Mark Schechter strikes back. The owner of adult talent agency ATMLA files a blistering Cross-Complaint against Shy Love and her husband, Roy Liberboim.

Schechter states claims against ATMLA’s previous owners for Fraud, Breach of Contract, Unfair Business Practice, and Interference with Prospective Business Advantage.

The Cross-Complaint cites:

• False financial information indicating the number of models recruited per month, income per month, expenses per month, and other important financial data provided at the time of the sale of ATMLA in order to inflate the value of  Shy Love’s business assets and consulting services;

• Shy Love starting a new agency, The VIP Connect, which competes directly with ATMLA, in violation of the terms of the contracts which effectuated the sale of ATMLA;

• Defamatory information provided to a porn gossip blogger in order to damage Schechter’s reputation;

• Disparaging statements made to clients, producers, directors, and adult industry professionals;

• The “poaching”  of models from ATMLA’s roster;

• Attempts to force Schechter’s removal from LATATA; and

• Other actions and activities meant to damage Schechter’s professional reputation in the adult film business.

The amount of liquidated damages specified for three of the alleged contract breaches is $100,000 USD per breach!

This came across our Google Alerts today — 

In November, ex-adult performer turned talent agent Shy Love (nee Sheelagh Blumberg) sued Mark Schechter, the man who now owns her old agency, ATMLA, for defamation. As TRPWL has indicated in its previous coverage, this move was not merely ridiculous, but also incredibly unwise.

Friday, in Los Angeles County Superior Court, Schechter filed not only his Answer, which denied each and every one of Blumberg/Love’s allegations, but also a Cross-Complaint, that added Shy’s husband Roy Liberboim as a party.

The pleadings lay out several claims, perhaps the juiciest of which is that the couple committed Fraud in the sale of ATMLA, by intentionally providing Schechter with financial information that was false.

In other words, he says that they cooked the books.

Prior to entering in to the above referenced contracts, Cross-Defendants [Blumberg/Love and Liberboim] provided emails concerning their 2011 tax returns, Profit and Loss Statements, and other revenue reporting information as part of the disclosure process….

Prior to entering in to the above referenced contracts, [Blumberg/Love and Liberboim] provided confidential financial information indicating the number of models recruited per month, income per month, expenses per month, and other important financial data.

This information referenced above was false.

[Blumberg/Love and Liberboim] were aware of the falsity of the above referenced documents. [Blumberg/Love and Liberboim] intended that Cross-Complainant Mark Schechter rely on the above referenced documents in order to inflate the value of the consulting services and business assets as referenced in Exhibit “A” and “B.”

The 2011 ATMLA tax returns provided by Blumberg/Love and Liberboim (marked “Self-Prepared”) are published at the end of this article, and they are fascinating.

Here is the ATMLA Balance Sheet that Schechter was provided at the time he was negotiating the deal to acquire ATMLA (also attached as an exhibit to his Cross-Complaint):

Note the $45,000 American Express balance. This, like Blumberg/Love’s $155,000 in tax liens, may be relevant because she claimed in her defamation complaint that Schechter and director Barrett Blade had disparaged her financial status in statements made to various members of the adult business community.

In his Cross-Complaint, Schechter also alleges that Blumberg and Liberboim breached the terms of the Asset Purchase Agreement and Consulting Services Agreement which effectuated the transfer of ATMLA, by competing directly with ATMLA, and that Blumberg “committed intentional acts designed to disrupt” the “economic relationship between [Schechter/ATMLA] and adult industry models”:

In 2014, these acts included but were not limited to: defamatory information was provided to adult industry gossip blogger in order to damage the reputation of Cross-Complainant Mark Schechter, “poaching” of models from the agency roster, attempts to force Cross-Complainant Mark Schechter’s removal from a trade organization, and other actions and activities meant to damage Cross-Complainant Mark Schechter’s professional reputation in the adult film industry.

The above referenced 2014 activities caused a disruption in the professional relationships with models.  Models left their contracts with the agency, and models were reluctant to enter in to contracts with Cross-Complainant Mark Schechter.

Cross-Complainant Mark Schechter suffered economic damages when models breached their talent agency contracts or refused to renew their contracts.  These damages included the booking fees as well agency fees for each booking.

TRPWL readers will no doubt immediately recognize the identity of the gossip blogger puppet to whom Shy has apparently provided information fairly regularly.

Here are the relevant sections of the Asset Purchase Agreement:

Note the language of Paragraph 9.1: “neither the seller nor Mrs. Liberboim shall solicit, negotiate or enter into any contract or agreement; commit any act or omission; or work with any third party or model in any matter whatsoever which would cause the Purchaser any prejudice during the licensing term or at any time after the purchase of the assets contemplated herein.”

According to Schechter’s Cross-Complaint, Blumberg/Love and Liberboim

breached the agreement by violating the terms of Paragraph 9.1 by committing acts and omissions which caused [Schechter] prejudice….  Specifically, [Blumberg and Liberboim] provided confidential information and false information to an adult industry gossip blogger who then posted said information.

