VIRGINIA: IN THE CIRCUIT COURT FOR THE CITY OF ALEXANDRIA NATIONAL RIFLE ASSOCIATION OF AMERICA Plaintiff v. Case No. CIA-1900175755 ACKERMAN MCQUEEN, INC. and MERCURY GROUP, INC. Defendants. i [3 MOTION FOR LEAVE TO FILE PORTIONS OF ANSWER. PLEA IN BAR, AND COUNTERCLAIM UNDER SEAL Defendants, hereby move the Court to enter an Order granting Defendants? Motion for Leave to File Portions of the Answer, Plea in Bar, and Counterclaim Under Seal. As set forth below, good cause exists for the grant of this motion. and the NRA have entered into a Service's Agreement that governs their business relationship. The Services Agreement obligates to protect the con?dentiality of ?material or information coming to the knowledge of supplied to by NRA, or otherwise made known to as a result of AMc?s providing Services.? The de?nition of Confidential Information is vastly overbroad and does not make any exceptions for information already in the public domain, nor does it make any exceptions for disclosures to a Court in litigation. Because does not wish to provide the NRA with any possible reason to claim that has breached the ?Confidentiality? clause in the Services Agreement, moves to ?le i :1 1.41.1 .1 its Answer, Plea in Bar and Counterclaim under seal along with a publicly-?led document that redacts the information that could conceivably be deemed con?dential by the NRA. Although the undersigned counsel does not believe that the information to be placed under seal is particularly sensitive or proprietary information, we take these steps to protect the Plaintiff? overbroad designation of the information as ?Con?dential Information? under the Services Agreement. Defendants? counsel has consulted with counsel for the NRA concerning how Con?dential Information in their pleading should be handled. The NRA has not approved the public disclosure of any potential Con?dential Information to be submitted to the Court with this litigation, nor has the NRA de?ned what information it believes is ?con?dentia Defendants? counsel has offered to make the Defendants? redacted pleading available for review by the counsel and the General Counsel of the NRA. The NRA was offered a chance to make additional designations of Con?dential Information prior to the public ?ling of the Defendant?s pleading. If the NRA desired, its attorneys could then make additional redactions in the public copy of the Defendants? pleading. After considering this offer for 24 hours,1 the NRA counsel declined the opportunity to make any additional designations of Con?dential Information. Ensuring the protection from the disclosure of potential Con?dential Information is apparently no longer worth the effort to the NRA. Defendants? counsel, therefore, has proceeded with their careful plan to ?le the pleading with this motion to ?le under seal with a redacted copy available for public disclosure. Defendants later learned that the 24-hour delay was intended to allow the NRA time to ?le a second law suit alleging, ironically, that the Defendants have breached their ?duciary duty to protect the Con?dential Information. Nothing could be further from the truth. Thus, ?ling the pleading under seal with a redacted version available for the public file is warranted to avoid ?lrther compounding the dispute between the parties. WHEREFORE, Defendants respectfully request that the Court grant this Motion for Leave to File Documents Under Seal and enter an Order permitting Defendants to ?le a redacted copy of the pleading in the public ?les of the Court Clerk?s Of?ce. Dated: May 23, 2019 Respectfully submitted, ACKERMAN MCQUEEN, INC. and MERCURY GROUP, INC. By Counsel Respectfully submitted, >423 David H. Dickieson (VA Bar #31768) SCHERTLER ONORATO, LLP 901 New York Avenue, NW, Suite 500 Washington, DC 20001 Telephone: 202-628-4199 Facsimile: 202-628-4177 OF SERVICE I hereby certify that the foregoing document was served on the following counsel via email and ?rst-class mail addressed to: James W. Hundley Robert H. Cox Amy L. Bradley BRIGLIA HUNDLEY, PC 1921 Gallows Road, Suite 750 Tysons Corner, VA 22182 jhundley@brigliahundley.com rcox@brigliahundley.com abradley@brigliahundley.com a, ?/13 I 1.1.5.4: 7' gq?b LIEJ David! .Dickieson. VIRGINIA: THE CIRCUIT COURT FOR THE CITY OF ALEXANDRIA NATIONAL RIFLE ASSOCIATION OF AMERICA Plaintiff v. Case No. CL19001757 and MERCURY GROUP, INC. i ACKERMAN MCQUEEN, INC. Defendants. ANSW ER, PLEA IN BAR. AND COUNTERCLAIM The Defendants, Ackerman McQueen, Inc. and Mercury Group, Inc. (collectively by and through the undersigned counsel, submit their Answer, Plea in Bar, and Counterclaim to the Amended Complaint ?led by Plaintiff National Ri?e Association in the above-captioned case, as follows: 1 is subject to a con?dentiality obligation in the Services Agreement (Exhibit A) between the NRA and that is vague and overbroad. It purports to prohibit from disclosing any ?materials or information coming to the knowledge of supplied to by NRA, or otherwise made known to as a result of AMc?s providing Services (hereinafter collectively referred to as the ?Con?dential Information?), without the prior express written permission of Thus, the Services Agreement de?nition of ?Con?dential Information? includes routine public and non? ?public information that comes to the attention of while working on NRA matters. The Services Agreement also states? may use such Con?dential Information only for the limited purpose of providing Services to [Section CONFIDENTIALITY, and Because the definition of ?Con?dential lnforinarion?: is 11? overbroad and vague, any disclosure necessary to its defense in this law suit could. be" construed as a breach of the Services Agreement. -footnote continued on next page? LE ?2 12: RESPONSE TO SPECIFIC ALLEGATIONS OF AMENDED COMPLAINT With respect to the speci?c allegations in the Amended Complaint, Defendants provide the following responses: A. RESPONSE TO PRELIMINARY STATEMENT Defendants move to strike the Plaintiff?s Preliminary Statement as a violation of the rules of pleading. Va. Sup. Ct. Rule 1.4(d) does not allow pleading in narrative form without numbered paragraphs. To the extent any response is required, the allegations set forth in the Preliminary Statement are generally denied. Speci?cally, Defendants deny Plaintiff unnumbered allegation that Defendants have denied access to any information that the NRA is entitled to under the Services Agreement. Defendants deny that it has only ?partially complied? with NRA requests and specifically denies that it has ?withheld material information about the related party contract with now former President, Lieutenant Colonel Oliver North Defendants admit that the Service Agreement requires the NRA to provide ?reasonable notice,? before examining ??les, books and records? of the Defendants that ?pertain to matters Therefore, and Mercury are responding to the allegations of the NRA with great caution and have redacted from public disclosure any information that could be deemed con?dential and will seek to ?le an unredacted version of the pleading under seal with the Court. At the same time, the Defendants throughout this pleading request an expedited reply from the Plaintiff, pursuant to Va. Sup. Ct. Rule 3.11, with respect to certain allegations in the Amended Complaint as to whether NRATS introduction of those allegations in a public court ?ling waives confidentiality interest in those matters. The Court should also consider ordering NRA to review the non-disclosed information, and on a paragraph by paragraph basis, permit disclosure or assert why it will be harmed by disclosure. covered by the parties? contract.? Defendants deny that the NRA has followed proper procedures to seek such materials and deny that the NRA has complied with the Examination of Records provision in the Services Agreement, and also deny that the NRA has properly interpreted the scope of its authority to review documents possessed by the Defendants. Defendants deny the allegation that the ?impasse between them which gives rise to this lawsuit is simple, and baf?ing; the NRA requested access to material, readily available records that Ackerman and Mercury are contractually obligated to provide. Defendants refused to provide them.? Defendants aver as a new matter, speci?cally requiring a response, that Defendants have complied with every audit request sought by the NRA during the past 38 years and that the most recent audit was completed by the NRA auditor in February 2019 with a determination that Defendants are in compliance and that Defendants do not need to return any funds to the NRA, the same result that has been reached in every other audit over the history of the relationship between the parties. Defendants aver as a new matter, speci?cally requiring a response, that Defendants aver as a new matter, specifically requiring a response, that Further, Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in its Preliminary Statement waives any claim of con?dentiality that the Plaintiff may have with respect to the subject matter alleged in the Preliminary Statement. B. RESPONSE TO NUMBERED ALLEGATIONS. PARTIES 1. Plaintiff NRA is a not-for-profit corporation organized under the laws of the State of New York with its principal place of business in Fairfax, Virginia. The NRA is America?s leading provider of gun-safety and marksmanship education for civilians and law enforcement. It is also the foremost defender of the Second Amendment of the United States Constitution. A 501(c)(4) tax-exempt organization, the NRA has over ?ve million members and its programs reach many millions more. ANSWER: Defendants admit the allegations contained in Paragraph 1. 