Atencio, Cate v. Tunecore (Amended Complaint)

JASON ARCHINACO,
State Bar ID Number: 284396

jarchinaco@ablitigation.com
ARCHINACO/BRACKEN, LLC
The Pennsylvanian
1100 Liberty Avenue, Suite C6
Pittsburgh, PA 15222
Telephone: (412) 434-0555
Fax (888) 563-7549
ATTORNEYS FOR PLAINTIFFS
IN THE UNITED STATES DISTRICT COURT

OF THE CENTRAL DISTRICT OF CALIFORNIA
LOS ANGELES DIVISION
THOMAS ATENCIO, an adult Case No. 2:16-cv-01925-DMG-MRW

individual, and GIAN CATERINE a/k/a
JOHN CATE, an adult individual,
SECOND AMENDED COMPLAINT
Plaintiffs,
IN CIVIL ACTION
v.
TUNECORE, INC., a corporation.
Defendants.
JURY TRIAL DEMANDED

1 SECOND AMENDED COMPLAINT IN CIVIL ACTION
2
AND NOW, comes Plaintiffs, Thomas Atencio and Gian Caterine a/k/a John
3
4 Cate, by and through counsel, Jason A. Archinaco, Esquire and Archinaco / Bracken
5 LLC and files the following Second Amended Complaint in Civil Action and avers as
6
follows:
7
8 Parties and Jurisdiction

9
1. Plaintiff Thomas Atencio, is an adult individual and citizen of the State of
10
11
California, with a primary address of 2705 Glendower Ave., Los Angeles, CA
12 90027. At all times relevant to, he was a citizen of the State of California.
13
2. Plaintiff Gian Caterine a/k/a John Cate is an adult individual and citizen of the
14
15 State of California with a primary address of 29500 Heathercliff Road, #259,

16
Malibu, CA 90265. For the time period 2005-2013, Caterine was a Citizen of
17
18
the State of Massachusetts. For 2014 to the present, Caterine was a citizen of
19 the State of California.

20
3. TuneCore, Inc. (hereinafter TuneCore) is a Delaware Corporation with a
21
22 principal place of business at 2711 Centerville Rd. Suite 400, Wilmington, DE

23
19808.
24
4. Jurisdiction is proper in this case under 28 U.S.C. 1332 as there is total
25
26 diversity of citizenship and the amount in controversy greatly exceeds $75,000.

27
28
SECOND AMENDED COMPLAINT IN CIVIL ACTION 2

1 Summary
2
5. This case is one where, despite TuneCore uploading billions of dollars of music
3
4 to iTunes through a business brand and model that both Plaintiffs assisted in
5 creating (paying out royalties of purportedly over $576 million to artists as a
6
result) and the Company being sold for $35 million, TuneCore refuses to
7
8 properly compensate two of its founding members.

9
FACTS
10
11
Plaintiffs Are Forbearers of the Movement to Democratize Music
12 6. Plaintiffs are two well-known pro-artist music industry executives with a

13
combined experience of over fifty years in the industry.
14
15 7. Plaintiff Atencio has managed or represented some of the most successful and
16
talented artists across multiple generations of music listeners including: Tom
17
18
Petty, New Order, Janes Addiction, No Doubt and Gwen Stefani, as well as
19 helped to establish Lollapalooza, the international music festival. Atencio also

20
initiated Rock the Vote.
21
22 8. There is a significant barrier to entry in the music industry in terms of managing

23
the top acts and obtaining legitimacy in the industry.
24
9. Until executives like Plaintiff Atencio entered the music business, most deals
25
26 were not pro-artist and there were significant hidden costs in contracts signed by
27
artists.
28

1 10. It is well known in the music industry that Plaintiff Atencio caused artists under
2
his purview, like Tom Petty, to be paid their fair share of their royalties and the
3
4 box office receipts from their live performances.

5 11. Over the course of his career, Plaintiff Atencio established himself as a pro-artist
6
representative who talked straight about contracts, rights and money.
7
8 12. Further, Plaintiff Atencios name in the music industry acquired secondary
9
meaning because of his repeated high profile successes such that if his name
10
11
were attached to a music project, the project would obtain a high level of
12 legitimacy in the industry.

13
13. Plaintiff Atencio is known in the music industry as one of the forbearers of the
14
15 movement to democratize music.

16
14. Plaintiff Caterine developed a similar reputation in the music industry as a pro-
17
18
artist executive and too is known as a forbearer in the movement to democratize
19 music.
20
15. As early as the 1990s, Plaintiff Caterine was courted by and served as an
21
22 executive at eMusic, a company that broke the former barriers to artists

23
publishing their music online and originated the $0.99 song download.
24
16. After eMusic became a sad casualty to the Napster revolution, Plaintiff Caterine
25
26 continued to work in the industry both as an executive and a music artist, further
27
28

1 enhancing his reputation as one of the leaders of the pro-artist democratization
2
movement.
3
4 17. Plaintiff Caterine has been associated since 2011 with a MIT think tank working
5 on the future of artist rights, communications and copyrights.
6
Plaintiffs Are Solicited to Work for TuneCore,
7
8 18. Because of the reputations that both Plaintiffs had, they were specifically
9
courted and targeted by the predecessor company to TuneCore, Your Tunes, Inc.
10
11
(hereinafter, Your Tunes), for involvement in the start-up venture.
12 19. The reason Plaintiffs were courted is simple: their reputations in the music
13
industry would be critical to obtaining success for Your Tunes.
14
15 20. Your Tunes was conceived to be an artist-friendly company that would provide
16
pro-artist licensing arrangements while simultaneously providing artists with
17
18
access to platforms where they could sell their music digitally (e.g. iTunes).
19 21. However, to achieve legitimate recognition as a pro-artist company required

20
affiliation with and consulting services from people like Plaintiffs that already
21
22 had recognized legitimacy in the industry.

23
22. In other words, Your Tunes was a great idea but the only way to ensure the
24
proper execution and penetration into the competitive music industry would be
25
26 to partner with people like Plaintiffs whose deep industry networks could assist
27
in making that happen.
28

1 23. So, Your Tunes did exactly that, hired Plaintiffs to consult on the project as well
2
as to lend their names and reputations to the company. Plaintiffs became some
3
4 of the first founders of the company.

5 Plaintiffs Help Build TuneCore
6
24. In September 2005, Plaintiff Caterine began consulting with the company.
7
8 25. In 2005, Plaintiff Atencio began consulting with the company.

9
26. Both became founding members / partners of TuneCore along with Jeff Price
10
11
and several others, each serving important roles in establishing and founding the
12 company.
13
27. Price and Caterine, whom Price had met at eMusic, created an ingenious model
14
15 on how TuneCore could provide access for millions of artists to iTunes and
16
other sales outlets that were normally closed off to independent record labels
17
18
and artists. In fact, that model was created and inspired when Caterine himself
19 attempted to place music onto iTunes but could not do so, so he and Price
20
created a solution that became TuneCores platform.
21
22 28. However ingenious Price and Caterines black box model was, it lacked specific
23
components that it needed to make it work.
24
29. Price and Caterine were aware of that, which is why they involved Atencio and
25
26 others to assist in building, creating and promoting TuneCore the independent

27
music delivery platform.
28

1 30. Atencio was hired for many reasons, but one reason in particular was because
2
without someone like Atencio attaching his name to the project, legitimacy and
3
4 trust was going to be nearly impossible to achieve in the music industry.

