AFK Lawsuit Complaint Letter
AFK Lawsuit Complaint Letter
AFK Lawsuit Complaint Letter
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LNLIMITED COMPLAiNT
t2 SECOND AMENDED AND RESTATED
AFK Broadcast Networks, LLC;
13 Bradiy Fry; BREACH OF CONTRACT I(WRITTEN);
David Fry II; BREACH OF THE COVENANT OF GOOD
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Cognitive Gaming LLC; and FAITH AND FATR DEALN\.IG
DOES 1-22
15 BREACH OF FiDUC]ARY:DUTY
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Defendants ACCOL]NTING ,,
FRAUD )
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IMPLIED IN FACT CONTTTACT
IR BY FAX
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PARTIES
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THE
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principal place of business in Santa Clara County, Calif'or:nia, I
eveRts giving dse to the causes of action staled herein took piace (*David'i). Aecorcling to a
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sh:'ewd a**holes." As of April 1 g, 2|l6,his twitter tagline reads, "My attorney says that I am
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too evil."
11 5. Bradley Fly is an individual and brother of David Fr"y, u,ho Qn information and
t3 belief, resides in Santa Clara County California ("Brad") and who, on information and belief, is a
l4 managiug membor of NACL and was the inirial manager of AFK acting on behalf of NACL.
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According to a document reviewed by the Plaintif{ David describes Brad as "dumb", "an idiot",
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and a "dumbat*" who "teils everyone to shut up when he cant make a good decision or take
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responsibiiity" fsic]. He fudher says tirat Brad'Just twists everything" and ihas no clue as to
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whathes doing" [sic]. ,
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6. On information and belief, Cognitive Gaming LLC is an entity owned by David
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and or Brad ('CG") and engages in competitive online gaming.
22 UIITTD PAITTIES
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7 ' David Santos is a business associate of Brad and David, on infonnatiol and belief
2 B, Ju-r'isdiction is proper in this Coul because substantially ali o1'acts giving rise to
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thr: causes of action herein complained occurred in Santa Clara County and,on infonnation and
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belief, DEFENDANTS reside in Santa Clara County,
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g. On or about June 16,2014, Plaintiff and his colleague Tyier Peckham forrned
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AFI( for the purpose of owning, opelating, and profiting fi:om a physical location where patrons
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10. In the fall of 2014, NACL negotiated an agreement with ,AFK, Piaintitf and
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1l Peckham where AFK would expand its business to include food and b"r.rug. service (the
t, *Gamer Lounge"); NACL wouid invest Tlu'ee Hundred'Ihousand Dollars ($300,000) for what
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13 would ultimately be a Slq/o proflts interest; Plaintiff would contribute his half of the business
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14 plan for what would ultimately be a24J% interest; ald Tyler Peskham would contribute his half
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11, On information and belief, Bmd, David, and NACL never intsnded to honor this
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agreement but intended to rnisappropriate funds from revenues of the Garner Lounge for their
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own benefit and blur tlie line between AFK ancl NACL so that they could claim that AFK did not
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i 3. On information and belief, two ways which they planned to aocomplish this were:
,< fi'om the operation of the AFI( business would be d"eposited direct to accounts
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Srcolro AMENDED AND RESTATED coMpLArN,t"
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of NACL, Bmd, or David (or entities controlled by them), would never be
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deposited into an AFI( bank account, zmd would not be counted as revenues
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on the AFK financial statements, l
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b" By putting assets of AFK, such as the lease ancl liquor license, in their names
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to make it easier to breach the operating agreemeRt, exert conhol over AFK,
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14. Ernployees were all hired by AFI(, i
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15. The parties memorjalized ihis agreement in an Amended and,Restated Operating
l1 Agreemerrt dated Novenibel 25, 20!4 astrue and correct copy hereof is attached as Exhibit A
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oprrration of an electronic garning business with food and beverage servicos at 163 W. Santa
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Clara Street, San Jose, CA."
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17, Brad, Peckham, and Plaintiff were the initial Managers,: See Operating
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Agreement Seetion 1,7 (i).
