1 COMPLAINT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 EPPS YONG & COULSON, LLP 333 S. HOPE STREET, 35TH FLOOR, LOS ANGELES, CALIFORNIA 90071 TEL (213) 613-2340 • FAX (213) 613-2344 Dawn M. Coulson, Esq. (SBN 154085) Casandra P. Secord, Esq. (SBN 237395) EPPS YONG & COULSON LLP 333 S. Hope Street. 35 th Los Angeles, California 90071 Floor Telephone: (213) 613-2340 Facsimile: (213) 613-2344 Attorneys for OTX CORPORATION, a Delaware Corporation SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES OTX CORPORATION, a Delaware Corporation,, Plaintiff, vs. RACHEL PARNESS, an individual; CHRISTINE V. PERAKIS, an individual; SCREEN ENGINE, LLC, a California limited liability company; KEVIN GOETZ, an individual; and DOES 1 through 50, inclusive, Defendants, Case No.:BC COMPLAINT FOR: (1) Misappropriation of Trade Secrets (Violation of Civil Code Section 3426, et seq.); (2) Breach of Contract; (3) Breach of the Implied Covenant of Good Faith and Fair Dealing; (4) Breach of Fiduciary Duty; (5) Breach of Duty of Loyalty; (6) Violation of Labor Code § 2860; (7) Intentional Interference with Contractual Relations; (8) Intentional Interference with Prospective Economic Advantage; (9) Negligent Interference with Prospective Economic Advantage; (10) Conversion; (11) Unfair Business Practices (Business and Professions Code §17200, et seq.); (12) Violation of Penal Code §§ 496 and 499c (13) Conspiracy (14) Unjust Enrichment (15) Preliminary and Permanent Injunction Plaintiff OTX CORPORATION (“OTX”), a Delaware Corporation, alleges as follows:
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Dawn M. Coulson, Esq. (SBN 154085) Casandra P. Secord, Esq. (SBN 237395) EPPS YONG & COULSON LLP 333 S. Hope Street. 35th
Los Angeles, California 90071 Floor
Telephone: (213) 613-2340 Facsimile: (213) 613-2344 Attorneys for OTX CORPORATION, a Delaware Corporation
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
OTX CORPORATION, a Delaware Corporation,, Plaintiff, vs. RACHEL PARNESS, an individual; CHRISTINE V. PERAKIS, an individual; SCREEN ENGINE, LLC, a California limited liability company; KEVIN GOETZ, an individual; and DOES 1 through 50, inclusive, Defendants,
Case No.:BC COMPLAINT FOR: (1) Misappropriation of Trade Secrets (Violation of Civil Code Section 3426, et seq.); (2) Breach of Contract; (3) Breach of the Implied Covenant of Good Faith and Fair Dealing; (4) Breach of Fiduciary Duty; (5) Breach of Duty of Loyalty; (6) Violation of Labor Code § 2860; (7) Intentional Interference with Contractual Relations; (8) Intentional Interference with Prospective Economic Advantage; (9) Negligent Interference with Prospective Economic Advantage; (10) Conversion; (11) Unfair Business Practices (Business and Professions Code §17200, et seq.); (12) Violation of Penal Code §§ 496 and 499c (13) Conspiracy (14) Unjust Enrichment (15) Preliminary and Permanent Injunction
Plaintiff OTX CORPORATION (“OTX”), a Delaware Corporation, alleges as follows:
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1. OTX is a Delaware Corporation duly licensed and operating under the laws of the
State of California with its principal place of business located at 10567 Jefferson Boulevard,
Culver City, California 90232.
PARTIES
2. OTX alleges, upon information and belief, that defendant RACHEL PARNESS
(“PARNESS”) is and, at all times herein mentioned herein, was a resident of the State of
California, County of Los Angeles.
3. OTX alleges, upon information and belief, that defendant CHRISTINE PERAKIS
(“PERAKIS”) is and, at all times herein mentioned herein, was a resident of the State of
California, County of Los Angeles. OTX alleges, upon information and belief, that PERAKIS is
owner and managing member of SCREEN ENGINE, LLC (“SCREEN ENGINE”)
4. OTX alleges, upon information and belief, that defendant SCREEN ENGINE is a
California Limited Liability Company with its principal place of business located at 2118 Wilshire
Boulevard, Suite 480, Beverly Hills, California.
5. OTX alleges, upon information and belief, that defendant KEVIN GOETZ
(“GOETZ”) is and, at all times herein mentioned herein, was a resident of the State of California,
County of Los Angeles and is owner and member of SCREEN ENGINE.
6. OTX is ignorant of the true names and capacities of defendants, sued herein as
DOES 1 through 50, inclusive, and therefore sues these defendants by these fictitious names.
OTX will seek leave of this Court to amend its Complaint to allege their true names, identities and
capacities when ascertained. OTX is informed, believes and therefore alleges that each of the
fictitiously named defendants are responsible in some manner for the unlawful conduct alleged
and its effect and that their acts, conduct and omissions directly caused injuries to OTX.
7. At all times herein mentioned, OTX alleges, based upon information and belief,
that each of the defendants, in addition to acting for himself, herself, or itself and on his, her, or its
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own behalf individually, is and was acting as the agent, servant, employee and representative of,
and with the knowledge, consent and permission of, and in conspiracy with, each and all of the
defendants and within the course, scope and authority of that agency, service, employment,
representation, and conspiracy. OTX further alleges on information and belief that the acts of
each of the defendants were fully ratified by each and all of the defendants. Specifically, and
without limitation, OTX alleges on information and belief that the actions, failures to act,
breaches, and conspiracies alleged herein and attributed to one or more of the specific defendants
were approved, ratified, and done with the cooperation and knowledge of each and all of the
defendants.
