A tip sent to me at click here told me to go look at a particular legal case for some shocking information about the debt settlement company, Johnson Law Group.
Here is how Johnson Law Group describes themselves on the web.
“We are a law firm whose services include debt settlement and bankruptcy. Our job is to analyze your debt situation and provide you with appropriate debt relief options. We do not hold your money in our account. The goal of our debt settlement program is to resolve your indebtedness through compromised settlements or through bankruptcy, whichever is best suited to your needs. There is a fee for our services, but we only accept clients who have the potential to achieve significant financial benefits from participating in our debt settlement program and our fees are figured into the monthly set-aside amounts to which you and your debt analyst agree. Our program allows you to pay only a portion of what you owe and helps you resolve your obligations usually in months rather than years. – Source”
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This story comes from the complaint filed by Johnson Law Group, a Nevada professional corporation, and Anan Mark Eldredge against Advanced Client Solutions, a Nevada LLC, KK and Paul Costantinou.
Jurisdictional Statement
- JLG, at all times relevant herein, was a Nevada professional corporation duly authorized and existing under the laws of the State of Nevada, with its principal place of business in Clark County, Nevada.
- Eldredge, an individual, at all times relevant herein, was a resident of Clark County, Nevada. Eldredge owns ninety-nine percent (99%) of JLG.
- ACS, at all times relevant herein, was a Nevada limited liability company duly authorized and existing under the laws of the State of Nevada, with its principal place of business in Clark County, Nevada.
- KK, an individual, at all times relevant herein, was a resident of Clark County, Nevada. KK owns seventy-seven percent (77%) of ACS.
- Constaninou, an individual, at all times relevant herein, was a resident of Clark County Nevada. Constaninou owns twenty-three percent (23%) of ACS.
Relevant Facts
Eldredge is an attorney who was admitted to practice in the State of Nevada in May, 2006. After being admitted, Eldredge was employed by the Johnson Law Group, a California professional corporation qualified to conduct business in the state of Nevada (“JLG California”). JLG California was owned by two veteran California attorneys, Douglas Crowder (“Crowder”) and William Johnson “Johnson”), as to ninety-nine percent (99%) together, and one Florida attorney, Bertran Bosman (“Bosman”), as to one percent (1%).
JLG California was a debt relief law firm that provided debt settlement and debt management services (the “Legal Services”). Although incorporated in California, JLG California’s offices were located in Las Vegas, Nevada. Defendant KK, via ACS, functioned as JLG California’s firm administrator.
From the time Eldredge commenced employment with JLG California in 2006, JLG California appeared to be growing and have potential to become highly successful.
In August of 2007, Crowder and Johnson informed Eldredge that they were leaving JLG California. Eldredge later learned the reason for their departure was an inability to work with defendant KK. Eldredge succeed to the remainder of Crowder’s and Johnson’s seventy-four percent (74%) interest in JLG California, thereby making Eldredge the owner of ninety-nine percent (99%) and Bosman the owner of one percent (1%) of JLG California.
In December 2009, JLG California merged with JLG, a newly formed entity for the purposes of the merger, thereby dissolving JLG California. With the merger, JLG replaced JLG California in any agreements JLG California had entered prior to the merger.
After Eldredge became a ninety-nine percent (99%) owner of JLG California (now JLG), he became aware of a “Service Agreement” JLG California had entered with ACS in October of 2006 (the “services Agreement”). The Services Agreement purportedly allows ACS to handle the administrative functions of JLG. For the first time, Eldredge became aware that KK, via ACS, was not simply the firm administrator, but controlled JLG’s administrative and non-attorney personnel, among other things.
Under the Services Agreement, ACS would provide JLG with “the necessary support to manage the business aspects” of providing debt settlement services, including providing “facilities, furniture, fixtures, equipment, non-professional personnel, clerical and billing services, collection claims pursuit and general administrative services.”
ACS’s specific duties under the Services Agreement included:
- Providing non-legal administrative support staff;
- Developing administrative policies for the overall operation of JLG;
- Consulting with and keeping JLG informed as to policy matters and other major decisions affecting legal services, including assistance in resolving complaints, grievances and disputes concerning the Legal Services provided to clients and/or third parties;
- Providing JLG with a law firm facility or facilities (the “Law Firm Facility”) and entering into the necessary lease for the Law Firm Facility;
- Paying all rent and amounts due under any lease and paying for the Law Firm Facility’s equipment, telephone, electric, gas and water utility expenses, and all other costs and expenses incurred at the Law Firm Facility.
- Providing JLG with all equipment reasonable and customary for JLG’s operation;
- Recruiting, hiring, and supervising an office administrator and other non-professional personnel reasonably necessary for the efficient operation of the Law Firm Facility, including technical personnel, receptionists, marketing personnel, and janitorial and maintenance personnel;
- Arranging for payroll service to pay all compensation due employees and independent contractors;
- Providing JLG with a method of bookkeeping;
- Providing JLG with a collection report every two weeks specifying: (i) total gross billing for the preceding two weeks; (ii) total gross receipts for the preceding two weeks; and (iii) an accounts receivable aging schedule indicating accounts receivable agings for 30, 60, 90 and over 120 days;
- Providing JLG with financial statements for its operations and data necessary JLG’s preparation of its federal or state income tax returns;
- Ordering and purchasing all office and related supplied required in the day-to-day operations of the Law Firm facility and furnishings or obtaining business cards, stationary, forms, telephones and postal services.
- Billing for all services rendered by JLG and serving as billing and collection agent; and
- Depositing all monies representing earned fees or non-refunable retainers received by JLG into JLG’s operating account, and all monies representing unearned fees or funds to be paid to other parties received on behalf of JLG into JLG’s trust account.
