Te ® ° crea Rachael Meny #178514 Jo W. Give #246224 RMeny@kun.com | Keker & Van Nest LLP | 833 Battery Straet San Francisco, CA 94111 | rwemensna, (418) 394-5400 xno. (415) 397-7168 | stousrrot fom Plaintiff Nel, tro. {suPERIOR COURT OF CALIFORNIA, COUNTY oF Santa Clara County smectsooress: 191 N. First Street | crvaimae cave San Jose, CA 95113 EASE wate: NETFLIK, ING. v. ICHAEL KAI and UNC WERGENARY LLG) é seg ~~ Gil. CASE COVER SHEET ~~ Complex Case Designation SEE ze I Uniimited CT) Limited ce ae (Amount tAmount Bere ea ne or ee cve78691 semanded demanded is | Filed with frst appearance by defendant toon Seat! “einuaremmrey scare | S24 CV | ems 1-6 below must be completed (see instructions on page 2 i hock one box below Tor the case type thal best describes this ease: ] Provisionally Complex Civil Litigation | Auto Tort Contact | OP sean Pee entra feta oo in 4 | Uninsured motost (8) Rule 9740 caectons 00) itu Trade eguation | Geebuporwo (Persona inunyiProvery —[] Other colectors (0) 1) Conetrction dotect 10) i Damagerrongfl Death) Tort [E)tnsurance coveroge (18) (Macs tort 40} (1) Asbestos (0) Cl other correct (a7 (]_ secuntes itigston 29 | [3 Product tiabiny (26) Real Property. (1 EnvronmertalToxic tort (30) F]tecicl mabractes (6) CEP eminent domaintwerse T tnourance coverage clans aaing rom the | (5) omer rimorw cen oe sete ls worst emo eave Non-PuPOnND (Other Tort ‘wrong enon (3) yp i z ‘Business forlunfar business practice (07) [1] Other seal property (26) fr eeeee aaa cae ‘i ahs (08) \Ubiawtul Setane fereemet of judgment ; een) Cl commercest) Wiscetlanoous Chil Complaint 1G Fraud 16) CE} estonia rico \ Ey restock pope sh El oage 35) Bi oiner compat not spzcttod above (42) | [Ey reteestonat nepigence (25) ‘Till Review iscelinoous Gill Petition Ny darter oupean ea TI Asset toot 8) CT petmeeip ond corporate governs 23) | | Empioyment EE] Pettonse:abtration award (11) (J Other petion (nat speaiod above) (43) [1 Wrostal termination (8) CG} we otrandao 02 | (1_oterenpioyment 15) Gooner uci oiow 28) : a This case [Jis Ddis nat complex under rule $.400 of the California Rules of Courl the case is complex, mark the faciors requiring exceptional judicial management 2, [Large numbe’ of soparaiely represented parties d. [] Largo number of witnesses 5. C1). Extensive motion practice raising cfcul ornavel e, (=) Coordination with eleted actions ponding in one or more courts [aes two une-conuing fo rose Moher coun, sete, occunres,or ns federal cour ec. {1} Substantial amount of documentary evidence +. (1) Substentiat postjudgment judicial supervision 3. Remedies sought (check all thet apply): a. B monetary b. [] nonmanetary: declaratory or injunctive relief c. Bi] punitive 4 Number aeauts of alo (spect: seven 5. Thiscase C] is [J isnot a ctass action suit 2 Te are ay kno relates eaaes, te and eorve ano feed case, (You may use fom CAEOtS) Date November 24,2044 RAGHAS E. MENY : ces ~ ite TER AS ake rarer Ser NOTICE + Plaintiff must fie this cover sheet withthe fist paper filed inthe action or proceeding (except small claims cases or cases fled tinder the Probate Code, Family Code, or Welfare and instutions Code). (Cal. Rules af Cour, rule 3220.) Faitie to fle may result in sanctions, «File this eaver sheet In adition fo any caver shest required by local court rule. 1 irthis case is cornplen under rule 3 400 et sea, of the California Rules of Court, you must serve a copy ofthis cover sheet on all father partes to the action of proceeding + Unless this ie colastions ease under rule 3.740 or a complex case, this cover sheet will bo used for statistical purposes only aero Fagan CIVIL CASE COVER SHEET oo wea amma1 |] KEKER & VAN NEST LLP RACHAEL E. MENY - # 178514 2|| meny@kvn.com | JO W. GOLUB - # 246224 | 3]| jgolub@kvn.com | BENJAMIN D, ROTHSTEIN - # 295720 4 || brothstein@kvn.com 633 Battery Street | 5 || San Francisco, CA 94111-1809 || Telephone: "415 391 $400 6|| Facsimile: 415 3977188 ‘T. Ngo 7|| Attorneys for Plaintiff NETFLIX, INC. SUPERIOR COURT OF THE STATE OF CALIFORNIA 10) IN AND FOR THE COUNTY OF SANTA CLARA 11 |) NETELIX, INC., CaseNo, L14CV273691 12 Plaintif COMPLAINT FOR DAMAGES 13 v BREACH OF FIDUCIARY DUTY AND DUTY OF LOYALTY 2, CONVERSION 3. FRAUDULENT CONCEALMENT 4. UNJUST ENRICHMENT Defendants. 