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If Dan Diaz gets his way, Tapout will be on trial this September

By Zach Arnold | March 12, 2012

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Superior Court of California, County of Orange, Central Justice Center

Case Number: 30-2011-00462171-CU-BT-CJC
DANIEL DIAZ VS. TAPOUT, LLC
BUSINESS TORT
Filing date: 03/29/2011

Text of plaintiff claim (filed with court) is below.

*********

MICHAEL W. VIVOLI (Bar No. 184366), JASON P. SACCUZZO (Bar No. 221837), VIVOLI SACCUZZO, LLP
2550 Fifth Avenue, Ninth Floor; San Diego, California 92103
(619) 744-9992 (Tel), (619) 744-9994 (Fax)

Attorney for Plaintiff, DANIEL DIAZ

vs.

COMPLAINT FOR DAMAGES FOR:

Plaintiff, both individually and where indicated derivatively on behalf of FIGHT INDUSTRIES, LLC alleges as follows:

Plaintiff Diaz is an individual domiciled within Orange County, California. Plaintiff is, and at all times relevant herein was, a minority member of FI and, as such, has 3′ standing to assert FI’s rights derivatively, and in response to FI’s refusal (because it is dominated and controlled by faithless fiduciaries with majority interests in FI) to take action against those majority members. Thus, Plaintiff asserts both direct and derivative rights in this action and will 6i prove with particularity which damages are individual and which are derivative at the time of trial.

Defendant TAPOUT, LLC (“TapouT”) is a California limited liability company formed under the laws of the State of California. TapouT maintains an active business presence in Orange County, California. At all relevant times herein, TapouT actively did business in the County of Orange, California, and purposefully availed itself of the benefits and protections of its laws such that the assertion of jurisdiction by this Court over TapouT does not offend traditional notions of fair play and substantial justice. TapouT is named as a defendant herein because, acting through its officers, TapouT converted cash and other assets in which Plaintiff had a legal interest, both individually and through Defendant FIGHT INDUSTRIES, LLC (“FI”).

Defendant (and nominal plaintiff) FI is a limited liability company formed under I the laws of the State of California. At all times relevant herein, FI actively did business within Orange County and purposefully availed itself of the benefits and protections of the laws of California such that the assertion of jurisdiction by this Court over FI does not offend traditional notions of fair play and substantial justice. FI is named here both because of the actions of its managing officers and as a nominal plaintiff whose interests Plaintiff asserts derivatively herein.

Defendant MARK KREINER (“Kreiner”) is an individual domiciled within the County of Los Angeles, California. Kreiner perpetrated the tortious conduct at issue herein I against Diaz, a resident of Orange County, with full knowledge Diaz would suffer damage within Orange County. Moreover, at all relevant times herein, Kreiner actively did business within Orange County and purposefully availed himself of the benefits and protections of its laws such that the assertion of jurisdiction by this Court over Kreiner does not offend traditional notions of fair play and substantial justice. Kreiner is named here because, among other things, he personally committed and directed the tortious misconduct alleged herein, and did so for his own personal and unlawful financial gain.

Defendant DAN (aka, “Punkass”) CALDWELL (“Caldwell”) is an individual domiciled within the County of San Bernardino. Caldwell perpetrated the tortious conduct at issue herein against Diaz, a resident of Orange County, with full knowledge Diaz would suffer damage within Orange County. Moreover, at all relevant times herein, Caldwell actively did business within Orange County and purposefully availed himself of the benefits and protections of its laws such that the assertion of jurisdiction by this Court over Caldwell does not offend traditional notions of fair play and substantial justice. Caldwell is named herein primarily because of, among other things, his willing participation in and/or acquiescence in, Kreiner’s tortious misconduct, from which Caldwell personally benefited, in knowing violation of Plaintiff’s rights.

Defendant GARY GALLINOT (“Gallinot”) is an individual believed to be domiciled within the County of Orange. Gallinot perpetrated and/or participated in the tortious conduct at issue herein against Diaz, a resident of Orange County, with full knowledge Diaz would suffer damage within Orange County. Moreover, at all times relevant herein, Gallinot regularly did business within Orange County and purposefully availed himself of the benefits and protections of its laws such that the assertion of jurisdiction by this Court over Gallinot does not offend traditional notions of fair play and substantial justice. Gallinot is named herein because of, among other things, his personal and active participation in converting cash and other assets in which Plaintiff had an interest, both individually and derivatively by and through FI.

Defendant GALLINOT ENTERPRISES (“GE”), is an entity of unknown form and origin, but is believed to be an alter ego of Gallinot. Gallinot used GE to siphon millions of dollars from TapouT and FI and into Kreiner’s pockets and/or Gallinot’s pockets, in violation of Plaintiff’s rights. GE, like Gallinot, actively participated in converting cash and other assets in which Plaintiff had an interest, both individually and derivatively by and through FL All of the foregoing defendants may be collectively referred to hereinafter as “the TapouT Defendants.”

Defendant ABG TAPOUT, LLC (“ABGT”), is limited liability company formed under the laws of the State of Delaware. ABGT maintains its corporate offices and its primary place of business in the County of Los Angeles, but actively conducts business in the County of Orange such that the assertion by this Court of jurisdiction over ABGT does not offend traditional notions of fair play and substantial justice. ABGT is named herein because, among other things, it knowingly and unlawfully took possession of assets in which Plaintiff has a legal interest, and because it knowingly facilitated a fraudulent conveyance designed to render the TapouT Defendants judgment proof while bestowing an improper financial gain upon ABGT and its members.

Defendant AUTHENTIC BRANDS GROUP, LLC (“ABG”) is a limited liability company of unknown origin. ABG maintains its corporate offices in the County of Los Angeles and, at all times relevant herein, ABG actively conducted business in the County of Orange such that the assertion by this Court of jurisdiction over ABG does not offend traditional notions of fair play and substantial justice. ABG knowingly perpetuated intentionally tortious conduct against Plaintiff, an Orange County resident, with knowledge Plaintiff would suffer damages in Orange County. ABG is named herein because, among other things, it knowingly facilitated a fraudulent conveyance of assets in which ABG knew Plaintiff and others had claims and a vested legal interest, and did so primarily for its own financial gain. ABGT and ABG may sometimes be collectively referred to as the “ABG Defendants.”

Plaintiff is ignorant of the true names and capacities of Defendants sued herein as Does 1 through 75, inclusive, and therefore sues these Defendants by such fictitious names. Plaintiff will amend this complaint to allege the Doe Defendants’ true names and capacities when ascertained. Plaintiff is informed and believes and based thereon alleges that each of the Doe Defendants was responsible in some manner for the acts and/or omissions herein alleged, and that Plaintiff’s damages were proximately caused by the acts and omissions of the Doe Defendants.

Plaintiff is informed and believes and thereon alleges that at all times herein mentioned, that the named Defendants above, together with DOES 1 through 75 (sometimes collectively “Defendants”), and each of them, were the agents, servants, employees, officers, partners, representatives, and/or alter egos of each other, and were acting within the scope of their authority as such, with the knowledge, consent, permission, approval, and ratification of the remaining defendants and each of them. Plaintiff will seek leave of this court to amend this Complaint to show the true nature and extent of the relationships among the Defendants when the relationships have been fully ascertained, and once all of the evidence concerning their improper effort to compartmentalize their risk has been established.