ACS is not a law firm; KK and Constantiou are not attorneys. Nonetheless, the Services Agreement gives ACS and its owners unfettered control over JLG’s operations and finances.
The Services Agreement also allows ACS to maintain operational and trust checking accounts in JLG’s name, and states that ACS “shall be a signatory on both accounts, with the right to make deposits and withdrawals to and from the accounts.” It further expressly authorizes ACS to disburse from JLG’s operating account ACS’s “compensation and all other costs, expenses and disbursements which are required or authorized” by the Services Agreement.
The Services Agreement outlines a complicated compensation formula for ACS defined as the “Administration Fee.” The Administration Fee is a monthly sum of $500,000 less the “Company Holdback,” as defined in the Services Agreement.
Per the Services Agreement, each calendar quarter, ACS must calculate JLG’s profit for the quarter based on the formula set forth therein, and ACS will pay JLG “a rebate” from a portion of the Administration Fee equal to twenty-five percent (25%) of JLG’s profits for each quarter. In other words, ACS, a non-lawyer, takes every penny JLG earns, and, if JLG makes a profit as determined by ACS, ACS “rebates” JLG twenty-five percent (25%) of that amount quarterly.
The Services Agreement was drafted by lawyers. It provides:
[ACS] shall not interfere with the exercise by the Professional (attorneys) of their professional judgment, nor shall [ACS] interfere with, control, direct or supervise and Professional (attorneys) or any individual whom and Professional may employ or contract with in connection with the care and treatment of [JLG’s] clients. [ACS] shall have no authority whatsoever with respect to the establishment of fees for the rendition of such services.
Despite this ostensible limiting language, ACS and its owners exercise absolute power over JLG and Eldredge. Defendants have free reign over JLG’s bank accounts, including JLG’s operating and client trust accounts.
On information and belief, defendant Constantiou is a felon for inter alia, grand larceny, enterprise corruption, and criminal possession of stolen property. Both KK and Constantiou are signers on virtuality all JLG accounts.
ACS controls the receipt of payments from JLG clients and any other sources and ACS controls payments to all vendors. ACS also controls payment from JLG to ACS. At KK’s and Constantiou’s direction, ACS routinely transfers sums up to $75,000 from JLG’s operating account to its own account.
Each month, regardless of the income JLG receives in its operating account, ACS transfers that amount to its own account.
Plaintiffs have demanded an accounting from defendants in excess of fifty (50) times. Defendants have refused and continue to refuse plaintiffs’ demands.
Defendants’ alleged justification for routinely draining the JLG operating account is their alleged entitlement to an Administration Fee under the Services Agreement.
Defendants KK, Constantiou, and their friends’ lavish lifestyles are all supported under the guise of “company expenses,” all of which ACS directly withdraws from JLG at KK’s or Constantiou’s discretion. Although ACS must “rebate” twenty-five percent (25%) of JLG’s profits each quarter to JLG, it never does so because JLG never has a profit. JLG never has a profit because defendants charge every trip, travel expense, food expense, lodging expense, and other lavish purchases directly to JLG. JLG has no ability to see the detail of these expenses because ACS simply pilfers all funds directly from JLG’s accounts.
Despite plaintiffs’ belief that payment of the Administration Fee as structured is prohibited by the ethical rules, plaintiffs have been unable to stop defendants from withdrawing funds in defendants’ sole and absolute discretion.
In late 2008, defendant KK informed plaintiff Eldredge that the JLG trust account was deficient by $185,000. KK admitted that he and his co-defendants failed to transfer client payments from JLG’s operating accounts to JLG’s trust account as they were occasionally obliged to do. instead, ACS kept the money and spent it, resulting in the $185,000 deficiency.
Plaintiffs demanded that ACS immediately cure the deficiency, and cease taking disbursements above what was essential to operate ACS and JLG until the trust account was replenished.
Defendants refused plaintiffs’ demands, and have continued to pillage JLG’s operating account. Defendants have also otherwise utilized unscrupulous accounting methods to attempt to conceal the deficient funds.
The individual defendants threatened Eldredge with physical harm unless plaintiffs agreed to sign certain documents or take certain actions.
Defendant KK consistently threatens to close the Law Office Facility if plaintiffs do not capitulate to his demands. Because plaintiffs would not acquiesce to certain demands, defendants have closed the Law Office Facility multiple times in the past, to the great detriment of plaintiffs and plaintiffs’ clients.
Defendants’ closing of the Law Office Facility rendered plaintiffs helpless to assist clients because defendants control JLG’s database of clients, all technology including e-mail and phones, and the Law Office Facility.
Defendant KK has threatened to reduce Eldredge’s salary, notwithstanding consistently increasing his own and Constantiou’s salaries to a combined total exceeding $36,000 per month.
Despite ACS’s duty to provide non-legal administrative support staff under the Services Agreement, defendants have reduced the number of employees available to service JLG as necessary for JLG to function. Defendants refuse to hire additional employees.
Despite ACS’s duty to consult with and keep JLG informed as to policy matters and other major decisions affecting the legal services, including assistance in resolving complaints, grievances, and disputes concerning the legal services provided to clients and/or third parties, defendants do not consult with and keep JLG informed, instead unilaterally making such major decisions with plaintiffs knowledge.
Despite ACS’s duty to provide JLG with a Law Office Facility and equipment customary for JLG’s operation, defendants unilaterally revoke JLG’s access to the Law Office Facility and equipment at their whim if plaintiffs do not succumb to defendants’ demands, no matter how outrageous those demands are.
