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Don A. Hernandez (SBN 125119)Alexandra M. Steinberg (SBN 227427)2 Adam Kargman (SBN 212109)HERNANDEZ SCHAEDEL & ASSOCIATES, LLP3 2 North Lake A venue, Suite 930Pasadena, CA 91101

4 T: (626)440-0022F: (626) 628-1725

5 [email protected]@hernlaw.com

6 [email protected]

7 Attorneys for PlaintiffsMICHAEL KONG and JEFF GOLDSTEIN

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES CENTRALDISTRICT

MICHAEL KONG, an individual; and JEFFGOLDSTEIN, an individual,

Plaintiffs,

vs.

MODERN LUXURY MEDIA, LLC, a DelawareLimited Liability Company; MLM

HOLDINGCORP., a Delaware Corporation; KEVINFLANNERY, as Director of Modern LuxuryMedia, LLC; WILLIAM COBERT, as Director ofModern Luxury Media, LLC; JAMESSP ANFELLER, as Director of Modern LuxuryMedia, LLC; JAMES FRIEDLICH, as Director ofModern Luxury Media, LLC; and DOES 1-25,inclusive,

Defendants.

Case No.: BC442086

FIRST AMENDED COMPLAINT FOR:1) Promissory Fraud2) Breach of Contract (Kong's

Employment Agreement);3) Breach of Contract (Kong's Separation

Agreement), alternatively;4) Breach of Contract (Goldstein's

Employment Agreement);5) Breach of Contract (Goldstein's

Separation Agreement), alternatively;6) Breach of Contract (the 2007 LLC

Agreement);7) Breach of Contract (the 2009 LLC

Agreement);8) Anticipatory Breach;9) Breach of the Implied Covenant of

Good Faith and Fair Dealing10)

Intentional Interference withContractual Relations;11) Indemnification (Lab. Code ~ 2802);12) Unfair Competition (Bus. & Prof. Code

~ 17200, et seq.); and13) Declaratory Relief14) Failure to Pay All Wages Due At

Termination (Lab. Code ~~ 201 & 203)15) Failure to Pay Wages (Lab. Code ~

1194)1

FIRST AMENDED COMPLAINT

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DEMAND FOR JURY TRIALComplaint Filed: July 22, 2010Discovery Cut-Off: NoneTrial Date: None

F or their Complaint herein, Plaintiffs Michael Kong and Jeff Goldstein (collectively,"Plaintiffs") hereby allege as follows:

PARTIES AND JURISDICTION1. Plaintiff Michael Kong ("Kong") is, and at all times relevant hereto was, a resident of

the County of Los Angeles, State of California.

2. Plaintiff Jeff Goldstein ("Goldstein"),at all times relevant hereto, was and is a resident

of the County of Los Angeles, State of California.

3. Defendant Modem Luxury Media, LLC ("Modem Luxury") is, and at al l timesrelevant herein was, a limited liability corporation formed under Delaware law, with its principalplace of business located in the County of Los Angeles, State of California.

4. Plaintiffs are informed and believe, and thereon allege, that Defendant MLM HoldingCorporation ("MLM Holding Corp.") is, and at all times relevant herein was, a corporation formedunder Delaware law, with its principal place of business located in Dover, Delaware.

5. Plaintiffs are informed and believe, and thereon allege, that Defendant Kevin Flannery("Flannery") is an individual who resides in the State of Virginia. Plaintiffs are further informed andbelieve, and thereon allege, that Flannery is the Chairman of the board of directors of ModemLuxury.

6. Plaintiffs are informed and believe, and thereon allege, that Defendant William Cobert("Cobert") is

an individual who resides in the State of California. Plaintiffs are further informed andbelieve, and thereon allege, that Cobert is the Chief Executive Officer and a member of the board ofdirectors of Modem Luxury.

7. Plaintiffs are informed and believe, and thereon allege, that Defendant James

Spanfeller ("Spanfeller") is an individual who resides in the State of New York. Plaintiffs arefurther informed and believe, and thereon allege, that Spanfeller is a member of the board of directors2


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1 of Modem Luxury.

2 8. Plaintiffs are informed and believe, and thereon allege, that Defendant James Friedlich3 ("Friedlich") is an individual who resides in the State of New York. Plaintiffs are further informed4

and believe, and thereon allege, that Friedlich is a member of the board of directors of Modem5 Luxury.

6 9. Plaintiffs are ignorant of the true names and capacities of the defendants sued as Does7 1 through 25, inclusive, and therefore sue these defendants by such fictitious names. Plaintiffs are8 informed and believe, and thereon allege, that each of the defendants designated herein as a Doe is9 legally responsible in some manner for the events and happenings herein referred to, and negligently,

10 wantonly, recklessly, tortiously and/or unlawfully, proximately caused the injuries and damages to11 Plaintiffs as herein alleged. Plaintiffs will ask leave of the Court to amend this Complaint to show12 their true names and capacities when the same have been ascertained.

13 10. At all times mentioned herein, Defendants Modem Luxury, MLM Holding, Flannery,14 Cobert, Spanfeller, Friedlich and Does 1 through 25, and each of them (collectively, "Defendants"),15 were the agents, representatives, successors and/or assigns, each of the other, and at al l times16 pertinent hereto, were acting within the course and scope of their authority as such agents,

17 representatives, employees, successors, and/or assigns, and with th e permission, consent, and18 approval, or subsequent ratification, of each of the other defendants.19 11. This Court has subject matter jurisdiction over the claims set forth herein because the20 relief sought herein can be awarded only by this Court.21 12. This Court has personal jurisdiction over the defendants because each of the acts or22 omissions set forth below either was committed in the County of Los Angeles, or was directed23 towards Plaintiffs here, and, accordingly, subjects the

defendants to the jurisdiction of this Court.24 13. Venue is proper in this county in accordance with Code of Civil Procedure section25 395(a) because the defendants, or some of them, reside in this county and the acts and omissions26 giving rise to the claims herein took place in this county.

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FACTS COMMON TO ALL COUNTS2

3

14.

15.

Defendant Modern Luxury was formed on or around September 2004.

Plaintiffs Kong and Goldstein are former officers of Modern Luxury, serving as Chief4

Executive Officer("CEO")

and Chief Financial Officer ("CFO"), respectively. Both Kong and5 Goldstein were terminated by Modern Luxury in early 2010. As set forth more fully below, both

6 Kong's and Goldstein's employment agreements and their separation agreements explicitly provide

7 for their indemnity and defense in any proceeding arising out of or incidental to the business8 activities of, or relating to, Modern Luxury, during the effective term of their employment9 agreements.

10 16. Kong was hired by Modern Luxury in or about June 2007. On or about May 21,2007,

II the parties entered into a written employment contract effective as of June 18,2007 (the "Kong12 Employment Agreement"). The Kong Employment Agreement expressly provided that Modern13 Luxury would indemnify and hold harmless Kong in any action arising from the performance of his14 duties as CEO:

15 15. Indemnification. In accordance with Section 18-108 of theDelaware Limited Liability Company Act, the Company shall16 indemnify and hold harmless Employee to the fullest extent permittedby law from and against any and all losses, claims, demands, costs,

17 damages, liabilities Goint or several), expenses of any nature (includingattorneys' fees and disbursements), judgments, fines, settlements, and18 other amounts arising from any and all claims, demands, actions, suits,or proceedings, whether civil, criminal, administrative or investigative,19 in which Employee may be involved, or threatened to be involved as aparty or otherwise, arising out of or incidental to the business or20 activities of or relating to the Company, regardless of whetherEmployee continues to be an officer or employee at the time any such21 liability or expense is paid or incurred. . . .

