Incentive Capital v. Camelot Entertainment Group et al

Filing 2

AMENDED COMPLAINT against Robert P. Atwell, Camelot Distribution Group, Camelot Entertainment Group, Camelot Film Group, Steven Istock, Jamie R. Thompson. New Defendants: Ted Baer; Peter Jarowey., filed by Incentive Capital. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E, # 6 Exhibit F, # 7 Exhibit G, # 8 Exhibit H, # 9 Exhibit I, # 10 Exhibit J) (Pia, Joseph)

Joseph G. Pia (9945)
Nathan S. Dorius (8977)
PIA ANDERSON DORIUS REYNARD & MOSS, PLLC
Wells Fargo Building
222 South Main Street, Suite 1800
Salt Lake City, Utah 84101
Tel: [phone]
Fax: [phone]
Email: [e-mail]
[e-mail]
Attorneys for Plaintiff Incentive Capital, LLC
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, CENTRAL DIVISION
INCENTIVE CAPITAL, LLC, a Utah Limited
Liability Company,
Plaintiff,
v.

AMENDED COMPLAINT

CAMELOT ENTERTAINMENT GROUP,
INC., a Delaware Corporation; CAMELOT
FILM GROUP, INC., a Nevada Corporation;
CAMELOT DISTRIBUTION GROUP, INC.,
a Nevada Corporation, ROBERT P. ATWELL,
an individual; JAMIE R. THOMPSON, an
individual; STEVEN ISTOCK, an individual;
TED BAER, an individual; PETER
JAROWEY, an individual,

Civil No.: 2:11-CV-00288

Defendants.
*******

Judge Paul Warner

Plaintiff Incentive Capital, LLC, a Utah limited liability company, (“Plaintiff” or
“Incentive”) by its counsel of record Pia Anderson Dorius Reynard & Moss, hereby complains
against Camelot Entertainment Group, Inc., a Delaware corporation (“CEG”), Camelot Film
Group, Inc., a Nevada corporation (“CFG”), and Camelot Distribution Group, Inc., a Nevada
corporation (“CDG” and collectively “Camelot”), Robert P. Atwell (“Atwell”), an individual,
Jamie R. Thompson (“Thompson”), an individual, Steven Istock (“Istock”), an individual, Ted
Baer (“Baer”), an individual, and Peter Jarowey, an individual (“Jarowey” and collectively
“Atwell Defendants”) (Camelot and Atwell Defendants may be collectively referred to herein as
the “Defendants”) (CFG, CEG, CDG, and Atwell may be collectively referred to herein as the
“Loan Parties”), and alleges in support thereof as follows:
NATURE OF THE ACTION
1.

This is a diversity action seeking injunctive and declaratory relief and damages

against Camelot and the Atwell Defendants for: (1) Breach of Contract; (2) Breach of Guaranty;
(3) Promissory Estoppel; (4) Quasi Contract, Unjust Enrichment, and/or Quantum Meruit; (5)
Breach of Covenant of Good Faith and Fair Dealing; (6) Fraud; (7) Fraud in the Inducement; (8)
Alter Ego; (9) Civil Conspiracy; (10) Conversion; (11) Negligent Misrepresentation; (12) Gross
Negligence; (13) Constructive Trust; (14) Declaratory Relief; and (15) Tortious Interference with
Economic Relations. These claims arise out of certain loans (collectively the “Loan”) that
Camelot took from Incentive to finance the acquisition and distribution of a film and television
library containing hundreds of media titles (“Liberation Library”).

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2.

Camelot (including CEG, a public company) and the Atwell Defendants, who are

each officers of Camelot, made gross misrepresentations about their financial stability, their
ability to pay back loans, their track record marketing and distributing films, and their ability to
distribute and exploit the Liberation Library to induce Incentive to provide it with funds to
acquire and distribute the Library.
3.

Camelot and the Atwell Defendants which are parties to the loans from Incentive

breached the plain terms of the several documents executed in connection with the Loan (the
“Loan Documents”), described more fully below, and pursuant to the security agreements
Incentive received in connection with the Loan, Incentive foreclosed on the Liberation Library
and some additional film titles pledged as collateral on the Loan (collectively, the “Library”)
and, as a result, is presently the legal title holder of all of the Library’s motion picture and
television titles and all rights and interests associated therewith or arising therefrom.
4.

Despite the legal acquisition of all ownership rights to the Library by Incentive

pursuant to the foreclosure sale, Camelot and the Atwell Defendants are continuing to
improperly hold themselves out as the owner of the Library, and are diverting and stealing funds
that rightfully belong to Incentive.
5.

Defendants have already damaged Incentive, and unless Defendants are

immediately enjoined from furthering their destructive actions, Incentive will suffer irreparable
harm.
DESCRIPTION OF THE PARTIES
6.

Plaintiff Incentive Capital, LLC is a Utah limited liability company with its

principal place of business in Utah County, and is therefore a citizen of Utah.

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7.

Defendant Camelot Entertainment Group, Inc., is a Delaware corporation with a

place of business at 8001 Irvine Center Drive, Suite 400, Irvine, California 92618. Defendant
CEG is a citizen of both Delaware and California.
8.

Defendant Camelot Film Group, Inc., is a Nevada corporation with a place of

business at 10 Universal City Plaza, NBC/Universal Building, 20th Floor, Universal City,
California 91608. Defendant CFG is a citizen of both Nevada and California.
9.

Defendant Camelot Distribution Group, Inc., is a Nevada corporation with a place

of business at 10 Universal City Plaza, NBC/Universal Building, 20th Floor, Universal City,
California 91608. Defendant CDG is a citizen of both Nevada and California.
10.

Defendant Robert P. Atwell is CEO of CEG, CFG, and CDG, and is a resident

and citizen of the State of California.
11.

Defendant Jamie R. Thompson is the former President of Distribution of CEG,

CFG, and CDG, and is a resident and citizen of the State of California.
12.

Defendant Steven Istock is the CFO of CEG, CFG, and CDG, and is a resident

and citizen of the State of California.
13.

Defendant Ted Baer has acted as the General Counsel for CEG, CFG, and CDG,

and is a resident and citizen of the State of California.
14.

Defendant Peter Jarowey is a consultant for CEG, CFG, and CDG, and is a

resident and citizen of the State of California.
15.

Defendants have conducted business in the State of Utah relative to the loans,

security agreements, guarantees, and foreclosure sale of the Library and other related assets, and
have participated in many business transactions in Utah relative to the dispute set forth herein.

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JURISDICTION AND VENUE
16.

This Court has jurisdiction over Plaintiff’s claims pursuant to 28 U.S.C. § 1332

because the amount in controversy exceeds the sum of $75,000.00, exclusive of interest and
costs, and is among citizens of different states.
17.

This Court has personal jurisdiction over Defendants based on Utah’s “long arm”

statute, Utah Code Ann. §78B-3-205, inasmuch as Defendants have transacted business in the
state of Utah and the claims asserted herein arise out of these transactions.
18.

