IN THE CHANCERY COURT FOR DAVIDSON COUNTY, TENNESSEE AT NASHVILLE

DOCKET NO. 1.

THOMAS J. SCOTT,   Plaintiff,          

LEIBY GOLDBERGER, and  CURT SWANSON,   Defendants.   

VERIFIED ORIGINAL COMPLAINT

Comes now Thomas J. Scott, who for his causes of action against Leiby “Leo” Goldberger and Curt Swanson states:

Parties

1. Plaintiff Thomas J. Scott (“Scott”) is an individual of the full age of majority domiciled in Davidson County, Tennessee.
2. Defendant Leiby “Leo” Goldberger (“Goldberger”) is an individual of the full age of majority domiciled at 1378 Cabernet Court, Toms River, NJ 08753.
3. Curt Swanson (“Swanson”) is a an individual of the full age of majority domiciled at 304 Bloomingrove Drive, Troy, NY 12180.

Venue

4. Venue is proper in this Court pursuant to TCA § 48-249-308(d), TCA § 249-618(a) and TCA § 48-249-805.

Jurisdiction

5. This Court has subject matter jurisdiction to hear this matter pursuant to TCA § 48-249-616 and TCA § 48-249-805.
6. This Court has personal jurisdiction over Defendant Goldberger because he has sufficient minimum contacts with Tennessee that allow him to be hailed into this Court, including but not limited to his transacting of business in this state, his regular travel to this state, and his membership in the business entities that are the subject of this suit.
7. This Court has personal jurisdiction over Defendant Swanson because he has sufficient minimum contacts with Tennessee that allow him to be hailed into this Court, including but not limited to his transacting of business in this state, his regular travel to this state, and his membership in the business entities that are the subject of this suit.

Facts

Clozetivity Franchising, LLC

8. Clozetivity Franchising, LLC (“Clozetivity”) is a Tennessee limited liability company that was formed on June 15, 2021 in accordance with the Tennessee Revised Limited Liability Company Act, TCA § 48-249-101 et seq. See Articles of Organization, attached as Exhibit 1.
9. The name of Clozetivity was changed from “Clozetivity, LLC” to “Clozetivity Franchising, LLC” on June 23, 2021.
10. Clozetivity’s Principal Executive Office is located at 3212 West End Avenue, Suite 201, Nashville, Davidson County, TN 37203-5835.
11. Clozetivity sells, develops, and supports independently owned franchised businesses that operate under the Clozetivity brand, trademarks, and proprietary system of operations.
12. Clozetivity started selling franchises on ______OCT 2021_____________.
13. A Clozetivity franchised business provides customized closet and storage solutions in a territory that is designated by Clozetivity.
14. Clozetivity is member-managed.
15. The members of Clozetivity are Scott, Goldberger, and Sawanson.
16. The members of Clozetivity do not have an Operating Agreement that regulates the affairs of the LLC and the conduct of its business or that governs relations between or among the members, holders, managers, directors, officers and Clozetivity.
17. Each of the members of Clozetivity own equal shares of the membership interests in Clozetivity.
18. The members of Clozetivity have equal rights in the management and conduct of Clozetivity’s business pursuant to TCA § 48-249-401(a)(1).
19. The allocation of profits and losses of Clozetivity is allocated amongst the members in equal shares pursuant to TCA § 48-249-304(b).
20. The members of Clozetivity have a fiduciary duty of loyalty to Clozetivity and the other members pursuant to TCA § 48-249-403(b).
21. The members of Clozetivity have a fiduciary duty of care to Clozetivity and the other members pursuant to TCA § 48-249-403(c).
22. The members of Clozetivity are required to discharge their duties to Clozetivity and the other members, and their exercise of any rights with respect to Clozetivity consistently with the obligation of good faith and fair dealing pursuant to TCA § 48-249-403(d).
23. The members of Clozetivity do not have the right to expel another member, except under the very limited circumstances allowed by TCA § 48-249-503(a)(1), (a)(6), (a)(7) and (a)(8).

Dryer Vent Squad Franchising, LLC

24. Dryer Vent Franchising, LLC (“Dryer Vent Squad”) is a Tennessee limited liability company that was formed on October 28, 2020 in accordance with the Tennessee Revised Limited Liability Company Act, TCA § 48-249-101 et seq. See Articles of Organization, attached as Exhibit 2.
25. Dryer Vent Squad’s Principal Executive Office is located at 3212 West End Avenue, Suite 201, Nashville, Davidson County, TN 37203-5835.
26. Dryer Vent Squad sells, develops, and supports independently owned franchised businesses that operate under the Dryer Vent Squad brand, trademarks, and proprietary system of operations.
27. Dryer Vent Squad Franchising LLC (TN COMPANY – there was a NJ company prior that also sold) started selling franchises on ____DEC 2020______________.
28. A Dryer Vent Squad franchised business provides dryer vent cleaning services in a territory that is designated by Dryer Vent Squad.
29. Dryer Vent Squad is member-managed.
30. The members of Dryer Vent Squad are Scott, Goldberger, and Sawanson.
31. The members of Dryer Vent Squad do not have an Operating Agreement that regulates the affairs of the LLC and the conduct of its business or that governs relations between or among the members, holders, managers, directors, officers and Dryer Vent Squad.
32. Each of the members of Dryer Vent Squad own equal shares of the membership interests in Dryer Vent Squad.
33. The members of Dryer Vent Squad have equal rights in the management and conduct of Dryer Vent Squad’s business pursuant to TCA § 48-249-401(a)(1).
34. The allocation of profits and losses of Dryer Vent Squad is allocated amongst the members in equal shares pursuant to TCA § 48-249-304(b).
35. The members of Dryer Vent Squad have a fiduciary duty of loyalty to Dryer Vent Squad and the other members pursuant to TCA § 48-249-403(b).
36. The members of Dryer Vent Squad have a fiduciary duty of care to Dryer Vent Squad and the other members pursuant to TCA § 48-249-403(c).
37. The members of Dryer Vent Squad are required to discharge their duties to Dryer Vent Squad and the other members, and their exercise of any rights with respect to Dryer Vent Squad consistently with the obligation of good faith and fair dealing pursuant to TCA § 48-249-403(d).
38. The members of Dryer Vent Squad do not have the right to expel another member, except under the very limited circumstances allowed by TCA § 48-249-503(a)(1), (a)(6), (a)(7) and (a)(8).

