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FBT-CV23-5051023-S
AMY HOCHHAUSER AND RHODIE : SUPERIOR COURT
LORENZ, :
: JUDICIAL DISTRICT OF FAIRFIELD
Plaintiffs, :
: AT BRIDGEPORT
-against- :
:
REBECCA CERRONI, :
: MAY 25, 2023
Defendant.
DEFENDANT’S REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF
MOTION TO DISMISS PLAINTIFFS’ APPLICATION FOR PREJUDGMENT
REMEDY
Gary Adelman, Esq.
Juris No. 405051
Adelman Matz P.C.
1159 Second Avenue, Ste 153
New York, New York 10065
Telephone: (646) 650-2207
Email: g@adelmanmatz.com
Attorneys for Defendant
Plaintiffs1 Opposition fails to demonstrate that the Court has jurisdiction over this action,
and as such the Motion to Dismiss (the “Motion”) should be sustained.
ARGUMENT
I. DEFENDANT’S AFFIDAVITS AND THE EVIDENCE ATTACHED
CONCLUSIVELY ESTABLISH THAT THE DELAWARE COURT OF
CHANCERY HAS JURISDICTION OVER PLAINTIFFS’ CLAIMS
A. THE AMENDMENT AND REORGANIZATION AGREEMENT
CONCLUSIVELY ESTABLISH THAT THE DELAWARE COURT
OF CHANCERY HAS STATUTORY JURISDICTION OVER
PLAINTIFFS’ BREACH OF CONTRACT CLAIM
Contrary to Plaintiffs’ conclusory arguments, the Amendment (Ex. A) and related
Reorganization Agreement (Ex. 5) are the only pieces evidence needed to show that such
agreements are of the exact type contemplated by Section 18-111 of the Delaware LLC Act and
are therefore within the Delaware Court of Chancery’s jurisdiction. See Principal Growth
Strategies, LLC v. AGH Parent LLC, 288 A.3d 1138, 1160 (Del. Ch. 2023), citing Duff v.
Innovative Discovery LLC, 2012 WL 6096586, at *6.
Indeed, the Amendment was executed between the parties “in connection with and
effective upon the closing of the transactions contemplated by [the Reorganization Agreement]”.
(Ex.A, ¶B). The Reorganization Agreement, entered into by TxHoldCo and Joyride, also
provides that the closing of the Reorganization Agreement was conditioned upon the execution
and delivery of the Amendment. (Ex.5, ¶5.1(g)). Clearly, the Amendment was negotiated along
with the Reorganization Agreement, when the parties were still members of Joyride, and
therefore both agreements “constitute documents formulated between participants in an LLC that
clearly are contemplated by the LLC Act”. Duff, 2012 WL 6096586, at *7 (“[W]hile a
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Defendant incorporates all of her defined terms as defined in the Motion to Dismiss.
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redemption agreement is formed with the intent of eliminating a member interest, it is technically
an agreement among current members of an LLC and the LLC as to how they are going to order
their business in connection with and after the repurchase of the members' interests.”). As such,
the Delaware Court of Chancery has statutory jurisdiction over Plaintiffs’ claims pursuant to
Delaware LLC Act § 18-111.
B. DEFENDANT’S EVIDENCE CONCLUSIVELY ESTABLISHES
THAT THE DELAWARE COURT OF CHANCERY HAS
JURISDICTION OVER PLAINTIFFS’ BREACH OF CONTRACT
CLAIM UNDER THE CLEANUP DOCTRINE
The Opposition fails to establish that the Delaware Court of Chancery lacks jurisdiction
over Plaintiffs’ claims. As discussed below in Section II, there is already equitable relief at issue
because of the injunctive relief that Plaintiffs seek in their Application. In addition, Defendant
stated in the Motion what counterclaims she intended to raise against Plaintiffs, and that filing
such claims would also warrant equitable relief that would confer jurisdiction in the Delaware
Court of Chancery under the cleanup doctrine (Motion pp. 11-12), which Plaintiffs did not refute
and therefore concede. See Emerald Partners v. Berlin, 726 A.2d 1215, 1224 (Del. 1999)
(“Issues not briefed are deemed waived.”); see also Teamsters Union 25 Health Services & Ins.
Plan v. Baiera, 119 A.3d 44, 69 (Del. Ch. 2015) (“Plaintiff did not advance any argument in its
brief concerning either of these issues; thus, those aspects of Count V are waived.”).
Indeed, under Delaware’s cleanup doctrine, the Court of Chancery may exercise
jurisdiction over purely legal claims that are closely intertwined with equitable claims. See
Medek v. Medek, 2008 WL 4261017. “Once the Court determines that equitable relief is
warranted, even if subsequent events moot all equitable causes of action or if the court ultimately
determines that equitable relief is not warranted, the court retains the power to decide the legal
features of the claim pursuant to the cleanup doctrine.” Id. at *3.
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That Defendant intended to file, and now did file,2 equitable claims against Plaintiffs
conclusively establishes that the Delaware Court of Chancery would have jurisdiction over
Plaintiffs’ claims under the cleanup doctrine, even if such claims were purely legal, which they
are not. See Medek, 2008 WL 4261017. The Delaware Complaint establishes that, in addition to
monetary damages, Defendant is in fact seeking equitable relief in the form of recission of the
Reorganization Agreement and the incorporated Indemnification Agreement, the Contribution
Agreement, and the Amendment, due to Plaintiffs’ breaches of the Reorganization Agreement
(Ex.6, ¶¶93-107), fraudulent inducement (Ex.6, ¶¶108-114, 171-192), and economic duress
(Ex.6, ¶¶160-170), as well as injunctive relief due to Plaintiffs’ continuous defamation (Ex.6,
¶¶115-126), commercial disparagement (Ex.6, ¶¶127-137), and tortious interference with
prospective economic advantages against Defendant (Ex.6, ¶¶115-137).
Clearly both parties’ claims are closely intertwined in that they require consideration of
the same facts and similar issues, such as what obligations were created under the Amendment
and related agreements, and therefore to keep the cases severed would undermine judicial
efficiency and create risk of inconsistent judgments about the enforceability of the very
agreement Plaintiffs seek to enforce here. See Medek, 2008 WL 4261017, at *3 (“The Court of
Chancery, having acquired jurisdiction over some part of the controversy, may decide to
determine the entire controversy for any of several reasons, including ‘to resolve a factual issue
which must be determined in the proceedings; to avoid multiplicity of suits; to promote judicial
efficiency; to do full justice; to avoid great expense; to afford complete relief in one action; and
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Defendant and TxHoldCo filed a Verified Complaint against Plaintiffs and Joyride in the
Delaware Court of Chancery (the “Delaware Complaint”), attached as Exhibit 6 to Defendant’s
Second Affidavit in Further Support of the Motion to Dismiss (“Cerroni Second Affidavit”).
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to overcome insufficient modes of procedure at law’”). As such, Plaintiffs must be required to
bring their claims in the Delaware Court of Chancery and the instant action must be dismissed.
C. DEFENDANT’S FACTUAL ARGUMENTS AND EVIDENCE ARE
ADMISSIBLE AS UNDISPUTED EVIDENCE
In determining the jurisdictional issue, the Court can consider “undisputed facts
established by affidavits submitted in support of the motion to dismiss.” Dorry v. Garden, 313
Conn. 516, 522–23 (2014). The Court can also consider other types of undisputed evidence,
such as agreements. See Ferreira v. Pringle, 255 Conn. 330, 348 (2001). “If affidavits and/or
other evidence submitted in support of a defendant's motion to dismiss conclusively establish
that jurisdiction is lacking, and the plaintiff fails to undermine this conclusion with
counteraffidavits; see Practice Book § 10–31(b); or other evidence, the trial court may dismiss
the action without further proceedings.” Dorry, 313 Conn. at 523. This Court can also consider
evidence and affidavits submitted by the moving party on reply. See, e.g. Comtech 21, LLC v.
Broadvox, LLC, 2010 WL 3038432, at *4.
The agreements submitted as evidence through Defendant’s first affidavit, i.e. the
Contribution Agreement (Ex. 4), the Reorganization Agreement (Ex. 5), fall within the definition
of “undisputed evidence” that rebuts Plaintiffs’ jurisdictional allegations as described above in
Sections I(A)-(B). See Ferreira, 255 Conn. at 348 (“The defendants also submitted to the trial
court the lease agreement…plaintiff did nothing to contradict these factual assertions.”).
Therefore, such evidence can and should be considered by the Court as conclusive evidence that
jurisdiction in this Court is lacking. See Dorry, 313 Conn. at 522–23; Ferreira, 255 Conn. at 348.
II. THE FORUM SELECTION CLAUSE IS LEGALLY ENFORCEABLE AND EL
PASO IS DISTINGUISHABLE
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Plaintiffs’ blatant attempts to avoid the contractually agreed to Forum Selection Clause
based on the premise that the Delaware Court of Chancery lacks jurisdiction over the breach of
contract claim fail because Plaintiffs seek an equitable remedy, and to enforce their alleged right
to indemnification under the Amendment. See Kaung v. Cole Nat. Corp., 884 A.2d 500, 506,
509–10 (Del. 2005) (determining indemnification rights and enforcement thereof was within the
Court of Chancery’s jurisdiction). Indeed, this is not a case where the parties are seeking to
“expand the court’s jurisdiction” by contract, as Plaintiffs claim. Aside from the remedies that
Plaintiffs seek to secure the judgment for the breach of contract claim, Plaintiffs seek equitable
relief pursuant to C.G.S § 42a-8-112(e), i.e. “to immediately bring into Connecticut and to make
available for attachment, any security, as defined in C.G.S. § 42a-8-102, in which she has an
ownership interest.” (Application ¶2(ii)).
Connecticut courts have held that the relief sought under C.G.S § 42a-8-112(e) is
separate from the enumerated prejudgment remedies under C.G.S. § 52-278a(d) (attachment,
foreign attachment, garnishment, and replevin), as it seeks injunctive relief, and therefore “the
court must determine whether the plaintiff can meet the standard for temporary injunctive relief
set forth in Aqleh v. Cadlerock Joint Venture II, L.P., 299 Conn. 84, 97 (2010) (“[i]n general, a
court may, in its discretion, exercise its equitable power to order a temporary injunction pending
final determination of the order, upon a proper showing by the movant that if the injunction is
not granted he or she will suffer irreparable harm for which there is no adequate remedy at law”
[internal quotation marks omitted]).” MDJ Realty, LLC v. Premier Educ. Group G.P., Inc., 2021
WL 2182929, at *4; see also Rhode Island Hosp. Tr. Nat. Bank v. Tr., 25 Conn. App. 28, 32
(1991) (“[C]ombining a prejudgment attachment with a temporary injunction does not transform
the latter into a PJR.”); Gen. Elec. Capital Corp. v. Metz Family Enterprises, LLC, 141 Conn.