5 31. Trust and legitimacy were needed due to the fact that musicians and artists were
6
going to be asked to entrust vast sums of royalty money to TuneCore as an
7
8 intermediary.
9
32. Atencio also was known for his ability to package, promote and market in the
10
11
music industry and bring product to market in a credible way, which is precisely
12 what he helped TuneCore to do, as he had done for other clients.

13
33. At or about the time Caterine and Price created TuneCores black box model,
14
15 Caterine was hired for many additional reasons, but included were the fact that
16
he had been associated with several successful start ups in the past, had good
17
18
relationships with a variety of people in the financial world, was a licensed CPA
19 and, most significantly, he was one of the creators of TuneCores platform.

20
34. As in any start up venture, cash and cash flow are at a premium.
21
22 35. Resultantly, association with top talent like Plaintiffs is usually obtained through
23
a combination of cash and stock and/or stock options.
24
36. Here, that is precisely what was promised would occur given a lack of cash and
25
26 resources in the fledgling company.

27
28

1 37. It was promised that in return for their time, energy and hard work along with
2
use of their names being associated on an ongoing basis with the business,
3
4 Plaintiffs would be compensated.

5 38. At the time that Jeff Price entered into (on behalf of TuneCore) the Stock Option
6
Agreements with both Atencio and Caterine, all parties to the transaction
7
8 believed that what was being provided were wages that, upon becoming full
9
vested, could not be taken away.
10
11
39. As founders of the company, both Atencio and Caterine were called upon in
12 different ways to create TuneCores brand, packaging, promotion and marketing

13
and also to provide it legitimacy, spreading its adoption as a platform.
14
15 40. Both Atencio and Caterine actively contributed their intellectual capital, and
16
intellectual property into the project providing creative input in addition to
17
18
other tasks that both were performing.
19 41. Beginning in September 2005, Plaintiff Caterine began providing consulting

20
services to Your Tunes at significantly reduced cash compensation over his
21
22 typical rates in exchange for options. The services included accounting and
23
financial services among others.
24
42. As a result, Plaintiff Caterine, believing he truly would be provided option
25
26 compensation, agreed to reduce his hourly rate from $180 an hour to $90 in
27
exchange for the option compensation.
28

1 43. By doing so, the company greatly benefited as it required less cash capitalization
2
and, further, was able to use its available cash to grow the company.
3
4 44. Caterine wanted the company to succeed, not to bleed it of its much-needed cash
5 despite his proper hourly compensation being much higher than what he was
6
provided.
7
8 45. In February and August 2006, Plaintiff Atencio was provided option grants in
9
consideration for his ongoing consulting work. Unlike Caterine, Atencio did not
10
11
work inside the business on a day-to-day basis.
12 46. However, although Atencio was not working inside the business on a day-to-day
13
basis, Atencio had not simply been paid an appearance or single name use
14
15 fee. Instead, Atencio was fully involved in the intricacies of the design of
16
TuneCore and its promotion, marketing and delivery as a platform as he had
17
18
placed his name on the project.
19 47. It was anticipated that Atencio would remain involved, as one of the companys
20
architects as he does when he agrees to become associated with an artist or
21
22 company. Indeed, Atencio served in a similar role to his prior role in managing
23
talent although he was not paid his usual and customary fee for doing so.
24
48. Over the course of 2006, Plaintiff Caterine worked at a reduced rate but even so
25
26 was still owed approximately $36,000 in fees from Your Tunes before year-end
27
2006.
28

1 49. Yet again, Plaintiff Caterine sacrificed immediate compensation owed to him to
2
benefit the business, obtaining options and a debt note instead for the wages
3
4 owed to him. By doing so, he again increased the value of the company.
5 50. In December 2006 Your Tunes was transitioned into TuneCore, Inc. as Plaintiff
6
Caterine helped the company secure $2 million in outside financing from Guitar
7
8 Center. Both Plaintiffs used their names and reputations to assist in obtaining
9
that financing.
10
11
51. Although TuneCores current attorneys attempt to portray that TuneCore is
12 unaware of the arrangements made with both Atencio and Caterine, TuneCore is
13
fully aware of the roles they played. For example, both of their actions were
14
15 instrumental to obtaining the Guitar Center financing and they both spent
16
considerable time in ensuring that the financing occur. Had that financing not
17
18
been obtained, the company likely would have collapsed.
19 52. At that time, Plaintiff Caterine was asked to become the CFO and to forego
20
$300,000 in his normal annual compensation in return for additional options.
21
22 53. Plaintiff Caterine agreed to do so, yet again providing substantial benefit and
23
increased book value to the company. By foregoing immediate cash
24
compensation, the companys cash flow was vastly improved.
25
26 54. By March of 2007, Atencio and Caterine had helped to save the company,
27
having obtained the Guitar Center financing which enabled the founders at
28

1 TuneCore including Atencio and Caterine the opportunity to finally unveil the
2
artists rights platform they had created the one that was going to forever
3
4 change the music industry.

5 55. At that point in time, TuneCore appears to have still planned on abiding by its
6
agreements with Atencio and Caterine.
7
8 56. On March 6, 2007 the big announcement of TuneCores business model was
9
unveiled to the world, the same one that Atencio and Caterine had contributed to
10
11
creating, with the headline: TuneCore Changes the Rules of the Music
12 Industry, Smashes Old Business Convention With No Fee Distribution Model.

13
57. The introduction to the press release touted the companys revolutionary
14
15 platform that Atencio and Caterine had assisted in creating: Its revolutionary.
16
As a record label or musician using TuneCore for global distribution: You keep
17
18
all your rights. You own your recordings. You get all the money. You sign no
19 contracts. You can terminate at will. You have no accounting periods. You can
20
take your money 24 hours a day 7 days a week.
21
22 58. And, it was truly revolutionary just as Atencio, Caterine, Price and several other
23
founders had imagined it would be.
24
59. The last quote in the Press Release was saved for Atencio - The crack of dawn
25
26 suffering a disconnect from both the consumer and the artistic community that is
27
unparalleled in my 25 years as a label executive and artist manager. TuneCore
28

1 provides the tools for artists to access their audience without penalty or
2
compromise.
3
4 60. Obviously, at that time, Atencio and Caterine certainly believed that the
5 company was going to honor their promises to them about their compensation,
6
and not renege later. Had either of them believed that at that time, they would
7
8 never have contributed their time, energy and valuable intellectual capital /
9
property into TuneCore.
10
11
61. Throughout the entirety of 2007, Caterine worked for the company, being
12 provided two additional option grants.

13
62. In each instance of those instances Caterine was provided options, they were
14
15 provided to make up for wages that he had truly earned, but not been paid.
16
63. For many reasons including that it was for the good of the company, Caterine
17
18
accepted reduced wages that he was otherwise entitled to in exchange for
19 options.
20
64. As for Plaintiff Atencio, he continued to be affiliated with and consult with the
21
22 business, but not in the same intensive, day-to-day manner as Plaintiff Caterine.
23
65. Instead, Atencio did what he had agreed to do. After successfully launching the
24
platform onto the world, he marketed and promoted the platform and its
25
26 legitimacy to a small group of elite music insiders among many other things.
27
28

1 66. As he agreed to do as part of his compensation, Atencio loaned his name and
2
credibility to the project and promoted TuneCore favorably amongst his list of
3
4 contacts, greatly assisting its efforts to obtain traction in the difficult-to-crack

5 music world.
6
67. Atencios promotional and marketing work helped TuneCore become massive in
7
8 size and scope in terms of the music the company began to upload to iTunes,
9
very quickly becoming the largest volume supplier of music to iTunes.
10
11
68. Indeed, from 2006 through 2015, TuneCore has uploaded billions of dollars in
12 music to iTunes, and purportedly paid out over $576 million to artists.
13
69. In or about 2007, Guitar Center failed to deliver the customers required to meet
14
15 TuneCores projections.
16
70. As the company faced more shortfalls and a deteriorating financial condition, in
17
18
October 2007, Caterine was awarded yet more options for wages he had earned,
19 but the company could not pay.

