SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ------X RIMYLAN ENTERPRISES, LLC, PROJECT Index No. APPLECART, LLC, TORMIMA, LLC, and MININO PRODUCTIONS, LLC, COMPLAINT Plaintiffs,
-against-
NO LABELS, INC., FORWARD NOT BACK, INC., UNITED FOR PROGRESS, INC., UNITED TOGETHER, INC., CITIZENS FOR A STRONG AMERICA, INC., GOVERN OR GO HOME, INC., AMERICANS COMMITTED FOR PROGRESS, INC., CITIZENS FOR AMERICA, INC., PROGRESS TOGETHER, INC., PATRIOTIC AMERICANS PAC, INC., NO LABELS ACTION, INC., PROGRESS TOMORROW, INC., and NANCY JACOBSON,
Defendants. ------X
Rimylan Enterprises, LLC (“Rimylan”), Project Applecart, LLC (“PAL”), Tormima,
LLC (“Tormima”), and Minino Productions, LLC (“Minino”) by their undersigned counsel, as and for their Complaint against Defendants No Labels, Inc. (“No Labels”), Forward Not Back,
Inc. (“Forward Not Back”), United For Progress, Inc. (“United For Progress”), United Together,
Inc. (“United Together”), Citizens For A Strong America, Inc. (“Citizens For A Strong
America”), Govern or Go Home, Inc. (“Govern or Go Home”), Americans Committed For
Progress, Inc. (“Americans Committed For Progress”), Citizens for America, Inc. (“Citizens for
America”), Progress Together, Inc. (“Progress Together”), Patriotic Americans PAC, Inc.
(“Patriotic Americans”), No Labels Action, Inc. (“No Labels Action”), Progress Tomorrow, Inc.
(“Progress Tomorrow”), and Nancy Jacobson (“Jacobson”), allege as follows:
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PRELIMINARY STATEMENT
No Labels owes Rimylan $3,708,214.26. Under a Binding Term Sheet, effective as of
December 3, 2016, Rimylan agreed to provide political data and analytic services exclusively to
No Labels in connection with the 2018 congressional primary elections. In exchange No Labels agreed to order and pay for $5 million in services from Rimylan during the 2018 election cycle – that is, before November 6, 2018. On June 19, 2018, No Labels unequivocally repudiated the
Binding Term Sheet. It did so after causing certain of its affiliates – a group of political action committees (“PACs”) and 501(c)(4) organizations formed to promote No Labels’ favored candidates – to order and pay for just $1,291,785.74 of services. After Rimylan informed No
Labels that it intended to sue for breach of contract, No Labels caused the PACs to gratuitously transfer substantially all of their assets – more than $4 million – to other entities that No Labels controls, thereby rendering the PACs judgment proof.
By their Complaint, Plaintiffs seek damages in the amount of $3,708,214.26 for breach of the Binding Term Sheet as against No Labels and as against each of the PACs as alter egos of No
Labels. Plaintiffs also seek an order nullifying as actually and constructively fraudulent the transfers by which No Labels stripped the PACs of assets with which to satisfy a judgment. In addition, Plaintiffs seek $958,450 as damages in quantum meruit for uncompensated extra- contractual services requested and accepted by Defendants. Plaintiffs further seek, in the alternative, approximately $3.7 million in damages against No Labels’ President, Nancy
Jacobson, for fraudulent inducement on the ground that she omitted to tell Rimylan that No
Labels did not intend to be bound by the Binding Term Sheet while repeatedly referring to that agreement prior to its execution as constituting a “guaranty” and a “commitment” of No Labels.
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PARTIES
1. Plaintiffs Rimylan, PAL, Tormima, and Minino are affiliated Delaware limited liability companies doing business under the tradename “Applecart”. Applecart is a technology company that provides political data and analytic services.
2. No Labels is a 501(c)(4) organization incorporated in Washington D.C. It describes itself as a “nonpartisan political organization whose mission is to combat partisan dysfunction in politics.”
3. Forward Not Back, United For Progress, United Together, Citizens For A Strong
America, Govern or Go Home, Patriotic Americans, No Labels Action, and Progress Tomorrow are political action committees (“PACs”) affiliated with No Labels. Each is a Delaware corporation.
4. Americans Committed For Progress, Citizens for America, and Progress Together are 501(c)(4) organizations affiliated with No Labels. Each is a Delaware Corporation.
5. Jacobson is a founder and the President of No Labels.
JURISDICTION AND VENUE
6. This Court has jurisdiction over Defendants pursuant to Sections 302(a)(1),
302(a)(2), and 302(a)(3) of the CPLR because each of them transacts business within the
State of New York or transacted such business throughout the relevant time period, each of them committed tortious acts within the State of New York, and each of them committed acts which caused injury within the State of New York.
7. Venue is proper in New York County pursuant to Sections 503(c) because
Plaintiffs’ principal office is located in New York County.
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FACTUAL BACKGROUND
8. Applecart is a technology company that provides political data and analytic services. It uses publicly available social data and technology to motivate people to vote and to persuade people to vote for less uncompromisingly partisan, more solutions-oriented politicians.
9. In 2013, Applecart was founded by Matthew Kalmans (“Kalmans”) and Sacha
Samotin (“Samotin”). Applecart’s founding mission was to develop political data and analytic services designed to help moderate and centrist candidates get elected to state and federal offices.
Applecart is Introduced to No Labels
10. In mid-2013, Applecart was introduced to No Labels’ President, Nancy Jacobson
(“Jacobson”) by former Utah Governor Jon Huntsman, then one of No Labels’ “Honorary Co-
Chairs”. Huntsman had previously employed Samotin on his 2012 campaign for the Republican nomination for President of the United States. The purpose of the introduction was to see if No
Labels might be interested in funding a pilot of Applecart’s technology.
11. Jacobson met with Samotin and Kalmans on September 20, 2013. Shortly after the meeting, Kalmans wrote to Jacobson that Applecart was “very excited about the synergy between our goals and those of No Labels and the impact that we can have together”.
12. Jacobson proceeded to introduce Samotin and Kalmans to a number of then- current and prospective financial supporters of No Labels over the following months, including donor Andrew Bursky (“Bursky”), then and now a member of No Labels’ Board of Directors.
13. No Labels entered into a non-disclosure agreement with Applecart on November
7, 2013 for the purpose of performing due diligence on Applecart’s technology.
14. A “deep dive” was conducted by representatives of No Labels, in No Labels’
Washington, DC offices, on November 13, 2013, and over e-mail over the preceding and subsequent week.
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15. On November 19, 2013, No Labels provided Applecart with a draft, non-binding
“terms sheet”, requiring, among other things, that any agreement with Applecart contractually guarantee that “Applecart will not provide it’s services in primary elections without No Labels permission for until 2019”.
16. Applecart and No Labels’ representatives including Jacobson and Bursky exchanged several proposed revisions of the term sheet, including a revision from No Labels on
December 1, 2013, which provided that “neither PA [Applecart] nor any of the Founders would provide, or begin negotiations with any third party to provide, the PA Strategy or any related services for any primary election in any even numbered year without the prior written consent of
NL [No Labels]…”.
17. No Labels’ December 1, 2013 draft term sheet also insisted that “PA would grant to NL a perpetual, non-exclusive, fully paid, royalty-free, non-assignable (except to a related organization) license to use the PA Strategy (including any updates, improvements, extensions and new technologies) and any PA deliverables in connection with any Campaign, whether or not subject to any Project Supplement. The license would include the rights to (a) sublicense
NL’s related organizations, (b) utilize outside vendors, consultants and other third parties, as well as in-house resources, for implementation of the PA Strategy, and (c) reproduce, modify, make derivative works based upon, distribute and otherwise deal with any PA deliverables as reasonably required in connection with the use of the PA Strategy by NL and its related organizations. For purposes of the foregoing, any organization that controls, is controlled by or is under common control with NL would be deemed to be a related organization.”
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18. On December 5, 2013 Samotin spoke to Jacobson over the phone and let her know that Applecart was not interested in proceeding with a relationship with No Labels due to concerns about the restrictive nature of No Labels’ exclusivity requirements.
Applecart Finds Other Sources Of Funding And Is Reintroduced To No Labels
19. In early 2014, Kalmans and Samotin pitched Applecart’s services to a representative of the Republican Governors Association (“RGA”). An affiliate of the RGA funded a study to test the effectiveness of Applecart’s techniques.