Despite ACS’s duty to provide JLG with specific financial information, defendants refuse to do so after innumerable requests.
Despite ACS’s duty to deposit monies accordingly into JLG’s operating and client trust accounts, defendants failed to do so and misappropriated $185,000 from JLG’s trust account, without justification. Defendants have failed to replenish the client trust accounts after their misappropriation, and have instead attempted to conceal their theft. – Source
Update 9-11-2012Here are the counterclaims made in the answer and first amended counterclaim that was filed in response by Advanced Client Solutions, LLC, KK, and Paul Constantinou.
Here are the counterclaims made in the answer and first amended counterclaim that was filed in response by Advanced Client Solutions, LLC, KK, and Paul Constantinou.
DEFENDANTS’ COUNTERCLAIM AGAINST PLAINTIFFS
Counterclaimants, Advanced Client Solutions, LLC (“ACS”), KK (“KK”) and Paul Constantinou (“Constantinou”) by and through their attomey of record, allege and complain as follows:
Johnson Law Group, P.C. (“JLG”) is a Nevada professional corporation authorized to do business in Clark County, Nevada.
Anan Mark Eldredge (“Eldredge”) is an individual and a licensed attomey in the State of Nevada, residing in Clark County, Nevada.
THE CONSUMER DEBT RELIEF BUSINESS
3. KK established one of Nevada’s first licensed consumer debt services organizations, Consumer Debt Relief Group (“CDRG”).
4. For years, CDRG operated both legally and ethically to help thousands of distressed consumers.
5. As time passed, a growing number of states began to implement new laws and regulations, requiring credit services organizations to provide services in conjunction with licensed attomeys.
6. In response to the growing trend among states, KK shifted the business model to focus primarily in providing marketing and administrative services needed by law firms to assist clients in the consumer debt relief industry.
THE RELATIONSHIP BETWEEN ACS AND JLG
7. In changing the business model, KK and Constantinou fonned ACS.
8. Alter reading numerous articles authored by Doug Crowder (“Crowder”), a Califomia licensed attomey with 20 years of experience in the consumer debt relief industry, a meeting was arranged to discuss the possibility of doing business in the Spring of 2006.
9. In August 2006, Crowder drafted and presented to KK outlining the contemplated relationship between ACS and JLG.
10. The parties negotiated the tenns of the contract with various proposals and revisions going back and forth between the parties.
11. Crowder represented JLG in the negotiations and KK and Constantinou hired a Nevada law finn to represent ACS.
12. Following weeks of negotiation, the parties executed the Service Agreement (“Service Agreement”) on October 17, 2006.
THE SERVICES AGREEMENT
13. The Service Agreement requires JLG to function symbiotically with ACS.
14. JLG is required to utilize and rely upon the administrative support services by ACS.
15. Indeed, the Service Agreement requires ACS to provide and administer all non-legal functions and all non-legal services for JLG.
16. The Service Agreement requires ACS to maintain and provide JLG’s office lease, utilities, equipment, supplies and all non-legal office and back end support persormel as well as maintain all of J LG’s payroll, bookkeeping, accounting, billing, collection and marketing functions.
17. In reliance upon the Service Agreement, ACS has incurred significant liabilities and expenses to provide all the non-legal administrative and back end support services for JLG.
SERVICE AGREEMENT COMPENSATION AND TERMINATION
18. In exchange for the numerous and extensive duties and services ACS was required to provide to JLG, JLG agreed to compensate ACS by way of monthly administration fees (the “Administration Fee”).
19. The Service Agreement set the Administration Fee as $5 00,000 per month.
20. As JLG’s monthly expenses vary dramatically between months, JLG and ACS developed a course of conduct whereby they would regularly agree to adjust the Administration Fee based upon monthly expenses.
21. In the event that either party agreed to terminate the Service Agreement, 30 days written notice was required.
22. Because ACS’s capital investment greatly eclipsed that of JLG, JLG agreed that if it wished to terminate the Service Agreement, a one-time termination fee of $2,000,000 (“Termination Fee”) would be due to ACS.
THE INCEPTION OF JLG UNDER CROWDER
23. With the Service Agreement in place, ACS and JLG began working together.
24. The business between JLG and ACS grew rapidly and before long Crowder decided to hire another full-time Nevada licensed attomey to assist in maintaining J LG’s various legal and ethical contractual duties and obligations.
25. In Fall of 2006, Crowder hired Eldredge, who was a recent law school graduate with no prior experience of which to speak.
26. Because Eldredge was a recent law school graduate, Crowder assured KK, Constantinou and Eldredge that Eldredge would be able to perfonn the duties required of him with adequate supervision and training.
27. Under the supervision of Crowder and as a result of the Service Agreement, the day-
to-day operations of the business grew substantially over the next year.
28. Ir1 Spring 2007, Crowder agreed to sell a portion of his interest in JLG to Eldredge.
29. On August 31, 2007, Eldredge acquired a 25% interest in JLG.
30. Ultimately, by the end of 2007, Crowder agreed to sell his remaining interest in JLG to Eldredge.
THE DIFFICULTIES OF THE BUSINESS UNDER ELDREDGE
31. Eldredge was unable to manage JLG.
32. Alter acquiring Crowder’s interests, Eldredge failed to keep regular hours in the office, showing up on an inconsistent basis and for only a few hours a day.
33. In response to Eldredge’s refusal to work, KK and ACS expressed concems over Eldredge’s refusal to maintain a regular business schedule.