22 17. The Kong Employment Agreement also provided at Section 2 that the term of the23 agreement would last "for a period of five (5) years (the

"Term"),commencing

onthe Closing

Date."24 The Closing Date was June 18,2007.

25 18. The Kong Employment Agreement further provided for the following compensation at26 Section 4:

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4. Compensation. [Kong] shall be paid a gross annual salary of four hundredthousand dollars ($400,000) (the "Base Salary") . . . . [Kong's] gross annualsalary shall be subject to annual review by the Board; provided, however, that

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in no event shall Employee's gross annual salary be reduced to less than theBase Salary as a result of such annual review.

19. The Kong Employment Agreement also provided that Kong's employment could only

be terminated prior to the expiration of the Term upon the occurrences expressly provided underSection 12, including as follows:

12.2. By Mutual Agreement. This Agreement may be terminated at any time bymutual agreement of the parties hereto.

20. In or around June 2007, Kong incurred expenses in the discharge of his duties or in8 obedience to the directions of his employer by way of a loan to Modern Luxury in the amount of9 $500,000. In or around July 2008, Kong incurred additional expenses in the discharge of his duties

10 or in obedience to the directions of his employer by way of a loan to ModernLuxury

in the amounto11 $100,000.

12 21. From on or about July 1, 2008 until on or about June 30, 2009, Modern Luxury paid13 Kong none of his $400,000 annual Base Salary.

14 22. On or about January 26,2010, Modern Luxury, MLM Holding Corp. and Kong15 entered into a Separation and Release of Claims Agreement (the "Kong Separation Agreement"),16 which provided for the release of any of Kong's known and unknown claims against Defendants

17 accrued up to that date, which would include those for unpaid wages and monies owed as set forth18 below. Further, the Kong Separation Agreement explicitly provided that Modern Luxury would19 indemnify and hold harmless Kong in any action arising from the performance of his duties as CEO:20 2.08 Indemnification. Executive shall continue to be indemnified and held harmlessfor actions taken during the period of his service in his capacity as an officer and1 director of the Company and its and as a director of the Parent to the fullest extentsuch indemnification is currently provided and consistent with applicable law.

23. Goldstein was hired by Modern Luxury as its CFO in or about January 1,2008. On orabout that date, the parties entered into a written employment contract (the "Goldstein Employment

Agreement"). The Goldstein Employment Agreement expressly provided that Modern Luxury wouldindemnify and hold harmless Goldstein in any action arising from the performance of his duties asCFO:

15. Indemnification. In accordance with Section 18-108 of theDelaware Limited Liability Company Act, the Company shall indemnify

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and hold harmless Employee to the fullest extent permitted by law fromand against any and all losses, claims, demands, costs, damages, liabilitiesGoint or several), expenses of any nature (including attorneys' fees anddisbursements), judgments, fines, settlements, and other amounts arisingfrom any and al l claims, demands, actions, suits, or proceedings, whethercivil, criminal, administrative or investigative, in which Employee may beinvolved, or threatened to be involved as a party or otherwise, arising outof or incidental to the business or activities of or relating to the Company,regardless of whether Employee continues to be an officer or employee atthe time any such liability or expense is paid or incurred. . . .

24. The Goldstein Employment Agreement also provided at Section 2 that the "Term" ofthe agreement would commence on January 1, 2008 and would continue in effect through December

31,2012 a period of approximately five (5) years.

25. The Goldstein Employment Agreement also provided that Goldstein's employment

could only be terminated prior to the expiration of the Term upon the occurrences expressly provided

under Section 12, including as follows:

12.2. By Mutual Agreement. This Agreement may be terminated at any time bymutual agreement of the parties hereto.

26. On or about that February 17,2010, Modern Luxury, MLM Holding Corp., and15 Goldstein entered into a Separation and Release of Claims Agreement (the "Goldstein Separation16 Agreement"), which provided for the release of any of Goldstein's known and unknown claims

17 against Defendants accrued up to that date and explicitly provided that Modern Luxury would18 indemnify and hold harmless Goldstein in any action arising from the performance of his duties as19 CFO:

20 2.07 Indemnification. Executive shall continue to be indemnified andheld harmless for actions taken during the period of his service in his21 capacity as an officer of the Company and a manager of the Company'ssubsidiaries to the fullest extent such indemnification is currently provided22 and consistent with applicable law.23 27. In or around June 2007,

Modern Luxury enactedits

Second Amended and Restated24 Limited Liability Company Agreement of Modern Luxury Media, LLC dated June 2007 (the "200725 LLC Agreement").

26 28. The 2007 LLC Agreement expressly provided yet another promise to indemnify and

28

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Holdings, Inc (the "Benlevi-Zeff Complaint" or the "Benlevi-Zeff Action"). The Benlevi-Zeff2 Complaint asserts causes of action for fraud; negligent or innocent misrepresentation; breach of3 fiduciary duty; breach of representations and warranties (against Modern Luxury); breach of the4

covenant of good faith and fair dealing (against Modern Luxury); declaratory judgment; and a5 contractual claim for attorneys' fees (against Modern Luxury), as well as independent claims against6 other entities who are not a party to this action. The allegations against Plaintiffs in that lawsuit arise7 out of or are incidental to business and activities of or relating to Modern Luxury conducted during8 the term of Kong and Goldstein's employment, with full knowledge and approval of the Board of9 Directors.

10 31. On or about June 18, 2010, Kong tendered the claims to Modern Luxury for defense11 and indemnity pursuant to Section 15 of the Kong Employment Agreement, Section 2.08 of the Kong12 Separation Agreement, Section 14 of the 2009 LLC Agreement, and California Labor Code section13 2802. On or about June 21, 2010, Goldstein likewise tendered the claims to Modern Luxury for14 defense and indemnity pursuant to Section 15 of the Goldstein Employment Agreement, Section 2.0715 of the Goldstein Separation Agreement, Section 14 of the 2009 LLC Agreement, and California16 Labor Code section. Modern Luxury failed to respond after multiple and repeated applications by

17 Plaintiffs' counsels, which was effectively a denial in light of the imminent deadlines forcing Kong18 and Goldstein to respond to the Benlevi-Zeff Complaint.

19 32. On or about July 20, 2010, Modern Luxury informed Plaintiffs that their demands for20 indemnification and reimbursement of costs of defense are worthless because the Company intended21 to sell all of its assets within approximately ten days.

22 FIRST CAUSE OF ACTION23

PROMISSORY FRAUD24 (By All Plaintiffs Against All Defendants)

25 33. Plaintiffs re-allege and incorporate by reference those allegations set forth in26 paragraphs 1-32, supra, as though fully set forth herein.

