The lawsuit involving Rob Black, Extreme Associates, Inc., Tom Byron, Tom Byron Productions [TBP] and attorney/accountant Mike Daniels promises to heat up. Black has been assured by his counsel that this has all the makings of a court case. Black was going to originally settle with Daniels out of court but has changed his mind.
Daniels' suit tells a tale of a breach of an alleged contract between [TBP] and Extreme, and a breach of financial agreements between Byron and Daniels. The suit also details Daniels' claims against Byron for a breach of contract and Daniels' charges of fraud against both Byron and Black, and charges against Black for interference with economic relations.
At the heart of Daniels' suit is the allegation that Rob Black "is lying about the facts" as to whether Extreme Associates is the distributor of TBP.
According to Daniels' suit, on April 5, 1996, Daniels filed articles of incorporation for TBP. Tom Byron was the company's sole shareholder and director. Daniels, according to him, provided both legal and accounting services for Byron and the company. During the course of the business relationship, Daniels alleges that Byron wound up owing him a sum of $10,400.
In February, 1998, when Rob Black left Elegant Angel to form his own company, Extreme Associates, Daniels came on board to perform legal and accounting services for the new company. Daniels' suit alleges that in the spring of 1998, Black and Byron reached an oral agreement. Extreme would distribute product for TBP. According to terms of the oral agreement, Extreme would advance production costs and distribute Byron's videos in exchange for 25% of the gross domestic income, reimbursement of production, plus marketing and advertising costs. The remaining money collected by Extreme would be paid to TBP, including 100% of the foreign distribution rights.
Between April and the end of May, 1998, Black and Byron produced three videos. Daniels' suit alleges that, during this time, Byron became "cash-strapped" to Extreme to the tune of $30,000. According to the suit, TBP incurred approximately $66,000 in production costs and other expenses. TBP, however, earned approximately $33,600 in revenues from video sales, which, according to Daniels' suit, was used by Extreme to reimburse itself for advanced production costs. Byron was unable to meet his monthly personal expenses, according to Daniels.
As a result, Byron attempted to obtain credit. Unsuccessfully. According to Daniels, Byron sought small loans from him and inquired of Daniels whether Daniels knew of, or had resources to get additional financing for TBP. Daniels supposedly lent Byron $8,000, interest-free, for several months and made inquiries on behalf of TBP for additional financing.
In May, 1998, Daniels obtained an American Express credit card for TBP with a $15,600 credit limit. Byron was to use the r for business expenses. In return, Byron verbally agreed to repay the full balance of each monthly statement when due. According to Daniels' suit, this arrangement enabled Byron to meet his monthly expenses and begin production on a new video. Daniels also sent Byron a letter dated May 19, 1998 informing Byron that, because they also had an attorney-client privilege besides a business one, that Byron should seek the advice of independent counsel. Daniels asked for a waiver of the potential conflict. On June 3, Byron executed the waiver. Byron did not seek independent counsel's advice
In the beginning of May, Daniels and Byron came to an agreement that Daniels would forgive the $10,400 Byron already owed Daniels from 1996 in exchange for 25% of TBP's shares. This agreement was written up as a Subchapter S Shareholders Agreement. In exchange, Byron would receive a guaranteed sum of $30,000, annually, and Daniels would receive an annual sum of 25% of TBP's net profits after deduction of production costs, the $30,000 to Byron and net expenses. Daniels also alleges that Byron agreed to pay him $750 monthly to continue legal and accounting services.
From June 1998 to November 1998, Daniels alleges that he continued to make interest-free loans to TBP, independent of the stock purchase, for another $9,000, for a total of $17,000.
Between June 1, 1998 and October 31, TBP produced three more videos, making it now a total of six videos. According to Daniels, although TBP earned $126,152 during this time, all of the money was allegedly kept by Extreme for reimbursement of production costs for the six videos, including a 25% distributors' fee. This reduced TBP's debt to Extreme to $8,000, down from the $30,000.
From October 1, 1998 to November 6, Extreme, according to Daniels, collected $43,049 in revenues from the sale of foreign. Daniels alleges that Extreme never allocated which portion of the foreign money was for TBP and never paid foreign money to TBP.
Also between June, 1998 and October, 1998, Daniels alleges that Byron exhausted the available credit limit on his company card and that Black and others were using the card.
Daniels also alleges that Byron requested additional loans of him in Oct., 1998. Daniels refused but offered Byron $1,500 per month and no more. Daniels says he told Byron that TBP was nearly out of debt to Extreme and that foreign money owed him would put TBP over the top to the tune of $35,000. But Extreme's failure to pay this sum, alleged in Daniels' suit, kept Byron in need of additional money.
Byron, Black and Daniels had a meeting on Nov. 4, 1998. Black, Daniels alleges, said that TBP's production budgets were too high, that this was Daniels' fault. Black, Daniels alleges, said that Daniels shouldn't be charging TBP $750 monthly for professional services since Daniels owned 25% of TBP. Daniels claims he never received that money since the deal was made. Daniels also claims he never received a penny from TBP since he acquired ownership interest.
On Nov. 12, 1998, Byron and Black met with Daniels to terminate his relationship with TBP, Byron and Extreme and to retrieve all of TBP's books and records from Daniels. On Nov. 23, 1998, Daniels made a written demand to inspect the current books and records of TBP, pursuant to California Corporations Code ยง 1601. Daniels alleges that the books projected TBP to receive over $35,000 from Extreme, but that TBP got only $3,600. Daniels says he has financial records to support that documentation. According to Daniels, there was no explanation for the discrepancy. According to Daniels, he also got wind that, as of Nov. 19, 1998, Black was allegedly signing checks written on TBP's account.