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18' On information ancl belief, later', Davicl took over for. Brad in the capacity of
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Marnager of AFK. i
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Section 4.1i of the Operating Agleement balred NACL fiom operatilg a
cornpetitive facitity within five miles of 163 West Santa Ciara Street,
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SecoNn A.MENDED AND E EsTATED coMpLAtNT
I 2t. On infolmation and belief, Brad lacked experience in opelating or managing a
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22. Plaintif,f took on the role of General Manager of the Gamer tr"ounge, assuming a
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fuil time employment position which was independent of his responsibilities as a Managing
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Member, ,
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23. Despite this lack of experience, Brad admitted in a convelsation which took place
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on February 4,2016, that he prepared the financial projections for the operation of the Gamer
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Lounge.
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24. As a Manager of AFI(, Plaintiff is entitled "to oversee the preparation and
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l1 nraintenance of the Company's [AFK's] books and records and ali reports relating to the
13 25, On inforrnation and belief, arnong other issues, tiris attempt to divert fiom AFK to
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not be recorded on the finafioial statements of AFK.
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as "mi$ceilaneous" to attemptto conceal imploper divers,ion of funcls.
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24 Tal<ing over operation of the Gamer Lounge and puttingrcash receipts irrto
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SscoNo AMENDED AND REST'ATED coMpLArNT
I cl. Denying Plaintiff timely access rp tlie books and records of AFK,
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26. In May, 2015, David purported to teiminate the services of the piaintiff as
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Gr:neral Manager dernoted hiur to be,"Events and sociai Media
Manager,,,
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27, On information and belief, Defendants had no plan to secure a different General
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Manager because one or more of them r.vanted AFK to f7il,
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In May,2015, David wrote to Santos,'iI want it to fail I want tliis to fail now
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Thats how f*cking underappreciated
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lll am, . .,,
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29' In ihe same collvelsation, Santos writes]to Davici, "Kevin is isetting up his ggls
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arrj ammo against us. . .Brad literally broke the AFK pperating agreement, and created
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new accounts without the majority votes of 'Iyler, I(ejrin and Brad. Took the money without
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General Manager for some period of time thereafter.
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32. On information and beiiej, Defendants i]ad no plan to recruit a new
GM and
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instead purported to rermi,ate piaintiff as nothing ,ror. t{u, rank bullying.
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33.
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belief:
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a. Putting the iease for the premises in a confusing and wlol1g name' On
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information and belief, the name was North American Challenger League
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LLC dba AF'I( Esports when, in t'act "AFK Esporls" was nqt a dba of NACL'
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35,
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In May, 2015, David. admittecl this plan writing, ". . . if bradstructured this like
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1t daveandIwrotehimtoyeaNagokevinandtyierhavenothing.,,,,
LZ 36, And despite the plain language of the op:erating agreement rnaking iegally ciear'
14 David; re.member 4 months ago where i kept raging at brad to figure out r,vhere
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afk begins l
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Santos: ya. .
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David: and the nacl ends this is u,hy Rightihere once again
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SO.
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Santos: I know you did. l
37, Plaintiff confronted David about a nurnber of issues, inclucling, but not limited to:
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Not putting the lease, liquol license and insurance in the name,of AFK.
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STcoNn AMENDED AND REsTATED CoMPLAINT
l d'Startingrnu1tipieot1rercompanieswiththesimi1arna1.nss.
2 38. David responded by blaming Brad ancl simply taking over the AFK declaling that
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none of the original members "ownecl" the cornpany any more, that "ownerless" cornpany would
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be
o'wou.nd
down" and its assets absolbed by its "parent'" .
39. NACL and David refused the requests of Plaintilf for f-rnancial statements and
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related financial information.
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40, NACL paid only Ninety One Thousand Dollars ($91,000) of :the Tlilee Hundred
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lLereto,
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41. In a conversation which took place between Brad ancl the Plaintiff on February 4,
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2016,Brad admitted making only $92,000 of the required $300,000 investme4t.
