Cu cit-Cam REED SMITH LLP 4% A limited liability pannership formed in the State of Delaware Marsha A. Houston (SBN 129956) Christopher 0. Rivas (SBN 238765) Jonathan D. Gershon (SBN 306979) REED SMITH LLP 355 South Grand Avenue, Suite 2900 Los Angeles, CA 90071-1514 Telephone: 213.457.8000 Facsimile: 213.457.8080 Attorneys for Plaintiff Providence Industries, LLC ?ll: NOV 2 '9 218 VILLANUEVA SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF COUNTY OF RIVERSIDE PROVIDENCE INDUSTRIES, LLC, a California limited liability company, Plaintiff, vs. LULAROE, LLC., a California limited liability company; LLR, IN C., a Wyoming Corporation; MARK STIDHAM, an individual; DEANNE BRADY a/k/a DEANNE STIDHAM, an individual; 159DE, LLC, a Delaware limited liability company; GHOST SQUADRON, LLC, a Wyoming limited liability company; INLAND EXOTIC MOTORS, LLC, a California limited liability company; LENNON LEASING, LLC, a Wyoming limited liability company; HUDSLOAN LAND COMPANY, LLC, a Wyoming limited liability company; 2000 CAROLINA PINES Dr., LLC, a South Carolina limited liability company; 823 RINGDAHL CIRCLE, LLC, a California limited liability company; 4048 SUZIE CIRCLE, LLC, a Californialimited liability company; and DOES 1 through 100, inclusive, Defendants. Ric 182 52 15.31 VERIFIED COMPLAINT FOR: (1) BREACH OF (2) BREACH OF (3) GOODS SOLD AND (4) OPEN BOOK (5) UNJUST (6) FRAUD IN THE (7) AVOIDANCE OF FRAUDULENT TRANSFERS (ACTUAL (8) AVOIDANCE OF FRAUDULENT TRANSFERS (CONSTRUCTIVE (9) SPECIFIC PERFORMANCE AND APPOINTMENT OF AND (10) INJUNCTIVE RELIEF 8103 6 AUN REED SMITH LLP A limited liability partnership formed in the State of Delaware Plaintiff Providence Industries, LLC (?Plaintiff or ?Supplier?) alleges as follows: GENERAL ALLEGATIONS A. The Parties 1. Plaintiff is a California limited liability company doing business in the State of California, which conducts business under the name ?MyDyer?, and is in the business of apparel design, manufacturing, and supply. 2. Plaintiff is informed and believes, and thereon alleges that at all relevant times mentioned herein, defendant Lularoe, LLC was and is a California limited liability company doing business in the State of California, with its principal place of business in Corona, California. 3. Plaintiff is informed and believes, and thereon alleges that at all relevant times mentioned herein, defendant LLR, Inc. and together with Lularoe, the ?Obligors?) was and is a Wyoming corporation doing business in the State of California, with its principal place of business in Corona, California. 4. Plaintiff is informed and believes, and thereon alleges that at all relevant times mentioned herein, Mark Alan Stidham Stidham?) was and is a resident of California. 5. Plaintiff is informed and believes, and thereon alleges that at all relevant times mentioned herein, DeAnne Brady a/k/a DeAnne Stidham (?Ms Stidham?) was and is a resident of California. 6. Plaintiff is informed and believes, and thereon alleges that at all relevant times mentioned herein, defendant 159DE, LLC was and is a Delaware limited liability company operating, at times, in the State of California, with its main of?ce based in Corona, California. 7. Plaintiff is informed and believes, and thereon alleges that at all relevant times mentioned herein, defendant Ghost Squadron, LLC (?Ghost Squadron?) was and is a Wyoming limited liability company operating, at times, in the State of California, with its main of?ce in Corona, California. 8. Plaintiff is informed and believes, and thereon alleges that at all relevant times 2 COMPLAINT REED SMITH LLP A limited liability partnership formed in the Stale of Delaware mentioned herein, defendant Inland Exotic Motors, LLC (?Inland Exotic?) was and is a California limited liability company purportedly operating, at times, in the State of California, with its main of?ce in Corona, California. 9. Plaintiff is informed and believes, and thereon alleges that at all relevant times mentioned herein, defendant Lennon Leasing, LLC was and is a Wyoming limited liability company operating, at times, in the State of California, with its main of?ce in Corona, California. 10. Plaintiff is informed and believes, and thereon alleges that at all relevant times mentioned herein, defendant Hudsloan Land Company, LLC (?Hudsloan Land?) was and is a Wyoming limited liability company operating, at times, in the State of California, with its main of?ce in Corona, California. 11. Plaintiff is informed and believes, and thereon alleges that at all relevant times mentioned herein, defendant 2000 Carolina Pines Dr., LLC (?Carolina Pines?) was and is a South Carolina limited liability company Operating, at times, in the State of California, with its main of?ce in Charleston, South Carolina. 12. The true names and capacities of Defendants DOES I through 100, inclusive, are unknown to Plaintiff, who therefore sues each such defendant by such ?ctitious names. Plaintiff will seek leave to amend this Complaint to state the true names and capacities of the ?ctitious defendants when they are ascertained. B. The Sourcing Agreement and Defaults Thereunder 13. Supplier and Obligors are parties to a Sourcing Agreement, effective as of April 12, 2016 (the ?Sourcing Agreement?), under which LLR agreed to purchase Products (as de?ned in the Sourcing Agreement) from Supplier pursuant to Purchase Orders (as de?ned in the Sourcing Agreement), and pursuant to which Lularoe guarantied obligations to Supplier.1 14. Pursuant to the Sourcing Agreement, Plaintiff sourced Products to ful?ll Obligors? 1 The Sourcing Agreement, which is subject to con?dentiality provisions, as well as the other exhibits identi?ed in this Complaint which may be con?dential under the provisions of the Sourcing Agreement, will each and all be ?led provisionally under seal at a subsequent date. 3 COMPLAINT REED SMITH LLP A limited liability partnership formed in the Stale of Delaware Purchase Orders and delivered the ordered Products to Obligors with payment due on Invoices on ?net 7 days? terms. Plaintiff also incurred other costs and expenses under the Sourcing Agreement as set forth below. 15. Obligors have committed multiple breaches under the Sourcing Agreement, and multiple Events of Default have occurred and are ongoing. Each breach and Event of Default is set forth more speci?cally as follows: 1. The Delivered Products 16. LLR ordered Products ?om the Supplier pursuant to the Sourcing Agreement, which have been delivered to LLR and accepted by LLR under the terms of the Sourcing Agreement (the ?Delivered Products?), and which are more speci?cally described in certain Purchase Orders and corresponding Invoices (the ?Delivered Products 17. On information and belief, LLR reaped the bene?ts of selling a portion of the Products and is potentially still selling the Products and/ or holding a portion of the Products for ?iture sale. 18. As set forth in the Delivered Products Invoices, Obligors are indebted to the Supplier in an amount not less than $33,753,895.66 for the Delivered Products (the ?Delivered Products Indebtedness?). 19. The Delivered Products Invoices are each and all past due and owing and in some cases, for as long as seven months. 2. The Reduced Liability Products 20. LLR also ordered certain Products ?om Supplier which were completed per instructions, but following completion of the order by Supplier, LLR informed Supplier that it no longer wanted the Products and instructed Supplier to destroy them (the ?Reduced Liability Products?). Unbeknownst to Supplier and as set forth in more detail below, Obligors had had made signi?cant ?nancial changes in its payment and returns policies with its independent ?Retailers? which resulted in a material and immediate negative impact on Obligors? revenues and its need for 2 The list of Purchase Orders and Invoices will be provided to Court provisionally under seal at a subsequent date. COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware Products. 21. Supplier was able to negotiate a reduction of its liability to its own vendor/manufacturer by obtaining agreement to the destruction of the Reduced Liability Products (as opposed to selling them in the open market). The reduction in Supplier?s liability to its vendor allowed Supplier to substantially reduce Obligors? liability to Supplier with respect to the Reduced Liability Products. 22. The Obligors and Supplier agreed to this arrangement. As set forth in a con?rming email provided to Supplier by Obligors, based upon request for destruction of the Reduced Liability Products, Supplier had its vendor/manufacturer arrange for the destruction of certain Products, which reduced the indebtedness owed by Obligors to Supplier on the Delivered Products from $11,020,800 to an agreed-upon amount of $8,000,000 (the ?Reduced Liability Products Indebtedness?). 