27 34. On or about January 26,2010, Kong, Modern Luxury, and MLM Holding Corp.28 entered into the Kong Separation Agreement which, as described in Paragraph 22, supra, provided at

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1 Section 2.08 that Modern Luxury would continue to "indemnify[y] and h[o]ld harmless" Kong for2 any of his actions taken during the period of his service as CEO and as a director.3 35. On or about February 17,2010, Goldstein, Modern Luxury, and MLM Holding Corp.4

entered the Goldstein Separation Agreement, which, as described in Paragraph 26, supra, provided a5 Section 2.07 that Modern Luxury would continue to "indemnify[y] and h[ ]ld harmless" Goldstein6 for any of his actions taken during the period of his service as CFO and as a manager.7 36. It was crucial to Kong and Goldstein's entering into their respective Separation8 Agreements with Modern Luxury and MLM Holding Corp., that they would be indemnified and held9 harmless of any actions taken during the period of their service as officers and directors of Modern

10 Luxury and its affiliate companies.

11 37. Plaintiffs are informed and believe, and thereon allege, that Defendants had intended12 to induce Kong and Goldstein to rely on their false promises to indemnify and hold Plaintiffs13 harmless so that they would enter into the Separation Agreements. Plaintiffs did so reasonably rely14 on Defendants' promises.

15 38. On or about June 18, 2010, Kong tendered the claims to Modern Luxury for defense16 and indemnity pursuant to Section 2.08 of the Kong Separation Agreement. On or about June 21,17 2010, Goldstein likewise tendered the claims to Modern Luxury for defense and indemnity pursuant18 to Section 2.07 of the Goldstein Separation Agreement.19 39. Modern Luxury failed to respond to either request, effectively denying those requests20 in light of the imminent deadlines forcing Kong and Goldstein to respond to the Benlevi-Zeff21 Complaint.

22 40. Plaintiffs are informed and believe, and thereon allege, that Defendants never intended23 to perform their promises to indemnify

andhold

Plaintiffs harmless when they entered into the Kong24 and Goldstein Separation Agreements. Rather, Defendants had already intended at the time to purge25 Modern Luxury of its assets within a couple months. Plaintiffs are informed and believe, and thereon26 allege, that Defendants were aware when they entered into the indemnification provisions that27 Modern Luxury would soon be an empty corporate shell with no means to meet its contractual28 requirements.

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41. As a direct and proximate result of the Defendants' tortious conduct, which has been2 undertaken willfully, knowingly and in bad faith, Plaintiffs have been damaged in a sum according t3 proof, but which damages presently include incurrence of attorney's fees and costs in connection wit4

the defense ofthe

Benlevi-Zeff Action.5

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SECOND CAUSE OF ACTION

BREACH OF CONTRACT

(The Kong Employment Agreement)

(By Plaintiff Kong Against Defendants Modern Luxury and Does 1-25, inclusive)

42. Plaintiffs re-allege and incorporate by reference those allegations set forth in11 paragraphs 1-41, supra, as though fully set forth herein.

12 43. On or about May 21,2007, Kong and Modern Luxury entered into an employment13 agreement, effective June 18, 2007 (the "Kong Employment Agreement"), which, as described in14 paragraphs 16-18, supra, provided that Modern Luxury would perform as follows:15

a. Indemnify and hold harmless Kong "to the fullest extent permitted by law" from16 and against any an all actions arising from his performance of duties as CEO,

17 "regardless of whether [Kong] continues to be an officer or employee at the time18 of any such liability or expense is paid or incurred";19 b. Pay Kong no less than an annual Base Salary of $400,000 during the Term of the20 Kong Employment Agreement;

21 44. The Kong Employment Agreement also provided that Kong's employment could only22 be terminated prior to the expiration of the Term upon the occurrences expressly provided under23 Section 12, including by mutual agreement. as follows:

24 12.2. By Mutual Agreement. This Agreement may be terminated at any time bymutual agreement of the parties hereto.

45. Kong performed al l conditions, covenants, and promises required on his part to be

performed in accordance with the terms and conditions of the Kong Employment Agreement, exceptthose conditions, covenants, and promises that were excused.

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46. On or about January 26,2010, Modern Luxury, MLM Holding Corp. and Kong2 entered into the Kong Separation Agreement to terminate the Kong Employment Agreement by3 mutual agreement. As set forth in Plaintiffs' First Cause of Action for Promissory Fraud above,4

Defendants fraudulently induced Kong to enter into the separation and release agreement.5 47. On or about June 18,2010, Kong's counsel tendered a formal request for defense and6 indemnity to Modern Luxury, pursuant to Section 15 of the Kong Employment Agreement. The7 allegations made in the Benlevi-Zeff Complaint arise out of or are incidental to only the business and8 activities of or relating to Modern Luxury, conducted during the effective term of the Kong9 Employment Agreement. Modern Luxury failed to respond to Kong's request, which was effectively

10 a denial in light of the imminent deadlines forcing Kong to respond to the Benlevi-ZeffComplaint.11

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48. Defendants have breached Kong's Employment Agreement in the following ways:

a. Defendants have failed to indemnify Kong and hold Kong harmless with respect to

the Benlevi-Zeff Action;

b. Defendants failed to pay Kong's annual Base Salary from in or around July 2008

until in or around July 2009;

c. Defendants pushed Kong out of Modern Luxury by fraudulently inducing him to

enter into the Kong Separation Agreement, such that there was no mutual

agreement pursuant to Section 12.2 of the Kong Employment Agreement to

terminate his employment.

By failing to defend and indemnify Kong in the Benlevi-Zeff Action, Modern Luxury9.

21 materially breached the Kong Employment Agreement, which has resulted in damages to Kong in a22 sum according to proof, but which damages presently include incurrence of attorney's fees and costs23 in connection with the defense of the

Benlevi-Zeff Action.24 50. By failing to pay Kong his full Base Salary for a period of approximately one year,25 Kong has been damaged by the amount of those wages and should be entitled to prejudgment interest26 on the unpaid amount pursuant to Labor Code ~ 218.6 and Civil Code ~ 3289, as well as attorneys'27 fees and costs pursuant to Labor Code ~~ 218.5 and 1194.

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1 51. By terminating Kong's employment by an invalid means under the Kong Employment2 Agreement, Kong has been damaged in the amount of his promised compensation under the Kong3 Employment Agreement in the form of back-pay and front-pay for the full five-year term of the4

agreement.5

6 THIRD CAUSE OF ACTION7 BREACH OF CONTRACT, IN THE ALTERNATIVE TO PROMISSORY FRAUD8 (The Kong Separation Agreement)9 (By Plaintiff Kong Against Defendants Modern Luxury, MLM Holding Corp., and Does 1-25,

10 inclusive)


13 53. On or about January 26,2010, Kong, Modern Luxury, and MLM Holding Corp.14 entered into a Separation and Release of Claims Agreement (the "Kong Separation Agreement"),15 which, as described in Paragraph 22, supra, provided at Section 2.08 that Modern Luxury would16 continue to "indemnify[y] and h[ ]ld harmless" Kong for any of his actions taken during the period

17 of his service as CEO and as a director.18 54. Kong performed al l conditions, covenants, and promises required on his part to be19 performed in accordance with the terms and conditions of the Kong Separation Agreement, except20 those conditions, covenants, and promises that were excused.21 55. The allegations made in the Benlevi-Zeff Complaint arise out of actions taken during22 the period of Kong's service in his capacity only as an officer and director of Modern Luxury and its23 subsidiaries.

24 56. On or about June 18,2010, Kong's counsel tendered a formal request for defense and25 indemnity to Modern Luxury, pursuant to Section 2.08 of the Kong Separation Agreement. Modern26 Luxury failed to respond to Kong's request, which was effectively a denial in light of the imminent27 deadlines forcing Kong to respond to the Benlevi-Zeff Complaint.