2. Defendant Ackerman is a nonresident for-pro?t business corporation organized under the laws of the State of Oklahoma with its principal place of business in Oklahoma City, Oklahoma. Ackerman is an advertising and public relations agency that has counted the NRA among its largest clients for more than thirty years. ANSWER: Defendants admit that Ackerman is a nonresident for-pro?t business corporation organized under the laws of the State of Oklahoma with its principal place of business in Oklahoma City, Oklahoma and that it is an advertising and public relations agency and that it has served the interests of the NRA for more than thirty years. 3. Defendant Mercury is a nonresident for?pro?t business corporation organized under the laws of the State of Oklahoma with its principal place of business in Alexandria, Virginia. Mercury is a wholly owned subsidiary of Ackerman which specializes in public- communications strategy, including on behalf of advocacy groups such as the NRA. At all relevant times, Ackerman has acted on behalf of both itself and Mercury pursuant to the Services Agreement (defined below) between Ackerman and the NRA. ANSWER: Defendants admit that Mercury is a nonresident for-profit business corporation organized under the laws of the State of Oklahoma with its principal place of business in Alexandria, Virginia, and that it is a wholly owned subsidiary of Ackerman. Defendants admit that Mercury specializes in public communications strategy and has worked on behalf of advocacy groups such as the NRA. Defendants deny the allegations that Ackerman has acted on behalf of both itself and Mercury at all relevant times and demand strict proof thereof. Furthermore, Defendants crave oyer to mandate the disclosure to the Court of the contract referenced and relied upon by Plaintiff in Paragraph 3. RELEVANT NONPARTIES 4. The NRA Foundation, Inc. (the Foundation?) is a 501(c)(3) tax-exempt organization that raises tax-deductible contributions in support of a wide range of firearm?related public interest activities of the NRA and other organizations that defend and foster the Second Amendment rights of law-abiding Americans. Over the course of its contractual relationship with the NRA, Ackerman has occasionally performed services for the benefit of the NRA Foundation and issued corresponding invoices to the NRA Foundation. Because of its 501(c)(3) designation, the NRA Foundation is permitted to engage in, and fund, a narrower range of activities and communications than the NRA. ANSWER: Defendants admit that it has occasionally performed services for the bene?t of the NRA Foundation. Defendants have insufficient information to admit or deny the allegations concerning the NRA Foundation?s activities or those of "other" Organizations. The allegations regarding the NRA Foundation's 501(c)(3) status and its permitted range of activities are legal conclusions which do not require a respOnse. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 4 waives any claim of confidentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. JURISDICTION AND VENUE 5. The Court has jurisdiction over the claims in this matter as the claims are subject to a court of general jurisdiction. ANSWER: The allegations of Paragraph 5 are legal conclusions which do not require a response. 6. This Court has jurisdiction over Ackerman and Mercury pursuant to Virginia Code 8.01 -3 28.1 because Ackerman and Mercury have both transacted business in the Commonwealth of Virginia and contracted to supply services in the Commonwealth of Virginia. ANSWER: The allegations of Paragraph 6 are legal conclusions which do not require a response. 7. Venue is proper in this Court pursuant to Virginia Code 8.01-262 because Mercury?s principal place of business is located in Alexandria, there exists a practical nexus to this forum, and/or a part of this cause of action arose in Alexandria. ANSWER: The allegations of Paragraph 7 are legal conclusions which do not require a response. 8. Additionally, jurisdiction and venue are proper in this Court because Ackerman and Mercury have both contractually consented with the NRA to exclusive jurisdiction and venue of courts sitting within Virginia and waived any objection to venue in Alexandria, Virginia regarding the matters presented herein. ANSWER: The allegations of Paragraph 8 are legal conclusions which do not require a response. Furthermore, Defendants crave oyer to mandate the disclosure to the Court of the contract referenced and relied upon by Plaintiff in Paragraph 8. Defendants aver as a new matter, specifically requiring a response, that the public disclosure of the allegatiOns in Paragraph 8 waives any claim of confidentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. FACTUAL BACKGROUND 9. For decades, and the NRA have collaborated closely regarding public affairs and messaging. Over that time, the NRA vested extensive trust and con?dence in relying upon the agency to perform work including: public relations and strategic marketing; planning and placement of media, including advertising during election cycles; management of digital media and websites; and, the operation of NRATV, a digital-media platform managed by but frequently perceived by the public as the ?voice? of the NRA [footnote omitted]. ANSWER: Defendants admit the allegations contained in Paragraph 9, except they lack knowledge as to the level of trust and con?dence that was actually vested in Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 9 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 10. Since at least 1999, AMc?s work on behalf of the NRA has been governed by successive incarnations of a Service Agreement containing detailed speci?cations for how various types of work performed by for the NRA should be budgeted and billed. The Services Agreement between the NRA and dated May 1, 1999 (the ?Previous Services Agreement?) as well as the current, operative Services Agreement dated April 30, 2017 (as amended May 6, 2018, the ?Services Agreement?) provide that certain categories of services, such as Owned Media and Internet Services, as compensated with an agreed annual fee, while others are required to be invoiced on an ad hoc basis based on estimates furnished by and approved by the NRA. ANSWER: Defendants admit that Service Agreements have existed between the parties. Defendants deny the remaining allegations in Paragraph 10. Furthermore, Defendants crave oyer to mandate the disclosure to the Court of the contract referenced and relied upon by Plaintiff in Paragraph 10. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 10 Waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 11. Both the Previous Services Agreement and the current Services Agreement have obligated to adjust its pricing based on the ?fair market value? or ?fair market price? of the services performed. For example, the Previous Services Agreement contained the straightforward assurance by ?we will charge you a fair market price for the work performed.? Similarly, the Previous Services Agreement and the current Services Agreement require to provide cost quotations for art concepts, design layouts, and similar items ?based on the fair market price of the work as determined by ANSWER: Defendants admit that Service Agreements have existed between the parties. Defendants further admit that pricing was based on fair market value as determined by Defendants are without sufficient information to admit or deny the remaining allegations in Paragraph 11. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 11 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 12. Anticipating that would, from time to time, incur out-of-pocket expenses in the course of its work, but mindful of the mandate to steward its funds in the interest of its public mission, the parties bargained for an expense-reimbursement protocol whereby travel and related expenses incurred by could be paid by the NRA but only upon prior written approval from the NRA in accordance with the expense-reimbursement procedures. ANSWER: Defendants deny the allegations contained in Paragraph 12. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 12 waives any claim of confidentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 13. The collaboration with has generated important, iconic Second Amendment advocacy. In recent years, the trust and con?dence it placed in led the NRA to invest in an expanding suite of services which were according to AMc?s assurances fairly priced. For example, the NRA agreed to experiment with an ?owned media company,? NRATV, a concept fervently pitched by By 2017, the aggregate payments to Ackerman and Mercury totaled nearly $40 million annually. ANSWER: Defendants admit the allegations contained in the first sentence of Paragraph 13. Defendants deny the remaining allegations in Paragraph 13. Defendants aver as a new matter, speci?cally requiring a response, that the aggregate payments to Ackerman? includes a substantial amount 'of reimbursements to for expenses incurred on behalf of the NRA. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 13 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 14. As the scope of AMc?s work for the NRA grew, represented to the NRA that. it was required to hire a substantial number of personnel, as well as incur obligations to third-party contractors, for the exclusive purpose of servicing the account. Accordingly, when the parties renegotiated a new services agreement in 2017, insisted upon and the NRA agreed to provide certain ?nancial assurances in the event that the NRA terminated the Services Agreement. Among other things, upon the termination, the Services Agreement requires that the NRA compensate for outstanding liabilities to both third-party contractors and employees. Speci?cally, the NRA must: pay We the balance of any compensation owed under ?non-cancellable contracts entered into between and third parties for the bene?t of the (as de?ned under the Services Agreement, the ?AMc-Third Party NRA Contracts?); and (ii) pay a termination fee to cover severance payments owed to employees who are ?dedicat[ed]. . .to provide services [to the and need to be laid off if the Services Agreement is terminated (the ?NRA-Dedicated Personnel?). ANSWER: Defendants generally admit the allegations contained in Paragraph 14, except they deny the characterization of the negotiations contained in the second sentence of Paragraph 14. To the extent that the allegations purport to interpret a legal document, the Defendants deny the interpretation and assert that the legal document best speaks for itself. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 14 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 15. The NRA bargained for transparency into AMc?s ?les, books and records to ensure that the NRA, a not-for-pro?t, could appropriately monitor the use of its funds. Both the Previous Services Agreement and the current Services Agreement incorporate records- examination clauses that require to Open its ?les for the inspection upon reasonable notice. The full text of the Records?Examination Clause in the Services Agreement appears below: Services Agreement I Dated April 30, 2017 (as amended May 6, 2018) 0 Between the NRA and (de?ned to include both Ackerman and Mercurv) EXAMINATION OF RECORDS During the term of this Services Agreement, authorizes NRA, upon reasonable notice, to examine We and Mercury?s ?les, books and records, with respect to matters covered under this Services Agreement. ANSWER: Defendants deny the allegations contained in Paragraph 15 of the Complaint. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 15 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 16. For years, the NRA conducted annual audits of certain ?les pursuant to the Records-Examination Clause. Frequently, the audited records consisted of ?samples? assembled in advance by During 2018, the NRA sought to expand its insight into AMc?s activities and its spending including full access to certain categories of records rather than sample subsets gathered by Surprisingly and unfortunately, that effort ignited the parties? current dispute. ANSWER: Defendants admit the allegation contained in the ?rst sentence of Paragraph 16 in that the NRA conducted annual audits of ?les and those ?les were provided to the NRA by Defendants deny the remaining allegations contained in Paragraph 16. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 16 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 17. In recent years, the State of New York amended its Not?for-Pro?t Corporation Law (the to clarify requirements for director independence and the rati?cation of related-party contracts, among other items. After updating its internal policies and controls to comply with the New York amendments, the NRA decided to strengthen its procedures for documentation and veri?cation of compliance with vendor contracts. Beginning in August 2018, the NRA sent letters to hundreds of vendors including - that set forth updated invoice- 10 support requirements and provided detailed guidance regarding, for example, expense reimbursement procedures. ANSWER: Defendants are without suf?cient information to admit or deny the allegations contained in Paragraph 17 and therefore deny those allegations. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 17 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 18. During the course of this process, the NRA developed concerns that AMc?s expenses and activities required closer oversight. Speci?c concerns that the NRA sought to investigate included: 6 ?Out of pocket? expenses that lacked meaningful documentation of NRA approvals, receipts, or other support, despite the requirements set forth in the Services Agreement; 0 Lack of transparency regarding AMc?s annual budgets under the Services Agreement, as well as its adherence to those budgets; 0 Lack of transparency regarding ?fair market value? determinations; Concerns that was invoicing the NRA for the entire salaries attributable to NRA?Dedicated Personnel, despite certain NRA-Dedicated Personnel allocating substantial time to non-NRA clients; 0 Refusal to provide any data ?in Writing? (such as viewership numbers, rates, or related performance metrics) that enable the NRA analyze [sic] the return on its investment in NRATV [footnote In addition, certain NRA stakeholders were also concerned that messaging on topics far a?eld of the Second Amendment deviated from the core mission and values]. ANSWER: Defendants are without suf?cient information to admit or deny the allegations contained in Paragraph 18 and therefore deny those allegations. Defendants deny the allegations contained in the ?fth bullet point. ll Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 18 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. '19. During early- and mid-2018, the NRA sought information from pursuant to the Records-Examination Clause on a common-interest basis to advance the parties? mutual interests in connection with an ongoing lawsuit. However, after the NRA began to request access to records that would shed light on the above topics, AMc's responses became evasive and hostile. In fact, in September 2018, for the ?rst time in the parties? decades?long course of dealing, demanded that its outside counsel supervise any document review conducted under the Records-Examination Clause, then demanded payment of outside counsel?s legal fees as a precondition for delivery of video footage for which had already invoiced the NRA. During a telephone call on September 19, 2018, after AMc?s counsel insisted that the NRA pay AMc?s legal fees without any insight into why the fees had been incurred, the counsel observed that AMc?s posture seemed more consistent with an adverse party than a common? interest relationship. AMc?s counsel replied: ?Ackerman views the relationship as adverse.? ANSWER: Defendants deny the allegations contained in Paragraph 19. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 19 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 20. Thereafter, strenuously resisted the efforts to enforce the Services Agreement, including by embarking on a campaign to ?kill the messenger? when the NRA sought access to documents or proposed reductions in AMc?s budget. At ?rst, scapegoated the outside counsel. However, over ensuing months, also refused to respond to basic information requests from NRA executives. After the NRA retained a third?party forensic accounting ?rm to interface with in an effort to appease and gain its compliance in January 2019, indicated it would cooperate. Unfortunately, that pledge of cooperation was short-lived as purported to forbid the accountants from disclosing simple, material information to the NRA including copies of annual budgets that the NRA allegedly approved. When the General Counsel sought additional information in follow-up to the forensic audit, ignored his letters. ANSWER: Defendants deny the allegations contained in Paragraph 20. Defendants aver as a new matter, speci?cally requiring a response, that provided NRA auditors with access to all matters requested by the auditors during the various audits of 12 Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 20 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 21. The NRA brings this action not only because has ?agrantly disregarded its contractual obligations, but because the NRA has recently grown concerned that the records is withholding include information material to the not-for?pro?t governance and its stewardship of its members? donations. ANSWER: Defendants deny the allegations contained in Paragraph 21. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 21 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 22. Lieutenant Colonel Oliver North (Ret.) (?Col North?) is a veteran of the United States Marine Corps and the Regan administration, a longstanding advocate for the Second Amendment, and a member of the NRA Board of Directors. During May 2018, the NRA announced that Col North was slated to serve as its next President a largely ceremonial but high-pro?le position famously occupied by Charlton Heston during the late 19905. As Col. North prepared to assume the presidency of the NRA, he separately discussed a potential engagement by as the host of an NRATV documentary series. On May 6, 2018, the NRA and amended the Services Agreement (such amendment, the ?May 2018 Amendment?) to af?rm that any contract between and Co]. North would be considered an AMc-Third Party NRA Contract, for which outstanding compensation would be owed by the NRA to if the Services Agreement was terminated. Importantly, the amendment treated Col. North as a third- party contractor but not, necessarily, an employee a of Importantly, Col. North and assured the NRA that Co] North?s profile and ?brand? would be actively leveraged to elicit sponsorships for the North documentary series. This was of vital interest because during recent years, the NRA had spent substantial sums on NRATV based on AMc?s advice and representations regarding achievable benefits of an owned-media platform. However, measured against any of the desired outcomes, the returns on the investment in NRATV were less favorable than predicted. Accordingly, the NRA began to reconsider its willingness to continue its investment in NRATV. If the North documentary series attracted sponsorships, then the costs associated with NRATV could be defrayed, altering the calculus about whether to continue supporting the platform. ANSWER: Defendants admit the allegations contained in the ?rst sentence of Paragraph 22. Defendants admit the allegations that Colonel North was President of the NRA. The allegation in the fourth sentence of Paragraph 22 purports to interpret a legal document which best speaks for itself. Defendants deny the remaining allegations contained in Paragraph 22. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 22 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 23. New York law requires that the NRA Board of Directors, or an authorized committee thereof, review and approve ?any transaction, agreement, or any other arrangement in which [a director or of?cer of the has a ?nancial interest and in which the or an af?liate] if a participant.? [footnote omitted] Guidance published by the New York Attorney General notes that a board of directors may de?ne additional restrictions on transactions giving rise to potential con?icts of interest [footnote omitted]; and, Consistent with best practices, the Con?ict of Interest Policy requires disclosure of contracts between NRA leadership and vendors, like that receive ?nds from the NRA. ANSWER: Defendants are without suf?cient information to admit or deny the allegations relating to the Con?ict of Interest Policy and therefore deny those allegations. The balance of Paragraph 23 contains legal conclusions which require no response. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 23 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 24. Aware that Col. North entered into a contract with (the ?North Contract?), the NRA diligently sought to comply with its obligations concerning analysis and approval of the North Contract. During September 2018, the Audit Committee of the NRA Board of Directors (the ?Audit Committee?) reviewed a purported summary of the material terms of the North Contract and rati?ed the relationship pursuant to New York law subject to carefully drawn provisos designed to avoid any con?icts of interest. ANSWER: Defendants admit that Colonel North entered into a contract with and that the NRA Audit Committee reviewed, approved, and rati?ed that contract. Defendants are without suf?cient information to admit or deny the remaining allegations in Paragraph 24 and therefore deny those allegations. 14 Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 24 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 25. At the time it rati?ed Col. North?s continued service as an NRA director and President given his relationship with the Audit Committee was assured that the counsel would review the North Contract in full. But that turned out to be false, at least for the duration of 20 8, as continued to refuse to provide the North Contract pursuant to the Records-Examination Clause. Meanwhile, Col. North indicated via counsel that he could only disclose a copy of the contract to the NRA subject to AMc?s consent. This back-and?forth persisted for nearly six months. ANSWER: Defendants deny the allegations contained in Paragraph 25. Defendants aver as a new matter, speci?cally requiring a response, that Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 25 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 26. Eventually, in February 2019, acceded to a brief, circumscribed, ?live? review of the North Contract (but no retention of any copies) by the General Counsel of the NRA. This review raised concerns about whether the previous summary of the North Contract which was provided to the Audit Committee had been complete and accurate. Among other things, the brief, limited review of the North Contract along with other information disclosed for the ?rst time by Col. North gave rise to questions regarding: whether Col. North was a third?party contractor of or, conversely, a full?time employee with ?duciary duties to that supersede his duties to the (ii) whether the previously disclosed costs home by the NRA in connection with the North Contract were complete and accurate; and whether the contract imposed obligations on Col. North that prevented him from communicating fully and honestly with other NRA ?duciaries about Against the backdrop of escalating concerns about AMc?s compliance with the Services Agreement and applicable law, the NRA became determined to resolve these issues. ANSWER: Defendants deny the allegations contained in Paragraph 26, other than to admit NRA General Counsel Frazer reviewed the North contract in his office at NRA pursuant to the contract. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 26 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 27. By letters dated March 25?26, 2019, the General Counsel again sought visibility regarding the North Contract and related business arrangements, as well as copies of other material business records pursuant to the Services Agreement. Speci?cally, the NRA requested: 0 A chance to conduct a follow-up review of the North Contract (the General Counsel even volunteered to conduct the review at AMc?s attomey offices, for AMc?s convenience); Ii Information about any additional costs relating to AMc?s engagement of Col. North, to the extent that such costs were being ?passed through? to the 0 Copies of any additional AMc-Third Party NRA Contracts currently in existence; 0 Information about which personnel purportedly constituted Dedicated Personnel,? such that their salaries or severance were alleged to be reimbursable by the NRA, and business records sufficient to show whether these personnel were in fact dedicated to NRA projects; and 0 Copies of the annual budget documents provided to the forensic accountants. ANSWER: Defendants admit that they received letters from the NRA General Counsel on March 25 and 26, 2019 requesting certain information related to the North Contract. Defendants deny the characterization and validity of those letters and respond that the documents best speak for themselves. Defendants aver as a new matter, speci?cally requiring a response, that Defendants have no duty to provide copies of Third-Party contracts or other business records pursuant to the 16 services contract, as the Services Agreement only requires that allow properly designated NRA representatives to ?examine? such records. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 27 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 28. The NRA made clear that it sought the above information ?in whatever form [wa]s most convenient? for and hoped to obtain access to ordinary-course business records as contemplated under the Records-Examination Clause. immediately acknowledged receipt of the letters and promised to respond substantively. It did not. ANSWER: Defendants admit that they received letters from the NRA General Counsel on March 25 and 26, 2019 requesting certain information related to the North Contract and that acknowledged the receipt of those letters. Defendants deny the remaining allegations contained in Paragraph 28. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 28 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 29. Meanwhile, the NRA began to suspect that the information it previously received regarding the North Contract was incomplete and, therefore, misleading. The May 2018 Amendment classi?ed Col. North as a third-party contractor of which had two important implications. First, an independent contractor is generally perceived to act with greater autonomy than an employee or servant. Second, in the event that the NRA terminates the Services Agreement, it incurs different trailing obligations with respect to AMc-Third Party NRA Contracts than with respect to severance of NRA-Dedicated Personnel. Consistent with the general arms-length nature of third-party contracts, the Services Agreement assumes that all ?non?cancellable contracts entered into between and third parties for the bene?t of the are just that: non-cancellable. Accordingly, under Section XLE of the Services Agreement, the NRA agrees to pay the full balance of any compensation owed by under an AMc-Third Party NRA Contract if the NRA terminates the Services Agreement, lest be unfairly saddled with a legacy third-party obligation. By contrast, the Services Agreement treats severance of NRA-Dedicated Personnel in a far less burdensome manner for the NRA, requiring only that and the NRA negotiate a ?fair and equitable termination fee? to absorb severance costs 17 ANSWER: Defendants deny the allegations contained in Paragraph 29. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 29 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 30. In short, by treating the North Contract as an AMc-Third Party NRA Contract pursuant to the May 2018 Amendment, (1) made an implicit representation about the degree of independence Col. North could exercise; and (2) imposed a rigid ?nancial liability on the NRA that persists if the Services Agreement is terminated as opposed to the ?fair and equitable?, negotiable severance offset that would apply if Co]. North were an employee. ANSWER: Defendants deny the allegations contained in Paragraph 30. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 30 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 31. On or about February 19, 2019, the NRA learned that Col. North was a salaried employee of Ackerman. Accordingly, Col. North owes a ?duciary duty of loyalty to Ackerman under the laws of many jurisdictions a fact that was never disclosed to the Audit Committee when it ratified Col. North?s service as ?duciary of the NRA. And under the terms of the May 2018 Amendment, the NRA has incurred a purported trailing liability under the North Contract that was never appropriate, and would not have resulted if the NRA had known that Col. North was an Ackerman employee. ANSWER: Defendants deny the allegations contained in Paragraph 31. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 31 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 32. Moreover, originally advised the NRA that it had contracted Col. North to host ?[t]welve feature?length episodes? of a digital documentary series, to be produced ?during each 12 mOnths of a three-year greement," commencing during or about May 2018. Yet by April 22, 2019 eleven months into Col. North?s engagement only three episodes are available, and none are ?feature?length.? Instead, as of the date of this filing, the three episodes made available by total 39 33 minutes, and 11 minutes in length, respectively. ANSWER: Defendants deny the allegations contained in Paragraph 32. 18 Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 32 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 33. On April 22, 2019, Col. North ?nally disclosed a copy of his contract to the NRA even as continued to rebuff the requests for material information about the contract. has also withheld documentation regarding sponsorships raised for the North documentary series, and the NRA has no evidence that any substantial sponsorships exist. Viewed in light of the series? production shortfalls, these facts have troubling implications. The NRA agreed to shoulder a speci?c ?nancial burden in connection with a speci?c digital-media project not to allow its President to be compensated by a for-pro?t advertising agency for performing generic leadership functions. Importantly, the Bylaws do not provide for the President to receive a salary. ANSWER: Defendants deny the allegations contained in Paragraph 33. Defendants aver as anew matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 33 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 34. In the wake of these deVelopments, the NRA again requested that allow it to examine business records that would shed light on ?what, exactly, [the is paying for and what it is getting.? As of the time of this ?ling, Ackerman has not responded. Put simplyits rope. ANSWER: Defendants deny the allegations contained in Paragraph 34. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 34 waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 35. AMc?s breach of the Services Agreement has damaged and threatens to imminently and irreparably harm the legitimate operational interests as a not?for-pro?t organization. By denying the NRA access to basic information regarding the nature of the services being performed, the putative budgets for these services, and the material terms of third- party contracts for which the NRA is purportedly liable, is interfering with the ability to steward its funds in pursuit of its public mission, Moreover, AMc?s baseless refusal to disclose material information relating to the North Contract threatens to impede the corporate governance process. 19 ANSWER: Defendants deny the allegations contained in Paragraph 35. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 35 waives any claim of confidentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 36. If the NRA is denied access to material business records regarding its largest vendor relationship records which it specifically bargained to access, under the Services Agreement the ?duciaries will be forced either to exercise their business judgment based on incomplete information or defer resolution of pressing matters. There is no adequate remedy at law for the risks that would arise in either scenario. The NRA is America?s oldest civil rights organization and an advocate for millions of law-abiding gun owners. Its compliance with not-for-pro?t law cannot be permitted to be held hostage by a recalcitrant advertising agency. ANSWER: Defendants deny the allegations contained in Paragraph 36. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 36 waives any claim of confidentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. DEMAND FOR JURY TRIAL 37. Plaintiff hereby demand a trial by jury regarding all issues of fact in this case. ANSWER: Paragraph 37 is a statement to which no response is required, but Defendants deny that Plaintiff has a right to a jury trial for equitable claims asserted in the Amended Complaint. FIRST CAUSE OF ACTION 31 [sic]2 Plaintiff incorporates by reference and realleges each and every allegation in the foregoing paragraphs as if fully set forth herein. ANSWER: Paragraph 31 (numerically twice by Plaintiff) is an incorporation clause to which Defendants incorporate their collective responses to each and every foregoing paragraph. 2 Plaintiff has mis-numbered all paragraphs following Paragraph 37. Defendants will follow the mis-numbering in responding to the allegations. 20 32[sic] The Services Agreement is a legally enforceable contract. The Records? Examination Clause is unambiguous. ANSWER: Defendants admit that the allegation that the Services Agreement is a legally enforceable contract, but deny that the Records-Examination Clause is unambiguous. Defendants aver as a new matter, speci?cally requiring a response, that the LaPierre letters of October 4, 2018 and October 18, 2018 are unambiguous. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 32 [sic] waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 33[sic] The NRA has performed all of its obligations under the Services Agreement, including its obligation to provide reasonable notice pursuant to the Records- Examination Clause. ANSWER: Defendants deny the allegations contained in Paragraph 33. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 33 [sic] waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 34[sic] Ackerman and Mercury have breached the Records-Examination Clause of the Services Agreement. Speci?cally, Ackerman acting at all times on behalf of both itself and Mercury, pursuant to the Services Agreement has repeatedly failed or refused to permit the NRA to examine speci?ed categories of books and records with respect to matters covered under the Services Agreement. ANSWER: Defendants deny the allegations contained in Paragraph 34 [sic]. Defendants aver as a new matter, Speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 34 [sic] waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 35[sic] There is no adequate remedy at law for AMc?s refusal to permit examination of records (whether they reside at Ackerman or Mercury) pursuant to the Services Agreement. The information sought by the NRA pursuant to the Records?Examination Clause 21 resides uniquely within the possession of Ackerman and/or Mercury, and cannot be acquired by the NRA on the open market for any sum of money. ANSWER: Paragraph 35 [sic] contains legal conclusions which do not require a response. To the extent a response is required, Defendants deny the allegations contained in Paragraph 35 [sic]. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 35 [sic] waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 36[sic] The nature of the obligation imposed by the Records-Examination Clause makes speci?c performance equitable and practical because the Court need only order to furnish to the NRA: copies of any AMc-Third Party NRA Contracts, including the North Contract; and (ii) business records, in whatever form they were generated in the ordinary course of AMc?s business, which are sufficient to convey the information sought by the NRA as described in Paragraph 27 hereof. ANSWER: Defendants deny the allegations contained in Paragraph 36. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 36 [sic] waives any claim of con?dentiality that the Plaintiff has with respect to the matters alleged in that Paragraph. 37[sic] Defendants? breaches of the Services Agreement have damaged and threaten to imminently, irreparably harm the legitimate operational interests as a not- for-pro?t organization. By denying the NRA access to basic information regarding the nature of the services being performed, the putative budgets for these services, and the material terms of third-party contracts for which the NRA is purportedly liable, Defendants have jeopardized the ability to steward its funds in pursuit of its public mission. Moreover, AMc?s continued and baseless refusal to disclose material information relating to the North Contract threatens to impede the corporate governance. ANSWER: Defendants deny the allegations contained in Paragraph 37 [sic]. Defendants aver as a new matter, speci?cally requiring a response, that the public disclosure of the allegations in Paragraph 37 [sic] waives any claim of con?dentiality that the Plaintiff has with reSpect to the matters alleged in that Paragraph. 22 38[sic] By reason of the foregoing, the NRA requests that this Court order speci?c performance by Defendants of their obligations pursuant to the Records-Examination Clause of the Services Agreement. ANSWER: Paragraph 38 [sic] contains a request for a courtjudgment which the Defendants oppose. WHEREFORE, Defendants respectfully request that the Plaintiff? 3 request for a judgment and award of speci?c performance be denied and that Defendants be awarded such relief, including attorney fees and costs, as this Court deems just. AFFIRMATIVE DEFENSES 1. The Amended Complaint fails to state a claim upon which relief may be granted. 2. Plaintiff is eStOpped from seeking speci?c performance. 3. Plaintiff has waived any right to the specific performance it has requested. 4. Defendant pleads the affirmative defense of ?satisfaction? of the relief requested by the Plaintiff. 5. Plaintiff is barred from any equitable relief based on the doctrine of ?unclean hands.? 6. Plaintiff?s prior breach of contract negates Plaintiff?s claim for breach of contract against Defendants. PLEA IN BAR (As to Plaintiff?s attorneys? authority to bring forth their Complaint) 1. On or about April 12, 2018, this Lawsuit was filed against Ackerman McQueen, Inc. and Mercury Group (collectively purportedly on behalf of the National Rifle Association asking, inter alia, this Court to compel the Defendants to produce documents for inspection by the NRA. 23 Consequently, this Lawsuit was not legally and properly authorized by the NRA Board as required under the New York law governing not-for-proflt corporations. 4. The New York law governing nonpro?t organizations requires that an organization?s board must authorize any corporate action. 5. No individual director or officer, acting alone, could legally authorize the action. The Executive Vice President therefore lacked legal authority to exercise the NRA board?s management responsibilities. WHEREFORE, the Defendants request that the Court dismiss this Lawsuit based on the lack of authority to bring forth the Complaint on behalf of Plaintiff NRA and to litigate all proceedings subsequent to the Complaint. COUNTERCLAIM Ackerman McQueen, Inc. and the Mercury Group (together ?Counterclaim Plaintiff" or by and through undersigned counsel, hereby file this Counterclaim against the National Rifle Association (?Counterclaim Defendant? or and in support thereof states as follows: 24 PARTIES 1. AMC is a corporation organized and existing under the laws of the State of Oklahoma. Its principal place of business is 1601 Northwest Expressway, Suite 1100, Oklahoma City, OK 73118. also maintains a key office in Dallas, Texas, the headquarters of NRATV. 2. The Mercury Group is a wholly-owned subsidiary of with its principal place of business in Alexandria, Virginia. 3. The NRA is a not-for-pro?t corporation organized and existing under the laws of the State of New York, doing business in Virginia. JURISDICTION AND VENUE 4. This Court has jurisdiction over the matter pursuant to Virginia Code 8.01-262. SUMMARY OF COUNTERCLAIM 5. On or about April 12, 2019, an attorney purporting to act on behalf of the NRA filed a Lawsuit against Ackerman McQueen, Inc. and Mercury Group, asking the Court, inter alia, to compel the Defendants to produce records and books for inspection by the NRA (the ?Lawsuit?). 6. On or about April 24, 2019, just three days before the start of the NRA Annual Meeting, the NRA ?led a Motion for Leave to Amend Complaint to include seven new paragraphs relating to the request for information about AMc's contract with NRA President Oliver North. 