Russell M. Frandsen, Esq.

, SBN 070880
1 THE BUSINESS LEGAL GROUP
225 South Lake Avenue, Suite 300
2 Pasadena, CA 91101
Tel: (626) 432-7229
3 Fax: (213) 403-5962

4 William B. DeClercq, Esq., SBN 240538

DECLERCQ LAW GROUP, INC.
5 225 South Lake Avenue, Suite 300
Pasadena, CA 91101
6 Tel: (626) 408-2150
Fax: (626) 408-2159
7
Attorneys for Plaintiffs
8
SUPERIOR COURT OF THE STATE OF CALIFORNIA
9

10 FOR THE COUNTY OF ORANGE

11 JEAN JOHNS, MICHAEL SORCI, CASE NO. _________________

CX-101
12 CATHLEEN BECKETT, and JEFF NYE,
on behalf of themselves and similarly Notice of related case filed concurrently
13 situated individuals, and as shareholders, herewith as to OCSC Case No:
derivatively for Nominal Defendant 30-2016-00834910-CU-BT-CJC
14 INTERNET CONNECTIVITY GROUP,
INC., a California corporation; COMPLAINT FOR JURY TRIAL FOR:
15 1. BREACH OF FIDUCIARY DUTY;
Plaintiffs,
16 vs. 2. VIOLATION OF CALIFORNIA
17 KEVIN B. HOWARD, an individual, UNIFORM COMMERCIAL CODE;

18 KURTIS VAN HORN, JR., an individual,

DOUGLAS MANCHESTER, an individual, 3. FINANCIAL ELDER ABUSE;
19 ADROIT WORLDWIDE MEDIA, INC. a
Delaware corporation, CLOVERLEAF 4. UNFAIR COMPETITION IN
20 MEDIA, LLC, a California limited liability VIOLATION OF CAL. BUS. &
company, MANCHESTER FINANCIAL PROF. CODE § 17200 ET SEQ.;
21 GROUP, INC., a California corporation,
and DOES 1 through 20, inclusive.
AND
22 Defendants.
5. UNJUST ENRICHMENT
23 And

24 INTERNET CONNECTIVITY GROUP, JURY TRIAL DEMANDED

25 INC., a California corporation, TEMPORARY, PRELIMARY AND

Nominal Defendant PERMANENT INJUNCTIVE RELIEF
26 REQUESTED
27

28
1
COMPLAINT
 1 Plaintiffs Jean Johns, Michael Sorci, Cathleen Beckett, and Jeff Nye (“Plaintiffs”)

2 individually, and on behalf of all others similarly situated, and derivatively on behalf of nominal

3 defendant Internet Connectivity Group, Inc., hereby complain against defendants (“Defendants”),

4 and allege, on information and belief (except as to those allegations relating to Plaintiffs

5 themselves, which are asserted on personal knowledge), as follows:

6 SUMMARY OF THE ACTION

7 1. This proposed class action and shareholder derivative lawsuit seeks to hold

8 Defendants accountable for a dishonest and illegal scheme of self-dealing at the expense of a class
9 of common-stock shareholder plaintiffs and plaintiff class members holding warrants for future

10 stock purchase who unexpectedly have been bilked of all of the benefits of many millions of

11 dollars of investment into a company called Internet Connectivity Group, Inc. (“ICG”). Plaintiffs

12 and the class they represent provided all of the initial and sustaining funding for ICG, in

13 excess of $12,000,000.00, only to have the Defendants illegally snatch their investment away.

14 2. Defendants Kevin Howard and Kurtis Van Horn are registered investment advisors
15 who “quit their day jobs” to run ICG, a hugely promising technology and media company, which

16 developed a groundbreaking digital signage and advertising business, funded in large part by

17 small, individual investors like the Plaintiffs, and to a lesser extent by increasingly risky

18 borrowing practices.

19 3. The Plaintiffs, and the classes they represent, had no idea that their investment was

20 diluted, and would ultimately get wiped out for pennies on the dollar, because Howard and Van

21 Horn entered into a secret, sweetheart deal with Douglas “Papa Doug” Manchester, and the

22 investment entity Manchester Financial Group, Inc. (“MFG”), which “Papa Doug” controls as his

23 instrumentality.

24 4. In exchange for a “bridge loan” of roughly $2,600,000.00 dollars, on usurious

25 terms, Howard and Van Horn pledged all of the assets of ICG as security for repayment of the

26 "bridge loan". In addition, without notice to the ICG shareholders, ICG filed Amended and

27 Restated Articles of Incorporation with the California Secretary of State on July 16, 2015, which

28 created two classes of stock. “Papa Doug” Manchester and/or MFG were immediately issued a
2
COMPLAINT
 1 new class of preferred stock, affording them dividends, preferential payments on dissolution of

2 ICG or liquidation of ICG assets, preferential voting rights and handed Papa Doug a seat on ICG’s

3 Board of Directors. The remaining shareholders retained their Common Shares that effectively,

4 unbeknownst to the shareholders, became worthless on the day the Amended and Restated

5 Articles of Incorporation were filed. From the beginning, “Papa Doug” Manchester and MFG

6 structured the loan, demand for non-dilutable “preferred” stock, and board seat to ensure that

7 Manchester/MFG would be able to take advantage of an insider position to prey upon ICG and its

8 innocent shareholders.
9 5. Manchester/MFG deliberately and repeatedly misrepresented their intentions to
10 ICG and its shareholders so that they could force ICG to turn over its assets at the most opportune

11 moment, in order to maximize their own profit at the expense and loss of Plaintiffs.

12 6. Indeed, MFG issued and then accelerated the bridge loan to ensure that ICG was
13 unable to keep up with the interest and penalties. But to mislead ICG and its investors into

14 refraining from action, “Papa Doug” (a Board member) and MFG (a controlling lender) repeatedly

15 promised, orally and in email communications to officers, directors, other lenders, and

16 shareholders, to extend the loan and forbear on default remedies. These representations were false.

17 MFG secretly created Cloverleaf Media, LLC and set a private “foreclosure sale” in violation of

18 the Uniform Commercial Code, whereby “Papa Doug” and MFG wiped many millions of dollars

19 in ICG’s assets, and immediately transferred everything to a new entity, Cloverleaf Media, LLC.

20 As ICG careened toward a Manchester-induced crisis, Defendants conspired to create and enforce

21 a “lockbox” on ICG’s funding, thereby preventing it from obtaining the access to capital it already

22 had on hand, and actually interfered with ICG’s last opportunity to file for bankruptcy protection

23 and hold on to its assets in an orderly restructuring. After the “foreclosure sale” was completed, on

24 information and belief, Manchester/MFG destroyed innumerable valuable ICG documents as a

25 precursor to its current efforts to drive out the founders and purchase the assets well below their

26 true market value in an effort to flip the assets for a quick profit.

27 7. Manchester/MFG is now controlling the activities of Cloverleaf Media, LLC and

28 on information and belief, seeking to re-sell the assets at a handsome profit. Meanwhile, Howard
3
COMPLAINT
 1 and Van Horn, who initially cooperated with “Papa Doug” and MFG, had a falling out with MFG

2 and have since been sued for creating a new corporation, Adroit Worldwide Media, Inc.

3 (“Adroit”). Cloverleaf, LLC has sued Adroit, Howard and Van Horn to prevent them from

4 competing and allegedly misappropriating its intellectual property, in a related action. Amazingly,

5 even after pledging and then losing the ICG assets to “Papa Doug” and MFG, Howard and Van

6 Horn have turned around and are at present attempting to raise funds from the very same investors

7 they wiped out a mere 90 days ago. This lawsuit seeks to right the injustice done to the many

8 individual shareholders, most of whom are small, unaccredited investors who lost a significant
9 portion of their savings and/or retirement by investing in ICG, only to have the business they had

10 funded since its inception taken from under them when it was finally on the verge of enormous

11 profitability.

12 8. This class action and shareholder derivative suit seeks disgorgement of profits,
13 restitution, injunctive relief, actual and punitive damages, and attorney’s fees and costs, and seeks

14 to hold Defendants jointly and severally liable for all damages and monies owed to Plaintiffs.

15 PARTIES TO THE ACTION

16 The Plaintiffs:

17 9. Jean Johns is an individual who is a shareholder of ICG. Ms. Johns is over the age

18 of 65, and was over the age of 65 at the time she invested in ICG. She lives on a fixed income. She

19 invested in ICG on the promises and representations (as well as omissions of material information)

20 of Howard and Van Horn. Those promises were uniformly made to all other common

21 shareholders. Plaintiff Johns is informed and believes that her shares in ICG are now essentially

22 worthless because MFG, and/or Cloverleaf, have taken ownership of all of the assets of ICG. Ms.