Frost Shades Franchising, LLC

39. Frost Shades Franchising, LLC (“Frost Shades”) is a Tennessee limited liability company that was formed on October 28, 2020 in accordance with the Tennessee Revised Limited Liability Company Act, TCA § 48-249-101 et seq. See Articles of Organization, attached as Exhibit 3.
40. Frost Shades’ Principal Executive Office is located at 3212 West End Avenue, Suite 201, Nashville, Davidson County, TN 37203-5835.
41. Frost Shades sells, develops, and supports independently owned franchised businesses that operate under the Frost Shades brand, trademarks, and proprietary system of operations.
42. Frost Shades started selling franchises on ____AUG 2020___________________.
43. A Frost Shades franchised business sells and installs residential window tinting, commercial window tinting, decorative and designer window films, and privacy and security films in a territory that is designated by Frost Shades.
44. Frost Shades is member-managed.
45. The members of Frost Shades are Scott, Goldberger, and Sawanson.
46. The members of Frost Shades do not have an Operating Agreement that regulates the affairs of the LLC and the conduct of its business or that governs relations between or among the members, holders, managers, directors, officers and Frost Shades.
47. Each of the members of Frost Shades own equal shares of the membership interests in Frost Shades.
48. The members of Frost Shades have equal rights in the management and conduct of Frost Shades’ business pursuant to TCA § 48-249-401(a)(1).
49. The allocation of profits and losses of Frost Shades is allocated amongst the members in equal shares pursuant to TCA § 48-249-304(b).
50. The members of Frost Shades have a fiduciary duty of loyalty to Frost Shades and the other members pursuant to TCA § 48-249-403(b).
51. The members of Frost Shades have a fiduciary duty of care to Frost Shades and the other members pursuant to TCA § 48-249-403(c).
52. The members of Frost Shades are required to discharge their duties to Frost Shades and the other members, and their exercise of any rights with respect to Frost Shades consistently with the obligation of good faith and fair dealing pursuant to TCA § 48-249-403(d).
53. The members of Frost Shades do not have the right to expel another member, except under the very limited circumstances allowed by TCA § 48-249-503(a)(1), (a)(6), (a)(7) and (a)(8).

Magnetainment Franchising, LLC

54. Magnetainment Franchising, LLC (“Magnetainment”) is a Tennessee limited liability company that was formed on October 28, 2020 in accordance with the Tennessee Revised Limited Liability Company Act, TCA § 48-249-101 et seq. See Articles of Organization, attached as Exhibit 4.
55. Magnetainment Principal Executive Office is located at 3212 West End Avenue, Suite 201, Nashville, Davidson County, TN 37203-5835.
56. Magnetainment sells, develops, and supports independently owned franchised businesses that operate under the Magnetainment brand, trademarks, and proprietary system of operations.
57. Magnetainment started selling franchises on _______NOV 2020______________.
58. A Magnetainment franchised business provides custom photo magnets that are party favors for the guests at parties and events, such as weddings, Bar/Bat Mitzvahs, anniversary parties, birthday parties, family reunions, graduation parties, school dances (g. prom), business conferences, and any other gathering where the host wants the guests to be able to leave with a cool party favor that memorializes the fun. Magnetainment franchisees shoot photos and produce the magnets during the event. The magnets go on magnetic boards and available for the party guests to take with them upon leaving. Magnetainment franchised businesses operate in a territory that is designated by Magnetainment.
59. Magnetainment is member-managed.
60. The members of Magnetainment are Scott, Goldberger, and Sawanson.
61. The members of Magnetainment do not have an Operating Agreement that regulates the affairs of the LLC and the conduct of its business or that governs relations between or among the members, holders, managers, directors, officers and Magnetainment.
62. Each of the members of Magnetainment own equal shares of the membership interests in Magnetainment.
63. The members of Magnetainment have equal rights in the management and conduct of Magnetainment’s business pursuant to TCA § 48-249-401(a)(1).
64. The allocation of profits and losses of Magnetainment is allocated amongst the members in equal shares pursuant to TCA § 48-249-304(b).
65. The members of Magnetainment have a fiduciary duty of loyalty to Magnetainment and the other members pursuant to TCA § 48-249-403(b).
66. The members of Magnetainment have a fiduciary duty of care to Magnetainment and the other members pursuant to TCA § 48-249-403(c).
67. The members of Magnetainment are required to discharge their duties to Magnetainment and the other members, and their exercise of any rights with respect to Magnetainment consistently with the obligation of good faith and fair dealing pursuant to TCA § 48-249-403(d).
68. The members of Magnetainment do not have the right to expel another member, except under the very limited circumstances allowed by TCA § 48-249-503(a)(1), (a)(6), (a)(7) and (a)(8).

The Federal Trade Commission’s Franchise Disclosure Requirement

16 CFR 436.1 et seq. and State Franchise Regulation

 

69. The sale of a “franchise” is regulated in much the same fashion as the sale of a secured investment. Franchisors are prohibited from making unfounded projections of financial performance to prospective franchisees by highly-detailed disclosure requirements (intended to provide prospective franchisees with all of the material information needed to make an informed purchase decision).
70. By way of background, in the 1950s and 1960s, modern franchising took off as a method of doing business, but sales of franchises were unregulated and subject to widespread abuse. See Franchise Guide (CCH) ¶ 6302.
71. Thousands of people lost their substantial franchise investments as a result of having been “misled as to the true risks involved in the franchise investment by the franchisor’s failure to disclose material facts” concerning franchise offerings. See id. at ¶¶ 6305, 6309.
72. State and federal regulators began to study the situation in the late 1960s and concluded that the sale of franchises was similar to the unregulated sale of securities in the 1920s.
73. Over the course of the 1970s, the Federal Trade Commission also undertook to study misleading practices by franchisors in connection with franchisors’ sales of franchised businesses. See Franchise Guide (CCH) ¶ 6301.
74. As reflected in the FTC’s Statement of Basis and Purpose Relating to Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures, Bus. Franchise Guide (CCH) ¶ 6300, et seq., the FTC made the following material findings:

• “[M]isrepresentations and failure to disclose material facts are widespread in franchising.” Franchise Guide (CCH) ¶ 6305.

 

• “On the basis of the record in this proceeding, the Commission concludes that franchises have been marketed through (A) misrepresentation of material facts relevant to the nature and value of the franchise; (B) unsubstantiated claims regarding the potential sales, income, gross or net profit of franchises; (C) unfair refusal by franchisors to honor refund provisions and (D) failure to disclose material facts about the franchise offering.”

 

• Many franchisors have made a practice of making “get rich quick” claims in advertisements and other promotional materials, and “such ‘get rich quick’ claims frequently either are unsubstantiated by the franchisor, or they misrepresent material facts with regard to the ‘potential earnings’ of a particular franchise business.” at ¶ 6304.

 

• “[T]he record also discloses that many franchisors have highlighted the atypical success of a few franchisees without disclosing the non-representative nature of these claims. Such representations are an unfair and deceptive trade practice.”  at ¶ 6307.