7. Although the Complaint and the Amended Complaint included numerous pejorative statements about the NRA did not expressly seek to terminate its contract with 25 nor did it seek relief beyond a declaration that has failed to provide access to a small set of documents. 8. The Amended Complaint asserts that certain changes in New York nonpro?t laws have motivated the NRA's requests for documentation and audits of AMc?s ?nancial records and information concerning its Services Agreement with the NRA. The Amended Complaint implies that these laws impose on the NRA board and of?cers, for the ?rst time, a ?duciary responsibility to oversee and account for the assets and its contractual arrangements with employees and outside vendors. 9. On its face, the Amended Complaint reads more like a discovery dispute than a complaint deserving of lawsuit status. However, the Lawsuit has triggered substantial media attention focused on the spending, policies, and procedures. 10. Upon information and belief, the Complaint and Amended Complaint do not appear to have been properly authorized, and were ?led at the direction of Wayne LaPierre, Executive Vice President of the NRA, as See Plea in Bar, supra. 11. The Executive Vice President and long-time leader Wayne LaPierre (?LaPierre?), enabled by his chosen attorney, William Brewer of William Brewer Associates and Counselors (?Brewer?), has set the NRA on a course 3 See Wall Street Journal article wherein Brewer states he is ?spearheading? this litigation. April 15, 2019 26 12. The Amended Complaint fails to identify for the Court the legal consequences that the NRA seeks to gain from a decision in this apparent ?discovery dispute.? Under a Services Agreement between the NRA and dated April 30, 2017 (and modified as 23 00 I 7 This undisclosed fact in the Amended Complaint provides the motivation to ?le the law suit and the need for to ?le this Counterclaim. THE SERVICES AGREEMENT 13. This suit arises from the Services Agreement between the parties which is attached hereto as ?Exhibit -Section IX of the Services Agreement, provides as follows: is authorized 27 2 28 THE DOCUMENT DEMAND 21. The NRA contends in its Lawsuit that, under the Services Agreement, is required to produce or allow for examination a number of documents and document categories including but not limited to the following: (1) AMc?s own books and records related to the Services Agreement; (2) information related to certain ongoing litigation; (3) information relating to a contract with former NRA president, Lt. Col. Oliver North 22. has complied with every authorized demand for examination of its documents. At no time relevant to this Lawsuit, however, has direction regarding these documents and information requests come in writing from LaPierre or his designee as required under the Services Agreement. -To the contrary, at least some of the documents requested for review and an .N 33. NRA had three to six auditors in AMc?s Oklahoma City of?ce reviewing ?les, records, and documents for approximately nine (9) days in February 2019. Another auditor 30 examined the records of We in November 2018 for an entire day. These audits were preceded by another audit in September 2018 by the NRA. 34. At no time did the auditors claim to that documents were withheld from "1 S. (D I The Amended Complaint admitted that Oliver North provided his contract to the NRA before the initial Complaint was ?led in this law suit. 38. The demand for the North Contract documents is a pretext to harm AMc?s reputation and an attempt to provide an unfounded basis for terminating the contractual obligations to under the Services Agreement. 39. The NRA and its executives and audit committee have had full knowledge of the North Contract for months, and the demand in this Lawsuit for a copy of that contract was made in bad faith and contrary to the procedure mandated by the Services Agreement. -The NRA has also alleged in bad faith that refuses to provide analytics.? This allegation is also false. Since October 2017, 41. 42. Even after the ?ling of this Lawsuit by the NRA, has continued to work with the NRA to provide the Services required under the Services Agreement and to provide the information and documents requested by the NRA, while protecting the confidentiality requirements imposed under the Services Agreement. Most recently, provided the NRA with NRATV analytics for January through April 2019. 32 THE PRETEXTS FOR LAWSUIT 43. The Amended Complaint asserts that changes in New York nonpro?t laws were the motivation for the requests for documents and audits of AMc?s ?nancial records. [Amended Complaint, 11 17.] This argument is a pretext: the recent changes in the rules occurred in 2014 and those changes did not alter the long-standing requirement that the board carefully consider related-party contracts as a non-pro?t incorporated in New York State. 44. Effective July 1, 2014, the New York Non-Pro?t Revitalization Act (the amended the N-PCL, including the provisions governing related-party transactions and conflict of interest policies. Further amendments to those provisions were made in 2015 and 2016. 45. However, New York law has contained speci?c rules regarding related-party transactions that have been in place since at least 1970. 46. compliance with the related-party transaction rules rests squarely on the NRA itself. 47. has complied with all of the properly authorized requests to review AMc?s books and records. in no way has impaired the ability to ful?ll its duties with respect to its own related-party transactions NRA DISCLOSES AMC PROPRIETARY INFORMATION. 48. On March 11, 2019, the New York Times ran an article in which the author revealed the existence of the North-AMc Contract and certain features thereof, including AMc?s involvement with C01. North. Exhibit C. The article misrepresented the facts and disparaged The New York Times article attributed certain factual assertions to Brewer as the source speaking on behalf of the NRA. 33 49. On information and belief, Brewer provided misleading information to the New York Times in an effort to undermine the NRA relationship and to rnisdirect blame for the terms of the North Contract to 51. The deliberate false statements to the media regarding AMc?s con?dential information represented a change in the parties? relationship as well as the ?rndamental protocol for dealing with the parties? con?dential information that had been in existence and honored for decades. 53. Frazer?s March 14 response (Exhibit B) did not deny that the NRA had leaked the information to the New York Times. Instead, the 54. The exchange of correspondence signaled claim that it could deliberately misuse AMc?s con?dential information and thereby violate duty of good faith and fair dealing inherent within the terms of the Services Agreement. 55. actions described herein, including the ?ling of the Complaint and Amended Complaint seeking documents that it has already examined or had access to examine when properly requested, have been taken with the strategic intention of injuring business, its reputation, and its business expectancies. 34 56. Already, current and prospective clients, ?nancial institutions and insurance providers have begun questioning employees in light of the New York Times article, this Lawsuit, and consequent media reports. TERMINATION OF CONTRACT 57. On information and belief, the Lawsuit is not intended to obtain documents, but rather, is intended to allow NRA to terminate the Services Agreement for cause. 58. Paragraph XI, of the Services Agreement deals with the consequences of termination of the Agreement. The section provides: 59. bad faith in initiating this Lawsuit is designed to avoid the payment of a very substantial amount of money in the form of severance and cancellation fees, COUNT BREACH OF CONTRACT [Breach of Payment Obligations and 60. The allegations contained in the foregoing paragraphs are incorporated as if fully set forth herein. 35 6 3 71. The NRA has failed to perform its payment obligations with diligence and good faith and it has failed to ful?ll the contractual obligations 72. The NRA breached its payment obligations under the Services Agreement long before any alleged breach by articulated by the NRA in its Amended Complaint. 73. The breaches that occurred have caused to incur damages, the amount of which are not yet ?Jlly calculated. The breaches by the NRA are material as that term is defined under the Code of Virginia, 59-1-507. 