23. As set forth in Section 5 of the Sourcing Agreement, Obligors have agreed to indemnify Supplier for all of its costs and expenses relating to any Products ordered by LLR or delivered to LLR under the Sourcing Agreement, whether arising before or after delivery. 24. The Reduced Liability Product Indebtedness is past due and owing and is accruing interest as set forth in the Sourcing Agreement. 3. Fabric Orders 25. LLR also purchased certain fabric from Supplier by purchaser order (the ?112m which Supplier ordered on behalf of LLR, which Fabric Products are more speci?cally described in an Invoice and accompanying list of Purchase Orders (the ?Fabric As set forth in the Fabric Invoices, Obligors are indebted to the Supplier in an amount not less than $4,812,487.80 for the Fabric Products (the ?Fabric Products Indebtedness?). 26. LLR requested that Supplier source the Fabric Products many months ago, but shortly after Supplier?s vendor received the Fabric Products, LLR asked Supplier to have the Fabric Products stored on its behalf for many months. As Supplier has informed LLR, Supplier was 3 The referenced Fabric Invoice will be provided to the Court provisionally under seal at a subsequent date. COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware informed and believes that the third-party manufacturers and warehousemen of the Fabric Products have disposed of some of the Fabric Products and more of the Fabric Products would be disposed of in the coming months if payment was not immediately received. Nevertheless, LLR refused to pay the Fabric Products Indebtedness. 27. By and large, the orders on the Fabric Products were initially accepted as Purchase Orders for ?nished goods to be completed using'the Fabric Products ordered by Obligors. Obligors, after the purchase of the Fabric Product, requested cancellation of the Purchase Order for ?nished goods. Rather than complete the Purchase Orders as ?nished goods, as Supplier was entitled to do under the Sourcing Agreement, Supplier reduced Obligors? liability to the cost of the Fabric Products themselves. 28. Although Obligorsh? requests were not cancelable under their own Purchase Orders, Supplier agreed, as an accommodation to Obligors, to reduce the liability from ?nished goods solely to the Fabric Products. In some cases, LLR pre-ordered fabric which it intended to use for near-term future ?nished goods, but LLR repeatedly failed to place orders for the ?nished goods and, instead, strung Supplier along month?after?month saying that the new orders were coming while Supplier continued to incur the cost of the fabric. 29. As described more fully below, Supplier has only recently learned about the material and negative impact Obligors? decisions in 2017 had on their revenues and need for Products. Obligors withheld these material facts regarding it revenues ?om Supplier even though it impacted Obligors? ability to pay for the orders it was making. 30. As set forth in Section 5 of the Sourcing Agreement, Obligors have agreed to indemnify Supplier for all of its costs and expenses relating to any Products ordered by LLR or delivered to LLR under the Sourcing Agreement, whether arising before or after delivery. 31. The Fabric Products Indebtedness is past due and owing and is accruing interest as set forth in the Sourcing Agreement. 4. License Obligations 32. LLR purchased certain licensed Products on behalf of LLR (the ?Licensed Products?), for which the Supplier, at request, obtained licenses from its license partner (the COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware \DOOxlc?kh-lth ?License Partner?) to develop and source the manufacture of the Licensed Products. Supplier also obtained sublicenses for LLR to sell the Licensed Products within a certain prescribed ?Territory?. In connection with order of the Licensed Products, LLR has incurred not less than $460,762 in obligations to its License Partner (the ?License Indebtedness?) on behalf and at its request. 33. Obligors and Supplier are parties to a Mutual Indemni?cation Agreement dated as of January 13, 2017, pursuant to which, among other things, Obligors agreed to indemnify Supplier for, among other things, any claims or liabilities incurred by Supplier in connection with its license of any Products on Supplier?s behalf.4 . 34. Additionally, as set forth in Section 5 of the Sourcing Agreement, Obligors have agreed to indemnify Supplier for all of its costs and expenses relating to any Products ordered by LLR or delivered to LLR under the Sourcing Agreement, whether arising before or after delivery. . 5. Storage and Other Costs 35. LLR also ordered certain Products from Supplier, which were completed per instructions, but following completion of the order by Supplier, LLR asked Supplier to store the Products on its behalf for many months rather than delivering them (the ?Stored Products?). On or about October 25, 2018, Supplier invoiced Obligors in the amount of $383,124.59 for such storage costs (the ?Storage Costs?). The Storage Costs constitute a portion of the total storage costs due from Obligors to Supplier, the balance of which remains be invoiced to Obligors immediately after receipt of such invoice by Supplier from the holders of the Stored Products. 36. Obligors ordered the Stored Products and Plaintiff has repeatedly attempted to arrange for delivery of the Stored Products to Obligors. 37. Plaintiff is informed and believes that Obligors are delaying their receipt of many of the ordered Stored Products in an effort to delay Obligors? payment obligations to Supplier, which are past due and owing and cannot be avoided under the Sourcing Agreement. Many of the Stored Products are seasonal, in nature, and given the rapid pace at which fashion trends change, the Stored Products continue to lose value as long as LLR continues to refuse to take delivery of the Stored 4 Copies of the License Agreement (as amended), the accompanying Sublicense Approval Agreement (as amended), and the Mutual Indemni?cation Agreement will be provided to the Court provisionally under seal at a subsequent date. COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware Products. 38. The Storage Costs are past due and owing and are accruing interest as set forth in the Sourcing Agreement. I 39. Supplier also incurred costs with resPect to ordering trims related to the production of the Products in connection with minimum orders anticipated to be made by Obligors as required by the Sourcing Agreement, and the costs of ordering such trims is in an amount of $1,322,685.40 (the ?Trim Costs?, and together with the Storage Costs, the ?Indemni?ed Costs?). 40. As set forth in Section 5 of the Sourcing Agreement, Obligors have agreed to indemnify Supplier for all of its costs and expenses relating to any Products ordered by LLR or delivered to LLR under the Sourcing Agreement, Whether arising before or after delivery, including without limitation the Indemni?ed Costs. 6. Minimum Purchase Commitment 41. The Sourcing Agreement provides a Minimum Purchase Commitment, as set forth more fully in Section 1.6 and Schedule thereof, pursuant to which LLR is required to purchase a certain minimum percent of the ?total annual combined volume of Products that Customer requires for resale based on and measured by the total sums spent by Customer on all Products for resale during any calendar year during the term of this Agreement.? The Sourcing Agreement also requires that ?[w]ithin thirty (30) days ?om the end of each six (6) month period during the term of this Agreement, Customer shall prepare and deliver to Supplier a semi-annual written report showing Customer's compliance with the minimum purchase commitment set forth herein during such six (6) month period. The semi?annual written report shall be in form and substance mutually acceptable to Supplier and Customer.? 42. To date, LLR has failed to provide any of the semi?annual written reports it is obligated to deliver to Supplier. 43. Since August 2018, Obligors have been ordering substantial products from other suppliers. 44. Supplier believes that Obligors are seeking to hide from Supplier information regarding Obligors? purchases from other suppliers by re?Jsing to provide the semi-annual reports or COMPLAINT REED SMITH LLP A limited liability partnership formed in lhe Slate of Delaware 10otherwise make its books and records available to Supplier so that it may determine the extent to which LLR has been and is continuing to do business with other suppliers. 45. Additionally, Supplier has serious concerns that Obligors are diverting to third parties (including to other suppliers) the funds that they owe to Supplier, notwithstanding that Obligors are as long as six months past due in their Indebtedness to Supplier. 46. Obligors? diversion of its orders to other suppliers is a breach of the Sourcing Agreement. 7. Demand Has Been Made Upon Defendants, Who Have Failed to Repay the Indebtedness 47. Together, the Delivered Products Indebtedness, the Indemni?ed Costs, the Reduced Liability Products Indebtedness, the Fabric Products Indebtedness, and the License Indebtedness are referred to herein as the ?Indebtedness?. 