10 08 05 FAC Conformed)

J ..0....
',<1 .
1 Don A. Hernandez (SBN 125119)

Alexandra M. Steinberg (SBN 227427)
2 Adam Kargman (SBN 212109)
HERNANDEZ SCHAEDEL & ASSOCIATES, LLP
3 2 North Lake A
venue, Suite 930
Pasadena, CA 91101
4 T: (626) 440-0022
F: (626) 628-1725
5 dhernandez ernlaw.com
asteinber ernlaw.com
6 akargman@hernlaw.com
7 Attorneys for Plaintiffs

MICHAEL KONG and JEFF GOLDSTEIN
8
9
SUPERIOR COURT OF THE STATE OF CALIFORNIA
10 FOR THE COUNTY OF LOS ANGELES -
CENTRAL DISTRICT
11
12
MICHAEL KONG, an individual; and JEFF Case No.: BC442086
GOLDSTEIN, an individual,
13
Plaintiffs, FIRST AMENDED COMPLAINT FOR:
14
1) Promissory Fraud
15 vs.
2) Breach of Contract (Kong's
Employment'Agreement);
16
MODERN LUXURY MEDIA, LLC, a 3) Breach ofContra.ct.(.Kong's
Delaware Separation
Limited Liability Company; MLM Agreement), alternatively;
17 HOLDING
CORP~,. .~. Del~ware Corporation; KEVIN 4) Breach of Contraçt (Goldstein's
18 FLANNERY, as Director of Modem Luxury Employment Agreement);
Media, LLC; WILMAMCOBERT, as Director of 5) Breach of Contract (Gold~tein 's
Modem Luxury Media, LLC; JAMES
19 SPANFELLER, as Director of Modem Separation Agreement), alternatively;
.
Luxury 6) Breach of Contract (tIle 2007
Media, LLC; JAMES FRIEDLICH, as Director of LLC
20 Modem Luxury Media, LLC; and DOES Agreement);
1-25, 7) Breach of Contract (the 2009 LLC
inclusive,
21 Agreement);
8) Anticipatory Breach;
Defendants.
22 9) Breach of the Implied Covenant
of
Good Faith and Fair Dealing
23 10) Intentional Inteñerence
with
24 Contractual Relations;
11) Indemnification
(Lab. Code ~ 2802);
25 12) Unfair Competition (Bus. &
Prof. Code
~ 17200, et seq.); and
26 13) Declaratory
Relief
14) Failure to Pay All Wages
Due At
27
Termination (Lab. Code ~~ 201 & 203)
15) Failure to Pay Wages
28 (Lab. Code ~
1194)
1
nRSTAMmNDEDCOMWLAINT
Don A. Hernandez (SBN 125119)
Alexandra M. Steinberg (SBN 227427)
2 Adam Kargman (SBN 212109)
3 2 North Lake A
venue, Suite 930
Pasadena, CA 91101
4 T: (626) 440-0022
F: (626) 628-1725
5 dhernandez@hernlaw.com
asteinberg@hernlaw.com
6 akargman@hernlaw.com

8
9
SUPERIOR COURT OF THE STATE OF
CALIFORNIA
10
FOR THE COUNTY OF LOS ANGELES CENTRAL DISTRICT
11
12
MICHAEL KONG, an individual; and JEFF Case No.: BC442086
13
GOLDSTEIN, an individual,
Plaintiffs, FIRST AMENDED COMPLAINT FOR:

14
1) Promissory Fraud
15 vs.
2) Breach of Contract (Kong's
16 Employment Agreement);
MODERN LUXURY MEDIA, LLC, a Delaware 3) Breach of Contract (Kong's Separation
Limited Liability Company; MLM Agreement), alternatively;
17 HOLDING
CORP., a Delaware Corporation; KEVIN 4) Breach of Contract (Goldstein's
18
FLANNERY, as Director of Modern Luxury Employment Agreement);
Media, LLC; WILLIAM COBERT, as Director of 5) Breach of Contract (Goldstein's
Modern Luxury Media, LLC; JAMES
19 SP ANFELLER, Separation Agreement), alternatively;
as Director of Modern Luxury 6) Breach of Contract (the 2007
Media, LLC; JAMES
FRIEDLICH, as Director of
LLC
20 Agreement);
Modern Luxury Media, LLC; and DOES 1-25,
7) Breach of Contract (the 2009
21
inclusive, LLC
Agreement);
8) Anticipatory Breach;
22 Defendants.
9) Breach of the Implied
Covenant of
Good Faith and Fair Dealing
23
10) Intentional Interference with
24 Contractual Relations;
11) Indemnification
(Lab. Code ~ 2802);
25
12) Unfair Competition (Bus. &
Prof. Code
~ 17200, et seq.); and
26 13) Declaratory Relief
14) Failure to Pay All
Wages Due At
27
Termination (Lab. Code ~~ 201 & 203)
15) Failure to Pay Wages
28 (Lab. Code ~
1194)
1
FIRST AMENDED COMPLAINT
DEMAND FOR JURY TRIAL
2
Complaint Filed: July 22, 2010
Discovery Cut-Off: None
3
Trial Date: None
4
5
F or their Complaint herein, Plaintiffs
Michael Kong and Jeff Goldstein (collectively,
6
"Plaintiffs") hereby
allege as follows:
7
PARTIES AND JURISDICTION
8
1. Plaintiff Michael Kong ("Kong") is, and at
all times relevant hereto was, a resident of
9
the County of Los Angeles, State of California.
10
2. Plaintiff Jeff Goldstein ("Goldstein"), at
all times relevant hereto, was and is a resident
11
of the County of Los Angeles, State of California.
12
3. Defendant Modem Luxury Media, LLC ("Modem Luxury") is,
and at all times
13
relevant herein was, a limited liability corporation formed under
Delaware law, with its principal
14
place of business located in the County
of Los Angeles, State of California.
15
4. Plaintiffs are informed and believe, and thereon allege, that
Defendant MLM Holding
16
Corporation ("MLM Holding Corp.") is, and at all times relevant herein a
was, corporation formed
17
under Delaware law, with its principal place of business
located in Dover, Delaware.
18
5. Plaintiffs are informed and believe, and thereon allege, that
Defendant Kevin Flannery
19
("Flannery") is an individual
who resides in the State of Virginia. Plaintiffs are further informed
and
20
believe, and thereon
allege, that Flannery is the Chairman of the board of directors
of Modem
21
Luxury.
22
6. Plaintiffs are informed and believe,
and thereon allege, that Defendant
William Cobert
23
("Cobert") is an individual
who resides in the State of California. Plaintiffs are further informed and
24
believe, and thereon allege, that Cobert is the Chief
Executive Officer and a member of the board of
25
directors of Modem Luxury.
26
7. Plaintiffs are informed and believe,
and thereon allege, that Defendant
James
27
Spanfeller ("Spanfeller") is an individual who resides in the
State of New York. Plaintiffs are
28
further informed and believe, and thereon allege, that
Spanfeller is a member of the board of directors
2
1 of Modem Luxury.
2 Plaintiffs are informed and believe,
8. and thereon allege, that Defendant James Friedlich
3 ("Friedlich") is an individual who
resides in the State of New York. Plaintiffs are further informed
4 and believe, and thereon allege, that Friedlich is a member of the board of directors of Modem
5
Luxury.
6 Plaintiffs are ignorant

9. of the true names and capacities of the defendants sued as Does
7 1 through 25,
inclusive, and therefore sue these defendants by such fictitious Plaintiffs are
names.
8 informed and believe, and thereon allege, that each
of the defendants designated herein as a Doe is
9 legally responsible in some
manner for the events and happenings herein referred to, and negligently,
10
wantonly, recklessly, tortiously and/or unlawfully, proximately caused the injuries
and damages to
11 Plaintiffs as herein alleged. Plaintiffs will ask leave
of the Court to amend this Complaint to show
12 their true names and capacities when the
same have been ascertained.
13 10. At all times mentioned herein, Defendants Modem Luxury, MLM Holding, Flannery,
14 Cobert, Spanfeller, Friedlich and Does 1 through 25, and each
of them (collectively, "Defendants"),
15
were the agents, representatives, successors and/or assigns, each of the other, and at
all times
16 pertinent hereto, were acting within the course and scope of their authority
as such agents,
17 representatives, employees, successors, and/or assigns, and with the permission,
consent, and
18
approval, or subsequent ratification, of each of the other defendants.
19 11. This Court has subject matter jurisdiction

over the claims set forth herein because the
20 relief sought herein can be awarded only by this
Court.
21 12. This Court has personal jurisdiction
over the defendants because each of the acts
or
22 omissions set forth below either was committed in the
County of Los Angeles, or was directed
23 towards Plaintiffs here, and, accordingly, subjects the
defendants to the jurisdiction of this Court.
24 13. Venue is proper in this county in accordance with Code of Civil
Procedure section
25 395(a) because the defendants,
or some of them, reside in this county and the acts and omissions
26 giving rise to the claims herein took place in this
county.
27
28
3
FACTS COMMON TO ALL COUNTS
2 14. Defendant Modern Luxury was formed on or around September 2004.
3 15. Plaintiffs Kong and Goldstein

are former officers of Modern Luxury, serving as Chief
4 Executive Officer ("CEO") and Chief Financial Officer ("CFO"), respectively. Both Kong and
5 Goldstein were terminated by Modern Luxury in early 2010. As set forth more fully below, both
6 Kong's and Goldstein's employment agreements and their separation
agreements explicitly provide
7 for their indemnity and defense in any proceeding arising
out of or incidental to the business
8 activities of, or relating to, Modern Luxury, during the effective

term of their employment
9 agreements.
10 16. Kong was hired by Modern Luxury in or about June

