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Bionet vs. Scout Analytics Complaint (3)

Bionet vs. Scout Analytics Complaint (3)

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Published by John Cook
Bionet vs. Scout Analytics Complaint (3)
Bionet vs. Scout Analytics Complaint (3)

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Published by: John Cook on Jan 22, 2014
Copyright:Attribution Non-commercial

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01/23/2014

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COMPLAINT- 1
N
EWMAN
D
U
W
ORS
LLP
1201 Third Avenue, Suite 1600 Seattle, Washington 98101 (206) 274-2800
SUPERIOR COURT OF THE STATE OF WASHINGTON IN AND FOR THE COUNTY OF KING
BIONET SYSTEMS LLC, a Washington limited liability company, COLIN BRYAR, an individual, SARAH BRYER, an individual, HEATHER E. ERDMANN, an individual,  J.B. CAPITAL LLC, a Washington limited liability company, ROBERT W. JOHNSON, an individual, STEVE MOORE, an individual, WILLARD B. SAMMS, an individual, SHARON M. SAMMS, an individual, Plaintiffs, v. SCOUT ANALYTICS, INC., a Washington corporation, MARK UPSON, an individual,  JOHN CONNORS, an individual, ADAM LUDWIN, an individual, IGNITION MANAGING DIRECTORS FUND III, LLC, a Delaware limited liability company, IGNITION VENTURE PARTNERS III, LP, a Delaware limited partnership, RRE VENTURES IV, LP, a Delaware limited partnership, Defendants. NO. _______________
COMPLAINT FOR DAMAGES AND INJUNCTIVE RELIEF  JURY DEMANDED
FILED
14 JAN 10 PM 4:06KING COUNTY
 
SUPERIOR COURT CLERKE-FILEDCASE NUMBER: 14-2-01133-4 SEA
 
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COMPLAINT- 2
N
EWMAN
D
U
W
ORS
LLP
1201 Third Avenue, Suite 1600 Seattle, Washington 98101 (206) 274-2800
Plaintiffs BIONET SYSTEMS LLC, a Washington limited liability company, COLIN BRYAR, an individual, SARAH BRYER, an individual, HEATHER E. ERDMANN, an individual, J.B. CAPITAL LLC, a Washington limited liability company, ROBERT W. JOHNSON, an individual, STEVE MOORE, an individual, WILLARD B. SAMMS a/k/a ROBIN SAMMS, an individual, SHARON M. SAMMS, an individual (collectively, “Plaintiffs”) file this Complaint against defendants SCOUT ANALYTICS, INC., a Washington corporation, MARK UPSON, an individual, JOHN CONNORS, an individual, ADAM LUDWIN, an individual, IGNITION MANAGING DIRECTORS FUND III, LLC, a Delaware limited liability company, IGNITION VENTURE PARTNERS III, LP, a Delaware limited partnership, RRE VENTURES IV, LP, a Delaware limited partnership (collectively, “Defendants”) on personal knowledge of their own activities and on information and belief as to the activities of others as follows:
I.
 
NATURE OF THE CASE
1.
 
Plaintiffs collectively hold a near supermajority (63%) of the Series A Preferred and 73% of the Common shares issued by Defendant Scout Analytics, Inc. (“Scout”). 2.
 
Defendants Mark Upson, John Connors and Adam Ludwin (collectively, the Individual Defendants”) serve on Scout’s Board of Directors and constitute three of the four voting members. 3.
 
Defendant Connors is a partner at Defendants Ignition Managing Directors Fund III and Ignition Venture Partners III (collectively, “Ignition”). Defendant Ludwin is a partner with Defendant RRE Ventures IV (“RRE”). Collectively, Defendants Ignition and RRE hold nearly half of Scout’s Series B Preferred and 64% of Scout’s Series C and C-1 Preferred shares. Neither Ignition, RRE, nor any Individual Defendant holds any of Scout’s Series A Preferred or Common shares. 4.
 
Scout is a closely-held corporation and, as such, Defendants owe a fiduciary duty to Scout’s Series A Preferred and Common shareholders. Defendants have instead engaged in self-dealing, corporate waste, and gross negligence to the detriment of Scout’s
 
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COMPLAINT- 3
N
EWMAN
D
U
W
ORS
LLP
1201 Third Avenue, Suite 1600 Seattle, Washington 98101 (206) 274-2800
Series A Preferred and Common shareholders. 5.
 
In particular, Defendants have voted to approve a sale proposal by ServiceSource International, Inc. (“ServiceSource”)—a proposal that eliminates the economic interests of Scout’s Series A Preferred and Common shareholders—rather than explore or investigate a proposal by Catalyst Investors III, LLP (“Catalyst”) which offers a much higher valuation but no post-merger payments to Scout’s management and its Series B, C and C-1 Preferred shareholders. 6.
 
As a result of Defendants’ oppressive management of Scout, the value of Scout’s Series A Preferred and Common shares—of which Plaintiffs hold the vast majority—has been and will continue to be adversely impacted. 7.
 
Plaintiffs are suing to recover their damages and obtain an injunction preventing the sale of Scout to ServiceSource, as well as further wrongful conduct by Defendants.
II.
 
PARTIES
8.
 
Plaintiff Bionet Systems LLC (“Bionet”) is a Washington limited liability company whose members are all residents of the State of Washington. Bionet holds 69.37% of Scout’s Common and 25.03% of Scout’s Series A Preferred shares. Its founder, Mark DiSalle, serves on Scout’s Board of Directors. 9.
 
Plaintiff J.B. Capital LLC (“J.B. Capital”) is a Washington limited liability company. J.B. Capital holds 15.84% of Scout’s Series A Preferred shares. 10.
 
Plaintiffs Colin Bryar and Sarah Bryar are Washington residents. As husband and wife, they own 5.43% of Scout’s Series A Preferred shares. 11.
 
Plaintiffs Robert W. Johnson and Heather E. Erdmann are Washington residents. Johnson holds 1.36% of Scout’s Series A Preferred shares in his own name. As husband and wife, Johnson and Erdmann own another 1.81% of Scout’s Series A Preferred shares. 12.
 
Plaintiff Steve Moore is a Washington resident. Moore holds 3.55% of Scout’s Common and 12.67% of Scout’s Series A Preferred shares.

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