SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ------------------------------------------------------------------------x NUE RESOURCE FUNDING, LLC, Index No.: 650454/2016 a New Jersey Limited Liability Company, Plaintiff, FIRST AMENDED COMPLAINT - against - LONE KAT INDUSTRIES, LLC a California Limited Liability Company Defendant -----------------------------------------------------------------------x Plaintiff, NUE RESOURCE FUNDING, LLC, by and through undersigned counsel, hereby files this First Amended Complaint against LONE KAT INDUSTRIES, LLC, and in support thereof, alleges as follows: OVERVIEW 1. This is a lawsuit for Fraudulent Inducement, Breach of Contract and Conversion. THE PARTIES 2. Plaintiff, NUE RESOURCE FUNDING, ( NRF or Plaintiff ) is a limited liability company duly organized under the laws of the State of New Jersey, with a principal address located at 195 Route 9 South, Suite #105, Manalapan, NJ 07726; 3. Defendant, LONE KAT INDUSTRIES, LLC ( LKI or Defendant ) is a limited liability company duly organized under the laws of the State of California, with a principal address located at 1460 W. Washington Blvd., Los Angeles, CA 90007. JURISDICTION AND VENUE
4. Jurisdiction and venue are proper with this Court pursuant to the Mutual Agreement and Global General Release, attached hereto as Exhibit A, which serves as an underlying basis for the initiation of this lawsuit. Specifically, Paragraph 18 of the Settlement Agreement states the following: Jurisdiction. Any legal action arising out of or relating to this Agreement shall be brought exclusively in the District, County, or Supreme Court located in the State of New York, New York County, to which each party hereby accepts and submits to its exclusive personal jurisdiction and venue, and waives any and all objections or defenses thereto. A. Preliminary Factual Background STATEMENT OF FACTS 5. At some point in time in September 2015, NRF contacted and retained LKI for the purpose of creating shirts, pants, and sports bras (collectively, the Products ). The parties agreed that the Products would be completed within three weeks. 6. In furtherance thereof, NRF paid LKI Five Thousand, Eight Hundred Forty-Two Dollars, and Fifty Cents (USD $5,842.50) as upfront payment for completion of the Products (the Upfront Payment ). 7. However, notwithstanding LKI s assertion that the Products would be completed within three weeks, as of the date of this Complaint, the Products have yet to be completed and delivered to NRF as planned. This is despite numerous assurances from LKI, through Dana Smith and LKI s legal counsel, that the Products had been created and shipped to NRF. In fact, on January 20, 2016, Smith sent the undersigned three tracking numbers that purportedly demonstrated delivery of the Products. However, none of the Products have been delivered.
8. Prior to the initiation of this lawsuit, NRF attempted on multiple occasions, in good faith, to negotiate with LKI a completion date for the Products, or in the alternative, the return of the Upfront Payment delivered by NRF for the completion of the Products. 9. During such negotiations, LKI routinely made promises and/or assertions to NRF regarding when the Products will be completed. As an example thereof, upon request for an update regarding the delay surrounding the completion of the Products, on or around November 24, 2015, LKI stated that the Products would be ready for shipment within 7-9 days. Yet, upon the arrival of the ninth day, rather than deliver the shipment as promised, LKI instead told NRF that the entirety of the shipment would not be ready as promised, and that the items that were ready would require additional payment before shipment would be made. 10. In relation to such discussions, NRF, by and through undersigned counsel, delivered to LKI a letter on December 7, 2015, wherein an express demand was made that LKI immediately refund the Upfront Payment ( Initial Demand Letter ). A true and correct copy of the Initial Demand Letter is attached hereto as Exhibit B. 11. In response, LKI asserted a number of meritless defenses as to why LKI was not in breach of the agreement entered into between the parties for the creation of the Products, refused to comply with the demands stated within the Initial Demand Letter, and failed to deliver the Products (wholly or partially completed) to NRF. 12. As a result thereof, NRF, by and through undersigned counsel, delivered a response letter to LKI on December 8, 2015, responding to LKI s meritless defenses, and further reiterating NRF s demands made in the Initial Demand Letter ( Response Letter. ) A true and correct copy of the Response Letter is attached hereto as Exhibit C.