20. Later that year, Applecart was hired by an affiliate of the RGA to help with two gubernatorial general election campaigns. Both candidates won their elections by very narrow margins, with unexpectedly high turnout.
21. That same year, Applecart was hired by an organization supporting the senatorial campaign of Dan Sullivan in Alaska. Sullivan also won his election by a narrow margin.
22. Applecart’s track record of success came to the attention of Marc Rowan
(“Rowan”), a co-founder of Apollo Global Management and a donor to No Labels. Rowan re- introduced Kalmans and Samotin to Jacobson.
23. In mid-2015, No Labels hired Applecart to organize a convention of independent voters in the State of New Hampshire in connection with the 2016 presidential election, which was attended by a number of Presidential candidates, including now President Donald Trump.
24. At around the same time, Applecart began working for the presidential campaign of John Kasich.
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Rimylan Runs Two Test Cases For No Labels
25. After the New Hampshire convention, Jacobson contacted Kalmans and Samotin to discuss next steps for No Labels and how No Labels and Applecart could work together in the
2016 campaign cycle. Kalmans and Samotin recommended that No Labels establish one or more super PAC – that is, a PAC that is permitted to spend unlimited amounts of money to elect and defeat candidates in federal elections – to support moderate candidates in Congressional primary elections, and specifically in “safe seats” where the primary winner would likely win in the general election.
26. Jacobson followed up with Kalmans and Samotin several times over the following months.
27. In October 2015, Kalmans and Samotin proposed to Jacobson that No Labels hire
Applecart to demonstrate the impact of their strategy for supporting moderate candidates in congressional primaries in two such races, one Republican and one Democrat.
28. In May 2016 Jacobson agreed to this proposal and selected two of several races proposed by Applecart. One, to support moderate Roger Marshall against three-term incumbent
Freedom Caucus leader Tim Huelskamp in the Republican primary election in the First
Congressional District of Kansas. The other, to support moderate Darren Soto to succeed far-left incumbent Alan Grayson in the Democratic primary in the Ninth Congressional District in
Florida.
29. No Labels formed two super PACs to support the elections of Marshall and Soto:
Strong Leadership for America (“SLA”) and Concerned Citizens for America’s Future
(“CCAF”).
30. No Labels established the super PACs because it, as a 501(c)(4) organization, is subject to limits on how much of its budget can be spent on political activities.
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31. No Labels also established the super PACs so that their work on behalf of
Marshall and Soto would not be tied to No Labels, a bipartisan organization, because such an association was thought likely to be unhelpful in a partisan primary election.
32. No Labels established separate super PACs for Marshall and Soto so that the work of one, on behalf of a Republican, would not be tied to the work of the other, on behalf of a
Democrat.
33. SLA and CCAF each entered into a Consulting Services Agreement (“CSA”) and
Statement of Work (“SOW”) with Rimylan.
34. In August 2016, Marshall and Soto both won their elections.
35. At Jacobson’s invitation, Kalmans and Samotin presented a summary of their work on the Marshall and Soto races at a meeting of No Labels’ executive council on September
21, 2016.
36. At the September 21 meeting, billionaire investor and businessman Nelson Peltz
(“Peltz”), a member of No Labels’ executive council, proposed that No Labels launch a $50 million campaign to promote the election of moderate candidates in the 2018 Congressional primaries. Peltz described his proposed initiative as a scaling-up of the 2016 effort run by
Applecart.
Negotiation Of The Binding Term Sheet
37. After the September 21 meeting Jacobson invited Kalmans and Samotin to discuss Peltz’s proposed initiative with Bursky.
38. On November 17, 2016, Kalmans and Samotin spoke by telephone with Jacobson and Bursky. Bursky and Jacobson told Kalmans and Samotin that No Labels wanted Applecart to agree to work exclusively for No Labels during the 2018 Congressional primary campaign cycle. In response, Kalmans told them that Applecart was open to such an arrangement because
8 of the two organizations’ political alignment, but that exclusivity was a “big deal” because (i) giving exclusivity would require Applecart to forego other potentially lucrative opportunities that were presenting themselves to Applecart after its success in the 2016 election cycle, and because
(ii) Applecart would incur the expense of keeping on and potentially hiring additional staff to work on building the infrastructure for the 2018 effort in the non-election year. Samotin reminded Bursky that terms involving exclusivity were the reason that the parties did not reach an agreement in 2013. In reply, Bursky and Jacobson told Kalmans that No Labels would guarantee a minimum of $5 million of business.
39. On November 21, 2016, Kalmans sent an email to Bursky and Jacobson summarizing his understanding of the potential arrangement. The email stated in relevant part:
Great to speak with you both the other day. At Nancy’s request, we just wanted to follow up with a summary of our understanding from the call of the potential arrangement we discussed and next steps:
Summary
No Label hopes to raise $25-50 [million] to fund a scaled version of the Applecart-led 2016 No Labels SuperPAC pilot effort to deploy in 2018 federal election contests.
NL would like to retain Applecart to lead the 2018 effort, but would like to do so with an understanding that NL will have exclusive use of Applecart’s services in 2018 U.S. House primary contests.
Given that the effort is still in its planning stages, NL would be prepared to provide Applecart a minimum guarantee of $5M of business between now and the end of the 2018 U.S. House primary cycle in exchange for Applecart’s commitment to this arrangement upfront. . .
Applecart expects that this effort will need to begin in earnest in early 2017.
40. Jacobson replied by email, stating “This looks right to me.”
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41. Bursky also replied by email, stating of Kalmans’ summary: it “captures our discussion well”.
42. On or about November 30, 2016, Jacobson asked Kalmans and Samotin to speak at a No Labels donor conference in Washington D.C. on December 5th where No Labels planned to announce the arrangement. In response, Kalmans told Jacobson that they would not be comfortable announcing the arrangement publicly unless No Labels first entered into a binding contract making the agreement enforceable. Kalmans explained to Jacobson that publicly aligning with No Labels, a bipartisan organization, would foreclose Applecart from working with some partisan-clients and that even though Applecart was aligned with No Labels’ professed mission of electing and defending moderates, Applecart would not agree to publicly affiliate exclusively with No Labels without a binding contract, especially in light of Applecart’s past experience negotiating with No Labels.
43. That same day, Jacobson instructed No Labels’ outside counsel, Charles Spies
(“Spies”) of Clark Hill PLC, to prepare a contract.
44. On December 1, 2016, Spies sent a draft contract to Jacobson, which she forwarded to Kalmans and Samotin. In his transmittal email, which Jacobson also forwarded,
Spies stated: “Because this is between unknown entities that would end up being the clients, there are some uncertainties.”
45. The “Minimum Commitment” provision of Spies’ draft contract stated that No
Labels “commits to use best efforts to have itself and allied entities provide Consultant with a minimum of $5 Million worth of consulting services through the end of the 2018 U.S. House primary election period.”
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46. As reflected in Spies’ email and draft contract, the parties understood that yet
“unknown” “allied entities” affiliated with No Labels would purchase consulting services from the Rimylan Entities as part of No Labels’ minimum guarantee of $5M of business.
47. The parties expected No Labels to form super PACs to purchase services from
Rimylan, as it had done in the Marshall and Soto races.
48. Kalmans proposed that instead of using Spies’ draft contract the parties sign a
“binding term sheet” that “stipulates to the terms of exclusivity” and that would “allow NL to move forward with announcing” the agreement at its December 5 donor conference.
49. Jacobson agreed.
50. On December 2, Kalmans sent a draft “Binding Term Sheet” to Bursky and
Jacobson under cover of email stating: “As discussed, we asked our counsel to take a stab at drafting a straightforward, binding term sheet to memorialize the terms we discussed, as we understand them.”
51. Bursky asked Kalmans to remove from the draft a “Confidentiality, Publicity” provision restricting the parties’ rights to publicizing the existence or terms of the Binding Term
Sheet. In making that request, Bursky wrote: “It is important to our PR and fundraising efforts to be permitted to announce the existence of this agreement and the fact that it is exclusive.”
52. Kalmans agreed to remove the “Confidentiality, Publicity” provision in reliance on No Labels’ minimum guarantee of $5M of business.
53. The parties exchanged one additional draft correcting typographical errors before finalizing an execution copy of the Binding Term Sheet.
