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VENABLE LLP
Alex M. Weingarten S~'~ -~10)
AM Weingarten@.V~n.~~z.c~m
Matthew M. Gurvitz(SB'_v 272895)
MMGurvitz@Venable.~~
Matthew J. Busch(SBN ~C1~9~
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2049 Century Park East, ~~ ~100
Los Angeles, CA 9006?
Telephone: (310)229-940
(310)2?5-9901
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~n~rri N. Carter, Executive OHiC~i
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Attorneysfor Plaintiffs
Spanky's Clothing, Inc. and Calvin Broadus, Jr.

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES CENTRAL DISTRICT

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CASE NO. BC584365


Hon. Malcom H. Mackey
Department: 55

Plaintiffs,

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SPANKY'S CLOTHING,INC., a California


Corporation, and CALVIN BROADUS,JR., an
individual,

V.

PLAINTIFFS' OPPOSITION TO
DEFENDANTS' MOTION FOR
SUMMARY JUDGMENT OR,IN THE
ALTERNATIVE,SUMMARY
ADJUDICATION

PABST BREWING COMPANY,LLC, a


Delaware Limited Liability Company; BLUE
RIBBON INTERMEDIATE HOLDINGS,LLC, a
[Response to Separate Statertzent,
Delaware Limited Liability Company; PABST
DOES 1-50, inclusive; ~~u STEW OWNER DOES Declarations of.Ylatthew~ _~~ ~r~;~=:~.,
David Byrnes, _Ni`kfir_ ~~her ~~u11era,
1-50, inclusive,
and Evidentiury G~-~ecl~ons ~i~e
Concurrently]
~fendants

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Hearing date:
Time:
Place:

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JJ

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Complaint Filed_ June 8, 2C~ls


October 3i,%G16
Trial date:

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PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

Table of Contents

I.

INTRODUCTION ............................................................................................................1

II.

STATEMENT OF FACTS ...............................................................................................2

A.

Dean Purchased Pabst Brewing Company in 2010 .............................................. 2

B.

Negotiation Of The Phantom Equity Clause ........................................................ 3

C.

Pabst's Attorney Drafted The Agreement, Including The IntraMetropoulos Change Of Control Exemption........................................................4

D.

Execution Of The Consulting And Promotions Agreement................................. 5

E.

Pabst And All Of Its Assets, Including The Colt 45 Brand, Is Sold
Through The Securities Purchase Agreement ...................................................... 7

F.

The Parties To The SPA Anticipated It Would Trigger The Phantom


Equity Clause At Issue And Negotiated An Indemnity For Such Claim .............7

G.

Both The Buyer And Seller Agree That Colt 45 Was Sold .................................. 8

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III.

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LEGAL STANDARDS .................................................................................................... 9


A.

Standard On Summary Judgment.........................................................................9

B.

Interpreting Contractual Language .....................................................................10

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DEFENDANTS BREACHED THE CONSULTING AND PROMOTIONS


AGREEMENT...............................................................................................................11

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A.

Defendants Admit that A Triable Issue of Fact Exists Regarding


Interpretation of SPA..........................................................................................11

B.

The Colt 45 Brand Family Was Sold As Part Of The SPA ................................12

IV.

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'I,

1.

The SPA Was A "Sale" Of The Colt 45 Brand Family..........................12

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2.

Pabst's Argument That The Agreement Lacks A "Change Of


Control" Provision Is Belied By Their Own Party Admission............... 13

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C.
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V.

DEFENDANTS BREACHED THE COVENANT OF GOOD FAITH AND FAIR


DEALING UNDER ILLINOIS LAW ............................................................................16

VI.

DEFENDANTS' CHALLENGE TO PLAINTIFFS' CLAIM FOR


CONVERSION ALSO FAILS .......................................................................................17

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Pabst's Beneficial Owners Received Consideration For The Sale Of


Colt 45 ................................................................................................................15

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PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT I

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3

PCH Is The Appropriate Entity Subject To Plaintiffs' Conversion


Claim ......................................................................................................17

2.

Plaintiffs Have Adequately Identified A Specific Chattel......................18

VII.

THERE IS A TRIABLE ISSUE OF FACT REGARDING PLAINTIFFS' CLAIM


FOR INTENTIONAL 1NTERFERENCE ......................................................................19

VIII.

SPANKY'S IS AN APPROPRIATE PLAINTIFF 1N THIS ACTION AND


SUFFERED DAMAGES ...............................................................................................20

IX.

CONCLUSION ..............................................................................................................20

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1.

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ii
PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY NDGMENT

TABLE OF AUTHORITIES

Pages)

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3

Cases

Aguilar v. Atlantic Richfield Co.


25 Cal. 4th 826(2001)...................................................................................................9, 10, 19

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9

Air Safety, Inc. v. Teachers Realty Corp.


185 Ill. 2d 457(1999)..............................................................................................................10
Baird &Warner, Inc. v. Ruud
45 Ill. App. 3d. 223 (1st Dist. 1976)........................................................................................12
Beraha v. Baxter Health Care Corp.
956 F.2d 1436 (7th Cir. 1992).................................................................................................16

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Black &Decker Corp. v. American Standard, Inc.,


682 F. Supp. 772(D. Del. 1988).............................................................................................14

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Chicago Dist. Council ofCarpenters Welfare Fund v. Gleason & Fritzshall


693 N.E.2d 412(I11.App.Ct.1998)...........................................................................................18
Evergreen Marine Corp. v. Division Sales, Inc.
2003 WL 1127905 (N.D. Ill. Mar. 12, 2003)..........................................................................18

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22

Fontana v. TLD Builders, Inc.


362 Ill. App. 3d 491 (2005).....................................................................................................14
Gallagher v. Lenart
226 Ill. 2d 208(2007)..................................................................................................10, 11, 13
Garrett v. Howmedica Osteonics Corp.
214 Cal. App. 4th 173 (2013)..................................................................................................11
General Motors Corp. v. Douglass
565 N.E.2d 93 (Ill. App. Ct. 1990)..........................................................................................17
Gore v. Indiana Ins. Co.
876 N.E.2d 156 (Ill. App. Ct. 2007)........................................................................................16

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Holmes v. BiNtman Elec. Co.


18 Ill. 2d 554(1960)................................................................................................................18
Ice Portal, Inc. v. VFMLeonardo, Inc.
2010 WL 2351463 (S.D. Fla June 11, 2010)...........................................................................14
Jennifer C. v. Los Angeles Unified School Dist.
168 Cal. App. 4th 1320(2008)................................................................................................11

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iii
PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

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2
3
4

Lidow v. Superior Court


206 Cal. App. 4th 351 (2012)..................................................................................................14
Mid-America Fire &Marine Insurance Co, v. Middleton
468 N.E.2d 1335 (1984)..........................................................................................................19
Oil Express Nat'l, Inc. v. Burgstone
958 F. Supp. 366(N.D. Ill. 1997)............................................................................................16

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6
7
8
9

Old Republic Ins. Co, v. Ace Property and Cas. Ins. Co.
389 Ill. App. 3d 356 (1st Dist. 2009).......................................................................................10
Powell v. Kleinman
151 Cal. App. 4th 112(2007)..................................................................................................10
Roderick Development Inv. Co. v. Community Bank ofEdgewater
668 N.E.2d 1129(1996)..........................................................................................................18

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Silverman v. Chicago Ramada Inn, Inc.