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1 57. By failing to indemnify and hold harmless Kong in the Benlevi-Zeff Action,2 Defendants materially breached the Kong Separation Agreement, which has resulted in damages to3 Kong in a sum according to proof, but which damages presently include incurrence of attorney's fee4

and costs in connection with the defense of the Benlevi-Zeff Action.5

6 FOURTH CAUSE OF ACTION7 BREACH OF CONTRACT8 (The Goldstein Employment Agreement)9 (By Plaintiff Goldstein Against Defendants Modern Luxury and Does 1-25, inclusive)


12 59. Goldstein and Modem Luxury entered into an employment agreement, effective13 January 1, 2008 (the "Goldstein Employment Agreement"), which, as described in Paragraph 23,14 supra, provided at Section 15 that Modem Luxury "shall indemnify and hold harmless [Goldstein] to15 the fullest extent permitted by law" from and against any and all actions arising from his performance16 of duties as CEO, "regardless of whether [Goldstein] continues to be an officer or employee at the

17 time of any such liability or expense is paid or incurred."18 60. The Goldstein Employment Agreement also provided that Goldstein's employment19 could only be terminated prior to the expiration of the Term upon the occurrences expressly provided20 under Section 12, including as follows;

21 12.2. By Mutual Agreement. This Agreement may be terminated at any time bymutual agreement of the parties hereto.22

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61. Goldstein performed all conditions, covenants, and promises required on his part to be

performed in accordance with the terms and conditions of the Goldstein Employment Agreement,

except those conditions, covenants, and promises that were excused.

62. On or about that February 17,2010, Modem Luxury, MLM Holding Corp., andGoldstein entered into a Separation and Release of Claims Agreement (the "Goldstein SeparationAgreement") to terminate the Goldstein Employment Agreement by mutual agreement. As set forth

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in Plaintiffs' First Cause of Action for Promissory Fraud above, Defendants fraudulently induced2 Goldstein to enter into the separation and release agreement.

3 63. On or about June 21, 2010, Goldstein's counsel tendered a formal request for defense4

and indemnity to Modem Luxury, pursuant to Section 15 of the Goldstein Employment Agreement.5 The allegations made in the Benlevi-Zeff Complaint arise out of or are incidental to only the business6 and activities of or relating to Modem Luxury, conducted during the effective term of the Goldstein7 Employment Agreement. Modem Luxury failed to respond to Goldstein's request, which was8 effectively a denial in light of the imminent deadlines forcing Goldstein to respond to the Benlevi-9 Zeff Complaint.

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17 65.

64. Defendants have breached Goldstein's EmploymentAgreement

in the followingways:

a. Defendants have failed to indemnify Goldstein and hold Goldstein harmless with

respect to the Benlevi-Zeff Action;

b. Defendants pushed Goldstein out of Modem Luxury by fraudulently inducing himto enter into the Goldstein Separation Agreement, such that there was no mutual

agreement pursuant to Section 12.2 of the Goldstein Employment Agreement to

terminate his employment.

By failing to defend and indemnify Goldstein in the Benlevi-Zeff Action, Modem18 Luxury materially breached the Goldstein Employment Agreement, which has resulted in damages to19 Goldstein in a sum according to proof, but which damages presently include incurrence of attorney's20 fees and costs in connection with the defense of the Benlevi-Zeff Action.21 66. By terminating Goldstein's employment by an invalid means under the Goldstein22 Employment Agreement, Goldstein has been damaged in the amount of his promised compensation23 under the Goldstein Employment

Agreement inthe

form of back-pay and front-pay for the full five-24 year term of the agreement.

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1 FIFTH CAUSE OF ACTION2 BREACH OF CONTRACT, IN THE ALTERNATIVE TO PROMISSORY FRAUD3 (The Goldstein Separation Agreement)4

(By Plaintiff Goldstein Against Defendants Modern Luxury, MLM Holding Corp., and DoesS

25, inclusive)

6 67 . Plaintiffs re-allege and incorporate by reference those allegations set forth in7 paragraphs 1-66, supra, as though fully set forth herein.

8 68. On or about February 17,2010, Goldstein, Modern Luxury, and MLM Holding Corp.9 entered into a Separation and Release of Claims Agreement (the "Goldstein Separation Agreement"),

10 which, as described in Paragraph 26, supra, provided at Section 2.07 that ModemLuxury would11 continue to "indemnify[y] and h[ 0 ]ld harmless" Goldstein for any of his actions taken during the

12 period of his service as CFO and as a manager.13 69. Goldstein performed al l conditions, covenants, and promises required on his part to be

14 performed in accordance with the terms and conditions of the Goldstein Separation Agreement,15 except those conditions, covenants, and promises that were excused.

16 70. The allegations made in the Benlevi-Zeff Complaint arise out of actions taken during

17 the period of Goldstein's service only in his capacity as an officer and director of Modern Luxury and18 its subsidiaries.

19 71. On or about June 21, 2010, Goldstein's counsel tendered a formal request for defense20 and indemnity to Modern Luxury, pursuant to Section 2.07 of the Goldstein Separation Agreement.21 Modern Luxury failed to respond to Goldstein's request, which was effectively a denial in light of the22 imminent deadlines forcing Goldstein to respond to the Benlevi-Zeff Complaint.

23 72. By failing to indemnifyand

holdharmless Goldstein in the Benlevi-Zeff Action,

24 Modern Luxury breached the Goldstein Separation Agreement, which has resulted in damages to25 Goldstein in a sum according to proof, but which damages presently include incurrence of attorney's26 fees and costs in connection with the defense of the Benlevi-Zeff Action.27

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SIXTH CAUSE OF ACTION

BREACH OF CONTRACT/THIRD PARTY BENEFICIARY

(The 2007 LLC Agreement)

(By All Plaintiffs Against Defendants Modern Luxury and Does 1-25, inclusive)73. Plaintiffs re-allege and incorporate by reference those allegations set forth in

6 paragraphs 1-72, supra, as though fully set forth herein.

7 74. Plaintiffs are informed and believe, and thereon allege, that in or around June 2007,8 Modern Luxury enacted the 2007 LLC Agreement, which, as described in paragraph 28, supra,9 provided at Section 14, that Modern Luxury would indemnify and hold harmless "the Member, and

10 each officer, employee or other agent of [Modern Luxury] . . . by reason of any act or omissionor11 alleged act or omission arising out of such person's activities as a Member, director, manager, officer,

12 employee or other agent or otherwise on behalf of the Company.. . ."

13 75. In or about June 2007, while the 2007 LLC Agreement was in effect, Modern Luxury14 hired Kong as an officer and employee. Kong also served as a director. As such, Kong was a third-15 party beneficiary under the 2007 LLC Agreement.16 76. On or about January 1, 2008, while the 2007 LLC Agreement was in effect, Modern

17 Luxury hired Goldstein as CFO. As such, Goldstein was a third-party beneficiary under the 200718 LLC Agreement.

19 77. The allegations made in the Benlevi-Zeff Complaint concern alleged acts or omissions20 arising from Kong's activities as a former officer or director of Modern Luxury, and alleged acts or21 omissions arising from Goldstein's activities as a former officer of Modern Luxury. All such22 activities were performed by Plaintiffs in good faith on behalf of Modern Luxury, or in furtherance of23 the interests of Modern Luxury.

24 78 . On or about June 18,2010, Kong's counsel tendered a formal request for defense and25 indemnity to Modern Luxury, pursuant to Section 14 of the LLC Agreement. On or about June 21,26 2010, Goldstein's counsel tendered a similar request.

