Complaint Unlimited Fee AppliesCal. Super. - 6th Dist.July 22, 202010 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 E-FILED 7/22/2020 3: 1 6 PM . Clerk of Court Mlchael W. Prozan, CSB # 124893 Superior Court Of CA,My General Counsel Group C t fS t CI 851 N. San Mateo Drive Suite C Gun y O an a ara San Mateo, CA 94401-2283 200_V368601 Tel: 650 348-1500 ReVIewed By: Y. Chavez Fax: 650 348-1543 Attorneyfor Vincent McPhillip SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SANTA CLARA UNLIMITED COMPLAINT 20CV368601 Vincent McPhillip PLAINTIFF COMPLAINT FOR WRONGFUL TERMINATION INTENTIONAL INFLICTION OF ) ) ) ) V. ) g ) EMOTIONAL DISTRESS ) ) ) ) ) ) Dr. Nicolas Kokkalis Dr. Chengdiao Fan NEGLIGENT INFLICTION OF EMOTIONAL DISTRESS BREACH OF FIDUCIARY DUTY Pi Community Company SocialChain, Inc. DEFENDANTS PLAINTIFF alleges: THE PARTIES 1. PLAINTIFF Vincent McPhillip (“PLAINTIFF”) is an individual who resides in San Francisco, California. 2. PLAINTIFF is a co founder of Defendant Pi Community Company (“Pi”) and owns equity in Pi. _ 1 _ COMPLAINT 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 10. 11. DEFENDANT Dr. Nicolas Kokkalis is an individual who resides in Santa Clara County, California, is a co founder of Pi and owns equity in Pi. Kokkalis is married t0 DEFEDNANT Fan. DEFENDANT Dr. Chengdiao Fan is an individual who resides in Santa Clara County, California and is a co founder of Pi, and owns equity 0f Pi. Fan is married t0 Defendant Kokkalis Pi Community Company is a Cayman Islands entity founded by the Plaintiff, Kokkalis, and Fan. Pi has conducted business in Santa Clara County, including, but not limited to, holding company meetings in Santa Clara County. SocialChain, Inc. (“Social”) is a wholly owned subsidiary of Pi with its principal place 0f business in Santa Clara County California. JURISDICTION AND VENUE Jurisdiction is proper in this Court because the acts giving rise to liability occurred in Santa Clara County and all 0f the Defendants reside their 0r have conducted business operations there. GENERAL ALLEGATIONS At the time of the acts alleged herein, Plaintiffwas employed by Social as its CEO. As the time of the acts alleged herein, Kokkalis and Fan were likewise employed by Social. Kokkalis and Fan suffered from marital issues. Pi raised money from third parties selling, “SAFE” instruments. SAFE is an acronym for “Simple Agreement for Future Equity.” -2- COMPLAINT 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 12. 13. 14. 15. 16. 17. 18. 19. 20. SAFEs are basically a prepaid warrant to purchase stock. They are prepaid because the terms of the stock including its price are determined at a later date based 0n a sale t0 later investors at a price and terms the later investors determine. The reason investors like SAFES is because the SAFES contain a maximum valuation 0r “cap” Which protects the investor against the issue being too successfill and selling the next investment for too high a price relative to the early purchase date. For example, if the SAFE has a “cap” of a $10 million valuation and a sale of securities occurs trigging a conversion 0f the SAFE at a $15 million valuation, the “cap” mandates that despite selling the securities at a $15 million valuation, the holder 0f the SAFE receives their equity at a $10 million valuation. Pi sold SAFE instruments at a $20 million valuation cap in September, 2019. Social made significant progress. At the time of Pi’s $500,000 sale of SAFE instruments in September, 2019, to the best of the Plaintiff’s recollection the Pi Network application had roughly 200K daily active users (DAUs). By April, 2020, the number 0fDAUS had surpassed 2M daily active users and was approaching 3M daily active users. In April and May, 2020, Pi began to deploy advertising to its millions of daily active users. Pi raised an additional $300K by selling SAFE instruments at a $20M valuation cap in February, 2020, to the best 0f the plaintiff” s recollection. Kokkalis and Fan had marital issues Which manifested themselves not only in workplace shouting and screaming but acts 0f physical aggression towards each other witnessed by Plaintiff. -3- COMPLAINT 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 21. 22. 23. 24. 25. 26. 27. 28. 29. Their behavior became increasingly hostile toward Plaintiff. Plaintiff summarized that their conduct: “also point[ed] t0 an inappropriate conflation of your marital issues With the operation 0f the company which you yourselves have acknowledged several times With statements like, “You wouldn’t speak t0 me that way if I were not your Wife / husband.” He concluded that their issues: "have also impaired my ability t0 fulfill my role as CEO by forcing me to dedicate an increasing share 0fmy time t0 resolving interpersonal disputes and managing the resultant hostile workplace." On April 26, 2020, said he needed t0 get away from the hostile environment and consider company issues. During this period, Kokkalis and Fan declared that Plaintiff had “abandoned his post” and “effectively resigned.” To that end, they terminated his access t0 Pi/SocialChain servers and Pi’s bank account. Prior t0 Kokkalis and Fan declaring the “effective resignation,” of the Plaintiff, Plaintiff secured the services of a consultant for some non mission critical, intellectual property, specifically logos and other marketing material. Plaintiff had