Filed Jun 21 2001 STEVEN T. ADAMS, ESQ., BAR ID #130816 JAMES D. HEPWORTH, ESQ., BAR ID #132910 ADAMS, HALL & HEPWORTH 1299 Ocean Avenue Suite 900 Santa Monica, California 90401 Telephone: (310) 260-8801 Attorneys for Plaintiff Gold & Silver Reserve, Inc. SUPERIOR COURT FOR THE STATE OF CALIFORNIA IN THE COUNTY OF SAN FRANCISCO GOLD & SILVER RESERVE, INC. Plaintiff vs. CHARLES EVENS [sic], an individual, and DOES 1 through 10, inclusive, Defendants. C No. 322321 COMPLAINT FOR 1. MISAPPROPRIATION OF TRADE SECRETS; 2. TORTIOUS INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE 3. UNFAIR TRADE PRACTICES; AND 4. BREACH OF THE DUTY OF LOYALTY Plaintiff, Gold & Silver Reserve, Inc. (hereinafter "G&SR"), brings the following claims against defendants and for reason therefore state as follows: SUMMARY OF THE CASE 1. G&SR is a well-established and thriving internet-based businesses [sic] which created and marketed e-gold, which is a secure - and therefore increasingly popular - electronic currency backed by the universally accepted commodity of gold (as well as certain other precious metals). E-gold currency is issued by e-gold, Ltd., a Nevis corporation. Title to the gold that backs the e-gold currency is held in The e-gold Bullion Reserve Special Purpose Trust (the "Trust"); the gold is physically stored in safety in treasury grade vaults by third-party custodians such as JP Morgan, Chase & Co. in London and Transguard in Dubai; it is audited from time-to-time by Ernst & Young, LLP; and the operations of e-gold and the Trust function under the auspices of an independent escrow agent, currently the Central Escrow Agency Ltd., an Ontario, Canada company, which is controlled by the same principals who control Central Funds of Canada, an internationally known and respected family of mutual funds which specialize in the investment in precious metals (the "Escrow Agent"). 2. During the period from its inception through present, G&SR has enjoyed great recognition for their product, much acceptance from the public and ever-increasing sales/market share. 3. In July, 1999, Jackson Trading Company, which was merged into its sister company G&SR on December 31, 2000, hired defendant Evans as its Executive Vice-President of Business Development. Defendant Evans held this position until October 23, 2000, when Jackson Trading Company terminated his employment. Jackson Trading Company/G&SR employed defendant Evans at its Melbourne, Florida office. 4. During the course of defendant Evans' employment with G&SR, and in conjunction with his responsibilities as Executive Vice President of Business Development, defendant Evans regularly participated in business planning meetings in which G&SR disclosed highly confidential and proprietary information regarding its business development plans. By way of example, G&SR developed unique proprietary exchange business software, and regularly discussed with defendant Evans the business development plans associated with, and upgrades to, that software. G&SR disclosed other business development plans for new products and services, the secrecy of which was and is instrumental to the success of these plans. The software, confidential business plans and services, and related confidential information, are considered by G&SR to be its trade secrets. 5. Prior to defendant Evans' termination, he transferred G&SR's trade secrets to his home computers. In addition, while employed by G&SR, defendant Evans shared trade secrets with third parties for the purpose of diverting business development opportunities away from G&SR and to other business entities in which defendant Evans had a financial interest. 6. Subsequent to defendant Evans' termination, he has misappropriated trade secrets of G&SR, and has sought to interfere with G&SR's existing and prospective business relations. 7. G&SR has brought this action to recover for the substantial damage that it has suffered in its business as a result of defendant Evans' wrongful conduct. JURISDICTION AND VENUE 8. This Court has jurisdiction in this matter pursuant to California Code of Civil Procedure ("CCP") § 410.10 and the California Constitution, Article VI, § 10. 9. Venue is proper in this Court pursuant to CCP § 395 because it is the county in which defendant Evans resides. 10. G&SR is a Delaware corporation which, with great investments of time, money and resources, originally developed the e-goldŽ system. Through its online OmniPay services (explained more fully below) G&SR is also the primary distributor for e-gold, Ltd. (hereinafter "EGL"), serving the wholesale exchange market and qualified retail customers. 11. Charles Evans is a former employee of G&SR. On information and belief, defendant Evans is a resident of the State of California. 