5. VIOLATION OF CAL, BUS. & PROF. 14 || MICHAEL KAIL, and UNIX 16 | Cope § 17200 |] MERCENARY LLC, 6, CONSTRUCTIVE FRAUD 17} 7. FRAUD 18} | UNLIMITED CIVIL CASE 19 DEMAND FOR JURY TRIAL 20 per 21 @ 24 25 26 |) 271 ® COMPLAINT ~~ _ cue Ne asrarot |8028101 Plaintiff Netflix, Ine, hereby alleges as follows: 1. NATURE OF THE ACTION 1, Plaintiff’ Netflix, Inc. (“Netflix”) hired Defendant Michae! Kail (“Kail”) in 2011 Kail worked at Netflix until August 2014 and his final position at Netflix was as Vice President of Information Technology Operations. Kail was a wusted, senior-level Netflix employee, whose job responsibilities included negotiating and executing contracts on Netilix’s behalf for products and services supporting Netflix’s Information Technotogy (“IT”) management. 2. After Kail departed Netflix in August 2014, Netflix discovered information indicating that, on information and belief, two third-party companies were paying Kail “commissions” on the invoice amounts for prostuicts and/or services that Netflix paid to these third party companies. 3. Netflix is informed and believes that these two third-party companies were paying Kail commissions that ranged between approximately 12-15% of the total invoice amounts paid by Netilix. Netflix is informed and believes that these two third-party companies were paying these commissions to, at least, Kail’s personal consulting company, Defendant Unix Mercenary (Unix Mercenary”). 4. Netflix is also informed and believes that, during his employment with Netflix, Kail recommended and/or advocated within Netflix that Netflix enter into many of the agreements and contracts with these third parties pursuant to which the third parties later paid commissions to Kail. 5, Netflix is informed and believes that, for many of these invoices, Kail was the Netflix employce responsible for approving these third-party invoices for payment by Netflix. Netflix is further informed and believes that Kail did approve many of these invoices and did so ‘without disclosing to Netflix that he was receiving commissions on the amounts that Netflix paid to these third parties. Netflix is also informed and believes that, for many of these invoices, ‘Netflix paid these invoices to the third-party companies on the basis of the fact that Kail provided approval for Netflix to pay such invoices. 1 COMPLAINT Case No,281 01 26 27 28 e ¢ 6 After Kail departed Netflix in August 2014, Netflix also discovered that, on information and belief, Kaif may have received other benefits from companies that contracted with Netflix, ineluding but not limited to, stock from such companies, 7. In light of such findings, Netflix brings this lawsuit to obtain compensation an restitution for the damages and harm inflicted on Netflix as a result of Kail’s actions, I, THE PARTIES 8. Plaintiff Netflix, Inc. (“Netflix”) is a Delaware corporation with its prineipal place of business located at 100 Winchester Circle, Los Gatos, CA 95032, & Plaintiff is informed and believes that Defendant Michae] Kail (“Kail”) is an individual residing in the County of Santa Clara, California. 10. Plaintiff is informed and believes that Defendant Unix Mercenary LLC (“Unix Mercenary") is a California limited liability company which has a principal place of business located in Los Gatos, California during at least the time period relevant to this complaint, Netflix is informed and believes that Kai! owns and/or operates Unix Mercenary and that Unix Mercenary operates for, or as an agent of, Kail u Plaintiff is informed and believes thal each Defendant acted in all respects pertinent to this action as the agent of the other Defendant, carried out a joint scheme, business plan or policy in all respects pertinent hereto, and that the acts of each Defendant are legally attributable to each of the other Defendants. 1, JURISDICTION 12, This Count bas jurisdiction over this case pursuant to California Code of Civil Procedure § 410.10, 13. This Court has subject matter jurisdiction to hear this case because Plaintif? is informed and believes that the monetary damages and restitution sought herein for Defendants’ conduet exceeds the minimal jurisdictional limits of the Superior Court 2 ‘COMPLAINT Case No.18 IV. VENUE 14. Venue is proper in Santa Clara County under California Code of Civil Procedure §§ 395(a) and 395.5 because Plaintiff is informed and believes that Defendant Kail resides in Santa Clara County, California, that Defendant Unix Mercenary LLC has its principal place of business in Santa Clara County, California, and that at least some of the transactions that are the subject matter of this Complaint occurred therein. V. GENERAL ALLEGATIONS jons of members in 15. Netflix isa leading Internet television network, with icluding the United States, the United Kingdom, continental countries throughout the world, Europe, and Latin America. 