34. Eldredge promised to improve his work ethic.
35. Despite promises that he would increase his work ethic, Eldredge was simply unprepared and incapable of managing JLG.
36. Indeed, Eldredge’s incompetence has drawn the attention of various state bar associations.
THE DISPUTE
37. By September 2009, the parties knew they needed to part ways with Eldredge.
38. ACS, KK, and Constantinou approached Eldredge with a proposal to sell ACS to Eldredge to which Eldredge was receptive.
39. Alter providing Eldredge all the access to ACS’s accounting records, Eldredge was ultimately unwilling or unable to secure financing and the deal fell through.
40. Desperate to part ways with Eldredge, KK, Constantinou and J LG’s part time attomey Laurel A. Duffy (“Duffy”) began negotiating with Eldredge to broker a deal whereby Duffy would purchase Eldredge’s interest in JLG in February 2010.
41. The parties exchanged dralts of an agreement and Eldredge even accepted $20,000 as cash for pay1nent of the transaction.
42. During negotiations for the sale of JLG company to Duffy, Eldredge and Constantinou met, along with KK, ACS employee Dan Demonte, and attomey Josh Corelli of the firm Marquis & Aurbach and Eldredge’s attorney’s Cami Perkins and Joseph Ganley of the firm Hutchison & Steffen.
43. At this meeting in early January 2010, the parties agreed that, among other ter1ns, ACS would pay $5 0,000.00 cash to Eldredge as an incentive for Eldredge to sell his law firm to another lawyer.
44. As negotiations continued Eldredge expressed his impatience for the length of time it was taking to complete the deal.
45. In order to placate Eldredge and keep the deal from falling through Constantinou agreed to loan Eldredge twenty-thousand dollars ($20,000.00) as bridge financing until the deal could be finalized.
46. This oral agreement and the surrounding discussion was heard and witnessed by two individuals, Dan Demonte, an employee of` ACS and f`riend to both Constantinou and Eldredge and by Marc Segal the accountant f`or ACS and JLG.
47. On January 26, 2010, Constantinou handed Eldredge twenty-thousand dollars ($20,000.00) cash and Eldredge signed a receipt f`or this money. A true and correct copy of` this receipt is attached hereto as Exhibit 1.
48. The receipt was witnessed by Marc Segal who signed the receipt as a witness.
49. As Eldredge backed out of the deal that was being negotiated and the transaction was never finalized Constantinou has requested on multiple occasions that Eldredge retum the twenty thousand dollars however to date Eldredge has refused to retum Constantinou’s money.
50. Unbeknownst to Duffy, KK, Constantinou and ACS, Eldredge never intended to sell his interest.
51. Eldredge intended to acquire ACS without having to use any of his own money, or pay ACS the $2,000,000 termination fee.
ELDREDGE AND JLG’S BAD FAITH LITIGATION
52. Despite knowing that ACS, KK and Constantinou were all represented by counsel, JLG and Eldredge filed a complaint and obtained an ex parte temporary restraining order against ACS, KK and Constantinou.
53. During the pendency of that temporary restraining order, the parties conducted mediation.
54. At the mediation, tenns were essentially agreed except for Eldredge wanted additional time to think about the terms.
55. Based upon the good-faith promises of continued cooperation by Eldredge and JLG, the parties agreed to maintain the status quo and schedule a new mediation in June following KK’s wedding and honeymoon.
56. As part of their agreement to maintain the status quo, Plaintiffs’ attomey Cami Perkins and Defendants’ attorney Charles Vlasic entered into an agreement on May 18, 2010 whereby Eldredge promised to pay the reasonable and necessary ACS expenses in the interim.
57. The parties proceeded with the good faith stipulation and JLG and Eldredge were provided additional access to ACS’s books and records in support of the mediation.
JLG AND ELDREDGE’S THEFT AND BREACH
58. Without warning on Saturday, June 12, 2010, after 5:00 p.m., Eldredge removed over 3,150 file folders and hanging file folders in possession of ACS; these file folders and hanging file folders were the property of ACS’.
59. Eldredge also removed Two-hundred and Sixteen (216) 5″ Cardinal® EasyOpen® Binders with Locking D-Rings and included paper which were the property of ACS.
60. Eldredge also removed Sixty (60) 3″ Avery® Heavy-Duty Binder with Round Rings and included paper.
61. Eldredge also removed other file folders and valuable papers belonging to ACS.
62. Eldredge also accessed and coped the electronic records of ACS and ACS’ other clients.
63. Eldredge also accessed and took a copy of the proprietary software and database owned by ACS.
64. Eldredge also removed all accounting records of JLG.
65. Eldredge also removed the signed contract between ACS and Jolm Barrett; this contract belonged to ACS.
66. Eldredge also removed all furnishings from his office.
67. Eldredge and JLG failed to pay more than $300,000 to ACS for administrative expenses through May.
68. Adding insult to injury, ACS refused to pay rent, and any further administration expenses already incurred by ACS for JLG’s benefit in June.
69. Eldredge and JLG never notified ACS, KK, or Constantinou of his intent to take all the business away from ACS.
70. In fact, ACS’s counsel had been trying to contact JLG and Eldredge’s counsel for Weeks to no avail.
71. Moreover, Constantinou had been attempting to contact Eldredge the ongoing business matters on multiple occasions Without any response over the past couple of weeks.
72. Finally, at 11:00 a.m., on June 14, 2010, JLG and Eldredge’s counsel advised that all the JLG’s clients serviced by ACS had been transferred to another law finn by way of an assigrnnent.
73. Despite repeated requests for the retum of ACS’ property which was taken by Eldredge he and his counsel have refused to retum ACS’ property.