63 Ill. App. 2d 96(1965)...................................................................................................12, 13
Simmons v. Campion
991 N.E. 2d 924 (Ill. App. Ct. 2013).......................................................................................19
Sutherland v. O'Malley
882 F.2d 1196 (7th Cir.1989)..................................................................................................19 '.

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19

Terrific Promotions, Inc, v. Dollar Tree Stores, Inc.


',
947 F. Supp. 1243 (N.D. Ill. 1996)..........................................................................................12
In re Thebus
',
483 N.E.2d 1258 (1985)..........................................................................................................18
Thomas v. Private Leger Fin. Serv., Inc.
'~
155 Ill. App. 3d 289(1987).....................................................................................................14 '~

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Tower Investors, LLC v. 111 East Chestnut Consultants, Inc.


371 Ill. App. 3d 1019(2007)...................................................................................................15
W. W. Vincent and Co. v. First Colony Life Ins. Co.
814 N.E.2d 752 (Ill. App. Ct. 2004)........................................................................................11
Walter E. Heller Western, Inc. v. Tecrinz Corp.
196 Cal. App. 3d 149(1987)...................................................................................................11

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26

WYDA Associates v. Meaner


42 Ca1.App.4th 1702(1996)....................................................................................................11

27

Statutes

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Cal. Civ. Proc. Code 437c~P)~2)...................................................................................................9


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PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

................12

0 815 Ill. Comp. Stat. Ann. 5/2.5

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v
PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

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INTRODUCTION
Defendants' Motion is predicated on the fantastic theory that they did not sell the Colt 45

I brand. Rather, Defendants incredulously urge that a transaction whereby one party paid another

party nearly $700 million for all of the assets of Pabst, including the Colt 45 brand, was not

really a sale but rather a mere "change of control." Nonsense.

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I.

Pabst Brewing Company ("Pabst") retained Calvin Broadus, Jr.("Broadus"),

professionally known as Snoop Dogg,to endorse and promote the Colt 45 brand. As part of the

negotiated compensation for those services, Plaintiffs were entitled to a flat fee and an additional

payment if the Colt 45 brand were to be sold (either individually or as part of a larger sale of the

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entire company), commonly referred to as "Phantom Equity." Pabst and all of its assets,

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including the Colt 45 brand, was sold in November 2014. The buyer, Eugene Kashper

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("Kashper"), testified under oath that he bought Pabst, including the Colt 45 brand. The seller,

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C. Dean Metropoulos ("Dean"), testified under oath that he sold Pabst, including the Colt 45

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brand. One day Kashper did not own Colt 45 he then paid approximately $700 million and the

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next day he did. Moreover, contrary to Defendants' invented for litigation theory, this

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transaction was a "sale" as defined by Illinois law. Even giving due consideration to

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Defendants' absurd argument, it is black letter law that a "change of control" transaction is

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merely a type of sale. Further eviscerating Defendants' claim, Pabst's general counsel -who

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drafted the agreement in question -interpreted the phantom equity clause at issue to include

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"change of control" transactions. Despite these facts and the controlling legal authorities,

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Defendants protest incredulously that their sale was not technically a sale and that Plaintiffs are

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I not entitled to payment for services indisputably rendered.

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Defendants' preposterous notion that a sale isn't really a sale further evidences that they

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structured the sale of Pabst in an effort to intentionally frustrate Plaintiffs' rights through a sham

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alter ego holding company structure. Although Kashper intended to and did actually purchase

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Pabst and all of its assets, including the Colt 45 brand, the parties structured the sale as a stock

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sale of a holding company so that they could protest here that the sale was not really a sale.

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Tellingly, Kashper demanded that Dean indemnify him for the very claims Plaintiffs bring here,
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PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

as he clearly interpreted the phantom equity clause as Plaintiffs do and as the law and facts here

compel. Accordingly, Defendants breached the implied covenant of good faith and Blue Ribbon

Intermediate Holdings, LLC("BRIH")intentionally interfered with Plaintiffs' contract.

Finally, as the recipient of the proceeds of the Pabst sale, Pabst Corporate Holdings LLC

("PCH")unlawfully converted funds owed to Plaintiffs. Defendants simply regurgitate the same

failed argument they made on demurrer, but fail to meet their burden that Plaintiffs cannot obtain

evidence ofthe amount unlawfully converted, which is subject to expert opinion.

II.

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STATEMENT OF FACTS
A.

Dean Purchased Pabst Brewing Company in 2010

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In around June, 2010, Dean' and his family related entities acquired Pabst and all of its

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assets, including the Colt 45 brand. Separate Statement of Additional Disputed Material Facts

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("DMF")# 71-72(Q: -- when you bought 100 percent of the stock of the entity, you bought all

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of those assets with it, right? ... A: We bought everything that was part of this business. Q:

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Okay. All of its assets, all of its liabilities, all of its obligations? A: Correct.").

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Immediately after purchasing Pabst, Dean and his attorneys created a tiered holding

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company structure to shield himselffrom any liabilities associated with Pabst. DMF # 73.

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Dean's attorneys created a holding company called Pabst Holdings, Inc.("PHI"), which simply

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owned 100% of the stock in Pabst. DMF # 74. Unsatisfied with only one holding company to

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obscure Pabst's ownership, Dean formed PCH, again did nothing more than hold 100% of the

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stock of PHI. DMF # 75. Dean confirmed that all three entities are simply alter egos of each

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other. DMF # 76; Declaration of Matthew Gurwitz("Gurwitz Decl."), Ex. 1, Deposition of C.

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Dean Metropoulos("Dean Depo.") at 18:19-23, 19:14-20:2("I'm not sure I would distinguish

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them as `all of them.' It was a business entity that represented those three, yes" and that "[t]here

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was ownership in one business by the three entities.").2

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1 To avoid confusion, and without any intention of disrespect, Plaintiffs will refer to Dean, Evan,
and Daren Metropoulos by their respective first names.
2 After acquiring Pabst, and creating the sham holding structure described above, Dean assumed
the position of Chairman of the Board for the top entity in the structure, PCH. DMF # 77. Dean
also created a board of directors comprised of himself, his trusted advisor and longtime business
partner Michael Cramer, and his two sons, Evan and Daren. DMF # 78. Dean also installed his
sons as co-chief executive offers of Pabst. DMF # 79.
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PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

In fact, none of Dean (the chairman of the board), Evan Metropoulos("Evan") or Daren

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Metropoulos("Daren")(Co-CEOs of Pabst), nor Pabst's designated person most knowledgeable

could identify whether the three entities were truly separate. DMF # 80-83. Evan, the co-CEO

of Pabst, did not know the corporate structure or even whether Pabst had a board of directors.

DMF # 84. None of the Metropoulos family members could identify whether any of the three

"entities" had different board of directors or officers, whether the three entities maintained

different bank accounts, whether each entity held different office space, whether any of the

entities held board meetings, whether they took minutes of those board meetings, or whether the

three companies shared in the earnings or profit of the other entities. DMF # 85-89. Indeed,

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Dean confirmed that proceeds from his sale of Pabst in 2014, which included all of Pabst's assets

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such as the Colt 45 brand family, did not flow down to the other entities sold. DMF # 90.