23 John is an adequate representative of a class of all investors in ICG, as well as a subclass of

24 investors who were over the age of 65 at the time they were victimized by the Defendants as

25 described in this complaint.

26 10. Michael Sorci is an individual who is a shareholder of ICG. He invested in ICG on

27 the promises and representations (as well as omissions of material information) of Howard and

28 Van Horn. Those promises were uniformly made to all other common shareholders. Plaintiff Sorci
4
COMPLAINT
 1 is informed and believes that his shares in ICG are now essentially worthless because MFG,

2 and/or Cloverleaf, have taken ownership of all of the assets of ICG. Plaintiff Sorci is an adequate

3 representative of a class of all investors in ICG.

4 11. Jeff Nye is an individual who is a shareholder of ICG, and a holder of warrants for

5 purchase of ICG stock which were awarded in exchange for valuable consideration. He invested in

6 ICG on the promises and representations (as well as omissions of material information) of Howard

7 and Van Horn. Those promises were uniformly made to all other common shareholders. Plaintiff

8 Nye is informed and believes that his shares and warrants in ICG are now essentially worthless
9 because MFG, and/or Cloverleaf, have taken ownership of all of the assets of ICG. Plaintiff Nye is

10 an adequate representative of a class of all investors in ICG, as well as a sub-class of investors

11 who hold warrants issued by ICG.

12 12. Cathleen Beckett is an individual who is a shareholder of ICG. Ms. Beckett is over
13 the age of 65, and was over the age of 65 at the time she invested in ICG. She lives on a fixed

14 income. She invested in ICG on the promises and representations (as well as omissions of material

15 information) of Howard and Van Horn. Those promises were uniformly made to all other common

16 shareholders. Plaintiff Beckett is informed and believes that her shares in ICG are now essentially

17 worthless because MFG, and/or Cloverleaf, have taken ownership of all of the assets of ICG. Ms.

18 Beckett is an adequate representative of a class of all investors in ICG, as well as a subclass of

19 investors who were over the age of 65 at the time they invested in ICG and/or lost the value of

20 their investment in ICG.

21 13. Plaintiffs Johns, Sorci, Nye, and Beckett bring this action on behalf of all persons

22 and/or entities within the following proposed class definition:

23 “All persons within the United States who purchased or held stock in Internet

24 Connectivity Group, Inc. on or before December 10, 2015, whose investment

25 was lost and/or devalued as a result of ICG’s pledging and sale of assets to

26 Manchester Financial Group, Inc.”

27 14. Plaintiffs Johns and Beckett bring this action on behalf of a sub-class of all persons

28 and/or entities within the following proposed subclass:

5
COMPLAINT
 1 “All persons within the United States who purchased or held stock in Internet

2 Connectivity Group, Inc. on or before December 10, 2015, whose investment

3 was lost and/or devalued as a result of ICG’s pledging and sale of assets to

4 Manchester Financial Group, Inc., and who were over the age of 65, were

5 disabled, or were dependent adults at the time of investment and/or loss.”

6 15. Plaintiff Nye brings this action on behalf of all persons and/or entities within the

7 following proposed class definition:

8 “All persons within the United States who held warrants for future purchases
9 of common stock in Internet Connectivity Group, Inc. on or before December
10 10, 2015, whose investment was lost and/or devalued as a result of ICG’s
11 pledging and sale of assets to Manchester Financial Group, Inc.”
12 16. Excluded from the Plaintiff class and sub-class are Defendants, members of
13 Defendants’ immediate families, officers, directors, employees of Defendants and any subsidiary

14 affiliate entity in which a Defendant has a controlling interest, and the legal representatives, heirs,

15 successors and assigns of any excluded person or entity.

16 17. Named Plaintiffs are adequate class representatives because their losses and
17 damages are identical to those of all other class and sub-class members, and their incentive to

18 pursue claims on behalf of the class are well-aligned with those of other class members. Plaintiffs

19 have retained experienced attorneys as class counsel to prosecute their claims competent in both

20 class and unfair business practices litigation. Plaintiffs have no interests which are contrary to or

21 in conflict with those of the class they seek to represent. The number and identity of the members

22 of the class are determinable from Defendants’ records; on information and belief there are a total

23 of approximately 180 shareholders who are members of the proposed class.

24 18. Plaintiffs’ claims are typical of the claims of the class because Plaintiffs and all

25 class members sustained damages and losses which arise out of Defendants’ conduct as alleged

26 herein.

27 19. Because the claims all arise out of a common practice, common stock ownership, a

28 common injury and a common cause of injury, there are no difficulties to be encountered in the
6
COMPLAINT
 1 management of the action, common issues would predominate the action, and damages or

2 restitution may be awarded proportionally based upon the investment amount of each class

3 member.

4 20. Since individual joinder of all members of each class is impracticable, class

5 treatment of Plaintiffs is superior to other methods for the fair and efficient adjudication of

6 litigation. Even if any class member could afford individual litigation, it would be unduly

7 burdensome to the individual courts. Individual litigation magnifies the delay and expense to all

8 parties. By contrast, the class action device presents far fewer management difficulties and
9 provides the benefits of unitary adjudication, economies of scale, and comprehensive supervision

10 by a single court. Concentrating this litigation in one forum would promote judicial economy and

11 efficiency and promote parity among the claims of individual class members as well as judicial

12 consistency.

13 21. There is a well-defined community of interests in the question of law and fact
14 between Plaintiffs and the class. Questions of law and fact common to the members of the

15 aforesaid class predominate over any questions which may affect only individual members, in that

16 Defendants have acted on grounds generally applicable to the entire class. Common questions

17 predominate the litigation, as set forth in greater detail herein, regarding the breaches of fiduciary

18 duty, violations of law, unfair competition, and unjust enrichment of the Defendants, at the

19 expense of the Plaintiffs, the class they represent, and ICG.

20 22. Plaintiffs anticipate commencing discovery and seeking class certification promptly

21 after filing this action, and further anticipate that temporary, preliminary and permanent injunctive

22 relief will be warranted under applicable law.

23 The Defendants:

24 23. Nominal Defendant Internet Connectivity Group, Inc. (“ICG”), is a California

25 corporation with its principal place of business in Aliso Viejo, Orange County, California, with

26 offices or employees located in Orange County. ICG is and was at all relevant times qualified to

27 do business in California. Under the direction of the Defendants, ICG described itself as follows,

28 and Plaintiffs invested in reliance on, the following key company attributes:
7
COMPLAINT
 1 a. ICG owns all rights to, produces, and markets a full motion, color video

2 display at the shelf edge technology that stimulates customer engagement

3 through tailored product information, messaging, and promotion.

4 b. ICG created and provided interactive digital media products and services to

5 the marketplace.

6 c. ICG created an infrastructure to revolutionize the digital media marketplace

7 by enabling high definition audio/video and functional application and data

8 transmission to digital signs, anytime, anywhere.

9 d. ICG’s business model used the power of point-of-purchase, the web, social
10 media and non-traditional services that enable, enhance and streamline the
11 overall sales and marketing efforts for each of ICG’s clients.
12 e. ICG offered complete and turn-key products and services to the QSR/CSR,
13 retail and big box, transportation, stadiums and arenas, hospitality, theme
14 parks and on-premise venue operators throughout North America.
15 f. ICG’s completely bundled products and services incorporated proprietary
16 hardware (media players), proprietary and custom software, application
17 development, content and campaign creation, social media integration, data
18 delivery, data collection, data analytics, implementation/installation and

19 network health and management.

20 g. ICG continuously created ideas, applications and capabilities to adapt to

21 changes in the marketplace and technology.

22 h. As of March 2015, ICG executed a Solutions Partners Agreement and

23 several accompanying agreements with Hewlett Packard that enabled ICG

24 to roll out its trademarked “cloverleafTM” product and service line and to

25 execute on its broader business platform.

26 i. cloverleafTM provides retail stores of virtually every nature (grocery, big

27 box, warehouse, department stores, pharmacy, etc.) operational cost

28 savings, real time informational update capabilities, new and significant

8
COMPLAINT
 1 revenue sources through the sale of on‐shelf advertising, the ability to drive

2 sales through more efficient point of sale marketing and enhanced sales

3 analytics.

4 j. ICG was prepared in 2015 for cloverleafTM pilot projects to commence at

5 some of the world’s largest retailers. These pilots were expected and

6 promised to generate hundreds of millions of dollars in revenue to ICG.

