ant to <.:C:.P ~ qi;U.U!

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Pla ntiff requests delayed

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public disclosure of this

p.Lor.;e:e:ding,
'--------

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JOHN B. SULLIVAN (State Bar No. 96742)

jbs@severson.com
HAROLD R. JONES (State Bar No. 209266)
hrj@severson.com
SEVERSON & WERSON
A Professional Corporation
One Embarcadero Center, Suite 2600
San Francisco, California 94111
Telephone: (4 15) 398 -3 344
Facsimile: (415) 956-043 9

LAURA C. MCBRIDE (State Bar No. 227038)

ULMER & BERNE LLP
1660 West Second Street, Suite 1100
8 Cleveland, OH 44113
Tel: (216) 583-7000
9 Fax: (216) 583-7001
7

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Attorneys for Plaintiff

FLEXTRONICS SALES AND
MARKETING, ASIA PACIFIC LTD.

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SUPERIOR COURT OF CALIFORNIA

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COUNTY OF SANTA CLARA

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FLEXTRONICS SALES AND

MARKETING, ASIA PACIFIC, LTD.,

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Plaintiff,
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vs.

Case No.

II4C Vl895 3 '7

COMPLAINT FOR WRIT OF

ATTACHMENT ARISING FROM:
(1) BREACH OF CONTRACT;
(2) ACCOUNT STATED

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ALIPHCOM dba JAWBONE,
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Defendant.
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X
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Flextronics Sales and Marketing, Asia Pacific I ,td. ("Flextronics" or "Plaintifr') brings this
Complaint for the sole purpose of obtaining a pre-judgment writ of attachment against Defendant

25 AliphCom dba Jawbon~ ("Jawbone" or "Ddt:ndant"). Flextronics does not waive, and expressly
26

reserves, the right to seek further relief through arbitration as authorized by the parties' agreement,

27

as described below. Flextronics alleges as follows:

28

PARTIES
2

Flcxtronics is a corporation organized under the laws of Mauritius and is, through

1.

its affiliates, in the business of, among other things, designing, manufacturing, and assembling

consumer electronic products.

2.

Upon information and belief: Defendant is a California corporation headquartered

in San Francisco, California and is in the business of, among other things, designing and selling

small consumer electronics products, including wireless headsets and personal activity tracking

devices.

JURISDICTION AND VENUE

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'll
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3.

Jurisdiction and venue in this Court exist by virtue of California Code of Civil

Procedure, section 410.10 .

Venue is proper in this Court because Jawbone does business in Santa Clara

4.

County and because this dispute arose, in whole or in part, in Santa Clara County.

SUMMARY OF CASE

14

lS

Jawbone has materially (and repeatedly) breached the terms of a clear and

5.

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unambiguous contract between the parties- to the extent of over $20 million in goods received,

'17

but not paid for. In advance of an agreed-upon contractual arbitration process to confirm

!8 Jawbone's breaches of the parties ' contract, Flextronics seeks the Court's assistance in securing a
19

writ of attaclunent to secure the amounts owed by Jawbone to Flextronics. Without the writ,

20 which is clearly provided for under Califomia law and expressly authorized as an available
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remedy by the parties ' contract, Flextronics may lose the ability to secure repayment for

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significant goods and services already rendered due to Jawbone!s admitted precarious financial

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condition.

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GENERAL ALLEGA TJONS

On or about November 28, 2013, Flextronics and Jawbone entered into an Interim

6.

Agreement (the "Agreement"), a true and accurate copy of which is attached hereto as Exhibit A.
7.

Pursuant to the Agreement, Flextronics, through its affiliates, agreed to

manufacture, assemble, and package certain personal activity tracking devices (the "Products") for
12334 0003/3392792.1
2
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1 Jawbone at pre-determined Prices.

2

8.

The Products and Prices are described in Attachment A to the Agreement.

9.

Jawbone also agreed to provide forecasts of its annual and monthly needs fur the

Products, on which forecasts Flextronics developed the Prices and ensured that necessary

5 equipment, materials, and personnel would be on-hand for the manufacturing process.

6
7
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10.

The Agreement incorporates Jawbone's agreement to purchase approximately 3.6

million Products over a one-year time frame.

11.

Pursuant to the Agreement, Jawbone issued purchase orders ("Orders") to

Flextronics for specific volumes of Products, which Products Flextronics would then have

10 manufactured and shipped to Jawbone.

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13
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15
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12.

Under the Agreement, payments were due to Flextronics from Jawbone within 60

days of Flextronics' invoices for the Products.

13.

The parties agreed that any late payments from Jawbone would be subject to a

1.5% per month interest rate until paid in full.

14.

Jawbone also agreed to be financiall y responsible for Materials and certain other

costs required for Flextronics' manufacturing process.

15.

Despite Jawbone's forecast and agreement to Order approximately 3.6 million

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Products, it became clear after the parties began operations under the Agreement that Jawbone was

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not submitting Orders for sufficient Products.

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21

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16.

As of June 1, 2014, approximately 8 months into the Agreement, Jawbone had only

submitted Orders for approximately 750,000 Products.