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54. Each of the three drafts of the “Binding Term Sheet” included an unqualified
“Minimum Spend” provision stating in relevant part “Client shall order and pay Consultant for at least $5,000,000.00 for all Services . . . not including expenses.”
55. Jacobson was carbon copied (cc’ed) on each of the emails between Kalmans and
Bursky by which they negotiated the terms of the Binding Term Sheet.
56. Spies and two additional No Labels supporters, Jim Stanard and Bradley Bloom, were also copied by Jacobson on the e-mail exchange.
57. Neither Bursky nor Jacobson objected to designating the term sheet “binding”.
58. Neither Bursky nor Jacobson objected to the use of the unqualified term “shall” in the Minimum Spend provision.
59. Neither Bursky nor Jacobson told Kalmans or Samotin that the Binding Term
Sheet or its Minimum Spend provision was “aspirational”.
60. Neither Bursky nor Jacobson told Kalmans or Samotin that No Labels did not intend to be bound by the Binding Term Sheet.
61. In pre-signing discussions, Bursky and Jacobson consistently referred to the
Minimum Spend obligation as a “guarantee” and “commitment”.
62. The Binding Term Sheet memorialized an overarching agreement between
Rimylan and No Labels: that Rimylan would work exclusively for No Labels in the 2018
Congressional primary elections in exchange for a guarantee of at least $5 million of business.
63. It was understood that No Labels would form super PACs to purchase services from Rimylan to satisfy its obligations under the Minimum Spend provision.
The Binding Term Sheet
64. On December 4, 2017, the parties exchanged signed copies of the Binding Term
Sheet, a copy of which is appended hereto as Exhibit A.
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65. The Binding Term Sheet states in relevant part:
BINDING TERM SHEET December 3, 2016 (“Effective Date”)
This Binding Term Sheet (“Term Sheet”) summarizes the terms and conditions of an agreement between Rimylan Enterprises, LLC, a Delaware limited liability company (“Consultant”) and No Labels, Inc., a 501(c)(4) nonprofit organization (“Client”). This Term Sheet is effective as of the Effective Date and continues for the duration of the Term (as defined below), unless the parties enter into an Agreement (as defined below) which expressly supersedes this Term Sheet.
Summary The parties desire to memorialize the terms and conditions of their agreement regarding Consultant’s performance of political data and analytics consulting services (“Services”) for Client throughout the 2018 election cycle (e.g., until November 6, 2018) (“Term”), as such services are set forth in one or more statements of work that are executed by the parties (each, an “SOW” and collectively the “SOWs”). Such SOWs will be subject to a Consulting Services Agreement (“Agreement”) to be entered into by the parties, which agreement will be substantially similar to Consultant’s standard Consulting Services Agreement. The parties shall use good faith and commercially reasonable efforts to reach mutual agreement on the terms and conditions of such Consulting Services Agreement within sixty (60) days of the Effective Date. The parties intend for the Agreement and first SOW to be executed, and the Services to begin, by January 31, 2017.
Exclusivity During the Term, and subject to Client’s compliance with the terms and conditions of this Term Sheet, the Agreement, and the SOWs: Consultant shall not perform, for any third party, Services relating to the 2018 U.S. House of Representatives primary election contests, unless approved in writing (email sufficing) by Client; and Consultant will notify Client prior to agreeing to perform Services for another client in a U.S. Senate primary, U.S. House of Representatives general election, or U.S. Senate general election . . .
Minimum Spend During the Term, Client shall order and pay Consultant for at least $5,000,000.00 for all Services (including, but not limited to, those services related to the U.S. House of Representatives primary election), not including expenses. . .
. . . Client expects to spend on Services (not including expenses) to equal approximately thirty percent (30%) of all contributions obtained during the Term.
Client shall pay Consultant a down payment of $250,000.00 within thirty (30) days of execution of the first SOW. . .
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No Labels Announces Its 2018 Super PAC Campaign
66. On December 5, 2016, No Labels convened a donor conference in Washington,
D.C. to announce its 2018 super PAC campaign.
67. Before the conference, on December 4, No Labels hosted a dinner for its largest donors at the Georgetown Club. At a pre-dinner reception, Jacobson and Bursky introduced
Kalmans and Samotin to numerous donors and members of Congress as working exclusively for
No Labels. Marshall and Soto were asked to address the convened donors. During his address,
Marshall credited Kalmans and Samotin for their role in his unexpected victory and invited them to come to the front of the room for a round of applause. At Jacobson’s request, Kalmans and
Samotin made a presentation to the donors about their past work on the Marshall and Soto races during the prior election.
68. The next day, Kalmans and Samotin attended a meeting of No Labels’ executive council to answer questions about the Marshall and Soto races. After the meeting, Kalmans made another presentation about Rimylan’s work to a group of approximately 200 donors, business people, and politicians.
69. On December 4, 2017, the Wall Street Journal published an article announcing the
No Labels Super PAC effort titled “Group Launches Effort to Protect Moderate Candidates From
Primary Challenges.” Based on interviews with Peltz, and No Labels’ Chief Strategist’ Ryan
Clancy (“Clancy”), the article reported the following:
A group called No Labels is launching a coalition of super PACs that aims to raise $50 million to support centrist lawmakers in Congress by promising to protect them financially in the 2018 election . . . On Monday, 200 business leaders and another 40 members of Congress are convening in Washington to discuss the effort . . . The super PACs will focus on boosting turnout of moderate voters in primaries, rather than general-election battles . . . During the 2016 elections, No Labels tested its theory in two
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House races. In Kansas and Florida, the group spent a total of $1 million backing a Republican and a Democrat, respectively, in their primary battles. The funds were spent on voter-outreach technology and mailers aimed at boosting voter turnout among moderate voters. In both races, turnout rose - and No Labels’ preferred candidates won. In 2018, the coalition of super PACs will likely target more than two dozen races, Mr. Peltz said in an interview.
Bursky And Jacobson Repeatedly Reaffirm The Binding Term Sheet
70. Coming away from the December 5 donor conference, it was No Labels’ strategy to develop a “Most Wanted List” of obstructionist lawmakers to target in primary campaigns by recruiting and supporting more moderate opponents. This strategy was proposed by Peltz as the best way to raise funds and to interest others in No Labels’ mission.
71. Jacobson asked Kalmans and Samotin to come up with a “Most Wanted List” and to prepare a plan for No Labels’ 2018 super PAC strategy.
72. On December 27, Kalmans sent Jacobson a 11-page memo titled “PAC
Preliminary Most Wanted List,” outlining a methodology for identifying the targets requested by
Peltz, as well as a specific list of Members of Congress identified as good targets for No Labels’ efforts, per Applecart’s analysis.
73. On January 6, Kalmans sent Jacobson a fifty-slide PowerPoint deck titled “No
Labels 2018 SuperPAC Roadmap” (the “Roadmap”). Among other things, the Roadmap included a time line and budget for the initiative.
74. The time line and budget proposed in the Roadmap planned for work to begin in
February 2017, as the parties expressed a mutual intent to do in the Binding Term Sheet.
75. On January 7, 2017, Jacobson sent an email to Kalmans telling him that she thought No Labels would not look to do any work in 2017. She also wrote: “I do look to you all
15 being the hub of the operation working with Ryan Clancy closely. Thank you for all you do.
You are family - we trust you - we respect you immensely - and really like working with you.”
76. Kalmans replied expressing concern that postponing work to scale up the effort until 2018 would make it difficult to meet the expectation of No Labels’ donors that No Labels deliver results as successfully as it had in the Marshall and Soto races.
77. Jacobson replied, acknowledging No Labels’ $5 million spending commitment.
She wrote: “You are terrific we will get there We probably have to have a 10 million dollar plan and 15, 20-30 40 and 50[.] The point is besides the 5 million we committed we really can’t plan above 10 million at this time because I don’t at this junction know where the money will above that will come from.”
78. On January 26, 2017, Kalmans and Samotin met with Jacobson and a No Labels donor Andrew Sugrue at the Harvard Club in New York City to discuss No Labels’ super PAC strategy. In that conversation Jacobson proposed a new focus for the PAC effort that relied on supporting incumbents in General Elections, instead of challenging obstructionists. Kalmans and
Samotin verbally disagreed with Jacobson’s strategy, disputing its feasibility within the low-cost budget proposed to donors, as well as its impact in elections where spending is dominated by significantly better funded party committees and other outside groups. Jacobson pulled Kalmans and Samotin aside. During the ensuing discussion, Kalmans and Samotin reminded Jacobson that under the Binding Term Sheet the first SOW was expected to be executed by January 31,
2017, and that a $250,000 down payment was to be made within thirty days thereafter.
