sweep: #2
Description
William Moran II (Pro Hac Vice forthcoming)
[email protected]
ARTHUR WILLIAM, LLP
10015 Old Columbia Rd.
Columbia, MD 21046
Tel: 520-604-0260
Scott M. Malzahn (Bar No. 229204)
[email protected]
WAYMAKER LLP
515 S. Flower Street, Suite 3500
Los Angeles, California 90071
Telephone: (424) 652-7800
Facsimile: (424) 652-7850
Attorneys for Plaintiff Michael Gruen
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION
MICHAEL GRUEN,
Plaintiff,
v.
JOSHUA RICHARDS, an individual;
CHRISTOPHER SAWTELLE, an
individual; CROSSCHECK STUDIOS,
LLC, a California Limited Liability
Company; BUDDY’S HARD, LLC, a
Delaware Limited Liability Company
and DOES 1 through 100, Inclusive,
Defendant.
Case No.
COMPLAINT FOR:
- RESCISSION: FRAUD
- RESCISSION: DURESS
- RESCISSION: UNDUE
INFLUENCE - RESCISSION: FAILED
CONSIDERATION - RESCISSION: PUBLIC POLICY
- BREACH OF CONTRACT
- BREACH OF THE IMPLIED
COVENANT OF GOOD FAITH
AND FAIR DEALING - FAILURE TO PAY WAGE/
SALARY
[[DEMAND FOR JURY TRIAL]
COMPLAINT
INTRODUCTION - At age 21, Michael Gruen co-founded and became V.P. of Talent at
TalentX where he almost single-handedly recruited 100 of the top social
media influencers. This included Josh Richards, an internet wunderkind just
shy of his 18th birthday, who signed with TalentX with parental consent in
accordance with California Family Code section 6750, et. seq. A month later,
as a TalentX V.P., Gruen helped create the internet phenomenon, the Sway
House, a full-time content creation mansion that was a crossover of the ‘90s
boy band, The Real World house, and Tik Tok dances. Weeks later, Gruen
chose Richards to headline the Sway House and within months demanded that
Richards’s contract be reworked on most favored terms. Gruen insisted that
Richards receive equity in TalentX – it was unheard of for a young artist to be
part-owner of their management company. Gruen signed over half of his
equity to make it happen. Gruen never took a commission. - As Richards and the Sway House took over the internet, Gruen worked
the phones to help them cash in. The industry took note of the 21-year old
powerbroker. One Forbes article titled “Michael Gruen Knows Everybody,”
explained: “If you need tickets to a Rockets basketball game, he can call
Tilman Fertitta. If you’re looking to start a streaming business, he’ll connect
you with cofounder of Netflix Marc Randolph, Dallas Mavericks owner Mark
Cuban, cofounder of Twitch Justin Kan, and former CEO of TikTok Kevin
Mayer . . . He’s got that kind of juice.” - After the Sway House broke up in February 2021, Gruen and Richards
turned their focus to the twin goals of making Richards the first billionaire
online influencer and helping Richards’s transition into the film industry. In
furtherance of these goals, Gruen would co-found several businesses with
Richards including CrossCheck Studios, a production company, and
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COMPLAINT
CrossCheck Sports, a sports agency.
The Rise of CrossCheck Studios - CrossCheck Studios was founded on February 17, 2021. Six days into
its existence, Gruen struck a groundbreaking partnership with Unrealistic
Ideas led by Mark Wahlberg, Steven Levinson and Archie Gips. Gruen
initiated another strategic partnership with Influential, a major online
marketing player. Soon after, Gruen cemented CrossCheck as a Hollywood
production company striking a First-Look film deal with STXfilms. The deal
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provided for CrossCheck to produce its first movie, Halloween Party, and for
Richards to headline it. The deal made Richards the youngest studio-backed
producer in Hollywood despite no prior experience. WME and CAA even
initiated coverage. Finally, Gruen initiated a TV production deal with
Amazon, worth $5 million+, which closed after his firing.