~~

B.

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Broadus, also known as Snoop Dogg, is a legendary entertainer, recording artist, and

Negotiation Of The Phantom Equity Clause

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actor, who has sold over 35 million albums worldwide. DMF # 91. Due to his iconic status and

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strong social media presence, Broadus is highly sought after by Fortune 500 companies to

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promote and endorse their brands. DMF # 92. Spanky's Clothing, Inc.("Spanky's") is

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Broadus's loan-out corporation for such endorsement agreements. DMF # 93.

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Around August, 2010, Evan and Daren expressed interest in Broadus endorsing and

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promoting the Colt 45 brand, one of numerous brands owned by Pabst. DMF # 94. Evan and

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Daren identified themselves as co-Chief Executive Officers of Pabst and explained that the

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Metropoulos family owned Pabst, which in turn owned the Colt 45 brand. DMF # 95.

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After Broadus reciprocated interest in potentially endorsing the Colt 45 brand, Pabst sent

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an initial proposal outlining the basic framework of a potential agreement with a royalty payment

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structure. DMF # 96. Plaintiffs were familiar with the Metropoulos family, knew they were in

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private equity, and anticipated that the Metropoulos family would attempt to enhance the value

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of the brands and sell the company quickly for a profit. DMF # 97. Given that likelihood (which

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ultimately came true), Broadus wanted to be true partners with the Metropoulos family and share

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in the overall value of the Colt 45 brand. DMF # 98.


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PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

With this understanding, Nick Adler, the principal negotiator of the business points on
Broadus's behalf, offered a counter proposal requesting phantom equity as part of the deal

compensation. DMF # 99. Mr. Adler eventually memorialized his intentions in an email to

Pabst stating:
Generally when Snoop enters a brand deal from the onset he negotiates an equity
stake in the brand. In this case the request was for a phantom equity stake in the
brand. Snoop wants to give the brand his full focus, he wants to fulfill what Colt
45 requires of him and he wants to go even beyond that. The main concern is that
there is no long term guarantee for him. If the brand is sold 1 week after his
contract ends he is not entitled to any portion of it.

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DMF # 100.
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As a result of Mr. Adler's expressed intent for phantom equity, as well as numerous
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conversations with Nick Osborne on the subject (Pabst's head of marketing for the Colt 45 brand
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and principal negotiator of the instant agreement on behalf of Pabst), Mr. Osborne sent a term

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sheet including the following language:


PHANTOM EQUITY DURING 3- YEAR TERM: In the even the Colt 45 brand
family is sold during the 3 year term of the agreement, Snoop Dogg will receive
10% of the sales price of the brand family.

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DMF # 101. Misters Osborne and Adler agreed that if the Colt 45 brand was sold (either

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individually or as part of a larger transaction involving all of or part of the company), without

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any other qualifying language, Broadus would be entitled to a percentage of the sales price.

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DMF # 102.3 A prime motivation for this agreement was that Broadus agreed to take less

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money under the royalty provision of the agreement with the understanding that he had this

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partnership type interest in the event the Colt 45 brand family were sold. DMF # 103. This

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language, based on the understanding of the parties, remained the operative language describing

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the triggering event in the final version of the agreement. DMF # 104.
Pabst's Attorney Drafted The Agreement,Including The IntY~a-Metropoulos
C.
Change Of Control Exemption

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Once the business points were finalized, the attorneys for both parties David Byrnes for
Plaintiffs and Michael Cramer for Pabst began drafting an agreement to reduce those terms to
writing. SF # 3, Adler Decl. 12. Pabst's attorney, Mr. Cramer, drafted each iteration of the

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3 As Pabst admits, Mr. Adler and Ted Chung principally negotiated the business terms with Pabst
representatives Mr. Osborne and Kevin Kotecki. SF #2; Declaration of Nick Adler ("Adler
Decl.") 10.
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PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

agreement, while Plaintiffs' legal representatives provided comments to those drafts. DMF #
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105. Without any discussion regarding the term between the parties themselves, Mr. Cramer

defined "Net Sales Price" as "the price realized by the stockholders of the Company for the sale

of the entire Colt 45 brand family during the Term of the Agreement after the subtraction of any

and all costs incurred by the Company to accomplish such sale." DMF # 106-107. Plaintiffs did

not think twice because Daren and Even held their family (themselves and their father, Dean)out

to be the stockholders of Pabst. DMF # 108

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definition of the term "sold":


In the event that the Blast by Colt 45 brand or the entire Colt 45 brand family is
sold to other than a subsidiary or affiliate ofthe Company that is accomplished
for corporate purposes or to purchases ofstock among existing shareholders
during the 3-year Term of the Agreement, or within two (2) years following the
end of the Term, Consultant will receive 10% of the net sales price of such sale.

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DMF # 109 (Italics indicate additions made by Mr. Cramer in his draft). During the negotiations

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ofthe agreement, when asked about this unusual exception to the word "sold," Mr. Cramer

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explained in contemporaneous correspondence:


The same reason that much else on your side has been added now and that is to
make clear the provision...in this case that an intra Metropoulos family transfer of
control or a corporate restructuring done simply for liability or tax reasons is not a
sale that should trigger a payment. So, this needs to stay. This is common in all
equity agreements with executives and Credit agreements with lenders.

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Pabst carved out only specific intra company transfers of the Colt 45 brand from the

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DMF # 110. Mr. Cramer confirmed during his deposition that the purpose of this clarification
was because he wanted to make sure that any intra-family change of control of a one-brand asset
or a brand to a subsidiary would not trigger the phantom equity clause. DMF # 111.
Accordingly, per Mr. Cramer, a "change of control" would trigger the phantom equity clause
exempt for a small subset of change of control transactions, those between the Metropoulos
family. DMF # 112. As such, so long as the transaction was not an intra Metropoulos family
transfer, it would trigger the phantom equity clause. DMF # 113.
D.

Execution Of The Consulting And Promotions Agreement

In January 2011,the parties agreed upon and executed the long form written Consulting
and Promotions Agreement, including the phantom equity clause. DMF # 114. The final
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PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

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phantom equity clause in the Consulting Agreement provides, in pertinent part:


a) In the event that the Blast by Colt 45 brand or the entire Colt 45 brand family
is sold (other than to a subsidiary or affiliate of the Company that is accomplished
for corporate purposes or to purchases or sales of stock among existing
shareholders, which transactions shall be conducted on an "arms length" basis)
during the 3-year Term of the Agreement or within two (2) years following the
end of the Term, Consultant will receive 10% ofthe net sales price of such sale.