13 opr:rated by Brad and David, starled treating funds of AFK as its orvn, The following table (witit
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14 supporting documentation as Exhibit C) lists improper ituklrg of AFK funds I:y one or more
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De.fendauts known to date:
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)ffi,ivi
11 4/t0/15 Check #1087 $10,000 Brad Frv Cash "tralsfer"
4/28/15 Check 1126
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$35,000 Brad {rr "payback and Food/Rent, r1o
supporting documentation.
t9 6t1t1s Check1232 $ 10,000 Davidlsantos Even though payroll taxes
payable to were priid :direct by AFI(,
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NACI, "payroll taxes."
/.t 6/t6/1s Check 1303 $8,000 David Sanlos Even though payroll taxes were
payablerto paid direct {:y AFK, "payroll
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taxes," .
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43. While the $35,000 check has notation that it is for food and rent, Plaintiff has
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never seen any supporting docuurentation to confirm this claim and believes instead that it was a
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6 44. On infolmatioir and beliel the checks set forth in \42 wcl'e non pr.o rata
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45. In a conversation which took place between Br:ad and the Plaintiff on February 4,
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2016,Bradadrnittedimpropcr.takingoffuirc]sfromAFK.
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46' on information and belief David Santos took the follor,ving actions at the expense
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of AFK for the benefit of CG frorn Mid May, 2015 Forwa*l;
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a. Paid rent for the Heroes of the storm Team sponsored by
'cG lHeroes of the
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Storm being an oniine game). l
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Allowed the cG Heroes of the stornt team to practics around the clock
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49. On information and beliel once Plaintiff was terminated,rl)efendants tooic all
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cash receipts and deposited them into NACL or other non AFK bank accounts,
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50. Section 13.2 ofthe Operating Agreement entitles a Mernber,to recover litigation
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expenses as defined in connection with any action to enforce rights under the Operating
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A6;reement, l
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51, In the late fall of 2015, Defeldant NACL simpiy took over the operations and
l1 52, In November, 2015, Defendant NACL finally provided plaintiff with financial
53.
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14 a, Setterely understated revenue, When compared to bank statements that are avaiiabtre
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to Plaintiff, the financial statements show a severe understatement of revenue.
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Plaintiff reviewed fte bank statements solely
for deposits front u.edit card charges
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fi'om the poinl; of sale system and excluding cash cleposits and private parties.
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Plaintjff found revenues for the period fi'om January L,2015-october.3l,2015
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to be
Seven Hundred Seventy Five Thousand Two Hundred
1n Fifty Four dollars and frfty two
cents ($775,254,52), By comparison, the financial statements provideci by NACL
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Seco]'In AMENDED AND REsTATED C0MPLAINT
I three cents ($335,984.03) less than the point of sale oniy deposits:in the bank account,
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. even though the financial statements had two additional income streams to be
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inciuded as t'eveflues (cash sales and private parties), ,
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b. Concealing funds transfers. The financial statements presented more in
such. Furlher, Plaintiff does not believe that these htmdrecls of thousands of doliars
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l1 were ever deposited into a bank account to whioh Plaintiff had access,
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12 54. Effective January 7,2016, NACL took all of AFK employees as their own, See
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14 55. In a eonversation which took place on February 4, 2076, among Plaintiff and Brad
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a. Adrnitted that the Gamer Lounge glossed Two Milli.on ($2,000,000) in its first year of
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operation.
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b. Triod to get Plaintiff to pay money fbr the lease and liquor license which Brad
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irnploperly put in the name of NACL.
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c- Admitted that the purpose of the operating agreement was to "protect" Brad.
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e. stated that the value of the NACL pofion of,the ongoing entity was $3.4 miliion and
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BITEACH OF CONTRACT
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(NACL)
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14 58, As set forth above, Plaintiff entered into a contract with NACLiand AFK.
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60. All conditions precedent to the performance of the eontract by AFK and NACL
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were performed or excused,
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61. NACL breached the contract by, including, but not lirnited to,:
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b' Taking non pro rata distributions in violation Section 3.7 of the Operating
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2 the books and lecorcls of AFK and of access to a1i such books and recolds in
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violation of Section 4,2(a) of the O1:erating Agreettrent,
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d, Talcing controi of the Gamer Lounge without propel" approvals'
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e, Operating the Garner Lounge in violation of the telritorial restlictions of
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the Operating Agreement,
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62. Plaintiffhas been harmed as a result of these breaches.
