. 38. Defendants have violated 29 U.S.C. § 201 et seq. by failing to compensate the Plaintiff and all other similarly situated employees “overtime” pay for all hours worked in excess of 40 hours per week. 39. Defendants have failed to make good faith efforts to comply with the FLSA, and have willfully and deliberately sought to evade the requirements of the federal statute. 40. Defendants have failed to maintain a complete, accurate, and contemporaneous record of the number of hours worked per workweek by Plaintiff and by all other similarly situated employees, as required by law. 41. The Defendant’s conduct was willful within the meaning of 29 U.S.C. § 255(a). 42. No lawful exemption excused the Defendants from compensating Plaintiff and all others similarly situated, overtime pay for hours worked over forty per week. 43. Defendants knowingly, willfully, or with reckless disregard carried out an illegal pattern and practice of deceptive and fraudulent accounting practices regarding overtime compensation due to Plaintiff and to all others similarly situated. 44. Plaintiff and all others similarly situated seek an amount of back-pay equal to the unpaid overtime compensation from the date they commenced employment for the Defendants until PLAINTIFF’S ORIGINAL COMPLAINT the date of trial. 45. Plaintiff and all others similarly situated further seek an additional equal amount as liquidated damages, as well as reasonable attorney’s fees and costs as provided by 29 U.S.C. § 216(b), along with post-judgment interest at the highest rate allowed by law. VII. COLLECTIVE ACTION ALLEGATIONS 46. Each and every allegation contained in the foregoing paragraph is re-alleged as if fully written herein. 47. Other employees have been victimized by this pattern, practice, and policy of the Defendants that is in violation of the FLSA. 48. Thus, from personal knowledge, Plaintiff is aware that the illegal practices and policies of Defendants have been imposed on other workers. 49. Other, similarly situated employees are being denied their lawful wages. 50. Accordingly, each Defendant’s pattern and practice of failing to pay the overtime pay (at time and one-half) of employees as required by the FLSA results from the Defendants’ general application of policies and practices, and does not depend on the personal circumstances of the members class. 51. Plaintiff JUAN VANZZINI’S experience is typical of the experience of the member’s class as it pertains to compensation. 52. The specific job titles or job requirements of the various members of the class do not prevent collective treatment. 53. All employees, regardless of their job requirements or rates of pay, who are denied overtime compensation for hour worked in excess of 40 per week, are similarly situated. 54. Although the issue of damages may be individual in character, there is no detraction PLAINTIFF’S ORIGINAL COMPLAINT from the common nucleus of liability facts. 55. All current and former employees of Defendant’s meat, and grocery business, who at any time during the three years prior to the date of filing of this action to the date of judgment who were denied overtime pay for hours worked in excess of forty (40) in any given workweek are properly included as members of the class. VIII. SECOND CLAIM FOR RELIEF (Plaintiff’s individual claim for unpaid wages In violation of the Texas Labor Code, Chapter 61) 56. Each and every allegation contained in the foregoing paragraph is re-alleged as if fully written herein. 57. By withholding Plaintiff JUAN VANZZINI’S overtime wages earned during the period of his employment until the present, Defendant’s have violated the Texas Labor Code, Chapter 61, et seq., which specifically requires the employer to pay its employees all of their wages earned. 58. Plaintiff therefore sues for his unpaid wages and all additional damages allowed under the Texas Labor Code, Chapter 61, and et seq. IX. ATTORNEY FEES 59. Each and every allegation contained in the foregoing paragraph is re-alleged as if fully written herein. 60. Plaintiff JUAN VANZZINI, and all other similarly situated, are entitled to recover attorney’s fees and costs for bringing this action pursuant to the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. X. JURY DEMAND 61. Plaintiff JUAN VANZZINI, and all other similarly situated, make a formal demand for PLAINTIFF’S ORIGINAL COMPLAINT a jury trial in this matter. XI. PRAYER FOR RELIEF WHEREFORE, PREMISES CONSIDERED, Plaintiff JUAN VANZZINI, and all other similarly situated respectfully request that upon hearing, the Court grant Plaintiff, and all others similarly situated, relief as follows: a. Declare that Defendants have violated the Fair Labor Standards Act, specifically , 29 U.S.C. § 207, by failing to Plaintiff and all others similarly situated, overtime pay at one and one-half times their regular hourly rate for all hours in excess of 40 worked during each seven-day work period. b. Enjoin Defendants from failing to pay Plaintiff and all others similarly situated, at one and one-half times their regular hourly rate for all hours in excess of 40 worked during each seven-day work period. c. Order Defendants to pay Plaintiff and all others similarly situated, the difference between what they should have paid for overtime hours Plaintiffs worked during the relevant period and what they were actually paid, together with an equal amount as to liquidated damages. d. Order Defendants to pay Plaintiff and all others similarly situated employees’ reasonable attorney’s fees and costs pursuant to 29 U.S.C. § 216(b). e. Order Defendants to pay post-judgment interest at the highest lawful rate for all amounts, including attorney’s fees, awarded against Defendants. f. Order further relief, whether legal, equitable, or injunctive, as may be necessitated to effectuate full relief to Plaintiff JUAN VANZZINI, and to all other similarly situated employees of the Defendants. Respectfully submitted, THE LAW OFFICES OF JOE M. WILLIAMS & ASSOCIATES 9950 Westpark Drive, Suite 330 Houston, Texas 77063 (713) 532-0336 – Telephone (713) 532-0337 – Facsimile By: /s/ Joe Williams Joe M. Williams PLAINTIFF’S ORIGINAL COMPLAINT Federal ID. No. 997092 State Bar No. 24063066 ATTORNEY FOR PLAINTIFF JUAN VANZZINI PLAINTIFF’S ORIGINAL COMPLAINT

employment & labor

zLs-DIcBD5gMZwczLzU9

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. ___________________ JOSEPH SOLIMAN, Individually and on behalf of all others similarly situated, Plaintiff, v. FUSIONPHARM, INC., SCOTT M. DITTMAN, and WILLIAM J. SEARS, Defendants. ______________________________________________________________________________ CLASS ACTION COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS ______________________________________________________________________________ Plaintiff Joseph Soliman (“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 information and belief as to all other matters from the investigation conducted by and through Plaintiff’s attorneys. The investigation includes, without limitation, a review of the following: 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 FusionPharm, Inc. (“FusionPharm” or the “Company”); analysts’ reports and advisories about the Company; and information readily obtainable from public sources. 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 (and others described below) who purchased or otherwise acquired FusionPharm securities between March 31, 2012 and May 16, 2014, both dates inclusive (the “Class Period”). Plaintiff seeks to recover compensable 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. 2. FusionPharm presented itself to the investing public as a company focused on the development, production and sales of its “patent pending PharmPods cultivation container system,” which are refurbished shipping containers used primarily to grow cannabis. Throughout the Class Period, FusionPharm’s stock traded over-the counter (“OTC”) and was quoted on OTC Link, operated by OTC Markets Group, Inc. 3. Throughout the Class Period, defendants caused the Company to issue materially misleading statements and/or omit material information regarding the Company’s purported revenues. In particular, defendants engaged in a fraudulent scheme by utilizing backdated convertible notes and preferred FusionPharm stock in order to cause the Company to issue common stock to entities owned and/or controlled by defendant William J. Sears (“Sears”) (the brother-in-law of the Company’s Chief Executive Officer (“CEO”), defendant Scott M. Dittman), including Microcap Management LLC (“Microcap”),1 Bayside Realty Holdings LLC (“Bayside”) and Meadpoint Venture Partners, LLC (“Meadpoint”). Defendant Sears would then cause the entities he controlled – Microcap, Bayside and Meadpoint – to sell the FusionPharm common 1 In 2009, Microcap received common shares from FusionPharm’s predecessor company for stock promotion work. In 2010, Microcap received preferred shares as part of the transfer of the predecessor company to defendant Dittman and Sears. In 2011, Microcap purchased FusionPharm common shares from an individual FusionPharm shareholder. shares those entities received to the investing public with some of the proceeds round-tripped back to the Company. Defendants caused the Company’s stock price to be artificially inflated throughout the Class Period by reporting the fraudulent stock sales as revenue from the sale of the Company’s PharmPods. 4. The Company was started in late 2010, when defendants Dittman and Sears acquired Baby Bee Bright Corp. (“Baby Bee Bright”), a company that purported to manufacture and sell prenatal audio systems which the Baby Bee Bright claimed to enhance the cognitive development and intelligence of babies. Defendant Dittman and his brother in-law, defendant Sears, changed Baby Bee Bright’s name to FusionPharm in March 2011. Defendant Dittman was listed as the CEO of the Company and FusionPharm’s sole director. 5. Upon information and belief, defendant Sears was an undisclosed executive officer of the Company and controlled the entities that received FusionPharm’s common stock during the Class Period, which was then sold to the investing public. According to cease-and-desist orders (see infra notes 2-7) by the SEC against defendants, defendant Sears worked at FusionPharm from its inception, appeared on non-public Company documents as an officer, drew a paycheck, and handled many day-to-day responsibilities usually reserved for an officer of the Company. 6. Defendants Dittman and Sears did not disclose Sears’ controlling position and receipt of salary from the Company because defendant Sears was a convicted felon, having pled guilty to conspiracy to commit securities fraud, securities fraud, and commercial bribery, in 2007. See United States v. Sears, Case No. 04-cr-556-swk (S.D.N.Y.). 7. Although FusionPharm reported that it was ostensibly in the business of selling PharmPods, it had almost no real revenue and the lion’s share of the revenue reported by the Company was a product of the fraudulent scheme described herein. Throughout the Class Period, FusionPharm was funded almost entirely through illegal sales of the Company’s stock through defendant Sears’ controlled entities, beginning with the initial stock that Sears received through his ownership in Microcap. 8. Defendants Dittman and Sears then caused the Company to falsely report that Bayside and Meadpoint, entities controlled by defendant Sears, had loaned money to FusionPharm in order to make the sales of FusionPharm stock by defendant Sears appear to be legitimate. After defendants sold the initial stock Sears’ entities had received, Sears then converted the purported “loan” – or fake “debt” – owed to Bayside and Meadpoint to unrestricted FusionPharm stock, which Bayside and Meadpoint turned around and sold to the investing public. 9. Portions of the proceeds of the sales by Bayside and Meadpoint were then given back to the Company and defendants caused FusionPharm to report those proceeds from the fraudulent stock sales as revenue from the sales of PharmPods. As such, the Company’s share price was artificially inflated during the Class Period when defendants engaged in the fraudulent scheme to sell the Company’s stock through defendant Sears’ controlled entities. 10. In furtherance of the fraudulent scheme, defendants caused the Company to report false information concerning the purported loans, and to omit material information regarding defendant Sears’ role in FusionPharm as well as his control over the entities receiving FusionPharm stock in exchange for the purported fake “debt.” The Company also failed to disclose that the transactions with these entities were related party transactions due to defendant Sears’ affiliation with FusionPharm. 11. Defendant Sears, through the entities he controlled, sold the FusionPharm stock into the market, reaping millions in fraudulent proceeds. Defendant Sears then transferred the proceeds from the illegal stock sales back to the Company, where the money was fraudulently recognized and reported as revenue in the Company’s financial reports to the investing public. To further artificially inflate the Company’s stock price, defendants caused FusionPharm to issue press releases and financial reports claiming the false revenues, and failed to disclose defendant Sears’ identity, role, and background in FusionPharm’s quarterly and annual reports posted on the OTC Markets Group, Inc.’s website for investors to know the truth concerning the reported revenues. During the Class Period, defendants’ fraudulent scheme defrauded shareholders of approximately $12.2 million. 12. The truth concerning defendants’ wrongdoing began to emerge on May 16, 2014, when the SEC issued an Order of Suspension of Trading and suspended FusionPharm from trading on OTC Link for the period May 16, 2014 through May 30, 2014 (the “Suspension Order”).2 The Suspension Order stated the reason for the suspension of trading against FusionPharm was due to “a lack of current and accurate information concerning the securities of FusionPharm…in filings and disclosures made by FusionPharm on OTC Link…and press releases to investors concerning, among other things: (1) the company’s assets; (2) the company’s revenues; (3) the company’s financial statements; (4) the company’s business transactions; and (5) the company’s current financial condition.” 13. On this news, the Company’s stock plummeted from $2.89 per share at the close of trading on May 15, 2014, the day prior to the issuance of the Suspension Order, to close at $1.10 per share on June 2, 2014, when the Company was allowed to resume trading, a loss of approximately 62% on heavy volume of 767,739 shares. 14. On or about September 16, 2016, the SEC instituted cease and desist proceedings 2 In the Matter of FusionPharm, Inc., File No. 500-1 (May 16, 2014) (Order of Suspension of Trading), available at https://www.sec.gov/litigation/suspensions/2014/34-72177-o.pdf. against FusionPharm,3 Scott M. Dittman,4 William J. Sears,5 Cliffe R. Bodden,6 Tod A. DiTommaso (“DiTommaso”),7 Microcap Management LLC, Bayside Realty Holdings LLC and Meadpoint Venture Partners, LLC,8 in connection with defendants’ scheme defraud investors through false and misleading statements concerning the Company’s purported loans, sales of the stock and reported revenue during the Class Period, as well as the omissions of defendant Sears’ controlling role in the scheme. 15. In connection with the federal criminal charges filed against defendants Sears and Dittman relating to the findings of the SEC cease-and-desist orders, defendant Sears pled guilty and was convicted of conspiracy [18 U.S.C. § 371] to commit violations of Section 5(a) of the Securities Act [15 U.S.C. § 77e(a)], violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5], wire fraud [18 U.S.C. § 1343], and mail fraud [18 U.S.C. § 1341]. See United States v. William Sears and Scott Matthew Dittman, 16- CR-301-WJM (D. Colo.). Defendant Sears agreed, as part of a plea agreement, to a minimum of 60 months in prison, a money judgment of over $12 million, and the forfeiture of over $45 million 3 Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order and Notice of Hearing, Securities Act Release No. 10210, Exchange Act Release No. 78863 (Sept. 16, 2016). 4 Order Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Section 8A of the Securities Act of 1933, Sections 4C, 15(b) and 21C of the Securities Exchange Act of 1934, and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order and Notice of Hearing, Securities Act Release No. 10211, Exchange Act Release No. 78864 (Sept. 16, 2016). 5 Order Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b) and 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order and Notice of Hearing, Securities Act Release No. 10212, Exchange Act Release No. 78865 (Sept. 16, 2016). 6 Order Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b) and 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order and Notice of Hearing, Securities Act Release No. 10214, Exchange Act Release No. 78867 (Sept. 16, 2016). 7 Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 9133 and Notice of Hearing, Securities Act Release No. 10215 (Sept. 16, 2016). 8 Order Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b) and 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order and Notice of Hearing, Securities Act Release No. 10213, Exchange Act Release No. 78866 (Sept. 16, 2016). including funds maintained by Sears in FusionPharm and Meadpoint bank accounts. JURISDICTION AND VENUE 16. 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 by the SEC (17 C.F.R. §240.10b-5). 17. This Court has jurisdiction over the subject matter of this action under 28 U.S.C. §1331 and §27 of the Exchange Act. 18. 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 FusionPharm maintains its executive offices in this District and a significant portion of the defendants’ actions, and the subsequent damages, took place within this District. 19. 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. THE PARTIES 20. Plaintiff Joseph Soliman (“Plaintiff”), as set forth in the accompanying certification, incorporated by reference herein, purchased FusionPharm 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. 21. Defendant FusionPharm is a Nevada corporation with its principal executive offices located at 355 South Teller Street, Suite 200, Lakewood, CO 80226. 22. Defendant Scott M. Dittman (“Dittman”) founded the Company and was the Chief Executive Officer (“CEO”), President and purported sole director of FusionPharm during the Class Period. Defendant Dittman signed and/or authorized the signing of the false and misleading financial statements described herein. 23. Defendant William J. Sears (“Sears”), upon information and belief, during the Class Period was a founder, de facto executive officer and undisclosed control person of FusionPharm. Upon information and belief, defendant Sears controls Microcap, Bayside and Meadpoint. 24. Defendants Dittman and Sears are collectively referred to herein as the “Individual Defendants.” 25. The Individual Defendants and defendant FusionPharm are collectively referred to herein as the “defendants.” SUBSTANTIVE ALLEGATIONS Background of the Company 26. The Company was started in late 2010 when defendants Dittman and his brother in-law, Sears, took over Baby Bee Bright, an over-the-counter (“OTC”) traded company. Baby Bee Bright reported $400 in gross revenues for the first quarter of 2010 (its final quarter of operations), and a $25,000 loss, for its business of purportedly manufacturing and selling prenatal audio systems the company claimed enhanced babies’ cognitive abilities. After drawing the attention of the Federal Trade Commission (“FTC”), Baby Bee Bright was forced to cease any representations that its prenatal audio system provided cognitive development and educational benefits to babies.9 Upon information and belief, once the FTC forced Baby Bee Bright to halt its false claims of product efficacy, the company was unable to attract investors’ capital, and thereafter 9 See Letter from Heather Hippsley, Acting Associate Director, Federal Trade Commission to Greg Lam, Esq., Copilevitz & Canter, LLC (Mar. 23, 2009), available at https://www.ftc.gov/sites/default/files/documents/closing_letters/baby-bee-bright- corporation/090323babybeebrightclosing.pdf. ceased operations. Baby Bee Bright was, in turn, proceeded by three other companies which operated in different business sectors and never produced a profit, including, Sequoia Interest Corp., Argent Capital Corp. and Sunport Medical. 27. Defendants Dittman and Sears took over Baby Bee Bright and started operations of FusionPharm (the name change occurred in April 2011) in late 2010 working with attorney Guy Jean-Pierre as corporate secretary and Company counsel for Fusion Pharm. Jean-Pierre had been added to the OTC Markets Prohibited Attorneys list in early 2010, and has since been barred from practicing before the Commission. He has also lost his license to practice law and was ordered to pay a monetary penalty of over $2 million for his role in penny stock fraud scheme. Despite this, OTC Markets filings reflect that Jean-Pierre served as corporate secretary to FusionPharm until early 2012. The proceedings against Jean-Pierre arose after he was charged with forging more than 100 legal opinions for multiple penny stock issuers all of which had gone public in reverse merger transactions. Fusion Pharm made no disclosure to investors or its shareholders of the charges against Jean-Pierre. 28. The Company claimed to be a business focused on commercializing its patent pending PharmPods line of hydroponic cultivation systems. PharmPods are intended to be used for indoor plant cultivation by urban farming companies and other specialty growers. According to the Company’s website, a single 40-foot PharmPod container is capable of growing more produce than one full acre of traditional farm agriculture. Defendants Cause the Company to Issue Materially Misleading Statements and/or Omit Material Information 29. The Class Period begins on March 31, 2012, when FusionPharm filed its annual report for the year ended December 31, 2011 (the “2011 Annual Report”). In the 2011 Annual Report, the Company reported the following: Results of Operation – January 1, 2011 to December 31, 2011 During this period the Company’s revenues were $256,895 with a gross profit of $111,880. Operating expenses during the period were $308,747. Our net loss during the period was $287,564. 30. In connection with the Company’s outstanding securities, the 2011 Annual Report Increases of 10% or more of the same class of outstanding equity securities: (a) Approximately 889,600 shares of common stock were issued during the fiscal year covered by this Annual Report for the conversion of preferred stock. (b) The Issuer sold at total of 165,918 shares of common stock to 7 individuals during the fiscal year covered by this Annual Report. (c) Approximately 194,224 shares of common stock were issued during the fiscal year covered by this report in settlement of debt. 31. In connection with related party transactions, the 2011 Annual Report stated: Disclosure of Related Party Transactions None of the following parties has, during the past two fiscal years, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us, other than as noted in this section: (i) Any of our directors or executive officers; (ii) Any person proposed as a nominee for election as a director; (iii) Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock; (iv) Any of our promoters; and (v) Any member of the immediate family (including spouse, parents, children, siblings and in-laws) of any of the foregoing persons. 32. The 2011 Annual Report was signed by defendant Dittman. 33. On April 9, 2012, DiTommaso filed an attorney letter with OTC Markets Group, Inc., which was published on April 10, 2012 to the investing public, and which stated that DiTommaso was retained by the Company to determine whether FusionPharm disclosed adequate current information in its financial reports, including the 2011 Annual Report.10 34. On February 20, 2013, FusionPharm filed its annual report for the year ended December 31, 2012 (the “2012 Annual Report”). In the 2012 Annual Report, the Company stated, in pertinent part: Dependence on One or a Few Major Customers; The Issuer’s largest customer, VertiFresh, accounted for approximately 90.8% of the Company’s sales for the year ended December 31, 2012. In addition, the Company’s two largest customers, VertiFresh and Meadpoint Venture Partners, together accounted for approximately 90.8% and 9.2%, respectively, of the Company’s sales for such period. * * * Meadpoint Venture Partners LLC: In November 2012, the Company entered into Licensing and Distribution Agreement with Meadpoint Venture Partners, a Colorado company. Under the agreement Meadpoint has agreed to be the Company’s primary distributor for the Company’s PharmPod High Intensity line of controlled environment agriculture containers. PharmPod High Intensity containers utilize High Intensity Discharge (HID) and/or High Pressure Sodium (HPS) lighting systems to achieve outstanding results with fruiting and flowing plants. An initial order for 8 PharmPod High Intensity containers was received from Meadpoint with minimum purchase quantities of 50 containers in both 2013 and 2014. 35. In connection with the Company’s revenue for 2012, the 2012 Annual Report stated the following: Net Revenues. Net revenues for the year ended December 31, 2012 was $825,594, an increase of $598,155 (263.0%) as compared with $227,439 for the year ended December 31, 2011. Revenue was derived primarily from the sale of PharmPods and licensing fees. (Emphasis added.) 10 See Letter from Tod A. Ditommaso to OTC Markets Group, Inc. (Apr. 9, 2012), available at http://www.otcmarkets.com/financialReportViewer?symbol=FSPM&id=77659. 36. The 2012 Annual Report further contained information concerning convertible promissory notes payable to third parties. In particular, the 2012 Annual Report described an outstanding $175,547 Convertible Promissory Note payable to Bayside Realty Holdings, LLC, due on May 2, 2013, with a per annum rate of 10%. This note was convertible into common stock at $0.01 per share. 37. The 2012 Annual Report described a similar Convertible Promissory Note in the amount of $88,000 payable to Meadpoint Venture Partners, LLC, due on June 15, 2013, pursuant to the same terms as the note payable to Bayside Realty Holdings, LLC. 38. In the 2012 Annual Report, the Company reported that during the year ended December 31, 2012, FusionPharm issued 619,000 shares of the Company’s common stock for the conversion of 6,190 shares of preferred stock by Microcap Management, LLC. The Company also issued 140,000 common shares for the conversion of $1,400 debt payable to Bayside Realty Holdings, LLC for the year ended December 31, 2012. 39. The 2012 Annual Report was signed by defendant Dittman. 40. On March 7, 2013, DiTommaso filed an attorney letter with OTC Markets Group, Inc., which was published that same day to the investing public, and which stated that DiTommaso was retained by the Company to determine whether FusionPharm disclosed adequate current information in its financial reports, including the 2012 Annual Report.11 41. The 2011 and 2012 Annual Reports were materially misleading and/or omitted material information. In particular, the 2011 and 2012 Annual Reports contained materially misleading statements and/or omitted material information concerning defendants Dittman’s and Sears’ scheme to prepare fraudulent non-convertible promissory notes and credit lines between 11 See Letter from Tod A. Ditommaso to OTC Markets Group, Inc. (Mar. 7, 2013), available at http://www.otcmarkets.com/financialReportViewer?symbol=FSPM&id=100536. FusionPharm and Bayside, as well as between FusionPharm and Meadpoint. 42. In June 2012, defendants Sears and Dittman prepared the fraudulent non- convertible promissory notes and credit lines. In fact, the non-convertible note and credit line agreement with Bayside, which contained a credit limit of $275,000, was backdated to May 2, 2011 and the non-convertible promissory note and credit line agreement with Meadpoint, which contained a credit limit of $200,000, was backdated to June 15, 2011. 43. Then, around November or December 2012, defendants Sears and Dittman re- drafted the Bayside and Meadpoint notes as fraudulent convertible notes, as described in the 2012 Annual Report. Defendants Dittman and Sears fraudulently re-drafted these notes in order to obtain more unrestricted FusionPharm common shares, which they could then sell illegally to the unsuspecting public, using the proceeds to fund the Company and report as illegal revenue, as described in the 2011 and 2012 Annual Reports. 44. Between approximately March 2011 and December 2012, Microcap sold approximately 735,000 shares of unregistered FusionPharm common stock. Microcap’s sale of unregistered FusionPharm common stock was based on, among other things, the materially misleading statements in the 2011 and 2012 Annual Reports. In particular, the 2011 and 2012 Annual Reports failed to disclose defendant Sears’ undisclosed role as an executive officer of FusionPharm, as well as his control over Microcap. Indeed, the sales were based on statements to the contrary, that defendant Sears had no role with the Company and was not an affiliate of Microcap. Portions of the sales of the Company’s common stock by Microcap were then funneled back into the Company and reported as fraudulent revenue from the sales of PharmPods which never occurred. 45. On April 15, 2014, FusionPharm filed a restated annual report for the year ended December 31, 2012, which also contained the Company’s financial report for the year ended December 31, 2013, and a supplemental disclosure statement for FusionPharm’s fiscal year 2013 (collectively, the “Restated 2012 and 2013 Annual Reports”). 46. In the Restated 2012 and 2013 Annual Reports, the Company reported restated revenue for fiscal 2012 of $308,398. Concerning the restatement of the financial results contained in the 2012 Annual Report, the Restated 2012 and 2013 Annual Reports stated, in pertinent part: In connection with the finalization of our 2013 financial statements, we have restated our 2012 financial statements to reverse $500,000 of the $750,000 in revenue that was recognized during 2012 for the previously reported exclusive licensing arrangement with VertiFresh LLC (“VertiFresh”) for the use of PharmPods growing technologies for agricultural products. The restatement was based on reevaluating the arrangement with VertiFresh which required $250,000 be paid during 2012 for the licensing of the Colorado territory (on a nonrefundable basis), and the remaining $500,000 to be due in equal installments of $250,000 during 2013 and 2014 for the rights to two additional territories. The initial $250,000 was paid during 2012 and was reflected as earned revenue. The remaining $500,000 was set up as an accounts receivable and was reflected as earned revenue in error under US GAAP as the formal agreement was never finalized the amounts due were for future territories and therefore not earned during 2012 and collection of this amount was never reasonably assured given the startup nature of VertiFresh. No further payments are anticipated. 47. The Restated 2012 and 2013 Annual Reports also contained information concerning outstanding notes owed by the Company, as shown in the table below: Notes Payable consists of the following as of: December 31, 2013 December 31, 2012 $30,703 $175,547 Convertible Unsecured Promissory Note payable to Bayside Realty Holdings, LLC. Originally due May 2, 2013 – extended to March 31, 2014. This note bears interest at a rate of 10% and is convertible into common stock at $0.01 per share. $63,250 $88,000 Convertible Unsecured Promissory Note payable to Meadpoint Venture Partners, LLC. Originally due June 15, 2013 – extended to June 30, 2014. This note bears interest at a rate of 10% and is convertible into common stock at $0.01 per share. Unsecured Promissory Note. Due on demand. Non- interest bearing. $26,205 $26,205 Total Notes Payable $120,158 $289,752 Current Notes Payable $120,158 $26,205 Long Term Notes Payable $0 $263,547 48. Further, in connection with common stock issued by the Company, the Restated 2012 and 2013 Annual Reports stated, in pertinent part: Common Stock During the year ended December 31, 2013, we issued 3,157,265 shares of our common stock in connection with the conversion of $170,994 in debt payable to Bayside Realty Holdings, LLC ($146,244) and Meadpoint Venture Partners, LLC ($24,750). During the year ended December 31, 2012, we had the following activity: we raised $68,000 from the sale of 68,000 shares of our common stock to various investors in a private placement; and we issued 12,000 shares of restricted common stock in exchange for professional services for which we recognized $12,000 of professional fee expense related to the issuance at the per share subscription price of our private placement then in effect. Preferred Stock During March of 2013, we issued 2,000,000 shares of common stock in connection with the conversion of 20,000 shares of Series A Convertible Preferred Stock. During 2012 we issued 619,000 shares of our common stock for the conversion of 6,190 shares of our preferred stock. 49. The Restated 2012 and 2013 Annual Reports were signed by defendant Dittman. 50. On April 15, 2014, Frederick M. Lehrer (“Lehrer”), attorney and counsel at law, filed an attorney letter with OTC Markets Group, Inc., which was published on April 16, 2014 to the investing public, and which stated that Lehrer was retained by the Company to determine whether FusionPharm disclosed adequate current information in its financial reports, including the Restated 2012 and 2013 Annual Reports.12 12 See Letter from Frederick M. Lehrer to OTC Markets Group, Inc. (Apr. 15, 2014), available at http://www.otcmarkets.com/financialReportViewer?symbol=FSPM&id=118876. The Material Omissions and Reasons Why the Statements Were False 51. Between approximately February 2013 and April 2013, pursuant to the convertible notes issued to Bayside, Bayside converted debt into 140,000 common shares of FusionPharm and sold them into the market. In order to facilitate the sales, defendants Sears and Dittman made false statements to brokers and the transfer agent about Bayside’s purported non-affiliate status. In addition to the illegality of the Bayside convertible promissory note fraudulent nature – since the loan it purported to memorialize had never been made – the note was also illegal because Bayside’s affiliate status also meant that Bayside was required to abide by certain volume restrictions, which it failed to do. Bayside sold the remainder of its note to an investment group for $250,000 and, based on more false statements from defendants Dittman and Sears, the investors sold shares prior to the expiration of the one-year holding period required by Securities Act Rule 144 [17 C.F.R. § 230.144]. Bayside’s proceeds from its sales of FusionPharm stock, as well as the payment from the investors, were ultimately funneled back to FusionPharm using Meadpoint as an intermediary. FusionPharm used proceeds from the Bayside sales of stock and debt to fund its 2013 operations and reported those proceeds as false revenue. 52. Between approximately March 2013 and April 2014, pursuant to the fraudulent Meadpoint convertible note, Meadpoint converted $42,450 of debt into 4.245 million FusionPharm common shares, and then sold into the market approximately 3.2 million of those shares. In order to facilitate the sales, defendants Dittman and Sears made false statements to brokers and the transfer agent about Meadpoint’s purported non-affiliate status. In August 2013, Meadpoint also converted $15,000 of fake debt into 1.5 million shares and then sold them to three investors. The investors received unrestricted shares on the basis of defendants Dittman’s and Sears’ false representations of Meadpoint’s non-affiliate status. In 2013, Meadpoint’s stock sale proceeds and payments from the investors funded FusionPharm operations. In 2014, Meadpoint’s proceeds from its note with FusionPharm were $9.9 million. While some of this amount was transferred to FusionPharm, the majority, $8.7 million, was seized by criminal authorities in May 2014. 53. The above statements in the Company’s financial reports during the Class Period were materially misleading and omitted material information because defendants caused the Company to falsely report proceeds from the stock sales as revenue when in fact they were the proceeds of illegal sales of FusionPharm stock by entities controlled by Sears – Microcap, Bayside, and Meadpoint – between April 28, 2011 and May 8, 2014. 54. Throughout the Class Period, defendants caused the Company to issue false and misleading financial reports. In particular, the Company’s financial reports failed to disclose that defendants Dittman and Sears transferred unrestricted FusionPharm shares to Sears’ controlled entities, who then illegally sold those shares into the market and round tripped some of the proceeds back to FusionPharm. Defendant Dittman then caused FusionPharm to report the illegal sales as revenue and issue false statements about sales of PharmPods in press releases, which in turn maintained and/or increased FusionPharm’s stock price and volume, and allowed Sears to sell his FusionPharm stock into the market. The false financial statements and revenue reported by FusionPharm were included in: (1) FusionPharm’s 2011 Annual Report (including its financial statements and notes to the financial statements), which was signed by defendant Dittman and posted on the OTC Markets Group Inc.’s website; (2) FusionPharm’s 2012 Annual Report, which was signed by defendant Dittman and posted on the OTC website; and (3) FusionPharm’s 2013 Annual Report, which was signed by defendant Dittman and posted on the OTC website. 55. FusionPharm also claimed to have sold PharmPods to certain entities affiliated or controlled by Sears, including Meadpoint, and another entity owned or controlled by Sears, but failed to disclose these transactions, as well as the Bayside and Meadpoint notes, as related party transactions. FusionPharm’s Information and Disclosure Statement for the period ended September 30, 2011, and its 2011 and 2012 annual reports, all signed by defendant Dittman and posted on the OTC website, falsely stated there were no related party transactions. Further, none of FusionPharm’s other quarterly reports or its 2013 annual report posted on the OTC website disclosed related party transactions. The Truth Begins to Emerge 56. On May 16, 2014, the SEC issued an Order of Suspension of Trading and suspended FusionPharm from trading on OTC Link for the period May 16, 2014 through May 30, 2014 (the “Suspension Order”).13 The Suspension Order stated the reason for the suspension of trading against FusionPharm was due to “a lack of current and accurate information concerning the securities of FusionPharm…in filings and disclosures made by FusionPharm on OTC Link…and press releases to investors concerning, among other things: (1) the company’s assets; (2) the company’s revenues; (3) the company’s financial statements; (4) the company’s business transactions; and (5) the company’s current financial condition.” 57. On this news, the Company’s stock plummeted from $2.89 per share at the close of trading on May 15, 2014, the day prior to the issuance of the Suspension Order, to close at $1.10 per share on June 2, 2014, when the Company was allowed to resume trading, a loss of approximately 62% on heavy volume of 767,739 shares. 58. On September 16, 2016, the SEC issued a press release entitled, “Marijuana- Related Company Charged with Scheming Investors.”14 The SEC press release stated: 13 In the Matter of FusionPharm, Inc., File No. 500-1 (May 16, 2014) (Order of Suspension of Trading), available at https://www.sec.gov/litigation/suspensions/2014/34-72177-o.pdf. 14 SEC release, https://www.sec.gov/news/pressrelease/2016-186.html. Washington D.C., Sept. 16, 2016 — The Securities and Exchange Commission today announced fraud charges in a scheme involving illegal stock sales and false financial filings of a company that makes containers for growing marijuana. An SEC investigation found that William J. Sears orchestrated the scheme along with his brother-in-law Scott M. Dittman, who was the CEO and sole officer at Fusion Pharm Inc. while Sears concealed his control from behind the scenes. Sears and Dittman hired Cliffe R. Bodden to help them create fraudulent corporate documents that enabled Fusion Pharm to issue common stock to three other companies controlled by Sears, who then illegally sold the restricted stock into the market for $12.2 million in profits while hiding the companies’ connection to Fusion Pharm. Sears transferred some of his illegal proceeds back to Fusion Pharm so the money could be falsely reported as revenue, and the company issued press releases and financial reports that misled investors to believe the revenue came from sales of the containers called PharmPods. Sears, Dittman, and Bodden as well as Fusion Pharm and Sears’s other three companies agreed to settle the SEC’s charges with monetary sanctions to be determined at a later date. The SEC barred Sears and his three companies, Dittman, and Bodden from participating in any future penny stock offerings, and Sears and Dittman are permanently barred from serving as an officer or director of any public company. Dittman also is permanently suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies. “Sears and Dittman misled investors by recording and trumpeting revenues for purported sales of PharmPods when they were really just round-tripping money from illegal stock sales by hidden affiliates,” said Julie K. Lutz, Director of the SEC’s Denver Regional Office. In a parallel action, the U.S. Attorney’s Office for the District of Colorado today announced criminal charges against Sears and Dittman. The SEC separately instituted an administrative proceeding against attorney Tod A. DiTommaso. The SEC Enforcement Division alleges that he issued attorney opinion letters for Sears and Dittman falsely stating that unrestricted shares in Fusion Pharm could be issued into the market when in reality it was restricted stock. The matter will be scheduled for a public hearing before an administrative law judge, who will prepare an initial decision stating what, if any, remedial actions are appropriate. (Emphasis added.) 59. Also on September 16, 2016, The Denver Post issued an article entitled, “FusionPharm owners face federal securities fraud charges.”15 The article stated: The U.S. Attorney’s Office for Colorado on Thursday charged Thornton resident William Sears, 50, and his brother-in-law, Scott Dittman, 47, formerly of Elizabeth, with conspiracy to defraud by passing off money from illegal stock sales as product sales. The two owned and ran FusionPharm Inc., a Commerce City company that promoted a triple green play — profits from the conversion old shipping containers into greenhouses, primarily to cultivate cannabis, which has struggled with a shortage of indoor space available for commercial-scale grow facilities. But the U.S. Securities and Exchange Commission said Friday the two illegally sold restricted FusionPharm shares issued to three companies that Sears controlled, misleading brokers and raising $12.2 million. Some of that money was funneled back to FusionPharm and reported as revenues from the sale of the company’s PharmPods containers. Investors, duped into thinking the company’s financial condition was stronger than it actually was, pushed up the share price, which got as high as $8.70 on March 5, 2014, the SEC said. * * * The disputed stock sales and transfers occurred from April 2011 to May 2014. Sears, who exercised control of the company from behind the scenes, and Dittman, who was officially the CEO, hired a third person, Cliffe R. Bodden, to help them create fraudulent corporate documents, the SEC said. A Manhattan judge in February 2013 sentenced Bodden to 74 months in prison in a separate scheme to defraud investors. Sears, Dittman, and Bodden all agreed to settle the civil charges in return for monetary sanctions that will be determined at a later date, the SEC said. They also agreed to a ban from participating in any future penny-stock offerings. Sears and Dittman are permanently barred as serving as an officer or director of any public company and Dittman, who now lives in Pennsylvania, agreed not to work as an accountant on behalf of any public companies, the SEC said. 60. In the article, Julie Lutz, director of the SEC’s Denver regional office, stated: Sears and Dittman misled investors by recording and trumpeting revenues for purported sales of PharmPods when they were really just round-tripping money 15 Aldo Svaldi, FusionPharm owners face federal securities fraud charges, The Denver Post (Sept. 16, 2016), available at http://www.denverpost.com/2016/09/16/fusionpharm-owners-face-federal-securities-fraud-charges/. from illegal stock sales by hidden affiliates 61. As a result of defendants’ wrongdoing described herein, the Company’s shares traded at artificially inflated prices throughout the Class Period. When the truth concerning the Company’s purported revenue and sales was exposed, the Company’s share price plummeted, harming investors. Since September 16, 2016, the Company’s stock has traded around $0.01 per 62. As described above, Sears has pled guilty to a variety of criminal offenses in connection with the above described conduct, for which he agreed to an over $45 million forfeiture and a minimum of 60 months in prison. Defendant Dittman awaits trial on the same charges. CLASS ACTION ALLEGATIONS 63. 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 FusionPharm 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. 64. 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 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 FusionPharm 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. 65. 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. 66. 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. 67. 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 financial condition, business, operations, and management of FusionPharm; c. whether defendants’ public 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 defendants caused FusionPharm to issue false and misleading filings and public statements during the Class Period; e. whether defendants acted knowingly or recklessly in issuing false and misleading filings and public statements during the Class Period; f. whether the prices of FusionPharm securities during the Class Period were artificially inflated because of 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. 68. 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. ADDITIONAL ALLEGATIONS OF SCIENTER 69. As alleged herein, defendants acted with scienter in that 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, defendants, by virtue of their receipt of information reflecting the true facts regarding FusionPharm, his control over, and/or receipt and/or modification of FusionPharm’s allegedly materially misleading misstatements and/or their associations with the Company which made them privy to confidential proprietary information concerning FusionPharm, participated in the fraudulent scheme alleged herein. 70. In addition, each of the defendants is the subject of cease-and-desist proceedings and orders with the SEC concerning the false and misleading statements and material omissions described herein (see supra notes 2-7). In connection with the above-described cease-and-desist proceedings, each of the defendants agreed to additional proceedings, including that each “respondent agrees that he [it] will be precluded from arguing that he [it] did not violate the federal securities laws described in this Order….” As such, each of the defendants knew of the falsity of the statements described herein. 71. Furthermore, according to an attorney letter dated April 15, 2014 to OTC Markets Group, Inc. from Frederick M. Lehrer (“Lehrer”), an attorney retained by FusionPharm, defendant Dittman prepared the following unaudited financial statements: (a) unaudited balance sheet for the fiscal year ended December 31, 2013; (b) unaudited profit and loss statement for fiscal year ended December 31, 2013; (c) unaudited statements of cash flow for the fiscal year ended December 31, 2013; and (d) completed information pertaining to the Company with respect to OTC Pink Disclosure Guidelines. As such, defendant Dittman knew the statements made throughout the Class Period were false and misleading and/or omitted material information with respect to the sales of PharmPods and purported revenue by FusionPharm as he was the sole individual responsible for preparing the Company’s financial reports, which were not audited by any independent third party auditor. 72. Defendant Dittman also knew of the material omissions in the Company’s financial reports concerning the related-party transactions involving the entities controlled by defendant Sears, who is defendant Dittman’s brother-in-law, as well as the failure to disclose defendant Sears’ involvement as an undisclosed officer of the Company throughout the Class Period. PRESUMPTION OF RELIANCE ON THE FRAUD-ON-THE-MARKET DOCTRINE 73. 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; FusionPharm securities traded in efficient markets; the Company’s shares were liquid and traded with moderate to heavy volume during the Class Period; the Company traded over-the-counter, 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 and/or sold FusionPharm 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. 74. Based upon the foregoing, Plaintiff and the members of the Class are entitled to a presumption of reliance upon the integrity of the market. 75. 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. NO SAFE HARBOR 76. 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 FusionPharm who knew that the statement was false when made. COUNT I (Against all Defendants For Violations of Section 10(b) and Rule 10b-5 Promulgated Thereunder) 77. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. 78. 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. 79. 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 FusionPharm securities; and (iii) cause Plaintiff and other members of the Class to purchase or otherwise acquire FusionPharm 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. 80. Pursuant to the above plan, scheme, conspiracy and course of conduct, 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 FusionPharm 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 FusionPharm’s internal quality controls, finances, and business prospects. 81. By virtue of their positions at FusionPharm, 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, defendants knew or recklessly disregarded that material facts were being misrepresented or omitted as described above. 82. Defendants were personally motivated to make false statements and omit material information necessary to make the statements not misleading in order to personally benefit from the sale of FusionPharm securities from their personal portfolios. 83. Information showing that defendants acted knowingly or with reckless disregard for the truth is peculiarly within defendants’ knowledge and control. 84. Defendants are liable both directly and indirectly for the wrongs complained of herein. Because of their position of control and authority, defendants were able to and did, directly or indirectly, control the content of the statements of FusionPharm. Defendants had a duty to disseminate timely, accurate, and truthful information with respect to FusionPharm’s quality controls, 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 FusionPharm securities was artificially inflated throughout the Class Period. In ignorance of the adverse facts concerning FusionPharm’s business and financial condition which were concealed by defendants, Plaintiff and the other members of the Class purchased or otherwise acquired FusionPharm 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. 85. During the Class Period, FusionPharm 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 FusionPharm 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 FusionPharm securities was substantially lower than the prices paid by Plaintiff and the other members of the Class. The market price of FusionPharm securities declined sharply upon public disclosure of the facts alleged herein to the injury of Plaintiff and Class members. 86. 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. 87. 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) 88. Plaintiff repeats and realleges each and every allegation contained in the foregoing paragraphs as if fully set forth herein. 89. During the Class Period, the Individual Defendants participated in the operation and management of FusionPharm, and conducted and participated, directly and indirectly, in the conduct of FusionPharm’s business affairs. Because of their senior positions, the Individual Defendants knew the adverse non-public information about FusionPharm’s misstatement of income and expenses and false financial statements. 90. As the controlling parties of a publicly owned company, the Individual Defendants had a duty to disseminate accurate and truthful information with respect to FusionPharm’s financial condition and results of operations, and to correct promptly any public statements issued by FusionPharm which had become materially false or misleading. 91. Because of their position of control and authority, the Individual Defendants were able to, and did, control the contents of the various reports, press releases and public filings which FusionPharm disseminated in the marketplace during the Class Period concerning FusionPharm’s results of operations. Throughout the Class Period, the Individual Defendants exercised their power and authority to cause FusionPharm to engage in the wrongful acts complained of herein. The Individual Defendants therefore, were “controlling persons” of FusionPharm within the meaning of Section 20(a) of the Exchange Act. In this capacity, the Individual Defendants participated in the unlawful conduct alleged which artificially inflated the market price of FusionPharm securities. 92. The Individual Defendants, therefore, acted as a controlling person of FusionPharm. By reason of their disclosed and undisclosed functional positions of senior management positions of FusionPharm, the Individual Defendants had the power to direct the actions of, and exercised the same to cause, FusionPharm to engage in the unlawful acts and conduct complained of herein. The Individual Defendants exercised control over the general operations of FusionPharm 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. 93. 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 FusionPharm. 94. 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. 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; 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 17, 2017 Respectfully submitted, s/ Jeffrey A. Berens Jeffrey A. Berens BERENS LAW LLC 2373 Central Park Boulevard, Suite 100 Denver, Colorado 80238 Telephone: (303) 861-1764 Facsimile: (303) 395-0393 Email: jeff@jberenslaw.com OF COUNSEL: LIFSHITZ & MILLER LLP Joshua M. Lifshitz Edward W. Miller 821 Franklin Avenue, Suite 209 Garden City, NY 11530 Telephone: (516) 493-9780 Facsimile: (516) 280-7376 Email: jml@jlclasslaw.com Email: ewm@jlclasslaw.com

securities

crDqCocBD5gMZwczJoKY

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION CRISTY BUNKER, individually § and on behalf of similarly situated employees, § § Plaintiffs, § § Civil Action No. ____________________ 4:16-cv-2573 -v- § § PCP FOR LIFE, PA and § NAJMUDDIN K. KARIMJEE § § Defendants. § PLAINTIFFS’ ORIGINAL COMPLAINT AND JURY DEMAND – COLLECTIVE ACTION TO THE HONORABLE UNITED STATES DISTRICT COURT JUDGE: NOW COMES Plaintiff, Cristy Bunker (“Ms. Bunker” or “Named Plaintiff”), individually and on behalf of all other similarly situated employees (“PCP Employees”), and files this, Plaintiffs’ Original Complaint – Collective Action, and respectfully shows the following: I. SUMMARY This is a simple case of wage theft. PCP for Life and Najmuddin K. Karimjee (collectively “Defendants”) failed to pay its employees overtime wages. Plaintiff was paid on an hourly basis, with no minimum guarantee. Defendants failed to pay Plaintiff the overtime to which she was entitled. Plaintiff brings suit under the FLSA on behalf of herself and similarly situated PCP Employees. Plaintiff seeks overtime wages owed to her, as well as liquidated damages, attorneys’ fees, and all other relief permitted. The putative class is all Nurse Practitioners and Physician Assistants who are or were employed by PCP for Life anytime during the past three II. JURISDICTION AND VENUE 1. 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 Federal Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (FLSA). 2. Venue is proper in this District under 28 U.S.C. § 1391(b)(2) because a substantial part of the events or omissions giving rise to this claim occurred in this District. III. PARTIES 3. Plaintiff Cristy Bunker is a resident of Texas and worked as a Nurse Practitioner for Defendants in Houston, Texas. Ms. Bunker worked for PCP and has “engaged in commerce” as required by the FLSA, 29 U.S.C. §§ 206-07. 4. Plaintiff brings this action on behalf of herself and other similarly situated employees pursuant to 29 U.S.C. § 216(b). Plaintiff and the similarly situated employees are individuals who are or were employed by Defendants as Nurse Practitioners and Physician Assistants (“PCP Employees”) and did not receive overtime pay in the past three years. The putative class has been “engaged in commerce” as required by the FLSA, 29 U.S.C. §§ 206-07. 5. Defendant, PCP for Life, is a company doing business in the Southern District of Texas. PCP for Life is an “employer” within the meaning of FLSA, 29 U.S.C. § 203(d), an “enterprise” within the meaning of FLSA, 29 U.S.C. § 203(r), and “engaged in commerce” within the meaning of FLSA, 29 U.S.C. § 203(s)(1). Defendant may be served with process by serving its Registered Agent, Najmuddin K. Karimjee at 12015 Louette, Ste. 200, Houston, Texas 77070. 6. Defendant, Najmuddin K. Karimjee, is the owner and operator of PCP for Life. Dr. Karimjee is an “employer” within the meaning of FLSA, 29 U.S.C. § 203(d), an “enterprise” within the meaning of FLSA, 29 U.S.C. § 203(r), and “engaged in commerce” within the meaning of FLSA, 29 U.S.C. § 203(s)(1). Defendant may be served with process by serving Najmuddin K. Karimjee at 12015 Louette, Ste. 200, Houston, Texas 77070 or wherever Defendant may be found. IV. COLLECTIVE ACTION FACTS 7. Ms. Bunker worked for Defendants during the relevant time period. 8. Ms. Bunker work at Defendants PCP for Life – Greenspoint facility, which is located at 12130 Greenspoint Dr., Houston, TX 77060 9. Ms. Bunker is covered by the Fair Labor Standards Act. 10. Defendants employed Ms. Bunker as a Nurse Practitioner. 11. PCP paid Ms. Bunker an hourly wage of $76.93 per hour. 12. Regardless of the number of hours worked, Ms. Bunker received straight pay for all hours worked, including those in excess of 40 hours. 13. Ms. Bunker regularly worked in excess of 40 hours per week. (Sample of Ms. Bunker’s Payroll History.) 14. Additionally, Defendants would deduct hours from Ms. Bunker’s pay. 15. Defendants’ deductions included deducting time for lunch periods. 16. However, Ms. Bunker regularly worked during lunch hours, as patients would be scheduled. 17. At any given time during the last three years, PCP employed other Nurse Practitioners, as well as Physician Assistants. Exhibit A 18. Nurse Practitioners and Physician Assistants employed by PCP shared many of the same job duties and responsibilities. 19. These other PCP Employees, Nurse Practitioners and Physician Assistants, also regularly worked in excess of 40 hours in each workweek. 20. Defendants have multiple facilities in the south Texas area. (Defendants’ locations - https://www.pcpforlife.com/locations.php.) 21. This practice and policy of denying PCP Employees overtime pay was applied to all PCP Employees. 22. All conditions precedent to the filing of this lawsuit have been satisfied and fulfilled. V. COLLECTIVE FAIR LABOR STANDARDS ACT VIOLATIONS 23. Named Plaintiff and other PCP Employees were “suffered or permitted to work” by Defendants during the relevant time period. 24. Defendants employed Named Plaintiff and other similarly situated PCP Employees. 25. Defendants are engaged in commerce. 26. Defendants are responsible for these alleged violations of the FLSA. 27. Named Plaintiff and other PCP Employees were considered by Defendants to be “hourly” employees. 28. As a matter of practice and policy, Defendants denied overtime pay to its PCP Employees. 29. By failing to provide overtime pay, Defendants violated the Federal Fair Labor Standards Act. 30. Defendants knew, had reason to know, or showed reckless disregard for the fact that its failure to pay overtime violated the law. 31. Because of the actions of Defendants, Named Plaintiff and other PCP Employees suffered damages within the jurisdictional limits of this Court. 32. Plaintiff brings this case as a collective action pursuant to §216(b) of the FLSA. Plaintiff alleges that the FLSA violations were applicable site wide. 33. Named Plaintiff is representative of those similarly situated individuals who are current or former employees of PCP, who are or were employed by PCP as Nurse Practitioners, and covered by the FLSA. 34. Named Plaintiff attaches her Consent Form. VI. DAMAGES 35. Plaintiffs seeks all damages allowed under the Fair Labor Standards Act, including: A. Issuance of notice as soon as possible to all PCP Employees who were employed by Defendants 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; B. Judgment against Defendants for an amount equal to Plaintiffs’ and the class’s unpaid overtime wages; C. Judgment against Defendants that their violations of the FLSA were willful; D. An equal amount to the wage damages as liquidated damages; E. To the extent that liquidated damages are not awarded, an award of prejudgment interest; F. All costs incurred and reasonable attorneys’ fees for prosecuting these claims; G. Leave to add additional Plaintiffs by motion, the filing of written consent forms, or any other method approved by the Court; H. Leave to amend to add claims, including any claims under applicable state laws; I. An incentive award to the Named Plaintiff; and J. For such further relief as the Court deems just and equitable. WHEREFORE, premises considered, Plaintiff respectfully pray that Defendants be summoned to appear and that, upon a trial on the merits, all relief requested be awarded to Plaintiffs and similarly situated employees, and for such other and further relief to which Plaintiffs are justly entitled. VII. JURY DEMAND Plaintiff seeks to have this matter tried before a jury. August 8, 2016 Dated: _______________ Respectfully submitted, ROB WILEY, P.C. By: __________________________ /s/ Robert J. Wiley Robert J. Wiley Texas Bar No. 24013750 Southern District Texas Bar No. 596499 Board Certified Specialist – Labor & Employment Law, Texas Board of Legal Specialization Kalandra N. Wheeler (Application for Admission forthcoming.) Texas Bar No. 24051512 ROB WILEY, P.C. 2613 Thomas Avenue Dallas, Texas 75204 Telephone: (214) 528-6500 Facsimile: (214) 528-6511 E-mail: kwheeler@robwiley.com

employment & labor

Aen_EYcBD5gMZwczapTs

Todd M. Friedman (SBN 216752) Meghan E. George (SBN 274525) Adrian R. Bacon (SBN 280332) LAW OFFICES OF TODD M. FRIEDMAN, P.C. 21550 Oxnard St., Suite 780 Woodland Hills, CA 91367 Phone: 877-206-4741 Fax: 866-633-0228 tfriedman@toddflaw.com mgeorge@toddflaw.com abacon@toddflaw.com Attorneys for Plaintiff UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA JONATHAN PAYTON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, Plaintiff, v. TAX HELP GROUP, LLC, 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. JONATHAN PAYTON (“Plaintiff”) bring this Class Action Complaint for damages, injunctive relief, and any other available legal or equitable remedies, resulting from the illegal actions of TAX HELP GROUP, LLC (“Defendant”), in negligently 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 himself and his own acts and experiences, and, as to all other matters, upon information and belief, including investigation conducted by their attorneys. 2. The TCPA was designed to prevent calls and messages like the ones 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 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, __ F.3d__, 2012 WL 4840814 (9th Cir. Oct. 12, 2012). JURISDICTION AND VENUE 7. 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 principal place of business in Florida. Plaintiff also seeks $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. 8. Venue is proper in the United States District Court for the Central District of California pursuant to 18 U.S.C. § 1391(b) and 1441(a) because Defendants are subject to personal jurisdiction in the County of Los Angeles, State of California. PARTIES 9. Plaintiff is, and at all times mentioned herein was, a 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. Plaintiff is informed and believes, and thereon alleges, that Defendant are, and at all times mentioned herein were, individuals who reside and do business within the State of California. Defendant, is and at all times mentioned herein were “persons,” as defined by 47 U.S.C. § 153 (39). Defendant provides tax services to those with liens or garnishments. Plaintiff alleges that at all times relevant herein Defendant conducted business in the State of California and in the County of Los Angeles, and within this judicial district. FACTUAL ALLEGATIONS 11. At all times relevant, Plaintiff was a citizen of the County of Los Angeles, State of California. Plaintiff is, and at all times mentioned herein was, a “person” as defined by 47 U.S.C. § 153 (39). 12. Defendant is, and at all times mentioned herein was, a “person,” as defined by 47 U.S.C. § 153 (39). 13. At all times relevant Defendant conducted business in the State of California and in the County of Los Angeles, within this judicial district. 14. On or about August of 2016, Plaintiff received a text message from Defendants on his cellular telephone, number ending in -5971. 15. 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 in or around August of 2016. 16. In August of 2016, Plaintiff received a text message from Defendants that read: Want help with taxes. Federally licensed firm that offers a 100% WRITTEN GUARANTEE! Call hotline for free info at 1-844-820-5800 or text back. $299 17. These text messages placed to Plaintiff’s cellular telephone 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). 18. The telephone number that Defendant, or its agent called was assigned to a cellular telephone service for which Plaintiff incurs a charge for incoming calls pursuant to 47 U.S.C. § 227 (b)(1). 19. These telephone calls constituted calls that were not for emergency purposes as defined by 47 U.S.C. § 227 (b)(1)(A)(i). 20. Plaintiff was never a customer of Defendant and never provided his cellular telephone number Defendant for any reason whatsoever. Accordingly, Defendant and its agents never received Plaintiff prior express consent to receive unsolicited text messages, pursuant to 47 U.S.C. § 227 (b)(1)(A). 21. These telephone calls by Defendant, or its agents, violated 47 U.S.C. § 227(b)(1). CLASS ACTION ALLEGATIONS 22. Plaintiff brings this action on behalf of herself and on behalf of and all others similarly situated (“the Class”). 23. Plaintiff represents, and is a member of, the Class, consisting of all persons within the United States who received any unsolicited text messages from Defendant which text message was not made for emergency purposes or with the recipient’s prior express consent within the four years prior to the filing of this Complaint. 24. 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 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. 25. 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 by using marketing and text messages, 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. 26. 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. 27. 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. 28. 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 its agents sent any text messages to the Class (other than a message made for emergency purposes or made 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. 29. As a person that received at least one marketing and text message without Plaintiff’s prior express consent, 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. 30. 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. 31. Plaintiff has retained counsel experienced in handling class action claims and claims involving violations of the Telephone Consumer Protection Act. 32. 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 California 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. 33. Defendants have acted on grounds generally applicable to the Class, thereby making 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. 34. Plaintiff incorporates by reference all of the above paragraphs of this Complaint as though fully stated herein. 35. The foregoing acts and omissions of Defendant constitutes 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. 36. 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). 37. 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. 38. Plaintiff incorporates by reference all of the above paragraphs of this Complaint as though fully stated herein. 39. The foregoing acts and omissions of Defendant constitutes 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 40. As a result of Defendant’s knowing and/or willful violations of 47 U.S.C. § 227 et seq, Plaintiff and The Class 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). 41. 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 Defendants: FIRST CAUSE OF ACTION FOR NEGLIGENT VIOLATION OF THE TCPA, 47 U.S.C. § 227 ET SEQ.  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).  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 FOR NEGLIGENT VIOLATION OF THE TCPA, 47 U.S.C. § 227 ET SEQ.  As a result of Defendant’s negligent violations of 47 U.S.C. § 227(b)(1), Plaintiff seeks for himself and each 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. TRIAL BY JURY 42. 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: January 27, 2017 Respectfully submitted, THE LAW OFFICES OF TODD M. FRIEDMAN, P.C. By: _/s/ Todd M. Friedman_____ TODD M .FRIEDMAN, ESQ. ATTORNEY FOR PLAINTIFF

privacy

0lJNBIkBRpLueGJZE6d_

Steve Wildman and Jon Borcherding, individually and as representatives of a class of similarly situated persons, and on behalf of the American Century Retirement Plan, Plaintiffs, FIRST AMENDED COMPLAINT CLASS ACTION IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MISSOURI WESTERN DIVISION Case No. 4:16-cv-737-DGK v. American Century Services, LLC, the American Century Retirement Plan Retirement Committee, American Century Investment Management, Inc., American Century Companies, Inc., Christopher Bouffard, Bradley C. Cloverdyke, John A. Leis, Tina S. Ussery-Franklin, Margaret E. Van Wagoner, Gudrun S. Neumann, Julie A. Smith, Margie A. Morrison, Chat Cowherd, Diane Gallagher, and John Does 1–20, Defendants. NATURE OF THE ACTION 1. Plaintiffs Steve Wildman and Jon Borcherding (“Plaintiffs”), individually and as representatives of the Class described herein, and on behalf of the American Century Retirement Plan (the “Plan”), bring this action under the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1001, et seq. (“ERISA”), against American Century Services, LLC (“ACS”), the American Century Retirement Plan Retirement Committee (the “Committee”), American Century Investment Management, Inc. (“ACIM”), American Century Companies, Inc. (“ACC”) (collectively, the “American Century entities” or “American Century”), Christopher Bouffard, Bradley C. Cloverdyke, John A. Leis, Tina S. Ussery-Franklin, Margaret E. Van Wagoner, Gudrun S. Neumann, Julie A. Smith, Margie A. Morrison, Chat Cowherd, Diane Gallagher, and John Does 1–20 (collectively, “Defendants”). As described herein, Defendants have breached their fiduciary duties and engaged in prohibited transactions with respect to the Plan in violation of ERISA, to the detriment of the Plan and its participants and beneficiaries. Plaintiffs bring this action to remedy this unlawful conduct, prevent further mismanagement of the Plan, and obtain equitable and other relief as provided by ERISA. PRELIMINARY STATEMENT 2. As of the end of 2015, Americans had approximately $6.7 trillion in assets invested in defined contribution plans, such as 401(k) and 403(b) plans. See INVESTMENT COMPANY INSTITUTE, Retirement Assets Total $24.0 Trillion in Fourth Quarter 2015 (Mar. 24, 2016), available at https://www.ici.org/research/stats/retirement/ret_15_q4; PLAN SPONSOR, 2015 Recordkeeping Survey (June 2015), available at http://www.plansponsor.com/2015- Recordkeeping-Survey/. Defined contribution plans have largely replaced defined benefit plans—or pension plans—that were predominant in previous generations. See BANKRATE, Pensions Decline as 401(k) Plans Multiply (July 24, 2014), available at http://www.bankrate.com/finance/retirement/pensions-decline-as-401-k-plans-multiply-1.aspx. By 2012, approximately 98% of employers offered defined contribution plans to their current employees, whereas only 3% offered pension plans. Id. 3. The potential for disloyalty and imprudence is much greater in defined contribution plans than in defined benefit plans. In a defined benefit plan, the participant is entitled to a fixed monthly pension payment, while the employer is responsible for making sure the plan is sufficiently capitalized, and thus the employer bears all risks related to excessive fees and investment underperformance. See Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 439 (1999). Therefore, in a defined benefit plan, the employer and the plan’s fiduciaries have every incentive to keep costs low and to remove imprudent investments. But in a defined contribution plan, participants’ benefits “are limited to the value of their own investment accounts, which is determined by the market performance of employee and employer contributions, less expenses.” Tibble v. Edison Int’l, 135 S. Ct. 1823, 1826 (2015). Thus, the employer has no incentive to keep costs low or to closely monitor the plan to ensure every investment remains prudent, because all risks related to high fees and poorly-performing investments are borne by the employee. In fact, employers often benefit from retaining higher-cost investments in the plan, because such investments often offer a kickback, known as “revenue sharing,” to subsidize the plan’s administrative costs. For financial service companies, the potential for imprudent and disloyal conduct is even greater, because the plan’s fiduciaries are in a position to benefit the company through the plan’s investment decisions by, for example, filling the plan with higher-cost proprietary investment products that a disinterested fiduciary would not choose. 4. The real life effect of such imprudence on workers can be severe. According to one study, the average working household with a defined contribution plan will lose $154,794 to fees and lost returns over a 40-year career. See Melanie Hicken, Your Employer May Cost You $100K in Retirement Savings, CNN MONEY (Mar. 27, 2013), available at http://money.cnn.com/2013/03/27/retirement/401k-fees/. Put another way, excess fees can force a worker to work an extra five to six years to make up for the excess fees that were paid. Id. 5. To safeguard against the financial incentives for disloyalty and imprudence in defined contribution plans, ERISA imposes strict fiduciary duties of loyalty and prudence upon employers and other plan fiduciaries. 29 U.S.C. § 1104(a)(1). These twin fiduciary duties are “the highest known to the law.” Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 598 (8th Cir. 2009). Fiduciaries must act “solely in the interest of the participants and beneficiaries.” 29 U.S.C. § 1104(a)(1). 6. Defendants do not act in the best interest of the Plan and its participants. Instead, Defendants have used the Plan as an opportunity to promote American Century’s mutual fund business and maximize profits at the expense of the Plan and its participants. Defendants loaded the Plan exclusively with American Century’s investment offerings, without investigating whether Plan participants would be better served by investments managed by unaffiliated companies. The retention of these proprietary mutual funds has cost Plan participants millions of dollars in excess fees. For example, in 2013, the Plan’s total expenses were 48% higher than the average retirement plan with between $500 million and $1 billion in assets (the Plan had $577 million in assets as of the end of 2013). The Plan’s high costs can be attributed almost entirely to Defendants’ selection and retention of high-cost proprietary mutual funds as investment options within the Plan, their failure to select the least expensive share class available for the Plan’s designated investment alternatives, and their failure to monitor and control recordkeeping expenses. 7. Defendants’ mismanagement of the Plan extends beyond their failure to adequately control Plan costs. Defendants also have failed to remove poorly performing investments from the Plan, in breach of their fiduciary duties. 8. Defendants’ prioritization of American Century’s profits over prudent management of Plan assets constitutes a breach of the fiduciary duties of prudence and loyalty, in violation of 29 U.S.C. § 1104. 9. These imprudent investment decisions were not the result of mere negligence or oversight. To the contrary, Defendants consistently included proprietary American Century- affiliated mutual funds in the Plan, and failed to timely remove those funds even after it was clear that they were imprudent, because American Century earned millions of dollars in investment management fees by retaining them in the Plan. By managing the Plan in this fashion, Defendants have breached their duty of loyalty, as well as their duty of prudence, in violation of 29 U.S.C. § 1104. 10. Based on this conduct, Plaintiffs assert claims against Defendants for breach of the fiduciary duties of loyalty and prudence (Count One), failure to monitor fiduciaries (Count Two), prohibited transactions with a party-in-interest (Count Three), prohibited transactions with a fiduciary (Count Four), and for equitable restitution of ill-gotten proceeds (Count Five). JURISDICTION AND VENUE 11. Plaintiffs bring this action pursuant to 29 U.S.C. § 1132(a)(2) and (3), which provide that participants in an employee retirement plan may pursue a civil action on behalf of the plan to remedy breaches of fiduciary duties and other prohibited conduct, and to obtain monetary and appropriate equitable relief as set forth in 29 U.S.C. § 1109. 12. This case presents a federal question under ERISA, and therefore this Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331 and 29 U.S.C. § 1132(e)(1)(F). 13. Venue is proper pursuant to 29 U.S.C. § 1132(e)(2) and 28 U.S.C. § 1391(b) because this is the district where the plan is administered, where the breaches of fiduciary duties giving rise to this action occurred, and where Defendants may be found. In addition, Plaintiff Steve Wildman resides in this District. THE PARTIES PLAINTIFFS 14. Plaintiff Steve Wildman (“Wildman”) resides in Shawnee Mission, Missouri and is a participant in the Plan. From 2005 to the present, Wildman has been invested in several different funds offered within the Plan, including several of the examples of imprudent investments identified herein. All of these funds were managed by ACIM. Wildman has suffered financial harm and has been injured by Defendants’ unlawful conduct as described herein. Furthermore, the American Century entities have been unjustly enriched from the various fees and expenses generated as a result of Wildman’s Plan investments. 15. Plaintiff Jon Borcherding (“Borcherding”) resides in Prairie Village, Kansas and was a participant in the Plan from 1996 to 2012. Borcherding is entitled to receive benefits from the Plan in the amount of the difference between the value of his account as of the time his account was distributed and what his account would have been worth at that time had Defendants not violated ERISA as described herein. While a participant, Borcherding was invested in several different funds offered within the Plan, including several of the examples of imprudent investments identified herein. All of these funds were managed by ACIM. Borcherding has suffered financial harm and has been injured by Defendants’ unlawful conduct as described herein. Furthermore, the American Century entities have been unjustly enriched from the various fees and expenses generated as a result of Borcherding’s Plan investments. THE PLAN 16. The Plan was established on December 31, 1966. The Plan is governed by a written instrument commonly referred to as the “Plan Document.” The Plan Document was recently amended and restated effective January 1, 2008, and again on January 1, 2014. 17. The Plan is an “employee pension benefit plan” within the meaning of 29 U.S.C. § 1002(2)(A) and a “defined contribution plan” within the meaning of 29 U.S.C. § 1002(34). 18. The Plan is a qualified plan under 26 U.S.C. § 401, and is commonly referred to as a “401(k) plan.” 19. The Plan covers eligible employees and former employees of ACS and other participating employers, who are American Century affiliates. 20. The Plan is a defined-contribution or 401(k) plan, a type of employee retirement plan in which employees invest a percentage of their earnings on a pre-tax basis. The employer often matches those contributions up to a certain percentage of the compensation contributed by the employee each pay period. Within the Plan, employees may defer up to 80% of their compensation on a pre-tax basis (subject to annual contribution limits), and those contributions are eligible for an employer match up to 4% of the employee’s salary.1 Participating employers may also make a discretionary profit sharing contribution, some of which may be made in the form of American Century Companies, Inc. common stock.   21. Participants in the Plan are responsible for directing the investment of contributions, choosing from among a lineup of options offered by the Plan.2 Because the Plan’s Committee determines the investment options available, the investment lineup maintained by the 1 Employer contributions, along with the opportunity to participate in a defined contribution plan in the first instance, are part of a standard benefits package offered by many large employers to attract and retain talented employees. See 401K SPECIALIST, Top 4 Priorities of 401(k) Plan Sponsors (Jan. 3, 2016) (highlighting survey findings that, among large defined contribution plan sponsors, attracting and retaining talented employees is a top priority), available at http://401kspecialistmag.com/top-4-priorities-of-401k-plan-sponsors; Joan Vogel, Until Death Do Us Part: Vesting of Retiree Insurance, 9 Indus. Rel. L.J. 183, 216 (1987) (noting that employers offer retirement benefits to attract and retain “reliable, productive employees”). ERISA is concerned with what happens next, the disposition of assets contributed. See In re RCN Litig., 2006 WL 753149, at *6, n.4 (D.N.J. Mar. 21, 2006) (observing that employer contributions occur before ERISA’s fiduciary duties kick in). 2 Participants in a defined-contribution plan are limited in their investment choices to the lineup of options offered by their plan. See INVESTMENT COMPANY INSTITUTE, A Close Look at 401(k) Plans, at 9 (Dec. 2014), available at https://www.ici.org/pdf/ppr_14_dcplan_profile_401k.pdf (hereinafter “ICI Study”). Committee is critical to participants’ investment results and, ultimately, the retirement benefits they receive.  22. According to a summary description of the Plan published by ACS effective January 1, 2014, the Plan’s investment options “are limited to a selection of American Century mutual funds, American Century collective investment trusts, and shares of American Century Companies, Inc. Class C common stock.” ACS amended this summary plan description effective January 1, 2016, to say the Plan’s investment options “are generally limited to a selection of American Century mutual funds, American Century collective investment trusts, and American Century Companies Inc. Class C common stock.” (emphasis added to highlight change). This change in thesis did not correspond to any actual change in plan composition. Between 2010 and the filing of this First Amended Complaint, all of the Plan’s designated investment alternatives have been propriety to American Century. DEFENDANTS ACS 23. Defendant American Century Services, LLC is the “plan sponsor” within the meaning of 29 U.S.C. § 1002(16)(B). ACS is also a “named fiduciary” pursuant to 29 U.S.C. § 1102(a) because it is identified in the Plan Document as having authority to control and manage the operation and administration of the Plan. ACS is located in Kansas City, Missouri and is a subsidiary of ACC. According to the Plan’s Form 5500s and Notes to Financial Statements attached thereto, ACS is also the Plan Administrator, controlling and managing the operation and administration of the Plan with authority to appoint and delegate discretionary authority to an advisory committee. To the extent that these representations are accurate, ACS exercises discretionary authority or discretionary control respecting management of the Plan, as well as discretionary authority and responsibility with respect to the administration of the Plan, and is therefore a fiduciary under 29 U.S.C. § 1002(21)(A). 24. ACS is also a fiduciary because it has authority to appoint and remove members to the Committee. It is well-accepted that the authority to appoint, retain, and remove plan fiduciaries constitutes discretionary authority or control over the management or administration of the plan, and thus confers fiduciary status under 29 U.S.C. § 1002(21)(A). 29 C.F.R. § 2509.75-8 (D-4); Liss v. Smith, 991 F. Supp. 278, 310-11 (S.D.N.Y. 1998); Coyne & Delany Co. v. Selman, 98 F.3d 1457, 1465 (4th Cir. 1996) (“It is by now well-established that the power to appoint plan trustees confers fiduciary status.”). The responsibility for appointing and removing members of the Committee carries with it an accompanying duty to monitor the appointed fiduciaries, to ensure that they were complying with the terms of the Plan and ERISA’s statutory standards. In re Polaroid ERISA Litig., 362 F. Supp. 2d 461, 477 (S.D.N.Y. 2005); 29 C.F.R. § 2509.75-8 (FR-17). Furthermore, that monitoring duty carries with it a responsibility “to take action upon discovery that the appointed fiduciaries [were] not performing properly.” Liss, 991 F. Supp. At 311. The Plan Document acknowledges this duty and expressly requires ACS to periodically review the conduct of the Committee and other fiduciaries. 25. ACS acts as transfer agent and dividend-paying agent for the proprietary funds in the Plan, and receives unreasonably high compensation from ACIM for providing these services to the Plan. As the sponsor and administrator of the Plan, a participating employer in the Plan, and a party that provides services to the investments held by the Plan, ACS is a “party in interest” under 29 U.S.C. § 1002(14). Further, many employees of ACS have dual roles whereby they also work for ACC and ACIM. For example, Jonathan S. Thomas is the current President and Chief Executive Officer of ACC, the Chief Executive Officer of ACS, the Executive Vice President of ACIM, and a director for each such entity and for other American Century subsidiaries. Given the interconnected nature of ACS and its affiliates, ACS possessed all actual and constructive knowledge possessed by ACIM and ACC. Pursuant to this knowledge, and the knowledge it gained through its role in the administration and monitoring of the Plan, ACS had actual and constructive knowledge of the conduct of the other Defendants and of their breaches of fiduciary duties, and the fact that the revenues received by ACS from Plan assets were the product of Defendants’ fiduciary breaches. As a result, regardless of whether ACS is a fiduciary, ACS is subject to appropriate equitable relief under 29 U.S.C. § 1132(a)(3), including disgorgement of ill-gotten profits associated with its knowing receipt of payments made in breach of other Defendants’ fiduciary duties. The Committee 26. ACS delegated its fiduciary responsibilities for investing Plan assets to the Committee. The Committee is responsible for maintaining the Plan’s investment lineup, including monitoring the Plan’s designated investment alternatives and making changes, as appropriate. The Committee is a functional fiduciary pursuant to 29 U.S.C. § 1002(21)(a) given this discretionary authority. The Committee is also a named fiduciary pursuant to 29 U.S.C. § 1102(a) because it is identified in the Plan Document as having responsibility for selecting, monitoring, and changing the Plan’s investment lineup. The following individuals have been or are members of the Committee: Christopher Bouffard, Bradley C. Cloverdyke, John A. Leis, Tina S. Ussery-Franklin, Margaret E. Van Wagoner, Gudrun S. Neumann, Julie A. Smith, Margie A. Morrison, Chat Cowherd, and Diane Gallagher. Because Plaintiffs do not know the identity of all of the current and former members of the Committee, they are collectively identified as John Does 1-10. Committee Members 27. Defendant Christopher Bouffard was Vice President, Director of Portfolio Research at ACIM. As disclosed in Notes to Financial Statements attached to the Plan’s Form 5500s, Mr. Bouffard was a member of the Committee from 2010 at the latest until at least 2013. 28. Defendant Bradley Cloverdyke is a Senior Vice President at American Century. As disclosed in Notes to Financial Statements attached to the Plan’s Form 5500s, Mr. Cloverdyke was a member of the Committee from 2010 at the latest until at least 2012. 29. Defendant John Leis is a Vice President at American Century. As disclosed in Notes to Financial Statements attached to the Plan’s Form 5500s, Mr. Leis was a member of the Committee starting in 2010 at the latest. 30. Defendant Tina S. Ussery-Franklin is a broker at American Century Investment Services Inc. As disclosed in Notes to Financial Statements attached to the Plan’s Form 5500s, Ms. Ussery-Franklin was a member of the Committee from 2010 at the latest until at least 2012. 31. Defendant Margaret E. Van Wagoner was a broker at American Century Investment Services Inc. Ms. Van Wagoner was a member of the Committee from 2010 at the latest until at least 2013. 32. Defendant Gudrun S. Neumann is Chief Technology Officer at American Century. As disclosed in Notes to Financial Statements attached to the Plan’s Form 5500s, Neumann was a member of the Committee starting in 2012 and served until 2013 at the latest. 33. Defendant Julie A. Smith is Vice President, Human Resources at American Century. As disclosed in Notes to Financial Statements attached to the Plan’s Form 5500s, Ms. Smith was a member of the Committee starting in 2012 at the latest. 34. Defendant Margie A. Morrison is a Senior Vice President at ACIM. As disclosed in Notes to Financial Statements attached to the Plan’s Form 5500s, Ms. Morrison was a member of the Committee starting in 2013 at the latest. 35. Defendant Chat Cowherd is Vice President of Industrial Relationship Management at ACIM. Mr. Cowherd was a member of the Committee starting in 2014 at the 36. Defendant Diane Gallagher is a Vice President at ACIM. Ms. Gallagher was a member of the Committee starting in 2014 at the latest. 37. Defendant American Century Investment Management, Inc. is a subsidiary of ACC and a Plan employer. ACIM acts as the investment advisor to all of the American Century investments within the Plan. At all relevant times, ACIM has collected fees on a monthly basis from Plan assets invested in American Century investment products. These fees are unreasonably high and come at the expense of the Plan and its participants. By virtue of its role as a provider of investment management services, ACIM exercises authority or control respecting management or disposition of Plan assets and renders advice for a fee or other compensation with respect to monies of the Plan. ACIM is therefore a functional fiduciary under 29 U.S.C. § 1002(21)(A). 38. Because ACIM provides services to the Plan and is a Plan employer, ACIM is a “party in interest” pursuant to 29 U.S.C. § 1002(14). ACIM possesses any actual or constructive knowledge possessed by ACS and ACC. As disclosed in Statements of Additional Information for the American Century Funds family, numerous directors of the American Century Funds are also officers and/or directors of ACS and ACC. For example, Jonathan S. Thomas is the current President and Chief Executive Officer of American Century Companies, Inc., the Chief Executive Officer of ACS, the Executive Vice President of ACIM, and a director for each entity and for other ACC subsidiaries. Likewise, Barry Fink is a current director of the American Century Funds and previously served simultaneously as Executive Vice President and Chief Operating Officer of ACC, and as President of ACS. Further, ACIM engages ACS as a transfer agent and dividend-paying agent, for which ACIM compensates it from the management fees it earns on the funds. Given the interconnected nature of ACIM and other American Century subsidiaries, ACIM had actual and constructive knowledge that the revenues it was receiving from Plan assets were the product of fiduciary breaches by Defendants. Further, because executive managers of ACIM have consistently served on the Committee, ACIM likewise had actual and constructive knowledge of the Committee’s actions and omissions respecting Plan investments, including the fact that revenues received by ACIM from Plan assets were the result of fiduciary breaches by Committee. As a result, regardless of whether ACIM is a fiduciary, ACIM is subject to appropriate equitable relief under 29 U.S.C. § 1132(a)(3), including disgorgement of ill-gotten profits associated with its knowing receipt of payments that resulted from other Defendants’ breaches of their fiduciary duties. 39. American Century Companies, Inc. directly owns ACS and ACIM, and is a Plan employer. As a Plan employer and owner of fiduciary entities, ACC is a “party in interest” pursuant to 29 U.S.C. § 1002(14). ACC has profited from the Plan’s retention of mutual funds within the American Century Funds family, and more specifically, the payments made from Plan assets to ACC’s subsidiary, ACIM. Given the interconnected nature of the American Century entities and the overlapping personnel of ACC, ACIM and ACS, as discussed in paragraph 24 and 35, ACC possesses all actual and constructive knowledge possessed by ACIM and ACS. ACC therefore had actual and constructive knowledge that the revenues it was receiving from Plan assets were the product of fiduciary breaches by the Defendants. As a result, ACC is subject to appropriate equitable relief under 29 U.S.C. § 1132(a)(3), including disgorgement of ill-gotten profits associated with its knowing receipt of payments that resulted from the other Defendants’ breaches of their fiduciary duties. 40. Any individuals or entities to whom Defendants delegated any fiduciary functions or responsibilities are also fiduciaries of the Plan pursuant to 29 U.S.C. §§ 1002(21)(A) and 1105(c)(2). Because the individuals and/or entities that have been delegated fiduciary responsibilities are not currently known to Plaintiffs, they are collectively named as John Does 41. Each Defendant identified above as a Plan fiduciary is also subject to co-fiduciary liability under 29 U.S.C. § 1105(a)(1)–(3) because it enabled other fiduciaries to commit breaches of fiduciary duties, failed to comply with 29 U.S.C. § 1104(a)(1) in the administration of its duties, and/or failed to remedy other fiduciaries’ breaches of their duties, despite having knowledge of the breaches. ERISA FIDUCIARY DUTIES AND PROHIBITED TRANSACTIONS 42. ERISA imposes strict fiduciary duties of loyalty and prudence upon Defendants as fiduciaries of the Plan. 29 U.S.C. § 1104(a)(1) states, in relevant part, that: [A] fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and— (A) For the exclusive purpose of (i) Providing benefits to participants and their beneficiaries; and (ii) Defraying reasonable expenses of administering the plan; (B) With the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims. 43. These ERISA fiduciary duties are “the highest known to the law.” Braden v. Wal- Mart Stores, Inc., 588 F.3d 585, 598 (8th Cir. 2009) (quoting Donovan v. Bierwirth, 680 F.2d 263, 272 n.8 (2d Cir. 1982)). DUTY OF LOYALTY 44. The duty of loyalty requires fiduciaries to act with an “eye single” to the interests of plan participants. Pegram v. Herdrich, 530 U.S. 211, 235 (2000). “Perhaps the most fundamental duty of a [fiduciary] is that he [or she] must display . . . complete loyalty to the interests of the beneficiary and must exclude all selfish interest and all consideration of the interests of third persons.” Id. at 224 (quotation marks and citations omitted). Thus, “in deciding whether and to what extent to invest in a particular investment, a fiduciary must ordinarily consider only factors relating to the interests of plan participants and beneficiaries . . . .” Dep’t of Labor ERISA Adv. Op. 88-16A, 1988 WL 222716, at *3 (Dec. 19, 1988) (emphasis added). 45. While ERISA does not prohibit an employer’s corporate officers from serving as plan fiduciaries—basically wearing two hats—it does require that the officer “wear the fiduciary hat when making fiduciary decisions.” Pegram, 530 U.S. at 225. In administering an ERISA plan, corporate officers must “avoid placing themselves in a position where their acts [or interests] as officers or directors of the corporation will prevent their functioning with the complete loyalty to participants demanded of them as trustees of the pension plan.” Donovan, 680 F.2d at 271. “A fiduciary with a conflict of interest must act as if he is ‘free’ of such a conflict. ‘Free’ is an absolute. There is no balancing of interests; ERISA commands undivided loyalty to the plan participants.” Bedrick ex rel. Humrickhouse v. Travelers Ins. Co., 93 F.3d 149, 154 (4th Cir. 1996). 46. “The presence of conflicting interests imposes on fiduciaries the obligation to take precautions to ensure that their duty of loyalty is not compromised.” Bussian v. RJR Nabisco, Inc., 223 F.3d 286, 299 (5th Cir. 2000). “When it is ‘possible to question the fiduciaries’ loyalty, they are obliged at a minimum to engage in intensive and scrupulous independent investigation of their options to insure that they act in the best interests of plan beneficiaries.’” Howard v. Shay, 100 F.3d 1484, 1488–89 (9th Cir. 1996) (quoting Leigh v. Engle, 727 F.2d 133, 125–26 (7th Cir. 1984)). DUTY OF PRUDENCE 47. ERISA also “imposes a ‘prudent person’ standard by which to measure fiduciaries’ investment decisions and disposition of assets.” Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459, 2467 (2014) (quotation omitted). In addition to a duty to select prudent investments, under ERISA a fiduciary “has a continuing duty to monitor [plan] investments and remove imprudent ones” that exists “separate and apart from the [fiduciary’s] duty to exercise prudence in selecting investments.” Tibble v. Edison Int’l, 135 S. Ct. 1823, 1828 (2015). If an investment is imprudent, the plan fiduciary “must dispose of it within a reasonable time.” Id. (quotation omitted). Therefore, “a fiduciary cannot free himself from his duty to act as a prudent man simply by arguing that other funds” available within the plan could have “theoretically . . . create[d] a prudent portfolio.” Krueger v. Ameriprise Fin., Inc., No. 11-CV- 02781, 2012 WL 5873825, at *14 (D. Minn. Nov. 20, 2012) (quoting DiFelice v. U.S. Airways, Inc., 497 F.3d 410, 423 (4th Cir. 2007)). 48. Failing to closely monitor and subsequently minimize administrative expenses (by, for example, failing to survey the competitive landscape and failing to leverage the plan’s size to reduce fees), constitutes a breach of fiduciary duty. Tussey v. ABB, Inc., 746 F.3d 327, 336 (8th Cir. 2014). Similarly, selecting and retaining higher-cost investments because they benefit a party in interest constitutes a breach of fiduciary duties when similar or identical lower- cost investments are available. Braden v. Wal-Mart Stores, 588 F.3d 585, 596 (8th Cir. 2009). SOURCE AND CONSTRUCTION OF DUTIES 49. The Supreme Court has noted that the legal construction of an ERISA fiduciary’s duties is “derived from the common law of trusts.” Tibble, 135 S. Ct. at 1828. Therefore, “[i]n determining the contours of an ERISA fiduciary’s duty, courts often must look to the law of trusts.” Id. In fact, the duty of prudence imposed under 29 U.S.C. § 1104(a)(1)(B) is a codification of the common law prudent investor rule found in trust law. Buccino v. Continental Assur. Co., 578 F. Supp. 1518, 1521 (S.D.N.Y. 1983). 50. Pursuant to the prudent investor rule, fiduciaries are required to “incur only costs that are reasonable in amount and appropriate to the investment responsibilities of the trusteeship.” Restatement (Third) of Trusts § 90(c)(3) (2007); see also Restatement § 90 cmt. b (“[C]ost-conscious management is fundamental to prudence in the investment function.”). The Introductory Note to the Restatement’s chapter on trust investment further clarifies: [T]he duty to avoid unwarranted costs is given increased emphasis in the prudent investor rule. This is done to reflect the importance of market efficiency concepts and differences in the degrees of efficiency and inefficiency in various markets. In addition, this emphasis reflects the availability and continuing emergence of modern investment products, not only with significantly varied characteristics but also with similar products being offered with significantly differing costs. The duty to be cost conscious requires attention to such matters as the cumulation of fiduciary commissions with agent fees or the purchase and management charges associated with mutual funds and other pooled investment vehicles. In addition, active management strategies involve investigation expenses and other transaction costs . . . that must be considered, realistically, in relation to the likelihood of increased return from such strategies. Restatement (Third) of Trusts ch. 17, intro. note (2007) (emphasis added). Where markets are efficient, fiduciaries are encouraged to use low-cost index funds. Id. § 90 cmt. h(1). While a fiduciary may consider higher-cost, actively-managed mutual funds as an alternative to index funds, “[a]ctive strategies . . . entail investigation and analysis expenses and tend to increase general transaction costs . . . . [T]hese added costs . . . must be justified by realistically evaluated return expectations.” Id. § 90 cmt. h(2). 51. In considering whether a fiduciary has breached the duties of prudence and loyalty, the Court considers both the “merits of the transaction” as well as “the thoroughness of the investigation into the merits of the transaction.” Howard, 100 F.3d at 1488 (quotation and citation marks omitted). Mere “subjective good faith” in executing these duties is not a defense: “a pure heart and an empty head are not enough.” Donovan v. Cunningham, 716 F.2d 1455, 1467 (5th Cir. 1983). CO-FIDUCIARY LIABILITY 52. ERISA also imposes explicit co-fiduciary duties on plan fiduciaries. 29 U.S.C. § 1105(a) states, in pertinent part, that: In addition to any liability which he may have under any other provision of this part, a fiduciary with respect to a plan shall be liable for a breach of fiduciary responsibility of another fiduciary with respect to the same plan in the following circumstances: (1) If he participates knowingly in, or knowingly undertakes to conceal, an act or omission of such other fiduciary, knowing such act or omission is a breach; or (2) if, by his failure to comply with section 404(a)(1) in the administration of his specific responsibilities which give rise to his status as a fiduciary, he has enabled such other fiduciary to commit a breach; or (3) If he has knowledge of a breach by such other fiduciary, unless he makes reasonable efforts under the circumstances to remedy the breach. PRUDENT MANAGEMENT OF AN EMPLOYEE RETIREMENT PLAN 53. In a defined-contribution plan, fiduciaries are obligated to assemble a diversified menu of investment options. 29 U.S.C. § 1104(a)(1)(C); 29 C.F.R. § 2550.404c-1(b)(1)(ii). Plan participants may invest in any of these “designated investment alternatives” that fiduciaries include within the Plan’s menu of investment options.3 54. Each investment alternative within a defined contribution plan is generally a pooled investment product—which includes mutual funds, collective investment trusts, and separate accounts—offering exposure to a particular asset class or sub-asset class. ICI Study at 7; Ian Ayres & Quinn Curtis, Beyond Diversification: The Pervasive Problem of Excessive Fees and “Dominated Funds” in 401(k) Plans, 124 Yale L.J. 1476, 1485 (2015) (hereinafter “Beyond Diversification”). 55. The broad asset classes generally include fixed investments, bonds, stocks, and occasionally real estate. Money market funds, guaranteed investment contracts, and stable value funds are examples of fixed investments. Bonds are debt securities, which are generally categorized by the issuer/borrower (U.S. Government, foreign governments, municipalities, corporations), the duration of the debt (repayable anywhere between 1 month and 30 years), and the default risk associated with the particular borrower. Equity, or stock, investments, obtain ownership shares of companies in anticipation of income from corporate dividends or appreciation in the value of the company. Equity investments are generally defined by three 3 A “designated investment alternative” is defined as “any investment alternative designated by the plan into which participants . . . may direct the investment of assets held in, or contributed to, their individual accounts.” 29 C.F.R. § 2550.404a-5(h)(4). characteristics: (1) where the investment managers invest geographically (i.e., whether they invest in domestic or international companies, or both); (2) the size of companies they invest in (generally categorized as small cap, mid cap, or large cap); and (3) their investment style, i.e. growth, value, or blend (growth funds invest in fast-growing companies, value funds look for more conservative or established stocks that are more likely to be undervalued, and blend funds invest in a mix of growth stocks, value stocks, and companies in between). Balanced funds are a type of mutual fund that invests in a mix of stocks and bonds. Target-date funds assemble a broad portfolio of investments from different asset classes at a risk level that declines over time as the targeted retirement date approaches. 56. Every pooled investment product charges certain fees and expenses that are paid by deductions from the pool of assets in transactions that typically occur on a monthly or quarterly basis. For example, within each of the American Century funds within the Plan, monthly management fees are paid to Defendant ACIM. ACIM then uses a portion of this fee to pay ACS for its services as a transfer agent and dividend-paying agent for the funds. 57. Investment funds can be either passively or actively managed. Passive funds, popularly known as “index funds,” seek to replicate the performance of a market index, such as the S&P 500, by purchasing a portfolio of securities matching the composition of the index itself. James Kwak, Improving Retirement Savings Options for Employees, 15 U. Pa. J. Bus. L. 483, 493 (2013). By following this strategy, index funds produce returns that are very close to the market segment tracked by the index. Id. Index funds therefore offer predictability, diversified exposure to a particular asset or sub-asset class, and low expenses. Id. Actively managed funds, on the other hand, pick individual stocks and bonds within a particular asset or sub-asset class and try to beat the market through superior investment selection. Id. at 485–86. Actively managed funds are typically much more expensive than index funds, but offer the potential to outperform the market (although this potential typically is not realized). U.S. Dep’t of Labor, Understanding Retirement Plan Fees and Expenses, at 9 (Dec. 2011), available at http://www.dol.gov/ebsa/pdf/undrstndgrtrmnt.pdf. 58. In addition to a core menu of designated investment alternatives, many plans (including the Plan at issue here) also provide employees the option of opening a self-directed brokerage account (“SDBA”), giving them access to a broad array of stocks, bonds, and mutual funds. Ayres & Curtis, Beyond Diversification at 1524; Ex. A § 5.02(c). However, SDBAs have significant drawbacks. Participants that choose to utilize an SDBA are typically assessed an account fee and a fee for each trade. These fees often make an SDBA a much more expensive option compared to investing in the designated investment alternatives available within the Plan.4 Costs are also higher because employees investing in mutual funds within an SDBA must invest in retail mutual funds, rather than lower-cost institutional shares typically available as core investment options within the plan that are only available because of the retirement plan’s ability to leverage the negotiating power of the plan’s assets. DOL Field Assistance Bulletin 2012-02R (July 30, 2012), available at http://www.dol.gov/ebsa/regs/fab2012-2R.html; Christopher Carosa, CTFA, Is the Fiduciary Liability of Self-Directed Brokerage Options Too Great for 401k Plan Sponsors?, FIDUCIARY NEWS (June 11, 2013), available at http://fiduciarynews.com/2013/06/is-the-fiduciary-liability-of-self-directed-brokerage-options- too-great-for-401k-plan-sponsors/ (last accessed Sept. 8, 2016). Furthermore, SDBA investors 4 Investments available within a self-directed brokerage account are excluded from the definition of “designated investment alternative”. 29 C.F.R. § 2550.404a-5(h)(4). Therefore, fiduciaries are under no obligation to disclose performance, benchmark, or fee information regarding the investments available within an SDBA. Id. § 2550.404a-5(d). often invest in imprudent investments, because there is no fiduciary selecting or monitoring the investments within an SDBA. 29 C.F.R. § 2550.404a-5(f), (h)(4). 59. The existence of an SDBA option does not excuse plan fiduciaries from constructing and maintaining a prudent and appropriate menu of core investment options. For the reasons described above, “the performance is generally lower with self-directed accounts compared to managed portfolios. This translates into low real rates of return and higher retirement failure rates.” Marijoyce Ryan, CPP, Money Management: The Downside of Self- Directed Brokerage Accounts, THE DAILY RECORD (June 26, 2012), available at http://nydailyrecord.com/blog/2012/06/26/money-management-the-downside-of-self-directed- brokerage-accounts/; Dr. Gregory Kasten, Self-Directed Brokerage Accounts Reduce Success (2004), at 1, 13–14, available at http://etf.wi.gov/boards/agenda_items_2004/ dc20040819item4.pdf (discussing results of study showing that self-directed brokerage accounts lagged the performance of a model portfolio of the plan’s designated investment alternatives by an average of 4.70% per year). 60. In addition to their high costs and poor investment outcomes, SDBAs are quite difficult to set up, requiring Plan participants to complete additional paperwork while also requiring a greater investment of time to choose among the hundreds or thousands of investment options. Due to their high costs and administrative complexity, SDBAs are seldom used by participants: only 2% of retirement plan assets are held in SDBAs. Investment Company Institute & Deloitte Consulting LLP, Inside the Structure of Defined Contribution/401(k) Plan Fees, 2013, at 15 (Aug. 2014), available at https://www.ici.org/pdf/rpt_14_dc_401k_ fee_study.pdf (hereinafter “ICI/Deloitte Study”). And while usage of the SDBA is higher within the Plan, no doubt due to Defendants’ imprudence and self-dealing, as reported in its 2014 Form 5500, less than 7% of the Plan’s assets are held in SDBAs. MINIMIZATION OF PLAN EXPENSES 61. At retirement, employees’ benefits “are limited to the value of their own investment accounts, which is determined by the market performance of employee and employer contributions, less expenses.” Tibble, 135 S. Ct. at 1826. Accordingly, poor investment performance and excessive fees can significantly impair the value of a participant’s account. Over time, even seemingly small differences in fees and performance can result in vast differences in the amount of savings available at retirement. See, e.g., Stacy Schaus, Defined Contribution Plan Sponsors Ask Retirees, “Why Don’t You Stay?” Seven Questions for Plan Sponsors, PIMCO (Nov. 2013), https://www.pimco.com/insights/investment-strategies/featured- solutions/defined-contribution-plan-sponsors-ask-retireeswhy-dont-you-stay-seven-questions- for-plan-sponsors (explaining that “a reduction in [annual] fees from 100 bps[5] to 50 bps [within a retirement plan] could extend by several years the potential of participants’ 401(k)s to provide retirement income”) (emphasis added); U.S. Dep’t of Labor, A Look at 401(k) Plan Fees 1–2 (Aug. 2013), available at http://www.dol.gov/ebsa/pdf/401kFeesEmployee.pdf (illustrating impact of expenses with example in which 1% difference in fees and expenses over 35 years reduces participant’s account balance at retirement by 28%). 62. There are two major categories of expenses within a defined contribution plan: administrative expenses and investment management expenses. ICI/Deloitte Study at 17. 5 The term “bps” is an abbreviation of the phrase “basis points.” One basis point is equal to .01%, or 1/100th of a percent. Thus, a fee level of 100 basis points translates into fees of 1% of the amount invested. See Investopedia, Definition of ‘Basis Point (BPS)’, http://www.investopedia.com/terms/b/basispoint.asp (last accessed Sept. 8, 2016). Investment management expenses are the fees that are charged by the investment manager, and participants “typically pay these asset-based fees as an expense of the investment options in which they invest.” Id. On average, 82% of overall fees within a plan are investment expenses, while administrative fees on average make up only 18% of total fees. Id. 63. Administrative expenses (e.g., recordkeeping, trustee and custodial services, accounting, etc.) can be paid directly by employers, directly by the plan, or indirectly as a built- in component of the fees charged for the investment products offered in the plan in a practice known as “revenue sharing.” Ayres & Curtis, Beyond Diversification at 1486; ICI/Deloitte Study at 16. These “revenue sharing” payments from investment managers to plan service providers typically happen on a monthly or quarterly basis and are determined by an agreed-upon contribution formula. Though revenue sharing arrangements are not necessarily prohibited transactions under 29 U.S.C. § 1106(b), plan fiduciaries “must act prudently and solely in the interest of plan participants and beneficiaries both in deciding whether to enter into, or continue, [a revenue sharing arrangement] and in determining the investment options in which to invest or make available to plan participants and beneficiaries in self-directed plans.” U.S. Dep’t of Labor, DOL Advisory Opinion 2003-09A, 2003 WL 21514170, at *6 (June 25, 2003). 64. Fiduciaries exercising control over administration of the plan and the selection and monitoring of core investment options can minimize plan expenses by hiring low-cost service providers and by curating a menu of low-cost investment options. This task is made significantly easier the larger a plan gets. Economies of scale generally lower administrative expenses on a per-participant or percentage-of-assets basis. ICI/Deloitte Study at 7, 21. Larger plans also can lower investment management fees by selecting mutual funds only available to institutional investors or by negotiating directly with the investment manager to obtain a lower fee than is offered to mutual fund investors. See Consumer Reports, How to Grow Your Savings: Stop 401(k) Fees from Cheating You Out of Retirement Money (Aug. 2013), available at http://www.consumerreports.org/cro/magazine/2013/09/how-to-grow-your-savings/index.htm (instructing employees of large corporations that “[y]our employer should be able to use its size to negotiate significant discounts with mutual-fund companies”); U.S. Dep’t of Labor, Study of 401(k) Plan Fees and Expenses, at 17 (April 13, 1998), available at https://www.dol.gov/ebsa/pdf/401kRept.pdf (reporting that by using separate accounts and similar instruments, “[t]otal investment management expenses can commonly be reduced to one- fourth of the expenses incurred through retail mutual funds”). Empirical evidence bears this out. In 2012, total plan fees in the average defined contribution plan were 0.91%, but this varied between an average of 1.27% in plans with $1 million to $10 million in assets, and an average of only 0.44% for plans with between $500 million and $1 billion in assets. ICI Study at 41. 65. Given the significant variation in total plan costs attributable to plan size, the reasonableness of administrative expenses and investment management expenses should be determined by comparisons to other similarly-sized plans. See 29 U.S.C. § 1104(a)(1)(B) (requiring ERISA fiduciaries to discharge their duties in the manner “that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character”) (emphasis added); Tibble v. Edison Int’l, 2010 WL 2757153, at *9, 15, 28 (C.D. Cal. July 8, 2010) (evaluating the propriety of particular fees and investment decisions in light of the size of the plan), rev’d on other grounds, 135 S. Ct. 1823 (2015); Tussey v. ABB, Inc., 2007 WL 4289694, at *6, n.5 (W.D. Mo. Dec. 3, 2007) (determining that administrative and investment expenses were unreasonable through comparisons to similar plans because “[a]t most, reasonable compensation should mean compensation commensurate with that paid by similar plans for similar services to unaffiliated third parties”) (quoting Nell Hennessy, Follow the Money: ERISA Plan Investments in Mutual Funds and Insurance, 38 J. Marshall L. Rev. 867, 877 (2005)). MANAGEMENT OF THE PLAN’S INVESTMENT OPTIONS 66. With respect to designing the menu of investment options, a substantial body of academic and financial industry literature provides two critical insights for fiduciaries to consider when selecting investments to be offered within a plan and monitoring the plan’s existing investments. 67. The first critical insight is that fiduciaries must carefully tend to their duty of investment menu construction—selecting prudent investments, regularly reviewing plan options to ensure that investment choices remain prudent, and weeding out costly or poorly-performing investments. Plan participants often engage in “naive diversification,” whereby they attempt to diversify their holdings simply by spreading their money evenly among the available funds. Jill E. Fisch & Tess Wilkinson-Ryan, Why Do Retail Investors Make Costly Mistakes?, 162 U. Pa. L. Rev. 605, 636–38 (2014) (hereinafter “Costly Mistakes”); Shlomo Benartzi & Richard H. Thaler, Naive Diversification Strategies in Defined Constribution Plans, 91 Am. Econ. Rev. 79, 96 (2001). Additionally, once an initial investment allocation has been chosen, 401(k) participants are prone to inertia, failing to reassess their investment decisions even when presented with evidence suggesting that they should. John Ameriks & Stephen P. Zeldes, How Do Household Portfolio Shares Vary with Age?, at 31, 48, Columbia University Working Paper (Sept. 2004) (finding that among group of 16,000 randomly selected TIAA-CREF participants, in a ten-year period, 48 percent of participants made no changes at all to their account and 73 percent of participants made no change to the allocation of existing assets); Julie Agnew et al., Portfolio Choice and Trading in a Large 401(k) Plan, 93 Amer. Econ. Rev. 193, 194 (Mar. 2003) (sampling of seven thousand 401(k) accounts showed that 87 percent of 401(k) account holders made no trades in the average year and that the average 401(k) investor makes one trade every 3.85 years). For all of these reasons, prudent fiduciaries will limit their menus to only those funds that represent sound long-term investments, and remove imprudent investments rather than trusting participants to move their money out of an imprudent investment. 68. The second critical insight provided by academic and financial industry literature is that in selecting prudent investments, the most important consideration is low fees. Numerous scholars have demonstrated that high expenses are not correlated with superior investment management. Indeed, funds with high fees on average perform worse than less expensive funds, even on a pre-fee basis. Javier Gil-Bazo & Pablo Ruiz-Verdu, When Cheaper is Better: Fee Determination in the Market for Equity Mutual Funds, 67 J. Econ. Behav. & Org. 871, 873 (2009) (hereinafter “When Cheaper is Better”); see also Fisch & Wilkinson-Ryan, Costly Mistakes, at 1993 (summarizing numerous studies showing that “the most consistent predictor of a fund’s return to investors is the fund’s expense ratio”). [T]he empirical evidence implies that superior management is not priced through higher expense ratios. On the contrary, it appears that the effect of expenses on after-expense performance (even after controlling for funds’ observable characteristics) is more than one-to-one, which would imply that low-quality funds charge higher fees. Price and quality thus seem to be inversely related in the market for actively managed funds. Gil-Bazo & Ruiz-Verdu, When Cheaper is Better, at 883. 69. While high-cost mutual funds may exhibit positive, market-beating performance over shorter periods of time, studies demonstrate that this is arbitrary: outperformance during a particular period is not predictive of whether a mutual fund will perform well in the future. Laurent Barras et al., False Discoveries in Mutual Fund Performance: Measuring Luck in Estimated Alphas, 65 J. Fin. 179, 181 (2010); Mark M. Carhart, On Persistence in Mutual Fund Performance, 52 J. Fin. 57, 57, 59 (1997) (measuring 31 years of mutual fund returns and concluding that “persistent differences in mutual fund expenses and transaction costs explain almost all of the predictability in mutual fund returns”). Any sustainable ability to beat the market that managers might demonstrate is dwarfed by mutual fund expenses. Eugene F. Fama & Kenneth R. French, Luck Versus Skill in the Cross-Section of Mutual Fund Returns, 65 F. Fin. 1915, 1931–34 (2010); Russ Wermers, Mutual Fund Performance: An Empirical Decomposition into Stock-Picking Talent, Style, Transaction Costs, and Expenses, 55 J. Fin. 1655, 1690 (2000). The one exception to the general arbitrariness and unpredictability of mutual fund returns is that the worst-performing mutual funds show a strong, persistent tendency to continue their poor performance. Carhart, On Persistence in Mutual Fund Performance, at 57. Therefore, regardless of where one comes down on the issue of active versus passive investing, a prudent investor should choose only index funds and low-cost actively managed funds whose long-term performance history permits a fiduciary to realistically conclude that the fund is likely to outperform its benchmark index in the future, after accounting for investment expenses. See Restatement (Third) of Trusts § 90 cmt. h(2). DEFENDANTS’ VIOLATIONS OF ERISA IN MANAGING THE PLAN DEFENDANTS USED A DISLOYAL AND IMPRUDENT PROCESS TO MANAGE THE PLAN. I. 70. To date, the only designated investment alternatives offered within the Plan have been investments managed by ACIM and ACC stock.6 6 In 2010, Plan participants were offered 45 proprietary mutual funds, a JPMorgan money market 71. Defendants were obligated to conduct a thorough investigation of each fund, and only include or retain funds in the Plan if the inclusion or retention of each fund was prudent and in the best interest of the Plan’s participants. See Dep’t of Labor ERISA Adv. Op. 88-16A (Dec. 19, 1988) (The “decision to make an investment may not be influenced by [other] factors unless the investment, when judged solely on the basis of its economic value to the plan, would be equal or superior to alternative investments available to the plan.”) (emphasis added). A prudent and loyal process is objective and thorough; such a process considers investments from all investment companies in the process of both selecting designated investment alternatives and reviewing those investments. Cf. Restatement (Third) of Trusts § 78 cmt. c(8) (2007) (to select mutual fund affiliated with the trustee, trustee “must be sufficiently aware of overall costs associated with other mutual fund alternatives to enable the trustee to fulfill its important responsibility to be cost conscious”); DOL, Target Date Retirement Funds–Tips for ERISA Plan Fiduciaries (2013), http://www.dol.gov/ebsa/pdf/fsTDF.pdf (prudent target date fund selection process requires consideration of different service providers’ products as well as “non- proprietary” options). 72. As is apparent from the Plan’s menu of designated investment alternatives, Defendants’ process for managing the Plan was neither prudent nor loyal. At all stages, both in selecting the Plan’s designated investment alternatives and in monitoring those investments, Defendants only considered investments affiliated with American Century, in furtherance of their account (JPMorgan owned 45% of American Century before they sold their minority share of the company in 2011), ACC stock, and an SDBA. By the end of 2013, the Plan offered 41 designated investment alternatives, all of which (other than ACC stock) continued to be managed by ACIM. As of 2016, the designated investment alternatives in the Plan are still limited to proprietary investments managed by ACIM. own financial interests, rather than the interests of Plan participants. In so doing, Defendants breached the fiduciary duties they owed to Plan participants. DEFENDANTS RETAINED HIGH COST PROPRIETARY FUNDS IN THE PLAN IN THEIR OWN II. SELF-INTEREST AND AT THE EXPENSE OF PLAN PARTICIPANTS 73. Because the Plan is laden with high-cost, proprietary mutual funds managed by American Century, and Defendants failed to investigate lower-cost, non-proprietary alternatives, the Plan’s expenses are significantly higher than other comparable retirement plans.7 74. Taking into account all administrative and investment expenses within the Plan, and using 2010 year-end balances (as reported on Form 5500 for 2010) and publicly available information regarding each investment’s expenses, Plaintiffs estimate that total Plan costs for 2010 were approximately $3,162,000, or 0.73% of the $438 million in Plan assets. Using the same data sets, Plaintiffs estimate that total Plan costs for 2013 were approximately $3,645,000, or 0.65% of the $577 million in Plan assets. 75. The Plan’s total costs are extremely high for defined-contribution plans with a similar amount of assets. For example, in 2009 (the nearest year to 2010 for which data is available), the average total plan cost for plans with between $250 million and $500 million in assets was 0.53% (the plan had $438 million in assets in 2010), compared to total plan costs of 0.73% for the Plan in 2010. ICI Study at 41. In 2013, average total plan cost for plans with between $500 million and $1 billion in assets was 0.44% (the plan had $577 million in assets in 2013), compared to 0.65% for the Plan. Id. Thus, in 2010 the Plan was 38% more expensive than the average similarly sized plan, and in 2013 it was 48% more expensive. 7 Compounding this problem, Defendants also failed to include the least expensive share class of certain proprietary funds in the Plan, and caused the Plan to pay excessive recordkeeping costs. See infra at ¶ 80-102. 76. These average-based comparisons of overall Plan costs actually understate the excessiveness of the investment management fees paid by the Plan’s participants. The fees charged by the American Century funds in the Plan were generally many times higher than the fees in comparable institutional mutual funds that were frequently used by other plans. As shown by the chart below, the fees for funds8 within the Plan as of year-end 2013 (as disclosed in the Plan’s 2013 Form 5500) were up to 15 times higher than alternatives in the same investment style. Indeed, for every fund in the Plan, there was a fund available from outside the American Century family with significantly lower expenses (typically, less expensive passively-managed and actively-managed funds were available): Fund in Plan Expense ratio Exp. ratio Investment style % fee excess Passive/Active Lower Cost Alternative9 American Century Capital Preservation (CPFXX) 48 bps Oppenheimer Institutional Money Mkt E (IOEXX) 11 bps Money Market 336% 45 bps Oppenheimer Institutional Money Mkt E (IOEXX) 11 bps Money Market 309% American Century Premium Money Market Fund (TCRXX) 5 bps 700% Vanguard Total Bond Market Index I (VBTIX) 40 bps Intermediate- Term Bond 30 bps 33% American Century Diversified Bond Fund Institutional (ACBPX) Baird Core Plus Bond Inst (BCOIX) 8 Plaintiffs have omitted from the chart the four collective trusts that were designated investment alternatives in the Plan in 2013 given the difficulty of obtaining fee data for such trusts. 9 Where appropriate, each cell in this column references both a passively-managed fund (identified first) and an actively-managed fund (identified second). The listed expenses figures are taken from each fund’s 2013 prospectus. Fund in Plan Expense ratio Exp. ratio Investment style % fee excess Passive/Active Lower Cost Alternative9 12 bps 983% Vanguard Emerging Markets Stock Index I (VEMIX) 130 bps Diversified Emerging Market 66 bps 97% American Century Emerging Markets Institutional (AMKIX) American Funds New World R6 (RNWGX) 146 bps Vanguard Market Neutral Institutional (VMNFX) 25 bps Market Neutral 484% American Century Equity Market Neutral Institutional (ALISX) 48 bps 26 bps Equity Precious Metals 85% Vanguard Precious Metals And Mining Fund Investor Shares (VGPMX) American Century Global Gold Institutional (AGGNX) 17 bps 429% Vanguard Total World Stock Index I (VTWIX) World Stock 90 bps 45 bps 100% American Century Global Growth Institutional (AGGIX) American Funds New Perspective Fund Class R6 (RNPGX) 710% 10 bps Vanguard Mid-Cap Growth Index Adm (VMGMX) 81 bps Mid-Cap Growth 31% 62 bps American Century Heritage Institutional (ATHIX) T. Rowe Price Institutional Mid-Cap Growth (PMEGX) 67 bps Vanguard High-Yield Corporate Adm (VWEAX) 13 bps High-Yield Bond 415% American Century High-Yield Institutional (ACYIX) Fund in Plan Expense ratio Exp. ratio Investment style % fee excess Passive/Active Lower Cost Alternative9 12 bps 400% Vanguard Total Intl Bd Idx Institutional (VTIFX) 60 bps World Bond 20 bps 200% American Century International Bond Institutional (AIDIX) DFA World ex US Government Fxd Inc I (DWFIX) 130 bps Oppenheimer Int’l Small-Mid Co I (OSCIX) 81 bps Foreign Small/Mid Growth 60% American Century International Discovery Institutional (TIDIX) 269% 16 bps Vanguard Target Retirement 2015 Investor (VTXVX) 59 bps Target-Date 2015 59% 37 bps American Century One Choice 2015 Institutional (ARNIX) American Funds 2015 Target Date Retire R6 (RFJTX) 288% 16 bps Vanguard Target Retirement 2020 Investor (VTWNX) 62 bps Target-Date 2020 39 bps 59% American Century One Choice 2020 Institutional (ARBSX) American Funds 2020 Target Date Retire R6 (RRCTX) 17 bps 282% Vanguard Target Retirement 2025 Fund Investor (VTTVX) 65 bps Target-Date 2025 American Century One Choice 2025 Institutional (ARWFX) 42 bps 55% American Funds 2025 Target Date Retire R6 (RFDTX) Fund in Plan Expense ratio Exp. ratio Investment style % fee excess Passive/Active Lower Cost Alternative9 17 bps 294% Vanguard Target Retirement 2030 Fund Investor (VTHRX) 67 bps Target-Date 2030 American Century One Choice 2030 Institutional (ARCSX) 43 bps 56% American Funds 2030 Target Date Retire R6 (RFETX) 18 bps 289% Vanguard Target Retirement 2035 Fund Investor (VTTHX) 70 bps Target-Date 2035 American Century One Choice 2035 Institutional (ARLIX) 43 bps 63% American Funds 2035 Target Date Retire R6 (RFFTX) 306% 18 bps Vanguard Target Retirement 2040 Fund Inv. (VFORX) 73 bps Target-Date 2040 66% 44 bps American Century One Choice 2040 Institutional (ARDSX) American Funds 2040 Target Date Retire R6 (RFGTX) 328% 18 bps Vanguard Target Retirement 2045 Fund Inv. (VTIVX) 77 bps Target-Date 2045 71% 45 bps American Century One Choice 2045 Institutional (AOOIX) American Funds 2045 Target Date Retire R6 (RFHTX) 18 bps 333% Vanguard Target Retirement 2050 Fund Inv. (VFIFX) 78 bps Target-Date 2050 45 bps 73% American Century One Choice 2050 Institutional (ARFSX) American Funds 2050 Target Date Retire R6 (RFITX) Fund in Plan Expense ratio Exp. ratio Investment style % fee excess Passive/Active Lower Cost Alternative9 18 bps 339% Vanguard Target Retirement 2055 Fund Inv. (VFFVX) 79 bps Target-Date 2055 48 bps 65% American Century One Choice 2055 Institutional (ARENX) American Funds 2055 Target Date Retire R6 (RFKTX) 17 bps 235% BlackRock LifePath Index Retirement Fund Class K Shares (LIRKX) 57 bps Target-Date Retirement 33% American Century One Choice Income Retirement Institutional (ATTIX) 38 bps TIAA-CREF Lifecycle Retirement Income Fund Instl (TLRIX) 7 bps 400% Vanguard Short- Term Govt Bd Idx I (VSBIX) 35 bps Short-Term Government American Century Short-Term Government Institutional (TWUOX) 20 bps 75% DFA Short-Term Government I (DFFGX) 1043% 7 bps TIAA-CREF Large- Cap Growth Idx I (TILIX) Large Growth American Century Select Institutional (TWSIX) 80 bps 34 bps 135% American Funds Growth Fund of America R6 (RGAGX) 8 bps 750% Vanguard Small Cap Index I (VSCIX) 68 bps Small Blend 37 bps 84% American Century Small Company Institutional (ASCQX) DFA U.S. Small Cap Portfolio Institutional (DFSTX) Fund in Plan Expense ratio Exp. ratio Investment style % fee excess Passive/Active Lower Cost Alternative9 471% 14 bps Vanguard LifeStrategy Income Fund Investor Shares (VASIX) 80 bps 700% 10 bps Asset Allocation – 15 to 30% Equity10 American Century Strategic Inflation Opportunities Institutional (ASINX) Vanguard Inflation- Protected Secs Adm (VAIPX) 344% 18 bps DFA Real Estate Securities I (DFREX) 1029% 7 bps TIAA-CREF Large- Cap Growth Idx I (TILIX) Large Growth American Century Ultra Institutional (TWUIX) 79 bps 119% 36 bps Vanguard PRIMECAP Adm (VPMAX) 8 bps 900% TIAA-CREF Large- Cap Value Idx I (TILVX) Large Value American Century Value Institutional (AVLIX) 80 bps 31 bps 158% American Funds American Mutual Fund R6 (RMFGX) 10 The American Century Strategic Inflation Opportunities Fund consists largely of Real Estate Securities and Treasury Inflation Protected Securities. Therefore, as actively-managed alternatives, Plaintiffs have identified one Real Estate fund and one Treasury Inflation-Protected Securities fund. Fund in Plan Expense ratio Exp. ratio Investment style % fee excess Passive/Active Lower Cost Alternative9 9 bps 511% Vanguard Intermediate-Term Gov’t Bond Index I (VIIGX) American Century Zero Coupon 2020 Investor (BTTTX) 55 bps Intermediate- Term Government 11 bps 400% Vanguard GNMA Fund Admiral Shares (VFIJX) 1100% 4 bps Vanguard Institutional Index I (VINIX) Large Blend 48 bps American Century Equity Growth Institutional (AMEIX) 55% 31 bps American Funds Fundamental Investors R6 (RFNGX) 1475% 8 bps Vanguard Small Cap Growth Index I (VSGIX) Small Growth 126 bps American Century Small Cap Growth Institutional (ANONX) 88% 67 bps T. Rowe Price Inst’l Small-Cap Stock (TRSSX) 10 bps 850% Vanguard REIT Index I (VGSNX) 95 bps Real Estate 18 bps 428% American Century Real Estate Institutional (REAIX) DFA Real Estate Securities I (DFREX) 289% 9 bps Vanguard Intermediate-Term Gov’t Bond Index I (VIIGX) Intermediate- Term Government American Century Ginnie Mae Instl (AGMNX) 35 bps 11 bps 218% Vanguard GNMA Fund Admiral Shares (VFIJX) Fund in Plan Expense ratio Exp. ratio Investment style % fee excess Passive/Active Lower Cost Alternative9 8 bps 500% TIAA-CREF Large- Cap Value Idx I (TILVX) Large Value American Century Income & Growth Inst (AMGIX) 48 bps 30 bps 60% American Funds Washington Mutual R6 (RWMGX) 5 bps 440% Fidelity Inflation- Protected Bond Index Inst’l Premium (FIPDX) 27 bps Inflation- Protected Bond American Century Inflation-Adjusted Bond Instl (AIANX) 7 bps 286% Vanguard Inflation- Protected Secs I (VIPIX) 8 bps 738% TIAA-CREF Large- Cap Value Idx I (TILVX) Large Value 67 bps 17 bps 294% American Century Large Company Value Instl (ALVSX) Vanguard Equity- Income Adm (VEIRX) 8 bps 1425% Vanguard Small-Cap Value Index Fund Institutional Shares (VSIIX) Small Value American Century Small Cap Value Instl (ACVIX) 122 bps 103% 60 bps Perkins Small Cap Value Fund Class N (JDSNX) 77. Despite the high cost of the proprietary investments within the Plan, Defendants failed to consider removing these proprietary mutual funds from the Plan in favor of lower-cost non-proprietary investments (i.e., investment products not affiliated with American Century) because this would have reduced the revenue received by the American Century entities. Although ACS recently amended its summary description of the Plan to state that the Plan will only “generally” be limited to proprietary investments, this change in thesis did not alter the operational reality that ACS and the Committee have only considered proprietary investments as designated investment alternatives, acting in their own interests to the detriment of the Plan.11 This constitutes a breach of the fiduciary duties of loyalty and prudence under ERISA, and cost Plan participants millions of dollars in excess fees. 78. Had Defendants prudently monitored the investments within the Plan to ensure that such investments did not have excessive fees, in a process that was not tainted by self- interest, Defendants would have removed the Plan’s investments in favor of investments such as the funds listed above that offered similar or superior performance at significantly less expense. 79. Given the excessive fees charged by American Century mutual funds and the availability of comparable or superior funds with significantly lower expenses, the compensation paid to ACIM and ACS for their services to the Plan was unreasonably high. 11 A reasonable inference drawn from ACS’s change to the summary description of the Plan between January 2014 and January 2016 is that ACS recognized potential liability for its slanted investment process that only considered proprietary investments. See ¶ 22, supra. During this time, the Supreme Court issued opinions favorable to plan participants, and a number of lawsuits asserting claims against plan fiduciaries for imprudent and disloyal management of a defined contribution plan’s investment lineup settled for substantial sums. See Tibble v. Edison Int'l, 135 S. Ct. 1823, 1828 (2015) (recognizing continuing duty to monitor plan investments and remove imprudent ones); Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459, 2467–71 (2014) (abrogating “presumption of prudence” in matters of employer securities); Spano v. Boeing Co., 2015 WL 11144499, at *1 (S.D. Ill. Nov. 18, 2015) (granting preliminary approval to $57 million settlement of claims of imprudence and disloyalty in management of plan’s investment lineup); Robert Steyer, Novant Health Settles with DC Participants on Fiduciary Breach Allegations, Pensions & Investments (Nov. 10, 2015) (announcing $32 million settlement in Kruger v. Novant Health case involving claims of imprudence and disloyalty in plan management); Krueger v. Ameriprise Fin., Inc., 2015 WL 7596926, at *1–*2 (D. Minn. Apr. 6, 2015) (granting preliminary approval to $27.5 million settlement of claims of imprudence and disloyalty arising primarily from defendants’ almost exclusive use of proprietary mutual funds in the plan’s investment lineup). III. DEFENDANTS FAILED TO PROCURE THE LEAST EXPENSIVE AVAILABLE SHARE CLASS OF NUMEROUS FUNDS 80. Defendants also failed to procure the lowest-cost share class of numerous mutual funds in the Plan. By way of background, most mutual funds offer multiple classes of shares that are targeted at different investors. Generally, more expensive share classes are targeted at smaller investors with less bargaining power, while lower-cost share classes are targeted at institutional investors with more assets (generally $1 million or more) and therefore greater bargaining power. There is no difference between share classes other than the costs. Thus, utilizing the cheapest share class provides an identical—but less expensive—version of the same investment, including the identical manager and an identical mix of investments within each fund. Given the Plan’s size, and its uniquely intimate relationship with the investment manager ACIM (its Committee members being ACIM executives), the Plan had sufficient bargaining power and access to the most up-to-date information to obtain the lowest cost share class available at any given time for the Plan’s investment lineup of proprietary American Century mutual funds. However, Defendants did not do this for the Plan. 81. In July of 2013, ACIM began offering “R6” shares for 22 of the funds offered by the Plan. Contemporaneously, ACIM published an updated prospectus for its investors for each fund offering the new R6 shares. According to each fund’s updated prospectus, the R6 shares were created for use by employer-sponsored retirement plans (like the Plan). Each fund’s updated prospectus further identified that investment management fees for the R6 class would be less than for other available share classes. Likewise, each updated prospectus announced that the R6 shares were open and available for investment. Although the R6 shares were about 5 to 15 basis points less expensive than the shares held by the Plan, Defendants failed to move the Plan’s investments out of a higher cost share class until the third quarter of 2014.12 Defendants’ delay of more than one year in taking advantage of lower investment management fees for identical investments cost Plan participants more than a quarter million dollars, enriching ACIM in a like amount. 82. There is no justification for Defendants’ failure to timely transition out of the higher-cost share classes. In November 2013, ACS hired a new directed trustee responsible for holding and executing the Plan’s investments. As part of the transaction, on November 6, 2013, ACS prepared a schedule of the Plan’s investments for the new directed trustee. In this schedule, ACS specifically instructed the directed trustee to hold the higher-cost share class of each fund, even though the less expensive R6 shares were then available. 83. The Committee’s failure to timely move Plan assets from the higher-cost shares was particularly beneficial to ACIM, which collected the excess fees the Plan paid. By way of example, ACIM received an annual fee of 80 basis points for performing investment advisory and management services for the Plan’s investment in the American Century Heritage Fund between July 26, 2013 and the third quarter of 2014. ACIM performed the exact same functions for holders of R6 shares, but charged them an annual fee of only 65 basis points. Id. For the Plan’s more than $35 million invested in the American Century Heritage Fund over the year the Committee delayed in making the necessary change, the Plan lost, and ACIM gained, approximately $55,000 in investment management fees. 84. As a result of the Committee’s failures, ACIM dealt with Plan participants on a 12 On August 15, 2014, the Committee moved most of the investments at issue to the appropriate R6 class and moved target retirement date investments to analogous collective trusts managed by ACIM. basis less favorable than other shareholders. 85. A prudent fiduciary would have taken advantage of the R6 shares of the Plan’s American Century investments as soon as the R6 shares became available. Many fiduciaries did just this, as ACIM processed transactions for other plans moving tens of millions of dollars to the new R6 shares within the first six months the R6 shares were available. For example, in just the first six months after ACIM started offering R6 shares, ACIM moved more than $14 million worth of investments (from other plans) in the American Century One Choice 2035 Fund to R6 shares. Meanwhile, the Plan remained invested in higher-cost shares of the same fund, paying an excess of 7 bps compared to R6 shareholders. Because ACS and the Committee did not timely transition Plan assets into available R6 shares as other fiduciaries did for their plans, ACIM was able to collect excessive investment management fees from Plan assets for a full year. Through these actions and omissions, Defendants breached their duty of loyalty, and their duty of prudence, owed to the Plan. IV. DEFENDANTS CAUSED THE PLAN TO PAY EXCESSIVE RECORDKEEPING COSTS 86. The Plan’s high costs are also due in part to the excessive recordkeeping fees Defendants have caused it to pay. 87. Recordkeeping is a necessary service for any defined contribution plan. The market for recordkeeping is therefore highly competitive, with many vendors equally capable of providing high-level services. As a result of such competition, vendors vigorously compete for business by offering the best price. 88. The cost of providing recordkeeping services depends on the number of participants in a plan. Given that it costs the same to provide recordkeeping to a participant with $1,000 in his retirement account as a participant with $100,000, the amount of money in participants’ accounts is generally not relevant. Thus, fiduciaries of plans with a large amount of assets but a relatively small number of participants would not pay recordkeeping fees based on account size, which could cause recordkeeping fees to be far higher than would be the case for per-participant pricing. 89. Some mutual funds engage in a practice known as “revenue sharing” where the mutual fund takes a portion of the expense ratio it charges investors and pays it to the plan’s recordkeeper. While this can provide an alternate source to pay recordkeeping fees, the amounts being paid to the recordkeepers increase as the Plan grows larger. Thus, left unmonitored, a revenue sharing scheme can result in increasingly excessive payments to recordkeepers. 90. In order to make an informed evaluation as to whether a recordkeeper is receiving no more than a reasonable fee for the services provided to a plan, a responsible fiduciary must identify all fees, including recordkeeping fees and other sources of compensation, paid to the service provider. To the extent that a plan’s investment options pay asset-based revenue sharing to the recordkeeper, prudent fiduciaries monitor the amount of the payments to ensure that the recordkeeper’s total compensation from all sources does not exceed reasonable levels, and require that any revenue sharing payments that exceed a reasonable level be returned to the plan and its participants. 91. Defendants could have, and should have, requested information from the Plan’s recordkeeper as an integral part of satisfying their fiduciary duties. If Defendants had asked for such information, they could have received (among other things) documents that summarized and contextualized the recordkeeper’s compensation, such as fee transparencies, fee analyses, fee summaries, relationship pricing analyses, cost-competitiveness analyses, and multi-practice and standalone pricing reports. 92. As part and parcel of a reasonable fiduciary’s monitoring of a plan’s recordkeeping expenses, prudent fiduciaries submit requests for proposal (RFPs) to potential recordkeeping service providers to obtain cost information regarding a plan’s recordkeeping options. The RFP process allows prudent fiduciaries to determine if their recordkeeping arrangement is competitive, and if it is not, make an appropriate change. 93. Based on Plaintiffs’ investigation and analysis, a normal range of recordkeeping fees for a plan like the Plan would have been between $55 and $70 per participant from 2009 to 2012, and between $50 and $65 per participant from 2013 to the present. 94. The recordkeeping fees paid by the Plan greatly exceeded the normal range. For example, based upon the fee disclosures in the Plan’s 2011 Form 5500s, the Plan’s recordkeeper at the time, JPMorgan Retirement Plan Services (hereinafter “JPMorgan RPS”), received approximately $625,000 for recordkeeping services, and all but about $10,000 of that fee was paid in revenue sharing dollars. The Plan thus paid more than $280 per participant in 2011 for recordkeeping, about five times what the Plan should have been paying (and would have been paying if Defendants had diligently monitored the Plan’s recordkeeping costs). 95. Defendants did not have an arm-length relationship with JPMorgan RPS. American Century formerly owned JPMorgan RPS, which was then called “American Century Retirement Plan Services”. American Century transferred control of that recordkeeping entity to JPMorgan Chase & Co. (hereinafter “JPMorgan”) in 2003, expecting that JPMorgan RPS would continue to promote ACIM funds to recordkeeping clients.13 13 Some details of the relationship between JPMorgan RPS and ACIM, specifically American Century’s expectation that JPMorgan RPS would promote ACIM’s funds pursuant to a “revenue agreement,” were made public following the conclusion of an arbitration dispute between 96. The transfer of this recordkeeping entity from American Century to JPMorgan was just one piece of a larger relationship between American Century and JPMorgan, with JPMorgan acquiring a 45 percent stake in ACIM in 1997 (and holding it until the end of 2011). Based on the relationship between American Century and JPMorgan, Defendants had a financial disincentive to utilize an alternate recordkeeping provider. As a result, Defendants did not question JPMorgan RPS’s fees or investigate or consider alternative recordkeeping vendors who could have provided the same services at substantially less cost. 97. The Plan continued to pay excessive fees to JPMorgan RPS through November 2013, when Defendants finally made a change in recordkeeping service providers after JPMorgan sold its stake in American Century. In November 2013, the Plan’s recordkeeper became Schwab Retirement Services, Inc. (“Schwab RS”).14 98. American Century has a broad relationship with Charles Schwab & Co. (“Schwab”), the parent company of Schwab RS. Schwab is the custodian for over $2 trillion in assets held in brokerage accounts that offer investors stocks, bonds, and mutual funds, in addition to other investments. Schwab makes American Century mutual funds available to its clients through this platform, in exchange for remuneration from American Century. 99. American Century pays a higher level of remuneration to Schwab than many other mutual fund companies, and in return is included among Schwab’s “No Transaction Fee (NTF)” and “OneSource” mutual fund lists. Inclusion on the NTF and OneSource platforms JPMorgan and American Century in late 2011. See Dawn Kopecki, Christopher Condon, and Andrew Harris, JPMorgan Loses $373 Million Arbitration to American Century (Mar. 22, 2012), available at http://www.bloomberg.com/news/articles/2012-03-22/jpmorgan-told-to-pay-373- million-in-american-century-funds-case. 14 Before hiring Schwab for recordkeeping, the Plan was already utilizing Schwab to provide services for the Plan’s SDBA. requires American Century to pay a kickback to Schwab of approximately 0.40% per year of all assets held in American Century funds acquired through these platforms.15 These amounts are lower in defined-contribution plans, but nevertheless American Century also makes revenue sharing payments to Schwab RS for all American Century mutual funds held in defined- contribution plans for which Schwab RS is the recordkeeper. 100. The relationship with Schwab is important to American Century, as Schwab brokerage accounts are one of the primary ways in which American Century funds are sold to the general public. As a result, Defendants have not questioned the fees or revenue sharing paid to Schwab RS, and have not investigated or considered alternative recordkeeping vendors since Schwab RS became the Plan’s recordkeeper. 101. Following the switch to Schwab RS, considerably less information has been made available concerning the recordkeeping expenses of the Plan. For purposes of a plan’s annual report, revenue sharing payments are classified as “indirect compensation,” as distinguished from “direct” payments from the plan. In the Plan’s annual reports, Defendants reported in 2014 that Schwab received indirect compensation in a “[r]ange of 0.05 – 0.35% of average daily balance of assets” from American Century funds within the Plan.16 Although this broad range renders it impossible to determine the exact amount of revenue sharing payments made to Schwab RS, this range of payment amounts is consistent with the payments that were made to 15 See Charles Schwab, Schwab’s Financial and Other Relationships with Mutual Funds, http://www.schwab.com/public/schwab/nn/no_transaction_fee_funds.html (last viewed Sept. 7, 2016). 16 In contrast, in its Form 5500 for 2013, the Plan listed the exact amount of revenue sharing paid to JPMorgan RPS (in bps) for every designated investment alternative in the Plan. JPMorgan RPS, which also ranged from 5 to 35 basis points. From this, it is reasonable to infer that the Plan has continued to pay grossly excessive recordkeeping fees to Schwab RS. 102. Rather than engaging in a prudent search of recordkeepers and hiring the recordkeeper that would best meet the needs and financial interests of the Plan’s participants, Defendants have simply moved from one imprudent and self-serving recordkeeping relationship (with JPMorgan RPS) to a another (with Schwab RS). Defendants have persistently failed to conduct a thorough and impartial investigation of available recordkeeping providers to ensure that the Plan is not paying excessive recordkeeping fees, causing millions of dollars in damage to the Plan.   V. DEFENDANTS FAILED TO ADEQUATELY MONITOR PLAN INVESTMENTS AND REMOVE POORLY PERFORMING INVESTMENTS 103. Defendants also failed to monitor the Plan’s investments, and failed to remove numerous funds that had a history of underperformance, in violation of their fiduciary duties under ERISA. This cost Plan participants millions of dollars due to these funds’ underperformance compared with prudent investment alternatives. Though numerous funds within the Plan were imprudent and should have been removed from the Plan, the following examples highlight Defendants’ failure to remove imprudent investments from the Plan. Defendants Included Short-Term, Minimal Return Money Market Funds While Failing to Consider a Stable Value Fund 104. During the statutory period, the Plan has included two money market or “capital preservation” funds as short-term investment options designed to protect investors’ principal and provide income: the American Century Capital Preservation Fund and the American Century Premium Money Market Fund.17 As of year-end 2013, the Plan had over $10 million in the Capital Preservation Fund and over $32 million in the Premium Money Market Fund. 105. During the six years preceding the filing of this lawsuit, the Plan’s money market funds returned 0.01% or less per year. During the same period, the funds both had expense ratios of over 0.45%—over forty-five times higher than the income paid to investors. 106. For the last six years, the money market funds in the Plan have not come close to keeping up with the rate of inflation. This was predictable because these funds, in contrast to stable value funds, use very short-duration investment vehicles, such as short-term U.S. Treasury notes, which provide minimal returns. Given the expected returns of money market funds and similar short-term investments, a prudent fiduciary would have known that the American Century Capital Preservation Fund and the American Century Premium Money Market Fund would not provide participants any meaningful retirement benefits. Indeed, accounting for inflation, participants invested in these options actually lost money. Accordingly, a prudent and loyal fiduciary would have removed these options and instead offered a stable value fund, which would have provided significantly higher returns while still offering protection of principal. 107. Stable value funds are a common investment in 401(k) plans. Like money market funds, stable value funds provide preservation of principal. And “[b]ecause they hold longer- duration instruments, [stable value funds] generally outperform money market funds, which invest exclusively in short-term securities.” Abbott v. Lockheed Martin Corp., 725 F.3d 803, 806 (7th Cir. 2013); see also Paul J. Donahue, Plan Sponsor Fiduciary Duty for the Selection of 17 On December 1, 2015, the Premium Money Market Fund changed its name to the U.S. Government Money Market Fund. For purposes of clarity, Plaintiffs shall refer to the fund as the American Century Premium Money Market Fund. Options in Participant-Directed Defined Contribution Plans and the Choice Between Stable Value and Money Market, 39 AKRON L. REV. 9, 20–27 (2006). Indeed, even during the period of market turbulence in 2008, “stable value participants received point-to-point protection of principal, with no sacrifice of return[.]” Paul J. Donahue, Stable Value Re-examined, 54 RISKS AND REWARDS 26, 28 (Aug. 2009), available at http://www.soa.org/library/newsletters/risks- and-rewards/2009/august/rar-2009-iss54-donahue.pdf. Thus, many large 401(k) plans have stable value funds. 108. A 2011 study from Wharton Business School analyzed money market and stable- value fund returns from the previous two decades and concluded that “any investor who preferred more wealth to less wealth should have avoided investing in money market funds when [stable value] funds were available, irrespective of risk preferences.” David F. Babbel & Miguel A. Herce, Stable Value Funds: Performance to Date, at 16 (Jan. 1, 2011), available at http://fic.wharton.upenn.edu/fic/papers/11/11-01.pdf (last accessed June 24, 2016). Given the superior yields offered by stable value funds at comparable levels of risk, large 401(k) plans overwhelmingly choose stable value funds over money market funds. Chris Tobe, CFA, Do Money-Market Funds Belong in 401(k)s?, MarketWatch (Aug. 30, 2013), available at http://www.marketwatch.com/story/do-money-market-funds-belong-in-401ks-2013-08-30 (last accessed June 24, 2016). “With yields hovering around 0%, money-market funds aren’t a prudent choice for a 401(k).” Id. 109. Defendants offered two proprietary money market funds as fixed investment options, even though prudent fiduciaries of plans similar in size to the Plan would have used a stable value fund. Defendants imprudently and disloyally disregarded stable value funds, not based upon a prudent assessment of the pros and cons of stable value funds versus money market funds as fixed options in the Plan, but because American Century does not offer a stable value fund product. 110. This fiduciary breach was very costly for Plan participants. Hueler Analytics and its Hueler Index is the industry standard for reporting and measuring returns of stable value funds. “The Hueler Analytics Stable Value Pooled Fund Universe includes data on 15 funds nationwide with assets totaling over $105 billion.” See http://hueler.com (last visited Oct. 8, 2015). Hueler data therefore represents a reasonable estimate of the returns of a typical stable value fund. The returns of the funds in the Hueler universe on average have far exceeded the returns of the American Century Capital Preservation Fund and the American Century Premium Money Market Fund. Year Capital Preservation Fund (CPFXX) Premium Money Market Fund (TCRXX) Hueler Index 2010 1 bp 1 bp 312 bps 2011 1 bp 1 bp 269 bps 2012 1 bp 1 bp 226 bps 2013 1 bp 1 bp 184 bps 2014 1 bp 1 bp 169 bps 2015 1 bp 1 bp 177 bps 111. Based on the amounts held by each fund, and the returns that would have been earned in an average stable value fund, Defendants’ failure to replace the American Century Premium Money Market Fund and Capital Preservation Fund with a stable value fund has cost participants over $4 million in lost earnings in the six years prior to the filing of this lawsuit. 112. Defendants failed to adequately investigate the possibility of including a stable value fund, and subsequently failed to offer a stable value option in the Plan, due to the fact that American Century does not offer a stable value fund product. By failing to offer a stable value fund and retaining these other fixed income investments, Defendants caused at least $4 million in losses to the Plan. Defendants Included and Retained the Underperforming Vista Fund in the Plan until ACIM Was Forced to Merge it with Another Fund 113. As another example of Defendants’ failure to remove imprudent investment options from the Plan, for years the Plan offered the American Century Vista Fund, a mid-cap growth fund, as a designated investment alternative. The Vista Fund held $13.6 million in Plan assets as of the end of 2010 and $11 million as of the end of 2012. Defendants retained the chronically underperforming Vista Fund in the Plan until ACIM was forced to merge it into the Heritage Fund in 2013. By that time, the Vista Fund had abysmal five-year annualized returns of 7.55% compared to 13.92% for its benchmark index, the Russell Mid Cap Growth Index. Over the prior 10 years, annualized returns were 7.85% for the Vista Fund, compared to 10.16% for its benchmark. 114. At the time the Vista Fund merged into the Heritage Fund, a prominent investment research firm (Morningstar) noted that (1) the Vista Fund had “experienced both underperformance and manager turnover since 2008”; and (2) since the lead manager left the fund in 2009, “the new management team has not been able to right the ship.” See MORNINGSTAR, American Century to Merge Vista Fund Into Heritage Fund (Sept. 26, 2013), available at http://www.morningstar.com/advisor/t/81414161/american-century-to-merge-vista- fund-into-heritage-fund.htm. The article further noted that the fund’s trailing five-year returns through September 25, 2013 were in the bottom 10% of mid-cap growth funds. Id. 115. In light of the Vista Fund’s long-term poor performance and manager turnover, a prudent fiduciary monitoring the Plan’s investments on an ongoing basis would have removed the fund from the Plan no later than 2010. Defendants’ failure to remove the fund before it was merged into another fund due to poor performance reflects that Defendants lacked a prudent process by which to evaluate funds within the Plan and remove those that were performing Defendants Retained the International Bond Fund in the Plan despite Chronic Underperformance 116. During the statutory period, Defendants also caused the Plan to hold and retain the American Century International Bond Fund despite its continually poor performance. 117. In its 2010 prospectus, the Fund disclosed that it had significantly underperformed its benchmark over the previous five years: As of the end of June 2010, the fund had average annualized returns of 5.96% for the previous year, compared to 9.05% for its benchmark, and average annualized returns of 4.21% for the previous 3 years, compared to 7.66% for its benchmark.18 Nonetheless, Defendants continued to retain this fund in the Plan, reflecting a failure to properly evaluate the Plan’s investments on a regular basis without giving preferential treatment to American Century funds. 118. This pattern of underperformance has continued to the present. As of May 31, 2016, the American Century International Bond Fund had experienced a 1-year return of 5.96% compared to 7.25% for its benchmark, 3-year annualized returns of -0.42% compared to 0.31% for its benchmark, and 10-year annualized returns of 2.55% compared to 3.3% for its benchmark. 18 The American Century International Bond Fund had new managers installed in January 2009, so performance history for the prior one- and three-year periods was particularly relevant in evaluating the Fund as of the end of June 2010. Yet, Defendants continued to retain this fund in the Plan, despite the Fund’s poor returns and the availability of lower-cost, better-performing alternatives. 119. Given its continually poor performance, a prudent fiduciary monitoring the Plan’s investments on an ongoing basis would have removed the International Bond Fund from the Plan no later than 2010, given the new management in place since early 2009 and the poor performance of the fund since the new managers took over. Defendants’ failure to do so reflects that Defendants lacked a prudent and/or loyal process by which to evaluate funds within the Plan and replace them with lower-cost options that offered superior performance. VI. PLAINTIFFS LACKED KNOWLEDGE OF DEFENDANTS’ CONDUCT AND PRUDENT ALTERNATIVES. 120. Plaintiffs did not have knowledge of all material facts (including, among other things, availability of less expensive alternative investments, the costs of the Plan’s investments compared to those in similarly-sized plans, investment performance versus other available alternatives, the excessiveness of the Plan’s recordkeeping costs compared to alternative service providers, the availability of less expensive share classes of investments held by the Plan, and comparisons of the Plan’s overall costs to the costs of other similarly-sized plans) necessary to understand that Defendants breached their fiduciary duties and engaged in other unlawful conduct in violation of ERISA, until shortly before this suit was filed. Further, Plaintiffs do not have actual knowledge of the specifics of Defendants’ decision-making processes with respect to the Plan (including Defendants’ processes and motivations for selecting, monitoring, evaluating and removing Plan investments, and Defendants’ processes for selecting and monitoring the Plan’s recordkeeper), because this information is solely within the possession of Defendants prior to discovery. For purposes of this First Amended Complaint, Plaintiffs have drawn reasonable inferences regarding these processes based upon (among other things) the facts set forth above. CLASS ACTION ALLEGATIONS 121. 29 U.S.C. § 1132(a)(2) authorizes any participant or beneficiary of the Plan to bring an action individually on behalf of the Plan to obtain for the Plan the remedies provided by 29 U.S.C. § 1109(a). Plaintiffs seek certification of this action as a class action pursuant to this statutory provision and Fed. R. Civ. P. 23. 122. Plaintiffs assert their claims in Counts I–V on behalf of a class of participants and beneficiaries of the Plan defined as follows:19 All participants and beneficiaries of the American Century Retirement Plan at any time on or after June 30, 2010, excluding Defendants, employees with responsibility for the Plan’s investment or administrative functions, and members of the American Century Services, LLC Board of Directors. 123. Numerosity: The Class is so numerous that joinder of all Class members is impracticable. The Plan has had approximately 2,000 to 2,250 participants during the applicable 124. Typicality: Plaintiffs’ claims are typical of the Class members’ claims. Like other Class members, Plaintiffs have participated in the Plan and suffered injuries as a result of Defendants’ mismanagement of the Plan. Defendants treated Plaintiffs consistently with other Class members with regard to the Plan. Defendants managed the Plan as a single entity, and therefore Defendants’ imprudent decisions affected all Plan participants similarly. 19 Plaintiffs reserve the right to propose other or additional classes or subclasses in their motion for class certification or subsequent pleadings in this action. 125. Adequacy: Plaintiffs will fairly and adequately protect the interests of the Class. Plaintiffs’ interests are aligned with the Class that they seek to represent, and they have retained counsel experienced in complex class action litigation. Plaintiffs do not have any conflicts of interest with any Class members that would impair or impede their ability to represent such Class members. 126. Commonality: Common questions of law and fact exist as to all Class members, and predominate over any questions solely affecting individual Class members, including but not limited to: a. Which Defendants are fiduciaries of the Plan; b. Whether the Plan’s fiduciaries breached their fiduciary duties by engaging in the conduct described herein; c. Whether the Plan’s fiduciaries are additionally or alternatively liable, as co-fiduciaries, for the unlawful conduct described herein pursuant to 29 U.S.C. § 1105; d. Whether ACS breached its duty to monitor other Plan fiduciaries; e. Whether the Plan engaged in prohibited transactions in violation of 29 U.S.C. § 1105; f. Whether the American Century entities are liable under 29 U.S.C. § 1132(a)(3) to disgorge the revenues they earned as a result of the fiduciary breaches and prohibited transactions that occurred; g. The proper form of equitable and injunctive relief; h. The proper measure of monetary relief. 127. Class certification is appropriate under Fed. R. Civ. P. 23(b)(1)(A) because prosecuting separate actions against Defendants would create a risk of inconsistent or varying adjudications with respect to individual Class members that would establish incompatible standards of conduct for Defendants. 128. Class certification is also appropriate under Fed. R. Civ. P. 23(b)(1)(B) because adjudications with respect to individual Class members, as a practical matter, would be dispositive of the interests of the other persons not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests. Any award of equitable relief by the Court, such as removal of particular Plan investments or removal of a Plan fiduciary, would be dispositive of non-party participants’ interests. The accounting and restoration of the property of the Plan that would be required under 29 U.S.C. §§ 1109 and 1132 would be similarly dispositive of the interests of other Plan participants. 129. Class certification is also appropriate under Fed. R. Civ. P. 23(b)(3) because questions of law and fact common to the Class 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. Defendants’ conduct as described in this First Amended Complaint applied uniformly to all members of the Class. Class members do not have an interest in pursuing separate actions against Defendants, as the amount of each Class member’s individual claims is relatively small compared to the expense and burden of individual prosecution, and Plaintiffs are unaware of any similar claims brought against Defendants by any Class members on an individual basis. Class certification also will obviate the need for unduly duplicative litigation that might result in inconsistent judgments concerning Defendants’ practices. 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 forum. COUNT I Breach of Duties of Loyalty and Prudence 29 U.S.C. § 1104(a)(1)(A)–(B)  130. Defendants ACS, ACIM, the Committee, Christopher Bouffard, Bradley C. Cloverdyke, John A. Leis, Tina S. Ussery-Franklin, Margaret E. Van Wagoner, Gudrun S. Neumann, Julie A. Smith, Margie A. Morrison, Chat Cowherd, Diane Gallagher, and John Does 1–20 (the “Fiduciary Defendants”) are or were fiduciaries of the Plan under 29 U.S.C. §§ 1002(21) and/or 1102(a)(1). 131. 29 U.S.C. § 1104 imposes fiduciary duties of prudence and loyalty upon the Fiduciary Defendants in their administration of the Plan and in their selection and monitoring of Plan investments. 132. The scope of the fiduciary duties and responsibilities of the Fiduciary Defendants includes managing the assets of the Plan for the sole and exclusive benefit of Plan participants and beneficiaries, defraying reasonable expenses of administering the plan, and acting with the care, skill, diligence, and prudence required by ERISA. The Fiduciary Defendants are directly responsible for ensuring that the Plan’s fees are reasonable, selecting prudent investment options, evaluating and monitoring the Plan’s investments on an ongoing basis and eliminating imprudent ones, and taking all necessary steps to ensure that the Plan’s assets are invested prudently. This duty includes “a continuing duty to monitor investments and remove imprudent ones[.]” Tibble, 135 S. Ct. at 1829. 133. As described throughout this First Amended Complaint, the Fiduciary Defendants failed to employ a prudent and loyal process for selecting, monitoring, and reviewing the Plan’s designated investment alternatives, by failing to consider investments from companies other than American Century when selecting investments, when evaluating the cost and performance of the Plan’s investments, and when considering whether to replace a designated investment alternative with an alternative. The Fiduciary Defendants imprudently and disloyally retained higher-cost American Century mutual funds despite the availability of lower-cost investments that offered comparable or superior investment management services. The Fiduciary Defendants also failed to promptly transfer into lower-cost share classes of American Century Funds when American Century introduced the R6 share class for many of the Plan’s designated investment alternatives in 2013. Additionally, the Fiduciary Defendants allowed the Plan to pay excessive recordkeeping fees by failing to monitor the Plan’s service providers and all revenue sharing arrangements to ensure that total recordkeeping fees were reasonable. Further, the Fiduciary Defendants failed to monitor the Plan’s investments and remove those that were imprudent. For example, the Fiduciary Defendants failed to remove the American Century Vista Fund and the American Century International Bond Fund from the Plan in 2010 despite chronic underperformance and the availability of lower-cost, better-performing alternatives.  134. Each of the above-mentioned actions and failures to act described in paragraph 133 and throughout the First Amended Complaint demonstrate the Fiduciary Defendants’ failure to make Plan investment decisions based solely on the merits of each investment and what was in the interest of Plan participants. Instead, the Fiduciary Defendants’ conduct and decisions were influenced by their desire to drive revenues and profits to the American Century entities. Through these actions and omissions, the Fiduciary Defendants failed to discharge their duties with respect to the Plan solely in the interest of the participants and beneficiaries of the Plan, and for the exclusive purpose of providing benefits to participants and their beneficiaries and defraying reasonable expenses of administering the Plan, in violation of their fiduciary duty of loyalty under 29 U.S.C. § 1104(a)(1)(A).  135. Each of the above actions and omissions described in paragraph 133 and elsewhere in this First Amended Complaint demonstrate that the Fiduciary Defendants failed to discharge their duties with respect to the Plan with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would have used in the conduct of an enterprise of like character and with like aims, thereby breaching their duties under 29 U.S.C. § 1104(a)(1)(B). 136. Each Fiduciary Defendant is personally liable, and the Fiduciary Defendants are jointly and severally liable, under 29 U.S.C. §§ 1109(a), 1132(a)(2), and 1132(a)(3), to make good to the Plan the losses resulting from the aforementioned breaches, to restore to the Plan any profits Defendants made through the use of Plan assets, and to restore to the Plan any profits resulting from the breaches of fiduciary duties alleged in this Count. 137. Each Fiduciary Defendant knowingly participated in each breach of the other Fiduciary Defendants, knowing that such acts were a breach, enabled the other Fiduciary Defendants to commit breaches by failing to lawfully discharge such Defendant’s own duties, and knew of the breaches by the other Fiduciary Defendants and failed to make any reasonable and timely effort under the circumstances to remedy the breaches. Accordingly, each Fiduciary Defendant is also liable for the losses caused by the breaches of its co-fiduciaries under 29 U.S.C. § 1105(a). COUNT II Failure to Monitor Fiduciaries 138. As alleged throughout the First Amended Complaint, the Fiduciary Defendants (including the Committee and the members of the Committee) are fiduciaries of the Plan pursuant to 29 U.S.C. § 1002(21). 139. ACS is responsible for appointing and removing members of the Committee. 140. Given that ACS had overall oversight responsibility for the Plan, and the explicit fiduciary duty to appoint and remove members of the Committee, ACS had a fiduciary responsibility to monitor the performance of the other fiduciaries, including the Committee and its members, as well as ACIM. 141. A monitoring fiduciary must ensure that the monitored fiduciaries are performing their fiduciary obligations, including those with respect to the investment and holding of plan assets, and must take prompt and effective action to protect the plan and participants when they are not. 142. To the extent that ACS’s fiduciary monitoring responsibilities were delegated, this monitoring duty included an obligation to ensure that any delegated tasks were being performed prudently and loyally. 143. ACS breached its fiduciary monitoring duties by, among other things: a. Failing to monitor and evaluate the performance of its appointees or have a system in place for doing so, standing idly by as the Plan suffered significant losses as a result of the appointees’ imprudent actions and omissions with respect to the Plan; b. Failing to monitor the process by which the Plan’s investments were selected, evaluated, and potentially replaced, and in particular the preferential treatment the Fiduciary Defendants were giving to American Century Funds;20 and 20 Reviewing these processes would have alerted a prudent fiduciary to the breaches of fiduciary duties taking place and the need for remedial action. c. Failing to remove appointees whose performance was inadequate in that they continued to maintain imprudent, excessively costly, and poorly performing investments within the Plan, all to the detriment of the Plan and Plan participants’ retirement savings. 144. As a consequence of the foregoing breaches of the duty to monitor, the Plan suffered millions of dollars of losses per year due to excessive fees and investment underperformance. 145. Pursuant to 29 U.S.C. §§ 1109(a), 1132(a)(2), and 1132(a)(3), ACS is liable to restore to the Plan all losses suffered as a result of the fiduciary breaches that resulted from its failure to properly monitor the Plan’s fiduciaries, and subsequent failure to take prompt and effective action to rectify any observed fiduciary breaches. COUNT III Prohibited Transactions with a Party in Interest 29 U.S.C. § 1106(a)(1) 146. As a Plan employer, the Plan sponsor, and a service provider for the Plan, ACS is a party in interest under 29 U.S.C. § 1002(14). As a Plan employer and service provider for the Plan, ACIM is also a party in interest. Finally, as a Plan employer and the corporate parent of service providers for the Plan, ACC is also a party in interest. 147. As described throughout the First Amended Complaint, Defendants caused the Plan to utilize proprietary investments that generated revenue for the American Century entities. 148. On a monthly basis throughout the relevant period, ACIM deducted fees and expenses from the assets being held for the Plan that were invested in American Century- affiliated mutual funds and collective trusts in return for the investment management services provided by ACIM. ACIM then used a portion of these fees to compensate ACS for its services as a transfer agent and dividend-paying agent for the funds. 149. These transactions constituted a direct or indirect furnishing of services between the Plan and a party in interest for more than reasonable compensation, and a transfer of assets of the Plan to a party in interest, in violation of 29 U.S.C. § 1106(a)(1). 150. As a direct and proximate result of these prohibited transactions, the Plan directly or indirectly paid millions of dollars in fees in connection with transactions that were prohibited under ERISA, resulting in significant losses to the Plan and its participants. 151. Pursuant to 29 U.S.C. §§ 1109(a), 1132(a)(2), and 1132(a)(3), Defendants are liable to restore all losses suffered by the Plan as a result of these prohibited transactions and disgorge all revenues received and/or earned by ACIM, ACS, and/or ACC in connection with the management of Plan assets or other services performed for the Plan for more than reasonable compensation. COUNT IV Prohibited Transactions with a Fiduciary 29 U.S.C. § 1106(b) 152. As described throughout the First Amended Complaint, ACIM and ACS are fiduciaries of the Plan as that term is used in 29 U.S.C. §§ 1002(21) and 1106(b)(1). 153. ACIM and ACIS dealt with the assets of the Plan in their own interest and for their own accounts when they caused the Plan to pay investment management fees and other fees to ACIM and ACS out of Plan assets, in violation of 29 U.S.C. § 1106(b)(1). 154. ACIM and ACS received consideration for their own personal accounts from parties dealing with the Plan in connection with transactions involving the assets of the Plan. These transactions took place on a monthly basis when fees and expenses were deducted from assets being held for Plan participants in exchange for services performed by ACIM and ACS. Accordingly, the payments to ACIM and ACS constituted prohibited transactions in violation of 29 U.S.C. § 1106(b)(3). 155. Based on the foregoing facts and other facts set forth in the First Amended Complaint, the Fiduciary Defendants are liable for violations of 29 U.S.C. § 1106(b) because they knowingly participated in these prohibited transactions, and made no efforts to prevent these transactions despite having knowledge that the prohibited transactions were taking place.   156. Based on the foregoing facts and the other facts set forth in this First Amended Complaint, the Fiduciary Defendants knowingly caused the Plan to engage in prohibited transactions with ACIM, ACS, both fiduciaries of the Plan, in violation of 29 U.S.C. § 1106(b). 157. As a direct and proximate result of these prohibited transactions, the Plan directly or indirectly paid excessive investment management and other fees to ACIM and ACS, in transactions that were prohibited under ERISA, resulting in significant losses to the Plan and its participants. 158. Pursuant to 29 U.S.C. §§ 1109(a), 1132(a)(2), and 1132(a)(3), Defendants are liable to restore all losses suffered by the Plan as a result of the prohibited transactions and disgorge all revenues received and/or earned by ACIM and ACS resulting directly or indirectly from the above-mentioned prohibited transactions. Plaintiffs also are entitled to appropriate equitable relief on behalf of the Plan pursuant to 29 U.S.C. § 1132(a)(3). COUNT V Other Equitable Relief Based on Ill-Gotten Proceeds 29 U.S.C. § 1132(a)(3) 159. Under 29 U.S.C. § 1132(a)(3), a court may award “other appropriate equitable relief” to redress “any act or practice” that violates ERISA. A defendant may be liable under this section regardless of whether it is a fiduciary. A non-fiduciary transferee of ill-gotten proceeds is subject to equitable relief if it had actual or constructive knowledge of the circumstances that rendered the transaction or payment unlawful. 160. The American Century entities profited from the Plan’s investments in American Century-affiliated mutual funds. 161. All payments to the American Century entities made in connection with Plan assets are in the current possession of one or more of the American Century entities, and are traceable to specific transactions that have taken place on specific dates. 162. Pursuant to 29 U.S.C. § 1132(a)(3), the American Century entities should be required to disgorge all monies they have received during the relevant class period as a result of the Plan’s investments in American Century-affiliated mutual funds. The selection and retention of these proprietary mutual funds was imprudent and violated ERISA based on the facts set forth in the First Amended Complaint, and also constituted prohibited transactions with a party-in- interest and a fiduciary. Moreover, the American Century entities had actual or constructive knowledge of circumstances rendering the selection and retention of these proprietary funds (and the payments that the American Century entities received from these proprietary funds) unlawful, by virtue of: (a) the Committee members with executive positions at multiple American Century entities; (b) other dual-hatted employees; (c) the American Century entities’ affiliation with a common parent and one another; (d) the American Century entities’ participation in the Plan as employers with employees in the Plan; and (e) The American Century entities’ general operational interconnectedness. 163. In light of the above facts and other facts likely to be revealed through discovery, the American Century entities had actual or constructive knowledge of the process for selecting and monitoring the investments in the Plan, and knew that this process was designed to enrich the American Century entities at the expense of Plan participants. The American Century entities knew that the proprietary investments in the Plan were excessively costly and performed poorly in comparison to other investment alternatives. The American Century entities also had knowledge of each entity’s fiduciary and/or party-in-interest status, and the circumstances that rendered the payment of fees to these entities prohibited transactions. 164. Given their knowledge of these fiduciary breaches and prohibited transactions, the American Century entities had actual or constructive knowledge that the monies they were receiving from or in connection with Plan assets were being received as a result of violations of ERISA by the Fiduciary Defendants. 165. Therefore, to the extent any ill-gotten revenues and profits are not disgorged under the relief provisions of 29 U.S.C. § 1109(a), the Court should order appropriate equitable relief under 29 U.S.C. § 1132(a)(3) to disgorge these monies from the American Century entities under principles of unjust enrichment and equitable restitution. PRAYER FOR RELIEF WHEREFORE, Plaintiffs Wildman and Borcherding, individually and as representatives of the Class defined herein, and on behalf of the American Century Retirement Plan, pray for relief as follows: A. A determination that this action may proceed as a class action under Rule 23(b)(1), or in the alternative, Rule 23(b)(3) of the Federal Rules of Civil Procedure; B. Designation of Plaintiffs as Class Representative and designation of Plaintiffs’ counsel as Class Counsel; C. A declaration that the Fiduciary Defendants have breached their fiduciary duties under ERISA; D. A declaration that Defendant ACS breached its fiduciary duty to monitor the Committee and its members as well as ACIM; E. A declaration that Defendants violated 29 U.S.C. § 1106 by allowing the Plan to engage in prohibited transactions; F. An order compelling Defendants to personally make good to the Plan all losses that the Plan incurred as a result of the breaches of fiduciary duties and prohibited transactions described above, and to restore the Plan to the position it would have been in but for this unlawful conduct; G. An order requiring ACS, ACIM, and ACC to disgorge all revenues received from, or in respect of, the Plan; H. An order granting equitable restitution and other appropriate equitable monetary relief against Defendants; I. An order enjoining Defendants from any further violations of their ERISA fiduciary responsibilities, obligations, and duties; J. Other equitable relief to redress Defendants’ illegal practices and to enforce the provisions of ERISA as may be appropriate, including appointment of an independent fiduciary or fiduciaries to run the Plan; transfer of Plan assets out of imprudent investments into prudent alternatives; and removal of Plan fiduciaries deemed to have breached their fiduciary duties and/or engaged in prohibited transactions; K. An award of pre-judgment interest; L. An award of attorneys’ fees and costs pursuant to 29 U.S.C. § 1132(g) and/or the common fund doctrine; M. An award of such other and further relief as the Court deems equitable and just. Dated: September 8, 2016 NICHOLS KASTER, PLLP /s/ Kai H. Richter Kai H. Richter, MN Bar No. 0296545* Carl F. Engstrom, MN Bar No. 0396298* Jacob T. Schutz, MN Bar No. 0395648* * admitted pro hac vice 4600 IDS Center 80 S 8th Street Minneapolis, MN 55402 Telephone: 612-256-3200 Facsimile: 612-338-4878 krichter@nka.com cengstrom@nka.com jschutz@nka.com BRADY & ASSOCIATES Michael F. Brady, KS Bar No. 18630 Mark Kistler, KS Bar No. 17171 10985 Cody Street Suite 135 Overland Park, KS 66210 brady@mbradylaw.com mkistler@mbradylaw.com ATTORNEYS FOR PLAINTIFFS

consumer fraud

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Steven A. Christensen Christensen Young & Associates, PLLC 9980 South 300 West #200 Sandy, UT 84070 Telephone: (801) 255-8727 Facsimile: (888) 569-2786 IN THE UNITED STATES DISTRICT COURT DISTRICT OF UTAH, CENTRAL DIVISION Nellie Christensen, Stephanie Wright, Jennifer Christensen, Zachary Christensen, Plaintiffs, Target Corporation, a Minnesota Corporation, and JOHN or JANE DOES 1- 10, CLASS ACTION COMPLAINT FOR: 1. Violation of Utah Unfair Competition Act, Utah Code Annotated 13-5a-101 et seq.; 2. Invasion of Privacy - Intrusion, Public Disclosure of Private Facts, Misappropriation of Likeness and Identity, and Utah Constitutional Right to Privacy; 3. Negligence; 4. Breach of Contract and Bailment; 5. Conversion; Defendants. Case No: Judge: Demand for Jury Trial COME NOW Plaintiff’s Nellie Christensen, Stephanie Wright, Jennifer Christensen, Zachary Christensen, ("Plaintiffs”) and brings this class action against Defendants TARGET CORPORATION ("TARGET"), a Minnesota Corporation, and DOES 1-10 (collectively, "Defendants") on behalf of themselves and all others similarly situated to obtain damages, restitution and injunctive relief for the Class, as defined, below, from DEFENDANTS. Plaintiffs make the following allegations upon information and belief, except as to their own actions, the investigation of their counsel, and the facts that are a matter of public record, and avers and alleges as follows: 1 1. Plaintiffs are individuals who reside in this Judicial District, in the State of Utah. 2. Defendant TARGET CORPORATION is a Minnesota Corporation headquartered in Minneapolis, Minnesota. JURISDICTION AND VENUE 3. This Court has original jurisdiction pursuant to 28 U.S.C. §1332(d)(2). In the aggregate, Plaintiffs claims and the claims of the other members of the Class exceed $5,000,000.00 exclusive of interest and costs, and there are numerous class members who are citizens of states other than TARGET'S state of citizenship, which is Minnesota. 4. This Court has personal jurisdiction over TARGET because TARGET is authorized to do business in the State of Utah, and operates stores within this Judicial District. 5. Venue is proper in this Court pursuant to 28 U.S.C. §1391 because many of the acts and transactions giving rise to this action occurred in this District and because TARGET is subject to personal jurisdiction in this District. GENERAL ALLEGATIONS 6. Upon information and belief, TARGET is the second-largest discount retailer in the United States and, as of 2013, was ranked 36th on the Fortune 500 list of top US companies, by revenue. 7. Plaintiffs shopped at Target stores, and used their debit cards, or charge cards at a Target Stores in this Judicial District between November 27 and December 15, 2013. 8. Upon information and belief, the data breach affected approximately 40 million credit and debit cards which were processed in U.S. TARGET stores between November 27 and December 15, 9. Upon information and belief the first news of the data breach was published by a blogger (Brian Krebs of <http://krebsonsecurity.com/>) on or about December 18, 2013, before TARGET made any attempt whatsoever to notify affected customers. 10. As widely reported by multiple news services on December 19, 2013: "Investigators believe the data was obtained via software installed on machines that customers use to swipe magnetic strips on their cards when paying for merchandise at Target stores." 2 <http://www.cbsnews.com/news/target-confirms-massive-credit-debit-card-data-breach/> (posted December 19, 2013). 11. "The type of data stolen — also known as 'track data' — allows crooks to create counterfeit cards by encoding the information onto any card with a magnetic stripe." <http://krebsonsecurity.com/> (posted December 19, 2013). 12. The thieves may also have accessed PIN numbers for affected customers' debit cards, allowing the thieves to withdraw money from those customers' bank accounts. (Id.) 13. Thieves could not have accessed this information and installed the software on TARGET'S point-of-sale machines but for DEFENDANTS' negligence. 14. Upon information and belief TARGET failed to implement and maintain reasonable security procedures and practices appropriate to the nature and scope of the information compromised in the data breach. 15. Plaintiffs that as this news broke, TARGET finally released a statement concerning the data breach, which statement did not notify affected customers directly, but the notification was posted as a statement on its corporate website (not on the shopping site regularly accessed by customers) on December 19, 2013, confirming "that the information involved in this incident included customer name, credit or debit card number, and the card's expiration date and CVV (the three-digit security code)." <https://corporate.target.com/discover/article/Important-Notice-Unauthorized-access-to- payment-ca> (posted December 19, 2013). 16. In its December 19 statement concerning the data breach, Target also claimed to "have identified and resolved the issue," conveying a false sense of security to affected customers. (Id.) 17. On information and belief, Plaintiffs identifying and financial information was disclosed in the data breach. 18. Plaintiffs contend that the ramifications of Defendants' failure to keep class members' data secure are severe. 3 19. The information Defendants lost, including Plaintiffs' identifying information and other financial information, is "as good as gold" to identity thieves, in the words of the Federal Trade Commission ("FTC"). FTC, About Identity Theft, available at <http://www.ftc.gov/bcp/edu/microsites/idtheft/consumers/about-identity-theft.html> (March 23, 20. Plaintiffs contend, according to the FTC, that identity theft occurs when someone uses another's personal identifying information, such as that person's name, address, credit card number, credit card expiration dates, and other information, without the owners permission or consent, in order to commit fraud or other crimes. Id 21. Identity thieves can use identifying data to open new financial accounts and incur charges in another person's name, take out loans in another person's name, incur charges on existing accounts, or clone ATM, debit, or credit cards. Id 22. Identity thieves can use personal information such as that lost by DEFENDANT and pertaining to the Plaintiff and other Class members, which Defendants failed to keep secure to perpetrate a variety of crimes that do not cause financial loss, but nonetheless harm the victims. For instance, identity thieves may commit various types of fraud, including, but not limited to: immigration fraud; obtaining a driver's license or identification card 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. 23. Additionally, identity thieves may obtain medical services using the Plaintiffs' lost information or commit any number of other fraudulent activities. 24. Annual monetary losses from identity theft are in the billions of dollars. 25. According to a Presidential Report on identity theft, produced in 2008: In addition to the losses that result when identity thieves fraudulently open accounts or misuse existing accounts,.. . individual victims often suffer indirect financial costs, including the costs incurred in both civil litigation initiated by creditors and in overcoming the many obstacles they face in obtaining or retaining credit. Victims of non-financial identity theft, for example, health-related or criminal record fraud, face other types of harm and frustration. 4 In addition to out-of-pocket expenses that can reach thousands of dollars for the victims of new account identity theft, and the emotional toll identity theft can take, some victims have to spend what can be a considerable amount of time to repair the damage caused by the identity thieves. Victims of new account identity theft, for example, must correct fraudulent information in their credit reports and monitor their reports for future inaccuracies, close existing bank accounts and open new ones, and dispute charges with individual creditors. The President's Identity Theft Task Force Report at p.21 (Oct. 21, 2008), available at <http://www.idtheft.gov/reports/StrategicPlan.pdf>. 26. According to the U.S. Government Accountability Office ("GAO"), which conducted a study regarding data breaches: [L]aw enforcement officials told us that in 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. GAO, Report to Congressional Requesters, at p.33 (June 2007), available at <http://www.gao.gov/new.items/d07737.pdf>. 27. Plaintiff and the Class they seek to represent now face years of constant surveillance of their financial and personal records, monitoring, and loss of rights. CLASS ACTION ALLEGATIONS 28. Plaintiffs bring this action on their own behalf, and on behalf of all other persons similarly situated ("the Class"). The Class that Plaintiffs seek to represent is: All persons who used credit or debit cards at Target Corporation stores in Utah and whose personal and/or financial information was breached during the period from on or about November 27 to on or about December 15, 2013. Excluded from the Class are Defendants; officers, directors, and employees of Defendants; any entity in which Defendants have a controlling interest; the affiliates, legal representatives, attorneys, heirs, and assigns of the Defendants. 5 29. The members of the Class are so numerous that the joinder of all members is impractical. While the exact number of Class members is unknown to Plaintiffs at this time, based on information and belief, it is in the hundreds of thousands. 30. There is a well-defined community of interest among the members of the Class because common questions of law and fact predominate, Plaintiffs claims are typical of the members of the Class, and Plaintiffs can fairly and adequately represent the interests of the Class. 31. This action satisfies the requirements of Federal Rules of Civil Procedure, Rule 23(b)(3) because it involves questions of law and fact common to the members of the Class that predominate over any questions affecting only individual members, including, but not limited to: a. Whether Defendants unlawfully used, maintained, lost or disclosed Class members' personal and/or financial information; b. Whether TARGET unreasonably delayed in notifying affected customers of the data c. Whether Defendants failed to implement and maintain reasonable security procedures and practices appropriate to the nature and scope of the information compromised in the data breach. d. Whether Defendants violated the requirements of Utah Code Annotated, Section 13-5a 103 et seq. e. Whether Defendants' conduct violated the Utah Code Annotated, Section 13-44-102, et f. Whether Defendants' conduct was negligent; g. Whether Defendants acted willfully and/or with oppression, fraud, or malice; h. Whether Defendants' conduct constituted intrusion; i. Whether Defendants' conduct constituted public disclosure of private facts; j. Whether Defendants' conduct constituted misappropriation of likeness and identity; k. Whether Defendants' conduct violated Class members' Utah Constitutional Right to Privacy; l. Whether Defendants' conduct constituted bailment and breach of contract; 6 m. Whether Defendants' conduct constituted conversion; n. Whether Plaintiffs and the Class are entitled to damages, civil penalties, punitive damages, and/or injunctive relief. 32. Plaintiffs claims are typical of those of other Class members because Plaintiffs information, like that of every other class member, was misused and/or disclosed by Defendants. 33. Plaintiffs will fairly and accurately represent the interests of the Class. 34. 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 Defendants and would lead to repetitive adjudication of common questions of law and fact. Accordingly, class treatment is superior to any other method for adjudicating the controversy. Plaintiffs know of no difficulty that will be encountered in the management of this litigation that would preclude its maintenance as a class action under Rule 23(b)(3). 35. Damages for any individual class member are likely insufficient to justify the cost of individual litigation, so that in the absence of class treatment, Defendants' violations of law inflicting substantial damages in the aggregate would go un-remedied without certification of the Class. 36. Defendants have acted or refused to act on grounds that apply generally to the class, as alleged above, and certification is proper under Rule 23(b)(2). FIRST COUNT Violation of the Utah Unfair Competition Law UCA §13-5a-103, et seq. 37. Plaintiffs incorporate by reference paragraphs 1-36 as if fully set forth herein. 38. Defendants' conduct constitutes unfair and illegal and fraudulent business practices within the meaning of the Utah Unfair Competition Law. 39. Defendants' conduct violated certain laws as alleged herein, and, ergo, by engaging in the said conduct in the course of doing business, Defendants engaged in unlawful business practices in violation of the Utah Unfair Competition Law, Utah Code Annotated (UCA) § 13-5a-101 et seq. 7 40. Plaintiffs contend that by engaging in the above-described conduct in the course of doing business, Defendants engaged in unfair business practices in violation of the Utah Unfair Competition Law (U.C.A. § 13-5a-101 et seq). The harm and potential harm to each Plaintiff outweighed any utility that Defendants' conduct may have produced. 41. Defendants' failure to disclose information concerning the data breach directly and promptly to affected customers, constitutes a fraudulent act or practice in violation of Utah Unfair Competition 42. Plaintiffs suffered injury in fact and lost property and money as a result of Defendants' conduct. 43. Plaintiffs seek restitution and injunctive relief on behalf of the Class. SECOND COUNT Invasion of Privacy - Intrusion, Public Disclosure of Private Facts, Misappropriation of Likeness and Identity, and Utah Constitutional Right to Privacy 44. Plaintiffs incorporate by reference paragraphs 1-43 as if set forth in full particularity herein. 45. Plaintiffs had a reasonable expectation of privacy in the private information Defendants mishandled. 46. By failing to keep Plaintiffs private information safe, and by misusing and/or disclosing said information to unauthorized parties for unauthorized use, Defendants invaded Plaintiffs privacy by: a. intruding into Plaintiffs private affairs in a manner that would be highly offensive to a reasonable person; b. publicizing private facts about Plaintiffs, which is highly offensive to a reasonable person; c. using and appropriating Plaintiffs identity without Plaintiffs' consent; d. violating Plaintiffs right to privacy under Utah Constitution, Article 1, Section 1, through the improper use of Plaintiff s private information properly obtained for a specific purpose for another purpose, or the disclosure of it to some third party. 47. Plaintiffs allege that Defendants knew, or acted with reckless disregard of the fact that, a reasonable person in Plaintiffs position would consider Defendants' actions highly offensive. 8 48. Plaintiffs assert that Defendants invaded Plaintiffs right to privacy and intruded into Plaintiffs private affairs by misusing and/or disclosing Plaintiffs private information without their informed, voluntary, affirmative and clear consent. 49. Plaintiffs contend that as a direct and proximate result of such misuse and disclosures, Plaintiffs reasonable expectations of privacy in their private information was unduly frustrated and thwarted, and that the Defendants' conduct amounted to a serious invasion of Plaintiffs’ protected privacy interests. 50. Plaintiff assert Defendants had a duty to protect Plaintiffs private information and that in failing to protect Plaintiffs private information, and in misusing and/or disclosing Plaintiffs private information, Defendants have acted with malice, oppression and in conscious disregard of Plaintiffs and the Class members' rights to have such information kept confidential and private. Plaintiffs, accordingly, seek an award of punitive damages on their behalf as well as on behalf of the Class. THIRD COUNT Negligence 51. Plaintiffs incorporate by reference paragraphs 1-50 as if set forth in full particularity herein. 52. Plaintiffs assert that Defendants came into possession of Plaintiff s private information and had a duty to exercise reasonable care in safeguarding and protecting such information from being compromised, lost, stolen, misused, and/or disclosed to unauthorized parties. 53. Plaintiffs contend that Defendants had a duty to timely disclose that Plaintiffs private information within its possession had been compromised. 54. Plaintiffs allege that Defendants had a duty to have procedures in place to detect and prevent the loss or unauthorized dissemination of Plaintiff s private information. 55. Plaintiffs assert that Defendants, through their actions and/or omissions, unlawfully breached their duty to Plaintiffs by failing to exercise reasonable care in protecting and safeguarding Plaintiffs private information within Defendants' possession. 9 56. Plaintiffs contend that Defendants, through their actions and/or omissions, unlawfully breached their duty to Plaintiffs by failing to exercise reasonable care, and by failing to have appropriate procedures in place to detect and prevent dissemination of Plaintiffs private information. 57. Plaintiffs allege that Defendants, through their actions and/or omissions, unlawfully breached their duty to timely disclose to the Plaintiffs and the Class members the fact that their private information within their possession had been compromised. 58. Plaintiffs assert that Defendants' negligent and wrongful breach of their duties owed to Plaintiffs and the Class proximately caused Plaintiffs and the Class members' private information to be compromised. 59. As a direct and proximate result of Defendants negligence, Plaintiffs seek the award of actual damages on behalf of the Class. FOURTH COUNT Breach of contract and Bailment 60. Plaintiffs incorporate by reference paragraphs 1-59 as if set forth with full particularity 61. Plaintiffs and the Class members delivered and entrusted their Private information to Defendants for the sole purpose of receiving goods and services from Defendants. 60. Plaintiffs allege that TARGET made representations and entered into contractual and implied contractual relations regarding TARGET’s duty to safeguard Plaintiffs private information, including, but not limited to TARGET’s representation that: How is Your Personal Information Protected? Security Methods We maintain administrative, technical and physical safeguards to protect your personal information. When we collect or transmit sensitive information such as a credit or debit card number, we use industry standard methods to protect that information. Target Privacy Policy. 61. Plaintiffs contend that the contractual duties between Plaintiffs and Defendants were established via representations and a pattern of conduct between TARGET and its customers. 10 62. Plaintiffs assert that TARGET breached its duty to safeguard its customers privacy, and thereafter intentionally failed to inform Plaintiffs and Class members of the data breach. 63. The Utah Supreme Court has held that breach of contract, standing alone, does not call for punitive damages even if intentional and unjustified, but such damages are allowable if there is some independent tort indicating malice, fraud or wanton disregard for the rights of others. Hal Taylor Assocs v. Unionamerica, Inc., 657 P.2d 743, 750 (Utah 1982); See also Dold v. Outrigger Hotel, 54 Hawaii 18, 501 P.2d 368 (1972); Temmen v. Kent-Brown Chevrolet Co., 227 Kan. 45, 605 P.2d 95 (1980); Jackson v. Glasgow, Okla. Ct. App., 622 P.2d 1088 (1980). 64. Plaintiffs contend that the wanton refusal to notify customers of the data breach, until the breach was identified by a third party, warrants the imposition of punitive damages against the Defendants pursuant to the independent intentional torts committed by the Defendants. 65. Plaintiffs additional contend that during the time of bailment, Defendants owed Plaintiffs and the Class members a duty to safeguard their information properly and maintain reasonable security procedures and practices to protect such information (as set forth in TARGET’s privacy policies). Plaintiffs allege Defendants breached this duty. 66. Plaintiffs assert that as a result of these breaches of duty, breach of contract, and breach of bailment, Plaintiffs and the Class members have suffered harm. 67. Plaintiffs seek actual damages on behalf of the Class. FIFTH COUNT Conversion 68. Plaintiffs incorporate by reference paragraphs 1-67 as if set forth with full particularity 69. Plaintiffs and Class members were the owners and possessors of their private information. As the result of Defendants' wrongful conduct, Defendants have interfered with the Plaintiffs and Class members' rights to possess and control such property, to which they had a superior right of possession and control at the time of conversion. 11 70. As a direct and proximate result of Defendants' conduct, Plaintiffs and the Class members suffered injury, damage, loss or harm and therefore seek compensatory damages. 71. Plaintiffs allege that in converting Plaintiffs private information, Defendants have acted with malice, oppression and in conscious disregard of the Plaintiffs and Class members' rights. Plaintiffs, accordingly, seek an award of punitive damages on behalf of the Class. 72. Plaintiffs and the Class members did not consent to Defendants' mishandling and loss of their private information. SIXTH COUNT Violation of UCA 73. Plaintiffs incorporate by reference paragraphs 1-72 as if set forth with full particularity 74. The data breach described above constituted a "breach of the security system" of TARGET, within the meaning of Section 13-44-102, Utah Code Annotated and constituted a breach of TARGETS announced adequate security measures. 75. The information lost in the data breach constituted "personal information" within the meaning of Section 13-44-102(3)(a) Utah Code Annotated. 76. Plaintiffs contend that Defendants failed to implement and maintain reasonable security procedures and practices appropriate to the nature and scope of the information compromised in the data breach, which failure cause Plaintiffs and other Class members harm and injury. 77. Plaintiffs assert that TARGET unreasonably delayed informing anyone about the breach of security of Utah Class members' confidential and non-public information after Defendants knew the data breach had occurred. 78. Plaintiffs allege Defendants failed to disclose to Utah Class members, without unreasonable delay, and in the most expedient time possible, the breach of security of their unencrypted, or not properly and securely encrypted, personal information when TARGET knew, or reasonably believed such information had been compromised. 12 79. Upon information and belief, no law enforcement agency instructed TARGET that notification to Utah Class members would impede investigation. 80. Plaintiffs allege that as a result of Defendants' breach of contract, negligence, failure to secure private information, Plaintiffs and other Class members incurred economic damages, including, but not limited to, expenses associated with necessary credit monitoring. 80. Plaintiffs, individually and on behalf of the Class, seek all remedies available under applicable Utah and Federal laws, including, but not limited to: (a) damages suffered by Class members as alleged above; (b) statutory damages for Defendants' willful, intentional, and/or reckless violation of Utah Unfair Competition Act; and (c) equitable relief. 81. Plaintiffs, individually and on behalf of the Class, also seek reasonable attorneys' fees and costs as allowed by statue, and law. PRAYER FOR RELIEF WHEREFORE Plaintiffs pray for judgment as follows: A. For an Order certifying this action as a class action and appointing Plaintiffs and their Counsel to represent the Class; B. For equitable relief enjoining Defendants from engaging in the wrongful conduct complained of herein pertaining to the misuse and/or disclosure of Plaintiffs and Class members' private information, and from refusing to issue prompt, complete and accurate disclosures to the Plaintiffs and Class members; C. For equitable relief requiring restitution and disgorgement of the revenues wrongfully retained as a result of Defendants' wrongful conduct; D. For an award of actual damages, compensatory damages, statutory damages, and statutory penalties, in an amount to be determined; E. For an award of punitive damages; F. For an award of costs of suit and attorneys' fees, as allowable by law; and G. Such other and further relief as this court may deem just and proper. 13

antitrust

Vd-2EIcBD5gMZwczuzy5

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK Israel Husarsky, individually and on behalf of all others similarly situated, Index No.: 1:20-cv-3323 Plaintiff, CLASS ACTION COMPLAINT DEMAND FOR JURY TRIAL -v.- Capital Management Services, L.P., and John Does 1-25. Defendants. Plaintiff Israel Husarsky (hereinafter, “Plaintiff”) brings this Class Action Complaint by and through his attorneys, Stein Saks PLLC, against Defendant Capital Management Services, L.P. (hereinafter “Capital”), 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 (“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. § l692(b), Congress gave consumers a private cause of action against debt collectors who fail to comply with the Act. § 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. 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 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 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 New York, County of Queens, residing at 8411 117th St. Richmond Hill, NY 11418. 8. Defendant Capital 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 698 ½ South Ogden Street Buffalo, NY 14206. 9. Upon information and belief, Defendant Capital 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 Capital sent a collection letter attempting to collect a consumer debt; c. that states that the amount due may increase due to “other charges,” without any explanation of the other charges; d. as well as states that the balance due may increase without delineating whether it is the minimum amount due or the overall balance that may will go up after payment; e. 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 officer, 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 communication 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 his 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 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 predominance over any questions or issues involving only individual class members. The principal issue is whether the Defendants' written communication 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. 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. 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 June 5, 2020, an obligation was allegedly incurred to Barclays Bank Delaware. 22. The obligation arose out of a transaction in which money, property, insurance or services, of which the subject transactions, were incurred for personal purposes, specifically a Barclays Bank credit card, used for these personal purchases. 23. The alleged Barclays Bank Delaware obligation is a "debt" as defined by 15 U.S.C.§ 1692a (5). 24. Barclays Bank Delaware is a "creditor" as defined by 15 U.S.C.§ 1692a (4). 25. Barclays Bank Delaware 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. June 5, 2020 Collection Letter 27. On or about June 5, 2020, Defendant sent the Plaintiff a collection letter (the “Letter”) regarding the alleged debt owed to Barclays Bank Delaware. See Letter attached as Exhibit A. 28. The collection letter states: “Because of interest, late charges, and other charges that may vary from day to day, the balance due on the day you pay may be greater. Hence, if you pay the balance in full shown above, an adjustment may be necessary after we receive your check.” 29. The Defendant’s Letter does not explain whether the “adjustment that may be necessary” is to be applied to the “Minimum Payment Due,” or the “total Amount of Debt,” which are stated as $772.87 and $32,687.90, respectively. 30. Defendant’s Letter unfairly confuses the Plaintiff as to where the adjustment may be applied, thus leaving Plaintiff with an unclear picture of which amount may be increasing and the total payments necessary for either category to be satisfied. 31. Additionally, Defendant’s letter does not explain the term “other charges” and Plaintiff has no way of determining what the “other charges” may be. 32. Plaintiff has no basis to determine what “other charges” could affect his balance day to day besides interest and late fees. 33. Defendant misleads and deceives Plaintiff into the belief that there are “other charges” which will possibly increase the daily balance when there are no other charges. 34. If Defendant is aware of “other charges” that would lead to an increase in the balance, Defendant should clarify and explain them in the letter. 35. This statement from the Defendant is a threat to collect an amount that is not provided in the contract or by law. 36. 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 et seq. 37. 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. 38. 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. 39. 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. 40. Defendant violated said section by: a. Failing to explain if the adjustment may be applied to the minimum payment or total amount of the debt; b. Making a false and misleading representation in violation of but not limited to §1692e (10). 41. By reason thereof, Defendant is liable to Plaintiff for judgment that Defendant's conduct violated Section 1692e, et seq. of the FDCPA and is entitled to 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. 42. 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. 43. 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. 44. 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. 45. Defendant violated this section by a. unfairly stating that the balance may increase due to “other charges”, when no other charges are allowed by contract or law; b. by failing to delineate to which amount the “adjustment” will be applied. 46. By reason thereof, Defendant is liable to Plaintiff for judgment that Defendant's conduct violated Section 1692f, et seq. of the FDCPA and is entitled to actual damages, statutory damages, costs and attorneys’ fees. DEMAND FOR TRIAL BY JURY 47. 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 Israel Husarsky, individually and on behalf of all others similarly situated, demands judgment from Defendant Capital Management Services, LP 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: July 23, 2020 Respectfully Submitted, /s/ David P. Force By: David P. Force, Esq. Stein Saks PLLC 285 Passaic Street Hackensack, NJ 07601 Phone: (201) 282-6500 ext. 107 Fax: (201) 282-6501 dforce@steinsakslegal.com Attorneys for Plaintiff

consumer fraud

QQnvFYcBD5gMZwczbz27

GROUP, INC. (EXCEPT IN U.S. PLAINTIFF CASES) County of Residence of First Listed Defendant (IN U.S. PLAINTIFF CASES ONLY) LAND INVOLVED. (Place an "X" in One Box Only) (For Diversity Cases Only) 3 Federal Question PTF DEF (U.S. Government Not a Party) Citizen of This State I 1 Incorporated Principal Place of Business In This State Citizen of Another State 2 2 4 Diversity Incorporated a nd Principal Place (Indicate Citizenship of Parties in Item III) of Business In Another State Citizen or Subject of a 3 3 Foreign Nation 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 340 Marine PERSONAL PROPERTY Safety/Health 490 Cable/Sat TV 345 Marine Product 370 Other Fraud 690 Other 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)) 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 445 Amer. w/Disabilities 540 Mandamus & Other Employment 550 Civil Rights to Justice 446 Amer. w/Disabilities 555 Prison Condition Other State Statutes 440 Other Civil Rights (Place an "X" in One Box Only) Transferred from Appeal to District 2 Removed from 3 Remanded from 4 Reinstated or 5 another district 6 Multidistrict State Court Appellate Court Reopened (specify) Litigation Judgment Cite the U.S. Civil Statute under which you are filing (Do not cite jurisdictional statutes unless diversity): 15 U.S.C. § 1692 Brief description of cause: Fair Debt Collection Practices Act CHECK IF THIS IS A CLASS ACTION DEMAND $ CHECK YES only if demanded in complaint UNDER F.R.C.P. 23 JURY DEMAND: Yes No. (See instructions): JUDGE DOCKET NUMBER SIGNATURE OF ATTORNEY OF RECORD AMOUNT APPLYING IFP JUDGE MAG. JUDGEAuthority For Civil Cover Sheet Example: U.S. Civil Statute: 47 USC 553 Brief Description: Unauthorized reception of cable serviceAPPENDIX I IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA CASE MANAGEMENT TRACK DESIGNATION FORM : CIVIL ACTION : V. : : NO. : Habeas Corpus - Cases brought under 28 U.S.C. $2241 through $2255. ( ) Social Security - Cases requesting review of a decision of the Secretary of Health and Human Services denying plaintiff Social Security Benefits ( ) Arbitration - Cases required to be designated for arbitration under Local Civil Rule 53.2. ( ) Asbestos - Cases involving claims for personal injury or property damage from exposure to asbestos. ( ) Special Management - Cases that do not fall into tracks (a) through (d) that are commonly referred to as complex and that need special or intense management by the court. (See reverse side of this form for a detailed explanation of special management cases) ( X ) Standard Management - Cases that do not fall into any one of the other tracks. ( ) lay L full Cary L. Flitter Attorney at Law Attorney for Plaintiff 610-667-0552 cflitter@consumerslaw.com Fax Number E-Mail Address (Use Reverse Side For Additional Space) Yes No Yes No Judge Date Terminated: Yes No Yes No Yes No in ONE CATEGORY ONLY) B. Diversity Jurisdiction Cases: 1. Insurance Contract and Other Contracts 2. Airplane Personal Injury 3. Assault, Defamation 4. Marine Personal Injury 5. Motor Vehicle Personal Injury 6. Other Personal Injury (Please specify) 7. Products Liability 8. Products Liability (Asbestos) 9. All other Diversity Cases (Please specify) ARBITRATION CERTIFICATION (Check appropriate Category) , counsel of record do hereby certify: 6/28/13 by sought L fath 35047 Attorney-a-Law Attorney I.D. NOTE: A trial de novo will be a trial by jury only if there has been compliance with F.R.C.P. 38. lay L full 35047 Attorney-at-Law Attorney I.D.IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA Plaintiff, CIVIL ACTION NO. VS. CLASS ACTION Defendant. COMPLAINT INTRODUCTION 1. This is a consumer class action for damages brought pursuant to the Fair Debt 2. Defendant debt collectors violated the FDCPA by placing the validation notice JURISDICTION 3. Jurisdiction arises under the FDCPA, 15 U.S.C. $1692k, and 28 U.S.C. §§ 1331 4. In personam jurisdiction exists and venue is proper as Defendants do business in PARTIES 5. Plaintiff Talitha Pass ("Pass" or "Plaintiff") is a consumer who resides in 6. Defendant North Shore Agency, Inc. ("North Shore") is an out of state 7. North Shore regularly uses the mail and telephone to attempt to collect consumer 8. North Shore is a "debt collector" as that term is contemplated in the FDCPA, 15 9. Defendant NCO Group, Inc. ("NCO") is a Delaware corporation with a business (North Shore and NCO are collectively referred to herein as 10. NCO is North Shore's parent corporation. 11. NCO is thoroughly enmeshed in the operations of North Shore's collection STATEMENT OF CLAIM 12. On June 30, 2012, North Shore sent Plaintiff an initial communication in 13. Section 1692g(a) of the FDCPA requires a debt collector to provide a consumer (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; (3) a statement that unless the consumer, within thirty days after receipt of 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 if the consumer notifies the debt collector in writing within the 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. 14. This Notice is an important statutory right which must be effectively conveyed to 15. The Notice must be sufficiently prominent to be readily noticed. It cannot be 16. The Notice in the June 30, 2012 collection dun is on the reverse side of the letter 17. The paragraphs on the reverse are not indented or spaced, making the copy 18. The front of the letter carries large and conspicuous warnings including 19. The notation on the front to "See Reverse Side for Important Information" does 20. The Validation Rights Notice on the reverse side of Defendants' June 30, 2012 V. CLASS ALLEGATIONS 21. Plaintiff brings this action on her own behalf and on behalf of a class designated 22. Plaintiff proposes to define the class (the "Class") as follows: a. All persons with addresses in Philadelphia, Pennsylvania; b. who were sent an initial collection letter from North Shore Agency;C. in which the statutory 1692g validation notice was printed on the reverse d. where the validation notice on the reverse side was substantially identical e. where the phrase "Notice: See Reverse Side for Important Information" f. where the underlying debt was incurred primarily for personal, family or g. where the letter(s) bears a date from June 30, 2012 through the date of 23. The Class is believed to be SO numerous that joinder of all members is 24. There are questions of law or fact common to the Class. These include: a. Whether Defendants' form letter violates the Fair Debt Collection b. Whether the Validation Notice in Defendants' initial notice(s) is C. The statutory damages available for Defendants' uniform violation of the 25. Pass' claims are typical of the claims of the Class. All are based on the same 26. Pass will fairly and adequately protect the interests of the Class. Plaintiff has no 27. The questions of law or fact common to the Class predominate over any questions 28. There are no individualized issues of reliance or causation of actual damages in 29. The Class may be certified under Fed.R.Civ.P. 23(b)(3), as such represents a a. Congress specifically contemplated FDCPA class actions as a principal b. The essence of Defendants' collection efforts is the uniform failure to C. The interest of Class members in individually controlling the prosecution d. This Philadelphia, Pennsylvania one-county class is likely to be easily COUNT I - FAIR DEBT COLLECTION PRACTICES ACT 30. Plaintiff repeats the allegations set forth above as if the same were set forth at 31. Defendants violated the FDCPA by sending a collection notice to Plaintiff and the WHEREFORE, Plaintiff Talitha Pass prays that this Court certify the Class, and enter a. Awarding damages to Plaintiff and to the Class as provided for in 15 U.S.C. b. Awarding Plaintiff and the Class their costs and reasonable attorney's fees; and C. Granting such other relief as may be deemed just and proper. DEMAND FOR JURY TRIAL Plaintiff demands a trial by jury as to all issues SO triable. Respectfully submitted: lay L tath CARY L. FLITTER THEODORE E. LORENZ ANDREW M. MILZ Attorneys for Plaintiff and the Class FLITTER LORENZ, P.C. 450 N. Narberth Avenue, Suite 101 Narberth, PA 19072 (610) 822-0782 EXHIBIT "A" 4000 East Fifth Avenue, Columbus, OH 43219 866-486-2424 EXT-24513 ID# 1218 0000 6847,TYPE-ND4 Date: JUNE 30, 2012 Membership #: TALITHA PASS 10754 JEANES ST FL 1 PHILADELPHIA PA 19116-3316 ACCOUNT STATUS: CRITICAL! TO RESOLVE THIS MATTER, YOUR RESPONSE IS REQUESTED. Your delinquent account detail: Amount Owed: $85.78 Owed To: DISNEY MOVIE CLUB To resolve this matter, your response is requested: the tear-off coupon below. THIS IS AN ATTEMPT TO COLLECT A DEBT AND ANY INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE. MasterCard VISA ACCOUNT #: Account #:at OFFICE HOURS: 9AM - 4:30PM Monday - Friday ET Phone # (877)-238-1244)

consumer fraud

7u-vEocBD5gMZwczgByB

UNITED STATES DISTRICT COURT IN THE EASTERN DISTRICT OF MICHIGAN -- SOUTHERN DIVISION CATHI SCHLOSS, Individually and on behalf others similarly situated, Plaintiff, -vs- Case No. Hon. CLASS ACTION COMPLAINT ONTIME BUSINESS FINANCING, LLC., CHRISTOPHER BARBER, and CRAIG PITTS, Defendants. COMPLAINT & JURY DEMAND Plaintiff Cathi Schloss brings this class action complaint against Defendants OnTime Business Financial, LLC (“OnTime”), Christopher Barber (“Mr. Barber”), and Craig Pitts (“Mr. Pitts”) to stop Defendants’ illegal practice of sending unsolicited text message calls to the cellular telephones of consumers and to obtain redress for all persons injured by their conduct. Jurisdiction 1. This Court has federal question jurisdiction under the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227 et seq., and 28 U.S.C. §§ 1331, 1337. 1 Parties 2. The Plaintiff to this lawsuit is Cathi Schloss (“Ms. Schloss”) who resides in Eastpointe, Michigan 48021. 3. The Defendants to this lawsuit are as follows: a. Ontime Business Financing, LLC (“OnTime”) which is a Florida Limited Liability Company doing business in Michigan. OnTime’s principal business mailing address is 4400 N. Federal Hwy, Suite 407, Boca Raton, Florida, 33431. OnTime’s Registered Agent and address is Christopher Barber at 801 SE 14 Street, Deerfield, Florida, 33441. OnTime is the lessor of Short Message Service (“SMS”), otherwise known as text messaging, Short Code 29249 as of August 2, 2016. b. Christopher Barber (“Mr. Barber”) is the Chief Executive Officer and the registered agent of OnTime. The following is the mailing address he provided to the Florida Division of Corporations, 801 SE Street, Deerfield, Florida, 33441. c. Craig Pitts (“Mr. Pitts”) is the Chief Operating Officer of OnTime. The following is the mailing address he provided to the Florida Division of Corporations, 4240 Palm Forest Drive North, Delray Beach, Florida, 2 33445. Venue 4. The transactions and occurrences which give rise to this action occurred in Macomb County, Michigan. 5. Venue is proper in the Eastern District of Michigan as the conduct and events giving rise to Plaintiff’s claims arose in substantial part in this District. Furthermore, a substantial amount of the property affected by this claim, the Plaintiff’s cellular telephone, is in this District. 6. Defendants sent multiple unsolicited text messages from SMS Short Code 29249 to Plaintiff in Michigan on her cellular phone with a Michigan area code. 7. Defendants’ messages to Plaintiff were to solicit commercial loan product sales from Plaintiff. Auto-Dialed Text Message Calls Violate the TCPA 8. In 1991, Congress enacted the TCPA, 47 U.S.C. § 227, to regulate the explosive growth of the telemarketing industry. In so doing, Congress recognized that unrestricted telemarketing . . . can be an intrusive invasion of privacy . . . 47 U.S.C. § 227, Congressional Statement of Findings #5. Specifically, in enacting the TCPA, Congress outlawed telemarketing via 3 unsolicited automated or pre-recorded telephone calls, finding: Evidence compiled by the Congress indicates that residential telephone subscribers consider automated or prerecorded telephone calls, regardless of the content or the initiator of the message, to be a nuisance and an invasion of privacy. Banning such automated or prerecorded telephone calls to the home, except when the receiving party consents to receiving the call . . . is the only effective means of protecting telephone consumers from this nuisance and privacy invasion. 47 U.S.C. § 227, Congressional Statement of Findings ## 10 and 12. 9. Thus, the TCPA prohibits the placement of calls to cell phones using an automated telephone dialing system without the prior express consent of the called party. 47 U.S.C. § 227(b)(1)(A)(iii). 10. A text message is a “call” within the meaning of the TCPA. Satterfield v. Simon & Schuster, Inc., 569 F.3d 946 (9th Cir. 2009). Cited by, Nunes v. Twitter, Inc., 194 F Supp 3d 959, 961-62 (ND Cal 2016). 11. Text messages to cellular devices can be intrusive, costly and are in violation of the TCPA, as noted in the Federal Communications Commission Consumer Bulletin, Avoiding Spam: Unwanted Email and Text Messages: Many consumers find unwanted texts and email – which can include commercial messages known as spam – annoying and time-consuming. And unwanted texts to mobile phones and other mobile devices can be intrusive and costly. (Exhibit 2 – Avoiding Spam: Unwanted Email and Text Messages.) 12. According to the Federal Trade Commission’s recent Biennial Report to 4 Congress, the emergence of new communication technologies has caused the number of illegal telemarketing calls to explode in the last four years. For example, VOIP technology allows callers to make a higher volume of calls inexpensively from anywhere in the world. Telemarketers have embraced these advances, causing consumer complaints about illegal telemarketing to skyrocket. 13. The Federal Communications Commission maintains a consumer guide called Stop Unwanted Calls and Texts finding that “unwanted calls, including robocalls and texts, are consistently among the top problems consumers cite when filing complaints with the FCC each year.” (Exhibit 3 – Stop Unwanted Calls and Texts). 14. The Federal Trade Commission also published the following regarding the nuisance of unlawful phone calls and text message calls: Unwanted phone calls or random text messages seem to come at all hours. They bug you at work, interrupt your dinner, or wake you up when you’re sound asleep. I think we can all agree they’re a real nuisance. (Exhibit 4 – Stopping unwanted phone calls and text messages). 15. On December 2, 2016, USA Today published a story, finding that these days, “many companies find it cheaper, easier and more profitable to send advertisements by text.” (Exhibit 5 – Stop unwanted calls and texts from hitting your cellphone). 5 16. Bill Schuette, the Michigan Attorney General, published the following consumer alert regarding spam text message calls: More than one billion text messages are sent everyday in the United States and studies show that more and more of these messages are spam, or unwanted, unsolicited junk mail, delivered to the consumer’s wireless phone text message inbox. Not only is text message spam annoying, but it can also slow down your phone by taking up your phone’s memory and, unlike spam e-mail, lead to unwanted charges on your wireless service bill. Many carriers will charge you simply for receiving a text message, regardless of whether you requested it. Additionally, if you use a smart phone or personal digital assistant (PDA) that functions like a personal computer, spam could put you at risk for viruses or “smishing,” a scam where consumers are directed via text message to a website that unknowingly collects their personal information or downloads software that allows the cell phone to be controlled by hackers. (Exhibit 6 – Cell Phone Spam Stop Receiving Unwanted Text Messages!). 17. The FCC has explicitly included text message calls within the orbit of the statute, explaining that the TCPA’s prohibition on ATDSs “encompasses both voice calls and text calls to wireless numbers including, for example, short message service (SMS) calls…” Satterfield, at 569 quoting In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, Report and Order, 18 FCC Rcd, 14014, 14115 (July 3, 2013); reconfirmed In the Matter of Rules and Regulations Implementing the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, Rules and 6 Regulations Implementing the Telephone Consumer Protection Act of 1991, 19 FCC Rcd. 15927, 15934 (FCC August 12, 2004). 18. Telemarketers have increasingly looked to alternative technologies through which to send bulk solicitations cheaply such as Short Message Services (SMS”). 19. An SMS message is a text message call directed to a wireless device through the use of the telephone number assigned to the device. 20. Plaintiff Cathi Schloss brings this complaint against OnTime and its officers, Mr. Barber and Mr. Pitts, to halt Defendants’ practice of making unsolicited text message calls to her cellular telephone, and to obtain redress for all persons injured by their conduct. 21. By making the text message calls at issue in this complaint, Defendants caused Plaintiff and the members of the class actual harm, including the aggravation and nuisance that necessarily accompanies the receipt of unsolicited text message calls, and in some cases, the monies paid to their wireless carriers for the receipt of such text message calls. 22. In response to Defendants’ unlawful conduct, Plaintiff files this lawsuit and seeks an injunction requiring Defendants to cease all unsolicited text message calling activities and an award of statutory damages to the members of the 7 class of $500-$1500 per illegal text message call under the TCPA, together with costs and reasonable attorneys’ fees. Defendants’ Marketing Model Includes Sending Bulk Illegal Text Messages 23. OnTime markets a number of different financial products to small business, including, Merchant Cash Advance, Small Business Loans, and Account Receivable Financing. (Exhibit 7 – OnTime Business Financing Home Page). 24. Defendants operate the website www.ontimebusinessfinancing.com. 25. According to the OnTime website, OnTime “was created to help small business’ [sic] obtain the financing deserved, in the time frame required.” (Exhibit 8 – OnTime Business Financing About Us Page). 26. OnTime’s website goes on to inform consumers: We provide a comprehensive platform that offers access to working capital to business’ [sic] that may have limited access to traditional financing. We have helped hundreds of business’ [sic] nationwide become the leaders in their industry. (Exhibit 8 – OnTime Business Financing About Us Page) 27. According to OnTime’s profile with the website, www.glassdoor.com, OnTime’s mission is: Providing access to capital through working capital loans to small business owners nationwide. The capital is used to scale business’ [sic] from $0 to 8 $100MM + in revenues. (Exhibit 9 – https://www.glassdoor.com/Overview/Working-at-OnTime-Business- Financing-EI_IE1327597.11,36.htm). 28. One of the methods Defendants use to market OnTime’s products is through the transmission of text messages to consumer cellular phones. 29. Christopher Barber is the CEO of OnTime. (Exhibit 10 – Barber LinkedIn Profile). 30. According to the OnTime website, Mr. Barber’s responsibilities include: Keeping OnTime focused on top and bottom line growth, while ensuring the company meets its financial obligations. Chris also ensures the company operates in accordance with best practices as established by the executive team. (Exhibit 8 – OnTime Business Financing About Us Page). 31. As CEO of OnTime, Christopher Barber created, authorized and/or implemented OnTime’s marketing campaigns, including its use of text message calls to solicit business and commercial loan product sales. 32. Craig Pitts is Chief Operating Officer of OnTime. (Exhibit 8 – OnTime Business Financing About Us Page). 33. According to the OnTime website, Mr. Pitts’ responsibilities include: Overseeing OnTime’s ongoing operations and procedures. Craig helps to establish policies and promotes the company culture and vision. (Exhibit 8 – OnTime Business Financing About Us Page). 9 34. As COO of OnTime, Craig Pitts created, authorized and/or implemented OnTime’s marketing campaigns, including its use of text message calls to solicit business and commercial loan product sales. 35. SMS marketing is an advertising tool designed to reach consumers through text messages to cellular phones. 36. According to usshortcodes.com, “text messages have a 98% open rate success rate that no other marketing tool can match.” (Exhibit 11 – www.usshortcodes.com). 37. According to Trumpia.com, “SMS Marketing is an advertising channel that allows businesses to advertise, promote, and engage their audience through text messaging.” (Exhibit 12 -- https://trumpia.com/how-sms-marketing-works.php). 38. Trumpia, a marketing platform, advertises on its website that SMS marketing offers benefits over traditional forms of marketing because: texts are a personal way of communication, SMS messages have a 98% open rate, and since American consumers never leave home without their cell phones, your text message will be seen within minutes after sending them out. (Exhibit 12 -- https://trumpia.com/how-sms-marketing-works.php). 39. Twilio, another marketing platform, advertises on its website that it’s service has the capability of sending “100 messages per second.” (Exhibit 13 – 10 https://www.twilio.com/sms/short-codes). 40. According to Buildfire.com, there are two ways to secure a short code: (1) Share a short code provided by your SMS marketing service. This is by far the most economical option, although it may limit your choice of keywords. Basically, the marketing service has one short code that is shared by all its clients and you use your keywords to identify campaigns. You will have to choose keywords not in use by other clients of that service. (2) Get your own short code used only by your customers. This gives you much more flexibility in choosing keywords; you own your short code, so you basically own all possible keywords for that code, as well. This option is far more expensive, typically costing $1,000 a month or more to lease from your SMS company. (Exhibit 14 -- https://buildfire.com/sms-marketing/). 41. SMS Marketing campaigns are comprised of two elements: a. Short Code- A five or six digit number that appears in place of a traditional phone number; and b. Keyword – When employed, a designated word included within the text message that the consumer is directed to text back to the short code to participate in a specific campaign. 42. The essential element of an SMS Marketing campaign is the Short Code because SMS Marketing messages are sent from short codes, rather than full telephone numbers. (Exhibit 15 -- https://www.sendinblue.com/blog/what-is-sms-marketing/). 11 43. SMS short codes are leased, either to the business itself or to an SMS provider, such as Tatango. (Exhibit 16 – https://www.tatango.com/blog/sms-short-codes-what-every-business-needs- to-know/). 44. Iconectiv is the company that leases out the SMS short codes. (Exhibit 16 https://www.tatango.com/blog/sms-short-codes-what-every-business-needs- to-know/). 45. According to tatango.com, “Common Short Code” or CSC is also a common name for SMS short code and: The organization within iconectiv that oversees the technical and operational aspects of CSC functions, in addition to maintaining a single database of available, reserved, and registered CSCs is called the Common Short Code Administration (CSCA). You can find their website here: http://www.usshortcodes.com/. (Exhibit 16 – https://www.tatango.com/blog/sms-short-codes-what-every-business-needs- to-know/). 46. Usshortcodes.com allows users or potential users to search their directory for available short codes. 47. According to tatango.com, SMS Short Codes are registered to a directory: Want to lookup who owns a short code? Check out the U.S. Short Code Directory, where not only can you lookup short codes, you can find out how each short code is being used, and even the most appropriate contact information for short code support. Not only does 12 the directory provide great information on who and how a short code is being used, it also is a great resource to figure out which short codes are available for sale, when it comes time to purchase a short code, they can help with that too. You can visit the directory here: www.usshortcodedirectory.com. (Exhibit 16 – https://www.tatango.com/blog/sms-short-codes-what-every-business- needs-to-know/). 48. OnTime is the lessor of SMS Short Code 29249. (Exhibit 17 -- https://usshortcodedirectory.com/directory/?fwp_short_code_search=29249) 49. The details section of the usshortcodedirectory regarding SMS Short Code 29249 provides that OnTime activated or that the short code was activated on OnTime’s behalf on August 2, 2016. (Exhibit 18 – https://usshortcodedirectory.com/directory/short-code-29249/) 50. As of the filing of this complaint, SMS Short Code 29249’s campaign status is active. (Exhibit 18 – https://usshortcodedirectory.com/directory/short-code-29249/) Text Message Calls to Plaintiff and Putative Class Members 51. Plaintiff’s cellular phone number has been registered with the National Do Not Call List since December 11, 2004. 52. Defendants purchased a list of cell phone numbers, or obtained access to a list of cell phone numbers through a third-party vendor. 13 53. Plaintiff believes her cell phone number was included in that list, as well as, numerous other residents of Michigan. 54. Defendants purchased numerous other lists of cell phone numbers that included Michigan residents, many of whom are registered on the National Do Not Call List. 55. Beginning in or around April 2017, although Plaintiff believes it could have been as early as August 2016, Defendants and/or their authorized agents, vendors, or contractors, used an automatic telephone dialing system to make multiple text message calls to the cellular telephone owned by Plaintiff. 56. The body of the message Defendants sent to Plaintiff on June 26, 2017 read: There are a number of commercial lending products available other than daily payment loans to help grow your business! Call 888-901-3446 for more information. 57. Of the multiple messages sent from or on behalf of OnTime to Ms. Schloss on her cellular phone, including on the following dates: April 5, 2017, June 26, 2017, July 21, 2017, August 10, 2017, August 29, 2017, September 25, 2017, and October 12, 2017, seven of the messages were the same or substantially the same. 58. All of the text message calls to Plaintiff from OnTime originated from SMS 14 Short Code 29249. 59. The return phone number included in the body of the text message was (888) 901-3446. 60. Plaintiff’s investigation confirmed that phone number (888) 901-3446 is used by OnTime. 61. On information and belief, Defendants made, or had made on their behalf, the same (or substantially the same) text message call to thousands of similarly situated Michigan cell phone users (“putative class members”). 62. Defendants made these text message calls to Plaintiff’ and putative class members using an automated telephone dialing system (“ATDS”), or contracted with another entity to make the calls using an automatic telephone dialing system. 63. Defendants made, or had made on their behalf, these text message calls to Plaintiff and putative class members, using equipment that had the capacity to store or produce telephone numbers to be called using a random or sequential number generator, and to dial such numbers. 64. On information and belief, Defendants texted thousands of consumers that were on the National Do Not Call Registry. 65. On information and belief, Defendants each were aware that the above 15 described text message calls were being made either by them directly, or made on their behalf. 66. These text message calls interrupted Plaintiff’s day, both her personal time and her work time. 67. These text message calls consumed storage space on her cellular phone. 68. These text message calls caused Plaintiff to stop what she was doing, review the unwanted text message call, and then delete the unwanted text message call or suffer loss of storage on her cellular phone. 69. These text message calls often littered her text message folder, much to her annoyance and frustration, and caused her to expend extra time to sift through the myriad of unwanted text message calls only to locate the personal text message calls she wanted to address. 70. The putative class members suffered similar damage. CLASS DEFINITION AND CLASS ISSUES 71. Plaintiff incorporates by reference the foregoing allegations as if fully set forth herein. 72. Plaintiff brings this action pursuant to Federal Rule of Civil Procedure 23(b)(2) and 23(b)(3) on behalf of herself and a class (the “Class”) defined as follows: 16 a. CLASS I All persons within the United States: (a) to whom Defendants and/or a third party acting on their behalf, made two or more non-emergency telephone calls in a twelve-month period; (b) to their residential or cellular telephone number; (c) using an automatic telephone dialing system or an artificial or prerecorded voice; and (d) when that residential or cellular telephone number had been on the National Do Not Call Registry for more than 30 days (e) at any time in the period that begins four years before the date of filing this Complaint to trial. b. CLASS II All persons within the United States: (a) to whom Defendants and/or a third party acting on their behalf, made one or more non-emergency telephone calls; (b) to their cellular telephone number; (c) using an automatic telephone dialing system or an artificial or prerecorded voice; and (d) at any time in the period that begins four years before the date of filing this Complaint to trial. 73. Numerosity: The message at issue appears in form and substance to be a pre- formatted advertisement targeted to a broad market of individuals who possess cell phones. While the precise number of Class members is unknown and not available to Plaintiff at this time, these known facts facially support the conclusion that individual joinder is impracticable. Class members can be identified through Defendants’ records and those of cell phone carriers through whom the texts were delivered. On information and 17 belief, Defendants have made text message calls to thousands of consumers who fall into the definition of the Class. 74. Typicality: Plaintiff’s claims are typical of the claims of other members of the Class, in that Plaintiff and the Class members sustained damages arising out of Defendants’ uniform wrongful conduct and unsolicited text message calls. 75. Adequate Representation: Plaintiff will fairly and adequately represent and protect the interests of the Class, and has retained counsel competent and experienced in class action litigation. Plaintiff has no interest antagonistic to those of the Class, and Defendants have no defenses unique to Plaintiff. 76. Commonality and Predominance: There are many questions of law and fact common to the claims of Plaintiff and the Class, and those questions predominate over any questions that may affect individual members of the Class. Common questions for the Class include, but are not necessarily limited to the following: a. Whether Defendants’ conduct constitutes a violation of the TCPA; b. Whether the equipment Defendants used to make the text message calls in question was an automatic dialing system as contemplated by the TCPA; 18 c. Whether Defendants systematically made text message calls to persons who did not previously provide Defendants with their prior express consent to receive such text message calls; d. Whether Class members are entitled to treble damages based on the willfulness of Defendants’ conduct. 77. 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 because joinder of all parties is impracticable. The damages suffered by the individual members of the Class will likely be relatively small, especially in comparison to 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 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 19 comprehensive supervision by a single court. Economies of time, effort, and expense will be fostered, and uniformity of decisions ensured. COUNT I: Violation of the TCPA, 47 U.S.C. § 227 et seq., (On behalf of Plaintiff and the Class) 78. Plaintiff incorporates by reference the foregoing allegations as if fully set forth herein. 79. Defendants and their agents made unsolicited text message calls to cellular telephone numbers belonging to Plaintiff and the other members of the Class en masse without their prior express consent. 80. Defendants made the text message calls, or had them made on their behalf, using equipment that had the capacity to store or produce telephone numbers to be called using a random or sequential number generator, and to dial such numbers. 81. Defendants and their agents utilized equipment that made, or had made on their behalf, the text message calls to Plaintiff and other members of the Class simultaneously and without human intervention. 82. By making, or having made on their behalf, the unsolicited text message calls to Plaintiff and the Class, Defendants have violated 47 U.S.C. § 227(b)(1)(A)(iii) and 47 U.S.C. §227(c)(5). As a result of Defendants’ 20 unlawful conduct, Plaintiff and the members of the Class suffered actual damages in the form of money they paid to receive the unsolicited text message calls on their cellular phones and are entitled to statutory damages under section 227(b)(3)(B) and 227(c)(5) at a minimum of $500.00 in damages for each such violation of the TCPA. 83. Should the Court determine that Defendants’ conduct was willful and knowing, the Court may, pursuant to section 227(b)(3)(C), treble the amount of statutory damages recoverable by Plaintiff and the other members of the Class. JURY DEMAND Plaintiff requests a trial by jury of all claims that can be so tried. PRAYER FOR RELIEF 84. WHEREFORE, Plaintiff Cathi Schloss, individually and on behalf of the Class, prays for the following relief: 85. An order certifying the Class as defined above, appointing Plaintiff Cathi Schloss as the representative of the Class, and appointing her counsel as Class Counsel; 86. An award of actual and statutory damages; 87. An injunction requiring Defendants to cease all unsolicited text message calls, 21 and otherwise protecting the interests of the Class; 88. An award of reasonable attorneys’ fees and costs; and 89. Such other and further relief that the Court deems reasonable and just. Respectfully Submitted, By: s/ Sylvia S. Bolos Sylvia S. Bolos (P78715) Ian B. Lyngklip (P47173) Julie A. Petrik (P47131) LYNGKLIP & ASSOCIATES CONSUMER LAW CENTER, PLC 24500 Northwestern Hwy, Ste 206 Southfield MI 48075 (248) 208-8864 SylviaB@MichiganConsumerlaw.com Ian@MichiganConsumerLaw.com Julie@MichiganConsumerLaw.com Anthony Paronich BRODERICK & PARONICH, P.C. 99 High Street Suite 304 Boston, MA 02110 (508) 221-1510 Anthony@broderick-law.com Attorneys for Plaintiff Dated: December 7, 2017 22