79. In response, Jacobson told Kalmans and Samotin that she did not sign the Binding
Term Sheet, that the deal was between them and Bursky, and that if a down payment was due,
Bursky could pay for it himself.
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80. Kalmans and Samotin were stunned. The executed Binding Term Sheet, which was emailed from Jacobson’s office, appears to bear her signature.
81. Later that day Jacobson sent an e-mail to Kalmans and Samotin stating her position that under the Binding Term Sheet the $250,000 down payment was not due until after an initial SOW is executed. She stated: “It’s 250k AFTER the first SOW. We don’t have a
SOW yet :)”
82. Kalmans replied fifteen minutes later: “Correct, the relevant sentence is ‘The parties intend for the Agreement and first SOW to be executed, and the Services to begin, by
January 31, 2017.’”
83. On March 2, 2017, Jacobson sent an email to Kalmans and Samotin asking that they confirm that they were still working exclusively with No Labels.
84. Kalmans replied by email the same day, stating “We have been planning to and are excited about working exclusively with No Labels in House primaries, as we agreed to in the term sheet, and haven’t been pitching any of those races. Our understanding of the term sheet was that we were looking to agree on next steps and first Statement of Work by the end of
January.”
85. Four days later, on March 6, 2017, Jacobson sent Kalmans and Samotin an email telling them that No Labels was no longer planning for an operation involving a $5 million spend on Rimylan services.
86. While Kalmans and Samotin had been concerned for some time about the constantly shifting strategic goals, objective, and timeline for No Labels’ nascent super PAC effort, at this point they became gravely concerned that Jacobson had blatantly misled them about No Labels’ intention to meet its $5 million minimum spend obligation.
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87. Kalmans and Samotin asked to meet with Jacobson and Bursky and a meeting was scheduled for March 20.
88. On March 19, Jacobson sent an email to Kalmans and Samotin advising them that the strategy of targeting obstructionist lawmakers no longer fit No Labels’ plans.
89. The next day Kalmans and Samotin met with Bursky, as Jacobson did not attend.
At that meeting, Kalmans and Samotin told Bursky that Jacobson had denied signing the Binding
Term Sheet and that they were concerned about Jacobson’s lack of a consistent strategy for No
Labels. At the same time, Applecart had been working to build the infrastructure and conduct the analysis to support No Labels’ 2018 efforts, but had been absorbing those costs, uncompensated.
90. In response, Bursky told Kalmans and Samotin that he knew how difficult
Jacobson is to work with but that No Labels was her organization and effectively the only organization working to elect moderates, so there was no other option. Bursky assured Kalmans and Samotin that No Labels remained committed to the Binding Term Sheet and promised that he would talk to Jacobson about making sure that money started flowing.
91. On April 5, 2017, Jacobson sent Kalmans an email reassuring him of No Labels’ commitment to its relationship with Rimylan, stating “We are only in initial stages of this We should meet – YOU GUYS are OUR partners in this – no one else We will be using you – JUST not operationalizing it this exact minute”.
The Parties Partially Perform Under The Binding Term Sheet
92. In March 2017, Jacobson started making plans to stand up super PACs for the
2018 Congressional primary elections.
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93. Between April 2017 and March 2018, No Labels formed six super PACs:
Defendants Forward Not Back, United for Progress, United Together, Citizens For A Strong
America, Govern or Go Home, and Patriotic Americans, Inc. (the “No Labels Super PACs”).
94. No Labels also formed three 501(c)(4) organizations: Defendants Americans
Committed For Progress, Citizens For America, and Progress Together (the “No Labels
501(c)(4)s”, and together with the No Labels Super PACs, the “No Labels Entities”).
95. No Labels established the Super PACs for the same reasons that SLA and CCAF were formed in connection with the Marshall and Soto races – namely (i) because No Labels, as a 501(c)(4) organization, is subject to limits on how much of its budget can be spent on political activities, (ii) so that the work of the PACs on behalf of a particular candidate would not be tied to No Labels, a bipartisan organization, because such an association was thought likely to be unhelpful to candidates in a partisan primary election, and (iii) so that the work of one PAC would not be tied to the work of the others.
96. The No Labels 501(c)(4)s were formed for similar reasons, and because certain of
No Labels’ donors did not wish to have their contributions made public in disclosures required of
PACs by the Federal Elections Commission (“FEC”).
97. Each of the No Labels Entities (other than Govern or Go Home and Patriotic
Americans) entered into a CSA and one or more SOW with Rimylan, PAL, Tormima, or Minino
(together, the “Rimylan Entities”).
98. The CSAs and SOWs were entered into in furtherance of the overarching agreement memorialized in the Binding Term Sheet – an exchange of exclusivity for at least $5 million of business.
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99. Between June 7, 2017 and April 18, 2018, the No Labels Entities and the Rimylan
Entities entered into thirty SOWs in connection with eighteen Congressional primary races.
100. In total, the No Labels Entities paid the Rimylan Entities $1,291,785.74 for services provided under the SOWs.
101. Jacobson praised Applecart’s work and authorized Kalmans and Samotin to post on Applecart’s website this statement made by her:
I have spent thirty years working at the highest levels of American politics. I’ve seen a lot of campaigns and a lot of consultants. And I believe Applecart offers the smartest and most effective approach to winning challenging political campaigns on either side of the aisle. Applecart has continuously earned my trust as a client, as uniquely honest and direct advocates for our best interests, even when it is not the easiest path. Without fail, they deliver clever and effective solutions to challenging problems. I could not recommend Applecart more highly.
102. During the period of performance, Jacobson personally introduced Applecart to other candidates running for high office and recommended Applecart’s services to them, ranging from Congressman John Delaney, Democratic presidential candidate, to Paul Massey, a
Republican running for Mayor of New York City.
103. No Labels’ preferred candidates won in seven out of eleven of the principal races on which the Rimylan Entities worked between August 2016 and June 2018, including a highly publicized and unexpected victory on behalf of Congressman Dan Lipinski, after which Bursky sent Kalmans an email on March 21 that read: “You crushed it. This was a big one. Thanks for your leadership, tenacity and great judgment.”
104. From the effective date of the Binding Term Sheet to the date of its termination the Rimylan Entities all complied with the Exclusivity provision of the Binding Term Sheet.
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105. None of the Rimylan Entities performed, for any third party, any services relating to the 2018 U.S. House of Representatives primary election contests without express approval in writing from No Labels.
106. Tormima provided such services in one Congressional primary race on behalf of a super PAC supporting Amy McGrath in the Democratic primary in the Sixth Congressional
District of Kentucky. As required by the Binding Term Sheet, Jacobson approved PAL’s work for the super PAC supporting McGrath in writing by email dated May 5, 2018.
No Labels Terminates The Binding Term Sheet
107. Starting in July 2017, Jacobson began to involve her husband, Mark Penn
(“Penn”), in No Labels’ 2018 super PAC campaign.
108. Penn was a co-founder of the polling firm Penn, Schoen and Berland Associates and is Founder and Managing Partner of The Stagwell Group, a private equity fund that invests in research, data analytics, public relations, and digital marketing services companies.
109. In early 2018, Jacobson requested that Kalmans and Samotin provide updates to and run some significant strategic decisions and plans through Penn.
110. Before this point, and throughout all of Applecart’s previous work with No
Labels, Applecart had only interacted with Penn once.
111. Jacobson recommended, urged, and/or instructed Kalmans and Samotin to use several vendors indirectly owned by Penn, including SKD Knickerbocker, a television advertising firm, Targeted Victory, a digital advertising firm, and PMX Agency, a mailing house.
Jacobson also urged Kalmans to omit a Penn-owned entity from a conflicts disclosure made to donors.
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112. No Labels solicited contributions from donors based, in part, on a promise to spend minimal money on television advertising and to instead use other individually addressable means of communication (e.g. mail, digital advertising, phone calls) to communicate to a more targeted audience, as Rimylan had done in the Marshall and Soto races.
113. Notwithstanding this promise, Jacobson brought in Penn and SKD Knickerbocker to create television ads, often ignoring guidance from Rimylan on the content or targeting of those ads.