Plaintiff is informed and believes that each of the Defendants was the alter ego of the other, that each of the Defendants was the agent of the other, and that each of the Defendants was acting within the course and scope of their agency relationship at all times relevant herein. As a result, each of the Defendants is liable for the acts and omissions of each other, and are jointly and severally liable to Plaintiff for the injuries complained of herein. Moreover, and to the extent any of the Defendants is a corporation, limited partnership, trust or other entity formed for purposes of limiting the personal exposure of any such Defendant, Plaintiff believes and hereby alleges such corporate or other status was and is fraudulent and/or improperly maintained to defraud Plaintiff as a creditor (as well as other insureds), and that such relationship must be disregarded pursuant to the doctrine of “piercing the corporate veil.” By virtue of application of this doctrine, all of the Defendants named herein are jointly and severally liable for each and all of Plaintiff’s injuries. Moreover, and by virtue of the fact each of the Defendants has ratified the conduct of the other, and their respective alter egos, all are jointly and severally liable as herein alleged.

JURISDICTION AND VENUE

This Court has jurisdiction over each Defendant named herein because each Defendant is either a resident of Orange County, is a corporation or other entity organized under the laws of the State of California, is a foreign corporation or other entity authorized to do business in Orange County, California and registered with the California Secretary of State, does sufficient business in Orange County, California, has sufficient minimum contacts with Orange County, California, or otherwise purposefully avails itself/himself of the benefits and protections of the laws of the County of Orange, California so as to render the assertion of jurisdiction by this Court both permissible and consistent with traditional notions of fair play and substantial justice.

Venue is proper in this Court pursuant to California Code of Civil Procedure sections 395 and 395.5 because Plaintiffs primary place of business is located within this jurisdiction, Plaintiff actively does business in this jurisdiction, the employment contract at issue
in this action was made and was to be performed in this jurisdiction, and the acts and omissions 81 which form the basis of Plaintiff’s claims herein occurred within the County of Orange, in the State of California. In addition, as indicated, Defendants have purposefully availed themselves of the jurisdiction of this court.

FACTUAL BACKGROUND

A. Diaz’s Creation of the “Hitman Fight Gear” Label

In or about August of 2001, Diaz and his brother first created the mixed martial arts-inspired clothing brand known as “Hitman Fight Gear.” Through Diaz’s efforts, Hitman Fight Gear became well known among mixed martial arts fans and fighters and effectively
competed with other mixed martial arts-inspired clothing brands such as “TapouT,” another well known mixed martial arts-inspired clothing brand. Diaz created and developed the Hitman Fight Gear trademark using his own assets, ingenuity and efforts and, through hard work, managed to compete with other larger manufacturers of similar-themed clothing labels, including TapouT.

In addition to his ownership of the brand “Hitman Fight Gear,” Diaz also performed design services for other clothing brands, including TapouT and distributors of TapouT clothing. In or about 2005, Diaz entered into a contract with Russell Lin, doing business as Roxwell, pursuant to which Diaz would receive a 10% commission on anything Roxwell made for TapouT. Diaz’s revenue under the Roxwell contract began to soar as TapouT increased in popularity and Diaz began to enjoy a steady stream of commission income on his contract with Roxwell. As of 2006, Diaz’s income pursuant to the Roxwell contract was steadily increasing.

Unbeknownst to Diaz at the time, Marc Kreiner became affiliated with TapouT in or about 2006, and was ultimately made Managing Member of TapouT. Kreiner discovered Diaz’s contractual right to a 10% commission on the sale of all TapouT apparel and approached Russell Lin and others in an effort to circumvent Diaz’s contract in order to save money for TapouT by securing a 10% lower cost on the goods TapouT was selling through Roxwell. Russell Lin and others refused to interfere with Diaz’s contract with Roxwell.

Diaz is informed and believes and based thereon alleges that Kreiner developed a scheme to defraud Diaz out of his existing contract with Roxwell for the benefit of TapouT and,specifically, Kreiner.

B. FI’s Purchase of “Hitman Fight Gear” From Diaz and Diaz’s Employment Agreement with Fl.

In or about December of 2007, TapouT, by and through Kreiner and Caldwell (“the TapouT Defendants”) approached Diaz regarding their indicated interest in acquiring Hitman Fight Gear from Diaz. The TapouT Defendants represented to Diaz they wished to build up and expand Hitman Fight Gear as a brand name, and to make it as popular and profitable as the “TapouT” brand name. The TapouT Defendants represented that FI, the company through which Hitman Fight Gear would be purchased, would have the full benefit of the “TapouT” name, and would have the full backing of TapouT behind it. The TapouT Defendants ultimately agreed to purchase the Hitman Fight Gear brand from Diaz in exchange for an employment contract plus the issuance of one million, one hundred twenty-five thousand (1,125,000) Class B Membership Interests in FT to Diaz. The parties ultimately executed an Asset Purchase Agreement memorializing the sale of Hitman Fight Gear by Diaz to FI; an agreement which would also include the relinquishment by Diaz of his contract with Roxwell for a 10% commission on all TapouT gear sold by Roxwell.

At all times relevant herein, Kreiner was the President of FI, and was also a managing member of TapouT. By reason of this relationship, TapouT was at all times well aware of FI’s legal obligations to its creditors, including Diaz, and TapouT was aware that its own interests could not be placed above those of FI’s interests.

In connection with the sale of Hitman Fight Gear to the TapouT Defendants, Diaz negotiated an. employment contract with FI, pursuant to which FI agreed to employ Diaz. Diaz’s continued employment with FI was important consideration to Diaz because his employment with FI would allow Diaz to maintain a voice and at least some measure of (at least promised) control over the manner in which the Hitman Fight Gear label would be marketed and developed. As the owner of 1,125,000 membership interests in FI, Diaz maintained a vested interest in seeing that Hitman Fight Gear was effectively, properly and profitably marketed and developed by FI, and that FI was itself profitably operated in a manner calculated to increase its value for the benefits of its members. These promised benefits were of material value to Diaz because without them, he would never have agreed to relinquish his contractual right to a 10% commission on all TapouT gear sold by Roxwell.

As an employee of FI, Diaz was entitled not only to an annual salary, but to reimbursement of his business expenses incurred during the term of his employment with FI. Moreover, Diaz was promised continuing employment with FI through March 2, 2013, unless otherwise terminated pursuant to the terms and conditions of his employment agreement. In the event FI sought to terminate Diaz’s employment without cause, FI was required to pay Diaz the sum of his salary in effect on the date of his termination for a period of six (6) months thereafter, plus reimbursement of Diaz’s business expenses as of the date of his termination. Diaz’s salary was to be $80,000 in 2008, and was to increase by five percent (5%) each year thereafter.

In addition to Diaz’s future rights as an employee of FI — and far more important to Diaz at the time of the asset sale and thereafter — Diaz was promised the aforementioned substantial Membership interest in FI. As a holder of that interest, and because Diaz essentially traded his ownership rights in Hitman Fight Gear for an ownership interest in FI and, the future profitability of FI, Diaz had a vested property interest in FI and in its continued profitability. Diaz was willing to make this trade in ownership because the TapouT Defendants represented to him that he would own far more through a minority interest in FI than he would through sole ownership of the Hitman Fight Gear label because the TapouT Defendants intended to take Hitman Fight Gear to “the next level,” which would result in a far more beneficial economic return to Diaz than would sole ownership of the Hitman Fight Gear label, and which would ultimately result in Hitman Fight Gear becoming a $100 million clothing label.

