What Is Dan Hollings Complaint With Rhonda Byrne And The Secret LLC?

Dan Hollings v. Rhonda Byrne et al
Case: ilndce 1:2008cv04369
Cause: 28:1332 Diversity-Breach of Contract
Filed: 07/31/2008

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Excerpted From Complaint Filed In Federal Civil Court By Dan Hollings

COMPLAINT

Dan Hollings, Plaintiff in the above-styled action, files this Complaint against Defendants Rhonda Byrne, TS Production, LLC, The Secret, LLC (aka TS Holdings, LLC) TS Production Holdings, LLC, TS Merchandising, Ltd., and Prime Time U.S., Inc. (hereinafter collectively referred to as “Defendants”), alleging as follows:

JURISDICTION AND VENUE

Plaintiff Dan Hollings is a resident of the State of Arizona.

Defendant Rhonda Byrne is a resident of the State of California… The corporate Defendants constitute a complex business organization designed to achieve beneficial tax treatment for Defendant Byrne for the substantial profits derived from The Secret. The Secret LLC is a Delaware limited liability company.  The Secret LLC operates under the name TS Holdings LLC.

Defendant Prime Time U.S., Inc. is a Delaware corporation with a principal place of business at 1550 N. Cleveland Avenue, Chicago, Illinois 60610 and conducts business in the United States on behalf of or through TS Production, LLC. Upon information and belief, Defendant Prime Time U.S., Inc. is the United States affiliate of Prime Time Productions Holdings Pty Ltd., an Australian corporation which regularly transacts business within the State of California.  Defendant Prime Time U.S., Inc. is the wholly-owned subsidiary of TS Productions, LLC.

Defendant TS Merchandising Ltd is a British Virgin Islands corporation which regularly transacts business within the State of California and which maintains its principal place of business in Chicago, Illinois. TS Merchandising Ltd. controls the distribution and sales of DVDs, books, and other materials relating to The Secret and operates websites www.thesecret.tv and www.whatisthesecret.tv that are currently believed to be hosted on Internet servers located in San Antonio, Texas.

Defendant TS Production, LLC is a Hungarian limited liability company which regularly transacts business within the State of California and which maintains its principal place of business at 1550 N. Cleveland Avenue, Chicago, Illinois 60610. TS Production, LLC purports to have a principal office at Eros Ugyvedi Iroda, Roosevelt Irodahaz, Roosevelt ter 7-8, Budapest H-I051, Hungary, but, in fact, conducts no substantive business at this location or anywhere within the country of Hungary. The Hungarian address is actually the offices of
Defendants’ legal counsel, Squire Sanders & Dempsey, a law firm headquartered in Cleveland, Ohio. TS Production, LLC is a shell company that was created in an effort to achieve favorable tax consequences for its owners and to help immunize them from liability. Upon information and belief, TS Production, LLC has been assigned many of the rights associated with The Secret.  TS Production Holdings, LLC is a Delaware limited liability company and the parent company of TS Production, LLC. It is believed that TS Production Holdings, LLC receives income from the operations of TS Production, LLC, Prime Time U.S., Inc., and TS Merchandising Ltd. relating to The Secret. TS Production Holdings, LLC is believed to be owned in whole or in substantial part by Rhonda Byrne. It is further believed that TS Production Holdings, LLC was originally incorporated under the name Byrne Holdings LLC.