20
71. At the end of 2007, although Plaintiff Caterine was asked to step down as CFO,
21
22 his general affiliation with the company was not ended. Such would prove to be
23
the repeating course of the relationship with the company.
24
72. In essence, an implied-in-fact contract came to exist between Caterine and
25
26 TuneCore in that while he would, from time to time be dismissed from

27
TuneCore, it was never permanent.
28

1 73. In other words, Caterine developed a pattern and longevity of service with
2
TuneCore such that he would not truly be dismissed absent cause, though no
3
4 cause ever came to pass.

5 74. Indeed, TuneCore intentionally did not permanently end or otherwise harm the
6
relationship between the parties because like Atencio, Caterines ongoing
7
8 promotion of the platform even when dismissed from TuneCore remained

9
important to TuneCore.
10
11
75. For a six-month period, Caterines involvement was substantially reduced
12 although his general affiliation with the company was not formally terminated in
13
any way.
14
15 76. As with Atencio, his affiliation with the company was always kept open, the
16
company continuing to benefit by its association with him in name, even if he
17
18
was not working there on a day-to-day basis.
19 77. TuneCore received an ongoing benefit from its relationship with Atencio and
20
Caterine, even when they did not perform day-to-day activities. That was by
21
22 intent and design of Jeff Price, TuneCores former CEO, as TuneCore continued
23
to benefit from its affiliation with Atencio and Caterine.
24
78. TuneCores first CEO, Jeff Price, agreed that neither Atencio nor Caterines
25
26 affiliation with the company would be terminated, absent written notice to them.
27
28

1 79. Indeed, despite any ups or downs, at the end of the day, Atencio and Caterine
2
stood by the company continuing to promote its brand its cause and the
3
4 brand and business model that they had helped to create as founders, the one
5 providing access to the newly evolving digital market, one that had been closed
6
to independent artists before.
7
8 80. In certain ways, the ongoing and never ending relationship between the parties
9
was like the existence of a rock band in many respects, with various artists like
10
11
Atencio and Caterine stepping in when and where they needed to help TuneCore
12 continue to succeed.
13
81. In June 2008, Plaintiff Caterine was again requested to contribute significant
14
15 hours to the company on a day-to-day basis. Caterine was specifically tasked

16
with developing a new business and financial plan that would assist in attracting
17
18
a much needed, new investor to avoid the companys total collapse.
19 82. At or about that time, Caterine was provided more options to account for past
20
wages due to him and essentially as a mea culpa.
21
22 83. At that time, Caterine also agreed to work for reduced wages, yet again,
23
provided that the company would agree to provide him with options as it had in
24
the past due to the shortfall in his compensation. Further, Caterine agreed to
25
26 even defer the cash portion of his wages until new financing was obtained.
27
84. TuneCore promised it would pay him his compensation.
28

1 85. At all times relevant hereto and prior to the entrance of Opus Capital, TuneCore
2
(through Jeff Price) on the one hand, and Atencio and Caterine on the other
3
4 hand, believed that the options that they were being provided were wages that
5 could not be taken from them or caused to be forfeited once they were fully
6
vested.
7
8 Opus Capital and its Attorneys Enter the Scene

9
86. From approximately July through September 2008, TuneCore involved Caterine
10
11
in negotiations for the sale of TuneCore to MySpace for $16 million and/or an
12 investment into TuneCore by Opus Capital.

13
87. The sale to MySpace did not occur, but in the fall of 2008, TuneCore, with
14
15 Caterines direct assistance, secured an outside $7 million investment from Opus

16
Capital.
17
18
88. At the time of the investment, counsel did not represent TuneCore.
19 89. As such, Cogan asked Price what law firm would be representing TuneCore.
20
When Price replied that TuneCore did not have counsel, Cogan recommended
21
22 that TuneCore retain OMelveny & Myers LLP (hereinafter OMM).

23
90. Cogan advised Price that he would not be using OMM on the transaction, but
24
that he had worked with OMM quite a bit in the past, that the lawyers were
25
26 excellent and suggested that Price hire OMM to represent TuneCore.

27
28

1 91. Price was not an attorney and did not understand the conflicts of interest that
2
could be presented by such a situation nor did he, at that time, believe that any
3
4 scheme would be orchestrated to deprive people of their earned compensation.

5 92. During the time in which Price signed conflict of interest disclosures, when
6
doing so, information was concealed from him about the fact that OMM
7
8 simultaneously represented Opus and Cogan while also representing TuneCore.

9
93. Although Cogan certainly knew the conflicts of interests that could and would
10
11
be developed by hiring his current attorneys to represent TuneCore, Cogan and
12 OMM did not disclose those conflicts to Price or explain how conflicts could
13
and would arise in the event TuneCore was ever sold when Cogan and Opus
14
15 own financial interests came into conflict with the best interests of the TuneCore
16
and its other shareholders.
17
18
94. Further, although OMM had a duty and obligation to disclose potential conflicts
19 to TuneCore / Price, including the fact that they were simultaneously

20
representing Opus and Cogan in other matters, no such disclosure ever occurred.
21
22 95. After the investment from Opus Capital, Opus effectively ran the company
23
through its General Partner / CEO Gill Cogan, who became a Board member
24
at TuneCore and essentially controlled its Board, as well TuneCores attorneys.
25
26
27
28

1 96. Although Caterine had been a Board member, in the fall 2008 when Cogan took
2
over the operation of TuneCore, Caterine was asked to resign from the Board of
3
4 Directors, but not from TuneCore, as he continued to work for TuneCore.

5 97. In 2009, Plaintiff Caterine continued to act as the CFO and performed other
6
tasks for Tunecore working for significantly reduced cash compensation.
7
8 98. Caterine hired staff, oversaw the day-to-day financial operations, interviewed
9
and hired executives, attending Board meetings and presented financial and
10
11
operating results.
12 99. By November 2009, Caterine was again owed money despite the equity
13
infusion.
14
15 100. In 2010, Plaintiff Caterine acted as the CFO again working for reduced cash
16
compensation. Like the end of 2007, however, at the end of 2010 Caterine
17
18
would again cease being the CFO, however, he continued to work for the
19 company.
20
101. As in 2007, subsequent to ending his role as CFO, Caterine continued in a
21
22 general consulting role on an ongoing basis.

23
102. Included in Caterines ongoing consulting were calls and e-mails from January
24
through December 2011, and a substantial number of calls through July 2012.
25
26 103. On or about January 5, 2011, while Caterine was working at TuneCore in their
27
offices, OMM and/or someone acting at their behest purportedly cancelled
28

1 Caterines prior options in the capitalization tables without his knowledge or
2
consent.
3
4 104. Although such options were identical to those possessed by Atencio, Atencios
5 were not also cancelled.
6
105. Upon information and belief, the cancellation occurred so that TuneCores new
7
8 owner and large shareholders could enrich themselves at the expense of

9
Caterine.
10
11
106. In or about June 2012, TuneCore through OMM, provided Caterine with what
12 were represented as replacement options to those he already possessed.