Beginning in or about March of 2008 and continuing thereafter, Diaz devoted his full time efforts to FI and carried out his duties to FI faithfully and diligently, with the expectation his efforts would be rewarded through the increased and ever increasing value of FI.

Diaz did all things required of him, and incurred substantial sums for the benefit of FI, including sums reimbursable to Diaz as part of his employment agreement with Fl.

Following the close of FI’s purchase of Hitman Fight Gear, and upon Diaz’s acquisition of 1,125,000 Class B Membership Interests in Fl, Kreiner, Caldwell and the other 10 TapouT Defendants owed Diaz a fiduciary duty to refrain from elevating their interests above
Diaz’s interests, to avoid subverting the interest of FI and Diaz to their own personal interests, and to instead give Diaz’s interests as much consideration as their own.

C. The TapouT Defendants’ Breeches Fiduciary Duties

Despite their fiduciary duties to the minority owners of FI, including Diaz, the TapouT Defendants have repeatedly, routinely and systematically breached their fiduciary duties to Diaz by using the assets of FI and TapouT as their own personal piggy banks, and by engaging in a calculated campaign of fraudulent transactions designed to appropriate all of the value of TapouT and FI for themselves, personally. Among many other examples, Kreiner has systematically engaged in a campaign of accepting (indeed, demanding) bribes from vendors of both TapouT and FI; the cost of which Kreiner and the other TapouT Defendants have unlawfully foisted onto FI. As examples, Kreiner has caused vendors of FI to give Kreiner lavish gifts (including a new Mercedes and Rolex watches) in exchange for vendor contracts with FI and TapouT at costs well over market rate. For instance, Kreiner, acting on behalf of FI and/or TapouT, would demand a particular vendor provide him with a lavish gift, in exchange for which Kreiner would then sign contracts on behalf of FI and TapouT pursuant to which those entities would pay inflated prices to those vendors for goods and services rendered to FI and TapouT. In some cases a vendor might receive as high as one dollar per t-shirt furnished which — over the life of a contract — might pay the vendor hundreds of thousands of dollars as a “kickback” to the vendor for providing Kreiner with demanded gifts. The foregoing kickback schemes were designed to line Kreiner’s pockets at the expense of TapouT and FI and these entities’ respective owners, including Diaz. Diaz suffered damages as a result of this conduct.

In addition to the foregoing, Kreiner devised, engineered and then perpetrated a campaign of developing false invoices for TapouT and Hitman gear which Kreiner used to misappropriate monies “borrowed” from Private Equity Management Group, Inc. and Private Equity Management Group, LLC (“the PEM Group”), which was later indicted for federal offenses. Kreiner also devised, engineered and engaged in customs fraud in order to appropriate millions of dollars from TapouT and Hitman for his own personal use.

Kreiner also paid exorbitant sums to friends and associates of his for services purportedly rendered to FI and TapouT, and Diaz is informed and believes Kreiner received illegal kickbacks from these friends and associates as well. For instance, Kreiner spend hundreds of thousands of dollars on “design services” for his own personal office, and for Caldwell’s office at TapouT, when the actual cost of the design services should have been a fraction of the cost charged to and paid by TapouT and FI. Similarly, Kreiner caused TapouT and/or FI to pay more than $1,348,254 in 2009, and more than $511,913 in 2010 to Gallinot or GE in the form of “consulting fees” and/or “bonuses,” from which Diaz is informed and believes Kreiner and the other TapouT Defendants received kickbacks. Kreiner also caused both companies to over pay attorneys retained to represent TapouT, Hitman and even Diaz, in order to secure personal benefits for Kreiner through that counsel. Again, these unlawful payments of money – personally directed by Kreiner without the knowledge or consent of the other members of these companies, substantially reduced the assets of TapouT and FI, to the detriment of Diaz and the other investors of these companies.

In addition to the acts of theft detailed above, Kreiner and the other TapouT Defendants participated in many more illegal and improper thefts of FI and TapouT’s company assets. As but one additional example (there are many more), Kreiner would routinely skim cash and inventory from TapouT and FI after “warehouse sales” of each companies’ clothing, which were customarily held at FI and TapouT’s warehouses. Diaz is informed and believes Kreiner shared his ill gotten gains with Gallinot, Caldwell and other business associates of Kreiner; all in order to secure their complicity in his conduct.

Diaz is informed and believes Caldwell was aware of Kreiner’s misconduct, but that Caldwell accepted the benefits of Kreiner’s misconduct in the form of his “cut” of the kickbacks Kreiner managed to generate from vendors of TapouT and FI, from TapouT and FI’s own assets, and from Kreiner’s personal friends and associates, who actively aided Kreiner in fleecing FI and TapouT of their liquid assets.

On at least one occasion, Diaz protested Kreiner’s conduct but was told – in no uncertain terms — he was not to interfere with Kreiner’s “business” or Diaz would be terminated.

After depleting FI and TapouT of their assets through the conduct described above, Kreiner refused to reimburse Diaz for his business expenses, which were owed to Diaz pursuant to the terms of his employment agreement. In “defense” of his failure and refusal to cause FI to pay Diaz his reimbursable expenses, Kreiner claimed. FI “lacked the money” to pay Diaz for his reimbursable expenses.

D. The Sale of TapouT and FI’s Assets to ABG.

After depleting TapouT and FI of all their operating capital and liquid assets through the tortious conduct detailed above, Kreiner and Caldwell offered to sell all of TapouT and FI’s assets to ABG in a patently unfair transaction. Specifically, Kreiner and Caldwell agreed to sell all of the assets of TapouT and FI to ABG in exchange for: (1) the payment of some of the debt Kreiner and Caldwell managed to accumulate through their scheme of skimming cash and other assets out of the companies; and (2) future cash payments to Kreiner and Caldwell, only (hereinafter, “the Asset Sale”), the amounts of which were to be withheld from Kreiner and Caldwell pending the resolution of remaining creditor claims against those assets. The Asset Sale would thus leave FI and TapouT bereft of any of their assets, while satisfying only somieof their liabilities. As such, Diaz believes and hereby alleges the Asset Sale represented a fraudulent transaction designed to defraud legitimate creditors and investors of FI and TapouT; Diaz included.

Diaz is informed and believes that while conducting its “due diligence” prior to purchasing the assets of TapouT and FI, ABG discovered Kreiner’s illegal conduct and his unlawful diversions of the assets of Fl and TapouT for his own benefit. ABG has admitted this discovery to Diaz. ABG was also aware, by virtue of its “due diligence,” that the Asset Sale would strip TapouT and FI of their assets while leaving creditors of TapouT and FI with nothing 6 to recover against. In fact, Diaz is informed and believes ABG used that knowledge and 7I~ information against the interests of TapouT and FI in its negotiations with Kreiner, to the detriment of Diaz and other creditors of FI and TapouT, by driving down the price to be paid by ABG for the assets of TapouT and FI; thus furthering injuring the rights of Diaz and other creditors of Fl and TapouT.