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DMF # 115.4 The pertinent portion of the phantom equity clause contains two components:(1)
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the triggering event(a sale) and (2)the payment calculation ("Net Sales Price"). DMF # 116.
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The language used for the triggering event "sold" encompasses either a sale of the Colt 45
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brand alone, or the sale of the brand as part of a larger transaction, as here. DMF 117. This is
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consistent with custom and practice in the industry as the phantom equity clause is intended to
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compensate Plaintiffs in the event of a corporate transactionof whatever structurethat
a

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monetized the Colt 45 brand. DMF 118. If the triggering event is satisfied (i.e. the Colt 45

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brand family is sold), only then must the parties calculate the payment amount. DMF # 119.5
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This broad definition is consistent with both the parties' intent and industry practice
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whereby a "sale" includes a "change of control" transaction. DMF # 122. Indeed, Mr. Cramer

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16

18
19

explained how the triggering event may be exercised:


It means ifany ofthose brands or pieces ofbrand, during at least the terns of the
agreement and whatever length of period that it goes beyond, is sold to a third
party, with the exception of the parenthetical, if any of that brand or piece of that
brand was sold, then there would be consequences that would result in the
potential for the consultant in this case potentially receiving some payment.
DMF # 123 (emphasis added).6

20
21
22
23
24
25
26
27
28

4 Under the Consulting and Promotions Agreement, subsection (a) of the phantom equity clause
was effective for two years after the end of Plaintiffs' obligation to provide services under the
agreement. Declaration of Michael Cramer ("Cramer Decl."), Ex. A. The term of the agreement
was three years, beginning in January 2011 and ending in January 2014. Id. As such, a sale
sufficient to trigger payment under the phantom equity clause was required to occur before
January 2016. Id. Thus, the sale of the Colt 45 brand in November 2014, discussed below, is
within the applicable time period to trigger payment under subsection (a) of the phantom equity
clause.
5 The triggering event has not substantively changed from the initial agreement between Mr.
Adler and Mr. Osborne a sale of the Blast by Colt 45 brand or the entire Colt 45 brand family.
DMF # 120. As such, the triggering event has the same meaning and scope as the parties
attached to it when the clause was negotiated any sale of the brand. DMF # 121.
6 In his declaration, Mr. Cramer contends that he informed Mr. Byrnes that if the company were
sold and the brands remained within Pabst, rather than a brand itself being sold, then subsection
(a) of the phantom equity clause would not be triggered. This is categorically false. Mr. Byrnes
0
PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

E.
2

In November 2014, Dean and his family trusts sold Pabst, including the entire Colt 45

brand, to Eugene Kashper and the private equity firm TSG Consumer Partners. DMF # 127. As

a result of the SPA,the Buyer (Kashper and TSG) was required to tender payment ofthe

purchase price of roughly $683,000,000(not including adjustments) to the Seller, which is

defined as PCH. DMF # 128.

Pabst And All Of Its Assets, Including The Colt 45 Brand,Is Sold Through
The Securities Purchase Agreement

The parties to the SPA intentionally structured the transaction as a stock sale, whereby

PCH sold 100% ofthe stock of PHI to Kashper and TSG. DMF # 129. While the parties called

the transaction a "stock sale," both the leader of the selling group (Dean) and the leader of the

10

buying group (Kashper) confirmed that the transaction was a sale of Pabst and the Colt 45 brand

11

family. DMF # 130. Even though the parties chose to structure the transaction as a "stock sale,"

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the parties were required to identify the transaction as an asset sale for Federal tax purposes.
DMF # 131. The SPA explicitly provides:
The parties agree that the purchase of the Securities shall be treated for federal
(and, where applicable, state) income Tax purposes as a sale by the Seller and a
purchase by the Buyer ofthe assets ofthe Company and the Company
Subsidiaries, in exchange for the Final Purchase Price....

16
DMF # 132(emphasis added). In fact, Pabst sought to amend the SPA to provide that the Colt

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45 brand would not be sold in order to intentionally avoid payment to Plaintiffs. DMF # 149.
18
19
20

F.

The Parties To The SPA Anticipated It Would Trigger The Phantom Equity
Clause At Issue And Negotiated An Indemnity For Such Claim

During Kashper's due diligence in negotiating the SPA, Kashper's representatives

21

expressed concern regarding the Consulting and Promotions Agreement. DMF # 133. As a

22

result, the parties negotiated a specific indemnity relating to any claims Broadus may make that

23

the SPA triggered the phantom equity clause. DMF # 134, 136. Mr. Kashper made it clear that

24

the Broadus agreement was entered into by the Metropoulos family and they should be liable for

25
26
27
28

vehemently denies that Mr. Cramer ever informed him that a sale of the entire company would
not trigger the phantom equity clause. DMF # 124. In fact, the only information Mr. Cramer
explained on this point was to the effect that subsection (a) would cover the event of a sale ofthe
company, but if the company wasn't sold, Broadus would have an alternative method for sharing
in the upside of the brand. DMF # 125. Mr. Byrnes certainly would have remembered such a
patently absurd explanation and would not have agreed to such a limited interpretation of the
agreement. DMF # 126.
PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

any payment owed under that agreement. DMF # 135.


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After the SPA was signed, but before the transaction closed, a Pabst representative sought

to amend the indemnity provision in the SPA for clarification. DMF # 137. The proposed

amendment "would make clear that the Seller's indemnity relating to a potential brand sale of

Colt 45 under the Snoop Agreement is limited to any losses triggered by this sale ofthe

Company (i. e., under the SPA), which I think is consistent with the agreement reached during our

negotiations." DMF # 138; see also Gurvitz Decl., Ex. 12, Deposition of Jim Vieceli, at 96:12-

18("A: I agree that the intention of the request and the intention of the indemnity all along was

to only indemnify with respect to transactions arising or consummated as a result of the

10

securities purchase agreement."). This clarifying amendment was executed based on the parties

I1

understanding above. DMF # 139.

12

G.

13

As if the plain language ofthe SPA was not enough, both the buyer and the seller

14

confirmed that Pabst and Colt 45 were sold as part of the SPA. Dean, the former chairman of the

15

board for PCH and beneficial owner of Pabst, testified under oath that the Colt 45 brand family

16

was sold to Kashper and his group:


Q: So 100 percent ofthe business stock, assets, obligations, liabilities was
sold to Mr. Kashper and his group, correct?
A: I think when one says they're selling the stock of an entity, that includes
everything, the goodwill and everything else ofthe company.
Q. So 100 percent of everything was sold to Mr. Kashper with the stock, correct?
A. Correct.

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Both The Buyer And Seller Agree That Colt 45 Was Sold

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DMF # 140.
21
Mr. Kashper, the leader of the buying group, also testified under oath that he purchased
22
23
24
25
26
27
28

Pabst, including the Colt 45 brand family:


Q. So you were buying a company and all ofthe assets of that company, right?
[Objection]
Q. You can answer.
A. We were buying the company, yes.
Q. And all the assets of the company?
[Objection]
A. Yes.
Q. And one of those assets was Colt 45, correct?
[Objection]
A. Yes.
E
PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

DMF # 141. After the SPA was signed, the parties issued a joint press release discussing the

transaction, approved by a representative for the Metropoulos family and Mr. Kashper himself,

that Kashper and his group were acquiring Pabst, which was previously owned by Evan, Daren

and Dean Metropoulos. DMF # 142.


In an admission that is fatal to Defendants' Motion, Dean confessed that his sale of the

5
6
7
8

company in 2014 actually triggered Broadus' phantom equity clause:


Q: Have you ever [] - -- you're familiar with the term "phantom equity"?
A: I'm familiar with it's interchanges with "incentive equity."
Q: You your understand them to be interchangeable terms?
A: Yes, that's my understanding.