17.

Not only was Jawbone ordering an insufficient number of Products, but Jawbone

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failed to timely pay the Invoices for the Products that were shipped and for other costs incurred by

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Flextronics under the Agreement.

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:2.8

18.

Jawbone submitted approximately 50 Orders for approximately 750,000 Products

under the Agreement.

19.

After the Products were shipped, Flextronics issued over 225 Invoices for the

approximately 750 ,000 Products and other costs.

12334.0003/3392792. 1

------~3___________

COMPLAINT FOR WRIT OF ATTACHMENT ARISING FROM: (I) BREACH OF CONTRACT:

f?) ArrnTTNT

20.
2

There are no outstanding quality issues with the Products and the Products shipped

were accepted by Jawbone.

21.

As of June 6, 2014, Flextronics' Accounts Receivable ("NR") for Jawbone totaled

4 $24.1 million, of which $16.5 million was overdue in accordance with the 60-day payment terms.
5

22.

Accordingly, on June 6, 2014, Flextronics issued notice to Jawbone of its intent to

6 terminate the Agreement due to Jawbone's material breach of the Agreement and demand for
7

8
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adequate assurances under UCC 2-609.

23.

Subsequently, on or about June 24, 2014. Flextronics and Jawbone agreed to a

payment plan for the outstanding AIR under which Jawbone promised to submit the following

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payments to Flextronics:

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June 2014

$3 million

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July 15,2014

$5 million

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August 15, 2014

$5 million

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September 15, 2014

$5 million

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October 15, 2014

$3.6 million I balance

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24.

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Jawbone advised Flextronics that it would be receiving additional funding that

would assure Jawbone ' s ability to make the payments.

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When it became clear that Jawbone did not intend to uphold its obligations under

19

the Agreement by adhering to the payment plan, Flcxtronics informed Jawbone that it had no

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choice but to pursue its remedies in court, including a pre-arbitral writ of attaclunent.

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26.

Jawbone responded by requesting additional time to make payment.

27.

On August 1I, 2014 , Flextronics again attempted to work with Jawbone to resolve

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Jawbone's outstanding debt under the agreement by offering to Jawbone that Flextronics would

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not pursue a writ of attachment if Jawbone paid $2 million on or before August 14, 2014, at 2pm

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Pacific Time and provided an additional propo::;ed payment plan to repay the debt in full in weekly

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installments.

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28.

Despite multiple attempts by Flextronics to work out Jawbone's debts, however,

Jawbone has again failed to make payment to Flextronics by the agreed deadline.
12334.0003/3392792.1
4
COMPLAINT FOR WRJT OF ATTACHMENT ARISING FROM : (11 RRFAC"H CW

rnNT'R t.rT f"!\ hrr11 nsr

29.

Jawbone has fa iled to adhere to and is in breach of the payment plan and its

2 subsequent August 11, 2014 agreement with Flextronics and has only submitted approximately
3

$4.6 million in payments since June 24, 2014.

Accordingly, a of August 7, 2014, Flextronics' overdue AIR for Jawbone totaled

30.

5 $19,814,801.45.
6

An additional $918,521 in interest for the overdue amounts has accrued as of

31.

7 August 7, 2014, and continues to accrue in accordance with the late payment terms set forth in the
8

Agreement.

32.

Thus, in total, Jawbone owes Flextronics $20,733,322.45 in outstanding and

10 overdue payment obligations, including interest as of August 7, 2014.

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Attached as Exhibit His a summary of the voluminous Orders and Invoices that are

33.

!2 overdue and for which Flextronics seeks the protections of a writ of attachment.

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34.

A sample Order and Invoice arc attached hereto as Exhibit C.

35 .

Jawbone has acknowledged and does not dispute that it owes the above amounts to

Flextronics.
Though Flextronics has repeatedly demanded payment from Jawbone, Jawbone has

36 .

17 refused, and continues to refuse, to pay the outstanding amounts.

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37.
1\gre~:mcnt

The Agreement provide::; that the parties would submit any disputes under the
to binding arbitration.

38.

However, the Agreement also specifically provides that a party "has the right to

21 apply to any court uf competent jurisdiction for provisional relief, including pre-arbitral
22
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attachments."
39.

Further, the parties agreed that any dispute submitted to a court would be decided

24 by the court without a jury, to the fullest extent permissible under applicable law.

,.
2.l

40 .

Flextronics intends to seek relief through the agreed-upon arbitration proceedings

26 for the amounts owed by Jawbone under the Agreement, including additional tcnnination drunages
27 provided for by the Agreement and the costs of approximately 76,000 more fini shed Products, that
28 Jawbone ordered and Flextronics, through its affiliates, has manufactured but has not yet shipped
12334.0003/33 92792.1
coMPLAINT FOR WRIT oF

5
A.T'TAcHMENTARi siNGT-R..oM:

( I ) BREAC H oF coNTRACT; (2) AccoUNT

to Jawbone due to Jawbone's breach of the Agreement - which together total an additional several
2

million dollars.

41.