FACTUAL BACKGROUND

Defendant Rhonda Byrne is the creator, author and producer of “The Secret”, a film that has been viewed by millions around the world. The Secret has also been released as a book with more than seven million copies in print.  Upon information and belief, Defendant Byrne owns all or a significant portion of Defendant Prime Time Productions, an Australia-based film and television company. Prime Time Productions produces films in multiple cities across the world including Melbourne, Chicago, Austin, and Los Angeles.  In 2005, Mr. Hollings began  negotiations with Rhonda Byrne and her company, Prime Time Productions, to perform Internet strategy and marketing services that included oversight and direct involvement in the creation, maintenance, support and operation of websites for the project known as The Secret
(collectively, “The Secret Website”), as well as the Internet marketing strategies to support The Secret. Ms. Byrne represented that she was in the course of producing a movie called The Secret and solicited Mr. Hollings’ help in designing and setting up the website and overseeing Internet activities such as Internet strategy, marketing, customer support, fulfillment and programming for The Secret’s website.  In September of 2005, Mr. Hollings and Ms. Byrne reached an agreement under which Mr. Hollings was retained to provide creative and marketing services necessary for the establishment of a website and related marketing channels that were a vital component of The Secret strategy, advertising, production and sales campaign that were to follow.  Mr. Hollings was chosen by Ms. Byrne based on his reputation, experience, and his unique skill set and ability to provide a substantial platform that would assist in the roll-out and sales of The Secret movie and related products in a manner that would maximize the revenue captured by the program. Far from just providing basic website development, the strategy, marketing and platform established and implemented by Mr. Hollings was integral to Ms. Byrne’s efforts to establish a multi-million dollar product in a world-wide consumer market. Mr. Hollings’ Internet strategy and services provided the primary means by which customers were introduced to and sold the various products offered at The Secret website. Mr. Hollings’ services were specifically acknowledged by Defendant Byrne in The Secret book.  The Secret marketing campaign and marketing pages were launched in March 2006 and The Secret web site was launched along with the release of The Secret movie in late August 2006.  Millions of people have viewed The Secret film since the Internet marketing campaign began in March 2006. The book The Secret, became a #1 New York Times bestseller and has more than 7.5 million copies in print. According to its website, The Secret film and book have been translated into many languages for audiences around the world.

The terms of the agreement between Mr. Hollings and Defendant Byrne are memorialized in a series of email correspondence which sets forth Defendant Byrne’s desire to maximize the profit potential surrounding this project and the amount of revenues that could be captured through the web-based marketing campaign.

In her email correspondence to Mr. Hollings, Defendant Byrne and Prime Time Productions promised to pay Mr. Hollings, “US$8,000.00 per month to broadcast plus a share of 10% of gross margins of all revenues from The Secret website. The revenues you will receive from this, in fact, will exceed the Nine Network’s revenues as they have 10% of Prime Time’s net profits, which will come after your share.” A true and correct copy of the email correspondence between Mr. Hollings and Defendant Byrne is attached hereto as Exhibit A.

Following the negotiations between Mr. Hollings and Defendant Byrne and Defendant Prime Time Products, Defendant Byrne established Defendant TS Merchandising to handle certain business matters related to The Secret’s website.  Plaintiff Hollings performed all work asked and required of him on The Secret website, including Internet strategy and development and implementation of the marketing campaign pursuant to his agreement with Defendants.   Further, in order to perform his obligations under the contract, Defendant was forced to put aside other clients and opportunities so that he could designate adequate time to The Secret website, Internet strategy and marketing.

In April, 2006, after the website’s launch, Mr. Hollings sent an invoice to TS Merchandising requesting his 10% share of the gross margins pursuant to the terms of his agreement with Ms. Byrne and Prime Time Productions.

Following April, 2006, The Secret sent numerous communications assuring Mr. Hollings that his portion of the gross margin would be forthcoming.  Defendant went so far as to instruct Mr. Hollings to set up an LLC for the purpose of receiving the large sum of money.

Defendants have failed to pay Mr. Hollings the agreed upon percentage of the gross margin which he is due pursuant to his agreement with Defendants; an amount which is now believed to be in excess $3,000,000.00.

COUNT I - BREACH OF CONTRACT

Plaintiff realleges the allegations in paragraphs 1 through 23 of this Complaint as if set forth here verbatim.

The agreement between Plaintiff and Defendants forms a binding contract between the parties for which Defendants have received valuable consideration.  Defendants’ failure to pay Plaintiff’s 10% portion of the gross margin constitutes a breach of the contract between the parties.

As a direct and proximate result of Defendants’ breach, Plaintiff has suffered damages in the amount of at least $250,000.00 plus interest and costs.

COUNT II-FRAUDULENT INDUCEMENT

Plaintiff realleges the allegations in paragraphs 1 through 26 of this Complaint as if set forth here verbatim.

Defendants induced Plaintiff to perform work for The Secret website by falsely representing either orally, in writing or by implied conduct, that they would pay him 10% of gross margin for his work.  Defendants induced Plaintiff to set aside other clients and business opportunities by falsely representing either orally, in writing or by implied conduct, that they would pay him 10% of gross margin for his work.

Defendants’ representations were false and Defendants knew them to be false. Defendants, through Rhonda Byrne and Robert Rainone, were well aware that they would not pay Plaintiff the percentage of gross margin which they had fraudulently promised.