13
107. OMM partner Paul Sieben told Caterine that the options were replacements
14
15 for his prior options that had been purportedly cancelled inadvertently /
16
mistakenly.
17
18
108. Upon reviewing the new replacement option document, the document made it
19 clear that the options were not a replacement for Caterines prior options and
20
were not intended to pay him for past compensation owed to him but instead
21
22 were a new award.

23
109. Caterine accepted the new options, but refused to agree that they were a
24
replacement for anything, his prior options remaining viable.
25
26 110. The following month, TuneCores CEO, Jeff Price was terminated.
27
28

1 111. At all times prior to Prices termination, TuneCore, Atencio and Caterine all
2
believed that the vested and earned options were wages that could not be taken
3
4 from Atencio and Caterine.

5 112. Not long after Prices termination, Atencio exercised 10 options, a de minimus
6
number but proving the ongoing viability of both he and Caterines options.
7
8 113. After Prices termination in July 2012, Caterine continued to be involved in

9
periodic calls with potential acquirers for TuneCore and many others for and on
10
11
behalf of TuneCore and its business including calls with Gill Cogan and Paul
12 Sieben.
13
114. After Prices termination, Atencio continued to promote the company to
14
15 industry insiders, as well as assisted in locating a new buyer of the company.

16
115. In or about early June 2013, Caterine wrote an email to Gill Cogan pertaining to
17
18
he and Atencios options. Therein, Caterine expressed his belief given what
19 Sieben of OMM had led him to believe, that he and Atencio only had a matter of
20
days to exercise their options when Cogan, who spoke for the Board of
21
22 Directors of TuneCore and was also Opus General Partner / CEO, the owner of
23
TuneCore, had told Atencio that Atencio and Caterine had at least ten years to
24
exercise their founder options and that would not run until 2016.
25
26 116. What Cogan had stated to Atencio was consistent with the option documents
27
themselves, as they possessed minimum ten-year terms.
28

1 117. Indeed, Cogan confirmed exactly the same thing to Caterine on June 11, 2013 in
2
an email to Caterine with a cc to the new CEO of TuneCore, Scott Ackerman,
3
4 and also Tom Atencio.

5 118. The June 11, 2013 email from Gill Cogan reads in relevant part (as to the
6
options other than the claimed replacement options): Similarly, Mr.
7
8 Atencios deadline to exercise the options underlying his 2 grants will not
9
expire until 2016.
10
11
119. Both Plaintiffs believed what had been communicated to them by Cogan who
12 was on TuneCores Board that they had until 2016 at least to exercise their
13
options.
14
15 120. That was, of course, also consistent with the options documents themselves that
16
provided minimum ten-year terms as well as the belief of Price, Atencio and
17
18
Caterine that vested options could not be taken as they were earned wages.
19 121. As such, believing that his options would be honored, plaintiff Caterine
20
continued to engage in business calls for TuneCore until approximately
21
22 September 2014.
23
122. Thereafter, Caterines status with the company was left open as a consultant in
24
the same manner it had been in the past.
25
26
27
28

1 123. As for Plaintiff Atencio, his public affiliation with the company continued
2
despite not providing day-to-day consulting services. However, like Caterine,
3
4 Atencio assisted in locating a new buyer for the company.

5 124. Further, up until the time of the filing of this suit, Plaintiff Atencio continued to
6
promote the TuneCore brand to others both inside and outside the music
7
8 industry bringing the company significant good will in the process which he
9
had been brought in to help to do.
10
11
125. Caterine also promoted the TuneCore brand and continued to do so until the suit
12 was filed.
13
126. Indeed, Cogans confirmation about Plaintiffs options had provided further
14
15 incentive for them to continue trying to build TuneCore in the hope that one day
16
a significant sale would occur and/or the company was taken public, rendering
17
18
their hard work more worthwhile from a financial standpoint.
19 127. Caterine, in particular, needed and wanted that to occur given all of the energy
20
and time he had devoted to the project accepting half or less pay for an extended
21
22 period of time.
23
128. At no point did TuneCore ever provide a formal notice of disassociation, as
24
required, had TuneCore wanted to disassociate with Atencio or Caterine.
25
26 129. The disassociation notice was particularly important because if TuneCore

27
decided to end its affiliation with either of Plaintiffs, it was required to do so in
28

1 writing so that they could then take appropriate steps to publicly disassociate
2
their names and reputations from the project, especially given their status in the
3
4 music industry.
5 130. Indeed, as TuneCore realized, a formal disassociation would have resulted in the
6
loss of the business relationships and good will that both Plaintiffs had generated
7
8 for TuneCore over the years and continue to generate with their ongoing
9
association with them.
10
11
131. A formal disassociation also would have run contrary to what Cogan had
12 directly encouraged by confirming that Plaintiffs had until 2016 to exercise their
13
options both Atencio and Caterines ongoing support for the project.
14
15 132. To this day, TuneCore has never disassociated itself from Plaintiffs and
16
continues to refuse to officially and publicly do so.
17
18
Good News Arrives: TuneCore is Sold for $35 million;
The Carpet is Pulled Out and Plaintiffs are Defrauded
19
20 133. Into 2015, both Atencio and Caterine assisted the company including, but not
21 limited to, locating a buyer.
22
134. In or about early April 2015, Plaintiffs were advised that TuneCore had been
23
24 sold and that it was merging with Believe Digital Holdings, Inc. Both Plaintiffs
25
understood that the transaction would be a cash out not cash in transaction.
26
27
28

1 135. Cogan and Opus Capitals sale of TuneCore came at the perfect time for
2
Plaintiffs, within the time period that they had to exercise their options, as the
3
4 options themselves provided and Cogan had confirmed to them.

5 136. Both Atencio and Caterine believed that the $35 million buy out of TuneCore by
6
Believe was a good thing, and precisely what needed to happen for TuneCore,
7
8 which they helped to create, to more fully succeed as a platform.

9
137. Not long after, on or about April 12, 2015, TuneCore and its attorneys provided
10
11
Plaintiffs with a form Letter of Transmittal.
12 138. TuneCore represented that the contents of the letter were true.
13
139. The letter prepared by TuneCore and its attorneys provided the following, in
14
15 relevant part:
16
Please be advised that on April 12, 2015 the Merger . . . and the Merger
17
18
Agreement was recommended to and approved . . . with the Company
19 continuing as the surviving entity in the Merger and each Security of the
20
Company owned by me was automatically cancelled and converted as
21
22 of the effectiveness of the Merger into the right to receive a payment in

23
cash with regard to such outstanding Securities.
24
(Emphasis added).
25
26
27
28

1 140. Both Plaintiffs were requested to complete a form, and then duplicate the letter
2
of transmittal that they had been provided, mailing it in to TuneCores
3
4 administrator.
5 141. After preparing and mailing in the paperwork, Plaintiffs were to be provided
6
cash compensation in exchange for their securities that included their stock and
7
8 options.
9
142. TuneCores form, in fact, called for Plaintiffs to identify not just the stock they
10
11
held, but also the options they held for purposes of being compensated in cash.
12 143. Four days later, on April 16, 2015, TuneCore issued a press release that:
13
TuneCore & Believe Digital Holdings Combine Forces! Therein, the press
14
15 release stated that TuneCore and Believe had entered into a partnership and a
16
strategic partnership.
17
18
144. Upon information and belief based upon filings and representations made in this
19 case, the statements made that there was a partnership or that there was a merger
20
with Believe were untrue.
21
22 145. Even though the press release appeared to contain some information inconsistent
23
with what had been communicated in the form Letter of Transmittal, Plaintiffs
24
reasonably believed that the information being provided by TuneCore and its
25
26 attorneys in the Letter of Transmission was, in fact, true.

