Ok, here you go....Taub v. Arrayit lawsuit Complaint...still active as of today with pending Summary Judgment motion filed by Plaintiffs
IRA DANIEL TOKAYER, ESQ. (IT-4734)
Attorney for Plaintiffs
405 Lexington Avenue, 7 Floor th
New York, New York 10174
(212) 695-5250
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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REUBEN TAUB, IRWIN L. ZALCBERG : 15 Civ. 01366 (ALC)
and IRWIN ZALCBERG PROFIT SHARING
PLAN, :
Plaintiffs, :
- against - : COMPLAINT
ARRAYIT CORPORATION, RENE SCHENA, :
MARK SCHENA and TODD MARTINSKY,
:
Defendants.
:
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Plaintiffs, Reuben Taub, Irwin L. Zalcberg and the
Irwin Zalcberg Profit Sharing Plan, by their attorney, Ira Daniel
Tokayer, Esq., as and for their Complaint herein, allege as
follows:
THE PARTIES
1. Plaintiff Reuben Taub (“Taub”) is an individual
residing in New York, New York.
2. Plaintiff Irwin L. Zalcberg (“Zalcberg”) is an
individual residing in Chicago, Illinois.
3. Plaintiff Irwin Zalcberg Profit Sharing Plan (the
“Plan”) is a trust created under § 401 of the Internal Revenue
Code. Zalcberg is the Plan’s trustee and sole beneficiary.
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4. Upon information and belief, defendant Arrayit
Corporation (“Arrayit”) is a corporation organized and existing
under the laws of the State of Nevada with its principal place of
business in Sunnyvale, California. It is a publicly traded
company which trades under the stock symbol ARYC and, upon
information and belief, conducts business both nationally and
internationally.
5. Upon information and belief, defendant Rene Schena
(“Rene”) is an individual who resides in Sunnyvale, California,
is Chief Executive Officer of Arrayit and Chairman of Arrayit’s
Board of Directors.
6. Upon information and belief, defendant Mark Schena
(“Mark”) is an individual who resides in Sunnyvale, California,
is President of Arrayit and a member of Arrayit’s Board of
Directors. Rene and Mark are married to each other.
7. Upon information and belief, defendant Todd
Martinsky (“Todd”) is an individual who resides in Sunnyvale,
California, is Chief Technology Officer of Arrayit and a member
of Arrayit’s Board of Directors. Todd is Rene’s brother.
THIS ACTION
8. This action was commenced in the Supreme Court of
the State of New York, County of New York, and was removed by
defendants to this Court pursuant to 28 U.S.C. § 1332(a) on the
ground that the matter in controversy exceeds the sum or value of
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$75,000, exclusive of interest and costs, and is between citizens
of different States.
PLAINTIFFS’ INVESTMENT IN ARRAYIT
9. Upon information and belief, Arrayit is a life
sciences technologies company involved in developing microarray
technology, including diagnostic microarrays for the detection of
food pathogens in meat, fish, produce and other foods (the “Food
Safety Testing Products”) and treatable diseases states such as
pre-symptomatic ovarian cancer (“OvaDX”), among other products.
10. In the period approximately October 2013 through
November 2013, Taub invested approximately $900,000 in Arrayit
through a private placement offering and the open market.
11. In the period approximately May 2013 through
January 2014, Zalcberg and the Plan invested approximately
$1,000,000 in Arrayit through a private placement offering and
the open market.
DEFENDANTS’ OMISSIONS AND MISREPRESENTATIONS
12. Upon information and belief, defendants have
engaged in gross mismanagement, tax fraud and misfeasance in
connection with the operation of Arrayit.
13. Upon information and belief, from in or about
2005, Arrayit has failed to issue W-2s or 1099s to employees.
14. Upon information and belief, from in or about
2005,
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payroll taxes withheld from Arrayit employees and instead held
those funds for Arrayit’s use.
15. Upon information and belief, Arrayit’s failure to
pay the United States Treasury the funds withheld from Arrayit
employees constitutes wage theft and tax fraud.