48. By letter dated October 31, 2018 (the ?Demand Letter?), Plaintiff made written demand upon Obligors for repayment of the full amount of that portion of the Indebtedness that is past due and owing under the Sourcing Agreement and for the semi-annual written reports required under the Sourcing Agreement.5 49. Each item of Indebtedness identi?ed above has not been repaid notwithstanding Plaintiff? demand for payment thereof. Each failure by Obligors to timely repay each item of Indebtedness to Supplier (as set forth above) constitutes a separate Event of Default under the Sourcing Agreement. 50. Further, Obligors? failure to timely provide each of the semi-annual written reports required under the Sourcing Agreement also each constitute a separate Event of Default under the Sourcing Agreement. 51. Pursuant to the terms of the Sourcing Agreement, including Section 8.12 thereof, Plaintiff is entitled to recover all costs and expenses that Plaintiff may incur in enforcing its rights, remedies and powers. Plaintiff has been compelled to retain the services of attorneys and has 5 The Demand Letter will be provided to Court provisionally under seal at a subsequent date. 9 COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware incurred and will continue to incur such costs and expenses. Plaintiff prays leave of court to amend this Complaint when said costs and expenses have been determined. 52. Plaintiff has performed all of the terms and conditions on its part to be performed under the terms of the Sourcing Agreement. 53. Demand Has Been Made Upon Defendants, Who Have Failed to Repay the Indebtedness C. Obligors? Precarious Financial Situation And Its Duties to Creditors 54. Supplier is informed and believes that Obligors are either unable or unwilling to pay their debts as they become due, as evidenced by Obligors? failure to repay Supplier on the Indebtedness, some of which has been past due and owing for over seven months. 55. Supplier is informed and believes that Obligors? financial dif?culties began to mount in mid-2017, based upon certain policy changes instituted by Obligors. Speci?cally, in approximately April 2017, Obligors? business suddenly took a turn for the worse when they changed their policy for paying bonuses to their ?independent fashion consultants? their ?Retailers?). Among other things, Obligors ceased paying bonus checks to its Retailers based upon the orders they purchased from Obligors, but instead began paying its Retailers bonuses based upon the number of products ultimately sold to the consumer. 5 6. As a consequence of the bonus policy change, Supplier has recently been informed that by August 2017, Obligors? revenues dropped in half from approximately $200 million per month to $100 million per month, and a large number of Retailers began leaving Obligors. 57. Supplier is also informed and believes that around the same time frame, from April 2017 through approximately September 2017, Obligors also instituted a 100% refund buyback offer for its Retailers. Supplier has recently been informed that as a consequence of the policy, Obligors have paid approximately $120 million in returns to its Retailers. 58. Notwithstanding these dif?culties, by late 2017, Obligors were ordering tens of millions of dollars from Supplier on a delivery schedule set through April 2018. The production process typically took approximately four to six months to complete. However, it appears Obligors had no ability to pay Supplier on the net 7 day terms under which the Products were ordered _10_ COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware 59. Obligors had suf?cient deposits with Supplier that they were able to bring their indebtedness down through the end of 2017, but they Withheld critical facts about the ?nancial troubles in order to induce Supplier to continue doing business with Obligors, even though Obligors 60. situation by the end of 2017, the magnitude of which Obligors hid from Supplier in order to induce knew that they would not be able to pay Supplier for the orders. In fact, Supplier has recently learned that Obligors were in a precarious ?nancial Supplier to continue supplying to Obligors. 61. debt, layoffs, and an exodus of top sellers, and sources say the $2.3 billion legging empire could be imploding.? ?ee?2018-11. 62. afraid [Lularoe] is headed for bankruptcy? and that the company ?faces several lawsuits attacking its business practices.? See Business Insider, One of LuLaRoe ?s most iconic executives has suddenly On November 20, 2018, news sources reported that ?LuLaRoe is facing mounting In October 2018, news sources have reported that ?former consultants said they are left as some ex?sellers claim the company owes them thousands of dollars in refunds, published October 8, 2018. refund-complaints-201 8- 10. 63. Moreover, over a dozen lawsuits have recently been ?led against Obligors collectively seeking hundreds of millions of dollars in damages, including, for example: 0 Lemberg v. Lularoe, LLC et al (U.S.D.C., Central District of California, Case No. 17-02102). 0 Solti v. Lularoe, LLC (U.S.D.C., Central District of California, Case No. 17-00451). 0 Mack, et al. v. LLR, Inc, (U .S.D.C., Central District of California, Case No. 17-00853). 0 Goodwin v. LLR, Inc. (U.S.D.C., Central District of California, Case No. 17-07252) - Doran v. LLR, Ina, (U.S.D.C., Central District of California, Case No. 17-07259). - 0 Heinichen, et al. v. LuLaRoe, LLC, et al. (U.S.D.C., Central District of California, Case No. No. 17-07308). 0 Dean, et al. v. LuLaRoe, LLC, et al. (U.S.D.C., Central District of California, Case No. 17?07310). 0 Universal Dyeing Printing, Inc. V. Lularoe, LLC (U.S.D.C., Central District of California, Case No. 17--0475 8). _11_ COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware LON Lamberg v. Lularoe LLC, et (U .S.D.C., Central District of California, Case No. 17?02102). 0 ormey v. LLR, Inc. et al (Superior Court of California, County of San Benito, Case No. 0 Harvey v. Lularoe, LLC et al (Superior Court of California, County of Los Angeles, Case No. BC668401). 0 Subble?eld v. Lularoe, et al (Superior Court of California, County of Riverside, Case No. RIC 1801304). 0 Deurquiza v. Lularoe, LLC et al (Superior Court of California, County of Riverside, Case No. RIC 1813560). 0 Porsch v. LLR, Inc, et al (U .S.D.C., Southern District of New York, Case No. 18-09312). 0 Hill v. LLR, Inc., et al (U .S.D.C., District of Montana, Case No. 18- 00 120). 0 Van v. LLR, Inc., et al (U .S.D.C., District of Alaska, Case No. 18- 001 97). 64. A summary of some of the lawsuits recently ?led against Obligors was compiled in an article published by TruthinAdvertising.Org. As noted in the referenced article, published in November 2017, ?complaints [against Lularoe] are coming in so quickly that it?s hard to keep up.? 65. The foregoing lawsuits reveal that Supplier is just one of many unpaid creditors of Obligors, and that Obligors may also owe signi?cant sums of money to their ?independent fashion consultants? their ?Retailers?), who are the class action plaintiffs in many of the lawsuits pending against Obligors. 66. Supplier is informed and believes that Obligors are indebted to numerous other vendors and suppliers that Obligors have been unable or unwilling to pay. 67. For example, Supplier is informed and believe that Obligors owe more than $1 million to UPS for shipping costs resulting in Obligors using FedEx as an alternative shipper, much the same way that Obligors simply stopped paying Plaintiff and turned to alternative vendors. 68. Supplier is also informed and believe that Obligors owe approximately $100,000 to West Coast Labels, which supplied Obligors with woven labels and hang tags. 69. Supplier is also informed and believe that Obligors owe approximately $3,000,000 to Zarn Brand, Inc., which supplied Obligors with garments. 70. Because Obligors have failed to pay the Indebtedness for many months, appear to have many other creditors and lawsuits pending with What Supplier is informed involve hundreds of COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware millions of dollars in claims, Supplier has reason to believe that Obligors are insolvent. 71. As the California Court of Appeal has recognized, in Berg Berg Enters. v. Boyle, 178 Cal. App. 4th 1020 (2009), the assets of an insolvent company are subject to the ?trust fund doctrine?, and directors of the company owe a non-contractual duty to creditors to avoid the diversion, dissipation, or undue risk to the insolvent company?s assets that would otherwise be used to pay creditors claims. Cf. Cal. Civ. Code 1708 (every person is bound, without contract, to abstain from ?injuring the person or property of another, or infringing upon any of his or her rights?). 