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Case 3:20-cv-00549 Document 1 Filed 01/23/20 Page 1 of 18
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`W. DOUGLAS SPRAGUE (Bar No. 202121)
`Email: dsprague@cov.com
`ETHAN FORREST (Bar No. 286109)
`Email: eforrest@cov.com
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`ANNIE SHI (Bar No. 327381)
`Email: ashi@cov.com
`COVINGTON & BURLING LLP
`Salesforce Tower
`415 Mission Street, Suite 5400
`San Francisco, CA 94105-2533
`Telephone: + 1 (415) 591-6000
`Facsimile: + 1 (415) 591-6091
`
`DAVID BUCKNER (Fla. Bar No. 60550)
`Email: david@bucknermiles.com
`BUCKNER + MILES
`3350 Mary Street
`Miami, Florida 33133
`Telephone: +1 (305) 964-8003
`pro hac vice to be filed
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`Attorneys for Plaintiff
`Airbnb, Inc.
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`UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF CALIFORNIA
`SAN FRANCISCO DIVISION
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`Civil Case No.:
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`COMPLAINT
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`JURY DEMAND
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`AIRBNB, INC.,
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`NGD HOMESHARING, LLC, a Florida
`limited liability company,
`and HARVEY HERNANDEZ, an individual,
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`Plaintiff,
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`v.
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`Defendants.
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`COMPLAINT
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`Case 3:20-cv-00549 Document 1 Filed 01/23/20 Page 2 of 18
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`Plaintiff, Airbnb, Inc. (“Airbnb”), brings this Complaint for monetary damages and other relief
`against Defendants NGD Homesharing, LLC (“NGD”), and Harvey Hernandez. In support of its
`Complaint, Airbnb alleges as follows:
`
`INTRODUCTION
`A little more than one year ago, Airbnb—relying on representations and promises made
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`by NGD and its CEO, Harvey Hernandez—invested approximately $11 million in NGD. In sum,
`Airbnb was providing capital, expertise, and brand recognition to NGD and Hernandez, who were
`supposed to manage, operate, and market rental properties throughout the United States. This
`investment was designed to create more homesharing accommodations for the Airbnb community,
`particularly in urban, multi-family buildings. Airbnb recently learned, however, that during the parties’
`business relationship, NGD and Hernandez stole funds, made unauthorized loans to other Hernandez-
`controlled companies, fraudulently backdated documents, breached contracts, and then lied repeatedly in
`an attempt to cover their tracks. As a result, Airbnb files this Complaint.
`Airbnb recently discovered that, unbeknownst to Airbnb, defendants misrepresented and
`2.
`concealed facts to induce Airbnb’s investment. Then, after the business relationship was established,
`defendants repeatedly violated the terms of the parties’ agreements and otherwise acted in bad faith. For
`example, defendants siphoned at least $1 million from the parties’ joint business interests without
`authorization. When confronted about this unauthorized diversion of funds, defendants responded with
`delay, misdirection, and false promises of repayment. Furthermore, in their frantic efforts to conceal
`their duplicity, defendants eventually produced fraudulent and backdated documentation of an
`unauthorized “loan”—reflecting Hernandez as the signatory on behalf of both borrower and lender—as
`purported justification for diverting the funds. The entire principal of and interest on this purported
`“loan” remains unpaid and is in default.
`In return for its investment of approximately $11 million, Airbnb negotiated for and
`3.
`received significant commitments and representations from NGD. Among other things, NGD
`represented that the calculation of another investor’s warrants for units in NGD would be on a class
`basis, not a fully diluted basis. Months after defendants had obtained Airbnb’s investment, however,
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`COMPLAINT
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`Case 3:20-cv-00549 Document 1 Filed 01/23/20 Page 3 of 18
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`defendants admitted that they had orally promised the other investor that these warrants were exercisable
`for units calculated on a fully diluted basis, effectively altering the value of Airbnb’s investment.