GENERAL ALLEGATIONS
8. OTX is a leading consumer research and consulting firm specializing in research
products and analysis in the fields of marketing, entertainment and advertising. One integral
portion of OTX’s business caters to the motion picture industry. The consumer research and
consulting business for the motion picture industry is extremely competitive. Each year various
companies attempt to enter into this industry, but are unable to obtain a significant market share
because there are several obstacles to overcome. In order to succeed in this industry, a company
must have close connections in the motion picture industry, a deep understanding of the movie
industry and a history of research in the industry. The research history provides historical
averages (“norms”), a basis against which to compare the current research about a movie. Without
historical research (“norms”), a research screening company like OTX and Screen Engine, would
not be able to provide the information requested by the client (i.e. a comparison of the current
research results against similar movies). A company must also employ individuals who are
knowledgeable, experienced and accepted by members of the movie industry, which are very few
and far between.
OTX
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9. OTX’s Motion Picture Group specifically caters to the film industry. The Motion
Picture Group is organized into three (3) divisions: (1) Creative Ad Testing; (2) Screenings and
Qualitative; and (3) Worldwide Tracking. The Screenings and Qualitative primarily conducts
screenings of movies, exit polls, and research analysis for the motion picture industry. Screening
events and exit polls allow OTX to collect valuable information, which is ultimately used by
OTX’s clients to, amongst other things, gauge audience reaction, develop marketing strategies and
generate publicity for a movie.
10. GOETZ was the President of the Motion Picture Group prior to his resignation on
February 25, 2010. Goetz was primarily responsible for business development, revenue
generation and the overall profit of the Motion Picture Group. Goetz initiated and maintained
client relationships for screenings and qualitative work, and moderated screenings and focus
groups. Goetz was also in charge of and made final decisions regarding product development.
Kathleen Pielow Nash (“Nash”) was Goetz’ Executive Assistant.
11. Vincent Bruzzese (“Bruzzese”) is the Executive Vice-President of the Motion
Picture Group. Bruzzese is in charge of the day to day operations of the Motion Picture Group,
including all issues pertaining to structure, operations, employee complaints and training.
Bruzzese reported directly to GOETZ and, since GOETZ’ resignation, assumed all of GOETZ’s
former duties and responsibilities.
12. PARNESS headed the Screenings and Qualitative division of the Motion Picture
Group as Vice President. PARNESS reported directly to Bruzzese, although in reality, PARNESS
and GOETZ worked directly together on most matters related to screenings and qualitative.
13. As Vice-President of Screenings and Qualitative, PARNESS managed this
division’s finances and was primarily responsible for this division’s profit and loss. PARNESS
coordinated all internal resources in this division and had full access to all confidential and
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proprietary information and trade secrets used by the screenings division. OTX alleges, upon
information and belief, that PARNESS maintained an electronic screenings folder that only
PARNESS could access that contained confidential and proprietary information and trade secrets,
such as clients list, contracts, agreements, and pricing information. The qualitative research team
also reported directly to PARNESS, although OTX alleges, upon information and belief, that
PARNESS did not have a working knowledge of research or the appropriate research
methodologies to use for a particular project.
14. PARNESS was also the primary point of contact for all incoming
screenings/qualitative projects. PARNESS was solely responsible for inputting new screenings
projects, and modifications to existing screenings projects, into OTX’s screenings status grid. The
screenings status grid is an excel spreadsheet that OTX uses to track all prior and upcoming
screenings projects. The screenings status grid is critical. If PARNESS failed to input a screening
event into the screenings status grid, OTX’s staff would not know that they needed to work up this
screening event. If this were to occur, OTX could lose the screening, lose future business from
this client, and suffer damage to its reputations as a whole in an already competitive industry.
15. There were several key senior level staff members that reported directly to
PARNESS, including: (1) Alok Mishra (“Mishra”); (2) Robert Siegel (“Siegel”); (3) Paul
Cathcart (“Cathcart”); (4) Phillip Montgomery (“Montgomery”); and (5) Elizabeth Wallan
(“Wallan”). Neolani Durfee (“Durfee”) and Natalie Baack (“Baack”) reported directly to Cathcart
and, as such, were also under PARNESS’ supervision and control. Each of these employees
performs an important function and is integral to the success of OTX’s screenings business.
16. Mishra was the Senior Manager of Audience Recruitment. As the Senior Manager
of Audience Recruitment, Mishra was responsible for filling screening events with audience
members that satisfied specific demographic criteria requested by OTX’s clients. Mishra is a
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valuable OTX employee due to his experience, skill and knowledge of the industry. Mishra has
also developed a close relationship with OTX’s recruiting staff over the years because Mishra is
the main point of contact for OTX’s recruiters. Mishra is also well-known in the screenings
business, and is one (1) of two (2) individuals trusted in the industry to successfully manage
recruiting efforts for screening events.
17. Siegel was the Senior Manager of Screenings Events. As the Senior Manager of
Screenings events, Siegel was responsible for overall event management and supervision at
screenings. Over the years, Siegel has also developed a close relationship with most of OTX’s
screenings clients. OTX’s clients know that a screening event will run seamlessly if Siegel is
present. Siegel is one (1) of two (2) people in the industry that can provide this level assurance.
18. Durfee is a Senior Research Manager who is in charge of the night research team.
Durfee is responsible for processing data collected from screenings, which is ultimately used by a
team of analysts to prepare research analysis reports. The night research team is integral to OTX’s
success in the screenings business because it allows OTX to immediately process all of the data
collected at screening events and prepare research analysis reports for delivery to their clients by
the following morning. By processing data in-house, OTX is able to provide this service to its
clients. Durfee is extremely valuable to OTX because she is knowledgeable, experienced, and
talented at her position. Durfee produces high quality work, meets sensitive deadlines, and
effectively manages her team of freelance employees with little turnover.