7 k. ICG had, as of 2015, an intellectual property portfolio strategy for filing at

8 least 22 patent applications and had at least eight patents issued or pending
9 in some form before the United States Patent & Trademark Office, as well
10 as international intellectual property rights.
11 l. As late as December 1, 2015, ICG had a total valuation that ranged between
12 $50,000,000.00 and $100,000,000.00.
13 m. Just before all of these carefully-laid plans were about to bear fruit for the
14 Plaintiffs, who funded the creation, development, and growth of ICG and its
15 cloverleafTM product line, Manchester/MFG swooped in to snatch it away.
16 Thus, as of the date of filing this action, ICG is an “empty shell”

17 corporation with no assets, as a result of the wrongful and illegal

18 conduct of Defendants, and Plaintiffs have nothing more than worthless

19 stock certificates to show for their investments and years of patience.

20 24. Defendant Douglas Manchester, an individual, refers to himself as “Papa Doug”

21 (http://www.papadougmanchester.com/). “Papa Doug” is and has been the controlling figure in an

22 empire of businesses including, formerly, the U-T San Diego newspaper (f/k/a the San Diego

23 Union-Tribune), and a hotel conglomerate that includes and/or included Manchester Grand

24 Resorts, the Grand Del Mar hotel, Manchester Grant Hyatt, the San Diego Marriott Hotel &

25 Marina. Most notably, and as relevant herein, “Papa Doug” is the controlling owner and chairman

26 of Defendant Manchester Financial Group, Inc. On information and belief “Papa Doug” is also the

27 owner/controller of Defendant Cloverleaf, LLC, which was created shortly before ICG’s forced

28 asset sale and was the purported recipient vessel of all of ICG’s assets. On information and belief,
9
COMPLAINT
 1 from July 2015 through at least the date of filing this action, “Papa Doug” Manchester was a

2 voting member of ICG’s board of directors, and held a substantial number of newly-issued

3 “preferred” shares of stock which contained non-dilution provisions. While “Papa Doug” holds

4 himself out as a great philanthropist and the “white hat” rescuer of distressed companies, the facts

5 are otherwise. Plaintiffs will demonstrate at trial that “Papa Doug” deliberately took a controlling

6 stake in the business of ICG on usurious terms, with full awareness that the deal he foisted on ICG

7 could drive the company to the brink of financial failure so that he could take advantage of all of

8 the assets for himself at pennies on the dollar. “Papa Doug” positioned himself, bided his time,
9 and pounced when the right opportunities presented. Plaintiffs are informed and believe that this is

10 a deliberate business practice that “Papa Doug” has executed previously, to great personal gain,

11 but that his business practice is illegal and wrongful to the companies and people he victimizes.

12 25. Manchester Financial Group, Inc. (“MFG”), is a California corporation that was
13 incorporated on October 25, 1982, with its principal place of business in San Diego, California,

14 with offices or employees located in San Diego County. MFG is and was at all relevant times

15 qualified to do business in California. On information and belief, ICG offered its assets as

16 collateral to secure a short-term, high-interest loan by MFG. Because of this loan, MFG was able

17 to control, direct and participate in the activities of ICG for its own benefit and to the detriment of

18 Plaintiffs. As additional consideration for the short-term, high-interest loan, the controlling owner

19 and chairman of MFG, Douglas “Papa Doug” Manchester and/or MFG obtained newly-issued

20 “preferred stock” which had a non-dilution provision (unlike the common stock held by

21 Plaintiffs). Finally, MFG’s controlling owner, “Papa Doug” Manchester, was given a seat on

22 ICG’s Board of Directors as further consideration for the loan, and voting rights. MFG is a mere

23 instrumentality of “Papa Doug” and MFG acts at “Papa Doug’s” bidding and command. On

24 information and belief, MFG pays out the overwhelming majority of its profits in the form of

25 salary, profits and benefits to “Papa Doug.” MFG lacks an independent board of directors, lacks

26 significant external controls, and at all times acted in concert with “Papa Doug.” MFG and “Papa

27 Doug” have a unity of interest and ownership such that it would be unfair to treat the acts of MFG

28 as those of the corporation alone.

10
COMPLAINT
 1 26. Cloverleaf Media, LLC (“Cloverleaf”), is a California limited liability company

2 with its principal place of business in San Diego, California, with offices or employees located in

3 San Diego and Orange County. Cloverleaf is and was at all relevant times qualified to do business

4 in California, and purposely directed its business activities at Orange County, California. On

5 information and belief, defendant “Papa Doug” Manchester dictated the creation of Cloverleaf as a

6 vehicle to receive the assets of ICG in advance of the asset sale by ICG, and on information and

7 belief, the directors, officers, and beneficial owners of MFG and Cloverleaf are one and the same.

8 Moreover, the assignment from MFG to Cloverleaf was for no value, and assignor and assignee
9 were the both represented by the same individual, acting at the direction of “Papa Doug”

10 Manchester for the benefit of MFG. In information and belief, Cloverleaf is actively seeking to

11 flip ICG’s assets into a quick profit at the expense and loss of Plaintiff investors who paid dearly

12 for the development of those assets. Thus Plaintiffs allege Cloverleaf is an alter ego of MFG

13 and/or Manchester and/or a “mere continuation” of ICG and MFG, created as a mere

14 instrumentality of fraud and self-dealing to deprive Plaintiffs of the value of their investments.

15 27. Defendant Kevin Howard ("Howard") is an individual who is, and at all relevant
16 times was, residing in Orange County, California. Defendant Howard is a former executive

17 employee of ICG and/or Cloverleaf, at the direction of “Papa Doug” Manchester and Manchester

18 Financial Group, who is now working for Defendant Adroit Worldwide Media, Inc.

19 28. Defendant Kurtis Van Horn ("Van Horn") is an individual who is, and at all

20 relevant times was, residing in Orange County, California. Defendant Van Horn is a former

21 executive employee of ICG and/or Cloverleaf, at the direction of “Papa Doug” Manchester and

22 Manchester Financial Group, who is now working for Defendant Adroit.

23 29. Defendant Adroit Worldwide Media, Inc. is a Delaware Corporation that was

24 incorporated on January 4, 2016, and qualified to do business in California on February 22, 2016.

25 The Plaintiffs are informed and believe, and based thereon allege, that Defendants Howard and

26 Van Horn directed and caused Defendant Adroit, a direct competitor of ICG, to be founded and

27 incorporated during the time they were employed by and receiving compensation from Cloverleaf.

28 Upon information and belief, Defendant Adroit's headquarters and principal place of business is in
11
COMPLAINT
 1 Orange County, California. On information and belief, Adroit is an alter ego of Howard and Van

2 Horn and/or a “mere continuation” of ICG created as an instrumentality to deprive Plaintiffs of the

3 value of their investments into the intellectual property ICG was supposed to hold. Indeed,

4 defendants Howard and Van Horn have approached various members of the Plaintiff classes

5 seeking new investment into Adroit, calling it a “better mousetrap” than ICG and promising to

6 recoup the Plaintiffs’ lost investments through Adroit.

7 30. In February 2016, Cloverleaf sued Adroit, Howard and Van Horn over ICG’s

8 intellectual property rights because Cloverleaf, Adroit, Howard and Van Horn all claim to own
9 those rights.

10 31. The true names and capacities of the Defendants, DOES 1 – 20, whether individual,
11 corporate, associate, representative, or otherwise, are unknown to Plaintiffs at the time of the filing

12 of this Complaint, and Plaintiffs, therefore, sue said Defendants by such fictitious names and will

13 ask leave of Court to amend this Complaint to show their true names and capacities when the same

14 have been ascertained. Plaintiffs are informed and believe, and thereon allege, that each of the

15 named Defendants is, in some manner, responsible for the events, wrongs and happenings herein

16 set forth and proximately caused the injuries and damages to the Plaintiffs as herein alleged.

17 Plaintiffs’ are ignorant of the true names and capacities of the Defendants sued herein as DOES 1

18 through 20, inclusive, and therefore sue these Defendants by such fictitious names.

19 32. Further, Plaintiffs are informed and believe and thereon allege, that at all times

20 herein mentioned, each of the Defendants, and Does 1 through 20, and each of them, were the

21 agents and/or employees of each of the remaining Defendants, and in doing the things herein

22 alleged, were acting within the course and scope of said agency and/or employment, in that the

23 actions of each of the Defendants as herein alleged were authorized, approved, and/or ratified by

24 each of the other Defendants as principals and/or employers.

