FILED: NEW YORK COUNTY CLERK 01/23/2018 11:00 AM INDEX NO.

650331/2018
NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/23/2018

SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK - COMMERCIAL DIVISION
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IndeX No.:
Angel Park Investors I LLC and Russell T. Shepard

Plaintiffs, COMPLAINT
-against-

Perch, Inc. and Lucy Lyle,

Defendants.
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(" API"
Plaintiffs Angel Park Investors I LLC ("API") and Russell T. Shepard ("Shepard")

"Plaintiffs"
(collectively "Plaintiffs"), by their undersigned counsel, state the following as their complaint

(" Perch" "Defendants"

against Defendants Perch, Inc. ("Perch") and Lucy Lyle ("Lyle") (collectively "Defendants").

NATURE OF THE ACTION

1. Plaintiffs seek access to the books and records of Perch, and to hold Perch and its

CEO and founder Lucy Lyle accountable for the disappearance of over $350,000 that the

Plaintiffs invested in Perch in the form of convertible promissory notes.

"disappeared,"
2. After Plaintiffs invested this money in Perch, Lyle and neither

Plaintiffs'
Lyle nor Perch has responded to informal attempts over the past 7 months to contact

the Defendants to determine the whereabouts of the investment funds.

3. Accordingly, on November 29, 2017, API filed a formal demand for inspection of

Perch's books and records, pursuant to 8 Del. C. § 220. API never received a response.

Plaintiffs'
4. As it turns out, Lyle appears to have vanished with the Plaintiffs investments,

shuttering the doors of Perch. Lyle is now living in a safe house in Brooklyn, NY in an attempt

Plaintiffs'
to avoid the repercussions of the apparent theft of investment funds.

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PARTIES

5. Plaintiff Angel Park Investors I LLC is a limited liability company with its

principal place of business at 66 E. 79th St. #9, New York, NY 10075. API invested $350,000 in

convertible promissory notes in Perch at the urging of Lyle.

6. Plaintiff Russell T. Shepard is the manager of API, and resides in New York

County, and has also made investments as an individual in Perch. Shepard maintained frequent

Plaintiffs'
contact with Lyle on behalf of API and as an individual before she vanished with

investments and stopped responding to their requests regarding what happened to the funds.

7. Perch, Inc. is a Delaware corporation that purports to sell office furniture with its

last known principal place of business at 113 University Place Floor 11, New York, NY 10003.

Plaintiffs'
Perch failed to respond to Plaintiffs November 29, 2017 formal demand letter, seeking to

Plaintiffs' Defendants'
determine the whereabouts of investments and investigate

misappropriation of those funds.

8. Lucy Lyle is the CEO and founder of Perch and currently lives with her boyfriend

in a safe house in Brooklyn, NY.

VENUE

9. Venue is proper pursuant to NY CPLR § 503 because each of the Plaintiffs and

Defendant Perch reside in New York County.

STATEMENT OF FACTS

10. Lyle founded Perch, an online curator and seller of office furniture for customized

workspaces. The company, prior to its launch, received widespread press coverage, including

features in the New York Times, Forbes, and Business Insider. Despite Lyle's lack of

experience, she used this press coverage to garner interest in the company and entice investors.

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11. Shepard serves as Manager of API. Following lengthy and ongoing discussions

and negotiations with Lyle, Shepard agreed to invest in Perch, a fledgling, but apparently

promising, start-up.

12. Both Shepard and API are holders of Convertible Promissory Notes issued by

Perch subject to conversion automatically or at Shepard and API's sole discretion, and thus they

are each beneficial owners of shares of common stock and preferred stock held in the form of

convertible promissory notes. See Exhibit A.

13. On June 23, 2016, Perch issued a convertible promissory note pursuant to note

series 2016A for a principal amount to $200,000 to API, promising to pay the principal amount

with simple interest on the outstanding principal amount at a rate of 5% per annum payable in

Date"
full on June 22, 2018 (the "Maturity Date"). This note provided for the conversion on or before

the Maturity Date to equity shares automatically if certain conditions were satisfied or in the sole

discretion of API.

14. the launch of Perch's office furniture product line around mid-
Following

November 2016, Lyle emailed Shepard on March 6, 2017 regarding the condition of Perch,

strong."
emphasizing "Please see actuals below; numbers are The email also emphasized, "I'm in

conversation with a number of new and existing investors who are interested in coming in for

round."
this The email also provided financial data, noting a high revenue stream and exceptional

rate."
"repeat purchaser The email also purported to include two charts showing how Perch had

spent the bridge funds and capital raised, breaking down spending into categories such as "site

development," "salaries,"
design and etc. See Exhibit B.

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15. A week after providing this update email, Perch issued a Series 2017A

convertible promissory note to API in the amount of $150,000, containing substantially similar

terms to the 2016A series convertible promissory notes. See Exhibit A.

"undisclosed-recipients,"
16. Lyle on behalf of Perch sent an email on July 3, 2017 to

including Shepard, stating, "We have $4k in the bank and $150k in debt...$83k in inventory,

potential..."
which has $200k in revenue Lyle continued: "I see there being three ways forward:

1. Close down the business and call it a day 2. Bridge the business $500k 3. Pivot to selling

desks."
strictly B2B and only sell In other words, just a few months after emailing the API with a

positive outlook and subsequently obtaining an infusion of capital from API through the series

2017A convertible promissory note issuance, Lyle was describing a dire situation and presenting

day."
as the first option to "[c]lose down the business and call it a See Exhibit C.