9
Q: Is part ofthat standard program a provision that says that in the event the
company is -- is sold or a portion of that company is sold that that would trigger
that clause?
A: I don't recall it ever coming into play when you sell a portion of a business, of

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a com or of a company.
Q: It's only when you sell the entire company is your
A: Yeah, when we sell the the the stock, which almost invariably we do.
Q: And that would trigger that incentive or phantom equity clause if you sell the
stock of the company?

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Q: So I I just want to make sure I understand what you're saying. Can you
explain it?
A: Yeah. We have a pool of incentive for those participants that help grow a
business, and we share the growth component of that business in a way with the
as an incentive to those who make it happen.
Q: And in that instance, that clause would be triggered by the sale of the stock of
the company?
A: Yes.

16

17
18
19
20

DMF # 143.

21

III.

LEGAL STANDARDS

22

A.

23

Defendants cannot obtain summary judgment or adjudication of their claims unless they

Standard On Summary Judgment

24

show that one or more elements of a cause of action cannot be established. Cal. Civ. Proc. Code

25

437c(p)(2). On summary judgment, Defendants bear the burden of showing that there is no

26

triable issue of material fact and that they are entitled to judgment as a matter of law. Aguilar v.

27

Atlantic Richfield Co., 25 Cal. 4th 826, 850(2001). If Defendants challenge that Plaintiffs lack

28

evidence to support an element of a cause of action, Defendant must show that Plaintiffs do not

PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

possess and cannot reasonably obtain evidence to support that element. Id. at 854. A triable

issue of fact exists if there is evidence that would allow a reasonable trier of fact to find the

underlying fact in favor of the opposing party. Id. Only if Defendants make a prima facie

showing that there are no triable issues of fact, does any burden shift to Plaintiffs to demonstrate,

by a preponderance of the evidence, that triable issues of fact exist. Id. at 850.

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Evidence cited by the moving party in support of a motion for summary judgment,

especially expert declarations, is to be strictly construed and taken in the light most-favorable to

the non-moving party. See, e.g., Powell v. Kleinman, 151 Cal. App. 4th 112, 125-126 (2007). In

considering expert declarations supporting a motion for summary judgment, the declarations are

10

liberally construed for the opposing party, and any doubts as to the propriety of granting the

11

motion are resolved in favor of the opposing party. Id.

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B.

Interpreting Contractual Lan~ua~e

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When construing a contract, courts traditionally apply the "four corners rule" and look to

14

the language of the contract alone to give effect to the intent of the parties. See Air Safety, Inc, v.

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i Teachers Realty Corp., 185 Ill. 2d 457, 462(1999). If the language of the contract is clear and

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facially unambiguous, the court interprets the contract as a matter of law without the use of

17

extrinsic evidence. Gallagher v. Lenart, 226 Ill. 2d 208, 233 (2007). However, if the language

18

of a contract is susceptible to more than one meaning, the court may consider extrinsic evidence

19

to determine the intent of the parties thereto. See Air Safety, 185 Ill. 2d at 462-463.

20

A contract is ambiguous when a provision in the contract has, or is susceptible to, at least

21

two reasonable but conflicting interpretations or meanings. Old Republic Ins. Co, v. Ace

22

Property and Cas. Ins. Co., 389 Ill. App. 3d 356 (1st Dist. 2009). In interpreting a contract, the

23

court "cannot alter, change or modify the existing terms of a contract or add new terms or

24

conditions to which the parties do not appear to have assented, write into the contract something

25

which the parties have omitted or take away something which the parties have included."

26

Gallagher, 367 Ill. App. 3d at 301-302. "A presumption exists against provisions that easily

27

could have been included in the contract but were not." Id. (emphasis added).

28
~ Plaintiffs do not dispute that Illinois substantive law applies to Plaintiffs' causes of action.
10
PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

1
2

IV.

DEFENDANTS BREACHED THE CONSULTING AND PROMOTIONS


AGREEMENT
To sustain a claim for breach of contract, Plaintiffs must prove: "(1) the existence of a

valid and enforceable contract;(2)substantial performance by the plaintiff;(3)~ breach by the

', defendant; and (4)resultant damages." W. W. Vincent and Co. v. Figst Colony Life Ins'. Co., 814

N.E.2d 752, 759 (Ill. App. Ct. 2004). Defendants do not challenge that the Consulting and

Promotions Agreement was a valid and enforceable contract(Cramer Decl., Ex. A), or that

Broadus substantially performed all that was required of him under that contract. DMF # 144.

8
9

A.

Defendants Admit that A Triable Issue of Fact Exists Regarding


Interpretation of SPA.

Defendants argue that they did not breach the agreement because the $70d million sale of
10
Pabst was not really a sale but rather a mere "change of control." Motion at 13-14. Aside from
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the disqualifying nature of the incrediUle argument, the fact that Defendants submitted extrinsic
12
evidence to interpret whether the SPA triggered the phantom equity clause, including expert
13
testimony, proves that Defendants admit the clause to be ambiguous and therefore concede that

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there is a triable issue of fact as to its interpretation. Walter E. Heller Western, Inc, v. Tec~im

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Corp., 196 Cal. App. 3d 149, 158 (1987)("[w]hen two equally plausible interpretations of the
16
' language of a contract may be made ... parol evidence is admissible to aid in interpreting the
17
agreement, thereby presenting a question of fact which precludes summary judgment if the
18
evidence is contradictory."); WYDA Associates v. Merner, 42 Ca1.App.4th 1702, 1713 (1996)
19
("Because the parol evidence is contradictory, a factual question [regarding interpretation of
20
ambiguous contract language] arises that should not be resolved on summary judgment.").
21
Additionally, the fact that there is a battle of experts regarding the interpretation ofthe
22
phantom equity clause (Bava and Moses for Defendants v. Byrnes and Mullen for Plaintiffs)
23
establishes a triable issue of fact and is itself sufficient grounds to deny the Motion. Garrett v.
24
Howmedica Osteonics Corp., 214 Cal. App. 4th 173, 190-91 (2013); see also Jennifer C. v. Los
25
Angeles Unified School Dist., 168 Cal. App. 4th 1320, 1332-33 (2008)(dueling expert
26
declarations is sufficient to deny a motion for summary judgment). Misters Bava and Moses
27
claim that it is custom and practice to include a "change of control" provision if such a
28
transaction is contemplated as triggering a phantom equity clause. See, e.g. Declaration of
11
PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

Gordon Bava., 18; Declaration of Peter Moses Decl., 4. Ms. Mullen, an expert in negotiating

and drafting phantom equity and executive compensation agreements, testifies that it is custom

and practice for a phantom equity clause to be triggered upon all forms of transactions, including

"change of control" transactions, as the goal is for the service provider to receive payment

whenever the beneficial owners of the company sell their interest in a company. Declaration of

Amber Mullen ("Mullen Decl."), 6-7. This conflict alone defeats Defendants' Motion.
B.

Defendants claim that the SPA did not constitute a "sale" of the Colt 45 brand family

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The Colt 45 Brand Family Was Sold As Part Of The SPA

because (1)the SPA was merely a stock sale whereby no assets were sold (rather than an asset

10

sale) and (2)that the SPA was simply a change of control, which is different than a sale. Motion

11

at 13-14. Both hypothesis are defeated as discussed below.