16. During his tenure at Netflix, including as Netflix’s Vice President of Information ‘Technology Operations, Kail was a trusted senior-level Netflix employee. Kail’s job responsibilities at Netflix included negotiating end executing contracts on behalf of Netflix to acquite (T-related products and servives, 17. Kail’s job responsibilities at Netflix, including as Netflix’s Vice President of Information Technology Operations, also inchided approving invoices for payments that third parties would request related to IT products and services purchased by Netflix. Netflix is informed and believes that, after Kail approved such invoices, Netlix would pay the third parties for these approved invoices, Kail was a trusted, senior-level Netflix employee, with authority to enter into appropriate contracts and approve appropriate invoices. STARA IT & NETENRICH 18. On information and belief, Vistara IT (*Vistara”) is a third-party company that provides “a software as a service (SaeS) solution providing all the benefits that enterprises expect from modern SaaS solutions including enterprise-grade security and ease of adoption and ‘maintenance {that} can scourely monitor and manage physical and virtual elements regardless of whether they are on-premise, on a private cloud, or on public clouds. »! Netflix is one of six V available at http://www. vistarait.com/produet/technology/. 3 ‘COMPLAINT Case No.882081 01 28 corporate logos that appear on Vistara’s homepage, under the caption “Trusted by 1000+ Customers” 19, On information and belief, Netenrich is a third party company that pravides “next gon IT infrastructure management & operations services for infrastructure, cloud, and applications, as well as services that enable agile DevOps and intelligent business operations.”* 20. During Kail’s tenure at Netflix, Netflix is informed and believes that Vistara and Netflix discussed whether Vistara would provide certain IT products to Netflix. During Kail’s tenure at Netflix, Netflix is informed and believes that Netenrich supplied at Icast some contract workers or services to Netflix. 2b ‘On information and belief, Netenrich is a third-party entity that is closely affiliated with Vistara, On information and belief, both Vistara and Netenrich were founded by the same individual, who remains chairman of both companies. 22, Following Kail’s August 2014 departure, Netflix discovered information raising questions about Netflix’s contracts with, and payments to, Vistara, When these questions arose, Netflix attempted to confirm the terms of its Vistara contract. According to a “Technology Proposal” document from Vistara dated June 10, 2012, Netflix is informed and believes that Netflix agreed to pay Vistara a total amount of $795,000 over a three-year period. Netflix is informed and believes that Kail is the Netflix employce who signed Vistara’s Technology Proposal on behalf of Netflix. Upon information and belief, Kail was also the Netilix employee who authorized Netflix’s payments to Vistara prior to his departure from Netflix. 23. When these questions about Netflix’s payments to Vistara arose, Netflix also attempted ( find a copy of the final Vistara contract within Kail’s Netflix, corporate DocuSign account, This DocuSign account is « third-party record management system that Netflix maintains for executed contracts. When Netflix attempted to find a copy of the final Vistara contract within Kail’s Netflix, corporate DocuSign account, Netflix discovered that Kail’s Netflix, corporate DoouSign account was missing from Netflix’s corporate DocuSign records, Nettlix subsequently learned that, on information and belief, Kail had apparently asked a senior- * Available at www.Netenrich.com, 4 COMPLAINT Case No.82281.01 26 n level DocuSign employee to transfer Kail’s Netflix, corporate DocuSign account to a personal DocuSign account for Kail, Netilix also learned that, on information and belief, Kail apparently asked DocuSign to remove his Netflix, corporate DocuSign account from Netilix’s corporate DocuSign records, 24, Netflix has also discovered emails between Kail and a third-party company named Netentich, which discuss invoices submitted to Netflix by Netenrich on behalf of Vistara, as well as invoices that Netenrich itself submitted to Netflix, These emails indicate that, on information and