While the Asset Sale was still under negotiation, ABG attempted to buy Diaz’s silence regarding Kreiner’s illegal conduct through an employment agreement with ABG TapouT (the new entity formed by ABG to own the assets of FI and TapouT) and other
consideration. When Diaz refused to release Kreiner and Caldwell in connection with those negotiations, however, ABG indicated it would simply “go around” Diaz and consummate the sale over his objections as a member of FI.

In connection with the Asset Sale, Diaz is informed and believes ABG, as buyer, and Kreiner — on behalf of FI and TapouT — allocated zero value to the assets of FI and thus gifted those assets to ABG. The parties to the Asset Sale allocated no value to those assets although ABG is presently actively marketing and selling millions of dollars worth of merchandise through K-Mart and other retailers.

Diaz is informed and believes ABG knowingly facilitated a fraudulent transfer of the assets of FI and TapouT in order to render those entities (and Kreiner and Caldwell) judgment-proof, and that ABG knowingly engaged in that conduct to further its own financial
interests to the detriment of Diaz and the other creditors of FI and TapouT.

FIRST CAUSE OF ACTION

Breach of Fiduciary Duty (By Diaz, individually, Again st Kreiner, Caldwell and Does 1 through 25)

Plaintiff hereby incorporates by reference each and every allegation contained in paragraphs 1 through 37, above.

As set forth above, Kreiner and Caldwell owed fiduciary duties to Diaz, as a minority member of FI, which included the duty to avoid placing their own personal interests 8. above those of Diaz. At all times relevant herein, Kreiner and Caldwell were also acting as
managing members of TapouT and, as such, each also owed Diaz a duty to refrain subverting the interests of Fl for their own personal benefit, or for the benefit of TapouT. Kreiner and Caldwell have at all times wholly dominated and controlled both FI and TapouT.

Kreiner and Caldwell breached their fiduciary duties to Diaz by engaging in the acts of self-dealing described above, and by unlawfully appropriating for themselves the liquid and other assets of FI. Kreiner and Caldwell have also used TapouT to commit their acts of breach of fiduciary duty by commingling funds between the two entities in an effort to cover up their unlawful diversions of FI assets for themselves.

Defendants breached their fiduciary duties to Diaz by converting assets (including cash and other tangible assets) of FI, and by causing FI to pay for expenses that were not lawful or proper expenses of FI, and from which Kreiner and Caldwell received improper personal benefits, including kickbacks. These breaches of fiduciary duty have caused damages directly to Diaz by, among other things, rendering his ownership interest in FI valueless (or at least potentially valueless).

Kreiner and Caldwell also breached their fiduciary duties to Diaz by orchestrating a fraudulent sale of FI and TapouT’s assets, in connection with which Kreiner and Caldwell fraudulently attributed “zero value” to FI; primarily if not exclusively to ensure that Diaz
received nothing from the sale of FI’s assets. Kreiner and Caldwell orchestrated this fraudulent transfer of FI’s assets to intentionally injure Diaz, in retaliation for Diaz’s having protested Kreiner and Caldwell’s illegal kickbacks and other misconduct while serving as officers, directors and/or managing members of TapouT and FI.

Defendants’ breaches of fiduciary duty were willful, intentional and despicable and were deliberately carried out to willfully inflict injury upon Diaz. As such, Defendants, and each of them, are guilty of fraud and malice such that an award of punitive damages is
appropriate to punish their misconduct and to make an example of Defendants to deter others from engaging in similar misconduct.

In addition to the compensatory and punitive damages to which Diaz is entitled, Diaz is also entitled to recover compensation for the attorney fees and costs incurred in creating a common fund from which other creditors of FI might recover amounts owed to them. These fees and costs will be determined with precision following a trial of Plaintiff s claims herein.

SECOND CAUSE OF ACTION

Breach of Fiduciary Duty (By Fl, derivatively, Against Kreiner, Caldwell and Does 1 through 25)

Plaintiff Diaz, derivatively on behalf of FI, hereby incorporates by reference each and every allegation contained in paragraphs 1 through 44, above.

As set forth above, Kreiner, Caldwell and Does 1 through 25, and each of them, breached fiduciary duties owed to Diaz and to FL In addition to the damages sustained by Diaz individually, FI also suffered damages as a result of Defendants’ breaches of fiduciary duties, in an amount to be determined with specificity at the time of trial. Diaz has demanded FI take action against Kreiner and Caldwell but both have refused to take proper actions to protect FI 21. from themselves. Any further demand of FI is futile because Kreiner and Caldwell fully dominate and control FI for their own personal benefit, and to the detriment of all others interested in the well being of FI, and will take no action to enforce FI’s rights against them.

Because Defendants’ breaches of fiduciary duty were willful, intentional and I despicable and were deliberately carried out to willfully inflict injury upon Diaz and FI, Defendants, and each of them, are guilty of fraud and malice as against FI as well, such that an
award of punitive damages is appropriate to punish their misconduct and to make an example of Defendants to deter others from engaging in similar misconduct.

In addition to the compensatory and punitive damages to which Diaz and FI are entitled, Diaz is also entitled to recover compensation for the attorney fees and costs incurred in creating a common fund from which FI might recover damages owed to it. These fees and costs will be determined with precision following a trial of Plaintiffs claims herein, and Plaintiff is entitled to recover his attorney fees and costs out of this recovered sum, so that the costs of this litigation are fairly apportioned to those who benefit from it, including FI.

THIRD CAUSE OF ACTION

Conversion (By Diaz, Individually, Against Kreiner, Caldwell, TapauT, ABG, ABGT, Gallinot, GE and Does 1 through 75)

Plaintiff hereby incorporates by reference each and every allegation contained in paragraphs 1 through 48, above.

As a member of FI, Diaz was entitled to distributions from cash flow that was available for distribution to the members of FI, and to his pro-rata share of the profits earned from FI’s business activities, including the sale of FI’s merchandise. Defendants Kreiner, Caldwell, TapouT, Gallinot and GE willfully converted property — including cash and distributable cash flow — which was the lawful property of Diaz by virtue of his membership interest in FI.

By and through the Asset Sale, Defendants ABG and ABGT (collectively, “the ABG Defendants”) each also converted property that was lawfully Diaz’s property. The ABG Defendants were aware that the property they were converting was property to which Diaz was entitled by virtue of their due diligence into the business affairs of FI, the assets that it owned and the conduct of the TapouT Defendants in misappropriating and converting those assets for their own personal benefit. The ABG Defendants were also aware — again, by virtue of their own extensive due diligence into the affairs of TapouT and Fl — that the TapouT Defendants, Gallinot and GE had converted property from Diaz, but willingly facilitated, aided and abetted those conversions by its participation in the Asset Sale.

In addition to and as a consequence of the Asset Sale, the ABG Defendants have converted property that is lawfully Diaz’s property, in an amount that is capable of being readily determined as to an ascertainable sum, provided Diaz obtains an accurate accounting from Defendants, and each of them, of their ill gotten gains through their acts of conversion. Defendants are uniquely in possession of the information needed to establish that ascertainable sum.

Diaz has been damaged by Defendants’ acts of conversion, as detailed above, and each of them, in an amount to be determined with precision at the time of trial.

