Novation Holdings Inc. (NOHO)

[Hi_Lo]

Michael J. Gelmon (CEO of NOHO) FRAUD:

BREACH OF CONTRACT
UNJUST ENRICHMENT
BREACH OF FIDUCIARY DUTIES
FRAUD

This is how Micheal J. Gelmon runs his companies:

DELAWARE JOURNAL OF CORPORATE LAW

http://www.djcl.org/wp-content/uploads/2014/08/Unreported-Cases-Vol.2411.pdf

Leon G. Cairns, Gerald A. Cairns, and Stanley K. Mabbott (the "plaintiffs" or the "Cairns Group") filed this action against Michael J. Gelmon, Lewis Gelmon, Cory Gelmon, and Alvin D. Gelmon (the "Individual defendants" or the "Gelmon Group"). The plaintiffs claim that the Gelmon Group wrongfully caused the Cairns Group to lose their equity in the corporate defendant Instant Vision, Inc. ("Instant Vision"), a Delaware corporation formed by the Gelmon Group.

The Complaint alleges five Counts: (i) breach of contract; (ii) unjust enrichment; (iii) breach of fiduciary duties; (iv) fraud; and (v) violation of 8 Del. C. § 242.1 The Gelmon Group has moved to dismiss the Complaint on the grounds of lack of personal jurisdiction and for failure to state a claim upon which relief can be granted. Defendant Cory Gelmon has moved separately for a dismissal as to himself on the ground of ineffective service of process, and Instant Vision has moved to dismiss as to it for failure to state a claim upon which relief can be granted. This is the Opinion of the Court on those motions, which are denied except with respect to Cory Gelmon.

http://www.djcl.org/wp-content/uploads/2014/08/Unreported-Cases-Vol.2411.pdf

DELAWARE JOURNAL OF CORPORATE LAW

FACTS

The Cairns Group obtained from Morrison International, Inc.("Morrison") an exclusive license to develop in Canada a product known as "Instant Eyeglasses." Morrison then invited the Cairns Group to bid for the right to license the Instant Eyeglasses technology in the United States. To raise the necessary capital, the Cairns Group formed ajoint venture with the Gelmon Group and introduced the Gelmon Group to Morrison.

The Cairns Group and the Gelmon Group then entered into two letter agreements, the essential elements of which were that (i) the parties would form a corporation as a vehicle to acquire the United States license from Morrison, (ii) the parties would share equally in the equity of that corporation, and (iii) each group would have one director on the corporation's board of directors. On January 28, 1997, the Gelmon Group incorporated Instant Vision. It is claimed that contrary to their agreements, the Gelmon Group issued all of the shares to themselves and placed four of its members -- but only one member of the Cairns Group -- on Instant Vision's board of directors. On June 25, 1997, the Gelmon Group announced that it exclusively would handle the license transaction with Morrison, and also declared unilaterally its entitlement to a 10% finder's fee. The Gelmon Group also caused Instant Vision to amend its Certificate of Incorporation to increase its authorized common stock from 3000 to 10,000,000 shares, even though Leon Cairns, the director who represented the Cairns Group, was never informed of the charter amendment in advance of its approval. This action followed. After commencing this action, the plaintiffs served each member of the Gelmon Group under 10 Del. C. § 3104, Delaware's long-arm statute, and 10 Del. C. § 3114, Delaware's director-consent-to-service statute. The record reflects that no member of the Gelmon Group has ever been physically present, or ever conducted any business or performed any work relevant to the plaintiffs' claims in Delaware.

CONCLUSION

For the foregoing reasons, the Court denies the defendants' motions to dismiss, except that the claims against Cory Gelmon will be dismissed unless the plaintiffs are able to demonstrate, by the filing of appropriate proof within ten days of the date of this Opinion, that Mr. Gelmon was properly served in accordance with 10 Del. § 3104. IT IS SO ORDERED.