19. Paul Cathcart (“Cathcart”) is a Senior Research Manager at OTX. Cathcart is in
charge of the research team and the overall quality of client deliverables, including data collected
from screenings and the final research report. Cathcart also develops the questionnaire for
screenings, answers client questions about research, builds the norms database, oversees special
research for screenings division, and updates the research methodology. Cathcart is very valuable
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to OTX’s screenings’ division because it is difficult to locate an individual who is sufficiently
proficient in market research and client service to perform all of the duties required of this
position. Even if OTX were to locate an individual with Cathcart’s skill set, it would take OTX
several months to train another employee to perform Cathcart’s duties.
20. Elizabeth Wallan (“Wallan”) is the Screenings Operations Manager. Wallan is
responsible for maintaining the screenings database, which contains all of the contact information
for audience members who have attended OTX’s screenings events. Wallan also built and
designed OTX’s call blast system, which allows OTX to send out a screenings invitation to all
individuals in OTX’s screenings database. Wallan is also in charge of all production materials for
screening events.
21. Josh Kash (“Kash”) and Terry Cavanaugh (“Cavanaugh”) are Focus Group
Moderators. Focus Group Moderators lead focus group discussions and are traditionally the main
point of client contact at screening events. Kash and Cavanaugh are two (2) of six (6) Focus
Group Moderators that are accepted by the major film studios. As such, Kash and Cavanaugh are
extremely valuable to OTX’s screenings team.
22. Blaine Vedros (“Vedros”) is one (1) of two (2) screenings supervisors at OTX, the
other being Siegel. Vedros is very charismatic and competent. As such, Vedros has developed
close relationships with OTX’s clients and OTX’s screenings and recruiting staff. Vedros is also
in training to become a focus group moderator.
23. Each of the employees mentioned herein are integral to the screenings division
because they have the skills, knowledge, experience and the relationships necessary to handle a
specific aspect of the screenings and qualitative research business. If OTX were to lose any of
these key employees, it would take several months, or in some cases years, to train another
individual to assume these key positions with the same degree of effectiveness. If all of these keys
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employees left at once, OTX’s screenings business would not survive. Even if OTX were able to
hire and train replacements, the mass exodus of OTX’s key personal would signal trouble to
OTX’s clients and staff, and damage OTX’s reputation. The disruption alone would also have
caused OTX to permanently lose many of its clients.
24. To compete with other consumer research and consulting firms, OTX devotes
substantial time and financial resources to the development of confidential and proprietary
information and trade secrets, including but not limited to online research and marketing data,
other analytic data based upon or derived from such online research and marketing data and
information concerning the financial condition, proprietary technology and research products,
customer lists and pricing, prospective business clients, business development plans and strategy,
financial records, vendor/supplier lists, employment manuals, training materials, screenings
attendee database, call blast system, employee and freelance contact lists, norms data, and various
screenings production materials.
25. In order to maintain its competitive edge in the consumer market research industry,
it is imperative for OTX to protect the secrecy of its confidential and proprietary information and
trade secrets, and to prevent the use and disclosure thereof by or to the public and its competitors.
Therefore, OTX expends substantial time and financial resources to maintain the secrecy of its
confidential and proprietary information and trade secrets. OTX does not disclose its confidential
and proprietary information and trade secrets to the public or its competitors, and did not do so at
any time relevant to this action.
26. OTX also implemented and enforces strict policies and procedures to prevent the
use and disclosure of its confidential and proprietary information and trade secrets by instituting,
among other measures, the signing of employment and/or Proprietary and Inventions Agreements
(“PII Agreement”) and the implementation of policies and procedures in OTX’s employment
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handbook. The employment agreements, PII Agreements and employee handbooks not only
notify OTX’s employees of OTX’s rights related to its confidential and proprietary information
and trade secrets, but also obtain written assurances from its employees that they will not
disseminate OTX’s confidential and proprietary information and trade secrets to the public, or use
or disclose OTX’s confidential and proprietary information and trade secrets to indirectly or
directly benefit themselves or any of OTX’s competitors.
27. On or about January 8, 2004, GOETZ and OTX executed an employment
agreement wherein GOETZ agreed to serve as OTX’s Executive Vice President of Entertainment
Research – Screenings and Qualitative from January 8, 2004 through December 31, 2006, subject
to the terms and conditions contained therein (the “2004 Employment Agreement”). The 2004
Employment Agreement is attached hereto as Exhibit “A.”
GEOTZ’ 2004 Employment Agreement
28. GOETZ’ duties and responsibilities as OTX’s Executive Vice President of
Entertainment Research – Screenings and Qualitative included, but were not limited to, (i)
implementation and supervision of OTX’s business plan for screenings, (ii) assistance with the
preparation and execution of OTX’s quarterly and annual budgets, (iii) management of screenings’
personnel, (iv) leadership of screenings business development, (v) management of relationships
with screenings clients, (vi) responsibility for driving screenings revenues, (vii) management of
screenings vendors and (viii) use of best efforts to seek innovations for screenings. See 2004
Employment Agreement Section 1.1(c) attached hereto as Exhibit “A.”
29. In order to prevent loss of its confidential and proprietary information and avoid an
employee later unfairly competing with OTX, Section 1.7 of the 2004 Employment Agreement
contains several restrictive covenants through which GOETZ recognized and acknowledged that
he had access to OTX’s confidential and proprietary information and trade secrets in order to carry
out duties owed to OTX. GOETZ agreed that he would protect the secrecy of OTX’s confidential
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and proprietary information and trade secrets, and that he would refrain from the use, disclosure
and misappropriation OTX’s confidential and proprietary information and trade secrets for his
own benefit or for the benefit of another person, business or legal entity.