27
28

1 146. Emerging from the reverse triangular merger apparently was the new TuneCore,
2
run by the same CEO as before the merger Scott Ackerman.
3
4 147. Although the options that both Atencio and Caterine had earned and were fully
5 vested called for them to pay in money to obtain their options, the merger
6
documents made it clear to both Plaintiffs that the merger was resulting in a
7
8 cash out transaction, not a cash in one.

9
148. Both Atencio and Caterine properly completed and submitted the required
10
11
Letter of Transmittal so that they would be paid as TuneCore told them they
12 would when they surrendered their securities including their stock and options.
13
149. Plaintiffs were entitled to the following compensation for their options:
14
15 a. Atencio 2/16/06 options - $43,177.961

16
b. Atencio 8/11/06 options - $5,925.40
17
18
c. Caterine 1/26/06 options - $73,035.06
19 d. Caterine 8/11/06 options - $19,751.62

20
e. Caterine 4/25/07 options - $33,600.00
21
22 f. Caterine 10/17/07 options - $36,480.00

23
g. Caterine 6/16/08 options - $33,950.00.2
24
25
1
For example, Atencio had 10,000 pre-exchange options, but 45,943 post-exchange
26
options. Thus, the value of the options on cash out is calculated by taking the
27 difference of the purported sale price ($1.27), subtracting the exercise price ($0.33)
and then multiplying that number ($0.94) by the post-exchange option amount
28
(45,943), arriving at the figure of $43,177.96.

1 150. Both Atencio and Caterine were also entitled to payment for their existing shares
2
that TuneCore stated had been cancelled. Atencio possessed 10 shares of
3
4 stock while Caterine possessed 100 shares of stock.

5 151. At or about the time of the reverse triangular merger (or at an undisclosed point
6
prior to then), someone at TuneCore decided that they would defraud Plaintiffs
7
8 of the compensation that they had earned over the years by refusing to
9
compensate them for their vested options.
10
11
152. Given the evidence known to date, it is believed that Cogan may have never
12 intended to honor the options agreements, and that he was intentionally

13
misleading Atencio and Caterine, but still wanted their ongoing support for as
14
15 long as possible before they were both defrauded.

16
153. In any event, after the letter was mailed, a debate about Caterines compensation
17
18
arose yet again with the attorneys leading the charge.
19 154. Jeff Price the former CEO of TuneCore (who did not have an ongoing personal
20
relationship with Caterine), stepped in to clarify the facts and demonstrate that
21
22 Caterine was entitled to be paid.

23
155. In relevant part, on May 15, 2015, Price sent an email to Cogan, Sieben and
24
others regarding the dispute, advising that Caterines options had been vested,
25
26 and had incorrectly been cancelled in TuneCores capitalization tables.

27
2
Caterine was also entitled to $122,200.00 for his 11/10/09 options that were the
28
subject of TuneCores arbitration motion.

1 156. Further, Price advised:
2
Gian continued to consult and work for TuneCore through current. As
3
4 one example he played an active role with Gill in trying to find an exit for
5 the company post the exit of past management.
6
From a legal perspective, he is entitled to be paid
7
8 From a moral perspective he is also entitled.

9
This exit would not exist if not for Gian and the other founders.
10
11
157. Defendants are fully aware, as was Price, that Caterine should be compensated
12 and that they have no defense for not doing so. Even so, Caterine was paid
13
nothing for the securities he surrendered, both his options, and his 100 shares of
14
15 stock.
16
158. As for Plaintiff Atencio, his situation was handled in a different, albeit equally
17
18
dishonest manner.
19 159. Although Atencio had continued to actively work to assist the company in
20
locating a buyer and exit strategy for Opus and Cogan, Atencio was only paid
21
22 for the ten shares of stock that he had been fraudulently induced into
23
surrendering under the representation that he would be paid for all his securities,
24
including both his stock and options.
25
26
27
28

1 160. As Plaintiff Atencio sadly learned, Defendant intended to defraud him too, and
2
also refused to compensate him in connection with his vested and earned
3
4 options.
5 161. Had Atencio known the truth, he never would have surrendered his ten shares,
6
receiving $11.51 for them, but causing him a negative balance in his account of
7
8 $5.49 because the wire charge was greater than the sum credited to Atencio.
9
162. Although it has never been explained to Atencio or Caterine as to why they were
10
11
involved, OMMs Sieben handed the compensation issues over the matter to the
12 New York law firm Pillsbury Winthrop Shaw Pitman LLP. Pillsbury simply
13
parroted Siebens assertions in resistance to Plaintiffs attempts to exercise their
14
15 options.
16
163. Because of the back and forth between Atencio, Caterine and Sieben / OMM,
17
18
Atencio and Caterine hired legal counsel to figure out how to properly obtain
19 their compensation and figure out what was going on.

20
164. On or about August 14, 2015, counsel for Plaintiffs wrote to Pillsbury Winthrop
21
22 Shaw Pittman LLP requesting the necessary information so that both Atencio
23
and Caterine could mail in a check to exercise their options given that TuneCore
24
had refused to pay either of them.
25
26
27
28

1 165. Having not been cashed out as the Letter of Transmittal stated they would,
2
Plaintiffs attempted to pay in cash in accordance with the actual option
3
4 agreements so that they would receive the compensation they had earned.
5 166. Plaintiffs were prepared to collectively pay in the required capital if that was
6
what was required for them to actually receive their compensation.
7
8 167. TuneCores legal counsel continued to stonewall and prevent the exercise of the
9
options despite the following: (1) Atencio, Caterine and Price all believed the
10
11
options were wages and could not be taken once vested, (2) the options
12 specifically permitted them to be exercised before 2016, (3) Cogan had

13
confirmed / promised that Plaintiffs had until 2016 to exercise their options (4)
14
15 the exercise would be consistent with the agreements between the parties, and
16
(5) the exercise would be consistent with TuneCores own Letter of
17
18
Transmission.
19 168. On September 9, 2015, Pillsbury attorney Ronald A. Fleming collectively

20
advised both Atencio and Caterine that neither one of them would be allowed to
21
22 exercise their options nor would they be provided any compensation despite
23
being owed it.
24
169. Thus, it was not until September 2015 that it was known that, in fact, TuneCore
25
26 intended to defraud Plaintiffs, breach any and/or all agreements between them
27
and refuse to pay Plaintiffs their earned wages / compensation.
28

1 170. Left with no other alternative, Plaintiffs filed suit.
2
171. After suit was filed, TuneCore threatened to file a series of motions leading to a
3
4 meet and confer conference between counsel.

5 172. During the meet and confer, TuneCores counsel could not explain the Cogan
6
email confirming the ten year exercise period, other than to claim that Cogan
7
8 was mistaken and that he got it wrong even going so far as to suggest the
9
Cogan should be sued for negligently advising with regard to the options
10
11
expiration date.
12 173. When confronted with the fact that if what counsel was stating was true, that
13
Cogan then would have to be sued, TuneCores counsel instead admitted that
14
15 Cogan was on the TuneCore Board of Directors when the statements were made,
16
that Opus Capital did control TuneCore at the time and that Cogan was Opus
17
18
CEO.
19 174. Despite refusing to properly compensate either of Plaintiffs, Defendants have

20
simultaneously refused to publicly disassociate themselves from Plaintiffs
21
22 despite the fact that if they intended on doing so, they were required to do so in
23
writing.
24
175. They have not done so because Defendants want to both have their cake and to
25
26 eat it to remaining associated publicly and in name with Plaintiffs and so that
27
28

1 the public and artists do not know the truth about them while simultaneously
2
privately defrauding Plaintiffs.
3
4 176. To date, Plaintiffs have been defrauded of their compensation.