As for Section 10, Schechter’s Cross-Complaint states that Blumberg/Love and Liberboim

breached the agreement by violating the terms of Paragraph 10.1 by engaging in management of an adult talent agency [The VIP Connect], which caused Cross-Complainant damages.

Here are the relevant sections of the Consulting Services Agreement:

Paragraph 6.4 makes it crystal clear that Blumberg/Love is the Consultant referenced in the agreement’s Non Competition Clause (Section 6).

And Paragraph 7.1 mirrors the language in the Asset Transfer Agreement, stating:

During the term of this Agreement and following the fulfillment of the consulting services, the Consultant and the representative agree not to circumvent or bypass any other party in any dealings or business transactions related to this Agreement or which the Consultant or the representative may reasonably know to be related to the Completion of this Agreement. Thusly, neither the Consultant nor the representative shall solicit, negotiate or enter into any contract or agreement; commit any act or omission; or work with any third party or model in any matter whatsoever which would cause the Client any prejudice during the licensing term or at any time after the purchase of the assets or the fulfillment of the consulting services are complete. [emphasis added]

Schechter also alleges that between October 2012 and September 2013, Blumberg/Love breached the Consulting Services Agreement

by violating the terms of Paragraph 5.1.2 by repeatedly disparaging Cross-Complainant MARK SCHECHTER, making statements such as “Mark doesn’t know what he’s doing,” and “Mark will fail.” SHEELAGH BLUMBERG made these statements to prospective clients, present clients, producers, directors, and adult industry profession[al]s. Paragraph 5.1.2 provides: “The Consultant represents and warrants in favor of the Client the following: it shall endeavor to ensure the reputation and relationships the agency and the Consultant have built over the years is kept up to date, in good standing, and at the same high level throughout the period wherein Services are provided.”

Lastly, in his Cross-Complaint, Schechter also claims that the couple’s

acts and practices as detailed above constitute acts of unfair competition. [Blumberg/Love and Liberboim] have engaged in an unlawful, unfair or fraudulent business act and/or practice within the meaning of California Business and Professions Code §17200.  These business practices violated numerous provisions of the law…

Through the above-described conduct, [Blumberg and Liberboim] have engaged in an unfair business act or practice in that the acts described above had a tendency and likelihood to deceive[] adult industry models who were either under contract with [Schechter] or were considering entering into agreements with [Schechter].  Additionally, the conduct deceived members of the adult film industry community.

As for Schechter’s Answer to Shy Love’s complaint claiming Defamation, his position boils down to this:

The complaint and each of its causes of action are barred because:

1) all statements made were truthful and accurate, and/or statements of opinion, and/or covered under the doctrine of qualified privilege, and were not made with malice;

2) the Statute of Limitations (one year in the state of California) has run;

3) as TRPWL examined here, Shy Love is a “limited purpose public figure” as she is an adult film performer, regularly publicizes herself and her expertise in the adult film industry, and holds herself out as a leader in the adult business;

4) Shy Love has filed the complaint with “unclean hands“, and is in some manner responsible for the alleged damages within her complaint ,and should therefore be estopped from obtaining any relief by virtue of this action; and

5) Shy Love failed to mitigate her alleged damages, nor does her complaint properly state a claim for Special Damages.

Schechter’s co-defendant in Blumberg/Love’s poorly drafted defamation action, adult director Barrett Blade, indicates he intends to file his Answer this week.

I personally feel this case will get really interesting when the subpoenas and demands for discovery start flying.

Sure hope we get that info 😉

Shy Love Sued — Mark Schechter’s Cross-Complaint

Shy Love’s “Self-Prepared” 2011 ATMLA Tax Returns

TRPWL has reached out to both Mark Schechter and Shy Love for comment on this story

UPDATE:

Mark Schechter has issued the following statement regarding the lawsuit:

By nature, I am not a litigious person, but after enduring over 2 years of relentless attempts to cause financial and personal harm to my business and my personal life, and ironically having to answer to the recent ridiculous and frivolous lawsuit against me, it was time to move forward with legal action.  Prior to being served with the recent ludicrous allegations, I was resolved with not pursuing my legal rights and simply continuing to run my business as I have, and enjoying the results of my efforts growing ATMLA to the status that it maintains today, being one of the top adult talent agency’s in the industry.  It’s unfortunate that Shy chose not to take advantage of this opportunity to sell her agency for more than it was worth, and be able to open another agency in violation of an agreement and do so without any recourse.  Instead, she has chosen to open up the lid to “Pandora’s Box”.

I have been an avid poker player for 30 years, and every so often you’re dealt a hand where you not only have the best cards, often referred to as “Holding the Nuts”, but your opponent bets and raises into you “All in”, and I simply respond with…. “I call”.

“Pandora’s Box” indeed.