 

• That said, “For most prospective franchisees there is quite simply no source other than the franchisor for much of the information necessary to make an informed investment decision.” at ¶ 6304.
• “The record establishes that prospective franchisees are at an informational disadvantage with respect to the franchisor in evaluating the franchise offering because of the setting in which franchises are sold. Because of this informational imbalance prospective franchisees do not have information about material aspects of the franchise and frequently are not even aware that they lack such information.  Without such information, however, prospective franchisees cannot evaluate the value of the franchise offering.  The record establishes that franchisors take advantage of the informational imbalance to sell franchises without disclosure of material facts.”  at ¶ 6309.

 

• “Without such information, prospective franchisees lack material information concerning the prices, the risks, the potential profitability, and even the nature and contents of the franchise offering.”

 

• “[T]he item being offered – the franchise opportunity – is complex, and the information necessary to test the accuracy of representations lies almost solely within the possession of the franchisor. Indeed, even if available, the search costs in obtaining such information would be prohibitive.  Accordingly, prospective franchisees, of necessity, have to rely on the accuracy of the representation of the franchisor as to the profitability of the franchise.”  at ¶ 6307 (emphasis added).

 

• “The failure to disclose material facts concerning the franchise offering, where the prospective franchisee is at an informational disadvantage, violates public policy encouraging informed consumer purchasing decisions.” at ¶ 6309.

 

• “Disclosure requirements are effective means of curbing the ‘half-truth’ and the failure to disclose used in marketing franchises because they provide prospective franchisees with at least the minimal information needed to make an informed decision whether to enter the franchise relationship. By specifying the type of information which should be provided, the rule prevents franchisors from selectively disclosing only the information which is favorable to them.”  at ¶ 6312.

 

• Going forward, “If franchisors choose to make representations concerning profits, income or sales to prospective franchisees or in the media,” franchisors should be required to make “certain disclosures which are intended to give the prospective franchisee information which will enable him or her to evaluate the merits of the franchisor’s claim.”

 

75. As a result, by the late 1970s, the sale of franchises came to be regulated in much the same fashion as the sale of securities under SEC Rule 10b-5. In 1979, the FTC adopted a trade regulation rule governing the sale of franchises that is roughly modeled on the SEC Act.  See 16 C.F.R. Part 436 (the “FTC Franchise Rule”).
76. The FTC Franchise Rule was amended effective July 1, 2007. See 72 FR 15444.
77. The FTC’s Amended Franchise Rule requires a franchisor to provide a prospective franchisee with certain disclosures, contained in a written Franchise Disclosure Document (“FDD”), prior to the purchase of the franchise. See 16 C.F.R. § 436.1, et seq.
78. Among those disclosures required in the FDD are:
    436. Under Item 2: Business Experience (16 CFR 436.5(b)), the name and position the franchisor’s directors, trustees, general partners, principal officers, and any other individuals who will have management responsibility relating to the sale or operation of franchises. For each person listed, the disclosure must state his or her principal positions and employers during the past five years, including each position’s starting date, ending date, and location.
    437. Under Item 3: Litigation (16 CFR 436.5(c)), whether the franchisor, a predecessor, a parent or affiliate who induces franchise sales by promising to back the franchisor financially or otherwise guarantees the franchisor’s performance, an affiliate who offers franchises under the franchisor’s principal trademark and any person identified in Item 2 of the FDD:
         1. has pending against that person an administrative, criminal, or material civil action alleging a violation of a franchise, antitrust, or securities law, or alleging fraud, unfair or deceptive practices, or comparable allegations;
         2. civil actions, other than ordinary routine litigation incidental to the business, which are material in the context of the number of franchisees and the size, nature, or financial condition of the franchise system or its business operations;

• was a party to any material civil action involving the franchise relationship in the last fiscal year;

1. Has in the 10-year period immediately before the disclosure document’s issuance date:
   1. been convicted of or pleaded nolo contendere to a felony charge;
   2. been held liable^[1] in a civil action involving an alleged violation of a franchise, antitrust, or securities law, or involving allegations of fraud, unfair or deceptive practices, or comparable allegations;
   3. whether the franchisor, a predecessor, a parent, or affiliate who guarantees the franchisor’s performance, an affiliate who has offered or sold franchises in any line of business within the last 10 years, or any other person identified in Item 2 is subject to a currently effective injunctive or restrictive order or decree resulting from a pending or concluded action brought by a public agency and relating to the franchise or to a Federal, State, or Canadian franchise, securities, antitrust, trade regulation, or trade practice law.

For each litigation matter disclosed, the disclosure must state the title, case number or citation, the initial filing date, the names of the parties, the forum, the relationship of the opposing party to the franchisor and a summary of the legal and factual nature of each claim in the action, the relief sought or obtained, and any conclusions of law or fact. Additionally, the disclosure must state: for pending actions, the status of the action;  for prior actions, the date when the judgment was entered and any damages or settlement terms; for injunctive or restrictive orders, the nature, terms, and conditions of the order or decree; and for convictions or pleas, the crime or violation, the date of conviction, and the sentence or penalty imposed.

436. Under Item 4: Bankruptcy (16 CFR 436.5(d)), whether the franchisor, a predecessor, a parent or affiliate who induces franchise sales by promising to back the franchisor financially or otherwise guarantees the franchisor’s performance, an affiliate who offers franchises under the franchisor’s principal trademark and any person identified in Item 2 of the FDD has, during the 10-year period immediately before the date of this disclosure document:
     1. Filed as debtor (or had filed against it) a petition under the United States Bankruptcy Code (‘‘Bankruptcy Code’’);
     2. Obtained a discharge of its debts under the Bankruptcy Code;

• Been a principal officer of a company or a general partner in a partnership that either filed as a debtor (or had filed against it) a petition under the Bankruptcy Code, or that obtained a discharge of its debts under the Bankruptcy Code while, or within one year after, the officer or general partner held the position in the company.

For each bankruptcy disclosed, the disclosure must state the current name, address, and principal place of business of the debtor; whether the debtor is the franchisor, and if not, the relationship of the debtor to the franchisor (for example, affiliate, officer); the date of the original filing and the material facts, including the bankruptcy court, and the case name and number; and if applicable, state the debtor’s discharge date, including discharges under Chapter 7 and confirmation of any plans of reorganization under Chapters 11 and 13 of the Bankruptcy Code.

436. Under Item 19: Financial Performance Representations (16 CFR 436.5(s)), when a franchisor makes a financial performance representation (commonly called an “earnings claim”), a franchisor to present that financial performance representation in a detailed format that, among other things, identifies the percentage of existing system units which have actually achieved the financial results set forth in the disclosure. It also has to be based upon written substantiation— documentation of actual performance—that is made available to the prospective franchisee upon request.