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Case No: CLASS ACTION COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS JURY TRIAL DEMANDED Laurence M. Rosen, Esq. (SBN 219683) THE ROSEN LAW FIRM, P.A. 355 South Grand Avenue, Suite 2450 Los Angeles, CA 90071 Telephone: (213) 785-2610 Facsimile: (213) 226-4684 Email: lrosen@rosenlegal.com Counsel for Plaintiff UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA MARK STOYAS, Individually and on behalf of all others similarly situated, Plaintiff, v. TOSHIBA CORPORATION, NORIO SASAKI, AND HISAO TANAKA, Defendants. Plaintiff Mark Stoyas (“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, announcements made by Defendants, wire and press releases published by and regarding Toshiba Corporation (“Toshiba” or the “Company”), securities analysts’ reports and advisories about the Company, and information readily obtainable on the Internet. Plaintiff believes that - 1 - 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 Toshiba securities between May 8, 2012 and May 7, 2015, inclusive, (the “Class Period”) seeking to recover compensable 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. During the Class Period, Defendants issued materially false and misleading statements and omitted to state material facts that rendered their affirmative statements misleading as they related to the Company’s financial performance, business prospects, and true financial condition. JURISDICTION AND VENUE 3. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act (15 U.S.C. § 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder (17 C.F.R. §240.10b-5). 4. 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. 5. Venue is proper in this Judicial District pursuant to §27 of the Exchange Act, 15 U.S.C. § 78aa and 28 U.S.C. § 1391(b) as Toshiba conducts business within this district. 6. 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 - 2 - 7. Plaintiff, as set forth in the accompanying certification, incorporated by reference herein, purchased Toshiba securities at artificially inflated prices during the Class Period and has been damaged thereby. 8. Defendant Toshiba is a Japanese corporation that engages in the research and development, manufacture, and sale of electronic and energy products worldwide. Toshiba American Depository Shares (“ADS”) are actively traded on the OTC Pink marketplace (“OTC Pink”) under the ticker “TOSYY” and Toshiba ordinary shares are actively traded on the OTC Pink under the ticker “TOSBF.” 9. Defendant Noro Sasaki (“Sasaki) was the Company’s Chief Executive Officer at all relevant times until June 2013. 10. Defendant Hisao Tanaka (“Tanaka”) has been the Company’s Chief Executive Officer since June 2013. 11. Sasaki and Tanaka are collectively referred to herein as the “Individual Defendants.” 12. Toshiba, Sasaki and Tanaka are herein referred to collectively as “Defendants.” 13. During the Class Period, each of the Individual Defendants, as senior executive officers, agents, and/or directors of Toshiba and its subsidiaries and affiliates, was privy to non-public information concerning the Company’s business, finances, products, markets, and present and future business prospects, via access to internal corporate documents, conversations and connections with other corporate officers and employees, attendance at management and 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 the fact that adverse facts specified herein had not been disclosed to, and were being concealed from, the investing public. 14. The Individual Defendants participated in the drafting, preparation, and/or approval of the various public, shareholder, and investor reports and other - 3 - communications complained of herein and were aware of, or recklessly disregarded, the misstatements contained therein and omissions therefrom, and were aware of their materially false and misleading nature. Because of their Board membership and/or executive and managerial positions with Toshiba, each of the Individual Defendants had access to the adverse undisclosed information about Toshiba’s financial condition and performance as particularized herein and knew (or recklessly disregarded) that these adverse facts rendered the positive representations made by or about Toshiba and its business issued or adopted by the Company materially false and misleading. SUBSTANTIVE ALLEGATIONS 15. The Class Period begins on May 8, 2012 when Toshiba issued a press release announcing its financial results for fiscal year 2011. The press release provided the following overview of its financial results for fiscal year 2011: - 4 - 16. On May 8, 2013, Toshiba issued a press release announcing its financial results for fiscal year 2012. The press release provided the following overview of its financial results for fiscal year 2012: 17. On May 8, 2014, Toshiba issued a press release announcing its financial results for fiscal year 2013. The press release provided the following overview of its financial results for fiscal year 2013: - 5 - 18. The statements referenced in ¶¶15-17 above were materially false and/or misleading because they misrepresented and failed to disclose the following adverse facts, which were known to Defendants or recklessly disregarded by them, including that: (1) the total amounts of contract costs for certain infrastructure projects were underestimated; (2) the timing in which such contract losses and provisions for contract losses were recorded was improper; and (3) as a result of the foregoing, Toshiba’s public statements were materially false and misleading at all relevant times. THE TRUTH EMERGES 19. On April 3, 2015, Toshiba issued a press release announcing the establishment of a special investigation committee concerning the accounting of certain infrastructure projects. The press releases stated in part: Notice regarding establishment of Special Investigation Committee - 6 - Toshiba Corporation (the “Company”) hereby notifies that a matter requiring investigation has come to the Company’s attention regarding the percentage-of-completion method of accounting used by the Company in fiscal 2013 (as a non-consolidated entity) in relation to certain infrastructure projects undertaken by the Company. Taking this matter seriously, the Company has decided to immediately establish a Special Investigation Committee (whose members include experts from outside the Toshiba Group) (the “Committee”) as set out below, in order to conduct an internal investigation into this matter. (Emphasis added). 20. On this adverse news, shares of TOSYY fell $1.23 per share or over 4% from its previous closing price to close at $24.56 per share on April 6, 2015 and shares of TOSBF fell $0.16 per share or over 3% from its previous closing price to close at $4.13 per share on April 6, 2015, damaging investors. 21. On May 8, 2015, Toshiba issued a press release announcing the establishment of an independent investigation committee concerning the accounting of certain infrastructure projects and the possible revision of earnings for prior years. The press release stated in part: Notice regarding establishment of Independent Investigation Committee Toshiba Corporation (the “Company”) hereby notifies that at a meeting of the Board of Directors held today it was decided to establish an Independent Investigation Committee as follows. 1. Reason for establishing an Independent Investigation Committee As announced by the Company in its press release dated April 3, 2015 titled “Notice regarding establishment of Special Investigation Committee,” the Company established a Special Investigation Committee chaired by the Chairman of the Board of Directors and whose members include outside experts, and has conducted an internal investigation of the relevant matter and examined the appropriateness of - 7 - the percentage-of-completion method of accounting used for projects undertaken by the Company. In the course of the investigation by the Special Investigation Committee to date, instances have been identified in some infrastructure-related projects in which the percentage-of-completion method of accounting was used, wherein the total amount of contract cost was underestimated and contract losses (including provisions for contract loss) were not recorded in a timely manner. Instances have also been identified other than in projects in which the percentage-of- completion method of accounting was used that require further investigation. As a result, it is expected that more time will be required in order to conduct a detailed investigation into the facts and to identify the causes. In light of this situation, and in order to further enhance the confidence of stakeholders in the results of the investigation, the Company has decided to change the framework of the investigation from one conducted by the current Special Investigation Committee to one conducted by an Independent Investigation Committee that conforms to the guideline prescribed by the Japan Federation of Bar Associations by being composed solely of fair and impartial outside experts who do not have any interests in the Company. The members of the Independent Investigation Committee are currently being selected from among experts in the fields of law and accounting, based on the recommendations of the outside members of the Special Investigation Committee, and the Company plans to promptly disclose the composition of the Independent Investigation Committee once the selection process has concluded. The Company will also discuss with the Independent Investigation Committee to be established about the handover of the results of the investigation by the Special Investigation Committee to date and the necessity of the Special Investigation Committee’s future activity. 2. Purpose of the establishing the Independent Investigation Committee It is planned to entrust the Independent Investigation Committee with tasks such as investigating the appropriateness of accounting, identifying the causes, and making recommendations about preventive measures, - 8 - but the specific scope and other matters relating to the investigation will be determined based on discussions with the committee members to be selected, and the Company will announce these details once they have been determined. 3. Schedule and outlook The Company and each subsidiary constituting the Toshiba Group will provide its full cooperation to the investigation by the Independent Investigation Committee. The schedule for the investigation by the Independent Investigation Committee will be announced once it has been determined. Please note that, based on the results of the investigation by the Special Investigation Committee to date, there has emerged a possibility that past financial results for fiscal 2013 or earlier may be corrected, and the Company is currently also ascertaining the amount of the impact on the financial results for fiscal 2014. The Company expects to announce its financial results in or after June 2015. The Company will also announce the date of the shareholders’ meeting as soon as it has been set. The Company expresses its most sincere apologies to our shareholders, investors, and all other stakeholders for any concern or inconvenience caused on this occasion, and will make its best efforts to restore your trust. Thank you for your ongoing support. (Emphasis added). 22. On this adverse news, shares of TOSYY fell $5.75 per share or over 23% over the next two days to close at $18.33 per share on May 11, 2015 and shares of TOSBF fell $0.88 per share or over 22% over the next two days to close at $3.09 per share on May 11, 2015, damaging investors. 23. 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. POST CLASS PERIOD DISCLOSURES - 9 - 24. On May 13, 2015, Toshiba issued a press announcing the currently expected amount of correction of past financial results. The press release stated in part: Currently expected amount of correction of past financial results and supplementary explanation regarding Independent Investigation Committee Toshiba Corporation (the “Company”) hereby provides further information in regard to its announcement dated May 8, 2015 titled “Notice regarding establishment of Independent Investigation Committee” as follows. 1. Currently expected amount of correction of past financial results The Company currently expects that it will be required to correct its past financial results in the amount of negative 50 billion yen or more (on an operating income basis) over the cumulative period from fiscal 2011 to fiscal 2013, based on the investigation conducted to date by the Special Investigation Committee in relation to certain infrastructure projects in which the percentage-of-completion method of accounting was used and that were undertaken by the Company (as a non- consolidated entity) through three of its in-house companies (the Power Systems Company, the Social Infrastructure Systems Company, and the Community Solutions Company). The correction amount pertains to underestimations of the total amounts of contract cost for such projects, and the timing in which contract losses (provisions) were recorded in connection therewith. Please note, however, that this is only the current expected amount and that the Special Investigation Committee has not reached a final conclusion, and please also note that there is a possibility that the amount of correction pertaining to projects in which the percentage-of- completion method of accounting was used as determined by the Independent Investigation Committee (which is to be newly established) may differ. 2. Background to and reasons for the Independent Investigation Committee - 10 - In the course of the investigation conducted by the Special Investigation Committee to date, matters have been identified requiring further investigation in addition to projects in which the percentage-of- completion method of accounting was used. Specifically, the matters requiring further investigation include matters such as the appropriateness of the timing and amount of provisions for loss that have been recorded, the appropriateness of the timing of the recording of operating expenses, and the appropriateness of valuations of inventory. In light of this, the Company decided that it was necessary to conduct a Company-wide, comprehensive investigation, which includes its in- house companies other than the above three, as well as its consolidated subsidiaries. The specific extent of the investigation will be determined by the Independent Investigation Committee going forward. It is currently undetermined as to whether any correction of financial results will be required for fiscal years earlier than those stated above as a result of the matters requiring further investigation, or as to the size of any such amount requiring correction. (Emphasis added). NO SAFE HARBOR 25. The statutory safe harbor provided for certain forward-looking statements does not apply to any of the false statements alleged in this Complaint. None of the statements alleged herein are “forward-looking” statements and no such statement was identified as a “forward looking statement” when made. Rather, the statements alleged herein to be false and misleading all relate to facts and conditions existing at the time the statements were made. Moreover, cautionary statements, if any, did not identify important factors that could cause actual results to differ materially from those in any forward-looking statements. 26. In the alternative, to the extent that the statutory safe harbor does apply to any statement pleaded herein which is deemed to be forward-looking, the Individual Defendants are liable for such false forward-looking statements because at the time each such statement was made, the speaker actually knew and/or recklessly disregarded the fact that such forward-looking statements were materially false or - 11 - misleading and/or omitted facts necessary to make statements previously made not materially false and misleading, and/or that each such statement was authorized and/or approved by a director and/or executive officer of Toshiba who actually knew or recklessly disregarded the fact that each such statement was false and/or misleading when made. None of the historic or present tense statements made by the Individual Defendants was an assumption underlying or relating to any plan, projection, or statement of future economic performance, as they were not stated to be such an assumption underlying or relating to any projection or statement of future economic performance when made, nor were any of the projections or forecasts made by the Individual Defendants expressly related to or stated to be dependent on those historic or present tense statements when made. PLAINTIFF’S CLASS ACTION ALLEGATIONS 27. 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 Toshiba during the Class Period and who were damaged thereby. 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. 28. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, Toshiba’s securities were actively traded on the OTC Pink. 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 Toshiba 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. - 12 - 29. 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. 30. 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. 31. 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 Toshiba; and (c) to what extent the members of the Class have sustained damages and the proper measure of damages. 32. 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. Applicability of Presumption of Reliance: Fraud on the Market Doctrine 33. At all relevant times, the market for Toshiba’s common stock was an efficient market for the following reasons, among others: (a) Toshiba is currently listed and actively traded on the OTC Pink, a highly efficient and automated market; - 13 - (b) During the Class Period, on average, several thousands of shares of Toshiba stock were traded on a weekly basis, demonstrating a very active and broad market for Toshiba and permitting a very strong presumption of an efficient market; (c) Toshiba 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; (d) Toshiba 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; (e) Numerous FINRA member firms were active market-makers in Toshiba stock at all times during the Class Period; and (f) Unexpected material news about Toshiba was rapidly reflected and incorporated into the Company’s stock price during the Class Period. 34. As a result of the foregoing, the market for Toshiba’s common stock promptly digested current information regarding Toshiba from all publicly available sources and reflected such information in Toshiba’s stock price. Under these circumstances, all purchasers of Toshiba’s common stock during the Class Period suffered similar injury through their purchase of Toshiba’s common stock at artificially inflated prices, and a presumption of reliance applies. LOSS CAUSATION/ECONOMIC LOSS 35. The market for Toshiba’s common stock was open, well-developed and efficient at all relevant times. As a result of these materially false and misleading statements and failures to disclose, Toshiba’s securities traded at artificially inflated - 14 - prices during the Class Period. Plaintiff and other members of the Class purchased or otherwise acquired Toshiba’s common stock relying upon the integrity of the market price of Toshiba’s securities and market information relating to Toshiba, and have been damaged thereby. 36. During the Class Period, Defendants materially misled the investing public, thereby inflating the price of Toshiba’s common stock, by publicly issuing false and misleading statements and omitting to disclose material facts necessary to make Defendants’ statements, as set forth herein, not false and misleading. Said statements and omissions were materially false and misleading in that they failed to disclose material adverse information and misrepresented the truth about the Company, its business and operations, as alleged herein. 37. 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 or misleading statements about Toshiba’s business, prospects and operations. These material misstatements and omissions had the cause and effect of creating in the market an unrealistically positive assessment of Toshiba and its business, prospects and operations, thus causing the Company’s common stock to be overvalued and artificially inflated at all relevant times. Defendants’ materially false and 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. FIRST CLAIM Violation of Section 10(b) Of The Exchange Act Against and Rule 10b-5 Promulgated Thereunder Against All Defendants 38. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. - 15 - 39. This claim is brought against Toshiba and all of the Individual Defendants. 40. During the Class Period, Defendants carried out a plan, scheme and course of conduct which 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 Toshiba’s 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. 41. 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 purchasers of the Company’s common stock in an effort to maintain artificially high market prices for Toshiba’s 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. 42. 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 Toshiba as specified herein. 43. These 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 Toshiba’s value and performance and continued substantial growth, which included the making of, or participation in the making of, untrue statements of material facts - 16 - and omitting to state material facts necessary in order to make the statements made about Toshiba 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 Toshiba’s common stock during the Class Period. 44. Each of the Individual Defendants’ primary liability, and controlling person liability, arises from the following facts: (1) the Individual Defendants were high-level executives, directors, and/or agents at 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 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. 45. 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 and for the purpose and effect of concealing Toshiba’s operating condition and future business prospects from the investing public and supporting the artificially inflated price of its common stock. As demonstrated by Defendants’ overstatements and misstatements of the Company’s - 17 - financial condition throughout the Class Period, Defendants, if they did not have actual knowledge of the misrepresentations and 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. 46. 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 Toshiba’s common stock was artificially inflated during the Class Period. In ignorance of the fact that market prices of Toshiba’s 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 disclosed in public statements by Defendants during the Class Period, Plaintiff and the other members of the Class acquired Toshiba common stock during the Class Period at artificially high prices and were or will be damaged thereby. 47. 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 Toshiba’s financial results, which were not disclosed by Defendants, Plaintiff and other members of the Class would not have purchased or otherwise acquired their Toshiba 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. 48. By virtue of the foregoing, Defendants have violated Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder. 49. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and the other members of the Class suffered damages in connection with - 18 - their respective purchases and sales 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 Plaintiff’s purchases of securities giving rise to the cause of action. SECOND CLAIM Violation of Section 20(a) Of The Exchange Act Against the Individual Defendants 51. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. 52. The Individual Defendants acted as controlling persons of Toshiba within the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions, agency, and their ownership and contractual rights, participation in and/or awareness of the Company’s operations and/or intimate knowledge of the false financial statements published by the Company and 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 Company, including the content and dissemination of the various statements that plaintiff contends are false and misleading. The 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 have been misleading prior to and/or shortly after these statements were issued and had the ability to prevent the issuance of the statements or to cause the statements to be corrected. 53. In particular, each Defendant had direct and supervisory involvement in the day-to-day operations of the Company and, therefore, is 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. - 19 - 54. As set forth above, Toshiba and the Individual Defendants each violated Section 10(b) and Rule 10b-5 by their acts and omissions as alleged in this Complaint. 55. 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 members of the Class suffered damages in connection with their purchases of the Company’s common stock during the Class Period. 56. This action was filed within two years of discovery of the fraud and within five years of Plaintiff’s purchases of securities giving rise to the cause of action. PRAYER FOR RELIEF WHEREFORE, Plaintiff prays for relief and judgment, as follows: (a) Determining that this action is a proper class action, designating Plaintiff as class representative under Rule 23 of the Federal Rules of Civil Procedure and Plaintiff’s counsel as Class 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) Awarding such other and further relief as the Court may deem just and proper. JURY TRIAL DEMANDED Plaintiff hereby demands a trial by jury. Dated: June 4, 2015 Respectfully submitted, - 20 - THE ROSEN LAW FIRM, P.A. /s/ Laurence Rosen Laurence M. Rosen, Esq. (SBN 219683) 355 S. Grand Avenue, Suite 2450 Los Angeles, CA 90071 Telephone: (213) 785-2610 Facsimile: (213) 226-4684 Email: lrosen@rosenlegal.com Counsel for Plaintiff - 21 -

securities

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John Du Wors, State Bar No. 233913 duwors@newmanlaw.com Leeor Neta, State Bar No. 233454 leeor@newmanlaw.com NEWMAN DU WORS LLP 1201 Third Avenue, Suite 1600 Seattle, WA 98101 Telephone: (206) 274-2800 Facsimile: (206) 274-2801 Attorneys for Plaintiffs UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA No. 14-2464 COMPLAINT FOR DAMAGES AND INJUNCTIVE RELIEF CLASS ACTION DEMAND FOR JURY TRIAL ZAK HURICKS, an individual, and TRISTA ROBINSON, an individual, by themselves and on behalf of all others similarly situated, Plaintiffs, v. SHOPKICK, INC., a Delaware corporation, Defendant. TABLE OF CONTENTS I. INTRODUCTION .................................................................................. 1 II. JURISDICTION AND VENUE ................................................................ 1 III. INTRADISTRICT ASSIGNMENT ......................................................... 2 IV. PARTIES ............................................................................................... 2 V. FACTS .................................................................................................. 2 A. Shopkick’s Mobile Application .................................................................... 2 B. Plaintiffs Received Text Messages Sent by Shopkick’s App ........................ 3 VI. CLASS ACTION ALLEGATIONS .......................................................... 5 VII. FIRST CAUSE OF ACTION (NEGLIGENT VIOLATIONS OF THE TELEPHONE CONSUMER PROTECTION ACT, 47 U.S.C. § 227 et Seq.) ...................................................................................................... 9 VIII. SECOND CAUSE OF ACTION (KNOWING AND/OR WILLFUL VIOLATIONS OF THE TELEPHONE CONSUMER PROTECTION ACT, 47 U.S.C. § 227 et Seq.) .................................................................. 9 IX. THIRD CAUSE OF ACTION (CAL. BUS. & PROF. CODE § 17200 et Seq.) ...................................................................................................... 9 X. PRAYER FOR RELIEF .......................................................................... 10 A. FIRST CAUSE OF ACTION FOR NEGLIGENT VIOLATIONS OF THE TCPA, 47 U.S.C. § 227 et Seq. ........................................................ 10 B. SECOND CAUSE OF ACTION FOR KNOWING/WILLFUL VIOLATIONS OF THE TCPA, 47 U.S.C. § 227 et Seq. .................................... 11 C. THIRD CAUSE OF ACTION FOR VIOLATIONS OF CAL. BUS. & PROF. CODE § 17200 et Seq. .................................................................... 11 I. INTRODUCTION 1. Plaintiffs Zak Huricks and Trista Robinson bring this complaint individually and on behalf of a class of similarly-situated individuals against Defendant Shopkick, Inc. for negligently, knowingly and willfully contacting Plaintiffs via cellular telephone in violation of the Telephone Consumer Protection Act, 47 U.S.C. § 227 et seq. (the “TCPA”) and for violation of Business and Professions Code § 17200 et seq. Plaintiffs allege as follows upon personal knowledge as to themselves and their own acts and experiences, and as to all other matters, upon information and belief. 2. The TCPA was designed to prevent calls and messages like the ones described within this complaint, and to protect the privacy of citizens like Plaintiffs. “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.” Telephone Consumer Protection Act of 1991, Pub. L. No. 102–243, § 2(11). 105 Stat. 2394, 2394 (1991). Toward this end, Congress found that “[b]anning such automated or prerecorded telephone calls to the home… is the only effective means of protecting telephone consumers from this nuisance and privacy invasion.” Id. at § 2(12). 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 §2(13). II. JURISDICTION AND VENUE 5. This Court has federal jurisdiction over the subject matter because this case arises out of violations of federal law. 6. Personal jurisdiction over Defendant Shopkick is proper in this Court. Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391(b) and/or (c) for the following reasons: a) Defendant Shopkick headquarters and principal place of business is in Redwood City, California; and b) on information and belief that a substantial part of the events or omissions giving rise to the claims occurred in the district. III. INTRADISTRICT ASSIGNMENT 7. Assignment to the San Francisco/Oakland district is proper because a substantial part of the events or omissions which give rise to the claim occurred or in which a substantial part of the property that is the subject of the action is situated in San Mateo County. IV. PARTIES 8. Plaintiff Zak Huricks is a United States resident and a “person” as defined by 47 U.S.C. § 153(39). 9. Plaintiff Trista Robinson is a United States resident and a “person” as defined by 47 U.S.C. § 153(39). 10. Defendant Shopkick is a Delaware corporation with its headquarters and principal place of business at 999 Main Street, Redwood City, California 94063. Plaintiffs allege that, at all times relevant herein, Defendant Shopkick conducted business in the State of California and in the County of San Mateo, and within this judicial district. At all times relevant, Shopkick is a “person” as defined by 27 U.S.C. § 153(39). V. FACTS A. Shopkick’s Mobile Application 11. Shopkick operates a shopping application for Apple and Android devices that helps customers discover products convenient to the customers’ location (the “App”). For example, the App shows customers popular products and rewards at stores like Target, Macy’s, and Crate & Barrel. The App then rewards the customer with points, or “kicks”, for going to the store, scanning items, and making purchases. Customers can then redeem their points for gift cards at participating retailers. The App has nearly 7 million users. 12. When a user downloads the App, she is offered the option of linking the App with her Facebook account or Google account. 13. If the user links the App to Facebook, the App then requests permission to “access your basic profile info, list of friends, likes and News Feed as well as your friends’ likes on your behalf.” 14. Similarly, if the user links the App to her Google account, the App requests permission to access the user’s profile information, notify individuals in her circle that she’s using the App, view her email address, and manage her contacts. 15. Once the user enters her Facebook or Google login information into the App, the App offers the user the opportunity to earn kicks: “BETTER with FRIENDS. Get started with 2,000 kicks when just three friends join. That’s like getting $8 gift card! The best part? You keep getting 2,000 kicks for every additional three friends that join.” If the user is interested in this incentive but has not linked the App with Facebook or Google, the App requires the user to link the App with Facebook or Google, or allow the App access to her phone’s contacts. 16. If the user pursues the 2,000 kicks, the App will sent a text message (the “Text Message”) to the user’s contacts that says “Hey, just gave you 50 bonus points on shopkick – a cool new app that rewards you for shopping. Check it out.” The Text Message also provides a link to Shopkick’s website. The App directs the user’s device to send the Text Message so that the Text Message appears to be from the App user—and not from Shopkick. 17. The App user can decides at any point to pursue the 2,000 kick reward offer, and the App will send the Text Message to stored telephone numbers. B. Plaintiffs Received Text Messages Sent by Shopkick’s App 18. On or about May 1, 2014, Plaintiffs Huricks and Robinson each received a Text Message, which stated “Hey, just gave you 50 bonus points on shopkick – a cool new app that rewards you for shopping. Check it out.” The Text Messages also provided a link to Shopkick’s website. 19. The App directed a user’s Apple or Android device to transmit the Text Messages to Plaintiffs. 20. Shopkick used the App to send the Text Message using an automatic telephone dialing system (ATDS) as defined by 47 U.S.C. § 277(a)(1) or an artificial or prerecorded message to contact numbers assigned to paging services, cellular telephone services, specialized mobile radio services, and/or other radio common carrier services, and/or services for which the called party is charged for the call. 21. Shopkick used its ATDS in order to contact Plaintiffs on their cellular telephones on at least one occasion, May 1, 2014. 22. Shopkick’s ATDS used by Shopkick to contact Plaintiffs had the capacity to store or produce telephone numbers to be contacted using a random or sequential number generator. 23. Shopkick’s ATDS has the capacity to generate numbers and dial them without human intervention. 24. Plaintiff Huricks’s telephone number ending in 6298 was assigned to a cellular telephone service. 25. Plaintiff Robinson’s telephone number ending in 9907 was assigned to a cellular telephone service. 26. Shopkick used the App to initiate a text message to a residential telephone line using an artificial or prerecorded message to deliver a message without the prior express consent of Plaintiffs. 27. The Text Messages sent to Plaintiffs constitute telephone communications that were not for emergency purposes as defined by 47 U.S.C. § 227(b)(1)(A)(i). 28. The Text Messages sent to Plaintiffs constitute telephone solicitations as defined by 47 U.S.C. § 227(a)(4). 29. At no time did Plaintiffs ever enter into a business relationship with Shopkick. 30. Plaintiffs did not provide their cellular telephone numbers to Shopkick directly or through any medium at any time. 31. Plaintiffs did not consent to receive text messages or another other calls from Shopkick directly or through any medium at any time. VI. CLASS ACTION ALLEGATIONS 32. Plaintiffs bring this suit as a class action pursuant to Federal Rule of Civil Procedure 23(a), (b)(1), (b)(2), (b)(3) and/or (c)(4), on behalf of themselves and the following Classes comprised of: a. All persons who received an unsolicited telephonic communication to their cellular telephones as a result of Defendant’s actions without receiving prior consent (the “National Class”); or b. All persons who reside in California and who received an unsolicited telephonic communication to their cellular telephones as a result of Defendant’s actions without receiving prior consent (the “California Class”). 33. Excluded from both the National Class and the California Class (collectively, the “Classes”) are: (a) Shopkick and any entity in which Shopkick has a controlling interest or which has a controlling interest in Shopkick; (b) Shopkick’s employees, agents, predecessors, successors or assigns; (c) Plaintiffs’ attorneys and any member of Plaintiffs’ attorneys’ immediate family; (d) the judge and staff to whom this case is assigned, and any member of the judge’s immediate family; (e) all persons who make a timely election to be excluded from the proposed Class; and (f) governmental entities. 34. Plaintiff reserves the right to modify the definitions of the Classes prior to moving for class certification. 35. This action has been brought on behalf of the Classes and may be properly maintained as a class action pursuant to CR 23 for the following reasons: a. The Classes are ascertainable and there is a well-defined community of interest among the members of the National Class and the California Class because all members received a text message sent by Shopkick through the App without giving prior consent. b. On information and belief, there are a minimum of 100 members of the National Class residing in each state within the United States. On information and belief, there are a minimum of 100 members of the California Class residing in each county within the state of California. Membership in both the Classes is so numerous and geographically dispersed as to make it impractical to bring all members of the Classes before the Court because the identity and exact number of members of the Classes are currently unknown but estimated to be well in excess of 5,000. c. Plaintiffs’ claims are typical of those of other members of the Classes, all of whom have suffered harm due to Shopkick’s course of conduct as alleged herein. d. Plaintiffs are members of the Classes because they both received a text message sent by Shopkick through the App without giving prior consent. e. There are numerous and substantial questions of law and fact common to all members of the Classes that control this litigation and predominate over any individual questions pursuant to FRCP 23(b)(3). The common issues include, but are not limited to, the following: i. Whether, within the four years prior to the filing of this Complaint, Shopkick or its agents initiated any telephonic communications (other than a message made for emergency purposes or made with the prior express consent of the called party) to a National Class and California Class member using any automatic dialing and/or pre-recorded voice to any telephone number assigned to a cellular phone service; ii. Whether Plaintiffs and the National Class and California Class members were damaged thereby, and to the extent of damages for such violation; and iii. Whether Shopkick and its agents should be enjoined from engaging in such conduct in the future. f. These and other questions of law and fact are common to the members of the Classes and predominate over any individual questions affecting the Classes. g. Plaintiffs will fairly and adequately protect the interests of the Classes in that Plaintiffs have no interests that are antagonistic to other members of the Classes and have retained counsel competent in the prosecution of class actions to represent them and the Classes. h. Without a class action lawsuit, the Classes’ members will continue to suffer damage, Shopkick’s violations of the law or laws will continue without remedy, and Shopkick will continue to enjoy the fruits and proceeds of its unlawful conduct. i. Given (1) the substantive complexity of this litigation; (2) the size of individual Classes’ members’ claims; and (3) the limited resources of the Classes’ members, few, if any, National Class or California Class members could afford to seek legal redress individually for the wrongs Shopkick has committed against them. j. This action will foster an orderly and expeditious administration of the Classes’ claims, will economize time, effort and expense, and will result in uniformity of decision because all matters will be resolved at one time with a minimum of legal fees and judicial resources. k. This action presents no difficulty that would impede the Court’s management of it as a class action, and a class action is the best and/or the only available means by which members of the Classes can seek legal redress for the harm caused by Shopkick. 36. The various claims asserted in this action are additionally or alternatively certifiable under the provisions of FRCP 23(b)(1) or 23(b)(2) because: a. The prosecution of separate actions by hundreds of individual National Class and California Class members would create a risk of inconsistent or varying adjudications with respect to individual National Class and California Class members, thus establishing incompatible standards of conduct for Shopkick; b. The prosecution of separate actions by individual National Class and California Class members would also create the risk of adjudications with respect to them that would, as a practical matter, be dispositive of the interests of the other National Class and California Class members who are not a party to such adjudications and would substantially impair or impede the ability of such non-party National Class and California Class members to protect their interests; and c. Shopkick has acted or refused to act on grounds generally applicable to the entire National Class and California Class, thereby making appropriate final declaratory and injunctive relief with respect to the National Class and California Class as a whole. The claims brought by Plaintiffs and the other members of the Classes all arise from substantially similar sets of facts and from Shopkick’s identical course of conduct. 37. The issues common to the Classes members’ claims, some of which are identified above, are alternatively certifiable pursuant to FRCP 23(c)(4) as resolution of these issues would materially advance the litigation, and class resolution of these issues is superior to repeated litigation of these issues in separate trials. VII. FIRST CAUSE OF ACTION (NEGLIGENT VIOLATIONS OF THE TELEPHONE CONSUMER PROTECTION ACT, 47 U.S.C. § 227 et Seq.) 38. Plaintiffs incorporate by reference all of the above paragraphs of this Complaint as though fully set forth herein. 39. The foregoing acts and omissions of Defendant constitute numerous and multiple negligent violations of the TCPA, including by not limited to each and every one of the above-cited provisions of 47 U.S.C. § 227 et seq. 40. As a result of Defendant’s negligent violations of 47 U.S.C. § 227 et seq., Plaintiffs and the National Class are entitled to an award of $500.00 in statutory damages for every violation pursuant to 47 U.S.C. § 227(b)(3)(B). 41. Plaintiffs and the National Class are also entitled to and seek injunctive relief prohibiting such conduct in the future. VIII. SECOND CAUSE OF ACTION (KNOWING AND/OR WILLFUL VIOLATIONS OF THE TELEPHONE CONSUMER PROTECTION ACT, 47 U.S.C. § 227 et Seq.) 42. Plaintiffs incorporate by reference all of the above paragraphs of this Complaint as though fully set forth herein. 43. 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. 44. As a result of Defendant’s knowing and/or willful violations of 47 U.S.C. § 227 et seq., Plaintiffs and the National Class are entitled to an award of $1,500.00 in statutory damages for every violation pursuant to 47 U.S.C. § 227(b)(3)(C). 45. Plaintiffs and the National Class are also entitled to and seek injunctive relief prohibiting such conduct in the future. IX. THIRD CAUSE OF ACTION (CAL. BUS. & PROF. CODE § 17200 et Seq.) 46. Plaintiff incorporates by reference all of the above paragraphs of this Complaint as though fully set forth herein. 47. Shopkick transmitted Text Messages to Plaintiffs on or about May 1, 2014 through its App. The Text Messages were transmitted using an ATDS or an artificial or prerecorded message. Shopkick did not receive Plaintiffs express consent prior to sending the Text Messages. 48. Shopkick’s conduct was an unlawful business practice because it violates the TCPA. 49. Shopkick’s conduct is also unfair, deceptive, untrue or misleading advertising because the App sent the Text Message but made it appear as if Plaintiffs’ acquaintance(s) sent the Text Message. 50. Plaintiffs and the National Class are also entitled to and seek injunctive relief prohibiting such conduct in the future. X. PRAYER FOR RELIEF Plaintiffs and the Class members respectfully request the following relief against Defendant: A. FIRST CAUSE OF ACTION FOR NEGLIGENT VIOLATIONS OF THE TCPA, 47 U.S.C. § 227 et Seq. a. A determination that this action is a proper class action maintainable pursuant to FRCP CR 23(a), (b)(1), (b)(2), (b)(3) and/or 23(c)(4), and appointing Plaintiff as representative of the National Class. b. As a result of Defendant’s negligent violations of 47 U.S.C. § 227(b)(1), Plaintiffs seeks, for themselves and each National Class member, $500.00 in statutory damages for each and every violation pursuant to 47 U.S.C. § 227(b)(3)(B). c. Pursuant to 47 U.S.C. § 227(b)(3)(A), injunctive relief prohibiting such conduct in the future. d. Any other relief the Court may deem just and proper. B. SECOND CAUSE OF ACTION FOR KNOWING/WILLFUL VIOLATIONS OF THE TCPA, 47 U.S.C. § 227 et Seq. a. A determination that this action is a proper class action maintainable pursuant to FRCP CR 23(a), (b)(1), (b)(2), (b)(3) and/or 23(c)(4), and appointing Plaintiff as representative of the National Class. b. As a result of Defendant’s negligent violations of 47 U.S.C. § 227(b)(1), Plaintiffs seeks, for themselves and each National Class, member $1,500.00 in statutory damages for each and every violation pursuant to 47 U.S.C. § 227(b)(3)(B). c. Pursuant to 47 U.S.C. § 227(b)(3)(A), injunctive relief prohibiting such conduct in the future. d. Any other relief the Court may deem just and proper. C. THIRD CAUSE OF ACTION FOR VIOLATIONS OF CAL. BUS. & PROF. CODE § 17200 et Seq. a. A determination that this action is a proper class action maintainable pursuant to FRCP CR 23(a), (b)(1), (b)(2), (b)(3) and/or 23(c)(4), and appointing Plaintiff as representative of the California Class. b. Pursuant to Cal. Bus. & Prof. Code § 17207, injunctive relief prohibiting such conduct in the future. c. Any other relief the Court may deem just and proper. DATED this 28th day of May 2014. NEWMAN DU WORS LLP By: John Du Wors, WSBA No. 33987 Email: john@newmanlaw.com Leeor Neta, State Bar No. 233454 leeor@newmanlaw.com Attorneys for Plaintiffs JURY DEMAND Pursuant to FED. R. CIV. P. 38(b), Plaintiffs demand a trial by jury of all issues presented in this complaint which are triable by jury. Dated this 28th day of May, 2014. NEWMAN DU WORS LLP By: John Du Wors, State Bar No. 233913 duwors@newmanlaw.com Leeor Neta, State Bar No. 233454 leeor@newmanlaw.com Attorneys for Plaintiffs

privacy

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JONATHAN A. STIEGLITZ, ESQ. (SBN 278028) jonathan.a.stieglitz@gmail.com THE LAW OFFICES OF JONATHAN A. STIEGLITZ 11845 W. Olympic Blvd., Suite 800 Los Angeles, California 90064 Telephone: (323) 979-2063 Facsimile: (323) 488-6748 Attorney for Plaintiff UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA ------------------------------------------------------------------------x Armand Edery, individually and on behalf of all others similarly situated, Plaintiff, Index No.: CLASS ACTION COMPLAINT for violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. -against- DEMAND FOR JURY TRIAL Unifin, Inc., and John Does 1-25, Defendant(s). ------------------------------------------------------------------------x Plaintiff Israel Husarsky brings this Class Action Complaint by and through his attorneys, The Law Offices of Jonathan A. Stieglitz, against Defendant Unifin, Inc. (“Unifin”), 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”) 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). 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. 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 it. § 1692k. JURISDICTION AND VENUE - 2 - 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 this is where the Plaintiff resides as well as 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 California consumers under § 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 California, County of Los Angeles, residing at 20644 Martinez St., Woodland Hills, CA, 91364. 8. Defendant Unifin is a "debt collector" as the phrase is defined in 15 U.S.C. § 1692(a)(6) and used in the FDCPA and may be served upon its registered agent Incorp Services Inc. at 901 S 2nd St, Ste. 201, Springfield, IL 62704. 9. Upon information and belief, Defendant Unifin 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. - 3 - 10. 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 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 California; b. to whom Defendant Unifin sent a letter; c. attempting to collect a consumer debt; d. that offers to accept payment “towards a discounted offer”; e. that does not state whether the offered settlement amount will be accepted as payment in full; or f. does not state the due date for one or more of the settlement payments; g. 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. - 4 - 13. 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 have purchased debts. 14. 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. 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 Defendant’s written communication to consumers, in the forms attached as Exhibit A, violate 15 U.S.C. §§ 1692e 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 his attorneys have any interests which might cause them not to vigorously pursue this action. - 5 - 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 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 predominance over any questions or issues involving only individual class members. The principal issue is whether the Defendant’s written communication to consumers, in the forms attached as Exhibit A, violate 15 U.S.C. § 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 Defendant’s 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. Plaintiff is committed to vigorously litigating this matter. Plaintiff has also retained - 6 - counsel experienced in handling consumer lawsuits, complex legal issues, and class actions. Neither the Plaintiff nor 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 - 7 - 20. Plaintiff repeats the above paragraphs as if set forth here. 21. Some time prior to August 19, 2020, an obligation was allegedly incurred to Bank of America, N.A. 22. The obligation arose out of a transaction in which money, property, insurance or services, of which the subject transactions, were incurred for personal purposes, specifically a Bank of America, N.A. credit card used for these types of transactions. 23. The alleged Bank of America, N.A. obligation is a "debt" as defined by 15 U.S.C. § 1692a (5). 24. Bank of America, N.A. is a "creditor" as defined by 15 U.S.C.§ 1692a (4). 25. Upon information and belief Bank of America, N.A. 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 - August 19, 2020 Collection Letter 27. On or about August 19, 2020, Defendant sent the Plaintiff a collection letter regarding the alleged debt owed to Bank of America, N.A. A copy of this letter is attached as Exhibit A. - 8 - 28. The letter lists the “Amount Due” as $17,803.02. 29. Further down in the letter it states: 1 payment of $5340.91 12 monthly payments towards the towards a discounted offer 3 payments of $2670.45 towards a discounted offer balance in full To take advantage of the discounted offer(s), please have payment (or first payment) in our office within 45 days from August 19, 2020. 30. The letter is confusing and deceptive by referring to a “discounted offer” that each payment will “towards”, without clearly defining such offer. 31. Alternatively, the letter is confusing and deceptive as it fails to state whether or not the debt will be considered settled if the consumer makes the listed payments. 32. In addition, the “3 payments” option does not have a due date for the second and third payments. 33. Perhaps those payments are due monthly or perhaps they are due before or after that – as only the first payment is requested within 45 days of August 19, 2020. 34. It appears that none of the settlement offers have firm due dates as Defendant only requests for payment by a specific date, and does not require that it be done by that date (“please have payment (or first payment) in our office within 45 days from August 19, 2020”). 35. In sum, the consumer is unable to determine what is the amount of the alleged “discounted offer”, or whether, if payments are sent, they will be accepted - 9 - in full settlement, and further is unable to discern the due dates for some of the settlement installments. 36. As a result of Defendant’s deceptive, misleading, and unfair debt collection practices, Plaintiff has been damaged. COUNT I VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT 15 U.S.C. § 1692e et seq. 37. Plaintiff repeats the above paragraphs as if set forth here. 38. 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. 39. 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. 40. Defendant violated said section, including § 1692e (10), by using false and deceptive means to collect a debt by: a. failing to state when some of the settlement payments were due; b. failing to state whether or not the settlement payment(s) would be considered payment in full; and c. mentioning a “discounted offer” without describing it. - 10 - 41. By reason thereof, Defendant is liable to Plaintiff for judgment that Defendant's conduct violated Section 1692e et seq. of the FDCPA and is entitled to 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. 42. Plaintiff repeats the above paragraphs as if set forth here. 43. 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. 44. 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. 45. Defendant violated this section by a. failing to state when some of the settlement payments were due; b. failing to state whether or not the settlement payment(s) would be considered payment in full; and a. mentioning a “discounted offer” without describing it. 46. By reason thereof, Defendant is liable to Plaintiff for judgment that Defendant's conduct violated Section 1692f et seq. of the FDCPA and is entitled to actual damages, statutory damages, costs and attorneys’ fees. DEMAND FOR TRIAL BY JURY - 11 - 47. 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 Armand Edery, individually and on behalf of all others similarly situated, demands judgment from Defendant Unifin as follows: i. Declaring that this action is properly maintainable as a Class Action and certifying Plaintiff as Class representative, and Jonathan A. Stieglitz, Esq., as Class Counsel; ii. Awarding Plaintiff and the Class statutory damages; iii. Awarding Plaintiff and the Class actual damages; iv. Awarding Plaintiff costs of this Action, including reasonable attorneys’ fees and expenses; v. Awarding pre-judgment interest and post-judgment interest; and vi. Awarding Plaintiff and the Class such other and further relief as this Court may deem just and proper. Dated: November 5, 2020 THE LAW OFFICES OF JONATHAN A. STIEGLITZ By: /s/ Jonathan A Stieglitz Jonathan A Stieglitz - 12 -

consumer fraud

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IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION DEDRICK PAGE, ) JURY TRIAL DEMANDED on behalf of himself and ) all those similarly situated, ) ) Plaintiff, ) CIVIL ACTION NO. ) v. ) ) THE HERTZ CORPORATION and ) HERTZ LOCAL EDITION CORP., ) ) Collective Action – Defendants. ) 29 U.S.C. § 216 (b) COMPLAINT Nature of the Claim PLAINTIFF DEDRICK PAGE (“PLAINTIFF”), for himself and on behalf of others similarly situated who consent to representation, hereby asserts claims under the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (“FLSA”) for unpaid overtime compensation, liquidated damages, prejudgment and postjudgment interest, reasonable expenses of litigation and attorneys fees, based on the grounds set forth below. Jurisdiction and Venue 1. This Court has subject-matter jurisdiction over PLAINTIFF’S claims pursuant to 28 U.S.C. § 1331 because this action arises under the laws of the United States, 28 U.S.C. § 1337 because this action arises under Acts of Congress regulating commerce, and 29 U.S.C. § 216(b) because this action arises under the FLSA. 2. Under 28 U.S.C. § 1391(b), venue is appropriate in this district because a substantial part of the events or omissions giving rise to the claims at issue occurred in this judicial district. The Parties 3. PLAINTIFF is a former employee of defendants THE HERTZ CORPORATION and HERTZ LOCAL EDITION CORP. (collectively “DEFENDANTS”), for whom he worked from on or about August 2008 to on or about March 2010. 4. At all relevant times PLAINTIFF was a resident of the state of Georgia. 5. At all relevant times, PLAINTIFF was employed at DEFENDANTS’ branch and satellite locations in Chamblee, Georgia. 6. At all relevant times during PLAINTIFF’S employment with DEFENDANTS, he performed the job duties for positions that DEFENDANTS commonly referred to as manager trainee. 7. At various relevant times during DEFENDANTS’ employment of PLAINTIFF, DEFENDANTS did not pay PLAINTIFF proper overtime compensation in violation of the FLSA. 8. At all relevant times, DEFENDANTS were corporations doing business within this judicial district and are subject to the jurisdiction of this Court. The Class 9. PLAINTIFF brings this case as a collective action pursuant to the collective-action provision of 29 U.S.C. § 216(b) for all Class Members within the Class described below in ¶ 10. 10. The Class whom PLAINTIFF represents is defined as: All employees of defendants THE HERTZ CORPORATION and/or HERTZ LOCAL EDITION who performed the duties of a manager trainee, or a manager associate, or an assistant branch manager at any location over which either Matt Earnest or April Matthews had responsibility as an area manager, during the period of three (3) years prior to the date of commencement of this action through the date of judgment in this action, and which employees were not paid proper overtime compensation required by federal law. 11. PLAINTIFF consents to participate in this collective action. His consent is attached hereto as Exhibit 1 and is a part hereof for all purposes pursuant to Fed. R. Civ. P. 10(c). The consents of other similarly situated individuals to participate in this lawsuit may be filed with the Court from time to time as they opt-in to this litigation, pursuant to 29 U.S.C. § 216(b). Grounds for this Action 12. At all relevant times, DEFENDANTS have operated car-rental locations in Georgia, including locations in Alpharetta, Atlanta, Buford, Chamblee, Decatur, Duluth, Gainesville, Lawrenceville, Roswell, and Sandy Springs. 13. At all relevant times, PLAINTIFF and the Class Members were paid at an hourly rate, and were non-exempt for purposes of the FLSA. 14. At all relevant times, each of the DEFENDANTS was an “employer” within the meaning of 29 U.S.C. § 203(d). 15. At all relevant times, each of the DEFENDANTS was not exempt from the overtime obligations of an “employer” under the FLSA, 29 U.S.C. § 201 et seq. 16. At all relevant times, PLAINTIFF and the Class Members were employed by each of the DEFENDANTS as employees, and therefore PLAINTIFF and the Class Members were employees within the meaning of 29 U.S.C. § 203(e)(1). 17. At all relevant times, each of the DEFENDANTS employed PLAINTIFF and the Class Members as employees and therefore each of the DEFENDANTS was an “employer” within the meaning of 29 U.S.C. § 203(d) and not exempt under the FLSA. 18. At all relevant times, each of the DEFENDANTS had an annual gross volume of sales made that was more than $500,000. At all relevant times, each of the DEFENDANTS had employees engaged in commerce. At all relevant times, because each of the DEFENDANTS had an annual gross volume of sales made that was more than $500,000 and had employees engaged in commerce, each of the DEFENDANTS was an enterprise engaged in commerce within the meaning of 29 U.S.C. 203(s)(1). 19. At all relevant times, PLAINTIFF and the Class Members were employees engaged in commerce and were employed by an enterprise engaged in commerce within the meaning of the FLSA and therefore are expressly covered by the protections of 29 U.S.C. § 207(a). 20. At all relevant times, PLAINTIFF and the Class Members performed the job duties of manager trainee, manager associate, or assistant branch manager. 21. At all relevant times, the positions of manager trainee, manager associate, and assistant branch manager performed by PLAINTIFF and the Class Members were paid at an hourly rate, and were non-exempt for purposes of the FLSA. 22. At all relevant times, DEFENDANTS classified PLAINTIFF and the Class Members as non-exempt employees for purposes of the FLSA. 23. At all relevant times, the primary duties of PLAINTIFF and the Class Members as a manager trainee or manager associate included waiting on customers who asked about renting a car, processing the customers’ requests, transporting cars, cleaning cars, preparing reports, maintaining cars, and tracking car inventory. 24. At all relevant times, the primary duties of the Class Members as an assistant branch manager included performing the duties of a manager associate, as well as scheduling staff, supervising staff, preparing additional reports, making bank deposits, and accounting for cash. 25. At all relevant times, PLAINTIFF and the Class Members worked at DEFENDANTS’ branch and satellite locations over which area managers Matt Earnest and April Matthews had supervisory authority and responsibility. 26. At all relevant times, PLAINTIFF and the Class Members worked at DEFENDANTS’ branch and satellite locations that were managed by branch managers who reported to, were supervised by, and took orders and directions from area managers Matt Earnest or April Matthews. These branch managers include but are not limited to Jim Bateman, Karl Cooper, Tim Dunlap, Charlie Elder, Solomon Fisherbier, LaShanda Henderson, Laria Lindsey, Todd Starbuck, and Sandra Zachary. 27. At all relevant times, area managers Matt Earnest and April Matthews supervised branch managers, including but not limited to Jim Bateman, Karl Cooper, Tim Dunlap, Charlie Elder, Solomon Fisherbier, LaShanda Henderson, Laria Lindsey, Todd Starbuck, and Sandra Zachary. 28. At all relevant times, area managers Matt Earnest and April Matthews directed the branch managers whom they supervised to falsify the time records of hourly-paid employees over whom the branch managers had responsibility by manually falsely reducing such employees’ time records by up to one hour on those days when the hourly-paid employee did not clock out for lunch—even though the employee took no lunch break and actually worked during the falsely deleted time period. 29. At all relevant times, the branch managers described above in ¶¶ 26-28 did as they were instructed by Earnest and Matthews, i.e., falsified the time records of PLAINTIFF and Class Members. 30. At all relevant times, PLAINTIFF and Class Members complained to their branch managers about DEFENDANTS’ policy, practice, plan and scheme of falsifying their time records, as described above in ¶¶ 28- 31. In response to their complaints, PLAINTIFF and Class Members were told by their branch managers that the branch managers were directed by area managers to manually falsely reduce the time records of hourly-paid employees for up to one hour on those days when the hourly-paid employee did not clock out for lunch – even though the employee did not take a lunch break and actually worked through lunch during the falsely deleted time period. 32. Despite the complaints of PLAINTIFF and Class Members to DEFENDANTS’ managers about DEFENDANTS’ policy, practice, plan, and scheme of falsely reducing the time records of hourly-paid employees for up to one hour on those days when the hourly-paid employee did not clock out for lunch because the employee did not take a lunch break and actually worked through lunch, DEFENDANTS’ policy, practice, plan, and scheme continued. 33. At all relevant times, PLAINTIFF and the Class Members who worked at branch and satellite locations managed by area managers Matt Earnest and April Matthews were paid an hourly wage, and were non-exempt for purposes of the FLSA. 34. At all relevant times, PLAINTIFF and the Class Members who worked as manager trainees at branch and satellite locations managed by area managers Matt Earnest and April Matthews performed the same job duties. 35. At all relevant times, the Class Members who worked as manager associates at branch and satellite locations managed by area managers Matt Earnest and April Matthews performed the same job duties. 36. At all relevant times, the Class Members who worked as assistant branch managers at branch and satellite locations managed by area managers Matt Earnest and April Matthews performed the same job duties. 37. At all relevant times, PLAINTIFF and the Class Members have been subject to same policies, procedures, practices, and guidelines of DEFENDANTS. 38. At all relevant times, PLAINTIFF and the Class Members who worked at branch and satellite locations managed by area managers Matt Earnest and April Matthews were subject to the same clock-in and clock-out procedures. Such employees were required on a daily basis to clock-in at the beginning of their scheduled shift and clock-out when they finished working. If such employees took a lunch break, they clocked-out when they started their break and clocked-in when they returned from their lunch break and started working again. However, DEFENDANTS paid PLAINTIFF and the Class Members for less than the number of hours they actually worked each week based on when they clocked in and clocked out each day. 39. At all relevant times, DEFENDANTS maintained documents indicating those days and time of day when a manager manually made changes to the time records of PLAINTIFF and the Class Members. 40. At all relevant times, DEFENDANTS did not properly record all hours worked by PLAINTIFF and the Class Members. 41. At all various relevant times, PLAINTIFF and the Class Members worked over 40 hours per week. 42. At all various relevant times, DEFENDANTS did not pay PLAINTIFF and the Class Members proper overtime compensation for all hours worked in excess of 40 hours in a work week at the rate of one and one- half times their regular rate of pay. 43. At all various relevant times, when DEFENDANTS did not pay PLAINTIFF and the Class Members proper overtime compensation for all hours worked in excess of 40 hours in a work week, DEFENDANTS and DEFENDANTS’ managers were aware of the extra hours PLAINTIFF and the Class Members worked each week in excess of 40 hours. 44. At all relevant times, there is no evidence that the conduct of DEFENDANTS that gave rise to this action was in good faith and based on reasonable grounds for believing that its conduct did not violate the FLSA. 45. At all relevant times, DEFENDANTS knowingly, intentionally, and willfully violated the FLSA by failing to pay PLAINTIFF and the Class Members the proper overtime compensation and other compensation to which they are entitled. Collective-Action Allegations Pursuant to 29 U.S.C. § 216(b) 46. PLAINTIFF seeks to bring all claims arising under the FLSA on behalf of himself individually and all other similarly situated employees of the DEFENDANTS who worked in any pay period falling within three chronological years immediately preceding the date on which this action was initially filed and continuing thereafter through the date on which final judgment is entered in this action and who timely file (or have already filed) a written consent to be a party to this action pursuant to 29 U.S.C. § 216(b). 47. PLAINTIFF and the Class Members seek unpaid overtime wages, liquidated damages, and prejudgment and postjudgment interest. 48. PLAINTIFF and the Class Members, as defined above in ¶ 10, are similarly situated. PLAINTIFF and the Class Members worked for DEFENDANTS performing similar job duties at DEFENDANTS’ locations, and were subject to similar job requirements, similar policies and procedures, and the same compensation plan. 49. DEFENDANTS subjected PLAINTIFF and the Class Members to a common policy, practice, plan or scheme that involved branch managers falsifying time records of hourly-paid employees for up to one hour on those days when the hourly-paid employee did not clock out for lunch—even though such employee did not take a lunch break and actually worked through lunch—by manually reducing such employee’s time. 50. DEFENDANTS subjected PLAINTIFF and the Class Members to a common policy, practice, plan or scheme that required or permitted them to perform uncompensated work for the benefit of DEFENDANTS in excess of 40 hours per workweek. 51. DEFENDANTS required PLAINTIFF and the Class Members to work more than 40 hours in a workweek without properly compensating these employees at one and a half times their regular rate of pay. 52. DEFENDANTS did not pay PLAINTIFF and the Class Members proper overtime compensation as required by 29 U.S.C. § 207. COUNT 1 (Violation of 29 U.S.C. § 207 – Overtime Compensation Due Under the FLSA) 53. PLAINTIFF re-alleges paragraphs 1-52 above and incorporates them by reference as if fully set forth herein. 54. By engaging in the above-described conduct, DEFENDANTS violated the FLSA with respect to PLAINTIFF and the Class Members in failing to pay them wages at a rate of 1.5 times their regular rate, for hours worked in excess of forty hours per week, all in violation of 29 U.S.C. § 207. 55. By engaging in the above-described conduct, DEFENDANTS knowingly, intentionally and willfully violated the FLSA with respect to PLAINTIFF and the Class Members, all in violation of 29 U.S.C. § 255. 56. 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 29 U.S.C. § 207. 57. As a direct and proximate result of DEFENDANTS’ conduct alleged above in ¶¶ 12-45, and herein incorporated as if fully set forth, PLAINTIFF and the Class Members have suffered lost wages. 58. As a direct and proximate result of DEFENDANTS’ FLSA violations alleged in this Count 1, PLAINTIFF and the Class Members are entitled to recover their unpaid overtime compensation and an equal amount in the form of liquidated damages, prejudgment and postjudgment interest, 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, from DEFENDANTS. PRAYER FOR RELIEF WHEREFORE, PLAINTIFF respectfully prays that this Court: 1. Issue a declaratory judgment that DEFENDANTS have engaged in unlawful employment practices in violation of the FLSA with respect to PLAINTIFF and the Class Members, as authorized by 28 U.S.C. § 2201; 2. Require DEFENDANTS to pay PLAINTIFF and the Class Members all lost compensation due and owing, including all such overtime compensation calculated at one and one-half times the proper normal rate that PLAINTIFF and the Class Members would have received but for DEFENDANTS’ unlawful conduct; 3. Require DEFENDANTS to pay PLAINTIFF and the Class Members liquidated damages pursuant to the FLSA, plus prejudgment and postjudgment interest; 4. Award PLAINTIFF and the Class Members their reasonable attorneys’ fees and costs and expenses of suit arising from DEFENDANTS’ violations under the FLSA; 5. Permit a trial by jury on all issues so triable; and 6. Provide such other and further relief as the Court may deem just and proper. DEMAND FOR A JURY TRIAL PLAINTIFF hereby demands a jury trial on all claims for which he has a right to a jury. Respectfully submitted, s/ Alan H. Garber Alan H. Garber Georgia Bar No. 283840 Marc N. Garber Georgia Bar No. 283847 THE GARBER LAW FIRM, P.C. 4994 Lower Roswell Rd Ste 14 Marietta, Georgia 30068 (678) 560-6685 (678) 560-5067 (facsimile) ahgarber@garberlaw.net mngarber@garberlaw.net Counsel for the Plaintiff and Putative Class

employment & labor

IdM9D4cBD5gMZwczuWIN

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ALEX SARRAF, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. Case No. COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS DEMAND FOR JURY TRIAL BT GROUP PLC., GAVIN E. PATTERSON, IAN LIVINGSTON, and TONY CHANMUGAM, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CLASS ACTION COMPLAINT Plaintiff Alex Sarraf (“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 its attorneys, which included, among other things, a review of the Defendants’ public documents, conference calls and announcements made by Defendants, U.S. Securities and Exchange Commission (“SEC”) filings, wire and press releases published by and regarding BT Group PLC (“BT Group” 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. 1 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 the American Depositary Receipts (“ADRs”) of BT Group between May 23, 2013 and January 23, 2017, 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. BT Group is a multinational telecommunications services company that offers fixed-line services, broadband, mobile and TV products and services, and networked IT services in the United Kingdom and across the world. The Company also sells wholesale products and services to communications providers around the world. Globally, BT Group supplies managed networked IT services to multinational corporations, domestic businesses, and national and local government organizations. 3. Founded in 2001, the Company was formerly known as “Newgate Telecommunications Limited” and changed its name to BT Group plc in September 2001. BT Group is headquartered in London, England. The Company’s ADRs trade on the New York Stock Exchange (“NYSE”) under the ticker symbol “BT.” 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) the Company’s Italian division had for years engaged in improper accounting practices; (ii) as a result, BT Group significantly overstated its earnings throughout the Class Period; (iii) the foregoing facts, when they became known, would foreseeably cause BT Group to cut its revenue, earnings, 2 and free cash flow forecasts; and (iv) as a result of the foregoing, BT Group’s public statements were materially false and misleading at all relevant times. 5. On October 27, 2016, BT Group announced that the Company had uncovered “inappropriate management behavior” at its Italian division. BT Group advised investors that the Company had “conducted an initial internal investigation” which “included a review of accounting practices during which we have identified certain historical accounting errors and reassessed certain areas of management judgment.” Consequently, the Company announced that it had “written down the value of items on the balance sheet by £145 [million].” 6. On this news, BT Group’s ADR price fell $0.57, or 2.39%, to close at $23.25 on October 27, 2016. 7. On January 24, 2017, BT Group issued a news release entitled “Update on investigation into BT’s Italian business and on BT Group outlook.” The news release stated, in relevant part: The investigation into the financial position of our Italian business is now substantially complete. The adjustments identified have increased from the £145m announced in our halfyear update to a total of around £530m. We are still evaluating what proportion of the total adjustments should be treated as prior year errors, and what proportion should be treated as the reassessment in the current year of management estimates. Work is also ongoing to establish how these adjustments should be reflected in BT Group’s financial statements for the current and previous periods in light of applicable accounting requirements. . . . The improper behaviour in our Italian business is an extremely serious matter, and we have taken immediate steps to strengthen the financial processes and controls in that business. We suspended a number of BT Italy’s senior management team who have now left the business. We have also appointed a new Chief Executive of BT Italy who will take charge on 1 February 2017. He will review the Italian management team and will work with BT Group Ethics and Compliance to improve the governance, compliance and financial safeguards in our Italian business. 3 Further, we are conducting a broader review of financial processes, systems and controls across the Group. The BT Group Remuneration Committee will consider the wider implications of the BT Italy investigation. Gavin Patterson, Chief Executive BT Group plc, said: “We are deeply disappointed with the improper practices which we have found in our Italian business. We have undertaken extensive investigations into that business and are committed to ensuring the highest standards across the whole of BT for the benefit of our customers, shareholders, employees and all other stakeholders.” . . . As a result of the outcome of the BT Italy investigation and the pressures in the UK public sector and international corporate markets, we now expect underlying revenue excluding transit adjusted for the acquisition of EE to be broadly flat in 2016/17 and adjusted EBITDA to be around £7.6bn. Normalised free cash flow is now expected to be around £2.5bn. For 2017/18, we now expect both underlying revenue excluding transit and adjusted EBITDA to be broadly flat year on year. We expect normalised free cash flow to be £3.0bn - £3.2bn. (Emphases added.) 8. On this news, BT Group’s ADR price fell $5.05, or 20.67%, to close at $19.38 on January 24, 2017. 9. 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 10. 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 by the SEC (17 C.F.R. § 240.10b-5). 11. 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. 4 12. Venue is proper in this District pursuant to § 27 of the Exchange Act and 28 U.S.C. § 1391(b). BT Group’s ADRs trade on the NYSE, located within this District. 13. 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 14. Plaintiff, as set forth in the attached Certification, acquired BT Group ADRs at artificially inflated prices during the Class Period and was damaged upon the revelation of the alleged corrective disclosures. 15. Defendant BT Group is incorporated under the laws of England. The Company’s principal executive offices are located at 81 Newgate Street London England X0 EC1A 7AJ. BT Group’s shares trade on the NYSE under the ticker symbol “BT.” 16. Defendant Gavin E. Patterson (“Patterson”) has served as the Company’s Chief Executive Officer (“CEO”) since September 2013. 17. Defendant Ian Livingston (“Livingston”) served as the Company’s CEO from June 2008 to September 2013. 18. Defendant Tony Chanmugam (“Chanmugam”) served as the Company’s Finance Director from 2008 to July 2016. 19. The Defendants referenced above in ¶¶ 16-18 are sometimes referred to herein as the “Individual Defendants.” 5 SUBSTANTIVE ALLEGATIONS Background 20. BT Group is a multinational telecommunications services company that offers fixed-line services, broadband, mobile and TV products and services, and networked IT services in the United Kingdom and across the world. The Company also sells wholesale products and services to communications providers around the world. Globally, BT Group supplies managed networked IT services to multinational corporations, domestic businesses, and national and local government organizations. Materially False and Misleading Statements Issued During the Class Period 21. The Class Period begins on May 23, 2013, when BT Group filed an annual report on Form 20-F with the SEC, announcing the Company’s financial and operating results for the quarter and fiscal year ended March 31, 2013 (the “2013 20-F”). For the quarter, BT Group reported net income of £555 million, or £0.07 per diluted share, on revenue of £4.81 billion, compared to net income of £632 million, or £0.08 per diluted share, on revenue of £4.87 billion for the same period in the prior year. For fiscal year 2013, BT Group reported net income of £1.94 billion, or £0.24 per diluted share, on revenue of £18.1 billion, compared to net income of £2.0 billion, or £0.24 per diluted share, on revenue of £18.9 billion for fiscal year 2012. 22. In the 2013 20-F, BT Group stated, in part: Business integrity and ethics We are committed to maintaining high standards of ethical behaviour, and have a zero tolerance approach to bribery and corruption. We have to comply with a wide range of local and international anti-corruption and bribery laws. In particular the UK Bribery Act and US Foreign and Corrupt Practices Act (FCPA) provide comprehensive anti-bribery legislation. Both have extraterritorial reach and thereby cover our global operations. As we expand internationally, we are increasingly operating in countries identified as having a higher risk of bribery and corruption. 6 We also have to ensure compliance with trade sanctions, and import and export controls. . . . BT Global Services . . . The UK is our largest region by revenue. We have a large base of customers in the corporate sector and serve public sector bodies such as central government and local councils. In continental Europe, we run large businesses in key countries such as Belgium, France, Germany, Italy, the Netherlands and Spain. Current Analysis ranked us second in the German market for pan-European and global IP and data services. In Italy, we are the main country-wide operator exclusively focused on business-to- business services. In Spain, the telecoms regulator ranked BT as the leading alternative to the incumbent operator in the enterprise data market. We also support customers in Central and Eastern Europe, the Nordics and Russia. . . . Corporate governance statement We are committed to operating in accordance with best practice in business integrity and ethics and maintaining the highest standards of financial reporting and corporate governance. The directors consider that BT has, throughout the year, complied with the provisions of the UK Corporate Governance Code (the Code) as currently in effect and applied the main principles of the Code as described on pages 63 to 97 of this Report of the Directors. . . . Governance and compliance In line with our revised terms of reference, we oversee and monitor BT’s governance framework (including our regional approach to governance) so that it continues to be fit for purpose to meet BT’s business and organisational goals and is consistent with our approach to risk. We have oversight of our key compliance programmes. These include: ethics and business practices; sanctions and international trade; regulatory compliance; and data preservation and protection in the UK and around the world. We review the process for, and effectiveness of, our whistleblowing procedures, and we have a code of ethics for the Chief Executive, Group Finance Director and senior finance managers as required by the Sarbanes- Oxley Act. We keep under review that the Board and its committees are 7 appropriately receiving assurances on all major governance and compliance matters. (Emphasis added.) 23. The 2013 20-F contained signed certifications pursuant to the Sarbanes-Oxley Act of 2002 (“SOX”) by Defendants Livingston and Chanmugam, stating that the financial information contained in the 2013 20-F was accurate and disclosed any material changes to the Company’s internal control over financial reporting. 24. On July 25, 2013, BT Group issued a press release and filed a Current Report on Form 6-K with the SEC, announcing the Company’s financial and operating results for the quarter ended June 30, 2013 (the “Q1 2013 6-K”). For the quarter, BT Group reported net income of £346 million, or £0.04 per diluted share, on revenue of £4.45 billion, compared to net income of £415 million, or £0.05 per diluted share, on revenue of £4.50 billion for the same period in the prior 25. On October 31, 2013, BT Group issued a press release and filed a Current Report on Form 6-K with the SEC, announcing the Company’s financial and operating results for the quarter ended September 30, 2013 (the “Q2 2013 6-K”). For the quarter, BT Group reported net income of £613 million, or £0.07 per diluted share, on revenue of £4.49 billion, compared to net income of £528 million, or £0.06 per diluted share, on revenue of £4.41 billion for the same period in the prior year. 26. On January 31, 2014, BT Group issued a press release and filed Current Report on Form 6-K with the SEC, announcing the Company’s financial and operating results for the quarter ended December 31, 2013 (the “Q3 2013 6-K”). For the quarter, BT Group reported net income of £493 million, or £0.06 per diluted share, on revenue of £4.6 billion, compared to net income of 8 £450 million, or £0.06 per diluted share, on revenue of £4.37 billion for the same period in the prior year. 27. On May 22, 2014, BT Group filed an annual report on Form 20-F with the SEC, announcing the Company’s financial and operating results for the quarter and fiscal year ended March 31, 2014 (the “2014 20-F”). For the quarter, BT Group reported net income of £566 million, or £0.07 per diluted share, on revenue of £4.78 billion, compared to net income of £555 million, or £0.07 per diluted share, on revenue of £4.81 billion for the same period in the prior year. For fiscal year 2014, BT Group reported net income of £2.01 billion, or £0.25 per diluted share, on revenue of £18.28 billion, compared to net income of £1.94 billion, or £0.24 per diluted share, on revenue of £18.1 billion for fiscal year 2013. 28. The 2014 20-F contained signed certifications pursuant to SOX by Defendants Patterson and Chanmugam, stating that the financial information contained in the 2014 20-F was accurate and disclosed any material changes to the Company’s internal controls over financial reporting. 29. In the 2014 20-F, BT Group stated, in part: BT Global Services . . . By region, the UK is our largest in terms of revenue. We serve a wide range of customers, with the financial, government and healthcare segments being particularly significant. Current Analysis ranked us as the number one provider in the UK public sector market, as well as a leader in the UK IP telephony and unified communications market. Continental Europe is our second largest region, but the slow economic recovery makes this a tough market as corporate customers continue to look for ways to make savings. We have a strong presence in this region with national networks and metropolitan fibre rings in most major markets. We focus on certain key countries such as Belgium, France, Germany, Italy, the Netherlands and Spain. In Italy, according to the telecoms regulator, we are the leading operator of those dedicated to business-to-business services. In Spain, the telecoms regulator ranked BT as the 9 leading alternative to the incumbent operator in the enterprise data transmission market. . . . Business integrity and ethics We are committed to maintaining high standards of ethical behaviour, and have a zero tolerance approach to bribery and corruption. We have to comply with a wide range of local and international anti-corruption and bribery laws. In particular, the UK Bribery Act and the US Foreign and Corrupt Practices Act (FCPA) provide comprehensive anti-bribery legislation. Both have extraterritorial reach and so cover our global operations. As we expand internationally, we are increasingly operating in countries identified as having a higher risk of bribery and corruption. We also have to ensure that we comply with trade sanctions, and import and export controls. . . . Corporate governance statement We are committed to operating in accordance with best practice in business integrity and ethics and maintaining the highest standards of financial reporting and corporate governance. The directors consider that BT has complied throughout the year with the provisions of the UK Corporate Governance Code (the Code) as currently in effect and applied the main principles of the Code as described on pages 75 to 115 of this Report of the Directors. . . . Audit & Risk Committee Chairman’s report “This year the Audit & Risk Committee paid special attention to several overseas locations that are important to BT Global Services, including Italy and Brazil, to data security and to the increasing cyber security threat. We have received detailed presentations from key personnel in each of these areas and reviewed management’s mitigation plans.” . . . Governance and compliance programmes As part of our governance oversight role, we have reviewed a number of BT’s core compliance programmes. We received a presentation on the increasingly important data governance programme and endorsed the current areas of focus. We also reviewed BT’s proposed conflict minerals compliance programme and received an 10 update on BT’s programme to monitor international trade and sanctions. At each meeting, we received an update on the implementation of our anti-corruption and bribery compliance programme for agents (agents programme) and highlighted the important oversight role that the Regional Governance Committees (RGCs) have to play. We endorsed a move to a new approach for mandatory compliance training. This includes annual assessment to allow people to demonstrate their competence, followed by focused learning in areas which the assessment highlights is required as well as re-assessment to provide assurance that learning has been effective. We received an update on the programme of externally conducted in-country risk reviews and the proposed next steps. (Emphases added.) 30. On July 31, 2014, BT Group issued a press release and filed Current Report on Form 6-K with the SEC, announcing the Company’s financial and operating results for the quarter ended June 30, 2014 (the “Q1 2014 6-K”). For the quarter, BT Group reported net income of £441 million, or £0.05 per diluted share, on revenue of £4.35 billion, compared to net income of £346 million, or £0.04 per diluted share, on revenue of £4.45 billion for the same period in the prior 31. On October 30, 2014, BT Group issued a press release and filed Current Report on Form 6-K with the SEC, announcing the Company’s financial and operating results for the quarter ended September 30, 2014 (the “Q2 2014 6-K”). For the quarter, BT Group reported net income of £446 million, or £0.06 per diluted share, on revenue of £4.44 billion, compared to net income of £613 million, or £0.07 per diluted share, on revenue of £4.49 billion for the same period in the prior year. 32. On January 30, 2015, BT Group issued a press release and filed Current Report on Form 6-K with the SEC, announcing the Company’s financial and operating results for the quarter ended December 31, 2014 (the “Q3 2014 6-K”). For the quarter, BT Group reported net income of £558 million, or £0.07 per diluted share, on revenue of £4.47 billion, compared to net income 11 of £493 million, or £0.06 per diluted share, on revenue of £4.6 billion for the same period in the prior year. 33. On May 21, 2015, BT Group filed an annual report on Form 20-F with the SEC, announcing the Company’s financial and operating results for the quarter and fiscal year ended March 31, 2015 (the “2015 20-F”). For the quarter, BT Group reported net income of £690 million, or £0.08 per diluted share, on revenue of £4.71 billion, compared to net income of £566 million, or 0.07 per diluted share, on revenue of £4.78 billion for the same period in the prior year. For fiscal year 2015, BT Group reported net income of £2.13 billion, or £0.26 per diluted share, on revenue of £19.98 billion, compared to net income of £2.01 billion, or £0.25per diluted share, on revenue of £18.28 billion for fiscal year 2014. 34. In the 2015 20-F, BT Group stated, in pertinent part: Business integrity and ethics We are committed to maintaining high standards of ethical behaviour, and have a zero tolerance approach to bribery and corruption. We have to comply with a wide range of local and international anti-corruption and bribery laws. In particular the UK Bribery Act and US Foreign and Corrupt Practices Act (FCPA) provide comprehensive anti-bribery legislation. Both have extraterritorial reach and so cover our global operations. As we expand globally, we are increasingly operating in countries identified as having a higher risk of bribery and corruption. We also have to ensure compliance with trade sanctions, and import and export controls. . . . BT Global Services The UK is our largest region by revenue. Financial institutions and government and healthcare customers are particularly important in this market. We have been ranked by Current Analysis as the number one provider in the UK public sector, as well as a leader in the UK IP telephony and unified communications market. We have a strong presence in Continental Europe, with national networks and metropolitan fibre rings in most major markets, including Belgium, France, Germany, Italy, the Netherlands and Spain. In this region we serve a large number 12 of customers in the pharmaceutical, retail, financial services and automotive industries. . . . Corporate governance statement We are committed to operating in accordance with best practice in business integrity and ethics and maintaining the highest standards of financial reporting and corporate governance. The directors consider that BT has applied the main principles of the UK Corporate Governance Code (the Code) as described on pages 93 to 136 of this Report of the Directors. The directors also consider that BT has complied with the Code provisions as currently in effect throughout the year, other than for five weeks (23 March–30 April 2014) when the Remuneration Committee comprised two (not three) members (Code provision D.2.1). Please see page 121 for further details of the Remuneration Committee membership. . . . The Board . . . During 2014/15, we also had in-depth discussions on external technology and market trends, UK mobile market and mobility, BT TV and BT Sport, the pension scheme and human rights. We visited our Italy business, and while there we reviewed operational matters with senior managers, met with employees as well as customers, government officials and opinion leaders. We also visited Openreach to see customer service in action and spent time on site visits with our engineers. . . . Internal control and risk management BT has in place an internal control environment to protect the business from material risks which have been identified within the group. Management is responsible for establishing and maintaining adequate internal controls over financial reporting and we have responsibility for ensuring the effectiveness of these controls. To enable us to do this, each quarter the lines of business certify compliance with the Turnbull guidance and Sarbanes-Oxley internal financial controls. Management reports the outcomes of these reviews to us and no significant weaknesses were identified in the annual review. BT’s risk management processes which have been in place throughout the period under review identify and monitor the risks facing the group. The risks which are 13 considered material are reviewed regularly by the Operating Committee and the Board. During the year we heard from the Chief Executive on the enterprise-wide risk management process and the key risks facing the group as a whole. We heard from each line of business CEO on the key risks in their part of the business as well as the actions they are taking to address them. [The Company] reported last year that the committee had given particular focus to BT’s operations in Italy and Brazil. We have continued to monitor the position and significant progress has been made to improve the control environment. We continue to keep under review the current trends of security risks facing BT and the progress made to manage these risks. . . . Governance and compliance programmes BT’s group director of ethics and compliance presented at our first meeting of the year on his strategic priorities for the year ahead. These included driving ethics and compliance as integral components of BT’s culture and learning. We also discussed at that meeting BT’s programme to monitor compliance with our ACB obligations, improvements that had been made and the continued focus on monitoring agents’ compliance with these obligations. We subsequently reviewed the proposed approach to our reviews of legal entity and agent compliance with our ACB policies and our plan through to 2016, including how internal audit and group compliance work together to assure compliance with ACB policies in particular jurisdictions. We reviewed, during the year, a number of BT’s other core compliance programmes: • our international telecommunications regulation and compliance programme which is aimed at both managing telecommunications regulatory risk and also supporting business growth; • our environment compliance programme including improvements in the control framework in the UK and planned improvements in environmental training and awareness; • enhancements to the operation of our conflicts of interest policy including additional pre-employment checks and the creation of a central register of potential conflicts of interest; and • our conflict minerals compliance programme, its progress and future plans. We supported the proposal to roll out a bespoke face-to-face competition law training programme for all UK-based lines of business. The programme will tailor 14 the training to the risks relevant to the line of business and make it relevant to people’s day job. In September we reviewed the progress made to put in place the improvements identified earlier in the year to ‘Speak Up’, BT’s whistleblowing confidential hotline. Every quarter we received a presentation from the group director of ethics and compliance who provided an overview of the ‘Speak Up’ statistics and trends, as well as a summary of key cases and outcomes. We discussed the progress made on a project outside the UK to clarify our country managers’ governance and compliance role. . . . How we tailored our audit scope . . . For three reporting units (UK, Italy and Germany), an audit of the complete financial information was performed. In a further four reporting units, specific audit procedures on revenue and receivables, purchases and payables, cash and provisions were performed. This, together with additional procedures performed on centralised functions and at the group level, gave us the evidence we needed for our opinion on the consolidated financial statements as a whole. The group engagement team performed the audit of the UK reporting unit. The group team visited Italy and Germany and conference calls were held with these teams on a regular basis. The group engagement team was also involved in the audits of the four reporting units for which specific audit procedures were performed through a combination of visits and conference calls. The reporting units within the scope of our group audit procedures accounted for over 80% of the group’s revenue and profit before tax. (Emphases added.) 35. The 2015 20-F contained signed certifications pursuant to SOX by Defendants Patterson and Chanmugam, stating that the financial information contained in the 2015 20-F was accurate and disclosed any material changes to the Company’s internal controls over financial reporting. 36. On July 30, 2015, BT Group issued a press release and filed Current Report on Form 6-K with the SEC, announcing the Company’s financial and operating results for the quarter 15 ended June 30, 2015 (the “Q1 2015 6-K”). For the quarter, BT Group reported net income of £511 million, or £0.06 per diluted share, on revenue of £4.36 billion, compared to net income of £441 million, or £0.05 per diluted share, on revenue of £4.35 billion for the same period in the prior 37. On October 29, 2015, BT Group issued a press release and filed Current Report on Form 6-K with the SEC, announcing the Company’s financial and operating results for the quarter ended September 30, 2015 (the “Q2 2015 6-K”). For the quarter, BT Group reported net income of £525 million, or £0.06 per diluted share, on revenue of £4.46 billion, compared to net income of £446 million, or £0.06 per diluted share, on revenue of £4.44 billion for the same period in the prior year. 38. On February 1, 2016, BT Group issued a press release and filed Current Report on Form 6-K with the SEC, announcing the Company’s financial and operating results for the quarter ended December 31, 2015 (the “Q3 2015 6-K”). For the quarter, BT Group reported net income of £796 million, or £0.09 per diluted share, on revenue of £4.63 billion, compared to net income of £558 million, or £0.07 per diluted share, on revenue of £4.47 billion for the same period in the prior year. 39. On May 19, 2016, BT Group filed an annual report on Form 20-F with the SEC, announcing the Company’s financial and operating results for the quarter and fiscal year ended March 31, 2016 (the “2016 20-F”). For the quarter, BT Group reported net income of £756 million, or £0.08 per diluted share, on revenue of £5.58 billion, compared to net income of £690 million, or £0.08 per diluted share, on revenue of £4.71 billion for the same period in the prior year. For 2016, BT Group reported net income of £2.58 billion, or £0.30 per diluted share, on revenue of 16 £19.04 billion, compared to net income of £2.13 billion, or £0.26 per diluted share, on revenue of £17.98 billion for 2015. 40. In the 2016 20-F, BT Group stated, in pertinent part: Regions The UK is our largest region by revenue. Financial institutions and government and healthcare customers are particularly important in this market. We have a strong presence in Continental Europe, with national networks and metropolitan fibre rings in most major countries, including Belgium, France, Germany, Italy, the Netherlands, the Republic of Ireland and Spain. . . . Business integrity and ethics We’re proud of our high ethical standards. We don’t tolerate bribery. We don’t tolerate any forms of corruption. We follow a wide range of local and international anti-corruption and bribery laws – in particular the UK Bribery Act and US Foreign Corrupt Practices Act (FCPA). Both these pieces of legislation have extraterritorial reach, so cover our global operations. As we expand globally, we’re increasingly operating in countries seen as having a higher risk of bribery and corruption. We also have to make sure we follow trade sanctions and import and export controls. . . . Corporate governance statement We are committed to operating in accordance with best practice in business integrity and ethics and maintaining the highest standards of financial reporting and corporate governance. The directors consider that BT has complied throughout the year with the provisions of the UK Corporate Governance Code (the Code) as currently in effect and applied the main principles of the Code as described on pages 109 to 155 of this Report of the Directors. Please see page 120 for details of the Audit & Risk Committee’s discussions on audit tendering. . . . Governance programmes This year, we discussed a review of BT’s governance operating model and framework, recent improvements to the Delegation of Authority framework, a project to clarify our governance and compliance roles outside the UK, and external governance developments on Board diversity and succession planning. 17 The aim of reviewing our governance framework is to ensure that governance in BT is clear and simple, to align with our culture and purpose. The review is ongoing; in December we endorsed the proposed next steps, and discussed the proposal to amend the terms of reference of our Regional Governance Committees to expand their oversight of risk. We asked the Chief Executive, Group Finance Director and Group General Counsel & Company Secretary to decide if this was appropriate and if so, gave them the authority to amend the terms of reference and seek endorsement from the Operating Committee. In BT’s non-UK operations, we have clarified our country managers’ accountability for a common set of governance and compliance standards, and put in place a formal process to appoint new country managers. As a result, country managers are reporting a better understanding of their obligations. We are now focusing on how to embed the principles into how we work, assessing the capabilities and development needs of country managers, and providing appropriate assurance to the Operating Committee. . . . How we tailored the audit scope . . . For four reporting units (the principal UK trading company, EE, Italy and Germany), an audit of the complete financial information was performed. For EE the audit was performed on the period from the group’s acquisition date, 29 January 2016. These units accounted for 79% of the group’s revenue and 93% of the group’s profit before tax. In five reporting units, based on our risk assessment, specific audit procedures on revenue and receivables, payables and cash were performed. This, together with additional procedures performed on centralised functions and at the group level, gave us the evidence we needed for our opinion on the financial statements as a whole. The group engagement team performed the audit of the UK and EE reporting units. The group team visited Italy and conference calls were held with both our teams in Italy and Germany on a regular basis. The group engagement team was also involved in the audits of the five reporting units for which specific audit procedures were performed through a combination of visits and conference calls. (Emphasis added.) 41. The 2016 20-F contained signed certifications pursuant to SOX by Defendants Patterson and Chanmugam, stating that the financial information contained in the 2016 20-F was 18 accurate and disclosed any material changes to the Company’s internal controls over financial reporting. 42. On July 28, 2016, BT Group issued a press release and filed Current Report on Form 6-K with the SEC, announcing the Company’s financial and operating results for the quarter ended June 30, 2016 (the “Q1 2016 6-K”). For the quarter, BT Group reported net income of £588 million, or £0.06 per diluted share, on revenue of £5.77 billion, compared to net income of £511 million, or £0.06 per diluted share, on revenue of £4.36 billion for the same period in the prior 43. The statements referenced in ¶¶ 21-42 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) the Company’s Italian division had for years engaged in improper accounting practices; (ii) as a result, BT Group significantly overstated its earnings throughout the Class Period; (iii) the foregoing facts, when they became known, would foreseeably cause BT Group to cut its revenue, earnings, and free cash flow forecasts; and (iv) as a result of the foregoing, BT Group’s public statements were materially false and misleading at all relevant times. The Truth Emerges 44. On October 27, 2016, BT Group announced that the Company had uncovered “inappropriate management behavior” at its Italian division. BT Group stated, in part: BT Italia investigation Following allegations of inappropriate management behaviour in our BT Italia operations, we have conducted an initial internal investigation. This included a review of accounting practices during which we have identified certain historical accounting errors and reassessed certain areas of management judgement. 19 We have written down the value of items on the balance sheet by £145m. This is our current best estimate of the financial impact based on our internal investigation. The write down relates to balances that have built up over a number of years and our assessment is that the errors have not materially impacted the group’s reported earnings over the previous two years. The amount has been charged as a specific item in our results for the quarter. As a non-cash item in the period it does not impact normalised free cash flow. A full investigation of these matters is ongoing and we have appointed external advisers to assist with this. Appropriate action will be taken as the investigation progresses. Our outlook is not affected. 45. On this news, BT Group’s ADR price fell $0.57, or 2.39%, to close at $23.25 on October 27, 2016. 46. On January 24, 2017, BT Group issued a news release entitled “Update on investigation into BT’s Italian business and on BT Group outlook.” The news release stated, in relevant part: The investigation into the financial position of our Italian business is now substantially complete. The adjustments identified have increased from the £145m announced in our halfyear update to a total of around £530m. We are still evaluating what proportion of the total adjustments should be treated as prior year errors, and what proportion should be treated as the reassessment in the current year of management estimates. Work is also ongoing to establish how these adjustments should be reflected in BT Group’s financial statements for the current and previous periods in light of applicable accounting requirements. . . . The improper behaviour in our Italian business is an extremely serious matter, and we have taken immediate steps to strengthen the financial processes and controls in that business. We suspended a number of BT Italy’s senior management team who have now left the business. We have also appointed a new Chief Executive of BT Italy who will take charge on 1 February 2017. He will review the Italian management team and will work with BT Group Ethics and Compliance to improve the governance, compliance and financial safeguards in our Italian business. Further, we are conducting a broader review of financial processes, systems and controls across the Group. The BT Group Remuneration Committee will consider the wider implications of the BT Italy investigation. 20 Gavin Patterson, Chief Executive BT Group plc, said: “We are deeply disappointed with the improper practices which we have found in our Italian business. We have undertaken extensive investigations into that business and are committed to ensuring the highest standards across the whole of BT for the benefit of our customers, shareholders, employees and all other stakeholders.” . . . As a result of the outcome of the BT Italy investigation and the pressures in the UK public sector and international corporate markets, we now expect underlying revenue excluding transit adjusted for the acquisition of EE to be broadly flat in 2016/17 and adjusted EBITDA to be around £7.6bn. Normalised free cash flow is now expected to be around £2.5bn. For 2017/18, we now expect both underlying revenue excluding transit and adjusted EBITDA to be broadly flat year on year. We expect normalised free cash flow to be £3.0bn - £3.2bn. (Emphases added.) 47. On this news, BT Group’s ADR price fell $5.05, or 20.67%, to close at $19.38 on January 24, 2017. 48. 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 49. 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 BT Group ADRs 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 21 families and their legal representatives, heirs, successors or assigns and any entity in which Defendants have or had a controlling interest. 50. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, BT Group ADRs 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 BT Group 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. 51. 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. 52. 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. 53. 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 BT Group; 22  whether the Individual Defendants caused BT Group 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 BT Group ADRs 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. 54. 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. 55. 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;  BT Group ADRs are traded in an efficient market;  the Company’s ADRs 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 ADRs; and  Plaintiff and members of the Class purchased, acquired and/or sold BT Group ADRs 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. 23 56. Based upon the foregoing, Plaintiff and the members of the Class are entitled to a presumption of reliance upon the integrity of the market. 57. 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) 58. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. 59. 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. 60. 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 BT Group ADRs; and (iii) cause Plaintiff and other members of the Class to purchase or otherwise acquire BT Group 24 securities 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. 61. 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 BT Group 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 BT Group’s finances and business prospects. 62. By virtue of their positions at BT Group, 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. 63. 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 BT Group, the Individual Defendants had knowledge of the details of BT Group’s internal affairs. 25 64. 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 BT Group. 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 BT Group’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 BT Group securities was artificially inflated throughout the Class Period. In ignorance of the adverse facts concerning BT Group’s business and financial condition which were concealed by Defendants, Plaintiff and the other members of the Class purchased or otherwise acquired BT Group ADRs 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. 65. During the Class Period, BT Group ADRs 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 BT Group ADRs 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 BT Group ADRs was substantially lower than the prices paid by Plaintiff and the other members of the Class. 26 The market price of BT Group ADRs declined sharply upon public disclosure of the facts alleged herein to the injury of Plaintiff and Class members. 66. 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. 67. 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 ADRs during the Class Period, upon the disclosure that the Company had been disseminating misrepresented financial statements to the investing public. COUNT II (Violations of Section 20(a) of the Exchange Act Against The Individual Defendants) 68. Plaintiff repeats and realleges each and every allegation contained in the foregoing paragraphs as if fully set forth herein. 69. During the Class Period, the Individual Defendants participated in the operation and management of BT Group, and conducted and participated, directly and indirectly, in the conduct of BT Group’s business affairs. Because of their senior positions, they knew the adverse non-public information about BT Group’s misstatement of income and expenses and false financial statements. 70. 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 BT Group’s financial condition and results of operations, and to correct promptly any public statements issued by BT Group which had become materially false or misleading. 27 71. 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 BT Group disseminated in the marketplace during the Class Period concerning BT Group’s results of operations. Throughout the Class Period, the Individual Defendants exercised their power and authority to cause BT Group to engage in the wrongful acts complained of herein. The Individual Defendants therefore, were “controlling persons” of BT Group 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 BT Group securities. 72. Each of the Individual Defendants, therefore, acted as a controlling person of BT Group. By reason of their senior management positions and/or being directors of BT Group, each of the Individual Defendants had the power to direct the actions of, and exercised the same to cause, BT Group to engage in the unlawful acts and conduct complained of herein. Each of the Individual Defendants exercised control over the general operations of BT Group 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. 73. 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 BT Group. 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; 28 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: January 25, 2017 Respectfully submitted, POMERANTZ LLP /s/ Jeremy A. Lieberman Jeremy A. Lieberman J. Alexander Hood II Hui M. Chang 600 Third Avenue, 20th Floor New York, New York 10016 Telephone: (212) 661-1100 Facsimile: (212) 661-8665 Email: jalieberman@pomlaw.com ahood@pomlaw.com hchang@pomlaw.com POMERANTZ LLP Patrick V. Dahlstrom 10 South La Salle Street, Suite 3505 Chicago, Illinois 60603 Telephone: (312) 377-1181 Facsimile: (312) 377-1184 Email: pdahlstrom@pomlaw.com Attorneys for Plaintiff 29 BT GROUP PLC (BT) Samar, Alex LIST OF PURCHASES AND SALES PURCHASE NUMBER OF PRICE PER DATE OR SALE SHS/UTS SH/UT 6/27/2016 Purchase 16 $25.2975

securities

pr_ADIcBD5gMZwczak2K

UNITED STATES DISTRICT COURT DISTRICT OF SOUTH CAROLINA (COLUMBIA DIVISION) 3:19-3304-MBS SAMUEL R. FLOYD, III on behalf of Himself and all others No: similarly situated, CLASS ACTION Plaintiff, JURY TRIAL DEMANDED Deloitte & Touche, LLP, Deloitte LLP, Defendants. CLASS ACTION SECURITIES COMPLAINT Thomas C. Jessee Jessee & Jessee P.O. Box 997 Johnson City, TN 37605 Tel: (423) 928-7175 Email: jjlaw@jesseeandjessee.com TNBPR #000113/ SC Bar #2996 Gordon Ball Jonothan Tanner Ball Steven Chase Fann GORDON BALL, LLC 7001 Old Kent Drive Knoxville, Tennessee 37919 Tel: (865) 525-7028 Email: gball@gordonball.com TNBPR#001135 jtannerball@gmail.com TNBPR#037011 chasefann@wfptnlaw.com TNBPR#36794 (Motion for Pro Hac Vice to be filed) Daryl G. Hawkins Law Offices of Daryl G. Hawkins, LLC P.O. Box 11906 Columbia, SC 29211 Tel: (803) 733-3531 Email: dgh@dghlaw.net Edward D. Sullivan, JD, LLM, CPA Sullivan Law Firm, PC Edward D. Sullivan PO Box 11714 Columbia, SC 29211 Tel: (803) 451-2775 Email: esullivan@esullivanlaw.com SC Bar #0011248/ USDC #5016 SC Bar #002844/ USDC #01781 Counsel for Plaintiff 1   TABLE OF CONTENTS I. JURISDICTION AND VENUE………………………………………………………3 II. THE PARTIES………………………………………………………………………..4 III. RELEVANT NON-PARTIES………………………………………………………...5 IV. CLASS ACTION ALLEGATIONS…………………………………………………..9 V. FACTUAL BACKGROUND AND SUBSTANTIVE ALLEGATIONS OF FRAUD………………………………………………………………………….10 VI. SCIENTER………………………………………………………………………….29 VII. LOSS CAUSATION………………………………………………………………..31 VIII. DELOITTE AUDITS WERE NO AUDITS AT ALL……………………………...36 IX. INAPPLICABILITY OF SAFE HARBOR…………………………………………37 X. PRESUMPTION OF RELIANCE…………………………………………………..38 XI. FRAUDULENT CONCEALMENT………………………………………………...39 XII. CAUSE OF ACTION COUNT ONE……………………………………………….39 XIII. PRAYER FOR RELIEF…………………………………………………………….42 XIV. JURY TRIAL DEMAND…………………………………………………………...42 EXHIBIT 1: KEN BROWN REPORT……………………………………………………………16 EXHIBIT 2: LETTER FROM ATTORNEY WENICK TO DEFENDANT DELOITTE………..17 2   Plaintiff, Samuel R. Floyd, III, (“Plaintiff”) individually and on behalf of all others similarly situated (the “Class”) through his undersigned attorneys, makes the following allegations against Defendants, Deloitte & Touche, LLP and Deloitte, LLP (“Deloitte”) based on his personal knowledge, information, belief, and on the investigation of Plaintiff’s counsel, which included a review of relevant U.S. Securities and Exchange Commission filings by SCANA Corporation (“SCANA”). These allegations are also based upon records of judicial proceedings in the United States District Court for the District of South Carolina, Columbia Division, as well as, regulatory filings, reports, press releases, depositions and answers to Interrogatories filed in the South Carolina State Court and regulatory proceedings. Public statements, news articles and security analyst reports about SCANA and other readily obtainable information have been used in the Complaint. Plaintiff believes that evidentiary support exists for the allegations set forth herein. I. JURISDICTION and VENUE 1. This Complaint asserts claims under Section 10b of the Exchange Act, 15 U.S.C. §§ 78j(b) and 78t(a), and the rules and regulations promulgated thereunder, including SEC rule 10b-5, 17 C.F.R. § 240.10b-5. 2. This Court has jurisdiction over the subject matter of this action under Section 27 of the Exchange Act, 15 U.S.C. § 78aa and 28 U.S.C. §§ 1331 and 1337. 3. Venue is proper in the District under Section 27 of the Exchange Act, 15 U.S.C. § 78aa, and 28 U.S.C. § 1391 (b), (c), and (d). Many of the acts and omissions that constitute the alleged violations of law, including the dissemination to the public of untrue statements of material facts, occurred in this District. 3   4. In connection with the acts alleged in this Complaint, Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including the United States mail, interstate telephone communications, and the facilities of national securities exchange. II. THE PARTIES PLAINTIFF 5. Plaintiff, Samuel R. Floyd, III, (“Floyd”) purchased and/or otherwise acquired shares of SCANA common stock during the Class Period, as defined below, and was damaged as a result of Defendants’ wrongdoing as alleged in this Complaint. DEFENDANTS 6. Deloitte & Touche, LLP is the accounting arm of Deloitte, LLP, the United States affiliate of the “Big 4” international accounting firm Deloitte Touche Tohmatsu Limited headquartered in the United Kingdom. Deloitte & Touche, LLP offers audit and enterprise risk services. As part of its business, the firm provides clients with audit and financial statement reviews. Other services include financial reporting, regulatory updates, employee benefit audits and venture capital services. Deloitte & Touche, LLP has more than 90 offices and 95,000 employees in the United States. It is registered with the Office of the South Carolina Secretary of State and is authorized to conduct business, and in fact does business, in South Carolina. 7. Deloitte, LLP also manages U.S. subsidiaries that offer tax, consulting, and financial advisory services. Deloitte, LLP is the largest professional service organization in the U.S. with U.S. revenue, in 2018, of $19.9 billion. 4   8. Deloitte & Touche, LLP and Deloitte, LLP (“Deloitte”) are Delaware limited liability partnerships duly organized and exist under the laws of the State of Delaware, with its main office at 30 Rockefeller Plaza, New York, New York. Deloitte also has an office at 550 South Tryon Street in Charlotte, North Carolina. 9. For the purposes of this Complaint, references to Deloitte refer to Deloitte & Touche, LLP and Deloitte, LLP or both entities, unless otherwise noted. DELOITTE AGENTS Eileen Little 10. Eileen F. Little (“Little”) is a certified public accountant. Little joined Deloitte as a staff auditor in the Atlanta office in 1992 and was admitted as an Audit Partner in 2011. Little served as the Audit Engagement Partner for both SCANA and SCE&G for the 2014, 2015, and 2016 engagements. Sean Bird 11. Sean M. Bird (“Bird”) is a certified public accountant with a Bachelor of Science degree in Business Administration in Accounting from Penn State University. He joined Deloitte as a staff auditor in May 1997 and was admitted as an Audit Partner in 2012. Bird served as the Audit Engagement Partner for both SCANA and SCE&G for the 2017 and 2018 engagements. In the deposition of Jimmy Addison, Bird was identified as the Audit Engagement Partner that informed him that Deloitte’s local, as well as the national offices, had reviewed their audit work in disclosures, post abandonment of the Project, and did not see “any gaps” in disclosures made in the financial statements. III. RELEVANT NON-PARTIES 5   SCANA Corporation 12. SCANA was incorporated in South Carolina and maintained its principal executive offices at 220 Operations Way, Cayce, South Carolina 29033. During the Class Period, SCANA’s stock was traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “SCG”. For purposes of this Complaint, references to SCANA refer to SCANA, SCE&G, or both companies, unless otherwise noted. 13. SCANA’s principal subsidiary, South Carolina Electric & Gas (“SCE&G”) is a regulated public utility engaged in the generation, transmission, distribution and sale of electricity primarily in South Carolina. Upon information and belief, Deloitte maintained an office at SCANA’s corporate office in Cayce, South Carolina. THE OFFICER AND DIRECTOR NON-PARTIES OF SCANA The responsibility and actual persons that performed all of the reporting requirements for SCANA and SCE&G to the Securities Exchange Commission (“SEC”), state regulatory bodies and shareholders all were certified public accountants who had strong current or former senior leadership positions with Deloitte. In addition, all of these persons had extensive experience in the investor- owned electric utility industries, including clients that were operating and building nuclear power plant projects. KEVIN B. MARSH 14. Kevin B. Marsh (“Marsh”) is a certified public accountant with a Bachelor of Business Administration degree in Accounting from the University of Georgia. Marsh worked at Deloitte in Columbia, South Carolina, for seven years prior to joining SCANA in 1984. Marsh became Vice President and Chief Financial Officer (“CFO”) of SCANA in 1996, President of SCE&G in 2006, and President 6   and Chief Operating Officer (“COO”) of SCANA in January 2011. In December 2011, Marsh became Chairman of the SCANA Board of Directors and Chief Executive Officer (“CEO”) of SCANA. On October 31, 2017, SCANA announced that Marsh would resign as a director effective December 31, 2017. JIMMY E. ADDISON 15. Jimmy E. Addison (“Addison”) is a certified public accountant with a Bachelor of Science degree in Business Administration in Accounting and a Masters of Accountancy degree from the University of South Carolina. Addison worked at Deloitte for seven years prior to joining SCANA. Addision served as SCANA’s Chief Financial Officer (“CFO”) since April 2006, and its Executive Vice President since January 2012. On October 31, 2017, SCANA announced that Addison would become SCANA’s CEO and relinquish his role as CFO effective January 1, 2018. In an October 3, 2018 deposition, Addison said he was not aware of details of the Bechtel Report, but relied on Deloitte as to disclosure of Bechtel findings in SCANA’s financial statements and filings with the Securities and Exchange Commission (“SEC”). JAMES E. SWAN 16. James E. Swan (“Swan”) is a certified public accountant with a Bachelor of Science Degree in Business Administration in Accounting from Clemson University. Swan worked at Deloitte for eighteen years, ultimately becoming an Audit Partner in the Washington, D.C. office. Swan joined SCANA in August 2000 as Vice President and Controller. James Swann was the lead person from SCANA that interacted day to day with the Deloitte audit engagement team. 7   GREGORY E. ALIFF, SCANA BOARD NON-PARTY AND RETIRED DELOITTE VICE CHAIRMAN 17. Gregory E. Aliff (“Aliff”) is a certified public accountant with a Bachelor of Science degree in Business Administration in Accounting, and a Masters of Business Administration degree from Virginia Tech University. Aliff retired from Deloitte & Touche, LLP in May 2015 after serving as a Partner for 28 years. During his career at Deloitte & Touche, LLP, Aliff became the company’s Vice Chairman. Aliff served as Vice Chairman and Senior Partner of the Energy & Resources division of Deloitte, LLP. Aliff was also the leader of Deloitte’s Energy and Natural Resources Management services. Aliff retired from Deloitte & Touche, LLP in May 2015 and became a member of the SCANA Board of Directors and head of SCANA’s Audit Committee in October 2015, prior to the first Bechtel Report. SOUTH CAROLINA PUBLIC SERVICE AUTHORITY (SANTEE COOPER) AND LONNIE CARTER 18. South Carolina Public Service Authority, also known as Santee Cooper (“Santee Cooper”) is the South Carolina’s state-owned electric and water utility. Santee Cooper was founded in 1934 and maintains principal executive offices at One Riverwood Drive, Monks Corner, South Carolina, 29461. Santee Cooper provides electricity to more than two million South Carolina customers. 19. Lonnie Carter (“Carter”) is the former President and Chief Executive Officer (“CEO”) for Santee Cooper. Carter retired on August 27, 2017 after serving 35 years (last 13 years as CEO) in various financial and planning positions. Carter 8   received a Bachelor of Science degree in Business Administration in 1982, and a Masters of Business Administration degree in 1987, both from The Citadel. IV. CLASS ACTION ALLEGATIONS 20. Plaintiff brings this action as a class action pursuant to Rule 23(a) and (b)(3) of the Federal Rules of Civil Procedure on behalf: of all persons or entities who purchased or otherwise acquired SCANA publicly-traded securities from February 27, 2015 through December 20, 2017, inclusive, and who were damaged thereby (the”Class”). Excluded from the Class are: Defendants; members of the immediate family of any Defendant who is an individual; the officers and directors of SCANA and Deloitte during the Class Period; any firm, trust, corporation, or other entity in which any Defendant has or had a controlling interest; the Company’s employee retirement and benefit plan(s); and the legal representatives, affiliates, heirs, successors-in-interest, or assigns of any such excluded person or entity. 21. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, SCANA common stock was actively traded on the New York Stock Exchange. 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 SCANA 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. 22. The disposition of the claims in a class action will provide substantial benefits to the parties and the Court. As of October 31, 2017, SCANA had 142,616,254 shares of stock outstanding, which were owned publicly by at least hundreds of persons or entities. 9   23. 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: Ÿ Whether the federal securities laws were violated by Defendant Deloitte’s acts as alleged herein; Ÿ Whether Defendant Deloitte acted knowingly or recklessly in issuing false and misleading financial statements; Ÿ Whether the prices of SCANA securities during the Class Period were artificially inflated because of Defendant Deloitte’s conduct complained of herein; and Ÿ Whether the members of the Class have sustained damages and, if so, what is the proper measure of damages. 24. Plaintiff’s claims are typical of the claims of other members of the Class, as all members of the Class are similarly affected by Defendant Deloitte’s wrongful conduct in violation of the federal law that is complained of herein. 25. Plaintiff will adequately protect the interests of the Class and has retained competent counsel experienced in class action securities litigation. Plaintiff has no interests which conflict with those of the Class. V. FACTUAL BACKGROUND AND SUBSTANTIVE ALLEGATIONS OF FRAUD 26. This securities fraud class action asserts claims arising from one of the most high- profile fiascos in modern South Carolina history—SCANA’s failed, $9 Billion decade-long effort to build two nuclear reactors in South Carolina in partnership 10   with state-owned utility South Carolina Public Service Authority (“Santee Cooper”). 27. Deloitte is the leading auditor of financial statements for the investor-owned electric utility industry in the United States. 28. Deloitte has served as the auditors of SCANA Corporation since 1945. 29. Deloitte issued unqualified audit reports on SCANA and SCE&G’s financial statements for the years ending December 31, 2014, December 31, 2015, December 31, 2016 and December 31, 2017, certifying that it had audited those statements in accordance with the standards of the Public Company Accounting Oversight Board for the United States (“PCAOB”) and that the statements presented the financial position of SCANA and SCE&G fairly and in conformity with Generally Accepted Accounting Principles (“GAAP”). 30. As set forth below, Deloitte knowingly or recklessly abdicated its responsibilities in connection with its audits of SCANA and SCE&G’s financial statements for fiscal years 2014 through 2017. Had Deloitte conducted its audits in compliance with Generally Accepted Auditing Standards (“GAAS”) and PCAOB standards, the investors, including Plaintiff and the Class, would have been furnished with the information that there was concern that the project would not be finished in time to receive the tax credits. Deloitte’s Unique Knowledge of South Carolina and Georgia Nuclear Construction Projects 31. In 2008, after SCANA and Santee Cooper announced the two nuclear units in South Carolina, Georgia Power, a wholly owned subsidiary of the Southern 11   Company, announced construction of two new nuclear plants to be built in Georgia. 32. South Carolina and Georgia were using Westinghouse’s AP1000 design. The two Projects were considered “sister projects” and Deloitte was the outside auditor on both Projects. 33. Deloitte had the institutional knowledge of knowing the problems, delays and impacts of both AP1000 on both companies and the resulting disclosures that should have been made to the investors of SCANA. Financial Plan for the Georgia Nuclear Project 34. The Georgia Project called for using debt and equity to fund the construction costs. The Georgia Project received federal loan guarantees from the Department of Energy totaling $12 Billion dollars as of March 2019. The loan guarantees from the federal government to the Georgia Project precluded the use of production tax credits. South Carolina Nuclear Projects and Federal Production Tax Credits 35. In order to fund the construction of nuclear plants, the federal government passed the Energy Policy Act of 2005 (“the Energy Project Act”). The Act created a federal production tax credit for new nuclear production projects. The tax credits were only available if the projects were in service before January 1, 2021. If the South Carolina plants were not in service by the end of 2020, SCANA would lose approximately $1.4 Billion dollars in tax credits. 36. This federal production tax credit deadline was the overriding factor that ultimately stopped SCANA and the South Carolina Project. 12   37. Plaintiff alleges that Deloitte knew SCANA’s financial ability from the start of the South Carolina Projects and knew that SCANA could not financially complete the Project unless the January 2021 date was achieved. BASE LOAD REVIEW ACT AND SOUTH CAROLINA PUBLIC SERVICE COMMISSION 38. In 2007, the South Carolina legislature passed the Base Load Review Act, South Carolina Code Annotated §§ 58-33-210, et seq. (“BLRA”). The BLRA was designed to allow utility companies to recoup “prudently incurred” capital and operating costs for a base load generating power plant during its construction, rather than waiting until it was built. Prior to the BLRA’s passage, South Carolina required utilities to complete construction and begin commercial operations before charging ratepayers for the costs associated with that construction. 39. SCANA’s base load review application contained, among other things, the construction schedule, the capital costs, and the schedule for incurring those costs, the selection of principal contractors and suppliers, the proposed rate design used in formulating revised rates, and the revised rates that the utility intended to put in place after the issuance of a base load review order. South Carolina Code Annotated § 58-33-250 (2007). 40. The BLRA contained some backstops against imprudently incurred costs, and thus put SCANA at risk of being forced to bear them. Specifically, South Carolina Code Annotated § 55-33-275(E) of the Base Load Review Act provided: “In cases where a party proves by a preponderance of the evidence that there has been a material and adverse deviation from the approved schedules, 13   estimates, and projections set forth in Section 58-33-270(B)(1) and 58-33-270(B)(2), as adjusted by the inflation indices set forth in Section 58-33-270(B)(5), the commission may disallow the additional capital costs that result from the deviation, but only to the extent that the failure by the utility to anticipate or avoid the deviation, or to minimize the resulting expense, was imprudent considering the information available at the time that the utility could have acted to avoid the deviation or minimize its effect.” Further, while the BLRA allows a utility to recover costs from ratepayers even for abandoned construction projects, such recovery is not allowed “to the extent that the failure by the utility to anticipate or avoid the allegedly imprudent costs, or to minimize the magnitude of the costs, was imprudent considering the information available at the time that the utility could have acted to avoid or minimize the costs.” Thus, Deloitte’s management and Board were on notice from the outset that the Company’s ability to recover costs from South Carolina ratepayers was limited by the BLRA’s prudence requirement. THE BLRA RATES BEING BILLED AND COLLECTED FROM THE RATEPAYER DURING THE CONSTRUCTION PERIOD WERE MATERIAL TO SCANA’S INCOME STATEMENT 41. The construction costs were being reflected on SCANA’s Balance Sheet as an asset and being represented to the investing public that its costs were going to be recovered in future rates as an operating generating plant. Both the Balance Sheet and Income Statement are part of the SCANA financial statements that Deloitte gave an unqualified, i.e., “clean” opinion, the highest type of opinion a CPA firm can issue, during the Class Period. 14   In actuality, SCANA ended up with a partially-completed, abandoned nuclear plant that is not only of no value (a non-asset), it is actually a liability, as ultimately the site must be returned back to raw ground at a great expense. DELOITTE AUDITED COST SUBMISSIONS ANNUALLY PLUS SPECIAL AUDIT STARTING IN 2015 42. The record has numerous incidents of SCANA making incomplete, untruthful and direct omissions of the true costs to complete the VC Summer Project, the progress to date and the true estimated completion date to the PSC, ORS, SEC, the public and its investors that were inconsistent with their own monthly internal reporting and Bechtel assessment. All of this was known to the Defendants throughout the Class Period. Deloitte had access to all of this information during its annual and special audits of SCANA and SCE&G. Deloitte was required to audit SCANA’s ratemaking submissions to the PSC and the revenue internal control systems (including the billing to its SCANA customers) for compliance with those submissions and the internal reports supporting those calculations. This is required by GAAS and PCAOB auditing standards. The BLRA rate component was a large part of the average bill to SCANA residential customers averaging $27 per month. This was a material misstatement of SCANA revenue and represents hundreds of millions of dollars of false revenue reported annually that resulted in overstating of Net Income and Earning Per Share. All of this had the impact of overstating SCANA stock price. These 15   material misstatements were in the financial statements of SCANA that Deloitte certified as being free of material misstatements. In a recent settlement of a class action lawsuit on this very issue SCANA’s successor, Dominion Energy, has agreed to refund $2 Billion dollars of this falsely collected BLRA revenue to its customers. 43. SCANA Corporation’s construction costs and accounting for the VC Summer Project were problematic. The two reasons for this are (1) BLRA and (2) the federal production tax credit. These two sources of funding represented approximately half of the originally budgeted costs of SCANA’s share of the Project. SCANA would be financially unable to take on the VC Summer Project without these two sources of funds. INSIDERS AND DELOITTE KNEW IN EARLY 2015 THAT THE SOUTH CAROLINA PROJECT WOULD NEVER MEET THE TAX CREDIT DEADLINE 44. Ken Browne was an engineer with SCANA, whose deposition was taken after SCANA failed. Browne stated that by 2014, there was substantial doubt that the Project would be completed at all and that one did not need the Bechtel Report to understand the problem, Lightsey, et. al. v. South Carolina Electric & Gas Company, et. al. Case No. 2017-CP-25-0335. 45. Mr. Browne provided: “Performance Factor (“PF”) is the critical measurement concerning construction progress. Performance Factor is the ratio of actual craft labor hours to be budgeted for the Project”. 16   46. In January 2015, Browne prepared a chart entitled, “Target Construction Productivity,” which he shared with his superiors at SCANA. Browne’s analysis was that, considering the history, completion of the Project would take 26.5 more years to complete (attached hereto as “EXHIBIT 1”). DELOITTE SPECIAL AUDIT 47. Relying on Browne’s report, SCANA commissioned Deloitte to do a special audit beginning in early 2015. Plaintiff and Plaintiff’s Class discovered the existence of Deloitte’s special audit of construction costs only by reading the sworn answers to interrogatories filed by SCANA in the case of Lightsey et al v. SCE&G and SCANA Case No. 2017-CP-25-0335 in Hampton, South Carolina after the South Carolina Project failed. 48. The filed interrogatory sworn by SCANA provided: “QUESTION: State the name of any consultants, companies, and/or other entities who reviewed or provided advice, audits or similar services on the VC Summer Project, and for each entity identified provide: a. The name of the person, company or entity; b. The purpose for that person, company or entity’s services; c. The date the consultant, company or service performed review or otherwise undertook services on the VC Summer Project; d. The outcome of those services; e. The name of any employees of SCE&G and/or SCANA with whom the entity interacted; f. Whether a report was generated as part of the services. ANSWER: Defendants engaged Deloitte in 2015 to audit the schedule for Project costs. Deloitte prepared an audit letter in connection with this engagement.” 49. Deloitte prepared an engagement letter to SCANA for the special audit of construction costs. Deloitte and SCANA knew before Bechtel was hired to do a construction progress report that the project would have never met the tax credit deadline. 17   BECHTEL RETAINED BY SCANA 50. Bechtel Engineering was retained by SCANA to assess the progress of Westinghouse on the nuclear project. Bechtel started the assessment on August 10, 2015. 51. As part of standard audit procedures, Deloitte received a letter from Attorney George Wenick of Smith, Curie & Hancok, LLP informing Deloitte that Wenick and his firm had been hired by SCANA to engage Bechtel to perform the assessment of Westinghouse’s work on the Project, (attached hereto as “EXHIBIT 2”). 52. Deloitte never made any mention of Bechtel or any of Bechtel’s reports in any 10K prepared for SCANA during the Class Period. 53. Bechtel’s assessment, finalized in a 130-page report on October 22, 2015, was not made public. Bechtel concluded that the schedule to secure the tax credit would be impossible to achieve. 54. In an October 3, 2018 deposition, after the failure of the South Carolina Project, Jimmy Addison, CFO of SCANA testified, as follows: Q. You were signing your company's or certifying your company's SEC filings during the time of the Bechtel assessment, correct? A. Correct. Q. It doesn't disturb you at all that the company spent seven figures on assessment in 2015 regarding the status—regarding the project and you weren't made aware of the results of that assessment while you were certifying these SEC filings? A. It does not. And part of that conclusion is we've got an international accounting firm that's auditing our records, that has gone back and looked at it completely and said the(y) did not see any gaps in our disclosures. Q. Is that Deloitte? 18   A. Yes. Q. You used to work there, right? A. I did about three decades ago. Q. So you trusted your accountants on that issue? A. I have a great deal of confidence that they thoroughly vetted that issue especially with the political and regulatory ramifications of it. Q. Sitting here now, do you know that they did vet that issue? A. Yes. Q. How do you know that? A. They told me that. Q. When? A. I don't know specifically when, sometime obviously post abandonment. Q. Did you have a conversation with them specifically about that issue? A. The conversation wasn't specific about that. It was conversation that—a topic that they offered in the middle of another—in the middle of another meeting. Q. What was the meeting about? A. A routine quarterly meeting where they meet with me before the financials are published. Q. And how do they bring up the Bechtel report? A. I don't remember the details of it. Q. What did they tell you about it? A. That they had gone back with their local team and their national team and reviewed all the disclosures at the point in time that they were made, and read this document. They did not see any gaps in the disclosure at the time they were made. Q. And who from Deloitte told you that? A. The partner at Deloitte now, Sean Bird. 55. On July 31, 2017 SCANA issued a press release announcing that it was abandoning the South Carolina Nuclear Project. 19   DELOITTE’S FALSE AND MISLEADING AUDIT REPORTS RELIED UPON BY INVESTORS 56. The following audit reports were issued as a result of audits by Deloitte on SCANA and SCE&G’s financial reports and included by SCANA in its annual Form 10-K filings. The audit report performed in 2015 by Deloitte of the VC Summer Project costs has not been released and is not included. 57. Every audit report of SCANA’s and SCE&G’s financial statements by Deloitte for 2014-2017 was a “clean opinion,” an unqualified report that the financial statements were fairly presented in all material respects. This is the highest level of audit report a Certified Public Accountant (“CPA”) may issue. These reports were all false and misleading. Again, it is extremely significant that Deloitte was additionally retained in 2015 by SCE&G to specifically audit the construction schedule of the VC Summer Nuclear Project, including issuing a report. 58. In addition, Deloitte consented to the use of its audit reports in each of SCANA’s SEC Form 10K filings during the Class Period. In each of the unqualified audit reports on SCANA’s and SCE&G’s 2014-2017 financial statements, Deloitte certified that: a. Deloitte had audited SCANA’s and SCE&G’s financial statements in accordance with auditing standards generally accepted in the United States; b. Deloitte had planned and performed those audits “to obtain reasonable assurance about whether the financial statements are free of material misstatement;” 20   c. In Deloitte’s opinion, SCANA’s and SCE&G’s financial statements “present fairly, in all material respects, the consolidated financial position” of SCANA and SCE&G “in conformity with accounting principles generally accepted in the United States;” and d. Deloitte’s audits provided a “reasonable basis” for Deloitte’s opinions. During the years 2014, 2015, 2016, and 2017, the fees paid by SCANA and SCE&G to Deloitte were reported to be $12,461,917. False & Misleading Statements & Omissions by Deloitte & SCANA in Federal Filings 59. In SCANA’s Form 8-K filed October 27, 2015, SCANA wrote, in part: a. “SCE&G announces an amendment to the Engineering, Procurement, and Construction Agreement for AP1000 plants at VC Summer Station (“EPC Amendment”). The EPC Amendment “revises the Guaranteed Substantial Completion Dates (GSCDs) for Units 2 and 3 to August 31, 2019 and 2020, respectively.” The EPC Amendment further stated, “[T]he total gross construction cost of the [Nuclear] Project [was raised to] approximately $7.113 billion [$5.5 billion in 2007 dollars].” b. The 8-K announced SCE&G’s “exclusive and irrevocable option to, at any time prior to November 1, 2016, further amend the EPC Agreement” and exercise a “fixed price option [that] would result in SCE&G’s total Project costs to increase by approximately $774 million over the $6.827 billion” approved by the PSC in September 2015. If exercised, this fixed price option “would bring the total gross construction cost of the Project to approximately $7.601 billion” for SCANA. 60. In SCANA’s Form 10-Q for the third quarter of 2015, signed and certified as accurate pursuant to the Sarbanes-Oxley Act of 2002 (“SOX”) by Marsh and Addison and filed on November 6, 2015, SCANA stated, in relevant part: a. “Based on the guaranteed substantial completion dates provided above, both New Units are expected to be operational and to qualify for the nuclear production tax credits; however, further delays in the schedule or changes in tax law could impact such conclusions.” 21   b. “Among other things, upon effectiveness, the October 2015 Amendment would ‘. . . revise the guaranteed substantial completion dates of Units 2 and 3 to August 31, 2019 and 2020, respectively . . .’ c. “Under the October 2015 Amendment, SCE&G’s total estimated project costs will increase by approximately $286 million over the $6.8 billion approved by the SCPSC in September 2015, and will bring its total estimated gross construction cost of the project (including escalation and AFC) to approximately $7.1 billion.” d. “Finally, upon effectiveness, the October 2015 Amendment would provide SCE&G and Santee Cooper an irrevocable option, until November 1, 2016 and subject to regulatory approvals, to further amend the EPC Contract to fix the total amount to be paid to the Consortium for its entire scope of work on the project (excluding a limited amount of work within the time and materials component of the contract price) after June 30, 2015 at $6.082 billion (SCE&G’s 55% portion being approximately $3.345 billion). This total amount to be paid would be subject to adjustment for amounts paid since June 30, 2015. Were this fixed price option to be exercised, the aggregate delay-related liquidated damages amount referred to in (iii) above would be capped at $338 million per unit (SCE&G’s 55% portion being approximately $186 million per unit), and the completion bonus amounts referred to in (iv) above would be $150 million per New Unit). The exercise of this fixed price option would result in SCE&G’s total estimated project costs increasing by approximately $774 million over the $6.8 billion approved by the SCPSC in September 2015, and would bring its total estimated gross construction cost (including escalation and AFC) of the project to approximately $7.6 billion.” e. “Under the BLRA, the SCPSC has approved, among other things, a milestone schedule and a capital costs estimates schedule for the New Units. This approval constitutes a final and binding determination that the New Units are used and useful for utility purposes, and that the capital costs associated with the New Units are prudent utility costs and expenses and are properly included in rates so long as the New Units are constructed or are being constructed within the parameters of the approved milestone schedule, including specified schedule contingencies, and the approved capital costs estimates schedule.” DELOITTE & SCANA failed to disclose the existence of known trends or uncertainties within the Company regarding the Project, namely, that SCANA was not going to be able to complete construction of the Project 22   by the end of 2020, was not going to be eligible to receive $1.4 billion in Nuclear Tax Credits, and that failure to complete the Project by the end 2020 would have material unfavorable impact on revenues. 61. In SCANA’s Form 10-K filed on February 26, 2016, SCANA repeated its earlier statement made in SCANA’s Form 10-Q for the third quarter of 2015, signed and certified as accurate pursuant to the Sarbanes-Oxley Act of 2002 (“SOX”) by Marsh and Addison and filed on November 6, 2015 stating, in relevant part: “Under the BLRA, the SCPSC has approved, among other things, a milestone schedule and a capital costs estimates schedule for the New Units. This approval constitutes a final and binding determination that the New Units are used and useful for utility purposes, and that the capital costs associated with the New Units are prudent utility costs and expenses and are properly included in rates so long as the New Units are constructed or are being constructed within the parameters of the approved milestone schedule, including specified schedule contingencies, and the approved capital costs estimates schedule.” Again, Defendants and SCANA failed to disclose the existence of known trends or uncertainties within the Company regarding the Project, namely, that SCANA was not going to be able to complete construction of the Project by the end of 2020, was not going to be eligible to receive $1.4 billion in Nuclear Tax Credits, and that failure to complete the Project by the end 2020 would have a material unfavorable impact on revenues. 62. In SCANA’s Form 10-Q filed on May 6, 2016: SCANA stated, “Under the BLRA, the SCPSC has approved, among other things, a milestone schedule and a capital costs estimates schedule for the New Units. This approval constitutes a final and binding determination that the New Units are used and useful for utility purposes, and that the capital costs associated with the New Units are prudent utility costs and expenses and are properly included in rates so 23   long as the New Units are constructed or are being constructed within the parameters of the approved milestone schedule, including specified schedule contingencies, and the approved capital costs estimates schedule.” Again, Defendants and SCANA failed to disclose the existence of known trends or uncertainties within the Company regarding the Project, namely, that SCANA was not going to be able to complete construction of the Project by the end of 2020, was not going to be eligible to receive $1.4 billion in Nuclear Tax Credits, and that failure to complete the Project by the end 2020 would have a material unfavorable impact on revenues. 63. In SCANA’s Form 10-Q filed on August 5, 2016: SCANA stated again, “Under the BLRA, the SCPSC has approved, among other things, a milestone schedule and a capital costs estimates schedule for the New Units. This approval constitutes a final and binding determination that the New Units are used and useful for utility purposes, and that the capital costs associated with the New Units are prudent utility costs and expenses and are properly included in rates so long as the New Units are constructed or are being constructed within the parameters of the approved milestone schedule, including specified schedule contingencies, and the approved capital costs estimates schedule.” SCANA stated again, “Under the October 2015 Amendment, SCE&G’s total estimated project costs will increase by approximately $286 million over the $6.8 billion approved by the SCPSC in September 2015, and will bring its total estimated gross construction cost of the project (including escalation and AFC) to approximately $7.1 billion.” Again, Defendants and SCANA failed to disclose the existence of known trends or uncertainties within the Company regarding the Project, namely, that SCANA was not going to be able to complete construction of the Project by the end of 2020, was not going to be eligible to receive $1.4 24   billion in Nuclear Tax Credits, and that failure to complete the Project by the end 2020 would have a material unfavorable impact on revenues. 64. In SCANA’s Form 10-Q filed on November 4, 2016: SCANA stated again, “Under the BLRA, the SCPSC has approved, among other things, a milestone schedule and a capital costs estimates schedule for the New Units. This approval constitutes a final and binding determination that the New Units are used and useful for utility purposes, and that the capital costs associated with the New Units are prudent utility costs and expenses and are properly included in rates so long as the New Units are constructed or are being constructed within the parameters of the approved milestone schedule, including specified schedule contingencies, and the approved capital costs estimates schedule.” SCANA stated, “On May 26, 2016, SCE&G petitioned the SCPSC seeking approval to update the capital cost schedule and construction milestone schedule for the New Units consistent with the October 2015 Amendment. Within this petition, SCE&G also informed the SCPSC that is had notified WEC of its intent to elect the fixed price option, subject to concurrence by the Santee Cooper and approval by the SCPSC. The petition reflected an increase in total project costs of approximately $852 million over the cost approved by the SCPSC in September 2015, of which approximately $505 million is directly attributable to the fixed price option. SCE&G’s estimated gross construction cost for the project is now estimated to be approximately $7.7 billion, including owner’s costs, transmission, escalation and AFC. After receiving Santee Cooper’s concurrence in June 2016, SCE&G executed the fixed price option on July 1, 2016, subject to SCPSC approval.” Again, Defendants and SCANA failed to disclose the existence of known trends or uncertainties within the Company regarding the Project, namely, that SCANA was not going to be able to complete construction of the Project by the end of 2020, was not going to be eligible to receive $1.4 billion in Nuclear Tax Credits, and that failure to complete the Project by the end 2020 would have a material unfavorable impact on revenues. 25   65. In SCANA’s Form 10-K filed on February 24, 2017: SCANA stated again, “Under the BLRA, the SCPSC has approved, among other things, a milestone schedule and a capital costs estimates schedule for the New Units. This approval constitutes a final and binding determination that the New Units are used and useful for utility purposes, and that the capital costs associated with the New Units are prudent utility costs and expenses and are properly included in rates so long as the New Units are constructed or are being constructed within the parameters of the approved milestone schedule, including specified schedule contingencies, and the approved capital costs estimates schedule.” Again, Defendants and SCANA failed to disclose the existence of known trends or uncertainties within the Company regarding the Project, namely, that SCANA was not going to be able to complete construction of the Project by the end of 2020, was not going to be eligible to receive $1.4 billion in Nuclear Tax Credits, and that failure to complete the Project by the end 2020 would have a material unfavorable impact on revenues. 66. SCANA’s March 29, 2017 Proxy Statement filed with the SEC included a “Chairman’s Letter and 2016 Highlights.” Again, SCANA stated in its Proxy Statement, “Under the BLRA, the SCPSC has approved, among other things, a milestone schedule and a capital costs estimates schedule for the New Units. This approval constitutes a final and binding determination that the New Units are used and useful for utility purposes, and that the capital costs associated with the New Units are prudent utility costs and expenses and are properly included in rates so long as the New Units are constructed or are being constructed within the parameters of the approved milestone schedule, including specified schedule contingencies, and the approved capital costs estimates schedule.” 67. In SCANA’s Form 10-Q filed on May 5, 2017: 26   Again, Defendants and SCANA stated, “Under the BLRA, the SCPSC has approved, among other things, a milestone schedule and a capital costs estimates schedule for the New Units. This approval constitutes a final and binding determination that the New Units are used and useful for utility purposes, and that the capital costs associated with the New Units are prudent utility costs and expenses and are properly included in rates so long as the New Units are constructed or are being constructed within the parameters of the approved milestone schedule, including specified schedule contingencies, and the approved capital costs estimates schedule.” Again, SCANA failed to disclose the existence of known trends or uncertainties within the Company regarding the Project, namely, that SCANA was not going to be able to complete construction of the Project by the end of 2020, was not going to be eligible to receive $1.4 billion in Nuclear Tax Credits, and that failure to complete the Project by the end 2020 would have a material unfavorable impact on revenues. 68. In SCANA’s Form 10-Q filed on May 5, 2017, again, SCANA stated, “Under the BLRA, the SCPSC has approved, among other things, a milestone schedule and a capital costs estimates schedule for the New Units. This approval constitutes a final and binding determination that the New Units are used and useful for utility purposes, and “that the capital costs associated with the New Units are prudent utility costs and expenses and are properly included in rates so long as the New Units are constructed or are being constructed within the parameters of the approved milestone schedule, including specified schedule contingencies, and the approved capital costs estimates schedule.” 69. SCANA’s Form 8-K filed on July 31, 2017 included a Abandonment Press Release that misled investors into believing Westinghouse’s bankruptcy was the 27   primary reason SCANA chose to abandon the Nuclear Project, and continued to conceal Bechtel’s earlier negative findings. “We arrived at this very difficult but necessary decision following months of evaluating the [P]roject from all perspectives to determine the most prudent path forward. Many factors outside our control have changed since inception of this [P]roject. Chief among them, the bankruptcy of our primary construction contractor, Westinghouse. . .” Similarly, that same day during the July 31, 2017 Abandonment Conference Call, Marsh affirmed that SCANA’s actions met the test for prudency, and placed the blame for the Nuclear Project’s demise on “the failure of Westinghouse to deliver on its fixed price contract.” Furthermore, Marsh explained that the “Westinghouse bankruptcy removed the benefits and protection of the [F]ixed [P]rice [O]ption,” which caused “SCANA and our project co-owner, Santee Cooper, to reevaluate the entire new [N]uclear [P]roject from all perspectives.” DELOITTE’S FIDUCIARY DUTY TO PLAINTIFF AND PLAINTIFFS CLASS 70. Every audit report of SCANA by Deloitte for years 2014-2017 was a “clean opinion”. Deloitte represented that the financial statements were fairly presented in all material respects. Deloitte gave SCANA the highest-level audit report that a Certified Public Accounting Firm may give a client. Deloitte knew that their opinions were false and materially misleading to investors when they were given to the public. DELOITTE KNEW FROM THE BEGINNING OF SOUTH CAROLINA PROJECT THAT SCANA DID NOT HAVE FINANCIAL ABILITY TO BUILD THE NUCLEAR FACILITY WITHOUT TAX CREDITS AND BSLRA 71. Throughout the Class Period, Deloitte failed to adequately assess the significant risks associated with the SCANA engagement. 72. Deloitte knowingly or recklessly abdicated its responsibilities in connection with its audits of SCANA’s financial statements for fiscal years 2014 through 2017. 28   Had Deloitte conducted its audits in compliance with Generally Accepted Auditing Standards (“GAAS”) and PCAOB standards, it would have told the public the truth. By issuing “clean opinions” for the 2015 to 2017 fiscal years, and failing to disclose adverse material facts. Deloitte knowingly or recklessly disregarded the truth concerning the progress and significant material weaknesses in the Company’s internal controls, specifically, internal controls relating to the way the Company portrayed the nuclear plant construction schedule. Furthermore, the Defendants overstated assets, overstated earnings, understated liabilities, and artificially inflated stock valuations. VI. SCIENTER 73. From January 31, 2015 to December 31, 2016, SCANA officials repeatedly represented that the Guaranteed Substantial Completion Date (“GSCD”) for Nuclear Project Unit 2 and Unit 3 were August 31, 2019 and August 30, 2020, respectively. These statements were blatant lies, and Deloitte knew that the statements were false, but continued to issue unqualified opinions. 74. Including and in addition to the materially false and misleading statements and omissions set forth above, Defendants made the following material false and misleading statements and omissions during the Class Period with knowledge or reckless disregard for their falsity at the time they were made. Indeed, as explained above, during the Class Period, Deloitte knew that (i) the Nuclear Project would not be completed in 2020; (ii) the costs of the Nuclear Project would be, at least, $935 million to $1.45 billion greater than represented; (iii) SCANA would be ineligible to receive the $1.4 billion in Nuclear Tax Credits; 29   (iv) the Nuclear Project was not progressing toward a 2020 completion date because the monthly progress rates never came close to the needed rate of 2.5% to 3% per month; (v) SCANA’s oversight was completely inadequate to “bring the project to completion;” (vi) SCANA’s May 2016 election of the fixed price option would likely force Toshiba and/or Westinghouse into bankruptcy, dooming the Nuclear Project, and (vii) Defendants’ affirmative commitment to heightened transparency at the start of the Class Period was patently false as SCANA buried the Deloitte Special Audit Report and the Bechtel Assessment and Report, as well as the monthly progress reports and other internal documents that revealed the fraud. 75. Deloitte not only did the annual audit, but also was retained in 2015 to do a “special” audit of VC Summer project costs. Deloitte knew from contemporaneous presentations, reports, analyses, and correspondence that individually and collectively informed Deloitte that SCANA’s public statements concerning the status of the Project were materially false and misleading when made. The failure to disclose the Deloitte Special Audit Report and the Bechtel Reports and other information regarding the viability of the Project are strong evidence of Scienter. 76. Deloitte knew that the monthly progress rate at the Project never tipped 0.8%, which means that there was no material improvement in progress throughout the Class Period. Deloitte’s concealment is even more incriminating when viewed in the context that the Project was the single most important component of SCANA’s business and financial statements during the Class Period. Deloitte 30   was motivated to keep the Project running so that SCANA could reap the benefits of the nine rate hikes permitted under the BLRA and approved by the PSC. Deloitte, being the largest auditor of investor-owned utilities in the United States, clearly knew how important to investors it was that the projects were on schedule. VII. LOSS CAUSATION 77. Defendants’ wrongful conduct, as alleged herein, directly and proximately caused Plaintiff and the Class to suffer substantial losses. During the Class Period, Plaintiff and the Class purchased SCANA securities at artificially inflated prices and were damaged thereby when the price of SCANA securities declined when the truth was revealed. The price of SCANA securities significantly declined (causing investors to suffer losses) when the Defendants’ misrepresentations, and/or the information alleged herein to have been concealed from the market, and/or the effects thereof, were revealed, and/or the risks that had been fraudulently concealed by the Defendants materialized. 78. Specifically, Defendants’ materially false and misleading statements misrepresented, inter alia, the status of the Nuclear Project (including the schedule for its completion, total costs, SCANA’s ability to qualify for the crucial Nuclear Tax Credit, and the progress of construction), SCANA’s purported commitment to honesty and transparency about the project, the prudency of SCANA’s management of the project, the likelihood and impact or a potential Toshiba and/or Westinghouse bankruptcy, and the ongoing viability of the project. When those statements were corrected and the truth revealed, investors suffered losses as the prices of SCANA securities declined. Because of the 31   disclosure of the truth of the Defendants’ fraud, SCANA’s common stock price declined over 50%, from a high closing price of $76.12 per share on July 6, 2016, to a closing price of $37.39 per share on December 21, 2017. The disclosures that corrected the market prices of SCANA securities and/or revealed a previously concealed, materialized risk to reduce the artificial inflation caused by the Defendants’ materially false and misleading statements and omissions are detailed below and summarized in the following chart. Specifically, the chart identifies each corrective disclosure and/or materialization of the risk event, the price declines in SCANA common stock resulting from the event, and, for purposes of comparison, the percentage change in the S&P 500 Index on each event date: Common Closing Stock S&P 500 Stock Price Price Date* Corrective Event Price Change Change 12/27/2016 Toshiba announced estimated $ 72.92 - 2.03% - 0.82% (12/28/2016) impairment of billions of dollars connected to Nuclear Project. 02/14/2017 Toshiba announced $6.3 billion $ 66.86 - 4.53% 0.43% writedown related to nuclear program and reported that it may have to sell its stake in Westinghouse. 02/16/2017 SCANA holds conference call $ 67.32 - 0.22% - 0.08% and discusses Toshiba announcement and possible impact on SCANA and Nuclear Project. 03/22/2017 Morgan Stanley issues report $ 67.74 - 0.78% 0.19% predicting “further cost overruns and delays” at the Nuclear Project and estimating that total costs would be 108% above the original 32   Common Closing Stock S&P 500 Stock Price Price Date* Corrective Event Price Change Change cost estimate, and $5.2 billion greater than most recent cost estimate. 03/22/2017 News coverage of Morgan Stanley $ 66.71 - 1.52% - 0.10% (03/23/2017) report and publication of Reuters article reporting that Westinghouse had secured bankruptcy counsel and indicating that bankruptcy announcement was imminent. 07/27/2017 SCANA and Santee Cooper $ 61.29 - 6.63% - 0.13% (07/28/2017) announce that (i) Toshiba agreement to honor its $2.168 billion parental guidance will not be sufficient as the costs of the two Units will “materially exceed” prior estimates, and (ii) the Nuclear Project will not be completed by 2021, “the current deadline for SCE&G to gain production tax credits for completing the reactors. 08/02/2017 Following news covering $ 65.34 - 2.70% - 0.20% (08/03/2017) testimony by Marsh, Byrne, and Addison before the PSC, which stated it was “a grim day” and that the “Commission was blindsided,” South Carolina lawmakers form South Carolina Energy Caucus in response to SCANA’s decision to abandon the Nuclear Project, with a goal to force “the shareholders of SCANA Corp. to eat any remaining costs to be tied to thehigh-profile cancellation of two multi-billion-dollar nuclear reactors. 08/04/2017 South Carolina Attorney General $ 63.79 - 2.37% - 0.19% announced initiation of an investigation into SCANA “to ensure that all laws were 33   Common Closing Stock S&P 500 Stock Price Price Date* Corrective Event Price Change Change complied with and all applicable procedures were followed,” and news that legislators were planning on closely investigating SCANA’s abandonment petition. 08/09/2017 It is reported that the ORS moved $ 62.01 - 1.10% - 1.41% (08/10/2017) to dismiss SCANA’s abandonment petition, and the Speaker of South Carolina’s House of Representatives intervened to join that motion. 08/10/2017 Post and Courier article reported $ 60.69 - 2.13% 0.13% (08/11/2017) that Marsh told lawmakers that he would not want to take on the Nuclear Project now “after it fell years behind schedule” and soared “billions of dollars over budget.” Article also reported lawmaker statements unless SCANA pulled its request to charge ratepayers for the failed project, “you may force the General Assembly to be more rash than we would otherwise want to be.” 09/07/2017 Articles report on the fallout from $ 59.58 - 0.75% 0.01% the release of the Final Bechtel Report and the release of internal documents and communications that revealed new information about SCANA executives’ knowledge of the significant risks facing the Nuclear Project at least by February 2016, as well as knowledge of a significant risk of bankruptcy facing Toshiba and Westinghouse and the adverse impact on the viability of the Nuclear Project from early in 2016. 09/21/2017 SCANA announces that it had been $ 55.22 - 3.43% 0.07% (09/22/2017) served with a subpoena from the U.S. Attorney; followed by news of a federal grand jury being 34   Common Closing Stock S&P 500 Stock Price Price Date* Corrective Event Price Change Change convened to look into SCANA’s role in the failed Nuclear Project. Lawmakers make public comments that the U.S. Attorney could uncover securities fraud violations. On September 22, 2017, an article is published detailing the insider trading of certain SCANA executives. 09/26/2017 South Carolina Attorney General $ 51.22 - 7.83% 0.41% (09/27/2017) issues opinion that BLRA was “constitutionally suspect,” calling into question its enforceability. ORS then filed a request with the PSC to block SCANA from charging ratepayers going forward, and force SCANA to refund ratepayers for prior charges. On 09/27/2017, The State reported on the existence of an earlier Bechtel Report suggesting that the initial report was “originally much worse.” 09/29/2017 Credit rating agencies Fitch and $ 48.49 - 4.90% 0.37% Standard & Poor’s both downgrade SCANA’s credit ratings and place SCANA on a negative “watch” lists, indicating further downgrades might be in store. 10/19/2017 South Carolina Governor McMaster $ 48.65 - 0.98% 0.04% asks SCANA to stop charging customers for Nuclear Project, and to use the $2 billion from Toshiba to repay those customers rather than fund the Nuclear Project. 10/26/2017 Earnings declined to $34 million, $ 46.50 - 2.78% 0.81% (10/27/2017) driven in large part by a $210 million impairment taken on the grounds that “the public, political and 35   Common Closing Stock S&P 500 Stock Price Price Date* Corrective Event Price Change Change regulatory response to the abandonment decision has been extremely contentious.” 10/31/2017 Marsh resigns after news of his $ 43.14 - 6.03% 0.10% ouster. 12/20/2017 The PSC denies request to dismiss $ 37.39 - 9.51% 0.20% rate relief suit; Morgan Stanley report on 12/21/2017 writes that petitioner success in any pending cases before PSC would dramatically reduce SCANA value. * Date of stock price drop indicated in parentheses. 79. The timing and the magnitude of the price declines in SCANA’s common stock negate any inference that the losses suffered by Plaintiff and the other Class members were caused by changed market conditions, macroeconomic or industry factors or Company-specific facts unrelated to Defendants’ fraudulent conduct. Indeed, analyst commentary after each corrective disclosure and/or materialization of the risk event attributed the large negative reaction in the stock specifically to the alleged disclosures. VIII. DELOITTE AUDITS WERE NO AUDITS AT ALL 80. Deloitte knew SCANA’S and SCE&G’S financial condition from the beginning of the South Carolina Project. Deloitte knew that the securing of the tax credits was crucial to finishing the Project. Deloitte’s accounting practices were so deficient that the audit amounted to no audit at all, or an egregious refusal to see the obvious, or to investigate the doubtful, or that the accounting judgments which 36   were made were such that no reasonable accountant would have made the same decisions if confronted with the same facts. The red flags should have been clearly evident to any auditor performing its duties. Deloitte deliberately chose to disregard the red flags to avoid revealing the truth to the public that the tax credit deadline would not be achieved. 81. Deloitte’s client, The Southern Company, experienced the same issues in Georgia. Deloitte had the unique knowledge of auditing all four AP1000 Westinghouse units in the United States. 82. SCANA hired Deloitte to do a “special audit” of construction costs in 2015. Auditing construction costs could not have been done without knowledge of construction progress. 83. Upon information and belief, Deloitte had knowledge of Bechtel’s role months before the Bechtel Report was finished in late 2015. 84. Upon information and belief, almost all of the executives and board members of SCANA were former Deloitte employees. Marsh, Addison, Swan and Aliff were the relevant people who knew of SCANA’s construction fiasco even before the Bechtel Report was written. IX. INAPPLICABILITY OF SAFE HARBOR 85. The statutory safe harbor applicable to forward-looking statements under certain circumstances does not apply to any of the false or misleading statements pleaded in this Complaint. The statements complained of herein were historical statements or statements of current facts and conditions at the time the statements were made. For example, many of the statements relate to the current or historical 37   status of the new nuclear unit project at VC Summer, including that the project is progressing well or that prior challenges have been resolved. To the extent that any of these statements might be construed to touch on the future intent, they are mixed statements of present facts and future intent and are not entitled to safe harbor protection with respect to the part of the statement that refers to the present. Further, to the extent that any of the false or misleading statements alleged herein can be construed as forward-looking, the statements were not accompanied by any meaningful cautionary language identifying important facts that could cause actual results to differ materially from those in the statements. X. PRESUMPTION OF RELIANCE 86. Plaintiff is entitled to a presumption of reliance under Affiliated Ute Citizens of Utah v. U.S., 406 U.S. 128 (1972), because the claims asserted herein against Deloitte are predicated in part upon material omissions of fact that Deloitte had a duty to disclose. 87. In the alternative, Plaintiff is entitled to a presumption of reliance on Deloitte’s material misrepresentations and omissions pursuant to the fraud-on-the-market doctrine because, at all relevant times, the market for SCANA securities was open, efficient, and well-developed. 88. As a result of the foregoing, the market for SCANA securities promptly digested current information regarding SCANA from all reliable, publicly-available sources and reflected such information in the price of SCANA’s securities. Under these circumstances, purchasers of SCANA securities during the Class Period 38   suffered injury through their purchase of SCANA securities at artificially-inflated prices and a presumption of reliance applies. 89. Accordingly, Plaintiff and other members of the Section 10(b) Class did rely and are entitled to have relied upon the integrity of the market price for SCANA securities and to a presumption of reliance on Defendants’ materially false and misleading statements and omissions during the Class Period. Additionally, Plaintiff and the Class are entitled to a presumption of reliance because the claims asserted herein against Deloitte are also predicated upon omissions of material fact, which there was a duty to disclose. XI. FRAUDULENT CONCEALMENT 90. The Plaintiff and Plaintiff Class allege that (1) Deloitte intentionally and/or recklessly failed to warn the investor/public at any time during the Class Period that the construction schedule was so far behind that the tax credits would never be collected, (2) Further that Deloitte took affirmative action and/or remained silent and failed to disclose material facts despite their duty to do so, (3) Further the Plaintiff and Plaintiff Class could not have discovered the Cause of Action despite exercising reasonable care and diligence, (4) Deloitte was aware of the wrong, and (5) The concealed information was material to Plaintiff and Plaintiff Class. XII. CAUSE OF ACTION COUNT ONE For Violation of Section 10b of The Exchange Act and Rule 10b-5 (Against All Defendants) 91. Plaintiff incorporates by reference each and every preceding paragraph as though fully set forth herein. 39   92. Plaintiff asserts this Count pursuant to §10b of the Exchange Act and Rule 10b-5 promulgated thereunder against Defendants Deloitte & Touche, LLP and Deloitte, LLP. 93. During the Class Period, Defendants disseminated or approved of the false statements set forth above, which they knew or deliberately disregarded, were false and 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. 94. Upon information and belief Defendants violated 10b of the Exchange Act and Rule 10b-5 in that they: i. Employed devices, schemes, and artifices to defraud; ii. Made or caused to be made untrue statements of material facts or omitted to state material facts necessary in order to make the statement made, in light of the circumstances under which they were made, not misleading; or iii. 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 purchase of SCANA securities during the class period. 95. By virtue of their positions at SCANA, as SCANA’s outside auditor and auditor in charge of special audits, upon information and belief 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 40   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. 96. Information showing that Defendant Deloitte acted knowingly or with reckless disregard for the truth is peculiarly within Defendants’ knowledge and control. Defendant Deloitte had knowledge of the details of SCANA’s internal affairs. As a result of the dissemination of false and misleading reports, releases, and public statements, the market price of SCANA securities was artificially inflated throughout the Class Period. In ignorance of the adverse facts concerning SCANA’s business and financial condition which were concealed by Defendant Deloitte, Plaintiff and other members of the Class purchased or otherwise acquired SCANA securities at artificially-inflated prices and relied upon the prices of the securities, the integrity of the market for the securities, and/or upon statements disseminated by Defendant Deloitte, and were damaged thereby. 97. Plaintiff and other members of the Class have suffered damages in that, in reliance on the integrity of the market, they paid artificially inflated prices for SCANA securities. Plaintiff and other members of the Class would not have purchased SCANA 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 Defendant Deloitte’s misleading statements. 41   XIII. PRAYER FOR RELIEF WHEREFORE, Plaintiff prays for judgment as follows: A. This action may proceed as a class action, with Plaintiff as the designated representative of the applicable Cause of Action. B. Plaintiff and the members of the Class recover damages sustained by them, as provided by law, and that a judgment in favor of Plaintiff and Class be entered against Deloitte in an amount permitted pursuant to such law; C. Plaintiff and members of the Class be awarded pre-judgment and post- judgment interest, and that such interest be awarded at the highest legal rate from and after the date of service of the initial Complaint in this action; D. Plaintiff and members of the Class recover their costs of this suit, including reasonable attorneys’ fees as provided by law; and E. Plaintiff and members of the Class receive such other and further relief as may be just and proper. XIV. JURY TRIAL DEMAND Pursuant to Federal Rule of Civil Procedure 38(b), Plaintiff demands a trial by jury of all of the claims asserted in this Complaint so triable. 42   Respectfully submitted this, the 22nd day of November, 2019. /s/ Daryl G. Hawkins Daryl G. Hawkins   Law Offices of Daryl G. Hawkins,  LLC   P.O. Box 11906 Columbia, SC 29211 Tel: (803) 733-3531 Email: dgh@dghlaw.net   SC Bar #002844/ USDC #01781 Thomas C. Jessee Jessee & Jessee P.O. Box 997 Johnson City, TN 37605 Tel: (423) 928-7175 Email: jjlaw@jesseeandjessee.com TNBPR #000113/ SC Bar #2996 Gordon Ball Jonothan Tanner Ball Steven Chase Fann GORDON BALL, LLC 7001 Old Kent Drive Knoxville, Tennessee 37919 Tel: (865) 525-7028 Email: gball@gordonball.com TNBPR#001135 jtannerball@gmail.com TNBPR#037011 chasefann@wfptnlaw.com TNBPR#36794 (Motion for Pro Hac Vice to be filed) Edward D. Sullivan,  JD,  LLM,  CPA Sullivan  Law  Firm,  PC Edward D. Sullivan PO Box 11714 Columbia, SC 29211 Tel: (803) 451-2775 Email: esullivan@esullivanlaw.com SC Bar #0011248/ USDC #5016 Counsel for Plaintiff 43  

consumer fraud

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UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS Justin Viveiros, Case No.: individually and on behalf of all others similarly situated, Plaintiff, CLASS ACTION COMPLAINT -v.- DEMAND FOR JURY TRIAL Resurgent Capital Services, L.P., and LVNV Funding, LLC, Defendants. Plaintiff Justin Viveiros brings this Class Action Complaint by and through his attorneys against Defendants Resurgent Capital Services (“Resurgent”) and LVNV Funding, LLC (“LVNV”), 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’) 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). This was because "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. The Act 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), consumers were given a private cause of action against debt collectors who fail to comply with the Act. § 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 also has pendant jurisdiction over the 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 this is where a substantial part of the events or omissions giving rise to the claim occurred and where the Plaintiff resides. NATURE OF THE ACTION 5. Plaintiff brings this class action on behalf of a class of Massachusetts 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 Massachusetts, County of Bristol. 8. Defendant Resurgent is a "debt collector" as the phrase is defined in 15 U.S.C. § 1692(a)(6) and used in the FDCPA with a service address c/o Corporation Service Company 84 State Street, Suite 400, Boston MA 02109. 9. Upon information and belief, Defendant Resurgent 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. Defendant LVNV is a "debt collector" as the phrase is defined in 15 U.S.C. § 1692(a)(6) and used in the FDCPA with a service address at Corporation Service Company, 84 State Street, Boston, MA 02109. 11. Upon information and belief, Defendants LVNV 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. CLASS ALLEGATIONS 12. Plaintiff brings this claim on behalf of the following class, pursuant to Fed. R. Civ. P. 23(a) and 23(b)(3). 13. The Class consists of: a. all individuals with addresses in the State of Massachusetts; b. that disputed a consumer debt being collected by Defendants; c. to whom Resurgent subsequently sent a letter on behalf of LVNV; d. that included the 15 U.S.C. §1692g notices; e. 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. 14. The identities of all class members are readily ascertainable from the records of Defendants and those companies and entities on whose behalf it attempts to collect and/or has purchased debts. 15. 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. 16. 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 communication to consumers, in the form attached as Exhibit A, violate 15 U.S.C. §§ 1692e, 1692f, and 1692g. 17. 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. 18. 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 predominance over any questions or issues involving only individual class members. The principal issue is whether the Defendants’ written communication to consumers, in the form attached as Exhibit A, violate 15 U.S.C. §§ 1692e, 1692f, and 1692g. 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. 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 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. 19. 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. 20. 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 21. Plaintiff repeats the above allegations as if set forth here. 22. Some time prior to August 17, 2020, Plaintiff allegedly incurred an obligation to non- party Credit One Bank, N.A. (“Credit One”). 23. The obligation arose out of transactions incurred primarily for personal, family, or household purposes, specifically personal credit. 24. The alleged Credit One obligation is a "debt" as defined by 15 U.S.C.§ 1692a (5). 25. Credit One is a "creditor" as defined by 15 U.S.C.§ 1692a (4). 26. According to Defendants’ letter, described below, the current owner of the Credit One debt is LVNV. 27. LVNV 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. 28. According to Defendants’ letter, described below, Resurgent manages the alleged debt for LVNV. 29. Resurgent 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 – August 17, 2020 Collection Letter 30. Some time prior to August 17, 2020, Defendants sent Plaintiff an initial collection letter regarding the alleged debt. 31. Pursuant to 15 U.S.C. §1692g, Plaintiff disputed the debt. 32. Then, on or about August 17, 2020, Defendants sent Plaintiff another collection letter regarding the alleged debt. See Letter attached as Exhibit A. 33. The Letter acknowledged receipt of the Plaintiff’s inquiry/dispute. 34. The Letter also contained a statement of the notices required only in an initial communication by 15 U.S.C. § 1692g (a). 35. Among the rights provided by 15 U.S.C. § 1692g (a) is a 30-day period from the consumer’s receipt of the initial communication in which the consumer may dispute the debt or request verification. 36. The consumer must dispute the debt within 30 days from their receipt of the initial communication in order for the FDCPA to require the debt collector to obtain and send the consumer verification prior to continuing collection efforts. 37. If the consumer disputes the debt after the 30-day period from the initial communication has expired, the debt collector is not required to send the consumer verification. 38. By stating that the consumer has an additional 30-day period in which he may dispute the debt, which is not accurate pursuant to 15 U.S.C. § 1692g (a), the Letter is misleading or unfairly confuses Plaintiff as to his rights. 39. In addition, Defendants previously stated that Plaintiff had already disputed the debt, leaving Plaintiff in doubt if these rights enumerated in the Letter were in a fact a new offer. 40. The Letter contradictorily states that it received Plaintiff’s dispute/inquiry but then states that Plaintiff may dispute the debt. 41. It is deceptive and misleading for Defendants to claim Plaintiff had yet another opportunity to dispute the debt, after previously stating he has already disputed it pursuant to the FDCPA. 42. Plaintiff was misled as to his rights. 43. Defendants’ actions were false, deceptive, and/or misleading. 44. Plaintiff was concerned and confused by the Letter. 45. Plaintiff was therefore unable to evaluate his options of how to handle this debt. 46. Because of this, Plaintiff expended time, money, and effort in determining the proper course of action. 47. Plaintiff would have pursued a different course of action were it not for Defendants’ statutory violations. 48. In addition, Plaintiff suffered emotional harm due to Defendants’ improper acts. 49. These violations by Defendants were knowing, willful, negligent and/or intentional, and Defendants did not maintain procedures reasonably adapted to avoid any such violations. 50. 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. 51. 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. 52. Defendants’ actions created an appreciable risk to Plaintiff of being unable to properly respond or handle Defendants’ debt collection. 53. 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. 54. 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. 55. Plaintiff repeats the above allegations as if set forth here. 56. 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. 57. 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. 58. Defendants violated said section, as described above, by making a false or misleading representation, and misstating Plaintiff’s rights enumerated in § 1692g, in violation of §§ 1692e, 1692e (2), and 1692e (10). 59. By reason thereof, Defendants are liable to Plaintiff for judgment that Defendants’ conduct violated Section 1692e, et seq. of the FDCPA and Plaintiff is entitled to 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. 60. Plaintiff repeats the above allegations as if set forth here. 61. 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. § 1692f. 62. 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. 63. Defendants violated this section by unfairly misrepresenting Plaintiff’s rights and misleading Plaintiff as to the proper course of action. 64. By reason thereof, Defendants are liable to Plaintiff for judgment that Defendants’ conduct violated Section 1692f, et seq. of the FDCPA and Plaintiff is entitled to actual damages, statutory damages, costs and attorneys’ fees. COUNT III VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT 15 U.S.C. §1692g et seq. 65. Plaintiff repeats the above allegations as if set forth here. 66. 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. § 1692g. 67. Pursuant to 15 U.S.C. § 1692g an initial collection letter must contain certain notices, including that the debtor has thirty days to dispute the debt. 68. Defendants violated 15 U.S.C. §1692g by misleading Plaintiff as to his rights, or overshadowing the required notices, as described above. 69. By reason thereof, Defendants are liable to Plaintiff for judgment that Defendants’ conduct violated Section 1692g et seq. of the FDCPA, actual damages, statutory damages, costs and attorneys’ fees. DEMAND FOR TRIAL BY JURY 70. 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 Justin Viveiros, individually and on behalf of all others similarly situated, demands judgment from Defendants Resurgent and LVNV as follows: a) Declaring that this action is properly maintainable as a Class Action and certifying Plaintiff as Class representative, and Scott Bernstein, 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: July 12, 2021 Respectfully submitted, Skolnick Legal Group, P.C. s/ Scott Bernstein By: Scott Bernstein, Esq. 103 Eisenhower Pkwy Roseland, New Jersey 07068 (203) 246-2887 scott@skolnicklegalgroup.com Attorneys for Plaintiff

consumer fraud

Ra6vCocBD5gMZwczUagi

CIVIL ACTION CLASS ACTION COMPLAINT AND DEMAND FOR JURY TRIAL UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK CHAYIM WALLK, on behalf of himself and all others similarly situated, Plaintiffs, -against- REVCO SOLUTIONS, INC., Defendant. Plaintiff Chayim Wallk (“Plaintiff”) brings this action against Defendant Revco Solutions, Inc., (hereinafter “Defendant” or “Revco”), both on an individual basis and on the behalf of all others similarly situated pursuant to Fed. R. Civ. P. Rule 23, and alleges based upon Plaintiff’s personal knowledge, the investigation of counsel, and upon information and belief, as follows: PRELIMINARY STATEMENT 1. In 1977 Congress enacted Title 15 of the United States Code § 1692 et seq., commonly referred to as the Fair Debt Collection Practices Act (“FDCPA”) 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 marital 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 “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, Congress gave consumers a private cause of action against debt collectors who failed to comply with the Act. Id.; § 1692k. 3. Thus, “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. 4. In determining whether a collection letter violates the FDCPA, courts in the Second Circuit apply the “least sophisticated consumer standard.” Jacobson, 516 F.3d at 91. In applying this standard, it is not relevant whether the particular debtor was confused by the communication that was received. See Jacobson, 516 F.3d at 91. 5. Under the least sophisticated consumer standard, a collection letter violates the FDCPA where the letter contains language that is “open to more than one reasonable interpretation, at least one of which is inaccurate.” Clomon v. Jackson, 988 F.2d 1314, 1319 (2d Cir. 1993). 6. In recovering damages under the FDCPA, a consumer need not show that the conduct or communication made by the debt collector was intentional. Ellis v. Solomon & Solomon, P.C., 591 F.3d 130, 135 (2d Cir. 1993). Rather, the FDCPA is a strict liability statute, and a single violation is sufficient to establish civil liability against the debt collector. Bentley v. Great Lakes Collection Bureau, 6 F.3d 60 (2d Cir 1993). JURISDICTION AND VENUE 7. The Court has jurisdiction over this action under 28 U.S.C. § 1331 and 15 U.S.C. § 1692k(d). 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 8. Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391(b)(2) as this is where the Plaintiff resides and where a substantial part of the events or omissions giving rise to the claim occurred. PARTIES 9. Plaintiff is a natural person and a resident of Brooklyn, New York. 10. Plaintiff is a “Consumer” as defined by 15 U.S.C. §1692(a)(3). 11. Upon information and belief, Defendant’s principal place of business is located at 250 E Broad Street, 4th Floor, Columbus, Ohio 43215 and their designated agent for service of process is Corporation Service Company located at 50 W. Broad Street, Suite 1330, Columbus, Ohio 43125. 12. 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. 13. Defendant was formerly known as Credit Bureau Collection Services, Inc., d/b/a CBCS. Effective July 7, 2020, Defendant ceased doing business as CBCS after acquisition by successor corporation Revco Solutions, Inc. 14. Defendant is a “debt collector,” as defined under the FDCPA under 15 U.S.C. § 1692a(6). CLASS ALLEGATIONS 15. Plaintiff brings this claim on behalf of the following class, pursuant to Fed. R. Civ. P. 23(a) and 23(b)(3). 16. The Class consists of: (a) all individuals with addresses in the state of New York; (b) to whom Defendant sent a collection letter in the form represented by Exhibit 3 A to the complaint in this action; (c) seeking to collect a debt for personal, family, or household purposes; (d) which was sent on or after a date one (1) year prior to the filing of this action. 17. Excluded from the Class are Defendant and all officers, members, partners, managers, directors, and employees of Defendant and their respective immediate families, and legal counsel for all parties to this action and all members of their immediate families. 18. 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: Plaintiff is informed and believes, and on that basis alleges, that the 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 Class and those questions predominate over any questions or issues involving only individual class members. The principal issue is whether Defendant’s written communications to consumers, in the forms attached as Exhibit A, violate 15 U.S.C. § 1692e. c. Typicality: Plaintiff’s claims are typical of the claims of the class members. Plaintiff and all members of the Class have claims arising out of the Defendant’s 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 absent class members. Plaintiff is committed to vigorously litigating this matter. Plaintiff has 4 also retained counsel experienced in handling consumer lawsuits, complex legal issues, and class actions. Neither Plaintiff nor Plaintiff’s counsel has 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. 19. 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 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. The identities of all class members are readily ascertainable from the records of Defendant and those companies and entities on whose behalf they attempt to collects and/or have purchased debts. 20. Depending on the outcome of further investigation and discovery, Plaintiff reserves the right to amend the class definition. STATEMENT OF FACTS 21. Some time prior to February 14, 2020 an alleged debt was incurred to USAA Federal Savings Bank (“USAA”). 22. The alleged USAA debt 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. 23. The alleged USAA obligation is a “debt” as defined by 15 U.S.C.§1692a(5). 5 24. USAA is a “creditor” as defined by 15 U.S.C.§ 1692a(4). 25. On or about February 14, 2020, Defendant mailed, or caused to be mailed, a collection letter (the “Letter”) to Plaintiff regarding the alleged debt. See Exhibit A. 26. Upon information and belief, the Letter is a form debt-collection letter, generated by a computer, with information specific to Plaintiff inserted by a computer. 27. Plaintiff received the Letter and read it. 28. The Letter states an outstanding balance of $19,509.86. 29. The Letter was the first written communication Plaintiff received from Defendant regarding the alleged debt owed to USAA. The Letter contains the statutory validation notice sent pursuant to 15 U.S.C.§1692g which a debt collector is required to mail to the debtor along with the initial communication, or within five days of the initial communication. 30. The Letter also includes the following representation: 31. The statement that “[w]hen you provide a check as payment…funds may be withdrawn from your account as soon as the same day we receive your payment” is false, deceptive and misleading to the least sophisticated consumer. 32. The least sophisticated consumer would reasonably infer that in making this statement Defendant is reserving the right to process any check on the date of receipt as an “electronic fund transfer” irrespective of whether the check was postdated. 33. The least sophisticated consumer would reasonably understand that a check processed as an “electronic fund transfer” may therefore occur as soon as the date that Defendant receives the check, irrespective of postdating. Indeed, many banks, including USAA, routinely charge against the account of a customer a check that is otherwise payable but for the payment 6 occurring prior to the date of the check. USAA states in its Depository Agreement and Disclosures: “FSB has no duty to discover, observe, or comply with postdated, incomplete, or conditional checks.” See USAA Federal Savings Bank, Depository Agreement and Disclosures (2020), p.20, https://content.usaa.com/mcontent/static_assets/Media/DaD0406_BillPay0704_SvcFee0606.pdf? cacheid=1271482591_p . 34. The FDCPA, however, expressly prohibits “depositing or threatening to deposit any postdated check or other postdated payment instrument prior to the date on such check or instrument. 15 U.S.C.§1692f(4). 35. Therefore, the statement made by Defendant that they may process postdated checks on the date of receipt is false. 36. As such, Defendant’s statement is deceptive and misleading. 37. Defendant’s conduct harmed Plaintiff. COUNT I VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT 15 U.S.C. § 1692e et seq. 38. 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. 39. Defendant’s debt collection efforts attempted and/or directed towards Plaintiff violated various provisions of the FDCPA, including but not limited to 15 U.S.C. § 1692e. 40. 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. 41. Defendant violated said section by making a false and misleading representation in violation of § 1692e(10). 42. By reason thereof, Defendant is liable to Plaintiff for judgment that Defendant's 7 conduct violated § 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. 43. 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. 44. Defendant’s debt collection efforts attempted and/or directed towards Plaintiff violated various provisions of the FDCPA, including but not limited to 15 U.S.C. § 1692f(4). 45. Pursuant to 15 U.S.C. § 1692f, a debt collector may not use unfair or unconscionable means in connection with the collection of any debt. 46. Defendant violated said section by making a false and misleading representation in violation of § 1692f(4), which prohibits Defendant from depositing or threatening to deposit any postdated check or other postdated payment instrument prior to the date on such check or instrument. 47. By reason thereof, Defendant is liable to Plaintiff for judgment that Defendant's conduct violated § 1692f et seq. of the FDCPA, actual damages, statutory damages, costs and attorneys’ fees. PRAYER FOR RELIEF WHEREFORE, Plaintiff demands judgment against Defendant as follows: (a) Declaring that this action is properly maintainable as a class action and certifying Plaintiff as Class representative and the undersigned as Class Counsel; (b) Awarding Plaintiff and the Class statutory damages; 8 (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. JURY DEMAND Plaintiff demands a trial by jury. DATED: August 3, 2020 COHEN & MIZRAHI LLP /s/ Jonathan B. Weiss JONATHAN B. WEISS JONATHAN B. WEISS JOSEPH H. MIZRAHI 300 Cadman Plaza West, 12th Floor Brooklyn, NY 11201 Telephone: 929/575-4175 929/575-4195 (fax) jonathan@cml.legal joseph@cml.legal Attorneys for Plaintiff 9

consumer fraud

88tJDocBD5gMZwcz1bGj

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x JOSEPH GUGLIELMO, on behalf of himself and all others similarly situated, CLASS ACTION COMPLAINT AND Plaintiffs, v. DEMAND FOR JURY TRIAL GILMAR U.S.A., INC., Defendant. : : : : : : : : : : : : - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x INTRODUCTION 1. Plaintiff JOSEPH GUGLIELMO, on behalf of himself and others similarly situated, asserts the following claims against Defendant GILMAR U.S.A., 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.iceberg.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 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 Delaware 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 clothing and accessories company that owns and operates www.iceberg.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 December of 2019, Plaintiff visited Defendant’s website, www.iceberg.com, 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 19, 2019 STEIN SAKS, PLLC By: /s/ David P. Force David P. Force, Esq. dforce@steinsakslegal.com 285 Passaic Street Hackensack, NJ 07601 Tel: (201) 282-6500 Fax: (201) 282-6501 ATTORNEYS FOR PLAINTIFF

civil rights, immigration, family

Q6RpCYcBD5gMZwcz3W39

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION CASE NO.: DANNY HAWK, on behalf of himself and those similarly situated, Plaintiffs, vs. J.R.K. TRUCKING, INC., a Domestic Profit Corporation, and NIZAM KHAN, Individually, Defendant. COLLECTIVE ACTION COMPLAINT & DEMAND FOR JURY TRIAL Plaintiff, DANNY HAWK, and those similarly situated files by and through his undersigned counsel, and hereby sues the Defendant, J.R.K. TRUCKING, INC., a Domestic Profit Corporation, and NIZAM KHAN, individually, (hereinafter referred to as the “Defendants”), and alleges as follows: COMPLAINT AND DEMAND FOR JURY TRIAL 1 INTRODUCTION 1. This is an action by the Plaintiff against Defendants for unpaid overtime wages pursuant to the Fair Labor Standards Act (“FLSA”). Plaintiff seeks damages, reasonable attorney’s fees, and other relief under the Fair Labor Standards Act, as amended, 29 U.S.C. § 216(b) (the “FLSA”). 2. This action is brought under the FLSA to recover from Defendant overtime compensation, liquidated damages, and reasonable attorneys’ fees and costs. JURISDICTION 3. This action arises under the Fair Labor Standards Act, 29 U.S.C. §210, et. seq. 4. The Court has jurisdiction over the FLSA claim pursuant to 29 U.S.C. §216(b). 5. This action is brought under Federal law to recover from Defendants unpaid overtime wages, liquidated damages, and reasonable attorneys’ fees and costs. COMPLAINT AND DEMAND FOR JURY TRIAL 2 VENUE 6. The venue of this Court over this controversy is proper based upon the claim arising in Clayton County, Georgia. PARTIES 7. Plaintiff was an hourly paid Truck Driver who worked for Defendants in Clayton County, Georgia. 8. Plaintiff, Danny Hawk, worked for Defendants as a Truck Driver from approximately June 1, 2015 through October 1, 2015, in Jonesboro, Georgia. 9. The proposed class members worked for Defendants in Jonesboro, Georgia. 10. Plaintiff and the proposed class members were subjected to similar violations of the FLSA. 11. Defendant, J.R.K. TRUCKING, INC., is a Domestic Profit Corporation which operates and conducts business in Clayton County, Georgia and is therefore, within the jurisdiction of this Court. COMPLAINT AND DEMAND FOR JURY TRIAL 3 12. Defendant, NIZAM KHAN, is an individual resident of the state of Georgia who, upon information and belief, resides in Jonesboro, Clayton County, Georgia. FACTUAL ALLEGATIONS 13. Plaintiff, and those similarly situated employees, worked for Defendants in Jonesboro, Clayton County, Georgia. 14. Plaintiff was paid an hourly rate of fourteen and 00/100 dollars ($14.00) per hour in exchange for work performed. 15. Plaintiff worked as a “Truck Driver” for Defendants and performed related activities (i.e. delivered dirt, rock, and salt, delivered to contractors and completed other related duties for Defendants). 16. Plaintiff worked in this capacity from June 1, 2015 through October 1, 2015. 17. Plaintiff routinely worked in excess of forty (40) hours per week as part of his regular job duties. 18. Plaintiff worked an average of sixty-five (65) hours per week. 19. Despite working more than forty (40) hours per week, COMPLAINT AND DEMAND FOR JURY TRIAL 4 Defendants failed to pay Plaintiff overtime compensation at a rate of no less than time and one half his regular rate of pay for all hours worked over forty in a workweek. 20. Truck Drivers were eligible for overtime provided they worked more than forty (40) hours per week. 21. At all material times during the last three years, Defendant, J.R.K. TRUCKING, INC., was an enterprise subject to the FLSA’s provision on overtime wages. 22. At all times relevant to this action, Defendant, NIZAM KHAN regularly exercised the authority to hire and fire employees of J.R.K. TRUCKING, INC. COVERAGE 23. The Defendant, J.R.K. TRUCKING, INC., is a corporation formed and existing under the laws of the State of Georgia and at all times, during Plaintiff’s employment, was an employer as defined by 29 U.S.C. §203. 24. The Defendant, NIZAM KHAN regularly exercised authority on behalf of J.R.K. TRUCKING, INC., a corporation formed and COMPLAINT AND DEMAND FOR JURY TRIAL 5 existing under the laws of the State of Georgia and at all times, during Plaintiff’s employment, was an employer as defined by 29 U.S.C. §203, et seq. 25. Plaintiff was an employee of Defendants and was at all times relevant to the violations of the FLSA (2016), engaged in commerce as defined by 29 U.S.C. §§206(a) and 207(a)(1). 26. At all material times relevant to this action (2013-2016), the Defendant was an enterprise covered by the FLSA, and as defined by 29 U.S.C. §203(r) and 203(s). 27. At all material times relevant to this action (2013-2016), the Defendant made gross earnings of at least five hundred thousand and 0/100 dollars ($500,000.00) annually. 28. At all material times relevant to this action (2013-2016), the Defendant had two (2) or more employees engaged in interstate commerce, producing goods for interstate commerce, or handling, selling or otherwise working on goods or materials that have been moved in or produced for such commerce. (i.e. worked with dump trucks, dirt, rock, salt, etc.). COMPLAINT AND DEMAND FOR JURY TRIAL 6 29. At all material times relevant to this action (2013-2016), Defendant had two (2) or more employees routinely ordering materials or supplies from out of state vendors, and sold to out of state customers. (i.e. landscaping and other related materials, etc.). 30. At all material times relevant to this action (2013-2016), the Defendant has been an enterprise involved in interstate commerce by accepting payments from customers based on credit cards issued by out of state banks. 31. At all material times relevant to this action (2013-2016), the Defendant also used heavy machinery, construction and landscaping materials, natural drainage and bio-retention systems, to complete complex projects for commercial use . 32. Upon information and belief, the records, to the extent any exist, concerning the number of hours worked and amounts paid to Plaintiff are in the possession and custody of Defendant. COLLECTIVE FACTUAL ALLEGATIONS 33. Class members are treated equally by Defendant. COMPLAINT AND DEMAND FOR JURY TRIAL 7 34. Defendant subjected class members to the same illegal practice policy by not paying Plaintiff and those similarly situated correct overtime wages. 35. Defendant has employed several truck drivers who were improperly paid overtime wages in the State of Georgia within the past three (3) years. 36. Defendant pays class members in the same manner. 37. Plaintiff and all class members worked in the State of Georgia. 38. Plaintiff and all class members in the State of Georgia were not correctly paid overtime wages for all hours worked in excess of forty (40) hours. 39. Defendant failed to keep accurate time and pay records for Plaintiff and all class members pursuant to 29 U.S.C. § 211(c) and 29 C.F.R. Part 516. 40. During the relevant period, Defendants violated the FLSA and Georgia Constitution by improperly paying Plaintiffs overtime wages for all hours worked excess of forty (40) hours per week. COMPLAINT AND DEMAND FOR JURY TRIAL 8 41. Defendant has acted willfully in failing to pay Plaintiff and the class members in accordance with the law. 42. Plaintiff has hired the undersigned law firm to represent her in this matter and is obligated to pay them reasonable fees and costs if they prevail. COUNT I - RECOVERY OF OVERTIME COMPENSATION VERSUS J.R.K. TRUCKING, INC. 43. Plaintiff reincorporates and readopts all allegations contained within Paragraphs 1-42 above as though fully stated herein. 44. Throughout Plaintiff’s employment, the Defendants repeatedly and willfully violated Section 7 and Section 15 of the FLSA by failing to compensate Plaintiff at a rate not less than one and one-half times the regular rate at which he was employed for workweeks longer than forty (40) hours while it knew that overtime compensation was required under the law. 45. Specifically, Defendants failed to keep accurate time records as required by the FLSA for Plaintiff. COMPLAINT AND DEMAND FOR JURY TRIAL 9 46. Plaintiff demands trial by jury. WHEREFORE, Plaintiff, DANNY HAWK, on behalf of HIMSELF and all other similarly situated employees, demands judgment against Defendant, J.R.K. TRUCKING, INC., for the payment of all overtime hours at one and one-half the regular rate of pay for the hours worked by them for which Defendant did not properly compensate them, liquidated damages, reasonable attorneys’ fees and costs incurred in this action, and any and all further relief that this Court determines to be just and appropriate. COUNT II - RECOVERY OF OVERTIME COMPENSATION VERSUS NIZAM KHAN, INDIVIDUALLY. 47. Plaintiff reincorporates and readopts all allegations contained within Paragraphs 1-42 above. 48. Defendant, NIZAM KHAN, is the Resident Agent, acting manager and sole corporate officer of Defendant, J.R.K. TRUCKING, INC. COMPLAINT AND DEMAND FOR JURY TRIAL 10 49. Defendant, NIZAM KHAN, is a manger who acted with direct control over the work, pay, and job duties of Plaintiff. 50. Defendant, NIZAM KHAN: (1) had the power to hire and fire Plaintiffs, (2) supervised and controlled Plaintiffs’ work schedules or conditions of employment, (3) determined Plaintiff’s rate and method of payment, (4) maintained employment records, and determined J.R.K. Trucking’s overtime policies. 51. As such, Defendant, NIZAM KHAN, is charged with responsibility for violations of Plaintiff’s rights to overtime and resulting damages. WHEREFORE, Plaintiff, DANNY HAWK, on behalf of himself and those similarly situated, demands judgment against Defendant, NIZAM KHAN, for the payment of all overtime hours at one and one-half the regular rate of pay for the hours worked for which Defendant did not properly compensate them, liquidated damages, reasonable attorneys’ fees and costs incurred in this action, and any and all further relief that this Court determines to be just and appropriate. In addition, Plaintiff seeks all damages COMPLAINT AND DEMAND FOR JURY TRIAL 11 sought above by virtue of joint and several liabilities versus Defendants J.R.K. TRUCKING, INC., and NIZAM KHAN. Dated this 11th day of May, 2016. Respectfully submitted, Justin D. Miller, Esquire GABN 001307 MORGAN & MORGAN, P.A. 191 Peachtree Street NE, P.O. Box 57007 Atlanta, GA 30343 Telephone: (404) 965-8811 Facsimile: (404) 965-8812 Email: jmiller@forthepeople.com Attorneys for Plaintiff COMPLAINT AND DEMAND FOR JURY TRIAL 12

employment & labor

a82NDocBD5gMZwczndW_

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY AMY FISCHER and MORRISON ) ) ) ) Civil Action No. _____________ OMORUYI, Individually and on Behalf of All Other Persons Similarly Situated, Plaintiffs, ) ) Class and Collective Action Complaint v. ) ) Jury Trial Demanded KMART HOLDING CORPORATION and, SEARS HOLDINGS CORPORATION, Defendants. ) ) ) ) ) INTRODUCTION Plaintiffs Amy Fischer and Morrison Omoruyi (“Plaintiffs”), individually and on behalf of all others similarly situated, file this Class and Collective Action Complaint (the “Complaint”) against Defendants Kmart Holding Corporation and Sears Holdings Corporation (collectively, “Defendants” or “Kmart”), seeking all available relief under the Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. §§ 201, et. seq., the New Jersey Wage and Hour Law, N.J.S.A. §§ 34:11-4.2, et. seq., §§ 34:11-56a, et seq., and §§ 12:56-6.1, et. seq. (“NJWHL”), the Maryland Wage and Hour Law, MD. Lab. & Empl. Code §§ 3-401, et. seq. (“MWHL”) and the Maryland Wage Payment and Collection Law (“MWPCL”). The following allegations are based on personal knowledge as to Plaintiffs’ own conduct and are made on information and belief as to the acts of others. NATURE OF THE ACTION 1. Plaintiffs allege on behalf of themselves and other current and former assistant managers and similarly situated current and former employees holding comparable positions but different titles (“Assistants”), employed by Defendants in the United States, who elect to opt into this action pursuant to the Fair Labor Standards Act (hereinafter the “FLSA”), 29 U.S.C. § 216(b) (hereinafter the “Collective” or “Collective Action Members”), that they are entitled to, inter alia: (i) unpaid overtime wages for hours worked above 40 in a workweek, as required by law, and (ii) liquidated damages pursuant to the FLSA, 29 U.S.C. §§ 201 et seq. 2. Plaintiff Fischer also brings this action under the NJWHL pursuant to Fed. R. Civ. P. 23 on behalf of all Assistants and other individuals paid by the same compensation method holding comparable positions but different titles employed by Kmart at its stores within the State of New Jersey (the “New Jersey Class”). Kmart violated the NJWHL by failing to pay Assistants for all hours worked, failing to pay Assistants overtime on a timely basis, and failing to pay Assistants the legally required amount of overtime compensation required by law for all hours worked over 40 in a workweek. Plaintiff Fischer and the New Jersey Class are entitled to unpaid wages from Kmart for all hours worked by them as well as unpaid overtime wages for hours worked above 40 in a workweek, and are also entitled to liquidated damages pursuant to the NJWHL. 3. Plaintiff Omoruyi also brings this action under the MWHL and MWPCL pursuant to Fed. R. Civ. P. 23 on behalf of all Assistants and other individuals paid by the same compensation method holding comparable positions but different titles employed by Kmart at its stores within the State of Maryland (the “Maryland Class”). Together, the New Jersey Class and the Maryland Class are referred to as the “State Classes.” Kmart violated the MWHL and MWPCL by failing to pay Assistants for all hours worked, failing to pay Assistants overtime on a timely basis, and failing to pay Assistants the legally required amount of overtime 2 compensation required by law for all hours worked above 40 in a workweek. Plaintiff Omoruyi and the Maryland Class are entitled to unpaid wages from Kmart for all hours worked by them as well as unpaid overtime wages for hours worked above 40 in a workweek, and are also entitled to liquidated damages pursuant to the MWHL and MWPCL. JURISDICTION AND VENUE 4. This Court has jurisdiction over Plaintiffs’ FLSA claims pursuant to 29 U.S.C. § 216(b) and 28 U.S.C. §§ 1331. 5. This Court has jurisdiction over Plaintiff Fischer’s NJWHL claims and Plaintiff Omoruyi’s MWHL and MWPCL claims pursuant to 28 U.S.C. § 1332(d) and the Class Action Fairness Act (“CAFA”). The parties are diverse and the amount in controversy exceeds $5,000,000, exclusive of interest and costs. 6. Upon information and belief, at least one member of the proposed classes is a citizen of a state different from that of the Defendants. 7. The class claims involve matters of national or interstate interest. 8. Venue is proper pursuant to 28 U.S.C. § 1391 because a substantial part of the events or omissions giving rise to the claims occurred in this District. 9. Upon information and belief, Defendants regularly conduct business in this district. 10. This Court is empowered to issue a declaratory judgment pursuant to 28 U.S.C. §§ 2201 and 2202. THE PARTIES The Plaintiffs 11. Plaintiff Amy Fischer is an individual residing in Bayville, New Jersey. 3 12. During all relevant times, Plaintiff Fischer was employed by Kmart, including, specifically, from January 2010 to August 2011, as an assistant manager at Defendants’ store located in Manahawkin, New Jersey. 13. Plaintiff Morrison Omoruyi is an individual residing in Riverdale, Maryland. 14. During all relevant times, Plaintiff Omoruyi was employed by Kmart, including, specifically, from July 7, 2011 to March 28, 2012, as an assistant manager at Defendants’ store located in Silver Spring, Maryland. The Defendants 15. Defendant Sears Holdings Corporation is a corporation, organized and existing under the laws of Delaware, with its corporate headquarters at 3333 Beverly Road, Hoffman Estates, Illinois 60179. 16. Defendant Kmart Holding Corporation is a wholly-owned subsidiary of Defendant Sears Holdings Corporation with its corporate headquarters at 3333 Beverly Road, Hoffman Estates, Illinois 60179. 17. According to its most recent 10K SEC filing, Defendants operate a chain of 1,221 stores across throughout the country, with sales of over $15.59 billion in fiscal year 2012. 18. At all times relevant herein, Defendants have been an employer within the meaning of Section 3(d) of the FLSA. 29 U.S.C. § 203(d). 19. At all times relevant herein, Defendants have been an enterprise within the meaning of Section 3(r) of the FLSA. 29 U.S.C. § 203(r). 20. At all times relevant herein, Defendants have been an enterprise engaged in commerce or the production of goods for commerce within the meaning of Section 3(s)(1) of the FLSA because it has had employees engaged in commerce or in the production of goods for 4 commerce, or employees handling, selling, or otherwise working on goods or materials that have moved in or were produced for commerce by any person, 29 U.S.C. § 203(s)(1). Further, Kmart has had and has a gross volume of sales made or business done of at least $500,000. 21. At all times relevant herein, Plaintiffs, and all similarly situated Assistants were engaged in commerce or in the production of goods for commerce as required by 29 U.S.C. §§ 206-207. 22. Defendants issued paychecks to the Plaintiffs and all similarly situated employees during their employment. 23. Defendants directed the work of Plaintiffs and similarly situated employees, and benefited from work performed it suffered or permitted from them. 24. Plaintiffs and similar employees worked in excess of 40 hours per workweek, without receiving overtime compensation as required by the FLSA, NJWHL, MWHL and MWPCL. 25. Pursuant to Defendants’ policy and pattern or practice, Defendants did not pay Plaintiffs and other similarly situated employees proper overtime wages for hours they worked for Defendants’ benefit in excess of 40 hours in a workweek. FACTUAL ALLEGATIONS 26. Consistent with Kmart’s policy and pattern or practice, Plaintiffs and the members of the Collective and State Classes regularly worked in excess of 40 hours per workweek without being paid overtime wages. 27. Kmart has assigned all of the work that Plaintiffs, the Collective Action Members, and State Class Members have performed, and/or Kmart is aware of all the work that they have performed. 5 28. The same primary job duties were performed by Plaintiffs and all members of the Collective and the State Classes: working the cash registers, stocking shelves, cleaning the store, assisting customers, building displays, unpacking merchandise, and unloading trucks. 29. The primary job duties of Plaintiffs and all members of the Collective and the State Classes did not include: hiring, firing, disciplining, or directing the work of other employees. 30. The primary job duties of Plaintiffs and all members of the Collective and the State Classes did not materially differ from the duties of non-exempt hourly paid employees. 31. The primary job duties of Plaintiffs and all members of the Collective and the State Classes did not include the exercise of meaningful independent discretion with respect to their duties. 32. The primary job duties of Plaintiffs and all members of the Collective and the State Classes were manual in nature. The performance of manual labor occupied the majority of the working hours of Plaintiffs and all members of the Collective and the State Classes. 33. Pursuant to a centralized, company-wide policy, and pattern or practice, Kmart classified all Assistants as exempt from coverage of the overtime provisions of the FLSA. 34. Kmart did not perform a person-by-person analysis of the job duties of Assistants when making the decision to uniformly classify all of them as exempt from the FLSA’s overtime protections. 35. As part of its regular business practice, Kmart has intentionally, willfully and repeatedly engaged in a policy, and pattern or practices of violating the FLSA and the state wage and hour laws with respect to Plaintiffs and the members of the Collective. This policy or practice includes but is not limited to: 6 a. willfully misclassifying Plaintiffs and members of the Collective and State Classes as exempt from the overtime requirements of the FLSA; b. willfully failing to pay Plaintiffs and the members of the Collective and State Classes overtime wages for hours they worked in excess of 40 hours per week. 36. Upon information and belief, Kmart’s unlawful conduct described in this Complaint is pursuant to a corporate policy or practice of minimizing labor costs by violating the FLSA and state wage and hour laws. 37. Kmart is aware, or should have been aware, that federal law and state wage and hour laws required it to pay employees performing non-exempt duties an overtime premium for hours worked in excess of 40 per workweek. 38. Kmart’s failure to pay overtime wages for work performed by the Collective Action Members and State Class Members in excess of 40 hours per workweek was willful. 39. Kmart’s unlawful conduct has been widespread, repeated and consistent. FLSA COLLECTIVE ACTION ALLEGATIONS 40. Pursuant to 29 U.S.C. § 207, Plaintiffs seek to prosecute their FLSA claims as a Collective Action on behalf of all persons who are or were formerly employed by Kmart as Assistants at any time from three years from date of filing this Complaint, to the entry of judgment in this case (the “Collective Action Period”). 41. Kmart is liable under the FLSA for, inter alia, failing to properly pay overtime wages to Plaintiffs and other similarly situated employees. 42. There are many similarly situated current and former Assistants who have not been paid proper overtime wages in violation of the FLSA and who would benefit from the 7 issuance of a court-supervised notice of this lawsuit and the opportunity to join it. Thus, notice should be sent to the Collective pursuant to 29 U.S.C. § 216(b). 43. Potential Collective Action Members are easily identified though Kmart’s business records. NEW JERSEY CLASS ALLEGATIONS 44. Plaintiff Fischer sues on her own behalf and on behalf of the New Jersey Class as defined above, pursuant to Fed. R. Civ. P. 23(a), (b)(2) and (b)(3). 45. Kmart violated the NJWHL and the regulations promulgated thereunder by failing to properly pay overtime wages to Plaintiff Fischer and other putative New Jersey Class Members for all hours in which they worked over 40 in a given workweek. 46. The New Jersey Class is so numerous that joinder of all members is impracticable. Although the precise number of such persons is unknown, these similarly situated employees are known to Defendants, are readily identifiable, and can be located through Defendants’ records. Upon information and belief, there are at least 100 members of the New Jersey Class. 47. There are questions of law and fact common to the members of the New Jersey Class that predominate over any questions solely affecting the individual members of the New Jersey Class. 48. The critical question of law and fact common to Plaintiff Fischer and the New Jersey Class that will materially advance the litigation is whether Kmart is required by the FLSA and NJWHL to pay Plaintiff Fischer and the New Jersey Class at a rate of 1.5 times its regular hourly rate for hours worked overtime. 8 49. Other questions of law and fact common to the New Jersey Class that will materially advance the litigation include, without limitation: a. Whether Kmart employed Plaintiff Fischer and the New Jersey Class Members within the meaning of the NJWHL; b. What proof of hours worked is sufficient when the employer fails in its duty to maintain time records; c. Whether Kmart failed to pay Plaintiff Fischer and the New Jersey Class members for all of the hours they worked; d. Whether Kmart failed to pay Plaintiff Fischer and the New Jersey Class the legally required amount of overtime compensation for hours worked in excess of 40 hours per workweek, in violation of the NJWHL and the regulations promulgated thereunder including, by adoption, 29 U.S.C. §§ 207(a)(1), 215(a), and 29 C.F.R. §§ 778.104; e. Whether Kmart is liable for all damages claimed by Plaintiff Fischer and the New Jersey Class, including, without limitation, compensatory, punitive and statutory damages, interest, costs and disbursements, and attorneys’ fees; and f. Whether Kmart should be enjoined from continuing to violate the NJWHL in the future. 50. Plaintiff Fischer’s claims are typical of the claims of the members of the New Jersey Class. Plaintiff Fischer has the same interests in this matter as all other members of the New Jersey Class. 9 51. Plaintiff Fischer is an adequate class representative, is committed to pursuing this action and has retained competent counsel experienced in wage and hour law and class action litigation. 52. Class certification of Plaintiff Fischer’s NJWHL claim is appropriate pursuant to FED. R. CIV. P. 23(b)(2) because Kmart has acted or refused to act on grounds generally applicable to the New Jersey Class, making appropriate both declaratory and injunctive relief with respect to the New Jersey Class as a whole. The members of the New Jersey Class are entitled to injunctive relief to end Kmart’s common and uniform policy and practice of denying the New Jersey Class the wages to which they are entitled. 53. Class certification of Plaintiff Fisher’s NJWHL claim is also appropriate pursuant to FED. R. CIV. P. 23(B)(3) because questions of law and fact common to the New Jersey Class predominate over questions affecting only individual members of the New Jersey Class, and because a class action is superior to other available methods for the fair and efficient adjudication of this litigation. 54. Plaintiff Fischer knows of no difficulty that would be encountered in the management of this litigation that would preclude its maintenance as a class action. MARYLAND CLASS ALLEGATIONS 55. Plaintiff Omoruyi sues on his own behalf and on behalf of the Maryland Class as defined above, pursuant to Fed. R. Civ. P. 23(a), (b)(2) and (b)(3). 56. Kmart violated the MWHL and MWPCL and the regulations promulgated thereunder by failing to properly pay overtime wages to Plaintiff Omoruyi and other putative Maryland Class Members for all hours in which they worked over 40 in a given workweek. 10 57. The Maryland Class is so numerous that joinder of all members is impracticable. Although the precise number of such persons is unknown, these similarly situated employees are known to Defendants, are readily identifiable, and can be located through Defendants’ records. Upon information and belief, there are at least 100 members of the Maryland Class. 58. There are questions of law and fact common to the members of the Maryland Class that predominate over any questions solely affecting the individual members of the Maryland Class. 59. The critical question of law and fact common to Plaintiff Omoruyi and the Maryland Class that will materially advance the litigation is whether Kmart is required by the FLSA, the MWHL and the MWPCL to pay Plaintiff Omoruyi and the Maryland Class at a rate of 1.5 times its regular hourly rate for hours worked overtime. 60. Other common questions of law and fact common to the Maryland Class that will materially advance the litigation include, without limitation: a. Whether Kmart employed Plaintiff Omoruyi and the Maryland Class Members within the meaning of the MWHL and MWPCL; b. What proof of hours worked is sufficient when the employer fails in its duty to maintain time records; c. Whether Kmart failed to pay Plaintiff Omoruyi and the Maryland Class members for all of the hours they worked; d. Whether Kmart failed to pay Plaintiff Omoruyi and the Maryland Class the legally required amount of overtime compensation for hours worked in excess of 40 hours per workweek, in violation of the MWHL and 11 MWPCL and the regulations promulgated thereunder including, by adoption, 29 U.S.C. §§ 207(a)(1), 215(a), and 29 C.F.R. §§ 778.104; e. Whether Kmart is liable for all damages claimed by Plaintiff Omoruyi and the Maryland Class, including, without limitation, compensatory, punitive and statutory damages, interest, costs and disbursements, and attorneys’ fees; and f. Whether Kmart should be enjoined from continuing to violate the MWHL and MWPCL in the future. 61. Plaintiff Omoruyi’s claims are typical of the claims of the members of the Maryland Class. Plaintiff Omoruyi has the same interests in this matter as all other members of the Maryland Class. 62. Plaintiff Omoruyi is an adequate class representative, is committed to pursuing this action and has retained competent counsel experienced in wage and hour law and class action litigation. 63. Class certification of Plaintiff Omoruyi’s MWHL and MWPCL claims is appropriate pursuant to FED. R. CIV. P. 23(b)(2) because Kmart has acted or refused to act on grounds generally applicable to the Maryland Class, making appropriate both declaratory and injunctive relief with respect to the Maryland Class as a whole. The members of the Maryland Class are entitled to injunctive relief to end Kmart’s common and uniform policy and practice of denying the Maryland Class the wages to which they are entitled. 64. Class certification of Plaintiff Omoruyi’s MWHL and MWPCL claims is also appropriate pursuant to FED. R. CIV. P. 23(B)(3) because questions of law and fact common to the Class predominate over questions affecting only individual members of the Class, and because a 12 class action is superior to other available methods for the fair and efficient adjudication of this litigation. 65. Plaintiff Omoruyi knows of no difficulty that would be encountered in the management of this litigation that would preclude its maintenance as a class action. FIRST CAUSE OF ACTION: FAIR LABOR STANDARDS ACT 66. Plaintiffs, on behalf of themselves and all Collective Action Members, reallege and incorporate by reference the paragraphs 1 through 65 as if they were set forth again herein. 67. Kmart has engaged in a widespread pattern and practice of violating the FLSA, as detailed in this Complaint. 68. Plaintiffs consent in writing to be a party to this action, pursuant to 29 U.S.C. § 216(b). Plaintiff Fischer’s consent form is attached as Exhibit A and Plaintiff Omoruyi’s consent form is attached as Exhibit B. 69. At all relevant times, Plaintiffs and other similarly situated current and former employees were engaged in commerce and/or the production of goods for commerce within the meaning of 29 U.S.C. §§ 206(a) and 207(a). 70. The overtime wage provisions set forth in 29 U.S.C. §§ 201 et seq. apply to 71. Kmart is an employer engaged in commerce and/or the production of goods for commerce within the meaning of 29 U.S.C. §§ 206(a) and 207(a). 72. At all times relevant, Plaintiffs were employees within the meaning of 29 U.S.C. §§ 203 (e) and 207(a). 73. Kmart has failed to pay Plaintiffs and other similarly situated current and former employees the overtime wages to which they were entitled under the FLSA. 13 74. Kmart’s violations of the FLSA, as described in the Complaint, have been intentional and willful. Kmart has not made a good faith effort to comply with the FLSA with respect to the compensation of Plaintiffs and other similarly situated current and former employees. 75. Because Kmart’s violations of the FLSA have been willful, a three-year statute of limitations applies, pursuant to 29 U.S.C. § 255. 76. As a result of the Kmart’s violations of the FLSA, Plaintiffs and all other similarly situated employees have suffered damages by being denied overtime wages in accordance with 29 U.S.C. §§ 201, et seq. 77. As a result of the unlawful acts of Kmart, Plaintiffs and other similarly situated current and former employees have been deprived of overtime compensation and other wages in amounts to be determined at trial, and are entitled to recover such amounts, liquidated damages, prejudgment interest, attorneys’ fees, costs and other compensation pursuant to 29 U.S.C. § SECOND CAUSE OF ACTION: NEW JERSEY WAGE AND HOUR LAW (NEW JERSEY CLASS) 78. Plaintiffs reallege and incorporate by reference the paragraphs 1 through 65 as if they were set forth again herein. 79. At all relevant times, Plaintiff Fischer and the New Jersey Class Members were employed by Defendants within the meaning of the NJWHL. 80. Defendants willfully violated Plaintiff Fischer’s rights and the rights of the New Jersey Class by failing to pay them the legally required amount of overtime compensation at 14 rates not less than one and one-half times the regular rate of pay for all hours worked by them in excess of 40 in a workweek in violation of the NJWHL and its regulations. 81. Defendants’ NJWHL violations have caused Plaintiff Fischer and the Class irreparable harm for which there is no adequate remedy at law. 82. Due to Defendants’ NJWHL violations, Plaintiff Fischer and the New Jersey Class are entitled to recover from Defendants their unpaid wages for the legally required amount of overtime compensation for all hours worked by them in excess of 40 in a workweek, actual and liquidated damages, including the employer’s share of FICA, FUTA, state unemployment insurance, and any other required employment taxes, reasonable attorneys’ fees and costs and disbursements of this action, pursuant to NJWHL § 34:11-56a25. THIRD CAUSE OF ACTION: MARYLAND WAGE AND HOUR LAW (MARYLAND CLASS)   83. Plaintiffs reallege and incorporate by reference the paragraphs 1 through 65 as if they were set forth again herein. 84. At all relevant times, Plaintiff Omoruyi and the members of the Maryland Class were employed by Defendants within the meaning of the MWHL. 85. Defendants willfully violated Plaintiff Omoruyi’s rights and the rights of the Maryland Class by failing to pay them for all hours worked, as well as for overtime compensation at rates not less than one and one-half times the regular rate of pay for each hour worked in excess of 40 hours in a workweek, in violation of the MWHL. 86. Defendants’ MWHL violations have caused Plaintiff Omoruyi and the Maryland Class irreparable harm for which there is no adequate remedy at law. 87. Due to Defendants’ MWHL violations, Plaintiff Omoruyi and the Maryland Class are entitled to recover from Defendants their unpaid wages for the legally required amount of 15 overtime compensation for all hours worked by them in excess of 40 in a workweek, actual and liquidated damages, including the employer’s share of FICA, FUTA, state unemployment insurance, and any other required employment taxes, reasonable attorneys’ fees and costs and disbursements of this action, pursuant to the MWHL. FOURTH CAUSE OF ACTION: MARYLAND WAGE PAYMENT AND COLLECTION LAW (MARYLAND CLASS) 88. Plaintiffs reallege and incorporate by reference the paragraphs 1 through 65 as if they were set forth again herein. 89. Plaintiff Omoruyi and members of the Maryland Class are entitled to compensation for time suffered and permitted as work benefitting Defendants. 90. Defendants have not paid Plaintiff Omoruyi and members of the Maryland Class their full wages as mandated by the MWPCL. 91. Defendants’ violation of the MWPCL is willful. 92. Plaintiff Omoruyi and members of the Maryland Class have suffered pecuniary losses and are entitled to full recovery pursuant to the MWPCL. PRAYER FOR RELIEF WHEREFORE, Plaintiffs and the Collective Action Members and the State Class Members are entitled to and pray for the following relief: a. Designation of this action as an FLSA collective action on behalf of Plaintiffs and the Collective Action Class and prompt issuance of notice pursuant to 29 U.S.C. §216(b) to all similarly situated members of the Collective Action Class, apprising them of the pendency of this action, permitting them to assert timely 16 FLSA claims in this action by filing individual Consents to Sue pursuant to 29 U.S.C. § 216(b), and tolling of the statue of limitations; b. Certification of the New Jersey Class as a class action pursuant to Fed. R. Civ. P. 23(b)(2) and (b)(3), and the appointment of Plaintiff Fischer and her counsel to represent the members of the New Jersey Class; c. Certification of the Maryland Class as a class action pursuant to Fed. R. Civ. P. 23(b)(2) and (b)(3), and the appointment of Plaintiff Omoruyi and his counsel to represent the members of the Maryland Class; d. A declaratory judgment that the practices complained of herein are unlawful under the FLSA, the NJWHL, the MWHL, and the MWPCL; e. An injunction requiring Kmart to cease its unlawful practices under, and comply with, the NJWHL; f. An injunction requiring Kmart to cease its unlawful practices under, and comply with, the MWHL and MWPCL; g. An award of unpaid wages for all hours worked in excess of 40 in a workweek at a rate of one and one-half times the regular rate of pay under the FLSA, the NJWHL, the MWHL, and the MWPCL; h. An award of liquidated and/or punitive damages as a result of Kmart’s willful failure to pay for all hours worked in excess of 40 in a workweek at a rate of one and one-half times the regular rate of pay pursuant to 29 U.S.C. § 216, the NJWHL, the MWHL, and the MWPCL; i. An award of damages representing the employer's share of FICA, FUTA, state unemployment insurance, and any other required employment taxes; 17 j. An award of prejudgment and post-judgment interest; k. An award of costs and expenses of this action together with reasonable attorneys’ and expert fees and an award of a service payment to the Plaintiffs; and l. 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), Plaintiffs demand a trial by jury on all questions of fact raised by the Complaint. Dated: July 3, 2013 ___________________________ Seth R. Lesser Fran L. Rudich* Michael J. Palitz Rachel E. Berlin* KLAFTER, OLSEN & LESSER, LLP Two International Drive, Suite 350 Rye Brook, NY 10573 Tel: (914) 934-9200 Fax: (914) 934-9220 Gary E. Mason* Nicholas A. Migliaccio* Jason S. Rathod* WHITFIELD BRYSON & MASON LLP 1625 Massachusetts Ave., N.W., Suite 605 Washington, DC 20036 Tel: (202) 429-2294 Fax: (202) 429-2294 Marc S. Hepworth* David A. Roth* Charlie Gershbaum HEPWORTH GERSHBAUM & ROTH, PLLC 192 Lexington Avenue Suite 802 New York, New York 10016 Tel: (212)545-1199 18 Fax: (212)532-3801 Peter Winebrake* R. Andrew Santillo* WINEBRAKE & SANTILLO, LLC 715 Twining Road, Suite 211 Dresher, PA 19025 Phone: 215.884.2491 Fax: 215.884.2492 Attorneys for Plaintiffs * To be admitted Pro Hac Vice 19

employment & labor

50do_YgBF5pVm5zYmAmr

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x Case no. 1:22-cv-10884 CLASS ACTION COMPLAINT JASMINE TORO, on behalf of herself and all others similarly situated, Plaintiffs, v. AND DEMAND FOR JURY TRIAL Jellycat, Inc., Defendant. : : : : : : : : : : : : - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x INTRODUCTION 1. Plaintiff, JASMINE TORO (“Plaintiff” or “TORO”), brings this action on behalf of herself and all other persons similarly situated against Jellycat, Inc. (hereinafter “Jellycat” 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 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 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 Jellycat 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 Jellycat provides to their non-disabled customers through https://www.jellycat.com (hereinafter “Jellycat.com” or “the website”). Defendant’s 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. Jellycat.com provides to the public a wide array of the goods, services, price specials and other programs offered by Jellycat. Yet, Jellycat.com contains significant 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, Jellycat 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. 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. Jellycat’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 Jellycat.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. The Plaintiff intended to make an online purchase of a plush toy “Cordy Roy Baby Elephant” on Jellycat.com. The product was intended as a gift for a relative's child. She browsed the categories on the site and found the desired product. Plaintiff attempted to purchase the selected item, but due to difficulties while navigating the site ("skip to content" was not implemented, navigation sub- menus were not accessible from keyboard, page used infinite scroll) it was difficult for Plaintiff to complete the purchase procedure. 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 Jellycat.com. 11. Because Defendant’s website, Jellycat.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 Jellycat’s policies, practices, and procedures to that Defendant’s 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. 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”). 13. Venue is proper in this District of New York pursuant to 28 U.S.C. §§ 1391(b)(c) and 144(a) 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. 14. 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. Because of this targeting, it is not unusual for Jellycat 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 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. PARTIES 15. Plaintiff, is and has been at all relevant times a resident of Bronx County, State of New York. 16. 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, JASMINE TORO, cannot use a computer without the assistance of screen reader software. Plaintiff has been denied the full enjoyment of the facilities, goods and services of Jellycat.com as a result of accessibility barriers on Jellycat.com. 17. Defendant, Jellycat, Inc., is a Minnesota Corporation doing business in this State with its principal place of business located at 800 N Washington Ave, Minneapolis, MN 55401. 18. Jellycat provides to the public a website known as Jellycat.com which provides consumers with access to an array of goods and services, including, the ability to view soft toys, stuffed animals, amuseables, books, bags, Christmas, baby and personalized gifts. Consumers across the United States use Defendant’s website to purchase soft toys and gifts. 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 Jellycat.com has deterred Plaintiff from making an online purchase of a plush toy. NATURE OF THE CASE 19. 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. 20. 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. 21. 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. 22. Blind users of Windows operating system-enabled computers and devices have several screen- reading software programs available to them. NonVisual Desktop Access, otherwise known as “NVDA”, is currently one of the most popular, downloaded screen-reading software program available for blind computer users. 23. 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 24. Defendant controls and operates Jellycat.com in New York State and throughout the United States. 25. Jellycat.com is a commercial website that offers products and services for online sale. The online store allows the user to view soft toys and gifts, make purchases, and perform a variety of other functions. 26. Among the features offered by Jellycat.com are the following: a) An online store, allowing customers to purchase soft toys, stuffed animals, amuseables, books, bags, Christmas, baby and personalized gifts, and other products for delivery to their doorsteps, and; b) Learning about shipping and return policies, reading reviews, and learning about the company, amongst other features. 27. This case arises out of Jellycat’s policy and practice of denying the blind access to the goods and services offered by Jellycat.com. Due to Jellycat’s failure and refusal to remove access barriers to Jellycat.com, blind individuals have been and are being denied equal access to Jellycat, as well as to the numerous goods, services and benefits offered to the public through Jellycat.com. 28. Jellycat denies the blind access to goods, services and information made available through Jellycat.com by preventing them from freely navigating Jellycat.com. 29. Jellycat.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: inaccurate landmark structure, inaccurate heading hierarchy, incorrectly formatted lists, inadequate focus order, inaccessible contact information, inaccurate alt-text on graphics, inaccessible drop-down menus, the lack of navigation links, the lack of adequate labeling of form fields, and the requirement that transactions be performed solely with a mouse. 30. 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 Jellycat.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 Jellycat.com customers are unable to determine what is on the website, browse the website or investigate and/or make purchases. 31. Jellycat.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 Jellycat.com, these forms include field to select quantity. 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. 32. When visiting the Website, Plaintiff, using NVDA, encountered the following specific accessibility a) “Skip to content” link was not implemented. Plaintiff was not provided with the mechanism to bypass repeated blocks of content; b) Landmarks were not properly inserted into the home page. Plaintiff tried to bypass navigation menus and could not access “main” region of the page using landmarks; c) The content on the home page was organized into sections with headings, but they were not correctly marked up and did not programmatically identify sections of the page. Plaintiff was deprived of the actual heading structure that was available to sighted customers and could not effectively navigate the content on the home page; d) Sub-menu elements with drop-down menu could not be accessed from the keyboard. Plaintiff tried to use “tab” or “arrow” keys to no avail. The website had functionality that was dependent on the specific devices such as a mouse, and was not available to the legally blind users; e) Interactive elements of the carousel on the home page did not receive focus in an order that followed sequences and relationships in the content. While tab controls should be the first focusable elements, screen reader moved directly to the content of the carousel and Plaintiff was not allowed to skip this section of the page; f) Plaintiff encountered repetitive ambiguous link texts on the home page, such as “shop now”. Links did not provide context and disoriented Plaintiff; g) Plaintiff encountered incorrectly marked up list in the content info “footer” region. It had visual appearance of lists but were not programmatically formatted as lists and did not announce the number of elements included in them. Thus, Plaintiff was unaware that different categories were included in the same sub-menus; h) Category page used “infinite scroll”, a design practice that loads content continuously as the user scrolls down the page, eliminating the need for pagination. Plaintiff was disoriented and could not navigate to the end of the page to access the footer content; i) On the Category page, Plaintiff was forced to repeatedly tab through elements with the same destination: the link text of products conveyed similar information and led to the same destinations as interactive images above the links; j) Different images of the same product on the Product details page had similar alternative text. The similar description impeded Plaintiff from learning more detailed information about the selected product; k) Plaintiff attempted to purchase the product and as a result, the confirmation dialog box opened, but the focus did not move from trigger button to dialog items. Plaintiff was confused when she was unable to navigate through the content with the keyboard; l) Unclear and ambiguous labels for form fields, specifically, the “quantity” field on the Cart page, impeded Plaintiff from correct selection of the product quantity when attempting to make a purchase. Plaintiff was unaware of the purpose of the interactive element; m) Plaintiff was unable to determine if the form fields on the Checkout page were mandatory (“Required”). The lack of detailed instructions and explanation of the “Star” sign (asterisk) while filling in the form, prevented Plaintiff from successful submission of personal information; n) The telephone number on the Customer care page was presented in plain text, and therefore was non-interactive and inaccessible to the screen reader software. As a result, Plaintiff was unable to contact the customer support to clarify details about products or purchase procedure. Consequently, blind customers are essentially prevented from purchasing any items on Jellycat.com. 33. Jellycat.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, Jellycat.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 Jellycat.com. 34. Due to Jellycat.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 Jellycat.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 element on Defendant’s website in an attempt to reach the desired service. Thus, Jellycat has inaccessible design that deprives the Plaintiff and blind customers of the opportunity to make purchases on Jellycat.com on their own. 35. Jellycat.com thus contains access barriers which deny the full and equal access to Plaintiff, who would otherwise use Jellycat.com and who would otherwise be able to fully and equally enjoy the benefits and services of Jellycat.com in New York State and throughout the United States. 36. Plaintiff, JASMINE TORO, has made numerous attempts to complete a purchase on Jellycat.com, most recently on December 23, 2022, but was unable to do so independently because of the many access barriers on Defendant’s website. These access barriers have caused Jellycat.com to be inaccessible to, and not independently usable by, blind and visually-impaired persons. Amongst other access barriers experienced, Plaintiff was unable to make an online purchase of a plush toy. 37. Moreover, Plaintiff intends on visiting the Website in the future in order to make additional potential purchases of another toys from Jellycat.com. Plaintiff enjoys the various selections of soft toys and gifts, and would like to order products to be shipped directly to her home from Defendant’s website. 38. As described above, Plaintiff has actual knowledge of the fact that Defendant’s website, Jellycat.com, contains access barriers causing the website to be inaccessible, and not independently usable by, blind and visually-impaired persons. 39. These barriers to access have denied Plaintiff full and equal access to, and enjoyment of, the goods, benefits and services of Jellycat.com. 40. 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. 41. Defendant utilizes standards, criteria or methods of administration that have the effect of discriminating or perpetuating the discrimination of others. 42. Because of Defendant’s denial of full and equal access to, and enjoyment of, the goods, benefits and services of Jellycat.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 43. 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 Jellycat.com and as a result have been denied access to the enjoyment of goods and services offered by Jellycat.com, during the relevant statutory period.” 44. 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 Jellycat.com and as a result have been denied access to the enjoyment of goods and services offered by Jellycat.com, during the relevant statutory period.” 45. 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. 46. 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 Jellycat.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 Jellycat.com. 47. There are common questions of law and fact common to the class, including without limitation, the following: (a) Whether Jellycat.com is a “public accommodation” under the ADA; (b) Whether Jellycat.com is a “place or provider of public accommodation” under the laws of New York; (c) Whether Defendant, through its website, Jellycat.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, Jellycat.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. 48. 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 Jellycat has violated the ADA, and/or the laws of New York by failing to update or remove access barriers on their website, Jellycat.com, so it can be independently accessible to the class of people who are legally blind. 49. 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. 50. 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. 51. 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. 52. 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) 53. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 56 of this Complaint as though set forth at length herein. 54. 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). 55. Jellycat.com is a sales establishment and public accommodation within the definition of 42 U.S.C. §§ 12181(7). 56. Defendant is subject to Title III of the ADA because it owns and operates Jellycat.com. 57. 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 58. 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. 59. 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.” 60. 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.” 61. 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. 62. 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 Jellycat who are blind have been denied full and equal access to Jellycat.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. 63. Defendant has failed to take any prompt and equitable steps to remedy its 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 goods, services, facilities, privileges, advantages, accommodations and/or opportunities of Jellycat.com in violation of Title III of the Americans with Disabilities Act, 42 U.S.C. §§ 12181 et seq. and/or its implementing regulations. 65. 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. 66. The actions of Defendant were and are in violation of the ADA, and therefore Plaintiff invokes her statutory right to injunctive relief to remedy the discrimination. 67. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 68. 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.)) 69. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 72 of this Complaint as though set forth at length herein. 70. 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.” 71. Jellycat.com is a sales establishment and public accommodation within the definition of N.Y. Exec. Law § 292(9). 72. Defendant is subject to the New York Human Rights Law because it owns and operates Jellycat.com. Defendant is a person within the meaning of N.Y. Exec. Law. § 292(1). 73. Defendant is violating N.Y. Exec. Law § 296(2)(a) in refusing to update or remove access barriers to Jellycat.com, causing Jellycat.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. 74. 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.” 75. 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.” 76. 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. 77. 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. 78. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 79. 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 Jellycat.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. 80. The actions of Defendant were and are in violation of the New York State Human Rights Law and therefore Plaintiff invokes her right to injunctive relief to remedy the discrimination. 81. 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. 82. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 83. 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.)) 84. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 87 of this Complaint as though set forth at length herein. 85. Plaintiff served notice thereof upon the attorney general as required by N.Y. Civil Rights Law § 41. 86. 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 . . .” 87. 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.” 88. Jellycat.com is a sales establishment and public accommodation within the definition of N.Y. Civil Rights Law § 40-c(2). 89. Defendant is subject to New York Civil Rights Law because it owns and operates Jellycat.com. Defendant is a person within the meaning of N.Y. Civil Law § 40-c(2). 90. Defendant is violating N.Y. Civil Rights Law § 40-c(2) in refusing to update or remove access barriers to Jellycat.com, causing Jellycat.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. 91. 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. 92. 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 . . .” 93. 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 . . .” 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 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. 96. 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.) 97. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 100 of this Complaint as though set forth at length herein. 98. 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.” 99. Jellycat.com is a sales establishment and public accommodation within the definition of N.Y.C. Administrative Code § 8-102(9). 100. Defendant is subject to City Law because it owns and operates Jellycat.com. Defendant is a person within the meaning of N.Y.C. Administrative Code § 8-102(1). 101. Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing to update or remove access barriers to Jellycat.com, causing Jellycat.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 § 8107(15)(a). 102. 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. 103. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 104. 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 Jellycat.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. 105. The actions of Defendant were and are in violation of City law and therefore Plaintiff invokes her right to injunctive relief to remedy the discrimination. 106. 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. 107. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 108. 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) 109. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 112 of this Complaint as though set forth at length herein. 110. An actual controversy has arisen and now exists between the parties in that Plaintiff contends, and is informed and believes that Defendant denies, that Jellycat.com contains access barriers denying blind customers the full and equal access to the goods, services and facilities of Jellycat.com, which Jellycat 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. 111. 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, Jellycat.com, into full compliance with the requirements set forth in the ADA, and its implementing regulations, so that Jellycat.com is readily accessible to and usable by blind individuals; c) A declaration that Defendant owns, maintains and/or operates its website, Jellycat.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 her 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; 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: Forest Hills, New York December 27, 2022 Attorneys for Plaintiff MARS KHAIMOV LAW, PLLC Mars Khaimov /s/ By: Mars Khaimov, Esq. Email: mars@khaimovlaw.com Fax (929) 333-7774 Tel (929) 324-0717 Forest Hills, New York 11375 108-26 64th avenue, Second Floor

civil rights, immigration, family

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BARSHAY, RIZZO & LOPEZ, PLLC 445 Broadhollow Road | Suite CL18 Melville, New York 11747 Tel: (631) 210-7272 Fax: (516) 706-5055 Attorneys for Plaintiff Our File No.: BRL21145 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK CENTRAL ISLIP DIVISION Brigette J. Giacomantonio, individually and on behalf of all others similarly situated, Plaintiff, Case No: CLASS ACTION COMPLAINT v. JURY TRIAL DEMANDED Alltran Financial, LP, Defendant. Plaintiff Brigette J. Giacomantonio, individually and on behalf of all others similarly situated, by and through the undersigned counsel, complains, states, and alleges against defendant Alltran Financial, LP as follows: INTRODUCTION 1. This is an action to recover damages 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, 28 U.S.C. § 1337 and 15 U.S.C. § 1692k(d). The Court has supplemental jurisdiction of any state law claims pursuant to 28 U.S.C. §1367. 3. This court has jurisdiction over defendant Alltran Financial, LP because it regularly conducts and transacts business in this state, and the conduct complained of herein occurred in this Judicial District. 4. Venue is proper in this Judicial District under 28 U.S.C. § 1391(b) because a substantial part of the conduct complained of herein occurred in this Judicial District. PARTIES 5. Plaintiff Brigette J. Giacomantonio (“Plaintiff”) is a natural person who is a citizen of the State of New York residing in Suffolk County, New York. 6. Plaintiff is a “consumer” as that term defined by 15 U.S.C. § 1692a(3). 7. Defendant Alltran Financial, LP (“Defendant”) is a company existing under the laws of the State of Texas, with its principal place of business in Houston, Texas. 8. Defendant has transacted business within this state as is more fully set forth hereinafter in this Complaint. 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 businesses is the collection of such debts. 12. Defendant uses instrumentalities of interstate commerce, including telephones and the mails, in furtherance of its debt collection business. 13. Defendant is a “debt collector” as that term is defined by 15 U.S.C. § 1692a(6). 14. The acts of Defendant as described in this Complaint were performed by Defendant or on Defendant’s behalf by its owners, officers, agents, and/or employees acting within the scope of their actual or apparent authority. As such, all references to “Defendant” in this Complaint shall mean Defendant or its owners, officers, agents, and/or employees. FACTUAL ALLEGATIONS 15. Defendant alleges Plaintiff owes a debt (“the alleged Debt”). 16. 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. 17. The alleged Debt does not arise from any business enterprise of Plaintiff. 18. The alleged Debt is a “debt” as that term is defined by 15 U.S.C. § 1692a(5). 19. At an exact time known only to Defendant, the alleged Debt was assigned or otherwise transferred to Defendant for collection. 20. At the time the alleged Debt was assigned or otherwise transferred to Defendant for collection, the alleged Debt was in default. 21. In its efforts to collect the alleged Debt, Defendant decided to contact Plaintiff by written correspondence. 22. Rather than preparing and mailing such written correspondence to Plaintiff on its own, Defendant decided to utilize a third-party vendor to perform such activities on its behalf. 23. As part of its utilization of the third-party vendor, Defendant conveyed information regarding the alleged Debt to the third-party vendor. 24. The information conveyed by Defendant to the third-party vendor included Plaintiff’s status as a debtor, the precise amount of the alleged Debt, the entity to which Plaintiff allegedly owed the debt, among other things. 25. Defendant’s conveyance of the information regarding the alleged Debt to the third- party vendor is a “communication” as that term is defined by 15 U.S.C. § 1692a(2). 26. The third-party vendor then populated some or all this information into a prewritten template, printed, and mailed the letter to Plaintiff at Defendant’s direction. 27. That letter, dated February 1, 2021, was received and read by Plaintiff. (A true and accurate copy of that collection letter (the “Letter”) is annexed hereto as “Exhibit 1.”) 28. The Letter, which conveyed information about the alleged Debt, is a “communication” as that term is defined by 15 U.S.C. § 1692a(2). 29. The Letter was the initial written communication Plaintiff received from Defendant concerning the alleged Debt. FIRST COUNT Violation of 15 U.S.C. § 1692c(b) and § 1692f 30. Plaintiff repeats and realleges the foregoing paragraphs as if fully restated herein. 31. 15 U.S.C. § 1692c(b) provides that, subject to several exceptions not applicable here, “a debt collector may not communicate, in connection with the collection of any debt,” with anyone other than the consumer “without the prior consent of the consumer given directly to the debt collector.” 32. The third-party vendor does not fall within any of the exceptions provided for in 15 U.S.C. § 1692c(b). 33. Plaintiff never consented to Defendant’s communication with the third-party vendor concerning the alleged Debt. 34. Plaintiff never consented to Defendant’s communication with the third-party vendor concerning Plaintiff’s personal and/or confidential information. 35. Plaintiff never consented to Defendant’s communication with anyone concerning the alleged Debt or concerning Plaintiff’s personal and/or confidential information. 36. Upon information and belief, Defendant has utilized a third-party vendor for these purposes thousands of times. 37. Defendant utilizes a third-party vendor in this regard for the sole purpose of maximizing its profits. 38. Defendant utilizes a third-party vendor without regard to the propriety and privacy of the information which it discloses to such third-party. 39. Defendant utilizes a third-party vendor with reckless disregard for the harm to Plaintiff and other consumers that could result from Defendant’s unauthorized disclosure of such private and sensitive information. 40. Defendant violated 15 U.S.C. § 1692c(b) when it disclosed information about Plaintiff’s alleged Debt to the third-party vendor. 41. 15 U.S.C. § 1692f provides that a debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. 42. The unauthorized disclosure of a consumer’s private and sensitive information is both unfair and unconscionable. 43. Defendant disclosed Plaintiff’s private and sensitive information to the third-party vendor. 44. Defendant violated 15 U.S.C. § 1692c(b) when it disclosed information about Plaintiff’s alleged Debt to the third-party vendor. 45. For the foregoing reasons, Defendant violated 15 U.S.C. §§ 1692c(b) and 1692f and is liable to Plaintiff therefor. SECOND COUNT Violations of 15 U.S.C. §§ 1692g(b), 1692e and 1692e(10) 46. Plaintiff repeats and realleges the foregoing paragraphs as if fully restated herein. 47. 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. 48. 15 U.S.C. § 1692g(a)(3) provides that the written notice must contain a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector. 49. 15 U.S.C. § 1692g(a)(4) provides that the written notice must contain a statement that if the consumer notifies the debt collector in writing within the 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. 50. 15 U.S.C. § 1692g(a)(5) provides that the written notice must contain 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. 51. A debt collector has the obligation not just to convey the 15 U.S.C. § 1692g required disclosures, but also to convey such clearly. 52. Even if a debt collector conveys the required information accurately, the debt collector nonetheless violates the FDCPA if that information is overshadowed or contradicted by other language in the communication. 53. Even if a debt collector conveys the required information accurately, the debt collector nonetheless violates the FDCPA if that information is overshadowed by other collection activities during the 30-day validation period following the communication. 54. 15 U.S.C. § 1692g(b) provides that collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer's right to dispute the debt or request the name and address of the original creditor. 55. A collection activity or communication overshadows or contradicts the validation notice if it would make the least sophisticated consumer uncertain or confused as to her rights. 56. The Letter contains multiple addresses for Defendant. 57. The first address is a PO Box address, located at top left of the coupon, and is: PO BOX 4044 CONCORD CA 94524-4044. 58. The second address is also PO Box address, located at bottom right of the coupon, and is: PO BOX 722910 HOUSTON TX 77272-2910. 59. The third address is a physical address located at the bottom of the Letter, but explicitly states that the address caters to complaints about the way the debt is being collected 60. To be entitled to obtain verification of the debt or a copy of a judgment against the consumer pursuant to 15 U.S.C. § 1692g(a)(4), the consumer must dispute the debt in writing. 61. To be entitled to obtain the name and address of the original creditor, if different from the current creditor, pursuant to 15 U.S.C. § 1692g(a)(5), the consumer must request such in writing. 62. The Letter fails to instruct the consumer to which of the multiple addresses provided requests for the name of the original creditor must be sent. 63. As a result of the multiple addresses, the least sophisticated consumer would likely be confused as to which of the multiple addresses she should send her written dispute. 64. As a result of the multiple addresses, the least sophisticated consumer would likely be uncertain as to which of the multiple addresses she should send her written dispute. 65. Without clear direction as to where to mail her written dispute, the least sophisticated consumer would likely not dispute the debt at all. 66. Without clear direction as to where to mail her written dispute, the least sophisticated consumer would likely not dispute the debt at all because she would be frightened of calling the collection agency where highly trained and aggressive debt collectors answer calls. 67. As a result of the foregoing, the Letter would likely discourage the least sophisticated consumer from exercising her right to dispute the debt. 68. Defendant violated 15 U.S.C. § 1692g(b) as the multiple addresses overshadow the disclosure of the consumer's right to dispute the debt provided by 15 U.S.C. § 1692g(a)(3). 69. Defendant violated 15 U.S.C. § 1692g(b) as the multiple addresses overshadow the disclosure of the consumer's right to receive verification of the debt or a copy of a judgment against the consumer provided by 15 U.S.C. § 1692g(a)(4). 70. Defendant violated 15 U.S.C. § 1692g(b) as the multiple addresses overshadow the disclosure of the consumer's right to request the name and address of the original creditor provided by 15 U.S.C. § 1692g(a)(5). 71. Defendant violated 15 U.S.C. § 1692g(b) as the multiple addresses are inconsistent with the disclosure of the consumer's right to dispute the alleged Debt provided by 15 U.S.C. § 1692g(a)(3). 72. Defendant violated 15 U.S.C. § 1692g(b) as the multiple addresses are inconsistent with the disclosure of the consumer's right to receive verification of the debt or a copy of a judgment against the consumer provided by 15 U.S.C. § 1692g(a)(4). 73. Defendant violated 15 U.S.C. § 1692g(b) as the multiple addresses are inconsistent with the disclosure of the consumer's right to request the name and address of the original creditor provided by 15 U.S.C. § 1692g(a)(5). 74. 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. 75. 15 U.S.C. § 1692e(10) prohibits the use of any false representation or deceptive means to collect or attempt to collect any debt. 76. 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. 77. 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. 78. A collection letter also violates 15 U.S.C. § 1692e if it is reasonably susceptible to an inaccurate reading by the least sophisticated consumer. 79. The least sophisticated consumer could read the Letter and be reasonably confused as to which of the multiple addresses provided, she must send her written dispute. 80. The least sophisticated consumer could read the Letter and be uncertain as to which of the multiple addresses provided, she must send her written dispute. 81. The least sophisticated consumer could reasonably interpret the Letter to mean that she could send her written dispute to any of the multiple addresses provided. 82. As a result of the foregoing, the Letter, in the eyes of the least sophisticated consumer, it is open to more than one reasonable interpretation concerning where the consumer must send her written dispute, at least one of which is inaccurate. 83. As a result of the foregoing, the Letter is reasonably susceptible to an inaccurate reading by the least sophisticated consumer as to where the consumer must send her written dispute. 84. Because the Letter is open to more than one reasonable interpretation in this regard, it violates 15 U.S.C. §§ 1692e and 1692e(10). 85. For all of the foregoing reasons, Defendant violated 15 U.S.C. §§ 1692g(b), 1692e and 1692e(10) and is liable to Plaintiff therefor. CLASS ALLEGATIONS 86. Plaintiff brings this action individually and as a class action on behalf of all consumers similarly situated in the State of New York. 87. Plaintiff seeks to certify two class of: i. All consumers where Defendant sent information concerning the consumer’s debt to a third-party vendor without obtaining the prior consent of the consumer, which disclosure was made 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 containing multiple addresses, with no clarification as to the one to be used for disputing the debt, which letter was sent on or after a date one year prior to the filing of this action to the present. 88. 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. 89. The Class consists of more than thirty-five persons. 90. 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. 91. 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. 92. 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 JURY DEMAND 93. Plaintiff hereby demands a trial of this action by jury. PRAYER FOR RELIEF WHEREFORE, Plaintiff respectfully requests judgment be entered as follows: a. Certifying this action as a class action; and b. Appointing Plaintiff as Class Representative and Plaintiff’s attorneys as Class Counsel; and c. Finding Defendant’s actions violate the FDCPA; and d. Awarding damages to Plaintiff and the Class pursuant to 15 U.S.C. § 1692k; and e. Awarding Plaintiff’s attorneys’ fees pursuant to 15 U.S.C. § 1692k, calculated on a “lodestar” basis; and f. Awarding the costs of this action to Plaintiff; and g. Awarding pre-judgment interest and post-judgment interest to Plaintiff; all together with h. Such other and further relief that the Court determines is just and proper. DATED: April 22, 2021 BARSHAY, RIZZO & LOPEZ, PLLC By: s/ David M. Barshay David M. Barshay, Esquire 445 Broadhollow Road | Suite CL18 Melville, New York 11747 Tel: (631) 210-7272 Fax: (516) 706-5055 Our File No.: BRL21145 Attorneys for Plaintiff

consumer fraud

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO WESTERN DIVISION : CASE NO: 1:14-cv-136 : JUDGE ALEXA BRENNEMAN c/o Goldenberg Schneider, LPA One West Fourth Street, 18th Floor Cincinnati, OH 45202 : individually, and on behalf of all those similarly situated, : CLASS ACTION COMPLAINT Plaintiffs, : : (WITH JURY DEMAND) : : CINCINNATI BENGALS, INC. c/o Michael Brown One Paul Brown Stadium Cincinnati, OH 45202 : Defendant. All allegations made in this Class Action Complaint are based upon information and belief except those allegations that pertain to Plaintiff, which are based on personal knowledge. Each allegation in this Class Action Complaint either has evidentiary support or, alternatively, pursuant to Rule 11(b)(3) of the Federal Rules of Civil Procedure, is likely to have evidentiary support after a reasonable opportunity for further investigation or discovery. I. PRELIMINARY STATEMENT 1. The Cincinnati Bengals current website, www.bengals.com, states that “[t]he Cincinnati Ben-Gals have played a major role in the Bengals organization year after year since 1968. On the field, these ladies perform in front of more than 64,000 fans at Paul Brown Stadium. When they are not cheering on the team, they are spending countless hours practicing, exercising and volunteering for community and charity events throughout the tri-state. The Ben- Gals have appeared at charity functions, conventions, grand openings, trade shows, and other charitable and civic causes each year. These ladies are young professionals who are not only involved in their own careers, but they are involved in many hours per week working for the Bengals organization within the community.”1 2. These statements are largely accurate – the Ben-Gals are required to attend at least 6-8 hours of mandatory practices every week from late May through December, are required to appear at no fewer than 10 “charity”2 functions a season, and must pose for and promote a Ben-Gals calendar. In fact, according to the official Cincinnati Ben-Gal Rules, “[t]he Cincinnati Ben-Gals do more outside appearances than on the field appearances.”3 3. When all of the mandatory practice time, public appearance time, time spent at Paul Brown stadium on game days, and time posing for and promoting the Ben-Gals calendar are added together, the Ben-Gals spend well over 300 hours a year “working for the Bengals organization.” 4. Yet despite the fact that Defendant admits the Ben-Gals spend these “many hours per week working for the Bengals organization,” Defendant only compensates them, at most, $90 for each home football game at which they cheer. 5. Plaintiff was a Ben-Gal cheerleader during the 2013 season, and as such was an employee of Defendant. Plaintiff worked well in excess of 300 hours for Defendant, and appeared at 10 home games during the 2013 season, but Defendant only paid her a total of $855, a pay rate of less than $2.85 per hour. 6. In 2013, the Ohio minimum wage was $7.85 an hour. 1 See www.bengals.com/cheerleaders/auditions.html, last accessed February 10, 2014. 2 As discussed in more detail below, “charity” is loosely defined to include not only traditional charities, but also promotional appearances serving no charitable purpose whatsoever. 3 See Cincinnati Ben-Gals Rules, attached as Exhibit B. 2 7. Unlike the Defendant, the 2013-14 Super Bowl Champion Seattle Seahawks organization compensates their team cheerleaders, the Sea Gals, at “an hourly wage and any applicable overtime required by law, for all hours worked.”4 8. Furthermore, the only other professional sports franchise in Ohio that employs cheerleaders, the Cleveland Cavaliers of the National Basketball Association, pays its cheerleaders for “rehearsals, games, appearances/promotions and dance clinics.”5 9. Plaintiff, a former non-exempt employee of Defendant, brings this action against Defendant because she and all other current and former Ben-Gal cheerleaders were unlawfully denied minimum wages in violation of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq., Article II, Section 34a of the Ohio Constitution, and the Ohio Minimum Fair Wage Standards Act, O.R.C. § 4111.01 et seq. II. JURISDICTION AND VENUE 10. This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1331 and 29 U.S.C. § 216. In addition to the named Plaintiff’s individual claims, this action is filed as and intended to be a “collective action” as authorized by the Fair Labor Standards Act. Federal jurisdiction is invoked in this instance to secure protection and to redress deprivations of rights under the statutes of the United States, specifically including the Fair Labor Standards Act, 29 U.S.C. § 201, et seq. 11. Plaintiff also seeks an exercise of this Court’s Supplemental Jurisdiction as to the Ohio State law claims under 28 U.S.C § 1367. 4 See http://prod.static.seahawks.clubs.nfl.com/assets/2013/sea-gals/html/auditions/rules.html, last accessed February 10, 2014. 5 See http://www.nba.com/cavaliers/dance/cavalier_girls_auditions.html, last accessed February 10, 2014. 3 12. The actions complained of by Plaintiff occurred within the Western Division of the Southern District of Ohio. Accordingly, venue with this Court is appropriate. III. PARTIES 13. Plaintiff Alexa Brenneman is a citizen of the United States who resides in Hamilton County, Ohio. Ms. Brenneman is a citizen of the State of Ohio. 14. Plaintiff was employed by Defendant as a Ben-Gal cheerleader from approximately May 2013 through January 2014. Ms. Brenneman has signed a consent to participate in this action in accordance with 29 U.S.C. § 216(b), which is attached as Exhibit A. 15. Defendant Cincinnati Bengals, Inc. is a for-profit Ohio Corporation first registered with the Ohio Secretary of State in 1980. The Cincinnati Bengals organization was the employer of Plaintiff and members of the proposed Class within the meaning of 29 U.S.C. § IV. STATEMENT OF FACTS 16. Defendant is a professional football franchise that employs approximately 30 cheerleaders each football season to “[r]epresent the Cincinnati Bengals organization by actively supporting the team, values, and goals of the Club.”6 17. Defendant is a member of the National Football League, an organization that includes a revenue-sharing program that spreads television royalties across the league. 18. However, the money that Defendant earns from Ben-Gal cheerleader calendar sales7 and Ben-Gal cheerleader promotional appearances8 remains with Defendant and is not 6 See www.bengals.com/cheerleaders/auditions.html, last accessed February 10, 2014. 7 The Ben-Gals Cheerleader Calendar is sold at Paul Brown Stadium and is available at http://proshop.bengals.com/Cheerleader-Calendar-%2713-%2714-CHEERCAL13/, last accessed February 10, 2014. 8 See www.bengals.com/cheerleaders/appearance-requests.html, last accessed February 10, 2014. 4 shared with the rest of the league. A 2003 Forbes Magazine article estimated that the extra revenue generated by a cheerleader squad such as the Ben-Gals amounts to “just over $1 million a season.”9 19. Upon information and belief, Defendant has employed approximately 50 different Ben-Gal cheerleaders during the 3 years preceding the filing of this lawsuit. 20. Plaintiff is one of those approximately 50 Ben-Gal cheerleaders. 21. In early 2013, Plaintiff decided to try out for the Ben-Gals cheerleading squad. 22. To improve her chances of making the squad, Plaintiff initially attended dance classes at Paul Brown Stadium in February, March, and April of 2013. 23. Plaintiff then attended tryouts in May, 2013 and was informed that she made the squad on or around May 25, 2013. 24. After making the squad, Defendant provided Plaintiff with a W-4 and an “Authorization Agreement for Payroll Direct Deposit” by the Cincinnati Bengals, Inc. She was instructed to return the direct deposit authorization form to Johanna Kappner, Controller of the Cincinnati Bengals, Inc. 25. After completing these and other papers, Plaintiff was hired by Defendant to work as a Ben-Gal cheerleader during the 2013 football season. 26. Plaintiff was then provided with a copy of the Cincinnati Ben-Gal Rules. 27. As a condition of her employment with the Defendant, and as set forth in the Cincinnati Ben-Gals Rules, Plaintiff agreed to restrictions on her ability to take other jobs, 9 See Pom-Pom and Profits, available at http://forbes.com/forbes/2003/0915/084.html, last accessed February 10, 2014. 5 including “[t]eaching outside Bengals affiliation,” and “dancing or performing with any other group ….”10 28. The Cincinnati Ben-Gal Rules emphasize that practices are mandatory and failure to attend and participate will result in being forced to “sit out” games. This threat of punishment is particularly severe because the only time a Ben-Gal gets paid is for appearing at games. 29. For example, Plaintiff missed one game during the 2013-14 season to attend a funeral and was not paid anything for that week. 30. According to the Rules, “You may miss only 4 practices the entire season. Two tardy practices equal an absence. 16 minutes (or more) late equals an absence. Technically, 4 absences and 1 tardy can be missed. A total of 5 absences results in termination. Exemption: Your wedding.”11 31. The Ben-Gals are required to practice at Paul Brown Stadium from 7-10 p.m. Tuesdays and Thursdays during the season, with additional practices required during the pre- season, and additional practices required for rookies (such as Plaintiff). However, because the Ben-Gals are required to “weigh-in”12 prior to practices, and practice in full hair and makeup, they must arrive well before 7:00. Plaintiff was never paid for any of the practices Defendant required her to attend. 32. The time that Plaintiff and the other Ben-Gal cheerleaders spent at practices was and is “working time” within the meaning of 29 C.F.R. § 785.27 because, inter alia, attendance was not voluntary pursuant to 29 C.F.R. § 785.28. 10 See Cincinnati Ben-Gals Rules, attached as Exhibit B. 11 See Exhibit B. 12 Ben-Gals are weighed twice a week and must stay within 3 pounds of their “goal weight” or face discipline, including mandatory “extra conditioning” after practices, being “benched for weight violations,” probation, and ultimately dismissal from the team. See Exhibit B. 6 33. In addition to mandatory practices, Ben-Gals are required to attend mandatory “charity events.” Plaintiff attended, and was not paid for, ten such events. While some of these events were in fact legitimate “charity events,” others were purely designed to promote the Cincinnati Bengals organization. For example, during one such “charity event,” Plaintiff travelled to Lexington, KY to make a promotional appearance at a Lexington television station.13 The length of the mandatory charity events varied, but averaged approximately four hours. 34. The time Plaintiff and the other Ben-Gal cheerleaders travelling to and attending “charity events” was and is “work time” within the meaning of 29 C.F.R. § 785.44 because it was performed at Defendant’s request and/ or under Defendant’s direction and control. 35. While Ben-Gals are led to believe that they will supplement their meager compensation through paid appearances, Plaintiff made only one paid appearance, lasting several hours, for which she was compensated at the “charity rate” of $75. Yet upon information and belief, the Cincinnati Bengals charge approximately the same rate for their cheerleaders to appear at events as other NFL organizations, or around $300 an hour.14 36. Plaintiff was also required to pose for and promote the 2013-4 Cincinnati Ben- Gals calendar. Plaintiff was not paid for the time she spent modeling for the photographs, or the time she was required to promote the Calendar at events such as the Calendar Release Party. 13 A television commercial created during that promotional visit is available at http://vimeo.com/73250126, last accessed February 10, 2014. 14 See, e.g., http://www.baltimoreravens.com/ravenstown/cheerleaders/appearances.html ($300 an hour per cheerleader for corporate events); http://www.titansonline.com/cheerleaders/cheerleader-appearances.html ($300 per hour per cheerleader); http://www.colts.com/cheerleaders/cheerleader-appearances.html (2 cheerleaders for 2 hours is $850). All sites last accessed February 10, 2014. 7 37. On days that the Cincinnati Bengals played a home game, Plaintiff was required to arrive at Paul Brown Stadium several hours before kickoff and stay until after the game was completed. 38. For example, if the Bengals were playing a 1:00 p.m. home game, Plaintiff was required to meet the other cheerleaders in a local parking lot at 7:45 a.m. in full hair and makeup. The Ben-Gals would then carpool to the stadium and arrive at 8:00 a.m. 39. After arriving at the stadium, the Ben-Gals typically practice twice prior to the game. They also must meet with fans at times and stadium locations selected by the Defendant. As part of these appearances, they must sign autographs and take pictures with fans. 40. Although 30 Ben-Gals are on the squad, only 24 are selected to perform during a game.15 The 6 Ben-Gals that are not chosen to cheer must still arrive at the stadium with the other Ben-Gals, and must go through the pre-game activities and drills. 41. However, if a Ben-Gal is not selected to perform at a given game, she must spend the first half of the game visiting with fans in the luxury suites. At halftime she is permitted to leave, but is encouraged to stay and help with on-field activities. 42. If a Ben-Gal does not cheer during the game, but performs the duties described above, she is paid $45 instead of the full $90. 43. Because Plaintiff missed a game to attend a funeral, she was not selected to perform during the following game. Although she worked no fewer than 6 hours that day, she was only paid $45, less than Ohio’s minimum wage. 15 However, if Defendant believes that 24 Ben-Gals have not earned the right to cheer, it will utilize less than 24: “Practice and games are working sessions. Give 100% and don’t just go through the motions or your position may be replaced or lost. 24 ladies cheer but less will be taken as necessary.” See Exhibit B. 8 44. On the days that Plaintiff did cheer during the Bengals game, she left the stadium at approximately 5:00 p.m. 45. Even beyond the many uncompensated hours they work, Ben-Gal cheerleaders must expend their own money for transportation to and from mandatory appearances, and pay for specialized clothing (including required items such as certain shoes and tights, and a bathing suit for the calendar), makeup (including required items such as fake eyelashes), skin tanning, and other gear. Defendant’s failure to pay for or reimburse the Ben-Gals for these required items further reduces their compensation below the minimum wage. 46. Even when Defendant does pay the Ben-Gal cheerleaders, it is not on a regular basis. Defendant only paid Plaintiff twice, on November 1, 2013 (over 22 weeks after the first mandatory practice and nearly 10 weeks after the first home game of the season) and January 10, 47. Ben-Gal cheerleaders are required to comply with all instructions and are not permitted to question “the person in authority.” According to the Ben-Gal Rules, under the heading “Attitude and Behavior:”  Insubordination- Webster defines this word as “not submitting to authority; disobedient.” Syn. Rebellious, mutinous, defiant. Insubordination to even the slightest degree IS ABSOLUTELY NOT TOLERATED!!! You will be benched or dismissed!!!  Authority- ABSOLUTELY NO ARGUING OR QUESTIONING THE PERSON IN AUTHORITY!!!16 48. Plaintiff followed Defendant’s instruction not to question the person in authority, worked for Defendant for a full season, and then resigned at the end of the year. 16 See Exhibit B (emphasis in original). 9 49. The effect of Defendant’s wage and hour policies and practices described above was to deny Plaintiff and every Cincinnati Ben-Gal cheerleader during the three years prior to the filing of this Complaint minimum wages in violation of 29 U.S.C. § 206, Article II, Section 34a of the Ohio Constitution, and O.R.C. § 4111.01, et seq. 50. Defendant was and is aware of the “countless hours” of work being performed by Cincinnati Ben-Gal cheerleaders at their direction and under their supervision. Despite this knowledge, Defendant has maintained its wage and hour policies and practices. V. COLLECTIVE ACTION ALLEGATIONS 51. Plaintiff brings the FLSA claims under 29 U.S.C. § 216(b) as a collective action on behalf of the following opt-in Class (the “FLSA Class”): All persons who were employed by Defendant as a Cincinnati Ben- Gal cheerleader at any time from February 10, 2011 through the present. 52. Plaintiff is similarly situated to all former and current Cincinnati Ben-Gals described in the FLSA Class. VI. CLASS ACTION ALLEGATIONS 53. Plaintiff brings this action pursuant to Rule 23 of the Federal Rules of Civil Procedure on behalf of herself and as representatives of a class of similarly situated individuals who have been subjected to Defendant’s violations of the minimum wage provisions of Article II, Section 34a of the Ohio Constitution and Ohio’s Minimum Fair Wage Standards Act, O.R.C. § 4111.01 et seq. (the “Ohio Minimum Wage Class”). 10 54. This class action is proper under Federal Rule of Civil Procedure 23(b)(2) and 23(b)(3). The requirements of Rule 23(a), (b)(2), and (b)(3) are met with respect to the Ohio Class defined below: All persons who were employed by Defendant as a Cincinnati Ben- Gal cheerleader at any time from February 10, 2011 through the present. 55. Although the precise number of the Ohio Minimum Wage Class members is unknown to Plaintiff, upon information and belief the number is at least 50, such that joinder is impractical. The disposition of each Ohio Minimum Wage Class member’s claims through the class action procedure will benefit the parties, the Court, and society as a whole. 56. Plaintiff will fairly and adequately represent and protect the Ohio Minimum Wage Class members’ interests, and is committed to the vigorous prosecution of this action. 57. Plaintiff has no conflicts of interest and has retained counsel who is competent and has experience in class actions, including wage and hour class actions. 58. Plaintiff’s claims are typical of the Ohio Minimum Wage Class member’s claims. Plaintiff and the Ohio Minimum Wage Class members work or have worked for Defendant and have been subjected to Defendant’s wage and hour policies and practices which create a pattern or practice of failing to pay minimum wages and timely wages. Ohio Minimum Wage Class members are victims of the same actions and conduct of Defendant. 59. Common questions of law and fact exist as to all members of the Ohio Minimum Wage Class and predominate over questions affecting individual members of the Ohio Minimum Wage Class. 60. The common questions include, but are not limited to, the following: 11 i) Whether Defendant denied Cincinnati Ben-Gal cheerleaders minimum wage by, among other things, compelling them to attend practices, “charity events,” and calendar photo shoots and promotional events without compensation; ii) Whether Defendant failed to pay Cincinnati Ben-Gal cheerleaders in a timely manner; iii) Whether Defendant’s conduct was willful; iv) Whether Defendant’s conduct as described above violates Article II, §34a of the Ohio Constitution governing payment of minimum wages; v) Whether Defendant’s conduct as described above violates Article II, Section 34(a) of the Ohio Constitution governing an employers’ duty to maintain records for each employee; and vi) Whether Defendant’s conduct violates the Ohio Minimum Fair Wage Standards Act. 61. As noted above, Defendant has acted on grounds that apply generally to the Ohio Minimum Wage Class, so that final injunctive and/or declaratory relief is appropriate respecting the Ohio Minimum Wage Class as a whole. 62. A class action is appropriate because the common questions of law and fact enumerated above predominate over questions affecting only individual members of the Ohio Minimum Wage Class. 63. A class action is superior to other available methods for the fair and efficient adjudication of the claims asserted in this action, as the financial interest of each individual Ohio 12 Minimum Wage Class member is relatively small, making it economically impracticable to pursue remedies other than by a class action. As such, the Ohio Minimum Wage Class members have little interest in individually controlling the prosecution of separate actions. 64. If individual actions were to be brought by the members of the Ohio Minimum Wage Class, the resulting duplication of lawsuits would cause undue hardship, inefficiencies, and expense to the Court and the litigants, and the nature of the claims is such that it is unlikely that many such claims would be pursued other than on a class basis. 65. Given the above considerations, it is desirable to concentrate the litigation of the claims in this particular forum. 66. Absent a class action, Defendant would likely retain the benefits of its wrongdoing, resulting in a miscarriage of justice. 67. There will be no difficulties in managing this class action as the names and addresses of the persons who are members of the Ohio Minimum Wage Class are available from Defendant. Further, notice can be provided to the members of the Ohio Minimum Wage Class by using techniques and a form of notice similar to those customarily used in class actions including individual mailed notice and notice by publication, as appropriate. VII. STATEMENT OF CLAIMS Count One Denial of Minimum Wages under the FLSA, 29 U.S.C. § 206 68. Plaintiff repeats and reiterates the previous paragraphs as if fully rewritten herein. 69. Defendant’s denial of minimum wages for hours worked violates the FLSA, including but not limited to the minimum wage provisions of 29 U.S.C. § 206. 13 70. Plaintiff and members of the FLSA Class are entitled to recover from Defendant an appropriate amount for all hours worked, for a period of two years prior to the filing of this action, together with liquidated damages in an amount equal thereto, and attorney fees pursuant to 29 U.S.C. § 216(b). Count Two Willful violation of FLSA, 29 U.S.C. § 255(a) 71. Plaintiff repeats and reiterates the previous paragraphs as if fully rewritten herein. 72. Defendant’s conduct constitutes a willful violation of the FLSA within the meaning of 29 U.S.C. § 255(a) such that Plaintiff and members of the FLSA Class are entitled to recover from Defendant an appropriate amount for all hours worked including minimum wages during the period beginning three years prior to the commencement of this action together with liquidated damages in an amount equal thereto and attorney fees pursuant to 29 U.S.C. § 216(b). Count Three Retaliation, under the FLSA, 29 U.S.C. § 215(a)(3) 73. Plaintiff repeats and reiterates the previous paragraphs as if fully rewritten herein. 74. Plaintiff and members of the FLSA Class are entitled to appropriate equitable relief pursuant to 29 U.S.C. §§ 215(a)(3) and 216(b), including without limitation an order enjoining Defendant from retaliating against Plaintiff or any other employees who may join in or assist this action or have sought or requested payment in accordance with applicable law. 14 Count Four Denial of Minimum Wages under Article II, § 34a of the Ohio Constitution 75. Plaintiff repeats and reiterates the previous paragraphs as if fully rewritten herein. 76. Under the Article II, § 34a of the Ohio Constitution, Defendant was required to pay Plaintiff and members of the Ohio Minimum Wage Class the legally-required minimum wage for all hours worked. 77. Defendant’s conduct as described above violates Article II, §34a of the Ohio Constitution governing payment of minimum wages. 78. Defendant has willfully and with reckless disregard deprived Plaintiff and members of the Ohio Minimum Wage Class of the payment of minimum wage compensation under Article II, § 34a of the Ohio Constitution, which entitles Plaintiff and others similarly situated to liquidated and/or punitive damages and other appropriate relief. Count Five Denial of Minimum Wages under the Ohio Minimum Fair Wage Standards Act 79. Plaintiff repeats and reiterates the previous paragraphs as if fully rewritten herein. 80. Under the Ohio Minimum Fair Wage Standards Act (“OMFWSA”), O.R.C. § 4111.01 et seq., Defendant was required to pay Plaintiff and members of the Ohio Minimum Wage Class the legally-required minimum wage for all hours worked. 81. Defendant’s conduct as described above violates the OMFWSA provisions governing payment of minimum wages. 82. Defendant has willfully and with reckless disregard deprived Plaintiff and members of the Ohio Minimum Wage Class of the payment of minimum wage compensation 15 under the OMFWSA, which entitles Plaintiff and others similarly situated to liquidated and/or punitive damages and other appropriate relief. Count Six Unjust Enrichment/ Quantum Meruit 83. Plaintiff repeats and reiterates the previous paragraphs as if fully rewritten herein. 84. Plaintiff and members of the Ohio Minimum Wage Class conferred a benefit upon Defendant when they worked hours and provided services to Defendant, and performed such other acts and conduct for Defendant’s benefit. 85. The benefits were conferred by Plaintiff and members of the Ohio Minimum Wage Class without receiving just compensation from Defendant for the services rendered. 86. Defendant has been unjustly enriched by the benefits conferred by Plaintiff and members of the Ohio Minimum Wage Class. 87. Plaintiff and members of the Ohio Minimum Wage Class are entitled to just compensation for the reasonable value of services rendered to Defendant. Count Seven Failure to Pay Semi-monthly Wages Due, O.R.C. § 4113.15 88. Plaintiff repeats and reiterates the previous paragraphs as if fully rewritten herein. 89. During the three-year period preceding the filing of this Complaint, Defendant breached Ohio Revised Code Section § 4113.15(A) by failing to pay Plaintiff and members of the Ohio Minimum Wage Class (1) on or before the first day of each month for all wages earned by them during the first half of the preceding month ending with the fifteenth day thereof, and 16 (2) on or before the fifteenth day of each month all wages earned by them during the last half of the preceding calendar month. 90. Defendant is liable for the unpaid wages described above and for additional amounts as interest as provided by O.R.C. § 4113.15(B). Count Eight Failure to Maintain Wage and Hour Records, Article II, §34(a) of the Ohio Constitution 91. Plaintiff repeats and reiterates the previous paragraphs as if fully rewritten herein. 92. Article II, Section 34a of the Ohio Constitution requires employers to maintain records for each employee showing that employee’s name, address, occupation, pay rate, hours worked for each day worked, and each amount paid to an employee for a period of not less than three years following the last date that the employee was employed. 93. Because Defendant compensated Plaintiff and members of the Ohio Minimum Wage Class at a flat rate of either $90 or $45 per home football game, Defendant does not and did not maintain records for each employee showing that employee’s name, address, occupation, pay rate, hours worked for each day worked, and each amount paid to an employee for a period of not less than three years following the last date that the employee was employed. 94. By failing to create, keep, and preserve proper wage and hour records, Defendant has violated Article II, Section 34a of the Ohio Constitution. 95. Defendant is liable for the attorney fees and costs of Plaintiff and members of the Ohio Minimum Wage Class incurred as a result of its failure to comply with Article II, Section 34a of the Ohio Constitution. 17 Count Nine Failure to Maintain Wage and Hour Records, O.R.C. § 4111.08 96. Plaintiff repeats and reiterates the previous paragraphs as if fully rewritten herein. 97. Ohio Revised Code § 4111.08 requires Defendant to make and keep for a period of not less than three years a record of the name, address, and occupation of each of the employer's employees, the rate of pay and the amount paid each pay period to each employee, the hours worked each day and each work week by the employee. 98. Because Defendant compensated Plaintiff and members of the Ohio Minimum Wage Class at a flat rate of either $90 or $45 per home football game, Defendant does not and did not maintain records for each employee showing that employee’s name, address, and occupation, the rate of pay and the amount paid each pay period to each employee, the hours worked each day and each work week by the employee. 99. By failing to create, keep, and preserve proper wage and hour records, Defendant has violated Ohio Revised Code § 4111.08. 100. Defendant is liable for the attorney fees and costs of Plaintiff and members of the Ohio Minimum Wage Class incurred as a result of its failure to comply with Ohio Revised Code § 4111.08. PRAYER FOR RELIEF WHEREFORE, Plaintiff and all other similarly situated employees of Defendant who elect to opt-in to this FLSA action as described with particularity in 29 U.S.C. § 216(b), and also those who are encompassed by the Rule 23 class definition described above in paragraph 54, demand judgment against the Defendant as follows: 18 1. An Order Permitting this litigation to proceed as a collective action; 2. Prompt notice, pursuant to 29 U.S.C. § 216(b), to all similarly situated employees of Defendant that this litigation is pending and that they have right to “opt-in” to this litigation; 3. Judgment against Defendant for violating the Fair Labor Standards Act; 4. An Order declaring that the Defendant’s violations of the Fair Labor Standards Act were willful; 5. An order enjoining Defendant from retaliating against Plaintiff or any other employees who may join in or assist this action or have sought or requested payment in accordance with applicable law; 6. An award of unpaid wages and liquidated damages thereon consistent with the provisions of the Fair Labor Standards Act; 7. An award of Plaintiff’s reasonable attorneys’ fees and costs; 8. With respect to the Ohio Minimum Wage Class: a. For an order certifying the Class, pursuant to Rule 23, appointing Plaintiff as representative of the Class, and appointing the law firms representing Plaintiff as counsel for the Class; b. An award of damages and liquidated damages; c. Pre-judgment and post-judgment interest, as provided by law; d. Such other injunctive and equitable relief as the Court may deem just and proper; and e. Reasonable costs and attorneys’ fees. 19 9. Such other relief which in law and equity is appropriate. Respectfully submitted, GOLDENBERG SCHNEIDER, LPA /s/Jeffrey S. Goldenberg___________________________ JEFFREY S. GOLDENBERG (Ohio Bar No. 0063771) TODD B. NAYLOR (Ohio Bar No. 0068388) One West Fourth Street, 18th Floor Cincinnati, Ohio 45202 Telephone (513) 345-8291 Telecopier (513) 345-8294 jgoldenberg@gs-legal.com tnaylor@gs-legal.com Trial Attorneys for Plaintiffs MINNILLO & JENKINS, Co. LPA /s/Christian A. Jenkins CHRISTIAN A. JENKINS (Ohio Bar No. 0070674) JOHN J. WILLIAMS (Ohio Bar No. 0041466) 2712 Observatory Avenue Cincinnati, Ohio 45208 Telephone (513) 723-1600 Telecopier (513) 723-1620 cjenkins@minnillojenkins.com jjwilliams@minnillojenkins.com JURY DEMAND Plaintiff demands a trial by jury as to all issues so triable in this matter. /s/Todd B. Naylor TODD B. NAYLOR (Ohio Bar No. 0068388) 20

employment & labor

4se_DYcBD5gMZwcz9lfl

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA x JACK D. KEMPER, on behalf of himself and others similarly situated, Plaintiff, Civil Action No.: COMPLAINT - - CLASS ACTION JURY TRIAL DEMANDED v. ANDREU, PALMA & ANDREU, PL, Defendant. : : : : : : : : : : : : x NATURE OF ACTION 1. This is a class action brought under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §1692 et seq. 2. Congress enacted the FDCPA in 1977 to “eliminate abusive debt collection practices by debt collectors,” 15 U.S.C. §1692(e), and in response to “abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors,” which Congress found to have contributed “to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.” 15 U.S.C. §1692(a). 3. As the Consumer Financial Protection Bureau (“CFPB”)—the Federal agency tasked with enforcing the FDCPA—recently explained, “[h]armful debt collection practices remain a significant concern today. The CFPB receives more consumer complaints about debt collection practices than about any other issue.”1 In fact, in 2013, over one-third of the complaints received by the CFPB involved debt collectors’ attempts to collect debts that consumers did not owe.2 4. To combat this serious problem in the debt collection industry, the FDCPA requires debt collectors to send consumers “validation notices” containing certain information about their alleged debts and consumers’ rights. 15 U.S.C. §1692g(a). A debt collector must send this notice “[w]ithin five days after the initial communication with a consumer in connection with the collection of any debt,” unless the required information was “contained in the initial communication or the consumer has paid the debt.” Id., §1692g(a). 5. Pertinent here, the validation notice must advise the consumer of his rights to dispute the debt in writing if the consumer wants the debt collector to “obtain verification of the debt or a copy of a judgment against the consumer” and mail “a copy of such verification or judgment” to the consumer. Id., §1692g(a)(4). 6. If the consumer disputes the debt in writing within thirty days of receiving such a notice, the debt collector must “cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt” and mail the consumer a copy of that verification. Id., §1692g(b). 7. As noted by the CFPB and the Federal Trade Commission, “this validation requirement was a ‘significant feature’ of the law that aimed to ‘eliminate the recurring problem 1 See Brief for the CFPB as Amicus Curiae, Dkt. No. 14, p. 10, Hernandez v. Williams, Zinman, & Parham, P.C., No. 14-15672 (9th Cir. Aug. 20, 2014), http://www.ftc.gov/system/files/documents/amicus_briefs/hernandez-v.williams-zinman- parham-p.c./140821briefhernandez1.pdf 2 See Consumer Financial Protection Bureau, Fair Debt Collection Practices Act—CFPB Annual Report 2014 at 9-10 (2014) (“CFPB 2014 Report”), http://files.consumerfinance.gov/f/201403_cfpb_fair-debt-collection-practices-act.pdf of debt collectors dunning the wrong person or attempting to collect debts which the consumer has already paid.’” Hernandez, No. 14-15672, at 5 (quoting S. Rep. No. 95-382, at 4 (1977)). 8. This case centers on the failure of Andreu, Palma & Andreu, PL (“Defendant”) to properly provide the disclosures required by 15 U.S.C. §1692g in its initial written communications to consumers, or within five days thereafter. PARTIES 9. Jack D. Kemper (“Mr. Kemper” or “Plaintiff”) is a natural person who resides in Marion County, Indiana. 10. Plaintiff is obligated, or allegedly obligated, to pay a debt owed or due, or asserted to be owed or due, a creditor other than Defendant. 11. Plaintiff’s obligation, or alleged obligation, owed or due, or asserted to be owed or due, arises from a transaction in which the money, property, insurance, or services that are the subject of the transaction were incurred primarily for personal, family, or household purposes— namely a personal credit card issued by Bank of America, N.A. (the “Debt”). 12. Plaintiff is a “consumer” as defined by 15 U.S.C. §1692a(3). 13. Defendant is a professional corporation with its corporate headquarters in Miami, Florida. 14. Defendant is an entity that at all relevant times was engaged, by use of the mails and telephone, in the business of attempting to collect a “debt” from Plaintiff, as defined by 15 U.S.C. §1692a(5). 15. At all relevant times, Defendant acted on behalf of, and as an agent of, Bank of America, N.A. 16. Bank of America, N.A. hired Defendant to collect the Debt from Plaintiff. 17. At the time Bank of America, N.A. hired Defendant to collect the alleged Debt from Plaintiff, the alleged Debt was in default. 18. Indeed, at the time that Bank of America, N.A. hired Defendant to collect the alleged Debt, the alleged Debt, upon information and belief, had already been charged off by Bank of America, N.A. 19. Defendant uses instrumentalities of interstate commerce or the mails in a business the principal purpose of which is the collection of any debts, and/or to regularly collect or attempt to collect, directly or indirectly, debts owed or due, or asserted to be owed or due, another. 20. Defendant is a “debt collector” as defined by the FDCPA, 15 U.S.C. §1692a(6). JURISDICTION AND VENUE 21. This Court has jurisdiction pursuant to 15 U.S.C. §1692k(d) and 28 U.S.C. §1331. 22. Venue is proper before this Court pursuant to 28 U.S.C. §1391(b), where the acts and transactions giving rise to Plaintiff’s action occurred in this District, and where Defendant has its headquarters and transacts business in this District. FACTUAL ALLEGATIONS 23. On or about January 7, 2015, Defendant sent a written communication to Mr. Kemper in connection with the collection of the debt allegedly owed by him. A true and correct copy of the January 7, 2015 communication to Mr. Kemper is attached hereto as Exhibit A. 24. The January 7, 2015 communication was the first communication Mr. Kemper received from Defendant. 25. Mr. Kemper did not receive any additional communications from Defendant within five days of the January 7, 2015 communication. 26. The January 7, 2015 communication to Mr. Kemper stated that Defendant “has been retained by Bank of America, N.A., successor-in-interest to FIA Card Services (the “Bank”), in connection with the above-referenced account. Please be advised that the Bank intends to invoke its right to file a lawsuit against you.” See Ex. A. 27. The January 7, 2015 communication then stated: If you notify this firm within thirty (30) days after your receipt of this letter, that the debt or any portion thereof, is disputed, we will obtain verification of the debt or a copy of the judgment, if any, and mail a copy of such verification or judgment to you. Upon your written request within the same thirty (30) day period mentioned above, we will provide you with the name and address of the original creditor, if different from the current creditor. 28. Defendant’s January 7, 2015 communication also stated: This communication is from a debt collector. We are attempting to collect a debt and any information obtained will be used for that purpose. 29. Defendant’s January 7, 2015 communication violated 15 U.S.C. §1692g(a)(4) by failing to inform Plaintiff that Defendant need mail verification of the debt, or a copy of the judgment, if any, to him only if he notified Defendant in writing that he disputed the debt. 30. That is, a debt collector need only provide verification of a debt, or a copy of an applicable judgment, if the consumer disputes the debt in writing. By failing to include this “in writing” requirement in its initial debt collection letter, Defendant misstated Plaintiff’s rights under the FDCPA. 31. Defendant’s January 7, 2015 communication implies to the least-sophisticated consumer that there is one standard if the consumer wants to obtain the name and address of the original creditor within the thirty-day time period—send a writing—and a different standard if the consumer wants to obtain verification of the debt or a copy of any judgment—call to dispute the debt or send a writing disputing the debt. 32. Defendant’s misstatement of the rights afforded by the FDCPA would cause the least-sophisticated consumer to understand, incorrectly, that orally disputing a debt would trigger Defendant’s obligation to obtain and send verification of the debt. Such a misunderstanding could lead the least-sophisticated consumer to waive or otherwise not properly vindicate her rights under the FDCPA. 33. Moreover, failing to dispute the debt in writing would cause a consumer to waive the important protections afforded by 15 U.S.C. §1692g(b)—namely, that a debt collector cease contacting the consumer until the debt collector provides the consumer with verification of the alleged debt. 34. As one district court explained: An oral notice of dispute of a debt’s validity has different legal consequences than a written notice. Section 1692g(b) provides that if the consumer notifies the collector of a dispute in writing within the 30–day period, the collector must cease collection activities until he obtains the verification or information required by subsections 1692g(a)(4) and (a)(5). But if the consumer disputes the debt orally rather than in writing, the consumer loses the protections afforded by § 1692g(b); the debt collector is under no obligation to cease all collection efforts and obtain verification of the debt. Withers v. Eveland, 988 F. Supp. 942, 947 (E.D.Va.1997). An oral dispute “triggers multiple statutory protections,” but these protections are not identical to those triggered by a written dispute. Camacho v. Bridgeport Fin. Inc., 430 F.3d 1078, 1081 (9th Cir. 2005). As the Ninth Circuit has explained, the FDCPA “assigns lesser rights to debtors who orally dispute a debt and greater rights to debtors who dispute it in writing.” Id. at 1082. Osborn v. Ekpsz, LLC, 821 F. Supp. 2d 859, 869-70 (S.D. Tex. 2011) (“Every district court to consider the issue has held that a debt collector violates §1692g(a) by failing to inform consumers that requests under subsections (a)(4) and (a)(5) must be made in writing.”) 35. Upon information and good-faith belief, Defendant’s January 7, 2015 communication is based on a form template used by Defendant to collect consumer debts in default on behalf of Bank of America, N.A. CLASS ACTION ALLEGATIONS 36. 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: (a) All persons with an address within the United States, (b) to whom Andreu, Palma & Andreu, PL mailed an initial debt collection communication that stated: “If you notify this firm within thirty (30) days after your receipt of this letter, that the debt or any portion thereof, is disputed, we will obtain verification of the debt or a copy of the judgment, if any, and mail a copy of such verification or judgment to you,” (c) in the one year preceding the date of this complaint, (d) in connection with the collection of a consumer debt. Excluded from the Class is Defendant, its officers and directors, members of their immediate families and their legal representatives, heirs, successors, or assigns, and any entity in which Defendant has or had controlling interests. 37. The proposed Class satisfies Fed. R. Civ. P. 23(a)(1) because, upon information and belief, it is so numerous that joinder of all members is impracticable. The exact number of Class members is unknown to Plaintiff at this time and can only be ascertained through appropriate discovery. The proposed Class is ascertainable in that, upon information and belief, the names and addresses of all members of the proposed Class can be identified in business records maintained by Defendant. 38. The proposed Class satisfies Fed. R. Civ. P. 23(a)(2) and (3) because Plaintiff’s claim is typical of the claims of the members of the Class. To be sure, the claims of Plaintiff and all of the members of the Class originate from the same conduct, practice, and procedure on the part of Defendant, and Plaintiff possesses the same interests and has suffered the same injuries as each member of the proposed Class. 39. Plaintiff satisfies Fed. R. Civ. P. 23(a)(4) because he will fairly and adequately protect the interests of the members of the Class and has retained counsel experienced and competent in class action litigation. Plaintiff has no interests that are contrary to or in conflict with the members of the Class that he seeks to represent. 40. 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. 41. Furthermore, as the damages suffered by individual members of the Class may be relatively small, the expense and burden of individual litigation make it impracticable for the 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. 42. Issues of law and fact common to the members of the Class predominate over any questions that may affect only individual members, in that Defendant has acted on grounds generally applicable to the Class. Among the issues of law and fact common to the Class are: a) Defendant’s violations of the FDCPA as alleged herein; b) Defendant’s failure to properly provide in its initial debt collection letter the disclosures required by 15 U.S.C. §1692g; c) the existence of Defendant’s identical conduct particular to the matters at issue; d) the availability of statutory penalties; and e) the availability of attorneys’ fees and costs. COUNT I: VIOLATION OF THE FAIR DEBT COLLECTION PRACTICES ACT, 15 U.S.C. §1692g(a)(4) 43. Plaintiff repeats and re-alleges each and every allegation contained in paragraphs 1 through 42. 44. 15 U.S.C. §1692g provides: (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; (3) a statement that unless the consumer, within thirty days after receipt of 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 if the consumer notifies the debt collector in writing within the 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. (b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector. (c) The failure of a consumer to dispute the validity of a debt under this section may not be construed by any court as an admission of liability by the consumer. (emphasis added). 45. Defendant’s January 7, 2015 communication was its initial communication to Mr. Kemper. 46. The January 7, 2015 communication was in connection with an attempt to collect the Debt from Plaintiff. 47. At the time Defendant acquired the Debt for collection, it was considered to be in default. 48. The January 7, 2015 communication did not contain the proper disclosures required by 15 U.S.C. §1692g, nor did Defendant provide such disclosures within five days thereafter. 49. Specifically, the January 7, 2015 communication violated 15 U.S.C. §1692g(a)(4) by failing to inform Plaintiff that Defendant need only mail verification of the debt to him, and a copy of any judgment, if he notified Defendant in writing that he disputed the debt. 50. As a result, Defendant violated 15 U.S.C. §1692g(a)(4). WHEREFORE, Plaintiff respectfully requests 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. Adjudging and declaring that Defendant violated 15 U.S.C. §1692g(a)(4); C. Awarding Plaintiff and members of the Class statutory damages pursuant to 15 U.S.C. §1692k in the amount of $1,000.00 per class member; D. Enjoining Defendant from future violations of 15 U.S.C. §1692g(a)(4) with respect to Plaintiff and the Class; E. Awarding Plaintiff and members of the Class their reasonable costs and attorneys’ fees incurred in this action, including expert fees, pursuant to 15 U.S.C. §1692k and Rule 23 of the Federal Rules of Civil Procedure; F. Awarding Plaintiff and the members of the Class any pre-judgment and post- judgment interest as may be allowed under the law; and G. Awarding other and further relief as the Court may deem just and proper. TRIAL BY JURY Plaintiff is entitled to and hereby demands a trial by jury. DATED: March 30, 2015 Respectfully submitted, /s/ Jesse S. Johnson James L. Davidson Florida Bar No.: 723371 Jesse S. Johnson Florida Bar No.: 0069154 Greenwald Davidson Radbil PLLC 5550 Glades Road, Suite 500 Boca Raton, FL 33431 Tel: (561) 826-5477 Fax: (561) 961-5684 jdavidson@gdrlawfirm.com jjohnson@gdrlawfirm.com Counsel for Plaintiff and the proposed Class