25 FACTUAL ALLEGATIONS

26 33. This is a class action and a shareholder derivative action brought on behalf of the

27 corporation Internet Connectivity Group, Inc. ("ICG"), and its individual, common-stock

28 shareholders, against the Defendants who committed or aided and abetted in the commission of
12
COMPLAINT
 1 breaches of their fiduciary duties to ICG and its shareholders, abused their positions of control of

2 ICG, and breached their duties of loyalty, care, and good faith towards ICG and its shareholders.

3 34. The individual Defendants were officers and directors of ICG, and/or of Cloverleaf,

4 and/or of Adroit, and/or of MFG. As officers and directors of ICG, they owed fiduciary duties to

5 the Plaintiffs and members of the class.

6 35. Furthermore, “Papa Doug” and MFG engaged in inequitable conduct, including its

7 abuse of fiduciary status, and its domination or control of ICG to the detriment of the Plaintiffs,

8 which resulted in injury to Plaintiffs and/or conferred an unfair advantage on the Defendants.
9 MFG’s activities exceeded the usual creditor-debtor relationship and thus MFG may be held liable

10 for aiding and abetting the other Defendants’ breaches of fiduciary duty, as well as conspiracy to

11 deprive Plaintiffs of the value of their investments.

12 36. MFG loaned money to ICG on terms favorable to MFG but unfavorable to ICG and
13 the common shareholders of ICG, and were usurious under California law. MFG dominated the

14 Board of Directors of ICG through the covenants contained in the Articles of Incorporation of ICG

15 and through the loan agreements between MFG and ICG. As a result of controlling Defendant

16 “Papa Doug” Manchester, and the controlling activities of MFG as lender, MFG assumed the

17 same fiduciary duties toward the common shareholders of ICG as the ICG directors’ duties to the

18 common shareholders.

19 37. On information and belief, MFG and its agents made false representations to ICG

20 and its agents with respect to the loan. MFG falsely represented, on numerous occasions, and

21 consistently, that it would extend additional repayment time and terms for ICG to come current or

22 find additional sources of capital. However, these representations were false when made. MFG,

23 and its agents, surreptitiously created Cloverleaf and initiated an asset foreclosure sale when it was

24 too late for ICG to respond or take steps to protect itself. In this way, MFG can be found to have a

25 duty of care to ICG because it stepped out of its traditional role of a money lender, induced

26 detrimental reliance by ICG, and took effective control of the activities of ICG while

27 simultaneously plotting to capture all of its assets for a fraction of their value.

28
13
COMPLAINT
 1 38. Prior to the asset capture by Manchester/MFG and transfer to Cloverleaf, ICG was

2 valued at estimates ranging from at least $50,000,000.00 and $100,000,000.00.by independent

3 third parties. By the end of 2015, Howard and Van Horn represented to the Plaintiffs that ICG had

4 secured or would soon secure major commitments:

5 a. the McDonald’s Corporation and its restaurants that promised

6 $125,000,000.00 in sales,

7 b. Kraft Foods Group (n/k/a The Kraft Heinz Company) for in-store displays

8 that promised to yield $40,000,000.00 per year in revenue for at least five
9 years;
10 c. Subway® (Doctor’s Associates, Inc.) for a digital menu redesign for 2,300
11 stores; and
12 d. Proctor & Gamble Co. (P&G) for in-store digital marketing, among many
13 others.
14 39. Hewlett-Packard, seeing a value of ICG in excess of $100,000,000.00, participated
15 in an investment plan to infuse $35,000,000.00 into ICG in anticipation of its branded

16 “cloverleafTM” product launches, set for late 2015.

17 40. In sum, ICG had developed an exciting, cutting-edge business model with actual

18 and significant revenue and the possibility of large returns on investment, but the company

19 required intensive and continued capital investment to continue its growth. Seeing this as an

20 opportunity to prey on ICG and its investors, MFG/Manchester offered $2,000,000.00 predatory

21 short-term loan that put it in a stronger position than the Plaintiffs, whose investment built ICG

22 from the ground up. MFG/Manchester intentionally created a loan structure with acceleration,

23 penalties and interest, that doomed ICG to failure. MFG/Manchester misrepresented its own

24 intentions, gained and then took advantage of an insider position, and finally wrested control of

25 ICG’s millions of dollars in assets and investment in a forced sale for a credit bid of

26 $2,600,000.00.

27 41. Manchester/MFG and Cloverleaf knew and took advantage of their knowledge ICG

28 had a lucrative business model and promising business prospects for the sale and installation of
14
COMPLAINT
 1 ICG's products. However, the Defendants conspired with one another, misrepresented the terms of

2 the loan, falsely promised to forbear, and thereby prevented ICG from obtaining the necessary

3 financing to carry out these contracts and to operate the business of ICG in the best interests of the

4 Plaintiffs and ICG. Moreover, all the Defendants conspired to prevent ICG from filing for Chapter

5 11 reorganization when it might have done so in order to ensure Manchester/MFG and Cloverleaf

6 could capture all of the assets for a tiny fraction of their value. As a result of these actions, the

7 Defendants, in concert with one another, conspired to misappropriate the assets from ICG and

8 transfer them to MFG/Cloverleaf for their own benefit.

9 42. The individual Defendants breached their duties to ICG and the Plaintiffs by
10 cutting a "sweetheart deal" between ICG and MFG with respect to MFG's loan of monies to ICG.

11 The individual Defendants, together with MFG, further breached their duties to the Plaintiffs and

12 ICG by engaging in a non-arm's length private foreclosure by MFG on the assets of ICG in

13 violation of California law, including the California Uniform Commercial Code.

14 43. Indeed, in the months prior to the due date on the note, MFG repeatedly
15 represented to ICG that MFG would either extend the note, as MFG had done in the past, or

16 convert it into equity. In November 2015, however, knowing how valuable the assets and business

17 of ICG had become, MFG sought to enrich itself at the expense of all of the shareholders of ICG

18 by assuring ICG that MFG would extend or convert the note, all the while knowing that it would

19 refuse to do so on terms that were fair to the other shareholders of MFG.

20 44. Instead, MFG offered repurchase terms that were not fair to the other shareholders

21 of ICG, knowing that after lulling ICG into thinking that it could reach an accommodation with

22 MFG, ICG would not be in a position to repay the note to MFG. MFG refused to negotiate in good

23 faith with ICG knowing that ICG would thereafter have insufficient time itself to market ICG for

24 sale or acquisition or merger to get a fair price for the benefit of all the shareholders. In November

25 2015, MFG quietly set up Cloverleaf to receive ICG’s assets.

26 45. Defendants never informed Plaintiffs of these behind-the scenes developments,

27 until it was too late. As late as December 1, 2015, Howard and Van Horn (and another executive,

28 Emad Mirgoli) informed members of the Plaintiff class that ICG had secured contracts with:
15
COMPLAINT
 1 • Carrefour

2 • Best Buy®

3 • Macy’s

4 • Tesco

5 • Aeon

6 • Kraft Foods Group, Inc. (n/k/a The Kraft Heinz Company)

7 • Ahold/Stop-N-Shop®

8 • Walmart, and
9 • The Coca-Cola Company.
10 46. On December 4, 2015, in a recorded conference call with shareholders, ICG
11 through Defendants Howard and Van Horn along with executives and board members Emad

12 Mirgoli and Gordon Davidson (who is – no coincidence – the current CEO of Cloverleaf),

13 reported:

14 “[ICG has] had an incredible response to cloverleaf[TM]…We knew we had

15 something special but . . . didn't expect . . . the degree that we've seen the response

16 from these largest retailers and super packaged good [sic] companies in the world,

17 the acceptance and the speed to market.”

18 47. Then they dropped the bombshell information on Plaintiffs.

19 48. On the same recorded phone call, defendants Howard and Van Horn, along with

20 Mirgoli and Davidson, suddenly informed Plaintiffs and a few members of the Plaintiff class – for

21 the first time – that MFG was about to “foreclose” on all of ICG’s assets and wipe out all of the

22 common stock – in less than a week.

23 49. Adding insult to injury, on this call, Howard and Van Horn solicited additional

24 common stock investment from the Plaintiff common shareholders. They did this without ever

25 telling the shareholders that Howard and Van Horn themselves held non-dilutable shares, that

26 Defendant Manchester/MFG held “preferred” shares with the Company as well as a seat on the

27 Board, and without telling them that Howard, Van Horn, Mirgoli and Davidson all expected to be

28
16
COMPLAINT
 1 offered positions as employees and equity holders in Cloverleaf, even if the ICG assets were lost

2 entirely.