79. The failure to comply with the FTC’s Amended Franchise Rule is an unfair or deceptive trade practice in violation of Section 5 of the FTC Act.
80. In addition to the FTC’s Amended Franchise Rule, there are:
    1. fourteen states that require registration of the franchise opportunity before franchise sales activity and sales can be made: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin;
    2. six states that require the filing of an exemption from that state’s Business Opportunity law: Connecticut, Florida, Kentucky, Nebraska, Texas, Utah; and
    3. a number of states that have franchise relationship laws and laws of generally applicability that govern provisions in the franchise agreement, including but not limited to venue, liquidated damages, termination, and non-competition covenants.
81. A franchisor’s FDD must be updated annually within 120 days of the close of the franchisor’s fiscal year. See 16 CFR 436.7(a).
82. Material changes to a franchisor’s disclosures in between annual updates must be completed within a reasonable period of time after the close of each fiscal quarter.
83. Registration of a franchisor’s FDD in the states that require registration must be renewed annually after the franchisor’s FDD is updated.
84. Business Opportunity law exemptions must be maintained, some of which, like Florida, require annual filings.
85. If a franchisor fails to update the FDD within 120 days’ of the close of its fiscal year, and quarterly if necessary, it cannot complete franchise sales without an applicable exemption.
86. If a franchisor does not update its registration in the states that require registration, it cannot conduct sales activities in those states and cannot complete any sales in those states absent an applicable exemption.
87. Failure to comply with the FTC’s Amended Franchise Rule and the applicable state laws exposes the franchisor, its individual owners and franchise sellers to significant liability from governmental enforcement actions, private civil suits, or both.

Goldberger’s and Swanson’s Failure to Disclose Material Litigation and Bankruptcy

88. In ___July________ 2022, plaintiff Scott discovered that defendants Goldberger and Swanson had failed to disclose to him, Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment the following litigation both of which contained allegations of fraud, unfair and deceptive trade practices, and violations of franchise law:
    1. Borgen v. Patch Boys Franchising, LLC, Leiby Goldberger, Curtis Swanson, and William Weber, No. 0:20-cv-02364-MJD-JFD, United States District Court for the District of Minnesota. Filed 11/20/2020; Closed 01/12/2022; and
    2. Anderson v. Patch Boys Franchising, LLC, Leiby Goldberger, Curtis Swanson, and William Weber, No. 0:19-cv-03119-JRT-DTS, United States District Court for the District of Minnesota. Filed 12/19/2019; Closed 02/20/2020.
89. Both the Borgen case and the Anderson case were required to be disclosed in Item 3 of Clozetivity’s FDD, but neither were.
90. Both the Borgen case and the Anderson case were required to be disclosed in Item 3 of Dryer Vent Squad’s FDD, but neither were.
91. Both the Borgen case and the Anderson case were required to be disclosed in Item 3 of Frost Shade’s FDD, but neither were.
92. Both the Borgen case and the Anderson case were required to be disclosed in Item 3 of Magnetainment’s FDD, but neither were.
93. Defendants Goldberger and Swanson intentionally and fraudulently concealed the Borgen case and the Anderson case from plaintiff Scott and the attorney who prepared the FDDs for Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment.
94. Additionally, in _____________, 2022, plaintiff Scott discovered that defendant Goldberger failed to disclose to him, Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment the following bankruptcy: In re: Rachelle Goldberger and Leiby Goldberger, No. 1-02-25985-cec, United States Bankruptcy Court for the Eastern District of New York, Brooklyn Division, Chapter 7 Proceeding. Filed 12/17/2002; Closed 10/22/2004.
95. Defendant Goldberger’s Ch. 7 Bankruptcy was required to be disclosed in Item 4 of Clozetivity’s FDD, but was not.
96. Defendant Goldberger’s Ch. 7 Bankruptcy was required to be disclosed in Item 4 of Dryer Vent Squad’s FDD, but was not.
97. Defendant Goldberger’s Ch. 7 Bankruptcy was required to be disclosed in Item 4 of Frost Shade’s FDD, but was not.
98. Defendant Goldberger’s Ch. 7 Bankruptcy was required to be disclosed in Item 4 of Magnatainment’s FDD, but was not.
99. Defendant Goldberger intentionally and fraudulently concealed his Ch. 7 Bankruptcy from plaintiff Scott and the attorney who prepared the FDDs for Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment.
100. Additionally, in _______DEC 21 – I found out about this from a franchise prospect who receved a NY FDD from LEO, which was different that the FDD Leo supplied me. He knew he was required to disclose that in NY but didn’t tell anyone about it. I made Charles aware of this when we prepared the 2022 FDD and was upset / concerned about it. I did not know about the 2018/19 requirement that it be included in all states from Patch boys______, 2022, plaintiff Scott discovered that defendant Goldberger failed to disclose to him, Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment the following felony conviction: USA v. Leiby Goldberger, No. 1:98-cr-01479-LMM-2 (Federal felony guilty plea of credit card fraud and conspiracy to commit credit card fraud under 18 USC § 1029(b)(2)). Filed 12/22/1998. Judgment 06/23/2000. Amended Judgment 05/02/2001. Restitution order of $199,142. Judgment satisfied 04/25/2006.^[2]
101. Defendant Goldberger’s felony conviction in New York was required to be disclosed in Item 3 of Closetivity’s FDD, but was not.
102. Defendant Goldberger’s felony conviction in New York was required to be disclosed in Item 3 of Dryer Vent Squad’s FDD, but was not.
103. Defendant Goldberger’s felony conviction in New York was required to be disclosed in Item 3 of Frost Shades’ FDD, but was not.
104. Defendant Goldberger’s felony conviction in New York was required to be disclosed in Item 3 of Magnetainment’s FDD, but was not.
105. Defendant Goldberger intentionally and fraudulently concealed this felony conviction from plaintiff Scott and the attorney who prepared the FDDs for Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment.
106. Additionally, plaintiff Scott discovered that in September 2016 in the matter styled In the Matter of Investigation by Eric T. Scheniderman, Attorney General of the State of New York, of Patch Boys Franchising, Inc. and Leiby Goldberer, a/k/a Leo Goldberger, the Office of the Attorney General of the State of New York and Patch Boys Franchising, Inc. and Leiby Goldberger entered into an Assurance and Discontinuance Pursuant to Executive Law § 63(12), wherein Patch Boys Franchising, Inc. and Goldberger acknowledged that they sold franchises without disclosing Goldberger’s felony conviction in Patch Boys’ FDD, as required by New York law and agreed to pay a $10,000 fine, offer rescission to its existing franchisees in New York, comply with the provisions of the New York Sales Act, and not to sell franchises in New York within or from New York without a current registration or exemption.
107. Defendant Goldberger’s Assurance and Discontinuance agreement with New York was required to be disclosed in Item 3 of Closetivity’s FDD, but was not.
108. Defendant Goldberger’s Assurance and Discontinuance agreement with New York was required to be disclosed in Item 3 of Dryer Vent Squad’s FDD, but was not.
109. Defendant Goldberger’s Assurance and Discontinuance agreement with New York was required to be disclosed in Item 3 of Frost Shades’ FDD, but was not.
110. Defendant Goldberger’s Assurance and Discontinuance agreement with New York was required to be disclosed in Item 3 of Magentainment’s FDD, but was not.
111. However, Defendant Goldberger’s Assurance and Discontinuance agreement with New York was disclosed in Item 3 of Patch Boys Franchising, Inc.’s FDDs with issuance dates of March 18, 2018 and April 12, 2019. See Exhibit 5 (collective).
112. Defendant Goldberger was disclosed as the President and CEO of Patch Boys Franchising, Inc. in Item 2 of the Patch Boys’ FDDs in 2018 and 2019.
113. Defendant Swanson was disclosed as the COO of Patch Boys Franchising, Inc. in Item 2 of the Patch Boys’ FDDs in 2018 and 2019.
114. Defendants Goldberger and Swanson intentionally and fraudulently concealed Goldberger’s Assurance and Discontinuance agreement with New York from plaintiff Scott and the attorney who prepared the FDDs for Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment.
115. Because defendants Goldberger and Swanson had disclosed Goldberger’s Assurance and Discontinuance agreement with New York, they knew or should have known that Goldberger’s Assurance and Discontinuance agreement with New York was required to be disclosed in Item 3 of the FDDs for Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment.
116. Defendants Goldberger and Swanson knew or should have known that Borgen and Anderson were required to be disclosed in Item 3 of any FDD in which they are listed in Item 2 of that FDD, including Item 3 of the FDDs for Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment.
117. Defendants Goldberger and Swanson knew or should have known that Goldberger’s felony conviction in New York was required to be disclosed in Item 3 of any FDD in which they are listed in Item 2 of that FDD, including Item 3 of the FDDs for Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment.
118. Defendant Goldberger knew or should have known that his Chapter 7 Bankruptcy was required to be disclosed in Item 4 of any FDD in which he is listed in Item 2 of that FDD, including Item 4 of the FDDs for Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment.
119. Goldberger had a duty to disclose the Borgen case, the Anderson case, his Ch. 7 Bankruptcy, the Assurance and Discontinuance agreement with New York, and his felony conviction to Scott, Clozetivity, Dryer Vent Squad, Frost Shades, Magnetainment and the attorney who prepared the FDDs for Clozetivity, Dryer Vent Squad, Frost Shades, Magnetainment.
120. But for Goldberger’s intentional and fraudulent concealment of the Borgen case, the Anderson case, his Ch. 7 Bankruptcy, the Assurance and Discontinuance agreement with New York, and his felony conviction from Scott, Clozetivity, Dryer Vent Squad, Frost Shades, Magnetainment and the attorney who prepared the FDDs for Clozetivity, Dryer Vent Squad, Frost Shades, Magnetainment, plaintiff Scott would have acted differently and would have made sure that the Item 3 and Item 4 disclosures for Clozetivity, Dryer Vent Squad, Frost Shades, Magnetainment were complaint by disclosing them therein.
121. Swanson had a duty to disclose the Borgen case, the Anderson case, Goldberger’s Assurance and Discontinuance agreement with New York, and Goldberger’s felony conviction to Scott, Clozetivity, Dryer Vent Squad, Frost Shades, Magnetainment, and the attorney who prepared the FDDs for Clozetivity, Dryer Vent Squad, Frost Shades, Magnetainment.
122. But for Swanson’s intentional and fraudulent concealment of the Borgen case, the Anderson case, Goldberger’s Assurance and Discontinuance agreement with New York, and Goldberger’s felony conviction from Scott, Clozetivity, Dryer Vent Squad, Frost Shades, Magnetainment and the attorney who prepared the FDDs for Clozetivity, Dryer Vent Squad, Frost Shades, Magnetainment, plaintiff Scott would have acted differently and would have made sure that the Item 3 and Item 4 disclosures for Clozetivity, Dryer Vent Squad, Frost Shades, Magnetainment were complaint by disclosing them therein.
123. Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment sold franchises using FDDs that did not include the information that was required to be disclosed in Item 3 and Item 4—a prohibited unfair and deceptive trade practice.