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App. 412, 425–26 (2013) (“The relief requested in the plaintiff's subsequent application for a
prejudgment remedy is the only apparent form of equitable relief sought in this case.”). The
Delaware Court of Chancery has exercised jurisdiction over claims seeking similar relief to that
which Plaintiffs seek. See, e.g. Brinati v. TeleSTAR, Inc., 1985 WL 44688, at *5 (granting
preliminary injunction protecting court's jurisdiction over assets by restraining defendants from
expending those funds, other than for purposes of winding up or liquidating); Eberhardt v.
Christiana Window Glass Co., 74 A. 33, 36–37 (Del. Ch. 1909) (issuing preliminary injunction
to preserve fund in controversy “to await the final determination of the cause”).
Plaintiffs also fail to address, and thus concede, Defendant’s argument that the Delaware
Court of Chancery is in the best position to decide whether the Forum Selection Clause is
enforceable. See Emerald Partners, 726 A.2d at 1224; see also Teamsters Union 25 Health
Services & Insurance Plan, 119 A.3d at 69. Indeed, the parties contractually agreed for disputes
arising under the Amendment to be heard by the Delaware Court of Chancery, and it is not up to
Plaintiffs to decide to ignore their contractual agreement to submit to the exclusive jurisdiction of
the Delaware Court of Chancery based upon their own interpretation of the law, especially where
the El Paso case they rely up on is distinguishable on multiple grounds.
One of the reasons that the court in El Paso found that the forum selection clause in El
Paso was unenforceable was because the parties had specifically attempted to confer subject
matter jurisdiction on the Court of Chancery over purely legal claims in the forum clause at
issue, which was improper. See El Paso Nat. Gas Co. v. Transamerican Nat. Gas Corp., 1994
WL 248195, at *2 (where the forum selection clause at issue stated, in pertinent part, “ALL
ACTIONS TO ENFORCE OR SEEK DAMAGES...FOR THE ALLEGED BREACH OF THIS
AGREEMENT OR THE OPERATIVE AGREEMENTS SHALL BE BROUGHT IN THE
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CHANCERY COURT OF THE STATE OF DELAWARE.” (emphasis added)). However, the
Court’s opinion was clear that despite the impermissible forum selection clause, if the parties’
underlying disputes were within the Court of Chancery’s jurisdiction, the forum selection clause
could be enforced. Id. The Court held, “El Paso’s specific performance claim, therefore, is only
viable if the parties’ underlying disputes are cognizable in this Court. Here, the claims in the
Texas Action are all legal in nature-TransAmerican seeks money damages for fraud, economic
torts, conspiracy and antitrust violations.” Id. Here, Plaintiffs’ claims are not purely legal, as
Plaintiffs also seek equitable relief under C.G.S § 42a-8-112(e). Further, the Delaware Court of
Chancery also has jurisdiction under the Delaware LLC Act, as noted in Section I(C), supra.
The forum selection clause here also differs from that of El Paso, which narrowly
covered claims that arose from breach of the agreement containing the forum selection clause,
and there was no breach of contract claim at issue. See ASDC Holdings, LLC v. Richard J.
Malouf 2008 All Smiles Grantor Retained Annuity Tr., 2011 WL 4552508, at *5 (“[B]ased on the
narrow forum selection clause and the omission of any claim for breach of contract in the Texas
action, it is highly unlikely that the forum selection clause in El Paso could have been applied to
the contested claims in that dispute.”). The Forum Selection Clause here is much broader than
that of El Paso, and clearly includes the claims at issue, as it applies to “[a]ll disputes claims or
controversies arising out of or relating to [the] Amendment or the transactions contemplated
hereby[.]” (emphasis added). See ASDC Holdings, LLC, 2011 WL 4552508, at *5 (“Here, the
use of the phrase “arising under or relating to” in the Agreements demonstrates that this is a
broad forum selection clause; therefore, any issues that ‘touch on contract rights or contract
performance’ should be subject to the exclusive jurisdiction agreed to under that clause.”).
Given that the Forum Selection Clause also relates to “transactions contemplated hereby” it
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undoubtedly also includes the other related agreements which are the subject of Defendant’s
Delaware claims that clearly seek equitable relief to unwind the Amendment and Reorganization
Agreement, which are going to have to be decided, and the parties agreed that the Delaware
Court should decide such claims. To deny Defendant’s motion to dismiss and keep one of the
parties’ cases in Connecticut would create the unwarranted risk of two different outcomes that
affect one another i.e. if the Amendment is rescinded, Plaintiffs here will have no right to enforce
it in this case. See Medek, 2008 WL 4261017, at *3.
Plaintiff’s reliance on Milhollan v. Live Ventures, Inc., is also misplaced because that
case only involved one single claim for breach of contract, and there was no application for
prejudgment remedy at issue. See Milhollan, 2023 WL 2943237, at *2. Further, Plaintiffs’
Application is much more than a mere “catchall phrase” in the complaint seeking equitable relief
as was the case in Milhollan. Indeed, Plaintiff seeks injunctive relief under C.G.S § 42a-8-112(e)
which, as stated above, does require a showing of irreparable harm and no adequate remedy at
law. See MDJ Realty, LLC, 2021 WL 2182929, at *4. The other cases cited by Plaintiff, Marlin
Broadcasting, LLC and Pursuit Partners, LLC, are equally unavailing where the applications for
prejudgment remedy at issue in those cases also do not seek relief under C.G.S § 42a-8-112(e).
See Marlin Broad., LLC v. Law Office of Kent Avery, LLC, 101 Conn. App. 638 (2007); Pursuit
Partners, LLC v. UBS AG, 2009 WL 2358310, at *4.
For these reasons, Plaintiffs argument that the Forum Selection Clause is unenforceable
fails. Further, Plaintiffs failed to oppose and thus concede (see Emerald Partners, 726 A.2d at
1224; Teamsters Union 25 Health Services & Insurance Plan, 119 A.3d at 69), that even if the
Court agreed that the Forum Selection Clause is unenforceable, it is within the Court’s power to
modify that provision to enforce the clear intent of the parties to litigate claims related to the
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Amendment or the transactions contemplated by it in Delaware. See Power v. Kean, 2022 WL
17439072, at *4; Newinno, Inc. v. Peregrim Dev., Inc., 2003 WL 21493838, at *5–6. Notably,
Plaintiffs also do not contest or offer evidence to rebut, and therefore concede (see Emerald
Partners, 726 A.2d at 1224; Teamsters Union 25 Health Services & Insurance Plan, 119 A.3d at
69), Defendant’s argument that the parties made an intentional and negotiated choice of
exclusive jurisdiction in Delaware, that same was not the product of fraud or deception, and that
any alleged inconvenience alleged by Plaintiff would have been foreseeable at the time the
Amendment was drafted. (Motion, pp. 8, 10). Plaintiffs did not oppose, and thus conceded,
defendants request that if the Court finds that the Forum Selection Clause is unenforceable as
written, the Forum Selection Clause should be modified by the Court as requested to make any
state court in Delaware the exclusive and mandatory forum for disputes arising from the
Amendment, as the parties clearly intended. This is also the correct result where any other
outcome would be inequitable and reward fraudulent behavior by the Plaintiffs, who seem to be
arguing that they knew the provision was facially invalid, but induced Defendant to sign the
Agreement relying on the fact that Delaware procedural and substantive law would apply.
III. TO FORCE DEFENDANT TO LITIGATE IN CONNECTICUT WOULD BE
UNREASONABLE
Plaintiffs’ argument as to forum non conveniens is also unpersuasive and intentionally
misses the point. The issue is that this Court exercising jurisdiction over Plaintiff’s claims would
be unreasonable because the parties contractually agreed to litigate in another forum, and it
deprives Defendant of the benefit of her bargain and is prejudicial to Defendant. See FAB Tech,
Inc. v. A.C.G. Contracting, Inc., LLC, 2016 WL 4708530, at *4; M/S Bremen v. Zapata Off-
Shore Co., 407 U.S. 1, 23 (1972). Indeed, it is Plaintiffs’ burden, as the party seeking to escape
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their contractual agreements, to show that Plaintiffs would be deprived of their day in court if the
forum selection clause were enforced, which they utterly failed to do.
Indeed Plaintiffs offer no argument that they could not have started their action in
Delaware—to the contrary Plaintiffs’ opposition seems to brag that they intentionally ignored the
exclusive jurisdiction clause so that they could forum shop for a procedural advantage in
Connecticut when that is not what the parties bargained for. Plaintiffs’ contention that
Defendant will not suffer any hardship, reeks with disingenuous intent when they simultaneously
brag that they have forum shopped to get into a court that has a remedy that is substantively
different than they are entitled to in Delaware. (See Opposition, p. 12 (“[A]ssuming the court
agrees that it has subject matter jurisdiction over the [P]laintiffs’ action and denies [D]efendant’s
motion to dismiss, the [P]laintiffs will reclaim their application for prejudgment remedy which
does not exist in Delaware.” (emphasis added)); p. 16 (“Plaintiffs have chosen to pursue their
claim in Connecticut which affords them consideration of their application for prejudgment
remedy.”)). Moreover, given that Defendant has filed a lawsuit in the Delaware Court of
Chancery seeking, inter alia, equitable relief in the form of recission of the Amendment, there is
no reason Plaintiffs cannot assert whatever claims they have there. See M/S Bremen, 407 U.S. at
18. The parties specifically bargained for Delaware substantive and procedural law to apply. To
prevent any further prejudice to Defendant, Plaintiffs claims must be dismissed here as they can
and should be litigated in Delaware.
CONCLUSION
Based upon the foregoing, Plaintiff respectfully requests that the Court grant Defendant’s
Motion to Dismiss in its entirety, with prejudice and without leave to amend, and grant any other
relief the Court deems just and proper.
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Dated: New York, New York
May 25, 2023 Respectfully submitted,
ADELMAN MATZ P.C.
By:_______________________
Gary Adelman, Esq.
1159 Second Avenue, Ste 153
New York, New York 10065
Telephone: (646) 650-2207
E-mail:g@adelmanmatz.com
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FBT-CV23-505 l 023-S
AMY HOCHHAUSER AND RHOD IE SUPERIOR COURT
LORENZ,
JUDICIAL DISTRICT OFFAIRFIELD
Plaintiffs,
AT BRIDGEPORT
-against-
REBECCA CERRONI,
MAY25, 2023
Defendant.
SECOND AFFIDAVIT OF REBECCA CERRONI IN FURTHER SUPPORT
OF MOTION TO DISMISS
STATE OFCONNECTICUT )
) ss:
COUNTY OFFAIRFIELD )
I, REBECCA CERRONI, being duly sworn, deposes and says:
1. I am the defendant in the above-entitled action. The facts stated herein are true
and correct and of my own personal knowledge, except for those facts stated on information and
belief, and as to those facts, I believe them to be true. If called and sworn as a witness, I could
and would testify competently thereto under oath.