74. On July 6, 2010 ACS filed a report with the Las Vegas Metropolitan Police Department for the items which Eldredge stole from ACS’ office; an investigation into the theft is ongoing.
FIRST CLAIM FOR RELIEF (Breach of Contract)
75. Defendants/Counterclaimants repeat and re-allege each and every allegation contained above and incorporates the same here by reference.
76. The parties have entered into the Service Agreement.
77. The Service Agreement is a valid and enforceable contract.
78. JLG and Eldredge have materially breached the Service Agreement by failing to pay for administrative expenses incurred on behalf of JLG, transferring all clients to another law firm; taking away all of ACS’s administrative services, transferring ACS’s services to another law finn, failing to provide a notice of termination of the Service Agreement, and failing to pay the $2 million termination fee.
79. Counterclaimants have perfonned all duties as required by the Service Agreement and satisfied all conditions precedent.
80. As a direct and proximate cause of the acts of Eldredge and JLG, Counterclaimants have been damaged in excess of $10,000.
81. It has become necessary for Counterclaimants to engage the services of an attomey to prosecute this action, and therefore, Counterclaimants are entitled to costs and attomeys fees as special damages.
SECOND CAUSE OF ACTION (Breach of Implied Covenant of Good Faith and Fair Dealing)
82. Defendants/Counterclaimants repeat and re-allege each and every allegation contained above and incorporates the same here by reference.
83. Every contract contains a covenant of good faith and fair dealing.
84. The parties entered into the valid and binding Service Agreement.
85. JLG and Eldredge have repeatedly and continuously breached the Service Agreement.
86. Under the guise of cooperation and maintaining the status quo While the parties are in litigation, JLG and Eldredge misrepresented and gained access to ACS’s records and office only to transfer all of its assets and ACS’ stolen property to another company.
87. It has become necessary for Counterclaimants to engage the services of an attomey to prosecute this action, and therefore, Counterclaimants are entitled to costs and attomeys fees as special damages.
THIRD CAUSE OF ACTION (Fraud by Eldredge)
88. Defendants/Counterclaimants repeat and re-allege each and every allegation contained above and incorporates the same here by reference.
89. Eldredge made material misrepresentations to ACS, Constantinou and KK.
90. Eldredge misrepresented that he would maintain the status quo While the parties proceeded to litigation and mediation and that he would continue to pay the reasonable expenses incurred by Defendants in servicing his clients.
91. KK, Constantinou and Eldredge justifiably relied upon Eldredge’s representations in good faith.
92. Eldredge’s misrepresentations were kr1oWingly made with intent to induce Counterclaimants to maintain the status quo, Wait for the mediation and continue to incur expenses on Eldredge’s behalf in order to service his clients.
93. Meanwhile, Eldredge used the access to infonnation and inaction to perpetuate his plan to transfer all the assets of JLG to another company.
94. As a direct and proximate result of the conduct and omissions of Eldredge and JLG, Counterclaimants have been damaged in excess of $10,000.
95. Eldredge’s actions were committed with malice and oppression entitling Counterclaimants to punitive damages.
96. It has become necessary for Counterclaimants to engage the services of an attomey to prosecute this action, and therefore, Counterclaimants are entitled to costs and attomeys fees as special damages.
FOURTH CLAIM FOR RELIEF (Constructive Fraud)
97. Defendants/Counterclaimants repeat and re-allege each and every allegation contained above and incorporates the same here by reference.
98. The parties shared a fiduciary relationship.
99. As a result of the fiduciary relationship, Eldredge and JLG had a duty to act in good faith and due regard for the parties’ interests.
100. Eldredge and JLG breached the duties to Counterclaimants by misrepresenting and concealing material facts about their true intentions.
101. Eldredge’s actions were committed with malice and oppression entitling Counterclaimants to punitive damages.
102. As a direct and proximate result of the conduct and omissions of Eldredge and JLG, Counterclaimants have been damaged in excess of $10,000.
FIFTH CLAIM FOR RELIEF (Intentional Ir1terference with Contractual Relations)
103. Defendants/Counterclaimants repeat and re-allege each and every allegation contained above and incorporates the same here by reference.
104. Counterclaimants had existing business and economic interest in the Service Agreement and clients being serviced by ACS.
105. Eldredge and JLG knew of Counterclaimants’ economic interest.
106. With intent to harm Counterclaimants’ interest, JLG and Eldredge transferred all of its’ assets over the weekend to another law finn without notice or consideration to ACS.
107. As a direct and proximate result of the conduct and omissions of Eldredge and JLG, Counterclaimants have been damaged in excess of $10,000.
108. Eldredge’s actions were committed with malice and oppression entitling Counterclaimants to punitive damages.
109. As a direct and proximate result of the conduct and omissions of Eldredge and JLG, Counterclaimants have been damaged in excess of $10,000.
SIXTH CLAIM FOR RELIEF (Fraud by Ir1tentional Misrepresentation by Eldredge)
110. Defendants/Counterclaimants repeat and re-allege each and every allegation contained above and ir1corporates the same here by reference.
111. On May 18, 2010 Plaintiffs’ and Counterclaimants’ by and through their attomeys entered into an agreement by which Eldredge agreed to pay the reasonable businesses expenses that were incurred by ACS in order to continue providing service to Plaintiff’ s clients. At the time Plaintiffs’ entered into this agreement they had no intention of paying the agreed upon expenses as they were already in negotiations with the Johr1son Law Group in Florida to transfer the clients and were plar1r1ing to close JLG.