belief, after Kail approved invoice payments by Netflix to Netenrich and/or Vistara for various contracted products and/or services, Netenrich and Vistara repeatedly paid Kail’s personal consulting company, Unix Mercenary, “commissions” worth approximately 12 to 15% of the total value of the invoice payments that Netflix made to Netenrich and Vistar 25. — Oninformation and belief, these emails indicate that, on October 30, 2013, Kail exchanged a series of emails with a Netenrich employee regarding invoicing issues. When th Netentich employce told Kail to contact a different Netenrich employee regarding Kail’s invoices to Netentich, Kail responded “Does [that Netenrich employee] know the context of my/our arrangement?” (emphasis added). Kail’s contact at Netenrich responded “Nope” but then told Kaif that he would follow up with Netenrich's “new consultant accounting manager” about these issues and would “...plan on, creating a clean/erisp plan, Will update you when we meet next.” 26. On information and belief, these emails indicate that on November 4, 2013, Kail wrote to Netentich stating that he had “approved the Notenrich invoices last week, so would be ‘good to understand who to work with on getting my portion paid.” (emphasis added). On 1013, Kail’s contact at Netentich told Kail that “Accounts team is suggesting that November 5, they would like fo get invoice from unix mercenary moving forward.” (emphasis added). Ina follow up email, a Netenrich employee told Kail: 5 COMPLAINT ‘Case No.e & 1 [We] discussed getting you paid and I just need to ensure the payments from Netflix are in Netentich’s bank account... suggest we employ the following process to ensure you receive your referral fees on a timely basis Netentich’s A/R department will invoice Netflix according to the terms of the atrangement. You will be copied to ensure awareness of receipt and to expedite | ofl approval 7 2, Please notify Netenrich [email address removed] when you are approving the | payment so can confirm payment receipt. 8 ‘| 3. Send Netenrich [email address removed) an invotce from Unix Mercenary for commission due 10 A 4, Netentich will verify the commission owing and pay upon receipt of the asso ul accounts receivable from Netflix, 12 | temphases added) 13 | Kail respondea that this “[plrocess makes sense...P1 also send my invo‘ee, but since it's 14} somewhat dynamic with amount, ca you sera me what my current sare is based upon the 15|| monthly total?” (emphasis added), Netesrich responded by telling Kail thatthe total amount for | 16|| october's invoices to Netix wos $74,640 and that based on a 1236 commission the ammount | 17 | owed to Unix would he $8,956.80 | 18 27. On information and belief, from December 2-4, 2013, Kail and numerous. 19 || Netensich employees exchanged emails regarding the November 2013 invoice amounts paid by 20 || Netflix to Netenrich, as well as the corresponding commissions owed to Kail. On December 4, 21 || 2013, Netenrich told Kail that the November Netflix invoice totaled $65,760 and that the “12% 22 || commission” on this amount totaled $7,891.20. That same day, Kait sent Netenrich a November 23 || 2013 invoice stating: 382281 01“Mike D. Kail [home address redacted) November 2013 Invoice: UNIXO02 invoiced to Netflix: INVCS0442. - $20,640 INVC50443- $45,120 Total amount = $65,760 Amount Due to Unix Mereenary LLC: $7891.20" ‘on December 31, 2013 and January 1, 2014 Kail and a 28, On information and be Netentich employee again emailed about commission amounts owed to Kail. On January 1, 2014, the Netemrich employee provided Kail with the following summaries: Vistara Invoices | Amount | % | Uniemercenary Invoice Value wiTi00g8 | $26,260.00 | 15% 53,937.60 | toose | $76,750.00 | 18% $41,012.50 515,750.00 Serviee Invoice# | Amount | % | Unb-mercenary te _[ Involee Value Inveso7es | $22,200.00 | 12% | $2,654.00, [ inveso7oe | $51,840.00 | 12% 36,220.80 eT 38,884.80 | in Although this email does not indicate the customer at issue for the “Servic: ices, upon {information and belief, the invoice numbers listed for “Service” in this email correlate to invoices that Netflix paid to Netenrich for serviees. Thus Netflix is informed and believes that Kail was receiving a 12% commission on these invoices Netflix paid to Netentich, as well as a 15% commission on these invoices Netflix paid relating to the Vistara product. 