consumer fraud

T0QV_YgBF5pVm5zY9yuO

Master File No. 2:19-cv-04565-JHS CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS JURY TRIAL DEMANDED UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA STÉPHANE GOUET, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. USA TECHNOLOGIES, INC., STEPHEN P. HERBERT, and PRIYANKA SINGH, Defendants. Lead Plaintiff Pinkesh Nahar and named Plaintiffs Peter Farsaci and University of Puerto Rico Retirement System (“Plaintiffs”), individually and on behalf of all other persons similarly situated, by Plaintiffs’ undersigned attorneys, for Plaintiffs’ complaint against Defendants (defined below), allege the following based upon personal knowledge as to Plaintiffs and Plaintiffs’ own acts, and upon information and belief as to all other matters based on the investigation conducted by and through Plaintiffs’ attorneys, which included, among other things, a review of 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 USA Technologies, Inc. (“USAT” or “Company”), analysts’ reports and advisories about the Company, other litigation involving the Company, consultations with market efficiency and forensic accounting experts, and information readily obtainable on the Internet. Plaintiffs believe 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: 1) a class consisting of all persons and entities, other than Defendants and their affiliates, who purchased USAT common stock from August 22, 2017 through February 6, 2019, both dates inclusive (“Class Period”) (the “Exchange Act Class”), seeking to recover compensable damages caused by USAT’s and the Officer Defendants’ violations of the Securities Exchange Act of 1934 (the “Exchange Act”); and 2) a subclass consisting of all persons or entities, other than Defendants and their affiliates, who purchased USAT common stock pursuant to the Company’s Registration Statement and Prospectus issued in connection with the Company’s May 23, 2018 secondary public offering (the “SPO”) (the “Securities Act Subclass”), seeking to recover compensable damages caused by Defendants’ violations of the Securities Act of 1933 (the “Securities Act”). Plaintiff the University of Puerto Rico Retirement System asserts the Securities Act claim on behalf of the Securities Act Subclass. 2. USAT focuses on electronic payment technology. The Company is best known for its ePort Connect cashless payment technology, which is designed to address the needs of the self-serve retail market. ePort Connect technology can be found in food and beverage vending machines, commercial or multi-housing laundry operations, amusement and arcade machines, and various other self-service kiosks or point-of-sale terminals. USAT’s ePort Connect products and services facilitate cashless payments by customers via credit, debit, or mobile payment or digital wallet services. 3. The Company derives the majority of its revenue from its ePort Connect technology, and more specifically from ongoing license and transaction fees. The majority of the Company’s ePort Connect customers pay a monthly fee plus a blended transaction rate on the transaction dollar volume processed by the Company, making connections to the ePort Connect service the most significant driver of the Company’s revenue. Equipment sales and servicing account for a smaller proportion of the Company’s revenue. 4. Throughout the Class Period, Defendants USAT, Stephen P. Herbert (“Herbert”), its former Chief Executive Officer (“CEO”), and Priyanka Singh (“Singh”), its former Chief Financial Officer (“CFO”) (collectively, the “Officer Defendants”), engaged in a multiyear accounting fraud by misrepresenting key financial metrics, including reporting “record” revenue and net income. Herbert “resigned” as USAT’s CEO under shareholder pressure effective October 17, 2019. Singh “resigned” effective January 7, 2019. 5. To avoid detection of their fraud, USAT and the Officer Defendants falsely reassured investors that prior material internal control weaknesses over financial reporting had been remediated. Rather than remediate those internal control weaknesses, USAT management, led by Defendants Herbert and Singh, lied to USAT’s auditor, RSM US LLP (“RSM”), in order to obtain clean audit reports for USAT’s financial statements. 6. USAT’s false financial statements allowed USAT to post “record” results to investors. These “record” results allowed Defendants Herbert and Singh, as well as other Company executives, to achieve valuable incentive compensation they otherwise would not have been entitled to, but for USAT’s false financial statements. 7. USAT’s false financial statements also permitted USAT to sell its stock at artificially inflated prices to investors in a secondary public offering --- raising over $75 million for USAT. 8. A series of corrective disclosures beginning on September 11, 2018 and continuing through November 14, 2019 gradually revealed the details of USAT and the Officer Defendants’ fraud on the market. 9. Among other problems, USAT, Herbert and Singh violated Generally Accepted Accounting Principles (“GAAP”) and USAT’s own accounting policies. For example, according to the Company’s 8-K filed with the SEC on January 14, 2019: (a) “senior management did not timely or fully report certain employee complaints and concerns to the independent auditor and/or the Audit Committee”; (b) “Senior management did not timely or thoroughly investigate or effectively remediate certain employee complaints or concerns relating to compliance and/or financial reporting matters”; (c) “pressure to achieve sales targets gave rise to the premature and/or inappropriate recognition of revenues and reporting of connections associated with certain of the examined transactions, typically occurring at or near the end of financial reporting periods”; (d) “on multiple occasions, the Company’s finance function was not timely or fully apprised of the salient transaction terms in order to permit them to properly evaluate the accounting treatment of a given transaction” (e) “the Company’s internal controls failed and/or were not adequate to ensure that there was effective communication between the sales and finance functions of the Company so as to allow proper and timely evaluation of the accounting treatment of the examined transactions[.]” 10. As a consequence of this fraud, (a) five senior executives, including defendants Herbert and Singh, were fired, resigned, or demoted; (b) the Company’s stock was delisted from trading on NASDAQ; (c) USAT’s independent auditor, RSM, noisily resigned, alerting investors that it could not rely on the Company’s management’s representations; and (d) investors saw the market price of USAT’s stock decimated by Defendants’ conduct, as it lost more than half of its value. JURISDICTION AND VENUE 11. The claims asserted herein arise under and pursuant to Sections 11, 12, and 15 of the Securities Act (15 U.S.C. §§ 77k and 77o), and 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, Section 22 of the Securities Act (15 U.S.C. § 77v), and Section 27 of the Exchange Act (15 U.S.C. § 78aa). 13. Venue is proper in this District pursuant to Section 27 of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1391(b) as the alleged misstatements entered the securities markets from this District and the subsequent damages took place in this District. USAT’s primary executive offices are located in this District. 14. 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 15. Lead Plaintiff, as set forth in his previously filed PSLRA Certification, acquired USA Technologies securities at artificially inflated prices during the Class Period and was damaged upon the revelation of the alleged corrective disclosures. 16. Named Plaintiff the University of Puerto Rico Retirement System (the “UPR Retirement System”), as set forth in its previously filed PSLRA Certification, purchased USAT common stock on the open market during the Class Period and pursuant to the Company’s materially untrue and misleading Registration Statement and Prospectus issued in connection with the Company’s SPO. 17. Named Plaintiff Peter Farsaci, as set forth in the accompanying PSLRA Certification, acquired USAT securities at artificially inflated prices during the Class Period. 18. Each of the Plaintiffs was damaged upon the revelation of the alleged corrective disclosures. 19. Defendant USAT provides wireless networking, cashless transactions, asset monitoring, and other value-added services in the United States and internationally. It is a Pennsylvania corporation. USAT common stock traded on NASDAQ under the symbol “USAT” until September 26, 2019. 20. Defendant Herbert served as the Company’s CEO from November 30, 2011 until October 17, 2019, when he “resigned” under pressure from an activist shareholder. The activist investor, Hudson Executive Capital LP, had proposed a new slate of directors on the grounds that the existing Board of Directors had failed to hold Herbert accountable for repeated failures and the destruction of shareholder 21. Until January 13, 2019, Herbert had also served as the Company’s Chairman. Throughout the Class Period, Herbert signed certifications in each of the Company’s periodic financial reports pursuant to the Sarbanes-Oxley Act of 2002 (“SOX”), stating that to his knowledge, each report fully complied with the requirements of Section 13(a) or 15(d) of the Exchange Act; and the information in each report fairly presented, in all material respects, the financial condition and results of operations of the Company. 22. Defendant Singh served as the Company’s CFO from March 31, 2017 until January 7, 2019. Throughout the Class Period, Singh signed certifications in each of the Company’s periodic financial reports pursuant to SOX, stating that to her knowledge, each report fully complied with the requirements of Section 13(a) or 15(d) of the Exchange Act; and the information in each report fairly presented, in all material respects, the financial condition and results of operations of the Company. 23. Defendants Herbert and Singh are herein referred to as “Officer Defendants.” 24. Each of the Officer 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; g. approved or ratified these statements in violation of the federal securities laws; and h. signed false SOX certifications. 25. Defendant Steven D. Barnhart (“Barnhart”) has been a member of USAT’s Board since October 2009. He is a member of its Audit Committee. 26. Defendant Joel Brooks (“Brooks”) has been a member of USAT’s Board since March 2007. 27. Defendant Robert L. Metzger (“Metzger”) has been a member of USAT’s Board since March 2016. He is the chair of its Audit Committee. 28. Defendant Albin F. Moschner (“Moschner”) joined the Board in May 2012, and became its Chairman in January 2019. 29. Defendant William J. Reilly, Jr. (“Reilly”) has been a member of the Board since July 2012. 30. Defendant William J. Schoch (“Schoch”) has been a member of the Board since July 2012. He is a member of its Audit Committee. 31. Defendants Barnhart, Brooks, Metzger, Moschner, Reilly, and Schoch are herein referred to as “Board Defendants.” 32. Each of the Board Defendants reviewed and signed the Registration Statement for the SPO. 33. Collectively, Defendants USAT, the Officer Defendants, and the Board Defendants are herein referred to as the “USAT Defendants.” 34. Defendant William Blair & Company, L.L.C. (“William Blair”) acted as sole book-running manager and underwriter for the SPO and assisted in the preparation and dissemination of USAT’s SPO materials (“Offering Documents”). William Blair’s headquarters are located at 150 North Riverside Plaza, Chicago, Illinois 60606. 35. Defendant Craig-Hallum Capital Group LLC (“Craig-Hallum”) acted as co-manager and underwriter for the SPO. Craig-Hallum’s headquarters are located at South 9th Street, Suite 350, Minneapolis, Minnesota 55402. 36. Defendant Northland Securities, Inc. (“Northland”) acted as co- manager and underwriter for the SPO. Northland’s headquarters are located at 150 South Fifth Street, Suite 3300, Minneapolis, Minnesota 55402. 37. Defendant Barrington Research Associates, Inc. (“Barrington”) acted as co-manager and underwriter for the SPO. Barrington’s headquarters are located at 161 North Clark Street, Suite 2950, Chicago, Illinois 60601. 38. Defendants William Blair, Craig-Hallum, Northland, and Barrington are herein collectively referred to as the “Underwriter Defendants.” 39. Collectively, the USAT Defendants and the Underwriter Defendants are herein referred to as “Defendants.” 40. Pursuant to the Securities Act, each Defendant is strictly liable for the false and misleading statements in the Offering Documents, subject to affirmative defenses. 41. USAT is liable for the acts of the Officer 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 USAT. 42. The scienter of the Officer Defendants and other employees and agents of the Company is similarly imputed to USAT under respondeat superior and agency principles. SUBSTANTIVE ALLEGATIONS Background 43. On September 29, 2015, USAT admitted that it had material weaknesses in its internal controls over financial reporting. 44. In a Form NT 10-K filed with the SEC on that day, the Company disclosed that its management’s assessment of its disclosure controls and procedures and internal control over financial reporting identified internal control deficiencies, most significantly process over the reconcilement, analysis and management oversight of certain customer accounts receivable balances related to customer processing and service fees. The Company admitted that the procedures in place did not identify a large number of uncollectible small balance accounts receivable, explaining: The Company’s management assessed the effectiveness of its disclosure controls and procedures and internal control over financial reporting as of June 30, 2015. Based on its assessment, management identified deficiencies in both the design and operating effectiveness of the Company’s internal control over financial reporting, which when aggregated represent a material weakness in internal control. The most significant of these was the process over the reconcilement, analysis and management oversight of certain customer accounts receivable balances related to customer processing and service fees. The procedures in place did not identify a large number of small balance accounts that may be uncollectible and were not appropriately dispositioned, collected, remediated, reserved for and/or written-off. As a result, the Company changed its June 30, 2015 financial results included in its September 10, 2015 press release by increasing its bad debt reserve by approximately $450 thousand resulting in an after-tax charge of approximately $270 thousand relating to these customer accounts receivable. 45. One year later, in the Company’s Form 10-K for the fiscal year ended June 30, 2016, filed with the SEC on September 13, 2016, the Company told investors that it was “committed to remediating the control deficiencies that gave rise to the material weakness.” 46. Defendant Singh joined the Company effective March 31, 2017. Defendants Misrepresent the Company’s Fourth Quarter and Fiscal Year 2017 Operating Results 47. The Class Period begins on August 22, 2017, when, prior to the opening of the stock market, USAT issued a press release announcing operating results for the fourth quarter and fiscal year ended June 30, 2017. The Company reported “record quarterly revenue of $34.3 million, a year-over-year increase of 56% marking the 31st consecutive quarter of growth.” “Record net connections of 64,000” represented “a year-over-year increase of 129%.” USAT also reported “[q]uarterly GAAP net income of $0.2 million, or $0.01 per share, compared to net loss of $(872,000), or $(0.02) per share for the prior year period.” 48. On an annual basis, “[r]ecord total revenue” was reported “of $104.1 million, a year-over-year increase of 35%.” A “[r]ecord 568,000 net connection to ePort services as of June 30, 2017, represent[ed] a year-over-year increase of 32%.” 49. In USAT’s press release announcing its results, reviewed and approved by Singh and Herbert, Herbert touted the record results: Our fiscal fourth quarter performance capped a strong year for USA Technologies. We achieved record revenue, and added the highest number of connections to our ePort service in the company’s history. We are executing well in an accelerating market and have exceeded our long-term goals of attaining $100 million in annual revenue and 500,000 connections this fiscal year. 50. At an earnings call held the same day, Defendant Herbert further emphasized the Company’s “record-breaking fourth quarter and fiscal year,” explaining that in the fourth quarter of 2016 alone, USAT added more new connections than in the entire 2015 fiscal year. Herbert also told analysts that Singh had already had a “swift and positive impact” on the Company’s finance function in only five months at USAT. 51. Singh added on the earnings call that in fiscal year 2017, USAT “exceeded our long-term goals by achieving $104 million in revenue and 568,000 in connections, all while driving growth in profitability and expansion in our operating margins.” 52. The next day, on August 23, 2017, USAT filed its annual report for the fiscal year ended June 30, 2017 with the SEC (“2017 10-K”). In the 2017 10-K, Defendants USAT, Herbert, and Singh reported USAT’s financial results for the fiscal year. They also told investors that the Company had solved its previous internal control problems. 53. The 2017 10-K stated that the Company’s internal controls over financial reporting were effective as of June 30, 2017 based on criteria established in the 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission (the “COSO Framework”). USAT explained that Herbert and Singh had assessed the effectiveness of its internal control over financial reporting as of June 30, 2017 and had concluded that the Company had remedied its internal control weaknesses, stating in relevant part: We identified in our Form 10-K for the fiscal year ended June 30, 2016 (the “2016 Form 10-K”), significant deficiencies that, when aggregated, resulted in a material weakness in our internal controls over financial reporting. In response to these weaknesses, we have designed and implemented a series of internal controls related to a number of business process areas, including: • Identification, analysis and accrual of merchant receivables at period-end • Detailed review of the accounts receivable aging, and • Search for and analysis of unrecorded liabilities prior to period close. We have successfully completed the testing and remediation necessary to conclude that the material weakness identified in our 2016 Form 10-K has been remediated. 54. The 2017 10-K was signed by Defendants Herbert and Singh. Herbert and Singh also signed certifications pursuant to SOX attesting that the Company’s financial statements “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.” 55. Herbert and Singh also attested in reciprocal certifications that they had designed “disclosure controls and procedures” and “internal control over financial reporting” required “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: 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)) 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 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 upon 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[.] 57. The 2017 10-K was materially false and misleading because Defendants USAT, Herbert, and Singh knew or recklessly disregarded that it materially misstated the Company’s financial statements and failed to disclose material weaknesses in its internal controls, which Defendants later admitted. 58. According to the Audit Committee’s investigation and the additional findings reported in the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2019, which also included USAT’s audited consolidated financial statements for the fiscal year ended June 30, 2018, which had not previously been filed, as well as restatements of previously filed consolidated financial statements, filed on October 9, 2019 (“2019 10-K”) and its amended 2019 10-K filed on November 14, 2019 (“2019 10-K/A”), the Company prematurely and/or inappropriately recognized revenue and reported connections associated with certain transactions at or near the end of financial reporting periods, accounted for transactions without being apprised of the salient transaction terms, recorded certain charges as expenses rather than reductions of reported revenues in earlier fiscal quarters, failed to ensure adequate communication between the sales and finance functions of the Company so as to allow proper and timely evaluation of the accounting treatment of the examined transactions, failed to ensure that employee complaints and concerns were investigated, if needed remediated, and reported to the Company’s auditor and/or the Audit Committee, failed to ensure a proper tone and control awareness that focused on achieving consistent application of accounting policies and procedures and strict adherence to GAAP, and failed to ensure that required accounting methodologies, policies and supporting documentation were in place. Consequently, the financial statements reported in the 2017 10-K were the result of improper accounting related to revenue recognition, deferred income tax accounting, sales-tax reserves, reserves for bad debts, sales return reserves, inventory reserves, sale-leaseback accounting, balance sheet classification of debt and preferred stock, and capitalization of sales commissions. 59. As disclosed in USAT’s 2019 10-K, in the 2017 10-K, the Company overstated its assets as of June 30, 2017 by $30.1 million (or 44.6%), understated its liabilities by $8 million (or 20.1%), overstated shareholders’ equity by $41.3 million (or 168.8%), overstated revenues by $2.7 million (or 2.6%), overstated gross profit by $1.6 million (or 6.3%), understated loss before income taxes by $5.6 million (or 76.1%), understated net loss by $5.6 million (or 69%), and understated loss per share by $0.14 or (or 70%). 60. The 2017 10-K also included a report by RSM to the Board and shareholders, stating that RSM had audited the Company’s financial statements and concluded that they were presented fairly, in all material respects, in conformity with GAAP. RSM also issued an opinion on USAT’s internal control over financial reporting stating that in its opinion, USAT maintained, in all material respects, effective internal control over financial reporting as of June 30, 2017, based on criteria established in the COSO Framework. 61. RSM’s clean audit opinions, however, were the result of Defendants Herbert, and Singh lying to RSM in connection with its audit, and were therefore materially false and misleading. As a result on February 6, 2019, RSM withdrew its audit opinions for the 2017 10-K, informing investors that they could no longer rely on management’s representations. The Cantaloupe Acquisition 62. On November 7, 2017, USAT announced that it had entered into a definitive agreement to acquire Cantaloupe Systems, Inc. (“Cantaloupe”), a provider of cloud and mobile solutions for vending, micro markets, and office coffee service. The acquisition was for $65 million in cash and $19.8 million in USAT common stock. The acquisition closed on November 9, 2017. Defendants Misrepresent the Company’s First Quarter for Fiscal Year 2018 Operating Results 63. On November 8, 2017, prior to the opening of the U.S. securities markets, the Company issued a press release announcing its financial results for the first quarter ended September 30, 2017 for fiscal year 2018 64. USAT reported (a) “[r]evenue of $25.6 million, a year-over-year increase of 19% marking the 32nd consecutive quarter of growth,” and (b) “[n]et connections of 26,000, a year-over-year increase of 37%.” 65. In the press release announcing the results, approved by Singh and Herbert, Herbert stated that the “first quarter was a strong start to our fiscal year, marked by continued momentum of cashless acceptance in our target market.” 66. Singh added in the press release that “I am very pleased with our first quarter results. Consistent with our strategy, we grew revenue, while increasing our [License & Transaction] margins and managing expenses, which led to improved profitability.” 67. The press release also stated that “[a]s a result of the announced agreement with Cantaloupe Systems, USAT is updated its outlook for fiscal 2018 … and now expects pro-forma combined revenue to be between $137 million to $142 million and adjusted EBITDA to be between $12.5 million to $13.5 million.” 68. On the earnings conference call conducted shortly after the issuance of the press release, Singh emphasized that “[w]e are pleased to announce another stellar quarter with strong performance and growth across all key performance indicators.” 69. On November 9, 2017, the Company filed the 1Q 2018 10-Q with the SEC, providing the Company’s first quarter 2018 financial results. The 1Q 2018 10- Q was signed by Defendants Herbert and Singh. Herbert and Singh also signed certifications pursuant to SOX attesting that the Company’s financial statements “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.” 70. Herbert and Singh also attested in reciprocal certifications that they had designed “disclosure controls and procedures” and “internal control over financial reporting” required “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: 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)) 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 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 upon 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[.] 72. The 1Q 2018 10-Q stated there were no changes in internal controls over financial reporting that occurred during the quarter ended September 30, 2017 that materially affected or were reasonably likely to materially affect the Company’s internal controls over financial reporting. 73. The 1Q 2018 10-Q was materially false and misleading because Defendants USAT, Herbert, and Singh knew or recklessly disregarded that it materially misstated the Company’s financial statements and failed to disclose material weaknesses in its internal controls, which Defendants later admitted. 74. According to the Audit Committee’s investigation and the additional findings reported in the 2019 10-K and 2019 10-K/A, the Company prematurely and/or inappropriately recognized revenue and reported connections associated with certain transactions at or near the end of financial reporting periods, accounted for transactions without being apprised of the salient transaction terms, recorded certain charges as expenses rather than reductions of reported revenues in earlier fiscal quarters, failed to ensure adequate communication between the sales and finance functions of the Company so as to allow proper and timely evaluation of the accounting treatment of the examined transactions, failed to ensure that employee complaints and concerns were investigated, if needed remediated, and reported to the Company’s auditor and/or the Audit Committee, failed to ensure a proper tone and control awareness that focused on achieving consistent application of accounting policies and procedures and strict adherence to GAAP, and failed to ensure that required accounting methodologies, policies and supporting documentation were in place. Consequently, the financial statements reported in the 1Q 2018 10-Q were the result of improper accounting related to revenue recognition, deferred income tax accounting, sales-tax reserves, reserves for bad debts, sales return reserves, inventory reserves, sale-leaseback accounting, balance sheet classification of debt and preferred stock, and capitalization of sales commissions. 75. As disclosed in USAT’s 2019 10-K, in the 1Q 2018 10-Q, the Company overstated its assets by $31.4 million (or 30.2%), understated liabilities by $8.9 million (or 23.5%), overstated shareholders’ equity by $43.4 million (or 69.3%), overstated revenues by $358,000 (or 1.4%), overstated gross profit by $1.0 million (or 16.5%), understated loss before income taxes by $1.5 million (or 68.2%), understated net loss by $2.0 million (or 78.2%), and understated loss per share by $0.04 or (or 80%). Defendants Misrepresent the Company’s Second Quarter for Fiscal Year 2018 Operating Results 76. On February 8, 2018, before the market opened, the Company issued a press release announcing its second quarter financial results for the period ending December 31, 2017 for the fiscal year 2018. On an earnings call held the same day, Herbert and Singh again reported strong results and increased management’s guidance for the year. 77. In the February 8, 2018 press release, USAT reported (a) “[r]evenue of 32.5 million, which reflects the acquisition of Cantaloupe [] on November 9, 2017, increased 49% year-over-year, marking the 33rd consecutive quarter of growth,” and (b) “[n]ew net connections of 311,000, which include approximately 270,000 connections related to the acquisition of Cantaloupe and bring total connections over 900,000.” 78. In the press release announcing the results, approved and reviewed by Singh and Herbert, Herbert stated that the “[w]e are very pleased with the significant progress we have made in integrating Cantaloupe into our organization.” 79. Singh added in the February 8, 2018 press release that “[t]he integration with Cantaloupe is proceeding very well.” 80. On a conference call conducted shortly after the issuance of the February 8, 2018 press release, Herbert emphasized his knowledge of the Company’s operations and its fast-paced revenue growth rate: Second quarter revenue increased 26% on a pro forma basis from the year ago period, an increase of 49% on a historical basis, which represents an acceleration in our top line growth and marks our 33rd consecutive quarter of year-over-year revenue growth. Given our increased scale and by continuing to leverage operating expenses, we were successful in converting this revenue growth to improving our non-GAAP profitability. Our service continues to be utilized by consumers at an increasing rate including the two months of results from Cantaloupe in the second quarter, we processed nearly 145 million transactions for approximately $273 million in value. * * * We are very pleased with the early success we've achieved in cross-selling our new cloud-based analytics software into the existing USAT customer base. During the month of December alone, we signed 20 customer agreements to add one or more of the performance optimization elements in our new analytics software into their existing ePort Connect cashless payment services. * * * For USAT, we were able to increase our revenue per connection while bringing more value to our customers and we added approximately 3,400 connections in the process as existing customers took the opportunity to also expand our cashless locations. We expect to begin generating revenue from these contract expansions in the fiscal third quarter. * * * We've always said that we will flex on hardware in order to acquire the long-term, sticky, recurring revenue associated with our services and the stakes for that are now much higher, because if we had four services, four core services previously, now we have eight. So the revenue opportunity associated with that hardware sale long-term is very significant, but yeah, I think what we will see is the number will fluctuate. 81. Singh added: Our business model features a high proportion of recurring revenue from a sticky customer base…. [O]ur strategy is to use equipment sales as an enabler for driving long-term higher margin recurring revenue by leveraging the relationship made from the initial connection…. Given the success we have seen so far with our combined offering, we are raising our revenue guidance to be between 140 million to 145 million and adjusted EBITDA to be between 13.5 million to 14.5 million. 82. On February 9, 2018, after the market closed, the Company filed the 2Q 2018 10-Q with the SEC, providing the Company’s first quarter 2018 financial results. The 2Q 2018 10-Q was signed by Defendants Herbert and Singh, and contained signed certifications pursuant to SOX by Defendants Herbert and Singh attesting to the accuracy of the Company’s financial reporting and the disclosure of all fraud. 83. The 2Q 2018 10-Q stated there were no changes in internal controls over financial reporting that occurred during the quarter ended December 31, 2017 that materially affected or were reasonably likely to materially affect the Company’s internal controls over financial reporting. 84. Herbert and Singh also signed certifications pursuant to SOX attesting that the Company’s financial statements “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.” 85. Herbert and Singh also attested in reciprocal certifications that they had designed “disclosure controls and procedures” and “internal control over financial reporting” required “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: 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)) 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 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 upon 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[.] 87. The 2Q 2018 10-Q was materially false and misleading because Defendants USAT, Herbert, and Singh knew or recklessly disregarded that it materially misstated the Company’s financial statements and failed to disclose material weaknesses in its internal controls, which Defendants later admitted. 88. According to the Audit Committee’s investigation and the additional findings reported in the 2019 10-K and 2019 10-K/A, the Company prematurely and/or inappropriately recognized revenue and reported connections associated with certain transactions at or near the end of financial reporting periods, accounted for transactions without being apprised of the salient transaction terms, recorded certain charges as expenses rather than reductions of reported revenues in earlier fiscal quarters, failed to ensure adequate communication between the sales and finance functions of the Company so as to allow proper and timely evaluation of the accounting treatment of the examined transactions, failed to ensure that employee complaints and concerns were investigated, if needed remediated, and reported to the Company’s auditor and/or the Audit Committee, failed to ensure a proper tone and control awareness that focused on achieving consistent application of accounting policies and procedures and strict adherence to GAAP, failed to correctly account for the Cantaloupe acquisition, failed to put appropriate financial reporting controls and processes in place to prevent or detect material errors in Cantaloupe’s financial statements on the date of and subsequent to the acquisition, failed to adequately or consistently perform financial integration of Cantaloupe, failed to conform certain of Cantaloupe’s accounting practices to the Company’s accounting policies and to GAAP, and failed to ensure that required accounting methodologies, policies and supporting documentation were in place. Consequently, the financial statements reported in the 2Q 2018 10-Q were the result of improper accounting related to revenue recognition, deferred income tax accounting, sales-tax reserves, reserves for bad debts, sales return reserves, inventory reserves, sale-leaseback accounting, balance sheet classification of debt and preferred stock, and capitalization of sales commissions. 89. As disclosed in USAT’s 2019 10-K, in the 2Q 2018 10-Q, the Company overstated its assets by $17.7 million (or 10.6%), understated liabilities by $11.0 million (or 13.5%), overstated shareholders’ equity by $31.8 million (or 38.7%), overstated quarterly revenues by $974,000 (or 3.1%), understated quarterly loss before income taxes by $908,000 (or 20.9%), overstated quarterly net loss by $8.3 million (or 198.4%), and overstated quarterly loss per share by $0.16 or (or 200%). Defendants Misrepresent the Company’s Third Quarter for Fiscal Year 2018 Operating Results 90. On May 8, 2018, before the market opened, the Company issued a press release announcing its third quarter financial results for the period ending March 31, 2018 for the fiscal year 2018 91. USAT reported (a) “[r]evenue of 35.8 million, increased 35% year- over-year, marking the 34th consecutive quarter of growth,” and (b) “[n]ew net connections of 64,000.” 92. In the May 8, 2018 press release, reviewed and approved by Singh and Herbert, Herbert told investors: “Our third fiscal quarter results demonstrate the successful integration of Cantaloupe, including additional cross-selling wins, improved operational efficiencies, as well as revenue and margin expansion across our business.” 93. On an earnings conference call convened shortly after the issuance of May 8, 2018 press release, both Herbert and Singh portrayed themselves as hands- on senior executives, intimately familiar with USAT’s operations. 94. Herbert emphasized on the call that “during the third quarter, we exceeded all of the long-term revenue margin targets that we put in place less than six months ago.” The Company’s Audit Committee later determined that pressure to achieve these same targets resulted in accounting fraud. 95. Singh added that the: [S]trength and consistency of our business model is evident in our third quarter results…. We also generated an almost 500 basis point expansion in our adjusted EBITDA margin as we benefited from significant operating leverage due to our growing scale…. Our long- term customer contracts and diversified offerings provides us with a highly visible and high margin recurring revenue streams…. In addition, we continue to experience quarter- over-quarter variability in equipment revenue, depending on the mix of services sold in a given quarter.… The sales team has done a fantastic job with the cross-sells and we expect to see the benefit of that in the future quarters. 96. On May 10, 2018, after the market closed, the Company filed the 3Q 2018 10-Q with the SEC, providing the Company’s third quarter 2018 financial results, including its revenues, and position. The 3Q 2018 10-Q was signed by Defendants Herbert and Singh, and contained signed certifications pursuant to SOX by Defendants Herbert and Singh attesting to the accuracy of the Company’s financial reporting and the disclosure of all fraud. 97. The 3Q 2018 10-Q stated there were no changes in internal controls over financial reporting that occurred during the quarter ended March 31, 2018 that materially affected or were reasonably likely to materially affect the Company’s internal controls over financial reporting. 98. The 3Q 2018 10-Q was materially false and misleading because Defendants USAT, Herbert, and Singh knew or recklessly disregarded that it materially misstated the Company’s financial statements and failed to disclose material weaknesses in its internal controls, which Defendants later admitted. 99. According to the Audit Committee’s investigation and the additional findings reported in the 2019 10-K and 2019 10-K/A, the Company prematurely and/or inappropriately recognized revenue and reported connections associated with certain transactions at or near the end of financial reporting periods, accounted for transactions without being apprised of the salient transaction terms, recorded certain charges as expenses rather than reductions of reported revenues in earlier fiscal quarters, failed to ensure adequate communication between the sales and finance functions of the Company so as to allow proper and timely evaluation of the accounting treatment of the examined transactions, failed to ensure that employee complaints and concerns were investigated, if needed remediated, and reported to the Company’s auditor and/or the Audit Committee, failed to ensure a proper tone and control awareness that focused on achieving consistent application of accounting policies and procedures and strict adherence to GAAP, failed to correctly account for the Cantaloupe acquisition, failed to put appropriate financial reporting controls and processes in place to prevent or detect material errors in Cantaloupe’s financial statements on the date of and subsequent to the acquisition, failed to adequately or consistently perform financial integration of Cantaloupe, failed to conform certain of Cantaloupe’s accounting practices to the Company’s accounting policies and to GAAP, and failed to ensure that required accounting methodologies, policies and supporting documentation were in place. Consequently, the financial statements reported in the 2Q 2018 10-Q were the result of improper accounting related to revenue recognition, deferred income tax accounting, sales-tax reserves, reserves for bad debts, sales return reserves, inventory reserves, sale-leaseback accounting, balance sheet classification of debt and preferred stock, and capitalization of sales commissions. 100. As disclosed in the Company’s 2019 10-K, in the 3Q 2018 10-Q, USAT overstated its assets by $22.7 million (or 13.4%), understated liabilities by $10.6 million (or 12.4%), overstated shareholders’ equity by $36.4 million (or 45.9%), overstated quarterly revenues by $2.2 million (or 6.7%), overstated quarterly gross profit by $2.1 million (or 21.3%), understated quarterly loss before income taxes by $2.2 million (or 69.5%), overstated quarterly net income by $4.4 million (turning a $3.6 million loss into $826,000 income), and overstated quarterly income per share by $0.09 (turning a $0.07 loss into $0.02 income). Defendants Misstate Facts In the Offering Documents For the SPO 101. On May 9, 2018, USAT filed a Registration Statement on Form S-1 with the SEC (“Registration Statement”). 102. On May 22, 2018, USAT’s Registration Statement, Amendment No. 1, was declared effective by the SEC. 103. On May 23, 2018, USAT filed the Prospectus pursuant to Rule 424(b)(4). 104. The SPO was priced at $11 per share, with 5,432,583 shares of USAT common stock to be sold by the Company and 553,187 shares of USAT common stock to be sold by certain selling shareholders. In addition, USAT granted the underwriters an option to purchase up to 897,866 additional shares from the Company. 105. On May 25, 2018, USAT issued a press release announcing the closing of its SPO, which generated gross proceeds of $75.7 million. USAT sold 6,330,449 shares of its common stock in the SPO, reflecting the full exercise of the underwriters’ option to purchase additional shares. Underwriters sold an additional 553,187 shares of USAT common stock on behalf of selling shareholders. 106. The Offering Documents for USAT’s SPO were materially false. The Prospectus incorporated by reference the Company’s 2017 10-K, 1Q 2018 10-Q, 2Q 2018 10-Q, and 3Q 2018 10-Q, which were materially false due to the Company’s failure to record the Cantaloupe acquisition in accordance with GAAP, appropriately classify its preferred stock on the Company’s balance sheet, and to recognize revenue and expenses in accordance with GAAP and its own policies. 107. The Company itself subsequently recognized that these financial statements were materially misleading, admitting to investors that seven quarters of financial reports (including the 2017 10-K, Q1 2018 10-Q, Q2 2018 10-Q, and Q3 2018 10-Q) could no longer be relied on and would have to be restated. 108. This action was brought within one year of the discovery of the untruthfulness of the statements and omissions and within three years of the SPO. The Truth Begins to Emerge and Materialize Through Partial Disclosures 109. On September 11, 2018, before the market opened, USA Technologies disclosed that it was unable to timely file its 2018 10-K with the SEC for the fiscal year ended June 30, 2018 as the Audit Committee of the Board was “conducting an internal investigation of current and prior period matters relating to certain of the Company’s contractual arrangements, including the accounting treatment, financial reporting and internal controls related to such arrangements.” 110. On this news, USAT’s stock declined 39.9% from a $15.30 closing price on September 10, 2018 to a $9.20 closing price on September 11, 2018. Trading volume was approximately 6.5 million shares, or approximately six times normal trading volume. 111. As the internal investigation proceeded without any news or conclusion, market analysts and investors lost confidence in USAT. 112. On September 28, 2018, Bloomberg News reported that “[i]nterest in news about [USAT] was unusually high…. Reader interest was at the highest level compared with the 30-day average based on Bloomberg measurements of the number of times people call up news stories or search for articles on a specific company. News flow gauges the amount of stories being published on a company relative to the previous 45 days. [USAT] shares fell 10 percent, compared with the 0.2 percent decline in the S&P 500 Index. Trading volume was 61 percent more than the 20-day average…. The stock is down 22 percent in the past week.” 113. On October 1, 2019, prior to the opening of trading, USAT issued a press release stating that the “[internal] investigation [being conducted by the Audit Committee] remains ongoing and, as such, the Company was not in a position to file the Annual Report within the 15 calendar day extension provided by the 12b-25 filing.” 114. Also on October 1, 2019, Theflyonthewall.com, an investment newsletter, reported that Barrington Research analyst Gary Prestopino had “temporarily suspended his investment rating on [USAT] citing the continuing delay in issuing its fiscal 2018 annual report ‘coupled with a lack of ability to provide any transparency into the issues revolving around its inability to issue’ the report.” 115. The Philadelphia Business Journal (“Journal”) also reported on October 5, 2018 that USAT “continued to lose ground in the weeks that followed [September 11, 2018], with the stock falling by 54 percent since the day before the announcement.” The Journal concluded that “Investors are not generally fans of uncertainty.” According to the Journal, Keith Noonan of Motley Fool had noted that “it’s possible that sales and earnings for the year and other periods could see substantial downward revisions, and that the company could face regulatory penalties and legal action.” 116. The newsletter Stocks Under $10, published by TheStreet.com, reported on November 6, 2018, that “the overhang that is the ongoing internal investigation and the failure to report its financials in a timely manner that has it noncompliant with Nasdaq [listing rules] remains…. No matter how much we may want to own USAT shares as a way to profit from the growing adoption of mobile payments, despite the tempting fall in the share price, the time isn’t right as yet to add them back to the active portfolio.” 117. On November 9, 2018, at 2.07 p.m., Bloomberg News reported that USAT was lower for the sixth consecutive day, and “was on track for the longest losing streak since the period ended Oct. 1, 2015.” Bloomberg News reported that USAT had “lost a total of 12 percent during the streak while the Russell 2000 Technology Index fell 1.3 percent. 118. USAT’s losing streak continued for a seventh consecutive day on November 12, 2018, falling an additional $0.20 per share to close at $5.22 per share. 119. On November 13, 2018, after the market closed, USAT filed a notification of inability to file Form 10-Q with the SEC on Form NT 10-Q, explaining that due to the previously disclosed investigation, it would not timely file its quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2018. 120. On November 13, 2018, USAT shares declined another 9.7%, or $0.51 per share, to close at $4.71 per share on 1.5 million shares traded. 121. In short, between September 12, 2018 and November 13, 2018 USAT’s stock price fell 53.6%, from $10.15 per share on September 12, 2018 to $4.71 per share on November 13, 2018. 122. On January 11, 2019, after the market closed, USAT announced that Singh had “resigned” as the Company’s CFO, effective January 7, 2019. Upon information and belief, Singh was forced to resign as a result of the accounting fraud. 123. On January 14, 2019, before the market opened, USAT filed a Form 8- K reporting certain findings of the Audit Committee’s investigation. The Company reported that the Audit Committee had substantially completed its investigation, which focused principally on certain customer transactions entered into by the Company during fiscal years 2017 and 2018. The Audit Committee found that, for certain of those transactions, the Company had prematurely recognized revenue and, in some cases, the reported number of connections associated with the transactions was under review. 124. USAT stated that the Audit Committee and its advisors proposed adjustments to previously reported revenues principally related to the fiscal quarters occurring during the 2017 and 2018 fiscal years, with an aggregate expected reduction to previously reported revenues of up to $5.5 million. The Company stated: In most cases, revenues that had been recognized prematurely were, or are expected to be, recognized in subsequent quarters, including quarters subsequent to the quarters impacted by the investigative findings. The investigation further found that certain items that had been recorded as expenses, such as the payment of marketing or servicing fees, were more appropriately treated as contra- revenue items in earlier fiscal quarters. USAT warned, however, that it had not completed its analysis of the specific adjustments to previously reported revenues identified by the investigation, and such analysis could result in further adjustments that could be material. 125. USAT admitted that its corporate culture, which Herbert and Singh led, effectively encouraged fraudulent recognition of revenue. USAT described the Audit Committee’s findings as a result of its investigation as follows: The principal findings of the Audit Committee were that: (i) pressure to achieve sales targets gave rise to the premature and/or inappropriate recognition of revenues and reporting of connections associated with certain of the examined transactions, typically occurring at or near the end of financial reporting periods; (ii) on multiple occasions, the Company’s finance function was not timely or fully apprised of the salient transaction terms in order to permit them to properly evaluate the accounting treatment of a given transaction; (iii) the Company’s internal controls failed and/or were not adequate to ensure that there was effective communication between the sales and finance functions of the Company so as to allow proper and timely evaluation of the accounting treatment of the examined transactions; (iv) senior management did not timely or fully report certain employee complaints and concerns to the independent auditor and/or the Audit Committee; (v) senior management did not timely or thoroughly investigate or effectively remediate certain employee complaints or concerns relating to compliance and/or financial reporting matters; and (vi) the foregoing matters gave rise to substantial tonal concerns warranting remediation. 126. In other words, the Audit Committee had discovered that the Company’s sales and/or finance employees had intentionally committed misconduct, misrepresenting transactions and improperly recognized revenue, and that its senior management had ignored employee concerns and complaints. Herbert and Singh, of course, were the most senior members of the Company’s management. 127. The January 14, 2019 Form 8-K reported that the Audit Committee had recommended and the Board of Directors decided to implement a list of remedial measures: enhancing the Company’s internal controls, particularly those relating to unusual or quarter end customer transactions and communication between the sales and finance departments, mandatory training for the sales department, claw-back of any appropriate compensation under the Company’s incentive compensation plans, expanding the Company’s public disclosure regarding connections, Company-wide training about compliance matters, including with respect to employee complaints and concerns and enhancement of the customer contracting process, considering appropriate employment actions relating to certain employees, enhancing the internal compliance and legal functions, and authorizing management to retain the appropriate individual or individuals, and splitting of the roles of Chairman and 128. The Board removed Herbert from his role as Chairman and appointed Albin Moschner, a Company director since 2012, as the new Chairman. It also created new Chief Operating Officer and Chief Compliance Officer positions. The Board additionally directed the Nominating and Corporate Governance Committee to identify two additional independent directors to join the Board, and authorized the formation of a new Compliance Committee, to be made up of independent directors, assume oversight responsibility for the Company’s compliance functions and supervise the new Chief Compliance Officer. 129. In the January 14, 2019 Form 8-K, the Company also announced the removal or demotion of three additional senior executives. USAT disclosed that its Chief Services Officer, Michael Lawlor (“Lawlor”) (the executive in charge of overseeing the growth and penetration of ePort connections), was no longer a Company employee, and was instead expected to “provide consulting services to the Company for a term and compensation to be agreed upon.” USAT’s Senior Vice President of Marketing and Strategic Development, Maeve Duska (“Duska”), and its Senior Vice President of Operations, George Harrum (“Harrum”), were each reassigned to new roles that would report to the to-be appointed Chief Operating Officer. 130. Prior to their departures and demotions, the Company’s former senior executives profited from its fraud. In the 2019 10-K, USAT admitted that the Compensation Committee of the Board had determined that based upon the Company’s restated financial results, the awards paid or issued to its executive officers under USAT’s incentive compensation bonus plans for the 2017 fiscal year were in excess of what they would have been under the restated results. According to USAT’s proxy statement filed on Schedule 14A with the SEC on April 2, 2018, for the 2017 fiscal year, approximately 65% of Herbert’s and 68% of Singh’s total target compensation was based on performance. Ultimately, Herbert’s compensation for fiscal year 2017 totaled $1,305,686 and Singh’s totaled $380,324. 131. The January 14, 2019 Form 8-K additionally stated that while the Audit Committee had substantially completed its investigation, more time would be required for it to finalize its 2018 10-K and to determine whether the restatement of previously filed financial statements would be required. 132. On February 6, 2019, after the market closed, Defendants’ credibility eroded even further. In an 8-K, USAT revealed that its auditor RSM: could no longer rely on USAT’s management’s representations; had withdrawn its audit opinion and interim reviews of USAT’s financial statements and internal controls; that such audit opinion and reviews should no longer be relied upon; and that RSM had resigned: [O]n February 1, 2019, RSM notified the Company that, based on the totality of the information, it had concluded in its professional judgment that it can no longer rely on management representations in connection with the audit of the Company’s 2017 internal control over financial reporting and consolidated financial statements. As such, RSM has recalled its previously issued audit report dated August 22, 2017 on the Company’s internal control over financial reporting and consolidated financial statements for the fiscal year ended June 30, 2017, and revoked its consents to incorporate such report by reference in any and all registration statements. RSM also indicated that reliance should not be placed on: (i) the Report of Independent Public Accounting Firm dated August 22, 2017 relating to the Company’s internal control over financial reporting and consolidated financial statements for the year ended June 30, 2017, and (ii) the completed interim reviews for the periods ended March 31, 2018. 133. RSM’s statement it “can no longer rely on management representations in connection with the audit of the Company’s 2017 internal control over financial reporting and consolidated financial statements” refers to representations, both oral and written, that Herbert and Singh as CEO and CFO, respectively made to RSM during the audit process. 134. In other words, USAT’s senior management lied to RSM in an ongoing attempt to avoid reporting accurate financial statements to investors. 135. In the February 6, 2019 8-K, USAT also revealed that that the Company had determined that it would restate the financial statements contained in the 2017 10-K, the 1Q 2018 10-Q, the 2Q 2018 10-Q, and the 3Q 2018 10-Q. The Company also stated that related press releases, earnings releases, management’s report on the effectiveness of internal control over financial reporting as of June 30, 2017, and investor communications describing the Company’s financial statements for these periods should no longer be relied upon. 136. On this news, USAT’s shares dropped by 50.58%, falling from a $6.88 closing price on February 6, 2019 to close at $3.40 per share on February 7, 2019. Trading value was 16.5 million shares, approximately 20 times normal trading value. 137. On September 4, 2019, USAT disclosed in a Form 8-K that its new auditor had discovered additional accounting issues, which had not been revealed by the Audit Committee’s investigation. As a result, on August 30, 2019, it had asked the NASDAQ Hearings Panel to grant it the maximum possible exception period permitted under applicable NASDAQ rules and interpretations, or until September 23, 2019, to regain compliance with its periodic filing requirements. 138. On September 20, 2019, during trading hours, USAT filed a Form 8-K disclosing that it was unlikely to meet the NASDAQ Hearings Panel’s September 23, 2019 deadline to regain compliance with its periodic filing obligations. As a result, USAT told investors, the NASDAQ Hearings Panel had told the Company that it would issue a delisting determination and the Company’s securities would be suspended from trading on NASDAQ. 139. Finally, on October 9, 2019, USAT filed its 2019 10-K, in which the Company reiterated the Audit Committee investigation findings and also revealed additional significant financial reporting issues and material weaknesses in the Company’s internal control over financial reporting. These problems resulted in “material adjustments” to the Company’s financial statements as follows: Non-Investigatory Adjustments Resulting From Financial Reporting Issues Identified During the Audit Process During the audit process, significant financial reporting issues were identified by current management, including our new interim Chief Financial Officer (the “CFO”), and our new independent auditor, which were unrelated to the internal investigation and which resulted in further adjustments to the Company’s previously issued or prior fiscal years’ unissued financial statements. These issues were primarily due to the lack of supporting documentation for various historical accounting reserves and policies, failure to adequately and consistently complete the financial integration of Cantaloupe, and the inadequate performance of our internal controls during the 2019 fiscal year. Based upon these non-investigatory adjustments, on October 7, 2019, the Board of Directors of the Company, upon the recommendation of the Audit Committee, determined that the following financial statements previously issued by the Company should no longer be relied upon: (1) the audited consolidated financial statements for the fiscal year ended June 30, 2015; (2) the audited consolidated financial statements for the fiscal year ended June 30, 2016; and (3) the quarterly and year- to-date unaudited consolidated financial statements for September 30, 2016, December 31, 2016, and March 31, 2017. The non-investigatory adjustments relate to revenue recognition, deferred income tax accounting, sales tax reserves, reserves for bad debts, inventory reserves, sale- leaseback accounting, balance sheet classification of preferred stock, and various other matters. * * * In addition to the Audit Committee investigation matter described above, the Company also corrected for (i) out of period adjustments and errors related to the Company's acquisition and financial integration of Cantaloupe and (ii) out of period adjustments and errors identified during management's review of significant accounts and transactions. The acquisition and financial integration-related adjustments referred to in (i) above were made in the restatement and relate to errors in the purchase accounting for our acquisition of Cantaloupe and errors in periods subsequent to the acquisition resulting from an ineffective integration of the financial systems and processes of the acquired entity with those of the Company. The significant account and transaction review adjustments referred to in (ii) above were made in the restatement and relate to revenue recognition, deferred income tax accounting, sales-tax reserves, reserves for bad debts, inventory reserves, sale-leaseback accounting, balance sheet classification of preferred stock, and various other matters. * * * Material Weaknesses Identified and Remedial Measures Implemented as a Result of Non- Investigatory Issues Identified During the Audit Process. During the audit process, and subsequent to June 30, 2019, financial reporting and accounting policy issues were identified by current management, including our new interim CFO, and our new independent auditor, that were unrelated to the internal investigation. These issues resulted in material adjustments to our fiscal year 2015 through 2019 financial statements, including the restatement of the fiscal year 2015 and 2016 selected financial data contained in Item 6 of this Form 10-K, and the quarterly and year-to-date unaudited financial statements for September 30, 2016, December 31, 2016, and March 31, 2017 which are contained in Note 20, “Unaudited Quarterly Data”, of the Notes to our Consolidated Financial Statements, located in Item 8 of this Form 10-K. We have identified the following material weaknesses in connection with the non-investigatory issues: RISK ASSESSMENT, CONTROL ENVIRONMENT, AND MONITORING A. Management did not effectively design controls in response to the risks of material misstatement and specifically did not have an adequate process or appropriate business combination controls in place to prevent or detect material errors in the financial statements of Cantaloupe, our subsidiary acquired on November 9, 2017. There was not a full nor effective financial integration of Cantaloupe resulting in significant adjustments as follows: • Certain trade and finance receivables relating to customer leasing/rental contracts of Cantaloupe were double counted by the Company on the opening balance sheet, and the Company’s sales-type lease accounting policy was not consistently or accurately applied by the Company to these contracts subsequent to the date of the acquisition. • In several cases, current management reversed previously recorded revenue associated with certain incorrect customer transactions and recorded accruals for potential uncollectible amounts due from customers. • Management has now determined the correct original amount of finance receivables and the proper balance for this and the other assets and liabilities acquired by the Company in its acquisition of Cantaloupe. • Cantaloupe’s goodwill had been incorrectly calculated using the Company’s weighted average stock price for the period leading up to the closing of the transaction. Current management has determined that the stock should have been valued on the November 9, 2017 opening balance sheet using the sale price on the date of closing resulting in an increase of approximately $3.5 million to goodwill and equity. We have concluded that we did not have appropriate financial reporting controls and processes in place to prevent or detect material errors in the financial statements of Cantaloupe on and subsequent to the acquisition, the financial integration of Cantaloupe was not adequately or consistently performed, and certain accounting practices were not implemented in order to conform to the Company’s existing accounting policies and generally accepted accounting principles in the United States. We continue to strengthen our internal controls with respect to Cantaloupe, and continue to refine our processes, procedures and documentation pertaining to our approach to the on-going accounting for Cantaloupe. CONTROL ENVIRONMENT AND CONTROL ACTIVITIES B. Management did not maintain an effective control environment including ensuring that required accounting methodologies, policies and supporting documentation were in place. This control deficiency led to a series of financial adjustments recently identified by both current management and the Company’s independent auditor related to fiscal years 2019, 2018 and 2017 and resulted in the requirement to restate previously issued financial statements. • The Company recorded an accrual for the payment of sales taxes in certain states for certain products which affected fiscal years 2016 through 2019 due to the failure to historically account for these matters. • The Company has determined to fully restore its income tax valuation allowance which resulted in a charge to the income statement and a corresponding reduction to retained earnings in fiscal year 2016 due to the lack of supporting evidence for its accounting position. • The Company has determined that the original accounting treatment of a 2014 fiscal year sale-leaseback transaction as an operating lease was incorrect, and should have been treated as a capital lease, and appropriate adjustments have been recorded during fiscal years 2015 through 2019. • Due to incorrect historical accounting treatment, the Company wrote off the outstanding inventory on the balance sheet relating to obsolete inventory during the 2015 through 2019 fiscal years which was returned to the Company by customers in exchange for new equipment as the Company did not have a history of collecting these items and the equipment was obsolete. • The Company had to revise its excess and obsolete inventory reserve analysis to conform with generally accepted accounting principles in the United States as the Company lacked supporting evidence for its historical reserve analysis. • The Company has reversed certain costs which were previously incorrectly capitalized and has now appropriately reclassified debt and preferred stock. C. Management did not perform all internal controls in a timely manner throughout the 2019 fiscal year. Although key financial closing controls were performed, documented, and tested from April 1 through June 30, 2019, not all of the Company’s internal controls were performed adequately or consistently during the year. Management has concluded that the foregoing was attributable to several factors including the lack of finance leadership during this interim period, not retaining the Company’s third-party professional SOX testing consultant during this interim period, and significant management turnover. 140. The 2019 10-K also reiterated the circumstances of accounting fraud that led to the restatement: Based on the principal findings of the investigation conducted by the Audit Committee, management has concluded that it did not maintain an appropriate control environment, inclusive of structure and responsibility, and risk assessment and monitoring activities which led to revenue recognition, tonal concerns, and communication issues and which constituted the following material weaknesses: A. Pressure to achieve sales targets gave rise to the premature and/or inappropriate recognition of revenues and reporting of connections associated with certain of the examined transactions, typically occurring at or near the end of financial reporting periods; B. On multiple occasions, the Company’s finance function was not timely or fully apprised of the salient transaction terms in order to permit them to properly evaluate the accounting treatment of a given transaction; C. The Company’s internal controls failed and/or were not adequate to ensure that there was effective communication between the sales and finance functions of the Company so as to allow proper and timely evaluation of the accounting treatment of the examined transactions; D. Senior management did not timely or fully report certain employee complaints and concerns to the independent auditor and/or the Audit Committee; and E. Senior management did not timely or thoroughly investigate or effectively remediate certain employee complaints or concerns relating to compliance and/or financial reporting matters. 141. In its report on internal control over financial reporting included in the 2019 10-K, USAT’s new auditor, BDO USA, LLP (“BDO”) detailed the poor state of the Company’s internal controls: In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of June 30, 2019, based on the COSO criteria. * * * Several material weaknesses regarding management’s failure to design and maintain controls have been identified and described in management’s assessment. The material weaknesses related to 1) the control environment, a) not maintaining an appropriate control environment, inclusive of structure and responsibility, and risk assessment and monitoring activities by appropriate qualified resources with the knowledge, experience and training important to the Company’s financial reporting to ensure compliance with generally accepted accounting principles requirements, b) inadequate mechanisms and oversight to ensure accountability for the performance of controls, 2) risk assessment, as the Company did not have an adequate assessment of changes in risks that could significantly impact internal control over financial reporting and did not effectively design controls in response to the risks of material misstatement; 3) control activities and information and communication, specifically between the accounting department and other operating departments necessary to support the proper functioning of internal controls; and 4) monitoring controls, as the Company did not effectively evaluate whether the components of internal control were present and functioning. The control environment material weaknesses contributed to additional material weaknesses in the control activities as the Company did not design and maintain effective controls over a) accounting close and financial reporting, including financial reporting controls at the Cantaloupe Systems, Inc. subsidiary; b) accounting for non-routine, unusual or significant transactions, including business combinations; c) accounting for income taxes and sales tax assessments in accordance with generally accepted accounting principles; d) accounting for certain leasing transactions in accordance with generally accepted accounting principles; e) accounting for slow-moving, obsolete or damaged inventory and f) accounting for revenue arrangements. The risk assessment material weakness contributed to an additional material weakness as the Company did not design effective controls over certain business processes, including controls over the preparation, analysis, and review of closing adjustments required to assess the appropriateness of certain account balances at period end. 142. The combined effect of (1) the misstatements uncovered during the Audit Committee investigation, (2) the misstatements related to the Cantaloupe acquisition and financial integration, and (3) the additional misstatements related to significant financial reporting issues and material weaknesses in the Company’s internal control over financial reporting on USAT’s previously issued financial statements is summarized below based on the information disclosed in the 2019 10- ($ in thousands, Fiscal Year Three Months Ended Total except per share data) Ended 9/30/2017 12/31/2017 3/31/2018 FY 2017 - 6/30/2017 (1Q 2018) (2Q 2018) (3Q 2018) 3Q 2018 Total Revenue As prev. rptd. 104,093 $ 25,617 $ 32,506 $ 35,832 $ 198,048 $ As Restated 101,436 $ 25,259 $ 31,532 $ 33,592 $ 191,819 $ Misstated $ (2,657) $ (358) $ (974) $ (2,240) $ (6,229) $ Misstated % -2.6% -1.4% -3.1% -6.7% -3.2% Gross Profit As prev. rptd. 26,646 $ 7,201 $ 9,201 $ 11,944 $ 54,992 $ As Restated 25,061 $ 6,181 $ 9,172 $ 9,845 $ 50,259 $ Misstated $ (1,585) $ (1,020) $ (29) $ (2,099) $ (4,733) $ Misstated % -6.3% -16.5% -0.3% -21.3% -9.4% Loss before income taxes As prev. rptd. (1,765) $ (681) $ (3,443) $ (978) $ (6,867) $ As Restated (7,370) $ (2,143) $ (4,351) $ (3,203) $ (17,067) $ Misstated $ (5,605) $ (1,462) $ (908) $ (2,225) $ (10,200) $ Misstated % 76.1% 68.2% 20.9% 69.5% 59.8% Net income (loss) applicable to common shares As prev. rptd. (2,520) $ (547) $ (12,516) $ 826 $ (14,757) $ As Restated (8,133) $ (2,505) $ (4,194) $ (3,557) $ (18,389) $ Misstated $ (5,613) $ (1,958) $ 8,322 $ (4,383) $ (3,632) $ Misstated % 69.0% 78.2% -198.4% NM 19.8% Net income (loss) per common share As prev. rptd. (0.06) $ (0.01) $ (0.24) $ 0.02 $ As Restated (0.20) $ (0.05) $ (0.08) $ (0.07) $ Misstated $ (0.14) $ (0.04) $ 0.16 $ (0.09) $ Misstated % 70.0% 80.0% -200.0% NM NM - not meaningful ($ in thousands, As of As of As of As of except per share data) Ended 9/30/2017 12/31/2017 3/31/2018 6/30/2017 (1Q 2018) (2Q 2018) (3Q 2018) Total assets As prev. rptd. 97,691 $ 135,219 $ 184,651 $ 191,393 $ As Restated 67,544 $ 103,860 $ 166,934 $ 168,728 $ Misstated $ (30,147) $ (31,359) $ (17,717) $ (22,665) $ Misstated % -44.6% -30.2% -10.6% -13.4% Total liabilities As prev. rptd. 31,913 $ 29,123 $ 70,481 $ 75,482 $ As Restated 39,938 $ 38,061 $ 81,475 $ 86,120 $ Misstated $ 8,025 $ 8,938 $ 10,994 $ 10,638 $ Misstated % 20.1% 23.5% 13.5% 12.4% Total shareholders' equity As prev. rptd. 65,778 $ 106,096 $ 114,170 $ 115,911 $ As Restated 24,468 $ 62,661 $ 82,321 $ 79,470 $ Misstated $ (41,310) $ (43,435) $ (31,849) $ (36,441) $ Misstated % -168.8% -69.3% -38.7% -45.9% 143. The 2019 10-K also emphasized the tremendous financial burden that the Audit Committee’s investigation of Defendants’ fraud had placed on the Company: Specifically, during the fiscal year ended June 30, 2019, the Company incurred various expenses including those relating to the internal investigation in the amount of $13.5 million, relating to the restatement in the amount of $1.9 million, and relating to pending class action litigation in the amount of $0.5 million. 144. On November 14, 2019, USAT filed an amendment number 1 to its 2019 10-K (2019 10-K/A), in which the Company revised its disclosures related to the circumstances that had resulted in restatement of the Company’s previously issued financial statements dating back to fiscal year 2015, finally explaining: On January 14, 2019, the Company reported that the Audit Committee’s internal investigation relating to accounting and reporting matters was substantially completed, the principal findings of the internal investigation, and the remedial actions to be implemented by the Company as a result of the internal investigation. The Audit Committee found that, for certain of the customer transactions under review, the Company had prematurely recognized revenue. The Audit Committee proposed certain adjustments to previously reported revenues related to fiscal quarters occurring during the 2017 and 2018 fiscal years of the Company. In most cases, revenues that had been recognized prematurely were, or were expected to be, recognized in subsequent quarters, including quarters subsequent to the quarters impacted by the investigative findings. The investigation further found that certain items that had been recorded as expenses, such as the payment of marketing or servicing fees, were more appropriately treated as contra-revenue items in earlier fiscal quarters. On February 4, 2019, the Board of Directors of the Company, upon the recommendation of the Audit Committee, and based upon the adjustments to previously reported revenues proposed by the Audit Committee, determined that the following financial statements previously issued by the Company should no longer be relied upon: (1) the audited consolidated financial statements for the fiscal year ended June 30, 2017; and (2) the quarterly and year-to-date unaudited consolidated financial statements for September 30, 2017, December 31, 2017, and March 31, 2018. During the course of the restatement process and related reaudit of prior period financial statements, management performed a review of certain historical significant accounting policies, significant transactions, and the methodologies and assumptions underlying significant reserves. As a result, in addition to the adjustments resulting from the Audit Committee investigation described above, the Company also corrected for (i) out of period adjustments and errors related to the Company's acquisition and financial integration of Cantaloupe and (ii) out of period adjustments and errors identified during management's review of significant accounts and transactions that are not related to the Company’s acquisition and financial integration of Cantaloupe. The acquisition and financial integration-related adjustments referred to in (i) above were reflected in the restatement of the financial statements for the fiscal quarters and year-to-date ended December 31, 2017 and March 31, 2018 contained in Note 20 hereof, and relate to errors in the purchase accounting for our acquisition of Cantaloupe and errors in periods subsequent to the acquisition resulting from an ineffective integration of the financial systems and processes of the acquired entity with those of the Company. Such adjustments are primarily the result of: • The Company previously recorded a conforming accounting policy adjustment in the Cantaloupe purchase price allocation to account for certain customer contracts as sales-type leases. Such adjustment was not recorded in accordance with Accounting Standards Codification 840, “Leases”. Further, the Company did not prepare and maintain adequate documentation and analyses to support the initial and ongoing accounting for such arrangements. • The Company did not have effective processes and controls to recognize adequate reserves for sales-tax, inventory valuation and bad debts. • The Company did not have effective controls to prevent or detect a data-entry error that resulted in duplicate sales order entries and related recognition of revenue in the accounting systems. • The Company previously capitalized certain sales commissions. The Company concluded that these costs did not meet the applicable criteria for capitalization and should have been expensed as incurred. • The Company previously issued shares of common stock as consideration for the acquisition of Cantaloupe and did not accurately record such shares at fair value based upon the closing price on the acquisition closing date. The significant account and transaction review adjustments referred to in (ii) above were reflected where appropriate in the restatement of our fiscal year 2017 financial statements, in the restatement of our financial statements for the fiscal quarters and year-to-date ended September 30, 2016 and 2017, December 31, 2016 and 2017, and March 31, 2017 and 2018 appearing in Note 20 hereof, and in the restated selected financial data for fiscal years 2015, 2016 and 2017 appearing in Item 6 of this Form 10-K/A, and primarily relate to the failure to maintain an effective control environment including ensuring that required accounting methodologies, policies and supporting documentation were in place. Such adjustments are not related to the Company’s acquisition and financial integration of Cantaloupe and are primarily the result of: • Since fiscal year 2014 the Company recognized a partial tax valuation allowance on its deferred tax assets. However, starting in fiscal year 2016 the Company should have recognized a full valuation allowance on its deferred tax assets. • The Company historically inappropriately accounted for a fiscal year 2014 sale-leaseback transaction as an operating lease. The Company should have accounted for such transaction as a capital lease. • The Company did not have effective processes and controls to recognize adequate reserves for sales-tax. In addition, the Company did not have effective processes to evaluate and estimate the Company’s reserves for bad debts, sales returns, and excess and obsolete inventory at the lower of cost or net realizable value. It was concluded that the previous processes were based on assumptions that were not sufficiently documented or supported. • The Company previously capitalized certain sales commissions. The Company concluded that these costs did not meet the applicable criteria for capitalization and should have been expensed as incurred. • The Company historically incorrectly classified its convertible preferred stock within shareholders’ equity on the Company’s consolidated balance sheets. On October 7, 2019, the Board of Directors of the Company, upon the recommendation of the Audit Committee, and based upon the non-investigatory adjustments referred to above, determined that the following financial statements previously issued by the Company should no longer be relied upon: (1) the audited consolidated financial statements for the fiscal year ended June 30, 2015; (2) the audited consolidated financial statements for the fiscal year ended June 30, 2016; and (3) the quarterly and year-to-date unaudited consolidated financial statements for September 30, 2016, December 31, 2016, and March 31, 2017. 145. As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s common shares, Plaintiffs and other Class members have suffered significant losses and damages. Additional Allegations Demonstrating Scienter 146. The magnitude and breadth of the Company’s restatement of its financial results, as set forth in the chart in ¶142, supra, demonstrates scienter. 147. The Company’s violation of fundamental GAAP as well as violations of its own internal accounting rules, demonstrates scienter. 148. The inflated results that the Company reported enabled it to report “record” results with laudable year-over-year growth, demonstrating scienter. 149. The inflated results that the Company reported was the basis of incentive compensation, enabling Defendants Herbert and Singh, as well as other Company executives, to profit from their fraud, demonstrating scienter. 150. The Company’s carrying out of the SPO on the basis of fraudulent financial results, enabling it to raise over $75 million, further demonstrates scienter. 151. The demotions and departures of Herbert, Singh, Lawlor, Duska, and Harrum, showing that the Company’s highest-level managers were responsible for its accounting fraud, further demonstrate scienter. Defendants’ Violations of GAAP, SEC Rules and Regulations, and USAT’s Internal Accounting Policies 152. GAAP are those principles recognized by the accounting profession as the conventions, rules and procedures necessary to define accepted accounting practice at a particular time. The SEC Rules and interpretive releases and the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) represent sources of authoritative GAAP for SEC registrants. (ASC 105-10-05-1) Regulation S-X (17 C.F.R. § 210.4-01(a)(1)) states that financial statements filed with the SEC which are not prepared in compliance with GAAP are presumed to be misleading and inaccurate. Regulation S-X requires that interim financial statements must also comply with GAAP, with the exception that interim financial statements need not include disclosure which would be duplicative of disclosures accompanying annual financial statements. 17 C.F.R. § 210.10-01(a). 153. The Company represented its financial position and results of operations in a manner which materially violated GAAP, including the following fundamental financial reporting principles and objectives: a. The objective that financial reporting should provide financial information that is useful to existing and potential investors, lenders and other creditors in making investment, credit and similar decisions was violated (FASB Statement of Concepts (“CON”) No. 8, ¶OB2); b. The objective that financial reporting should provide information about the financial position of a reporting entity, which is information about the entity’s economic resources and the claims against the reporting entity, and effects of transactions and other events that change a reporting entity’s economic resources and claims was violated (CON 8, ¶OB12); c. The objective that information about a reporting entity’s financial performance should help financial statement users to understand the return the entity has produced on its economic resources was violated. Information about the return the entity has produced provides an indication of how well management has discharged its responsibilities to make efficient and effective use of the reporting entity’s resources. Information about the variability and components of that return also is important, especially in assessing the uncertainty of future cash flows. Information about a reporting entity’s past financial performance and how its management discharged its responsibilities usually is helpful in predicting the entity’s future returns on its economic resources. (CON 8, ¶OB16); d. The principle that a reporting entity’s accrual accounting should depict the effects of transactions, and other events and circumstances on a reporting entity’s economic resources and claims in the periods in which those effects occur, even if the resulting cash receipts and payments occur in a different period, was violated. This is important because information about a reporting entity’s economic resources and claims and changes in its economic resources and claims during a period provides a better basis for assessing the entity’s past and future performance than information solely about cash receipts and payments during that period. Information about a reporting entity’s financial performance during a period, reflected by changes in its economic resources and claims other than by obtaining additional resources directly from investors and creditors, is useful in assessing the entity’s past and future ability to generate net cash inflows. That information indicates the extent to which the reporting entity has increased its available economic resources, and thus its capacity for generating net cash inflows through its operations rather than by obtaining additional resources directly from investors and creditors. (CON 8 ¶¶OB17 – OB18); e. The principle that financial information should be useful, which means that it must be relevant and faithfully represent what it purports to represent, was violated. Relevance and faithful representation are fundamental qualitative characteristics of useful financial information. (CON 8, ¶¶QC4 – QC5); f. The principle of relevance was violated in that material information of predictive or confirmatory value capable of making a difference in the decisions made by financial statement users was misrepresented (CON 8, ¶¶QC6 – QC7, QC11); g. The principle of faithful representation was violated in that financial information was not complete, neutral, or free from error (CON 8, ¶QC12); h. The principle of completeness, which means including all information necessary for a financial statement user to understand the phenomenon being depicted, was violated (CON 8, ¶QC13; i. The principle of neutral depiction, meaning selection or presentation of financial information without bias, was violated. (CON 8, ¶QC14); and j. The principle of faithful representation was violated due to errors and omissions in selecting and applying appropriate processes to produce the reported information and in its presentation (CON 8, ¶QC15); and k. The revenue recognition principle that revenues are recognized when they are realized or realizable and earned was violated. (CON 5 ¶83; ASC 605-10-25-1). Revenue is generally realized and realizable when all of the following conditions are met: 1) persuasive evidence of an arrangement exists, 2) delivery has occurred or services have been rendered, 3) the seller’s price is fixed or determinable, and 4) collectability is reasonably assured. (ASC 605-10-S99-1, SAB Topic 13). 154. USAT’s violations of specific GAAP requirements during the Class Period are detailed below. 155. Revenue Recognition: Revenues are recognized when they are realized or realizable and earned. (CON 5 ¶83; ASC 605-10-25-1). Revenue is generally realized and realizable when all of the following conditions are met: 1) persuasive evidence of an arrangement exists, 2) delivery has occurred or services have been rendered, 3) the seller’s price is fixed or determinable, and 4) collectability is reasonably assured. (ASC 605-10-S99-1, SAB Topic 13). Additionally, GAAP requires payments or other consideration provided to customers which constitute an adjustment of the selling price to be recorded as a reduction of revenues rather than a cost or an expense in the vendor’s income statement. (ASC 605-50-45) 156. If an entity gives the buyer a right to return its product, revenue from the sales transaction is only recognized at the time of sale if all of the following conditions are met: a) the seller’s price is substantially fixed or determinable at the date of sale, b) the buyer has paid, or is contractually obligated to pay, the seller and the buyer’s obligation is not contingent on resale of the product, c) the buyer’s obligation to the seller would not be changed in the event of theft or physical destruction or damage to the product, d) the buyer acquiring product for resale has economic substance apart from that provided by the seller, e) the seller does not have significant obligations for future performance to directly bring about the resale of the product by the buyer, and lastly, f) the amount of future returns can be reasonably estimated. (ASC 605-15-25-1) 157. The following factors may impair an entity’s ability to make a reasonable estimate of the amount of future returns: a. The susceptibility of the product to significant external factors, such as technological obsolescence or changes in the demand. b. Relatively long periods in which a particular product may be returned. c. Absence of historical experience with similar types of sales of similar product, or inability to apply such experience because of changing circumstances, for example, changes in the selling entity’s marketing policies or relationships with its customers. d. Absence of large volume of relatively homogeneous transactions. (ASC 605-15-25-3) 158. When a company recognizes sales with the right of return, it records the estimated sales returns in a contra-revenue account (i.e., as a reduction of revenues) and establishes a corresponding reserve (i.e., a liability account) for sales returns. (ASC 605-15-25-2; ASC 450-20-25) “Sales revenue and cost of sales that are not recognized at the time of sale because the foregoing conditions are not met shall be recognized either when return privilege has substantially expired or if those conditions subsequently are met, whichever occurs first.” (ASC 605-15-25-1) 159. Additionally, GAAP requires payments or other consideration provided to customers which constitute an adjustment of the selling price to be recorded as a reduction of revenues rather than a cost or an expense in the vendor’s income statement. (ASC 605-50-45) 160. Throughout the Class Period, USAT stated that it accounted for revenues in accordance with GAAP, stating in the 2017 10-K: In all cases, revenue is only recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed and determinable, and collection of the resulting receivable is reasonably assured. The Company estimates an allowance for product returns at the date of sale and license and transaction fee refunds on a monthly basis. 161. However, in its 2019 10-K and 2019 10-K/A, USAT admitted that it violated GAAP and its own revenue recognition policy. The Audit Committee’s investigation revealed that Defendants prematurely and/or improperly recognized revenue and number of connections. The Company also admitted that its previously recorded sales returns reserves were not appropriately supported. Moreover, USAT admitted further inflating revenues by improperly recording certain charges as expenses rather than contra-revenue items in earlier fiscal quarters: 2019 10-K Material Weaknesses Identified and Remedial Measures Implemented Based upon Audit Committee Investigation. * * * Pressure to achieve sales targets gave rise to the premature and/or inappropriate recognition of revenues and reporting of connections associated with certain of the examined transactions, typically occurring at or near the end of financial reporting periods; * * * Material Weaknesses Identified and Remedial Measures Implemented as a Result of Non- Investigatory Issues Identified During the Audit Process. * * * Due to incorrect historical accounting treatment, the Company wrote off the outstanding inventory on the balance sheet relating to obsolete inventory during the 2015 through 2019 fiscal years which was returned to the Company by customers in exchange for new equipment as the Company did not have a history of collecting these items and the equipment was obsolete. 2019 10-K/A On January 14, 2019, the Company reported that the Audit Committee’s internal investigation relating to accounting and reporting matters was substantially completed, the principal findings of the internal investigation, and the remedial actions to be implemented by the Company as a result of the internal investigation. The Audit Committee found that, for certain of the customer transactions under review, the Company had prematurely recognized revenue. The Audit Committee proposed certain adjustments to previously reported revenues related to fiscal quarters occurring during the 2017 and 2018 fiscal years of the Company. In most cases, revenues that had been recognized prematurely were, or were expected to be, recognized in subsequent quarters, including quarters subsequent to the quarters impacted by the investigative findings. The investigation further found that certain items that had been recorded as expenses, such as the payment of marketing or servicing fees, were more appropriately treated as contra-revenue items in earlier fiscal quarters. * * * … the Company did not have effective processes to evaluate and estimate the Company’s reserves for … sales returns… . It was concluded that the previous processes were based on assumptions that were not sufficiently documented or supported. 162. USAT’s failure to follow GAAP in accounting for the Company’s revenues had the effect of materially misstating its financial statements during the Class Period. 163. Accounting for the acquisition of Cantaloupe: GAAP requires business combinations to be accounted for using the acquisition method of accounting which involves allocating the purchase price to identifiable assets acquired and liabilities assumed in a business combination as well as recording goodwill. (ASC 805-10-05- 4, ASC 805-10-25-1.) 164. The purchase price in a business combination is generally measured at fair value and is calculated as the sum of the acquisition date fair value of the assets transferred by the acquirer (such as cash and other assets), the liabilities incurred by the acquirer to former owners of the acquire (such as an earn-out), and the equity interests issued by the acquirer (such as common or preferred stock). (ASC 805-30- 30-7) The identifiable assets acquired and liabilities assumed are recorded on the acquirer’s balance sheet at fair value on the acquisition date. (ASC 805-20-30-1) Fair value is defined in GAAP as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market- participants. (ASC 820-10-20.) 165. USAT has admitted that it violated GAAP in accounting for the acquisition of Cantaloupe. The 2019 10-K and 2019 10-K/A disclosed that the Company, in violation of GAAP, did not measure the purchase price at fair value, failed to record the acquired assets and liabilities at fair value, and failed to recognize the correct amount of goodwill from the acquisition. 166. More specifically, USAT erroneously valued the 3,423,367 shares of common stock it issued in connection with the acquisition at the “weighted average stock price for the period leading up to the closing of the transaction” instead of at the stock price on the date of the acquisition, which resulted in understating the Company’s goodwill and equity by approximately $3.5 million. USAT also admitted that it not only failed to measure at fair value the Cantaloupe assets and liabilities it acquired, but also failed to account for Cantaloupe’s activities subsequent to the acquisition in accordance with GAAP due to material weaknesses in the Company’s internal controls: 2019 10-K Management did not effectively design controls in response to the risks of material misstatement and specifically did not have an adequate process or appropriate business combination controls in place to prevent or detect material errors in the financial statements of Cantaloupe, our subsidiary acquired on November 9, 2017. There was not a full nor effective financial integration of Cantaloupe resulting in significant adjustments as follows: • Certain trade and finance receivables relating to customer leasing/rental contracts of Cantaloupe were double counted by the Company on the opening balance sheet, and the Company’s sales- type lease accounting policy was not consistently or accurately applied by the Company to these contracts subsequent to the date of the acquisition. • In several cases, current management reversed previously recorded revenue associated with certain incorrect customer transactions and recorded accruals for potential uncollectible amounts due from customers. • Management has now determined the correct original amount of finance receivables and the proper balance for this and the other assets and liabilities acquired by the Company in its acquisition of Cantaloupe. • Cantaloupe’s goodwill had been incorrectly calculated using the Company’s weighted average stock price for the period leading up to the closing of the transaction. Current management has determined that the stock should have been valued on the November 9, 2017 opening balance sheet using the sale price on the date of closing resulting in an increase of approximately $3.5 million to goodwill and equity. We have concluded that we did not have appropriate financial reporting controls and processes in place to prevent or detect material errors in the financial statements of Cantaloupe on and subsequent to the acquisition, the financial integration of Cantaloupe was not adequately or consistently performed, and certain accounting practices were not implemented in order to conform to the Company’s existing accounting policies and generally accepted accounting principles in the United States. 2019 10-K/A The acquisition and financial integration-related adjustments … were reflected in the restatement of the financial statements for the fiscal quarters and year-to-date ended December 31, 2017 and March 31, 2018 … , and relate to errors in the purchase accounting for our acquisition of Cantaloupe and errors in periods subsequent to the acquisition resulting from an ineffective integration of the financial systems and processes of the acquired entity with those of the Company. Such adjustments are primarily the result of: • The Company previously recorded a conforming accounting policy adjustment in the Cantaloupe purchase price allocation to account for certain customer contracts as sales-type leases. Such adjustment was not recorded in accordance with Accounting Standards Codification 840, “Leases”. Further, the Company did not prepare and maintain adequate documentation and analyses to support the initial and ongoing accounting for such arrangements. • The Company did not have effective processes and controls to recognize adequate reserves for sales-tax, inventory valuation and bad debts. • The Company did not have effective controls to prevent or detect a data-entry error that resulted in duplicate sales order entries and related recognition of revenue in the accounting systems. • The Company previously capitalized certain sales commissions. The Company concluded that these costs did not meet the applicable criteria for capitalization and should have been expensed as incurred. • The Company previously issued shares of common stock as consideration for the acquisition of Cantaloupe and did not accurately record such shares at fair value based upon the closing price on the acquisition closing date. 167. USAT’s failure to follow GAAP in accounting for the Cantaloupe acquisition and Cantaloupe’s activities subsequent to the acquisition had the effect of materially misstating USAT’s financial statements during the class period beginning with 2Q 2018. 168. Deferred income tax accounting: in general, most items that enter into pretax accounting income for book purposes enter into taxable income in the same year, and vice versa. However, some events are recognized for book purposes and tax purposes in different years. Over time, as these differences reverse, they eventually offset each other. The tax effects of these differences, referred to as deferred taxes, should be accounted for in the intervening periods. GAAP requires financial statements to reflect the current and deferred tax consequences of all events that have been recognized in the financial statements or tax returns. (ASC 740) To accomplish this goal, GAAP provides the following basic principles: l. A current tax liability or asset is recognized for the estimated taxes payable or refundable on tax returns for the current and prior years. m. A deferred tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences and carryforwards. n. The measurement of current and deferred tax liabilities and assets is based on provisions of the enacted tax law. o. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. 169. A deferred tax asset is an income tax reduction whose recognition is delayed due to deductible temporary differences1 and carryforwards.2 (ASC 740-10- 20) GAAP requires that a valuation allowance for a deferred tax asset be created if, based on the weight of available evidence, it is more likely than not (a likelihood of more than 50%) that the company will not realize some portion or all of the deferred tax asset. The valuation allowance must be sufficient to reduce the deferred tax asset 1 Deductible temporary differences are temporary differences that result in deductible amounts in future years. 2 Carryforwards are deductions or credits that cannot be utilized on the tax return during a year that may be carried forward to reduce taxable income or taxes payable in a future year. to the amount that is more likely than not to be realized. (ASC 740-10-30-5) The need for a valuation allowance is especially likely if a business has a history of letting various carryforwards expire unused, or it expects to incur losses in the next few years. (ASC 740-10-30-16 – 25) Generally, changes in a valuation allowance, including increasing a valuation allowance to 100% of the amount of the related deferred tax asset, are reflected in the income statement. (ASC 740-10-45.) 170. The following table shows the deferred tax asset balance USAT originally reported beginning in fiscal year 2016 through the end of 3Q 2018: FY16 1Q 2017 2Q 2017 3Q 2017 FY17 1Q 2018 2Q 2018 3Q 2018 ($ in millions) 6/30/16 9/30/16 12/31/16 3/31/17 6/30/17 9/30/17 12/31/17 3/31/18 Deferred tax assets, 27.7 $ 28.0 $ 28.0 $ 27.6 $ 27.7 $ 28.2 $ 14.8 $ 16.9 $ net of allowance 171. Throughout the Class Period, USAT stated that it accounted for income taxes in accordance with GAAP: Income taxes are computed using the asset and liability method of accounting. Under the asset and liability method, a deferred tax asset or liability is recognized for estimated future tax effects attributable to temporary differences and carryforwards. The measurement of deferred income tax assets is adjusted by a valuation allowance, if necessary, to recognize future tax benefits only to the extent, based on available evidence, it is more likely than not such benefits will be realized. 172. However, in its 2019 10-K and 2019 10-K/A, USAT has admitted that it violated GAAP and its own policy in accounting for deferred tax assets and that it should have fully reserved its deferred tax assets (i.e., reduced their book value to zero) for the year ended June 30, 2016 and onward: 2019 10-K: The Company has determined to fully restore its income tax valuation allowance which resulted in a charge to the income statement and a corresponding reduction to retained earnings in fiscal year 2016 due to the lack of supporting evidence for its accounting position. * * * The Company has significant deferred tax assets, a substantial amount of which result from operating loss carryforwards. The Company routinely evaluates its ability to realize the benefits of these assets to determine whether it is more likely than not that such benefit will be realized. In periods prior to the year ended June 30, 2014, the Company’s evaluation of its ability to realize the benefit from its deferred tax assets resulted in a full valuation allowance against such assets. Based upon earnings performance that the Company had achieved along with the belief that such performance would continue into future years, the Company determined during the year ended June 30, 2014 that it was more likely than not that a substantial portion of its deferred tax assets would be realized with approximately $64 million of its operating loss carryforwards being utilized to offset corresponding future years’ taxable income resulting in a reduction in its valuation allowances recorded in prior years. However, due to the adjustments to earnings and management's reassessment of the underlying factors it uses in estimating future taxable income, and in accordance with the history of losses generated, the Company believes that for the year ended June 30, 2016 and onward, it is more likely than not that its deferred tax assets will not be realized. Accordingly, the Company re- established a full valuation allowance on its net deferred tax assets. 2019 10-K/A: Since fiscal year 2014 the Company recognized a partial tax valuation allowance on its deferred tax assets. However, starting in fiscal year 2016 the Company should have recognized a full valuation allowance on its deferred tax assets. 173. USAT’s failure to follow GAAP in accounting for its deferred tax assets had the effect of materially misstating USAT’s financial statements during the class period. 174. Inventory valuation: GAAP requires inventory to be valued at the lower of cost or net realizable value.3 When evidence exists that the net realizable value of inventory is less than its cost, the difference shall be recognized as a loss in earnings in the period in which it occurs. That loss may be required, for example, due to damage, physical deterioration, obsolescence, changes in price levels, or other causes. (ASC 330-10-35-1B) 175. Throughout the Class Period, USAT stated that it accounted for revenues in accordance with GAAP, stating in the 2017 10-K: Inventory consists of finished goods. The company's inventories are valued at the lower of cost or net realizable value. 3 Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. (ASC 330-10-20.) The Company establishes allowances for obsolescence of inventory based upon quality considerations and assumptions about future demand and market conditions. 176. However, in its 2019 10-K and 2019 10-K/A, USAT admitted that it violated GAAP and its own policy in valuing its inventory: 2019 10-K: Due to incorrect historical accounting treatment, the Company wrote off the outstanding inventory on the balance sheet relating to obsolete inventory during the 2015 through 2019 fiscal years which was returned to the Company by customers in exchange for new equipment as the Company did not have a history of collecting these items and the equipment was obsolete. The Company had to revise its excess and obsolete inventory reserve analysis to conform with generally accepted accounting principles in the United States as the Company lacked supporting evidence for its historical reserve analysis. 2019 10-K/A: … the Company did not have effective processes to evaluate and estimate the Company’s reserves for … excess and obsolete inventory at the lower of cost or net realizable value. It was concluded that the previous processes were based on assumptions that were not sufficiently documented or supported. 177. Moreover, in its 2019 10-K/A, the Company admitted that lack of “effective processes and controls to recognize adequate reserves for … inventory valuation,” among others, led it to make errors in accounting for the acquisition of Cantaloupe and in periods subsequent to the acquisition. 178. USAT’s failure to follow GAAP in accounting for inventory valuation had the effect of materially misstating USAT’s financial statements during the Class Period. 179. Sale-leaseback accounting: there are two principal lease classifications on a lessee’s financial statements: an operating lease and a capital lease. An operating lease is any lease other than a capital lease. A capital lease is a lease that meets any one of the four criteria specified in GAAP: a. The lease transfers ownership of the property to the lessee by the end of the lease term. b. The lease contains a bargain purchase option. c. The lease term is equal to 75% or more of the estimated economic life of the leased property. d. The present value of the minimum lease payments at the beginning of the lease is at least 90% of the fair value of the asset at the inception of the lease. (ASC 840-10-25-1, ASC 840-10-20) 180. The difference in accounting for an operating lease and a capital lease consists of the following: a. Each lease payment under an operating lease is recorded as an expense. Neither, the leased asset, nor an obligation to make future payments is recorded on the lessee’s books. (ASC 840-20-25-1.) b. Under a capital lease, the present value of all lease payments is considered to be the cost of the asset, which is recorded as a fixed asset, with an offsetting obligation recorded as a capital lease liability. As each monthly lease payment is made to the lessor, the lessee records a combined reduction in the capital lease liability account and a charge to interest expense. The lessee also records a periodic depreciation charge to gradually reduce the carrying amount of the fixed asset in its accounting records. (ASC 840-30- 25-1, ASC 840-30-30-1, ASC 840-30-35.) 181. When a sale of a property is accompanied by a leaseback of all or any part of the property for all or part of its remaining economic life and the lease meets any of the aforementioned four capital lease criteria, the seller-lessee shall account for the lease as a capital lease. Otherwise, the seller-lessee shall account for the lease as an operating lease. (ASC 840-40-25-2.) 182. As disclosed in USAT’s 2017 10-K, “during the fiscal year ended June 30, 2014, the Company and a third party finance company, entered into the six Sale Leaseback Agreements pursuant to which the third-party finance company purchased ePort equipment owned by the Company and used by the Company in its JumpStart Program.” The Company initially recorded the sale-leaseback arrangement as an operating lease. However, “during the fiscal year ended June 30, 2017, the Company extended the termination date for each of the six Sales Leaseback Agreements with the third party financing company for an additional year and the extension will also result in the transfer of ownership of the leased assets to the Company at the end of the new term. As a result of the new provision for ownership transfer at the end of the lease, the Sale Leaseback Agreements previously considered to be operating leases are classified as capital leases at June 30, 2017 and the remaining deferred gain at the time of the extension will be amortized ratably over the remaining estimated useful lives of the related property and equipment, through the fourth quarter of 2019.” 183. In its 2019 10-K, USAT revised the gain on sale of the ePort equipment from $1.45 million to $2.6 million and admitted that “the original accounting treatment of a 2014 fiscal year sale-leaseback transaction as an operating lease was incorrect, and should have been treated as a capital lease and appropriate adjustments have been recorded during fiscal years 2015 through 2019.” The Company then admitted in its 2019 10-K/A that it “historically inappropriately accounted for a fiscal year 2014 sale-leaseback transaction as an operating lease. The Company should have accounted for such transaction as a capital lease.” 184. USAT’s failure to follow GAAP in accounting for its 2014 sale- leaseback transaction had the effect of materially misstating USAT’s financial statements during the Class Period. 185. Balance sheet classification of preferred stock: public companies are required to present contingently redeemable preferred stock (i.e., redeemable upon the occurrence of an event outside the control of the issuer) and preferred stock that is redeemable at the option of the holder, in mezzanine equity. (ASC 480-10-S99- 3A.) Mezzanine equity is presented after liabilities and before stockholders’ equity on the balance sheet. The purpose of this classification is to convey to the reader that such a security may not be permanently part of equity and could result in a demand for cash or other assets of the entity in the future. Reporting entities should present redeemable securities that are classified as mezzanine equity separate from stockholders’ equity accounts that are classified as permanent equity (e.g., non redeemable preferred, common stock, and retained earnings). 186. USAT has admitted that it violated GAAP in accounting for the preferred stock. The 2019 10-K disclosed that even though its convertible preferred stock is contingently redeemable due to the existence of deemed liquidation provisions contained in its certificate of incorporation, the Company had improperly classified it as part of the shareholders’ equity on its balance sheet in violation of GAAP. The Company then admitted in its 2019 10-K/A that it “historically incorrectly classified its convertible preferred stock within shareholders’ equity on the Company’s consolidated balance sheets. 187. USAT’s failure to follow GAAP in classifying its preferred stock on its balance sheets had the effect of materially misstating USAT’s financial statements during the Class Period. 188. Bad debt reserves: accounts receivable are commonly paired with the allowance for doubtful accounts, a contra asset account which stores a reserve for bad debts. (ASC 210-10-45-13, CON 6 ¶ 34.) The combined balances in the accounts receivable and allowance accounts represent the net carrying value of accounts receivable. GAAP requires losses from uncollectable receivables to be accrued by a charge to income when such loss is probable (i.e., likely to occur) and estimable. (ASC 310-10-35-8 – 11, ASC 450-20-25-1 – 2.) 189. Throughout the Class Period, USAT stated that it valued accounts receivable in accordance with GAAP, stating in the 2017 10-K: The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments, including from a shortfall in the customer transaction fund flow from which the Company would normally collect amounts due. The allowance is determined through an analysis of various factors including the aging of the accounts receivable, the strength of the relationship with the customer, the capacity of the customer transaction fund flow to satisfy the amount due from the customer, an assessment of collection costs and other factors. The allowance for doubtful accounts receivable is management’s best estimate as of the respective reporting date. The Company writes off accounts receivable against the allowance when management determines the balance is uncollectible and the Company ceases collection efforts. Management believes that the allowance recorded is adequate to provide for its estimated credit losses. 190. Although in its 2017 10-K the Company represented that it successfully remediated material weaknesses in its internal controls over financial reporting, including those related to determining the collectability of accounts receivable, the 2019 10-K, revealed that USAT’s previously issued financial statements dating back to fiscal year 2015 were misstated, in part, due to its failure to properly account for reserves for bad debts. 191. The Company then admitted in its 2019 10-K/A that “the Company did not have effective processes to evaluate and estimate the Company’s reserves for bad debts … . It was concluded that the previous processes were based on assumptions that were not sufficiently documented or supported.” Moreover, the Company admitted that lack of “effective processes and controls to recognize adequate reserves for … bad debts,” among others, led it to make errors in accounting for the acquisition of Cantaloupe and in periods subsequent to the acquisition. 192. USAT’s failure to follow GAAP in accounting for bad debt reserves had the effect of materially misstating USAT’s financial statements during the Class Period. 193. Sales tax reserves: liabilities are probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. (CON 6 ¶ 35.) 194. Although in its 2017 10-K the Company represented that it successfully remediated material weaknesses in its internal controls over financial reporting, including implementing internal controls related to “search for an analysis of unrecorded liabilities prior to period close,” the 2019 10-K, revealed that USAT’s previously issued financial statements were misstated, in part, due to its failure to record “an accrual for the payment of sales taxes in certain states for certain products which affected fiscal years 2016 through 2019 due to the failure to historically account for these matters.” USAT’s 2019 10-K disclosed that “during the year ended June 30, 2019, the Company identified sales tax liabilities and related interest in the aggregate amount of $16.6 million.” The Company then admitted in its 2019 10-K/A that it “did not have effective processes and controls to recognize adequate reserves for sales-tax. … It was concluded that the previous processes were based on assumptions that were not sufficiently documented or supported.” Moreover, the Company admitted that lack of “effective processes and controls to recognize adequate reserves for sales tax,” among others, led it to make errors in accounting for the acquisition of Cantaloupe and in periods subsequent to the acquisition 195. In addition to adjustments made to correct the above misstatements, USAT also noted in its 2019 10-K that it “has reversed certain costs which were previously incorrectly capitalized and has now appropriately reclassified debt.” The 2019 10-K/A revealed that the “[t]he Company previously capitalized certain sales commissions. The Company concluded that these costs did not meet the applicable criteria for capitalization and should have been expensed as incurred.” Moreover, the Company admitted that improper capitalization of sales commissions, was one of the errors which led it to improperly account for the acquisition of Cantaloupe and make errors in periods subsequent to the acquisition. 196. The total impact of the aforementioned GAAP violations on the Company’s financial statements filed with the SEC during the Class Period is summarized below based on the information disclosed in the 2019 10-K: ($ in thousands, Fiscal Year Three Months Ended Total except per share data) Ended 9/30/2017 12/31/2017 3/31/2018 FY 2017 - 6/30/2017 (1Q 2018) (2Q 2018) (3Q 2018) 3Q 2018 Total Revenue As prev. rptd. 104,093 $ 25,617 $ 32,506 $ 35,832 $ 198,048 $ As Restated 101,436 $ 25,259 $ 31,532 $ 33,592 $ 191,819 $ Misstated $ (2,657) $ (358) $ (974) $ (2,240) $ (6,229) $ Misstated % -2.6% -1.4% -3.1% -6.7% -3.2% Gross Profit As prev. rptd. 26,646 $ 7,201 $ 9,201 $ 11,944 $ 54,992 $ As Restated 25,061 $ 6,181 $ 9,172 $ 9,845 $ 50,259 $ Misstated $ (1,585) $ (1,020) $ (29) $ (2,099) $ (4,733) $ Misstated % -6.3% -16.5% -0.3% -21.3% -9.4% Loss before income taxes As prev. rptd. (1,765) $ (681) $ (3,443) $ (978) $ (6,867) $ As Restated (7,370) $ (2,143) $ (4,351) $ (3,203) $ (17,067) $ Misstated $ (5,605) $ (1,462) $ (908) $ (2,225) $ (10,200) $ Misstated % 76.1% 68.2% 20.9% 69.5% 59.8% Net loss applicable to common shares As prev. rptd. (2,520) $ (547) $ (12,516) $ 826 $ (14,757) $ As Restated (8,133) $ (2,505) $ (4,194) $ (3,557) $ (18,389) $ Misstated $ (5,613) $ (1,958) $ 8,322 $ (4,383) $ (3,632) $ Misstated % 69.0% 78.2% -198.4% NM 19.8% Net loss per common share As prev. rptd. (0.06) $ (0.01) $ (0.24) $ 0.02 $ As Restated (0.20) $ (0.05) $ (0.08) $ (0.07) $ Misstated $ (0.14) $ (0.04) $ 0.16 $ (0.09) $ Misstated % 70.0% 80.0% -200.0% NM NM - not meaningful ($ in thousands, As of As of As of As of except per share data) Ended 9/30/2017 12/31/2017 3/31/2018 6/30/2017 (1Q 2018) (2Q 2018) (3Q 2018) Total assets As prev. rptd. 97,691 $ 135,219 $ 184,651 $ 191,393 $ As Restated 67,544 $ 103,860 $ 166,934 $ 168,728 $ Misstated $ (30,147) $ (31,359) $ (17,717) $ (22,665) $ Misstated % -44.6% -30.2% -10.6% -13.4% Total liabilities As prev. rptd. 31,913 $ 29,123 $ 70,481 $ 75,482 $ As Restated 39,938 $ 38,068 $ 81,475 $ 86,120 $ Misstated $ 8,025 $ 8,945 $ 10,994 $ 10,638 $ Misstated % 20.1% 23.5% 13.5% 12.4% Total shareholders' equity As prev. rptd. 65,778 $ 106,096 $ 114,170 $ 115,911 $ As Restated 24,468 $ 62,661 $ 82,321 $ 79,470 $ Misstated $ (41,310) $ (43,435) $ (31,849) $ (36,441) $ Misstated % -168.8% -69.3% -38.7% -45.9% 197. An error in financial statements exists when those financial statements contain an error in recognition, measurement, presentation, or disclosure in financial statements resulting from mathematical mistakes, mistakes in the application of GAAP, or oversight or misuse of facts that existed at the time the financial statements were prepared. (ASC 250-10-20.) GAAP requires that errors in financial statements be corrected retrospectively by restating the previously issued financial statements. (ASC 250-10-05-4.) The restated financial statements should disclose, inter alia, the nature of the error, the effect of the correction on each financial statement line item and any per-share amounts affected (ASC 250-10-50-7 – 8.) Because GAAP provisions do not apply to immaterial items, a restatement is only warranted when the previously issued financial statements are materially misstated. (ASC 105-10-05-6.) Therefore, a restatement of a Company’s financial statements is an admission that the previously issued financial statements were materially misstated. 198. The omission or misstatement of an item in a financial report is material if, in light of surrounding circumstances, the magnitude of the item is such that it is probable that the judgment of a reasonable person relying upon the report would have been changed or influenced by the inclusion or correction of the item. (CON 8 ¶ QC11.) Assessment of whether an item is material involves performing not only a quantitative but also a qualitative assessment. According to the SEC, materiality assessment should consider the “total mix” of information. In other words, “materiality concerns the significance of an item to users of a registrant's financial statements. A matter is ‘material’ if there is a substantial likelihood that a reasonable person would consider it important.” (Staff Accounting Bulletin No. 99 (“SAB 99”) – Materiality.) 199. USAT has admitted that its financial statements were materially false by telling investors that at least nine quarters of financial reports could no longer be relied on and restating the financial statements for those periods. 200. In addition, Section 13(b) 2 of the Exchange Act entitled Periodical and Other Reports states the following with respect to books and records and internal controls: Every issuer which has a class of securities registered pursuant to section 12 and every issuer which is required to file reports pursuant to section 15(d) shall: A. Make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer; B. devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that – i. transactions are executed in accordance with management's general or specific authorization; ii. transactions are recorded as necessary (I) to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and (II) to maintain accountability for assets; iii. access to assets is permitted only in accordance with management's general or specific authorization; and iv. the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. 201. A strong system of internal controls helps management achieve its objectives related to the effectiveness and efficiency of its operations, the reliability of its financial reporting, and compliance with applicable laws and regulations. It is management’s responsibility to develop and implement internal controls necessary to ensure that it maintains adequate books and records. It is management’s responsibility to evaluate, with the participation of the CEO and the CFO, the effectiveness of the company’s internal controls over financial reporting as of the end of each fiscal year. (Exchange Act Rules 13a‑15(c) and 15d-15(c) [17 C.F.R. §§ 240.13a-15(c) and 240.15d-15(c)]). In its 2017 10-K, USAT disclosed that the Company’s management performed its evaluations in accordance with criteria set forth the COSO Framework.4 202. The COSO Framework defines internal control as a process that is “designed to provide reasonable assurance regarding the achievement of objectives” related to the effectiveness and efficiency of operations, the reliability of financial reporting and non-financial reporting, and compliance with applicable laws and regulations.5 Internal control encompasses more than the policies governing the objectives related to operations, financial reporting, and compliance; namely, it includes the actions taken by a company’s board of directors, management at all levels, and employees in running the business. 203. According to COSO Framework, “setting objectives is a prerequisite to internal control and a key part of the management process relating to strategic 4 The original COSO framework was issued in 1992. In May 2013 COSO issued an updated Internal Control – Integrated Framework. 5 COSO Framework, Chapter 1. planning.”6 “Management, with board oversight, sets entity-level objectives that align with the entity’s mission, vision, and strategies. … External reporting objectives are driven primarily by regulations and/or standards established by regulators and standard-setting bodies. … —Entities need to achieve external financial reporting objectives to meet obligations to and expectations of stake holders. Financial statements are necessary for accessing capital markets and may be critical to being awarded contracts or in dealing with suppliers and vendors. Investors, analysts, and creditors often rely on an entity’s external financial statements to assess its performance against peers and alternative investments. Management may also be required to publish financial statements using objectives set forth by rules, regulations, and external standards.”7 204. The COSO Framework defines five components of an internal control that are needed to enable a business to achieve its objectives: (1) control environment, (2) risk assessment, (3) control activities, (4) information and communication, and (5) monitoring activities. 6 COSO Framework, Chapter 2. 7 COSO Framework, Chapter 2. 205. Of the five components of internal control, the control environment has a pervasive impact on the overall system of internal control.8 The “tone at the top” is an essential element of the control environment. “The board of directors and senior management establish the tone at the top regarding the importance of internal control including expected standards of conduct.”9 “The board of directors and management at all levels of the entity demonstrate through their directives, actions, and behavior the importance of integrity and ethical values to support the functioning of the system of internal control. … Tone at the top and throughout the organization is fundamental to the functioning of an internal control system. Without a strong tone at the top to support a strong culture of internal control, awareness of risk can be undermined, responses to risks may be inappropriate, control activities may be ill defined or not followed, information and communication may falter, and feedback from monitoring activities may not be heard or acted upon.”10 The COSO Framework recognizes that the CEO – during the Class Period, Defendant Herbert – , more than any other individual in an organization, sets the “tone at the top” that 8 COSO Framework, Chapter 5. 9 COSO Framework, Chapter 5. 10 COSO Framework, Chapter 5. affects the control environment and all other components of internal control.11 Moreover, the CEO “is responsible for designing, implementing, and conducting an effective system of internal control.”12 The COSO Framework makes it clear that, in addition to the CEO, other members of senior management, such as the CFO – during the Class Period, Defendant Singh – play a critical role in setting the tone at the top and performing vital internal control functions.13 206. USAT’s CEO, Herbert, and its CFO, Singh, failed to comply with SEC regulations and the requirements of COSO Framework. As described herein, there were material weaknesses in internal control at USAT that were necessary to prepare accurate financial statements and ensure compliance with regulatory filing requirements applicable to public companies. A material weakness is defined by the SEC as “a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements will not be prevented or detected on a timely basis.” (Rule 1-02(a)(4) of Regulation S-X [17 C.F.R. 210.1-02(a)(4)].) The Company’s own admissions, in the January 14, 2019 8-K and the February 6, 2019 8-K, show that its internal controls were ineffective 11 COSO Framework, Appendix B. 12 COSO Framework, Appendix B. 13 COSO Framework, Chapter 5 and Appendix B. and materially deficient, causing it to make material errors in revenue recognition and lie to its own auditor. USAT’s internal control system failed to live up to the standards as set forth in the five elements of an internal control framework described above, and Defendants Herbert and Singh thus failed to maintain a proper tone and control awareness that focused on achieving consistent application of accounting policies and procedures and strict adherence to GAAP. The existence of these material weaknesses enabled the Defendants to recklessly or knowingly misstate USAT’s restated financial results, which Herbert and Singh certified in false SOX certifications. PLAINTIFFS’ CLASS ACTION ALLEGATIONS 207. Plaintiffs bring this action as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of 1) the Exchange Act Class, consisting of all those who purchased or otherwise acquired the publicly traded common stock of USAT during the Class Period, and 2) the Securities Act Subclass, including all those who purchased or otherwise acquired USAT common stock in the SPO; and were damaged upon the revelation of the alleged corrective disclosure. Excluded from the Exchange Act Class and Securities Act Subclass 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. 208. The members of the Exchange Act Class and the Securities Act Subclass are so numerous that joinder of all members is impracticable. Throughout the Class Period, the Company’s securities were actively traded on NASDAQ. The Company sold over 5.5 million shares of USAT stock in the SPO. While the exact number of Class members is unknown to Plaintiffs at this time and can be ascertained only through appropriate discovery, Plaintiffs believe that there are hundreds or thousands of members in the proposed Exchange Act Class and the Securities Act Subclass. Record owners and other members of the Exchange Act Class and the Securities Act Subclass 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. 209. Plaintiffs’ claims are typical of the claims of the members of the Exchange Act Class and the UPR Retirement Fund’s claims are typical of the claims of members of the Securities Act Subclass as all members of the Exchange Act Class and the Securities Act Subclass, respectively, are similarly affected by Defendants’ wrongful conduct in violation of federal law that is complained of herein. 210. Plaintiffs will fairly and adequately protect the interests of the members of the Exchange Act Class and the Securities Act Subclass and have retained counsel competent and experienced in class and securities litigation. Plaintiffs have no interests antagonistic to or in conflict with those of the Exchange Act Class and the Securities Act Subclass. 211. Common questions of law and fact exist as to all members of the Exchange Act Class and the Securities Act Subclass predominate over any questions solely affecting individual members of the Exchange Act Class and the Securities Act Subclass. Among the questions of law and fact common to the Exchange Act Class and the Securities Act Subclass 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 (unique to the Exchange Act claim); (f) whether the prices of the Company’s common stock during the Class Period was artificially inflated because of the Defendants’ conduct complained of herein; (g) whether the Offering Documents were false and misleading; and (h) whether the members of the Exchange Act Class and the Securities Act Subclass have sustained damages and, if so, what is the proper measure of damages. 212. 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 Exchange Act Class and the Securities Act Subclass members may be relatively small, the expense and burden of individual litigation make it impossible for members of the Exchange Act Class and the Securities Act Subclass to individually redress the wrongs done to them. There will be no difficulty in the management of this action as a class action. 213. Exchange Act Class Plaintiffs 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 NASDAQ, 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; Plaintiffs 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 214. Based upon the foregoing, Plaintiffs and the members of the Exchange Act Class are entitled to a presumption of reliance upon the integrity of the market. 215. Alternatively, Plaintiffs and the members of the Exchange Act 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 USAT and the Officer Defendants 216. Plaintiffs repeat and reallege each and every allegation contained above as if fully set forth herein. 217. This Count is asserted against the Company and the Officer 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. 218. During the Class Period, the Company and the Officer 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. 219. The Company and the Officer 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 Plaintiffs and others similarly situated in connection with their purchases of the Company’s securities during the Class Period. 220. The Company and the Officer 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. 221. The Officer Defendants, who were 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 Plaintiffs 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 Plaintiffs and the Class. 222. 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 Officer Defendants’ statements, Plaintiffs 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 Officer Defendants’ false and misleading statements. 223. Had Plaintiffs 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 Officer Defendants’ misleading statements and by the material adverse information which the Company and the Officer Defendants did not disclose, they would not have purchased the Company’s securities at the artificially inflated prices that they did, or at all. 224. As a result of the wrongful conduct alleged herein, Plaintiffs and other members of the Class have suffered damages in an amount to be established at trial. 225. By reason of the foregoing, the Company and the Officer Defendants have violated Section 10(b) of the 1934 Act and Rule 10b-5 promulgated thereunder and are liable to the Plaintiffs 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 Officer Defendants 226. Plaintiffs repeat and reallege each and every allegation contained in the foregoing paragraphs as if fully set forth herein. 227. During the Class Period, the Officer 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. 228. As officers and/or directors of a publicly owned company, the Officer 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. 229. Because of their positions of control and authority as senior officers, the Officer 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 Officer Defendants exercised their power and authority to cause the Company to engage in the wrongful acts complained of herein. The Officer 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. 230. Each of the Officer 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 Officer 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 Officer 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 Plaintiffs and the other members of the Class complain. 231. By reason of the above conduct, the Officer Defendants are liable pursuant to Section 20(a) of the Exchange Act for the violations committed by the Company. COUNT III Violation of Section 11 of the Securities Act Against All Defendants 232. Plaintiffs repeat and reallege each and every allegation contained above as if fully set forth herein, except that his Count III disclaims any allegations of fraudulent intent. Section 11 is a strict liability statute, subject only to affirmative defenses. 233. This Count is asserted against all Defendants on behalf of all persons who purchased shares of the Company’s common stock pursuant to the Company’s SPO, in which shares registered under the Registration Statement were sold, and is based upon Section 11 of the Securities Act. 15 U.S.C. §77k. 234. The Registration Statement was inaccurate and misleading, as described in detail above. 235. The Company is the issuer of the securities and as such is strictly liable for the material misstatements and omissions contained in the Registration Statement. 236. The Individual Defendants each signed the Registration Statement or authorized the signing of the Registration Statement on their behalf, and are therefore liable for the misrepresentations and omissions contained therein and the failure of the Registration Statement to be complete and accurate. 237. The Underwriter Defendants each served as underwriters in connection with the SPO, which was conducted pursuant to the Registration Statement. As such, each is liable for the misrepresentations and omissions contained in the Registration Statement and the failure of the Registration Statement to be complete and accurate. 238. By reason of the conduct alleged, each of the Defendants violated Section 11 of the Securities Act. 239. The UPR Retirement System and members of the Securities Act Subclass acquired USAT common stock pursuant to the Registration Statement used for the SPO, and, at the time of their purchases, were without knowledge of the wrongful conduct alleged herein. This claim has been brought within one year of the discovery of the untrue statements and omissions and within three years of the date of the offering. 240. The UPR Retirement System and the Securities Act Subclass are entitled to damages under Section 11 as measured by the provisions of Section 11(e). COUNT IV Violation of Section 12(a)(2) of the Securities Act Against USAT, the Officer Defendants, and the Underwriter Defendants 241. Plaintiffs repeat and reallege each and every allegation contained above as if fully set forth herein. 242. This Count IV disclaims any allegations of fraudulent intent. Section 11 is a strict liability statute, subject only to affirmative defenses. 243. This Count is brought by the UPR Retirement System, on behalf of all persons who purchased shares of USAT common stock pursuant to the SPO, against USAT, the Officer Defendants and the Underwriter Defendants, and is based on Section 12(a)(2) of the Securities Act. 15 U.S.C. §77l. 244. By means of the Offering Documents, USAT, the Officer Defendants, and the Underwriter Defendants promoted and sold USAT common stock in the SPO, and therefore is liable under Section 12(a)(2) for the misrepresentations and omissions contained in the Offering Documents. 245. At the time of their purchases, the UPR Retirement System and the Securities Act Subclass did not know, nor in the exercise of due diligence could have known, of the material misstatements and omissions in the Offering Documents. 246. The UPR Retirement System and other members of the Securities Act Subclass who purchased USAT stock pursuant to the Offering Documents sustained substantial damages as a direct and proximate result of violations of Section 12(a)(2). 247. Accordingly, members of the Securities Act Subclass who hold common stock issued pursuant to the Offering Documents have the right to rescind and recover the consideration paid for their shares, or to recover rescissory or other damages to the maximum extent permitted by law, and hereby tender (to the extent tender is required) their shares. Securities Act Subclass members who have sold their common stock seek damages to the maximum extent permitted by law. COUNT V Violation of Section 15 of the Securities Act Against the Individual Defendants 248. Plaintiffs repeat and reallege each and every allegation contained above as if fully set forth herein. 249. This Count is asserted against the Individual Defendants and is based upon Section 15 of the Securities Act. 15 U.S.C. §77o. 250. The Individual Defendants, by virtue of their positions as senior officers or directors of the Company, were, at the time of the wrongs alleged herein, controlling persons of USAT within the meaning of Section 15 of the Securities Act. The Individual Defendants had the power and influence and exercised the same to cause USAT to engage in the acts described herein. 251. The Individual Defendants’ positions made them privy to the material facts concealed from Plaintiffs and the Securities Act Subclass. 252. By virtue of the conduct alleged herein, the Individual Defendants are liable as control persons for the violations of Section 11 by the persons they controlled, as alleged in Count III. 253. Each of the Individual Defendants is liable to the UPR Retirement System and the Securities Act Subclass for damages suffered as a result of the Securities Act violations of the persons they controlled. PRAYER FOR RELIEF WHEREFORE, Plaintiffs demand 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 Plaintiffs as the Class representatives; B. Requiring Defendants to pay damages sustained by Plaintiffs and the Exchange Act Class and the Securities Act Subclass by reason of the acts and transactions alleged herein; C. Awarding Plaintiffs 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 Plaintiffs hereby demand a trial by jury. Dated: November 20, 2019 Respectfully submitted, THE ROSEN LAW FIRM, P.A. By: /s/ Jacob A. Goldberg Jacob A. Goldberg Leah Heifetz-Li 101 Greenwood Avenue Suite 440 Jenkintown, PA 19046 Tel: (215) 600-2817 Fax: (212) 202-3827 Phillip Kim (admitted pro hac vice) 275 Madison Avenue 40th Floor New York, NY 10016 Tel: (212) 686-1060 Fax: (212) 202-3827 Lead Counsel WOLF POPPER LLP By: /s/ Robert C. Finkel Robert C. Finkel (admitted pro hac vice) 845 Third Avenue New York, NY 10022 Tel: (212) 759-4600 Fax: (212) 486-2093 Counsel for Securities Act Subclass CERTIFICATE OF SERVICE I hereby certify that on this 20th day of November 2019, I caused a true and correct copy of the foregoing CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS, to be served by CM/ECF to the parties registered to the Court’s CM/ECF system. /s/ Jacob A. Goldberg   EXHIBIT 1 The individual or institution listed below (the “Plaintiff”) authorizes the Rosen Law Firm, P.A. to file an action or amend a current action under the federal securities laws to recover damages and to seek other relief against USA Technologies, Inc. (“USAT”), and their current and former officers, and others in connection with the purchase and sale of securities issued by USAT. Plaintiff declares, as to the claims asserted under the federal securities laws, that: 1. I have reviewed a complaint against USAT and certain of their officers and directors and I authorize The Rosen Law Firm, PA to file a lead plaintiff motion on my behalf. 2. I did not engage in transactions in the securities that are the subject of this action at the direction of plaintiff’s counsel or in order to participate in this or any other litigation under the securities laws of the United States. 3. I am willing to serve as a lead plaintiff either individually or as part of a group. A lead plaintiff is a representative party who acts on behalf of other class members in directing the action, and whose duties may include testifying at deposition and trial. 4. The following is a list of all of the purchases and sales I have made in USAT securities during the Class Period set forth in the complaint. I have made no transactions during the class period in the securities that are the subject of this lawsuit except those set forth below. See schedule A 5. I have not, within the three years preceding the date of this certification, sought to serve or served as a representative party on behalf of a class in an action involving alleged violations of the federal securities laws, except: for the following company(ies): 6. I will not accept any payment for serving as a representative party beyond my pro rata share of any recovery, except reasonable costs and expenses, such as travel expenses and lost wages directly related to the class representation, as ordered or approved by the court pursuant to law. I declare under penalty of perjury that the foregoing is true and correct. Executed this ���������� Day __________________. In DocuSigned by: L~9B~~~ Signature: _________________ Name: Peter Farsaci SCHEDULE A PETER FARSACI CLASS PERIOD TRANSACTIONS PURCHASES SALES DATE SHARES PRICE DATE SHARES PRICE 9/11/2017 100 ($5.30) 9/15/2017 10000 $5.46 9/11/2017 185 ($5.30) 9/21/2017 10000 $5.46 9/11/2017 100 ($5.30) 10/20/2017 100 $6.35 9/11/2017 300 ($5.30) 10/20/2017 100 $6.35 9/11/2017 300 ($5.30) 10/20/2017 100 $6.35 9/11/2017 200 ($5.30) 10/20/2017 30 $6.35 9/11/2017 100 ($5.30) 10/20/2017 70 $6.35 9/11/2017 100 ($5.30) 10/20/2017 100 $6.35 9/11/2017 100 ($5.30) 10/20/2017 300 $6.35 9/11/2017 100 ($5.30) 10/20/2017 100 $6.35 9/11/2017 100 ($5.30) 10/20/2017 100 $6.35 9/11/2017 100 ($5.30) 10/20/2017 100 $6.33 9/11/2017 100 ($5.30) 10/20/2017 90 $6.33 9/11/2017 100 ($5.30) 10/20/2017 10 $6.33 9/11/2017 5800 ($5.35) 10/20/2017 90 $6.33 9/11/2017 200 ($5.30) 10/20/2017 80 $6.33 9/11/2017 52 ($5.30) 10/20/2017 20 $6.33 9/11/2017 200 ($5.30) 10/20/2017 100 $6.33 9/11/2017 300 ($5.30) 10/20/2017 100 $6.33 9/11/2017 163 ($5.30) 10/20/2017 100 $6.33 9/11/2017 200 ($5.30) 10/20/2017 100 $6.33 9/11/2017 300 ($5.30) 10/20/2017 100 $6.30 9/11/2017 300 ($5.30) 10/20/2017 110 $6.30 9/11/2017 300 ($5.30) 10/20/2017 190 $6.30 9/11/2017 100 ($5.30) 10/20/2017 100 $6.30 9/20/2017 1900 ($5.33) 10/20/2017 400 $6.30 9/20/2017 1700 ($5.32) 10/20/2017 100 $6.30 9/20/2017 1900 ($5.32) 10/20/2017 100 $6.30 9/20/2017 4500 ($5.32) 10/20/2017 300 $6.30 10/19/2017 10000 ($6.24) 10/20/2017 400 $6.30 10/23/2017 10000 ($6.24) 10/20/2017 400 $6.30 11/2/2017 100 ($6.23) 10/20/2017 10 $6.30 11/2/2017 198 ($6.25) 10/20/2017 70 $6.30 11/2/2017 102 ($6.25) 10/20/2017 100 $6.30 11/2/2017 183 ($6.25) 10/20/2017 66 $6.30 11/2/2017 350 ($6.25) 10/20/2017 100 $6.30 11/2/2017 336 ($6.25) 10/20/2017 100 $6.30 11/2/2017 211 ($6.25) 10/20/2017 200 $6.30 11/2/2017 111 ($6.25) 10/20/2017 5057 $6.25 11/2/2017 69 ($6.25) 10/31/2017 10000 $6.41 11/2/2017 239 ($6.25) 11/2/2017 10000 $6.40 11/2/2017 121 ($6.25) 11/30/2017 10000 $8.61 11/2/2017 174 ($6.25) 12/7/2017 10000 $8.66 11/2/2017 283 ($6.25) 12/12/2017 10000 $8.75 11/2/2017 173 ($6.25) 12/12/2017 10000 $8.96 11/2/2017 98 ($6.25) 12/12/2017 100 $8.88 11/2/2017 260 ($6.25) 12/12/2017 100 $8.86 11/2/2017 2 ($6.25) 12/12/2017 100 $8.86 11/2/2017 247 ($6.25) 12/12/2017 100 $8.86 11/2/2017 239 ($6.25) 12/12/2017 300 $8.86 11/2/2017 54 ($6.25) 12/12/2017 100 $8.86 11/2/2017 36 ($6.25) 12/12/2017 100 $8.86 11/2/2017 100 ($6.25) 12/12/2017 200 $8.86 11/2/2017 39 ($6.25) 12/12/2017 100 $8.86 11/2/2017 5299 ($6.24) 12/12/2017 100 $8.86 11/2/2017 100 ($6.23) 12/12/2017 100 $8.86 11/2/2017 62 ($6.23) 12/12/2017 100 $8.86 11/2/2017 100 ($6.23) 12/12/2017 100 $8.86 11/2/2017 100 ($6.23) 12/12/2017 200 $8.86 11/2/2017 53 ($6.25) 12/12/2017 100 $8.86 11/2/2017 100 ($6.23) 12/12/2017 100 $8.86 11/29/2017 100 ($8.38) 12/12/2017 96 $8.86 11/29/2017 400 ($8.40) 12/12/2017 100 $8.86 11/29/2017 100 ($8.40) 12/12/2017 100 $8.86 11/29/2017 100 ($8.40) 12/12/2017 100 $8.86 11/29/2017 100 ($8.40) 12/12/2017 100 $8.83 11/29/2017 100 ($8.40) 12/12/2017 7504 $8.81 11/29/2017 100 ($8.40) 12/18/2017 10000 $9.46 11/29/2017 100 ($8.40) 12/18/2017 10000 $9.66 11/29/2017 100 ($8.40) 12/26/2017 10000 $9.61 11/29/2017 20 ($8.40) 1/5/2018 10000 $9.66 11/29/2017 100 ($8.40) 1/16/2018 10000 $9.60 11/29/2017 100 ($8.40) 1/16/2018 10000 $9.55 11/29/2017 100 ($8.40) 1/24/2018 100 $8.65 11/29/2017 500 ($8.43) 1/24/2018 400 $8.65 11/29/2017 400 ($8.43) 1/24/2018 400 $8.65 11/29/2017 400 ($8.43) 1/24/2018 100 $8.60 11/29/2017 300 ($8.43) 1/24/2018 100 $8.60 11/29/2017 400 ($8.43) 1/24/2018 100 $8.60 11/29/2017 100 ($8.43) 1/24/2018 100 $8.60 11/29/2017 100 ($8.43) 1/24/2018 100 $8.60 11/29/2017 300 ($8.43) 1/24/2018 100 $8.60 11/29/2017 300 ($8.43) 1/24/2018 100 $8.60 11/29/2017 3767 ($8.45) 1/24/2018 400 $8.60 11/29/2017 1280 ($8.44) 1/24/2018 100 $8.60 12/1/2017 100 ($8.45) 1/24/2018 100 $8.65 12/1/2017 100 ($8.45) 1/24/2018 1 $8.65 12/1/2017 100 ($8.45) 1/24/2018 100 $8.60 12/1/2017 100 ($8.45) 1/24/2018 100 $8.60 12/1/2017 200 ($8.45) 1/24/2018 700 $8.60 12/1/2017 100 ($8.45) 1/24/2018 100 $8.60 12/1/2017 100 ($8.45) 1/24/2018 200 $8.60 12/1/2017 100 ($8.45) 1/24/2018 99 $8.60 12/1/2017 100 ($8.45) 1/24/2018 100 $8.60 12/1/2017 100 ($8.45) 1/24/2018 300 $8.60 12/1/2017 2000 ($8.48) 1/24/2018 100 $8.60 12/1/2017 100 ($8.50) 1/24/2018 100 $8.60 12/1/2017 100 ($8.50) 1/24/2018 400 $8.60 12/1/2017 200 ($8.50) 1/24/2018 100 $8.60 12/1/2017 100 ($8.50) 1/24/2018 100 $8.60 12/1/2017 100 ($8.50) 1/24/2018 100 $8.60 12/1/2017 17 ($8.50) 1/24/2018 100 $8.60 12/1/2017 100 ($8.50) 1/24/2018 100 $8.60 12/1/2017 500 ($8.50) 1/24/2018 100 $8.75 12/1/2017 100 ($8.50) 1/24/2018 9 $8.65 12/1/2017 400 ($8.50) 1/24/2018 100 $8.75 12/1/2017 100 ($8.50) 1/24/2018 100 $8.65 12/1/2017 100 ($8.50) 1/24/2018 100 $8.75 12/1/2017 83 ($8.50) 1/24/2018 100 $8.66 12/1/2017 100 ($8.50) 1/24/2018 599 $8.75 12/1/2017 100 ($8.50) 1/24/2018 100 $8.65 12/1/2017 100 ($8.50) 1/24/2018 100 $8.78 12/1/2017 100 ($8.50) 1/24/2018 300 $8.65 12/1/2017 100 ($8.50) 1/24/2018 100 $8.75 12/1/2017 100 ($8.50) 1/24/2018 100 $8.65 12/1/2017 200 ($8.50) 1/24/2018 100 $8.75 12/1/2017 100 ($8.50) 1/24/2018 100 $8.65 12/1/2017 100 ($8.50) 1/24/2018 100 $8.75 12/1/2017 100 ($8.50) 1/24/2018 100 $8.65 12/1/2017 100 ($8.50) 1/24/2018 400 $8.75 12/1/2017 100 ($8.50) 1/24/2018 100 $8.65 12/1/2017 100 ($8.50) 1/24/2018 100 $8.75 12/1/2017 100 ($8.50) 1/24/2018 800 $8.66 12/1/2017 100 ($8.50) 1/24/2018 800 $8.75 12/1/2017 100 ($8.50) 1/24/2018 900 $8.65 12/1/2017 2900 ($8.55) 1/24/2018 20500 $8.66 12/26/2017 10000 ($9.44) 1/24/2018 100 $8.65 1/4/2018 10000 ($9.44) 1/24/2018 100 $8.65 1/8/2018 10000 ($9.45) 1/24/2018 100 $8.65 1/9/2018 10000 ($9.24) 1/24/2018 191 $8.65 1/10/2018 10000 ($9.09) 1/24/2018 300 $8.65 1/16/2018 10000 ($9.34) 1/24/2018 100 $8.65 1/18/2018 10000 ($9.20) 1/24/2018 100 $8.65 1/23/2018 10000 ($9.04) 1/24/2018 100 $8.75 1/25/2018 10000 ($8.74) 1/24/2018 100 $8.78 3/16/2018 10000 ($9.44) 1/24/2018 1 $8.75 3/19/2018 10000 ($9.45) 1/24/2018 100 $8.78 3/20/2018 1000 ($9.45) 1/24/2018 100 $8.75 3/22/2018 10000 ($9.45) 1/24/2018 1 $8.70 3/23/2018 10000 ($9.09) 1/24/2018 100 $8.75 3/28/2018 10000 ($8.99) 1/24/2018 100 $8.70 4/2/2018 10000 ($8.84) 1/24/2018 100 $8.75 4/19/2018 800 ($9.20) 1/24/2018 100 $8.70 4/19/2018 2000 ($9.20) 1/24/2018 200 $8.75 4/19/2018 2300 ($9.19) 1/24/2018 400 $8.70 4/19/2018 4900 ($9.18) 1/24/2018 500 $8.75 4/20/2018 10000 ($9.05) 1/24/2018 1000 $8.66 4/24/2018 10000 ($8.60) 1/24/2018 400 $8.75 5/14/2018 10000 ($11.89) 1/24/2018 1000 $8.66 6/22/2018 10000 ($13.39) 1/24/2018 100 $8.75 7/24/2018 9700 ($14.95) 1/24/2018 100 $8.65 7/24/2018 300 ($14.90) 1/24/2018 100 $8.75 7/24/2018 2387 ($14.80) 1/24/2018 100 $8.65 7/24/2018 4500 ($14.75) 1/24/2018 100 $8.75 7/24/2018 2900 ($14.70) 1/24/2018 100 $8.65 7/24/2018 213 ($14.65) 1/24/2018 12790 $8.56 9/5/2018 10000 ($15.84) 2/5/2018 150 $7.71 9/25/2018 1000 ($15.52) 2/5/2018 30 $7.80 2/5/2018 200 $7.70 2/5/2018 100 $7.80 2/5/2018 200 $7.71 2/5/2018 200 $7.80 2/5/2018 100 $7.80 2/5/2018 300 $7.80 2/5/2018 400 $7.80 2/5/2018 100 $7.80 2/5/2018 200 $7.80 2/5/2018 200 $7.80 2/5/2018 100 $7.80 2/5/2018 100 $7.80 2/5/2018 200 $7.80 2/5/2018 200 $7.80 2/5/2018 400 $7.80 2/5/2018 100 $7.80 2/5/2018 100 $7.80 2/5/2018 100 $7.75 2/5/2018 200 $7.90 2/5/2018 100 $7.75 2/5/2018 100 $7.90 2/5/2018 300 $7.90 2/5/2018 100 $7.80 2/5/2018 100 $7.80 2/5/2018 2915 $7.76 2/5/2018 100 $7.75 2/5/2018 100 $7.90 2/5/2018 100 $7.75 2/5/2018 100 $7.90 2/5/2018 100 $7.75 2/5/2018 200 $7.85 2/5/2018 200 $7.75 2/5/2018 200 $7.85 2/5/2018 250 $7.75 2/5/2018 200 $7.85 2/5/2018 100 $7.75 2/5/2018 100 $7.80 2/5/2018 100 $7.70 2/5/2018 1715 $7.80 2/5/2018 400 $7.70 2/5/2018 740 $7.80 2/8/2018 10000 $9.61 2/8/2018 10000 $9.56 3/16/2018 10000 $9.60 3/20/2018 10000 $9.66 3/21/2018 10000 $9.70 4/18/2018 10000 $9.31 5/7/2018 9000 $9.66 5/8/2018 10000 $9.96 6/28/2018 10000 $13.76 9/21/2018 10000 $9.86 9/21/2018 10000 $9.41 9/21/2018 20000 $9.76 9/21/2018 20000 $9.70 9/21/2018 10000 $9.51 9/21/2018 10000 $9.41 9/25/2018 15000 $8.26 9/25/2018 1000 $8.36 9/26/2018 15000 $8.16 9/26/2018 10000 $8.16 CERTIFICATE OF SERVICE I hereby certify that on this 20th day of November 2019, I caused a true and correct copy of the foregoing CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE FEDE CURITIES LAWS, FILED NOV 2 0 /01Q ~~ ,

securities

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Todd M. Friedman (SBN 216752) Nicholas J. Bontrager (SBN 252114) Arvin Rantanavongse (SBN 257619) LAW OFFICES OF TODD M. FRIEDMAN, P.C. 369 S. Doheny Dr., #415 Beverly Hills, CA 90211 Phone: 877-206-4741 Fax: 866-633-0228 tfriedman@attorneysforconsumers.com nbontrager@attorneysforconsumers.com arantanavongse@toddflaw.com L. Paul Mankin, IV (SBN 264038) Law Offices of L. Paul Mankin, IV 8730 Wilshire Blvd, Suite 310 Beverly Hills, CA 90211 Phone: 800-219-3577 Fax: 866-633-0228 pmankin@paulmankin.com (Additional attorneys listed on signature page) Attorneys for Plaintiff UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA MIKE ESPOSITO, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, Case No. CLASS ACTION COMPLAINT FOR VIOLATIONS OF: Plaintiff, vs. AMSHER COLLECTION SERVICES INC., AND DOES 1 THROUGH 10, INCLUSIVE, AND EACH OF THEM, Defendants. 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, MIKE ESPOSITO (“Plaintiff”), on behalf of himself 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 himself and others similarly situated seeking damages and any other available legal or equitable remedies resulting from the illegal actions of AMSHER COLLECTION 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 Sacramento, 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 and State of Incorporation in Alabama state. 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 Eastern 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 Sacramento. PARTIES 4. Plaintiff, MIKE ESPOSITO (“Plaintiff”), is a natural person residing in California and is a “person” as defined by 47 U.S.C. § 153 (10). 5. Defendant, AMSHER COLLECTION SERVICES INC., (“Defendant”), is a leader in the consumer debt recovery industry and is a “person” as defined by 47 U.S.C. § 153 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. On or about December 2013, Plaintiff began receiving automated telephone messages from Defendant from phone number 877-322-9724. 9. In addition Plaintiff received calls from Defendant on December 16, 2013 at 8:24 am, 9:33 am, 12:16 pm, 1:42 pm, and 1:51 pm. 10. The 1-800-527-5717 phone number in reference above belongs to Defendant, AMSHER COLLECTION SERVICES INC. 11. Plaintiff repeatedly asked Defendant to cease any communication with him. 12. Defendant contacted Plaintiff at least 10 times in one week. 13. 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 Plaintiff. 14. Defendant’s calls constituted calls that were not for emergency purposes as defined by 47 U.S.C. § 227(b) (1) (A). 15. 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). 16. Defendant never received Plaintiff’s “prior express consent” to receive calls using an automatic telephone dialing system or an artificial or prerecorded voice on his cellular telephone pursuant to 47 U.S.C. § 227(b)(1)(A). CLASS ALLEGATIONS 17. Plaintiff brings this action on behalf of himself 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 telephone call/s from Defendant or its agent/s and/or employee/s to said person’s cellular telephone made through the use of any automatic telephone dialing system or with an artificial or prerecorded voice within the four years prior to the filling of the Complaint. 18. Plaintiff represents, and is a member of, The Class, consisting of All persons within the United States who received any collection telephone call 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. 19. 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. 20. 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. 21. 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. 22. 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 or an artificial or prerecorded voice 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. 23. As a person that received numerous collection 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. 24. 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. 25. A class action is superior to other available methods of fair and efficient adjudication of the 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. 26. 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 this 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. 27. 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. 28. Plaintiff repeats and incorporates by reference into this cause of action the allegations set forth above at Paragraphs 1-33. 29. 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. 30. 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). 31. 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) 32. Plaintiff repeats and incorporates by reference into this cause of action the allegations set forth above at Paragraphs 1-37. 33. 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. 34. 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). 35. 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. Respectfully Submitted this 10th Day of March, 2014. LAW OFFICES OF TODD M. FRIEDMAN, P.C. By: /s/ Todd M. Friedman Todd M. Friedman, Esq. Law Offices of Todd M. Friedman Attorneys for Plaintiff tfriedman@attorneysforconsumers.com KAZEROUNI LAW GROUP, APC Abbas Kazerounian, Esq. (SBN: 249203) ak@kazlg.com 245 Fischer Avenue, Unit D1 Costa Mesa, CA 92626 Telephone: (800) 400-6808 Facsimile: (800) 520-5523 HYDE & SWIGART Joshua B. Swigart, Esq. (SBN: 225557) josh@westcoastlitigation.com 411 Camino Del Rio South, Suite 301 San Diego, CA 92108 Telephone: (619) 233-7770 Facsimile: (619) 297-1022 Attorneys for Plaintiff

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK MONIQUE DA SILVA MOORE, ) MARYELLEN O’DONOHUE, ) LAURIE MAYERS, HEATHER ) PIERCE, KATHERINE WILKINSON ) and ZANETA HUBBARD on behalf of ) themselves and all others similarly ) situated, ) SECOND AMENDED CLASS ) AND COLLECTIVE ACTION PLAINTIFFS, ) COMPLAINT ) ) Civ No. 11-CV-1279 (ALC) (AJP) ) v. ) JURY TRIAL DEMANDED ) PUBLICIS GROUPE SA, and ) MSLGROUP, ) ) DEFENDANTS. ) ____________________________________) Plaintiffs Monique da Silva Moore, MaryEllen O’Donohue, Laurie Mayers, Heather Pierce, Katherine Wilkinson, and Zaneta Hubbard (“Named Plaintiffs” or “Plaintiffs”), by and through their attorneys Sanford Wittels & Heisler, LLP, bring this action in their individual capacities and on behalf of a class of women defined below against Defendants Publicis Groupe SA (“Publicis”) and MSLGroup (“MSL”), (collectively “the Company” or “Defendants”). Plaintiffs allege upon knowledge as to themselves and their own acts, and otherwise upon information and belief, as follows: INTRODUCTION 1. Publicis is one of the world’s “big four” advertising conglomerates. With a public relations (“PR”) practice spanning 104 countries on five continents, Publicis sets the standards in a majority-female industry where women remain a rarity at the highest levels of management. 2. Like nearly every agency in the PR industry, Publicis employs a predominantly female workforce. Of the 45,000 PR professionals employed by the world’s third largest advertising and media conglomerate, women account for approximately 70 percent of the staff and men account for only 30 percent. 3. “Viva La Difference!” celebrates the slogan in Publicis’s diversity program. For women employed at Publicis, there may be a “La Difference” but it gives them nothing to “Viva” about. A gender hierarchy haunts Publicis; and the Company’s diversity program announces it explicitly: “every employee – both male and female – has his or her place . . . .” This sentence captures the essence of how Publicis treats its women. All employees have their place: males come before females. A Publicis woman’s place is in the back of the line, far removed from senior management positions, almost all of which are reserved for the men. 4. While Publicis funnels women into entry level rank-and-file positions at a disproportionate rate, these female PR employees rarely break through the glass ceiling at any agency in the conglomerate. Men dominate the senior management ranks throughout Publicis worldwide. 5. From Publicis’s Management Board to MSLGroup Americas (“MSL Americas”) – the Company’s PR network in the United States – Publicis reserves positions of power and influence for men. Only men serve on Publicis’s 5-member Management Board, known as the “Directoire,” and only two women are members of Publicis’s 13-member Executive Board, the “P12.” 6. Publicis’s glass ceiling might as well be a cement wall. Gender discrimination permeates Publicis’s entire PR practice. Only two women are part of the MSL leadership team worldwide and only one female sits on the senior management team of MSL Americas in the United States. 7. Across Publicis’s PR practice, upon information and belief, women hold approximately 15 percent of leadership positions compared to 75 percent of staff positions. 8. Publicis’s lack of women in leadership positions and key decision-making roles reflects its systemic, company-wide gender discrimination against female PR employees like Plaintiffs. Such gender discrimination includes: (1) paying Plaintiffs and other female PR employees less than similarly-situated male employees; (2) failing to promote or advance Plaintiffs and other female PR employees at the same rate as similarly-situated male employees; (3) treating pregnant employees and mothers differently from non-pregnant employees, male employees, and non-caregivers; (4) failing to prevent, respond to, adequately investigate, and/or appropriately resolve instances of gender discrimination, sexual harassment, and pregnancy/caregiver discrimination in the workplace; and (5) carrying out discriminatory hires, terminations, demotions, and/or job reassignments based on gender when the Company reorganized its PR practice and management structure beginning in 2008, including wrongfully terminating Plaintiff da Silva Moore immediately following her return from maternity leave after thirteen years of exemplary employment with the Company. OVERVIEW OF THE CLASS-WIDE GENDER DISCRIMINATION AT PUBLICIS Publicis’s Male Management Team 9. When identifying the “number of women in senior management positions” in its 2009 Corporate Social Responsibility Report, Publicis actually refers to its “Management Board” which is “composed of 5 men.” Ignoring its underrepresentation of women in management, Publicis admits that its “agencies have already had discrimination claims brought against them (especially in the USA).”1 10. At the top of the Publicis hierarchy is the “Management Board.”2 Its all- male members include Maurice Levy, Chief Executive Officer (“CEO”) of Publicis; Kevin Roberts, CEO of Saatchi & Saatchi Worldwide; Jack Klues, CEO of Vivaki; Jean- Yves Naouri, Chief Operating Officer (“COO”) of Publicis; and Jean-Michel Etienne, Executive Vice President (“EVP”) and Chief Financial Officer (“CFO”) of Publicis. 11. These five men also sit on Publicis’s “P12” Executive Board, made up of 13 members, including only two women (15%).3 The “P12” represent the leaders of the conglomerate. Women have never had a real presence on the “P12” despite the predominately female staff working under it. 12. One of the male members of “P12,” Publicis CEO Levy, appointed another male “P12” member, Senior Vice President and General Secretary of Publicis Mathias Emmerich, to run 1 Publicis Groupe 2009 Social Responsibility Report at 6, 15 http://www.publicisgroupe.com/media/display/id/2924.pdf. 2 http://www.publicisgroupe.com/#/en/group/governance/management-board. 3 Publicis Groupe 2009 Social Responsibility Report at 6, http://www.publicisgroupe.com/media/display/id/2924.pdf. Publicis General Secretary Emmerich makes employment decisions for Publicis worldwide along with Publicis CFO Etienne. 13. Publicis CEO Levy also appointed another male “P12” member, Olivier Fleurot, to run Publicis’s PR practice worldwide. Under the brand “MSLGroup,” CEO Fleurot heads a consolidated network of PR agencies under the Publicis umbrella. MSL’s Male Executive Team 14. Like its male-led parent, MSL is run by men. MSL CEO Fleurot created one centralized leadership team of nearly all male members immediately after taking the helm of the newly formed PR network in July 2009. CEO Fleurot’s PR leadership team is divided into three levels: the Officers, the Presidents, and the Directors. At the top is the Officer level, which included two males with work experience at other Publicis subsidiaries: Pascal Beucler, Chief Strategy Officer and Peter Miller, CFO, who works out of New York. Under CEO Fleurot’s leadership, four males were appointed to the middle Presidents level: Fabrice Fries, President of France; Anders Kempe, President of Europe; Glenn Osaki, President of Asia; and Jim Tsokanos, President of the Americas, who also works out of New York. The Presidents level also excluded women. 15. The only level of CEO Fleurot’s PR leadership team with any female representation was initially the bottom level, Director – a level which, unsurprisingly, has no males. At that level, two females, Sophie Martin-Chantepie, HR Director; and Trudi Harris, Communication Director; were able to “join” the team. Since “joining,” it is unclear whether Ms. Martin-Chantepie and Ms. Harris still hold Director titles.4 4 On its webpage, MSLGroup labels Sophie Martin-Chantepie and Trudi Harris as “Officers” on its leadership team; however, when describing both women’s positions in their bios on the same webpage, the Company states that they are Directors. No male on the leadership team has a similar discrepancy in their position description on the webpage. http://www.mslgroup.com/support/about-us.aspx Regardless, these women hold support roles (e.g., HR and communications) without significant decision-making authority on the team. MSL Americas’s Male Executive Team 16. In the United States, Publicis and MSL operate their public relations practice through MSLGroup Americas (“MSL Americas”), which is also run by men. One of the members of CEO Fleurot’s management team, Jim Tsokanos, is the President of MSL Americas. 17. Like CEO Fleurot, President Tsokanos created a nearly all-male regional organizational team in 2008 to lead approximately 1,000 PR employees working across the United States. To head the South region, President Tsokanos selected Robert Baskin. In 2008, he also hired Joel Curran to head the Midwest region and Neil Dhillon to head the Mid-Atlantic region. In 2009, President Tsokanos hired Joseph Carberry to head the West region. Renee Wilson, the only woman on the U.S. team, oversees the Northeast region while working under the direct supervision of President Tsokanos at MSL Americas’s New York headquarters. Five Male Executives’ Unfettered Power Over Employment Decisions at MSL: Publicis’s Global Employment Manual: 18. From Publicis to MSL to MSL Americas, male-dominated executive leadership reigns with unfettered power through highly centralized employment policies. 20. For example, MSL Americas President Tsokanos must authorize all salary decisions for MSL employees in the United States. 21. Bonus decisions are also controlled by the same group of male executives. 22. Furthermore, determinations about individual annual bonuses must be made by 24. Although empowers a handful of Defendants’ male executives to decide salary increases, bonuses, and other decisions for thousands of public relations professionals worldwide, it fails to give any guidance or directives with regard to how that power should be wielded. Thus, Defendants fail to have a performance evaluation system that is designed and implemented to compensate, promote and terminate employees in a manner that is consistent, reliable and equitable. In addition, Defendants do not require that employment decisions made by the all male executives have any connection to an employee’s performance evaluation, or to the employee’s overall work-quality or contributions to the company. Without any neutral evaluative system in place, the power given to the all male executives, as set forth in results in decisions that have had an adverse impact on female PR professionals in the United States. The decisions made by these few individuals has also perpetuated systemic, company-wide gender discrimination against female PR employees at MSL. Publicis’s Global Hiring and Salary Freeze, and Exceptions to the Freeze (2008- 2011) 25. In October 2008, Publicis CEO Levy instituted a global hiring and salary freeze at MSL and its other worldwide subsidiaries. The freeze prohibited new hires and salary increases for existing employees, and continued at MSL Americas until 2011. 26. In practice, however, Publicis CEO Levy 10 Id. at 80. 28. Like policies, practices lacked the quality standards, controls, or implementation metrics that could ensure consistent, reliable, or equitable decisions that correlated with an employee’s overall quality or contributions to the Company. 29. For example, at or around the time of the freeze, CFO Etienne and General Secretary Emmerich approved MSL President Tsokanos’ request to hire his male regional leadership team, including Neil Dhillon in 2008, Joel Curran in 2008 and Joel Carberry in 2009, at salaries approximately above their female counterparts. At the same time, President Tsokanos demoted two high-performing female management employees in the Midwest. also approved MSL President Tsokanos’ request to while many high-performing female employees were told increases were prohibited. Indeed, Plaintiffs da Silva Moore, O’Donohue, Pierce, Wilkinson and Hubbard did not receive a salary increase during the freeze. 30. As a result of unchecked decision-making by male dominated leadership, the freeze had a disparate impact on female public relations professionals and perpetuated the systemic, company-wide gender discrimination against Defendants’ female PR employees in the United States. MSL’s Common Employment Policies and Practices and Centralized Decisionmaking 31. MSL’s policies mirror Publicis’s centralized policies. 32. President Tsokanos plays a key decisionmaking role under both and MSL’s policies. He has final approval over the major employment decisions for MSL employees in the United States, including hiring, termination, and compensation decisions. 33. For example, in 2008, when Tsokanos was promoted from Managing Director of New York to President of the Americas, he reorganized MSL’s PR practice in the United States into five regions: the Northeast, South, Mid-Atlantic, Midwest and West. He hired a predominantly male North American Leadership Team, eliminated predominantly female teams, dedicated resources to male dominated teams, and demoted several female managers. President Tsokanos was able to make these discriminatory decisions due to his largely unchecked authority. 34. MSL CFO Miller also plays a key decisionmaking role under both and MSL’s policies. For example, MSL Americas’s nationwide compensation policy mandates that 11 Vol. I, at 77. MSL’s CFO Miller also signs off on nearly every personnel action involving at MSL that is recorded in kept by Publicis subsidiary, Re:Sources.13 35. According to MSL’s compensation policy, President Tsokanos and CFO Miller are required to make salary decisions consistent with MSL’s salary structure, which 36. MSL’s salary bands are defined by For example, salary bands exist for the Atlanta, Boston, Chicago, Los Angeles, San Francisco, Seattle, New York, and Washington D.C. offices. Salary bands set pay ranges for each job title along the standard PR professional’s career progression: Account Associate, Assistant Account Executive, Account Executive, Senior Account Executive, Account Supervisor, Senior Account Supervisor, Vice President, and Senior Vice President. Salary bands for each job title are often identical across offices. 37. According to MSL’s policy, the salary bands are to allow for The policy, however, lacks any definitions of nor does it set quality standards, controls, or implementation metrics by which to measure these terms or by which to apply such Without definitions or standards, 12 MSLGroup Americas Guide at 1-4 (undated). 13 Re:Sources is a wholly owned subsidiary of Publicis Groupe with offices in New York. Re:Sources provides shared services such as payroll, technology and legal services to Publicis subsidiaries. 14 Id. at 1 (Industry wide surveys include ) compensation decisions do not correlate consistently and equitably with employees’ overall quality or contributions to the company. 38. MSL’s compensation policy also encourages Again, MSL’s compensation policy lacks any standards concerning or that would standardize and consistently apply such decisions. 39. Without any standards, the Company’s centralized, and mostly male, decisionmakers have made employment and compensation decisions that have had a disparate impact on female public relations professionals and have perpetuated systemic, company-wide gender discrimination against Defendants’ female PR employees in the United States. MSL’s Common Public Relations Professional Career Track 40. The job titles of MSL’s PR professional career track are consistent with those in the PR industry. Throughout the PR industry, entry-level PR positions include Account Associate, Assistant Account Executive, Account Executive and Senior Account Executive, who are responsible for day-to-day client contact and account management activities. Similarly at the mid-level, industry-wide positions include Account Supervisor and Senior Account Supervisor, who are primarily responsible for a part of a large account or all activities on several smaller accounts with minimal support from more senior management. Finally, management positions include Vice President and Senior Vice President, who are the management level ultimately responsible for a significant portion of a large account or all activities on several smaller accounts. 41. For each of MSL’s PR professional career track job titles, MSL has created a job description that sets out common job duties. These job descriptions by title, apply nationwide in every MSL office in the U.S. 42. Countless women have started on MSL’s standard career track and progressed with rave reviews, only to have their careers stopped short of the leadership ranks due to MSL’s glass ceiling. “That’s Just Jim. You Know How He Is”: MSL’s Deliberate Indifference to Discrimination in the Workplace 43. MSL has long been on notice regarding its company-wide gender discrimination, particularly with respect to President Tsokanos, but it has taken no steps to remedy it. 44. In 2002, a female PR professional submitted a written complaint against President Tsokanos (then Managing Director of the Atlanta office) stating : In response, Human Resources did nothing. 45. In 2003, another female PR professional employee submitted a written complaint against President Tsokanos stating: 46. President Tsokanos also regularly made comments about the appearance of his female subordinates during Managing Directors’ conference calls attended by Plaintiff da Silva Moore (while she was Managing Director of the Boston office). 47. Despite ongoing inappropriate conduct and complaints, Tsokanos was promoted to Executive Vice President and Managing Director of the Company’s largest office in New York and ultimately to President of the Americas. In his new role, Tsokanos continues to make comments about the appearance of female employees often discussing their “looks” in front of other employees and during meetings. He is also known to take young female employees out for drinks frequently. Human Resources has never taken any action to end President Tsokanos’ ongoing inappropriate conduct. 48. In 2008, President Tsokanos proudly announced to many in the company that he “need[ed] a big swinging dick to lead the Midwest” while searching for a candidate to fill the head position for the Midwest region. The comment was widely circulated around the company. Tsokanos later hired a male, Joel Curran, for the Midwest Regional President position, while demoting two female Directors, Nancy Brennan and Kelly Kolhagen, working in the same region. Again, Human Resources took no action. 49. In 2009, President Tsokanos made a sexist comment to Plaintiff O’Donohue during a national meeting attended by over 40 employees, including the head of Human Resources, Rita Masini. He questioned Plaintiff in the presence of the attendees at the close of her presentation, asking: “How are you going to deliver on this project when you have two young kids at home and you work a flexible schedule?” Plaintiff O’Donohue complained about the comment to Masini, but Human Resources again did nothing. 50. In 2009, President Tsokanos made sexist comments about former Executive Vice President Wendy Lund, including stating to other employees during well- attended meetings that he was “imagining her in a porn movie.” Human Resources again did nothing. 51. In or around 2010, President Tsokanos verbally attacked two female Senior Vice Presidents during a meeting. The female employee later reported the incident to head of Human Resources, Rita Masini, who did nothing. 52. President Tsokanos has hired like-minded men to fill his leadership ranks. For example, Tsokanos hired Neil Dhillon as Managing Director of the Washington D.C. office in 2008. Soon after his hire, Dhillon held a work-related holiday party at his home for employees from MSL’s Washington, D.C. office. At the party, Dhillon stripped down to his boxer shorts and groped several female employees. Human Resources was notified about the party and Dhillon’s actions, but again did nothing. Indeed, Dhillon was later promoted to Regional President of the Mid-Atlantic region. 53. Other female employees also complained about MSL’s discrimination, only to have their complaints fall on deaf ears. In 2011, a female Account Supervisor complained to Human Resources when a male Vice President gave her an assignment and said, “she needed to get her big girl panties on” to complete it. Another female employee complained to Human Resources when a male Senior Vice President said she could not advance because she had a sign on her head that said “I want to get married.” Faced with these complaints, the Company again sat on its hands and allowed the discrimination and harassment to continue unabated. 54. Human Resources is also directly involved in the terminations of female PR employees upon return from maternity leave, including Plaintiffs Monique da Silva Moore, Heather Pierce and Zaneta Hubbard, as well as Heather Wadia, Lorie Hirson, Erin Mand, Kristin Rubi, Taryn Green, Tara Meadows, Jamillah Renard, Heather Hall, Ana DaCosta, Erica Kless, Jennifer Hazard, Beth McIntyre, and Renae Wolter, among others. Instead of investigating Defendants’ apparent pattern of terminating female employees upon return from leave, Human Resources actively facilitates it. 55. Human Resources also did nothing to address numerous complaints raised during exit interviews with female PR employees. For example, Vice President Lisa Marinelli, Senior Vice President Maryellen O’Donohue and Executive Vice President Wendy Lund raised gender discrimination issues with Human Resources Senior Vice President Tara Lilien during their exit interview. Again, nothing was done in response. 56. Defendants’ mishandling of repeated complaints highlights various system-wide flaws in Defendants’ HR complaint mechanisms, including inadequate reporting mechanisms; the lack of a defined channel to report complaints of discrimination and harassment; insufficiently defined and implemented investigation procedures; and inadequate training of Human Resources and other professionals tasked with addressing complaints of discrimination and harassment. These system-wide flaws allow President Tsokanos’s direct participation in discrimination, and his active encouragement of others’ discrimination, such that a sexist “old boys” culture is permitted to flourish at the Company. 57. The blatant disregard and indifference displayed by Defendants towards complaints of discrimination is all the more shocking given the Company’s awareness that these problems are systemic. As both Rita Masini, Chief of Human Resources and Tara Lillien, Senior Vice President of Human Resources told Plaintiffs time and time again, “That’s just Jim. You know how he is.” * * * 58. Plaintiffs bring this lawsuit on their own behalf and on behalf of a class of similarly-situated female PR professionals company-wide to remedy the gender discrimination they have witnessed and experienced during their years of exemplary service to Defendants. The lawsuit is designed to achieve systemic injunctive relief and to change Defendants’ discriminatory employment policies, practices and/or procedures based on gender, including: (1) assigning female PR professionals to lower titles than similarly-situated male employees; (2) paying female PR professionals less compensation than their male counterparts; (3) denying female PR professionals promotion and advancement opportunities in favor of male employees; (4) treating pregnant employees and mothers differently from non-pregnant employees, male employees, and non- caregivers; (5) failing to prevent, respond to, adequately investigate, and/or appropriately resolve instances of gender discrimination, sexual harassment, and pregnancy/caregiver discrimination in the workplace; and (6) carrying out discriminatory hires, terminations, demotions, and/or job reassignments based on gender when the Company reorganized its PR practice and management structure beginning in 2008, including wrongfully terminating Plaintiff da Silva Moore immediately following her return from maternity leave after thirteen years of exemplary employment with the Company. 59. Had the changes sought been in place previously, Plaintiffs might still be employed there. Should the changes come about as a result of this action, Plaintiffs might, in fact, be able to pursue careers with Defendants in the future. JURISDICTION AND VENUE 60. This Court has subject matter jurisdiction over this suit pursuant to 28 U.S.C. § 1332(a)(1); Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000(e)-5(f), et seq., as amended (“Title VII”); 29 U.S.C. § 201, et seq., the Equal Pay Act of 1963 (“EPA”); and 29 U.S.C. § 2601, et seq., the Family and Medical Leave Act of 1993 (“FMLA”); and supplemental jurisdiction pursuant to 28 U.S.C. § 1367, to redress and enjoin employment practices of Defendants in violation of these federal statutes and Plaintiffs’ pendent state claims. 61. The matter in controversy exceeds the sum or value of $75,000, exclusive of interests and costs, and is between citizens of different states. 62. Venue is proper in this District pursuant to 28 U.S.C. § 1391(b) and 42 U.S.C. 2000e-5(g) because Defendants Publicis and MSL do business in New York, New York, and because the unlawful employment practices were committed in this District. 63. Plaintiffs have standing to bring this suit as Plaintiff da Silva Moore has duly filed her administrative class charge of discrimination before the U.S. Equal Employment Opportunity Commission (“EEOC”) and has received her right to sue letter from the EEOC. THE PARTIES 64. At all times relevant to this action, PLAINTIFF MONIQUE DA SILVA MOORE has been a resident of New York, Maine, or Massachusetts. Ms. da Silva Moore worked for Defendants from approximately 1991 through 1993, and from September 1999 through January 7, 2010. Ms. Da Silva worked in MSL’s Boston and New York offices in MSL Americas’s Northeast region. 65. At all times relevant to this action, PLAINTIFF MARYELLEN O’DONOHUE has been a resident of New York. Ms. O’Donohue worked for Defendants from June 1985 through January 2010. Ms. O’Donohue worked in MSL’s New York office in MSL Americas’s Northeast region. 66. At all times relevant to this action, PLAINTIFF LAURIE MAYERS has been a resident of Michigan and Washington, D.C. Ms. Mayers worked for Defendants from early 2000 until May 2010. Ms. Mayers worked in MSL’s Ann Arbor office in MSL Americas’s Midwest region and MSL’s Washington, D.C. office in MSL Americas’s Mid-Atlantic region. 67. At all times relevant to this action, PLAINTIFF HEATHER PIERCE has been a resident of California and Washington, D.C. Ms. Pierce worked for Defendants from October 2004 through December 2008. Ms. Pierce worked in MSL’s San Francisco office in MSL’s Western region and MSL’s Washington, D.C. office in MSL Americas’s Mid-Atlantic region. 68. At all times relevant to this action, PLAINTIFF KATHERINE WILKINSON has been a resident of California. Ms. Wilkinson worked for Defendants from February 2009 through February 2010. Ms. Wilkinson worked in MSL’s Los Angeles office in MSL Americas’s Western region. 69. At all times relevant to this action, PLAINTIFF ZANETA HUBBARD has been a resident of Georgia. Ms. Hubbard worked for Defendants from February 2008 through December 2008. Ms. Hubbard worked in MSL’s Atlanta office in MSL Americas’s Southern region. 70. DEFENDANT PUBLICIS GROUPE SA, based in Paris, France, is a top four global communications group and employs approximately 45,000 professionals, including one thousand MSL employees in the United States. Publicis Groupe SA does business in New York through at least forty-one wholly-owned subsidiaries operating in New York, including (1) atelier New York; (2) BBH New York; (3) Digitas USA - New York; (4) Forty-Two Degrees at MediaVest New York; (5) In-sync Customer Insight; (6) Kekst& Company New York; (7) Leo Burnett Business; (8) Leo Burnett USA New York; (9) masiusPublicis Consultants New York; (10) MediaVest USA – New York; (11) Medicus International – New York; (12) Moxie Interactive New York (13) Mundocom USA – New York; (14) Optimedia USA – New York; (15) PBJS New York, Performics USA – New York; (16) Prodigious Worldwide USA – New York; (17) Publicis BOS Group; (18) Publicis Consultants USA – New York; (19) Publicis Events USA – New York; (20) Publicis Healthcare Communications Group; (21) PublicisHealthware International – New York; (22) Publicis Life Brands Medicus New York; (23) Publicis Life Brands Resolute – New York; (24) Publicis Modem East – NY; (25) Publicis USA – New York; (26) Razorfish New York; (27) Re:Sources USA – New York; (28) Rosetta New York; (29) Saatchi &Satchi Healthcare Communication New York; (30) Saatchi & Saatchi Healthcare Wellness; (31) Saatchi &Satchi New York; (32) Saatchi & Saatchi Worldwide USA; (33) Saatchi & Saatchi X New York; (34) Science & Medicine; (35) SMG Performance Marketing – New York; (36) StarcomMediaVest Group Corporate; (37) StarcomMediaVest Group USA – New York; (38) The Third Act – New York; (39) Youth Connection, Zenith Direct USA; (40) Zenith Media Services USA – New York; (41) ZenithOptimedia USA – New York. Many of Publicis’s subsidiaries are located in the “Publicis” building at 950 Sixth Avenue, New York, NY 10001. These New York subsidiaries do all the business which Publicis would do if Publicis was located in New York. Additionally, all of Publicis’s subsidiaries are governed by Publicis’s compulsory employment policies known as , discussed supra, and as demonstrated by the allegations herein, Publicis interferes in the selection and assignment of MSL’s executive personnel; fails to observe corporate formalities; and wholly controls the marketing and operational policies of MSL. Publicis’s global hiring and salary freeze, initiated by Publicis from 2008 until 2011, had a direct effect on MSL employees working through the United States, including within its headquarters in New York. In 2009, Publicis brought in revenues of over 6.1 billion dollars. 71. DEFENDANT MSLGROUP is a Brand of Defendant Publicis. It is a one of the world’s top 5 public relations and events networks. MSL does business in the United States through MSLGroup Americas, which is headquartered in New York, NY and employs approximately 1,000 employees in at least 10 offices, located in New York, NY; Boston, MA; Washington, D.C.;; Atlanta, GA; Chicago, IL; Ann Arbor, MI; San Francisco, CA; Los Angeles, CA; and Seattle, WA, and organized into five regions: Northeast; Mid-Atlantic, South; Midwest; and West.15 FACTUAL ALLEGATIONS A. PLAINTIFF MONIQUE DA SILVA MOORE 72. Defendants employed Plaintiff Monique da Silva Moore from approximately 1991 to 1993 and from September 1999 until Defendants wrongfully terminated Ms. da Silva Moore in January 2010. 73. Ms. da Silva Moore spent the last six years of her career at the Senior Vice President/ Director level at the Company. While she worked as Vice President in MSL’s 15 MSL’s offices in the United States can be found at http://www.mslgroup.com/where-we- are/americas/offices/. MSL five regions in the United States can be found at http://www.mslworldwide.com/global-reach/north-america New York office from September 1999 through May 2004, she became a Senior Vice President/Director of the Boston office in 2004 and she remained a Senior Vice President/Director until her termination in 2010. In October 2004, Ms. da Silva Moore took the position of Managing Director of the Boston office, and then in January 2007 she became an MSL Senior Vice President/North American Director. From January 2008 through her wrongful termination in January 2010, Plaintiff served as an MSL Senior Vice President/Global Director, based out of Boston, Massachusetts. 74. Despite her slow advancement, Ms. da Silva Moore received strong performance evaluations and feedback from her supervisors, colleagues, and clients throughout her thirteen-year tenure with the Company. 75. Plaintiff da Silva Moore was consistently recognized as “best in class” in the PR industry. Indeed over the course of her career, she has received more than 22 industry awards, including a 2009 Silver Anvil from the Public Relations Society of America. Plaintiff’s stellar performance while working for Defendants is reflected in her increased responsibilities from Managing Director of the MSL Boston office in 2004, North American Health Care Director in 2007, and Senior Vice President/Global Health Care Director in January 2008. 76. In addition, Plaintiff da Silva Moore grew existing client business and brought in a number of new accounts to MSL every year she worked for the Company. 77. Under Plaintiff da Silva Moore’s leadership, the Boston office earned a profit in 2004 for the first time in years. A year later, in 2005, the Boston office was one of two offices across the whole global network with the highest annual revenue growth. The office’s pitch to win the Virgin Life Care account was highlighted at the July 2005 MSL leadership meeting in Chicago for its creativity. 78. Defendants repeatedly turned to Ms. da Silva Moore to help shore up troubled accounts and floundering offices. For example, in 2007, MSL sent Ms. da Silva Moore to London to help rebuild its health care team and successfully put the healthcare practice on a more profitable path. Also in 2007, MSL transferred the floundering BD account to Boston from the Washington, D.C. office, and Ms. da Silva Moore stabilized the account. In 2009, when MSL was attempting to retain the Philips account, CEO Mark Hass, London CEO Stuart Wilson, and EVP Wendy Lund had a serious discussion with Ms. da Silva Moore about relocating to Amsterdam to manage the account if Philips agreed to stay with MSL. 79. Ms. da Silva Moore continued her strong performance in her role as Global Health Care Director, the last position she held before Defendants terminated her. Pay Discrimination 80. Plaintiff da Silva Moore’s stellar performance was never recognized in her compensation. Upon information and belief, throughout Plaintiff’s career and in every position she held at MSL, the Company paid Ms. da Silva Moore less than similarly- situated males. 81. Upon information and belief, from May to October 2004 when Plaintiff da Silva Moore was a Senior Vice President/Director of the Boston Office, Defendants paid Plaintiff less than similarly-situated males such as Kelly Denker, a Director of the New York Office. 82. Upon information and belief, from October 2004 to December 2006 when Plaintiff da Silva Moore was Managing Director of the Boston Office, Defendants paid her less than the following similarly-situated males: Jim Tsokanos, Managing Director of the Atlanta office; Don Hannaford, Managing Director of the Washington, D.C. Office; and Bill Orr, Managing Director of the San Francisco Office. 83. Upon information and belief, from January 2007 to January 2010 when Plaintiff da Silva Moore was a Senior Vice President/North American Director and a Senior Vice President/Global Director, Defendants paid her less than the following similarly-situated males: Peter Harris, Senior Vice President/North American Director of the Corporate Practice; and Keith Hughes, Senior Vice President/North American Director of Consumer Operations. 84. Upon information and belief, Defendants paid Mr. Harris approximately more than Ms. Da Silva Moore in salary for the same work in the same position, despite Ms. Da Silva Moore’s superior qualifications and longer tenure in the position and at the Company. 85. For example, when Peter Harris was promoted to serve as the Senior Vice President/North America Director in 2009, Ms. Da Silva Moore had been working as North American Director of North America Healthcare Practice since 2007. As Senior Vice Presidents/North American Directors, Ms. Da Silva Moore and Mr. Harris performed substantially equal client work, worked across offices to expand business, and managed teams. 86. From January 2007 until Defendants wrongfully terminated her in January 2010, Ms. da Silva Moore never received a raise in salary. Upon information and belief, comparable male employees such as Senior Vice President David Chamberlin continued to receive raises in their salaries although Publicis CEO Levy had instituted a salary freeze during this time period. 87. Furthermore, when Ms. da Silva Moore moved from Senior Vice President/North American Director to Global Director, Defendants did not raise her salary or compensation. Rather, the Company considered Plaintiff to continue to be at the same level as the other Senior Vice President/Directors, and the promotion was in name only. 88. Defendants pay female PR management employees at the Senior Vice President/Director level like Plaintiff Ms. da Silva Moore less than similarly-situated male employees across the PR practice in the United States. 89. Upon information and belief, Defendants pay female PR employees like Plaintiff Ms. da Silva Moore less than similarly-situated male employees across the PR practice in the United States. Promotion Discrimination 90. While Defendants steadily increased Ms. da Silva Moore’s responsibilities and she advanced from Vice President in 1999 to Global Director in 2008, her career progression was much slower than that of her male peers at MSL. She stagnated at the Director level for six years while Defendants promoted her male counterparts to Presidents and Officers. Eventually, Defendants demoted and abruptly terminated her in January 2010. 91. For example, Ms. da Silva Moore and Jim Tsokanos held comparable positions when they served as Managing Directors of the Boston and Atlanta Offices, respectively, in 2004. 92. By 2005, Mr. Tsokanos was promoted to Executive Vice President and Managing Director of the Company’s largest office in New York. Ms. da Silva Moore was not promoted. 93. In 2008, Defendants promoted Mr. Tsokanos to President of North America. Ms. da Silva Moore took a new position at the Senior Vice President/Director level, MSL’s Global Director, with no increase in pay. 94. Most recently, when Publicis formally reorganized and combined MS&L Worldwide with its other agencies to form MSLGroup in November 2009, Defendants again made drastically different plans for Ms. da Silva Moore and Mr. Tsokanos. 95. Defendants promoted Mr. Tsokanos to the global leadership team of MSL in November 2009. Two months later, Ms. da Silva Moore’s employment abruptly ended when Defendants wrongfully terminated her immediately after her return from maternity leave. 96. In addition to Mr. Tsokanos, Defendants promoted several other men during the reorganization. For example, Defendants promoted Peter Harris as North American Director in January 2009. Defendants promoted Scott Beaudoin to North American Director in February 2010. Defendants promoted Steve Bryant to Managing Director of the Seattle Office in June 2010. 97. In addition to internal promotions, MSL’s reorganization led to many appointments of men to senior leadership positions from outside the Company. For example, Defendants hired Michael Sullivan as North American Director in July 2010. Defendants hired Joel Curran to head its Midwest region in May 2008. Defendants hired Neil Dhillon to head the mid-Atlantic region in September 2008. Defendants hired Joseph Carberry to head its Western region in April 2009. 98. Through the reorganization, Defendants promoted and hired men with children. However, few, if any, women with children were promoted or hired through the reorganization. 99. By promoting a disproportionate amount of men to senior management positions in the reorganization, Defendants denied numerous promotions to qualified female PR management employees in the PR practice across the United States. Discriminatory Terminations, Demotions, Reassignments, and Hires 100. While the Company’s reorganization led to significant promotions and hires for male employees like Mr. Tsokanos, a disproportionate number of women, including Ms. da Silva Moore, suffered discriminatory terminations, demotions, and job reassignments. 101. As part of the reorganization, Defendants planned to demote Wendy Lund, the only female PR Executive in the United States who held the position of Executive Vice President of Global Client and Business Development, by eliminating her position and her entire team, and offering her a position reporting to Jim Tsokanos, her former peer on the Global Leadership Team. In turn, MSL forced Ms. Lund to leave the Company. 102. Additionally, although female employees once led four out of MSL’s ten U.S. offices, the number of female leaders has been reduced to one since 2008. One of the former female U.S. office leaders left, while two peers were demoted to roles that required them to report to their newly hired male peers. 103. Defendants demoted the former female leaders of MSL’s Chicago and Los Angeles offices. In 2008, Nancy Brennan, the then Managing Director of the Chicago office, was demoted to Senior Vice President of Corporate Branding. She now reports to her male replacement, Joel Curran. Vicki Fite, the Managing Director of the Los Angeles office, still holds her title but reports to the Western Region President, Joseph Carberry, who reported to Mr. Tsokanos until Mr. Carberry left the Company. Ms. Fite had previously reported directly to Mr. Tsokanos. 104. Like Plaintiff da Silva Moore as well as Ms. Lund, Ms. Brennan and Ms. Fite, Defendants targeted female PR management employees with discriminatory terminations, demotions and reassignments during its reorganization of the PR practice and management structure across the United States. Pregnancy/ Caregiver Discrimination 105. While Defendants’ glass ceiling has led to an underrepresentation of women in leadership positions, pregnant employees and working mothers at the Company face similar systemic barriers to equal employment opportunities. 106. For example, beginning on September 5, 2009, Plaintiff da Silva Moore took maternity leave to care for her newborn child. She returned from maternity leave on January 4, 2010. 107. Despite her superior performance and service to the Company, Defendants terminated Plaintiff immediately upon her return from maternity leave in January 2010. 108. Prior to beginning her leave, it became apparent to Ms. da Silva Moore that MSL would soon be reorganized under the new CEO. At that time, Plaintiff’s supervisor, Executive Vice President of Global Client and Business Development Wendy Lund, advised Plaintiff that the Senior Vice President/Global Director position would be eliminated but that a new position would be available to Plaintiff upon her return from maternity leave. Ms. Lund informed Plaintiff that Plaintiff would be asked to run the oncology business of Sanofi Aventis, working primarily from Boston, with some time also spent in Publicis’s PR office in New York. Following this initial conversation, Ms. Lund again mentioned to Plaintiff that Ms. da Silva Moore would take the oncology position upon her return from maternity leave. 109. Later on December 23, 2009, less than two weeks before Plaintiff’s scheduled return from maternity leave, Mr. Tsokanos called Plaintiff da Silva Moore to tell her that she would have to run the MSL brand Publicis Consultants out of the New York City office or Defendants would terminate her employment with the Company. Mr. Tsokanos also confirmed that he would meet with Plaintiff and Senior Vice President of Human Resources Tara Lilien on January 7, 2010, to discuss his employment decision. Ms. Lilien refused Plaintiff’s requests for additional information prior to the January 7 meeting. 110. Defendants placed Plaintiff da Silva Moore on paid administrative leave for three days as she awaited her meeting with Mr. Tsokanos and Ms. Lilien after returning from maternity leave on January 4, 2010. At the January 7 meeting in New York City, Mr. Tsokanos repeated his ultimatum to Plaintiff and required her to respond by the following day. 111. As Plaintiff da Silva Moore was at the time a mother of a newborn and two other children aged 10 and 12, she asked Mr. Tsokanos if there was any flexibility in the transition period in which she would have to move to New York City. Mr. Tsokanos stated that he required Plaintiff to move immediately, as the business required immediate “in-office” attention, and that the Company would not reimburse Plaintiff’s moving expenses. MSL thus forced Ms. da Silva Moore to accept termination of her employment with the Company. 112. Although Mr. Tsokanos denied Plaintiff da Silva Moore’s request for time to relocate to New York City, MSL has granted similar requests from Plaintiff’s similarly-situated male peers and female peers without children. For example, Mr. Tsokanos paid David Chamberlain tens of thousands of dollars in relocation expenses and also provided him with several months to relocate from Dallas to New York on or around early 2009. Michael Morsman was also given relocation expenses when he was hired as an SVP in the Ann Arbor office. Around the same time, Mr. Tsokanos requested that Plaintiff’s female peer who did not have any children, Krista Webster, relocate from Toronto to New York. Mr. Tsokanos extended the time to several months for Ms. Webster to make her move. When Karlenne Trimble, the new Chief Growth Officer, was asked to move to New York, she declined and now divides her time equally between two offices. Ms. Trimble has no children. B. PLAINTIFF MARYELLEN O’DONOHUE 113. Defendants employed Plaintiff O’Donohue, a mother of two young children, from June 1985 until her constructive discharge in January 2010. Though she received regular promotions before the Company’s reorganization in 2008, Ms. O’Donohue did not advance beyond the Senior Vice President/Director level after the reorganization. Before her constructive discharge in January 2010, Plaintiff served as MSL’s Senior Vice President/North American Director. 114. Ms. O’Donohue served as Account Coordinator, Assistant Account Executive, Account Executive, Senior Account Executive, Supervisor, and Vice President in High Technology; Vice President; Senior Vice President/Director, Senior Vice President/Co-Director; and finally Senior Vice President/North American Director. 115. After MSL’s 2008 reorganization, Jim Tsokanos, President of the Americas for MSL, began to assume responsibility for Ms. O’Donohue. Pay Discrimination 116. Plaintiff O’Donohue’s excellent performance over the course of twenty- three years was rewarded until the Company’s reorganization, when the Company began compensating her at a level lower than that which she deserved. Upon information and belief, after the Company’s reorganization, the Company paid Ms. O’Donohue less than similarly-situated males. 117. In 1996, Ms. O’Donohue began working on a flexible work schedule due to her caregiving responsibilities for her family. From 1996 through 2008, while Ms. O’Donohue worked on a flexible schedule, she worked as part of a senior team that built the respected healthcare practice at MSL. During this time, she was promoted twice. When she began working on this reduced schedule, Executive Vice President of Global Client and Business Development, Wendy Lund, paid Ms. O’Donohue hourly for any hours she worked beyond those set in her flexible schedule. 118. After MSL’s 2008 reorganization, Jim Tsokanos assumed responsibility of Ms. O’Donohue. Mr. Tsokanos was known to be hostile towards working mothers with young children. His actions and comments revealed that he felt that women were a “liability” to the Company. 119. After assuming the role as her supervisor, Jim Tsokanos required Ms. O’Donohue to work a full-time schedule despite the fact that she had elected to work on a Company-sanctioned flexible schedule. Until that point, Ms. O’Donohue had a history of proven success working on a flexible schedule. Mr. Tsokanos inundated Ms. O’Donohue with additional assignments, making it impossible for her to continue working on the flexible schedule. Though Ms. O’Donohue was thus forced to work on a full-time schedule, Defendants continued to pay her at the reduced rate of a flexible schedule based on her gender and her status as a working mother. 120. From 2008 until her employment ended in 2010, Ms. O’Donohue never received a raise in salary. Upon information and belief, comparable male employees such as David Chamberlin continued to receive raises in their salaries although Publicis had instituted a salary freeze during this time period. 121. Upon information and belief, when Plaintiff O’Donohue was Senior Vice President/North American Director, MSL paid her less than the following similarly- situated males: Peter Harris, Senior Vice President/North American Director and Kelly Dencker, Senior Vice President/Director. 122. Peter Harris, as a Senior Vice President/Director in the New York office, performed the same job duties and worked less hours than Ms. O’Donohue. Mr. Tsokanos circulated a memo in January 2009 that outlined Mr. Harris’ responsibilities, which were similar to Ms. Donohue’s responsibilities. 123. Upon information and belief, Defendants paid Mr. Harris approximately more than Ms. O’Donohue in salary for the same work in the same position, despite Ms. Donohue’s superior qualifications and longer tenure in the position and at the Company. 124. Defendants pay female PR employees like Plaintiff O’Donohue less than similarly-situated male employees across the PR practice in the United States. Promotion Discrimination 125. Despite working at the company for twenty-five years, Ms. O’Donohue reached Defendants’ glass ceiling when she hit the Senior Vice President/Director level at the Company. In contrast, during the same time period, newcomer Jim Tsokanos quickly rose through the ranks beyond the Director level to the President level until he was appointed to the highest position in the United States, President of the Americas for MSL. 126. After the Company’s 2008 reorganization, when Mr. Tsokanos assumed responsibility for Ms. O’Donohue, Ms. O’Donohue could no longer advance in the Company after over two decades of dedication to the Company. 127. Ms. O’Donohue advanced up to the Senior Vice President/Director level, where the glass ceiling at Publicis exists. Men were regularly promoted to President levels and above. 128. Upon information and belief, Defendants promote female employees at a slower rate than similarly-situated male employees across the PR practice in the United States. Defendants also deny promotions to female employees in favor of less qualified male employees across the PR practice in the United States. Caregiver Discrimination 129. Ms. O’Donohue went on a flexible work schedule in 1996 in order to care for a sick family member and continued on the flexible schedule through the birth of her two children in 2003 and 2004. After Mr. Tsokanos assumed responsibility for the Company’s North American region in 2008, he forced Ms. O’Donohue to work a full- time schedule; she often worked late nights and weekends. Mr. Tsokanos told Ms. O’Donohue she had to work and travel more, requiring her to inform him of her whereabouts every hour of every day. Still, Defendants refused to pay Ms. O’Donohue for a full-time work schedule. 130. Conversely, Mr. Tsokanos allowed Bill Orr, Managing Director of the San Francisco Office and full-time employee, to be absent from the office. Mr. Orr’s poor performance was apparent throughout the office. Mr. Orr maintained his job and salary while Mr. Tsokanos continued to place additional work duties on Ms O’Donohue to help fix the problems Mr. Orr had created in the San Francisco office. Additionally, Mr. Tsokanos never required that Mr. Orr inform him of his whereabouts at all times, as he required Ms. O’Donohue to do, after years of her consistently excellent work at the Company. 131. Unlike female PR employees, male PR employees who have children are not treated less favorably because they have a career and children. 132. Furthermore, Plaintiff O’Donohue endured constant derogatory comments at the Company regarding her and other women’s status as working mothers. When Mr. Tsokanos met with Ms. O’Donohue in his office, he made reference to another telecommuting working mother, stating, “She needs to pick up that baby and get to New York.” 133. Mr. Tsokanos also made discriminatory comments directly to Ms. O’Donohue. For example, at a 2009 leadership meeting in Washington, D.C., Plaintiff O’Donohue made a successful presentation for an audience of over 40 professionals, including Mr. Tsokanos. While Mr. Tsokanos congratulated Ms. O’Donohue on her practice plan and platform in private, he questioned Plaintiff in the presence of the attendees at the close of her presentation, asking: “How are you going to deliver on this project when you have two young kids at home and you work a flexible schedule?” 134. Ms. O’Donohue complained about this blatantly discriminatory comment to the head of HR, Rita Masini. Ms. Masini agreed that Mr. Tsokanos’s comment was inappropriate. The Company, however, did not investigate the complaint or discipline Mr. Tsokanos in any way. 135. Since MSL’s reorganization, Defendants have made it a policy to hire only childless females. For example, after the reorganization, the Company hired Ellena Friedman, Senior Vice President, Director of the Healthcare and Life Sciences Practice and Deputy Managing Director in Boston; Nancy Glick, Senior Vice President in the Healthcare Practice in Washington, D.C.; Jeanine O’Kane, North America Director of MS&L Healthcare; and Anita Manning, Senior Strategist – all of whom have no children. 136. Mr. Tsokanos’s and the Company’s discriminatory behavior gave Ms. O’Donohue no choice but to leave the Company. After twenty-five years at the Company and less than two years working with Mr. Tsokanos, Ms. O’Donohue was forced to resign from the Company in January 2010. 137. Upon information and belief, Defendants have subjected and continue to subject female employees with caregiving responsibilities and/or young children like Plaintiff O’Donohue to disparate terms and conditions of employment across the PR practice in the United States. C. PLAINTIFF LAURIE MAYERS 138. Plaintiff Mayers, a working mother with children, began working for Hass Associates in September 2000. Defendants employed Plaintiff Mayers beginning in 2000, when Defendants acquired Hass Associates, until Ms. Mayers’s constructive discharge in May 2010. Ms. Mayers worked as a Vice President, Senior Vice President, and Senior Vice President/Deputy Managing Director in the Company’s Ann Arbor, Michigan and Washington, D.C. offices. 139. While at the Company, Ms. Mayers achieved stellar performance appraisals, winning two awards from the PRWeek publication. She was responsible for the high-profile General Motors (“GM”) account. In 2009, despite dire financial straits at GM, Ms. Mayers’s GM accounts thrived. As a result of her superior management of her accounts, Ms. Mayers even won new business with GM. Discriminatory Assignment 140. Although Ms. Mayers was highly qualified for the Senior Vice President position at the time MSL acquired Hass Associates in 2002, she was initially assigned to the position of Vice President. The Company did not promote her to Senior Vice President until after she had worked at the Company for approximately five years. 141. In January 2009, Defendants hired Michael Morsman from outside the Company and immediately assigned him into the position of Senior Vice President in the Ann Arbor office. When the Company assigned Mr. Morsman to the Senior Vice President position, he was less qualified for the position than Ms. Mayers had been at the time she was appointed Vice President in the Ann Arbor office. 142. As they did with Plaintiff Mayers, Defendants consistently assign females to lower-level positions than males who are less qualified than them across the PR practice in the United States. Pay Discrimination 143. Upon information and belief, the Company paid Ms. Mayers less than similarly-situated male employees throughout her career at the Company. 144. In 2004, Ms. Mayers hired David Binkowski as a Web Project Manager. Three years later, MSL promoted Mr. Binkowski to Vice President. Only one year after Mr. Binkowski’s promotion to VP, Mr. Tsokanos promoted Mr. Binkowski again to Senior Vice President, the same position held by Ms. Mayers, but Mr. Tsokanos doubled Mr. Binkowski’s salary. Mr. Binkowski’s new salary was approximately more than Ms. Mayers’s salary for the same work in the same position, despite Ms. Mayers’s superior qualifications and longer tenure in the position and at the Company. 145. In January 2009, Defendants hired Michael Morsman from outside the Company as a Senior Vice President in the Ann Arbor office. The Company rewarded him with relocation expenses and a higher salary than that of Ms. Mayers. At the time, Plaintiff Mayers had been with the Company approximately seven years and had served as Senior Vice President and Deputy Managing Director two years. Mr. Morsman had significantly less qualifications than Ms. Mayers. 146. Defendants paid Mr. Morsman at a higher rate than Ms. Mayers as a Senior Vice President, although they performed the same job duties. Mr. Morsman and Ms. Mayers did the same client work, new business work, financial/budgeting work and staffing work. At the time of Mr. Morsman’s hire, Mr. Curran informed Ms. Mayers that Mr. Morsman was being paid more than her. 147. From 2008 until her employment ended in 2010, Ms. Mayers never received a raise in salary. Upon information and belief, comparable male employees such as David Binkowski continued to receive raises in their salaries, even though Publicis had instituted a salary freeze during this time period. 148. Defendants pay female PR management employees at the Senior Vice President level like Plaintiff Mayers less than similarly-situated male employees across the PR practice in the United States. 149. Upon information and belief, Defendants pay female PR employees like Plaintiff Mayers less than similarly-situated male employees across the PR practice in the United States. Promotion Discrimination 150. Before the Company’s reorganization in 2008, Ms. Mayers received periodic promotions. She began working for Hass Associates in September 2000. She became a Vice President in MSL’s Ann Arbor office when it acquired Hass Associates in 2000. In 2007, she was promoted to Senior Vice President and Deputy Managing Director. 151. After the Company’s reorganization in 2008, however, Ms. Mayers hit a glass ceiling and was no longer allowed to advance. 152. Unlike the glass ceiling Plaintiff Mayers faced after the reorganization, similarly-situated males were consistently promoted to the Director, President, and Officer levels. 153. On May 27, 2008, President Tsokanos appointed Joel Curran as Senior Vice President and Managing Director of the Midwest region. After assuming his role, Mr. Curran told Plaintiff Mayers that Mr. Tsokanos had told him during the interview process that he “need[ed] a big swinging dick” to lead the Midwest. Although Plaintiff Mayers was qualified for the position, Mr. Tsokanos apparently had a different gender in mind for it. 154. In February 2009, the Company hired Michael Morsman as Senior Vice President in the Ann Arbor office and only a few months later, promoted him to Deputy Managing Director of the Ann Arbor office. As a result of Mr. Morsman’s promotion, the Company stripped the title from Ms. Mayers. Plaintiff Mayers only learned about her demotion, however, by reviewing a new organizational chart. 155. When Plaintiff Mayers asked Mr. Curran, head of MSL’s Midwest region, about the demotion, Mr. Curran justified Plaintiff Mayers’s demotion and Mr. Morsman’s promotion by stating to Plaintiff Mayers, “You don’t want to run the office and deal with that financial stuff.” Mr. Curran defended the Company’s discrimination and entirely dismissed Plaintiff Mayers’s concerns. 156. In the same conversation with Mr. Curran, Plaintiff Mayers asked whether Mr. Morsman was getting paid more than her. Mr. Curran said he was. 157. In October 2009, Plaintiff Mayers moved from Michigan and continued to work as Senior Vice President for Ann Arbor from the Company’s Washington, D.C. office. 158. In February 2010, only one year after joining MSL, the Company promoted Mr. Morsman to Managing Director of the Ann Arbor office. Although Plaintiff Mayers was Deputy Director for three years and Senior Vice President for seven years, MSL did not select her for the position. 159. Upon information and belief, Defendants promote female employees like Plaintiff Mayers at a slower rate than similarly-situated male employees across the PR practice in the United States. Defendants also deny promotions to female employees like Plaintiff Mayers in favor of less qualified male employees across the PR practice in the United States. Constructive Discharge 160. After Mr. Morsman’s promotion to Managing Director, he showed Plaintiff Mayers his proposed new organization chart for the Ann Arbor office. Plaintiff Mayers’s name was not on the chart. 161. In November 2009, Plaintiff Mayers’s manager, Jud Branam, former Managing Director of the Ann Arbor office, called Plaintiff Mayers at home to confidentially warn her that she was no longer on the Washington, D.C. books or the Ann Arbor books for 2010 and that Mr. Curran and Mr. Morsman planned to offer her either freelance work or a reduced salary. 162. Later in November 2009, Alicia Dorset, Plaintiff Mayers’s direct report, told her that Mr. Morsman had shown her his new organization chart the previous week and said, “Now, the first thing you’ll notice is that Laurie [Mayers] isn’t on here.” He also told her that Ms. Mayers was not on the books in either Washington, D.C. or Ann Arbor next year. 163. Plaintiff Mayers also witnessed discriminatory and harassing comments and behavior while working for the Company. Routinely at business meetings at which Plaintiff Mayers and others were present, Mr. Tsokanos made sexually derogatory comments about female employees commenting on their looks, personal lives, and other inappropriate subjects. 164. In May 2008, President Tsokanos hired Joel Curran as Regional President of the Midwest region. After joining the Company, Mr. Curran told Ms. Mayers that Mr. Tsokanos had told him during his interview that he “need[ed] a big swinging dick” to lead the Midwest. 165. Because she could not endure the discrimination and hostile work environment at the Company, and because MSL executives actively attempted to force Plaintiff Mayers to resign, she had no choice to but to leave in May 2010. D. PLAINTIFF HEATHER PIERCE 166. Defendants employed Plaintiff Heather Pierce, a mother of two young children, from October 2004 until they forced her to leave the Company in December 2008. From October 2004 through January 2008, Ms. Pierce worked as Account Supervisor, Management Supervisor, and Vice President in MSL’s San Francisco office in MSL Americas’s Western region. From January 2008 until her constructive discharge in December 2008, she served as Vice President in the Healthcare Practice in MSL’s Washington, D.C. office in MSL Americas’s Mid-Atlantic region. 167. Throughout her four years at the Company, Ms. Pierce never advanced beyond Vice President to the Senior Vice President, Director or Officer levels, while her male counterparts quickly advanced to the highest ranks of management across the PR practice in the United States. During Ms. Pierce’s tenure, for example, the Company promoted David Binkowski from Supervisor to Senior Vice President in less than three years, and Mr. Tsokanos also doubled Mr. Binkowski’s salary over the same time period. 168. Throughout her time at MSL, Plaintiff Pierce was a stellar employee, receiving extremely positive feedback from clients, colleagues and supervisors. In her 2005 performance review, her colleagues and supervisor wrote, “Heather integrated seamlessly into the team and has become an essential element not only of the practice but on the accounts she manages with efficiency and apparent ease.” They continued, “She is a tremendous asset to the team.” 169. The Company also praised Plaintiff Pierce in her 2007 performance review, writing, “[Heather] is a strong leader and motivator.” The review further states: “Heather excels at client and account management” and “Heather has demonstrated a keen ability to organically grown [sic] current business.” 170. In May 2006, Plaintiff Pierce won the San Francisco office’s “Superstar of the Month” award. 171. Plaintiff Pierce’s stellar performance continued until she was forced to resign due to gender discrimination in December 2008. Pay Discrimination 172. Plaintiff Pierce’s excellent performance over the course of four years was never rewarded with the compensation she deserved. Upon information and belief, throughout Plaintiff Pierce’s career and in every position she held at MSL, the Company paid her less than similarly-situated males. For example, the Company paid David Binkowski, a Vice-President, well above annually and Mr. Tsokanos doubled his salary in 2008. 173. When Plaintiff Pierce was transferred to the Washington, D.C. office, her new Managing Director told her he was increasing her annual salary by $25,000 without giving her any explanation. Although Plaintiff Pierce did not have knowledge of her male counterparts’ salaries, this sudden and inexplicable increase suggested that she may have been underpaid by at least $25,000 in her position at the San Francisco office. 174. Even after her abrupt and unexplained salary adjustment, the Company continued to pay Plaintiff Pierce less than similarly-situated males for her remaining tenure at MSL in Washington, D.C. For example, Randolph Court, Jonathan Osmundsen, and Michael King were Vice Presidents in the Washington, DC office. Although these male VPs performed substantially equal work to Ms. Pierce, Defendants paid them higher compensation. 175. Upon information and belief, Defendants paid Mr. Court, Mr. Osmundsen and Mr. King approximately more than Ms. Pierce in salary for the same position, despite Ms. Pierce’s superior qualifications and longer tenure in the position and at the Company. 176. Upon information and belief, Defendants pay female employees like Plaintiff Pierce less than similarly-situated male employees across the PR practice in the United States. Promotion Discrimination 177. During her first two years at the Company, from 2004 through 2006, Plaintiff Pierce was periodically promoted from Account Supervisor to Management Supervisor, and finally to Vice President. For her last two years at the Company, however, Ms. Pierce remained at the Vice President level while her male counterparts were promoted to the Senior Vice President, Director, and President levels. 178. In August 2008, Plaintiff Pierce went on maternity leave. Before she went on maternity leave, a Managing Director position became available. Although several female employees in the Washington, D.C. office were highly qualified for and strongly interested in this position; they did not receive the promotion. When the position had been available for approximately seven months, the Company filled it by hiring Neil Dhillon, a male from outside the Company. 179. Upon information and belief, Defendants deny promotions to female employees like Plaintiff Pierce in favor of less qualified male employees across the PR practice in the United States. Defendants also promote male employees at a more rapid rate than similarly-situated female employees across the PR practice in the United States. Pregnancy/Caregiver Discrimination 180. In January 2008, Plaintiff Pierce relocated from the Company’s San Francisco office to its Washington, D.C. office. 181. Plaintiff Pierce went on maternity leave in August 2008. While on maternity leave, newly hired Managing Director Dhillon had a meeting with Ms. Pierce in the office to talk to him about her anticipated assignments upon her return from maternity leave. At this meeting, Mr. Dhillon told Plaintiff Pierce that she would be required to work on San Francisco accounts to “cover” for Kelly McKenna, another female who was going on maternity leave. 182. At the same meeting, Mr. Dhillon suggested that Plaintiff Pierce “deal” with the constant travel across the country to San Francisco by hiring a live-in nanny. 183. Mr. Dhillon also suggested that Plaintiff Pierce travel with her newborn to San Francisco since children under two years old “fly for free” and “drop off” her newborn at her mother’s house in California while she worked. Mr. Dhillon’s suggestion was both presumptuous and lacking in common sense, as Ms. Pierce’s mother lived in Thousand Oaks, California – approximately four hundred miles from San Francisco – and worked full-time. 184. Mr. Dhillon’s message was clear to Plaintiff Pierce: Defendants had no interest in keeping Ms. Pierce as an employee. Without consulting Ms. Pierce, Mr. Dhillon decided that her first assignment, immediately upon returning from maternity leave, would be to cover for another woman on maternity leave three thousand miles away from her home. 185. Plaintiff Pierce expressed her concerns about covering an account in San Francisco in an effort to work with Mr. Dhillon to determine an appropriate balance between her job responsibilities and her responsibilities as a mother. Mr. Dhillon, however, dismissed her concerns and offered unrealistic solutions. Mr. Dhillon did not question any male employee’s ability to be a successful working parent. Ms. Pierce, however, was labeled by the Company’s prevalent gender stereotyping as less committed to her job after having a child. Therefore, Mr. Dhillon intended to test her commitment to the Company by giving her burdensome assignments that included cross-country travel. 186. Mr. Dhillon made it clear to Plaintiff Pierce that as long as she worked for Defendants, she would not be given employment opportunities comparable to those of males or childless females. Thus, Plaintiff Pierce was forced to resign from the Company in December 2008. 187. Upon information and belief, Defendants have subjected and continue to subject pregnant employees and/or female employees with young children and/or caregiving responsibilities like Plaintiff Pierce to disparate terms and conditions of employment across the PR practice in the United States. E. PLAINTIFF KATHERINE WILKINSON 188. Defendants employed Plaintiff Wilkinson, a mother of a young child, from February 2008 until her constructive discharge from the Company in early 2010. Plaintiff Wilkinson worked as an Account Executive in MSL’s Los Angeles office in MSL Americas’s Western region. Discriminatory Assignment 189. Although Plaintiff Wilkinson was qualified for a higher level position at the time the Company hired her in 2008, she was initially assigned to the position of Account Executive. 190. Unlike the low-level assignment of Plaintiff Wilkinson and other female employees, Defendants hired males into higher level positions without the requisite qualifications for those positions. For example, in early 2009, Defendants hired a male from outside the Company, Steve Chipman, as Vice President and West Coast Director of Digital Innovation and Strategy, even though Mr. Chipman was not qualified for this position. Mr. Chipman exhibited his lack of skills quickly and, consequently, Defendants terminated him three months after hiring him into this high-level position. 191. Like Plaintiff Wilkinson, females at the Company are consistently assigned into lower-level positions than males who are less qualified than them across the PR practice in the United States. Pay Discrimination 192. Upon information and belief, Defendants paid Plaintiff Wilkinson less than similarly-situated male employees throughout her career as an Account Executive at the Company. In her two years at the Company, Defendants never gave Ms. Wilkinson a pay increase. 193. Upon information and belief, Defendants pay female employees like Plaintiff Wilkinson less than similarly-situated male employees across the PR practice in the United States. Promotion Discrimination 194. In June 2009, Plaintiff Wilkinson received a positive performance review. Because she was initially hired as a high-level, overqualified Account Executive, she expected to be promoted after her review to Senior Account Executive along the standard track of progression at the Company. 195. Although Ms. Wilkinson received an excellent review, satisfied the prerequisites for the promotion, and was already performing the duties of a Senior Account Executive, the Company refused to promote her because she “had not learned the financial side of running an account and had no direct reports.” Neither of these criticisms was applicable to Ms. Wilkinson, as knowledge of the financial side and direct reports were essential for Account Directors, but not for Account Executives like Ms. Wilkinson. 196. Defendants pressured Ms. Wilkinson to sign her performance review, despite her disagreement with the comments from her superiors explaining her promotion denial. 197. Upon information and belief, male employees who did not have direct reports at the Company were promoted to Senior Account Executives and above. 198. When Ms. Wilkinson was denied this promotion, Vickie Fite, Managing Director, offered her a regroup meeting in four months so that in the interim, she would have an opportunity to showcase her leadership and to take over the finances on one of her accounts. Again, these goals were suitable for an Account Director, not an Account Executive like Ms. Wilkinson. Despite this, she achieved these goals as successfully as her job allowed throughout the next four months. At the end of the four month period, Ms. Wilkinson requested the regroup meeting, but it never took place. 199. Ms. Wilkinson never received a promotion at the Company, while her male counterparts were consistently promoted along the standard progression track outlined in HR policies, often reaching Vice President and above. 200. Upon information and belief, Defendants also deny promotions to female employees like Plaintiff Wilkinson in favor of less qualified male employees across the PR practice in the United States. Defendants also promote male employees at a faster rate than similarly-situated female employees across the PR practice in the United States. Pregnancy/Caregiver Discrimination 201. In October 2009, Plaintiff Wilkinson announced she was pregnant with her first child. Although the Company acknowledged her pregnancy, it assigned greater responsibilities to Ms. Wilkinson in response to the announcement. She was expected to successfully perform the work of several employees. By increasing her workload to an unattainable level after announcing her pregnancy, the Company sent a clear message that she was no longer welcome there. 202. Around the same time, Ms. Wilkinson’s immediate supervisor went on maternity leave. Consequently, Ms. Wilkinson became the only Account Executive in the Los Angeles office working on a large account. Although the account required substantial resources and staffing by several employees, the Company did not establish a plan to properly manage this large account during this employee’s absence. The Company assigned an Executive Vice President to the account, but she was not able to dedicate enough time to service the account properly. Thus, Ms. Wilkinson was in charge of the account. 203. The client on the account finally lodged a complaint, stating that it was not receiving strategic counsel from senior management. The Company did not respond to this complaint by assigning an additional senior employee to the account. Instead, as a result of this complaint alone, Ms. Wilkinson was put on probation for ninety days in December 2009, 2 months after announcing her pregnancy. 204. Further, Defendants told Ms. Wilkinson that she would be relocated to an interior office so that she would be “closer to the team.” This move functioned as a demotion and damaged Ms. Wilkinson’s reputation with the Company by suggesting that she needed to be constantly monitored. 205. Because of the Company’s response to her pregnancy, Ms. Wilkinson felt she had no choice but to leave the Company. She resigned on December 22, 2009 and continued to do freelance work for the Company until February 2010, so that she could help transition another employee onto one of her several accounts. She only continued to work short-term for the Company because she had slightly more tolerable conditions as a freelancer. First, she had set hours that she could not exceed, and unlike before, she was compensated for each hour of work. She also did not have to interact with several of her colleagues responsible for the discrimination. 206. After Ms. Wilkinson resigned from the Company, it assigned several more employees to the account that she had been unable to handle on her own. It also filled her position with two employees, confirming its awareness that they had given Ms. Wilkinson more responsibilities than one employee could possibly handle – a fact that the Company did not take into account when it chose to wrongfully discipline Ms. Wilkinson for its own mistakes and in response to her pregnancy. 207. Upon information and belief, Defendants have subjected and continue to subject pregnant employees and/or female employees with young children and/or caregiving responsibilities like Plaintiff Wilkinson to disparate terms and conditions of employment across the PR practice in the United States. F. PLAINTIFF ZANETA HUBBARD 208. Defendants employed Plaintiff Hubbard from February 2008 through her termination in December 2008. Ms. Hubbard was terminated while on maternity leave. 209. Ms. Hubbard served as an Account Supervisor in MSL’s Atlanta office in the Southern region. Pay Discrimination 210. In Ms. Hubbard’s three-month review, the Company found that she “meets expectations” – the highest assessment available. Her supervisor also wrote, “[I]t’s clear that Zaneta has excellent project management skills.” 211. Ms. Hubbard’s excellent performance at the Company was never rewarded. Ms. Hubbard did not receive any raises or bonuses during her time at the Company and was paid much less than similarly-situated males. 212. For example, two male employees in MSL’s Atlanta office, Matt Fogt and Carlos Campos, had similar job duties to Ms. Hubbard’s. They also had less experience than Ms. Hubbard. Mr. Campos and Mr. Fogt, however, received substantially higher salaries than Ms. Hubbard’s. 213. Upon information and belief, MSL paid Mr. Campos approximately more than Ms. Hubbard in salary for performing substantially equal work. Promotion Discrimination 214. In her three-month review, Ms. Hubbard wrote that her long term goal was “to be promoted to [Senior Account Supervisor].” 215. Despite having more experience than Mr. Fogt and Mr. Campos, and having similar job duties to theirs, Ms. Hubbard was never promoted to their level, Senior Account Supervisor. Pregnancy/Caregiver Discrimination 216. In early 2008, Ms. Hubbard became pregnant. 217. Ms. Hubbard discussed working from home with her supervisor, Greg Euston, a Senior Vice President. Mr. Euston told Ms. Hubbard, “You need to be in the office so we can see your face and you can interact with clients.” 218. In June 2008, Ms. Hubbard’s doctor informed her that she needed a pregnancy-related operation performed immediately. After the surgery, Ms. Hubbard’s doctor put her on bed-rest. 219. Ms. Hubbard informed the Company that she was on bed-rest. Although the Company initially told her she could work from home, soon thereafter a Vice President in Human Resources, Susan Stewart, told Ms. Hubbard that working from home was against Defendants’ policy, and Ms. Hubbard was forced to take disability leave. 220. On October 9, 2008, Jenni McDonough, a Vice President in Human Resources, emailed Ms. Hubbard: “I’d like to be able to help [Managing Director,] Rob [Baskin] and [Senior Vice President,] Greg [Euston] prepare for finding work for you if you chose to return full-time.” Although Ms. Hubbard was allegedly a valued employee at MSL, she had lost her accounts and responsibilities after the Company forced her to take disability leave. 221. Ms. McDonough also wrote in her October 9, 2008 email to Ms. Hubbard: “Just so you know, regardless of what your decision is, you remain an employee of MS&L until the end of your disability period. So, even if you decide you want to be a stay-at-home mom, it would not in any way affect your benefits if you have already made that decision.” The Company was clearly giving Ms. Hubbard incentive to leave by telling her she could keep her benefits if she decided to leave, despite the fact that Ms. Hubbard had not intended to leave the Company. 222. Ms. Hubbard’s maternity leave began on October 23, 2008, the day she gave birth. While on maternity leave, Ms. Hubbard corresponded with Ms. McDonough about the possibility of returning either full time with flexibility or part time. 223. Ms. McDonough submitted Ms. Hubbard’s proposed flexible work schedule to the Managing Director of the Atlanta office, Robert Baskin. On October 15, 2008, Ms. McDonough told Ms. Hubbard in an email: “We’ll all be fluid and work this out as time marches on.” Thus, Defendants led Ms. Hubbard to believe she would be able to return on a flexible schedule. 224. Two months later, in December 2008, Ms. Hubbard was terminated due to the “economic downturn” and “clients slashing budgets.” Ms. Hubbard’s male peers who were working on the same accounts, however, were not termintated. 225. Ms. McDonough told Ms. Hubbard to keep checking back because the Company might need freelancers. Ms. Hubbard emailed Ms. McDonough every few weeks seeking a freelance position. 226. Ms. Hubbard was never again hired by the Company. G. WIDESPREAD PREGNANCY DISCRIMINATION AT PUBLICIS 227. Like Plaintiffs da Silva Moore, O’Donohue, Pierce, Wilkinson, and Hubbard, Defendants subjected other female employees who took maternity leave to similar systemic barriers to equal employment opportunities across the Company. 228. Defendants terminated Plaintiffs da Silva Moore and Pierce shortly after their returns from maternity leave, Plaintiff Wilkinson before she left for maternity leave, and Plaintiff Hubbard while out on maternity leave. Defendants also forced several other women out of the Company under similar circumstances. 229. Upon information and belief, Defendants terminated a Vice President at MSL in the San Francisco office, Heather Wadia, while she was on maternity leave, effective the day she was scheduled to return from maternity leave in September 2009. Ms. Wadia had been a stellar employee for Defendants since August 2005. Soon after Ms. Wadia’s termination, Defendants filled her position with Brian Baker, a male who had previously worked with the new head of the Western region, Joseph Carberry, at another company. Approximately two weeks after Mr. Baker began working at the Company, he went on paternity leave. Mr. Baker faced no adverse actions by the Company for taking leave, as Ms. Wadia had. 230. Upon information and belief, around the same time period, Defendants also terminated another Vice President at MSL in the San Francisco office, Lorie Hirson, three weeks after she returned from maternity leave. 231. Upon information and belief, Defendants also terminated Jamillah Renard, the Financial Director at MSL’s Washington, D.C. office, shortly after her return from maternity leave in April 2009, effective June 2009. She had worked at the Company since October 2007. 232. Upon information and belief, Defendants terminated Senior Account Manager in the Washington, D.C. office, Taryn Dorsey, shortly after her return from maternity leave. She worked at the Company from October 2005 until her termination in September 2010. 233. Upon information and belief, Shula Sarner worked as a Scientific Director at Publicis in New York, New York for approximately eight years. During her pregnancy, the Company significantly increased Ms. Sarner’s job responsibilities without a comparable increase in pay or status. After she returned from maternity leave, the Company subjected Ms. Sarner to disparate treatment based on her status as a working mother. As a result, Ms. Sarner was forced to leave the Company in December 2010. 234. Upon information and belief, Defendants terminated Lorna Feeney, an Associate Creative Director for Defendants in New York, New York, shortly after returning from maternity leave. Ms. Feeney worked for Defendants from 2006 until July 2010. 235. Upon information and belief, Defendants terminated Jeannie Kang, an Art Director for Defendants in New York, New York, shortly after she returned from maternity leave. Ms. Kang worked for Defendants from April 2006 until February 2010. 236. Upon information and belief, Martha Connor-VanDyke worked as a Creative Director for Defendants in New York, New York for five years. While on maternity leave, she was transferred to a new group, which adversely impacted her employment. Approximately one year later, Defendants terminated Ms. Connor- VanDyke. 237. Upon information and belief, Jill Lewis, a Vice President for Defendants in New York, New York, went on maternity leave in 2001. She had been at the Company since approximately 1998. Soon after her return, Defendants terminated her employment with the Company. 238. Upon information and belief, Francine Cohen, Group Media Director for Defendants in New York, New York, worked for the Company from approximately 1998 until May 2003. After she returned from maternity leave, the Company subjected her to disparate treatment and she had no choice but to resign from the Company. V. CLASS ACTION ALLEGATIONS 239. Plaintiffs da Silva Moore, O’Donohue, Mayers, Pierce, Wilkinson, and Hubbard (“Class Representatives”) incorporate by reference the allegations from the previous paragraphs of this Complaint alleging common policies and practices resulting in discrimination against female PR management employees. 240. Class Representatives and the class of female PR employees they seek to represent have been subjected to a pattern or practice of gender discrimination and disparate impact gender discrimination as a result of Defendants’ common discriminatory employment policies and practices. Such gender discrimination includes: (1) paying Plaintiffs and other female PR employees less than similarly-situated male employees; (2) failing to promote or advance Plaintiffs and other female PR employees at the same rate as similarly-situated male employees; (3) treating pregnant employees and mothers differently from non-pregnant employees, male employees, and non-caregivers; (4) failing to prevent, respond to, adequately investigate, and/or appropriately resolve instances of gender discrimination, sexual harassment, and pregnancy/caregiver discrimination in the workplace; and (5) carrying out discriminatory hires, terminations, demotions, and/or job reassignments based on gender when the Company reorganized its PR practice and management structure beginning in 2008, including wrongfully terminating Plaintiff da Silva Moore immediately following her return from maternity leave after thirteen years of exemplary employment with the Company. 241. Defendants, in effect, bar female PR employees from better and higher- paying positions which have traditionally been held by male employees. The systemic means of accomplishing such gender-based stratification include, but are not limited to, Defendants’ assignment, development, promotion, advancement, compensation, performance evaluation, leave, and termination policies, practices and procedures. These practices and procedures all suffer from a lack of: transparency, adequate quality standards and controls; sufficient implementation metrics; management/HR review; and opportunities for redress or challenge. As a result, employees are assigned, evaluated, compensated, developed, promoted and terminated within a system that is insufficiently designed, articulated, explained or implemented to consistently, reliably or equitably manage or reward employees. 242. Within these flawed structures, specific policies and practices negatively affect Defendants’ female PR professionals. For example, Defendants’ common and centralized employment policies have been implemented in an intentionally discriminatory manner and have had an adverse disparate impact on female PR employees. Defendants’ centralized decisionmaking by predominately male executive staff has been implemented in an intentionally discriminatory manner and has had an adverse disparate impact on female PR employees. Defendants’ hiring and salary freeze and exceptions have been implemented in an intentionally discriminatory manner and have had an adverse disparate impact on female PR employees. Defendants’ reorganization of its PR practice, management structure and resource allocation has been implemented in an intentionally discriminatory manner and has had an adverse disparate impact on female PR employees. Such policies, practices and procedures are not valid, job-related, or justified by business necessity. 243. Without the appropriate standards, guidelines, or transparency necessary to ensure an equitable workplace, unfounded criticisms may be lodged against female PR professionals who are female, pregnant, or mothers, and legitimate criticisms may be given undue weight. Moreover, taking leave or flex time for pregnancy and caretaking reasons can constitute a negative factor in employees’ evaluations, compensation, and promotion prospects; Defendants’ HR and management have failed to curb a corporate culture that presumes that being a mother makes an employee less dedicated or productive. 244. These problems are systemic and company-wide, because, upon information and belief, they all stem from flawed policies, practices and procedures which emanate from the Company’s Paris and New York headquarters. 245. Where Human Resources complaint and compliance policies exist, they lack meaningful quality controls, standards, implementation metrics, and means of redress. Concerns about discrimination made to supervising staff and HR itself are allowed to go unaddressed. Worse, there is no meaningful separation between HR complaint processes and the executives and managers who create discriminatory or hostile work conditions for women and mothers, such that victims of discrimination often face retaliation or are dissuaded from voicing concerns altogether. 246. Defendants have failed to impose adequate discipline on managers and employees who violate equal employment opportunity laws and have failed to create adequate incentives for its managerial and supervisory personnel to comply with such laws regarding the employment policies, practices, and procedures described above. 247. Thus, Defendants tolerate and even cultivate a hostile environment in which women and mothers are openly devalued and where (a) retaliation for voicing gender discrimination complaints is the norm, and (b) women and mothers who question or even inadvertently disrupt the Company’s gendered norms are routinely pushed out of the Company. 248. In sum, Defendants demonstrate a reckless disregard – a deliberate indifference – to its female employees by overlooking or otherwise dismissing even blatant evidence of gender discrimination. 249. Because of Defendants’ pattern or practice of gender discrimination and disparate impact gender discrimination, the Class Representatives and class they seek to represent have been adversely affected and have experienced harm, including the loss of compensation, promotion and other advancement opportunities, employment benefits and non-economic damages. 250. The Class Representatives and the class have no plain, adequate, or complete remedy at law to redress the wrongs alleged herein, and this suit is their only means of securing adequate relief. The Class Representatives and the class have suffered, and will continue to suffer, irreparable injury from Defendants’ ongoing, unlawful policies, practices, and procedures as set forth herein unless those policies, practices, and procedures are enjoined by this Court. A. General Facts Relevant to Class Claims and Class Definition 251. Class Representatives seek to maintain claims on their own behalf and on behalf of a class of current, former and future female PR employees who worked at any time in Defendants’ PR practice in the United States during the applicable liability period. 252. The class consists of all female public relations employees, who are, have been, or will be employed by Defendants in the United States at any time during the applicable liability period, including until the date of judgment in this case (“female public relations employees” or “female public relations professionals”). Upon information and belief, there are hundreds of such employees in the proposed class. 253. The Class Representatives seek to represent all of the female PR employees described above. The systemic gender discrimination described in this Complaint has been, and is, continuing in nature. B. Efficiency of Class Prosecution of Common Claims 254. Certification of a class of female PR employees is the most efficient and economical means of resolving the questions of law and fact which are common to the claims of the Class Representatives and the proposed class. 255. The individual claims of the Class Representatives require resolution of the common question of whether Defendants have engaged in a systemic pattern or practice of gender discrimination or disparate impact discrimination against female public relations employees. Class Representatives seek remedies to eliminate the adverse effects of such discrimination in their own lives, careers, and working conditions, and in the lives, careers, and working conditions of the proposed class members, and to prevent continued gender discrimination in the future. 256. Plaintiffs have standing to seek such relief because of the adverse effect that such discrimination has had on them individually and on female public relations employees generally. Defendants caused Plaintiffs’ injuries through its discriminatory practices, policies, and procedures, as well as its disparate treatment of employees who are female, pregnant, and/or have caregiving responsibilities. These injuries are redressable through systemic relief, such as an injunction, and other appropriate class- wide and individual remedies sought in this action. 257. In addition, proper relief for Plaintiffs’ individual constructive discharge and wrongful termination claims can include reinstatement. As such, each has a personal interest in the policies, practices, and procedures implemented at Defendants moving forward. 258. In order to gain such relief for themselves, as well as for the class members, Class Representatives will first establish the existence of systemic gender discrimination as the premise for the relief they seek. 259. Without class certification, the same evidence and issues would be subject to re-litigation in a multitude of individual lawsuits with an attendant risk of inconsistent adjudications and conflicting obligations. Certification of the proposed class of females is the most efficient and judicious means of presenting the evidence and arguments necessary to resolve such questions for the Class Representatives, the proposed class, and Defendants. C. Numerosity and Impracticability of Joinder 260. The class that the Class Representatives seek to represent is too numerous to make joinder practicable. Upon information and belief, the proposed class consists of hundreds of current, former, and future female public relations employees during the liability period. Defendants’ pattern or practice of gender discrimination and disparate impact gender discrimination also makes joinder impracticable by discouraging females from applying for or pursuing promotional, training, or transfer opportunities, thereby making it impractical and inefficient to identify many members of the class prior to determination of the merits of Defendants’ class-wide liability. D. Common Questions of Law and Fact 261. The prosecution of the claims of Class Representatives requires the adjudication of numerous questions of law and fact common to both their individual claims and those of the class they seek to represent. 262. The common questions of law include, inter alia: (a) whether Defendants have engaged in a pattern or practice of unlawful, systemic gender discrimination in its compensation, assignment, selection, performance evaluation, promotion, advancement, transfer, leave, and termination policies, practices, and procedures, and in the general terms and conditions of work and employment; (b) whether Defendants have engaged in unlawful disparate impact gender discrimination in its compensation, assignment, selection, performance evaluation, promotion, advancement, transfer, leave, and termination policies, practices, and procedures, and in the general terms and conditions of work and employment; (c) whether the failure to institute adequate standards, quality controls, implementation metrics, or oversight in assignment, compensation, evaluation, development, maternity and flex/time, promotion, and termination systems violates Title VII and/or other statutes; (d) whether the lack of transparency and of opportunities for redress in those systems violates Title VII and/or other statutes; (e) whether senior management and HR’s failure to prevent, investigate, or properly respond to evidence and complaints of discrimination in the workplace violates Title VII and/or other statutes; and (f) whether Defendants are liable for a continuing systemic violation of Title VII and/or other statutes; and a determination of the proper standards for proving a pattern or practice of discrimination by Defendants against its female PR professionals. 263. The common questions of fact include whether Defendants have, inter alia: (a) used a system of assignment that lacks meaningful or appropriate standards, implementation metrics, quality controls, transparency, and opportunities for redress; (b) through the use of that system of assignment, placed female PR professionals in job titles or classifications lower than similarly-situated male employees; (c) systematically, intentionally, or knowingly placed female PR professionals in job titles or classifications lower than similarly-situated male employees; (d) used a compensation system that lacks meaningful or appropriate standards, implementation metrics, quality controls, transparency, and opportunities for redress; (e) through the use of that compensation system, compensated female PR professionals less than similarly-situated males in salary, bonuses, and/or other perks; (f) systematically, intentionally, or knowingly compensated female PR professionals less than similarly-situated males; (g) used a system of development and mentoring that lacks meaningful or appropriate standards, implementation metrics, quality controls, transparency, and opportunities for redress (h) through the use of that development and mentoring system failed to develop or mentor female PR professionals in a commensurate manner to their similarly-situated male counterparts; (i) systematically, intentionally, or knowingly failed to develop or mentor female PR professionals in a commensurate manner to their similarly-situated male counterparts; (j) used a promotion system that lacks meaningful or appropriate standards, implementation metrics, quality controls, transparency, and opportunities for redress; (k) through the use of that promotion system, precluded or delayed the promotion of female PR professionals into higher level jobs traditionally held by male employees; (l) systematically, intentionally, or knowingly precluded or delayed the promotion of female PR professionals into higher level jobs traditionally held by male employees; (m) used a system for performance evaluations that lacks meaningful or appropriate standards, implementation metrics, quality controls, transparency, and opportunities for redress; (n) through use of that performance evaluation system, inaccurately, inequitably, or disparately measured and classified female and male PR professionals’ performance; (o) systematically, intentionally, or knowingly subjected female PR professionals to inaccurate, inequitable, or discriminatorily lowered performance evaluations; (p) through its policies, practices, and procedures, developed male and female PR professionals inequitably; (q) used maternity and flex time policies, practices, and procedures that lack meaningful or appropriate standards, implementation metrics, quality controls, transparency, or opportunities for redress; (r) through use of those policies, practices and procedures, treated pregnant employees and mothers differently and discriminatorily from non-pregnant employees, male employees, and non-caregivers; (s) systematically, intentionally, or knowingly subjected pregnant employees and mothers to disparate and discriminatory terms and conditions of employment; (t) used HR and EEO systems that lack meaningful or appropriate standards, implementation metrics, quality controls, transparency, or opportunities for redress; (u) through the use of those systems, minimized, ignored, or covered up evidence of gender discrimination and harassment in the workplace and/or otherwise mishandled the investigation of and response to complaints of discrimination and harassment brought to the attention of senior management, the human resources department, or other reporting channels; (v) systematically, intentionally, knowingly, or deliberately showed an indifference to evidence of discrimination in the workplace or otherwise minimized, ignored, mishandled, or covered up evidence of or complaints about gender and pregnancy discrimination and harassment in the workplace; (w) failed to adequately or meaningfully train, coach, or discipline senior management on EEO principles and compliance; and (x) carried out discriminatory hires, terminations, demotions, and/or job reassignments based on gender when the Company reorganized its PR practice and management structure beginning in 2008. 264. The employment policies, practices, and procedures to which the Class Representatives and the class members are subjected are set at Defendants’ corporate level, which is headquartered in and directed from Paris, France and New York, New York, and apply universally to all class members. These employment policies, practices and procedures are not unique or limited to any office location; rather, they apply to all office locations and, thus, affect the Class Representatives and class members in the same ways no matter the office, area, or position in which they work. 265. Throughout the liability period, a disproportionately large percentage of Defendants’ executives, senior executives, and officers have been male. 266. Defendants’ assignment, development, promotion, advancement, compensation, performance evaluation, leave, and termination policies, practices, and procedures all suffer from a lack of: transparency, adequate quality standards and controls; sufficient implementation metrics; management/HR review; and opportunities for redress or challenge. As a result, employees are assigned, evaluated, compensated, developed, promoted, and terminated within a system that is insufficiently designed, articulated, explained, or implemented to consistently, reliably or equitably manage or reward employees. 267. Discrimination in development, promotion, advancement, compensation, performance evaluation, leave, and terminations occurs in a pattern or practice throughout all offices in Defendants’ PR practice in the U.S. Employment opportunities are driven by personal familiarity, subjective decision-making, pre-selection, and interaction between male executives and subordinates, rather than by merit or equality of opportunity. As a result, male employees have advanced and continue to advance more rapidly to better and higher-paying jobs than do female employees. Defendants’ policies, practices, and procedures have had an adverse impact on female PR employees seeking selection for, or advancement to, better and higher-paying positions. In general, the higher the level of the job classification, the lower the percentage of female PR employees holding it. E. Typicality of Claims and Relief Sought 268. The claims of Class Representatives are typical of the claims of the class. The relief sought by the Class Representatives for gender discrimination complained of herein is also typical of the relief which is sought on behalf of the class. 269. Like the members of the class, Class Representatives are female PR employees who have worked for Defendants during the liability period. 270. Discrimination in assignment, selection, promotion, advancement, compensation, leave, and termination affects the compensation and employment opportunites of the Class Representatives and all the PR employee class members in the same or similar ways. 271. Defendants have failed to create adequate incentives for its executives and managers to comply with its own policies and equal employment opportunity laws regarding each of the employment policies, practices, and procedures referenced in this Complaint, and have failed to discipline adequately its executives, managers and other employees when they violate Company policy or discrimination laws. These failures have affected the Class Representatives and the class members in the same or similar ways. 272. The relief necessary to remedy the claims of the Class Representatives is exactly the same as that necessary to remedy the claims of the class members in this case. Class Representatives seek the following relief for their individual claims and for those of the members of the proposed class: (A) a declaratory judgment that Defendants have engaged in systemic gender discrimination and disparate impact discrimination against female PR employees by (1) paying female PR employees less than their male counterparts, (2) denying female PR employees promotions into better and higher-paying positions, (3) advancing female PR employees at a slower rate than their male counterparts, (4) treating pregnant employees and mothers differently from non-pregnant employees, male employees, and non-caregivers, (5) failing to prevent, respond to, adequately investigate, and/or appropriately resolve instances of gender discrimination and pregnancy/caregiver discrimination in the workplace, and (6) terminating, demoting, and reassigning a disproportionate number of females during its reorganization of its PR practice and management structure beginning in 2008; (B) a permanent injunction against such continuing discriminatory conduct; (C) injunctive relief which effects a restructuring of Defendants’ promotion, transfer, assignment, demotion, training, performance evaluation, compensation, leave, and termination policies, practices, and procedures – so that female PR employees will be able to compete fairly in the future for promotions, transfers, and assignments to better and higher-paying positions with terms and conditions of employment traditionally enjoyed by male employees; (D) back pay, front pay, and other equitable remedies necessary to make the female PR employees whole from the Defendants’ past discrimination; (E) punitive and nominal damages to prevent and deter Defendants from engaging in similar discriminatory practices in the future; (F) compensatory damages; (G) pre- and post-judgment interest; and (H) attorneys’ fees, costs and expenses. F. Adequacy of Representation 273. The Class Representatives’ interests are co-extensive with those of the members of the proposed class which they seek to represent in this case. Class Representatives seek to remedy Defendants’ discriminatory employment policies, practices, and procedures so that female PR employees will no longer be prevented from advancing into higher paying and more desirable higher level positions. Plaintiffs are willing and able to represent the proposed class fairly and vigorously as they pursue their individual claims in this action. 274. Class Representatives have retained counsel who are qualified, experienced, and able to conduct this litigation and to meet the time and fiscal demands required to litigate an employment discrimination class action of this size and complexity. The combined interests, experience, and resources of Plaintiffs’ counsel to litigate competently the individual and class claims at issue in this case clearly satisfy the adequacy of representation requirement of Federal Rule of Civil Procedure 23(a)(4). G. Requirements Of Rule 23(b)(2) 275. Defendants have acted on grounds generally applicable to the Class Representatives and the class by adopting and following systemic policies, practices, and procedures which are discriminatory. Disparate impact and systemic gender discrimination is Defendants’ standard operating procedure rather than a sporadic occurrence. Defendants have refused to act on grounds generally applicable to the class by, inter alia: (1) paying Plaintiffs and other female PR employees less than similarly- situated male employees; (2) failing to promote or advance Plaintiffs and other female PR employees at the same rate as similarly-situated male employees; (3) treating pregnant employees and mothers differently from non-pregnant employees, male employees, and non-caregivers; (4) failing to prevent, respond to, adequately investigate, and/or appropriately resolve instances of gender discrimination, sexual harassment and pregnancy/caregiver discrimination in the workplace; and (5) carrying out discriminatory hires, terminations, demotions, and/or job reassignments based on gender when the Company reorganized its PR practice and management structure beginning in 2008. 276. Defendants’ systemic discrimination and refusal to act on grounds that are not discriminatory have made appropriate the requested final injunctive and declaratory relief with respect to the class as a whole. H. Requirements of Rule 23(b)(3) 277. The common issues of fact and law affecting the claims of Class Representatives and proposed class members, including, but not limited to, the common issues previously identified herein, predominate over any issues affecting only individual claims. These issues include whether Defendants have engaged in gender discrimination against female employees by: (1) paying Plaintiffs and other female PR employees less than similarly-situated male employees; (2) failing to promote or advance Plaintiffs and other female PR employees at the same rate as similarly-situated male employees; (3) treating pregnant employees and mothers differently from non-pregnant employees, male employees, and non-caregivers; (4) failing to prevent, respond to, adequately investigate, and/or appropriately resolve instances of gender discrimination, sexual harassment, and pregnancy/caregiver discrimination in the workplace; and (5) carrying out discriminatory hires, terminations, demotions, and/or job reassignments based on gender when the Company reorganized its PR practice and management structure beginning in 2008. 278. A class action is superior to other available means for the fair and efficient adjudication of the claims of the Class Representatives and members of the proposed class. 279. The cost of proving Defendants’ pattern or practice of discrimination makes it impracticable for the Class Representatives and members of the proposed class to prosecute their claims individually. VI. COLLECTIVE ACTION ALLEGATIONS (EQUAL PAY ACT) 280. Plaintiffs da Silva Moore, O’Donohue, Mayers, and Pierce (“EPA Collective Action Plaintiffs”) incorporate by reference the allegations from the previous paragraphs of this Complaint alleging class-based common policies and practices resulting in unequal pay earned by similarly-situated female PR management employees. 281. Plaintiffs da Silva Moore, O’Donohue, Mayers, and Pierce bring collective claims alleging violations of the Equal Pay Act (“EPA”) as a collective action pursuant to Section 16(b) of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 216(b) on behalf of all members of the EPA Class. The EPA Class consists of female public relations management employees who are, have been, or will be employed by Defendants in the following positions, including but not limited to Vice President, Senior Vice President, Senior Vice President/Director, and/or Senior Vice President/Deputy Managing Director (classified in the job codes of in Defendants’ compensation/payroll policies and records) in the United States, at any time during the applicable liability period (“female PR management employees”). 282. Plaintiffs da Silva Moore, O’Donohue, Mayers, and Pierce seek to represent all of the female PR management employees described above. The systemic gender discrimination described in this Complaint has been, and is, continuing in nature. 283. The EPA action includes female PR management employees who (a) were not compensated equally to males who had substantially similar job classifications, job functions, job families, job codes, job titles, job descriptions, and/or job duties based on Defendants’ common employment policies and centralized decisionmaking; (b) were not compensated equally to males who performed substantially similar work based on Defendants’ common employment policies and centralized decisionmaking; and (c) who were denied assignment, placement, promotion, and/or advancement opportunities that would have resulted in greater compensation in favor of lesser qualified male employees based on Defendants’ common employment policies and centralized decisionmaking. 284. Questions of law and fact common to the EPA Collective Action Plaintiffs and the EPA Class as a whole include but are not limited to the following: (a) Whether Defendants unlawfully failed and continue to fail to compensate female PR management employees at a level commensurate with similarly- situated male employees; (b) Whether Defendants unlawfully failed and continue to fail to assign, place, promote, and advance female PR management employees to higher paying positions in a fashion commensurate with similarly-situated males; (c) Whether Defendants’ policy or practice of failing to compensate female PR management employees on a par with comparable male employees as a result of (a) and (b) violate applicable provisions of the EPA; and (d) Whether Defendants’ failure to compensate female PR management employees on a par with comparable male employees as a result of (a) and (b) was willful within the meaning of the EPA. 285. Counts for violation of the EPA 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 EPA Collective Action Plaintiffs, because their claims are similar to the claims of the EPA Class. 286. Plaintiffs da Silva Moore, O’Donohue, Mayers, and Pierce, and the EPA Collective Action Class (a) are similarly situated; (b) have substantially similar job classifications, job functions, job families, job titles, job descriptions, and/or job duties; and (c) are subject to Defendants’ common compensation policies and practices, and centralized decisionmaking resulting in unequal pay based on sex by (i) failing to compensate female PR management employees on a par with men who perform substantially equal work and/or hold equivalent levels, job titles, and positions, and (ii) failing to provide female PR management employees equal pay by denying opportunities for assignment, placement, promotion, and advancement that would have resulted in greater compensation to them comparable to those afforded to males who perform substantially equal work. COUNTS COUNT I (INDIVIDUAL AND CLASS ACTION CLAIMS) VIOLATION OF TITLE VII OF THE CIVIL RIGHTS ACT OF 1964 (“TITLE VII”) - GENDER DISCRIMINATION 42 U.S.C. § 2000e, et seq. (Plaintiffs da Silva Moore, O’Donohue, Mayers, and Wilkinson Against All Defendants) 287. Plaintiffs re-allege and incorporate by reference each and every allegation in each and every aforementioned paragraph as if fully set forth herein. 288. This Count is brought on behalf of Class Representatives da Silva Moore, O’Donohue, Mayers, and Wilkinson, and all members of the class. 289. Defendants have discriminated against the Class Representatives and all members of the class in violation of Title VII of the Civil Rights Act, 42 U.S.C. § 2000e, et seq., as amended by the Civil Rights Act of 1991 (“Title VII”), by subjecting them to different treatment on the basis of their gender. Plaintiffs have suffered both disparate impact and disparate treatment discrimination as a result of Defendants’ wrongful conduct. 290. Defendants have discriminated against the Class Representatives and all members of the class by treating them differently from and less preferably than similarly- situated male employees and by subjecting them to discriminatory pay, discriminatory denial of promotions, disparate terms and conditions of employment, discriminatory job assignment, discriminatory terminations and demotions, and other forms of discrimination, in violation of Title VII. 291. Defendants have failed to prevent, respond to, adequately investigate, and/or appropriately resolve instances of gender discrimination, sexual harassment, and pregnancy/caregiver discrimination in the workplace. 292. Defendants’ conduct has been intentional, deliberate, willful, malicious, reckless, and conducted in callous disregard of the rights of the Class Representatives and all members of the class, entitling the Class Representatives and all members of the class to punitive damages. 293. By reason of the continuous nature of Defendants‟ discriminatory conduct, which persisted throughout the employment of the Class Representatives and the members of the class, the Class Representatives and the members of the class are entitled to application of the continuing violations doctrine to all violations alleged herein. 294. As a result of Defendants‟ conduct alleged in this complaint, the Class Representatives and the members of the class have suffered and continue to suffer harm, including but not limited to lost earnings, lost benefits, lost future employment opportunities, and other financial loss, as well as non-economic damages. 295. Defendants‟ policies, practices, and/or procedures have produced a disparate impact on the Class Representatives and the members of the class with respect to the terms and conditions of their employment. 296. By reason of Defendants‟ discrimination, the Class Representatives and the members of the class are entitled to all legal and equitable remedies available for violations of Title VII, including reinstatement and an award of compensatory and punitive damages. 297. Attorneys‟ fees and costs should be awarded under 42 U.S.C. § 2000e- 5(k). COUNT II (INDIVIDUAL AND CLASS ACTION CLAIMS) VIOLATION OF NEW YORK EXECUTIVE LAW § 296, subd. 1(a) – GENDER DISCRIMINATION (Against All Defendants) 298. Plaintiffs re-allege and incorporate by reference each and every allegation in each and every aforementioned paragraph as if fully set forth herein. 299. This Count is brought on behalf of New York Plaintiffs and all appropriate members of the class. 300. Defendants have discriminated against New York Plaintiffs and members of the class in violation of Section 296, subdivision 1(a) of the New York Executive Law, by subjecting them to different treatment and disparate impact discrimination on the basis of their gender. 301. Defendants have discriminated against New York Plaintiffs and members of the class by treating them differently from and less preferably than similarly-situated male employees and by subjecting them to discriminatory pay, discriminatory denial of promotions, discriminatory performance evaluations, disparate terms and conditions of employment, discriminatory terminations and demotions, and other forms of discrimination, in violation of New York Executive law. 302. Defendants‟ policies, practices, and procedures have produced disparate impacts on New York Plaintiffs and members of the class with respect to the terms and conditions of employment. 303. As a result of Defendants‟ conduct alleged in this complaint, New York Plaintiffs and members of the class have suffered and continue to suffer harm, including but not limited to lost earnings, lost benefits, lost future employment opportunities, and other financial loss, as well as non-economic damages. 304. By reason of Defendants‟ discrimination, New York Plaintiffs and members of the class are entitled to all legal and equitable remedies available for violations of the New York Executive Law, including reinstatement and compensatory damages. 305. Attorneys‟ fees and costs should be awarded under the New York Executive Law. COUNT III (INDIVIDUAL AND CLASS ACTION CLAIMS) VIOLATION OF NEW YORK CITY ADMINISTRATIVE CODE § 8-107, subd. 1(a) – GENDER DISCRIMINATION (Plaintiffs da Silva Moore and O’Donohue Against All Defendants) 306. Plaintiffs re-allege and incorporate by reference each and every allegation in each and every aforementioned paragraph as if fully set forth herein. 307. This Count is brought on behalf of the New York Plaintiffs, and all appropriate members of the class to whom this statute applies. 308. Defendants have discriminated against New York Plaintiffs and members of the class in violation of Section 8-107, subdivision 1(a) of the New York City Administrative Code, by subjecting them to different treatment and disparate impact discrimination on the basis of their gender. 309. Defendants have discriminated against New York Plaintiffs and members of the class by treating them differently from and less preferably than similarly-situated male employees and by subjecting them to discriminatory pay, discriminatory denial of promotions, discriminatory performance evaluations, disparate terms and conditions of employment, discriminatory terminations and demotions, and other forms of discrimination, in violation of New York City Administrative Code. 310. Defendants‟ policies, practices, and procedures have produced disparate impacts on the Plaintiffs and members of the class with respect to the terms and conditions of employment. 311. As a result of Defendants‟ conduct alleged in this complaint, New York Plaintiffs and members of the class have suffered and continue to suffer harm, including but not limited to lost earnings, lost benefits, lost future employment opportunities, and other financial loss, as well as non-economic damages. 312. By reason of Defendants‟ discrimination, New York Plaintiffs and members of the class are entitled to all legal and equitable remedies available for violations of the New York City Administrative Code, including reinstatement and an award of compensatory and punitive damages. 313. Attorneys‟ fees and costs should be awarded under the New York Administrative Code. COUNT IV (INDIVIDUAL AND COLLECTIVE ACTION CLAIMS) VIOLATION OF THE FAIR LABOR STANDARDS ACT OF 1938, AS AMENDED BY THE EQUAL PAY ACT OF 1963 – 29 U.S.C. §§ 206, et seq. DENIAL OF EQUAL PAY FOR EQUAL WORK (Plaintiffs da Silva Moore, O’Donohue, Mayers, and Pierce Against All Defendants) 314. Plaintiffs re-allege and incorporate by reference each and every allegation contained in the previous paragraphs of this Complaint as though fully set forth herein. 315. This Count is brought on behalf of Plaintiffs da Silva Moore, O‟Donohue, Mayers, and Pierce, and all members of the EPA Collective Action Class. 316. Defendants are employers of Plaintiffs and the EPA Collective Action Class within the meaning of the Fair Labor Standards Act of 1938, 29 U.S.C. §§ 206, et seq., as amended by the Equal Pay Act of 1963 (“EPA”). 317. Defendants have paid the EPA Collective Action Plaintiffs and the EPA Class less than similarly-situated male employees in violation of the Fair Labor Standards Act of 1938, 29 U.S.C. §§ 206, et seq., as amended by the Equal Pay Act of 1963 (“EPA”), by paying them less for substantially equal work on the basis of sex. 318. Defendants have discriminated against EPA Collective Action Plaintiffs and the EPA Class by paying them less than similarly-situated male employees who performed jobs which required equal skill, effort, and responsibility, and which were performed under similar working conditions. Defendants so discriminated by subjecting the EPA Collective Action Plaintiffs and EPA Class to common discriminatory pay policies, including discriminatory salaries, bonuses, and other compensation incentives, and discriminatory assignments, denials of promotions, and other advancement opportunities that would result in higher compensation, and other forms of discrimination in violation of the Equal Pay Act. 319. Defendants caused, attempted to cause, contributed to, or caused the continuation of, the wage rate discrimination based on sex in violation of the Equal Pay Act. Moreover, Defendants willfully violated the Equal Pay Act by intentionally paying women less than men. 320. As a result of Defendants‟ conduct alleged in this Complaint and/or Defendants‟ willful, knowing, and intentional discrimination, the EPA Collective Action Plaintiffs and EPA Class have suffered and will continue to suffer harm, including but not limited to lost earnings, lost benefits, and other financial loss, as well as non- economic damages. 321. The EPA Collective Action Plaintiffs and EPA Class are therefore entitled to all legal and equitable remedies, including doubled awards for all willful violations. 322. Attorneys‟ fees and costs should be awarded under 29 U.S.C. §§ 216, et seq. COUNT V (INDIVIDUAL AND CLASS ACTION CLAIMS) VIOLATION OF THE NEW YORK EQUAL PAY LAW– N.Y. LABOR LAW § 194 DENIAL OF EQUAL PAY FOR EQUAL WORK (Against All Defendants) 323. Plaintiffs re-allege and incorporate by reference each and every allegation contained in the previous paragraphs of this Complaint as though fully set forth herein. 324. Defendants, an employer of the Plaintiffs and all members of the class within the meaning of the New York Equal Pay Law, have discriminated against New York Plaintiffs and appropriate class members in violation of the New York Labor Law § 194, by subjecting them to unequal pay on the basis of sex. 325. Defendants have discriminated against New York Plaintiffs and class members by treating them differently from and less preferably than similarly-situated male employees who performed jobs that required equal skill, effort, and responsibility, and which were performed under similar working conditions. Defendants so discriminated by subjecting them to discriminatory pay, discriminatory denials of bonuses and other compensation incentives, discriminatory denials of promotions and other advancement opportunities that would result in higher compensation, and other forms of discrimination in violation of the New York Equal Pay Law. 326. Defendants caused, attempted to cause, contributed to, or caused the continuation of, the wage rate discrimination based on sex in violation of the New York Equal Pay Law. Moreover, Defendants willfully violated the New York Equal Pay Law by intentionally paying women less than similarly-situated men. 327. As a result of Defendants‟ conduct alleged in this Complaint and/or Defendants‟ willful, knowing, and intentional discrimination, New York Plaintiffs and class members have suffered and will continue to suffer harm, including but not limited to lost earnings, lost benefits, and other financial loss, as well as non-economic damages. 328. New York Plaintiffs and class members are therefore entitled to all legal and equitable remedies, including doubled awards for all willful violations and attorneys‟ fees and costs. COUNT VI (INDIVIDUAL AND CLASS CLAIMS) VIOLATIONS OF TITLE VII, 42 U.S.C. § 2000e(k) et seq. PREGNANCY DISCRIMINATION (Plaintiffs da Silva Moore and Wilkinson Against All Defendants) 329. Plaintiffs da Silva Moore and Wilkinson re-allege and incorporate by reference each and every allegation contained in each and every aforementioned paragraph as though fully set forth herein. 330. Defendants discriminated against the Plaintiffs da Silva Moore and Wilkinson and members of the class because of or on the basis of pregnancy, childbirth, or related medical conditions. 331. Plaintiffs da Silva Moore and Wilkinson and members of the class were not treated the same for all employment-related purposes, as other not-pregnant persons, who were similarly-situated in their ability or inability to work. 332. Defendants‟ conduct has been intentional, deliberate, willful, malicious, reckless, and conducted in callous disregard of the rights of Plaintiffs da Silva Moore and Wilkinson and members of the class. 333. As a direct and proximate result of Defendants‟ aforementioned conduct, Plaintiffs da Silva Moore and Wilkinson and all members of the class were damaged and suffered economic and non-economic damages. 334. By reason of the continuous nature of Defendants‟ discriminatory conduct, persistent throughout the employment of Plaintiffs da Silva Moore and Wilkinson and the class members, Plaintiffs da Silva Moore and Wilkinson and the class members are entitled to application of the continuing violation doctrine to all of the violations alleged herein. 335. By reason of the pregnancy discrimination suffered as a result of Defendants‟ discriminatory conduct, Plaintiffs da Silva Moore and Wilkinson and members of the class are entitled to legal and equitable remedies available under Title VII, including reinstatement and an award of compensatory and punitive damages. 336. Attorneys‟ fees and costs should be awarded under 42 U.S.C. § 2000e- 5(k). COUNT VII (INDIVIDUAL CLAIM – PLAINTIFF DA SILVA MOORE) VIOLATION OF THE FAMILY AND MEDICAL LEAVE ACT OF 1993 (“FMLA”) 29 U.S.C. § 2601, et seq. (Plaintiff da Silva Moore Against All Defendants) 337. Plaintiff da Silva Moore re-alleges and incorporates by reference each and every allegation in each and every aforementioned paragraph as if fully set forth herein. 338. This Count is brought on behalf of Plaintiff da Silva Moore. 339. Under the FMLA, an employee must be restored by the employer to the same position held by the employee when the leave commenced, or to an equivalent position with equivalent employment benefits, pay, and other terms and conditions of employment. 340. From September 5, 2009 to January 4, 2010, Ms. da Silva Moore took approved FMLA leave for maternity leave to care for her newborn child. Upon her return from such leave, Defendants failed to restore Ms. da Silva Moore to the position she held in September 2009, when the leave commenced. Defendants demoted Ms. da Silva Moore by eliminating her position, gave her less desirable terms and conditions of employment, and terminated her upon her return from FMLA leave. 341. Defendants acted willfully, intentionally, and with reckless disregard to Plaintiff‟s FMLA rights. 342. As a result of Defendants‟ conduct alleged in this Complaint and/or Defendants‟ willful, knowing, and intentional discrimination, Plaintiff da Silva Moore has suffered and will continue to suffer harm, including but not limited to lost earnings, lost benefits, and other financial loss, as well as non-economic damages. 343. Plaintiff da Silva Moore is therefore entitled to all legal and equitable remedies, including doubled awards for all willful violations. 344. Attorneys‟ fees and costs should be awarded under 29 U.S.C. §§ 216, et seq. COUNT VIII (INDIVIDUAL CLAIM – PLAINTIFF DA SILVA MOORE) VIOLATION OF THE FAMILY AND MEDICAL LEAVE ACT OF 1993 (“FMLA”) - RETALIATION 29 U.S.C. § 2601, et seq. (Plaintiff da Silva Moore Against All Defendants) 345. Plaintiff da Silva Moore re-alleges and incorporates by reference each and every allegation in each and every aforementioned paragraph as if fully set forth herein. 346. This Count is brought on behalf of Plaintiff da Silva Moore. 347. Under the FMLA, it is unlawful for any employer to discharge or in any other manner discriminate against any individual for opposing any practice made unlawful under the FMLA. 348. Moreover, employers may not use the taking of FMLA leave as a negative factor in employment decisions, such as hiring, promotions, or disciplinary actions. 349. In September 2009, Ms. da Silva Moore took approved FMLA leave to care for her newborn daughter. In so doing, Ms. da Silva Moore exercised her rights protected under FMLA. Upon her return from protected FMLA leave, Defendants unlawfully terminated Ms. da Silva Moore because she had taken FMLA leave and because she insisted upon exercising her rights under the FMLA. 350. In retaliating against Plaintiff, by ultimately terminating her because she had taken FMLA leave and because she had insisted upon exercising her rights under the FMLA, Defendants acted willfully, intentionally, and with reckless disregard of Ms. da Silva Moore‟s FMLA-protected rights. 351. As a result of Defendants‟ conduct alleged in this Complaint and/or Defendants‟ willful, knowing, and intentional discrimination, Plaintiff da Silva Moore has suffered and will continue to suffer harm, including but not limited to lost earnings, lost benefits, and other financial loss, as well as non-economic damages. 352. Plaintiff da Silva Moore is therefore entitled to all legal and equitable remedies, including doubled awards for all willful violations. 353. Attorneys‟ fees and costs should be awarded under 29 U.S.C. §§ 216, et seq. COUNT IX (INDIVIDUAL CLAIM – PLAINTIFF PIERCE) VIOLATION OF THE FAMILY AND MEDICAL LEAVE ACT OF 1993 (“FMLA”) 29 U.S.C. § 2601, et seq. (Plaintiff Pierce Against All Defendants) 354. Plaintiff Pierce re-alleges and incorporates by reference each and every allegation in each and every aforementioned paragraph as if fully set forth herein. 355. This Count is brought on behalf of Plaintiff Pierce. 356. Under the FMLA, an employee must be restored by the employer to the same position held by the employee when the leave commenced, or to an equivalent position with equivalent employment benefits, pay, and other terms and conditions of employment. 357. Ms. Pierce went on maternity leave in August 2008. Shortly thereafter, Ms. Pierce‟s supervisor forced her to work across the country from her home, making it impossible to work at the Company. As a result, Ms. Pierce was forced to resign in December 2008. 358. Defendants acted willfully, intentionally, and with reckless disregard to Plaintiff‟s FMLA rights. 359. As a result of Defendants‟ conduct alleged in this Complaint and/or Defendants‟ willful, knowing, and intentional discrimination, Plaintiff Pierce has suffered and will continue to suffer harm, including but not limited to lost earnings, lost benefits, and other financial loss, as well as non-economic damages. 360. Plaintiff Pierce is therefore entitled to all legal and equitable remedies, including doubled awards for all willful violations. 361. Attorneys‟ fees and costs should be awarded under 29 U.S.C. §§ 216, et seq. COUNT X (INDIVIDUAL CLAIM – PLAINTIFF PIERCE) VIOLATION OF THE FAMILY AND MEDICAL LEAVE ACT OF 1993 (“FMLA”) - RETALIATION 29 U.S.C. § 2601, et seq. (Plaintiff Pierce Against All Defendants) 362. Plaintiff Pierce re-alleges and incorporates by reference each and every allegation in each and every aforementioned paragraph as if fully set forth herein. 363. This Count is brought on behalf of Plaintiff Pierce. 364. Under the FMLA, it is unlawful for any employer to discharge or in any other manner discriminate against any individual for opposing any practice made unlawful under the Act. 365. Moreover, employers may not use the taking of FMLA leave as a negative factor in employment decisions, such as hiring, promotions, or disciplinary actions. 366. Ms. Pierce took approved FMLA leave in August 2008 to care for her newborn child. In so doing, Ms. Pierce exercised her rights protected under the FMLA. Shortly thereafter, Ms. Pierce‟s supervisor forced her to work across the country from her home, making it impossible to work at the Company. As a result, Ms. Pierce was forced to resign in December 2008. 367. In retaliating against Plaintiff, by ultimately terminating her because she had taken FMLA leave and because she had insisted upon exercising her rights under the FMLA, Defendants acted willfully, intentionally, and with reckless disregard of Ms. Pierce‟s FMLA-protected rights. 368. As a result of Defendants‟ conduct alleged in this Complaint and/or Defendants‟ willful, knowing, and intentional discrimination, Plaintiff Pierce has suffered and will continue to suffer harm, including but not limited to lost earnings, lost benefits, and other financial loss, as well as non-economic damages. 369. Plaintiff Pierce is therefore entitled to all legal and equitable remedies, including doubled awards for all willful violations. 370. Attorneys‟ fees and costs should be awarded under 29 U.S.C. §§ 216, et seq. COUNT XI (INDIVIDUAL CLAIM – PLAINTIFF WILKINSON) VIOLATION OF THE FAIR LABOR STANDARDS ACT OF 1938, AS AMENDED BY THE EQUAL PAY ACT OF 1963 – 29 U.S.C. §§ 206, et seq. DENIAL OF EQUAL PAY FOR EQUAL WORK (Plaintiff Wilkinson Against All Defendants) 371. Plaintiff Wilkinson re-alleges and incorporates by reference each and every allegation contained in the previous paragraphs of this Complaint as though fully set forth herein. 372. This Count is brought on behalf of Plaintiff Wilkinson. 373. Defendants are an employer of Plaintiff Wilkinson within the meaning of the Fair Labor Standards Act of 1938, 29 U.S.C. §§ 206, et seq., as amended by the Equal Pay Act of 1963 (“EPA”). 374. Defendants paid Plaintiff Wilkinson less than similarly-situated male employees in violation of the EPA on the basis of sex. 375. Defendants have discriminated against Plaintiff Wilkinson by paying her less than similarly-situated male employees who performed jobs which required equal skill, effort, and responsibility, and which were performed under similar working conditions. Defendants so discriminated by subjecting Plaintiff Wilkinson to common discriminatory pay policies, including discriminatory salaries, bonuses and other compensation incentives, and discriminatory assignments and denials of promotions and other advancement opportunities that would result in higher compensation, and other forms of discrimination in violation of the Equal Pay Act. 376. Defendants caused, attempted to cause, contributed to, or caused the continuation of, the wage rate discrimination based on sex in violation of the Equal Pay Act. Moreover, Defendants willfully violated the Equal Pay Act by intentionally paying Plaintiff Wilkinson less than similarly-situated men. 377. As a result of Defendants‟ conduct alleged in this Complaint and/or Defendants‟ willful, knowing and intentional discrimination, Plaintiff Wilkinson has suffered and will continue to suffer harm, including but not limited to lost earnings, lost benefits, and other financial loss, as well as non-economic damages. 378. Plaintiff Wilkinson is therefore entitled to all legal and equitable remedies, including doubled awards for all willful violations. 379. Attorneys‟ fees and costs should be awarded under 29 U.S.C. §§ 216, et seq. COUNT XII (INDIVIDUAL CLAIM – PLAINTIFF HUBBARD) VIOLATION OF THE FAIR LABOR STANDARDS ACT OF 1938, AS AMENDED BY THE EQUAL PAY ACT OF 1963 – 29 U.S.C. §§ 206, et seq. DENIAL OF EQUAL PAY FOR EQUAL WORK (Plaintiff Hubbard Against All Defendants) 380. Plaintiff Hubbard re-alleges and incorporates by reference each and every allegation contained in the previous paragraphs of this Complaint as though fully set forth herein. 381. This Count is brought on behalf of Plaintiff Hubbard. 382. Defendants are an employer of Plaintiff Hubbard within the meaning of the Fair Labor Standards Act of 1938, 29 U.S.C. §§ 206, et seq., as amended by the Equal Pay Act of 1963 (“EPA”). 383. Defendants paid Plaintiff Hubbard less than similarly-situated male employees in violation of the EPA on the basis of sex. 384. Defendants have discriminated against Plaintiff Hubbard by paying her less than similarly-situated male employees who performed jobs which required equal skill, effort, and responsibility, and which were performed under similar working conditions. Defendants so discriminated by subjecting Plaintiff Hubbard to common discriminatory pay policies, including discriminatory salaries, bonuses and other compensation incentives, and discriminatory assignments and denials of promotions and other advancement opportunities that would result in higher compensation, and other forms of discrimination in violation of the Equal Pay Act. 385. Defendants caused, attempted to cause, contributed to, or caused the continuation of, the wage rate discrimination based on sex in violation of the Equal Pay Act. Moreover, Defendants willfully violated the Equal Pay Act by intentionally paying Plaintiff Hubbard less than similarly-situated men. 386. As a result of Defendants‟ conduct alleged in this Complaint and/or Defendants‟ willful, knowing and intentional discrimination, Plaintiff Hubbard has suffered and will continue to suffer harm, including but not limited to lost earnings, lost benefits, and other financial loss, as well as non-economic damages. 387. Plaintiff Hubbard is therefore entitled to all legal and equitable remedies, including doubled awards for all willful violations. 388. Attorneys‟ fees and costs should be awarded under 29 U.S.C. §§ 216, et seq. PRAYER FOR RELIEF ON CLASS, COLLECTIVE ACTION, AND INDIVIDUAL CLAIMS WHEREFORE, Plaintiffs, on their own behalves and on behalf of the class, prays that this Court: A. Certify the case as a class action maintainable under Federal Rules of Civil Procedure Rule 23(a), (b)(2) and/or (b)(3), on behalf of the proposed Plaintiff class, and designate Ms. da Silva Moore, Ms. O‟Donohue, Ms. Mayers, and Ms. Wilkinson as the representatives of this class and their counsel of record as class counsel; B. Designate this action as a collective action on behalf of the proposed EPA Collective Action Plaintiffs (asserting EPA claims) and (i) promptly issue notice pursuant to 29 U.S.C. § 216(b) to all similarly-situated members of the EPA Collective Action Opt-In Class, which (a) apprises them of the pendency of this action, and (b) permits them to assert timely EPA claims in this action by filing individual Consent to Join forms pursuant to 29 U.S.C. § 216(b); and (ii) toll the statute of limitations on the claims of all members of the EPA Collective Action Opt-In Class from the date the original complaint was filed until the Class members are provided with reasonable notice of the pendency of this action and a fair opportunity to exercise their right to opt-in as Plaintiffs; C. Designate Plaintiffs da Silva Moore, O‟Donohue, Mayers, and Pierce as representatives of the EPA Collective Action Class; D. Declare and adjudge that Defendants‟ employment policies, practices and/or procedures challenged herein are illegal and in violation of the rights of: (i) Class Representatives and members of the class under Title VII of the Civil Rights Act of 1964, as amended; (ii) New York Plaintiffs and class members under the New York Executive Law, the New York City Administrative Code, and the New York Equal Pay Law; (iii) Collective Action Plaintiffs and members of the collective action under the Federal Equal Pay Act; (iv) Plaintiffs da Silva Moore and Pierce under the Family and Medical Leave Act of 1993; and (v) Plaintiffs Wilkinson and Hubbard under the Federal Equal Pay Act; E. Issue a permanent injunction against the Defendants and their partners, officers, trustees, owners, employees, agents, attorneys, successors, assigns, representatives and any and all persons acting in concert with them from engaging in any conduct violating the rights of the Class Representatives, class members and those similarly situated as secured by 42 U.S.C. §§ 2000e et seq., and order such injunctive relief as will prevent Defendants from continuing their discriminatory practices and protect others similarly situated; F. Issue a permanent injunction against Defendants and their partners, officers, trustees, owners, employees, agents, attorneys, successors, assigns, representatives and any and all persons acting in concert with them from engaging in any further unlawful practices, policies, customs, usages, gender discrimination or retaliation by the Defendants as set forth herein; G. Order Defendants to initiate and implement programs that will: (i) provide equal employment opportunities for female PR employees; (ii) remedy the effects of the Defendants‟ past and present unlawful employment policies, practices and/or procedures; and (iii) eliminate the continuing effects of the discriminatory and retaliatory practices described above; H. Order Defendants to initiate and implement systems of assigning, training, transferring, compensating and promoting female PR employees in a non-discriminatory manner; I. Order Defendants to establish a task force on equality and fairness to determine the effectiveness of the programs described above, which would provide for: (i) monitoring, reporting, and retaining of jurisdiction to ensure equal employment opportunity; (ii) the assurance that injunctive relief is properly implemented; and (iii) a quarterly report setting forth information relevant to the determination of the effectiveness of the programs described above; J. Order Defendants to adjust the wage rates and benefits for the Class Representatives and the class members to the level that they would be enjoying but for the Defendants‟ discriminatory policies, practices and/or procedures; K. Order Defendants to place or restore the Class Representatives and the class members into those jobs they would now be occupying but for Defendants‟ discriminatory policies, practices and/or procedures; L. Order that this Court retain jurisdiction of this action until such time as the Court is satisfied that the Defendants have remedied the practices complained of herein and are determined to be in full compliance with the law; M. Award nominal, compensatory and punitive damages to the Class Representatives, the class members, and individual Plaintiffs in excess of 100 million dollars; N. Award liquidated damages to the EPA Collective Action Plaintiffs, EPA Class, and individual Plaintiffs; O. Award litigation costs and expenses, including, but not limited to, reasonable attorneys‟ fees, to the Class Representatives, the class members, the EPA Collective Action Plaintiffs, the EPA Class, and individual Plaintiffs; P. Award back pay, front pay, lost benefits, preferential rights to jobs and other damages for lost compensation and job benefits with pre-judgment and post- judgment interest suffered by the Class Representatives, the class members, the EPA Collective Action Plaintiffs, the EPA Class, and individual Plaintiffs to be determined at trial; Q. Order Defendants to make whole Class Representatives, the class members, the EPA Collective Action Plaintiffs, the EPA Class, and individual Plaintiffs by providing them with appropriate lost earnings and benefits, and other affirmative relief; R. Award any other appropriate equitable relief to the Class Representatives, the class members, the EPA Collective Action Plaintiffs, the EPA Class, and individual Plaintiffs; and