3 50. Howard and Van Horn concealed from the Plaintiffs their belief that Howard and

4 Van Horn could claim ownership in some assets of ICG. On information and belief, Howard and

5 Van Horn now claim that they, and/or Adroit, own some aspects of the ICG assets.

6 51. MFG/Manchester was successful in their scheme to enrich itself at the expense of

7 the Plaintiff shareholders of ICG. On December 12, 2015, MFG purported to foreclose on the

8 assets of ICG and then commenced to continue to operate ICG as a going concern by purportedly
9 transferring all assets to Cloverleaf and Cloverleaf hiring all of the employees of ICG. To the

10 outside world, there was no apparent change at all in the business of ICG, except that it was now

11 conducted under the name of Cloverleaf. Nevertheless, Cloverleaf continued to use the name and

12 goodwill of ICG in the business, including advertising and promotion. As a result of MFG's self-

13 dealing and breach of fiduciary duty, ICG has been left without assets and the common

14 shareholders of ICG have been left with worthless stock.

15 52. On information and belief, MFG and/or “Papa Doug” Manchester currently own or

16 control the majority of the equity in Cloverleaf. MFG and “Papa Doug” Manchester conspired

17 with one another and the other Defendants to transfer the assets from ICG to Cloverleaf without

18 proper consideration in order to damage the Plaintiffs and ICG and to benefit the individual

19 Defendants and MFG.

20 53. Cloverleaf, pursuant to the illegal arrangement beforehand with the individual

21 Defendants Howard and Van Horn, hired Howard and Van Horn, as well as ICG executive

22 Gordon Davidson, and on information and belief, granted them equity interests in Cloverleaf, and

23 promised Davidson, Howard and Van Horn executive positions in the new venture. Indeed,

24 Cloverleaf has alleged that it in fact hired Howard and Van Horn as its executives on December

25 15, 2015 – only days after MFG took over ICG’s assets and purportedly delivered those assets to

26 Cloverleaf. MFG, through its instrumentality, Cloverleaf, characterized the forced sale and

27 subsequent transfer as a “spinoff” from ICG in an effort to show continuity with ICG, and Howard

28 and Van Horn cooperated with this misrepresentation to the marketplace until they set up Adroit.
17
COMPLAINT
 1 Since MFG wrongfully “foreclosed” on the assets of ICG and transferred the assets to Cloverleaf,

2 Cloverleaf has misappropriated the assets of ICG and holds them in a constructive trust for the

3 benefit of ICG and its shareholders.

4 54. Defendants Howard and Horn were officers/executives of Cloverleaf, and now are

5 officers and managers of Defendant Adroit. Mr. Howard and Mr. Van Horn claim ownership to

6 certain assets of ICG and have attempted to convert the assets of ICG to their own benefit through

7 Adroit, in breach of their duties to the Plaintiffs and ICG. These actions were taken to deprive ICG

8 of its valuable assets and to injure the Plaintiffs and ICG by causing their common shares to lose
9 all value.

10 55. Defendants’ self-dealing and breaches of fiduciary duties violated applicable law
11 and have unjustly enriched MFG, Cloverleaf, Adroit and each of the individual Defendants.

12 56. As the current ICG Board including Howard, Van Horn, and “Papa Doug”
13 Manchester, either cannot or will not act to protect and recover ICG’s assets, Plaintiff herein

14 brings this shareholder derivative action on behalf of ICG, against the entire ICG Board of

15 Directors and its executive officers, to recover damages suffered by ICG as a result of Defendants’

16 misconduct in breach of their fiduciary duties to ICG.

17 57. Because the entire current ICG Board, including Defendants “Papa Doug”
18 Manchester, as well as Howard and Van Horn, either personally participated in the transactions or

19 were controlled by and beholden to MFG who engineered and benefited from the misconduct to

20 the detriment of ICG and its shareholders, they cannot vigorously investigate or prosecute an

21 action to recover the valuable assets shamelessly plundered by ICG’s faithless fiduciaries.

22 58. Plaintiffs are entitled to recover attorney’s fees from the Defendants under Code

23 Civ. Proc. section 1021.5 for having conferred a benefit on a large number of persons. Plaintiffs

24 are entitled to recover attorney’s fees from MFG and under Civil Code section 1717 pursuant to

25 the attorney’s fees agreement in the agreements between ICG and MFG. The Plaintiffs who were

26 65 years of age at the time the Defendants committed the acts set forth in this Complaint are

27 entitled to recover attorney’s fees from all Defendants based upon the law of financial elder abuse.

28
18
COMPLAINT
 1 Plaintiffs are entitled to recover attorney’s fees from all Defendants, or from the damages paid by

2 the Defendants, under the common fund doctrine.

3 JURISDICTION AND VENUE

4 59. This Court has jurisdiction over all causes of action asserted herein pursuant to the

5 California Constitution, Article VI, §10, because this case is a cause not given by statute to other

6 trial courts, as this derivative action is brought pursuant to §800 of the California Corporations

7 Code to remedy Defendants’ violations of law.

8 60. This Court has jurisdiction over each of the Defendants named herein who are
9 residents of California, including ICG, which has its principal place of business in this state, MFG,

10 which has its principal place of business in this State, Cloverleaf, which has its principal place of

11 business in this State, and Adroit, which has its principal place of business in this State. This Court

12 has jurisdiction over each individual Defendant because each individual Defendant resides in this

13 State. Additionally, this Court has specific jurisdiction over any named non-resident defendant (if

14 any), and any unnamed defendant, because these defendants maintain sufficient minimum contacts

15 with California to render jurisdiction by this Court permissible under traditional notions of fair

16 play and substantial justice. ICG is headquartered in California, and because the allegations

17 contained herein are brought derivatively on behalf of ICG, Defendants' conduct was purposefully

18 directed at California. Finally, exercising jurisdiction over any non-resident defendant is

19 reasonable under these circumstances.

20 61. Venue is proper in this Court because one or more of the Defendants either resides

21 in or maintains executive offices in this County, a substantial portion of the transactions and

22 wrongs complained of herein, including the Defendants' primary participation in the wrongful acts

23 detailed herein and aiding and abetting and conspiracy in violation of fiduciary duties owed to

24 ICG occurred in this County, and Defendants have received substantial compensation in this

25 County by doing business here and engaging in numerous activities that had an effect in this

26 County.

27 DEMAND FOR ACTION

28
19
COMPLAINT
 1 62. Plaintiffs bring this action derivatively in the right and for the benefit of ICG, and

2 on behalf of a class of common stock shareholders and subclass of those shareholders over the age

3 of 65, to redress injuries suffered and to be suffered by ICG as a direct result of the breaches of

4 fiduciary duty, abuse of control, and other violations of state law alleged herein, as well as the

5 aiding and abetting thereof, by Defendants. This is not a collusive action to confer jurisdiction on

6 this Court which it would not otherwise have.

7 63. Plaintiffs will adequately and fairly represent the interests of ICG and its

8 shareholders in enforcing and prosecuting its rights.

9 64. Plaintiffs are owners of ICG stock and were owners of ICG stock during all times
10 relevant to Defendants’ illegal and wrongful course of conduct alleged herein.

11 65. As a result of the facts set forth throughout this Complaint, demand on the
12 controlling members of the board of ICG – Howard, Van Horn and “Papa Doug” Manchester -- to

13 institute this action against themselves is not necessary because such a demand would be a futile

14 and useless act, particularly for the following reasons:

15 a. Demand is clearly futile as to each of them due to their own culpability, as

16 they were beneficiaries of the scheme under which they would deprive all
17 other shareholders of their equity interests in ICG and they would continue
18 with an equity interest in Cloverleaf. Further, Howard and Van Horn are the

19 only beneficiaries of equity ownership in Adroit, which is attempting to

20 appropriate the assets of ICG without compensation. Cloverleaf (controlled

21 by Manchester/MFG) has sued Adroit, Howard, and Van Horn alleging

22 misappropriation of the intellectual property that rightfully belongs to ICG

23 and/or its shareholders. Indeed, if these three directors were inclined to

24 admit wrongdoing and return the assets, they could have done so over the

25 past few months, but they have declined to do so and instead are embroiled

26 in another lawsuit with one another over the assets that rightfully belong to

27 ICG. Accordingly, demand is futile.

28
20
COMPLAINT
 1 b. In order to bring this suit, all of the directors of ICG would be forced to sue

2 themselves and persons with whom they have extensive business and

3 personal entanglements, which they will not do, thereby excusing demand.

4 c. The acts complained of constitute violations of applicable law and the

5 fiduciary duties owed by ICG’s officers and directors and these acts are

6 incapable of ratification.