72. Making matters worse, as to the tens of millions of dollars of Products that LLR has received and accepted, Plaintiff believes that LLR has sold the products and absconded with the proceeds of the sale without repaying Plaintiff for the very same Products sold by Obligors. Instead, Plaintiff is informed and believes that Obligors are using the proceeds of sale to fund the lavish lifestyle of Obligors? principals, as well as to pay for new products from other suppliers (in breach of Obligors? agreement with Plaintiff), in order to generate further revenues for the personal enrichment of Obligors? principals, While failing to pay Plaintiff the tens of millions of dollars it is owed. D. Suspicious Transfers bv Obligors and Their Alter Egos and Cohorts 73. Notwithstanding What appears to be Obligors? precarious ?nancial condition, its principals and owners (directly or indirectly), Mr. Stidham and Ms. Stidham, have acted in an improper manner to divert funds from Obligors to themselves, directly or indirectly. 74. In March 2018, during a business trip to Korea and Vietnam with Mr. Stidham and representatives of Supplier, Mr. Stidham showed off pictures of his multi-million ranch property in Wyoming, and stated that he was going to buy a neighboring ranch property adjacent to his current ranch in order to gain exclusive access to the river running next to the two ranches. 75. On or about September 7, 2018, Supplier engaged in discussions with Mark Stidham, who is the principal owner of Obligors (directly or indirectly), about the past due amounts owed by Obligors to Supplier. In response to Suppliers? requests that Obligors repay the amounts they owed, Mr. Stidham told Plaintiff?s representatives ?look guys, I am not going to pay you guys a _13_ COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware ?ow-kWhdime unless a judge orders me to pay it, and Deanne and I will take our two to three hundred million dollars to the Bahamas, and everything.? 76. Plaintiff is informed and believes that Obligors have diverted funds to third parties at the direction of their principals, Mr. Stidham and Ms. Stidham, who have lavished themselves with luxurious lifestyles by misappropriating the money that Obligors owe to their legitimate creditors, including Plaintiff. For example, Mr. Stidham is widely reported to own exotic race cars, including a Koenigsegg CCX estimated to cost approximately $700,000 and a Koenigsegg Agera RS estimated to cost over $2 million. Mr. Stidham recently was reported to have engaged a professional driver to break the land speed record for a production car using one of the ?supercars? he purchased with funds that likely came from Obligors? coffers. The following is a photograph from reporting on Mr. Stidham, the ?supercar? he purchased, and the record attempt: 77. Plaintiff is informed and believes that Ghost Squadron and Inland Exotic are entities in which Mr. Stidham has taken ownership of exotic race cars for purposes of shielding such assets from Obligors? creditors. 78. Plaintiff is informed and believes that Obligors, at the direction of their principals, have purchased private airplanes or transferred their funds for the purchase of private airplanes, _14_ COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware which are held in the name of 159DE, for purposes of shielding such assets from Obligors? creditors. 79. Plaintiff is informed and believes that Obligors, at the direction of their principals, have transferred valuable assets into Lennon for purposes of shielding such assets ?om Obligors? creditors. 80. Plaintiff is informed and believes that Obligors, at the direction of their principals, have purchased valuable ranch homes and other properties in the names of Hudsloan Land, for purposes of shielding such assets from Obligors? creditors. 81. Plaintiff is informed and believes that Obligors, at the direction of their principals, have purchased residences in the names of Hudsloan Land, for purposes of shielding such assets from Obligors? creditors. 82. Plaintiff is informed and believes that Obligors, at the direction of their principals, have purchased residences in the names of 823 Ringdahl Circle, LLC and 4048 Suzie Circle, LLC, for purposes of shielding such assets from Obligors? creditors. 83. Moreover, Plaintiff is informed and believes that Obligors have opened a new distribution center in Columbia, South Carolina, and that it may seek to take its assets out of Califomia, which would delay Obligors? California creditors from enforcing their judgment rights against Plaintiff. Plaintiff is informed and believes that Carolina Pines was created as an entity to hold these valuable assets. 84. Together, Mr. and Ms. Stidham, Ghost Squadron, Inland Exotic, 159DE, Lennon, Hudsloan Land, Carolina Pines, 823 Ringdahl Circle, LLC and 4048 Suzie Circle, LLC, are referred to herein as the ?Transferees.? 85. Plaintiff is informed and believes that Obligors, through Mr. Stidham and Ms. Stidham, have created dozens of additional shell entities, Which Plaintiff believes are part of a scheme to hinder, delay and defraud the creditors of Obligors and Mr. Stidham and Ms. Stidham. Of particular note, for example, is that between July 2017 and December 2017, the following entities were organized (primarily in the state of Wyoming), but most or all of which have identi?ed 1375 Sampson Ave., Corona CA as their main of?ce and one or both of the Stidham?s as an of?cer or manager. Of particular note, thirteen of the entities were created in December 2017 alone, shortly _15_ COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware after a series of class actions were ?led against Obligors. Date of Incorporati? Straight and Narrow, LLC 7/1 1/2017 Airport Road #25, LLC 8/17/2017 Yellow Husky, LLC 8/17/2017 Bradham Investment Holdings, LLC 9/18/2017 Sequoia Holdings, LLC 12/4/2017 Sequoia Holdings Management, LLC 12/11/2017 Big Sky Company Ventures, LLC 12/11/2017 Joshua Tree Investments, LLC 12/29/2017 Bryce Canyon Investments, LLC 12/13/2017 Golden Gate Holdings Management, LLC 12/14/2017 Redwood Ventures, LLC 12/14/2017 Legal Fund Holdings, LLC 12/14/2017 Storyland Investments, LLC 12/14/2017 13 Crowns Investments, LLC 12/14/2017 Corona Land Campus, LLC 12/8/2017 823 Ringdahl Circle, LLC 12/8/2017 4048 Suzie Circle, LLC 12/8/2017 86. Plaintiff reserves its rights, upon further investigation, to include the above-references entities, and any others it locates, as additional defendants and/or DOE defendants in this action. E. Obligors? Purchases From New Vendors . 87. Supplier has also recently been informed that Obligors have ordered substantial amounts of new products from other suppliers. 88. As of November 14, 2018, Boss system records re?ect that Obligors have ordered over $30 million in products from other suppliers, including: Creative Apparel LLC ($3,211,250 in orders), Mad Engine, LLC RSGA Incorporated DBA InnovAsia and Zam Brand, Inc. 89. Obligors? BOSS system records re?ect that just in November 2018, alone, Obligors have ordered in excess of $10 million in products. _16_ COMPLAINT REED SMITH LLP A limited liability partnership formed in the Stale of Delaware FIRST CAUSE OF ACTION (Breach of Contract) Against Defendant LLR 90. Plaintiff hereby incorporates by reference the allegations set forth above as though fully set forth herein. 91. Plaintiff has performed all of the obligations required to be performed by it under the Sourcing Agreement. Plaintiff has timely made demand upon LLR to perform its obligations under the Sourcing Agreement, including the payment to Plaintiff of all amounts owing to Plaintiff under the Sourcing Agreement. 92. Plaintiff relied on the promises made by LLR in connection with the Sourcing Agreement when it sourced, stored, and/or delivered goods ordered by LLR thereunder. 93. LLR has breached and defaulted in its obligations under the terms of the Sourcing Agreement by, among other things, failing and re?lsing, and continuing to fail and refuse to pay the entire Indebtedness due from LLR to Plaintiff thereunder, as well as all accrued but unpaid interest due thereunder notwithstanding Plaintiff? demand for such payments. 94. There is now due, owing, and unpaid from LLR to Plaintiff under the Sourcing Agreement, and otherwise, the amount of $48,732,955 .45, plus additional interest accrued, attorneys? fees and costs, and such other amounts as may be proven at trial of this action. In addition, LLR will owe Plaintiff further interest, costs, and attorneys? fees incurred by Plaintiff through the date of trial in this matter. SECOND CAUSE OF ACTION (Goods Sold and Delivered) Against Defendant LLR 95. Plaintiff hereby incorporates by reference the allegations set forth above as though set forth herein. 96. Within the last four years, LLR became indebted to plaintiff in the sum of $33,753,895.66 for goods sold and delivered to LLR. _17_ COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware 97. Plaintiff has demanded payment in full ?om LLR for the delivered goods, but LLR has refused to repay Plaintiff for same. THIRD CAUSE OF ACTION (Open Book Account) Against Obligors 98. Plaintiff hereby incorporates by reference the allegations set forth above as though fully set forth herein. 