`Finally, NGD utterly failed to deliver on the core purpose of this partnership: creating
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`more homesharing accommodations for the Airbnb community, particularly in urban, multi-family
`buildings. Importantly, NGD committed to open at least seven real estate projects in 2019. This
`commitment was so central to the parties’ relationship that Airbnb could terminate the parties’
`Collaboration Agreement if NGD failed to open seven projects. NGD failed to open a single project in
`2019. Furthermore, in connection with previous projects in development, NGD also repeatedly violated
`its agreement to incorporate Airbnb’s input as to design, apparently sold units without Airbnb’s requisite
`written approval, and misused Airbnb’s name and trademarks.
`As a result, and as set forth below, Airbnb brings this action to terminate its relationship
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`with defendants and to seek monetary recovery in excess of $11 million, plus fees and costs from having
`to prosecute this action.
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`PARTIES
`Airbnb is a Delaware corporation with its principal place of business at 888 Brannan
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`Street, San Francisco, California, 94103.
`NGD is a Florida limited liability company with its principal place of business at 14 NE
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`1st Avenue, Penthouse, Miami, Florida, 33132.
`Harvey Hernandez is an individual residing, on information and belief, in Miami, Florida.
`8.
`JURISDICTION AND VENUE
`This Court has jurisdiction over the subject matter of this action under 28 U.S.C. § 1332
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`because the parties are diverse and Airbnb’s claim exceeds $75,000, exclusive of interest and costs.
`NGD is subject to personal jurisdiction within the Northern District of California because
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`NGD does business in California; because its acts, misrepresentations, and omissions occurred in and
`harmed Airbnb in California; and because under the Collaboration Agreement, NGD expressly
`consented to the exclusive jurisdiction of federal or state courts in San Francisco, California.
`Hernandez is subject to personal jurisdiction within the Northern District of California
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`because he does business in California; because his acts, misrepresentations, and omissions occurred in
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`COMPLAINT
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`Case 3:20-cv-00549 Document 1 Filed 01/23/20 Page 4 of 18
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`and harmed Airbnb in California; and because he is an alter ego of NGD. Hernandez and NGD share
`(a) such unity of interest and ownership that in reality no separate entities exist; and (b) failure to
`disregard the separate identities would result in fraud or injustice. Hernandez personally directed
`NGD’s activities giving rise to the claims in this Complaint. Hernandez also purposefully availed
`himself of business opportunities in California, visiting from time to time in connection with his and
`NGD’s business relationship with Airbnb.
`Venue is proper under 28 U.S.C. §§ 1391(b) and (c) because a substantial part of the
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`events and omissions giving rise to the claims in this Complaint occurred in the Northern District of
`California, where Airbnb maintains its headquarters.
`INTRA-DISTRICT ASSIGNMENT
`A substantial part of the events or omissions giving rise to the claims in this Complaint
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`occurred within San Francisco City and County. Accordingly, this case is rightfully assigned to the San
`Francisco division of this Court pursuant to Civil Local Rule 3-2, subsections (c) and (d).
`FACTS ENTITLING AIRBNB TO RELIEF
`Airbnb’s and NGD’s Partnership and Contracts
`Airbnb operates an online platform that enables people to list, explore, and book both
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`housing accommodations and experiences. Airbnb is one of the world’s largest marketplaces for unique,
`authentic places to stay and things to do. Through its proprietary online platform, Airbnb offers more
`than 7 million accommodations and 40,000 handcrafted experiences, all powered by hosts. Airbnb
`allows people all over the world to open up their homes and to offer their time and expertise to others—
`so that instead of travelling to stay in the usual international chain hotels or pay for readymade activity
`packages, Airbnb’s customers can stay where locals live and partake in one-of-a-kind experiences.
`NGD purports to manage, operate, and market real estate. Hernandez is NGD’s
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`co-founder, sole manager, and CEO. According to NGD’s 2019 Florida Limited Liability Company
`Annual Report, NGD’s principal place of business is 14 NE 1st Avenue, Penthouse, Miami, FL 33132.
`NGD’s registered agent is Hernandez, whose address is also 14 NE 1st Avenue, Penthouse, Miami, FL
`33132. Hernandez purports to own the largest interest in NGD.
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`In 2016, Airbnb entered into an initial agreement with NGD to explore the possibility of
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`developing residential homesharing-friendly properties in various cities. The parties contemplated that
`these properties would be co-branded projects, the first of their kind. After working together on pilot
`projects, in April 2018 Airbnb provided NGD with a $1 million loan pursuant to a convertible
`promissory note. The principal and interest of that note would convert into equity securities in
`connection with, among other things, an equity financing of NGD.
`The parties’ initial agreement was subsequently superseded and replaced by the
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`contractual agreements summarized below.
`The Collaboration Agreement. On January 2, 2019, the parties entered into a
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`Collaboration Agreement (the “Collaboration Agreement”). Under this agreement, NGD committed to
`work with Airbnb to create specialized real estate properties suited to the Airbnb community.
`Specifically, NGD committed to “open at least seven (7) Projects in each calendar year 2019 and 2020.”
`If it failed to do so, Airbnb could terminate the contract. Collaboration Agreement § 7.3. NGD also was
`required to work in good faith with Airbnb to implement Airbnb’s feedback and designs and to seek
`Airbnb’s written approval before publishing any marketing or promotional materials with Airbnb’s
`name or mark.
`Section 10.4 of the Collaboration Agreement states that it is to be governed by California
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`law, and Section 10.5 of the Collaboration Agreement provides as follows:
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`Any legal action or proceeding arising out of or related to this Agreement,
`including any non- contractual claim, shall be brought exclusively in the
`federal or state courts located in San Francisco, California. Each party
`hereby consents to the exclusive jurisdiction of such courts. Each party
`hereby waives any venue or inconvenient forum defense to any claim filed
`and maintained in such courts and disclaims its right to initiate any action
`or proceeding arising out of or related to this Agreement in any other court
`or forum.
`The Unit Purchase Agreement. On January 4, 2019, Airbnb and NGD entered into the
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`Class A-1 Unit Purchase Agreement (the “Unit Purchase Agreement”). Under that contract, Airbnb
`purchased 3,407,785 Class A-1 Units in NGD, for a total of $11,042,408.26, including conversion of
`Airbnb’s April 2018 promissory note. The Unit Purchase Agreement explicitly prohibits the use of the
`proceeds for a distribution to any member. Unit Purchase Agreement § 1.2. The Unit Purchase
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`Agreement also includes representations and warranties from NGD that its statements about its
`capitalization were accurate. Id. § 2.3.
`The Operating Agreement. Also on January 4, 2019, the parties entered an Amended
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`and Restated Limited Liability Company Operating Agreement for NGD (the “Operating Agreement”).
`The Operating Agreement provides Airbnb with several rights, including “the right to receive, with
`reasonable promptness, such other information and financial data” concerning NGD as Airbnb
`reasonably requests. Operating Agreement § 8.4. Beyond this general inspection right, NGD also
`agreed to give Airbnb GAAP-compliant audited statements of income, changes in equity, cash flows,
`and audited consolidated balance sheets “as soon as available and in any event within [120] days after
`the end of each Fiscal Year.” Id. § 8.3. And “as soon as available and in any event within thirty (30)
`days after the end of each fiscal quarter,” NGD promised to give Airbnb those same documents in
`unaudited but still GAAP-compliant form. Id. Similarly, NGD agreed to give Airbnb a budget prepared
`for each month of the Fiscal Year “as soon as available, but in any event no less than [60] days
`following the first day of each Fiscal Year” of NGD. Id.
`In addition, the Operating Agreement provides that a “Key Member,” including
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`Hernandez, defaults if he (a) “misapplies or misappropriates funds” of NGD, or (b) “commits any act of
`gross negligence, willful misconduct, bad faith or fraud in connection with or related to [NGD] or its
`duties or obligations hereunder or under any other agreement or contract with Airbnb.” Id. at 6–7.
`Last, the Operating Agreement states, “Any Officer may be removed as such, either with
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`or without cause, by the Majority Members in their sole discretion at any time.” Id. § 6.5(c). Section
`6.5 of the agreement does not allow for Officers being removed in any ways other than (i) removal by
`Majority Members, (ii) the Officer’s death, (iii) the Officer’s resignation, or (iv) appointment of a
`successor to the Officer. Id. § 6.5(b). Under the contract, Airbnb’s approval is required for the Majority
`Members to remove any Officer.
`The Additional Rights letter agreement. Also on January 4, 2019, Airbnb and NGD
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`entered into an “Additional Rights” letter agreement. Related to Airbnb’s purchase of 3,407,785 Class
`A-1 Units in NGD, this agreement entitles Airbnb to additional information and management rights
`beyond those listed in the Operating Agreement. Id. at 1. For example, the Additional Rights letter
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`agreement states that Airbnb “shall be entitled to consult with and advise management of [NGD] on
`significant business issues . . . .” Id. § 1. The Additional Rights letter agreement also requires NGD to
`give Airbnb all reasonable information Airbnb requires to accommodate its financial reporting
`requirements, including audited financial statements of NGD. Id. § 2.
`Airbnb Can Terminate the Collaboration Agreement
`One of the key provisions in the Collaboration Agreement is that Airbnb has the right to
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`terminate the agreement if NGD failed to open at least seven projects in 2019. This section reads in
`relevant part:
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`Airbnb may terminate this Agreement and/or the applicable Project
`Agreement . . . notwithstanding anything to the contrary, as to each Project
`in Exhibit A, on no less than fifteen (15) days prior written notice if:
`(i) NGD fails to open at least seven (7) Projects in each calendar year 2019
`and 2020 . . . .
`Collaboration Agreement § 7.3.1 The contract provides that “a Project is ‘open’ when it receives a
`properly issued certificate of occupancy.” Id. § 1.1.
`In 2019, NGD failed to open any Projects under the Collaboration Agreement.
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`Hernandez Loaned His Other Company $1 Million, Violating Airbnb’s Rights
`On September 16, 2019, Hernandez informed Airbnb that Hernandez had “provide[d] a
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`bridge loan of $1,000,000 to the development entity for Natiivo / Miami (6th Street Partners LLC),
`payback for this loan is expected in 30 days or less.” A true and correct copy of this email is attached to
`this Complaint as Exhibit A. In addition, Hernandez acknowledged in this email that he had an
`obligation to provide notice of the loan to Airbnb pursuant to the Operating Agreement. Id.
`Airbnb neither received notice prior to this purported loan nor authorized it. Upon
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`learning about this purported loan, Airbnb immediately asked Hernandez to (1) provide the loan
`documentation, (2) describe the specific purpose of the loan and why NGD made it, and (3) explain
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`1 “Project” means each real property listed in Exhibit A to the Collaboration Agreement. Collaboration
`Agreement at 1. A “Project Agreement” is an agreement separate from the Collaboration Agreement
`setting forth any additional terms subject to a “Project.”
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`whether 6th Street Partners LLC is an NGD subsidiary, and, if so, to provide documentation of that
`relationship, or, if not, to describe 6th Street Partners LLC’s ownership.
`Hernandez did not answer Airbnb’s questions, instead claiming that NGD’s general
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`counsel was out of the office and would provide responses later. Airbnb continued to press NGD and
`Hernandez for details about this purported loan. In response, NGD and Hernandez responded with
`delays and vague non-answers. NGD eventually provided Airbnb with a copy of an “unsecured
`promissory note” dated September 5, 2019, to justify the claimed loan. A true and correct copy of the
`purported unsecured promissory note is attached to this Complaint as Exhibit B. That note contains no
`information about the purpose of the loan. That document states that the loan, plus interest, is due and
`payable by December 31, 2019. Hernandez is listed as the signatory for both parties—lender and
`borrower—to the loan transaction. The document also reflects that notices to either party to the
`transaction should be sent to the same person, Hernandez, at the same address, NGD’s. One or both of
`the electronic signatures on this document appear to have been affixed on or about November 2, 2019—
`almost two months after the date of the purported note and approximately six weeks after Airbnb began
`pressing Hernandez for details about this unauthorized loan and after Airbnb notified NGD that the
`apparent misuse of significant funds violated the parties’ agreements. On its face, the purported “loan”
`appears to show Hernandez simply diverting funds from an entity in which Airbnb has substantial
`interests and rights into one that Hernandez controls without oversight from Airbnb. As far as Airbnb is
`aware, the $1 million “loan” remains outstanding and is in default.
`Hernandez’s unauthorized loan violates the Operating Agreement, which states that
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`because Hernandez is a “Key Member,” he defaults under that contract if he (a) “misapplies or
`misappropriates funds” of NGD, or (b) “commits any act of gross negligence, willful misconduct, bad
`faith or fraud in connection with or related to [NGD] or its duties or obligations hereunder or under any
`other agreement or contract with Airbnb.” Operating Agreement at 6–7.
`Pursuant to its inspection and information rights under the Operating Agreement, Airbnb
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`promptly and repeatedly over months demanded detailed information about the loan after learning of it.
`NGD, via Hernandez, repeatedly and consistently deflected, refusing to provide even the most basic
`information about the loan, despite the fact that Hernandez signed as both borrower and lender.
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`Hernandez’s unauthorized loan also violates the Additional Rights letter agreement,
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`which states that, unlike other members of the LLC, Airbnb is entitled to consult with and advise
`management of NGD—including Hernandez—on significant business issues. A $1 million loan to
`another company affiliated with Hernandez is certainly significant. The Additional Rights letter
`agreement also includes requirements that NGD furnish Airbnb with financial information upon request,
`yet NGD and Hernandez failed to honor that commitment despite repeated requests from Airbnb.
`NGD Misrepresented Its Capitalization to Airbnb
`Airbnb recently discovered that Hernandez’s misrepresentations and lack of candor date
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`back at least to the key agreements executed in January 2019.
`NGD misrepresented its capitalization in the Unit Purchase Agreement’s representations
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`and warranties. That contract states that its disclosure schedule “sets forth the authorized and
`outstanding equity capitalization of [NGD] as of immediately following [the Unit Purchase Agreement’s
`closing date].” Unit Purchase Agreement § 2.3.1.
`In relevant part, the disclosure schedule states that another investor, Brookfield,
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`possessed warrant purchase rights to specific percentages “of any single class of Units” issued by NGD
`following the date Airbnb invested under the Unit Purchase Agreement. Based on this plain language,
`Brookfield’s warrants could be exercised on a class basis, not a fully diluted basis.
`Contrary to this clear language that was the subject of lengthy negotiations prior to
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`Airbnb’s investment, Airbnb learned that NGD orally promised Brookfield that the warrants were
`exercisable on a fully diluted basis. Airbnb discovered this fact when NGD sent it an amendment to the
`Operating Agreement that would have allowed Brookfield to exercise its warrants on a fully diluted
`basis, not a class basis. NGD subsequently admitted that its agreement with Brookfield was indeed
`based on fully diluted capitalization. Stunningly, NGD attempted to excuse this as “a scrivener’s error.”
`But this was no typo or minor drafting mistake—it changed the entire denominator of
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`NGD’s capitalization related to Brookfield’s warrants. It also had the effect of decreasing the dilution of
`Hernandez’s units in NGD in relation to the financing, giving him greater voting control over the
`company and a larger stake in any future monetary distribution. NGD misrepresented the facts of its
`capitalization to Airbnb in securing Airbnb’s multi-million dollar investment.
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`NGD Failed to Disclose Its Lawsuit with a Former Executive,
`Whom NGD and Hernandez Impermissibly Removed from the LLC
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`Airbnb also has learned that a co-founder and officer of NGD, Cindy Diffenderfer, filed a
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`series of lawsuits against Hernandez and NGD accusing Hernandez of diverting funds from NGD for his
`personal use and of diverting corporate opportunities from the company to himself. See Complaint,
`Diffenderfer v. NGD Homesharing, LLC, No. 19-cv-23225 (S.D. Fla. Aug. 2, 2019); Complaint,
`Diffenderfer v. NGD Homesharing, LLC, No. 2019-010785-CA-01 (Fla. 11th Jud. Cir. Apr. 9, 2019).
`As with so many other aspects of their relationship with Airbnb, NGD and Hernandez were evasive
`about their live disputes with Diffenderfer, despite their obligations to disclose such disputes and to
`communicate candidly with Airbnb. Instead, NGD and Hernandez attempted to conceal from Airbnb
`these lawsuits and Diffenderfer’s termination from NGD.
`Diffenderfer filed a Declaration in one of those lawsuits alleging that Hernandez
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`personally took “Acquisition Fees” and “Developer Fees” for the capital raised by NGD on real estate
`assets. A true and correct copy of Ms. Diffenderfer’s declaration is attached to this Complaint as
`Exhibit C. In it, she claimed all of these fees belonged to NGD, the diversion of which excluded
`investors in NGD, including Airbnb, from benefiting from those funds.
`Diffenderfer also questioned Hernandez’s stated $1.5 million capital contribution to
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`NGD, and asserted that Hernandez caused NGD to pay a former associate to whom he owed money
`without disclosing that payment to investors, including Airbnb. She alleged that Hernandez ordered her
`to remain silent about these events or face termination.
`Diffenderfer also alleged a number of troubling practices at NGD, including backdating
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`documents and blaming material changes in foundational documents on a scrivener’s error.
`Further, NGD and Hernandez’s removal of Diffenderfer violates the Operating
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`Agreement. That contract states that Diffenderfer is an Officer of the LLC—Chief Marketing Officer, to
`be exact. Operating Agreement § 6.5(b). As an Officer, Diffenderfer cannot by removed except by the
`Majority Members, which must include Airbnb, unless she resigns, dies, or has been appointed a
`successor. Id. The Majority Members did not act to remove Diffenderfer. NGD and Hernandez did so
`without notice or authorization. Diffenderfer’s removal was improper.
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`NGD Failed to Collaborate in Good Faith with Airbnb
`Pursuant to the Collaboration Agreement, NGD was required to “accept and implement
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`Airbnb’s reasonable feedback, suggestions and additions as to Development and each Project.”2
`Collaboration Agreement § 1.1(c).
`NGD also had to “[a]dhere, and ensure that each Project adheres” to specific project
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`guidelines Airbnb provided. Id. § 1.1(e). These guidelines required NGD to develop unique floor plans
`and layouts for its buildings’ units, “such that the unit types are heterogeneous across the Project.” Id.
`Ex. B. They also required “[a]pproved structural and design guidelines within buildings.” Id.
`The parties were to “discuss in good faith making one or more public announcements
`45.
`regarding their collaboration and each Project. Any marketing or promotional materials using the name,
`logo or other property of a party may be used only with the prior written approval of that party.” Id.
`§ 1.3(c).
`Airbnb worked tirelessly to get NGD to comply with its obligations. Despite these
`46.
`efforts, NGD failed to perform and simply ignored Airbnb and its rights. For example, NGD frequently
`disregarded or delayed implementing Airbnb’s design input, which was crucial to fulfilling Airbnb’s
`goal of providing its users with unique experiences. NGD also repeatedly used Airbnb’s name and
`branding without permission and made marketing and promotional statements for its Airbnb Projects
`without consulting with Airbnb. Id. at 2.
`FIRST CAUSE OF ACTION
`FRAUD and DECEIT (CAL. CIV. CODE § 1709)
`Airbnb incorporates by reference paragraphs 1–46.
`47.
`NGD and Hernandez made or were responsible for the making of statements to Airbnb
`48.
`that were knowingly and intentionally false, incorrect and/or misleading, and/or which omitted
`information necessary to make such statements true, accurate, and complete. NGD and Hernandez, by
`their conduct and actions, led Airbnb to believe that its $11 million investment would be protected from
`dilution when another investor exercises its warrants. NGD and Hernandez, by their conduct and
`
`
`2 “Development” refers to NGD’s obligation to plan, design, develop, and construct Projects.
`
`
`
`11
`COMPLAINT
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
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`

`

`Case 3:20-cv-00549 Document 1 Filed 01/23/20 Page 12 of 18
`
`
`
`actions, also led Airbnb to believe that its $11 million investment would contribute to NGD’s working
`capital, not to another one of Hernandez’s companies.
`Airbnb now has learned that NGD and Hernandez’s representations were false. NGD and
`49.
`Hernandez knew the representations were false when they made them, or they made the representations
`recklessly and without regard for the truth. In truth, Airbnb’s investment was not protected from
`dilution, and NGD and Hernandez diverted at least $1 million from NGD to another one of his
`companies, all contrary to the representations made to Airbnb by NGD and Hernandez.
`NGD and Hernandez intended that Airbnb rely on their representations. Airbnb
`50.
`reasonably relied on the false, incorrect and/or misleading statements, and acted or refrained from acting
`based on such reasonable reliance. Had true, correct, accurate, and complete statements been made by
`NGD and Hernandez, Airbnb would not have entered into the same agreements with NGD.
`As a direct and proximate result of NGD and Hernandez’s fraudulent statements and
`51.
`omissions and Airbnb’s reasonable reliance, Airbnb has suffered substantial monetary damages at least
`to the extent of its $11 million investment.
`SECOND CAUSE OF ACTION
`NEGLIGENT MISREPRESENTATION
`Airbnb incorporates by reference paragraphs 1–46.
`52.
`NGD and Hernandez negligently and without due care made statements, and negligently
`53.
`and without due care acted and led Airbnb to believe that certain statements were true, when NGD and
`Hernandez knew, or were negligent in not knowing, that such statements were not true. NGD and
`Hernandez, by their conduct and actions, led Airbnb to believe that its $11 million investment would be
`protected from dilution when another investor exercises its warrants. NGD and Hernandez, by their
`conduct and actions, also led Airbnb to believe that its $11 million investment would contribute to
`NGD’s working capital, not to another one of Hernandez’s companies.
`Airbnb now has learned that NGD and Hernandez’s representations were false. NGD and
`54.
`Hernandez knew the representations were false when they made them, or they made the representations
`recklessly and without regard for the truth. In truth, Airbnb’s investment was not protected from
`
`1
`2
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`4
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`6
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`8
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`13
`14
`15
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`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`12
`COMPLAINT
`
`

`

`Case 3:20-cv-00549 Document 1 Filed 01/23/20 Page 13 of 18
`
`
`
`dilution, and NGD and Hernandez diverted at least $1 million from NGD to another one of his
`companies, all contrary to the representations made to Airbnb by NGD and Hernandez.
`Airbnb reasonably relied on the false, incorrect and/or misleading statements, and acted
`55.
`or refrained from acting based on such reasonable reliance. Had true, correct, accurate, and complete
`statements been made by NGD and Hernandez, Airbnb would not have entered into the same
`agreements with NGD.
`As a direct and proximate result of NGD and Hernandez’s untrue statements and
`56.
`omissions and Airbnb’s reasonable reliance, Airbnb has suffered substantial monetary damages at least
`to the extent of its $11 million investment.
`THIRD CAUSE OF ACTION
`CAL. CORP. CODE §§ 25400 AND 25500
`Airbnb incorporates by reference paragraphs 1–46.
`57.
`NGD and Hernandez made or were responsible for the making of statements to Airbnb
`58.
`that were knowingly and intentionally false, incorrect and/or misleading during a securities offering to
`induce Airbnb to purchase such securities.
`NGD and Hernandez knew or had reasonable ground to believe that the statements were
`59.
`false or misleading.
`Airbnb reasonably relied on the false, incorrect and/or misleading statements, and acted
`60.
`or refrained from acting based on such reasonable reliance. Had true, correct, accurate, and complete
`statements been made by NGD and Hernandez, Airbnb would not have entered into the same
`agreements with NGD.
`As a direct and proximate result of NGD and Hernandez’s untrue statements and
`61.
`omissions and Airbnb’s reasonable reliance, Airbnb has suffered substantial monetary damages at least
`to the extent of its $11 million investment.
`FOURTH CAUSE OF ACTION
`CONVERSION
`Airbnb incorporates by reference paragraphs 1–46.
`Airbnb has a property interest in its $11 million investment in NGD.
`
`62.
`63.
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`13
`COMPLAINT
`
`

`

`Case 3:20-cv-00549 Document 1 Filed 01/23/20 Page 14 of 18
`
`
`
`NGD and Hernandez substantially interfered with Airbnb’s property interest by
`64.
`knowingly or intentionally issuing a $1 million loan to another

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