LOS ANGELES — Rascal Video on Tuesday filed suit against Topco Sales' past and current operators, claiming the sex toy company breached its contract over unpaid royalties and continues to sell its products.
The federal lawsuit has its roots in Topco's move in July to make a general assignment for the benefit of creditors to pay off bills to avert Chapter 7 bankruptcy.
At the time Topco officials said all “inventory, equipment and means of production, packaging and shipping, as well as all trademarks, unexpired licenses and other intellectual property, including the Topco name and other business and brand names” were sold to World Sexy Media Investment LLC (WSMI).
In the suit filed this week, Los Angeles-based Rascal Video — which owns and operates Channel 1 Releasing, the Rascal Video brand and Live and Raw, as well as the Chi Chi LaRue trade name — said that after it learned that Topco paid off creditors through general assignment, it also found out that WSMI "is owned, at least in part, by the owners of the old Topco."
Rascal Video that it didn't receive formal notice of the assignment and never received a final statement of sales and inventory as specified in its contract with Chatsworth, Calif.-based Topco, which was founded in 1973.
Because of the deficiencies, Rascal Video deemed the contract terminated. But now, according to the suit, WSMI plans on continuing with the deal, even though Rascal Video declared it a goner.
"[WSMI] has announced that it intends and has continued to manufacture and distribute, distribute, sell and market adult products internationally under the Rascal marks despite termination of the license agreement," Rascal Video said in the suit.
Further, Rascal Video alleges in the suit that it lost leverage in collecting funds it was owed as a result of Topco's decision to choose general assignment over Chapter 7 and allowing an assignee to sell off the company to its old operators.
"New Topco conspired with and aided and abetted old Topco's fraud in order to obtain the assets of old Topco at less than their fair value in order to defraud and hinder the creditors of old Topco," the suit said.
Past and current Topco CEO Scott Tucker, who declined comment to XBIZ over the suit, has denied any obligation to pay Rascal Video's royalties prior to the general assignment, according to the suit.
As a result, Rascal Video has asked the court to void general assignment and also has requested that the new Topco and Tucker be restrained from further transfers of old Topco assets. It also has asked for a receiver be assigned to manage old Topco assets.
In addition, Rascal Video has asked for an accounting identifying all sales and inventory of its products manufactured and distributed by the olds and new Topco.
The complaint, which asks for unspecified and enhanced damages, makes additional charges that both the past and current Topco was distributing goods under the Dirk Yates mark without permission.
Rascal Video also asks for a declaration stating that its original Topco deal is not renewable because of an earlier default on payment obligations and an order requiring Topco's present ownership to destroy Rascal Video's body molds used in manufacturing sex toys.