However, until such time as the arbitration proceeding has concluded, Flextronics

seeks a writ of attachment to protect Jawbone's assets necessary to repay only the current overdue

AIR plus interest- a total of $20,733,322.45.

42.

Flextronics does not seek the attachment in this case for any purpose other than to

recover the amounts due to Flextronics under the Agreement.

43.

Flextronics has no information or belief that Flextronics's claim in this case has

9 been discharged in a proceeding pursuant to Title 11 of the United States Code or that this action
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is in any way stayed in such a proceeding.

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44.

Upon information, belief, and statements made by Jawbone representatives,

Jawbone's financial condition is perilous and currently insufiicient to pay its debts.

45.

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Withotlt the security provided by a pre-arbitral writ of attacluncnt, Flextronics faces

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the real possibility that Jawbone's assets will be insufficient to satisfy the anticipated arbitration

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award.

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46.

The allegations and causes of action set forth herein in support of the writ of

: 7 attachment that Flcxtronics seeks in this Complaint are not in lieu of the

stat~ment

of claim that

18 Flextronics intends to file with the American Arbitration Association pursuant to the lerrns of the
19 parties' Agreement; instead, Plextronics specifically reserves its right to make additional factual
2.0
21

allegations and to assert additional causes of action in arbitration.

47 .

Flextronics seeks attachment of all corporate property of 1\ liphCom db a Jawbone

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that is subject to attachment pursuant to subdivision (a) of Code of Civil Procedure Section

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487.010 .

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48 .

Pursuant to Code of Civil Procedure Section 483 .050, Flcxtronics further seeks

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delayed public disclosure of thi s proceeding, which is appropriate because Jawbone is not a

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natural person and Flextronics ' claim is unsecured .

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12334.0003/3392792.1

COMPLAINT FOR WRlT OF ATTACHMEN"f ARI~

Sl~N;-;:G;-;F:;;:R;-70~M-;-:--;(~
1 )--::B:-:::RE-::::-:-A-::C:-::H--::0:-::F: -C::-0-N_T_R_A_C.T: (2) ACCOUNT

FIRST CAUSE OF ACTION

2

(Breach of Contract)

49.

Flextronics incorporates by reference each and every allegation set forth in

4 paragraphs 1 through 48, inclusive, and realleges them as if they were fully set forth herein.
50.

Flextronics has duly performed under the Agreement and/or has satisfied all

6 conditions, promises, and obligations required to be perfonned or satisfied by it in accordance

7 with the tenns of the Agreement.

51.

Despite repeated requests that Jawbone do so, Jawbone has failed and refused, and

9 continues to fail and refuse, to make full and complete payment to Flextronics for the products and
10 services that Flextronics provided to Jawbone, thereby breaching the Agreement.
11

52.

As a direct and proximate result of Jawbone's breach of the Agreement, Flextronics

12 has suffered damages currently no less than $20,733 ,322.45 and in a total amount that flextronics
13

will prove at arbitration.

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SECOND CAUSE OF ACTION

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(Account Stated)

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53 .

Flextronics incorporates by reference each and every allegation

l:let forth

in

:! 7 paragraphs 1 through 42, inclusive, and rea!lcges them as if they were fully set forth herein.
54.

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During the course of the parties' dealings under the Agreement, rlextronics

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submitted numerous invoil:es to Jawbone detailing the amounts due and owing for the products

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and services provided by Flcxtronics ami its afiiliates to Jawbone;:.

55.

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2.2

Flcxtronics has requested that Jawbone pay these sums. However, Jawbone has

failed and refused, and continues to fail and refuse, to pay Flextronics.

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56.

As a direct and proximate result of Jawbone's failure to pay Flextronics,

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Flextronics has suffered damages currently no less than $20,733,322.45 and in a total amount that

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Flextronics will prove at arbitration.

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II I

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28

II I
12334.0003/3392792.1

,. ___ __

7_ .

COMPLAINT FOR WRIT OF ATTACHMENT ARISING F=RO

-::-:M:-:=-(1=-)-B-RE
---ACH OF rONTH ArT ("J) A rrr'll r~r'T'

1
2

PRAYER
WHEREFORE, Plaintiff, Flextronics Sales and Marketing, Asia Pacific Ltd., demands

3 judgment against Defendant AliphCom dba Jawbone as follows:

4

1.

A writ of attachment securing the full amount due and owing to Flextronics under

the parties' Interim Agreement, which at this time totals no less than $20,733,322.45;

2.

Costs ofthis action;

3.

Attorney's fees ; and

4.

Such other and further relief as this Court may deem just and proper.

9 DATED: August I ), 2014

:.o

SEVERSON & WERSON

A Professional Corporation

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By:

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Attorneys for Plaintiff FLEXTRONICS SALES AND

MARKETING, ASIA PACIFIC LTD.

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12334.0003/3392792.1

COMPLAINT FOR WRIT OF ATTACHMENT ARlSTNG--=r=

R:-:0: -: -M--:-:--:(-::-:J)-:8::-::R:-::F:~.A:-:r=H-::-n
-:::-::r< rrYII.TTo ,\ ,.... ......

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