29. Oninformation and belief, Kail would approve many, if not all, of the NetenticlyVistare invoices on behalf of Netilix and would then seck payment of his commission8281.9 14, Netenrich’s Accounts umount from Netensich/Vistara. For example, on Februar Receivable department sent Netilix’s Streaming Accounts Payable department an invoice from Vistara that sought payment trom Netflix for Invoice VITLO0042 in the amount of $32,000 for Tannary 2014, On February 4, 2014, Kail responded to both Netilix’s Streaming Accounts Payable department and to Nefemich, stating that Vistara’s January 2014 invoice was “Approved!” st Netenrich emailed 30. On information and belief, on February 5, 2014, an employ’ Kail directly with the following summary related to invoice VIT]0042 to Netflix that Kail had approved for payment on behalf of Netflix Vistara Unicmercenary invoice Invoico# | Amount | % Value variooas | s32000.00 | 7 FaR0000 800.00 Kail responded that same day ftom his Netix email address stating “Please pay this invoive for | UNIXCOS 31. On information and belief. on February 20, 2014, Kail emailed this Netenrich | employee asking about “Invoice payment status (just checking).” When the Netenrich employee asked Kail if he was referring to the VIT10042 invoice and to the commission information referenced in paragraphs 27 and 28 above, Kail responded that ‘I am referring to my past 2 invoices Unix004 and unix005,” The next day, his Netensich ensployce responded to Kail and stated “The check # is $093 for $1193.60 and has been mailed out today.” 32. On information and belief, these emails indicate that, on Mareh 1, 2014, a Netenrich employee emailed Kail and asked him to “Please provide two separate invoices for the below": Wi2281.01 Service cao? [moe [oo | RoR TT] ™ Value a TANCES? | FIRABL OD | 1 2.25780 THOS | $22,680.00] 12% $2721.60 1 “$4,939.20 Vistara Invoice # [Amount |a% | UBPe mercenary Invoice [wiTion4s "| $32,000.00 |" 15% $4,600.00 | "$4,800.00 | On Merch 1, 2014, Kail responded with an email that stated: “UNIX006: $4939.20 UNTX007: $4800.00" 33. On information and belief, between March 7-11, 2014, Kail and Netenrich employees exchanged various emeils about the status of having these two Unix Mercenary invoices paid. On Mareh 12, 2014, Netenrich emailed Kail and told him that “Cheek #5115 in the amount of $9,739.20 was mailed on 3/6/14 to: Michael Kail, Unix Mercenary LLC...", with an address that appears to be Kail's home address, 34, On information and belief, between March 12-14, 2014, Kail and Netenrieh employees exchanged various additional emails about the fact that Kail had not yet received Netenrich's 3/6/14 check for the two Unix Mercenary invoices. On March 14, 2014, Kail followed up with Netenrich stating “Received, but it was sent to Netflix, not my home address, Please always use the latter” (emphasis added) 35. To date, on information and belief, Netflix appears to have paid ¢ total of $1,437,490 to Vistara for invoices it submitted to Netflix since 2012. Netflix also appears to have paid a total of $2,293,874.80 to Netentich for invoices if submitted to Netflix since 2012, Based 9 COMPLAINT |882261,01 10 u 6 a on Netflix’s records, Netilix is informed and believes that Kail authorized and approved each of Netflix’s payments to Vistara (hat were made during Kail’s employment with Netflix. Netflix is also informed and believes that Kail supervised, recommended, authorized and/or approved Netflix’s payments to Netenrich that were made during Kail’s employment with Netilix, 36, During Kail’s employment at Netflix, Netflix was not aware of Vistara’s and Netensich's apparent commission payments to Kail related to Vistara's and Netenrich’s agreements with Netflix and did not anthorize or allow Kail to receive such commission. payments, Upon information and belief, during Kail’s employment at Netilix, Kail did not disclose to Netflix management or other appropriate Netflix personnel that he was receiving these contmission payments from Vistara and/or Netenzich OTHER COMPANIES 37. Since Kail left Netflix, Netflix has also reviewed information regarding other contracts signed, authorized or approved by Kail during his employment at Netflix. 38. This information indicates that, during Kail’s employment with Netflix, Kail, upon information and belief, entered into agrecments with other companies that have contracts with, or provide products and services to, Netflix, under which Kail received certain benefits from these other companies. Netflix is informed and believe that such benefits may have included, among other things, stock and/or gift cards. 