Defendants’ conversion of property, as outlined above, was fraudulent, malicious and designed to oppress Diaz and was conducted with conscious disregard of Diaz’s rights. As such, and in addition to such compensatory damages as Diaz is entitled to recover
herein, the Diaz is also entitled to an award of punitive damages in an amount sufficient to punish Defendants’ misconduct and to deter others from engaging in similar misconduct.

FOURTH CAUSE OF ACTION

Conversion (By Fl, Derivatively, Against Kreiner, Caldwell, TapauT, ABG, ABGT, Gallinat, GE and DOES 1 through 75)

Plaintiff Diaz, acting derivatively on behalf of FI, hereby incorporates by reference each and every allegation contained in paragraphs 1 through 54, above.

As set forth above, Kreiner and Caldwell have at all relevant times actively dominated and controlled the affairs of FI for their own personal benefit, and to the detriment of FI and its other owners. In addition to the damages sustained by Diaz individually by
Defendants’ acts of conversion, Fl also suffered damages of its own as a result of Defendants’ acts of conversion, in an amount to be determined with specificity at the time of trial.

Diaz has demanded FI take action against Kreiner and Caldwell but both individuals (and thus FI) have/has refused to take proper actions to protect FI from the actions of these faithless officers and directors. Any further demand of FI, or of Caldwell or Kreiner would be futile because Kreiner and Caldwell fully dominate and control FI for their own personal benefit, and to the detriment of all others interested in the well being of FI, and will take no action to enforce F1’s rights against them.

FI was the lawful owner of cash, inventory and other tangible assets. Defendants Kreiner, Caldwell, TapouT, Gallinot and GE willfully converted cash, inventory and other tangible assets from FI, causing damage to FL

By and through the Asset Sale, Defendants ABG and ABGT (collectively, “the ABG Defendants”) each also converted property, including cash, cash flows, inventory and other assets, that were lawfully FI’s property. The ABG Defendants were aware that the property they were converting was FI’s property and that FI and other third parties had an ownership interest in the property they were converting, but they proceeded with converting said property anyway for their own personal benefit.

The ABG Defendants were also aware —by virtue of their own extensive due diligence into the affairs of TapouT and FI — that the TapouT Defendants, Gallinot and GE had converted property from FI, but the ABG Defendants nonetheless willingly facilitated, aided and abetted those conversions, as well as its own acts of conversion by its participation in the Asset Sale, pursuant to which they converted FI’s remaining assets for no consideration to FI.

The amount converted by FI is an amount that is capable of being readily determined and fixed as an ascertainable sum, provided Fl and Diaz obtain an accurate accounting from Defendants, and each of them, of their ill gotten gains through their acts of conversion. Defendants are uniquely and solely in possession of the information needed to establish that ascertainable sum.

FI has been damaged by Defendants’ acts of conversion, as detailed above, and each of them, in an amount to be determined with precision at the time of trial.

Defendants’ conversion of property from FI, as outlined above, was fraudulent, malicious and designed to oppress FI and its other minority members and was conducted with conscious disregard of FI’s rights. As such, and in addition to such compensatory damages as FI is entitled to recover herein, FI is also entitled to an award of punitive damages in an amount sufficient to punish Defendants’ misconduct and to deter others from engaging in similar such misconduct.

FIFTH CAUSE OF ACTION

Aiding and Abetting Breaches at Fiduciary Dutiesfor Personal Gain (By Diaz Again st TapouT, ABG, ABGT, Gallinot, GE and DOES 50 through 75)

Plaintiff Diaz hereby incorporates by reference each and every allegation contained in paragraphs 1 through 63, above.

As set forth above, Kreiner and Caldwell breached fiduciary duties owed to Diaz FI by improperly appropriating FI’s assets and property that lawfully belonged to Diaz for their own personal benefit, and by orchestrating a fraudulent transfer of all of FI’s assets in exchange for no consideration to FI and/or Diaz.

Defendants ABG, ABGT, TapouT, Gallinot and GE were each well aware of the fiduciary duties owed by Kreiner and Caldwell to Diaz and FI. The AGB Defendants were aware of these duties by virtue of the extensive due diligence they conducted regarding the
business and business affairs of FI and TapouT, while Gallinot and GE were well aware of these duties by virtue of their close personal friendship with Kreiner and their involvement in the business affairs of FI.

Notwithstanding their familiarity with the fiduciary duties owed by Kreiner and Caldwell to Diaz, Defendants knowingly conspired with Kreiner and Caldwell to aid and abet their past breaches of fiduciary duties and to commit new breaches by and through the Asset Sale pursuant to which Kreiner and Caldwell purported to divest FI and TapouT of all their assets, and of Diaz’s assets, for no consideration to anyone other than Kreiner and Caldwell.

By virtue of the foregoing, Defendants TapouT, ABG, ABGT, Gallinot and GE each knowingly and actively aided and abetted breaches of fiduciary duties by Kreiner and Caldwell for their own personal financial benefit and gain, causing damages to Diaz.

Defendants TapouT, ABG, ABGT, Gallinot and GE acted fraudulently, willfully and reprehensibly by engaging in the conduct described above and their aforementioned conduct caused oppression to Diaz. Accordingly, and in addition to such compensatory damages as Diaz is entitled to recover against these Defendants, Diaz is also entitled to an award of punitive damages in a sum to be determined with precision at the time of trial.

SIXTH CAUSE OF ACTION

Aiding and Abetting Breaches of Fiduciary Dutiesfor Personal Gain (By Fl, Derivatively, Against TapouT, ABG, ABGT, Gallinat, GE and DOES 50 through 75)

Plaintiff, FI, acting derivatively by and through Diaz, hereby incorporates by 7′ reference each and every allegation contained in paragraphs 1 through 69, above.

As set forth above, Kreiner and Caldwell breached fiduciary duties owed to Diaz FI by improperly appropriating FI’s assets and property that lawfully belonged to Diaz for their own personal benefit, and by orchestrating a fraudulent transfer of all of FI’s assets in exchange for no consideration to FI and/or Diaz.

Defendants ABG, ABGT, TapouT, Gallinot and GE were each well aware of the fiduciary duties owed by Kreiner and Caldwell to Diaz and FI. The AGB Defendants were aware of these duties by virtue of the extensive due diligence they conducted regarding the
business and business affairs of FI and TapouT, while Gallinot and GE were well aware of these duties by virtue of their close personal friendship with Kreiner and their involvement in the business affairs of FI.

Notwithstanding their familiarity with the fiduciary duties owed by Kreiner and Caldwell to Diaz, Defendants knowingly conspired with Kreiner and Caldwell to aid and abet their past breaches of fiduciary duties and to commit new breaches by and through the Asset Sale pursuant to which Kreiner and Caldwell purported to divest FI and TapouT of all their assets, and of Diaz’s assets, for no consideration to anyone other than Kreiner and Caldwell.

By virtue of the foregoing, Defendants TapouT, ABG, ABGT, Gallinot and GE each knowingly and actively aided and abetted breaches of fiduciary duties by Kreiner and Caldwell for their own personal financial benefit and gain, causing damages to Diaz.

Defendants TapouT, ABG, ABGT, Gallinot and GE acted fraudulently, willfully and reprehensibly by engaging in the conduct described above and their aforementioned conduct caused oppression to Diaz. Accordingly, and in addition to such compensatory damages as Diaz is entitled to recover against these Defendants, Diaz is also entitled to an award of punitive damages in a sum to be determined with precision at the time of trial.