30. GOETZ and OTX further agreed that the restrictive covenants contained in the
2004 Employment Agreement shall survive the termination of GOETZ’s employment with OTX.
See Section 1.7(j) of the 2004 Employment Agreement. In executing the 2004 Employment
Agreement, GOETZ and OTX recognized and agreed that the terms and conditions set forth in the
2004 Employment Agreement, “including the restrictive covenants set forth in Section 1.7,” were
“critical to the operations of the [OTX’s] business.” See Recitals in the 2004 Employment
Agreement attached hereto as Exhibit “A.”
31. Sections 1.6(j) and 1.7(f) of the 2004 Employment Agreement provide also for the
return of OTX’s property, including, but not limited to, all books, records, accounts, documents,
effects, money, securities, credit cards, and other property belonging to OTX upon termination of
GOETZ’s employment with OTX.
32. Section 2.2 of the 2004 Employment Agreement provides for the award of
reasonable attorneys’ fees and costs to the prevailing party in the event that an action or
proceeding is brought relating to, or to enforce any provisions contained in, the 2004 Employment
Agreement.
33. On or about January 1, 2007, GOETZ and OTX executed another employment
agreement whereby GOETZ agreed to serve as President of OTX’s Motion Picture Group (“MPG”
or “Screenings Division”) from January 1, 2007 to June 30, 2009, subject to the terms and
conditions set forth therein (the “2007 Employment Agreement”). The 2007 Employment
Agreement is attached hereto as Exhibit “B.”
GOETZ 2007 Employment Agreement
34. As President of OTX’s Screenings Division, GOETZ was uniquely responsible for
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the success, operations, customer relationships, and business strategy of OTX’s Screenings
Division. GOETZ’s duties and responsibilities included, but were not limited to, (i) development,
implementation and supervision of OTX’s business plan for the Screenings Division, (ii)
assistance with the preparation and execution of OTX’s quarterly and annual budgets, (iii)
management of Screenings Division personnel, (iv) leadership of the business development of the
Screenings Division, (v) management of relationships with Screenings Division clients, (vi)
responsibility for driving Screening Divisions revenues, (vii) management of Screenings Division
vendors, and (viii) use of best efforts to seek innovations for the Screenings Division.
35. By virtue of GOETZ’s position as President of OTX’s Motion Picture Group,
GOETZ had access to highly confidential and proprietary information and trade secrets belonging
to OTX, including, but not limited to, online research and marketing data, other analytic data
based upon or derived from such online research and marketing data and information concerning
the financial condition, proprietary technology and research products, customer lists and pricing,
prospective business, business development plans and strategy, financial records, vendor/supplier
lists, employment manuals, training materials, screenings attendee database, employee contact
lists, employee payroll information, research reports, norms data, and screenings production
materials.
36. In executing the 2007 Employment Agreement, GOETZ and OTX recognized and
agreed that the terms and conditions set forth in the 2007 Employment Agreement, “including the
restrictive covenants set forth in Section 1.7,” were “critical to the operations of [OTX’s]
business.” See Recitals in the 2007 Employment Agreement attached hereto as Exhibit “B.”
37. Furthermore, GOETZ agreed to the following restrictive covenants contained in
Section 1.7 of the 2007 Employment Agreement, which prohibits GOETZ from unlawfully
competing with OTX, using or disclosing OTX’s confidential and proprietary information and
trade secrets, and unlawfully soliciting OTX’s employees and customers:
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“(a) Non-competition. The Employee recognizes and acknowledges
that his services to the Company are of a special, unique and extraordinary
nature that cannot easily be duplicated. Further, the Company has and will
expend substantial resources to promotes such services and develop MPG.
Accordingly, in order to protect the Company unfair competition and to
protect the Company’s proprietary information, the Employee agrees that, at
all times during the Restricted Period, the Employee shall not, directly or
indirectly (i) perform or provide managerial or employee services on behalf
of any Person which is engaged in, or plans to engage in, any business that
directly or indirectly competes with the Company’s Business within the
United States and Canada; or (ii) have any interest in any business that
competes with the Company’s Business….
“(b) Confidential Information1. The Employee recognizes and
acknowledges that he has access to Proprietary Information2
1 “Confidential Information” shall mean any information belonging to or licensed to the Company, regardless of form, other than Trade Secrets, which is valuable to the Company and not generally known to competitors of the Company, including, without limitation, all online research and marketing data, other analytic data based upon or derived from such online research and marketing data and information concerning the financial condition, proprietary technology and research products, customer lists and pricing, business prospects and strategic plans of the Company, MPG and the Company’s Entertainment Divisions.” Section 1.8 of the 2007 Employment Agreement.
, which is a
valuable, special and unique asset of the of the Company’s business. In
order to obtain and/or maintain access to the Proprietary Information, which
Employee acknowledges is essential to the performance of his duties under
2 Proprietary Information” shall mean the Trade Secrets, the Confidential Information and all physical embodiments thereof, as they may exist from time to time. “Trade Secrets” means information belonging to or licensed to the Company, regardless of form, including, but not limited to, any technical or non-technical data, formula, pattern, compilation, program, device, method, technique, drawing, financial, marketing or other business plan, lists of actual or potential customers or suppliers, or any other information similar to any of the foregoing, which derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable or discoverable by proper means by, other persons who can derive economic value from its disclosure or use. Section 1.8 of the 2007 Employment Agreement.