2007. On or about May 21,2007,
II the parties entered into a written employment contract effective as of June 18,2007 (the "Kong
12 Employment Agreement"). The Kong Employment Agreement expressly provided that
Modern
13 Luxury would indemnify and hold harmless Kong in any action arising from the
performance of his
14 duties as CEO:
15 15. Indemnification. In accordance with Section 18-108 of the

Delaware Limited Liability Company Act, the Company shall
16 indemnify and hold harmless Employee to the
fullest extent permitted
by law from and against any and all losses,
17 claims, demands, costs,
damages, liabilities Goint or several), expenses
of any nature (including
attorneys' fees and disbursements), judgments, fines, settlements, and
18
other amounts arising from any and all claims, demands, actions, suits,
or proceedings, whether civil, criminal, administrative or investigative,
19 in which Employee may be involved, or threatened to be
involved as a
party or otherwise, arising out of or incidental to the business or
20 activities of or relating to the Company, regardless
of whether
Employee continues to be an officer or employee at the
21 time any such
liability or expense is paid
or incurred. . . .
22 17. The Kong Employment Agreement also provided at Section 2

that the term of the
23 agreement would last "for a period of five (5) years (the
"Term"), commencing on the Closing Date."
24 The Closing Date was June 18,2007.
25 18. The Kong Employment Agreement further provided

for the following compensation at
26 Section 4:
27 4. Compensation. [Kong] shall be paid a

gross annual salary of four hundred
thousand dollars ($400,000) (the "Base Salary") [Kong's] gross annual
28 salary shall be subject to annual review by the Board;
. . . .
provided, however, that

4
1 in no event shall Employee's gross annual salary be
reduced to less than the
Base Salary as a result of such annual review.
2
19. The Kong Employment Agreement also provided that
3 Kong's employment could only
be terminated prior to the expiration of the Term upon the occurrences expressly provided
4 under
Section 12, including as follows:
5
12.2. By Mutual Agreement. This Agreement
6 may be terminated at any time by
mutual agreement of the parties hereto.
7 20. In or around June 2007, Kong incurred expenses in the discharge
of his duties or in
8 obedience to the directions of his employer by
way of a loan to Modern Luxury in the amount of
9 $500,000. In or around July 2008, Kong incurred additional expenses in the discharge
of his duties
10 or in obedience to the directions of his employer by way of a loan to Modern Luxury in the amount of
11 $100,000.
12 21. From on or about July 1, 2008 until on or about June 30, 2009, Modern
Luxury paid
13 Kong none of his $400,000 annual Base Salary.
14 22. On or about January 26,2010, Modern
Luxury, MLM Holding Corp. and Kong
15 entered into a Separation and Release of Claims Agreement (the
"Kong Separation Agreement"),
16 which provided for the release of any of Kong's
known and unknown claims against Defendants
17 accrued up to that date, which would include those for unpaid
wages and monies owed as set forth
18 below. Further, the Kong Separation Agreement explicitly provided that
Modern Luxury would
19 indemnify and hold harmless
Kong in any action arising from the performance of his duties as CEO:
20 2.08 Indemnification. Executive shall continue to be indemnified and held
harmless
for actions taken during the period of his service in his capacity
21 as an officer and
director of the Company and its and as a director
of the Parent to the fullest extent
such indemnification is currently provided and
22 consistent with applicable law.
23. Goldstein was hired by Modern Luxury as its CFO in

23 or about January 1,2008. On or
about that date, the parties entered into a written employment contract (the "Goldstein Employment
24
Agreement"). The Goldstein Employment Agreement expressly
25 provided that Modern Luxury would
indemnify and hold harmless Goldstein in
any action arising from the performance of his duties as
26
CFO:
27
15. Indemnification. In accordance with Section 18-108
28 of the
Delaware Limited Liability Company Act, the
Company shall indemnify
5
and hold harmless Employee to the fullest extent
permitted by law from
and against any and all losses, claims, demands,
2 costs, damages, liabilities
Goint or several), expenses of
any nature (including attorneys' fees and
disbursements), judgments, fines, settlements,
3 and other amounts arising
from any and all claims, demands, actions, suits, or proceedings, whether
civil, criminal, administrative or investigative, in which Employee
4 involved, or threatened to be involved as a may be
party or otherwise, arising out
of or incidental to the business or activities of or relating to the Company,
5 regardless of whether Employee continues
to be an officer or employee at
the time any such liability or expense is paid
6 or incurred. . . .
24. The Goldstein Employment Agreement also provided

7 at Section 2 that the "Term" of
the agreement would commence on January 1, 2008 and would continue in effect through
8 December
31,2012 a period of approximately five (5)
years.
9
25. The Goldstein Employment Agreement also provided that
Goldstein's employment
10
could only be terminated prior to the
11
expiration of the Term upon the occurrences expressly provided
under Section 12, including as follows:
12
12.2. By Mutual Agreement. This
13 Agreement may be terminated at any time by
14 26. On or about that February 17,2010, Modern

Luxury, MLM Holding Corp., and
15 Goldstein entered into a Separation and Release
of Claims Agreement (the "Goldstein Separation
16 Agreement"), which provided for the
release of any of Goldstein's known and unknown claims
17 against Defendants accrued up to that date
and explicitly provided that Modern Luxury
would
18 indemnify and hold harmless Goldstein in
any action arising from the performance of his duties as
19 CFO:
20 2.07 Indemnification. Executive shall continue to be indemnified

and
held harmless for actions taken during the period
21 of his service in his
capacity as an officer of the Company and a
manager of the Company's
subsidiaries to the fullest extent such indemnification is
22 currently provided
and consistent with applicable
law.
23 27. In or around June 2007, Modern Luxury enacted its Second
Amended and Restated
24 Limited Liability Company Agreement of
Modern Luxury Media, LLC dated June 2007 (the "2007
25 LLC Agreement").
26 28. The 2007 LLC Agreement expressly provided yet

another promise to indemnify and
27 hold harmless both
Kong and Goldstein:
28
6
14. Exculpation and Indemnification. To the fullest extent
permitted by law, the
2
Company will indemnify and hold harmless the
Member, and each officer, employee or other agent of the Company
who was or is a party or is threatened to be made a
3 party to any
threatened, pending or completed
action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of any act
4 or
omission or alleged act or omission arising out of such
person's
activities as a Member, director, manager, officer, employee
5 or other
agent or otherwise on behalf of the Company
if such activities were
performed in good faith either on behalf of the Company or in
6
furtherance of the interests of the Company, and were performed
or
omitted in a manner reasonably believed by such person to be within
7 the scope of the authority conferred by this
Agreement, by law against
losses, damages, or expenses for which such
8 person has not otherwise
been reimbursed (including, without limitation,
attorneys and
accountant fees and expenses, judgment fines and
9 amounts paid in
settlement), actually and reasonably incurred by
such person in
connection with such action, suit or proceeding, so long as
such person
10 was not guilty of gross negligence or willful misconduct with respect
to
such act or omission.
11
29. Luxury Media enacted a Third Amended and Restated Limited Liability Company
12
Agreement of Modern Luxury Media, LLC (the "2009 LLC Agreement"), dated
December 11,2009,
13
in which Kong and Goldstein were expressly
14
provided yet another promise that they would be
indemnified and held harmless:

15
14. Exculpation and Indemnification. To the fullest
16 extent permitted
by law, the Company will indemnify and hold
harmless the Member, and
each director, manager, officer, employee or other agent
17 of the Member or
the Company, who was or is a
party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether
18
civil, criminal, administrative or investigative, by reason
of any act or
omission or allegedact or omission arising out of such person's activities
19 a Member, director,
as manager, officer, employee or other agent or
otherwise on behalf of the Member or the Company if such
20 activities were
performed in good faith either
on behalf of the Member or the Company
or in furtherance of the interests of the Member or the Company, and
21 were
performed or omitted in a manner reasonably believed by such person to
be within the scope
of the authority conferred by this Agreement or by
22 law, against losses, damages, or expenses for which such person has
not
otherwise been reimbursed (including, without limitation,
23 attorneys and
accountant fees and expenses, judgment fins and
amounts paid in
settlement), actually and reasonably
incurred by such person in connection
24 with such action, suit or proceeding, so long as such
person was not guilty
of wo~s negligence or willful misconduct with respect to such act
25 or
omISSIOn.
26
30. On or about June 11,2010, a lawsuit was filed in the Delaware Chancery Court
27
against Kong, Goldstein,
Modern Luxury, and other defendants, by Juli Benlevi-Zeff and JBA
28
7
Holdings, Inc (the "Benlevi-Zeff Complaint"
or the "Benlevi-Zeff Action"). The Benlevi-Zeff
2 Complaint asserts causes of action for fraud; negligent
or innocent misrepresentation; breach of
3 fiduciary duty; breach of representations and warranties (against
Modern Luxury); breach of the
4 covenant of good faith and fair dealing (against Modern Luxury); declaratory judgment;
and a
5 contractual claim for attorneys' fees (against Modern