99. Obligors have become indebted to Plaintiff on an open book account for money due in the sum of $48,732,955 .45 for goods sold by Plaintiff to Obligors pursuant to a valid written contract under which Supplier regularly sold Products to Obligors, plus interest at the contract rate, fees and costs. 100. Neither the whole nor any part of the above sum has been paid although demand therefore has been made, and there is now due, owing, and unpaid the sum of $48,732,955.45, plus interest at the contract rate, plus fees and costs associated with collection per the terms of the Sourcing Agreement. FOURTH CAUSE OF ACTION (Breach of Guaranty) Against Defendant Lularoe 101. Plaintiff hereby incorporates by reference the allegations set forth above as though fully set forth herein. 102. Plaintiff has performed all of the obligations required to be performed by it under the Sourcing Agreement. Plaintiff has timely made demand upon Lularoe pursuant to the Guaranty set forth in Section 1.7 of the Sourcing Agreement (the ?Guaranty?) to perform its obligations under the Guaranty, including the payment to Plaintiff of all Indebtedness owing to Plaintiff by LLR under the Sourcing Agreement, but Lularoe has failed and re?ised to perform its obligations under the Guaranty and related documents. _18_ COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware 103. hinder the terms of the Guaranty, Lularoe is obligated to reimburse Plaintiff for all of the obligations incurred by LLR to Plaintiff under the Sourcing Agreement. 104. In addition to the Indebtedness, Plaintiff has incurred accrued interest, costs and expenses under the Sourcing Agreement, including without limitation, legal fees and costs, and will continue in the future to incur the same. 105. Plaintiff relied on the promises made by Lularoe in the Guaranty in connection with the Sourcing Agreement when it sold goods to LLR. 106. Lularoe has breached and defaulted on its respective obligations to Plaintiff under the Guaranty by failing to repay, after demand, the indebtedness owed by LLR to Plaintiff. 107. There is now due, owing, and unpaid from LLR to Plaintiff under the Sourcing Agreement, which Lularoe guarantied, the amount of $48,732,95 5.45, plus additional interest accrued, costs, attorneys? fees and costs, and such other amounts as may be proven at trial of this action. In addition, Lularoe will owe Plaintiff ?irther interest, costs, and attorneys? fees incurred by Plaintiff through the date of trial in this matter. FIFTH CAUSE OF ACTION (Unjust Enrichment) Against all Defendants 108. Plaintiff hereby incorporates by reference the allegations set forth above as though fully set forth herein. 109. The Delivered Products ordered by LLR were used for the bene?t of each of the Obligors. 110. The Delivered Products were sourced and delivered by Plaintiff for the bene?t of the reSpective Obligors with the legitimate expectation that the Obligors would repay Plaintiff. 111. To permit the Obligors to retain the bene?ts that have been conferred upon them without making just compensation therefore, would result in an unjust and unconscionable enrichment of the Defendants at Plaintiff? expense and unjusti?able detriment in an amount in excess of $48,732,955.45. _19_ COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware 12. Plaintiff has been compelled to retain the services of legal counsel to prosecute this action, and is entitled to an award of attorney's fees and costs of suit incurred herein. SIXTH CAUSE OF ACTION (Fraud in the Inducement Against Obligors) 113. Plaintiff hereby incorporates by reference the allegations set forth above as though fully set forth herein. 114. By not later than April 2018, Obligors were purchasing Products from Suppliers, pursuant to separate Purchase Orders (each made pursuant to the Sourcing Agreement), pursuant to which Obligors promised to repay Suppliers Within seven (7) days of their receipt of an Invoice. 115. At that time, Obligors had lost a thousands of Retailers as a consequence of Obligors? changes to their bonus policies, had paid approximately $120 million to Retailers for refunds, and had been sued in over a dozen lawsuits collectively seeking hundreds of millions of dollars in damages against Obligors. Making matters worse, ?nancially, Mark Stidham and DeAnne Stidham appear to have been transferring substantial assets of the Obligors to themselves and/or their family members, directly or indirectly, to continue living their lavish lifestyles. 116. At the time the Obligors made the promise to Plaintiff that they would repay Plaintiff for the products being ordered by Obligors, the Obligors had no intention of performing their promises. 1 17. The promises were made by Obligors with the intent to induce Supplier to manufacture and deliver Products to Obligors under the Sourcing Agreement, and Supplier timely performed in reliance on these promises when it provided the Delivered Products to Obligors. 1 18. As evidenced by the Delivered Products Invoices, Supplier delivered not less than $33,753,895.66 in Delivered Products to Obligors in reliance on Obligors? promises to pay, and yet to date Obligors have failed and refused to repay Plaintiff on account of the Delivered Products. 119. From June 2018 through September 2018, Obligors also engaged Supplier in prolonged discussions over the terms of a security agreement in connection with their indebtedness to Supplier in order to mislead Supplier into believing that Obligors were working in good faith to 20 COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware repay their obligations and to induce Supplier to continue providing Products ordered via Purchase Order. 120. However, Supplier is informed and believes that as early as June 2018, Mark Stidham was telling at least one of his employees that he had no intention of signing any security agreement. 121. Supplier, at the time Obligors? promises were made, was ignorant of the Obligors? secret intention not to perform and only recently learned about the effects of Obligors? changes to its bonus policy and its return policies have had on Obligors? ?nancial condition and their intention to never pay Supplier. Had Supplier known about Obligors? insolvency or inability to pay, Supplier would have demanded payment in advance by Obligors prior to accepting the Purchase Orders related to the Delivered Products. 122. Obligors? fraudulent scheme has damaged Supplier in an amount not less than $33,753,895.66, for the Delivered Products. SEVENTH CAUSE OF ACTION (To Avoid Fraudulent Transfer [Actual Intent Pursuant to Cal. Civil Code Against Transferees 123. Plaintiff hereby incorporates by reference the allegations set forth above as though fully set forth herein. 124. At all times mentioned herein, Obligors owed not less than $48,732,955.45 to Plaintiff, which remains unpaid and past due and owing. 125. Plaintiff is informed and believes and thereon alleges that Obligors have transferred substantial amounts of money, in amounts to be proven at trial, to the Transferees, including, for example, transfers with respect to the purchase of exotic race cars, and transfers to the within- referenced companies for the purpose of hiding such funds from Obligors? creditors. 126. Plaintiff is informed and believes and thereon alleges that the transfers were made or obligations were incurred with an actual intent to hinder, delay, or defraud all of Obligors? creditors, including Plaintiff, in the collection of their claims. 127. In exchange for the aforementioned transfers, Obligors did not receive reasonably 21 COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware equivalent value in exchange for the funds transferred. 128. Plaintiff is informed and believes and thereon alleges that the transfers were received by Transferees, who are insiders of Obligors, with knowledge that Obligors intended to hinder, delay, or defraud the collection of Plaintiff 5 claims. EIGHTH CAUSE OF ACTION (To Avoid Fraudulent Transfer [Constructive Fraud Pursuant to Cal. Civil Code Against Transferees 129. Plaintiff hereby incorporates by reference the allegations set forth above as though fully set forth herein. 130. At all times mentioned herein, Obligors owed not less than $48,732,955.45 to Plaintiff, which remains unpaid and past due and owing. 131. Plaintiff is informed and believes and thereon alleges that Obligors have transferred substantial amounts of money, in amounts to be proven at trial, to the Transferees, including, for example, transfers with respect to the purchase of exotic race cars, airplanes, warehouses, residences, ranch houses, raw land, as well as transfers to the within-referenced companies for the purpose of hiding such funds from Obligors? creditors. 