27

28

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79. Modern Luxury failed to respond to any of the Plaintiffs' requests, effectively denyin2 those requests in light of the imminent deadlines forcing Plaintiffs to respond to the Benlevi-Zeff3 Complaint.

4 80. By failingto indemnify and hold harmless Plaintiffs in the Benlevi-Zeff Action,

5 Modern Luxury breached the 2007 LLC Agreement, which has resulted in damages to Plaintiffs in a6 sum according to proof, but which damages presently include incurrence of attorney's fees and costs7 in connection with the defense of the Benlevi-Zeff Action.8

9SEVENTH CAUSE OF ACTION

10 BREACH OF CONTRACT/THIRD PARTY BENEFICIARY11

(The 2009 LLC Agreement)12 (By All Plaintiffs Against Defendants Modern Luxury, MLM Holding Corp., and Does 1-25,13

inclusive)14 81. Plaintiffs re-allege and incorporate by reference those allegations se t forth in15 paragraphs 1-80, supra, as though fully set forth herein.16 82. Plaintiffs are informed and believe, and thereon allege, that on or about December 11,17

2009, Defendant MLM Holding Company, the then-sole member of Modern Luxury, enacted the18 2009 LLC Agreement, which, as described in Paragraph 29, supra, provided at Section 14 that19 Modern Luxury would indemnify and hold harmless "the Member, and each officer, employee or20 other agent of [Modern Luxury]

'" by reason of any act or omission or alleged act or omission21 arising out of such person's activities as a Member, director, manager, officer, employee or other22 agent or otherwise on behalf of the Company.

. . ."

23 83. At the time of the 2009 LLCAgreement,

Kong andGoldstein were officers of Modern24 Luxury. Kong was also a director. As such, Kong and Goldstein were third-party beneficiaries under

25 the LLC Agreement.

26 84 . The allegations made in the Benlevi-Zeff Complaint concern acts or omissions arising27 from 'Plaintiffs' activities as former officers or directors of Modern Luxury, which activities were28

17


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1 performed in good faith on behalf of Modern Luxury, or in furtherance of the interests of Modern2 Luxury.

3 85. On or about June 18,2010, Kong's counsel tendered a formal request for defense and4 indemnity

to Modern Luxury, pursuant to Section 14 of the LLC Agreement. On or about June 21,5 2010, Goldstein's counsel tendered a similar request. Modern Luxury failed to respond to either6 request, effectively denying those requests in light of the imminent deadlines forcing Kong and7 Goldstein to respond to the Benlevi-Zeff Complaint.

8 86. By failing to indemnify and hold harmless Kong and Goldstein in the Benlevi-Zeff9 Action, Modern Luxury and MLM Holding Company breached the 2009 LLC Agreement, which has

10 resulted in damages to Plaintiffs in a sum according to proof, but which damagespresently include11 incurrence of attorney's fees and costs in connection with the defense of the Benlevi-Zeff Action.

12

13 EIGHTH CAUSE OF ACTION14

ANTICIPATORY BREACH15 (By All Plaintiffs Against Defendants Modern Luxury, MLM Holding Corp., and Does 1-25,16

inclusive)

17 87 . Plaintiffs re-allege and incorporate by reference those allegations set forth in18 paragraphs 1-86, supra, as though fully set forth herein.19 88 . California Civil Code Section 1440 provides: "If a party to an obligation gives notice20 to another, before the latter is in default, that he will not perform the same upon his part, and does not21 retract such notice before the time at which performance upon his part is due, such other party is22 entitled to enforce the obligation without previously performing or offering to perform any conditions23 upon his part in favor of the former

party."24 89. As se t forth in the second through seventh causes of action above, Defendants25 assumed contractual obligations to indemnify and hold harmless Kong and Goldstein for activities26 they performed in good faith on behalf of Modern Luxury, or in furtherance of the interests of27 Modern Luxury, by entering into Section 15 of the Kong Employment Agreement, Section 2.08 of28 the Kong Separation Agreement, Section 15 of the Goldstein Employment Agreement, Section 2.07

18


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1 of the Goldstein Separation Agreement, and Section 14 of the 2007 and 2009 LLC Agreements.2 90. Kong and Goldstein performed all conditions, covenants, and promises required on3 their parts to be performed in accordance with the terms and conditions of their respective4 Employment

Agreements and Separation Agreements, except those conditions, covenants, and5 promises that were excused. Kong and Goldstein were third-party beneficiaries under the LLC6 Agreement.

7 91. On or about June 11, 2010, a lawsuit was filed in the Delaware Chancery Court8 against Kong, Goldstein, Modern Luxury, and other defendants, by Juli Benlevi-Zeff and JBA9 Holdings, Inc. The allegations made in the Benlevi-Zeff Complaint concern acts or omissions arising

10 from Plaintiffs' activities as former officers or directors of ModernLuxury,

which activitieswere11 performed in good faith on behalf of Modern Luxury, or in furtherance of the interests of Modern

12 Luxury.

1392. On or about June 18, 2010, Kong tendered the claims to Modern Luxury for defense

14 and indemnity pursuant. On or about June 21, 2010, Goldstein likewise tendered the claims to15 Modern Luxury for defense and indemnity.

16 93. Defendants have positively indicated that they will not and cannot meet its contractual

17 obligations to indemnify and hold Plaintiffs' harmless by the following words and conduct:18

a. On or about July 20, 2010, Plaintiffs' counsel sought assurances from Modern19

Luxury's counsel that the Company would assume its defense and indemnification20 obligations. Modern Luxury informed Plaintiffs' counsel that their demand for21

indemnification and reimbursement of costs of defense is worthless because the22 Company intended to sell all of its assets within approximately ten days.23 b. On or about July

23, 2010,Plaintiffs'

counsel wrote to Defendants' counsel to24 demand that the Company setting aside sufficient reserves to fulfill its obligations25 to defend and indemnify Plaintiffs in the pending Benlevi-Zeff Action. Plaintiffs26 received no response.

27c. On or about July 27,2010, Plaintiffs' filed an ex parte application to protect the

28 proceeds of the approaching asset sale.19


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and Plaintiffs' indemnification rights under the six contracts, entitling Plaintiffs to an award of2 exemplary damages under Cal. Civ. Code S 3294 against Defendants.3

4

TENTH CAUSE OF ACTION5 INTENTIONAL INTERFERENCE WITH CONTRACT6 (By All Plaintiffs Against Defendants Flannery, Cobert, Span feller, Friedlich, and Does 1-25,7

inclusive)


10 104. Flannery, Cobert, Spanfeller, and Friedlich (collectively, the "Defendant Directors")11 knew of the existence of the following valid contracts: (i) the Kong Employment Agreement; (ii) the12 Kong Separation Agreement; (iii) the Goldstein Employment Agreement; (iv) the Goldstein13 Separation Agreement; (v) the 2007 LLC Agreement; and (vi) the 2009 LLC Agreement..14 105. Plaintiffs are informed and believe, and thereon allege, that through their intentional15 acts or conduct, the Defendant Directors induced Modern Luxury to breach Section 15 of the Kong16 and Goldstein Employment Agreements, Section 2.08 of the Kong Separation Agreement, and

17 Section 2.07 of the Goldstein Separation Agreement, depriving Kong and Goldstein of their right to18 defense and indemnity in the Benlevi-Zeff Action, pursuant to those contracts. Furthermore,19 Plaintiffs are informed and believe, and thereon allege, that the Defendant Directors intended to20 induce Modern Luxury to breach those contracts.21 106. Plaintiffs are informed and believe, and thereon allege, that through their intentional22 acts or conduct, the Defendant Directors induced Modern Luxury to breach Section 14 of the 200723 LLC Agreement, depriving Kong and Goldstein

oftheir right

to defense and indemnity in the24 Benlevi-Zeff Action, pursuant to the 2007 LLC Agreement. Furthermore, Plaintiffs are informed and25 believe, and thereon allege, that the Defendant Directors intended to induce Modern Luxury to breach26 the 2007 LLC Agreement.