Luxury), as well as independent claims against
6 other entities who are not a party to this action. The allegations against Plaintiffs in that lawsuit arise
7 out of or are incidental to business and activities of
or relating to Modern Luxury conducted during
8 the term of Kong and Goldstein's employment, with
full knowledge and approval of the Board of
9 Directors.
10 31. On or about June 18, 2010, Kong tendered the claims to

Modern Luxury for defense
11 and indemnity pursuant to Section 15 of the Kong Employment
Agreement, Section 2.08 of the Kong
12 Separation Agreement, Section 14
of the 2009 LLC Agreement, and California Labor Code section
13 2802. On or about June 21, 2010, Goldstein likewise tendered the
claims to Modern Luxury for
14 defense and indemnity pursuant to Section 15
of the Goldstein Employment Agreement, Section 2.07
15 of the Goldstein Separation Agreement, Section 14
of the 2009 LLC Agreement, and California
16 Labor Code section. Modern Luxury failed to respond
after multiple and repeated applications by
17 Plaintiffs' counsels, which was effectively a denial in light of the imminent deadlines forcing
Kong
18 and Goldstein to respond to the Benlevi-Zeff Complaint.
19 32. On or about July 20, 2010, Modern Luxury informed Plaintiffs that
their demands for
20 indemnification and reimbursement of costs of defense are
worthless because the Company intended
21 to sell all of its assets within approximately ten days.
22
FIRST CAUSE OF ACTION
23
PROMISSORY FRAUD
24 (By All Plaintiffs Against All Defendants)
25 33. Plaintiffs re-allege and incorporate by
reference those allegations set forth in
26 paragraphs 1-32, supra, as though fully set
forth herein.
27 34. On or about January 26,2010, Kong, Modern
Luxury, and MLM Holding Corp.
28 entered into the Kong Separation Agreement which, as described in Paragraph
22, supra, provided at
8
1 Section 2.08 that Modern Luxury would continue to "indemnify[y]
and h[o]ld harmless" Kong for
2 any of his actions taken during the period of his service as CEO and as a director.
3 35. On or about February 17,2010, Goldstein,
Modern Luxury, and MLM Holding Corp.
4 entered the Goldstein Separation Agreement, which, as described in Paragraph
26, supra, provided at
5 Section 2.07 that Modern Luxury would continue to "indemnify[y]
and h[0 ]ld harmless" Goldstein
6 for any of his actions taken during the period of his
service as CFO and as a manager.
7 36. It was crucial to Kong and Goldstein's entering into their respective Separation
8
Agreements with Modern Luxury and MLM Holding Corp., that they would be indemnified and held
9 harmless of any actions taken during the period of their service as officers and directors of Modern
10
Luxury and its affiliate companies.
11 Plaintiffs are informed and

37. believe, and thereon allege, that Defendants had intended
12 to induce Kong and Goldstein to rely on their false promises to indemnify and hold
Plaintiffs
13 harmless so that they would enter into the Separation
Agreements. Plaintiffs did so reasonably rely
14 on Defendants' promises.
15
38. On or about June 18, 2010, Kong tendered the claims to
Modern Luxury for defense
16 and indemnity pursuant to Section 2.08
of the Kong Separation Agreement. On or about June 21,
17 2010, Goldstein likewise tendered the claims to
Modern Luxury for defense and indemnity pursuant
18 to Section 2.07 of the Goldstein Separation Agreement.
19 39. Modern Luxury failed to respond to either request, effectively denying
those requests
20 in light of the imminent deadlines forcing Kong and Goldstein to respond
to the Benlevi-Zeff
21 Complaint.
22 40. Plaintiffs are informed and believe,

and thereon allege, that Defendants never intended
23 to perform their promises to indemnify
and hold Plaintiffs harmless when they entered into the
Kong
24 and Goldstein Separation Agreements. Rather, Defendants had already
intended at the time to purge
25 Modern Luxury of its assets within a couple months. Plaintiffs are informed and believe,
and thereon
26 allege, that Defendants
were aware when they entered into the indemnification provisions that
27 Modern Luxury would soon be an empty corporate shell with
no means to meet its contractual
28 requirements.
9
41. As a direct and proximate result of the Defendants' tortious conduct, which has been
2 undertaken willfully, knowingly and in bad faith, Plaintiffs have
been damaged in a sum according to
3
proof, but which damages presently include incurrence of attorney's fees and costs in
connection with
4 the defense of the Benlevi-Zeff Action.
6
SECOND CAUSE OF ACTION
7
BREACH OF CONTRACT
8
(The Kong Employment Agreement)
9 (By Plaintiff Kong Against Defendants
Modern Luxury and Does 1-25, inclusive)
10 42. Plaintiffs re-allege and incorporate by reference those allegations
set forth in
11 paragraphs 1-41, supra, as though fully set forth
herein.
12 On or about May 21,2007, Kong and Modern

43. Luxury entered into an employment
13
agreement, effective June 18, 2007 (the "Kong Employment Agreement"),
which, as described in
14 paragraphs 16-18, supra, provided that
Modern Luxury would perform as follows:
15 Indemnify and hold harmless Kong "to the
a. fullest extent permitted by law" from
16 and against any an all actions arising from his
performance of duties as CEO,
17 "regardless of whether [Kong] continues to be an officer or employee at the time
18
of any such liability or expense is paid or incurred";
19 Pay Kong no less than an annual Base Salary

b.
of $400,000 during the Term of the
20 Kong Employment Agreement;
21 The Kong Employment Agreement also provided that Kong's

44. employment could only
22 be terminated prior to the expiration of the Term upon the occurrences expressly provided under
23 Section 12, including by mutual agreement. as
follows:
24 12.2. By Mutual Agreement. This Agreement
may be terminated at any time by
25
45. Kong performed all conditions,
covenants, and promises required on his part to be
26
performed in accordance with the
terms and conditions of the Kong Employment Agreement, except
27
those conditions, covenants, and promises that
28
were excused.
10
46. On or about January 26,2010, Modern Luxury, MLM Holding Corp. and Kong
2 entered into the Kong Separation Agreement to terminate the Kong Employment Agreement
by
3 mutual agreement. As set forth in Plaintiffs' First Cause of Action for Promissory Fraud above,
4 Defendants fraudulently induced Kong to enter into the

separation and release agreement.
5 47. On or about June 18,2010, Kong's counsel tendered a formal request for defense and
6 indemnity to Modern
Luxury, pursuant to Section 15 of the Kong Employment Agreement. The
7 allegations made in the Benlevi-Zeff Complaint
arise out of or are incidental to only the business and
8 activities of or relating to Modern Luxury, conducted during the effective
term of the Kong
9 Employment Agreement. Modern Luxury failed to respond to Kong's request, which was effectively
10 a denial in light of the imminent deadlines forcing Kong to respond to the Benlevi-ZeffComplaint.
11 48. Defendants have breached Kong's Employment Agreement in the following
ways:
12
a. Defendants have failed to indemnify Kong and hold Kong harmless with respect
to
13 the Benlevi-Zeff Action;
14
b. Defendants failed to pay Kong's annual Base Salary from in
or around July 2008
15 until in or around July 2009;
16
c. Defendants pushed Kong out of Modern Luxury by fraudulently inducing him to
17
enter into the Kong Separation Agreement, such that there
was no mutual
18
agreement pursuant to Section 12.2 of the Kong Employment
Agreement to
19
terminate his employment.
20 49. By failing to defend and indemnify Kong in the