7 d. Each of the directors of ICG authorized the illegal conduct alleged herein.

8 Having acquiesced to the misconduct, and failing to take appropriate action

9 against themselves, ICG’s directors could not fairly and fully prosecute
10 such a suit even if such a suit were instituted by them.
11 e. Any suit by the directors of ICG to remedy these wrongs would likely
12 expose the Defendants to liability and having civil actions filed against one
13 or more of them, and thus, they are hopelessly conflicted in making any
14 supposedly independent determination whether to sue themselves.
15 f. ICG has been and will continue to be exposed to significant losses due to
16 the wrongdoing complained of herein, yet the Defendants have not filed any
17 lawsuits against MFG, Cloverleaf or Adroit or others who were responsible
18 for that wrongful conduct to attempt to recover for ICG any part of the

19 damages ICG suffered and will suffer thereby.

20 g. On information and belief, ICG’s current and past officers and directors are

21 protected against personal liability for their acts of mismanagement, waste

22 and breach of fiduciary duty alleged in this Complaint by directors’ and

23 officers’ liability insurance which they caused the Company to purchase for

24 their protection with corporate funds, i.e., monies belonging to the

25 shareholders of ICG. However, the directors’ and officers’ liability

26 insurance policies covering the Defendants in this case contain provisions

27 which eliminate coverage for any action brought directly by ICG against

28
21
COMPLAINT
 1 these Defendants, known as, inter alia, the “insured versus insured

2 exclusion.”

3 66. As a result, if these directors were to sue themselves or certain of the officers of

4 ICG, there would be no directors’ and officers’ insurance protection and thus, this is a further

5 reason why they will not bring such a suit. On the other hand, if the suit is brought derivatively, as

6 this action is brought, such insurance coverage exists and will provide a basis for the Company to

7 effectuate a recovery.

8 FIRST CAUSE OF ACTION - BREACH OF FIDUCIARY DUTY

9 (AGAINST ALL DEFENDANTS)

10 67. Plaintiffs reallege and incorporate herein by reference each and every allegation

11 contained in paragraphs 1 through 66, inclusive, as set forth hereinabove.

12 68. A fiduciary relationship is any relation existing between parties to a transaction

13 wherein one of the parties is duty bound to act with the utmost good faith for the benefit of the

14 other party. Such a relation ordinarily arises where there is a relation of trust or confidence

15 reposed by one person in the integrity and fidelity of another, which precludes the idea of profit or

16 advantage resulting from the dealings of the parties and the person in whom the confidence is

17 reposed. As the venerable Justice Cardozo observed nearly a century ago:

18 “Many forms of conduct permissible in a workaday world for those acting at arm’s

19 length, are forbidden to those bound by fiduciary ties. A trustee is held to

20 something stricter than the morals of the market place. Not honesty alone, but the

21 punctilio of an honor the most sensitive is then the standard of behavior.”

22 Defendants, and each of them, fell far below the lofty standard of conduct articulated by

23 Judge Cardozo, instead resorting to the most craven self-interest.

24 69. A more recent commentary observes that there is a substantial justification for

25 imposition of fiduciary duties in economic relationships:

26 “Because fiduciaries manage or have some control over very substantial property

27 interests of others, they have the potential to inflict great losses on those property

28 owners. [The] economic interests of fiduciaries are frequently substantially affected

22
COMPLAINT
 1 by the discretionary decisions they make on behalf of others . . . As a result . . .

2 fiduciaries have unusually great opportunities to cheat without detection and they

3 have unusually great incentives to do so. Moreover, the relative costs which their

4 cheating may impose on those whose property they manage are frequently much

5 greater than the relative costs that can be imposed without detection or remedy in

6 simpler contractual exchanges.”

7 There could not be a better illustration of this principle than the great harm inflicted on

8 Plaintiffs by the Defendants.

9 70. Defendants, and each of them, owed a fiduciary duty to the Plaintiffs, both as a
10 class of individual shareholders, and to ICG, whose rights are asserted by Plaintiffs derivatively.

11 The basis for the existence of fiduciary duties between the Plaintiffs and each of the Defendants is

12 as follows:

13 a. Defendants Howard and Van Horn were licensed investment advisors, are
14 and at all applicable times, were officers and directors of ICG, actually
15 solicited Plaintiffs’ investment in ICG, withheld key information regarding
16 ICG’s borrowing activities, and made key representations to Plaintiffs to
17 cause them to invest. Defendants Howard and Van Horn, and Does, knew
18 that the note payable to MFG would become due on October 20, 2015. In

19 breach of their fiduciary duties to the common shareholders, these

20 Defendants refused to negotiate commercially reasonable investment parties

21 pay the note due to MFG. Instead, they thought they could negotiate a

22 transaction with MFG that would preserve their significant equity position

23 in ICG at the expense of Plaintiffs. Further, these Defendants viewed

24 themselves as indispensable to the business of ICG and therefore if MFG

25 foreclosed on the assets, ICG would have to hire them and offer them an

26 equity stake in Cloverleaf.

27 b. Defendant Adroit is an alter ego of Howard and Van Horn: on information

28 and belief, it is inadequately capitalized, has failed to comply with corporate

23
COMPLAINT
 1 formalities, and is a mere instrumentality of the other Defendants’ actions to

2 deprive Plaintiffs of their investment in ICG, while thinly shielding the

3 assets, if any, of Howard and Van Horn.

4 c. Defendant “Papa Doug” Manchester was an insider at ICG, as a director

5 from July 2015 to the present, as well as the principal of its secured lender,

6 MFG and the purported recipient of ICG’s assets, Cloverleaf. “Papa Doug”

7 negotiated the creation, issuance and sale to himself, and/or his corporation,

8 a new class of “preferred” stock, although he owed the corporation a duty of

9 undivided loyalty and a duty of care. “Papa Doug” caused his
10 instrumentality, MFG, to falsely represent that ICG would have additional
11 time to generate capital, all the while causing MFG to take steps to seize
12 ICG’s assets.
13 d. Defendant MFG, through Defendant “Papa Doug” Manchester and its other
14 agents, falsely represented that it would forbear on enforcing the short-term
15 loan it issued to ICG, while causing its owner, “Papa Doug” Manchester to
16 gain a seat on ICG’s board of directors and effectively control the activities
17 of ICG. At the same time, MFG was planning to execute on the collateral of
18 ICG in a manner contrary to the Uniform Commercial Code, in order to

19 take ownership of the assets for a fraction of their true market value. MFG

20 violated the covenant of good faith and fair dealing by falsely representing,

21 in October 2015, that it would continue to grant a “workout” of the debt

22 owed by ICG to MFG, and negotiate additional extensions of time as it had

23 in the past, while it was actually planning to use its position of domination

24 and control to seize the assets of ICG.

25 e. Defendant Cloverleaf is a mere shell or instrumentality of MFG/Manchester

26 (as well as formerly the employer of defendants Howard and Van Horn,

27 before they fell out of the favor of “Papa Doug.”) Cloverleaf was created to

28 collect and hold the assets of ICG the day after Manchester and MFG
24
COMPLAINT
 1 cynically withdrew their promises to work out the debt of ICG, and gave 30

2 days’ notice of their intent to “foreclose.” On information and belief,

3 Cloverleaf immediately took purported assignment of the ICG assets from

4 MFG and commenced holding itself out as ICG’s successor. Indeed,

5 Defendants, and each of them, caused Cloverleaf to publically represent

6 itself at trade shows and in media as the successor to ICG, even referring to

7 the entity as “Cloverleaf (formerly ICG).”

8 f. On information and belief, DOES 1-20 each held positions of trust and
9 reliance that give rise to the existence of a fiduciary duty owed to Plaintiffs,
10 both as a class of investors in ICG, and/or to ICG directly.
11 71. Defendants, and each of them, breached their fiduciary duties of utmost loyalty and
12 good faith owed to the Plaintiffs by conspiring, aiding and abetting one another, or directly acting

13 in a manner contrary to the interests of Plaintiffs in order to secure the assets of ICG themselves,

14 and to deprive Plaintiffs of any value whatsoever, as set forth more fully herein.

15 72. Plaintiffs, as a class, derivatively, and individually, have been damaged in an

16 amount according to proof, but in no event less than the jurisdictional amount.

17 73. Defendants, and each of them, acted with fraud, malice and oppression, as follows:
18 a. Plaintiffs, as a class, are small individual investors whose personal savings,

19 retirement accounts, reverse mortgages, and pensions funded the activities

20 of ICG based upon the promise of rich rewards, and the repeated,

21 knowingly false reassurances by Defendants Howard and Van Horn of rich

22 future profits.