Goldberger’s Unauthorized Financial Performance Representations

124. Under Item 19: Financial Performance Representations (16 CFR 436.5(s)), a franchisor may choose whether to affirmatively provide a prospective franchisee with information about the actual or potential financial performance of the franchise. The regulation states:
     Item 19: Financial Performance, Representations:

(1)  Begin by stating the following:

 

The FTC’s Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the disclosure document.  Financial performance information that differs from that included in Item 19 may be given only if (1) a franchisor provides the actual records of an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.

 

(2)  If a franchisor does not provide any financial performance representation in Item 19, also state:

 

We do not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance information or projections of your future income, you should report it to the franchisor’s management by contacting [name address, and telephone number], the Federal Trade Commission, and the appropriate state regulatory agencies.

 

(3)  If the franchisor makes any financial performance representation to prospective franchisees, the franchisor must have a reasonable basis and written substantiation for the representation at the time the representation is made and must state the representation in the Item 19 disclosure. The franchisor must also disclose the following:

 

(i)   Whether the representation is an historic financial performance representation about the franchise system’s existing outlets, or a subset of those outlets, or is a forecast of the prospective franchisee’s future financial performance.

 

(ii)   If the representation relates to past performance of the franchise system’s existing outlets, the material bases for the representation, including:

 

(A) Whether the representation relates to the performance of all of the franchise system’s existing outlets or only to a subset of outlets that share a particular set of characteristics (for example, geographic location, type of location (such as free standing vs. shopping center), degree of competition, length of time the outlets have operated, services or goods sold, services supplied by the franchisor, and whether the outlets are franchised or franchisor-owned or operated).

 

(B) The dates when the reported level of financial performance was achieved.

 

(C) The total number of outlets that existed in the relevant period and, if different, the number of outlets that had the described characteristics.

 

(D) The number of outlets with the described characteristics whose actual financial performance data were used in arriving at the representation.

 

(E) Of those outlets whose data were used in arriving at the representation, the number and percent that actually attained or surpassed the stated results.

 

(F) Characteristics of the included outlets, such as those characteristics noted in paragraph (3)(ii)(A) of this section, that may differ materially from those of the outlet that may be offered to a prospective franchisee.

 

(iii)  If the representation is a forecast of future financial performance, state the material bases and assumptions on which the projection is based. The material assumptions underlying a forecast include significant factors upon which a franchisee’s future results are expected to depend. These factors include, for example, economic or market conditions that are basic to a franchisee’s operation, and encompass matters affecting, among other things, a franchisee’s sales, the cost of goods or services sold, and operating expenses.

 

(iv)   A clear and conspicuous admonition that a new franchisee’s individual financial results may differ from the result stated in the financial performance representation.