This Court also has jurisdiction pursuant to 28 U.S.C. §§ 2201 and 2202,

inasmuch as Plaintiff requests a declaration of its rights vis a vis Defendants.
19.

This Court also has jurisdiction over the subject matter of this action pursuant to

Sections 15 and 22 of the Securities Act, [15 U.S.C. §§ 77o and 77v].
20.

Venue is appropriate in this Court pursuant to 15 U.S.C. § 77v and 28 U.S.C.

§1391(b). The defendants have purposefully availed themselves of the rights and privileges of
the State of Utah, and a substantial part of the events or omissions giving rise to the claims set
forth herein occurred in Utah.
21.

As set forth more fully below, on or about April 27, 2010, Incentive entered into a

loan agreement with CFG (the “Note”), attached hereto as Exhibit A, whereby Incentive agreed
to loan CFG the principal amount of $650,000.00 with fees and interest and CFG promised to
repay the same according to the express terms of the Note. See Exh. A.
22.

The Note’s “Governing Law” section provides in part: “This Note shall be

construed and enforced under the laws of the State of Utah and any applicable federal laws.”
See id. (emphasis added.)

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23.

The Note, and the CEG, Atwell and CDG Guarantees (collectively the

“Guarantees” as more fully described and defined below) are secured by collateral, some of
which is described in a security agreement between Incentive and CDG (the “CDG Security
Agreement”), attached hereto as Exhibit B, as “Distribution Assets,” a series of thirteen (13)
films being distributed by CDG. See Exh. B.
24.

The “Governing Law; Terms” section of the CDG Security Agreement provides:

This Security Agreement shall be deemed to have been made in the state of Utah and
the validity, construction, interpretation, and enforcement hereof, and the rights of the
parties hereto, shall be determined under, governed by, and construed in accordance
with the internal laws of the state of Utah. Debtor hereby consents to the jurisdiction of
any Utah state or United States Federal Court sitting in Utah with respect to disputes
arising out of this Security Agreement.
See id (emphasis added).
25.

The “Waiver of Jury Trial” section of the CDG Security Agreement provides:

Any legal action or proceeding with respect to this Security Agreement must be brought
before the federal or state courts located in the State of Utah, unless Secured Party
elects to bring such legal action or proceeding elsewhere. Debtor hereby irrevocably
accepts for itself and in respect of its property, generally and unconditionally, the
jurisdiction of the federal or state courts located in the State of Utah as having proper
venue. Debtor hereby irrevocably waives any objection which it may have now or
hereafter have to the laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this Security Agreement brought in the aforesaid
Utah courts and irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in an
inconvenient forum, and also consents to the service of process by any means authorized
by the State of Utah.
See id. (emphasis added).
26.

The parties entered into a security and participation agreement between Incentive

and CFG (the “CFG Security Agreement”), attached hereto as Exhibit C, for the “Liberation
Assets,” a large library of approximately 880 motion pictures and television series episodes

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(collectively the Liberation Assets and the Distribution Assets [defined herein] shall be referred
to as the “Library”). See Library, attached hereto as Exhibit D.
27.

The “Governing Law; Terms” section of the CFG Security Agreement is identical

to the CDG Security agreement:
This Security Agreement shall be deemed to have been made in the state of Utah and
the validity, construction, interpretation, and enforcement hereof, and the rights of the
parties hereto, shall be determined under, governed by, and construed in accordance
with the internal laws of the state of Utah. Debtor hereby consents to the jurisdiction of
any Utah state or United States Federal Court sitting in Utah with respect to disputes
arising out of this Security Agreement.
See id. (emphasis added).
28.

The “Waiver of Jury Trial” section of the CFG Security Agreement provides:

Any legal action or proceeding with respect to this Security Agreement must be brought
before the federal or state courts located in the State of Utah, unless Secured Party
elects to bring such legal action or proceeding elsewhere. Debtor hereby irrevocably
accepts for itself and in respect of its property, generally and unconditionally, the
jurisdiction of the federal or state courts located in the State of Utah as having proper
venue. Debtor hereby irrevocably waives any objection which it may have now or
hereafter have to the laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this Security Agreement brought in the aforesaid
Utah courts and irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in an
inconvenient forum, and also consents to the service of process by any means authorized
by the State of Utah.
See id. (emphasis added).
29.

On or about April 27, 2010, Incentive entered into a guaranty agreement with

CEG (the “CEG Guaranty”), attached hereto as Exhibit E, whereby CEG unconditionally and
absolutely guaranteed payment of all of CFG’s indebtedness owing to Incentive, including
without limitation all amounts owing under the Note . See Ex. E.

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30.

The CEG Guaranty’s “Governing Law” section provides:

The provisions of this Guaranty and the respective rights and duties of Guarantor and
Lender hereunder shall be governed by and construed in accordance with Utah law and
any applicable federal laws. . . . Guarantor hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in such Utah state
or federal court. The Guarantor hereby waives any objection that it may nor or hereafter
have to the venue of any suit or any such court or that such suit is brought in any
inconvenient court.
See id. (emphasis added).
31.

On or about April 27, 2010, Incentive entered into a guaranty agreement with the

CEO of the Camelot Entities, Robert Atwell (the “Atwell Guaranty”), attached hereto as Exhibit
F, whereby Atwell unconditionally and absolutely guaranteed payment of all of CFG’s
indebtedness owing to Incentive, including without limitation all amounts owing under the Note.
See Ex. F.
32.

The Atwell Guaranty’s “Governing Law” section provides:

The provisions of this Guaranty and the respective rights and duties of Guarantor and
Lender hereunder shall be governed by and construed in accordance with Utah law and
any applicable federal laws. Guarantor hereby irrevocably submits to the non-exclusive
jurisdiction of any Utah state or federal court sitting in Salt Lake County, over any action
or proceeding arising out of or relating to this Guaranty, or any document related to the
Obligations, and Guarantor hereby irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in such Utah state or federal court.
The Guarantor hereby waives any objection that it may nor or hereafter have to the venue
of any suit or any such court or that such suit is brought in any inconvenient court.
See id. (emphasis added).
33.

On or about April 27, 2010, Incentive entered into a guaranty agreement with

CDG (the “CDG Guaranty”) as further inducement for the Note, attached hereto as Exhibit G,
whereby CDG unconditionally and absolutely guaranteed payment of all of CFG’s indebtedness
owing to Incentive, including without limitation all amounts owing under the Note. See Ex. G.

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34.

The CDG Guaranty’s “Governing Law” section provides:

The provisions of this Guaranty and the respective rights and duties of Guarantor and
Lender hereunder shall be governed by and construed in accordance with Utah law and
any applicable federal laws. Guarantor hereby irrevocably submits to the non-exclusive
jurisdiction of any Utah state or federal court sitting in Salt Lake County, over any action
or proceeding arising out of or relating to this Guaranty, or any document related to the
Obligations, and Guarantor hereby irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in such Utah state or federal court.
The Guarantor hereby waives any objection that it may nor or hereafter have to the venue
of any suit or any such court or that such suit is brought in any inconvenient court.
See id. (emphasis added).
35.