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this Agreement, the Employee agrees that, except with respect to those
duties assigned to him by Company, the Employee: (i) shall hold in
confidence all Proprietary Information; (ii) shall not reproduce, use,
distribute, disclose, or otherwise misappropriate any Proprietary
Information, in whole or in part; (iii) shall take no action causing, or fail to
take any action necessary to prevent causing, any Proprietary Information to
lose its character as Proprietary Information; and (iv) shall not make use of
any such Proprietary Information for the Employee’s own purposes or for
the benefit of any person, business or legal entity (except the Company)
under any circumstances…3
(c) Nonsolicitation of Employees and Customers. At all times during the
Restricted Period, the Employee shall not, directly or indirectly, for himself
or for any other person: (i) employ, solicit, recruit or attempt to employ,
solicit, or recruit any employee of the Company to leave the Company’s
employment; or (ii) solicit or attempt to solicit any of the actual or targeted
prospective customers or clients of the Company with whom the Employee
had personal contact or about whom the Employee learned Confidential
Information on behalf of any person in connection with any business that
competes with the Company’s Business.”
“(d) Ownership of Developments. All Work Product4
3 Section 1.7(b) of the 2007 Employment Agreement.
shall belong
exclusively to the Company and shall, to the extent possible, be considered
a work made by the Employee for hire for the Company within the meaning
4 “Work Product” means all copy rights, patents, trade secrets, or other intellectual property rights associated with any ideas, concepts, techniques, inventions, processes, or works of authorship developed, modified or created by the Employee during the course of performing work for the Company or its clients.” Section 1.8 of the 2007 Employment Agreement.
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of Title 17 of the United States Code. To the extent the Work Product may
not be considered work made by the Employee for hire for the Company,
the Employee agrees to assign, and automatically assign at the time of
creation of the Work Product, without any requirement of further
consideration, any right, title, or interest the Employee may have in such
work product. Upon request of the Company, the Employee shall take such
further actions, including execution and delivery of instruments of
conveyance, as may be appropriate to give full and proper effect to such
assignment.”5
38. According to Section 1.7(j), the restrictive covenants contained in the 2007
Employment Agreement shall survive the termination of this Agreement.
39. Section 2.2 of the 2007 Employment Agreement further provides for the recovery
of reasonable attorneys’ fees and costs if any action or proceeding relating to this Agreement or
the enforcement of any provision of this Agreement is brought against any party.
40. Section 2.8 of the 2007 Employment Agreement further provides:
“Remedies Cumulative; Specific Performance. The rights and remedies of
the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that, in the event of any breach by any party to this
Agreement of any covenant, obligation or other provision set forth in this
Agreement for the benefit of any other party to this Agreement, such other
party shall be entitled (in addition to any other remedy that may be available
to it) to seek (a) a decree or order of specific performance or mandamus to
enforce the observance and performance of such covenant, obligation or
other provision, and (b) an injunction restraining such breach or threatened
breach.”
41. On or about July 1, 2009, GOETZ and OTX executed an amendment to the 2007
GOETZ’ 2009 Amendment
5 Section 1.7(d) of the 2007 Employment Agreement.
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Employment Agreement (the “2009 Amendment”). A true and correct copy of the 2009
Amendment is attached hereto as Exhibit “C.”
42. The 2009 Amendment extended the termination date of the 2007 Employment
Agreement from June 30, 2009 to December 31, 2009. According to the 2009 Amendment, all
terms used therein shall have the same meaning as the 2007 Employment Agreement.
Additionally, all terms provided in the 2007 Employment Agreement shall continue in full force
and effect, subject to the following terms:
“…Employee shall have the right to engage, nonexclusively, in any
business activities, provided that such activities are outside of the
entertainment market research areas which Employee currently engages in
on behalf of OTX, and provided further that such non-exclusive business
activities (i) do not interfere with the performance of Employee’s
responsibilities under the Agreement or (ii) conflict or compete with the
Company’s business as currently conducted. It is hereby expressly
understood and acknowledged between the parties that provided that there
is no use of the Company’s proprietary property or technology, the
ownership, results and proceeds of any such outside business activities shall
be the exclusive property of Employee, and Company shall have no right,
title or interest therein…”
43. From December 31, 2009 until GOETZ’ resignation on February 25, 2010,
GOETZ and OTX were operating under the 2007 Agreement pending the sale of OTX to Ipsos
(the “OTX-Ipsos deal”) and pending GOETZ’ negotiations regarding the terms of his future
employment with OTX and/or Ipsos.
44. PARNESS was employed as the Vice President of OTX’s Screenings and
Qualitative division from June 1, 2008 to February 28, 2010, at which time PARNESS resigned
from OTX. Prior to this time, PARNESS served as OTX’s Executive Director of Screenings
PARNES’ Employment With OTX
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from January 1, 2007 until June 1, 2008. PARNESS served as OTX’s Director of Operations in
the Screenings and Qualitative division from January 1, 2006 through January 1, 2007.
45. OTX alleges, upon information and belief, that by virtue of her employment with
OTX, PARNESS had access to and assisted in the development of OTX’s confidential and
proprietary information and trade secrets, including, but not limited, online research and
marketing data, other analytic data based upon or derived from such online research and
marketing data and information concerning the financial condition, proprietary technology and
research products, customer lists and pricing, prospective business, business development plans
and strategy, financial records, vendor/supplier lists, employment manuals, training materials,
screenings attendee database, employee contact lists, employee payroll information, research
reports, norms data, and screenings production materials.
46. On or about January 12, 2002, PARNESS executed a PII Agreement, a true and
correct copy of which is attached hereto as Exhibit “D.”
47. Under Section 1 of the PII Agreement, PARNESS agreed to hold OTX’s
confidential and proprietary information in the strictest confidence and to refrain from
disclosing, using, lecturing upon, or publishing any of OTX’s confidential and proprietary
information.
48. Under Section 2.5 of the PII Agreement, PARNESS agreed to assign to OTX all
rights, title and interest in and to any and all inventions and all proprietary rights with respect
thereto.