At all times relative hereto, Plaintiff reasonably believed Defendants’ representations, was unaware of the true concealed facts, and justifiably relied upon Defendants’ representations by performing work on The Secret’s website and setting aside other clients and opportunities in order to complete his performance under the contract.

If Plaintiff had known the true facts, Plaintiff would not have performed the work on The Secret’s Website and would not have set aside other clients and opportunities in order to perform work for Defendants.

As a proximate result of Defendants’ fraud and deceit, Plaintiff has suffered general and special damages in an amount to be proven at trial in excess of $250,000.00.

Upon information and belief, Defendants are guilty of oppression, fraud and malice towards him. Therefore, in addition to actual damages, Plaintiff is entitled to recover punitive damages from Defendants, for the purpose of punishing Defendants and deterring it and others from engaging in such actions in the future.

COUNT III - UNJUST ENRICHMENT

Plaintiff realleges the allegations in paragraphs 1 through 34 of this Complaint as if set forth here verbatim.

Plaintiffs has performed services for Defendant for which Defendant has failed to compensate Plaintiff and Defendant has been unjustly enriched thereby.

Defendant has maintained money which is due and owing to Plaintiff and to which Plaintiff is entitled and Defendant has been unjustly enriched thereby.  Plaintiff has repeatedly demanded that Defendant remit payment of the amounts owed by Defendant to Plaintiff.

Defendant has failed, refused and continues to refuse to pay the amount due and owing to Plaintiff, thereby resulting in damages to Plaintiff in the amount to be proven at trial, plus interest, attorney fees and costs pursuant to the terms of the Programs.

COUNT IV - UNFAIR COMPETITION UNDER CALIFORNIA BUSINESS AND PROVISIONS CODE

Plaintiff realleges the allegations in paragraphs 1 through 40 of this Complaint as if set forth here verbatim.

Defendants, and each of them, are “persons” as defined under California Business and Professions Code § 17021.

By engaging in the above-described practices and actions, Defendants have committed one or more acts of unfair competition within the meaning of California Business & Professions Code § 17200, et seq. Under these statutes, “unfair competition” means an unlawful, unfair or fraudulent business act or practice. This conduct as alleged is actionable pursuant to Business & Professions

From: Rhonda Byrne
sent: Monday, 26 September 2005 12:44 PM
To: ‘Dan Hollings
Subject: RE: THE SECRET

Hello Dan,

We are still working out the basic heads of agreement with PI, which is all going along really well, and I anticipate we will have that all down within the next day or two. In the meantime, I want to proceed with finalising things with you, so you know where you are.  I am happy to pay you US$8,OOO per month to broadcast plus a share in 10% of gross margins of all
revenues from The Secret website. The revenues you will receive from this, in fact will exceed the Nine Network’s revenues, as they have 10% of Prime Time’s net profits, which will come after your share.  If you are fine with this, I will have a simple agreement drawn up that reflects it. The only other thing that I am thinking I would want to include is that when you reach a particular platform of receiving revenues that your monthly fee is offset against that. So for example, when you are receiving US$100,OOO a month, it seems unrealistic to be paying you your monthly fee on top of that. So I want to set a figure that we both feel comfortable with. I am sure there is a set formula for doing this, so I will check on that in the meantime.

Let me know if you are fine with this, and we can proceed.

Regards,
Rhonda Byrne
DIRECTOR

—–Original Message—–
From: Dan Hollings
Sent: Sunday, 25 September 20052:01 PM
To: Rhonda Byrne
Subject: Re: THE SECRET

On Sep 24,2005, at 8:12 PM, Rhonda Byrne wrote:

Hi Dan

The great news Is Marcy and I have Just been on Yahoo, and the confusion has now turned into clarity for us both. so we can move forward in Just defining that clarity In our agreement.

Great.

I wanted you to know that all is well. and our Intention is to proceed on the way Bob presented the proposal with The Secret and PI, and we will define the value brought to both in our agreement.  I will be back to you today or tomorrow on percentages. I am very excited about all of this. My team will have finished reformalling the trailer for the website by tomorrow morning, which also includes the finished logo and animation of The Secret.
Thank you for your help on this Dan.

Rhonda

All good. Very good.  Oh, and your letter “The Secret Update” was very exciting. Well written.

Thanks
Dan

SEE ALSO http://www.backgroundnow.com/blog/2008/07/31/rhonda-byrne-the-secret-civil-litigation/

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