5 177. The Defendants remain in non-compliance with the law until this day.
6
178. Plaintiffs presented a spreadsheet containing a calculation of the value of their
7
8 stock and options to defendants and sought payment for those amounts.
9
179. Despite demanding only that to which they believed they were due under the
10
11
options (even though a breach of the contract by TuneCore would cause
12 TuneCore to owe them greater sums), TuneCore refused to pay Plaintiffs any of
13
their compensation.
14
15 COUNT I
Breach of Contract
16
(All Plaintiffs v. TuneCore)
17
18
180. Plaintiffs incorporate by reference Paragraphs 1 through 179 of the within
19 Second Amended Complaint as if more fully set forth at length herein.

20
181. Atencio agreed to a business arrangement under which TuneCore could use
21
22 Atencios name to promote the TuneCore business, as well as his time and
23
energy in promoting the company itself, in exchange for stock options.
24
182. Atencios status as a consultant and promoter continued until he filed the instant
25
26 lawsuit as he continued to honor the agreement that he had made with Jeff Price,
27
and that Jeff Price had made with him.
28

1 183. Atencios options were not terminated due to disassociation of the parties work
2
relationship and should have been made available until at least February and
3
4 August 2016 under the respective agreements.

5 184. But when Atencio tried to exercise his options in the fall of 2015, after receiving
6
only a pittance upon following the Letter of Transmittals directions, he was told
7
8 he could no longer exercise his options.

9
185. Similarly, Caterine entered into a business arrangement under which he agreed
10
11
to work at significantly reduced cash compensation in exchange for stock
12 options.
13
186. Caterines affiliation with TuneCore continued until he filed the instant lawsuit
14
15 as he continued to honor the agreement that he had made with Jeff Price, and
16
that Jeff Price had made with him which included his ongoing promotion and
17
18
support for the project.
19 187. Caterines options were not terminated due to disassociation of the parties work
20
relationship and should have been made available until at least 2016.
21
22 188. When Caterine attempted to exercise his options in the fall of 2015, after
23
receiving nothing following the Letter of Transmittals directions, he was told he
24
could no longer exercise his options.
25
26 189. TuneCore breached the contracts entered into with both Atencio and Caterine
27
causing them harm as more fully set forth at length herein.
28

1 190. Accordingly, Atencio and Caterine are entitled to be compensated for all of the
2
harm proximately caused from TuneCores improper actions.
3
4 191. TuneCore, through its then CEO Jeff Price, also agreed that although the
5 relationship between the parties was terminable at will, as part of Atencio and
6
Caterines compensation package, Price agreed that neither Atencio nor
7
8 Caterines relationship with the company would be ended, triggering any option
9
exercise period.
10
11
192. The employment agreement entered into between Price, Atencio and Caterine
12 did not include a definite term of years, but instead was terminable at the will of
13
the parties and, therefore, was not prohibited by the statute of frauds. Russell v.
14
15 International Alliance of Theatrical Stage Employees & Moving Picture

16
Machine Operators (1944, Cal App) 66 Cal.App.2d 691, 152 P.2d 737, 1944
17
18
Cal.App. LEXIS 1230.
19 193. Further, a contract for services for an indefinite period of time, to be paid for at
20
the termination of the relationship, is not within the statute of frauds. Mayborne
21
22 v. Citizens Trust & Sav. Bank (1920, Cal.App) 46 Cal.App. 178, 188 P. 1034,
23
1920 Cal.App. LEXIS 638.
24
WHEREFORE, for the foregoing reasons, Plaintiffs respectfully request that
25
26 judgment be entered in their favor and against Defendants in all respects, with
27
28

1 damages, punitive damages and costs of suit, or such other relief that the Court
2
deems appropriate.
3
4 JURY TRIAL DEMANDED

5
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

1 COUNT II
2
Quantum Meruit
3
4 194. Plaintiffs incorporate by reference Paragraphs 1 through 193 of the within

6
195. This Count is pled in addition to and in the alternative to the other counts herein.
7
8 196. As set forth herein, both Atencio and Caterine provided services for an extended
9
period of time to TuneCore from 2005 through 2016. TuneCore greatly
10
11
benefitted from the work they performed and the services they rendered.
12 197. Plaintiff Atencios services included but are not limited to the following:
13
a. 2005-2006 Approximately 200 hours of service - provided marketing
14
15 and promotion input, including developing strategies to obtain wide scale

16
adoption of the platform, positive PR avalanche / marketing, engaged in
17
18
meetings and calls;
19 b. 2007-2008 Approximately 100 hours of service - assisted in locating

20
buyer / investor, interacted with buyer / investor, assisted in closing
21
22 funding necessary for the companys continued operations, continued to

23
market the platform to cause its adoption, meetings, etc.;
24
c. 2009- Approximately 50 hours of service promoted and marketed the
25
26 platform, in person meetings, consultation with Caterine regarding the

27
28

1 ongoing marketing and promotional activities, artist rights issues /
2
payments, etc.;
3
4 d. 2010 Approximately 25 hours of service similar to the above;

5 e. 2011-2015 Approximately 500 hours of service that not only included
6
promoting and marketing the platform, but also assisted in locating a new
7
8 buyer / investor, continued to promote the platform through the transition

9
to new ownership.
10
11
198. Plaintiff Caterines services included provided substantial time to the project in
12 the form of day-to-day responsibilities over accounting and other functions as

13
well as promotion of the platform, including:
14
15 a. 2005 Approximately 500 hours of services, including accounting and

16
other type functions as well as co-creation of the companys black box
17
18
copyrightable model;
19 b. 2006 Approximately 500 hours of services, including accounting and

20
similar functions;
21
22 c. 2007 Approximately 2000 hours of service;

23
d. 2008 Approximately 2000 hours of service;
24
e. 2009 Approximately 2000 hours of service;
25
26 f. 2010 Approximately 2000 hours of service;

27
28

1 g. 2011-2015 Approximately 500 hours of service total, including various
2
consulting, promotion and, ultimately, assistance in locating a buyer /
3
4 investor.
5 199. TuneCore requested, by words or conduct, that Plaintiffs perform services for
6
the benefit of TuneCore.
7
8 200. All told, Plaintiff Caterine invested over 9000 hours into the project while
9
Atencio invested approximately 875 hours.
10
11
201. Plaintiffs performed the services as requested.
12 202. TuneCore has not paid Atencio for his services.