132. At the time Obligors made the aforementioned transfers they intended and/or believed and/or reasonably should have believed that they would thereafter incur debts which would be beyond their ability to pay as they became due. 133. Plaintiff is informed and believes and thereon alleges that the assets remaining in the Obligors? hands after the aforementioned transfers were unreasonably small in relation to the above- described transfers. 134. In exchange for the aforementioned transfers, Obligors did not receive reasonably equivalent value in exchange for the funds transferred. 135. Plaintiff is informed and believes and thereon alleges that the transfers were received by Transferees, who are insiders of Obligors, with knowledge that Obligors intended to hinder, COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware delay, or defraud the collection of Plaintiffs claims. NINTH CAUSE OF ACTION (For Speci?c Performance and Appointment of Receiver) Against all Defendants 136. Plaintiff hereby incorporates by reference the allegations set forth above as though ?illy set forth herein. 137. Obligors has failed and refused, and continues to fail and refuse, to perform the conditions of the contract on their part in that, among other things, they have failed to deliver the required semi-annual written reports to Supplier, and that, on information and belief, Obligors may be breaching the Minimum Purchase Commitment of the Sourcing Agreement by purchasing products from other suppliers. Without the requisite semi-annual written reports from Obligors, Supplier is unable to ascertain whether Obligors have breached and are continuing to breach their Minimum Purchase Commitment obligations. 138. Additionally, under the Sourcing Agreement, Supplier is entitled, upon receiving such semi-annual written reports, to examine and copy books of account and records (de?ned in the Sourcing Agreement as the ?Sales Records?), in order to ascertain whether LLR is complying with the Sourcing Agreement. 139. Without an order requiring speci?c performance, Supplier has no adequate legal remedy in that it cannot otherwise ascertain the extent of Obligors? breaches and the amount of damages based upon improper sales. 140. Moreover, LLR must take delivery of ordered Products once Supplier has caused the Products to be manufactured and made ready for delivery. The Sourcing Agreement does not give LLR the right to order Products only to have Supplier ?store? them inde?nitely at its expense. Given what appears to be a reasonable likelihood of insolvency of Obligors, Supplier is entitled under the California Commercial Code to require payment in cash before delivery of the Products. 141. Supplier requests that this Court order Obligors to take delivery of the ordered Products and that, pursuant to the California Commercial Code, that Obligors pay in advance of such 23 COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware delivery. 142. Alternatively, given the myriad uncertainties regarding Obligors? ?nancial condition, its continuing inability or refusal to pay Supplier or to take delivery of Products that LLR ordered, and the inability of Supplier to sell the Products, which are subject to Obligors? licenses, Obligors believe that the appointment of a limited receiver is necessary and appropriate to effectuate Supplier?s rights and remedies, including speci?c performance with respect to all of its contractual rights and remedies under the Sourcing Agreement and California Commercial Code, including but without limitation pursuant to UCC 2-703 and 2-706. TENTH CAUSE OF ACTION (Injunctive Relief) Against all Defendants 143. Plaintiff hereby incorporates by reference the allegations set forth above as though ?illy set forth herein. 144. Notwithstanding Plaintiff?s demands and requests, Obligors have refused to perform under the Sourcing Agreement, as set forth more fully above. 145. Plaintiff will suffer irreparable injury for which no adequate remedy at law exists unless Obligors and other persons and ?rms having knowledge of an injunction are: enjoined from: expending, disbursing, transferring, assigning, selling, conveying, devising, pledging, mortgaging, creating a security interest in, or encumbering, the whole or any part of the Obligors? property or assets outside of the ordinary course of business; concealing or in any manner whatsoever destroying or disposing of the whole or any part of the Obligors? prOperty or assets; (0) doing any act which will, or which will tend to, impair, defeat, divert, prevent or prejudice the preservation of Obligors? assets or of Plaintiffs interest therein in whatever form the interest is held or used as of this date pending further proceedings in this action; destroying, concealing, transferring or failing to preserve any document which 24 COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware evidences, re?ects or pertains to any disposition by Defendant or any of their agents, of the Obligors? assets, or any part thereof; (6) causing any mail or email to be delivered or forwarded to any address other than the primary email account or the principal places of business of the Defendants or any of them, or otherwise interfering with or intercepting any mail or emails relating to Obligors? business, or of Obligors? af?liates or insiders; (ii) ordered to advise Plaintiff of the exact location of each of the Products; ordered to account for intercompany transfers and/or transfers to any insiders or af?liates of Obligors; and (iv) ordered to comply with a limited-purpose receiver to sell Products under Obligors? name and to remit the proceeds of such sale to Plaintiff to repay the Indebtedness. WHEREFORE, Plaintiff prays for relief as hereinafter set forth. ON ITS FIRST CAUSE OF ACTION (Breach of Contract) 1. For judgment against LLR in an amount not less than $48,732,955.45, plus accrued interest, fees and costs; 2. For reasonable attorneys? fees and costs according to proof against 3. For costs of suit herein incurred against and 4. For such other and further relief as the Court may deem proper. ON ITS SECOND CAUSE OF ACTION (Goods Sold and Delivered) 1. For judgment against LLR in an amount not less than $33,753,895.66, plus accrued interest, fees and cost; 2. For costs of suit herein incurred against and 3. For such other and further relief as the Court may deem proper. 2 5 COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware ITS THIRD CAUSE OF ACTION (Open Book Account) 1. For judgment against Obligors in an amount not less than $33,753,895.66, plus accrued interest, fees and costs; 2. For costs of suit herein incurred against Obligors; and 3. For such other and further relief as the Court may deem proper. ON ITS FOURTH CAUSE OF ACTION (Breach of Guaranty) 1. For judgment against Lularoe in an amount not less than $48,732,955.45, plus accrued interest, fees and costs; 2. For reasonable attorneys? fees and costs according to proof against Lularoe; 3. For costs of suit herein incurred against Lularoe; and 4. For such other and further relief as the Court may deem proper. ON ITS FIFTH CAUSE OF ACTION (Unjust Enrichment) 1. For judgment against Obligors in an amount not less than $48,732,955.45, plus accrued interest, fees and costs; 3. For costs of suit herein incurred against Obligors; and 4. For such other and further relief as the Court may deem proper. ON ITS SIXTH CAUSE OF ACTION (Fraud in the Inducement) 1. For general damages against Obligors in an amount not less than $48,732,955.45; 2. For punitive damages in an amount appropriate to punish the Obligors and deter others from engaging in similar misconduct; 3. For costs of suit herein incurred against Obligors; and 26 COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware For such other and further relief as the Court may deem proper. ON ITS SEVENTH CAUSE OF ACTION (To Avoid Fraudulent Transfer [Actual Intent Pursuant to Cal. Civil Code 1. That the transfers from Obligors to Transferees be set aside as to the Plaintiff herein to the extent necessary to satisfy Plaintiff?s claim in the sum of $48,732,955.45, plus accrued interest, fees and cost; 2. That an order be made declaring that Transferees hold the property described above in trust for Plaintiff; 3. That Transferees be required to account to plaintiff for all pro?ts and proceeds earned from or taken in exchange for the property described above; and 4. For such other and further relief as the Court may deem proper. ON ITS EIGHTH CAUSE OF ACTION (To Avoid Fraudulent Transfer [Constructive Fraud Pursuant to Cal. Civil Code 1. That the transfers from Obligors to Transferees be set aside as to the Plaintiff herein to the extent necessary to satisfy Plaintiff 5 claim in the sum of $48,732,955.45, plus accrued interest, fees and cost; 2. That an order be made declaring that Transferees hold the property described above in trust for Plaintiff; 3. That Transferees be required to account to plaintiff for all pro?ts and proceeds earned