12. Plaintiff does not know the true names and capacities of defendants designated as Does 1 through 10, inclusive, and therefore sues such defendants by such fictitious names pursuant to California Code of Civil Procedure § 474. Plaintiff will amend its complaint when the true identities of said defendants are revealed or become known. FACTUAL ALLEGATIONS I. GOLD AND SILVER RESERVE, INC. AND CHARLES EVANS 13. By way of background, e-gold, Ltd. is the world's first electronic currency designed for borderless, electronic business transactions. The e-gold currency enables the worldwide use of gold as money. It merges the digital transaction efficiencies of an electronic payment system with a universally acceptable basis of value. Advantages of e-gold include immediate settlement, low transaction costs, non-repudiation of payments, no financial risk, bi-directional payments, and automation support. 14. G&SR, through its OmniPay system, enables customers to keep their money in their e-gold account, free of any financial risk, but to use the value to pay anyone, anywhere, in any one of various different currencies. OmniPay extends the usefulness of EGL by seamlessly integrating it with existing payment systems. Customers use e-gold to make direct payments to the ever-growing multitude of businesses and individuals that accept it. For payments to businesses who do not yet accept e-gold directly, customers may use OmniPay. 15. G&SR accepts only bank wires from its customers, thereby eliminating the risk of receiving fraudulent payment from unknown sources. EGL does not accept any payments in national currencies and does not even have a bank account. The only, way for a person to obtain e-gold is to purchase it from G&SR or one of many independent exchange providers or to be paid in e-gold for goods or services provided by that person. II. G&SR'S TRADE SECRETS 16. As Executive Vice-President of Business Development, defendant Evans' duties consisted primarily of developing new business ventures on behalf of G&SR. 17. During the course of defendant Evans' employment with G&SR, and in conjunction with his responsibilities as Executive Vice President of Business Development, defendant Evans regularly participated in business planning meetings in which G&SR disclosed highly confidential and proprietary information regarding its business development plans. By way of example, G&SR developed unique proprietary exchange business software, and regularly discussed with defendant Evans the business development plans associated with, and upgrades to, that software. G&SR disclosed other business development plans for new products and services, the secrecy of which was and is instrumental to the success of these plans. The software, confidential business plans and services, and related confidential information, are considered by G&SR to be its trade secrets. 18. The trade secrets are highly valuable to G&SR and constitute a primary source of G&SR's present and future income. 19. Great sums of money were devoted by G&SR to researching and developing its software, business plans and services. Others could not duplicate G&SR's software, business plans and services without knowing the trade secrets developed solely by G&SR and its agents, servants and employees. III. DEFENDANT EVANS' WRONGFUL CONDUCT 20. During the course of his employment with G&SR, defendant Evans worked for G&SR as its employee with the understanding and appreciation that the relationship between the parties was a confidential one, particularly with regard to his obligation to maintain the secrecy and confidentiality of G&SR's trade secrets. 21. During the course of his employment with G&SR, defendant Evans wrongfully contacted competitors of G&SR and other third parties without G&SR's authorization and disclosed to them G&SR's trade secrets. Said disclosures were made in numerous locations, including, but not limited to, the State of California. Defendant Evans engaged in this and other wrongful conduct for the purpose of personal gain and attempted to conceal his wrongful conduct from G&SR by reporting to G&SR that he was engaged in proper employment activities, when, in fact, he was engaged in activities designed to benefit himself and harm his employer, G&SR. 22. Subsequent to G&SR's termination of defendant Evans' employment, he wrongfully took the trade secrets from G&SR without authorization, and without a right or privilege to do so, and used and disclosed said trade secrets in his own business. 23. Said trade secrets were disclosed to Defendant Evans and learned by Defendant Evans while in a confidential employment relationship with G&SR. The use of said trade secrets by Defendant Evans is causing substantial injury to G&SR. FIRST CAUSE OF ACTION (Misappropriation of Trade Secrets - CCP §3426 et seq.)) (Against All Defendant ) 24. Plaintiffs incorporate the allegations made in Paragraphs 1 through 23 as if stated herein in their entirety. 25. In engaging in the conduct described above, Defendant Evans misappropriated the above-described trade secrets of G&SR in violation of Code of Civil Procedure section 3426 et seq. 26. As a proximate result of the misappropriation, G&SR has suffered actual damages in an amount to be proven at trial. As a further proximate result of the misappropriation, defendants were unjustly enriched in an amount to be proven at trial. 