The Conspiracy to Destroy Michael Gruen - In April 2021, ICM talent agency’s Chris Sawtelle begged for four
hours for Richards to leave Gersh, his talent agency, and to sign with him at
ICM. Gruen knew Sawtelle from when his ICM team had partnered with
TalentX 18 months earlier. Months in, TalentX chose not to continue with
ICM, citing Sawtelle’s: (a) failure to bring business; (b) falsely taking credit
for others’ deals; (c) claiming he was a TalentX V.P.’s superior; and (d)
dropping the ball on deals. Ex. A, 5/20/20 Letter. - Despite the history, Richards left Gersh and signed with Sawtelle as his
agent. Then, in September 2021, Sawtelle became Co-President at
CrossCheck. In talks for the job, Sawtelle said he was “coming for the
Rolodex,” referring to Gruen’s contacts. Gruen later learned that Sawtelle
No deal listed in this Complaint would have worked without the amazing staff – it 1
takes a team. Further, Richards’ talent agent at Gersh, and then ICM, were involved
in each deal. That said, Gruen was instrumental to each deal listed herein.
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harbored malice from his prior failure. - On November 7, 2021, Gruen underwent bariatric surgery. Gruen
returned to remote work that same day while in tears from post-surgical pain.
Gruen kept working long weeks, for CrossCheck and for Buddy’s Hard 2
(Richards’s wholly owned LLC), until late-January 2022. As Gruen explained
in a January 2022 video: “Every day I work my a-- off to make sure the
people around me are succeeding.” - On February 2, 2022, Gruen fell down the stairs and, on insistence of
his father and recommendation of his doctor, went home to New York. The
next day, Gruen collapsed on the street and was rushed to the E.R. He learned
that he was suffering Beriberi, a condition that, if left untreated, can result in
cardiovascular failure or permanent paralysis. The condition causes
neurological defects including speech and ambulation difficulties, mental
confusion, and loss of feeling, with a 3-6 month recovery period for the brain
and nervous system effects. At the time, Gruen was also struggling with
Bipolar II, of which CrossCheck and Richards were well aware. - In March 2022, the Unrealistic Ideas team tipped off Gruen that a coup
was underway against him. Despite being far from medically and mentally
recovered, Gruen called Richards to say he was flying out to return to work.
On the call, Richards told Gruen that he was being replaced by Sawtelle, Co-
President of CrossCheck at the time, and that Gruen should not return. - Gruen would later learn the reason why – Sawtelle had spread
malicious claims to Richards and industry-wide that Gruen had
“misappropriated” or “siphoned” money from Richards and that he was a
“fraud.” In reality, Gruen netted negative income and was the only unpaid
Post-surgery, his weekly workload reduced from about 110 hours per week to less 2
than 80 hours per week, and further, the week prior to his February 2022 medical
leave, his hours worked count did decrease substantially due to marked illness.
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employee or executive.
The Kafka-esque Coup Before the Settlement - During Gruen’s medical leave, Sawtelle removed CrossCheck’s
esteemed business manager and replaced him with his personal tax preparer,
whose only professional credential was as a “Certified Tax Preparer”
(“Business Manager”). - When Gruen requested an equity buy-out (as suggested by Richards
weeks earlier) and his form K-1, CrossCheck – after first ignoring Gruen –
referred him to the Business Manager. In response to Gruen, the Business
Manager claimed in emails, with Richards and investors copied, that Gruen
was trying to “line his own pockets” by “unilaterally siphoning off money
from the business” and by improperly taking a claim to investor funds. - In his emails, the Business Manager mocked Gruen’s medical absence
for “fat-loss surgery” and claimed that Gruen was not entitled to income
because he was gone for six months (Gruen was out for a few weeks). The 3
Business Manager also unilaterally declared Gruen’s equity in CrossCheck
Sports void (“no equitable internet [sic]”) and disposed of the entity’s assets
without securing Gruen’s consent. While voiding Gruen’s CrossCheck Sports 4
equity, the Business Manager called the business Gruen’s “ill-conceived failed
venture” – that business was Richards’s idea. 5
In a June 9, 2021 email, that was included in the thread of a Dec. 17, 2023 email 3
on an unrelated matter of CrossCheck trying to figure out how to access their
website account, Richards'/CrossCheck’s attorney confirmed that the Business
Manager’s acts were "on behalf of Mr. Richards and the company.”