civil rights, immigration, family

d6j5CYcBD5gMZwczK-2y

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK --------------------------------------------------------- YEHOSHUA C. MINSKY on behalf of himself and all other similarly situated consumers Plaintiff, -against- FINANCIAL RECOVERY SERVICES, INC. Defendant. ----------------------------------------------------------- CLASS ACTION COMPLAINT Introduction 1. Plaintiff Yehoshua C. Minsky seeks redress for the illegal practices of Financial Recovery Services, Inc. concerning the collection of debts, in violation of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (“FDCPA”). Parties 2. Plaintiff is a citizen of the State of New York who resides within this District. 3. Plaintiff is a consumer as that term is defined by Section 1692(a)(3) of the FDCPA, in that the alleged debt that Defendant sought to collect from Plaintiff is a consumer debt. 4. Upon information and belief, Defendant's principal place of business is located in Minneapolis, Minnesota. 5. Defendant is regularly engaged, for profit, in the collection of debts allegedly owed by consumers. 6. Defendant is a “debt collector” as that term is defined by the FDCPA, 15 U.S.C. § 1692(a)(6). Jurisdiction and Venue 7. This Court has federal question jurisdiction under 15 U.S.C. § 1692k(d) and 28 U.S.C. § 1331. 8. Venue is proper in this district pursuant to 28 U.S.C. § 1391(b), as the acts and transactions that give rise to this action occurred, in substantial part, in this district. Allegations Particular to Yehoshua C. Minsky 9. Upon information and belief, on a date better known by Defendant, Defendant began to attempt to collect an alleged consumer debt from the Plaintiff. 10. On or about February 5, 2015, Defendant sent the Plaintiff a collection letter seeking to collect a balance allegedly incurred for personal purposes. 11. The said letter stated in pertinent part as follows: “******PAYMENTS ARE AN OPTION****** AS YOU HAVE NOT RESOLVED THIS ACCOUNT AND WE BELIEVE THAT YOU ARE UNABLE TO BORROW THE MONEY TO PAY OFF THE ABOVE ACCOUNT, WE ARE EXTENDING TO YOU ANOTHER OPTION. IN AN EFFORT TO ALLOW YOU MORE TIME TO GET YOUR FINANCES IN ORDER, WE WILL AGREE TO ACCEPT $25.00 PER MONTH FOR THE NEXT THREE MONTHS. AT THE END OF THE THREE MONTHS THE ARRANGEMENT WILL BE REVIEWED AND HOPEFULLY YOU WILL BE ABLE TO PAY THE REMAINING BALANCE IN FULL. IN ORDER FOR THIS ARRANGEMENT TO BE ACCEPTED BY OUR OFFICE, YOU NEED TO NOTIFY US BY EITHER WRITING OR TELEPHONING OUR OFFICE THAT YOU AGREE TO THE TERMS MENTIONED ABOVE, OR JUST SEND THE PAYMENT IN THE ENCLOSED ENVELOPE. IT’S THAT EASY!!! SINCERELY, COREY KEVITT ACCOUNT MANAGER” 12. The Defendant’s letter is deceptive and misleading in violation of 15 U.S.C. §§ 1692e and 1692e(10) as it falsely implies that the Defendant has actual knowledge about Yehoshua C. Minsky’s financial conditions and what intentions he has or does not have regarding the alleged debt. 13. The said statement: “WE BELIEVE THAT YOU ARE UNABLE TO BORROW THE MONEY TO PAY OFF THE ABOVE ACCOUNT” is an unaccountable claim, not only regarding the Plaintiff’s ability to borrow, but also about his wish or intention to do so. 14. Defendant continues to state that it wishes to “ALLOW YOU MORE TIME TO GET YOUR FINANCES IN ORDER,” which is a further baseless and presumptuous statement, as it implies that the Defendant has actual knowledge of the Plaintiff’s personal circumstances. 15. The said statement that “AT THE END OF THE THREE MONTHS THE ARRANGEMENT WILL BE REVIEWED…,” is a vague statement, as it does not explain precisely what the Defendant is going to further review. 16. More importantly, by stating that “HOPEFULLY YOU WILL BE ABLE TO PAY THE REMAINING BALANCE IN FULL,” the Defendant opts out from identifying what precisely will occur in the event that the Plaintiff is unable to do so. 17. Defendant further states that its “ARRANGEMENT” could be accepted by writing or calling the Defendant and “THAT YOU AGREE TO THE TERMS MENTIONED ABOVE,” when the “terms” had been deliberately obscured or excluded from the Defendant’s letter. 18. 15 U.S.C. § 1692e provides: A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section: (5) The threat to take any action that cannot legally be taken or that is not intended to be taken. (10) the use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer. 19. 15 U.S.C. § 1692f provides: A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. 20. Said language can be reasonably read to have two or more different meanings, one of which is false.1 21. The letter concludes with a statement encouraging the Plaintiff to contact the Defendant and indicate that he agrees to “THE TERMS MENTIONED,” and ending with the words “IT'S THAT EASY!!!” when no clear terms have been provided which a consumer would be able to easily understand. 22. 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 1 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.) utilized by Defendant in mailing the above-cited letter to the Plaintiff. 23. The letters the 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. 24. The said letter is a standardized form letter. 25. Defendant's February 5, 2015 letter is in violation of 15 U.S.C. §§ 1692e, 1692e(10) and 1692f for deceptive and misleading misrepresentations and for using unfair and unconscionable means to collect on an alleged debt. AS AND FOR A FIRST CAUSE OF ACTION Violations of the Fair Debt Collection Practices Act brought by Plaintiff on behalf of himself and the members of a class, as against the Defendant. 26. Plaintiff re-states, re-alleges, and incorporates herein by reference, paragraphs one (1) through twenty five (25) as if set forth fully in this cause of action. 27. This cause of action is brought on behalf of Plaintiff and the members of a class. 28. The class consists of all persons whom Defendant's records reflect resided in the State of New York and who were sent a collection letter in substantially the same form letter as the letter sent to the Plaintiff on or about February 5, 2015; and (a) the collection letter was sent to a consumer seeking payment of a personal debt purportedly owed to Barclays Bank Delaware; and (b) the collection letter was not returned by the postal service as undelivered; (c) and the Plaintiff asserts that the letter contained violations of 15 U.S.C. §§ 1692e, 1692e(10) and 1692f for deceptive and misleading misrepresentations and for using unfair and unconscionable means to collect on an alleged debt. 29. Pursuant to Federal Rule of Civil Procedure 23, a class action is appropriate and preferable in this case because: A. Based on the fact that a form collection letter is at the heart of this litigation, the class is so numerous that joinder of all members is impracticable. B. There are questions of law and fact common to the class and these questions predominate over any questions affecting only individual class members. The principal question presented by this claim is whether the Defendant violated the FDCPA. C. The only individual issue is the identification of the consumers who received such collection letters (i.e. the class members), a matter capable of ministerial determination from the records of Defendant. D. The claims of the Plaintiff are typical of those of the class members. All are based on the same facts and legal theories. E. The Plaintiff will fairly and adequately represent the class members’ interests. The Plaintiff has retained counsel experienced in bringing class actions and collection-abuse claims. The Plaintiff's interests are consistent with those of the members of the class. 30. A class action is superior for the fair and efficient adjudication of the class members’ claims. Congress specifically envisions class actions as a principal means of enforcing the FDCPA. 15 U.S.C. § 1692(k). The members of the class are generally unsophisticated individuals, whose rights will not be vindicated in the absence of a class action. Prosecution of separate actions by individual members of the classes would create the risk of inconsistent or varying adjudications resulting in the establishment of inconsistent or varying standards for the parties and would not be in the interest of judicial economy. 31. If the facts are discovered to be appropriate, the Plaintiff will seek to certify a class pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure. 32. Collection attempts, such as those made by the Defendant are to be evaluated by the objective standard of the hypothetical “least sophisticated consumer.” Violations of the Fair Debt Collection Practices Act 33. The Defendant's actions as set forth above in the within complaint violates the Fair Debt Collection Practices Act. 34. Because the Defendant violated the Fair Debt Collection Practices Act, the Plaintiff and the members of the class are entitled to damages in accordance with the Fair Debt Collection Practices Act. WHEREFORE, Plaintiff, respectfully requests preliminary and permanent injunctive relief, and that this Court enter judgment in his favor and against the Defendant and award damages as follows: A. Statutory damages provided under the FDCPA, 15 U.S.C. § 1692(k); B. Attorney fees, litigation expenses and costs incurred in bringing this action; and C. Any other relief that this Court deems appropriate and just under the circumstances. Dated: Cedarhurst, New York July 15, 2015 /s/ Adam J. Fishbein_________ Adam J. Fishbein, P.C. (AF-9508) Attorney At Law Attorney for the Plaintiff 483 Chestnut Street Cedarhurst, New York 11516 Telephone (516) 791-4400 Facsimile (516) 791-4411 Plaintiff requests trial by jury on all issues so triable. /s/ Adam J. Fishbein___ Adam J. Fishbein (AF-9508)

consumer fraud

oaj7CYcBD5gMZwczNP61

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS EASTERN DIVISION CLAUDIA DURAN, ) On Behalf of Herself and All Others ) JURY TRIAL DEMANDED Similarly Situated, ) ) Plaintiff, ) ) vs. ) Civil Action No.: 1:19-cv-10286 ) CURRICULUM ASSOCIATES, LLC ) ) Defendant. ) PLAINTIFF’S ORIGINAL COMPLAINT FLSA §216(b) Collective Action and FRCP Rule 23 Class Action Plaintiff Claudia Duran, on behalf of herself and all others similarly situated, by and through counsel, for her Original Complaint against Defendant Curriculum Associates, LLC (“Defendant”) states as follows: PRELIMINARY STATEMENT 1. Plaintiff Claudia Duran is a former Account Specialist for Defendant. She performed data entry work and spoke to Defendant’s customers primarily over the telephone. Defendant treated Plaintiff and other Account Specialists as exempt employees and did not pay them overtime. 2. This is a collective and class action brought by Individual and Representative Plaintiff Claudia Duran on her own behalf and on behalf of the proposed collective and any sub- collectives and proposed classes and any sub-classes. Defendant employs and/or employed Plaintiff and the putative collective and class members as “Account Specialist,” “Senior Account Specialist,” and in other similar account specialist jobs, and denied them overtime compensation as required by federal and Massachusetts state wage and hour laws. These employees are similarly situated under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 216(b) and Federal Rule of Civil Procedure 23. 3. The FLSA Collective is made up of all persons who are, have been, or will be employed by Defendant as “Account Specialist,” “Senior Account Specialist,” and in other similar account specialist jobs (collectively as “Account Specialists”), within the United States at any time within the last three years through the date of final disposition of this action (the “Collective Period”). 4. During the Collective Period, Defendant failed to pay overtime compensation to each member of the respective collective as required by the FLSA. Plaintiff seeks relief for the FLSA Collective under the FLSA to remedy Defendant’ failure to pay all wages due, pay appropriate overtime compensation, and maintain and distribute accurate time records, in addition to injunctive relief. 5. The Rule 23 Class is made up on all persons who are, have been, or will be employed by Defendant as “Account Specialist,” “Senior Account Specialist,” and in other similar account specialist jobs (collectively as “Account Specialists”), within Massachusetts at any time within three years back from the filing date of this action (the “Class Period”). 6. During the Class Period, Defendant failed to pay all wages due including overtime compensation to each member of the Rule 23 Class. Plaintiff seeks relief for the Rule 23 Class under Massachusetts law including the Massachusetts Overtime Law, M.G.L. c. 151 §§ 1, 1A, and the Massachusetts Wage Act, M.G.L. c. 149 § 148, on behalf of a class of current and former employees who work or worked for Defendant as Account Specialists pursuant to Fed. R. Civ. P. 23, M.G.L. c. 149, § 150, and M.G.L. c. 151, §§ 1B, 20. 7. Defendant’s policy and practice is to deny earned wages including overtime pay to its Account Specialists. In particular, Defendant require these employees to perform work in excess of forty (40) hours per week, but it fails to pay them overtime pay/premiums for such work hours. 8. Defendant’s deliberate illegal treatment of its Account Specialists which denies them wages including overtime compensation results in Defendant violating the FLSA and Massachusetts state law. PARTIES 9. Plaintiff Claudia Duran currently resides in the Manchester, New Hampshire area. Defendant employed Plaintiff Duran as an Account Specialist from approximately July 5, 2017 through January 22, 2019 at Defendant’s offices located in North Billerica, Massachusetts. Plaintiff’s Consent to become a Party Plaintiff pursuant to 29 U.S.C. § 226(b) is attached as an exhibit. 10. Defendant Curriculum Associates, LLC is a Massachusetts limited liability company with its principal office located in North Billerica, Massachusetts. Defendant Curriculum Associates, LLC does business in this judicial district and nationwide thru the internet and other media. JURISDICTION AND VENUE 11. This Court has original federal question jurisdiction under 28 U.S.C. § 1331 for the claims brought under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq. 12. This Court has supplemental jurisdiction for all individual claims the Rule 23 Class assert under Massachusetts state law in that the claims under these Massachusetts state laws are part of the same case and controversy as the FLSA claims, the state and federal claims derive from a common nucleus of operative fact, the state claims will not substantially dominate over the FLSA claims, and exercising supplemental jurisdiction would be in the interests of judicial economy, convenience, fairness, and comity. 13. The United States District Court for the District of Massachusetts has personal jurisdiction because Defendant conducts/conducted business within this District. 14. Venue is proper in this Court pursuant to 28 U.S.C. § 1391(b), inasmuch as Defendant has offices, conducts business, and can be found in the District of Massachusetts, and the causes of action set forth herein have arisen and occurred in part in the District of Massachusetts. Venue is also proper under 29 U.S.C. §1132(e)(2) because Defendant has substantial business contacts within the state of Massachusetts. FACTUAL ALLEGATIONS 15. “Founded in 1969, Curriculum Associates, LLC designs research-based print and online instructional materials, screens and assessments, and data management tools.” In 2018, Defendant appeared in the “37th annual Inc. 5000, the most prestigious ranking of the nation’s fastest-growing private companies.” See Defendant website: https://www2.curriculumassociates.com/aboutus/Press-Release-Curriculum- Associates-featured-on-37th-annual-Inc-5000.aspx. 16. At all relevant times, Defendant has been, and continues to be, an “employer” 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. 17. At all relevant times, Defendant has employed, and/or continues to employ, “employee[s],” including Plaintiff and all similarly situated employees. At all relevant times, Defendant has had gross operating revenues in excess of $500,000.00 which is the threshold test for the “enterprise” requirement under the FLSA. 18. Defendant paid Plaintiff and other Account Specialists on a salary plus bonus basis. 19. Defendant did not pay Plaintiff and other Account Specialists any overtime premiums for hours worked more than forty (40) per week. 20. Defendant did not require Plaintiff and the other Account Specialists to utilize any timekeeping system during this time period. 21. Defendant uniformly applied its payment structure to all Account Specialists. 22. Defendant suffered and permitted Plaintiff and other Account Specialists to work more than forty hours per week without overtime compensation for all hours worked. For example, Plaintiff and other Account Specialists regularly worked at least five days a week. They usually began work in the early morning. In addition, Plaintiff and other Account Specialists regularly worked into the evenings and on the weekends, causing their hours worked to exceed forty in a week on a regular basis. 23. Defendant knew Plaintiff and other Account Specialists worked more than forty hours in a week because Defendant expected Plaintiff and Account Specialists to be available to receive phone calls and answer emails – from customers and from Defendant’s management employees – in the mornings, evenings, and on weekends. Also, for example, Plaintiff and other Account Specialists were expected to timely respond to customer inquiries and/or questions after receiving them. Plaintiff sometimes received these inquiries and/or questions in the evenings and on the weekends. 24. Defendant uniformly denied Plaintiff and other Account Specialists overtime pay. 25. In reality, Plaintiff and other Account Specialists are and were non-exempt employees who are and were entitled to minimum wages and /or overtime pay for all hours worked. 26. Plaintiff and the other Account Specialists had the same duties of data entry and directly working with customers. 27. Plaintiff and other Account Specialists are and were entry-level employees who are and were entitled to minimum wages and/or overtime pay. 28. Plaintiff and other Account Specialists did not customarily and regularly make sales at their customers’ home or place of business. 29. Plaintiff and other Account Specialists did not regularly supervise the work of two or more employees. 30. Plaintiff and other Account Specialists did not exercise discretion and independent judgment as to matters of significance. 31. Plaintiff and other Account Specialists did not perform office work related to Defendant’s general business operations or its customers. 32. Plaintiff and other Account Specialists had no advance knowledge in a field of science or learning which required specialized instruction that was required to perform the job. 33. All Account Specialists are similarly situated in that they share common job duties and descriptions, Defendant treated them as exempt employees at relevant times, and were all subject to Defendant’ policy and practice that paid them a salary plus bonus, and they all performed work without overtime compensation for all hours worked. 34. Defendant did not keep accurate records of the hours Plaintiff and other Account Specialists worked. Because Defendant did not pay Plaintiff and other Account Specialists for all the hours they worked, including overtime hours, Defendant’ wage statements did not accurately reflect all hours Plaintiff and other Account Specialists worked. 35. Defendant did not provide Plaintiff and the other Account Specialists with accurate paychecks. 36. Defendant did not pay Plaintiff and other Account Specialists for all of their overtime hours. Accordingly, Defendant did not provide Plaintiff and other Account Specialists with all compensation owed to them, including their unpaid overtime, at the time they separated from the company. 37. Defendant are aware of wage and hour laws, as evidenced by the fact that they provide minimum wage and overtime compensation to other employees who are not Account Specialists. 38. Defendant’ conduct, as set forth in this Complaint, was willful and in bad faith, and has caused significant damages to Plaintiff and other Account Specialists. FLSA Collective 39. Plaintiff brings Count I on behalf of herself and other similarly situated employees as authorized under the FLSA, 29 U.S.C. § 216(b). The similarly situated employees are: All persons who are, have been, or will be employed by Defendant as “Account Specialists,” “Senior Account Specialists,” and other individuals who worked in similar job titles within the United States at any time during the last three years through the entry of judgment in this case (“FLSA Collective”). Plaintiff will subgroup the FLSA Collective as necessary for certification and/or litigation purposes. 40. Upon information and belief, Defendant paid Plaintiff and the FLSA Collective on a salary plus bonus basis, and suffered and permitted them to work more than forty hours per week without overtime compensation. 41. Defendant’s unlawful FLSA conduct has been widespread, repeated, and consistent. 42. Defendant’s conduct, as set forth in this Complaint, was willful and in bad faith, and has caused significant damages to Plaintiff and the FLSA Collective. 43. Defendant is liable under the FLSA for failing to properly compensate Plaintiff and the FLSA Collective, and as such, notice should be sent to the FLSA Collective. There are numerous similarly situated, current and former employees of Defendant who have been denied overtime pay in violation of the FLSA who would benefit from the issuance of a Court supervised notice of the present lawsuit and the opportunity to join. Those similarly situated employees are known to Defendant and are readily identifiable through Defendant’s records. The Rule 23 Class 44. Pursuant to M.G.L. c. 151 §§ 1, 1A, 1B and M.G.L. c. 149 §§ 148, 150, and Rule 23, Plaintiff brings the Massachusetts state law claims on behalf of herself and all others similarly situated which are all persons who Defendant employed in the state of Massachusetts at any time from three years back from the date this Complaint is filed until the entry of judgment in this case who held the position(s) of Account Specialist, Senior Account Specialist, and/or in other like jobs, were non-exempt employees within the meaning of the Massachusetts Labor Law, and who have not been paid for all hours worked, including overtime wages, in violation of the Massachusetts Labor Law. 45. The Rule 23 Class is so numerous that joinder of all members is impracticable. Although the precise number of such persons is unknown, and the facts on which the calculation of that number are presently within the sole control of Defendant, Plaintiff, upon information and belief, states that there have been over forty (40) members of the Rule 23 Class during the Class Period. 46. The claims of the Plaintiff and the Rule 23 Class are typical because they worked in the same and/or similar job with the same/similar illegal wage practices. Further, Plaintiff seeks to recover damages on her own behalf and on behalf of the Rule 23 Class Members. 47. A class action is superior to other available methods for the fair and efficient adjudication of the controversy because a series of such individual wage lawsuits would be duplicative, inefficient, and burdensome on this Court. This is particularly in the context of wage and hour litigation where individual plaintiffs lack the financial resources to vigorously prosecute a lawsuit in federal court. 48. Defendant has acted and/or refused to act on grounds generally applicable to the Rule 23 Class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the Class as a whole. 49. Plaintiff is committed to pursuing this action and has retained competent counsel who are experienced in wage and hour, and class action litigation. 50. There are issues of law and fact common to the Rule 23 Class because Defendant’s wage payment practices applied to all Rule 23 Class members. The common issues of law and fact include: a. Whether Defendant employed the Rule 23 Class Members within the meaning of the Massachusetts Labor Law; b. Whether the Rule 23 Class Members are non-exempt employees within the meaning of the Massachusetts Labor Law; c. Whether Defendant failed and/or refused to pay the Rule 23 Class Members for all hours worked by them including overtime hours with the meaning of the Massachusetts Labor Law; d. Whether Defendant is liable for all damages claimed in this Complaint, including but not limited to, compensatory, interest, treble damages, and attorney’s fees and expenses, and; e. Whether Defendant should be enjoined from such violations of Massachusetts Labor Law in the future. Exhaustion of Administrative Remedies 51. Pursuant to M.G.L. c. 149, § 150, Plaintiff filed notice of her statutory claims with the Massachusetts Office of the Attorney General on February 14, 2019. COUNT I Collective Action under §216(b) of the FAIR LABOR STANDARDS ACT and Overtime Claims 52. Plaintiff hereby incorporates by reference the foregoing paragraphs of this Complaint into this count. 53. The FLSA requires each covered employer such as Defendant to compensate all non- exempt employees at the applicable minimum wage for all hours worked up to forty hours per week, and a rate of not less than one and one-half times the regular rate of pay for work performed in excess of forty hours per work week. 29 U.S.C. § 207(a)(1). 54. Plaintiff and the FLSA Collective are entitled to be paid minimum wages and/or overtime compensation for all hours worked. 55. Defendant, pursuant to their policies and practices, failed and refused to pay minimum wages and/or overtime premiums to Plaintiff and the FLSA Collective for all of their hours worked. 56. Defendant violated the FLSA, 29 U.S.C. § 201 et seq. by failing to compensate Plaintiff and the FLSA Collective for all minimum wages and/or overtime compensation. 57. By failing to record, report, and/or preserve accurate records of hours worked by Plaintiff and the FLSA Collective, Defendant failed to make, keep, and preserve records with respect to each of their employees sufficient to determine their wages, hours, and other conditions and practice of employment, in violation of the FLSA, 29 U.S.C. § 201 et seq. 58. The foregoing conduct, as alleged herein, constitutes a willful violation of the FLSA within the meaning of 29 U.S.C. § 255(a). 59. Plaintiff, on behalf of himself and the FLSA Collective, seek damages in the amount of all respective unpaid minimum wages at the applicable rate and overtime compensation at a rate of one and one-half times the regular rate of pay for work performed in excess of forty hours in a work week, plus liquidated damages as provided by the FLSA, 29 U.S.C. § 216(b), interest, and such other legal and equitable relief as the Court deems just and proper. 60. Plaintiff, on behalf of himself and the FLSA Collective seek recovery of all attorneys’ fees, costs, and expenses of this action, to be paid by Defendant, as provided by the FLSA, 29 U.S.C. § 216(b). COUNT II Rule 23 Class Action Massachusetts State Law Overtime Claims 61. Plaintiff hereby incorporates by reference the foregoing paragraphs of this Complaint into this count. 62. The Massachusetts Fair Minimum Wage Act requires that employees be compensated for all hours worked in excess of forty (40) hours per week at a rate not less than one and one-half (1 ½) times the regular rate at which he is employed. See Mass. Gen. L. c. 151 §1A. As set forth above, Defendant’s conduct in failing to pay Plaintiff and the Rule 23 Class Members the applicable overtime compensation violates M.G.L. c. 151, §§ 1, 1A. This claim is brought pursuant to Mass. Gen. L. c. 151 § 1B. COUNT III Rule 23 Class Action State Massachusetts Wage Act Claims 63. Plaintiff hereby incorporates by reference the foregoing paragraphs of this Complaint into this count. 64. As non-exempt employees, Plaintiff and the Rule 23 Class are entitled to be paid for all hours worked including overtime compensation. Defendant’s failure to pay overtime wages as required by 29 U.S.C. § 207 and Mass. Gen. L. c. 151 §§ 1, 1A, caused Plaintiff and the putative class members to be deprived of the full amount of their earned wages when same became due and payable, including upon their termination. 65. Defendant willfully violated the rights of Plaintiff and the Rule 23 Class by failing to pay them for all hours worked including overtime hours in violation of M.G.L. c. 149, § 148. This claim is brought pursuant to Mass. Gen. L. c. 149 § 150. 66. Defendant’s Massachusetts Labor Law violations have caused Plaintiff and the Rule 23 Class irreparable harm for which there is no adequate remedy at law. 67. Due to Defendant’s Massachusetts Labor Law violations, Plaintiff and the Rule 23 Class are entitled to recover from Defendant their unpaid wages for all hours worked including overtime, damages for unreasonably delayed payment of wages, treble damages as liquidated damages, and reasonable attorney’s fees, costs, and disbursements, pursuant to the Massachusetts Labor Law. WHEREFORE, Plaintiff, on behalf of herself and all similarly situated members of the FLSA Collective and Rule 23 Class, prays for relief as follows: A. Designation of this action as a collective action on behalf of the FLSA Collective and prompt issuance of notice pursuant to 29 U.S.C. § 216(b) to all similarly situated members of the FLSA Collective, apprising them of the pendency of this action, and permitting them to assert timely FLSA claims in this action by filing individual Consent to Join forms pursuant to 29 U.S.C. § 216(b); B. Certification of this action as a Class Action pursuant to Fed. R. Civ. P. 23 and/or M.G.L. c. 149, § 150; C. Appointment of Plaintiff and her Counsel to represent the FLSA Collective and/or the Certified Class; D. Judgment against Defendant for an amount equal to Plaintiff’s and the FLSA Collective’s unpaid wages including overtime wages at the applicable rates; E. A finding that Defendant’s conduct was willful; F. An equal amount to the overtime wages as liquidated damages; G. Statutory trebling of all wage-related damages; H. All costs and attorney’ fees incurred prosecuting these claims, including expert fees; I. Pre-judgment and post-judgment interest, as provided by law; and J. Such further relief as the Court deems just and equitable. Demand for Jury Trial Plaintiff, individually and behalf of all others similarly situated, hereby demands a jury trial on all causes of action and claims with respect to which she has a right to jury trial pursuant to Federal Rule of Civil Procedure 38(b).

employment & labor

x9n7D4cBD5gMZwcz21z3

IN THE UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TENNESSEE KNOXVILLE DIVISION JESSE PIERCE and MICHAEL PIERCE, ) on behalf of themselves and all others ) similarly situated, ) CASE NO._________________________ ) Plaintiffs, ) ) COLLECTIVE ACTION COMPLAINT vs. ) FOR VIOLATIONS OF THE FAIR ) LABOR STANDARDS ACT OF 1938 WYNDHAM VACATION RESORTS, ) INC., and WYNDHAM VACATION ) OWNERSHIP, INC., ) ) Defendants. ) Come Plaintiffs JESSE PIERCE and MICHAEL PIERCE (“Representative Plaintiffs”), on behalf of themselves and all others similarly situated (“Class Members”), and for their collective action complaint against Defendants WYNDHAM VACATION RESORTS, INC., and WYNDHAM VACATION OWNERSHIP, INC., (“Defendants”) allege the following: I. OVERVIEW 1. The Fair Labor Standards Act (“FLSA”) was passed by Congress in 1938 to eliminate low wages and long hours and to correct conditions that were detrimental to the health and well- being of workers. To achieve its humanitarian goals and purposes, Section 7(a) of the FLSA “limits to 40 a week the number of hours that an employer may employ any of his employees subject to the Act, unless the employee receives compensation for his employment in excess of 40 hours at a rate ‘not less than one and one-half times the regular rate at which he is employed.’” Walling v. Helmerich & Payne, 323 U.S. 37, 39 (1944)(citing 29 U.S.C. §207(a)). 2. This is a collective action brought pursuant to the FLSA by Representative Plaintiffs Jesse Pierce and Michael Pierce, on behalf of themselves and all similarly situated current and former non-exempt, commission-paid Front Line Sales Representatives, In-House Sales Representatives and Discovery Sales Representatives (“Class Members”), who worked for Defendants at Defendants’ Tennessee offices from October 21, 2010 through the present (hereinafter referred to as the “Recovery Period”), and who: a) worked “off the clock;” and/or b) were not paid overtime for working in excess of 40 hours in a workweek. 3. Throughout their employment with Defendants, including the Recovery Period, Representative Plaintiffs and Class Members were classified as non-exempt employees by Defendants who regularly and routinely worked more than 40 hours in a typical workweek. 4. Throughout their employment with Defendants, including during the Recovery Period, Representative Plaintiffs and Class Members: a) worked “off the clock;” and/or b) were denied proper overtime compensation. 5. Throughout Representative Plaintiffs’ and Class Members’ employment, including during the Recovery Period, Defendants regularly and routinely violated the FLSA in a willful manner by failing to pay the Representative Plaintiffs and Class Members at time and one-half their regular rates of pay for all hours worked in excess of forty (40) hours within a workweek. II. JURISDICTION AND VENUE 6. This Court has jurisdiction over this action pursuant to 29 U.S.C. §216(b) and 28 U.S.C. §1331 & §1343. 7. Venue is proper in the Eastern District of Tennessee under 28 U.S.C. §1391 because a substantial portion of the events forming the basis of the suit occurred in this District. 2 III. PARTIES 8. Representative Plaintiff Jesse Pierce is a resident and citizen of Knoxville, Tennessee. His Plaintiff Consent Form to join this lawsuit is attached as Exhibit 1. During the Recovery Period, Jesse Pierce worked as an In-House Sales Representative for Defendants in Sevierville, Tennessee. 9. Representative Plaintiff Michael Pierce is a resident and citizen of Sevierville, Tennessee. His Plaintiff Consent Form to join this lawsuit is attached as Exhibit 2. During the Recovery Period, Michael Pierce worked as a Front Line Sales Representative for Defendants in Sevierville, Tennessee, and an In-House Sales Representative in Nashville, Tennessee. 10. Defendant Wyndham Vacation Resorts, Inc. (“WVR”) is a Delaware corporation, with its principal place of business in Orlando, Florida. WVR’s registered agent for service in Tennessee is Corporate Creations Network Inc., 205 Powell Place, Brentwood, Tennessee 37027. 11. Defendant Wyndham Vacation Ownership, Inc. (“WVO”) is a Delaware corporation, with its principal place of business in Orlando, Florida. According to its website, WVO is the world’s largest developer and marketer of flexible, point-based vacation ownership products, and has developed or acquired more than 185 vacation ownership resorts throughout the United States, Canada, Mexico, the Caribbean and the South Pacific that represent more than 23,000 vacation ownership units. WVO’s registered agent for service in Tennessee is Corporate Creations Network Inc., 205 Powell Place, Brentwood, Tennessee 37027. IV. COVERAGE UNDER THE FLSA 12. At all material times, Defendant WVR has been an employer of Representative Plaintiffs and Class Members within the meaning of §3(d) of the FLSA, 29 U.S.C. §203(d). 3 13. At all material times, Defendant WVO has been an employer of Representative Plaintiffs and Class Members within the meaning of §3(d) of the FLSA, 29 U.S.C. §203(d). 14. At all material times, Defendant WVR has constituted an enterprise within the meaning of §3(r) of the FLSA, 29 U.S.C. §203(r). 15. At all material times, Defendant WVO has constituted an enterprise within the meaning of §3(r) of the FLSA, 29 U.S.C. §203(r). 16. At all material times, Defendant WVR has been an enterprise engaged in commerce, or in the production of goods for commerce, within the meaning of §3(s)(1) of the FLSA because it has had employees engaged in commerce and made an annual gross income of not less than $500,000. 29 U.S.C. §203(s)(1). 17. At all material times, Defendant WVO has been an enterprise engaged in commerce, or in the production of goods for commerce, within the meaning of §3(s)(1) of the FLSA because it has had employees engaged in commerce and made an annual gross income of not less than $500,000. 29 U.S.C. §203(s)(1). 18. At all material times, Representative Plaintiffs and Class Members have been employees within the meaning of §3(e)(1) of the FLSA. 29 U.S.C. §203(e)(1). 19. At all material times, the overtime provisions set forth in §6 and §7, respectively, of the FLSA applied to Defendant WVR, and to each of Defendant WVR’s commission-paid non- exempt employees pursuant to 29 U.S.C. §206 and §207. 20. At all material times, the overtime provisions set forth in §6 and §7, respectively, of the FLSA applied to Defendant WVO, and to each of Defendant WVO’s commission-paid non- exempt employees pursuant to 29 U.S.C. §206 and §207. 4 V. FACTUAL BACKGROUND 21. Defendants operate numerous vacation resorts throughout the United States. Consumers acquire ownership interests through a point-based system, by purchasing “points.” After the initial purchase and the establishment of an account, owners can acquire additional “points” to increase their ownership interest. 22. In an effort to obtain new owners, Defendants market their resorts utilizing various marketing tools, including promotions which allow potential owners to stay on the resort property by agreeing to attend a “tour” during their stay which, simply put, is a sales pitch meeting conducted by one or more of Defendants’ sales representatives at Defendants’ offices located on site. The sales representatives conducting these “tours” for potential new owners are referred to as “Front Line Sales Representatives” by Defendants. 23. For individuals who have already acquired “points” and an ownership interest, Defendants utilize various marketing tools to obtain additional purchases of “points.” For example, when an existing owner with a “points” account is staying at one of Defendants’ vacation resorts, he or she is solicited by Defendants’ sales representatives to visit one of Defendants’ offices on site, where Defendants’ sales representatives attempt to sell additional “points” to him or her. The sales representatives conducting these sales pitches are referred to as “In-House Sales Representatives” by Defendants. 24. In an effort to obtain new owners, Defendants also offer what is called a “Discovery by Wyndham” membership which, according to Defendants, offers a glimpse of the many benefits vacation ownership has to offer. Individuals staying on Defendants’ resort properties who decide not to purchase “points” and become an owner are offered a “Discovery by Wyndham” membership, 5 which is a trial package allowing them to stay on Defendants’ properties for a short period of time. If an individual decides not to become an owner, before leaving Defendants’ resort during a promotional visit, they are solicited by Defendants’ sales representatives to meet in Defendants’ offices located on site. The sales representatives conducting these sales pitches are referred to as “Discovery Sales Representatives” by Defendants. 25. Defendants utilize a uniform and common sales strategy at all of its resorts in the United States, including the use of Front Line Sales Representatives, In-House Sales Representatives and/or Discovery Sales Representatives. Defendants also utilize a uniform and common organizational structure for their sales forces at their vacation resort properties, consisting of sales representatives, managers, site directors, and site vice presidents. Defendants also employ area vice presidents, who are responsible for overseeing multiple vacation resort properties, as well as regional vice presidents, who are responsible for overseeing certain geographic regions of the country. 26. Representative Plaintiff Jesse Pierce has been employed by Defendants for approximately 11 years. During his employment, Jesse Pierce has held several positions, including but not limited to Front Line Sales Representative and In-House Sales Representative. During the past three (3) years, Jesse Pierce has worked as an In-House Sales Representative. 27. Representative Plaintiff Michael Pierce has been employed by Defendants for approximately 13 years. During his employment, Michael Pierce has held several positions, including but not limited to Front Line Sales Representative and In-House Sales Representative. During the past three years, Michael Pierce has worked as a Front Line Sales Representative and an In-House Sales Representative. 6 28. The job duties performed by Representative Plaintiffs Jesse Pierce and Michael Pierce as In-House Sales Representatives and Front Line Sales Representatives during their employment tenure with Defendants, were and are similar to those performed by other Class Members during their employment with Defendants, including during the Recovery Period. 29. Attached as Exhibit 3 are the Plaintiff Consent Forms to join this lawsuit signed by forty six (46) current and former commission-paid, non-exempt employees of Defendants. Upon information and belief, the individuals filing the Plaintiff Consent Forms attached as Exhibit 3 are either current employees, or were employed by Defendants at Defendants’ Tennessee offices within the three (3) year period preceding the filing of this Complaint, who currently hold or previously held the position of In-House Sales Representative, Front Line Sales Representative and/or Discovery Sales Representative; and further, who perform and/or performed similar job duties as Representative Plaintiffs. As this case proceeds, it is highly likely that other individuals will sign consents and join this action as opt-in Plaintiffs. 30. Throughout their employment, including during the Recovery Period, Representative Plaintiffs and Class Members worked as Front Line Sales Representatives, In-House Sales Representatives, and/or Discovery Sales Representatives (hereinafter referred to collectively as “Sales Representatives”) for Defendants. As Sales Representatives, Plaintiffs and Class Members’ primary job duty was to sell “points” for a consumer’s use at Defendants’ timeshare properties and/or promotional packages entitling purchasers to access timeshare properties. 31. During the Recovery Period, Defendants classified Plaintiffs and Class Members as non-exempt employees under the FLSA. 7 32. During the Recovery Period, Defendants have paid Plaintiffs and Class Members on a commission basis, with an hourly draw paid at minimum wage rates. Defendants have paid Representative Plaintiffs and Class Members approximately $7.25 per hour (or minimum wage), and a commission based on a percentage of sales. Upon receipt of commissions however, Defendants have uniformly deducted the hourly wages previously paid from commissions earned pursuant to Defendants’ common policy, practices and/or procedures. 33. During the Recovery Period, Representative Plaintiffs and Class Members routinely and regularly worked more than forty (40) hours per week. In the majority of weeks they were employed as Sales Representatives by Defendants, Representative Plaintiffs and Class Members worked as much as sixty (60) or more hours per week. 34. Throughout the employment of Representative Plaintiffs and Class Members, including during the Recovery Period, Defendants had a uniform policy, practice and/or procedure in place at all of their Tennessee vacation resort properties which required Sales Representatives to work without overtime compensation for workweeks in which they worked in excess of 40 hours in violation of the FLSA. This illegal policy, practice and/or procedure included, but was not limited to, requiring Sales Representatives to clock out of Defendants’ time-keeping system and to continue performing work on behalf of Defendants. 35. For example, Defendants’ supervisors required Sales Representatives to clock out of Defendants’ time-keeping system any time they were not giving “tours” to potential buyers. During these times between “tours,” however, Defendants required Sales Representatives to remain on Defendants’ premises. 8 36. Defendants’ supervisors also required Sales Representatives to clock out in the middle of the day, and did not allow them to clock back in, yet required them to continue working. 37. For example, Defendants refused to allow Sales Representatives to clock back in after a break or lunch, yet required them to continue working. 38. Throughout the employment of Representative Plaintiffs and Class Members, including during the Recovery Period, Defendants had a policy, practice and/or procedure of instructing Sales Representatives that they could not be clocked in to Defendants’ time-keeping system for more than forty (40) hours per week. 39. Throughout the employment of Representative Plaintiffs and Class Members, including during the Recovery Period, Defendants had a policy, practice and/or procedure requiring Defendants’ managerial and supervisory employees to “edit” or “shave” Sales Representatives’ time entries, in order to improperly reduce the number of hours they actually worked per week. 40. Defendants were aware, or should have been aware, that Sales Representatives performed work that required payment of overtime compensation for all of their hours worked; however, Defendants routinely suffered and permitted Sales Representatives, including the Representative Plaintiffs and Class Members, to work excessively long hours without paying them proper overtime compensation for all the hours they routinely worked in excess of 40. 41. Defendants’ daily records of Sales Representatives’ hours worked contain gaps in time throughout the work day, which indicate that Sales Representatives, including Representative Plaintiffs and Class Members, were required to clock out of Defendants’ time-keeping system, and perform work “off the clock.” 9 42. A comparison between Defendants’ records of the dates and times that “back end” meetings often occurred and Defendants’ time-keeping records reflect that “back end” meetings took place after Sales Representatives, including Representative Plaintiffs and Class Members, had already clocked out, but were required to continue working during the “back end” meetings. 43. Moreover, Defendants’ records of completed sales transactions contain the name of the Sales Representative and the dates and times that the sales were “closed” in Defendants’ system, because each sales transaction is date and time “stamped.” Because of Defendants’ illegal policies, practices and/or procedures, Sales Representatives were required to stay with buyers until the transactions were completed, and even after the buyer left, until the transactions were “closed” in Defendants’ system, even though the Sales Representatives were already “clocked out.” A comparison between Defendants’ records of completed transactions and Defendants’ daily records of Sales Representatives’ hours worked, will reflect that Sales Representatives, including Representative Plaintiffs and Class Members, were regularly and routinely required to clock out prior to the time that sales transactions were completed and “closed” in Defendants’ system. Defendants have knowledge of these facts. 44. Defendants’ management and supervisory-level employees routinely and regularly review the time records of Sales Representatives as part of their job duties. In reviewing the time records, Defendants’ managerial and supervisory employees are fully aware that Sales Representatives are working “off the clock” because the managers/supervisors are present to visibly observe Defendants’ Sales Representatives working inordinately long hours on site, which does not correspond to the time records. Moreover, it is these same managerial and supervisory employees of Defendants who instructed the Representative Plaintiffs and Class Members to clock out and 10 continue to work off-the-clock, and who “shaved” hours worked from Defendants’ time system in order to deprive Class Members from receiving overtime pay. Defendants have knowledge of these 45. Defendants instruct their managerial and supervisory employees to mislead Sales Representatives regarding Defendants’ legal obligations to pay overtime, including the method and manner by which overtime is calculated. Defendants instruct their managerial employees to tell Sales Representatives, including Representative Plaintiffs and Class Members, that Defendants are only required to pay overtime at time and one-half of minimum wage, as opposed to overtime based on the regular rate of pay of a Sales Representatives, properly calculated by including their entire pay, including earned commissions. Defendants further instruct their managerial and supervisory employees to tell Sales Representatives, including Representative Plaintiffs and Class Members, that because Defendants’ policies, practices and procedures allow Defendants to deduct the hourly wages paid at minimum wage, including any overtime Defendants claim would be paid at time and one-half of minimum wage, overtime becomes a moot point because any overtime wages paid would be small, and would be deducted from commissions earned in any event. 46. As further example of Defendants’ knowledge of violations of the FLSA, Defendants instruct their managerial and supervisory employees to tell Sales Representatives, including Representative Plaintiffs and Class Members, that they (Sales Representatives) are highly compensated based on the commissions they are paid and they should not complain about not being paid the overtime they are owed. 47. Defendants’ managerial and supervisory employees have openly admitted that Defendants’ policies, practices and procedures require them to force Sales Representatives, including 11 Representative Plaintiffs and Class Members, to work “off the clock” and to not properly record all hours worked, including overtime. 48. Defendants’ managerial and supervisory employees have admitted that they are required by Defendants to make the misleading statements to Sales Representatives as alleged in Paragraphs 45 and 46. 49. Defendants’ managerial and supervisory employees attempt to deter Sales Representatives from complaining about unpaid overtime, by stating that if Sales Representatives complain, they will lose their job and/or suffer other adverse employment actions. 50. The foregoing conduct, as alleged, constitutes a willful violation of law because Defendants knew or showed reckless disregard for the fact that their compensation policies, practices and procedures violated the law. VI. COLLECTIVE ACTION ALLEGATIONS 51. The Representative Plaintiffs reassert and re-allege the allegations set forth above. 52. The FLSA regulates, among other things, the payment of wages for overtime worked by employees who are engaged in interstate commerce or engaged in the production of goods for commerce, or employed in an enterprise engaged in commerce or in the production of goods for commerce. 29 U.S.C. §207(a)(1). 53. The Representative Plaintiffs bring this FLSA collective action on behalf of themselves and all other persons similarly situated pursuant to §16(b) of the FLSA (codified at 29 U.S.C. §216(b)), which provides, in pertinent part, as follows: 12 An action to recover the liability prescribed in either of the preceding sentences may be maintained against any employer . . . by any one or more employees for and in behalf of himself or themselves and other employees similarly situated. 54. The collective Class consists of all current and former non-exempt, commission-paid Front Line Sales Representatives, In-House Sales Representatives and Discovery Sales Representatives who worked for Defendants at Defendants’ Tennessee offices from October 21, 2010, through the present, and who: a) worked “off the clock;” and/or b) were not paid overtime for working in excess of 40 hours in a workweek. 55. Section 13 of the FLSA, codified at 29 U.S.C. §213, exempts certain categories of employees from overtime pay obligations. None of the FLSA exemptions from overtime pay apply to the Representative Plaintiffs or to Class Members. 56. The FLSA requires covered employers, such as Defendants, to compensate all 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 (40) hours per work week. 57. The FLSA requires covered employers, such as Defendants, to make, keep, and preserve accurate records of the hours worked by non-exempt employees. 58. Representative Plaintiffs and Class Members are victims of Defendants’ widespread, repeated, systematic, illegal and uniform compensation policies, practices and/or procedures designed to evade the requirements of the FLSA. 13 59. Defendants willfully engaged in a pattern of violating the FLSA, 29 U.S.C. § 201 et seq., as described in this Complaint, in ways including, but not limited to, knowingly failing to pay employees overtime compensation. 60. Defendants have/had uniform policies, practices and/or procedures which require(d) Sales Representatives, including Representative Plaintiffs and Class Members, to work without compensation in violation of the FLSA. Specifically, Defendants required Sales Representatives, including Representative Plaintiffs and Class Members, to work “off the clock.” 61. Further, pursuant to Defendants’ uniform policies, practices and/or procedures, although Defendants regularly required Representative Plaintiffs and other Class Members to work more than 40 hours in a work week, the Representative Plaintiffs and other Class Members were not paid at the rate of at time and one-half their regular rates of pay for any hours they worked beyond 40 hours in a workweek. 62. Defendants’ conduct constitutes willful violations of the FLSA within the meaning of 29 U.S.C. §255. 63. Defendants are liable under the FLSA for failing to properly compensate Representative Plaintiffs and Class Members. Representative Plaintiffs are similarly situated to Class Members, and, as such, notice should be sent to the collective Class. There are numerous similarly situated current and former employees of Defendants who have suffered from Defendants’ common and uniform policies, practices and/or procedures of not paying Sales Representatives, including Representative Plaintiffs and Class Members, for all of their work hours, including overtime, and who would benefit from the issuance of a Court-supervised notice of the present 14 lawsuit and the opportunity to join in this action. Those similarly situated employees are known to Defendants, and are readily identifiable through Defendants’ records. 64. Representative Plaintiffs and Class Members are entitled to damages equal to pay for all overtime hours worked at the overtime premium rate mandated by the FLSA within the three (3) years preceding the filing of the Complaint, because Defendants acted willfully and knew, or showed reckless disregard for whether, their conduct was prohibited by the FLSA. 65. Defendants have not acted in good faith or with reasonable grounds to believe that their actions and omissions were not a violation of the FLSA as alleged in the preceding Paragraphs. As a result thereof, Representative Plaintiffs and Class Members are entitled to recover an award of liquidated damages in an amount equal to the amount of unpaid overtime compensation as permitted by §16(b) of the FLSA. 29 U.S.C. §216(b). Alternatively, should the Court find that Defendants acted in good faith and with reasonable grounds to believe they were complying with the FLSA, Representative Plaintiffs and all similarly-situated Class Members are entitled to an award of prejudgment interest at the applicable legal rate. 66. As a result of the aforesaid violations of the FLSA’s overtime provisions, overtime compensation has been unlawfully withheld by Defendants from the Representative Plaintiffs and Class Members. Accordingly, Defendants are liable under §16(b) of the FLSA (codified at 29 U.S.C. §216(b)), together with an additional amount as liquidated damages, pre- and post-judgment interest, reasonable attorneys’ fees, and costs of this action. 15 VII. PRAYER FOR RELIEF 67. Wherefore, Representative Plaintiffs, on behalf of themselves and all other similarly situated Class Members, respectfully request that this Court grant the following relief: a. Designation of this action as a collective action on behalf of the Class Members and prompt issuance of notice pursuant to 29 U.S.C. §216(b) to all similarly situated members of the FLSA Class, apprising them of the pendency of this action, and permitting them to assert timely FLSA claims in this action by filing individual consents to join this lawsuit pursuant to 29 U.S.C. §216(b); b. An award of unpaid wages, including all overtime compensation due under the FLSA; c. An award of liquidated damages as a result of the Defendants’ failure to exercise good faith in failing to pay lawful overtime compensation pursuant to 29 U.S.C. §216; d. An award of prejudgment and post-judgment interest; e. An award of costs and expenses of this action, together with reasonable attorneys’ fees; and f. Such other and further relief as this Court deems just and proper. Respectfully submitted, DICKINSON WRIGHT PLLC By: /s/ Martin D. Holmes_______________ Martin D. Holmes, # 012122 Darrell L. West, # 005962 Fifth Third Center, Suite 1401 424 Church Street Nashville, TN 37219 (615) 244-6538 Attorneys for Plaintiffs and Putative Collective Class NASHVILLE 57404-1 470465 16

employment & labor

-NxiEIcBD5gMZwczTJNq

Joel E. Elkins (SBN 256020) jelkins@weisslawllp.com WEISSLAW LLP 9107 Wilshire Blvd., Suite 450 Beverly Hills, CA 90210 Telephone: 310/208-2800 Facsimile: 310/209-2348 Attorneys for Plaintiff UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA STEPHEN BUSHANSKY, On Behalf of Himself and All Others Similarly Situated Plaintiff, Case No. CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS JURY TRIAL DEMANDED vs. FINISAR CORPORATION, ROBERT N. STEPHENS, MICHAEL HURLSTON, MICHAEL C. CHILD, ROGER C. FERGUSON, THOMAS E. PARDUN, JERRY S. RAWLS, MICHAEL L. DREYER, and HELENE SIMONET, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Plaintiff Stephen Bushansky (“Plaintiff”), by and through his undersigned counsel, alleges the following upon information and belief, including an examination and inquiry conducted by and through his counsel, except as to those allegations pertaining to Plaintiff, which are alleged upon personal knowledge, as follows: NATURE OF THE ACTION 1. This is a class action brought on behalf of the public stockholders of Finisar Corporation (“Finisar” or the “Company”) against Finisar and the members of its Board of Directors (the “Board” or the “Individual Defendants”) for their violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§ 78n(a), 78t(a), and U.S. Securities and Exchange Commission (“SEC”) Rule 14a-9, 17 C.F.R. 240.14a-9, and to enjoin the vote on a proposed transaction, pursuant to which Finisar will be acquired by II-VI Incorporated (“II-VI”) through its wholly owned subsidiary, Mutation Merger Sub Inc. (“Merger Sub”) (the “Proposed Transaction”). 2. On November 9, 2018, Finisar and II-VI issued a joint press release announcing they had entered into an Agreement and Plan of Merger dated November 8, 2018 (the “Merger Agreement”) to sell Finisar to II-VI. Under the terms of the Merger Agreement, for each share of Finisar common stock they own, Finisar stockholders may elect to receive, subject to proration: (i) $26.00 in cash (“Cash Consideration”); (ii) 0.5546 shares of II-VI common stock (“Stock Consideration”); or (iii) a combination of $15.60 in cash and 0.2218 shares of II-VI common stock (“Mixed Consideration,” and together with the Cash Consideration and the Stock Consideration, the “Merger Consideration”). The Merger Consideration is subject to proration so that the aggregate consideration paid consists of approximately 60% cash and 40% II-VI common stock. The Proposed Transaction has an equity value of approximately $3.2 billion. 3. On December 28, 2018, Finisar filed a Preliminary Proxy Statement on Schedule 14A with the SEC and II-VI and Finisar filed a joint proxy statement/prospectus on Form S-4 (as amended on January 18, 2018, the “Registration Statement”) with the SEC. The Registration Statement, which recommends that Finisar stockholders vote in favor of the Proposed Transaction, omits and/or misrepresents material information concerning, among other things: (i) the data and inputs underlying the financial valuation analyses prepared by the Company’s financial advisor, Barclays Capital Inc. (“Barclays”) in connection with the rendering of its fairness opinion; (ii) Barclays’ potential conflicts of interest; and (iii) Company insiders’ potential conflicts of interest. The failure to adequately disclose such material information constitutes a violation of Sections 14(a) and 20(a) of the Exchange Act as Finisar stockholders need such material information in order to cast a fully-informed vote or seek appraisal in connection with the Proposed Transaction. 4. In short, unless remedied, Finisar’s public stockholders will be forced to make a voting or appraisal decision on the Proposed Transaction without full disclosure of all material information concerning the Proposed Transaction being provided to them. Plaintiff seeks to enjoin the stockholder vote on the Proposed Transaction unless and until such Exchange Act violations are cured. JURISDICTION AND VENUE 5. This Court has jurisdiction over the claims asserted herein for violations of Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder pursuant to Section 27 of the Exchange Act, 15 U.S.C. § 78aa, and 28 U.S.C. §1331 (federal question jurisdiction). 6. The Court has jurisdiction over defendants because each defendant is either a corporation that conducts business in and maintains operations in this District, or is an individual who has sufficient minimum contacts with this District so as to render the exercise of jurisdiction by this Court permissible under traditional notions of fair play and substantial justice. 7. Venue is proper in this District pursuant to 28 U.S.C. § 1391 because Plaintiff’s claims arose in this District, where a substantial portion of the actionable conduct took place, where most of the documents are electronically stored, and where the evidence exists. Finisar is incorporated in Delaware and is headquartered in this District. Moreover, each of the Individual Defendants, as Company officers or directors, either resides in this District or has extensive contacts within this District. THE PARTIES 8. Plaintiff is, and has been at all times relevant hereto, a continuous stockholder of Finisar. 9. Defendant Finisar is a Delaware corporation with its principal executive offices located at 1389 Moffett Park Drive, Sunnyvale, California 94089. Finisar’s common stock trades on the NASDAQ Global Select Market under the ticker symbol “FNSR.” 10. Defendant Robert N. Stephens (“Stephens”) has been a director of the Company since August 2005. 11. Defendant Michael Hurlston (“Hurlston”) has been Chief Executive Officer (“CEO”) and a director of the Company since January 2018. 12. Defendant Michael C. Child (“Child”) has been a director of the Company since June 2010. 13. Defendant Roger C. Ferguson (“Ferguson”) has been a director of the Company since August 1999. 14. Defendant Thomas E. Pardun (“Pardun”) has been a director of the Company since December 2009. 15. Defendant Jerry S. Rawls (“Rawls”) has been Chairman of the Board since 2006 and a director of the Company since 1989. Defendant Rawls co-founded the Company and previously served as its President and CEO from 1989 to 2008. 16. Defendant Michael L. Dreyer (“Dreyer”) has been a director of the Company since 2015. 17. Defendant Helene Simonet (“Simonet”) has been a director of the Company since March 2017. 18. Defendants Stephens, Hurlston, Child, Ferguson, Pardun, Rawls, Dreyer and Simonet are collectively referred to herein as the “Board” or the “Individual Defendants.” OTHER RELEVANT ENTITIES 19. II-VI is a Pennsylvania corporation with its principal executive offices located at 375 Saxonburg Boulevard, Saxonburg, Pennsylvania 16056. II-VI’s common stock is traded on the NASDAQ Global Select Market under the ticker symbol “IIVI.” 20. Merger Sub is a Delaware corporation and a wholly owned subsidiary of II-VI. CLASS ACTION ALLEGATIONS 21. Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure on behalf of all persons and entities that own Finisar common stock (the “Class”). 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. 22. This action is properly maintainable as a class action under Rule 23 of the Federal Rules of Civil Procedure. 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. As of November 6, 2018, there were 117,385,367 shares of Finisar common stock outstanding. All members of the Class may be identified from records maintained by Finisar 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. 23. Questions of law and fact are common to the Class and predominate over questions affecting any individual Class member, including, inter alia: (a) Whether defendants have violated Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder; (b) Whether the Individual Defendants have violated Section 20(a) of the Exchange Act; and (c) Whether Plaintiff and the other members of the Class would suffer irreparable injury were the Proposed Transaction consummated. 24. Plaintiff will fairly and adequately protect the interests of the Class, and has no interests contrary to or in conflict with those of the Class that Plaintiff seeks to represent. Plaintiff has retained competent counsel experienced in litigation of this nature. 25. 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. 26. Defendants have acted, or refused to act, on grounds generally applicable to the Class as a whole, and are causing injury to the entire Class. Therefore, final injunctive relief on behalf of the Class is appropriate. SUBSTANTIVE ALLEGATIONS Background of the Company and the Proposed Transaction 27. Finisar is a global technology leader in optical communications, providing components and subsystems to networking equipment manufacturers, data center operators, telecom service providers, consumer electronics and automotive companies. The Company designs products that meet the demands for network bandwidth, data storage and 3D sensing subsystems. Finisar’s optical subsystems consist primarily of transmitters, receivers, transceivers, transponders and active optical cables, which provide optical-electrical interface for interconnecting the electronic equipment used in these networks. 28. Finisar also provides products known as wavelength selective switches (“WSS”) that are used to dynamically switch network traffic from one optical fiber to multiple other fibers without first converting to an electronic signal. This wavelength selective feature means that WSS enable any wavelength or combination of wavelengths to be switched from the input fiber to the output fibers. 29. The Company has also entered the 3D Sensing market. The 3D Sensing market includes features such as facial recognition, gaming and virtual reality. Finisar designs and manufactures Vertical Cavity Surface Emitting Lasers, which are core to 3D Sensing. 30. On September 6, 2018, Finisar announced its first quarter of fiscal 2019 financial results, reporting revenues of $317.3 million, compared to $310.1 million in the fourth quarter of fiscal 2018. Defendant Hurlston commented on the quarter’s financial results, stating: Revenues grew over the prior quarter and exceeded the mid-point of our guidance range, primarily driven by strength in demand for our wavelength selective switches. Gross margin also improved over the prior quarter and exceeded our guidance range due to favorable product mix. . . . In addition, we were able to accelerate the process of bringing more focus to our product development efforts, which allowed the company to reduce relative expense levels faster than expected. In combination, this led to better earnings per share, exceeding the high end of our guidance range. 31. On November 9 2018, Finisar and II-VI issued a joint press release announcing the Proposed Transaction, which states, in relevant part: PITTSBURGH & SUNNYVALE, Calif., November 9, 2018 (GLOBE NEWSWIRE) – II-VI Incorporated (NASDAQ:IIVI), a global leader in engineered materials and optoelectronic components, and Finisar Corporation (NASDAQ: FNSR), a global technology leader in optical communications, today announced that they have entered into a definitive merger agreement under which II-VI will acquire Finisar in a cash and stock transaction with an equity value of approximately $3.2 billion. Under the terms of the merger agreement, which has been unanimously approved by the Boards of Directors of both companies, Finisar’s stockholders will receive, on a pro-rated basis, $15.60 per share in cash and 0.2218x shares of II-VI common stock, valued at $10.40 per share based on the closing price of II-VI’s common stock of $46.88 on November 8, 2018. The transaction values Finisar at $26.00 per share, or approximately $3.2 billion in equity value and represents a premium of 37.7% to Finisar’s closing price on November 8, 2018. Finisar shareholders would own approximately 31% of the combined company. The combination of II-VI and Finisar would unite two innovative, industry leaders with complementary capabilities and cultures to form a formidable industry leading photonics and compound semiconductor company capable of serving the broad set of fast growing markets of communications, consumer electronics, military, industrial processing lasers, automotive semiconductor equipment and life sciences. Together, II-VI and Finisar will employ over 24,000 associates in 70 locations worldwide upon closing of the transaction. “Disruptive megatrends driven by innovative uses of lasers and other engineered materials present huge growth opportunities for both of our companies,” said Dr. Vincent D. Mattera, Jr., President and CEO, II-VI Incorporated. “In communications, materials processing, consumer electronics and automotive, we expect that the combination with Finisar will allow us to leverage our combined technology and intellectual property in InP, GaAs, SiC, GaN, SiP and diamond to achieve faster time to market, cost and scale. Together, we believe that we will be better strategically positioned to play a strong leadership role in the emerging markets of 5G, 3D sensing, cloud computing, electric and autonomous vehicles, and advanced microelectronics manufacturing.” Dr. Mattera continued, “We have long admired Finisar and have a great deal of regard for its founders and its talented global team. Our companies both have a long history of focusing on innovation, breakthrough solutions and competitive follow- through by manufacturing high quality products for our customers, and we look forward to welcoming Finisar to the II-VI family and further strengthening our competitive position in the industry.” “The combination of our state-of-the-art technology platforms, deep customer relationships, great assets and amazing talent will enhance our ability to hit market windows that won’t stay open for long,” said Michael Hurlston, Finisar’s CEO. “This combination will accelerate our collective growth and will take advantage of the technology, products and manufacturing expertise that Finisar has uniquely developed over the course of its 30 year history.” Mr. Hurlston added, “We are extremely excited to combine Finisar with II-VI and together create a leader in photonics and compound semiconductors across all of the markets we serve. We are confident that the growth potential for the combined company is substantial, and we believe that our respective shareholders will be able to enjoy significant potential for value creation when the transaction is completed.” Insiders’ Interests in the Proposed Transaction 32. Finisar and II-VI 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 Finisar. 33. Notably, it appears that certain Company insiders have secured positions for themselves with the combined company. For example, according to the Registration Statement, three members of the Board will be appointed to the board of directors of the combined company. Additionally, II-VI’s May 3, 2018 proposal included an “expectation that members of Finisar’s management team would have key leadership roles.” Registration Statement at 80. 34. Further, Finisar directors and executive officers stand to reap substantial financial benefits for securing the deal with II-VI. According to the Merger Agreement, all Finisar performance-based restricted stock units will vest and be converted into the form of Merger Consideration elected by the holder, and all Finisar stock options will be converted into the right to receive the Mixed Consideration. 35. Moreover, if they are terminated in connection with the Proposed Transaction, the Company’s named executive officers stand to receive substantial cash severance payments in the form of golden parachute compensation, as set forth in the following table: The Registration Statement Contains Material Misstatements and Omissions 36. The defendants filed a materially incomplete and misleading Registration Statement with the SEC and disseminated it to Finisar’s stockholders. The Registration Statement misrepresents or omits material information that is necessary for the Company’s stockholders to make an informed decision whether to vote in favor of the Proposed Transaction or seek appraisal. 37. Specifically, as set forth below, the Registration Statement fails to provide Company stockholders with material information or provides them with materially misleading information concerning: (i) the data and inputs underlying the financial valuation analyses prepared by Barclays in connection with the rendering of its fairness opinion; (ii) Barclays’ potential conflicts of interest; and (iii) Company insiders’ conflicts of interest. Accordingly, Finisar stockholders are being asked to make a voting or appraisal decision in connection with the Proposed Transaction without all material information at their disposal. Material Omissions Concerning Barclays’ Financial Analyses 38. The Registration Statement describes Barclays’ fairness opinion and the various valuation analyses it performed in support of its opinion. However, the description of Barclays’ fairness opinion and analyses fails to include key inputs and assumptions underlying these analyses. Without this information, as described below, Finisar’s public stockholders are unable to fully understand these analyses and, thus, are unable to determine what weight, if any, to place on Barclays’ fairness opinion in determining whether to vote in favor of the Proposed Transaction or seek appraisal. This omitted information, if disclosed, would significantly alter the total mix of information available to Finisar’s stockholders. 39. In arriving at its fairness opinion, Barclays reviewed, among other things, “the pro forma impact of the proposed transaction on the future financial performance of the combined company, including cost savings, operating synergies, and other strategic benefits, expected by the management of the Finisar to result from a combination of the businesses (the “Expected Synergies”).” Registration Statement at 103. Yet, the Registration Statement fails to disclose the Expected Synergies relied upon by Barclays in its analyses. 40. With respect to Barclays’ Selected Comparable Company Analysis for Finisar, the Registration Statement fails to disclose: (i) the individual multiples for each of the comparable companies analyzed by Barclays; and (ii) any benchmarking analyses performed by Barclays to compare Finisar with the comparable companies. 41. With respect to Barclays’ Selected Comparable Company Analysis for II-VI, the Registration Statement fails to disclose: (i) the individual multiples for each of the comparable companies analyzed by Barclays; and (ii) any benchmarking analyses performed by Barclays to compare II-VI with the comparable companies. 42. With respect to Barclays’ Selected Precedent Transactions Analysis, the Registration Statement fails to disclose: (i) the individual multiples for each of the transactions analyzed by Barclays; and (ii) any benchmarking analyses performed by Barclays to compare Finisar with the target companies of the transactions analyzed. 43. With respect to Barclays’ Discounted Cash Flow Analysis, the Registration Statement fails to disclose: (i) quantification of the inputs and the assumptions underlying the discount rate range of 11.0% to 12.0%; (ii) the estimated terminal unlevered free cash flow for Finisar calculated based upon the Finisar Projections; (iii) Barclays’ basis for applying a range of perpetual growth rates of 2.0% to 4.0%; (iv) Finisar’s net debt as of July 29, 2018; and (v) the implied terminal multiples resulting from the analysis. 44. With respect to Barclays’ Discounted Cash Flow Analysis for II-VI, the Registration Statement fails to disclose: (i) quantification of the inputs and the assumptions underlying the discount rate range of 10.0% to 11.0%; (ii) the estimated terminal unlevered free cash flow for II-VI calculated based upon the Barclays Fairness Opinion II-VI projections; (iii) Barclays’ basis for applying a range of perpetual growth rates of 2.0% to 4.0%; and (iv) the implied terminal multiples resulting from the analysis. 45. The omission of this information renders the statements in the “Opinion of Finisar’s Financial Advisor” and “Unaudited Prospective Financial Information” sections of the Registration Statement false and/or materially misleading in contravention of the Exchange Act. Material Omissions Concerning Barclays’ Potential Conflicts of Interest 46. The Registration Statement fails to disclose material information concerning potential conflicts of interest faced by Barclays in serving as the Company’s financial advisor. 47. The Registration Statement sets forth: Barclays is acting as financial advisor to Finisar in connection with the proposed transaction. As compensation for its services in connection with the proposed transaction, Finisar will pay Barclays a fee for its services, $1.0 million of which was paid upon the delivery of Barclays’ opinion, which is referred to as the “Opinion Fee.” The Opinion Fee was not contingent upon the consummation of the proposed transaction. The remaining amount of the fee due to Barclays, which remaining amount is currently estimated at approximately $25.4 million, will be payable by Finisar on completion of the proposed transaction against which the amounts paid for the opinion will be credited. In addition, Finisar has agreed to reimburse Barclays for up to a specified amount of its reasonable and documented expenses incurred in connection with the proposed transaction and to indemnify Barclays for certain liabilities that may arise out of its engagement by Finisar and the rendering of Barclays’ opinion. Barclays has performed various investment banking services for Finisar and II-VI in the past, and expects to perform such services in the future, and has received, and expects to receive, customary fees for such services. However, since January 1, 2015, Barclays has not earned any investment banking fees from either Finisar or II-VI. Barclays and its affiliates engage in a wide range of businesses from investment and commercial banking, lending, asset management and other financial and non- financial services. In the ordinary course of its business, Barclays and affiliates may actively trade and effect transactions in the equity, debt and/or other securities (and any derivatives thereof) and financial instruments (including loans and other obligations) of Finisar and II-VI for its own account and for the accounts of its customers and, accordingly, may at any time hold long or short positions and investments in such securities and financial instruments. Registration Statement at 112. The Registration Statement fails, however, to disclose whether Barclays has received compensation for any non-investment banking services performed for Finisar or II-VI in the past two years and the nature of these services. 48. Full disclosure of all potential conflicts concerning investment bankers is required due to the central role played by investment banks in the evaluation, exploration, selection, and implementation of strategic alternatives. 49. The omission of this information renders the statements in the “Opinion of Finisar’s Financial Advisor” section of the Registration Statement false and/or materially misleading in contravention of the Exchange Act. Material Omissions Concerning Company Insiders’ Potential Conflicts of Interest 50. Further, the Registration Statement fails to disclose material information concerning the potential conflicts of interest faced by Finisar insiders. 51. In the November 9, 2018 joint press release, II-VI’s President and CEO Vincent D. Mattera (“Mattera”) stated that “[w]e have long admired Finisar and have a great deal of regard for its founders and its talented global team. Our companies both have a long history of focusing on innovation, breakthrough solutions and competitive follow-through by manufacturing high quality products for our customers, and we look forward to welcoming Finisar to the II-VI family and further strengthening our competitive position in the industry.” 52. The Registration Statement, however, fails to disclose whether any of Finisar’s executive officers is continuing their employment following consummation of the Proposed Transaction, as well as the details of all employment and retention-related discussions and negotiations that occurred between II-VI and Finisar’s executive officers, including who participated in all such communications, when they occurred and their content. 53. Additionally, the Registration Statement sets forth that, “[o]n May 3, 2018, Dr. Mattera met with Mr. Hurlston in BofA Merrill Lynch’s office in Palo Alto, California and presented the II-VI proposal outlined above (the “May 3 Proposal”).” Id. at 80. The May 3 Proposal included representation of the Finisar Board on the II-VI board commensurate with the Finisar shareholders’ pro forma ownership of the combined company and the expectation that members of Finisar’s management team would have key leadership roles. Id. The Registration Statement fails, however, to disclose the specific members of Finisar’s management team that were expected to have key leadership roles with the combined company and what these roles are. 54. Communications regarding post-transaction employment and merger-related benefits 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. 55. The omission of this information renders the statements in the “Background of the Merger” and “Interests of Finisar’s Directors and Executive Officers in the Merger” sections of the Registration Statement false and/or materially misleading in contravention of the Exchange Act. 56. The Individual Defendants were aware of their duty to disclose the above-referenced omitted information and acted negligently (if not deliberately) in failing to include this information in the Registration Statement. Absent disclosure of the foregoing material information prior to the stockholder vote on the Proposed Transaction, Plaintiff and the other members of the Class will be unable to make a fully-informed voting or appraisal decision in connection with the Proposed Transaction and are thus threatened with irreparable harm warranting the injunctive relief sought herein. CLAIMS FOR RELIEF COUNT I Class Claims Against All Defendants for Violations of Section 14(a) of the Exchange Act And SEC Rule 14a-9 Promulgated Thereunder 57. Plaintiff repeats all previous allegations as if set forth in full. 58. SEC Rule 14a-9, 17 C.F.R. §240.14a-9, promulgated pursuant to Section 14(a) of the Exchange Act, provides: 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 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. 59. During the relevant period, defendants disseminated the false and misleading Registration Statement 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 in violation of Section 14(a) of the Exchange Act and SEC Rule 14a-9 promulgated thereunder. 60. By virtue of their positions within the Company, the defendants were aware of this information and of their duty to disclose this information in the Registration Statement. The Registration Statement was prepared, reviewed, and/or disseminated by the defendants. The Registration Statement misrepresented and/or omitted material facts, including material information about the valuation analyses prepared by the Company’s financial advisor, Barclays’ potential conflicts of interest, and Company insiders’ potential conflicts of interest. The defendants were at least negligent in filing the Registration Statement with these materially false and misleading statements. 61. The omissions and false and misleading statements in the Registration Statement are material in that a reasonable stockholder would consider them important in deciding how to vote on the Proposed Transaction or whether to seek appraisal. In addition, a reasonable investor would view a full and accurate disclosure as significantly altering the “total mix” of information made available in the Registration Statement and in other information reasonably available to stockholders. 62. By reason of the foregoing, the defendants have violated Section 14(a) of the Exchange Act and SEC Rule 14a-9(a) promulgated thereunder. 63. Because of the false and misleading statements in the Registration Statement, Plaintiff and the Class are threatened with irreparable harm, rendering money damages inadequate. Therefore, injunctive relief is appropriate to ensure defendants’ misconduct is corrected. COUNT II Class Claims Against the Individual Defendants for Violation of Section 20(a) of the Exchange Act 64. Plaintiff repeats all previous allegations as if set forth in full. 65. The Individual Defendants acted as controlling persons of Finisar within the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their positions as officers or directors of Finisar and participation in or awareness of the Company’s operations or intimate knowledge of the false statements contained in the Registration Statement 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 Company, including the content and dissemination of the various statements which Plaintiff contends are false and misleading. 66. Each of the Individual Defendants was provided with or had unlimited access to copies of the Registration Statement and other statements alleged by Plaintiff 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 the statements to be corrected. 67. In particular, each of the Individual Defendants had direct and supervisory involvement in the day-to-day operations of the Company, and, therefore, is 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 Registration Statement 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. 68. In addition, as the Registration Statement sets forth at length, and as described herein, the Individual Defendants were each involved in negotiating, reviewing, and approving the Proposed Transaction. The Registration Statement purports to describe the various issues and information that they reviewed and considered — descriptions which had input from the Individual Defendants. 69. By virtue of the foregoing, the Individual Defendants have violated Section 20(a) of the Exchange Act. 70. 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 that defendants’ actions threaten to inflict. PRAYER FOR RELIEF WHEREFORE, Plaintiff demands judgment and preliminary and permanent relief, including injunctive relief, in his favor on behalf of Finisar, and against defendants, as follows: A. Ordering that this action may be maintained as a class action and certifying Plaintiff as the Class representative and Plaintiff’s counsel as Class counsel; B. Preliminarily and permanently enjoining defendants and all persons acting in concert with them from proceeding with, consummating, or closing the Proposed Transaction and any vote on the Proposed Transaction, unless and until defendants disclose and disseminate the material information identified above to Finisar stockholders; C. In the event defendants consummate the Proposed Transaction, rescinding it and setting it aside or awarding rescissory damages to Plaintiff; D. Awarding Plaintiff the costs of this action, including reasonable allowance for Plaintiff’s attorneys’ and experts’ fees; and E. Granting such other and further relief as this Court may deem just and proper. JURY DEMAND Plaintiff demands a trial by jury on all claims and issues so triable. Dated: January 25, 2019 WEISSLAW LLP Joel E. Elkins Joel E. El El El El El El Elkikikikikikikikikikikikikikikikikikikikikins ns ns ns ns ns ns ns ns ns ns ns ns ns ns ns ns ns ns By: By By Byy: Jo Jo Jo Jo Jo Jo Jo Jo Jo Jo Jo Jo Jo Jo Jo Jo Jo Jo Jo J elelelelelelelelelelelelelelelelelelelelel E. Elkins Joel E. Elkins 9107 Wilshire Blvd., Suite 450 Beverly Hills, CA 90210 Telephone: 310/208-2800 Facsimile: 310/209-2348 -and- Richard A. Acocelli 1500 Broadway, 16th Floor New York, NY 10036 Telephone: 212/682-3025 Facsimile: 212/682-3010 Attorneys for Plaintiff

securities

C6tTCocBD5gMZwczqMai

announcements made by the Defendants, United States Securities and Exchange Commission (“SEC”) filings, wire and press releases published by and regarding the Company, securities 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 common stock of China Integrated during the period between March 31, 2010 and March 16, 2011, inclusively (the “Class Period”). Plaintiff seeks to recover damages caused by Defendants’ violations of the Securities Exchange Act of 1934 (the “Exchange Act”). 2. Throughout the Class Period, the Defendants made false and/or misleading statements, and failed to disclose material adverse facts about the Company's business, operations, prospects and performance. Specifically, during the Class Period, Defendants made false and/or misleading statements and/or failed to disclose: (1) that the Company misrepresented the number of buses in its advertising network; (2) that the Company misrepresented the nature and extent of its business relationships; (3) that, as a result, the Company's financial results were overstated during the Class Period; and (4), as a result of the above, that the Company's statements concerning its business, operations, and prospects were materially false and misleading at all relevant times. JURISDICTION AND VENUE 3. 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). 4. 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. 5. Venue is proper in this Judicial District pursuant to §27 of the Exchange Act, 15 U.S.C. § 78aa and 28 U.S.C. § 1391(b). 6. In connection with the acts, conduct and other wrongs alleged in this Complaint, the 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 NASDAQ. PARTIES 7. Plaintiff Larry Brown, as set forth in the attached PSLRA certification, purchased China Integrated securities at artificially inflated prices during the Class Period and has been damaged thereby. 8. Defendant China Integrated is a Delaware Corporation with its principal executive offices at Dongxin Century Square, 7th Floor, Hi-Tech Development District. 9. Defendant Gao Xincheng was at all relevant times China Integrated’s Chief Executive Officer. 10. Defendant Albert C. Pu was at all relevant times China Integrated’s Chief Financial Officer. 11. Defendant Li Gaihong was at all relevant times China Integrated’s Financial Controller, and was also a Director and Executive Vice President of China Integrated. 12. Defendants Gaihong, Pu, and Xincheng are collectively the “Individual Defendants”. 13. China Integrated and the Individual Defendants are collectively “Defendants”. 14. Defendants’ fraudulent scheme: (i) deceived the investing public regarding China Integrated’s business, operations, management and the intrinsic value of China Integrated common stock; and (ii) caused plaintiff and other members of the Class to purchase China Integrated securities at artificially inflated prices. 15. During the Class Period, the Defendants were privy to non-public information concerning the Company’s business, finances, products, markets, and present and future business prospects, via access to internal corporate documents, conversations and connections. Because of possession of such information, the Defendants knew or recklessly disregarded the fact that the adverse facts specified herein had not been disclosed to, and were being concealed from, the investing public. 16. Due to the accessibility to the adverse undisclosed information about the Company’s business, operations, operational trends, financial statements, markets and present and future business prospects via access to internal corporate documents and via reports and other information provided in connection therewith. 17. Throughout the Class Period, the Defendants were able to control the content of the various SEC filings, press releases and other public statements pertaining to the Company during the Class Period. The Defendants had access to the documentation of filings alleged herein to be misleading prior to or shortly after their issuance and/or had the ability and/or opportunity to prevent their issuance or to cause them to be corrected. Accordingly, the Defendants are responsible for the accuracy of the public reports and press releases detailed herein, and are therefore primarily liable for the representations contained therein. PLAINTIFF’S CLASS ACTION ALLEGATIONS 18. 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 common stock of China Integrated during the Class Period and who were damaged thereby. Excluded from the Class are 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. 19. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, the Company’s common stock was 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 China Integrated 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. 20. 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. 21. 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. 22. 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 the Defendants to the investing public during the Class Period misrepresented material facts about the business, operations, and management of the Company; and (c) to what extent the members of the Class have sustained damages, and the proper measure of damages. 23. 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. SUBSTANTIVE ALLEGATIONS 24. The Class Period begins on March 31, 2010 when the Company issued on form 10-K its financial results for the year finishing on December 31, 2009. Under the heading “related party transactions”, the Company listed: As of December 31, 2007, there was an advance of $593,696 to a related party that is 40% owned by one of the shareholders of Baorun Industrial. In 2008, the advance was fully repaid. The Company has also periodically purchased oil supplies at the fair market value from this related party. There has been no purchase from this related party since 2008. 25. The section listed no other transactions. 26. The section did not disclose payments amounting to $35 Million made by the Company to entities in which the CEO’s first born son – who was then 22 years old – held controlling interests. 27. The Company issued financial statements for the first, second, and third quarters of 2010 on Form 10-Q released, respectively, on May 13, August 13, and November 5. 28. None of these financial statements disclosed the related party transaction. 29. The Company issued its 10-K for the year ending December 31, 2010, on March 16, 2011. It also did not disclose the related party transactions. 30. Also on March 16, 2011, the analyst firm Sinclair Upton Research issued a Report alleging that China Integrated concealed a host of concealed transactions between the Company and its officers and directors that had the effect of funneling cash to these officers and directors. In addition, citing Chinese SAIC filings, the report stated that China Integrated misrepresented its financial performance, business prospects, and financial condition to investors. It claimed that the Company’s CEO had been funneling money to corporations owned by his son, Gao Bo. 31. On March 16, 2011, the Company’s stock price fell from an opening price of $5.95 to a closing price of $5.00 on heavy volume. 32. On March 17, 2011, the Company’s stock price fell from an opening price of $4.41 to a closing price of $3.52, also on heavy volume. 33. On March 22, 2011, the Company issued a press release purporting to respond to the Report’s accusations. In its rebuttal, the Company denied one related party transaction. However, with respect to another transaction, the Company had this to say: With regard to the acquisition of the Shenmu gas station, in September 2010, we prepaid RMB 20 million as a security deposit to Lu Wehhua, the legal representative and a majority shareholder of Shenmu, to expedite transferring the ownership, related gas station operating permits and land use right. Based on that payment, Gao Bo [the CEO’s son] received 80% of the ownership of Shenmu from Lu Wenhua and Wang Zhijun. […] We intend to transfer the ownership interest in Shenmu held by Gao Bo, on behalf of Xi’an Baorun Industrial, and Yongsheng Song, to Xi’an Baorun Industrial. 34. Thus, the Company conceded that it had paid RMB 20 million for an interest in a Company that it then transferred to the CEO’s son. To reassure investors, the Company indicated that it “intended” to have this interest transferred back to the Company. 35. The Company’s stock price fell from a close of $4.24 the previous day to a close of $3.83 on the day of the Company’s “rebuttal”. Applicability of Presumption of Reliance: Fraud-on-the-Market Doctrine 36. At all relevant times, the market for China Integrated common stock was an efficient market for the following reasons, among others: (a) The Company’s stock 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, China Integrated filed periodic public reports with the SEC and the NASDAQ; (c) China Integrated 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; (d) China Integrated 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 37. As a result of the foregoing, the market for the Company’s common stock promptly digested current information regarding the Company from all publicly available sources and reflected such information in the Company’s stock price. Under these circumstances, all purchasers of the Company’s common stock during the Class Period suffered similar injury through their purchase of the Company’s common stock at artificially inflated prices, and a presumption of reliance applies. NO SAFE HARBOR 38. 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. Many or all of the specific statements pleaded herein were not identified as “forward-looking statements” when made. To the extent there were any forward-looking statements, 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. Alternatively, to the extent that the statutory safe harbor does 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 particular speaker knew that the particular forward-looking statement was false, and/or the forward-looking statement was authorized and/or approved by an executive officer of the Company who knew that those statements were false when made. FIRST CLAIM Violation of Section 10(b) of The Exchange Act and Rule 10b-5 Promulgated Thereunder Against All Defendants 39. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. 40. During the Class Period, Defendants carried out a plan, scheme and course of conduct which 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 China Integrated’s securities 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. 41. 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 purchasers of the Company’s securities in an effort to maintain artificially high market prices for China Integrated’s securities in violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. 42. Defendants, 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 China Integrated as specified herein. 39. These 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 the Company’s 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 the Company 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 the Company’s securities during the Class Period. 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. Such material misrepresentations and/or omissions were done knowingly or recklessly and for the purpose and effect of concealing the Company’s operating condition and future business prospects from the investing public and supporting the artificially inflated price of its securities. As demonstrated by overstatements and misstatements of the Company’s financial condition throughout the Class Period, if the Defendants did not have actual knowledge of the misrepresentations and omissions alleged, they 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. 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 China Integrated’s securities was artificially inflated during the Class Period. In ignorance of the fact that market prices of the Company’s publicly- traded securities were artificially inflated, and relying directly or indirectly on the false and misleading statements made by the 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 the Defendants, but not disclosed in public statements by the Defendants during the Class Period, Plaintiff and the other members of the Class acquired China integrated 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 China Integrated’s financial results, which was not disclosed by the Defendants, Plaintiff and other members of the Class would not have purchased or otherwise acquired their China Integrated securities, or, if they had acquired such securities during the Class Period, they would not have done so at the artificially inflated prices that they paid. 43. As a direct and proximate result of the Defendants’ wrongful conduct, Plaintiff and other members of the Class suffered damages in connection with their purchases of China Integrated’s securities during the Class Period. WHEREFORE, Plaintiff prays for relief and judgment, as follows: (a) Determining that this action is a proper class action, designating Plaintiff as Lead Plaintiff and certifying Plaintiff as a 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

securities

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IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK CELLINO & BARNES, P.C., on behalf of itself and all others similarly situated, Plaintiff, – v. – Civil Case No.:__________ JURY TRIAL DEMANDED HEARST TELEVISION, INC., GRAY TELEVISION, INC., NEXSTAR MEDIA GROUP, INC., TEGNA, INC., TRIBUNE MEDIA COMPANY, and SINCLAIR BROADCAST GROUP, INC., Defendants. ANTITRUST CLASS ACTION COMPLAINT Plaintiff Cellino & Barnes, P.C. (“Plaintiff”), individually and on behalf of all others similarly situated (the “Class,” as defined below), upon personal knowledge as to the facts pertaining to itself and upon information and belief as to all other matters, and based on the investigation of counsel, brings this class action for damages, injunctive relief, and other relief pursuant to federal antitrust laws, demands a trial by jury, and alleges as follows: NATURE OF ACTION 1. This antitrust action concerns the illegal and anticompetitive practices of Defendants Hearst Television, Inc. (“Hearst”), Gray Television, Inc. (“Gray”), Nexstar Media Group, Inc. (“Nexstar”), Tegna, Inc. (“Tegna”), Tribune Media Company (“Tribune”), and Sinclair Broadcast Group, Inc. (“Sinclair”), (collectively, “Defendants”), who engaged in unlawful collusion and conspired to artificially inflate the price of local television advertisements in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. 2. This case is filed in this district because: (1) the New York Designated Marketing Area (“DMA”), which includes New York City, Long Island, portions of New {2862 / CMP / 00151191.DOCX v4} York State, Connecticut, New Jersey, and Pike County, Pennsylvania is the largest in the U.S., comprising more than 7.3 million television households; (2) Plaintiff purchased significant amount of television advertising from one or more Defendants in this district during the Class Period; (3) Defendants had ample opportunities to conspire through membership and attendance at industry associations, including the Television Bureau of Advertising, Inc., the Media Rating Council, both of which are located in New York City, and at the industry’s up-front television advertising sales event which is held annually in New York City and attended by Defendants’ senior executives and representatives; and (4) Defendant Hearst has its headquarters in this district. 3. Defendants sell television advertising to local advertisers in multiple Designated Market Areas (“DMAs”) throughout the U.S. New York City is the largest DMA, reaching more than 7.3 million households. A DMA is a geographic area for which A.C. Nielsen Company furnishes broadcast television stations, and others with data to aid in evaluating audience size and composition. 4. Plaintiff seeks to represent a Class consisting of all persons and entities in the U.S. who paid for all or a portion of advertisement time on local TV provided by Defendants from at least January 1, 2012 until the effects of their unlawful conduct cease (the “Class Period”). 5. During the Class Period, Defendants unlawfully shared information and coordinated efforts to artificially inflate prices for television commercials. Specifically, instead of competing with each other on prices for advertising sales, as competitors normally do, Defendants and their co-conspirators shared proprietary information and conspired to fix prices and reduce competition in the market. {2862 / CMP / 00151191.DOCX v4} 2 6. On July 26, 2018, The Wall Street Journal and other media outlets reported that Sinclair, Tribune, and certain independent local television stations are the subjects of an ongoing U.S. Department of Justice (“DOJ”) investigation regarding whether communication between the stations’ ad sales teams led to higher rates for TV commercials. Later that day, Newsmax.com, an online news journal, reported that Defendants Hearst, Nexstar, and Tegna are also involved in the DOJ probe. 7. The impact of Defendants’ unlawful and anticompetitive conduct is ongoing and continues to this day and requires injunctive relief to prevent future harm to Plaintiff and members of the Class. 8. Until the publication of reports regarding the DOJ investigation on July 26, 2018, Defendants fraudulently concealed their unlawful conduct from Plaintiff and members of the Class, and Plaintiff and members of the Class had no way of knowing the advertising rates they were paying were the result of unlawful collusion. 9. Plaintiff and members of the Class seek injunctive relief and damages for their injuries caused by Defendants’ collusive, manipulative, and anticompetitive restraint of competition in the market for television advertising in the U.S. Specifically, Plaintiff seeks injunctive relief, treble damages, costs of suit, and reasonable attorneys’ fees on behalf of itself and the Class of direct purchasers, as defined herein, pursuant to Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. JURISDICTION AND VENUE 10. Plaintiff brings this class action lawsuit pursuant to Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26, to recover damages suffered by the Class and the costs of suit, including reasonable attorneys’ fees; to enjoin Defendants’ anticompetitive conduct; and for such other relief as is afforded under the antitrust laws of the U.S. for Defendants’ {2862 / CMP / 00151191.DOCX v4} 3 violations of Section 1 of the Sherman Act, 15 U.S.C. § 1. 11. This Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331, 1337, and Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15(a), 26. 12. Venue is proper in this District pursuant to Sections 4, 12, and 16 of the Clayton Act, 28 U.S.C. §§ 15, 22, and 26, and pursuant to 28 U.S.C. § 1391(b), (c), and (d), because, at all times relevant to the Complaint, one or more of the Defendants resided, transacted business, was found, or had agents in this District and for the reasons alleged above in Paragraph 2. PARTIES A. PLANTIFF 13. Plaintiff is law firm with offices in this District at 420 Lexington Avenue, New York, NY 10170, and throughout New York State, including in Buffalo, Garden City, Melville, and Rochester. During the Class Period, Plaintiff purchased advertisement time directly from one or more of the Defendants in the New York DMA and has suffered monetary loss as a result of the antitrust violations alleged herein. B. DEFENDANTS 14. Defendant Hearst is headquartered at 300 West 57th Street, New York, New York 10019 and is a diversified media and information company. Hearst operates television stations and cable networks throughout the U.S. According to its website, Hearst has ownership interests in 31 televisions stations which reach a combined 19% of U.S. viewers. 15. Defendant Gray is a television broadcast company headquartered at 4370 Peachtree Road, NE, Suite 400, Atlanta, Georgia 30319. Gray owns and operates television stations and digital assets in the U.S. As of February 23, 2018, Gray owned and operated television stations in 57 television markets, broadcasting approximately 200 program streams, including approximately 100 channels affiliated with the CBS Network, the NBC {2862 / CMP / 00151191.DOCX v4} 4 Network, the ABC Network, and the FOX Network. On June 23, 2018, Gray entered into a merger agreement with, among others, Raycom Media, Inc. Giving effect to the merger and prior to divestitures of stations due to market overlaps, Gray expects to own and/or operate 142 full-power television stations serving 92 markets. Upon completion, Gray expects to reach approximately 24 percent of U.S. television households through nearly 400 separate program streams including approximately 165 affiliates of the ABC/NBC/CBS/FOX networks, and over 100 affiliates of the CW, My Network, and MeTV networks. 16. Defendant Nexstar is headquartered at 545 East John Carpenter Freeway, Suite 700, Irving, Texas 75062, and operates as a television broadcasting and digital media company in the U.S. As of December 31, 2017, the company owned, operated, programmed, or provided sales and other services to 170 television stations in 100 markets. 17. Defendant Tegna is a broadcasting, digital media, and marketing services company and is headquartered at 7950 Jones Branch Drive, McLean, Virginia 22107. Tegna owns and operates 47 television stations in 39 markets across the U.S. 18. Defendant Tribune is headquartered at 515 North State Street, Chicago, Illinois 60654 and operates, through its subsidiaries, as a media and entertainment company in the U.S. Tribune offers news, entertainment, and sports programming through Tribune Broadcasting local television stations, including FOX television affiliates, CW Network television affiliates, CBS television affiliates, ABC television affiliates, MY television affiliates, NBC television affiliates, and independent television stations; and television series and movies on WGN America, a national general entertainment cable network. Tribune owns 43 broadcast television stations in approximately 35 cities. 19. Defendant Sinclair is headquartered at 10706 Beaver Dam Road, Hunt Valley, Maryland 21030 and operates as a television broadcast company in the U.S. As of December {2862 / CMP / 00151191.DOCX v4} 5 31, 2017, it owned, operated, and/or provided services to 191 stations in 89 markets, which broadcast 601 channels. C. AGENTS AND CO-CONSPIRATORS 20. The acts alleged against the Defendants in this Complaint were authorized, ordered, or done by their officers, agents, employees, or representatives, while actively engaged in the management and operation of Defendants’ businesses or affairs. 21. 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. 22. Each Defendant acted as the principal, agent, or joint venture of, or for, other Defendants with respect to the acts, violations, and common course of conduct alleged by Plaintiff. FACTUAL ALLEGATIONS A. The U.S. Department of Justice Investigation 23. On July 26, 2018, The Wall Street Journal reported that the DOJ is investigating whether Defendants Sinclair, Tribune, and other local television station owners unlawfully shared information and coordinated efforts to artificially raise prices for television commercials. Later that day, Newsmax.com, an online news journal, reported that, Defendants Hearst, Nexstar, and Tegna are also involved in the DOJ probe. 24. Upon information and belief, during the review of a proposed $3.9 billion acquisition of Sinclair and Tribune, the DOJ uncovered anti-competitive market information that led it to investigate Defendants’ conspiracy to artificially inflate television advertising prices. Specifically, the DOJ is investigating whether Defendants “coordinated efforts when their ad sales teams communicated with each other about their performance” in order to artificially inflate television advertising prices in violation of federal antitrust laws. {2862 / CMP / 00151191.DOCX v4} 6 25. On August 9, 2018, Tribune announced its withdrawal from its $3.9 billion merger with Sinclair. B. The Local Television Advertising Market 26. The local television landscape in the U.S. is made up of parent companies who own dozens of local TV stations that carry programming distributed through their broadcast platform, consisting of programming provided by third-party network and syndicators, local news, their own networks, and other original programming. 27. Defendants sell television advertising to local advertisers in multiple DMAs throughout the U.S. A DMA is a geographic area for which A.C. Nielsen Company furnishes broadcast television stations, and others with data to aid in evaluating audience size and composition. 28. The New York City region is the largest DMA, reaching more than 7.3 million households. There are 210 DMAs in the U.S. According to Nielsen, the key benefits to DMAs including: 1) targeting local advertising and direct marketing campaigns across multiple media; 2) selling advertising by local television market; 3) selecting local research samples; and 4) segmenting and analyzing internal and third-party data by local television market. 29. In recent years, television broadcasting companies have experienced significant slowing of growth in their advertising revenues due to increased competition from internet and other advertising. The following chart depicts the slowing growth of television advertising spending in the U.S. since 2012: {2862 / CMP / 00151191.DOCX v4} 7 30. In response to reduced spending, Defendants conspired to artificially inflate advertising prices in order to stabilize and grow revenues. 31. For example, television up-front advertising prices have increased steadily since 2012. In the television industry, an upfront is a gathering at the start of important advertising sales periods, held by television network executives and attended by major advertisers and the media. It is so named because of its main purpose, to allow marketers to buy television commercial airtime “up front”, or several months before the television season begins. Up-front advertising account for a substantial portion of Defendants’ revenues. In the U.S., the major broadcast networks’ upfronts traditionally occurred in New York City, starting in March or May each year. 32. Since 2012, despite stagnant and decreasing demand, up-front prices have materially increased: {2862 / CMP / 00151191.DOCX v4} 8 TV primetime upfront advertising prices $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 $18.00 $20.00 $22.00 $24.00 $26.00 $28.00 $30.00 $32.00 33. Given the above factors, Defendants and their co-conspirators have responded to falling advertisement sales by colluding on pricing, forcing Plaintiff and members of the Class to pay supracompetitive prices for local television advertising. 1. The Structure and Characteristics of the Market for Local Television Advertising Supports the Existence of a Conspiracy 34. The structure and other characteristics of the market for local television advertising make it conducive to anticompetitive conduct among Defendants, and make collusion particularly attractive. Specifically, the local television advertising market (1) is in an industry that has been rapidly consolidating and is becoming increasingly concentrated; (2) has high barriers to entry; and (3) is comprised of participants who had motives and ample opportunities to conspire. a. The Local Television Industry Is Rapidly Consolidating 35. A highly-concentrated market is more susceptible to collusion and other anticompetitive practices than less concentrated markets. 36. In response to decreased advertisement spending, the local television industry market has been consolidating in recent years. This consolidation of the market continues as {2862 / CMP / 00151191.DOCX v4} 9 station owners look to increase their leverage with broadcast networks, which supply much of their programming, and pay-TV distributors, which carry their channels. In 2013, “big owners of local TV stations got substantially bigger, thanks to a wave of station purchases.” 37. Additionally, in February 2018, E.W. Scripps Co., another local television station owner indicated that its “priority is in-market consolidation to create duopolies.” 38. Moreover, on June 25, 2018 Defendant Gray TV agreed to buy fellow television-station owner Raycom Media Inc. in a $3.65 billion deal that would create a company that reaches nearly a quarter of U.S. TV households. If the Gray-Raycom deal is completed, the combined company would own 142 television stations in 92 U.S. markets, reaching 24% of TV households and owning the third-largest number stations. b. Several Challenges Restrict Access to the Local Television Market 39. A collusive arrangement that raises product prices above competitive levels would, under basic economic principles, attract new entrants seeking to benefit from the supracompetitive pricing. When, however, there are significant barriers to entry, new entrants are much less likely to enter the market. Thus, barriers to entry help facilitate the formation and maintenance of a cartels and market-allocation agreements. In a conspiracy that increases the prices for consumers, market forces would typically attract new entrants seeking to exploit {2862 / CMP / 00151191.DOCX v4} 10 the pricing gap created by the conspiracy’s supracompetitive pricing. But where, as here, there are high barriers to entry for an industry, new broadcast television companies are less likely to enter the market. 40. New entrants planning to enter into broadcasting markets typically face six critical barriers (1) governmental policy; (2) the presence of dominant broadcasters; (3) access to content; (4) audience behavior; (5) consumer costs; and (6) capital requirements. 41. Governmental policy, including regulatory or administrative practices may restrict market access. Responsible authorities take into account economic as well as cultural and social factors when issuing broadcasting licenses which may lead to distortions of competition. 42. The existing dominant broadcasters usually have long-established relationships with its viewers and most likely also with advertisers. New entrants in the market would have to offer a better deal than the existing broadcasters in order to usurp any market share. Additionally, bigger companies have more clout to negotiate programming deals with networks or syndicators. “If you wanted a decent seat at the table talking to those guys, you had to have scale,” said Barry Lucas, senior vice president of research at the investment firm Gabelli & Co. “Otherwise you were irrelevant and got pushed around.” A new entrant to the market would have to invest significant capital and time in establishing itself before it could work with networks. 43. Additionally, successful entry into television broadcasting markets requires access at reasonable prices to desirable programming, including production or acquisition from third parties. Acquisition of this content, which is critical to attract viewers, is likely to constitute a significant cost to new market players. 44. Commercial broadcasters, whose operations are primarily financed through advertising fees, must establish within a short period of time an audience base that will also {2862 / CMP / 00151191.DOCX v4} 11 attract a sufficient number of advertisers. Therefore, in the presence of established dominant broadcasters, new entrants must provide offers attractive enough to convince viewers to alter their already existing patterns of viewing and channel choice—a task that proves to be difficult. 45. Most likely, new entrants to the market will offer television broadcasting services using cable, satellite, or digital terrestrial technologies—all of which require viewers to incur hardware related costs. The inconvenience and costs that viewers may encounter when switching between different television broadcasters have the potential of discouraging them from altering their established patterns of viewing. For example, consumers who switch from one cable television provider to another generally have to incur costs related to the rental or purchase of adequate equipment, such as set-top boxes and will have to trade in the old equipment for the new equipment. 46. Finally, it would require considerable funding, time, and technical sophistication for a potential market entrant to gain the economies of scale and audience base achieved by Defendants necessary to compete in the market for local television advertising. For example, Defendant Sinclair “believe[s] the greatest opportunity for a sustainable and growing customer base lies within [its] local communities” which it has developed by training “a strong local sales force at each of [its] television stations, which is comprised of approximately 800 marketing consultants and 100 local sales managers company-wide.” Where the level of capital required is prohibitively high, it constitutes a significant barrier to c. Defendants Had Motives and Opportunities to Conspire with Each Other 47. In 2017, U.S. television advertising sales fell 7.8 percent to $61.8 billion, the steepest drop experienced by the industry in at least 20 years. According to data from {2862 / CMP / 00151191.DOCX v4} 12 MagnaGlobal, a resource that develops investment strategies for industry heads, there is no sign of a pickup in 2018: 48. “In a healthy economy, we’re looking at no growth in advertising from traditional media companies,” said Michael Nathanson, an analyst with research firm, MoffettNathanson. “That’s a worrying trend.” The decline in television viewership is accelerating due to increased investments in the online video advertising market, capturing almost every new advertising dollar entering the marketplace. Almost half of the growth in local video ad spending during the next five years will go to digital platforms, including local mobile video, local online video and out-of-home video, according to a new study on advanced television advertising published last week by BIA/Kelsey industry analysts. “Television ad sales have fallen even as global advertising grows, leading research firms and analysts to predict that the business may never recover.” 49. According to Defendant Sinclair’s annual report for the year ended December 31, 2017 filed with the U.S. Securities and Exchange Commission on Form 10-K, a primary source of revenue for local television stations is “the sale of commercial inventory on . . . {2862 / CMP / 00151191.DOCX v4} 13 television stations to . . . advertising customers.” However, Defendant Sinclair also concedes that “advertising revenue can vary substantially from period to period based on many factors beyond [its] control.” Further, “[t]his volatility affects [its] operating results and may reduce [its] ability to repay indebtedness or reduce the market value of [its] securities.” Defendant Sinclair specifically admits that its “operating results depend on the amount of advertising revenue [it] generate[s].” 50. As Defendants largely rely on revenue from local television advertising in order to sustain their daily operations, in the face of declining sales, Defendants had reason and motivation to conspire to artificially raise the prices of local TV advertisements. 51. Moreover, Defendants had numerous opportunities to meet and conspire with each other and to perform acts necessary for the operation and furtherance of the conspiracy. In particular, almost 300 full-power local TV stations changed hands in 2013 and many of these deals resulted in stations in the same market being separately owned on paper but operated jointly, a practice that has grown exponentially in recent years. As of 2014, joint service agreements of one kind or another existed between Defendants and other local TV station owners in at least 94 markets, almost half of the 210 local television markets nationwide, and up from 55 in 2011. Specifically, Defendant Sinclair admits that “[c]ertain of [its] stations have entered into agreements with other stations in the same market, through which [it] provide[s] programming and operating services[,] . . . sales services[,] and other non-programming operating services.” 52. Additionally, Defendants and their co-conspirators had numerous opportunities to conspire through industry associations such as the Television Bureau of Advertising, Inc. (“TVB”), the National Association of Broadcasters (“NAB”), and the Media Rating Council (“MRC”), conferences and meetings held by those associations, and through merger negotiations. {2862 / CMP / 00151191.DOCX v4} 14 53. Defendants Hearst, Nexstar, Sinclair, Tegna, Gray, and Tribune are members of TVB, which is headquartered at 3 East 54th Street, New York, NY. Nexstar’s President and CEO serves as the Chairman of TVB. TVB is a “not-for-profit trade association representing America’s $21 billion local broadcast television industry.” TVB is designed to bring together and encourage information sharing among employees of broadcast television companies, including Defendants, especially advertising sales representatives. 54. On November 20, 2017, a group of broadcast television companies, including Defendants Hearst, Nexstar, Sinclair, Tegna, and Tribune, announced the launch of the TV Interface Practices or “TIP” Initiative, described as “an industry work group dedicated to developing standard-based interfaces to accelerate electronic advertising transactions for local TV broadcasters and their media agency partners.” Defendant Nexstar’s President and CEO made a public statement regarding TIP indicating that the industry “must work together as an industry.” President and CEO of Defendant Sinclair echoed this sentiment stating that “[t]he TIP Initiative demonstrates the industry’s shared commitment to working together” to grow their advertising sales. Defendant Tribune’s President and CEO also indicated that through the TIP Initiative, Defendants could “actively work[] together.” 55. Defendants are also members of the NAB, which describes itself as the “premier trade association for broadcasters.” Defendant Tegna’s President and CEO and Defendant Hearst’s President both serve on NAB’s Executive Committee. Defendant Gray’s Chairman, President, and CEO, Defendant Nexstar’s Chairman, President and CEO, Defendant Sinclair’s President and CEO, and Defendant Tribune’s COO each serve on the NAB Television Board of Directors. NAB hosts numerous meetings and other events for industry members throughout the year, which are attended by Defendants’ executives. {2862 / CMP / 00151191.DOCX v4} 15 56. Defendants and several other local television station owners are also members of MRC. MRC boasts that one of the “[b]enefits of MRC [m]embership” is that “[m]embers are exposed to other members’ ideas and thoughts”. FRAUDULENT CONCEALMENT AND TOLLING OF THE STATUTE OF LIMITATIONS 57. Any applicable statute of limitations has been tolled by Defendants’ knowing and active concealment of the conspiracy and conduct alleged herein. Through no fault or lack of diligence, Plaintiff and members of the Class were deceived and had no knowledge regarding Defendants’ collusion to fix, maintain, stabilize, and/or artificially inflate prices in the market for the sale of television advertising and could not reasonably discover the collusion. 58. The very nature of Defendants’ conspiracy was secret and self-concealing. Defendants engaged in market manipulation that could not be detected by Plaintiff and members of the Class. 59. Plaintiff and members of the Class had no facts sufficient to place them on inquiry notice of the conspiracy alleged herein until July 26, 2018, when The Wall Street Journal published an article reporting that the DOJ was investigating collusion between Defendants and their coconspirators to inflate prices in the market for the sale of television advertising. 60. As alleged herein, Defendants’ collusion to fix prices in the market for the sale of television advertising was material to Plaintiff and members of the Class at all relevant times. Within the time period of any applicable statute of limitations, Plaintiff and members of the Class could not have discovered through the exercise of reasonable diligence that Defendants and their co-conspirators were colluding to fix, maintain, stabilize, and/or {2862 / CMP / 00151191.DOCX v4} 16 artificially inflate prices for television advertising, which Defendants fraudulently concealed. 61. Plaintiff and members of the Class did not discover and did not know of any facts that would have caused a reasonable person to suspect that Defendants and their co- conspirators were colluding to fix, maintain, stabilize, and/or artificially inflate prices for television advertising. 62. Defendants knowingly, actively, and affirmatively concealed the facts alleged herein, including their collusion to fix, maintain, stabilize, and/or artificially inflate prices in the market for the sale of television advertising. 63. Plaintiff and Class members reasonably relied on Defendants’ knowing, active, and affirmative concealment. 64. For these reasons, all applicable statutes of limitations have been tolled based on the discovery rule and Defendants’ fraudulent concealment and Defendants are estopped from relying on any statutes of limitations in defense of this action. CLASS ACTION ALLEGATIONS 65. Plaintiff brings this action on behalf of itself and as a class action under Rule 23(a), (b)(2) and (b)(3) of the Federal Rules of Civil Procedure on behalf of the following class (the “Class”): All persons and entities in the U.S. who paid for all or a portion of the cost of advertisement time directly to Defendants, or any current or former subsidiary or affiliate of Defendants, or any co-conspirator, during the period from at least and including January 1, 2012 until the effects of Defendants’ unlawful conduct ceases. Excluded from the Class are Defendants, their parent companies, subsidiaries, affiliates, agents, co- conspirators, federal governmental entities and instrumentalities of the federal government, and states and their subdivisions, agencies and instrumentalities. {2862 / CMP / 00151191.DOCX v4} 17 66. While Plaintiff does not know the exact number of members of the Class, Plaintiff believes the class size is numerous given Defendants’ substantial nationwide presence. 67. Common questions of law and fact exist as to all members of the Class. This is particularly true given the nature of Defendants’ unlawful anticompetitive conduct, which was generally applicable to all the members of the Class, thereby making appropriate relief with respect to the Class as a whole. Such questions of law and fact common to the Class include, but are not limited to: (a) Whether Defendants and their co-conspirators engaged in a combination and conspiracy among themselves to restrict output and fix, raise, maintain or stabilize the prices of local television advertising time; (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 Section 1 of the Sherman Act; (e) Whether the conduct of Defendants and their co-conspirators, as alleged in this Complaint, caused injury to the business or property of Plaintiff and the members of the Class; (f) The effect of the alleged conspiracy on the cost of local television advertising time during the Class Period; (g) Whether the Defendants and their co-conspirators fraudulently concealed the existence of their anticompetitive conduct from Plaintiff and the members of the Class; (h) The appropriate injunctive and related equitable relief for Plaintiff and the Class; and (i) The appropriate class-wide measure of damages. 68. Plaintiff’s claims are typical of the claims of the members of the Class, and Plaintiff will fairly and adequately protect the interests of the Class. Plaintiff and all members of the Class are similarly affected by Defendants’ unlawful conduct in that they paid artificially inflated prices for local television advertising time provided by Defendants and/or their co-conspirators. {2862 / CMP / 00151191.DOCX v4} 18 69. Plaintiff’s claims arise out of the same common course of conduct giving rise to the claims of the other members of the Class. Plaintiff’s interests are coincident with, and not antagonistic to, those of the other members of the Class. Plaintiff is represented by competent counsel who are experienced in the prosecution of antitrust and class action litigation. 70. The questions of law and fact common to the members of the Class predominate over any questions affecting only individual members, including legal and factual issues relating to liability and damages. 71. 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 it might not be practicable to pursue individually, substantially outweigh any difficulties that may arise in management of this class action. 72. The prosecution of separate actions by individual members of the Class would create a risk of inconsistent or varying adjudications, establishing incompatible standards of conduct for Defendants. INTERSTATE TRADE AND COMMERCE 73. Billions of dollars of transactions in local television advertisements are entered into each year in interstate commerce in the U.S. and the payments for those transactions flowed in interstate commerce. {2862 / CMP / 00151191.DOCX v4} 19 74. Defendants’ manipulation of the market for the sale of local television advertising had a direct, substantial, and foreseeable impact on interstate commerce in the 75. Defendants intentionally targeted their unlawful conduct to affect commerce, including interstate commerce within the U.S., by combining, conspiring, and/or agreeing to fix, maintain, stabilize, and/or artificially inflate prices for local television advertising. 76. Defendants’ unlawful conduct has a direct and adverse impact on competition in the U.S. Absent Defendants’ combination, conspiracy, and/or agreement to manipulate the market for the sale of local television advertising, the prices of local television advertising would have been determined by a competitive, efficient market. PLAINTIFF AND THE CLASS SUFFERED ANTITRUST INJURY 77. Defendants’ antitrust conspiracy, conspiracy to monopolize, attempted monopolization, and monopolization had the following effects, among others: (a) Price competition has been restrained or eliminated with respect to local television advertising; (b) The prices of local television advertising have been fixed, raised, maintained, or stabilized at artificially inflated levels; (c) Purchasers of local television advertising time have been deprived of the benefits of free and open competition; and (d) Purchasers of local television advertising time paid artificially inflated prices. 78. The purpose of the conspiratorial and unlawful conduct of Defendants and their co-conspirators was to fix, raise, stabilize and/or maintain the price of local television advertising time. 79. The precise amount of the overcharge impacting the prices of local television advertising time paid by Plaintiff and the Class can be measured and quantified using well- accepted models. {2862 / CMP / 00151191.DOCX v4} 20 80. By reason of the alleged violations of the antitrust laws, Plaintiff and the members of the Class have sustained injury to their businesses or property, having paid higher prices for local television advertising time than they would have paid in the absence of Defendants’ illegal contract, combination, or conspiracy and, as a result, have suffered damages in an amount presently undetermined. This is an antitrust injury of the type that the antitrust laws were meant to punish and prevent. FIRST COUNT Violation of Section 1 of the Sherman Act (15 U.S.C. § 1) (Conspiracy in Restraint of Trade) 81. Plaintiff repeats the allegations set forth above as if fully set forth herein. 82. From at least January 1, 2012 until the effects of their unlawful conduct ceases, Defendants and their co-conspirators entered into and engaged in a contract, combination, or conspiracy with regards to local television advertising in unreasonable restraint of trade in violation of Section 1 of the Sherman Act (15 U.S.C. § 1). 83. The contract, combination or conspiracy consisted of an agreement among the Defendants and their co-conspirators to fix, raise, stabilize or maintain at artificially high levels the prices they charged for local television advertising time in the U.S. 84. In formulating and effectuating this conspiracy, Defendants and their co- conspirators did those things that they combined and conspired to do, including: (a) participating in meetings and conversations among themselves during which they agreed to charge prices at certain levels, and otherwise to fix, increase, maintain, or stabilize prices of local television advertisements in the U.S.; and (b) participating in meetings and conversations among themselves to implement, adhere, and police the agreements they reached. 85. Defendants and their co-conspirators engaged in the actions described above for the purpose of carrying out their unlawful agreements to fix, maintain, raise, or stabilize prices of local television advertising time. {2862 / CMP / 00151191.DOCX v4} 21 86. Defendants’ conspiracy had the following effects, among others: (a) Price competition in the market for local television advertisements has been restrained, suppressed, and/or eliminated; (b) Prices for local television advertisement time provided by Defendants and their co-conspirators have been fixed, raised, maintained, and stabilized at artificially high, non-competitive levels throughout the U.S.; and (c) Plaintiff and members of the Class who purchased local television advertisement time from Defendants and their co-conspirators have been deprived of the benefits of free and open competition. 87. Plaintiff and members of the Class have been injured and will continue to be injured in their business and property by paying more for local television advertising time purchased from Defendants and their co-conspirators than they would have paid and will pay in the absence of the conspiracy. 88. The alleged contract, combination, or conspiracy is a per se violation of the federal antitrust laws. 89. Plaintiff and members of the Class are entitled to treble damages and an injunction against Defendants, preventing and restraining the violations alleged herein. PRAYER FOR RELIEF WHEREFORE, Plaintiff and the Class respectfully request the following relief: A. That the Court determine that this action may be maintained as a class action under Rule 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; B. The Court adjudge and decree that the acts of the Defendants are illegal and unlawful, including the agreement, contract, combination, or conspiracy, and acts done in furtherance thereof by Defendants and their co-conspirators be adjudged to have been a per se violation of Section 1 of the Sherman Act, 15 U.S.C. § 1; {2862 / CMP / 00151191.DOCX v4} 22 C. The Court permanently enjoin and restrain Defendants, their affiliates, successors, transferees, assignees, and other offices, directors, agents, and employees thereof, and all other persons acting or claiming to act on their behalf, from in any manner continuing, maintaining, or renewing the conduct, contract, conspiracy, or combination allege 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; D. That Judgment be entered against Defendants, jointly and severally, and in favor of Plaintiff and members of the Class for treble the amount of damages sustained by Plaintiff and the Class as allowed by law, together with costs of the action, including reasonable attorneys’ fees, pre- and post-judgment interest at the highest legal rate from and after the date of service of this Complaint to the extent provided by law; E. That each of the Defendants, and their respective successors, assigns, parent, subsidiaries, affiliates, and transferees, and their officers, directors, agents, and representatives, and all other persons acting or claiming to act on behalf of Defendants or in concert with them, be permanently enjoined and restrained from, in any manner, directly or indirectly, continuing, maintaining or renewing the combinations, conspiracy, agreement, understanding, or concert of action as alleged herein; and F. That the Court award Plaintiff and members of the Class such other and further relief as the case may require and the Court may deem just and proper under the circumstances. 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. {2862 / CMP / 00151191.DOCX v4} 23 Dated: September 25, 2018 LOWEY DANNENBERG, P.C. By: /s/ Barbara J. Hart___________________ Barbara J. Hart Scott V. Papp 44 South Broadway, Suite 1100 White Plains, NY 10601 Tel.: 914-997-0500 E-mail: bhart@lowey.com E-mail:: spapp@lowey.com Counsel for Plaintiff and the Proposed Class {2862 / CMP / 00151191.DOCX v4} 24

antitrust

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No. CLASS ACTION COMPLAINT DEMAND FOR JURY TRIAL UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE LLOYD EVAN BRADOW D/B/A PENINSULA CONTRACTING AND ROOFING, individually and on behalf of all others similarly situated, Plaintiff, vs. CEDAR SHAKE & SHINGLE BUREAU, a Washington non-profit corporation; WALDUN FOREST PRODUCTS, LTD., a British Columbia corporation; ANBROOK INDUSTRIES LTD, a British Columbia corporation; and G&R CEDAR LTD., a British Columbia corporation, Defendants. TABLE OF CONTENTS I. NATURE OF THE ACTION ............................................................................................. 1 II. JURISDICTION AND VENUE ......................................................................................... 4 III. THE PARTIES .................................................................................................................... 5 A. PLAINTIFF ............................................................................................................................... 5 B. DEFENDANTS .......................................................................................................................... 5 C. NON-DEFENDANT CO-CONSPIRATORS ................................................................................... 7 D. OTHER NON-PARTIES ........................................................................................................... 15 E. FORMER CSSB MEMBERS .................................................................................................... 15 IV. IMPACT ON UNITED STATES TRADE & COMMERCE ........................................ 19 V. FACTUAL ALLEGATIONS ........................................................................................... 21 A. THE RELEVANT PRODUCTS ................................................................................................... 21 B. THE CSSB STRUCTURE, BYLAWS, AND MEETINGS .............................................................. 25 The CSSB Board of Directors ......................................................................................... 26 The “All or Nothing Rule” .............................................................................................. 27 CSSB Meetings ................................................................................................................ 28 C. THE PROXIMITY OF CSSB AND ITS MANUFACTURER MEMBERS .......................................... 29 D. THE DEFENDANTS AND THEIR CO-CONSPIRATORS ENTERED INTO A CONSPIRACY TO FIX THE PRICES OF CEDAR SHAKES & SHINGLES IN THE UNITED STATES .......................................... 30 E. THE DEFENDANTS AND THEIR CO-CONSPIRATORS AGREED TO JOINTLY BOYCOTT PRICE DISCOUNTERS ....................................................................................................................... 32 F. THE GROUP BOYCOTT STRENGTHENED THE CONSPIRACY ................................................... 33 G. THE ALLEGED CONSPIRACY WAS ECONOMICALLY PLAUSIBLE AND NORMAL MARKET FORCES CANNOT EXPLAIN THE PRICING FOR CERTI-LABEL™ CSS ..................................... 35 H. THE CSS MARKET IS CONDUCIVE TO COLLUSION ................................................................ 41 VI. CLASS ACTION ALLEGATIONS ................................................................................. 43 VII. ANTITRUST INJURY ...................................................................................................... 45 VIII. FRAUDULENT CONCEALMENT & TOLLING ........................................................ 46 IX. CLAIM FOR RELIEF ...................................................................................................... 47 SECTION 1 OF THE SHERMAN ACT (15 U.S.C. § 1): UNLAWFUL CONSPIRACY IN UNREASONABLE RESTRAINT OF TRADE ............................................................................................................... 47 X. PRAYER FOR RELIEF ................................................................................................... 48 XI. JURY DEMAND ............................................................................................................... 48   TABLE OF FIGURES FIGURE 1: BRITISH COLUMBIA EXPORTS OF CSS .......................................................................... 20 FIGURE 2: CEDAR SHAKES & CEDAR SHINGLES ............................................................................ 21 FIGURE 3: CSSB’S CERTI-LABEL™ .............................................................................................. 24 FIGURE 4: CSSB "FRAUD ALERT" ................................................................................................ 25 FIGURE 5: CSS MANUFACTURERS ON CSSB BOARD OF DIRECTORS (2012-2019) ....................... 26 FIGURE 6: LOCATIONS OF CSSB AND MANUFACTURER DEFENDANTS .......................................... 29 FIGURE 7: LOCATIONS OF CSSB, MANUFACTURER DEFENDANTS, AND NON-DEFENDANT CO-CONSPIRATORS .......................................................................... 30 FIGURE 8: S&W INVOICE #00400105 ........................................................................................... 34 FIGURE 9: S&W INVOICE #0049063 AND INVOICE #00400218 .................................................... 34 FIGURE 10: PRICING OF #1 WESTERN RED CEDAR SHAKES & SHINGLES ...................................... 35 FIGURE 11: PRICING OF #2 WESTERN RED CEDAR SHAKES & SHINGLES ...................................... 36 FIGURE 12: BRITISH COLUMBIA WRC HARVEST VERSUS WRC-CSS PRICING ............................ 37 FIGURE 13: PRODUCER PRICE INDICES FOR SOFTWOOD LUMBER AND SAWMILL SHAKE & SHINGLE PRODUCTS; PRICE INDEX OF CANADIAN SOFTWOOD EXPORTS; AND INDEX OF BRITISH COLUMBIA WRC HARVEST ............................................................. 38 FIGURE 14: AVERAGE PRICE INDICES OF SUPPLY INPUTS AND OF CSS ......................................... 39 FIGURE 15: INVENTORY VALUE AND MANUFACTURING FOR CANADIAN SHINGLE & SHAKE MILLS .................................................................................................... 40 I. NATURE OF THE ACTION 1. Plaintiff alleges as follows based upon personal knowledge as to the facts pertaining to itself, and upon information and belief and the investigation of counsel as to all other matters. 2. This class action lawsuit involves an antitrust conspiracy to fix the prices of cedar shakes and shingles (“CSS”) between and among Defendant Cedar Shake and Shingle Bureau (“CSSB” or “Bureau”)—the industry’s only trade association—and its manufacturer members, including Defendant Anbrook Industries Ltd. (“Anbrook”), Defendant Waldun Forest Products Ltd. (“Waldun”), and Defendant G&R Cedar Ltd. (“G&R”) (collectively, “Manufacturer Defendants”). 3. Plaintiff, Lloyd Evan Bradow (“Plaintiff” or “Bradow”), brings this action on behalf of himself and on behalf of a Class consisting of all individuals and entities in the United States that directly purchased Certi-Label™ CSS from the Manufacturer Defendants or their co- conspirators from at least as early as January 1, 2011 through the present (the “Class Period,” more fully defined infra).1 4. Cedar shakes are split by hand, have a relatively rough appearance, and are almost always used in roofing applications, whereas cedar shingles are machine-sawn, have a consistent appearance and thickness, and are used in both siding and roofing applications. CSS are made from Western Red Cedar or Alaskan Yellow Cedar, and these species are only commercially harvested in the Pacific Northwest, especially British Columbia and the State of Washington. 5. CSS is overwhelmingly manufactured in the Pacific Northwest for sale in the United States. The United States is the largest market for CSS in the world, and more than 90% of the CSS exported from Canada is imported into the United States. Between 2011 and 2018, Canadian manufacturers, including the Manufacturer Defendants and their co-conspirators, exported more than $1 billion of CSS to the United States, or more than $139 million of CSS per year. 1 Additional discovery may reveal that the conduct alleged in this Complaint commenced prior to the start of the Class Period, and Plaintiff reserves all rights to amend his complaint as appropriate. 6. The CSS sold by the Manufacturer Defendants and their co-conspirators all carry the “Certi-Label™” designation and include Certi-Grade™ shingles, Certi-Sawn™ shakes, and Certi-Split™ shakes. These products are collectively referred to herein as “Certi-Label™ CSS”. 7. The CSSB controls the Certi-Label™, Certi-Grade™, Certi-Sawn™, and Certi- Split™ trademarks and limits their use to CSSB members. Certi-Label™ CSS account for 95% of the CSS products sold in the United States and sell at a price of at least 15-20% more than CSS without the Certi-Label™. 8. Because the raw material costs for CSS are set based on competitive auctions, this price premium restricts the ability of non-CSSB manufacturers to obtain raw materials on commercially viable terms. 9. Defendants conspired to fix, increase, maintain, or stabilize the price of Certi- Label™ CSS and reduce or eliminate price competition among CSS manufacturers in violation of the Sherman Act. Defendants’ conspiracy began at least as early as January 1, 2011 and continues through the present. 10. Throughout the Class Period, the Defendants and their co-conspirators routinely discussed and agreed on the pricing levels to charge for Certi-Label™ CSS, and when confronted with CSSB members that were not adhering to their price-fixing arrangement, agreed to take action to terminate those price discounters from the CSSB, thereby eliminating their ability to utilize the Certi-Label™ designation on their CSS product. For example, in late 2018, Waldun’s Director, Curtis Walker (“Walker”) met with Kris Watkins, Chief Operating Officer of co-conspirator Watkins Sawmills Ltd. (“Watkins”), and stated that Waldun “never dropped their pricing,” and that all CSSB manufacturers should keep their prices at consistent levels. When told that another CSSB manufacturer, S&W Forest Products Ltd. (“S&W”), was discounting Certi-Label™ CSS during times of low demand, Waldun’s Walker exclaimed: “Yeah, well we just need to get rid of that guy.” Thereafter, Defendants successfully took coordinated action, citing pretextual justifications, to terminate S&W’s CSSB membership, which threatened S&W’s ability to continue its operations. The foregoing example is merely illustrative: Defendants’ price-fixing, enforced through collective boycotting of price discounters, has been ongoing for nearly a decade, if not longer. 11. The conspiracy was facilitated and enforced by the CSSB, which provides ample opportunities for its members to conspire. In addition, the Manufacturer Defendants have worked to consolidate their power in the CSSB—partly through the elimination of would-be discounters— so that the CSSB now serves as little more than a vehicle through which the price-fixing conspiracy is implemented and policed, as demonstrated by the pretextual termination of S&W from the CSSB for pricing Certi-Label™ CSS below the agreed-upon prices. The collusive mission of the CSSB was confirmed by another excluded competitor, who called the organization the “Mafia.” 12. The CSSB, under the control of the Manufacturer Defendants, has also enacted policies aimed at further eliminating competition among and between the CSSB member manufacturers. For example, the CSSB by-laws contain an “All or Nothing” rule, which requires all CSSB members to only produce and sell Certi-Label™ CSS. This rule was intended to eliminate, and has the actual impact of eliminating, price competition among CSSB manufacturers. The “All or Nothing” rule therefore helps to ensure that Certi-Label™ CSS continue to be sold at higher, supra-competitive prices. This rule has no competitive purpose. 13. Due to the Manufacturer Defendants’ success in consolidating their power in the CSSB and eliminating price discounters from the trade association (and thereby also eliminating their ability so secure the necessary raw materials), the other manufacturer members of the CSSB, which would normally compete with the Manufacturer Defendants on the basis of price, agreed to join the price-fixing conspiracy. These non-party conspiring manufacturers joined the conspiracy because they feared they would face the same fate as other CSSB price discounters before them: expulsion from the Bureau and the significant loss of revenue that would entail, due to concerted retaliation by the Defendants. 14. Apart from this traditional conspiracy evidence, the structure and pricing behavior of the CSS market support the conclusion that the Defendants entered into an anticompetitive scheme in violation of the Sherman Act. With respect to structure, the industry is highly concentrated and vertically integrated, with high barriers to entry; CSS is a commodity without a good substitute, and the demand for it is price-inelastic; and there are ample opportunities to conspire. With respect to pricing behavior, the prices of CSS sold in the United States have increased substantially, in amounts that cannot be explained by normal market forces such as raw material costs or supply and demand, since January 1, 2011. 15. Defendants’ anticompetitive actions had the intended purpose and effect of artificially fixing, inflating, maintaining, or stabilizing the price of Certi-Label™ CSS sold to Plaintiff and other members of the Class. Plaintiff and other members of the Class paid these supra- competitive prices, and accordingly, suffered an antitrust injury as a result of the Defendants’ conduct. II. JURISDICTION AND VENUE 16. This action arises under Section 1 of the Sherman Act (15 U.S.C. § 1), and Sections 4 and 16 of the Clayton Act (15 U.S.C. §§ 15 and 26). 17. This Court has jurisdiction under 28 U.S.C. §§ 1331 and 1337 and Sections 4 and 16 of the Clayton Act (15 U.S.C. §§ 15 and 26). This Court also has original jurisdiction under 28 U.S.C. § 1332(d)(2) because the amount in controversy exceeds $5 million, exclusive of costs and interest, and is a class action in which at least one Defendant is a citizen or subject of a foreign 18. Venue is proper in this District pursuant to Sections 4, 12, and 16 of the Clayton Act (15 U.S.C. §§ 15, 22, and 26) and 28 U.S.C. § 1391(b), (c), and (d). One or more of the Defendants resided, transacted business, were found, or had agents in this District, a substantial part of the events giving rise to Plaintiffs’ claims arose in the District, and a substantial portion of the affected interstate trade and commerce described herein has been carried out in this District. 19. This Court has personal jurisdiction over each Defendant because each: (a) transacted business throughout the United States, including in this District; (b) manufactured, sold, shipped, or delivered substantial quantities of CSS throughout the United States, including this District; (c) had substantial contacts with the United States, including this District; and/or (d) engaged in an antitrust conspiracy that was directed at and had a direct, foreseeable, and intended effect of causing injury to the business or property of persons or entities residing in, located in, or doing business in the United States, including in this District. 20. The Defendants and their co-conspirators’ activities, as described herein, were within the flow of, were intended to, and did have direct, substantial, and reasonably foreseeable effects on the foreign and interstate commerce of the United States. 21. No other forum would be more convenient for the parties and witnesses to litigate this case. III. THE PARTIES A. Plaintiff 22. Plaintiff is a Washington resident doing business as Peninsula Contracting and Roofing, with his principal place of business in Port Angeles, Washington. Plaintiff purchased Certi-Label™ CSS directly from one or more of the co-conspirators identified above during the Class Period. B. Defendants 23. Defendant CSSB is a Washington non-profit corporation that is the only trade association serving the CSS industry in the United States and Canada. The CSSB is headquartered in Mission, British Columbia and maintains an office in Sumas, Washington. The brother of Waldun’s Walker, Clay Walker, is CSSB’s “Cedar Quality Auditor” and CSSB’s “District Manager” for the Pacific Northwest region. 24. Defendant Anbrook is a British Columbia corporation with its primary place of business in Pitt Meadows, British Columbia. Anbrook is one of the largest CSS manufacturers in the world. Anbrook is a member of the CSBB, and its President, Brooke Meeker (“Meeker”), sits on CSSB’s Board of Directors and acts as its Chairwoman. Anbrook owns and operates a CSS manufacturing facility in Pitt Meadows, British Columbia and manufacturers Certi-Label™ CSS. During the Class Period, Anbrook and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 25. Defendant Waldun is a British Columbia corporation with its principal place of business in Maple Ridge, British Columbia. Waldun bills itself as “the largest company in the world manufacturing such a selection of cedar products.” It is a member of the CSSB, and its Director, Walker, sits on CSSB’s Board of Directors and acts as its Secretary/Treasurer. Waldun owns and operates a CSS manufacturing facility in Maple Ridge, British Columbia and manufactures Certi-Label™ CSS. During the Class Period, Waldun and/or its predecessors, agents, wholly owned or controlled subsidies, or affiliates sold Certi-Label™ CSS in interstate commerce to purchasers in the United States. 26. Defendant G&R is a British Columbia corporation headquartered in Matsqui, British Columbia. G&R is a self-described industry leader in the CSS industry. It is a member of the CSSB, and its Sales Manager, Stuart Dziedzic (“Dziedzic”), sits on CSSB’s Board of Directors. G&R owns and operates a CSS manufacturing facility in Matsqui, British Columbia and manufactures Certi-Label™ CSS. During the Class Period, G&R and/or its predecessors, agents, wholly owned or controlled subsidies, or affiliates sold Certi-Label™ CSS in interstate commerce to purchasers in the United States. 27. “Defendant” or “Defendants” as used herein includes, in addition to those named above, each of the named Manufacturer Defendants’ predecessors, including CSS companies that merged with or were acquired by the Manufacturer Defendants and each Manufacturer Defendant’s agents or wholly owned or controlled subsidiaries that sold Certi-Label™ CSS in interstate commerce, to purchasers in the United States during the Class Period. 28. To the extent that subsidiaries and divisions within each Manufacturer Defendant’s corporate family sold or distributed Certi-Label™ CSS, these subsidiaries played a material role in the conspiracy alleged in this Complaint because Defendants wished to ensure that the prices paid for such CSS would not undercut the artificially raised and inflated pricing that was the purpose of Defendants’ coordinated and collusive behavior as alleged herein. Thus, all such entities within the corporate family were active, knowing participants in the conspiracy alleged herein, and their conduct in selling, pricing, distributing and collecting monies from Plaintiff and the members of the Class for Certi-Label™ CSS was known to and approved by their respective corporate parent named as a Defendant in this Complaint. 29. Each of the Defendants named herein acted as the agent or joint-venturer of or for the other Defendants with respect to the acts, violations, and common course of conduct alleged 30. Defendants are also liable for acts done in furtherance of the alleged conspiracy by companies they acquired through mergers and acquisitions. 31. Whenever reference is made to any act of any corporation, the allegation means that the corporation engaged in the act 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. C. Non-Defendant Co-Conspirators 32. Various other persons, firms, and corporations not currently named as defendants have participated as co-conspirators as Defendants and have performed acts and made statements in furtherance of the conspiracy (collectively, the “Non-Defendant Co-Conspirators”). Defendants are jointly and severally liable for the acts of the Non-Defendant Co-Conspirators whether or not named as defendants in this Complaint. A list of the known Non-Defendant Co-Conspirators follows. 33. #208 Shake & Shingle/Griffiths Inc. (“#208”) is a Washington corporation headquartered in Moclips, Washington. It is a member of the CSSB and manufactures CSS. During the Class Period, #208 and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United 34. A & R Cedar, Inc. (“A&R”) is a Washington corporation headquartered in Hoquiam, Washington. It is a member of the CSSB, and a member of its senior management team, Cecilia Acuna (“Acuna”), sits on the CSSB Board of Directors. A&R manufactures CSS. During the Class Period, A&R and/or its predecessors, agents, wholly owned or controlled subsidies, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United 35. A.B. Cedar Shingle (“A.B. Cedar”) is a British Columbia corporation headquartered in Sicamous, British Columbia. It is a member of the CSSB and manufactures CSS. During the Class Period, ACS and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 36. A.C.S. Cedar, Inc. (“A.C.S.”) is a Washington corporation headquartered in Aberdeen, Washington. It is a member of the CSSB and manufactures CSS. During the Class Period, ACS and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 37. Acuna Cedar Products, Inc. (“Acuna Cedar”) is a Washington corporation headquartered in Sedro-Woolley, Washington. It is a member of the CSSB and manufactures CSS. During the Class Period, Acuna Cedar and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 38. Alfa Red Cedar Products, Inc. (“Alfa Red”) is a Washington corporation headquartered in Hoquiam, Washington. It is a member of the CSSB and manufactures CSS. During the Class Period, Alfa Red and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly or through its wholly-owned or controlled affiliates, to purchasers in the United States. 39. American Cedar Sales, LLC (“American Cedar”) is an Idaho corporation headquartered in Kamiah, Idaho. It is a member of the CSSB and manufactures CSS. During the Class Period, American Cedar and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 40. Anderson Shake and Shingle Mill, Inc. (“Anderson”) is a Washington corporation headquartered in Cathlamet, Washington. It is a member of the CSSB and manufactures CSS. During the Class Period, Anderson and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 41. Best Shingle Sales, Inc. (“Best”) is a Washington corporation headquartered in Hoquiam, Washington. It is a member of the CSSB, and its owner, Terry Kost (“Kost”), sits on CSSB’s Board of Directors. Best manufactures CSS. During the Class Period, Best and/or its predecessors, agents, wholly owned or controlled subsidies, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 42. Campbell River Shake & Shingle Co. Ltd. (“Campbell River”) is a British Columbia corporation headquartered in Campbell River, British Columbia. It is a member of the CSSB and manufactures CSS. During the Class Period, Campbell River and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 43. Cape Scott Cedar Products Ltd. (“Cape Scott”) is a British Columbia corporation headquartered in Port Hardy, British Columbia. It is a member of the CSSB and manufactures CSS. During the Class Period, Cape Scott and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 44. Clearbrook Shake & Shingle Ltd. (“Clearbrook”) is a British Columbia corporation headquartered in Abbotsford, British Columbia. It is a member of the CSSB and manufactures CSS. During the Class Period, Clearbrook and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 45. Comox Valley Shakes (2019) Ltd. (“Comox”) is a British Columbia corporation headquartered in Campbell River, British Columbia. It is a member of the CSSB and manufactures CSS. During the Class Period, Comox and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 46. Confederate Shake & Shingle Ltd. (“Confederate”) is a British Columbia corporation headquartered in Duncan, British Columbia. It is a member of the CSSB and manufactures CSS. During the Class Period, Confederate and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 47. DLM Shake Co. (“DLM”) is an Idaho business based in Saint Maries, Idaho. It is a member of the CSSB and manufactures CSS. During the Class Period, DLM and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 48. Fabian Shingles LLC (“Fabian”) is a Washington corporation headquartered in Amanda Park, Washington. It is a member of the CSSB and manufactures CSS. During the Class Period, Fabian and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United 49. Goat Lake Forest Products (1985) Ltd. (“Goat Lake”) is a British Columbia corporation headquartered in Powell River, British Columbia. It is a member of the CSSB and manufactures CSS. During the Class Period, Goat Lake and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 50. Golden Ears Shingle Ltd. (“Golden Ears”) is a British Columbia corporation headquartered in Maple Ridge, British Columbia. It is a member of the CSSB and manufactures CSS. During the Class Period, Golden Ears and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 51. Imperial Cedar Products Ltd. (“Imperial Cedar”) is a British Columbia corporation headquartered in Maple Ridge, British Columbia. It is a member of the CSSB and manufactures CSS. During the Class Period, ACS and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 52. J.C. Shingles, Inc. (“J.C. Shingles”) is a Washington corporation headquartered in Amanda Park, Washington. It is a member of the CSSB and manufactures CSS. During the Class Period, J.C. Shingles and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United 53. J.E.C. Cedar, Inc. (“J.E.C.”) is a Washington corporation headquartered Amanda Park, Washington. It is a member of the CSSB and manufactures CSS. During the Class Period, J.E.C. and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 54. L & H Shake, Inc. (“L&H”) is a Washington corporation headquartered Hoquiam, Washington. It is a member of the CSSB and manufactures CSS. During the Class Period, L&H and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi- Label™ CSS in interstate commerce, directly to purchasers in the United States. 55. Long Cedar Inc. (“Long Cedar”) is a Washington corporation headquartered in Forks, Washington. It is a member of the CSSB and manufactures CSS. During the Class Period, Long Cedar and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 56. Pacific Cedar (“Pacific Cedar”) is a Canadian business based in Port Alberni, British Columbia. It is a member of the CSSB and manufactures CSS. During the Class Period, Pacific Cedar and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 57. Pacific Chalet Ltd. (“Pacific Chalet”) is a British Columbia corporation headquartered in Powell River, British Columbia. It is a member of the CSSB and manufactures CSS. During the Class Period, Pacific Chalet and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 58. Pacific Coast Cedar Products, Ltd. (“Pacific Coast”) is a British Columbia corporation headquartered in Maple Ridge, British Columbia. It is a member of the CSSB and manufactures CSS. During the Class Period, ACS and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 59. Pacific Shingle Inc. (“Pacific Shingle”) is a Washington corporation headquartered in Forks, Washington. It is a member of the CSSB and manufactures CSS. During the Class Period, Pacific Shingle and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United 60. Pleasant Lake Cedar (“Pleasant Lake”) is a Washington business based in Beaver, Washington. It is a member of the CSSB and manufactures CSS. During the Class Period, Pleasant Lake and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 61. Port McNeill Shake & Shingle (2007) Ltd. (“Port McNeill”) is a Canadian corporation headquartered in Port McNeill, British Columbia. It is a member of the CSSB and manufactures CSS. During the Class Period, Port McNeill and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 62. Premium Cedar Products Ltd. (“Premium Cedar”) is a British Columbia corporation headquartered in Mission, British Columbia. It is a member of the CSSB, and one of its senior managers, Ed Watkins, sits on CSSB’s Board of Directors and served as its Past Chairman. Premium manufactures CSS. During the Class Period, Premium and/or its predecessors, agents, wholly owned or controlled subsidies, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 63. Premium Shingle LLC (“Premium Shingle”) is a Washington corporation headquartered in Beaver, Washington. It is a member of the CSSB and manufactures CSS. During the Class Period, Premium Shingle and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 64. Rainy Day Shake & Shingle, Inc. (“Rainy Day”) is a Washington corporation headquartered in Forks, Washington. It is a member of the CSSB and manufactures CSS. During the Class Period, Rainy Day and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 65. Riverside Shingle Products Ltd. (“Riverside”) is a British Columbia corporation headquartered in Errington, British Columbia. It is a member of the CSSB and manufactures CSS. During the Class Period, Riverside and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 66. Serpentine Cedar Ltd. (“Serpentine”) is a British Columbia corporation headquartered in Langley City, British Columbia. It is a member of the CSSB and manufactures CSS. During the Class Period, Serpentine and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 67. Silver-Coqu Cedar Products (“Silver-Coqu”) is a Canadian business headquartered in Hope, British Columbia. It is a member of the CSSB and manufactures CSS. During the Class Period, Silver Coqu and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United 68. Star Cedar Sales, Inc. (“Star Cedar”) is an Idaho corporation headquartered in Kamiah, Idaho. It is a member of the CSSB and manufactures CSS. During the Class Period, ACS and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi- Label™ CSS in interstate commerce, directly to purchasers in the United States. 69. Stave Lake Cedar Mills Inc. (“Stave”) is a British Columbia corporation headquartered in Dewdney, British Columbia. It is a member of the CSSB and manufactures CSS. During the Class Period, Stave and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 70. Titan Cedar Products Ltd. (“Titan”) is a British Columbia corporation headquartered in Port Coquitlam, British Columbia. It is a member of the CSSB and manufactures CSS. During the Class Period, Titan and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 71. Vancouver Island Shingle Ltd. (“Vancouver Shingle”) is a British Columbia corporation headquartered in Mount Waddington, British Columbia. It is a member of the CSSB and manufactures CSS. During the Class Period, Vancouver Shingle and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 72. Watkins is a British Columbia corporation headquartered in Mission, British Columbia. It has common ownership and management with Premium Cedar, and even uses the same main telephone number. It is a member of the CSSB, and its President, Ed Watkins, sits on CSSB’s Board of Directors and served as its Past Chairman. Watkins manufactures CSS. During the Class Period, Watkins and/or its predecessors, agents, wholly owned or controlled subsidies, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United 73. Zoffel Logging & Milling Inc. (“Zoffel”) is a Washington corporation headquartered in Forks, Washington. It is a member of the CSSB and manufactures CSS. During the Class Period, Zoffel and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United D. Other Non-Parties 74. S&W is a British Columbia corporation headquartered in Maple Ridge, British Columbia. During the Class Period, S&W and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. As described in greater detail herein, in December 20, 2018, the CSSB Board of Directors terminated S&W’s membership in the CSSB because S&W was selling Certi-Label™ CSS at discounted prices, and after filing a complaint (S&W Forest Prods., Ltd. v. CSSB, et al., No. 2:19-cv-000202 (W.D. Wash.)) (the “S&W Lawsuit”)—which included allegations of anticompetitive conduct by the Defendants in this action—and successfully moving for a preliminary injunction in this District, was re-admitted to the CSSB in April 2019. E. Former CSSB Members 75. Various other persons, firms, and corporations manufactured Certi-Label™ CSS as members of the CSSB during the Class Period (collectively, the “Former CSSB Members”). A list of the known Former CSSB Members follows. As explained herein, a yet unknown number of these Former CSSB Members—as with S&W—were expelled from the Bureau for discounting Certi-Label™ CSS. 76. A.K. Cedar Products Ltd. (“A.K. Cedar”) is a British Columbia corporation headquartered in Abbotsford, British Columbia. It was a member of the CSSB in or around 2016. During the Class Period, A.K. Cedar and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 77. B&B Cedar Sales, Inc. (“B&B”) is a Washington corporation headquartered in Lacey, Washington. It was a member of the CSSB in or around 2012. During the Class Period, B&B and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 78. B.C.F. Shake Mill Ltd. (“B.C.F.”) is a British Columbia corporation headquartered in Fanny Bay, British Columbia. It was a member of the CSSB during the Class Period. During the Class Period, B.C.F. and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 79. Cedar Valley Holdings Ltd. (“Cedar Valley”) was a British Columbia corporation headquartered in Valemont, British Columbia. It was a member of the CSSB in or around 2016. During the Class Period, Cedar Valley and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 80. Crawford Shake & Shingle, Ltd. (“Crawford”) was a British Columbia corporation headquartered in Port Alberni, British Columbia. It was a member of the CSSB in or around 2013. During the Class Period, Crawford and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 81. D & G Shake Co., Inc. (“D&G”) was a Washington corporation headquartered in Amanda Park, Washington. It was a member of the CSSB in or around 2016. During the Class Period, D&G and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 82. Francisco Cisneros Shingles (“Francisco Shingles”) was a Washington business based in the Forks, Washington area. It was a member of the CSSB in or around 2016. During the Class Period, Francisco Shingles and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 83. Hoko Falls Cedar is a Washington business based in Sekiu, Washington. It was a member of the CSSB in or around 2012. During the Class Period, Hoko Falls Cedar and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 84. Lamming Cedar Mills BC (“Lamming Cedar”) is a British Columbia business based in McBride, British Columbia. It was a member of the CSSB in or around 2012. During the Class Period, Lamming Cedar and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 85. Medley Co. Cedar, Inc. (“Medley”) is an Idaho corporation headquartered in Pierce, Idaho. It was a member of the CSSB in or around 2012. During the Class Period, Medley and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 86. ML Cedar Products Inc. (“ML Cedar”) was a Washington corporation headquartered in Forks, Washington. It was a member of the CSSB in or around 2013, 2016, and 2017. During the Class Period, ML Cedar and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 87. Olympic Cedar Products, Inc. (“Olympic”) is a Washington corporation headquartered in Forks, Washington. It was a member of the CSSB in or around 2016 and 2017. During the Class Period, Olympic and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 88. Pacific NW Products LLC (“Pacific NW”) is a Washington corporation headquartered in Forks, Washington. It was a member of the CSSB in or around 2017. During the Class Period, Pacific NW and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, to purchasers in the United States. 89. Real Wood, Inc. (“Real Wood”) was a Washington corporation headquartered in Sequim, Washington. It was a member of the CSSB in or around 2012 and 2015. During the Class Period, Real Wood and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 90. S&K Cedar Products Ltd. (“S&K”) is a British Columbia corporation headquartered in Mission, British Columbia. It was a member of the CSSB in or around 2012 to 2017. During the Class Period, S&K and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 91. Sherico Cedar Products (“Sherico”) is a Washington corporation headquartered in Forks, Washington. It was a member of the CSSB in or around 2012 and 2013. During the Class Period, Sherico and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 92. Stave River Industries Ltd. (“Stave River”) was a British Columbia corporation headquartered in Maple Ridge, British Columbia It was a member of the CSSB in or around 2012 and 2015. During the Class Period, Stave River and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 93. Twin River Lumber is a British Columbia business based in Malakwa, British Columbia. It was a member of the CSSB in or around 2013, 2016, and 2017. During the Class Period, Twin River Lumber and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 94. Western Gold Cedar Products (“Western Gold”) is an Alaskan business based in Thorne Bay, Alaska. It was a member of the CSSB in or around 2016. During the Class Period, Western Gold and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. 95. Wilson Shake Mill was a Washington business based in Chehalis, Washington. It was a member of the CSSB in or around 2012. During the Class Period, Wilson Shake Mill and/or its predecessors, agents, wholly owned or controlled subsidiaries, or affiliates manufactured and sold Certi-Label™ CSS in interstate commerce, directly to purchasers in the United States. IV. IMPACT ON UNITED STATES TRADE & COMMERCE 96. The United States is the largest market for CSS in the world, valued at hundreds of millions of dollars annually, and during the Class Period, the Manufacturer Defendants and their co-conspirators collectively possessed a sizeable majority share of the market for CSS in the United States. 97. Most CSS is manufactured in British Columbia—mostly by the Manufacturer Defendants—and then imported into the United States. According to official Canadian export data, between 2011 and 2018, roughly $1.1 billion worth of CSS was imported into the United States from British Columbia (nearly 10% of these imports were into Washington), or more than $139 million, on average, worth of CSS per year. This equates to nearly 91% of all CSS manufactured in British Columbia being imported into the United States between 2011 and 2018. 98. The following chart shows the dollar value (in U.S. Dollars) of British Columbia CSS exports to the United States, as well as the percentage of all CSS exported from British Columbia to the United States: Figure 1: British Columbia Exports of CSS $170,000,000 100.00% $160,000,000 95.00% $150,000,000 90.00% $140,000,000 85.00% $130,000,000 80.00% $120,000,000 75.00% $110,000,000 70.00% $100,000,000 65.00% 2011 2012 2013 2014 2015 2016 2017 2018 Export Value to U.S. (in USD) % of Total Exports 99. All CSSB manufacturers (the Manufacturer Defendants and the Non-Defendant Co-Conspirators) participate in and sell the vast majority of their CSS in the United States, and due to the “All or Nothing” Rule, all of the CSS sold by CSSB manufacturers in the United States was Certi-Label™ CSS. 100. Thus, during the Class Period, Defendants engaged in conduct both inside and outside the United States that caused direct, substantial, and reasonably foreseeable and intended anticompetitive effects upon interstate commerce within the United States. 101. In addition, each Manufacturer Defendant, directly or through its subsidiaries or other affiliates, sold Certi-Label™ CSS in the United States in a continuous and uninterrupted flow of interstate commerce and foreign commerce, including through and into this District, during the Class Period. 102. Defendants’ business activities substantially affected interstate trade and commerce in the United States and caused antitrust injury in the United States. V. FACTUAL ALLEGATIONS 103. The facts in support of this action are based on Plaintiffs’ review of publicly- available information. Based on a review of these documents, and as described in greater detail herein, Plaintiffs believe that discovery will result in the production of many more inculpatory documents within Defendants’ sole possession, custody, or control. A. The Relevant Products 104. Cedar shakes are used for roofing shingles and have been hand split for a rustic look, whereas cedar shingles are used for both sidewalls and roofing and have been uniformly sawn for a consistent, uniform machine-like look. According to G&R’s website, “[t]he main difference between a shingle and a shake is that a shingle is sawn on both sides for a smooth, tailored appearance, while a shake is split on the face, and sawn on the back, for a rougher, rustic 105. The following illustrations visually depict the differences between cedar shakes and Figure 2: Cedar Shakes & Cedar Shingles cedar shingles: 106. CSS are produced from logs and cut blocks of Western Red Cedar (Thuja plicata) or Alaskan Yellow Cedar (Cupressus nootkatensis). Western Red Cedar and Alaskan Yellow Cedar are only commercially available in the Pacific Northwest, and British Columbia has the world’s largest supply of standing Western Red Cedar. 107. Both Western Red Cedar and Alaskan Yellow Cedar are durable, naturally water- resistant, and highly resistant to decay, and both species are used for a variety of building applications outside of CSS (e.g., decking, fencing, and landscaping). While CSS is the second most valuable product (by total dollar value) made for Western Red Cedar and Alaskan Yellow Cedar, the market for lumber made from Western Red Cedar and Alaskan Yellow Cedar is roughly four times as valuable as the market for CSS. 108. The United States is the largest market for CSS in the world. As noted above, the United States was the destination for roughly 91% of all CSS produced in British Columbia during the Class Period. 109. CSS are considerably more expensive than traditional roofing and siding materials (e.g., asphalt shingles and vinyl siding) because they are widely considered to be more visually pleasing as well as more durable than traditional products. While roofing and siding generally constitute 10% of the cost of a home, CSS constitute a proportionally higher percentage due to the price premium they command over traditional products. For instance, a cedar shingle roof of between 1,400-2,100 square feet would cost approximately $12,800-$19,700, depending on various factors, and a cedar shake roof of the same size would cost approximately $15,200- $24,000, depending on various factors. 110. Certi-Label™ CSS constitute an economically distinct product in the United States and account for roughly 95% of the CSS purchased in the United States. 111. The Certi-Label™ denotes that the CSS complies with the CSSB-97 grading rules. The CSSB-97 grading rules govern the production and packing of CSS made from Western Red Cedar and Alaskan Yellow Cedar, and the CSSB holds the copyright to the CSSB-97 grading rules. 112. The CSSB has aggressively and successfully promoted its CSSB-97 grading rules and its trademarked Certi-Label™ CSS. As a result, notwithstanding the fact that “non-bureau” mills can market their CSS product as complying with the CSSB-97 grading rules, the Certi- Label™ label is perceived as guaranteeing a certain quality of product. This is further evidenced by the fact that the CSSB-97 grading rules have been widely incorporated into building codes throughout the United States and Canada, as well as the fact that many architects and builders require Certi-Label™ CSS in their building specifications. In fact, Certi-Label™ CSS has near 100% market share in the northeastern United States, Pacific Northwest, Mountain West, and Midwest. 113. A CSS manufacturer must be a member of the CSSB in order to use the Certi- Label™ trademark and affiliated copyrights. As the CSSB explains in its Certi-Label™ Cedar Shake and Shingle Product Catalog: “Cedar shakes and shingles manufactured by members of the [CSSB] are the only products labeled with the ‘Certi’ brand name.” 114. Because the Certi-Label™ label is limited to CSSB members, manufacturers of CSS that are not members of the CSSB only have access to a small fraction of the CSS market. Without membership in the CSSB, a manufacturer of CSS is unable to effectively compete in the United States market for CSS, and as a result, during the last 20 years, virtually all Canadian and US-based manufacturers of CSS have been members of the CSSB. 115. Certi-Label™ CSS fall into three main categories: Certi-Split® shakes, Certigrade® shingles, and Certisawn® shakes. Each of these three main product types are described in greater detail below: a. Certi-Split® Shakes: These shakes have a split face exposed with a naturally rustic appearance and are sawn the back. The most common lengths for this shake are 18” and 24”, and the butt thickness ranges from 3/8” to 2” plus. b. Certisawn® Shakes: These shakes are sawn on both sides for a semi-textured look with a stronger shadow-line than a shingle. The most common lengths for this shake are 18” and 24”, and the butt thickness ranges from 5/8” to 1.5”. c. Certigrade® Shingles: These shingles are sawn on both sides for a tailored appearance and are available in 16”, 18”. or 24” lengths. The butt thickness is gauged using a stack of shingles. 116. In order to distinguish products of different qualities, each product category is subject to Bureau requirements setting forth how the product will “grade,” taking into consideration numerous factors such as how clear the wood is, the thickness of the product, and the grain of the wood. For instance, Certigrade® shingles are broken down into Number 1 Grade, Number 2 Grade, Number 3 Grade, and Undercoursing Grade products. 117. Each product type and grade have a distinct Certi-Label™ that conveys certain pieces of information to buyers. The below graphic, from the CSSB, shows the Certi-Split® label and what its various components indicate: Figure 3: CSSB’s Certi-Label™ 118. The CSSB ensures that Certi-Label™ maintains its dominant position in the CSS market by, in part, issuing warnings against using competing products that amplify the alleged differences between Certi-Label™ CSS and CSS manufactured by “non-bureau” mills. 119. An example of one such “Fraud Alert” is shown below. In relevant part, this “Fraud Alert” warns buyers: “PITCH: ‘These products are just as good as Certi-label™ brand products, but they are cheaper/more readily available/what your roofing contractor prefers to work with.’ Don’t believe these types of misleading statements. You get what you pay for.” Figure 4: CSSB "Fraud Alert" B. The CSSB Structure, Bylaws, and Meetings 120. The CSSB traces its origin to a June 1915 meeting of the Trustees of the West Coast Lumber Manufacturers Association, at which “it was agreed to establish a branch of the association to serve those members who manufactured shingles.” This organization merged with the Handsplit Shake Bureau in 1963 to become the Red Cedar Shingle & Handsplit Bureau, and in 1988, the organization’s name was officially changed to the Cedar Shake & Shingle Bureau. 121. Throughout the Class Period, the CSSB has been the sole trade association for CSS manufacturers and the preeminent regulator of the CSS industry in the United States and Canada. 122. The CSSB grants its member manufacturers weighted votes based on each manufacturer’s annual CSS production, and the Manufacturer Defendants—among the largest manufacturers of CSS in the world—have a combined voting power of more than 50%. This gives the Manufacturer Defendants significant power within the CSSB, including the ability to ensure members that discount below the agreed upon price levels are expelled from the CSSB. The CSSB Board of Directors 123. The Manufacturer Defendants have sat on CSSB’s board since at least 2012. During this same period, representation by other CSS manufacturers has trended downward, as shown in the below chart: Figure 5: CSS Manufacturers on CSSB Board of Directors (2012-2019) 2012 2013 2014 2015 2016 2017 2018 2019 Anbrook X X X X X X X X G&R X X X X X X X X Waldun X X X X X X X X A&R Cedar X Anderson X X X X X X X Best X X X X X X Premium Cedar X X X X X X X X S&K X X X X Serpentine X X X # of Manufacturer Members 7 8 8 6 6 6 6 6 124. The Manufacturer Defendants’ employees have also served in leadership capacities on the CSSB Board of Directors throughout the Class Period. For example, Anbrook’s Meeker has served as the CSSB Board of Director’s Chairwoman and Vice Chairwoman and Waldun’s Walker has served as the Secretary/Treasurer on the CSSB Board of Directors. 125. In addition, the brother of Waldun’s Walker, Clay Walker, is CSSB’s “Cedar Quality Auditor” and CSSB’s “District Manager” for the Pacific Northwest region. 126. Throughout the Class Period, the Manufacturer Defendants have utilized their weighted voting power to defeat proposals by smaller CSSB manufacturers, including proposals to eliminate weighted voting on non-manufacturing members and to impose term limits on directors. 127. Throughout the Class Period, the Manufacturer Defendants have utilized their weighted voting power to consolidate their power over the CSSB by, among other things, adopting bylaw changes that reduced the number of seats on the Board of Directors, reducing membership meeting quorum requirements (from 40% to 30% of the membership), and ensuring the Board chairperson was not constrained by the historic practice of only voting in the event of a tie but instead was afforded full voting rights like other members of the Board of Directors. The “All or Nothing Rule” 128. Throughout the Class Period, the CSSB by-laws have prevented its manufacturer members from producing non-Certi-Label™ CSS. As mentioned earlier, this is known inside the CSSB as the “All or Nothing Rule.” 129. Specifically, Article III § 2 of the CSSB by-laws provides, in relevant part, that “[t]o become a Mill-Member, a person or entity must: (a) manufacture or process only Products that comply with CSSB’s Product quality, inspection, grading and labeling policies, procedures, rules, regulations and standards.” 130. The “All or Nothing Rule” was strengthened by the CSSB Board in November 2018—on the motion and second of Waldun’s Walker and Anbrook’s Meeker—to “ensure that all enterprises owned, operated, or controlled by a Member that are involved in the manufacture, distribution, or sale of [CSS] apply for and become CSSB Members,” such that they could only manufacture, distribute, and sell Certi-Label™ product. 131. Under the terms of the “All or Nothing Rule,” a manufacturer would be expelled from the CSSB if it manufactured and sold any CSS that did not carry the Certi-Label™. Because the price of Certi-Label™ CSS was fixed pursuant to an anticompetitive agreement, this rule prevented CSSB members from undercutting the conspiracy by selling non-Certi-Label™ product at lower prices. The “All or Nothing Rule” therefore had the purpose and effect of preventing price competition between CSSB manufacturers. CSSB Meetings 132. The CSSB holds its Annual General Meeting, which includes a meeting of the Board of Directors, every Fall. 133. The Annual General Meetings during the Class Period were held on the following dates at the following locations:2 a. 2013: October 23, 2013 in Las Vegas, Nevada; b. 2015: September 10-12, 2015 in Whistler, British Columbia; c. 2016: August 26-27, 2016 in Vancouver, British Columbia; and d. 2017: September 15, 2017 in Abbotsford, British Columbia. 134. In its newsletter, Certi-Scene™, CSSB touts benefits of attending the Annual General Meeting as including the following: (a) “information sharing and business education”; (b) “see[ing] what their association is doing to promote and protect the Certi-label™ brand”; (c) “high levels of member engagement and excellent conversation about protecting and promoting the Certi-label™ brand”; and (d) “enjoy[ing] excellent networking with colleagues.” 135. In addition to its annual meeting, the CSSB Board of Directors also holds regular conference calls and in-person meetings throughout the year. For example, on February 17, 2016 the CSSB Board of Directors held a conference call that included a confidential portion to which non-members were not invited, and on May 27, 2016 the CSSB Board of Directors met in Ocean Shores, Washington. 136. CSSB members also attend ad hoc events on a regular basis. For instance, on December 17, 2015, the CSSB hosted a Lifetime Achievement Awards luncheon in Bellingham, 2 Plaintiff is not yet aware of the dates and locations of the Annual General Meetings held in 2011, 2012, 2014, and 2018. Washington that was attended by the Manufacturer Defendants and other CSSB manufacturers. 137. These meetings provided the Defendants and the Non-Defendant Co-Conspirators numerous opportunities to conspire on the pricing of Certi-Label™ CSS and the punishment of price discounters within the CSSB. C. The Proximity of CSSB and Its Manufacturer Members 138. The Manufacturer Defendants are all located in the greater Vancouver, British Columbia metropolitan area. Anbrook is headquartered in Pitt Meadows, British Columbia, while Waldun is headquartered in the neighboring city, Maple Ridge, British Columbia, under 14 miles east of Anbrook. G&R Cedar is based in Chilliwack, which is under 20 miles east of Waldun. Defendant CSSB is located in Mission, British Columbia—under 7 miles east of Waldun and under 14 miles west of G&R Cedar. 139. The below figure shows the locations of CSSB and the Manufacturer Defendants: Figure 6: Locations of CSSB and Manufacturer Defendants 140. The co-conspirator manufacturers are also located close to each other and to Defendants. Premium Cedar and Watkins are both located in Maple Ridge, British Columbia, the same city where Waldun is located. A&R and Best are both headquartered in Hoquiam, Washington. 141. The map below shows the locations of CSSB, the three Manufacturer Defendants, and each of the Non-Defendant Co-Conspirators (represented by the blue dots): Figure 7: Locations of CSSB, Manufacturer Defendants, and Non-Defendant Co-Conspirators 142. The proximity of Defendants and the Non-Defendant Co-Conspirators provided ample opportunities to meet and discuss the pricing of Certi-Label™ CSS, as well as to conspire to jointly boycott manufacturers that discounted their Certi-Label™ CSS below the agreed-upon price levels. D. The Defendants and Their Co-Conspirators Entered into a Conspiracy to Fix the Prices of Cedar Shakes & Shingles in the United States 143. On information and belief, no later than January 1, 2011 and continuing through the present, Defendants and their co-conspirators conspired to fix the prices of Certi-Label™ CSS sold into and in the United States. 144. In the S&W Lawsuit, S&W alleged in its complaint: “Throughout the four years predating the filing of this complaint, Waldun’s Curtis Walker and Anbrook’s Brooke Meeker have regularly conspired and colluded to fix prices for cedar shake and shingle products sold into the United States market and have encouraged other mill manufacturers to join in that price collusion.” 145. Kris Watkins, Chief of Operations of Watkins, submitted a declaration in support of the S&W Lawsuit. The declaration described a December 5, 2018 discussion between Kris Watkins and Waldun’s Walker in which they discussed “shake and shingle pricing.” Kris Watkins attested that he had decided to absorb some of the impact of a tariff rather than pass it all on to customers, and that “Mr. Walker told me that we should not have done this and that Waldun Forest Products never dropped their pricing.” 146. Len Taylor, President and Owner of Taylor Forest Products, also submitted a declaration in support of the S&W Lawsuit. This declaration describes a visit Mr. Taylor made to G&R at an unknown point in the last five years, during which he visited with G&R’s Sale Manager, Stuart Dziedzic (“Dziedzic”). According to Taylor, when he arrived, Dziedzic was finishing a phone call, and when he got off the phone, told Taylor that some competitors were being tough on him and wanted him to raise G&R’s CSS prices. 147. Taylor is 100% certain that Dziedzic told him that the call was from either Anbrook’s Meeker or Waldun’s Walker, but he cannot remember which of the two was the person who called Dziedzic. It was clear, however, from Dziedzic’s statements to Taylor that Dziedzic was referring to collective pressure from both Defendant Anbrook and Defendant Waldun. G&R’s Dziedzic submitted a declaration in opposition to S&W’s motion for a preliminary injunction in the S&W Lawsuit but made no attempt to refute Taylor’s sworn declaration. Likewise, Anbrook’s Meeker submitted a declaration in opposition to S&W’s motion for a preliminary injunction in the S&W Lawsuit, but also made no attempt to refute Taylor’s sworn declaration. In opposing S&W’s motion for a preliminary injunction, CSSB said that S&W’s price-fixing allegations were “irrelevant” and that in any event, if there was such a conspiracy, S&W benefited from it. 148. Defendants’ and co-conspirators’ collusive conduct had the intended purpose and effect of increasing the price of cedar shakes and shingles sold to Plaintiff and the other members of the Class. E. The Defendants and Their Co-Conspirators Agreed to Jointly Boycott Price Discounters 149. On information and belief, no later than January 1, 2011 and continuing through the present, Defendants and their co-conspirators conspired to expel manufacturers from the CSSB that sold Certi-Label™ CSS into and in the United States below cartelized price levels. 150. CSSB and the Manufacturer Defendants’ exclusionary conduct is so well known in the CSS industry that they are colloquially referred to as the “Mafia.” 151. In the S&W Lawsuit, S&W allege that it was expelled from the CSSB for selling Certi-Label™ CSS at discount prices during periods of low demand. According to S&W, it was forced out of the CSSB during a “hastily convened special meeting by telephone conference call” involving presently unknown members of the CSSB Board of Directors. S&W maintains that the purported reason for its expulsion—a mislabeling violation—is false, pretextual, and unsupported: “Despite these facts, several CSSB Directors who are executives with Waldun, Anbrook and a number of other large member mills successfully secured a three-fourths vote in favor of terminating S&W’s CSSB membership, not because of a mislabeling violation but in pursuit of their conspiracy to eliminate a competitor unwilling to engage in price fixing or collusion.” 152. As noted above, Kris Watkins, Chief of Operations of Watkins, submitted a declaration in support of the S&W Lawsuit. In that declaration, Kris Watkins attested to a conversation about CSS pricing with Waldun’s Walker in which “Mr. Walker argu[ed] that CSSB mills should hold their prices at consistent levels.” When Kris Watkins stated his disagreement “because the smaller self-financed mills needed to drop their prices during times like winter slowdowns when cash flow was reduced in order to generate operating cash, Mr. Walker stated that he did not believe that many CSSB mills would do this.” Kris Watkins then stated that S&W engaged in discounting “from time to time” in order “to generate the cash flow,” to which Waldun’s Walker became “very agitated” and exclaimed: ‘“yeah, well we just need to get rid of that guy.’” 153. The Former CSSB Members include at least another twenty (20) CSS manufacturers (in addition to S&W) that have left the CSSB since 2012. A large (but yet unknown) number of these Former CSSB Members are no longer in business. 154. A significant number of these Former CSSB Members were expelled from the CSSB because they refused to comply with the conspiracy and the arbitrary whims of the Manufacturer Defendants. For example, Plaintiff is aware of at least one other CSS manufacturer that the Defendants expelled from the CSSB because it refused to comply with a demand made by one of the Manufacturer Defendants regarding the price at which it would sell Certi-Label™ CSS. F. The Group Boycott Strengthened the Conspiracy 155. The economic consequences for would-be competitors that are expelled from the CSSB are significant and potentially fatal to their business. CSSB members therefore joined the Bureau, remained in it, and participated in the alleged conspiracy in order to avoid this fate. A coerced price fixing agreement is actionable under the Sherman Act. 156. For instance, in the S&W Lawsuit, S&W alleged that it would be forced out of business in a matter of months if not re-admitted to the CSSB. S&W stated this was the case because it would be forced to charge 15-25% less for non-Certi-Label™ CSS than for Certi- Label™ CSS. In support of this allegation, S&W attached three invoices that showed price differences of between roughly 18% and roughly 38%. 157. Invoice #00400105 (Order Date: 1/16/2019) showed a price of $145/square for Certi-Label™ CSS, and a price of $98/square for non-Certi-Label™ CSS of the same grade. This is a $47 (38.68%) difference in price. This invoice is depicted below. Figure 8: S&W Invoice #00400105 158. Invoices #0049063 (Order Date: 2/18/2019) and #00400218 (Order Date: 3/7/2019) show a price of $240/square for Certi-Label™ CSS, and a price of $200/square for non-Certi- Label™ CSS of the same grade. This is a $40 (18.18%) difference in price. These invoices are depicted below. Figure 9: S&W Invoice #0049063 and Invoice #00400218 159. In addition, an agricultural economist who submitted a declaration in the S&W Lawsuit supported the existence of a price differential between Certi-Label™ CSS and non-Certi- Label™ CSS of 15-25%. G. The Alleged Conspiracy was Economically Plausible and Normal Market Forces Cannot Explain the Pricing for Certi-Label™ CSS 160. As shown in greater detail below, since at least January 1, 2011, there has been a consistent increase in the prices of CSS that cannot be fully explained by normal market forces, such as increased demand or lower supply. 161. The chart below shows the weekly price of Number 1 grade CSS from January 1, 2011 through December 31, 2018.3 The prices for these products have surpassed pre-recession levels, and certain products have experienced 10 percent year-over-year price increases. Figure 10: Pricing of #1 Western Red Cedar Shakes & Shingles $300.00 $250.00 $200.00 $150.00 $100.00 $50.00 $0.00 1/7/2011 1/7/2012 1/7/2013 1/7/2014 1/7/2015 1/7/2016 1/7/2017 1/7/2018 WRC Shingles #1 - 5X WRC Shingles #1 - Perfections WRC Shingles #1 - R&R WRC Shakes #1 5/8"x24" WRC Shakes #1 1/2"x24" WRC Shakes #1 3/4"x24" 3 The Price data reflected in these two charts is from Random Lengths, which reports pricing on a weekly basis and describes itself as “the most widely circulated and respected source of information for the wood products industry, provid[ing] unbiased, consistent, and timely reports of market activity and prices . . . .” 162. The pricing behavior of lower-quality Number 2 grade CSS is no different. As shown in the below chart, the weekly prices of these products have increased significantly since January 1, 2011. Figure 11: Pricing of #2 Western Red Cedar Shakes & Shingles $140.00 $120.00 $100.00 $80.00 $60.00 $40.00 $20.00 $0.00 1/7/2011 1/7/2012 1/7/2013 1/7/2014 1/7/2015 1/7/2016 1/7/2017 1/7/2018 WRC Shingles #2 - 5X WRC Shingles #2 - Perfections 163. The steady increase in prices for CSS contrasts with a cyclical, though generally consistent on a year-over-year basis, British Columbia Western Red Cedar harvest. The chart below compares the British Columbia Western Red Cedar harvest against the price per square for Western Red Cedar shakes and shingles and shows that while the harvest pattern has remained consistent throughout the Class Period, the prices for the end product have consistently risen: Figure 12: British Columbia WRC Harvest Versus WRC-CSS Pricing 250,000.00 $300.00 $250.00 200,000.00 $200.00 150,000.00 $150.00 100,000.00 Volume (m3) Harvested $100.00 50,000.00 $50.00 0.00 $0.00 1/1/2011 3/26/2012 6/19/2013 9/12/2014 12/6/2015 2/28/2017 5/24/2018 British Columbia WRC Harvest WRC Shingles #1 - 5X WRC Shingles #1 - Perfections WRC Shingles #1 - R&R WRC Shingles #2 - 5X WRC Shingles #2 - Perfections WRC Shakes #1 5/8"x24" WRC Shakes #1 1/2"x24" WRC Shakes #1 3/4"x24" 164. As one would expect, the year-over-year consistency in Western Red Cedar harvest has resulted in much lower price increases on the supply side. The chart below shows: (a) the Producer Price Index (“PPI”) for commodity data for Lumber and wood products, covering wood ties, siding, shingles, and shakes, and contract sawing of logs owned by others; (b) PPI for industry data for sawmills, covering wood ties, siding, shingles, and shakes, and contract sawing of logs owned by others, not seasonally adjusted; (c) Average Canadian export price index for coniferous industrial roundwood other than fir or spruce or pine (USD); and (d) the index of the British Columbia Western Red Cedar harvest. The tightness of these various indices demonstrates a close relationship between supply and price. Figure 13: Producer Price Indices for Softwood Lumber and Sawmill Shake & Shingle Products; Price Index of Canadian Softwood Exports; and Index of British Columbia WRC Harvest 435.0 410.0 385.0 360.0 335.0 310.0 285.0 260.0 235.0 210.0 185.0 160.0 135.0 110.0 85.0 60.0 1/1/2011 4/1/2011 7/1/2011 10/1/2011 1/1/2012 4/1/2012 7/1/2012 10/1/2012 1/1/2013 4/1/2013 7/1/2013 10/1/2013 1/1/2014 4/1/2014 7/1/2014 10/1/2014 1/1/2015 4/1/2015 7/1/2015 10/1/2015 1/1/2016 4/1/2016 7/1/2016 10/1/2016 1/1/2017 4/1/2017 7/1/2017 10/1/2017 1/1/2018 4/1/2018 7/1/2018 10/1/2018 PPI for Softwood Lumber, Not Seasonably Adjusted PPI for Sawmills: Wood Ties, Siding, Shingles, Shakes, and Contract Sawing of Logs Owned by Others, Not Seasonably Adjusted Average Canadian Export Price Index: Coniferous Industrial Roundwood Other Than Fir, Spruce, or Pine Index: British Columbia WRC Harvest 165. Comparing the indices of the average supply input prices4 and the average CSS price shows that the prices for CSS have grown far more rapidly than the prices of other softwood 4 The average of (a) the Producer Price Index (“PPI”) for Commodity data for Lumber and wood products, covering Wood ties, siding, shingles, and shakes, and contract sawing of logs owned by others; (b) PPI for industry data for Sawmills, covering Wood ties, siding, shingles, and shakes, and contract sawing of logs owned by others, not seasonally adjusted; and (c) Average Canadian export price index for coniferous industrial roundwood other than fir or spruce or pine (USD). lumber inputs and the price of Canadian timber. This divergence is shown in the below chart: Figure 14: Average Price Indices of Supply Inputs and of CSS 1/1/2011 4/1/2011 7/1/2011 10/1/2011 1/1/2012 4/1/2012 7/1/2012 10/1/2012 1/1/2013 4/1/2013 7/1/2013 10/1/2013 1/1/2014 4/1/2014 7/1/2014 10/1/2014 1/1/2015 4/1/2015 7/1/2015 10/1/2015 1/1/2016 4/1/2016 7/1/2016 10/1/2016 1/1/2017 4/1/2017 7/1/2017 10/1/2017 1/1/2018 4/1/2018 7/1/2018 10/1/2018 Average Supply Price Index WRC #1 Shingles Index Average WRC #2 Shingles Index Averge WRC #1 Shakes Index Average 166. This anomalous pricing behavior was also acknowledged by the U.S. government. In a December 2017 U.S. International Trade Commission (“USITC”) report entitled Softwood Lumber Products from Canada, the USITC wrote that while U.S. producers of softwood lumber generally reported the need to reduce prices and roll back announced price increases to compete with Canadian imports and that they had lost sales to Canadian competitors, U.S. producers and importers in the cedar/redwood market reported that since January 1, 2014 they generally: (a) had not reduced prices in order to compete with Canadian producers of cedar/redwood products, (b) had not rolled back announced price increases to compete with Canadian producers of cedar/redwood products, and (c) had not lost sales to Canadian producers of these products. 167. Finally, the chart below shows a monthly comparison of the inventory value of CSS and the value of manufactured CSS. This chart shows that production of new CSS began to decline in 2009 and remained comparatively low through 2016. This decline began to stabilize in the 2011 to 2012 period, and thereafter, production increased substantially. In a competitive market, manufacturers of CSS would opt to sell this product at a lower price rather than accumulate inventory, yet, as shown above, the price for CSS was increasing significantly during this same period. The build-up of inventory at the same time that manufacturers of CSS were increasing their prices is indicative of anti-competitive practices by these manufacturers. Figure 15: Inventory Value and Manufacturing for Canadian Shingle & Shake Mills 168. The above charts and resulting analysis reveal that prices for CSS have displayed a consistent increase since 2011 when, all else being equal, one would expect a decline as explained 169. Tariffs recently being considered for softwood lumber imports from Canada also do not explain the price increase in cedar shakes and shingles, since those tariffs have not actually been implemented. While a September 2018 decision from the International Trade Administration (“ITA”) suggested that these producers were encompassed by a January 2018 tariff order, manufacturers formed a Shake and Shingle Alliance (“SSA”) to challenge the ITA’s decision. On November 8, 2018, SSA sued to challenge the ITA decision in the Court of International Trade. Information from the International Trade Commission currently shows cedar shakes and shingles being free of any such tariff. H. The CSS Market is Conducive to Collusion 170. The market for CSS has characteristics that make it conducive to collusion. 171. Vertical Integration. Vertically integrated industries are highly susceptible to collusion because the dominant firms control all or nearly all aspects of the supply chain, and thus have the ability to coordinate on output and inventory levels and, ultimately, prices. 172. The CSS industry has become highly vertically integrated, particularly as a result of the Manufacturer Defendants’ acquisitions. For example, Defendant Waldun states on its website that it “has integrated the various aspects of cedar manufacturing, producing cedar lumber, shakes, and value-added rebutted and rejointed sidewall shingles.” 173. Inelastic Demand. Inelastic demand means that increases in price result in limited declines in quantity sold in the market. While demand for CSS is driven by residential and consumer construction, consumer demand for CSS would be unaffected by a small but significant, non-transitory increase in price (or “SSNIP”). Thus, demand for CSS is inelastic. 174. Because the demand for CSS is inelastic, sellers of CSS, including the Manufacturer Defendants and their co-conspirators, can raise the prices of CSS above competitive levels without seeing a decline in sales revenue. 175. Commodity-Like Product. Markets involving commodity-like products are more susceptible to collusive conduct because price is the primary basis on which sellers compete for sales and purchasers cannot differentiate one seller’s product from another seller’s product. Certi- Label™ CSS are undifferentiated, commodity-like products because each manufacturer’s product (within a relevant product type, size, and grade) is interchangeable with the corresponding product of another CSSB manufacturer. This commoditization is all but assured by the CSSB-97 grading 176. Lack of Significant Substitutes. Certi-Label™ CSS are perceived by customers as high-end products that have a distinctive look and feel, and there are no significant substitutes for Certi-Label™ CSS. While there are potential substitute products—including non-Certi-Label™ CSS, asphalt shingle roofs, ceramic tile roofs, slate roofs, vinyl siding, or a different type wood siding—these products lack the unique characteristics of Certi-Label™ CSS (e.g., durability and an appearance and texture that cannot be attained with modern products) and are not significant substitutes. 177. High Concentration. The CSS industry has seen significant concentration over the past two decades, with the three Manufacturer Defendants accounting for more than 50% of the Certi-Label™ CSS production. Together with the Non-Defendant Co-Conspirators, the CSSB manufacturers control 100% of the market for Certi-Label™ CSS. The Manufacturer Defendants and their co-conspirators therefore possess enough market power to control prices and to exclude price competition. 178. Opportunities to Conspire. The Defendants and their co-conspirators had ample opportunities to discuss, agree, and act on their anticompetitive scheme to artificially raise the price of Certi-Label™ CSS and to punish manufacturers that sold Certi-Label™ CSS at discounted prices. For example, as outlined above, the CSSB is controlled by the Manufacturer Defendants (through, in part, its weighted voting), the CSSB holds an Annual General Meeting to which all members are invited, the CSSB holds regular conference calls and in-person meetings (which include confidential/closed portions), and the CSSB holds various ad hoc meetings throughout the year. In addition (also as noted above), the Defendants and their co-conspirators are all within close proximity to one another. 179. High Barriers to Entry. There are significant barriers to entering the CSS market, which makes it difficult for potential competitors to enter the market in a meaningful way. Specifically, in order to effectively compete for the necessary raw materials (the prices of which are set through a competitive process), a CSS manufacturer must join the CSSB so that they can secure the 15-20% price premium charged for Certi-Label™ CSS. And once a member of the CSSB, pursuant to the “All or Nothing Rule,” the manufacturer is unable to produce or sell lower- priced non-Certi-Label™ product. In any event, even if an upstart or potential competitor managed to gain entry to CSSB to participate in the CSS market, that competitor could not deviate from the price-fixing conspiracy implemented by the Defendants and gain substantial market share through price competition. Otherwise, that competitor would be expelled from the CSSB, as was S&W in December 2018. VI. CLASS ACTION ALLEGATIONS 180. Plaintiff brings this action as a class action under Federal Rule of Civil Procedure 23(a) and 23(b)(3), on behalf of itself and all others similarly situated. The “Class” is defined as follows: All persons or entities who purchased Certi-Label™ CSS directly from Defendants, their Co-Conspirators, or their agents in the United States during the period from at least and including January 1, 2011 until the effects of the unlawful conduct are adjudged to have ceased. 181. Specifically excluded from the Class are the Defendants, their co-conspirators, and their agents; any officers, directors, or employees of any Defendant or co-conspirator; any entity in which any Defendant or co-conspirator has a controlling interest; and any affiliate, legal representative, heir or assign of any Defendant or co-conspirator. Also excluded from the Class are any judicial officer presiding over this action and the members of his/her immediate family and judicial staff, any juror assigned to this action. 182. Ascertainability. The foregoing Class is readily identifiable from the records of Defendants and their co-conspirators. 183. Numerosity. Plaintiff does not know the exact number of the members of the Class because such information presently is in the exclusive control of Defendants and their co- conspirators. Plaintiff believes that due to the volume of United States commerce, there are hundreds or thousands of geographically-dispersed members of the Class such as joinder of all members of the Class is impracticable. 184. Typicality. Plaintiff’s claims are typical of the claims of the members of the Class because Plaintiff and members of the Class sustained damages arising out of Defendants and their co-conspirators’ common course of conduct in violation of law as complained herein. The injuries and damages of each member of the Class was directly caused by the Defendants and their co- conspirators’ wrongful conduct. 185. Adequacy. Plaintiff will fairly and adequately protect the interests of the members of the Class in that Plaintiff’s interests are aligned with, and not antagonistic to, those of the other members of the Class. Plaintiff has retained counsel competent in class action litigation, including antitrust class action litigation. 186. Commonality & Predominance. Common questions of law and fact exist as to all members of the Class that predominate over any questions affecting solely individual members of the Class. These predominating common questions of law and fact include the following: a. Whether Defendants and their co-conspirators entered into a conspiracy to artificially inflate the price of Certi-Label™ CSS in violation of the Sherman Act; b. Whether Defendants and their co-conspirators entered into a conspiracy to boycott CSS manufacturers that discounted Certi-Label™ CSS below the agreed-upon price; c. Whether Defendants’ conduct had an anticompetitive and manipulative effect on the price of Certi-Label™ CSS during the Class Period; d. Whether Defendants’ conduct negatively affected the price of Certi- Label™ CSS purchased directly from the Defendants or their co- conspirators during the Class Period; and e. The appropriate measure of damages for the injury sustained by Plaintiff and members of the Class as a result of Defendants and their co- conspirators’ unlawful activities. 187. Superiority. A class action is superior to other available methods for the fair and efficient adjudication of this controversy because joinder of all Class members is impracticable. The prosecution of separate actions by individual members of the Class would impose heavy burdens upon the courts and Defendants and would create a risk of inconsistent or varying adjudications of the questions of law and fact common to the Class. A class action, 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. 188. Manageability. The interest of members of the Class in individually controlling the prosecution of separate actions is theoretical rather than practical. The Class has a high degree of cohesion, and prosecution of the action through representatives would be unobjectionable. The amounts at stake for Class members, while substantial in the aggregate, are not great enough individually to enable them to maintain separate suits against Defendants. Plaintiff does not anticipate any difficulty in the management of this action as a class action. VII. ANTITRUST INJURY 189. In an efficient market, manufacturers of CSS would compete on the basis of price to keep or increase their market share. For example, a company might choose to discount its CSS during periods of low demand. 190. Defendants’ anticompetitive conduct had the following effects, among others: a. Price competition has been restrained or eliminated with respect to Certi- Label™ CSS; b. The prices of Certi-Label™ CSS have been fixed, raised, stabilized, or maintained at artificially inflated levels; and c. Purchasers of Certi-Label™ CSS have been deprived of free and open competition among CSS manufacturers. 191. The purpose of the conspiratorial conduct of Defendants and their co-conspirators was to raise, fix, or maintain the price of Certi-Label™ CSS and, as a direct and foreseeable result, Plaintiff and members of the Class paid supra-competitive prices for Certi-Label™ CSS during the Class Period. 192. By reason of the alleged violations of the antitrust and other laws, Plaintiff and members of the Class have sustained injury to their businesses or property, having paid higher prices for Certi-Label™ CSS than they would have paid in the absence of Defendants’ illegal contract, combination, or conspiracy, and as a result have suffered damages. 193. This is an antitrust injury of the type that the antitrust laws were meant to punish and prevent. VIII. FRAUDULENT CONCEALMENT & TOLLING 194. Plaintiff had neither actual nor constructive knowledge of the facts constituting its claim for relief. 195. Plaintiff and members of the Class did not discover, and could not have discovered through the existence of reasonable diligence, the existence of the alleged conspiracy alleged herein until on or about February 13, 2019, the date on which the S&W Lawsuit was filed. 196. Defendants and the Non-Defendant Co-Conspirators engaged in a secret conspiracy that did not reveal facts that would put Plaintiff and members of the Class on inquiry notice that there was a conspiracy to fix the prices of Certi-Label™ CSS and to expel price discounters from the CSSB. 197. Accordingly, Plaintiff could not have had either actual or constructive knowledge of the conspiracy until the S&W Lawsuit was filed. 198. Furthermore, Defendants and the Non-Defendant Co-Conspirators took active steps to conceal the conspiracy and to prevent Plaintiff and members of the Class from discovering the conspiracy’s existence until the S&W Lawsuit was filed. For instance, in order to discuss and implement the conspiracy, Defendants and their co-conspirators met in private at their places of business and during CSSB meetings that were not open to the public. They also discussed the conspiracy during private telephone calls. Finally, Defendants and their co-conspirators did not reveal in their price increase announcements or otherwise that a reason for the price increases and price levels during the Class Period was the anticompetitive conspiracy described herein. 199. Because the alleged conspiracy was kept secret, Plaintiff and members of the Class were unaware of this unlawful conduct alleged herein and did not know that the prices they paid for Certi-Label™ CSS were artificially high during the Class Period. IX. CLAIM FOR RELIEF Section 1 of the Sherman Act (15 U.S.C. § 1): Unlawful Conspiracy in Unreasonable Restraint of Trade 200. Plaintiff realleges and incorporates herein by reference, as though fully set forth here, all preceding paragraphs of this Complaint. 201. Plaintiff brings this cause of action individually and on behalf of the Class. 202. Manufacturer Defendants are horizontal competitors that unlawfully agreed with one another and acted in concert not to compete on price, including agreements to fix prices for Certi-Label™ CSS and to boycott or threaten to boycott market participants, including other CSS manufacturers, that were or considered selling CSS at lower prices. Defendants’ conduct constitutes an unlawful conspiracy that is per se unlawful. 203. Manufacturer Defendants worked with and through Defendant CSSB and the Non- Defendant Co-Conspirators to facilitate and accomplish their unlawful agreement to fix prices for Certi-Label™ CSS and to boycott or threaten to boycott market participants, including other CSS manufacturers, that were or considered selling CSS at lower prices. 204. Defendants’ conspiracy has caused Plaintiffs and members of the Class Class antitrust injury in the form of payment of artificially inflated prices for Certi-Label™ CSS as a result of the conspiracy alleged herein. These injuries, in the form of payment of overcharges, are quintessential antitrust injuries flowing directly from the unlawful conduct alleged herein. 205. There are no procompetitive justifications for Defendants’ conduct. Even if there were such justifications, there are clear less restrictive alternatives to achieve them, and Defendants’ conduct unreasonably restrains trade. X. PRAYER FOR RELIEF WHEREFORE, Plaintiff prays for judgment and relief against Defendants as follows: A. That the Court determine that this action may be maintained as a class action under Rules 23(a), 23(b)(2), and 23(b)(3) of the Federal Rules of Civil Procedure, that Plaintiff be appointed as class representative, and that Plaintiff’s counsel be appointed as counsel for the Class; B. That the unlawful conduct alleged herein be adjudged and decreed to be an unlawful restraint of trade in violation of Section 1 of the Sherman Act and Section 4 of the Clayton Act; C. That Defendants, their subsidiaries, affiliates, successors, transferees, assignees and the respective officers, directors, partners, agents, and employees and all other persons acting or claiming to act on their behalf, be permanently enjoined and restrained from continuing and maintaining the conspiracy alleged in the Complaint; D. That Plaintiff and the Class recover damages, as provided under federal antitrust laws, and that a joint and several judgment in favor of Plaintiff and the Class be entered against Defendants in an amount to be trebled in accordance with such laws; E. That Plaintiff and the Class recover their costs of the suit, including attorneys’ fees, as provided by law; and F. That the Court direct such further relief it may deem just and proper. XI. JURY DEMAND Plaintiff demands a trial by jury on all causes of action so triable. Dated: April 17, 2019 TOUSLEY BRAIN STEPHENS PLLC By: /s/ Kim D. Stephens Kim D. Stephens, WSBA #11984 /s/ Kaleigh N. Powell By: Kaleigh N. Powell, WSBA #52684 1700 Seventh Avenue, Suite 2200 Seattle, WA 98101 Telephone: (206) 682-5600 Facsimile: (206) 682-2992 Email: kstephens@tousley.com kpowell@tousley.com Paul Gallagher* James J. Pizzirusso* Nathaniel C. Giddings*5 HAUSFELD LLP 1700 K. St., NW, Suite 650 Washington, DC 20006 Telephone: 202-540-7200 Facsimile: 202-540-7201 Email: pgallagher@hausfeld.com jpizzirusso@hausfeld.com ngiddings@hausfeld.com Bonny Sweeney* Samantha Stein* HAUSFELD LLP 600 Montgomery Street, Suite 3200 San Francisco, CA 94111 Telephone: 415-633-1908 Facsimile: 415-217-6813 Email: bsweeney@hausfeld.com sstein@hausfeld.com Larry D. Lahman* Roger L. Ediger* MITCHELL DeCLERCK 202 West Broadway Avenue Enid, Oklahoma 73701 Tel.: 580-234-5144 Fax: 580-234-8890 Email: larry.lahman@sbcglobal.net rle@mdpllc.com Counsel for Plaintiff and the Putative Direct Purchaser Class * pro hac vice application to be filed

antitrust

VA6hFocBD5gMZwczBtQ7

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x VICTOR LOPEZ AND ON BEHALF OF ALL OTHER PERSONS SIMILARLY SITUATED, 1:17-cv-8303 Plaintiffs, v. ECF CASE No.: _________________ CLASS ACTION COMPLAINT JURY TRIAL DEMANDED : : : : : : : : : : : : THE NEIMAN MARCUS GROUP, LLC, NEIMAN MARCUS GROUP, INC. AND BERGDORF GOODMAN, INC. Defendant. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x INTRODUCTION 1. Plaintiff, VICTOR LOPEZ, on behalf of himself and others similarly situated, asserts the following claims against Defendants, THE NEIMAN MARCUS GROUP, LLC, NEIMAN MARCUS GROUP, INC. AND BERGDORF GOODMAN, 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 THE NEIMAN MARCUS GROUP, LLC, NEIMAN MARCUS GROUP, INC. AND BERGDORF GOODMAN, INC. (“Defendants” or “COMPANY”) 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 locations, is a violation of Plaintiff’s rights under the Americans with Disabilities Act (“ADA”). 5. Because Defendant’s website, WWW.BERGDORFGOODMAN.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) Defendants conduct and continues to conduct a substantial and significant amount of business in this District, Defendants are subject to personal jurisdiction in this District, and a substantial portion of the conduct complained of herein occurred in this District. Additionally, Plaintiff resides in New York, NY in this District. 9. Defendants are subject to personal jurisdiction in this District. Defendants have 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 separate occasions, Plaintiff has been denied the full use and enjoyment of the facilities, goods, and services of Defendant’s Website and physical retail stores due to the inaccessibility of Defendant’s website while attempting to access the website from his home. These access barriers that 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 Defendant’s retail locations. This includes, Plaintiff attempting to obtain information about Defendant’s retail locations and hours, sales, coupons, discounts, new releases, editorials, customer support and other important information, which is located in New York, NY. 10. This Court is empowered to issue a declaratory judgment under 28 U.S.C. §§ 2201 and 2202. THE PARTIES 11. Plaintiff VICTOR LOPEZ, at all relevant times, is a resident of New York, New York. Plaintiff is a blind, visually-impaired handicapped person and a member of a protected class of individuals under the ADA, 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, THE NEIMAN MARCUS GROUP LLC is and was, at all relevant times herein a Foreign Limited Liability Company with its principal executive offices in New York, NY. Defendant operates the Website in New York, and operate the Bergdorf Goodman retail location as well as the Bergdorf Goodman website and advertises, markets, distributes, and/or sells clothing and accessories in the State of New York and throughout the United States. Defendant is, upon information and belief, licensed to do business and is doing business in the State of New York. 13. Defendant, NEIMAN MARCUS GROUP INC is and was, at all relevant times herein a Deleware Domestic Corporation with its principal executive offices in New York, NY. Defendant operates the Website in New York, and operate the Bergdorf Goodman retail location as well as the Bergdorf Goodman website and advertises, markets, distributes, and/or sells clothing and accessories in the State of New York and throughout the United States. Defendant is, upon information and belief, licensed to do business and is doing business in the State of New York. 14. Defendant, Bergdorf Goodman Inc is and was, at all relevant times herein a Domestic Business Corporation with its principal executive offices in New York, NY. Defendant operates the Bergdorf Goodman Website in New York, and operate the Bergdorf Goodman retail location and advertises, markets, distributes, and/or sells clothing and accessories in the State of New York and throughout the United States. Defendant is, upon information and belief, licensed to do business and is doing business in the State of New York. 15. Defendants operates numerous BERGDORF GOODMAN ratail locations across the United States. Defendant’s flagship retail location is located in New York, New York. These retail locations and Website constitute places of public accommodation. Defendant’s retail location provide to the public important goods and services. Defendant’s Website provides consumers with access to an array of goods and services including the retail locations and hours, sales, coupons, discounts, new releases, editorials, events, customer support , policies, and other important information. 16. Defendant’s physical retail locations are public accommodations within the definition of Title III of the ADA, 42 U.S.C. § 12181(7). Defendant’s Website is a service, privilege, or advantage that is heavily integrated with Defendant’s retail locations and operates as a gateway thereto. NATURE OF ACTION 17. 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. 18. 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. An accessibility notice is put on a website by the creator thereof to showcase that the website is working diligently to create a better experience for low-vision or blind users. 19. 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. 20. 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. 21. 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. Many Courts have also established WCAG 2.0 as the standard guideline for accessibility. 22. 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 23. Defendant offers the commercial website, WWW.BERGDORFGOODMAN.COM, 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 locations. The goods and services offered by Defendants include, but are not limited to the following, which allow consumers to: find retail locations and hours, sales, coupons, discounts, new releases, editorials, events, customer support, policies, and other important information. 24. 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 are heavily integrated with Defendant’s retail locations. 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 retail locations and the numerous goods, services, and benefits offered to the public through the Website. 25. 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. 26. During Plaintiff’s visits to the Website, the last occurring in October 2017, 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 locations in New York by being unable to learn more information about retail locations and hours, sales, coupons, discounts, new releases, editorials, events, customer support , policies, and other important information. 27. 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 BERDORF GOODMAN customers are unable to determine what is on the website, browse, look for the physical retail locations and hours of operation, information retail locations and hours, sales, coupons, discounts, new releases, editorials, events, customer support, policies, and other important information. 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 28. 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 offer 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. 29. These access barriers on Defendant’s Website have deterred Plaintiff from visiting Defendant’s physical retail locations, and enjoying them equal to sighted individuals because: Plaintiff was unable to find: the location and hours of operation of Defendant’s physical retail location on its Website, information about retail locations and hours, sales, coupons, discounts, new releases, editorials, events, customer support, policies, and other important information preventing Plaintiff from visiting the locations. Plaintiff intends to visit Defendant's retail locations in the near future if he could access their website. 30. If the Website was equally accessible to all, Plaintiff could independently navigate the Website and complete a desired transaction as sighted individuals do. 31. 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. 32. 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 Defendants have 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. 33. Defendant therefore uses standards, criteria or methods of administration that have the effect of discriminating or perpetuating the discrimination of others, as alleged herein. 34. 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). 35. 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. The Website must be accessible for individuals with disabilities who use computers, laptops, tablets and smart phones. 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 2.0 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 Website, with contact information for users to report accessibility-related problems and require that any third party vendors who participate on its Website to be fully accessible to the disabled by conforming with WCAG 2.0 criteria. 36. If the Website was accessible, Plaintiff and similarly situated blind and visually-impaired people could independently view service items, locate Defendant’s retail locations and hours of operation, shop for and otherwise research related products and services available via the Website and ordering tickets to live music events. 37. 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. 38. Defendants have, upon information and belief, invested substantial sums in developing and maintaining its 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. 39. 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 40. 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 offered in Defendant’s physical locations, during the relevant statutory period. 41. Plaintiff, on behalf of himself and all others similarly situated, seeks to 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 goods and services offered in Defendant’s physical locations, during the relevant statutory period. 42. 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 in Defendant’s physical locations, during the relevant statutory period. 43. 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. 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 Defendants have 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. 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 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. 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 retail locations are public accommodations 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 retail locations. The Website is a service that is heavily integrated with these locations and is a gateway thereto. 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 goods, 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 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). 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. Defendants have 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 NYSHRL 56. 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. 57. 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.” 58. Defendant’s physical locations are located in State of New York and throughout the United States and 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. Defendant’s Website is a service that is heavily integrated with these physical locations and is a gateway thereto. 59. Defendants are subject to New York Human Rights Law because it owns and operates its physical locations and Website. Defendants are a person within the meaning of N.Y. Exec. Law § 292(1). 60. 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 locations 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. 61. 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". 62. 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.” 63. 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. 64. 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 Defendants have: 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. 65. Defendants have failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 66. 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 and its physical locations 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 State Sub-Class Members will continue to suffer irreparable harm. 67. 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. 68. 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. 69. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 70. 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 71. 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. 72. Plaintiff served notice thereof upon the attorney general as required by N.Y. Civil Rights Law § 41. 73. 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 . . .” 74. 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.” 75. Defendant’s New York State physical locations are sales establishments and public accommodations within the definition of N.Y. Civil Rights Law § 40-c(2). Defendant’s Website is a service, privilege or advantage of Defendant and its Website is a service that is heavily integrated with these establishments and is a gateway thereto. 76. Defendants are subject to New York Civil Rights Law because it owns and operates its physical locations and Website. Defendants are a person within the meaning of N.Y. Civil Law § 40-c(2). 77. Defendants are 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 services integrated with Defendant’s physical locations 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. 78. 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 . . .” 79. 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 ...” 80. Defendants have failed to take any prompt and equitable steps to remedy its discriminatory conduct. These violations are ongoing. 81. 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. 82. 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 83. 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. 84. 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.” 85. Defendant’s locations are sales establishments and public accommodations within the definition of N.Y.C. Admin. Code § 8-102(9), and its Website is a service that is heavily integrated with its establishments and is a gateway thereto. 86. Defendants are subject to NYCHRL because it owns and operates its physical locations 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). 87. Defendants are 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 locations 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. 88. Defendants are 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). 89. Defendant’s actions constitute willful intentional discrimination against the City 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 Defendants 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. 90. Defendants have failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 91. As such, Defendant discriminates, and will continue in the future to discriminate against Plaintiff and members of the proposed Class and City 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 City Subclass will continue to suffer irreparable harm. 92. Defendant’s actions were and are in violation of the NYCHRL and therefore Plaintiff invokes his right to injunctive relief to remedy the discrimination. 93. 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 and punitive damages pursuant to § 8-502(a). 94. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 95. 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 96. 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. 97. 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 locations, which Defendant owns, operates and controls and 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. 98. 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 the State and City 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 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: New York, New York October 27, 2017 THE MARKS LAW FIRM, PC s/ Bradly G. Marks Bradly G. Marks 175 Varick St. 3rd Floor New York, New York 10014 Tel: (646) 770-3775 Fax: (646) 867-2639 bmarkslaw@gmail.com 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 nyjg@aol.com danalgottlieb@aol.com

civil rights, immigration, family

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William A. Kershaw, State Bar No. 057486 Lyle W. Cook, State Bar No. 148914 Stuart C. Talley, State Bar No. 180374 Ian J. Barlow, State Bar No. 262213 KERSHAW, CUTTER & RATINOFF, LLP 401 Watt Avenue Sacramento, California 95864 Telephone: (916) 448-9800 Facsimile: (916) 669-4499 James P. Ulwick Jean E. Lewis, State Bar No. 148717 KRAMON & GRAHAM, P.A. One South Street, Suite 2600 Baltimore, Maryland 21202 Telephone: (410) 752-6030 Facsimile: (410) 539-1269 Attorneys for Plaintiff UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA YURY ADAMOV, individually, and on behalf of himself and all other similarly situated current and former employees of PricewaterhouseCoopers LLP, Plaintiff, vs. PRICEWATERHOUSECOOPERS LLP, a Limited Liability Partnership; and DOES 1-100, inclusive, Defendants. Case No.: CLASS ACTION COMPLAINT FOR: 1) Violation of Labor Code §§ 510 and 1194 – Failure to Pay Overtime; 2) Violation of Labor Code §§ 226 and 1174 – Failure to Provide Itemized Employee Wage Statements; 3) Violation of Labor Code §§ 512 and 226.7 – Failure to Provide Meal Periods; 4) Violation of Labor Code § 226.7 – Failure to Provide Rest Periods; 5) Violation of Business & Professions Code § 17200, et seq. – Unfair Business Practices. JURY TRIAL DEMANDED INTRODUCTION 1. This is a class action brought by plaintiff on behalf of himself and similarly situated attest associates employed by Defendant PricewaterhouseCoopers LLP (“Defendant” or “PwC”) in California after the time Defendant compiled the notice list for the July 23, 2008 notice to the certified class in Campbell v. PricewaterhouseCoopers LLP, Case No. 2:06-cv- 02376-LKK-AC (“Campbell”). The proposed class has sustained injuries or damages arising out of Defendant’s conduct in violating wage and hour laws of the State of California and California Business and Professions Code sections 17200, et seq. 2. This class action complaint asserts claims for relief for: (1) Defendant’s failure to pay for hours worked, including overtime; (2) Defendant’s failure to authorize and permit paid rest periods as required by law; (3) Defendant’s failure to provide first and second meal periods as provided by law; (4) Defendant’s failure to provide class members with accurate itemized wage statements; and (5) Defendant’s unlawful, unfair and fraudulent conduct in violation of California Business and Professions Code sections 17200, et seq. 3. Plaintiff petitions this Court for permission to represent and prosecute claims against Defendant in class action proceedings on behalf of all those similarly situated. PARTIES 4. Plaintiff Yury Adamov (hereinafter, referred to as “Plaintiff”) is an individual and resident of the State of California. Plaintiff was employed by the Defendant as an unlicensed associate accountant in Defendant’s Attest division (“attest associate”). Plaintiff brings this class action on behalf of himself and other current and former California employees of Defendant who are similarly situated and who were employed by Defendant after the date notice was given in Campbell. 5. At all relevant times alleged herein, Plaintiff alleges upon information and belief that Defendant PricewaterhouseCoopers LLP is and was a Limited Liability Partnership organized and existing under and by virtue of the laws of the State of Delaware. Defendant is one of the largest accounting firms in the world and employs thousands of attest associates in the does conduct business in the State of California. 6. Plaintiff alleges, upon information and belief, that each of the Defendants, DOES 1 through 100 inclusive, are legally responsible in some manner, negligently, in warranty, strictly, intentionally, or otherwise, for the events and happenings herein referred to, and that each of the Defendants proximately caused injuries and damages to Plaintiff and class members as herein alleged. 7. Plaintiff alleges upon information and belief (unless otherwise alleged in this Complaint) that at all relevant times herein all Defendants were the agents, employees and/or servants, masters or employers of the remaining Defendants, and in doing the things hereinafter alleged, were acting within the course and scope of such agency or employment, and with the approval and ratification of each of the other Defendants. JURISDICTION AND VENUE 8. The aggregate amount in controversy for the class exceeds $5,000,000. Plaintiff is a citizen of the State of California. Defendant is a Limited Liability Partnership organized under the laws of the State of Delaware. Defendant’s executive office and principal place of business is in New York. An unincorporated association is, under U.S.C. §1332(d)(10), a citizen of the state where it has its principle place of business and the state under whose laws it is organized. Diversity, therefore, can be found because, under U.S.C. §1332(d)(2)(A), a member of the class is a citizen of a state different from any defendant. No exceptions to jurisdiction under U.S.C. §1332(d) apply. Accordingly, this Court has diversity jurisdiction pursuant to 28 U.S.C. §1332(d) also known as the Class Action Fairness Act. 9. This class action is a related action. It is the same class of attest associates as in Campbell, except that the class of later attest associates were employed by PwC after notice was given in Campbell. FACTUAL ALLEGATIONS 10. Plaintiff is a former employee of Defendant who, within the past four years, was employed in the position of attest associate. other attest associates it employed as exempt employees. Defendant does not require a prolonged course of specialized academic instruction as a standard prerequisite for acceptance into the attest associate position. Defendant has hired attest associates with a wide variety of educational backgrounds and degree types, including those with certificates, Associate’s degrees, and degrees in such disciplines as: Physical Education, History, Microbiology, Mass Communications, Women’s Studies and Zoology. Defendant has hired, and continues to hire, candidates for attest associate positions even if they do not have any of the educational requirements needed to sit for the CPA exam. 12. In addition, Plaintiff and class members were required to perform their duties based on the specific instructions outlined in Defendant’s internal audit manual, which included an internal control framework that attest associates were required to follow in carrying out their work. Plaintiff’s and class members’ work was subject to review by a supervisor and they could not proceed with the next step in assisting with an audit until the work had been submitted to and approved by a supervisor. Taken as a whole, attest associates’ job duties do not require the education, experience and licensing necessary for becoming a CPA. Instead, attest associates are on the path to obtaining these requirements by working as apprentices and assistants to licensed CPAs. Attest associates do not independently perform the work of attest professionals; they perform work that assists them. 13. Plaintiff and the class routinely worked more than eight hours per day. Despite routinely working these long hours, Defendant (1) failed to compensate them for overtime in violation of California law; (2) failed to compensate them for all hours worked in violation of California law; (3) failed to provide them with an accurate itemized statement of hours worked in violation of California law and misrepresented the hours worked on the itemized statement; (4) failed to provide paid rest periods in violation of California law; and (5) failed to provide timely meal periods in violation of California law. 14. Plaintiff alleges upon information and belief that in perpetrating the acts and omissions alleged herein, Defendant acted pursuant to and in furtherance of a policy and practice Regulations, and the California Labor Code. 15. Plaintiff also alleges upon information and belief that Defendant’s practices were undertaken with the deliberate intent to increase its profits and with a conscious disregard of the rights of class members under California wage and hour law. Defendant’s business practice was and is to bill clients for time worked by its attest associates. Significantly, Defendant billed this work at an hourly rate that was many times greater than the amount paid to its attest associates as wages. Because Defendant did not pay overtime, the hours worked by attest associates over and above 8 hours per day and 40 hours per week were even more highly profitable to Defendant than regular work hours worked by class members and provided a strong incentive to deliberately violate California wage and hour law. 16. Plaintiff is informed and believes, and thereon alleges, that the acts and omissions alleged herein were performed by, and/or are attributable to, all Defendants, each acting as agents and/or employees, and/or under the direction and control of each of the other Defendants, and that said acts and failures to act were within the course and scope of said agency, employment and/or direction and control. 17. As a direct and proximate result of the unlawful actions of Defendants, Plaintiff and members of the class have been denied wages and other payments due under California wage and hour law in amounts as yet ascertained, but subject to proof at trial in amounts collectively in excess of the jurisdiction of this Court. CLASS ALLEGATIONS 18. This class action is properly brought pursuant to the provisions of Federal Rule of Civil Procedure 23. Plaintiff brings this class action on behalf of himself as well as all others who are similarly situated. The proposed class that Plaintiff seeks to represent is defined as follows: All persons employed by PricewaterhouseCoopers LLP in California after PricewaterhouseCoopers LLP compiled the notice list for purposes of giving the July 23, 2008 notice to the certified class in Campbell v. PricewaterhouseCoopers LLP to the present who: (1) assisted certified public accountants in the practice of public accountancy, as provided for in California Business and Professions Code §§ 5051 and 5053; (2) worked as Associates in the “Attest” Division of the “Assurance” Line of Service (“attest associates”); (3) were not licensed by the State of California as certified public accountants during some or all of this time period; and (4) were classified by Defendant as “exempt” employees. 19. This class of persons within the State of California is so numerous that joinder of all members is impracticable, and the disposition of their claims in a class action is a benefit to the parties and to the Court. Plaintiff is informed and believes, and thereon alleges, that Defendant employed, at any one time, at least 1,000 or more employees in California who satisfy the class definition. 20. Though the exact number and identity of class members is not presently known, they can be identified in Defendant’s records through coordinated discovery pursuant to this class action. 21. There are numerous common questions of fact and law arising out of Defendant’s conduct. The action focuses on the Defendant’s systematic course of illegal employment practices or policies that applied to all attest associates employed by Defendant in violation of the California Industrial Welfare Commission Wage Orders, the California Labor Code, and the California Business and Professions Code, which prohibits unlawful, unfair and fraudulent business practices. 22. Furthermore, common questions of fact and law predominate over any questions affecting only individual members of the class. 23. The predominating common or class-wide questions of fact include the following: (a) Whether Defendant classified its attest associates as exempt employees; (b) Whether Defendant’s attest associates were licensed Certified Public Accountants; (c) Whether Defendant requires, as a standard prerequisite for acceptance into the attest associate position, advanced knowledge customarily acquired by a prolonged course of specialized academic instruction; (d) Whether attest associates perform work directly related to the management policies or general operations of Defendant or Defendant’s clients; independent judgment; (f) Whether attest associates work only under general supervision; (g) Whether attest associates are primarily engaged in exempt work; (h) Whether Defendant knew or had reason to know that its attest associates were not exempt under California overtime law and other California wage and hour law that applies to non-exempt employees; (i) Whether Defendant kept accurate records of the time actually worked by its attest associates for billing and other purposes; (j) Whether Defendant disregarded its accurate time records when it prepared an itemized statement of hours worked and calculated the amount of wages to be paid to its attest associates; (k) Whether Defendant had a policy or practice to authorize and permit paid rest breaks for its attest associates; (l) Whether Defendant had a policy or practice to provide a duty free meal period of at least thirty minutes within five hours from the time class members began their work day; and (m) Whether Defendant had a policy or practice to provide second meal periods to its attest associates when they worked more than ten hours in a day. 24. The predominating common questions of law include the following: (a) Defendant’s violation of California law requiring employees to be paid for all hours worked; (b) Defendant’s violation of California Labor Code section 510 in failing to pay overtime; (c) Defendant’s violation of California Labor Code section 226 in failing to comply with Itemized Employee Wage Statement Provisions; (d) Defendant’s violation of California Industrial Welfare Wage Orders and California Labor Code sections, including section 226.7, by not permitting (e) Defendant’s violation of California Labor Code section 512 in failing to provide attest associates a duty free meal period of at least thirty minutes within five hours from the time they began their work day and a second meal period on days in which they worked ten or more hours; (f) Defendant’s violation of the Unfair Competition Law as codified in Business and Professions Code sections 17200, et seq. 25. The defenses of Defendant, to the extent that any such defenses apply, are applicable generally to the whole class and are not distinguishable as to proposed class members. 26. Defendant has the burden of proving that its attest associates qualify under any applicable California exemption. 27. The claims of the Plaintiff herein are typical of the claims of the members of the class as a whole, all of whom have sustained and/or will sustain damages, including irreparable harm, as a proximate or legal result of the common course of conduct of Defendant as complained of in this class action complaint. The claims of the Plaintiff are typical of the class because Defendant subjected all of its employees to the same or similar violations of the California Industrial Welfare Commission Wage Orders, the California Labor Code, and California Business and Professions Code sections 17200, et seq. 28. Plaintiff, on behalf of himself and all others similarly situated, will fairly and adequately protect the interests of all members of the class, and has retained attorneys experienced in the prosecution of class action cases. The Plaintiff is able to fairly and adequately protect the interests of all members of the class because it is in their best interest to prosecute the claims alleged herein to obtain full compensation due for all services rendered and hours worked. Proposed class counsel have the necessary experience and skill to prosecute the action on behalf of the class. 29. Under the facts and circumstances alleged herein, class action proceedings are superior to any other methods available for both fair and efficient adjudication of the rights of each class member who is, or in the past was, a non-exempt California employee of Defendant. individual litigation would be unnecessarily costly and burdensome and would deter individual claims. Furthermore, class members depend upon their employer for their livelihood and are understandably fearful of the consequences to their current employment and future careers if they were to bring direct individual suits. In addition, California public policy encourages the use of the class action device to enforce California’s overtime laws and protect individuals who, by virtue of their subordinate position, are particularly vulnerable to adverse employment actions by Defendant. 30. To process individual cases would increase both the expenses and the delay not only to class members, but also to Defendant and the Court. In contrast, a class action in this matter will avoid case management difficulties and provide multiple benefits to the litigating parties, including efficiency, economy of scale, unitary adjudication with consistent results and equal protection of the rights of each class member, all by way of the comprehensive and efficient supervision of the litigation by a single court. In addition, the outcome in the certified Campbell class action, which is likely to have a strong, if not dispositive, affect on this class of PwC attest associates, further supports a finding that the second class action, like the first, is superior. 31. Without class certification, 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 proposed class that would establish incompatible standards of conduct for Defendant. 32. Notice of a certified class action and of any result or resolution of the litigation can be provided to class members by mail, email, publication, or such other methods of notice as deemed appropriate by the Court. FIRST CAUSE OF ACTION Failure to Compensate For All Hours Worked in Violation of the California Labor Code Section 510 And California Law Requiring The Payment of Wages 33. Plaintiff hereby re-alleges, and incorporates by reference as though fully set forth herein, all of the allegations contained in this Complaint. 34. At all times relevant herein, Defendant was required to compensate its attest Code of Regulations and Labor Code sections 200, 500, et seq. and 1194. 35. Under Labor Code section 510, any work in excess of eight hours in one workday and any work in excess of 40 hours in any workweek shall be compensated at the rate of no less than one and one half times the regular rate of pay for an employee. Any work in excess of twelve hours in one day shall be compensated at the rate of no less than twice the regular rate of pay for an employee. 36. Defendant required Plaintiff and class members to work days in excess of eight hours and twelve hours and weeks in excess of forty hours. Moreover, Defendant failed to compensate Plaintiff and class members for all hours worked and failed to compensate them for overtime pursuant to Labor Code section 510. 37. Plaintiff and class members are entitled to recover compensation for lost wages, plus reasonable attorneys’ fees and costs of suit pursuant to Labor Code section 218.5, mandatory interest for non-payment of wages pursuant to Labor Code section 218.6, and all penalties allowed by law. 38. Defendant has failed to perform its obligations to compensate Plaintiff and class members for all wages earned and all hours worked. As a direct result, Plaintiff and the class have suffered, and continue to suffer, substantial losses related to the use and enjoyment of such wages, lost interest on such wages, and expenses and attorneys’ fees in seeking to compel Defendant to fully perform its obligations under California law, all to their respective damage in amounts according to proof at time of trial. Plaintiff is informed and believes, and thereon alleges, that Defendant acted deliberately and with a conscious disregard of his and class members’ rights in order to increase its profits while forcing them to work long hours without compensation. Plaintiff and the class are thus entitled to recover nominal, actual, compensatory, punitive, and exemplary damages in amounts according to proof at time of trial. Plaintiff is also entitled to mandatory prejudgment interest as required by Labor Code section 218.6. SECOND CAUSE OF ACTION Failure To Provide An Itemized Statement Of Time As Required By Labor Code § 226 39. Plaintiff hereby re-alleges, and incorporates by reference as though fully set forth herein, all of the allegations contained in this Complaint. 40. Labor Code section 226(a) requires employers to provide an itemized wage statement in writing at the time of the payment of wages. The itemized statement is to be provided on the detachable portion of the paycheck or the equivalent if payment is made by other means. Among other things, the itemized statement must accurately reflect the total number of hours worked by the employee and the gross and net wages earned. All deductions to hours and wages must be itemized in writing on the statement. 41. Plaintiff is informed and believes, and thereon alleges, that Defendant deliberately failed to itemize the number of hours actually worked by Plaintiff and class members as required by Labor Code section 226(a). The failure to fully and accurately state the number of hours worked by the class violates Labor Code section 226(a). The wrong occurs by failing to itemize the required information. The failure to accurately itemize the hours worked also resulted in inaccurate statements of the gross and net wages earned and of overtime earnings. 42. Labor Code section 226(e) provides that an employee suffering injury as a result of a knowing and intentional failure by an employer to comply with subdivision (a) is entitled to recover the greater of all actual damages or fifty ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, not exceeding an aggregate amount of four thousand dollars ($4,000). 43. Plaintiff is informed and believes, and thereon alleges, that at all times mentioned herein, Defendant has failed to properly list all hours worked by Plaintiff and class members in violation of Labor Code section 226, Industrial Welfare Commission Orders, and California Code of Regulations. 44. As a proximate result of the aforementioned violations, Plaintiff and class members have been damaged in an amount according to proof at time of trial. 45. WHEREFORE, Plaintiff requests relief as provided by statute. THIRD CAUSE OF ACTION Failure To Provide First and Second Meal Periods As Required By Labor Code Sections 512 and 226.7 And Industrial Welfare Commission Wage Orders 46. Plaintiff hereby re-alleges, and incorporates by reference as though fully set forth herein, all of the allegations contained in this Complaint. 47. Labor Code section 512 provides that an employer may not employ an employee for a work period of more than ten hours per day without providing the employee with a second meal period. A limited exception to the ten hour rule occurs when (a) the total hours worked are no more than twelve hours and (b) a first meal period was provided and (c) the second meal period was waived by the mutual consent of the employer and employee. The statutory requirements in Labor Code sections 512 and 226.7 are also set forth in Industrial Welfare Commission Wage Orders. 48. Plaintiff is informed and believes, and thereon alleges, that Defendant never sought or received mutual consent for a waiver of the second meal period where total hours worked were less than twelve hours. Instead, Defendant treated its attest associates as exempt employees and failed to inform them of their right to a second meal period. Defendant’s time keeping procedures did not record meal periods. Defendant’s conduct resulted in the systematic, company-wide deprivation of attest associates’ statutory and regulatory right to a second meal period. 49. Labor Code sections 512, 226.7 and the California Wage Orders also require Defendant to provide class members with a duty free thirty-minute meal period within five hours from the start of their shift. Defendant treated its attest associates as exempt employees and violated its statutory duty to provide them with first meal periods. Defendant’s conduct was a breach of its meal period duty as to all class members. 50. Labor Code section 226.7 and the applicable Industrial Welfare Commission’s Wage Order provides that an employer’s failure to provide a meal period obligates the employer to pay the employee one hour of pay at the employee’s regular rate of compensation for each workday that the meal period is not provided. members have been damaged in an amount according to proof at time of trial. 52. WHEREFORE, Plaintiff requests relief as provided by statute and for mandatory prejudgment interest as required by Labor Code section 218.6. FOURTH CAUSE OF ACTION For Failure To Provide Paid Rest Breaks As Required By Labor Code Section 226.7 And Industrial Welfare Commission Wage Orders 53. Plaintiff hereby re-alleges, and incorporates by reference as though fully set forth herein, all of the allegations contained in this Complaint. 54. Defendant established company-wide practices and procedures and thereby created a work environment where Plaintiff and class members were routinely denied paid rest breaks required by Labor Code section 226.7 and Industrial Welfare Commission Wage Orders, which require ten minute rest periods for each four hours worked or major fraction thereof, and, insofar as is practicable, should be allowed in the middle of each work period. 55. Defendant did not have a policy and practice authorizing and permitting the required paid rest breaks for its attest associates. Defendant, instead, treated attest associates as exempt employees who did not qualify for paid rest periods mandated by law for non-exempt employees. 56. Where an employer fails to authorize and permit a paid rest period in accordance with the applicable provisions of Labor Code section 226.7 and Wage Orders, the employer must pay the employee one hour of pay at the employee’s regular rate of compensation for each workday where one or more rest periods are not authorized or permitted. 57. As a proximate result of the aforementioned violations, Plaintiff and class members have been damaged in an amount according to proof at time of trial. 58. WHEREFORE, Plaintiff requests relief as provided by statute and for mandatory prejudgment interest as required by Labor Code section 218.6. FIFTH CAUSE OF ACTION For Relief For Violations Of California Business And Professions Code Sections 17200, et seq. 59. Plaintiff hereby re-alleges, and incorporates by reference as though fully set forth 60. Defendant’s conduct constitutes an unfair business practice, as defined in California Business and Professions Code sections 17200, et seq. (“UCL”). This Court has authority, pursuant to section 17203 of the UCL, to “make such orders . . . as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition.” Id. Moreover, this Court possesses the inherent power to craft such injunctive relief as may be necessary to protect the interests of the parties pending trial of this matter on the merits. 61. Defendant’s violations of California wage and hour laws constitute unlawful, unfair, and/or fraudulent business practices under the UCL because they were done repeatedly over a significant period of time, and in a systematic manner to the detriment of Plaintiff and the class. 62. Defendant’s conduct was and is unlawful under the UCL because that conduct violates numerous California wage and hour statutes and regulations as alleged herein. 63. Defendant’s conduct was and is unfair within the meaning of the UCL because that conduct causes significant harm to Plaintiff and class members, and is in no way counterbalanced by legitimate utility to Defendant. In addition, the conduct offends established legislatively declared public policy and was immoral, unethical, oppressive, or unscrupulous. Furthermore, Defendant’s conduct was unfair in that its violations of California wage and hour laws allowed it to gain a competitive advantage over other comparable companies doing business in the State of California that comply with their obligations under such laws. 64. Defendant’s conduct was fraudulent under the UCL because hours worked and wages due to Defendant’s attest associates were misreported on statements that were required to be accurate and complete. Furthermore, under fundamental California public policy, nonpayment of wages is considered a kind of fraud. 65. For the four (4) years preceding the filing of this action, as a result of Defendant’s unlawful, unfair and/or fraudulent business practices, Defendant has retained ill-gotten gains that should be restored and/or disgorged to Plaintiff and the class in an amount according to proof at providing for equitable and injunctive relief enjoining Defendant from pursuing the policies, acts and practices complained of herein. PRAYER FOR RELIEF WHEREFORE, Plaintiff prays for judgment as follows: 1. For compensatory damages; 2. For restitution of all monies due to Plaintiff and the class, and disgorged profits from the unlawful, unfair and/or fraudulent business practices of Defendant; 3. For statutory damages and/or penalties as allowed by California wage and hour statutes and regulations; 4. For interest accrued to date; 5. For costs of suit and expenses incurred herein; 6. For reasonable attorneys’ fees; 7. For punitive and exemplary damages in an amount commensurate with Defendant’s ability to pay and sufficient to deter such conduct in the future; 8. For injunctive relief; and 9. For all such other and further relief that the Court may deem just and proper. Dated: June 19, 2013. Respectfully submitted, KERSHAW, CUTTER & RATINOFF, LLP By: /s/ William A. Kershaw WILLIAM A. KERSHAW Attorneys for Plaintiff DEMAND FOR JURY TRIAL Plaintiff hereby demands a jury trial. Dated: June 19, 2013. Respectfully submitted, KERSHAW, CUTTER & RATINOFF, LLP By: /s/ William A. Kershaw WILLIAM A. KERSHAW Attorneys for Plaintiff