Benlevi-Zeff Action, Modern Luxury
21 materially breached the Kong Employment Agreement, which has resulted in damages
to Kong in a
22 sum according to proof, but which damages presently include

incurrence of attorney's fees and costs
23 in connection with the defense of the Benlevi-Zeff Action.
24 50. By failing to pay Kong his full Base Salary
for a period of approximately one year,
25 Kong has been damaged by the amount
of those wages and should be entitled to prejudgment interest
26 on the unpaid amount pursuant to Labor Code ~ 218.6 and Civil Code ~ 3289, as well as attorneys'
27 fees and costs pursuant to
Labor Code ~~ 218.5 and 1194.
28
11
1 51. By terminating Kong's employment by
an invalid means under the Kong Employment
2 Agreement, Kong has been damaged in the
amount of his promised compensation under the Kong
3 Employment Agreement in the form of back-pay and front-pay for the full five-year term of the
4 agreement.
6
THIRD CAUSE OF ACTION
7 BREACH OF CONTRACT, IN THE ALTERNATIVE
TO PROMISSORY FRAUD
8
(The Kong Separation Agreement)
Modern Luxury, MLM Holding Corp., and Does 1-25,
10
inclusive)
12 paragraphs 1-52, supra, as though
fully set forth herein.
13 53. On or about January 26,2010, Kong, Modern Luxury,
and MLM Holding Corp.
14 entered into a Separation and Release of Claims
Agreement (the "Kong Separation Agreement"),
15 which, as described in Paragraph 22, supra, provided at Section
2.08 that Modern Luxury would
16 continue to "indemnify[y] and h[0 ]ld harmless" Kong
for any of his actions taken during the period
17 of his service as CEO and as a director.
18 54. Kong performed all conditions,
covenants, and promises required on his part to be
19 performed in accordance with the
terms and conditions of the Kong Separation
Agreement, except
20 those conditions, covenants, and promises that
were excused.
21 The allegations made in the Benlevi-Zeff Complaint
55.
arise out of actions taken during
22 the period of Kong's service in his capacity only as
an officer and director of Modern Luxury and its
23 subsidiaries.
Luxury, pursuant to Section 2.08 of the Kong Separation
Agreement. Modern
26 Luxury failed to respond to Kong's request, which was effectively a denial in light of the imminent
27 deadlines forcing Kong to respond to the
Benlevi-Zeff Complaint.
28
12
1 57. By failing to indemnify and hold
harmless Kong in the Benlevi-Zeff Action,
2 Defendants materially breached the Kong Separation
Agreement, which has resulted in damages to
3 Kong in a sum according to proof, but which damages
presently include incurrence of attorney's fees
4 and costs in connection with the defense of the
Benlevi-Zeff Action.
5
6
FOURTH CAUSE OF ACTION
7
BREACH OF CONTRACT
8
(The Goldstein Employment Agreement)
9 (By Plaintiff Goldstein Against Defendants
11
paragraphs 1-57, supra, as though fully set forth herein.
12
59. Goldstein and Modem Luxury entered into
an employment agreement, effective
13 January 1, 2008 (the "Goldstein Employment Agreement"),
which, as described in Paragraph
23,
14 provided 15
supra, at Section that Modem Luxury "shall indemnify and hold
harmless [Goldstein] to
15 the fullest extent permitted by law" from and against
any and all actions arising from his performance
16 of duties as CEO, "regardless of whether [Goldstein] continues to be
an officer or employee at the
17 time of any such liability or expense is paid
or incurred."
18 The Goldstein Employment Agreement also provided that
60.
Goldstein's employment
19 could only be terminated prior to the expiration
of the Term upon the occurrences expressly provided
20 under Section 12, including as follows;
21 By Mutual Agreement. This

12.2. Agreement may be terminated at any time by
22
61. Goldstein performed all conditions,
23 covenants, and promises required on his part to be
performed in accordance with the terms and conditions

24 of the Goldstein Employment Agreement,
except those conditions, covenants, and promises that
25 were excused.
62. On or about that February 17,2010, Modem
26 Luxury, MLM Holding Corp., and
Goldstein entered into a Separation and Release of Claims
27 Agreement (the "Goldstein Separation
Agreement") to terminate the Goldstein Employment
28 Agreement by mutual agreement. As set forth
13
in Plaintiffs' First Cause of Action for Promissory Fraud above, Defendants fraudulently induced
2 Goldstein to enter into the separation and release
agreement.
3 63. On or about June 21, 2010, Goldstein's counsel tendered a formal request for defense
4 and indemnity to Modem Luxury, pursuant to Section 15
of the Goldstein Employment Agreement.
5 The allegations made in the Benlevi-Zeff Complaint arise
out of or are incidental to only the business
6 and activities of or relating to Modem Luxury, conducted during
the effective term of the Goldstein
7 Employment Agreement. Modem Luxury failed to respond to Goldstein's
request, which was
8 effectively a denial in light of the imminent deadlines forcing
Goldstein to respond to the Benlevi-
9 Zeff Complaint.
10 64. Defendants have breached Goldstein's Employment

Agreement in the following ways:
11
a. Defendants have failed to indemnify Goldstein and hold
Goldstein harmless with
12 respect to the Benlevi-Zeff Action;
13 b. Defendants pushed Goldstein out of Modem Luxury by fraudulently inducing
him
14 to enter into the Goldstein Separation
Agreement, such that there was no mutual
15
agreement pursuant to Section 12.2 of the Goldstein Employment Agreement
to
16
terminate his employment.
17 65. By failing to defend and indemnify Goldstein in the
Benlevi-Zeff Action, Modem
18 Luxury materially breached the Goldstein Employment
Agreement, which has resulted in damages to
19 Goldstein in a sum according to proof, but which damages presently include
incurrence of attorney's
20 fees and costs in connection with the defense
of the Benlevi-Zeff Action.
21 By terminating Goldstein's employment by
66.
an invalid means under the Goldstein
22 Employment Agreement, Goldstein has been damaged
in the amount of his promised compensation
23 under the Goldstein Employment
Agreement in the form of back-pay and front-pay for the full five-
24 year term of the agreement.
25
26
27
28
14
1
FIFTH CAUSE OF ACTION
2
BREACH OF CONTRACT, IN THE ALTERNATIVE TO PROMISSORY FRAUD
3
(The Goldstein Separation Agreement)
4 (By Plaintiff Goldstein Against Defendants
Modern Luxury, MLM Holding Corp., and Does I-
S
25, inclusive)
herein.
8 68. On or about February 17,2010, Goldstein, Modern

Luxury, and MLM Holding Corp.
9 entered into a Separation and Release of Claims Agreement (the
"Goldstein Separation Agreement"),
10 which, as described in Paragraph
26, supra, provided at Section 2.07 that Modem Luxury would
11 continue to "indemnify[y] and h[ 0 ]ld harmless" Goldstein for
any of his actions taken during the
12 period of his service as CFO and as a
manager.
13 69. Goldstein performed all conditions, covenants, and promises required
on his part to be
14 performed in accordance with the terms and
conditions of the Goldstein Separation Agreement,
15 except those conditions, covenants, and promises that were

excused.
16 70. The allegations made in the Benlevi-Zeff Complaint
arise out of actions taken during
17 the period of Goldstein's service only in his capacity
as an officer and director of Modern
Luxury and
18 its subsidiaries.
19 71. On or about June 21, 2010, Goldstein's counsel tendered a formal request for defense
20 and indemnity to Modern
Luxury, pursuant to Section 2.07 of the Goldstein Separation Agreement.
21 Modern Luxury failed to respond to Goldstein's request, which was effectively a denial in light of the
22 imminent deadlines forcing Goldstein to respond to the Benlevi-Zeff Complaint.
23 72. By failing to indemnify and hold harmless Goldstein in the

Benlevi-Zeff Action,
24 Modern Luxury breached the Goldstein Separation Agreement, which has resulted in damages
to
25 Goldstein in a sum according to proof, but which damages presently include
incurrence of attorney's
26 fees and costs in connection with the defense
27
28
15
SIXTH CAUSE OF ACTION
2
BREACH OF CONTRACT/THIRD PARTY BENEFICIARY
3
(The 2007 LLC Agreement)
4 (By All Plaintiffs Against Defendants
5 Plaintiffs re-allege and incorporate by
73.
and thereon allege, that in or around June
2007,
8 Modern Luxury enacted the 2007 LLC Agreement, which, as
described in paragraph 28,
supra,
9 provided at Section 14, that
Modern Luxury would indemnify and hold harmless "the
Member, and
10 each officer, employee or other agent
of [Modern Luxury] by reason of any act or omission
. . .
or
11 alleged act or omission arising
out of such person's activities as a Member, director, manager, officer,
12 employee or other agent or otherwise
on behalf of the Company. . .
."
13 75. In or about June 2007, while the 2007 LLC
Agreement was in effect, Modern Luxury
14 hired Kong as an
officer and employee. Kong also served as a director. As such, Kong was a third-
15
party beneficiary under the 2007 LLC Agreement.
16 76. On or about January 1, 2008, while the 2007 LLC
Agreement was in effect, Modern
17 Luxury hired Goldstein as CFO. As
such, Goldstein was a third-party beneficiary under the 2007
18 LLC Agreement.
19 The allegations made in the Benlevi-Zeff Complaint
77.
concern alleged acts or omissions
20 arising from Kong's activities as a former officer or director of Modern Luxury, and alleged acts
or
21 omissions arising from Goldstein's activities as a
former officer of Modern Luxury. All such
22 activities were
performed by Plaintiffs in good faith on behalf
of Modern Luxury, or in furtherance of
23 the interests of Modern Luxury.
Luxury, pursuant to Section 14 of the LLC Agreement. On
or about June 21,
26 2010, Goldstein's counsel tendered a similar request.
27
28
16
79. Modern Luxury failed to respond to any of the Plaintiffs'
requests, effectively denying
2 those requests in light of the imminent deadlines forcing
Plaintiffs to respond to the Benlevi-Zeff
3 Complaint.
4 80. By failing to indemnify and hold harmless Plaintiffs