 

(v)  A statement that written substantiation for the financial performance representation will be made available to the prospective franchisee upon reasonable request.

 

(4)  If a franchisor wishes to disclose only the actual operating results for a specific outlet being offered for sale, it need not comply with this section, provided the information is given only to potential purchasers of that outlet.

 

(5)  If a franchisor furnishes financial performance information according to this section, the franchisor may deliver to a prospective franchisee a supplemental financial performance representation about a particular location or variation, apart from the disclosure document. The supplemental representation must:

 

(i)  Be in writing.

(ii)  Explain the departure from the financial performance representation in the disclosure document

(iii)  Be prepared in accordance with the requirements of paragraph (s)(3)(i)-(iv) of this section.

(iv) Be furnished to the prospective franchisee.

125. Clozetivity does not and has not ever made an affirmative financial performance representation in its FDD. Instead, it made a “negative” disclosure, as authorized by 16 CFR 436.5(s)(2).
126. Dryer Vent Squad does not and has not ever made an affirmative financial performance representation in its FDD. Instead, it made a “negative” disclosure, as authorized by 16 CFR 436.5(s)(2).
127. Frost Shades does not and has not ever made an affirmative financial performance representation in its FDD.  Instead, it made a “negative” disclosure, as authorized by 16 CFR 436.5(s)(2).
128. Magnetainment does not and has not ever made an affirmative financial performance representation in its FDD. Instead, it made a “negative” disclosure, as authorized by 16 CFR 436.5(s)(2).
129. Without making an affirmative financial performance representation in Item 19 of the FDDs, any such representation was prohibited and constituted an unfair and deceptive trade practice.
130. Goldberger, in contravention to the Item 19 disclosure requirement, frequently made financial performance representations to prospective franchisees. Those financial performance representations were inaccurate, grossly inflated and lacked basis in fact.

Plaintiff Scott is Wrongfully Expelled

131. In July 2022 a dispute related to the management of the operations of Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment arose between Scott, Goldberger and Sawanson.
132. No meeting of the members was held by Clozetivity.
133. No meeting of the members was held by Dryer Vent Squad.
134. No meeting of the members was held by Frost Shades.
135. No meeting of the members was held by Magnetainment.
136. Nonetheless, Goldberger and Sawanson “removed” Scott from Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment, including electronic mail, Customer Relations Management software, website management and design software, This is a mistake – my email had personal and confiendital info and it was removed without notice or discusson or meeting. bank account access, credit card accounts, tax records, mortgage information and access to the company warehouse located on Charlotte Avenue in Nashville, Tennessee.
137. This action was taken without notice being given to Scott.
138. The warehouse contained items belonging to Scott, including, but not limited to tools, a workshop, furniture, kitchen appliances and other office equipment, and a trailer full of high end concrete refinishing equipment and tools / materials belonging to Clozetivity of Nashville, Angie Scott’s personal business.
139. Goldberger and Swanson knew the warehouse contained said items when the locks were changed.
140. Goldberger sent an electronic mail out to the ENTIRE company to all franchisees of all brands, stating that Scott was removed and while he “couldn’t talk about it at this time,” implying that Scott was guilty of “criminal and unethical” behavior. See Exhibit 6.
141. Effectively, Goldberger and Sawanson expelled Scott from the membership of from Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment.
142. This expulsion was ultra vires and in contravention of TCA § 48-249-503.
143. Scott demanded that he be restored to his membership rights as well as his management rights and to day to day operations. Goldberger and Sawanson refused.

COUNT 1: Access to Records TCA § 48-249-308(d)

144. Plaintiff re-alleges the allegations contained in Paragraphs 1-143 as if restated herein in extenso.
145. Scott’s wrongful expulsion has prevented him from being able to access the books, banking, database systems, email accounts and records of Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment.
146. Swanson and Goldberger have a duty to provide him with the information related to the business affairs of Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment pursuant to TCA § 48-249-308(b)(2).
147. This Court should order Swanson and Goldberger to provide access to all of the information related to the business affairs of Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment pursuant to TCA § 48-249-308(d). This inclused addition to the bank accounts of which he is a principle owner, the Vonigo CRM system as an admin, the Google Email system as an admin, all facebook and website accounts as an admin and all other operational, marketing, credit or financial systems as he was prior to July 7^th
148. This Court should award all costs, including reasonable attorney fees, to Scott for obtaining such an order pursuant to TCA § 48-249-308(d).
149. This Court also should grant all equitable relief it considers just and reasonable in the circumstances, and, award expenses, including attorneys’ fees and disbursements, to Scott pursuant to T.C.A. § 48-249-805.

WHEREFORE, plaintiff Scott prays that this Court find in his favor and that enter an order commanding Goldberger and Swanson to provide Scott access to all books and records of Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment, and that it award him all costs, expenses, and reasonable attorney fees pursuant to TCA § 48-249-308(d) and T.C.A. § 48-249-805.  Scott also prays for all equitable relief that this Court deems just and necessary under the circumstances pursuant to T.C.A. § 48-249-805.

COUNT 2: Breach of Duty of Loyalty TCA § 42-249-403(b)

150. Plaintiff re-alleges the allegations contained in Paragraphs 1-149 as if restated herein in extenso.
151. Goldberger’s and Sawanson’s actions, including but not limited to their failure to disclose information required by 16 CFR 436.1 et seq. is adverse to Scott, Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment.
152. Goldberger’s and Sawanson’s actions constitute a breach of their duty of loyalty as set forth in TCA § 42-249-403(b).
153. Goldberger’s and Swanson’s breach of their duty of loyalty is material.
154. Goldberger’s sand Swanson’s breach of their duty of loyalty has damaged Scott in an amount to be proven at the trial on the merits of this matter.
155. This Court should grant all equitable relief it considers just and reasonable in the circumstances, and, award expenses, including attorneys’ fees and disbursements, to Scott pursuant to T.C.A. § 48-249-805.

WHEREFORE, plaintiff Scott prays that this Court find in his favor, find that Goldberger and Sawanson have breached their duty of loyalty, find that their breach of their duty of loyalty is material, find that their breach of their duty of loyalty has damaged Scott and that it award Scott all damages proven at the trial on the merits of this matter.  Scott also prays that this Court grant all equitable relief it considers just and reasonable in the circumstances, and, award expenses, including attorneys’ fees and disbursements, to Scott pursuant to T.C.A. § 48-249-805.

COUNT 3: Breach of Duty of Care TCA § 42-249-403(c).