13. NRF contracted in good faith with LKI for the purpose of creating the Products, which were to be completed shortly thereafter within three weeks, and has steadily engaged LKI in discussion in order to receive a completion date regarding the Products, or a return of the Upfront Payment made by NRF towards the completion of same due to the fact that, as of the date of this Complaint, LKI has failed to perform as promised. 14. As a result thereof, rather than seeking judicial intervention due to not wanting to bother the Court with an issue that surely should have been resolved through mutual cooperation of the parties, on or around January 15, 2016, NRF and LKI entered into a Mutual Agreement and Global General Release (the Settlement Agreement ). B. The Settlement Agreement. 15. The Settlement Agreement contains several terms and conditions governing the delivery of the Products from LKI to NRF. 16. Specifically, Paragraph 2 of the Settlement Agreement reads as follows: Delivery of Goods. On or before January 19, 2016, Upon the execution of this Agreement by the parties, LKI shall deliver the following (collectively, the Materials ) to NRF to the address listed in Section 6 of this Agreement, via United Parcel Service, U.S. Postal Service, Federal Express, or other similar delivery service, and shall provide NRF with a tracking number once shipment is complete: a) All shirts completed by LKI pursuant to NRF s request(s); b) All uncut fabric created as a result of or related to the Products; and c) All samples created by LKI for the purpose of completing the Products pursuant to NRF s request(s). LKI shall bear the cost of the initial delivery. 17. However, on January 19, LKI failed to deliver the Materials as agreed upon pursuant to the terms contained in the Settlement Agreement.
18. Furthermore, rather than provide a tracking number detailing the delivery of the Materials as required pursuant to the paragraph 2 of the Settlement Agreement, the tracking numbers provided by LKI simply details that LKI made pre-shipment arrangements in printing out labels regarding delivery of the Materials. However, LKI failed to ship the Materials as required. 19. Thus, on January 21, 2016, correspondence was issued to LKI stating that LKI was in breach of the Settlement Agreement due to its failure to perform pursuant to Paragraph 2 as stated therein. Furthermore, written demand was made stating that if undersigned counsel did not receive confirmation of actual shipment of the Materials, a lawsuit would be filed against LKI. 20. Nonetheless, LKI failed to provide confirmation of actual shipment of the Materials. Furthermore, LKI failed to provide the Products as originally bargained for by NRF. 21. As a result thereof, NRF has been substantially harmed by LKI s willful and wanton behavior in failing to provide the Products or ship the Materials as promised, thus leaving NRF without the goods originally sought from LKI, despite the fact NRF paid the Upfront Payment as required. 22. Not only has LKI failed to perform with regard to the completion and delivery of the Products, as a result of entering into and executing the Settlement Agreement, it follows that LKI has also materially breached the provisions contained therein. 23. Time and time again, NRF has materially relied upon the promises made by LKI in order to manage and operate its business. Additionally, the provisions contained in the Settlement Agreement specifically, the delivery of the Materials on or by a certain date
served as material inducements for NRF to enter into and execute the Settlement Agreement with LKI. 24. However, due to the subsequent acts taken by LKI i.e. the failure to deliver the Materials by or on the date provided and the failure to provide a tracking number detailing that delivery of the Materials would, or will, actually take place it follows that LKI made such assertions with the requisite knowledge that it would not be able to perform same, and did so only to avoid the initiation of litigation by NRF. 25. Despite the good faith and willing nature shown by NRF in order to resolve the underlying issue and preempt the need for judicial intervention, LKI has acted in direct contravention of the agreement entered into and executed by the parties, and has blatantly refused to abide by the express provisions contained therein. C. Issue of Double Payment. 26. On or around February 22, 2016, NRF examined and reconciled its accounting statements and discovered a major issue with regard to the Upfront Payment provided to the LKI for the creation of the Products, which NRF had yet to receive and still has yet to receive as of the date of this Amended Complaint. 27. Upon delivery of the Upfront Payment, NRF contacted LKI to confirm that LKI had received the check. In response, Dana Smith, principal owner of LKI, stated that LKI had not effectively completed depositing the check, and that NRF should wire the money directly instead, as the bank was in possession of the check constituting the Upfront Payment and would not let him re-deposit. Dana Smith then provided NRF with wiring instructions to a Bank of America account.