112. Plaintiffs intentionally concealed from Counterclaimants the fact that they never plarmed to pay Counterclaimants for the expenses incurred on their behalf and instead plarmed to remove or transfer all assets of JLG.
113. Counterclaimants actually relied on Plaintiffs’ intentional misrepresentations and concealment of material facts because they continued to incur expenses on behalf of Plaintiffs in the for1n of rent, utilities, office expenses, employee salaries, marketing fees and other reasonable business expenses incurred in continuing to service Plaintiffs’ clients.
114. Plaintiffs’ conduct in making misrepresentations and concealing material facts from Counterclaimants caused Counterclaimants to be damaged in excess of $3 00,000.00 by continuing to incur expenses on Plaintiffs behalf.
115. Counterclaimants’ reliance on Plaintiffs’ misrepresentations was justified given that the misrepresentations were communicated to Counterclaimants by Plaintiffs’ attomey. Moreover, because Plaintiffs actively concealed their negotiations with various companies to transfer the assets of JLG and concealed their plan to take all of the client files While Counterclaimants’ were not in their office, Counterclaimants could not have, with reasonable inquiry, discovered Plaintiffs’ deceit.
116. Counterclaimants have been damaged by Plaintiffs’ misrepresentations and concealment of material fact in an amount to be detennined by proof Further, Plaintiffs acted With fraud, oppression and malice such that Counterclaimants are entitled to exemplary damages.
SEVENTH CLAIM FOR RELIEF (Constructive Trust)
117. Defendants/Counterclaimants repeat and re-allege each and every allegation contained above and incorporates the same here by reference.
118. Each month since the parties began their relationship the Plaintiffs have provided payment to Counterclaimants for the services rendered on Plaintiffs’ behalf Since the filing of this proceeding by Plaintiffs, Plaintiffs have failed to pay Counterclaimants in full for the services rendered to Plaintiffs and their clients.
119. On May 18, 2010 Plaintiffs reaffirmed their agreement to pay Counterclaimants for the reasonable business expenses incurred on their behalf 15
120. Plaintiffs have failed to pay Counterclaimants for the reasonable business expenses incurred on their behalf during the months of May and June 2010.
121. On numerous occasions Counterclaimants have demanded that Plaintiffs pay the reasonable and necessary business expenses incurred and due to them under the agreement entered into between the parties and their counsel on May 18, 2010.
122. Plaintiffs however, have refused, and continue to refuse, to convey Counterclaimants their monies due as reimbursement for the reasonable and necessary business expenses incurred on Plaintiffs’ behalf.
123. Counterclaimants are informed and believe, and thereon allege, that at the time Plaintiffs stopped paying Counterclaimants, Plaintiffs had no intention of ever paying Counterclaimants’ for the expenses incurred on their behalf and instead sought to keep, and did keep, the money for themselves.
124. Counterclaimants are informed and believe, and thereon allege, that Plaintiffs made these promises to Counterclaimants with the intent to defraud Counterclaimants and to induce Counterclaimants to agree to continue providing services while Plaintiffs arranged strip the company of all its assets.
125. At the time these promises were made, and at the time Counterclaimants acted in reliance on them, Counterclaimants were ignorant of Plaintiffs’ secret intention not to perform.
Counterclaimants’ reliance on the promises was justified, and Plaintiffs could not, in the exercise of reasonable diligence, have discovered Plaintiffs’ secret intention and therefore acted reasonably in relying on their promises. Had Counterclaimants known of Plaintiffs secret intention to transfer all of the assets of the company, and that Eldredge plarmed to take the money out of the company accounts for his own use and to never pay Counterclaimants, Counterclaimants would not have acted in reliance on Plaintiffs’ promises.
126. By virtue of their fraudulent acts, Plaintiffs hold Counterclaimants money as a constructive trustee for Defendants’ benefit.
EIGHTH CLAIM FOR RELIEF (Conversion of property by Eldredge)
127. Defendants/Counterclaimants repeat and re-allege each and every allegation contained above and incorporates the same here by reference.
128. On June 12, 2010 Eldredge converted to his own use numerous items of property belonging to Counterclaimants, including in excess of 3,150 file folders, hanging file folders and included paper, Two-hundred and Sixteen (216) 5 ” Cardinal® EasyOpen® Binders With Locking D- Rings and included paper, Sixty (60) 3″ Avery® Heavy-Duty Binder with Round Rings and included paper, file folders, binders, and other valuable papers belonging to Counterclaimants. The value of the converted property is $16,808.43 for the cost of materials and $141,413.25 for the cost of labor to create or recreate the materials contained in the binders taken by Eldredge.
129. Counterclaimants demand judgment against Eldredge in the amount of $158,221.68 plus interest and costs.
NINTH CLAIM FOR RELIEF (Constructive Trust as to Eldredge for property taken)
130. Defendants/Counterclaimants repeat and re-allege each and every allegation contained above and incorporates the same here by reference.
131. On June 12, 2010 Eldredge obtained access to Counterclaimants’ offices under false pretenses and stayed afterwards to take property belonging to Counterclaimants including, over 3,150 file folders, hanging file folders and included paper, Two-hundred and Sixteen (216) 5 ”
Cardinal® EasyOpen® Binders With Locking D-Rings and included paper, Sixty (60) 3″ Avery®
Heavy-Duty Binder with Round Rings and included paper, and other valuable papers belonging to Counterclaimants.
132. On multiple occasions Counterclaimants have demanded that Plaintiffs retum their property which was taken from their office.
133. Plaintiffs however, have refused, and continue to refuse, to retum Counterclaimants’
property.
