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Cross Complaint Selena

Cross Complaint Selena

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Published by Eriq Gardner
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Published by: Eriq Gardner on May 08, 2013
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  ___________________________________________________________________________________ 
CROSS-COMPLAINT1
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MICHAEL E. WEINSTEN (SBN 155680
)
DANIEL R. GUTENPLAN (SBN 260412)LAVELY & SINGERPROFESSIONAL CORPORATION
 2049 Century Park East, Suite 2400Los Angeles, California 90067-2906Telephone: (310) 556-3501Facsimile: (310) 556-3615E-Mail:mweinsten@lavelysinger.com dgutenplan@lavelysinger.comAttorneys forDEFENDANTS/CROSS-COMPLAINANTSJULY MOON PRODUCTIONS, INC.AND SELENA GOMEZ
SUPERIOR COURT OF THE STATE OF CALIFORNIACOUNTY OF LOS ANGELES- WEST DISTRICT
ADRENALINA INCORPORATED, a Nevadacorporation,Plaintiff,vs.JULY MOON PRODUCTIONS, INC., aCalifornia corporation, SELENA GOMEZ,an individual,Defendants.JULY MOON PRODUCTIONS, INC., aCalifornia corporation, SELENA GOMEZ,an individual,Cross-Complainants,vs.ADRENALINA INCORPORATED, a Nevadacorporation; GIGANTIC PARFUMS, LLC, aFlorida Limited Liability Company; ILIALEKACH, an individual.Cross-Defendants.___________________________________))))))))))))))))))))))))))))))CASE NO. SC120598[Hon. Gerald Rosenberg, Dept. K]CROSS-COMPLAINT FOR:(1) BREACH OF CONTRACT; AND(2) DECLARATORY RELIEF.
 
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CROSS-COMPLAINT2
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Cross-Complainants July Moon Productions, Inc. and Selena Gomez (collectively,“Cross-Complainants”) allege as follows:
INTRODUCTION
1. This action commenced by Florida-based fragrance company Adrenalina is bornof pure fiction - a tactical ploy to escape liability for its own breaches of contract and exposureto millions in damages. In early 2011, Adrenalina was a company on its last legs, running onfumes, and looking for a miracle to turn it around. Having gone from 122 full-time employeesto 5 in just three years, Adrenalina had already abandoned its prior business plan and begantargeting celebrities for licenses it could exploit. One of those celebrities was actress/pop starSelena Gomez, who was then “hot” off the launch of her new clothing line,
Dream Out Loud.
2. In June 2011, Adrenalina convinced Ms. Gomez to sign a five-year worldwidelicense for rights to exploit the Selena Gomez brand and trademark in connection with a newline of fragrances to be developed and distributed by Adrenalina. It did so by promising to payMs. Gomez a 5% royalty with a
guaranteed 
minimum payment of $5.7 million. Adrenalinaalso promised to invest millions each year for advertising in “trade and consumer press,” with$2 million to be spent in the first year alone. Those promises, however, proved meaningless.As would later be disclosed in public filings, but which was not known to Ms. Gomez or herrepresentatives at the time, Adrenalina was a company with a checkered past and without thewherewithal to fund its financial commitments.3. Indeed, on March 15, 2012,
 just 45 days 
before launch of the new SelenaGomez line of fragrances, Adrenalina publicly announced in SEC filings that it did not in facthave the capital necessary to meet its contractual obligations. In an “Annual Report” to theSEC, Adrenalina revealed:Our licensing agreements with both Selena Gomez and [another celebrity] require us toincur advertising expenses during the term of each agreement. This expense, togetherwith costs associated with hiring additional personnel, development, production anddistribution costs will put tremendous pressure on our working capital requirements. Wecurrently do not have sufficient capital to fund these activities. . . .
We currently do 
 
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CROSS-COMPLAINT3
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not have any commitments for financing and there can be no assurance that we will be able to secure sufficient financing to implement our business strategy and comply with our contractual commitments.
(emphasis added).Elsewhere in the report, Adrenalina states: “[w]e have not generated sufficient revenues tocover our operating expenses,” and “
[o]ur current financial condition has raised doubt regarding our ability to continue as a growing concern.” 
4. Of course, Adrenalina did not disclose any of this to Ms. Gomez or herrepresentatives when it pitched the idea of a worldwide license just nine months earlier. Nordid they disclose it to the investing public. In its Annual Report, Adrenalina makes the startlingadmission: “
We are not in compliance with the reporting requirements as established by the rules and regulations promulgated by the Securities and Exchange Commission.
. . .We have not filed any required reports since the quarter ended September 30, 2008.” HadAdrenalina been forthcoming with its financial problems, Ms. Gomez would never have goneinto business with Adrenalina, or its Chairman- a man dubbed by the Wall Street Journal in2006 as “Worst CEO of the Year.”5. Over the past fourteen years, Ms. Gomez (now 21) has worked hard building animpressive career as an actress and singer. Her popularity and unblemished reputation havetranslated into one of the most sought after celebrity brands. To protect her valuable brand,the license expressly required that Adrenalina conduct its business “in a manner consistentwith the high reputation” of Ms. Gomez, and that it refrain from any conduct that might reflectnegatively on Ms. Gomez or her brand. The license also required that Adrenalina providesufficient capital to ensure payment of its bills, invest heavily in advertising, and employ “bestcommercially reasonable efforts” to maximize sales, marketing and distribution. Having failedto secure the necessary financing, Adrenalina could not, and did not, meet any of theseobligations.6. Specifically, in March of this year, Ms. Gomez learned for the first time ofAdrenalina
ʼ
s financial problems when her representatives were contacted by a principalsupplier concerning monies owed by Adrenalina. That supplier has since sued Adrenalina for

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