in the Benlevi-Zeff Action,
5 Modern Luxury breached the 2007 LLC Agreement, which has
resulted in damages to Plaintiffs in a
6 sum according to proof, but which damages
presently include incurrence of attorney's fees and costs
7 in connection with the defense
8
9
SEVENTH CAUSE OF ACTION
10
BREACH OF CONTRACT/THIRD PARTY BENEFICIARY
11
(The 2009 LLC Agreement)
13
inclusive)
15 paragraphs 1-80,
supra, as though fully set forth herein.
and thereon allege, that on or about
December 11,
17 2009, Defendant MLM Holding
Company, the then-sole member
of Modern Luxury, enacted the
18 2009 LLC Agreement, which,
as described in Paragraph 29,
supra, provided at Section 14 that
19 Modern Luxury would indemnify and hold harmless "the
Member, and each officer, employee or
20 other agent of [Modern Luxury] by reason of any act or omission
'" or alleged act or omission
21 arising out of such person's activities
as a Member, director, manager, officer, employee
or other
22 agent or otherwise on behalf of the Company. . .
."
23 At the time
83. of the 2009 LLC Agreement, Kong and Goldstein
were officers of Modern
24 Luxury. Kong was also a director. As such, Kong and Goldstein
were third-party beneficiaries under
25 the LLC Agreement.
26 84. The allegations made in the

Benlevi-Zeff Complaint concern acts or omissions arising
27 from 'Plaintiffs' activities as former officers
or directors of Modern Luxury, which
activities were
28
17
1 performed in good faith on behalf of Modern
Luxury, or in furtherance of the interests of Modern
2
Luxury.
Luxury, pursuant to Section 14 of the LLC Agreement. On or about June 21,
5 2010, Goldstein's counsel tendered a similar request. Modern Luxury failed to respond to either
6 request, effectively denying those requests in light
of the imminent deadlines forcing Kong and
7 Goldstein to respond to the Benlevi-Zeff Complaint.
8 By failing to indemnify and hold

86. harmless Kong and Goldstein in the Benlevi-Zeff
9 Action, Modern Luxury and MLM Holding Company breached the 2009 LLC Agreement, which has
10 resulted in damages to Plaintiffs in a sum according to proof, but which damages
presently include
11
incurrence of attorney's fees and costs in connection with the
defense of the Benlevi-Zeff Action.
12
13
EIGHTH CAUSE OF ACTION
14
ANTICIPATORY BREACH
16
inclusive)
18 paragraphs 1-86,
19 88. California Civil Code Section 1440 provides: "If a party to an obligation gives notice
20 to another, before the latter is in default, that he
will not perform the same upon his part, and does
not
21 retract such notice before the time at which performance
upon his part is due, such other party is
22 entitled to enforce the obligation without previously performing
or offering to perform any conditions
23 upon his part in favor of the former party."
24 89. As set forth in the second through seventh

causes of action above, Defendants
25 assumed contractual obligations to indemnify and hold harmless
Kong and Goldstein for activities
26 they performed in good faith
on behalf of Modern Luxury, or in furtherance
of the interests of
27 Modern Luxury, by entering into Section 15 of the Kong Employment
Agreement, Section 2.08 of
28 the Kong Separation Agreement, Section 15
of the Goldstein Employment Agreement, Section 2.07
18
1 of the Goldstein Separation Agreement, and Section 14
of the 2007 and 2009 LLC Agreements.
2 90. Kong and Goldstein performed
all conditions, covenants, and promises required
on
3 their parts to be performed in accordance with
the terms and conditions of their respective
4 Employment Agreements and Separation
Agreements, except those conditions, covenants, and
5 promises that were
excused. Kong and Goldstein were third-party beneficiaries
under the LLC
6 Agreement.
7 91. On or about June 11, 2010, a lawsuit was filed in the Delaware Chancery
Court
8 against Kong, Goldstein,
Modern Luxury, and other defendants, by Juli Benlevi-Zeff and JBA
9 Holdings, Inc. The allegations
made in the Benlevi-Zeff Complaint concern acts
or omissions arising
10 from Plaintiffs' activities as former officers or directors
of Modern Luxury, which activities were
11 performed in good faith on behalf of Modern Luxury,
or in furtherance of the interests of Modern
12
Luxury.
13
92. On or about June 18, 2010, Kong tendered the
claims to Modern Luxury for defense
14 and indemnity pursuant. On or about June
21, 2010, Goldstein likewise tendered the claims to
15
Modern Luxury for defense and indemnity.
16
93. Defendants have positively indicated that they
will not and cannot meet its contractual
17 obligations to indemnify and hold Plaintiffs'
harmless by the following
words and conduct:
18
a. On or about July 20, 2010, Plaintiffs' counsel sought
assurances from Modern
19
Luxury's counsel that the Company would assume its defense and indemnification
20 obligations. Modern Luxury informed Plaintiffs' counsel that their demand
for
21
indemnification and reimbursement of costs of defense is
worthless because the
22 Company intended to sell all of its assets
within approximately ten days.
23 On or about July 23, 2010, Plaintiffs' counsel
b.
wrote to Defendants' counsel to
24 demand that the Company setting aside sufficient
reserves to fulfill its obligations
25 to defend and indemnify Plaintiffs in the pending
Benlevi-Zeff Action. Plaintiffs
26 received no response.
27 On or about July 27,2010, Plaintiffs' filed

c.
an ex parte application to protect the
28
proceeds of the approaching asset sale.
19
d. On or about July 28, 2010, Plaintiffs' counsel reached
out to Defendants' counsel
2
yet again and suggested that if they would just agreed to set aside a fund to ensure
3 that Defendants
can make good on their indemnification obligations to Plaintiffs,
4 Plaintiffs would not need to go through with the requested
relief. Again, Plaintiffs
5
received no response.
6
e. On or about August 3, 2010, Defendants' suggested
to Plaintiffs and the other co-
7
defendants in the Benlevi-Zeff Action requesting that they
fund a settlement
8
agreement with plaintiffs in the action in complete
contravention to its duties to
9 indemnify Plaintiffs.
10 94. By repudiating their duty to indemnify

and hold harmless Kong and Goldstein in the
11 Benlevi-Zeff Action, Modern Luxury and MLM Holding Company
has breached by nonperformance
12 Section 15 of the Kong Employment Agreement, Section
2.08 of the Kong Separation Agreement,
13 Section 15 of the Goldstein Employment Agreement,
Section 2.07 of the Goldstein Separation
14 Agreement, and Section 14 of the 2007 and 2009 LLC Agreements. Defendants breach has resulted
15 in damages to Plaintiffs in a sum according to proof, but which damages presently
include incurrence
16 of attorney's fees and costs in connection with the defense
17
18
NINTH CAUSE OF ACTION
19
BREACH OF THE IMPLIED COVENANT OF GOOD
FAITH AND FAIR DEALING
20 (By All Plaintiffs Against
Modern Luxury, MLM Holding Corp., and Does 1-25)
21 Plaintiffs re-allege and incorporate
95. by reference those allegations set forth in
23 96. In every contract or agreement there is
an implied covenant of good faith and fair
24 dealing. Under this implied covenant, each party shall not do anything
to unfairly interfere with the
25 right of the other party to receive the
benefits of the contract.
26 97. As set forth in the second through seventh causes

of action above, Defendants
27 assumed contractual obligations to indemnify
and hold harmless Kong and Goldstein for activities
28 they performed in good faith
on behalf of Modern Luxury, or in furtherance
of the interests of
20
1 Modern Luxury, by entering into Section 15 of the Kong Employment Agreement, Section 2.08 of
2 the Kong Separation Agreement, Section 15 of the Goldstein Employment Agreement, Section
2.07
3 of the Goldstein Separation Agreement, and Section 14 of the 2007 and 2009 LLC Agreements.
4 98. Kong and Goldstein performed all conditions,
covenants, and promises required on
5 their parts to be performed in accordance with the
terms and conditions of their respective
6 Employment Agreements and Separation Agreements, except those conditions, covenants, and
7 promises that were excused. Kong and Goldstein were third-party beneficiaries under the 2007 and
8 2009 LLC Agreements.
9 99. Plaintiffs are informed and believe, and thereon allege, that Defendants
never intended
10 to perform their promises to indemnify and hold Plaintiffs
harmless when they entered into their
11 respective Separation Agreements. Rather, Defendants had already
intended at the time to purge
12 Modern Luxury of its assets within a couple months. Plaintiffs are informed and believe, and
thereon
13
allege, that Defendants were aware when they entered into the indemnification provisions that
14 Modern Luxury would soon be an empty corporate shell with no means to meet its contractual
15 requirements under the Separation
Agreements.
16 100. Plaintiffs are informed and believe, and
thereon allege, that at the very least,
17 Defendants were aware when they voted to entered into asset sale proceedings
and commenced such
18 proceeds that they would compromise their ability to meet their contractual obligations to indemnify
19 Plaintiffs and hold Plaintiffs harmless under their respective Employment