SEVENTH CAUSE OF ACTION

Fraudulent Conveyances (By Diaz, Individually, Against F1, TapouT, Kreiner, Caldwell, ABG, ABGT and DOES 50 through 75)

Plaintiff hereby incorporates by reference each and every allegation contained in paragraphs 1 through 75, above.

At all times relevant herein, Diaz has been the holder of certain matured claims and accrued causes of action against Defendants TapouT, Kreiner and Caldwell, and has held rights in the intellectual property of F.I. As such, Diaz is a “creditor” of Defendants and Defendants FI, TapouT, Kreiner and Caldwell are debtors of Diaz in accordance with the meaning of “debtor” and “creditor” set forth in California Civil Code section 3439.01(c) and (e) with respect to all of Plaintiffs claims, causes of action, damages awards and potential judgments against Defendants.

As of September of 2010, Defendants TapouT, Fl, Kreiner and/or Caldwell owned certain property and/or property rights involved in the business of TapouT and Fl. In or about October of 2010, Defendants TapouT, FI, Kreiner and Caldwell purported to sell all of the assets of FI and TapouT to ABG and ABGT for little or no consideration to either FI or TapouT, with all cash consideration other than payment of debt going to Kreiner and Caldwell. The transfer of these assets was made with the intention to hinder, delay or defraud Defendants’ creditors, including Diaz, in the collection of their claims and future judicial awarded damages and judgments as against TapouT, FI, Kreiner and Caldwell.

In exchange for the aforementioned transfer, Defendants FI, Kreiner, TapouT and Caldwell received consideration which was substantially below the fair market value of the property transferred to ABG and AGBT. At the time of the transfer the value of the property transferred by Kreiner, Caldwell, TapouT and FI was substantially greater than the amount received as consideration for it, which was paid solely and exclusively to Kreiner and Caldwell, under the guise of employment agreements. Thus, Defendants Kreiner, Caldwell, FI and TapouT did not receive reasonably equivalent value for the property transferred to Defendants ABG and ABGT.

As a result of the aforementioned transfer of real property, Defendants Kreiner, Caldwell, FI and TapouT sought to render themselves insolvent, or at least to dispossess themselves of executable assets against which Plaintiff Diaz would be entitled to collect his claims against them. Thus, at the time of the transfer, all Defendants were attempting to render Kreiner, Caldwell, FI and TapouT insolvent through the transfer of their assets.

Defendants ABG and ABGT were aware of the foregoing Defendants’ intention. and actively and fraudulently aided, participated in and facilitated that intention through their conduct by participating in and facilitating these fraudulent transfers for their own financial gain.

At the time of these fraudulent transfers identified above, AGB and ABGT knew (by virtue of their due diligence and otherwise) the assets were worth far more than they were paying for them and knew (again, by virtue of their due diligence) that Diaz and other creditors had claims against and rights in these assets, but knowingly facilitated a fraudulent transfer (or at least an atte t&d fraudulent transfer) of these assets through their participation in the asset sales at issue herein.

Plaintiff was damaged by the foregoing transfers in that Defendants attempted to place out of Plaintiff’s reach the assets in which Plaintiff has a legal interest, and against which Plaintiff is entitled to exercise his right to collect on the damages owed to him by Plaintiff and other creditors. Moreover, Plaintiff has been damaged by having to engage counsel to initiate this action to set aside the fraudulent transfers alleged herein and, by reason of those damages, is entitled to recover his attorney fees incurred herein pursuant to the doctrine of “tort of another,” and for other reasons consistent with California law.

Based upon the foregoing, Plaintiff is entitled to an order that the above-described transfers, assumption of obligations incurred and payment of consideration be set aside and declared void. In the event the sale cannot be set aside and/or the assets cannot be recovered by Plaintiff, then Plaintiff seeks an award of damages from ABG and ABGT to compensate him for the value of the property lost through the fraudulent transfers alleged above. Such an award of damages would be appropriate.

Based upon the foregoing, Plaintiff is entitled to an order that the assets that were the subject of the fraudulent asset sale be attached in accordance with the provisions of Sections 481.010 through 493.060 of the Code of Civil Procedure.

Based upon the foregoing, Plaintiff is also entitled to a temporary restraining order pending the issuance of an Order to Show Cause Why a preliminary injunction should not issue to enjoin Defendants, and each of their respective attorneys, representative and/or agents against selling, transferring, conveying or otherwise disposing of any portion of the assets that were the subject of the fraudulent transfers identified herein.

EIGHTH CAUSE OF ACTION

Fraudulent Conveyances (By Fl, Derivatively, Against TapouT, Kreiner, Caldwell, ABG, ABGT and DOES 50 through 75)

Plaintiff Diaz, derivatively and on behalf of FI, hereby incorporates by reference each and every allegation contained in paragraphs 1 through 87, above.

At all times relevant herein, FI has been the holder of certain matured claims and accrued causes of action against Defendants TapouT, Kreiner and Caldwell, and has held rights in the intellectual property that was the subject of the asset sale at issue herein. As such, FI is a “creditor” of Defendants and Defendants TapouT, Kreiner and Caldwell are all debtors of FI in accordance with the meaning of “debtor” and “creditor” set forth in California Civil Code section 3439.01(c) and (e) with respect to all of Plaintiff’s claims, causes of action, damages awards and potential judgments against Defendants.

As of September of 2010, Defendants TapouT, FI, Kreiner and/or Caldwell owned certain property and/or property rights involved in the business of TapouT and controlled and/or were custodians and trustees of assets owned by FT. In or about October of 2010, Defendants TapouT, Kreiner and Caldwell purported to sell all of the assets of FI and TapouT to ABG and ABGT for little or no consideration to either FI or TapouT, with all cash consideration other than payment of debt going to Kreiner and Caldwell. The transfer of these assets was made with the intention to hinder, delay or defraud Defendants’ creditors, including Fl, in the collection of their claims and future judicial awarded damages and judgments as against TapouT, Kreiner and Caldwell.

These transfers were made at a time when Kreiner and Caldwell had reason to attempt to render themselves and FI judgment-proof.

In exchange for the aforementioned transfer, Defendants Kreiner, TapouT, FI and Caldwell received consideration which was substantially below the fair market value of the property transferred to ABG and AGBT. At the time of the transfer the value of the property transferred by Kreiner, Caldwell, TapouT and, purportedly, FI was substantially greater than the amount received as consideration for it, which was paid solely and exclusively to Kreiner and Caldwell, under the guise of employment agreements. Thus, Defendants Kreiner, Caldwell, FI and TapouT did not receive reasonably equivalent value for the property transferred to Defendants ABG and ABGT; nor did FI. Indeed, FI received no value for its assets.

As a result of the aforementioned transfer of real property, Defendants Kreiner, Caldwell and TapouT sought to render themselves insolvent, or at least to dispossess themselves of executable assets against which Plaintiff FI would be entitled to collect its claims against them. Thus, at the time of the transfer, all Defendants were attempting to render Kreiner, Caldwell and TapouT insolvent through the transfer of their assets. Defendants ABG and ABGT were aware of that intention and actively and fraudulently aided, participated in and facilitated that intention through their conduct by participating in and facilitating these fraudulent transfers for their own financial gain.