28. Rather than wiring the money, at Dana Smith s direct request, NRF issued another check made payable to a Jamie Suh ( Second Check ). In addition, Dana Smith asked that tracking be sent as soon as possible. Both were provided by NRF, and the Second Check was deposited by LKI. 29. However, soon thereafter, the check previously provided by NRF for delivery of the Upfront Payment was also deposited by LKI. 30. Therefore, due to LKI s failure to perform as originally bargained for by NRF and provide the Products, it follows that LKI was wrongfully paid twice. 31. LKI, by and through its owner Dana Smith, improperly led NRF to believe that the first check constituting the Upfront Payment could not be deposited. Nonetheless, LKI proceeded to deposit the first constituting the Upfront Payment despite already receiving payment for the Products by way of the Second Check. 32. Shortly after discovering this transgression, NRF, by and through undersigned counsel, issued a written demand to LKI, demanding that the Upfront Payment be returned immediately, as LKI had no right to deposit same based upon its prior deposit of the Second Check. 33. In response, LKI stated that it would be investigating the matter and rectifying any issue with regard to receipt of double payment. 34. After conducting its investigation, LKI acknowledged that it had wrongfully deposited the Upfront Payment due to already depositing the Second Check, and stated that the monies contained therein would be returned to NRF. 35. However, despite this promise to remedy its prior wrong, upon the date the money was to be returned to NRF, no check was received, nor was any tracking number provided
symbolizing the mailing of same. As of the date of this Complaint, LKI has still failed to provide a check for the money rightfully due and owned by NRF. 36. Thus, as a direct and proximate result of LKI s breach of the Settlement Agreement, LKI s wrongful retaining of money rightfully owned by LKI by way of wrongfully depositing the Upfront Payment in spite of also depositing the Second Check, and LKI s fraudulent inducement of NRF into entering into and executing the Settlement Agreement, NRF has suffered substantial damages. 37. Furthermore, as a direct and proximate result of LKI s acts complained of herein, NRF has had to retain the undersigned counsel, and has agreed to pay its reasonable attorney s fees and costs incurred as a result of this action. 38. All conditions precedents have been satisfied prior to the filing of this Complaint. COUNT I FRAUDULENT INDUCEMENT 39. Plaintiff hereby re-alleges and incorporates the allegations contained in paragraph 1 though 38 as if fully stated herein and further alleges as follows: 40. This is a count for fraudulent inducement against LKI. 41. On or around January 11, prior to execution of the Settlement Agreement, LKI, by and through LKI s attorney, assured NRF that the Materials were in existence and ready to be shipped. 42. As a result of this assurance, rather than filing a lawsuit against LKI, NRF agreed to enter into and execute the Settlement Agreement so that it may receive the Materials and proceed with the future management and operation of its business. 43. In addition to the foregoing assurance made to NRF, LKI espoused multiple other declarations and assertions regarding the promise of shipment of the Materials within the time
frame detailed by the Settlement that appear to have been made solely for the purpose of avoiding the initiation of a lawsuit by NRF. 44. On January 19, knowing that was the day delivery of the Materials was to be made, LKI failed to perform as required by the terms contained in Paragraph 2 of the Settlement Agreement. 45. Furthermore, as of the date of this Complaint, LKI has failed to provide a tracking number signifying that shipment of the Materials has been made, or that delivery will be effected, instead electing to provide a tracking number that details that LKI has only made preshipment arrangements by printing labels. 46. As of the date of this Complaint, the only information provided by the tracking number sent by LKI to NRF for the purpose of signifying shipment of the Materials states as follows: The U.S. Postal Service was electronically notified by the shipper on January 20, 2016 to expect your package for mailing. This does not indicate receipt by the USPS or the actual mailing date. Delivery status information will be provided if/when available. (emphasis added). 47. Thus, based on the fact this message appears, it follows that LKI has provided no information regarding shipment of the Materials, nor have the Materials been sent to USPS for the purpose of delivering same to NRF. 48. NRF materially relied on LKI s misrepresentation regarding the availability of the Materials and that the Materials would be shipped pursuant to the terms contained in Paragraph 2 of the Settlement Agreement, and such reliance served as a material inducement for NRF entering into and executing the Settlement Agreement. 49. Based on LKI s subsequent acts in failing to deliver the Materials and providing a tracking number that signified no arrangement(s) for shipment of the Materials had been made, it
follows that LKI made such assertions knowing them to be false and incapable of being performed. 50. Furthermore, it follows that LKI made such assertions for the sole purpose of avoiding the initiation of a lawsuit by NRF. 51. On top of the false statements of material fact alleged by LKI in order to induce NRF into executing the Settlement Agreement, LKI also made false statements of material fact in order to induce NRF to provide the Second Check. 52. Upon asking whether LKI had received the Upfront Payment, LKI informed NRF that the bank was unable to deposit the Upfront Payment, and directed NRF to issue the Second Check. 53. At LKI s direction, and advisement that the Upfront Payment could not be deposited, NRF provided LKI with the Second Check, which was deposited by LKI. 54. Nonetheless, shortly thereafter, LKI proceeded to deposit the first check that served as providing the Upfront Payment. 55. Furthermore, upon being informed of the issue of double payment, LKI stated that it would look into the matter. Upon discovery that it had in fact received double payment, LKI stated that the issue would be rectified and a check would be sent to NRF in order to rectify the issue. 56. Nonetheless, as of the date of this Complaint, LKI has yet to deliver a check or tracking number symbolizing the issuance of money rightfully owned by NRF. 57. As a direct and proximate result of LKI s misrepresentations made to NRF in order to induce execution of the Settlement Agreement, NRF has been substantially harmed.
