|(Oct. 6, 2020, updated 11:50 p.m.) -- The two buyers of Cindy Allen's ETA advertising agency (Ivana and Dominic Cummins) have filed a civil lawsuit against Ns, Allen alleging fraudulent inducement and breach of contract in the transaction.
The ten page complaint (which includes 600 pages of attached exhibits) is dated Sept. 25, 2020; an online court filed copy includes a court clerk reference to filing at midnight Monday Oct. 5 [meaning the document may have been filed submitted Friday Oct. 2.]
The complaint alleges that plaintiffs "paid the purchase price of $128,038.40 for a going concern and received an insolvent company in exchange" The complaint indicates that on August 14, 2020, plaintiffs, through counsel, sent Ms. Allen a letter giving notice of their claims and demanding rescission of the agreement, and Ms. Allen didn't agree to rescind.
The complaint, filed in Los Angeles County Superior Court (downtown Los Angeles) by attorneys with the firms of Olivarez, Madruga, Lemieux, O'Neill (Los Angeles) and Immix Law Group (Bainbridge Island, WA), says L.A. County venue is proper on grounds Ms. Allen is a Los Angeles County resident.
The complaint's general allegations appliacble to its two causes of actions state in pertinent part:
[Scroll down for further.]
PLAINTIFFS’ suit concerns misrepresentations made by ALLEN during the negotiation and consummation of PLAINTIFFS’ purchase and ALLEN’s sale of an advertising firm. Specifically, ALLEN failed and refused to provide audited and unaudited financial statements for the advertising firm, contrary to the terms of the parties’ agreement. Furthermore, ALLEN intentionally concealed and omitted certain debts and obligations of the firm. This active deceit - aided by the failure to provide the contractually-required financial statements -- induced PLAINTIFFS to enter into the contract and purchase the advertising agency....
At midevening Oct. 6, LBREPORT.com emailed Ms. Allen inviting comment/statement for publication re the civil action. Our invitation also noted that although the civil action relates to a business transaction, Ms. Allen might wish to comment on to what extent, if at all, it's fair for 2nd district voters to consider the complaint's allegations in connection with Ms. Allen seeking to represent LB's 2nd Council district. A response to our invitation is pending.
In October 2019 just weeks before announcing her 2nd dist. Council candidacy, Ms. Allen publicly indicated she'd sold ETA (which at the time City of Long Beach contract in addition to contracts with other entities) to a Georgia entity. LB media outlets subsequently discovered and reported that the Georgia entity's claims about its operations weren't credible and the sale wasn't consummated. In August 2020, Ms. Allen announced sale of ETA to the two buyers now suing her.
Ms, Allen 2nd district Council candidacy is endorsed (and has received campaign contributions from) Mayor Robert Garcia, the LB Police Offices Ass'n PAC and multiple LB Council and other area electeds. Her runoff opponent is Reform Ticket candidate Robert Fox. Vote by mail ballots are not circulating in the Nov. 3 runoff.
The Cummins' complaint alleges that the plaintiffs and Ms. Allen were in negotiations in the spring of 2020 to purchase the stock Ms. Allen owned in ETA Advertising (d/b/a Agency ETA) and ETA "was not in a healthy financial state" and a "cornerstone" in a business plan to revive the company called for plaintiffs to have ETA take out a Small Business Administration Economic Injury Disaster Loan ("SBA EIDL")..
The complaint alleges that at a May 14, 2020 meeting the plaintiffs asked Ms. Allen if she'd applied for or obtained money for an SBA EIDL and Ms. Allen allegedly said she'd only applied for and obtained an SBA Paycheck Protection Program loan ("PPP LOAN") and hadn't applied for or obtained an SBA EIDL.
The complaint alleges that "The reason PLAINTIFFS asked ALLEN if she applied for or received funds for an SBA EIDL was because if an SBA EIDL had been applied for and funds were received by the COMPANY, a second SBA EIDL was not possible under SBA guidelines.. The complaint alleges: "The determination to purchase the stock of the COMPANY from ALLEN, as opposed to buying the assets, kept the COMPANY intact for the purpose of applying for an SBA EIDL and for forgiveness of the PPP LOAN." . ...
The complaint indicates that the sale closed on or about July 20, 2020. It alleges Ms. Allen representing that she'd furnished the plaintiffs with accurate and complete copies of ETA's 2019 audited financial statements and first quarter 2020 unaudited interim financial statements as well as Disclosure Schedules accurately listing the company's employees, their titles/positions, their hire dates, their compensation, and any agreements entered into between these employees and the company.
The complaint alleges that "Beginning the week of August 3, 2020, PLAINTIFFS began to uncover financial and employment information not disclosed by ALLEN. It alleges the plaintiffs discovered "an undisclosed funded SBA EIDL to the COMPANY in the amount of $29,000" when the plaintiffs "attempted to apply for their own SBA EIDL and were denied as the COMPANY had already received the undisclosed $29,000 SBA EIDL."
The complaint alleges that Ms. Allen intentionally failed to disclose the SBA EIDL "to ensure that PLAINTIFFS closed on the AGREEMENT."
The complaint also alleges that Adam Carrillo [background: husband of state Senator Lena Gonzalez] and Jan Andrew Montoya were full-time, salaried employees and after plaintiffs' "post-closing introduction to these employees, it was revealed to PLAINTIFFS that the disclosed salaries were in an amount after they were cut so that the COMPANY could avail itself of the benefits of the PPP loan. The complaint alleges that their salaries cuts were in an amount of $25,002 for CARILLO and $19,002 for MONTOYA. "PLAINTIFFS were advised by CARRILLO and MONTOYA that these salary cuts were agreed to be temporary with a promise and an expectation that their original salaries would be reinstated after the PPP LOAN was forgiven. This equates to additional undisclosed salary in the amount of $44,004."
The complaint also alleges plaintiffs discovered various "undisclosed vendor invoices (itemized in complaint) in the amount of $22,615.37
The complaint asserts two causes of action. One is for alleged "fraud in the inducement" in which Ns, Allen allegedly "intentionally concealed facts from PLAINTIFFS in the negotiation and closing...and affirmatively misrepresented material facts to PLAINTIFFS by omitting material facts in ALLEN’s Disclosure Statements as to the presence of additional unpaid invoices and the outstanding $29,000 SBA loan and in misreporting the salaries of employees CARRILLO and MONTOYA and disclosing COMPANY equipment and furniture that was missing at the time of closing.
A second cause of action for "breach of agreement" alleges that Allen "did not perform under the AGREEMENT" including but not limited to "failing to provide accurate and complete copies of COMPANY’s 2019 audited financial statements and first quarter 2020 unaudited interim financial statements; (2) omitting material facts as to the presence of additional unpaid invoices; (3) failing to disclose the outstanding $29,000 SBA loan; (4) failing to disclose the accurate nature of the salary obligations for employees CARRILLO and MONTOYA; and (5) disclosing COMPANY equipment and furniture that was missing at closing."
The complaint alleges that "[b]y reason of ALLEN’s breaches PLAINTIFFS have been damaged insofar as they have purchased a business with greater debts and lower profitability than they anticipated. They have been damaged in an amount to be proven at trial."
The complaint seeks compensatory damages in an amount to be proven at trial as well as punitive damages;
As with most CA civil action, plaintiffs have the burden of proving their allegations by a preponderance of the evidence.
Oct. 9, 2020: Text clarified to indicate ETA had a City of Long Beach contract at the time ETA's sale to the Georgia entity was announced.
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