13
203. TuneCore paid Caterine half the value of his services.
14
15 204. Neither Atencio nor Caterine were provided with the reasonable value of their
16
services.
17
18
205. Plaintiffs are entitled to be compensated for the reasonable value of the services
19 they provided.
20
206. The option contract for Atencio called for Atencio to be paid a minimum of
21
22 $49,103.36 for the services that he provided. However, the reasonable value of
23
the services Atencio provided to TuneCore significantly exceeds that amount.
24
207. The services that Atencio provided are similar and in line with other services
25
26 that he has provided to his other clients. There, fees generally were paid on a
27
percentage basis typically between 17-20%.
28

1 208. The value of Atencios time, on a hourly basis, would also greatly exceeded the
2
value of the options even if a standard percentage calculation were not used.
3
4 209. Although the options contracts, had they been honored, would have provided a
5 lesser sum to Atencio, Atencio is entitled the actual reasonable value of the
6
services he provided given TuneCores refusal to honor any agreement he made
7
8 with them in accordance with his customary fee and/or such other sum that the
9
jury believes is reasonable for his services.
10
11
210. As set forth earlier, Caterine cut the cash component of the reasonable value of
12 his services in half, from $180 an hour to $90 an hour, causing him not to be
13
paid approximately $630,000 for the years 2005 through 2008.
14
15 211. The options contracts for Caterine for the work he performed from 2005 through
16
2008 called for Caterine to be paid less than the $630,000 that he was not paid,
17
18
in the minimum amount of $196,816.68 for the services he provided. However,
19 the reasonable value of the services provided to TuneCore significantly exceeds

20
that amount.
21
22 212. Although the options contracts, had they been honored, would have provided a
23
lesser sum to Caterine, Caterine is entitled to the reasonable value of the services
24
he provided given TuneCores refusal to honor the agreements that he made
25
26 with them in line with his customary fee and/or such other sum that the jury
27
believes is reasonable for his services.
28

1 213. Further, in the alternative to the breach of contract count above, the parties to the
2
contract, TuneCore (through CEO Jeff Price) on the one hand, Atencio and
3
4 Caterine (similarly situated) on the other hand, operated under a mutual mistake
5 of law.
6
214. All parties to the contract believed that the options being provided to Atencio
7
8 and Caterine were wages that could not be taken away once fully vested.
9
215. However, as the Court has concluded, the parties were all operating under a
10
11
mistake of law, because options are not wages.
12 216. The parties to the contract all misapprehended the law, all supposing that they
13
knew and understood it, and all making the substantially the same mistake as to
14
15 the law. Cal.Civ.Code 1578(1).

16
217. Accordingly, the contracts alternatively should be rescinded with Plaintiffs and
17
18
Plaintiffs should be entitled to the reasonable value of their services, which is
19 significantly greater than the value of the options contracts.

20
218. Given that Caterines copyrightable business model design was also procured
21
22 through the contract that has been breached and that can be rescinded due to
23
mutual mistake of law, Caterine should also be entitled to a reasonable sum of
24
royalties for the business model that TuneCore continues to use without
25
26 compensation to him.
27
28

1 219. Obtaining the services and intellectual property of Plaintiffs without proper
2
compensation to them has unjustly enriched TuneCore and, accordingly,
3
4 Plaintiffs are entitled to be compensated due to that unjust enrichment in an

5 amount to be determined at the time of trial.
6
220. Indeed, TuneCore succeeded and grew to a minimum value of $35 million
7
8 through Atencio and Caterines contributions that have not properly been
9
compensated.
10
11
221. Further, Atencio and Caterine have been harmed as they invested significant
12 time to ensure the success of the platform to the exclusion of them being able to
13
be first to market with a democratic music platform.
14
15 222. Plaintiffs should be properly provided royalties and/or incentive payments from
16
the ongoing use of the platform that they assisted in creating and that they have
17
18
not justly been compensated or rewarded.
19 WHEREFORE, for the foregoing reasons, Plaintiffs respectfully request that

20
judgment be entered in their favor and against Defendants in all respects, with
21
22 damages and costs of suit, or such other relief that the Court deems appropriate.
23
JURY TRIAL DEMANDED
24
25
26
27
28

1 COUNT III
2
Fraud / Intentional Misrepresentation / Fraud In the Inducement
3
4 223. Plaintiffs incorporate by reference Paragraphs 1 through 222 of the within

6
224. This Count is pled in addition and in the alternative to the above.
7
8 225. TuneCore promised to pay Plaintiffs as set forth above and herein.
9
226. In or about June 2013, an issue arose about the timing of the exercise of
10
11
Plaintiffs options.
12 227. Indeed, as set forth herein, although the options agreements called for a ten year
13
period to permit exercise.
14
15 228. At that time, Gill Cogan advised both Atencio and Caterine that they had until
16
2016 to exercise their options.
17
18
229. Both Atencio and Caterine relied on the statements made by Cogan.
19 230. It was justifiable for Atencio and Caterine to rely on Cogans statements, as they
20
were consistent with the options agreements themselves, with both California
21
22 and Massachusetts law and with the agreements that they had reached with
23
TuneCores CEO Jeff Price as they understood the law to be.
24
231. As a result of their justifiable reliance on Cogans statements, neither Plaintiff
25
26 brought a claim or filed suit in 2013.

27
28

1 232. Instead, to the contrary, they continued to promote the TuneCore brand and
2
remained on generally positive terms with TuneCore, with an open status as
3
4 consultants with the company.

5 233. Indeed, Cogan made those representations to cause that very result: the ongoing
6
cooperation of both Plaintiffs and to avoid any potential problems that would be
7
8 caused with attempting to sell the business to a third-party if there was an

9
ongoing dispute with founders of the company.
10
11
234. At the time, neither Atencio nor Caterine could know that Cogan was not telling
12 the truth or that there was a scheme to deny them their earned income.
13
235. Cogans statements were successful in fraudulently obtaining both ongoing
14
15 cooperation and also labor from both Plaintiffs.

16
236. In or about April 2015, TuneCore made representations to both Plaintiffs.
17
18
237. Indeed, in a letter of transmittal drafted by TuneCores attorneys, both Plaintiffs
19 were advised that their securities had been cancelled and they both had the
20
right to receive a payment in cash with regard to such outstanding securities.
21
22 238. Both Plaintiffs reasonably relied upon the statements made to them that they
23
would be paid cash for their securities, submitting the required forms and
24
identifying their stocks and options so that they could be paid.
25
26 239. Neither Plaintiff was properly compensated for their securities.

27
28

1 240. Indeed, to the contrary, Plaintiff Atencio was caused to surrender his shares of
2
stock under false pretenses.
3
4 241. So too was Caterine caused to surrender his shares of stock under false
5 pretenses.
6
242. Atencio was wired $11.51 for his shares (being caused a negative balance of
7
8 $5.49), but zero for his options.

9
243. Caterine was paid nothing for his shares or his options.
10
11
244. This is not a simple case of a failure to perform. To the contrary, the
12 circumstantial evidence discloses that TuneCore had intent to defraud Plaintiffs

13
and then did so.
14
15 245. Upon information and belief, Cogan had no intention of honoring the
16
representations he made to Plaintiffs in or about 2013.
17
18
246. Upon information and belief, TuneCore had no intention of honoring the
19 representations they made to Plaintiffs in or about April 2015 but instead needed
20
a scheme that would cause both Plaintiffs, and possibly others, to surrender their
21
22 stock to TuneCore.
23
247. Instead, the intent was to have both Plaintiffs rely upon false statements made by
24
TuneCore, and then defraud them out of their earned compensation so that the
25
26 money could be paid to someone else.

27
28

1 248. The entire reason the false statements were made to Plaintiffs by Cogan and
2
TuneCore were specifically so that Plaintiffs would rely on them.
3
4 249. Cogan and TuneCore intentionally misled Atencio, in particular, so that they
5 could continue fraudulently exploiting its association with him on an ongoing
6
basis, and to avoid the disclosure of the facts in this lawsuit.
7
8 250. The Defendant and/or its agents, servants and/or employees knew the
9
representations above were false when they made them, or conversely the
10
11
statements were made with a reckless disregard for the truth.
12 251. Plaintiffs justifiably relied upon the false statements.