39, During Kail’s employment with Netflix, upon information and belief, Kail did not disclose to the required Netflix personnel that he was receiving these benefits from third-party companies thet have contracts with, or provide products and services to, Netélix. VI. CAUSES OF ACTION HIRST CAUSE OF ACTION Breach of Fiduciary Duty and Duty of Loyalty (Against Defendant Kail) 40. Plaintiff incorporates all of the above paragraphs as though fully set forth herein. io COMPLAINT No.A208 01 1 41. Kail was employed by Netitix and was acting as Netflix’s agent when he signed 2]| the contracts, or entered into the agreements, at issue, including contracts and agreements with 3] | Vistara and Netenrieh: 4 42, Netilix and Kail were in a fiduciary relationship, giving rise to Kail’s daties to 5 || Netflix, including bis duties 10 disclose his effiliations with potential counterparties to contracts 6|| and agreements with Netflix; 7II 43. Kail received a commission and/or other compensation from at least one 3 || counterparty that related to the counterparty’s contracts and/or agreements with Netflix, including 9}| commissions received from Netlix's contrscts and agreements with Vistara and Netentichss 19)) 44, ‘These commissions or other forms of compensation belong to Netflix, under 11 |} California Labor Code § 2860; 12 45. Kail’s failure to remit these commissions or other forms of compensation to 13|| Netflix constitutes a breach of his fiduciary cuty and duty of loyalty to Netflix: 4 46. Kail’s failure to reveal these commissions or other forms of compensation to 15 || Netflix constitutes a breach of his fiduciary duty and duty of loyalty to Netflix, 16 47, Kail’s concealment of his affilition with, and personal interests in, these contracts 71| and agreements also constitutes a breach of Kail’s fiduciary duty and duty of loyalty to Netflix; 18 |] and 19 48, Netflix was damaged by these breaches in the amounts of Kail’s ill-gotten profits 20|| from these contracts and agreements, including with Vistara and Netentieb, and in any additional 21 |) amounts to be proven at trial, 22)| SECOND CAUSE OF ACTION 23) Conversion aH (Against All Defendants) 25 49, Plaintiff incorporates all of the above paragraphs as though fully set forth herein. 26 50. Kail was employed by Netflix and was acting as Netflix’s agent when he signed 27|| the contracts with, entered into the agreements with, and approved invoices submitted by, the882281.01 e . counterparties providing undisclosed compensation and benefits to Kail, including contracts and agreements with Vistara and Netenrich; 51. Unix Mercenary is an LLC that, upon information and belief, is owned by Kail and associated with Kail; 52, Kail and/or Unix Mercenary received a commission or other compensation fom at least one counterparty in connection with signing the contracts and agreements, including rom contracts and agreements with Vistara and Netenrich; 53, Netflix possessed or had a right to possess these commissions or other forms of compensation, under California Labor Code § 2860; 54, Kail’s and/or Unix Mercenary’s failure to remit these commissions or other forms of compensation to Netflix is inconsistent with Netflix’s rights to possess these commissions; 53. Kail and Unix Mercenary intentionally and substantially interfered with Netflix's property by taking possession of it; 56, Netflix did not consent to the taking of Netflix’s property, including the taking, of these commissions and other forms of compensation; 57. Asaresult of Kail’s and Unix Mercenary’s conduct, Netflix has suffered actual damages in a sum to be proven at trial; 58. Kail’s and Unix Mereenary’s conduct was a substantial factor in causing Netflix's harm; and 59. Kail’s end Unix Mercenary’s conduct was willful, malicious, oppressive, and in conscious disregard of Netflix’s rights, and Netflix is therefore entitled to an award of punitive damages to punish Kait’s and Unix Mercenary’s wrongful conduct and deter future wrongful conduct, THIRD CAUSE OF ACTION Fraudulent Concealment (Against Defendant Kail) 60. Plaintiff incorporates all of the above paragraphs as though fully set forth herein. 