134. Counterclaimants are informed and believe, and thereon allege, that at the time Eldredge gained access to their office under guise of needing a client’s file, Eldredge intended to take property belonging to Counterclaimants and did take property that did not belong to him.
135. Counterclaimants are informed and believe, and thereon allege, that Eldredge entered their premises with the intent to defraud Counterclaimants of their property.
136. Counterclaimants could not, in the exercise of reasonable diligence, have discovered Plaintiffs’ secret intention to steal their property and therefore acted reasonably in allowing Eldredge access to their office. Had Counterclaimants kr1oWn of Plaintiffs’ secret intention to steal their property, and that Eldredge plarmed to keep the property and transfer it to another company, Counterclaimants would not have allowed Eldredge access to their office.
137. By virtue of his fraudulent acts, Plaintiff holds Counterclaimants’ property as a constructive trustee for Counterclaimants’ benefit.
TENTH CLAIM FOR RELIEF (Intentional Infliction of Emotional Distress by Eldredge)
138. Defendants/Counterclaimants repeat and re-allege each and every allegation contained above and incorporates the same here by reference.
139. While Counterclai1nantKK was out of the county on his honeymoon, Eldredge obtained access to KK’s office under false pretenses and stole truckloads of property belonging to Counterclaimants; facilitated a fraudulent transfer of the assets of his company rather than paying Counterclaimants as promised and failed to maintain the status quo.
140. Eldredge intentionally took these actions while KK was out of the country on his honeymoon and unable to intervene.
141. Eldredge’s outrageous criminal conduct caused KK extreme emotional distress as he tried to cope with the theft, loss of business, and breach of the parties agreement to maintain the status quo while off on his honeymoon.
142. KK has suffered and continues to suffer emotional distress which has required regular treatment by his physicians and therapist.
143. Counterclaimant KK has been damaged in an amount to be detennined by proof.
ELEVENTH CLAIM FOR RELIEF (Breach of Oral Contract by Eldredge)
144. Defendant/Counterclaimant Constantinou repeats and re-alleges each and every allegation contained above and incorporates the same here by reference.
145. Constantinou and Eldredge entered into a valid and enforceable agreement under which Constantinou loaned twenty-thousand dollars ($20,000) to Eldredge in order to bridge the gap until the contemplated transaction could be completed.
146. Constantinou perfonned all conditions, covenants, and promises required on his part to be perfonned in accordance with the tenns and conditions of the oral contract by delivering the twenty-thousand dollars ($20,000) to Eldredge.
147. Eldredge breached the oral agreement by failing to retum the money to Constantinou.
Constantinou has repeatedly requested that Eldredge retum his money but to date Eldredge has refused to retum the money to Constantinou.
148. As a result of Eldredge’s breach of the oral contract, Constantinou has been deprived of twenty-thousand dollars ($20,000).
TWELTH CLAIM FOR RELIEF (Fraud by Eldredge as to Constantinou)
149. Defendant/Counterclaimant Constantinou repeats and re-alleges each and every allegation contained above and incorporates the same here by reference.
150. Eldredge knowingly made false statements, concealed material facts and made false promises to Constantinou. Specifically, Eldredge induced Constantinou to enter into the agreement and tender money, by stating to Constantinou that Eldredge would complete the transaction that was contemplated between the parties and retum Constantinou’s money at that time or if the transaction was not completed retum the money to the Constantinou. At the time Eldredge made these representations to Constantinou, he kr1eW them to be false, and had no intention of ever retuming Constantinou’s money.
151. Eldredge intended for Constantinou to rely on his misrepresentations and concealed the material fact that he was not intending to ever complete the transaction nor retum Constantinou’s money.
152. Constantinou actually relied on Eldredge’s misrepresentations and concealment of 19 material facts when deciding to enter into the Agreement and tender money to Eldredge.
153. Eldredge’s conduct was a substantial factor in causing damage to Constantinou.
154. Constantinou’s reliance on Eldredge’s misrepresentations was justified due to the fact that Constantinou had no means by which to verify Eldredge’s claim. Constantinou could not have, with reasonable inquiry, discovered Eldredge’s deceit prior to tendering the money.
155. Constantinou has been damaged by Eldredge’s misrepresentations and concealment of material fact in the amount of twenty-thousand dollars ($20,000) Further, Eldredge acted with fraud, oppression and malice such that Constantinou is entitled to exemplary damages.
THIRTEENTH CLAIM FOR RELIEF (Conversion by Eldredge for the $20,000)
156. Defendant/Counterclaimant Constantinou repeats and re-alleges each and every allegation contained above and incorporates the same here by reference.
157. Eldredge was given the sum of twenty-thousand dollars ($20,000) for the purpose of completing the contemplated transaction between the party’s respective companies.
158. Eldredge did not use the money for the agreed upon purpose and instead converted the money to his own use and for other purposes.
159. Eldredge failed to use the money for the purpose for which it was given and failed to retum the money to Constantinou.
160. Constantinou has been denied his rightful possession, use and enjoyment of his twenty-thousand dollars ($20,000) by the Eldredge.
161. Constantinou has been damaged by Eldredge’s act of conversion in the amount of twenty-thousand dollars ($20,000).
FOURTEENTH CLAIM FOR RELIEF (Rescission of the Oral Contract between Eldredge and Constantinou)
162. Defendant/Counterclaimant Constantinou repeats and re-alleges each and every allegation contained above and incorporates the same here by reference.
163. Constantinou and Eldredge entered into an oral agreement whereby Constantinou agreed to give Eldredge t money in exchange for Eldredge completing the transaction that was being negotiated between the parties.