The Guarantees are further secured by collateral described in a separate escrow

agreement between Incentive and CEG (the “Escrow Agreement”), attached hereto as Exhibit H.
See Ex. H.
36.

The Escrow Agreement provides in part: “These Escrow Instructions and this

Escrow Agreement shall be governed by the internal laws of the State of Utah applicable to
contracts negotiated and entered into and performed wholly within the State of Utah.” See id.
(emphasis added).
37.

On or about June 11, 2010, Incentive entered into a loan modification agreement

with Defendants (the “Loan Modification Agreement”), attached hereto as Exhibit I, whereby
Defendants agreed to meet certain sales and payment benchmarks in addition to their existing
obligations under the Note. In exchange, Incentive agreed to continue its monetary advances to
CFG and to refrain from instituting legal action against Defendants for alleged breaches of the
Loan Documents. See id. (emphasis added).
38.

The “Recitals” section of the Loan Modification Agreement provides in part:

“Unless specifically and expressly modified herein, all remaining terms of the Loan Documents

9

shall remain in full force and effect.” See id. Furthermore, the Loan Modification Agreement
does not modify any of the choice of law provisions in the Loan Documents, described more
fully below. See id.
39.

Pursuant to the Loan Documents—which comprises the Note, the Guarantees, the

Security Agreements, the Escrow Agreement, the Loan Modification, and all related
documents—the applicable law as agreed to and acknowledged by Defendants is Utah law, and
the proper forum for this action is Utah.
GENERAL ALLEGATIONS
40.

Plaintiff incorporates by reference each and every one of the allegations contained

in the preceding paragraphs of the complaint as if fully set forth herein.
The Loan Parties Breached the Terms of the Loan Documents
41.

As alleged above, on April 27, 2010, CFG executed and delivered the Note to

Incentive, evidencing Incentive’s Loan to CFG in the principal amount of $650,000.00 with fees
and interest and CFG’s agreement to repay the same according to the terms of the Note . See
Exh. A.
42.

Pursuant to the terms of the Note, the principal amount of $650,000.00, fees of

approximately $32,500.00, and applicable interest, and costs were due on or before January 31,
2011. See id.
43.

Additional terms of the Loan Documents require the Loan Parties to pay: (a)

interest of one and one-half percent (1.5%) of the outstanding balance of the Note per month
commencing May 27, 2010; and (b) ten percent (10%) of all gross revenues received by

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Defendants for the exploitation of the Liberation Library described in the CFG Security
Agreement. See id; see Exh. C.
44.

The Note and all of CFG’s indebtedness owing to Incentive is guaranteed by

CEG, Atwell, and CDG. See Exhs. A, E-G.
45.

The same day that the Note was entered into, on April 27, 2010, Incentive entered

into a guaranty agreement with CEG (the “CEG Guaranty”) whereby CEG unconditionally and
absolutely guaranteed CFG’s repayment obligations under the Note. See Exh. E.
46.

On or about April 27, 2010, Incentive entered into a second guaranty agreement

with Atwell (the “Atwell Guaranty”) whereby Atwell unconditionally and absolutely guaranteed
CFG’s repayment obligations under the Note. See Exh. F.
47.

On or about April 27, 2010, Incentive entered into a third guaranty agreement

with CDG (the “CDG Guaranty”) whereby CDG unconditionally and absolutely guaranteed
CFG’s repayment obligations under the Note. See Exh. G.
48.

The CEG, Atwell and CDG Guarantees (collectively the “Guarantees”) are

secured by collateral described in a separate security agreement between Incentive and CDG (the
“CDG Security Agreement”) including the “Distribution Assets,” a list of thirteen (13) films in
which CDG has certain distribution and license rights. See Exh. B.
49.

The Guarantees are secured by additional collateral described in a separate

security and participation agreement between Incentive and CFG (the “CFG Security
Agreement”) including the “Liberation Assets,” which encompasses a large library of motion
pictures and television series. See Exh. C.

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50.

Pursuant to the CFG Security Agreement, CFG agreed to provide detailed

quarterly statements including, without limitation, an accounting of all revenue and expenses
related to the disposition or other exploitation of the Liberation Library. See id. CFG further
agreed to provide a monthly general statement indicating the total gross revenues received for or
in connection with the disposition or other exploitation of the Liberation Library from the
previous month. See id.
51.

The Guarantees are further secured by collateral described in a separate escrow

agreement between Incentive and CEG (the “Escrow Agreement”) referred to as “Pledged
Shares.” See Exh. H. By way of the Escrow Agreement, Defendants offered CEG Class F
Convertible Preferred shares as additional collateral securing CFG’s Note obligations and its
indebtedness owing to Incentive.
52.

Shortly after Incentive made the Loan to CFG, the Loan Parties breached certain

terms of the Loan Documents, including certain representations and warranties made in the Loan
Documents and in connection therewith relating to certain benchmarks for exploitation of the
Liberation Library.
53.

On or about June 11, 2010, in an effort to remedy the Loan Parties’ breach of the

Loan Documents and maintain a working relationship with Defendants, Incentive entered into a
loan modification agreement with the Loan Parties (the “Loan Modification”), whereby the Loan
Parties agreed to meet certain sales and payment benchmarks in addition to their obligations
under the Note. See Exh. I.
54.

Pursuant to the Loan Modification, the Loan Parties agreed to generate sales from

the exploitation of the Liberation Library in an amount not less than $2,284,500. See id. The

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Loan Parties further agreed to pay Incentive “Increased Participation Amounts” of 13% of all
revenues received less than $200,000, and 15% of all revenues received greater than $200,000.
See id. The Loan Parties agreed to pay the Increased Participation Amounts to Incentive until
such time that Incentive received at least $375,000 in Increased Participation Amounts, at which
time the payments Incentive would receive from the Loan Parties would be equal to 10% of all
revenues. See id.
55.

Based on the Loan Parties’ representations, Incentive agreed to continue its

monetary advances to CFG and to refrain from instituting legal action against Defendants or
pursuing any of the collateral. See id.
56.

Despite Incentive’s good-faith attempt to work through the Loan Parties’ initial

breach of the Loan Documents by entering into the Loan Modification Agreement, the Loan
Parties failed to meet their obligations under the Loan Modification Agreement and the terms of
the Note.
57.

To date, the Loan Parties have failed to meet their obligations to Incentive under

the Loan Documents and the Loan Modification Agreement.
Incentive Properly Foreclosed on the Library and Related Rights and Interests
58.

Incentive has notified Defendants of the breach of the Loan Documents on

numerous occasions.
59.

After many unsuccessful attempts to settle the matter, Incentive initiated non-

judicial foreclosure of its security interest in portions of the pledged collateral set forth in the
Security Agreements.