Agreements, their
20 respective Separation
Agreement, as well as the 2007 and 2009 LLC Agreements and therefore
21 deprived Plaintiffs of their right to receive the
benefits of those contracts.
22 101. Plaintiff has been damaged as a result of Defendants' knowing and intentional breach
23 of the implied covenant of good faith and fair dealing in an amount exceeding the jurisdictional
24 minimum of this court. Plaintiff's damages, which are presently unknown but which
will be proven
25 at trial, include the incurrence of attorney's fees and costs in this action and in
connection with the
26 defense of the Benlevi-Zeff Action.
27 102. Defendants have acted with oppression, fraud, and malice and in knowing and
28 conscious disregard of their responsibilities under the implied covenant of good faith and fair dealing
21
and Plaintiffs' indemnification rights under the six contracts, entitling
Plaintiffs to an award of
2
exemplary damages under Cal. Civ. Code S 3294 against
Defendants.
3
4
TENTH CAUSE OF ACTION
5
INTENTIONAL INTERFERENCE WITH CONTRACT
6 (By All Plaintiffs Against
Defendants Flannery, Cobert, Span feller, Friedlich,
and Does 1-25,
7
inclusive)
8 Plaintiffs re-allege and incorporate by
103.
10 104. Flannery, Cobert, Spanfeller, and Friedlich
(collectively, the "Defendant Directors")
11 knew of the existence of the following valid contracts: (i)
the Kong Employment Agreement; (ii) the
12 Kong Separation
Agreement; (iii) the Goldstein Employment Agreement; (iv) the
Goldstein
13 Separation Agreement; (v) the 2007
LLC Agreement; and (vi) the 2009 LLC
Agreement..
14
105. Plaintiffs are informed and believe, and
thereon allege, that through their intentional
15 acts or conduct, the Defendant Directors induced
Modern Luxury to breach Section 15 of the Kong
16 and Goldstein Employment
Agreements, Section 2.08 of the Kong Separation
Agreement, and
17 Section 2.07 of the Goldstein Separation
Agreement, depriving Kong and Goldstein of their right to
18 defense and indemnity in the Benlevi-Zeff Action,
pursuant to those contracts. Furthermore,
19 Plaintiffs are informed and believe, and
thereon allege, that the Defendant Directors intended
to
20 induce Modern Luxury to breach those
contracts.
and thereon allege, that through their intentional
22 acts or conduct, the Defendant Directors
induced Modern Luxury to breach Section 14 of the 2007
23 LLC Agreement, depriving Kong and Goldstein of their right to defense and indemnity in the
24 Benlevi-Zeff Action, pursuant to the 2007 LLC
Agreement. Furthermore, Plaintiffs are informed
and
25 believe, and thereon allege, that the
Defendant Directors intended to induce
Modern Luxury to breach
26 the 2007 LLC Agreement.
27 107. Plaintiffs are informed
and believe, and thereon allege, that through
their intentional
28 acts or conduct, the Defendant Directors
induced Modern Luxury and MLM Holding Corp. to breach
22
Section 14 of the 2009 LLC Agreement, depriving Kong and Goldstein
of their right to defense and
2 indemnity in the Benlevi-Zeff Action,
pursuant to the 2009 LLC Agreement.
Furthermore, Plaintiffs
3 are informed and believe, and thereon allege, that the
Defendant Directors intended to induce Modern
4 Luxury and MLM Holding Corp. to breach the 2009 LLC Agreement.
5
108. As a direct and proximate result of the Defendant Directors'
tortious conduct, which
6 has been undertaken willfully, knowingly and in bad faith, Plaintiffs
have been damaged in sum a
7 according to proof, but which damages presently

include incurrence of attorney's fees
and costs in
8 connection with the defense of the Benlevi-Zeff Action.
10
ELEVENTH CAUSE OF ACTION
11
INDEMNIFICATION
12
(Labor Code ~ 2802)
16 According to California Labor Code
110. section 2802(a), "An employer shall indemnify
17 his or her employee
for all necessary expenditures or losses incurred by the employee
in direct
18
consequence of the discharge of his or her duties. . .
."
19 111. In or around June 2007, Kong incurred
expenses in the discharge of his duties or in
20 obedience to the directions
of his employer by way of a loan to Modern Luxury in the
amount of
21 $500,000. In or around July 2008, Kong incurred additional
expenses in the discharge of his duties
22 or in obedience to the directions of his employer by
way of a loan to Modern Luxury in the amount of
23 $100,000.
24 112. As a proximate result of Defendants' failure to indemnify and

reimburse Kong for
25 these expenditures, Kong has been damaged in the
amount of $600,000 plus interest.
26 113. Further, Labor Code section 2802(c) specifically states that,
"For purposes of this
27 section, the term 'necessary expenditures
or losses' shall include all reasonable costs, including, but
28 not limited to, attorney's fees incurred by the employee enforcing
the rights granted by this section."
23
1 114. According to Jacobus
v. Krambo (2000) 78 Ca1.App.4th 1096, 1100, "The statute
2 [section 2802] requires the employer
not only to pay any judgment entered against the employee
for
3 conduct arising out of his employment but also to defend an employee
who is sued for such conduct.
4 Unlike an insurer, the employer need not defend
whenever there is a mere potential for liability.
5
However, if the employer elects to run a risk and refuses to defend, the employer
must indemnify the
6 employee for his attorney fees and costs in defending
the underlying action if the employee was sued
7 for acts within the scope of his employment."
8 115. All of the alleged conduct attributed to Kong and Goldstein in the
Benlevi-Zeff
9 Complaint arises out of or is incidental
to the business activities of, or related to
Modern Luxury
10 during the effective term of Kong's and
Goldstein's respective employment
agreements.
11
Furthermore, all such alleged conduct was performed with the full knowledge
and approval of the
12 Board of Directors, to which Kong and Goldstein
reported, which Board authorized all of the
13 business dealings our of which the Benlevi-Zeff Complaint
arises. The alleged conduct was entirely
14 within the scope of Kong's and Goldstein's employment
with Modern Luxury.
15 116. Kong and Goldstein have incurred and
will continue to incur attorneys' fees and costs
16 in defending themselves against the allegations in the
Benlevi-Zeff Complaint.
17 117. The Benlevi-Zeff Complaint seeks approximately
$8.5 million in damages against
18 Kong and Goldstein. On July 29, 2010 Modern Luxury's Directors and
Officers insurance policy
19 denied all Plaintiffs' demand for
coverage. Even if the insurance company had not denied coverage,
20 Plaintiffs are informed and believe, and thereon allege, that
any insurance coverage that may exist is
21 insufficient to cover anywhere near the amount sought by
Benlevi-Zeff. The litigation involves
22 numerous parties, in multiple forums, and a wide array of unrelated and complex issues which must
23 be addressed. It is anticipated that

numerous depositions will be taken and extensive discovery
24 conducted. The underlying lawsuit is in
Delaware, thus requiring some amount of travel, and counsel
25 for Kong and Goldstein are seeking
pro hac vice admission in Delaware. Additionally, Ms. Benlevi-
26 Zeffhas filed a related lawsuit against Modern
Luxury, which the plaintiff is attempting to
27 consolidate with the action against Kong and Goldstein.
It is not unreasonable to expect attorneys'
28 fees in defense of this litigation to be $500,000 to $1
million. Thus, between the damages sought and
24
the anticipated attorneys' fees and costs, the potential total
amount at stake could be $9 to $10
2 million.
4
TWELVTH CAUSE OF ACTION
5
UNFAIR COMPETITION
6
(Business & Professions Code ~ 17200 et seq.)
7
(By All Plaintiffs Against All Defendants)
8 118. PlaintitTs re-allege and incorporate by
herein.
10 119. Plaintiffs are "persons" within the meaning
of Business and Professions Code S 17204
11 and, therefore, have standing to bring this cause of action for restitution and
other appropriate
12 equitable relief.
13 120. Business and Professions Code S 17200 et seq., prohibits unlawful and unfair business
14 practices.
15 121. The laws and the public policy of the State

of California prohibit refusing to
16 indemnify and reimburse an employee,
officer, or other agent for expenses reasonably and
17 necessarily incurred by reason of any act
or omission arising out of such person's activities on behalf
18 of their company and/or within the scope of their employment, including the cost of defending
19 themselves in a lawsuit.
20 122. Defendants have violated statutes and public policies. Through