2. I submit this affidavit in further support of my motion to dismiss plaintiffs', Amy
Hochhauser ("Hochhauser") and Rhodie Lorenz ("Lorenz") (Hochhauser and Lorenz
collectively, "Plaintiffs"), Application for Prejudgment Remedy and Complaint (the "Motion").
3. Annexed hereto as Exhibit 6 is a true and correct copy of the Verified Complaint
that was filed in the Delaware Court of Chancery by me and TxHoldCo against Plaintiffs and
JoyRide, dated May 19, 2023:
EXHIBIT 6
EFiled: May 19 2023 11:35AM EDT
Transaction ID 70047445
Case No. 2023-0541-
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
REBECCA CERRONI, as an )
individual, and LVWL, LLC, )
)
Plaintiffs, )
C.A. No. _____________
)
v. )
)
AMY HOCHHAUSER, as an )
individual, and RHODIE LORENZ )
as an individual, and )
JOYRIDE CYCLE STUDIO LLC, )
)
Defendants. )
VERIFIED COMPLAINT
Rebecca Cerroni (“Cerroni”) and LVWL, LLC (“TxHoldCo”) (collectively,
“Plaintiffs”), by and through their undersigned counsel, upon Cerroni’s personal
knowledge as to herself and TxHoldCo and her own acts and upon information and
belief as to all other matters, alleges for its Verified Complaint against Defendants,
Amy Hochhauser (“Hochhauser”) and Rhodie Lorenz (“Lorenz”) as individuals and
Joyride Cycle Studio, LLC (“JoyRide Franchise”) as a company owned and operated
solely by Hochhauser and Lorenz (Hochhauser, Lorenz, and JoyRide Franchise
collectively referred to as “Defendants”) as follows:
NATURE OF THE ACTION
1. The nature of this action is: (i) rescission of the Omnibus Spin-Out
Distribution and Transition Services Agreement, executed on December 23, 2021
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(“Reorganization Agreement”) and Amendment Agreement to Indemnify
(“Indemnity Agreement No. 2”), incorporated into the Reorganization Agreement,
between the Parties due to breach of contract, and any damages for such acts; (ii)
rescission of the Reorganization Agreement due to fraudulent inducement, and to
recover any punitive or other damages for these acts; (iii) declaratory and injunctive
relief for the harm caused to Cerroni’s reputation as well as punitive or other
damages for defamation iv) and declaratory and injunctive relief along with damages
for disparagement by Hochhauser and Lorenz against Cerroni; (v) declaratory relief,
injunctive relief and damages for tortious interference by Defendants with Plaintiffs’
businesses; (vi) declaratory and injunctive relief for breach of fiduciary duties to
Cerroni and the JoyRide Franchise along with money damages; and (viii) rescission
of the Contribution Agreement between the Parties dated February 11, 2019 (the
“Contribution Agreement”) and the Letter Agreement to Indemnify in Connection
with the SBA Loan (the “Indemnification Agreement No. 1”) dated March 12, 2019
due to fraudulent inducement and economic duress perpetrated on Cerroni by the
Defendants and punitive as well as compensatory or other money damages for the
same.
JURISDICTION
2. This Court has jurisdiction over this action pursuant to 10 Del. C.
§§ 341, 342, and 6501 et seq because the Plaintiffs seek equitable relief in the form
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of rescission for breach of contract, declaratory and injunctive relief for tortious
interference with business relations and breach of fiduciary duties. The Court also
has jurisdiction over the defamation claim pursuant to the clean-up doctrine and to
avoid any piecemeal litigation.
3. This Court has jurisdiction over Defendants pursuant to 10 Del. C.
§ 3111 as this action is being brought against the JoyRide Franchise and its owners
who submit to the jurisdiction of this Court pursuant to the Reorganization
Agreement.
4. Jurisdiction is also proper pursuant to Section 8.9 of the Reorganization
Agreement, which provides the Parties’ unconditional consent that the exclusive
forum for disputes arising out of or related to the Reorganization Agreement is the
Chancery Court of the State of Delaware and any or all such disputes will be
governed by and construed in accordance with the laws of the State of Delaware.
5. Jurisdiction is also proper pursuant to Section 6.7 of the Reorganization
Agreement, which provides “the non-breaching Party shall be entitled to immediate
temporary and other equitable relief” and “if the other Party breaches any of the
terms of the said restrictive covenants…the non-breaching Party will have no
adequate remedy at law”, and Defendants have breached restrictive covenants of the
Reorganization Agreement as described herein.
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6. Jurisdiction is also proper pursuant to the forum selection clauses in the
agreements that are integral to the determination of the Defendants’ breach and other
tortious acts against Cerroni, including Contribution Agreement (Clause 9.8) dated
February 11, 2019, Indemnification Agreement No. 1 (incorporates Clause 9.8 of
Contribution Agreement), Reorganization Agreement (Clause 8.9) and
Indemnification Agreement No. 2 (Clause 7(e)) between the Parties.
THE PARTIES
7. Rebecca Cerroni is a natural person, residing at 3590 Congress Street
Fairfield, CT 06824.
8. LVWL LLC, is a Texas limited liability company, (“TXHoldCo”), with
its principal place of business at 3590 Congress Street Fairfield, CT 06824.
9. Upon information and belief, Amy Hochhauser is a natural person
currently residing at 4 Melwood Lane, Westport, Connecticut 06880.
10. Upon information and belief, Rhodie Lorenz is a natural person
currently residing at 1 Nutmeg Lane, Westport, Connecticut 06880.
11. JoyRide Cycle Studio LLC is a limited liability company registered in
Connecticut, with its principal place of business located at 4 Melwood Lane,
Westport, Connecticut 06880.
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FACTUAL BACKGROUND
I: Facts Preceding the Reorganization Agreement
12. Upon information and belief, since 2010, Hochhauser and Lorenz
owned and operated several fitness studios in Connecticut under the JoyRide parent
company, JoyRide Franchise, which were located in Westport (“JRC Westport
Studio”), Wilton (“JRC Wilton Studio”), Darien (“JRC Darien Studio”), and
Ridgefield (“JRC Ridgefield Studio”) (collectively the “Connecticut Studios”).
13. Plaintiffs became affiliated with Defendants in 2013 when Cerroni
began licensing the JoyRide name for two (2) fitness studios located in Texas,
JoyRide Fitness Texas, LLC (“JRT Broadway Studio”) and JoyRide Fitness Texas
II, LLC (“JRT Alon Studio”) (the JRT Broadway Studio and the JRT Alon Studio
collectively referred to as the “Texas Studios”), which Cerroni owned and operated.
14. Under a Trademark License Agreement dated February 8, 2014, (the
“License Agreement”), a small royalty of 6-8% was paid to the JoyRide Franchise
for the use of the JoyRide name for the Texas Studios.
15. In 2018, after Cerroni moved to Westport, Connecticut, Hochhauser
told Cerroni that the Texas Studios could either be acquired by the JoyRide
Franchise, or Hochhauser and Lorenz would take away Cerroni’s license to use the
JoyRide brand for the Texas Studios (which Cerroni had used for over five (5) years)
and would terminate the License Agreement, a right they did not have.
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16. Hochhauser and Lorenz also demanded that as part of the acquisition
of the Texas Studios, Cerroni would take over Hochhauser’s current role as Chief
Executive Officer (“CEO”) of the JoyRide Franchise because Hochhauser wanted to
transition out of the role.
17. To coerce Cerroni into accepting their offer to acquire the Texas
Studios, Hochhauser and Lorenz falsely promised that as CEO, Cerroni would have
independent decision-making abilities.
18. Once Cerroni had agreed to have the Texas Studios be acquired by the
JoyRide Franchise, Hochhauser and Lorenz told Cerroni that their offer was also
conditioned upon Cerroni signing a personal guarantee as to Defendants’ small
business loan that Hochhauser and Lorenz had taken out before offering Cerroni the
CEO position, specifically, a TD Bank Small Business Administration Loan dated
April 27, 2018 (“SBA 7a Loan”), and which Hochhauser and Lorenz had personally
guaranteed.
19. Hochhauser and Lorenz again threatened that if Cerroni did not agree
to personally guarantee the SBA 7a Loan, they would prematurely terminate the
License Agreement. Hochhauser and Lorenz were aware that they possessed no such
right to terminate the License Agreement.
20. Upon information and belief, Defendants knew that they did not have
the right to terminate the license arbitrarily, and terminating the License Agreement
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would be devastating to Cerroni’s livelihood and the Texas Studios’ business, as it
would require Cerroni to rebuild the Texas Studios with a new brand, and
Defendants exploited this fact to coerce Cerroni into indemnifying the Defendants
for the SBA 7a Loan.
21. At the time Hochhauser and Lorenz coerced Cerroni into indemnifying
Hochhauser and Lorenz for the SBA 7a Loan, they did not disclose any of the
specific details of the SBA 7a Loan to Cerroni.
22. Upon information and belief, Hochhauser and Lorenz had taken out the
SBA 7a Loan to finance the acquisition of the JRC Ridgefield Studio and the JRC
Wilton Studio, which Cerroni had no connection to, and the JRC Wilton Studio and
the JRC Darien Studio and/or their assets were used as collateral.
23. Despite not knowing the specific details of the SBA 7a Loan, Cerroni
had no option to decline or negotiate the terms of the offer because she had been put
under economic duress by Hochhauser and Lorenz’s threats to terminate the License
Agreement if Cerroni did not agree, which Cerroni feared would put the Texas
Studios out of business.
24. As a result, on February 11, 2019, Cerroni signed the Contribution
Agreement with the Defendants (the “Contribution Agreement”) through which the
JoyRide Franchise acquired the Texas Studios.
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25. In line with the Contribution Agreement, an Amendment to the
Operating Agreement (“Operating Agreement”) for the JoyRide Franchise was also
executed on February 11, 2019, which gave Cerroni, Hochhauser and Lorenz, equal
voting rights and management rights in the JoyRide Franchise.
26. Pursuant to Section 7(c) of the Operating Agreement, Cerroni was
appointed as the Chief Executive Officer of the JoyRide Franchise and was provided
with the powers to “manage the day-to-day operation of the business and affairs of
the JoyRide Franchise [company]”. Clause 6.2 of the Contribution Agreement also
included a reference to the SBA 7a Loan and an agreement to indemnify Hochhauser
and Lorenz for the SBA 7a Loan.
27. Pursuant to Clause 6.3 of the Contribution Agreement, Cerroni was also
supposed to be provided with an employment agreement at closing, outlining her
duties, severance compensation benefit continuation and issuance of incentive
equity. Cerroni was never provided with any such employment agreement either
during the closing of the Contribution Agreement or thereafter.
28. Subsequently, on March 12, 2019, Indemnification Agreement No. 1
was also signed providing names of the parties who guaranteed the SBA 7a Loan,
although the specific terms of the SBA 7a Loan were not provided to Cerroni.