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60.

On February 9, 2011, Incentive issued a proper Notice of Disposition of Collateral

by Public Sale that set as the sale date February 21, 2011.
61.

Incentive duly published notice of the public sale in a commercially reasonable

manner.
62.

On February 21, 2011 at 9:00 a.m., Incentive held a properly noticed foreclosure

sale (the “Foreclosure Sale”) in the state of Utah to foreclose on collateral set forth in the
Security Agreements.
63.

All aspects of the Foreclosure Sale were commercially reasonable, including the

method, manner, time and place thereof.
64.

Also on February 21, 2011, Incentive issued a Transfer Statement to Defendants

stating, among other things:
The debtors, Camelot Distribution Group, Inc., Camelot Entertainment Group, Inc., and
Camelot Film Group, Inc. (collectively, “Debtor”), defaulted under their loan obligations
to the secured party, Incentive Capital, LLC (the “Secured Party”). As a result thereof,
the Secured Party, pursuant to its Notice of Disposition of Collateral by Public Sale dated
February 9, 2011, did conduct a public sale of the following personal property
constituting a portion of Secured Party’s collateral (the “Collateral”):
All of Debtor’s rights to the film library described herein below and
referred to as the “Distribution Assets”, along with all products and
proceeds of or from (a) the Distribution Assets; and (b) all accounts,
negotiable instruments, chattel paper and electronic chattel paper, general
intangibles, proceeds, and monies derived from the disposition or other
exploitation of the Distribution Assets in all media, from all sources,
worldwide during the term hereof. The Distribution Assets include without
limitation the following films, and all of Debtor’s right, title and interest
therein, including distribution rights, royalty interests, and contract/account
payments: Samurai Avenger; First Strike; Screwball: The Ted Whitfield
Story (aka The Wiffler); The Fallen; One Lucky Dog (aka Weiner Dog
Nationals); Never Sleep Again; Hellraiser Unleashed; Fink!; Nude Nuns
With Big Guns; Zombie Culture; National Lampoons Dirty Movie; Who Is
KK Downey; and Next of Kin.

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All of Debtor’s personal property assets and interests as more particularly
described in the Asset Purchase Agreement (the “Asset Purchase
Agreement”) dated April 28, 2010 between Camelot Film Group, Inc., a
Nevada corporation, on the one hand, and CMBG Advisors, Inc., a
California corporation in its sole and limited capacity as assignee for the
benefit of creditors of Liberation Group, Inc., on the other hand, and all
products and proceeds thereof, including without limitation (a) that certain
film library referred to as the Liberation Assets (as defined in the Asset
Purchase Agreement); (b) all accounts, negotiable instruments, chattel
paper and electronic chattel paper, general intangibles, proceeds, and
monies derived from the disposition or other exploitation of the Liberation
Assets in all media, from all sources, worldwide during the term hereof; and
(c) other assets of the Debtor as set forth in the Asset Purchase Agreement.
See Transfer Statement, attached hereto as Exhibit J.
65.

Defendants permitted the Foreclosure Sale to be conducted. In fact, legal counsel

for the Defendants was present at the Foreclosure Sale.
66.

Incentive was the successful bidder at the Foreclosure Sale. Immediately

following the Foreclosure Sale, Incentive became the legal title holder to the Library, and each
and every title therein, all tangible and intangible elements thereto, and all rights to proceeds and
other value derived therefrom.
67.

The Foreclosure Sale, as evidenced by the Transfer Statement, transferred

ownership of all of the collateral set forth in the Security Agreements to Incentive.
68.

Defendants refuse to acknowledge the ownership interests of Incentive and are

improperly maintaining control over funds, physical property, and intellectual property,
including without limitation contracts and payment rights in contravention of Incentive’s
ownership rights.
69.

On March 7, 2011, CDG wrongfully brought a copyright infringement suit in

California federal court against nearly 5,865 Doe Defendants who have allegedly downloaded

15

one or more of the Library films without authorization. See Camelot Distribution Group, Inc. v.
Does 1 through 5865, Case No. CV11-01949 (“Improper Infringement Suit”). Camelot alleges
in the Improper Infringement Suit that it is “licensed with the exclusive right to distribute the
Motion Picture in the United States for any and all media platforms, including but not limited to
theatrical, home video, television and Internet.” See id.
70.

Contrary to such representations at the time the Improper Infringement Suit was

brought, all distribution and ownership rights of the alleged “Motion Picture’ and all motion
pictures and media included in the Library belonged solely to Incentive. CDG does not have
standing to maintain the Improper Infringement Suit, because Incentive – not CDG – is the
owner of any and all rights CDG once had in the Library.
71.

CDG is therefore incorrectly and fraudulently holding itself out as the legal title

holder to rights in the Library.
72.

Defendants are diverting and converting revenue that is being generated from the

Library that rightfully belongs to Incentive.
73.

Defendants are refusing to provide information regarding the location of physical

elements of the Library, such as where master video and audio recordings are stored, licensing
contracts and terms, and where revenue and funds are being deposited that are derived from the
Liberation Library.
74.

These actions violate the property rights of Incentive, are a breach of the parties’

agreements, and amount to, among other things, conversion, theft, and trespass.

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Camelot and the Atwell Defendants
Made Fraudulent Misrepresentations to Induce the Loan
75.

In order to induce Incentive to make the Loan and enter into the Loan Documents,

Camelot and the Atwell Defendants made misrepresentations regarding their financial stability,
their ability to repay the loan, their ability to distribute and generate revenues from exploitation
of the Liberation Library, and the value of the Liberation Library.
76.

On March 24, 2010, Jarowey, Camelot’s advisor and representative performing

the due diligence in relation to the loan agreements, provided Incentive with an income statement
with actual and monthly forecasts from 2009 for the Liberation Library as support for Camelot’s
representation that the Liberation Assets would generate sufficient cash flow to pay back the loan
and meet the represented revenue benchmarks.
77.

On March 30, 2010, Jarowey further indicated that the monthly average gain for

the Liberation Assets in 2009 was between $200,000 and $300,000 in support for his
representation that the Liberation Library would garner at least the same results in 2010 and
beyond.
78.

The foregoing representations about the profitability of the Liberation Assets were

material and were relied upon by Incentive in providing financing.
79.

The foregoing representations were false.

80.

On April 1, 2010, Baer, acting general counsel for Camelot during the negotiation

of the loan agreements, misrepresented that CDG’s assets have a significantly higher value than
the amount of the proposed loan and the interest thereon.
81.

On April 16, 2010, Thompson, former President of Distribution, in an attempt to

induce Incentive to loan the funds at issue to CFG, misrepresented Defendants’ ability to market

17

and commercialize the Liberation Assets and the Distribution Assets at the upcoming annual
Cannes film festival, and, therefore, misrepresented its ability to generate sufficient revenues to
repay the Loan.
82.