27. G&SR is informed and believes that the aforementioned acts of the defendants were willful and malicious in that defendants misappropriated G&SR's trade secrets with the deliberate intent to injure G&SR's business and improve their own. G&SR is therefore entitled to punitive damages. G&SR is also entitled to reasonable attorney's fees. 28. Defendants' wrongful conduct in misappropriating G&SR's trade secrets, unless and until enjoined and restrained by order of this Court, will cause great and irreparable injury to G&SR's business. 29. G&SR has no adequate remedy at law for the injuries currently being suffered in that defendants will continue to misappropriate trade secrets and plaintiff will be required to maintain a multiplicity of judicial proceedings to protect its interests. SECOND CAUSE OF ACTION (Tortious Interference with Prospective Advantage) (Against All Defendants) 30. Plaintiffs incorporate the allegations made in Paragraphs 1 through 29 as if stated herein in their entirety. 31. G&SR had established relationships with numerous clients and businesses who utilized G&SR's services to the substantial benefit of G&SR. Defendant Evans knew of these relationships as a result of his employment relationship with G&SR. 32. The conduct of defendant Evans as described above was designed to disrupt the economic relationships between G&SR and its clients, and indeed, the relationships were disrupted as a result of defendants Evans' interference in that prospective customers and merchants have declined to do business with G&SR as a result of the conduct of Defendant Evans in communicating the Trade Secrets to others. 33. Defendant Evans' interference with G&SR's economic relationships constituted an unfair trade practice in violation of Business and Professions Code section 17200. 34. As a proximate result of defendant Evans' conduct, G&SR suffered damages in an amount to be proven at trial. 35. The conduct of Defendant Evans in interfering with G&SR's economic relationships was intentional, willful, and calculated to cause damage to G&SR's lawful business. The conduct of Defendant Evans was perpetrated with actual malice and ill will toward G&SR, and with the intentional and improper purpose of causing damage. There was no justifiable cause for Defendant Evans' actions. As a result, an award of punitive damages is warranted. THIRD CAUSE OF ACTION (Unfair Business Practice) (Against All Defendants) 36. Plaintiffs incorporate the allegations made in Paragraphs 1 through 35 as if stated herein in their entirety. 37. The conduct of Defendant Evans described above constitutes an unfair trade practice in violation of Business arid Professions Code section 17200. 38. As a result of Defendants Evans' conduct, G&SR has suffered damage in an amount to be proven at trial. FOURTH CAUSE OF ACTION (Breach of the Duty of Loyalty) (Against All Defendants) 39. Plaintiffs incorporate. the allegations made in Paragraphs 1 through 38 as if stated herein in their entirety. 40. Under both California and Florida law, and by virtue of his employment relationship, defendant Evans owed G&SR a duty of loyalty. 41. Defendant Evans breached that duty by misappropriating G&SR's trade secrets and interfering with G&SR's economic relationships as described above. 42. As a proximate result of defendant Evans' conduct, G&SR suffered damages in an amount to be proven at trial. 43. The conduct of Defendant Evans in breaching his duty of loyalty was intentional, willful, and calculated to cause damage to G&SR's lawful business. The conduct of Defendant Evans was perpetrated with actual malice and ill will toward G&SR, and with the intentional and improper purpose of causing damage. There was no justifiable cause for Defendant Evans' actions. As a result, an award of punitive damages against defendant Evans is warranted. PRAYER FOR RELIEF WHEREFORE, Plaintiffs G&SR seeks judgment against Defendant Charles Evans for: 1. Compensatory damages (consisting of general and special damages) in an amount to be proven at trial; 2. An award of punitive damages; 3. Reasonable attorneys' fees and costs of suit; 4. An order requiring defendants to show cause why they should not be enjoined as set forth below during the pendency of this action; 5. A temporary restraining order, a preliminary injunction, and a permanent injunction, all enjoining defendants from contacting clients or former clients of G&SR and/or disclosing confidential information regarding G&SR's software, business plans, and other trade secrets; 6. Costs incurred herein; and 7. Such other and further relief as justice may require. JURY DEMAND Plaintiffs hereby demand a trial of their claims against defendants by jury. DATED: June 21, 2001 Adams, Hall & Hepworth By [signature] Steven T. Adams Attorneys for plaintiff Gold & Silver Reserve, Inc.