The Business Manager killed off CrossCheck Sports at the tail end of its first 4
recruiting season, when players decide who to sign with, likely causing the
investors’ loss.
As he explained here: https://youtu.be/9gmXUjChEII?si=KmR0JrWgTYECpI_C
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4 - Gruen requested an accounting and to inspect records, but the Business
Manager declined. Right after this, an attorney reached out to Gruen stating
he was “litigation counsel to Mr. Joshua Richards” (“Litigation Counsel”). In
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his letter to Gruen, the Litigation Counsel claimed that Gruen had “abus[ed]
his role” and put Richards into “self-serving deals” and “lopsided contracts”
to “take advantage” of him. Gruen, who was extremely ill, was shaken by
these false allegations. In reality, Gruen had worked 80+ hour weeks for a
year in order to the benefit of all named Defendants only to receive net
negative compensation. See e.g., Ex. B. - The pressure tactics designed to drive Gruen out of the business and
deprive him of his equity continued, with the Litigation Counsel also claiming
Gruen owed Richards $142,500 in back rent (something never previously
claimed by Richards) for the privilege of falling asleep and waking up at the
business where he was expected to be at all times working those unpaid
hours. Litigation Counsel and the Business Manager proceeded to banish
Gruen from the house, without any notice, prohibiting him from even picking
up his belongings and threatening him with arrest for alleged harassment. The
belongings that Gruen was not allowed to pick up included highly valuable
memorabilia such as Suits TV show character Harvey Specter’s desk and
chair, potentially worth hundreds of thousands of dollars to fans of the show. - Litigation Counsel and the Business Manager took these actions with
knowledge, complete with letters from Gruen’s doctor and psychiatrist, that
Gruen’s medical condition was a disability under California law and that he
also suffered from Bipolar II. Behind the scenes, Sawtelle orchestrated the
campaign to terrorize Gruen, in the name of Richards and CrossCheck,
Litigation Counsel later identified himself as representing CrossCheck. 6
5
bragging to staff that Gruen was “taken care of,” boasting about plans to
publicize that Gruen would walk around the house (where he lived) in a t-shirt
and boxers, and asking staff for “dirt” on Gruen.
The Settlement - Two months after Gruen requested an accounting and inspection, the
Litigation Counsel provided Gruen – who was still ill – a 20-hour exploding
offer: $90,000 and dinner with Richards in return for his equity stake. Ex. C.
Gruen accepted this due to duress, undue influence, fraud, and
misrepresentation. First, the Litigation Counsel claimed in writing that
Amazon refused to deal with CrossCheck, a material misrepresentation of fact
worth over $5 million. Second, statements about the company’s financials
were false or deceptive because Richards had been dumping personal
business costs onto CrossCheck’s books. Finally, defendants and their agents
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had spent the two months leading up to the settlement terrorizing the 23-year-
old Gruen knowing he was suffering both medical and mental illness by: (i)
kicking him out of his home; (ii) depriving him of his belongings; (iii)
threatening him with arrest; (iv) defaming him as a thief and a fraud to
investors and to Richards; (v) refusing to give him an accounting of his own
business; and (vi) voiding his equity in another business (CrossCheck Sports).
Defendants would then proceed to repeatedly breach the already unfair
agreement. - In sum, by fraud, misrepresentation, duress, and undue influence,
CrossCheck procured a settlement agreement with Gruen that made a
mockery of his rights as an equity holder. Moreover, the agreement never
Buddy's Hard is Richards' sole-owned LLC, where his profits for social media 7
work went. However, the employees on CrossCheck’s books had to work primarily
on deals to profit Buddy’s Hard. In fact, Richards even shifted his existing Buddy’s
Hard staff onto CrossCheck’s books. The effect of Richards’s financial comingling
was that he kept the profits while the losses were shared.
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mentioned any wages for the thousands of hours that Gruen put into the
business (and into Buddy’s Hard), conferring an enormous benefit on the
defendants without just compensation.