Thompson further represented that the animation titles and classic TV titles of the

Liberation Library have tremendous worth, would exceed $300,000 per month in revenue, have
generated high interest among distributors and media buyers, that Camelot had already been
approached by bulk package buyers, and that Camelot knows who to target to generate
Defendants’ projected revenues.
83.

On April 22, 2010, Thompson provided Incentive with a cash flow forecast for

the Liberation Library in further support for representations that the Liberation Library would
generate sufficient revenue to meet Camelot’s projected sales targets.
84.

Thompson’s representations in the preceding paragraphs were false.

85.

Pursuant to the Loan Documents which were executed on April 27, 2010, Atwell

represented that the Liberation Assets were generating no less than $150,000 monthly in
“Existing Sales Revenue.” This representation was false.
86.

Camelot and Atwell further represented that Defendants’ exploitation of the

Liberation Library would generate $22,845,000 in “Exploitation Sales Revenue.” This
representation was false.
87.

Additionally, Camelot and Atwell were given a 25% cushion within which the

Exploitation Sales Revenue would be acceptable pursuant to the Loan Documents, allowing
Defendants to meet their represented projection with $17,133,750 in Exploitation Sales Revenue,
reflecting a 25% decrease.

18

88.

That Camelot would meet the Exploitation Sales Revenue benchmark or the lower

cushioned benchmark were egregious misrepresentations.
89.

Camelot and Atwell further represented that Incentive would receive 10% of the

Existing Sales Revenue, or at least $15,000 monthly, and 10% of the Exploitation Revenues, or
at least $190,375 monthly, for a total of $205,375 each month (“Payment Benchmark”).
90.

Alternatively, Camelot and Atwell represented that Incentive would receive 10%

of the Existing Sales Revenue, or at least $15,000 monthly, and 10% of the Exploitation
Revenues as modified by the 25% cushion referenced in the preceding paragraph, or at least
$142,781.25 monthly, for a total of $157,781.25 (“Cushioned Benchmark”).
91.

Based on the foregoing misrepresentations, as well as the aforementioned

Security Agreements and Guarantees, including Atwell’s personal guaranty, Incentive lent CFG
the funds to acquire and distribute the Liberation Library.
92.

It was only a matter of months before Camelot was seriously underperforming on

its agreed-to benchmarks for distributing the Liberation Library, resulting in immediate breach of
the Loan Documents.
93.

Camelot has not generated monthly revenues in accordance with its or the other

Atwell Defendants’ representations.
94.

To date, Incentive has not received any payments remotely close to the $205,375

monthly payments represented. Nor have the Defendants met their cushioned Benchmark
Payments as modified by the 25% cushion referenced above of $157,781.25.
95.

The Loan Parties materially breached the terms of the Loan Documents.

19

96.

Further, the Loan Parties failed to meet their modified payment and performance

obligations under the Loan Modification.
97.

The Defendants knowingly and/or recklessly made material misrepresentations

regarding their income statements, their financial stability, their ability to undertake and pay
back loans, and their distribution capabilities in order to induce Incentive to enter into the Loan
Documents, while knowing that they would not be able to achieve their said projections.
98.

But for Defendants’ misrepresentations, Incentive would not have entered into the

agreements set forth in the Loan Documents.
FIRST CAUSE OF ACTION
(Breach of Contract – Against CFG)
99.

Incentive hereby incorporates by reference the allegations set forth above as if

fully set forth herein.
100.

The Loan Documents, whereby CFG agreed to repay the Loan pursuant to the

Note, and whereby CEG, Atwell and CDG guaranteed CFG’s repayment pursuant to the
Guarantees, the Security Agreements, and the Escrow Agreement, constitute valid and
enforceable express or implied contracts in that Incentive agreed to loan $650,000.00 in principal
to CFG in exchange for CFG’s promise to make repayment in full for the Loan plus interest, fees
and costs, and for CEG’s, Atwell’s and CDG’s unconditional and absolute guarantee of CFG’s
repayment in full for the Loan to Incentive.
101.

Incentive rendered performance of its obligations under the Loan Documents, by

making the loan to CFG, which was authorized, requested, approved and accepted by Defendants
to their benefit.

20

102.

The Loan Parties, on the other hand, materially breached the Loan Documents,

by, among other things, failing to repay Incentive the $650,000.00 in principal plus interest, fees
and costs to Incentive as required under the Loan Documents, and in particular the Note and
Guarantees.
103.

The Loan Parties have breached their performance obligations as set forth in the

Loan Documents, such as to generate income in accordance with their projections and to provide
detailed accounting of revenues received on a monthly and quarterly basis.
104.

The Loan Parties have failed to make interest payments, and revenue payments as

required under the terms of the Note, and have improperly diverted and converted funds
belonging to Incentive to themselves in violation of the parties’ agreements.
105.

As a direct and proximate result of the Loan Parties’ breach of the Loan

Documents, as described above, Incentive has incurred, and continues to incur, damages in an
amount to be determined at trial, but no less than $650,000.00 plus all costs, expenses and
attorneys’ fees incurred by Incentive.
106.

Incentive is, therefore, entitled to judgment as set forth below in the Prayer for

Relief.
SECOND CAUSE OF ACTION
(Breach of Guarantees – Against CDG, CEG and Atwell)
107.

Incentive hereby incorporates by reference the allegations set forth above as if

fully set forth herein.
108.

The Guarantees, whereby CDG, CEG and Atwell unconditionally and absolutely

guaranteed repayment in full for Incentive’s loan to CFG, constitute valid and enforceable
express or implied contracts.

21

109.

Incentive rendered full performance of its obligations under the Loan Documents,

by making the Loan to CFG, which was authorized, requested, approved and accepted by
Defendants to their benefit.
110.

CDG, CEG and Atwell, on the other hand, materially breached the Guarantees by,

among other things, failing to satisfy CFG’s repayment and performance obligations to Incentive
under the Note when CFG failed to make its balloon payment of $650,000.00 in principal, its
profit participation payments, along with interest, fees and costs to Incentive.
111.

As a direct and proximate result of CDG’s, CEG’s and Atwell’s breach of the

Guarantees, Incentive has incurred, and continues to incur, damages in an amount to be
determined at trial.
112.

Incentive is, therefore, entitled to judgment as set forth below in the Prayer for

Relief.
THIRD CAUSE OF ACTION
(Promissory Estoppel – Against the Loan Parties)
113.

Incentive hereby incorporates by reference the allegations set forth above as if

fully set forth herein.
114.

Incentive relied to its detriment on the Loan Parties’ representations and

agreements to comply with their obligations under the Loan Documents.
115.

Had Incentive known that the Loan Parties would not repay the Loan and make

the monthly payments in accordance with the aforementioned representation and benchmarks,
Incentive would not have provided financing to CFG.

22

116.

Under these circumstances, it would be fundamentally unfair to permit the Loan

Parties to deny the existence of a contract and their payment obligations, and they should be
estopped from doing so.
117.

Incentive has fully performed all of its obligations under the Loan Documents.

118.

