FILED: NEW YORK COUNTY CLERK 01/22/ :11 PM INDEX NO /2016 NYSCEF DOC. NO. 17 RECEIVED NYSCEF: 01/22/2018

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2 4. Venue in this district is proper pursuant to CPLR 503 and 509. PAR TIES AND IMPORTANT ENTITY 5. Plaintiff Paragon provides a wide array of financial, budgetary, program design, staffing design, and grant proposal services to government agencies and nonprofit organizations, i.e., LSSNY. 6. Defendant LSSNY is engaged in child welfare programs in New York. One such program is for the development and management for early care and education services, not unlike the Head Start program. 7. The New York City Administration for Children's Services ("ACS'') is a City agency that protects and promotes safety and well-being of New York City's children and families by providing child welfare, juvenile justice, and early care and education services. 8. In child welfare. ACS contracts with private nonprofit organizations to support and stabilize families at risk of a crisis through preventive services, and provides foster care services for children notable to safely remain at home. FACTS Contract Dispute 9. Generally, a Request for Proposal ("RFP") is a solicitation for bids, when an agency such as ACS announces that funding is available for a particular project or program, and companies can place bids for the project's completion. The RFP outlines the bidding process and contract terms, and provides guidance on how the bid should be formatted and 2 3 of 9

3 presented. A RFP is typically open to a wide range of bidders, creating open competition between companies looking for work. 10. In early 2011, ACS issued RFP 06811P0012A for development and management of early care and education services ("EarlyLearn"). The EarlyLearn RFP was an integrated early education program consisting of federal Head Start, state and New York City funding. 11. LSSNY submitted a bid for EarlyLeam. LSSNY, however, had no prior experience in operating these types of programs. 12. On July 1, 2011, LSSNY and Paragon signed an agreement for Paragon to provide services in connection with LSSNY's bid ("First Agreement"). 13. The services Paragon was to provide included: review of the RFP requirements and LSSNY finances; provide input on program design and staffing; evaluate and recommend funding opportunities; prepare program budgets; review draft proposals; and assist in any other way needed to win proposals. Once funding was secured, Paragon assisted in implementing the program and instituting management processes. 14. Under the First Agreement, Paragon was to receive a payment of $10,000 by December 31, Additional fees to Paragon were contingent upon receipt of funding for the programs. 15. On June 18, 2012, when LSSNY secured a contract from ACS for "Earlyl.earn" programs as a result of Paragon's services from the "First Agreement," Paragon and LSSNY signed a revised, superseding agreement for post award services ("Second Agreement"), pursuant to which, Paragon would provide services to help run and manage the EarlyLearn programs. 3 4 of 9

4 Pursuant to the Second Agreement, LSSNY, agreed to pay Paragon 2.67% of monthly revenue from all Early Learn programs, with the exception of universal pre-k programs. 16. On July 18, 2012, Paragon began performing services under the Second Agreement and LSSNY, began making its contractual payments without objection. 17. On January 30, 2014, LSSNY experienced a financial crisis as a result of "giveback" requirements after two audit findings unrelated to the "EarlyLeam" program. In January 2014, LSSNY fell two months behind in their contractual payment obligations to Paragon. 18. In February 2014, Paragon initially reduced the hours of its employee Bruce Hershfield, who was assigned to the LSSNY Agreements and ultimately was required to terminate his services because of LSSNY' s non-payment of services performed according to the Agreements. 19. In April 2014, Paragon and LSSNY agreed to revisions of the Second Agreement as follows: Due to the changing needs of LSSNY, Paragon will focus its services on financial management services. Paragon offered LSSNY a 33% discount on contractual payments retroactively from October 1, 2013, conditioned on LSSNY making timely payments. 20. Paragon's offer of a discount was based on Chief Executive Officer Ron Drews' representation that the management staff of LSSNY had accepted a salary cut between 10% to 18% in response to LS SNY' s financial crisis. 4 5 of 9