27 107. Plaintiffs are informed and believe, and thereon allege, that through their intentional28 acts or conduct, the Defendant Directors induced Modern Luxury and MLM Holding Corp. to breach

22FIRST AMENDED COMPLAINT

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Section 14 of the 2009 LLC Agreement, depriving Kong and Goldstein of their right to defense and2 indemnity in the Benlevi-Zeff Action, pursuant to the 2009 LLC Agreement. Furthermore, Plaintiffs3 are informed and believe, and thereon allege, that the Defendant Directors intended to induce Modern4

Luxury and MLM Holding Corp. to breach the 2009 LLC Agreement.5 108. As a direct and proximate result of the Defendant Directors' tortious conduct, which6 has been undertaken willfully, knowingly and in bad faith, Plaintiffs have been damaged in a sum7 according to proof, but which damages presently include incurrence of attorney's fees and costs in8 connection with the defense of the Benlevi-Zeff Action.9

10

11

12

13

ELEVENTH CAUSE OF ACTION

INDEMNIFICATION

(Labor Code ~ 2802)

(By All Plaintiffs Against Defendants Modern Luxury and Does 1-25, inclusive)14 109. Plaintiffs re-allege and incorporate by reference those allegations set forth in15 paragraphs 1-108, supra, as though fully set forth herein.16 110. According to California Labor Code section 2802(a), "An employer shall indemnify

17 his or her employee for all necessary expenditures or losses incurred by the employee in direct18 consequence of the discharge of his or her duties. . . ."19 111. In or around June 2007, Kong incurred expenses in the discharge of his duties or in20 obedience to the directions of his employer by way of a loan to Modern Luxury in the amount of21 $500,000. In or around July 2008, Kong incurred additional expenses in the discharge of his duties22 or in obedience to the directions of his employer by way of a loan to Modern Luxury in the amount of23 $100,000.

24 112. As a proximate result of Defendants' failure to indemnify and reimburse Kong for25 these expenditures, Kong has been damaged in the amount of $600,000 plus interest.26 113. Further, Labor Code section 2802(c) specifically states that, "For purposes of this27 section, the term 'necessary expenditures or losses' shall include all reasonable costs, including, but28 not limited to, attorney's fees incurred by the employee enforcing the rights granted by this section."


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1 114. According to Jacobus v. Krambo (2000) 78 Ca1.App.4th 1096, 1100, "The statute2 [section 2802] requires the employer not only to pay any judgment entered against the employee for3 conduct arising out of his employment but also to defend an employee who is sued for such conduct.4

Unlike an insurer, the employer need not defend whenever there is a mere potential for liability.5 However, if the employer elects to run a risk and refuses to defend, the employer must indemnify the6 employee for his attorney fees and costs in defending the underlying action if the employee was sued7 for acts within the scope of his employment."

8 115. All of the alleged conduct attributed to Kong and Goldstein in the Benlevi-Zeff9 Complaint arises out of or is incidental to the business activities of, or related to Modern Luxury

10 during the effective term of Kong's and Goldstein's respective employment agreements.11 Furthermore, al l such alleged conduct was performed with the full knowledge and approval of the12 Board of Directors, to which Kong and Goldstein reported, which Board authorized al l of the13 business dealings our of which the Benlevi-Zeff Complaint arises. The alleged conduct was entirely14 within the scope of Kong's and Goldstein's employment with Modern Luxury.15 116. Kong and Goldstein have incurred and will continue to incur attorneys' fees and costs16 in defending themselves against the allegations in the Benlevi-Zeff Complaint.

17 117. The Benlevi-Zeff Complaint seeks approximately $8.5 million in damages against18 Kong and Goldstein. On July 29, 2010 Modern Luxury's Directors and Officers insurance policy19 denied all Plaintiffs' demand for coverage. Even if the insurance company had not denied coverage,20 Plaintiffs are informed and believe, and thereon allege, that any insurance coverage that may exist is21 insufficient to cover anywhere near the amount sought by Benlevi-Zeff. The litigation involves22 numerous parties, in multiple forums, and a wide array of unrelated and complex issues which must23 be addressed. It is anticipated that

numerousdepositions

willbe

taken and extensive discovery24 conducted. The underlying lawsuit is in Delaware, thus requiring some amount of travel, and counsel25 for Kong and Goldstein are seeking pro hac vice admission in Delaware. Additionally, Ms. Benlevi-26 Zeffhas filed a related lawsuit against Modern Luxury, which the plaintiff is attempting to27 consolidate with the action against Kong and Goldstein. It is not unreasonable to expect attorneys'28 fees in defense of this litigation to be $500,000 to $1 million. Thus, between the damages sought and


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the anticipated attorneys' fees and costs, the potential total amount at stake could be $9 to $102 million.

3

4

5

6

7

TWELVTH CAUSE OF ACTIONUNFAIR COMPETITION

(Business & Professions Code ~ 17200 et seq.)

(By All Plaintiffs Against All Defendants)

8 118. PlaintitTs re-allege and incorporate by reference those allegations set forth in9 paragraphs 1-117, supra, as though fully set forth herein.

10 119. Plaintiffs are "persons" within the meaning of Business and Professions Code S 1720411 and, therefore, have standing to bring this cause of action for restitution and other appropriate12 equitable relief.

13 120. Business and Professions Code S 17200 et seq., prohibits unlawful and unfair business14 practices.

15 121. The laws and the public policy of the State of California prohibit refusing to16 indemnify and reimburse an employee, officer, or other agent for expenses reasonably and

17 necessarily incurred by reason of any act or omission arising out of such person's activities on behalf18 of their company and/or within the scope of their employment, including the cost of defending19 themselves in a lawsuit.

20 122. Defendants have violated statutes and public policies. Through the conduct alleged in21 this Complaint, Defendants have acted contrary to these public policies, have violated specific

22 provisions of the Labor Code, including Labor Code S 2802, and have engaged in other unlawful and23 unfair business practices in violation of Business & Profession Code S

17200 et seq.; depriving24 Plaintiff of rights, benefits, and privileges guaranteed to all employees under law.25 123. Defendants' conduct, as alleged hereinabove, constituted unfair business practices in26 violation of S 17200 et seq. of the Business & Professions Code.27 124. Defendants, by engaging in the conduct herein alleged, including by failing to respond28 to Plaintiffs' tender of the claims to Defendants for indemnification and reimbursements of

25


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reasonably necessary attorneys' fees and costs that Plaintiffs have incurred and will incur in their2 defense of the Benlevi-Zeff lawsuit, either knew or in the exercise of reasonable care should have3 known that the conduct was unlawful. As such, Defendants violated section 17200 et seq. of the4

Business and Professions Code.5 125. As a proximate result of the above mentioned acts of Defendants, Plaintiff has been6 damaged in a sum as may be proven at the time of trial.7 126. Unless restrained by this Court, Defendants will continue to engage in the unlawful8 conduct as alleged above. This Court should therefore make such orders or judgments, including the9 appointment of a trustee or receiver, as may be necessary to prevent the use or employment, by

10 Defendants, their agents or employees, of any unlawful or deceptive practice prohibited by the11 Business & Professions Code.