16. Upon information and belief, board members such as
defendants who knew of these actions or learned of them but
failed to remedy them can be personally liable for 100% of the
tax liability and can face criminal prosecution, fines and
imprisonment.
17. Upon information and belief, defendants’ knowledge
of and/or failure to remedy Arrayit’s failure to issue W-2s or
1099s and/or remit payroll taxes has endangered the viability of
Arrayit.
18. Defendants did not disclose to Taub, Zalcberg or
the Plan Arrayit’s failure to properly issue W-2s or 1099s and/or
remit payroll taxes withheld from Arrayit employees.
19. In or about 2013, when Taub, Zalcberg and the Plan
invested in Arrayit, they were not aware of Arrayit’s failure to
properly issue W-2s or 1099s and/or remit payroll taxes withheld
from Arrayit employees.
20. In conference calls and in writing during the
period June or July 2013 to January 2014, to induce investment in
Arrayit, Mark and Rene repeatedly misrepresented to Taub,
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Zalcberg and the Plan that Arrayit owned 100% of the intellectual
property and all rights relating to OvaDX except for sales and
marketing rights which they were negotiating to re-acquire from
Avant Diagnostics Inc. (“Avant”) for a minimal amount of money.
21. In addition, in conference calls from June or July
2013 to January 2014, and an Executive Summary received by Taub,
Zalcberg and the Plan no later than approximately October 17,
2013, to induce investment in Arrayit, defendants misrepresented
that Arrayit’s estimated costs to develop OvaDX was $1,000,000,
later clarified to be $500,000, instead of Arrayit’s true
estimate for such costs of $2.1 to $3.1 million.
22. Furthermore, in a Private Placement Memorandum
received by Taub, Zalcberg and the Plan no later than on or about
October 17, 2013, to induce investment in Arrayit, defendants
misrepresented that the expected uses of the proceeds of the
private placement offering were for operating expenses when in
fact such proceeds were used to pay down prior debt.
23. At the time Taub, Zalcberg and the Plan invested
in Arrayit, they were not aware of Arrayit’s true interest in
OvaDX, Arrayit’s true estimated development costs for OvaDX and
Arrayit’s intent to misuse the proceeds of the private placement
offering.
24. Taub has suffered realized losses of over $360,000
in connection with his investment in Arrayit. Moreover, Taub
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still owns 1,000,000 shares and 1,000,000 warrants that have
substantially decreased in value since they were acquired.
25. Zalcberg and the Plan have suffered realized
losses of over $500,000 in connection with their investment in
Arrayit.
THE CONTRIBUTION AGREEMENT
26. On or about August 19, 2014, in exchange for
Taub’s discontinuance of a New York state action, and Taub and
Zalcberg’s assistance in funding the development and
commercialization of the Food Safety Testing Products and other
consideration, Arrayit entered into a Contribution Agreement (the
“Agreement”).
27. The signatories to the Agreement included Arrayit,
Rene (as CEO of Arrayit), Mark, Todd, Taub and Zalcberg.
28. Pursuant to the § 1.1 of the Agreement, Arrayit
agreed on November 14, 2014 (the “Closing Date”) to contribute
all assets relating to the Food Safety Testing Products to Array
Molecular Corp. (“AM”), except for certain patents which were to
be licensed to AM (“the “Assets”). AM is a company organized and
incorporated under the laws of the State of Delaware which is 76%
owned by Zalcberg or entities controlled by him.
29. Pursuant to the § 1.9(a) of the Agreement, Arrayit
agreed to double the amount of Arrayit shares that could be
purchased with each of the Outstanding Warrants set forth in
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Exhibit G of the Agreement, including 1,000,000 warrants held by
Taub, and modify the purchase price for the Arrayit shares
subject to such warrants from 45 cents to 10 cents.