WHEREFORE, for the reasons set forth herein, NRF demands judgment against LKI in the principal amount of at least $15,000.00, plus prejudgment interest, post judgment interest, in addition to punitive damages and all other such relief as this Court deems proper and just. COUNT II BREACH OF CONTRACT 58. Plaintiff hereby re-alleges and incorporates the allegations contained in paragraph 1 though 38 as if fully stated herein and further alleges as follows: 59. This is a count for breach of the Settlement Agreement against LKI. 60. NRF and LKI entered into and executed the Settlement Agreement on or around January 15, 2016. 61. As a result thereof specifically, Paragraph 2 of the Settlement Agreement LKI was to deliver the following Materials to NRF on or before January 19, 2016: (i) all shirts competed by LKI pursuant to NRF s request(s); (ii) all uncut fabric created as a result of or related to the Products; and (iii) all samples created by LKI for the purpose of completing the Products pursuant to NRF s request(s). 62. However, LKI failed to deliver the Materials or provide a tracking number signifying shipment of the Materials as required. 63. Furthermore, the tracking number provided by LKI simply details that LKI made pre-shipment arrangements in printing out labels regarding delivery of the Materials. However, as of the date of this Complaint, the Materials have yet to be shipped. 64. Upon execution, the Settlement Agreement creates a valid, binding legal agreement amongst the parties. 65. Nonetheless, LKI materially breached the provisions contained in the Settlement Agreement when it failed to deliver the Materials as required pursuant thereto.
66. As such, NRF has failed to receive the benefits originally bargained for when it entered into the arrangement with LKI for the completion and delivery of the Products despite providing the Upfront Payment, and as a result thereof, has been substantially harmed. WHEREFORE, for the reasons set forth herein, NRF demands judgment against LKI in the principal amount of $5,842.50, plus prejudgment interest, post judgment interest, and all other such relief as this Court deems proper and just. COUNT III CONVERSION 67. Plaintiff hereby re-alleges and incorporates the allegations contained in paragraph 1 though 38 as if fully stated herein and further alleges as follows: 68. This is a count for conversion against LKI. 69. Prior to the execution of the Settlement Agreement, NRF provided LKI with an Upfront Payment in order complete and deliver the Products. 70. Due to the fact NRF had yet to receive the Products despite LKI s multiple assurances regarding when such would be delivered, by and through the Initial Demand Letter and the Response Letter, NRF demanded that LKI return NRF s Upfront Payment. 71. Furthermore, upon examining its accounts, NRF realized that LKI had received additional payment in the form of the Second Check. Upon such discovery, NRF informed LKI of same, who then stated that it would return the amount of money constituting the Upfront Payment in order to rectify this issue. 72. However, as of the date of this Complaint, LKI has refused to do either of the following: (i) complete and deliver the Products; or (ii) return the Upfront Payment to NRF.
73. Additionally, as of the date of this Complaint, LKI has failed to provide a check or tracking number signifying the delivery of the check meant to remedy the issue of double payment. 74. Due to LKI s illegal retention of the Upfront Payment and Second Check, LKI has exercised dominion over property that should be rightfully possessed by NRF specifically, the (1) the Second Check; and (2) the Upfront Payment or, in the alternative, the Products and has blatantly refused to abide by NRF s multiple demands for delivery of either items. 75. As a result of LKI s refusal to return the Upfront Payment despite the issuance of multiple demands regarding same, NRF has been substantially deprived of its superior right of possession in and to the Upfront Payment, or alternatively, the Products. WHEREFORE, for the reasons set forth herein, NRF demands judgment against LKI in the principal amount of $11,685.00, plus prejudgment interest, post judgment interest, in addition to punitive damages and all other such relief as this Court deems proper and just. February 28, 2017 Respectfully submitted, /Jason B. Belzer/ JASON B. BELZER New York Bar No.: 4997599 jasonbelzer@gmail.com HEITNER LEGAL, P.L.L.C. Attorney for Plaintiff 1736 NE 7 th Street Fort Lauderdale, Florida 33304 Phone: 954-558-6999 Fax: 954-927-3333 By:
Darren A. Heitner Florida Bar No.: 85956 Darren@heitnerlegal.com Pro Hac Vice