Daniels came to the conclusion that Extreme owed TBP in excess of $50,000 and, allegedly, not paid TBP "anywhere near that sum." According to Daniels, in Dec., 1998, only $10,000 was deposited in TBP's account, and nothing, according to Daniels, deposited in Jan., 1999. According to Daniels' suit, there was less than $400 in the TBP bank account, yet Byron was projected to receive approximately $35,000 per month from Extreme. Daniels also alleges that Black's production company, Extreme Video, was paying Extreme Associates well over $100,000. Daniels alleges that Extreme Associates was loaning money owed to TBP, to Black's production company. Daniels also alleges that payments were being made directly to Byron and his creditors instead of TBP, making it appear that TBP had no revenues to repay Daniels his loans.
Daniels' suit is basing claims on verbal commercial contracts including the distribution agreement between TBP and Extreme; and the loan agreements between Daniels and TBP. The distribution agreement required Extreme to pay TBP over $50,000 as of Dec., 1998. The loan agreements required TBP to repay loans to Daniels when TBP started generating revenues.
Daniels alleges he's owed $31,638.86 by TBP and Extreme and claims to have checks and invoices supporting that figure. Daniels also alleges that Extreme owes TBP much more. Daniels is seeking a writ of attachment for the lesser amount, it being the sum of the unpaid loans to TBP. Daniels' suit, however, reserves the right to seek writs for a greater sum after discovery has been conducted to determine how much Extreme actually owes TBP since Dec., 1998.
The suit acknowledges that Daniels' loans to TBP were not secured and weren't made in order to purchase TBP's stock. The stock purchase, according to the suit, was forgiveness of the original $10,400. Daniels' suit also alleges, that as the accountant for TBP and Extreme, Daniels is the "person most knowledgeable" about TBP's and Extreme's finances.
Daniels alleges that Byron doesn't realize or believe that Extreme owes TBP money, that Byron is "close friends" with Black. Because of this, Daniels alleges that Byron won't review documents and has further insulated himself with Black's acquisition of new attorneys. Daniels alleges that Black "has not acted in the best interests" of TBP, and Byron doesn't recognize this fact.
"He [Byron] does not appear to realize he is being lent money Extreme already owes TBP," Daniels alleges in his suit.
According to replies filed by Black, there are few matters of disagreement. Byron admits he owes Daniels $10,400 and that, in consideration, of Daniels getting 25% interest in Tom Byron Productions, Daniels waived the debt.
Byron also concurs with the minutes of the meeting in which Daniels was to have informed him about the potential conflict of interest. Byron also admits authorizing Daniels $750 monthly payments for professional services. Byron concedes the American Express card and the fact that Black and others had used it. Byron also admits that he had no money to finance TBP and that Extreme Associates as well as Daniels loaned him money. Byron also admits that Daniels requested authorization for TBP to sue Extreme Associates but that Byron refused to give the authorization.
Black and Byron have offered no evidence to dispute Daniels' key contentions. Neither do Black and Byron deny that Extreme Associates owes TBP in excess of $31,638.86. Black and Byron haven't denied that Daniels made loans to TBP and have supported the fact that the loans were fair and reasonable.
However, Black and Byron are saying that Daniels' loans to TBP were not personal ones [to be repaid], they were "part of his [Daniels'] investment as a part owner of the corporation."
According to Black and Byron, they also relied on statements published on Luke Ford's website in their opposition to Daniels. Daniels' suit further alleges conflict of interest in that Extreme Associates and TBP are represented by the same attorneys and that Black has contradicted his position in media interviews as to whether Extreme owns TBP's videos or distributes them.
Daniels' suit also alleges that Black and Byron have repeatedly violated the Court's protective order requiring no transfer of assets outside the ordinary course of business, and that Daniels was to have been notified about any payments made to Tom Byron or TBP. He says he wasn't. Daniels says this is a "clear evasion" of the court's order.
Daniels' suit alleges that Byron and Black's having the same attorneys has been the "greatest impediment" to proving to Byron that Extreme owes TBP money. Daniels alleges that Extreme has withheld $20,000 to $30,000 per month from Byron since Nov. 3, 1998.
Daniels alleges that various creditors of TBP have confirmed that TBP is current on its payments for Byron's Mercedes; that TBP is current in its rent for Byron's residence and that taxes are being paid. However, Daniels alleges that no notice was ever given to him by Extreme or TBP about the source of the money for those payments.
Daniels' suit also states that Black is "lying about the facts," that Extreme Associates is the distributor of TBP. To support that allegation, Daniels' suit, points to a Luke Ford interview in which Black is quoted as saying, "Tommy [Byron] is an employee of Extreme and he does not own his videos. Tom Byron owns nothing except Tom Byron Productions. Tom Byron is an employee. It's a misconception that they've [including Van Damage] told people that they own their own stuff." Daniels' suit also states that the boxcovers of TBP's videos prove that Extreme was just the distributor.
"Even the boxcovers of TBP's videos indiucate that TBP is the copyright holder and Extreme is the distributor," Daniels' suit states. "However, it appears that Black may be attempting to steal the rights to TBP's videos."