30. Pursuant to § 1.9(a)(iii) of the Agreement,
Arrayit agreed within 30 days of the date of the Agreement to
file with the Securities and Exchange Commission (“SEC”) whatever
registration statement was required or available for the
underlying shares to be issued upon the exercise of the above
warrants so that they would be freely tradeable with no
restrictions.
31. Pursuant to § 1.9(a)(iii) of the Agreement,
Arrayit agreed to issue 500,000 additional warrants to any person
who paid the legal and other costs of such registration.
32. Pursuant to § 1.9(a)(iii) of the Agreement,
Arrayit agreed that any person who paid the legal and other costs
of the above registration would be reimbursed from the cash
proceeds obtained from the exercise of any of the above warrants.
33. Pursuant to § 1.9(c) of the Agreement, Arrayit
agreed, upon execution of the Agreement, to issue Zalcberg
5,000,000 shares of Arrayit common stock (1,000,000 of which,
with Arrayit’s knowledge, would belong to Taub) and a three-year
warrant for the right to purchase 7,000,000 additional shares
under certain terms and conditions.
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34. Pursuant to § 5.2 the Agreement, Arrayit agreed
that, for a period of six months from the date of the execution
of the Agreement, it would not issue or agree to issue more than
3,000,000 additional equity securities except under certain
conditions not applicable here.
DEFENDANTS’ BREACHES OF THE CONTRIBUTION AGREEMENT
35. Defendants have wilfully refused to abide by
virtually every material obligation of the Agreement on their
part to be performed, despite due demand.
36. Specifically, in breach thereof, defendants have:
(A) failed on the Closing Date or any time thereafter to
contribute the Assets to AM despite due demand while invoicing
Zalcberg $518,053.00 for, inter alia, liabilities which, pursuant
to § 1.5 of the Agreement, were to be assumed by AM only after
the closing of said contribution and which invoice, upon
information and belief, included charges for bogus expenses which
were not incurred and/or were paid by third parties;
(B) failed to double the amount of Arrayit shares that may be
purchased with the Outstanding Warrants and modify the purchase
price for the Arrayit shares subject to such warrants to 10
cents;
(C) failed to file a registration statement with the SEC for the
underlying shares to be issued upon the exercise of the above
warrants;
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(D) refused to issue 500,000 warrants to Taub to which he became
entitled upon funding of the costs of the registration for the
shares to be issued upon the exercise of the above warrants;
(E) failed to reimburse Taub from the cash proceeds received by
Arrayit from the exercise of warrants under § 1.9 of the
Agreement;
(F) refused to issue to Zalcberg 5,000,000 shares of Arrayit
common stock and 7,000,000 warrants for the right to purchase
7,000,000 additional shares;
(G) refused to issue 1,000,000 shares (of the 5,000,000 that were
promised to Zalcberg) to Taub;
(H) issued, during the six-month period following the date of the
execution of the Agreement, convertible debentures worth at least
$500,000, including a $78,000 debenture to LG Capital; and
(I) agreed, during the six-month period following the date of the
execution of the Agreement, to issue convertible debentures worth
an additional $1,000,000; among other things.
AS AND FOR A FIRST CLAIM
37. Plaintiffs repeat and reallege the allegations set
forth above as if fully set forth herein.
38. Plaintiffs and Arrayit entered into the Agreement.
39. Arrayit breached the Agreement.
40. Plaintiffs have performed all obligations of the
Agreement on their part to be performed.
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41. By reason of the foregoing, plaintiffs have been
damaged in an amount to be determined at trial, including but not
limited to no less than approximately $450,000 consisting of the
value of the shares and warrants Arrayit failed to issue to Taub;
approximately $1,500,000 consisting of the value of the shares
and warrants Arrayit failed to issue to Zalcberg; approximately
$25,000 for defendants’ failure to reimburse Taub from the cash
proceeds received by Arrayit from the exercise of warrants under
§ 1.9 of the Agreement; and approximately $250,000,000 consisting
of the value of Zalcberg’s percentage ownership of AM had the
Assets been contributed by Arrayit to AM on the Closing Date.