156. Plaintiff re-alleges the allegations contained in Paragraphs 1-155 as if restated herein in extenso.
157. Goldberger’s and Swanson’s actions, including Goldberger’s and Sawanson’s actions, including but not limited to their failure to disclose information required by 16 CFR 436.1 et seq. constitutes intentional misconduct.
158. Goldberger’s and Swanson’s actions, including Goldberger’s and Sawanson’s actions, including but not limited to their failure to disclose information required by 16 CFR 436.1 et seq. constitutes a knowing violation of law.
159. Goldberger’s unauthorized financial performance representations in contravention of 16 CFR 436.5(s) constitutes intentional misconduct.
160. Goldberger’s unauthorized financial performance representations in contravention of 16 CFR 436.5(s) constitutes a knowing violation of law.
161. Goldberger’s and Swanson’s actions expelling Scott from membership of Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment constitutes intentional misconduct.
162. Goldberger’s and Swanson’s actions expelling Scott from membership of Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment constitutes a knowing violation of law.
163. Goldberger and Swanson have breached their duty of care to Scott as set forth in TCA § 48-249-403(c).
164. Goldberger’s and Swanson’s breach of their duty of care to Scott is material.
165. Goldberger’s and Swanson’s breach of their duty of care to Scott has damaged Scott in an amount to be proven at the trial on the merits of this matter.
166. This Court should grant all equitable relief it considers just and reasonable in the circumstances, and, award expenses, including attorneys’ fees and disbursements, to Scott pursuant to T.C.A. § 48-249-805.

WHEREFORE, plaintiff Scott prays that this Court find in his favor, find that Goldberger and Sawanson have breached their duty of care, find that their breach of their duty of care is material, find that their breach of their duty of care has damaged Scott and that it award Scott all damages proven at the trial on the merits of this matter.  Scott also prays that this Court grant all equitable relief it considers just and reasonable in the circumstances, and, award expenses, including attorneys’ fees and disbursements, to Scott pursuant to T.C.A. § 48-249-805.

COUNT 4: Breach of the Duty of Good Faith and Fair Dealing TCA § 48-249-403(d)

167. Plaintiff re-alleges the allegations contained in Paragraphs 1-166 as if restated herein in extenso.
168. Goldberger and Sawanson have not exercised their rights as members of Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment consistently with their obligation of good faith and fair dealing.
169. Goldberger’s and Swanson’s actions, including but not limited to their expulsion of Scott, their refusal to allow Scott access to the books and records of Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment, and their intentional and fraudulent concealment of information that was required to be disclosed in the FDDs of Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment, and their misappropriation of Scott’s personal property are a breach of their obligation to Scott to act with good faith and fair dealing.
170. Goldberger’s and Swanson’s breach of their obligation of good faith and fair dealing to Scott is material.
171. Goldberger’s and Swanson’s breach of their obligation of good faith and fair dealing to Scott has damaged Scott in an amount to be proven at the trial on the merits of this matter.
172. This Court should grant all equitable relief it considers just and reasonable in the circumstances, and, award expenses, including attorneys’ fees and disbursements, to Scott pursuant to T.C.A. § 48-249-805.

WHEREFORE, plaintiff Scott prays that this Court find in his favor, find that Goldberger and Sawanson have breached their obligation of good faith and fair dealing, find that their breach of their obligation of good faith and fair dealing is material, find that their breach of their obligation to act in good faith and fair dealing with respect to Scott  has damaged Scott, and that it award Scott all damages proven at the trial on the merits of this matter.  Scott also prays that this Court grant all equitable relief it considers just and reasonable in the circumstances, and, award expenses, including attorneys’ fees and disbursements, to Scott pursuant to T.C.A. § 48-249-805.

Count 5: Conversion

173. Plaintiff re-alleges the allegations contained in Paragraphs 1-172 as if restated herein in extenso.
174. Goldberger and Swanson have assumed control over Scott’s personal property that is located in the warehouse on Charlotte Avenue, Nashville, Tennessee.
175. Goldberger’s and Swanson’s assumption of control over Scott’s personal property is inconsistent with Scott’s rights as the owner of his personal property.
176. Goldberger and Swanson have exercised dominion and control over Scott’s personal property in defiance of Scott’s rights as the owner of that personal property.
177. Scott demanded that Goldberger and Swanson turn over Scott’s personal property. Goldberger and Swanson refused.
178. Goldberger and Swanson have converted Scott’s personal property.
179. Goldberger’s and Swanson’s conversion of Scott’s personal property has Damaged Scott in an amount to be proven at the trial on the merits of this matter.

WHEREFORE, Scott prays that this Court find in his favor, that this Court find that Goldberger and Scott have exercised dominion and control over Scott’s personal property in defiance of Scott’s rights as the owner of the personal property, that this Court find that Goldberger’s and Swanson’s actions are inconsistent with Scott’s rights as the owner of his personal property, that this Court find that Goldberger and Swanson have converted Scott’s personal property, that this Court find that Goldberger’s and Swanson’s conversion of Scott’s personal property has damaged Scott, and that it award damages to Scott for the conversion in an amount proven at trial. Scott also prays that this Court grant all equitable relief it considers just and reasonable in the circumstances.

Count 6: Defamation and False Light Invasion of Privacy

180. Plaintiff re-alleges the allegations contained in Paragraphs 1-172 as if restated herein in extenso.
181. Goldberger and Sawanson through emails and communications with franchisees of Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment have falsely attacked Scott’s reputation, including but not limited to falsely accusing him of sabotages, disruptions and illegal acts.
182. These communications have been written and oral.
183. These communications have placed Scott in a false light.
184. These communications have deprived Scott of the benefits of public confidence, particularly within the broader franchise community.
185. These communications were defamatory, constituting libel, slander, and false light invasion of privacy.
186. These communications were read or heard by persons other than Scott who understood their defamatory meaning and that they referred to Scott.
187. Goldberger and Swanson knew that the communications were false before communicating them or with a reckless disregard of whether they were false or not.
188. These communications have damaged Scott’s reputation and have damaged Scott economically in an amount to be proven at the trial on the merits of this matter.
189. Goldberger’s and Swanson’s defamatory communications were made willfully, intentionally, and in reckless disregard of their possible results, with the intention of injuring Scott, entitling Scott to an award of punitive damages.

WHEREFORE, Scott prays that this Court find in his favor, that this Court find that Goldberger’s  and Swanson’s communications have falsely attacked Scott’s reputation, that Goldberger’s and Swanson’s communications have placed Scott in a false light, that Goldberger and Swanson knew that the communications were false before they were made or recklessly disregarded whether they were true or not, that Goldberger’s and Swanson’s communications constitute defamation and false light invasion of privacy, that the recipients of Goldberger’s and Swanson’s communications understood their defamatory meaning and that they referred to Scott, that Goldberger’s and Swanson’s communications damaged Scott’s reputation deprived Scott of the benefits of public confidence, that Goldberger’s and Swanson’s communications were made willfully, intentionally, and in reckless disregard of their possible results, with the intention of injuring Scott, that Goldberger’s and Swanson’s communications caused Scott to suffer damages, and that it award Scott an amount of damages to be proven at the trial on the merits of this matter, as well as punitive damages. Scott also prays that this Court grant all equitable relief it considers just and reasonable in the circumstances.