5 21. Another condition of Paragon's 33% discount was that LSSNY would give payments owed to Paragon the same priority as that of employees' paychecks; payments to Paragon could be delayed only if employees' paychecks were delayed. 22. On behalf of LSSNY, Ron Drews agreed to the conditions in communications between him and Paragon. 23. On April 14, 2014, Paragon sent LSSNY a contract to replace the Second Agreement dated June 18, Despite agreement by of the revised scope of services, and terms and conditions including the 33% discount, LSSNY did not sign the revised contract. 25. Thereafter, until October 2014, LSSNY made payments to Paragon based on the 33% discount by making estimated payments and/or payments based on revenue numbers from their monthly filings to ACS. 26. In October 2014, LSSNY stopped making any payments to Paragon and stopped providing revenue numbers on which Paragon's invoices were to be based, as required by the "Second Agreement." 27. From November 2014 through March 2015, Paragon and members of the LSSNY Board of Directors Don Thorsen and Zoe Jasper sought to resolve the contract dispute between Paragon and LSSNY. 28. On April 13, 2015, Zoe Jasper sent an with an estimate of $273,000 owed Paragon based on revenue numbers, which was forwarded separately to Paragon by LSSNY CFO Tamer Seoud by in a spreadsheet. 5 6 of 9

6 First Cause of Action (Breach of Contract) 29. Plaintiff repeats and re-alleges each and every allegation contained in paragraphs 1 through 28 of this Complaint as though fully set forth herein. 30. Based upon the foregoing, LSSNY has breached the terms of each and every Agreement with Paragon. 31. As a direct, proximate and foreseeable result of LSSNY' s breach of the Agreements, Paragon has suffered damages in an amount to be determined at trial but in any event in excess of$ 750,000. Second Cause of Action (Unjust Enrichment) 32. Plaintiff repeats and re-alleges each and every allegation contained in paragraphs 1 through 28 of this Complaint as though fully set forth herein. 33. LSSNY has received the benefit of Paragon's efforts, advice, and consulting and the benefit of Plaintiffs delay in taking legal action against LSSNY as a result of the Agreements and LSSSNY's promises to make payments to Paragon. 34. In equity and good conscience, LSSNY should have not obtained these benefits without paying for them in full. LSSNY should also have allowed Paragon to provide services starting April of 9

7 35. As a direct, proximate and foreseeable result, LSSNY has been unjust enriched in an amount to be determined at trial but in any event in excess of$ 750,000. Third Cause of Action (Quantum Meruit) 36. Plaintiff repeats and re-alleges each and every allegation contained in paragraphs 1 through 28 of this Complaint as though fully set forth herein. 37. Plaintiff has fully performed its obligations under each and every Agreement with LSSNY. 38. LSSNY accepted and utilized these services knowing that Plaintiff expected to be paid by LSSNY. 39. As a result, LSSNY is liable to Plaintiff for the fair and reasonable value of the services it provided to LSSNY, in an amount to be proven at trial in excess of $750,000. Fourth Cause of Action (Account Stated) 40. Plaintiff repeats and re-alleges each and every allegation contained in paragraphs 1 through 28 of this Complaint as though fully set forth herein. 41. Starting in November 2012, LSSNY, accepted the payment terms of the Second Agreement with Paragon without objection, by regularly making payments under that Agreement's terms until April 2014, and then making regular reduced payments from April 2014 through October of 9

8 42. As a result, an account has been duly stated between Paragon and LSSNY, upon which LSSNY owes to Paragon an amount to be proven at trial, no less than $750,000. WHEREFORE, Plaintiff seeks judgment against Defendant as follows: 43. A Judgment against defendant LSSNY in an amount to be proven at trial, but not less than $ 750,000, plus interest, costs, and attorneys' fees; and 44. Granting such other and further relief as the Court deems just and proper. Dated: New York, New York July 22, 2016 By: SADOWSKI KATZ LLP 11 Broadway, Suite 615 New York, New York Telephone: Facsimile: rsadowski@sadowskikatz.com Attorneys for Plaintiff 8 9 of 9