been trying to finalize compensation arrangements for the consultant but was obstructed by Kokkalis and Fan. Because 0f a potential new investment, the situation had become important. After Kokkalis and Fan declared his resignation for him, they then asked for his help. Kokkalis wrote Plaintiff as follows: -4- COMPLAINT 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Hi Vince, As you mentioned 0n Slack you’re reviewing this important message we sent, so we want t0 lay out some points t0 guide your review. A11 the matters in the “important message” are important and you can take your time reviewing them. However, there is one urgent matter we need t0 take care right away: The IP situation With Christine, due to its connection With our upcoming potential investment. Our deadline for submitting the SAFE docs to our investors is in a week from now. Before we ask them to sign the SAFE we need t0 either resolve the Christine situation 0r disclose the situation. If we disclose the situation, we expect that they Will not invest if there is a cloud over our 1P (see What happened with John who has concerns continuing t0 work with us after we disclosed the situation with him as we were finalizing his advisory terms). So the only thing that we urgently need t0 address is this issue. This is an issue that you caused and also have the power to fix. If we do not fix the situation then the Company will likely suffer material damage t0 the loss of the $500K offered investment. This Will be compounded by fithher damages to the product and the proj ect due t0 the fact we are running out of cash. Given the importance of the investment to the Company, the IP issue with Christine cannot wait. As far as the documents we require from Christine, we can ask the company lawyers to simplify them for her to sign. There is n0 need t0 have the heavy docs we presented to her in December. So, we ask you in your role as a Director to help us resolve this issue by next Thursday. Given that you previously said in your message, Christine was ready to sign but it was you Who was “not there yet” in resolving the matter, this hopefully should not require much exertion or stress for you. As we are only in this position, because you admittedly delayed paying Christine's invoice for over a -5- COMPLAINT 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 year, hopefully you can see your way t0 assisting in resolving this urgent matter. Please respond or talk With us by this Monday 0n if you are going to assist in the resolution. If we don’t hear from you, we Will assume you Will not help. You d0 not have to completely fix the situation by Monday, just t0 respond to this message or talk with us. Alternatively, if the funding falls through we will have t0 consider other immediate actions to assure the Viability of the business. This might include the founders having to put in some serious cash from our personal money to fund the business, due to the difficulty in fundraising in the middle of the COVID19 pandemic and the down market. Even though undesirable, it seems like this is a feasible approach, given that the company has billions of shares already authorized and only 100M issued, so theoretically we have much room t0 grow up to 1000 times if push comes to shove. But, we really want to avoid putting our much needed personal funds into the company right now. In this case, not only the company will have lost its $500k investment but also the founders, including you if you participate, Will have lost hundreds of thousands 0f dollars t0 self- fund the business. Just to be clear: The urgent thing right now is that we need to resolve the IP situation With Christine to avoid the loss of the offered $500k next week. We need you t0 participate as a Director in order t0 address this issue. Please respond by Monday if you plan t0 participate. Thanks. 30. In fact, the important issues With the Consultant did get resolved. 3 1. However, the communication contained exaggeration and threats. 32. As noted, the intellectual property was not mission critical but was branding material. -6- COMPLAINT 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 33 34. 35. 36. 37. 38. 39. 40. 41 On information and belief, disclosure to the investor might not have caused to walk away but might have only caused a delay in funding. Further, this contained an implied threat: that they would dilute the equity 0f the Plaintiff t0 enhance their equity interests, a bad faith tactic sometimes attempted in founder disputes. The implied threat was that they would offer shares only t0 the founders, at a particularly attractive price, With full knowledge that as a result 0f the adversarial relationship Plaintiff could not be expected t0 contribute. The offer t0 Plaintiff was a bad faith ruse. Defendants understood that Plaintiff would not participate in the offer because of the dispute between Plaintiff and Defendants. Their objective was to make near valueless his equity in Pi while creating the mirage of being reasonable. In addition, such threat implied that Kokkalis and Fan would not make the same offer 0n the same conditions t0 purchasers 0f SAFES, that the purchase price would not reflect the progress of the Defendant companies, and would not reflect that Pi had sold recently sold securities at a valuation cap of $20 million. Attempts to resolve the situation continued. Counsel