employment & labor

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Cristina Perez Hesano (#027023) cperez@perezlawgroup.com PEREZ LAW GROUP, PLLC 7508 N. 59th Avenue Glendale, AZ 85301 Telephone: 602.730.7100 Fax: 623.235.6173 Gary M. Klinger (Pro Hac Vice Forthcoming) gklinger@milberg.com MILBERG COLEMAN BRYSON PHILLIPS GROSSMAN, PLLC 221 West Monroe Street, Suite 2100 Chicago, IL 60606 (847) 208-4585 Terence R. Coates (Pro Hac Vice Forthcoming) tcoates@msdlegal.com Jonathan T. Deters (Pro Hac Vice Forthcoming) jdeters@msdlegal.com MARKOVITS, STOCK & DEMARCO, LLC 119 E. Court Street, Suite 530 Cincinnati, OH 45202 Telephone 513.651.3700 Fax 513.665.0219 Attorneys for Plaintiff IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Case No. CLASS ACTION COMPLAINT JURY TRIAL DEMANDED Katherine Witkowski, on behalf of herself and all others similarly situated, Plaintiff, v. PracticeMax, Inc., Defendant. Plaintiff Katherine Witkowski (hereinafter known as “Plaintiff” or “Witkowski”), individually and on behalf of all others similarly situated, brings this action against Defendant PracticeMax, Inc. (hereinafter known as “PracticeMax” or “Defendant”), a Delaware corporation, to obtain damages, restitution, and injunctive relief for the Class, as defined below, from Defendant. Plaintiff makes the following allegations upon information and belief, except as to her own actions, the investigation of her counsel, and the facts that are a matter of public record. NATURE OF THE ACTION 1. This class action arises out of the recent targeted cyberattack and data breach (“Data Breach”) on PracticeMax’s network that resulted in unauthorized access to patient data. As a result of the Data Breach, Plaintiff and approximately 165,698 Class Members1 suffered ascertainable losses in the form of the loss of the benefit of their bargain, out-of-pocket expenses, and the value of their time reasonably incurred to remedy or mitigate the effects of the Data Breach. 2. In addition, Plaintiff and Class Members’ sensitive personal information—which was entrusted to PracticeMax, its officials, and its agents—was compromised and unlawfully accessed due to the Data Breach. 3. Information compromised in the Data Breach includes names, addresses, dates of birth, Social Security Numbers, financial information (“PII”), and medical treatment information, diagnosis information, and health insurance information (“PHI”). The PII and PHI 1 https://apps.web.maine.gov/online/aeviewer/ME/40/f3f3fcf1-7bee-45cc-a959-5fb886bf6ee1 .shtml (Last visited July 27, 2022). that Defendant PracticeMax collected and maintained will be collectively referred to as the “Private Information.” 4. Plaintiff brings this class action lawsuit on behalf of those similarly situated to address Defendant’s inadequate safeguarding of her and Class Members’ Private Information that Defendant collected and maintained, and for Defendant’s failure to (1) provide timely and adequate notice to Plaintiff and other Class Members that their Private Information had been subject to the unauthorized access of an unknown third party, and (2) identify precisely what specific type of information was accessed. 5. Defendant maintained the Private Information in a negligent and/or reckless manner. In particular, the Private Information was maintained on Defendant’s computer system and network in a condition vulnerable to cyberattacks. Upon information and belief, the mechanism of the cyberattack and potential for improper disclosure of Plaintiff’s and Class Members’ Private Information was a known risk to Defendant, and thus Defendant was on notice that failing to take steps necessary to secure the Private Information from those risks left that property in a dangerous condition. 6. Plaintiff and Class Members’ identities are now at risk because of Defendant’s negligent conduct because the Private Information that PracticeMax collected and maintained is now in the hands of data thieves. 7. Armed with the Private Information accessed in the Data Breach, data thieves can commit a variety of crimes including opening new financial accounts in Class Members’ names, taking out loans in Class Members’ names, using Class Members’ names to obtain medical services, using Class Members’ health information to target other phishing and hacking intrusions based on their individual health needs, using Class Members’ information to obtain government benefits, filing fraudulent tax returns using Class Members’ information, obtaining driver’s licenses in Class Members’ names but with another person’s photograph, and giving false information to police during an arrest. 8. As a result of the Data Breach, Plaintiff and Class Members have been exposed to a heightened and imminent risk of fraud and identity theft. Plaintiff and Class Members must now and in the future closely monitor their financial accounts to guard against identity theft. 9. Plaintiff and Class Members may also incur out of pocket costs for purchasing credit monitoring services, credit freezes, credit reports, or other protective measures to deter and detect identity theft. 10. By her Complaint, Plaintiff seeks to remedy these harms on behalf of herself and all similarly situated individuals whose Private Information was accessed during the Data Breach. 11. Plaintiff seeks remedies including, but not limited to, compensatory damages, treble damages, punitive damages, reimbursement of out-of-pocket costs, and injunctive relief including improvements to Defendant’s data security systems, future annual audits, and adequate credit monitoring services funded by Defendant. 12. Accordingly, Plaintiff brings this action against Defendant seeking redress for its unlawful conduct, and asserting claims for: (i) negligence, (ii) breach of implied contract; and (iii) unjust enrichment. THE PARTIES 13. Plaintiff Katherine Witkowski is a natural person, resident, and a citizen of the State of Illinois. Witkowski has no intention of moving to a different state in the immediate future. Plaintiff Witkowski is acting on her own behalf and on behalf of others similarly situated. Defendant obtained and continues to maintain Plaintiff Witkowski’s Private Information and owed her a legal duty and obligation to protect that Private Information from unauthorized access and disclosure. Plaintiff Witkowski would not have entrusted her Private Information to Defendant had she known that Defendant failed to maintain adequate data security. Plaintiff Witkowski’s Private Information was compromised and disclosed as a result of Defendant’s inadequate data security, which resulted in the Data Breach. 14. Defendant PracticeMax, Inc. is a Delaware Corporation with its principal place of business in Phoenix, Arizona. JURISDICTION AND VENUE 15. This Court has original jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d)(2), because this is a class action involving more than 100 putative class members and the amount in controversy exceeds $5,000,000, exclusive of interest and costs. Plaintiff (and many members of the class) and Defendant are citizens of different states. Plaintiff is a citizen of Illinois. Defendant is a Delaware Corporation with headquartered in Phoenix, Arizona, with an address of 1440 E Missouri Ave., C200, Phoenix, Arizona, 85014. 16. This Court has general personal jurisdiction over PracticeMax because PracticeMax’s principal place of business is in Phoenix, Arizona, Defendant and regularly conducts business in Arizona. 17. Venue is proper in this District under 28 U.S.C. §§ 1391(a)(2), 1391(b)(2), and 1391(c)(2) as a substantial part of the events giving rise to the claims emanated from activities within this District, and PracticeMax conducts substantial business in this District. DEFENDANT’S BUSINESS 18. PracticeMax is a Delaware corporation, that provides billing, consulting, and registration services to hospitals and healthcare providers. 19. Defendant PracticeMax represents, “PracticeMax is committed to protecting your privacy.”2 20. Defendant PracticeMax further states, “We will not disclose personally identifiable information we collect from you to third parties without your permission except to the extent necessary.”3 21. On information and belief, in the ordinary course of billing, consulting, and registration services to hospitals and healthcare providers. PracticeMax maintains the Private Information of patients and customers, including but not limited to: • Name, address, phone number and email address; • Date of birth; • Demographic information; • Social Security number; • Financial information; • Information relating to individual medical history; • Information concerning an individual’s doctor, nurse, or other medical providers; 2 https://practicemax.com/privacy-policy/ 3 Id. • Medication information, • Health insurance information, • Photo identification; • Employment information, and; • Other information that Defendant may deem necessary to provide care. 22. Additionally, PracticeMax may receive Private Information from other individuals and/or organizations that are part of a patient’s “circle of care,” such as referring physicians, customers’ other doctors, customers’ health plan(s), close friends, and/or family Members. 23. Because of the highly sensitive and personal nature of the information Defendant acquires and stores with respect to its customers, PracticeMax, upon information and belief, promises to, among other things: keep customers’ protected health information (PHI) private; comply with healthcare industry standards related to data security and Private Information; inform customers and patients of its legal duties and comply with all federal and state laws protecting customers’ and patients’ Private Information; only use and release customers’ Private Information for reasons that relate to medical care and treatment; and provide adequate notice to customers if their Private Information is disclosed without authorization. 24. As a condition of billing, consulting, and registration services in the medical field, PracticeMax requires that its patients and customers entrust it with Private Information. 25. By obtaining, collecting, using, and deriving a benefit from Plaintiff and Class Members’ Private Information, Defendant assumed legal and equitable duties and knew or should have known that it was responsible for protecting Plaintiff’s and Class Members’ Private Information from unauthorized disclosure. 26. Plaintiff and the Class Members have taken reasonable steps to maintain the confidentiality of their Private Information. 27. Plaintiff and the Class Members relied on Defendant to implement and follow adequate data security policies and protocols, to keep their Private Information confidential and securely maintained, to use such Private Information solely for business and health care purposes, and to prevent the unauthorized disclosures of the Private Information. THE CYBERATTACK AND DATA BREACH 28. On May 1, 2021, PracticeMax identified suspicious on company servers within its network. 29. Through investigation, PracticeMax determined that its network and servers were subject to a cyber-attack that impacted its network for over two weeks, beginning on April 17, 2021, until May 5, 2021. 30. The investigation determined that files on PracticeMax’s network were accessed by an unauthorized user and were removed. 31. The investigation also identified unauthorized access to a limited number of company email accounts. 32. Upon information and belief, Plaintiff’s and Class Members’ Private Information was exfiltrated and stolen in the attack, and other information stored on PracticeMax was encrypted by the unauthorized actors. 33. PracticeMax “partnered with subject matter specialists” to resolve the impact of a cyber-attack. The investigation determined that the accessed systems contained Private Information that was accessible, unprotected, and vulnerable for acquisition and/or exfiltration by the unauthorized actor. 34. The type of Private Information accessed by the unauthorized actor included includes names, addresses, dates of birth, Social Security Numbers, financial information, medical treatment information, diagnosis information, and health insurance information. 35. As a result of the Data Breach, PracticeMax took steps to secure the network, and launched a thorough investigation, with the assistance of third-party experts, to determine the nature and scope of the incident. In addition, the investigation revealed that approximately 165,698 individuals were victims of the Data Breach.4 36. While PracticeMax stated in the notice letter that May 1, 2021, was the date the Data Breach was discovered, PracticeMax did not begin notifying some victims until June 2022 – over a full year later. 37. Upon information and belief, and based on the type of cyberattack, along with public news reports, it is plausible and likely that Plaintiff’s Private Information was stolen in the Data Breach. Plaintiff further believes her Private Information was likely subsequently sold on the dark web following the Data Breach, as that is the modus operandi of all cybercriminals. 38. Defendant had obligations created by HIPAA, contract, industry standards, common law, and its own promises and representations made to Plaintiff and Class Members to keep their Private Information confidential and to protect it from unauthorized access and disclosure. 4 https://apps.web.maine.gov/online/aeviewer/ME/40/f3f3fcf1-7bee-45cc-a959-5fb886bf6ee1 .shtml (Last visited July 27, 2022). 39. Plaintiff and Class Members entrusted their Private 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. 40. Defendant’s data security obligations were particularly important given the substantial increase in cyberattacks and/or data breaches in the healthcare industry preceding the date of the breach. 41. In light of recent high profile data breaches at other healthcare partner and provider companies, Defendant knew or should have known that their electronic records and patient and customer Private Information would be targeted by cybercriminals and ransomware attack groups. 42. Indeed, cyberattacks on medical systems like Defendant have become so notorious that the FBI and U.S. Secret Service have issued a warning to potential targets, so they are aware of, and prepared for, a potential attack. As one report explained, “[e]ntities like smaller municipalities and hospitals are attractive. . . because they often have lesser IT defenses and a high incentive to regain access to their data quickly.”5 43. In fact, according to the cybersecurity firm Mimecast, 90% of healthcare organizations experienced cyberattacks in the past year.6 44. Therefore, the increase in such attacks, and attendant risk of future attacks, was 5 FBI, Secret Service Warn of Targeted, Law360 (Nov. 18, 2019), https://www.law360.com/articles/1220974/fbi-secret-service-warn-of-targeted-ransomware (last visited June 23, 2021). 6 See Maria Henriquez, Iowa City Hospital Suffers Phishing Attack, Security Magazine (Nov. 23, 2020), https://www.securitymagazine.com/articles/93988-iowa-city-hospital-suffers- phishing-attack. widely known to the public and to anyone in Defendant’s industry, including Defendant. Defendant Fails to Comply with FTC Guidelines 45. The Federal Trade Commission (“FTC”) has promulgated numerous guides for businesses which highlight the importance of implementing reasonable data security practices. According to the FTC, the need for data security should be factored into all business decision- making. 46. In 2016, the FTC updated its publication, Protecting Personal Information: A Guide for Business, which established cyber-security guidelines for businesses. The guidelines note that businesses should protect the personal customer information that they keep; properly dispose of personal information that is no longer needed; encrypt information stored on computer networks; understand their network’s vulnerabilities; and implement policies to correct any security problems.7 The guidelines also recommend that businesses use an intrusion detection system to expose a breach as soon as it occurs; monitor all incoming traffic for activity indicating someone is attempting to hack the system; watch for large amounts of data being transmitted from the system; and have a response plan ready in the event of a breach.8 47. The FTC further recommends that companies not maintain PII longer than is needed for authorization of a transaction; limit access to sensitive data; require complex passwords to be used on networks; use industry-tested methods for security; monitor for suspicious activity on the network; and verify that third-party service providers have 7 Protecting Personal Information: A Guide for Business, Federal Trade Commission (2016). Available at https://www.ftc.gov/system/files/documents/plain-language/pdf-0136_proteting- personal-information.pdf (last visited Jan. 19, 2022). 8 Id. implemented reasonable security measures. 48. The FTC has brought enforcement actions against businesses for failing to adequately and reasonably protect customer data, treating the failure to employ reasonable and appropriate measures to protect against unauthorized access to confidential consumer data as an unfair act or practice prohibited by Section 5 of the Federal Trade Commission Act (“FTCA”), 15 U.S.C. § 45. Orders resulting from these actions further clarify the measures businesses must take to meet their data security obligations. 49. These FTC enforcement actions include actions against healthcare providers and partners like Defendant. See, e.g., In the Matter of Labmd, Inc., A Corp, 2016-2 Trade Cas. (CCH) ¶ 79708, 2016 WL 4128215, at *32 (MSNET July 28, 2016) (“[T]he Commission concludes that LabMD’s data security practices were unreasonable and constitute an unfair act or practice in violation of Section 5 of the FTC Act.”) 50. Defendant failed to properly implement basic data security practices. 51. Defendant’s failure to employ reasonable and appropriate measures to protect against unauthorized access to customers’ Private Information constitutes an unfair act or practice prohibited by Section 5 of the FTC Act, 15 U.S.C. § 45. 52. Defendant was at all times fully aware of its obligation to protect the Private Information of its customers and patients. Defendant was also aware of the significant repercussions that would result from its failure to do so. Defendant Fails to Comply with Industry Standards 53. As shown above, experts studying cyber security routinely identify healthcare providers as being particularly vulnerable to cyberattacks because of the value of the Private Information which they collect and maintain. 54. Several best practices have been identified that at a minimum should be implemented by healthcare providers like Defendant, including but not limited to: educating all employees; strong passwords; multi-layer security, including firewalls, anti-virus, and anti- malware software; encryption, making data unreadable without a key; multi-factor authentication; backup data; and limiting which employees can access sensitive data. 55. Other best cybersecurity practices that are standard in the healthcare industry include installing appropriate malware detection software; monitoring and limiting the network ports; protecting web browsers and email management systems; setting up network systems such as firewalls, switches and routers; monitoring and protection of physical security systems; protection against any possible communication system; training staff regarding critical points. 56. Defendant failed to meet the minimum standards of any of the following frameworks: the NIST Cybersecurity Framework Version 1.1 (including without limitation PR.AC-1, PR.AC-3, PR.AC-4, PR.AC-5, PR.AC-6, PR.AC-7, PR.AT-1, PR.DS-1, PR.DS-5, PR.PT-1, PR.PT-3, DE.CM-1, DE.CM-4, DE.CM-7, DE.CM-8, and RS.CO-2), and the Center for Internet Security’s Critical Security Controls (CIS CSC), which are all established standards in reasonable cybersecurity readiness. 57. These foregoing frameworks are existing and applicable industry standards in the healthcare industry, and Defendant failed to comply with these accepted standards, thereby opening the door to the cyber incident and causing the data breach. Defendant’s Conduct Violates HIPAA and Evidences Its Insufficient Data Security 58. HIPAA requires covered entities to protect against reasonably anticipated threats to the security of sensitive patient health information. 59. Covered entities must implement safeguards to ensure the confidentiality, integrity, and availability of PHI. Safeguards must include physical, technical, and administrative components. 60. Title II of HIPAA contains what are known as the Administrative Simplification provisions. 42 U.S.C. §§ 1301, et seq. These provisions require, among other things, that the Department of Health and Human Services (“HHS”) create rules to streamline the standards for handling PII like the data Defendant left unguarded. The HHS subsequently promulgated multiple regulations under authority of the Administrative Simplification provisions of HIPAA. These rules include 45 C.F.R. § 164.306(a)(1-4); 45 C.F.R. § 164.312(a)(1); 45 C.F.R. § 164.308(a)(1)(i); 45 C.F.R. § 164.308(a)(1)(ii)(D), and 45 C.F.R. § 164.530(b). 61. A Data Breach such as the one Defendant experienced, is considered a breach under the HIPAA Rules because there is an access of PHI not permitted under the HIPAA Privacy Rule: A breach under the HIPAA Rules is defined as, “...the acquisition, access, use, or disclosure of PHI in a manner not permitted under the [HIPAA Privacy Rule] which compromises the security or privacy of the PHI.” See 45 C.F.R. 164.40 62. The Data Breach resulted from a combination of insufficiencies that demonstrate PracticeMax failed to comply with safeguards mandated by HIPAA regulations. DEFENDANT’S BREACH 63. Defendant breached its obligations to Plaintiff and Class Members and/or was otherwise negligent and reckless because it failed to properly maintain and safeguard its computer systems and data. Defendant’s unlawful conduct includes, but is not limited to, the following acts and/or omissions: a. Failing to maintain an adequate data security system to reduce the risk of data breaches and cyber-attacks; b. Failing to adequately protect customers’ Private Information; c. Failing to properly monitor its own data security systems for existing intrusions; d. Failing to ensure that its vendors with access to its computer systems and data employed reasonable security procedures; e. Failing to train its employees in the proper handling of emails containing Private Information and maintain adequate email security practices; f. Failing to ensure the confidentiality and integrity of electronic PHI it created, received, maintained, and/or transmitted, in violation of 45 C.F.R. § 164.306(a)(1); g. Failing to implement technical policies and procedures for electronic information systems that maintain electronic PHI to allow access only to those persons or software programs that have been granted access rights in violation of 45 C.F.R. § 164.312(a)(1); h. Failing to implement policies and procedures to prevent, detect, contain, and correct security violations in violation of 45 C.F.R. § 164.308(a)(1)(i); i. Failing to implement procedures to review records of information system activity regularly, such as audit logs, access reports, and security incident tracking reports in violation of 45 C.F.R. § 164.308(a)(1)(ii)(D); j. Failing to protect against reasonably anticipated threats or hazards to the security or integrity of electronic PHI in violation of 45 C.F.R. § 164.306(a)(2); k. Failing to protect against reasonably anticipated uses or disclosures of electronic PHI that are not permitted under the privacy rules regarding individually identifiable health information in violation of 45 C.F.R. § 164.306(a)(3); l. Failing to ensure compliance with HIPAA security standard rules by its workforces in violation of 45 C.F.R. § 164.306(a)(4); m. Failing to train all members of its workforces effectively on the policies and procedures regarding PHI as necessary and appropriate for the members of its workforces to carry out their functions and to maintain security of PHI, in violation of 45 C.F.R. § 164.530(b); n. Failing to render the electronic PHI it maintained unusable, unreadable, or indecipherable to unauthorized individuals, as it had not encrypted the electronic PHI as specified in the HIPAA Security Rule by “the use of an algorithmic process to transform data into a form in which there is a low probability of assigning meaning without use of a confidential process or key” (45 CFR § 164.304’s definition of “encryption”); o. Failing to comply with FTC guidelines for cybersecurity, in violation of Section 5 of the FTC Act; p. Failing to adhere to industry standards for cybersecurity as discussed above; and q. Otherwise breaching its duties and obligations to protect Plaintiff’s and Class Members’ Private Information. 64. Defendant negligently and unlawfully failed to safeguard Plaintiff’s and Class Members’ Private Information by allowing cyberthieves to access PracticeMax’s computer network and systems which contained unsecured and unencrypted Private Information. 65. Accordingly, as outlined below, Plaintiff and Class Members now face an increased risk of fraud and identity theft. In addition, Plaintiff and the Class Members also lost the benefit of the bargain they made with Defendant. Cyberattacks and Data Breaches Cause Disruption and Put Consumers at an Increased Risk of Fraud and Identity Theft 66. Cyberattacks and data breaches at healthcare companies like Defendant are especially problematic because they can negatively impact the overall daily lives of individuals affected by the attack. 67. Researchers have found that among medical service providers that experience a data security incident, the death rate among patients increased in the months and years after the attack.9 9 See Nsikan Akpan, Ransomware and Data Breaches Linked to Uptick in Fatal Heart Attacks, PBS (Oct. 24, 2019), https://www.pbs.org/newshour/science/ransomware-and-other-data- breaches-linked-to-uptick-in-fatal-heart-attacks. 68. Researchers have further found that at medical service providers that experienced a data security incident, the incident was associated with deterioration in timeliness and patient outcomes, generally.10 69. The United States Government Accountability Office released a report in 2007 regarding data breaches (“GAO Report”) in which it noted that victims of identity theft will face “substantial costs and time to repair the damage to their good name and credit record.”11 70. That is because any victim of a data breach is exposed to serious ramifications regardless of the nature of the data. Indeed, the reason criminals steal personally identifiable information is to monetize it. They do this by selling the spoils of their cyberattacks on the black market to identity thieves who desire to extort and harass victims, take over victims’ identities in order to engage in illegal financial transactions under the victims’ names. Because a person’s identity is akin to a puzzle, the more accurate pieces of data an identity thief obtains about a person, the easier it is for the thief to take on the victim’s identity, or otherwise harass or track the victim. For example, armed with just a name and date of birth, a data thief can utilize a hacking technique referred to as “social engineering” to obtain even more information about a victim’s identity, such as a person’s login credentials or Social Security number. Social engineering is a form of hacking whereby a data thief uses previously acquired information to manipulate individuals into disclosing additional confidential or personal information through 10 See Sung J. Choi et al., Data Breach Remediation Efforts and Their Implications for Hospital Quality, 54 Health Services Research 971, 971-980 (2019). Available at https://onlinelibrary.wiley.com/doi/full/10.1111/1475-6773.13203. 11 See U.S. Gov. Accounting Office, GAO-07-737, Personal Information: Data Breaches Are Frequent, but Evidence of Resulting Identity Theft Is Limited; However, the Full Extent Is Unknown (2007). Available at https://www.gao.gov/new.items/d07737.pdf. means such as spam phone calls and text messages or phishing emails. 71. The FTC recommends that identity theft victims take several steps to protect their personal and financial information after a data breach, including contacting one of the credit bureaus to place a fraud alert (consider an extended fraud alert that lasts for 7 years if someone steals their identity), reviewing their credit reports, contacting companies to remove fraudulent charges from their accounts, placing a credit freeze on their credit, and correcting their credit reports.12 72. Identity thieves use stolen personal information such as Social Security numbers for a variety of crimes, including credit card fraud, phone or utilities fraud, and bank/finance fraud. 73. Identity thieves can also use Social Security numbers to obtain a driver’s license or official identification card in the victim’s name but with the thief’s picture; use the victim’s name and Social Security number to obtain government benefits; or file a fraudulent tax return using the victim’s information. In addition, identity thieves may obtain a job using the victim’s Social Security number, rent a house or receive medical services in the victim’s name, and may even give the victim’s personal information to police during an arrest resulting in an arrest warrant being issued in the victim’s name. 74. Moreover, theft of Private Information is also gravely serious because Private Information is an extremely valuable property right.13 12 See IdentityTheft.gov, Federal Trade Commission, https://www.identitytheft.gov/Steps (last visited Jan. 19, 2022). 13 See, e.g., John T. Soma, et al, Corporate Privacy Trend: The “Value” of Personally Identifiable Information (“PII”) Equals the “Value" of Financial Assets, 15 Rich. J.L. & Tech. 75. Its value is axiomatic, considering the value of “big data” in corporate America and the fact that the consequences of cyber thefts include heavy prison sentences. Even this obvious risk to reward analysis illustrates beyond doubt that Private Information has considerable market value. 76. Theft of PHI, in particular, is gravely serious: “[a] thief may use your name or health insurance numbers to see a doctor, get prescription drugs, file claims with your insurance provider, or get other care. If the thief’s health information is mixed with yours, your treatment, insurance and payment records, and credit report may be affected.”14 77. Drug manufacturers, medical device manufacturers, pharmacies, hospitals, and other healthcare service providers often purchase Private Information on the black market for the purpose of target marketing their products and services to the physical maladies of the data breach victims themselves. Insurance companies purchase and use wrongfully disclosed PHI to adjust their insureds’ medical insurance premiums. 78. It must also be noted there may be a substantial time lag – measured in years -- between when harm occurs and when it is discovered, and also between when Private Information and/or financial information is stolen and when it is used. 79. According to the U.S. Government Accountability Office, which conducted a study regarding data breaches: 11, at *3-4 (2009) (“PII, which companies obtain at little cost, has quantifiable value that is rapidly reaching a level comparable to the value of traditional financial assets.”) (citations omitted). 14 See Federal Trade Commission, Medical Identity Theft, http://www.consumer.ftc.gov/articles/0171-medical-identity-theft (last visited Jan. 19, 2022). [L]aw enforcement officials told us that in 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. See GAO Report, at p. 29. 80. Private Information is such a valuable commodity to identity thieves that once the information has been compromised, criminals often trade the information on the “cyber black-market” for years. 81. There is a strong probability that entire batches of stolen information have been dumped on the black market and are yet to be dumped on the black market, meaning Plaintiff and Class Members are at an increased risk of fraud and identity theft for many years into the future. 82. Thus, Plaintiff and Class Members must vigilantly monitor their financial and medical accounts for many years to come. 83. Private Information can sell for as much as $363 per record according to the Infosec Institute.15 PII is particularly valuable because criminals can use it to target victims with frauds and scams. Once PII is stolen, fraudulent use of that information and damage to victims may continue for years. 84. For example, the Social Security Administration has warned that identity thieves 15 See Ashiq Ja, Hackers Selling Healthcare Data in the Black Market, InfoSec (July 27, 2015), https://resources.infosecinstitute.com/topic/hackers-selling-healthcare-data-in-the-black- market/. can use an individual’s Social Security number to apply for additional credit lines.16 Such fraud may go undetected until debt collection calls commence months, or even years, later. Stolen Social Security Numbers also make it possible for thieves to file fraudulent tax returns, file for unemployment benefits, or apply for a job using a false identity.17 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. 85. Moreover, it is not an easy task to change or cancel a stolen Social Security number. 86. 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.”18 87. This data, as one would expect, demands a much higher price on the black market. Martin Walter, senior director at cybersecurity firm RedSeal, explained, “[c]ompared to credit card information, personally identifiable information and Social Security Numbers are worth 16 Identity Theft and Your Social Security Number, Social Security Administration (2018) at 1. Available at https://www.ssa.gov/pubs/EN-05-10064.pdf (Jan. 19, 2022). 17 Id at 4. 18 Brian Naylor, Victims of Social Security Number Theft Find It’s Hard to Bounce Back, NPR (Feb. 9, 2015), http://www.npr.org/2015/02/09/384875839/data-stolen-by-anthem-s- hackers-has-millions-worrying-about-identity-theft. more than 10x on the black market.”19 88. Medical information is especially valuable to identity thieves. 89. According to account monitoring company LogDog, coveted Social Security numbers were selling on the dark web for just $1 in 2016 – the same as a Facebook account.20 That pales in comparison with the asking price for medical data, which was selling for $50 and up.21 90. Because of the value of its collected and stored data, the medical industry has experienced disproportionally higher numbers of data theft events than other industries. 91. For this reason, Defendant knew or should have known about these dangers and strengthened its data and email handling systems accordingly. Defendant was put on notice of the substantial and foreseeable risk of harm from a data breach, yet PracticeMax failed to properly prepare for that risk. Plaintiff’s and Class Members’ Damages 92. To date, Defendant has done absolutely nothing to provide Plaintiff and the Class Members with relief for the damages they have suffered as a result of the Data Breach. 19 Tim Greene, Anthem Hack: Personal Data Stolen Sells for 10x Price of Stolen Credit Card Numbers, Computer World (Feb. 6, 2015), http://www.itworld.com/article/2880960/anthem- hack-personal-data-stolen-sells-for-10x-price-of-stolen-credit-card-numbers.html. 20 See Omri Toppol, Email Security: How You Are Doing It Wrong & Paying Too Much, LogDog (Feb. 14, 2016), https://getlogdog.com/blogdog/email-security-you-are-doing-it- wrong/. 21 Lisa Vaas, Ransomware Attacks Paralyze, and Sometimes Crush, Hospitals, Naked Security (Oct. 3, 2019), https://nakedsecurity.sophos.com/2019/10/03/ransomware-attacks-paralyze- and-sometimes-crush-hospitals/#content. 93. Plaintiff and Class Members have been damaged by the compromise of their Private Information in the Data Breach. 94. Plaintiff’s and Class Members’ names, addresses, Social Security numbers, dates of birth, medical and treatment information, diagnosis information, health insurance information, medical billing and claims information, and treating and referring physician information were all compromised in the Data Breach and are now in the hands of the cybercriminals who accessed Defendant’s computer system. 95. Due to the Data Breach, Plaintiff and Class members will spend considerable time and money on an ongoing basis to try to mitigate and address harms caused by the Data Breach. This includes changing passwords, cancelling credit and debit cards, and monitoring their accounts for fraudulent activity. 96. Plaintiff’s and Class Members’ Private Information was compromised as a direct and proximate result of the Data Breach. 97. As a direct and proximate result of Defendant’s conduct, Plaintiff and Class Members have been placed at a present, imminent, immediate, and continuing increased risk of harm from fraud and identity theft. 98. As a direct and proximate result of Defendant’s conduct, Plaintiff and Class Members have been forced to expend time dealing with the effects of the Data Breach. 99. Plaintiff and Class Members face substantial risk of out-of-pocket fraud losses such as loans opened in their names, medical services billed in their names, tax return fraud, utility bills opened in their names, credit card fraud, and similar identity theft. 100. Plaintiff and Class Members face substantial risk of being targeted for future phishing, data intrusion, and other illegal schemes based on their Private Information as potential fraudsters could use that information to more effectively target such schemes to Plaintiff and Class Members. Plaintiff has already experienced various phishing attempts by telephone and through electronic mail. 101. Plaintiff and Class Members may also incur out-of-pocket costs for protective measures such as credit monitoring fees, credit report fees, credit freeze fees, and similar costs directly or indirectly related to the Data Breach. 102. Plaintiff and Class Members also suffered a loss of value of their Private Information when it was acquired by cyber thieves in the Data Breach. Numerous courts have recognized the propriety of loss of value damages in related cases. 103. Plaintiff and Class Members were also damaged via benefit-of-the-bargain damages. Plaintiff and Class Members overpaid for a service that was intended to be accompanied by adequate data security that complied with industry standards but was not. Part of the price Plaintiff and Class Members paid for healthcare was intended to be used by Defendant to fund adequate security of PracticeMax’s network and systems and Plaintiff’s and Class Members’ Private Information. Thus, Plaintiff and the Class Members did not get what they paid for and agreed to. 104. Plaintiff and Class Members have spent and will continue to spend significant amounts of time to monitor their medical accounts and sensitive information for misuse. 105. Plaintiff and Class Members have suffered or will suffer actual injury as a direct result of the Data Breach. Many victims suffered ascertainable losses in the form of out-of- pocket expenses and the value of their time reasonably incurred to remedy or mitigate the effects of the Data Breach relating to: a. Reviewing and monitoring sensitive accounts and finding fraudulent insurance claims, loans, and/or government benefits claims; b. Purchasing credit monitoring and identity theft prevention; c. Placing “freezes” and “alerts” with reporting agencies; d. Spending time on the phone with or at financial institutions, healthcare providers, and/or government agencies to dispute unauthorized and fraudulent activity in their name; e. Contacting financial institutions and closing or modifying financial accounts; and, f. Closely reviewing and monitoring Social Security Number, medical insurance accounts, bank accounts, and credit reports for unauthorized activity for years to come. 106. Moreover, Plaintiff and Class Members have an interest in ensuring that their Private Information, which is believed to remain in the possession of Defendant, is protected from further breaches by the implementation of security measures and safeguards, including but not limited to, making sure that the storage of data or documents containing Private Information is not accessible online and that access to such data is password protected. 107. Further, as a result of Defendant’s conduct, Plaintiff and Class Members are forced to live with the anxiety that their Private Information—which contains the most intimate details about a person’s life, including what ailments they suffer, whether physical or mental— may be disclosed to the entire world, thereby subjecting them to embarrassment and depriving them of any right to privacy whatsoever. 108. As a direct and proximate result of Defendant’s actions and inactions, Plaintiff and Class Members have suffered anxiety, emotional distress, and loss of privacy, and are at an increased risk of future harm. Plaintiff Witkowski’s Experience 109. Plaintiff Witkowski entrusted her Private Information to one of the entities that contracts services from PracticeMax. Upon information and belief, PracticeMax’s agreements with those entities require it to protect and maintain the confidentiality of Private Information entrusted to it. 110. As part of her care and treatment, and as a requirement to receive Defendant’s services, Plaintiff Witkowski entrusted her confidential information such as her name, address, Social Security number, medical and treatment information, and health insurance information to PracticeMax with the reasonable expectation and understanding that PracticeMax would take at a minimum industry standard precautions to protect, maintain, and safeguard that information from unauthorized users or disclosure, and would timely notify her of any data security incidents related to her. Plaintiff would not have entrusted her Private Information to any entity that used PracticeMax’s services had she known that PracticeMax would not take reasonable steps to safeguard her Private Information. 111. In June 2022, a full year after PracticeMax learned of the data breach, Plaintiff Witkowski received a letter from PracticeMax, dated June 9, 2022, notifying her that her Private Information had been improperly accessed and/or obtained by unauthorized third parties. The notice indicated that Plaintiff Witkowski’s Private Information was compromised as a result of the Data Breach. 112. As a result of the Data Breach, Plaintiff Witkowski made reasonable efforts to mitigate the impact of the Data Breach, including but not limited to researching the Data Breach, reviewing credit card and financial account statements, changing her online account passwords, and monitoring her credit information. 113. Plaintiff Witkowski has spent 5-10 hours responding to the Data Breach and will continue to spend valuable time she otherwise would have spent on other activities, including but not limited to work and/or recreation. 114. Moreover, Plaintiff was forced to spend approximately $24.99 a month on a subscription to an independent identity theft and credit monitoring service to mitigate any consequences of the Data Breach. Shortly after she enrolled in the independent credit monitoring service, she received a phone call from the service informing her that someone had opened a financial account using her information. As a result, Plaintiff was forced to take additional time to place a freeze on her credit profile to prevent further harm. 115. Plaintiff Witkowski suffered actual injury from having her Private Information compromised as a result of the Data Breach including, but not limited to (a) damage to and diminution in the value of her Private Information, a form of property that PracticeMax obtained from Plaintiff Witkowski; (b) violation of her privacy rights; (c) the likely theft of her Private Information; and (d) imminent and impending injury arising from the increased risk of identity theft and fraud. 116. As a result of the Data Breach, Plaintiff Witkowski has also suffered emotional distress as a result of the release of her Private Information, which she believed would be protected from unauthorized access and disclosure, including anxiety about unauthorized parties viewing, selling, and/or using her Private Information for purposes of identity theft and fraud. Plaintiff Witkowski is very concerned about identity theft and fraud, as well as the consequences of such identity theft and fraud resulting from the Data Breach. Plaintiff also has suffered anxiety about unauthorized parties viewing, using, and/or publishing her information related to her medical records and prescriptions. Plaintiff’s anxiety was further increased as a result of learning that someone had used her information to commit financial fraud. 117. As a result of the Data Breach, Plaintiff Witkowski anticipates spending considerable time and money on an ongoing basis to try to mitigate and address harms caused by the Data Breach. In addition, Plaintiff Witkowski will continue to be at present, imminent, and continued increased risk of identity theft and fraud for years to come. CLASS ACTION ALLEGATIONS 118. Plaintiff brings this action on behalf of herself and on behalf of all other persons similarly situated (“the Class”). 119. Plaintiff proposes the following Class definitions, subject to amendment as appropriate: All persons PracticeMax identified as being among those individuals impacted by the Data Breach, including all who were sent a notice of the Data Breach (the “Class”). 120. Excluded from the Class are Defendant’s officers, directors, and employees; any entity in which Defendant has a controlling interest; and the affiliates, legal representatives, attorneys, successors, heirs, and assigns of Defendant. Excluded also from the Class are members of the judiciary to whom this case is assigned, their families and Members of their staff. 121. Plaintiff reserves the right to amend or modify the Class or Subclass definitions as this case progresses. 122. Numerosity. The Members of the Class are so numerous that joinder of all of them is impracticable. While the exact number of Class Members is unknown to Plaintiff at this time, based on information and belief, the Class consists of approximately 155,000 patients that PracticeMax maintained their Private Information, which was compromised in the Data Breach. 123. Commonality. There are questions of law and fact common to the Class, which predominate over any questions affecting only individual Class Members. These common questions of law and fact include, without limitation: a. Whether Defendant unlawfully used, maintained, lost, or disclosed Plaintiff’s and Class Members’ Private Information; b. Whether Defendant failed to implement and maintain reasonable security procedures and practices appropriate to the nature and scope of the information compromised in the Data Breach; c. Whether Defendant’s data security systems prior to and during the Data Breach complied with applicable data security laws and regulations including, e.g., HIPAA; d. Whether Defendant’s data security systems prior to and during the Data Breach were consistent with industry standards; e. Whether Defendant owed a duty to Class Members to safeguard their Private Information; f. Whether Defendant breached its duty to Class Members to safeguard their Private Information; g. Whether Defendant knew or should have known that its data security systems and monitoring processes were deficient; h. Whether Defendant should have discovered the Data Breach sooner; i. Whether Plaintiff and Class Members suffered legally cognizable damages as a result of Defendant’s misconduct; j. Whether Defendant’s conduct was negligent; k. Whether Defendant breach implied contracts with Plaintiff and Class Members; l. Whether Defendant was unjustly enriched by unlawfully retaining a benefit conferred upon them by Plaintiff and Class Members; m. Whether Defendant failed to provide notice of the Data Breach in a timely manner, and; n. Whether Plaintiff and Class Members are entitled to damages, civil penalties, punitive damages, treble damages, and/or injunctive relief. 124. Typicality. Plaintiff’s claims are typical of those of other Class Members because Plaintiff’s information, like that of every other Class Member, was compromised in the Data Breach. 125. Adequacy of Representation. Plaintiff will fairly and adequately represent and protect the interests of the Members of the Class. Plaintiff’s Counsel are competent and experienced in litigating class actions. 126. Predominance. Defendant have engaged in a common course of conduct toward Plaintiff and Class Members, in that all the Plaintiff’s and Class Members’ data was stored on the same computer system and unlawfully accessed in the same way. The common issues arising from Defendant’s conduct affecting Class Members set out above predominate over any individualized issues. Adjudication of these common issues in a single action has important and desirable advantages of judicial economy. 127. Superiority. A class action is superior to other available methods for the fair and efficient adjudication of the controversy. Class treatment of common questions of law and fact is superior to multiple individual actions or piecemeal litigation. Absent a class action, most Class Members would likely find that the cost of litigating their individual claims is prohibitively high and would therefore have no effective remedy. The prosecution of separate actions by individual Class Members would create a risk of inconsistent or varying adjudications with respect to individual Class Members, which would establish incompatible standards of conduct for Defendant. In contrast, the conduct of this action as a Class action presents far fewer management difficulties, conserves judicial resources and the parties’ resources, and protects the rights of each Class Member. 128. Defendant has acted on grounds that apply generally to the Class as a whole, so that Class certification, injunctive relief, and corresponding declaratory relief are appropriate on a Class-wide basis. CAUSES OF ACTION FIRST COUNT Negligence (On Behalf of Plaintiff and the Class) 129. Plaintiff re-alleges and incorporates by reference all other paragraphs in the Complaint as if fully set forth herein. 130. Defendant required customers, including Plaintiff and Class Members, to submit non-public Private Information in the ordinary course of rendering medical billing, consulting, and registration services to hospitals and healthcare providers. 131. By collecting and storing this data in its computer system and network, and sharing it and using it for commercial gain, Defendant owed a duty of care to use reasonable means to secure and safeguard its computer system—and Class Members’ Private Information held within it—to prevent disclosure of the information, and to safeguard the information from theft. Defendant’s duty included a responsibility to implement processes by which it could detect a breach of its security systems in a reasonably expeditious period of time and to give prompt notice to those affected in the case of a data breach. 132. Defendant owed a duty of care to Plaintiff and Class Members to provide data security consistent with industry standards and other requirements discussed herein, and to ensure that its systems and networks, and the personnel responsible for them, adequately protected the Private Information. 133. Defendant’s duty of care to use reasonable security measures arose as a result of the special relationship that existed between Defendant and patients, which is recognized by laws and regulations including but not limited to HIPAA, as well as common law. Defendant was in a superior position to ensure that its systems were sufficient to protect against the foreseeable risk of harm to Class Members from a data breach. 134. Defendant’s duty to use reasonable security measures under HIPAA required 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). Some or all of the medical information at issue in this case constitutes “protected health information” within the meaning of HIPAA. 135. In addition, Defendant had a duty to employ reasonable security measures under Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, which prohibits “unfair . . . practices in or affecting commerce,” including, as interpreted and enforced by the FTC, the unfair practice of failing to use reasonable measures to protect confidential data. 136. Defendant’s duty to use reasonable care in protecting confidential data arose not only as a result of the statutes and regulations described above, but also because Defendant is bound by industry standards to protect confidential Private Information. 137. Defendant breached its duties, and thus was negligent, by failing to use reasonable measures to protect Class Members’ Private Information. The specific negligent acts and omissions committed by Defendant include, but are not limited to, the following: a. Failing to adopt, implement, and maintain adequate security measures to safeguard Class Members’ Private Information; b. Failing to adequately monitor the security of its networks and systems; c. Failing to ensure that its email system had plans in place to maintain reasonable data security safeguards; d. Failing to have in place mitigation policies and procedures; e. Allowing unauthorized access to Class Members’ Private Information; f. Failing to detect in a timely manner that Class Members’ Private Information had been compromised; and g. Failing to timely notify Class Members about the Data Breach so that they could take appropriate steps to mitigate the potential for identity theft and other damages. 138. It was foreseeable that Defendant’s failure to use reasonable measures to protect Class Members’ Private Information would result in injury to Class Members. Furthermore, the breach of security was reasonably foreseeable given the known high frequency of cyberattacks and data breaches in the healthcare industry. 139. It was therefore foreseeable that the failure to adequately safeguard Class Members’ Private Information would result in one or more types of injuries to Class Members. 140. Plaintiff and Class Members are entitled to compensatory and consequential damages suffered as a result of the Data Breach. 141. Plaintiff and Class Members are also entitled to injunctive relief requiring Defendant to, e.g., (i) strengthen their data security systems and monitoring procedures; (ii) submit to future annual audits of those systems and monitoring procedures; and (iii) continue to provide adequate credit monitoring to all Class Members. SECOND COUNT COUNT Unjust Enrichment (On Behalf of Plaintiff and the Class) 142. Plaintiff repeats and re-allege each and every allegation contained in the Complaint as if fully set forth herein. 143. Plaintiff and Class Members conferred a monetary benefit on Defendant, by paying money for healthcare services that relied on Defendant to render certain services, a portion of which was intended to have been used by Defendant for data security measures to secure Plaintiff’s and Class Members’ Personal Information. Plaintiff and Class Members further conferred a benefit on Defendant by entrusting the Private Information to it and from which Defendant derived profits. 144. Defendant enriched itself by saving the costs it reasonably should have expended on data security measures to secure Plaintiff’s and Class Members’ Personal Information. Instead of providing a reasonable level of security that would have prevented the Data Breach, Defendant instead calculated to avoid their data security obligations at the expense of Plaintiff and Class Members by utilizing cheaper, ineffective security measures. Plaintiff and Class Members, on the other hand, suffered as a direct and proximate result of Defendant’s failure to provide the requisite security. 145. Under the principles of equity and good conscience, Defendant should not be permitted to retain the money belonging to Plaintiff and Class Members, because Defendant failed to implement appropriate data management and security measures that are mandated by industry standards. 146. Defendant acquired the monetary benefit and Personal Information through inequitable means in that it failed to disclose the inadequate security practices previously alleged and failed to maintain adequate data security. 147. If Plaintiff and Class Members knew that Defendant had not secured their Personal Information, they would not have agreed to provide their Personal Information to Defendant. 148. Plaintiff and Class Members have no adequate remedy at law. 149. As a direct and proximate result of Defendant’s conduct, Plaintiff and Class Members have suffered and will suffer injury, including but not limited to: (i) actual identity theft; (ii) the loss of the opportunity how their PII is used; (iii) the compromise, publication, and/or theft of their Personal Information; (iv) out-of-pocket expenses associated with the prevention, detection, and recovery from identity theft, and/or unauthorized use of their Personal Information; (v) 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; (vi) the continued risk to their Personal Information, which remain in Defendant’s possession and is subject to further unauthorized disclosures so long as Defendant fail to undertake appropriate and adequate measures to protect Personal Information in their continued possession; and (vii) future costs in terms of time, effort, and money that will be expended to prevent, detect, contest, and repair the impact of the Personal Information compromised as a result of the Data Breach for the remainder of the lives of Plaintiff and Class Members. 150. As a direct and proximate result of Defendant’s conduct, Plaintiff and Class Members have suffered and will continue to suffer other forms of injury and/or harm. 151. Defendant should be compelled to disgorge into a common fund or constructive trust, for the benefit of Plaintiff and Class Members, proceeds that they unjustly received from them. In the alternative, Defendant should be compelled to refund the amounts that Plaintiff and Class Members overpaid for Defendant’s services. PRAYER FOR RELIEF WHEREFORE, Plaintiff prays for judgment as follows: a) For an Order certifying this action as a Class action and appointing Plaintiff as Class Representative and her counsel as Class Counsel; b) For equitable relief enjoining Defendant from engaging in the wrongful conduct complained of herein pertaining to the misuse and/or disclosure of Plaintiff’s and Class Members’ Private Information, and from refusing to issue prompt, complete and accurate disclosures to Plaintiff and Class Members; c) For equitable relief compelling Defendant to utilize appropriate methods and policies with respect to consumer data collection, storage, and safety, and to disclose with specificity the type of Personal Information compromised during the Data Breach; d) For equitable relief requiring restitution and disgorgement of the revenues wrongfully retained as a result of Defendant’s wrongful conduct; e) Ordering Defendant to pay for not less than three years of credit monitoring services for Plaintiff and the Class; f) For an award of actual damages, compensatory damages, statutory damages, and statutory penalties, in an amount to be determined, as allowable by law; g) For an award of punitive damages, as allowable by law; h) For an award of attorneys’ fees and costs, and any other expense, including expert witness fees; i) Pre- and post-judgment interest on any amounts awarded; and, j) Such other and further relief as this court may deem just and proper. JURY TRIAL DEMANDED Under Federal Rule of Civil Procedure 38(b), Plaintiff demand a trial by jury of any and all issues in this action so triable as of right. Dated: August 17, 2022. Respectfully Submitted, /s/ Cristina Perez Hesano_____________ Cristina Perez Hesano (#027023) cperez@perezlawgroup.com PEREZ LAW GROUP, PLLC 7508 N. 59th Avenue Glendale, AZ 85301 Telephone: 602.730.7100 Fax: 623.235.6173 Gary M. Klinger (Pro Hac Vice Forthcoming) gklinger@milberg.com MILBERG COLEMAN BRYSON PHILLIPS GROSSMAN, PLLC 221 West Monroe Street, Suite 2100 Chicago, IL 60606 (847) 208-4585 Terence R. Coates (Pro Hac Vice Forthcoming) tcoates@msdlegal.com Jonathan T. Deters (Pro Hac Vice Forthcoming) jdeters@msdlegal.com MARKOVITS, STOCK & DEMARCO, LLC 119 E. Court Street, Suite 530 Cincinnati, OH 45202 Telephone 513.651.3700 Fax 513.665.0219 Counsel for Plaintiff and the Class Civil Cover Sheet This automated JS-44 conforms generally to the manual JS-44 approved by the Judicial Conference of the United States in September 1974. The data is required for the use of the Clerk of Court for the purpose of initiating the civil docket sheet. The information contained herein neither replaces nor supplements the filing and service of pleadings or other papers as required by law. This form is authorized for use only in the District of Arizona. The completed cover sheet must be printed directly to PDF and filed as an attachment to the Complaint or Notice of Removal. Plaintiff(s): Katherine Witkowski Defendant(s): PracticeMax, Inc. County of Residence: Outside the State of Arizona County of Residence: Maricopa County Where Claim For Relief Arose: Maricopa Plaintiff's Atty(s): Defendant's Atty(s): Cristina Perez Hesano Perez Law Group, PLLC 7508 N. 59th Avenue Glendale,, Arizona 85301 (602) 730-7100 Gary M. Klinger Milberg Coleman Bryson Phillips Grossman, PLLC 221 W. Monroe St., Suite 2100 Chicago, Illinois 60606 (847) 208-4585 Terence R. Coates Markovits, Stock & DeMarco, LLC 119 E. Court St., Suite 530 Cincinati, Ohio 45202 (513) 651-3700 II. Basis of Jurisdiction: 4. Diversity (complete item III) III. Citizenship of Principal Parties (Diversity Cases Only) Plaintiff:-2 Citizen of Another State Defendant:- 4 AZ corp or Principal place of Bus. in AZ 1. Original Proceeding VII. Requested in Complaint Class Action:Yes Dollar Demand: Jury Demand:Yes VIII. This case IS RELATED to Case Number 2:22-cv-01261 & 2:22-cv-01286 assigned to Judge Douglas L . Rayes & Diane J. Humetewa. Signature: Cristina Perez Hesano Date: 8/17/2022 If any of this information is incorrect, please go back to the Civil Cover Sheet Input form using the Back button in your browser and change it. Once correct, save this form as a PDF and include it as an attachment to your case opening documents.

consumer fraud

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IN THE UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO EASTERN DIVISION CHARLES C. SPIELMAN AKA CHRIS SPIELMAN, : INDIVIDUALLY (AND/OR AS AN OFFICER, : JUDGE: SHAREHOLDER AND/OR AFFILIATE OF : PROFECTUS GROUP, INC., D/B/A : THE COLLEGE FOOTBALL PLAYERS CLUB) : CASE NO.: ON BEHALF OF HIMSELF AND ALL OTHERS : SIMILARLY SITUATED : : : PLAINTIFFS, : CLASS ACTION COMPLAINT : -VS- : : IMG COLLEGE, LLC, [IMG WORLDWIDE, : INC., WME ENTERTAINMENT (“WME”), DBA : IMG, DBA INTERNATIONAL MANAGEMENT GROUP : DBA OHIO STATE IMG SPORTS MARKETING] : (COLLECTIVELY REFERRED TO AS “IMG”); : JURY DEMAND ENDORSED HEREIN AND THE OHIO STATE UNIVERSITY : (AKA “OSU”), JOHN DOES 1-10, ABC : COMPANY’S 1-10. : : DEFENDANTS. : : INTRODUCTION 1. Plaintiff and putative Class Representative Charles C. Spielman aka Chris Spielman (“Chris Spielman”) brings this action both individually and on behalf of damages and injunctive relief classes (collectively, the “Classes”) consisting of former and current student-athletes who competed for Defendant The Ohio State University’s (“OSU”) football program (hereinafter, “Football Program” sometimes referred to hereinafter as “student-athletes”). The Classes who participated in the Football Program have had their images licensed or sold or distributed by Defendants, their Co-Conspirators, or their licensees preceding the filing of this Complaint (the “Class Period”), and will continue in the future. Plaintiff also brings this action on behalf of current student-athletes competing in the Football Program, as well as former and current student-athletes of the Football Program, for purposes of the injunctive relief class only, as both groups’ future compensation rights are impacted by the anticompetitive practices described herein. 2. Defendants OSU and IMG/WME and their Co-Conspirators, including Nike USA Inc. and Nike, Inc. (“NIKE”) and American Honda Motor Co. Inc. ("HONDA") have committed per se violations of the federal antitrust laws by engaging in a price-fixing conspiracy and a group boycott / refusal to deal that has unlawfully foreclosed class members from receiving compensation in connection with the commercial exploitation of their images following their cessation of intercollegiate athletic competition. Plaintiff also sets forth claims for (1) Unreasonable Restraint of Trade in Violation of Section 1 of the Sherman Act 15 U.S.C. §1, (2) Unreasonable Restraint of Trade – Group Boycott / Refusal to Deal in Violation of Section 1 of the Sherman Act 15 U.S.C. §1, (3) Violations of 15 U.S.C. §1125, et seq., (4) Violations of R.C. 4165, et seq., (5) Violations of R.C. 2741, et seq., (6) Accounting, (7) Unjust Enrichment, and (8) Declaratory Relief. Plaintiff further requests that the Court establish a constructive trust for the benefit of the Class Members and for the purpose of holding in trust the licensing revenues that Defendants and their Co- Conspirators have unlawfully diverted from Class Members. 3. As utilized herein, the term "former student athletes" includes only those individuals that have permanently ceased competing on the Football Program at OSU because of, for example, graduation; exhaustion of eligibility; injury; voluntary decisions to cease competition; and involuntary separations from teams due to decisions by coaches, schools, conferences, and/or the NCAA, and also includes those individuals that subsequently became professional athletes, whether prior to or after the exhaustion of their intercollegiate eligibility, and further includes current students that have remained in school but ceased competing on the OSU Football Program. The term "Damages Class" refers to former student-athletes as described herein. The term "Declaratory and Injunctive Relief Class" includes both former and current student-athletes with respect to the OSU Football Program as described herein. The terms "Class," "Classes" and “Class Members” include both Damages and Declaratory and Injunctive Relief class members, unless otherwise specified. 4. As described below Defendants OSU, IMG/WME, and/or their Co-Conspirators have unreasonably and illegally restrained trade in order to commercially exploit former OSU student-athletes previously subject to its control, with such exploitation affecting those individuals well into their post-collegiate competition lives. The conduct of Defendants OSU, IMG/WME, and its/their Co-Conspirators is blatantly anticompetitive and exclusionary, as it wipes out in total the future ownership interests of former student- athletes in their own images - rights that all other members of society enjoy - even long after student-athletes have ceased attending The Ohio State University and/or participating on the Football Program. 5. OSU, by and through its business partners, including, but not limited to Defendant IMG/WME and its Co-Conspirators, NIKE and HONDA, and in conjunction with its for- profit business partners, have attempted to eliminate the rights of former student-athletes to receive even a single dollar from the substantial revenue streams described herein (See Agreements by and between OSU and NIKE, collectively attached hereto as Exhibit A for an example of said behaviors). Former OSU student-athletes, as defined under the Class herein, do not share in these revenues even though they have never given informed consent to the widespread and continued commercial exploitation of their images. While OSU and its for-profit business partners reap millions of dollars from revenue streams including television contracts, rebroadcasts of "classic" games, DVD game and highlight film sales and rentals, "stock footage" sales to corporate advertisers and others, photograph sales, and jersey and other apparel sales, former student-athletes in the Class whose likenesses are utilized to generate those profit-centers receive no compensation whatsoever. (See Exhibit A). Despite the holdings in the O’Bannon v. NCAA, 802 F.3d 1049 (N.D. Cal. 2015), and without the consent of the Class Members and/or Plaintiff, OSU has entered into various licensing partnerships that unlawfully utilize the images of Plaintiff and Class Members, by and through Defendant IMG College, and as further detailed herein. The related available content featuring likeness of former student-athletes in the Class, such as DVDs, photos, and banners, and merchandise, continues to grow in both availability and popularity, and the growth will continue to explode as merchandise continues to be made available in new delivery formats as developing technology and ingenuity permits, as exemplified by the substantial library of "on demand" internet content now available for sale for OSU games as well as jerseys on OSU’s website. 6. Plaintiff and Class Members have not transferred or conveyed their rights in the licensing or use of their image or likeness following the cessation of their participation on the OSU Football Program. OSU and its affiliates, including, but not limited to Defendant IMG/WME and Co-Conspirators have no right to license or use players’ images, name, and likeness upon the conclusion of their participation in intercollegiate athletics, nor do they have the ability to restrict Plaintiff or Class Members usage and/or utilization of the same. Defendants, as well as the Co-Conspirators defined herein; however, have agreed to act as if they were granted perpetual licenses with no limits, and further agreed to license and use the wrongfully obtained rights. (See Exhibit A). 7. In addition to agreeing to wrongfully interpret the use of Plaintiff and Class Members images while they were attending OSU as perpetual licenses, OSU has organized maintained and operated an unjust, perpetual system consisting of its dealings with the other named Defendants and Co-Conspirators, which perpetual system of unjust usage and restriction has been further facilitated by Defendant IMG and/or WME. The wrongdoers in the aforementioned perpetual system of unjust and monopolistic behaviors have collectively and illegally conspired to limit and depress the compensation of Plaintiff and Class Members for continued use of their images to zero, and have restricted their ability to capitalize on the blood, sweat, and tears that Plaintiff and the Class Members shed throughout their respective tenure at The Ohio State University. Defendants’ and their Co- Conspirators’ actions further constitute a group boycott/ refusal to deal as their concerted actions have effectively caused Plaintiff and Class Members to relinquish all rights in perpetuity for use of their images. This concerted action is in effect a refusal to deal with Plaintiff and Class Members on future post-competition rights issues. 8. OSU’s abridgement of Plaintiff and Class Members economic rights in perpetuity is unconnected to any continuing pro-educational benefits for Plaintiff and/or Class Members. Defendants and Co-Conspirators’ patently anti-competitive and illegal scheme has unreasonably restrained trade and is a per se violation of Section 1 of the Sherman Act. (See Exhibit A). 9. In addition to violating the federal antitrust laws, Defendants have been unjustly enriched. Defendants’ actions have deprived Plaintiff and Class Members of their ability to exploit their right of publicity which protects the misappropriation of a person’s identity for commercial use by another, and such use can consist of the person’s name, visual likeness, or “other indicia of identity” such as voice, photograph, signature, or physical mannerisms. (See Exhibit A). 10. Reasonable and less restrictive alternatives are available other than OSU’s “zero compensation” policy for Plaintiff and Class Members licensing rights. For example, all of the major professional sports, including basketball and football, have identified and utilized group-licensing methods to share revenues among teams and players. Additionally, other reasonable and less restrictive alternatives could include the establishment of funds for health insurance, additional educational or vocational training, and/or pension plans to benefit former student athletes. 11. On behalf of the Damages Class described herein, Plaintiff seeks relief herein including monetary damages, to be automatically trebled under the federal antitrust laws; disgorgement and restitution of all monies by which the Defendants have been unjustly enriched; and declaratory relief thereby establishing that that the language set forth in those OSU’s agreements with those certain entities, including, but not limited to, those certain agreements with co-conspirator Nike, specifically Nike’s licensing agreement with Defendant OSU referring to the “Legends of the Scarlet and Gray” vintage jersey licensing program and any similar contracts and/or agreements regarding future compensation rights and/or which any agreements which seek to impose restrictions on Plaintiff and the Class Members be declared as void and unenforceable. (See Exhibit A). Plaintiff and the Class Members further seek an account of the monies received by Defendants, their Co- Conspirators, and their licensees in connection with the exploitation of Damages Class Members’ images, and the establishment of a constructive trust to benefit Damages Class Members. 12. Plaintiff, on behalf of both former and current competitors in OSU’S Football Program, additionally requests injunctive relief permanently enjoining OSU and Defendants from entering into any other contracts and/or agreements regarding future compensation rights and/or restrictions with respect to Plaintiff and the Class Members. STATEMENT OF JURISDICTION 13. This Court has jurisdiction over the claims under 28 U.S.C. § 1331 because the action arises under the laws of the Unites States and involves federal questions, including but not limited to, 15 U.S.C. § 1125, et seq. The Court also has pendent jurisdiction of state law claims pursuant to 28 U.S.C. § 1367. 14. Jurisdiction is proper as the Causes of Actions are brought pursuant to the laws of the United States and/or utilize the same core of operative facts and is, therefore, subject to supplemental jurisdiction pursuant to 28 U.S.C. § 1367. 15. Venue lies in the Southern District of Ohio because the facts leading to the dispute between the parties occurred in Franklin County, Ohio, within this District, and the Defendants and co-conspirators are doing business in this District. INTRADISTRICT ASSIGNMENT 16. This action arises in Franklin County because that is where a substantial part of the events that give rise to the claim occurred. OSU’s main campus resides within this County. OSU fields many intercollegiate sports teams, including OSU’s Football Program, all of which participate in the Big 10 Conference. Plaintiff and Class Members have been and will be, subject to the continuing violations described herein, as are current putative Class Members on those teams for purposes of the Declaratory and Injunctive Relief Class. For the foregoing reasons, this action should be assigned to the Southern District of Ohio. PLAINTIFF 17. Plaintiff Charles “Chris” Spielman is an individual who resides in Franklin County, Ohio. Mr. Spielman competed at the Ohio State University on its football team from 1984 through 1987. Mr. Spielman led the Buckeyes in total tackles in 1986 and 1987 and he is OSU’s all-time leader in solo tackles.1 He also holds the OSU record for most total tackles in a game.2 Mr. Spielman is a three-time All-Big Ten choice and a two-time All-American and concluded his career at OSU by winning the Lombardi Award.3 Mr. Spielman is third on the all-time OSU list in total tackles behind Marcus Marek and Tom Cousineau.4 After leaving OSU Mr. Spielman became recognized as one of the National Football League’s top players after finishing his 12-year career in 1999 with the Cleveland Browns.5 In this case, Mr. Spielman has been deprived of compensation by Defendants and its Co- Conspirators for the continued use of his image following the end of his playing career at OSU, and has be subjected to unnecessary, unjust, and unconstitutional restrictions with respect to the usage of his own name, image and/or likeness. Upon information and belief, OSU, by and through the efforts of IMG/WME and Co-Conspirators NIKE and HONDA, organized and participated in a for-profit program whereby sixty-four (64) former student- 1 http://www.ohiostatebuckeyes.com/sports/m-footbl/spec-rel/062707aaa.html athletes and/or coaches were depicted upon banners that were hung in the OSU football stadium “The Horseshoe” (the “Honda Banner Program”). (See depictions of those Honda Banners attached hereto as Exhibit B). Plaintiff was one of the sixty-four (64) individuals depicted on said banners, despite the fact that Plaintiff did not provide consent, and Plaintiff was not compensated for said Honda Banner Program. Further, Plaintiff, among others in this Class, is a shareholder and/or officer in non-party Profectus Group, Inc. d/b/a The College Football Players Club. Upon information and belief, Plaintiff and Class Members have been and will continue to be subjected to damages for the unauthorized use of their names, images and likeness, as OSU, by and through the efforts of Defendant IMG/WME and Co-Conspirators HONDA and NIKE have continued to engage in for-profit business ventures while utilizing the name, images and/or likeness of Plaintiff and the Class Members without providing just compensation, without obtaining their consent, and while engaging in contractual dealings with Defendant IMG/WME and/or Co-Conspirators HONDA and NIKE in an attempt to impose restrictions upon Plaintiff and the Class Members. See Exhibits A and B; See also depictions of banners and marketing materials related to Co-Conspirators attached collectively hereto as Exhibit C). DEFENDANTS 18. Defendant IMG College, LLC [dba and/or otherwise known as and/or affiliated with WME Entertainment, also known as IMG Worldwide, Inc., dba IMG dba International Management Group dba Ohio State IMG Sports Marketing (collectively, “IMG” or “IMG/WME”)] is a for-profit entity and is registered as a Foreign limited liability company in the State of Ohio. 19. Defendant, the Ohio State University (the "OSU") is an is a political subdivision/instrumentality of the State of Ohio with its principal place of business located in Columbus, Ohio. (OSU, Unnamed Defendants and IMG/WME are collectively referred to as “Defendants”) 20. Whenever a reference is made in this Complaint to any act, deed, or transaction of the Defendants and/or Unnamed Defendants, the allegation means that the Defendants engaged in the act, deed, or transaction by or through their officers, directors, agents, employees, licensees, or representatives while they were actively engaged in the management, direction, control or transaction of Defendants’ for-profit business affairs. CO-CONSPIRATORS 21. NIKE USA, Inc. and NIKE, Inc. (“NIKE”) is a non-defendant co-conspirator and are for- profit entities incorporated under the laws of the State of Oregon. NIKE has participated in and derived a benefit from the above-referenced business relationships and/or contractual agreements and is engaged in business in this Jurisdiction by its dealings with Defendants OSU and/or IMG/WME. (See Exhibits A and C). 22. American Honda Motor Co. Inc. ("HONDA") is a non-defendant co-conspirator is a for- profit entity incorporated under the laws of the State of California with its principal place of business located at 700 Van Ness Ave, Torrance, California 90501. HONDA has participated in and derived a benefit from the above-referenced Honda Banner Program and is engaged in business in this Jurisdiction by its dealings with OSU and/or IMG/WME. (See Exhibit B). 23. John Does 1-10 and ABC Company’s 1-10 and various other persons, firms, corporations, and entities have participated as unnamed co-conspirators with Defendants in the violations and conspiracy alleged herein, including that certain third party/parties that OSU has “assigned its rights” with respect to licensing of jerseys and additional apparel as set forth in the License Agreement with NIKE and as referenced and or reaffirmed by those certain amendments/addenda thereto. (See Exhibit A - C). In order to engage in the offenses, charges, restrictions, and violations alleged herein, these Co-Conspirators in concert with Defendants have performed acts and made statements in furtherance of the antitrust violations and other violations alleged herein. The names and contact information of John Does 1-10 and ABC Company’s 1-10 could not be identified at the time of the filing of this action. 24. At all relevant times, and upon information and belief, each Co-Conspirator was an agent, affiliate, and/or contractual party with respect to Defendants OSU and/or IMG/WME and/or the remaining Co-Conspirators, and in doing the acts alleged herein, was/were acting within the course and scope of such agency/business relationship by and through the various programs and contractual dealings, including those set forth herein. Defendants and each Co-Conspirator ratified and/or authorized the wrongful acts of Defendants and each of the other Co- Conspirators. (See Ex.’s A – C). Defendants and the Co-Conspirators are participants as aiders and abettors in the improper acts and transactions that are the subject of this action. (See Ex.’s A – C). GENERAL ALLEGATIONS 25. Defendant, the Ohio State University (“OSU”) is one of the largest universities in the nation, with student population over 60,000 students at its Columbus campus.6 26. Additionally, OSU has an estimated alumni base comprised of nearly half a million-people living around the world.7 27. In addition to its academic curriculum, OSU offers various Football Program, including football, men and women basketball, men and women soccer, and track and field. 28. OSU is widely recognized for its football program. 29. Each year the football program hosts home games (as often as seven times a year) at Ohio Stadium, which is also known by its nicknames the “Horseshoe” or the “Shoe.” 30. A large number of people (fans) attend these home games. 31. Indeed, Ohio Stadium boasts a seating capacity of 104,944 people and is the fourth largest on-campus facility in the nation.8 32. “From 1951 to 1973, the Buckeyes led the nation in attendance 21 times, including the 14 consecutive years from 1958 to 1971. Since 1949, Ohio State has never been lower than fourth nationally in average home attendance.”9 33. Ohio Stadium had an average attendance in 2014 of 106,296 fans per game.10 34. OSU also regularly hosts other events at Ohio Stadium including, tours, events, and recruiting. 6 https://www.osu.edu/osutoday/stuinfo.php 7 https://www.osu.edu/alumni/about-us/ 8 http://www.ohiostatebuckeyes.com/facilities/ohio-stadium.html 10 http://www.azcentral.com/story/sports/ncaaf/2015/05/14/ohio-state-had-highest-2014-average- football-attendance/27336369/ 35. At each of these home games and various events, the fans are accosted by various advertisements. 36. These advertisements included banners that hung around Ohio Stadium as fans attempted to locate their seats or obtain refreshments, namely, the Honda Banner Program. (See Exhibit B.) 37. These banners contained depictions of notable OSU football players with their last names placed vertically next to a photograph of the player and a black bar at the bottom of the banner with the letters HONDA in white text. (See Exhibit B.) 38. The depictions throughout OSU’s athletic facilities include Plaintiff Chris Spielman as well as other putative Class Members. (See Exhibits B & C). 39. In addition to the “Shoe,” OSU also boasts the largest arena in the Big Ten, the Value City Arena.11 40. The Value City Arena is a 770,000-square foot multipurpose venue which seats 17,500 people for ice hockey, 19,500 people for basketball and up to 20,000+ for concerts.12 41. Value City Arena averages over 1 million guests per year.13 42. The OSU men’s basketball hosted 257,957 fans over the course of 21 home games in 2016.14 11 http://www.ohiostatebuckeyes.com/facilities/schottenstein-center.html 14 http://i.turner.ncaa.com/sites/default/files/images/2016/06/09/2016_release_mens_basketball_attend ance_final.pdf 43. The OSU women’s basketball team boasted the fourteenth highest average attendance in the NCAA with 89,066 fans attending 17 home games during the course of the 2016 season.15 44. Plaintiff Chris Spielman and other Putative Class Members did not provide Defendants or its/their Co-Conspirators with, among other things, their permission to engage in for-profit licensing/marketing programs with Defendants and/or Co-Conspirators and/or other unnamed parties, nor did they consent, to the use of their personas by any of the Defendants and/or Co-Conspirators. (See Exhibits A – C; see also, Exhibit D, which is an agreement between Defendant OSU and putative Class Member James Stillwagon for the use of his name, image, and/or likeness in connection with a “Coke Machine” that was to be placed in Ohio Stadium in 2000). COUNT ONE – VIOLATION OF SECTION 1 OF THE SHERMAN ACT -15 U.S.C. § 1 UNREASONABLE RESTRAINT OF TRADE 45. Plaintiffs incorporate all the preceding paragraphs by reference as if fully rewritten herein. 46. Defendants and their Co-Conspirators, specifically, OSU, by and through Defendants’ and Co-Conspirators’ officers, directors, employees, agents, or other representatives, have entered into a continuing contract, combination, and conspiracy in restraint of trade to artificially depress, fix, maintain, and/or stabilize the prices paid (specifically, depressing, fixing, maintaining and stabilizing them at zero dollars) to Plaintiff Class Members for the use of, and to limit supply for, licensing, restrictions, and sale of their images in the United States and its territories and possessions, in violation of Section 1 of the Sherman Act (15 U.S.C. § 1). (See Ex.’s A – D). 15 http://fs.ncaa.org/Docs/stats/w_basketball_RB/reports/Attend/2016.pdf 47. If Plaintiff and Class Members were free to license and sell the rights to their names, images, and likeness many more licenses would be sold. This output restriction also has the effect of raising the prices charged by the OSU and IMG/WME for licensing rights. (See Ex.’s A – C). 48. Defendants' unlawful conduct resulted in Plaintiff and Class Members losing their freedom to compete in the open market. This unreasonable restraint on competition has artificially limited supply and depressed prices paid by Defendants and their Co-Conspirators to Plaintiff and the Class Members for use of their images after cessation of participation in the aforementioned Football Program. (See Ex.’s A – D). 49. Plaintiff and the Class Members received less than they otherwise would have received for the use of their images in a competitive marketplace, and were thus damaged, and seek to recover for those damages. (See Ex.’s A – D). 50. Defendants and Co-Conspirators total abridgment of compensation rights to Plaintiff and the Class Members comprised of former OSU student-athletes in that defined Football Program is a per se restraint of trade and are not connected to any legitimate non-commercial goal. The purpose of the actions undertaken by Defendants OSU, IMG/WME, and Co-Conspirators is/are solely to enhance revenue for themselves and their for-profit business partners, by cutting costs, i.e., eliminating the need to pay any compensation to Plaintiff and Class Members for the continuing commercial exploitation of their names, images, and likenesses. OSU’s actions have no relationship to any alleged goal of advancing educational or institutional objectives, as former student-athletes (namely Plaintiff and the Class Members), by definition are no longer members of OSU Football Program under the control of OSU. 51. IMG/WME has facilitated this illegal scheme and has financially benefited from the same. 52. As a direct and proximate result of Defendants' utter disregard for the Plaintiff and the Class Members, Plaintiff and the Class Members have been injured and financially damaged in amounts which are presently undetermined. Plaintiffs and Class Members’ injuries consist of receiving lower prices for use of their images than they would have received absent Defendants’ conduct and they have been unjustly and unlawfully restrained from participating in the open market. Plaintiff's and Class Members' injuries are of the type the antitrust laws were designed to prevent and flow from that which makes Defendants' conduct unlawful. (See Ex.’s A – D). 53. Plaintiff alternatively pleads that Defendants have violated Section 1 of the Sherman Act and that Defendants' actions violate the "rule of reason" antitrust analysis. 54. Defendants’ and their Co-Conspirators' have collectively conspired to illegally limit and depress the compensation of Plaintiff and the Class Members for continued use of their images to zero. This patently anticompetitive and illegal scheme has unreasonably restrained trade. (See Ex.’s A – D). 55. Defendants’ scheme fails the "rule of reason" antitrust analysis, as its anticompetitive effects substantially outweigh any alleged procompetitive effects that may be offered by Defendants, including that their collusive conduct is shielded by its concept of "amateurism." Reasonable and less restrictive alternatives are available to Defendants' current anticompetitive practices. (See Ex.’s A – D). 56. As a direct and proximate result of the wrongful conduct of the Defendants and Co- Conspirators, Plaintiff and Class Members have been damaged and are entitled to a declaratory judgment declaring as void and unenforceable all contractual agreements and/or relevant sections thereof that purport to grant, transfer, restrict or convey the rights of Plaintiff and the Class Members in the use of their names, images, and/or likeness by and among Defendants and/or Co-Conspirators. Plaintiff and the Class are entitled to a permanent injunction that terminates the ongoing violations alleged in this Complaint. 57. Plaintiff and Class Members are entitled to a judgment against the Defendants and unnamed Defendants in an amount no less than $75,000.00. 58. That the Defendants, their officers, directors, agents, employees, and successors and all other persons acting or claiming to act on their behalf and all Co-Conspirators be enjoined and restrained from, in any manner, directly or indirectly, continuing, maintaining, or renewing the alleged combination and conspiracy, or from engaging in any other combination, conspiracy, contract, agreement, understanding or concert of action having a similar purpose or effect, and from adopting or following any practice, plan, program, or device having a similar purpose or effect. COUNT TWO - VIOLATION OF SECTION 1 OF THE SHERMAN ACT- 15 U.S.C. § 1 UNREASONABLE RESTRAINT OF TRADE - GROUP BOYCOTT/ REFUSAL TO DEAL 59. Plaintiff incorporates and re-alleges each allegation set forth in the preceding paragraphs of this Complaint. 60. Defendants and their Co-Conspirators, specifically, OSU and IMG/WME by and through Defendants' and Co-Conspirators' officers, directors, employees, agents, or other representatives, entered into various contractual agreements and conspiracy in restraint of trade to effectuate a group boycott of Plaintiff and the Class Members. (See Ex.’s A – D). 61. Defendants’ group boycott / refusal to deal encompasses Defendants' concerted refusal to compensate Class Members for use of their names, images, and likeness, and to otherwise concertedly act to prevent Class Members from being compensated for use of their images, in the United States and its territories and possessions, in violation of Section 1 of the Sherman Act (15 U.S.C. § 1). (See Ex.’s A – D). 62. Defendants’ group boycott/ refusal to deal includes concerted actions whereby Defendants and Co-Conspirators have essentially impeded Plaintiff and Class Members ability to maximize on future post-competition compensation rights, and attempts to restrict them from access to the market via dealings such as those set forth in the NIKE/OSU License Agreement (See Exhibit A). 63. Defendants’ group boycott/ refusal to deal also includes Defendants’ ongoing concerted action to deny Class Members compensation in the form of royalties for the continued use of their names, images, and likeness for profit, including, but not limited to, those certain dealings of and concerning the Honda Banner Program, other licensing programs with Co- Conspirators, and those Agreements by and between NIKE and OSU. (See Ex.’s A – D). 64. Plaintiff and the Class Members received less than they otherwise would have received for the use of their names, images, and likeness in a competitive marketplace were thus damaged, and seek to recover for those damages. 65. Defendants and its/their Co-Conspirators' total abridgment of compensation rights for Plaintiff and the Class Members are a blanket, per se restraint of trade, and are not connected to any legitimate non-commercial goal. (See Ex.’s A – D). Defendants’ actions are solely to enhance revenue for themselves and their for-profit business partners, by cutting costs, i.e., eliminating the need to pay any compensation to Plaintiff and the Class Members for the continuing commercial exploitation of their images and likenesses. Defendants' actions have no relationship to any alleged goal of advancing OSU’s “educational or institutional objectives,” as Plaintiff and the Class Members as former student-athletes of the Football Program at the Ohio State University, by definition, are no longer members of the Football Program under the control of Defendant OSU. Thus, the actions of Defendants seek to directly regulate a commercial market and therefore are illegal. 66. IMG/WME has facilitated this illegal group boycott/refusal to deal and has financially benefited from it. (See Ex.’s A – D). 67. As a direct and proximate result of Defendants' group boycott, Plaintiff and the Class Members have been injured and financially damaged in amounts which are presently undetermined. Plaintiff's and Class members’ injuries consist of denial of compensation for use of their names, images, and likeness and attempts to restrict their usage of the same. Plaintiff's and Class Members’ injuries are of the type the antitrust laws were designed to prevent and flow from that which makes Defendants’ conduct unlawful. (See Ex.’s A – D). 68. Plaintiff alternatively pleads that the Defendants’ group boycott/ refusal to deal violates Section 1 of the Sherman Act and their concerted actions violate the "rule of reason" antitrust analysis. (See Ex.’s A – D). 69. Defendants’ and their Co-Conspirators' have collectively conspired to restrict Plaintiff and the Class Members from utilizing their own names, images, and likeness illegally denying compensation to Plaintiff and the Class Members for continued use of their images in unreasonable restraint of trade. 70. Defendants’ group boycott fails the "rule of reason" antitrust analysis, as its anticompetitive effects substantially outweigh any alleged pro-competitive effects that may be offered by Defendants, including that their collusive conduct is shielded by its concept of “amateurism" or pro-educational purpose. Reasonable and less restrictive alternatives are available to Defendants and Co-Conspirators’ current anticompetitive practices. (See Ex.’s A – D). 71. Plaintiff and the Class Members are entitled to a permanent injunction that terminates the ongoing violations alleged in this Complaint. 72. Plaintiff and Class Members are entitled to a judgment against the Defendants and unnamed Defendants in an amount no less than $75,000.00. 73. That the Defendants, their officers, directors, agents, employees, and successors and all other persons acting or claiming to act on their behalf and all Co-Conspirators be enjoined and restrained from, in any manner, directly or indirectly, continuing, maintaining, or renewing the alleged combination and conspiracy, or from engaging in any other combination, conspiracy, contract, agreement, understanding or concert of action having a similar purpose or effect, and from adopting or following any practice, plan, program, or device having a similar purpose or effect. COUNT THREE – VIOLATIONS OF 15 U.S.C. § 1125, ET SEQ. (ALSO KNOWN AS THE LANHAM ACT) 74. Plaintiff incorporates all the preceding paragraphs by reference as if fully rewritten herein. 75. Defendants by and through their actions described throughout this Complaint have violated 15 U.S.C. § 1125, et seq. 76. By and through Defendants’ actions, Plaintiff and Class Members believe that they have been and/or are likely to be damaged by Defendants’ actions. 77. Pursuant to 15 U.S.C. § 1125(a), et seq., civil liability is created for “[a]ny person who, on or in connection with any goods or services . . . uses in commerce any word, term, name, symbol, or device or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsor-ship, or approval of his or her goods, services, or commercial activities by another person . . . shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.” 15 U.S.C. § 1125(a). 78. Pursuant to 15 U.S.C. § 1125(a)(2), the term “any person” includes any State, instrumentality of a State or employee of a State or instrumentality of a State acting in his or her official capacity. Any State, and any such instrumentality, officer, or employee, shall be subject to the provisions of this chapter in the same manner and to the same extent as any nongovernmental entity.” 15 U.S.C. § 1125(a)(2). 79. Defendant OSU is an instrumentality of the State of Ohio. 80. Defendant OSU, as an instrumentality of the State of Ohio, is subject to civil liability under 15 U.S.C. § 1125(a). 81. Plaintiff and Class Members are highly recognized figures in or around the United States. 82. Plaintiff and Class Members are highly recognized figures in or around the State of Ohio. 83. Plaintiff and Class Members are highly recognized figures in the State of Ohio. 84. Plaintiff and Class Members are highly recognized because, among other things, their accomplishments while attending college and participating in OSU’s Football Program. (See Ex.’s A - D). 85. Plaintiff’s and Class Members’ successes on and off the field have made them highly recognizable to many people, including, current and former students at OSU, the general public, OSU sports fans, collegiate athletics fans, and professional football fans. (See Ex.’s A - D). 86. Plaintiff and Class Members, as a result of their personal, amateur, and professional accomplishments, have obtained a certain amount of good will among many people, including, but not limited to, current and former students at OSU, the general public, OSU sports fans, collegiate athletics fans, and professional football fans. 87. Defendants and Co-Conspirators are capitalizing on Plaintiff’s and Class Members’ personal, amateur, professional accomplishments and good will by, among other things, entering into for-profit licensing/marketing agreements, posting banners, or images depicting Plaintiff and certain Class Members while they were competing in athletic events while attending OSU. (See Ex.’s A – D). 88. Evidently, Defendants are attempting to persuade Ohio Stadium visitors to purchase certain products and/or supplies because said products and/or supplies perform at a high level, just like Plaintiff and Class Members did while they were participating in sporting events while attending OSU. (See Ex.’s A – D). 89. Various images were/are displayed prominently around the OSU campus including, Ohio Stadium, Value City Arena, and the Woody Hayes Facility, which contain or contained Plaintiff and Class Members’ names and photographs/images, which are actual depictions of Plaintiff and Class Members while they were participating in the Football Program while attending school at OSU. (See Ex.’s A – D). 90. Those various images which were/are displayed prominently around the OSU campus including, Ohio Stadium, Value City Arena, and the Woody Hayes Facility, which contain or contained Plaintiff and Class Members’ names and photographs/images, are/were actual depictions of Plaintiff and Class Members while they were participating in sporting events while attending school at OSU. (See Ex.’s A – D). 91. Visitors to Ohio Stadium, Value City Arena, and the Woody Hayes Facility, and/or any other athletic venue on or about the Ohio State University campus are likely confused, mistaken or deceived as to the affiliation, connection, or association of Plaintiff and Class Members with Defendants, or the origin, sponsorship, or approval of Defendant’s and/or Co-Conspirator’s commercial activities, including, but not limited to, HONDA and NIKE, services and/or products. (See Ex.’s A – D). 92. As a direct and proximate result of the wrongful conduct of Defendants, Co-Conspirators and Unnamed Defendants Plaintiff and Class Members have been damaged and are entitled to the following remedies: a permanent injunction against commercial marketing, sale, and use of the Plaintiff and Class Members names and likeness with corporate sponsors, confiscation and destruction of offending products (including banners, jerseys, pictures, and all other marketing material), damages and attorney’s fees. 93. Upon information and belief Defendants and Unnamed Defendants actions as alleged herein was committed with knowledge that such conduct was intended to be used to cause confusion, or cause mistake, or to deceive. 94. Plaintiff and the Class Members are entitled to a judgment against Defendants and Unnamed Defendants in an amount no less than $75,000. 95. Defendants and Unnamed Defendants violation of § 43(a) of the Lanham Act has caused and, unless restrained, will continue to cause great and irreparable injury to Plaintiff and the Class Members good will and business in an amount that cannot be presently ascertained, leaving Plaintiff and the Class Members with no adequate remedy at law. Plaintiff and the Class Members are therefore entitled to injunctive relief under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). 96. Plaintiff and Class Members alternatively plead that as a direct and/or proximate result of Defendants’ and Unnamed Defendants actions, Plaintiff and Class Members are likely to be damaged. COUNT FOUR – VIOLATIONS OF R.C. 4165, ET SEQ. 97. Plaintiffs incorporate all the preceding paragraphs by reference as if fully rewritten herein. 98. Pursuant to R.C. 4165, et seq., “[a] person engages in a deceptive trade practice when, in the course of the person’s business, vocation, or occupation, the person: a. [c]auses [a] likelihood of confusion or misunderstanding as to the . . . sponsorship [or] approval of goods or services; b. [c]auses [a] likelihood of confusion or misunderstanding as to affiliation, connection, or association with . . . another; or c. [r]epresents that goods or services have sponsorship [or] approval . . . that they do not have or that a person has a sponsorship, approval, status, affiliation, or connection that the person does not have; See R.C. 4165.02(A)(2, 3, and 7). 99. Defendants have violated R.C. 4165, et seq. 100. Defendant OSU routinely advertises and/or promotes the sale of OSU and/or third- party products, services, and/or goods. (See Ex.’s A – D). 101. Defendant IMG/WME routinely advertises and/or promotes the sale of third-party products, services, and/or goods. (See Ex.’s A – D). 102. Defendant OSU, by and through its agents, predecessors, successors, employees, contractors, assignees, Co-Conspirators, and assignors (as appropriate), in the course of its business, vocation, and/or occupation, routinely advertise and/or promote the sale of OSU and/or third-party products, services, and/or goods. 103. Defendant IMG, by and through its agents, predecessors, successors, employees, contractors, assignees, Co-Conspirators and assignors (as appropriate), in the course of their business, vocation, and/or occupation, routinely advertise and/or promote the sale of products, services, and/or goods. 104. Defendants have violated R.C. 4165, et seq., by causing a likelihood of confusion and/or misunderstanding as to Plaintiff’s and Class Members’ sponsorship of goods or services related to Defendants and/or Co-Conspirators. See R.C. 4165.02(A)(2). 105. Defendants have violated R.C. 4165, et seq., by causing a likelihood of confusion and/or misunderstanding as to Plaintiff’s and Class Members’ approval of goods or services of Defendants and/or Co-Conspirators. See R.C. 4165.02(A)(2). 106. Defendants have violated R.C. 4165, et seq., by causing a likelihood of confusion and/or misunderstanding as to Plaintiff’s and Class Members’ affiliation with Defendants and/or Co-Conspirators. See R.C. 4165.02(A)(3). 107. Defendants have violated R.C. 4165, et seq., by causing a likelihood of confusion and/or misunderstanding as to Plaintiff’s and Class Members’ connection with Defendants and/or Co-Conspirators. See R.C. 4165.02(A)(3). 108. Defendants have violated R.C. 4165, et seq., by causing a likelihood of confusion and/or misunderstanding as to Plaintiff’s and Class Members’ association with Defendants and/or Co-Conspirators. See R.C. 4165.02(A)(3). 109. Defendants have violated R.C. 4165, et seq., by representing Defendants’ and/or Co-Conspirators’ goods or services have the sponsorship of Plaintiff and Class Members when Defendants nor the Co-Conspirators have the sponsorship of Plaintiff and Class Members. See R.C. 4165.02(A)(7). 110. Defendants have violated R.C. 4165, et seq., by representing that Defendants and/or Co-Conspirators’ goods or services have the approval of Plaintiff and Class Members when Defendants do not have the approval of Plaintiff and Class Members. See R.C. 4165.02(A)(7). 111. Defendants have violated R.C. 4165, et seq., by representing that Defendants and/or Co-Conspirators has the sponsorship of Plaintiff and Class Members when they do not have the sponsorship of Plaintiff and Class Members. See R.C. 4165.02(A)(7). 112. Defendants have violated R.C. 4165, et seq., by representing that Defendants and/or Co-Conspirators have the approval of Plaintiff and Class Members when they do not have the approval of Plaintiff and Class Members. See R.C. 4165.02(A)(7). 113. Defendants have violated R.C. 4165, et seq., by representing that Defendants and/or Co-Conspirators have an affiliation with Plaintiff and Class Members when they do not have the affiliation with Plaintiff and Class Members. See R.C. 4165.02(A)(7). 114. Defendants have violated R.C. 4165, et seq., by representing that Defendants and/or Co-Conspirators have a connection with Plaintiff and Class Members when they do not have a connection with Plaintiff and Class Members. See R.C. 4165.02(A)(7). 115. Plaintiff and the Class Members are entitled to a judgment against Defendants and Unnamed Defendants in an amount no less than $75,000. 116. Defendants and Unnamed Defendants acts or failures to act demonstrated malice, aggravated or egregious fraud, and oppression. Plaintiff and the Class Members suffered actual damages that resulted from those acts or failures to act of Defendants and Unnamed Defendants. 117. Plaintiff and the Class Members are entitled to an award of punitive damages in an amount to be determined at trial against Defendants and Unnamed Defendants together with costs of this action and reasonable attorney’s fees. 118. Pursuant to R.C. 4165, et seq., a person who commits a deceptive trade practice, as listed in section 4165.02 of the Revised Code is entitled to commence a civil action for injunctive relief against the other person for injunctive relief and to recover actual damages from the person who commits the deceptive trade practice. (See Ex.’s A – D). COUNT FIVE – VIOLATIONS OF R.C. 2741, ET SEQ. 119. Plaintiffs incorporate all the preceding paragraphs by reference as if fully rewritten herein. 120. Pursuant to R.C. 2741, et seq., a person shall not use any aspect of an individual’s persona for commercial purpose. 121. Pursuant to R.C. 2741.01(A), an individual’s “persona” includes, an individual’s name, photograph, image, likeness, or distinctive appearance, if any of these aspects have commercial value. 122. Defendants have hung banners and/or engaged in additional for-profit licensing and/or marketing ventures by depicting banners and/or marketing material containing the last name and photographs, images and/or the likenesses of Plaintiff and additional Class Members around Ohio Stadium, Value City Arena, and other locations on or about the Ohio State University Campus. (See Ex.’s A – D). 123. Pursuant to R.C. 2741.01(B), a “commercial purpose” is the use of or reference to an aspect of an individual’s persona, including, but is not limited to, for the advertising or soliciting the purchase of products, merchandise, goods, services, or other commercial activities. 124. Defendants use of or reference to Plaintiff’s and Class Members’ personas is for the advertisement or solicitation of the purchase of products, merchandise, goods, services, or other commercial activities by and among Defendants. 125. Pursuant to R.C. 2741.01(C), “name” means the actual, assumed, or clearly identifiable name of or reference to a living or deceased individual that identifies the individual. 126. Defendants have used the last names of Plaintiff and certain Class Members on the banners and other media at the Ohio Stadium, Value City Arena, and other locations which host athletic events on or about the Ohio State University Campus. (See Ex.’s A – D). 127. Pursuant to R.C. 2741.02, a person shall not use any aspect of an individual’s persona for a commercial purpose during the individual’s lifetime or for a period of sixty years after the date of the individual’s death, unless that person obtains the written consent to use the individual’s persona, as further set forth in R.C. 2741, et seq. 128. Defendants have used aspects of Plaintiff’s and Class Members’ persona for a commercial purpose. (See Ex.’s A – D). 129. Defendants have used aspects of Plaintiff and Class Members persona during their lifetimes and/or during the period of sixty years after the date of some of the Class Members’ death. 130. Pursuant to R.C. 2741.01(F), “written consent” includes written, electronic, digital, or any other verifiable means of authorization. 131. Plaintiff and Class Members have not provided written consent (as defined under R.C. 2741.01(F)), to Defendants for the use of their personas, specifically, with respect to for-profit ventures. 132. Specifically, Plaintiff and Class Members have not provided written consent (as defined under R.C. 2741.01(F)), to Defendants for the use of their personas, with respect to the for-profit ventures described herein. (See Ex.’s A – D). 133. Defendants have used aspects of Plaintiff and Class Members persona without Plaintiff’s and Class Members’ written consent, as set forth in R.C. 2741, et seq. 134. Pursuant to R.C. 2741.01(D), “right of publicity” means the property right in an individual's persona to use the individual's persona for a commercial purpose. 135. Defendants have violated Plaintiff’s and Class Members’ right of publicity. 136. Defendants have violated Plaintiff’s and Class Members’ right of publicity by, including but not limited to, displaying banners depicting Plaintiff and Class Members throughout the Campus, including in and around Ohio Stadium. (See Ex.’s A – D). 137. Defendant OSU’s use of Plaintiff’s and Class Members’ personas is not subject to the exception contained in R.C. 2741.09(A)(5). 138. Pursuant to R.C. 2741.09(A)(5), an individual’s persona can be used by an institution of higher education if: d. The individual is or was a student at, or a member of the faculty or staff of, the institution of higher education; and e. The use of the individual's persona is for educational purposes or for the promotion of the institution of higher education and its educational or institutional objectives. 139. Defendant OSU’s use of Plaintiff’s and Class Members’ personas is not used for the promotion of the institution of higher education and its educational or institutional objectives. (See Ex.’s A – D). 140. Defendant OSU’s use of Plaintiff’s and Class Members’ personas is used for the promotion of an ancillary objective (i.e. its for-profit ventures with Defendants IMG/WME and/or Co-Conspirators and the sale and/or promotion of other Defendants and/or Co- Conspirators’ commercial activities, services, and/or products). 141. Defendants have violated Plaintiff’s and Class Members’ rights of publicity in their respective individual personas, as set forth in R.C. 2741, et seq. 142. Plaintiff and the Class Members are entitled to a judgment against Defendants and Unnamed Defendants in an amount no less than $75,000. 143. Defendants and Unnamed Defendants acts or failures to act demonstrated malice, aggravated or egregious fraud, and oppression. Plaintiff and the Class Members suffered actual damages that resulted from those acts or failures to act of Defendants and Unnamed Defendants. 144. Plaintiff and the Class Members are entitled to an award of punitive damages in an amount to be determined at trial against Defendants and Unnamed Defendants together with costs of this action and reasonable attorney’s fees. COUNT SIX – ACCOUNTING 145. Plaintiffs incorporate all the preceding paragraphs by reference as if fully rewritten herein. 146. As a result of Defendants’ aforementioned conduct with Co-Conspirators, Defendants have received money, a portion of which is due to Plaintiff and the Class Members from Defendants. (See Ex.’s A – D). 147. The amount of money due from Defendants to Plaintiff and the Class Members is unknown to Plaintiffs and cannot be ascertained without an accounting of the transactions by and between Defendants and/or any receipts and/or disbursements derived from the aforementioned transactions. Plaintiffs’ allege that the amount due to Plaintiffs is in excess of $75,000.00. (See Ex.’s A – D). 148. Plaintiff and the Class Members hereby demand an accounting of the aforementioned transactions from Defendants and payment of the amounts found due as Defendants have failed and/or refused, and continue to fail and/or refuse, to render such an accounting and/or pay such sum. COUNT SEVEN- UNJUST ENRICHMENT 149. Plaintiff incorporates and re-alleges each allegation set forth in the preceding paragraphs of this Complaint. 150. Defendants have been unjustly enriched as a result of the unlawful conduct detailed herein at the expense of Plaintiff and Class members. Under common law principles of unjust enrichment, Defendants should not be permitted to retain the benefits conferred upon them via their wrongful conduct, and it would be unjust for them to be allowed to do so. (See Ex.’s A – D). 151. Plaintiff seeks disgorgement of all Defendants' profits resulting from the wrongful conduct described herein and the establishment of a constructive trust from which Plaintiff and the Class members may seek restitution. COUNT EIGHT – ACTION FOR DECLARATORY RELIEF 152. Plaintiff incorporates and re-alleges each allegation set forth in the preceding paragraphs of this Complaint. 153. Defendant OSU and Co-Conspirator NIKE have combined to injure Plaintiff and Class Members by and through the allegations and causes of action set forth herein. (See Ex. A). 154. Defendant OSU and Co-Conspirator NIKE through their actions have injured Plaintiff and Class Members in such a way that it is not competent for one person alone to accomplish. (See Ex. A). 155. For the reasons set forth throughout this Complaint, Plaintiff and Class Members hereby seek declaratory relief thereby establishing that that the language set forth in those OSU’s agreements with those certain entities, including, but not limited to, that certain license Agreement with Nike, which refers to the “Legends of the Scarlet and Gray” vintage jersey licensing program, and any similar contracts and/or agreements regarding future compensation rights and/or the rights of Plaintiff and the Class Members with respect to their rights in and to their name, image, and/or likeness and/or ability to sell jerseys and/or other merchandise be declared as void and unenforceable. (See Ex. A). WHEREFORE, Plaintiff and Class Members prays for judgment against Defendants, jointly and severally, and its/their Co-Conspirators, jointly and severally, as follows: 1. Assume jurisdiction of this case; 2. That the Court determine that this action may be maintained as a class action under Rule 23 of the Federal Rules of Civil Procedure; 3. That the contract, combination, or conspiracy, and the acts done in furtherance thereof by Defendants and/or its/their Co-Conspirators, be adjudged to have been in violation of Section 1 of the Sherman Act (15 U.S.C. §1); 4. That judgment be entered for Plaintiff and Class Members against Defendants and/or its/their Co-Conspirators for three times the amount of damages sustained by Plaintiff and Class Members as allowed by law, together with the costs and expenses of this action, including reasonable attorneys’ fees, including, but not limited to, those permitted under Section 1 of the Sherman Act (15 U.S.C. §1 and/or R.C. 2741.07(D); 5. Award Plaintiff and Class Members actual damages, including any profits derived from and attributable to the unauthorized use of an individual's persona for a commercial purpose as determined under division (A)(2) of R.C. 2741.07; 6. Award Plaintiff and Class Members actual damages in an amount to be determined at trial not less than $75,000.00; 7. Award Plaintiff and Class Members the maximum economic, non-economic, actual, general, other, and statutory damages sought under each Count of this Complaint; 8. Award Plaintiff and Class Members costs and reasonable attorney’s fees, including, pursuant to R.C. 4165.03 and/or 15 U.S.C. §15 and/or Count 3 of the Complaint; 9. Plaintiff and Class Members have been damaged and are entitled to the following remedies: a permanent injunction against commercial marketing, sale, and use of the Plaintiff and Class Members names and likeness with corporate sponsors, confiscation and destruction of offending products (including banners, jerseys, pictures, and all other marketing material), damages and attorney’s fees. 10. Issue a declaratory judgment that Plaintiff and Class Members are entitled to Declaratory relief declaring as void and unenforceable any contracts and/or agreements that purport to have caused Plaintiff and Class Members to relinquish rights to compensation for use of their images after they are no longer student-athletes; 11. Issue a declaratory judgment declaring as void and unenforceable any and all provisions of the licensing agreements by and between Defendant OSU and NIKE of and concerning the “Legends of the Scarlet and Gray, Vintage Jersey Program”; 12. Issue a declaratory judgment declaring as void and unenforceable any and all provisions of the licensing agreements by and between Defendant OSU and IMG that purport to have caused Plaintiff and Class Members to relinquish rights to compensation for use of their images after they are no longer student-athletes; 13. That Defendants, their Co-Conspirators, their affiliates, successors, transferees, assignees, licensees, and the officers, directors, partners, agents and employees thereof, and all other persons acting or claiming to act on their behalf, be permanently enjoined and restrained from, in any manner, continuing, maintain, or renewing the contract, combination, or conspiracy alleged herein, or from engaging in any other contract, combination, or conspiracy having a similar purpose or effect, and from adopting or following any practice, plan, program, or device having a similar purpose or effect; 14. Grant Plaintiff and Class Members prejudgment and post-judgment interest; and 15. Grant such other and further relief as this Court deems proper. (SEE SIGNATURES ON THE FOLLOWING PAGE) Respectfully submitted, /s/ Brian K. Duncan Brian K. Duncan (0080751) BKD LEGAL, LLC 119 East Granville Street Sunbury, Ohio 43074 Phone: (740) 965-1347 Fax: (614) 386-0410 bduncan@bkdlegal.com Trial Counsel for Plaintiffs /s/ Bryan Thomas Bryan D. Thomas (0084659) Of Counsel /s/ Anthony R. McGeorge Anthony McGeorge (0093475) Of Counsel JURY TRIAL DEMANDED Plaintiff and Class Members respectfully request a jury trial on all triable issues. /s/ Brian K. Duncan Brian K. Duncan (0080751)

antitrust

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IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK MICHAEL MADER, and all others similarly situated, Plaintiff, v. 19-CV-3787 EXPERIAN INFORMATION SOLUTIONS, LLC, Defendants. COMPLAINT Plaintiff brings this action against defendant Experian Information Solutions, LLC (“Experian”) for violations of 15 U.S.C. § 1681, known as the Fair Credit Reporting Act (“FCRA”) and New York General Business Law § 380, known as the New York Fair Credit Reporting Act (“NY FCRA”). I. PRELIMINARY STATEMENT 1. Congress enacted the Fair Credit Reporting Act to ensure the fair and accurate reporting of consumer credit information. Congress enacted this law because of the vital importance of credit information in modern banking and commerce, and imposed significant duties upon those trusted with aggregating and reporting credit information. For the last twelve years, Defendant has violated these duties, and has been failing to update credit reports to reflect that certain student loans were discharged in bankruptcy. Plaintiff brings this action to enforce his rights under law. II. PARTIES 2. MICHAEL MADER is an individual and a resident of New York. 3. EXPERIAN INFORMATION SOLUTIONS LLC is a business entity existing under the laws of Delaware with its principal place of business in California. III. JURISDICTION AND VENUE 4. This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1331 and 15 U.S.C. § 1681, as a civil action to enforce liability under federal law. 5. This Court has supplemental jurisdiction over the state law claim pursuant to 28 U.S.C. § 1367 because the state law claim forms part of the same controversy. 6. Venue is proper in the Southern District of New York pursuant to 28 U.S.C. § 1391 because a substantial part of the events giving rise to this action occurred in this District and Defendant is subject to this Court’s personal jurisdiction. IV. STATEMENT OF FACTS 7. Defendant is in the principal business of preparing “consumer reports” as that term is defined in 15 U.S.C. § 1681 (hereinafter, “Credit Reports”). 8. The Fair Credit Reporting Act requires Defendant to adopt and employ “reasonable procedures” to ensure these Credit Reports are prepared with the “maximum possible accuracy.” 9. When a consumer files for bankruptcy and receives a discharge, Defendant is legally obligated to update that consumer’s Credit Report to reflect that any dischargeable debt was discharged in bankruptcy. 10. When a debtor files for bankruptcy and obtains a discharge, all pre- petition debt that is not non-dischargeable is discharged. 11. The Bankruptcy Code makes certain educational loans non-dischargeable in bankruptcy, including federal insured student loans and private education loans that are qualified under the tax code. 12. In order for a private education loan to be qualified under the tax code, it must be made to an eligible student attending an accredited school for eligible expenses (“Qualified Education Loan”). 13. Commercial banks make numerous types of student loans that are not Qualified Education Loans under 11 U.S.C. § 523(a)(8)(B), including loans for non-Title IV accredited institutions, loans made in excess of the “Cost of attendance,” and loans made to ineligible students (“Consumer Education Loans”). 14. All of these types of student loans are dischargeable in bankruptcy because none of them are made to “eligible institutions” as that term is defined in 26 U.S.C § 221(d) and 11 U.S.C. § 523(a)(8)(B). 15. In fact, the plain language of the national discharge order states that a discharge does not discharge “most student loans.” Obviously, some student loans are therefore discharged. 16. Since 1994, bankruptcy and appellate courts across the country have clearly articulated this distinction, and declared that Consumer Education Loans made by commercial banks are dischargeable in bankruptcy, including four bankruptcy courts from the Eastern District of New York since 2016. 17. Indeed, the Ninth Circuit Bankruptcy Appellate Panel reiterated this position in Kashikar in 2017 and held that not all student loans are immune from discharge in bankruptcy. 18. Recent cases reiterating this distinction have received wide-spread media coverage since 2016, including in the Wall Street Journal, ABC News, Fox News, the National Law Journal, Bloomberg Media, People Magazine, National Public Radio, and more. 19. In addition, major student lenders like Sallie Mae and Navient publicly disclose to shareholders and the SEC that their Consumer Education Loan products are dischargeable in bankruptcy. See attached as Exhibit A. 20. Despite being on full constructive and actual notice of this crucial distinction in bankruptcy law, Defendant does not, and has never had or provided for, an internal procedure to delineate between Qualified Education Loans and Consumer Education Loans, which is necessary to assuring maximum possible accuracy and complying with the FCRA. 21. Upon information and belief, Defendant codes all “educational loans” as a no. 9 and no loan coded as a no. 9 is reflected as discharged in bankruptcy after a consumer obtains a discharge under Title 11. 22. This is not a “reasonable procedure” given the differences between Qualified Education Loans and Consumer Education Loans. 23. One reasonable procedure that would insure maximum possible accuracy would be to have two different codes for educational loans: “9” for Qualified Education Loans, and “10” for Consumer Education Loans. 24. To ensure maximum possible accuracy, Defendants could simply ask lenders (who know exactly which loans are Qualified Education Loans and which are Consumer Education Loans) to report educational loans as either a 9 or a 10. Once a discharge was entered, Defendant could program its system so that any loan coded as a 10 reflected a discharge, and loans coded as a 9 reflected that the discharge did not affect the loan. 25. Plaintiff submits that this procedure would not require individual analysis and would not be overly burdensome. 26. As stated, Defendant has no such procedure. 27. Defendant has failed to report these Consumer Education Loans as discharged in bankruptcy for hundreds of thousands of debtors, resulting in erroneously high debt to equity ratios, poor credit scores, and negative remarks suggesting that debtors were in default on debts that had already been discharged. 28. This has prevented consumers from applying for subsequent loans for their various needs and from obtaining affordable home loans/car insurance. 29. Debtors have also been denied employment opportunities, and housing. 30. Given the plain language of the discharge order, the numerous bankruptcy cases articulating this point, the massive media coverage on this issue, and the public statements by credit furnishers, Defendant’s failure to adopt reasonable procedures to ensure that these Consumer Education Loans were reported as having been discharged in bankruptcy on consumers’ Credit Reports is a violation of the Fair Credit Reporting Act. 31. But for Defendant’s failure to adopt such a reasonable procedure to distinguish between Qualified Education Loans and Consumer Education Loans, consumers would have realized a drastic increase in their credit scores in the months and years following their bankruptcy discharge. By not receiving that increase due to the patent flaw in the Defendant’s procedures, consumers were not able to enjoy the “fresh start” that they deserved, and needed; the fresh start that the bankruptcy law was created to provide to debtors. B. Plaintiff Borrows A Consumer Education Loans And Seek Relief Under Title 11. 32. On or about March 21, 2008, Plaintiff incurred a loan from Sallie Mae to attend Reformed Theological Seminary which was subsequently assigned to Navient (the “Navient Loan” or “Loan” or “Debt”). 33. This Loan was used to pay expenses while attending Reformed Theological Seminary, which is not and was not a Title IV eligible institution under the Higher Education Act, or 26 U.S.C. 221(d). 34. On or about December 28, 2012, the Plaintiff sought relief under Title 11 in the United States Bankruptcy Court for the Southern District of New York. 35. On or about April 16, 2013, the bankruptcy court ordered discharge of all Plaintiff’s pre-petition debt, including the Loan. 36. Navient and Defendant were notified of discharge. 37. Instead of reporting that this Loan had been discharged in bankruptcy, Experian continues to report this Loan as “account charged off” with an outstanding balance of $22,785, and a past due balance of $9,009 as of March 2019. See attached as Exhibit B. 38. Upon information and belief, Navient knows this Loan was discharged in bankruptcy, and Defendant either knows or should have known that this Loan was discharged. 39. Defendant’s reporting practices were done in violation of the Fair Credit Reporting Act and the New York Fair Credit Reporting Act. 40. Defendant’s reporting practices have injured Plaintiff by decreasing his credit score and depriving him of the “fresh start” that Congress intended he should have. 41. The fundamental purpose of the Bankruptcy Code is to give debtors like the Plaintiff a “fresh start” and to wipe away old debts so that they can begin life anew. 42. This “fresh start” is frustrated when Defendant fails to accurately report the discharge of debts in bankruptcy. 43. But for this unreasonable procedure, Plaintiff would have experienced an increase in credit score, and his credit report would not be showing that he is currently past due on this Debt and that he owes Navient $22,875. 44. Plaintiff’s reputation is being injured because everyone who looks at his report believes he is past due on an account when in fact Plaintiff’s personal obligation on the account was discharged in bankruptcy. 45. But for Defendant’s failure to accurately report the Debt, Plaintiff would have been offered better credit terms by potential and existing creditors. 46. The fact that Plaintiff completed a bankruptcy – a bankruptcy which accurately appears on his credit report – makes it even more important for Plaintiff’s credit report to accurately reflect that he has changed his behavior, and no longer is in financial trouble. 47. Defendant’s failure to report that this Debt was discharged in bankruptcy, and Defendant’s continued reporting that Plaintiff is currently past due and in default on the Debt makes it appear as though Plaintiff continues to be unable to manage his finances. 48. Plaintiff has worked hard to rebuild his life and credit since his bankruptcy. 49. Defendant’s inaccurate reporting makes Plaintiff look like just another irresponsible debtor who cannot handle his financial affairs, cannot be trusted with credit and has not learned from his mistakes. 50. Plaintiff’s Credit Report has been reviewed by not less than 8 potential creditors in the past two years, all of whom were wrongly informed that Plaintiff is currently in default on the Debt. C. All Class Members Share A Similar Narrative. 51. All Class Members share a similar factual narrative. 52. All Class Members borrowed Consumer Education Loans from various lenders. 53. All Class Members filed for bankruptcy protection in the United States Bankruptcy Court. 54. At the conclusion of these bankruptcy cases, all Class Members were issued discharge orders. 55. These Discharge Orders extinguished all education-related debt that was not excepted from discharge by 11 U.S.C. § 523(a)(8). 56. Notwithstanding the discharge of these debts, Defendants have failed to update the Class Members’ Credit Reports to reflect these debts were discharged. V. CLASS ACTION ALLEGATIONS 57. Pursuant to Rule 23(a) and 23(b) of the Federal Rules of Civil Procedure, Mader brings this action on behalf of himself and all other persons similarly situated, as a representative of the following class: 58. Citizens of the various states who filed for bankruptcy in any of district courts of the United States and were issued Discharge Orders since October 17, 2005 (the effective date of the Bankruptcy Abuse Prevention and Consumer Protection Act), who: (i) Obtained pre-petition Consumer Education Loans; and (ii) whose Credit Reports do not reflect that the Consumer Education Loans were discharged. Plaintiff also seeks to represent a subclass of residents of the state of New York who are protected by the New York Fair Credit Reporting Act, who obtained pre-petition Consumer Education Loans, obtained a Discharge Order since October 17, 2005, and whose Credit Reports do not reflect that the Consumer Education Loans were discharged. 59. Plaintiff reserves the right to amend the definition of the class and/or add subclasses to include or exclude members. 60. As described below, this action satisfies the numerosity, commonality, typicality, superiority, predominance, and adequacy of representation requirements of Rule 23 of the Federal Rules of Civil Procedure. Numerosity 61. The persons in the class of plaintiffs are so numerous that joinder of all members is impracticable. In the interest of judicial economy, this dispute should be resolved through class action. 62. Upon information and belief, the number of plaintiffs will likely exceed 100,000. The quantity, identity, and location of class members are ascertainable through appropriate discovery and may be identified by the records maintained and possessed by Defendants. 63. The Class Members have been through bankruptcy over the last decade. Upon information and belief, the individual members of the class of plaintiffs, or at least a large portion thereof, lack the means to pursue these claims individually and severally. Commonality 64. There are common questions of law/fact affecting the entirety of the class. Specifically, predominant common questions include without limitation: (i) whether the Class Members’ Consumer Education Loans were discharged at the conclusion of their bankruptcy cases; and (ii) whether Defendants’ current procedure for ensuring maximum possible accuracy is reasonable. 65. Answers to these common questions will drive the resolution of the injuries shared by each member of the class. Typicality 66. Plaintiff’s claims against Defendants are representative of those of all Class Members. Specifically, Mader’s Navient Loans is one type of Consumer Education Loan that has been wrongfully reported on Plaintiff’s Credit Report because of the Defendants’ unreasonable procedures. Predominance and Superiority 67. There are questions of law and fact common to the Class that predominate over any questions affecting only individual Class Members. The questions include, but are not limited to: (i) whether the Class Members’ Consumer Education Loans were discharged at the conclusion of their bankruptcy cases; and (j) whether Defendants’ current procedure for ensuring maximum possible accuracy is reasonable. 68. This action should be maintained as a class action because 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, which would establish incomplete standards of conduct for the parties opposing the Class, as well as a practical matter be dispositive of interests of other members not parties to the adjudications, or substantially impair or impede their ability to protect their interests. 69. Defendant has acted, or refused to act, on grounds generally applicable to the Class, thereby making appropriate final injunction relief or corresponding declaratory relief with respect to the Class as a whole. 70. A class action is a superior method for the fair and efficient adjudication of this controversy. Management of the Class claims is likely to present significantly fewer difficulties than those presented in many individual claims. The identities of the Class members may be obtained from Defendant’s records. Adequacy of Representation 71. Mader will fairly and adequately represent and protect the interests of the members of the class of plaintiffs. Mader’s interests are squarely aligned with those of individual members of the class. Plaintiff’s counsel, Smith Law Group LLP is experienced in class actions lawsuits, complex commercial litigation, bankruptcy law and procedure, and student loan litigation. VI. DEMAND FOR JURY TRIAL 72. Pursuant to Fed. R. Civ. P. 38, Plaintiff hereby requests a trial by jury for all issues so triable. VII. CLAIMS FOR RELIEF Count One: Negligent Violations of 15 U.S.C. § 1681e(b) 73. The allegations set forth in paragraphs 1-26 are here incorporated by reference as if fully set forth. 74. Defendants are regularly engaged in the practice of assembling and evaluating consumer credit information for the purpose of preparing “consumer reports,” as that term is defined in 15 U.S.C. § 1681a(d). 75. Defendants use the means and facilities of interstate commerce for the purpose of preparing and furnishing consumer reports, and therefore are “consumer reporting agencies” within the meaning of 15 U.S.C. § 1681a(f). 76. In preparing Credit Reports, Defendant has failed to use reasonable procedures to ensure maximum possibly accuracy of information relating to the discharged Consumer Education Loans of Plaintiff and the Class, in violation of 15 U.S.C. § 1681e(b). 77. As a result of Defendant’s failure to use reasonable procedures to ensure accuracy, Defendant has erroneously reported the Loan has having a past due balance, and similarly failed to report the Consumer Education Loans as having been discharged in bankruptcy. 78. Defendants’ failure to comply with the requirements of 15 U.S.C. § 1681e(b) is negligent within the meaning of 15 U.S.C. § 1681o(a). 79. As a result of Defendants’ negligent noncompliance with the FCRA, plaintiff has been injured, and is entitled to actual damages and attorneys’ fees under section 1681o. Count Two: Willful Violations of 15 U.S.C. § 1681e(b) 80. The allegations set forth in paragraphs 1-26 are here incorporated by reference as if fully set forth. 81. Defendants are regularly engaged in the practice of assembling and evaluating consumer credit information for the purpose of preparing “consumer reports,” as that term is defined in 15 U.S.C. § 1681a(d). 82. Defendants use the means and facilities of interstate commerce for the purpose of preparing and furnishing consumer reports, and therefore are “consumer reporting agencies” within the meaning of 15 U.S.C. § 1681a(f). 83. In preparing Credit Reports, Defendant has failed to use reasonable procedures to ensure maximum possibly accuracy of information relating to the discharged Consumer Education Loans of Plaintiff and the Class, in violation of 15 U.S.C. § 1681e(b). 84. As a result of Defendant’s failure to use reasonable procedures to ensure accuracy, Defendant has erroneously reported the Loan has having a past due balance, and similarly failed to report the Consumer Education Loans as having been discharged in bankruptcy. 85. Defendants’ failure to comply with the requirements of 15 U.S.C. § 1681e(b) is willful within the meaning of 15 U.S.C. § 1681n. 86. As a result of Defendants’ willful noncompliance with the FCRA, plaintiff has been injured, and is entitled to actual damages, statutory damages, punitive damages and attorneys’ fees under section 1681n. Count Three: Negligent Violations of N.Y. General Business Law § 380 87. The allegations set forth in paragraphs 1-26 are here incorporated by reference as if fully set forth. 88. Plaintiff is a “consumer” as that term is defined in section 380-A. 89. Defendant is regularly engaged in the practice of assembling and evaluating consumer credit information for the purpose of preparing “consumer reports,” as that term is defined in section 380-A 90. Defendant charges fees for assembling and furnishing consumer reports, and therefore is a “consumer reporting agency” and “consumer credit reporting agency” within the meaning of section 380-A. 91. In preparing Credit Reports, Defendant has failed to use reasonable procedures to ensure maximum possibly accuracy of information relating to the discharged Consumer Education Loans of Plaintiff and the Class, in violation of section 380-J 92. As a result of Defendants’ failure to use reasonable procedures to ensure accuracy, Defendant has erroneously reported the Loan has having a past due balance, and similarly failed to report the Consumer Education Loans as having been discharged in bankruptcy, for both the Plaintiff, and the putative class. 93. Defendant’s failure to comply with the requirements of section 380-J is negligent within the meaning of section 380-M. 94. As a result of Defendant’s negligent noncompliance with GBL § 380, plaintiff is entitled to actual damages and attorneys’ fees under section 380-M. Count Four: Willful Violations of N.Y. General Business Law § 380 95. The allegations set forth in paragraphs 1-26 are here incorporated by reference as if fully set forth. 96. Plaintiff is a “consumer” as that term is defined in section 380-A. 97. Defendant is regularly engaged in the practice of assembling and evaluating consumer credit information for the purpose of preparing “consumer reports,” as that term is defined in section 380-A 98. Defendant charges fees for assembling and furnishing consumer reports, and therefore is a “consumer reporting agency” and “consumer credit reporting agency” within the meaning of section 380-A. 99. In preparing Credit Reports, Defendant has failed to use reasonable procedures to ensure maximum possibly accuracy of information relating to the discharged Consumer Education Loans of Plaintiff and the Class, in violation of section 380-J 100. As a result of Defendants’ failure to use reasonable procedures to ensure accuracy, Defendant has erroneously reported the Loan has having a past due balance, and similarly failed to report the Consumer Education Loans as having been discharged in bankruptcy, for both the Plaintiff, and the putative class. 101. Defendant’s failure to comply with the requirements of section 380-J is willful within the meaning of section 380-L. 102. As a result of Defendant’s willful noncompliance with GBL § 380, plaintiff is entitled to actual damages, punitive damages and attorneys’ fees under section 380-L. Prayer 103. In light of the foregoing, Plaintiff request that Defendant be cited to appear and judgment be entered against Defendant for: (1) Declaratory relief that the practices and procedures complained of by Plaintiff are in violation of the Fair Credit Reporting Act and New York Fair Credit Reporting Act; (2) actual damages, statutory damages, and punitive damages for violations of Fair Credit Reporting Act and New York Fair Credit Reporting Act; (3) attorneys’ fees and costs to the fullest extent permitted under the law; (4) other such relief as the Court deems just and proper. Respectfully submitted, By: /s/ Austin Smith Austin Smith, NY Bar. # 5377254 SMITH LAW GROUP LLP 3 Mitchell Place New York, New York 10017 Telephone: (917) 992-2121 Austin@acsmithlawgroup.com

consumer fraud

Utn2D4cBD5gMZwczNy_j

'17CV0331 BGS JM Case No. CLASS ACTION COMPLAINT FOR DAMAGES AND DEMAND FOR JURY TRIAL MARTIN & BONTRAGER, APC G. Thomas Martin, III (SBN 218456) Nicholas J. Bontrager (SBN 252114) 6464 W. Sunset Blvd., Ste. 960 Los Angeles, CA 90028 T: (323) 940-1700 F: (323) 238-8095 Tom@mblawapc.com Nick@mblawapc.com Attorneys for Plaintiff TODD FRIEDMAN UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA TODD FRIEDMAN, Individually and On Behalf of All Others Similarly Situated, Plaintiff, vs. RELIANT SERVICES GROUP, LLC dba RELIANT FUNDING, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) 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 RELIANT SERVICES GROUP, LLC dba RELIANT FUNDING (“Defendant”), in negligently, knowingly, and/or willfully contacting Plaintiff and 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 as Plaintiff seeks redress under a federal statute, thus this Court has jurisdiction as this matter involves questions of federal law. 3. Venue is proper in the United States District Court for the Southern 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 Southern District of California as Defendant’s headquarters is located in San Diego, California. PARTIES 4. Plaintiff, TODD FRIEDMAN (“Plaintiff”), is a natural person residing in Los Angeles County, California and is a “person” as defined by 47 U.S.C. § 153 (10). 5. Defendant, RELANT SERVICES GROUP, LLC dba Reliant Funding (“Defendant”), is a limited liability company engaged in the business of lending business capital loans to business owners nationwide with its state of incorporation in Delaware and its corporate headquarters in the County of San Diego, State of California and is a “person” as defined by 47 U.S.C. § 153 (10). FACTUAL ALLEGATIONS 6. Beginning in or around January 2017, Defendant began placing autodialed telephone calls to Plaintiff’s cellular telephone number ending in 9293, which Plaintiff has possessed exclusively since approximately 2011. 7. To date, Defendant has placed at least one (1) such autodialed solicitation call to Plaintiff’s cellular telephone on or about January 31, 2017 at approximately 9:12am PST. 8. Defendant placed its call from telephone number (213) 266-9556. 9. The purpose of Defendant’s call was to attempt to solicit Plaintiff into applying for a business capital loan. Plaintiff answered Defendant’s call and spoke with an employee/agent for Defendant for a period of approximately eight (8) minutes. 10. However, when Plaintiff answered the call, he was greeted with “dead air” whereby no person was on the other line. After several seconds, an agent was connected to the automated call, greeted Plaintiff and sought to speak with Plaintiff in an attempt to solicit a potential commercial loan or line of credit Defendant was offering. 11. Defendant and/or its agent(s) used an “automatic telephone dialing system”, as defined by 47 U.S.C. § 227(a)(1) to place January 31, 2017 call to Plaintiff soliciting his business. The dead air that the Plaintiff experienced on the call that he received is indicative of the use of an automatic telephone dialing system. 12. This “dead air” is commonplace with autodialing and/or predictive dialing equipment. It indicates and evidences that the algorithm(s) being used by Defendant’s and/or its agent’s autodialing equipment to predict when the live human agents are available for the next call has not been perfected and/or has not been recently refreshed or updated. Thus resulting in the autodialer placing a call several seconds prior to the human agent’s ability to end the current call he or she is on and be ready to accept the new connected call that the autodialer placed, without human intervention, to Plaintiff. 13. The dead air is essentially the autodialer holding the call it placed to Plaintiff until the next available human agent is ready to accept it. Should the call at issue been manually dialed by a live human being, there would be no such dead air as the person dialing Plaintiff’s cellular telephone would have been on the other end of the call the entire time and Plaintiff would have been immediately greeted by said person. 14. Defendant’s call constituted a call that was not for emergency purposes as defined by 47 U.S.C. § 227(b)(1)(A). 15. Defendant’s call was placed to a 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). 16. Plaintiff has no business relationship with Defendant whatsoever and never provided Defendant with his cellular telephone number for any purpose. Accordingly, Defendant did not have Plaintiff’s “prior express consent” to receive calls using an automatic telephone dialing system on his cellular telephone pursuant to 47 U.S.C. § 227(b)(1)(A). 17. As a result of Defendant’s alleged violations of law by placing these automated calls to Plaintiff’s cellular telephone without prior express consent, Defendant caused Plaintiff harm and/or injury such that Article III standing is satisfied in at least the following, if not more, ways: a. Invading Plaintiff’s and the putative class’ privacy; b. Electronically intruding upon Plaintiff’s and the putative class’ seclusion; c. Intrusion into Plaintiff’s and the putative class’ use and enjoyment of their cellular telephones; d. Impermissibly occupying minutes, data, availability to answer another call, and various other intangible rights that Plaintiff and the putative class have as to complete ownership and use of their cellular telephones; e. Causing Plaintiff and the putative class to expend needless time in receiving, answering, and attempting to dispose of Defendant’s unwanted calls. CLASS ALLEGATIONS 18. Plaintiff brings this action on behalf of himself 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 telephone call from Defendant or Defendant’s 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 filing of this Complaint wherein said person had not previously consented to receive any such call/s 19. Plaintiff represents, and is a member of, The Class, consisting of All persons within the United States who received any telephone call from Defendant or Defendant’s 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 filing of this Complaint wherein said person had not previously consented to receive any such call/s. 20. 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 hundreds, if not more. Thus, this matter should be certified as a Class Action to assist in the expeditious litigation of the matter. 21. 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 hundreds if not thousands of members. Plaintiff alleges that The Class members may be ascertained by the records maintained by Defendant. 22. 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. 23. 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 telephone 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 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. 24. As a person that received a call from Defendant using an automatic telephone dialing system, without prior express consent, Plaintiff is asserting claims that are typical of The Class. 25. 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. 26. 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. 27. 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. 28. 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. 29. Plaintiff repeats and incorporates by reference into this cause of action the allegations set forth above at Paragraphs 1-28. 30. 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. 31. 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). 32. 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. 33. Plaintiff repeats and incorporates by reference into this cause of action the allegations set forth above at Paragraphs 1-32. 34. 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 35. 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). 36. 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).  Injunctive relief.  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).  Injunctive relief.  Any and all other relief that the Court deems just and proper. DEMAND FOR JURY TRIAL Please take notice that Plaintiff demands a trial by jury in this action. Date: February 17, 2017 MARTIN & BONTRAGER, APC By:/s/ Nicholas J. Bontrager Nicholas J. Bontrager Attorneys for Plaintiff

privacy

ya_DCocBD5gMZwczCEYN

EASTERN DISTRICT OF NORTH CAROLINA KARL KENDALL, SUZANNE RAINEY and VINCENZO PERNICE, individually and on behalf of all others similarly situated, Plaintiffs, v. CIVIL ACTION NO.: CLASS ACTION COMPLAINT PHARMACEUTICAL PRODUCT DEVELOPMENT, LLC, BOARD OF DIRECTORS OF PHARMACEUTICAL PRODUCT DEVELOPMENT, LLC, THE BENEFITS ADMINISTRATIVE COMMITTEE, and JOHN DOES 1-30. Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) COMPLAINT Plaintiffs, Karl Kendall, Suzanne Rainey and Vincenzo Pernice (“Plaintiffs”), by and through their attorneys, on behalf of the Pharmaceutical Product Development, LLC Retirement Savings Plan (the “Plan”),1 themselves and all others similarly situated, state and allege as follows: I. INTRODUCTION 1. This is a class action brought pursuant to §§ 409 and 502 of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1109 and 1132, against the Plan’s fiduciaries, which include Pharmaceutical Product Development, LLC (“PPD” or “Company”), the Board of Directors of PPD (“Board”) and its members during the Class Period 1 The Plan is a legal entity that can sue and be sued. ERISA § 502(d)(1), 29 U.S.C. § 1132(d)(1). However, in a breach of fiduciary duty action such as this, the Plan is not a party. Rather, pursuant to ERISA § 409, and the law interpreting it, the relief requested in this action is for the benefit of the Plan and its participants. (“Committee”) for breaches of their fiduciary duties. 2. Defined contribution retirement plans, like the Plan, confer tax benefits on participating employees to incentivize saving for retirement. As of the end of 2015, Americans had approximately $6.7 trillion in assets invested in defined contribution plans. See INVESTMENT COMPANY INSTITUTE, Retirement Assets Total $24.0 Trillion in Fourth Quarter 2015 (Mar. 24, 2016), available at https://www.ici.org/research/stats/retirement/ret_15_q4; PLAN SPONSOR, 2015 Recordkeeping Survey (June 2015), available at http://www.plansponsor.com/2015- Recordkeeping-Survey/. 3. In a defined contribution plan, participants’ benefits “are limited to the value of their own investment accounts, which is determined by the market performance of employee and employer contributions, less expenses.” Tibble v. Edison Int’l, 135 S. Ct. 1823, 1826 (2015). Thus, the employer has no incentive to keep costs low or to closely monitor the Plan to ensure every investment remains prudent, because all risks related to high fees and poorly-performing investments are borne by the participants. 4. To safeguard Plan participants and beneficiaries, ERISA imposes strict fiduciary duties of loyalty and prudence upon employers and other plan fiduciaries. 29 U.S.C. § 1104(a)(1). These twin fiduciary duties are “the highest known to the law.” Tatum v. RJR Pension Investment Committee et al., 761 F.3d 346, 356 (4th Cir. 2014). Fiduciaries must act “solely in the interest of the participants and beneficiaries,” 29 U.S.C. § 1104(a)(1)(A), with the “care, skill, prudence, and diligence” that would be expected in managing a plan of similar scope. 29 U.S.C. § 1104(a)(1)(B). 5. At all times during the Class Period (defined below) the Plan had at least half a billion in assets under management. At the end of 2017 and 2018, the Plan had over 700 million dollars in assets under management that were/are entrusted to the care of the Plan’s fiduciaries. marketplace, and among the largest plans in the United States. As a large plan, the Plan had substantial bargaining power regarding the fees and expenses that were charged against participants’ investments. Defendants, however, did not try to reduce the Plan’s expenses or exercise appropriate judgment to scrutinize each investment option that was offered in the Plan to ensure it was prudent. 6. Plaintiffs allege that during the putative Class Period (April 15, 2014 through the date of judgment) Defendants, as “fiduciaries” of the Plan, as that term is defined under ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A), breached the duties they owed to the Plan, to Plaintiffs, and to the other participants of the Plan by, inter alia, (1) failing to objectively and adequately review the Plan’s investment portfolio with due care to ensure that each investment option was prudent, in terms of cost; and (2) maintaining certain funds in the Plan despite the availability of identical or similar investment options with lower costs and/or better performance histories. 7. To make matters worse, Defendants failed to utilize the lowest cost share class for many of the mutual funds within the Plan, and failed to consider collective trusts, commingled accounts, or separate accounts as alternatives to the mutual funds in the Plan, despite their lower 8. Defendants’ mismanagement of the Plan, to the detriment of participants and beneficiaries, constitutes a breach of the fiduciary duties of prudence and loyalty, in violation of 29 U.S.C. § 1104. Their actions were contrary to actions of a reasonable fiduciary and cost the Plan and its participants millions of dollars. 9. Based on this conduct, Plaintiffs assert claims against Defendants for breach of the fiduciary duties of loyalty and prudence (Count One) and failure to monitor fiduciaries (Count 10. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1331 because it is a civil action arising under the laws of the United States, and pursuant to 29 U.S.C. § 1332(e)(1), which provides for federal jurisdiction of actions brought under Title I of ERISA, 29 U.S.C. § 1001, et seq. 11. This Court has personal jurisdiction over Defendants because they transact business in this District, reside in this District, and/or have significant contacts with this District, and because ERISA provides for nationwide service of process. 12. Venue is proper in this District pursuant to ERISA § 502(e)(2), 29 U.S.C. § 1132(e)(2), because some or all of the violations of ERISA occurred in this District and Defendants reside and may be found in this District. Venue is also proper in this District pursuant to 28 U.S.C. § 1391 because Defendants do business in this District and a substantial part of the events or omissions giving rise to the claims asserted herein occurred within this District. III. PARTIES Plaintiffs 13. Plaintiff, Karl Kendall (“Kendall”), resides in Huber Heights, Ohio. During his employment, Plaintiff Kendall participated in the Plan investing in the options offered by the Plan and which are the subject of this lawsuit. 14. Plaintiff, Vincenzo Pernice (“Pernice”), resides in Tabernacle, New Jersey. During his employment, Plaintiff Pernice participated in the Plan investing in the options offered by the Plan and which are the subject of this lawsuit. employment, Plaintiff Rainey participated in the Plan investing in the options offered by the Plan and which are the subject of this lawsuit. 16. Each Plaintiff has standing to bring this action on behalf of the Plan because each of them participated in the Plan and were injured by Defendants’ unlawful conduct. Plaintiffs are entitled to receive benefits in the amount of the difference between the value of their accounts currently, or as of the time their accounts were distributed, and what their accounts are or would have been worth, but for Defendants’ breaches of fiduciary duty as described herein. 17. Plaintiffs did not have knowledge of all material facts (including, among other things, the investment alternatives that are comparable to the investments offered within the Plan, comparisons of the costs and investment performance of Plan investments versus available alternatives within similarly-sized plans, total cost comparisons to similarly-sized plans, information regarding other available share classes, and information regarding the availability and pricing of separate accounts and collective trusts) necessary to understand that Defendants breached their fiduciary duties and engaged in other unlawful conduct in violation of ERISA until shortly before this suit was filed. Further, Plaintiffs did not have and do not have actual knowledge of the specifics of Defendants’ decision-making process with respect to the Plan, including Defendants’ processes (and execution of such) for selecting, monitoring, and removing Plan investments, because this information is solely within the possession of Defendants prior to discovery. Having never managed a large 401(k) plan such as the Plan, Plaintiffs lacked actual knowledge of reasonable fee levels and prudent alternatives available to such plans. Plaintiffs did not and could not review the Committee meeting minutes (to the extent they exist) or other Complaint, Plaintiffs have drawn reasonable inferences regarding these processes based upon (among other things) the facts set forth herein. Defendants Company Defendant 18. PPD is the Plan sponsor with a principal place of business being 929 North Front Street, Wilmington, NC 28401. See, 2018 Form 5500 at 1. 19. PPD describes itself as “a leading global contract research organization providing comprehensive, integrated drug development, laboratory and lifecycle management services. Our clients and partners include pharmaceutical, biotechnology, medical device, academic and government organizations. With offices in 46 countries and approximately 23,000 professionals worldwide”3 20. The Company is a fiduciary for several reasons. First, it is identified as a “Fiduciary” under the Plan’s investment policy. See Investment Policy Statement (“IPS”) at 4. Second, it had responsibility for management of Plan assets. The IPS states “the Company, as Fiduciary, will select the array of investment options to be made available for participant investment, and then provide on-going oversight of those investment options.” IPS at 4. 21. Third, the Company appointed other Plan fiduciaries and accordingly had a concomitant fiduciary duty to monitor and supervise those appointees. 2 Several weeks prior to filing the instant lawsuit, Plaintiffs requested pursuant to ERISA §104(b)(4) that the Plan administrator produce several Plan governing documents, including any meeting minutes of the relevant Plan investment committee(s). Their request for meeting minutes was denied for, among other reasons, that the request went beyond the scope of Section 104(b)(4). See Braden v. Wal-mart Stores, Inc., 588 F.3d 585, 598 (8th Cir. 2009) (“If Plaintiffs cannot state a claim without pleading facts which tend systematically to be in the sole possession of defendants, the remedial scheme of [ERISA] will fail, and the crucial rights secured by ERISA will suffer.”) 3 https://www.ppdi.com/careers/about#Global-Reach responsibilities of Plan Administrator. … [t]he Benefits Administrative Committee.” See, Summary Plan Description at page 3. In addition, PPD established a trust to hold all amounts contributed to the Plan by the Plan Trustee in a qualified Trust. “The trust established on behalf of the Plan will be the funding medium used for the accumulation of assets from which Plan benefits will be distributed.” Id. As of January 1, 2020, the Trustee was a nondiscretionary Trustee and was only able to “invest Plan assets as directed by the Plan Administrator, the Employer, an Investment Manager or other Named Fiduciary or, to the extent authorized under the Plan, a Plan Participant.” See, Plan Adoption Agreement at page 54. It is believed and, therefore, averred that Trustees duties may have changed from time to time during the Class Period. 23. Lastly, the Company acted through its officers, including the Board and Committee, and their members, to perform Plan-related fiduciary functions in the course and scope of their employment. 24. For the foregoing reasons, the Company is a fiduciary of the Plan, within the meaning of ERISA Section 3(21)(A), 29 U.S.C. § 1002(21)(A). Board Defendants 25. The Company acted through the Board (defined above) to perform some of the Company’s Plan-related fiduciary functions, including monitoring the activities of the Committee. “The Benefits Administrative Committee determines the appropriateness of the Plan’s investment offerings, monitors investment performance and reports to the Company’s Board of Directors.” See, 2018 Form 5500 filing at page 5 of the attached audited financial statement. “The Benefits Administration Committee …was established by the Compensation Committee of the Board of Directors … of Pharmaceutical Product Development, LLC…. The purpose of the [Benefits Administration Committee] is to assist the Committee in the discharge of its responsibilities programs. See, the Trustee Declaration which is an Exhibit to the Investment Policy Statement. 26. Accordingly, each member of the Board during the putative Class Period (referred to herein as John Does 1-10) is/was a fiduciary of the Plan, within the meaning of ERISA Section 3(21)(A), 29 U.S.C. § 1002(21)(A) because each exercised discretionary authority to appoint and/or monitor the Committee, which had control over Plan management and/or authority or control over management or disposition of Plan assets. 27. The unnamed members of the Board of Directors for PPD during the Class Period are collectively referred to herein as the “Board Defendants.” Committee Defendants 28. The Committee had discretionary authority to select, and accordingly, the fiduciary duty to prudently select and monitor Plan investments. “The Benefits Administrative Committee determines the appropriateness of the Plan’s investment offerings, monitors investment performance and reports to the Company’s Board of Directors.” See, 2018 Form 5500 filing at page 5 of the attached audited financial statement. 29. “The Benefits Administration Committee …was established by the Compensation Committee of the Board of Directors … of Pharmaceutical Product Development, LLC…. The purpose of the [Benefits Administration Committee] is to assist the Committee in the discharge of its responsibilities relating to the oversight and administration of the Company’s employee benefits plans and programs. See, the Trustee Declaration which is an Exhibit to the Investment Policy Statement. 30. The Committee and each of its members were fiduciaries of the Plan during the Class Period, within the meaning of ERISA Section 3(21)(A), 29 U.S.C. § 1002(21)(A) because each exercised discretionary authority over management or disposition of Plan assets. (referred to herein as John Does 11-20), are collectively referred to herein as the “Committee Defendants.” Additional John Doe Defendants 32. To the extent that there are additional officers, employees and/are contractors of PPD who are/were fiduciaries of the Plan during the Class Period, or were hired as an investment manager for the Plan during the Class Period, the identities of whom are currently unknown to Plaintiffs, Plaintiffs reserve the right, once their identities are ascertained, to seek leave to join them to the instant action. Thus, without limitation, unknown “John Doe” Defendants 21-30 include, but are not limited to, PPD officers, employees and/or contractors who are/were fiduciaries of the Plan within the meaning of ERISA Section 3(21)(A), 29 U.S.C. § 1002(21)(A) during the Class Period. IV. THE PLAN 33. PPD “has adopted the Pharmaceutical Product Development, LLC Retirement Savings Plan to help its employees save for retirement.” PPD Corporation 401(k) Savings Plan Summary Plan Description, Effective January 1, 2020 (“SPD”) at 1. 34. The Plan is a “defined contribution” or “individual account” plan within the meaning of ERISA § 3(34), 29 U.S.C. § 1002(34), in that the Plan provides for individual accounts for each participant and for benefits based solely upon the amount contributed to those accounts, and any income, expense, gains and losses, and any forfeitures of accounts of the participants which may be allocated to such participant’s account. Consequently, retirement benefits provided by the Plan are based solely on the amounts allocated to each individual’s account. Eligibility the first Entry Date following [their] date of employment.” SPD at 8. Entry Date is defined as “the first day of the month coinciding with or next following the date” you become a regular full-time employee. SPD at 8. Contributions 36. There are several types of contributions that can be added to a participant’s account, including: an employee salary deferral contribution, an employee Roth 401(k) contribution, an employee after-tax contribution, catch-up contributions for employees aged 50 and over, rollover contributions, and employer matching contributions based on employee pre-tax, Roth 401(k), and employee after-tax contributions. SPD at 4. 37. With regard to employee contributions, “[p]articipants may contribute up to 50% of pretax annual compensation, as defined in the Plan.” Notes to Financial Statements, December 31, 2018 (“Financial Statement”) at 5. 38. PPD “contributes an amount equal to 50% of the participants contribution not to exceed 6% of compensation.” Id. 39. Like other companies that sponsor 401(k) plans for their employees, PPD enjoys both direct and indirect benefits by providing matching contributions to Plan participants. Employers are generally permitted to take tax deductions for their contributions to 401(k) plans at the time when the contributions are made. See generally, https:/www.irs.gov/retirement- plans/plan-sponsor/401k-plan-overview. 40. PPD also benefits in other ways from the Plan’s matching program. It is well- known that “[o]ffering retirement plans can help in employers’ efforts to attract new employees and reduce turnover.” See https://www.paychex.com/articles/employee-benefits/employer- matching-401k-benefits. from offering a match. Vesting 42. A participant is 100 percent vested at all times in their contributions plus actual earnings thereon. Financial Statement at 5. The Plan’s Investments 43. Several funds were available to Plan participants for investment each year during the putative Class Period. Specifically, “a participant may direct all contributions to selected investments as made available and determined by the Plan Administrator in 1% increments.” Id. As noted above, the Committee, selects the investment funds that the Plan participants invest in. See, 2018 Form 5500 filing at page 5 of the attached audited financial statement. 44. The Plan specifically permitted investments in collective trusts. In particular, it stated “Plan assets may also be invested in a common/collective trust fund, or in a group trust fund that satisfies the requirements of IRS Revenue Ruling 81-100.” Basic Plan Document at 110. 45. The Plan’s assets under management for all funds as of December 31, 2018 was over $700,000,000. Id. at 4. Payment of Plan Expenses 46. As a first resort, Plan assets were or are used to pay for all expenses incurred by the Plan, including recordkeeping fees. PPD established a trust to hold all amounts contributed to the Plan by the Plan Trustee in a qualified Trust. “The trust established on behalf of the Plan will be the funding medium used for the accumulation of assets from which Plan benefits will be distributed.” See, Summary Plan Description at page 3. The Trustee, Reliance Trust Company, is empowered to pay all Plan expenses. “All reasonable expenses related to plan administration will be paid from Plan assets…. For this purpose, Plan expenses include, but are not limited to, all administration of the Trust….” Id. V. CLASS ACTION ALLEGATIONS 47. Plaintiffs bring this action as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure on behalf of themselves and the following proposed class (“Class”):4 All persons, except Defendants and their immediate family members, who were participants in or beneficiaries of the Plan, at any time between April 15, 2014 through the date of judgment (the “Class Period”). 48. The members of the Class are so numerous that joinder of all members is impractical. The 2018 Form 5500 filed with the Dept. of Labor lists 9,103 Plan “participants with account balances as of the end of the plan year.” See, the PPD 2018 Form 5500 at p. 2. 49. Plaintiffs’ claims are typical of the claims of the members of the Class. Like other Class members, Plaintiffs participated in the Plan and have suffered injuries as a result of Defendants’ mismanagement of the Plan. Defendants treated Plaintiffs consistently with other Class members, and managed the Plan as a single entity. Plaintiffs’ claims and the claims of all Class members arise out of the same conduct, policies, and practices of Defendants as alleged herein, and all members of the Class have been similarly affected by Defendants’ wrongful conduct. 50. There are questions of law and fact common to the Class, and these questions predominate over questions affecting only individual Class members. Common legal and factual questions include, but are not limited to: A. Whether Defendants are fiduciaries of the Plan; 4 Plaintiffs reserve the right to propose other or additional classes or subclasses in their motion for class certification or subsequent pleadings in this action. by engaging in the conduct described herein; C. Whether the Company and Board Defendants failed to adequately monitor the Committee and other fiduciaries to ensure the Plan was being managed in compliance with ERISA; D. The proper form of equitable and injunctive relief; and E. The proper measure of monetary relief. 51. Plaintiffs will fairly and adequately represent the Class, and have retained counsel experienced and competent in the prosecution of ERISA class action litigation. Plaintiffs have no interests antagonistic to those of other members of the Class. Plaintiffs are committed to the vigorous prosecution of this action, and anticipate no difficulty in the management of this litigation as a class action. 52. This action may be properly certified under Rule 23(b)(1). Class action status in this action is warranted under Rule 23(b)(1)(A) because prosecution of separate actions by the members of the Class would create a risk of establishing incompatible standards of conduct for Defendants. Class action status is also warranted under Rule 23(b)(1)(B) because prosecution of separate actions by the members of the Class would create a risk of adjudications with respect to individual members of the Class that, as a practical matter, would be dispositive of the interests of other members not parties to this action, or that would substantially impair or impede their ability to protect their interests. 53. In the alternative, certification under Rule 23(b)(2) is warranted because the Defendants have acted or refused to act on grounds generally applicable to the Class, thereby making appropriate final injunctive, declaratory, or other appropriate equitable relief with respect to the Class as a whole. AND OVERVIEW OF FIDUCIARY DUTIES 54. ERISA requires every plan to provide for one or more named fiduciaries who will have “authority to control and manage the operation and administration of the plan.” ERISA § 402(a)(1), 29 U.S.C. § 1102(a)(1). 55. ERISA treats as fiduciaries not only persons explicitly named as fiduciaries under § 402(a)(1), 29 U.S.C. § 1102(a)(1), but also any other persons who in fact perform fiduciary functions. Thus, a person is a fiduciary to the extent “(i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercise any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.” ERISA § 3(21)(A)(i), 29 U.S.C. § 1002(21)(A)(i). 56. As described in the Parties section above, Defendants were fiduciaries of the Plan because: (a) they were so named; and/or (b) they exercised authority or control respecting management or disposition of the Plan’s assets; and/or (c) they exercised discretionary authority or discretionary control respecting management of the Plan; and/or (d) they had discretionary authority or discretionary responsibility in the administration of the Plan. 1104(a)(1), to manage and administer the Plan, and the Plan’s investments, solely in the interest of the Plan’s participants and beneficiaries and with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. These twin duties are referred to as the duties of loyalty and prudence, and are “the highest known to the law.” Tatum v. RJR Pension Investment Committee et al., 761 F.3d 346, 356 (4th Cir. 2014). 58. The duty of loyalty requires fiduciaries to act with an “eye single” to the interests of plan participants. Pegram v. Herdrich, 530 U.S. 211, 235 (2000). “Perhaps the most fundamental duty of a [fiduciary] is that he [or she] must display . . . complete loyalty to the interests of the beneficiary and must exclude all selfish interest and all consideration of the interests of third persons.” Pegram, 530 U.S. at 224 (quotation marks and citations omitted). Thus, “in deciding whether and to what extent to invest in a particular investment, a fiduciary must ordinarily consider only factors relating to the interests of plan participants and beneficiaries . . . . A decision to make an investment may not be influenced by [other] factors unless the investment, when judged solely on the basis of its economic value to the plan, would be equal or superior to alternative investments available to the plan.” Dep’t of Labor ERISA Adv. Op. 88-16A, 1988 WL 222716, at *3 (Dec. 19, 1988) (emphasis added). 59. In effect, the duty of loyalty includes a mandate that the fiduciary display complete loyalty to the beneficiaries, and set aside the consideration of third persons. 60. ERISA also “imposes a ‘prudent person’ standard by which to measure fiduciaries’ investment decisions and disposition of assets.” Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459, 2467 (2014) (quotation omitted). In addition to a duty to select prudent investments, under ERISA a fiduciary “has a continuing duty to monitor [plan] investments and remove imprudent investments.” Tibble v. Edison Int’l, 135 S. Ct. 1823, 1828 (2015). “[A] fiduciary cannot free himself from his duty to act as a prudent man simply by arguing that other funds . . . could theoretically, in combination, create a prudent portfolio.” In re Amer. Int’l Grp., Inc. ERISA Litig. II, No. 08-cv-5722, 2011 WL 1226459, at *4 (S.D.N.Y. Mar. 31, 2011) (quoting DiFelice v. U.S. Airways, Inc., 497 F.3d 410, 418 n.3, 423-24 (4th Cir. 2007)). 61. In addition, ERISA § 405(a), 29 U.S.C. § 1105(a) (entitled “Liability for breach by co-fiduciary”) further provides that: [I]n addition to any liability which he may have under any other provision of this part, a fiduciary with respect to a plan shall be liable for a breach of fiduciary responsibility of another fiduciary with respect to the same plan in the following circumstances: (A) if he participates knowingly in, or knowingly undertakes to conceal, an act or omission of such other fiduciary, knowing such an act or omission is a breach; (B) if, by his failure to comply with section 404(a)(1), 29 U.S.C. §1104(a)(1), in the administration of his specific responsibilities which give rise to his status as a fiduciary, he has enabled such other fiduciary to commit a breach; or (C) if he has knowledge of a breach by such other fiduciary, unless he makes reasonable efforts under the circumstances to remedy the breach. 62. During the Class Period, Defendants did not act in the best interests of the Plan participants. Investment fund options chosen for a plan should not favor the fund provider over the plan’s participants. Yet, here, to the detriment of the Plan and their participants and beneficiaries, the Plan’s fiduciaries included and retained in the Plan many mutual fund investments that were more expensive than necessary and otherwise were not justified on the basis of their economic value to the Plan. 63. Based on reasonable inferences from the facts set forth in this Complaint, during the Class Period Defendants failed to have a proper system of review in place to ensure that participants in the Plan were being charged appropriate and reasonable fees for the Plan’s for (1) lower expense ratios for certain investment options maintained and/or added to the Plan during the Class Period and (2) lower recordkeeping and administrative fees. 64. As discussed below, Defendants breached fiduciary duties to the Plan and its participants and beneficiaries, and are liable for their breaches and the breaches of their co- fiduciaries under 29 U.S.C. § 1104(a)(1) and 1105(a). VII. SPECIFIC ALLEGATIONS A. Improper Management of an Employee Retirement Plan Can Cost the Plan’s Participants Millions in Savings 65. Under 29 U.S.C. § 1104(a)(1), a plan fiduciary must provide diversified investment options for a defined-contribution plan while also giving substantial consideration to the cost of those options. “Wasting beneficiaries’ money is imprudent. In devising and implementing strategies for the investment and management of trust assets, trustees are obligated to minimize costs.” Uniform Prudent Investor Act (the “UPIA”) § 7. 66. “The Restatement … instructs that ‘cost-conscious management is fundamental to prudence in the investment function,’ and should be applied ‘not only in making investments but also in monitoring and reviewing investments.’” Tibble v. Edison Int’l, 843 F.3d 1187, 1197-98 (9th Cir. Dec. 30, 2016) (en banc) (quoting Restatement (Third) of Trust § 90, cmt. b). See also U.S. Dep’t of Labor, A Look at 401(k) Plan Fees, (Aug. 2013), at 2, available at https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource- center/publications/a-look-at-401k-plan-fees.pdf (last visited February 21, 2020) (“You should be aware that your employer also has a specific obligation to consider the fees and expenses paid by your plan.”). As the Ninth Circuit described, additional fees of only 0.18% or 0.4% can have a large effect on a participant’s investment results over time because “[b]eneficiaries subject to is, the money that the portion of their investment spent on unnecessary fees would have earned over time.” Tibble, 843 F.3d at 1198 (“It is beyond dispute that the higher the fees charged to a beneficiary, the more the beneficiary’s investment shrinks.”). 67. Most participants in 401(k) plans expect that their 401(k) accounts will be their principal source of income after retirement. Although at all times 401(k) accounts are fully funded, that does not prevent plan participants from losing money on poor investment choices of plan sponsors and fiduciaries, whether due to poor performance, high fees, or both. 68. In fact, the Department of Labor has explicitly stated that employers are held to a “high standard of care and diligence” and must both “establish a prudent process for selecting investment options and service providers” and “monitor investment options and service providers once selected to see that they continue to be appropriate choices,” among other duties. See “A Look at 401(k) Plan Fees,” supra. 69. The duty to evaluate and monitor fees and investment costs includes fees paid directly by plan participants to investment providers, usually in the form of an expense ratio or a percentage of assets under management within a particular investment. See Investment Company Institute (“ICI”), The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, (July 2016), at 4. “Any costs not paid by the employer, which may include administrative, investment, legal, and compliance costs, effectively are paid by plan participants.” Id. at 5. 70. The fiduciary task of evaluating investments and investigating comparable alternatives in the marketplace is made much simpler by the advent of independent research from companies like Morningstar, which sorts mutual funds of all kinds into categories “based on the underlying securities in each portfolio…We place funds in a given category based on their http://www.morningstar.com/InvGlossary/morningstar_category.aspx.5 71. On average, there are lower expense ratios for 401(k) participants than those for other investors. See The Economics of Providing 401(k) Plans, at 11. ERISA-mandated monitoring of investments leads prudent and impartial plan sponsors to continually evaluate performance and fees, resulting in great competition among mutual funds in the marketplace. Furthermore, the large average account balances of 401(k) plans, especially the largest ones as measured by assets managed, lead to economies of scale and special pricing within mutual funds. See id at 10. 72. This has led to falling mutual fund expense ratios for 401(k) plan participants since 2000. In fact, these expense ratios fell 31 percent from 2000 to 2015 for equity funds, 25 percent for hybrid funds, and 38 percent for bond funds. See id. at 1. 73. The most recent comprehensive average mutual fund expense data for plans of different sizes is from 2012, and industry analysts have recognized a marked trend toward lower fees in 401(k)s over the past four years. See Anne Tergesen, 401(k) Fees, Already Low, Are Heading Lower, WALL STREET JOURNAL (May 15, 2016), available at http://www.wsj.com/articles/401-k-fees-already-low-are-heading-lower-1463304601 (noting precipitous drop in overall 401(k) fees from 2012 to 2014). 5 As described by Morningstar, these categories “were introduced in 1996 to help investors make meaningful comparisons between mutual funds. Morningstar found that the investment objective listed in a fund’s prospectus often did not adequately explain how the fund actually invested…[we] solved this problem by breaking portfolios into peer groups based on their holdings. The categories help investors identify the top performing funds, assess potential risk, and build well-diversified portfolios.” See The Morningstar Category Classifications (June 30, 2016), at 7. These categories are assigned to mutual funds, variable annuities, and separate accounts. Id. average pay far lower fees than regular industry investors, even as expense ratios for all investors continued to drop for the past several years.6 Id. at 12. 75. Prudent and impartial plan sponsors thus should be monitoring both the performance and cost of the investments selected for their 401(k) plans, as well as investigating alternatives in the marketplace to ensure that well-performing, low cost investment options are being made available to plan participants. B. Defendants Breached Their Fiduciary Duties in Failing to Investigate and Select Lower Cost Alternative Funds 6 This chart does not account for the strategy of a mutual fund, which may be to mirror an index, a so-called passive management strategy, or may attempt to “beat the market” with more aggressive investment strategies via active management. Active management funds tend to have significantly higher expense ratios compared to passively managed funds because they require a higher degree of research and monitoring than funds which merely attempt to replicate a particular segment of the market. plan’s investment options in Tibble, 135 S. Ct. at 1823. In Tibble, the Court held that “an ERISA fiduciary’s duty is derived from the common law of trusts,” and that “[u]nder trust law, a trustee has a continuing duty to monitor trust investments and remove imprudent ones.” Id. at 1828. In so holding, the Supreme Court referenced with approval the Uniform Prudent Investor Act, treatises, and seminal decisions confirming the duty. 77. Under trust law, one of the responsibilities of the Plan’s fiduciaries is to “avoid unwarranted costs” by being aware of the “availability and continuing emergence” of alternative investments that may have “significantly different costs.” Restatement (Third) of Trusts ch. 17, intro. note (2007); see also Restatement (Third) of Trusts § 90 cmt. B (2007) (“Cost-conscious management is fundamental to prudence in the investment function.”). Adherence to these duties requires regular performance of an “adequate investigation” of existing investments in a plan to determine whether any of the plan’s investments are “improvident,” or if there is a “superior alternative investment” to any of the plan’s holdings. Pension Ben. Gaur. Corp. ex rel. St. Vincent Catholic Med. Ctrs. Ret. Plan v. Morgan Stanley Inv. Mgmt., 712 F.3d 705, 718-19 (2d Cir. 2013). 78. When large plans, particularly those with nearly a billion dollars in assets like the Plan here, have options which approach the retail cost of shares for individual investors or are simply more expensive than the average or median institutional shares for that type of investment, a careful review of the plan and each option is needed for the fiduciaries to fulfill their obligations to the plan participants. 79. The Plan has retained several actively-managed funds as Plan investment options despite the fact that these funds charged grossly excessive fees compared with comparable or superior alternatives, and despite ample evidence available to a reasonable fiduciary that these funds had become imprudent due to their high costs. options that had similar or identical characteristics to other lower-priced investment options. 81. The funds in the Plan have stayed relatively unchanged since 2014. Taking 2018 as an example year, the majority of funds in the Plan (at least 13 out of 21 or more than 60%) were much more expensive than comparable funds found in similarly sized plans (plans having between $500m and $1b in assets). The expense ratios for funds in the Plan in some cases were up to 127% (in the case of the PIMCO Real Return Inst’l – Domestic Bond Fund) above the median expense ratios in the same category: 7 Fund ER8 Category ICI Median Fee9 0.43% PIMCO Real Return Instl 0.98% Domestic Bond Fidelity Freedom 0.65% 2035 0.73% Target Date Fund Fidelity Freedom 0.65% 2040 0.75% Target Date Fund Fidelity Freedom 0.65% 2045 0.75% Target Date Fund Fidelity Freedom 0.65% 2045 0.75% Target Date Fund 7 See BrightScope/ICI Defined Contribution Plan Profile: A Close Look at 401(k) Plans, 2015 at 69 (March 2018) (hereafter, “ICI Study”) available at https://www.ici.org/pdf/ppr_18_dcplan_profile_401k.pdf 8 The listed expense figures are taken from the most recent available summary prospectuses published in 2018. 9 This median fee is taken from plans with $500m to $1b in assets. Fund ER8 Category ICI Median Fee9 Fidelity Freedom 0.65% 2050 0.75% Target Date Fund Fidelity Freedom 0.65% 2050 0.75% Target Date Fund Fidelity Freedom Target Date Fund 0.65% 2055 0.75% Hartford International 0.76% Int’l Equity 0.53% Opportunities Y JPMorgan Core 0.43% Bond R6 0.35% Domestic Bond 0.43% PIMCO Real Return Instl 0.98% Domestic Bond MFS Total Return R4 0.49% Non-target date balanced 0.34% JPMorgan Small Cap Equity R5 0.80% Domestic Equity 0.43% MassMutual Select Mid Cap 0.71% Domestic Equity 0.43% Growth I Victory 0.88% Domestic Equity 0.43% Sycamore Small Company Opp I 82. The above comparisons understate the excessiveness of fees in the Plan throughout the Class Period. That is because the ICI study was conducted in 2015 when expense ratios would have been higher than today given the downward trend of expense ratios the last few years. Accordingly, the median expense ratios in 2018 utilized by similar plans would be lower than indicated above, demonstrating a greater disparity between the 2018 expense ratios utilized in the 83. Further, median-based comparisons also understate the excessiveness of the investment management fees of the Plan funds because many prudent alternative funds were available that offered lower expenses than the median. Failure to Utilize Lower Fee Share Classes 84. Many mutual funds offer multiple classes of shares in a single mutual fund that are targeted at different investors. Generally, more expensive share classes are targeted at smaller investors with less bargaining power, while lower cost shares are targeted at institutional investors with more assets, generally $1 million or more, and therefore greater bargaining power. There is no difference between share classes other than cost—the funds hold identical investments and have the same manager. 85. Large defined contribution plans such as the Plan have sufficient assets to qualify for the lowest cost share class available. Even when a plan does not yet meet the investment minimum to qualify for the cheapest available share class, it is well-known among institutional investors that mutual fund companies will typically waive those investment minimums for a large plan adding the fund in question to the plan as a designated investment alternative. Simply put, a fiduciary to a large defined contribution plan such as the Plan can use its asset size and negotiating power to invest in the cheapest share class available. For this reason, prudent retirement plan fiduciaries will search for and select the lowest-priced share class available. 86. Indeed, recently a court observed that “[b]ecause the institutional share classes are otherwise identical to the Investor share classes, but with lower fees, a prudent fiduciary would know immediately that a switch is necessary. Thus, the ‘manner that is reasonable and appropriate to the particular investment action, and strategies involved…in this case would mandate a prudent fiduciary – who indisputably has knowledge of institutional share classes and that such share et al. v. Edison Int. et al., No. 07-5359, 2017 WL 3523737, at * 13 (C.D. Cal. Aug. 16, 2017). 87. As demonstrated by the chart below, in several instances during the Class Period, Defendants failed to prudently monitor the Plan to determine whether the Plan was invested in the lowest-cost share class available for the Plan’s mutual funds. The chart below uses 2018 expense ratios to demonstrate how much more expensive the funds were than their identical counterparts: Net Identical Current Fund Expense Identical Lower Share Option Fund Assets Ratio Class Lower Cost Fund ER Excess Expense FFFFX Fidelity Freedom FSNVX 2040 $45,167,311 0.75 % Fidelity Freedom 2040 K 0.65 % 15.38% FFFEX Fidelity Freedom FSNQX 2030 $38,386,840 0.69 % Fidelity Freedom 2030 K 0.60 % 15.00% FFFHX Fidelity Freedom FNSBX 2050 $22,403,229 0.75 % Fidelity Freedom 2050 K 0.65 % 15.38% FFFGX Fidelity Freedom FSNZX 2045 $15,477,046 0.75 % Fidelity Freedom 2045 K 0.65 % 15.38% FFFDX Fidelity Freedom FSNOX 2020 $15,394,192 0.60 % Fidelity Freedom 2020 K 0.53 % 13.21% FFTHX Fidelity Freedom FSNUX 2035 $14,969,537 0.73 % Fidelity Freedom 2035 K 0.63 % 15.87% FDEEX Fidelity Freedom FNSDX 2055 $12,236,349 0.75 % Fidelity Freedom 2055 K 0.65 % 15.38% FFFCX Fidelity Freedom FSNKX 2010 $5,559,655 0.52 % Fidelity Freedom 2010 K 0.46 % 13.04% FFTWX Fidelity Freedom FSNPX 2025 $4,404,269 0.65 % Fidelity Freedom 2025 K 0.56 % 16.07% FFVFX Fidelity Freedom FSNLX 2015 $715,028 0.56 % Fidelity Freedom 2015 K 0.49 % 14.29% MSFJX MSFKX MFS Total Return R4 $66,418,732 0.49 % MFS Total Return R6 0.40 % 22.50% HAOYX Hartford IHOVX International Hartford International Opportunities Y $36,507,752 0.76 % Opportunities R6 0.71 % 7.04% 88. The above is for illustrative purposes only. At all times during the Class Period, Defendants knew or should have known of the existence of cheaper share classes and therefore also should have immediately identified the prudence of transferring the Plan’s funds into these alternative investments. 89. Qualifying for lower share classes usually requires only a minimum of a million dollars for individual funds. However, it is common knowledge that investment minimums are often waived for large plans like the Plan. Sweda v. Univ. of Pennsylvania, 923 F.3d 320, 329 (3d Cir. 2019) (citing Tibble II, 729 F.3d at 1137 n.24). The assets under management for each fund ranged from $27m to $92m thus easily qualifying them for lower share classes. The following is a sampling of the assets under management as of the end of 2018: Fund in Plan 2018 Assets Under Management American Funds-Investment Co. of America $64.1m Fidelity Freedom 2040 Fund $45.1m Fund in Plan 2018 Assets Under Management Hartford International Opportunities Y $36.5m JPMorgan Small Cap Equity Fund $49.1m $27.0m JPMorgan Core Bond MFS Total Return Fund $66.4m MFS Mid Cap Value $38.4m MFS Growth Fund $62.6m Vanguard Institutional Index Fund $91.9m 90. Additionally, most of the lower share alternatives were available prior to the start of the Class Period. By August 2017, all the lower share alternatives were available. A prudent fiduciary conducting an impartial review of the Plan’s investments would have identified the funds into the lower share classes at the earliest opportunity. 91. There is no good-faith explanation for utilizing high-cost share classes when lower- cost share classes are available for the exact same investment. The Plan did not receive any additional services or benefits based on its use of more expensive share classes; the only consequence was higher costs for Plan participants. 92. It is not prudent to select higher cost versions of the same fund even if a fiduciary believes fees charged to plan participants by the “retail” class investment were the same as the fees charged by the “institutional” class investment, net of the revenue sharing paid by the funds to defray the Plan’s recordkeeping costs. Tibble, 2017 WL 3523737, at * 8. Fiduciaries should not “choose otherwise imprudent investments specifically to take advantage of revenue sharing.” Id. at * 11. This basic tenet of good fiduciary practice resonates loudly in this case especially where the recordkeeping and administrative costs were unreasonably high as discussed below. A fiduciary’s task is to negotiate and/or obtain reasonable fees for investment options and recordkeeping/administration fees independent of each other if necessary. 93. By failing to investigate the use of lower cost share classes Defendants caused the Plan to pay millions of dollars per year in unnecessary fees. Failure to Investigate Availability of Lower Cost Collective Trusts and Separate Accounts 94. Throughout the Class Period, the investment options available to participants were almost exclusively mutual funds, which are pooled investment products. 95. As noted supra, ERISA is derived from trust law. Tibble, 135 S. Ct. at 1828. Accordingly, the Supreme Court has stated that where ERISA is silent, courts should seek guidance from trust law. Varity Corp v. Howe, 516 U.S. 489, 496-97 (1996). One such area is the the nature of the breach involved, the availability of relevant data, and other facts and circumstances of the case.” Restatement (Third) of Trusts § 100 cmt. b(1). To determine whether a fiduciary has selected appropriate funds for the trust, appropriate comparators may include “return rates of one or more suitable common trust funds, or suitable index mutual funds or market indexes (with such adjustments as may be appropriate).” Id. (emphasis added). 96. Plan fiduciaries such as Defendants here must be continually mindful of investment options to ensure they do not unduly risk plan participants’ savings and do not charge unreasonable fees. Some of the best investment vehicles for these goals are collective trusts, which pool plan participants’ investments further and provide lower fee alternatives to even institutional and 401(k) plan specific shares of mutual funds. 97. Collective trusts are administered by banks or trust companies, which assemble a mix of assets such as stocks, bonds and cash. Regulated by the Office of the Comptroller of the Currency rather than the Securities and Exchange Commission, collective trusts have simple disclosure requirements, and cannot advertise nor issue formal prospectuses. As a result, their costs are much lower, with less or no administrative costs, and less or no marketing or advertising costs. See Powell, Robert, “Not Your Normal Nest Egg,” The Wall Street Journal, March 2013, available at http://www.wsj.com/articles/SB10001424127887324296604578177291881550144. 98. Due to their potential to reduce overall plan costs, collective trusts are becoming increasingly popular; Use of CITs in DC Plans Booming (discussing data showing that among both mid-size and large defined contribution plans, significantly more assets are held in collective trusts than in mutual funds).10 Indeed, as of 2012, among plans over $1 billion in size, more assets were 10 The criticisms that have been launched against collective trust vehicles in the past no longer apply. Collective trusts use a unitized structure and the units are valued daily; as a result, 401(k) Plans, at 21, 23 (Dec. 2014), available at https://www.ici.org/pdf/ppr_14_dcplan_profile_401k.pdf. 99. Separate accounts are another type of investment vehicle similar to collective trusts, which retain their ability to assemble a mix of stocks, bonds, real property and cash, and their lower administrative costs. 100. Separate accounts are widely available to large plans such as the Plan, and offer a number of advantages over mutual funds, including the ability to negotiate fees. Costs within separate accounts are typically much lower than even the lowest-cost share class of a particular mutual fund. By using separate accounts, “[t]otal investment management expenses can commonly be reduced to one-fourth of the expenses incurred through retail mutual funds.” U.S. Dep’t of Labor, Study of 401(k) Plan Fees and Expenses, at 17 (April 13, 1998), available at https://www.dol.gov/sites/dolgov/files/EBSA/researchers/analysis/retirement/study-of-401k- plan-fees-and-expenses.pdf 101. Unlike mutual funds, which by law must charge the same fee to all investors, separate account fee schedules are subject to negotiation. Industry data shows that actual fee participants invested in collective trusts are able to track the daily performance of their investments online. Use of CITs in DC Plans Booming; Paula Aven Gladych, CITs Gaining Ground in 401(k) Plans, EMPLOYEE BENEFIT NEWS (Apr. 14, 2016), available at http://www.benefitnews.com/news/cits-gaining-ground-in-401-k-plans (hereinafter CITs Gaining Ground). Many if not most mutual fund strategies are available in collective trust format, and the investments in the collective trusts are identical to those held by the mutual fund. Use of CITs in DC Plans Booming; CITs Gaining Ground. And because collective trusts contract directly with the plan, and provide regular reports regarding costs and investment holdings, the Plan has the same level of protection that the Investment Company Act provides to individual investors, thus eliminating the need for the protections of the Investment Company Act. Further, collective trusts are still subject to state and federal banking regulations that provide comparable protections. American Bankers Association, ABA Primer on Bank Collective Funds, June 2015, at 1, available at https://www.aba.com/advocacy/policy-analysis/primer-bank-collective-investment-funds. the plan or investor has a large amount of assets to invest, as did the Plan here. 102. Thus, a prudent fiduciary managing a large plan will give serious consideration to the use of separate accounts or collective trusts, and in the majority of cases, will opt to move out of mutual funds. As relevant in this case, Fidelity offered collective trust formats for its “Freedom” index and blend target-date funds during the Class Period. 103. Here in particular, there were no limitations on using collective trusts. The Plan Document stated “Plan assets may also be invested in a common/collective trust fund, or in a group trust fund that satisfies the requirements of IRS Revenue Ruling 81-100.” Basic Plan Document at 110. The Plan incurred excess fees due to Defendants’ failure to adequately investigate the availability of collective trusts and/or separate accounts in the same investment style of mutual funds in the Plan. Because of the Plan’s size, it could have reaped considerable cost savings by using collective trusts or separate accounts, but Defendants again failed to investigate this option. 104. In summary, Defendants could have used the Plan’s bargaining power to obtain high-quality, low-cost alternatives to mutual funds, in order to negotiate the best possible price for the Plan. By failing to investigate the use of alternative investments such as collective trusts or separate accounts, Defendants caused the Plan to pay millions of dollars per year in unnecessary Failure to Utilize Lower Cost Passively Managed and Actively Managed Funds 105. As noted supra, ERISA is derived from trust law. Tibble, 135 S. Ct. at 1828. Accordingly, appropriate investments for a fiduciary to consider are “suitable index mutual funds or market indexes (with such adjustments as may be appropriate).” Restatement (Third) of Trusts § 100 cmt. b(1). passively-managed index fund, over the short term, they rarely do so over a longer term. See Jonnelle Marte, Do Any Mutual Funds Ever Beat the Market? Hardly, The Washington Post, available at https://www.washingtonpost.com/news/get-there/wp/2015/03/17/do-any-mutual- funds-ever-beat-the-market-hardly/ (citing a study by S&P Dow Jones Indices which looked at 2,862 actively managed mutual funds, focused on the top quartile in performance and found most did not replicate performance from year to year); see also Index funds trounce actively managed funds: Study, available at http://www.cnbc.com/2015/06/26/index-funds-trounce-actively- managed-funds-study.html (“long-term data suggests that actively managed funds “lagged their passive counterparts across nearly all asset classes, especially over the 10-year period from 2004 to 2014.”) 107. Indeed, funds with high fees on average perform worse than less expensive funds, even on a pre-fee basis. Javier Gil-Bazo & Pablo Ruiz-Verdu, When Cheaper is Better: Fee Determination in the Market for Equity Mutual Funds, 67 J. Econ. Behav. & Org. 871, 873 (2009) (hereinafter “When Cheaper is Better”); see also Jill E. Fisch, Rethinking the Regulation of Securities Intermediaries, 158 U. Pa. L. Rev. 1961, 1967-75 (2010) (summarizing numerous studies showing that “the most consistent predictor of a fund’s return to investors is the fund’s expense ratio”). 108. During the Class Period, Defendants failed to consider materially similar but cheaper alternatives to the Plan’s investment options. The chart below demonstrates that the expense ratios of the Plan’s investment options were more expensive by multiples of comparable passively-managed and actively-managed alternative funds in the same investment style. A reasonable investigation would have revealed the existence of these lower-cost alternatives. The the Plan’s funds were than their alternative fund counterparts. Fund ER Category Alternative Fund Index / Alternative Managed 2018 ER % Fee Excess American Funds Vanguard Intl Growth Adm 0.32% 53% Europacific Growth 0.49 % Int'l Equity R6 -- -- -- -- -- 0.29 % Domestic 0.04% 1,350% Vanguard 500 Index American Funds Invmt Co of Amer Equity Admiral / R6 Vanguard Growth & Income 0.23% 26% Fidelity Freedom Fidelity Freedom® Index 0.12 % 333% 2010 2010 Investor/ 0.52 % Target Date Fund American Funds Trgt Date 0.33 % 57% Retirement 2010 R6 Fidelity Freedom Fidelity Freedom® Index 0.12 % 366% 2015 2015 Investor/ 0.56 % Target Date Fund American Funds Trgt Date 0.33 % 70% Retirement 2015 R6 Fidelity Freedom 0.12 % 400% 2020 Fidelity Freedom® Index 0.60 % Target Date Fund 2020 Investor/ American Funds Trgt Date 0.34 % 76% Retirement 2020 R6 Fidelity Freedom 0.12 % 441% 2025 Fidelity Freedom® Index 0.65 % Target Date Fund 2025 Investor/ American Funds Trgt Date 0.36 % 81% Retirement 2025 R6 Fidelity Freedom Fidelity Freedom® Index 0.12 % 475% 2030 2030 Investor/ 0.69 % Target Date Fund American Funds Trgt Date 0.38 % 81% Retirement 2030 R6 Managed 2018 ER % Fee Excess Fidelity Freedom Fidelity Freedom® Index 0.12 % 508% 2035 2035 Investor/ 0.73 % Target Date Fund American Funds Trgt Date 0.39 % 87% Retirement 2035 R6 Fidelity Freedom Fidelity Freedom® Index 0.12 % 525% 2040 2040 Investor/ 0.75 % Target Date Fund American Funds Trgt Date 0.40 % 87% Retirement 2040 R6 Fidelity Freedom 0.12 % 525% 2045 Fidelity Freedom® Index 0.75 % Target Date Fund 2045 Investor/ American Funds Trgt Date 0.40 % 88% Retirement 2045 R6 Fidelity Freedom 0.12 % 525% 2050 Fidelity Freedom® Index 0.75 % Target Date Fund 2050 Investor/ American Funds Trgt Date 0.41 % 82% Retirement 2050 R6 Fidelity Freedom Fidelity Freedom® Index 0.12 % 525% 2055 2055 Investor/ 0.75 % Target Date Fund American Funds Trgt Date 0.42 % 79% Retirement 2055 R6 Hartford Fidelity International Index/ 0.04% 1,800% International 0.76 % Int'l Equity Opportunities Y Elfun International Equity 0.36% 111% JPMorgan Core Bond 0.35 % Domestic Vanguard Interm-term Bond 0.07% 400% R6 Bond Index/ Johnson Institutional Core 0.25 % 40% Bond JPMorgan Small Cap 0.80 % Domestic -- -- -- Equity R5 Equity Vanguard Explorer 0.46% 73% Managed 2018 ER % Fee Excess 0.71 % Domestic Vanguard Mid-Cap Growth 0.07% 914% MassMutual Select Mid Cap Growth I Equity Index Admiral/ Fidelity Growth Strategies K 0.46% 54% MFS Growth R6 0.58 % Domestic Vanguard Russell 1000 0.07% 728% Equity Growth Index I/ Fidelity Advisor Series 0.01% 7,000% Growth Opps MFS Mid Cap Value 0.69 % Domestic -- -- -- R6 Equity Fidelity Low-priced Stock 0.43% 60% State Farm Balanced/ 0.13% 276% MFS Total Return R4 0.49 % Non- target date balanced Vanguard Balanced Index I 0.06 % 716% PIMCO Real Return 0.98 % Domestic 0.05% 1,860% Instl Bond Fidelity® Inflation-Prot Bd Index/ Vanguard Inflation-protected 0.10% 880% Securities ADM 109. The above is for illustrative purposes only as the significant fee disparities detailed above existed for all years of the Class Period. The Plan expense ratios were multiples of what they should have been given the bargaining power available to the Plan fiduciaries. 110. Moreover, the Plan’s fiduciaries cannot justify selecting actively managed funds over passively managed ones. As noted above, while higher-cost mutual funds may outperform a less-expensive option such as a passively-managed index fund over the short term, they rarely do so over a longer term. With regard to this action in particular, there is objective evidence that selection of actively managed funds over passively managed ones with materially similar characteristics was unjustified. Comparing the five-year returns of some of the Plan’s actively demonstrates that accounting for fees paid, the actively managed funds lagged behind in performance. The chart below indicates the efficiency of the active funds or lack thereof (i.e., the return needed by the actively managed fund to match the returns of the passively managed fund): Return Deficiency Fund Name/ Comparator Expense Ratio11 Return (5 Year) MFS Total Return R4 (MSFJX)/ 0.48 2.96 Fails Efficiency Requires 2.01% more 0.06 4.53 return to pass Vanguard Balanced Index I (VBAIX) 0.27 4.51 Fails Efficiency American Funds-Investment Company of America R6 (RICGX)/ Requires 1.41% more return to pass Vanguard 500 Index Admiral (VFIAX) 0.04 5.9 Fidelity Freedom 2040 (FFFFX)/ 0.75 3.78 Fails Efficiency Requires 1.60% more 0.11 4.6 return to pass Fidelity Freedom Index 2040 Investor (FBIFX) 0.77 -0.39 Fails Efficiency Hartford International Opportunities Y (HAOYX)/ Requires 0.98% more return to pass Fidelity International Index (FSPSX) 0.035 -0.37 Fidelity Freedom 2030 (FFFEX)/ 0.69 4.18 Fails Efficiency Requires 1.41% more 0.12 4.87 return to pass Fidelity Freedom Index 2030 Investor (FXIFX) Fidelity Freedom 2050 (FFFHX)/ 0.75 3.78 Fails Efficiency Requires 1.59% more 0.12 4.60 return to pass Fidelity Freedom Index 2050 Investor (FIPFX) 111. The comparator funds above belong to the same peer group as the Plan fund. Comparing funds in the same peer group is an industry-standard that allows comparisons to be “apples to apples.” Here, the following data points were used to calculate the Plan fund’s 11 Expense ratios are as of January 2020. both the active and passive funds to calculate the incremental cost and incremental return and then to determine if the active fund is efficient, less than efficient, or fails efficiency. 112. Defendants’ failure to investigate lower cost alternative investments (both actively and passively managed funds) during the Class Period cost the Plan and its participants millions of dollars. C. Defendants Failed to Monitor or Control the Plan’s Recordkeeping Expenses 113. The Plan’s recordkeeper during the Class Period was Massachusetts Mutual Life Insurance Company (“Mass Mutual”). SPD at 21. The term “recordkeeping” is a catchall term for the suite of administrative services typically provided to a defined contribution plan by the plan’s “recordkeeper.” Beyond simple provision of account statements to participants, it is quite common for the recordkeeper to provide a broad range of services to a defined contribution plan as part of its package of services. These services can include claims processing, trustee services, participant education, managed account services, participant loan processing, QDRO12 processing, preparation of disclosures, self-directed brokerage accounts, investment consulting, and general consulting services. Nearly all recordkeepers in the marketplace offer this range of services, and defined contribution plans have the ability to customize the package of services they receive and have the services priced accordingly. Many of these services can be provided by recordkeepers at very little cost. In fact, several of these services, such as managed account services, self-directed brokerage, QDRO processing, and loan processing are often a profit center for recordkeepers. 12 Qualified Domestic Relations Order. capable of providing a high-level service. As a result of such competition, vendors vigorously compete for business by offering the best price. 115. On overage, administrative expenses – the largest of which, by far, is recordkeeping – make up 18% of total plan fees. Investment Company Institute & Deloitte Consulting LLP, Inside the Structure of Defined Contribution/401(k) Plan Fees, 2013, at 17 (Aug. 2014), available at https://www.ici.org/pdf/rpt_14_dc_401k_fee_study.pdf 116. The cost of providing recordkeeping services depends on the number of participants in a plan. Plans with large numbers of participants can take advantage of economies of scale by negotiating a lower per-participant recordkeeping fee. Because recordkeeping expenses are driven by the number of participants in a plan, the vast majority of plans are charged on a per-participant 117. Recordkeeping expenses can either be paid directly from plan assets, or indirectly by the plan’s investments in a practice known as revenue sharing (or a combination of both or by a plan sponsor). Revenue sharing payments are payments made by investments within the plan, typically mutual funds, to the plan’s recordkeeper or to the plan directly, to compensate for recordkeeping and trustee services that the mutual fund company otherwise would have to provide. 118. Although utilizing a revenue sharing approach is not per se imprudent, unchecked, it could be devastating for Plan participants. “At worst, revenue sharing is a way to hide fees. Nobody sees the money change hands, and very few understand what the total investment expense pays for. It’s a way to milk large sums of money out of large plans by charging a percentage- based fee that never goes down (when plans are ignored or taken advantage of). In some cases, employers and employees believe the plan is ‘free’ when it is in fact expensive.” Justin Pritchard, and-invisible-fees (last visited March 19, 2020). 119. Prudent fiduciaries implement three related processes to prudently manage and control a plan’s recordkeeping costs. See Tussey v. ABB, Inc., 746 F.3d 327, 336 (8th Cir. 2014) (“Tussey II”) (holding that fiduciaries of a 401(k) plan “breach[] their fiduciary duties” when they “fail[] to monitor and control recordkeeping fees” incurred by the plan); George v. Kraft Foods Glob., Inc., 641 F.3d 786, 800 (7th Cir. 2011) (explaining that defined contribution plan fiduciaries have a “duty to ensure that [the recordkeeper’s] fees [are] reasonable”). First, they must pay close attention to the recordkeeping fees being paid by the plan. A prudent fiduciary tracks the recordkeeper’s expenses by demanding documents that summarize and contextualize the recordkeeper’s compensation, such as fee transparencies, fee analyses, fee summaries, relationship pricing analyses, cost-competitiveness analyses, and multi-practice and standalone pricing reports. 120. Second, in order to make an informed evaluation as to whether a recordkeeper or other service provider is receiving no more than a reasonable fee for the services provided to a plan, a prudent fiduciary must identify all fees, including direct compensation and revenue sharing being paid to the plan’s recordkeeper. To the extent that a plan’s investments pay asset-based revenue sharing to the recordkeeper, prudent fiduciaries monitor the amount of the payments to ensure that the recordkeeper’s total compensation from all sources does not exceed reasonable levels, and require that any revenue sharing payments that exceed a reasonable level be returned to the plan and its participants. 121. Third, the plan’s fiduciaries must remain informed about overall trends in the marketplace regarding the fees being paid by other plans, as well as the recordkeeping rates that are available. This will generally include conducting a Request for Proposal (“RFP”) process at reasonable intervals, and immediately if the plan’s recordkeeping expenses have grown should happen at least every three to five years as a matter of course, and more frequently if the plans experience an increase in recordkeeping costs or fee benchmarking reveals the recordkeeper’s compensation to exceed levels found in other, similar plans. George, 641 F.3d 800; Kruger v. Novant Health, Inc., 131 F. Supp. 3d 470, 479 (M.D.N.C. 2015). 122. Defendants have wholly failed to prudently manage and control the Plan’s recordkeeping and administrative costs by failing to undertake any of the aforementioned steps because, among other things, there is no evidence that Defendants negotiated to lower recordkeeping costs. The total amount of recordkeeping fees paid throughout the Class Period on a per participant basis was astronomical. 123. According to data compiled in the 20th edition of the 401k Averages Book, for plans with 2,000 participants and $200 million in assets (a fraction the size of the Plan), the average recordkeeping/administration fee (through direct compensation), based on data obtained in 2019, was $5 per participant. See Pension Data Source, 401k Averages Book at 107 (20th ed. 2020) (data updated through September 30, 2019).13 Expressed as a range, $0 per participant is at the low end and $43 per participant is at the high end. Id. As noted above, some plans pay recordkeepers additional fees on top of direct compensation in the form of revenue sharing, and that was the case with the Plan. However, the indirect compensation received by Mass Mutual for recordkeeping services is impossible to pinpoint using publicly available information given that “revenue sharing’ is divvied among all the plan’s service providers which “could include but are not limited to 13 “Published since 1995, the 401k Averages Book is the oldest, most recognized source for non- biased, comparative 401(k) average cost information.” 401k Averages Book at 2. added).14 124. Nonetheless, the Plan’s recordkeeping costs were at all times well above the $5 average cost per participant of plans that were a fraction of its size in terms of assets under management. The Plan’s direct compensation recordkeeping costs (and overall recordkeeping costs) should have been much lower given its size. 125. To place this in context, recordkeeping costs drop as a plan increases in size. So for example, a plan with 200 participants and $20m in assets has an average recordkeeping and administration cost (through direct compensation) of $12 per participant with $190 at the high end. 401k Averages Book at 95. A plan with 1,000 participants and $100m in assets has an average recordkeeping and administration cost (through direct compensation) of $6 per participant. 401k Averages Book at 103. 126. A 1998 study conducted by the Department of Labor (“1998 DOL Study”) reflected that as the number of participants grow, a plan can negotiate lower recordkeeping fees:15 Number of Participants Avg. Cost Per Participant 200 $42 500 $37 1,000 $34 14 See Braden v. Wal-mart Stores, Inc., 588 F.3d 585, 598 (8th Cir. 2009) (“If Plaintiffs cannot state a claim without pleading facts which tend systematically to be in the sole possession of defendants, the remedial scheme of [ERISA] will fail, and the crucial rights secured by ERISA will suffer.”) 15 See https://www.dol.gov/sites/dolgov/files/EBSA/researchers/analysis/retirement/study-of- 401k-plan-fees-and-expenses.pdf. Given the general trend of decreasing recordkeeping fees, the average costs per participants from nearly 20 years ago cited in the DOL study would be much lower today as reflected in the latest edition of the 401k Averages Book. 127. Additionally, as plan asset size increases, so should the costs per participant decrease. See 1998 DOL Study at 4.2.2 (“Basic per-participant administrative charges typically reflect minimum charges and sliding scales that substantially reduce per capita costs as plan size increases.”) 128. Here, the Plan averaged around $20 per participant in direct fees paid to the recordkeeper between 2014 and 2018, well above the average of plans a fraction of its size. Moreover, if all the indirect revenue sharing reported on the Plan’s form 5500 (or even a fraction of it)16 were paid to the recordkeeper, then prior to any rebates, the per participant recordkeeping fee would have ranged from $54 to $143 during the Class Period. These amounts are clearly unreasonable as they are well above recognized reasonable rates.17 129. Even though the Defendants claim to have paid back a certain amount of revenue sharing back into the Plan, a review of the Plaintiffs’ account statements fails to show that any of those amounts were added back directly to each Plaintiffs’ retirement accounts. See, 2018 Form 16 The Plan reported the following revenue sharing payments during the Class Period: 2018 $ 679,914.00 2017 $ 638,293.00 2016 $ 630,964.00 2015 $ 595,758.00 2014 $ 395,953.00 17 Case law is in accord that large plans can bargain for low recordkeeping fees. See, e.g., Spano v. Boeing, Case 06-743, Doc. 466, at 26 (S.D. Ill. Dec. 30, 2014) (plaintiffs’ expert opined market rate of $37–$42, supported by defendants’ consultant’s stated market rate of $30.42–$45.42 and defendant obtaining fees of $32 after the class period); Spano, Doc. 562-2 (Jan 29, 2016) (declaration that Boeing’s 401(k) plan recordkeeping fees have been $18 per participant for the past two years); George v. Kraft Foods Global, Inc., 641 F.3d 786 (7th Cir. 2011) (plaintiffs’ expert opined market rate of $20–$27 and plan paid record-keeper $43–$65); Gordon v. Mass Mutual, Case 13-30184, Doc. 107-2 at ¶10.4 (D.Mass. June 15, 2016) (401(k) fee settlement committing the Plan to pay not more than $35 per participant for recordkeeping). that any amounts paid back into the Plan by the Defendants simply went to paying additional excessive fees and should not be considered to have reduced the excessive costs charged to Plan participants. However, even if those amounts could be considered a reduction of the Plan’s excessive costs, the costs are still excessive as discussed above. 130. Given the size of the Plan’s assets during the Class Period and total number of unique participants, in addition to the general trend towards lower recordkeeping expenses in the marketplace as a whole, the Plan could have obtained recordkeeping services at a lower cost that were comparable to or superior to the typical services provided by the Plan’s recordkeeper. 131. A prudent fiduciary would have observed the excessive fees being paid to the recordkeeper and taken corrective action. Defendants’ failures to monitor and control recordkeeping compensation cost the Plan millions of dollars per year and constituted separate and independent breaches of the duties of loyalty and prudence. FIRST CLAIM FOR RELIEF Breaches of Fiduciary Duties of Loyalty and Prudence (Asserted against the Committee) 132. Plaintiffs re-allege and incorporate herein by reference all prior allegations in this Complaint as if fully set forth herein. 133. At all relevant times, the Committee and its members (“Prudence Defendants”) were fiduciaries of the Plan within the meaning of ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A), in that they exercised discretionary authority or control over the administration and/or management of the Plan or disposition of the Plan’s assets. 134. As fiduciaries of the Plan, these Defendants were subject to the fiduciary duties imposed by ERISA § 404(a), 29 U.S.C. § 1104(a). These fiduciary duties included managing the assets of the Plan for the sole and exclusive benefit of Plan participants and beneficiaries, and acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims. 135. The Prudence Defendants breached these fiduciary duties in multiple respects as discussed throughout this Complaint. They did not make decisions regarding the Plan’s investment lineup based solely on the merits of each investment and what was in the best interest of Plan participants. Instead, the Prudence Defendants selected and retained investment options in the Plan despite the high cost of the funds in relation to other comparable investments. The Prudence Defendants also failed to investigate the availability of lower-cost share classes of certain mutual funds in the Plan. In addition, the Prudence Defendants failed to investigate separate accounts and/or collective trusts as alternatives to mutual funds, even though they generally provide the same investment management services at a lower cost. Likewise, the Prudence Defendants failed to monitor or control the grossly-excessive compensation paid for recordkeeping services. 136. As a direct and proximate result of the breaches of fiduciary duties alleged herein, the Plan suffered millions of dollars of losses due to excessive costs and lower net investment returns. Had Defendants complied with their fiduciary obligations, the Plan would not have suffered these losses, and Plan participants would have had more money available to them for their retirement. 137. Pursuant to 29 U.S.C. §§ 1109(a) and 1132(a)(2), the Prudence Defendants are liable to restore to the Plan all losses caused by their breaches of fiduciary duties, and also must restore any profits resulting from such breaches. In addition, Plaintiffs are entitled to equitable relief and other appropriate relief for Defendants’ breaches as set forth in their Prayer for Relief. 138. The Prudence Defendants knowingly participated in each breach of the other Defendants, knowing that such acts were a breach, enabled the other Defendants to commit by the other Defendants and failed to make any reasonable and timely effort under the circumstances to remedy the breaches. Accordingly, each Defendant is also liable for the breaches of its co-fiduciaries under 29 U.S.C. § 1105(a). SECOND CLAIM FOR RELIEF Failure to Adequately Monitor Other Fiduciaries (Asserted against PPD and the Board Defendants) 139. Plaintiffs re-allege and incorporate herein by reference all prior allegations in this Complaint as if fully set forth herein. 140. PPD and the Board Defendants (the “Monitoring Defendants”) had the authority to appoint and remove members of the Committee, and the duty to monitor the Committee and were aware that the Committee Defendants had critical responsibilities as fiduciaries of the Plan. 141. In light of this authority, the Monitoring Defendants had a duty to monitor the Committee Defendants to ensure that the Committee Defendants were adequately performing their fiduciary obligations, and to take prompt and effective action to protect the Plan in the event that the Committee Defendants were not fulfilling those duties. 142. The Monitoring Defendants also had a duty to ensure that the Committee Defendants possessed the needed qualifications and experience to carry out their duties; had adequate financial resources and information; maintained adequate records of the information on which they based their decisions and analysis with respect to the Plan’s investments; and reported regularly to the Monitoring Defendants. 143. The Monitoring Defendants breached their fiduciary monitoring duties by, among other things: Defendants or have a system in place for doing so, standing idly by as the Plan suffered significant losses as a result of the Committee Defendants’ imprudent actions and omissions; (b) failing to monitor the processes by which Plan investments were evaluated, their failure to investigate the availability of lower-cost share classes, and their failure to investigate the availability of lower-cost separate account and collective trust vehicles; and (c) failing to remove Committee members whose performance was inadequate in that they continued to maintain imprudent, excessively costly, and poorly performing investments within the Plan, and caused the Plan to pay excessive recordkeeping fees, all to the detriment of the Plan and Plan participants’ retirement savings. 144. As a consequence of the foregoing breaches of the duty to monitor, the Plan suffered millions of dollars of losses. Had Monitoring Defendants complied with their fiduciary obligations, the Plan would not have suffered these losses, and Plan participants would have had more money available to them for their retirement. 145. Pursuant to 29 U.S.C. §§ 1109(a) and 1132(a)(2), the Monitoring Defendants are liable to restore to the Plan all losses caused by their failure to adequately monitor the Committee Defendants. In addition, Plaintiffs are entitled to equitable relief and other appropriate relief as set forth in their Prayer for Relief. PRAYER FOR RELIEF 145. WHEREFORE, Plaintiffs pray that judgment be entered against Defendants on all claims and requests that the Court awards the following relief: 23(b)(1), or in the alternative, Rule 23(b)(2) of the Federal Rules of Civil Procedure; B. Designation of Plaintiffs as Class Representatives and designation of Plaintiffs’ counsel as Class Counsel; C. A Declaration that the Defendants, and each of them, have breached their fiduciary duties under ERISA; D. An Order compelling the Defendants to make good to the Plan all losses to the Plan resulting from Defendants’ breaches of their fiduciary duties, including losses to the Plan resulting from imprudent investment of the Plan’s assets, and to restore to the Plan all profits the Defendants made through use of the Plan’s assets, and to restore to the Plan all profits which the participants would have made if the Defendants had fulfilled their fiduciary obligations; E. An order requiring the Company Defendants to disgorge all profits received from, or in respect of, the Plan, and/or equitable relief pursuant to 29 U.S.C. § 1132(a)(3) in the form of an accounting for profits, imposition of a constructive trust, or a surcharge against the Company Defendant as necessary to effectuate said relief, and to prevent the Company Defendant’s unjust enrichment; F. Actual damages in the amount of any losses the Plan suffered, to be allocated among the participants’ individual accounts in proportion to the accounts’ losses; fiduciary responsibilities, obligations, and duties; H. Other equitable relief to redress Defendants’ illegal practices and to enforce the provisions of ERISA as may be appropriate, including appointment of an independent fiduciary or fiduciaries to run the Plan and removal of Plan fiduciaries deemed to have breached their fiduciary duties; I. An award of pre-judgment interest; J. An award of costs pursuant to 29 U.S.C. § 1132(g); K. An award of attorneys’ fees pursuant to 29 U.S.C. § 1132(g) and the common fund doctrine; and L. Such other and further relief as the Court deems equitable and just. Dated: April 15, 2020 Respectfully submitted, MATHESON & ASSOCIATES, PLLC /s/ John Szymankiewicz . John Szymankiewicz NC Attorney ID # 41623 127 West Hargett Street, Suite 100 Raleigh, NC 27601 (919) 335-5291 Fax (919) 516-0686 Local Civil Rule 83.1 Counsel for Plaintiffs CAPOZZI ADLER, P.C. /s/ Donald R. Reavey . Donald R. Reavey, Esquire (Notice of Special Appearance to be Filed) PA Attorney ID #82498 2933 North Front Street Harrisburg, PA 17110 donr@capozziadler.com (717) 233-4101 Fax (717) 233-4103 /s/ Mark K. Gyandoh . Mark K. Gyandoh, Esquire PA Attorney ID #88587 (Notice of Special Appearance to be Filed) CAPOZZI ADLER, P.C. 312 Old Lancaster Road Merion Station, PA 19066 markg@capozziadler.com (610) 890-0200 Fax (717) 233-4103 Counsel for Plaintiffs and the Putative Class

consumer fraud

Z1I6BIkBRpLueGJZ8QXb

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK In re Jumia Technologies AG Securities Litigation, Master File No. 1:19-cv-04397-PKC DEMAND FOR JURY TRIAL : : : : : : AMENDED SECURITIES CLASS ACTION COMPLAINT Lead Plaintiff Hexuan Cai (“Cai”) and Named Plaintiffs Kalyan and Kalyanasundaram Venkataraman (the “Venkataramans”), Matthew Sacks (“Sacks”), and Yifeng Zhu (“Zhu”) (collectively, “Plaintiffs”), individually and on behalf of all others similarly situated, allege the following based upon information and belief as to the investigation conducted by Plaintiffs’ counsel, which included, among other things, a review of U.S. Securities and Exchange Commission (“SEC”) filings by Jumia Technologies AG (“Jumia” or the “Company”), securities analyst research reports, press releases, and other public statements issued by, or about, the Company. Plaintiffs believe 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 two classes of purchasers of Jumia’s American Depository Shares (“ADSs”), the Securities Act Class and the Exchange Act 2. The “Securities Act Class” includes the following: As to claims under Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”) (the “Securities Act Claims” or “Securities Act Counts”), all purchasers who purchased or otherwise acquired Jumia’s ADSs pursuant or traceable to the Registration Statement (defined below) issued in connection with Jumia’s April 2019 initial public stock offering (the “IPO”), and were damaged thereby. 3. The “Exchange Act Class” includes the following: As to claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), all purchasers who purchased or otherwise acquired Jumia’s ADSs between April 12, 2019 and September 20, 2019, inclusive (the “Exchange Act Class Period”), and were damaged thereby. 4. Defendant Jumia characterizes itself as the leading pan-African e-commerce platform, which, according to Jumia, consists of a marketplace that connects sellers with consumers, a package shipment and delivery service, and a payment service. 5. On March 12, 2019, Jumia filed a Form F-1 Registration Statement with the SEC for the Company’s IPO. That Registration Statement, as amended, was signed by the Management Defendants (defined below) and declared effective by the SEC on April 10, 2019. 6. On April 15, 2019, Jumia filed a prospectus with the SEC for the IPO (which, along with Jumia’s Form F-1 and amendments, constitutes the “Registration Statement”) offering to sell to the public 13.5 million ADSs at a price of $14.50 per ADS. Thereafter, Jumia raised approximately $196 million therefrom, net of underwriting discounts and commissions and other offering expenses. 7. The Registration Statement issued in connection with the IPO and other subsequent statements made by Defendants (defined below) were materially false and misleading 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. 8. On May 9, 2019, less than a month after Jumia’s IPO, Citron Research, a longtime publisher of online investment reports, issued a research report entitled “Not All IPOs are Created Equal. Jumia is a Fraud” (the “May 9, 2019 Citron Report”). 9. The May 9, 2019 Citron Report stated that Citron had obtained a copy of a confidential investor presentation, dated October 2018 (the “2018 Confidential Investor Presentation”), that Jumia used in an effort to raise private capital shortly before its IPO. 10. Three of the four terms that Jumia defined as “Key Terms and Performance Indicators Used in this Prospectus” (emphasis in original) in its Registration Statement1 were Gross Merchandise Value (“GMV”), 2 Active Sellers, and Active Consumers, and the Registration Statement is replete with references to those metrics. Excerpts of the 2018 Confidential Investor Presentation that Citron reprinted in its May 9, 2019 report show that there were material discrepancies between the information concerning GMV, Active Consumers, and Active Sellers in the 2018 Confidential Investor Presentation and what Jumia disclosed in its Registration Statement:  The 2018 Confidential Investor Presentation stated that orders that were returned, not delivered or cancelled accounted for 41% of Jumia’s 2017 GMV and indicated based on projected numbers that it would constitute a similar amount of Jumia’s 2018 GMV. In contrast, the Registration Statement only disclosed that 14.4% of Jumia’s 2018 GMV consisted of orders that were failed deliveries or were returned by customers while misleadingly omitting any information about cancellations.  The 2018 Confidential Investor Presentation stated that Jumia had 2.1 million Active Consumers in 2017. The Registration Statement, however, stated that Jumia had 2.7 million Active Consumers in the same year. 1 When this Complaint refers to statements in the Registration Statement, it means that the statements appear both in the Form F-1/A Amendment No. 2 that Jumia filed with the SEC on April 9, 2019 and the final Form 424(B)4 Prospectus that Jumia filed with the SEC on April 15, 2019. 2 The Registration Statement states that GMV “corresponds to the total value of orders including shipping fees, value-added tax, and before deductions of any discounts or vouchers, irrespective of cancellations or returns.”  The 2018 Confidential Investor Presentation stated that Jumia had 43,000 Active Merchants in 2017. The Registration Statement, however, stated that Jumia had 53,000 Active Sellers in the same year. 11. The May 9, 2019 Citron Report also expressed concern that Jumia’s Registration Statement contained misstatements about fraudulent transactions generated by Jumia’s “JForce Consultants” in Nigeria. JForce Consultants are a sales force that places orders on Jumia’s platform for other people. Jumia pays the JForce Consultant a commission for each order. 12. On May 28, 2019, Citron released additional evidence that Jumia had made material misstatements — a video entitled “Jumia — Indisputable Evidence of Fraud” (the “May 28, 2019 Citron Video”) along with a report linking to internal Jumia documents that supported the allegations in the video. The video and supporting documents presented the following:  Internal Jumia documents showing that Jumia reported a GMV in its Registration Statement that was 30% higher than in its pre-IPO internal records.  Internal Jumia documents and interviews with two former Jumia executives showing that more than 50% of Jumia’s orders in Nigeria were fake or invalid.  An October 2018 Jumia internal report showing that Ernst & Young Luxembourg only audited 7 of the 14 countries that Jumia operated in at the time of its IPO. Jumia did not disclose the limited scope of the audit in its Registration Statement. 13. Jumia made statements generally denying Citron’s allegations, but later in 2019, in its second quarter earnings press release, filed with the SEC on August 21, 2019, the Company admitted that its JForce program had generated a significant number of “improper” i.e. fake orders that were subsequently cancelled. The Company admitted that improper orders accounted for 2% of Jumia’s GMV in 2018, concentrated in the fourth quarter of 2018, and approximately 4% of Jumia’s first quarter 2019 GMV. 14. Jumia tried to downplay its admission about JForce, but numerous media and analyst reports agreed that the fact that the Company admitted to such a large number of improper orders was a significant problem for the Company and that Jumia’s disclosure backed up the numbers in Citron’s earlier reports. 15. On September 20, 2019, Bloomberg News published an article entitled “Amazon of Africa Van Drivers Battle Hardships on Lagos Streets”. The article documented problems with Jumia’s delivery system — including that Jumia’s percentage of failed deliveries, including cancellations and returns, was around 40% — which, like Jumia’s August disclosure, supported the numbers in Citron’s reports and undercut Jumia’s denials concerning misstatements in its Registration Statement. 16. At the time of the filing of this Amended Complaint, Jumia’s ADSs was trading at $6.25, 43% of their IPO price. JURISDICTION AND VENUE 17. 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 Sections 11 and 15 of the Securities Act, 15 U.S.C. §§77k and 77o. This Court has jurisdiction over the subject matter of this action under Section 27 of the Exchange Act, 15 U.S.C. § 78aa, Section 22 of the Securities Act, 15 U.S.C. §77v, and 28 U.S.C. § 1331 because this is a civil action arising under the laws of the United States. 18. Venue is proper in this District under Section 27(c) of the Exchange Act, 15 U.S.C. § 78aa(c), §22(a) of the Securities Act, 15 U.S.C. §77v(a)), and 28 U.S.C. § 1391(b)-(d). Many of the acts complained of herein occurred, in substantial part, in this District, as the Company’s IPO was marketed in this District. 19. In connection with the acts alleged in this Complaint, Defendants (defined below) 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 of the New York Stock Exchange (“NYSE”), a national securities exchange located in this District. SECURITIES ACT CLAIMS 20. Pursuant to the Securities Act, the Defendants are strictly liable for material misstatements in the Registration Statement issued in connection with the IPO, and these claims specifically exclude any allegations of knowledge or scienter. 21. The Securities Act Claims are based solely on negligence and strict liability, and are not based on any reckless or intentionally fraudulent conduct by or on behalf of Defendants (defined below)—i.e., the Securities Act Claims do not allege, arise from, or sound in, fraud. Plaintiffs specifically disclaims any allegation of fraud, scienter, or recklessness in these non- fraud claims. All of the sources used in this Amended Complaint to support Plaintiffs’ Securities Act Claims have been introduced solely for the purpose of showing there were material misstatements in Jumia’s Registration Statement. Plaintiffs expressly disclaim any language in those sources that indicates that those misstatements were fraudulent or were made with scienter or recklessly for the purpose of their Securities Act Claims. PARTIES 22. Lead Plaintiff Cai and Named Plaintiffs the Venkataramans purchased Jumia ADSs, as set forth in previously filed certifications incorporated by reference herein, that are traceable to the IPO. 23. Named Plaintiffs Sacks and Zhu purchased Jumia ADSs, as set forth in the certifications attached as Exhibit 1 to this Complaint, that are traceable to the IPO. 24. Defendant Jumia operates a pan-African e-commerce platform. The Company is incorporated under German law and maintains its principal executive offices in Berlin, Germany. Its ADSs are listed and trade on the NYSE under the ticker symbol “JMIA.” In accordance with the German Stock Corporation Act, Jumia has a management board of directors and supervisory board of directors. The management board is responsible for the day-to-day management of the business. The principal function of the supervisory board is to supervise the management board. The supervisory board is also responsible for appointing and removing the members of the management board, representing the Company in connection with transactions between a current or former member of the management board and the Company, and granting approvals for certain significant matters. 25. Defendant Jeremy Hodara (“Hodara”) has served as Jumia’s Co-Chief Executive Officer and a member of its management board at all relevant times. He works in Jumia’s office in Dubai, United Arab Emirates. Defendant Hodara signed the Registration Statement. 26. Defendant Sacha Poignonnec (“Poignonnec”) has served as Jumia’s Co-Chief Executive Officer and a member of its management board at all relevant times. He works in Jumia’s office in Dubai, United Arab Emirates. Defendant Poignonnec signed the Registration Statement. 27. Defendant Antoine Maillet-Mezeray (“Maillet-Mezeray”) has served as Jumia’s Chief Financial Officer and Principal Accounting Officer at all relevant times. He works in Jumia’s office in Dubai, United Arab Emirates. Defendant Maillet-Mezeray signed the Registration Statement. 28. Defendants Hodara, Poignonnec and Maillet-Mezeray are collectively referred to herein as the “Management Defendants.” 29. Defendant Gilles Bogaert (“Bogaert”) has been a member of the Company’s supervisory board since January 2019. 30. Defendant Andre T. Iguodala (“Iguodala”) has been a member of the Company’s supervisory board since January 2019. 31. Defendant Blaise Judja-Sato (“Judja-Sato”) has been a member of the Company’s supervisory board since January 2019. 32. Defendant Jonathan D. Klein (“Klein”) has been a member of the Company’s supervisory board since January 2019. 33. Defendant Angela Kaya Mwanza (“Mwanza”) has been a member of the Company’s supervisory board since March 2019. 34. Defendant Alioune Ndiaye (“Ndiaye”) has been a member of the Company’s supervisory board since January 2019. 35. Defendant Matthew Odgers (“Odgers”) has been a member of the Company’s supervisory board since January 2019. 36. Defendant John H. Rittenhouse (“Rittenhouse”) has been a member of the Company’s supervisory board since January 2019. 37. Bogaert, Iguodala, Judja-Sato, Klein, Mwanza, Ndiaye, Odgers, and Rittenhouse are collectively referred to herein as the “Supervisory Director Defendants.” 38. The Management Defendants and the Supervisory Director Defendants are collectively referred to herein as the “Individual Defendants.” 39. Defendant Morgan Stanley & Co. LLC (“Morgan Stanley”) was an underwriter of the Company’s IPO and assisted in the preparation and dissemination of Jumia’s Registration Statement. 40. Defendant Citigroup Global Markets Inc. (“Citigroup”) was an underwriter of the Company’s IPO and assisted in the preparation and dissemination of Jumia’s Registration Statement. 41. Defendant Berenberg Capital Markets, LLC (“Berenberg”) was an underwriter of the Company’s IPO and assisted in the preparation and dissemination of Jumia’s Registration Statement. 42. Defendant RBC Capital Markets, LLC (“RBC Capital”) was an underwriter of the Company’s IPO and assisted in the preparation and dissemination of Jumia’s Registration Statement. 43. Defendant Stifel, Nicolaus & Company, Incorporated (“Stifel”) was an underwriter of the Company’s IPO and assisted in the preparation and dissemination of Jumia’s Registration Statement. 44. Defendant Raymond James & Associates, Inc. (“Raymond James”) was an underwriter of the Company’s IPO and assisted in the preparation and dissemination of Jumia’s Registration Statement. 45. Defendant William Blair & Company, L.L.C. (“William Blair”) was an underwriter of the Company’s IPO and assisted in the preparation and dissemination of Jumia’s Registration Statement. 46. Defendants Morgan Stanley, Citigroup, Berenberg, RBC Capital, Stifel, Raymond James, and William Blair are collectively referred to herein as the “Underwriter Defendants.” 47. Unless otherwise noted, Jumia, the Individual Defendants, and the Underwriter Defendants are collectively referred to herein as “Defendants.” UNDERWRITER LIABILITY ALLEGATIONS FOR SECURITIES ACT CLAIMS 48. Pursuant to the Securities Act, the Underwriter Defendants are liable for the false and misleading statements in the Registration Statement as follows. 49. The Underwriter Defendants are investment banking houses that specialize in, among other things, underwriting public offerings of securities. They served as the underwriters of the IPO and shared tens of millions of dollars in fees collectively. The Underwriter Defendants arranged a multi-city roadshow prior to the IPO during which they, and representatives from Jumia, met with potential investors and presented highly favorable information about the Company, its operations and its financial prospects. 50. The Underwriter Defendants also demanded and obtained an agreement from Jumia that Jumia would indemnify and hold the Underwriter Defendants harmless from any liability under the federal securities laws. They also made certain that Jumia had purchased millions of dollars in directors’ and officers’ liability insurance. 51. Representatives of the Underwriter Defendants also assisted Jumia and the Individual Defendants in planning the IPO, and purportedly conducted an adequate and reasonable investigation into the business and operations of Jumia, 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 Jumia’s most up-to-date operational and financial results and prospects. 52. In addition to availing themselves of virtually unlimited access to internal corporate documents, agents of the Underwriter Defendants met with Jumia’s lawyers, management and top executives and engaged in “drafting sessions.” During these sessions, understandings were reached as to: (i) the strategy to best accomplish the IPO; (ii) the terms of the IPO, including the price at which Jumia’s ADSs would be sold; (iii) the language to be used in the Registration Statement; what disclosures about Jumia’s business and operations would be made in the Registration Statement; and (v) what responses would be made to the SEC in connection with its review of the Registration Statement. As a result of those constant contacts and communications between the Underwriter Defendants’ representatives and Jumia’s management and top executives, the Underwriter Defendants knew of, or in the exercise of reasonable care should have known of, Jumia’s existing problems as detailed herein. 53. 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 members of the Securities Act Class. SUBSTANTIVE ALLEGATIONS SHOWING THAT THERE WERE MATERIALLY FALSE AND MISLEADING STATEMENTS IN JUMIA’S REGISTRATION STATEMENT. A. Jumia’s IPO in April 2019. 54. Defendant Jumia characterizes itself as the leading pan-African e-commerce platform. Its platform consists of a marketplace that connects sellers with consumers, a package shipment and delivery service, and a payment service. 55. Jumia was founded in 2012 as Africa Internet Holding GmbH. On December 17 and 18, 2018, the Company changed its legal form into a German stock corporation (Aktiengesellschaft) and changed its name to Jumia Technologies AG. These changes became effective on January 31, 2019, upon registration with the commercial register of the local court (Amtsgericht) in Berlin, Germany. 56. On March 12, 2019, Jumia filed with the SEC a Form F-1 Registration Statement for the Company’s IPO. The Registration Statement, as amended, was signed by the Management Defendants and declared effective by the SEC on April 10, 2019. 57. On April 15, 2019, Jumia filed a prospectus with the SEC for the IPO, which forms part of the Registration Statement, offering to sell to the public 13.5 million ADSs at a price of $14.50 per ADS. Thereafter, Jumia raised approximately $196 million therefrom, net of underwriting discounts and commissions and other offering expenses. 58. According to the Registration Statement, the Company’s operations were conducted in six regions in Africa, which consisted of fourteen countries — Nigeria, Kenya, Egypt, Morocco, Ivory Coast, South Africa, Ghana, Senegal, Tunisia, Algeria, Rwanda, Uganda, Tanzania, and Cameroon — that, together, accounted for 72% of Africa’s 2018 Gross Domestic Product. Nigeria, which accounted for 28.6% of Jumia’s GMV, makes up a larger portion of Jumia’s business than any other country. B. Less Than a Month After Jumia’s IPO, Citron Research Issued a Report Revealing it had Obtained a 2018 Confidential Investor Presentation that Showed that the Registration Statement Had Reported Jumia’s Key Performance Indicators in a False and Misleading Way. 59. On May 9, 2019, less than a month after Jumia’s IPO, Citron Research issued the May 9, 2019 Citron Report, entitled “Not All IPOs are Created Equal. Jumia is a Fraud.”3 60. Citron Research publishes an online investment newsletter that, according to its website, has amassed an unparalleled investigative track record over its seventeen-year existence, 3 References to the titles of the May 9, 2019 Citron Report and May 28, 2019 Citron Video are merely to identify the reports and should not be construed as substantive allegations of fraud. with more than fifty companies it highlighted becoming targets of regulatory interventions. Citron Research’s website further notes that its reports are based upon the findings of a team of investigators, led by Andrew Left, its founder, who has been quoted in major financial publications, including Forbes, Fortune, Wall Street Journal, Barron’s, CNBC, Investors’ Business Daily, and Business Week. 61. The May 9, 2019 Citron Report stated that Citron had obtained a copy of the 2018 Confidential Investor Presentation that Jumia used during an effort to raise money privately in October 2018. Citron stated that there were “many material discrepancies in reported key financial metrics when comparing this confidential document with Jumia’s F-1 filing from last month.” 62. The May 9, 2019 Citron Report compared the following excerpts from the October 2018 Confidential Investor Presentation and Jumia’s Registration Statement: 63. The excerpts above show that for the fiscal year 2017, the Confidential Investor Presentation reported that Jumia had 2.1 million Active Consumers and 43,000 Active Merchants, but Jumia’s Registration Statement instead publicly reported 2.7 million Active Consumers and 53,000 Active Sellers for that fiscal year. 64. The 2018 Confidential Investor Presentation further stated that in fiscal year 2017, 209 million Euros of Jumia’s 507 million Euro GMV were for returned, not delivered or cancelled orders, accounting for 41% of Jumia’s total GMV. Additionally, the estimated Total Net Merchandise Value (“NMV”) that Jumia included in the 2018 Confidential Investor Presentation indicated that the Company projected that the percentage of Jumia’s orders that were returned, not delivered or cancelled in 2018 would be similar to 2017.4 Jumia did not publicly disclose these troubling numbers in its Registration Statement, however. Instead, Jumia disclosed that in fiscal year 2018, orders accounting for 14.4% of its GMV were either failed deliveries or returned by its consumers, but did not disclose the percentage of cancellations. Additionally, Jumia’s Registration Statement did not disclose what percentage of GMV represented returned, not delivered or cancelled orders in 2017. The May 9, 2019 Citron Report correctly stated that this was “[t]he most disturbing disclosure that Jumia removed from its F-1 filing.” 65. The May 9, 2019 Citron Report also expressed concern that Jumia’s Registration Statement made misstatements about fraudulent transactions generated by Jumia’s JForce Consultants in Nigeria. JForce Consultants are a sales force of Nigerians that place orders on 4 The excerpts of the October 2018 Confidential Investor Presentation published by Citron defines NMV as GMV minus cancellations and returns. Since the October 2018 Confidential Investor Presentation forecasted that Jumia’s 2018 NMV would be 543 million euros and Jumia later reported a GMV of 828 million Euros, based on the estimated 2018 NMV, the percentage of Jumia’s GMV that was from orders that were returned, not delivered or cancelled was approximately 35%. Jumia’s platform for other people using their IDs. Jumia pays the JForce Consultant a commission for each order. According to the 2018 Confidential Investor Presentation, JForce Consultants accounted for 34% of Jumia’s NMV in 2017 and Jumia projected JForce to account for around the same amount in 2018. 66. Jumia held its earning call for the first quarter of 2019 on May 13, 2019 (“First Quarter 2019 Earnings Call”). In his opening remarks, Defendant Poignonnec denied the allegations in the May 9, 2019 Citron Report in a vague and general way: We are of course aware of a recent opinion piece that was published. We would like to say upfront that we completely stand by our prospectus, our audited financials and the risk factors. We're very excited about the future and our prospects. We will not be distracted from executing on our strategy, and carrying out our mission by those we [sic] seek to create doubts, to profit at our expense, and that of our long term stakeholders. 67. Defendant Poignonnec also dismissed a question about “JForce and fraud in Nigeria”: I would like to say very upfront that the Jforce agents which are consultants which are part of Jforce get commissions of course on the percentage of their completed transaction after all cancellations and returns. And this is of course key and very normal. We do that. We have even actually introduced penalties as well as extra incentive to drive lower cancellations and returns for the orders which are generated by the Jforce consultant. So for us this is a very innovative marketing channel which helps consumers adopt ecommerce. It's also very useful channel to gather insights on the consumers, in addition to the data we collect online. And it's been a very successful channel which is particularly adapted to the needs of our market. 68. On the same day as the First Quarter 2019 Earnings Call, the website Real Money, https://realmoney.thestreet.com/, published an article by Kevin Curran entitled “Jumia CEO Sacha Poignonnec Responds to Citron's Incendiary Short Report” that contained additional comments on the May 9, 2019 Citron Report from Defendant Poignonnec. Defendant Poignonnec did not deny the authenticity of the 2018 Confidential Investor Presentation and admitted that “[t]he prospectus and the investor document referenced are not consistent.” He further stated that “[t]he documents are calculated differently, since the prospectus presents active consumers in the same way we present gross merchandise volume.” 69. No Defendant has ever challenged the authenticity of the 2018 Confidential Investor Presentation or Citron’s account of the figures it contained. 70. Rocket Internet was one of the Company’s largest shareholders prior to its IPO. Rocket Internet’s Annual Reports, which included a limited amount of financial information for Jumia prior to its IPO, provide some insight into Defendant Poignonnec’s comments. 71. Rocket Internet’s 2017 Annual Report stated that Jumia had 2.2 million Active Customers that year. That is almost the same as the 2.1 million active customers listed for 2017 in the 2018 Confidential Presentation and also inconsistent with the 2.7 million Active Consumers Jumia disclosed in its Registration Statement. The reason for this discrepancy appears to be a difference of definition. Jumia’s Registration Statement defined Active Consumers as “unique consumers who placed an order on our marketplace within the 12-month period preceding the relevant date, irrespective of cancellations or returns.” (emphasis added). That definition includes people who have never actually completed a transaction on Jumia’s platform. In contrast, Rocket Internet’s 2017 Annual Report only included people who had made “valid orders” in its count of Active Customers.5 Rocket Internet’s 2017 Annual Report does not define “valid orders,” but Rocket Internet’s 2016 Annual Report defines “Valid Orders” as part of its definition of “Total Transactions.” It defines “Total Transactions” as the “Total 5 Rocket Internet’s 2017 Annual Report defines Active Consumers as the “[n]umber of customers having made at least one order as defined in ‘total orders’ with the last 12 months before end of period.” It further defined “Total Orders” as the “Total number of valid orders placed on the platform within the period.” number of valid (i.e. not failed or declined) orders starting the fulfilment process less cancelled orders…” (emphasis added). 72. Based on the above, there is strong evidence that the following is true about the contrasts between Jumia’s 2018 Confidential Investor Presentation and the Registration Statement: (1) Defendant Poignonnec’s comments confirmed the authenticity of the 2018 Confidential Investor Presentation and the numbers it reported. (2) The difference between the 2.7 million Active Consumers in 2017 reported in the Registration Statement and the 2.1 million Active Consumers for that same year reported in the 2018 Confidential Investor Presentation is accounted for by the inclusion of people who had not completed a transaction with Jumia as “Active Consumers” in its Registration Statement. (3) Given that the Registration Statement defines Active Sellers in a similar way to Active Consumers (as “unique sellers who received an order on our marketplace within the 12-month period preceding the relevant date, irrespective of cancellations or returns” (emphasis added)), it is reasonable to assume that the 10,000 seller discrepancy between the 53,000 Active Sellers in 2017 reported in Jumia’s Registration Statement and 43,000 Active Merchants in 2017 reported in the 2018 Confidential Investor Presentation exists for the same reason as the Active Consumer discrepancy: the inclusion of sellers who had not actually completed a transaction on the Jumia platform as Active Sellers in Jumia’s Registration Statement. (4) None of the statements made by Defendant Poignonnec dispute that the 2018 Confidential Investor Presentation accurately stated that 41% of Jumia’s 2017 GMV consisted of returned, not delivered, or cancelled orders and that the percentage was similar in 2018. C. Less Than Three Weeks After Issuing its First Report, Citron Releases a Video and Accompanying Report Showing that Jumia Misstated its GMV; that More Than 50% of Jumia’s Nigerian Orders are Fraudulent or Invalid; and that Ernst & Young Luxembourg Only Audited Seven of the Fourteen Countries Jumia Operated in Prior to Jumia’s IPO. 73. On May 28, 2019, Citron released the May 28, 2019 Citron Video, entitled “Jumia — Indisputable Evidence of Fraud”, along with a report linking to internal Jumia documents that support the allegations in the video. 74. In the May 28, 2019 Citron Video, Citron founder Andrew Left stated that pre- IPO internal Jumia documents show that Jumia reported GMVs for 2017 and 2018 in its Registration Statement that were 30% higher than its pre-IPO internal records. Jumia’s internal records showed GMVs of 381 million Euros for 2017 and 645 million euros for 2018, but it reported 507 and 828 million euros for those years in its Registration Statement, respectively. The report accompanying the Video cited an internal email from a member of Jumia’s Financial Planning and Analysis group, Wael Dib, who works in Jumia’s Dubai office like the Management Defendants, to what the report describes as “Jumia CFOs”, and said that the email attached an excel spreadsheet with Jumia’s monthly GMV and NMV by country. A screenshot of the email in the video shows that the subject line of the email was “August 18: Ecommerce GMV & NMV Data, Topline Report and KPIs.” The body of the email stated: Dear all, Please find attached the topline report Please update your packages with the KPIs sent above so that the information your country managers and CEOs will be reviewing will be the same Note: will send soon the: - NMV/GMV file (still waiting a response from BI team) - Investors KPI report (solving out an issue with BI team) - FPA KPIs (to be received from BI team) The screenshot of the email further shows that the people that Wael Dib sent it to included Ernest Eguasa, the CFO of Jumia Nigeria, Ibrahim Megahed, the CFO of Jumia Egypt, Mehdi Essaoui, the CFO at Jumia Morocco, Giraud Njakou, CFO in Cameroon, Siaka Tiote, Financial Planner & Analyst at Jumia Ivory Coast and Senegal, and Abdeladim Habiballah, Senior Financial Planning & Analysis at Jumia Morocco. 75. The May 28, 2019 Citron Video also included strong additional evidence that Jumia had a large volume of undisclosed cancelled and/or fraudulent orders. 76. The Video features clips of interviews with two former Jumia executives with their faces obscured. The first former Jumia executive stated that more than 50% of Jumia’s orders in Nigeria were fake: And also there is a very important point related to fake orders. Just if we talk about Nigeria, the fake orders exceed 50% as per Jumia internal report and on a group level, the fraud and fake orders are around 40%. Because if you talk about 50% fake orders, it’s like a strategy of the company. (emphasis added). 77. The second former Jumia executive stated that Jumia’s own customer service agents placed fraudulent orders: Yeah, a higher percentage of orders are not completely true. This is because some of these orders are placed by us individually at the office. It is not like a real order from customer so, some of these orders are placed by the customer service agents who have targets, to ensure that they place like a hundred orders per day. For example, one hundred orders, so you call a client and say, oh we haven’t seen your order from us and then this client say “oh no, I don’t like your product, you guys delay my orders, you guys deliver a bad product to me. I’m not ordering from you again.” And then we place the order anyway, and we send it to them free of charge just to make up for the orders. (emphasis added). 78. Additionally, the report accompanying the video cited another internal email from Wael Dib to Jumia CFOs that attached an excel spreadsheet with monthly invalid or fraudulent orders by country confirming the first Jumia executive’s statement that more than 50% of Jumia’s orders in Nigeria are invalid or fraudulent. Citron further noted that this meant that even Jumia’s internal GMV was inflated. 79. The May 28, 2019 Citron Video also stated that Jumia’s Registration Statement misrepresented Ernst & Young Luxembourg’s audit. The Video shows footage of a Jumia internal report entitled “Jumia – Audit Workshop Morocco: Overview of Timeline and Audit Stream October 2018”. The Video further shows a page in the audit report that listed 7 of the 14 countries as “Not in Group Audit Scope”: Senegal, Tunisia, Algeria, Rwanda, Uganda, Tanzania, and Cameroon. The report accompanying the video stated that the presentation was attached to an email from Jumia Group SVP of Finance Nathalie De Witte, who is located in Jumia’s Dubai office, to Jumia CFOs. D. In August 2019, Jumia Admits That JForce was a Significant Source of Fake Orders, Supporting Citron’s Allegations Concerning the Number of Cancelled Orders. 80. In the second quarter 2019 earnings press release that Jumia filed with the SEC on August 21, 2019, Jumia admitted that there was a significant amount of fake transactions generated by JForce: [W]e identified several JForce agents and sellers who collaborated with employees in order to benefit from differences between commissions charged to sellers and higher commissions paid to JForce agents. The transactions in question generated approximately 1% of our GMV in each of 2018 and the first quarter of 2019 and had virtually no impact on our 2018 or 2019 financial statements. We have terminated the employees and JForce agents involved, removed the sellers implicated and implemented measures designed to prevent similar instances in the future. The review of this matter is closed. More recently, we have also identified instances where improper orders were placed, including through the JForce program, and subsequently cancelled. Based on our findings to date, we believe that the transactions in question generated approximately 2% of our GMV in 2018, concentrated in the fourth quarter of 2018, approximately 4% in the first quarter of 2019 and approximately 0.1% in the second quarter of 2019. These 0.1% have already been adjusted for in the reported GMV figure for the second quarter of 2019. These transactions had no impact on our financial statements. We have suspended the employees involved pending the outcome of our review and are implementing measures designed to prevent similar instances in the future. We continue our review of this matter. (emphasis added). 81. On the same day that Jumia admitted to fake orders caused by its JForce program, Bloomberg News published an article by John Bowker and Loni Prinsloo entitled “Jumia Identifies Graft in Nigerian Sales Force as Losses Widen”. The article stated that Jumia’s disclosure about JForce “backed up warnings made by short-seller Citron in a report three months ago.” (emphasis added). The article further indicated that Jumia’s advertising for candidates to join JForce made fraudulent orders likely since it “promise[d] the opportunity to ‘earn unlimited income’ while having ‘complete freedom and control over your activities.’” The article also further noted that Nigeria is ranked 744th on a list of 780 countries on the Corruption Perceptions Index, compiled by Transparency International. 82. On August 22, 2019, The Guardian, an English language independent daily newspaper published in Lagos, Nigeria, published a story by Tonye Bakare on its website www.guardian.ng entitled “Jumia Sacks Three Over ‘Improper Sales Practices’”. Consistent with the Bloomberg News article published a day earlier, it stated that “[t]he acknowledgement of the dubious figures by Jumia on Wednesday” reinforced Citron’s claims. 83. The Breaking Times, which describes itself as an “Africa-based online multi- dimensional news and information media company,” published an article by Ikokwu Ikemba entitled “Jumia Admits to Fraud as it Reports Q2 2019 Earnings” on its website www.thebreakingtimes.com on August 22, 2019. As with other contemporary media reports, the article emphasized the significance of Jumia’s disclosure and the fact that it supported Citron’s allegations: Despite JUMIA trying their best to highlight some of the more positive numbers from their second quarter…attention by those trading the e-commerce company’s stock seemed to be more focussed on the sales and order fraud that JUMIA has now finally admitted. …. What is curious when you read JUMIA’s Q2 financials and the statements around fraudulent activity is that not only is a very small section light on details afforded to the serious fraud, it is also that when you read between the lines JUMIA executives are essentially saying that they were not aware of fraudulent activity that amounted to approximately $18 million under their watch, if that is the case then at minimum they should be held accountable for being incompetent or did they know all along? Given that the types of fraud they claim to have only recently uncovered is the same as was alluded in a scathing report by Citron Research earlier in May 2019, one has to wonder whether the recent statements by JUMIA are merely a public relations damage control strategy to contain the fall out from the fraud being exposed. (emphasis added). 84. Also on August 22, 2019, Morgan Stanley issued an analyst report in response Jumia’s second quarter 2019 earnings release. The report stated that Jumia’s admission of improper sales in the JForce program was “[m]ore important than 2Q results” and the disclosure was “Likely to Weigh on Multiple Investors Will Pay for JMIA” (emphasis added for first quote; emphasis in original for second quote). The report further stated that the GMV affected by these issues “is a material part of JForce, which JMIA has talked about being an important growth driver” and that “failing to catch these challenges and potential internal control question marks are likely to weigh on the multiple investors will pay for this emerging market asset a few years away from cash flow break even.” 85. Weeks later, Jumia’s disclosure about JForce was still reverberating. On September 10, 2019, Tellimer, an investment company that specializes in and issues analyst reports concerning developing markets, posted an entry on its blog6 by Nigunan Tiruchelvam, Head of Consumer Equity Research, entitled “Jumia Fraud Revelation Raises Three Questions”. The first question the post asked was “How material is Jumia’s fraud?” (emphasis in original). It answered that Jumia’s disclosure had a “high degree of materiality”: The improper orders were EUR16mn (US$17.5mn) in gross merchandise value (GMV) in Q418-Q219. This accounts for 2% of GMV in 2018 and 4% of GMV in Q1 19. The fake orders are a much larger proportion of Jumia's gross profit. Gross margins are typically c6% of GMV. This suggests that about two-thirds of the gross profits in Q1 19 were tainted. In a slim margin and negative cash flow business, fraudulent orders have a high degree of materiality. (emphasis added). Tellimer’s article also asked: “Does it vindicate Citron's allegations?” (emphasis in original). It answered that while Tellimer had not independently verified Citron’s allegations, “the latest revelations seriously damage Jumia's credibility. Its denial of Citron’s allegations seems to ring hollow.” (emphasis added). E. Bloomberg News Publishes Additional Reporting Confirming That 40% of Jumia’s Orders Result in Failed Deliveries, Cancellations, or Returns. 86. On September 20, 2019, Bloomberg News published an article by Tope Alake entitled “Amazon of Africa Van Drivers Battle Hardships on Lagos Streets”. The article discussed a typical day of a Jumia driver in Lagos, Nigeria which the article describes as featuring “[f]aulty payment systems, patchy phone-network coverage, parking woes and unreliable customers.” The article confirmed Citron’s allegations that Jumia’s percentage of failed deliveries, including cancellations and returns, was around 40%: 6 https://blog.tellimer.com/jumia-fraud-revelation-raises-three-questions. It's easy to see why Jumia's investors have a concern over the company’s high level of failed deliveries across its 14 countries -- some 40%, including cancellations and returns -- and question the viability of ordering goods online and having them delivered in major African cities. The skepticism is evident in the share price, down about 25% since its high-profile initial public offering in New York in April. (emphasis added). 87. On October 10, 2019, the Motley Fool, which is a private financial and investment advice company, published an article by Jeremy Bowman on its website fool.com entitled “Why Jumia Technologies Stock Fell 29% Last Month: Shares of the African e- commerce company slipped after a news report detailed its struggles”. According to the article, Bloomberg News’ September 20, 2019 report “seemed to prompt a new round of selling for the busted IPO” since Bloomberg’s statement “that approximately 40% of the company's orders result in either cancellations or returns, illuminat[ed] the difficulties in bringing e-commerce to a continent that lacks much of the infrastructure -- including roads, an address system, and internet connectivity.” MATERIALLY FALSE AND MISLEADING STATEMENTS IN JUMIA’S REGISTRATION STATEMENT. 88. Jumia’s Registration Statement contained numerous untrue statements of material fact and omitted to state material facts both required by governing regulations and necessary to make the statements made not misleading. Defendants are liable for those false and misleading statements either because they are strictly liable or because the statements were made negligently. 89. Jumia’s Registration Statement repeatedly stated that the Company’s GMV was 507.1 million euros in 2017 and 828.2 million euros in 2018 and emphasized the importance of the metric. It referred to GMV as a one of its four “key performance indicators” and further stated that “GMV is the primary driver of our revenue, as the vast majority of our revenue is a function of our overall GMV net of cancellations and returns.” 90. The Registration Statement further stated that “Active Consumers” and “Active Sellers” were two of Jumia’s three other “key performance indicators.” 91. In both the “Prospectus Summary” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Registration Statement stated: “Our business has grown substantially. As of December 31, 2018, we had 4.0 million Active Consumers, up from 2.7 million Active Consumers as of December 31, 2017. Our GMV was €828.2 million in 2018, up from €507.1 million in 2017. GMV is the primary driver of our revenue.” (emphasis in original) 92. Jumia’s Registration Statement later presented GMV in the following table in three different places: As of and for the year ended December 31, 2017 2018 (unaudited, in millions) Active Consumers 2.7 4.0 GMV € 507.1 € 828.2 $ 948.8 Adjusted EBITDA € (126.8) € (150.1) $ (172.0) 93. The Registration Statement further stated concerning the “Growth and engagement of our Active Customers” that “[o]ur GMV is a function of the number of Active Consumers on our platform and the amount they spend on our marketplace. As of December 31, 2018, we had 4.0 million Active Consumers, up from 2.7 million Active Consumers as of December 31, 2017. GMV increased from €507.1 million in 2017 to €828.2 million in 2018.” (emphasis in original). 94. The foregoing statements concerning Jumia’s GMV and Active Consumers in Paragraphs 91-93 were false and misleading because the 2017 and 2018 GMV numbers that Jumia disclosed in its Registration Statement were 30% higher than in its pre-IPO internal records. Additionally, even if the GMV numbers Jumia disclosed were correct, the foregoing statements were still false and misleading because Jumia failed to disclose that 41% of Jumia’s reported 2017 GMV consisted of orders that were returned, not delivered or cancelled and that such orders made up a similar percentage of its GMV in 2018. The foregoing statements were also false and misleading because Jumia failed to disclose that fake and invalid orders exceeded 50% in Nigeria, the Company’s largest market, but included those orders in its GMV. The foregoing statements were also false and misleading because Jumia failed to disclose that approximately 600,000 of the 2.7 million people it stated were Active Consumers in 2017, or approximately 22%, had not completed a transaction on Jumia’s platform in 2017 and that a significant percentage of the 4.0 million people who it stated were Active Customers in 2018 had not completed a transaction on Jumia’s platform in 2018. 95. In a Section entitled “Revenue,” the Registration Statement stated “GMV increased by 63.3% from €507.1 million in 2017 to €828.2 million in 2018, mainly due to a 74.7% increase in GMV from third-party sales. All regions contributed to the growth of GMV, with particularly strong contributions from West Africa and Egypt.” (emphasis in original). 96. The foregoing statement concerning Jumia’s GMV was false and misleading because the 2017 and 2018 GMV numbers that Jumia disclosed in its Registration Statement were 30% higher than in its pre-IPO internal records. Additionally, even if the GMV numbers Jumia disclosed were correct, the foregoing statement was still false and misleading because Jumia failed to disclose that 41% of Jumia’s reported 2017 GMV consisted of orders that were returned, not delivered or cancelled and that such orders made up a similar percentage of its GMV in 2018. The foregoing statement was also false and misleading because Jumia failed to disclose that fake and invalid orders exceeded 50% in Nigeria, the Company’s largest market, but included those orders in its GMV. 97. Jumia’s Registration Statement also cited GMV, Active Consumers, and Active Sellers when discussing “Strengths Related to Our Competitive Position”: Pan-African leader. We believe that we are the only e-commerce business successfully operating across multiple regions in Africa. Through our full scale operations in six regions of Africa, we generated €507.1 million in GMV in 2017 and €828.2 million in 2018, more than any other e-commerce player in the markets in which we operate. Our reach and capabilities position us as the preferred partner in Africa for sellers, from individuals to large global brands, and as the preferred shopping destination for consumers. On our platform, we had 81 thousand Active Sellers as of December 31, 2018 and a total of 4.0 million Active Consumers as of December 31, 2018. (emphasis in original.) 98. The foregoing statement was false and misleading because the 2017 and 2018 GMV numbers that Jumia disclosed in its Registration Statement were 30% higher than in its pre-IPO internal records. Additionally, even if the GMV numbers Jumia disclosed were correct, the foregoing statement was still false and misleading because Jumia failed to disclose that 41% of Jumia’s reported 2017 GMV consisted of orders that were returned, not delivered or cancelled and that such orders made up a similar percentage of its GMV in 2018. The foregoing statement was also false and misleading because Jumia failed to disclose that fake or invalid orders exceeded 50% in Nigeria, the Company’s largest market, but included those orders in its GMV. The foregoing statement was also false and misleading because Jumia failed to disclose that a significant percentage of the 4.0 million Active Customers and 81,000 Active Sellers it reported for 2018 had not completed a transaction on Jumia’s platform in 2018. 99. The Registration Statement made the following statement concerning transactions that were placed on Jumia’s platform, but were not completed: We face challenges with failed deliveries, excessive returns, late collections, unrecoverable receivables and voucher abuse, which may materially and adversely affect our business and prospects. We typically provide our consumers with the option to pay cash on delivery. Many of our consumers choose this option. . . . In situations where the consumer elects to pay cash on delivery, he/she must be present at home in order to provide payment at the time of delivery; otherwise, the delivery will fail. . . . If a consumer is not present, we schedule a new delivery time. We typically make three delivery attempts, and if all of these attempts fail, we return the product to the seller. . . . Even if the product is successfully delivered to the consumer and delivery is verified, most of our sellers are required, either by local regulations or by our operating standards, to allow consumers to return goods within a certain period of time after delivery. For example, in Egypt, which is one of our largest markets, consumers have a legal right to return any product within fourteen days after delivery so long as the product is in the same condition as when delivered. Furthermore, if our sellers offer more consumer friendly return policies, the number of returns may increase, which could adversely affect our business. In 2018, orders accounting for 14.4% of our GMV were either failed deliveries or returned by our consumers. . . . We also face the risk that third-party delivery agents might misappropriate inventory, and we struggle to verify delivery when our third-party delivery partners deliver packages without obtaining consumer signatures. When goods are delivered without verification, we may be required to deliver a duplicate product. When a third-party delivery agent successfully delivers a product and accepts cash payment from the consumer, we face the additional risks of late collections (in the event that the third-party delivery agent does not remit the funds to us on time) or unrecoverable receivables (in the event that the third-party delivery agent commits fraud or becomes insolvent). These risks are particularly acute in countries where the percentage of outsourced deliveries remains high. For example, in Kenya, where approximately 95% of our consumers paid in cash or with cash equivalents on delivery in 2016, we discovered in early 2018 that €720 thousand of cash payments remained uncollected in 2016, the large majority of which was never subsequently collected. The extent of the effect on our cash flows in 2016 was due to our previous use of an insufficient cash reconciliation system, which has now been replaced with an automated system that allows us to monitor transactions in each of our markets on a daily basis. Even though we have taken measures to reduce the risks of fraud and uncollected receivables, these risks – whether facilitated by our employees, sellers, partners or consumers – remain, due largely to the prevalence of cash on delivery in many of our markets. (emphasis of title in original; other emphasis added.) 100. The foregoing statement was false and misleading because Jumia failed to disclose that 41% of Jumia’s reported 2017 GMV consisted of orders that were returned, not delivered or cancelled and that such orders made up a similar percentage of its GMV in 2018. The foregoing statement was also false and misleading because Jumia failed to disclose that fake or invalid orders exceeded 50% in Nigeria, the Company’s largest market, but included those orders in its GMV. 101. Jumia’s Registration Statement made the following disclosure concerning fraudulent and fictitious transactions: Failure to deal effectively with any fraud perpetrated and fictitious transactions conducted on our platform could harm our business. We face risks with respect to fraudulent activities on our platform. . . . Given the countries in which we operate, the number of participants on our platform and the fragmentation of our business, it is a challenge to anticipate, detect and address fraudulent activities. Although we have implemented various measures to detect and reduce the occurrence of fraudulent activities on our platform, there can be no assurance that such measures will be effective in combating fraudulent transactions or improving overall satisfaction among sellers, consumers and other participants. Additional measures that we take to address fraud could also negatively affect the attractiveness of our platform to sellers or consumers. For example, we may receive complaints from consumers who may not have received goods that they had purchased, or complaints from sellers who have not received payment for the goods ordered. In addition to fraudulent transactions with legitimate consumers, sellers may also engage in fictitious or “phantom” transactions with themselves or collaborators in order to artificially inflate their own ratings on our marketplace, reputation and search results rankings. This activity may harm other sellers by enabling the perpetrating seller to be favored over legitimate sellers and may harm consumers by deceiving them into believing that a seller is more reliable or trusted than the seller actually is. Recently, we also received information alleging that a seller in Morocco bribed one of our employees in order to receive favorable marketing treatment. In addition, we recently received information alleging that some of our independent sales consultants, members of our JForce program in Nigeria, may have engaged in fraudulent activities. We are currently investigating these allegations and are unable to determine their accuracy and/or the potential scope of fraud, if any. In addition to seller fraud, we face the risk of fraud perpetrated directly by our consumers. For example, a group of consumers in Kenya fraudulently used electronic payment suppliers to acquire approximately €550,000 in goods on our marketplace in December 2017. Consumer fraud may harm seller confidence in the integrity of our marketplace and the certainty of payment. Illegal, fraudulent or collusive activities by our employees could have a material adverse effect on our business, financial condition, results of operations and prospects and could subject us to liability or negative publicity. While we have not experienced any material events of this nature in the past, we have identified allegations of employee misconduct, which led us to improve our internal controls and our cash reconciliation system. . . . (emphasis of title in original; other emphasis added.) 102. The foregoing statement, including the bold and italicized portion that indicated that there might not be any fraud in the JForce program, was false and misleading because invalid orders exceeded 50% in Nigeria, the Company’s largest market; and 41% of Jumia’s reported 2017 GMV consisted of orders that were returned, not delivered or cancelled and that such orders made up a similar percentage of GMV in 2018. 103. Jumia’s Registration Statement made the following disclosure concerning the number of Active Sellers in 2017 and 2018: The success of our marketplace, which is central to our business model, is driven by the breadth and quality of the goods and services offered, which depends largely on the number of sellers on our marketplace and their ability to increase the range of goods and services they offer to our consumers. As of December 31, 2018, we had 81 thousand Active Sellers on our platform, up from 53 thousand Active Sellers as of December 31, 2017. The number of sellers offering similar goods on our marketplace is a key driver of price attractiveness and quality of service, as they compete for market share on our marketplace. Competition between sellers is also essential to our monetization, as it increases the appetite for sellers to use our services that are geared toward enhancing the sellers’ visibility or their quality of service. (emphasis added). 104. The foregoing statement regarding Active Sellers was false and misleading because Jumia failed to disclose that 10,000 of the 53,000 sellers it stated were Active Sellers in 2017, or almost 19%, had not completed a transaction on Jumia’s platform in 2017 and a significant percentage of the 81,000 Active Sellers it reported for 2018 had not completed a transaction on Jumia’s platform in 2018. 105. The Registration Statement repeated the Active Consumer and Active Seller numbers for 2018 several more times, showing the importance of those metrics. 106. The “Prospectus Summary,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and a section discussing the “overview” of the “business” set forth in the Registration Statement all stated “[o]n our platform, we had 81 thousand Active Sellers as of December 31, 2018 and a total of 4.0 million Active Consumers as of December 31, 2018. We believe that the number and quality of sellers on our marketplace, and the breadth of their respective offerings, attract more consumers to our platform, increasing traffic and orders, which in turn attracts even more sellers to Jumia, creating powerful network effects.” 107. The foregoing statements regarding Active Consumers and Active Sellers were false and misleading because Jumia failed to disclose that a significant percentage of the 4.0 million Active Customers and 81,000 Active Sellers it reported for 2018 had not completed a transaction on Jumia’s platform in 2018. 108. The “Prospectus Summary” and a section of the Registration Statement entitled “Our Value Proposition to Customers” stated: “Selection, price and convenience: We believe that our platform is the largest e-commerce marketplace in Africa. With a total of 81 thousand Active Sellers as of December 31, 2018 and over 29.5 million product listings on our marketplace as of December 31, 2018, consumers have access to goods from a wide range of categories.” (emphasis in original). 109. The foregoing statements regarding Active Sellers were false and misleading because Jumia failed to disclose that a significant percentage of the 81,000 Active Sellers it reported for 2018 had not completed a transaction on Jumia’s platform in 2018. 110. The Registration Statement also stated the following about the importance of Jumia’s seller network: “Our seller network consisted of 81 thousand Active Sellers as of December 31, 2018, who range from small merchants and artisans to larger corporations. If we fail to maintain and expand our existing relationships or to build new relationships with sellers on acceptable commercial terms, we will not be able to maintain and expand our broad product and service offering, which could adversely affect our business.” 111. The foregoing statement regarding Active Sellers was false and misleading because Jumia failed to disclose that a significant percentage of the 81,000 Active Sellers it reported for 2018 had not completed a transaction on Jumia’s platform in 2018. 112. The section of the Registration Statement entitled “Our Value Proposition to Sellers” stated the following concerning the importance of Jumia’s customer base: “Access to a large and growing consumer base: We believe that our brand has become synonymous with online and mobile shopping in our markets, and we have built a logistics service that provides sellers with access to consumers across a wide delivery footprint. As a result, through our platform, local sellers can efficiently reach consumers across a particular country, and international sellers can efficiently reach a large number of consumers across most major markets in Africa. In 2018, we connected sellers with 4.0 million Active Consumers.” (emphasis in original). 113. The foregoing statement regarding Active Consumers was false and misleading because Jumia failed to disclose that a significant percentage of the 4 million Active Customers it reported for 2018 had not completed a transaction on Jumia’s platform in 2018. 114. Finally, Jumia’s Registration Statement included the following report by Ernst & Young Luxembourg concerning its audit of Jumia: REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Management and the Supervisory Board of Jumia Technologies AG (formerly Africa Internet Holding GmbH) Opinion on the Financial Statements We have audited the accompanying consolidated statement of financial position of Africa Internet Holding GmbH and subsidiaries (the Company) as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive income (loss), changes in equity and cash flows for each of the two years in the period ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2018, in conformity with International Financial Reporting Standards as issued by the International Accounting Standard Board. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young Ernst & Young Société Anonyme Cabinet de Révision Agréé We have served as the Company’s auditor since 2014. Luxembourg February 6, 2019 (emphasis in original). 115. The foregoing statement concerning Ernst & Young’s audit of Jumia was false and misleading because Ernst & Young only audited 7 of the 14 countries that Jumia operated in at the time Jumia issued its Registration Statement. Ernst & Young’s audit scope did not include Senegal, Tunisia, Algeria, Rwanda, Uganda, Tanzania, and Cameroon. PLAINTIFFS’ CLASS ACTION ALLEGATIONS 116. Plaintiffs bring this action as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of the Securities Act Class. Excluded from the Securities Act 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. 117. The members of the Securities Act Class are so numerous that joinder of all members is impracticable. While the exact number of Securities Act Class members is unknown to Plaintiffs at this time and can be ascertained only through appropriate discovery, Plaintiffs believe that there are hundreds or thousands of members in the proposed Securities Act Class. Record owners and other members of the Securities Act Class may be identified from records maintained by Jumia 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. 118. Plaintiffs’ claims are typical of the claims of the members of the Securities Act Class as all members of the Securities Act Class are similarly affected by Defendants’ wrongful conduct in violation of federal law that is complained of herein. 119. Plaintiffs will fairly and adequately protect the interests of the members of the Securities Act Class and has retained counsel competent and experienced in class and securities litigation. Plaintiffs have no interests antagonistic to or in conflict with those of the Securities Act Class. 120. Common questions of law and fact exist as to all members of the Securities Act Class and predominate over any questions solely affecting individual members of the Securities Act Class. Among the questions of law and fact common to the Securities Act Class are:  whether the federal securities laws were violated by Defendants’ acts as alleged herein;  whether the Registration Statement was negligently prepared and contained materially misleading statements and/or omitted material information required to be stated therein; 121. 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 Securities Act Class members may be relatively small, the expense and burden of individual litigation make it impossible for members of the Securities Act Class to individually redress the wrongs done to them. There will be no difficulty in the management of this action as a class action. SECURITIES ACT COUNTS COUNT I Violations of Section 11 of the Securities Act Against All Defendants 122. Plaintiffs incorporate the foregoing Paragraphs 1-121 by reference. 123. This Count is brought against all Defendants pursuant to §11 of the Securities Act, 15 U.S.C. §77k, on behalf of Plaintiffs and all members of the Securities Act Class who purchased or otherwise acquired Jumia ADSs pursuant or traceable to the materially false and misleading Registration Statement for the IPO. 124. The Registration Statement contained untrue statements of material facts, omitted to state other facts necessary to make the statements made not misleading, and omitted to state material facts required to be stated therein. 125. This count is based on negligence and strict liability and does not sound in fraud. Any allegation of fraud or fraudulent conduct and/or motive is expressly excluded from this count. 126. None of the 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. 127. By reason of the conduct herein alleged, each Defendant violated or controlled a person who violated §11 of the Securities Act. 128. At the time of their purchases of Jumia ADSs, Plaintiffs and other members of the Securities Act Class were without knowledge of the facts concerning the wrongful conduct alleged herein and could not have reasonably discovered those facts prior to the disclosures herein. 129. This claim is brought within one year after discovery of the untrue statements and/or omissions in the IPO that should have been made and/or corrected through the exercise of reasonable diligence, and within three years of the effective date of the IPO. It is therefore COUNT II Violations of Section 15 of the Securities Act Against the Individual Defendants 130. Plaintiffs incorporate the foregoing Paragraphs 1-129 by reference. 131. This cause of action is brought pursuant to §15 of the Securities Act, 15 U.S.C. §77o against all Defendants except the Underwriter Defendants. 132. The Individual Defendants were controlling persons of Jumia by virtue of their positions as directors or senior officers of Jumia. The Individual Defendants each had a series of direct and indirect business and personal relationships with other directors and officers and major shareholders of Jumia. The Company controlled the Individual Defendants and all of Jumia’s employees. 133. Jumia and the Individual Defendants were culpable participants in the violations of §11 of the Securities Act as alleged above, based on their having signed or authorized the signing of the Registration Statement and having otherwise participated in the process which allowed the IPO to be successfully completed. 134. This count is based on negligence and strict liability and does not sound in fraud. Any allegation of fraud or fraudulent conduct and/or motive is expressly excluded from this count. 135. This claim is brought within one year after discovery of the untrue statements and/or omissions in the IPO that should have been made and/or corrected through the exercise of reasonable diligence, and within three years of the effective date of the IPO. It is therefore EXCHANGE ACT CLAIMS PARTIES AND CONTROL PERSON ALLEGATIONS. 136. Plaintiffs, who purchased or otherwise acquired Jumia ADSs during the Exchange Act Class Period, bring these claims on behalf of the Exchange Act Class against Jumia and the Management Defendants only. 137. Each of the Management Defendants, by virtue of their high-level positions with Jumia, directly participated in the management of the Company, were directly involved in the day-to-day operations of the Company at the highest levels, and had access to the adverse undisclosed information about the Company’s business, operations, financial statements and present and future business prospects via access to internal corporate documents. The Management Defendants participated in drafting, preparing, and/or approving the public statements and communications complained of herein and were aware of, or recklessly disregarded, the material misstatements contained therein and omissions therefrom, and were aware of their materially false and misleading nature. 138. The Management Defendants, as senior executive officers of Jumia, were able to and did control the content of the various SEC filings, press releases, and other public statements pertaining to the Company during the Exchange Act Class Period. The Management Defendants had access to and were provided with copies of the documents and statements alleged herein to be materially false and misleading prior to or shortly after their issuance and/or had the ability and opportunity to prevent their issuance or cause them to be corrected. Accordingly, the Management Defendants are responsible for the accuracy of the public reports, releases, and other statements detailed herein and are primarily liable for the misrepresentations and omissions contained therein. 139. As senior officers and controlling persons of a publicly-held company whose ADSs were, during the relevant time, registered with the SEC pursuant to the Exchange Act and traded on the NYSE, the Management Defendants each had a duty to promptly disseminate accurate and truthful information with respect to Jumia’s operations and business, and to correct any previously issued statements that were materially misleading or untrue when made, so that the market price of the Company’s common stock would be based upon truthful and accurate information. The Management Defendants’ wrongful conduct during the Exchange Act Class Period as described herein violated these specific requirements and obligations. 140. In making the statements complained of herein, the Management Defendants, who were senior officers and controlling persons of Jumia, were acting on behalf of the Company in the regular course of business. Therefore, each of the statements made by the Management Defendants is attributable to Jumia. 141. Pursuant to Item 303 of Regulation S-K, 17 C.F.R. § 229.303(ii), Jumia and the Management Defendants also had an affirmative, independent duty to disclose “any known trends or uncertainties that have had or that the registrant reasonably expects will have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations.” By failing to disclose that (1) 41% of Jumia’s reported 2017 GMV consisted of orders that were returned, not delivered or cancelled and that such orders made up a similar percentage of its GMV in 2018; (2) that fake or invalid orders exceeded 50% in Nigeria, the Company’s largest market; (3) that 10,000 of the 53,000 sellers the Company stated were Active Sellers in 2017, or almost 19%, had not completed a transaction on Jumia’s platform in 2017 and a significant percentage of the 81,000 Active Sellers it reported for 2018 had not completed a transaction on Jumia’s platform in 2018; and (4) that approximately 600,000 of the 2.7 million people the Company stated were Active Consumers in 2017, or approximately 22%, had not completed a transaction on Jumia’s platform in 2017 and that a significant percentage of the 4.0 million people who it stated were Active Customers in 2018 had not completed a transaction on Jumia’s platform in 2018, Jumia and the Management Defendants failed to satisfy this duty. These omissions give rise to Plaintiffs’ Exchange Act Claims because they render statements by the Company, including the ones enumerated below, materially misleading. 142. Additionally, pursuant to Item 105 of Regulation S-K, 17 C.F.R. § 229.105, Jumia and the Management Defendants had an affirmative, independent duty to disclose in the Prospectus the Company’s most significant risk factors that make the offering speculative or risky. By failing to disclose (1) 41% of Jumia’s reported 2017 GMV consisted of orders that were returned, not delivered or cancelled and that such orders made up a similar percentage of its GMV in 2018; (2) that fake or invalid orders exceeded 50% in Nigeria, the Company’s largest market; (3) that 10,000 of the 53,000 sellers the Company stated were Active Sellers in 2017, or almost 19%, had not completed a transaction on Jumia’s platform in 2017 and a significant percentage of the 81,000 Active Sellers it reported for 2018 had not completed a transaction on Jumia’s platform in 2018; and (4) that approximately 600,000 of the 2.7 million people the Company stated were Active Consumers in 2017, or approximately 22%, had not completed a transaction on Jumia’s platform in 2017 and that a significant percentage of the 4.0 million people who it stated were Active Customers in 2018 had not completed a transaction on Jumia’s platform in 2018, Jumia and the Management Defendants failed to satisfy this duty. Since, according to the Company’s Registration Statement, GMV, Active Sellers, and Active Consumers are three of the Company’s four “key performance indicators” and “GMV is the primary driver of [Jumia’s] revenue, as the vast majority of [Jumia’s] revenue is a function of [Jumia’s] overall GMV net of cancellations and returns,” the omissions described in this paragraph posed a grave threat to Jumia’s profitability and were among the most significant factors making an investment in Jumia risky. These omissions give rise to Plaintiffs’ Exchange Act Claims because they render statements by the Company, including the ones enumerated below, materially misleading. ALLEGATIONS SOLELY FOR PLAINTIFFS’ EXCHANGE ACT CLAIMS SHOWING THAT JUMIA AND THE MANAGEMENT DEFENDANTS ACTED WITH SCIENTER. 143. The Management Defendants were able to, and did, control the contents of the various reports, press releases and public filings which Jumia disseminated in the marketplace during the Exchange Act Class Period. 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 Jumia’s operations. Throughout the Exchange Act Class Period, the Management Defendants exercised their power and authority to cause Jumia to engage in the wrongful acts complained of herein. The Management Defendants, therefore, were “controlling persons” of Jumia 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 Jumia’s ADSs. 144. By reason of their senior management positions and/or being directors of Jumia, each of the Management Defendants had the power to direct the actions of, and exercised the same to cause, Jumia to engage in the unlawful acts and conduct complained of herein. Each of the Management Defendants exercised control over the general operations of Jumia and possessed the power to control the specific activities which comprise the primary violations about which Plaintiffs and the other members of the Exchange Act Class complain. 145. By virtue of their positions at Jumia, the Management Defendants had actual knowledge or reckless disregard for the discrepancies between Jumia’s internal documents and Jumia’s Registration Statement and other public statements. Accordingly, the Management Defendants had actual knowledge of materially false and misleading statements and material omissions alleged herein and intended thereby to deceive Plaintiffs and the other members of the Exchange Act Class, or, in the alternative, Management 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 such defendants. Said acts and omissions of such defendants were committed willfully or with reckless disregard for the truth. In addition, each of the Management Defendants knew or recklessly disregarded that material facts were being misrepresented or omitted as described above. 146. The Management Defendants are liable both directly and indirectly for the wrongs complained of herein. Because of their positions of control and authority, the Management Defendants were able to and did, directly or indirectly, control the content of the statements of 147. As a result of the dissemination of the aforementioned false and misleading reports, releases and public statements, the market price of Jumia’s ADSs were artificially inflated throughout the Exchange Act Class Period. In ignorance of the adverse facts concerning Jumia’s business and financial condition which were concealed by the Management Defendants, Plaintiffs and the other members of the Exchange Act Class purchased or otherwise acquired Jumia’s ADSs at artificially inflated. A. The Timing and Nature of the Discrepancies Between the Registration Statement and the 2018 Confidential Investor Presentation Show that Jumia and the Management Defendants Intentionally or Recklessly Misled Shareholders. 148. Jumia has never made a profit and its accumulated losses though 2018, the year before its IPO, were 862 million euros, including a loss of 170.7 million euros in 2018 that was greater than the Company’s 130.6 million euros in revenue that year. 149. According to the May 9, 2019 Citron Report, Jumia’s IPO was motivated by the Company’s need to raise cash quickly. At the end of 2018, the unprofitable Company had less than a year’s worth of cash left and its two largest shareholders, MTN Group Ltd. and Rocket Internet, wanted to exit their investments. 150. The 2018 Confidential Investor Presentation was used in a failed last-ditch effort to raise money privately. Accordingly, the Management Defendants and Jumia had a strong motivation to make the company’s numbers look better so that its IPO would be successful. 151. Furthermore, a comparison between the 2018 Confidential Investor Presentation and the Registration Statement shows that the numbers in the Registration Statement were intentionally and/or recklessly manipulated to look misleadingly favorable. 152. Jumia’s disclosure in the 2018 Confidential Investor Presentation that 41% of its GMV was returned, not delivered or cancelled in 2017 shows the awareness that it was an important metric to shareholders. The exclusion of that metric from the Registration Statement and the inclusion of the statement that only 14.4% of Jumia’s GMV in 2018 was either “failed deliveries or return[s]” was clearly intended to make it appear that Jumia was disclosing all material information when instead, it was disclosing a misleadingly favorable metric that excluded cancellations for the purpose of deceiving shareholders. 153. Moreover, since Jumia’s key performance indicators in the Registration Statement — GMV, Active Consumers, and Active Sellers — were all calculated without removing cancelled orders (“irrespective of cancellations or returns”) there was no justification for Jumia’s decision to only disclose in the Registration Statement that in 2018, 14.4% of its GMV was “failed deliveries or return[s]” without disclosing its large volume of cancellations. The only possible motivation for Jumia’s decision to exclude cancellations from that metric — while including them in GMV, Active Consumers, and Active Sellers — is that the Management Defendants and Jumia intended to mislead investors into believing that only 14.4% of GMV consisted of uncompleted orders when, in reality, almost 41% of Jumia’s GMV consisted of uncompleted orders in 2017 with a similar amount in 2018. Furthermore, the phrases “failed deliveries or return[s]” and “cancellations or returns” sound sufficiently similar that it appears that Jumia and the Management Defendants intentionally intended to confuse and mislead investors. 154. Jumia’s decision to include Active Sellers and Active Consumers who had not actually completed an order on Jumia’s platform in their Registration Statement numbers, even though those same consumers and sellers were not included in the numbers in the 2018 Confidential Investor Presentation, also shows knowing intent to present metrics that looked misleadingly positive. B. The Management Defendants Were Motivated to Misrepresent GMV Because of Jumia’s Stock Option Program. 155. According to the Registration Statement, all of the Management Defendants are participants in Jumia’s 2019 stock option program. 156. The stock options can only be exercised once the performance targets have been reached and “the minimum performance target is based on GMV growth.” Additionally, “[i]n the event that the performance target(s) is/are not met by the end of the waiting period, all stock options will be completely forfeited.” (emphasis added.) 157. The Registration Statement stated that Defendants Hodara and Poignonnec would receive up to 269,288 options under the 2019 stock option program if performance targets were met. Additionally, Defendants Hodara and Poignonnec both owned an additional 2,209,192.52 in options with an exercise price of 1 euro at the end of 2018. 158. Accordingly, all the Management Defendants have a strong motivation to inflate GMV to avoid the forfeiture of their stock options. Additionally, the Management Defendants have a strong motivation to keep the price of Jumia’s ADSs high to increase the value of their options. C. Additional Scienter Allegations Concerning the Management Defendants. 159. As discussed herein in Paragraph 68 above, Defendant Poignonnec gave an interview to Real Money in which he admitted that “[the prospectus and the investor document referenced are not consistent” with Jumia’s Registration Statement. He further stated that “[t]he documents are calculated differently, since the prospectus presents active consumers in the same way we present gross merchandise volume.” These statements show that he was familiar with the 2018 Confidential Investor Presentation and knew there were material discrepancies between it and the Registration Statement. 160. Defendant Poignonnec’s scienter can also be inferred from his false exculpatory statements during Jumia’s First Quarter 2019 Earnings Call concerning fraud in Jumia’s Nigeria operation and the volume of Jumia’s cancelled orders (described in Paragraphs 66-67). 161. Given that GMV, Active Sellers, and Active Consumers are three of the four metrics defined as “Key Terms and Performance Indicators” in the Registration Statement, it is inconceivable that Defendants Poignonnec and Hodara as Co-CEOs of the Company and members of its management board, and Defendant Maillet-Mezeray, as CFO and Principal Accounting Officer of the Company, would have been unaware of the fact that there was material information about those metrics in the 2018 Confidential Investor Presentation and other internal documents that was not disclosed in the Registration Statement. Additionally, they would have been aware of emails from Wael Dib, who worked in the same office in Dubai as them, to the Jumia CFOs, given their high-level positions within Jumia. As discussed above in Paragraph 78, one of those emails attached an excel spreadsheet with monthly invalid or fraudulent orders by country confirming that more than 50% of Jumia’s orders in Nigeria were invalid or fraudulent. They also would have been aware that Ernst & Young’s pre-IPO audit of the Company only considered 7 of the 14 countries that Jumia operated in given its importance and the fact that the Senior Vice President of Finance, Nathalie De Witte, who also worked in the same office as them, emailed Jumia CFOs about it. At a minimum, these failures show reckless disregard for making false and misleading statements to shareholders. D. The Scienter of the Management Defendants and Other Employees and Agents of the Company is Imputed to Jumia. 162. The scienter of the Management Defendants and other employees and agents of the Company is imputed to Jumia under respondeat superior and agency principles as all of the wrongful acts complained of herein were carried out within the scope of their employment with authorization. 163. As explained herein, their fraudulent conduct enabled the Company to attract investors and raise funds for corporate purposes, thereby defrauding third parties for the corporation. 164. Since respondeat superior extends to employees other than the Management Defendants, regardless of whether the allegations against the Management Defendants are sufficient, knowledge of the 2018 Confidential Investor Presentation and the emails between Wael Dib and Jumia CFOs and Nathalie De Witte and the Jumia CFOs must be imputed to Jumia. Therefore, Jumia knowingly or recklessly made the false and misleading statements detailed below. MATERIALLY FALSE AND MISLEADING STATEMENTS MADE BY JUMIA AND THE MANAGEMENT DEFENDANTS DURING THE EXCHANGE ACT CLASS PERIOD. 165. The Management Defendants signed Jumia’s Registration Statement. 166. Jumia’s Registration Statement repeatedly stated that the Company’s GMV was 507.1 million euros in 2017 and 828.2 million euros in 2018 and emphasized the importance of the metric. It referred to GMV as a one of its four “key performance indicators” and further stated that “GMV is the primary driver of our revenue, as the vast majority of our revenue is a function of our overall GMV net of cancellations and returns.” 167. The Registration Statement further stated that “Active Consumers” and “Active Sellers” were two of Jumia’s three other “key performance indicators.” 168. In both the “Prospectus Summary” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Registration Statement stated: “Our business has grown substantially. As of December 31, 2018, we had 4.0 million Active Consumers, up from 2.7 million Active Consumers as of December 31, 2017. Our GMV was €828.2 million in 2018, up from €507.1 million in 2017. GMV is the primary driver of our revenue.” (emphasis in original) 169. Jumia’s Registration Statement later presented GMV in the following table in three different places: As of and for the year ended December 31, 2017 2018 (unaudited, in millions) Active Consumers 2.7 4.0 GMV € 507.1 € 828.2 $ 948.8 Adjusted EBITDA € (126.8) € (150.1) $ (172.0) 170. The Registration Statement further stated concerning the “Growth and engagement of our Active Customers” that “[o]ur GMV is a function of the number of Active Consumers on our platform and the amount they spend on our marketplace. As of December 31, 2018, we had 4.0 million Active Consumers, up from 2.7 million Active Consumers as of December 31, 2017. GMV increased from €507.1 million in 2017 to €828.2 million in 2018.” (emphasis in original). 171. The foregoing statements concerning Jumia’s GMV and Active Consumers in Paragraphs 168-170 were false and misleading because the 2017 and 2018 GMV numbers that Jumia disclosed in its Registration Statement were 30% higher than in its pre-IPO internal records. Additionally, even if the GMV numbers Jumia disclosed were correct, the foregoing statements were still false and misleading because Jumia failed to disclose that 41% of Jumia’s reported 2017 GMV consisted of orders that were returned, not delivered or cancelled and that such orders made up a similar percentage of its GMV in 2018. The foregoing statements were also false and misleading because Jumia failed to disclose that fake and invalid orders exceeded 50% in Nigeria, the Company’s largest market, but included those orders in its GMV. The foregoing statements were also false and misleading because Jumia failed to disclose that approximately 600,000 of the 2.7 million people it stated were Active Consumers in 2017, or approximately 22%, had not completed a transaction on Jumia’s platform in 2017 and that a significant percentage of the 4.0 million people who it stated were Active Customers in 2018 had not completed a transaction on Jumia’s platform in 2018. 172. In a Section entitled “Revenue,” the Registration Statement stated “GMV increased by 63.3% from €507.1 million in 2017 to €828.2 million in 2018, mainly due to a 74.7% increase in GMV from third-party sales. All regions contributed to the growth of GMV, with particularly strong contributions from West Africa and Egypt.” (emphasis in original). 173. The foregoing statement concerning Jumia’s GMV was false and misleading because the 2017 and 2018 GMV numbers that Jumia disclosed in its Registration Statement were 30% higher than in its pre-IPO internal records. Additionally, even if the GMV numbers Jumia disclosed were correct, the foregoing statement was still false and misleading because Jumia failed to disclose that 41% of Jumia’s reported 2017 GMV consisted of orders that were returned, not delivered or cancelled and that such orders made up a similar percentage of its GMV in 2018. The foregoing statement was also false and misleading because Jumia failed to disclose that fake and invalid orders exceeded 50% in Nigeria, the Company’s largest market, but included those orders in its GMV. 174. Jumia’s Registration Statement also cited GMV, Active Consumers, and Active Sellers when discussing “Strengths Related to Our Competitive Position”: Pan-African leader. We believe that we are the only e-commerce business successfully operating across multiple regions in Africa. Through our full scale operations in six regions of Africa, we generated €507.1 million in GMV in 2017 and €828.2 million in 2018, more than any other e-commerce player in the markets in which we operate. Our reach and capabilities position us as the preferred partner in Africa for sellers, from individuals to large global brands, and as the preferred shopping destination for consumers. On our platform, we had 81 thousand Active Sellers as of December 31, 2018 and a total of 4.0 million Active Consumers as of December 31, 2018. (emphasis in original.) 175. The foregoing statement was false and misleading because the 2017 and 2018 GMV numbers that Jumia disclosed in its Registration Statement were 30% higher than in its pre-IPO internal records. Additionally, even if the GMV numbers Jumia disclosed were correct, the foregoing statement was still false and misleading because Jumia failed to disclose that 41% of Jumia’s reported 2017 GMV consisted of orders that were returned, not delivered or cancelled and that such orders made up a similar percentage of its GMV in 2018. The foregoing statement was also false and misleading because Jumia failed to disclose that fake or invalid orders exceeded 50% in Nigeria, the Company’s largest market, but included those orders in its GMV. The foregoing statement was also false and misleading because Jumia failed to disclose that a significant percentage of the 4.0 million Active Customers and 81,000 Active Sellers it reported for 2018 had not completed a transaction on Jumia’s platform in 2018. 176. The Registration Statement made the following statement concerning transactions that were placed on Jumia’s platform, but were not completed: We face challenges with failed deliveries, excessive returns, late collections, unrecoverable receivables and voucher abuse, which may materially and adversely affect our business and prospects. We typically provide our consumers with the option to pay cash on delivery. Many of our consumers choose this option. . . In situations where the consumer elects to pay cash on delivery, he/she must be present at home in order to provide payment at the time of delivery; otherwise, the delivery will fail. . . . If a consumer is not present, we schedule a new delivery time. We typically make three delivery attempts, and if all of these attempts fail, we return the product to the seller. . . . Even if the product is successfully delivered to the consumer and delivery is verified, most of our sellers are required, either by local regulations or by our operating standards, to allow consumers to return goods within a certain period of time after delivery. For example, in Egypt, which is one of our largest markets, consumers have a legal right to return any product within fourteen days after delivery so long as the product is in the same condition as when delivered. Furthermore, if our sellers offer more consumer friendly return policies, the number of returns may increase, which could adversely affect our business. In 2018, orders accounting for 14.4% of our GMV were either failed deliveries or returned by our consumers. . . . We also face the risk that third-party delivery agents might misappropriate inventory, and we struggle to verify delivery when our third-party delivery partners deliver packages without obtaining consumer signatures. When goods are delivered without verification, we may be required to deliver a duplicate product. When a third-party delivery agent successfully delivers a product and accepts cash payment from the consumer, we face the additional risks of late collections (in the event that the third-party delivery agent does not remit the funds to us on time) or unrecoverable receivables (in the event that the third-party delivery agent commits fraud or becomes insolvent). These risks are particularly acute in countries where the percentage of outsourced deliveries remains high. For example, in Kenya, where approximately 95% of our consumers paid in cash or with cash equivalents on delivery in 2016, we discovered in early 2018 that €720 thousand of cash payments remained uncollected in 2016, the large majority of which was never subsequently collected. The extent of the effect on our cash flows in 2016 was due to our previous use of an insufficient cash reconciliation system, which has now been replaced with an automated system that allows us to monitor transactions in each of our markets on a daily basis. Even though we have taken measures to reduce the risks of fraud and uncollected receivables, these risks – whether facilitated by our employees, sellers, partners or consumers – remain, due largely to the prevalence of cash on delivery in many of our markets. (emphasis of title in original; other emphasis added.) 177. The foregoing statement was false and misleading because Jumia failed to disclose that 41% of Jumia’s reported 2017 GMV consisted of orders that were returned, not delivered or cancelled and that such orders made up a similar percentage of its GMV in 2018. The foregoing statement was also false and misleading because Jumia failed to disclose that fake or invalid orders exceeded 50% in Nigeria, the Company’s largest market, but included those orders in its GMV. 178. Jumia’s Registration Statement made the following disclosure concerning fraudulent and fictitious transactions: Failure to deal effectively with any fraud perpetrated and fictitious transactions conducted on our platform could harm our business. We face risks with respect to fraudulent activities on our platform. . . . Given the countries in which we operate, the number of participants on our platform and the fragmentation of our business, it is a challenge to anticipate, detect and address fraudulent activities. Although we have implemented various measures to detect and reduce the occurrence of fraudulent activities on our platform, there can be no assurance that such measures will be effective in combating fraudulent transactions or improving overall satisfaction among sellers, consumers and other participants. Additional measures that we take to address fraud could also negatively affect the attractiveness of our platform to sellers or consumers. For example, we may receive complaints from consumers who may not have received goods that they had purchased, or complaints from sellers who have not received payment for the goods ordered. In addition to fraudulent transactions with legitimate consumers, sellers may also engage in fictitious or “phantom” transactions with themselves or collaborators in order to artificially inflate their own ratings on our marketplace, reputation and search results rankings. This activity may harm other sellers by enabling the perpetrating seller to be favored over legitimate sellers and may harm consumers by deceiving them into believing that a seller is more reliable or trusted than the seller actually is. Recently, we also received information alleging that a seller in Morocco bribed one of our employees in order to receive favorable marketing treatment. In addition, we recently received information alleging that some of our independent sales consultants, members of our JForce program in Nigeria, may have engaged in fraudulent activities. We are currently investigating these allegations and are unable to determine their accuracy and/or the potential scope of fraud, if any. In addition to seller fraud, we face the risk of fraud perpetrated directly by our consumers. For example, a group of consumers in Kenya fraudulently used electronic payment suppliers to acquire approximately €550,000 in goods on our marketplace in December 2017. Consumer fraud may harm seller confidence in the integrity of our marketplace and the certainty of payment. Illegal, fraudulent or collusive activities by our employees could have a material adverse effect on our business, financial condition, results of operations and prospects and could subject us to liability or negative publicity. While we have not experienced any material events of this nature in the past, we have identified allegations of employee misconduct, which led us to improve our internal controls and our cash reconciliation system. . . . (emphasis of title in original; other emphasis added.) 179. The foregoing statement, including the bold and italicized portion that indicated that there might not be any fraud in the JForce program, was false and misleading because invalid orders exceeded 50% in Nigeria, the Company’s largest market; and 41% of Jumia’s reported 2017 GMV consisted of orders that were returned, not delivered or cancelled and that such orders made up a similar percentage of GMV in 2018. 180. Jumia’s Registration Statement made the following disclosure concerning the number of Active Sellers in 2017 and 2018: The success of our marketplace, which is central to our business model, is driven by the breadth and quality of the goods and services offered, which depends largely on the number of sellers on our marketplace and their ability to increase the range of goods and services they offer to our consumers. As of December 31, 2018, we had 81 thousand Active Sellers on our platform, up from 53 thousand Active Sellers as of December 31, 2017. The number of sellers offering similar goods on our marketplace is a key driver of price attractiveness and quality of service, as they compete for market share on our marketplace. Competition between sellers is also essential to our monetization, as it increases the appetite for sellers to use our services that are geared toward enhancing the sellers’ visibility or their quality of service. (emphasis added). 181. The foregoing statement regarding Active Sellers was false and misleading because Jumia failed to disclose that 10,000 of the 53,000 sellers it stated were Active Sellers in 2017, or almost 19%, had not completed a transaction on Jumia’s platform in 2017 and a significant percentage of the 81,000 Active Sellers it reported for 2018 had not completed a transaction on Jumia’s platform in 2018. 182. The Registration Statement repeated the Active Consumer and Active Seller numbers for 2018 several more times, showing the importance of those metrics. 183. The “Prospectus Summary,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and a section discussing the “overview” of the “business” set forth in the Registration Statement all stated “[o]n our platform, we had 81 thousand Active Sellers as of December 31, 2018 and a total of 4.0 million Active Consumers as of December 31, 2018. We believe that the number and quality of sellers on our marketplace, and the breadth of their respective offerings, attract more consumers to our platform, increasing traffic and orders, which in turn attracts even more sellers to Jumia, creating powerful network effects.” 184. The foregoing statements regarding Active Consumers and Active Sellers were false and misleading because Jumia failed to disclose that a significant percentage of the 4.0 million Active Customers and 81,000 Active Sellers it reported for 2018 had not completed a transaction on Jumia’s platform in 2018. 185. The “Prospectus Summary” and a section of the Registration Statement entitled “Our Value Proposition to Customers” stated: “Selection, price and convenience: We believe that our platform is the largest e-commerce marketplace in Africa. With a total of 81 thousand Active Sellers as of December 31, 2018 and over 29.5 million product listings on our marketplace as of December 31, 2018, consumers have access to goods from a wide range of categories.” (emphasis in original). 186. The foregoing statements regarding Active Sellers were false and misleading because Jumia failed to disclose that a significant percentage of the 81,000 Active Sellers it reported for 2018 had not completed a transaction on Jumia’s platform in 2018. 187. The Registration Statement also stated the following about the importance of Jumia’s seller network: “Our seller network consisted of 81 thousand Active Sellers as of December 31, 2018, who range from small merchants and artisans to larger corporations. If we fail to maintain and expand our existing relationships or to build new relationships with sellers on acceptable commercial terms, we will not be able to maintain and expand our broad product and service offering, which could adversely affect our business.” 188. The foregoing statement regarding Active Sellers was false and misleading because Jumia failed to disclose that a significant percentage of the 81,000 Active Sellers it reported for 2018 had not completed a transaction on Jumia’s platform in 2018. 189. The section of the Registration Statement entitled “Our Value Proposition to Sellers” stated the following concerning the importance of Jumia’s customer base: “Access to a large and growing consumer base: We believe that our brand has become synonymous with online and mobile shopping in our markets, and we have built a logistics service that provides sellers with access to consumers across a wide delivery footprint. As a result, through our platform, local sellers can efficiently reach consumers across a particular country, and international sellers can efficiently reach a large number of consumers across most major markets in Africa. In 2018, we connected sellers with 4.0 million Active Consumers.” (emphasis in original). 190. The foregoing statement regarding Active Consumers was false and misleading because Jumia failed to disclose that a significant percentage of the 4 million Active Customers it reported for 2018 had not completed a transaction on Jumia’s platform in 2018. 191. Finally, Jumia’s Registration Statement included the following report by Ernst & Young Luxembourg concerning its audit of Jumia: REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Management and the Supervisory Board of Jumia Technologies AG (formerly Africa Internet Holding GmbH) Opinion on the Financial Statements We have audited the accompanying consolidated statement of financial position of Africa Internet Holding GmbH and subsidiaries (the Company) as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive income (loss), changes in equity and cash flows for each of the two years in the period ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2018, in conformity with International Financial Reporting Standards as issued by the International Accounting Standard Board. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young Ernst & Young Société Anonyme Cabinet de Révision Agréé We have served as the Company’s auditor since 2014. Luxembourg February 6, 2019 (emphasis in original). 192. The foregoing statement concerning Ernst & Young’s audit of Jumia was false and misleading because Ernst & Young only audited 7 of the 14 countries that Jumia operated in at the time Jumia issued its Registration Statement. Ernst & Young’s audit scope did not include Senegal, Tunisia, Algeria, Rwanda, Uganda, Tanzania, and Cameroon. 193. On May 13, 2019, Jumia held its First Quarter 2019 Earnings Call. Defendants Poignonnec and Maillet-Mezeray were participants on the call. 194. During the First Quarter 2019 Earnings Call, Mark Mahaney from Royal Bank of Canada asked about JForce and fraud in Nigeria: “[C]ould you just address the issue of Jforce and fraud [ph] in Nigeria as an operating risk? And how you tried to hedge that? How you tried to manage that?” Defendant Poignonnec responded: I would like to say very upfront that the Jforce agents which are consultants which are part of Jforce get commissions of course on the percentage of their completed transaction after all cancellations and returns. And this is of course key and very normal. We do that. We have even actually introduced penalties as well as extra incentive to drive lower cancellations and returns for the orders which are generated by the Jforce consultant. So for us this is a very innovative marketing channel which helps consumers adopt ecommerce. It's also very useful channel to gather insights on the consumers, in addition to the data we collect online. And it's been a very successful channel which is particularly adapted to the needs of our market. 195. The foregoing statement were false and misleading because Jumia failed to disclose that fake or invalid orders exceeded 50% in Nigeria. The foregoing statements were also false and misleading because Jumia failed to disclose that 41% of Jumia’s reported 2017 GMV consisted of orders that were returned, not delivered or cancelled and that such orders made up a similar percentage of its GMV in 2018. 196. Later on during the First Quarter 2019 Earnings Call, Aaron Kessler of Raymond James asked if Defendant would “address some of the recent concerns around maybe its delivery rates, failed deliveries and cancellations kind of where we're at now on that?” Defendant Poignonnec responded: Then on the failed delivery; these are normal features of an e-commerce business and for us we have cancellations, failed deliveries and returns and those are expected to be higher in the nation's e-commerce markets where the majority of the business is still cash on delivery. And for us this actually represents monetization upsides, because today we carry certain costs on those transactions without booking a corresponding revenue, so of course we see the upside there. 197. The foregoing statement was false and misleading because Jumia failed to disclose that 41% of Jumia’s reported 2017 GMV consisted of orders that were returned, not delivered or cancelled and that such orders made up a similar percentage of its GMV in 2018. The foregoing statements were also false and misleading because Jumia failed to disclose that fake or invalid orders exceeded 50% in Nigeria, the Company’s largest market. LOSS CAUSATION. 198. As detailed herein, during the Exchange Act Class Period, Jumia and the Management Defendants engaged in a scheme to deceive the market and a course of conduct that artificially inflated the price of Jumia ADSs. This scheme operated as a fraud or deceit on purchasers of Jumia ADSs by failing to disclose and misrepresenting the adverse facts detailed herein. When Jumia and the Management Defendants’ prior misrepresentations and fraudulent conduct were disclosed and became apparent to the market, the price of Jumia ADSs declined significantly as the prior artificial inflation came out of the price of Jumia ADSs. 199. By concealing the adverse facts detailed herein from investors, Jumia and the Management Defendants presented a misleading picture of Jumia’s business, prospects, and operations. Jumia and the Management Defendants’ false and misleading statements had the intended effect and caused Jumia ADSs to trade at artificially inflated levels throughout the Exchange Act Class Period, reaching as high as $49.77 per ADS on April 17, 2019. As a result of their purchases of Jumia ADSs at artificially inflated prices during the Exchange Act Class Period, Plaintiffs and the other Exchange Act Class members suffered economic loss, i.e., damages, under the federal securities laws. 200. When the truth about the Company was revealed to the market, the price of Jumia ADSs fell significantly. The decline removed the inflation from the price of Jumia ADSs, causing real economic loss to investors who had purchased Jumia ADSs during the Exchange Act Class Period. The decline in the price of Jumia ADSs, when the corrective disclosures came to light, was a direct result of the nature and extent of Jumia and the Management Defendants’ fraudulent misrepresentations being revealed to investors and the market. The timing and magnitude of the price decline in Jumia ADSs negates any inference that the loss suffered by Plaintiffs and the other Exchange Act Class members was caused by changed market conditions, macroeconomic or industry factors or Company-specific facts unrelated to Jumia and the Management Defendants’ fraudulent conduct. 201. The disclosures that corrected the market price to eliminate the inflation maintained by Jumia and the Management Defendants’ material misstatements and omissions are detailed below: (1) As detailed in Paragraphs 59-65, Citron issued its first report concerning Jumia on May 9, 2019. In response to the issuance of the May 9, 2019 Citron Report, the price of Jumia ADSs declined over 26% on heavy trading volume over a two-day period, from $33.11 per ADS on May 8, 2019 to $24.50 per ADS on May 10, 2019. (2) As detailed in Paragraph 80, on August 21, 2019, before market hours, Jumia admitted, in the Company’s second quarter 2019 earnings press release that was filed with the SEC, that there was a significant amount of fake orders generated by JForce in Nigeria. In response to that disclosure, the price of Jumia ADSs declined almost 17% on heavy trading volume over, from $14.75 per ADS on August 21, 2019 to $12.27 per ADS on August 22, 2019. (3) As detailed in Paragraph 86, on September 20, 2019, after the close of the market, Bloomberg News published an article entitled “Amazon of Africa Van Drivers Battle Hardships on Lagos Streets” that confirmed Citron’s allegations that Jumia’s percentage of failed deliveries, including cancellations and returns, was around 40%. In response to the publication of that Bloomberg Article, the price of Jumia ADSs declined more than 23% on heavy trading volume over a three-business day period, from $10.38 per ADS on September 20, 2019 to $7.95 per ADS on September 25, 2019. 202. The economic loss, i.e., damages, suffered by Plaintiffs and the other Exchange Act Class members was a direct result of Jumia and the Management Defendants’ fraudulent scheme to artificially inflate the price of Jumia ADSs and the subsequent significant decline in the value of Jumia ADSs when their prior misrepresentations and omissions were revealed. NO STATUTORY SAFE HARBOR 203. The statutory safe harbor provided for forward-looking statements under the Private Securities Litigation Reform Act of 1995 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 adequately 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, Jumia and the Management 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 Jumia who knew that the statement was false when made. PLAINTIFFS’ CLASS ACTION ALLEGATIONS 204. Plaintiffs bring these claims as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of the Exchange Act Class. Excluded from the Exchange Act Class are Jumia and the Management 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 Jumia and the Management Defendants have or had a controlling interest. 205. The members of the Exchange Act Class are so numerous that joinder of all members is impracticable. Throughout the Exchange Act Class Period, Jumia ADSs were actively traded on the NYSE. While the exact number of Exchange Act Class members is unknown to Plaintiffs at this time and can be ascertained only through appropriate discovery, Plaintiffs believe that there are hundreds or thousands of members in the proposed Exchange Act Class. Record owners and other members of the Exchange Act Class may be identified from records maintained by Jumia 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. 206. Plaintiffs’ claims are typical of the claims of the members of the Exchange Act Class as all members of the Exchange Act Class are similarly affected by Defendants’ wrongful conduct in violation of federal law that is complained of herein. 207. Plaintiffs will fairly and adequately protect the interests of the members of the Exchange Act Class and has retained counsel competent and experienced in class and securities litigation. Plaintiffs have no interests antagonistic to or in conflict with those of the Exchange Act Class. 208. Common questions of law and fact exist as to all members of the Exchange Act Class and predominate over any questions solely affecting individual members of the Exchange Act Class. Among the questions of law and fact common to the Exchange Act Class are:  whether the federal securities laws were violated by Jumia and the Management Defendants’ acts as alleged herein;  whether statements made by Jumia and the Management Defendants to the investing public during the Exchange Act Class Period misrepresented material facts about the business, operations and management of Jumia;  whether the Management Defendants caused Jumia to issue false and misleading financial statements;  whether Jumia and the Management Defendants acted knowingly or recklessly in issuing false and misleading financial statements;  whether the prices of Jumia ADSs during the Exchange Act Class Period were artificially inflated because of the Jumia and the Management Defendants’ conduct complained of herein; and  whether the members of the Exchange Act Class have sustained damages and, if so, what is the proper measure of damages. 209. 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 Exchange Act Class members may be relatively small, the expense and burden of individual litigation make it impossible for members of the Exchange Act Class to individually redress the wrongs done to them. There will be no difficulty in the management of this action as a class action. PRESUMPTION OF RELIANCE 210. Plaintiffs will rely, in part, upon the presumption of reliance established by the fraud-on-the-market doctrine in that:  Jumia and the Management Defendants made public misrepresentations or failed to disclose material facts during the Exchange Act Class Period;  the omissions and misrepresentations were material;  Jumia ADSs are traded in an efficient market;  the Company’s shares were liquid and traded with moderate to heavy volume during the Exchange Act 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 ADSs; and  Plaintiffs and members of the Exchange Act Class purchased, acquired and/or sold Jumia ADSs between the time Jumia and the Management Defendants failed to disclose or misrepresented material facts and the time the true facts were disclosed, without knowledge of the omitted or misrepresented facts. 211. Based upon the foregoing, Plaintiffs and the members of the Exchange Act Class are entitled to a presumption of reliance upon the integrity of the market. 212. Alternatively, Plaintiffs and the members of the Exchange Act 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 Jumia and the Management Defendants omitted material information in their statements during the Exchange Act Class Period in violation of a duty to disclose such information, as detailed herein. EXCHANGE ACT COUNTS COUNT III Violations of Section 10(b) of the Exchange Act Against Jumia and the Management Defendants 213. Plaintiffs incorporate the foregoing Paragraphs 1-19, 22-28, 54-87, and 136-212 by reference. 214. During the Exchange Act Class Period, Jumia and the Management 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. 215. Jumia and the Management 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 that operated as a fraud and deceit upon the purchasers of the Company’s ADSs during the Exchange Act Class Period. 216. Plaintiffs and the Exchange Act Class have suffered damages in that, in reliance on the integrity of the market, they paid artificially inflated prices for Jumia ADSs. Plaintiffs and the Exchange Act Class would not have purchased Jumia ADSs at the prices they paid, or at all, if they had been aware that the market prices had been artificially and falsely inflated by Jumia and the Management Defendants’ misleading statements. 217. As a direct and proximate result of Jumia and the Management Defendants’ wrongful conduct, Plaintiffs and the other members of the Exchange Act Class suffered damages in connection with their purchases of Jumia ADSs during the Exchange Act Class Period. COUNT IV Violations of Section 20(a) of the Exchange Act Against the Management Defendants 218. Plaintiffs incorporate the foregoing Paragraphs 1-19, 22-28, 54-87, and 136-217 by reference. 219. The Management Defendants acted as controlling persons of Jumia within the meaning of Section 20(a) of the Exchange Act. 220. By virtue of their positions as officers and/or directors of Jumia, and/or their ownership of Jumia securities, the Management Defendants had the power and authority to, and did, cause Jumia to engage in the wrongful conduct alleged. 221. As a direct and proximate result of the Management Defendants’ wrongful conduct, Plaintiffs and the other members of the Exchange Act Class suffered damages in connection with their purchases of Jumia ADSs during the Exchange Act Class Period. 222. By reason of such conduct, the Management Defendants are liable pursuant to Section 20(a) of the Exchange Act. PRAYER FOR RELIEF WHEREFORE, Plaintiffs demand judgment against Defendants as follows: A. Declaring this action to be a class action properly maintained pursuant to Rule 23 of the Federal Rules of Civil Procedure, certifying Plaintiffs as class representatives and appointing Plaintiffs’ counsel as Co-Class Counsel; B. Awarding Plaintiffs and other members of the two classes damages together with interest thereon; C. Awarding Plaintiffs and other members of the two classes their costs and expenses of this litigation, including reasonable attorneys’ fees, expert fees and other costs and disbursements; and D. Awarding Plaintiff and other members of the two classes such other and further relief as the Court deems just and proper under the circumstances. DEMAND FOR TRIAL BY JURY Plaintiffs hereby demand a trial by jury. Dated: December 30, 2019 Respectfully submitted, THE ROSEN LAW FIRM, P.A. By: /s/ Phillip Kim Phillip Kim Laurence Rosen Brian B. Alexander 275 Madison Avenue, 40th Floor New York, NY 10016 Telephone: (212) 686-1060 Fax: (212) 202-3827 Email: pkim@rosenlegal.com lrosen@rosenlegal.com balexander@rosenlegal.com POMERANTZ LLP Jeremy A. Lieberman Brenda Szydlo 600 Third Avenue, 20th Floor New York, New York 10016 Telephone: (212) 661-1100 Facsimile: (917) 463-1044 Email: jalieberman@pomlaw.com bszydlo@pomlaw.com POMERANTZ LLP Patrick V. Dahlstrom 10 South La Salle Street, Suite 3505 Chicago, Illinois 60603 Telephone: (312) 377-1181 Facsimile: (312) 377-1184 Email: pdahlstrom@pomlaw.com Attorneys for Plaintiffs and the Proposed Classes