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1.

The SPA Was A "Sale" Of The Colt 45 Brand Family.

Under Illinois law, the term "'[s]ale' or `sell' shall have the full meaning of that term as

14

applied by or accepted in courts of this State, and shall include every contract of sale or

15

disposition of a security or interest in a security for value." 815 Ill. Comp. Stat. Ann. 5/2.5.

16

"[The] definition of sale is in itself liberal. Its obvious purpose is to exclude nothing that court

17

[could possibly regard] as a sale." Silverman v. Chicago Ramada Inn, Inc., 63 Ill. App. 2d 96,

18

101 (1965)(emphasis added).

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Further, a transaction whereby one hundred percent of the stock in a corporation is sold is

20

akin to asset sales in that they sell one hundred percent of the assets of a corporation. See, e.g.,

21

TeNrific Promotions, Inc. v. Dollar Thee Stores, Inc., 947 F. Supp. 1243, 1252(N.D. Ill. 1996)

22

("As a matter of law, a written agreement to sell one hundred percent ofthe stock in a

23

corporation conveys ownership of the entire corporate entity," including all of its divisions and

24

assets,"unless the agreement explicitly excludes some portion of the company from the

25

transaction."); Baird &Warner, Inc. v. Ruud, 45 Ill. App. 3d. 223, 228 (lst Dist. 1976)("The

26

sale of all ofthe stock of a corporation is, in legal effect, a sale of all of its assets. The mere fact

27

that the parties found it more convenient to transfer all of the stock rather than to make

28

conveyances of its assets does not change the substance of the transaction.").
12
PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

1
2

conclude that the SPA triggered the clause. The triggering event provides,"In the event that the

Blast by Colt 45 brand or the entire Colt 45 brand family is sold...." DMF # 115. As explained

above, the term "sold" is interpreted broadly under Illinois law. Silverman, 63 Ill. App. 2d at

101. There is no qualifying language limiting the type of sale that can trigger this provision

(other than a limited and wholly inapplicable exception discussed below) nor any language

excluding the sale of the entire company. Mullen Decl. 12. The Court will not add such an

exclusion that the parties could have added but did not. Gallagher, 367 Ill. App. 3d at 301-302.

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A review of the plain language of the phantom equity clause can only be interpreted to

Both Dean and Kashper admit that Pabst and the Colt 45 brand family were sold as part

10

of the SPA. DMF # 140-141. Dean even admitted under oath that the SPA did trigger Broadus'

11

phantom equity clause. DMF # 143. The SPA itself identifies that the transaction was for the

12

assets of PHI and Pabst, which includes the Colt 45 brand. Cramer Decl., Ex. B at 7.13(d)(i).

13

As such, the stock sale memorialized by the SPA is a "sale" as contemplated by the phantom

14

equity clause. Declaration of David Byrnes("Byrnes Decl."), 17; Mullen Decl. 12.

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To the extent that the Court finds that the phantom equity clause is ambiguous as to the

16

term "sold," volumes of extrinsic evidence establish that the mutual intent of the parties was to

17

include any sale of the Colt 45 brand. Misters Adler and Osborne agreed that if the Colt 45

18

', brand was sold, without any other qualifying language, Broadus would be entitled to a

19

li, percentage of the sales price. DMF # 102. Because Defendants admit that the business terms

20

!I, were negotiated primarily between Mr. Adler and Mr. Osborne (as well as Pabst representative

21

Mr. Kotecki)(SF# 2-3) and because Mr. Adler's testimony is the only one from that group being

22

presented to the Court here, it is unrefuted. Likewise, Mr. Cramer agreed that the phantom

23

', equity clause would be triggered by any sale of the brand to a third party(DMF # 123), which is

24

', exactly what happened here. Lastly, Kashper demanded an indemnity from Dean because he

25

', believed that the SPA would trigger the phantom equity clause. DMF # 137-138. The Colt 45

26

', brand was undoubtedly sold.

27

2.

Pabst's Argument That The Agreement Lacks A "Change Of Control"


Provision Is Belied By Their Own Partv Admission

28
It is black letter law that a change of control is a type of sale. Black &Decker Corp. v.
13
PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY NDGMENT

American Standard, Inc., 682 F. Supp. 772, 781 (D. Del. 1988)(holding that "a sale of control
2

amounts to a sale" under Delaware corporate governance law which applies to Defendants as

Delaware corporations);$ Thomas v. Private Leger Fin. Serv., Inc., 155 Ill. App. 3d 289(1987)

("Final payment for unregistered stock, transfer of the stock certificate and passing of title

completed the sale, fixed the rights of the parties and constituted a `sale' under this section.");

Ice Portal, Inc. v. VFMLeonardo, Inc., 2010 WL 2351463 at * 6(S.D. Fla June 11, 2010)("In

addition, `change of control' typically means either a sale of stock or an assets acquisition.").9

8
9

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Defendants' own representatives confirm that the term "sold" contemplated and included
a change of control transaction. While negotiating the Consulting and Promotions Agreement,

10

Mr. Cramer included a specific carve out in the term "sold" for intra-Metropoulos transfers.

11

DMF # 109. Mr. Cramer was concerned that a change of control between members of the

12

Metropoulos family(who owned the entire chain of companies) would trigger a payment

13

obligation. DMF # 110-111. As such, Mr. Cramer interpreted the term "sold" to include a

14

change of control at the time of contracting, and exempted a small subset of potential change of

15

control transactions. Defendants' interpretation that the term "sold" does not include a "change

16

of control" transaction would render the exception superfluous, which violates a fundamental

17

tenant of contract interpretation. Fontana v. TLD Builders, Inc., 362 Ill. App. 3d 491, 511

18

(2005). Therefore, any change of control transaction not between members of the Metropoulos

19

family would trigger the phantom equity clause, such as the SPA did here. DMF # 112-113.

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28

8 As Delaware companies(DMF # 146-148), Defendants are required to follow Delaware


corporate governance laws. See Lidow v. Superior CouNt, 206 Cal. App. 4th 351, 359(2012)(the
internal affairs doctrine applies the corporate governance laws of the state of incorporation).
9 Defendants' reference to case law interpreting anti-assignment clauses is irrelevant here. An
anti-assignment clause protects the service provider in the event that company sells, assigns, or
transfers that service obligation to a third party. Byrnes Decl. 13; Mullen Decl. 5. The
purpose of a phantom equity clause is vastly different. Byrnes Decl. 15; Mullen Decl. 6-7. A
phantom equity clause is a form of additional compensation that is triggered by a certain event or
series of events a sale in this particular instance. Byrnes Decl. 16-17; Mullen Decl. 10.
Unlike an anti-assignment clause, the phantom equity clause was not intended to protect
Plaintiffs from performing services for an unrelated third party, but was additional compensation
for performance of his obligations. Byrnes Decl. 15; Mullen Decl. 12. Here, subsection (a)
of the phantom equity clause is triggered upon a sale, irrespective of Plaintiffs' services under
the agreement. Byrnes Decl. 17; Mullen Decl. 12.
14
PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

C.