1. 37 WHEREFORE, Ackerman McQueen seeks, on its behalf and on behalf of its subsidiary Mercury Group, recovery of contract damages and severance remedies in the amount not less than $50 million and such other relief as this Court deems just. COUNT II - BREACH OF CONTRACT [Breach of Implied Covenant of Good Faith and Fair Dealing] 74. The allegations contained in the foregoing paragraphs are incorporated as if fully set forth herein. 75. Under Virginia law, every contract contains an implied covenant of good faith and fair dealing. Va. Code 8.1A-304. 76. Pursuant to the Services Agreement Section IV, The Services Agreement is silent and does not provide any guidance on how the NRA must treat AMc?s con?dential proprietary information that it receives ?om under the Examination of Records? clause. 77. A good faith reading of the Services Agreement does not authorize the NRA to disclose proprietary and con?dential information that it gains from the Examination of Records clause. 78. The NRA used its contractual rights under the Services Agreement to gain proprietary information about AMc?s business, including information about its contract with Lt. Col. Oliver North. 38 82. The decision to work with Brewer to release proprietary information gained from to the New York Times is a breach of the implied covenant of good faith and fair dealing. 83. The NRA compounded its bad faith and unfair dealing by requiring that remain silent in the aftermath of the false and misleading statements made about its contract with Oliver North. 85. The NRA has breached its implied contractual duty of good faith and fair dealing by disclosing proprietary information it gained through the contract to a business, Brewer and his public relations unit, that was seeking to take over the services that is providing to the A. 39 86. The breaches that occurred have caused to incur damages, the amount of which are not yet fully calculated. The breaches by the NRA are material as that term is de?ned under the Code of Virginia, 59-1-507.1. WHEREFORE, Ackerman McQueen seeks, on its behalf and on behalf of its subsidiary Mercury Group, recovery of contract damages and severance remedies in an amount not less than $50 million and such other relief as this Court deems just. COUNT - ABUSE OF PROCESS 87. The allegations contained in the foregoing paragraphs are incorporated as if fully set forth herein. 88. NRA has ?led suit claiming that it is entitled to receive documents from and Mercury pursuant to a Services Agreement. The NRA failed to attach the Services Agreement to it's Complaint or its Amended Complaint. has attached the Services Agreement as Exhibit A. 89. Prior to ?ling suit to obtain certain documents, NRA had already subjected to a detailed audit that ended in February of 201 9 after nine days of in-depth analysis of AMc?s records undertaken within the offices of AMc?s accountants. The team of auditors, upon concluding their audit, informed AMc?s representatives that the audit was successfully completed, had provided all requested documents in its possession, and no further documents were needed. 90. Two months later, NRA ?led this suit on April 12, 2019 claiming that it seeks access to documents and a declaration that is in breach because of a failure to provide access to those documents. 40 91. Subsequent to the ?ling of the Complaint, NRA ?led a motion to amend the complaint and attached a copy of the proposed Amended Complaint on April 24, 2019. The Amended Complaint included detailed new allegations about Lieutenant Colonel Oliver North (Ret) who was simultaneously serving as President of the NRA as well as an employee of The Amended Complaint did not seek any new relief, nor did it correct any prior allegation. 92. The proposed Amendment was intended to serve an ulterior motive of spreading false statements about the North-AMc Contract immediately prior to the annual meeting where Lt. Co]. North was slated to be reappointed as President of the NRA. 93. The Motion to File the Amended Complaint served its ulterior motive, unrelated to the issues in this case. There was a ?restorm of publicity blanketing national news stations concerning the dispute between Lt. Col. North and the NRA. was dragged into the dispute based on the public disclosure of the North?AMc Contract in the Motion to File the Amended Complaint. LaPierre won the power struggle. North was not reappointed as NRA President; AMc?s reputation was harmed; and AMc?s contract with Lt. Col. North was diminished in value. 94. The Motion to File the Amended Complaint did not advance the stated cause of obtaining ?speci?c performance? of AMc?s duty to provide any documents, but was highly effective in turning the spotlight away from the troubles and setting up Lt. Col. North and to be the scapegoat in the national news. 41 95. Such tortious acts that misuse the Court?s legitimate judicial functions for ulterior purposes constitute an abuse of process. 96. use of this Court to falsely demand access to documents that it already possessed and documents that it had not previously requested through the own required procedures was a pretext designed to cover the ulterior motive of the law suit to cause damage to AMc?s reputation and to facilitate the transfer of AMc?s business to Brewer?s control without obligating the NRA to pay the severance payment required under the Services Agreement. 97. abuse of process was further accomplished when it made the bad faith 98. NRA used this Court?s public proceeding as a vehicle to defame and its employee, Lt. Col. Oliver North, and to accomplish ulterior purposes. Pursuing such ulterior motives constitutes an abuse of process, that was further ampli?ed by the fact that is unable to respond publicly by using any facts that the NRA could claim was ?Con?dential Information.? 99. Lastly, after the counsel was informed that intended to ?le a Counterclaim in this Lawsuit, the NRA responded on May 22, 2019, by ?ling a second law suit. The second lawsuit gives up any pretext that the dispute between the two parties is about a few documents. The NRA now seeks damages of $40 million for actions by that the NRA claims began in August 2018, thereby revealing the pretext in ?ling this ?rst Lawsuit in April 2019 seeking the North Contract. 100. Continuing its strategy of trying the dispute in the press, the NRA leaked the second lawsuit to the Wall Street Joumal before or its attorneys were even told the suit was ?led or that any contract breach had occurred. 101. As a result of the abuse of process, has sustained actual and reputational damages to be proven at trial, with such compensatory damages exceeding $50 million. WHEREFORE, Ackerman McQueen seeks, on its behalf and on behalf of its subsidiary Mercury Group, recovery of damages in the amount not less than $50 million for damages to their businesses, punitive damages, attorney fees, costs, and such other relief as this Court deems just. Counterclaim Plaintiffs demand this matter be heard before a jury on all triable issues. REQUEST FOR RELIEF WHEREFORE, for all the foregoing reasons, Defendants/Counterclaim Plaintiffs request the following relief: A. Actual and consequential damages arising from breach of contract in the amount of $50,000,000; B. Punitive damages of at least $50,000,000; C. Injunctive relief barring the NRA from taking any further action in derogation of the Services Agreement and the obligation to comply with all good faith and fair dealing; D. Reasonable attorney?s fees as allowed under the ?American Rule? exception allowing for the award of attorney fees for bad faith litigation; E. Court costs; and 43 F. And such other legal and/or equitable relief to which Counterclaim Plaintiffs may be entitled. Dated: May 23, 2019 44 Respectfully submitted, ACKERMAN MCQUEEN, INC. and MERCURY GROUP, INC. By Counsel -. Respectfully submitted, i mt David H. oi?ckiesm (VA Bar #31768) SCI-IERTLER ONORATO, LLP 901 New York Avenue, NW, Suite 500 Washington, DC 20001 Telephone: 202-628-4199 Facsimile: 202-628-4177 CERTIFICATE OF SERVICE I hereby certify that the foregoing document was served on the following counsel via email and ?rst-class mail addressed to: James W. Hundley Robert H. Cox Amy L. Bradley BRIGLIA HUNDLEY, PC 1921 Gallows Road, Suite 750 Tysons Corner, VA 22182 jhundley@brigliahundley.com rcox@brigliahundley.com abradley@brigliahundley.com a I David H. Dickieson. 45 EXHIBIT A REDACTED EXHIBIT REDACTED EXHIBIT REDACTED EXHIBIT REDACTED EXHIBIT REDACTED