164. The assertions made by Eldredge were made to induce Constantinou to tender money to Eldredge, despite the fact that Eldredge knew the statements to be false when made. The true fact was that Eldredge never intended to complete the transaction between the parties nor to use the money for the stated purpose.
165. Constantinou believed Eldredge’s statements to be true, and reasonably relied upon their oral agreement. Had Constantinou known the true facts, Constantinou would not have entered into the agreement nor tendered money to Eldredge.
166. Constantinou will suffer and has suffered substantial damage if the agreement between Constantinou and Eldredge is not rescinded.
167. Constantinou intends this counterclaim to serve as notice of rescission of the agreement, and hereby demands that Eldredge restore to him the consideration he fumished, specifically a sum equivalent to the twenty-thousand dollars ($20,000) which Constantinou paid to Eldredge.
FIFTEENTH CLAIM FOR RELIEF (Constructive Trust as to Eldredge for the $20,000)
168. Defendant/Counterclaiinant Constantinou repeats and re-alleges each and every allegation contained above and incorporates the same here by reference.
169. Plamtiff/Counterdefendant Eldredge received $20,000 from Constantinou as a temporary loan until the proposed transaction could be completed, this transaction was never completed.
170. Constantinou has demanded that Eldredge retum his property, specifically the $20,000.
171. Eldredge however, has refused, and continues to refuse, to retum Constantinou’s property.
1. Constantinou is informed and believes, and thereon alleges, that at the time Eldredge entered into the oral contract with Counterclaimant, Eldredge had no intention of completing the deal that was being negotiated and intentionally misrepresented this fact in order to induce Constantinou to enter into the agreement and give him the $20,000.00.
172.
173. Counterclaimant could not, in the exercise of reasonable diligence, have discovered Eldredge’s secret intention to take his $20,000 and never complete the deal and therefore Constantinou acted reasonably in giving the $20,000 to Eldredge. Had Constantinou known that Eldredge plar1r1ed to keep the property and never complete the deal nor retum the property than Constantinou would not have given the $20,000 to Eldredge.
174. By virtue of his fraudulent acts, Plaintiff holds Counterclaimant’s $20,000 as a constructive trustee for Counterclaimant’s benefit.
PRAYER FOR RELIEF WHEREFORE, Counterclaimants pray as follows:
First Cause of Action: Breach of Contract
l. For damages in excess of $l0,000;
2. For interest;
3. For reasonable attomey’s fees according to proof;
4. For costs of suit; and, 5. For such other and further relief as the court may deem proper.
Second Cause of Action: Breach of Implied Covenant of Good Faith and Fair Dealing
l. For damages in excess of $l0,000;
2. For interest;
3. For reasonable attomey’s fees according to proof;
4. For costs of suit; and, 5. For such other and further relief as the court may deem proper.
Third Cause of Action: Fraud by Eldredge
l. For general damages according to proof;
2. For reasonable attomey’s fees according to proof;
3. For punitive damages;
4. For costs of suit; and, 5. For such other and further relief as the court may deem proper.
22
Fourth Cause of Action: Constructive Fraud by Eldredge 1. For general damages according to proof;
2. For reasonable attomey’s fees according to proof;
3. For punitive damages;
4. For costs of suit; and, 5. For such other and further relief as the court may deem proper.
Fifth Cause of Action: Intentional Interference with Contractual Relations
1. For general damages according to proof;
2. For reasonable attomey’s fees according to proof;
3. For punitive damages;
4. For costs of suit; and, 5. For such other and further relief as the court may deem proper.
Sixth Cause of Action: Fraud by Intentional Misrepresentation by Eldredge
1. For general damages according to proof;
2. For reasonable attomey’s fees according to proof;
3. For punitive damages;
4. For costs of suit; and, 5. For such other and further relief as the court may deem proper
Seventh Cause of Action: Constructive Trust
1. For an order declaring Plaintiffs/Counterdefendants hold all funds owed to Defendants/Counterclaimants in trust;
2. For such other and further relief as the court may deem proper.
Eighth Cause of Action: Conversion of Property by Eldredge 1. For damages in the amount of $158,221.68;
2. For interest;
3. For reasonable attomey’s fees according to proof;
4. For costs of suit; and, 5. For such other and further relief as the court may deem proper.
Ninth Cause of Action: Constructive Trust as to Eldredge for property taken
3. For an order declaring Plaintiff/Counterdefendant Eldredge hold all property taken from Defendants/ Counterclaimants in trust;
4. For such other and further relief as the court may deem proper.
Tenth Cause of Action: Intentional Infliction of Emotional Distress by Eldredge
1. For damages in an amount according to proof;
2. For reasonable attomey’s fees according to proof;
3. For costs of suit; and, 4. For such other and further relief as the court may deem proper.
Eleventh Cause of Action: Breach of Oral Contract by Eldredge
1. For damages $20,000;
2. For interest;
3. For reasonable attomey’s fees according to proof;
4. For costs of suit; and, 5. For such other and further relief as the court may deem proper.
Twelfth Cause of Action: Fraud by Eldredge
6. For damages of $20,000;
7. For reasonable attomey’s fees according to proof;
8. For punitive damages;
9. For costs of suit; and, 10. For such other and further relief as the court may deem proper.
Thirteenth Cause of Action: Conversion by Eldredge of the $20,000 1. For damages in the amount of $20,000;
2. For interest;
3. For reasonable attomey’s fees according to proof;
4. For costs of suit; and, 5. For such other and further relief as the court may deem proper.
Fourteenth Cause of Action: Rescission of the Oral Contract between Eldredge and – Source
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