114. By June 2018, the No Labels’ Super PACs had spent more than $970,000 on television advertising, representing more than a third of all spending on voter contact that the No
Labels Entities did as of June 19, 2018.
115. In mid-2018, Jacobson found a pretext on which to hand over strategic oversight of No Labels’ super PAC campaign to Penn.
116. On or about May 2, 2018, Citizens For A Strong America paid for a mailing criticizing Jim Baird, a candidate in an Indiana Republican primary race, for voting in favor of a gas tax. The mailer included an image of a gas station sign with the words "ARM" and "LEG" in the place of prices, suggesting that the tax would cost voters an arm and a leg. The mailer generated negative press because Baird had lost an arm fighting in the Vietnam War.
117. Jacobson blamed Kalmans and Samotin for the negative press about the mailer because PAL hired the vendor that sent the mailer.
118. Jacobson did so, though the mailer was approved by Clancy and No Labels’ attorney. The mailer was also cleared for payment by Jacobson’s deputy, Clarine Nardi Riddle
(“Riddle”), when the invoice for the mailing was presented for her approval.
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119. Two weeks after the Baird mailing, after Applecart had delivered victories in three out of the four elections No Labels was involved in on May 15, Jacobson invited Kalmans and Samotin to a “strategy meeting” at No Labels’ offices in Washington D.C. on May 18, 2018.
At that meeting, Jacobson told Kalmans and Samotin that going forward all strategic decisions relating to the No Labels’ super PAC campaign would be made by Penn, along with SKD
Knickerbocker partner Bill Knapp, and No Labels’ co-founder Tom Davis (“Davis”).
120. As a practical matter, Penn was calling all of the shots.
121. On June 5, 2017, Kalmans and Samotin received a call from Clancy and No
Labels vendor, Eli Kaplan (“Kaplan”). Clancy told Kalmans and Samotin that he had been instructed by Jacobson to tell them that No Labels had been planning for weeks to replace
Applecart, in order to pursue a more conventional Super PAC strategy that would not rely as heavily on data. Clancy had been instructed to tell Applecart that No Labels did not plan to fire
Applecart, but would like them to voluntarily step aside and sign a mutual non-disparagement agreement. Clancy also said that Jacobson told him to tell Kalmans and Samotin that this would be the “easy way” and that if they agreed No Labels would tell everyone that they had a great experience working with Applecart and that No Labels and Applecart would go their separate ways. But that if Applecart chose the “hard way” then “things would get ugly” because there are
“lots of powerful people associated with No Labels.”
122. Samotin told Clancy that they had no intention of letting No Labels walk away from its obligations and that Clancy should tell Jacobson that Applecart would sue if No Labels did not meet its obligations under the Binding Term Sheet.
123. On June 11, 2018, Kalmans and Samotin met with an investor in PAL, Ari
Emanuel (“Emanuel”). During the June 11 meeting, Emanuel called Peltz on the telephone and
23 told him that No Labels had asked Rimylan to step aside, but owed Rimylan several million dollars and that Jacobson should call Emanuel to discuss a path forward and that if she was not willing to do so he would see her in court. Peltz told Emanuel that he would tell Jacobson to settle the matter and promised to ask Jacobson to contact Emanuel.
124. On June 13, 2018, Jacobson convened a conference call of No Labels’ governing council. On that call, Jacobson told the council that Rimylan was being terminated for performance. On this call, in the presence of other members of the governing council, Peltz recommended to Jacobson that she settle with Rimylan.
125. That same day, each of the No Labels Entities sent letters terminating their respective CSAs. Of the various bases cited in those letters as grounds for termination, none – other than the “Arm and the Leg” incident – had ever previously been a subject of a genuine complaint by the No Labels Entities.
126. By letter dated June 19, 2018, Jacobson terminated the Binding Term Sheet. She cited as her basis incidents of alleged “nonfeasance” and “malfeasance” identified in the termination letters sent by the No Labels Entities. The letter stated: “because of the malfeasance and nonfeasance of Rimylan and its affiliates set out in . . . the above-referenced termination notices, this letter shall constitute a termination of that term sheet for significant material breaches by Rimylan together with its affiliates.”
127. Jacobson also said in her June 19 letter that the Binding Term Sheet was
“aspirational” and that it was not, and had never been, binding on No Labels.
128. By letter dated June 29, 2018, Kalmans responded to the termination letters answering each allegation of supposed “malfeasance” and “nonfeasance”. In particular:
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Some letters asserted that the Rimylan Entities failed to “deliver” or “present”
particular items of work product to the No Labels Entities. That is untrue. The
Rimylan Entities provided all of the materials required by the SOWs in the form
requested by Jacobson. Notably, prior to sending the termination letters, neither No
Labels nor any of the No Labels Entities ever said anything to the Rimylan Entities
about having not received any of the materials listed in their termination letters.
Some letters asserted that the Rimylan Entities failed to provide a “lessons learned”
analysis of the race for which they were engaged. But in none of the SOWs did the
Rimylan Entities agree to provide such an analysis. And, even if they had, the voter
data needed to perform such an analysis was not yet available from the Division of
Election in the states where the Rimylan Entities engaged in elections on behalf of No
Labels.
Some letters asserted that the Rimylan Entities failed to “arrange and participate” in
weekly team strategy calls. Again, in none of the SOWs did the Rimylan Entities
agree to “arrange” weekly team strategy calls. Kalmans and Samotin participated in
every such call to which they were invited and regularly scheduled calls with
members of the No Labels team of employees and vendors when such calls were not
scheduled by No Labels. The phone records of the Rimylan Entities show that
Kalmans spent many hours every week consulting with Jacobson and others at No
Labels who were acting as representatives of the No Labels Entities, as well as with
other strategic vendors retained by No Labels and those entities. Between March and
May 2018, Kalmans alone spent 48 hours on the telephone with Jacobson and/or
members of the No Labels staff, not including time spent speaking directly to vendors
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and consultants or on conference calls with Jacobson and/or other No Labels staff or
No Labels donors.
Some letters asserted that the Rimylan Entities’ allegedly inadequate supervision
resulted in ineffective and inappropriate “push polling” to be conducted by a sub-
vendor. But attorneys for No Labels approved the language and format of every poll
conducted by the Rimylan Entities.
Some letters asserted that the Rimylan Entities caused “improper” and “scandalous”
mailings to be sent to prospective voters (e.g. the Baird mailer). For each of those
mailing the Rimylan Entities followed the approval process that Jacobson requested,
which was to generate a “creative” and to provide it to Clancy and No Labels’
attorneys (Sloane Skinner, David Powers and Trevor Stanley) for approval. No
Labels outside counsel, Spies, specifically authorized the Rimylan Entities sending,
without disclaimers, mailings that the No Labels Entities claimed in their termination
letters appear to be from governmental sources.
Some letters asserted that the Rimylan Entities retained voter files paid for by a No
Labels Entity from third-party vendors without turning the file over to the purchaser.
But no request had ever previously been made that they do so and Kalmans offered in
his response to Jacobson to the turn the files over.
Some letters asserted that the No Labels Entities paid for services that the Rimylan
Entities did not perform. The Rimylan Entities’ records show the following with
respect to those items:
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With respect to Progress Together SOW No. 1, and Citizens For America SOW
No. 4, Applecart had already fully refunded the amounts claimed to be owed
without prompting from No Labels;
With respect to Citizens For A Strong America SOW No. 12, Charles Gantt, a
member of No Labels’ accounting team, advised Applecart that he would apply
the $21,546.10 to another invoice rather than request a refund;
With respect to Americans Committed For Progress SOW No. 1, it is correct that
a single email purchase cost, in the amount of $7,500, was billed twice. This
resulted from a clerical error. The error was not previously flagged for Applecart,
but in any event the second invoice was never paid by Americans Committed For
Progress or any other No Labels entity;
With respect to both United Together SOW No. 1, and Citizens For A Strong
America SOW No. 2, it is correct that fees, in the amount of $5,761.58, were
billed and paid for surveys that were not performed. That occurred because, after
the SOW was executed, No Labels removed from its target list the candidates
with respect to whom the surveys were to be conducted. The Rimylan Entities’
accounting system automatically generates invoices from the executed SOWs. In
his June 29 letter, Kalmans offered to credit the $5,761.58 paid by both United
Together and Citizens For A Strong America against the outstanding amounts
owed to Applecart.1
1 Applecart is still investigating a similar charge said to relate to a United For Progress SOW dated July 7, 2017. Applecart has not located any such SOW. In his June 29 letter, Kalmans asked Jacobson to provide him with a copy of the SOW, but she has not done so.