At the time of these fraudulent transfers identified above, AGB and ABGT knew (by virtue of their due diligence and otherwise) the assets were worth far more than they were paying for them and knew (again, by virtue of their due diligence) that FI and other creditors had claims against and rights in these assets, but knowingly facilitated a fraudulent transfer (or at least an attt& fraudulent transfer) of these assets through their participation in the asset sales at issue herein.

Plaintiff was damaged by the foregoing transfers in that Defendants attempted to place out of Plaintiff’s reach the assets in which Plaintiff has a legal interest, and against which Plaintiff is entitled to exercise its right to collect on the damages owed to it by Plaintiff and other creditors. Moreover, Plaintiff has been damaged by having to engage counsel to initiate this action to set aside the fraudulent transfers alleged herein and, by reason of those damages, is entitled to recover its attorney fees incurred herein pursuant to the doctrines of “tort of another,” “common fund” and for other reasons consistent with California law.

Based upon the foregoing, Plaintiff is entitled to an order that the above-described transfers, assumption of obligations incurred and payment of consideration be set aside and declared void. In the event the sale cannot be set aside and/or the assets cannot be recovered by Plaintiff, then Plaintiff seeks an award of damages from ABG and ABGT to compensate it for the value of the property lost through the fraudulent transfers alleged above, as well as for the lost opportunities caused by Defendants’ conduct.

Based upon the foregoing, Plaintiff is entitled to an order that the assets that were the subject of the fraudulent asset sale be attached in accordance with the provisions of Sections 481.010 through 493.060 of the Code of Civil Procedure.

Based upon the foregoing, Plaintiff is also entitled to a temporary restraining order pending the issuance of an Order to Show Cause Why a preliminary injunction should not issue to enjoin Defendants, and each of their respective attorneys, representative and/or agents against selling, transferring, conveying or otherwise disposing of any portion of the assets that were the subject of the fraudulent transfers identified herein.

NINTH CAUSE OF ACTION

Breach of Employment Contract — Wrongful Termination (By Diaz, Individually, Against Kreiner, Caldwell and F1 and DOES 1 through 26)

Plaintiff hereby incorporates by reference each and every allegation contained in paragraphs 1 through 96, above.

As set forth above, and in connection with the purchase by FI of assets from Diaz, FI agreed to employ Diaz through and including March 2, 2013. Diaz was to receive a salary of Eighty Thousand Dollars in 2008, which was to be increased by five percent (5%) on March 3rd of each year. As part of his employment agreement, Diaz was to be reimbursed for his reasonable expenses incurred in connection with his work on behalf of FI.

In the event Defendants sought to terminate Diaz without Cause to terminate his employment, Defendants were required to pay to Diaz his Salary in effect on the date of his termination for a period of six (6) months from and after the termination date, in addition to his accrued but unused vacation pay earned prior to the termination date.

In or about October of 2010, Defendants purported to terminate Diaz’s employment, and did so without Cause. Diaz is informed and believes his termination was wrongful and in retaliation for protesting Defendants’ unlawful business practices, as described herein, and not for any valid, non-retaliatory reason. In addition, and regardless of whether Diaz’s termination was tortious, Defendants, and each of them, have breached Diaz’s employment agreement by failing to pay him the amounts due under the contract, including reimbursement of Diaz’s reasonable business expenses incurred during the year 2008. Indeed, when Diaz requested he be paid for his 2008 expenses he was told FI lacked the money to pay them and Defendants represented FI would likely “go under” if it paid his expenses.

Diaz performed all obligations owed by him under his employment agreement with Defendants, except for such obligations concerning which his performance was excused, waived or otherwise legally discharged.

Defendants breached Diaz’s employment agreement by failing to pay Diaz the severance owed, and by failing and refusing to pay Diaz reimbursement for his business expenses reasonably incurred and submitted to Defendants pursuant to the terms of his
employment agreement.

As a direct and proximate result of Defendants’ breach of Diaz’s employment agreement, Diaz has suffered damages in a sum to be determined with precision at trial.

TENTH CAUSE OF ACTION

Unpaid Wages— Labor Code 203 and 203.1 (By Diaz Against Kreiner, Caldwell, Fl and DOES 1 through 25)

Plaintiff hereby incorporates by reference each and every allegation contained in paragraphs 1 through 103, above.

Diaz was employed by Defendants from March of 2008 through October of 2010 pursuant to the terms and conditions of Plaintiff’s employment agreement with Defendants. Diaz performed all obligations required of him, with the sole exception of such obligations for which his performance was waived, frustrated or otherwise legally discharged.

In October of 2010, Defendants purported to terminate Diaz’s employment with Defendants, without Cause. As of that date, Diaz had accrued wages plus unpaid vacation and sick days, plus reimbursement of his expenses for 2008, which constitute “wages” under Labor Code section 203. Defendants failed to pay Diaz the actual wages (inclusive of all amounts owed) on the date of his employment or within the statutorily required period of time thereafter. Moreover, Defendants tendered a check for a portion of the wages owed, but then stopped payment on the check. Pursuant to Labor Code section 203.1, this payment by a bad check constitutes the withholding of wages sufficient to trigger application of the penalty provisions of Labor Code sections 203 and 203.1.

There is now due and has been due since January 2009, unpaid wages plus accrued vacation and sick time and reimbursement of expenses, which Defendants have failed and refused to pay Diaz. Pursuant to Labor Code section 218.5, Diaz requests this Court award Diaz his reasonable attorney fees and costs incurred by him in this action.

Pursuant to Labor Code section 218.6, Diaz requests this Court award him interest on all due and unpaid wages, at the legal rate specified by Civil Code section 3289(b), accruing from the date the wages were due and payable, including but not limited to Diaz’s 2008 unpaid business expenses.

ELEVENTH CAUSE OF ACTION

For Fraud in the Inducement (By Diaz Individually and Against TapouT, Kreiner, Caldwell and Fl)

Plaintiff hereby incorporates by reference each and every allegation contained in paragraphs 1 through 108, above.

In or about December of 2007, the TapouT Defendants — acting primarily through Kreiner — approached Diaz regarding their ndicated interest in “bringing Diaz in house” and acquiring Hitman Fight Gear from Diaz. The TapouT Defendants represented to Diaz they wished to build up and expand Hitman Fight Gear as a brand name, and to make it as popular and profitable as the “TapouT” brand name. The TapouT Defendants represented that FI, the company through which Hitman Fight Gear would be purchased, would have the full benefit of the “TapouT” name, and would have the full backing of TapouT behind it. Kreiner represented to Diaz that by the time he and TapouT was done building up the Hitman brand, it would be worth $100 million. Kreiner pointed out that 11% of $100 million was $11,000,000, and suggested that was the value to be gained by Diaz through selling his brand to the TapouT Defendants. Kreiner and the other TapouT Defendants made other promises with the intent of inducing Diaz to sell his brand to the TapouT Defendants.