12 COMPLANT Case Ne2281.01 e 9 61. By concealing his affiliation with, and compensation from, Netflix’s actual and potential contracting counterparties, including but not limited to Netenrich and Vistara, Kail breached a duty to disclose his affiliations with potential counterparties to Netflix’s contracts and/or agreements, including by concealing this information before recommending and/or advocating that Netflix enter into contracts and/or agreements with the counterparties and before approving invoices that Netflix received from the counterparties; 62. Netilix and Kail were ina fiduciary relationship, giving rise to Kail’s duties to Netflix, including his duties to disclose his affiliations with potential counterparties to contracts and agreements with Netilix, including Vistara and Netenrich; 63. Kail knowingly and intentionally hid those relationships from Netflix; 64, Netilix did not otherwise know of those relationships, and is not at fault for failing to discover those relationships, including because Kail actively hid his misconduct by forming, secret relationships with Netflix’s actual and potential countesparties for contracts and agreements, including but not limited Netentich and Vistara; 65. Kail intended to deceive Netflix by hiding the relationships; 66, Netflix reasonably relied on Kail’s deception, including on Kail’s seemingly objective and disinterested recommendation and/or advocacy that Netflix enter into a particular contract or agreement and on Kail's seemingly objective and disinterested approval of the invoices submitted by these counterparties to Netflix; and feom companies that were paying undisclosed commissions and compensation and, under Kail’s direction, making payments, on those products and services, in an amount to be proven at tral FOURTH CAUSE OF ACTION Unjust Enrichment (Against all Defendants) 68. Plaintiff incorporates all ofthe above paragraphs as though fully set forth herein. 69. Asaresult ofthe illegal and wrongful conduct alleged herein, Defendants have been and will be unjustly enriched at the expense of Netflix in an amount to be proven at tial 53 NT 67. Netflix was harmed as a result of this reliance by purehasing products and services |ag2281.01 6 ® o 70. Specifically, Kail and Unix Mercenary have been unjustly enriched by receiving | ‘commissions and other forms of compensation and benefits provided to them by the potential and } actual counterparties to the relevant contracts and agreements with Netflix, including Vistara and | Netenrich, sums that rightfully belong to Netflix. 71. Defendants should be required to disgorge and return to Netilix all the ill-gotten gains that Defendants illegally and wrongfully obtained at the expense of Netflix, in an amount to be determined at tral, and a constructive trust should be imposed thereto. EIFTH CAUSE OF ACTION Unlawful Conduct and Unfair Competition Under California Business and Professions ‘ction 17200 et seg. st all Defendants) 72, Plaintif? incorporates all of the above paragraphs as though fully sct forth herein ced in unlawful, unfair, and/or fraudu TB. Asalleged above, Defendants have eng: business practices within the meaning of California Business and Professions Code Section | 17200. 74. Defendants have engaged in unlawful business practices within the meaning of California Business and Professions Code Section 17200, including by accepting compensation and benefits from entities other than Netflix in return for Kail’s agreement to use his position as Netflix’s Vice President of IT Operations for the benefit of those entities, in violation of California’s commercial bribery statute, Penal Code § 641.3. 75. Defendants have engaged in unCair business practices within the meaning of California Business and Professions Code Section 17200, including by: (i) concealing from Netflix, and failing to disclose to Netflix, the separate relationships between Defendants and Netflix’s contractual counterparties during Netflix’s decision-making processes related to the contracts, agreements and invoices at issue, including but not limited to, those with Netenrich and Vistaras and ({i) concealing from Netflix, and failing to disclose to Netflix, the compensation end benefits promised to, or received by, Defendants from Netflix’s contractual counterparties. } including but not Hinited to, Netenrich and Vistara, 4seze.01 20 e e 76. Defendants have engaged in fratidulent conduct within the meaning of California Business and Professions Code Section 17200, inclnding by: (i) misrepresenting, concealing from Netflix, and failing to disclose (o Netflix, the separate relationships between Defendants and Netflix’s contractual counterparties during Netflix’s decision-making processes related to the contracts, agreements and invoices at issue, including but not limited to, those with Netenrich and Vistara; and (ii) concealing from Netflix,, and failing to disclose to Netflix, the compensation and benefits promised to, or received by, Defendants from Netflix's contractual counterparties, including but not limited to, Netenrich and Vistere. 