29. After the Contribution Agreement was signed, Hochhauser and Lorenz
failed to allow Cerroni to exercise the decision-making authority conferred upon
8
Cerroni under the Operating Agreement and as is customary to the position of the
CEO, by constantly interfering in the day-to-day operations of the JoyRide
Franchise.
30. Hochhauser and Lorenz routinely undermined Cerroni’s decisions,
even when such decisions would be beneficial to the JoyRide Franchise, to advance
their own personal interests over the interests of the JoyRide Franchise.
31. For example, in January 2020, Cerroni secured a membership offer
from Young President’s Organization (“YPO”), which was a valuable networking
opportunity for the JoyRide Franchise, but Hochhauser and Lorenz voted against
Cerroni’s decision to accept the offer despite the fact that it was in the best interest
of the JoyRide Franchise.
32. After the COVID-19 lockdown in May 2020, Cerroni secured and
personally guaranteed two loans, an SBA EIDL loan worth $500,000 (“EIDL Loan”)
and a PPP loan worth $382,000 (“PPP Loan”), for the JoyRide Franchise.
33. Cerroni continued her efforts to raise money for the JoyRide Franchise,
including securing a $12,000 grant from the Lululemon ambassador fund that was
used to launch the JoyRideGo proprietary application (“JoyRideGo App”).
34. Upon information and belief, on the other side, Hochhauser and Lorenz
continued to engage in waste of JoyRide Franchise’s funds, disparaging Cerroni in
front of employees and mismanaging the affairs of theJoyRide Franchise.
9
35. As just one example, Hochhauser and Lorenz engaged in an excessive
and unnecessary amount of spending on company credit cards without Cerroni’s
knowledge, as the credit cards were under Hochhauser and Lorenz’s names,
resulting in the amount of the JoyRide Franchise’s credit card debt doubling within
a year.
36. By failing to disclose their spending, Hochhauser and Lorenz violated
the Operating Agreement by depriving Cerroni of the ability to operate the day-to-
day affairs of the JoyRide Franchise and failing to allow her to control the budget or
have any input on whether such company expenses were necessary or beneficial for
the JoyRide Franchise.
37. In May 2020, Cerroni engaged expert counsel to evaluate options to
help manage the difficult financial condition of the JoyRide Franchise, and was told
that one option was to close the JRC Wilton Studio if it was not encumbered by any
loan because there was no revenue being generated from that particular studio.
38. Hochhauser and Lorenz represented to Cerroni that the JRC Wilton
Studio could be closed and was unencumbered by any loans.
39. Upon information and belief, this representation was false and false
when made as it and its assets were collateral for the SBA 7a Loan.
40. Then, in October 2020, Hochhauser and Lorenz decided to close the
JRC Ridgefield Studio over Cerroni’s objection.
10
41. Closing the JRC Ridgefield Studio was not in the best interests of the
JoyRide Franchise.
42. Moreover, upon information and belief, Hochhauser and Lorenz
decided to close the JRC Ridgefield Studio and used $20,000 from the EIDL Loan
and PPP Loan to pay off their own personal guarantee so that they would be shielded
from liability.
43. Cerroni conveyed to Hochhauser and Lorenz that closing both the JRC
Wilton Studio and JRC Ridgefield Studio would make it nearly impossible to make
payments on JoyRide Franchise’s existing loans, but Hochhauser and Lorenz
disregarded Cerroni’s concerns, and acted in their own personal interests, not the
best interests of the JoyRide Franchise.
44. In November 2020, Hochhauser and Lorenz informed Cerroni of their
intention to sell the JoyRide Franchise.
45. Acting in the best interest of the JoyRide Franchise, Cerroni engaged a
financial advisor, Align Business Advisory (“Align”), to advise and navigate the
options of either selling or finding investors for the JoyRide Franchise.
46. Upon information and belief, Hochhauser and Lorenz prioritized their
personal interests over finding investments for the JoyRide Franchise. When Align
made efforts to find potential investors, the potential investors were scared off by
11
Hochhauser’s requests for investors to buy Hochhauser out before investing in the
JoyRide Franchise.
47. Upon information and belief, Hochhauser also made disparaging
statements about Cerroni to the CEO of Align, claiming that Cerroni was incapable
of performing her duties with respect to the JoyRide Franchise, with the intent of
further discouraging investors from investing in the JoyRide Franchise.
48. In December 2020, Hochhauser and Lorenz conveyed their intentions
to close the JRC Darien Studio, which Cerroni also opposed because the JoyRide
Franchise would experience further financial hardship without the revenue from the
Darien Studio, and again, Hochhauser and Lorenz disregarded Cerroni’s concerns
about the detrimental effect of this decision.
49. Amidst this financial crisis and days before the launch of the
JoyRideGo app, Hochhauser resigned as Chief Brand Officer of the JoyRide
Franchise.
50. In January 2021, the Parties began negotiating the possible closure of
the JRC Darien Studio.
51. In April 2021, after negotiations surrounding closing of the JRC Darien
Studio were unfruitful, Cerroni expressed that she wanted to separate the Texas
Studios from the JoyRide Franchise.
12
52. On May 20, 2021, Cerroni emailed Hochhauser and Lorenz a proposed
a separation agreement, and Hochhauser responded to Cerroni’s proposal with a
request for Cerroni to pay $720,000 to pay off the remainder of the SBA 7a Loan, in
addition to removing Hochhauser and Lorenz’s names from the EIDL Loan so that
Cerroni would assume all personal liability for same.
53. Subsequently, Hochhauser and Lorenz began employing coercive
tactics to force Cerroni to agree to these terms, such as by threatening to remove
Cerroni from the CEO role and removing Cerroni’s management rights if she did not
agree and remained with the JoyRide Franchise.
54. As a result of Hochhauser and Lorenz’s threats, Cerroni decided to
resign from her role as CEO and relinquished her managing rights, and the Parties
continued informal mediation to finalize the separation agreement.
55. Upon information and belief, sometime after Cerroni sent her proposed
separation agreement to Hochhauser and Lorenz on May 20, 2021, Lorenz defamed
Cerroni by making a false statement to one of the JoyRide instructors that Cerroni
had taken out a fraudulent loan from Jefferson Bank.
56. Upon information and belief, also sometime after May 20, 2021,
Hochhauser and Lorenz made further defamatory statements about Cerroni to third
parties, including but not limited to a friend of Hochhauser and Lorenz that provided
business advice to the JoyRide Franchise, about Cerroni “destroying” the JoyRide
13
Franchise because she created a culture that contributed to the suicide of an
employee of the JoyRide Franchise.
57. Upon information and belief, Hochhauser and Lorenz voted to remove
Cerroni’s voting rights so that Cerroni would not be able to object to their attempt
to close the JRC Darien Studio, which was the last studio encumbered by the SBA
7a Loan.
II: Reorganization Agreement
58. In November 2021, Hochhauser and Lorenz threatened to prematurely
close the Texas Studios, which were currently being leased by the JoyRide
Franchise, to coerce Cerroni to reaffirm Indemnification Agreement No. 1 and
provide her personal guarantee for the SBA 7a Loan, as part of the separation.
59. Under economic duress, Cerroni agreed to indemnify Hochhauser and
Lorenz for around $590,000 worth of loans from the JoyRide Franchise so that the
Texas Studios could remain open.
60. On December 24, 2021, the Reorganization Agreement, which
governed the separation between JoyRide Franchise and TxHoldCo, was executed.
61. Under the Reorganization Agreement, Hochhauser and Lorenz kept the
Employee Retention Compensation Tax Credits (the “ERC Tax Credits”) from both
the Texas Studios and Connecticut Studios in the amount of or about $250,000.
14
62. Cerroni agreed to the aforementioned terms because (1) she was
fraudulently induced into believing that the Texas Studios had no liabilities, (2)
Hochhauser and Lorenz were threatening to close the Texas Studios, and (3)
Hochhauser and Lorenz would be contractually bound to refrain from making further
disparaging statements against the Cerroni and her businesses, who was a third-party
beneficiary of the Reorganization Agreement.
63. Pursuant to clause 8.3 of the Reorganization Agreement,
Indemnification Agreement No. 2 was incorporated. Indemnification Agreement
No. 2 reaffirmed Cerroni’s obligations under the earlier coercive Indemnification
Agreement No. 1, and also obligated Cerroni to confirm that Cerroni would be liable
for the “total Losses incurred or suffered by the Hochhauser and Lorenz to the extent
arising out of the Loan Agreement” (Clause 1 of Indemnification Agreement No. 2).
64. Cerroni’s entire motivation behind finalizing the Reorganization
Agreement on such unfair terms, was firstly, to ensure that Hochhauser and Lorenz
would stop interfering with her businesses or disparaging her in the future and
secondly, to salvage the Texas Studios, which Hochhauser and Lorenz fraudulently
induced her to believe were the only studios of the JoyRide Franchise that were not
in debt.
65. Clause 6.5 of the Reorganization Agreement, was the non-
disparagement clause, which states:
15
6.5. Non-Disparagement. Neither Party shall make any statement with
the purpose or intent of disparaging or maligning the reputation of the
other Party, its Affiliates, or any of their products or services, or their
equity holders, managers, officers, or agents; provided that nothing
herein shall limit a Party from responding truthfully as required in
connection with any judicial or similar legal process.
66. Moreover, the Absence of Undisclosed Liabilities Clause (Schedule
3.11) of the Reorganization Agreement (the “Absence of Undisclosed Liabilities
Clause”) states that “each of JRT Alon Studio and JRT Broadway Studio have
liabilities …(ii) under their respective real estate leases (copies of which have been
provided to TxHoldCo) as more particularly set forth therein”.
67. The Absence of Undisclosed Liabilities Clause was a material term of
the Reorganization Agreement, because it was Plaintiffs’ objective to separate the
Texas Studios from the JRT Franchise and to only assume the liabilities that had
been disclosed and negotiated between the Parties.
68. Cerroni only agreed to release the Defendants “from and against any
and all actions/claims/damages/demands….”, per Clause 6.8 due to and in exchange
for the promises and warranties that Defendants had provided in the Reorganization
Agreement.
III: Post-Reorganization Agreement
69. Following the execution of the Reorganization Agreement, Cerroni
became aware of multiple instances when the Defendants breached (a) the disclosed
16
liabilities (Clause 3.11) and (b) the non-disparagement clause (Clause 6.5) of the
Reorganization Agreement.
70. Specifically, Hochhauser and Lorenz misrepresented to Cerroni that the
Texas Studios did not have any liabilities, when in fact in December 2021, Cerroni
was made aware that clients had been locked out of the JRT Broadway Studio
because Hochhauser and Lorenz had not paid the rent.
71. Subsequently, in January 2022, Cerroni also learned that Hochhauser
and Lorenz falsely misrepresented the liability of the Texas Studios when she found
an unpaid ledger for rent of the JRT Alon Studio, that amounted to around $10,000
had not been paid by Hochhauser and Lorenz since April of 2021.