securities

qFKp_ogBF5pVm5zY3S_n

Krieger Law Group, LLC David Krieger, Esq. (NV Bar No. 9086) 2850 W. Horizon Ridge Parkway Suite 200 Henderson, NV 89052 E: DKrieger@Kriegerlawgroup.com T: 702-848-3855 Hiraldo P.A. Manuel Hiraldo, Esq. (pro hac vice forthcoming) 401 E Las Olas Blvd., Suite 1400 Fort Lauderdale, FL 33301 E: Mhiraldo@Hiraldolaw.com T: 954-400-4713 Attorneys for Plaintiff and Proposed Class UNITED STATES DISTRICT COURT DISTRICT OF NEVADA JOHN NATIVIDAD, individually and on behalf of all others similarly situated, Plaintiff, Case No. CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE TELEPHONE CONSUMER PROTECTION ACT, 47 U.S.C. §§ 227, ET SEQ. (TCPA) JURY TRIAL DEMANDED vs. NEVADA HOLISTIC MEDICINE LLC Defendant. CLASS ACTION COMPLAINT 1. Plaintiff, John Natividad, brings this action against Defendant, Nevada Holistic Medicine LLC., to secure redress for violations of the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227. NATURE OF THE ACTION 2. This is a putative class action pursuant to the Telephone Consumer Protection Act, 47 U.S.C. §§ 227, et seq. (the “TCPA”). 3. Defendant markets and sells cannabis products that it grows indoors.1,2 4. To promote its goods and services, Defendant engages in telephonic sales calls using text messages and ignores requests that it stop. 5. 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. Plaintiff also seeks statutory damages on behalf of Plaintiff and members of the Class, and any other available legal or equitable remedies. JURISDICTION AND VENUE 6. 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”). 7. The Court has personal jurisdiction over Defendant and venue is proper in this District because Defendant directs, markets, and provides its business activities to this District, and because Defendant’s unauthorized marketing scheme was directed by Defendant to consumers in this District, including Plaintiff. PARTIES 1 vegastreehouse.com/order 2 https://www.globenewswire.com/en/news-release/2021/06/24/2252474/0/en/Agrify-Expands- Relationship-with-Current-Customer-Nevada-Holistic-Medicine-Further-Increases-Presence-in- Attractive-Nevada-Market.html 8. Plaintiff is a natural person who, at all times relevant to this action, was a resident of Las Vegas, Nevada 9. Defendant is a Nevada corporation whose principal office is located at 4660 S Decatur Blvd, Las Vegas NV 89103. Defendant directs, markets, and provides its business activities throughout the United States, including throughout the state of Nevada. 10. 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 11. On November 17, 2020, Defendant caused the following text message to be transmitted to Plaintiff’s cellular telephone number ending in 9505 (“9505 Number”) from the telephone number 205-850-7102: 12. On November 18, 2021, Plaintiff responded “Stop ny16” in order to stop Defendant from continuing to send him text messages. 13. On May 4, 2021, Defendant caused another text message to be transmitted to the 9505 Number from the telephone number 515-654-3108: 14. On May 8, 2021, Plaintiff responded “End” in order to stop Defendant from continuing to send him text messages. 15. Despite Plaintiff’s requests that it cease sending him messages, Defendant sent Plaintiff the following text messages from a different number (530- 451-1575) on June 20, 2021, June 21, 2021, June 22, 2021 and June 24, 2021: 16. The purpose of these text messages is to promote and market Defendant’s products, goods and or services. 17. At the time Plaintiff received these text messages Plaintiff was the subscriber and/or sole user of the 9505 Number. 18. Plaintiff received the subject text messages within this judicial district and, therefore, Defendant’s violation of the TCPA occurred within this district. 19. Upon information and belief, Defendant caused similar text messages to be sent to individuals residing within this judicial district. 20. Plaintiff never gave Defendant consent to send him marketing text messages and any consent Defendant may claim to have had was revoked by Plaintiff when he requested that Defendant stop sending him text messages. 21. Defendant failed to honor or abide by Plaintiff’s opt-out request and continued to repeatedly text message Plaintiff after he asked for the messages to stop. 22. Defendant sent Plaintiff no less than five (5) text message solicitations after Plaintiff’s initial stop request on November 18, 2020. 23. Defendant’s failure to abide by Plaintiff’s opt-out requests is indicative of Defendant’s lack of a written policy for maintaining internal do not call procedures. 24. Defendant’s failure to abide by Plaintiff’s opt-out requests is indicative of Defendant’s failure to institute procedures for maintaining a list of persons who request not to receive telemarketing calls. 25. Defendant’s failure to abide by Plaintiff’s opt-out requests is indicative of Defendant’s failure to maintain an internal do not call list, as well as inform and train its personnel engaged in telemarking in the existence and the use of any internal do not call list. 26. Defendant’s failure to abide by Plaintiff’s opt-out requests demonstrates that Defendant does not record opt-out requests or place subscribers’ names and telephone number on any do-not-call list at the time the requests are made. 27. Defendant’s unsolicited calls caused Plaintiff to suffer injuries including annoyance and disruption to his daily life, as well as violation of Plaintiff’s legal rights under the TCPA. CLASS ALLEGATIONS PROPOSED CLASS 28. Plaintiff brings this case as a class action pursuant to Fed. R. Civ. P. 23, on behalf of himself and all others similarly situated. 29. Plaintiff brings this case on behalf of the Class defined as follows: Internal Do Not Call Class: All persons within the United States who, within the four years prior to the filing of this Complaint, (1) were sent a text message from Defendant or anyone on Defendant’s behalf, (2) promoting Defendant’s products, goods or services, (3) to said person’s residential telephone number, (4) after making a request to Defendant to not receive future text messages, including, but not limited to, by replying “end” or “stop ny16” to Defendant’s text messages. 30. Plaintiff reserves the right to modify the Class definitions as warranted as facts are learned in further investigation and discovery. 31. 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 32. Upon information and belief, Defendant has placed calls to cellular telephone numbers belonging to thousands of consumers. The members of the Class, therefore, are believed to be so numerous that joinder of all members is impracticable. 33. The exact number and identities of the Class members are unknown at this time and can be ascertained only through discovery. Identification of the Class members is a matter capable of ministerial determination from Defendant’s call records, which contains the date, time, content, and recipient of each of Defendant’s text message solicitations, as wells as inbound messages like Plaintiff’s “end” COMMON QUESTIONS OF LAW AND FACT 34. 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: [1] Whether Defendant initiated telemarketing calls to telephone numbers; [2] Whether Defendant continued to text message individuals after they requested for the messages to stop; [3] Whether Defendant failed to properly maintain and internal do not call list and procedures; [4] Whether Defendant’s conduct was knowing and willful; [5] Whether Defendant is liable for damages, and the amount of such damages; and [6] Whether Defendant should be enjoined from such conduct in the future. 35. The common questions in this case are capable of having common answers. If Plaintiff’s claim that Defendant routinely transmits unsolicited text messages to telephone is accurate, Plaintiff and the Class members will have identical claims capable of being efficiently adjudicated and administered in this case. TYPICALITY 36. 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 37. 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 38. 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. 39. 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 47 U.S.C. § 227(c) and 47 C.F.R. § 64.1200(d) (On Behalf of Plaintiff and the Internal Do Not Call Class) 40. Plaintiff re-alleges and incorporates the foregoing allegations as if fully set forth herein. 41. 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. 42. 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. 43. Plaintiff and the Internal Do Not Call Class members made requests to Defendant not to receive calls from Defendant. 44. Defendant failed to honor Plaintiff and the Internal Do Not Call Class members opt-out requests. 45. 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. 46. Thus, Defendant has violated 47 C.F.R. § 64.1200(d). 47. 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. 48. 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. 49. 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 relief: a) An order certifying this case as a class action on behalf of the Class as defined above, and appointing Plaintiff as the representative of the Class and Plaintiff’s counsel as Class Counsel; b) An award of actual and statutory damages for Plaintiff and each member of the Class; c) As a result of Defendant’s negligent violations of 47 U.S.C. §§ 227, et seq., and its implementing regulations, Plaintiff seeks for Plaintiff and each member of the Class $500.00 in statutory damages for each and every violation pursuant to 47 U.S.C. §§ 227. d) As a result of Defendant’s knowing and/or willful violations of 47 U.S.C. §§ 227, et seq., and its implementing regulations, Plaintiff seeks for Plaintiff and each member of the Classes treble damages, as provided by statute, up to $1,500.00 for each and every violation pursuant to 47 U.S.C. § 277(b)(3)(B) and § 277(b)(3)(C); e) An order declaring that Defendant’s actions, as set out above, violate the TCPA and its implementing regulations; f) An injunction requiring Defendant to cease all unsolicited text messaging activity, and to otherwise protect the interests of the Classes; g) An injunction requiring Defendant to cease all text messaging activity to individuals who have requested to be removed from Defendant’s contact list; h) A declaration that Defendant’s practices described herein violate 47 C.F.R. § 64.1200(a)(1)(iii); i) A declaration that Defendant’s violations of 47 C.F.R. § 64.1200(a)(1)(iii) were willful and knowing; and j) 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. Respectfully submitted, Dated: September 20, 2021 HIRALDO P.A. /s/Manuel Hiraldo Manuel S. Hiraldo Florida Bar No. 030380 Pro Hac Vice Forthcoming 401 E. Las Olas Boulevard Suite 1400 Ft. Lauderdale, Florida 33301 Email: mhiraldo@hiraldolaw.com Telephone: 954.400.4713 Counsel for Plaintiff Krieger Law Group, LLC /s/David Krieger David Krieger, Esq. (NV. Bar No. 9086) 2850 W. Horizon Ridge Parkway Suite 200 Henderson, NV 89052 E: DKrieger@Kriegerlawgroup.com T: 702-848-3855 Attorneys for Plaintiff and the Proposed Class

privacy

p-EBEYcBD5gMZwczFpPR

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 and the Class UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK LUCIA MARETT, on behalf of herself and all others similarly situated, Case No.: Plaintiff, CLASS ACTION COMPLAINT -against- BOSTON MARKET CORPORATION, Defendant, Plaintiff, LUCIA MARETT (hereinafter, “Plaintiff”), on behalf of herself and others similarly situated, by and through her undersigned attorney, hereby files this Class Action Complaint against Defendant, Boston Market Corporation, and states as follows: INTRODUCTION 1. This class action seeks to put an end to systemic civil rights violations committed by Defendant Boston Market Corporation (hereafter collectively as “Boston Market” or “Defendant”), against the blind in New York State and across the United States. Defendant is denying blind individuals throughout the United States equal access to the goods and services Boston Market provides to their non-disabled customers through http://www.bostonmarket.com (hereafter “Bostonmarket.com” or “the website”). Bostonmarket.com provides to the public a wide array of the goods, services, price specials, employment opportunities and other programs offered by Boston Market. Yet, Bostonmarket.com contains thousands of access barriers that make it difficult if not impossible for blind customers to use the website. In fact, the access barriers make it impossible for blind users to even complete a transaction on the website. Boston Market thus excludes the blind 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 people to fully and independently access a variety of services, including ordering food online. 2. Plaintiff is a blind individual. She brings this civil rights class action against Defendant for failing to design, construct, and/or own or operate a website that is fully accessible to, and independently usable by, blind people. 3. Specifically, Bostonmarket.com has many access barriers preventing blind people to independently navigate and complete a purchase using assistive computer technology. 4. Plaintiff uses the terms “blind person” or “blind people” and “the blind” to refer to all persons 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. 5. Approximately 8.1 million people in the United States are visually impaired, including 2.0 million who are blind.1 There are approximately 400,000 visually impaired persons in New York State.2 6. Many blind people enjoy online shopping just as sighted people do. The lack of 1 Americans with Disabilities: 2010 Report, U.S. Census Bureau Reports 2 American Foundation for the Blind, State-Specific Statistical Information, January 2015 an accessible website means that blind people are excluded from the rapidly expanding self- service food industry and from independently accessing this ever-popular 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. Boston Market’s sighted customers can independently browse, select, and buy gift cards online without the assistance of others. However, blind people must rely on sighted companions to assist them in accessing and purchasing on Bostonmarket.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 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 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 buy “Rotisserie Turkey Breast” on Bostonmarket.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 Bostonmarket.com. 11. This complaint seeks declaratory and injunctive relief to correct Boston Market’s policies and practices to include measures necessary to ensure compliance with federal and state law and to include monitoring of such measures, to update and remove accessibility barriers on Bostonmarket.com so that Plaintiff and the proposed Class of customers who are blind will be able to independently and privately use Defendant’s website. 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 of this action pursuant to: a. 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 b. 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. § 1332(d)(2). 13. 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”). 14. Venue is proper in the Southern District of New York pursuant to 28 U.S.C. §§ 1391(b)- (c) and 1441(a). 15. Defendant is registered to do business in New York State and has been doing business in New York State, including the Southern District of New York. Defendant maintains 15 restaurants in the Southern District of New York, which are subject to personal jurisdiction in this District. Defendant also has been and is committing the acts alleged herein in the Southern District of New York, has been and is violating the rights of consumers in the Southern District of New York, and has been and is causing injury to consumers in the Southern District of New York. A substantial part of the acts and omissions giving rise to Plaintiff’s claims have occurred in the Southern District of New York. Specifically, Plaintiff attempted to purchase “Rotisserie Turkey Breast” on Defendant’s website Bostonmarket.com in New York County. PARTIES 16. Plaintiff, LUCIA MARETT, is and has been at all times material hereto a resident of New York County, New York. 17. Plaintiff LUCIA MARETT is legally blind 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 MARETT cannot use a computer without the assistance of screen reader software. Plaintiff MARETT has been denied the full enjoyment of the facilities, goods and services of Bostonmarket.com, as well as to the facilities, goods and services of Boston Market restaurant locations, as a result of accessibility barriers on Bostonmarket.com. Most recently in October 2016, Plaintiff MARETT attempted to make a purchase on Bostonmarket.com but could not add “Rotisserie Turkey Breast” to her cart due to the inaccessibility of the website. The inaccessibility of Bostonmarket.com has deterred her and Class members from the enjoyment of Boston Market Restaurants. 18. Defendant BOSTON MARKET CORPORATION is an American for-profit corporation organized under the laws of New York, with a process of service address at 111 EIGHTH AVENUE, NEW YORK, NY, 10011. 19. Defendant owns and operates restaurant locations (hereafter “Boston Market Restaurants”), which are places of public accommodations. There are currently more than 40 Boston Market restaurants in New York State. These restaurants provide to the public important goods, such as chicken, turkey and sandwich. Boston Market also provides to the public a website service known as Bostonmarket.com. Among other things, Bostonmarket.com provides access to the array of goods and services offered to the public by Boston Market, including turkey. The inaccessibility of Bostonmarket.com has deterred Plaintiff from buying Boston Market’s food. 20. Plaintiff, on behalf of herself and others similarly situated seeks full and equal access to the goods and services provided by Boston Market through Bostonmarket.com. CLASS ACTION ALLEGATIONS 21. 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 Bostonmarket.com and as a result have been denied access to the enjoyment of goods and services offered in Boston Market Restaurants, during the relevant statutory period.” 22. 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 Bostonmarket.com and as a result have been denied access to the enjoyment of goods and services offered in Boston Market Restaurants, during the relevant statutory period.” 23. 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. 24. 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 Bostonmarket.com and Boston Market Restaurants. 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 Bostonmarket.com and by extension the goods and services offered through Defendant’s website to Boston Market Restaurants. 25. There are common questions of law and fact common to the class, including without limitation, the following: a. Whether Bostonmarket.com is a “public accommodation” under the ADA; b. Whether Bostonmarket.com is a “place or provider of public accommodation” under the laws of the New York; c. Whether Defendant through its website Bostonmarket.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 Bostonmarket.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 laws of New York. 26. The claims of the named Plaintiff are typical of those of the class. The class, similarly to the Plaintiff, are severely visually impaired or otherwise blind, and claim that Boston Market has violated the ADA, and/or the laws of New York by failing to update or remove access barriers on their website, Bostonmarket.com, so it can be independently accessible to the class of people who are legally blind. 27. 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. 28. 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. 29. 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. 30. References to Plaintiff shall be deemed to include the named Plaintiff and each member of the class, unless otherwise indicated. FACTUAL ALLEGATIONS 31. Boston Market operates Boston Market Restaurants, which are chain restaurants with more than 40 locations in New York State. There are 15 Boston Market Restaurants located in the Southern District of New York. 32. Bostonmarket.com is a service and benefit offered by Boston Market and Boston Market Restaurants throughout the United States, including New York state. Bostonmarket.com is owned, controlled and/or operated by Boston Market. 33. Bostonmarket.com is a commercial website that offers products and services for online sale that are available in Boston Market restaurant locations. The online store allows the user to browse menu items, menu descriptions and prices; buy Boston Market gift cards, find restaurant locations; and perform a variety of other functions. 34. Among the features offered by Bostonmarket.com are the following: (a) restaurant information, allowing persons who wish to dine at a Boston Market restaurant to learn its location, hours, and phone numbers; (b) an online store, allowing customers to make a purchase and select for pick up or delivery; (c) information about Boston Market’s job opportunities; and (d) information about Boston Market’s specials, company story and contact information. 35. This case arises out of Boston Market’s policy and practice of denying the blind access to Bostonmarket.com, including the goods and services offered by Boston Market Restaurants through Bostonmarket.com. Due to Boston Market’s failure and refusal to remove access barriers to Bostonmarket.com, blind individuals have been and are being denied equal access to Boston Market Restaurants, as well as to the numerous goods, services and benefits offered to the public through Bostonmarket.com. 36. Boston Market denies the blind access to goods, services and information made available through Bostonmarket.com by preventing them from freely navigating Bostonmarket.com. 37. The Internet has become a significant source of information for conducting business and for doing everyday activities such as shopping, banking, etc., for sighted and blind persons. 38. 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. 39. There are well-established guidelines for making websites accessible to blind people. These guidelines have been in place for at least 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. 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 people can easily navigate the site. Without these very basic components a website will be inaccessible to a blind person using a screen reader. 40. Bostonmarket.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 windows, the lack of navigation links; the denial of keyboard access; and the requirement that transactions be performed solely with a mouse. 41. 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 a sighted user sees 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 Bostonmarket.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 Boston Market customers are unable to determine what is on the website, browse the site, investigate Boston Market’s menu, gift card details and/or make any purchases. 42. More specifically, Bostonmarket.com utilizes inaccessible pop-up forms for customers to purchase food on Bostonmarket.com. In attempting to navigate the purchase window, the screen reader only reads the background webpage. However, it is a tenet of website accessibility that websites make it easier for users to see and hear content including separating foreground from background. Because of the inaccessible pop-up window, blind customers are essentially prevented from purchasing any item on Bostonmarket.com. 43. Moreover, the lack of navigation links on Boston Market’s website makes attempting to navigate through Boston Market.com even more time consuming and confusing for Plaintiff and blind consumers. 44. Bostonmarket.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, Bostonmarket.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 Bostonmarket.com. 45. Due to Bostonmarket.com’s inaccessibility, Plaintiff and blind customers must in turn spend time, energy, and/or money to make their purchases at a Boston Market restaurant. Some blind customers may require a driver to get to the restaurant or require assistance in navigating the restaurant. By contrast, if Bostonmarket.com was accessible, a blind person could independently investigate products and programs and make purchases via the Internet as sighted individuals can and do. 46. Bostonmarket.com thus contains access barriers which deny full and equal access to Plaintiff, who would otherwise use Bostonmarket.com and who would otherwise be able to fully and equally enjoy the benefits and services of Boston Market Restaurants in New York State. 47. Plaintiff LUCIA MARETT has made numerous attempts to complete a purchase on Bostonmarket.com, most recently in October 2016, but was unable to do so independently because of the many access barriers on Defendant’s website, causing Bostonmarket.com to be inaccessible and not independently usable by, blind and visually impaired individuals. 48. As described above, Plaintiff has actual knowledge of the fact that Defendant’s website, Bostonmarket.com contains access barriers causing the website to be inaccessible, and not independently usable by, blind and visually impaired individuals. 49. These barriers to access have denied Plaintiff full and equal access to, and enjoyment of, the goods, benefits and services of Bostonmarket.com and Boston Market Restaurants. 50. Boston Market 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. 51. Boston Market utilizes standards, criteria or 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) 52. Plaintiff realleges and incorporates by reference the foregoing allegations as if set forth fully herein. 53. 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 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). 54. Boston Market Restaurants located in New York State and throughout the United States are sales establishments and public accommodations within the definition of 42 U.S.C. § 12181(7)(E). Bostonmarket.com is a service, privilege or advantage of Boston Market Restaurants. Bostonmarket.com is a service that is by and integrated with these restaurants. 55. Defendant is subject to Title III of the ADA because they own and operate Boston Market Restaurants. 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 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. 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, among other things, “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. 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 large 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 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. 61. 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 Boston Market Restaurants who are blind have been denied full and equal access to Bostonmarket.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. 62. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 63. 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 Bostonmarket.com and Boston Market Restaurants 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 Defendant from continuing to engage in these unlawful practices, Plaintiff and members of the proposed class and subclass will continue to suffer irreparable 65. The actions of Defendant were and are in violation of the ADA and therefore Plaintiff invokes her 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.” 70. Boston Market Restaurants located in New York State and throughout the United States are sales establishments and public accommodations within the definition of N.Y. Exec. Law § 292(9). Bostonmarket.com is a service, privilege or advantage of Boston Market Restaurants. Bostonmarket.com is a service that is by and integrated with these restaurants. 71. Defendant is subject to New York Human Rights Law because they own and operate the Boston Market Restaurants and Bostonmarket.com. Defendant is a person within the meaning of N.Y. Exec. Law § 292(1). 72. Defendant is violating N.Y. Exec. Law § 296(2)(a) in refusing to update or remove access barriers to Bostonmarket.com, causing Bostonmarket.com and the services integrated with Boston Market Restaurants 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. 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. 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 large 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 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. 76. 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. Exc. 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. 77. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 78. 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 in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, accommodations and/or opportunities of Bostonmarket.com and Boston Market Restaurants 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 members of the class will continue to suffer irreparable 79. The actions of Defendant 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. 80. 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. 81. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 82. 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.) (on behalf of Plaintiff and New York subclass) 83. Plaintiff served notice thereof upon the attorney general as required by N.Y. Civil Rights Law § 41. 84. Plaintiff realleges and incorporates by reference the foregoing allegations as though fully set forth herein. 85. 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 …” 86. 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” 87. Boston Market Restaurants located in New York State are sales establishments and public accommodations within the definition of N.Y. Civil Rights Law § 40-c(2). Bostonmarket.com is a service, privilege or advantage of Boston Market Restaurants. Bostonmarket.com is a service that is by and integrated with these restaurants. 88. Defendant is subject to New York Civil Rights Law because they own and operate Boston Market Restaurants and Bostonmarket.com. Defendant is a person within the meaning of N.Y. Civil Law § 40-c(2). 89. Defendant is violating N.Y. Civil Rights Law § 40-c(2) in refusing to update or remove access barriers to Bostonmarket.com, causing Bostonmarket.com and the services integrated with Boston Market Restaurants 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. 90. 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 large 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 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. 91. 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…” 92. Specifically, under NY Civ 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 …” 93. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 94. 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 or indirectly refused, withheld from, or denied the accommodations, advantages, facilities and privileges thereof in § 40 et seq. and/or its implementing regulations. 95. 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) 96. Plaintiff realleges and incorporates by reference the foregoing allegations as if set forth fully herein. 97. 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.” 98. Boston Market Restaurants located in New York State and throughout the United States are sales establishments and public accommodations within the definition of N.Y.C. Administrative Code § 8-102(9). Bostonmarket.com is a service, privilege or advantage of Boston Market Restaurants. Bostonmarket.com is a service that is by and integrated with these restaurants. 99. Defendant is subject to City Law because they own and operate the Boston Market Restaurants and Bostonmarket.com. Defendant is a person within the meaning of N.Y.C. Administrative Code § 8-102(1). 100. Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing to update or remove access barriers to Bostonmarket.com, causing Bostonmarket.com and the services integrated with Boston Market Restaurants 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). 101. 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: (d) constructed and maintained a website that is inaccessible to blind class members with knowledge of the discrimination; and/or (e) constructed and maintained a website that is sufficiently intuitive and/or obvious that is inaccessible to blind class members; and/or (f) failed to take actions to correct these access barriers in the face of substantial harm and discrimination to blind class members. 102. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 103. 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 Bostonmarket.com and Boston Market Restaurants 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. 104. The actions of Defendant were and are in violation of City law and therefore Plaintiff invokes her right to injunctive relief to remedy the discrimination. 105. 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. 106. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 107. 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 FIFTH CAUSE OF ACTION (Declaratory Relief) (on behalf of Plaintiff and the Class) 108. Plaintiff realleges and incorporates by reference the foregoing allegations as if set forth fully herein. 109. An actual controversy has arisen and now exists between the parties in that Plaintiff contends, and is informed and believes that Defendant denies, that Bostonmarket.com contains access barriers denying blind customers the full and equal access to the goods, services and facilities of Bostonmarket.com and by extension Boston Market Restaurants, which Boston Market 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 blind. 110. 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. WHEREFORE, Plaintiff prays for judgment as set forth below. PRAYER FOR RELIEF WHEREFORE, Plaintiff requests relief as follows: 111. 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; 112. A preliminary and permanent injunction requiring Defendant to take all the steps necessary to make its website, Bostonmarket.com, into full compliance with the requirements set forth in the ADA, and its implementing regulations, so that Bostonmarket.com is readily accessible to and usable by blind individuals; 113. A declaration that Defendant owns, maintains and/or operates its website, Bostonmarket.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., N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York; 114. 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; 115. 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; 116. Plaintiff’s reasonable attorneys’ fees, expenses, and costs of suit as provided by state and federal law; 117. For pre and post-judgment interest to the extent permitted by law; and 118. Such other and further relief as the Court deems just and proper. DATED: November 29, 2016 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 By: _____/s/ C.K. Lee____________ C.K. Lee, Esq.

civil rights, immigration, family

H6IxCYcBD5gMZwczAKUT

Michael Kind, Esq. NV Bar No. 13903 KAZEROUNI LAW GROUP, APC 7854 W. Sahara Avenue Las Vegas, NV 89117 Phone: (800) 400-6808 x7 FAX: (800) 520-5523 mkind@kazlg.com Sara Khosroabadi, Esq. NV Bar No. 13703 HYDE & SWIGART 7854 W. Sahara Avenue Las Vegas, NV 89117 Phone: (619) 233-7770 Fax: (619) 297-1022 sara@westcoastlitigation.com Attorneys for Plaintiff, John Hastings UNITED STATES DISTRICT COURT DISTRICT OF NEVADA JOHN HASTINGS, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, Plaintiff, v. FINANCIAL CORPORATION OF AMERICA, 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. 1. JOHN HASTINGS (“Plaintiff”) brings this Class Action Complaint for damages, injunctive relief, and any other available legal or equitable remedies, resulting from the illegal actions of FINANCIAL CORPORATION OF AMERICA (“Defendant”) in negligently and/or intentionally 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 himself and his 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 like the ones 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. 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 (emphasis added.) 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). 6. The Ninth Circuit recently affirmed certification of a TCPA class case similar to this one in Meyer v. Portfolio Recovery Associates, LLC, __ F.3d__, 2012 WL 4840814 (9th Cir. Oct. 12, 2012). JURISDICTION AND VENUE 7. This Court has federal question jurisdiction because this case arises out of violation of federal law. 47 U.S.C. §227(b); Mims v. Arrow Fin. Servs., LLC, 132 S. Ct. 740 (2012). 8. Venue is proper in the United States District Court for the District of Nevada pursuant to 18 U.S.C. § 1391(b) because the harm to Plaintiff occurred in the County of Clark, State of Nevada as it conducts business there. PARTIES 9. Plaintiff is, and at all times mentioned herein was, a citizen and resident of the State of Nevada. Plaintiff is, and at all times mentioned herein was, a “person” as defined by 47 U.S.C. § 153 (39). 10. Plaintiff is informed and believes, and thereon alleges, that Defendant is a Nevada corporation with its principal place of business in Austin, Texas. Defendant is, and at all times mentioned herein was, a “person” as defined by 47 U.S.C. § 153 (39). 11. Plaintiff alleges that at all times relevant herein Defendant conducted business in the State of Nevada and within this judicial district. FACTUAL ALLEGATIONS 12. At all times relevant, Plaintiff was a citizen of the State of Nevada. Plaintiff is, and at all times mentioned herein was, a “person” as defined by 47 U.S.C. § 153 (39). 13. Defendant is, and at all times mentioned herein was, a corporation and a “person,” as defined by 47 U.S.C. § 153 (39). 14. At all times relevant Defendant conducted business in the State of Nevada and within this judicial district. 15. At no time did Plaintiff provide Plaintiff’s cellular phone number to Defendant through any medium. 16. At no time did Plaintiff ever enter in a business relationship with Defendant. 17. On or about August 18, 2015, at approximately 8:46 a.m. PST, Defendant contacted Plaintiff’s cellular telephone number ending in “1539” from telephone number (800) 950-5762. contacted Plaintiff’s cellular telephone number ending in “1539” from telephone number (800) 950-5762. 19. On or about September 8, 2015, at approximately 6:21 p.m. PST, Defendant contacted Plaintiff’s cellular telephone number ending in “1539” from telephone number (800) 950-5762. 20. On or about October 6, 2015, at approximately 11:29 a.m. PST, Defendant contacted Plaintiff’s cellular telephone number ending in “1539” from telephone number (800) 950-5762. 21. On or about October 20, 2015, at approximately 10:59 a.m. PST, Defendant contacted Plaintiff’s cellular telephone number ending in “1539” from telephone number (800) 950-5762. 22. On or about December 23, 2015, at approximately 9:48 a.m. PST, Defendant contacted Plaintiff’s cellular telephone number ending in “1539” from telephone number (800) 950-5762. 23. On or about January 13, 2016, at approximately 2:00 p.m. PST, Defendant contacted Plaintiff’s cellular telephone number ending in “1539” from telephone number (800) 950-5762. 24. On or about February 10, 2016, at approximately 4:32 p.m. PST, Defendant contacted Plaintiff’s cellular telephone number ending in “1539” from telephone number (800) 950-5762. 25. On or about February 20, 2016, at approximately 2:23 p.m. PST, Defendant contacted Plaintiff’s cellular telephone number ending in “1539” from telephone number (800) 950-5762. 26. On or about March 2, 2016, at approximately 10:59 a.m. PST, Defendant contacted Plaintiff’s cellular telephone number ending in “1539” from telephone number (800) 950-5762. cellular telephone. 28. Through these numerous unsolicited and unwanted telephone calls, Defendant was attempting to collect an alleged debt allegedly owed to Defendant by Plaintiff. 29. Through this conduct, Defendant contacted Plaintiff’s cellular telephone via an “automatic telephone dialing system,” (“ATDS”) as defined by 47 U.S.C. § 227(a)(1) and prohibited by 47 U.S.C. § 227(b)(1)(A), using an artificial or prerecorded voice message as prohibited by 47 U.S.C. § 227(b)(1)(A), in an attempt to collect allegedly owed debt. 30. This ATDS has the capacity to, and does, place calls without human intervention to telephone numbers stored as a list or in a database. 31. The telephone number Defendant called was assigned to a cellular telephone service for which Plaintiff incurs a charge for incoming calls pursuant to 47 U.S.C. § 227(b)(1). 32. The telephone calls constitutes calls that were not for emergency purposes as defined by 47 U.S.C. § 227(b)(1)(A)(i). 33. Plaintiff did not provide Defendant or its agent prior express consent to receive calls to his cellular telephone, including by means of ATDS and/or artificial or prerecorded voice message, pursuant to 47 U.S.C. § 227 (b)(1)(A). 34. These telephone calls by Defendant, or its agent, violated 47 U.S.C. § 227(b)(1)(A)(iii). 35. Plaintiff’s cellular telephone number had been registered on the National Do Not Call Registry since August 27, 2015. 36. Plaintiff brings this action on behalf of himself and on behalf of all others similarly situated (“the Class”). 37. Plaintiff represents, and is a member of the Class, consisting of: All persons within the United States who received any telephone call/s from Defendants or their agent/s and/or employee/s to said person’s cellular telephone made through the use of any automatic telephone dialing system or with an artificial or prerecorded voice within the four years prior to the filling of the Complaint. 38. 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 hundreds, if not substantially 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 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 by using an ATDS and/or artificial or prerecorded voice message, 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. 40. 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 discovery. 41. 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. 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 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 its agents made automated and/or artificial or prerecorded calls to the Class (other than a message made for emergency purposes or made with the prior express consent of the called party) 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. 43. As a person that received at least one call utilizing an ATDS and/or artificial or prerecorded voice message without Plaintiff’s prior express consent, 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. 44. 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 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. 45. Plaintiff has retained counsel experienced in handling class action claims and claims involving violations of the Telephone Consumer Protection Act. 46. 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 California 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. 47. Defendant has acted on grounds generally applicable to the Class, thereby making 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. 48. Plaintiff incorporates by reference all of the above paragraphs of this Complaint as though fully stated herein. 49. 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. 50. 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). 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. 52. Plaintiff incorporates by reference all of the above paragraphs of this Complaint as though fully stated herein. 53. 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. 54. As a result of Defendant’s knowing and/or willful violations of 47 U.S.C. § 227 et seq., Plaintiff and The Class 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). 55. 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 VIOLATION OF THE TCPA, 47 U.S.C. § 227 ET SEQ. • 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). conduct in the future. • Post-judgment interest. • 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. • 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)(B). • Pursuant to 47 U.S.C. § 227(b)(3)(A), injunctive relief prohibiting such conduct in the future. • Post-judgment interest. • Any other relief the Court may deem just and proper. TRIAL BY JURY 56. 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: March 4, 2016 Respectfully submitted, KAZEROUNI LAW GROUP, APC By: _/s/ Michael Kind_______ Michael Kind ATTORNEY FOR PLAINTIFF

privacy

zQxfFocBD5gMZwczlcX0

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA CIVIL ACTION NO. ________ Todd Roth, Individually And On Behalf of All Others Similarly Situated, Plaintiff, CLASS ACTION COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS vs. JURY TRIAL DEMANDED ROYAL CARIBBEAN CRUISES LTD., RICHARD D. FAIN, BRIAN J. RICE and HENRY L. PUJOL, Defendants ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) INTRODUCTION 1. This is a federal class action on behalf of purchasers of the securities of Royal Caribbean Cruises Ltd. (“Royal Caribbean” or the “Company”) between January 27, 2011 and July 28, 2011, inclusive (the “Class Period”), seeking to pursue remedies under the Securities Exchange Act of 1934 (the “Exchange Act”). As alleged herein, defendants published a series of materially false and misleading statements that defendants knew and/or recklessly disregarded were materially false and misleading at the time of such publication, and that omitted to reveal material information necessary to make defendants’ statements, in light of such material omissions, not materially false and misleading. 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 by the United States Securities and Exchange Commission (“SEC”) [17 C.F.R. § 240.10b-5]. 3. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §§ 1331 and 1337, and Section 27 of the Exchange Act [15 U.S.C. § 78aa]. 4. Venue is proper in this District pursuant to Section 27 of the Exchange Act, and 28 U.S.C. § 1391(b). Royal Caribbean maintains its principal place of business in this District and many of the acts and practices complained of herein occurred in substantial part in this District. 5. 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 6. Plaintiff Todd Roth, as set forth in the accompanying certification, incorporated by reference herein, purchased the securities of Royal Caribbean at artificially inflated prices during the Class Period and has been damaged thereby. 7. Defendant ROYAL CARIBBEAN CRUISES LTD. is a corporation organized under the laws of the Republic of Liberia, which maintains its principal place of business at 1050 Caribbean Way, Miami, FL 33132-2096. According to the Company’s website, Royal Caribbean is the world’s second largest cruise company, with 40 ships and a passenger capacity of approximately 92,300. The Company also has a 50% joint venture with TUI Cruises. The ships operate worldwide with a selection of itineraries that call on approximately 400 destinations. 8. Defendant RICHARD D. FAIN (“Fain”) is, and during the Class Period was, Chief Executive Officer, Principal Executive Officer and Chairman of the Board of Directors of the Company. During the Class Period, defendant Fain certified the Company’s Form(s) 10-Q and 10-K. In addition, during the Class Period, defendant Fain sold 200,000 of his personally held securities of the Company, to reap illicit gross proceeds of over $9.3 million. 9. Defendant BRIAN J. RICE (“Rice”) is, and during the Class Period was, Chief Executive Financial Officer, Principal Financial Officer and Executive Vice President of the Company. During the Class Period, defendant Rice signed and certified the Company’s Form(s) 10-Q and 10-K. In addition, during the Class Period, defendant Rice sold over 88,872 of his personally held securities of the Company, to reap illicit gross proceeds of over $4.1 million. 10. Defendant HENRY L. PUJOL (“Pujol”) is, and during the Class Period was, Vice President, Principal Accounting Officer and Corporate Controller of the Company. During the Class Period, defendant Pujol signed the Company’s Form 10-K. In addition, during the Class Period, defendant Pujol sold over 700 of his personally held securities of the Company, to reap illicit gross proceeds of over $35,000. 11. The defendants referenced above in ¶¶ 8-10 are referred to herein as the “Individual Defendants.” 12. The Individual Defendants, because of their positions with the Company, possessed the power and authority to control the contents of Royal Caribbean’s quarterly reports, press releases, and presentations to securities analysts, money and portfolio managers and institutional investors, i.e., the market. They 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 with the Company, and their access to material non-public 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 and misleading statements pleaded herein. 13. Each of the defendants is liable as a participant in a fraudulent scheme and course of business that operated as a fraud or deceit on purchasers of Royal Caribbean securities by disseminating materially false and misleading statements and/or concealing material adverse facts. The scheme: (i) deceived the investing public regarding Royal Caribbean’s business, operations, management and the intrinsic value of Royal Caribbean securities; (ii) enabled defendants to artificially inflate the price of Royal Caribbean shares; (iii) enabled Royal Caribbean insiders to sell millions of dollars of their privately held Royal Caribbean shares while in possession of material adverse non-public information about the Company; and (iv) caused plaintiff and other members of the Class to purchase Royal Caribbean securities at artificially inflated prices. PLAINTIFF’S CLASS ACTION ALLEGATIONS 14. 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 securities of Royal Caribbean between January 27, 2011 and July 28, 2011, inclusive (the “Class”) and who were damaged thereby. 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. 15. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, Royal Caribbean common shares were actively traded on the New York Stock Exchange. As of April 18, 2011, the Company had 216,511,000 shares of common stock issued and outstanding. 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 hundreds or thousands of members in the proposed Class. Record owners and other members of the Class may be identified from records maintained by Royal Caribbean 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. 16. 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. 17. 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. 18. 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 Royal Caribbean; and (c) to what extent the members of the Class have sustained damages and the proper measure of damages. 19. 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. SUBSTANTIVE ALLEGATIONS Defendants’ Materially False and Misleading Statements Made During the Class Period 20. FY:10 Results / 2011 Guidance Announced. On January 27, 2011, the inception of the Class Period, defendants published a release announcing purported results for the fourth quarter and year end 2010, the period ended December 31, 2010. This release stated, in part, the following: Royal Caribbean Reports Better Than Expected Results and Forward Guidance Royal Caribbean Cruises Ltd. (NYSE, OSE: RCL) today announced better than expected fourth quarter and full year 2010 results and provided earnings guidance for 2011. Key Highlights For the Fourth Quarter 2010: • Net income was $42.7 million, or $0.20 per share versus $3.4 million, or $0.02 per share in 2009; • Weather and currency related issues reduced earnings by $0.03 per share, but were more than offset by higher revenues and cost containment; • Net Yields increased 3.2%, (4.2% on a Constant Currency basis). Absent extreme weather conditions, constant currency Net Yields would have increased 4.7%; • Net Cruise Costs per APCD ("NCC") were flat, (up 1.0% on a Constant Currency basis). For the Full Year 2010: • Net Yields increased 4.2% (4.4% on a Constant Currency basis); • NCC declined 1.8% (down 1.3% on a Constant Currency basis); • NCC excluding fuel declined for the third year in a row and were down 1.6%; • Net income was $547.5 million, or $2.51 per share versus $162.4 million, or $0.75 per share in 2009. * * * Full Year 2010 Results Net income for the full year 2010 was $547.5 million, or $2.51 per share, compared to net income of $162.4 million, or $0.75 per share, for the full year 2009. Revenues for the full year 2010 increased 15% to $6.8 billion from revenues of $5.9 billion for the full year 2009. Net cruise costs excluding fuel declined for the third year in a row and were down 1.6%. Despite significant market price increases, fuel costs per metric ton increased only 1% to $493 as a result of the company's hedging program. Since 2005, the company has reduced energy consumption per APCD by 15% and full year 2010 consumption was 1,311,000 metric tons. 21. Regarding the Company’s forward guidance, the January 27, 2011 release also stated, in part, the following: 2011 Guidance: • Net Yields are expected to improve 4% to 6% for the full year and 2% to 3% in the first quarter; • NCC excluding fuel are expected to increase approximately 2% for the full year and the first quarter; • EPS is expected to be between $3.25 and $3.45 for the full year and $0.10 to $0.15 for the first quarter of 2011, based on current fuel prices and currency exchange rates. * * * 2011 Outlook The company reported that early "WAVE season" bookings have been encouraging and booked load factors and average per diems are ahead of same time last year. On an as reported basis, the company expects net yields to increase between 4% and 6% for the full year and 2% to 3% for the first quarter of 2011. On a Constant Currency basis, Net Yields are forecasted to be up between 4% and 5% for the full year and to increase 1% to 2% in the first quarter of 2011. On a Constant Currency basis, NCC excluding fuel are forecasted to be up 1% to 2% for the full year and the first quarter of 2011. On an as reported basis, NCC excluding fuel are expected to be up approximately 2% for the full year and the first quarter of 2011. Based upon the above and current fuel prices and currency exchange rates, the company expects full year EPS will be between $3.25 and $3.45 per share. "Our company continues to focus on costs and improving its financial performance," said Brian J. Rice, executive vice president and chief financial officer. "This focus, combined with the improving pricing power of our brands should generate significant earnings opportunities as we move into 2011 and beyond." 22. In addition to the foregoing, the January 27, 2011 release also quoted defendant Fain, in part, as follows: "These improved results reflect the strong reception our new ships have received along with the solid branding our different cruise brands have enjoyed," said Richard D. Fain, chairman and chief executive officer. Fain continued, "WAVE is off to a solid start and supports our earlier confidence in meaningful pricing recovery and record financial performance in 2011." [Emphasis added.] 23. Following the publication of the January 27, 2011 release, shares of the Company traded at prices artificially inflated by defendants’ false and misleading statements. Taking advantage of this artificial inflation in the price of Company shares, defendant Fain immediately liquidated over $9 million of his personally held Royal Caribbean shares. 24. 2010 Form 10-K. On February 24, 2011, defendants filed with the SEC the Company’s 2010 Form 10-K, for the year ended December 31, 2010, signed by all defendants and certified by defendants Rice and Fain. In addition to making substantially similar statements concerning the Company operations, including expenses, costs and ratios, as had been published previously in the January 27, 2011 release, the 2010 Form 10-K also contained representations which attested to the purported effectiveness and sufficiency of the Company’s controls and procedures, as follows: Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chairman and Chief Executive Officer and our Executive Vice President and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this report. Based upon such evaluation, our Chairman and Chief Executive Officer and Executive Vice President and Chief Financial Officer concluded that those controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chairman and Chief Executive Officer and our Executive Vice President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our management, with the participation of our Chairman and Chief Executive Officer and our Executive Vice President and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2010. The effectiveness of our internal control over financial reporting as of December 31, 2010 has been audited by PricewaterhouseCoopers LLP, the independent registered certified public accounting firm that audited our consolidated financial statements included in this Annual Report on Form 10-K, as stated in its report, which is included herein on page F-2. Changes in Internal Controls Over Financial Reporting There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 during the quarter ended December 31, 2010 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. 25. Certifications. In addition to the foregoing, the Company’s 2010 Form 10-K also contained certifications by defendants Rice and Fain, that attested to the purported accuracy and completeness of the Company’s financial and operational reports, as follows: CERTIFICATION 1. I have reviewed this annual report on Form 10-K of Royal Caribbean Cruises Ltd.; 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)) 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 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. Date: February 24, 2011 /s/ Richard D. Fain Richard D. Fain Chairman and Chief Executive Officer (Principal Executive Officer) * * * Date: February 24, 2011 /s/ Brian J. Rice Brian J. Rice Executive Vice President and Chief Financial Officer (Principal Financial Officer) In connection with the annual report on Form 10-K for the year ended December 31, 2010 as filed by Royal Caribbean Cruises Ltd. with the Securities and Exchange Commission on the date hereof (the “Report”), Richard D. Fain, Chairman and Chief Executive Officer, and Brian J. Rice, Executive Vice President and Chief Financial Officer, each certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge: 1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Royal Caribbean Cruises Ltd. Date: February 24, 2011 By:/s/ Richard D. Fain Richard D. Fain Chairman and Chief Executive Officer (Principal Executive Officer) By:/s/ Brian J. Rice Brian J. Rice Executive Vice President and Chief Financial Officer (Principal Financial Officer) [Emphasis added.] 26. The statements made by defendants and contained in the Company’s January 27, 2011 release and in the Company’s 2010 Form 10-K were each materially false and misleading when made, and were known by defendants to be false or were recklessly disregarded as such thereby, for the following reasons, among others: (a) At all times during the Class Period, it was not true that the Company had reported its results in accordance with Generally Accepted Accounting Principles, when in fact, throughout that time, defendants had failed to properly account for interest expenses related to the amortization of financing fees, such that defendants would be required to revise past financial statements to reflect Royal Caribbean’s correct accounting; (b) At all times during the Class Period, unbeknownst to investors, defendants had materially overstated the Company’s profitability by failing to properly account for the Company’s results of operations and by artificially inflating the Company’s financial results; (c) Throughout the Class Period, it was also not true that Royal Caribbean had adequate systems of internal operational or financial controls, such that Royal Caribbean ’s reported financial statements were true, accurate or reliable; (d) As a result of the foregoing, throughout the Class Period it also was not true that the Company’s financial statements and reports were prepared in accordance with GAAP and SEC rules, where defendants had failed to disclose that errors in the previous accounting treatment of interest expense relating to its amortization of certain financing fees would require the revision of the Company’s past financial statements to reflect the correct accounting; and (e) As a result of the aforementioned adverse conditions which defendants failed to disclose, throughout the Class Period, defendants lacked any reasonable basis to claim that Royal Caribbean was operating according to plan, or that Royal Caribbean could achieve guidance sponsored and/or endorsed by defendants. 27. Taking full advantage of the artificial inflation in the price of Company shares caused as a result of the publication of defendants materially false and misleading statements, throughout February 2011, Company insiders - - including defendants Fain, Rice and Pujol - - sold millions of dollars of their privately held Royal Caribbean securities. The sale of Company shares by Royal Caribbean insiders during that time, included in part, the following: Insider Transactions Reported – During Class Period Date Insider Shares Sale / Disposition Value May 18, 2011 BAYLEY MICHAEL W 52 $40.18 per share. 2,089 Officer Feb 17, 2011 CHICO BARBIER GONZALO 43,000 $46.98 per share. 2,020,139 Officer Feb 16, 2011 GOLDSTEIN ADAM M 23,191 $47.34 per share. 1,097,861 Officer Feb 16, 2011 STEIN BRADLEY H 22,828 $47.76 per share. 1,090,265 Officer Feb 14, 2011 HANRAHAN DANIEL J 16,978 $46.83 per share. 795,079 Officer Feb 14, 2011 RICE BRIAN J 3,000 $46.90 per share. 140,700 Officer Feb 14, 2011 RICE BRIAN J 73,930 $46.83 - $46.91 per 3,465,000 Officer share. Feb 11, 2011 STEIN BRADLEY H 258 $47.38 per share. 12,224 Officer Feb 11, 2011 BAYLEY MICHAEL W 302 $47.38 per share. 14,308 Officer Feb 11, 2011 PUJOL HENRY L 215 $47.38 per share. 10,186 Officer Feb 11, 2011 KULOVAARA HARRI U 388 $47.38 per share. 18,383 Officer Feb 11, 2011 HANRAHAN DANIEL J 1,695 $47.38 per share. 80,309 Officer Feb 11, 2011 RICE BRIAN J 1,606 $47.38 per share. 76,092 Officer Feb 11, 2011 GOLDSTEIN ADAM M 2,231 $47.38 per share. 105,704 Officer Feb 10, 2011 STEIN BRADLEY H 113 $46.58 per share. 5,263 Officer Feb 10, 2011 BAYLEY MICHAEL W 5,569 $46.26 per share. 257,621 Officer Feb 10, 2011 KULOVAARA HARRI U 2,048 $46.58 per share. 95,395 Officer Feb 10, 2011 HANRAHAN DANIEL J 7,832 $46.58 per share. 364,814 Officer Feb 10, 2011 RICE BRIAN J 7,305 $46.58 per share. 340,266 Officer Feb 10, 2011 GOLDSTEIN ADAM M 11,014 $46.58 per share. 513,032 Officer 10,037 $46.69 per share. 468,627 Feb 9, 2011 BAYLEY MICHAEL W Officer 424 $46.18 per share. 19,580 Feb 8, 2011 STEIN BRADLEY H Officer 2,660 $46.18 per share. 122,838 Feb 8, 2011 GOLDSTEIN ADAM M Officer 2,227 $46.18 per share. 102,842 Feb 8, 2011 RICE BRIAN J Officer 2,345 $46.18 per share. 108,292 Feb 8, 2011 HANRAHAN DANIEL J Officer 593 $46.18 per share. 27,384 Feb 8, 2011 KULOVAARA HARRI U Officer 380 $46.18 per share. 17,548 Feb 8, 2011 PUJOL HENRY L Officer 253 $45.57 per share. 11,529 Feb 1, 2011 BAYLEY MICHAEL W Officer 169 $45.57 per share. 7,701 Feb 1, 2011 PUJOL HENRY L Officer 337 $45.57 per share. 15,357 Feb 1, 2011 KULOVAARA HARRI U Officer 855 $45.57 per share. 38,962 Feb 1, 2011 HANRAHAN DANIEL J Officer 804 $45.57 per share. 36,638 Feb 1, 2011 RICE BRIAN J Officer 1,533 $45.57 per share. 69,858 Feb 1, 2011 GOLDSTEIN ADAM M Officer Jan 28, 2011 FAIN RICHARD D 200,000 $46.63 per share. 9,326,000 Officer Total Shares Sold = 447,172 Gross Proceeds = $ 20,908,786 28. 1Q:11 Results Announced. On April 28, 2011, defendants published a release announcing purported “Record” setting results for the third quarter of 2011, the period ended March 31, 2011. This release also stated, in part, the following: Royal Caribbean Reports First Quarter Results and Updates 2011 Guidance Royal Caribbean Cruises Ltd. (NYSE, OSE: RCL) today announced better than expected first quarter results and updated guidance for the remainder of 2011. Key Highlights For the First Quarter 2011: • Net income was $91.6 million, or $0.42 per share versus, $87.4 million, or $0.40 per share in 2010. Included in the 2010 results was a one-time gain of $85.6 million, or $0.39 per share related to a legal settlement; • Net Yields increased 4.0% (2.8% on a Constant-Currency basis); • Net Cruise Costs per APCD ("NCC") were up 0.2% (down 0.1% on a Constant-Currency basis); • Included in Other Income/(Expense) was an $0.11 per share marked-to-market gain on the company's fuel option portfolio. * * * First Quarter 2011 Results Royal Caribbean Cruises Ltd. today announced net income for the first quarter 2011 of $91.6 million, or $0.42 per share. This compares to net income of $87.4 million, or $0.40 per share, in the first quarter of 2010, which included a gain on a legal settlement of $85.6 million, or $0.39 per share. An $0.11 per share marked- to-market gain on the company's fuel option portfolio is included in first quarter 2011 results. Revenues improved to $1.7 billion in the first quarter of 2011 compared to $1.5 billion in the first quarter of 2010 as a result of capacity increases and yield improvements. Net Yields for the first quarter of 2011 increased 4.0% (2.8% on a Constant-Currency basis). The company saw improvement in both ticket and onboard revenue yields and across all major product groups. Costs in the first quarter of 2011 were well controlled with most expense categories performing better than expected. While a less significant factor, some timing shifts to later in 2011 occurred. NCC were up 0.2%, and NCC excluding fuel increased 0.8%. Excluding currency impacts, the comparable figures show decreases of 0.1% and increases of 0.6%, respectively. At-the-pump fuel pricing (including the benefit of the company's hedging program) was very similar to earlier calculations at $511 per metric ton. As previously disclosed, in addition to its fuel hedging activities the company has purchased various fuel options as further protection against rising fuel prices. Unlike its fuel swaps which largely receive hedge accounting treatment, fuel options are marked-to-market to the income statement at the end of each reporting period. During the first quarter of 2011 the value of the company's fuel option portfolio increased by $24.2 million, or $0.11 per share, and the associated gain was booked to Other Income/(Expense). 29. In addition to the foregoing, the April 28, 2011 release also quoted defendant Fain, in part, as follows: "The year started off with a roar -- strong bookings, low costs and solid profits - - and in the first quarter every one of our brands exceeded its forecast," said Richard D. Fain, chairman and chief executive officer. Fain added, "Unfortunately, the events in Northern Africa and Japan have turned what was shaping up as a spectacular year into merely a very good one. Nonetheless, other than adjustments for fuel pricing, our earnings guidance for the year is essentially intact despite these dramatic geopolitical events. The demand for the majority of our products has remained quite strong and even the impacted itineraries have begun to improve." [Emphasis added.] 30. The Company’s April 28, 2011 release also purported to provide 2011 Guidance, in part, as follows: 2011 Guidance: • The company has been able to largely offset higher fuel prices through its hedging strategies as well as the impact of currency exchange rates. The effects of recent geopolitical events in Northern Africa and Japan have also been partially offset by improvements in the company's other itineraries. As a result, full year EPS guidance has been reduced by $0.15 per share to a range of $3.10 to $3.30. 31. 1Q:11 Form 10-Q. On or about April 28, 2011, defendants also filed with the SEC the Company’s 1Q:11 Form 10-Q, for the quarter ended March 31, 2011, signed by defendant Rice and certified by defendants Fein and Rice. In addition to making substantially similar statements concerning the Company operations, including expenses, costs and ratios, as had been published previously, the 1Q:11 Form 10-Q also provided statements concerning the Company’s Significant Accounting Policies and the Basis of its Accounting Presentation, in part, as follows: Basis for Preparation of Consolidated Financial Statements The unaudited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. Estimates are required for the preparation of financial statements in accordance with these principles. Actual results could differ from these estimates. All significant intercompany accounts and transactions are eliminated in consolidation. We consolidate entities over which we have control, usually evidenced by a direct ownership interest of greater than 50% and variable interest entities where we are determined to be the primary beneficiary…. We believe the accompanying unaudited consolidated financial statements contain all normal recurring accruals necessary for a fair statement. Our revenues are seasonal and results for interim periods are not necessarily indicative of results for the entire year. [Emphasis added.] 32. Controls. The Company’s 1Q:11 Form 10-Q also contained representations which attested to the purported effectiveness and sufficiency of the Company’s controls and procedures, as follows: Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chairman and Chief Executive Officer and Executive Vice President and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this report. Based upon such evaluation, our Chairman and Chief Executive Officer and Executive Vice President and Chief Financial Officer concluded that those controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submits under the Exchange Act is accumulated and communicated to management, including our Chairman and Chief Executive Officer and our Executive Vice President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 during the quarter ended March 31, 2011 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. [Emphasis added.] 33. Certifications. In addition to the foregoing, the Company’s 1Q:11 Form 10-Q also contained certifications by defendants Rice and Fein, that attested to the purported accuracy and completeness of the Company’s financial and operational reports, as follows: CERTIFICATIONS 1. I have reviewed this quarterly report on Form 10-Q of Royal Caribbean Cruises Ltd.; 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)) 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 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. Date: April 28, 2011 /s/ RICHARD D. FAIN Richard D. Fain Chairman and Chief Executive Officer (Principal Executive Officer) * * * /s/ BRIAN J. RICE Brian J. Rice Executive Vice President and Chief Financial Officer (Principal Financial Officer) In connection with the quarterly report on Form 10-Q for the quarterly period ended March 31, 2011 as filed by Royal Caribbean Cruises Ltd. with the Securities and Exchange Commission on the date hereof (the “Report”), Richard D. Fain, Chairman and Chief Executive Officer, and Brian J. Rice, Executive Vice President and Chief Financial Officer, each hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge: 1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Royal Caribbean Cruises Ltd. Date: April 28, 2011 By: /s/ RICHARD D. FAIN Richard D. Fain Chairman and Chief Executive Officer (Principal Executive Officer) By: /s/ BRIAN J. RICE Brian J. Rice Executive Vice President and Chief Financial Officer (Principal Financial Officer) [Emphasis added.] 34. The statements made by defendants and contained in the Company’s April 28, 2011 release and in the Company’s 1Q:11 Form 10-Q were materially false and misleading when made, and were know by defendants to be false at that time or were recklessly disregarded as such thereby for the reasons stated herein in ¶ 26, supra. THE TRUE FINANCIAL AND OPERATIONAL CONDITION OF ROYAL CARIBBEAN IS BELATED DISCLOSED 35. On July 28, 2011, defendants shocked and alarmed investors after they published a release that revealed, for the first time, that the Company was performing well below expectations and that errors in the previous accounting treatment of interest expense relating to its amortization of certain financing fees, had resulted in the revision of the Company’s past financial statements. That day, the South Florida Business Journal reported, in part, the following: Royal Caribbean takes beating over accounting issue Royal Caribbean Cruises Ltd. shares took a drubbing Thursday after the company announced some accounting issues along with second quarter results. Shares of the world's second-largest cruise company were down $3.94, or 11.02 percent, to $31.82 in mid-afternoon trading. Trading was a heavy 8.48 million shares, compared with an average daily volume of 2.78 million. Yahoo Finance reported that Royal Caribbean (NYSE: RCL) was the day's 11th- biggest decliner. The accounting revisions overshadowed revenue improving to $1.8 billion in the second quarter from $1.6 billion a year ago as a result of capacity increases and yield improvements. Profit rose to $93.5 million, or 43 cents a share, from $53.7 million, or 25 cents a share. A press release gave an accounting of what went wrong, but also said a dividend would be reinstated: • Management identified an error in the previous accounting treatment of interest expense relating to its amortization of certain financing fees and has revised its past financial statements to reflect the correct accounting. • Second quarter earnings per share were 47 cents before the interest expense revision, but were revised to 43 cents. The interest revision is forecast to reduce 2011 earnings per share by 20 cents, within a range of $2.85 to $2.95. 36. Investors were quick to realize that defendants had attempted to slide another $0.10 reduction in full-year earnings under the radar, in conjunction with this press release, completely unrelated to the accounting snafu. Accordingly, following defendants’ belated revelation, analysts at JP Morgan immediately downgraded shares of the Company, from Neutral to Overweight, and slashed its price target to $33 from $48 per share. 37. The following day, July 29, 2011, the Associated Press reported on the analyst ratings cut and price target downgrade, in part, as follows: Analyst cuts Royal Caribbean rating, price target Analyst cuts Royal Caribbean rating, price target on difficulties facing Mediterranean cruises NEW YORK (AP) -- Wall Street analysts are lowering expectations for cruise operator Royal Caribbean Cruises Ltd. on Friday, citing soft demand and difficulties facing its Mediterranean cruises. * * * JPMorgan Analyst Kevin Milota said that Royal Caribbean's prices will likely be weak for some of its cruises to the Eastern Mediterranean area for the near to intermediate term until unrest in the region starts to stabilize and negative media attention fades. He cut his rating to "Neutral" from "Overweight" and slashed its price target to $33 from $48. * * * Raymond James lowered its target price from $46 to $39, but maintained its "outperform" rating, saying that outside of the troubled Middle East, "demand remains strong, with Caribbean and Alaska net yields growing double digits." William Blair & Co. lowered its per-share estimate for this year by 29 cents to $2.91, including interest expenses. It also lowered its 2012 estimate "to better handicap the Mediterranean wild card." After falling sharply Thursday, Royal Caribbean's shares fell 25 cents to $31.01 in Friday morning trading. 38. The revelations that the Company had materially misrepresented its financial and operational condition, its controls and procedures and its results of operations, belatedly revealed on July 28, 2011 caused shares of Royal Caribbean stock to fall precipitously. As evidence of this, on July 28, 2011, shares of the Company collapsed over 13%, from a close of $35.75 per share to a trading low of just below $31.00 - - in the single trading day, on very high trading volume of over 11.32 million shares traded. The following day, July 29, 2011, shares of the Company continued to trade lower, closing just above $30.50 per share, again on high volume of over 4.337 million shares traded. CAUSATION AND ECONOMIC LOSS 39. During the Class Period, as detailed herein, defendants engaged in a scheme to deceive the market, and a course of conduct that artificially inflated the price of Royal Caribbean securities and operated as a fraud or deceit on Class Period purchasers of Royal Caribbean’s securities by misrepresenting the Company’s financial results. Over a period of approximately six months, defendants improperly inflated the Company’s financial results. Ultimately, however, when defendants’ prior misrepresentations and fraudulent conduct came to be revealed and was apparent to investors, shares of Royal Caribbean declined precipitously - - evidence that the prior artificial inflation in the price of Royal Caribbean ’s shares was eradicated. As a result of their purchases of Royal Caribbean stock during the Class Period, plaintiff and other members of the Class suffered economic losses, i.e. damages under the federal securities laws. 40. By improperly characterizing the Company’s financial results and misrepresent- ing its prospects, the defendants presented a misleading image of Royal Caribbean’s business and future growth prospects. During the Class Period, defendants repeatedly emphasized the ability of the Company to monitor and control expenses, and consistently reported expenses and expense ratios within expectations and within the range for which the Company was adequately reserved. These claims caused and maintained the artificial inflation in the price of Royal Caribbean ’s securities throughout the Class Period and until the truth about the Company was ultimately revealed to investors. 41. Defendants’ false and materially misleading statements had the intended effect of causing Royal Caribbean’s securities to trade at artificially inflated levels throughout the Class Period - - the Company’s common stock closed above $47.00 per share on February 18, 2011. 42. On July 28, 2011, however, as investors learned the truth about the Company, and learned that defendants had failed to properly report the Company’s financial and operational results, shares of the Company collapsed. Defendants’ belated disclosures had an immediate, adverse impact on the price of Royal Caribbean shares. 43. These belated revelations also evidenced defendants’ prior falsification of Royal Caribbean ’s business prospects due to defendants’ false statements. As investors and the market ultimately learned, the Company’s prior business prospects had been overstated as were the Company’s results of operations. As this adverse information became known to investors, the prior artificial inflation began to be eliminated from Royal Caribbean’s share price and were damaged as a result of the related share price decline. 44. As a direct result of investors learning the truth about the Company on July 28, 2011, shares of the Company collapsed over 13%, from a close of $35.75 per share to a trading low of just below $31.00 - - in the single trading day, on very high trading volume of over 11.32 million shares traded. The following day, July 29, 2011, shares of the Company continued to trade lower, closing just above $30.50 per share, again on high volume of over 4.337 million shares traded. These dramatic share price declines, eradicated much of the artificial inflation from Royal Caribbean ’s share price, causing real economic loss to investors who purchased this stock during the Class Period. 45. The decline in price of Royal Caribbean securities at the end of the Class Period was a direct result of the nature and extent of defendants’ fraud being revealed to investors and to the market. The timing and magnitude of Royal Caribbean ’s stock price decline negates any inference that the losses suffered by plaintiff and the other members of the Class was caused by changed market conditions, macroeconomic or industry factors or even Company-specific facts unrelated to defendants’ fraudulent conduct. During the same period in which Royal Caribbean’s share price fell almost 15% as a result of defendants’ fraud being revealed, the Standard & Poor’s 500 securities index was relatively unchanged. 46. The economic loss, i.e. damages suffered by plaintiff and other members of the Class, was a direct result of defendants’ fraudulent scheme to artificially inflate the price of Royal Caribbean’s stock and the subsequent significant decline in the value of the Company’s shares when defendants’ prior misstatements and other fraudulent conduct was revealed. The dramatic decline in the price of Company shares immediately following defendants’ belated disclosure is evidenced, in part, by the chart below: VIOLATIONS OF GAAP AND SEC REPORTING RULES 47. During the Class period, defendants materially misled the investing public, thereby inflating the price of the Company's securities, by publicly issuing false and misleading statements and omitting to disclose material facts necessary to make defendants' statements, as set forth herein, not false and misleading. Said statements and omissions were materially false and misleading in that they failed to disclose material adverse information and misrepresented the truth about the Company, its financial performance, accounting, reporting, and financial condition in violation of the federal securities laws and GAAP. 48. GAAP consists of those principles recognized by the accounting profession as the conventions, rules, and procedures necessary to define accepted accounting practice at the particular time. Regulation S-X, to which the Company is subject as a registrant under the Exchange Act, 17 C.F.R. 210.4-01(a)(1), provides that financial statements filed with the SEC which are not prepared in compliance with GAAP, are presumed to be misleading and inaccurate. SEC Rule 13a-13 requires issuers to file quarterly reports. 49. SEC Rule 12b-20 requires that periodic reports contain such further information as is necessary to make the required statements, in light of the circumstances under which they are made, not misleading. 50. In addition, Item 303 of Regulation S-K requires that, for interim periods, the Management Division and Analysis Section ("MD&A") must include, among other things, a discussion of any material changes in the registrant's results of operations with respect to the most recent fiscal year-to-date period for which an income statement is provided. Instructions to Item 303 require that the this discussion identify any significant elements of registrant's income or loss from continuing operations that are not necessarily representative of the registrant's ongoing business. Item 303(a)(2)(ii) to Regulation S-K requires the following discussion in the MD&A of a company's publicly filed reports with the SEC: Describe any known trends or uncertainties that have had or that the registrant reasonably expects will have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations. If the registrant knows of events that will cause a material change in the relationship between costs and revenues (such as known future increases in costs of labor or materials or price increases or inventory adjustments), the change in relationship shall be disclosed. Paragraph 3 of the Instructions to Item 303 states in relevant part: The discussion and analysis shall focus specifically on material events and uncertainties known to management that would cause reported financial information not to be necessarily indicative of future operating results or of future financial condition. This would include descriptions and amounts of (A) matters that would have an impact on future operations and have not had an impact in the past. . . 51. The GAAP requirement for recognition of an adequate provision for foreseeable costs and an associated allowance applies to interim financial statements as required by Accounting Principles Board Opinion No. 28. Paragraph 17 of this authoritative pronouncement states that: The amounts of certain costs and expenses are frequently subjected to year-end adjustments even though they can be reasonably approximated at interim dates. To the extent possible such adjustments should be estimated and the estimated costs and expenses assigned to interim periods so that the interim periods bear a reasonable portion of the anticipated annual amount. 52. The Company's financial statements contained in the quarterly reports filed with the SEC on Forms 10-Q for the quarterly periods throughout the Class Period were presented in a manner that violated the principle of fair financial reporting and the following GAAP, among (a) The principle that financial reporting should provide information that is useful to present and potential investors and creditors and other users in making rational investment, credit and similar decisions (FASB Statement of Concepts No. 1). (b) The principle that financial reporting should provide information about an enterprise's financial performance during a period (FASB Statement of Concepts No. 1). (c) The principle that financial reporting should be reliable in that it represents what it purports to represent (FASB Statement of Concepts No. 2). (d) The principle of completeness, which means that nothing material is left out of the information that may be necessary to ensure that it validly represents underlying events and conditions (FASB Statement of Concepts No. 2). (e) The principle that conservatism be used as a prudent reaction to uncertainty to try to ensure that uncertainties and risks inherent in business situations are adequately considered (FASB Statement of Concepts No. 2). (f) The principle that contingencies and other uncertainties that affect the fairness of presentation of financial data at an interim date shall be disclosed in interim reports in the same manner required for annual reports (APB Opinion No. 28). (g) The principle that disclosures of contingencies shall be repeated in interim and annual reports until the contingencies and have been removed, resolved, or have become immaterial (APB Opinion No. 28). (h) The principle that management should provide commentary relating to the effects of significant events upon the interim financial results (APB Opinion No. 28). 53. In addition, during the Class Period, defendants violated SEC disclosure rules: (a) defendants failed to disclose the existence of known trends, events or uncertainties that they reasonably expected would have a material, unfavorable impact on net revenues or income or that were reasonably likely to result in the Company's liquidity decreasing in a material way, in violation of Item 303 of Regulation S-K under the federal securities laws (17 C.F.R. § 229.303), and that failure to disclose the information rendered the statements that were made during the Class Period materially false and misleading; and (b) by failing to file financial statements with the SEC that conformed to the requirements of GAAP, such financial statements were presumptively misleading and inaccurate pursuant to Regulation S-X, 17 C.F.R. § 210.4-01(a)(1). 54. Defendants were required to disclose, in the Company's financial statements, the existence of the material facts described herein and to appropriately recognize and report assets, revenues, and expenses in conformity with GAAP. The Company failed to make such disclosures and to account for and to report its financial statements in conformity with GAAP. Defendants knew, or were reckless in not knowing, the facts which indicated that all of the Company's interim financial statements, press releases, public statements, and filings with the SEC, which were disseminated to the investing public during the Class Period, were materially false and misleading for the reasons set forth herein. Had the true financial position and results of operations of the Company been disclosed during the Class period, the Company's securities would have traded at prices well below that which they did. ADDITIONAL SCIENTER ALLEGATIONS 55. As alleged herein, defendants acted with scienter in that each defendant 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 federal securities laws. As set forth elsewhere herein in detail, defendants, by virtue of their receipt of information reflecting the true facts regarding Royal Caribbean, their control over, and/or receipt and/or modification of Royal Caribbean’s allegedly materially misleading misstatements and/or their associations with the Company which made them privy to confidential proprietary information concerning Royal Caribbean, participated in the fraudulent scheme alleged herein. 56. Defendants were motivated to materially misrepresent to the SEC and investors the true financial condition of the Company because: (i) it deceived the investing public regarding Royal Caribbean ’s business, operations, management and the intrinsic value of Royal Caribbean securities; (ii) it enabled defendants to artificially inflate the price of Royal Caribbean shares; (iii) it enabled Royal Caribbean insiders to sell tens of millions of dollars of their privately held Royal Caribbean shares while in possession of material adverse non-public information about the Company; and (iv) it caused plaintiff and other members of the Class to purchase Royal Caribbean securities at artificially inflated prices. Applicability Of Presumption Of Reliance: Fraud-On-The-Market Doctrine 57. At all relevant times, the market for Royal Caribbean ’s securities was an efficient market for the following reasons, among others: (a) Royal Caribbean’s stock met the requirements for listing, and was listed and actively traded on the NYSE national market exchange, a highly efficient and automated market; (b) As a regulated issuer, Royal Caribbean filed periodic public reports with the SEC and the NYSE; (c) Royal Caribbean 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; and (d) Royal Caribbean was followed by several securities analysts employed by major brokerage firm(s) who wrote reports which were distributed to the sales force and certain customers of their respective brokerage firm(s). Each of these reports was publicly available and entered the public marketplace. 58. As a result of the foregoing, the market for Royal Caribbean securities promptly digested current information regarding Royal Caribbean from all publicly available sources and reflected such information in Royal Caribbean stock price. Under these circumstances, all purchasers of Royal Caribbean securities during the Class Period suffered similar injury through their purchase of Royal Caribbean securities at artificially inflated prices and a presumption of reliance applies. NO SAFE HARBOR 59. 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. Many of the specific statements pleaded herein were not identified as “forward-looking statements” when made. To the extent there were any forward-looking statements, 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. Alternatively, to the extent that the statutory safe harbor does 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 particular speaker knew that the particular forward-looking statement was false, and/or the forward-looking statement was authorized and/or approved by an executive officer of Royal Caribbean who knew that those statements were false when made. BASIS OF ALLEGATIONS 60. Plaintiff has alleged the following based upon the investigation of plaintiff’s counsel, which included a review of SEC filings by Royal Caribbean, as well as regulatory filings and reports, securities analysts’ reports and advisories about the Company, press releases and other public statements issued by the Company, and media reports about the Company, and plaintiff believes that substantial additional evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery. FIRST CLAIM Violation Of Section 10(b) Of The Exchange Act And Rule 10b-5 Promulgated Thereunder Against All Defendants 61. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. 62. 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 regarding Royal Caribbean ’s business, operations, management and the intrinsic value of Royal Caribbean securities; (ii) it enabled defendants to artificially inflate the price of Royal Caribbean securities; (iii) enable Royal Caribbean insiders to sell tens of millions of dollars of their privately held Royal Caribbean securities while in possession of material adverse non- public information about the Company; and (iv) cause plaintiff and other members of the Class to purchase Royal Caribbean securities at artificially inflated prices. In furtherance of this unlawful scheme, plan and course of conduct, defendants, jointly and individually (and each of them) took the actions set forth herein. 63. 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 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 Royal Caribbean ’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. 64. 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 Royal Caribbean as specified herein. 65. These 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 Royal Caribbean ’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 omitting to state material facts necessary in order to make the statements made about Royal Caribbean 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 which operated as a fraud and deceit upon the purchasers of Royal Caribbean securities during the Class Period. 66. 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 his 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 or recklessly disregarded was materially false and misleading. 67. The 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. Such defendants’ material misrepresentations and/or omissions were done knowingly or with recklessly for the purpose and effect of concealing Royal Caribbean ’s operating condition and future business prospects from the investing public and supporting the artificially inflated price of its securities. As demonstrated by defendants’ overstatements and misstatements of the Company’s business, operations and earnings throughout the Class Period, defendants, if they did not have actual knowledge of the misrepresentations and omissions alleged, were reckless in failing to obtain such knowledge by recklessly refraining from taking those steps necessary to discover whether those statements were false or misleading. 68. 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 Royal Caribbean securities was artificially inflated during the Class Period. In ignorance of the fact that market prices of Royal Caribbean ’s publicly-traded 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 trade, and/or on 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 Royal Caribbean securities during the Class Period at artificially high prices and were damaged thereby. 69. 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 the problems that Royal Caribbean was experiencing, which were not disclosed by defendants, plaintiff and other members of the Class would not have purchased or otherwise acquired their Royal Caribbean 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. 70. By virtue of the foregoing, defendants 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 and sales of the Company’s securities during the Class Period. SECOND CLAIM Violation Of Section 20(a) Of The Exchange Act Against Individual Defendants 72. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. 73. The Individual Defendants acted as controlling persons of Royal Caribbean 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/or intimate knowledge of the false financial statements filed by the Company with the SEC and 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 Company, including the content and dissemination of the various statements which plaintiff contends are false and misleading. The 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. 74. In particular, each of these defendants had direct and supervisory involvement in the day-to-day operations of the Company and, therefore, is 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. 75. As set forth above, Royal Caribbean and the 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 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 members of the Class suffered damages in connection with their purchases of the Company’s securities during the Class Period. WHEREFORE, plaintiff prays for relief and judgment, as follows: A. Determining that this action is a proper class action, designating plaintiff as Lead Plaintiff and certifying plaintiff as a 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; D. Awarding extraordinary, equitable and/or injunctive relief as permitted by law, equity and the federal statutory provisions sued hereunder, pursuant to Rules 64 and 65 and any appropriate state law remedies to assure that the Class has an effective remedy; and E. 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 1, 2011 s/ Julie Prag Vianale JULIE PRAG VIANALE VIANALE & VIANALE LLP Florida Bar No. 184977 jvianale@vianalelaw.com 2499 Glades Road, Suite 112 Boca Raton, FL 33431 Telephone: (561) 392-4750 Facsimile: (561) 392-4775 KIM MILLER KAHN SWICK & FOTI, LLC 500 Fifth Avenue, Ste. 1810 New York, NY 10110 Telephone: (212) 696-3730 Facsimile: (504) 455-1498 Email: kim.miller@ksfcounsel.com LEWIS KAHN KAHN SWICK & FOTI, LLC 206 Covington Street Madisonville, Louisiana 70447 Telephone: (504) 455-1400 Facsimile: (504) 455-1498 Email: lewis.kahn@ksfcounsel.com Attorneys for Plaintiff

securities

Sb2KDIcBD5gMZwczrp1M

STEVEN M. TINDALL (SBN 187862) stindall@rhdtlaw.com VALERIE BRENDER (SBN 298224) vbrender@rhdtlaw.com RUKIN HYLAND DORIA & TINDALL LLP 100 Pine Street, Suite 2150 San Francisco, CA 94111 Telephone: (415) 421-1800 Facsimile: (415) 421-1700 Attorneys for Plaintiff UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA Case No. CLASS ACTION COMPLAINT DEMAND FOR JURY TRIAL ANASTASIO GARCIA RODRIGUEZ, individually and on behalf of all others similarly situated, Plaintiff, v. SONY PICTURES ENTERTAINMENT, INC., a Delaware Corporation, Defendant. and all others similarly situated, brings this action as a class action under Rule 23 of the Federal Rules of Civil Procedure against Sony Pictures Entertainment, Inc. (“Sony” or “Defendant”). I. JURISDICTION AND VENUE 2. This Court has jurisdiction over this putative nationwide class action under the Class Action Fairness Act (“CAFA”) 28 U.S.C. § 1332(d)(2) because the amount in controversy exceeds $5,000,000.00, there are more than 100 putative class members, and Plaintiff and Defendant are citizens of different states. 3. Venue in this Court and in this District is proper under 28 U.S.C. § 1391(d) because Sony is headquartered in Los Angeles County, it conducts substantial business in Los Angeles County, and the harm in this action arose, in part, in Los Angeles County. 4. This Court has personal jurisdiction over Defendant because it is headquartered and conducts substantial business in Los Angeles County. II. INTRODUCTION 5. On or around November 24, 2014, hackers self-described as the “Guardians of Peace” (GOP) announced that they had breached Sony’s network and possessed internal data that they were planning to publicize. As part of this data breach, thousands of current and former Sony employees have had their personally identifiable information (PII), including social security numbers, names, birthdates, passport information, and medical information, published on internet file sharing websites. 6. Defendant failed to adequately secure the sensitive data belonging to Plaintiff and similarly situated current and former employees and their families (“Class Members”). In recent years, Defendant has been the target of several large, successful hacking attempts that experts deemed preventable had adequate security protections and protocol been in place. Defendant was also informed multiple times Defendant negligently failed to take steps to adequately protect Plaintiff and Class Members’ PII. III. PARTIES A. Plaintiff 7. Plaintiff Anastasio Garcia Rodriguez is currently a resident of Pennsylvania. Plaintiff worked for Sony from approximately February of 2011 until May of 2013 as a software engineer at Sony’s Culver City, California, offices. Sony has informed Plaintiff that his PII may have been compromised as a result of the security breach, and Plaintiff has confirmed that the PII obtained by the GOP and distributed on the internet includes at minimum his social security number, immigration information and visa, and passport information. B. Defendant 8. Defendant Sony Pictures Entertainment, Inc., is a Delaware corporation with its principal place of business in Culver City, California. IV. STATEMENT OF FACTS A. The Sony data breach compromised the personally identifiable information (PII) of thousands of current and former Sony employees 9. On or about November 24, 2014, hackers identifying themselves as the Guardians of Peace (“GOP”) appeared on Sony’s computer networks and threatened to release “internal data” if the group’s demands were not “obeyed.” 10. In December of 2014, reports surfaced that unreleased Sony films appeared online on file sharing websites. Shortly after the films were released, the PII of thousands of current and former Sony employees was published online. 11. The PII that was released included social security numbers, names, birthdates, addresses, passport and visa information, salary information, private medical documents and information, and other sensitive information. Experts reported an estimated 25 gigabytes of sensitive data was stolen and released. Some data, much of which has not been published online. 12. Employees’ stolen PII was published on the internet and made widely available through file sharing websites. Identity Finder LLC, a global security firm that specializes in data loss and identity theft prevention, used its software to run analytics on the Sony data leak. It found that 600 files (including Acrobat PDFs, Excel spreadsheets, and Word documents) contained more than 47,000 unique social security numbers that were referenced over 1.1 million times in the files identified. It also found that many of the social security numbers were accompanied with other PII, such as “full names, date of birth, and home addresses,” permitting criminals to easily access the core data needed to commit identity theft and fraud. 13. On December 19, 2014, the U.S. Federal Bureau of Investigation (FBI) announced in a press release that North Korea was behind the GOP hacking attack. However, the identities of the GOP and any other hacking groups affiliated with the Sony data breach remain unknown. 14. Sony knew or should have known that it was failing to take the necessary steps to secure its current and former employees’ PII. As a result of its actions and inaction, current and former employees and their families will have to monitor their data for years to come and have been potentially exposed to a lifetime of heightened risk of identity theft and fraud. B. Sony knowingly and negligently failed to provide sufficient data protections for current and former employees’ PII 15. Sony’s recent history with negative audits and data breaches underscore that Sony knew or should have known that its security protections and protocol for sensitive information were woefully inadequate. 16. In April of 2007, CIO Magazine, a publication that caters to Chief Information Officers and other information technology leaders, published an article revealing that the then-executive director of information security, Jason Spaltro, had and that passwords used by Sony employees did not meet best practice standards. In the same interview, Spaltro stated that the company engaged cost-benefit analyses in determining how to protect data. He stated that in a scenario where notifying customers of a breach of data would cost $1 million, while updating and securing a system to prevent the breach would cost $10 million, he would “not invest $10 million to avoid a possible $1 million loss.” A privacy expert also interviewed called this reasoning “shortsighted,” since it did not take into account damage to Sony’s brand or possible fines from the U.S. Federal Trade Commission if the company was deemed negligent in its protection of sensitive information. 17. In April of 2011, hackers stole the personal information from over 77 million Sony PlayStation accounts. Sony admitted that it had not encrypted user account information, which included usernames, passwords, birthdates, and other personal information as well as some credit card information. Some users’ account information was discovered online later that year. The United Kingdom’s Information Commissioner's Office (ICO) fined Sony £250,000 (US$395,775) for violating UK data laws and stated that the breach “could have been prevented” had proper security precautions been taken. 18. In June of 2011, another hacking group called LulzSec claimed responsibility for obtaining over a million Sony customer passwords. The information stolen by hackers was reportedly not encrypted and included passwords, email addresses, phone numbers, and dates of birth. 19. According to media reports, a security audit performed by PricewaterhouseCoopers months before GOP hackers breached Sony’s system detailed serious gaps in Sony’s monitoring of data systems, which made Sony’s systems susceptible to security breaches. entrusted to the company despite multiple warnings from independent auditors and experts and repeated data breaches of personal information. C. Current and former Sony employees were harmed by Sony’s actions and inaction 21. The Sony data breach exposed the social security numbers, names, birthdates, addresses, passport and visa information, salary information, private medical documents and information, and other sensitive information of thousands of current and former Sony employees. Since the GOP hackers claim that they have not released all the information seized, the full scope of the breach is still unknown. 22. This breach of extremely sensitive PII will require multiple forms of identity theft protection and prevention for years to come. Sony’s offer of a year of AllClear ID monitoring is entirely inadequate to address the scope of the breach. 23. Experts report that with the type of PII released in the Sony data breach, fraudsters can apply for credit cards and mortgages, accumulate debt, file fraudulent tax returns, illicitly collect government benefits, apply for jobs and rental apartments, secure fake forms of identification, and even be arrested and jailed under someone else’s identity. 24. Unlike with credit card theft, social security numbers cannot be easily cancelled or changed. The Social Security Administration will not consider requests for a new social security number when an individual’s social security number has been stolen, but there is no evidence that someone else is using the number. Furthermore, even if the number is replaced, credit card companies, the IRS, and private businesses will still have records of the old number linked to an individual’s name. 25. Because of the serious consequences of theft of the PII released in the Sony data breach, employees will need to monitor their credit and personal accounts and information for many years. Sony’s paltry one-year offer of free credit the monitoring that they will need to undertake for years to come. V. CLASS ACTION ALLEGATIONS 26. Plaintiff brings all claims alleged herein as class action on behalf of, and seeks to have certified pursuant to Rule 23 of the Federal Rules of Civil Procedure, the class comprised of all current and former Sony employees and their families whose PII was compromised and disclosed to any third party as a result of the GOP security breach. 27. The class claims herein have been brought and may properly be maintained as a class action under Rule 23 of the Federal Rules of Civil Procedure because (1) the class is so numerous that joinder of all class members is impracticable; (2) there are questions of law and or fact common to the class; (3) the claims of the proposed class representative are typical of the claims of the class; and (4) the proposed class representative and his counsel will fairly and adequately protect the interests of the class. In addition, the questions of law or fact that are common to the class predominate over any questions affecting only individual class members and a class action is superior to other available means for fairly and efficiently adjudicating the controversy. 28. Ascertainability and Numerosity: The Class Members as defined herein are so numerous that joinder would be impracticable. Upon information and belief, reports estimate that over 47,000 current and former employees’ PII has been compromised as a result of the Sony data breach. The names and addresses of the Class Members should be identifiable and available to Defendant. Notice can be provided to the Class Members via first class mail using techniques and a form of notice similar to those customarily used in class action lawsuits of this nature. 29. Commonality and Predominance of Common Questions: There are questions of law and fact common to Plaintiff and Class Members that predominate questions of law and fact include, but are not limited to: whether Sony had a legal duty of care to Plaintiff and the proposed Class; whether Sony satisfied that duty of care; and whether Sony’s act and omissions give rise to a claim of negligence. 30. Typicality: Plaintiff’s claims are typical of the claims of the other Class Members. Defendant’s common course of unlawful conduct has caused Plaintiff and Class Members to sustain the same or similar injuries and damages caused by the same common policies, practices, and decisions of Defendant. Plaintiff’s claims are thereby representative of and co-extensive with the claims of the other Class Members. 31. Adequacy of Representation: Plaintiff is a member of the Rule 23 Class defined herein, does not have any conflicts of interest with other Class Members, and will prosecute the case vigorously on behalf of the class. Plaintiff will fairly and adequately represent and protect the interests of the Class Members. Plaintiff has retained attorneys who are competent and experienced in litigating large class actions. 32. Superiority: The expense and burden of individual litigation by each class member makes or make it impractical for Class Members to seek redress individually for the wrongful conduct alleged herein. Should separate actions be brought, or be required to be brought, by each individual Class Member, the resulting multiplicity of lawsuits would cause undue hardship and expense for the Court and the litigants. The prosecution of separate actions would also create a risk of inconsistent rulings which might be dispositive of the interests of other Class Members who are parties to the adjudication and/or may substantially impede their ability to adequately protect their interests. COUNT ONE: NEGLIGENCE 33. Plaintiff realleges and incorporates each and every allegation of this Complaint as if fully set forth herein. 34. Defendant owed a legal duty to Plaintiff and Class Members to exercise reasonable care in obtaining, maintaining, securing, and disposing of PII. This duty included: (a) designing, implementing, maintaining, and testing Defendant’s data security systems to ensure that they were adequate to timely identify and prevent a breach by unauthorized persons; (b) securely and completely disposing of PII that was no longer needed by Defendant; and (c) timely acting upon warnings and indications that its current systems were inadequate to protect PII from unauthorized release. 35. Defendant’s duty included an obligation to maintain data security consistent with industry standards and best practices. The nature of the technology available to hackers, and the speed at which changes in that technology occur, required Defendant to maintain industry-standard vigilance in updating its protection and detection defenses. 36. Defendant breached its duties owed to Plaintiff and Class Members (a) by failing to exercise reasonable care in the adoption, implementation, and maintenance of IT security procedures, infrastructure, personnel, and protocols; (b) by failing to securely dispose of PII that Defendant no longer required; (c) by failing to utilize industry standard methods for timely identifying security breaches; (d) by failing to timely act on information suggesting that its IT security was inadequate/had been breached; and (e) by failing to timely notify Plaintiff and Class Members of the GOP data breach. 37. Plaintiff and Class Members were foreseeable and probable victims of the GOP data breach. caused injuries to Plaintiff and Class Members, including, but not limited to: (a) theft of their PII; (b) expenses associated with the detection and prevention of identity theft and unauthorized use of their personal, financial and medical records; (c) expenses associated with time spent addressing and attempting to mitigate the consequences of the GOP data breach; and (d) injury resulting from fraud and identity theft caused by the use of PII by criminals or others who access PII now available on the internet. 39. But for Defendant’s negligent and wrongful breach of its legal duty to Plaintiff and Class Members, Plaintiff and the Class would not have been harmed. 40. Plaintiff and Class Members seek an award of actual damages for the injuries caused by Defendant. VII. PRAYER FOR RELIEF WHEREFORE, Plaintiff, on behalf of himself and the above-described Class of similarly situated, requests relief as follows: A. Certification of this case as a class action pursuant to Fed. R. Civ. P. 23(a), (b)(2), and (b)(3). B. Appointment of Plaintiff and Plaintiff’s counsel to represent the Class pursuant to Fed. R. Civ. P. 23(g); C. A finding that Sony breached its legal duty to Plaintiff and the Class; D. An award of damages to Plaintiff and the Class for the harm caused by Defendant; E. An award of costs; F. Additional legal or equitable relief as this Court may find just and proper. Plaintiff demands a trial of his claims by jury to the extent authorized by law. DATED: January 2, 2015 RUKIN HYLAND DORIA & TINDALL LLP By: /s/ Steven M. Tindall STEVEN M. TINDALL Attorney for Plaintiff

securities

7Nn8D4cBD5gMZwczl2JU

16-cv-7036 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK ADAM J. STARKE, Individually and On Behalf of All Others Similarly Situated, Plaintiff, vs. No: CLASS ACTION COMPLAINT DEMAND FOR JURY TRIAL SQUARETRADE, INC., Defendant. x ) ) ) ) ) ) ) ) ) ) ) x Now comes Plaintiff Adam Starke (“Plaintiff” or “Starke”), by and through his attorneys, on behalf of himself and all others similarly situated, and for his Complaint states as follows: NATURE OF ACTION 1. This action seeks to remedy the unfair, deceptive, and unlawful business practices of SquareTrade, Inc. (“Defendant” or “SquareTrade”) with respect to the advertising, marketing and sales of Protection Plans through Amazon.com as to consumer electronics and appliances costing between $1.00 and $6,000. 2. Defendant SquareTrade fraudulently and deceptively markets, sells, and distributes its Protection Plans through Amazon.com using three distinct fraudulent and deceptive practices. 3. First, when selling its Protection Plans, SquareTrade does not provide the legally- required pre-sale access to the Terms and Conditions of the respective Protection Plans. These Terms and Conditions severely restrict and contradict the seemingly broad coverage presented in SquareTrade’s product pages on Amazon.com. 4. For the vast majority of Protections Plans, a link to the pre-sale copy of the Terms and Conditions is buried, in a non-descript section titled “Technical Specification,” several screens below the purchase section of the product page and below advertisements for unrelated products and all manner of non-essential information. 5. Second, the pre-sale copy of the Terms and Conditions that SquareTrade provides to the consumer is a false contract – i.e., a Terms and Conditions document that is drastically different and more generous than the post-sale Terms and Conditions that SquareTrade enforces against the customer after she purchases a Protection Plan. As soon the Protection Plan is purchased, the customer is simply provided a link to a different set of Terms and Conditions. 6. Third, for years, SquareTrade has been knowingly selling fake Protection Plans to Amazon.com customers. SquareTrade routinely sells Protection Plans that cover products that are not eligible for coverage because the underlying product was not bought at Amazon.com. SquareTrade does not properly inform visitors to its Amazon.com storefront that Protection Plans do not cover consumer products that were not purchased on Amazon.com. 7. SquareTrade has continued to sell these fake Protection Plans despite years of consumer complaints. 8. SquareTrade enriches itself by selling such Protection Plans using a simple and fraudulent scheme: If a customer files a claim for such coverage, SquareTrade informs the customer that the Protection Plan is void and cancels the policy. If a customer does not make a claim, SquareTrade keeps the premium and does not inform the consumer that the policy was void ab initio. 9. This action seeks to remedy SquareTrade’s deceptive and fraudulent practices. 10. All of Defendant’s actions described in this Complaint are part of, and in furtherance of, the unlawful conduct alleged herein, and were authorized and/or done by SquareTrade’s various officers, agents, employees, or other representatives while actively engaged in the management of SquareTrade’s affairs within the course and scope of their duties and employment, and/or with the actual, apparent, and/or ostensible authority of the SquareTrade. 11. Through this action, Plaintiff seeks injunctive relief on behalf of the public, and actual damages, restitution and/or disgorgement of profits, statutory damages, attorneys’ fees, costs, and all other relief available to the Class as a result of SquareTrade’s unlawful conduct. JURISDICTION AND VENUE 12. Claims asserted herein arise under the laws of the State of New York and other states, and the laws of the United States, including the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301, et seq. (the “MMWA”). 13. This Court has subject matter jurisdiction pursuant to the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d), because at least one class member is of diverse citizenship from one defendant, there are more than 100 class members that are citizens of New York, and the aggregate amount in controversy exceeds $5,000,000. The Court also has jurisdiction over the MMWA claims pursuant to 28 U.S.C. § 1337. 14. Venue is proper in this District under 28 U.S.C. § 1391(a) because Plaintiff resides within it and Defendant has caused harm to Starke and class members residing in this District. PARTIES 15. Plaintiff, Adam J. Starke, is a resident of Brooklyn, Kings County, New York and, thus, is a citizen of New York. 16. Plaintiff is a consumer. 17. Defendant SquareTrade, Inc. is a corporation existing under the laws of the state of Delaware with its principal place of business located at 360 3rd Street, 6th Floor, San Francisco, California, 94107. 18. Defendant is a merchant in the business of marketing, selling and administering extended warranties, service contracts and accident protection plans for a broad range of consumer products, including household and electronic devices. Defendant claims to have sold some 25 million such contracts, marketed as “Protection Plans.” STATEMENT OF FACTS A. SquareTrade’s Products and Sales through Amazon.com 19. SquareTrade markets, sells and administers extended warranties, accident protection and service plans for consumer products, including smartphones, kitchen appliances, and computers. SquareTrade boasts of having over 25 million customers and represents its Protection Plans as the protection of “mobile devices, laptops and tablets, and other consumer electronics and appliances from malfunctions, accidental damage and life’s frequent mishaps.” 20. SquareTrade sells its Protection Plans through a number of major retailers, such as amazon.com (Amazon.com), Costco, Sam’s Club, Target, Staples, Office Depot and Toys “R” Us. 21. Upon information and belief, SquareTrade’s largest online partner is Amazon.com, where it has sold hundreds of thousands and, perhaps, millions of Protection Plans for merchandise bought at Amazon.com and other retailers. SquareTrade sells its products on Amazon.com through “storefronts” listing hundreds of Protection Plans, categorized by type and cost of covered product. 22. SquareTrade sells its Protection Plans through Amazon.com as either a stand- alone item or as an add-on to an existing purchase. 23. For example, when an Amazon.com customer purchases a kitchen appliance, the customer might receive a pop-up screen offering a SquareTrade Protection Plan for that item, from where the consumer can access SquareTrade’s storefront on Amazon.com. 24. For customers who purchased that same kitchen appliance from a source other than Amazon.com, the same Protection Plans are offered to consumers by SquareTrade through the same Amazon.com storefront. 25. SquareTrade offers Protection Plans tailored to both broad and narrow product lines, including, but not limited to, electronics, computers, furniture, televisions, game consoles, home audio-video systems, and Amazon devices (e.g., the Amazon Kindle). SquareTrade also varies the scope and pricing of its Protection Plans based on how many of years’ of coverage it provides and the costs of the covered product, covering products valued from $1 to $6,000. 26. Below is a screenshot of a representative coverage plan offered by SquareTrade on Amazon.com. 27. Once a consumer purchases a Protection Plan on Amazon.com, the consumer receives a confirmation email from Amazon.com, followed by a confirmation email from SquareTrade. 28. SquareTrade’s email follows the provision to it by Amazon.com of the customer’s transactional details, including the identity of the underlying product covered by the Protection 29. The confirmation email from SquareTrade sets out the general contract terms, and provides a link or other access to the Terms and Conditions of the Protection Plan. 30. The consumer is also instructed by the email from SquareTrade to log in or create an account on SquareTrade’s website, where a link to the Terms and Conditions of the Protection Plans are again provided as to the respective Protection Plan. The consumer is also immediately asked to upload a copy of the receipt for the product being covered, and told that uploading that receipt is a necessary condition to submitting a claim under the Protection Plan. B. SquareTrade Fails to Provide Clear and Conspicuous Pre-Sale Access to the Terms and Conditions of the Coverage Plans 31. The description of the Protection Plans on Amazon.com contains general platitudes about the coverage and the purported benefits of SquareTrade’s coverage, but makes it close to impossible to discover the severe coverage limitations that apply to these plans. In fact the webpage is structured such that the customer concludes her purchase of the Protection Plan prior to any but the remotest possibility of discovering that highly-limiting terms and conditions exist. None of those limitations are listed in the product pages, but are only available in the formal “terms and conditions” of the Protection Plans (the “Terms and Conditions”). 32. As an example, although SquareTrade claims on its Amazon.com product page that “Your plan begins on the date you purchased your item”, SquareTrade typically does not provide any protection for up to 30 days after the purchase of the Protection Plan unless the coverage was bought simultaneously with the product. SquareTrade takes the position that any coverage event that occurs in the first 30 days is considered a pre-existing defect not covered by the Protection Plan. Such information is available only in the Terms and Conditions. 33. Additionally, the Terms and Conditions provide 1) that a third-party company (depending on the geography of the customer) is responsible for the coverage under the Protection Plan; 2) the involvement of an insurer to whom a consumer can appeal from a SquareTrade claim denial; 3) and a long list of exclusions and restrictions to coverage not disclosed prior to purchasing the Protection Plan, e.g. “claims made under any improperly or incorrectly purchased Protection Plan.” 34. Despite the numerous restrictions in the Terms and Conditions, SquareTrade fails to provide clear and conspicuous disclosure of the Terms and Conditions prior to the sale as required by law. The customer has to buy the Protection Plan to obtain reasonable access to the coverage restrictions in the Terms and Conditions. In fact, SquareTrade designed its sales materials to make it difficult to impossible for the consumer to access Terms and Conditions. 35. Generally, there are no instructions on how to receive a pre-sale copy of Terms and Conditions. Indeed, the advertised plan description leads the consumer to believe that she will receive the Terms and Conditions only after she purchases the plan – and that a pre-sale copy is not readily available. SquareTrade typically informs the consumer that “Your Service Contract will be delivered via email and not mailed to you. It will come from SquareTrade Warranty Services (warrantysupport@squaretrade.com) within 24 hours of purchase.” (See, e.g., https://www.amazon.com/SquareTrade-3-Year-Electronics-Protection-350- 400/dp/B001N82KO2) 36. The Amazon.com product page for SquareTrade’s Protection Plans, on which the consumer executes her transaction, does not reference, link to, or otherwise create awareness of the Terms and Conditions of the Protection Plan. Instead, when the customer has a claim and it is “too late,” the claim is often denied based on Terms and Conditions to which the customer did not assent prior to purchasing her Protection Plan. 37. A pre-sale link to Terms and Conditions is buried, in a non-descript section titled “Technical Specification,” several screens below the purchase section of the product page and below advertisements for unrelated products and all manner of non-essential information. This remotest of disclosure consists of a hyperlink with the words “Warranty [pdf ]” that is a link to https://images-na.ssl-images-amazon.com/images/I/51Y1uUTi6rL.pdf (the “Pre-Sale Terms and Conditions”; Exh. 1). (In any case, as described in the section below, this link with the purported Terms and Conditions, inconspicuously disclosed at best, is fraudulent, and a different, more restrictive Terms and Conditions are provided to the customer by SquareTrade after the customer has concluded her purchase of the Protection Plan.) 38. For Protection Plans for Amazon-manufactured devices such as the Amazon Kindle or Amazon Echo, SquareTrade provides some instructions and a link to access a pre-sale copy of the Terms and Conditions, but only if the customer will scroll down (below advertisements for unrelated products) and fails to do so in a clear and conspicuous manner as required by law. (In any case, as described in the section below, the pre-sale copy of the Terms and Conditions document provided at this link are fraudulent, and a different, more restrictive Terms and Conditions are provided to the customer by SquareTrade after the customer has concluded her purchase of the Protection Plan.) C. SquareTrade Deceptively and Fraudulently Provides Pre-Sale Terms and Conditions that Are Different and Less Restrictive than the Terms and Conditions Provided to the Customer After She Purchases the Protection Plan 39. Shockingly, if a customer attempts to access a pre-sale copy of the Terms and Conditions, SquareTrade provides the consumer with a false contract – i.e., a Terms and Conditions document that is different and less restrictive than the Terms and Conditions that SquareTrade enforces after the customer purchases a Protection Plan (the “Post-Sale Terms and Conditions”; Exh. 2). (Compare Exh. 1 to Exh. 2.) 40. The Pre-Sale Terms and Conditions differs from the Post-Sale Terms and Conditions in that it adds a number of restrictions to the scope of the coverage, including, but not limited to, a) expanding the “no-lemon” exclusion policy; b) drastically increasing the number of defective pixels required for a cell phone or tablet screen to be considered defective; c) adding limitations such that certain defects are only covered to the extent covered by manufacturer’s warranty; d) adding an exclusion for products that were fraudulent described even where the misrepresentation was not by the customer; e) exclusion of any claim that is covered by a manufacturer’s warranty but denied by the manufacturer – even if the claim was otherwise eligible under the Protection Plan, and f) adding a California choice of law requirement. 41. Most egregiously, the Post-Sale Terms and Conditions purport to include a waiver and forfeiture of individual/class remedies and access to the courts that is not included in the Pre- Sale Terms and Conditions accessible through the inconspicuous “Warranty” link described in ¶ 37 above. 42. In the fraudulent Post-Sale Terms and Conditions, SquareTrade created an arbitration scheme that effectively removes any ability to obtain a remedy for most disputes. Although absent from any pre-sale documentation, the Post-Sale Terms and Conditions requires the consumer to proceed in arbitration, while requiring the consumer to pay arbitration costs even if consumer wins, unless the consumer recovers more than $500. 43. In other words, no reasonable consumer would pursue a claim unless the claim is certain to win more than $500, because the customer would suffer a net loss even if she wins the arbitration. 44. Given that the value of a repair or even the total value of the covered product is routinely less than $500, the fraudulent Post-Sale Terms and Conditions effectively removes any ability by consumers to obtain relief against SquareTrade. At the same time, the Post-Sale Terms and Conditions purports to have obtained a waiver by the consumer to pursue the matter in courts where consumers have statutory and common law rights to recover costs. But no such waiver existed in any pre-sale document or disclosure, rendering impossible such assent to this waiver and forfeiture. 45. SquareTrade continues to provide its customers with a Post-Sale Terms and Conditions purporting that they have waived their class action and common law and statutory rights in courts, and requires customers to pursue any claims through mediation and arbitration. This is despite the fact that such Terms and Conditions were fraudulently imposed after the purchase of the Protection Plan, and no pre-sale documentation contains waivers of any class and individual rights to access the courts. D. SquareTrade Deceptively Sells Protection Plans on Amazon.com to Cover Products Not Purchased On Amazon.com 46. Unknown to consumers who purchase Protection Plans on Amazon, such Protection Plans are effective only if the underlying electronic item or appliance was purchased on Amazon.com. An inconspicuous disclosure of this critical eligibility requirement is made approximately six pages down on SquareTrade’s Amazon storefront, below unrelated items and advertisements. 47. SquareTrade knowingly and deceptively sells Protection Plans for items not purchased on Amazon.com and therefore, not eligible for coverage, despite knowing that the product is not eligible for coverage. The scheme is as simple as it is profitable. 48. In SquareTrade’s first email to the consumer (who purchased from a source other than Amazon.com), SquareTrade tells the consumer to upload a copy of the receipt. If the consumer never makes a claim under her plan, SquareTrade keeps the premiums and retains the policy in effect. If the consumer makes a claim that requires SquareTrade to honor the policy, SquareTrade informs the customer that Protection Plan is void because the underlying product was not purchased through Amazon.com. 49. SquareTrade has continued with this scheme despite a long litany of complaints by consumers, going back to at least 2014, including sincere pleas to properly inform potential purchasers of the Amazon-purchased-only rule so that future customers are not deceived. 1. SquareTrade Deceptively Sells Void Policies 50. Pursuant to a carefully crafted course of deceptive conduct, SquareTrade purports to offer, unqualified, “Coverage for product breakdowns and malfunctions” for its line of Protection Plans. The customer is led to believe that any one of thousands of electronic products within the defined product price range is eligible for a Protection Plan. 51. The Amazon.com product page for SquareTrade’s Protection Plans, on which the consumer executes her transaction, does not reference, link to, or otherwise create awareness of the Amazon-purchased-only requirement. 52. An Amazon.com-purchased-only disclosure appears several pages down on the digital advertisement and after unrelated advertisements. Such placement of a material limitation is deceptive per se under the Federal Trade Commission’s Online Advertising Disclosure Guidelines (p.9) for clear and conspicuous disclosure: If scrolling is necessary to view a disclosure, then, ideally, the disclosure should be unavoidable — consumers should not be able to proceed further with a transaction, e.g., click forward, without scrolling through the disclosure. Making a disclosure unavoidable increases the likelihood that consumers will see it. https://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-staff-revises-online- advertising-disclosure-guidelines/130312dotcomdisclosures.pdf Contrary to FTC guidance, the purchase of the Protection Plan proceeds to conclusion with approximately zero likelihood that the consumer will encounter the Amazon-purchased-only requirement. 53. When a customer purchases a Protection Plan for a non-Amazon.com product, SquareTrade sets up the policy and keeps the premium. Only after a consumer makes a claim does SquareTrade inform the consumer that the Protection Plan is void – leaving the consumer without coverage, and unable to obtain other coverage for a now-old product. 54. However, SquareTrade retains the premiums from consumers who do not make claims and who are unaware that their Protection Plan is void. 55. Thus, SquareTrade’s conduct is deceptive at two levels: First, SquareTrade deceptively sells Protection Plans by not adequately informing consumers that coverage for products not purchased on Amazon.com is not available. Second, SquareTrade sells these Protection Plans despite contemporaneous awareness that the Protection Plans are void. 56. SquareTrade can easily and immediately identify when it sold a fake policy because it usually receives information about the covered Amazon.com product, but does not receive such information when it sells a fake policy. Indeed, in the case of a Protection Plan that is purchased simultaneously with a covered product through Amazon.com, SquareTrade immediately receives information from Amazon.com about the details of the transaction, including the purchaser’s name, email address and transactional details including, the identity of the covered product. 57. However, when a consumer purchases a Protection Plan on a stand-alone basis for a product not purchased on Amazon.com, SquareTrade would not receive information from Amazon.com for the underlying transaction. Consequently, SquareTrade typically knows whether a new Protection Plan is likely intended to cover an Amazon.com-purchased product or, conversely, a non-Amazon purchased covered product . . . prior to its first contact with the Protection Plan purchaser. 58. Moreover, SquareTrade requests of all Protection Plan purchasers that they immediately upload a copy of the product sales receipt, containing the name of the covered product seller, e.g., Staples, Amazon.com, etc. Consequently, SquareTrade is at all relevant times keenly aware of its Amazon customers’ eligibility or ineligibility for Protection Plan coverage. But even if a customer is ineligible for Protection Plan coverage, SquareTrade accepts the premium, misleads the consumer into believing she has coverage, attempts to resolve customer claims through manufacturer warranties or otherwise at no cost to SquareTrade, and voids the Protection Plan only if it is called upon to honor its warranty commitment. 2. SquareTrade Continues With Its Deceptive Practice Despite Long-Running Complaints by Consumers that they were Deceptively Sold Void Policies 59. A recurring theme of consumer reviews of SquareTrade’s Protections Plans is a complaint by consumers that they were deceptively sold void policies for coverage of products not purchased through Amazon.com. 60. Below is a sampling of such consumer complaints over a period of months and years, with some editing for readability (the full text and content is available at the link provided). 61. The following is a review and interaction with SquareTrade during March and April of 2016 (available at https://www.amazon.com/gp/review/R2Q6DUMSCKOLU9?ref_=glimp_1rv_cl). 9 of 9 people found the following review helpful Don't buy through Amazon if it's not covering an Amazon product!, March 15, 2016 By Shannon Murphey Verified Purchase(What's this?) This review is from: SquareTrade RD-PH0699N2A 2-Year Smartphone Accident Protection Plan (Wireless Phone Accessory) Do not buy this product if you didn't buy the item to be covered through Amazon. I blame Amazon for not making this more clear on their page, and I blame square trade for accepting my receipt and my money, and never telling me that the warranty was actually void and not covering anything. I have an iPhone 6 that I thought I had protection on (and I need to be replaced), and a year and a half later, I find out I don't. So disappointed. Help other customers find the most helpful reviews Was this review helpful to you? Report abuse | Permalink Sort: Oldest first | Newest first Showing 1-3 of 3 posts in this discussion Initial post: Mar 17, 2016 2:52:28 PM PDT SquareTrade Inc. says: Hi Shannon, We're so sorry for the experience you had while trying to make a claim with us. We have reviewed your account and someone will be reaching out to you within the next 24-48 hours. -SquareTrade Reply to this post Permalink | Report abuse Do you think this post adds to the discussion? Posted on Mar 26, 2016 10:05:14 AM PDT Joshua D. Meeker says: I has the exact same thing happen to me. Found out today that they will not offer my claim because I bought the phone through Amazon and the warranty through the Squaretrade website. Buyer beware! Reply to this post Permalink | Report abuse Do you think this post adds to the discussion? Posted on Apr 29, 2016 10:09:20 AM PDT Engineer of Things says: This just happened to me also. Really not happy! 62. The following is a review in August of 2016 (available at https://www.amazon.com/gp/review/R34YLXM5NGO9VU?ref_=glimp_1rv_cl). 4 of 5 people found the following review helpful Covers items purchased from Amazon only., August 29, 2016 By Mysticats Verified Purchase(What's this?) This review is from: SquareTrade RD-PH0699N2A 2-Year Smartphone Accident Protection Plan (Wireless Phone Accessory) Make sure you scroll down to the very bottom and read the fine print. Your item must be purchased through Amazon for it to be covered. They will accept your receipt from another company (T-Mobile in our case), and collect the money, and than point to that bottom print when they decline your claim. I own my part in not reading everything but to accept the receipt and not point out that the policy is not valid for the submitted item is not good practice in my opinion. Help other customers find the most helpful reviews Was this review helpful to you? Report abuse | Permalink 63. The following is a review in May of 2016 (available at https://www.amazon.com/gp/review/R107RG5G61AMDG?ref_=glimp_1rv_cl). 3 of 5 people found the following review helpful FIne Print, May 2, 2016 By Ryerson Verified Purchase(What's this?) This review is from: SquareTrade 2-Year Electronics Accident Protection Plan ($50-75) (Electronics) This plan as good as it sounds may as well be crap. The note that it is only able to used on "Amazon purchased items" needs to be moved to the top of the page instead of BURIED in all of the garbage in the middle of page. So as I did not purchase the tablet from Amazon I am stuck cancelling this plan, and as it has been over 30 days I am figuring that I will get a refund of about $3.00. Moral of story....make sure you read ALL of the fine print to make sure that you are getting what you really need instead of garbage from major retailers like AMAZON and SQUARE TRADE. Help other customers find the most helpful reviews Was this review helpful to you? Report abuse | Permalink 64. The following is a review in December of 2016 (available at https://www.amazon.com/gp/review/R2HYYI2INMBV7R?ref_=glimp_1rv_cl). 0 of 1 people found the following review helpful Be mindful that these Amazon SqTrade Plans ONLY work if TV was purchased on Amazon.com, December 5, 2016 By That one guy Verified Purchase(What's this?) This review is from: SquareTrade 5-Year TV Protection Plan ($1250-$1500) (Electronics) Its a good deal for the plan, IF you bought your TV @ Amazon. My concerns: - it's buried in the fine print. - when I received the Square Trade contract info, they set up my plan and everything and accepted my receipt from other retailer, but when I called, they (SqT) said i would NOT be covered. - Seems shady that they are quick/willing to take my money and NOT tell me that I'm not actually covered. I'm normally happy with Sq Trade and would use again...but don't like that they took my money, and accepted my Non-Amazon purchase receipt, but then told me it wasn't covered. THEN they had the gall to ask me if I wanted to cancel it. OF COURSE i want to cancel the plan if they're not actually going to cover it!!! Help other customers find the most helpful reviews Was this review helpful to you? Report abuse | Permalink 65. The following is a review and interaction with SquareTrade in December of 2014 (available at https://www.amazon.com/gp/review/R2O0PED1VSQDIV?ref_=glimp_1rv_cl). The exchange below shows that SquareTrade has been aware of this issue for at least two years. 1 of 1 people found the following review helpful Read The Product Page VERY CAREFULLY if you didn't purchase your item off of Amazon., December 1, 2014 By TBlazer07 Verified Purchase(What's this?) This review is from: SquareTrade 4-Year TV Protection Plan ($900-$1000) (Electronics) First let me say that Squaretrade is a great company to deal when you need service however Be VERY CAREFUL here on Amazon.Com. READ ALL THE FINE BURIED PRINT. Only mentioned as an after though in their listing under the line: Things to know (way down at the bottom) is: "SquareTrade Protection Plans are only valid for new products purchased at Amazon within the last 30 days." You can read ALL the drivel that is posted all over their product page but that ONE LITTLE LINE is the "catch 22." These warranties are only good for items purchased off of Amazon. That should be CLEARLY AND IN LARGE PRINT posted at the top of each warranty listing because it is quite obviously "under-reported." Intentionally? Who knows. But without a doubt it should be made MUCH CLEARER on the top of the page in the MAIN HEADLINE. After buying a warranty for a TV purchased elsewhere I happened to call them and was also told ONLY FOR ITEMS PURCHASED OFF AMAZON. They told me they were "going to make a one time exception for my warranty which was great but 4 years down the road should I need the service what is to stop them from telling me "SORRY YOU ARE S.O.L." I did receive an email confirming this "one time exception" but I am still feeling a bit uneasy and concerned. AGAIN, this is no reflection on Squaretrade warranty service itself, they are excellent 5 STAR service company however the way the listings are posted on Amazon is VERY MISLEADING and needs to be made much clearer. I'm sure i am not the only one who purchased a warranty thinking it could apply to any purchase (Costco ST warranty is good on items purchased from other stores). My bad for not reading every single word on the overloaded page carefully but they really do need to make it more obvious. So: Squaretrade as a SERVICE COMPANY: Five Stars Squaretrade selling on Amazon: 2 Stars for very unclear product description. Help other customers find the most helpful reviews Was this review helpful to you? Report abuse | Permalink 1 Comments Track comments by e-mail Tracked by 1 customer Sort: Oldest first | Newest first Showing 1-1 of 1 posts in this discussion Initial post: Dec 2, 2014 5:40:46 PM PST SquareTrade Inc. says: Hey TBlazer07, Thanks for your feedback, we really appreciate it. I'll be sure to pass along your feedback to our team. In the meantime, feel free to reach out to me at tiffanyhelps(at)squaretrade.com with any questions at all. Regards, Tiffany U., SquareTrade 66. The above is merely a sampling of consumer complaints going back to 2014. The fraud is then compounded when these consumers are provided false Post-Sale Terms and Conditions limiting their individual and class remedies and their access to the courts. 67. Finally, these complaints are only from consumers that became aware of the deception. Consumers that will not have claims will never know that they paid for a worthless, illusory policy. PLAINTIFF STARKE’S FACTUAL ALLEGATIONS 68. Plaintiff Starke is an individual that has over the years purchased several Protection Plans issued by SquareTrade. 69. On December 27, 2015, Plaintiff Starke ordered a CD Player from Staples (the “CD Player”), for $61.83, with an expected delivery date of January 7, 2016. 70. Upon receipt of the CD Player, Plaintiff Starke shopped for a SquareTrade Protection Plan on Amazon.com, and encountered the SquareTrade 2-Year Electronics Protection Plan (the “2-Year Electronics Protection Plan”), for $4.34 plus $.39 tax, that was in sum and substance as follows: 71. Prior to the sale, SquareTrade did not make the Terms and Conditions (or the fact they existed) available to Mr. Starke in a clear and conspicuous manner. 72. Upon information and belief, the Pre-Sale Terms and Conditions were at most buried in a non-descript section titled “Technical Specification,” several screens below the purchase section of the page and below advertisements for unrelated products. Mr. Starke never read the Technical Specification. 73. Plaintiff Starke was not made aware and did not know that the 2-Year Electronics Protection Plan did not cover items that were not purchased through Amazon.com. 74. On January 5, 2016, Plaintiff Starke purchased the 2-Year Electronics Protection Plan. Plaintiff Starke immediately received a confirmation email from Amazon.com. The confirmation email by Amazon.com informed Plaintiff Starke that “Your protection plan service agreement will be sent via a separate e-mail by your seller.” 75. Indeed, on the same day, SquareTrade sent an email to Plaintiff Starke confirming the purchase of the 2-Year Electronics Protection Plan. The email asked Plaintiff Starke to submit his receipt to SquareTrade. 76. The email also provided a link to the Terms and Conditions (Exhibit 2) (http://www.squaretrade.com/merchant/contracts/2014_1_1_STC_Standard.pdf). 77. The Post-Sale Terms and Conditions issued by SquareTrade to Plaintiff Starke was different and more restrictive than the Pre-Sale Terms and Condition. 78. As directed by SquareTrade, Plaintiff Starke immediately sent a copy of his receipt of CD Player. The receipt clearly stated that the item was purchased at Staples. 79. On January 7, 2016, SquareTrade emailed Plaintiff Starke confirmation that it received the receipt. In the email, SquareTrade stated: “Your receipt has been successfully submitted! Thanks again for being such an awesome customer.” 80. In October 2016, the CD Player required repair or replacement, and Plaintiff Starke made a claim for coverage under the 2-Year Electronics Protection Plan. At first, SquareTrade directed Plaintiff Starke to the manufacturer for warranty assistance. 81. Plaintiff Starke informed SquareTrade that there was no coverage by the manufacturer and that he expected SquareTrade to honor the claim. SquareTrade denied Plaintiff’s claim, whereupon Plaintiff sought review by a supervisor. 82. SquareTrade’s supervisor then informed Plaintiff Starke in writing that since the CD Player was not purchased on Amazon.com, there was no coverage and that the Protection Plan would be canceled and the premium would be refunded. 83. SquareTrade, however, never refunded the purchase price of the 2-Year Electronics Protection Plan. CLASS ACTION ALLEGATIONS 84. Plaintiff brings this action on behalf of himself and all other persons similarly situated, pursuant to Rule 23 of the Federal Rules of Civil Procedure. 85. The Class and Sub-Class (collectively “Classes”) that Plaintiff seeks to represent are defined as follows: New York Amazon Plan Purchaser Class (Class I): All New York residents who purchased a SquareTrade Protection Plan on Amazon.com within three (3) years of the commencement hereof; New York Non-Amazon Product Purchaser Sub-Class (Sub-Class I): All New York residents who purchased a SquareTrade Protection Plan on Amazon.com within four (4) years of the commencement hereof, as to an underlying product not purchased on Amazon.com. National Magnuson-Moss Warranty Class (Class II) All residents of the United States who purchased a SquareTrade Protection Plan on Amazon.com within the four (4) years of the commencement hereof. National Unjust Enrichment Class (Class III): All residents of the United States who purchased a SquareTrade Protection Plan on Amazon.com within the period of limitations provided in their respective states for claims in unjust enrichment. 86. Excluded from the Classes are (a) Defendant, including any entity in which Defendant has a controlling interest, and its representatives, officers, directors, employees, assigns and successors; and (b) the Judge to whom this case is assigned. 87. Numerosity/Impracticability of Joinder: The members of the Classes are so numerous that joinder of all members would be impracticable. The proposed Classes include, at a minimum, thousands of members. The precise number of Class members can be ascertained by reviewing documents in Defendant’s possession, custody and control or otherwise obtained through reasonable means. 88. Commonality and Predominance: There are common questions of law and fact which predominate over any questions affecting only individual members of the Classes. These common legal and factual questions, include, but are not limited to the following: a. whether SquareTrade engaged in a pattern of fraudulent, deceptive and misleading conduct targeting the public through the marketing, advertising, promotion and/or sale of Protection Plans; b. whether SquareTrade’s acts and omissions violated New York General Business Law, Deceptive Acts and Practices, N.Y. Gen. Bus. Law §§ 349- 50; c. whether SquareTrade made material misrepresentations of fact or omitted material facts to Plaintiff and the Classes regarding the marketing, promotion, advertising and sale of the Protection Plans, which material misrepresentations or omissions operated as fraud and deceit upon Plaintiff and the Classes; d. whether SquareTrade’s false and misleading statements of fact and concealment of material facts regarding the Protection Plans were intended to deceive the public; e. whether SquareTrade’s acts and omissions deceived Plaintiff and the Classes; f. whether, as a result of SquareTrade’s misconduct, Plaintiff and the Classes are entitled to equitable relief and other relief, and, if so, the nature of such relief; g. whether SquareTrade deceives consumers by not clearly and conspicuously disclosing that Protection Plans do not cover (i) breakdowns and malfunctions covered by a manufacturer’s warranty, or (ii) breakdowns and malfunctions denied coverage by a manufacturer under its warranty; h. whether Plaintiff and the members of the Classes have sustained ascertainable loss and damages as a result of SquareTrade’s acts and omissions, and the proper measure thereof; and i. whether, as a result of SquareTrade’s misconduct, Plaintiff and the Classes are entitled to statutory damages, 89. Typicality: Plaintiff’s claims are typical of the claims of the members of the Classes he seeks to represent. Plaintiff and all Class members have been injured by the same wrongful practices in which Defendant has engaged. Plaintiff’s claims arise from the same practices and course of conduct that give rise to the claims of Class members, and are based on the same legal theories. 90. Adequacy: Plaintiff is a representative who will fully and adequately assert and protect the interests of the Classes, and has retained Class counsel who are experienced and qualified in prosecuting class actions. Neither Plaintiff nor his attorneys have any interests which are contrary to or conflicting with the Classes. 91. Superiority: 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 Classes 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 Classes 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, SquareTrade has acted or refused to act on grounds generally applicable to the Classes and, as such, final injunctive relief or corresponding declaratory relief with regard to the members of the Classes as a whole is appropriate. FIRST COUNT VIOLATION OF NEW YORK GENERAL BUSINESS LAW (Deceptive Acts and Practices, N.Y. Gen. Bus. Law §§ 349-350 on behalf of Plaintiff and Class I and Sub-Class I) 92. Plaintiff incorporates the allegations set forth above as if fully set forth herein. 93. SquareTrade’s business acts and practices and/or omissions alleged herein constitute deceptive acts or practices under the New York General Business Law, Deceptive Acts and Practices, N.Y. Gen. Bus. Law §§ 349-50 (“NYGBL”), which were enacted to protect the consuming public from those who engage in unconscionable, deceptive or unfair acts or practices in the conduct of any business, trade or commerce. 94. The practices of SquareTrade, described throughout this Complaint, were specifically directed to consumers and violate the NYGBL for, inter alia, one or more of the following reasons: a. SquareTrade engaged in deceptive, unfair and unconscionable commercial practices in failing to reveal material facts and information about the Protection Plans, which did, or tended to, mislead Plaintiff and the Classes about facts that could not reasonably be known by them; b. SquareTrade failed to reveal facts that were material to the transactions in light of representations of fact made in a positive manner; c. SquareTrade caused Plaintiff and the Classes to suffer a probability of confusion and a misunderstanding of legal rights, obligations and/or remedies by and through its conduct; d. SquareTrade failed to reveal material facts to Plaintiff and Classes with the intent that Plaintiff and the Class members rely upon the omission; e. SquareTrade made material representations and statements of fact to Plaintiff and the Classes that resulted in Plaintiff and the Class members reasonably believing the represented or suggested state of affairs to be other than what they actually were; f. SquareTrade intended that Plaintiff and the other members of the Classes rely on its misrepresentations and omissions, so that Plaintiff and other Class members would purchase the Protection Plans; and g. Under all of the circumstances, SquareTrade’s conduct in employing these unfair and deceptive trade practices was malicious, willful, wanton and outrageous such as to shock the conscience of the community and warrant the imposition of punitive damages. 95. SquareTrade’s actions impact the public interest because Plaintiff and members of the Classes were injured in exactly the same way as thousands of others purchasing the Product as a result of and pursuant to SquareTrade’s generalized course of deception. 96. By committing the acts alleged in this Complaint, SquareTrade has misled Plaintiff and the Classes into purchasing the Protection Plans, in part or in whole, due to an erroneous belief that the Protection Plans had few restrictions and limitations, and were available for products purchased elsewhere from Amazon.com.. These are deceptive business practices that violate NYGBL § 349. The coordinate advertising violates NYGBL § 350. 97. SquareTrade’s conduct misled Plaintiff and members of the Classes, and is likely in the future to mislead reasonable consumers acting reasonably under the circumstances. Had Plaintiff and other members of the Classes known of the true facts about the Protection Plans, many would not have purchased the Protection Plans. 98. The foregoing acts, omissions and practices set forth in connection with Defendants’ violations of NYGBL §§ 349 and 350 proximately caused Plaintiff and other members of the Classes to suffer actual damages in the form of, inter alia, monies spent to purchase the Protection Plans and loss of investment in underlying products which suffered “malfunctions, accidental damage and life’s frequent mishaps.”, Class members are entitled to recover such damages, together with equitable and declaratory relief, appropriate damages including punitive damages, attorneys’ fees and costs of suit. SECOND COUNT VIOLATION OF THE MAGNUSON-MOSS WARRANTY ACT (15 U.S.C. § 2301 et seq., on behalf of Plaintiff and Class II) 99. Plaintiff incorporates the allegations set forth above as if fully set forth herein. 100. The MMWA, 15 U.S.C. § 2301 et seq., creates a cause of action for consumers damaged by “the failure of a supplier, warrantor, or service contractor to comply with any obligation under this chapter, or under a written warranty, implied warranty, or service contract.” 15 U.S.C. § 2310(d). 101. The MMWA required clear and conspicuous disclosures of the Terms and Conditions of the Protections Plans prior to the purchase of the Protection Plans. 102. SquareTrade failed to comply with the requirements of the MMWA by failing to clearly and conspicuously disclose the Terms and Conditions of the Protection Plans, and by changing the Terms and Conditions of the Protection Plans. 103. Specifically, SquareTrade violated the “full, clear and conspicuous disclosure of terms and conditions” standard applicable to the Protection Plans. 104. All class members were injured by reason of SquareTrade’s subject disclosure violations, in that their Protection Plans were worth ascertainably less as enforced than as disclosed prior to and at the time of sale. 105. Plaintiff and other members of the Class were damaged by Defendant SquareTrade’s violations of its obligations under the MMWA. 106. As a direct and proximate cause of Defendant SquareTrade’s violations of its obligations under the MMWA, Plaintiff and other Class members have suffered actual economic damages, and are threatened with irreparable harm. 107. Class members are entitled to recover such damages, together with equitable and declaratory relief, appropriate damages including statutory and punitive damages, attorneys’ fees and costs of suit. THIRD COUNT UNJUST ENRICHMENT (on behalf of Plaintiff and Class III) 108. Plaintiff incorporates the allegations set forth above as if fully set forth herein. 109. It would be inequitable for SquareTrade to be allowed to retain the benefits conferred on it by Plaintiff and Class members, traceable to its misrepresentations and false advertising. 110. Plaintiff and members of the Class are entitled to the establishment of a constructive trust upon the benefits to SquareTrade from the aforesaid unjust enrichment and inequitable conduct. PRAYER FOR RELIEF WHEREFORE, Plaintiff, on behalf of himself and the Classes, prays for judgment against Defendant granting the following relief: a. An order certifying this case as a class action and appointing Plaintiff as Class representative and Plaintiff’s counsel to represent the Classes; b. Restitution and disgorgement of all amounts obtained by SquareTrade as a result of its misconduct, together with interest thereon from the date of purchase, to the victims of such violations; c. All recoverable compensatory and other actual damages sustained by Plaintiff ($4.73 for protection Plan and $61.83 for CD Player) and the Classes; d. Actual and/or statutory damages for injuries suffered by Plaintiff and the Classes and in the maximum amount permitted by applicable law; e. An order enjoining SquareTrade from enforcing any and all terms and conditions requiring mediation and arbitration that were not provided to consumers in the pre- sale documentation, and staying any and all such proceedings until corrective notice is provided to the claimant. f. An order (1) requiring SquareTrade to immediately cease its wrongful conduct as set forth above; (2) enjoining SquareTrade from continuing to misrepresent and conceal material information and conduct business via the unlawful, unfair and deceptive business acts and practices complained of herein; (3) ordering SquareTrade to engage in a corrective advertising campaign; and (4) requiring SquareTrade to pay to Plaintiff and all members of the Classes the amounts paid for the Product; g. Statutory pre-judgment and post-judgment interest on any amounts; h. Payment of reasonable attorneys’ fees and costs; and i. Such other relief as the Court may deem just and proper. DEMAND FOR JURY TRIAL Plaintiff, and all others similarly situated, hereby demand a trial by jury herein. Dated: December 21, 2016 LAW OFFICES OF MARK SCHLACHET By:/s/ Mark Schlachet Mark Schlachet 3515 Severn Road Cleveland, Ohio 44118 (216)225-7559 (216)932-5390(f) markschlachet@me.com Attorneys for Plaintiff and the Proposed Classes Solomon N. Klein LAW OFFICE OF SOLOMON N. KLEIN 26 Broadway, 19th Floor New York, New York 10004 Tel.: (212) 575-0202 Fax: (212) 575-0233 Email: sklein@solomonklein.com Of Counsel Bradley J. Nash SCHLAM STONE & DOLAN LLP 26 Broadway New York, New York 10004 Tel.: (212) 344-5400 Fax: (212) 344-7677 bnash@schlamstone.com Exhibit 1 Congratulations on purchasing this Protection Plan. Please read these terms and conditions carefully so that you fully understand your coverage under this Protection Plan. Please also review the Order Summary or purchase receipt provided to you at the time you purchased this Protection Plan. The Order Summary defines the Covered Product, Maximum Coverage Amount and the Coverage Term of this Protection Plan. ii. WATCHES: This Protection Plan provides coverage for parts and labor costs to repair the Watch where the problem is the result of a failure caused by defects in workmanship and/or materials, including those resulting from normal wear and tear such as: watch band, case, clasp, crown, cracked crystal, inner movement and stem. For watch band failure, We may elect to replace either segments of the band, the complete band, or the watch, at Our discretion. You will be reimbursed for Square Trade-authorized repairs to or replacement of the Watch, at Our discretion, when required due to a problem which is not covered under any other warranty, service plan or insurance. “We”, “Us” and “Our” shall mean the obligor of this Protection Plan, ST Product Care Corp, 360 Third Street, 6th Floor, San Francisco, CA 94107, except as follows: In Arizona, New Mexico, Virginia, and Wyoming “We, “Us”, and “Our” shall mean Starr Protection Solutions, LLC, 399 Park Avenue, 8th Floor, New York, NY 10022. In Florida and Oklahoma “We”, “Us” and “Our” shall mean Starr Indemnity & Liability Company, 399 Park Avenue, 8th Floor, New York, NY 10022. In Washington, “We, “Us, and “Our” shall mean Starr Technical Risks Agency, LLC, 399 Park Avenue, 8th Floor, New York, NY 10022. You may reach Us at 1-877 WARRANTY (1-877-927-7268). iii. Specific details about your coverage under this Protection Plan are provided in the ORDER SUMMARY. C. ALL OTHER PRODUCTS: Administrator shall mean SquareTrade, Inc. However, in California the Administrator shall mean ST Product Care Corp. The aforementioned Administrators are located at 360 Third Street, 6th Floor, San Francisco, CA 94107 with a telephone number: 1-877 WARRANTY (1-877-927-7268). i. This Protection Plan provides coverage for parts and labor costs to repair or replace Your Product where the problem is the result of a failure caused by: The following terms are used in the Order Summary 1. Normal wear and tear; Protection Plan Price: The price you paid for this Protection Plan. 2. Accidental damage from handling (ADH), such as damage from drops, spills and liquid damage Coverage Start Date: This is the date when coverage starts under this Protection Plan. associated with the handling and use of Your Product, if the coverage has been offered and purchased at the time of sale with your Protection Plan; 3. One (1) battery repair or replacement, when the original rechargeable battery is defective as determined by Us and at Our sole discretion, if the coverage has been offered and purchased at the time of sale with your Protection Plan.; 4. One (1) bulb replacement, replacement of a faulty bulb during the first three (3) years of the Term, if the coverage has been offered and purchased at the time of sale with your Protection Plan; Waiting Period: This is the amount of time, varying from zero (0) to thirty (30) days, between the Protection Plan purchase date and the Coverage Start Date, during which if any issues occur, they are considered pre-existing conditions and render the item ineligible for coverage under this Protection Plan. A Waiting Period applies to Protection Plans purchased for refurbished items and protection Plans purchased subsequent to the purchase of Your Covered Product. Any applicable Waiting Period does not affect Your coverage under any manufacturer’s warranty. If during the Waiting Period a pre-existing condition renders the item ineligible for coverage We will cancel Your protection Plan and provide You with a full refund of the Protection Plan Price. 5. Dust, internal overheating, internal humidity/condensation; 6. Defects in materials or workmanship; 7. Power surge/fluctuation. Please see section 11 “POWER SURGE PROTECTION” for details. ii. Specific details about your coverage under this Protection Plan are provided in the ORDER SUMMARY. Coverage Term or Term: This is the years of coverage, varying from one (1) to five (5) year(s), you receive under this Protection Plan, starting on the Coverage Start Date which begins after any Waiting Period. The Protection Plan is inclusive of any US manufacturer’s warranty that may exist during the Coverage Term. It does not replace the manufacturer’s warranty, but provides certain additional benefits during the term of the manufacturer’s warranty. The Term of this Protection Plan is extended for the duration of any time that the item is being repaired under this Protection Plan. 3. OPTIONAL COVERAGE: Covered Product or Your Product: The product or type of product covered by this Protection Plan. A. ACCIDENTAL DAMAGE FROM HANDLING (ADH): Coverage Amount: The purchase price of the Covered Product. Coverage Type: This defines the level of coverage You purchased, such as whether Your Protection Plan includes the optional Accidental Damage from Handling (ADH) coverage. If you were offered and elected to include accidental damage from handling (ADH) as an integral part of your coverage, it augments Your Protection Plan by providing additional protection for damage from drops, spills and liquid damage associated with the handling and use of Your Product. Deductible: The applicable deductible, if any, for claims. ADH does not provide protection against theft, loss, reckless, or abusive conduct associated with handling and use of the product, cosmetic damage and/or other damage that does not affect unit functionality, or damage caused during shipment between you and Our service providers. B. BULB COVERAGE: If you were offered and elected to include bulb coverage on your rear-projection or DLP Television, your Protection Plan shall also include additional coverage of the bulb in your television (“Bulb Coverage”) for up to three (3) years from the start of the Coverage Term. This Protection Plan will cover a mechanical or electrical failure of the Covered Product(s) in subsections A, B and C below during normal usage for the Term of this Protection Plan. This Protection Plan is inclusive of any manufacturer’s warranty that may exist during the Coverage Term. It does not replace the manufacturer’s warranty, but provides certain additional benefits during the term of the manufacturer’s warranty. Replacement parts will be new, rebuilt or non-original manufacturer’s parts that perform to the factory specifications of the product at our sole option. This Protection Plan does not cover repair or replacement of Your Product for any of the causes or provide coverage for any losses set forth in Section 9 of these Terms and Conditions, entitled “WHAT IS NOT COVERED.” Specific details about Your coverage under this Protection Plan are provided in the Order Summary. A. CELL PHONES AND TABLETS Bulb Coverage includes up to one (1) replacement of a faulty bulb during the first three (3) years of the Coverage Term. You will be responsible for installing the replacement bulb, which We will provide to you in most occurrences. If, at Our discretion, We do not provide you with a replacement bulb, We will reimburse you for the cost of the bulb. Bulb Coverage will terminate either at the end of three (3) years or when you have received a replacement bulb or reimbursement for the cost of a replacement bulb from Us, whichever occurs first. You may be required to return the defective bulb to Us. C. BATTERY COVERAGE: i. This Protection Plan provides coverage for parts and labor costs to repair or replace Your Product where the problem is the result of a failure caused by: 1. Normal wear and tear; 2. Accidental damage from handling (ADH), such as damage from drops, spills and liquid damage associated with the handling and use of Your Product, if the coverage has been offered and purchased at the time of sale with your Protection Plan; If you were offered and elected to include battery coverage on your mobile product, your Protection Plan shall also include additional coverage of the battery in Your Product for up to two (2) years from the start of the Coverage Term. Battery Coverage shall be in addition to the coverage described in the “Coverages and Terms” section of these terms and conditions. Battery coverage is only available for Covered Products that are new or newly manufacturer refurbished. 3. One (1) battery repair or replacement, when the original rechargeable battery is defective as determined by Us and at Our sole discretion. We may require you to return your original defective battery to Us to receive a replacement battery; Battery Coverage includes up to one (1) battery repair or replacement, when the original rechargeable battery is defective as determined by Us and at Our sole discretion. We may require you to return your original defective battery to Us to receive a replacement battery. 4. Damaged or defective buttons or connectivity ports located on Your Product; 4. WHAT TO DO IF A COVERED PRODUCT REQUIRES SERVICE: 5. Defective pixels when there are at least three (3) defective pixels throughout the entire display area; 6. Dust, internal overheating, internal humidity/condensation; 7. Defects in materials or workmanship; File online at www.squaretrade.com or call Us toll-free at 1-877 WARRANTY (1-877-927-7268) and explain the problem. We will attempt to troubleshoot the problem you are experiencing. If We cannot resolve the problem, you will be directed to an authorized service center. ii. This Protection Plan also provides the following additional benefits: 5. HOW WE WILL SERVICE YOUR ITEM: 1. Online assistance for hardware troubleshooting tips, visit: http://www.squaretrade.com and select the Depending on the item and failure circumstances, We will either: A. Repair Your Product, or; 2. Power surge/fluctuation protection. Please see section 11 “POWER SURGE PROTECTION” for details. B. Provide a cash settlement or a Gift Card reflecting the replacement cost of a new item of equal features and iii. Specific details about your coverage under this Protection Plan are provided in the ORDER SUMMARY. functionality up to the Coverage Amount, or; B. JEWELRY AND WATCH PLANS C. Provide a new or refurbished product of equal features and functionality. 6. PLACE OF SERVICE: The total amount that We will pay for repairs or replacement made in connection with all claims that you make pursuant to this Protection Plan shall not exceed the Coverage Amount of Your Product. In the event that We make payments for repairs or replacements, which in the aggregate, are equal to the Coverage Amount, or provide a cash settlement reflecting the replacement cost of a new item of equal features and functionality, We will have no further obligations under this Protection Plan. You may cancel this Protection Plan for any reason at any time. To cancel it, log in to www.squaretrade.com or contact Us toll-free at 1-877 WARRANTY (1-877-927-7268) 24 hours a day, seven days week. If you cancel this Protection Plan within the first thirty (30) days after purchase of this Protection Plan you will receive a 100% refund of the purchase price of the Protection Plan. If you cancel after the first thirty (30) days from purchase of this Protection Plan, you will receive a pro rata refund based on the time remaining on your Protection Plan. No fees or past claims shall be deducted from the refund and the refund will be sent to you within ten (10) business days from the cancellation request or else a ten percent (10%) penalty per month shall be applied to the refund. WE SHALL NOT BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO, PROPERTY DAMAGE, LOST TIME, OR LOST DATA RESULTING FROM THE FAILURE OF ANY PRODUCT OR EQUIPMENT OR FROM DELAYS IN SERVICE OR THE INABILITY TO RENDER SERVICE. 8. YOUR RESPONSIBILITIES: A. Provide Us with a complete copy of proof of purchase. We can either store it for you or you can provide such proof of purchase at time of claim. We may cancel this Protection Plan at Our option on the basis of nonpayment, fraud, or material misrepresentation by you. If We cancel your Protection Plan, you will receive a pro rata refund. If this Protection Plan was inadvertently sold to you on a product which was not intended to be covered by this Protection Plan, We will cancel this Protection Plan and return the full purchase price of the Protection Plan to you. Written notice which includes the effective date of cancelation and reason for cancellation, will be mailed to you at least 30 days prior to termination. If We cancel this Protection Plan for nonpayment then We will provide notice at time of cancellation. B. Correctly select the right SquareTrade Protection Plan for your product based on condition, price or purchase location. 16. GUARANTEE: C. Properly maintain, store and use your item according to the manufacturer instructions. A. Any product fraudulently described or materially misrepresented by you; B. Maintenance, repair, or replacement necessitated by loss or damage resulting from any cause other than This is not an insurance policy. Our obligations under this Protection Plan are guaranteed under a reimbursement insurance policy issued by Starr Indemnity & Liability Company. Starr Indemnity & Liability Company is located at 399 Park Avenue, 8th Floor, New York, NY 10022 and you may contact them toll-free at (855) 438-2390. If We fail to pay or provide service on a claim within sixty (60) days after proof of loss has been filed, You are entitled to make a claim directly against Starr Indemnity & Liability Company. ENTIRE CONTRACT: Unless amended by the State Specific Provisions, this Protection Plan sets forth the entire contract between the parties and no representation, promise or condition not contained herein shall modify these terms. normal use and operation of the product in accordance with the manufacturer’s specifications and owner’s manual, including but not limited to , theft or loss, exposure to weather conditions, failure to properly clean, maintain or lubricate, operator negligence, misuse, abuse, improper electrical/power supply, improper equipment modifications, attachments or installation or assembly, vandalism, animal or insect infestation, battery leakage, or act of nature or any other peril originating from outside the product. State Variations: C. Cosmetic damage to case or cabinetry or other non-operating parts or components which does not affect the The following state variations shall apply if inconsistent with any other terms and conditions. functionality or the covered product. D. Television or personal computer monitor screen imperfections, including “burn-in” or burned CRT phosphor. E. Projector or rear projection TV bulbs unless that specific coverage has been offered and purchased at the time of sale with your Protection Plan. F. Damaged or defective LCD screens when the failure is caused by abuse or is otherwise excluded herein; G. All equipment intended for heavy commercial or industrial use such as industrial printers or IT equipment; California: If you decide to cancel your Protection Plan for a product other than a home appliance or electronics item within sixty (60) days after the receipt of the Protection Plan you will be refunded the full price paid for the Protection Plan. If you decide to cancel your Protection Plan for this type of item after sixty (60) days after the receipt of the Protection Plan you will receive a pro-rated refund based on the time remaining on your Protection Plan. All Protection Plans for home appliance or home electronics are covered by the “Cancellation” section of the Protection Plan. riding mowers or backhoe type products; H. Accidental damage, cracked or damaged monitor, laptop or display screens, liquid damage, lost buttons or knobs etc., unless optional accidental damage from handling (ADH) coverage was offered and purchased at the time of sale with your Protection Plan; I. Conditions that were caused by you intentionally, or known by you prior to purchasing this Protection Plan; J. Consumer replaceable or consumable batteries unless that specific coverage has been offered and purchased at the time of sale with your Protection Plan; Connecticut: Resolution of Disputes: If you purchased this Protection Plan in Connecticut, you may pursue arbitration to settle disputes between you and the provider of this Protection Plan. You may mail your complaint to: State of Connecticut, Insurance Department, P.O. Box 816, Hartford, CT 06142-0816, Attn: Consumer Affairs. The written complaint must describe the dispute, identify the price of the product and cost of repair, and include a copy of this Protection Plan. You have the right to cancel this Protection Plan if you return the product or if the product is sold, lost, stolen, or destroyed. If We cancel this Protection Plan, written notice including effective date and reason for cancellation will be mailed to you electronically or by U.S. Mail at least 30 days prior to termination. K. Consumer replaceable or consumable items such as but not limited to toner, ribbons, ink cartridges, drums, belts, printer heads, belts, blades, strings, trim etc.; L. Product(s) with removed or altered serial numbers; M. Manufacturer defects or equipment failure which is covered by manufacturer’s warranty, manufacturer’s recall, or Florida: The rates charged to you for this Protection Plan are not subject to regulation by the Florida Office of Insurance Regulation. The Guarantee, in Section 16, does not apply to Protection Plans sold in Florida as this Protection Plan is directly issued by the insurer, Starr Indemnity & Liability Company, 399 Park Avenue, 8th Floor, New York, NY 10022. factory bulletins (regardless of whether or not the manufacturer is doing business as an ongoing enterprise); N. Damage to computer hardware, software and data caused by, including, but not limited to, viruses, Georgia: Cancellation will comply with Section 33-24-44 of the Georgia Code. Failure to refund in accordance with the aforementioned Section will make Us liable for penalty equal to 25% of refund and interest of 18% per annum until refund is paid, not to exceed 50% of refund. The waiting period will not exceed 30 days. application programs, network drivers, source code, object code or proprietary data, or any support, configuration, installation or reinstallation of any software or data; O. Failures related to transportation damage, customer education, cleaning, preventive maintenance, “No Problem Found” diagnosis, non-intermittent issues that are not product failures; P. Jewelry or watches that are used or refurbished at the time of purchase; Nevada: This Protection Plan is not renewable. If We cancel this Protection Plan for nonpayment by You, then We will provide notice at least 15 days prior to the effective date of cancellation. We may cancel this Protection Plan at Our option on the basis of nonpayment, fraud, or material misrepresentation by you. Prior approval of service should be obtained as outlined in the “WHAT TO DO IF A COVERED PRODUCT REQUIRES SERVICE” or “WORLDWIDE SERVICE” sections of the Protection Plan. Waiting Period: This is the amount of time from the Protection Plan Purchase Date during which if any issues occur, they are considered pre-existing conditions and render the item ineligible for coverage under this Protection Plan. To see the length of the Waiting Period, please refer to the ORDER SUMMARY at the top of the first page of this Protection Plan. If Your Product has three service repairs completed for the same problem, which repairs are covered by this Protection Plan, and a fourth such repair for the same problem occurs, as determined by Us, within any twelve (12) month period, Your Product will be replaced with a comparable product or a cash settlement for replacement provided. This cost of the replacement will not exceed Your Product’s original purchase price. 11. POWER SURGE PROTECTION: This Protection Plan protects against the operational failure of a Covered Product resulting from a power surge while properly connected to a surge protector. You may be asked to provide your surge protector for examination. Oklahoma: This Protection Plan is not issued by the manufacturer or wholesale company marketing the product. This Protection Plan will not be honored by such manufacturer or wholesale company. The Oklahoma Service Agreement statutes do not apply to commercial use references in Protection Plan contracts. Coverage afforded under this Protection Plan is not guaranteed by the Oklahoma Insurance Guaranty Association. If you cancel after the first thirty (30) days from purchase of this Protection Plan, you will receive a one hundred percent (100%) unearned pro rata refund based on the time remaining of your Protection Plan. This Protection Plan covers all shipping charges to repair or service facilities during the Coverage Term, including shipping to the manufacturer if the manufacturer does not cover shipping charges to their facilities. South Carolina: In the event of a dispute with the provider of this Protection Plan, you may contact the South Carolina Department of Insurance, Capitol Center, 1201 Main Street, Ste. 1000, Columbia, South Carolina 29201 or (800) 768-3467. This Protection Plan is not an insurance contract. Texas: The administrator for this Protection Plan is SquareTrade, Inc. registration number 155. Utah: Replacement parts will be new, rebuilt or non-original manufacturer’s parts that perform to the factory specifications of the Covered Product at Our sole option. Coverage afforded under this Protection Plan is not guaranteed by the Property and Casualty Guaranty Association. This Protection Plan is subject to limited regulation by the Utah Insurance Department. To file a complaint, contact the Utah Insurance Department. Notice of cancellation for nonpayment of the purchase price of this Protection Plan will be in writing given at least ten (10) days prior to cancellation. The coverage provided in this Protection Plan also applies when you travel overseas. If Your Product needs repair overseas, you may file a claim online to obtain a claim authorization number. Once You have obtained Your claim authorization number, You will need to carry Your Product into an authorized service center and then submit to the Administrator a copy of the detailed service repair invoice that identifies Your Product, the claim authorization number, and include a thorough description of the repair made. This documentation should be faxed or emailed to the Administrator and the Administrator will reimburse you within 5 business days of receipt of all necessary paperwork, provided a covered repair was performed. Note: Worldwide service does not include shipping or on-site service. Wisconsin: THIS PROTECTION PLAN IS SUBJECT TO LIMITED REGULATION BY THE OFFICE OF THE COMMISSIONER OF INSURANCE. No claim will be denied solely because you failed to obtain preauthorization. This agreement, including optional ADH coverage, does not provide coverage for intentional damage. Wyoming: Prior notice is not required if the reason for cancellation is nonpayment of the provider fee, a material misrepresentation by the Protection Plan holder to the provider or a substantial breach of duties by the Protection Plan holder relating to the Covered Product or its use. Exhibit 2 PROTECTION PLAN TERMS & CONDITIONS Congratulations on purchasing this Protection Plan. Please read these Terms and Conditions carefully so that You fully understand Your coverage under this Protection Plan. Please also review the Order Summary or purchase receipt provided to You at the time You purchased this Protection Plan. The Order Summary defines the Covered Product, Coverage Amount and the Coverage Term of this Protection Plan. 1. DEFINITIONS: “We”, “Us” and “Our” shall mean the obligor of this Protection Plan, CE Care Plan Corp except as follows: In California, “We”, “Us” and “Our” shall mean SquareTrade, Inc.; in Arizona, Oklahoma, and Wyoming, “We, “Us”, and “Our” shall mean Complete Product Care Corp. The aforementioned are located at 360 3rd Street, 6th Floor, San Francisco, CA 94107. In Florida, “We”, “Us” and “Our” shall mean Starr Indemnity & Liability Company, 399 Park Avenue, 8th Floor, New York, NY 10022. In Washington, “We, “Us, and “Our” shall mean Starr Technical Risks Agency, Inc., 399 Park Avenue, 8th Floor, New York, NY 10022. You may reach Us at 1-877 WARRANTY (1-877-927-7268). Administrator shall mean SquareTrade, Inc. located at 360 3rd Street, 6th Floor, San Francisco, CA 94107 with a telephone number: 1-877 WARRANTY (1-877-927-7268). “You”, “Your” shall mean the individual or entity who purchased this Protection Plan or the individual or entity to whom this Protection Plan was properly transferred in accordance with these Terms and Conditions. The following terms are used in the Order Summary Protection Plan Price: The price You paid for this Protection Plan. Coverage Start Date: This is the date when coverage starts under this Protection Plan. Waiting Period: This is the amount of time, varying from zero (0) to thirty (30) days, between the Protection Plan purchase date and the Coverage Start Date, during which if any issues occur, they are considered pre-existing conditions and render the item ineligible for coverage under this Protection Plan. A Waiting Period applies to Protection Plans purchased for refurbished items and Protection Plans purchased subsequent to the purchase of Your Covered Product. Any applicable Waiting Period does not affect Your coverage under any manufacturer’s warranty. If during the Waiting Period a pre-existing condition renders the item ineligible for coverage We will cancel Your Protection Plan and provide You with a full refund of the Protection Plan Price. Coverage Term or Term: This is the years of coverage, varying from one (1) to five (5) year(s), You receive under this Protection Plan, starting on the Coverage Start Date which begins after any Waiting Period. The Protection Plan is inclusive of any US manufacturer’s warranty that may exist during the Coverage Term. It does not replace the manufacturer's warranty, but provides certain additional benefits during the term of the manufacturer's warranty. The Term of this Protection Plan is extended for the duration of any time that the item is being repaired under this Protection Plan. Covered Product or Product: The product or type of product covered by this Protection Plan. Coverage Amount: The purchase price of the Covered Product. Coverage Type: This defines the level of coverage You purchased, such as whether Your Protection Plan includes Optional Coverage, such as Accidental Damage from Handling (ADH) coverage. Deductible: The applicable deductible, if any, for claims. 2. COVERAGES AND TERMS: This Protection Plan will cover a mechanical or electrical failure of the Covered Product(s) in subsections A, B, C and D below during normal usage for the Term of this Protection Plan. This Protection Plan is inclusive of any manufacturer’s warranty that may exist during the Coverage Term. It does not replace the manufacturer’s warranty, but provides certain additional benefits during the term of the manufacturer’s warranty. Replacement parts will be new, rebuilt or non-original manufacturer's parts that perform to the factory specifications of the product at Our sole option. This Protection Plan does not cover repair or replacement of Your Product for any of the causes or provide coverage for any losses set forth below in Section 9, “WHAT IS NOT COVERED.” Specific details about Your coverage under this Protection Plan are provided in the Order Summary. For online assistance and hardware troubleshooting tips, visit www.squaretrade.com and select the Support option. A. CELL PHONES AND TABLETS: i. This Protection Plan provides coverage for parts and labor costs to repair or replace Your Product where the problem is the result of a failure caused by: 1. Normal wear and tear; 2. Accidental damage from handling (ADH), such as damage from drops, spills and liquid damage associated with the handling and use of Your Product, if the coverage has been offered and purchased at the time of sale with your Protection Plan; 3. One (1) battery repair or replacement, when the original rechargeable battery is defective as determined by Us and at Our sole discretion. We Product; 5. For defective pixels We will match the manufacturer’s warranty for the Term of Your Protection Plan. In the absence of a manufacturer’s dead pixel policy, We will cover a failure of three (3) or more defective pixels within a one square inch area of the display; 6. Dust, internal overheating, internal humidity/condensation; 7. Defects in materials or workmanship; 8. Operational failure resulting from a power surge while properly connected to a surge protector. You may be asked to provide Your surge protector for examination. B. JEWELRY AND WATCH PLANS: i. JEWELRY: This Protection Plan provides coverage for parts and labor costs to repair the Jewelry where the problem is a result of a failure caused by defects in workmanship and/or materials, including those resulting from normal wear and tear such as: cracks, chips, scratches, dents, kinks, breaks, and thinning. You will be reimbursed for SquareTrade-authorized repairs to, or replacement of the Jewelry, at Our discretion, when required due to a problem which is not covered under any other warranty, service plan or insurance. ii. WATCHES: This Protection Plan provides coverage for parts and labor costs to repair the Watch where the problem is the result of a failure caused by defects in workmanship and/or materials, including those resulting from normal wear and tear such as: watch band, case, clasp, crown, cracked crystal, inner movement and stem. For watch band failure, We may elect to replace either segments of the band, the complete band, or the watch, at Our discretion. You will be reimbursed for Square Trade-authorized repairs to or replacement of the Watch, at Our discretion, when required due to a problem which is not covered under any other warranty, service plan or insurance. C. FURNITURE: i. This Protection Plan covers only products used primarily for personal, family or household purposes or in a small office or home office setting. ii. UPHOLSTERED WOOD AND METAL FURNITURE: This Protection Plan provides coverage for damage due to seam separation; broken hardware and pulls; seam separation of joints and welds; cracks; peeling of veneers; broken hinges, casters, slides, drawer pull/guides or swivels; damaged mechanical elements; scratches; chips; gouges; cracking, warping or peeling of finish due to normal use. The Protection Plan also covers breakage, chips and scratches to glass on tables, desks, wall units and cabinets, and breakage, chipping and/or loss of silvering to mirrors due to normal use or accidental damage. iii. FABRIC AND LEATHER COVERAGE: This Protection Plan provides coverage for damage due to separation or peeling of topcoat finish. i. This Protection Plan provides coverage for parts and labor costs to repair or replace Your Product where the problem is the result of a failure caused by: 1. Normal wear and tear; 2. Accidental damage from handling (ADH), such as damage from drops, spills and liquid damage associated with the handling and use of Your Product, if the coverage has been offered and purchased at the time of sale with your Protection Plan; 3. One (1) battery repair or replacement, when the original rechargeable battery is defective as determined by Us and at Our sole discretion, if the coverage has been offered and purchased at the time of sale with your Protection Plan; 4. One (1) bulb replacement, replacement of a faulty bulb during the first three (3) years of the Term, if the coverage has been offered and purchased at the time of sale with your Protection Plan; 5. For defective pixels We will match the manufacturer’s warranty for the Term of Your Protection Plan. In the absence of a manufacturer’s dead pixel policy, We will cover: i. Six (6) or more defective pixels for displays up to 17”; ii. Eight (8) or more defective pixels for displays greater than 17”. 6. Dust, internal overheating, internal humidity/condensation; 7. Defects in materials or workmanship; 8. Operational failure resulting from a power surge while properly connected to a surge protector. You may be asked to provide Your surge protector for examination. 3. OPTIONAL COVERAGES: A. ACCIDENTAL DAMAGE FROM HANDLING (ADH): If You were offered and elected to include accidental damage from handling (ADH) as an integral part of Your coverage, it augments Your Protection Plan by providing additional protection for damage from drops, spills and liquid damage associated with the handling and use of Your Product. ADH does not provide protection against theft, loss, reckless, or abusive conduct associated with handling and use of the product, cosmetic damage and/or other damage that does not affect unit functionality, or damage caused during shipment between You and Our service providers. B. BULB COVERAGE: If You were offered and elected to include Bulb Coverage on Your rear-projection or DLP Television, Your Protection Plan shall also include up to one (1) replacement of a faulty bulb during the first three (3) years of the Coverage Term. You will be responsible for installing the replacement bulb, which We will provide to You in most occurrences. If, at Our discretion, We do not provide You with a replacement bulb, We will reimburse You for the cost of the bulb. Bulb Coverage will terminate either at the end of three (3) years or when You have received a replacement bulb or reimbursement for the cost of a replacement bulb from Us, whichever occurs first. You may be required to return the defective bulb to Us. C. BATTERY COVERAGE: If You were offered and elected to include Battery Coverage on Your Product, Your Protection Plan shall also include up to one (1) battery repair or replacement during the first two (2) years of the Coverage Term, when the original rechargeable battery is defective as determined by Us and at Our sole discretion. We may require You to return Your original defective battery to Us to receive a replacement battery. Battery Coverage is only available for Covered Products that are new or newly manufacturer refurbished. 4. WHAT TO DO IF A COVERED PRODUCT REQUIRES SERVICE: File a claim online at www.squaretrade.com or call Us toll-free at 1-877 WARRANTY (1-877- 927-7268) and explain the problem. We will attempt to troubleshoot the problem You are experiencing. If We cannot resolve the problem, You will be directed to an authorized service center. 5. HOW WE WILL SERVICE YOUR PRODUCT: Depending on the Product and failure circumstances, at Our discretion, We will either: A. Repair Your Product, or; B. Provide a cash settlement or a Gift Card reflecting the replacement cost of a new product of equal features and functionality up to the Coverage Amount, or; C. Replace Your Product with a product of like, kind, quality and functionality. 6. PLACE OF SERVICE: At Our discretion, large items will receive on-site service. Within five (5) business days of determining Your Product requires on-site service, We will assign You an authorized service center technician and arrange to repair or replace the Product at Your location during normal business hours. If We fail to have an authorized service center technician assigned within five (5) business days, We will continue to service Your Product and the cost of Your Protection Plan will be refunded to You at Your request. On-site service may occasionally necessitate the authorized service center technician to bring the Product back to their shop to complete repairs. For shippable items, We will provide a free prepaid shipping label to Our authorized service center for repair, replacement or settlement. You will be responsible for safe packaging and shipment of Your Product. If, upon inspection, Your Product is determined to have experienced a failure which is covered by Your Protection Plan, We will service Your Product, in accordance with Section 5, “HOW WE WILL SERVICE YOUR PRODUCT”, within five (5) days of our authorized service center’s receipt of Your Product. If We fail to repair, payout or replace the Product within five (5) business days of receiving it, We will continue to service Your Product and the cost of Your Protection Plan will be refunded to You at Your request. If the authorized service center determines Your Product is in working condition or is not covered by Your Protection Plan, We will return Your Product to You or dispose of it at Your request. 7. LIMIT OF LIABILITY: The total amount that We will pay for repairs or replacement made in connection with all claims that You make pursuant to this Protection Plan shall not exceed the Coverage Amount. In the event that We make payments for repairs or replacements, which in the aggregate, are equal to the Coverage Amount, or if We provide a cash settlement reflecting the replacement cost of a new item of equal features and functionality, then We will have no further obligations under this Protection Plan. WE SHALL NOT BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO, PROPERTY DAMAGE, LOST TIME, OR LOST DATA RESULTING FROM THE FAILURE OF ANY PRODUCT OR EQUIPMENT OR FROM DELAYS IN SERVICE OR THE INABILITY TO RENDER SERVICE. 8. YOUR RESPONSIBILITIES: A. Provide Us with a complete copy of proof of purchase. You can send Us a digital copy through www.squaretrade.com and We can store it for You, or You can provide such proof of purchase at time You make a claim. B. Purchase the correct SquareTrade Protection Plan for Your Product based on condition, price or purchase location. C. Properly maintain, store and use Your Product according to the manufacturer instructions. 9. WHAT IS NOT COVERED: A. Any and all pre-existing conditions that occur prior to the Coverage Start Date of this Protection Plan; B. Intentional damage; C. Lost, stolen, or irretrievable items; D. Any product that is fraudulently described or materially misrepresented; E. Maintenance, repair, or replacement necessitated by loss or damage resulting from any cause other than normal use and operation of the product in accordance with the manufacturer’s specifications and owner’s manual, including, but not limited to, exposure to weather conditions, failure to properly clean, maintain or lubricate, operator negligence, misuse, abuse, improper electrical/power supply, improper equipment modifications, attachments or installation or assembly, vandalism, animal or insect infestation, battery leakage, act of nature (any accident caused or produced by any physical cause which cannot be foreseen or prevented, such as storms, perils of the sea, tornadoes, hurricanes, floods and earthquakes), or any other peril originating from outside the product; F. Defects due to the initial installation, assembly or hookup of Your Product; G. Cases wherein the manufacturer acknowledges the existence of a valid manufacturer’s warranty and denies a claim against the manufacturer’s warranty; H. Claims made under any improperly or incorrectly purchased Protection Plan; I. Cosmetic damage to case or cabinetry or other non-operating parts or components which does not affect the functionality or the covered product; J. Television or personal computer monitor screen imperfections, including “burn-in” or burned CRT phosphor; K. Accidental damage, cracked or damaged monitor, laptop or display screens, liquid damage, lost buttons or knobs etc., unless optional accidental damage from handling (ADH) coverage was offered and purchased at the time of sale with Your Protection Plan; L. Projector or rear projection TV bulbs unless Bulb Coverage has been offered and purchased at the time of sale with Your Protection Plan; M. Consumer replaceable or consumable batteries unless Battery Coverage has been offered and purchased at the time of sale with Your Protection Plan; N. Consumer replaceable or consumable items such as but not limited to toner, ribbons, ink cartridges, drums, belts, printer heads, belts, blades, strings, trim etc.; O. All equipment intended for heavy commercial or industrial use such as industrial printers or IT equipment; riding mowers or backhoe type products; P. Product(s) with removed or altered serial numbers; Q. Manufacturer defects or equipment failure which is covered by manufacturer’s warranty, manufacturer’s recall, or factory bulletins (regardless of whether or not the manufacturer is doing business as an ongoing enterprise); R. Damage to computer hardware, software and data caused by, including, but not limited to, viruses, application programs, network drivers, source code, object code or proprietary data, or any support, configuration, installation or reinstallation of any software or data; S. Failures related to shipping damage, cleaning, preventive maintenance, “No Problem Found” diagnosis, intermittent and non-intermittent issues that are not product failures (such as poor cell phone reception); T. Jewelry or watches that are used or refurbished at the time of purchase; U. Rattan, wicker, plastic, or non-colorfast fabric furniture; or inherent furniture design defects including, but not limited to, natural inconsistencies in wood grains, fabrics, coloring or leathers; fading due to sunlight; or dust corrosion; V. Stains, water marks or rings on furniture caused by consumable beverages, smoke or other materials deemed by Us to be caustic; W. Items sold in a private sale (e.g. flea market, yard sale, estate sale, craigslist). 10. NO LEMON POLICY: If Your Covered Product has two (2) service repairs completed for the same problem and a third (3rd) repair is needed for the same problem, within any twelve (12) month period, the Covered Product will be replaced with a comparable product or a cash settlement will be provided. The cost of the replacement will not exceed Your Product’s original purchase price. 11. FREE SHIPPING: This Protection Plan covers all shipping charges to authorized service centers during the Coverage Term, including shipping to the manufacturer if the manufacturer does not cover shipping charges to their facilities. The coverage provided in this Protection Plan also applies when You travel outside of the United States. If Your Product needs repair while traveling abroad, You may file a claim online at www.squaretrade.com to obtain a claim authorization number. At this time You will be instructed on how to proceed to obtain service and You will also receive a fax number and an email address for You to submit Your service repair invoice to Us after the repair is completed. Once You have obtained Your claim authorization number, You will need to carry Your Product into a service center and then submit to Us a copy of the detailed service repair invoice that identifies Your Product, the claim authorization number, and includes a thorough description of the repair made. This documentation should be faxed or emailed to Us and We will reimburse You within five (5) business days of receipt of all necessary paperwork, provided a covered repair was performed. 13. TRANSFER OF PROTECTION PLAN: This Protection Plan may be transferred at no charge. To transfer this Plan log in to www.squaretrade.com, or contact Us toll-free at 1-877 WARRANTY (1-877-927-7268) 24 hours a day, 7 days a week. 14. CANCELLATION: You may cancel this Protection Plan for any reason at any time. To cancel it, log in to www.squaretrade.com or contact Us toll-free at 1-877 WARRANTY (1-877-927-7268) 24 hours a day, 7 days week. If You cancel this Protection Plan within the first thirty (30) days after purchase of this Protection Plan You will receive a 100% refund of the Protection Plan Price. If You cancel after the first thirty (30) days from purchase of this Protection Plan, You will receive a pro rata refund based on the time remaining on Your Protection Plan. No fees or past claims shall be deducted from the refund and the refund will be sent to You within ten (10) business days from the cancellation request or else a ten percent (10%) penalty per month shall be applied to the refund. We may cancel this Protection Plan at Our option on the basis of nonpayment, fraud, or material misrepresentation by You. If We cancel Your Protection Plan, You will receive a pro rata refund. If this Protection Plan was inadvertently sold to You on a product which was not intended to be covered by this Protection Plan, We will cancel this Protection Plan and return the full purchase price of the Protection Plan to You. Written notice which includes the effective date of cancelation and reason for cancelation, will be mailed to You at least thirty (30) days prior to termination. If We cancel this Protection Plan for nonpayment then We will provide notice at time of cancellation. 15. ARBITRATION: Any controversy or claim arising out of or relating to this Protection Plan, or breach thereof, will be settled by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Under this Arbitration provision, We both give up the right to resolve any controversy or claim arising out of or relating to this Protection Plan by a judge and/or a jury. Prior to filing any arbitration, We jointly agree to seek to resolve any dispute between us by mediation conducted by the AAA, with all mediator fees and expenses paid by Us. If You are successful in obtaining an arbitration award against us greater than $500, We agree to pay all arbitrator fees and expenses. We also agree not to participate as a class representative or class member in any class action litigation, any class arbitration or any consolidation of individual arbitrations against each other. The laws of the state of California (without giving effect to its conflict of laws principles) govern all matters arising out of or relating to this Protection Plan and all transactions contemplated by this Protection Plan, including, without limitation, the validity, interpretation, construction, performance and enforcement of this Protection Plan. A judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The parties specifically agree to the binding nature of the arbitration. 16. GUARANTEE: This is not an insurance policy. Our obligations under this Protection Plan are guaranteed under a reimbursement insurance policy issued by Starr Indemnity & Liability Company. Starr Indemnity & Liability Company is located at 399 Park Avenue, 8th Floor, New York, NY 10022 and You may contact them toll-free at (855) 438-2390. If We fail to pay or provide service on a claim within sixty (60) days after proof of loss has been filed, You are entitled to make a claim directly against Starr Indemnity & Liability Company. 17. ENTIRE CONTRACT: Unless amended by the State Specific Provisions or revised by Us with at least thirty (30) days advance written notice to You, this Protection Plan sets forth the entire contract between the parties and no representation, promise or condition not contained herein shall modify these terms. State Variations: The following state variations shall apply if inconsistent with any other terms and conditions. California: If You decide to cancel Your Protection Plan for a product other than a home appliance or electronics item within sixty (60) days after the receipt of the Protection Plan You will be refunded the full price paid for the Protection Plan. If You decide to cancel your Protection Plan for this type of item after sixty (60) days after the receipt of the Protection Plan You will receive a pro-rated refund based on the time remaining on Your Protection Plan. All Protection Plans for home appliance or home electronics are covered by the “Cancellation” section of the Protection Plan. Connecticut: Resolution of Disputes: If You purchased this Protection Plan in Connecticut, you may pursue arbitration to settle disputes between You and the provider of this Protection Plan. You may mail Your complaint to: State of Connecticut, Insurance Department, P.O. Box 816, Hartford, CT 06142-0816, Attn: Consumer Affairs. The written complaint must describe the dispute, identify the price of the product and cost of repair, and include a copy of this Protection Plan. You have the right to cancel this Protection Plan if You return the product or if the product is sold, lost, stolen, or destroyed. If We cancel this Protection Plan, written notice including effective date and reason for cancellation will be mailed to You electronically or by U.S. Mail at least 30 days prior to termination. Florida: The rates charged to You for this Protection Plan are not subject to regulation by the Florida Office of Insurance Regulation. The Guarantee, in Section 16, does not apply to Protection Plans sold in Florida as this Protection Plan is directly issued by the insurer, Starr Indemnity & Liability Company, 399 Park Avenue, 8th Floor, New York, NY 10022. Georgia: Cancellation will comply with Section 33-24-44 of the Georgia Code. Failure to refund in accordance with the aforementioned Section will make Us liable for penalty equal to 25% of refund and interest of 18% per annum until refund is paid, not to exceed 50% of refund. The waiting period will not exceed 30 days. Arbitration is non-binding. Section 9 (A) “What is Not Covered” of these Terms and Conditions is deleted in its entirety and replaced with the following: Any and all pre- existing conditions known to You that occur prior to the Coverage Start Date of this Protection Plan. Nevada: This Protection Plan is not renewable. If We cancel this Protection Plan for nonpayment by You, then We will provide notice at least 15 days prior to the effective date of cancellation. We may cancel this Protection Plan at Our option on the basis of nonpayment, fraud, or material misrepresentation by You. Prior approval of service should be obtained as outlined in the "WHAT TO DO IF A COVERED PRODUCT REQUIRES SERVICE" or "WORLDWIDE SERVICE" sections of the Protection Plan. Section 15 “Arbitration” of these Terms and Conditions is deleted in its entirety. Waiting Period: This is the amount of time from the Protection Plan Purchase Date during which if any issues occur, they are considered pre-existing conditions and render the item ineligible for coverage under this Protection Plan. To see the length of the Waiting Period, please refer to the ORDER SUMMARY at the top of the first page of this Protection Plan. Oklahoma: This Protection Plan is not issued by the manufacturer or wholesale company marketing the product. This Protection Plan will not be honored by such manufacturer or wholesale company. The Oklahoma Service Agreement statutes do not apply to commercial use references in Protection Plan contracts. Coverage afforded under this Protection Plan is not guaranteed by the Oklahoma Insurance Guaranty Association. If You cancel after the first thirty (30) days from purchase of this Protection Plan, You will receive a one hundred percent (100%) unearned pro rata refund based on the time remaining of Your Protection Plan. Oregon: Arbitration: If You are a resident of Oregon, the following shall replace Section 15 “Arbitration” of these Terms and Conditions: Any arbitration occurring under this policy shall occur in an agreed upon location by both parties and be administered in accordance with the Arbitration Rules unless any procedural requirement of the Arbitration Rules is inconsistent with the Oregon Uniform Arbitration Act in which case the Oregon Uniform Arbitration Act shall control as to such procedural requirement. Any award rendered shall be a nonbinding award against You. Under no circumstances shall a legal proceeding be filed in a federal, state or local court until such time as both You and We first address our disagreement in an arbitration proceeding and obtain an arbitration award pursuant to this arbitration provision. South Carolina: In the event of a dispute with the provider of this Protection Plan, You may contact the South Carolina Department of Insurance, Capitol Center, 1201 Main Street, Ste. 1000, Columbia, South Carolina 29201 or (800) 768-3467. This Protection Plan is not an insurance contract. Texas: The administrator for this Protection Plan is SquareTrade, Inc. registration number 155. Utah: Replacement parts will be new, rebuilt or non-original manufacturer's parts that perform to the factory specifications of the Covered Product at Our sole option. Coverage afforded under this Protection Plan is not guaranteed by the Property and Casualty Guaranty Association. This Protection Plan is subject to limited regulation by the Utah Insurance Department. To file a complaint, contact the Utah Insurance Department. Notice of cancellation for nonpayment of the purchase price of this Protection Plan will be in writing given at least ten (10) days prior to cancellation. Washington: Section 16 of these Terms and Conditions is deleted in its entirety and replaced with the following: This is not an insurance policy. Obligations of the service contract provider under this contract are backed by the full faith and credit of the service contract provider, Starr Technical Risks Agency, Inc. Starr Technical Risk Agency, Inc. is located at 399 Park Avenue, 8th Floor, New York, NY 10022 and You may contact them toll-free at (855) 438-2390. Wisconsin: The term “Protection Plan” in these terms and conditions shall be understood to mean “Service Contract”. THIS CONTRACT IS SUBJECT TO LIMITED REGULATION BY THE OFFICE OF THE COMMISSIONER OF INSURANCE. No claim will be denied solely because You failed to obtain preauthorization. This Service Contract, including optional ADH coverage, does not provide coverage for intentional damage and/or pre-existing conditions that occur prior to the Coverage Start Date. Arbitration: The laws of the state of Wisconsin shall govern all matters arising out of or relating to this Service Contract. Arbitration is non-binding. Under no circumstances shall a legal proceeding be filed in a federal, state or local court until such time as both You and We first address our disagreement in an arbitration proceeding and obtain an arbitration award pursuant to this arbitration provision. Cancellation: We shall mail a written notice to You at the last-known address contained in our records at least five (5) days prior to cancellation by Us. This notice will include the effective date of and reason for the cancellation. In the event of a total loss of property covered by a Service Contract that is not covered by a replacement of the property pursuant to the terms of the Service Contract, You shall be entitled to cancel the Service Contract and receive a pro rata refund on any unearned provider fee, less any claims paid. If a claim has been made under this Service Contract, You may cancel the Service Contract and We shall refund to You one hundred percent (100%) of the unearned pro rata provider fee, less any claims paid. Wyoming: The provider of the service contract shall mail a written notice to the service contract holder at the last known address of the service contract holder contained in the records of the provider at least ten (10) days prior to cancellation by the provider. Prior notice is not required if the reason for cancellation is nonpayment of the provider fee, a material misrepresentation by the service contract holder to the provider or a substantial breach of duties by the service contract holder relating to the covered product or its use. Arbitration: If You are a resident of Wyoming, the following shall replace Section 15 “Arbitration” of these Terms and Conditions: At the time of any disagreement, the parties may mutually agree to submit any matters of difference to arbitration by executing a separate written agreement. Any arbitration shall be conducted within the state of Wyoming.