77. The natural, probable, and foreseeabic result of Defendants’ conduet has been and will continue to be to injure Netflix’s business, to impose substential expenses on Neiflix to counteract that conduct, end to injure and damage Netflix in other ways. 78. Defendants have used these acts of unlawful conduct, unfair competition ang fraudulent conduct to their advantage and have unfeinly profited, and will continue unfairly to benefit, as a result of these acts of unlawful conduct, unfair competition and fraudulent conduct 79, Netflix is therefore entitled to restitution in the amount, at a minimam, of the commissions and other benefits paid to Kail and/or Unix Mercenary by contractual counterpartics of Netflix, as well as the entire contract value of the contracts and agreements that were procured by Defendants through unlawful conduet, unfair competition and fraudulent conduct. SIXTH CAUSE OF ACTION Constructive Fraud (Against Defendant Kail) 80. Plaintiff incorporates all of the above paragraphs as though fully set forth herein, 81. Netflix and Kail were in a fiduciary relationship, giving tise to Kail"s duties 10 Netflix, including his duties to disclose his affiliations with potential counterparties to contracts and agreements with Netix, including Vistara and Netenrich; 82, Kail made an act, omission or concealment involving a breach of that duty by: concealing and failing to disclose his relationships with potential counterparties to contra agroements and invoices with Netflix. including but not Hieaited to his vel:ap2281.0 6 Netenrich and Vistara; and (ji) concealing and failing to disclose the compensation and benefits promised to, or received by, Defendants from Netflix’s contractual counterparties, including but not limited to, Netenrich and Vistera: 83. Netflix did not otherwise know of Kail’'s relationships with the counterparties and relied upon Kail’s representation of himself as a fiduciary of Netflix, with no interest in the business of the counterpasties; 84. Asa result of Kail’s actions, Netflix sustained damages in an amount to be determined at trial, VENTH CAUSE OF ACTION Fraud (Against Defendant Kail) 85, Plaintiff incorporates all of the above paragraphs as though fully set forth herein. 86. Kail misrepresented and omitted material facts to Netilix by holding himself out as a disinterested representative of Netflix when recommending, engaging in contract negotiations ‘with, entering into contracts with, and authorizing payments on behalf of Netflix to, third-perty companies, including but not limited to Netentich and Vistara, when in fact, Kail was receiving o: going to receive benefits from these third-party companies in exchange for Netflix’s contracts and agreements, including but not limited to commissions from Netenrich and Vistara; 87. Kail knew his misrepresentations and omissions were false; 88, By making these misrepresentations and omissions, Kail intended to deceive Netflix and induce reliance upon his statements and omissions; 89. Netilix justifiably relied on Kail’s misrepresentations and omissions in purchasing products and services from these companies, including but not limited to its purchase of the | Vistara product from Netenrieh/Vistara; and 90, As aresult of Kail’s actions, Netflix sustained damages in an amount to be determined at tial isemasi.at WW \ VOL PRAYER FOR RELIEF WHEREFORE, Plaintiff respectfully requests the following relief: 91. Judgment in Plaintiff's favor and against Defendants on all causes of action alleged herein; 92. For damages in an amount of at least $25,000, to be further proven at trial; 93. For punitive damages: 94, For zestivution under Business and Professions Code § 17200; 95. For costs of suit ineurred herein; 96. For prejudgment interest; and 97. Forsuch other and finther relief as the Court may deem to be just and proper. | VAIL. DEMAND FOR JURY TRIAL Netflix hereby demands trial by jury for all eauses of action, claims, or issues in this aetion that are iriable as a matter of right to a jury Respectfully submitted, Dated: November 24, 2014 KEKER & VAN NESS LLP RACHAEL E. MENY JO W. GOLUB BENJAMIN D, ROTHSTEIN Attomeys for Plaintiff NETFLIX, INC. Wn COMPLAINT ‘Case No.