72. Cerroni was not made aware of this ledger or unpaid rent before the
Reorganization Agreement, which amounts to a breach of Clause 3.11 of the
Reorganization Agreement.
73. In February 2022, Cerroni also learned of multiple instances when the
Defendants breached the Non-Disparagement Clause of the Reorganization
Agreement.
74. Specifically, in November 2021, Cerroni had interviewed with Amanda
Freeman (“Freeman”), the owner, and founder of a business called Strengthen,
Length and Tone (“SLT”) based in New York City, for the position of President
Preview
FBT-CV23-5051023-S AMY HOCHHAUSER AND RHODIE : SUPERIOR COURT LORENZ, : : JUDICIAL DISTRICT OF FAIRFIELD Plaintiffs, : : AT BRIDGEPORT -against- : : REBECCA CERRONI, : : MAY 25, 2023 Defendant. DEFENDANT’S REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF MOTION TO DISMISS PLAINTIFFS’ APPLICATION FOR PREJUDGMENT REMEDY Gary Adelman, Esq. Juris No. 405051 Adelman Matz P.C. 1159 Second Avenue, Ste 153 New York, New York 10065 Telephone: (646) 650-2207 Email: g@adelmanmatz.com Attorneys for Defendant Plaintiffs1 Opposition fails to demonstrate that the Court has jurisdiction over this action, and as such the Motion to Dismiss (the “Motion”) should be sustained. ARGUMENT I. DEFENDANT’S AFFIDAVITS AND THE EVIDENCE ATTACHED CONCLUSIVELY ESTABLISH THAT THE DELAWARE COURT OF CHANCERY HAS JURISDICTION OVER PLAINTIFFS’ CLAIMS A. THE AMENDMENT AND REORGANIZATION AGREEMENT CONCLUSIVELY ESTABLISH THAT THE DELAWARE COURT OF CHANCERY HAS STATUTORY JURISDICTION OVER PLAINTIFFS’ BREACH OF CONTRACT CLAIM Contrary to Plaintiffs’ conclusory arguments, the Amendment (Ex. A) and related Reorganization Agreement (Ex. 5) are the only pieces evidence needed to show that such agreements are of the exact type contemplated by Section 18-111 of the Delaware LLC Act and are therefore within the Delaware Court of Chancery’s jurisdiction. See Principal Growth Strategies, LLC v. AGH Parent LLC, 288 A.3d 1138, 1160 (Del. Ch. 2023), citing Duff v. Innovative Discovery LLC, 2012 WL 6096586, at *6. Indeed, the Amendment was executed between the parties “in connection with and effective upon the closing of the transactions contemplated by [the Reorganization Agreement]”. (Ex.A, ¶B). The Reorganization Agreement, entered into by TxHoldCo and Joyride, also provides that the closing of the Reorganization Agreement was conditioned upon the execution and delivery of the Amendment. (Ex.5, ¶5.1(g)). Clearly, the Amendment was negotiated along with the Reorganization Agreement, when the parties were still members of Joyride, and therefore both agreements “constitute documents formulated between participants in an LLC that clearly are contemplated by the LLC Act”. Duff, 2012 WL 6096586, at *7 (“[W]hile a 1 Defendant incorporates all of her defined terms as defined in the Motion to Dismiss. 1 redemption agreement is formed with the intent of eliminating a member interest, it is technically an agreement among current members of an LLC and the LLC as to how they are going to order their business in connection with and after the repurchase of the members' interests.”). As such, the Delaware Court of Chancery has statutory jurisdiction over Plaintiffs’ claims pursuant to Delaware LLC Act § 18-111. B. DEFENDANT’S EVIDENCE CONCLUSIVELY ESTABLISHES THAT THE DELAWARE COURT OF CHANCERY HAS JURISDICTION OVER PLAINTIFFS’ BREACH OF CONTRACT CLAIM UNDER THE CLEANUP DOCTRINE The Opposition fails to establish that the Delaware Court of Chancery lacks jurisdiction over Plaintiffs’ claims. As discussed below in Section II, there is already equitable relief at issue because of the injunctive relief that Plaintiffs seek in their Application. In addition, Defendant stated in the Motion what counterclaims she intended to raise against Plaintiffs, and that filing such claims would also warrant equitable relief that would confer jurisdiction in the Delaware Court of Chancery under the cleanup doctrine (Motion pp. 11-12), which Plaintiffs did not refute and therefore concede. See Emerald Partners v. Berlin, 726 A.2d 1215, 1224 (Del. 1999) (“Issues not briefed are deemed waived.”); see also Teamsters Union 25 Health Services & Ins. Plan v. Baiera, 119 A.3d 44, 69 (Del. Ch. 2015) (“Plaintiff did not advance any argument in its brief concerning either of these issues; thus, those aspects of Count V are waived.”). Indeed, under Delaware’s cleanup doctrine, the Court of Chancery may exercise jurisdiction over purely legal claims that are closely intertwined with equitable claims. See Medek v. Medek, 2008 WL 4261017. “Once the Court determines that equitable relief is warranted, even if subsequent events moot all equitable causes of action or if the court ultimately determines that equitable relief is not warranted, the court retains the power to decide the legal features of the claim pursuant to the cleanup doctrine.” Id. at *3. 2 That Defendant intended to file, and now did file,2 equitable claims against Plaintiffs conclusively establishes that the Delaware Court of Chancery would have jurisdiction over Plaintiffs’ claims under the cleanup doctrine, even if such claims were purely legal, which they are not. See Medek, 2008 WL 4261017. The Delaware Complaint establishes that, in addition to monetary damages, Defendant is in fact seeking equitable relief in the form of recission of the Reorganization Agreement and the incorporated Indemnification Agreement, the Contribution Agreement, and the Amendment, due to Plaintiffs’ breaches of the Reorganization Agreement (Ex.6, ¶¶93-107), fraudulent inducement (Ex.6, ¶¶108-114, 171-192), and economic duress (Ex.6, ¶¶160-170), as well as injunctive relief due to Plaintiffs’ continuous defamation (Ex.6, ¶¶115-126), commercial disparagement (Ex.6, ¶¶127-137), and tortious interference with prospective economic advantages against Defendant (Ex.6, ¶¶115-137). Clearly both parties’ claims are closely intertwined in that they require consideration of the same facts and similar issues, such as what obligations were created under the Amendment and related agreements, and therefore to keep the cases severed would undermine judicial efficiency and create risk of inconsistent judgments about the enforceability of the very agreement Plaintiffs seek to enforce here. See Medek, 2008 WL 4261017, at *3 (“The Court of Chancery, having acquired jurisdiction over some part of the controversy, may decide to determine the entire controversy for any of several reasons, including ‘to resolve a factual issue which must be determined in the proceedings; to avoid multiplicity of suits; to promote judicial efficiency; to do full justice; to avoid great expense; to afford complete relief in one action; and 2 Defendant and TxHoldCo filed a Verified Complaint against Plaintiffs and Joyride in the Delaware Court of Chancery (the “Delaware Complaint”), attached as Exhibit 6 to Defendant’s Second Affidavit in Further Support of the Motion to Dismiss (“Cerroni Second Affidavit”). 3 to overcome insufficient modes of procedure at law’”). As such, Plaintiffs must be required to bring their claims in the Delaware Court of Chancery and the instant action must be dismissed. C. DEFENDANT’S FACTUAL ARGUMENTS AND EVIDENCE ARE ADMISSIBLE AS UNDISPUTED EVIDENCE In determining the jurisdictional issue, the Court can consider “undisputed facts established by affidavits submitted in support of the motion to dismiss.” Dorry v. Garden, 313 Conn. 516, 522–23 (2014). The Court can also consider other types of undisputed evidence, such as agreements. See Ferreira v. Pringle, 255 Conn. 330, 348 (2001). “If affidavits and/or other evidence submitted in support of a defendant's motion to dismiss conclusively establish that jurisdiction is lacking, and the plaintiff fails to undermine this conclusion with counteraffidavits; see Practice Book § 10–31(b); or other evidence, the trial court may dismiss the action without further proceedings.” Dorry, 313 Conn. at 523. This Court can also consider evidence and affidavits submitted by the moving party on reply. See, e.g. Comtech 21, LLC v. Broadvox, LLC, 2010 WL 3038432, at *4. The agreements submitted as evidence through Defendant’s first affidavit, i.e. the Contribution Agreement (Ex. 4), the Reorganization Agreement (Ex. 5), fall within the definition of “undisputed evidence” that rebuts Plaintiffs’ jurisdictional allegations as described above in Sections I(A)-(B). See Ferreira, 255 Conn. at 348 (“The defendants also submitted to the trial court the lease agreement…plaintiff did nothing to contradict these factual assertions.”). Therefore, such evidence can and should be considered by the Court as conclusive evidence that jurisdiction in this Court is lacking. See Dorry, 313 Conn. at 522–23; Ferreira, 255 Conn. at 348. II. THE FORUM SELECTION CLAUSE IS LEGALLY ENFORCEABLE AND EL PASO IS DISTINGUISHABLE 4 Plaintiffs’ blatant attempts to avoid the contractually agreed to Forum Selection Clause based on the premise that the Delaware Court of Chancery lacks jurisdiction over the breach of contract claim fail because Plaintiffs seek an equitable remedy, and to enforce their alleged right to indemnification under the Amendment. See Kaung v. Cole Nat. Corp., 884 A.2d 500, 506, 509–10 (Del. 2005) (determining indemnification rights and enforcement thereof was within the Court of Chancery’s jurisdiction). Indeed, this is not a case where the parties are seeking to “expand the court’s jurisdiction” by contract, as Plaintiffs claim. Aside from the remedies that Plaintiffs seek to secure the judgment for the breach of contract claim, Plaintiffs seek equitable relief pursuant to C.G.S § 42a-8-112(e), i.e. “to immediately bring into Connecticut and to make available for attachment, any security, as defined in C.G.S. § 42a-8-102, in which she has an ownership interest.” (Application ¶2(ii)). Connecticut courts have held that the relief sought under C.G.S § 42a-8-112(e) is separate from the enumerated prejudgment remedies under C.G.S. § 52-278a(d) (attachment, foreign attachment, garnishment, and replevin), as it seeks injunctive relief, and therefore “the court must determine whether the plaintiff can meet the standard for temporary injunctive relief set forth in Aqleh v. Cadlerock Joint Venture II, L.P., 299 Conn. 84, 97 (2010) (“[i]n general, a court may, in its discretion, exercise its equitable power to order a temporary injunction pending final determination of the order, upon a proper showing by the movant that if the injunction is not granted he or she will suffer irreparable harm for which there is no adequate remedy at law” [internal quotation marks omitted]).” MDJ Realty, LLC v. Premier Educ. Group G.P., Inc., 2021 WL 2182929, at *4; see also Rhode Island Hosp. Tr. Nat. Bank v. Tr., 25 Conn. App. 28, 32 (1991) (“[C]ombining a prejudgment attachment with a temporary injunction does not transform the latter into a PJR.”); Gen. Elec. Capital Corp. v. Metz Family Enterprises, LLC, 141 Conn. 5 App. 412, 425–26 (2013) (“The relief requested in the plaintiff's subsequent application for a prejudgment remedy is the only apparent form of equitable relief sought in this case.”). The Delaware Court of Chancery has exercised jurisdiction over claims seeking similar relief to that which Plaintiffs seek. See, e.g. Brinati v. TeleSTAR, Inc., 1985 WL 44688, at *5 (granting preliminary injunction protecting court's jurisdiction over assets by restraining defendants from expending those funds, other than for purposes of winding up or liquidating); Eberhardt v. Christiana Window Glass Co., 74 A. 33, 36–37 (Del. Ch. 1909) (issuing preliminary injunction to preserve fund in controversy “to await the final determination of the cause”). Plaintiffs also fail to address, and thus concede, Defendant’s argument that the Delaware Court of Chancery is in the best position to decide whether the Forum Selection Clause is enforceable. See Emerald Partners, 726 A.2d at 1224; see also Teamsters Union 25 Health Services & Insurance Plan, 119 A.3d at 69. Indeed, the parties contractually agreed for disputes arising under the Amendment to be heard by the Delaware Court of Chancery, and it is not up to Plaintiffs to decide to ignore their contractual agreement to submit to the exclusive jurisdiction of the Delaware Court of Chancery based upon their own interpretation of the law, especially where the El Paso case they rely up on is distinguishable on multiple grounds. One of the reasons that the court in El Paso found that the forum selection clause in El Paso was unenforceable was because the parties had specifically attempted to confer subject matter jurisdiction on the Court of Chancery over purely legal claims in the forum clause at issue, which was improper. See El Paso Nat. Gas Co. v. Transamerican Nat. Gas Corp., 1994 WL 248195, at *2 (where the forum selection clause at issue stated, in pertinent part, “ALL ACTIONS TO ENFORCE OR SEEK DAMAGES...FOR THE ALLEGED BREACH OF THIS AGREEMENT OR THE OPERATIVE AGREEMENTS SHALL BE BROUGHT IN THE 6 CHANCERY COURT OF THE STATE OF DELAWARE.” (emphasis added)). However, the Court’s opinion was clear that despite the impermissible forum selection clause, if the parties’ underlying disputes were within the Court of Chancery’s jurisdiction, the forum selection clause could be enforced. Id. The Court held, “El Paso’s specific performance claim, therefore, is only viable if the parties’ underlying disputes are cognizable in this Court. Here, the claims in the Texas Action are all legal in nature-TransAmerican seeks money damages for fraud, economic torts, conspiracy and antitrust violations.” Id. Here, Plaintiffs’ claims are not purely legal, as Plaintiffs also seek equitable relief under C.G.S § 42a-8-112(e). Further, the Delaware Court of Chancery also has jurisdiction under the Delaware LLC Act, as noted in Section I(C), supra. The forum selection clause here also differs from that of El Paso, which narrowly covered claims that arose from breach of the agreement containing the forum selection clause, and there was no breach of contract claim at issue. See ASDC Holdings, LLC v. Richard J. Malouf 2008 All Smiles Grantor Retained Annuity Tr., 2011 WL 4552508, at *5 (“[B]ased on the narrow forum selection clause and the omission of any claim for breach of contract in the Texas action, it is highly unlikely that the forum selection clause in El Paso could have been applied to the contested claims in that dispute.”). The Forum Selection Clause here is much broader than that of El Paso, and clearly includes the claims at issue, as it applies to “[a]ll disputes claims or controversies arising out of or relating to [the] Amendment or the transactions contemplated hereby[.]” (emphasis added). See ASDC Holdings, LLC, 2011 WL 4552508, at *5 (“Here, the use of the phrase “arising under or relating to” in the Agreements demonstrates that this is a broad forum selection clause; therefore, any issues that ‘touch on contract rights or contract performance’ should be subject to the exclusive jurisdiction agreed to under that clause.”). Given that the Forum Selection Clause also relates to “transactions contemplated hereby” it 7 undoubtedly also includes the other related agreements which are the subject of Defendant’s Delaware claims that clearly seek equitable relief to unwind the Amendment and Reorganization Agreement, which are going to have to be decided, and the parties agreed that the Delaware Court should decide such claims. To deny Defendant’s motion to dismiss and keep one of the parties’ cases in Connecticut would create the unwarranted risk of two different outcomes that affect one another i.e. if the Amendment is rescinded, Plaintiffs here will have no right to enforce it in this case. See Medek, 2008 WL 4261017, at *3. Plaintiff’s reliance on Milhollan v. Live Ventures, Inc., is also misplaced because that case only involved one single claim for breach of contract, and there was no application for prejudgment remedy at issue. See Milhollan, 2023 WL 2943237, at *2. Further, Plaintiffs’ Application is much more than a mere “catchall phrase” in the complaint seeking equitable relief as was the case in Milhollan. Indeed, Plaintiff seeks injunctive relief under C.G.S § 42a-8-112(e) which, as stated above, does require a showing of irreparable harm and no adequate remedy at law. See MDJ Realty, LLC, 2021 WL 2182929, at *4. The other cases cited by Plaintiff, Marlin Broadcasting, LLC and Pursuit Partners, LLC, are equally unavailing where the applications for prejudgment remedy at issue in those cases also do not seek relief under C.G.S § 42a-8-112(e). See Marlin Broad., LLC v. Law Office of Kent Avery, LLC, 101 Conn. App. 638 (2007); Pursuit Partners, LLC v. UBS AG, 2009 WL 2358310, at *4. For these reasons, Plaintiffs argument that the Forum Selection Clause is unenforceable fails. Further, Plaintiffs failed to oppose and thus concede (see Emerald Partners, 726 A.2d at 1224; Teamsters Union 25 Health Services & Insurance Plan, 119 A.3d at 69), that even if the Court agreed that the Forum Selection Clause is unenforceable, it is within the Court’s power to modify that provision to enforce the clear intent of the parties to litigate claims related to the 8 Amendment or the transactions contemplated by it in Delaware. See Power v. Kean, 2022 WL 17439072, at *4; Newinno, Inc. v. Peregrim Dev., Inc., 2003 WL 21493838, at *5–6. Notably, Plaintiffs also do not contest or offer evidence to rebut, and therefore concede (see Emerald Partners, 726 A.2d at 1224; Teamsters Union 25 Health Services & Insurance Plan, 119 A.3d at 69), Defendant’s argument that the parties made an intentional and negotiated choice of exclusive jurisdiction in Delaware, that same was not the product of fraud or deception, and that any alleged inconvenience alleged by Plaintiff would have been foreseeable at the time the Amendment was drafted. (Motion, pp. 8, 10). Plaintiffs did not oppose, and thus conceded, defendants request that if the Court finds that the Forum Selection Clause is unenforceable as written, the Forum Selection Clause should be modified by the Court as requested to make any state court in Delaware the exclusive and mandatory forum for disputes arising from the Amendment, as the parties clearly intended. This is also the correct result where any other outcome would be inequitable and reward fraudulent behavior by the Plaintiffs, who seem to be arguing that they knew the provision was facially invalid, but induced Defendant to sign the Agreement relying on the fact that Delaware procedural and substantive law would apply. III. TO FORCE DEFENDANT TO LITIGATE IN CONNECTICUT WOULD BE UNREASONABLE Plaintiffs’ argument as to forum non conveniens is also unpersuasive and intentionally misses the point. The issue is that this Court exercising jurisdiction over Plaintiff’s claims would be unreasonable because the parties contractually agreed to litigate in another forum, and it deprives Defendant of the benefit of her bargain and is prejudicial to Defendant. See FAB Tech, Inc. v. A.C.G. Contracting, Inc., LLC, 2016 WL 4708530, at *4; M/S Bremen v. Zapata Off- Shore Co., 407 U.S. 1, 23 (1972). Indeed, it is Plaintiffs’ burden, as the party seeking to escape 9 their contractual agreements, to show that Plaintiffs would be deprived of their day in court if the forum selection clause were enforced, which they utterly failed to do. Indeed Plaintiffs offer no argument that they could not have started their action in Delaware—to the contrary Plaintiffs’ opposition seems to brag that they intentionally ignored the exclusive jurisdiction clause so that they could forum shop for a procedural advantage in Connecticut when that is not what the parties bargained for. Plaintiffs’ contention that Defendant will not suffer any hardship, reeks with disingenuous intent when they simultaneously brag that they have forum shopped to get into a court that has a remedy that is substantively different than they are entitled to in Delaware. (See Opposition, p. 12 (“[A]ssuming the court agrees that it has subject matter jurisdiction over the [P]laintiffs’ action and denies [D]efendant’s motion to dismiss, the [P]laintiffs will reclaim their application for prejudgment remedy which does not exist in Delaware.” (emphasis added)); p. 16 (“Plaintiffs have chosen to pursue their claim in Connecticut which affords them consideration of their application for prejudgment remedy.”)). Moreover, given that Defendant has filed a lawsuit in the Delaware Court of Chancery seeking, inter alia, equitable relief in the form of recission of the Amendment, there is no reason Plaintiffs cannot assert whatever claims they have there. See M/S Bremen, 407 U.S. at 18. The parties specifically bargained for Delaware substantive and procedural law to apply. To prevent any further prejudice to Defendant, Plaintiffs claims must be dismissed here as they can and should be litigated in Delaware. CONCLUSION Based upon the foregoing, Plaintiff respectfully requests that the Court grant Defendant’s Motion to Dismiss in its entirety, with prejudice and without leave to amend, and grant any other relief the Court deems just and proper. 10 Dated: New York, New York May 25, 2023 Respectfully submitted, ADELMAN MATZ P.C. By:_______________________ Gary Adelman, Esq. 1159 Second Avenue, Ste 153 New York, New York 10065 Telephone: (646) 650-2207 E-mail:g@adelmanmatz.com 11 FBT-CV23-505 l 023-S AMY HOCHHAUSER AND RHOD IE SUPERIOR COURT LORENZ, JUDICIAL DISTRICT OFFAIRFIELD Plaintiffs, AT BRIDGEPORT -against- REBECCA CERRONI, MAY25, 2023 Defendant. SECOND AFFIDAVIT OF REBECCA CERRONI IN FURTHER SUPPORT OF MOTION TO DISMISS STATE OFCONNECTICUT ) ) ss: COUNTY OFFAIRFIELD ) I, REBECCA CERRONI, being duly sworn, deposes and says: 1. I am the defendant in the above-entitled action. The facts stated herein are true and correct and of my own personal knowledge, except for those facts stated on information and belief, and as to those facts, I believe them to be true. If called and sworn as a witness, I could and would testify competently thereto under oath. 2. I submit this affidavit in further support of my motion to dismiss plaintiffs', Amy Hochhauser ("Hochhauser") and Rhodie Lorenz ("Lorenz") (Hochhauser and Lorenz collectively, "Plaintiffs"), Application for Prejudgment Remedy and Complaint (the "Motion"). 