17. Following this communication Shepard made several attempts to contact Lyle by

phone, email, and in person to determine what happened to API's investments and the remaining

inventory, but was unable to contact her. Growing increasingly concerned about the investments,

Shepard retained counsel to represent him and API. Counsel for Shepard and API emailed Lyle

on September 26, 2017, stating, "I understand that Mr. Shepard has made several attempts to

communicate with you, and that all of his attempts have gone unresponded. As he has a right to

inspect the books and records of the company, I would like to set up a time for me or a

Perch...."
representative of my office to review the relevant books and records of See Exhibit D

18. On September 27, 2017, counsel for API and Shepard sent a text message to Lyle

explaining who he was and the reason for his communication, and requesting that she contact his

law firm immediately. After neither Lyle nor Perch responded, counsel sent another informal

request by email as well as a letter dated October 5, 2017, stating, "My clients are growing

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increasingly concerned about the investments that they made and your refusal to respond to

matter."
either them or their counsel regarding this See Exhibit E.

19. Having received no response, Shepard and API were forced to hire a private

investigator to attempt to locate Lyle. A stakeout of the Perch office, as well her listed home

address resulted in the conclusion that she no longer was present in either location. The

investigators eventually determined that she was living at 133 Saint James Place in Brooklyn. An

individual living with Lyle at that address acknowledged to the investigators that Lyle was

presently living there, and this individual agreed to hand deliver a copy of the September 26

letter.

20. To date neither Lyle nor any other agent of Perch has responded to API's or

Shepard's requests seeking to determine the whereabouts of the funds invested in the series

2016A and 2017A convertible promissory notes. This non-responsiveness and attempts at

evasion suggest a misappropriation of funds, and call into question Lyle's fitness to serve as

CEO of Perch.

21. Accordingly, API served a formal demand pursuant to 8 Del. C. § 220(b) to

inspect the books and records of Perch to, among other things, (a) investigate wrongdoing,

misappropriation, or possible mismanagement of Lyle and/or its management and/or officer(s) or

committee(s) of its Board of Directors in connection with the use of $350,000 received in

connection with the purchase of Convertible Promissory Notes by API, as well as other

investments by API and Shepard; (b) to investigate wrongdoing, misappropriation, or possible

mismanagement by Lyle and/or its management and/or officer(s) or committee(s) of its Board of

Directors in connection with the sale of $83,000 in inventory with a revenue potential of

$200,000; and (c) to determine Lyle's fitness to serve as CEO. See Exhibit F.

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22. Neither Perch nor Lyle responded to the formal demand.

23. Accordingly, Plaintiffs have been forced into initiating this litigation to inspect

the books and records of Perch, and recover funds misappropriated by Perch and/or Lyle.

CAUSES OF ACTION

As for the First Cause of Action

(Demand for Inspection of Books and Records Pursuant to 8 Del. C. § 220)

(Against Perch)

24. Plaintiffs repeat and realleges the allegations in paragraphs —

1-23 as though fully

set forth herein.

25. On November 29, 2017, Plaintiffs made a written demand upon Perch for the

inspection of the books and records set forth in the Demand.

26. Plaintiffs have fully complied with all requirements under Section 220 of the

Delaware General Corporation Law respecting the form and manner of making a demand for

inspection of the books and records set forth in the Demand.

Plaintiffs'
27. Plaintiffs demand for inspection is made for proper purposes. The documents

identified in the Demand are essential to those proper purposes.

28. Perch has failed to permit the inspection sought by Plaintiffs in the Demand, or

Plaintiffs'
even respond to Demand.

29. Perch's failure to respond to or acknowledge the Demand constitutes a refusal of

the Demand.

30. By reason of the foregoing and pursuant to 8 Del C. § 220, Plaintiffs are entitled

to an Order permitting Plaintiffs to inspect and make copies of the books and records set forth in

the Demand.

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As for the First Cause of Action

(Conversion)
(Against Both Defendants)

31. Plaintiffs repeat and reallege the allegations in paragraphs —

1-30 as though fully

set forth herein.

32. Plaintiffs invested substantial funds in Perch through the purchase of convertible

promissory notes.

33. Defendants misappropriated these funds and used them for improper purposes.

Plaintiffs'
Defendants have refused to respond to request concerning the funds.

34. This act of dominion wrongfully exerted over the investment funds of Plaintiffs

by misappropriating the funds for improper purposes is inconsistent with Plaintiffs rights and

expectations concerning the use of the investment funds.

Defendants'
35. misappropriation of the investment funds caused damages to

Plaintiffs in an amount to be determined at trial, but in any case, no less than $400,000.

Jury Trial Demanded

Plaintiffs hereby demand a jury trial.

Prayer for Relief

WHEREFORE, Plaintiffs demand judgment as follows:

A. Awarding Plaintiff full compensatory damages, including all out-of-pocket losses,

mitigation expenses, and moneys owed in an amount to be determined at trial;

B. Awarding Plaintiff statutory damages, in the form of liquidated or punitive

damages in an amount to be determined at trial;

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C. Granting such other and further relief, including punitive damages, pre-judgment

interest, the cost of this action, and attorney's fees, as the Court may deem just

and appropriate.

Dated: January 23, 2018

New York, New York

O'
FORD O'BRIEN LLP

Adam C. Ford
575 Fifth Avenue
17th Floor
New York, NY 10017
aford@fordobrien.com

(212) 858-0040

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