Because Defendants clearly breached the Consulting and Promotions Agreement,

Broadus suffered harm when Defendants refused to tender payment owed. Under the agreement,

if the Colt 45 brand family is sold, Broadus is entitled to 10% of the net sales price. Cramer

Decl., Ex. A at 3(a)(v)(a). "'Net sales Price' shall mean the price realized by the stockholders

6
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Pabst's Beneficial Owners Received Consideration For The Sale Of Colt 45

' of the Company for the sale of the Blast brand or the entire Colt 45 brand family..." Id.
Dean and his family related entities were the beneficial owners and "stocYcholders" of

Pabst and Colt 45. Prior to the Consulting and Promotions Agreement, Evan and Daren

identified themselves as co-Chief Executive Officers of Pabst and explained that the

10

Metropoulos family owned Pabst, which in turn owned the Colt 45 brand. DMF # 95, 108.

11

After the Colt 45 brand was sold, Dean (as well as his related family trusts) received the

12

proceeds of that sale. Dean Depo., 48:11-49:13. It is reasonable to interpret "stockholders" as

13

the beneficial owners of the company, i.e, the Metropoulos family, thereby creating a triable

14

issue offact.

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Moreover, there is strong evidence that PCH,PHI, and Dean himself are the alter ego of

16

Pabst. A court may pierce the corporate veil "where:(1)there is such a unity of interest and

17

ownership that the separate personalities of the corporation and the parties who compose it no

18

longer exist, and (2)circumstances are such that adherence to the fiction of a separate

19

corporation would promote injustice or inequitable circumstances." Tower Investors, LLC v. 111

20

East Chestnut Consultants, Inc., 371 Ill. App. 3d 1019, 1033-34 (2007).

21

Here, Dean (the chairman of the board), Evan or Daren(Co-CEOs of Pabst), nor Pabst's

22

person most knowledgeable could identify whether the three entities were truly separate. DMF #

23

80-89. Indeed, Dean confirmed that proceeds from his sale of Pabst, which included all of

24

Pabst's assets, did not flow down to the other entities sold. DMF # 90. Defendants here are

25

attempting to interpret the phantom equity clause in a manner that would avoid a payment that is

26

clearly due according to the agreement. Adherence to this sham corporate structure would result

27

in injustice or inequitable circumstances. As such, there is undoubtedly a triable issue of fact

28

regarding Defendants' alter ego structure.


15
PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

V.
2

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DEFENDANTS BREACHED THE COVENANT OF GOOD FAITH AND FAIR


DEALING UNDER ILLINOIS LAW
"In Illinois, a covenant of good faith and fair dealing is implied in every contract." Oil

Express Nat'l, Inc. v. Burgstone, 958 F. Supp. 366, 369(N.D. Ill. 1997). To establish a breach of

the duty of good faith and fair dealing, the complaining party must show that the contract vested

the opposing party with discretion in performing an obligation under the contract and the

opposing party exercised that discretion in bad faith, unreasonably, or in a manner inconsistent

'

with the reasonable expectations ofthe parties. Beraha v. Baxter Health Care Corp., 956 F.2d

',

1436, 1443-45 (7th Cir. 1992); see also Gore v. Indiana Ins. Co., 876 N.E.2d 156, 161-62 (Ill.

App. Ct. 2007)("The duty of good faith and fair dealing is a limitation on the exercise of that

10

', discretion, requiring the party vested with discretion to exercise it reasonably and with proper

11

motive, not arbitrarily, capriciously, or in a manner inconsistent with the parties' reasonable

12

expectations.")(citations omitted)). "When such discretion is abused by a party in bad faith,

13

then, a cause of action may arise derivatively from the duty of good faith and fair dealing." Oil

14

Express Nat'l, Inc., 958 F. Supp. at 369.

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Here, there is a triable issue of fact regarding whether Defendants breached the covenant

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of good faith and fair dealing. As discussed above, the Consulting and Promotions Agreement

17

requires a payment to Plaintiffs if and when the Colt 45 brand family is sold. DMF # 115-119.

18

Defendants, not Plaintiffs, had broad discretion in performing this obligation under the contract,

19

as Plaintiffs had no control over whether the Colt 45 brand family were sold.

20

Defendants exercised this discretion in bad faith and in a manner inconsistent with the

21

parties' reasonable expectations. Evan and Daren represented that the Metropoulos family

22

owned Pabst and the Colt 45 brand. DMF # 95, Plaintiffs proposed the phantom equity clause

23

because they anticipated that the Metropoulos family would attempt to sell the company quickly

24

for a profit. DMF # 97-99. For the reasons stated above, Plaintiffs had a reasonable expectation

25

that a sale of the entire company would trigger the phantom equity clause. DMF # 97-99.

26

Instead, Defendants intentionally structured the SPA to avoid any payment to Plaintiffs

27

under the farce that the SPA was simply a "change of control" rather than an asset sale of Pabst

28

and its brands. DMF # 149. However, Kashper confirmed that he understood that his group was
16
PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

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buying the assets ofPHI and Pabst through the SPA. DMF # 141, 145. Indeed, Kashper was so

concerned that the transaction memorialized in the SPA would trigger the phantom equity clause

that he demanded an indemnity for the very claim Plaintiffs bring here. DMF # 138.
Also, Defendants continue to inappropriately avoid payment by playing a shell game with

4
5

the alter ego entity structure for Pabst. DMF # 80-89. Kashper and his group had every

intention of purchasing Colt 45 as part of the transaction (Gurvitz Decl., Ex. 11, Deposition of

Eugene Kashper, at 175:15-21), yet Defendants structured the sale to make the appearance that

the brand was not sold. These actions were made in bad faith and at the very least, create a

triable issue of fact whether Defendants breached the covenant of good faith and fair dealing.

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A claim for conversion must satisfy the following elements: "(1) an unauthorized and
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wrongful assumption of control, dominion, or ownership by defendant over plaintiff's [personal
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DEFENDANTS' CHALLENGE TO PLAINTIFFS' CLAIM FOR CONVERSION


ALSO FAILS

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VI.

property];(2) plaintiff's right in the property;(3) plaintiffs right to the immediate possession of
the property, absolutely and unconditionally; and (4) a demand for possession of the property.'"

15
General Motors Corp. v. Dou~7lass, 565 N.E.2d 93, 96-97 (Ill. App. Ct. 1990).
16

17
18
19
20

Defendants challenge the pleading regarding conversion on the following grounds:(1)


Plaintiffs have failed to state a cause of action for breach of contract regarding the Consulting
Agreement, and therefore, do not have a right to any money;(2)Plaintiffs bring this cause of
action against PCH, which no longer has possession of the money sought; and (3)Plaintiffs have
failed to identify a specific chattel that was converted. Motion at 17-19. Defendants' Motion to

21
this cause of action on the ground that Defendants did not breach the Consulting Agreement fails
22
for the same reasons as discussed in Section IV above. The remaining two arguments also fail.
23
1.