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129. In his June 29 letter, Kalmans also notified Jacobson that the Rimylan Entities had retained litigation counsel and that they intended to bring suit seeking damages in the amount owed under the Binding Term Sheet – that is, $3,708,214.16.
130. No Labels never responded to Kalmans’ letter or furnished Kalmans with information that he requested regarding certain claims made by the No Labels Entities.
No Labels Transfers Substantially All Of The Assets Out Of The No Labels Entities
131. After being told that Rimylan intended to sue, Jacobson caused the No Labels
Super PACs to transfer substantially all of their assets to Defendants No Labels Action, Progress
Tomorrow and Patriotic Americans (together, the “Affiliated Transferees”).
132. Specifically: (a) Citizens For A Strong America transferred $470,971.68 to No
Labels Action and $600,000 to Patriotic Americans; (b) Govern or Go Home transferred
$770,128.06 to No Labels Action; (c) Forward Not Back transferred $348,423.10 to No Labels
Action; (d) United For Progress transferred $889,815.15 to No Labels Action; (e) Forward Not
Back transferred $619,865.69 to Progress Tomorrow; and (f) United Together transferred
$730,134.31 to Progress Tomorrow (together, the “Affiliate Transfers”).
133. In total, by the Affiliate Transfers, No Labels caused $4,429,337.99 to be transferred from the No Labels Super PACs to the Affiliate Transferees.
134. A reputable industry publication, CQ’s Political MoneyLine, reported that the
Affiliate Transfers represented three of the four largest transfers made by all PACs in the United
States in the third quarter of 2018.
135. Filings made by the No Labels Super PACs with the FEC show that no consideration was given to the No Labels Super PACs in exchange for the Affiliate Transfers.
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136. Filings made with the FEC also show that, as of July 31, 2018, the combined cash on hand of the No Labels Super PACs after the Affiliate Transfers was just $123,493.85. That is
$3,584,720.41 less than the amount owed to Rimylan under the Binding Term Sheet.
137. The Affiliate Transfers were made to render the No Labels Super PACs judgment proof.
138. On information and belief, No Labels, with an intent to defraud, delay or hinder the Rimylan Entities, also caused the No Labels 501(c)(4)s to transfer substantially all of their assets for less than fair consideration and were also rendered judgment proof as a result.
The Affiliate Transferees Dissipate The Transferred Funds
139. According to filings made by the Affiliate Transferees with the FEC as of August
9, 2018, those entities had spent a total of $650,383.52 since the Affiliate Transfers were made.
140. Filings made by Progress Tomorrow show that it expended $385,750.41 between
July 27, 2018, and August 11, 2018.
141. Filings made by Patriotic Americans show that it expended $264,633.11 between
July 24, 2018 and August 11, 2018.
No Labels, The No Labels Entities, And The Affiliate Transferees Operate As A Single Economic Entity
142. According to their most recent Annual Franchise Tax Reports, for the year 2017, none of the No Labels Entities appear to have ever authorized or issued any stock.2
143. The available annual reports state as to each of the No Labels Entities: “THE
CORPORATION HAS NO DIRECTORS”.
2 According to the Delaware Secretary of State, Govern or Go Home and Patriotic Americans have not filed Annual Franchise Tax Reports for 2017.
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144. The Certificate of Incorporation for each of the No Labels Entities state that the
“activities and affairs of the Corporation shall be managed by a Board of Directors” and that the
“Board of Directors shall be elected by the members at the annual meeting of the Corporation”.
145. According to its Certificate of Incorporation, Progress Tomorrow has no capital stock or Board of Directors. Its incorporator and Treasurer, Bruce Goren, was also appointed by
Jacobson to be Treasurer of Forward Not Back, United For Progress, and United Together. Bruce
Goren is not listed as Treasurer of any other entity registered with the FEC.
146. According to its Certificate of Incorporation, No Labels Action has no capital stock or Board of Directors. Its incorporator, Riddle, sits on the board of the No Labels
Foundation, a 501(c)(3) affiliated with No Labels. In May 2017, Jacobson designated Riddle her
“second set of eyes” overseeing the No Labels 2018 super-PAC campaign.
147. Patriotic Americans’ sole officer, Treasurer Ruth Rochelle Stoner, was also appointed by Jacobson to be Treasurer for Citizens For A Strong America and Govern or Go
Home. Ruth Rochelle Stoner is not listed as Treasurer of any other entity registered with the
FEC.
148. Jacobson, in her capacity as President of No Labels, directed all of the activities of the No Labels Entities, including by:
Arranging for the formation of the No Labels Entities with No Labels’ outside
counsel;
Setting the strategic direction of the 2018 super PAC campaign and
communicating that strategy to donors;
Aligning No Labels’ super PAC strategy with the goals of the No Labels
congressional caucus;
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Vetting and selecting candidates for the No Labels Entities to support;
Exercising ultimate authority over budgets and expenditures, including
allocation of funds to particular races, ad buys, and mailing;
Deciding how to respond to media inquiries; and
Allocating funds and functions between No Labels and the No Labels Entities.
149. None of the No Labels Entities have any employees separate from No Labels.
150. No Labels’ accounting staff allocated vendor costs across the No Labels Entities without regard to which entity contracted for the services.
151. None of the No Labels Entities are operating businesses.
152. Each of the No Labels Entities is a single purpose entity established to spend money to promote the election of No Labels’ preferred candidates in the 2018 congressional elections.
153. None of the No Labels Entities exercised autonomous decision making authority.
154. Jacobson directed all of the activities of the No Labels Entities in her capacity as
President of No Labels to further No Labels’ political goals.
155. Jacobson directed all of the No Labels Entities’ activities from her No Labels email address.
156. All of the funds held and spent by the No Labels Entities were raised by Jacobson.
157. Jacobson led Rimylan to believe that it would have recourse against the No
Labels Entities under the Minimum Spend provision of the Binding Term Sheet.
158. From the inception, it was understood that the Minimum Spend obligation would be satisfied by payments under SOWs with “allied entities” of No Labels.
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159. It was also understood that No Labels was legally prohibited from paying for the scale of services that Rimylan was being hired to provide.
160. Jacobson negotiated the first CSA between a No Labels Entity and Rimylan in her capacity as No Labels’ President. The Termination clause in that contract expressly states that the contracting entity, United For Progress, is a party to the Binding Term Sheet. It states: “For clarity, the termination right in this section applies only to this Agreement, and not any other agreement between the parties, including, but not limited to the Binding Term Sheet dated
December 3, 2016.”
161. Jacobson, in her capacity as President of No Labels, also approved the second
CSA to be executed, between PAL and Citizens For a Strong America, which contained the same language. She did so after being advised that the Binding Term Sheet referred to in the
Termination clause “was the contract that Andy Bursky negotiated”.
162. No Labels was the counterpart to the Binding Term Sheet only because it was the only entity in existence at the time of contracting.
163. Operationally, the No Labels Entities were distinguished from No Labels and one another only for purposes of making disclosures mandated by the FEC.
164. Jacobson specifically instructed Kalmans that for any communications that he had with the press relating to the No Labels Super PAC campaign he was to identify himself as a No
Labels strategist – not as a vendor hired by one of the No Labels Entities.
165. Jacobson drafted, edited, and disseminated donor materials that referred to
Applecart’s proprietary technology as the “proprietary technology” of No Labels.
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166. The Rimylan Entities performed under the CSAs and SOWs with the understanding that the orders and payments made by the No Labels Entities were in satisfaction of the $5 million minimum spend obligation.
No Labels And The No Labels Entities Were Unjustly Enriched
167. Kalmans, Samotin and employees of the Rimylan Entities provided No Labels and the No Labels Entities with approximately 1,714.5 hours of uncompensated work.
168. Among other things, they assisted No Labels and the No Labels Entities in its fundraising efforts, including by participating in no less than forty five donor meetings and phone calls, in cities throughout the country, including with current and past U.S. Senators,
Congressmen, Governors, major party Presidential candidates and billionaire donors.