products liability and mass tort

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK Case No. CLASS ACTION COMPLAINT DEMAND FOR JURY TRIAL DAVID STERN, CYRUS JENANI, and DANIEL SOFFER, Individually and on behalf of all others similarly situated, Plaintiffs, v. SCOTTRADE, INC., a Missouri Corporation, Defendant. ) ) ) ) ) ) ) ) ) ) ) Plaintiffs David Stern (“Plaintiff Stern”), Cyrus Jenani (“Plaintiff Jenani”), and Daniel Soffer (“Plaintiff Soffer” and, collectively, “Plaintiffs”) bring this class action individually and on behalf of all others similarly situated against Scottrade, Inc. (“Scottrade” or the “Defendant”). Plaintiffs make the following allegations 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 their attorneys, and state as follows: NATURE OF THE ACTION 1. Beginning in or around late 2013 and continuing through early 2014, Scottrade’s confidential database was hacked, leaving millions of Scottrade consumers exposed to fraud and identity theft. Cybercriminals accessed personal information, such as names, addresses, social security numbers, email addresses, and financial information, from approximately 4.6 million consumers. 2. The data breach is a direct result of Scottrade’s negligent failure to implement and maintain reasonable and industry-standard security measures to protect its consumers’ personal and financial information. Scottrade’s failure to safeguard its database is even more egregious considering this is not the first time Scottrade has been criticized for having weak security measures. Recently, in 2014, a hacker accessed retail brokerage accounts and made unauthorized trades in Scottrade. Moreover, in 2013, FINRA fined Scottrade for failing to implement and have in place a reasonable supervisory system. 3. Despite the fact that the security breach initially occurred nearly two years ago, Scottrade has only recently begun to notify its consumers of the breach. The notice sent to Scottrade customers, however, is also deficient, failing to fully explain the nature and cause of the massive data breach. 4. Plaintiffs bring this class action lawsuit on behalf of Scottrade customers whose personal and financial information has been compromised as a result of the data breach. Plaintiffs seek injunctive relief requiring Scottrade to implement and maintain security practices that comply with regulations designed to prevent and remedy these types of breaches, as well as restitution, damages, and other relief. JURISDICTION AND VENUE 5. This Court has original jurisdiction over this action under the Class Action Fairness Act, 28 U.S.C. § 1332(d)(2). The amount in controversy in this action exceeds $5,000,000, exclusive of interest and costs and there are more than 1,000 members of the Class (as defined below). Further, Plaintiff David Stern, a citizen of New York, Plaintiff Daniel Soffer, a citizen of New Jersey, and Plaintiff Cyrus Jenani, a citizen of California, and many Class members are citizens of a different state than the Defendant, which is incorporated in Missouri and has its principal place of business in Missouri. 6. This Court has personal jurisdiction over Scottrade because Scottrade is authorized to conduct business in New York and transacts substantial business in this District through its retail stores within New York. Scottrade, thus, has sufficient minimum contacts with New York to render exercise of jurisdiction by this Court in compliance with traditional notions of fair play and substantial justice. 7. Venue is proper in this District pursuant to 28 U.S.C. § 1391 (a)-(d) because, inter alia Scottrade regularly transacts business in this District and a substantial part of the events giving risk to this cause of action took place in this District. PARTIES 8. Plaintiff David Stern is an individual residing in New York. Plaintiff Stern opened an account with Scottrade on or about June 27, 2005. Believing Scottrade would safeguard his personal information, Plaintiff Stern provided his confidential and highly sensitive personal and private information to Scottrade during the enrollment process. On or about October 7, 2015, Plaintiff Stern received a letter from Scottrade via email informing Stern “about a security compromise involving a database containing some of [Stern’s] personal information.” 9. Plaintiff Daniel Soffer is an individual residing in New Jersey. Plaintiff Soffer opened an account with Scottrade approximately fifteen (15) years ago. Believing Scottrade would safeguard his personal information, Plaintiff Soffer provided his confidential and highly sensitive personal and private information to Scottrade during the enrollment process. On or about October 7, 2015, Plaintiff Soffer received a letter from Scottrade via email informing Soffer “about a security compromise involving a database containing some of [Soffer’s] personal information.” Subsequent to the data breach, numerous attempts were made to open lines of credit using Soffer’s 10. Plaintiff Cyrus Janani is an individual residing in California. Plaintiff Janani opened an account with Scottrade at a date unknown but prior to 2014. Believing Scottrade would safeguard his personal information, Plaintiff Janani provided his confidential and highly sensitive personal and private information to Scottrade during the enrollment process. On or about October 2, 2015, Plaintiff Janani received a letter from Scottrade via email informing Janani “about a security compromise involving a database containing some of [Janani’s] personal information.” 11. Defendant Scottrade is a Missouri corporation with its principal executive offices located in St. Louis, Missouri. FACTUAL BACKGROUND I. SCOTTRADE MARKETS ITSELF AS A TRUSTWORTHY COMPANY WITH PROTECTIVE POLICIES IN PLACE TO SAFEGUARD CONSUMERS’ PERSONAL INFORMATION 12. Opening in 1980, Scottrade is a privately owned discount retail brokerage firm with over 500 branch offices in the United States. Scottrade renders both online and branch office services, including brokerage services, banking services, investment education, and online trading platforms. 13. In order to create a Scottrade investment account, customers must provide certain personal and confidential information to Scottrade during the sign up process.1 This information includes names, addresses, phone numbers, social security numbers, employment information and other personal information. 14. Scottrade’s Privacy Statement explains to consumers that their personal information may also be collected from third parties: “We also collect your personal information from others, such as credit bureaus, affiliates or other companies.”2 1 https://www.scottrade.com/documents/alt/PrivacyStatement.pdf (last visited Oct. 23, 2015). 15. Scottrade markets and holds itself out as a company that can be trusted by consumers and the public at large. It assures its consumers that as a result of its “continued stability and steady growth . . . [its] clients have been empowered to invest with confidence.”3 According to Scottrade’s Privacy Statement, the Company assures customers that Scottrade vigorously protects the private and confidential information of its customers: To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.4 16. Scottrade also makes a number of representations on its website regarding its concern for the protection of its customers’ personal information and the steps Scottrade takes to safeguard that information. For example, under a page titled “Secure Online Investing & Identity Theft Protection,” Scottrade represents, in part, the following: Take Control of Your Safety At Scottrade, we take security seriously and use a variety of measures to protect your personal information and accounts. We keep all customer information confidential and maintain strict physical, electronic and procedural safeguards to protect against unauthorized access to your information. Scottrade is committed to constantly updating its practices to stay ahead of identity thieves. Using VeriSign Identity Protection Fraud Detection Service, for example, Scottrade automatically checks your account for signs of activity from a foreign computer.5 3 https://www.scottrade.com/online-brokerage/company-overview.html (last visited Oct. 23, 2015). 5 https://www.scottrade.com/online-brokerage/secure-trading.html (last visited Oct. 23, 2015). 17. Viewing Scottrade as a trustworthy company is important to consumers, since their personal information—including social security numbers, names, addresses, and financial information—is entrusted in Scottrade and stored on Scottrade’s network. 18. Scottrade recognizes the importance of protecting its customers’ highly sensitive and valuable information, as well as the dire consequences of falling victim to identity theft if such information is accessed by unauthorized third parties. In fact, Scottrade warns its customers that “Identity theft is the theft of your personal information, which is then used to commit fraud. Account numbers, Social Security numbers and other pieces of personal information can all be used to commit fraud.”6 Scottrade describes how it protects against identity theft: How We Protect You Awareness is critical. That’s why we’ve developed these guidelines: Identify Theft Schemes Arm yourself against an attack by learning about potential threats. 1. Phishing is a scheme to collect personal information via e-mail or pop-ups which seem legitimate. Pharming is a hacker's attempt to redirect a website's traffic to another, bogus website. Both are common ways hackers collect personal information. 2. Trojan horse - a program that installs bad code that’s hidden or harmless until an action occurs, such as clicking a link. When this happens, a hacker can access your keystrokes to get passwords or other personal information. Trojan horses are spread through e-mail or embedded in Web pages, spyware, and worms via “free downloads.” 3. Detect spyware – keep your operating system updated by enabling the automatic Windows updates or by downloading Microsoft updates regularly. It’s the best defense against spyware installation.7 66 Id. 7 https://www.scottrade.com/online-brokerage/secure-trading/security-center.html (last visited Oct. 23, 2015). 19. At all relevant times, Scottrade had the above privacy policy in effect and made such representations to Plaintiffs and the Class. Plaintiffs and the Class bargained for the privacy and security of their information during the sign up process and through their customer agreement with Scottrade. The security of Plaintiffs’ personal and financial information was central to their decision to invest in Scottrade. II. THE DATA BREACH 20. On October 1, 2015, Scottrade disclosed through its website that its network had been hacked, compromising the records of approximately 4.6 million customers.8 Specifically, between late 2013 and early 2014, cybercriminals hacked into Scottrade’s network and stole client names and street addresses. The cybercriminals had access to customers’ social security numbers, email addresses and other sensitive data but, according to Scottrade, “it appears that contact information was the focus of the incident.”9 21. According to Scottrade’s website, it did not become aware of the breach until it was contacted by Federal law enforcement officials.10 Brian Krebbs (“Krebbs”), a respected security blogger, contacted Scottrade to inquire about the context of the notification the company received. In response, “Scottrade spokesperson Shea Leordeanu said the company couldn’t comment on the incident much more than the information included in its Web site notice about the attack. But she did say that Scottrade learned about the data theft from the Federal Bureau of Investigation (“FBI”), and that the company is working with agents from FBI field offices in Atlanta and New York. FBI officials could not be immediately reached for comment.”11 8 https://about.scottrade.com/updates/cybersecurity.html (last visited Oct. 23, 2015). 11 Brian Krebs, Scottrade Breach its 4.6 Million Customers (Oct. 2, 2015), 22. According to Krebbs, the data stolen may have been taken to facilitate stock scams, similar to what happened in the 2014 data breach involving JPMorgan Chase.12 The authorities in the JPMorgan Chase investigation suspect that the stolen email addresses were used to further stock manipulation schemes involving spam emails to pump up the price of otherwise worthless penny stocks.13 It is speculated that the same motivation could be at the heart of the Scottrade data breach. 23. According to a December 22, 2014 New York Times article, entitled “Neglected Server Entry for JPMorgan Hackers, the attack on J.P. Morgan was preventable: Most big banks use a double authentication scheme, known as a two-factor authentication, which requires a second one-time password to gain access to a protected system. But JPMorgan’s security team had apparently neglected to upgrade one of its network servers with the dual password scheme, the people briefed on the matter said. That left the bank vulnerable to intrusion. * * * The revelation that a simple flaw was at issue may help explain why several other financial institutions that were targets of the same hackers were not ultimately affected nearly as much as JPMorgan Chase was. To date, only two other institutions have suffered some kind of intrusion, but those breaches were said to be relatively minor by people briefed on the attacks. What is clear is JPMorgan’s attack did not involve the use of a so-called zero day attack — the kind of sophisticated, completely novel software bug that can sell for a million dollars on the black market. Nor did hackers use the kind of destructive malware that government officials say hackers in North Korea used to sabotage data at Sony Pictures. * * * It is not clear why the vulnerability in the bank’s network had gone unaddressed previously. But this summer’s hack occurred during a period of high turnover in http://krebsonsecurity.com/2015/10/scottrade-breach-hits-4-6-million-customers/. the bank’s cybersecurity team with many departing for First Data, a payments processor. III. THE INADEQUATE AND DELAYED NOTIFICATION TO THE CLASS 24. On October 2, 2015, Scottrade began notifying Plaintiffs and the Class about the data breach. The notification, which was sent via email, states, in relevant part: Dear Client: We are writing to share with you important information about a security compromise involving a database containing some of your personal information, as well as steps we are taking in response, and the resources we are making available to you. What Happened Federal law enforcement officials recently informed us that they’ve been investigating cybersecurity crimes involving the theft of information from Scottrade and other financial services companies. We immediately initiated a comprehensive response. Based upon our subsequent internal investigation coupled with information provided by the authorities, we believe a list of client names and street addresses was taken from our system. Importantly, we have no reason to believe that Scottrade’s trading platforms or any client funds were compromised. All client passwords remained encrypted at all times and we have not seen any indication of fraudulent activity as a result of this incident. Although Social Security numbers, email addresses and other sensitive data were contained in the system accessed, it appears that contact information was the focus of the incident. The unauthorized access appears to have occurred over a period of several months between late 2013 and early 2014. We have secured the known intrusion point and conducted an internal data forensics investigation on this incident with assistance from a leading computer security firm. We have taken appropriate steps to further strengthen our network defenses. What Happens Now Federal authorities had requested that they be allowed to complete much of their investigation before we notified clients. In coordination with them, we are now able to alert you of this incident. We are fully cooperating with law enforcement in their investigation and prosecution of the criminals involved. Notices like this one are being sent to all individuals and entities whose information was contained in the affected database, and we have included here information about steps you can take to protect yourself. 25. Scottrade’s email continues, making it clear that the onus is on Plaintiffs and Class members, rather than Scottrade, to protect themselves and mitigate against any damages caused by the data breach: What You Can Do As always, we encourage you to regularly review your Scottrade and other financial accounts and report any suspicious or unrecognized activity immediately. As recommended by federal regulatory agencies, you should remember to be vigilant for the next 12 to 24 months and report any suspected incidents of fraud to us or the relevant financial institution. Please also read the important information included on ways to protect yourself from identity theft. We encourage clients to be particularly vigilant against email or direct mail schemes seeking to trick you into revealing personal information. Never confirm or provide personal information such as passwords or account information to anyone contacting you. Please know that Scottrade will never send you any unsolicited correspondence asking you for your account number, password or other private information. If you receive any letter or email requesting this information, it is fraudulent and we ask that you report it to us at phishing@scottrade.com. Be cautious about opening attachments or links from emails, regardless of who appears to have sent them. 26. The email also states that Scottrade will provide one year of free credit monitoring to its customers: Identity Theft Protection As a precaution, Scottrade has arranged with AllClear ID to help you protect your identity at no cost to you for a period of one year. You are pre-qualified for identity repair and protection services and have additional credit monitoring options available, also at no cost to you. You can call AllClear ID with any concerns about your identity at 855.229.0083. This hotline is available from 8:00 am to 8:00 pm (central) Monday through Saturday. We have also included additional steps you could consider at any time if you ever suspect you’ve been the victim of identity theft. We offer this out of an abundance of caution so that you have the information you need to protect yourself. We are very sorry that this happened and for any uncertainty or inconvenience this has caused you. We know that incidents like these are frustrating. We take the security of your information very seriously and are committed to continually strengthening and evolving our defenses based on new and emerging threats. Sincerely, Scottrade 27. Scottrade’s offered “credit monitoring,” however, is inadequate and requires Plaintiffs and the Class to spend additional time and resources just to set the monitoring up. Furthermore, the credit monitoring offered by Scottrade, AllClear ID, is completely inadequate. As described by one news source: [AllClear ID] while a popular choice for companies like Scottrade to provide complimentary protection to customers in the event of a data breach, does not offer the best protection a consumer could have. Specifically, it is missing two crucial features that make one of these services effective: Internet black market monitoring and access to your triple-bureau credit reports and scores.14 28. Thus, Scottrade’s offered credit monitoring is a haphazard effort to address concerns by those affected by the breach, but in reality it does not provide the quality of coverage necessary to monitor for identity theft. Rather, Plaintiffs and the Class are left to incur the costs of finding adequate credit and identity theft monitoring. 29. The email proceeds to outline additional precautions Scottrade customers can take to protect against identity fraud, all of which require additional time and expenses that would be incurred by Plaintiffs and the Class: Important Identity Theft Information: Additional Steps You Can Take to Protect Your Identity 14 Jocelyn Baird, 4.6 Million Customers Affected in Scottrade Breach: Are You One of Them? (Oct. 6, 2015), http://www.huffingtonpost.com/nextadvisorcom/46-million-customers- affe_b_8248276.html. The following are additional steps you may wish to take to protect your identity. Review Your Accounts and Credit Reports Regularly review statements from your accounts and periodically obtain your credit report from one or more of the national credit reporting companies. You may obtain a free copy of your credit report online at www.annualcreditreport.com by calling toll-free 1.877.322.8228, or by mailing an Annual Credit Report Request Form (available at www.annualcreditreport.com) to: Annual Credit Report Request Service. P.O. Box 105281, Atlanta, GA, 30348-5281. You may also purchase a copy of your credit report by contacting one or more of the three national credit reporting agencies listed below. • Equifax, P.O. Box 740241, Atlanta, Georgia 30374-0241. 1.800.685.1111. www.equifax.com • Experian, P.O. Box 9532, Allen, TX 75013, 1.888.397.3742. www.experian.com • TransUnion, 2 Baldwin Place, P.O. Box 1000, Chester, PA 19016. 1.800.916.8800. www.transunion.com Consider Placing a Fraud Alert You may wish to consider contacting the fraud department of the three major credit bureaus to request that a "fraud alert" be placed on your file. A fraud alert notifies potential lenders to verify your identification before extending credit in your name. Equifax: Report Fraud: 1.800.525.6285 Experian: Report Fraud: 1.888.397.3742 TransUnion: Report Fraud: 1.800.680.7289 Security Freeze for Credit Reporting Agencies You may wish to request a security freeze on your credit reports. A security freeze prohibits a credit reporting agency from releasing any information from a consumer’s credit report without written authorization. However, please be aware that placing a security freeze on your credit report may delay, interfere with, or prevent the timely approval of any requests you make for new loans, credit mortgages, employment, housing or other services. If you have been a victim of identity theft, and you provide the credit reporting agency with a valid police report, it cannot charge you to place, lift or remove a security freeze. In all other cases, a credit reporting agency may charge you up to $10.00 each to place, temporarily lift, or permanently remove a security freeze. To place a security freeze on your credit report, you must send a written request to each of the three major consumer reporting agencies by regular, certified or overnight mail at the following addresses: • Equifax Security Freeze, P.O. Box 105788, Atlanta, GA 30348 • Experian Security Freeze, P.O. Box 9554, Allen, TX 75013 • TransUnion Security Freeze, Fraud Victim Assistance Department, 2 Baldwin Place, P.O. Box 1000, Chester, PA 19016 30. The email sent out by Scottrade is also deficient in that it fails to explain the breadth of the breach and the potential threat that consumers face. For example, the email does not explain why or how the breach occurred, the number of people impacted, or why this information was not properly safeguarded. It furthermore fails to explain what information was actually taken during the breach. Although it states that “contact information was the focus of the incident,” it does not explain why the other sensitive information in the database, such as social security numbers, is not believed to have been taken. 31. Many affected customers, however, will not even receive this email, since they may have changed email addresses or used alternative email addresses for personal and financial matters. IV. SCOTTRADE KNEW ITS SECURITY SYSTEM WAS INADEQUATE 32. Exacerbating matters, Scottrade was on notice of its flawed security system as early as 2011, as it has been fined and criticized on several occasions for its weak network security and lack of supervisory mechanisms. For instance, FINRA recently fined Scottrade $300,000 for failing to implement reasonable supervisory systems: The Financial Industry Regulatory Authority (FINRA) announced today that it has fined Morgan Stanley Smith Barney, LLC (Morgan Stanley) $650,000 and Scottrade, Inc. $300,000 for failing to implement reasonable supervisory systems to monitor the transmittal of customer funds to third- party accounts. Both firms were cited for the weak supervisory systems by FINRA examination teams in 2011, but neither took necessary steps to correct the supervisory gaps. Brad Bennett, Executive Vice President and Chief of Enforcement, said, "Firms must have robust supervisory systems to monitor and protect the movement of customer funds. Morgan Stanley and Scottrade had been alerted to significant gaps in their systems by FINRA staff, yet years went by before either firm implemented sufficient corrective measures." * * * FINRA also found that Scottrade failed to establish a reasonable supervisory system to monitor for wires to third-party accounts. From October 2011 to October 2013, Scottrade did not obtain any customer confirmations for third-party wire transfers of less than $200,000, and Scottrade failed to ensure that the appropriate personnel obtained confirmations for third-party wire transfers of between $200,000 and $500,000. During that period, the firm processed over 17,000 third-party wire transfers totaling more than $880 million.15 33. In addition, a hacker was recently sentenced to prison for hacking into retail brokerage accounts and making unauthorized trades from online accounts at Scottrade and other brokerage accounts: A Russian national living in New York, Petr Murmylyuk, was sentenced to 30 months in prison in January for hacking into retail brokerage accounts and making unauthorized trades from online accounts at Scottrade, E*Trade Financial ETFC, +2.74% , Fidelity Investments, Charles Schwab SCHW, +2.25% and other brokerages. He and his co- conspirators made trades in victim accounts to move the prices of holdings in accounts they had opened using stolen identities, causing about $1 million in losses, according to the Federal Bureau of Investigation. The court ordered Murmylyuk to pay about $500,000 in restitution.16 15 Press Release, FINRA Fines Morgan Stanley Smith Barney and Scottrade a Total of $950,000 for Failing to Supervise the Transmittal of Customer Funds to Third-Party Accounts, (June 22, 2015) https://www.finra.org/newsroom/2015/finra-fines-mssb-scottrade-950k-failing-supervise- transmittal-customer-funds. 16 Priya Anand, Was your brokerage account hacked? Here’s how to know, (Oct. 9, 2014), http://www.marketwatch.com/story/was-your-brokerage-account-hacked-heres-how-to-know- 34. Moreover, Scottrade knew or should have known it was susceptible to data breaches in light of the recent rise in massive security breaches on the internet and the fact that the information contained on Scottrade’s network is particularly sensitive. 35. Despite prior warnings that its security measures were inadequate, Scottrade failed to heed those warnings and instead put its customers at risk. V. PLAINTIFFS AND THE CLASS SUFFERED HARM 36. At all relevant times, Scottrade had a duty to, and represented to Plaintiffs and members of the Class that it would properly secure the personal and financial information in its network and act reasonably to prevent the foreseeable harms to Plaintiffs and the Class which would naturally result from data theft. 37. The damage that results from data theft is severe. The United States Government Accountability Office noted in a June 2007 report on Data Breaches (“GAO Report”) that identity thieves use identifying data, such as social security numbers, to open financial accounts, receive government benefits and incur charges and credit in a person’s name.17 As stated in the GAO Report, this type of identity theft is the most harmful because it may take time for the victim to become aware of the theft and can adversely impact the victim’s credit rating. 38. The GAO Report also notes that victims of identity theft will face “substantial costs and inconveniences repairing damage to their credit records . . . [and their] good name.” 39. The Federal Trade Commission (“FTC”) also recognizes the damage and costs incurred by identity theft victims. According to the FTC, identity theft victims must spend 2014-07-25. 17 http:///www.gao.gov/new.items/d07737.pdf. countless hours and large amounts of money repairing the impact to their good name and credit record.18 Identity thieves use stolen personal information, such as social security numbers, for a variety of crimes, including credit card fraud, phone or utilities fraud, and bank/finance fraud.19 40. In addition to emptying out a victim’s bank account, identity thieves may commit various other frauds, such as: (1) obtaining a driver’s license or official identification card in the victim’s name; (2) using the victim’s name and social security number to obtain government benefits; (3) filing a fraudulent tax return using the victim’s information; (4) obtaining a job using the victim’s social security number; (5) renting a home using the victim’s information; (6) receiving medical services in the victim’s name; and/or (7) providing the victim’s information to the police during an arrest.20 41. When personal information is compromised, a victim may not see signs of identity theft until years later. According to the GAO Report: law enforcement officials told us that in 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. 42. Personal information is a valuable commodity to identity thieves, so much so that criminals often trade the information on the “cyber black-market” for a number of years. On the “cyber black-market,” stolen private information gets posted, making the information publicly 18 FTC Identity Theft Website, www.ftc.gov/bcp/edu/microsites/idtheft/consumers/about-identity- theft.html. available. In one study, researchers found hundreds of websites were blocked by Google’s safeguard filtering mechanism-the “Safe Browsing list.” The study concluded: It is clear from the current state of the credit card black-market that cyber criminals can operate much too easily on the Internet. They are not afraid to put out their email addresses, in some cases phone numbers and other credentials in their advertisements. It seems that the black market for cyber criminals is not underground at all. In fact, it’s very “in your face.”21 43. As a result of Scottrade’s inadequate security measures, Plaintiffs and the class have suffered damage, including: (a) time, effort, and out-of-pocket expenses incurred to mitigate the increased risk of identity theft and/or fraud; (b) credit, debt, and financial monitoring to prevent and/or mitigate theft, identity theft, and/or fraud incurred or likely to occur as a result of the breach; (c) the value of their time and resources spent mitigating the identity theft and/or fraud; (d) the cost and time spent replacing credit cards and debit cards and reconfiguring automatic payment programs with other merchants related to the compromised cards; and (e) the financial losses for any unauthorized charges by identity thieves. 44. These costs and expenses will continue to accrue as additional fraud alerts and fraudulent charges are discovered and occur. CLASS ACTION ALLEGATIONS 45. Plaintiffs bring this action pursuant to Federal Rules of Civil Procedure 23(a), (b)(2) and (b)(3) individually and on behalf of the class, defined as follows: All current and former customers of Scottrade in the United States (including its territories and the District of Columbia) whose personal or financial information was compromised as a result of the data breach announced on October 2, 2015 (the “National Class”). 46. Plaintiffs also bring this action on behalf of the following subclasses: 21 http://www.stopthehacker.com/2010/03/03/the-underground-credit-card-blackmarket/ All current and former customers of Scottrade in New York whose personal or financial information was compromised as a result of the data breach announced on October 2, 2015 (the “New York Subclass”). All current and former customers of Scottrade in New Jersey whose personal or financial information was compromised as a result of the data breach announced on October 2, 2015 (the “New Jersey Subclass”). All current and former customers of Scottrade in California whose personal or financial information was compromised as a result of the data breach announced on October 2, 2015 (the “California Subclass”). 47. The National Class, New York Subclass, New Jersey Subclass, and California Subclass are collectively referred to as the “Class,” unless specifically indicated otherwise. 48. Excluded from the Class are the following individuals and/or entities: Scottrade and its parents, subsidiaries, affiliates, officers and directors, current or former employees, and any entity in which Scottrade has a controlling interest; all individuals who make a timely election to be excluded from this proceeding using the correct protocol for opting out; any and all federal, state or local governments, including but not limited to their departments, agencies, division, bureaus, boards, sections, groups, counsels and/or subdivisions; and all judges assigned to hear any aspect of this litigation, as well as their immediate family members. 49. Plaintiffs reserve the right to modify or amend the definition of the Class after they have had an opportunity to conduct discovery. 50. Numerosity. Rule 23(a)(1). The Class is so numerous that joinder of all members is impracticable. Plaintiffs are informed and believe that the proposed Class contains at least thousands of customers, as Scottrade has confirmed that the number of separate individuals whose private financial data has been compromised as a result of the Security Breach is approximately 4.6 million. The number of Class members is unknown to the Plaintiffs but could be discerned from the records maintained by Scottrade. 51. Existence of Common Questions of Law and Fact. Rule 23(a)(2). This action involves substantial questions of law and fact common to all members of the Class, which include, but are not limited to, the following: a. Whether Scottrade failed to employ reasonable and industry-standard measures to secure and safeguard its customers’ personal and financial data; b. Whether Scottrade failed to properly implement and maintain its purported security measures to protect its customers’ personal and financial data; c. Whether Scottrade’s security failures resulted in the unauthorized breach of Scottrade’s network containing customers’ personal and financial information; d. Whether Scottrade misrepresented that its customers’ personal and financial information was secure; e. Whether Scottrade was negligent in failing to properly secure and protect its customers’ personal and financial information; f. Whether Scottrade’s conduct violated New York General Business Law § 349; g. Whether Scottrade’s conduct violated the New Jersey Consumer Fraud Act, N.J.S.A. § 56:8-2, et seq.; h. Whether Scottrade’s conduct violated the California Civil Code § 1798.80 et seq.; i. Whether Scottrade’s conduct violated California’s Unfair Competition Law; j. Whether Plaintiffs and other members of the Class are entitled to injunctive relief; and k. Whether Plaintiffs and other members of the Class are entitled to damages and the measure of such damages. 52. Typicality. Rule 23(a)(3). Plaintiffs’ claims are typical of the claims of the members of the Class. Plaintiffs and the members of the Class were damaged by the same unreasonable conduct of Scottrade. 53. Adequacy. Rule 23(a)(4). Plaintiffs will fairly and adequately protect the interests of the members of the Class. Plaintiffs have retained counsel experienced in complex class action litigation and Plaintiffs intend to prosecute this action vigorously. Plaintiffs have no adverse or antagonistic interests to those of the Class. 54. Injunctive Relief. Rule 23(b)(2). Scottrade’s actions complained of herein are uniform as to all members of the Class. Scottrade has acted or refused to act on grounds that apply generally to the Class, so that final injunctive relief as requested herein is appropriate respecting the Class as a whole. 55. Predominance and Superiority of Class Action. Rule 23(b)(3). Questions of law or fact common to the Class predominate over any questions affecting only individual members and a class action is superior to other methods for the fast and efficient adjudication of this controversy, for at least the following reasons: a. Absent a class action, members of the Class as a practical matter will be unable to obtain redress, Scottrade’s violations of its legal obligations will continue without remedy, and additional customers will be harmed; b. It would be a substantial hardship for most individual members of the Class if they were forced to prosecute individual actions; c. When the liability of Scottrade has been adjudicated, the Court will be able to determine the claims of all members of the Class; d. A class action will permit an orderly and expeditious administration of each Class member’s claims and foster economies of time, effort, and expense; e. A class action regarding the issues in this case does not create any problems of manageability; f. Scottrade has acted on grounds generally applicable to the members of the Class, making class-wide monetary relief appropriate. FIRST CLAIM FOR RELIEF BREACH OF FIDUCIARY DUTY (On Behalf of Plaintiffs and the Class) 56. Plaintiffs repeat and re-allege all previous allegations as if fully set forth herein. 57. By virtue of Scottrade’s possession, custody and/or control of Plaintiffs’ and Class members’ personal and private information, and Scottrade’s duty to properly monitor and safeguard such information, the Defendant was (and continues to be) in a confidential, special and/or fiduciary relationship with Plaintiffs and the Class. As fiduciaries, the Defendant owes (and continues to owe) to Plaintiffs and Class members: a. The commitment to deal fairly and honestly; b. The duties of good faith and undivided loyalty; and c. Integrity of the strictest kind. The Defendant was (and continues to be) obligated to exercise the highest degree of care in carrying out its responsibilities to Plaintiffs and Class members under such confidential, special and/or fiduciary relationships. 58. Scottrade breached its fiduciary duties to Plaintiffs and the Class by, inter alia, improperly storing, monitoring and/or safeguarding the Plaintiffs’ and Class members’ personal and private information. 59. Scottrade breached its fiduciary duties to Plaintiffs and the Class by its wrongful actions described above. Defendant willfully and wantonly breached its fiduciary duties to Plaintiffs and the Class or, at the very least, committed these breaches with conscious indifference and reckless disregard of its rights and interests. The Defendant’s wrongful actions constitute breach of fiduciary duty at common law. SECOND CLAIM FOR RELIEF NEGLIGENCE (On Behalf of Plaintiffs and the Class) 60. Plaintiffs repeat and re-allege all previous allegations as if fully set forth herein. 61. Scottrade came into possession, custody and/or control of confidential personal and financial information of Plaintiffs and Class members. 62. In collecting the personal information of its current and former customers, Scottrade owed Plaintiffs and the members of the Class a duty to exercise reasonable care in safeguarding, keeping private, and protecting such information from being accessed by and disclosed to third parties. 63. Scottrade had a duty to, among other things, maintain and test its security systems and take other reasonable security measures to protect and adequately secure the personal data of Plaintiffs and the Class from unauthorized access and use. 64. Scottrade was aware that by taking such sensitive personal information from its customers that it had a responsibility to take reasonable security measures to protect the data from being stolen and easily accessed. 65. Scottrade also had a duty to exercise reasonable care by timely notifying Plaintiffs and the Class of an authorized disclosure of their confidential personal or financial information. 66. Defendant, through its actions and/or omissions, unlawfully breached its duty to Plaintiffs and the Class by failing to exercise reasonable care in protecting and safeguarding Plaintiffs’ personal and financial information within Defendant’s possession. 67. Defendant, through its actions and/or omissions, unlawfully breached its duty to Plaintiffs and the Class by failing to exercise reasonable care by failing to have appropriate procedures in place to detect and prevent the dissemination of Plaintiffs’ personal and financial information. 68. Defendant, through its actions and/or omissions, unlawfully breached its duty to Plaintiffs and the Class by failing to timely disclose that the personal and financial information within Defendant’s possession had been released to unauthorized persons. 69. Defendant’s negligent and wrongful breach of its duties owed to Plaintiffs and the Class proximately caused Plaintiffs’ and Class members’ personal and financial information to be compromised. 70. Plaintiffs seek the award of actual damages on behalf of the Class. THIRD CLAIM FOR RELIEF BREACH OF CONTRACT (On Behalf of Plaintiffs and the Class) 71. Plaintiffs repeat and re-allege all previous allegations as if fully set forth herein. 72. Plaintiffs and the Class were parties to actual or implied contracts with Scottrade that required Scottrade to properly safeguard their personal and financial information from theft, compromise and/or unauthorized disclosure. 73. Scottrade solicited Plaintiffs and the Class to sign up with Scottrade and to provide their personal and financial information. Plaintiffs and the Class later paid fees to Scottrade based on Scottrade’s express representations concerning the safeguarding and protection of personal and financial information. 74. Plaintiffs and the Class fully performed their obligations under their contracts with Scottrade. 75. Scottrade breached its agreements with Plaintiffs and the Class by failing to properly safeguard their personal and financial information from theft, compromise and/or unauthorized disclosure. The Defendant’s wrongful conduct constitutes breach of contract. FOURTH CAUSE OF ACTION NEW YORK GENERAL BUSINESS LAW § 349 (On Behalf of Plaintiff Stern and the New York Subclass) 76. Plaintiff Stern repeats and re-alleges all previous allegations as if fully set forth 77. As fully alleged above, Scottrade engaged in unfair and deceptive acts and practices in violation of Section 349 of the New York General Business Law (“GBL”). 78. Reasonable consumers would be misled by Defendant’s misrepresentations and/or omissions concerning the security of their personal information, because they understand that national brokerage companies that take personal and financial information from customers will properly safeguard that private information in a manner consistent with industry standards and practices. 79. Scottrade did not inform its customers that it failed to properly safeguard their personal and financial information, thus misleading Plaintiff Stern and the New York Subclass in violation of GBL § 349. Such misrepresentations were material because Plaintiff Stern and the New York Subclass entrusted Scottrade with their private information. 80. As a direct and proximate result of Scottrade’s violations, Plaintiff Stern and the New York Subclass suffered injury in fact and loss, including loss of time and money monitoring their finances for future fraud and other damages. 81. Plaintiff Stern and the New York Subclass seek injunctive relief in the form of an order: (a) compelling Scottrade to institute appropriate data collection and safeguarding methods and policies with regard to consumer information; and (b) compelling Scottrade to provide detailed and specific disclosure of what types of personal and financial information have been compromised as a result of the data breach. 82. Plaintiff Stern seeks attorney’s fees and damages to the fullest extent permitted under GBL § 349(a). FIFTH CAUSE OF ACTION VIOLATION OF NEW JERSEY CONSUMER FRAUD ACT, N.J.S.A §56:8-2, et. seq. (On Behalf of Plaintiff Soffer and the New Jersey Subclass) 83. Plaintiff Soffer repeats and re-alleges all previous allegations as if fully set forth 84. The New Jersey Consumer Fraud Act (“NJCFA”) protects consumers against “any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise . . . .” N.J.S.A. § 56:8-2. 85. In enacting the Identity Theft Prevention Act, which among other things, amended the New Jersey Consumer Fraud Act, the New Jersey Legislature found that “[i]dentity theft is an act that violates the privacy of our citizens and ruins their good names: victims can suffer restricted access to credit and diminished employment opportunities, and may spend years repairing damage to credit histories.” N.J.S.A. §56:1-45. 86. Scottrade violated the NJCFA by affirmatively representing that Plaintiff Soffer and the New Jersey Subclass’s personal and financial information would be collected and stored securely. Scottrade also engaged in unlawful conduct in violation of the NJCFA by making knowing and intentional omissions regarding the inadequacy of its data security systems. 87. Defendant knew or should have known that its data security systems and procedures were inadequate. Scottrade did not fully and truthfully disclose to its customers the inadequate nature of its data security systems, omitting material facts that it was under a duty to disclose to Plaintiff Soffer and the New Jersey Subclass. 88. Plaintiff Soffer and the New Jersey Subclass reasonably expected that their personal and financial information would be securely collected and maintained such that the data breach would not occur. 89. As a result, Plaintiff Soffer and the New Jersey Subclass were fraudulently induced to sign up with Scottrade and provide personal and financial information to Defendant without knowledge of Defendant’s inadequate data security systems and procedures. The facts that Defendant concealed were solely within its possession. 90. Defendant intended for Plaintiff Soffer and the New Jersey Subclass to rely on its acts of concealment and omissions so that they would use Scottrade’s services. 91. If Plaintiff Soffer and members of the New Jersey Subclass knew about Defendant’s inadequate data security and procedures, they would not have used Scottrade’s services or would not have provided their personal and/or financial information to Scottrade. 92. Defendant’s conduct caused Plaintiff Soffer and the New Jersey Subclass to suffer an ascertainable loss by having their personal and financial information compromised. SIXTH CAUSE OF ACTION FAILURE TO EXPEDIENTLY NOTIFY CUSTOMERS IN VIOLATION OF THE NEW JERSEY CONSUMER FRAUD ACT, N.J.S.A. 56:8-2, et seq. (On Behalf of Plaintiff Soffer and the New Jersey Subclass) 93. Plaintiff Soffer repeats and re-alleges all previous allegations as if fully set forth 94. As stated above, the New Jersey Consumer Fraud Act provides that it is “an unlawful practice and a violation of P.L. 1960 c. 39 (C.56:8-1 et seq.) to willfully, knowingly or recklessly violate” Sections 56:8-161-164 of that Act. 95. Section 56:8-163 of the New Jersey Consumer Fraud Act requires that a business conducting business in New Jersey: shall disclose any breach of security of those computerized records following discovery or notification of the breach to any customer who is a resident of New Jersey whose personal information was, or is reasonably believed to have been, accessed by an unauthorized person. The disclosure to a customer shall be made in the most expedient time possible and without unreasonable delay, consistent with the legitimate needs of law enforcement, as provided in subsection c. of this section, or any measures necessary to determine the scope of the breach and restore the reasonable integrity of the data system. N.J.S.A. § 56:8-163. 96. The New Jersey Consumer Fraud Act defines a breach of security as follows: "Breach of security" means unauthorized access to electronic files, media or data containing personal information that compromises the security, confidentiality or integrity of personal information when access to the personal information has not been secured by encryption or by any other method or technology that renders the personal information unreadable or unusable. Good faith acquisition of personal information by an employee or agent of the business for a legitimate business purpose is not a breach of security, provided that the personal information is not used for a purpose unrelated to the business or subject to further unauthorized disclosure. N.J.S.A. § 56:8-161. 97. Scottrade’s data breach constitutes a breach of security. 98. Scottrade’s disclosure regarding the breach of security to Plaintiff Soffer and the new Jersey Subclass was delayed and not made in the most expedient time possible. 99. As a result of the foregoing, Plaintiff Soffer and the New Jersey Subclass suffered and will continue to suffer ascertainable losses and other damages, and are entitled to treble damages as provided by N.J.S.A. § 56:18-19. SEVENTH CAUSE OF ACTION CALIFORNIA CIVIL CODE §1798.80, et seq. (On Behalf of Plaintiff Jenani and the California Subclass) 100. Plaintiff Jenani repeats and re-alleges all previous allegations as if fully set forth 101. The events alleged herein constitute a “breach of the security system” of Scottrade within the meaning of California Civil Code §1798.82. 102. The information lost, disclosed, or intercepted during the events alleged herein constitute unencrypted “personal information” within the meaning of California Civil Code §§1798.80(e) and 1798.82(h). 103. Scottrade failed to implement and maintain reasonable or appropriate security procedures and practices to protect customers’ personal and financial information. Upon information and belief, Scottrade failed to employ industry standard security measures, best practices or safeguards with respect to customers’ personal and financial information. 104. Scottrade failed to disclose the breach of security to its network using means and methods to reach all affected customers, in the most expedient time possible, and without unreasonable delay after it knew or reasonably believed that customers’ personal and financial data had been compromised. 105. The breach of the personal information of millions of accounts of Scottrade customers constituted a “breach of the security system” of Scottrade pursuant to Civil Code section 1798.82(g). 106. By failing to implement reasonable measures to protect its customers’ personal data, Scottrade violated Civil Code section 1798.81.5. 107. By failing to promptly notify all affected Scottrade customers that their personal information had been acquired (or was reasonably believed to have been acquired) by unauthorized persons in the data breach, Scottrade violated Civil Code section 1798.82 of the same title in a manner that would reach all affected customers. 108. By violating Civil Code sections 1798.81.5 and 1798.82, Scottrade “may be enjoined” under Civil Code section 1798.84(e). 109. Accordingly, Plaintiff Jenani requests that the Court enter an injunction requiring Scottrade to implement and maintain reasonable security procedures to protect customers’ data in compliance with the California Customer Records Act, including, but not limited to: (1) ordering that Scottrade, consistent with industry standard practices, engage third party security auditors/penetration testers as well as internal security personnel to conduct testing, including simulated attacks, penetration tests, and audits on Scottrade’s systems on a periodic basis; (2) ordering that Scottrade engage third party security auditors and internal personnel, consistent with industry standard practices, to run automated security monitoring; (3) ordering that Scottrade audit, test, and train its security personnel regarding any new or modified procedures; (4) ordering that Scottrade, consistent with industry standard practices, conduct regular database scanning and security checks; (5) ordering that Scottrade, consistent with industry standard practices, periodically 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; and (6) ordering Scottrade to meaningfully educate its customers about the threats they face as a result of the loss of their personal and financial information to third parties, as well as the steps Scottrade customers must take to protect themselves. 110. Plaintiff Jenani further requests that the Court require Scottrade to (1) identify and notify all members of the Class who have not yet been informed of the data breach; and (2) notify affected customers of any future data breaches by email, text, and pre-recorded phone calls within 24 hours of Scottrade’s discovery of a breach or possible breach and by mail within 72 hours. 111. As a result of Scottrade’s violation of Civil Code sections 1798.81, 1798.81.5, and 1798.82, Plaintiff Jenani and members of the California Subclass have and will incur economic damages relating to time and money spent remedying the breach, expenses for bank fees associated with the breach, late fees from automated billing services associated with the breach, as well as the costs of credit monitoring and purchasing credit reports. 112. Plaintiff Jenani, individually and on behalf of the members of the California Subclass, seek all remedies available under Civil Code section 1798.84, including, but not limited to: (a) damages suffered by members of the California Subclass; and (b) equitable relief. Plaintiff Jenani, individually and on behalf of the California Subclass, also seeks reasonable attorneys’ fees and costs under applicable law. EIGHTH CAUSE OF ACTION CALIFORNIA’S UNFAIR COMPETITION LAW (“UCL”) (On Behalf of Plaintiff Jenani and the California Subclass) 113. Plaintiff Jenani repeats and re-alleges all previous allegations as if fully set forth 114. Beginning at an exact date unknown, but at least since October 1, 2015, Scottrade has committed and continues to commit acts of unfair competition, as defined by California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200, et seq. 115. As specifically alleged herein, Scottrade’s acts, practices, omissions and nondisclosures violate Cal. Civ. Code §§ 1572, 1573, 1709, 1711, 1798.80 et seq., and the common law. Consequently, Scottrade’s acts, practices, omissions, and nondisclosures, as alleged herein, constitute unlawful acts and practices within the meaning of Cal. Bus. & Prof. Code § 17200. 116. Scottrade’s acts, practices, omissions, and nondisclosures threaten a continued violation of Cal. Civ. Code §§ 1709, 1711, 1798.80 et seq., and the common law, violate the policy and spirit of such laws, and otherwise significantly harm consumers. 117. Scottrade’s acts, practices, omissions, and nondisclosures are immoral, unethical, oppressive, unscrupulous, and substantially injurious to consumers. The harm to Plaintiff Jenani, the California Subclass, and members of the general public substantially outweighs any benefits of Scottrade’s conduct. Furthermore, there were reasonably available alternatives to further Scottrade’s legitimate business interests, including using the best practices to protect the personal and financial information other than Scottrade’s wrongful conduct described herein. Consequently, Scottrade’s acts, practices, omissions, and nondisclosures constitute “unfair” business acts and practices within the meaning of Cal. Bus. & Prof. Code § 17200. 118. Scottrade’s acts, practices, omissions and nondisclosures, as alleged herein, are likely to deceive, and did deceive, Plaintiff Jenani, the California Subclass, and members of the general public, and consequently constitute “fraudulent” acts and practices within the meaning of Cal. Bus. & Prof. Code § 17200. Scottrade’s conduct was likely to deceive reasonable consumers. 119. Scottrade violated the UCL by accepting and storing personal and financial information of Plaintiff Jenani and the California Subclass and then failing to take reasonable steps to protect it. In violation of industry standards, best practices, and reasonable consumer expectations, Scottrade failed to safeguard personal and financial information and failed to tell consumers that it did not have reasonable and best practices, safeguards and data security in place to protect their personal and financial information. 120. As a result of Scottrade’s conduct, Plaintiff Jenani and the California Subclass have suffered damage and been harmed by, among other things: (a) the interception, loss, and disclosure of their personal and financial information; and (b) making purchases from Scottrade that they otherwise would not have made or would have paid less for had they known their personal information was at risk of disclosure. In addition, Plaintiff Jenani and the California Subclass have suffered harm through the expenditure of time and resources in connection with: (a) discovering and assessing fraudulent or unauthorized charges; (b) contesting fraudulent or unauthorized charges; (c) adjusting automatic or other billing instructions; and (d) obtaining credit monitoring and identity theft protection. 121. Plaintiff Jenani and the California Subclass seek injunctive relief, restitution and/or disgorgement, and any further relief that the Court deems proper. In addition, Plaintiff Jenani seeks reasonable attorneys’ fees and prays for the relief set forth below. NINTH CAUSE OF ACTION BAILMENT (On Behalf of Plaintiffs and the Class) 122. Plaintiffs repeat and re-allege all previous allegations as if fully set forth herein. 123. Plaintiffs’ and the Class’s personal and financial information is their personal property, which they delivered to Scottrade for the sole and specific purpose of paying for services from Scottrade. 124. Defendant accepted Plaintiffs’ and the Class’s personal information. As bailee, the Defendant owed a duty to Plaintiffs and the Class and, in fact, had an express and/or implied contract with them, to use their personal and financial information only for that period of time necessary to complete the services by Scottrade. 125. Scottrade breached its duty and/or express and/or implied contracts with the Plaintiffs and Class members by, inter alia, improperly storing and inadequately protecting Plaintiffs’ and the Class’s personal information from theft, compromise and/or unauthorized disclosure, which directly and/or proximately caused the Plaintiffs and the Class to suffer damages. 126. Scottrade’s wrongful actions constitute breaches of its duty to (and/or express and/or implied contracts with) the Plaintiffs and the Class arising from the bailment. WHEREFORE, Plaintiffs, individually and on behalf of the Class, respectfully request that the Court enter judgment in its favors as follows: A. Determine that this action be maintained as a class action pursuant to Federal Rule of Civil Procedure 23(a), (b)(2) and (b)(3); B. Direct that reasonable notice of this action, as provided by Federal Rule of Civil Procedure 23(c)(2), be given to the Class; C. Appoint Plaintiff Stern as class representative for the New York Subclass, appoint Plaintiff Soffer as class representative for the New Jersey Subclass, appoint Plaintiff Jenani as class representative for the California Subclass and appoint Plaintiffs’ counsel as counsel for the Class; D. Enter judgment against Scottrade and in favor of the Plaintiffs and the Class; E. Order Scottrade to pay for not less than three years of credit and identity theft monitoring services for Plaintiffs and the Class; F. Award all compensatory and statutory damages to the Plaintiffs and the Class in an amount to be determined at trial; G. Award punitive damages, including treble and/or exemplary damages, in an appropriate amount; H. Award the Plaintiffs and the Class the costs incurred in this action together with reasonable attorneys’ fees and expenses, including any necessary expert fees as well as pre-judgment and post-judgment interest; and I. Grant such other and further relief as is necessary to correct for the effects of Scottrade’s unlawful conduct and as the Court deems just and proper. JURY TRIAL DEMANDED Plaintiffs, on behalf of themselves and the Class, demand a trial by jury on all issues so DATED: October 30, 2014 Respectfully submitted, LEVI & KORSINSKY LLP By: /s/ Shannon L. Hopkins Shannon L. Hopkins (SH1887) shopkins@zlk.com Nancy A. Kulesa (NK2015) nkulesa@zlk.com Stephanie A. Bartone sbartone@zlk.com 733 Summer Street, Suite 304 Stamford, CT 06901 Telephone: (212) 363-7500 Facsimile: (212) 363-7171

securities

b-RjEYcBD5gMZwczzK-U

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK Case No. CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS JURY TRIAL DEMANDED KEVIN O’BRIEN, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. PARETEUM CORPORATION, VICTOR BOZZO, EDWARD O’DONNELL, and DENIS MCCARTHY, Defendants. Plaintiff Kevin O’Brien (“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 Pareteum Corporation (“Pareteum” 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 Pareteum; and (c) review of other publicly available information concerning Pareteum. NATURE OF THE ACTION AND OVERVIEW 1. This is a class action on behalf of persons and entities that purchased or otherwise acquired Pareteum securities between March 12, 2019 and October 21, 2019, inclusive (the “Class Period”). Plaintiff pursues claims against the Defendants under the Securities Exchange Act of 1934 (the “Exchange Act”). 2. Pareteum is a cloud communication company. Its platforms connect mobile networks using multiple communications channels including mobile telephony, data, SMS, VOIP, and OTT services. 3. On June 7, 2019, Marcus Aurelius Value published a report questioning the Company’s accounting regarding backlog, backlog conversion rates, and receivables. 4. On this news, the Company’s stock price fell $0.83, or over 24%, to close at $2.58 per share on June 7, 2019, on unusually heavy trading volume. 5. On June 25, 2019, Viceroy Research Group published a report that alleged further accounting discrepancies related to several sources of “uncollectable” revenue, concluding that “total revenue is overstated by 42%.” 6. On this news, the Company’s stock price fell $0.51, or over 20%, to close at $2.00 per share on June 26, 2019, on unusually heavy trading volume. 7. On October 15, 2019, the Company announced that Chief Operating Officer Denis McCarthy was leaving the Company. McCarthy had maintained the Company’s 36-month contractual revenue backlog spreadsheets and analysis that were scrutinized by the Aurelius Value and Viceroy reports. 8. On this news, the Company’s stock price fell $0.36, over three consecutive trading sessions to close at $0.83 per share on October 17, 2019, on unusually heavy trading volume. 9. On October 21, 2019, after the market closed, the Company disclosed that certain revenues recognized during 2018 and 2019 should not have been recorded during that period and that, as a result, the Company would restate their previously issued consolidated financial statements as of and for the full year ended December 31, 2018, and interim periods ended March 31, 2019 and June 30, 2019. 10. On this news, the Company’s stock price fell $0.4401, or nearly 60%, to close at $0.2992 on October 22, 2019, on unusually heavy trading volume. 11. 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 the Company’s backlog had been artificially inflated; (2) that the Company was not likely to collect from several of its key customers; (3) that, as a result, the Company’s accounts receivable was overstated; (4) that the Company improperly recognized revenue from certain customer transactions; (5) that there was a material weakness in Pareteum’s internal control over financial reporting related to the Company’s backlog; (6) that, as a result of the foregoing, the Company was reasonably likely to restate financial statements for several periods; 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. 12. 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 13. 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). 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.S.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)). 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 has offices in this 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 Kevin O’Brien, as set forth in the accompanying certification, incorporated by reference herein, purchased Pareteum 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. 18. Defendant Pareteum is incorporated under the laws of Delaware with its principal executive offices located in New York, NY. Pareteum’s common stock trades on the NASDAQ exchange under the symbol “TEUM.” 19. Defendant Victor Bozzo (“Bozzo”) was, at all relevant times, the Chief Executive Officer (“CEO”) of the Company. 20. Defendant Edward O’Donnell (“O’Donnell”) was, at all relevant times, the Chief Financial Officer (“CFO”) of the Company. 21. Defendant Denis McCarthy (“McCarthy”) was the Chief Operating Officer of the Company until October 9, 2019. 22. Defendants Bozzo, O’Donnell, and McCarthy (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 23. Pareteum is a cloud communication company. Its platforms connect mobile networks using multiple communications channels including mobile telephony, data, SMS, VOIP, and OTT services. Materially False and Misleading Statements Issued During the Class Period 24. The Class Period begins on March 12, 2019. On that day, the Company announced its fourth quarter and full year 2018 financial results, reporting revenue of $14.3 million and stated that backlog had quadrupled to $615 million compared to the prior year. The press release stated, in relevant part: FULL YEAR 2018 FINANCIAL RESULTS: (Unless otherwise noted, all comparisons are made to full year of 2017) • Revenues increased 139% to $32.4 million • Adjusted EBITDA improved 199% year-over-year to $6.4 million • Non-GAAP EPS of $0.09 cents compared to $0.05 cents for year ending 2017 • We ended the year with a $6.1 million cash balance and no secured debt KEY 2018 OPERATIONAL METRICS: • 36-month Contractual Revenue Backlog quadrupled to $615 million for the full year 2018, up from $147 million in 2017 with a conversion rate to revenue of 100% • Connections increased 252% to 4,609,000 for the full year 2018, and grew 59% sequentially in the fourth quarter of 2018 • Fourth quarter average annualized revenue per employee of $415,000, an improvement of 78% year-over-year RECENT BUSINESS HIGHLIGHTS: • The Company completed the acquisition of Artilium in late September bringing several strategic advantages including an increased product offering; larger addressable market in Europe; expanded our executive, operational and sales talent; and enhanced our cloud platform with key operating support systems (OSS) and the internet of things (IoT) capabilities. • In February 2019, Pareteum completed the acquisition of iPass, delivering key strategic benefits including an intelligent Wi-Fi connectivity platform; deep relationships with marquis enterprise customers; strong process, procedures and systems; and strong talent particularly on the technology development side. • The Company closed a $50M credit facility with Post Road Group in February 2019. An initial draw of $25M will be used to repay the debt and transaction costs associated with the iPass transaction and to facilitate accelerated organic growth and potential M&A transactions. 2019 FULL YEAR GUIDANCE: We expect revenue to be between $105 million and $115 million for the full year of 2019. Adjusted EBITDA and Cash Flow, net of restructuring and acquisition costs will be positive for the year. We are expecting 2019 revenue growth in the range of 225% to 260% year-over-year, outpacing the market growth rate fivefold to be updated quarterly. 25. On March 18, 2019, the Company filed its annual report for the period ended December 31, 2018 (the “2018 10-K”) with the SEC, affirming the previously reported financial results. Under Controls and Procedures, the 2018 10-K identified certain material weaknesses over the Company’s internal controls over financial reporting, stating: Based on the foregoing evaluation, our management has identified the following deficiencies that constitute material weaknesses in the Company’s internal controls over financial reporting: Inadequate and ineffective management assessment of internal control over financial reporting, including insufficient experienced resources to complete the documentation of internal control assessment. Ineffective design, implementation and monitoring of information technology general controls pertaining to the Company’s change management process. The material weakness did not result in any identified misstatements to the financial statements, and there were no changes to previously released financial results. Based on these material weaknesses, the Company’s management concluded that at December 31, 2018, the Company’s internal control over financial reporting was not effective. Squar Milner LLP, the Company’s independent registered public accounting firm, expressed an unqualified opinion for the audit of our consolidated financial statements as of and for the year ended December 31, 2018 and has issued an adverse audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018, which appears below. 26. On May 7, 2019, the Company announced its first quarter 2019 financial results, reporting revenue of $23 million and backlog of $938 million, including the results from recent acquisitions. 27. On May 10, 2019, the Company filed its quarterly report on Form 10-Q for the period ended March 31, 2019, affirming the previously reported financial results. Moreover, the report stated that the Company had remediated the previously identified material weakness, stating in relevant part: To address ineffective design, implementation and monitoring of information technology general controls pertaining to the Company’s change management process, the Company has (i) removed all live access to all developers, internal and external, from being able to make coding changes directly in our reporting system; (ii) has continued to monitor and document all changes made in our reporting system and add additional layers of documented review of these changes; (iii) instituted sample testing of changes made in our reporting system to ensure the documented policies are being followed and report the results of these tests to senior management in regular appropriate intervals; and (iv) enhanced our quarterly reporting on the remediation measures to the Audit Committee of the Board of Directors. Management believes this material weakness has been remediated, as of March 31, 2019, pending further testing. . . . . . . However, the identified material weakness in internal control over financial reporting will not be considered remediated until controls have been designed and/or controls are in operation for a sufficient period of time for our management to conclude that the material weaknesses have been remediated. Additional remediation measures may be required, which may require additional implementation time. 28. The above statements identified in ¶¶ 24-27 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 the Company’s backlog had been artificially inflated; (2) that the Company was not likely to collect from several of its key customers; (3) that, as a result, the Company’s accounts receivable was overstated; (4) that the Company improperly recognized revenue from certain customer transactions; (5) that there was a material weakness in Pareteum’s internal control over financial reporting related to the Company’s backlog; (6) that, as a result of the foregoing, the Company was reasonably likely to restate financial statements for several periods; 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. 29. Analysts began to present certain accounting irregularities in the Company’s financial reporting. On June 7, 2019 when Marcus Aurelius Value published a report questioning the Company’s accounting regarding backlog, backlog conversion rates, and receivables. The report stated, in relevant part: TEUM’s Purported $900 Million Backlog Appears Significantly Exaggerated or Fictitious. The foundation of the Pareteum growth story is built on the company’s supposedly large and fast-growing 36-month backlog, which management now says exceeds $900 million. But our investigation identified a variety of purportedly valuable customers that appear wholly incapable of paying TEUM anywhere near the large contractual values that TEUM has touted. Examples include: • A nearly-worthless penny-stock managed by a former AudioEye executive named alongside TEUM’s CFO in the fraud suit. • African entities that show no signs of meaningful business activity. • Contracts with crypto-companies including one that recently settled with the SEC and “agreed to return funds to harmed investors”. • Closed or dissolved businesses. • Websites that are inactive or offer limited contact information. • Businesses that don’t answer the phones or report having minimal employees. • European entities with tiny amounts of capital or revenue. • Featured customers located in apartment buildings. • Millions in loans to an entity bleeding cash. • A purported $50 million contract with an entity in Thailand that reports having zero 2018 revenue, years of losses, and involvement with a crypto-coin that has lost 97% of its peak value. We also found irregularities and embellishments involving a significant portion of the “notable partners and customers” that TEUM highlighted in a graphic at its recent analyst day, suggesting TEUM struggles to find enough legitimate new customers to even fill a simple slide. TEUM’s Backlog Conversion and Receivables Signal Serious Potential Accounting Problems The accounting fraud that TEUM’s CFO allegedly perpetrated at AudioEye involved the booking of phantom revenues to artificially inflate the stock price. Bulls have taken comfort in management’s assurances that TEUM’s backlog has converted to revenue at over 100% of contractual rates thus far. But we find TEUM’s backlog conversion rate highly problematic considering that our research has flagged so many small or defunct customers. If exaggerated contractual values are now being recognized as revenue, then we believe TEUM will face serious accounting problems. TEUM’s receivables have already begun to balloon after growing at sequential rates far faster than revenues in each of the last four quarters. TEUM’s small California auditor, which was specifically cited by the PCAOB for audit deficiencies related to revenue, gives us no comfort. 30. On this news, the Company’s stock price fell $0.83, or over 24%, to close at $2.58 per share on June 7, 2019, on unusually heavy trading volume. 31. The truth partially emerged again on June 25, 2019 when Viceroy Research Group published a report that alleged further accounting discrepancies related to several sources of “uncollectable” revenue, concluding that “total revenue is overstated by 42%.” The report stated, in relevant part: Pareteum has 4 months accounts receivable sitting on its balance sheet. When combined with the drastic increase in receivable days since the end of 2017, it appears that Pareteum’s new customers are not paying their bills. Despite this Pareteum’s management continues to recognize this apparent uncollectable revenue from customers. • Pareteum’s acquired businesses iPass and Artilium are getting paid on “typical” billing terms of 30 days, per management assertion. It is noteworthy that this is not strictly true: o Artilium’s last publicly available financials show 77.473 receivable days and claim that the average credit period on sales to be 87 days as of June 30, 2018. o iPass’s Q3 2018 10-Q revenue and receivables figures show 78.155 receivable days with standard credit terms of 30 days. • iPass’ purchase price accounting allocated US$4.344m in accounts receivable to Pareteum’s balance sheet. • Artilium’s purchase price accounting allocated a negligible amount of accounts receivable to Pareteum’s balance sheet: it appears Pareteum wrote a significant balance off. We have not accounted for this negligible balance. According to our model Pareteum has collected only 4% of the revenue recognized from these customers in the 12 months trailing Q1 2019. While this figure is probably lower than Pretium’s actual collections, it creates a Catch-22 situation where receivables from Artilium and iPass are also growing exponentially. 32. On this news, the Company’s stock price fell $0.51, or over 20%, to close at $2.00 per share on June 26, 2019, on unusually heavy trading volume. 33. On August 6, 2019, the Company announced its second quarter 2019 financial results, reporting revenue of $34.1 million. Notably, the Company did not report Pareteum’s backlog. The press release stated, in relevant part: SECOND-QUARTER 2019 FINANCIAL RESULTS YEAR-OVER-YEAR: • Total revenue increased 469% to $34.1 million • Income from Operations totaled $159,000 • EBITDA increased 466% to $3.4 million • Adjusted EBITDA increased 369% to $6.1 million • Non-GAAP EPS of $0.03 (Non-GAAP EPS of $0.05 for the 6 months ending June 30, 2019) • Net Dollar-based expansion rate represented 151% growth • Increase in total assets from $33.1 million at June 30, 2018 to $246.9 million at June 30, 2019 KEY SECOND-QUARTER OPERATIONAL METRICS: • Connections increased 380% to 13,030,000 for the second quarter of 2019, and grew 108.5% sequentially for the first half of 2019 • Second-quarter average annualized revenue per employee of $583,000, an increase of 55% year-over-year 34. On August 9, 2019, the Company filed its quarterly report on Form 10-Q for the period ended June 30, 2019, affirming the previously reported financial results. Regarding internal control over financial reporting, the report was substantially similar to the quarterly report for the previous reporting period. 35. The above statements identified in ¶¶ 33-34 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 the Company’s backlog had been artificially inflated; (2) that the Company was not likely to collect from several of its key customers; (3) that, as a result, the Company’s accounts receivable was overstated; (4) that the Company improperly recognized revenue from certain customer transactions; (5) that there was a material weakness in Pareteum’s internal control over financial reporting related to the Company’s backlog; (6) that, as a result of the foregoing, the Company was reasonably likely to restate financial statements for several periods; 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. 36. On October 15, 2019, the Company announced that Chief Operating Officer Denis McCarthy was leaving the Company. McCarthy had maintained the Company’s 36-month contractual revenue backlog spreadsheets and analysis that were scrutinized by the Aurelius Value and Viceroy reports. In a Form 8-K filed with the SEC, the Company stated, in relevant On October 9, 2019, Denis McCarthy and Pareteum Corporation (the “Company”) entered into a settlement agreement and release (the “Separation Agreement”) pursuant to which Mr. McCarthy’s at-will employment agreement with the Company was terminated and Mr. McCarthy ceased all positions with the Company and its subsidiaries, including as the Company’s Chief Operating Officer. Pursuant to the Separation Agreement, Mr. McCarthy will receive a severance payment of $225,000 to be paid in equal monthly installments according to the Company’s payroll practices over a period of 12 months from the date of the Separation Agreement and agreed not to trade in the Company’s securities through October 1, 2021. Mr. McCarthy will also forego earned and unearned bonuses and vested and unvested stock options will lapse. 37. On this news, the Company’s stock price fell $0.36, over three consecutive trading sessions to close at $0.83 per share on October 17, 2019, on unusually heavy trading volume. 38. The above statements identified in ¶ 36 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 the Company’s backlog had been artificially inflated; (2) that the Company was not likely to collect from several of its key customers; (3) that, as a result, the Company’s accounts receivable was overstated; (4) that the Company improperly recognized revenue from certain customer transactions; (5) that there was a material weakness in Pareteum’s internal control over financial reporting related to the Company’s backlog; (6) that, as a result of the foregoing, the Company was reasonably likely to restate financial statements for several periods; 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. Disclosures at the End of the Class Period 39. On October 21, 2019, after the market closed, the Company disclosed that certain revenues recognized during 2018 and 2019 should not have been recorded during that period and that, as a result, the Company would restate their previously issued consolidated financial statements as of and for the full year ended December 31, 2018, and interim periods ended March 31, 2019 and June 30, 2019. In a press release, the Company stated, in relevant part: The decision to restate these financial statements is based on the Company’s conclusion that certain revenues recognized during 2018 and 2019 should not have been recorded during that period. For certain customer transactions, the Company may have prematurely or inaccurately recognized revenue. These restatements should not impact historical cash or cash equivalents based upon the current review. At the present time, the restatements are expected to impact Revenue, Cost of Service, Operating Income, Net Loss, Accounts Receivable and other Balance Sheet line items. While the Company’s analysis is still underway, the Company currently estimates the revenue impact for the full year 2018 to be a reduction of approximately $9 million. For the first half of 2019, the Company currently estimates the revenue impact to be a reduction of approximately $24 million. At this time, the Company has not fully completed its review and the expected financial impact of the restatement described above is preliminary and subject to change. The Company cannot predict the aggregate amount of revenue that will ultimately be restated, whether additional periods beyond those referenced above will be affected, and the final outcome or timing of the Company's filing of restated financial statements for the affected annual and quarterly periods. Until the full magnitude of these transactions is analyzed and understood, the Company cannot provide forward guidance, and expects financial results for the second half and full year 2019 will be materially below current analysts’ estimates. Pareteum has achieved a significant business transformation over the last few years, including the completion and integration of two large acquisitions, Artilium and iPass. The Company recently discovered internal control issues related to the accuracy and timing of the recognition of revenue. The Company is undertaking a financial review and is taking proactive steps to improve the oversight and controls associated with customer transactions. (Emphasis added.) 40. On this news, the Company’s stock price fell $0.4401, or nearly 60%, to close at $0.2992 on October 22, 2019, on unusually heavy trading volume. CLASS ACTION ALLEGATIONS 41. 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 Pareteum securities between March 12, 2019 and October 21, 2019, 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. 42. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, Pareteum’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 Pareteum 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 Pareteum 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. 43. 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. 44. 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. 45. 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 Pareteum; and (c) to what extent the members of the Class have sustained damages and the proper measure of damages. 46. 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 47. The market for Pareteum’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, Pareteum’s securities traded at artificially inflated prices during the Class Period. Plaintiff and other members of the Class purchased or otherwise acquired Pareteum’s securities relying upon the integrity of the market price of the Company’s securities and market information relating to Pareteum, and have been damaged thereby. 48. During the Class Period, Defendants materially misled the investing public, thereby inflating the price of Pareteum’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 Pareteum’s business, operations, and prospects as alleged herein. 49. 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 Pareteum’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 50. Defendants’ wrongful conduct, as alleged herein, directly and proximately caused the economic loss suffered by Plaintiff and the Class. 51. During the Class Period, Plaintiff and the Class purchased Pareteum’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 52. 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 Pareteum, their control over, and/or receipt and/or modification of Pareteum’s allegedly materially misleading misstatements and/or their associations with the Company which made them privy to confidential proprietary information concerning Pareteum, participated in the fraudulent scheme alleged herein. APPLICABILITY OF PRESUMPTION OF RELIANCE (FRAUD-ON-THE-MARKET DOCTRINE) 53. The market for Pareteum’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, Pareteum’s securities traded at artificially inflated prices during the Class Period. On March 18, 2019, the Company’s share price closed at a Class Period high of $5.70 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 Pareteum’s securities and market information relating to Pareteum, and have been damaged thereby. 54. During the Class Period, the artificial inflation of Pareteum’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 Pareteum’s business, prospects, and operations. These material misstatements and/or omissions created an unrealistically positive assessment of Pareteum 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. 55. At all relevant times, the market for Pareteum’s securities was an efficient market for the following reasons, among others: (a) Pareteum 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, Pareteum filed periodic public reports with the SEC and/or the NASDAQ; (c) Pareteum 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) Pareteum 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. 56. As a result of the foregoing, the market for Pareteum’s securities promptly digested current information regarding Pareteum from all publicly available sources and reflected such information in Pareteum’s share price. Under these circumstances, all purchasers of Pareteum’s securities during the Class Period suffered similar injury through their purchase of Pareteum’s securities at artificially inflated prices and a presumption of reliance applies. 57. 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 58. 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 Pareteum 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 59. Plaintiff repeats and re-alleges each and every allegation contained above as if fully set forth herein. 60. 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 Pareteum’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. 61. 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 Pareteum’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. 62. 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 Pareteum’s financial well-being and prospects, as specified herein. 63. 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 Pareteum’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 Pareteum 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. 64. 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. 65. 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 Pareteum’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. 66. 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 Pareteum’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 Pareteum’s securities during the Class Period at artificially high prices and were damaged thereby. 67. 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 Pareteum was experiencing, which were not disclosed by Defendants, Plaintiff and other members of the Class would not have purchased or otherwise acquired their Pareteum 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. 68. By virtue of the foregoing, Defendants violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. 69. 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 70. Plaintiff repeats and re-alleges each and every allegation contained above as if fully set forth herein. 71. Individual Defendants acted as controlling persons of Pareteum 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. 72. 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 73. As set forth above, Pareteum 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: October 22, 2019 GLANCY PRONGAY & MURRAY LLP By: s/ Gregory B. Linkh Gregory B. Linkh (GL-0477) Lesley F. Portnoy (LP-1941) 230 Park Ave., Suite 530 New York, New York 10169 Telephone: (212) 682-5340 Facsimile: (212) 884-0988 Email: glinkh@glancylaw.com lportnoy@glancylaw.com -and- GLANCY PRONGAY & MURRAY LLP Lionel Z. Glancy 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 Email: info@glancylaw.com Attorneys for Plaintiff Kevin O’Brien ���������� SWORN CERTIFICATION OF PLAINTIFF PARETEUM CORPORATION SECURITIES LITIGATION I, Kevin O’Brien , certify that: 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 the Pareteum Corporation 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 Pareteum Corporation 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. 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. ________________ _________________________________________ Date Kevin O’Brien Kevin O'Brien's Transactions in Pareteum Corporation (TEUM) Date Transaction Type Quantity Unit Price 6/19/2019 Bought 2,000 $2.8199

securities

zQYnM4cBD5gMZwczN-fi

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA WILLIAM C. STEPPACHER, JR., Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. Case No. CLASS ACTION COMPLAINT JURY TRIAL DEMANDED ALFI, INC., PAUL ANTONIO PEREIRA, DENNIS MCINTOSH, JOHN M. COOK, II, PETER BORDES, JIM LEE, JUSTIN ELKOURI, ALLISON FICKEN, FRANK SMITH, and RICHARD MOWSER, Defendants. Plaintiff William C. Steppacher, Jr. (“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 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 Alfi, Inc. (“Alfi” 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. 1 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: (a) Alfi common stock or warrants pursuant and/or traceable to the Offering Documents (defined below) issued in connection with the Company’s initial public offering conducted on or about May 4, 2021 (the “IPO” or “Offering”); and/or (b) Alfi securities between May 4, 2021 and November 15, 2021, both dates inclusive (the “Class Period”). Plaintiff pursues claims against the Defendants under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). 2. Alfi provides interactive artificial intelligence and machine learning software solutions. The Company was led by, among other management, Chief Executive Officer (“CEO”) Paul Antonio Pereira (“P. Pereira”), Chief Technology Officer (“CTO”) Charles Raglan Pereira (“C. Pereira”), and Chief Financial Officer (“CFO”) Dennis McIntosh (“McIntosh”). 3. On January 8, 2021, Alfi filed a registration statement on Form S-1 with the SEC in connection with the IPO, which, after several amendments, was declared effective by the SEC on May 3, 2021 (the “Registration Statement”). 4. On or about May 4, 2021, pursuant to the Registration Statement, Alfi’s common stock and warrants began trading on the NASDAQ Capital Market (“NASDAQ”) under the trading symbols “ALF” and “ALFIW”, respectively. 5. On May 5, 2021, Alfi filed a prospectus on Form 424B4 with the SEC in connection with the IPO, which formed part of the Registration Statement (the “Prospectus” and, together with the Registration Statement, the “Offering Documents”). 2 6. Pursuant to the Offering Documents, Alfi conducted the IPO, selling approximately 3.7 million shares of common stock, and approximately 3.7 million warrants, to the public at the Offering price of $4.15 per both share and warrant for approximate proceeds to the Company of $14 million after applicable underwriting discounts and commissions, and before expenses. 7. The Offering Documents were negligently prepared and, as a result, contained untrue statements of material fact or omitted to state other facts necessary to make the statements made not misleading and were not prepared in accordance with the rules and regulations governing their preparation. Additionally, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operations, and compliance policies. Specifically, the Offering Documents and Defendants made false and/or misleading statements and/or failed to disclose that: (i) Alfi maintained deficient disclosure controls and procedures and internal control over financial reporting; (ii) as a result, the Company and its employees could and did engage in corporate transactions and other matters without sufficient and appropriate consultation with or approval by the Company’s Board of Directors (the “Board”); (iii) all the foregoing increased the risk of internal and regulatory investigations into the Company and its employees; (iv) all the foregoing, once revealed, was likely to have a material negative impact on the Company’s reputation, financial condition, and ability to timely file periodic reports with the SEC; and (v) as a result, the Company’s public statements were materially false and misleading at all relevant times. 8. On October 28, 2021, Alfi disclosed in an SEC filing that, on October 22, 2021, the Board had placed P. Pereira, C. Pereira, and McIntosh “on paid administrative leave and authorized an independent internal investigation regarding certain corporate transactions and other matters.” That filing further disclosed, among other changes, that on October 22, 2021, the Board had 3 appointed a new interim CEO and Chairman of the Board, and that “[o]n October 28, 2021, Mr. C. Pereira’s employment with the Company was terminated.” 9. On this news, Alfi’s stock price fell $1.24 per share, or 21.91%, to close at $4.42 per share on October 29, 2021. 10. On November 1, 2021, Alfi disclosed in another SEC filing, among other matters, that the Company’s Chair of the Audit Committee had resigned from the Board, and details concerning the corporate transactions and matters that had precipitated the internal investigation into P. Pereira, C. Pereira, and McIntosh. According to that filing, the internal investigation resulted from “the Company’s purchase of a condominium for a purchase price of approximately $1.1 million” and “the Company’s commitment to sponsor a sports tournament in the amount of $640,000,” both of which “were undertaken by the Company’s management without sufficient and appropriate consultation with or approval by the Board.” 11. Then, on November 15, 2021, Alfi disclosed that it “received a letter from the staff of the [SEC] indicating that the Company, its affiliates and agents may possess documents and data relevant to an ongoing investigation being conducted by the staff of the SEC” and “that such documents and data should be reasonably preserved and retained until further notice.” According to Alfi, “[t]he materials to be preserved and retained include documents and data created on or after April 1, 2018 that[,]” among other things, “were created, modified or accessed by certain named former and current officers and directors of the Company or any other officer or director of the Company” or “relate or refer to the condominium or the sports tournament sponsorship identified in the Company’s Current Report on Form 8-K filed on November 1, 2021, or financial reporting and disclosure controls, policies or procedures.” 4 12. Also on November 15, 2021, Alfi announced “that Louis A. Almerini, CPA, has been appointed by the [Board] to serve as interim [CFO], effective November 8, 2021.” 13. Finally, on November 16, 2021, Alfi filed a notice of its inability to timely file its quarterly report on Form 10-Q with the SEC for the quarter ended September 30, 2021 (the “3Q21 10-Q”). That filing cited, inter alia, “recent changes in the Company’s [CEO] and [CFO] and in the Chair of the Audit Committee” of the Board, as well as needing “a new independent registered public accounting firm,” as reasons for the Company’s inability to timely file the 3Q21 10-Q. 14. Following these disclosures, the Company’s stock price fell $0.24 per share, or 5.21%, to close at $4.37 per share on November 16, 2021. 15. As of the time this Complaint was filed, the price of Alfi common stock and warrants were trading below the $4.15 per share Offering price, damaging investors. 16. 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 17. The claims asserted herein arise under and pursuant to Sections 11 and 15 of the Securities Act (15 U.S.C. §§ 77k and 77o), and 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). 18. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. § 1331, Section 22 of the Securities Act (15 U.S.C. § 77v), and Section 27 of the Exchange Act (15 U.S.C. § 78aa). 5 19. Venue is proper in this Judicial District pursuant to Section 28 U.S.C. § 1391(b) and Section 27 of the Exchange Act (15 U.S.C. § 78aa(c)). Alfi 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. 20. 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 21. Plaintiff purchased or otherwise acquired Alfi common stock or warrants pursuant and/or traceable to the Offering Documents issued in connection with the IPO, and/or Alfi 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. Plaintiff attaches his Certification hereto with Schedule A of transactions. 22. Defendant Alfi is a Delaware corporation with principal executive offices located at 429 Lenox Avenue, Suite 547, Miami Beach, Florida. Alfi’s common stock and warrants trade in an efficient market on the NASDAQ under the trading symbols “ALF” and “ALFIW”, respectively. 23. Defendant P. Pereira served as Alfi’s Chairman of the Board, President, and CEO from before the start of the Class Period to October 22, 2021. P. Pereira is also a co-founder of the Company. P. Pereira signed or authorized the signing of the Registration Statement filed with the SEC. 6 24. Defendant McIntosh served as Alfi’s CFO and Treasurer from before the start of the Class Period to November 8, 2021. McIntosh signed or authorized the signing of the Registration Statement filed with the SEC. 25. Defendants P. Pereira and McIntosh are sometimes referred to herein collectively as the “Exchange Act Individual Defendants.” 26. The Exchange Act Individual Defendants possessed the power and authority to control the contents of Alfi’s SEC filings, press releases, and other market communications. The Exchange Act Individual Defendants were provided with copies of Alfi’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 Alfi, and their access to material information available to them but not to the public, the Exchange Act 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 Exchange Act Individual Defendants are liable for the false statements and omissions pleaded herein. 27. Alfi and the Exchange Act Individual Defendants are sometimes referred to herein collectively as the “Exchange Act Defendants.” 28. Defendant John M. Cook, II (“Cook”) has served as Alfi’s Chief Business Development Officer at all relevant times. Cook also served as a Director of the Company at the time of the IPO. Cook signed or authorized the signing of the Registration Statement filed with the SEC. 7 29. Defendant Peter Bordes (“Bordes”) has served as a Director of Alfi at all relevant times. Bordes has also served as the Company’s Interim CEO since October 22, 2021. Bordes signed or authorized the signing of the Registration Statement filed with the SEC. 30. Defendant Jim Lee (“Lee”) has served as a Director of Alfi at all relevant times. Lee has also served as the Company’s Chairman of the Board since October 22, 2021. Lee signed or authorized the signing of the Registration Statement filed with the SEC. 31. Defendant Justin Elkouri (“Elkouri”) served as a Director of Alfi at the time of the IPO. Elkouri signed or authorized the signing of the Registration Statement filed with the SEC. 32. Defendant Allison Ficken (“Ficken”) has served as a Director of Alfi at all relevant times. Ficken signed or authorized the signing of the Registration Statement filed with the SEC. 33. Defendant Frank Smith (“Smith”) has served as a Director of Alfi at all relevant times. Smith signed or authorized the signing of the Registration Statement filed with the SEC. 34. Defendant Richard Mowser (“Mowser”) served as a Director of Alfi at the time of the IPO. Mowser signed or authorized the signing of the Registration Statement filed with the 35. The Exchange Act Individual Defendants and Defendants Cook, Bordes, Lee, Elkouri, Ficken, Smith, and Mowser are sometimes referred to herein collectively as the “Securities Act Individual Defendants.” 36. As directors, executive officers, and/or major shareholders of the Company, the Securities Act Individual Defendants participated in the solicitation and sale of Alfi common stock and warrants in the IPO for their own benefit and the benefit of the Company. The Securities Act Individual Defendants were key members of the IPO working group and executives of the Company who pitched investors to purchase the shares sold in the IPO. 8 37. Alfi and the Securities Act Individual Defendants are sometimes referred to herein collectively as the “Securities Act Defendants.” 38. The Exchange Act Defendants and the Securities Act Defendants are sometimes collectively, in whole or in part, referred to herein as “Defendants.” SUBSTANTIVE ALLEGATIONS Background 39. Alfi provides interactive artificial intelligence and machine learning software solutions. The Company was led by, among other management, CEO P. Pereira, CTO C. Pereira, and CFO McIntosh. 40. On January 8, 2021, Alfi filed the Registration Statement on Form S-1 with the SEC in connection with the IPO, which, after several amendments, was declared effective by the SEC on May 3, 2021. 41. On or about May 4, 2021, pursuant to the Registration Statement, Alfi’s common stock and warrants began trading on the NASDAQ under the trading symbols “ALF” and “ALFIW”, respectively. 42. On May 5, 2021, Alfi filed the Prospectus on Form 424B4 with the SEC in connection with the IPO, which formed part of the Registration Statement. 43. Pursuant to the Offering Documents, Alfi conducted the IPO, selling approximately 3.7 million shares of common stock, and approximately 3.7 million warrants, to the public at the Offering price of $4.15 per both share and warrant for approximate proceeds to the Company of $14 million after applicable underwriting discounts and commissions, and before expenses. 9 Materially False and Misleading Statements Issued in the Offering Documents 44. With respect to the Company’s disclosure controls and procedures, the Offering Documents assured investors, in relevant part: Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. 45. Similarly, with respect to Alfi’s internal control over financial reporting, the Offering Documents assured investors, in relevant part, that “[o]ur internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles[,]” and that “[i]n connection with this offering, we intend to begin the process of documenting, reviewing and improving our internal controls and procedures for compliance with Section 404 of the Sarbanes-Oxley Act, which will require annual management assessment of the effectiveness of our internal control over financial reporting.” 46. The Offering Documents also represented that “[t]he roles of [CEO], President and Chairman of [the Board] are currently performed by the same person because we do not have a policy regarding the separation of these roles,” although the Board “believes that it is in the best interests of the Company and our stockholders to make that determination from time to time based upon the position and direction of the Company and the membership of [the Board]”; that the Board “has determined that our leadership structure is appropriate for the Company and our stockholders as it helps to ensure that the [Board] and management act with a common purpose and provides a single, clear chain of command to execute our strategic initiatives and business plans”; and that the Board “believes that a combined role of [CEO], President and Chairman is 10 better positioned to act as a bridge between management and [the Board], facilitating the regular flow of information.” 47. Additionally, the Offering Documents stated that “[w]e are committed to having sound corporate governance principles, which are essential to running our business efficiently and maintaining our integrity in the marketplace”; that “[w]e understand that corporate governance practices change and evolve over time, and we seek to adopt and use practices that we believe will be of value to our stockholders and will positively aid in the governance of the Company”; that, “[t]o that end, we regularly review our corporate governance policies and practices and compare them to the practices of other peer institutions and public companies”; and that “[w]e will continue to monitor emerging developments in corporate governance and enhance our policies and procedures when required or when our board determines that it would benefit our Company and our stockholders.” 48. The statements referenced in ¶¶ 44-47 were materially false and misleading because the Offering Documents were negligently prepared and, as a result, contained untrue statements of material fact or omitted to state other facts necessary to make the statements made not misleading and were not prepared in accordance with the rules and regulations governing their preparation. Specifically, the Offering Documents made false and/or misleading statements and/or failed to disclose that: (i) Alfi maintained deficient disclosure controls and procedures and internal control over financial reporting; (ii) as a result, the Company and its employees could and did engage in corporate transactions and other matters without sufficient and appropriate consultation with or approval by the Board; (iii) all the foregoing increased the risk of internal and regulatory investigations into the Company and its employees; (iv) all the foregoing, once revealed, was likely to have a material negative impact on the Company’s reputation, financial condition, and ability 11 to timely file periodic reports with the SEC; and (v) as a result, the Offering Documents were materially false and/or misleading and failed to state information required to be stated therein. Materially False and Misleading Statements Issued During the Class Period 49. The Class Period begins on May 4, 2021, when Alfi’s common stock and warrants began publicly trading on the NASDAQ pursuant to the materially false or misleading statements or omissions in the Offering Documents, as referenced in ¶¶ 44-47, supra. 50. On June 10, 2021, Alfi filed a quarterly report on Form 10-Q with the SEC, reporting the Company’s financial and operating results for the quarter ended March 31, 2021 (the “1Q21 10-Q”). With respect to Alfi’s disclosure controls and procedures, the 1Q21 10-Q assured investors, in relevant part: [The Exchange Act Individual Defendants] evaluated the effectiveness of our disclosure controls and procedures . . . as of March 31, 2021 (the “Evaluation Date”). Based upon that evaluation, the [Exchange Act Individual Defendants] concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) are recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) are accumulated and communicated to management, specifically [the Exchange Act Individual Defendants], as appropriate to allow timely decisions regarding required disclosure[.] 51. The 1Q21 10-Q also represented that “[t]here was no change in our internal control over financial reporting . . . that occurred during the fiscal quarter ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.” 52. Appended as exhibits to the 1Q21 10-Q were signed certifications pursuant to the Sarbanes-Oxley Act of 2002 (“SOX”), wherein the Exchange Act Individual Defendants certified that “[t]he [1Q21 10-Q] fully complies with the requirements of Section 13(a) or 15(d) of the 12 Securities Exchange Act of 1934” and that “[t]he information contained in the [1Q21 10-Q] fairly presents, in all material respects, the financial condition and result of operations of the Company.” 53. On August 16, 2021, Alfi filed a quarterly report on Form 10-Q with the SEC, reporting the Company’s financial and operating results for the quarter ended June 30, 2021 (the “2Q21 10-Q”). The 2Q21 10-Q contained substantively the same statements as referenced in ¶¶ 50-51, supra, regarding the review and effectiveness of the Company’s disclosure controls and procedures, and that there were no changes in Alfi’s internal control over financial reporting during the quarter that materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting. 54. The 2Q21 10-Q also noted the purchase of an “Office Condo,” stating that “[t]he Company signed a contract to acquire additional office space for $1,100,000 in Miami Beach, FL on July 12, 2021[,]” the purchase of which “is expected to close late August.” 55. Appended as exhibits to the 2Q21 10-Q were substantively the same SOX certifications as referenced in ¶ 52, supra, signed by the Exchange Act Individual Defendants. 56. The statements referenced in ¶¶ 49-55 were materially false and misleading because the Exchange Act 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, the Exchange Act Defendants made false and/or misleading statements and/or failed to disclose that: (i) Alfi maintained deficient disclosure controls and procedures and internal control over financial reporting; (ii) as a result, the Company and its employees could and did engage in corporate transactions and other matters without sufficient and appropriate consultation with or approval by the Board; (iii) all the foregoing increased the risk of internal and regulatory investigations into the Company and its employees; (iv) all the foregoing, once revealed, was likely 13 to have a material negative impact on the Company’s reputation, financial condition, and ability to timely file periodic reports with the SEC; and (v) as a result, the Company’s public statements were materially false and misleading at all relevant times. The Truth Begins to Emerge 57. On October 28, 2021, during after-market hours, Alfi filed a current report on Form 8-K with the SEC, disclosing that, on October 22, 2021, the Board had placed P. Pereira, C. Pereira, and McIntosh “on paid administrative leave and authorized an independent internal investigation regarding certain corporate transactions and other matters.” That Form 8-K further disclosed, in relevant part, that “[o]n October 22, 2021, the Board elected [Defendant] Bordes . . . to serve as interim [CEO]”; that, “[o]n October 22, 2021, the Board elected [Defendant] Lee . . . to serve as Chairman of the Board, replacing [Defendant] P. Pereira in such role”; that, “[o]n October 27, 2021, the Board appointed David Gardner, the Company’s Vice President of Technology, to serve as the Company’s [CTO] effective immediately, replacing Mr. C. Pereira in such role”; and that, “[o]n October 28, 2021, Mr. C. Pereira’s employment with the Company was terminated.” 58. On this news, Alfi’s stock price fell $1.24 per share, or 21.91%, to close at $4.42 per share on October 29, 2021. Despite this decline in the Company’s stock price, Alfi securities continued to trade at artificially inflated prices throughout the remainder of the Class Period because of the Exchange Act Defendants’ continued misstatements and omissions regarding the likely consequences of the internal investigation into the conduct of P. Pereira, C. Pereira, and McIntosh. 59. For example, on November 1, 2021, Alfi filed another current report on Form 8-K with the SEC, disclosing, among other things, that the Company’s Chair of the Audit Committee had resigned from the Board, and details concerning the corporate transactions and matters that 14 had precipitated the internal investigation into P. Pereira, C. Pereira, and McIntosh. Specifically, with respect to Alfi’s internal investigation, that Form 8-K stated, in relevant part: The corporate transactions that precipitated the Board’s actions to place the executives on paid administrative leave and to authorize the independent internal investigation included: (i) the Company’s purchase of a condominium for a purchase price of approximately $1.1 million and the related erroneously certified corporate resolution regarding the unanimous approval by the Board and the Company’s stockholders of such purchase, and (ii) the Company’s commitment to sponsor a sports tournament in the amount of $640,000, a portion of which was payable through the issuance by the Company of unregistered shares of the Company’s common stock, and as to which the Company would be obligated to pay additional cash amounts if the net proceeds received by the recipient upon the sale of such shares are less than an amount specified in the contract and for which the Company would be given a credit toward sponsorship or attendance at events in the future if the net proceeds received by the recipient upon the sale of such shares exceed an amount specified in the contract. (The Company’s entry into the contract for the purchase of the condominium was disclosed in the [2Q21 10-Q].) These transactions were undertaken by the Company’s management without sufficient and appropriate consultation with or approval by the Board. The independent internal investigation is expected to investigate the details of the above-noted transactions and any other matters that come to the Board’s attention regarding actions taken by the executives in their management of the Company. One of the goals of the independent internal investigation is to help the Company in developing improved corporate governance policies and procedures to ensure that the Board is provided the opportunity to consider and provide appropriate input to the Company’s management on significant corporate transactions. If, during the course of the independent internal investigation, the Board uncovers any wrongdoing, it will take appropriate action with respect to the person or persons responsible therefor. (Emphases added.) 60. The statements referenced in ¶¶ 57 and 59 were materially false and misleading because the Exchange Act 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, the Exchange Act Defendants made false and/or misleading statements and/or failed to disclose that: (i) Alfi faced an increased risk of regulatory investigation into the Company and its employees; (ii) the foregoing, as well as the Company’s internal investigation 15 into P. Pereira, C. Pereira, and McIntosh, were likely to have a material negative impact on the Company’s reputation, financial condition, and ability to timely file periodic reports with the SEC; and (iii) as a result, the Company’s public statements were materially false and misleading at all relevant times. The Truth Fully Emerges 61. On November 15, 2021, during after-market hours, Alfi filed a current report on Form 8-K with the SEC, disclosing that “[o]n November 9, 2021, the Company received a letter from the staff of the [SEC] indicating that the Company, its affiliates and agents may possess documents and data relevant to an ongoing investigation being conducted by the staff of the SEC” and “that such documents and data should be reasonably preserved and retained until further notice.” The same filing also disclosed, in relevant part: The materials to be preserved and retained include documents and data created on or after April 1, 2018 that: (i) were created, modified or accessed by certain named former and current officers and directors of the Company or any other officer or director of the Company; or (ii) relate or refer to the condominium or the sports tournament sponsorship identified in the Company’s Current Report on Form 8-K filed on November 1, 2021, or financial reporting and disclosure controls, policies or procedures. The Company intends to cooperate fully with the SEC in this matter. 62. Also on November 15, 2021, during after-market hours, Alfi issued a press release announcing “that Louis A. Almerini, CPA, has been appointed by the [Board] to serve as interim [CFO], effective November 8, 2021.” 63. Then, on November 16, 2021, Alfi filed a notification of late filing on Form 12b- 25 with the SEC, disclosing the Company’s inability to timely file the 3Q21 10-Q with the SEC because of, inter alia, recent management changes related to the investigation into P. Pereira, C. Pereira, and McIntosh, the resignation of the Company’s Chair of the Audit Committee from the 16 Board, and the resignation of Alfi’s independent registered public accounting firm. Specifically, that that filing advised, in relevant part: Alfi . . . is unable, without unreasonable effort or expense, to file its [3Q21 10-Q] by the November 15, 2021 filing date applicable to smaller reporting companies: (i) due to recent changes in the Company’s [CEO] and [CFO] and in the Chair of the Audit Committee (the “Audit Committee”) of the [Board]; and (ii) because the Company has not yet engaged a new independent registered public accounting firm, which is needed to provide the required review of the Company’s financial statements to be filed as part of the [3Q21 10-Q]. As previously disclosed by the Company in its filings with the [SEC], on: (i) October 22, 2021, the Board placed [Defendant P.] Pereira, the Company’s President and [CEO], and [Defendant] McIntosh, the Company’s [CFO] and Treasurer, on paid administrative leave and elected [Defendant] Bordes, a member of the Board, to serve as the Company’s interim [CEO]; (ii) October 27, 2021, [Defendant] Mowser, a director of the Company and Chair of the Audit Committee, resigned as a member of the Board; (iii) October 29, 2021, the Company’s then-serving independent registered public accounting firm resigned; (iv) November 1, 2021, the Board appointed Allen Capsuto to serve as a director of the Company and as Chair of the Audit Committee; and (v) November 8, 2021, the Board appointed Louis A. Almerini to serve as the Company’s interim [CFO]. The Audit Committee is in the process of selecting and engaging a new independent registered public accounting firm. 64. Following these disclosures, the Company’s stock price fell $0.24 per share, or 5.21%, to close at $4.37 per share on November 16, 2021. 65. As of the time this Complaint was filed, the price of Alfi common stock and warrants were trading below the $4.15 per share Offering price, damaging investors. 66. 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 67. 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 Alfi common stock or warrants pursuant and/or 17 traceable to the Offering Documents issued in connection with the IPO, and/or Alfi securities during the Class Period; and 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. 68. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, Alfi 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 Alfi 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. 69. 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. 70. 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. 71. 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; 18 • whether statements made by Defendants to the investing public in the Offering Documents for the IPO, or during the Class Period, misrepresented material facts about the business, operations and management of Alfi; • whether the Securities Act Individual Defendants negligently prepared the Offering Documents for the IPO and, as a result, the Offering Documents contained untrue statements of material fact or omitted to state other facts necessary to make the statements made not misleading, and were not prepared in accordance with the rules and regulations governing their preparation; • whether the Exchange Act Individual Defendants caused Alfi to issue false and misleading financial statements during the Class Period; • whether certain Defendants acted knowingly or recklessly in issuing false and misleading financial statements; • whether the prices of Alfi 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. 72. 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. 73. 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; • Alfi securities are traded in an efficient market; • the Company’s shares were liquid and traded with moderate to heavy volume during the Class Period; 19 • 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 Alfi 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. 74. Based upon the foregoing, Plaintiff and the members of the Class are entitled to a presumption of reliance upon the integrity of the market. 75. 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 the Exchange Act Defendants) 76. Plaintiff repeats and re-alleges each and every allegation contained above as if fully set forth herein. 77. This Count is asserted against the Exchange Act 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. 78. During the Class Period, the Exchange Act 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 20 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 Alfi securities; and (iii) cause Plaintiff and other members of the Class to purchase or otherwise acquire Alfi securities and options at artificially inflated prices. In furtherance of this unlawful scheme, plan and course of conduct, the Exchange Act Defendants, and each of them, took the actions set forth herein. 79. Pursuant to the above plan, scheme, conspiracy, and course of conduct, each of the Exchange Act 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 Alfi 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 Alfi’s finances and business prospects. 80. By virtue of their positions at Alfi, the Exchange Act 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, the Exchange Act 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 Exchange Act Defendants. Said acts and omissions of the Exchange Act Defendants were committed willfully or with reckless disregard for the truth. In addition, each of the Exchange Act Defendants knew 21 or recklessly disregarded that material facts were being misrepresented or omitted as described 81. Information showing that the Exchange Act Defendants acted knowingly or with reckless disregard for the truth is peculiarly within the Exchange Act Defendants’ knowledge and control. As the senior managers and/or directors of Alfi, the Exchange Act Individual Defendants had knowledge of the details of Alfi’s internal affairs. 82. The Exchange Act Individual Defendants are liable both directly and indirectly for the wrongs complained of herein. Because of their positions of control and authority, the Exchange Act Individual Defendants were able to and did, directly or indirectly, control the content of the statements of Alfi. As officers and/or directors of a publicly-held company, the Exchange Act Individual Defendants had a duty to disseminate timely, accurate, and truthful information with respect to Alfi’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 Alfi securities was artificially inflated throughout the Class Period. In ignorance of the adverse facts concerning Alfi’s business and financial condition which were concealed by the Exchange Act Defendants, Plaintiff and the other members of the Class purchased or otherwise acquired Alfi 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 the Exchange Act Defendants, and were damaged thereby. 83. During the Class Period, Alfi 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 Exchange Act Defendants made, issued or caused to be disseminated, or relying upon the integrity of the market, purchased or otherwise acquired shares 22 of Alfi securities at prices artificially inflated by the Exchange Act 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 Alfi securities was substantially lower than the prices paid by Plaintiff and the other members of the Class. The market price of Alfi securities declined sharply upon public disclosure of the facts alleged herein to the injury of Plaintiff and Class members. 84. By reason of the conduct alleged herein, the Exchange Act Defendants knowingly or recklessly, directly or indirectly, have violated Section 10(b) of the Exchange Act and Rule 10b- 5 promulgated thereunder. 85. As a direct and proximate result of the Exchange Act 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 public. COUNT II (Violations of Section 20(a) of the Exchange Act Against the Exchange Act Individual Defendants) 86. Plaintiff repeats and re-alleges each and every allegation contained in the foregoing paragraphs as if fully set forth herein. 87. During the Class Period, the Exchange Act Individual Defendants participated in the operation and management of Alfi, and conducted and participated, directly and indirectly, in the conduct of Alfi’s business affairs. Because of their senior positions, they knew the adverse 23 non-public information about Alfi’s misstatement of income and expenses and false financial statements. 88. As officers and/or directors of a publicly owned company, the Exchange Act Individual Defendants had a duty to disseminate accurate and truthful information with respect to Alfi’s financial condition and results of operations, and to correct promptly any public statements issued by Alfi which had become materially false or misleading. 89. Because of their positions of control and authority as senior officers, the Exchange Act Individual Defendants were able to, and did, control the contents of the various reports, press releases and public filings which Alfi disseminated in the marketplace during the Class Period concerning Alfi’s results of operations. Throughout the Class Period, the Exchange Act Individual Defendants exercised their power and authority to cause Alfi to engage in the wrongful acts complained of herein. The Exchange Act Individual Defendants, therefore, were “controlling persons” of Alfi 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 Alfi securities. 90. Each of the Exchange Act Individual Defendants, therefore, acted as a controlling person of Alfi. By reason of their senior management positions and/or being directors of Alfi, each of the Exchange Act Individual Defendants had the power to direct the actions of, and exercised the same to cause, Alfi to engage in the unlawful acts and conduct complained of herein. Each of the Exchange Act Individual Defendants exercised control over the general operations of Alfi 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. 24 91. By reason of the above conduct, the Exchange Act Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act for the violations committed by Alfi. COUNT III (Violations of Section 11 of the Securities Act Against the Securities Act Defendants) 92. Plaintiff repeats and incorporates paragraphs 1 through 75 contained above as if fully set forth herein, except any allegation of fraud, recklessness, or intentional misconduct. 93. This Count is brought pursuant to Section 11 of the Securities Act, 15 U.S.C. § 77k, on behalf of the Class, against Defendants. 94. The Offering Documents for the IPO were inaccurate and misleading, contained untrue statements of material facts, omitted to state other facts necessary to make the statements made not misleading, and omitted to state material facts required to be stated therein. 95. Alfi is the registrant for the IPO. Defendants named herein were responsible for the contents and dissemination of the Offering Documents. 96. As issuer of the shares, Alfi is strictly liable to Plaintiff and the Class for the misstatements and omissions in the Offering Documents. 97. None of the Defendants named herein made a reasonable investigation or possessed reasonable grounds for the belief that the statements contained in the Offering Documents were true and without omissions of any material facts and were not misleading. 98. By reasons of the conduct herein alleged, each Defendant violated, and/or controlled a person who violated Section 11 of the Securities Act. 99. Plaintiff acquired Alfi shares pursuant and/or traceable to the Offering Documents for the IPO. 100. Plaintiff and the Class have sustained damages. The value of Alfi common stock and warrants has declined substantially subsequent to and because of Defendants’ violations. 25 COUNT IV (Violations of Section 15 of the Securities Act Against the Securities Act Individual Defendants) 101. Plaintiff repeats and incorporates paragraphs 1 through 75 and 92 through 100 contained above as if fully set forth herein, except any allegation of fraud, recklessness, or intentional misconduct. 102. This Count is asserted against the Securities Act Individual Defendants and is based upon Section 15 of the Securities Act, 15 U.S.C. § 77o. 103. The Securities Act Individual Defendants, by virtue of their offices, directorship, and specific acts were, at the time of the wrongs alleged herein and as set forth herein, controlling persons of Alfi within the meaning of Section 15 of the Securities Act. The Securities Act Individual Defendants had the power and influence and exercised the same to cause Alfi to engage in the acts described herein. 104. The Securities Act Individual Defendants’ positions made them privy to and provided them with actual knowledge of the material facts concealed from Plaintiff and the Class. 105. By virtue of the conduct alleged herein, the Securities Act Individual Defendants are liable for the aforesaid wrongful conduct and are liable to Plaintiff and the Class for damages suffered. 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; 26 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: December 2, 2021 Respectfully submitted, KOMLOSSY LAW P.A. /s/ Emily C. Komlossy Emily Komlossy (FBN 7714) eck@komlossylaw.com 4700 Sheridan St., Suite J Hollywood, FL 33021 Phone: (954) 842-2021 Fax: (954) 416-6223 POMERANTZ LLP Gustavo F. Bruckner (pro hac vice application forthcoming) Thomas H. Przybylowski (pro hac vice application forthcoming) 600 Third Avenue New York, New York 10016 Telephone: (212) 661-1100 Facsimile: (212) 661-8665 gfbruckner@pomlaw.com tprzybylowski@pomlaw.com Attorneys for Plaintiff 27 Alfi, Inc. (ALF) William C. Steppacher, Jr. List of Purchases and Sales Transaction Number of Price Per Type Date Shares/Unit Share/Unit Purchase 6/15/2021 4,250 $6.0000 Purchase 8/11/2021 3,125 $8.0000 Purchase 10/22/2021 5,000 $5.5000 Sale 10/28/2021 (2,685) $4.8500 Sale 10/28/2021 (9,690) $4.6000 WILLIAM C. STEPPACHER, JR., individually ALFI, INC., PAUL ANTONIO PEREIRA, DEls (b) County ofResidence of First Listed Plaintiff Lackawanna County, PA County ofResidence ofFirst Listed Defendant (EXCEPTIN U.S. PLUNTIFF CASES) (IN US. PLAINTIFF CASES ONL3) NOTE: IN LAND CONDEMNATION CASES. USE THE LOCATION OF THE TRACT OF LAND INVOLVED. (C) Attomeys (Firm Name, Address, and Telephone Number) Attorneys (IKnown) Emily C. Komlossy, KOMLOSSY LAW, P.A., 4700 Sheridan St. Ste JU (d) Check County -tete WI A i .. _cton Arose: ii MIAMI- DADE 0 MONROE 0 BROWARD 0 PALM BEACH 0 MARTIN 1:1 ST LUCIE 0 LNDIAN RWER 0 OKEECHOBEE CI HIGHLANDS II. BASIS OF JURISDICTION (Place an "X" in One Box Only) III. CITIZENSHIP OF PRLNCIPAL PARTIES (Mace an "X" in One Boxfor Plaint(f) (For Diversity Cases Only) and One Boxfor Defendant) (2 1 U.S. Government il 3 Federal Question PTF DEF PTF DEF Plaintiff (U.S. Government Nor a Party) Citizen of This State 0 1 0 1 Incorporated or Principal Place 0 4 0 4 of Business In This State 0 2 U.S. Government 12 4 Diversity Citizen of Another State 0 2 0 2 Incorporated and Principal Place 0 5 0 5 Defendant (Indicate Cittenship ofParties in Item III) of Business In Another State Citizen or Subject of a 12 3 0 3 Foreign Nation 0 6 0 6 Foreign Country TV. NATURE OF SUIT (Place an "X" in One Box Only) Click here for Nature of Sint Codc Descriptions ,,,....,, „. CONTRACT TORTS „,,;.,.,,'Asigiii.J.,-L, FORFEITURE/PENALTY BANKRUPTCY OTHER STATUTES; ' 0 110 Insurance PERSONAL INJURY PERSONAL INJURY El 625 Drug Related Seizure 0 422 Appeal 28 USC 158 0 375 False Claims Act - of Propetty 21 USC 881 0 423 Withdrawal 0 376 Qui Tam(31 USC 12 120 Marine 12 310 Airplane El 365 Personal Injury 130 Miller Act 0 315 Airplane Product Product Liability 0 690 Other 28 USC 157 3729 (a)) 140 Negotiable Instrument Liability El 367 Health Care/ 12 400 State Reapportionment 0 150 Recovery ofOverpayment 0 320 Assault, Libel & Pharmaceutical PROPERTY RIGHTS 0 410 Antitrust & Enforcement ofludgment Slander Personal Injury 12 820 Copyrights 0 430 Banks and Banking El 151 Medicare Act 0 330 Federal EmployersProduct Liability 0 830 Patent 0 450 Conunerce ri 835 Patent - Abbiriated 12 460 Deportation 0 152 Recovery of Defaulted Liability 12 368 Asbestos Personal " New Drug Application 840 Trademark 1-1 470 Racketeer Influenced and Student Loans 0 340 Marine 880 Defend Trade Secrets '-' Comipt Organizations Act of 2016 Injury Product Liability 0 r-i 480 Consumer Credit (Excl. Veterans) 0 345 Marine Product LABOR SOCIAL SECURITY 1..-1 (15 USC 1681 or 1692) rl 485 Telephone Consumer 0 153 Recovery ofOverpayment Liability PERSONAL PROPERTY 0 7 I 0 Fair Labor Standards 0 861 HIA 11:015 if) '-' Protection Act (TCPA) of Veteran's Benefits 0 350 Motor Vehicle 0 370 Other Fraud Act 0 862 Black Lung (923) 0 490 Cable/Sat TV 0 160 Stockholders' Suits 0 355 Motor Vehicle 0 371 Truth in Lending 0 720 Labor/Mgmt. Relations 0 863 DIWC/D1WW (405(g)) 12 850 Securities/Commodities/ 0 190 Other Contract Product Liability 0 380 Other Personal p 740 Railway Labor Act 0 864 SSID Title XVI Exchange 0 195 Contract Product Liabilii\ 0 360 Other Personal Property Damage 0 751 Family and Medical 0 865 RSI (405(g)) 0 890 Other Statutory Actions. 0 196 Franchise Injury 12 385 Property Damage Leave Act 0 891 Agricultural Acts - Product Liability 0 790 Other Labor Litigation 0 893 Environmental Matters 12 362 Personal Injury Med. Malpractice 0 791 Empl. Ret. Inc. 0 895 Freedom ofInformation REAL PROPERTY CIVIL RIGHTS PRISONER PETITIONS Security Act L FEDERAL TAX SUITS Act O 210 Land Condemnation 0 440 Other Civil Rights Habeas Corpus: 0 870 Taxes (U S. Plaintiff 12 896 Arbitration O 220 Foreclosure 0 441 Voting 0 463 Alien Detainee or Defendant) 0 899 Administrative Procedure rt 510 Motions to Vacate ri 871 IRS-Third Party 26 USC Act/Review nr Appeal of 0 230 Rent Lease & Ejectment 0 442 Employment " Sentence " 7609 ,..., Agency Decision - O 240 Torts to Land in 443 Housing/Other: Li 950 Constitutionality of State "' Accommodations Statutes, • IMMIGRATION ••• 245 Tort Product Liability 0 445 Amer. Iv/Disabilities - 0 530 General ilt,: 290 All Other Real Property Employment 0 535 Death Penalty P 462 Naturalization Application 0 446 Amer wDisabilities - 0 540 Mandamus & Other 0 465 Other Immigration Other 0 550 Civil Rights Actions 0 448 Education 0 555 Prison Condition 560 Civil Detainee - 0 Conditions of Confinement V. ORIGIN (Place an "X" in One Box On1y) 11 1 Original o 2 Removed 0 3 Re-filed 0 4 Reinstated o 5 Transferred from 0 6 Multidistriel 0 7 Appeal to El 8 Multidistrict Proceeding from State (See VI or another district Litigation 1-6, Retnanded from - Direct Court below) Reopened (speci(y) Transfer District Judge Litigation i-v Appellate Court from Magistrate Judgment File VI. RELATED/ (See instructions): a) Re-filed Case OYES E NO b) Related Cases OYES 111 NO RE-FILED CASE(S) JUDGE: DOCKET NUMBER: Cite the U.S. Civil Statute under which you are filing and Write a Brief Statement ofCause (Do not citejurisdictional statutes unless diversity): VII. CAUSE OF ACTION Sections 11 and 15 of the Securities Act (15 U.S.C. §§ 77k and 77o), and Sections I 0(b) and 20(a) ofthe Exchanci LENGTH OF TRIAL via 14 days estimated (for both sides to try entire case) 41' UNDER F.R.C.P. 23 VIII. REQUESTED IN Ai CHECK IF THIS IS A CLASS ACTION DENUND S unknown CHECK YES only ifdemanded in complaint: COMPLAINT: JURY DEMAND: 111 Yes 0 No ABOVE INFORMATION IS TRUE & CORRECT TO THE BEST OF MY KNOW GE ' Y OF RECORD DATE / SIGNATURE OF ArI. The JS 44 civil cover sheet and the information contained herein neither replaces nor supplements the filings and service ofpleading or other papers as required by law, except as provided by local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Court for the purpose of initiating the civil docket sheet. Consequently, a civil cover sheet is submitted to the Clerk ofCourt for each civil complaint filed. The attorney filing a case should complete the form as follows: I. (a) Plaintiffs-Defendants. Enter names (last, first, middle initial) ofplaintiff and defendant. If the plaintiff or defendant is a government agency, use only the full name or standard abbreviations. Ifthe plaintiff or defendant is an official within a government agency, identify first the agency and then the official, giving both name and title. (b) County of Residence. For each civil case filed. except U.S. plaintiff cases, enter the name of the county where the first listed plaintiff resides at the time of filing. In U.S. plaintiff cases, enter the name of the county in which the first listed defendant resides at the time offiling. (NOTE: In land condemnation cases, the county of residence of the "defendanr is the location ofthe tract of land involved.) (c) Attorneys. Enter the firm name, address, telephone number. and attorney of record. If there are several attorneys, list them on an attachment, noting in this section "(see attachment). IL Jurisdiction. The basis ofjurisdiction is set forth under Rule 8(a), F.R.C.P., which requires that jurisdictions be shown in pleadings. Place an "V in one of the boxes. Ifthere is more than one basis ofjurisdiction, precedence is given in the order shown below. United States plaintiff. (1) Jurisdiction based on 28 U.S.C. 1345 and 1348. Suits by agencies and officers ofthe United States are included here. United States defendant. (2) When the plaintiff is suing the United States, its officers or agencies, place an "V in this box. Federal question. (3) This refers to suits under 28 U.S.C. 1331, where jurisdiction arises under the Constitution of the United States, an amendment to the Constitution, an act of Congress or a treaty of the United States. In cases where the U.S. is a party, the U.S. plaintiff or defendant code takes precedence, and box 1 or 2 should be marked. Diversity of citizenship. (4) This refers to suits under 28 U.S.C. 1332, where parties are citizens ofdifferent states. When Box 4 is checked, the citizenship ofthe different parties must be checked. (See Section 111 below: federal question actions take precedence over diversity cases.) III. Residence (citizenship) of Principal Parties. This section of the JS 44 is to be completed if diversity of citizenship was indicated above. Mark this section for each principal party. IV. Nature of Suit. Nature of Suit. Place an "V in the appropriate box. If there are multiple nature ofsuit codes associated with the case, pick the nature of suit code that is most applicable. Click here for: Nature of Suit Code Descriptions. V. Origin. Place an "V in one ofthe seven boxes. Original Proceedings. (1) Cases which originate in the United States district courts. Removed from State Court. (2) Proceedings initiated in state courts may be removed to the district courts under Title 28 U.S.C.. Section 1441. When the petition for removal is granted. check this box. Refilled (3) Attach copy of Order for Dismissal ofPrevious case. Also complete VI. Reinstated or Reopened. (4) Check this box for cases reinstated or reopened in the district court. Use the reopening date as the filing date. Transferred from Another District. (5) For cases transferred under Title 28 U.S.C. Section 1404(a). Do not use this for within district transfers or multidistrict Multidistrict Litigation. (6) Check this box when a multidistrict case is transferred into the district under authority ofTitle 28 U.S.C. Section 1407. When this box is checked, do not check (5) above. Appeal to District Judge from Magistrate Judgment. (7) Check this box for an appeal from a magistrate judge's decision. Remanded from Appellate Court. (8) Check this box ifremanded from Appellate Court. VL Related/Rerded Cases. This section ofthe JS 44 is used to reference related pending cases or re-filed cases. Insert the docket numbers and the corresponding judges name for such cases. VII. Cause of Action. Report the civil statute directly related to the cause of action and give a brief description of the cause. Do not cite jurisdictional statutes unless diversity. Example: U.S. Civil Statute: 47 USC 553 Brief Description: Unauthorized reception of cable service VIII. Requested in Complaint. Class Action. Place an "X" in this box ifyou are filing a class action under Rule 23, F.R.Cv.P. Demand. In this space enter the dollar amount (in thousands of dollars) being dernanded or indicate other demand such as a prelirninary injunction. Jury Demand. Check the appropriate box to indicate whether or not a jury is being demanded. Date and Attorney Signature. Date and sign the civil cover sheet. Ex. A to Civil Cover Sheet UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA WILLIAM C. STEPPACHER, JR., Case No. Individually and on Behalf ofAll Others Similarly Situated, CLASS ACTION COMPLAINT Plaintiff, v. I JURY TRIAL DEMANDED ALFI, INC., PAUL ANTONIO PEREIRA, DENNIS MCINTOSH, JOHN M. COOK, II, PETER BORDES, JIM LEE, JUSTIN ELKOURI, ALLISON FICKEN, FRANK SMITH, and RICHARD MOWSER, Defendants. AO 440 (Rev. 06/12) Summons in a Civil Action UNITED STATES DISTRICT COURT for the Southern District of Florida __________ District of __________ WILLIAM C. STEPPACHER, JR., Individually and on Beahlf of All Others Similarly Situated, Plaintiff(s) v. Civil Action No. ALFI, INC., PAUL ANTONIO PEREIRA, DENNIS MCINTOSH, JOHN M. COOK, II, PETER BORDES, JIM LEE, JUSTIN ELKOURI, ALLISON FICKEN, FRANK SMITH, and RICHARD MOWSER Defendant(s) ) ) ) ) ) ) ) ) ) ) ) ) SUMMONS IN A CIVIL ACTION To: (Defendant’s name and address) Peter Bordes c/o ALFI, Inc. 429 Lenox Ave., Suite 547 Miami Beach, FL 33139 A lawsuit has been filed against you. Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if you are the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ. P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney, whose name and address are: Emily C. Komlossy, Esq. KOMLOSSY LAW, P.A. 4700 Sheridan St., Suite J Hollywood, FL 33021 (954) 842-2021 eck@komlossylaw.com If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court. CLERK OF COURT Date: Signature of Clerk or Deputy Clerk PROOF OF SERVICE (This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l)) This summons for (name of individual and title, if any) was received by me on (date) . ’ I personally served the summons on the individual at (place) on (date) ; or ’ I left the summons at the individual’s residence or usual place of abode with (name) , a person of suitable age and discretion who resides there, on (date) , and mailed a copy to the individual’s last known address; or ’ I served the summons on (name of individual) , who is designated by law to accept service of process on behalf of (name of organization) on (date) ; or ’ I returned the summons unexecuted because ; or ’ Other (specify): My fees are $ for travel and $ for services, for a total of $ . 0.00 I declare under penalty of perjury that this information is true. Date: Server’s signature Printed name and title Server’s address Additional information regarding attempted service, etc: AO 440 (Rev. 06/12) Summons in a Civil Action UNITED STATES DISTRICT COURT for the Southern District of Florida __________ District of __________ WILLIAM C. STEPPACHER, JR., Individually and on Beahlf of All Others Similarly Situated, Plaintiff(s) v. Civil Action No. ALFI, INC., PAUL ANTONIO PEREIRA, DENNIS MCINTOSH, JOHN M. COOK, II, PETER BORDES, JIM LEE, JUSTIN ELKOURI, ALLISON FICKEN, FRANK SMITH, and RICHARD MOWSER Defendant(s) ) ) ) ) ) ) ) ) ) ) ) ) SUMMONS IN A CIVIL ACTION To: (Defendant’s name and address) ALFI, INC., c/o registered agent, John M. Cook, II 429 Lenox Ave., Suite 547 Miami Beach, FL 33139 A lawsuit has been filed against you. Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if you are the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ. P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney, whose name and address are: Emily C. Komlossy, Esq. KOMLOSSY LAW, P.A. 4700 Sheridan St., Suite J Hollywood, FL 33021 (954) 842-2021 eck@komlossylaw.com If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court. CLERK OF COURT Date: Signature of Clerk or Deputy Clerk PROOF OF SERVICE (This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l)) This summons for (name of individual and title, if any) was received by me on (date) . ’ I personally served the summons on the individual at (place) on (date) ; or ’ I left the summons at the individual’s residence or usual place of abode with (name) , a person of suitable age and discretion who resides there, on (date) , and mailed a copy to the individual’s last known address; or ’ I served the summons on (name of individual) , who is designated by law to accept service of process on behalf of (name of organization) on (date) ; or ’ I returned the summons unexecuted because ; or ’ Other (specify): My fees are $ for travel and $ for services, for a total of $ . 0.00 I declare under penalty of perjury that this information is true. Date: Server’s signature Printed name and title Server’s address Additional information regarding attempted service, etc: AO 440 (Rev. 06/12) Summons in a Civil Action UNITED STATES DISTRICT COURT for the Southern District of Florida __________ District of __________ WILLIAM C. STEPPACHER, JR., Individually and on Beahlf of All Others Similarly Situated, Plaintiff(s) v. Civil Action No. ALFI, INC., PAUL ANTONIO PEREIRA, DENNIS MCINTOSH, JOHN M. COOK, II, PETER BORDES, JIM LEE, JUSTIN ELKOURI, ALLISON FICKEN, FRANK SMITH, and RICHARD MOWSER Defendant(s) ) ) ) ) ) ) ) ) ) ) ) ) SUMMONS IN A CIVIL ACTION To: (Defendant’s name and address) John M. Cook, II c/o ALFI, Inc. 429 Lenox Ave., Suite 547 Miami Beach, FL 33139 A lawsuit has been filed against you. Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if you are the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ. P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney, whose name and address are: Emily C. Komlossy, Esq. KOMLOSSY LAW, P.A. 4700 Sheridan St., Suite J Hollywood, FL 33021 (954) 842-2021 eck@komlossylaw.com If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court. CLERK OF COURT Date: Signature of Clerk or Deputy Clerk PROOF OF SERVICE (This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l)) This summons for (name of individual and title, if any) was received by me on (date) . ’ I personally served the summons on the individual at (place) on (date) ; or ’ I left the summons at the individual’s residence or usual place of abode with (name) , a person of suitable age and discretion who resides there, on (date) , and mailed a copy to the individual’s last known address; or ’ I served the summons on (name of individual) , who is designated by law to accept service of process on behalf of (name of organization) on (date) ; or ’ I returned the summons unexecuted because ; or ’ Other (specify): My fees are $ for travel and $ for services, for a total of $ . 0.00 I declare under penalty of perjury that this information is true. Date: Server’s signature Printed name and title Server’s address Additional information regarding attempted service, etc: AO 440 (Rev. 06/12) Summons in a Civil Action UNITED STATES DISTRICT COURT for the Southern District of Florida __________ District of __________ WILLIAM C. STEPPACHER, JR., Individually and on Beahlf of All Others Similarly Situated, Plaintiff(s) v. Civil Action No. ALFI, INC., PAUL ANTONIO PEREIRA, DENNIS MCINTOSH, JOHN M. COOK, II, PETER BORDES, JIM LEE, JUSTIN ELKOURI, ALLISON FICKEN, FRANK SMITH, and RICHARD MOWSER Defendant(s) ) ) ) ) ) ) ) ) ) ) ) ) SUMMONS IN A CIVIL ACTION To: (Defendant’s name and address) Justin Elkouri c/o ALFI, Inc. 429 Lenox Ave., Suite 547 Miami Beach, FL 33139 A lawsuit has been filed against you. Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if you are the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ. P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney, whose name and address are: Emily C. Komlossy, Esq. KOMLOSSY LAW, P.A. 4700 Sheridan St., Suite J Hollywood, FL 33021 (954) 842-2021 eck@komlossylaw.com If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court. CLERK OF COURT Date: Signature of Clerk or Deputy Clerk PROOF OF SERVICE (This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l)) This summons for (name of individual and title, if any) was received by me on (date) . ’ I personally served the summons on the individual at (place) on (date) ; or ’ I left the summons at the individual’s residence or usual place of abode with (name) , a person of suitable age and discretion who resides there, on (date) , and mailed a copy to the individual’s last known address; or ’ I served the summons on (name of individual) , who is designated by law to accept service of process on behalf of (name of organization) on (date) ; or ’ I returned the summons unexecuted because ; or ’ Other (specify): My fees are $ for travel and $ for services, for a total of $ . 0.00 I declare under penalty of perjury that this information is true. Date: Server’s signature Printed name and title Server’s address Additional information regarding attempted service, etc: AO 440 (Rev. 06/12) Summons in a Civil Action UNITED STATES DISTRICT COURT for the Southern District of Florida __________ District of __________ WILLIAM C. STEPPACHER, JR., Individually and on Beahlf of All Others Similarly Situated, Plaintiff(s) v. Civil Action No. ALFI, INC., PAUL ANTONIO PEREIRA, DENNIS MCINTOSH, JOHN M. COOK, II, PETER BORDES, JIM LEE, JUSTIN ELKOURI, ALLISON FICKEN, FRANK SMITH, and RICHARD MOWSER Defendant(s) ) ) ) ) ) ) ) ) ) ) ) ) SUMMONS IN A CIVIL ACTION To: (Defendant’s name and address) Allison Ficken c/o ALFI, Inc. 429 Lenox Ave., Suite 547 Miami Beach, FL 33139 A lawsuit has been filed against you. Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if you are the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ. P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney, whose name and address are: Emily C. Komlossy, Esq. KOMLOSSY LAW, P.A. 4700 Sheridan St., Suite J Hollywood, FL 33021 (954) 842-2021 eck@komlossylaw.com If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court. CLERK OF COURT Date: Signature of Clerk or Deputy Clerk PROOF OF SERVICE (This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l)) This summons for (name of individual and title, if any) was received by me on (date) . ’ I personally served the summons on the individual at (place) on (date) ; or ’ I left the summons at the individual’s residence or usual place of abode with (name) , a person of suitable age and discretion who resides there, on (date) , and mailed a copy to the individual’s last known address; or ’ I served the summons on (name of individual) , who is designated by law to accept service of process on behalf of (name of organization) on (date) ; or ’ I returned the summons unexecuted because ; or ’ Other (specify): My fees are $ for travel and $ for services, for a total of $ . 0.00 I declare under penalty of perjury that this information is true. Date: Server’s signature Printed name and title Server’s address Additional information regarding attempted service, etc: AO 440 (Rev. 06/12) Summons in a Civil Action UNITED STATES DISTRICT COURT for the Southern District of Florida __________ District of __________ WILLIAM C. STEPPACHER, JR., Individually and on Beahlf of All Others Similarly Situated, Plaintiff(s) v. Civil Action No. ALFI, INC., PAUL ANTONIO PEREIRA, DENNIS MCINTOSH, JOHN M. COOK, II, PETER BORDES, JIM LEE, JUSTIN ELKOURI, ALLISON FICKEN, FRANK SMITH, and RICHARD MOWSER Defendant(s) ) ) ) ) ) ) ) ) ) ) ) ) SUMMONS IN A CIVIL ACTION To: (Defendant’s name and address) Jim Lee c/o ALFI, Inc. 429 Lenox Ave., Suite 547 Miami Beach, FL 33139 A lawsuit has been filed against you. Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if you are the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ. P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney, whose name and address are: Emily C. Komlossy, Esq. KOMLOSSY LAW, P.A. 4700 Sheridan St., Suite J Hollywood, FL 33021 (954) 842-2021 eck@komlossylaw.com If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court. CLERK OF COURT Date: Signature of Clerk or Deputy Clerk PROOF OF SERVICE (This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l)) This summons for (name of individual and title, if any) was received by me on (date) . ’ I personally served the summons on the individual at (place) on (date) ; or ’ I left the summons at the individual’s residence or usual place of abode with (name) , a person of suitable age and discretion who resides there, on (date) , and mailed a copy to the individual’s last known address; or ’ I served the summons on (name of individual) , who is designated by law to accept service of process on behalf of (name of organization) on (date) ; or ’ I returned the summons unexecuted because ; or ’ Other (specify): My fees are $ for travel and $ for services, for a total of $ . 0.00 I declare under penalty of perjury that this information is true. Date: Server’s signature Printed name and title Server’s address Additional information regarding attempted service, etc: AO 440 (Rev. 06/12) Summons in a Civil Action UNITED STATES DISTRICT COURT for the Southern District of Florida __________ District of __________ WILLIAM C. STEPPACHER, JR., Individually and on Beahlf of All Others Similarly Situated, Plaintiff(s) v. Civil Action No. ALFI, INC., PAUL ANTONIO PEREIRA, DENNIS MCINTOSH, JOHN M. COOK, II, PETER BORDES, JIM LEE, JUSTIN ELKOURI, ALLISON FICKEN, FRANK SMITH, and RICHARD MOWSER Defendant(s) ) ) ) ) ) ) ) ) ) ) ) ) SUMMONS IN A CIVIL ACTION To: (Defendant’s name and address) Dennis McIntosh c/o ALFI, Inc. 429 Lenox Ave., Suite 547 Miami Beach, FL 33139 A lawsuit has been filed against you. Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if you are the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ. P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney, whose name and address are: Emily C. Komlossy, Esq. KOMLOSSY LAW, P.A. 4700 Sheridan St., Suite J Hollywood, FL 33021 (954) 842-2021 eck@komlossylaw.com If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court. CLERK OF COURT Date: Signature of Clerk or Deputy Clerk PROOF OF SERVICE (This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l)) This summons for (name of individual and title, if any) was received by me on (date) . ’ I personally served the summons on the individual at (place) on (date) ; or ’ I left the summons at the individual’s residence or usual place of abode with (name) , a person of suitable age and discretion who resides there, on (date) , and mailed a copy to the individual’s last known address; or ’ I served the summons on (name of individual) , who is designated by law to accept service of process on behalf of (name of organization) on (date) ; or ’ I returned the summons unexecuted because ; or ’ Other (specify): My fees are $ for travel and $ for services, for a total of $ . 0.00 I declare under penalty of perjury that this information is true. Date: Server’s signature Printed name and title Server’s address Additional information regarding attempted service, etc: AO 440 (Rev. 06/12) Summons in a Civil Action UNITED STATES DISTRICT COURT for the Southern District of Florida __________ District of __________ WILLIAM C. STEPPACHER, JR., Individually and on Beahlf of All Others Similarly Situated, Plaintiff(s) v. Civil Action No. ALFI, INC., PAUL ANTONIO PEREIRA, DENNIS MCINTOSH, JOHN M. COOK, II, PETER BORDES, JIM LEE, JUSTIN ELKOURI, ALLISON FICKEN, FRANK SMITH, and RICHARD MOWSER Defendant(s) ) ) ) ) ) ) ) ) ) ) ) ) SUMMONS IN A CIVIL ACTION To: (Defendant’s name and address) Richard Mowser c/o ALFI, Inc. 429 Lenox Ave., Suite 547 Miami Beach, FL 33139 A lawsuit has been filed against you. Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if you are the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ. P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney, whose name and address are: Emily C. Komlossy, Esq. KOMLOSSY LAW, P.A. 4700 Sheridan St., Suite J Hollywood, FL 33021 (954) 842-2021 eck@komlossylaw.com If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court. CLERK OF COURT Date: Signature of Clerk or Deputy Clerk PROOF OF SERVICE (This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l)) This summons for (name of individual and title, if any) was received by me on (date) . ’ I personally served the summons on the individual at (place) on (date) ; or ’ I left the summons at the individual’s residence or usual place of abode with (name) , a person of suitable age and discretion who resides there, on (date) , and mailed a copy to the individual’s last known address; or ’ I served the summons on (name of individual) , who is designated by law to accept service of process on behalf of (name of organization) on (date) ; or ’ I returned the summons unexecuted because ; or ’ Other (specify): My fees are $ for travel and $ for services, for a total of $ . 0.00 I declare under penalty of perjury that this information is true. Date: Server’s signature Printed name and title Server’s address Additional information regarding attempted service, etc: AO 440 (Rev. 06/12) Summons in a Civil Action UNITED STATES DISTRICT COURT for the Southern District of Florida __________ District of __________ WILLIAM C. STEPPACHER, JR., Individually and on Beahlf of All Others Similarly Situated, Plaintiff(s) v. Civil Action No. ALFI, INC., PAUL ANTONIO PEREIRA, DENNIS MCINTOSH, JOHN M. COOK, II, PETER BORDES, JIM LEE, JUSTIN ELKOURI, ALLISON FICKEN, FRANK SMITH, and RICHARD MOWSER Defendant(s) ) ) ) ) ) ) ) ) ) ) ) ) SUMMONS IN A CIVIL ACTION To: (Defendant’s name and address) Paul Antonio Pereira c/o ALFI, Inc. 429 Lenox Ave., Suite 547 Miami Beach, FL 33139 A lawsuit has been filed against you. Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if you are the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ. P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney, whose name and address are: Emily C. Komlossy, Esq. KOMLOSSY LAW, P.A. 4700 Sheridan St., Suite J Hollywood, FL 33021 (954) 842-2021 eck@komlossylaw.com If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court. CLERK OF COURT Date: Signature of Clerk or Deputy Clerk PROOF OF SERVICE (This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l)) This summons for (name of individual and title, if any) was received by me on (date) . ’ I personally served the summons on the individual at (place) on (date) ; or ’ I left the summons at the individual’s residence or usual place of abode with (name) , a person of suitable age and discretion who resides there, on (date) , and mailed a copy to the individual’s last known address; or ’ I served the summons on (name of individual) , who is designated by law to accept service of process on behalf of (name of organization) on (date) ; or ’ I returned the summons unexecuted because ; or ’ Other (specify): My fees are $ for travel and $ for services, for a total of $ . 0.00 I declare under penalty of perjury that this information is true. Date: Server’s signature Printed name and title Server’s address Additional information regarding attempted service, etc: AO 440 (Rev. 06/12) Summons in a Civil Action UNITED STATES DISTRICT COURT for the Southern District of Florida __________ District of __________ WILLIAM C. STEPPACHER, JR., Individually and on Beahlf of All Others Similarly Situated, Plaintiff(s) v. Civil Action No. ALFI, INC., PAUL ANTONIO PEREIRA, DENNIS MCINTOSH, JOHN M. COOK, II, PETER BORDES, JIM LEE, JUSTIN ELKOURI, ALLISON FICKEN, FRANK SMITH, and RICHARD MOWSER Defendant(s) ) ) ) ) ) ) ) ) ) ) ) ) SUMMONS IN A CIVIL ACTION To: (Defendant’s name and address) Frank Smith c/o ALFI, Inc. 429 Lenox Ave., Suite 547 Miami Beach, FL 33139 A lawsuit has been filed against you. Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if you are the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ. P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney, whose name and address are: Emily C. Komlossy, Esq. KOMLOSSY LAW, P.A. 4700 Sheridan St., Suite J Hollywood, FL 33021 (954) 842-2021 eck@komlossylaw.com If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court. CLERK OF COURT Date: Signature of Clerk or Deputy Clerk PROOF OF SERVICE (This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l)) This summons for (name of individual and title, if any) was received by me on (date) . ’ I personally served the summons on the individual at (place) on (date) ; or ’ I left the summons at the individual’s residence or usual place of abode with (name) , a person of suitable age and discretion who resides there, on (date) , and mailed a copy to the individual’s last known address; or ’ I served the summons on (name of individual) , who is designated by law to accept service of process on behalf of (name of organization) on (date) ; or ’ I returned the summons unexecuted because ; or ’ Other (specify): My fees are $ for travel and $ for services, for a total of $ . 0.00 I declare under penalty of perjury that this information is true. Date: Server’s signature Printed name and title Server’s address Additional information regarding attempted service, etc:

securities

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DATE May 31, 2018 FOROFFICEUSEONLV JUDGE --------------- ___ DOCKET NUMBER ~O~RECORD I DEMANDS VII. REQUESTED IN COMPLAINT: VIIL RELATED CASE(S)' IFANY 0 I Original 0 2 Removed from 0 3 Remanded from Appellate Court 0 4 Reinstated or Reopened 0 6 Multidistrict 0 8 Multidistrict Litigation- DirectFile Proceeding State Court V. ORIGIN (Placea11 "X"" in On• Bwc Only) 0 S60 Civil Delaincc - Conditions of Confinement ~'lMMrGRM'ION~ · • •, •:, 0 462 Naturalization AppliClltion 0 465 Other lnunigration Action• 0 871 IRS-TbirdParty 26USC 7609 0 896 Arlritration CJ 899 Administrative Procedure Act/Review or Appeal of Agency Decision CJ 9SO Conslitutionality of State Sta1Ules ,,.;-~;,<l<,RElUJJ!R PERTY 1 ;.;l'i?1~ i;•.1ii''CMJAlfGHTS .. ·,,:,t:;r,, Rll'E'.Jll , Ns>:·, CJ 7900therlaborLitigation CJ 21 O Land Condcnmalion 0 440 Other Civil Rights Habeu Corpus: 0 791 Employee Retirement - -- - - D K7U nxcs (U.S. Plaintiff or Defendant) 0 220 Foreclosure CJ 44 l Voting 0 463 Alien Detainee Income Security Act CJ 230 Rent Lease&. Ejectment 0 442 Employment CJ SIO Motions to Vacate t:I 240 Torts to Land 0 443 HoW1ing/ Sentence CJ 245 Ton Product liability Accommodations 0 530 General CJ 290 AU 01hcr Real Propeny 0 445 Amer. w/Disabilities - 0 535 Death Penalty Employment Other: 0 446 Amer. w/Disabilities - CJ 540 Mandamu• & Other Other 0 550 Civil Rights 0 448 Education 0 SSS Prison Condition CJ llO!osurunce PERSONAL INlURV PERSONAL INJURY 0 625 DrugRelatedScizwe 0 422 Appeal 28USC 158 0 375FalseClaimsAct CJ 120 Marine 0 310 Airplane CJ 36S Personal lflimy - of Property 21USC881 CJ 423 Withdrawal 0 376 Qui Tam (31 USC CJ 130MillerAct 0 315AirplancProduct ProduetLiability 0 6900tber 28USC 157 3729(a)) 0 140 Negotiable Instrument Liability CJ 367 Health Carel CJ 400 Slate Reapponionment 0 I SO Recovery of Overpayment 0 320 Assault, Libel &: Pbannaceutical ;,5,o, >.,~"oh 0 41 O Anlilnlsl &. Enforcement of Judgment Slander Personal Injury 0 430 Banks and Banking 0 ISi MedicorcAct CJ 330Fcdera1F.mploycrs' Productliability Cl 4SOCo CJ 152 Recovery of Defaulted Liability 0 368 Asbcslos "Personal 0 460 SIUdenl Loans 0 340 Marine Injury Product 0 (Excludes Vetm1ns) CJ 3-4S Marine Product Liability 0 l S3 Recovery of Ovetpaymcnt Liability PERSONAL PROPERTY iz,._ -[:::3·'·'.l::-·E··1:::~-:J:!i°imiE"a:J;;E:J~mWWmriiiii[.;;il::m,f:i ofVctcmn'sBenefit• Cl 350MotorVchiclc 0 3700therfraud Cl 710FairLaborStandards 0 861 IDA(l39Sfl) 0 160 Stodcholders' Suits 0 355 Motor Vehicle 0 371 Truth in Lending Act 0 862 Black Lung (923) 0 190 Other Conttaet Produet Liability 0 380 Other Personal CJ 720 Labor/Management 0 863 OIWC/DIWW (405(g)) CJ 195 Contro1e1 Product Liability 0 360 Other Personal Propeny Damage Relations CJ 864 SSID Title XVI CJ 196 Franchise lnjwy 0 38S Propeny Damage CJ 740Jlailway Labor Act 0 865 RSI (40S(g)) 0 362 Personal lnjuty- Product Liability 0 751 Family and Medical Medic:al Mal ticc Leave Act c'""~;»:e ~~ ,,',;'fy1·:£{::ECONTRAe1'_·_~-2':~ ·~~--" .(L-:il:ti·iX'::_;t i''i ~:-:'i·;~;,ur~:~'~r~.: .. ~-· -~-:- .~t~TORTS~~f, t1~..,,1~·~;,;: ,-:....:~~; ·~r-· ~if}JiJ,.: "'!11 ·;:A IV. NATURE OF SUIT (Place an "X" 111 0110 Box Only) 0 3 CJ 3 Fmeign Nation Incorporated and Principal Place of Business In Another State 0 2 U.S. Government 0 4 Diversity Citizen of Ano1her Slate Defendant (lndlt:ate Citiz«nship of l'arlie1 In Item Ill) CJ 2 a of Business In This State IT. BASIS OF JURISTJON fPlact!a11 ··x"inOneBoxOnly) III. CITIZENSHIP OF PRINCIPAL PARTIES (Place an ·r in One Bazfor P1a1111iff (For Diver.vi{\' Cases Only) and One Box/or Defendant) 0 I U.S. Government 3 Federal Question PTF DEF PTF DEF Plaintiff (U.S. Government Not a Party) Citizen of This State 0 I CJ I Incorporated or Principal Place 0 4 0 4 KASKELA LAW LLC 201 King of Prussia Road, Suite 650, Radnor, P'A 19087; (484) 258-158 (c) Attorneys (Fi1111 Name. Address, and Telephone Number) Attorneys (JfKnown) (IN U.S. l'LATNTIFFCASESONL NOTE: IN LAND CONDEMNATION CASES, USE THJfLOCA TION OE THE TRACT OF LAND INVOLVED. County of Residence of First Listed Defendanl (b) Coun1y of Residence offirst Listed Plaintiff Chester Coun~. _P_'A __ (EXCEPT JN U.S. PU/NT/FF CASES) RECRO PH'ARMA, INC., GERALDINE 'A. HENWOOD and MICHAEL CELANO I. (a) PLAINTIFFS I DEFENDANTS JOHN ALBERICI, Individually and On Behalf of All Others Similar1y Situated The JS 44 civil cover sheet and the information contained herein neither replace nor supplement the filing and service of pleading.~ or other papers as required by law, except as provided by local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required fir~ of the Cle,r;k,o.of Court for the pwpose of initiating the civil docket sheet. (SEE INSTRUC110NS ON NEXT PAGE OFTHJS FORM.) 0 ~ I certify that, to my knowledge, the within case Is not related to any case now pending or within one year previously terminated action In this court except as noted above. ~-.., Z.0'13S/ DATE: '!!>/$1/'ZOll'- NOTE: A trial de novo will be a trial by jury only if there has been compliance with F.R.C.P. 38. M A y 3 1 2018 DATE: s/s1/Zo1' ;:::;: ~ ZO'"l-ss-1 Attorney-at-Law Attorney 1.D.# . ){iursuant to Local Civil Rule 53.2, Section 3(c)(2), that to the best of my knowledge and belief, the damages recoverable in this civil action case exceed the sum of sfso:ooo.oo exclusive of interest and costs; c Relief other than monetary damages is sought ARBITRATION CERTIFICATION (Check Appropriate Category) I, • ~AM."S ~ , counsel of record do hereby certify: 1 All other Federal Question Cases (Please specify) ________________ _ D. a ocial Security Review Cases (Please specify) --------------- 9. ]I. S curities Act(s) Cases 9. a All other Diversity Cases a t,beas Corpus 8. a Products Liability- Asbestos Civil Rights 7. o Products Liability 6. o Labor-Management Relations 6. o Other Personal Injury (Please specify) 5. a Patent 5. a Motor Vehicle Personal Injury 4. a Antitrust 4. o Marine Personal Injury 3. a Jones Act-Personal Injury 3. a Assault, Defamation 2. o FELA 2. a Airplane Personal Injury A Federal Question Cases: B. Diversity Jurisdiction Cases: I. o Indemnity Contract, Marine Contract, and All Other Contracts I. a Insurance Contract and Other Contracts CIVIl.: (Place ti' in ONE CATEGORY ONLY) YcsD No)ICI 4. Is this case a second or successive habeas corpus, social security appeal, or pro se civil rights case filed by the same individual? terminated action in this court? Y esD No)!( YesCl Nq/ii 3. Does this case involve the validity or infringement of a patent already in suit or any earlier numbered case pending or within one year previously YesD N~ 2. Does this case involve the same issue of fact or grow out of the same transaction as a prior suit pending or within one year previously terminated action in Ibis court? L Is this case related to property included in an earlier numbered suit pending or within one year previously terminated action in this court? Civil cases are deemed related when yes is answered to any of the following questions: Case Number: Judge Date Terminated:------------------ Does this case involve multidistrict litigation possibilities? RELATED CASE, IF ANY: Ycsc NoD (Attach two copies of the Disclosure Statement Form in accordance with Fed.R.Civ.P. 7.l(a)) YesD NoD Does this civil action involve a nongovernmental COl)Joratc party with any parent corporation and any publicly held COl)JOration owning 10% or more of its stock? Place of Accident, Incident or Transaction: (Use Reverse Side For Additional Space) AddressofDefendant: ~ 'l>'°'A«MA.'3.ic;,., Ltqo U\Pf "Re>,J--lALUUVJ),6- \~~ FOR T!E EAST .. ~s,ttll~[llf.PENNS~ VANIA - DESIGNATION FORM to be used by coun1el to indicate the category of the case for the purpose of assigni;nent to apsi'opritte code~ 'i"·' A~r pfal'iitirf: ~~ASl(-~cA LAw l.tc~ to 1 K.1111~ 11~ ~""b, S.,,~ 1.sa, bPNiqt, />,4 J'?df 7 I.,; ; ,, (Civ. 660) 10/02 Telephone FAX Number E-Mail Address 'I~ -Z.~·t<~ lf "" 'Z.~9'· l~r" Sl<ASKE-1..Ae.. l<A&JCE.t.AL.AW. co_.,. ?&..A-,un~ Attorney for s/'3.t/U>\ i' Date b. ~~u$ l<As.~M Attorney-at-law (f) Standard Management- Cases that do not fall into any one of the other tracks. (e) Special Management- Cases that do not fall into tracks (a) through (d) that are commonly referred to as complex and that need special or intense management by the court. (See reverse side of this form for a detailed explanation of special management cases.) ( d) Asbestos - Cases involving claims for personal injury or property damage from exposure to asbestos. (c) Arbitration - Cases required to be designated for arbitration under Local Civil Rule 53.2. (b) Social Security - Cases requesting review of a decision of the Secretary of Health and Human Services denying plaintiff Social Security Benefits. (a) Habeas Corpus - Cases brought under 28 U.S.C. § 2241 through§ 2255. SELECT ONE OF THE FOLLOWING CASE MANAGEMENT TRACKS: In accordance with the Civil Justice Expense and Delay Reduction Plan of this court, counsel for plaintiff shall complete a Case Management Track Designation Form in all civil cases at the time of filing the complaint and serve a copy on all defendants. (See§ 1 :03 of the plan set forth on the reverse side of this form.) In the event that a defendant does not agree with the plaintiff regarding said designation, that defendant shall, with its first appearance, submit to the clerk of court and serve on the plaintiff and all other parties, a Case Management Track Designation Fonn specifying the track to which that defendant believes the case should be assigned. v. "2uao '°?'°'"~A,"J).Jc.,>~cA • 18 2279 NO. A1..~e.'c.' CIVIL ACTION CASE MANAGEMENT TRACK DESIGNATION FORM . I,,..,~""""""' 1 5 other than Defendants who purchased or otherwise acquired Recro securities between July 31, 1. This is a federal securities class action on behalf of a class consisting of all persons NATURE OF THE ACTION reasonable opportunity for discovery. believes that substantial evidentiary support will exist for the allegations set forth herein after a advisories about the Company, and information readily obtainable on the Internet. Plaintiff published by and regarding Recro Pharma, Inc. ("Recro" or the "Company"), analysts' reports and United States Securities and Exchange Commission ("SEC") filings, wire and press releases the Defendants' public documents, conference calls and announcements made by Defendants, conducted by and through Plaintiff's attorneys, which included, among other things, a review of own acts, and information and belief as to all other matters, based upon, inter alia, the investigation Defendants, alleges the following based upon personal knowledge as to Plaintiff and Plaintiff's similarly situated, by Plaintiffs undersigned attorneys, for Plaintiff's complaint against Plaintiff John Alberici ("Plaintiff'), individually and on behalf of all other persons CLASS ACTION COMPLAINt~b~p~~~rk Defendants. ~ MAY 3 1 2018 ~~~~~~~~~~~~--' e.~T~R~ ~ FIL ) RECRO PHARMA, INC., GERALDINE A. HENWOOD, RYAND. LAKE, AND MICHAEL CELANO, ) ) JURY TRIAL DEMANDED v. ~ COMPLAINT- CLASS ACTION ) Plaintiff, ) ~Case No. Ii 1.D'91. Qi, \Q) 2279 JOHN ALBERICI, Individually and On Behalf of All Others Similarly Situated, ) ) ~ ..... ~I;;<~ ~ •• ··~ -~-.,....,.~ fl/, J·,~ ~~:J."t.:.,~ ... ·· . .,. r~~· UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA ;ft\ fJ {,1]\\\, 24, 2018. 6. On this news, Recro's share price fell $6.79, or 54.67%, to close at $5.63 on May to chemistry, manufacturing and controls data. stated that the drug's analgesic effects did not meet FDA expectations and raised questions related New Drug Application ("NDA") for IV meloxicam. In its Complete Response Letter, the FDA 5. On May 24. 2018, Recro announced that the FDA had declined to approve Recro's materially false and misleading at all relevant times. and Drug Administration ("FDA") approval; and (ii) as a result, Recro's public statements were Meloxicam lacked supporting clinical data to show sufficient clinical benefits to receive U.S. Food Defendants made false and/or misleading statements and/or failed to disclose that: (i) IV statements regarding the Company's business, operational and compliance policies. Specifically, 4. Throughout the Class Period, Defendants made materially false and misleading securities trade on the NASDAQ Capital Market ("NASDAQ") under the ticker symbol "REPH." 3. Founded in 2007, Recro is headquartered in Malvern, Pennsylvania, and its to severe pain. acting preferential COX-2 inhibitor ("IV meloxicam") to be used for the management of moderate industry. The Company's lead product is a proprietary injectable form of meloxicam, a long- for the treatment of pain in the post-operative setting. Recro offers its products to the medical 2. Recro is a specialty pharmaceutical company that develops non-opioid therapeutics 1 Ob-5 promulgated thereunder, against the Company and certain of its top officials. Sections lO(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule caused by Defendants' violations of the federal securities laws and to pursue remedies under 2017 through May 23, 2018, both dates inclusive (the "Class Period"), seeking to recover damages under the ticker symbol "REPH." located at 490 Lapp Road, Malvern, Pennsylvania 19355. Recro's securities trade on the NASDAQ 13. Defendant Recro is incorporated in Pennsylvania, with principal executive offices alleged corrective disclosures. artificially inflated prices during the Class Period and was damaged upon the revelation of the 12. Plaintiff, as set forth in the attached Certification, acquired Recro's securities at PARTIES facilities of the national securities exchange. including but not limited to, the United States mail, interstate telephone communications and the Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, 11. In connection with the acts, conduct and other wrongs alleged in this Complaint, this Judicial District. U.S.C. §78aa) and 28 U.S.C. §1391(b) as Recro's principal executive offices are located within 10. Venue is proper in this Judicial District pursuant to §27 of the Exchange Act (15 U.S.C. §§ 1331 and Section 27 of the Exchange Act. 9. This Court has jurisdiction over the subject matter of this action pursuant to 28 ( 17 C.F .R. §240. lOb-5). Exchange Act(15 U.S.C. §§78j(b) and 78t(a)) and Rule lOb-5 promulgated thereunder by the SEC 8. The claims asserted herein arise under and pursuant to §§lO(b) and 20(a) of the JURISDICTION AND VENUE significant losses and damages. in the market value of the Company's securities, Plaintiff and other Class members have suffered 7. As a result of Defendants' wrongful acts and omissions, and the precipitous decline omissions pleaded herein. materially false and misleading. The Individual Defendants are liable for the false statements and were being concealed from the public, and that the positive representations being made were then Individual Defendants knew that the adverse facts specified herein had not been disclosed to and Company, and their access to material information available to them but not to the public, the to prevent their issuance or to cause them to be corrected. Because of their positions with the herein to be misleading prior to or shortly after their issuance and had the ability and opportunity Defendants were provided with copies of the Company's SEC filings and press releases alleged contents of Recro 's SEC filings, press releases, and other market communications. The Individual 18. The Individual Defendants possessed the power and authority to control the the "Individual Defendants." 1 7. The Defendants referenced above in ~~ 14-16 are sometimes referred to herein as 2016 to January 2018, and has served as its Chief Operating Officer ("COO") since January 2018. 16. Defendant Michael Celano ("Celano") served as the Company's CFO from July Accounting Officer from June 6, 2017 to January 2018. Officer ("CFO") since January 2018, and served as its Senior Vice President of Finance and Chief 15. Defendant Ryan D. Lake ("Lake") has served as the Company's Chief Financial Chief Executive Officer ("CEO"), President and Director since 2008. 14. Defendant Geraldine A. Henwood ("Henwood") has served as the Company's "Q2 2017 10-Q"). The Q2 2017 10-Q contained signed certifications pursuant to the Sarbanes- announcing the Company's financial and operating results for the quarter ended June 30, 2017 (the 21. On August 11, 2017, Recro filed a Quarterly Report on Form 10-Q with the SEC, The N meloxicam 30mg NDA is supported by positive results from two pivotal Phase Ill clinical efficacy trials in patients following bunionectomy and abdominoplasty surgeries, a large double-blind Phase III safety trial and four Phase II clinical trials for the management of moderate to severe postoperative pain, among others. In the first Phase III efficacy trial, N meloxicam 30mg achieved the primary endpoint of a statistically significant difference in Summed Pain Intensity Difference (SPID) over the first 48 hours (SPID48) compared to placebo in patients following bunionectomy surgery, a representative bard tissue model. In the second Phase III efficacy, trial IV meloxicam 30mg achieved the primary endpoint of a statistically significant difference in SPID over the first 24 hours (SPID24) compared to placebo in patients following abdominoplasty surgery, a representative soft tissue model. In the pivotal safety study, the largest Phase III double-blind, placebo-controlled non-opioid trial to evaluate the safety of an IV pain product candidate in a postoperative setting, N meloxicam 30mg was well tolerated and demonstrated a solid safety and tolerability profile. MALVERN, Pa., July 31, 2017 (GLOBE NEWSWIRE) -- Recro Pharma, Inc. (Nasdaq:REPH), a revenue generating specialty pharmaceutical company focused on therapeutics for hospital and other acute care settings, today announced it has submitted a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) for its lead investigational product candidate intravenous (IV) meloxicam 30mg for the treatment of moderate to severe, acute postoperative pain. release stated, in relevant part: entitled "Recro Pharma Submits New Drug Application for N Meloxicam 30mg." The press 20. The Class Period begins on July 31, 2017, when Recro issued a press release Materially False and Misleading Statements Issued During the Class Period industry. for the treatment of pain in the post-operative setting. Recro offers its products to the medical 19. Recro is a specialty pharmaceutical company that develops non-opioid therapeutics Background SUBSTANTIVE ALLEGATIONS American Society of Plastic Surgeons Annual Meeting". The press release stated, in relevant part: Phase III IV Meloxicam Clinical Efficacy Data in Patients Following Abdominoplasty at the 2017 24. On October 10, 2017, Recro issued a press release entitled "Recro Pharma Presents "The acceptance for review of the IV meloxicam 30mg NDA marks an important milestone in our effort to bring new therapeutics to patients and to the physicians who treat them," said Gerri Henwood, President and Chief Executive Officer of Recro Pharma. MAL VERN, Pa., Sept. 28, 2017 (GLOBE NEWSWIRE) -- Recro Pharma, Inc. (Nasdaq:REPH), a revenue generating specialty pharmaceutical company focused on therapeutics for hospital and other acute care settings, today announced that the U.S. Food and Drug Administration (FDA) has accepted for review its New Drug Application (NDA) for intravenous (IV) meloxicarn 30mg for the management of moderate to severe pain. press release stated, in relevant part: Announces FDA Acceptance for Review ofNew Drug Application for IV Meloxicam 30mg." The 23. On September 29, 2017, Recro issued a press release entitled "Recro Pharma Our Acute Care segment is primarily focused on developing innovative products for commercialization in hospital and other acute care settings. Our lead product candidate, IV meloxicam, has successfully completed two pivotal Phase III clinical trials, a large Phase III safety trial and other safety Studies for the management of moderate to severe pain. Overall, we emolled a total of approximately 1, 100 patients in our Phase III program. At the end of July 2017, we submitted an NDA to the FDA for IV meloxicam 30mg for the management of moderate to severe pain. The FDA has a 60-day filing review period to determine whether the NDA is complete and acceptable for filing. Our Acute Care segment has no revenue and our costs consist primarily of expenses incurred in conducting our clinical trials and preclinical studies, manufacturing scale-up, regulatory activities, initial pre- commercialization of meloxicam and personnel costs. 22. In the Q2 2017 I 0-Q, the Company stated in relevant part: were made, not misleading with respect to the period covered by this report." necessary to make the statements made, in light of the circumstances under which such statements 10-Q "does not contain any untrue statement of a material fact or omit to state a material fact Oxley Act of 2002 ("SOX'') by Defendants Henwood, Celano and Lake, stating that the Q2 2017 untrue statement of a material fact or omit to state a material fact necessary to make the statements by Defendants Henwood, Celano and Lake, stating that the Q3 2017 10-Q "does not contain any 2017 (the "Q3 2017 10-Q"). The Q3 2017 10-Q contained signed certifications pursuant to SOX announcing the Company's financial and operating results for the quarter ended September 30, 25. On November 9, 2017, Recro filed a Quarterly Report on Form 10-Q with the SEC, (Emphases added.) IV meloxicam 30mg has successfully completed three Phase III trials, including two Phase III efficacy trials and one Phase Ill safety trial. The results from these studies, as well as results from four Phase TI trials and other safety studies, comprised the NDA package for IV meloxicam 30mg that was accepted for review by the U.S. Food and Drug Administration in September 2017. "The Phase III results presented this year at Plasdc Surgery The Meeting demonstrate the efficacy of IV meloxkam 30mg, including significant reductions in pain, as evidenced by SPID24, meaningful reductions in opioid rescue use and improvements across numerous other pain relief metrics,'' said Stewart McCallum, M.D., F.A.C.S., Chief Medical Officer ofRecro Pharma and co-author of the poster. "On the safety front, IV meloxicam 30mg condnues to demonstrate a favorable safety and tolerability profile with a low incidence of adverse events (AEs), serious AEs and infusion events. We believe these results demonstrate IV meloxicam 30mg's ability to provide rapid and durable pain relief following abdominoplasty surgery and support its potential to be an attractive non-opioid alternative for physicians a11d patients for the treatment of acute, postoperative pain." MALVERN, Pa., Oct. 10, 2017 (GLOBE NEWSWIRE) -- Recro Pharma, Inc. (Nasdaq:REPH), a revenue generating specialty pharmaceutical company focused on therapeutics for hospital and other acute care settings, today announced an oral presentation highlighting clinical efficacy data from its Phase Ill study evaluating intravenous (IV) meloxicam 30mg for the treatment of acute postoperative pain in patients following abdonrinoplasty surgery. The poster was presented at Plastic Surgery The Meeting 2017, hosted by the American Society of Plastic Surgeons (ASPS), taking place October 6-10, 2017, in Orlando, FL. The poster, which was selected as a "Top 6" of the meeting, describes the clinical performance of IV melox.icam 30mg, including achievement of the study's primary endpoint, a statistically significant difference in Summed Pain Intensity Difference (SPID) over the first 24 hours (SPID24) compared to placebo, along with detailed secondary endpoints. "Moderate to severe pain is common following bunionectomy, particularly in the first few days after surgery," said Stewart McCallum, MD, Chief Medical Officer of Recro Pharma. "Selection of effective pain control strategies for these patients is generally guided by the intensity of the pain, the duration of analgesia provided and the associated risks and benefits of the particular therapy. Although opioids have traditionally been the mainstay of postoperative pain management, opioid related adverse events, together with the possibility oflong-tenn dependence, have created a need for effective non-opioid analgesics. The data from this Phase 2 study support the growing body of clinical evidence demonstrating that W meloxicam acts rapidly and offers durable pain relief, with a favorable safety profile. We believe Wmeloxicam 30mg,for which we are awaiting a May 2018 approval decision from t/1e U.S. Food and Drug Administration, has the potential MALVERN, Pa., Feb. 20, 2018 (GLOBE NEWSWIRE) -- Recro Pharma, Inc. (Nasdaq:REPH), a revenue generating specialty pharmaceutical company focused on therapeutics for the hospital and other acute care settings, today announced the publication of previously reported Phase II clinical data for intravenous (IV) meloxicam for the treatment of pain following bunionectomy surgery. The article, titled "Evaluation of the safety and efficacy of an intravenous nanocrystal formulation of meloxicam in the management of moderate-to-severe pain after bunionectomy," was published online in the Journal of Pain Research. of Pain Research". The press release stated, in relevant part: Announces Publication of Supportive Phase II IV Meloxicam Bunionectomy Data in the Journal 27. On February 20, 2018, Recro issued a press release entitled "Recro Pharma Our Acute Care segment is primarily focused on developing innovative products for commercialization in hospital and other acute care settings. Our lead product candidate, IV meloxicam, has successfully completed two pivotal Phase Ill clinical trials, a large Phase Ill safety trial and other safety studies for the management of moderate to severe pain. Overall, we enrolled a total of approximately 1, 100 patients in our Phase III program. At the end of July 2017, we submitted an NDA to the FDA for IV meloxicam 30mg for the management of moderate to severe pain. The FDA has accepted the NDA for review and set a PDUF A date of May 26, 2018. Our Acute Care segment has no revenue and our costs consist primarily of expenses incurred in conducting our clinical trials and preclinical studies, manufacturing scale-up, regulatory activities, initial pre-commercialization of meloxicam and personnel costs. 26. In Q3 20 l 7 l 0-Q, the Company stated in relevant part: respect to the period covered by this report." made, in light of the circumstances under which such statements were made, not misleading with Pain". The press release stated, in relevant part: Announces Publication of Phase ill IV Meloxicam Bunionectomy Data in the Clinical· Journal of 30. On March 27, 2018, Recro issued a press release entitled "Recro Pharma Our Acute Care division is primarily focused on developing and commercializing innovative products for hospital and related acute care settings. Our lead product candidate is a proprietary injectable form of meloxicam, a long-acting preferential COX-2 inhibitor. IV meloxicam has successfully completed three Phase III clinical trials, including two pivotal efficacy trials, a large double-blind Phase III safety trial and other safety studies for the management of moderate to severe pain. Overall, the total new drug application, or NDA, program included over 1,400 patients. In late July 2017, we submitted a NDA to the Food and Drug Administration, or FDA, for IV meloxicam 30mg for the management of moderate to severe pain. The FDA has accepted the NDA for review and set a date for decision on the NDA under the Prescription Drug User Fee Act, or PDUFA, of May 26, 2018. We believe that IV meloxicam compares favorably to competitive therapies in onset of pain relief, duration of pain relief, extent of pain relief and time to peak analgesic effect as well as that it has been well tolerated. We believe injectable meloxicam, as a non-opioid product, will overcome many of the issues associated with commonly prescribed opioid therapeutics, including respiratory depression, excessive nausea and vomiting, constipation, as well having no addiction potential while maintaining analgesic, or pain relieving, effects. We are pursuing a Section 505(b )(2) regulatory strategy for IV meloxicam. 29. In the 2017 10-K, the Company stated in relevant part: to the period covered by this report." in light of the circumstances under which such statements were made, not misleading with respect statement of a material fact or omit to state a material fact necessary to make the statements made, Defendants Henwood, Celano and Lake, stating that the 2017 10-K "does not contain any untrue 2017 (the "2017 10-K"). The 2017 10-K contained signed certifications pursuant to SOX by announcing the Company's financial and operating results for the quarter ended December 31, 28. On March 2, 2018, Recro filed an Annual Report on Fonn 10-K with the SEC, (Emphasis added.) to play a meaningfully differentiated role in the management of moderate to severe, postoperative pain." Our Acute Care segment is primarily focused on developing and commercializing innovative products for hospital and related acute care settings. Our lead product candidate is a proprietary injectable form of meloxicam, a long-acting preferential COX-2 inhibitor. IV meloxicam has successfully completed three Phase Ill clinical trials for the management of moderate to severe pain, consisting of two pivotal efficacy trials and a large double-blind Phase ill safety trial, as well as other safety studies. Overall, the total new drug application, or NDA, program included over 1,400 patients. In late July 2017, we submitted a NDA to the U.S. Food and Drug Administration, or FDA, for IV meloxicam 30mg for the management of moderate 32. In the Q 1 2018 10-Q, the Company stated in relevant part: to the period covered by this report." in light of the circumstances under which such statements were made, not misleading with respect statement of a material fact or omit to state a material fact necessary to make the statements made, Defendants Henwood and Lake, stating that the Q 1 2018 10-Q "does not contain any untrue (the "Ql 2018 10-Q"). The QI 2018 10-Q contained signed certifications pursuant to SOX by announcing the Company's financial and operating results for the quarter ended March 31, 2018 31. On May 9, 2018, Recro filed a Quarterly Report on Form 10-Q with the SEC, (Emphasis added.) "As previously reported, the data from this Phase III trial demonstrate that IV meloxicam provides rapid and sustained pain relief following bunionectomy surgery, a favorable safety and tolerability profile, and a significant opioid- sparing effect," said Stewart McCallum, M.D., Chief Medical Officer of Recro Pharma. "An urgent, unmet medical need for non-opioid agents for the management of moderate to severe pain persists for patients and physicians. The New Drug Application for IV meloxicam is currently under review with the U.S. Food and Drug Administration with a target PDUFA date of May 26, 2018. If approved, IV melox.icam will be the first 24-hour duration, non-opioid, IV analgesic for moderate to severe pain." MALVERN, Pa, March27, 2018 (GLOBE NEWSWIRE) - Recro Pharma, Inc. (Nasdaq:REPH). a revenue generating specialty pharmaceutical company focused on therapeutics for the hospital and other acute care settings, today announced the publication of Phase III clinical data for intravenous (IV) meloxicam for the treatment of pain following bunionectomy surgery. The article, titled "Efficacy and Safety of Intravenous Meloxicam in Subjects with Moderate-to-Severe Pain Following Bunionectomy," was published online in the Clinical Journal of Pain. Complete Response Letter from the FDA," disclosing that the FDA had declined to approve 35. On May 24, 2018, Recro issued a press release entitled "Recro Pharma Receives The Truth Begins to Emerge result, Recro's public statements were materially false and misleading at all relevant times. supporting clinical data to show sufficient clinical benefits to receive FDA approval; and (ii) as a made false and/or misleading statements and/or failed to disclose that: (i) IV Meloxicam lacked facts about the Company's business, operational and compliance policies. Specifically, Defendants Defendants made false and/or misleading statements, as well as failed to disclose material adverse 34. The statements referenced in~~ 20-33 were materially false and misleading because From an economic standpoint, we believe IV meloxicam's durable 24-hour dosing profile will allow ambulatory surgical centers to perform more complex procedures with same date discharge, while managing pain. And hospitals to accelerate patients discharge and reduce length of stay through reduction of opioids. We believe, we've identified clear addressable segments of the market, that will benefit from IV meloxicam's profile. Segments in which we believe, IV meloxicam's profile provides both clinical and economic value.. From a clinical standpoint, we believe IV meloxicam can effectively treat pain, while reducing opioid consumption, which reduced opioid related adverse events. Given the increasing urgency of the national opioid crisis, we believe IV meloxicam has to potential to serve as a valuable analgesic alternative for healthcare institutions, physicians and patients. in relevant part: 2018 results. During the call, a Recro executive discussed its lead product, IV meloxicam, stating 33. On May 9, 2018, the Company held an earnings call with analysts to discuss its QI to severe pain. The FDA has accepted. the NDA for review and set a date for decision on the NDA under the Prescription Drug User Fee Act, or PDUF A, of May 26, 2018. Our Acute Care segment has no revenue and our costs consist primarily of expenses incurred in conducting our clinical trials and preclinical studies, manufacturing scale-up, regulatory activities, pre-commercialization of meloxicam and personnel costs. Defendants have or had a controlling interest. families and their legal representatives, heirs, successors or assigns and any entity in which the officers and directors of the Company, at all relevant times, members of their immediate revelation of the alleged corrective disclosures. Excluded from the Class are Defendants herein, acquired Recro securities during the Class Period (the "Class"); and were damaged upon the Procedure 23 (a) and (b )(3) on behalf of a Class, consisting of all those who purchased or otherwise 38. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil PLAINTIFF'S CLASS ACTION ALLEGATIONS significant losses and damages. in the market value of the Company's securities, Plaintiff and other Class members have suffered 37. As a result of Defendants' wrongful acts and omissions, and the precipitous decline 24, 2018. 36. On this news, Recro's share price fell $6.79, or 54.67%, to close at $5.63 on May (Emphasis added.) The CRL stated that although the outcome of the pivotal phase III trials demonstrated statistically significant outcomes on the primary endpoints, the FDA is unable to approve the application in its current form. The CRL states that data from ad hoc analyses and selective secondary endpoints suggest that the analgesic effect does not meet the expectations of the FDA. In addition, the CRL raised CMC related questions on extractable and leachable data provided in the NDA. MAL VERN, PA, May 24, .2018 - Recro Pharma, Inc. (Nasdaq: REPH), a revenue generating specialty pharmaceutical company focused on therapeutics for the hospital and other acute care settings, today announced it has received a Complete Response Letter (CRL) from the U.S. Food and Drug Administration (FDA) Office of Drug Evaluation II regarding the New Drug Application (NDA) for IV meloxicam. release, the Company stated in relevant part: Recro's New Drug Application for the non-opioid pain relieftreatment IV meloxicam. In the press • whether Defendants acted knowingly or recklessly in issuing false and misleading financial statements; • whether the Individual Defendants caused Recro to issue false and misleading financial statements during the Class Period; • whether statements made by Defendants to the investing public during the Class Period misrepresented material facts about the business, operations and management of Recro; • whether the federal securities laws were violated by Defendants' acts as alleged herein; questions oflaw and fact common to the Class are: predominate over any questions solely affecting individual members of the Class. Among the 42. Common questions of law and fact exist as to all members of the Class and no interests antagonistic to or in conflict with those of the Class. and has retained counsel competent and experienced in class and securities litigation. Plaintiff has 41. Plaintiff will fairly and adequately protect the interests of the members of the Class federal law that is complained of herein. members of the Class are similarly affected by Defendants' wrongful conduct in violation of 40. Plaintiff's claims are typical of the claims of the members of the Class as all securities class actions. pendency of this action by mail, using the form of notice similar to that customarily used in be identified from records maintained by Recro or its transfer agent and may be notified of the thousands of members in the proposed Class. Record owners and other members of the Class may be ascertained only through appropriate discovery, Plaintiff believes that there are hundreds or NASDAQ. While the exact number of Class members is unknown to Plaintiff at this time and can impracticable. Throughout the Class Period, Recto securities were actively traded on the 39. The members of the Class are so numerous that joinder of all members is presumption of reliance upon the integrity of the market. 45. Based upon the foregoing, Plaintiff and the members of the Class are entitled to a • Plaintiff and members of the Class purchased, acquired and/or sold Recro 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. • the misrepresentations and omissions alleged would tend to induce a reasonable investor to misjudge the value of the Company's securities; and • the Company traded on the NASDAQ and was covered by multiple analysts; • !he Company's shares were liquid and traded with moderate to heavy volume during the Class Period; • Recro securities are traded in an efficient market; • the omissions and misrepresentations were material; • Defendants made public misrepresentations or failed to disclose material facts during the Class Period; on-the-market doctrine in that: 44. Plaintiff will rely, in part, upon the presumption of reliance established by the fraud- wrongs done to them. There will be no difficulty in the management of this action as a class action. of individual litigation make it impossible for members of the Class to individually redress the damages suffered by individual Class members may be relatively small, the expense and burden adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the 43. A class action is superior to all other available methods for the fair and efficient • whether the members of the Class have sustained damages and, if so, what is the proper measure of damages. • whether the prices of Recro securities during the Class Period were artificially inflated because of the Defendants' conduct complained of herein; and of conduct, Defendants, and each of them, took the actions set forth herein. and options at artificially inflated prices. In furtherance of this unlawful scheme, plan and course cause Plaintiff and other members of the Class to purchase or otherwise acquire Recro securities as alleged herein; (ii) artificially inflate and maintain the market price of Recro securities; and (iii) the Class Period, did: (i) deceive the investing public, including Plaintiff and other Class members, connection with the purchase and sale of securities. Such scheme was intended to, and, throughout which they were made, not misleading; and employed devices, schemes and artifices to defraud in material facts necessary in order to make the statements made, in light of the circumstances under members of the Class; made various untrue statements of material facts and omitted to state practices and courses of business which operated as a fraud and deceit upon Plaintiff and the other course of conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions, 49. During the Class Period, Defendants engaged in a plan, scheme, conspiracy and Exchange Act, 15 U.S.C. § 78j(b), and Rule lOb-5 promulgated thereunder by the SEC. 48. This Count is asserted against Defendants and is based upon Section 1 O(b) of the set forth herein. 4 7. Plaintiff repeats and realleges each and every allegation contained above as if fully (Violations of Section lO(b) of the Exchange Act and Rule lOb-5 Promulgated Thereunder Against All Defendants) COUNT I their Class Period statements in violation of a duty to disclose such information, as detailed above. United States, 406 U.S. 128, 92 S. Ct. 2430 (1972), as Defendants omitted material information in of reliance established by the Supreme Court in Affiliated Ute Citizens of the State of Utah v. 46. Alternatively, Plaintiff and the members of the Class are entitled to the presumption Defendants were able to and did, directly or indirectly, control the content of the statements of complained of herein. Because of their positions of control and authority, the Individual 53. The Individual Defendants are liable both directly and indirectly for the wrongs internal affairs. and/or directors of Recro, the Individual Defendants had knowledge of the details of Recro's for the truth is peculiarly within Defendants' knowledge and control. As the senior managers 52. Information showing that Defendants acted knowingly or with reckless disregard described above. lmew or recklessly disregarded that material facts were being misrepresented or omitted as were committed willfully or with reckless disregard for the truth. In addition, each Defendant although such facts were readily available to Defendants. Said acts and omissions of Defendants such facts as would reveal the materially false and misleading nature of the statements made, acted with reckless disregard for the truth in that they failed or refused to ascertain and disclose thereby to deceive Plaintiff and the other members of the Class, or, in the alternative, Defendants materially false and misleading statements and material omissions alleged herein and intended 51. By virtue of their positions at Recro , Defendants had actual lmowledge of the misrepresented the truth about Recro' s finances and business prospects. materially false and misleading in that they failed to disclose material adverse information and influence the market for Recro securities. Such reports, filings, releases and statements were above, including statements made to securities analysts and the media that were designed to and annual reports, SEC filings, press releases and other statements and documents described Defendants participated directly or indirectly in the preparation and/or issuance of the quarterly 50. Pursuant to the above plan, scheme, conspiracy and course of conduct, each of the promulgated thereunder. directly or indirectly, have violated Section lO(b) of the Exchange Act and Rule lOb-5 55. By reason of the conduct alleged herein, Defendants knowingly or recklessly, facts alleged herein to the injury of Plaintiff and Class members. the Class. The market price of Recro securities declined sharply upon public disclosure of the Recro securities was substantially lower than the prices paid by Plaintiff and the other members of paid. At the time of the purchases and/or acquisitions by Plaintiff and the Class, the true value of securities, or would not have purchased or otherwise acquired them at the inflated prices that were members of the Class known the truth, they would not have purchased or otherwise acquired said at prices artificially inflated by Defendants' wrongful conduct. Had Plaintiff and the other relying upon the integrity of the market, purchased or otherwise acquired shares ofRecro securities statements described herein, which the Defendants made, issued or caused to be disseminate~ or market. Plaintiff and the other members of the Class, relying on the materially false and misleading 54. During the Class Period, Recro securities were traded on an active and efficient the securities and/or upon statements disseminated by Defendants, and were damaged thereby. artificially inflated prices and relied upon the price of the securities, the integrity of the market for Plaintiff and the other members of the Class purchased or otherwise acquired Recro securities at facts concerning Recro' s business and financial condition which were concealed by Defendants, Recro securities was artificially inflated throughout the Class Period. In ignorance of the adverse aforementioned false and misleading reports, releases and public statements, the market price of operations, future financial condition and future prospects. As a result of the dissemination of the duty to disseminate timely, accurate, and truthful information with respect to Recro's businesses, Recro. As officers and/or directors of a publicly-held company, the Individual Defendants had a Individual Defendants therefore, were "controlling persons" of Recro within the meaning of their power and authority to cause Recro to engage in the wrongful acts complained of herein. The Recro's results of operations. Throughout the Class Period, the Individual Defendants exercised public filings which Recro disseminated in the marketplace during the Class Period concerning Defendants were able to, and did, control the contents of the various reports, press releases and 60. Because of their positions of control and authority as senior officers, the Individual by Recro which had become materially false or misleading. financial condition and results of operations, and to correct promptly any public statements issued Defendants had a duty to disseminate accurate and truthful information with respect to Recro's 59. As officers and/or directors of a publicly owned company, the Individual information about Recro's misstatement of income and expenses and false financial statements. of Recro's business affairs. Because of their senior positions, they knew the adverse non-public and management ofRecro, and conducted and participated, directly and indirectly, in the conduct 58. During the Class Period, the Individual Defendants participated in the operation paragraphs as if fully set forth herein. 57. Plaintiff repeats and realleges each and every allegation contained in the foregoing (Violations of Section 20(8) of the Exchange Act Against The Individual Defendants) COUNT II public. that the Company had been disseminating misrepresented financial statements to the investing acquisitions and sales of the Company's securities during the Class Period, upon the disclosure other members of the Class suffered damages in connection with their respective purchases, 56. As a direct and proximate result of Defendants' wrongful conduct, Plaintiff and the D. Awarding such other and further relief as this Court may deem just and proper. judgment interest, as well as their reasonable attorneys' fees, expert fees and other costs; and C. Awarding Plaintiff and the other members of the Class prejudgment and post- of the acts and transactions alleged herein; B. Requiring Defendants to pay damages sustained by Plaintiff and the Class by reason 23 of the Federal Rules of Civil Procedure, and certifying Plaintiff as the Class representative; A. Determining that the instant action may be maintained as a class action under Rule WHEREFORE, Plaintiff demands judgment against Defendants as follows: PRAYER FOR RELIEF Section 20(a) of the Exchange Act for the violations committed by Recro. 62. By reason of the above conduct, the Individual Defendants are liable pursuant to other members of the Class complain. control the specific activities which comprise the primary violations about which Plaintiff and the Defendants exercised control over the general operations of Recro and possessed the power to Recro to engage in the unlawful acts and conduct complained of herein. Each of the Individual Individual Defendants had the power to direct the actions of, and exercised the same to cause, By reason of their senior management positions and/or being directors of Recro, each of the 61. Each of the Individual Defendants, therefore, acted as a controlling person ofRecro. alleged which artificially inflated the market price ofRecro secwities. Section 20(a) of the Exchange Act. In this capacity, they participated in the unlawful conduct Attorneys for Plaintiff POMERANTZ LLP Patrick V. Dahlstrom I 0 South La Salle Street, Suite 3505 Chicago, I11inois 60603 Telephone: (312) 377-1181 Facsimile: (312) 377-1184 Email: pdahlstrom@pomlaw.com POMERANTZ LLP Jeremy A. Lieberman J. Alexander Hood II 600 Third A venue, 20th Floor New York, New York 10016 Telephone: (212) 661-1100 Facsimile: (212) 661-8665 Email: jalieberman@pomlaw.com ahood@pomlaw.com D. Seamus Kaskela (PA Bar No. 204351) 201 King of Prussia Road, Suite 650 Radnor, Pennsylvania 19087 Telephone: (484) 258- 1585 Facsimile: (484) 258-1585 Email: skaskela@kaskelalaw.com Respectfully submitted, Dated: May 31, 2018 Plaintiff hereby demands a trial by jury. DEMAND FOR TRIAL BY JURY Date: May --1£._, 2018 8. 1 declare under penalty of perjury that the foregoing is true and eorrect. costs and expenses directly relating to the representation of the class as ordered or approved by the Court. class as set forth in the Complaint, beyond my pro rata share of any recovery, except such reasonable 7. I agree not to accept any payment for serving as a reprosentative party on behalf' of the have not sought to serve as a representative party on behalf of a class under the federal securities laws. 6. During tbe three-year period preceding the date on which this Certification is signedi 1 Recro seourities during t'he Class .Period as specified in the Complaint. 5. To the best of my current knowledge, the attached sheet lists all of my transactions ;n lead plaintiff in this action. deposition and trial~ if necessary. I understand that the Court has the authority to select the most adequate purchased or acquired Recro securities during the class pel'iod, including providing testimony at 4. l am willing to serve as a representative party on behalf of a Class of investors who order to participate in any private action arising under the Securities Act or E'X.change Act. 3. 1 did not purchase or acquire Recro securities at the direction of plaintiffs' counsel or In authorize its filing on my behalf. 2. I have reviewed a Complail\t against Recro Phanna. Inc. ("Rec:ro" or the "Company") and Act") u amended by the Private Securities Litigation Refonn Act of 1995. of 1933 ("Securities Act") and/or Section 21 D(a)(2) of the Securities Exchange Act of 1934 ("Exchange l. 1. John AJberici, make this declaration pursuant to Section 27(a)(2) of the Securities Aet CEltTIFlCATION PURSUANT TO FEDERAL SECURITIES LAWS Purc;hase Purchase 2,000 2,000 3/14/2018 5/15/2018 $10.9100 $11.1400 DATE PRICE PER SHARES/UNITS PURCHASE OR SALE NUMBER OF SHARES/UNITS LIST OF PURCHASES AND SALES RECRO PHARMA, INC. (REPH) Alberlcl, John

securities

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Juyoun Han (seeking pro hac vice) Eric Baum (seeking pro hac vice) EISENBERG & BAUM, LLP 24 Union Square East, PH New York, NY 10003 Tel: (212) 353-8700 Fax: (212) 353-1708 jhan@eandblaw.com ebaum@eandblaw.com John K. Buche (CA Bar No. 239477) (Local Counsel) BUCHE & ASSOCIATES, P.C. 875 Prospect St., Suite 305 La Jolla, CA 92037 Tel: (858) 459-9111 Fax: (858) 430-2426 jbuche@buchelaw.com UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA (SAN FRANCISCO DIVISION) The Estate of Carson Bride by and through his appointed administrator, Kristin Bride, and Tyler Clementi Foundation, on behalf of themselves and all others similarly situated, Plaintiff, v. Civil Action No.: 3:21-cv-3473 COMPLAINT [CLASS ACTION] DEMAND FOR JURY TRIAL SNAP, INC., YOLO TECHNOLOGIES, INC., LIGHTSPACE, INC., DOES #1-10. Defendants. 1 TABLE OF CONTENTS INTRODUCTION................................................................................................................ 1 PARTIES .............................................................................................................................. 6 The Plaintiffs ..................................................................................................................... 7 The Defendants ............................................................................................................... 10 JURISDICTION AND VENUE ........................................................................................ 12 FACTUAL ALLEGATIONS ............................................................................................ 13 Snapchat, LMK and YOLO apps .................................................................................... 13 Inherently Dangerous, Defective Design of Anonymous Apps ..................................... 14 Cyberbullying and Teen Suicide ..................................................................................... 16 Carson Bride’s Death Caused by Cyberbullying ............................................................ 18 Cyberbullying on YOLO Anonymous Messaging App.................................................. 19 YOLO’s Misrepresentations ........................................................................................... 22 YOLO’s Non-Response to Kristin Bride ........................................................................ 27 Cyberbullying on LMK Anonymous Messaging App .................................................... 30 LMK’s Misrepresentations .............................................................................................. 31 Cyberbullying on Snapchat and Misrepresentations regarding Snap Kits ..................... 34 CLASS ACTION ALLEGATIONS .................................................................................. 39 FIRST CAUSE OF ACTION: Strict Liability ................................................................... 44 SECOND CAUSE OF ACTION: Negligence ................................................................... 47 THIRD CAUSE OF ACTION: Fraudulent Misrepresentation ......................................... 49 FOURTH CAUSE OF ACTION: Negligent Misrepresentation ....................................... 52 FIFTH CAUSE OF ACTION: Oregon UTPA (Or. Rev. Stat. §§ 646.605) ...................... 54 SIXTH CAUSE OF ACTION: New York General Business Law § 349 ......................... 57 SEVENTH CAUSE OF ACTION: New York General Business Law § 350 ................... 62 EIGHTH CAUSE OF ACTION : California Business and Professional Code §§17200 & 17500 .................................................................................................................................. 63 NINTH CAUSE OF ACTION : Unjust Enrichment ......................................................... 64 TENTH CAUSE OF ACTION : Injunctive Relief ............................................................ 65 PRAYER FOR RELIEF ..................................................................................................... 66 i * * * Honoring Carson Bride, Tyler Clementi, and for every teenager who will become upstanders. * * * INTRODUCTION 1. This lawsuit is brought on behalf of Carson Bride, a 16-year-old teenager who took his own life after being a victim of cyberbullying on the following mobile phone applications (“apps”): “Snapchat” owned by Defendant Snap, Inc. (“Snap Inc.”), “YOLO” owned by Defendant Yolo Technologies, Inc., and “LMK” owned by Defendant LightSpace, Inc. (collectively, “Defendants”), all of which are popular apps among teenagers. 2. Carson asserts claims for strict liability, negligence, fraudulent misrepresentation, negligent misrepresentation, and violations of consumer protection laws on behalf of class members against the entities that developed and marketed Snapchat, YOLO, and LMK, for creating, maintaining, and distributing anonymous messaging apps to teens that are inherently dangerous and defective, and for falsely promising the enforcement of safeguards. Carson’s mother, Kristin Bride, also bring claims of misrepresentation against Defendant YOLO. 3. Tyler Clementi Foundation, a national advocacy organization whose mission is to combat bullying and cyberbullying, joins in this lawsuit. 4. The claims in this action are not about third-party users’ communications; 1 hence, this action does not focus on the users’ communications themselves nor does it seek to punish the senders of the bullying and harassing messages. 5. Rather, the claims here are about how the anonymous messaging apps designed and distributed products and services that are inherently dangerous, unsafe, useless. For decades, anonymous messaging apps been known to cause severe and fatal harm to teenagers, hence, the harms caused by Defendants’ apps were foreseeable. 6. The misrepresentation claims alleged focus on the concrete statements made by the apps about the specific actions they would take to safeguard young users from harm:  YOLO stated that it would reveal the identities and ban users who engage in bullying and harassing behavior. YOLO stated that it has a zero-tolerance policy for bullying.  LMK stated that it would implement and enforce zero-tolerance policies against bullying and harassing behavior, monitor and report any bullying and harassing behavior to law enforcement, and prohibit sexually explicit and inappropriate texts and photos.  Snapchat stated that it would remove third party apps that allow bullying and harassing behavior on its platform. 7. Despite the affirmative statements above, facts alleged here demonstrate that Defendants’ apps are unable or unwilling to take action and carry out their promises to safeguard children. 2 8. Due to the Defendants’ apps’ defective design and their misrepresentations, millions of users are harmed daily, suffering permanent consequences. 9. Defendants knew, or should have known, that irreversible, deadly consequences will arise from the use of anonymous messaging apps used by teens. 10. In 2010, 17-year-old Alexis Pilkington from Long Island, New York was cyberbullied on Formspring.me, an anonymous question and answer site, and ended her own life.1 11. In 2011, 15-year-old Natasha MacBryde from Worcestershire, U.K., took her own life after receiving anonymous messages on Formspring.me. According to news reports, her family “believe[d] that the anonymous postings on the Formspring social networking website were a significant contributor” to her death.2 12. In 2011, 14-year-old Jamey Rodemeyer from Buffalo, New York took his life after receiving slurs on Formspring.me from anonymous senders.3 13. In 2012, 13-year-old Ciara Pugsley, from Leitrim, Ireland took her own life after being cyberbullied on an anonymous website, ask.fm.4 14. In 2015, 18-year-old Elizabeth Long created a Change.org petition signed by 1 Town angry over Net slurs at suicide victim, NBC NEWS, March 26, 2010, at https://www.nbcnews.com/id/wbna36058532 2 Natasha MacBryde: Rail death teen threatened online, BBC.COM, July 21, 2011, at https://www.bbc.com/news/uk-england- hereford-worcester-14239702 3 Jamey Rodemeyer Suicide: Police Consider Criminal Bullying Charges, ABC NEWS, September 21, 2011, at https://abcnews.go.com/Health/jamey-rodemeyer-suicide-ny-police-open-criminal- investigation/story?id=14580832#.UXfKtrU3uSo 4 Third suicide in weeks linked to Cyberbullying, IRISH EXAMINER, Oct. 29, 2012, at https://www.irishexaminer.com/news/arid-20212271.html 3 83,363 individuals to the creators of Yik Yak, an anonymous messaging app. Her message in the petition is loud and clear, and an excerpt is quoted here (emphasis added): My name is Elizabeth. I’m 18 years old, and earlier this year I tried to commit suicide. While still recovering, I started seeing messages about me on Yik Yak, anonymously telling me that I should kill myself. And I am not the only one. . . it is time that we stand up and do something about it before a life is senselessly lost because of this app. Yik Yak allows users to post anonymous messages that are broadcast to other users close by. . . With the shield of anonymity, users have zero accountability for their posts, and can openly spread rumors, call classmates hurtful names, send threats, or even tell someone to kill themselves -- and all of these things are happening. The app claims that it is not meant to be used by people under 17, but there are no safeguards to prevent younger users from downloading the app . . . The app claims to not tolerate bullying or threats, but no action is being taken to remove threatening or harmful posts, or suspend users who write them . . . we want the app removed from the Apple App Store and Google Play immediately.5 15. Unfortunately, change did not happen in time, and later that year in 2015, Jacob Marberger, another teenager who was anonymously cyberbullied on the same app Yik Yak, ended his own life.6 16. In 2018, a parent witnessed her 13-year-old daughter receive an anonymous message on the app Sarahah from a user who wrote: “I hope she kills herself.” The parent started a Change.org petition that was signed by 466,714 supporters. Sarahah was removed from Apple and Google app stores after reported instances of severe cyberbullying became 5 Shut Down the app “Yik Yak”, CHANGE.ORG, at https://www.change.org/p/tyler-droll-and-brooks-buffington-shut-down- the-app-yik-yak 6 Student’s Suicide Prompts Investigation of College’s Culture, Yik Yak, NBC PHILADELPHIA.COM, Dec. 3, 2015, https://www.nbcphiladelphia.com/news/local/task-force-washington-college-jacob-marberger-bullying-social-media-yik- yak/157654/ 4 known to the public.7 17. According to a media interview by Tech Crunch, YOLO’s founder Gregoire Henrion stated that the app focused on blocking 10% of offensive messaging. Henrion reportedly admitted that YOLO saw reviews about bullying from its users. Yet, in that report, Henrion brushed off the concern about bullying saying “it’s nothing compared to any other anonymous app.”8 18. Carson’s parents notified YOLO app and its founder Gregoire Henrion about Carson’s death caused by cyberbullying and conveyed the urgency of revealing the identities of the users so that they can be prevented from harming other victims. To date, no one has responded. 19. Despite the widely reported danger of anonymous apps, opportunistic app developers like Defendants continued to reap profits using the same, defective, and inherently unsafe designs in apps that are marketed and used predominantly by teens. 20. The dangerous design of YOLO and LMK, like all the other anonymous apps described above, provide the means, motive, and opportunity for cyberbullying. 21. This lawsuit demands that Defendants be held accountable for the wrongful deaths, personal injuries, and other losses that Carson Bride and his family have suffered as a result of Defendants’ defective and dangerously designed apps. 7 Ban apps like Sarahah where my daughter was told to “kill herself”, CHANGE.ORG, https://www.change.org/p/app-store- google-play-ban-apps-like-sarahah-where-my-daughter-was-told-to-kill-herself?redirect=false 8 Teen hit Yolo raises $8M to let you Snapchat anonymously, TECH CRUNCH, Feb. 28, 2020, https://techcrunch.com/2020/02/28/anonymous-snapchat-group-chat-yolo/ 5 22. This putative class action further demands that Defendants be held accountable for designing defective and dangerous products and services, and for making false promises about the actions they would take to safeguard teens from cyberbullying. Such actions and misrepresentations violate consumer protection laws and other tort laws stated herein. 23. This putative class action additionally demands that YOLO and LMK be immediately discontinued and banned from the market until they can prove that effective safeguards are implemented and enforced. Additionally, for Snap Inc., this action demands that it immediately remove all third-party apps that fail to set up appropriate safeguards for young users from cyberbullying. 24. Defendants’ owners, investors, and affiliates should be restrained from marketing, selling, operating, and otherwise replicating its services, specifically, anonymous messaging features, in the form of a different corporate entity and service. PARTIES 25. Plaintiffs, estate of Carson Bride through his appointed administrator Kristin Bride, Kristin Bride on behalf of herself, and Tyler Clementi Foundation (collectively, “Plaintiffs”), bring this action, on behalf of themselves and similarly-situated putative class members comprised of approximately 93 million U.S.-based users of “Snapchat” owned by Defendant Snap, Inc. (“Snap Inc.”), approximately 10 million users of app “YOLO” owned by Defendant Yolo Technologies, Inc. (“YOLO”), and approximately 1 million 6 users of app “LMK” owned by Defendant LightSpace, Inc (“LMK”) (collectively, Defendants). The Plaintiffs 26. At all relevant times, Plaintiff Carson Bride was a resident and a citizen of Oregon. Plaintiff Carson Bride on behalf of himself and all other similarly situated minor users of Defendants’ apps that comprise the putative National class and Oregon sub-class, brings this class action against each and all of the Defendants. 27. At all relevant times, Plaintiff Kristin Bride was a resident and a citizen of Oregon. Kristin Bride brings claims as the appointed administrator of Carson’s estate and on behalf of herself. 28. Plaintiff Tyler Clementi Foundation is a bona fide 501(c)(3) organization registered in New York9 whose mission is to end online and offline bullying, harassment and humiliation. Plaintiff Tyler Clementi Foundation advocates for and educates parents and children who struggle with cyberbullying and safety issues. Plaintiff Tyler Clementi Foundation brings this class action against each and all of the Defendants on behalf of itself and the putative National class and New York sub-class. 29. Tyler Clementi Foundation was founded in 2010 by the Clementi family in memory of Tyler Clementi, a beloved son and family member who took his own life after 9 Tyler Clementi Foundation’s temporary address during the time of the pandemic is at a P.O. Box in New Jersey, but its registration and work is centered in New York. 7 suffering from cyberbullying. 30. Tyler Clementi Foundation works with individuals, minors, schools, educators, parents, companies, faith communities, universities and other individuals who themselves are or have been bullied as consumers of online platforms, or have children or students who are at risk of being bullied as consumers of online platforms. 31. Tyler Clementi Foundation’s Youth Ambassadors are members from high schools across the country who work to prevent bullying and cyberbullying within their schools and local communities. Youth Ambassadors serve for a one-year period. Upon information, several Youth Ambassadors have used, or are currently using, Defendants’ apps: Snapchat, YOLO, and LMK. 32. In addition to the Foundation’s flagship bullying-prevention and education program #Day1, the Foundation runs other programs including the Upstander Pledge, Upstander Speaker Series, Tyler’s Suite, and True Faith Doesn’t Bully, a public education campaign that fights religious bullying. 33. Tyler Clementi Foundation has engaged in extensive advocacy efforts propelling the introduction of bills in Congress that would prevent bullying and cyberbullying. Tyler Clementi Higher Education Anti-Harassment Act was introduced in Congress in 2011 and re-introduced in every congressional session, most recently in 2019. This bill would require colleges and universities receiving federal funding to prohibit harassment based on actual or perceived race, color, national origin, sex, disability, sexual 8 orientation, gender identity or religion. 34. Tyler Clementi Foundation organizes research and education programs on cyberbullying harms and prevention, including but not limited to gathering and maintaining statistics on bullying, educating the public about online civility, creating campaigns and toolkits for online and offline bullying prevention (#Day1), and collaborating with Youth Ambassadors to create and connect with a community of Upstanders. 35. Specifically, by researching and creating the 2020 Cyber Safety Guides and cyber safety campaigns such as “#Keepitcool,” Tyler Clementi Foundation helps the public understand the importance of safety on social media and online platforms and de-escalating incivility that occur. According to the Foundation’s research, “84 percent of Americans have experienced incivility first-hand and 69 percent believe that social media and the internet are to blame.”10 36. Tyler Clementi Foundation’s cyberbullying prevention work includes conducting the Survey of New York City Teens developed in collaboration with AT&T’s Corporate Social Responsibility initiative in 2016 and 2018.11 That survey was comprised of 500 teens, 500 parents of teens, and 500 millennial parents of younger children in New York City. Most recently, Tyler Clementi Foundation has engaged in survey and data 10 Keep it Cool by Building Online Civility, TYLER CLEMENTI FOUNDATION, July 18, 2017, at https://tylerclementi.org/bullying-prevention-through-building-online-civility/ 11 Tyler Clementi Foundation Emphasizes Early Bullying Prevention Efforts Following AT&T Survey on Cyberbullying, Online Behavior, TYLER CLEMENTI FOUNDATION, Nov. 28, 2018, at https://tylerclementi.org/tyler-clementi-foundation- emphasizes-early-bullying-prevention-efforts-following-att-survey-on-cyberbullying-online-behavior/ 9 collection efforts to investigate the impact of social media platforms and anonymity-based platforms on teenagers’ mental health. 37. In 2016, Tyler Clementi Foundation worked with teenagers in New York City in collaboration with AT&T and the All-American High School Film Festival to educate people about the effects of bullying and cyberbullying. 38. Between 2015 and 2020, Tyler Clementi Foundation’s founders and staff devoted time and resources to speak at more than 180 nationwide events, educating and advocating on behalf of minors and parents about combatting bullying and cyberbullying. 39. As a result of Defendants’ legal violations, Tyler Clementi Foundation has suffered injury in fact. Tyler Clementi Foundation has expended its resources to address the harms that arise from the use of Defendants’ anonymous messaging apps. 40. If Defendants were to cease their unlawful conduct alleged herein, Plaintiff Tyler Clementi Foundation would avoid diverting part of their organizational resources to educate the consumers and the public about the surreptitious harms arising from Defendants’ apps, and the Foundation could redirect these resources to other projects in furtherance of its mission. The Defendants 41. Defendant Snap Inc. (“Snap Inc.”) is a Delaware Corporation with its principal place of business in Santa Monica, California, doing business in California as Snapchat Inc. Each of the DOES 1-10 is the agent, servant, partner, joint-venturer, co- 10 venturer, “media partner,” principal, director, officer, manager, employee, or shareholder of one or more of its co-defendant(s) who aided, abetted, controlled, and directed or conspired with and acted in furtherance of said conspiracy with one or more of its co- defendant(s) in said co-defendant(s) performance of the acts and omissions described below. Plaintiffs sue each of these Doe Defendants by these fictitious names because Plaintiffs do not know these Defendants’ true names and capacities. Despite reasonable efforts, Plaintiffs have not been able to ascertain the identity of DOES 1-10. 42. Defendant Yolo Technologies, Inc. (formerly Popshow, Inc.) is a Delaware corporation with its headquarters and principal place of business in Los Angeles, California. Yolo Technologies, Inc. is the developer of the app YOLO. Each of the DOES 1-10 is the agent, servant, partner, joint-venturer, co-venturer, “media partner,” principal, director, officer, manager, employee, or shareholder of one or more of its co-defendant(s) who aided, abetted, controlled, and directed or conspired with and acted in furtherance of said conspiracy with one or more of its co-defendant(s) in said co-defendant(s) performance of the acts and omissions described below. Plaintiffs sue each of these Doe Defendants by these fictitious names because Plaintiffs do not know these Defendants' true names and capacities. Despite reasonable efforts, Plaintiffs have not been able to ascertain the identity of DOES 1-20. 43. Upon information and belief, Defendant LightSpace, Inc., is a Cayman Island corporation with its principal place of business in Palo Alto, California. Each of the DOES 11 1-10 is the agent, servant, partner, joint-venturer, co-venturer, “media partner,” principal, director, officer, manager, employee, or shareholder of one or more of its co-defendant(s) who aided, abetted, controlled, and directed or conspired with and acted in furtherance of said conspiracy with one or more of its co-defendant(s) in said co-defendant(s) performance of the acts and omissions described below. Plaintiffs sue each of these Doe Defendants by these fictitious names because Plaintiffs do not know these Defendants' true names and capacities. Despite reasonable efforts, Plaintiffs have not been able to ascertain the identity of DOES 1-20. 44. Plaintiffs further allege that each and all of the Defendants are directly liable and/or vicariously, jointly and severally liable for the violations of state consumer protection laws and other tort law claims alleged herein. 45. At all times relevant, Plaintiffs and/or those associated with Plaintiffs used the features of the Defendants’ apps which includes the anonymous messaging features enabled through YOLO or LMK on Snapchat. 46. Upon information and belief, Defendants’ conduct directly affects millions of users to whom each Defendant owe a legal duty of care and to whom each Defendant is directly responsible for damages and the injuries caused. JURISDICTION AND VENUE 47. This Court has diversity jurisdiction over this class action pursuant to 28 U.S.C. § 1332(d)(2) because the matter in controversy, exclusive of interest and costs, 12 exceeds $5,000,000 and is a class action in which some members of the class are citizens of states different from the states where Defendants are citizens. 48. Venue is proper in this Court pursuant to 28 U.S.C. § 1391 because many of the acts and transactions giving rise to this action occurred in this District as Defendants are: (a) authorized to conduct business in this District and has intentionally availed itself to the laws and markets within this District through the promotion, marketing, distribution and sale of its products in this District; (b) currently conducting substantial business in this District; and (c) are subject to personal jurisdiction in this District. FACTUAL ALLEGATIONS Snapchat, LMK and YOLO apps 49. Snapchat is an American multimedia messaging app developed by Snap Inc. One of the principal features of Snapchat is that pictures and messages are typically only available for a short period of time. In October 2013, the app evolved from its original focus on person-to-person photo sharing to featuring users’ “Stories,” content that is available to a user’s in-app friends for 24 hours. 50. YOLO and LMK are apps on “Snap Kits” – third-party apps reviewed, vetted, and integrated for use on Snapchat so that users can access the third-party app’s features on Snapchat’s platform. 51. Through Snap Kit, new apps like YOLO and LMK can instantly gain access to millions of Snapchat’s teen users. 13 52. YOLO and LMK are Snap Kit apps designed to allow Snapchat users to send messages anonymously. Predominantly used by teens, the apps allow teens to chat, exchange questions and answers, and send polling requests to one another on a completely anonymous basis – that is, the receiver of a message will not know the sender’s account names, nicknames, online IDs, phone numbers, nor any other identifying information unless the sender “reveals” himself or herself by “swiping up” in the app. Inherently Dangerous, Defective Design of Anonymous Apps 53. As stated in paragraphs 1 through 19 of this Complaint, the dangers associated with anonymous apps were widely reported throughout the news, media reports, petitions, and direct notifications by consumers which were directed at, or available to Defendants. 54. When anonymity is involved, it reinforces depersonalization which leads to an increase in antinormative behavior and decrease in bystander intervention. A well- regarded study has found that “the perceived anonymity of the bystander [was] negatively related to their propensity to intervene.”12 Also, the perceived invisibility of the communicators can often lead to antinormative behavior” because the anonymity reinforces “depersonalization” (i.e., the inability to tell “who is who” online). According to the study, “depersonalization” happens in “online environments in which people are interacting with people they already know in a face-to-face context,” as opposed to the 12 N. Brody & A.L. Vangelisti, Bystander Intervention in Cyberbullying, COMMUNICATION MONOGRAPHS, 83:1, 94 (2016). 14 traditional sense of anonymity where people may be complete strangers to one another.13 55. Well-cited studies reveal that “[a]nonymity has a more negative impact on the victim. Adolescents believed that the anonymous situation is more serious and has more of a negative impact on the victim.” 14 The negative feelings that a victim feels is amplified when the bullying is anonymous, because the aggressor’s intentions and perceptions are even more difficult to determine. Adolescents believe that anonymity allows individuals to behave in ways they might not otherwise (e.g., engage in cyberbullying) since they can remain anonymous and have more power.15 56. Leading experts who have spent years studying the causes and effects of bullying found that certain apps are a “one-stop shop for the bully” because everything they need is there: an audience, anonymity, an emphasis on appearances, and channels that range from public feeds to behind-the-back group chats.16 All of these factors exist on the Defendants’ apps. 57. According to studies, significant challenges remain in the detection and mitigation of cyberbullying. While tech firms may incorporate human labor and/or machine-based methods to detect cyberbullying, human labor is costly and machine-based 13 Id.(earlier version of the study available at https://www.natcom.org/sites/default/files/pages/NCA_Anti- Bullying_Resources_Brody.pdf, p. 20.) 14 B. Mascotto, Exploring the impact of anonymity on cyberbullying in adolescents: an integrative literature review, UNIVERSITY OF VICTORIA (2015), available at https://dspace.library.uvic.ca/bitstream/handle/1828/5986/Mascotto_Brooke_MN_2015.pdf?sequence=1&isAllowed=y 15 Id. 16 Katy Steinmetz, Inside Instagram’s War on Bullying, TIME, July 8, 2019, https://time.com/5619999/instagram-mosseri- bullying-artificial-intelligence/ 15 detection are technologically infeasible to be effective. In particular, machine-based methods of sifting through contents are largely inaccurate due to the varied role and context of communication, ever-changing texts and visual lexicon of speech, the latency of the detection and mitigation after users’ exposure to harm, and the challenge of scalability applied to a high volume of users. 58. Particularly, anonymous apps pose unique challenges in detecting bullying and harassing behavior, because the anonymity renders the construction of the users’ relationships nearly impossible.17 59. According to reports, technology firms and social media firms are reluctant to hire staff to detect and take action to address bullying incidents due to the high cost of employing labor and resources.18 60. While many apps put the burden on the users to block and report abusive behavior on mobile platforms, this does not safeguard vulnerable teens from harm because they have already been exposed to the harmful, hateful, and inappropriate messages. To prevent harm, the apps must enforce their own rule that deters abusive users by reporting to authorities and parents, revealing their identities and banning them from the apps. Cyberbullying and Teen Suicide 61. Experts have found that students who experienced bullying and/or 17 Chelmis, C. & Zois, D., Characterization, Detection, and Mitigation of Cyberbullying [Tutorial], ICWSM U. ALBANY (2018), available at http://www.cs.albany.edu/~cchelmis/icwsm2018tutorial/CyberbullyingTutorial_ICWSM2018.pdf 18 Why Content Moderation Costs Billions and is So Tricky for Facebook, Twitter, Youtube and other, CNBC, Feb. 27, 2021, https://www.cnbc.com/2021/02/27/content-moderation-on-social-media.html 16 cyberbullying are nearly two times more likely to attempt suicide.19 Victims of cyberbullying are at a greater risk than non-victims of both self-harm and suicidal behaviors.20 62. According to the Pew Research Center, 59% of U.S. teenagers have been bullied or harassed online.21 80 percent of teenagers who responded to the survey believed that the platforms and messaging apps were not doing enough to prevent bullying and harassment online. In this way, teenagers themselves believed that apps should be responsible for preventing bullying on online platforms. 63. The mobile app companies are in the best position to prevent cyberbullying and enforce safeguards, because users interact within the apps’ platforms instead of within classrooms where traditional bullying had occurred. According to reports, teen victims are less likely to report to parents and school officials about cyberbullying incidents because they worry that adults would then restrict their access to their mobile devices.22 Teens also fear that they would get into trouble themselves if they had already been warned to stay off electronic devices or social media. Moreover, teens are concerned that if they report to 19 Hinduja, Sameer & Patchin, Bullying, Cyberbullying, and Suicide. ARCHIVES OF SUICIDE RESEARCH : OFFICIAL JOURNAL OF THE INTERNATIONAL ACADEMY FOR SUICIDE RESEARCH (2010), available at https://www.researchgate.net/publication/45289246_Bullying_Cyberbullying_and_Suicide. 20 John A, Glendenning AC, Marchant A, Montgomery P, Stewart A, Wood S, Lloyd K, Hawton K, Self-Harm, Suicidal Behaviours, and Cyberbullying in Children and Young People: Systematic Review, J MED INTERNET RES (2018);20(4):e129 doi: 10.2196/jmir.9044 21 A Majority of Teens have Experienced Some Form of Cyberbullying, PEW RESEARCH CENTER (Sept. 27, 2018), https://www.pewresearch.org/internet/2018/09/27/a-majority-of-teens-have-experienced-some-form-of-cyberbullying/ 22 Why Victims of Bullying Often Suffer in Silence (Feb. 27, 2021), VERYWELL FAMILY, https://www.verywellfamily.com/reasons-why-victims-of-bullying-do-not-tell-460784 17 adults, the bullying will exacerbate or that their aggressors would retaliate.23 64. During the COVID-19 pandemic, as of June 2020, 62 percent of parents of U.S. teens aged 14-17 years stated their children were spending more than 4 hours per day on electronic devices, nearly a two-fold increase compared to the pre-pandemic times when only 32 percent of parents of U.S. teens aged 14-17 years were spending more than 4 hours per day on electronic devices.24 Upon information and belief, Defendants’ apps thrived and profited throughout the pandemic given the surge of users’ time spent on their apps. Carson Bride’s Death Caused by Cyberbullying 65. According to his family and friends, Carson Bride was a teenager who had “an infectious smile that would brighten everyone’s day.” When he passed away from suicide on June 23, 2020, he was 16 years old and had just completed his sophomore year in high school. He was a caring and compassionate teenager who taught ski classes to children during winters. 66. Carson took his own life by hanging himself at his home on the morning of June 23, 2020. 67. On or about July 4, 2020, it was revealed that Carson had been bullied on Defendants’ apps Snapchat, YOLO and LMK prior to his suicide. 68. After Carson ended his life, two psychologists who provided care to Carson 23 Id. 24 Internet Demographics and Use, STATISTA, https://www.statista.com/statistics/1189204/us-teens-children-screen-time- daily-coronavirus-before-during/ 18 and his family opined that Carson’s suicide was triggered by cyberbullying. 69. Carson’s parents did not consent nor were present when their son Carson downloaded the Defendants’ apps and presumably agreed to their Terms of Use. 70. The Defendants purport to enter in to their Terms of Service with minors who lack the capacity to enter in to contracts in the first place. 71. Carson’s mother, Kristin Bride, on behalf of her deceased son Carson Bride, hereby disaffirms the Terms of Use, Terms of Service, Privacy Policy, and/or EULA agreements between her son and each all of Defendants as it relates to their apps. Cyberbullying on YOLO Anonymous Messaging App 72. Released in May 2019, YOLO (which stands for the phrase “You Only Live Once”) is an anonymous question-and-answer app. 73. YOLO launched on Snap Kit which enables the app to be integrated and used on Snapchat. YOLO users can create a content Q&A post. Incoming questions would appear in the YOLO app, but users must go back to Snapchat to answer them. 74. Upon information and belief, from January 23, 2020 to June 22, 2020, Carson received 105 messages via YOLO. He received 35 anonymous messages between January 23, 2020 and January 29, 2020. Carson received 13 anonymous messages from May 25, 2020 to May 31, 2020. The anonymous messages Carson received surged from June 7, 2020 to June 22, 2020, just prior to his death, during which time Carson received 57 19 messages from anonymous users on YOLO. 75. Upon information and belief, of the 105 anonymous messages Carson received via YOLO, 62 messages included content that was meant to humiliate him, often involving sexually explicit and disturbing content. 76. On May 31, 2020, messages sent to Carson included threats:  “Remember when someone threatened to push u [Carson] into the Grand Canyon, that shit was so funny”  “I’m gonna push u [Carson] into the Grand Canyon.” 77. Later, on June 7, 2020, Carson received the following messages after an incident where he had fainted during his biology class: “When u passed out in Biology I put my balls in ur mouth” and “When you passed out I ate your ass.” 78. Upon information and belief, 27 out of 105 YOLO messages involved catfishing, a deceptive activity where a person creates a fake identity on a social platform, usually targeting a specific victim for abuse. These messages are also sexually explicit in nature, including “are you a virgin”; “I WANT YOUR WEINER NOWWWW”; and “Sometimes I print ur face out and throw darts at it…but others I just want ur tender love in the night.” 79. Upon information and belief, on June 7, 2020, after receiving numerous abusive, harassing, and upsetting messages on YOLO, Carson searched YOLO’s website and other websites searching for “YOLO reveal,” “YOLO username reveal hacks,” and 20 other keyword searches in an effort to find out who was sending abusive messages to him. 80. Upon information and belief, Carson relied on YOLO’s misrepresentation that YOLO would reveal the identities of the aggressors. 81. In responding to numerous abusive messages, Carson asked the anonymous users sending him abusive messages to voluntarily “S/U” (Swipe Up) to reveal their identities. None of the users chose to reveal themselves. 82. On or about June 13, 2020, 10 days before his death, Carson asked a friend via text message about the identities of the anonymous senders: “Do you know who is sending me all these sus(picious) YOLOs. Whenever I do one I only get people either trying to catfish me or bait me into saying dumb (things) or whatever . . . I guess I understand like a bit of sus(picious) shit every once in a while but it [is] my entire inbox of YOLO’s.” 83. On June 21 and 22, 2020, Carson posted his final Snapchat story about starting a summer job at Papa Murphy’s pizza restaurant: “Pull up to Papa Murphy’s at 3-5 on Wednesday [i]f you wanna see me working”; “Come to Papa Murphy’s and order Pizza.” 84. On June 21 and 22, 2020, Carson received anonymous responses to his Snapchat story via YOLO: “why do you make my peepee so hard”; “How big is your penis”; “How big are your balls.” 85. Upon information and belief, on June 23, 2020, the morning of Carson’s death, the last web history found from his phone shows that Carson was again searching 21 “Reveal YOLO Username Online” which reflects his final painstaking attempt to find out who was sending abusive YOLO messages to him. 86. YOLO developed, designed, and distributed the anonymous messaging feature to minor users, despite the known dangers and the foreseeability of injury and wrongful deaths caused by its services. In this way, YOLO failed to exercise the duty of care owed to Carson and other users. YOLO’s Misrepresentations 87. On the Google Play store, YOLO is accompanied by a “Teen” content rating, intentionally focusing its marketing and solicitation toward teenagers.25 According to Google Play Help, the content ratings in the app store “are the responsibility of the app developers.” Users are not required to input their date of birth or age verification process when they sign up for YOLO. 25 Google Play Help, Apps & Games Content Ratings on Google Play: https://support.google.com/googleplay/answer/6209544?p=appgame_ratings&visit_id=637560335067969325- 3904586056&rd=1 22 88. When a user first opens YOLO after downloading it from the Apple or Google app store, a pop-up notice fills the screen: “By using YOLO you agree the terms of service (EULA) and privacy policy. YOLO has no tolerance for objectionable content or abusive users. You’ll be banned for any inappropriate behavior.” 89. On the first screen of the user’s interface with the app, YOLO states, “No bullying. If you send harassing messages to our users, your identity will be revealed.” 23 90. The YOLO App Store page also states: “Be kind, respectful, show compassion with other users, otherwise you will be banned.” 91. In the most visible places, YOLO falsely represented it would take concrete actions to enforce safeguards: that the abusive users’ accounts will be banned and their identities will be revealed. 92. However, abusive users remain anonymous and active on the YOLO platform even after victims have repeatedly reported inappropriate content or harassment and asked for their identities to be revealed. 93. According to Apple Store’s user reviews, YOLO routinely ignores requests by consumers to ban or reveal the identity of users engaging in harassing or bullying 24 behavior, even when users have reported death threats and suicidal thoughts:  ******, 09/13/2020: “This app does not prevent bullying. It says above every YOLO question that any user will get banned from the app if they say anything considered as bullying. Well, I am very disappointed because I have seen more than enough users’ telling children to “kill themselves.” I personally know one child that had these messages coming in repeatedly for months, and is still getting them to this day. The child had even had many suicidal thoughts and actions.”  *****, 05/16/2019: “I’ve gotten disgusting messages that I’ve reported and waited to see whose name it would be so I know on my Snapchat who to delete but how would I know if they don’t reveal the names instantly. When I reported this issue I pressed the report button and the conversation deleted but no name shows up so I still believe that whoever is on my Snapchat is still on my friends list . . .”  ******dove, 3/25/2020: “it says that only positive messages are allowed and that if you bully or harass someone you will be banned from yolo. But I have gotten messages where I have been bullied and that person was not banned. . .”  ******, 11/18/2019: “My daughter has been getting bullied on this app and we report/block, and this bully keeps on going and it’s about suicide! . . . If someone truly reports someone this nasty on the app, it should be dealt with instantly!!”  Briggs ****, 02/17/2020: “At a time when suicide is the number 1 killer of teens in America, we definitely don’t need apps like this where bullied haters can hide behind a screen . . .”  Ieila****: 01/14/2021: “Honestly, the hate and death threats . . . on this app should be immediately taken care or when we report something someone has anonymously said.”  Uhohsp***: 08/10/2020: “In a few group chats people have been using the ghost messages to cyberbully people by calling them fat, ugly, gross and such and sometimes even to kill themselves. . . I think it would be practical that if someone sends an outrageous message like that, getting 25 flags would result in a ban? . . . these messages hurt. I am a pre-teen and I know kids my age are going to take these comments personally. I just want everyone to stay safe.” 94. According to one review, YOLO’s failure to unmask and ban abusive users from the platform encourages bullying behavior:  Nicole *******, 09/29/2019: “it’s teaching our youth that it’s okay to hide behind a screen and bully. So if someone want to say something nice, they should say it to them directly, not through an anon[ymous] messaging app where people are constantly getting hurt and bullied . . .” 95. If YOLO had followed its own stated policy and revealed the identities or banned abusive users, more users would be deterred from engaging in harassing or bullying because they would know they would be held accountable for their actions. 96. YOLO’s anonymous app hinders parents, guardians, and educators from taking action because they do not know who the sender of the message might be. 97. YOLO’s own privacy policy states that it collects personally identifiable information to “protect and enforce our rights and the rights of other Users against unlawful activity, including identify theft and fraud, and other violations of our Terms of Use.” The Terms of use reiterates its zero-tolerance policy toward bullying and harassment. 98. Despite its representations to consumers, YOLO is unable and/or unwilling to detect content that constitutes bullying, harassing, and inappropriate comments. YOLO is also unable and/or unwilling to ban abusive users which contradicts their own stated policies and guidelines. 26 99. Upon information and belief, Carson relied on the misrepresentations of YOLO that it would ban and reveal identities of users engaging in bullying and harassing behavior. Many users like Carson relied on these representations. According to the customer reviews (paras. 93-94), many users made reports to YOLO to unmask identities or block abusive users but received no resolution nor any response. 100. Contrary to the representation that YOLO would ban and reveal users who are engaging in bullying and harassment, YOLO failed to identify, detect, prevent, protect, or otherwise take any action to prevent the harm that Carson suffered using the YOLO app. YOLO’s misrepresentations were material and resulted in the injury suffered by Carson and other consumers. 101. Carson’s estate is therefore entitled to compensatory and punitive damages for intentionally causing physical and emotional pain and distress suffered by Carson Bride in the months leading to his death, and the pecuniary loss and loss of society, companionship, services and expenses incurred, in the amount that the jury may determine fair and reasonable. YOLO’s Non-Response to Kristin Bride 102. On or around July 6, 2020, two weeks after Carson’s death, his parents Kristin and Tom Bride contacted YOLO’s app developers. Using the Contact Us form on YOLO’s Customer Support page, Kristin and Tom wrote about the cyberbullying that occurred on YOLO and their son’s resulting death. 27 103. In the message to YOLO, Kristin and Tom Bride conveyed the urgency about this topic, expressing that YOLO must reveal the abusive users’ identities to protect other children from the same harm that happened to her son. 104. To date, YOLO has not responded. 105. On September 26, 2020, approximately three months after Carson’s death, Carson’s parents again sent an email entitled “Our Son’s Suicide – Request for Help” to the law enforcement email address (lawenforcement@onyolo.com) provided by YOLO for reporting emergencies. Carson’s parents expected that sending an email to the “law enforcement” address might prompt a timely response. 106. In the email, Carson’s parents included details about the abusive messages that anonymous YOLO users had sent to Carson prior to his death. In addition, Carson’s parents wrote: “Clearly, no one was policing YOLO when my son received hundreds of abusive messages during the first 3 weeks of June. These offenders may very well be continuing their bullying practices, especially now that they know the power of their words. For this reason, we are requesting the contacts of every SnapChat/YOLO anonymous user who sent a message to my son’s SnapChat account [] during the month of June 2020 . . . If you create an app which provides a platform for the anonymous bullying of vulnerable teens, the very least you can do is take accountability and assist the parents of your app’s victims so that more YOLO deaths do not occur.” 107. The email sent to the email address “lawenforcement@onyolo.com” immediately bounced back displaying the following error message: “The following recipient(s) cannot be reached” due to “invalid address.” 28 108. YOLO again misrepresented and/or implied that it would provide users a way to contact them to report any issues that relate to law enforcement, when in fact, YOLO did not even maintain such an email account. 109. Kristin simultaneously sent the same message to YOLO’s Customer Support, which was returned with an automated response, stating “We’re currently checking your message and will respond as soon as we can.” 110. To date, no one from YOLO’s Support Team has responded. 111. On December 16, 2020, Kristin once again tried to reach YOLO’s team through the help of Josh Golin, Executive Director of the organization Campaign for a Commercial-Free Childhood, who directly contacted Gregoire Henrion (Co-founder and CEO of YOLO) through LinkedIn, a social media site for professional networks, demanding that YOLO provide a response to Kristin and Tom Bride. 112. To date, no one from YOLO has responded. 113. On December 30, 2020, Kristin again contacted YOLO’s team through YOLO’s “Contact Us” form and email (lawenforcement@onyolo.com). 114. To date, no one from YOLO has responded. 115. Contrary to its representations in its Terms of Use and other policies, YOLO failed to protect, communicate, and respond to reports from its teen users and their parents. 116. Reasonably relying on the misrepresentations of YOLO with respect to its protection of users, Kristin Bride used YOLO’s service and suffered injury in fact. 29 117. Kristin is therefore entitled to compensatory damages for physical and emotional pain and distress in the amount that the jury may determine fair and reasonable. 118. Kristin is also entitled to injunctive relief and punitive damages for the gross, continued, and callous misrepresentations and non-response of Defendant YOLO even after being notified of Carson’s death multiple times. Cyberbullying on LMK Anonymous Messaging App 119. LMK is an anonymous Question and Answer and polling app that integrates with Snapchat through Snap Kit. LMK users can create and customize stickers and backgrounds while sharing polls with their friends on Snapchat. Other users vote anonymously and the user who posted the poll can share results on Snapchat. 120. From January 23, 2020 to June 22, 2020, Carson received numerous messages on LMK. 121. On June 21 to 22, 2020, Carson received the following messages on LMK: “Ayo where is the horse cock bb”; “Yes daddy harder daddy”; “hi babygirl do you wanna have a threesome sometime?”; “My WiFi sucks so I just flick the bean to ur Bitmoji”; “Do them every week pls daddy I got a hard on for your reply’s just let my gf watch u and flick her bean.” 122. On June 21, 2020, Carson stated in a private message to his friend on LMK: “for some reason whenever I do one of these [posts]” people send messages containing sexually explicit and harassing comments such as “beanflickers.” 30 123. LMK maintained, developed, and distributed anonymous features which are dangerous, despite the foreseeability of injury and wrongful death caused by its services to teen users. LMK failed to take action to enforce its purported zero-tolerance policies against bullying and harassing behavior, failed to monitor and report bullying and harassing behavior to law enforcement, and failed to prohibit sexually explicit and inappropriate texts and photos sent to young users as they promised in their stated policies and guidance. In this way, they have failed to exercise the duty of care owed to its users including Carson. LMK’s Misrepresentations 124. On Google Play Store, LMK is accompanied by a “Teen” content rating sign, indicating that the app is marketed toward teenage users. According to Google Play, content ratings are the responsibility of app developers.26 125. According to the LMK’s Guidelines, LMK does “not tolerate any sexually explicit content. This includes content in the form of text, photo, and video.” LMK 26 Google Play Help, Apps & Games Content Ratings on Google Play, https://support.google.com/googleplay/answer/6209544?p=appgame_ratings&visit_id=637560335067969325- 3904586056&rd=1 31 represented that it “does not tolerate ANY objectionable content or abusive users.”27 126. LMK’s Terms of Use states that it will not tolerate any user who is “mean, is bullying someone or is intended to harass, scare or upset anyone.” It expressly represents: “LMK does not tolerate ANY objectionable content or abusive users. Any objectionable content posted on LMK will be reviewed by our Content Safety team.” “Reports of stalking, threats, bullying, or intimidation, are taken very seriously and may be reported to law enforcement.” 127. According to LMK’s Privacy Policy, LMK collects information about “how [users] communicate with other users on LMK, such as their names, the time and date of your communications, the number of messages [users] exchange with your friends, which friends [users] exchange messages with the most, and [the user’s] interactions with messages (such as when [users] open a message or capture a screenshot).”28 128. LMK represented that it would “go to great lengths to protect our community from ‘inappropriate users’ by implementing various technology and moderation practices including: Artificial intelligence technology to identify potentially inappropriate content within text . . . human moderation to assess whether content or user violates our Community Guidelines.”29 129. According to the above representations -- that LMK collects a wide variety of 27 Guidelines, LMK, at https://www.lmk.chat/guidelines 28 Privacy Policy, LMK, https://www.lmk.chat/privacy 29 What is LMK doing to ensure safety within the app?, LMK Support Center, https://lmk.zendesk.com/hc/en- us/articles/360047469394-What-is-LMK-doing-to-ensure-safety-within-the-app- 32 private data of minor users and uses artificial intelligence technology and human labor to discern whether contents are harmful -- LMK would have known that teen users, including Carson, were receiving sexually explicit contents, bullying, and harassing messages. 130. Despite its knowledge of bullying, LMK did not report the incident to the police, did not enforce its “no tolerance” policy, and did not prohibit sexually explicit content. 131. LMK represents that it is collecting a wide variety of information about the users that would reveal their age and contents exchanged, including: “names of other users, time and date of communications, number of messages you exchange with your friends . . . content information, usage information, location information, and phonebooks.” 132. Despite its representations to consumers, LMK is unable and/or unwilling to detect behavior that constitute bullying, harassing, and inappropriate comments by users per its own policies and guidelines. 133. Upon information and belief, Carson relied on the misrepresentations of LMK, that it would prohibit sexual content (text, photo, and video) and report threats, bullying or intimidation. These misrepresentations were material and resulted in the injury suffered by Carson and other consumers. 134. Carson’s estate is therefore entitled to compensatory and punitive damages for intentionally causing physical and emotional pain and distress suffered by Carson Bride in the months leading to his death, and the pecuniary loss and loss of society, 33 companionship, services and expenses incurred, in the amount that the jury may determine fair and reasonable. 135. Putative class members would use LMK’s services in the future which entitles them to injunctive relief. Putative class members are also entitled to compensatory damages, restitution, and punitive damages in the amount that the jury may determine fair and reasonable. Cyberbullying on Snapchat and Misrepresentations regarding Snap Kits 136. Snapchat is a software service by Snap Inc. that provides a mobile app allowing consumers to send and receive photo and video messages. Snapchat markets itself as a messaging app in which contents are posted for a short time before they disappear from users’ view. 137. Market and consumer data company Statista found that, as of June 2020, 66.5% of Snapchat users in the United States were between 12 and 17 years of age, making it the No. 1 app used among teenagers.30 Since the spring of 2016, Snapchat consistently ranks as the most popular social network for teenagers in the United States. Yet, 31% of young people experienced cyberbullying on Snapchat.31 138. The age rating for Snapchat is 13, but there is no age verification procedure 30 Most popular social networks of teenagers in the United States from fall 2012 to fall 2020, Statista, https://www.statista.com/statistics/250172/social-network-usage-of-us-teens-and-young-adults/ 31 Id. 34 in the sign-up process. 139. Snap Kit is Snap Inc.’s platform which allows third-party apps to use Snapchat features. Snap Kit grants third-party apps access to Snapchat’s Application Programming Interface (API). Third-party apps on Snap Kit can allow users to user their Snapchat credentials to log-in. 140. Snap Inc. benefits from Snap Kit by bringing new users to Snapchat via third- party apps while reengaging existing users by offering a variety of third-party, add-on services. Third-party app developers benefit through Snap Kit by generating referral traffic by tapping into Snapchat’s more than 280 million teen users world-wide.32 141. Since on or around May 2019, both LMK and YOLO were approved by Snap Inc. to be used on Snapchat through Snap Kit. Both apps are also advertised for “teens” and provide a platform for anonymous chat, polling, and Q&A. 142. Upon information and belief, YOLO and LMK’s users are predominantly 143. Developers of third-party apps seeking access to Snap Kit must pass a human review and approval process, and Snap Inc. reviews the functionality of the other apps to ensure they satisfy Snap Inc.’s standards. Snap Inc.’s approval process is meant to retain control over the third-party app’s operations. Snap Inc.’s trust, safety and customer 32 Josh Constine, Snapchat launches privacy-safe Snap Kit, the un-Facebook Platform, TechCrunch, June 14, 2018, at https://techcrunch.com/2018/06/14/snapchat-snap-kit/ 35 operations teams review the third-party apps before they approve them for Snap Kit access. Snap Inc. represented that, if Snap Inc.’s review teams have any concerns about a third- party app’s “security or intentions,” the third-party app is denied access to Snap Kit.33 144. According to Snap Kit App Review Guidelines, third-party apps that “[e]ncourag[e] or promot[e] violence, harassment, bullying, hate speech, threats, and/or self-harm” are considered “unacceptable.” Unacceptable features or content include “inadequate safeguards in place to prevent this type of behavior.”34 145. Per the Snap Kit App Review Guidelines, to access Snap Kit, all third-party apps “containing user generated content must have the ability to report inappropriate content and have a contact method made available to users. The developer team should be able to swiftly and effectively handle any concerns raised about the safety of users.”35 146. Snap Inc. states that if a third-party app violates the Review Guidelines or contains unacceptable features or content, Snap Inc. will remove the third-party app. One example of unacceptable features include: “Encouraging or promoting violence, harassment, bullying, hate speech, threats, and/or self-harm. This also includes inadequate safeguards in place to prevent this type of behavior.” 36 147. According to Snap Kit’s Review Guidelines, where an app contains potential 33 Lauren Goode, Snap Will Let Other Apps Use Its Features, But Not Your Data, WIRED, June 14, 2018, https://www.wired.com/story/snap-kit/ 34 Snap Kit App Review Guidelines, https://kit.snapchat.com/docs/review-guidelines 35 Id. 36 Id. 36 trust and safety issues, including “user-generated content, anonymous postings . . . or an audience that includes minors” the app would be subject to longer and on-going review processes. 148. Snap Inc. states that it would take negative user feedback in to account in reviewing third-party apps. 37 149. Additionally, Snap Kit’s Review Guidelines state, “[a]ll apps must conform with local laws and regulations in the jurisdiction where they are available.”38 Almost all states and territories in the U.S. has Anti-Bullying laws that prohibit bullying and require reporting incidents, prevention methods, and safeguards.39 150. Upon information and belief, none of the promises and policies stated by Stan Inc. above are enforced. 151. Both LMK and YOLO were subject to Snap Kit’s Review Guidelines and periodic review processes. But despite LMK and YOLO’s defectively designed anonymous messaging features that were known to promote cyberbullying and harassment among users, Snap Inc. did not remove them from Snap Kit. 152. Snap Inc. knew about the dangers of anonymous apps that promote cyberbullying, because similar problems had surfaced when Snap Inc. had previously 37 Id. 38 Id. 39 Key Components in State Anti-Bullying Laws, Policies, and Regulations, STOPBULLYING.GOV, https://www.stopbullying.gov/resources/laws/key-components 37 allowed the anonymous app Sarahah to be used in connection with Snapchat’s platform.40 Sarahah app was eventually banned from Apple and Android app stores for “making bullying easy.”41 153. Snap Inc. represented that third-party apps on Snap Kit are periodically re- reviewed for compliance.42 Through numerous reports, customer complaints and negative feedback – which Snap Inc. purports to take into account in their review -- Snap Inc. would have known that the anonymous messaging apps YOLO and LMK are causing fatal harm and that those apps had failed to enforce safeguards. Yet, contrary to the representations in its Review Guidelines, Snap Inc. has not removed YOLO and LMK from its platform. 154. Despite numerous reports of harassment, bullying, and harm suffered by teenagers arising from anonymous features embedded in YOLO and LMK, Snap Inc. reviewed, vetted, and approved YOLO and LMK to be on Snap Kit, exposing millions of teen users on Snapchat to these apps. Snap Inc. continues to provide YOLO and LMK access to its platform, users, and suite of services. 155. Despite its representations to consumers, Snap Inc. maintained, developed, and distributed anonymous features together with YOLO and LMK to Snapchat’s teen users, despite knowledge of their dangerous and defective design. The injuries and 40 How to Link your Sarahah Account To Your Snapchat – Here’s How, BUSTLE, Aug. 10, 2017, https://www.bustle.com/p/how-to-link-your-sarahah-snapchat-so-your-friends-can-send-you-messages-75838 41 Sarahah: Popular Anonymous Messaging App Blamed for Making Abuse Easy is Kicked Off iphone and Android, INDEPENDENT, Feb. 26, 2018, https://www.independent.co.uk/life-style/gadgets-and-tech/news/sarahah-banned-iphone- android-download-app-store-down-not-working-anonymous-curious-cat-a8228941.html 42 Snap Kit App Review Guidelines, https://kit.snapchat.com/docs/review-guidelines 38 wrongful deaths caused by anonymous apps to teen users were foreseeable, but Snap Inc. failed to maintain safeguards to protect users from harm. In this way, they have failed to exercise the duty of care owed to Snapchat users including Carson Bride. 156. Upon information and belief, Carson relied on the misrepresentations of Snap Inc. that it reviewed, vetted, and approved third-party apps like YOLO and LMK, and that it would remove third-party apps from Snap Kit if they fail to comply with Snap’s Review Guidelines. These misrepresentations were material and resulted in the injury suffered by Carson and other consumers. 157. Carson’s estate is therefore entitled to compensatory and punitive damages for intentionally causing physical and emotional pain and distress suffered by Carson Bride in the months leading to his death, and the pecuniary loss and loss of society, companionship, services and expenses incurred, in the amount that the jury may determine fair and reasonable. 158. Putative class members would use Snapchat’s services in the future which entitles them to injunctive relief. Putative class members are also entitled to compensatory damages, restitution, and punitive damages, in the amount that the jury may determine fair and reasonable. CLASS ACTION ALLEGATIONS 159. Plaintiffs bring this class action on behalf of themselves and Class Members pursuant to Rule 23 of the Federal Rules of Civil Procedure. 39 160. Plaintiffs Carson Bride and Tyler Clementi Foundation seek to represent a national “Snapchat Class” defined as follows: All United States residents between the ages of 13 and 17, who are or were registered users of Snapchat between May 10, 2018 and the date of judgment in this action, excluding Defendant, Defendant’s officers, directors, and employees, Defendant’s subsidiaries, the Judge to which this case is assigned and the immediate family of the Judge to which this case is assigned. 161. Plaintiffs Carson Bride and Tyler Clementi Foundation seek to represent a national “YOLO Class” defined as follows: All United States residents between the ages of 13 and 17, who are or were registered users of YOLO between May 1, 2019 and the date of judgment in this action, excluding Defendant, Defendant’s officers, directors, and employees, Defendant’s subsidiaries, the Judge to which this case is assigned and the immediate family of the Judge to which this case is assigned. 162. Plaintiffs Carson Bride and Tyler Clementi Foundation seek to represent a national “LMK Class” defined as follows: All United States residents between the ages of 13 and 17, who are or were registered users of LMK between May 1, 2019 and the date of judgment, excluding Defendant, Defendant’s officers, directors, and employees, Defendant’s subsidiaries, the Judge to which this case is assigned and the immediate family of the Judge to which this case is assigned. 163. Plaintiffs reserve the right to re-define any of the Class definitions prior to class certification or thereafter, including after having the opportunity to conduct 40 discovery. 164. Plaintiffs are members of the putative class that they seek to represent. 165. The definition of the putative class is narrowly tailored to include only persons who can be identified through Defendants’ database of registered users for the discrete period of time from when the Defendants’ apps launched through the date of judgment in this action, or from the appropriate statutory limitations period through the date of judgment in this action. F.R.C.P. 23(a) 166. The proposed class is so numerous that the individual joinder of all its members, in this or any action, is impracticable. The exact number or identification of the members of the putative class is presently unknown to Plaintiffs, but it is believed to comprise millions of United States residents throughout the nation, thereby making joinder impractical. 167. Common questions of fact and law exist as to all Class Members. These include, but are not limited to, the following: (a) Whether the defective design of the anonymous messaging function was dangerous such that the solicitation, maintenance and distribution of the apps’ services constitute unfair and deceptive business practices; (b) Whether the representations made by each of the Defendants’ apps were materially misleading to consumers; 41 (c) Whether Defendants failed to carry out what they explicitly represented through their app store descriptions, terms of use, and privacy policy; (d) Whether Defendants’ conduct resulted in harm to consumers; and (c) Whether Plaintiffs and the Class members are entitled to an injunction, damages, restitution, equitable relief and other relief deemed appropriate and the amount and nature of such relief. 168. Plaintiffs’ claims are typical of the claims of the putative class members. Plaintiffs and all putative Class members were subject to the above misrepresentations made by Defendants and all have claims based on the same legal theories against the Defendants. 169. The factual bases of Defendants’ misconduct are common to the putative Class members and represent a common scheme and pattern of practice surrounding the defectively designed products and services, and misrepresentations about their services and guidelines, and enforcement, resulting in injury to all putative class members alike. Plaintiffs are asserting the same rights, making the same claims, and seeking similar relief for themselves and all other putative class members. 170. Plaintiffs are adequate representatives of the proposed class because they are putative class members and do not have interests that conflict with those of the other putative class members they seek to represent. 171. Plaintiffs are represented by experienced and able counsel, who have litigated 42 lawsuits of this complexity, and Plaintiffs’ Counsel intends to prosecute this action vigorously for the benefit of the proposed class. Plaintiffs and their Counsel will fairly and adequately protect the interests of the class members. Plaintiffs’ Class Seeks Certification under F.R.C.P. 23(b)(3) 172. The central questions of whether Defendants’ apps were dangerous and defectively designed, and whether Defendants’ made misrepresentations about their safeguards and enforcement predominate over all other questions, both legal and factual, in this litigation. 173. A class action is the superior method available for the efficient adjudication of this litigation because: (a) The prosecution of separate actions by individual members of the Class would create a foreseeable risk of inconsistent or varying adjudications which would establish incompatible results and standards for Defendant; (b) Adjudications with respect to individual members of the Class would, as a practical matter, 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 own separate interests; (c) Class action treatment avoids the waste and duplication inherent in potentially thousands of individual actions, and conserves the resources of the courts; and (d) the claims of the individual class members are relatively small compared to the burden and expense that would be required to individually litigate their claims against Defendant, so it would be impracticable for the members of the Class to individually seek redress for Defendant’s 43 wrongful conduct. Even if the members of the Class could afford individual litigation, the court system could not. Moreover, this action is manageable as a class action. Individualized litigation creates a 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 single adjudication, economy of scale, and comprehensive supervision by a single court. Plaintiffs’ Class Seeks Certification under F.R.C.P. 23(b)(2) 174. A class action for injunctive and equitable relief pursuant to Rule 23(b)(2) of the Federal Rules of Civil Procedure is also appropriate. Defendant acted or refused to act on grounds generally applicable to the Class thereby making appropriate final injunctive and equitable relief with respect to the Class as a whole. Defendants’ actions are generally applicable to the Class as a whole, and Plaintiffs, on behalf of the Class, seeks damages and injunctive relief described herein. Moreover, Defendant’s systemic policy and practices make declaratory relief with respect to the Class as a whole appropriate. FIRST CAUSE OF ACTION: STRICT LIABILITY (Plaintiff Estate of Carson Bride Individually and on Behalf of a National Class Against All Defendants) 175. At all times relevant to this action, Defendants directed its business activities, solicited the use of, and provided service to residents in Oregon, and conducted regular, sustained, and isolated business activity in the state of Oregon. 176. Plaintiff Carson Bride brings this claim individually and on behalf of a 44 National class against all Defendants. 177. At all times relevant to this action, Plaintiff Carson Bride was a resident of the state of Oregon. 178. The acts complained of herein, and the injury suffered by Plaintiff Carson Bride occurred in Oregon. 179. As alleged above, Defendants’ anonymous apps, YOLO and LMK which integrates with Snapchat, was unreasonably dangerous for use by teenagers, and the unreasonable danger was inherent in designing, maintaining, distributing the anonymous messaging function. 180. At all material times, Defendants knew, or in the exercise of reasonable care, should have known that the anonymity features on teen messaging apps that lack adequate safeguards pose serious danger of mental harm to teen users. Yet, Defendants failed to warn users about the dangers of using the service – instead, it made false promises about preventing harm. 181. Defendants’ apps promoted cyberbullying and are designed to be inherently dangerous. LMK and YOLO are unable or unwilling to detect and identify abusive users who send bullying and harassing messages. These apps are also unable or unwilling to enforce their policies where they state they would ban, reveal, and report abusive users. Despite Snap Inc.’s policy of removing third-party apps from Snap Kit that are noncompliant, YOLO, LMK and Snapchat still lack safeguards to prevent cyberbullying. 45 By failing to enforce their stated policies, Defendants’ apps hinder victims, parents, adults, and schools from identifying the abusive users and undermine efforts to prevent future harm. Defendants’ products and services provide the means, motive, and opportunity for bullying to occur. Defendants’ failure to enforce their policies spreads the belief among young users that they can impose harm behind screens without facing any consequences. 182. As a direct result of the defective and unreasonably dangerous design of the Defendants’ apps, Plaintiff Carson Bride suffered from bullying and harassment by unknown users on Defendants’ apps and suffered while being unsuccessful at getting Defendants’ apps to reveal the identities of those sending harassing messages. 183. Defendants’ apps caused Carson’s pain, suffering, and wrongful death. 184. The Estate of Carson Bride and Class members are therefore entitled to compensatory damages for physical and emotional pain and distress such as those suffered by Carson Bride in the months leading to his death, and the pecuniary loss and loss of society, companionship and services to Carson Bride’s parents as the jury may determine fair and reasonable. 185. The Estate of Carson Bride and Class members are entitled to punitive damages for the gross, continued, and callous misrepresentations such as those caused by the non-response of Defendant YOLO toward the Estate of Carson Bride, even after being notified of his death multiple times. 186. The Estate of Carson Bride and class members are entitled to expenses such 46 as those incurred by Carson Bride for services including burial and memorial services. 187. The Estate of Carson Bride and class members are entitled to attorney’s fees and reimbursement of all costs as deemed fair and reasonable by the court. 188. Putative Class members use and would use Defendants’ apps in the future which entitles them to injunctive relief. SECOND CAUSE OF ACTION: NEGLIGENCE (Plaintiff Estate of Carson Bride Individually and on behalf of a Nation-wide Class Against All Defendants) 189. Plaintiff Carson Bride, adopts and incorporates by reference all allegations contained in the foregoing paragraphs as though fully set forth herein. 190. Plaintiff Carson Bride brings this claim individually and on behalf of a National class against all Defendants. 191. Defendants owed a due to use ordinary care in designing, maintaining, and distributing its services to teen users. 192. Defendants were negligent in one or more of the following, each of which foreseeably created an unreasonable risk of injury to Carson Bride and was a substantial factor in causing Carson’s death and Plaintiff’s resulting damages:  Failing to remove the dangerous function of anonymous apps or otherwise failing to use reasonable care to address the danger of anonymous apps created by Defendants; 47  Marketing and soliciting teenagers to use the Defendants’ apps without safeguards knowing that bullying and harassment would proliferate on the platforms;  Failure to warn users about the serious negative effects of using the anonymity chat apps and instead falsely promoting positive effects;  Failure to let users know that their purported safeguards (monitoring, reporting, banning, revealing identities) are not effective. 193. Plaintiff reserves the right to supplement its specifications of negligence as to each of the Defendants after conducting reasonable and necessary discovery. 194. As a direct and proximate result of the negligence of each of the Defendants, Plaintiff Carson Bride suffered from harassment by unknown users within his networks, suffered while making unsuccessful attempts to reveal the identities of those sending harassing messages, and suffered from the high volume of unfiltered messages sent to him that caused his wrongful death. 195. The Estate of Carson Bride and Class members are therefore entitled to compensatory damages for physical and emotional pain and distress, such as those suffered by Carson Bride in the months leading to his death, and the pecuniary loss and loss of society, companionship and services to Carson Bride’s family, as the jury may determine fair and reasonable. 196. The Estate of Carson Bride and Class members are entitled to punitive 48 damages for the gross, continued, and callous misrepresentations, such as the non-response of Defendant YOLO toward the Estate of Carson Bride, even after being notified of Carson’s death multiple times. 197. The Estate of Carson Bride and Class members are entitled to expenses, such as those incurred by Carson Bride including burial and memorial services. 198. The Estate of Carson Bride and Class members are entitled to attorney’s fees and reimbursement of all costs as deemed fair and reasonable by the court. 199. Putative Class members use and would use Defendants’ apps in the future which entitles them to injunctive relief. THIRD CAUSE OF ACTION: FRAUDULENT MISREPRESENTATION (Plaintiff Estate of Carson Bride, individually and on behalf of a National Class, Against All Defendants; Kristin Bride Against YOLO) 200. Plaintiff Carson Bride, adopts and incorporates by reference all allegations contained in the foregoing paragraphs as though fully set forth herein. 201. Plaintiff Carson Bride brings this claim individually and on behalf of a National class against all Defendants. 202. Kristin Bride brings this claim against YOLO. 203. Defendants engaged in the tort of common law fraud or fraudulent misrepresentation. 204. The elements of fraudulent misrepresentation are (1) the defendant made a false representation, (2) in reference to a material fact, (3) that the defendant made with 49 knowledge of its falsity, (4) with an intent to deceive, and (5) reliance was taken based on the representation. 205. As described in the allegations above, the Defendants’ statements about taking specific action to address bullying and harassing behavior -- including removing third-party apps, banning abusive users and revealing their identities, reporting to authorities -- were in reference to a material fact to consumers, and Defendants knew those statements were false when they made them. 206. The Defendants knew that victims of bullying would rely on the policies and assurance. 207. The Defendants knew from news reports and customer reviews that teen users, supervising adults, app stores and app markets would consider the statement in determining whether the apps are suitable for teenagers’ use. 208. Defendant YOLO specifically set up a Contact Us form and a “law enforcement” email address for purportedly enforcing their policies. However, reports made through the contact form and email address were either invalid and/or ignored. 209. Carson reasonably relied upon Defendants’ statements to their detriment when he began to use YOLO. Carson, at various points throughout the months preceding his death, looked up “YOLO Identity Reveal,” trying to find ways to reveal the identities of the anonymous message senders. 210. Kristin Bride reasonably relied upon YOLO’s representations and sent 50 multiple requests to YOLO to urge YOLO to reveal the message senders’ identities. 211. In like manner, Plaintiff Carson reasonably relied upon Snapchat and LMK to carry out their own stated policies and guidelines when using their apps. 212. The Defendants’ fraudulent misrepresentations proximately caused harm to Plaintiffs Carson and Kristin Bride. By not revealing the identities of users who were sending anonymous harassing and bullying messages to Carson, the Defendants promoted cyberbullying. Defendant’s fraudulent misrepresentation also caused Carson and Kristin to expend painstaking, frustrating effort to reveal the identities of abusive users sending harassing messages. While investigating which of his friends were sending him the abusive messages, Carson felt emotional distress, deep-seated vulnerability, and frustration. While relying for Defendants to fulfill their promise, Kristin suffered grief, frustration, anger, and helplessness. Defendants’ fraudulent misrepresentation directly contributed to Plaintiff Carson’s wrongful death and contributed to Carson’s and Kristin’s emotional harm. 213. The Estate of Carson Bride, Kristin Bride, and Class members are therefore entitled to compensatory damages for physical and emotional pain and distress such as that suffered by Carson Bride in the months leading to his death, and the pecuniary loss and loss of society, companionship and services as the jury may determine fair and reasonable. 214. The Estate of Carson Bride, Kristin Bride, and class members are entitled to punitive damages for the gross, continued, and callous misrepresentations such as the non- response of Defendant YOLO toward the Estate of Carson Bride, even after being notified 51 of Carson’s death multiple times. 215. The Estate of Carson Bride, Kristin Bride, and class members are entitled to expenses incurred for services such as those rendered to Carson Bride including burial and memorial services. 216. The Estate of Carson Bride, Kristin Bride, and class members are entitled to attorney’s fees and reimbursement of all costs as deemed fair and reasonable by the court. 217. The Estate of Carson Bride, Kristin Bride and class members are also entitled to injunctive relief for ongoing misrepresentations by Defendants. FOURTH CAUSE OF ACTION: NEGLIGENT MISREPRESENTATION (Plaintiff Estate of Carson Bride, individually, and on behalf of a National Class Against All Defendants; Kristin Bride against Defendant YOLO) 218. Plaintiff Carson Bride, adopts and incorporates by reference all allegations contained in the foregoing paragraphs as though fully set forth herein. 219. Plaintiff Carson Bride brings this claim individually and on behalf of a National class against all Defendants. 220. Kristin Bride brings this claims against Defendant YOLO. 221. Defendants committed the tort of negligent misrepresentation elements of which claim are: (1) the defendant made a false statement or omission of a fact, (2) the statement was in violation of a duty to exercise reasonable care, (3) the false statement or omission involved a material issue, (4) the plaintiff reasonably relied and to its detriment relied on the false information, and (5) the defendant’s challenged conduct proximately 52 caused injury to the plaintiff. 222. As described in the allegations above, Defendants made false statements about enforcing a zero-tolerance policy against bullying and harassing behavior, including banning users and revealing their identity, reporting harassment by users, and removing third-party apps that lack adequate safeguards against bullying and harassing behavior. 223. These false statements violated the Defendants’ duty of reasonable care to provide accurate information to its users, the app stores, and the general public. 224. As described above, the Defendants’ statements were made in reference to a material fact or issue which Plaintiffs Carson reasonably relied on to his detriment, and these statements were the proximate cause of his emotional distress damages and caused Carson’s wrongful death. 225. Kristin Bride reasonably relied upon YOLO’s representations and sent multiple requests to YOLO to urge YOLO to reveal the message senders’ identities. 226. The Estate of Carson Bride, Kristin Bride, and Class members are therefore entitled to compensatory damages for physical and emotional pain and distress such as those suffered by Carson Bride in the months leading to his death, and the pecuniary loss and loss of society, companionship and services as the jury may determine fair and reasonable. 227. The Estate of Carson Bride, Kristin Bride, and class members are entitled to punitive damages for the gross, continued, and callous misrepresentations such as the non- 53 response of Defendant YOLO toward the Estate of Carson Bride, even after being notified of Carson’s death multiple times. 228. The Estate of Carson Bride, Kristin Bride, and Class members are entitled to expenses incurred for services rendered such as burial and memorial services. 229. The Estate of Carson Bride, Kristin Bride, and Class members are entitled to attorney’s fees and reimbursement of all costs as deemed fair and reasonable by the court. 230. Plaintiff Carson Bride, Kristin Bride, and Class members are also entitled to injunctive relief for ongoing misrepresentations by Defendants. FIFTH CAUSE OF ACTION: OREGON UTPA (OR. REV. STAT. §§ 646.605) (Plaintiff Estate of Carson Bride, Kristin Bride, on behalf of the Oregon sub-class Against All Defendants) 231. Plaintiff Carson Bride, individually, and on behalf of all others similarly situated, adopts and incorporates by reference all allegations contained in the foregoing paragraphs as though fully set forth herein. 232. The Oregon Unlawful Trade Practices Act (“UTPA”), ORS §646.605 et seq., protects persons who obtain real estate, goods or services primarily for personal, family or household purposes from fraudulent and unfair business practices. 233. The UTPA generally prohibits the false representation or false advertising of goods and services. ORS §646.608(1)(e). 234. Defendant’s apps and services are marketed to customers primarily for personal, family or household purposes. 54 235. Defendants YOLO, LMK and Snap Inc. violated the UTPA in the following respects:  Creating and designing anonymous apps which are inherently dangers and failing to use reasonable care to address the danger and risk of such services;  Marketing and soliciting the anonymous app’ services to teenagers that lack adequate safeguards knowing that bullying and harassment would proliferate on the platforms;  Failure to warn users about the serious negative effects of using the anonymity chat apps and instead falsely promoting positive effects;  Failure to let users know that their purported safeguards (monitoring, detection, banning, revealing identities) are not effective; and  Making false promises about specific actions they will take to combat cyberbullying such as banning abusive users and unmasking their identity, reporting to authorities, and removing third-party apps that violate zero-tolerance policies about cyberbullying. 236. Defendant YOLO made affirmative misrepresentations as follows:  Knowingly misrepresenting that it would reveal identities of, and ban users that engage in inappropriate and bullying conduct on the platform when the app is unable and/or unwilling to carry out the policy and 55 notice represented to consumers;  Knowingly misrepresenting that it would respond to contacts made by users through the Contact Us forms and Law Enforcement emails. 237. Defendant LMK made affirmative misrepresentations including: “LMK does not tolerate ANY objectionable content or abusive users. Any objectionable content posted on LMK will be reviewed by our Content Safety team.” Upon information and belief, this statement is false. 238. Defendant Snap Inc. made affirmative misrepresentations conveying that it would remove third-party apps that fail to confirm to its community guidelines against bullying and harassment. Upon information and belief, this statement is false. 239. The unlawful trade practices alleged herein caused an ascertainable loss of injury to Plaintiffs and the sub-class. 240. Pursuant to ORS 646.638(1), Plaintiffs and each sub-class member is entitled to a $200 minimum statutory penalty as a result of the unlawful trade practices alleged 241. Plaintiffs and the sub-class are entitled to their reasonable attorney fees pursuant to ORS 646.638(3). 242. Plaintiffs and the sub-class are entitled to injunctive and equitable relief. 56 SIXTH CAUSE OF ACTION: NEW YORK GENERAL BUSINESS LAW § 349 (Plaintiff Tyler Clementi Foundation on behalf of New York sub-class against all Defendants) 243. Plaintiff Tyler Clementi Foundation restates each and every paragraph of this Complaint as if fully rewritten herein. 244. Plaintiff Tyler Clementi Foundation brings this claim on behalf of New York Sub-Class members. 245. Plaintiff Tyler Clementi Foundation and New York Sub-Class members and Defendants are “persons” under N.Y. Gen. bus. Law § 349(h), the New York Deceptive Acts and Practices Act (“NY DAPA”). 246. Plaintiff Tyler Clementi Foundation is associated with members who belong to the defined sub-class and have used, or are currently using Defendants’ apps. 247. Defendants’ actions as set forth herein occurred in the conduct of trade or commerce under the NY DAPA. 248. The NY DAPA makes unlawful “[d]eceptive acts or practices in the conduct of any business, trade or commerce.” N.Y. Gen. Bus. Law § 349. Defendants’ conduct, as set forth herein, constitutes deceptive acts or practices under this section:  Creating and designing anonymous apps which are inherently dangers and failing to use reasonable care to address the danger and risk of such services;  Marketing and soliciting the anonymous app’ services to teenagers that 57 lack adequate safeguards knowing that bullying and harassment would proliferate on the platforms;  Failure to warn users about the serious negative effects of using the anonymity chat apps and instead falsely promoting positive effects;  Failure to let users know that their purported safeguards (monitoring, detection, banning, revealing identities) are not effective; and  Making false promises about specific actions they will take to combat cyberbullying such as banning abusive users and unmasking their identity, reporting to authorities, and removing third-party apps that violate zero-tolerance policies about cyberbullying. 249. In the course of business, Defendants violated N.Y. Gen. Bus. Law § 349 by making false or misleading statements.  In the course of business, Defendant YOLO made affirmative misrepresentations that were conveyed to Plaintiffs and Class members including: “if [users] send harassing messages to our users, your identity will be revealed” and “YOLO has no tolerance for objectionable content or abusive users. You’ll be banned for any inappropriate usage.” Upon information and belief, this statement is false.  In the course of business, Defendant LMK made affirmative 58 misrepresentations including: “LMK does not tolerate ANY objectionable content or abusive users. Any objectionable content posted on LMK will be reviewed by our Content Safety team.” Upon information and belief, this statement is false.  In the course of business, Defendant Snap Inc. made affirmative misrepresentations conveying that it would remove third-party apps that fail to confirm to its community guidelines against bullying and harassment. Upon information and belief, this statement is false. 250. In the course of business, Defendants YOLO and LMK made affirmative misrepresentations in its Privacy Policy conveying to Plaintiffs and Sub-Class members that it collects personally identifiable information to “protect and enforce our rights and the rights of other Users against unlawful activity, including identify theft and fraud, and other violations of our Terms of Use” which includes their zero-tolerance policy toward bullying and harassment.” Upon information and belief, this statement is false. 251. In the course of business, Defendant YOLO made affirmative misrepresentations that conveyed to Plaintiffs and Sub-Class members that certain reports and communications sent to their “law enforcement” email or through their CONTACT US form would be responded to in a timely manner. Upon information and belief, this statement is false. 59 252. Plaintiff Tyler Clementi Foundation and New York Sub-Class members had no way of discerning whether Defendants’ representations were false and misleading because Sub-Class members do not have access to Defendants’ internal protocols, practice, and operations regarding their zero-tolerance policy and privacy policy. 253. Defendants thus violated the NY DAPA by making false statements that induced reasonable consumers to believe that the apps would enforce their zero-tolerance policy against bullying and harassing behavior, reveal the bad actors’ identities, and monitor the contents of users for harmful content as stated in the Defendants’ marketing language, app store descriptions, terms of use, and privacy policy. 254. Defendants intentionally and knowingly made affirmative misrepresentations regarding the services on their apps with intent to mislead Plaintiff Tyler Clementi Foundation and New York Sub-Class members. 255. Defendants knew or should have known that their conduct violated the NY 256. Defendants’ misrepresentations of their services were material to Plaintiffs and Class members. 257. Defendants’ unfair and deceptive acts were likely to, and did in fact, deceive regulators and reasonable consumers, including Plaintiffs and Sub-Class members, 258. Plaintiff Tyler Clementi Foundation and New York Sub-Class members relied on the misrepresentations when they used the apps and gave their personal information and 60 data to the Defendants, which Defendants used to make profit. 259. Defendants’ violations present a continuing risk to Plaintiff, New York Sub- Class members, and the general public. 260. Plaintiffs and New York Sub-Class are entitled to all injunctive relief, actual and statutory damages and punitive damages to the extent available under the law, reasonable attorneys’ fees and costs, and all other just and appropriate relief available under the NY DAPA. 261. Defendants’ unlawful acts and practices complained of herein affect the public interest. 262. Plaintiff Tyler Clementi Foundation and New York State Class members suffered ascertainable loss and actual damages as a direct and proximate result of Defendants’ actions. 263. Defendants have an ongoing duty to all customers and the public to refrain from unfair and deceptive practices under the NY DAPA. As a result of Defendants’ ongoing unlawful acts, Plaintiffs and all Class members are suffering ongoing harm. 264. As a result of the foregoing willful, knowing, and wrongful conduct of Defendants, Plaintiff Tyler Clementi Foundation and Class members have been damaged in an amount to be proven at trial, and seek all just and proper remedies, including but not limited to actual damages or $50, whichever is greater, treble damages up to $1,000, punitive damages to the extent available under the law, reasonable attorneys’ fees and 61 costs, an order enjoining Defendants’ deceptive and unfair conduct, and all other just and appropriate relief available under the NY DAPA. SEVENTH CAUSE OF ACTION: NEW YORK GENERAL BUSINESS LAW § 350 (Plaintiff Tyler Clementi Foundation on behalf of New York Sub-Class against all Defendants) 265. Plaintiff Tyler Clementi Foundation incorporates by reference all allegations in this Complaint and restate them as if fully set forth herein. 266. Plaintiff Tyler Clementi Foundation brings this claim on behalf of New York State Class members. 267. Defendants were engaged in the “conduct of business, trade or commerce,” within the meaning of N.Y. Gen. Bus. Law § 350, the New York False Advertising Act (“NY FAA”). 268. The NY FAA makes unlawful “[f]alse advertising in the conduct of any business, trade or commerce.” N.Y. Gen. Bus. Law § 350. False advertising includes “advertising, including labeling, of a commodity . . . if such advertising is misleading in a material respect,” taking into account “the extent to which the advertising fails to reveal facts material in light of . . . representations [made] with respect to the commodity . . .” N.Y. Gen. Bus. Law § 350-a. 269. Defendants caused to be made or disseminated through New York, through advertising, marketing, and other publications, statements and omissions that were untrue 62 or misleading, and that were known by Defendants, or that through the exercise of reasonable care should have been known by Defendants, to be untrue and misleading. 270. Defendants made numerous material and affirmative misrepresentations and omissions of fact with intent to mislead and deceive concerning the zero-tolerance for bullying and harassing users using their apps as well as their use of personally identifiable information. 271. Plaintiff and New York Sub-Class are entitled to all injunctive relief, actual and statutory damages and punitive damages to the extent available under the law, reasonable attorneys’ fees and costs, and all other just and appropriate relief available under the NY FAA. EIGHTH CAUSE OF ACTION : CALIFORNIA BUSINESS AND PROFESSIONAL CODE §§17200 & 17500 (All Plaintiffs on behalf of National Class Against All Defendants) 272. Plaintiffs restate each and every paragraph of this Complaint as if fully rewritten herein. 273. Plaintiffs on behalf of a National Class allege claims under California Business and Professional Code §§17200 & 17500 et seq. 274. Defendants have engaged in unfair competition and prohibited activities. 275. Unfair competition includes any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by California Bus. & Prof. Code §§17200 and 17500 et seq. 63 276. Plaintiffs and the putative National class seek equitable relief and to enjoin Defendants from engaging in its current practice and scheme of making misrepresentations about their services and guidelines, and enforcement to the detrimental harm of its users. 277. Pursuant to Cal. Bus. & Prof. Code §17200 and 17500 et seq., Plaintiffs and the putative National class seek an order enjoining the above-described wrongful acts and practices of the Defendants and for restitution and disgorgement. NINTH CAUSE OF ACTION : UNJUST ENRICHMENT (All Plaintiffs on behalf of National Class Against All Defendants) 278. Plaintiffs, individually, and on behalf of all others similarly situated, adopt and incorporate by reference all allegations contained in the foregoing paragraphs as though fully set forth herein. 279. Plaintiffs, and the putative National class, conferred a tangible economic benefit upon Defendants by signing up as a user to the apps, sacrificing privacy rights and privileges, and consuming advertisements. 280. Through the profits gained by the sale of personal and non-personal information of users and other purchases facilitated on the apps, Defendants reaped hundreds of millions of dollars of profit from its dangerous and defectively designed products and services, misrepresentations and deceptive trade practices. Defendants specifically represented in their privacy policies that they would collect private data to monitor and detect unlawful and inappropriate content that runs afoul their policies against 64 bullying and harassment. Instead, Defendants were enriched by their collection of minor users’ private data and selling it for advertisements and other profitable uses. Plaintiffs lost their privacy with no benefit in exchange and was exposed to harm as a result. 281. Under the circumstances, it would be against equity and good conscience to permit Defendant to retain the ill-gotten benefits that it received from Plaintiffs and members of the putative class. 282. It would thus be unjust and inequitable for Defendants to retain the benefit reaped from Plaintiffs and National Class members without restitution or disgorgement of valuable goods (e.g., personal data, in app purchases and more) provided to Defendants, or such other appropriate equitable remedy as appropriate, to the Plaintiffs and other members of the putative National class. TENTH CAUSE OF ACTION : INJUNCTIVE RELIEF (Plaintiffs and National Class Against All Defendants) 283. Plaintiffs, individually, and on behalf of all others similarly situated, adopts and incorporates by reference all allegations contained in the foregoing paragraphs as though fully set forth herein. 284. Defendants have refused to act on grounds generally applicable to the injunctive relief sought by Plaintiffs and other members of the putative class and subclass, thereby making final injunctive relief appropriate. 285. Defendant’s conduct, as more fully set forth herein, both in the past and 65 through the present, has demonstrated a willful disregard for the health and safety of minors and their parents and made misrepresentations and deceptive trade practices. 286. If Defendants continue with these practices, consumers, including the Plaintiffs and the putative classes will be irreparably harmed in that they do not have a plain, adequate, speedy, or complete remedy at law to address all of the wrongs alleged in this Complaint, unless injunctive relief is granted to stop Defendant’s improper conduct. 287. Plaintiffs and the putative National class and Sub-classes are therefore, entitled to an injunction requiring Defendants to carry out and implement the actions it has set forth in its own guidance to prevent bullying. Until the time that safeguards can be implemented, Defendants’ app shall be discontinued of its service, temporarily made unavailable on all app stores, and cease to allow users to access its app services. PRAYER FOR RELIEF WHEREFORE, the putative representative Plaintiffs, on behalf of themselves and the putative members of the class defined herein prays for judgment against the Defendants as follows: A. For an order certifying this action and/or common issues raised herein as a "Class Action under the appropriate provision of Federal Rule of Civil Procedure 23(a), 23(b)(2) and/or (b)(3); designating Class Representatives; and appointing the undersigned to serve as class counsel. B. For notice of class certification and of any relief to be disseminated to all Class 66 Members and for such other further notices as this Court deems appropriated under Fed. R. Civ. P. 23(d)(2); C. For an order requiring complete and immediate disclosure of all studies, reports, analyses, data, compilations, and other similar information within the possession, custody, or control of Defendants concerning, relating to, or involving the marketing, advertising, development, implementation, creation, and partnership between Defendants and their media partners; D. For an order barring Defendants from destroying or removing any computer or similar records which record evidence related to the claims above. E. For an order barring Defendants from attempting, on its own or through its agents, to induce any putative Class Members to sign any documents which in any way releases any of the claims of any Putative Class Members; F. For an order mandating YOLO and LMK to be immediately discontinued and banned from the market until they can prove that effective safeguards are implemented and enforced. Additionally, for an order mandating Snap Inc. to immediately remove all third-party apps on Snap Kit that fail to set up appropriate safeguards for young users from cyberbullying. For and order restraining Defendants from marketing, selling, operating, and otherwise replicating its services, specifically, anonymous messaging features, in the form of a different corporate entity and service; 67 G. For granting declaratory and injunctive relief to Plaintiffs as permitted by law or equity, including: enjoining Defendants from continuing the unlawful practices as set forth herein, and directing Defendants to identify, with Court supervision, victims of its conduct and pay them, restitution and disgorgement of all monies acquired by Defendants by means of any act or practice declared by the Court to be wrongful; H. For an award of compensatory damages in the amount exceeding $5,000,000, to be determined by proof of all injuries and damages described herein and to be proven at trial; I. Awarding Plaintiffs and the National Class and Sub-Class members appropriate relief, including actual and statutory damages; J. Awarding Plaintiffs, the National Class and Sub-Class members punitive damages to the extent allowable by law, in an amount to be proven at trial; K. Awarding restitution and disgorgement of Defendants’ revenues to the Plaintiffs and the proposed Class and Sub-Class members; L. Ordering Defendants to change their practice and set up safeguards to prevent harassment and bullying online and engage in a corrective advertising campaign; M. Compensation to Plaintiff Estate of Carson Bride for the physical and emotional pain and distress which Plaintiff Carson Bride suffered during months preceding his death from the use of Defendants’ apps, for his wrongful death, for the pecuniary loss and loss of society, companionship and services to the parents of Plaintiff 68 Carson Bride including punitive damages against Defendant YOLO for the gross, continued, and callous misrepresentations and non-response of Defendant YOLO toward Kristin Bride and the Estate of Carson Bride, even after being notified of the Carson’s death multiple times, and expenses incurred for services rendered to Carson Bride, decedent, including charges for burial and memorial services. N. Awarding Plaintiffs and the Class reasonable attorney’s fees and costs of prosecuting this action, including expert witness fees; O. Awarding pre-judgment and post-judgment interest; and P. Providing such other relief as may be just and proper. DEMAND FOR JURY TRIAL Plaintiffs hereby demand a trial by jury for all issues a jury may properly decide and for all of the requested relief that a jury may award. Dated: May 10, 2021 Respectfully submitted, By: EISENBERG & BAUM, LLP ________________________ Juyoun Han, Esq. (seeking pro hac vice) Eric Baum, Esq. (seeking pro hac vice) 24 Union Square East, PH New York, NY 10003 Attorneys for Plaintiffs43 43 Plaintiff’s Counsel thanks student intern Patrick K. Lin (Brooklyn Law School, 2L) for his contribution to this case and Complaint. 69 /s/ John K. Buche John K. Buche (Local Counsel) BUCHE & ASSOCIATES, P.C. 875 Prospect St., Suite 305 La Jolla, CA 92037 Attorneys for Plaintiffs 70