Incentive has demanded repayment from the Loan Parties of any remaining

balance owed under the Loan Documents and other payment obligations, but the Loan Parties
have failed to comply with such demands and the plain terms of their agreements.
119.

Under the Loan Documents, the Loan Parties are obligated to pay Incentive the

principal amount of $650,000.00, all unpaid profit participation payments, accrued but unpaid
interest and fees, plus all costs, expenses and attorneys’ fees incurred by Incentive in an amount
to be determined at trial.
120.

Incentive is therefore entitled to judgment against the Loan Parties as set forth

below in the Prayer for Relief.
FOURTH CAUSE OF ACTION
(Quasi Contract, Unjust Enrichment and/or Quantum Meruit Claim –
Against the Loan Parties)
121.

Incentive hereby incorporates by reference the allegations set forth above as if

fully set forth herein.
122.

If for any reason the trier-of-fact in this case fails to identify the existence of

enforceable and binding contracts between Incentive and the Loan Parties, including the Loan
Documents, Incentive asserts an alternative claim for Quasi Contract, Unjust Enrichment and/or
Quantum Meruit against the Loan Parties.

23

123.

Incentive provided a Loan in the principal amount of $650,000.00 to CFG for the

Loan Parties’ benefit, thereby conferring a benefit upon the Loan Parties with a reasonable
expectation of being compensated in an amount equal to the value of the Loan, plus profit
participation payments, interest, and fees.
124.

Among other things, Incentive, in justifiable and reasonable reliance on the Loan

Parties’ promise to pay, provided a Loan in the principal amount of $650,000.00 to CFG.
125.

To permit the Loan Parties to retain the benefits received for the Loan on their

behalf without complying with their payment and profit participation obligations, would result in
an unconscionable and unjust enrichment of the Loan Parties at Incentive’s expense.
126.

The Loan Parties were fully aware of the benefits conferred upon them by

Incentive.
127.

Incentive did not act as a volunteer or intermeddler in making the Loan because

the Loan was expressly requested, authorized and accepted by Defendants.
128.

The Loan Parties have been unjustly enriched, and Incentive is entitled to recover

under a theory of quasi contract/quantum meruit, in an amount to be determined at trial but in no
event less than $650,000.00, profit participation payments, accrued but unpaid interest and fees,
plus all costs, expenses and attorneys’ fees incurred by Incentive.
129.

Incentive is therefore entitled to judgment against the Loan Parties as set forth

below in the Prayer for Relief.

24

FIFTH CAUSE OF ACTION
(Breach of Covenant of Good Faith and Fair Dealing –
Against the Loan Parties)
130.

Incentive hereby incorporates by reference the allegations set forth above as if

fully set forth herein.
131.

The Loan Documents constitute binding agreements between Incentive and the

Loan Parties.
132.

An implied covenant of good faith and fair dealing inheres in the Loan

Documents that requires the Loan Parties to not act in any manner that denies Incentive the
benefit of its bargain under the Loan Documents as set forth above.
133.

The Loan Parties breached the implied covenant of good faith and fair dealing by,

among other things, misrepresenting the financial stability, marketing and distribution
capabilities of Defendants, the assets owned or controlled by Defendants, and the ability to meet
their obligations under the Loan Documents.
134.

The Loan Parties’ breach of the covenant of good faith and fair dealing has

directly and proximately caused damages to Incentive in an amount to be determined at trial,
together with the value of interest, costs, and attorneys’ fees.
135.

Incentive is therefore entitled to judgment against the Loan Parties as set forth

below in the Prayer for Relief.
SIXTH CAUSE OF ACTION
(Fraud – Against All Defendants)
136.

Incentive hereby incorporates by reference the allegations set forth above as if

fully set forth herein.

25

137.

Defendants made representations regarding their ability to generate certain

revenues in connection with the exploitation of the Liberation Library, and to meet certain
benchmarks and performance obligations pursuant to the Loan Documents as set forth above.
138.

Defendants knew, at the time such representations were made, that they were

unable to generate the revenues as represented or meet the benchmarks and performance
obligations as agreed upon by the parties, including the repayment of the Loan.
139.

Defendants made the aforesaid misrepresentations in order to induce Incentive to

enter into the Loan Documents and make the Loan to CFG.
140.

Incentive was ignorant as to the falsity of Defendants’ misrepresentations and

relied on the same misrepresentations as truth.
141.

Incentive reasonably and justifiably relied on Defendants’ misrepresentations,

which were central to Incentive’s decision to enter into the Loan Documents and make the Loan.
As such, Defendants’ misrepresentations were material.
142.

As a direct and proximate result of Defendants’ fraudulent actions, Incentive has

suffered significant damages.
143.

Incentive is therefore entitled to judgment against Defendants as set forth below

in the Prayer for Relief.
SEVENTH CAUSE OF ACTION
(Fraud in the Inducement – Against All Defendants)
144.

Incentive hereby incorporates by reference the allegations set forth above as if

fully set forth herein.
145.

Incentive entered into the Loan Documents based on the misrepresentations and

omissions made by Defendants that they were financially stable, able to undertake and fully

26

perform under the Loan Documents, and capable of exploiting the Liberation Library as set forth
above.
146.

Defendants made the aforesaid misrepresentations and omissions knowing them

to be false, with the intent to defraud, deceive and induce Incentive to make the Loan, and with
no intention of performing under the Loan Documents.
147.

Incentive was ignorant of Defendants’ intentions not to perform, and in the

exercise of reasonable diligence could not have discovered Defendants’ intentions or the falsity
of their representations.
148.

In justifiable reliance on Defendants’ misrepresentations, Incentive was induced

to and did enter into the Loan Documents as set forth above.
149.

Had Incentive known of Defendants’ actual intentions or of the facts surrounding

the same, Incentive would not have made the Loan.
150.

Defendants’ conduct was malicious, fraudulent, oppressive and/or recklessly

committed, with wanton disregard of Incentive’s rights and interests.
151.

Incentive has been damaged by Defendants’ actions.

152.

Incentive is therefore entitled to judgment against Defendants as set forth below

in the Prayer for Relief.
EIGHTH CAUSE OF ACTION
(Alter Ego – Against All Defendants)
153.

Incentive hereby incorporates by reference the allegations set forth above as if

fully set forth herein.

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154.

Upon information and belief, the Defendants have had such a unity of interest,

ownership, and control that the separate personalities of the parties do not exist, but are instead
the alter ego of each other.
155.

Upon information and belief, the Atwell Defendants used one or more the

Camelot entities, including CDG, CFG and CEG, and personal accounts for the purpose of
improperly hiding assets, and diverting production funds either owed to, belonging to, or
attributable to Incentive.
156.

Upon information and belief, the Atwell Defendants have failed to observe

corporate formalities.
157.

Upon information and belief, the Atwell Defendants improperly commingled

funds, thus allowing them to withhold consideration from Incentive and to misappropriate and
hide monies.
158.