PCH Is The Appropriate Entit.~ubiect To Plaintiffs' Conversion Claim

24
PCH's first argument, unsupported by any authority, is that PCH is the wrong entity to
25

sue for conversion because PCH no longer has possession of the property Plaintiffs seek. Motion

26
at 18. Under the SPA, payment of the purchase price was owed to PCH. DMF # 128. As such,
27

when PCH executed the SPA and refused to tender the portion owed to Plaintiffs, PCH

28
unlawfully converted those funds. PCH may not avoid liability for conversion by simply
17
PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

distributing its assets to its shareholders. See Holmes v. Birtman Elec. Co., 18 I11. 2d 554, 567-69
2

(1960)(a stockholder can treat the wrongful refusal to allow a transfer as a conversion of the

shares as of the time of the conversion). Whether PCH distributed the proceeds to its

~ shareholders, or needs to initiate an action to recover from its shareholders, is irrelevant to this

~ claim. It would be improper to shield PCH from liability simply because it distributed the

unlawfully converted property.

2.

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Plaintiffs Have Adequatel~Identified A Specific Chattel

PCH also challenges Plaintiffs' conversion claim on the ground that Plaintiffs have not
identified a specific chattel. Motion at 18-19. This Court rejected the identical argument, on the
same authority, in overruling Defendants' demurrer. Nothing has changed.
Under Illinois law, the property at issue in a conversion action must be "an identifiable

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object of property of which the plaintiff was wrongfully deprived. Money may be the subject of

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conversion, but it must be capable of being described as a specific chattel, although it is not

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necessary for purposes of identification that money should be specifically earmarked." In re

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T7zebus, 483 N.E.2d 1258, 1260(1985). The fact that one party may require discovery to

16

determine precisely the amount of money converted, or the amount of money the defendant

17

received from the unlawful conversion, does not mean the claim is for an indeterminate sum.

18

Evergf~een Marine Corp. v. Division Sales, Inc., 2003 WL 1127905, at * 9(N.D. Ill. Mar. 12,

19

2003); see also Chicago Dist. Council ofCarpenters Welfare Fund v. Gleason & Fritzshall, 693

20

N.E.2d 412, 416 (I11.App.Ct.1998)(claim for certain specified medical expenses from a $50,000

21

settlement check was not for an indeterminate amount because source and description were

22

sufficient to identify converted money). Indeed, the Illinois Court of Appeal held that a claim for

23

conversion seeking 5% of the final payment under a purchase agreement was sufficiently definite

24

irrespective of the fact that the final sum was unknown at the time. Roderick Development Inv.

25

Co. v. Community Bank ofEdgewater,668 N.E.2d 1129, 1136 (1996).

26

Furthermore, the cases Defendants cite are distinguishable as those courts held that the

27

sum allegedly converted was indeterminable because it was subject to deductions that had yet to

28

be determined at the time of the complaint. See, e.g., Sutherland v. O'Malley, 882 F.2d 1196
18
PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

(7th Cir.1989)(money allegedly converted was indeterminate because it was subject to

deductions for the reasonable value of another attorney's services in that litigation, which

amount had yet to be determined); Mid-America Fire &Marine Insurance Co. v. Middleton, 468

N.E.2d 1335 (1984)(the sum sought was an indeterminate sum because it was to be reduced by

the plaintiffs share of the costs of the suit, which amount was undetermined). In both of these

cases, the plaintiffs' recovery was dependent upon attorney services or costs related to that

litigation, which could not be determined until the end of the matter.
Here, on the other hand, the costs and expenses that must be deducted from the Net Sales

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Price have been final and determinable since the close of the sale. Plaintiffs have adequately

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identified they are owed 10% of the Net Sales Price attributable to the Colt 45 brand family as a

11

result of the sale ofthe entire Pabst company. DMF # 115. While the exact sum is subject to

12

expert testimony (which is not yet due), there is clearly a triable issue of fact as to the amount

13

due under the claim. Moreover, for Defendants to prevail on the ground that Plaintiffs lack

14

evidence of the exact amount converted, Defendants must show that Plaintiffs do not possess and

15

cannot reasonably obtain evidence to support their claim. Aguilar, 25 Cal. 4th at 854.

16

Defendants do not even approach their burden and summary judgment must be denied.

17

VII.

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THERE IS A TRIABLE ISSUE OF FACT REGARDING PLAINTIFFS' CLAIM


FOR INTENTIONAL INTERFERENCE
The elements for intentional interference with contract under Illinois law are: "(1)the

existence of a valid and enforceable contract between the plaintiff and another;(2)the

20
defendant's awareness of this contractual relationship;(3)the defendant's intentional and
21
unjustified inducement of a breach ofthe contract;(4) a subsequent breach by the other, caused
22

by the defendant's wrongful conduct; and (5) damages." Simmons v. Campion, 991 N.E. 2d 924,

23
930 (Ill. App. Ct. 2013). Again, BRIH does not challenge that the Consulting and Promotions
24

Agreement is a valid and enforceable contract or that BRIH knew about the agreement. Motion

25
at 19-20. Instead, BRIH claims (1)there was no breach of the Consulting and Promotions
26

Agreement and (2) BRIH did not induce Pabst to breach the agreement. Id. BRIH's Motion on

27
the ground that Defendants did not breach the Consulting Agreement fails for the same reasons
28
as discussed in Section IV(A) above. DMF # 102, 110-115, 123, 137-138, 140-143
19
PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY NDGMENT

As BRIH identifies, Plaintiffs claim that BRIH induced Pabst to breach the Consulting

and Promotions Agreement by intentionally structuring the SPA as a stock sale rather than an

asset sale to avoid triggering the phantom equity clause. For the same reasons as stated in

Section V above, Plaintiffs have presented more than enough evidence of nefarious intent of the

structure of the SPA to create a triable issue of fact. DMF # 80-89, 95, 97-99, 115-119, 138,

141, 145, 149. As such, BRIH's Motion regarding intentional interference must be denied.

VIII. SPANKY'S IS AN APPROPRIATE PLAINTIFF IN THIS ACTION AND


SUFFERED DAMAGES

8
Defendants' conclusory argument, unsupported by any authority, claims that Spanky's is

not an appropriate plaintiff in this action and has not suffered any damages. However,

10
Defendants admit that Spanky's was a party to the Consulting and Promotions Agreement, which
11

Defendants breached, and that payment is to be made directly to Spanky's. Cramer Decl., Ex. A

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at 3(a)(v)(a); DMF # 16; SF # 17. Defendants have not made any showing that Spanky's is not
entitled to any portion of those proceeds or has not otherwise suffered any damage. Moreover,

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', Spanky's was damaged by Defendants intentional tortious conduct under its causes of action for

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', breach of the covenant of good faith and fair dealing, conversion, and intentional interference

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with contract. DMF # 80-89, 95, 97-99, 115-119, 138, 141, 145. Defendants have cited no
17

authority for the proposition that a party to a contract lacks standing to bring a claim for a breach

18
of that contract.
19
IX.

CONCLUSION

20
For all of the foregoing reasons, Defendants' Motion should be overruled in its entirety.
21
Dated: August 15, 2016
22
23

VENABLE LLP
Alex M. Weingarten
Matthew M. Gurvitz
Matthew

24
25
26
27

By:
A

emgarten

Attorneysfor PlaintiffsSPANKY'SCLOTHING,
INC. AND CALVIN BROADUS,JR.

28
20
PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT