BARRIE – Eventbrite Inc. is fighting back against Roxodus Music Festival organizers, demanding $5 million to cover the costs of refunded tickets, attorney fees, and other costs and expenses.
Their lawsuit, filed in a California court last month, is claiming breach of contract, breach of the implied covenant of good faith and fair dealing, fraudulent transfer, intentional misrepresentation, and four other related claims.
Eventbrite won a preliminary injunction to prevent Fab Loranger, one of the event organizers, from transferring or disposing of any assets that would impede Eventbrite’s ability to recover their losses. United States District Judge Richard Seeborg granted the request on Oct. 25.
“The record suggests Loranger and (Mike) Dunphy should have been aware by late June — mere days before Roxodus was cancelled — that Roxodus would not go forward and that refunds would have to be issued under the services agreement,” he wrote in his decision.
According to the statement of facts in the case, just days before the Roxodus cancellation, Loranger transferred $650,000 out of MF Live to his own Taurus entity, meaning there would be no money left with which to refund ticket-purchasers.
“The decision to transfer such a large sum to Loranger’s related entity just days before cancelling the festival at the expense of other creditors like Eventbrite suggests Eventbrite will likely prevail on its fraudulent transfer claims,” wrote Seeborg.
Eventbrite, Inc. filed the $5 million lawsuit against Fab Loranger, three businesses owned by Loranger (Taurus Site Services Inc., Taurus Projects Inc., and Taurus Investment Group Inc.) and additional Doe defendants.
According to the decision issued by Seeborg, on Nov. 13, 2018, MF Live executed a written services agreement with Eventbrite under which Eventbrite would sell tickets to Roxodus through its online platform in exchange for certain fees. Per this agreement, Eventbrite would retain the ticket sale proceeds until after the festival, except for an advance cap amount, set at $750,000.
According to this agreement, should Roxodus be cancelled, MF Live was responsible to refund all ticket sales to customers or to reimburse Eventbrite, should Eventbrite refund customers directly.
The decision states rock fans purchased $4.3 million worth of Roxodus passes and credentials.
In January, Loranger allegedly contacted Eventbrite to request an increase in the advance cap to give MF Live access to more of the ticket revenue to help pay for Roxodus.
Eventbrite agreed, but says it did so in exchange for additional assurances. On Jan. 29, 2018, Eventbrite sent to Dunphy a new agreement for Loranger where Eventbrite agreed to raising the advance cap to $2 million.
The current lawsuit is being tried in California as that agreement contained a clause that Loranger consented to the jurisdiction of the State of California to resolve any dispute with respect to the agreement.
According to the court documents, between Nov. 23, 2018 and June 26, 2019, Eventbrite advanced approximately $3.9 million to MF Live from Roxodus ticket revenue.
Upon receiving this money, MF Live transferred the vast majority of it to Taurus Site Services, which Loranger claims was then used to pay performers for the music festival.
On June 27, just two weeks before the scheduled start of Roxodus, MF Live personnel informed Eventbrite that they were considering postponing Roxodus or moving it to a new location.
On July 2, Eventbrite provided MF Live personnel with sample language that MF Live could send to ticket-buyers in the event of a postponement or cancellation, which included language about MF Live’s obligation to pay refunds under the services agreement.
On July 3, MF live announced it had cancelled Roxodus and identified “tremendous rainy weather” as the reason, however a footnote in the court filing indicates there is a factual dispute as to whether the months preceding the concert date were unusually rainy, or whether this was merely an excuse for cancelling the show.
The cancellation notice on the Roxodus website initially said: “Information about ticket refunds will be released shortly,” but this reference to refunds was later removed. Loranger now identifies “failure to meet projected ticket sales” as an additional cause.
Immediately after MF Live’s cancellation announcement, Eventbrite requested that MF Live wire back the funds Eventbrite had advanced to facilitate refunds. Two days later, on July 5, Eventbrite sent MF Live a formal demand letter.
On July 6, 2019, Eventbrite informed ticket purchasers that Eventbrite itself would be refunding customers through a specially created “Fan Relief Program,” and to date Eventbrite has issued more than $4 million in refunds.
The court documents state MF Live filed for bankruptcy on July 12, and although the bankruptcy proceeding is ongoing, the trustee concluded that he does not anticipate there being any material distribution to MF Live’s unsecured creditors given the minimal value of estate assets in comparison to its liabilities.
“Eventbrite has shown a likelihood of success on the merits on its breach of contract claim,” wrote Seeborg. “Because MF Live declared bankruptcy before reimbursing Eventbrite any of the advanced funds with which to refund customers, MF Live appears to have breached the services agreement. Loranger is now responsible for that amount owed.”
The filing indicates Loranger’s only defense to the breach of contract claim is he’s denying he ever signed it, however emails between Dunphy and Loranger produced in the filing show Dunphy forwarding the DocuSign contract to Loranger two minutes before it was executed. The signature on the document is typed, not hand signed.
“The defense seems highly improbable (and casts a cloud over Loranger’s credibility generally). Eventbrite has therefore shown a likelihood of success on the breach of contract claim,” wrote Seeborg.
Seeborg also states that MF Live’s bankruptcy trustee, after reviewing Taurus Site Service’s bank statements, corroborated that the Taurus entity made payments of approximately $10 million to agents representing performers, over double the amount Eventbrite advanced to MF Live.
“Eventbrite alleges the $3.9 million in transfers from MF Live to Taurus Site Services were largely done in secret and evince the nefarious purpose of siphoning money out of MF Live before its inevitable bankruptcy,” wrote Seeborg in his decision. “Defendants, by contrast, argue these transfers were legitimate, as the Taurus Defendants were providing administrative and financial support, including banking and payment services, to MF Live, a fledgling operation.”
On Nov. 19, a motion by Loranger to dismiss the case due to a lack of jurisdiction by the California court was denied. In the motion, Loranger’s attorneys make the argument that the facts indicate that even if Loranger had signed the agreement, the facts suggest he took no time to read it.
“Loranger’s apparent decision to execute the agreement seconds after opening it does not excuse him from the agreement,” wrote Seeborg. “He is a sophisticated serial entrepreneur, and this one-page guaranty is easily understood by someone of his background.”
Fab Loranger’s attorney, Sharon Kour, did not return a request for comment from BarrieToday.