169. Kalmans, Samotin and the Rimylan Entities’ employees also vetted candidates on behalf of No Labels and the No Labels Entities. They vetted all 435 congressional districts for viability and seriously investigated approximately 150 districts. In furtherance of No Labels’ original strategy of targeting obstructionist lawmakers, Rimylan initially targeted fifty races.
The Rimylan Entities continually monitored and adjusted its target list based on No Labels changing goals and strategies, at times having as many as ninety three targets and at other times as few as twenty.
170. In addition, they evaluated approximately thirty candidates, speaking to them over the telephone, investigating their backgrounds, and in some cases traveling to meet with them.
For instance: (a) on October 11, 2017, Kalmans traveled to Ohio to meeting with candidates for
Ohio’s sixteenth Congressional district, (b) on November 15, 2017, Kalmans traveled to
Pennsylvania to vet candidates for Pennsylvania’s seventh congressional district, (c) on
November 17, 2017, Samotin traveled to Nevada to vet candidates for Nevada’s third
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Congressional district, (d) on November 18, 2017, Samotin traveled to New Mexico to vet candidates for New Mexico’s first congressional district, and (e) on November 20, 2017,
Kalmans traveled to Michigan to vet candidates for Michigan’s eleventh congressional district.
171. Kalmans, Samotin and the Rimylan Entities’ employees also spent hundreds of hours preparing strategic analysis, planning documents and pitch materials for No Labels and the
No Labels Entities.
172. Jacobson and Bursky induced Kalmans and Samotin to perform that work by (i) failing to timely order and pay for services by January 31, 2017, as the parties expressed a mutual intent to do in the Binding Term Sheet, while (ii) asking for and accepting the Rimylan
Entities assistance with No Labels’ fundraising, vetting, and strategic planning, and while also
(iii) reassuring the Rimylan Entities that No Labels was committed to the agreement memorialized in the Binding Term Sheet.
173. Plaintiffs provided the uncompensated services with the expectation of being paid.
174. In the Binding Term Sheet, No Labels expressed an intention to spend approximately 30% of all contributions for services to be provided by Rimylan. The Binding
Term Sheet states: “Client expects to spend on Services (not including expenses) to equal approximately thirty percent (30%) of all contributions obtained during the Term.”
175. Plaintiffs reasonably believed that No Labels would honor that representation and order and pay for services equal to approximately 30% of all contributions. In reliance on that belief they assisted No Labels in raising funds by meeting with donors and by assisting No
Labels in developing a strategic plan and vetting potential candidates for No Labels to support.
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176. None of this work was the subject matter of any CSA or SOW between the No
Labels Entities and the Rimylan Entities or between No Labels and any of the Rimylan Entities.
177. The Rimylan Entities were not compensated for any of their work between
December 4, 2016 and June 7, 2017.
178. Using standard billing rates, this uncompensated work was worth $958,450.
179. Alternatively, the uncompensated work was worth 30% of any contributions obtained by No Labels prior to June 19, 2018, when the Rimylan Entities were terminated.
Amounts Owed Under The Binding Term Sheet And CSAs
180. Crediting the amounts already paid to the Rimylan Entities by the No Labels
Entities, No Labels owes Rimylan $3,708,214.26 under the Binding Term Sheet.
181. As alter egos of No Labels each of the No Labels Entities are joint and severally liable to Rimylan for that amount.
182. United for Progress owes Minino approximately $82.15 for unreimbursed expenses and work performed and invoiced under SOW No. 1.
183. Citizens For a Strong America owes PAL approximately $43,403.22 for unreimbursed expenses and work performed and invoiced under SOW No. 13.
184. Forward Not Back owes Tormima approximately $44,383.81 for unreimbursed expenses and work performed and invoiced under SOW No. 2.
185. Citizens for America owes PAL approximately $22,652.80 for unreimbursed expenses and work performed and invoiced under SOW Nos. 2, 3 and 4.
186. United Together owes Tormima approximately $17,113.80 for unreimbursed expenses and work performed under their CSA.
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187. Americans Committed for Progress owes Tormima approximately $7,531.77 for unreimbursed expenses and work performed and invoiced under SOW No. 2.
188. Progress Together owes Tormima approximately $29.59 for unreimbursed expenses and work performed under SOW No. 1.
189. In total, the No Labels Entities owe the Rimylan Entities $135,211.41 for unreimbursed expenses and for work performed under the SOWs.
FIRST CAUSE OF ACTION (Breach of Contract, as against No Labels, the No Labels Entities and the Affiliate Transferees)
190. Each of the allegations contained in paragraphs 1 to 189 are repeated as if fully stated herein.
191. The Binding Term Sheet is a valid contract.
192. The Rimylan Entities performed their obligations under the Exclusivity provision of the Binding Term Sheet.
193. No Labels accepted the benefits of that performance, including by touting its exclusive relationship with Rimylan to donors.
194. The Rimylan Entities performed under the CSAs and SOWs.
195. No Labels and the No Labels Entities accepted the benefits of that performance.
196. No Labels partly performed under the Binding Term Sheet by causing the No
Labels Entities to order and pay for services from the Rimylan Entities.
197. No Labels unequivocally repudiated the Binding Term Sheet.
198. No Labels had no good faith basis for declaring a default under and/or terminating the Binding Term Sheet.
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199. As a consequence of No Labels’ anticipatory breach of the Binding Term Sheet,
Rimylan has been damaged in an amount equal to $3,708,214.26.
200. Each of the No Labels Entities and Affiliate Transferees are joint and severally liable for the amounts owed under the Binding Term Sheet as alter egos of No Labels.
SECOND CAUSE OF ACTION (Quantum Meruit, as against No Labels, the No Labels Entities, and the Affiliate Transferees)
201. Each of the allegations contained in paragraphs 1 to 200 are repeated as if fully stated herein.
202. Based on its standard rates, Rimylan Entities performed, in good faith, approximately $958,450 of uncompensated work on behalf of Defendants.
203. Defendants requested and accepted the benefits of that work.
204. The Rimylan Entities reasonably expected to be compensated for its work based on No Labels’ representation in the Binding Term Sheet that it expected to spend approximately
30% of all contributions obtained on services performed by Rimylan and by subsequent assurances made by Jacobson and Bursky that No Labels remained committed to the relationship. To wit, Jacobson’s statement in a April 5, 2017 e-mail: “YOU GUYS are OUR partners in this – no one else We will be using you – JUST not operationalizing it this exact minute”.
205. Defendants benefitted from the Rimylan Entities uncompensated work, including in the form of contributions that Defendants would not have received from donors but for that work.
206. It would be unjust to allow Defendants to enjoy the benefit of the Rimylan
Entities’ uncompensated work.
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THIRD CAUSE OF ACTION (Fraudulent Conveyance, pursuant to New York Debtor Creditor Law §§ 273 & 276, as against No Labels Action)
207. Each of the allegations contained in paragraphs 1 to 206 are repeated as if fully stated herein.
208. The No Labels Super PACs received no consideration in exchange for the
Affiliate Transfers made to No Labels Action.
209. Those transfers, along with the other Affiliate Transfers, rendered the No Labels
Super PACs insolvent.
210. No Labels caused the Affiliate Transfers to be made with actual intent to hinder, delay, or defraud Rimylan. This is evident from the following facts, among others: (1) the proximity in time between when No Labels learned that Rimylan intended to sue if not paid and its causing the No Labels Super PACs to make the Affiliate Transfers; (2) No Labels continuing ability to use the transferred funds through its control over the Affiliate Transferees; (3) the lack of any consideration paid in exchange for the Affiliate Transfers; and (4) the Affiliate Transfers rendered the No Labels Super PACs judgment proof.
211. The Affiliate Transfers have impaired Rimylan’s rights under the Binding Term
Sheet by rendering the No Labels Super PACs judgment proof.
FOURTH CAUSE OF ACTION (Fraudulent Conveyance, pursuant to New York Debtor Creditor Law §§ 273 & 276, as against Progress Tomorrow)
212. Each of the allegations contained in paragraphs 1 to 211 are repeated as if fully stated herein.
213. The No Labels Super PACs received no consideration in exchange for the
Affiliate Transfers made to Progress Tomorrow.
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214. Those transfers, along with the other Affiliate Transfers, rendered the No Labels
Super PACs insolvent.