the conduct alleged in
21 this Complaint, Defendants
have acted contrary to these public policies, have violated specific
22 provisions of the Labor Code, including Labor Code S 2802, and have engaged
in other unlawful and
23 unfair business practices in violation of Business & Profession Code S17200 et seq.; depriving
24 Plaintiff of rights, benefits, and privileges
guaranteed to all employees under law.
25 123. Defendants' conduct, as alleged hereinabove, constituted
unfair business practices in
26 violation of S 17200 et seq. of the Business & Professions
Code.
27 124. Defendants, by engaging in the conduct
herein alleged, including by failing to
respond
28 to Plaintiffs' tender of the claims to Defendants for indemnification and reimbursements
of
25
reasonably necessary attorneys' fees and
costs that Plaintiffs have incurred and
will incur in their
2 defense of the Benlevi-Zeff lawsuit, either knew or in the exercise of reasonable care should have
3 known that the conduct was unlawful. As such, Defendants
violated section 17200 et seq. of the
4 Business and Professions Code.
5 125. As a proximate result of the above mentioned acts of Defendants, Plaintiff has
been
6 damaged in a sum as may be proven at the time of trial.
7 126. Unless restrained by this Court, Defendants
will continue to engage in the unlawful
8 conduct as alleged above. This Court should therefore
make such orders or judgments, including the
9 appointment of a trustee or receiver,
as may be necessary to prevent the use
or employment, by
10 Defendants, their agents
or employees, of any unlawful or deceptive practice prohibited by the
11 Business & Professions Code.
12
13
THIRTEENTH CAUSE OF ACTION
14
DECLARA TORY RELIEF
IS (By All Plaintiffs Against Defendants
17 paragraphs 1-126,
18 128. A dispute has arisen between
Plaintiffs and Modern Luxury relating to the legal rights,
19 duties and obligations
of said parties as described herein, including
but not limited to Modern
20 Luxury's duty to indemnify
and reimburse Plaintiffs for the cost of their defense in the Benlevi-Zeff
21 action.
22 129. No adequate remedy, other than herein prayed

for, exists by which the rights of the
23 parties hereto
may be determined.
24 130. Plaintiffs request declaratory
relief to prevent continuation of the conduct herein
25 alleged, including but not
limited to the refusal to indemnifY and reimburse Plaintiffs
for the cost of
26 defense in the Benlevi-Zeff action.
27
28
26
FOURTEENTH CAUSE OF ACTION
2
FAILURE TO PAY ALL WAGES DUE AT TERMINATION
3
(Labor Code ~~ 201 and 203)
4 (By Plaintiff Michael Kong Against
Defendants Modern Luxury and Does 1-25, inclusive)
5 131. Plaintiff re-alleges and incorporates by
7 132. Labor Code S 201(a) provides that if an employer discharges an employee, the
wages
8 earned and unpaid at the time of discharge are due and payable immediately.
9 133. Labor Code S 203 provides that if an employer
willfully fails to pay, without
10 abatement or reduction, any wages of an employee who is discharged, the
wages of the employee
11 shall continue as a penalty from the due date thereof at the same rate until paid
or for; but these
12 penalty wages shall not continue for
more than thirty (30) days.
13
134. Defendants' failure to pay wages to Kong, as alleged above, including
but not limited
14 to the wages earned and unpaid at the time
of termination, was willful in that Defendants, and each
of
15 them, knew wages to be due but failed to pay them, thus entitling
Kong to wage continuation under
16 Labor Code SS203,1194, and 1194.2.
17 Defendants failed to
135. pay Kong a sum certain at the time of termination, and have
18 failed to pay those sums as of the time
of filing of this complaint. Pursuant to the provisions
of the
19 Labor Code S 203, Kong is entitled to wage continuation
in the amount of Kong's daily
wage
20 multiplied by thirty (30) days.
21 136. direct, foreseeable and

As a
proximate result of Defendants' violation of Labor Code
22 SS201 and 203, Kong has suffered lost income in
an amount according to proof. In addition, under
23 Labor Code S 203, Kong is entitled to a "waiting time" penalty in
an amount equivalent to 30 days of
24 wages. Additionally, as a result of Defendants' willful failure to pay Kong the
amounts due, Kong is
25 also entitled to recover prejudgment
interest on this unpaid amount, as well as
reasonable attorneys'
26 fees and costs pursuant to Labor Code S 1194.
27 III
28
27
FIFTEENTH CAUSE OF ACTION
2
FAILURE TO PAY WAGES
3
(Labor Code ~ 1194 and IWC Wage Order No.4)
Modern Luxury and Does 1 -
25, inclusive)
5 137. Plaintiffre-alleges and incorporates by reference those allegations set
forth in
7 138. Labor Code S 1194 and IWC Wage Order
No.4 provide that employees
are entitled to
8 wages and compensation for work performed, at the legal
minimum wage. Labor Code SS 1194(a)
9 and 1194.2(a) provide that an employee
who has not been paid the legal overtime wage as required
10 by S1197 may recover the unpaid balance together
with attorney's fees and costs of suit, as well as
11 liquidated damages in
an amount equal to the wages unpaid and interest
thereon.
12 139. In or about June 2008 Plaintiff Michael Kong and Defendants,
and each of them, had
13 entered into an employment contract whereby Kong
was to be compensated at the rate of four
14 hundred thousand dollars ($400,000) per
year, which equates to $33,333.33 per month.
15 140. At all relevant times herein, Defendants were required to
compensate Kong for his
16 work pursuant to California Labor Code S 1194 and in
accordance with the aforementioned
17 employment contract.
18 141. Kong was not compensated for all time that he

was subject to the control of
19 Defendants. Defendants required Kong to work without
pay for an entire year, from on or about July
20 1, 2008 through on or about June 30, 2009,
in violation of Labor Code S 1194 and IWC Wage
Order
21
No.4.
22 142. Further, Labor Code S 206.5 provides that "[a]n employer shall
not require the
23 execution of a release of a claim or right on account
of wages due, or to become due, or made as an
24 advance on wages to be earned, unless payment
of those wages has been made. A release required
or
25 executed in violation of this provision of this section
shall be null and void as between the employer
26 and the employee. Violation of this section by the employer is a misdemeanor."
27 143. In or about January 2010, Defendants, and each
of them, terminated Kong's
28 employment and unlawfully required him
to execute a release of his right to wages due. That release,
28
. .
contained in the Kong Separation Agreement set forth above,

states:
2
4.01 In consideration of the Payment and other benefits
provided hereunder,
Executive.. agrees to release and discharge the Company, the Parent
and any
.
3 subsidiary, affiliate, successor, predecessor,

or otherwise related companies, and the
past, present, and future employees, agents, officers,
4 attorneys, directors, owners,
members, shareholders and employee benefit programs of
any of them, and their
agents and insurers (collectively, the "Releasees"),
5 liabilities, or causes of action,
from all claims, demands,
known or unknown, of any nature whatsoever, from the
beginning of time until the Effective
6 Date, which the Releasors have or may have
against the Releasees, including
without limitation claims related to Executive's
employment with the Releasees
7 or the termination of that employment, provided,
however, that nothing in this
Agreement shall either waive any rights or claims of
Executive that arise after the Effective Date
8 or impair or preclude Executive's right to
take action to enforce the
terms of this Agreement. Executive's release includes
rights or claims Executive any
9 may have under any federal, state or local ordinances,
statutes or common This also includes a
law.... release by Executive of any claims for
wrongful discharge, breach of contract, severance
10 bonus, or commissions and pay, overtime pay, vacation pay,
any common law claims whatsoever, to the fullest extent
such claims may be released under the
11 law. . . .
144. Plaintiff is informed and believes, and based

12 thereon alleges, that Defendants' regular
custom and practice of requiring him to work and

13 not paying for that work according to the
mandates
of California law and his employment
agreement is, and at all times herein mentioned
14 was, in
violation of Labor Code S 1194. Defendants' employment policies and practices wrongfully
15 and
illegally failed to compensate Plaintiff for all time worked and compensation
16 earned, as required by
California law. Further, Kong is informed and believes, and based
17 thereon alleges, that Defendants'
requiring him to execute the
aforementioned release of his right to wages due is, and
18 all times herein
mentioned was, a violation of Labor Code S
19 206.5 and a misdemeanor, and that the release is
null and
void.
20
145. Such a practice regarding illegal compensation
21 as described herein entitIes Plaintiff
to
a recovery in a civil action for the unpaid balance of compensation, including
22 interest thereon,
penalties, reasonable attorneys' fees, and costs of suit according
23 to California Labor Code S 1194, et
seq.
24
25
26 PRAYER FOR RELIEF

WHEREFORE, Plaintiffs pray for the following relief:
27
ON THE FIRST CAUSE OF ACTION:
28
29
1 1. For compensatory damages according to proof;
2
2. For exemplary damages;
3 ON THE SECOND CAUSE OF ACTION:
4 For compensatory damages according to proof;

3.
5
4. For an injunction ordering Defendants to specifically perform its obligations
to
6 indemnify and hold Plaintiffs' harmless in the
Benlevi-Zeff Action;
7 ON THE THIRD CAUSE OF ACTION:
8
5. For compensatory damages according to proof;
9
6. For an injunction ordering Defendants to specifically perform its obligations to
10 indemnify and hold Plaintiffs' harmless in the
Benlevi-Zeff Action;
lION THE FOURTH CAUSE OF ACTION:

12 For compensatory damages according to proof;
7.
13 8. For an injunction ordering Defendants to specifically perform its

contractual
14 obligations to indemnity and hold Plaintiffs'
harmless in the Benlevi-Zeff Action;
15 ON THE FIFTH CAUSE OF ACTION:
16
9. For compensatory damages according to proof;
17
10. For attorney's fees and costs, pursuant to Section 10.08
of the Goldstein Separation
18
Agreement;
19 11. For an injunction ordering Defendants to specifically
perform its contractual
21 ON THE SIXTH CAUSE OF ACTION:

contractual
25 ON THE SEVENTH CAUSE OF ACTION:
26 14. F or compensatory damages according

to proof;

contractual
30
. .
ON THE EIGHTH CAUSE OF ACTION:

3 17. For attorney's fees and costs, pursuant to Section
10.08 of the Goldstein Separation
4
Agreement;
5 18. For an injunction ordering Defendants to specifically perform
its contractual
6 obligations to indemnify and hold Plaintiffs'
7 ON THE NINTH CAUSE OF
ACTION:
9
10 ON THE TENTH CAUSE OF ACTION:
11 21. For compensatory damages according to

proof;
12
22. For an Order of the court enjoining Defendants Flannery,
Cobert, Spanfeller,
13 Friedlich, and Does 1-25, inclusive,
from further interference;
14
15 ON THE ELEVENTH CAUSE OF ACTION:
16 That this Court issue an Order requiring

24.
Modern Luxury to indemnify and reimburse
17 Kong for his $600,000
expenditure, plus interest thereon;
18 That this Court issue an Order requiring
25.
Modern Luxury to indemnify and reimburse
19 Plaintiffs Kong and Goldstein
for all fees and costs they reasonably and necessarily
20 have incurred and will incur in the process
of defending themselves in the Benlevi-
21
Zeff Action;
22 ON THE TWELVTH CAUSE OF
ACTION:
23 26. For an injunction ordering Modern
Luxury and MLM Holding Corp. to indemnify and
24 reimburse Plaintiffs for all fees and costs they reasonably
and necessarily have
25
incurred and will incur in the process of defending
themselves in the Benlevi-Zeff
26 Action;
27 27. For an injunction preventing Defendants

from distributing the proceeds of the sale of
28
any assets of Modern Luxury until sufficient funds
have been set aside for the defense
31
. .
, .
and indemnification of Plaintiffs in the Benlevi-Zeff Action,

or, alternatively, for an
2 injunction preventing Defendants
from transferring or selling the assets of Modem
3
Luxury during the pendency of the Benlevi-Zeff Action;
4 ON THE THIRTEENTH CAUSE OF ACTION:
5
28. For an Order granting declaratory relief to Plaintiffs that
Defendant Modem Luxury
6 has a duty to indemnify and defend Plaintiffs
as to the Benlevi-Zeff Action, including
7 but not limited to attorneys' fees and
costs of suit;
8 ON THE FOURTEENTH CAUSE OF
ACTION:
9 29. For unpaid wages, including interest thereon, according
to proof;
10 30. For waiting time penalties equal to 30 days'
pay at Plaintiff Michael Kong's regular
11
rate of pay, according to proof;
12 31. For reasonable attorneys' fees pursuant to Labor

Code S 203;
13 ON THE FIFTEENTH CAUSE OF
ACTION:
14
32. For unpaid wages, including interest thereon, according
to proof;
15
33. For liquidated damages in an amount equal to the unpaid
wages, including interest
16 thereon, according to proof,
pursuant to Labor Code S1194.2;
17
34. For reasonable attorneys' fees pursuant to
California Labor Code S1194, et seq.
18 ON ALL CAUSES OF ACTION:
19 F or
A. Plaintiff s costs of suit herein; and
20 B. For all such other and further relief as the Court deems just and proper.
21
22 Dated: August 4,2010

23
24 By:
I on A. Hernandez
26
27
28
32
, .
1
DEMAND FOR JURY TRIAL
2 Plaintiffs hereby demands trial by jury on all issues so triable in the Complaint.
4 Dated: August 4, 2010 HERNANDEZ SCHAEDEL & ASSOCIATES, LLP

5
By:
6
Attorneys for Plaintiffs

7
8
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
33
PROOF OF SERVICE
2
STATE OF CALIFORNIA )
3
) ss.
COUNTY OF LOS ANGELES )
4
I reside in the County
of Los Angeles, State of California. I am over the age
5 not a party to the within action. My business address is 2 North Lake of eighteen and
CA91101. Avenue, Suite 930, Pasadena,
6
On August 5, 2010, I served the foregoing document(s)
7 described as: FIRST AMENDED
CO MPLAINT on the parties in this action by placing a
true copy(ies) thereof enclosed in a sealed envelope
addressed
as follows:
8
J.Robert Renner, Esq.

9
Duane Morris LLP
865 South Figueroa St., Suite 3100
10
Los Angeles, CA 90017-5450
11 rrenner@duanemorris.com
12
Attorney for Defendants
MODERN LUXURY MEDIA, LLC,; MLM
13
HOLDING CORP.
14 (BY U.
XX S. MAIL) I am "readily familiar" with the fInn's practice
of collection and processing
correspondence for mailing. Under that practice it
15 would be depositedwith U.S. Postal Service on that
same day with postage thereon fully prepaid at Pasadena,
California in the ordinary course of business. I
16 am aware that on motion of the party served, service is presumed invalid
if postal cancellation date or
postage meter date is more than one day after date
of deposit for mailing aftìdavit.
17
(BY EMAIL) By
agreement of the parties, I sent a true copy thereof to the last knO"'11 email address to the
18 identified addresses
above.
19 (BY PERSONAL SERVICE) I

delivered such document to the above party at the above location.
20 (BY OVERNIGHT
MAIL) I caused said envelope(s) to be delivered overnight via overnight delivery
an
21 service in lieu of delivelY by mail to the addressee(s).
22 XX (STATE) I declare under penalty of

peIjury under the laws of the State of Cal ifornia that the above is
and correct. true
23
(FEDERAL) I declare that I am a member of the bar of this
24 Court.
Executed on August 5, 2010, at Pasadena,

25 California
~
26
27
28
1
PROOF OF SERVICE

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J ..0....

1 Don A. Hernandez (SBN 125119)

7 Attorneys for Plaintiffs

7 Attorneys for Plaintiffs

Plaintiffs, FIRST AMENDED COMPLAINT FOR:

6 Plaintiffs are ignorant

19 11. This Court has subject matter jurisdiction

3 15. Plaintiffs Kong and Goldstein

8 activities of, or relating to, Modern Luxury, during the effective

10 16. Kong was hired by Modern Luxury in or about June

15 15. Indemnification. In accordance with Section 18-108 of the

22 17. The Kong Employment Agreement also provided at Section 2

25 18. The Kong Employment Agreement further provided

27 4. Compensation. [Kong] shall be paid a

provided, however, that

23. Goldstein was hired by Modern Luxury as its CFO in

24. The Goldstein Employment Agreement also provided

14 26. On or about that February 17,2010, Modern

20 2.07 Indemnification. Executive shall continue to be indemnified

26 28. The 2007 LLC Agreement expressly provided yet

indemnified and held harmless:

5 contractual claim for attorneys' fees (against Modern

10 31. On or about June 18, 2010, Kong tendered the claims to

11 Plaintiffs are informed and

22 40. Plaintiffs are informed and believe,

12 On or about May 21,2007, Kong and Modern

19 Pay Kong no less than an annual Base Salary

21 The Kong Employment Agreement also provided that Kong's

4 Defendants fraudulently induced Kong to enter into the

20 49. By failing to defend and indemnify Kong in the

22 sum according to proof, but which damages presently include

21 By Mutual Agreement. This

performed in accordance with the terms and conditions

10 64. Defendants have breached Goldstein's Employment

8 68. On or about February 17,2010, Goldstein, Modern

15 except those conditions, covenants, and promises that were

23 72. By failing to indemnify and hold harmless Goldstein in the

4 80. By failing to indemnify and hold harmless Plaintiffs

26 84. The allegations made in the

8 By failing to indemnify and hold

24 89. As set forth in the second through seventh

27 On or about July 27,2010, Plaintiffs' filed

10 94. By repudiating their duty to indemnify

26 97. As set forth in the second through seventh causes

19 Plaintiffs and hold Plaintiffs harmless under their respective Employment

7 according to proof, but which damages presently

24 112. As a proximate result of Defendants' failure to indemnify and

23 be addressed. It is anticipated that

15 121. The laws and the public policy of the State

20 122. Defendants have violated statutes and public policies. Through

22 129. No adequate remedy, other than herein prayed

21 136. direct, foreseeable and

18 141. Kong was not compensated for all time that he

contained in the Kong Separation Agreement set forth above,

3 subsidiary, affiliate, successor, predecessor,

144. Plaintiff is informed and believes, and based

custom and practice of requiring him to work and

26 PRAYER FOR RELIEF

3 ON THE SECOND CAUSE OF ACTION:

4 For compensatory damages according to proof;

lION THE FOURTH CAUSE OF ACTION:

13 8. For an injunction ordering Defendants to specifically perform its

22 12. For compensatory damages according to proof;