13
252. Plaintiffs have been harmed and the reliance was a substantial factor in causing
14
15 the harm.
16
253. Further representations were also made that Plaintiffs justifiably relied upon
17
18
causing harm.
19 254. Although it is specifically denied that the statute of limitations bars Plaintiffs
20
claims, should it be determined that is the case, then the statements of Cogan in
21
22 2013, in particular, were intentionally designed so that that TuneCore could

23
formulate a statute of limitations defense, harm resulting if the claims were not
24
timely brought as a result of Cogans statements.
25
26 255. Defendant fraudulently induced both Plaintiffs to surrender their shares based
27
upon the false promise of payment.
28

1 256. The fraudulent agreement to secure Plaintiffs stock is therefore voidable at the
2
election of Plaintiffs.
3
4 257. Defendant also attempted to insert another unconscionable arbitration agreement

5 into the contract to provide Plaintiffs their cash.
6
258. That arbitration agreement / clause was both procedurally and substantively
7
8 unconscionable and was an attempt to impose terms on already earned wages.

9
Further, the unconscionable agreement seeks to impose costs and a forum that
10
11
are not conscionable.
12 259. In the alternative to the above, Plaintiffs elect to void the contract given that it
13
was induced by fraudulent misrepresentations.
14
15 WHEREFORE, for the foregoing reasons, Plaintiffs respectfully request that

16
judgment be entered in their favor and against Defendants in all respects, with
17
18
damages, punitive damages and costs of suit, or such other relief that the Court
19 deems appropriate.
20
JURY TRIAL DEMANDED
21
22 COUNT IV
Violations of Massachusetts Wage Payment Laws M.G.L. c. 149, s. 148
23
(Plaintiff Caterine v. TuneCore)
24
260. Plaintiffs incorporate by reference Paragraphs 1 through 259 of the within
25
26 Second Amended Complaint as if more fully set forth at length herein

27
28

1 261. For the period of time September 2005 through the award of his 2009 options on
2
or about November 10, 2009, Plaintiff Caterine was an employee as defined
3
4 under M.G.L. c. 149, s. 148.3

5 262. During that time period, Caterine worked nearly 7000 hours for TuneCore.
6
263. Plaintiff was only paid half the wages he was due as a result of the agreements
7
8 he made to reduced compensation in exchange for options.

9
264. However, TuneCore breached those agreements, and never truly provided him
10
11
with his options compensation as agreed.
12 265. Accordingly, Caterine has never been properly compensated for the hours that
13
he worked as an employee of TuneCore.
14
15 266. Plaintiff Caterine has been harmed by the non-payment of his wages as set forth
16
above and herein.
17
18
267. Had Caterine been paid his proper wages for the time periods that he was
19 employed in Massachusetts from 2005 through 2009, he would be entitled to

20
approximately $630,000 in compensation that has not been paid to him.
21
22 268. Pursuant to M.G.L. c. 149, s. 150, Plaintiff is entitled to treble damages under
23
the Act as well as attorneys fees.
24
25
26
3
27 Caterine was also an employee for periods beyond November 2009; however, the
Court ruled that disputes pertaining to Caterines 2009 options (and beyond) have been
28
referred to arbitration.

1 269. TuneCore cannot claim the benefit of a contract that it has breached in order to
2
reduce the wages owed to Caterine for services he rendered.
3
4
WHEREFORE, for the foregoing reasons, Plaintiff Caterine respectfully
5
6
requests that judgment be entered in his favor and against Defendants in all
7 respects, with damages, costs of suit and attorneys fees assessed, treble damages
8
and/or such other relief that the Court deems appropriate.
9
10 JURY TRIAL DEMANDED

11
12
13
14 DATED: November 14, 2016 ARCHINACO / BRACKEN LLC

15
16
By: /s/ Jason A. Archinaco
17
Jason Archinaco
18 Counsel for Plaintiffs
19
20
21
22
23
24
25
26
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28

Atencio, Cate v. Tunecore (Amended Complaint)

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Atencio, Cate v. Tunecore (Amended Complaint)

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JASON ARCHINACO,

State Bar ID Number: 284396

ATTORNEYS FOR PLAINTIFFS

IN THE UNITED STATES DISTRICT COURT

THOMAS ATENCIO, an adult Case No. 2:16-cv-01925-DMG-MRW

TUNECORE, INC., a corporation.

JURY TRIAL DEMANDED

8 Parties and Jurisdiction

15 State of California with a primary address of 29500 Heathercliff Road, #259,

19 the State of California.

22 principal place of business at 2711 Centerville Rd. Suite 400, Wilmington, DE

26 diversity of citizenship and the amount in controversy greatly exceeds $75,000.

SECOND AMENDED COMPLAINT IN CIVIL ACTION 2

8 properly compensate two of its founding members.

12 6. Plaintiffs are two well-known pro-artist music industry executives with a

19 helped to establish Lollapalooza, the international music festival. Atencio also

22 8. There is a significant barrier to entry in the music industry in terms of managing

SECOND AMENDED COMPLAINT IN CIVIL ACTION 3

4 box office receipts from their live performances.

12 legitimacy in the industry.

15 movement to democratize music.

22 executive at eMusic, a company that broke the former barriers to artists

SECOND AMENDED COMPLAINT IN CIVIL ACTION 4

19 21. However, to achieve legitimate recognition as a pro-artist company required

22 had recognized legitimacy in the industry.

SECOND AMENDED COMPLAINT IN CIVIL ACTION 5

4 of the first founders of the company.

8 25. In 2005, Plaintiff Atencio began consulting with the company.

26 others to assist in building, creating and promoting TuneCore the independent

SECOND AMENDED COMPLAINT IN CIVIL ACTION 6

4 trust was going to be nearly impossible to achieve in the music industry.

12 what he helped TuneCore to do, as he had done for other clients.

19 and, most significantly, he was one of the creators of TuneCores platform.

26 resources in the fledgling company.

SECOND AMENDED COMPLAINT IN CIVIL ACTION 7

4 Plaintiffs would be compensated.

12 different ways to create TuneCores brand, packaging, promotion and marketing

19 41. Beginning in September 2005, Plaintiff Caterine began providing consulting

SECOND AMENDED COMPLAINT IN CIVIL ACTION 8

SECOND AMENDED COMPLAINT IN CIVIL ACTION 9

SECOND AMENDED COMPLAINT IN CIVIL ACTION 10

4 change the music industry.

12 Industry, Smashes Old Business Convention With No Fee Distribution Model.

SECOND AMENDED COMPLAINT IN CIVIL ACTION 11

12 provided two additional option grants.

SECOND AMENDED COMPLAINT IN CIVIL ACTION 12

4 contacts, greatly assisting its efforts to obtain traction in the difficult-to-crack

19 but the company could not pay.

26 TuneCore in that while he would, from time to time be dismissed from

SECOND AMENDED COMPLAINT IN CIVIL ACTION 13

4 cause ever came to pass.

8 promotion of the platform even when dismissed from TuneCore remained

SECOND AMENDED COMPLAINT IN CIVIL ACTION 14

15 hours to the company on a day-to-day basis. Caterine was specifically tasked

SECOND AMENDED COMPLAINT IN CIVIL ACTION 15

8 Opus Capital and its Attorneys Enter the Scene

12 investment into TuneCore by Opus Capital.

15 Caterines direct assistance, secured an outside $7 million investment from Opus

22 that TuneCore retain OMelveny & Myers LLP (hereinafter OMM).

26 excellent and suggested that Price hire OMM to represent TuneCore.

SECOND AMENDED COMPLAINT IN CIVIL ACTION 16

4 scheme would be orchestrated to deprive people of their earned compensation.

8 simultaneously represented Opus and Cogan while also representing TuneCore.

19 to TuneCore / Price, including the fact that they were simultaneously