AS AND FOR A SECOND CLAIM
42. Plaintiffs repeat and reallege the allegations set
forth above as if fully set forth herein.
43. Upon information and belief, and according to
Arrayit’s latest-filed 10-Q (as of September 30, 2014), Arrayit’s
working capital deficits and accumulated deficit together with
the insufficiency of current available resources have created
substantial doubt about Arrayit’s ability to fund the Company’s
planned expenditures and continue as a going concern.
44. In addition, upon information and belief, Arrayit
owes suppliers for previous shipments of goods and is in arrears
on payments to its employees.
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45. Upon information and belief, Arrayit’s only
substantial liquid asset is approximately 39,350,000 shares of
Avant, 10,000,000 shares of which it intends as soon as legally
possible to dividend to shareholders to the exclusion of Taub and
Zalcberg.
46. Plaintiffs will suffer irreparable harm and have
no adequate remedy at law in the event Arrayit dividends
10,000,000 Avant shares to the exclusion of Taub and Zalcberg;
pledges Avant shares as collateral for additional funds as
necessary to continue in business; and/or irreversibly issues
freely-tradable stock to any person exercising debentures rights
which were improperly issued in violation of the Agreement.
47. Accordingly, plaintiffs are entitled to a receiver
and/or a temporary, preliminary and/or permanent injunction
enjoining and restraining Arrayit from dividending 10,000,000
Avant shares to the exclusion of Taub and Zalcberg; pledging
Avant shares as collateral; and/or issuing common stock to any
person exercising debentures rights issued in violation of the
Agreement, including LG Capital.
AS AND FOR A THIRD CLAIM
48. Plaintiffs repeat and reallege each of the
allegations above as if fully set forth herein.
49. Defendants, through omissions and
misrepresentations, induced plaintiffs to invest in Arrayit.
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50. The omissions were material, made with the
intention of deceiving plaintiffs and inducing them to invest in
Arrayit.
51. The misrepresentations were false, made by
defendants knowingly, in reckless disregard of the truth or
negligently, with the intention of deceiving plaintiffs and
inducing them to invest in Arrayit.
52. Plaintiffs were not aware of the material
information omitted or the falsity of the misrepresentations,
believed the misrepresentation to be true and relied upon, inter
alia, the misrepresentation in investing in Arrayit.
53. But for defendants’ omissions and
misrepresentations, plaintiffs would not have invested in
Arrayit.
54. Such omissions and misrepresentations were made by
defendants knowingly, wilfully, wantonly and/or recklessly and in
conscious disregard of plaintiffs’ rights and/or involved such a
high degree of moral turpitude such as to imply a criminal
indifference to civil obligations.
55. As a proximate result of the foregoing, plaintiffs
have suffered substantial losses, including but not limited to
actual losses by Taub of over approximately $360,000; actual
losses by Zalcberg and the Plan of over approximately $500,000;
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plus the decrease in value of the Arrayit shares and warrants
that Taub continue to own.
WHEREFORE, plaintiffs respectfully request that the
Court enter Judgment in favor of plaintiffs and against
defendants, jointly and severally: (I) for monetary damages in an
amount to be determined at trial, but in all events not less than
$252,835,000; (II) appointing a receiver and/or granting a
temporary, preliminary and/or permanent injunction enjoining and
restraining Arrayit from dividending 10,000,000 Avant shares to
the exclusion of Taub and Zalcberg, pledging Avant shares as
collateral and/or issuing common stock to any person exercising
debentures rights issued in violation of the Agreement, including
LG Capital; (III) punitive damages in an amount to be determined
at trial; (IV) the costs and disbursements of this action,
including a reasonable attorneys’ fee pursuant to the Agreement
and as permitted by law; and (V) for such other and further
relief as to this Court may seem just and proper.
Dated: New York, New York
March 30, 2015
_____________/s/__________________
IRA DANIEL TOKAYER, ESQ. (IT-4734)
Attorney for Plaintiffs
405 Lexington Avenue, 7 Floor th
New York, New York 10174
(212) 695-5250