3. Annexed hereto as Exhibit 6 is a true and correct copy of the Verified Complaint that was filed in the Delaware Court of Chancery by me and TxHoldCo against Plaintiffs and JoyRide, dated May 19, 2023: EXHIBIT 6 EFiled: May 19 2023 11:35AM EDT Transaction ID 70047445 Case No. 2023-0541- IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE REBECCA CERRONI, as an ) individual, and LVWL, LLC, ) ) Plaintiffs, ) C.A. No. _____________ ) v. ) ) AMY HOCHHAUSER, as an ) individual, and RHODIE LORENZ ) as an individual, and ) JOYRIDE CYCLE STUDIO LLC, ) ) Defendants. ) VERIFIED COMPLAINT Rebecca Cerroni (“Cerroni”) and LVWL, LLC (“TxHoldCo”) (collectively, “Plaintiffs”), by and through their undersigned counsel, upon Cerroni’s personal knowledge as to herself and TxHoldCo and her own acts and upon information and belief as to all other matters, alleges for its Verified Complaint against Defendants, Amy Hochhauser (“Hochhauser”) and Rhodie Lorenz (“Lorenz”) as individuals and Joyride Cycle Studio, LLC (“JoyRide Franchise”) as a company owned and operated solely by Hochhauser and Lorenz (Hochhauser, Lorenz, and JoyRide Franchise collectively referred to as “Defendants”) as follows: NATURE OF THE ACTION 1. The nature of this action is: (i) rescission of the Omnibus Spin-Out Distribution and Transition Services Agreement, executed on December 23, 2021 1 (“Reorganization Agreement”) and Amendment Agreement to Indemnify (“Indemnity Agreement No. 2”), incorporated into the Reorganization Agreement, between the Parties due to breach of contract, and any damages for such acts; (ii) rescission of the Reorganization Agreement due to fraudulent inducement, and to recover any punitive or other damages for these acts; (iii) declaratory and injunctive relief for the harm caused to Cerroni’s reputation as well as punitive or other damages for defamation iv) and declaratory and injunctive relief along with damages for disparagement by Hochhauser and Lorenz against Cerroni; (v) declaratory relief, injunctive relief and damages for tortious interference by Defendants with Plaintiffs’ businesses; (vi) declaratory and injunctive relief for breach of fiduciary duties to Cerroni and the JoyRide Franchise along with money damages; and (viii) rescission of the Contribution Agreement between the Parties dated February 11, 2019 (the “Contribution Agreement”) and the Letter Agreement to Indemnify in Connection with the SBA Loan (the “Indemnification Agreement No. 1”) dated March 12, 2019 due to fraudulent inducement and economic duress perpetrated on Cerroni by the Defendants and punitive as well as compensatory or other money damages for the same. JURISDICTION 2. This Court has jurisdiction over this action pursuant to 10 Del. C. §§ 341, 342, and 6501 et seq because the Plaintiffs seek equitable relief in the form 2 of rescission for breach of contract, declaratory and injunctive relief for tortious interference with business relations and breach of fiduciary duties. The Court also has jurisdiction over the defamation claim pursuant to the clean-up doctrine and to avoid any piecemeal litigation. 3. This Court has jurisdiction over Defendants pursuant to 10 Del. C. § 3111 as this action is being brought against the JoyRide Franchise and its owners who submit to the jurisdiction of this Court pursuant to the Reorganization Agreement. 4. Jurisdiction is also proper pursuant to Section 8.9 of the Reorganization Agreement, which provides the Parties’ unconditional consent that the exclusive forum for disputes arising out of or related to the Reorganization Agreement is the Chancery Court of the State of Delaware and any or all such disputes will be governed by and construed in accordance with the laws of the State of Delaware. 5. Jurisdiction is also proper pursuant to Section 6.7 of the Reorganization Agreement, which provides “the non-breaching Party shall be entitled to immediate temporary and other equitable relief” and “if the other Party breaches any of the terms of the said restrictive covenants…the non-breaching Party will have no adequate remedy at law”, and Defendants have breached restrictive covenants of the Reorganization Agreement as described herein. 3 6. Jurisdiction is also proper pursuant to the forum selection clauses in the agreements that are integral to the determination of the Defendants’ breach and other tortious acts against Cerroni, including Contribution Agreement (Clause 9.8) dated February 11, 2019, Indemnification Agreement No. 1 (incorporates Clause 9.8 of Contribution Agreement), Reorganization Agreement (Clause 8.9) and Indemnification Agreement No. 2 (Clause 7(e)) between the Parties. THE PARTIES 7. Rebecca Cerroni is a natural person, residing at 3590 Congress Street Fairfield, CT 06824. 8. LVWL LLC, is a Texas limited liability company, (“TXHoldCo”), with its principal place of business at 3590 Congress Street Fairfield, CT 06824. 9. Upon information and belief, Amy Hochhauser is a natural person currently residing at 4 Melwood Lane, Westport, Connecticut 06880. 10. Upon information and belief, Rhodie Lorenz is a natural person currently residing at 1 Nutmeg Lane, Westport, Connecticut 06880. 11. JoyRide Cycle Studio LLC is a limited liability company registered in Connecticut, with its principal place of business located at 4 Melwood Lane, Westport, Connecticut 06880. 4 FACTUAL BACKGROUND I: Facts Preceding the Reorganization Agreement 12. Upon information and belief, since 2010, Hochhauser and Lorenz owned and operated several fitness studios in Connecticut under the JoyRide parent company, JoyRide Franchise, which were located in Westport (“JRC Westport Studio”), Wilton (“JRC Wilton Studio”), Darien (“JRC Darien Studio”), and Ridgefield (“JRC Ridgefield Studio”) (collectively the “Connecticut Studios”). 13. Plaintiffs became affiliated with Defendants in 2013 when Cerroni began licensing the JoyRide name for two (2) fitness studios located in Texas, JoyRide Fitness Texas, LLC (“JRT Broadway Studio”) and JoyRide Fitness Texas II, LLC (“JRT Alon Studio”) (the JRT Broadway Studio and the JRT Alon Studio collectively referred to as the “Texas Studios”), which Cerroni owned and operated. 14. Under a Trademark License Agreement dated February 8, 2014, (the “License Agreement”), a small royalty of 6-8% was paid to the JoyRide Franchise for the use of the JoyRide name for the Texas Studios. 15. In 2018, after Cerroni moved to Westport, Connecticut, Hochhauser told Cerroni that the Texas Studios could either be acquired by the JoyRide Franchise, or Hochhauser and Lorenz would take away Cerroni’s license to use the JoyRide brand for the Texas Studios (which Cerroni had used for over five (5) years) and would terminate the License Agreement, a right they did not have. 5 16. Hochhauser and Lorenz also demanded that as part of the acquisition of the Texas Studios, Cerroni would take over Hochhauser’s current role as Chief Executive Officer (“CEO”) of the JoyRide Franchise because Hochhauser wanted to transition out of the role. 17. To coerce Cerroni into accepting their offer to acquire the Texas Studios, Hochhauser and Lorenz falsely promised that as CEO, Cerroni would have independent decision-making abilities. 18. Once Cerroni had agreed to have the Texas Studios be acquired by the JoyRide Franchise, Hochhauser and Lorenz told Cerroni that their offer was also conditioned upon Cerroni signing a personal guarantee as to Defendants’ small business loan that Hochhauser and Lorenz had taken out before offering Cerroni the CEO position, specifically, a TD Bank Small Business Administration Loan dated April 27, 2018 (“SBA 7a Loan”), and which Hochhauser and Lorenz had personally guaranteed. 19. Hochhauser and Lorenz again threatened that if Cerroni did not agree to personally guarantee the SBA 7a Loan, they would prematurely terminate the License Agreement. Hochhauser and Lorenz were aware that they possessed no such right to terminate the License Agreement. 20. Upon information and belief, Defendants knew that they did not have the right to terminate the license arbitrarily, and terminating the License Agreement 6 would be devastating to Cerroni’s livelihood and the Texas Studios’ business, as it would require Cerroni to rebuild the Texas Studios with a new brand, and Defendants exploited this fact to coerce Cerroni into indemnifying the Defendants for the SBA 7a Loan. 21. At the time Hochhauser and Lorenz coerced Cerroni into indemnifying Hochhauser and Lorenz for the SBA 7a Loan, they did not disclose any of the specific details of the SBA 7a Loan to Cerroni. 22. Upon information and belief, Hochhauser and Lorenz had taken out the SBA 7a Loan to finance the acquisition of the JRC Ridgefield Studio and the JRC Wilton Studio, which Cerroni had no connection to, and the JRC Wilton Studio and the JRC Darien Studio and/or their assets were used as collateral. 23. Despite not knowing the specific details of the SBA 7a Loan, Cerroni had no option to decline or negotiate the terms of the offer because she had been put under economic duress by Hochhauser and Lorenz’s threats to terminate the License Agreement if Cerroni did not agree, which Cerroni feared would put the Texas Studios out of business. 24. As a result, on February 11, 2019, Cerroni signed the Contribution Agreement with the Defendants (the “Contribution Agreement”) through which the JoyRide Franchise acquired the Texas Studios. 7 25. In line with the Contribution Agreement, an Amendment to the Operating Agreement (“Operating Agreement”) for the JoyRide Franchise was also executed on February 11, 2019, which gave Cerroni, Hochhauser and Lorenz, equal voting rights and management rights in the JoyRide Franchise. 26. Pursuant to Section 7(c) of the Operating Agreement, Cerroni was appointed as the Chief Executive Officer of the JoyRide Franchise and was provided with the powers to “manage the day-to-day operation of the business and affairs of the JoyRide Franchise [company]”. Clause 6.2 of the Contribution Agreement also included a reference to the SBA 7a Loan and an agreement to indemnify Hochhauser and Lorenz for the SBA 7a Loan. 27. Pursuant to Clause 6.3 of the Contribution Agreement, Cerroni was also supposed to be provided with an employment agreement at closing, outlining her duties, severance compensation benefit continuation and issuance of incentive equity. Cerroni was never provided with any such employment agreement either during the closing of the Contribution Agreement or thereafter. 28. Subsequently, on March 12, 2019, Indemnification Agreement No. 1 was also signed providing names of the parties who guaranteed the SBA 7a Loan, although the specific terms of the SBA 7a Loan were not provided to Cerroni. 29. After the Contribution Agreement was signed, Hochhauser and Lorenz failed to allow Cerroni to exercise the decision-making authority conferred upon 8 Cerroni under the Operating Agreement and as is customary to the position of the CEO, by constantly interfering in the day-to-day operations of the JoyRide Franchise. 30. Hochhauser and Lorenz routinely undermined Cerroni’s decisions, even when such decisions would be beneficial to the JoyRide Franchise, to advance their own personal interests over the interests of the JoyRide Franchise. 31. For example, in January 2020, Cerroni secured a membership offer from Young President’s Organization (“YPO”), which was a valuable networking opportunity for the JoyRide Franchise, but Hochhauser and Lorenz voted against Cerroni’s decision to accept the offer despite the fact that it was in the best interest of the JoyRide Franchise. 