Upon information and belief, the Atwell Defendants failed to keep separate

capital accounts and/or commingled funds.
159.

The Atwell Defendants have been conducting, managing, and controlling the

affairs of Camelot as though such affairs were their own.
160.

Upon information and belief, Camelot has not ever had any genuine or separate

existence from the Atwell Defendants, but these parties have used Camelot for the sole purpose
of transacting business under a separate guise.
161.

Observation of the corporate form of Camelot as separate from the Atwell

Defendants would sanction a fraud, promote injustice, or result in an inequity.

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162.

Because Camelot and the Atwell Defendants are the alter egos of one another,

each is jointly and severally liable for the obligations of one another, and judgment must be
entered against them jointly and severally, in an amount to be determined at trial.
163.

Incentive is therefore entitled to judgment against Defendants as set forth below

in the Prayer for Relief.
NINTH CAUSE OF ACTION
(Civil Conspiracy – Against All Defendants)
164.

Incentive hereby incorporates by reference the allegations set forth above as if

fully set forth herein.
165.

Defendants conspired to deprive Incentive of monies and other property by

among other things, making the misrepresentations set forth herein, failing to repay the amounts
due under the Loan Documents, diverting and converting funds and property that rightfully
belong to Incentive, and falsifying information and other documents reasonably relied upon by
Incentive.
166.

Defendants have no legal or lawful claim to the Library or funds and interests

derived therefrom.
167.

As owner of the Library, Incentive should be entitled to freely exploit the assets

therein to generate revenue and to enlist the assistance of other individuals and parties to
commercialize the Library.
168.

Defendants have and continue to undertake an unlawful conspiracy to deprive

Incentive of monies and property rightfully belonging to Incentive.
169.

Defendants have and continue to improperly misappropriate assets of Incentive,

including revenue rightfully belonging to Incentive.

29

170.

Defendants’ conspiracy has directly and proximately caused damages to Incentive

in an amount to be determined at trial, together with the value of interest, costs, and attorneys’
fees.
171.

Incentive is therefore entitled to judgment against Defendants as set forth below

in the Prayer for Relief.
TENTH CAUSE OF ACTION
(Conversion – Against the Loan Parties)
172.

Incentive hereby incorporates by reference the allegations set forth above as if

fully set forth herein.
173.

Pursuant to the Loan Parties’ breach of the Loan Documents and the subsequent

Foreclosure Sale of the Library, Incentive is the rightful owner of the Library, including all
revenues generated therefrom (“Incentive’s Property”).
174.

The Loan Parties have intentionally interfered with Incentive’s Property by

unlawfully retaining funds and profits that belong to Incentive as well as all of the underlying
physical elements of the Library, including DVDs, audio/visual recordings, masters and the like.
175.

The Loan Parties have intentionally interfered with Incentive’s Property by

holding themselves out as the owners.
176.

The Loan Parties’ interference with and theft of Incentive’s Property have

deprived Incentive of the ability to enjoy the benefits thereof.
177.

The Loan Parties’ conversion has directly and proximately caused damages to

Incentive.
178.

Incentive is therefore entitled to judgment against the Loan Parties as set forth

below in the Prayer for Relief.

30

ELEVENTH CAUSE OF ACTION
(Negligent Misrepresentation – Against All Defendants)
179.

Incentive hereby incorporates by reference the allegations set forth above as if

fully set forth herein.
180.

Under the parties’ agreements, Defendants were required to provide Incentive

with accurate information as set forth in the First Cause of Action, including, without limitation,
information concerning revenues being generated from existing and exploitation sales of the
Liberation Library, Camelot’s financial ability to take and repay loans, and Camelot’s
performance of all other obligations under the Loan Documents.
181.

Defendants’ deviation from the agreements and election to not provide

information to Incentive constitutes the non-disclosure of material information.
182.

Defendants knew that they were misinforming or omitting material information

from Incentive.
183.

Defendants knew, should have known, or expected that Incentive would rely on

Defendants’ misrepresentations or omissions.
184.

Incentive relied upon Defendants’ misrepresentations or omissions and undertook

to perform according to the agreements until discovering Defendants’ wrongdoing.
185.

Incentive is therefore entitled to judgment against Defendants as set forth below

in the Prayer for Relief.
TWELFTH CAUSE OF ACTION
(Gross Negligence – Against All Defendants)
186.

Incentive hereby incorporates by reference the allegations set forth above as if

fully set forth herein.

31

187.

As a public company, and employees of said company, holding itself out as a

responsible borrower of funds in relation to media and entertainment investment transactions,
CEG and the principals thereof owe a duty of care to lenders, including Incentive, from whom
they borrow investment funds.
188.

Defendants not only breached their duty of care to Incentive, but failed to observe

even slight care by carelessly or recklessly misrepresenting their financial stability, their ability
to repay monies loaned to them by Incentive, and their ability to distribute and generate revenues
from the exploitation of the Liberation Library.
189.

Given Defendants’ previous experience and sophistication in borrowing funds for

media and entertainment investment transactions, Defendants’ careless and reckless actions as
set forth above shows utter indifference to the consequences that Defendants should have known
would result.
190.

As a direct and proximate result of Defendants’ failure to observe even slight

care, which arises to the level of gross negligence, Incentive reasonably, justifiably and
detrimentally relied on Defendants’ misrepresentations and has suffered significant damages.
191.

Incentive is therefore entitled to judgment against Defendants as set forth below

in the Prayer for Relief.
THIRTEENTH CAUSE OF ACTION
(Constructive Trust – Against the Loan Parties)
192.

Incentive hereby incorporates by reference the allegations set forth above as if

fully set forth herein.
193.

When the Loan Parties improperly retained monies and property (including all

tangible and intangible elements of the Library) and failed to provide the same to Incentive as

32

required under the Loan Documents, and pursuant to the Foreclosure Sale, they wrongfully took
and retained property in contravention of Incentive’s rights.
194.

The Loan Parties’ wrongful acts were intentional, active, egregious and willful.

195.

The Loan Parties have improperly retained the benefits of their wrongful acts.

196.

The Loan Parties have been unjustly enriched by their wrongful acts.

197.

The specific monies and property wrongfully retained by the Loan Parties are

traceable to the Loan Parties’ bank accounts, warehouses, offices, and other facilities maintained
by the Loan Parties.
198.

Injustice would result if the Loan Parties were able to keep property that rightfully

belongs to Incentive.
199.

Incentive is therefore entitled to judgment against Defendants as set forth below

in the Prayer for Relief.
FOURTEENTH CAUSE OF ACTION
(Declaratory Relief – Against All Defendants)
200.

Incentive hereby incorporates by reference the allegations set forth above as if

fully set forth herein.
201.

Incentive and the Loan Parties entered into Loan Documents wherein each party

agreed to perform certain obligations set forth above and in the attached agreements,
incorporated herein by this reference.
202.