products liability and mass tort

CMfUDYcBD5gMZwczUf1D

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK BRYAN SCHOENGOOD, ANNETTA KING SIMPSON and WILLIE ROLAND, Individually and on behalf of all others similarly situated, Plaintiffs, -against- HOFGUR LLC D/B/A QUEENS ADULT CARE CENTER, and GEFEN SENIOR CARE GROUP, Defendants. Civil Action No.: cv-20-2022 CLASS ACTION COMPLAINT FOR DECLATORY JUDGMENT AND INJUCTIVE RELIEF Bryan Schoengood, Annetta King Simpson, and Willie Roland (sometimes collectively “Plaintiffs”), on behalf of themselves and others similarly situated, and by and through their attorneys, The Jacob D. Fuchsberg Law Firm, LLP, upon information and belief, state and allege as follows: PRELIMINARY STATEMENT 1. Plaintiffs bring this action against Defendants Hofgur, LLC d/b/a Queens Adult Care Center and Gefen Senior Care Group (sometimes collectively “Defendants”) on behalf of individuals with disabilities residing in Defendants’ assisted living facility for declaratory and injunctive relief to stop Defendants’ unlawful practices under Title III of the Americans with Disabilities Act of 1990 (“ADA”), 42 U.S.C. §§ 12101 et seq. and § 504 of the Rehabilitation Act (“RA”), 29 U.S.C. §§ 701 et seq. 2. Plaintiffs seek declaratory and injunctive relief (a) directing that the Defendants immediately comply with the applicable regulations and guidelines governing long-term care facilities with regard to the control and mitigation of coronavirus disease, and (b) appointing a Special Master at Defendants’ cost to chair a committee to evaluate, oversee, manage, advise, and direct ameliorative action for the residents of Defendants’ assisted living facility, who are particularly vulnerable to contracting and suffering dire consequences from the coronavirus.. 3. Hofgur, LLC d/b/a Queens Adult Care Center (“QACC”) is an adult care home located at 80-08 45th Avenue, Elmhurst NY 11373. The facility is publicly marketed as a home for old, sick, or mentally ill New York residents. Out of approximately 350 total beds available at the facility, 200 are specifically designated as assisted living program beds.1 4. Plaintiffs are elderly or dependent individuals with disabilities and associated significant care needs who reside at QACC. Plaintiffs and the class they seek to represent chose to stay at QACC because they have physical or mental impairment that substantially limits one or more major activities of daily living including, but not limited to, assistance with managing and taking medication, housekeeping, laundry, dressing, bathing, toileting, hygiene, food preparation, and transportation. 5. Plaintiffs are entitled to the assisted living services at QACC because of their conditions that are defined as disabilities by the government and the Defendants. As stated in the New York State Guide to Medicaid Coverage for Assisted Living Benefits: Applicants must be medically eligible for nursing home care. However, their functional ability cannot be so limiting that they require nursing home care around the clock. See Ex. D, Declaration of Philip McCallion, PhD, ACSW, dated May 3, 2020 (“McCallion Decl.”), ¶ 11. In addition, New York State Department of Health defines Assisted Living Program as provision of “personal care, room, board, housekeeping, supervision, home health aides, personal emergency response services, nursing, physical therapy, occupational therapy, speech therapy, 1 https://profiles.health.ny.gov/acf/view/1255101 medical supplies and equipment, adult day health care, a range of home health services, and the case management services of a registered professional nurse.”2 McCallion Decl., ¶ 11. New York State Social Security program follows the same definition in providing coverage.3 6. Upon information and belief, the majority of QACC’s residents receive assisted living benefits under these or equivalent provisions. Furthermore, a high number of these residents suffer specific mental health psychiatric disabilities requiring assistance as well as guidance and support with activities of daily living. Upon information and belief, approximately two-thirds of the residents of QACC suffer from mental illness or are regarded as such. See Ex. A, Declaration of Plaintiff Annetta King Simpson, dated May 1, 2020 (“Simpson Decl.”), ¶ 2. Without proper guidance and support, they pose an infectious disease risk to themselves and all others at the facility. 7. Since the coronavirus first made its way into QACC in mid- or late- March 2020, Plaintiffs and the proposed class members have experienced and witnessed QACC’s gross failure to provide the most basic level of care to safeguard their health and safety in the context of a global health pandemic. People with disabilities are exposed to high risks of contracting the virus with no or few preventative measures in place. Residents who fall sick are left to languish in their room without proper access to medical care. As set forth below, permitting such substandard conditions in an assisted living facility that primarily houses disabled individuals with physical or mental impairment constitutes violation of Title III of the ADA and § 504 of the RA. 8. New York City is the epicenter of the country’s struggle with the COVID-19 virus and the resulting coronavirus disease (“COVID-19”). As this disease ravages the City, infecting 2 https://www.health.ny.gov/health_care/medicaid/program/longterm/alps.htm 3https://www.ahcancal.org/ncal/advocacy/regs/State%20Reg%20Review%20%20State%20Summaries/New%20Yor k.pdf more than 174,000 and killing close to 14,000 City residents to date, the risks posed by COVID- 19 to people in adult homes – in terms of transmission, exposure, and harm – are stark and alarming. See Ex. E, Declaration of Richard Martinello, M.D., dated May 4, 2020 (“Martinello Decl.”), ¶ 7. Residents are packed in a combustible mix of sick and elderly patients alongside those with mental illness, often with little understanding of the risks and danger of this highly contagious disease. For reasons beyond their control, people in assisted living facilities are unable to voluntarily practice social distancing, control their exposure to large groups, practice increased hygiene, wear protective clothing, obtain specific products for sanitation, cleaning, or laundry, avoid high-touch surfaces, or sanitize their own environment. 9. QACC is one of the largest assisted living facilities in the State of New York.4 It is crowded with as many as 352 New York residents who are aging, mentally ill, or otherwise in poor health. Residents are vulnerable and susceptible to the risks of COVID-19 because they are likely to have chronic underlying health conditions, such as chronic obstructive pulmonary disease, other chronic lung diseases, diabetes, heart disease, and asthma. McCallion Decl., ¶ 12. Moreover, because of their physical or mental impairments, residents have limited capacity to access or seek medical care, to absorb the severity of COVID-19, and to understand the importance of self- awareness and the need to stay indoors in the context of COVID-19. 10. The outbreak of a highly infectious, deadly virus in an assisted living facility setting is a disaster, calling for urgent and decisive action to protect the health of those residing in the home, those who work there, the medical professionals who will treat those who become infected, and the members of the surrounding community. 4 See, e.g., Disabiilty Advocates v. Paterson, 1:03-cv-03209 (E.D.N.Y.) 11. Since March 22, 2020, when news media articles began to publicize accounts of COVID-19 infection and deaths in QACC,5 the number of residents and staff who have fallen ill or dead has multiplied. The coronavirus is spreading in the facility, fast. 12. Nevertheless, QACC has failed or refused to put cleanliness and sanitary measures in place, to adequately screen for the virus in its residents and staff, to enforce social distancing among residents, or to properly isolate residents suspected as having COVID-19. Simpson Decl., ¶ 4. The majority of QACC's residents, many of whom are mentally ill, are still allowed to wander freely through the facility’s three floors, recreational rooms, and communal rooms, and outside to the surrounding Elmhurst neighborhood. Simpson Decl., ¶ 5. Medical care and treatment within QACC are highly limited in capacity, and as staff become sick or refuse to care or offer assistance to those residents who fall sick, even fewer people are present to care for those residents who remain in the facility. Simpson Decl., ¶ 4. 13. Title III of the ADA imposes affirmative duties upon Defendants to make their assisted living facilities accessible to disabled residents. In the context of COVID-19 pandemic and the particular vulnerability of disabled residents, ADA requires Defendants to make reasonable modifications to their policies, practices, and procedures to protect their residents by implementation of an effective infectious disease control and prevention program. 14. Similarly, § 504 of the RA, 29 U.S.C. § 794, provides that no person 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.” Under information and belief, QACC qualifies as a program or 5 Joaquin Sapien, Now That Coronavirus Is Inside This Adult Home for the Elderly or Mentally Ill, It May Be Impossible to Stop, ProPublica (Apr. 2, 2020), https://www.propublica.org/article/now-that-coronavirus-is-inside- this-adult-home-for-the-elderly-or-mentally-ill-it-may-be-impossible-to-stop activity receiving Federal financial assistance as its programs and activities are financed by Medicare and Medicaid among other federal programs. 15. In violation of these laws, Defendants have failed to respond to the urgent and serious threat to the health of elderly or dependent residents within their facility. Although many residents and staff members have been infected with the virus, Defendants have failed to take measures appropriate for a public health crisis such as prompt and strict compliance with applicable regulations and guidelines with regard to the control and prevention of COVID-19 in their facility. These regulations and guidelines include those of the Centers for Disease Control and Protection (“CDC”), the Department of Health & Human Services Centers for Medicare & Medicaid Services (“CMS”), federal regulations for states and long-term care facilities including 42 C.F.R. § 483, as well as New York Public Health Law governing long term care facilities, nursing homes, and/or assisted living facilities. Defendants’ policy and practice of failing to follow the applicable infection control regulations and guidelines violates the ADA and RA by making their facility inaccessible and unusable by persons with disabilities. 16. In violation of the ADA and RA, Defendants have failed to make reasonable modifications to their policies, practices, and procedures that are necessary for persons with disabilities to have full and equal access to and enjoyment of the services, goods, facilities, privileges, advantages, and accommodations purportedly provided by QACC, including the most basic level of promised care which is to safeguard the health and safety of its residents. 17. The prevention of the acquisition of a potentially deadly/disabling communicable disease, such as COVID-19, is a duty of the facility. Martinello Decl., ¶ 8. During this critical time when healthcare institutions of all sizes across the U.S. and the world are adapting to ensure safety, Defendants have failed to make modifications to QACC’s policies and procedures to protect its vulnerable residents in direct contravention of the ADA and RA as well as the instructive guidelines from the CDC, CMS, and regulations such as 42 C.F.R. § 483. Martinello Decl., ¶ 8. 18. Defendants are receiving federal funding for certain programs and activities that are supposed to inure to the benefit of individuals with disabilities, but in fact, QACC is not providing the benefits and services that were promised to its disabled residents to receive effective care and assisted living services. 19. Plaintiffs Bryan Schoengood, Annetta King Simpson, and Willie Roland are three (3) of the approximately 350 residents of QACC, who face an imminent risk of serious injury or death if exposed to COVID-19 because of their disabilities. Defendants are grossly ill-equipped to identify, monitor, and treat a COVID-19 epidemic. The combination of an infectious disease epidemic striking a facility that houses 352 people with various underlying medical conditions is likely to result in serious illness and death, if residents remain there at current population levels and under current conditions. 20. This lawsuit seeks to avoid real, imminent, and irreparable harm to the health of Plaintiffs and similarly situated vulnerable individuals. This action seeks to require that Defendants immediately and strictly follow the applicable regulations and guidelines from CDC, CMS, 42 C.F.R. § 483, and Public Health Law in providing services, goods, privileges, advantages and accommodations to QACC’s residents. Further, this action seeks to appoint an expert Special Master at Defendants’ cost to chair COVID-19 investigation to evaluate and oversee Defendants and their staff’s treatment and care of QACC’s residents and to make recommendations for ameliorative action. These measures are necessary in order to make QACC readily accessible to and usable by persons with disabilities as required by the ADA and § 504 of the RA. 21. Now is the time to act to stop the spread of COVID-19 to disabled residents at QACC and to protect them and the broader community from the serious risk to their health and safety. Plaintiffs have no adequate remedy at law and, unless Defendants are preliminarily and permanently enjoined, Plaintiffs will continue to suffer real, imminent, and irreparable harm as a result of being denied full and equal access to and enjoyment of QACC’s goods, services, facilities, privileges, advantages, and/or accommodations. Plaintiffs seek declaratory and injunctive relief as set forth below and recovery of reasonable attorneys’ fees, costs, and litigation expenses available under the law. BACKGROUND 22. Though they were not required to do so, Plaintiffs notified the ombudsman from New York State Department of Health of QACC’s violations of Title III of the ADA and their intention to file this lawsuit. The ombudsman’s office is tasked with investigating and resolving residents’ complaints regarding long-term care facilities such as QACC. 23. Upon information and belief, Defendants have been under investigation by the ombudsman’s office relating to possible misappropriation of funds they received from New York State under the Enhancing the Quality of Adult Living (“EQUAL”) Program in that the Defendants may have used the funds improperly, including for their facility’s renovation, rather than for resident care as they were required to do. Upon information and belief, under Governor Cuomo’s Executive Order regarding the COVID-19 pandemic,6 New York State’s Long-Term Care Ombudsman Program has been deemed “non-essential,” and therefore the ombudsman’s office is no longer allowed to perform onsite inspections or enter QACC at this time. 6 Governor Cuomo Signs the 'New York State on PAUSE’ Executive Order, New York State (Mar. 20, 2020), https://www.governor.ny.gov/news/governor-cuomo-signs-new-york-state-pause-executive-order 24. The limited oversight available during the course of the pandemic and Defendants’ tendency to disregard resident care directives urges immediate judicial intervention including appointment of a Special Mater on an emergency basis to protect QACC’s residents and the surrounding community from imminent, serious, and irreparable risk to their health and safety. JURISDICTION AND VENUE 25. This court has subject matter jurisdiction of this action pursuant to 28 U.S.C. §§ 1331, 1343(a)(4). The Americans with Disabilities Act, 42 U.S.C. §§ 12101 et seq. and § 504 of the Rehabilitation Act, 29 U.S.C. §§ 701 et seq, present federal questions and confers jurisdiction on this Court over Plaintiffs’ claims regardless of the amount in controversy 26. In addition, the Court has jurisdiction to grant declaratory and injunctive relief pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201. 27. Defendants are subject to personal jurisdiction and venue is proper in this Court pursuant to 28 U.S.C. § 1391(b), because a substantial portion or the acts or omissions upon which this action is based occurred and continue to occur in this District within the County of Queens. JURY DEMAND 28. Plaintiffs demand a jury trial on all issues so triable. PARTIES 29. Plaintiff Bryan Schoengood (“Mr. Schoengood”) is a 61-year-old man who resides in QACC. At all times relevant to this Complaint, Mr. Schoengood was a qualified person with disabilities within the meaning of the ADA and the RA. Mr. Schoengood has been diagnosed with paranoid schizophrenia, which qualified him as a resident of QACC for his mental health needs and assistance. Mr. Schoengood requires continuous care and assistance with basic activities of daily living including but not limited to housekeeping, laundry, dressing, bathing, managing medications, toileting, and transportation. Mr. Schoengood has been a resident of QACC for approximately 31 years. Mr. Schoengood’s roommate at the facility was one of the first to be infected with the coronavirus and subsequently died from it. 30. Plaintiff Annetta King Simpson (“Ms. Simpson”) is a 64-year-old woman who resides in QACC. At all times relevant to this Complaint, Ms. Simpson was a qualified person with disabilities within the meaning of the ADA and the RA. Ms. Simpson suffers from chronic and severe cardiovascular disease, with a history of prior myocardial infarction, six (6) stents of major cardiac vessels, as well as diabetes and hypertension. These conditions qualified her as a resident of QACC for her medical needs and assistance. Ms. Simpson requires continuous care and assistance with basic activities of daily living including but not limited to housekeeping, laundry, dressing, bathing, managing medications, toileting, and transportation. Ms. Simpson has been a resident of QACC for approximately two (2) years. Ms. Simpson was one of the residents who became severely ill from coronavirus. She was hospitalized at an external medical facility and was discharged back to QACC. 31. Plaintiff Willie Roland (“Mr. Roland”) is an 82-year-old man who resides in QACC. At all times relevant to this Complaint, Mr. Roland was a qualified person with disabilities within the meaning of the ADA and the RA. Mr. Roland suffers from chronic obstructive pulmonary disease and diabetes, has a cardiac valve pump, and is legally blind. These conditions qualified him as a resident of QACC for his medical needs and assistance. Mr. Roland requires continuous care and assistance with basic activities of daily living including but not limited to housekeeping, laundry, dressing, bathing, managing medications, toileting, and transportation. Mr. Roland has been a resident of QACC for approximately 15 years. Mr. Roland was one of the residents who became severely ill from coronavirus. Upon information and belief, for approximately two and a half weeks after testing positive for coronavirus, Mr. Roland did not receive any care or assistance from the QACC’s staff before he was rescued by his daughter and brought to a hospital for treatment. Once he is discharged, he will be returning to QACC due to his disabilities and significant care needs. 32. Plaintiffs are pursuing this action to protect and advocate for the rights and interests of themselves as well as other QACC residents with qualifying disabilities under the meaning of the ADA during the course of COVID-19 pandemic. Plaintiffs and members of the proposed class have physical or mental impairments that substantially limit one or more major life activities, have a record of such impairments that qualified them to receive Defendants’ services at QACC, and are regarded as having such impairments. Therefore, they are entitled to protection under the ADA and RA as individuals with disabilities. 33. Upon information and belief, Defendant Hofgur, LLC d/b/a Queens Adult Care Center is a corporation organized under the laws of the State of New York with its principal place of business located at 80-08 45th Avenue, Elmhurst NY 11373. 34. Upon information and belief, Defendant Gefen Senior Care Group is a corporation organized under the laws of the State of New York with its principal place of business located at 2830 Pitkin Boulevard, Brooklyn NY 11208. In addition to QACC, it owns four other assisted living facilities throughout New York City. 35. Defendants are responsible for and oversee the care and treatment provided at QACC’s facility located at 80-08 45th Avenue, Elmhurst NY 11373. Approximately 350 people reside in the facility with designated beds. Defendants have adopted and enforced policies, practices, and procedures that leave Plaintiffs and all those similarly situated exposed to infection, severe illness, and death due to COVID-19. 36. QACC is an assisted living facility that provides basic and personal care services to their residents. It is an entity covered by Title III of the ADA under the enumerated category of “senior citizen center […] or other social service center establishment.” 42 U.S.C. § 12181(7)(K). It is an entity covered by § 504 of the RA as a program receiving Federal financial assistance. STATEMENT OF FACTS I. The COVID-19 Health Crisis 37. The novel coronavirus that causes COVID-19 has led to a global pandemic. Upon information and belief, as of May 3, 2020, there were more than 1.1 million reported COVID-19 cases in the United States and more than 67,000 deaths. The virus is known to spread easily from person to person through respiratory droplets, close personal contact, and from contact with contaminated surfaces and objects. 38. In many people, COVID-19 causes fever, cough, and shortness of breath. However, for people over the age of fifty or with pre-existing medical conditions that increase the risk of serious COVID-19 infection, these symptoms can be severe.7 Upon information and belief, most people in higher risk categories who develop serious illness will need advanced and intensive support. This level of supportive care requires highly specialized equipment that is in limited supply, and an entire team of care providers, including 1:1 or 1:2 nurse-to-patient ratios, respiratory therapists, and intensive care physicians. 39. COVID-19 can cause severe damage to lung tissue, which requires an extensive period of intensive rehabilitation, and in some cases, can cause a permanent loss of respiratory capacity. COVID-19 can also can damage tissues in other vital organs, including the heart and 7 Age, Sex, Existing Conditions of COVID-19 Cases and Deaths Chart, https://www.worldometers.info/coronavirus/coronavirus-age-sex-demographics/ (data analysis based on WHOChina Joint Mission Report). liver, thereby causing rapid and untimely deaths. For example, COVID-19 may target the heart muscle, causing a medical condition called myocarditis, or inflammation of the heart muscle. Myocarditis can affect the heart muscle and electrical system, reducing the heart’s ability to pump. This reduction can lead to rapid or abnormal heart rhythms in the short term, and long-term heart failure. COVID-19 may also trigger an over-response of the immune system, further damaging tissues in a cytokine release syndrome that can result in widespread damage to other organs, including permanent injury to the kidneys and neurologic injury. 40. Dangerous complications from COVID-19 can manifest at an alarming pace. Patients can show the first symptoms of infection in as little as two days after exposure, and their condition can rapidly deteriorate in as little as five days or sooner. Even younger and healthier people who contract COVID-19 may require supportive care, which includes supplemental oxygen, positive pressure ventilation, and in extreme cases, extracorporeal mechanical oxygenation in order to prevent serious illness or death. The need for COVID-19 prevention, screening, diagnosis, and treatment is even more salient for the high-risk population including the elderly and those with underlying medical conditions. McCallion Decl., ¶ 12; Martinello Decl., ¶¶ 41. There is no vaccine against COVID-19. Upon information and belief, social distancing, or remaining physically separated from known or potentially infected individuals, and vigilant hygiene, including frequently washing hands with soap and water, are the only available effective measures for protecting vulnerable people from COVID-19. Some experts expect the pandemic to last up to two (2) more years.8 8See, e.g., Maggie Fox, Expert report predicts up to two more years of pandemic misery, CNN (May 1, 2020), https://www.cnn.com/2020/04/30/health/report-covid-two-more-years/index.html II. Particular Vulnerability of Residents and Staff of Long-Term Care Facilities in New York City 42. New York is currently at the epicenter of the coronavirus pandemic. Governor Cuomo declared a state of emergency in New York State on March 7, 2020. Mayor DeBlasio declared a state of emergency in New York City on March 12, 2020. These declarations remain in effect to date. 43. Upon information and belief, as of May 3, 2020, there are over 300,000 positive cases in New York State with more than half of those cases being in New York City. Upon information and belief, to date, there have been 18,909 deaths from COVID-19 in New York State, with 13,538 of those deaths in New York City. 44. People in congregate environments, where people live, eat, and sleep in close proximity, face increased danger of contracting COVID-19. Martinello Decl., ¶ 7. People who require the services of assisted living facilities find it virtually impossible to engage in the necessary social distancing and hygiene required to mitigate the risk of transmission, without a carefully laid plan to prevent and control the spread of COVID-19. The CDC also warns of “community spread” where the virus spreads easily and sustainably within a community where the source of the infection is unknown.9 45. On March 20, 2020, Governor Cuomo took a strict measure to fight the virus’s spread, issuing a “stay at home” executive order for all residents. In a statement to the public, Governor Cuomo explained that the order prohibits non-essential gatherings of any size, requires all non-essential businesses to close and 100 percent of their employees to work from home, and recommends that people stay at least six (6) feet away from others.10 9 https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/summary.html 10 Governor Cuomo Signs the 'New York State on PAUSE’ Executive Order, New York State (Mar. 20, 2020), https://www.governor.ny.gov/news/governor-cuomo-signs-new-york-state-pause-executive-order. 46. It is known that those who are older and those with underlying chronic medical conditions such as diabetes, chronic obstructive pulmonary disease, cardiac disease, are at highest risk for COVID-19. McCallion Decl., ¶ 12. The risk is further compounded when individuals live in congregate settings because of the potential for close contact. Id. 47. The setting of long-term care facility increases the risk of contracting an infectious disease, such as COVID-19, due to the high numbers of people with chronic, often untreated, illnesses housed in a setting with limited access to medical care. Martinello Decl., ¶ 7. Residents have varying levels of mental capacities, and therefore cannot autonomously stay at a distance from others without an effective quarantine guideline developed and enforced by the facility. Moreover, due to their physical ailments and/or mental illnesses, residents are often unable to advocate for enforcement of hygiene or quarantine protocols, for diagnostic screening of their or others’ conditions, and for transfer to an external medical facility when the symptoms warrant such a transfer. 48. Adult homes such as QACC in particular house large groups of people together, and move people in groups to eat, do recreation, and socialize. They frequently have insufficient medical care for the population, and, in times of crisis, even those medical staff cease coming to the facility or tending to the residents. Simpson Decl., ¶ 4. Residents are often not given appropriate protective gears or supplies such as masks, gloves, and gowns, and many of them are not capable of asking for these gears or understanding their importance because of their disabilities including mental illness. Id., ¶ 5. 49. High risk does not have to mean infection and mortality. McCallion Decl., ¶ 14. It is in the context of this health crisis that organizations such as CDC and CMS have published guidelines for infection control and prevention of COVID-19 in long-term care facilities including nursing homes and/or assisted living facilities.11 Martinello Decl., ¶ 8. These guidelines were devised to ensure the health and safety of the residents of these facilities, who are particularly vulnerable to COVID-19 due to the very conditions that qualify them to reside there. 50. CDC has detailed the gravely serious threat posed to resident populations in nursing, assisted living, and long-term care facilities like QACC. CDC recommends that long-term care facilities act immediately to address asymptomatic and pre-symptomatic transmission, to implement source control for everyone entering the facility regardless of symptoms, and to dedicate an aera of the facility to care for residents with suspected or confirmed COVID-19 with an adequate staffing plan for that specific location. In addition, CDC specifically enumerates various guidelines and strategies such as: 1. Keep COVID-19 from entering your facility: • Restrict all visitors except for compassionate care situations (e.g., end- of- life). • Restrict all volunteers and non-essential healthcare personnel (HCP), including consultant services (e.g., barber, hairdresser). • Implement universal use of source control for everyone in the facility. • Actively screen anyone entering the building (HCP, ancillary staff, vendors, consultants) for fever and symptoms of COVID-19 before starting each shift; send ill personnel home. Sick leave policies should be flexible and nonpunitive. • Cancel all field trips outside of the facility. 2. Identify infections early: • Actively screen all residents daily for fever and symptoms of COVID- 19; if symptomatic, immediately isolate and implement appropriate Transmission-Based Precautions. o Older adults with COVID-19 may not show typical symptoms such as fever or respiratory symptoms. Atypical symptoms may include new or worsening malaise, new dizziness, or diarrhea. Identification of these symptoms should prompt isolation and further evaluation for COVID-19. • Notify your state or local health department immediately (<24 hours) if these occur: 11 See, e.g., https://www.cdc.gov/coronavirus/2019-ncov/hcp/long-term-care.html; https://www.cms.gov/files/document/qso-20-14-nh-revised.pdf o Severe respiratory infection causing hospitalization or sudden death o Clusters (≥3 residents and/or HCP) of respiratory infection o Individuals with suspected or confirmed COVID-19 3. Prevent spread of COVID-19: • Actions to take now: o Cancel all group activities and communal dining. o Enforce social distancing among residents. o Ensure all residents wear a cloth face covering for source control whenever they leave their room or are around others, including whenever they leave the facility for essential medical appointments. o Ensure all HCP wear a facemask or cloth face covering for source control while in the facility. Cloth face coverings are not considered personal protective equipment (PPE) because their capability to protect healthcare personnel (HCP) is unknown. Cloth face coverings should NOT be worn instead of a respirator or facemask if more than source control is required. • If COVID-19 is identified in the facility, restrict all residents to their rooms and have HCP wear all recommended PPE for care of all residents (regardless of symptoms) on the affected unit (or facility- wide depending on the situation). This includes: an N95 or higher- level respirator (or facemask if a respirator is not available), eye protection, gloves, and gown. HCP should be trained on PPE use including putting it on and taking it off. o This approach is recommended because of the high risk of unrecognized infection among residents. Recent experience suggests that a substantial proportion of residents could have COVID-19 without reporting symptoms or before symptoms develop. o When a case is identified, public health can help inform decisions about testing asymptomatic residents on the unit or in the facility. 4. Assess supply of personal protective equipment (PPE) and initiate measures to optimize current supply: • If you anticipate or are experiencing PPE shortages, reach out to your state/local health department who can engage your local healthcare coalition. • Consider extended use of respirators, facemasks, and eye protection or prioritization of gowns for certain resident care activities. 5. Identify and manage severe illness: • Designate a location to care for residents with suspected or confirmed COVID-19, separate from other residents. • Monitor ill residents (including documentation of temperature and oxygen saturation) at least 3 times daily to quickly identify residents who require transfer to a higher level of care. See Key Strategies to Prepare for COVID-19 in Long-term Care Facilities, Center for Disease Control and Prevent, April 15, 2020 (emphasis added).12 51. In addition to incorporating the CDC’s recommendations outlined above, CMS recommends reinforcement of strong hand-hygiene practices, availability of tissues, no touch receptacles for disposal, and facemasks.13 It also provides additional guidance which includes: “Cancel communal dining and all group activities, such as internal and external group activities. Implement active screening of residents and staff for fever and respiratory symptoms.” 52. 42 C.F.R. § 483 sets forth federal regulations governing the quality of long-term care facilities such as QACC. 42 C.F.R. § 483.80 specifically governs the requirement for the facilities to have “an infection prevention and control program designed to provide a safe, sanitary, and comfortable environment and to help prevent the development and transmission of communicable diseases and infections.” These are the “the requirements that an institution must meet in order to qualify to participate as a Skilled Nursing Facility in the Medicare program, and as a nursing facility in the Medicaid program. They serve as the basis for survey activities for the purpose of determining whether a facility meets the requirements for participation in Medicare and Medicaid.” 53. The New York State Department of Health provides New York Public Health Law § 415.12, which further provides that “Each resident shall receive and the facility shall provide the necessary care and services to attain or maintain the highest practicable physical, mental and 12 https://www.cdc.gov/coronavirus/2019-ncov/hcp/long-term-care.html 13 https://www.cms.gov/files/document/qso-20-14-nh-revised.pdf psychosocial well-being, in accordance with the comprehensive assessment and plan of care subject to the resident's right of self-determination.” 54. For congregate settings, these guidelines require transparency in communications with residents and responsible family, training for staff, identification and use of space for quarantining and isolation, constant emphasis on preventive strategies, vigilance around spaces when individuals may congregate, use of masks and in infection cases, PPE, and attention to the potential that staff may themselves be infected and/or carriers. McCallion Decl., ¶ 14. 55. As with other aspects of medical care, if the facility is unable to provide an aspect of necessary care, the facility has a duty to coordinate access to this care for their patients. Martinello Decl., ¶ 9. At times, a patient’s clinical condition may require their immediate transfer to another healthcare facility, such as a hospital, where the appropriate access to diagnostic tests, clinical monitoring, and/or treatment can be provided. Id. Likewise, if a facility is unable to sufficiently protect a resident from a communicable, potentially deadly infectious diseases, it is a duty for the facility to transfer the patient to another facility which can provide the proper level of safety and care for the patient/resident. Id. 56. It is imperative to implement and enforce these and other effective guidelines to control and prevent the spread of COVID-19 among residents of long-term care facilities. Protecting those with the greatest vulnerability to COVID-19 also allows for greater risk mitigation for all people working in the facilities and living in the surrounding community. 57. Conversely, disregarding these guidelines poses a grave, imminent, and irreparable risk to the health and well-being of vulnerable and dependent population of residents within long- term care facilities. Martinello Decl., ¶¶ 12-14. To prevent undue risk of infection and mortality in congregate settings, it is essential to implement an effective Infection Prevention program that is led by an identifiable individual who has the needed expertise (often recognized by certification in infection control), is provided with authority by facility leadership, is held accountable by facility leadership, and is adequately resourced to manage the facility’s infection prevention needs. Id., ¶¶ 10-11. III. QACC’s Failure to Implement Proper Disease Prevention or Control Measures, Placing its Disabled Residents at a Serious, Imminent, and Irreparable Risk of Harm in Violation of the ADA and the RA 58. Unfortunately, Defendants have demonstrated an ongoing pattern of failing to comply with COVID-19 control and prevention guidelines since the CDC and CMS first issued guidelines to facilities like QACC back on March 13, 2020. As a result, COVID-19 is rampant in the facility among residents and staff alike. 59. Upon information and belief, QACC is one of the largest adult homes in New York State, known to provide assisted living services to individuals with physical disabilities as well as individuals with mental illnesses. About 200 out of a total of 352 available beds at QACC are specifically designated as assisted living program beds. In addition, QACC is registered with CMS and the New York Department of Health as an Assisted Living Facility.14 60. Assisted Living Facility is required to provide a level of care appropriate for those who are unable to live by themselves and require assistance and/or monitoring to assure their safety and well-being, but who do not have medical conditions requiring more extensive nursing care. McCallion Decl., ¶ 11. 61. Defendants have marketed QACC as not merely an adult home but an assisted living facility with skilled nursing services available on site. On their website, Defendants state that QACC provides Assisted Living Program (“ALP”) which is explained to serve “as an 14 https://npidb.org/organizations/nursing_and_custodial_care/assisted-living-facility_310400000x/1669885174.aspx alternative to nursing home that enables nursing home eligible residents to receive home health care services in the facility,” with “Skilled Nursing Services Provided by On-Site Home Care Agency to those resident [sic] who require skilled care.”15 Defendants also state in their online marketing brochure that QACC: Offer[s] just the right amount of assistance tailored to each resident’s individual needs, enabling each person to live in the most independent and least restrictive environment. [QACC] offers a wide spectrum of services including case management, to recreational activities, to assistance with self-administration of medications and meal preparation. 62. QACC has been accepting and retaining residents with conditions and care needs that were once handled almost exclusively in skilled nursing facilities. This has allowed it to increase the potential resident pool by promising to provide skilled health care services. 63. As a long-term care facility that provides nursing services, QACC is also subject to federal regulations for states and long-term care facilities including 42 C.F.R. § 483. In order to participate in Medicare and Medicaid, which upon information and belief QACC does, a facility must establish and maintain a working system for preventing, identifying, reporting, investigating, and controlling communicable diseases for all residents, staff, volunteers, and visitors. In addition, the facility must designate an infection preventionist who appropriate specialty to oversee infection prevention and control. In violation of this regulation as well as instructive guidelines from the CDC and CMS, QACC has failed to establish standards and transmission-based precautions to be followed to prevent spread of COVID-19 and to take corrective actions. 64. Defendants have failed to take necessary and appropriate measures to control and prevent the spread of COVID-19 among QACC’s residents who, individually and as a population, are highly vulnerable to contracting and suffering dire consequences from COVID-19 due to their disabilities. Failure to establish policies, practices, and procedures to safeguard the disabled 15 https://gefenseniorcare.com/assisted-living-services/ residents’ right to access and enjoy QACC’s facilities and services constitutes a violation of Title III of the ADA and § 504 of the RA. 65. Upon information and belief, an overwhelming majority of QACC’s residents suffer from a disability, whether it be age-related or psychiatric, that put them at an increased risk of severe illness and death upon contraction of COVID-19. See Ex. B, Declaration of Natasha Roland, daughter and appointed healthcare proxy of Plaintiff Willie Roland, dated May 3, 2020 (“Roland Decl.”), ¶ 5. Furthermore, upon information and belief, mentally ill residents who suffer from various psychiatric and mental disorders comprise approximately two-thirds of QACC’s resident population. Simpson Decl., ¶ 2. 66. The conditions at QACC pose a grave health risk for the spread of COVID-19 to this already-vulnerable population. Residents live, eat, and socialize in close quarters and cannot achieve the “social distancing” needed to effectively prevent the spread of COVID-19. Simpson Decl., ¶¶ 4-5. Residents typically share a small room with one (1) other resident with their beds placed only a few feet apart from each other, and two (2) rooms with four (4) residents typically share one bathroom. See Ex. C, Declaration of Bruce Schoengood, identical twin brother and appointed healthcare proxy of Plaintiff Bryan Schoengood, dated May 3, 2020 (“Schoengood Decl.”), ¶ 5. 67. Due to these constraints, QACC’s residents are often unable to maintain the recommended distance of six (6) feet from others, and may share or touch objects used by others. Toilets, sinks, and showers are shared, often without disinfection between each use. Many daily activities such as meal and recreation are communal with little opportunity for surface disinfection. Hundreds of residents share access to popular common areas and hallways. Residents with disabilities are further limited in their ability to distance themselves from others, and in the case of those with mental illness, even in their ability to understand the need to do so. 68. With an increasing number of residents testing positive for the coronavirus or dying from it, QACC has begun to implement some rudimentary instructions to its residents for hygiene, safety isolation, or separation. However, these instructions have been framed as voluntary requests that are often ignored. Simpson Decl., ¶¶ 6-7. Residents with disabilities, due to their physical or cognitive limitations, are especially unlikely to heed to these voluntary requests. 69. Upon information and belief, QACC does not have a protocol in place for comprehensive testing or screening of residents or staff for cough, fever, and respiratory symptoms. Simpson Decl., ¶ 9. QACC has failed to screen all staff at the beginning of their shift for fever and respiratory symptoms by actively taking their temperature and documenting absence of shortness of breath, new or change in cough, and sore throat. In addition, despite requests of family members of residents, QACC’s residents are not being screened or tested, even those who have had direct and close contact with other residents diagnosed with COVID-19. Schoengood Decl., ¶ 11; Simpson Decl., ¶ 9. 70. Upon information and belief, despite requests of family members of residents, Defendants have failed and refused to identify or isolate those residents who are particularly susceptible or vulnerable to COVID-19 because of their disabilities, defined as physical or psychiatric ailments. Schoengood Decl., ¶ 9. 71. Upon information and belief, the facility continues to accept new residents to fill up beds that become vacant with an increasing number of residents leaving the facility due to hospitalizations or deaths. Schoengood Decl., ¶ 12. Upon information and belief, these new residents also do not undergo comprehensive screening for COVID-19 symptoms or related history. 72. Upon information and belief, there is a complete lack of isolation and enforcement of social distancing among its residents, including those residents who are symptomatic or suspected to have COVID-19. Schoengood Decl., ¶ 9; Simpson Decl., ¶¶ 5-7; Roland Decl., ¶ 23. QACC’s residents continue to share room with residents who are suspected of having, or already diagnosed with, COVID-19. Schoengood Decl., ¶ 9; Simpson Decl., ¶ 8. Plaintiff Bryan Schoengood, for example, remained in the same room as his former roommate who succumbed to COVID-19, sleeping just a few feet away from his bed. Schoengood Decl., ¶ 9. 73. Upon information and belief, residents are permitted to congregate in large groups and at close distances, including eating together and smoking in the hallways, watching TV in the TV room, and socializing in large groups, often without the proper use facemasks and without enforcement of social distancing. Simpson Decl., ¶¶ 5-6. For example, even though Plaintiff Bryan Schoengood was never tested for coronavirus despite his roommate’s death from COVID-19, he continues to have essentially unrestricted movement throughout the facility, including its hallways, common areas, and outdoor grounds without undergoing COVID-19 screening or testing. Schoengood Decl., ¶ 12. While residents are provided an option to eat in their rooms, many still choose to eat in the common areas of the facility with other residents, and the facility permits this to occur. Schoengood Decl., ¶ 13. Plaintiff Annetta King Simpson observes approximately 20 residents continuing to congregate every night outside her room. Simpson Decl., ¶ 6. 74. Upon information and belief, QACC does not provide, or enforce the usage of, appropriate protective clothing, gears, or supplies such as masks. Schoengood Decl., ¶ 14; Simpson Decl., ¶ 5. This lack of enforcement is particularly troubling to residents with disabilities, including mental illness, who may not be able to comprehend the gravity of the safety concerns of COVID- 19 and the need for usage of protective devices. Disabled residents are also more likely to misuse the masks or fail to utilize them properly to cover their noses and mouths. Schoengood Decl., ¶ 75. Upon information and belief, QACC does not have a comprehensive protocol in place to isolate residents who are suspected to have the coronavirus or who test positive for the coronavirus. Simpson Decl., ¶ 8. Residents who are symptomatic and suspected to suffer from COVID-19 remain in their usual rooms often with other residents, and not separated in any fashion from other residents. Simpson Decl., ¶ 8. There is no isolation or quarantine area set up in the facility which consists of three floors and three units per floor. Schoengood Decl., ¶ 10; Simpson Decl., ¶¶ 7-8. Subsequent to the death of his roommate, Plaintiff Bryan Schoengood was not tested for COVID-19 and was not put in quarantine or isolation. Schoengood Decl., ¶ 15. This is particularly disturbing given Mr. Schoengood’s apparent lack of comprehension and self- awareness regarding the risk of COVID-19 infection and its consequences. Id. 76. Moreover, to the extent that their physical conditions allow, QACC’s residents are allowed to roam the streets of the neighboring community with little supervision or control, and with no COVID-19 screening. Schoengood Decl., ¶¶ 12, 15; Simpson Decl., ¶ 9. QACC’s policy and practice of not isolating its sick residents puts residents with disabilities including mental illnesses at a particularly heightened risk because of their inability to comprehend the grave and urgent need for self-quarantine. Schoengood Decl., ¶ 15. 77. Upon information and belief, QACC lacks adequate medical infrastructure to address the spread of infectious disease and treat the people most vulnerable to COVID-19. Staff members are not trained to recognize and address disabilities and other comorbidities that indicate increased vulnerability or risk of respiratory disease for residents. Simpson Decl., ¶ 11. Even when a QACC resident becomes visibly and severely symptomatic, there is no plan in place for their referral and transfer to a hospital for appropriate intensive care. Simpson Decl., ¶¶ 10-12. Instead, staff members often leave visibly sick disabled residents to languish in their rooms as the staff are unable or unwilling to provide care and treatment to these people. Id. In one instance, a resident had died in his bed and his body was left there for almost a day with his roommate remaining in the room. Simpson Decl., ¶ 18. 78. Given these dire circumstances, family members and other residents of QACC complain of having to take matters into their own hands by rendering care and assistance to sick residents who are suspected to have the coronavirus or who test positive for the coronavirus, putting themselves at a direct risk for contracting and further spreading the virus. Simpson Decl., ¶¶ 10-12. For example, QACC’s staff members refused to provide care to Plaintiff Willie Roland when he fell visibly ill from coronavirus and almost died, losing a significant amount of weight. Id. Staff left Mr. Roland’s food at his door, refused to come into his room to assist him with eating, his medications, provide him with any care, test him (or send him for testing) for COVID-19, or even take his temperature. Simpson Decl., ¶ 11; Roland Decl., ¶ 10. Nor would they provide his family with updates concerning his condition. Id. As a result, Plaintiff Annette King Simpson had to provide care to Mr. Roland, eventually contracting and failing ill to the coronavirus as well. Simpson Decl., ¶¶ 12-15. 79. The absence of protocol for prompt transfer to a hospital is particularly troubling because people who contract COVID-19 can deteriorate rapidly, even before a test result can be received. These patients need constant and intensive monitoring. Most people in the higher risk categories will require more advanced support: positive pressure ventilation, and in extreme cases, extracorporeal mechanical oxygenation. Such care requires specialized equipment in limited supply as well as an entire team of specialized care providers. QACC does not have that specialized equipment or specialized providers. In fact, QACC seems to be failing in the most basic duties of screening or testing residents for COVID-19 or assisting sick residents with meals or medications. Simpson Decl., ¶¶ 12-15. 80. Defendants have deliberately refused to make public or inform the family members of QACC’s residents regarding the QACC’s polices, practices, and procedures for preventing COVID-19 outbreak and responding to the residents who contract coronavirus. Simpson Decl., ¶ 16. QACC’s management has refused to provide vital information to the residents’ family members, including those who are the appointed healthcare proxy of the residents, concerning the conditions within the facility, and in particular, the effects of COVID-19 on its resident population and the specific residents and what actions the facility is taking to protect its residents and mitigate the COVID-19 risk. Simpson Decl., ¶ 16; Roland Decl., ¶ 6; Schoengood Decl., ¶ 17. 81. Defendants have also refused to share, or conveyed misleading or false information, to residents and family members regarding the number of residents within QACC who have fallen ill, who have contracted the virus, or who have died from the virus. Simpson Decl., ¶ 18; Roland Decl., ¶ 6. Family members describe having inquiring QACC’s administrator regarding the risks posed by the coronavirus to QACC’s residents and consistently being told that the facility is “safe” for the residents. Roland Decl., ¶¶ 7-9. Family members are being told that there are no or very few cases of COVID-19 infection in the facility, when this is in fact far from the truth. Roland Decl., ¶¶ 9-14. This lack of transparency further jeopardizes the disabled residents within QACC who are not able to advocate for their needs or gather information as their non-disabled peers may. 82. Although QACC and its staff have not disclosed the true calamity of what is going on inside the facility, residents report that at least 14 residents of QACC have died so far from COVID-19, and many more have and continue to suffer from COVID-19 with little to no assistance from the facility or its staff. Simpson Decl., ¶ 18; Roland Decl., ¶ 22; Schoengood Decl., ¶ 10. 83. Defendants have violated the ADA and the RA by failing to make their assisted living facility readily accessible to and usable by persons with disabilities, even though these laws impose affirmative duties upon Defendants to make their assisted living facilities accessible. Defendants’ response to COVID-19 crisis within QACC does not meet the needs of persons with disabilities, whether it be persistent mental illness or chronic medical conditions. 84. Defendants have also violated the ADA and the RA by failing to make reasonable modifications to their policies, practices, and procedures that are necessary for persons with disabilities to have full and equal access to and enjoyment of the services, goods, facilities, privileges, advantages and accommodations provided by QACC. For instance, staff were overly focused upon resident choice, did not understand the risk that COVID-19 represents for this vulnerable population, and did not have the training, tools, or instructions to successfully manage risk and response to COVID-19, thereby failing to provide protections, care, and services to the residents with disabilities that were required to be provided under the ADA and § 504 of the RA. See McCallion Decl., ¶ 16. IV. QACC’s Reckless Disregard of the Health and Safety of Its Residents 85. Upon information and belief, QACC’s leadership and staff have demonstrated a pattern of reckless disregard for the well-being of its residents and the applicable guidelines in place to prevent and control the spread of COVID-19 among its residents. This puts residents with disabilities who are unable to obtain information, advocate for themselves, or protect and isolate themselves from human contact at an unequal and heightened risk of serious illness or death. 86. Upon information and belief, Defendants have been aware of the substandard conditions of QACC and of its failure to accommodate its disabled residents in the context of COVID-19 pandemic. Yet, Defendants have failed and refused to implement proper protocols for disease control and prevention, recklessly and knowingly causing residents to be exposed to a substantial risk of serious illness and death from contracting COVID-19. 87. Upon information and belief, by March 22, 2020 at the latest, Defendants were clearly aware that the deadly coronavirus had made its way into QACC as the first known instance of resident’s death due to COVID-19 occurred at that time.16 88. Nevertheless, Defendants have failed to implement or enforce testing, screening, isolation, or treatment measures in place for those residents suspected to be infected or who have had direct contact with residents diagnosed with COVID-19. Residents are allowed to freely enter and leave the facility from the surrounding Elmhurst area and to congregate in groups without screening or protective equipment, all in violation of CDC, CMS, 42 C.F.R. § 483, and New York Public Health rules and guidelines. 89. Tragically, upon information and belief, at least 15 of the facility’s residents have already died, and many more have been confirmed for illness and complications from COVID-19 including Plaintiffs Annetta King Simpson and Willie Roland. Simpson Decl., ¶¶ 4, 18; Roland Decl., ¶ 22; Schoengood Decl., ¶ 10. 16 Joaquin Sapien, Now That Coronavirus Is Inside This Adult Home for the Elderly or Mentally Ill, It May Be Impossible to Stop, ProPublica (Apr. 2, 2020), https://www.propublica.org/article/now-that-coronavirus-is-inside- this-adult-home-for-the-elderly-or-mentally-ill-it-may-be-impossible-to-stop 90. There continues to be a concerted effort by the Defendants to hide from residents and their families what is going on within the facility, including the number of COVID-related deaths and the number of residents suspected of having the virus. Simpson Decl., ¶¶ 16-18; Roland Decl., ¶¶ 6-14; Schoengood Decl., ¶ 17. 91. At the same time, family members are limited in the amount of information they can comfortably request or demand from the Defendants. Some family members fear that if they were to be seen as raising a complaint regarding QACC’s policies, the resident may be asked or ordered to leave the facility. 92. Defendants continue to refuse to inform QACC’s residents or their family members regarding the prevalence of COVID-19 within QACC and regarding concrete measures in place to prevent the spread of the infection, except for general exhortations (delivered in groups) to wash their hands and practice social distancing. Upon information and belief, QACC is deliberately obfuscating facts regarding the conditions and medical catastrophe that is unfolding inside the facility on a day-to-day basis. Simpson Decl., ¶¶ 16-18; Roland Decl., ¶¶ 6-14; Schoengood Decl., ¶¶ 16-17. When pressed by family members for suggestions, the staff members indicate that it is evitable that the residents will be infected with the coronavirus and that the residents should do bare minimum such as eating all three (3) meals to keep up their strength once they become infected with the virus. Schoengood Decl., ¶ 16. 93. Defendants have not informed the residents or their family members of what the protocol will be for monitoring and quarantining exposed or symptomatic patients; for testing, caring for, and treating patients sick with the virus; for timely transferring sick patients out of the facility to a hospital with intensive care capacity. Absent a transparent protocol shared with residents as well as their families or healthcare proxies, residents with disabilities cannot make educated or autonomous decisions regarding their health and are left at Defendants’ mercy. 94. Despite requests and inquiries from family members, Defendants have refused to implement a disciplined structure to institute social distancing and protective equipment requirements and further, prevent patients from congregating in community rooms and hallways, or facility perimeters without necessary precautions. Defendants have also failed to hire or train a capable team of staff or leadership to follow and implement the applicable rules and guidelines for infectious disease prevention and control including those from CDC, CMS, 42 C.F.R. § 483, and the New York Department of Health. 95. The requirements that Assisted Living Programs provide medical supplies and equipment, adult day health care, home health services, and case management services of a registered professional nurse show that there was a failure to provide supports that would be expected and should be possible, given these requirements. McCallion Decl., ¶ 18. 96. Despite taking on the responsibility to take care of the residents’ health and safety by admitting them, Defendants have disregarded the clear need to ensure the safety of QACC’s residents and staff despite their awareness of a risk in having a communicable disease spread through the facility. Martinello Decl., ¶¶ 6, 8. Upon information and belief, Defendants have failed to take steps to implement an effective infection disease program, including policies and practices set in place to minimize the communicability of coronavirus and to minimize the risk of residents or staff acquiring illness. Id., ¶¶ 11-13. 97. Defendants have disregarded the need to transfer QACC’s residents who have fallen ill to COVID-19 or who are suspected to have fallen ill to another facility even though they are aware that their illness outstrips QACC’s limited capabilities to care for its residents. Martinello Decl., ¶ 9. 98. An infectious disease specialist and an epidemiologist Richard Martinello, M.D. has opined that the above-outlined facts are concerning as they reflect the absence of an effective infection prevention program at QACC. Martinello Decl., ¶¶ 12-14. Similarly, an expert with specialty in assisted living and nursing facility administration Philip McCallion, PhD, ACSW., also opined that there were no protocols in place to address the infection, or if there were protocols, they were not consistently followed as they should have been. McCallion Decl., ¶ 16. There was a plain failure to provide supports that would be expected and should be possible, given these requirements. Id. 99. These gross and reckless deficiencies have placed QACC’s residents at a heightened, unnecessary, and unreasonable risk for their health and safety, and will continue to do so absent immediate and appropriate countermeasures ordered by the Court and overseen by an expert Special Master. Martinello Decl., ¶¶ 11-15; McCallion Decl., ¶¶ 19-21. 100. Therefore, immediate judicial relief is necessary to prevent an imminent and serious risk of irreparable harm to Plaintiffs and the class they seek to represent. V. Particular Vulnerability of the Plaintiffs 101. Plaintiffs in this case are examples of QACC’s residents who are particularly vulnerable to contracting COVID-19 and to serious illness or death if infected by COVID-19. 102. Vast majority of patients in an assisted living or nursing facility have chronic health, mental health, and/or physical disabilities. Martinello Decl., ¶ 13. They reside in such a facility because of their dependence on healthcare professionals to ensure their safety and ability to manage their activities of daily living. Chronic conditions such as those often found among residents of these facilities place them at greater risk for serious illness or death if infected by COVID-19, and also likely limit their ability to protect themselves effectively against the risk for exposure to COVID-19 or to leave the facility by their free will. Martinello Decl., ¶ 13; McCallion Decl., ¶ 12. This is the case for all three Plaintiffs herein. 103. Bryan Schoengood. Mr. Schoengood is 61 years old. He has been diagnosed with paranoid schizophrenia, and has been a resident of QACC for approximately 31 years because of this condition. Mr. Schoengood’s former roommate was diagnosed with COVID-19, and upon information and belief was one of the first QACC residents to have died from the disease. Due to his significant mental illness, Mr. Schoengood is unable to understand the risk of COVID-19 and the necessary precautions to prevent the disease. Mr. Scheongood’s daily routine continues to involve congregating with other residents to watch TV and eat meals in the common area. To date, he has never been tested for COVID-19 despite his close proximity to his roommate who recently died from it. Notwithstanding his twin brother Bruce Schoengood being his appointed healthcare proxy, facility staff have failed to advise him regarding the death of Mr. Schoengood’s roommate from COVID-19, and the measures taken to protect Mr. Schoengood from infection. Mr. Schoengood is critically vulnerable to COVID-19 because of his disability. See Ex. C, Schoengood 104. Annetta King Simpson. Ms. Simpson is 64 years old and is a retired teacher. She suffers from chronic and severe cardiovascular disease, with a history of prior myocardial infarction, six (6) stents of major cardiac vessels, as well as diabetes and hypertension. Ms. Simpson assisted and personally cared for several residents, including co-Plaintiff Willie Roland, who were ill and were suspected as having COVID-19 because QACC providers and staff would not assist or even enter the rooms of those residents who were suspected as having COVID-19. Shortly after caring for Mr. Roland, Ms. Simpson became seriously ill and was transferred to Long Island Jewish Medical Center where she was tested positive for COVID-19. She was subsequently transferred to the Jacob Javits Center where she received intensive treatment for COVID-19. She recently returned to QACC after discharge from the Jacob Javits Center. Upon return to QACC, Ms. Simpson has observed continued failure of the facility to implement proper measures for infectious disease prevention and control. She observes residents routinely congregating in large groups and in close proximity in common areas, hallways, and recreation rooms. She observes a continued lack of screening for fevers or other symptoms that may be consistent with the disease, and lack of isolation measures in place to isolate those residents suspected as having COVID-19 from the rest of the resident population at QACC. Ms. Simpson was and is critically vulnerable to COVID-19 because of her disability. See Ex. A, Simpson Decl. 105. Willie Roland. Mr. Roland is 82 years old. He suffers from chronic obstructive pulmonary disease and diabetes, has a cardiac valve pump, and is legally blind. In late March or early April 2020, Mr. Roland became severely ill with what was suspected to be COVID-19. After he became sick, providers and staff at the facility refused to care for him or even provide him with his daily diabetes regimen. Instead, he relied on the good will of other residents in the facility, namely co-Plaintiff Annetta King Simpson to provide him with those medications and to care for him. He was ultimately carried out of QACC by his children and transferred on April 6, 2020 to New York Presbyterian hospital, but not until he lost approximately 35 pounds and was gravely ill from the disease. He is now at a rehabilitation facility where he continues to recover from COVID-19. As Ms. Simpson did, Mr. Roland intends to return to QACC if the conditions improve. Mr. Roland was and is critically vulnerable to COVID-19 because of his disability. See Ex. B, Roland Decl. LEGAL ALLEGATIONS I. Defendants’ Conduct is in Violation of the ADA and the RA. 106. Plaintiffs bring this action under Title III of the ADA, 42 U.S.C. §§ 12101 et seq., and under § 504 of the RA, 29 U.S.C. §§ 701 et seq. 107. Defendants are violating Plaintiffs’ rights under the ADA and the RA by continuing to subject them to conditions where it is virtually impossible to take steps to prevent transmission of an infectious disease that will prove deadly because of the Plaintiffs’ vulnerable conditions. 108. The RA was enacted before the ADA. Its focus is narrower than that of the ADA. Its provisions apply only to programs that receive federal financial assistance. 109. Congress enacted the ADA to provide a more comprehensive statutory solution to widespread discrimination against persons with disabilities in all aspects of society. PGA Tour, Inc. v. Martin, 532 U.S. 661, 674-75 (2001). To advance its stated purpose of eliminating and providing remediation for such discrimination, the ADA is to be construed broadly. See, e.g., Henrietta D. v. Bloomberg, 331 F.3d 261 (2d Cir. 2003). 110. Nonetheless, both § 504 of the Rehabilitation Act and Title III of the ADA have generally equivalent requirements for claims, such that claims under those statutes are analyzed together. Dean v. Univ. at Buffalo Sch. of Med. and Biomedical Sciences, 804 F.3d 178, 187 (2d Cir. 2015) (citing Harris v. Mills, 572 F.3d 66, 73–74 (2d Cir. 2009)). As such, to establish a prima facie violation of either statute, a plaintiff must show “(1) that she is a ‘qualified individual’ with a disability; (2) that the defendants are subject to one of the Acts; and (3) that she was denied the opportunity to participate in or benefit from defendants’ services, programs, or activities, or was otherwise discriminated against by defendants, by reason of her disability.” Powell v. Nat. Bd. of Med. Examiners, 364 F.3d 79, 85 (2d Cir. 2004) (alterations omitted) (citing Henrietta D. v. Bloomberg, 331 F.3d 261, 272 (2d Cir. 2003)). 111. At all times relevant to this action, Plaintiffs and the class they seek to represent were and remain qualified individuals with disabilities. 112. Title III of the ADA provides in pertinent part: “[N]o 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. 113. Under 42 U.S.C. § 12181(7), “[t]he phrase ‘public accommodation’ is defined in terms of 12 extensive categories, which the legislative history indicates ‘should be construed liberally’ to afford people with disabilities ‘equal access’ to the wide variety of establishments available to the nondisabled.” PGA Tour, 532 U.S. 676-77. 114. QACC is an assisted living facility. Assisted living facilities provide basic and personal care services to their residents, and clearly fall under the enumerated categories of “service establishment,” “senior citizen center,” and “other social service establishment.” 42 U.S.C. § 12181(7)(F) & (K); see also 28 C.F.R. § 36.104. 115. Courts have recognized as “public accommodations” those entities whose services and benefits are provided only to qualified members of the public. PGA Tour, 532 U.S. at 677-80 (the fact that plaintiff needed to compete to be eligible for defendant’s services and benefits did not exclude him or the PGA Tour from ADA coverage). 116. As a place of public accommodation, QACC has violated Title III of the ADA in various ways. It is well established that even facially neutral policies may violate the ADA when such policies unduly burden disabled persons. See, e.g., Tsombanidis v. West Haven Fire Dept., 352 F.3d 565 (2d Cir. 2003). 117. Section 504 of the RA states that “[n]o otherwise qualified individual with a disability in the United States […] shall, solely by reason of her or his disability, be excluded from 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). 118. Upon information and belief, Defendants receive federal financial assistance in owning, managing, and operating QACC. 119. Defendants are charged with ensuring that QACC’s services and programs are conducted in conformity with § 504 of the Rehabilitation Act and Title III of the ADA. By failing to comply with regulations and guidelines with respect to control and prevention of COVID-19, Defendants have discriminated against or denied the opportunity for QACC’s residents with disabilities to benefit from services, programs, or activities for which the Defendants had responsibility. 120. Plaintiffs and other disabled residents of QACC are placed at a high risk of serious COVID-19 illness or death because of their disabilities, whether physical or mental. 121. Upon information and belief, more than half of QACC’s residents suffer from various psychiatric and mental disorders comprise more than 50% of QACC’s resident population. Simpson Decl., ¶ 2. As a result of this disability, these residents have severely limited capability to isolate themselves from communing with others who may have contracted COVID-19 or come into contact with those who have. 122. Because of their physical infirmities and/or psychiatric conditions, residents with disabilities are also not able to request medical attention or transfer to an outside medical facility once they notice the onset of COVID-19 symptoms as their non-disabled peers may. 123. Residents with disabilities are also more likely to be at a heightened risk of serious illness or death if they were to contract the coronavirus. 124. Defendants have violated Title III of the ADA and § 504 of the RA by maintaining a policy and practice of staffing their facility without regard for residents’ needs, making it impossible for residents with disabilities to access the services, goods, facilities, privileges, advantages or accommodations for which they have paid without a fear of contracting COVID-19. 125. QACC's failure to protect its disabled residents from harm poses a heightened risk to their health and safety because of their disability. The facility is not equipped to stop the spread of the disease or treat residents who become ill. Plaintiffs and the putative class are at an increased risk of contracting the virus and of suffering serious illness or death upon contraction of the virus because of their underlying medical conditions, whether physical or mental. 126. In addition, Defendants have violated 42 U.S.C. § 12182(b)(2)(A)(ii) by refusing to make reasonable modifications in policy and practice to provide sufficient staffing so that Plaintiffs may receive full and equal access to and enjoyment of QACC’s services. Such reasonable modifications in QACC’s policies, practices and procedures are necessary to ensure that Plaintiffs and the members of the putative class receive full and equal access to and enjoyment of QACC’s services, including assistance with, inter alia, feeding, bathing, showering, toileting, transferring, taking medications, dressing, dining, and housekeeping. 127. Unless and until QACC makes reasonable modifications in policies, practices, and procedures as required by Title III of the ADA and § 504 of the RA, Plaintiffs and the members of the putative class will continue to be denied full and equal access to and enjoyment of the services, goods, facilities, privileges, advantages and accommodations that QACC claims to provide to all of its residents. II. Injunctive Relief is an Appropriate Vehicle to Address the Imminent and Serious Risk of Irreparable Harm to the Plaintiffs Caused by Defendants’ Violation of the ADA and the RA. 128. Judicial intervention through injunctive relief is necessary to ensure that QACC’s residents have their disabilities in a manner to reasonably protect their health in accordance with good and accepted practice applicable to this assisted living facility. See Martinello Decl., ¶¶ 12- 15; McCallion Decl., ¶¶ 19-21. 129. Court can award injunctive relief under both the ADA and the RA. To support such a claim, Plaintiffs must plead a violation of each statute and that they will suffer real, imminent, and irreparable harm absent a remedy. Henrietta D., 331 F.3d at 290. Claims for injunctive relief do not require a showing of discriminatory animus. Davis v. Shah, 821 F.3d 231, 260 (2d Cir. 130. Left to their own devices, Defendants’ violations of the ADA and RA will continue to inflict serious, imminent, and irreparable injury to QACC’s vulnerable residents. 131. External oversight must be provided through an emergency appointment of a Special Master to chair the investigation of QACC’s health and safety compliance for mitigation of COVID-19 for its qualified residents with medical conditions and other disabilities entitled to protection under the ADA and RA. 132. Defendants are unable to self-police and ameliorate their acts to adequately protect their vulnerable residents from COVID-19. With confirmed COVID-19 infections among staff and residents at the facility and the facility’s disregard of applicable guidelines to protect its residents from the disease, internal transmission of the virus to all residents within the facility will be an eventuality without the Court’s intervention to compel QACC to follow applicable guidelines. 133. QACC has a history of inadequate staffing and gross neglect of its disabled residents. For example, upon information and belief, Defendants have been under investigation by the New York State ombudsman’s office for their misappropriation of New York State funds under the EQUAL Program. EQUAL funds are provided by the state for the purpose of enhancing both residents’ quality of care and life experience in the adult care facility. A condition for participation in the EQUAL program is that the funds “will not be awarded to subsidize daily operational expenses such as staffing or utilities.”17 Nevertheless, upon information and belief, Defendants used the EQUAL funds for their facility’s renovation rather than for resident care. 134. Defendants have a policy and practice of staffing and operating QACC without regard for residents’ needs, making it impossible for residents with disabilities to access the services, goods, facilities, privileges, advantages or accommodations for which they have paid, especially in the context of the COVID-19 pandemic. 135. Defendants’ history of gross negligence and recklessness toward resident care highlights the need for injunctive relief including the appointment of a Special Master whose duties would be to provide external oversight of COVID-19 mitigation plans within QACC. 136. Unfortunately, the COVID-19 pandemic is not expected to resolve in the near future. A team of pandemic experts advised as of April 30, 2020, that the United States must 17 New York State Department of Health Division of Adult Care Facility/Assisted Living Surveillance, Conditions for Participation in the Enhancing the Quality of Adult Living (EQUAL) Program 2018-2019, https://www.health.ny.gov/facilities/adult_care/dear_administrator_letters/docs/2018-05-01_dal_18-11_2018- 2019_equal_instructions.pdf prepare for a likelihood that the virus will keep spreading for at least another 18 months to two (2) years.18 137. Therefore, Plaintiffs will continue to face irreparable harm if QACC is not compelled to abide by the applicable guidelines concerning COVID-19 with oversight of a Special Master to advise on the development, implementation and success of policy, procedures, and interventions. These measures are necessary to provide the residents with disabilities full and equal opportunity to access and enjoy QACC’s services without undue risk of contracting the virus. 138. Unless and until Defendants bring their facility into compliance with the requirements of the ADA and the RA and applicable standards, Plaintiffs and the members of the putative class will continue to be denied full access to and enjoyment of QACC’s services in violation of the ADA and the RA. 139. Unless and until Defendants make reasonable modification in QACC’s policies, practices, and procedures with respect to the staffing and implementation of properly functioning infectious disease prevention and management protocols, Plaintiffs and the members of the putative class will continue to be denied access to and enjoyment of the services, goods, facilities, privileges, advantages and accommodations purportedly provided to QACC’s residents. 140. The relief sought herein is urgently requested to prevent further and ongoing catastrophe among the approximately 350 residents of QACC who represent some of the most vulnerable individuals to COVID-19, many of whom have disabilities that put them at a grave risk of contracting COVID-19 under the conditions that exist at QACC. Because of their medical conditions and other qualifying disabilities, Plaintiffs are at a substantially increased risk of death or serious illness if infected by COVID-19. 18 Maggie Fox, Expert report predicts up to two more years of pandemic misery, CNN (May 1, 2020), https://www.cnn.com/2020/04/30/health/report-covid-two-more-years/index.html 141. A present and actual controversy exists regarding the respective rights and obligations of Plaintiffs and Defendants. Plaintiffs desire a judicial determination of their rights and Defendants’ obligations in a declaration as to whether, and to what extent, the Defendants’ conduct violates applicable law. 142. Such a declaration is necessary and appropriate at this time in order that Plaintiffs may ascertain their rights. Such a declaration is also necessary and appropriate to prevent further harm or infringement of Plaintiffs’ rights. 143. Plaintiffs have no adequate remedy at law for the harm to them arising from the conduct alleged herein. Unless and until Defendants are preliminarily and permanently enjoined from engaging in such conduct, Plaintiffs will continue to suffer irreparable harm as a result of Defendants’ violations of the ADA and the RA as alleged herein. Moreover, given the grave risk of harm and/or death facing QACC’s residents by Defendants’ failure to comply with the applicable disease prevention regulations and protocols, the balance of equities and the public interest clearly favor the Plaintiffs herein. 144. Plaintiffs are entitled to declaratory and injunctive relief pursuant to the ADA and the RA. Defendants must be immediately enjoined to provide services that comply with applicable regulations and guidelines of the CDC, CMS, 42 C.F.R. § 483, and New York Public Health Law governing nursing homes and assisted living facilities with regard to the control and prevention of COVID-19. To ensure proper compliance with these protocols, Plaintiffs submit that a Special Master must be appointed on an emergency basis to, inter alia, ensure a safe, functioning and effective system to prevent and control the spread of COVID-19 within QACC with a sufficient number of adequately trained staff. 145. Pursuant to the power of this Court under 28 U.S.C. § 2201 to grant declaratory and injunctive relief, Plaintiffs respectfully request the Court to declare QACC’s aforementioned acts and omissions as violative of Title III of the ADA and § 504 of the RA, and to compel QACC to immediately follow applicable rules and guidelines including those of the CDC, CMS, 42 C.F.R. § 483, and New York Department of Health. In addition, Plaintiffs respectfully request that the Court appoint an expert Special Master to chair the investigation and oversight of COVID-19 mitigation efforts at QACC, and order the Defendants to pay the costs associated with this appointment. Examples of specific COVID-19 prevention and mitigation strategies appropriate for QACC are outlined in Dr. McCallion’s Declaration (Ex. D), ¶¶ 19-21. CLASS ACTION ALLEGATIONS 146. The named Plaintiffs bring this action on behalf of themselves and all persons similarly situated and seek class certification pursuant to Federal Rule of Civil Procedure 23(b)(2) and/or (b)(3). 147. Plaintiffs seek to represent a class consisting of all current and future residents of QACC during the course of the COVID-19 pandemic who have disabilities that require assistance with activities of daily living (the “Class”). 148. This action is brought as a class action and may properly be so maintained pursuant to Federal Rule of Civil Procedure 23 and applicable case law. 149. Members of the proposed Class are identifiable and ascertainable. Upon information and belief, Defendants retain admission contracts, resident service plans, and billing statements for all persons who currently reside or resided at QACC. The medical conditions that qualify the residents to receive QACC’s services are the very disabilities requiring assisted living services that define the Class. 150. The members of the Class are too numerous to be joined in one action, and their joinder is impracticable and the disposition of their claims in a class action is a benefit both to the parties and to this Court. Upon information and belief, the Class exceeds 300 individuals and will continue to increase as QACC admits new residents during the course of COVID-19 pandemic. The number of persons in the Class and their identities may be ascertained from Defendants’ records to be produced in discovery. 151. Common questions of law and fact exist as to all Class members and predominate over questions that affect only the individual members. All members of the Class have been and continue to be denied their civil rights to full and equal access to, and use and enjoyment of, the services and facilities operated by the Defendants because of the violations of ADA and RA alleged herein. 152. There are numerous questions of law and fact common to the Class, including, but not limited to: a. Whether QACC, an assisted living facility, is a place of public accommodation within the meaning of Title III of the ADA; b. Whether QACC is a program receiving federal financial assistance within the meaning of § 504 of the RA; c. Whether QACC’s conditions described in this Complaint amount to violations of the ADA and § 504 of the RA; d. What measures Defendants took in response to the COVID-19 crisis; e. Whether Defendants implemented a structured plan or protocol during the COVID-19 crisis, and if so, what it was; f. Whether Defendants’ policies, procedures, and practices during the COVID-19 crisis exposed QACC’s residents to a substantial risk of serious and undue harm; g. Whether Defendants violated and disregarded applicable rules and guidelines from CDC, CMS, 42 C.F.R. § 483, and New York State Department of Health; h. Whether QACC has developed, implanted, or enforced measures to isolate, screen, and test those residents who are suspected to be infected or who have had contact with other residents diagnosed with COVID-19; i. Whether QACC has developed, implanted, or enforced measures to restrict congregation of residents in communal areas or to ensure the residents’ social distancing and proper usage of protective equipment; j. Whether QACC has allowed residents, including those who are suspected to be infected or who have had contact with other residents diagnosed with COVID- 19 to freely enter and leave the facility from the surrounding Elmhurst area; k. Whether the Defendants knew of and disregarded a substantial and heightened risk of serious harm to the safety and health of the Class; l. Whether members of the Class are at a particular risk of harm during the COVID-19 crisis because of their disability, and whether Defendants’ policies, procedures, and practices addressed such a heightened risk of harm; m. Whether members of the Class are being denied full and equal access to and enjoyment of QACC’s goods, services, facilities, privileges, advantages or accommodations; n. What reasonable modifications in policies, practices and/or procedures can be made to ensure that QACC’s residents with disabilities receive full and equal access to and enjoyment of the services; o. Whether reasonable modifications in policies, practices and/or procedures are necessary to ensure that residents with disabilities have full and equal access to and enjoyment of QACC’s goods, services, facilities, privileges, advantages and accommodations as required by Title III of the ADA and § 504 of the RA; p. Whether Defendants, by their actions and omissions alleged herein, have engaged and continue to engage in a pattern and practice of discriminating against Plaintiffs and other residents with disabilities in violation of the ADA and § 504 of the RA; q. Whether the Plaintiffs and the putative Class members have been injured; r. Whether the Plaintiffs and the putative Class members are entitled to declaratory and/or injunctive relief; s. What relief should be awarded to redress the harms threatened to members of the Class as a result of the conditions at QACC. 153. Absent class certification, individuals with disabilities residing in QACC during the COVID-19 pandemic would face a series of barriers in accessing the relief sought. Due to their physical or mental impairments, members of the Class have limited ability to obtain legal representation and pursue litigation. 154. Defendants’ practices and the claims alleged in this Complaint are common to all members of the Class. 155. The claims of the named Plaintiffs are typical of those of the Class. Plaintiffs are themselves members of the proposed Class. Plaintiffs are threatened with imminent perilous conditions of residence at QACC. Plaintiffs’ claims arise from the same uniform policies, procedures, practices and course of conduct on the part of Defendants in operating the QACC. Plaintiffs’ claims are based on the same or similar legal and remedial theories as those of the proposed Class and involve similar factual circumstances. The injuries and harms suffered by the named Plaintiffs are typical of those suffered by all the other Class members. Finally, the relief sought herein will benefit the named Plaintiffs and all Class members alike. 156. The named Plaintiffs will fairly and adequately represent and protect the interests of the Class. They have no interests adverse to the interests of other members of the Class and have retained counsel who are competent and experienced in litigating class actions and civil rights litigation. Counsel for Plaintiffs know of no conflicts of interest among Class members or between the attorneys and Class members that would affect this litigation. 157. The Class Meets the Requirements of Federal Rule of Civil Procedure 23(b)(2). Defendants have acted and refused to act on grounds generally applicable to the Class, making the declaratory and injunctive relief sought on behalf of the Class as a whole appropriate. 158. Class certification is also appropriate under Federal Rule of Civil Procedure 23(b)(3) because questions of law or fact common to the Class members predominate over any questions affecting individual members of the putative Class. 159. In addition, a class action is superior to other available methods for the fair and efficient adjudication of this controversy because, inter alia: 1) individual claims by the Class members would be impracticable because the pursuit of such claims will impose undue financial, administrative, and procedural burdens on the parties and on this Court; 2) the concentration of litigation of these claims in one forum will achieve efficiency and promote judicial economy; 3) joinder of all Class members is impracticable; 4) individual Class members are unlikely to have an interest in separately prosecuting and controlling individual actions, especially given the injunctive and remedial nature of relief sought herein; 5) the proposed Class is manageable, and no extraordinary difficulties are likely to be encountered in the management of this class action that would preclude its maintenance as a class action; 6) the proposed Class members are readily identifiable; and 7) prosecution of separate actions by individual members of the proposed Class would create the risk of inconsistent or varying adjudications with respect to individual members of the proposed Class that would establish incompatible standards of conduct for QACC. FIRST CLAIM FOR RELIEF (Declaratory and Injunctive Relief for Violation of Title III of the Americans with Disabilities Act) 160. Plaintiffs incorporate by reference each and every allegation contained in the preceding paragraphs of this Complaint as though set forth fully herein. 161. Plaintiffs bring this claim on their own behalf and on behalf of the Class. 162. As Congress explicitly stated, the ADA was enacted with the purpose of providing “a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities” and “clear, strong, consistent, enforceable standards addressing discrimination against individuals with disabilities.” 42 U.S.C. § 12101(b)(1)-(2). 163. Title III of the ADA provides in pertinent part: “[N]o 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). 164. Title III of the ADA also provides that an entity “shall not, directly or through contractual or other arrangements, utilize standards or criteria or methods of administration: [t]hat have the effect of discriminating on the basis of disability.” 42 U.S.C. § 12182(b)(1)(D)(i). 165. 42 U.S.C. § 12102 defines the term “disability” within the ADA statutes as “(A) a physical or mental impairment that substantially limits one or more major life activities of such individual; (B) a record of such an impairment; or (C) being regarded as having such an impairment.” 42 U.S.C. § 12102(1). 166. At all times relevant to this action, Plaintiffs Bryan Schoengood, Annetta King Simpson, and Willie Roland were and remain to be qualified individuals with disabilities within the meaning of the ADA. They have physical or mental impairments that substantially limit one or more major life activities, have a record of such impairments that qualified them to receive Defendants’ services at QACC, and are regarded as having such impairments. 167. Defendants are each a “private entity,” as defined under 42 U.S.C. § 12181(6). They own, operate, and/or manage QACC, a large assisted living facility in Elmhurst, New York. QACC provides and purports to provide assisted living services to its residents, including but not limited to, assistance with managing and taking medication, housekeeping, laundry, dressing, bathing, toileting, hygiene, food preparation, and transportation. Therefore, QACC is considered a “public accommodation” within the meaning of Title III of the ADA, because it should be considered a “senior citizen center […] or other social service center establishment.” 42 U.S.C. § 12181(7)(K). 168. QACC is subject to Title III of the ADA and its corresponding regulations in providing services and benefits to Plaintiffs and the members of the proposed class. 169. Defendants were obligated under Title III of the ADA to administer polices, practices, and procedures at QACC in a manner that supports and accommodates the needs of its disabled residents. Plaintiffs and the members of the putative Class are not able to take steps to protect themselves, and their ability to do so is compromised by their disabilities. In addition, they are medically vulnerable and therefore are at a higher risk of developing serious COVID-19 illness. 170. Given the particular vulnerabilities of disabled residents to COVID-19 and the risk of serious illness or death upon contracting the coronavirus, ADA imposes affirmative obligations on the Defendants to develop and enforce effective polices, practices, and procedures to prevent or mitigate the spread of coronavirus within QACC. 171. Defendants have violated the ADA by, inter alia: a. Failing to take steps to screen or test residents for COVID-19; b. Failing to comply with the applicable disease prevention regulations and protocols; c. Failing to isolate those residents who are suspected to have contracted COVID- 19 or have come into contact with someone who did; d. Failing to enforce necessary prevention measures such as social distancing; and e. Failing to provide medical care for visibly ill residents, with staff members not trained or equipped to provide the services, goods, facilities, privileges, advantages or accommodations that those residents require, such as immediate transfer to hospital for intensive care. 172. Defendants have harmed and will continue to harm QACC’s disabled residents in violation of the ADA by failing to take reasonable and adequate measures to redress continued poor conditions and increasing infection in QACC. Defendants have continued to act in this manner, knowing that an increasing number of staff and residents are contracting the coronavirus, and that residents with disabilities are at a particular risk of contracting COVID-19 and of suffering serious illness or death once infected with coronavirus. 173. Defendants utilize standards or criteria or methods of administration that have the effect of subjecting individuals with disabilities to increased, imminent, and irreparable harm. Defendants have failed to facilitate the receipt of QACC’s services in a setting appropriate to the needs of residents with disabilities. 174. Defendants have failed and refused to make reasonable modifications in policies, practices, or procedures as required by Title III of the ADA. Those modifications would include immediate and strict compliance with applicable regulations and guidelines from CDC, CMS, 42 C.F.R. § 483, and New York Department of Health governing nursing homes and assisted living facilities with regard to the control and prevention of COVID-19. 175. These modifications will not make a fundamental alteration in the nature of QACC’s services. Rather, Plaintiffs merely seek to ensure that QACC provides its residents with disabilities full and equal access to and enjoyment of the types of services that QACC already promises to provide to its residents. Thus, the requested reasonable modification in policy, practice or procedure would not change the nature or type of services that Defendants sell to the public. 176. Unless and until QACC makes reasonable modifications in policies, practices, and procedures and implements same to protect its residents from COVID-19, Plaintiffs and the members of the putative Class will continue to be denied full and equal access to and enjoyment of the services, goods, facilities, privileges, advantages, and accommodations that QACC claims to provide to all residents. As COVID-19 rapidly spreads, the already deplorable conditions at QACC will only be exacerbated, and the ability to protect oneself will become even more impossible. 177. Defendants’ failure to adequately protect Plaintiffs from these conditions, or to follow the applicable regulations and guidelines on the control and prevention of COVID-19, constitutes an egregious violation of Title III of the ADA, 42 U.S.C. §§ 12101 et seq., and the regulations promulgated thereunder. The violations include, inter alia: a. Failing to provide residents with disabilities the opportunity to participate in or benefit from goods, services, facilities, privileges, advantages, and/or accommodations at QACC as an assisted living facility, in violation of 42 U.S.C. § 12182(b)(1)(A)(i); b. Failing to provide residents with disabilities the opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages and/or accommodations that are equal to that afforded to individuals without disabilities, in violation of 42 U.S.C. § 12182(b)(1)(A)(ii); c. Utilizing standards, criteria and methods of administration that have the effect of discriminating against residents on the basis of their disabilities, in violation of 42 U.S.C. § 12182(b)(1)(D); and d. Failing to make reasonable modifications in its policies, practices, and procedures which are necessary for its residents with disabilities to enjoy and access QACC’s goods, services, facilities, privileges, advantages and/or accommodations, in violation of 42 U.S.C. § 12182(b)(2)(A)(ii). 178. As a direct and proximate result of the aforementioned unlawful conduct of the Defendants, Plaintiffs and the Class have suffered, and continue to suffer irreparable harm including threat of imminent physical injury, pain and suffering, emotional distress, humiliation, hardship and anxiety, serious illness, and death. SECOND CLAIM FOR RELIEF (Declaratory and Injunctive Relief for Violation of Section 504 of the Rehabilitation Act) 179. Plaintiffs incorporate by reference each and every allegation contained in the preceding paragraphs of this Complaint as though set forth fully herein. 180. Plaintiffs bring this claim on their own behalf and on behalf of the Class. 181. Section 504 of the RA, 29 U.S.C. § 794, provides that no person 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.” 182. Under information and belief, Defendants are recipients of Federal financial assistance. 183. QACC’s programs and activities are financed by Medicare and Medicaid among other federal funding programs. 184. Regulations implementing § 504 of the RA provide that a “recipient may not, directly or through contractual or other arrangements, utilize criteria or methods of administration: (i) [t]hat have the effect of subjecting qualified handicapped persons to discrimination on the basis of handicap; [or] (ii) [t]hat have the purpose or effect of defeating or substantially impairing accomplishment of the objectives of the recipient’s program with respect to handicapped persons.” 45 C.F.R. § 84.4(b)(4). 185. 29 U.S.C. 705(20) defines the term “individual with a disability” within the RA statutes as any individual who “has a physical or mental impairment which for such individual constitutes or results in a substantial impediment to employment.” 29 U.S.C. 705(20)(A)(i). In the alternative, the relevant subchapters of the RA incorporate by reference the definitions of “disability” under ADA, in particular 42 U.S.C. § 12102. 186. 42 U.S.C. § 12102 defines the term “disability” as “(A) a physical or mental impairment that substantially limits one or more major life activities of such individual; (B) a record of such an impairment; or (C) being regarded as having such an impairment.” 42 U.S.C. § 12102(1). 187. At all times relevant to this action, Plaintiffs Bryan Schoengood, Annetta King Simpson, and Willie Roland were and remain to be qualified individuals with disabilities within the meaning of the ADA and the RA. They have physical or mental impairments that substantially limit one or more major life activities, have a record of such impairments that qualified them to receive Defendants’ services at QACC, and are regarded as having such impairments. Moreover, their physical or mental impairments result in a substantial and permanent impediment to employment. 188. QACC is subject to § 504 of the RA and its corresponding regulations in providing services and benefits to Plaintiffs and the members of the proposed class. 189. Defendants were obligated under § 504 of the RA to administer polices, practices, and procedures at QACC in a manner that supports and accommodates the needs of its disabled residents. Plaintiffs and the members of the putative Class are not able to take steps to protect themselves, and their ability to do so is compromised by their disabilities. In addition, they are medically vulnerable and therefore are at a higher risk of developing serious COVID-19 illness. 190. Given the particular vulnerabilities of disabled residents to COVID-19 and the risk of serious illness or death upon contracting the coronavirus, RA imposes affirmative obligations on the Defendants to develop and enforce effective polices, practices, and procedures to prevent or mitigate the spread of coronavirus within QACC. 191. Defendants have violated the RA by, inter alia: a. Failing to take steps to screen or test residents for COVID-19; b. Failing to comply with the applicable disease prevention regulations and protocols; c. Failing to isolate those residents who are suspected to have contracted COVID- 19 or have come into contact with someone who did; d. Failing to enforce necessary prevention measures such as social distancing; and e. Failing to provide medical care for visibly ill residents, with staff members not trained or equipped to provide the services, goods, facilities, privileges, advantages or accommodations that those residents require, such as immediate transfer to hospital for intensive care. 192. Defendants have harmed and will continue to harm QACC’s disabled residents in violation of the RA by failing to take reasonable and adequate measures to redress continued poor conditions and increasing infection in QACC. Defendants have continued to act in this manner, knowing that an increasing number of staff and residents are contracting the coronavirus, and that residents with disabilities are at a particular risk of contracting COVID-19 and of suffering serious illness or death once infected with coronavirus. 193. Defendants utilize methods of administration that have the effect of subjecting individuals with disabilities to increased, imminent, and irreparable harm. Defendants have failed to facilitate the receipt of QACC’s services in a setting appropriate to the needs of residents with disabilities. 194. Defendants have failed and refused to make reasonable modifications in policies, practices, or procedures as required by § 504 of the RA. Those modifications would include immediate and strict compliance with applicable regulations and guidelines from CDC, CMS, 42 C.F.R. § 483, and New York Department of Health governing nursing homes and assisted living facilities with regard to the control and prevention of COVID-19. 195. These modifications will not make a fundamental alteration in the nature of QACC’s services. Rather, Plaintiffs merely seek to ensure that QACC provides its residents with disabilities full and equal access to and enjoyment of the types of services that QACC already promises to provide to its residents. Thus, the requested reasonable modification in policy, practice or procedure would not change the nature or type of services that Defendants sell to the public. 196. Unless and until QACC makes reasonable modifications in policies, practices, and procedures and implements same to protect its residents from COVID-19, Plaintiffs and the members of the putative Class will continue to be denied full and equal access to and enjoyment of the services, goods, facilities, privileges, advantages, and accommodations that QACC claims to provide to all residents. As COVID-19 rapidly spreads, the already deplorable conditions at QACC will only be exacerbated, and the ability to protect oneself will become even more impossible. 197. Defendants’ failure to adequately protect Plaintiffs from these conditions, or to follow the applicable regulations and guidelines on the control and prevention of COVID-19, constitutes an egregious violation of § 504 of the RA, 29 U.S.C. §§ 701 et seq., and the regulations promulgated thereunder. The violations include, inter alia: a. Failing to provide residents with disabilities the opportunity to participate in or benefit from goods, services, facilities, privileges, advantages, and/or accommodations at QACC as an assisted living facility receiving Federal financial assistance, in violation of 29 U.S.C. § 794; b. Failing to provide residents with disabilities the opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages and/or accommodations that are equal to or as effective as that afforded to individuals without disabilities, in violation of 45 C.F.R. § 84.4(b)(1)(i)-(iii) and 45 C.F.R. § 84.52(a); c. Utilizing criteria or methods of administration that have the effect of discriminating against residents on the basis of their disabilities, in violation of 45 C.F.R. § 84.4(b)(4)(i); d. Utilizing criteria or methods of administration that have the purpose or effect of defeating or substantially impairing accomplishment of the objectives of the QACC’s program with respect to disabled residents, in violation of 45 C.F.R. § 84.4(b)(4)(ii); and e. Failing to make reasonable modifications in its policies, practices, and procedures which are necessary for its residents with disabilities to enjoy and access QACC’s goods, services, facilities, privileges, advantages and/or accommodations, in violation of 29 U.S.C. § 794. 198. As a direct and proximate result of the aforementioned unlawful conduct of the Defendants, Plaintiffs and the Class have suffered, and continue to suffer irreparable harm including threat of imminent physical injury, pain and suffering, emotional distress, humiliation, hardship and anxiety, serious illness, and death. PRAYER FOR RELIEF WHEREFORE, Plaintiffs and the Class members respectfully request that the Court enter a class- wide judgment for the following relief: A. A declaratory judgment that Defendants have violated the Americans with Disabilities Act and the Rehabilitation Act by failing to administer protocols, practices, and procedures with regard to the control and prevention of COVID-19 that are appropriate to the needs of disabled residents; B. Certification of this action as a class action; C. Preliminary and permanent injunctions requiring that Defendants promptly take such steps as are necessary to mitigate the serious risk of illness, death, and harm from COVID-19 to those who reside or will reside at QACC during the course of COVID-19 pandemic; D. Preliminary and permanent injunctions requiring that Defendants promptly come into full compliance with the requirements of the ADA and its implementing regulations by: a. directing that Defendants immediately comply with applicable regulations and guidelines of the Centers for Disease Control and Protection (“CDC”), the Department of Health & Human Services Centers for Medicare & Medicaid Services (“CMS”), 42 C.F.R. § 483, as well as New York Public Health Law governing nursing homes and assisted living facilities with regard to the control and prevention of COVID-19; and b. appointing a Special Master at Defendants’ cost to chair a QACC COVID-19 Advisory Committee during the course of COVID-19 pandemic to (i) evaluate and oversee QACC and its staff’s treatment and care of residents, and (ii) make recommendations for ameliorative action to minimize the impact of COVID- 19. E. An award to Plaintiffs of reasonable attorneys’ fees, costs, and litigations expenses incurred in bringing this action, as provided by law; F. Preliminary and permanent injunctions the Court deems necessary to rectify the acts and omissions alleged herein; and G. Such other relief as the Court deems just, proper, and equitable. Dated: New York, NY May 4, 2020 THE JACOB D. FUCHSBERG LAW FIRM, LLP Attorneys for Plaintiffs and the Proposed Class _/s/ Jaehyun Oh___________________________ By: Jaehyun Oh, Esq. _/s/ Aaron S. Halpern_______________________ By: Aaron S. Halpern, Esq. _/s/ Alan L. Fuchsberg______________________ By: Alan L. Fuchsberg, Esq. 3 Park Avenue, 37th Floor New York, NY 10016 Tel. (212) 869-3500 Fax (212) 398-1532 j.oh@fuchsberg.com a.halpern@fuchsberg.com a.fuchsberg@fuchsberg.com

civil rights, immigration, family

arRnC4cBD5gMZwcz1HXx

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION LORI SHAMBLIN, individually and ) on behalf of all others similarly situated, ) ) Plaintiff, ) v. ) ) OBAMA FOR AMERICA, ) ) Defendant. ) __________________________________________/ CLASS ACTION COMPLAINT (Injunctive Relief Sought and Demand for Jury Trial) I. NATURE OF ACTION 1. Two months before the 2012 presidential election, the Federal Communications Commission (“FCC”) issued an Enforcement Advisory reminding political organizations that auto-dialed or pre-recorded calls are unlawful violations of the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227 when directed to a cell phone. 2. Despite the TCPA’s prohibition of robo-calls to cell phones, and t h e F C C ’ s r e m i n d e r that s u c h calls are illegal, President Obama’s principal campaign committee, Obama for America, bombarded voter cell phones with both auto-dialed and pre-recorded calls urging the recipients to vote for Barack Obama in the 2012 presidential election. 1 3. Plaintiff Lori Shamblin received multiple illegal calls as part of Defendant’s pre-election calling campaign and brings this class action for injunctive relief and statutory damages under the TCPA as a remedy for Defendant’s unlawful conduct. II. JURISDICTION AND VENUE 4. This Court has jurisdiction pursuant to 28 U.S.C. § 1331 because the action arises under federal law, namely, the TCPA. 5. Venue is proper in this District pursuant to 28 U.S.C. § 1391 because the automated calls giving rise to Plaintiff’s claims occurred within this District. III. PARTIES 6. Plaintiff L o r i S h a m b l i n is a citizen of the State of F l o r i d a and a resident of Bradenton, Florida. 7. Defendant O b a m a f o r A m e ri c a is registered as a non-profit corporation under the laws of the State of Illinois and was the re-election committee for President Barack Obama’s re-election campaign in 2012. IV. CLASS ACTION ALLEGATIONS 8. Plaintiff brings this action u n d e r Federal Rule of Civil Procedure 23 on behalf of a class defined as, subject to revision by the Court as appropriate: All persons who received one or more non-emergency telephone calls from Defendant i n 2 0 1 2 to a cellular telephone through the use of an automatic-telephone-dialing system or an artificial or pre-recorded voice, and for whom Defendant’s record do not show prior express consent for those calls. 2 Excluded from the class is any officer, director, employee, or agent of Defendant, or the Judge, including staff and immediate family of any Judge to whom this action is assigned. 9. Plaintiff satisfies the numerosity, commonality, typicality, and adequacy prerequisites for suing as a representative party pursuant to Rule 23. 10. Numerosity: Defendants’ pre-election calling campaign was far- reaching and made without regard to whether the telephone numbers dialed were assigned to a cellular telephone service. It would therefore be impractical to join all class members, who are likely to number in the tens of thousands, into a single action through conventional joinder. 11. Commonality: Plaintiff’s and class members’ TCPA claims raise predominantly factual and legal questions that can be answered for all class members through a single class-wide proceeding. For example, to resolve any class member’s TCPA claims, it will be necessary to answer the following questions, each of which can be answered through common, generalized evidence (such as Defendant’s call logs and records): a. Did Defendant conduct a pre-election calling campaign? b. Were the cellular telephone numbers of Plaintiff and class members among those called during Defendant’s pre-election calling campaign? c. Should Defendant be enjoined from making further auto-dialed and/or pre-recorded telephone calls to cell phones in the future. 3 d. Does Defendant have any record that Plaintiff or other class members provided them with prior express consent to receive auto-dialed or pre- recorded calls on their cellular phones? e. Was Defendant’s conduct knowing or willful to justify an increase in the statutory damages Defendant is required to pay for each violation? 12. Typicality: Plaintiff’s claim is typical of class member’s claims, as each arises from the same conduct and automated-calling practices of Defendant. 13. Adequacy: Plaintiff will fairly and adequately protect the interests of the class. Her interests do not conflict with the class’s interests and she has retained counsel experienced in class action and TCPA litigation to prosecute this action on behalf of the class. 14. In addition to satisfying the prerequisites of Rule 23(a), Plaintiff satisfies the requirements for maintaining a class action under Rule 23(b)(3). Common questions of law and fact predominate over any questions affecting only individual members and a class action is superior to individual litigation. The amount of statutory damages available to individual plaintiffs is insufficient to make litigation addressing Defendant’s conduct economically feasible in the absence of the class action procedure. 15. Class certification is also appropriate under Rule 23(b)(2) because Defendant has acted or refused to act on grounds generally applicable to the class, thereby making final injunctive relief appropriate for the class as a whole. 4 V. CLAIM FOR RELIEF Violation of the Telephone Consumer Protection Act 47 U.S.C. § 227 16. The TCPA made it illegal to call any telephone number assigned to a cellular telephone service using an automatic-telephone-dialing system or an artificial or pre-recorded voice. 47 U.S.C. § 227(b)(1)(A). The statute imposes strict liability for violations, making exceptions only for calls made for emergency purposes or made with the prior express consent of the called party. 17. In the days prior to the 2012 presidential election, Defendant Obama for America initiated a pro-Obama calling campaign that violated 47 U.S.C. § 227(b)(1)(A) by targeting voter cell phones with auto-dialed calls and pre- recorded messages. 18. Beginning in or about September 2012 and continuing up to the November 2012 election, Obama for America made unsolicited auto- dialed telephone calls to plaintiff Shamblin’s cellular telephone number. When plaintiff Shamblin did not answer the call, Obama for America’s pre-recorded message was left on her cellular telephone’s voice mail system, as follows: … a vote by mail application. All you need to do is fill it out and drop it in the mail. Then, you will be sent a ballot to vote from home. Voting from home is easy and convenient, and you can avoid the lines on election day. President Obama needs you to join your neighbors and vote. For more information, please visit vote.barackobama.com, or call 855-vote-214, that’s 855-868-3214. This call is paid for by Obama for America, 813-445-5126. 5 19. In late October and early November, 2012, Obama for America made more unsolicited auto-dialed calls to Ms. Shamblin’s cellular telephone number, resulting in yet another pre-recorded message being left on her voice mail system: Hi. I’m calling for Obama for America to say that the President, Barack Obama, needs you to join your neighbors and make your voice heard by early voting. Florida is a key state in this close election and your vote matters. But don’t wait until election day to vote. Early vote sites are open today and Saturday. Early voting for President Obama is a great way to move America forward. When you go early vote, remember to bring your current valid photo ID with a signature. For early vote sites, or more information, call 1-855-vote-214, or go to vote.barackobama.com. Paid for by Obama for America, 813-445-5126. 20. Plaintiff Shamblin received one or more additional calls from this same phone number, but a voice message was not captured. 21. Ms. Shamblin had not given Obama for America her express consent to call her cell phone with automatically-dialed or pre-recorded messages. She had never given Obama for America her telephone number and, prior to receiving Obama for America’s messages, had never even heard of Obama for America. 22. Defendant’s calls to Plaintiff Shamblin and other members of the proposed class violated the TCPA because the calls were made to telephone numbers assigned to a cellular telephone service and were made using an automatic-telephone-dialing system and/or an artificial or pre-recorded voice. 47 U.S.C. § 227(b)(1)(A). 6 23. As a result of Defendant’s violations of the TCPA, Plaintiff Shamblin and the other members of the proposed class are entitled to statutory damages of $500.00 for each violation, and an injunction prohibiting Obama for America from engaging in similar conduct in the future. 24. In addition, because Defendant willfully or knowingly violated the TCPA and did so even after the FCC issued Enforcement Advisory No. 2012-06, the Court may in its discretion increase the amount of the statutory damages to an amount up to $1,500 per violation. VI. PRAYER FOR RELIEF WHEREFORE, Plaintiff Shamblin requests that the Court: a. Certify this action as a class action under Rule 23 of the Federal Rules of Civil Procedure, appointing Plaintiff as the class representative and her counsel as class counsel; b. Enjoin Defendant from violating the TCPA in the future by placing auto-dialed or pre-recorded calls to cellular telephone numbers; c. Award statutory damages to Plaintiff and the class pursuant to 47 U.S.C. § 227(b)(3). d. Award a reasonable amount of attorney fees and costs to compensate Plaintiff’s counsel for the time and litigation expenses incurred on behalf of the class; and e. Issue such other relief as the Court deems equitable and just. 7 VII. DEMAND FOR JURY TRIAL Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, Plaintiff demands a trial by jury of any and all issues in this action so triable of right. Dated: September 19, 2013 Respectfully Submitted, By: /s/ Joseph J. Mellon Joseph J. Mellon Pro Hac Vice Mary F. Mellon Pro Hac Vice THE MELLON LAW FIRM 1401 Wewatta St., #806 Denver, CO 80202 Telephone: (303) 915-0198 jmellon@mellonlaw.com LORI SHAMBLIN, individually and on behalf of all others similarly situated By: /s/ Richard M. Paul III Pro Hac Vice – Trial Counsel Jack D. McInnes Pro Hac Vice PAUL McINNES LLP 2000 Baltimore, Suite 100 Kansas City, MO 64108 Tele: 816-984-8100 Fax: 816-984-8101 paul@paulmcinnes.com mcinnes@paulmcinnes.com By: /s/ Jeffrey M. Paskert Jeffrey M. Paskert MILLS PASKERT DIVERS, P.A. 100 North Tampa Street, Suite 3700 Tampa, FL 33602 Tel: (813) 229-3500 Fax: (813) 229-3502 jpaskert@mpdlegal.com By: /s/ Andrew L. Quiat Andrew L. Quiat Pro Hac Vice THE LAW OFFICES OF ANDREW L. QUIAT, P.C. 7955 E. Arapahoe Court #1250 Centennial, Federal 80112 Tele: (303) 471-8558 aquiat@faxlawcenter.com Attorneys for Plaintiff and the Class 8

privacy

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Case No. _______________________ SHANITA TAYLOR, and those similarly situated; Plaintiffs, v. REGIONAL TRANSPORTATION DISTRICT, and FIRST TRANSIT, INC., Defendants. CLASS ACTION COMPLAINT AND JURY DEMAND INTRODUCTORY STATEMENT 1. This case is about Regional Transportation District’s (RTD’s) and First Transit, Inc.’s (First Transit’s) admitted policy of automatically denying employment to potential bus drivers with more than ten points on their driver’s licenses, whether or not those points arise from violations that might bear on an applicant’s ability to drive safely. 2. That policy is described here as the “automatic denial” policy. 3. People of color are disproportionately likely to be the subject of traffic stops and are disproportionately likely to be ticketed for minor traffic violations, which may increase the points on a driver’s record. 4. Therefore, Defendants’ automatic denial policy has a disparate impact on people of color and violates Title VII of the Civil Rights Act of 1964. 5. Although Defendants may permissibly consider an applicant’s driving record in evaluating her application to be a bus driver, they must do so through an individualized 1 assessment of each applicant’s driving record to determine whether the record has a bearing on the applicant’s capacity to drive safely and effectively as a bus driver for RTD. 6. Plaintiff Shanita Taylor is a black African American woman who lives in the Denver area. 7. Ms. Taylor worked hard to obtain her commercial driver’s license because she believed it would allow her to obtain jobs that paid decent wages and provided good benefits. 8. When she applied to work for RTD and First Transit as a bus driver, however, Ms. Taylor was denied employment due to no other reason than that her driving record had more than 10 points in the preceding seven years. 9. The vast majority of those points arose from violations that have no bearing on Ms. Taylor’s ability to drive safely or effectively for RTD, but Defendants did not undertake an individualized assessment of Ms. Taylor’s driving record. 10. Ms. Taylor brings this case, on behalf of herself and others similarly situated, to obtain damages and other relief for the wrongful denial of her application for employment as a bus driver and an injunction that would require RTD and First Transit to perform an individualized assessment of each applicant’s driving record. JURISDICTION AND VENUE 11. This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1331 (federal question). 12. Venue is proper pursuant to 28 U.S.C. § 1391. A substantial part of the events giving rise to Plaintiffs’ claims occurred in this District, where RTD is located and where First Transit operates its buses contracted with RTD. 2 ADMINISTRATIVE EXHAUSTION 13. Plaintiff timely filed Charges of Discrimination with the Equal Employment Opportunity Commission (“EEOC”) against Defendants First Transit, Inc., (Charge No. 541- 2019-00686) and RTD (Charge No. 541-2019-00603) alleging illegal discrimination 14. Plaintiff received Notices of Right to Sue from the EEOC on September 25, 2019 on each of her Charges of Discrimination. 15. Both of the foregoing Charges were filed on behalf of the Plaintiff Charging Party and all those similarly situated. 16. Plaintiff is a member of the group of those similarly situated to Plaintiff for purposes of Title VII. 17. Accordingly, Plaintiff, and all others similarly situated, have exhausted their administrative remedies and this action is timely filed as a Rule 23 class action on their behalf. PLAINTIFF 18. Plaintiff is an adult black African American woman. 19. At all times material to the allegations of the complaint, Plaintiff was domiciled in the District of Colorado. 20. While in Colorado, Plaintiff applied to work as a bus driver for Defendants RTD and First Transit. 21. Defendants RTD and First Transit denied Plaintiff employment to work as a bus driver for RTD and First Transit. DEFENDANTS 22. RTD is the regional agency responsible for providing public transportation to the metropolitan Denver area. 23. RTD’s principal place of business is in Colorado. 3 24. RTD has a fleet of more than 1,000 buses. Many of them are RTD-owned and operated, and many are leased to private carriers. 25. Defendant First Transit, Inc., is an Ohio corporation with its principal place of business in Ohio. 26. First Transit has a contract with RTD to operate more than 100 of RTD’s buses and to help hire and manage more than 300 of RTD’s employees in Colorado. STATEMENT OF FACTS 27. Under Colorado law, drivers may be assigned a certain number of “points” per traffic violation. 28. Points may be assigned for a range of violations from speeding, to driving without proof of insurance, to driving with a defective headlamp. 29. There is abundant evidence that people of color are disproportionately likely to be pulled over in a traffic stop and disproportionately likely to be cited for traffic violations of all kinds, including minor traffic violations. 30. In official postings advertising bus driver positions, RTD has announced that it will not accept job applicants who have “more than five points assessed against [their] motor vehicle record in the past two years” and “not more than ten points on the seven year record.” 31. First Transit’s contract with RTD specifies that First Transit may not hire bus drivers to drive for RTD and First Transit unless those drivers meet certain criteria including that they may not have more than ten points on their license in the preceding seven years. 32. Pursuant to its contract with RTD, First Transit applies the automatic denial policy when it jointly hires and employs RTD drivers. 33. Ms. Taylor obtained her CDL in February 2017. 4 34. In 2017, after she obtained her CDL, Ms. Taylor applied to work as a bus driver with RTD. 35. RTD informed Ms. Taylor that she could not obtain employment as a bus driver because she had more than 10 points assessed against her driving record in the preceding seven- year period. 36. Those points including points for driving an unsafe vehicle, driving with defective headlamps, and failing to provide proof of insurance. 37. In 2018, Ms. Taylor saw an advertisement for work as an RTD bus driver through First Transit. 38. The advertisement specified that applicants did not need to have a CDL to obtain employment as an RTD bus driver. 39. Because RTD and First Transit were apparently not requiring a CDL to obtain employment, Ms. Taylor assumed that the points on her driving record would also not prevent her from obtaining employment, especially because the vast majority of the points on her license related to her vehicle being defective or not having proof of insurance. 40. In March 2018, Ms. Taylor submitted her application to First Transit to apply as a bus driver for RTD and First Transit. 41. First Transit granted Ms. Taylor an interview for the position. 42. In the interview, First Transit did not ask Ms. Taylor about her driving record. 43. Ms. Taylor received a contingent offer from RTD and First Transit by email after her interview. 44. However, on April 18, 2018, Ms. Taylor received another letter by email rejecting her from the position. She also received a similar letter by mail. 5 45. At the time Ms. Taylor applied for a position with RTD in 2017, none of the points on her record were from convictions for moving violations in the prior seven years. 46. At the time Ms. Taylor applied for a position with RTD and First Transit in March 2018, none of the points on her record were from convictions for moving violations in the prior seven years. Rather, six were for driving a defective vehicle, eight were for not having proof of insurance or driving without insurance, and one was for defective headlamps. 47. Ms. Taylor believes that were she white, she would not have received many of the points on her driving record. 48. For example, Ms. Taylor was assessed points for not having proof of insurance when two police cars pulled her over for no clear reason after having followed her out of a convenience store parking lot. 49. Had RTD and First Transit performed an individualized assessment of Ms. Taylor’s driving record, she would not have been denied employment with RTD and First Transit. 50. Were it not for the automatic denial policy, Ms. Taylor would apply in the future for a bus driver position with RTD or with First Transit to work for First Transit and RTD. RULE 23 CLASS ALLEGATIONS 51. Plaintiff incorporates by reference all previous and subsequent paragraphs of this Complaint as if fully rewritten herein. 52. Plaintiff asserts her Count I as a Fed R. Civ P. 23 class action on their own behalf and on behalf of classes for which they seek certification. 53. Pending any modifications necessitated by discovery, Plaintiff preliminarily defines the classes as follows: 6 DAMAGES CLASS: ALL PEOPLE WHO IDENTIFY AS BLACK OR LATINO AND WHO HAVE APPLIED TO RTD OR FIRST TRANSIT AS A BUS DRIVER BUT WHOSE APPLICATIONS WERE REJECTED BECAUSE THEY HAD MORE THAN TEN POINTS ON THEIR DRIVER’S LICENSE IN THE SEVEN YEARS PRECEDING THEIR APPLICATION INJUNCTION CLASS: ALL PEOPLE WHO IDENTIFY AS BLACK OR LATINO WHO HAVE MORE THAN TEN POINTS ON THEIR DRIVER’S LICENSE IN THE PRIOR TEN YEARS AND WHO WOULD APPLY FOR EMPLOYMENT AS A BUS DRIVER WITH RTD OR FIRST TRANSIT WERE IT NOT FOR DEFENDANTS’ AUTOMATIC DENIAL POLICY 54. The classes are so numerous that joinder of all potential class members is impracticable. 55. There are questions of law or fact common to the classes that predominate over any individual issues that might exist. Common questions of law and fact include whether Defendants’ policy and practice of automatically rejecting applicants based on the number of points on their driving records violates Title VII because it has a disparate impact on black and Latino applicants. 56. The class claims asserted by Plaintiff are typical of the claims of all the potential Class Members. A class action is superior to other available methods for the fair and efficient adjudication of this controversy because numerous identical lawsuits alleging similar or identical causes of action would not serve the interests of judicial economy. This is especially true in the case of relatively low-wage, minority bus driver applicants, like the class members here, who are unlikely to seek, or be able to retain, legal representation on their own. 7 57. Plaintiff will fairly and adequately protect and represent the interests of the class. She applied to work for Defendants and was a victim of the same violations of law as the other class members, including violations of the federal anti-discrimination laws. 58. Plaintiff is represented by counsel experienced in litigating employment claims. 59. The prosecution of separate actions by the individual putative class members would create a risk of inconsistent or varying adjudications with respect to individual potential class members that would establish incompatible standards of conduct for Defendants. 60. Each Class Member’s claim is relatively small. Thus, the interest of potential Class Members in individually controlling the prosecution or defense of separate actions is slight. In addition, public policy supports the broad remedial purposes of class actions in general and that the pertinent federal laws are appropriate vehicles to vindicate the rights of those employees with small claims as part of the larger class. 61. Plaintiff is unaware of any members of the putative classes who are interested in presenting their claims in a separate action. 62. Plaintiff is unaware of any pending litigation commenced by putative class members. 63. It is desirable to concentrate this litigation in this forum because the positions applied for existed in this jurisdiction and Plaintiff is domiciled in this jurisdiction. 64. This class action will not be difficult to manage due to the uniformity of claims among putative class members and the susceptibility of these discrimination claims to both class litigation and the use of representative testimony and representative documentary evidence. 8 COUNT I: DISCRIMINATION ON THE BASIS OF RACE AND COLOR, TITLE VII, 42 U.S.C. § 2000E ET SEQ. Plaintiff and the Rule 23 Damages Class and Rule 23 Injunction Class vs. All Defendants 65. Plaintiff incorporates by reference all previous and subsequent paragraphs of this Complaint. 66. Plaintiff is black and African America and within the classes protected by Title 67. Defendants First Transit and RTD are each an employer for purposes of Title VII. 68. Plaintiff applied to work for Defendant RTD in 2017 and 2018. 69. In 2018, Plaintiff applied to work for Defendant First Transit to be jointly employed by RTD and First Transit. 70. Defendants rejected Plaintiff’s applications to work for RTD and First Transit. 71. Both Defendants adopted a specific policy and/or practice that significantly disparately impacted Plaintiff and those similarly situated based on their race and national origin. 72. RTD has a policy and/or practice of rejecting applicants applying for bus driver positions based on the number of points on their driving record without considering the source or type of violation resulting in the points. 73. First Transit employs the same policy and/or practice when hiring for the positions it manages through its contract with RTD. 74. RTD and First Transit’s automatic denial policy has a disparate impact on minorities because people of color are stopped at disproportionately higher rates compared to white drivers. 9 75. Defendants have no legitimate business justification for this policy and/or practice. 76. One or more alternate practices that would not cause a significant disparate impact would equally meet Defendants’ business needs. 77. Alternate practices include evaluating the type and source of the violations giving rise to points on applicants’ driving records when determining whether an applicant should be rejected based on their driving records. 78. RTD and First Transit’s use of points adversely impacts job opportunities for minority candidates. 79. RTD and First Transit’s actions described herein were intentional and taken with malice and with reckless indifference to Plaintiff’s federally protected rights. 80. Defendants failed to take reasonable care to prevent and to correct the unlawful discriminatory practices described herein. 81. As a direct and proximate cause of Defendants’ discriminatory actions and conduct, Plaintiff suffered, and will continue to suffer damages including, but not limited to, loss of salary wages, earnings and benefits; diminution of future earning capacity; loss of accumulated benefits, emotional distress and other compensatory damages in an amount to be determined at trial; punitive damages in an amount to be determined at trial; and attorney’s fees and costs. DEMAND FOR JURY TRIAL 82. Plaintiff demands a trial by jury for all issues so triable. PRAYER FOR RELIEF 83. Plaintiffs respectfully request an Order from this Court: 10 a. Certifying the Rule 23 classes, naming the named Plaintiff class representative, and naming Plaintiff’s counsel class counsel; b. granting judgment in favor of Plaintiff and against all Defendants; c. awarding Plaintiff and the Rule 23 classes their damages and penalties under state laws; d. awarding Plaintiff and those similarly situated their costs; e. awarding Plaintiff and those similarly situated their attorney’s fees; f. awarding Plaintiff and members of the classes all appropriate equitable and injunctive relief; g. granting such other relief as this Court deems just and proper; h. injunctive relief prohibiting Defendants from future discriminatory and illegal practices as described herein and requiring Defendants to adopt policies and procedures to eradicate the effects of past discriminatory and illegal practices; i. compensatory damages, including for emotional distress, as allowed by law; j. punitive, exemplary, and liquidated damages as allowed by law; k. awarding Plaintiffs and those similarly situated prejudgment and post- judgment interest, when allowable by law. Respectfully submitted this 23rd day of December 2019. s/David H. Seligman ___ David H. Seligman Juno Turner Brianne Power Towards Justice 11 1410 High St., Suite 300 Denver, CO 80218 Tel.: 720-239-2606 Email: david@towardsjustice.org juno@towardsjustice.org brianne@towardsjustice.org Attorneys for Plaintiffs Address for Plaintiff: Shanita Taylor c/o Towards Justice 1410 High St., Suite 300 Denver, CO 80218 12

civil rights, immigration, family

nr6wDIcBD5gMZwcz7dEm

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN Civil Action No.: CLASS ACTION ERIC B. FROMER CHIROPRACTIC, INC., a California corporation, individually and as the representative of a class of similarly- situated persons, Plaintiff, v. STAT TRANSCRIPTION SERVICES INC., a Michigan corporation, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CLASS ACTION COMPLAINT Plaintiff, ERIC B. FROMER CHIROPRACTIC, INC. (“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, STAT TRANSCRIPTION SERVICES INC. (“Defendant”): PRELIMINARY STATEMENT 1. This case challenges Defendant’s practice of sending unsolicited advertisements by facsimile. 2. The federal Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention Act of 2005, 47 U.S.C. § 227 (collectively, “TCPA” or the “Act”), and the regulations promulgated under the Act, prohibit a person or entity from sending fax advertisements without the recipient’s “prior express invitation or permission.” The TCPA provides a private right of action and provides minimum statutory damages of $500 per violation. 3. On or about April 13, 2021, 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. 4. Upon information and belief, Defendant 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 medical transcription services. (Exhibit A). 5. 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. 6. 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. 7. 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. 8. 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, its 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 the Court determines any TCPA violations were willful or knowing. JURISDICTION AND VENUE 9. This Court has subject matter jurisdiction under 28 U.S.C. § 1331 and 47 U.S.C. § 227. 10. This Court has personal jurisdiction over Defendant because Defendant’s principal place of business is within this judicial district, Defendant transacts business within this judicial district, has made contacts within this judicial district, and/or has committed tortious acts within this judicial district. PARTIES 11. Plaintiff, Eric B. Fromer Chiropractic, Inc., is a California corporation. 12. On information and belief, Defendant, STAT Transcription Services Inc., is a Michigan corporation with its principal place of business in Davison, Michigan. FACTS 13. On or about April 13, 2021, Defendant sent the Fax to Plaintiff using a telephone facsimile machine, computer, or other device. (Exhibit A). 14. The April 13, 2021 Fax states, in part: “…Welcome to STAT Transcription Services, Inc. With over three decades of experience, we are an elite provider of medical transcription services. We off you quality outsourcing of medical transcription to improve your workflow and efficiency with rates starting as low as $0.10 per line…We have been serving hospitals and clinics of all sizes across the United States since 2001” The fax advertises a Free Trial Offer: “…We would like to take this opportunity to extend to you a FREE trial offer of our medical transcription services with no obligation! We are confident that once you try us, you will want to continue using our service. …If you are satisfied with the quality of our service, just continue dictating and you will be billed on the first and the fifteenth of each month.” (Exhibit A). 15. The Fax contains no opt out notice. (Exhibit A). 16. The Fax advertises the commercial availability or quality of Defendant’s medical transcription services to Plaintiff and the proposed class of recipients. 17. The purpose of the Fax was to induce the recipients to sign up for a free trial and then continue using its transcription services for a fee. 18. Defendant created or made the Fax, or directed a third party to do so, and the Fax was sent by or on behalf of Defendant with Defendant’s knowledge and authorization. 19. Plaintiff did not give Defendant “prior express invitation or permission” to send the Fax. 20. On information and belief, Defendant faxed the same and other unsolicited facsimile advertisements without prior express invitation or permission, and without the required opt-out language, thereby precluding the affirmative defense of established business relationship. 21. 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. 22. The Fax does not display a proper opt-out notice as required by 47 U.S.C. § 227(b)(1)(C) and 47 C.F.R. § 64.1200(a)(4). CLASS ACTION ALLEGATIONS 23. 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, and/or (5) where the fax advertisements did not include an opt-out notice compliant with 47 C.F.R. § 64.1200(a)(4). Excluded from the Class are Defendant, its employees and agents, and members of the Judiciary. Plaintiff seeks to certify a class which includes, but are not limited to, the fax advertisement sent to Plaintiff. Plaintiff reserves the right to amend the class definition upon completion of class certification discovery. 24. 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. 25. 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 contains 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. 26. 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. 27. Fair and Adequate Representation (Fed. R. Civ. P. 23(a)(4)): Plaintiff will fairly and adequately represent and protect the interests of the class. Plaintiff is interested in this matter, has no conflicts, and has retained experienced class counsel to represent the class. 28. 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 is 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. 29. 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). 30. 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). 31. 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. 32. 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); 33. The Fax. Defendant sent the Fax on or about April 13, 2021, 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 constitutes 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 Defendant is precluded from asserting 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 the Fax and all others sent during the four years prior to the filing of this case through the present. 34. 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 without compliant opt-out notice. By virtue thereof, Defendant violated the TCPA and the regulations promulgated thereunder. 35. The TCPA provides a private right of action to bring this action on behalf of Plaintiff and the 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. 36. 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. 37. 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 medical transcription services; (b) Plaintiff and the other class members did not have an established business relationship; (c) Defendant transmitted advertisements; (d) the Fax does not contain the required Opt-Out Notice, thereby precluding the affirmative defense of established business relationship; and (e) Defendant’s transmission of fax advertisements without prior express invitation or permission was unlawful. 38. Defendant’s actions injured 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 machines. 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, ERIC B. FROMER CHIROPRACTIC, INC., individually and on behalf of all others similarly situated, demands judgment in its favor and against Defendant, STAT TRANSCRIPTION SERVICES, 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, ERIC B. FROMER CHIROPRACTIC, INC., individually, and as the representative of a class of similarly-situated persons By: /s/ Ryan M. Kelly Ryan M. Kelly ANDERSON + WANCA 3701 Algonquin Road, Suite 500 Rolling Meadows, IL 60008 Telephone: 847/368-1500 Fax: 847/368-1501 rkelly@andersonwanca.com

privacy

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Benjamin Heikali (SBN 307466) FARUQI & FARUQI, LLP 10866 Wilshire Boulevard, Suite 1470 Los Angeles, CA 90024 Telephone: (424) 256-2884 Facsimile: (424) 256-2885 E-mail: bheikali@faruqilaw.com [Additional Captions on Signature Page] Attorney for Plaintiff Mark Kerry IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA Case No. 3:19-cv-02535 CLASS ACTION COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a) AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934 JURY TRIAL DEMANDED MARK KERRY, Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. QUANTENNA COMMUNICATIONS, INC., DR. SAM HEIDARI, MARK A. STEVENS, GLENDA MARY DORCHAK, JACK R. LAZAR, EDWIN B. HOOPER III, HAROLD E. HUGHES JR., and JOHN SCULL, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Plaintiff Mark Kerry (“Plaintiff”), by his undersigned attorneys, alleges upon personal knowledge with respect to himself, and information and belief based upon, inter alia, the investigation of counsel as to all other allegations herein, as follows: NATURE OF THE ACTION 1. This action is brought as a class action by Plaintiff on behalf of himself and the other public holders of the common stock of Quantenna Communications, Inc. (“Quantenna” or the “Company”) against the Company and the members of the Company’s board of directors (collectively, the “Board” or “Individual Defendants,” and, together with Quantenna, the “Defendants”) for their violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§ 78n(a), 78t(a), SEC Rule 14a-9, 17 C.F.R. 240.14a-9, and Regulation G, 17 C.F.R. § 244.100, in connection with the proposed merger (the “Proposed Transaction”) between Quantenna and ON Semiconductor Corporation (“ON Semiconductor”). 2. On March 27, 2019, the Board caused the Company to enter into an agreement and plan of merger (“Merger Agreement”), pursuant to which the Company’s shareholders stand to receive $24.50 in cash for each share of Quantenna stock they own (the “Merger Consideration”). 3. On May 3, 2019, in order to convince Quantenna shareholders to vote in favor of the Proposed Transaction, the Board authorized the filing of a materially incomplete and misleading Form PREM14A Preliminary Proxy Statement (the “Proxy”) with the Securities and Exchange Commission (“SEC”), in violation of Sections 14(a) and 20(a) of the Exchange Act. The materially incomplete and misleading Proxy violates both Regulation G (17 C.F.R. § 244.100) and SEC Rule 14a-9 (17 C.F.R. 240.14a-9), each of which constitutes a violation of Section 14(a) and 20(a) of the Exchange Act. 4. While touting the fairness of the Merger Consideration to the Company’s shareholders in the Proxy, Defendants have failed to disclose certain material information that is necessary for shareholders to properly assess the fairness of the Proposed Transaction, thereby violating SEC rules and regulations and rendering certain statements in the Proxy materially incomplete and misleading. 5. In particular, the Proxy contains materially incomplete and misleading information concerning: (i) the financial projections for the Company that were prepared by the Company and relied on by Defendants in recommending that Quantenna shareholders vote in favor of the Proposed Transaction; and (ii) the summary of certain valuation analyses conducted by Quantenna’s financial advisor, Qatalyst Partners LP (“Qatalyst”) in support of its opinion that the Merger Consideration is fair to shareholders on which the Board relied. 6. It is imperative that the material information that has been omitted from the Proxy is disclosed prior to the forthcoming vote to allow the Company’s shareholders to make an informed decision regarding the Proposed Transaction. 7. For these reasons, and as set forth in detail herein, Plaintiff asserts claims against Defendants for violations of Sections 14(a) and 20(a) of the Exchange Act, based on Defendants’ violation of (i) Regulation G (17 C.F.R. § 244.100) and (ii) Rule 14a-9 (17 C.F.R. 240.14a-9). Plaintiff seeks to enjoin Defendants from holding the shareholder vote on the Proposed Transaction and taking any steps to consummate the Proposed Transaction unless, and until, the material information discussed below is disclosed to Quantenna shareholders sufficiently in advance of the vote on the Proposed Transaction or, in the event the Proposed Transaction is consummated, to recover damages resulting from the Defendants’ violations of the Exchange Act. JURISDICTION AND VENUE 8. 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 Section 14(a) and 20(a) of the Exchange Act. 9. 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. 10. Venue is proper in this District under Section 27 of the Exchange Act, 15 U.S.C. § 78aa, as well as under 28 U.S.C. § 1391, because Quantenna maintains its principal executive offices in this District. PARTIES 11. Plaintiff is, and at all relevant times has been, a holder of Quantenna common stock. 12. Defendant Quantenna is incorporated in Delaware and maintains its principal executive offices at 1704 Automation Parkway, San Jose, California 95131. The Company’s common stock trades on the NASDAQ under the ticker symbol “QTNA.” 13. Individual Defendant Dr. Sam Heidari is Quantenna’s Chief Executive Officer and Chairman and has been a director of Quantenna since March 2011. 14. Individual Defendant Mark A. Stevens is Quantenna’s has been a director of Quantenna since July 2016. 15. Individual Defendant Glenda Mary Dorchak has been a director of Quantenna since June 2018. 16. Individual Defendant Jack R. Lazar has been a director of Quantenna since July 17. Individual Defendant Edwin B. Hooper III has been a director of Quantenna since December 2014. 18. Individual Defendant Harold E. Hughes Jr. has been a director of Quantenna since December 2014. 19. Individual Defendant John Scull has been a director of Quantenna since November 20. The Individual Defendants referred to in paragraphs 13-19 are collectively referred to herein as the “Individual Defendants” and/or the “Board.” CLASS ACTION ALLEGATIONS 21. Plaintiff brings this class action pursuant to Fed. R. Civ. P. 23 on behalf of himself and the other public shareholders of Quantenna (the “Class”). Excluded from the Class are Defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any Defendant. 22. This action is properly maintainable as a class action because: a. The Class is so numerous that joinder of all members is impracticable. As of April 29, 2019, there were approximately 39,000,000 shares of Quantenna common stock outstanding, held by hundreds of individuals and entities scattered throughout the country. The actual number of public shareholders of Quantenna will be ascertained through discovery; b. There are questions of law and fact that are common to the Class that predominate over any questions affecting only individual members, including the following: i) whether Defendants disclosed material information that includes non-GAAP financial measures without providing a reconciliation of the same non-GAAP financial measures to their most directly comparable GAAP equivalent in violation of Section 14(a) of the Exchange Act; ii) whether Defendants have misrepresented or omitted material information concerning the Proposed Transaction in the Proxy in violation of Section 14(a) of the Exchange Act; iii) whether the Individual Defendants have violated Section 20(a) of the Exchange Act; and iv) whether Plaintiff and other members of the Class will suffer irreparable harm if compelled to vote their shares regarding the Proposed Transaction based on the materially incomplete and misleading Proxy. 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. 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; and g. A class action is superior to other available methods for fairly and efficiently adjudicating the controversy. SUBSTANTIVE ALLEGATIONS I. The Proposed Transaction 23. Quantenna designs, develops and markets advanced high-speed wireless communication solutions enabling wireless local area networking. The Company applies its wireless systems and software expertise with high-performance radio frequency, mixed-signal and digital semiconductor design skills to provide highly integrated Wi-Fi solutions. Historically, Quantenna’s products have targeted communications service providers, service providers, and the market for home networking applications, including home gateways, repeaters, mesh nodes and video clients. The Company has been actively working to address additional markets including retail, outdoor, small and medium business, enterprise, industrial and consumer electronics. 24. On March 27, 2019, Quantenna and ON Semiconductor issued a joint press release announcing the Proposed Transaction, which states in pertinent part: PHOENIX & SAN JOSE, Calif.--(BUSINESS WIRE)--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. Teleconference ON Semiconductor will host a conference call for the financial community at 5:00 p.m. Eastern Daylight Time (EDT), on March 27, 2019, to discuss this announcement. ON Semiconductor will also provide a real-time audio webcast of the teleconference on the Investors page of its website at http://www.onsemi.com. The webcast replay will be available at this site approximately one hour following the live broadcast and will continue to be available for approximately one year following the conference call. Investors and interested parties can also access the conference call through a telephone call by dialing (877) 356-3762 (U.S./Canada) or (262) 558-6155 (International). In order to join this conference call, you will be required to provide the Conference ID Number - which is 7271535. About ON Semiconductor ON Semiconductor (Nasdaq: ON) is driving energy efficient innovations, empowering customers to reduce global energy use. The Company is a leading supplier of semiconductor-based solutions, offering a comprehensive portfolio of energy efficient power management, analog, sensors, logic, timing, connectivity, discrete, SoC and custom devices. The Company’s products help engineers solve their unique design challenges in automotive, communications, computing, consumer, industrial, medical, aerospace and defense applications. ON Semiconductor operates a responsive, reliable, world-class supply chain and quality program, a robust compliance and ethics program and a network of manufacturing facilities, sales offices and design centers in key markets throughout North America, Europe and the Asia Pacific regions. For more information, visit www.onsemi.com. ON Semiconductor and the ON Semiconductor logo are registered trademarks of Semiconductor Components Industries, LLC. All other brand and product names appearing in this document are registered trademarks or trademarks of their respective holders. Although the Company references its website in this news release, information on the website is not to be incorporated herein. About Quantenna Communications Quantenna (Nasdaq: QTNA) is the global leader and innovator of high performance Wi-Fi solutions. Founded in 2006, Quantenna has demonstrated its leadership in Wi-Fi technologies with many industry firsts. Quantenna continues to innovate with the mission to perfect Wi-Fi by establishing benchmarks for speed, range, efficiency and reliability. Quantenna takes a multidimensional approach, from silicon and system to software, and provides total Wi-Fi solutions. For more information, visit www.quantenna.com. 25. Quantenna is well-positioned for financial growth and the Merger Consideration fails to adequately compensate the Company’s shareholders. It is imperative that Defendants disclose the material information they have omitted from the Proxy, discussed in detail below, so that the Company’s shareholders can properly assess the fairness of the Merger Consideration for themselves and make an informed decision concerning whether or not to vote in favor of the Proposed Transaction. II. The Materially Incomplete and Misleading Proxy 26. On May 3, 2019, Defendants caused the Proxy to be filed with the SEC in connection with the Proposed Transaction. The Proxy solicits the Company’s shareholders to vote in favor of the Proposed Transaction. Defendants were obligated to carefully review the Proxy before it was filed with the SEC and disseminated to the Company’s shareholders to ensure that it did not contain any material misrepresentations or omissions. However, the Proxy misrepresents and/or omits material information that is necessary for the Company’s shareholders to make an informed decision concerning whether to vote in favor of the Proposed Transaction, in violation of Sections 14(a) and 20(a) of the Exchange Act. The Materiality of Financial Projections 27. A company’s financial forecasts are material information a board relies on to determine whether to approve a merger transaction and recommend that shareholders vote to approve the transaction. Here, the Proxy discloses “the Board expressed its support for using the preliminary ten-year forecast in its review and consideration of strategic transactions. . . .” Proxy 28. When soliciting proxies from shareholders, a company must furnish the information found in Schedule 14A (codified as 17 C.F.R. § 240.14a-101). Item 14 of Schedule 14A sets forth the information a company must disclose when soliciting proxies regarding mergers and acquisitions. In regard to financial information, companies are required to disclose “financial information required by Article 11 of Regulation S-X[,]” which includes Item 10 of Regulation S- K. See Item 14(7)(b)(11) of 17 C.F.R. § 240.14a-101. 29. Under Item 10 of Regulation S-K, companies are encouraged to disclose “management’s projections of future economic performance that have a reasonable basis and are presented in an appropriate format.” 17 C.F.R. § 229.10(b). Although the SEC recognizes the usefulness of disclosing projected financial metrics, the SEC cautions companies to “take care to assure that the choice of items projected is not susceptible of misleading inferences through selective projection of only favorable items.” 17 C.F.R. § 229.10(b)(2). 30. In order to facilitate investor understanding of the Company’s financial projections, the SEC provides companies with certain factors “to be considered in formulating and disclosing such projections[,]” including: (i) When management chooses to include its projections in a Commission filing, the disclosures accompanying the projections should facilitate investor understanding of the basis for and limitations of projections. In this regard investors should be cautioned against attributing undue certainty to management’s assessment, and the Commission believes that investors would be aided by a statement indicating management’s intention regarding the furnishing of updated projections. The Commission also believes that investor understanding would be enhanced by disclosure of the assumptions which in management’s opinion are most significant to the projections or are the key factors upon which the financial results of the enterprise depend and encourages disclosure of assumptions in a manner that will provide a framework for analysis of the projection. (ii) Management also should consider whether disclosure of the accuracy or inaccuracy of previous projections would provide investors with important insights into the limitations of projections. In this regard, consideration should be given to presenting the projections in a format that will facilitate subsequent analysis of the reasons for differences between actual and forecast results. An important benefit may arise from the systematic analysis of variances between projected and actual results on a continuing basis, since such disclosure may highlight for investors the most significant risk and profit-sensitive areas in a business operation. 17 C.F.R. § 229.10(b)(3) (emphasis added). 31. Here, Quantenna’s shareholders would clearly find complete and non-misleading financial projections material in deciding how to vote, considering that in making its recommendation that shareholders vote in favor of the Proposed Transaction, the Board specifically relied on the financial forecasts to determine “the prospects and likelihood of realizing superior benefits through remaining an independent company, risks associated with remaining an independent company, and possible alternative business strategies[.]” Proxy 47. 32. As discussed further below, the non-GAAP financial projections here do not provide Quantenna’s shareholders with a materially complete understanding of the assumptions and key factors considered in developing financial projections, which assumptions, factors and other inputs the Board reviewed. The Financial Projections Relied on by the Board 33. The Proxy discloses that the financial projections were developed by the Company’s management “in connection with Quantenna’s evaluation of strategic alternatives and a potential strategic transaction involving Quantenna, at the direction of the Board. . . . [and] were made available to the Board and Qatalyst Partners. . . .” Id. at 49. 34. The Proxy further discloses that the financial projections “had been reasonably prepared on a basis reflecting the best currently available estimates and judgments of Quantenna’s management of the future financial performance of Quantenna and other matters covered thereby.” Id. at 50 35. The Proxy goes on to disclose, inter alia, forecasted values for projected non- GAAP (Generally Accepted Accounting Principles) financial metrics for 2019 through 2028 (the “Management Projections”) for: (1) Non-GAAP COGS; (2) Non-GAAP Gross Profit; (3) Non- GAAP Operating Expense; (3) Non-GAAP Operating Income; (4) Net Operating Profit After Tax; (5) Unlevered Free Cash Flow; and (6) EBITDA but fails to provide (i) the line items used to calculate these non-GAAP metrics nor (ii) a reconciliation of these non-GAAP projections to the most comparable GAAP measures. Id. at 51. 36. The Proxy discloses that “Non-GAAP metrics exclude stock-based compensation expense, non-recurring items, including acquisition related costs, and changes to deferred tax balances[,]” id. at 51 n.1., but fails to provide values for the line items used in the calculation. Id. 37. Additionally, the Proxy provides a sensitivity analysis by applying the operating margin sensitivities to three revenue cases. Id. at 52. The sensitivity analysis states three different 2028 terminal revenue scenarios and three operating margins scenarios for various calendar years. 38. The Proxy does not provide a complete implementation of the sensitivity analysis. The operating margin is disclosed, but there is no indication of if the operating margin is based off of GAAP or non-GAAP financials. Operating margin is calculated as operating income divided by earnings, and it is not clear if the Company has used GAAP operating income or non-GAAP operating income in the calculation. Furthermore, there is no indication as to how the sensitivities would affect the Net Operating Profit After Tax (“NOPAT”), Unlevered Free Cash Flows (“UFCF”) or EBITDA. Moreover, the Proxy does not indicate which of the three cases disclosed in the sensitivity analysis is the most likely. 39. Thus, the Proxy’s disclosure of these non-GAAP financial forecasts and the sensitivity analysis provides an incomplete and materially misleading understanding of the Company’s future financial prospects and the inputs and assumptions for which those prospects are based upon. It is clear that those inputs and assumptions were in fact forecasted and utilized in calculating the non-GAAP measures disclosed and relied on by the Board to recommend the Proposed Transaction in violation of Section 14(a) of the Exchange Act. 40. The financial projections disclosed on page 51 of the Proxy violate Section 14(a) of the Exchange Act because: (i) the use of such forecasted non-GAAP financial measures alone violates SEC Regulation G, as a result of Defendants’ failure to reconcile those non-GAAP measures to their closest GAAP equivalent or otherwise disclose the specific financial assumptions and inputs used to calculate the non-GAAP measures; and (ii) they violate SEC Regulation 14a-9 because they are materially misleading, as shareholders are unable to discern the veracity of the financial projections. 41. As such, this information must be disclosed in order to cure the materially misleading disclosures regarding both the financial projections developed by the Company as well as the projections relied upon by the Company’s financial advisors. The Financial Projections Violate Regulation G 42. The SEC has acknowledged that potential “misleading inferences” are exacerbated when the disclosed information contains non-GAAP financial measures1 and adopted Regulation G2 “to ensure that investors and others are not misled by the use of non-GAAP financial measures.”3 43. Defendants must comply with Regulation G. More specifically, the company must disclose the most directly comparable GAAP financial measure and a reconciliation (by schedule or other clearly understandable method) of the differences between the non-GAAP financial measure disclosed or released with the most comparable financial measure or measures calculated and presented in accordance with GAAP. 17 C.F.R. § 244.100. This is because the SEC believes “this reconciliation will help investors . . . to better evaluate the non-GAAP financial measures . . . . [and] more accurately evaluate companies’ securities and, in turn, result in a more accurate 1 Non-GAAP financial measures are numerical measures of future financial performance that exclude amounts or are adjusted to effectively exclude amounts that are included in the most directly comparable GAAP measure. 17 C.F.R. § 244.101(a)(1). 2 Item 10 of Regulations S-K and S-B were amended to reflect the requirements of Regulation G. 3 SEC, Final Rule: Conditions for Use of Non-GAAP Financial Measures (Jan. 22, 2003), available at https://www.sec.gov/rules/final/33-8176.htm (last visited May 10, 2019) (“SEC, Final Rule”). pricing of securities.”4 44. Moreover, the SEC has publicly stated that the use of non-GAAP financial measures can be misleading.5 Former SEC Chairwoman Mary Jo White has stated that the frequent use by publicly traded companies of unique company-specific non-GAAP financial measures (as Quantenna included in the Proxy here) implicates the centerpiece of the SEC’s disclosures regime: In too many cases, the non-GAAP information, which is meant to supplement the GAAP information, has become the key message to investors, crowding out and effectively supplanting the GAAP presentation. Jim Schnurr, our Chief Accountant, Mark Kronforst, our Chief Accountant in the Division of Corporation Finance and I, along with other members of the staff, have spoken out frequently about our concerns to raise the awareness of boards, management and investors. And last month, the staff issued guidance addressing a number of troublesome practices which can make non-GAAP disclosures misleading: the lack of equal or greater prominence for GAAP measures; exclusion of normal, recurring cash operating expenses; individually tailored non-GAAP revenues; lack of consistency; cherry- picking; and the use of cash per share data. I strongly urge companies to carefully consider this guidance and revisit their approach to non-GAAP disclosures. I also urge again, as I did last December, that appropriate controls be considered and that audit committees carefully oversee their company’s use of non-GAAP measures and disclosures.6 45. The SEC has required compliance with Regulation G, including reconciliation requirements in other merger transactions. Compare Youku Tudou Inc., et al., Correspondence 5 (Jan. 11, 2016) (Issuer arguing that Rule 100(d) of Regulation G does not apply to non-GAAP financials relating to a business combination),7 with Youku Tudou Inc., et al., SEC Staff Comment 4 SEC, Final Rule. 5 See, e.g., Nicolas Grabar and Sandra Flow, Non-GAAP Financial Measures: The SEC’s Evolving Views, Harvard Law School Forum on Corporate Governance and Financial Regulation (June 24, 2016), available at https://corpgov.law.harvard.edu/2016/06/24/non-gaap-financial- measures-the-secs-evolving-views/ (last visited May 10, 2019); Gretchen Morgenson, Fantasy Math Is Helping Companies Spin Losses Into Profits, N.Y. Times, Apr. 22, 2016, available at http://www.nytimes.com/2016/04/24/business/fantasy-math-is-helping-companies-spin-losses- into-profits.html?_r=0 (last visited May 10, 2019). 6 Mary Jo White, Keynote Address, International Corporate Governance Network Annual Conference: Focusing the Lens of Disclosure to Set the Path Forward on Board Diversity, Non- GAAP, and Sustainability (June 27, 2016), available at https://www.sec.gov/news/speech/chair- white-icgn-speech.html (emphasis added) (footnotes omitted) (last visited May 10, 2019). 7 Available at https://www.sec.gov/Archives/edgar/data/1442596/000110465916089133/ filename1.htm (last visited May 10, 2019). Letter 1 (Jan. 20, 2016) (“[The SEC] note[s] that your disclosure of projected financial information is not in response to the requirements of, or pursuant to, Item 1015 of Regulation M-A and is thus not excepted from Rule 100 of Regulation G.”);8 see Harbin Electric, Inc., Correspondence 29 (Aug. 12, 2011) (“Pursuant to the requirements of Regulation G, we have added a reconciliation of actual and projected EBIT to GAAP net income . . . .”).9 46. Compliance with Regulation G is mandatory under Section 14(a), and non- compliance constitutes a violation of Section 14(a). Thus, in order to bring the Proxy into compliance with Regulation G, Defendants must provide a reconciliation of the non-GAAP financial measures to their respective most comparable GAAP financial measures. The Financial Projections are Materially Misleading and Violate SEC Rule 14a-9 47. In addition to the Proxy’s violation of Regulation G, the lack of reconciliation or, at the very least, the line items utilized in calculating the non-GAAP measures render the financial forecasts disclosed materially misleading as shareholders are unable to understand the differences between the non-GAAP financial measures and their respective most comparable GAAP financial 8 Available at https://www.sec.gov/Archives/edgar/data/1442596/000000000016062042/ filename1.pdf (last visited May 10, 2019) 9 Available at https://www.sec.gov/Archives/edgar/data/1266719/000114420411046281/ filename1.htm (last visited Jan. 11, 2019). See also Actel Corp., SEC Staff Comment Letter 2 (Oct. 13, 2010) (“Opinion of Actel’s Financial Advisor, page 24 . . . This section includes non- GAAP financial measures. Please revise to provide the disclosure required by Rule 100 of Regulation G.”), available at https://www.sec.gov/Archives/edgar/data/907687/00000000001 0060087/filename1.pdf (last visited May 10, 2019). See also The Spectranetics Corp., SEC Staff Comment Letter 1 (July 18, 2017) (“Item 4. The Solicitation or Recommendation Certain Spectranetics Forecasts, page 39 . . . [P]rovide the reconciliation required under Rule 100(a) of Regulation G”), available at https://www.sec.gov/Archives/edgar/data/789132/0000000000 17025180/filename1.pdf (last visited May 10, 2019). The SEC Office of Mergers and Acquisitions applied Regulation G in these transactions and reflect the SEC’s official position. Any claim that the SEC has officially sanctioned the use of non-GAAP financial forecasts for business combinations when the Board itself created and relied on such non-GAAP forecasts to recommend a transaction such at the Proposed Transaction is incorrect. The SEC’s website provides certain unofficial guidance for certain matters, called Compliance and Disclosure Interpretations (“C&DI’s”) which through the use of Q&As reflect the views of particular SEC staff and on which certain issuers have in the past claimed an exemption from Regulation G. The SEC itself expressly disclaims C&DI’s as they are not regulations that have been reviewed by the SEC, and the SEC expressly states that they are not binding and should not be relied on. See www.sec.gov/divisions/corpfin/cfguidance.shtml (last visited May 10, 2019). measures. Nor can shareholders compare the Company’s financial prospects with similarly situated companies. 48. Such projections are necessary to make the non-GAAP projections included in the Proxy not misleading for the reasons discussed above. Indeed, Defendants acknowledge that Non- GAAP financial measures “are not prepared in accordance with GAAP and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.” Proxy 50. 49. As such, financial projections are plainly material, and shareholders would clearly want a complete and non-misleading understanding of those projections. 50. In order to cure the materially misleading nature of the projections under SEC Rule 14a-9 as a result of the omitted information on page 51, Defendants must provide a reconciliation table of the non-GAAP financial measures to the most comparable GAAP measures. The Materially Misleading Financial Analyses 51. The summary of the valuation methodologies utilized by Qatalyst including the utilization of certain of the non-GAAP financial projections described above by Qatalyst, in connection with its valuation analyses, (id. at 53) is misleading in violation of Regulation 14a-9. The opacity concerning the Company’s internal projections renders the valuation analyses described below materially incomplete and misleading, particularly as companies formulate non- GAAP metrics differently. Once a proxy discloses internal projections relied upon by the Board, those projections must be complete and accurate. 52. With respect to Qatalyst’s Illustrative Discounted Cash Flow Analysis, the Proxy states that Qatalyst used the management projections to perform the discounted cash flow analysis on Quantenna and performed alternate discounted cash flow analyses based on the sensitivities. Id. at 54. Qatalyst used management’s forecasted UFCF for calendar years 2019 through 2027 and a discount rate of 10.5% to 14% to calculate the net present value of the Company’s estimated cash flows. Id. The discount rate of 10.5% to 14% was based on the Company’s weighted average cost of capital. Id. Qatalyst added the implied net present value of the terminal value of Quantenna, calculated by multiplying management’s 2028 NOPAT forecast by multiplies of enterprise value to next twelve months estimated NOPAT ranging from 12x to 22x. Id. Qatalyst then added Quantenna’s cash net of debt as of December 30, 2018, as provided by management, and divided by the number of fully diluted shares of Quantenna common stock, adjusted for restricted stock units, performance stock units, and stock options (the “Fully-Diluted Shares of Quantenna”), outstanding as of March 25, 2019, as provided by management. Id. Qatalyst also adjusted the UFCF and terminal value net present values for the degree of estimated dilution to current stockholders based on future dilution estimates from Quantenna management. Id. 53. The Company does not provide the information Qatalyst utilized in the Illustrative Discounted Cash Flow Analysis. The Company did not disclose the values Qatalyst calculated for the dilution adjusted UFCF, the range of terminal values, the range of dilution adjusted terminal values, any of the inputs that went into calculating the Company’s weighted average cost of capital, the estimated cash net of debt, nor the Fully-Diluted Shares of Quantenna. The Proxy also fails to disclose the inputs and assumptions that went into selecting the enterprise value to next-twelve- months estimated NOPAT multiple range of 12x-22x. 54. Additionally, the Proxy fails to provide any of the above information in relation to the discounted cash flow analyses based on the sensitivities. This is all the more concerning due to the fact that sensitivity case is supposed to be the same as the full set of management projections but Qatalyst has calculated two different implied per share value ranges. Id. Qatalyst calculated a range of $19.93 to $34.26 for the management projections and a range of $19.07 to $34.26 for the sensitivity case. 55. Since information was omitted, shareholders are unable to discern the veracity of Qatalyst’ Illustrative Discounted Cash Flow Analysis. Without further disclosure, shareholders are unable to compare Qatalyst’s calculations with the Company’s financial projections. The absence of any single piece of the above information renders Qatalyst’ Illustrative Discounted Cash Flow Analysis incomplete and misleading. Thus, the Company’s shareholders are being materially misled regarding the value of the Company. 56. As a highly-respected professor explained in one of the most thorough law review articles regarding the fundamental flaws with the valuation analyses bankers perform in support of fairness opinions, in a discounted cash flow analysis a banker takes management’s projections and then makes several key choices “each of which can significantly affect the final valuation.” Steven M. Davidoff, Fairness Opinions, 55 Am. U.L. Rev. 1557, 1576 (2006). Such choices include “the appropriate discount rate, and the terminal value . . . .” Id. As Professor Davidoff explains: There is substantial leeway to determine each of these, and any change can markedly affect the discounted cash flow value . . . . The substantial discretion and lack of guidelines and standards also makes the process vulnerable to manipulation to arrive at the “right” answer for fairness. This raises a further dilemma in light of the conflicted nature of the investment banks who often provide these opinions[.] Id. at 1577-78 (footnotes omitted). 57. Therefore, in order for Quantenna shareholders to become fully informed regarding the fairness of the Merger Consideration, the material omitted information must be disclosed to shareholders. 58. With respect to Qatalyst’s Selected Companies Analysis, Qatalyst compared the price to earnings per share multiples for the calendar year 2020 (“CY2020E P/E Multiple”) of the Company to selected companies. Proxy 55. There is a footnote attached to the multiples stating “[e]stimates generally based on non-GAAP statistics as defined by each company and explicitly excluding stock-based compensation, amortization of intangibles and other non-recurring items regardless of non-GAAP treatment.” Id. at 55 n.*. 59. The Proxy does not disclose how the comparable companies’ CY2020E P/E Multiple was impacted by non-uniform non-GAAP financials nor if any attempt was made to standardize the calculation. It is unclear if any of the CY2020E P/E Multiple calculations have any comparative value to Quantenna due to the possibly different formulation of the non-GAAP financials involved in the CY20E P/E Multiple calculations. 60. In order to cure the materially misleading Selected Companies Analysis, each individual company’s CY20E P/E Multiple calculation must be disclosed, or at the very least, the Company must disclose whether or not Qatalyst standardized the calculation. The absence of the above information renders Qatalyst’ Selected Companies Analysis incomplete and misleading. Thus, the Company’s shareholders are being materially misled regarding the value of the Company. 61. With respect to Qatalyst’s Selected Transaction Analysis, Qatalyst reviewed the implied fully-diluted enterprise value of the target company as a multiple of (a) the revenue of the target company for the next twelve month period (“NTM Revenue Multiple”) and (b) the price to earnings per share multiple for such next twelve month period (“NTM P/E Multiple”). Id. at 57. As in the Selected Companies Analysis, there is a footnote attached to the multiples stating “[e]stimates generally based on non-GAAP statistics as defined by each company and explicitly excluding stock-based compensation, amortization of intangibles and other non-recurring items regardless of non-GAAP treatment.” Id. at 57 n.*. 62. The Proxy does not disclose how the target companies’ NTM P/E Multiple was impacted by non-uniform non-GAAP financials nor if any attempt was made to standardize the calculation. It is unclear if any of the NTM P/E Multiple calculations have any comparative value to Quantenna due to the possibly different formulation of the non-GAAP financials involved in the NTM P/E Multiple calculations. 63. Qatalyst also provides two different sets of means and medians, one set for the entire group of selected transactions and one set for target companies with less than 55% gross margins. Id. at 57. Nowhere does the Proxy state which companies are included in the less than 55% gross margin group nor does it disclose what effect, if any, the less than 55% gross margin group had on Qatalyst’s multiple range. 64. Additionally, Qatalyst appears to have included old transactions in the analysis. 11 of the 39 selected transactions were announced prior to January 1, 2014. Id. at 56. It is unlikely that these transactions are still representative of current day transactions. Moreover, by including these transactions, the mean and median appear to be artificially lowered. The mean and median of all the selected companies for NTM Revenue Multiple was 3.7x and 3.1x, respectively. Id. at 57. The mean and median of all the selected companies for NTM P/E Multiples was 22.5x and 21.7x, respectively. Id. With respect to NTM Revenue Multiples, 8 of the 11 old transactions fall below the median and 9 out of the 11 fall below the mean. Id. at 56. With respect to NTM P/E Multiple, 7 of the 11 old transactions fall below the median and 8 of the 11 fall below the mean. Id. at 56. 65. The failure to disclose each individual company’s NTM P/E Multiple calculation, what target companies were in the group for less than 55% gross margins, and why the old transactions aren’t stale is incomplete and materially misleading. Shareholders are unable to discern the veracity of the Selected Transactions Analysis. Thus, the Company’s shareholders are being materially misled regarding the value of the Company. 66. In sum, the Proxy independently violates both (i) Regulation G, which requires a presentation and reconciliation of any non-GAAP financial to their most directly comparable GAAP equivalent, and (ii) Rule 14a-9, since the material omitted information renders certain statements, discussed above, materially incomplete and misleading. As the Proxy independently contravenes the SEC rules and regulations, Defendants violated Section 14(a) and Section 20(a) of the Exchange Act by filing the Proxy to garner votes in support of the Proposed Transaction from Quantenna shareholders. 67. Absent disclosure of the foregoing material information prior to the special shareholder meeting to vote on the Proposed Transaction, Plaintiff and the other members of the Class will not be able to make a fully-informed decision regarding whether to vote in favor of the Proposed Transaction, and they are thus threatened with irreparable harm, warranting the injunctive relief sought herein. COUNT I (Against All Defendants for Violations of Section 14(a) of the Exchange Act and 17 C.F.R. § 244.100 Promulgated Thereunder) 68. Plaintiff incorporates each and every allegation set forth above as if fully set forth 69. Section 14(a)(1) of the Exchange Act makes it “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 Commission 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.” 15 U.S.C. § 78n(a)(1). 70. As set forth above, the Proxy omits information required by SEC Regulation G, 17 C.F.R. § 244.100, which independently violates Section 14(a). SEC Regulation G, among other things, requires an issuer that chooses to disclose a non-GAAP measure to provide a presentation of the “most directly comparable” GAAP measure and a reconciliation “by schedule or other clearly understandable method” of the non-GAAP measure to the “most directly comparable” GAAP measure. 17 C.F.R. § 244.100(a). 71. The failure to reconcile the non-GAAP financial measures included in the Proxy violates Regulation G and constitutes a violation of Section 14(a). COUNT II (Against All Defendants for Violations of Section 14(a) of the Exchange Act and Rule 14a-9 Promulgated Thereunder) 72. Plaintiff incorporates each and every allegation set forth above as if fully set forth 73. SEC Rule 14a-9 prohibits the solicitation of shareholder votes in registration statements that contain “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[.]” 17 C.F.R. § 240.14a-9(a). 74. Regulation G similarly prohibits the solicitation of shareholder votes by “mak[ing] public a non-GAAP financial measure that, taken together with the information accompanying that measure . . . contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the presentation of the non-GAAP financial measure . . . not misleading.” 17 C.F.R. § 244.100(b) (emphasis added). 75. Defendants have issued the Proxy with the intention of soliciting shareholder support for the Proposed Transaction. Each of the Defendants reviewed and authorized the dissemination of the Proxy, which fails to provide critical information regarding, amongst other things, the financial projections for the Company. 76. In so doing, Defendants made untrue statements of fact and/or omitted material facts necessary to make the statements made not misleading. Each of the Individual Defendants, by virtue of their roles as directors and/or officers, were aware of the omitted information but failed to disclose such information, in violation of Section 14(a). The Individual Defendants were therefore negligent, as they had reasonable grounds to believe material facts existed that were misstated or omitted from the Proxy but nonetheless failed to obtain and disclose such information to shareholders although they could have done so without extraordinary effort. 77. The Individual Defendants knew or were negligent in not knowing that the Proxy is materially misleading and omits material facts that are necessary to render it not misleading. The Individual Defendants undoubtedly reviewed and relied upon the omitted information identified above in connection with their decision to approve and recommend the Proposed Transaction. 78. The Individual Defendants knew or were negligent in not knowing that the material information identified above has been omitted from the Proxy, rendering the sections of the Proxy identified above to be materially incomplete and misleading. 79. The Individual Defendants were, at the very least, negligent in preparing and reviewing the Proxy. The preparation of a registration statement by corporate insiders containing materially false or misleading statements or omitting a material fact constitutes negligence. The Individual Defendants were negligent in choosing to omit material information from the Proxy or failing to notice the material omissions in the Proxy upon reviewing it, which they were required to do carefully as the Company’s directors. Indeed, the Individual Defendants were intricately involved in the process leading up to the signing of the Merger Agreement and the preparation of the Company’s financial projections. 80. Quantenna is also deemed negligent as a result of the Individual Defendants’ negligence in preparing and reviewing the Proxy. 81. The misrepresentations and omissions in the Proxy are material to Plaintiff and the Class, who will be deprived of their right to cast an informed vote if such misrepresentations and omissions are not corrected prior to the vote on the Proposed Transaction. COUNT III (Against the Individual Defendants for Violations of Section 20(a) of the Exchange Act) 82. Plaintiff incorporates each and every allegation set forth above as if fully set forth 83. The Individual Defendants acted as controlling persons of Quantenna within the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their positions as directors and/or officers of Quantenna, and participation in and/or awareness of the Company’s operations and/or intimate knowledge of the incomplete and misleading statements contained in the 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 Company, including the content and dissemination of the various statements that Plaintiff contends are materially incomplete and misleading. 84. Each of the Individual Defendants was provided with or had unlimited access to copies of the 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. 85. In particular, each of the Individual Defendants had direct and supervisory involvement in the day-to-day operations of the Company and, therefore, is presumed to have had the power to control or influence the particular transactions giving rise to the Exchange Act violations alleged herein and exercised the same. The Proxy at issue contains the unanimous recommendation of each of the Individual Defendants to approve the Proposed Transaction. They were thus directly involved in preparing the Proxy. 86. In addition, as the Proxy sets forth at length, and as described herein, the Individual Defendants were involved in negotiating, reviewing, and approving the Merger Agreement. The Proxy purports to describe the various issues and information that the Individual Defendants reviewed and considered. The Individual Defendants participated in drafting and/or gave their input on the content of those descriptions. 87. By virtue of the foregoing, the Individual Defendants have violated Section 20(a) of the Exchange Act. 88. As set forth above, the Individual Defendants had the ability to exercise control over and did control a person or persons who have each violated Section 14(a) and Rule 14a-9 by their acts and omissions as alleged herein. By virtue of their positions as controlling persons, these Defendants are liable pursuant to Section 20(a) of the Exchange Act. As a direct and proximate result of Individual Defendants’ conduct, Plaintiff and the Class will be irreparably harmed. PRAYER FOR RELIEF WHEREFORE, Plaintiff prays for judgment and relief as follows: A. Declaring that this action is properly maintainable as a Class Action and certifying Plaintiff as Class Representative and his counsel as Class Counsel; B. Enjoining Defendants and all persons acting in concert with them from proceeding with the shareholder vote on the Proposed Transaction or consummating the Proposed Transaction, unless and until the Company discloses the material information discussed above which has been omitted from the Proxy; C. Directing Defendants to account to Plaintiff and the Class for all damages sustained as a result of their wrongdoing and to award damages arising from proceeding with the Proposed Transaction; D. Awarding Plaintiff the costs and disbursements of this action, including reasonable attorneys’ and expert fees and expenses; and E. Granting such other and further relief as this Court may deem just and proper. JURY DEMAND Plaintiff demands a trial by jury on all issues so triable. Dated: May 10, 2019 Respectfully submitted, FARUQI & FARUQI, LLP By: /s/ Benjamin Heikali OF COUNSEL: FARUQI & FARUQI, LLP Benjamin Heikali, Bar No. 307466 10866 Wilshire Blvd., Suite 1470 Los Angeles, CA 90024 Tel.: (424) 256-2884 Fax: 424.256.2885 Email: bheikali@faruqilaw.com Counsel for Plaintiff Nadeem Faruqi James M. Wilson, Jr. 685 Third Ave., 26th Fl. New York, NY 10017 Telephone: (212) 983-9330 Email: nfaruqi@faruqilaw.com Email: jwilson@faruqilaw.com Counsel for Plaintiff

securities

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Christopher D. Moon, SBN 246622 chris@moonlawapc.com Kevin O. Moon, SBN 246792 kevin@moonlawapc.com MOON LAW APC 600 West Broadway, Suite 700 San Diego, California 92101 Telephone: (619) 915-9432 Facsimile: (650) 618-0478 Attorneys for Plaintiff UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA '19CV2340 RBB JLS LINDSAY PENHALL, on behalf of herself and a class of all others similarly situated, Plaintiff, v. YOUNG LIVING ESSENTIAL OILS, LC, Defendant. Case No.: CLASS ACTION COMPLAINT DEMAND FOR JURY TRIAL Plaintiff Lindsay Penhall, individually and on behalf of a class of persons similarly situated, brings this class action against Defendant Young Living Essential Oils, LC (“Young Living” or “Defendant”) seeking equitable relief and damages as set forth below. /// /// /// I. NATURE OF THIS ACTION 1. Young Living purports to sell essential oils when, in reality, it sells a convincing lie—the irresistible promise of financial success and “generous, industry leading compensation” by joining its unlawful pyramid scheme. 2. Plaintiff Lindsay Penhall and hundreds of thousands of putative class members just like her, paid and lost hundreds (and in many cases thousands) of dollars to become Young Living distributors or “Members” based upon Defendant’s false promise to “transform your financial future.” 3. Of course, the promise of riches was simply the hook used to grow Young Living’s base of recruits, which is the true purpose of the organization and the source of immense profits for Defendant—at the expense of its Members. 4. Young Living falsely represents to its Members that participation in Young Living—which necessarily requires hefty monthly payments—will result in material riches as long as they continue to solicit additional recruits to become Members of the Young Living family. 5. But that promise is nothing more than a pipe dream for Young Living’s millions of Members. In reality, Defendant has created nothing more than an unlawful pyramid scheme—the cornerstone of which is Young Living’s emphasis on new Member recruitment over the sale of its products. 6. Indeed, in 2016, the median monthly income of 94% of Members was $0 a month, and the average monthly income was a dismal $1 a month. But these amounts do not include the hundreds of dollars in costs Members incurred each year just to remain eligible to earn commissions. When these costs are accounted for, at least 97.5% of Members lost money rather than earned money working for Young Living in 2016. In fact, in 2016, the average Member lost $1,175. 7. And Members did not fare any better in 2018. Nearly 89% of Members earned on average $4 for the year. And, again, this does not include the hundreds of dollars in costs incurred by Members to achieve that dismal $4 annual income. Similar to 2016, at least 96.7% of Members lost money in 2018 rather than earned money working for Young Living. 8. Through this class action, Plaintiff and the putative class seek to hold Defendant accountable for its illegal and deleterious conduct, which has injured hundreds of thousands of unwitting consumers who put their faith in Defendant’s empty promises. II. PARTIES 9. Plaintiff Lindsay Penhall is a resident of San Diego, California. In 2018, Lindsay became a distributor (or “Member”) of Young Living essential oils after being recruited by another distributor. Lindsay lost nearly $2,000 dollars participating in the Young Living pyramid scheme. 10. Defendant Young Living Essential Oils, LC is a Utah company with its principal offices and headquarters located in Lehi, Utah. Young Living claims to “create abundance” for its Members. In reality, Young Living creates abundance only for itself through the unlawful operation of its vast pyramid scheme. 11. Plaintiff alleges, on information and belief, that at all times herein, Defendant’s agents, employees, representatives, executives, directors, partners, and/or subsidiaries were acting within the course and scope of such agency, employment, and representation, on behalf of Defendant. III. JURISDICTION 12. This Court has original jurisdiction over this action pursuant to the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d), because the proposed Class consists of 100 or more members; the amount in controversy exceeds $5,000,000, exclusive of costs and interest; and minimal diversity exists. This Court also has supplemental jurisdiction over the state law claims pursuant to 28 U.S.C. § 1367. IV. VENUE 13. Venue is proper in this District under 28 U.S.C. § 1391 because a substantial part of the events or omissions giving rise to Plaintiff’s claims occurred in this District. In addition, Plaintiff worked as a Young Living Member in this District. Further, Defendant has purposefully availed itself of the California forum by intentionally directing its fraudulent pyramid scheme in California. Among other things, Defendant has a website presence that targets California residents like Lindsay; it sells and ships product to California Members like Lindsay; it markets its pyramid scheme in California; and it sponsors conferences and “Education Events” in California, where Members are encouraged to recruit new Members in furtherance of Defendant’s illegal pyramid scheme. V. FACTUAL ALLEGATIONS A. Background 14. Founded in 1993 by Gary D. Young, Defendant claims to be the world leader in essential oils. Defendant describes its essential oils as “aromatic, concentrated plant extracts that are carefully obtained through steam distillation, cold pressing, or resin tapping.” 15. Defendant’s purported vision is to “bring Young Living Essential Oils to every home in the world.” Defendant’s vision is also a lucrative one: In 2017, sales of Defendant’s more than 150 essential oils exceeded over $1.5 billion. In addition, Defendant’s revenues have increased over 800 percent over the last 6 years. 16. Defendant also touts its purported values: “Always be honest. Young Living prides itself on strict compliance policies that keep us honest and transparent. Acquiring these characteristics can help us continue to progress the company.” In addition, Defendant instructs its Members to “be sure to use good judgment[.]” 17. But in practice, Defendant has fallen far short of upholding its self- professed values. For example, Defendant’s founder, Gary D. Young, was prosecuted for practicing medicine without a license. Mr. Young also ran a now shuttered “Young Living Research Clinic” in Springville, Utah (subsequently replaced by a Young Living clinic in Ecuador) where he employed a quack physician convicted of manslaughter. Mr. Young is also alleged to have nearly killed a patient through vitamin C infusions, which caused renal failure. 18. Even more, in 2014, the U.S. Food and Drug Administration sent a warning letter to Defendant for falsely promoting its products as viable treatments for certain viral infections, including Ebola, Parkinson’s disease, autism, diabetes, hypertension, cancer, multiple sclerosis, dementia, and other serious health issues. 19. In 2017, Young Living pleaded guilty to federal charges and paid $760,000 for illegally trafficking certain oils in violation of the Lacey Act and the Endangered Species Act. Utah’s U.S. Attorney called Young Living’s natural resource violations “substantial.” 20. In 2018, Young Living was ordered to pay $1.8 million for pursuing a lawsuit in bad faith against a competitor. 21. But most pernicious of all is that Defendant’s immense wealth is derived from a vast, illegal pyramid scheme that has caused countless unwitting victims to lose substantial sums of money. B. How the Young Living Pyramid Scheme Works 22. Defendant sells “essential oils” via a complicated multilevel marketing (“MLM”) operation. The complex and intentionally hard-to-understand multi-layer compensation/participation structure of Young Living is a hallmark of illegal MLM pyramid schemes.1 23. While many consider every MLM company to be inherently fraudulent, the Federal Trade Commission (“FTC”) has outlined guidelines it considers critical to distinguishing an illegal pyramid scheme from a “legitimate” MLM. For example, a legal MLM program must structure its compensation so that the members are paid primarily based on sales of goods and/or services to those outside of the plan. By contrast, an illegal pyramid scheme overwhelmingly rewards its participants for recruiting new members rather than through product sales made to persons outside the pyramid structure. 24. In advising consumers about how to identify a pyramid scheme, the FTC stated, in relevant part: The promoters of a pyramid scheme may try to recruit you with pitches about what you’ll earn. They may say you can change your life – quit your job and even get rich – by selling the company’s products. . . . Often in a pyramid scheme, you’ll be encouraged or even required to buy a certain amount of product at regular intervals, even if you already have more inventory than you can use or sell. You may even have to buy products before you’re eligible to be paid or get certain bonuses. . . . In addition, the company may say you can earn lavish rewards, like prizes, bonuses, exotic vacations, and luxury cars. However, it often turns out that you have to meet certain product purchase, recruitment, training, or other goals to qualify for the rewards, and only a handful of distributors ever qualify.2 25. In addition, according to the California Department of Justice, “Millions of Americans have lost money in pyramid schemes. A pyramid scheme can take many forms, but generally involves the promise of making money by recruiting new people. Pyramid schemes are illegal, and most people lose 1See Exhibit A (Young Living’s compensation plan); also available at (and more easily viewed given its formatting) https://static.youngliving.com/en- US/PDFS/compensation-plan.pdf. 2https://www.consumer.ftc.gov/articles/0065-multi-level-marketing-businesses- and-pyramid-schemes. money.”3 26. Indeed, according Jon M. Taylor, MBA, Ph.D., who has extensively studied and written about MLMs: [T]o promote as a ‘business opportunity’ an endless chain or pyramid selling activity (MLM) that in fact leads to almost certain loss for all but the founders and primary promoters (who are enriched from the purchases of victims/recruits), is a misrepresentation of the facts, and can lead to the defrauding of large numbers of participants. MLM is the epitome of the type of business activity the FTC[] is pledged to protect against – ‘unfair and deceptive acts or practices. . . . It is not just a few MLMs that are conducting unfair and deceptive marketing practices, but virtually all of them, as all MLMs are built on a fundamentally flawed system of endless chain recruitment of participants as primary customers.4 27. Here, Defendant operates an illegal pyramid scheme because the financial success of a Young Living Member is overwhelmingly dependent on the recruitment of new people into the Young Living sales force—i.e., the defining characteristic of an illegal pyramid scheme versus a legitimate MLM company. 28. In addition, Young Living represents, either expressly or by implication, that by becoming a Young Living distributor or Member, a person will likely earn substantial income and/or achieve financial success—what Young Living calls “abundance” or “income opportunity.” Young Living makes these representations through a variety of channels, including its website, “youngliving.com,” print materials, videos, social media, live presentations, events and trainings, income testimonials, and other means. 29. Examples of the false and misleading representations Young Living 3 https://oag.ca.gov/consumers/general/pyramid_schemes. 4 Jon M. Taylor, MBA, Ph.D., Consumer Awareness Institute, The Case (for and) against Multi-level Marketing, 7-20, (2011), available at https://www.ftc.gov/sites/default/files/documents/public_comments/trade- regulation-rule-disclosure-requirements-and-prohibitions-concerning-business- opportunities-ftc.r511993-00008%C2%A0/00008-57281.pdf. has made and makes to recruit new Members include the following from its website: • “Have you ever wanted to truly own your time—and your life? What if going to work every day was exciting and enjoyable, and you no longer had to wonder how you were going to pay the bills? Young Living’s generous compensation plan gives you the power to take control of your future and build a business that will change your life forever.” • “If you’re ready to achieve your dream of independence and security, our generous, industry leading compensation plan will help you get there.” • “With a Young Living business, you’re on a path to a different type of lifestyle—one with the potential to earn free products, transform your financial future, and bring life-changing solutions to homes around the world.” • “Every business needs a solid foundation. With our Rising Star Team Bonus, you can achieve abundance as you progress from distributor all the way up to executive.” • “With dedicated support from Young Living and your team and a comprehensive compensation plan, you can take control of your future by building a rewarding business.” • “Young Living offers an industry-leading compensation plan with generous commissions and bonuses.” 30. Even more egregious, Young Living actually requires its Members to further its deception. Specifically, Young Living requires that “[t]o qualify for compensation under Young Living’s Compensation Plan . . . . [Members] have the responsibility to promote Young Living products and the Young Living income opportunity.”5 The effect of which is that Young Living has engaged in a long- term advertising campaign that promoted—albeit misleadingly—that becoming a distributor of Young Living products will lead to financial success and/or 5 See Young Living’s U.S. Policies and Procedures, § 3.12.2 (2018). meaningful income. 31. Unfortunately, Young Living’s very structure ensures that nearly every new Member will almost certainly lose large sums of money, chasing the elusive promise of “abundance” by trying to recruit additional new Members from an ever-shrinking pool of available candidates. 31. And Young Living’s Members’ losses are compounded by its structure, which requires its Members to continuously purchase (and, as a result, hold) an ever-growing inventory of unused product, in direct violation of the 70/30 rule established in the FTC's seminal Amway ruling.6 (1) Young Living Encourages the Recruitment of Members over Retail Sales 32. The Young Living compensation plan rewards the recruitment of new Members far more than the sale of product outside of the Pyramid. 33. In describing the structure of its “generous, industry leading compensation plan,” Defendant admits its compensation structure is designed to “help you build your business with compensation that rewards you as you grow.” Indeed, Defendant stated on its website: If you’re ready to achieve your dream of independence and security, our generous, industry-leading compensation plan will help you get there. It’s all about caring for our Young Living family, and another example of our commitment to total body wellness. Through our three-level approach, we’ve developed an efficient structure to help you build your business with compensation that rewards you as you grow. 1. Create a Foundation Every business needs a solid foundation. With our Rising Star Team Bonus you can achieve abundance as you progress from distributor all the way up to executive. /// 6 See Matter of Amway Corp., Inc., 93 F.T.C. 618 (1979). 2. Build Your Business Once you’ve seen the benefits of being your own business, you’re ready to share that experience with others. Build on your foundation by adding others to your team to achieve shared success. 3. Become a Leader With an established business and a passion for inspiring wellness through Young Living, you’re ready to take the mission worldwide as you lead others to success. 34. Notably absent from Defendant’s message is any emphasis on selling product outside of the pyramid. 35. To become a distributor of Young Living products and eligible for commissions, new Members must first purchase a “starter kit.” These kits range from “basic” ($35) to “premium” kits ($165)—however, the price can dramatically increase depending if additional options are selected. 36. The vast majority of new Members opt for the premium kits, largely because the recruiters are actively encouraged by Young Living to push the premium kits over the basic kits and because certain bonuses are available if a new Member purchases a Premium Starter Kit. 37. Once a new Member enrolls, Young Living pays a cash bonus to the “upline” Member who recruited the new “downline” Member to incentivize its existing Members to recruit as many new downline Members as possible. And Young Living encourages recruiting new Members soon after a Member enrolls by providing certain recruiting bonuses called “Fast Start” bonuses only available during the first three months after a Member enrolls. 38. The payment of the cash enrollment bonus, however, is not the only manner in which Members are actively and repeatedly encouraged to focus their efforts on the recruitment of new Members. Indeed, Young Living’s compensation structure makes crystal clear that recruiting is prioritized over the sale of product in the Young Living system—to a fault.7 39. As Members attempt to earn compensation through the Young Living system, their only opportunity to earn enough income to cover the cost of Membership is by recruiting new Members and then encouraging their downline Members to also recruit aggressively. 40. To move up the pyramid and to be eligible to receive commissions, Young Living Members must also enroll in the Essential Rewards (“ER”) program and maintain their active enrollment in ER by purchasing a minimum amount of Young Living products on a monthly basis, which is referred to as personal volume or “PV.” 41. Young Living gives each product a PV value, where each point is roughly equivalent to each dollar of goods purchased. So a $10 product would typically have a PV value of 10. To earn commissions on a downline, the minimum PV is 100. In Lindsay’s case, she purchased at least $100—often $300—of Young Living product each month in order to maintain her eligibility to earn commissions. 42. The products that comprise a Member’s PV are purchased at a 24% discount and, at least theoretically, can be resold by each Member, who could retain any difference between the discount and the retail price for which they might sell the product. 43. Critically, however, is that there is no real incentive for a Member to try to become a reseller of oils as opposed to recruiting more downline members—for two important reasons. First, there is no real opportunity for a Member to profit from becoming a reseller of oils at a mark-up because anyone can buy the oils at the discounted “wholesale” price directly from Young Living. 7 See Exhibit A; https://static.youngliving.com/en-US/PDFS/compensation-plan.pdf. Second, Members do not earn any commissions on the PV they purchase from Young Living. 44. Instead, Members earn compensation in the form of commissions and bonuses only from (a) starter kits sold to newly recruited Young Living Members, and (b) the “Organization Group Volume,” or “OGV,” purchased by their downline Members either recruited personally by them or recruited by their downline Members.8 45. More specifically, to qualify for commissions and/or to advance in rank, a Member must recruit new Members to become “Legs” in their downline— much like a branch in a family tree. Each “Leg” must generate a certain “Leg Volume” through their own recruitment efforts. And, under Defendant’s “Unilevel Commission” structure, each level of new Member in a Member’s downline can generate additional commissions for the Member—the effect of which is to further incentivize recruiting. Therefore, a Member’s compensation (commissions and bonuses) are all determined based on a Member’s PV, Legs, Leg Volume and OGV—all of which are based on the recruitment of new Members. Importantly, no Member can earn a commission except through recruitment. 46. Even the Membership titles are intended to falsely convey to new Members the promise of wealth—such as “Gold,” “Platinum,” and potentially, the elusive rank of “Royal Crown Diamond.” The problem is, these higher tiers are virtually unattainable. In order to move up the pyramid and share in the “abundance” of promised riches, a Member’s required minimum OGV increases dramatically. For example, in order to earn the relatively low rank of “Star,” a new Member must have an OGV of 500, and the Member’s minimum PV of 100 doesn’t count towards the 500 OGV. In other words, a Member is required to 8 OGV is the total volume generated within a Member’s organization. recruit new Members to move up the pyramid and earn commissions. And because Members are not rewarded for additional PV purchased personally, the only conceivable way for a Member to move up in rank is by achieving the near impossible—i.e., the creation of a downline consisting of thousands of recruits. 47. Consider, for example, Young Living’s highest rank of “Royal Crown Diamond.” The required OGV is a staggering 1,500,000. In order to meet an OGV of 1,500,000, a Member would need a downline of more than 15,000 members each purchasing the minimum PV. Because attrition and failure to order minimum PV is not uncommon, it is likely a Member would actually need a downline consisting of many multiples of that number. Thus, it is not surprising that an infinitesimally small number of Members have ever actually achieved any meaningful success. Indeed, while Young Living brazenly touts the achievement of becoming a “Royal Crown Diamond” as within the grasp of all of its Members, a mere 46 have ever achieved this goal. Young Living claims it has 3,000,000 active Members, but does not report on the number of former Members. Thus, only .0015% of active Members have made it to the top of the pyramid, and the percentage of all Members is very likely much, much smaller. 48. And even more shocking is that Young Living doesn’t even pay monetary commissions to most of those lucky few who are able to amass a downline that purchases the minimum level of OGV each month. To the contrary, if a Member’s earned commission is less than $25 in a single month, Young Living will not pay that commission to the Member. Instead, Young Living issues a credit, which can be used by the Member only to buy more product. So, if a Member’s OGV isn’t large enough each month to trigger a commission check, his or her only option is to recruit even more Members in hopes of driving up OGV. 49. Defendant’s singular focus on Member recruitment is further exemplified by its appropriately titled “On the Grow Tour,” which is a series of “Education Events” held throughout the country. As part of the tour, Members can participate in a “Grow Tour Challenge” where Members must enroll two new Members with a premium starter kit within a certain time period, as well as post certain information on social media to “encourage others to grow with you.” By doing so, a Member will “receive on-stage recognition for growing your team,” as well as a gift. 50. In short, this is not a system designed to sell product to those outside the pyramid. Rather, the entire system is designed for one purpose: to recruit new Members to grow the illegal pyramid, which only benefits Defendant and those very few Members at the top. 51. Indeed, financial success remains elusive to nearly all Members. In 2016, the median monthly income of 94% of Members was $0 a month, and the average monthly income was a dismal $1 a month! But these amounts do not include the hundreds of dollars in costs Members incur each year to remain eligible to earn commissions downline. When these costs are accounted for, at least 97.5% of Members lost money rather than earned money working for Young Living in 2016.9 In fact, in 2016, the average Member lost $1,175. 52. Members did not fare any better in 2018. Nearly 89% of Members earned on average $4 for the year. And, again, this does not include the hundreds of dollars in costs incurred by Members to achieve that dismal $4 annual income. Similar to 2016, at least 96.7% of Members lost money rather than earned money working for Young Living.10 See also https://www.ftc.gov/news- events/press-releases/2019/10/multi-level-marketer-advocare-will-pay-150- million-settle-ftc (The FTC alleged that Advocare operated an illegal pyramid 9 Specifically, according to Defendant’s 2016 Income Disclosure, the average yearly income of 97.5% of Members did not cover the minimum yearly costs to remain eligible to earn commissions and bonuses. 10 Specifically, according to Defendant’s 2018 Income Disclosure, the average annual income of 96.7% of Members did not cover the minimum annual cost to remain eligible to earn commissions and bonuses. scheme and “AdvoCare did not offer consumers a viable path to financial freedom. In 2016, 72.3 percent of distributors did not earn any compensation from AdvoCare; another 18 percent earned between one cent and $250; and another 6 percent earned between $250 and $1,000. The annual earnings distribution was nearly identical for 2012 through 2015.”). 53. Moreover, even the smaller-than-promised potential incomes described herein do not account for the significant additional outlays of time and money that Members are forced to incur just to maintain their business, including traveling around the country to Young Living conferences or meetings, and organizing their own sales events. In addition, since Members are not classified as employees but as independent contractors of Young Living, Members are responsible for paying self-employment taxes and for their own health insurance or other typical job-related benefits. 54. This is not “abundance.” Rather, this is the very definition of an illegal pyramid scheme. And Defendant’s misleading and deceptive representations concerning a consumer’s ability to earn income does not only violate Defendant’s self-professed values—it’s unlawful. 55. Plaintiff and Class Members relied on Defendant’s material misrepresentations concerning the income opportunity and/or financial success a consumer can achieve by becoming a Young Living distributor. 56. And, as described herein, Defendant willfully failed to disclose and continues to fail to disclose that the program’s structure ensures that most Members will not earn any—much less meaningful—income. 57. In addition, Defendant willfully failed to and continues to fail to adequately disclose its appalling—and certainly material—income statistics. 58. Further, Defendant willfully failed to disclose and continues to fail to disclose that it operates an illegal pyramid scheme. 59. Had Plaintiff and reasonable consumers known that Defendant was operating an illegal pyramid scheme and/or had they known that nearly all Members lose money rather than make money, they would not have become Members or would have acted differently. 60. Unfortunately, Plaintiff and Class Members have suffered an injury in fact and have lost money because of Defendant’s unlawful misrepresentations and omissions. (2) Young Living Members are Encouraged to Violate the 70/30 Amway Rule 61. Beyond Young Living’s overwhelming dependence on recruitment income, Young Living’s status as an unlawful pyramid scheme is further evidenced by its brazen violation of the so-called 70/30 rule. In the FTC’s 1979 Amway ruling, it concluded that Amway did not operate as a pyramid scheme, in part, because Amway required its representatives to submit proof of resale demonstrating no more than 30% of purchased product was for personal use or storage before permitting its representatives to purchase additional product—thus the term "70/30." See Matter of Amway Corp., Inc., 93 F.T.C. 618 (1979) 62. The 70/30 rule is designed to prevent an MLM from encouraging its members to continuously order new product for sale (sometimes referred to as “inventory loading”) in order to be eligible to earn commissions. Here, Young Living’s compensation system actually requires its Members to inventory load product. If a Member fails to meet his or her minimum monthly PV, he or she is not eligible to earn any commissions on his or her downline’s OGV no matter how large that OGV may be. 63. Young Living is well aware of the 70/30 rule. Its policies and guidelines even say that no more than 30% of ordered PV can be stored prior to purchasing additional inventory. But this is mere lip-service. Young Living does absolutely nothing to enforce this policy and is well-aware that it is routinely violated. Young Living has no method of compliance in place, and it requires no proof that its Members are actually selling their PV. Any Member can order as much PV as he or she wants, whenever he or she wants. And Young Living turns a blind eye, because doing so helps further its scheme. 64. And, unlike MLMs that sell physically large products, which impedes inventory loading, the opposite is true of Young Living’s products. Young Living’s oils are contained in small, easily stored vials, which actually facilitate inventory loading. Most vials contain only 5 ML to 15 ML of product and each one can sell for $20 or more. At that size and price, a single closet shelf would be enough space for a failing Young Living Member to store literally thousands of dollars in unsold product, hoping against hope that his or her downline OGV will grow large enough to trigger a meager commission. (3) Young Living Is an Illegal Pyramid Scheme 65. By any measure, Young Living is unequivocally a pyramid scheme. 66. Numerous government agencies, legal opinions and experts have all recognized that MLM companies—like Young Living—which emphasize member recruitment over product sales, earn the majority of their revenue from member recruitment, and make no effort to enforce the "70/30" rule, are in fact illegal pyramid schemes.11 67. Indeed, in 2015, the FTC sued Arizona-based Vemma Nutrition Company in the District Court of Arizona for running an illegal pyramid scheme utilizing a very similar pay structure and model utilized by Young Living.12 68. In December 2016, Vemma admitted it was running an illegal pyramid scheme and agreed to a judgment that included $238 million in monetary 11 See e.g., Stull v. YTB Intern., Inc., CIV. 10-600-GPM, 2011 WL 4476419, *5 (S.D. Ill. Sept. 26, 2011) (noting the fact that travel-based pyramid scheme’s revenues were largely derived from new recruits supported allegation it was a pyramid scheme). 12 See FTC v. Vemma Nutrition Co., et al., 15 CV 01578 – PHX (D. Ariz.) (ECF No. 1). damages, as well as an injunction that prohibits Vemma from, inter alia, engaging in the very same acts which the Defendant is engaging here.13 69. According to the FTC: [Vemma,] [t]he multi-level marketing (MLM) company[] which sells health and wellness drinks through a network of distributors called “affiliates,” will be prohibited under a federal court order from paying an affiliate unless a majority of that affiliate’s revenue comes from sales to real customers rather than other distributors. The order also bars Vemma from making deceptive income claims and unsubstantiated health claims. “Unfortunately, extravagant income claims and compensation plans that reward recruiting over sales continue to plague the MLM industry,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “MLM companies must ensure that their promotional materials aren’t misleading, and that their compensation programs focus on selling goods or services to customers who really want them, not on recruiting more distributors.”14 70. Specifically (and just like Vemma), the overwhelming majority of distributors will not even recoup the money that they paid to Young Living to become a Member and be part of Young Living’s sales force. 71. Conversely (and just like Vemma), Young Living’s enormous revenue is largely based on the money it receives from its own distributors to be part of the sales force, and the products its sales force are required to purchase.15 72. Federal and state courts across the country have recognized that the 13 See FTC Release “Vemma Agrees to Ban on Pyramid Scheme Practices to Settle FTC Charges.” https://www.ftc.gov/news-events/press-releases/2016/12/vemma- agrees-ban-pyramid-scheme-practices-settle-ftc-charges. 14 Id. 15 See also https://www.ftc.gov/news-events/press-releases/2019/10/multi-level- marketer-advocare-will-pay-150-million-settle-ftc (On October 2, 2019, “Multi- level marketer AdvoCare International, L.P. and its former chief executive officer agreed to pay $150 million and be banned from the multi-level marketing business to resolve Federal Trade Commission charges that the company operated an illegal pyramid scheme that deceived consumers into believing they could earn significant income as ‘distributors’ of its health and wellness products.”); operation of a pyramid scheme such as Young Living constitutes fraud. Pyramid schemes make money for those at the top of the pyramid and victimize those at the bottom who cannot find recruits. Accordingly, pyramid schemes are inherently fraudulent. Defendant’s operations are also a pyramid scheme because they are based on false promises of vast financial rewards, which are impossible to achieve for new Members who enter at the bottom of the pyramid and who have no realistic chance of moving up the ladder. 73. Ultimately, the Members are financially induced by Defendant to recruit new distributors to join the sales force through materially false representations and omissions concerning the Young Living pyramid scheme. By emphasizing recruitment over product sales, Young Living easily crosses the threshold from legitimate MLM into an illegal pyramid scheme. 74. The rewards that Members can achieve in this case are dependent on virtually endless recruitment into the scheme in which people are exploited and have virtually no chance to get a return on their investment, let alone achieve the high financial gains that Defendant induced these representatives to believe they would achieve. C. Plaintiff's Experience Confirms Young Living Is a Pyramid Scheme 75. In May 2018, Plaintiff Lindsay Penhall joined Young Living as a distributor (or Member) after learning about it from another Young Living Member. Lindsay worked as a Young Living distributor from May to December 2018. 76. In deciding to become a Young Living Member, Lindsay relied on Young Living’s material misrepresentations concerning the financial success she would likely achieve by becoming a distributor of Defendant’s essential oils. Specifically, Lindsay believed she would earn significant income through recruiting others to become Young Living Members and part of her downline. 77. To join Young Living, Lindsay purchased a premium starter kit and approximately $300 worth of essential oils. Thereafter, Lindsay began making monthly payments to Young Living in order to satisfy her PV requirement and to ensure she could receive the potential commissions of her downline. 78. Of course, like the overwhelming majority of Members, Lindsay found recruitment difficult, notwithstanding the fact that Lindsay expended considerable time and money in her recruitment efforts. Indeed, Lindsay organized classes, giveaways, and other recruiting events to which she invited friends and others in an attempt to recruit new Members. Lindsay even constructed a display of Young Living products at the store where she worked and spoke with numerous customers about Young Living products in an effort to recruit new Members. Notwithstanding her efforts, between May and December of 2018, Lindsay was only able to recruit two new Members. 79. Yet, during that time, Lindsay bought product month after month even though she didn’t need it and had no hope of re-selling it to someone else. Moreover, Young Living never questioned whether Lindsay was re-selling at least 70% of her purchases. 80. By the time Lindsay realized she had been victimized by Young Living, she had purchased approximately $2,150 of product, but had only “earned” commissions of approximately $300 from her downline. Accordingly, Lindsay did not receive the benefit of her bargain and suffered an injury in fact. 81. Lindsay describes her experience working as a Young Living distributor as extremely stressful. But Lindsay’s experience is hardly an aberration; rather, it is typical of the experience of most Young Living Members. 82. Had Young Living disclosed to Lindsay that most Members lose money rather than earn money, Lindsay would never have become a Young Living distributor. Similarly, had Young Living disclosed that it was an illegal pyramid scheme, Lindsay would not have become a distributor. And, had Young Living not misrepresented the financial success Lindsay was likely to achieve and/or the “income opportunity,” Lindsay would not have become a distributor. VI. CLASS ACTION ALLEGATIONS 83. Plaintiff brings this action as a class action pursuant to Federal Rules of Civil Procedure 23(b)(2) and 23(b)(3) on behalf of herself and all others similarly situated, and as a member of the Classes defined as follows: All residents of the United States who, within the relevant statute of limitations periods, were Young Living distributors (“Nationwide Class”); and All residents of California who, within four years prior to the filing of this Complaint, were Young Living distributors (“California Subclass”) (“Nationwide Class” and “California Subclass,” collectively, “Class”). 84. Excluded from the Class are: (i) Defendant, its assigns, successors, and legal representatives; (ii) any entities in which Defendant has controlling interests; (iii) federal, state, and/or local governments, including, but not limited to, their departments, agencies, divisions, bureaus, boards, sections, groups, counsels, and/or subdivisions; (iv) all persons presently in bankruptcy proceedings or who obtained a bankruptcy discharge in the last three years; and (v) any judicial officer presiding over this matter and person within the third degree of consanguinity to such judicial officer. 85. Plaintiff reserves the right to amend or otherwise alter the class definitions presented to the Court at the appropriate time in response to facts learned through discovery, legal arguments advanced by Defendant, or otherwise. 86. This action is properly maintainable as a class action pursuant to Federal Rule of Civil Procedure 23 for the reasons set forth below. 87. Numerosity: Members of the Class are so numerous that joinder of all members is impracticable. Upon information and belief, the Nationwide Class consists of hundreds of thousands of Members (if not more) dispersed throughout the United States, and the California Subclass likewise consists of tens of thousands of Members (if not more) dispersed throughout the State of California. Accordingly, it would be impracticable to join all members of the Class before the Court. 88. Common Questions Predominate: There are numerous and substantial questions of law or fact common to all members of the Class that predominate over any individual issues. Included within the common questions of law or fact are: a. Whether Defendant engaged in unlawful, unfair or deceptive business practices; b. Whether Defendant violated California Bus. & Prof. Code § 17200, et seq.; c. Whether Defendant violated Cal. Bus. & Prof. Code § 17500, et seq.; d. Whether Defendant was operating an unlawful pyramid scheme; e. Whether Defendant was operating an unlawful endless chain under California state law. f. Whether Defendant fraudulently omitted and otherwise failed to inform Plaintiff and the Class that they were entering into an unlawful scheme where an overwhelming number of participants lose money; k. Whether Defendant negligently misrepresented the income opportunity and/or financial success Class Members would achieve by becoming a Young Living Member. l. Whether Plaintiff and the Class are entitled to equitable and/or injunctive relief; m. Whether Plaintiff and the Class have sustained damages as a result of Defendant’s unlawful conduct; n. The proper measure of damages sustained by Plaintiff and Class Members; and o. Whether Defendant was unjustly enriched by its unlawful conduct. 89. Typicality: Plaintiff’s claims are typical of the claims of the Class Members they seek to represent because Plaintiff, like the Class Members, participated in Defendant’s misleading and deceptive practices, and Defendant’s unlawful, unfair and/or fraudulent actions concern the same business practices described herein irrespective of where they occurred or were experienced. Plaintiff and the Class sustained similar injuries arising out of Defendant’s conduct. Plaintiff’s and Class Members’ claims arise from the same practices and course of conduct and are based on the same legal theories. 90. Adequacy: Plaintiff is an adequate representative of the Class she seeks to represent because her interests do not conflict with the interests of the Class Members Plaintiff seeks to represent. Plaintiff will fairly and adequately protect Class Members’ interests and has retained counsel experienced and competent in the prosecution of complex class actions. 91. Superiority and Substantial Benefit: A class action is superior to other methods for the fair and efficient adjudication of this controversy, since individual joinder of all members of the Class is impracticable and no other group method of adjudication of all claims asserted herein is more efficient and manageable for at least the following reasons: a. The claims presented in this case predominate over any questions of law or fact, if any exist at all, affecting any individual member of the Class; b. Absent a Class, the members of the Class will continue to suffer damage and Defendant’s unlawful conduct will continue without remedy while Defendant profits from and enjoys its ill-gotten gains; c. Given the size of individual Class Members’ claims, few, if any, Class Members could afford to or would seek legal redress individually for the wrongs Defendant committed against them, and absent Class Members have no substantial interest in individually controlling the prosecution of individual actions; d. When the liability of Defendant has been adjudicated, claims of all members of the Class can be administered efficiently and/or determined uniformly by the Court; and e. This action presents no difficulty that would impede its management by the Court as a class action, which is the best available means by which Plaintiff and Class Members can seek redress for the harm caused to them by Defendant. 92. Because Plaintiff seeks relief for all members of the Class, the prosecution of separate actions by individual members 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 Defendant. 93. The prerequisites to maintaining a class action for injunctive or equitable relief pursuant to Fed. R. Civ. P. 23(b)(2) are met as Defendant has acted or refused to act on grounds generally applicable to the Class, thereby making appropriate final injunctive or equitable relief with respect to the Class as a whole. 94. Plaintiff and Plaintiff’s counsel are unaware of any difficulties that are likely to be encountered in the management of this action that would preclude its maintenance as a class action. /// /// /// COUNT I Endless Chain Scheme (California Penal Code § 327 and California Civil Code § 1689.2) (On Behalf of the California Subclass) 95. Plaintiff repeats and re-alleges the allegations made throughout this Complaint as if fully set forth herein. 96. Plaintiff brings this claim individually and on behalf of the California Subclass. 97. California Penal Code § 327 renders endless chain schemes illegal. Section 1689.2 of the California Civil Code provides: A participant in an endless chain scheme, as defined in Section 327 of the Penal Code, may rescind the contract upon which the scheme is based, and may recover all consideration paid pursuant to the scheme, less any amounts paid or consideration provided to the participant pursuant to the scheme. 98. Defendant is operating an endless chain scheme, as described herein. 99. Plaintiff and the California Subclass have suffered an injury in fact and have lost money because of Defendant’s business acts, omissions, and practices. 100. Plaintiff and the California Subclass are entitled to recover all consideration paid under the scheme, less any amounts paid or consideration provided to the participant under the scheme. 101. A violation of California Penal Code § 327 can be punishable by imprisonment for up to three years in state prison. COUNT II Unfair and Unlawful Business Acts and Practices (California Business and Professions Code § 17200, et seq.) (On Behalf of the California Subclass) 102. Plaintiff repeats and re-alleges the allegations made throughout this Complaint as if fully set forth herein. 103. Plaintiff brings this claim individually and on behalf of the California Subclass. 104. Defendant engaged in continuous illegal, unfair, and fraudulent business acts or practices, and unfair, deceptive, false and misleading advertising within the meaning of the California Business and Professions Code § 17200, et. seq. The acts or practices alleged herein constitute a pattern of behavior, pursued as a wrongful business practice, that has victimized and continues to victimize thousands of consumers. 105. Under California Business and Professions Code § 17200, an “unlawful” business practice violates California law. Defendant’s business practices are illegal because they involve the creation and promotion of an illegal pyramid scheme or “endless chain” under California law. Defendant is engaged in an illegal pyramid scheme or “endless chain” as defined under California Penal Code § 327. Defendant utilizes this illegal pyramid scheme with the intent, directly or indirectly to dispose of property, in Young Living products, and to convince Members to recruit others to do the same. 106. Under California Business and Professions Code § 17200, an “unfair” business practice includes a practice that offends an established public policy, or that is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers. Defendant’s promotion and operation of an illegal pyramid scheme is unethical, oppressive, and unscrupulous in that Defendant is duping consumers out of vast sums of money through the illegal pyramid scheme. 107. Under California Business and Professions Code § 17200, a “fraudulent” business practice is likely to deceive the public. Defendant’s business practice is fraudulent in that Defendant has deceived and continued to deceive the public by misrepresenting their business. Defendant has made numerous misrepresentations and material omissions regarding the income a Member can realize and the financial success a Member can achieve, and Defendant has failed to inform consumers that they are operating an illegal pyramid scheme where nearly all Members will lose money rather than make money. Plaintiff and the California Subclass have relied on and continue to rely on Defendant’s misrepresentations and omissions to their detriment. 108. Because of these unlawful acts, Defendant has reaped and continues to reap unfair benefits and illegal profits at the expense of Plaintiff and the California Subclass. Defendant should be made to disgorge these ill-gotten gains and return to Plaintiff and the California Subclass the wrongfully taken revenue. 109. Defendant’s unlawful, unfair, and fraudulent acts and omissions will not cease without injunctive relief being provided. Under California Business and Professions Code § 17203, Plaintiff seeks equitable and injunctive relief to stop Defendant’s misconduct, as complained of herein, including, but not limited to, an order declaring such misconduct to be unlawful, unfair, fraudulent, and/or deceptive, and enjoining Defendant from undertaking any further unfair, unlawful, fraudulent, and/or deceptive acts or omissions relate to operating the illegal pyramid scheme. COUNT III Deceptive Advertising Practices (California Business and Professions Code § 17500, et seq.) (On Behalf of the California Subclass) 110. Plaintiff repeats and re-alleges the allegations made throughout this Complaint as if fully set forth herein. 111. Plaintiff brings this claim individually and on behalf of the California Subclass. 112. California Business & Professions Code § 17500 prohibits “unfair, deceptive, untrue or misleading advertising[.]” 113. Defendant’s business acts, false advertisements and materially misleading omissions constitute unfair trade practices and false advertising, in violation of the California Business and Professions Code § 17500, et. seq. 114. Defendant engaged in and continues to engage in false, unfair, and misleading business practices consisting of false advertising and materially misleading omissions likely to deceive the public and include, but are not limited to: a. Defendant failing to disclose to Class Members that they were entering into an illegal pyramid scheme; b. Defendant misrepresenting the income opportunity and/or financial success a Class Member would achieve; and c. Defendant failing to disclose to Class Members that the vast majority would lose money rather than earn money. 115. Defendant’s marketing and promotion of the illegal pyramid scheme constitutes misleading, unfair, and fraudulent advertising in connection with its false advertising to induce consumers to purchase products and join the illegal pyramid scheme. Defendant knew or should have known, in exercising reasonable care, that the statements it was making were untrue or misleading and deceived members of the public. Defendant knew or should have known, in exercising reasonable care, that Members, including Plaintiff, would rely, and relied on Defendant’s misrepresentations and omissions. 116. Because of Defendant’s untrue and misleading representations, Defendant wrongfully acquired money from Plaintiff and the California Subclass to which it was not entitled. Accordingly, the Court should order Defendant to disgorge, for the benefit of Plaintiff and the Class, its profits and compensation and/or make restitution to Plaintiff and the Class. 117. Under California Business and Professions Code § 17535, Plaintiff and the California Subclass seek a judicial order directing Defendant to cease and desist with all false advertising related to Defendant’s illegal pyramid scheme and such other injunctive relief as the Court finds just and appropriate. 118. Pursuant to Civil Code § 3287(a), Plaintiff and the California Subclass are further entitled to pre-judgment interest as a direct and proximate result of Defendant’s unfair and fraudulent business conduct. The amount on which interest is to be calculated is a sum certain and capable of calculation, and Plaintiff and the California Subclass are entitled to interest in an amount according to proof. COUNT IV Fraudulent Omission (Cal. Civ. Code §§ 1709-1710 and California Common Law) (On Behalf of the California Subclass) 119. Plaintiff repeats and re-alleges the allegations made throughout this Complaint as if fully set forth herein. 120. Plaintiff brings this claim individually and on behalf of the California Subclass. 121. Plaintiff brings this claim pursuant to California Civil Code §§ 1709- 1710, et seq., and pursuant to California common law. 122. This claim is based on fraudulent omissions concerning Defendant’s illegal pyramid scheme. Defendant actively concealed material facts, in whole or in part, with the intent to induce Plaintiff and the Class to join Defendant’s illegal pyramid scheme. 123. As discussed herein, and among other things, Defendant failed to disclose to Class Members that they were entering into an illegal pyramid scheme, and that the vast majority of Class Members would lose money rather than earn money. Moreover, Defendant failed to adequately disclose its appalling—and certainly material—income statistics to Class Members. 124. The false and misleading omissions were made with knowledge of their falsehood. 125. Defendant knew the omitted information was material and was information Class Members would have wanted to know in making a decision to become a Young Living distributor. 126. In addition, Defendant could easily have disclosed the omitted information through the many different channels Defendant uses to disseminate information, as described herein, including on the various pages of Defendant’s website through which consumers enroll to become Members. 127. Nonetheless, Defendant continued to encourage consumers to become Members of the illegal pyramid scheme without disclosing and actively concealing this material information. 128. The false and misleading omissions were made by Defendant, upon which Plaintiff and Class Members reasonably and justifiably relied, and were intended to induce and actually induced Plaintiff and Class Members to become Young Living Members. 129. Plaintiffs and the Class were unaware of these omitted material facts and would not have become Young Living distributors had they known them. 130. Plaintiff and the Class suffered injuries that were proximately caused by Defendant’s active concealments and omissions of material facts. COUNT V Negligent Misrepresentation (Cal. Civ. Code §§ 1709-1710 and California Common Law) (On Behalf of the California Subclass) 131. Plaintiff repeats and re-alleges the allegations made throughout this Complaint as if fully set forth herein. 132. Plaintiff brings this claim individually and on behalf of the California Subclass. 133. Plaintiff brings this claim pursuant to California Civil Code §§ 1709- 1710, et seq. and pursuant to California common law. 134. As described in more detail herein, Defendant negligently misrepresented material facts concerning the income opportunity and/or financial success that a Class Member would achieve by becoming a Young Living distributor, and/or that Young Living was a legitimate—and lawful—multilevel marketing company as opposed to an illegal pyramid scheme. 135. Plaintiff and Class Members were unaware of the falsity of Defendant’s misrepresentations and, as a result, justifiably relied on them when making the decision to become Young Living distributors. 136. Defendant knew or should have known that Plaintiff and Class Members would not have realized the truth of Defendant’s negligent misrepresentations. 137. Defendant was in a superior position than Plaintiff and the Class such that reliance by Plaintiff and the Class on Defendant’s misrepresentations was justified. Defendant possessed the skills and expertise to know the type of information that would influence a consumer’s decision to become a distributor. COUNT VI Unjust Enrichment (On Behalf of the Nationwide Class and California Subclass) 137. Plaintiff repeats and re-alleges the allegations of the preceding paragraphs as if fully set forth herein. 138. Plaintiff brings this claim individually and on behalf of the Nationwide Class and California Subclass. 139. By becoming a Member, Plaintiff and the Class conferred a benefit on Defendant in the form of monetary payments made to Defendant. 140. Defendant had knowledge of such benefits. 141. Defendant appreciated the benefit because, were consumers not to become Members, Defendant would not generate substantial revenues and profits. 142. Defendant’s acceptance and retention of the benefit is inequitable and unjust because the benefit was obtained by Defendant’s fraudulent conduct. 143. Equity cannot in good conscience permit Defendant to be economically enriched for such actions at the expense of Plaintiff and the Class, and therefore restitution and/or disgorgement of such economic enrichment is required. PRAYER FOR RELIEF WHEREFORE, Plaintiff and the putative Class pray for judgment against Defendant as follows: 1. For an order certifying the Nationwide Class and the California Subclass under Rule 23 of the Federal Rules of Civil Procedure; naming Plaintiff as representatives of the Nationwide Class and California Subclass; and naming Plaintiff’s attorneys as Class Counsel to represent the Nationwide Class and California Subclass; 2. A judgment against Defendant; 3. For an order declaring that Defendant’s conduct violates the statutes and laws referenced herein; 4. Rescission of the agreements upon which the scheme is based, and recovery of all consideration paid pursuant to the scheme, less any amounts paid or consideration provided to the participant pursuant to the scheme; 5. For an order awarding, as appropriate, compensatory and monetary damages, restitution or disgorgement to Plaintiff and the Class for all causes of action; 6. Temporary and permanent injunctive relief enjoining Defendant from further unfair, unlawful, fraudulent and/or deceptive acts, including but not limited to supporting the pyramid scheme; 7. The costs of investigation and litigation reasonably incurred, as well as attorneys’ fees; 8. For such other damages, relief and pre- and post-judgment interest as the Court may deem just and proper. DEMAND FOR JURY TRIAL Plaintiff, on behalf of herself and the proposed Class, hereby demands a trial by jury as to all matters so triable. Dated: December 6, 2019 MOON LAW APC By: CHRISTOPHER D. MOON KEVIN O. MOON Attorneys for Plaintiff

environmental & natural resources

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William C. Rand, Esq. (WR-7685) LAW OFFICE OF WILLIAM COUDERT RAND 501 Fifth Ave., 15th Floor New York, New York 10017 Phone: (212) 286-1425; Fax: (646) 688-3078 Email: wcrand@wcrand.com UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK ------------------------------------------------------------------------X AVIS WATSON, : ECF Individually and on Behalf of All Other : 21 Civ. 3833 Persons Similarly Situated, : : Plaintiffs, : : COMPLAINT AND -against- : JURY DEMAND : FUNZALO & CANTEET, INC. d/b/a “Right at Home”, : ZUBIN KAPADIA,SANDRA P. QUARTUCCIO, : PHILIP QUARTUCCIO and JOHN DOES #1-10, : : Defendants. : ------------------------------------------------------------------------X Plaintiff AVIS WATSON (“Plaintiff” or “WATSON”), on behalf of herself individually and as class representative of other employees similarly situated, by and through her attorney, complains and alleges for her complaint against FUNZALO & CANTEET, INC. d/b/a “Right at Home”, ZUBIN KAPADIA, SANDRA P. QUARTUCCIO, PHILIP QUARTACCIO and JOHN DOES #1-10 (together “Defendant” or “Defendants”) as follows: NATURE OF THE ACTION 1. Plaintiff WATSON was a home health aide who worked for Defendants for more than 40 hours per week (“overtime hours”) and, along with numerous other similar home health aides, was paid straight time for her overtime hours and was not paid time and one half for her overtime hours and was illegally not paid for many 24 hour shifts or illegally paid for only 13 hours of her 24 hour shifts and also was not paid minimum wages under the New York Labor Law and the N.Y. Health Care Worker Wage Parity Act. 2. Plaintiff alleges on behalf of herself and other similarly situated current and former employees of the Defendants who elect to opt into this action pursuant to the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 216(b), that they are: (i) entitled to unpaid wages from Defendants for overtime work for which they did not receive overtime premium pay, as required by law, and (ii) entitled to liquidated damages pursuant to the FLSA, 29 U.S.C. §§201 et seq. 3. Plaintiff further complains on behalf of herself, and a class of other similarly situated current and former employees of the Defendant, pursuant to Fed. R. Civ. P. 23, that they are entitled to back wages from Defendant for (a) hours worked for which they did not receive wages including wages as required under the Wage Parity Act, (b) overtime work performed for which they received straight pay and did not receive time and one half the minimum wage or time and one half their actual wages, and (c) spread of hours work performed for which they did not receive an extra hour of pay, as required by the New York Labor Law §§ 650 et seq. and the supporting New York State Department of Labor regulations and are also entitled to damages under the New York Wage Theft Prevention Act because Defendants did not provide proper notices to Plaintiff and similar employees. JURISDICTION AND VENUE 4. This Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331 and 1337, 1343, and supplemental jurisdiction over Plaintiff’s state law claims pursuant to 28 U.S.C. § 1367. In addition, the Court has jurisdiction over Plaintiff’s claims under the FLSA pursuant to 29 U.S.C. § 216(b). 2 5. Venue is proper in this District pursuant to 28 U.S.C. §1391 because a substantial part of the events or omissions giving rise to the claims occurred in this District. 6. This Court is empowered to issue a declaratory judgment pursuant to 28 U.S.C. §§ 2201 and 2202. THE PARTIES 7. Plaintiff WATSON, was, at all relevant times, an adult individual, residing in QUEENS County in New York State. 8. Upon information and belief, Defendant FUNZALO & CANTEET, INC. (the “Corporate Defendant”) is a New York corporation, with its principal place of business at 400 Post Ave. Suite 302, Westbury, NY 11590, which does and did business in the name “Right at Home.” 9. Upon information and belief, Defendant ZUBIN KAPADIA is an owner of the Corporate Defendant and has been an owner since about November 29, 2020. 10. Upon information and belief, Defendants SANDRA P. QUARTUCCIO and PHILIP QUARTACCIO were owners of the Corporate Defendant during the 6 years prior to their sale of the Corporate Defendant to ZUBIN KAPADIA in about November 29, 2020. 11. Upon information and belief, Defendants ZUBIN KAPADIA, SANDRA P. QUARTUCCIO, PHILIP QUARTACCIO and JOHN DOES #1-10 are each an officer, director and/or managing agent of the Corporate Defendant (the “Individual Defendants”), whose address is unknown at this time and who participated in the day-to-day operations of the Corporate Defendant and acted intentionally and maliciously and is an “employer” pursuant to the FLSA, 29 U.S.C. §203(d) and regulations promulgated thereunder, 29 C.F.R. §791.2, as well as the New 3 York Labor Law Sec. 2 and the regulations thereunder and is jointly and severally liable with the Corporate Defendant. 12. Upon information and belief, each Individual Defendants during the last 6 year period, had authority over the management, supervision, and oversight of the Corporate Defendant’s affairs in general and exercised operational control over the Corporate Defendant’s home health aide employees and other employees and the each Individual Defendant’s decisions directly affected the nature and condition of the home health aide employees’ employment. 13. Upon information and belief, during the last 6 years, each Individual Defendant (1) had the power to hire and fire the home health aide employees of the Corporate Defendant, (2) supervised and controlled the home health aide employees’ schedules and conditions of employment, (3) determined the rate and method of payment of the home health aide employees, and (4) maintained employment records related to the home health aide employees. COLLECTIVE ACTION ALLEGATIONS 14. Pursuant to 29 U.S.C. §207, Plaintiff seeks to prosecute her FLSA claims as a collective action on behalf of all persons who are or were formerly employed by Defendant at any time since July 7, 2015 (time tolled by failure to post notice) to the entry of judgment in this case (the “Collective Action Period”), who were non-exempt employees within the meaning of the FLSA and who were not paid minimum wages and/or overtime compensation at rates not less than one and one-half times the regular rate of pay for hours worked in excess of forty hours per workweek (the “Collective Action Members”). 15. This collective action class is so numerous that joinder of all members is impracticable. Although the precise number of such persons is unknown, and the facts on which 4 the calculation of that number are presently within the sole control of the Defendant, upon information and belief, there are at least 40 members of the Class during the Collective Action Period, most of whom would not be likely to file individual suits because they lack adequate financial resources, access to attorneys or knowledge of their claims. 16. Plaintiff will fairly and adequately protect the interests of the Collective Action Members and has retained counsel that is experienced and competent in the fields of employment law and class action litigation. Plaintiffs have no interests that are contrary to or in conflict with those members of this collective action. 17. A collective action is superior to other available methods for the fair and efficient adjudication of this controversy, since joinder of all members is impracticable. Furthermore, inasmuch as the damages suffered by individual Collective Action Members may be relatively small, the expense and burden of individual litigation make it virtually impossible for the members of the collective action to individually seek redress for the wrongs done to them. There will be no difficulty in the management of this action as a collective action. 18. Questions of law and fact common to the members of the collective action predominate over questions that may affect only individual members because Defendant has acted on grounds generally applicable to all members. Among the common questions of law and fact common to Plaintiffs and other Collective Action Members are: a. whether the Defendant employed the Collective Action members within the meaning of the FLSA; b. whether the Defendant failed to keep true and accurate time records for all hours worked by Plaintiff and the Collective Action Members; c. what proof of hours worked is sufficient where the employer fails in its duty to maintain time records; 5 d. whether Defendant failed to post or keep posted a notice explaining the minimum wages and overtime pay rights provided by the FLSA in any area where Plaintiffs are employed, in violation of C.F.R. § 516.4; e. whether Defendant failed to pay the Collective Action Members minimum wages and overtime compensation for hours worked in excess of forty hours per workweek, in violation of the FLSA and the regulations promulgated thereunder; f. whether Defendant’s violations of the FLSA are willful as that term is used within the context of the FLSA; g. whether Defendant is liable for all damages claimed hereunder, including but not limited to compensatory, punitive and statutory damages, interest, costs and disbursements and attorneys’ fees; and h. whether Defendant should be enjoined from such violations of the FLSA in the future. 19. Plaintiff knows of no difficulty that will be encountered in the management of this litigation that would preclude its maintenance as a collective action. CLASS ALLEGATIONS 20. Plaintiff sues on her own behalf and on behalf of a class of persons under Rules 23(a), (b)(1), (b)(2) and (b)(3) of the Federal Rules of Civil Procedure. 21. Plaintiff brings her New York Labor Law claim on behalf of all persons who were employed by Defendant at any time since July 7, 2015 (time tolled for failure to post notice of right to minimum wages and overtime), to the entry of judgment in this case (the “Class Period”), who were not paid all their straight time wages, minimum wages (including those required by the NY Health Care Worker Wage Parity Act), spread of hour wages, and/or overtime wages and/or were not provided the notices required by the Wage Theft Prevention Act (the “Class”). 6 22. The persons in the Class identified above are so numerous that joinder of all members is impracticable. Although the precise number of such persons is unknown, and the facts on which the calculation of that number are presently within the sole control of the Defendant, upon information and belief, there are at least 40 members of Class during the Class 23. The claims of Plaintiff are typical of the claims of the Class, and a class action is superior to other available methods for the fair and efficient adjudication of the controversy— particularly in the context of wage and hour litigation where individual plaintiffs lack the financial resources to vigorously prosecute a lawsuit in federal court against corporate defendants. 24. The 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. 25. Plaintiff is committed to pursuing her action and has retained competent counsel experienced in employment law and class action litigation. 26. Plaintiff has the same interests in this matter as all other members of the class and Plaintiff’s claims are typical of the Class. 27. There are questions of law and fact common to the Class which predominate over any questions solely affecting the individual members of the Class, including but not limited to: a. whether the Defendant employed the members of the Class within the meaning of the New York Labor Law; b. whether the Defendant failed to keep true and accurate time records for all hours worked by Plaintiff and members of the Class; 7 c. what proof of hours worked is sufficient where employers fail in their duty to maintain time records; d. whether Defendant failed and/or refused to pay the members of the Class for all hours worked by them as well as premium pay for hours worked in excess of forty hours per workweek as well as spread of hours pay for hours worked a spread of more than ten hours, within the meaning of the New York Labor Law; e. whether the Defendant is liable for all damages claimed hereunder, including but not limited to compensatory, interest, costs and disbursements and attorneys’ fees; f. whether the Defendant should be enjoined from such violations of the New York Labor Law in the future; and STATEMENT OF FACTS 28. WATSON was a home health aide/maid employed by Funzalo & Canteet, Inc. doing business as “Right at Home” (the “Company”) and its owner and officers, Zubin Kapadia and Sandra Quartuccio and Philip Quartuccio (“Officers”) (collectively “Defendants”), from about October 30, 2020 until about April 15, 2021 (the “time period”). 29. Defendants are an employment agency that sent WATSON to work as a home health aide/maid for a husband and wife who lived in Fresh Meadows, New York in Queens County. 30. Each Individual Defendant is and has been an owner and Chief Executive Officer and President of the Company during the time period and during the last 6 years. 31. During the time period, each Individual Defendant participated in the day-to-day operations of the Company. 32. During the time period, WATSON worked for Defendants in Queens County, New York. 33. During the time period, WATSON maintained her own residence, and did not 8 “live in” the homes of Defendants’ clients or in the home of her employer, as her primary residence. 34. During the time period, WATSON was not an “exempt companion” of the Defendants’ clients. 35. While employed by Defendants, WATSON generally worked more than 40 hours per week and was not paid time and one half for her hours worked over 40 in a work week. 36. WATSON worked 24-hour shifts for Defendants during her employment and regularly worked 4 24-hour shifts in a week. 37. Defendants had no policies in place to determine if a health aide received three one hour meal breaks during a 24-hour live in shift and did not have any policies to determine if any health aide received 5 hours of uninterrupted sleep and 8 hours of sleep during a 24-hour live in shift. 38. Even when Defendants had knowledge that a health aide was unable to get any sleep during the night or take any meal breaks, Defendants still illegally deducted 8 hours of sleep time and 3 hours of meal break time from the health aide’s hours worked. 39. Defendants had no policies in place to identify which health aides were not getting sleep or breaks during 24-hour live in shifts and to pay them for their lack of sleep or meal breaks. 40. Defendants had no policy to identify which aides were not provided a bed to sleep on during 24-hour live in shifts. 41. Even when Defendants knew an aide was not given a bed to sleep on during 24- hour live in shifts, Defendants did not pay the health aide for 8 hours of the aide’s 24 hour shift. 9 42. When WATSON worked 24-hour shifts, WATSON was required to stay overnight at the residences of Defendants’ clients, and needed to be ready and available to provide assistance to Defendants’ clients as needed. 43. When WATSON worked 24-hour shifts, WATSON was not permitted to leave the client unattended. 44. WATSON was only paid for approximately 13 hours of her 24-hours shifts. WATSON was not paid any hourly rate for the other 11 hours worked. 45. WATSON was generally not permitted to leave the client’s residence during her 46. Because Defendants’ clients were often elderly and/or suffering from dementia, WATSON did not get an opportunity to sleep for eight hours or 5 hours without any interruption. 47. WATSON did not get a one-hour break for each of three meals per day. 48. WATSON was often forced to combine her meal times with the meal times of the Defendants’ clients because they needed feeding assistance or constant supervision. 49. WATSON did not receive the “spread of hours” premium of one additional hour at the minimum wage rate for the days in which WATSON worked a spread of more than ten 50. WATSON also did not receive minimum wages, including minimum wages under the Wage Parity Act, for all her hours worked and was not paid time and one half the minimum wage rate for her overtime hours and was not paid full time and one half her regular rate for her overtime hours. 51. Defendants never provided or offered to WATSON any health insurance, free of 10 charge, and never paid WATSON for any vacation or holiday time off. 52. Medicaid paid Defendants for some or all of WATSON’s services and the services of the other similar home health aide employees. 53. Watson’s co-workers performed the same and/or similar work to that of WATSON and were paid in a similar manner and subject to the same rules and policies (“similar health aides”). 54. The similar health aides did not “live in” the homes of Defendants’ clients as their primary residences. 55. The similar health aides generally worked more than 40 hours per week, but were not paid for every hour that they worked. 56. The similar health aides were only paid for approximately 13 hours of their 24- hours shifts, and were not paid any hourly rate for the other 11 hours worked. 57. The similar health aides were generally not permitted to leave the client’s residence during their shift. 58. When the similar health aides worked 24-hour shifts, they were required to stay overnight at the residences of Defendants’ clients, and were required to be ready and available to provide assistance to Defendants’ clients as needed. 59. At all relevant times, Defendants have maintained a practice and policy of paying similar health aides for only 13 hours of their 24-hour shifts in violation of New York Labor 60. Defendants had no policies in place to determine if a health aide received three one hour meal breaks during a 24-hour live in shift and did not have any policies to determine if 11 any health aide received 5 hours of uninterrupted sleep and 8 hours of sleep during a 24-hour live in shift. 61. When WATSON told the supervisor that WATSON was unable to get any sleep during the night or any meal breaks, Defendants still deducted 8 hours of sleep time and three hours of meal breaks from her hours worked. 62. Defendants had no policies in place to identify which health aides were not getting sleep or breaks during 24-hour live in shifts and to pay them for their lack of sleep or meal breaks. 63. When WATSON complained about not getting sleep or breaks and still only getting paid for 13 hours of a 24-hour shift, the Company gave WATSON time sheets to fill out to show her lack of sleep and breaks but even when WATSON filled out the time sheets showing no sleep or breaks, the Company still never paid WATSON for more than 13 hours of a 24-hour 64. WATSON knows that other similar health aide employees of the Company also were not paid more than 13 hours for a 24-hour shift even when they reported not getting 3 one hour breaks and not getting 5 hours of uninterrupted sleep or 8 hours of sleep because WATSON spoke to aides named Marie and Michelle who indicated that they had complained about not getting sleep and breaks and also had not been paid more than 13 hours for their 24-hour shifts. These aides also said that they were paid at minimum wage and were not paid an extra hour of wages for spread of hours wages when they worked 24-hour shifts. 65. WATSON talked with Marie when WATSON relieved her shift as they worked for the same clients, and WATSON spoke to Michelle at an in service class. 12 66. At all relevant times, Defendants have maintained a practice and policy of assigning WATSON and similar health aides to work more than 40 hours per week without paying us one and one half times the basic minimum hourly rate for all hours worked in excess of forty per week, in violation of New York State Labor Law and the Wage Parity Act. 67. WATSON and the similar health aides did not receive the “spread of hours” premium of one additional hour at the minimum wage rate for the days in which they worked a spread of more than ten hours. 68. Defendants’ actions as described herein were intentional and not made in good 69. When WATSON first started to work 24-hour shifts, WATSON complained to her coordinator and to payroll, that WATSON was not able to sleep during the night or get meal breaks but was not being paid for 8 hours of alleged sleep and 3 hours of meal breaks. They responded that the Company would pay WATSON for these hours, but the Company never did subsequently pay WATSON for these hours worked. 70. WATSON was not able to get 5 hours of uninterrupted sleep or 8 hours of sleep during 24 hour live in shifts because WATSON generally had to get up at least every 2-3 hours to attend to the client, which included among other services, to take the client to the bathroom, to get the client food and/or a drink, to calm the client when the client awoke in stress, to clean the client’s bed when the client urinated in the bed and/or to change the client’s pajamas. 71. WATSON’s clients had Alzheimer’s Disease and never continuously slept for more than half 2 hours at any time. 72. During the time period, WATSON was not paid full regular wages for all her 13 hours worked and was not paid overtime wages for all of her hours worked over forty in a workweek (“overtime”), and was not paid an extra hour of pay for her hours worked over a spread of 10 hours per day. 73. During the time period, WATSON often worked for 24 hours staying overnight at the client’s house, and on these days was only paid for 13 hours, despite the fact that her sleep was regularly interrupted generally at least 3-4 times by the client throughout the night which prevented WATSON from getting 5 hours of uninterrupted sleep and/or 8 hours of sleep and despite the fact that WATSON was not given any time off for meal breaks. 74. WATSON also generally signed in and out using the client’s land line phone. When WATSON clocked out, WATSON generally entered codes showing the types of work that WATSON had performed. At times WATSON filed handwritten time sheets. There were no codes to report not getting sleep or breaks during 24-hour shifts. 75. During the time period, WATSON did not receive a meal break because WATSON was on call or working during her break and regularly interrupted by the client while 76. During the time period, WATSON was not paid for all her hours worked and was not paid for her hours worked over 40 hours a week (“overtime hours”) at time and one half her regular wages and at times was not paid for all her hours at the minimum wage rate. 77. During the time period, Watson’s job responsibilities as a home health aide/maid included, among others, cleaning the entire house, cooking and doing the laundry. 78. WATSON was required to prepare three meals a day, breakfast, lunch and dinner. 79. Breakfast usually consisted of coffee, eggs, toast, and oatmeal. 14 80. Lunch usually consisted of a cooked meal with rice or pasta, beans, and a meat or fish. Sometimes alternatively WATSON made a sandwich or mixed vegetables for lunch. 81. Dinner usually consisted of the similar items as lunch plus soup and desert. 82. WATSON generally was required to make the beds every morning. 83. Defendants required WATSON to do a number of tasks on a daily basis, including but not limited to: dusting, vacuuming, cleaning the bathroom (including the toilet, tub and shower), mopping the kitchen floors, scrubbing the kitchen counters, cleaning the pots and pans, and taking out the garbage. 84. WATSON generally was required to do the laundry two days per week. 85. WATSON spent at least 30% of her time directly performing household work. 86. During the time period, WATSON and similar aides were not specifically notified by Defendants of the regular pay day designated by Defendants, Defendants’ name, address and principal place of business and telephone number and her specific rate of pay as required by the New York Wage Theft Prevention Act. WATSON and similar aides have not been given any specific notice of this information to sign and have not signed any such notice. 87. Defendants never posted a notice in a conspicuous location that Plaintiff and similar health aide employees had a right to minimum wages and/or overtime wages. CLAIM I FAIR LABOR STANDARDS ACT 88. Plaintiff repeats and realleges each and every allegation of the preceding paragraphs hereof with the same force and effect as though fully set forth herein. 89. At all relevant times, Defendants have been and continue to be, employers 15 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). 90. At all relevant times, Defendants employed, and/or continue to employ, Plaintiff and each of the Collective Action Members within the meaning of the FLSA. 91. Upon information and belief, at all relevant times, Defendants have had gross revenues in excess of $500,000. 92. Plaintiff consents in writing to be a party to this action, pursuant to 29 U.S.C. §216(b). The named Plaintiff’s written consent is attached hereto and incorporated by reference. 93. At all relevant times, the Defendants had a policy and practice of refusing to pay its employees minimum wages and/or overtime wages equal to time and one half their employees’ regular wages for hours worked over forty in a work week. 94. As a result of the Defendants’ willful failure to compensate its employees, including Plaintiff and the Collective Action members overtime wages and/or minimum wages for all of their hours worked the Defendants have violated and, continue to violate, the FLSA, 29 U.S.C. §§ 201 et seq., including 29 U.S.C. §§ 207(a)(1) and 215(a). 95. As a result of the Defendants’ failure to record, report, credit and/or compensate its employees, including Plaintiff and the Collective Action members, the Defendants have failed to make, keep and preserve records with respect to each of its employees sufficient to determine the wages, hours and other conditions and practices of employment in violation of the FLSA, 29 U.S.C. §§ 201, et seq., including 29 U.S.C. §§ 211(c) and 215(a). 96. The foregoing conduct, as alleged, constitutes a willful violation of the FLSA within the meaning of 29 U.S.C. § 255(a). 16 97. Due to the Defendants’ FLSA violations, Plaintiff and the Collective Action Class are entitled to recover from the Defendants, their unpaid minimum and overtime wages, and an equal additional amount as liquidated damages, additional liquidated damages for unreasonably delayed payment of wages, interest, reasonable attorneys’ fees, and costs and disbursements of this action, pursuant to 29 U.S.C. § 216(b). CLAIM II NEW YORK LABOR LAW 98. Plaintiff repeats and realleges each and every allegation of the preceding paragraphs hereof with the same force and effect as though fully set forth herein. 99. At all relevant times, Plaintiff and the members of the Class were employed by the Defendants within the meaning of the New York Labor Law, §§ 2 and 651. 100. Defendants willfully violated Plaintiff’s rights, and the rights of the members of the Class, by failing to pay them wages in violation of the New York Labor Law and its regulations. 101. The Defendants’ New York Labor Law violations have caused Plaintiff and the members of the Class, irreparable harm for which there is no adequate remedy at law. 102. Due to the Defendants’ New York Labor Law violations, Plaintiff and the members of the Class are entitled to recover from Defendants their unpaid wages, unpaid minimum wages, unpaid overtime wages, unpaid spread of hours wages, reasonable attorneys’ fees, and/or costs and disbursements of the action, pursuant to New York Labor Law §663(1) et 103. Defendants willfully violated Plaintiff’s rights by failing to provide his proper notices and wage statements in violation of the New York Wage Theft Prevention Act, N.Y. Lab. 17 Law § 198(1-a) (enacted on April 9, 2011). 104. As a result of Defendants’ violation of the New York Wage Theft Prevention Act, Plaintiff is entitled to damages of at least $150 per week during which the violations occurred. CLAIM III (Breach of Contract –Third Party Beneficiaries of Wage Parity Act Contract With New York State) 105. Plaintiff realleges and incorporates by reference all preceding paragraphs of this Complaint. 106. Upon information and belief, at all times relevant to this complaint, Defendant were required to certify and did certify that they paid Plaintiff and members of the Class wages as required by NY Health Care Worker Wage Parity Act. 107. The agreement to pay Plaintiff and the Class wages as required by the NY Health Care Worker Wage Parity Act was made for the benefit of the Plaintiff and the Class. 108. Defendant breached their obligation to pay Plaintiff and the Class all wages they were due as required by the NY Health Care Worker Wage Parity Act and as result Plaintiffs and members of the Class were injured. 109. Plaintiff and the Class, as third party beneficiaries of Defendants' contract with government agencies to pay wages as required by the NY Health Care Worker Wage Parity Act, and as persons protected by the NY Health Care Worker Wage Parity Act are entitled to relief for the breach of this contractual obligation and the violation of this Act, plus interest. CLAIM IV (Unjust Enrichment, Defendants’ Failure to Pay All Wages Due Including Wages for Minimum Wages under the NY Health Care Worker Wage Parity Act, and Spread of Hours) 110. Plaintiff realleges and incorporates by reference all preceding paragraphs of this 18 Complaint. 111. Under the common law doctrine of "unjust enrichment" insofar as Defendants, by their policies and actions, benefited from, and increased their profits and personal compensation by failing to pay Plaintiff and the Class: (1) all wages due for work performed; (2) an extra hour at the minimum wage for working a "spread of hours" in excess of 10 hours or a shift longer than 10 hours; and (3) all minimum wages due under NY Pub. Health§ 3614-c, the New York Health Care Worker Wage Parity Act. 112. Defendant accepted and received the benefits of the work performed by Plaintiff and the Class at the expense of Plaintiff and the Class. It is inequitable and unjust for Defendants to reap the benefits of Plaintiff’s and the Class’ labor, without paying all wages due, which includes but is not limited to all minimum wages due under NY Pub. Health§ 3614-c, the New York Health Care Worker Wage Parity Act, for hours caring for the clients of Defendants. 113. Plaintiff and the Class are entitled to relief for this unjust enrichment in an amount equal to the benefits unjustly retained by Defendants, plus interest on these amounts. CLAIM V (Violation of Wage Parity Act Minimum Wage Requirement) 114. Plaintiff realleges and incorporates by reference all preceding paragraphs of this Complaint. 115. Upon information and belief, at all times relevant to this complaint, Defendants were required to certify and did certify that they paid Plaintiff and members of the Class wages as required by NY Health Care Worker Wage Parity Act. 116. Under the NY Health Care Worker Wage Parity Act Defendants were required to pay Plaintiff and the members of the Class minimum wages under the NY Health Care Worker 19 Wage Parity Act. 117. Defendants breached their obligations to pay minimum wages as required by the NY Health Care Worker Wage Parity Act, and as result Plaintiff and members of the Class were injured. 118. Plaintiff and the Class are entitled to recover their unpaid minimum wages, plus interest, as relief for the violation of the NY Health Care Worker Wage Parity Act. CLAIM VI (Breach of Contract-Wages) 119. Plaintiff realleges and incorporates by reference all preceding paragraphs of this Complaint. 120. Plaintiff and the members of the class entered into contracts with the Defendant under which Plaintiff and the members of the Class were to provide home health aide and maid services and Defendants were required to pay (a) wages as required by law, (b) wages equal to time and one half the regular wage rate for hours worked during Federal holidays and also (c) a one week paid vacation annually. 121. Plaintiff and the members of the Class fulfilled their obligations under the contracts, but Defendant failed to pay the wages as required by the contracts. 122. As a result of Defendants’ breach, Plaintiff and the members of the Class are entitled to recover damages, plus interest. CLAIM VII (Living Wage Act Claim) 123. Plaintiffs reallege and incorporate by reference all the allegations set forth above. 124. NYC Admin. Code § 6-109 provides that an employer whose employees perform 20 work pursuant to city service contracts or subcontracts (the “City Service Contract(s)”) must pay “no less than the living wage and must provide its employees health benefits (supplemental benefits) or must supplement their hourly wage rate by an amount no less than the health benefits supplement rate.” 125. NYC Admin. Code § 6-109 further provides that “[the abovementioned] requirement applies for each hour that the employee works performing the city service contract or subcontract.” 126. The “living wage” and “health benefits” or “health benefits supplement” are the wages and supplements set forth under Homecare Services in § 6-109 of the NYC Admin. Code. 127. Upon information and belief, the schedule of living wages and supplements to be paid to all workers furnishing labor pursuant to the City Service Contract(s) was annexed to and formed a part of the City Service Contract(s), in accordance with NYC Admin. Code § 6-109 128. Named Plaintiff and other members of the putative class furnished labor to Defendant in furtherance of its performance of the City Service Contract(s). Upon information and belief, Defendant willfully paid Named Plaintiff and the other members of the putative class less than the rates of wages and benefits to which Named Plaintiff and the other members of the putative class were entitled. 129. Defendant’s actions as described herein were intentional and not made in good 130. Upon information and belief, the City Service Contract(s) entered into by Defendant contained provisions requiring the payment of living wages and health benefits or health benefit supplements to Plaintiffs. 21 131. Those living wages and health benefits or health benefit supplements were made a part of the City Service Contract(s) for the benefit of Plaintiffs. 132. Defendant breached the City Service Contract(s) by willfully failing to pay Plaintiffs the living wages and health benefits or health benefit supplements for all labor performed. 133. Further, NYC Admin. Code § 6-109 specifically requires, as a matter of law, that language mandating compliance with NYC Admin. Code § 6-109 be included with and form a part 13 of the City Service Contract(s). 134. Further, upon information and belief, each and every City Service Contract(s) contained a provision, in identical or similar language, stating that “each and every provision of law required to be inserted in this Agreement shall be and is inserted herein. Furthermore, it is hereby stipulated that every such provision is to be deemed to be inserted herein.” 135. By reason of its breach of the City Service Contract(s), Defendant is liable to Plaintiffs for an amount to be determined at trial, plus interest. CLAIM VIII (Notice & Wage Statement Violations – NYLL §195) 136. Plaintiffs reallege and incorporate by reference all allegations in all preceding paragraphs as if they were set forth again herein. 137. Defendant has willfully failed to supply Plaintiff and members of the Class with the notice required by NYLL § 195(1), in English or the language identified by Plaintiff or the Class Member as his/her primary language. 138. Defendant has failed to provide Plaintiff and Members of the Class with a notice 22 containing their "rate or rates of pay and the basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission, or other; hourly rate or rates of pay and overtime rate or rates of pay if applicable; allowances, if any, claimed as part of the minimum wage, including tip, meal, or lodging allowances; the regular pay day designated by the employer in accordance with [NYLL §191]; the name of the employer; any 'doing business as' names used by the employer; the physical address of the employer’s main office or principal place of business, and a mailing address if different; the telephone number of the employer; plus such other information as the commissioner deems material and necessary." 139. Defendant has willfully failed to supply Plaintiff and Members of the Class with an accurate statement of wages as required by NYLL § 195(3), containing 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; hourly rate or rates of pay and overtime rate or rates of pay if applicable; the number of hours worked, including overtime hours worked if applicable; deductions; allowances, if any, claimed as part of the minimum wage; and net wages." 140. Due to Defendant’s violations of the NYLL§ 195(1), Plaintiff and each Class Member is entitled to $50 dollars for each workday in which the violations occurred or continue to occur, or a total of $5,000, as provided for by NYLL § 198(1)-b, as well as reasonable attorneys’ fees, costs, injunctive and declaratory relief. 141. Due to Defendant’s violations of the NYLL § 195(3), Plaintiff and each Class Member is entitled to recover from Defendant $250 for each workday on or after April 9, 2011, 23 on which the violations occurred or continue to occur, or a total of $5,000, as provided for by NYLL § 198(1)-d. PRAYER FOR RELIEF WHEREFORE, Plaintiff on behalf of herself and all other similarly situated Collective Action Members and members of the Class, respectfully requests that this Court grant the following relief: a. Certification of this action as a class action pursuant to Fed. R. Civ. P. 23(b)(2) and (3) on behalf of the members of the Class and appointing Plaintiff and her counsel to represent the Class; b. Designation of this action as a collective action on behalf of the Collective Action Members and prompt issuance of notice pursuant to 29 U.S.C. §216(b) to all similarly situated members of an FLSA Opt-In Class, 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) and appointing Plaintiff and her counsel to represent the Collective Action members; c. Judgment in an amount to be determined at trial, plus interest; d. A declaratory judgment that the practices complained of herein are unlawful under the FLSA and the New York Labor Law; e. An order tolling the statute of limitations; f. An injunction against the Defendants and their officers, agents, successors, employees, representatives and any and all persons acting in concert with it, as provided by law, from engaging in each of the unlawful practices, policies and 24 patterns set forth herein; g. An award of unpaid wages, spread of hours wages, overtime wages and minimum wages due under the FLSA, the New York Labor Law, the New York common law, and/or the NY Health Care Worker Wage Parity Act; h. An award of liquidated and/or punitive damages, as a result of the Defendants’ willful failure to pay wages, minimum wages, and/or overtime wages pursuant to 29 U.S.C. § 216 and the New York Labor Law and the New York common law and the NY Health Care Worker Wage Parity Act; i. An award of prejudgment and postjudgment interest; j. An award of costs and expenses of this action together with reasonable attorney’s and expert fees; k. Such other and further relief as this Court deems just and proper. DEMAND FOR TRIAL BY JURY Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, Plaintiff demands a trial by jury on all questions of fact raised by the complaint. 25 Dated: New York, New York July 7, 2021 LAW OFFICE OF WILLIAM COUDERT RAND William Coudert Rand, Esq. Attorney for Plaintiff, Individually and on Behalf of All Persons Similarly Situated 501 Fifth Avenue 15th Floor New York, New York 10017 Tel: (212) 286-1425 Fax: (646) 688-3078 Email: wcrand@wcrand.com 26

employment & labor

9rNMC4cBD5gMZwczw5uP

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF OKLAHOMA CIV-14-1252-L STEVE SURBAUGH, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, Plaintiff, vs. Case No.: CLASS ACTION COMPLAINT JURY TRIAL DEMANDED SANDRIDGE ENERGY, INC; TOM L. WARD, JAMES D. BENNETT; EDDIE M. LEBLANC; AND RANDALL D. COOLEY, Defendants. Plaintiff, Steve Surbaugh, 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 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 SandRidge Energy, Inc. (“SandRidge” or the “Company”), securities analysts’ reports and advisories about the Company, and information readily obtainable on the Internet. 1 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 the securities of SandRidge between March 1, 2013 through November 4, 2014 (the “Class Period”), seeking to recover damages caused by Defendants’ violations of federal securities laws and pursue remedies under the Securities Exchange Act of 1934 (the “Exchange Act”). 2. SandRidge is engaged in the exploration and production of oil and natural gas. SandRidge divides its operations in three reportable business segments: (a) exploration and production; (b) drilling and oil field services; and (c) midstream services. 3. SandRidge entered into a 30-year treating agreement with Occidental Petroleum Corporation (“Occidental”) to build and operate a carbon dioxide extraction plant called Century Plant in Pecos County, Texas. Under this agreement, Occidental will cover the expected costs of building the project and operate Century Plant. SandRidge is to drill, produce and deliver carbon dioxide gas to Century Plant. SandRidge will retain all of the methane gas produced and Occidental will retain all of the carbon dioxide gas. During the term of the agreement, SandRidge is required to deliver 3,2000 Bcf (billion cubic feet of gas at standard conditions) of Carbon Dioxide. If SandRidge does not meet the annual delivery requirement of carbon dioxide, the Company must pay Occidental $0.25 per Mcf (1000 cubic 2 feet of gas) for the amount under the requirement. If the shortage of production is not made up by over deliveries in the future, SandRidge must pay Occidental an additional penalty of $0.70 per Mcf of the aggregate undelivered volumes in 2041. 4. On November 4, 2014 the SEC notified SandRidge that its calculation of the under-delivery penalties for the Occidental agreement should be accounted for quarterly rather than annually as SandRidge had been doing since the entering of the agreement. This change in accounting for the under-delivery penalties caused SandRidge to announce that investors could no longer rely on its financial statements for the years ending 2012 and 2013, each quarter of 2013 and the first two quarters of 2014. JURISDICTION AND VENUE 5. 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). 6. 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. 7. Venue is proper in this Judicial District pursuant to §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. 8. In connection with the acts, conduct and other wrongs alleged in this Complaint, Defendants, directly or indirectly, used the means and instrumentalities of 3 interstate commerce, including but not limited to, the United States mails, interstate telephone communications and the facilities of the national securities exchange. PARTIES 9. Plaintiff Steve Surbaugh, as set forth in the accompanying certification, incorporated by reference herein, purchased SandRidge securities at artificially inflated prices during the Class Period and has been damaged thereby. 10. Defendant SandRidge is a Delaware corporation with its principal executive offices located in Oklahoma City, Oklahoma. SandRidge’s common stock is listed on the NYSE exchange under ticker “SD.” 11. Defendant Tom L. Ward (“Ward”) served as the Company’s Chief Executive Officer and Chairman of the Board from the beginning of the Class Period until June 2013. 12. Defendant James D. Bennett (“Bennett”) served as the Company’s Chief Financial Officer until June 2013 when he became the Company’s Chief Executive Officer. He currently is the CEO of the Company. 13. Defendant Eddie M. LeBlanc (“LeBlanc”) served as the Company’s Chief Financial Officer beginning in June 2013 and throughout the rest of the Class Period. 14. Defendant Randall D. Cooley (“Cooley”) at all relevant times herein served as the Company’s Principal Accounting Officer. 15. Ward, Bennett, LeBlanc, and Cooley are collectively referred to hereinafter as the “Individual Defendants.” 4 16. 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 involved in drafting, producing, reviewing and/or disseminating the false and misleading statements and information alleged herein; (e) was aware of or recklessly disregarded the fact that the false and misleading statements were being issued concerning the Company; and (f) approved or ratified these statements in violation of the federal securities 17. As officers, directors and controlling persons of a publicly-held company whose common stock is and was registered with the SEC pursuant to the Exchange Act, and was traded on the NYSE and governed by the provisions of the federal securities laws, the Individual Defendants each had a duty to disseminate accurate and truthful information promptly with respect to the Company’s financial condition and to correct any previously- issued statements that had become materially misleading or untrue to allow the market price of the Company’s publicly-traded stock to reflect truthful and accurate information. 5 18. SandRidge 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. 19. The scienter of the Individual Defendants and other employees and agents of the Company is similarly imputed to SandRidge under respondeat superior and agency principles. PLAINTIFF’S CLASS ACTION ALLEGATIONS 20. 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 SandRidge during the Class Period and who were damaged thereby. 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. 21. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, SandRidge’s securities were actively traded on the NYSE. 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 SandRidge or its transfer agent and may be notified of the 6 pendency of this action by mail, using a form of notice customarily used in securities class actions. 22. 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. 23. 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. 24. 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 SandRidge; and (c) to what extent the members of the Class have sustained damages and the proper measure of damages. 25. 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, 7 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. SUBSTANTIVE ALLEGATIONS 26. On March 1, 2013 SandRidge filed its annual report for the fiscal year ended December 31, 2012 on Form 10-K with the SEC. The 10-K was signed by Defendants Ward, Bennett, and Cooley. The 10-K was separately certified by Defendants Ward and Bennett pursuant to the Sarbanes-Oxley Act of 2002 (“SOX”) attesting to the completeness and accuracy of the Company’s annual report. The financial statements contained in the 10-K were materially false and misleading because they failed properly to account for the penalties SandRidge accrued under the agreement with Occidental. 27. On May 8, 2013 SandRidge filed with the SEC its quarterly report for the first quarter of 2013 ended March 31, 2013 on Form 10-Q. The 10-Q was signed by Defendant Bennett; and separately certified by Ward and Bennett pursuant to SOX attesting to the completeness and accuracy of the Company’s quarterly report. The financial statements contained in the 10-Q were materially false and misleading because they failed properly to account for the penalties SandRidge accrued under the agreement with Occidental. 28. On August 8, 2013 SandRidge filed with the SEC its quarterly report for the second quarter of 2013 ended June 30, 2013 on Form 10-Q. The 10-Q was signed by Defendant LeBlanc; and separately certified by Bennett and LeBlanc pursuant to SOX 8 attesting to the completeness and accuracy of the Company’s quarterly report. The financial statements contained in the 10-Q were materially false and misleading because they failed properly to account for the penalties SandRidge accrued under the agreement with Occidental. 29. On November 6, 2013 SandRidge filed with the SEC its quarterly report for the third quarter of 2013 ended September 30, 2013 on Form 10-Q. The 10-Q was signed by Defendant LeBlanc; and separately certified by Bennett and LeBlanc pursuant to SOX attesting to the completeness and accuracy of the Company’s quarterly report. The financial statements contained in the 10-Q were materially false and misleading because they failed to properly account for the penalties SandRidge accrued under the agreement with Occidental. 30. On February 28, 2014 SandRidge filed with the SEC its annual report for the fiscal year ended December 31, 2013 on Form 10-K. The 10-K was signed by Defendants Bennett, LeBlanc, and Cooley; and separately certified by Bennett and LeBlanc pursuant to SOX attesting to the completeness and accuracy of the Company’s annual report. The financial statements contained in the 10-K were materially false and misleading because they failed properly to account for the penalties SandRidge accrued under the agreement with Occidental. 31. On May 8, 2014 SandRidge filed with the SEC its quarterly report for the first quarter of 2014 ended March 31, 2014 on Form 10-Q. The 10-Q was signed by Defendant LeBlanc; and separately certified by Bennett and LeBlanc pursuant to SOX attesting to the 9 completeness and accuracy of the Company’s quarterly report. The financial statements contained in the 10-Q were materially false and misleading because they failed properly to account for the penalties SandRidge accrued under the agreement with Occidental. 32. On August 7, 2014 SandRidge filed with the SEC its quarterly report for the second quarter of 2014 ended June 30, 2013 on Form 10-Q. The 10-Q was signed by Defendant LeBlanc; and separately certified by Bennett and LeBlanc pursuant to SOX attesting to the completeness and accuracy of the Company’s quarterly report. The financial statements contained in the 10-Q were materially false and misleading because they failed to properly account for the penalties SandRidge accrued under the agreement with Occidental. TRUTH BEGINS TO EMERGE 33. On November 4, 2014 the Company filed with the SEC a press release on Form 8-K. The press release states in relevant part: Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review. As SandRidge Energy, Inc. (the “Company”) has disclosed in prior filings, it is party to a 30-year treating agreement (the “Agreement”) with Occidental Petroleum Corporation (“Occidental”) for the removal of CO2 from the Company’s delivered natural gas production. Under the Agreement, the Company is required to deliver to Occidental’s Century Plant a total of approximately 3,200 Bcf of CO2 during the term of the Agreement. Through September 30, 2014, the Company had delivered to Occidental 117 Bcf of CO2. After each calendar year, the Company is obligated to pay Occidental $0.25 per Mcf (the “$0.25 Fee”) to the extent minimum annual CO2 volume requirements are not met. If such underdelivered volumes are not made up with commensurate overdeliveries in the future, the Company will be obligated to pay Occidental an additional $0.70 per Mcf (the “$0.70 Fee”) of the aggregate underdelivered volumes in 2041. 10 Because the minimum CO2 delivery requirements associated with the $0.25 Fee are based on annual volumes, and not quarterly volumes, the Company has historically accrued and recorded a liability for the annual $0.25 Fee in the fourth quarter of each year. Likewise, because the Company has until 2041 to make up underdelivered volumes with commensurate overdeliveries, no amount has been accrued by the Company as a liability in respect of the $0.70 Fee. Based on this accounting treatment, the Company accrued liabilities for the $0.25 Fee of $8.5 million in 2012 and $32.7 million in 2013, which are reflected in the consolidated financial statements included in the Annual Reports on Form 10-K for such years. In addition, the Company disclosed in its Annual Report on Form 10-K for the year ended December 31, 2013 that it expected to accrue between approximately $30.0 million and $37.0 million for the $0.25 Fee during the year ending December 31, 2014 for amounts related to the Company’s anticipated shortfall in meeting its annual CO2 delivery obligations for 2014 under the Agreement. The Company has recently engaged in discussions with the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission regarding the appropriate accounting treatment with respect to the timing of accrual of liabilities for the $0.25 Fee. As a result of such discussions, the Company is reconsidering its historical accounting treatment with respect to such accruals, and, in that regard, some or all of the liabilities associated with the Agreement previously recorded annually by the Company may be required to be re-recorded in one or more prior quarterly periods, which, in turn, could materially affect the net income previously reported for prior periods. The Company plans to continue to discuss with the Staff the appropriate accounting treatment with respect to the underdelivery penalties under the Agreement, and any revised accounting treatment adopted by the Company could materially affect the amount and timing of accruals with respect to such penalties. Upon resolution of the matter with the Staff, the Company will restate, to the extent necessary, the financial statements for prior periods to make any necessary changes. In addition, the Company is reassessing its previous conclusions regarding the effectiveness of internal control over financial reporting and disclosure controls and procedures as they relate to the accounting under the Agreement. As a result of the circumstances described above, on November 2, 2014, the Audit Committee of the Board of Directors of the Company concluded that (i) the consolidated financial statements of the Company for the periods ended December 31, 2012 and 2013 included in the Company’s Annual Reports on Form 10-K for the periods then ended, with respect to which the Company 11 received an unqualified opinion from its independent registered public accounting firm, PricewaterhouseCoopers LLP (“PwC”), and (ii) the unaudited consolidated financial statements of the Company for the periods ended March 31, 2013, June 30, 2013, September 30, 2013, March 31, 2014, and June 30, 2014 included in the Company’s Quarterly Reports on Form 10-Q for the periods then ended should no longer be relied upon due to potential changes related to the accrual of a liability associated with underdelivery by the Company of CO2 to the Century Plant. In connection with any restatement of the financial statements for prior periods as described above, and as a result of the resolution of other comments made by the Staff, the Company may make other changes to such financial statements; however, the Company does not anticipate that any of these other corrections would be material to the respective prior periods. The Company is working to complete and file its Quarterly Report for the period ended September 30, 2014 as soon as possible following resolution of this matter. However, it is currently anticipated that such filing will not be timely. SandRidge’s Audit Committee has discussed the foregoing matters with PwC. (emphasis added) 34. On November 4, 2014, the Company filed a press release stating that the third quarter financials for 2014 would be delayed pending the investigation of the SEC’s concerns. The press release states in relevant part: SandRidge Energy, Inc. Files Form 8-K Noting Delay in Third Quarter Financial Reporting OKLAHOMA CITY, Nov. 4, 2014 /PRNewswire/ -- SandRidge Energy, Inc. (the “Company”) (SD) today announced that as a result of a routine review by the Securities and Exchange Commission (the “SEC”) of its Annual Report on Form 10-K, the Company currently anticipates that its Quarterly Report on Form 10-Q for the third quarter of 2014 will not be filed timely, but, rather, will be completed and filed as soon as possible following the resolution of the SEC’s review. 12 As the Company has disclosed in prior filings, it is party to a 30-year agreement with Occidental Petroleum Corporation (“Occidental”) for the delivery by the Company to Occidental of CO2 and the removal of CO2 from the Company’s delivered natural gas production. After each calendar year, the Company is obligated to pay a penalty fee to the extent minimum required CO2 delivery volumes are not met. While the Company historically has accrued a liability for such annual penalty on an annual basis, the Staff (the “Staff”) of the Division of Corporation Finance of the SEC recently has requested that the Company reassess that practice and consider whether the liability should be accrued quarterly. As a result of its ongoing dialogue with the Staff some or all of the liabilities associated with the agreement may be required to be shifted to one or more prior periods, which could materially affect the net income of such prior periods. Upon resolution of the matter with the Staff, the Company will restate, to the extent necessary, these financial statements to reflect such shifts. In addition, the Company is reassessing its previous conclusions regarding the effectiveness of internal control over financial reporting and disclosure controls and procedures as they relate to the accounting under the Agreement. Accordingly, the Audit Committee of the Board of Directors of the Company has concluded that the consolidated financial statements included in the Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, as applicable, filed for periods ended December 31, 2012, March 31, 2013, June 30, 2013, September 30, 2013, December 31, 2013, March 31, 2014, and June 30, 2014 cannot be relied upon until resolution of this matter. It is important to note, there is no impact on the Company’s cash and cash equivalent balances reported in any of these periods. SandRidge President and CEO, James Bennett, commented, “We are obviously disappointed in the distraction this news may bring at such an otherwise exciting time for SandRidge. We want to be clear that, while certainly unfortunate, at this time we believe the resolution of this matter will only affect the timing of accruals of our CO2 underdelivery penalty and does not have any material impact on the core sectors of our business. Our team is working diligently to resolve this matter with the SEC as quickly as possible, 13 and we will still host our regularly scheduled conference call to update our investors on operating progress.” (emphasis added) 35. This announcement surprised the market and caused the Company’s stock to fall $0.25 per share or about 6.5% to $3.56 per share on November 4, 2014. 36. Had the Plaintiff and the Class been aware of this adverse information they would not have purchased the Company’s securities at all or would not have purchased such securities at the artificially inflated prices at which they did. The Affiliated Ute Presumption Of Reliance 37. Neither Plaintiff nor the Class need prove reliance – either individually or as a class –because under the circumstances of this case, which involves inaccurate financial statements described herein above, 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. This complaint is based primarily on Defendants’ material misrepresentations of the Company’s financial statements described herein in violation of Generally Accepted Accounting Principles and federal securities regulations. 14 Applicability of Presumption of Reliance: Fraud-on-the-Market Doctrine 38. At all relevant times, the market for SandRidge’s common stock was an efficient market for the following reasons, among others: (a) SandRidge’s stock met the requirements for listing, and was listed and actively traded on the NYSE, a highly efficient and automated market; (b) During the class period, on average, several hundreds of thousands of shares of SandRidge stock were traded on a weekly basis, demonstrating a very active and broad market for SandRidge stock and permitting a strong presumption of an efficient market; (c) As a regulated issuer, SandRidge filed with the SEC periodic public reports during the Class Period; (d) SandRidge 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; (e) SandRidge 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; (f) Numerous NASD member firms were active market-makers in SandRidge stock at all times during the Class Period; and 15 (g) Unexpected material news about SandRidge was rapidly reflected in and incorporated into the Company’s stock price during the Class Period. 39. As a result of the foregoing, the market for SandRidge’s common stock promptly digested current information regarding SandRidge from all publicly available sources and reflected such information in SandRidge’s stock price. Under these circumstances, all purchasers of SandRidge’s common stock during the Class Period suffered similar injury through their purchase of SandRidge’s common stock at artificially inflated prices, and a presumption of reliance applies. FIRST CLAIM Violation of Section 10(b) of The Exchange Act Against and Rule 10b-5 Promulgated Thereunder Against All Defendants 40. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. 41. This claim is asserted against all Defendants. 42. During the Class Period, Defendants carried out a plan, scheme and course of conduct which 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 SandRidge’s securities at artificially inflated and distorted prices. In furtherance of this unlawful scheme, plan and course of conduct, Defendants, individually and as a group, took the actions set forth herein. 16 43. 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 SandRidge as specified herein. 44. These 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 SandRidge’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 omitting to state material facts necessary in order to make the statements made about SandRidge 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 that operated as a fraud and deceit upon the purchasers SandRidge’s securities during the Class Period. 45. Each of the Defendants’ primary liability, and controlling person liability, arises from the following facts: (1) the Defendants were high-level executives, directors, and/or agents at the Company during the Class Period and members of the Company’s management team or had control thereof; (2) each of the Defendants, by virtue of his 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 17 condition; (3) each of the 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; (4) each of the Defendants was aware of the Company’s dissemination of information to the investing public that they knew or recklessly disregarded was materially false and misleading; and (5) each of the Defendants culpably participated in the wrongful conduct alleged herein. 46. 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 and for the purpose and effect of concealing SandRidge’s financial condition and future business prospects from the investing public and supporting the artificially inflated or distorted price of its securities. As demonstrated by Defendants’ misstatements of the Company’s financial condition and business prospects throughout the Class Period, Defendants, if they did not have actual knowledge of the misrepresentations and 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. 47. 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 for 18 SandRidge’s securities was artificially inflated during the Class Period. In ignorance of the fact that market prices of SandRidge’s publicly-traded securities were artificially inflated or distorted, and relying directly or indirectly on the false and misleading statements made by defendants, or upon the integrity of the market in which the Company’s securities trade, and/or on 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 SandRidge securities during the Class Period at artificially high prices and were damaged thereby. 48. 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 SandRidge’s financial results, which were not disclosed by Defendants, Plaintiff and other members of the Class would not have purchased or otherwise acquired SandRidge securities, or, if they had acquired such securities during the Class Period, they would not have done so at the artificially inflated prices or distorted prices at which they did. 49. By virtue of the foregoing, Defendants have violated Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder. 50. 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. 19 51. This action was filed within two years of discovery of the fraud and within five years of Plaintiff’s purchases of securities giving rise to the cause of action. SECOND CLAIM Violation of Section 20(a) of The Exchange Act Against the Individual Defendants 52. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. 53. This Second Claim is asserted against each of the Individual Defendants. 54. The Individual Defendants acted as controlling persons of SandRidge within the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions, agency, and their ownership and contractual rights, participation in and/or awareness of the Company’s operations and/or intimate knowledge of aspects of the Company’s revenues and earnings and dissemination of information 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 Company, including the content and dissemination of the various statements that Plaintiff contend are false and misleading. The 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 to cause the statements to be corrected. 20 55. In particular, each of these Defendants had direct and supervisory involvement in the day-to-day operations of the Company and, therefore, is 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. 56. As set forth above, SandRidge and the certain Individual Defendants each violated Section 10(b) and Rule 10b-5 by their acts and omissions as alleged in this Complaint. 57. By virtue of their positions as controlling persons, the Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act as they culpably participated in the fraud alleged herein. 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 common stock during the Class Period. 58. 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, designating Plaintiff as Lead Plaintiff and certifying Plaintiff as a class representative under Rule 23 of the Federal Rules of Civil Procedure and Plaintiff’s counsel as Lead Counsel; 21 (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: Dated: November 10, 2014 Respectfully submitted, RUBENSTEIN & PITTS, PLLC Michael A. Rubenstein, Esq. 1503 E. 19th Street Edmond, OK 73013 Phone: (405) 340-1900 Fax: (405) 340-1001 Email: mrubenstein@oklawpartners.com THE ROSEN LAW FIRM, P.A. Phillip Kim, Esq. Laurence Rosen, Esq. 275 Madison Avenue, 34th Floor New York, NY 10016 Phone: (212) 686-1060 Fax: (212) 202-3827 Email: pkim@rosenlegal.com Email: lrosen@rosenlegal.com Counsel for Plaintiff 22

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