for the parties scheduled a call t0 discuss the situation t0 see if the dispute could be resolved prior to instituting litigation on the morning 0f Friday, June 12, 2020. Late the afternoon/early evening 0f Thursday, June 11, 2020, Kokkalis indicated that he and Fan intended t0 make good 0n their implied threat by sending out a notice 0f meeting t0 consider an equity issuance t0 the founders t0 take place 0n Monday, June 15, 2020. See Exhibit A attached hereto. Plaintiff” s counsel cancelled the call. -7- COMPLAINT 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. On information and belief, Kokkalis and Fan followed through on their threat including the mirage 0f asking Plaintiff to invest. At that point, an investment by Plaintiff would have been in essence nothing more than Plaintiff funding the defense for the Defendants of this legal action. FIRST CAUSE OF ACTION WRONGFUL TERMINATION/CONSTRUCTIVE DISCHARGE DEFENDANTS SOCIAL, KOKKALIS AND FAN PLAINTFF realleges and incorporates by reference paragraphs 1-46 of this complaint as though fully set forth herein. PLAINTIFF was employed by Social. That DEFENDANTS Social, Kokkalis and Fan created an intolerable work environment making it impossible for him t0 do his job. That these DEFENDANTS did this intentionally and knowingly. That these working conditions were so intolerable that n0 reasonable person could be expected t0 endure them. That Plaintiff was harmed. That the conduct of the Defendants was a substantial factor in causing the harm. SECOND CAUSE OF ACTION NEGLIGENT INFLICTION OF EMOTIONAL DISTRESS DEFANDANT SOCIAL Paragraphs 1-46 are incorporated herein by reference. Defendant was negligent. Plaintiff suffered serious emotional distress; and -8- COMPLAINT 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 54. Negligence of the Defendants was a substantial factor in causing the serious emotional 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. distress of Plaintiff. THIRD CAUSE OF ACTION INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS DEFANDANTS SOCIAL, KOKKALIS AND FAN PLAINTIFF realleges each and every allegation set forth in Paragraphs 1-46 inclusive and incorporates them by reference herein. The conduct was outrageous; Defendants acted With reckless disregard of the probability that Plaintiff would suffer emotional distress, knowing that Plaintiff was present when the conduct occurred. Plaintiff suffered severe emotional distress; and Plaintiffs conduct was a substantial factor in causing the severe emotional distress 0f the Plaintiff. FOURTH CAUSE OF ACTION BREACH OF FIDUCIDARY DUTY DEFENDANT KOKKALIS AND FAN PLAINTIFF realleges each and every allegation set forth in Paragraphs 1-46 inclusive and incorporates them by reference herein. Defendants Kokkalis and Fan were the directors 0f Pi in which Plaintiff owned stock. Defendants knowingly acted against interest 0f the Plaintiff in connection with issuing shares of Pi t0 themselves. Plaintiff did not give informed consent to the conduct of the Defendants; Plaintiffwas harmed; and -9- COMPLAINT 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 65. The conduct 0f the Defendants was a substantial factor in causing harm to Plaintiff. WHEREFORE, THE PLAINTIFF PRAYS FOR THE FOLLOWING: 1. With regard t0 all causes 0f action, actual damages in an amount t0 be proven at trial believed to be in excess 0f the jurisdictional amount 0f this Court. 2. Punitive damages 0n the third cause of action. 3. Costs. 4. Such other relief to which the PLAINTIFF may be entitled by law or as the Court may deem just and proper. July 2 1 , 2020 My General Counsel PC, Wflw M Michael Prozan Counsel t0 Vincent McPhillip _ 1 0- COMPLAINT 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 EXHIBIT A -11- COMPLAINT Pi Community Company Registered Company no 354341 (Company) Notice of a meeting of the directors of the Company Pursuant to article 30.5 of the articles of association of the Company, notice is hereby given by the director below that a meeting of the directors of the Company wi|| be held at 520 Sacramento St., East Palo Alto, CA94303, USA on June 15, 2020 at PST 6:00pm for the purpose of considering whether to offer the following ordinary shares of par value US$0.00001 per share (each, an Ordinary Share) to the following persons on the following terms: (a) Chengdiao Fan be invited to purchase up to 500,000,000 Ordinary Shares for the purchase price of US$0.00005 per share; (b) Petros Nicolas Kokkalis be invited to purchase up to 500,000,000 Ordinary Shares for the purchase price of US$0.00005 per share; and (c) Vincent McPhiIIip be invited to purchase up to 500,000,000 Ordinary Shares for the purchase price of US$0.00005 per share, each offer being made on the terms and conditions of a draft share purchase agreement (SPA) to be tabled to the meeting, with each SPA to be entered into by the Company as offeror and each person above as offeree, and to consider incidental business thereto. Meeting by Telephone The participants of the meeting may participate through the medium of conference telephone or equivalent communication tool i.e. Skype. Participants wishing to attend the meeting by telephone or Skype may call the following direct line or Skype account: Phone number: +1 (650) 283-2323 Skype account: Nicolas Kokkalis Date: June 11, 2020 Petros Nic Kokkalis (Director) 1 GCM_ADM | N-1 894642-3