from or taken in exchange for the property described above; and 4. For such other and further relief as the Court may deem proper. ON ITS NINTH CAUSE OF ACTION (Speci?c Performance and Appointment of Receiver) 1. For an order directing Obligors to turn over to Plaintiff, or to a court-appointed 27 COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware limited receiver for the bene?t of Plaintiff, any and all Products sold by Supplier to LLR for sale by the receiver, and to turn over the proceeds thereof to Plaintiff to reduce the Indebtedness; 2. For reasonable attorneys? fees according to proof against Obligors; 3. For costs of suit herein incurred against Obligors; and 5. For such other and further relief as the Court may deem proper. ON ITS TENTH CAUSE OF ACTION (Injunctive Relief) 1. For an order declaring that Obligors and Transferees are jointly and severally liable to Plaintiff in an amount not less than $48,732,955 .45; 2. For an order: enjoining Defendants from: expending, disbursing, transferring, assigning, selling, conveying, devising, pledging, mortgaging, creating a security interest in, or encumbering, the whole or any part of the Obligors? property or assets outside of the ordinary course of business; concealing or in any manner whatsoever destroying or disposing of the whole or any part of the Obligors? property or assets; (0) doing any act which will, or which will tend to, impair, defeat, divert, prevent or prejudice the preservation of Obligors? assets or of Plaintiff? 5 interest therein in whatever form the interest is held or used as of this date pending further proceedings in this action; destroying, concealing, transferring or failing to preserve any document which evidences, re?ects or pertains to any disposition by Defendant or any of their agents, of the Obligors? assets, or any part thereof; causing any mail or email to be delivered or forwarded to any address other than the primary email account or the principal places of business of the Defendants or any of them, or otherwise interfering with or intercepting any mail or emails relating to Obligors? business, or of Obligors? affiliates or insiders; (ii) ordering Defendants to advise Plaintiff of the exact location of each of the Products; 28 COMPLAINT REED SMITH LLP A limited liability partnership formed in the State of Delaware ordering Defendants to account for intercompany transfers and/or transfers to any insiders of Obligors; and (iv) ordering Defendants to comply with a limited-purpose receiver to sell Products under Obligors? name and to remit the proceeds of such sale to Plaintiff to repay the Indebtedness. 3. For reasonable attorneys? fees according to proof against Obligors; 4. For costs of suit herein incurred against Obligors; and 5. For such other and further relief as the Court may deem proper. DATED: November 26, 2018 REED SMITH LLP By Masha A. Houst Christopher 0. Rivas Attorneys for Plaintiff Providence Industries, LLC _29_ COMPLAINT Nil!) it" A hulml incl-duly ?1le DH lulmunl 53:33,. MICK I l. ('hui. um lilL.? I'I'usidcm mul :1 cn-l?uumicr ni' I'ininlil?l? intin'slrica. which cmulucls lmsincss 3H I am mailmri/cd In Illilir?.? illi?w' Vcrilicnlimi UH lichull?nl' l?inimii?l'. I have rcvicwcd lh ul' SCI limit in the Vcrilicd 11an vcrii'y that said statements; an: lruci correct. and nccurulc In the bust (review of Plaintiffs hunks and records. and :15 lo the mailcrx which are therein slum! (In inlimnulinu and belief. I hclicvc them in hc lruc. . I declare umlcr pcnuily 01' perjury under Ilic laws ul'thc Slulc ul?(?nlilhmiu {but l'nrcguingg IS lruc and correct. 1: i szcculud un this day ui ZUIX at California. It 20 COMPLAINT . Iv i?nn at.- 393%? err Gilli-01D m-ron'nsv on. nARwerrHour (Name; StateBgr nurnber. and address); i?MarshaA. Houston (SBN 129956); Christopher 0. Ri?Vas (SBN 238765) Reed Smith LLP 3-55 South Grand Avenue, Suite 2900 Los Angeles. CA 90071 213-457-8000. ATTORNEY FOR (Name): SUPERIOR COURT OF CALIFORNIA. COUNTY OF Riverside ADDRESS: '4050 Main Street ADDRESS: CITYAND ZIP CODE: Riverside, CA 92501 amncn Riverside Historic Courthouse CASE NAME: Providence Industries, LLC v. Lularoe, et .al. FOR COURT use unity 213-451?8080 CIVIL CASE COVER SHEET complex Case Designation 1 8 2 5 2?5 2} Unlimited Limited . . 1' - . (Amount (Amount El Counter El Jomder JUDGE . demanded demanded is Filed with ?rst appearance. by defendant exceeds $25,000) $25,000 or less) (Gal. Rules of Court. rule "3.402) DEFT: Items. 1?6 below must be completed? (see instructions on page 2). 1. Check one box, below 'for the Case type that best describes this case: Auto Tort Contract Provisionally Complex Civil Litigation. Auto (22) is Breach of contractlw?arra'nty (06) (Cal- RU'esi 0f C?urtr ?1?95 34010-3403) I Uninsured motorist (46) El Rule; 3.740 Collections (09) Antitrusthrade. regulation Other PIlPolwo (Personal InjuryI'Propert'y Other Collections (09) Construction defect (10) Damage/Wrongful Death) Tor-t? Insurance coverage 5) Mass tort (4.0) Asbestos (04) El Other con-tract (3.7) Ci Securities litigation (28) El Product liability (24.) Real Property Environmentalfioxic tort (30) Medical malpractice (45) Emingnt Insurance coverage claims arising from the Other (23) condemnation (14) aboVe listed provisionally-complex case (Other) Tort El Wrongful eviction Business tortlunfair business practice (07) Other ?real property (26) Enforcement Of Judgment Civil rights {03) unlawful Detainer Enforcement -?fiUd9m'ent (20) Defamation (13) [3 Commercial (31) Mlscellaneo?us Clvil Complaint Fraud (16) El Residential (32) <27) I I: Intellectual-l property (19). Drugs (38) .Other complaint (not speci?ed above) (42) D. Professional negligence (25) Judicial Reyiew Miscellaneous Civil Petition othernon-Pl/Pomto tort (35) Asset meme (05) Partners?? and Wme Qwemance ?20 Employment El Petition re: arbitration award Other Pew-0-n {mt Speci?ed above) (4.3) Wrongful termination (36) Writ of mandate (02) Other employment (15) Oth?erjudicial review (39) 2., This case is is not complex under- rule 3.400 of the California Rules of Court. if the case is complex. mark the factors requiring exceptional judicial management: a. El Large number of separately repreSented parties EI- b. Extensive motion practice raising difficult or novel a. issues that will be time-Consuming to resolVe Substantial amount of documentary evidence f. Remedies sought (check all that apply): a. E. monetary b. [Xi nonmo?netary; declaratory or injunctive relief Number of causes of action (spacing: 1 This case Ci is is not a Class action suit- . If there are any known related cases. .?le and serve a notice of related case. (You may use-form Date: Not/ember 26, 2018- Large number-of'witnesses Coordination with related actions pending in one Or 'mOre courts in other counties, states, or countries, min a federal court Substantial postjudgment judicial supervision c. punitive mines? Christopher 0. Rivas (TYPE NAME) (SIGN URE OF ATTORNEY FOR PARTY) . NOTICE - Plaintiff must ?le this cover sheet with the ?rst paper ?led in the action or proceeding, (except small claims cases or cases ?led under the Probate Code, Family Code. or Welfare and institutions Code). (Cal. Rules of?Court. rule 3.220,.) Failureto ?le may result in sanctions. ?0 File this cover sheet in addition to any cover sheet required by local court rule. If this case is complex under rule 3.400 et seq. of the Califomia Rules of? Court, you must serve a copy of this cover sheet on all other-parties to the action or proceeding. 0 Unless this is a collections case under rule 3.740 or a complex case. this cover sheet will be used, for statistical porposes- on; . 