32. After the COVID-19 lockdown in May 2020, Cerroni secured and personally guaranteed two loans, an SBA EIDL loan worth $500,000 (“EIDL Loan”) and a PPP loan worth $382,000 (“PPP Loan”), for the JoyRide Franchise. 33. Cerroni continued her efforts to raise money for the JoyRide Franchise, including securing a $12,000 grant from the Lululemon ambassador fund that was used to launch the JoyRideGo proprietary application (“JoyRideGo App”). 34. Upon information and belief, on the other side, Hochhauser and Lorenz continued to engage in waste of JoyRide Franchise’s funds, disparaging Cerroni in front of employees and mismanaging the affairs of theJoyRide Franchise. 9 35. As just one example, Hochhauser and Lorenz engaged in an excessive and unnecessary amount of spending on company credit cards without Cerroni’s knowledge, as the credit cards were under Hochhauser and Lorenz’s names, resulting in the amount of the JoyRide Franchise’s credit card debt doubling within a year. 36. By failing to disclose their spending, Hochhauser and Lorenz violated the Operating Agreement by depriving Cerroni of the ability to operate the day-to- day affairs of the JoyRide Franchise and failing to allow her to control the budget or have any input on whether such company expenses were necessary or beneficial for the JoyRide Franchise. 37. In May 2020, Cerroni engaged expert counsel to evaluate options to help manage the difficult financial condition of the JoyRide Franchise, and was told that one option was to close the JRC Wilton Studio if it was not encumbered by any loan because there was no revenue being generated from that particular studio. 38. Hochhauser and Lorenz represented to Cerroni that the JRC Wilton Studio could be closed and was unencumbered by any loans. 39. Upon information and belief, this representation was false and false when made as it and its assets were collateral for the SBA 7a Loan. 40. Then, in October 2020, Hochhauser and Lorenz decided to close the JRC Ridgefield Studio over Cerroni’s objection. 10 41. Closing the JRC Ridgefield Studio was not in the best interests of the JoyRide Franchise. 42. Moreover, upon information and belief, Hochhauser and Lorenz decided to close the JRC Ridgefield Studio and used $20,000 from the EIDL Loan and PPP Loan to pay off their own personal guarantee so that they would be shielded from liability. 43. Cerroni conveyed to Hochhauser and Lorenz that closing both the JRC Wilton Studio and JRC Ridgefield Studio would make it nearly impossible to make payments on JoyRide Franchise’s existing loans, but Hochhauser and Lorenz disregarded Cerroni’s concerns, and acted in their own personal interests, not the best interests of the JoyRide Franchise. 44. In November 2020, Hochhauser and Lorenz informed Cerroni of their intention to sell the JoyRide Franchise. 45. Acting in the best interest of the JoyRide Franchise, Cerroni engaged a financial advisor, Align Business Advisory (“Align”), to advise and navigate the options of either selling or finding investors for the JoyRide Franchise. 46. Upon information and belief, Hochhauser and Lorenz prioritized their personal interests over finding investments for the JoyRide Franchise. When Align made efforts to find potential investors, the potential investors were scared off by 11 Hochhauser’s requests for investors to buy Hochhauser out before investing in the JoyRide Franchise. 47. Upon information and belief, Hochhauser also made disparaging statements about Cerroni to the CEO of Align, claiming that Cerroni was incapable of performing her duties with respect to the JoyRide Franchise, with the intent of further discouraging investors from investing in the JoyRide Franchise. 48. In December 2020, Hochhauser and Lorenz conveyed their intentions to close the JRC Darien Studio, which Cerroni also opposed because the JoyRide Franchise would experience further financial hardship without the revenue from the Darien Studio, and again, Hochhauser and Lorenz disregarded Cerroni’s concerns about the detrimental effect of this decision. 49. Amidst this financial crisis and days before the launch of the JoyRideGo app, Hochhauser resigned as Chief Brand Officer of the JoyRide Franchise. 50. In January 2021, the Parties began negotiating the possible closure of the JRC Darien Studio. 51. In April 2021, after negotiations surrounding closing of the JRC Darien Studio were unfruitful, Cerroni expressed that she wanted to separate the Texas Studios from the JoyRide Franchise. 12 52. On May 20, 2021, Cerroni emailed Hochhauser and Lorenz a proposed a separation agreement, and Hochhauser responded to Cerroni’s proposal with a request for Cerroni to pay $720,000 to pay off the remainder of the SBA 7a Loan, in addition to removing Hochhauser and Lorenz’s names from the EIDL Loan so that Cerroni would assume all personal liability for same. 53. Subsequently, Hochhauser and Lorenz began employing coercive tactics to force Cerroni to agree to these terms, such as by threatening to remove Cerroni from the CEO role and removing Cerroni’s management rights if she did not agree and remained with the JoyRide Franchise. 54. As a result of Hochhauser and Lorenz’s threats, Cerroni decided to resign from her role as CEO and relinquished her managing rights, and the Parties continued informal mediation to finalize the separation agreement. 55. Upon information and belief, sometime after Cerroni sent her proposed separation agreement to Hochhauser and Lorenz on May 20, 2021, Lorenz defamed Cerroni by making a false statement to one of the JoyRide instructors that Cerroni had taken out a fraudulent loan from Jefferson Bank. 56. Upon information and belief, also sometime after May 20, 2021, Hochhauser and Lorenz made further defamatory statements about Cerroni to third parties, including but not limited to a friend of Hochhauser and Lorenz that provided business advice to the JoyRide Franchise, about Cerroni “destroying” the JoyRide 13 Franchise because she created a culture that contributed to the suicide of an employee of the JoyRide Franchise. 57. Upon information and belief, Hochhauser and Lorenz voted to remove Cerroni’s voting rights so that Cerroni would not be able to object to their attempt to close the JRC Darien Studio, which was the last studio encumbered by the SBA 7a Loan. II: Reorganization Agreement 58. In November 2021, Hochhauser and Lorenz threatened to prematurely close the Texas Studios, which were currently being leased by the JoyRide Franchise, to coerce Cerroni to reaffirm Indemnification Agreement No. 1 and provide her personal guarantee for the SBA 7a Loan, as part of the separation. 59. Under economic duress, Cerroni agreed to indemnify Hochhauser and Lorenz for around $590,000 worth of loans from the JoyRide Franchise so that the Texas Studios could remain open. 60. On December 24, 2021, the Reorganization Agreement, which governed the separation between JoyRide Franchise and TxHoldCo, was executed. 61. Under the Reorganization Agreement, Hochhauser and Lorenz kept the Employee Retention Compensation Tax Credits (the “ERC Tax Credits”) from both the Texas Studios and Connecticut Studios in the amount of or about $250,000. 14 62. Cerroni agreed to the aforementioned terms because (1) she was fraudulently induced into believing that the Texas Studios had no liabilities, (2) Hochhauser and Lorenz were threatening to close the Texas Studios, and (3) Hochhauser and Lorenz would be contractually bound to refrain from making further disparaging statements against the Cerroni and her businesses, who was a third-party beneficiary of the Reorganization Agreement. 63. Pursuant to clause 8.3 of the Reorganization Agreement, Indemnification Agreement No. 2 was incorporated. Indemnification Agreement No. 2 reaffirmed Cerroni’s obligations under the earlier coercive Indemnification Agreement No. 1, and also obligated Cerroni to confirm that Cerroni would be liable for the “total Losses incurred or suffered by the Hochhauser and Lorenz to the extent arising out of the Loan Agreement” (Clause 1 of Indemnification Agreement No. 2). 64. Cerroni’s entire motivation behind finalizing the Reorganization Agreement on such unfair terms, was firstly, to ensure that Hochhauser and Lorenz would stop interfering with her businesses or disparaging her in the future and secondly, to salvage the Texas Studios, which Hochhauser and Lorenz fraudulently induced her to believe were the only studios of the JoyRide Franchise that were not in debt. 65. Clause 6.5 of the Reorganization Agreement, was the non- disparagement clause, which states: 15 6.5. Non-Disparagement. Neither Party shall make any statement with the purpose or intent of disparaging or maligning the reputation of the other Party, its Affiliates, or any of their products or services, or their equity holders, managers, officers, or agents; provided that nothing herein shall limit a Party from responding truthfully as required in connection with any judicial or similar legal process. 66. Moreover, the Absence of Undisclosed Liabilities Clause (Schedule 3.11) of the Reorganization Agreement (the “Absence of Undisclosed Liabilities Clause”) states that “each of JRT Alon Studio and JRT Broadway Studio have liabilities …(ii) under their respective real estate leases (copies of which have been provided to TxHoldCo) as more particularly set forth therein”. 67. The Absence of Undisclosed Liabilities Clause was a material term of the Reorganization Agreement, because it was Plaintiffs’ objective to separate the Texas Studios from the JRT Franchise and to only assume the liabilities that had been disclosed and negotiated between the Parties. 68. Cerroni only agreed to release the Defendants “from and against any and all actions/claims/damages/demands….”, per Clause 6.8 due to and in exchange for the promises and warranties that Defendants had provided in the Reorganization Agreement. III: Post-Reorganization Agreement 69. Following the execution of the Reorganization Agreement, Cerroni became aware of multiple instances when the Defendants breached (a) the disclosed 16 liabilities (Clause 3.11) and (b) the non-disparagement clause (Clause 6.5) of the Reorganization Agreement. 70. Specifically, Hochhauser and Lorenz misrepresented to Cerroni that the Texas Studios did not have any liabilities, when in fact in December 2021, Cerroni was made aware that clients had been locked out of the JRT Broadway Studio because Hochhauser and Lorenz had not paid the rent. 71. Subsequently, in January 2022, Cerroni also learned that Hochhauser and Lorenz falsely misrepresented the liability of the Texas Studios when she found an unpaid ledger for rent of the JRT Alon Studio, that amounted to around $10,000 had not been paid by Hochhauser and Lorenz since April of 2021. 72. Cerroni was not made aware of this ledger or unpaid rent before the Reorganization Agreement, which amounts to a breach of Clause 3.11 of the Reorganization Agreement. 73. In February 2022, Cerroni also learned of multiple instances when the Defendants breached the Non-Disparagement Clause of the Reorganization Agreement. 74. Specifically, in November 2021, Cerroni had interviewed with Amanda Freeman (“Freeman”), the owner, and founder of a business called Strengthen, Length and Tone (“SLT”) based in New York City, for the position of President