In reasonable reliance upon the TapouT Defendants’ representations, Diaz agreed to sell Hitman Fight Gear brand to the TapouT Defendants, which formed a new corporation, FI, to own the brand. Diaz’s reliance upon Defendants’ representations was reasonable because Defendants had seemingly created an immensely valuable clothing brand reported (by Defendants) to be worth more than One Hundred Million Dollars ($100,000,000). Given Defendants’ apparent success at creating another $100 million brand, Diaz reasonably believed Defendants would do the same thing for Diaz; particularly after Diaz agreed to have the TapouT Defendants retain ownership of approximately 89% of the ownership of the Hitman Fight Gear label. But for Defendants’ representations and promises, Diaz would not have sold Hitman Fight Gear to the TapouT Defendants, but would instead have continued to build Hitman Fight Gear into a hugely successful brand that would have easily continued to compete with TapouT, and which would have benefitted from Diaz’s continued infusion of the cash he was earning through 21 his Roxwell contract payments to build up, develop and promote Hitman Fight Gear.

All of Kreiner and the other TapouT Defendants’ representations and promises were false, and were knowingly false when made. Diaz is now informed and believes that Defendants made the various representations set forth above for the sole purpose of getting Diaz to relinquish his existing rights to a ten percent (10%) commission in the sale of TapouT gear through Roxwell in order to secure a more advantageous price for the TapouT Defendants through Roxwell. Defendants made their fraudulent representations for the express purpose of defrauding Diaz out of his commission rights.

Diaz is informed and believes that after the acquisition of Hitman Fight Gear by the TapouT Defendants, Roxwell sold more than $10,000,000 in TapouT apparel. Accordingly, Diaz has suffered damages of not less than One Million Dollars ($1,000,000) by virtue of Defendants having fraudulently induced Diaz to relinquish his contractual right to a ten percent (10%) commission in the sale of TapouT gear through Roxwell.

When Defendants made the foregoing representations they knew the representations were false and made the representations with the intention to deceive and defraud Diaz and to cause Diaz to act in reliance upon Defendants’ misrepresentations.

At the time Defendants made the foregoing representations, Diaz was ignorant of the falsity of their representations and promises, and had no idea Defendants had absolutely no intentions of honoring their promises to Diaz.

Diaz did not discover the falsity of Defendants’ representations until well after the close of escrow on the purchase by the TapouT Defendants of the Hitman Fight Gear brand, and until fewer than three years before the filing of this complaint.

The aforementioned conduct by Defendants represents an intentional misrepresentation, deceit and/or concealment of a material fact known to the Defendants with the intention on the part of Defendants of thereby depriving Plaintiffs of property or legal rights or otherwise causing injury to Plaintiffs. Defendants’ conduct was despicable conduct that subjected Plaintiffs to a cruel and unjust hardship in conscious disregard of Plaintiffs’ rights. Defendants’ conduct justifies an award of punitive and exemplary damages to punish Defendants’ misconduct and to deter others from engaging in similar misconduct, all in an amount to be proven at the time of trial.

The aforementioned conduct by Defendants represents an intentional misrepresentation, deceit and/or concealment of a material fact known to the Defendants with the intention on the part of Defendants of thereby depriving Plaintiff of property or legal rights or otherwise causing injury to Plaintiff. Defendants’ conduct was despicable conduct that subjected Plaintiff to a cruel and unjust hardship in conscious disregard of Plaintiffs rights. Defendants’ conduct justifies an award of punitive and exemplary damages to punish Defendants’ misconduct and to deter others from engaging in similar misconduct, all in an amount to be proven at the
time of trial.

ELEVENTH CAUSE OF ACTION

For Unfair Business Practices – Violations of Civil Codes 17200, et Seq. (By Diaz, Individually, Against TapouT, Kreiner, Caldwell, ABG, ABGT and DOES 1 through 50)

Plaintiff re-alleges and incorporates herein by this reference each of the allegations of paragraphs 1 through 118, above.

The Unfair Business Practices Act defines unfair business competition to include any “unfair,” “unlawful,” or “fraudulent” business act or practice. (See, Bus. & Prof. Code § 17200, et seq.). The act also provides for injunctive relief and restitution for violations of the statute.

Defendants violated, and continue to violate, the Unfair Business Practices Act by willfully and wrongfully engaging in unfair, unlawful and fraudulent business acts and practices, as a pattern and practice, aimed at misleading Diaz and others into believing Defendants were managing and operating a profitable business when, in fact, Defendants were secretly fleecing TapouT and FI of all of their cash and liquid assets. Moreover, the ABG Defendants were actively engaged in false, fraudulent and unfair business practices by engaging in purportedly “arm’s length” purchases of assets through asset purchases while secretly scheming with the TapouT Defendants to appropriate for the ABG Defendants all of the assets of TapouT and Fl, while leaving it bereft of any other assets to satisfy the claims the ABG Defendants knew existed by virtue of their due diligence efforts.

Defendants, and each of them, through the foregoing unlawful, unfair and/or fraudulent business acts or practices has been unjustly enriched. In this regard, Plaintiff and others have conferred upon the TapouT Defendants cash and other assets that they have appropriated for themselves through their unfair, fraudulent and unlawful business practices as outlined above. Likewise, the ABG Defendants have derived benefits from Plaintiff and others as a result of their unfair, fraudulent and unlawful business practices, as outlined above.

Plaintiff Diaz, both individually and derivatively on behalf of Fl, is entitled to restitution of the “ill-gotten gains” Defendants have obtained through their unlawful, unfair or fraudulent business acts or practices.

Plaintiff seeks an order enjoining Defendants from engaging in their unlawful, unfair and/or fraudulent business practices.

Plaintiff also seek recovery of attorney’s fees pursuant to Code of Civil Procedure section 1021.5 to the extent the public’s rights are secured by the action undertaken by Defendants, and each of them.

PRAYER

WHEREFORE, Plaintiff Diaz, both individually and derivatively on behalf of Fl, prays for judgment against Defendants as follows:

  1. For compensatory damages in an amount subject to proof at trial, but not less than Two Million Dollars ($2,000,000.00);
  2. For general damages, in an amount to be determined with precision at trial;
  3. For attorney’s fees incurred in creating a common fund for the benefit of other members, shareholders and/or investors of FI and TapouT, and as otherwise allowed by law, including pursuant to the “tort of another” doctrine;
  4. For punitive damages in an amount sufficient to deter and make an example of Defendants;
  5. For prejudgment interest in an amount to be proven at time of trial;
  6. For costs of suit incurred herein; and,
  7. For such other and further relief as the court may deem just and proper.

Topics: All Topics, MMA, Media, Zach Arnold | 3 Comments » | Permalink | Trackback |

3 Responses to “If Dan Diaz gets his way, Tapout will be on trial this September”

  1. Steve4192 says:

    Tapout lost it’s soul the day Mask died. Nothing they have done in the wake of his death surprises me.

  2. RST says:

    Just to be honest, I’m not all that upset aboot tapout one way or the other.

    Tapout always seemed like…
    iffy persons from the get go.

    They all seem like they deserve eachother.

  3. I worked for TapouT as Senior Accounting Manager under Ron Surak who was the CFO of the company during the period from October 1st, 2008 through March 20th, 2009. I was let go a few days after Charles Lewis was killed in the automobile accident in Newport Beach. Although I am not knowledgeable of every allegation contained within this document, I will say that the atmosphere created by Marc Kreiner was exactly as it was stated. Put it this way….it wouldn’t surprise me at all if every single allegation against Kreiner turned out to be true. He was all about getting over on everyone and wasn’t about the product at all. He didn’t give a shit about the company and he didn’t give a shit about promises he made, bills he owed or anything at all but looking cool to the fighters and being some sort of a big shot.

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