23 b. Manchester/MFG and Cloverleaf took advantage of their insider position

24 with conscious disregard of the rights of Plaintiffs, the harm they would

25 cause by their breaches, and with knowledge that their co-conspirators had

26 actively misrepresented or omitted material facts in representing the status

27 of ICG to the Plaintiffs, and misrepresented to ICG their intentions with

28 respect to the loan documents, with the malicious intention to oppress the
25
COMPLAINT
 1 common stockholders and deprive them of the benefits of their personal

2 savings, investment, pension funds and retirement funds. MFG falsely

3 promised ICG it would once again “work through” the loan, when it had

4 already decided to foreclose on ICG’s assets without complying with the

5 law, without conducting a public auction, and without paying a fair price.

6 Moreover, Manchester/MFG and Cloverleaf actively participated in,

7 encouraged, and supported the activities of ICG that led to Plaintiffs’ harm.

8 74. In short, MFG and its instrumentality and successor in interest Cloverleaf, is and
9 are responsible for the breaches of the other Defendants because both MFG and its controlling

10 owner, “Papa Doug” Manchester exerted excessive control over ICG as a lender, board member

11 and shareholder, to the detriment of the Plaintiffs.

12 75. MFG, and the other Defendants, knew that ICG could not repay its loan made at the
13 time the Articles were amended. MFG took complete control of ICG, causing ICG to move

14 offices, lay-off employees, approve settlements with creditors, and take other steps that were not

15 in the best interest of ICG and/or the Plaintiffs. MFG was involved in the day to day operations of

16 ICG and did not act merely as a lender. As set forth above, MFG, and its successor in interest,

17 Cloverleaf, should be held liable because, on information and belief:

18 a. MFG exercised excessive control over ICG’s affairs;

19 b. MFG engaged in inequitable or fraudulent conduct with respect to ICG; and

20 c. MFG violated the implied covenant of good faith and fair dealing in its

21 contractual relations with ICG, of the reasons set forth herein.

22 As a result, MFG may be held liable to the Plaintiffs for damages or penalties, and its

23 rights under its loan agreements and collusive amendments to the Articles of Incorporation of ICG

24 – as well as the rights it purportedly transferred to Cloverleaf – should be equitably subordinated

25 or avoided entirely in favor of the Plaintiffs.

26 76. Moreover, the foregoing acts and omissions of each of the Defendants were

27 committed with fraud, oppression, and malice, including conscious disregard for the rights of the

28 Plaintiffs, despite the fiduciary obligations owed by Defendants, and each of them, to the
26
COMPLAINT
 1 Plaintiffs, as well as the Defendants’ obligations to avoid fraud and misrepresentation. Since

2 Defendants intentionally breached those obligations, punitive and exemplary damages are

3 necessary to punish and deter future wrongful conduct by the Defendants.

4 77. Since Defendants conspired, colluded, aided and abetted one another, joint and

5 several liability is appropriate.

6 SECOND CAUSE OF ACTION - VIOLATION OF CALIFORNIA UNIFORM

7 COMMERCIAL CODE

8 (AGAINST DEFENDANT MANCHESTER FINANCIAL GROUP, INC., DOUGLAS

9 MANCHESTER, CLOVERLEAF MEDIA, LLC and DOES 5-10)
10 78. Plaintiffs reallege and incorporate herein by reference each and every allegation
11 contained in paragraphs 1 through 66, and 68 through 77, inclusive, as set forth hereinabove.

12 79. In addition to the breaches of fiduciary duty as to ICG and its shareholders, and
13 their breaches of the implied covenant of good faith and fair dealing as to ICG, Defendants MFG,

14 Cloverleaf, and Manchester violated, conspired to violate, and aided and abetted one another in

15 violating the California Uniform Commercial Code, acting in concert to purportedly deprive ICG

16 of all of its assets in a so-called “foreclosure sale.”

17 80. On November 11, 2015, at the behest of “Papa Doug” Manchester, MFG gave
18 notice to ICG of its intent to “foreclose” on ICG’s assets, contrary to all of its representations to

19 ICG and its shareholders prior to that date. (None of the Defendants disclosed this material

20 development to the Plaintiffs until nearly a month later, on the eve of the “foreclosure,” when

21 Howard and Van Horn, along with ICG executive and director Gordon Davidson – who now is an

22 executive of Cloverleaf—asked for additional capital investment to stave off the imminent

23 foreclosure sale.)

24 81. Between November 11, 2015, and December 11, 2015, Manchester and MFG took

25 no steps to comply with California Uniform Commercial Code section 9610, which requires that a

26 secured party may sell or otherwise dispose of collateral "following any commercially reasonable

27 preparation or processing." Furthermore, "[e]very aspect of a disposition of collateral, including

28 the method, manner, time, place and other terms, must be commercially reasonable." (Cal. Civil
27
COMPLAINT
 1 Code section 9610.) Despite the mandates of the UCC, MFG (at the direction of “Papa Doug”

2 Manchester) took none of the steps that would have been “commercially reasonable”:

3 a. Defendants did not seek to find a third-party buyer for the assets of ICG.

4 b. Defendants did not seek to hire an investment banker to find a third-party

5 buyer for the assets of ICG.

6 c. Defendants did not seek to find a merger partner for ICG that would

7 preserve value for the common shareholders.

8 d. Defendants did not seek to find an investor to invest in ICG in order to

9 repay the note owing to MFG.
10 e. Defendants did not actively advertise the pending auction sale date of the
11 collateral in a commercially reasonable manner that could have gained the
12 attention of a qualified buyer. Any advertisement by the Defendants was
13 minimal and/or perfunctory at best, rather than a good-faith effort to find a
14 bona fide purchaser for value.
15 f. Defendants did not conduct the sale in a place and manner that would attract
16 any bids other than the bid of the Defendants.
17 g. On information and belief, the Defendants, and each of them, entered into
18 secret side agreements to enrich one another at the expense of the Plaintiffs

19 and to deprive them of their ownership of ICG, and to turn ICG into an

20 empty shell corporation so the new entity Cloverleaf could capture all of the

21 upside with none of the debt incurred by ICG.

22 h. On information and belief, the Defendants, and each of them, conspired to

23 ensure that ICG failed to seek bankruptcy protection in a timely manner.

24 82. To the contrary, Defendants, and each of them, conspired and aided and abetted one

25 another in violating the California Uniform Commercial Code by setting up a purported secret

26 “foreclosure” sale that ensured no other bidders would participate and MFG could claim to capture

27 the entirety of ICG’s assets in a credit bid that was pennies on the dollar, and immediately transfer

28 assets to its puppet entity, Cloverleaf. The facts and circumstances are not “commercially
28
COMPLAINT
 1 reasonable” and resulted in a purported forced sale to MFG and Cloverleaf, for the benefit of

2 “Papa Doug” Manchester and other Defendants, for a small fraction of even the most conservative

3 valuation of ICG’s assets.

4 83. In short, ICG’s assets were worth $50,000,000.00 and $100,000,000.00. or more in

5 December 2015, and its assets are likely to increase in value in the future. MFG and “Papa Doug”

6 Manchester used their insider status to “purchase” those assets for $2,600,000.00 – i.e., between

7 2.5% and 5% of their true market value. On information and belief, Cloverleaf paid no

8 consideration for those assets. Plaintiffs gained nothing in this “forced sale,” and stand to lose the
9 entirety of their investment.

10 84. As a result, Plaintiffs, and each of them, and ICG, have each been damaged in an
11 amount according to proof at trial, but in no event less than the jurisdictional amount.

12 THIRD CAUSE OF ACTION - FINANCIAL ELDER ABUSE

13 (AGAINST ALL DEFENDANTS)

14 85. Plaintiffs reallege and incorporate herein by reference each and every allegation

15 contained in paragraphs 1 through 66, and 68 through 77, 79 through 84, inclusive, as set forth

16 hereinabove.

17 86. Defendants Howard and Van Horn, their alter ego instrumentality, Adroit, MFG.,

18 and Douglas “Papa Doug” Manchester have violated the Elder Abuse and Dependent Adult Civil

19 Protection Act by taking advantage of Ms. Johns, Ms. Beckett and the class of persons they

20 represent who are, and at all applicable times, were, over the age of 65, dependent adults, and/or

21 disabled persons (“Elder Plaintiffs”), because they took and retained Plaintiffs’ money and

22 property on false pretenses, and out of undue influence based on their position of loyalty and trust

23 as investment advisors.