3991 of 2. CIVIL CASE COVER SHEET Cal. Rules or Coun._ rules 2.30, 3.220. ation?sizes, 35740: Cal. Standards of Judicial Administration. std. 3.10 Form Adopted for Mandatory Use Judicial iCouncil of California (Rev. July 1, 200?] CM-010 INSTRUCTIONS ON HOW TO COMPLETE THE COVER SHEET To Plaintiffs and Others Filing First Papers. If you are ?ling a ?rst paper (for example. a complaint) in a civil case, you must complete and ?le, along with your ?rst paper. the Civil Case Cover Sheet contained on page 1. This information will be used to compile statistics about the types and numbers of cases ?led. You must complete items 1 through 6 on the sheet. in item 1. you must check one box for the case type that best describes the case. If the case ?ts both a general and a more speci?c type of case listed in item 1, check the more speci?c one. If the case has multiple causes of action, check the box that best indicates the primary cause of action. To assist you in completing the sheet, examples of the cases that belong under each case type in item 1 are provided below. A cover sheet must be ?led only with your initial paper. Failure to ?le a cover sheet with the ?rst paper ?led in a civil case may subject a party, its counsel, or both to sanctions under rules 2.30 and 3.220 of the California Rules of Court. To Parties in Rule 3.740 Collections Cases. A "collections case" under rule 3.740 is de?ned as an action for recovery of money owed in a sum stated to be certain that is not more than $25,000, exclusive of interest and attorney's fees, arising from a transaction in which property, services. or money was acquired on credit. A collections case does not include an action seeking the following: (1) tort damages, (2) punitive damages, (3) recovery of real property, (4) recovery of personal pr0perty, or (5) a prejudgrnent writ of attachment. The identi?cation of a case as a rule 3.740 collections case on this form means that it will be exempt from the general time-for-service requirements and case management mles. unless a defendant ?les a responsive pleading. A rule 3.740 collections case will be subject to the requirements for service and obtaining a judgment in rule 3.740. To Parties in Complex Cases. In complex cases only, parties must also use the Civil Case Cover Sheet to designate whether the case is complex. If a plaintiff believes the case is complex under rule 3.400 of the California Rules of Court, this must be indicated by completing the appropriate boxes in items 1 and 2. if a plaintiff designates a case as complex. the cover sheet must be served with the complaint on all parties to the action. A defendant may ?le and serve no later than the time of its ?rst appearance a joinder in the plaintiff's designation, a counter-designation that the case is not complex, or, if the plaintiff has made no designation, a designation that the case is complex. Auto Tort Auto (22)-Personal Injury/Preperty Damage/Wrongful Death Uninsured Motorist (46) (if the case involves an uninsured motorist claim subject to arbitration. check this item instead of Auto) Other (Personal Injury! Property DamageIWrongfuI Death) Tort Asbestos (04) Asbestos Property Damage Asbestos Personal Injury! Wrongful Death Product Liability (not asbestos or toxic/environmental) (24) Medical Malpractice (45) Medical Malpractice? Physicians Surgeons Other Professional Health Care Malpractice Other (23) Premises Liability slip and fall) Intentional Bodily assault, vandalism) Intentional ln?iction of Emotional Distress Negligent Infliction of Emotional Distress Other (Other) Tort Business Tort/Unfair Business Practice (07) Civil Rights discrimination, false arrest) (not civil harassment) (08) Defamation slander. libel) (13) Fraud (16) Intellectual Property (19) Professional Negligence (25) Legal Malpractice Other Professional Malpractice (not medical or legal) Other Tort (35) Employment Wrongful Termination (36) Other Employment (15) CASE TYPES AND EXAMPLES Contract Breach of Contractharranty (06) Breach of Rental/Lease Contract (not unlawful detainer or wrongful eviction) ContracWVarranty Breach?Seller Plaintiff (not fraud or negligence) Negligent Breach of Contract/ Warranty Other Breach of Contract/Warranty Collections money owed, open book accounts) (09) Collection Case-Seller Plaintiff Other Promissory Note/Collections Case insurance Coverage (not provisionally complex) (18) Auto Subrogation Other Coverage Other Contract (37) Contractual Fraud Other Contract Dispute Real Property Eminent Domain/Inverse Condemnation (14) Wrongful Eviction (33) Other Real PrOperty quiet title) (26) Writ of Possession of Real Property Mortgage Foreclosure Quiet Title Other Real Property (not eminent domain, landlord/tenant, or foreclosure) .Unlawful Detainer Commercial (31) Residential (32) Drugs (38) (if the case involves illegal drugs, check this item; otherwise, report as Commercial or Residential) Judicial Review Asset Forfeiture (05) Petition Re: Arbitration Award (11) Writ of Mandate (02) Writ?Administrative Mandamus Writ?Mandamus on Limited Court Case Matter Writ?Other Limited Court Case Review Other Judicial Review (39) Review of Health Of?cer Order Notice of Appeal?Labor Commissioner Appeals Provisionally Complex Civil Litigation (Cal. Rules of Court Rules 3400-3403) Antitrust/Trade Regulation (03) Defect (10) Claims Involving Mass Ton (40) Securities Litigation (28) EnvironmentallToxic Tort (30) insurance Coverage Claims (arising from provisionally complex case type listed above) (41) Enforcement of Judgment Enforcement of Judgment (20) Abstract of Judgment (Out of County) Confession of Judgment (non- domeslic relations) Sister State Judgment Administrative Agency Award (not unpaid taxes) Petition/Certi?cation of Entry of Judgment on Unpaid Taxes Other Enforcement of Judgment Case Miscellaneous Civil Complaint RICO (27) Other Complaint (not speci?ed above) (42) Declaratory Relief Only lnjunctive Relief Only (non- harassment) Mechanics Lien Other Commercial Complaint Case Other Civil Complaint (non-tort/non-complex) Miscellaneous Civil Petition Partnership and Corporate Governance (21) Other Petition (not speci?ed above) (43) Civil Harassment Workplace Violence Elder/Dependent Adult Abuse Election Contest Petition for Name Change Petition for Relief From Late Claim Other Civil Petition oil/1.010 (Rev. July 1, 2007] CIVIL CASE COVER SHEET Page 2 of 2 American LegalNet, Inc, FormsWork?owcom SUPERIOR COURT OF CALIFORNIA, COUNTY OF RIVERSIDE 4050 Main Street Riverside, CA 92501 NOTICE OF CASE MANAGEMENT CONFERENCE PROVIDENCE INDUSTRIES LLC VS LULAROE LLC CASE NO. RIC1825263 The Case Management Conference is scheduled for 05/28/19 at 8:30 in Department 01. No later than 15 calendar days before the date set for the case management conference or review, each party must ?le a case management statement and serve it on all other parties in the case. CRC, Rule 3.725. The plaintiff/cross-complainant shall serve a copy of this notice on all defendants/cross-defendants who are named or added to the complaint and file proof of service. Any disqualification pursuant to CCP Section 170.6 shall be ?led in accordance with that sec?on. Requests for accommodations can be made by submitting Judicial Council form no fewer than five court days before the hearing. See California Rules of Court, rule 1.100. CERTIFICATE OF MAILING I certify that I am currently employed by the Superior Court of California, County of Riverside, and that I am not a party to this action or proceeding. In my capacity, I am familiar with the practices and procedures used in connection with the mailing of correspondence. Such correspondence is deposited in the outgoing mail of the Superior Court. Outgoing mail is delivered to and mailed by the United States Postal Service, postage prepaid, the same day in the ordinary course of business. I certify that I served a copy of the foregoing NOTICE on this date, by depositing said copy as stated above. Court Executive Of?cer/Clerk Date: 11/29/18 by. LOURDES VILLANUEVA Dep cmcnic 5125/16 SUPERIOR COURT OF CALIFORNIA, COUNTY OF RIVERSIDE 4050 Main Street - 2nd Floor Riverside, CA 92501 NOTICE OF DEPARTMENT ASSIGNMENT PROVIDENCE INDUSTRIES LLC VS LULAROE CASE NO. This case is assigned to the HONORABLE Judge Sharon J. Waters in Department 10for Law and Motion purposes only. The case is assigned to Honorable Judge John Vineyard in Department 1for case management hearings (Case Management Conferences, Order to Show Causes, Status Conferences and Trial Setting Conferences) and trial assignment purposes. Any disquali?cation pursuant to CCP section 170.6 shall be ?led in accordance with that section. The court follows California Rules of Court, Rule for tentative rulings (see Riverside Superior Court Local Rule 3316). Tentative Rulings for each law and motion matter are posted on the Internet by 3:00 pm on the court day immediately before the hearing at If you do not have internet access, you may obtain the tentative ruling by telephone at (760) 904-5722. To request oral argument, you must (1) notify the judicial secretary at (760) 904?5722 and (2) inform all other parties, no later than 4:30 pm the court day before the hearing. If no request for oral argument is made by 4:30 pm, the tentative ruling will become the final ruling on the matter effective the date of the hea?ng. The ?ling party shall serve a copy of this notice on all parties. Requests for accommodations can be made by submitting Judicial Council form MC-410 no fewer than five court days before the hearing. See California Rules of Court, rule 1.100. CERTIFICATE OF MAILING I certify that I am currently employed by the Superior Court of California, County of Riverside, and that I am not a party to this action or proceeding. In my capacity, I am familiar with the practices and procedures used in connection with the mailing of correspondence. Such correspondence is deposited in the outgoing mail of the Superior Court. Outgoing mail is delivered to and mailed by the United States Postal Service, postage prepaid, the same day in the ordinary course of business. I certify that I served a copy of the foregoing NOTICE on this date, by depositing said copy as stated above. Court Executive Of?cer/Clerk Date: 11/29/18 by: LOURDES VILLANUEVA, Deputy Clerk CNDALM 11/17/17