12

13

14

IS

THIRTEENTH CAUSE OF ACTION

DECLARA TORY RELIEF(By All Plaintiffs Against Defendants Modern Luxury and Does 1-25, inclusive)

16 127. Plaintiffs re-allege and incorporate by reference those allegations set forth in

17 paragraphs 1-126, supra, as though fully set forth herein.18 128. A dispute has arisen between Plaintiffs and Modern Luxury relating to the legal rights,19 duties and obligations of said parties as described herein, including but not limited to Modern20 Luxury's duty to indemnify and reimburse Plaintiffs for the cost of their defense in the Benlevi-Zeff21 action.

22 129. No adequate remedy, other than herein prayed for, exists by which the rights of the23 parties hereto may be determined.

24 130. Plaintiffs request declaratory relief to prevent continuation of the conduct herein25 alleged, including but not limited to the refusal to indemnifY and reimburse Plaintiffs for the cost of26 defense in the Benlevi-Zeff action.

27

28


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FOURTEENTH CAUSE OF ACTION2 FAILURE TO PAY ALL WAGES DUE AT TERMINATION3

(Labor Code ~~ 201 and 203)4

(By Plaintiff Michael Kong Against Defendants Modern Luxury and Does 1-25, inclusive)5 131. Plaintiff re-alleges and incorporates by reference those allegations set forth in6 paragraphs 1-130, supra, as though fully se t forth herein.7 132. Labor Code S 201(a) provides that if an employer discharges an employee, the wages8 earned and unpaid at the time of discharge are due and payable immediately.9 133. Labor Code S 203 provides that if an employer willfully fails to pay, without

10 abatement or reduction, any wages of an employee who is discharged, thewages of

the employee11 shall continue as a penalty from the due date thereof at the same rate until paid or for; but these12 penalty wages shall not continue for more than thirty (30) days.13 134. Defendants' failure to pay wages to Kong, as alleged above, including but not limited14 to the wages earned and unpaid at the time of termination, was willful in that Defendants, and each of15 them, knew wages to be due but failed to pay them, thus entitling Kong to wage continuation under16 Labor Code SS 203,1194, and 1194.2.

17 135. Defendants failed to pay Kong a sum certain at the time of termination, and have18 failed to pay those sums as of the time of filing of this complaint. Pursuant to the provisions of the19 Labor Code S 203, Kong is entitled to wage continuation in the amount of Kong's daily wage20 multiplied by thirty (30) days.

21 136. As a direct, foreseeable and proximate result of Defendants' violation of Labor Code22 SS 201 and 203, Kong has suffered lost income in an amount according to proof. In addition, under23 Labor Code S 203, Kong is entitled to a "waiting

time" penalty in an amount equivalent to 30 days of24 wages. Additionally, as a result of Defendants' willful failure to pay Kong the amounts due, Kong is25 also entitled to recover prejudgment interest on this unpaid amount, as well as reasonable attorneys'26 fees and costs pursuant to Labor Code S 1194.

27 III28


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FIFTEENTH CAUSE OF ACTION2 FAILURE TO PAY WAGES3 (Labor Code ~ 1194 and IWC Wage Order No.4)4

(By Plaintiff Kong Against Defendants Modern Luxury and Does 1 - 25, inclusive)5 137. Plaintiffre-alleges and incorporates by reference those allegations set forth in6 paragraphs 1-136, supra, as though fully set forth herein.7 138. Labor Code S 1194 and IWC Wage Order No.4 provide that employees are entitled t8 wages and compensation for work performed, at the legal minimum wage. Labor Code SS 1194(a)9 and 1194.2(a) provide that an employee who has not been paid the legal overtime wage as required

10 by S1197 ma y recover the unpaid balance together with attorney's fees and costs of suit, aswell

as11 liquidated damages in an amount equal to the wages unpaid and interest thereon.12 139. In or about June 2008 Plaintiff Michael Kong and Defendants, and each of them, had13 entered into an employment contract whereby Kong was to be compensated at the rate of four14 hundred thousand dollars ($400,000) per year, which equates to $33,333.33 per month.15 140. At all relevant times herein, Defendants were required to compensate Kong for his16 work pursuant to California Labor Code S 1194 and in accordance with the aforementioned

17 employment contract.

18 141. Kong was not compensated for al l time that he was subject to the control of19 Defendants. Defendants required Kong to work without pay for an entire year, from on or about July20 1, 2008 through on or about June 30, 2009, in violation of Labor Code S 1194 and IWC Wage Order21 No.4.

22 142. Further, Labor Code S 206.5 provides that "[a]n employer shall not require the23 execution of a release of a claim or right on account

of wages due, or to become due, or made as an24 advance on wages to be earned, unless payment of those wages has been made. A release required or25 executed in violation of this provision of this section shall be null and void as between the employer26 and the employee. Violation of this section by the employer is a misdemeanor."27 143. In or about January 2010, Defendants, and each of them, terminated Kong's28 employment and unlawfully required him to execute a release of his right to wages due. That release,


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. .

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contained in the Kong Separation Agreement set forth above, states:

4.01 In consideration of the Payment and other benefits provided hereunder,Executive.. . agrees to release and discharge the Company, the Parent and anysubsidiary, affiliate, successor, predecessor, or otherwise related companies, and thepast, present, and future employees, agents, officers, attorneys, directors, owners,members, shareholders and employee benefit programs of any of them, and theiragents and insurers (collectively, the "Releasees"), from all claims, demands,liabilities, or causes of action, known or unknown, of any nature whatsoever, from thbeginning of time until the Effective Date, which the Releasors have or may haveagainst the Releasees, including without limitation claims related to Executive'semployment with the Releasees or the termination of that employment, provided,however, that nothing in this Agreement shall either waive any rights or claims ofExecutive that arise after the Effective Date or impair or preclude Executive's right totake action to enforce the terms of this Agreement. Executive's release includes anyights or claims Executive may have under any federal, state or local ordinances,statutes or common law.... This also includes a release by Executive of any claims fowrongful discharge, breach of contract, severance pay, overtime pay, vacation pay,onus, or commissions and any common law claims whatsoever, to the fullest

extentsuch claims may be released under the law. . . .

144. Plaintiff is informed and believes, and based thereon alleges, that Defendants' regular

custom and practice of requiring him to work and not paying for that work according to the mandatesof California law and his employment agreement is, and at all times herein mentioned was, inviolation of Labor Code S 1194. Defendants' employment policies and practices wrongfully andillegally failed to compensate Plaintiff for all time worked and compensation earned, as required by

California law. Further, Kong is informed and believes, and based thereon alleges, thatDefendants'

requiring him to execute the aforementioned release of his right to wages due is, and al l times hereinmentioned was, a violation of Labor Code S 206.5 and a misdemeanor, and that the release is null andvoid.

145. Such a practice regarding illegal compensation as described herein entitIes Plaintiff toa recovery in a civil action for the unpaid balance of compensation, including interest thereon,penalties, reasonable attorneys' fees, and costs of suit according to California Labor Code S 1194, etseq.