According to the Loan Documents, upon breach by the Loan Parties, Incentive is

entitled as a secured creditor to foreclose on any portion or all of the collateral set forth in the
Security Agreements, including without limitation the Library.

33

203.

Incentive conducted a proper Foreclosure Sale on the Library after providing

appropriate notice and publication of the sale.
204.

Immediately following the sale on February 21, 2011, Incentive became the legal

title owner of the Library.
205.

Defendants refuse to acknowledge the ownership interests of Incentive and are

improperly retaining funds and tangible and intangible property in contravention of Incentive’s
ownership rights.
206.

Defendants are diverting and converting revenue and property that rightfully

belong to Incentive.
207.

Defendants are refusing to provide information regarding the location of physical

elements of the Library, such as where licensing contracts, master video and audio recordings are
stored, and where revenue and funds are being deposited.
208.

These actions violate the property rights of Incentive.

209.

An actual, justiciable controversy exists between Incentive and Defendants as to

the parties’ rights and privileges, particularly with regard to the Library.
210.

Incentive’s interests are adverse to Defendants’ interests.

211.

Incentive and Defendants have legally protectable rights and interests in the

aforementioned controversy, particularly as they relate to ownership of the Library.
212.

The causes of action raised by Incentive in this Complaint evidence that the issue

of the parties’ rights and privileges under the Loan Documents and relating to the Library are
ripe for judicial determination.

34

213.

Based on the allegations set forth herein, Incentive requests the Court to declare

that:
a.

Incentive is the legal owner of all right, title, and interest in and to the

Library and all other rights and interests related thereto or arising therefrom.
b.

Per the parties’ agreements, Defendants must provide all funds, contracts,

contract rights, property (whether physical or intangible), accounts, all products and proceeds of
or from the Library; and all accounts, negotiable instruments, chattel paper and electronic chattel
paper, general intangibles, proceeds, and monies derived from the disposition or other
exploitation of the Library in all media, from all sources, worldwide.
c.

None of the Defendants retains any rights relative to the Library.

d.

Defendants must affirmatively indicate to all interested third parties that

Incentive is the owner thereof.
e.

Incentive has acted properly in all respects relative to the Library and

other matters at issue herein.
214.

Incentive is therefore entitled to judgment against Defendants as set forth below

in the Prayer for Relief.
FIFTEENTH CAUSE OF ACTION
(Tortious Interference with Economic Relations – Against All Defendants)
215.

Incentive hereby incorporates by reference the allegations set forth above as if

fully set forth herein.
216.

As a result of the Foreclosure Sale, Incentive became the legal title owner of the

Library and all rights and interests related thereto or arising therefrom.

35

217.

Among said rights and interest are the (i) distribution or licensing agreements for

portions of the Library and (ii) right to initiate and prosecute the Improper Infringement Suit.
218.

Defendants continue to interfere with the economic relations of Incentive by,

among other things, (i) directing third party payments under said distribution and licensing
agreements to themselves rather than to Incentive and (ii) prosecuting the Improper Infringement
Suit belonging to Incentive.
219.

Such interference is tortious inasmuch as Defendants have done so knowingly

following the divestiture of all of their rights and interests to the Library following the
Foreclosure Sale, and following demands by Incentive to cease such interference.
220.

Incentive is therefore entitled to judgment against Defendants as set forth below

in the Prayer for Relief.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff Incentive demands judgment against Defendants as follows:
1.

For a judgment against Defendants for each of the causes of action set forth

above, including punitive damages where applicable, attorneys’ fees, costs, and other relief as
the Court may deem just, but in no event less than $75,000;
2.

For a judgment for at least the principal of the Note for $650,000, plus interest,

costs, pre and post-judgment interest, attorneys’ fees, and other consequential damages.
3.

Disgorgement of monies and property wrongfully retained by Defendants;

4.

Specific performance as to all obligations set forth in the parties’ agreements,

including the full and complete delivery to Incentive of all contracts, information whether in
physical or electronic form, files, physical masters of the Liberation Library and elements thereto

36

such as all audio/visual materials, spreadsheets, accounting documents, accounts, all products
and proceeds of or from the Library, negotiable instruments, chattel paper and electronic chattel
paper, general intangibles, proceeds, and monies derived from the disposition or other
exploitation of the Library in all media, from all sources, worldwide.
5.

The imposition of a constructive trust for the benefit of Plaintiff on monies,

property, and other value improperly retained by Defendants;
6.

For a third-party collection account to receive and distribute all revenue generated

from the exploitation of the Distribution Assets and the Liberation Library;
7.

For a restraining order and preliminary injunction preventing Defendants from (i)

further interference with the Library and business associated with the Library, and improper
infringement suit, and (iii) any activities interfering with, hindering, or delaying Incentive’s
exercise of its rights and interest in and to the Library, exploitation of the Library, including all
payments received under any distribution or licensing agreements;
8.

Declaratory relief adjudicating that:
a.

Incentive is the legal owner of all right, title, and interest in and to the

Library and all other rights and interests related thereto or arising therefrom.
b.

Per the parties’ agreements, Defendants must provide all funds, contracts,

contract rights, property (whether physical or intangible), accounts, all products and proceeds of
or from the Library; and all accounts, negotiable instruments, chattel paper and electronic chattel
paper, general intangibles, proceeds, and monies derived from the disposition or other
exploitation of the Library in all media, from all sources, worldwide.
c.

None of the Defendants retains any rights relative to the Library.

37

d.

Defendants must affirmatively indicate to all interested third parties that

Incentive is the owner thereof.
e.

Incentive has acted properly in all respects relative to the Library and

other matters at issue herein.
9.

Determination that Defendants have operated as alter egos of one another and,

therefore that the corporate veil of each of CEG, CDG, and CFG should be disregarded and
pierced with all corporate liabilities and obligations being assessed to and borne by the
Defendants jointly and severally.
10.

Judgment in favor of Plaintiff against Defendants jointly and severally on all

11.

For such other and further legal or equitable relief as the Court deems just and

claims;

proper.
DATED this 14th of April, 2011.
PIA ANDERSON DORIUS REYNARD & MOSS
_/s/ Joseph G. Pia___________________________
Joseph G. Pia
Nathan Dorius
Attorneys for Plaintiff
Plaintiff’s Address:
Incentive Capital, LLC
222 South Main Street, Suite 1800
Salt Lake City, Utah 84101

38

EXHIBIT LIST

Exhibit A-

April 27, 2010 Incentive loan agreement with CFG

Exhibit B-

Security Agreement between Incentive and CDG

Exhibit C-

Security and Participation agreement between Incentive and CFG

Exhibit D-

Liberation Library

Exhibit E-

April 27, 2010 Incentive guaranty agreement with CEG

Exhibit F-

April 27, 2010 Incentive guaranty agreement with Robert Atwell

Exhibit G-

April 27, 2010 CDG guaranty agreement with Incentive

Exhibit H-

Escrow Agreement

Exhibit I-

Loan Modification Agreement

Exhibit J-

Transfer Statement

39