Count 7: Civil Conspiracy

190. Plaintiff re-alleges the allegations contained in Paragraphs 1-189 as if restated herein in extenso.
191. Goldberger and Sawanson had, and continue to have, a common design between them to deprive Scott of his ownership rights, governing rights, and financial rights in Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment, to convert Scott’s personal property, to defame Scott and to paint Scott in a false light.
192. Goldberger knew of Swanson’s intent to deprive Scott of his ownership rights, governing rights, and financial rights in Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment, to convert Scott’s personal property, to defame Scott and to paint Scott in a false light.
193. Swanson knew of Goldberger’s intent to deprive Scott of his ownership rights, governing rights, and financial rights in Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment, to convert Scott’s personal property, to defame Scott and to paint Scott in a false light.
194. Goldberger and Swanson have taken action to deprive Scott of his ownership rights, governing rights, and financial rights in Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment, to convert Scott’s personal property, to defame Scott and to paint Scott in a false light in concert by unlawful means.
195. Goldberger and Swanson are engaged in a civil conspiracy against Scott.
196. Goldberger and Swanson have done overt acts in furtherance of their conspiracy against Scott, including their wrongful expulsion of Scott from Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment, their conversion of Scott’s personal property, their defamation of Scott, and their false light invasion of privacy of Scott.
197. Goldberger’s and Swanson’s conspiratorial actions have injured and damaged Scott in an amount to be proven at the trial on the merits of this matter.

WHEREFORE, Scott prays that this Court find in his favor, that this Court find that Goldberger  and Swanson have engaged in a civil conspiracy, find that their civil conspiracy has damaged Scott, and that it award Scott damages in an amount proven at the trial on the merits of this matter. Scott also prays that this Court grant all equitable relief it considers just and reasonable in the circumstances.

Count 8: Misrepresentation by Concealment

198. Plaintiff re-alleges the allegations contained in Paragraphs 1-197 as if restated herein in extenso.
199. Goldberger and Swanson concealed and suppressed material facts that they had a duty to disclose to Scott, including but not limited to the information that was required to be disclosed in Items 3 and 4 of the FDDs for Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment.
200. Goldberger and Swanson intentionally concealed and suppressed the facts that they were required to disclose to Scott, with the intent to deceive Scott.
201. Scott was not aware of the facts that Goldberger and Swanson were required to disclose and would have acted differently if he had known about them.
202. As a result of the concealment and suppression of the facts that Goldberger and Swanson were required to disclose, Scott has been damaged in an amount to be proven at the trial on the merits of this matter.

WHEREFORE, Scott prays that this Court find in his favor, find that Goldberger and Swanson concealed and suppressed material facts that they had a duty to disclose to Scott, find that Goldberger and Swanson intentionally concealed and suppressed the facts that they were required to disclose to Scott, with the intent to deceive Scott, find that if Scott had known about the concealed facts, he would have acted differently, find that Scott has been damaged by Goldberger’s and Swanson’s concealment, and that it award Scott damages in an amount to be proven at trial. Scott also prays that this Court grant all equitable relief it considers just and reasonable in the circumstances.

Count 9: Judicial Dissolution TCA § 48-249-616 et seq

203. Plaintiff re-alleges the allegations contained in Paragraphs 1-202 as if restated herein in extenso.
204. Pursuant to T.C.A. § 48-249-616 this Court may grant any equitable relief it considers just and reasonable under the circumstances, may dissolve an LLC or otherwise be terminated, on the terms and conditions the court deems equitable.
205. Because of Goldberger’s and Swanson’s actions, it is not reasonably practicable to carry on the business of Clozetivity in conformity with the Tennessee Revised Limited Liability Act and it should be dissolved by judicial decree pursuant to TCA § 48-249-617(a).
206. Because of Goldberger’s and Swanson’s actions, it is not reasonably practicable to carry on the business of Dryer Vent Squad in conformity with the Tennessee Revised Limited Liability Act and it should be dissolved by judicial decree pursuant to TCA § 48-249-617(a).
207. Because of Goldberger’s and Swanson’s actions, it is not reasonably practicable to carry on the business of Frost Shades in conformity with the Tennessee Revised Limited Liability Act and it should be dissolved by judicial decree pursuant to TCA § 48-249-617(a).
208. Because of Goldberger’s and Swanson’s actions, it is not reasonably practicable to carry on the business of Magnetainment conformity with the Tennessee Revised Limited Liability Act and it should be dissolved by judicial decree pursuant to TCA § 48-249-617(a).
209. Considering the egregiousness of the actions of Goldberger and Swanson and Scott’s likelihood of success, the bond required by Scott pursuant to TCA § 48-249-618(d) should not exceed $1,000.
210. To effectively wind up and terminate the business of Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment, this Court should appoint a receiver to wind up and liquidate Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment pursuant to TCA § 48-249-618(c) and TCA § 48-249-619(a).
211. This Court should grant the receiver the right to take all actions necessary to preserve the assets of Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment, wherever located, and carry on the business of Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment and all of the powers and duties of the members pursuant to TCA § 48-249-618(c) and TCA § 48-249-619(c)(1).
212. This Court should award Scott his reasonable costs, including attorney fees pursuant to TCA § 48-249-618(d).

WHEREFORE, Scott prays that this Court find that there are sufficient equitable grounds for judicial intervention, that it find that it is not reasonably practicable to carry on the businesses of Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment, in conformity with the Tennessee Revised Limited Liability Act, that it find that a bond not exceeding $1,000 is sufficient under TCA § 48-249-618(d), that it appoint a receiver for Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment to wind up and liquidate Clozetivity, Dryer Vent Squad, Frost Shades, and Magnetainment, for an award of all costs and expenses, including attorney fees, and for other such equitable relief that this Court considers just and reasonable in the circumstances.

PRE-JUDGMENT INTEREST TCA § 47-14-123

213. Scott hereby demands an award of Pre-Judgment Interest pursuant to TCA § 47-14-123 on all counts herein.

JURY DEMAND

Plaintiff hereby demands a trial by a jury of 12 plus two alternates on all counts herein.

 

Respectfully submitted,

 

 

_____________________________                                                           

Paul W. Moser, BPR No. 022205

5505 Edmondson Pike Ste. 11

Nashville, Tennessee 37211

(615) 662-3697, x. 1

Fax: (615) 469-6871

[email protected]

 

 

 

______________________________

Roland W. Baggott III (No. 023428)

BAGGOTT LAW, PLLC

4525 Harding Road, Suite 105

Nashville, Tennessee 37205

(615) 620-4580

(615) 620-4581 (fax)

[email protected]

 

Attorneys for the Plaintiffs