24 87. Defendants Howard and Van Horn, their alter ego instrumentality, Adroit, MFG.,

25 and Douglas “Papa Doug” Manchester failed and refused to return Plaintiffs’ money, and knew or

26 should have known that their conduct would harm Elder Plaintiffs by depriving them of pension,

27 savings, home equity, and/or retirement funds without giving reasonably equivalent value.

28
29
COMPLAINT
 1 88. Defendants Howard and Van Horn, their alter ego instrumentality, Adroit, MFG.,

2 and Douglas “Papa Doug” Manchester misrepresented the facts pertaining to Elder Plaintiffs’

3 investment in ICG.

4 89. Defendants “Papa Doug” Manchester, MFG, and Cloverleaf also conspired to

5 deprive Elder Plaintiffs of their investment in ICG, knowing that their purported and wrongful

6 “foreclosure” would wipe out the entire investment of Elder Plaintiffs, who were known to

7 Defendants as common stock shareholders over the age of 65 who were relying upon the promises

8 of rich rewards for their investment in ICG. Defendants “Papa Doug” Manchester, MFG, and
9 Cloverleaf misappropriated and converted the assets of ICG, and assisted in misappropriating the

10 assets of ICG which Elder Plaintiffs owned as common stockholders, and were therefore a

11 substantial factor in causing harm to Elder Plaintiffs. Defendants “Papa Doug” Manchester, MFG,

12 and Cloverleaf knew or should have known that their wrongful conduct would and did harm Elder

13 Plaintiffs.

14 90. Elder Plaintiffs have been severely harmed and suffered monetary damages as a
15 result of Defendants’ conduct, including an unforeseen loss of their principal investment at a time

16 they were relying upon a fixed income, government assistance, and the funds invested with

17 Defendants. Nevertheless, Defendants, and each of them, knowingly and intentionally deprived

18 Elder Plaintiffs of their investment. Accordingly, each Defendant is guilty of recklessness,

19 oppression, fraud, or malice in the commission of the abuse of Elder Plaintiffs.

20 91. Elder Plaintiffs are entitled to compensatory monetary damages, punitive damages

21 and a pre-judgment writ of attachment as to all of Defendants’ assets pursuant to California

22 Welfare and Institutions Code section 15657.01, including damages against the MFG, Adroit, and

23 Cloverleaf, as employers of each of the individual Defendants, and their successors in interest.

24 92. Under the law, Elder Plaintiffs must be awarded reasonable attorney’s fees and

25 costs if they prevail at trial, and Elder Plaintiffs have incurred and will continue to incur

26 substantial, but reasonable attorney’s fees and costs.

27 FOURTH CAUSE OF ACTION – UNFAIR COMPETITION

28 IN VIOLATION OF BUS. & PROF. CODE § 17200 ET SEQ.

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COMPLAINT
 1 (AGAINST ALL DEFENDANTS)

2 93. Plaintiffs reallege and incorporate herein by reference each and every allegation

3 contained in paragraphs 1 through 66, and 68 through 77, 79 through 84, and 86 through 92

4 inclusive, as set forth hereinabove.

5 94. Defendants, and each of them, have engaged in unfair competition as defined in

6 California’s Business and Professions Code § 17200, et seq. because they have engaged in

7 practices that are fraudulent, unfair, and illegal for the reasons set forth in the preceding causes of

8 action and otherwise under applicable law.

9 95. Plaintiffs, and each of them, have standing to sue because each of them have
10 suffered injury and/or damages as a result of Defendants’ wrongful conduct.

11 96. Defendants’ wrongful conduct is likely to continue until and unless the Court
12 intervenes and enjoins further conduct. As a result, Plaintiffs are entitled to temporary,

13 preliminary, and permanent injunctive relief to prevent further harm, as well as the appointment of

14 a receiver.

15 97. Plaintiffs are also entitled to an order restoring to them any money or property
16 which may have been acquired by means of Defendants’ unfair competition.

17 98. Plaintiffs, particularly those who are over the age of 65 or are disabled, are further
18 entitled to civil penalties under the Unfair Competition Law, and further penalties for intentional

19 violations of the law, according to proof at trial.

20 99. Furthermore, under the Unfair Competition Law, Plaintiffs are entitled to three

21 times their actual damages, and pre-judgment and post-judgment interest.

22 100. Plaintiffs are also entitled to recover their reasonable attorney’s fees and costs,

23 according to proof, incurred in investigating and prosecuting this lawsuit, pursuant to the Unfair

24 Competition Law. Plaintiffs have incurred and will continue to incur substantial, but reasonable,

25 attorney’s fees and costs in the prosecution of this action.

26

27

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COMPLAINT
 1 FIFTH CAUSE OF ACTION - UNJUST ENRICHMENT

2 (AGAINST ALL DEFENDANTS)

3 101. Plaintiffs reallege and incorporate herein by reference each and every allegation

4 contained in paragraphs 1 through 66, and 68 through 77, 79 through 84, and 86 through 92 and 94

5 through 100, inclusive, as set forth hereinabove.

6 102. For the reasons set forth above, Defendants have received money and property

7 which rightfully belongs to Plaintiffs, and which in equity and good conscience, should be

8 returned to the Plaintiffs. Accordingly, it would be unjust to permit Defendants to be enriched at

9 the expense of the Plaintiffs.

10 103. Plaintiffs hereby demand return of their money and property, and are informed and
11 believe that Defendants fail and refuse to return said money and property to them.

12 PRAYER FOR RELIEF

13 Wherefore, Plaintiffs accordingly pray for the following relief:

14 As to the First Cause of Action:

15 Against All Defendants

16 1. For actual damages in a sum according to proof;

17 2. For general and consequential damages in a sum according to proof;

18 3. For exemplary and punitive damages in a sum according to proof;

19 4. For attorney’s fees and costs of suit incurred herein to the extent permitted by law;

20 5. For temporary, preliminary, and permanent injunctive relief;

21 6. For an accounting and imposition of a constructive trust;

22 7. For equitable subordination and avoidance of the lien(s) of Defendants;

23 8. For pre-judgment and post-judgment interest as allowed by law;

24 9. For such other and further relief as the Court deems just and proper.

25 As to the Second Cause of Action:

26 Against Defendant Manchester Financial Group, Inc.

27 1. For actual damages in a sum according to proof;

28 2. For general damages in a sum according to proof;

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COMPLAINT
 1 3. For rescission and restitution;

2 4. For temporary, preliminary, and permanent injunctive relief;

3 5. For equitable subordination and avoidance of the lien(s) of MFG;

4 6. For attorney’s fees and costs of suit incurred herein to the extent permitted by law;

5 7. For pre-judgment and post-judgment interest as allowed by law;

6 8. For such other and further relief as the Court deems just and proper.

7 As to the Third Cause of Action:

8 Against all Defendants

9 1. For actual damages in a sum according to proof;
10 2. For general and consequential damages in a sum according to proof;
11 3. For exemplary and punitive damages in a sum according to proof;
12 4. For attorney’s fees and costs of suit incurred herein, as allowed;
13 5. For temporary, preliminary, and permanent injunctive relief;
14 6. For a pre-judgment writ of attachment;
15 7. For an accounting and imposition of a constructive trust;
16 8. For pre-judgment and post-judgment interest as allowed by law;
17 9. For such other and further relief as the Court deems just and proper.
18 As to the Fourth Cause of Action:

19 Against All Defendants

20 1. For temporary, preliminary, and permanent injunctive relief;

21 2. For restitution and disgorgement of profits;

22 3. For civil penalties;

23 4. For treble damages;

24 5. For reasonable attorney’s fees and costs of suit incurred herein;

25 6. For pre-judgment and post-judgment interest as allowed by law;

26 7. For such other and further relief as the Court deems just and proper.

27 As to the Fifth Cause of Action:

28 Against All Defendants

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COMPLAINT
 1 1. For disgorgement of profits and restitution to Plaintiffs;

2 2. For an accounting and imposition of a constructive trust;

3 3. For temporary, preliminary, and permanent injunctive relief;

4 4. For pre-judgment and post-judgment interest as allowed by law;

5 5. For reasonable attorney’s fees and costs of suit incurred herein, as allowed;

6 6. For such other and further relief as the Court deems just and proper.

8 DEMAND FOR JURY TRIAL

9 Plaintiffs hereby demand a jury trial on all causes of action.

10 DATED: June 29, 2016

11 THE BUSINESS LEGAL GROUP

12

13 By ________________________________
Russell M. Frandsen
14 Attorneys for Plaintiffs

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COMPLAINT