49. Under Section 5 of the PII Agreement, PARNESS agreed to return all documents
and other property belonging to OTX, including all originals and copies, upon termination of her
employment with OTX.
50. Under Section 6 of the PII Agreement, OTX shall have the right to enforce the PII
Agreement and any of its provisions by injunction, specific performance or other equitable relief.
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51. On or about July 19, 2004, PARNESS received OTX’s employment handbook
and acknowledge receipt of and acceptance of the terms contained in OTX’s employment
handbook. OTX’s employment handbook contains specific provision prohibiting unlawful
solicitation and the use and disclosure of OTX’s confidential and proprietary information and
trade secrets. A true and correct copy of the OTX’s employment handbook and PARNESS’
acknowledgement of receipt of the OTX’s employment handbook is attached hereto as Exhibit
“E.”
52. OTX alleges, upon information and belief, that on or about February 25, 2010 at
approximately 11:23 a.m., GOETZ abruptly and without any forewarning submitted his
resignation from OTX. A few minutes thereafter, GOETZ walked into the Human Resources
Department and handed in his corporate credit card and building access card. GOETZ
immediately walked out of OTX’s office and refused to stay to discuss his resignation, despite
OTX’s requests. As a result of GOETZ’ abrupt departure from OTX, OTX did not have an
opportunity to conduct an exit interview or collect company property from GOETZ.
GOETZ’ Resignation from OTX and Screen Engine
53. OTX alleges, upon information and belief, that GOETZ’ resignation was designed
to maximize the disruption and chaos to OTX’s business and internal operations. GOETZ
submitted his resignation on a day when a majority of OTX’s executives were outside the state of
California on pre-planned vacations, meetings and conferences, including OTX’s Chief
Executive Officer, Shelly Zalis (“Zalis”), Chief Financial Officer, Jeffrey Dean (“Dean”), and
GOETZ’ boss, Bruce Friend (“Friend”). GOETZ did not provide OTX an opportunity to make
any transitions, as is typically done when an employee resigns, because GOETZ abruptly left
OTX within minutes of submitting his resignation and refused to discuss his resignation with
anyone.
54. Shortly after GOETZ’ departure from OTX, Bruzzese received a press release
that announced GOETZ’ resignation from OTX to start a new company called SCREEN
ENGINE. According to the press release, SCREEN ENGINE would provide custom research
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and marketing products, and conduct screening research, exit polling and qualitative analysis for
the motion picture industry in direct competition of OTX’s Screenings and Qualitative Division.
55. OTX alleges, upon information and belief, that within minutes of leaving OTX,
GOETZ began to contact and solicit key employees within OTX’s screenings division for
SCREEN ENGINE, including, but not limited to, including Mishra, Siegel, Kash and Wallan. At
the time, PARNESS, Mishra, Siegel and Kash were in, or in route to, New York City and
Chicago to supervise screening events for OTX. OTX alleges, upon information and belief, that
GOETZ purposely announced his resignation on a day when these key employees were outside
of the state of California, and even directed Mishra to attend a press junket screening in New
York, so that GOETZ could freely solicit key employees.
56. OTX alleges, upon information and belief, that in each case, GOETZ initiated
discussions regarding employment opportunities at SCREEN ENGINE. GOETZ told these key
employees that he was starting a new screenings and research business named SCREEN
ENGINE. In order to create anxiety about their job security at OTX, GOETZ told these key
employees that SCREEN ENGINE would inevitably take all of OTX’s screenings and research
business due to GOETZ’ connections in the industry. GOETZ referred these key employees to a
website called Entertainmentcareers.net to locate positions available at SCREEN ENGINE and
encouraged them to submit an application. In many cases, the jobs that SCREEN ENGINE
posted did not match the positions that these key employees held at OTX; other postings were
designed to specifically describe an OTX key employee’s job. In other cases, it was unusual to
advertise the position to the general public (i.e. Focus Group Moderator) because the position is
traditionally filled by someone who is already well known and accepted by the industry. In an
attempt to claim he was not soliciting employees. GOETZ also asked these key employees to
submit resumes, even though GOETZ supervised and worked closely with these key employees
for several years and was fully aware of their relevant experience and skills.
57. OTX alleges, upon information and belief, that defendants publically advertised
the positions at SCREEN ENGINE and asked OTX’s employees to submit employment
applications and resumes in order to create the illusion that it was these key employees who
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solicited GOETZ for employment, as opposed to GOETZ soliciting these key employees to work
for SCREEN ENGINE.
58. OTX alleges, upon information and belief, GOETZ quickly set up “interviews”
with Kash, Siegel and Mishra the weekend after he resigned from OTX. Both GOETZ and
PERAKIS, GOETZ’s business partner, attorney and friend, met with Mishra, Kash and Siegel at
GOETZ’ home in Studio City. During these meetings, GOETZ and PERAKIS offered Mishra,
Kash, and Siegel the same positions that they held at OTX, at a base salaries, plus ‘equity’
interest that was projected to approximate what these employees made at OTX. OTX alleges,
upon information and belief, that GOETZ used OTX’s confidential and proprietary information
to learn Mishra, Kash and Siegel’s base salaries at OTX, and offered Mishra, Kash and Siegel
compensation packages, and other incentives, to induce them to work for SCREEN ENGINE.
59. OTX alleges, upon information and belief, that GOETZ and PERAKIS pressured
Mishra, Siegel and Kash to make a decision and submit their resignations to OTX as soon as
possible, preferably by Monday, March 1, 2010.