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SECOND CAUSE OF ACTION
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BREACH OF THE COVENANT OF GOOD FAITH ANT} FAII{:NNAIIXC
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64. As set fortir above, plaintiff enter.ed into a contract with NACL,
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65' Piaintiff pelformed all or substantialiy all obligations leqnired to be performed
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him rurder the agreement or such performa:rce iras been excused.
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66. A11 co,ditions for the perforrnanee of the contract by NACL harr 6ss,,.r.d
or wer.e
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excused.
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6l ' Brad and hIACL have unfairly interfered with the
right of the plaintiff to secure
the benefits of AFK by taking or failing to take a vaiety of actions, including,
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the followirrg:
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i b. Putting licenses criticai to the company in the narne of NACL and other third parties,
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c. Diverting revenues of AFI( to other accomts to deny Plaintiff the profits of AFI( to
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68, Plaintiff has been harrned as a. result ofthis wlongful
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interference,
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BRtrACH OF F',TDUCIARY DUTY CAL.C'ORP,CO DEgl 7 7,04.$9
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69, PLAINTFF lealleges and incorporates by reference paragraphs 1-58 of this
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complainl as thor.rgh fuliy set forth herein :
l2 70. As set forth above, Brad Fry was a managel' ancl NACL was a mernber of AFK,
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l2 71. Brad Fry and NACL owed a fiducialy duty to AFI( and to Plaintiff as a rrember
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of AFK, including, but not limited to:
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a. The duty to account for and hold property as a tlustee of AFI(.
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c. Refrain from competing with AFK; and I
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d. Refraj.n fiom engaging in inteutional misconduct or a vioiation of the law,
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IL, As mole particularly described above, Defenclants violated all of the foregoing
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duties.
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/ -). Plaintiff has been harmed as a result of the breaches of fiducialy duty described
herein.
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ACCOUNTII\G
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(BRAD FRY AND NACL) .
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74. PLAINTFF realleges and incorporates by reference paragraphs i-58 of this
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complaint as though fu1ly set foth herein
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75, As set forih above, Brad Fry was a manager and NACL was a:member of AFK.
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76. Brad Fry and NACL owed a fiducialy duty to AFI( and to Plaintiff as a member
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77 , Plaintiff has been harmed as a lesult of the actions described ir,r this conrplaint and
1l cannot aseertain the fi:.ll amount because of the co mingiing of funds of the Defendants.
13 F'RAUD
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14 (BRAD FRY, DAVID FRY,A.ND NACL) :
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(PROMTSE WITH NO TNTENTION TO PERFORM)
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78, PLAINTFF realleges and incorporates by lefbrence paragraphs 1-58 of this
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limited to, the fact that they had no intontion of honoring the agreement.
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80. Defendants made these promises lmowingly and with tlie intent to ind.uce Plaintiff
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to provide his business plan and services to AFl( so thai they could divert funcls for their own rise
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AFK.
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82. Plaintiff has been halmed for the foregoing which was caused by the fbrgoing
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plomises of tire Defendants. ,
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83. The Defendants were guilty of rnalice, fi.aud and oppression,
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IMPLIED IN FACT CONTRACT
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58' As set forth above, cG took goods, se,vices and funds fi.om AFI(.
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59. CG knew that these goods selvices and funds were valuable and needed to be paid
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for and did not pay for them.
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60. An implied in fact contract was created for Cogntive Gamingrto pay for,goocls,
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services and loans fi.om AFI(.
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62' As a member of AFK and party to its operating agreement, Defe,ndant was a third
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2. On the fourth cause of action, m acsounting to determine the amounts owed
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pursuant to the other causes of action
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5, Interest (inoludingprejudgment p-ul's-uant to Civil Code Sectio n3257(a)and post
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judgment), l
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6' Suoh other relief to which the Plaintiff may be entitled by law or as the Court may
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C o uns e l for P I aintiff Kevin
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