PRAYER FOR RELIEFWHEREFORE, Plaintiffs pray for the following relief:

ON THE FIRST CAUSE OF ACTION:


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1

2

1.

2.

For compensatory damages according to proof;

For exemplary damages;

3 ON THE SECOND CAUSE OF ACTION:

4

5

3.

4.


For an injunction ordering Defendants to specifically perform its obligations to6 indemnify and hold Plaintiffs' harmless in the Benlevi-Zeff Action;7 ON THE THIRD CAUSE OF ACTION:

8

9

5.

6.


For an injunction ordering Defendants to specifically perform its obligations to10 indemnify and hold Plaintiffs' harmless in the Benlevi-Zeff Action;

lION THE FOURTH CAUSE OF ACTION:12

13

7.

8.


For an injunction ordering Defendants to specifically perform its contractual14 obligations to indemnity and hold Plaintiffs' harmless in the Benlevi-Zeff Action;15 ON THE FIFTH CAUSE OF ACTION:

16

17

18

19

9.

10.


For attorney's fees and costs, pursuant to Section 10.08 of the Goldstein Separation

Agreement;

11. For an injunction ordering Defendants to specifically perform its contractual20 obligations to indemnity and hold Plaintiffs' harmless in the Benlevi-Zeff Action;21 ON THE SIXTH CAUSE OF ACTION:

22

23

12.

13.


For an injunction ordering Defendantsto

specificallyperform its contractual

24 obligations to indemnity and hold Plaintiffs' harmless in the Benlevi-Zeff Action;25 ON THE SEVENTH CAUSE OF ACTION:

26

27

28

14 .

15.

F or compensatory damages according to proof;

For an injunction ordering Defendants to specifically perform its contractual

obligations to indemnity and hold Plaintiffs' harmless in the Benlevi-Zeff Action;30


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. .

ON THE EIGHTH CAUSE OF ACTION:2

3

4

5

16.

17.


For attorney's fees and costs, pursuant to Section 10.08 of the Goldstein Separation

Agreement;

18. For an injunction ordering Defendants to specifically perform its contractual6 obligations to indemnify and hold Plaintiffs' harmless in the Benlevi-Zeff Action;7 ON THE NINTH CAUSE OF ACTION:8

9

19.

20.


For exemplary damages;

10 ON THE TENTH CAUSE OF ACTION:11

12

13

14

21.

22.


For an Order of the court enjoining Defendants Flannery, Cobert, Spanfeller,Friedlich, and Does 1-25, inclusive, from further interference;

23. For exemplary damages;

15 ON THE ELEVENTH CAUSE OF ACTION:16

17

18

24.

25.

That this Court issue an Order requiring Modern Luxury to indemnify and reimburse

Kong for his $600,000 expenditure, plus interest thereon;

That this Court issue an Order requiring Modern Luxury to indemnify and reimburse19 Plaintiffs Kong and Goldstein for al l fees and costs they reasonably and necessarily20 have incurred and will incur in the process of defending themselves in the Benlevi-21 Zeff Action;

22 ON THE TWELVTH CAUSE OF ACTION:23

24

25

26

27

28

26.

27.

For an injunction orderingModern Luxury and MLM Holding Corp. to indemnify and

reimburse Plaintiffs for all fees and costs they reasonably and necessarily have

incurred and will incur in the process of defending themselves in the Benlevi-ZeffAction;

For an injunction preventing Defendants from distributing the proceeds of the sale ofany assets of Modern Luxury until sufficient funds have been set aside for the defense

31


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. .

, .

and indemnification of Plaintiffs in the Benlevi-Zeff Action, or, alternatively, for an2 injunction preventing Defendants from transferring or selling the assets of Modem3 Luxury during the pendency of the Benlevi-Zeff Action;4

ON THE THIRTEENTH CAUSE OF ACTION:5 28. For an Order granting declaratory relief to Plaintiffs that Defendant Modem Luxury6 has a duty to indemnify and defend Plaintiffs as to the Benlevi-Zeff Action, including7 but not limited to attorneys' fees and costs of suit;8 ON THE FOURTEENTH CAUSE OF ACTION:9

10

11

12

29.

30.

For unpaid wages, including interest thereon, according to proof;

For waiting time penalties equal to 30 days' pay at Plaintiff Michael Kong'sregular

31.

rate of pay, according to proof;

For reasonable attorneys' fees pursuant to Labor Code S 203;13 ON THE FIFTEENTH CAUSE OF ACTION:14

15

16

17

32.

33.

34.

For unpaid wages, including interest thereon, according to proof;

For liquidated damages in an amount equal to the unpaid wages, including interestthereon, according to proof, pursuant to Labor Code S1194.2;

For reasonable attorneys' fees pursuant to California Labor Code S1194, et seq.18 ON ALL CAUSES OF ACTION:

22 Dated: August 4,201023

24

25

26

27

28

19

20

21

A.

B.

F or Plaintiff s costs of suit herein; and

For all such other and further relief as the Court deems just and proper.

HERNANDEZ SCHAEDEL & ASSOCIATES, LLP

By:

I on A. HernandezAttorneys for PlaintiffsMICHAEL KONG and JEFF GOLDSTEIN


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, .

1 DEMAND FOR JURY TRIAL2 Plaintiffs hereby demands trial by jury on all issues so triable in the Complaint.

3

4 Dated: August4, 2010

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HERNANDEZ SCHAEDEL & ASSOCIATES, LLP

By:

Attorneys for PlaintiffsMICHAEL KONG and JEFF GOLDSTEIN

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15

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22 XX

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PROOF OF SERVICE2

STATE OF CALIFORNIA )3 ) ss.

COUNTY OF LOS ANGELES )4

I reside in the County of Los Angeles, State of California. I am over the age of eighteen andnot a party to the within action. My business address is 2 North Lake Avenue, Suite 930, Pasadena,CA91101.6

On August 5, 2010, I served the foregoing document(s) described as: FIRST AMENDEDCO MPLAINT on the parties in this action by placing a true copy(ies) thereof enclosed in a sealed envelopeaddressed as follows:8

9

10

11

12

13

14

J. Robert Renner, Esq.Duane Morris LLP865 South Figueroa St., Suite 3100Los

Angeles, CA [email protected]

Attorney for DefendantsMODERN LUXURY MEDIA, LLC,; MLMHOLDING CORP.

XX (BY U. S. MAIL) I am "readily familiar" with the fInn's practice of collection and processingcorrespondence for mailing. Under that practice it would be deposited with U.S. Postal Service on thatsame day with postage thereon fully prepaid at Pasadena, California in the ordinary course of business.am aware that on motion of he party served, service is presumed invalid if postal cancellation date orpostage meter date is more than one day after date of deposit for mailing aftdavit.(BY EMAIL) By agreement of he parties, I sent a true copy thereof to the last knO"'11 email address to thidentified addresses above.

(BY PERSONAL SERVICE) I delivered such document to the above party at the above location.

(BY OVERNIGHT MAIL) I caused said envelope(s) to be delivered overnight via an overnight deliveryservice in lieu of delivelY by mail to the addressee(s).

(STATE) I declare under penalty of peIjury under the laws of the State of Cal ifornia that the above is trueand correct.

(FEDERAL) I declare that I am a member of he bar of his Court.

Executed on August 5, 2010, at Pasadena, California25 ~

26

27

Documents

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