60. OTX alleges, upon information and belief, that GOETZ and PERAKIS pressured
Mishra, Siegel and Kash to submit their resignations because GOETZ and PERAKIS knew that
the success of SCREEN ENGINE (and downfall of OTX) depended upon their ability to secure
these key employees. GOETZ and PERAKIS did not want to provide OTX an opportunity to
talk with these key employees to stay at OTX. GOETZ and PERAKIS were also aware that, if
SCREEN ENGINE were able to secure Mishra and Siegel, the rest of OTX’s screenings staff and
clients would follow as Mishra and Siegel’s departure would have signaled trouble in OTX’s
screenings business.
61. On Sunday, February 28, 2010 at approximately 10:00 p.m., PARNESS abruptly
and without notice resigned from OTX. OTX alleges, upon information and belief, that
PARNESS resigned from OTX to join GOETZ and PERAKIS at SCREEN ENGINE under a
predetermined plan.
PARNESS’ Resignation from OTX
62. OTX alleges, upon information and belief, that PARNESS entered OTX’s
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building the night that she resigned to take confidential and proprietary information from OTX
and to destroy information and files.
63. Due to PARNESS’ weekend late night departure from OTX, OTX did not have an
opportunity to conduct an exit interview or retrieve any company property from PARNESS, as is
typically done with employees when they decide to leave OTX. OTX alleges, upon information
and belief, that PARNESS’ abrupt, weekend night departure was intentionally designed to cause,
and in fact did cause, disruption to OTX’s business. PARNESS was the head of OTX’s
Screenings and Qualitative division, and PARNESS’ abrupt departure and immediate resignation
denied OTX an opportunity to transition her duties in an organized manner.
64. OTX alleges, upon information and belief, that shortly after PARNESS’
resignation, PARNESS and GOETZ used OTX’s confidential employee contact list to call
Cathcart’s private home telephone number late Sunday evening and offer him employment at
SCREEN ENGINE. Cathcart would have been particularly useful to SCREEN ENGINE as
PARNESS does not have working knowledge of research and heavily relied upon Cathcart while
she was employed at OTX to prepare accurate research reports and field questions from the
client.
65. OTX alleges, upon information and belief, that in order to make it appear that
they were not soliciting OTX’s employees, PARNESS and GOETZ referred Cathcart to the
EntertainmentCareers.Net website and encouraged Cathcart to apply for the Research Manager
position. PARNESS and GOETZ also used fear and intimidation to convince Cathcart to apply
for the position at SCREEN ENGINE. PARNES and GOETZ told Cathcart that several key
screenings employees were leaving OTX to work for SCREEN ENGINE and that OTX’s
business would soon follow. PARNESS and GOETZ also used OTX’s confidential information
to offer Cathcart a salary that was slightly higher than OTX to further entice him to accept the
position at SCREEN ENGINE.
66. OTX alleges, upon information and belief, that Cathcart ultimately submitted a
resume to SCREEN ENGINE out of fear that he would lose his job at OTX.
67. OTX alleges, upon information and belief, that PARNESS and GOETZ also used
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OTX’s confidential and proprietary information to contact Durfee and Vedros, other key
employees of OTX, to discuss employment opportunities at SCREEN ENGINE. GOETZ and/or
PARNESS informed Durfee and Vedros that there were positions available at SCREEN
ENGINE and encouraged them to visit the EntertainmentCareers.Net website. GOETZ and/or
PARNESS also asked Durfee and Vedros to submit an application and resume, despite the fact
that both GOETZ and PARNESS were Durfee and Vedros’ supervisors at OTX, and GOETZ
and PARNESS were fully aware of Durfee and Vedros’ employment history and experience.
68. OTX alleges, upon information and belief, that GOETZ has repeatedly contacted,
and continues to aggressively pursue, Durfee since he initially contacted Durfee.
Defendants’ Conspiracy/Scheme and Use Of OTX Confidential Information to Raid
OTX’s Workforce and Take OTX’s Business
69. OTX alleges, upon information and belief, that defendants made efforts to start
SCREEN ENGINE several months before GOETZ and PARNESS resigned from OTX. In the
meantime, defendants plotted and schemed to unlawfully steal OTX’s confidential and
proprietary information and trade secrets, unlawfully compete with OTX, unlawfully raid OTX’s
employees, and unlawfully divert OTX’s business opportunities to SCREEN ENGINE. OTX
further alleges, upon information and belief, that defendants plotted and schemed to maximize
the disruption to OTX’s business operations and destroy OTX’s reputation in the industry in
order to benefit SCREEN ENGINE and ultimately themselves.
70. OTX alleges, upon information and belief, that in the months leading up to
GOETZ and PARNESS’ resignation from OTX, PARNESS made several unusual requests for
OTX’s confidential and proprietary information and trade secrets, including but not limited to
following:
• In approximately the middle of January 2010, PARNESS asked Montgomery to
update OTX’s Active Freelance Database for her. PARNESS also asked
Montgomery to include OTX’s senior staff, focus group moderators, and analysts.
The Active Freelance Database contains confidential information regarding
OTX’s screenings staff, recruiting staff, office staff, night staff, and New York
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staff, including their names, telephone numbers, email addresses, date of birth,
position/title, salary, and year to date earnings. The Active Freelance Database
had not been updated since December 2008. Montgomery made PARNESS’
revisions and renamed the document “Screenings Employee Database” as it now
included information regarding every employee in OTX’s screenings staff as
opposed to just the freelance employees. Although Montgomery emailed the
Screenings Employee Database document and location where to find it on the
OTX network server, PARNESS asked Montgomery to hand her a printed copy.
Pursuant to PARNESS’ request, Montgomery printed a hard copy of the
“Screenings Employee Database” and delivered it to her.
• In middle of January 2010, PARNESS asked the senior level employees of
screenings staff to create a master vendor list that included all pertinent
information regarding vendors that are used by the screenings division, including
their names, addresses, telephones numbers and pricing information.