JURISDICTION AND VENUE - This Court has jurisdiction over this action pursuant to 28 U.S.C. §
1332 as complete diversity exists and the amount in controversy of
$38,974,960 plus punitive damages for fraud, well exceeds $75,000,
exclusive of interest and costs. - This Court has personal jurisdiction over Defendants Sawtelle and
Richards who reside and work in California. The Court has personal
jurisdiction over CrossCheck Studios, LLC, which is incorporated and
headquartered in California, and over Buddy’s Hard, LLC, which is
headquartered and principally operates in California. - Venue is proper in this District pursuant to 28 U.S.C. §1391(b) because
a substantial portion of the events that give rise to Plaintiff’s claims transpired
in the County of Los Angeles in the State of California and all Defendants
reside, work, or principally operate in the County of Los Angeles in the State
of California.
PARTIES - Plaintiff MICHAEL GRUEN (“Gruen”) is a 25-year-old entrepreneur
and businessman residing in Florida. Gruen was featured in Forbes’s 30
Under 30 list for his substantial contributions to the media and entertainment
industries as a guiding force behind the internet phenomenon, the Sway
House, and his work on behalf of and in relation to Josh Richards. Business
Insider profiled Gruen as one of the top 19 talent managers or agents for
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TikTok influencers and then as one of the 24 power players using TikTok to
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transform the music industry. Gruen and Richards co-founded CrossCheck
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Studios on February 17, 2021. Gruen’s entire family relies on him now that
his father is suffering terminal cancer, but due to the malicious and still
ongoing acts of Defendants, Gruen has been deprived of a fair exchange for
his valuable equity, compensation for one year of work, and has had his
professional career amputated by Defendants obtaining, and going line-by-
line through, his personal business contacts to falsely disparage him to each. - Defendant CHRIS SAWTELLE (“Sawtelle”) is a 36-year-old Los
Angeles media agent and the current CEO of CrossCheck Studios, LLC, who
joined the company, seven months after its founding, on September 22, 2021,
saying: “I’m grateful to Josh and Michael [Gruen] for giving me this
opportunity.” After his spiteful company coup, Sawtelle has all but assumed
Gruen’s identity, now even representing himself as "the visionary co-founder
& CEO of CrossCheck Studios." - Defendant JOSH RICHARDS (“Richards”) is a Los Angeles actor,
producer, social media superstar, and co-founder of CrossCheck Studios,
LLC. Richards is also the sole-owner of Buddy’s Hard, LLC, into which the
profits from his social media engagements and brand deals flow. - Defendant CROSSCHECK STUDIOS, LLC (“CrossCheck”) is a Los
Angeles production company co-founded on February 17, 2021, by Gruen
Dana Whateley, "The top 19 talent managers and agents for TikTok influencers
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who are helping build the careers of a new generation of digital stars,” BUSINESS
INSIDER (Apr. 14, 2020), https://www.businessinsider.com/top-talent-agents-and-
managers-for-tiktok-influencers-creators-list-2020-4.
Dana Whateley, “The 24 power players using TikTok to transform the music
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industry, from marketers and record execs to artists,” BUSINESS INSIDER (AUG. 12,
2020), https://www.businessinsider.com/top-power-players-using-tiktok-to-
transform-the-music-industry-2020-8.
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and Richards boasting strategic partnerships with Unrealistic Ideas and
Influential, and studio production deals with STX and Amazon, among others.
All pled actions of Richards and Sawtelle were in their capacity as members,
officers or agents of, and are attributable by reference to, Defendant
CrossCheck. Except for a 4-5 week period of medical leave, Gruen worked
80+ hours per week for Defendant CrossCheck and Defendant Buddy’s Hard
from February 17, 2021, until his medical leave on February 2, 2022, for
which he received no pay whatsoever and only suffered losses. - Defendant BUDDY’S HARD, LLC (“Buddy’s Hard”) is a Delaware
Limited Liability Company registered with the State of California, with a
principal place of business in Los Angeles County. Buddy’s Hard is the
primary business of Defendant Richards, who is its sole member.
NATURE OF THE ACTION - Gruen brings this action to rescind the settlement agreement seeking
restitutionary and special damages. In the alternative, he demands damages
for multiple breaches of the agreement. Separately, he also brings this action
to recover his unpaid wages for his work at CrossCheck Studios and Buddy’s
Hard.