215. No Labels caused the Affiliate Transfers to be made with actual intent to hinder, delay, or defraud Rimylan. This is evident from the following facts, among others: (1) the proximity in time between when No Labels learned that Rimylan intended to sue if not paid and its causing the No Labels Super PACs to make the Affiliate Transfers; (2) No Labels continuing ability to use the transferred funds through its control over the Affiliate Transferees; (3) the lack of any consideration paid in exchange for the Affiliate Transfers; and (4) the Affiliate Transfers rendered the No Labels Super PACs judgment proof.
216. The Affiliate Transfers have impaired Rimylan’s rights under the Binding Term
Sheet by rendering the No Labels Super PACs judgment proof.
FIFTH CAUSE OF ACTION (Fraudulent Conveyance, pursuant to New York Debtor Creditor Law §§ 273 & 276, as against Patriotic Americans)
217. Each of the allegations contained in paragraphs 1 to 216 are repeated as if fully stated herein.
218. The No Labels Super PACs received no consideration in exchange for the
Affiliate Transfers made to Patriotic Americans.
219. Those transfers, along with the other Affiliate Transfers, rendered the No Labels
Super PACs insolvent.
220. No Labels caused the Affiliate Transfers to be made with actual intent to hinder, delay, or defraud Rimylan. This is evident from the following facts, among others: (1) the proximity in time between when No Labels learned that Rimylan intended to sue if not paid and its causing the No Labels Super PACs to make the Affiliate Transfers; (2) No Labels continuing
39 ability to use the transferred funds through its control over the Affiliate Transferees; (3) the lack of any consideration paid in exchange for the Affiliate Transfers; and (4) the Affiliate Transfers rendered the No Labels Super PACs judgment proof.
221. The Affiliate Transfers have impaired Rimylan’s rights under the Binding Term
Sheet by rendering the No Labels Super PACs judgment proof.
SIXTH CAUSE OF ACTION (Fraudulent Inducement, as against Jacobson, in the alternative)
222. Each of the allegations contained in paragraphs 1 to 221 are repeated as if fully stated herein.
223. During the negotiation of the Binding Term Sheet Jacobson referred to No
Labels’ minimum spend obligation as a “commitment” and “guaranty” of No Labels.
224. Before signing the Binding Term Sheet Jacobson never told Kalmans or Samotin that the Binding Term Sheet or its Minimum Spend provision was merely “aspirational”.
225. Jacobson never told Kalmans or Samotin that No Labels did not intend to be bound by the Binding Term Sheet.
226. Jacobson did not object to designating the term sheet “binding”.
227. Jacobson did not object to the use of the unqualified term “shall” in the Minimum
Spend provision of the Binding Term Sheet.
228. Kalmans and Samotin would not have caused Rimylan to sign the Binding Term
Sheet if Jacobson had told them that she did not intend for No Labels to be bound by the Binding
Term Sheet or that the Binding Term Sheet or Minimum Spend provision was “aspirational”.
229. Plaintiffs were damaged in the amount of approximately $3,708,214.26 as a result of Rimylan being fraudulently induced to enter into the Binding Term Sheet because it could
40 have pursued other business opportunities, free of the exclusivity restrictions contained in the
Binding Term Sheet, had they not been bound by the Binding Term Sheet.
SEVENTH CAUSE OF ACTION (Breach of Contract, as against Citizens For A Strong America, in the alternative)
230. Each of the allegations contained in paragraphs 1 to 229 are repeated as if fully stated herein.
231. Citizens For A Strong America owes PAL approximately $43,402.22 for work performed under SOW No. 13.
232. SOW No. 13 is a valid and binding contract.
233. Citizens For A Strong America breached SOW No. 13 unequivocally repudiating its payment obligations thereunder.
234. As a result, PAL has been damaged in the amount of approximately $43,402.22.
EIGHTH CAUSE OF ACTION (Breach of Contract, as against Citizens For America, in the alternative)
235. Each of the allegations contained in paragraphs 1 to 234 are repeated as if fully stated herein.
236. Citizens For America owes PAL approximately $22,652.80 for work performed under a SOW Nos. 2, 3 and 4.
237. The SOWs are valid and binding contracts.
238. Citizens For America breached the SOWs by unequivocally repudiating its payment obligations thereunder.
239. As a result, PAL has been damaged the amount of approximately $22,652.80.
NINTH CAUSE OF ACTION (Breach of Contract, as against United For Progress, in the alternative)
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240. Each of the allegations contained in paragraphs 1 to 239 are repeated as if fully stated herein.
241. United For Progress owes Minino approximately $82.15 for work performed under SOW No. 1.
242. SOW No. 1 is a valid and binding contract.
243. United For Progress breached SOW No.1 by unequivocally repudiating its payment obligations thereunder.
244. As a result, Minino has been damaged in the amount of approximately $82.15.
TENTH CAUSE OF ACTION (Breach of Contract, as against Forward Not Back, in the alternative)
245. Each of the allegations contained in paragraphs 1 to 244 are repeated as if fully stated herein.
246. Forward Not Back owes Tormima approximately $44,383.81 for work performed under SOW No. 2.
247. SOW No. 2 is a valid and binding contract.
248. Forward Not Back breached SOW No. 2 by unequivocally repudiating its payment obligations thereunder.
249. As a result Tormima has been damaged in the amount of approximately
$44,383.81.
ELEVENTH CAUSE OF ACTION (Breach of Contract, as against United Together, in the alternative)
250. Each of the allegations contained in paragraphs 1 to 249 are repeated as if fully stated herein.
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251. United Together owes Tormima approximately $17,113.80 for work performed under their CSA.
252. The CSA is a valid and binding contract.
253. United Together breached the CSA by unequivocally repudiating its payment obligations thereunder.
254. As a result Tormima has been damaged in the amount of approximately
$17,113.80.
TWELFTH CAUSE OF ACTION (Breach of Contract, as against Progress Together, in the alternative)
255. Each of the allegations contained in paragraphs 1 to 254 are repeated as if fully stated herein.
256. Progress Together owes Tormima approximately $29.59 for work performed under their SOW No.1.
257. SOW No. 1 is a valid and binding contract.
258. Progress Together breached SOW No.1 by unequivocally repudiating its payment obligations thereunder.
259. As a result Tormima has been damaged in the amount of approximately $29.59.
THIRTEENTH CAUSE OF ACTION (Breach of Contract, as against Americans Committed For Progress, in the alternative)
260. Each of the allegations contained in paragraphs 1 to 259 are repeated as if fully stated herein.
261. Americans Committed For Progress owes Tormima approximately $7,531.77 for work performed under SOW No. 2.
43
262. SOW No. 2 is a valid and binding contract.
263. Americans Committed For Progress breached SOW No. 2 by unequivocally repudiating its payment obligations thereunder.
264. As a result Tormima has been damaged in the amount of approximately
$7,531.77.
PRAYER FOR RELIEF
WHEREFORE, Plaintiffs requests that the Court enter judgment:
A. Awarding compensatory damages, joint and severally, against each of the
Defendants (other than Jacobson) for breach of contract in the amount of $3,708,214.26,
or in the alternative in the amounts owed to the Rimylan Entities under the unpaid SOWs,
but not less than $135,211.41;
B. Awarding compensatory damages, joint and severally, against each of the
Defendants (other than Jacobson) for unjust enrichment in the amount of $958,450;
C. Nullifying each of the Affiliate Transfers and ordering a return of funds
from the Affiliate Transferees to the No Labels PACs in amounts sufficient to satisfy a
judgment against the No Labels PACs as alter egos of No Labels;
D. Awarding compensatory damages against Jacobson for fraudulent
inducement in an amount to be determined at trial, but not less than $3,708,214.26;
E. Interest from the date of judgment herein until the date the judgment is
paid in full, plus costs;
F. Awarding costs and expenses incurred in this action, including an award
of reasonable attorneys’ fees;
G. Granting Plaintiffs such other and further relief as the Court deems just
and proper.
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JURY DEMAND
Plaintiffs demand a trial by jury.
Dated: New York, New York August _____, 2018
KAGEN & CASPERSEN PLLC
______Stuart Kagen, Esq. Joel M. Taylor, Esq. 757 Third Avenue, 20th Floor New York, New York 10017 (212) 880-2045
Attorneys for Plaintiffs Rimylan Enterprises, LLC, Project Applecart, LLC, Tormima, LLC, and Minino Productions, LLC
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