• In middle of January 2010, at her request, OTX’s Human Resources Department
provided PARNESS 2009 salary information for OTX’s freelance staff.
• In middle of January 2010, PARNESS asked Mishra to provide her a hardcopy of
OTX’s recruiting manual.
• In late January 2010, PARNESS asked Mishra to update and provide her a copy
of the Movie Release Schedule for 2010 and 2011. PARNESS asked Mishra to
indicate which screenings were already taken by OTX/NRG and which screenings
were still available.
• On or about January 26, 2010, PARNESS asked Siegel to provide her a list of
issues to discuss with a screenings team before a screenings event.
• During the first week of February 2010, Parness asked Wallan to provide her
specific research reports for various screenings that occurred within the last four
(4) months, including, but not limited to, family screenings, focus group
screenings, normal screenings and critics screenings. Approximately two (2)
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weeks later, and shortly before PARNESS’ resignation, PARNES requested
additional research reports, including a copy of an unusual research report
prepared in PowerPoint.
• On or about February 11, 2010, PARNESS requested Wallan to provide her an
electronic copy of a screenings invitation template.
• Approximately two (2) weeks before PARNESS resigned from OTX, PARNESS
asked Mishra to print out a hardcopy of the active recruiter list, which includes
the names, telephone numbers, email addresses, and addresses of active recruiters.
• On or about February 18, 2010, PARNESS asked Wallan to provide her a copy of
an exit poll manual and banned list. The exit poll manual was created by OTX
and provides detailed procedures regarding exit polls for training and reference
purposes. The banned list contains a list of individuals who have been banned
from OTX screenings events over the years. The banned list would be very
helpful for a new screenings business to avoid admitting trouble makers and
unqualified audience members at screening events.
• At their request, Cathcart provided PARNESS and GOETZ OTX’s proprietary
normative data, including new kids normative data and updated normative data.
Cathcart also provide GOETZ materials for his presentation at FOX shortly
before GOETZ’ departure from OTX.
71. OTX alleges, upon information and belief, that since their resignation from OTX,
defendants have used OTX’s confidential and proprietary information and trade secrets and
insider information to unlawfully solicit and raid not only OTX’s key screening staff members as
fully described above, but also its freelance staff. As a result of defendants’ actions, OTX was
forced to substantially increase salaries and offer retention bonuses in order to persuade these
key employees to remain at OTX. OTX anticipates that it will have to continue offering raises
and bonuses to keep other employees if defendants continue to unlawfully solicit OTX’s
employees.
72. OTX alleges, upon information and belief, that defendants have also used
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employee contact lists to systematically solicit most, if not all, of OTX’s screening and recruiting
staff. OTX alleges, upon information and belief, that defendants contacted OTX’s screening and
recruiting staff at their private home and cellular telephone numbers, which only could have been
obtained through unauthorized access to OTX private and confidential employee contact list.
73. In order to convince OTX’s screenings and recruiting staff to work for SCREEN
ENGINE instead of OTX, OTX is informed and believes and on that basis alleges that
defendants have made disparaging and threatening remarks regarding the future viability OTX’s
screenings business and their overall job security at OTX. Defendants have also used OTX’s
confidential payroll information to further entice OTX’s screenings and recruiting staff to work
for SCREEN ENGINE by offering slightly higher compensation packages than OTX or promises
of a certain number of screenings. Defendants have successfully convinced many of OTX’s
screenings and recruiting staff to work for SCREEN ENGINE. If defendants are not enjoined
from continuing to solicit OTX’s screenings and recruiting staff, OTX anticipates that it will be
unable to work the screenings that is has and it will have to continue increasing pay to keep these
employees, whom GOETZ, PARNESS and PERAKIS would not know or be able to contact
but/for defendants having used OTX’s confidential information to contact the employees.
74. OTX alleges, upon information and belief, that defendants have also used OTX’s
confidential and proprietary information and trade secrets to attempt to hire OTX’s prospective
employees for SCREEN ENGINE, including George Zavier (“Zavier”). Although Zavier
interviewed and filled out hiring paperwork at OTX (which is not done unless a hiring decision is
made), PARNESS and GOETZ intentionally delayed the hiring of Zavier until they resigned
from OTX, at which point they used OTX’s confidential and proprietary information and trade
secrets to contact Zavier and offer him employment at SCREEN ENGINE instead.
75. OTX alleges, upon information and belief, that defendants used OTX’s
confidential and proprietary information and trade secrets to unlawfully and unfairly solicit
OTX’s clients, during and after their employment with OTX, including, but not limited to, FOX
and Universal.
76. OTX alleges, upon information and belief, that defendants took OTX’s confidential
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and proprietary information and trade secrets for the use and benefit of SCREEN ENGINE and in
order to negotiate comparable deals with OTX’s vendors, thus, allowing OTX to lose its
competitive edge. Moreover, shortly before GOETZ and PARNESS resigned from OTX, OTX
learned of vendors that could provide alternative ways to quickly and more cost effectively recruit
audience members to fill screening events. OTX negotiated pricing and other terms with these
vendors prior to GOETZ and PARNESS’ departure, which pricing GOETZ and PARNESS knew.
Immediately after GOETZ and PARNESS resigned from OTX, defendants used this confidential
and proprietary information to negotiate similar contracts for SCREEN ENGINE, as a brand new
company, with these vendors at rates that OTX, as an established business. OTX is informed and
believes that SCREEN ENGINE is now using these vendors to recruit audience members for
SCREEN ENGINE’s screening events.
77. OTX alleges, upon information and belief, that defendants plotted and schemed to
use OTX’s confidential and proprietary information and trade secrets to quickly and inexpensively
set up SCREEN ENGINE’s infrastructure, including, but not limited to, OTX’s employee contacts