Planet's Response to Inspar
Case 4:10-cv-05086 Document 6
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IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
(HOUSTON DIVISION)
KENT WEISENBERG and
INSPAR FIELD SERVICES, LLC,
Plaintiffs,
v.
PLANET RESOURCES RECOVERY,
INC. and KURT NEUBAUER,
Defendants.
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Civil Action No.4:10-cv-05086
DEFENDANTS’ MEMORANDUM IN SUPPORT OF
MOTION TO DISMISS FOR FAILURE TO JOIN A REQUIRED PARTY
MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM
AND MOTION TO DISMISS OR IN THE ALTERNATIVE STAYING PROCEEDINGS
AND COMPELLING MEDIATION
Defendants file this motion to dismiss Plaintiffs’ suit for failure to join a required party,
as authorized by Federal Rule of Civil Procedure 12(b)(7); to dismiss for failure to state a claim
upon which relief can be granted, as authorized by Federal Rule of Civil Procedure 12(b)(6); and
to dismiss or, in the alternative, to stay proceedings and compelling mediation.
Introduction
1.
(Inspar) (together, Plaintiffs). Defendants are Planet Resources Recovery, Inc. (Planet) and Kurt
Neubauer (Neubauer) (together, Defendants).
2.
Securities Law, Violation of Texas Securities Law, Rescission, Violation of 27.01 of the Texas
Business and Commerce Code, Common Law Fraud, and Fraud in the Inducement. Plaintiffs’
standing to file such claims seems tenuous at best.
3.
Purchase Agreement with the Planet. This Asset Purchase Agreement, which is attached hereto
Plaintiffs are Kent Weisenberg (Weisenberg) and Inspar Field Services, LLC
On December 20, 2010, Plaintiffs sued Defendants for Violation of Federal
On or about April 15, 2010, Inspar and Weisenberg entered into an Asset
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as Exhibit A, was for the purchase of certain assets of the Seller, Inspar and Weisenberg. In
exchange for these assets, Plaintiffs received nearly 18 million shares of stock, which was
distributed to the following individuals: Dudley Primeaux, Emil Pena, John Nixon, Barbara A.
Hoekstra Revocable Trust, Mark Alan Ragen, Sheila M. Wales, and Kent Weisenberg, plus
approximately $1 million in working capital contribution for its technology. (At the time of
contract negotiations the parties estimated $400,000 would be needed in working capital instead
of stating a figure in the letter of intent; Weisenberg requested the figure be removed because he
did not want there to be a ceiling on the working capital contribution.) The Asset Purchase
Agreement contains a mediation clause.
Agreement. Weisenberg received 15 million shares, but nearly three million additional shares
were given as consideration to the absent parties. Inspar and Weisenberg want their technology
back but want to keep a significant portion of what was paid for it. Since Inspar and Weisenberg
do not have all of what was paid for the technology, necessary parties are missing. Plaintiffs’
Original Complaint does not explain why they are entitled to rescission without returning the full
consideration. They want to keep almost 3 million shares for friends and relatives and over one
million dollars.
4.
Hoekstra Revocable Trust, Mark Alan Ragen, and Sheila M. Wales are required for the
resolution of Plaintiffs’ suit; therefore, the Court should dismiss Plaintiffs’ suit.
5.
$1,116,181.24 in working capital. Plaintiffs have not disclosed where the working capital was
distributed. These unknown parties are required for the resolution of Plaintiffs’ suit but cannot
be joined; therefore, the Court should dismiss Plaintiff’s suit. At least some of the money was
D’S RULE 12 MOTION
Now Inspar wants to rescind the Asset Purchase
The absent parties, Dudley Primeaux, Emil Pena, John Nixon, Barbara A.
Unknown Required Parties. Defendants provided Plaintiffs with approximately
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converted by Weisenberg. Weisenberg negotiated the price for a company vehicle purchased by
Planet, allegedly for $5500.00 but in reality for $3500.00 secretly pocketing the difference. It
will require extensive discovery to determine what portion of the million dollars of Planet funds
was misappropriately directed by Weisenberg.
6.
Defendants and Plaintiffs. If Inspar or Weisenberg relied on his representations, which is not
reflected in the Original Complaint, and if his representations to Inspar and/or Planet were not
true in all respects, which is also not reflected in the Original Complaint, such representations
were not authorized and as such Williams would be a necessary party. The relationship between
Williams, Inspar, and Weisenberg will have to be explained during discovery. The failure to
even name him in the original petition while citing pages of irrelevant opinions suggests a
concealed relationship.
7.
be granted. Therefore, the Court should dismiss Plaintiffs’ suit.
8.
made claims of criminal conduct they know are not true, and that they have no standing to raise.
They have claimed there are pending criminal complaints but have not referenced these in any
way to the give the defendants a clue as where they are or what they are. On the face the
allegations are naked personal attaches unrelated to any legitimate issue in the lawsuit. Their
purpose is not the litigation of grievances – they have no intention of going to trial. Their
purpose has been to use this Court to batter the stock of Planet, hoping to hide behind the
pleadings, and gain a negotiating advantage with an unfairly injured party.
Tim Williams (Williams) handled virtually all of the negotiations between
In their Original Complaint, Plaintiffs do not state a claim upon which relief can
Plaintiffs have filed a suit for rescission, which is defective on its face. They have
Argument
D’S RULE 12 MOTION
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Dismissal Under Fed. R. Civ. P. 12(b)(7)
9.
absent party is required for the suit to proceed, (2) that party cannot be joined, and (3) the suit
cannot proceed in equity and good conscience without that party. Fed. R. Civ. P. 19(a), (b).
10.
suit. Fed. R. Civ. P. 19(a)(1)(B). To proceed without the absent party would impair or impede
the absent party’s ability to protect its interests in the suit. Fed. R. Civ. P. 19(a)(1)(B)(i);
Dawavendewa v. Salt River Project Agric. Improvement & Power Dist., 276 F.3d 1150, 1155
(9th Cir. 2002). Plaintiffs are seeking to recover all the consideration provided in connection
with the sales transaction including but not limited to all of the intellectual property, patents,
trade secrets and the like that were transferred to Defendants. In exchange for the acquisition of
Inspar, Defendants distributed 15 million shares of common stock to Plaintiff Weisenberg and
nearly three million shares of common stock to the following: Dudley Primeaux, Emil Pena,
John Nixon, Barbara A. Hoekstra Revocable Trust, Mark Alan Ragen, and Sheila M. Wales.
The stock of the individuals cannot be ordered returned if the owners are not parties. In
connection with the Asset Purchase Agreement a letter of intent was signed.
provided over $1 million of working capital. When the working capital was provided it was
distributed to numerous unknown individuals and entities. These unknown entities must be
joined in order to protect their interest in the contract.
11.
seeking to have the contract rescinded must offer to give back all of the benefits he or she
received. Here, Plaintiffs are asking the Court to perform inequity on its face. If Plaintiffs want
to rescind the contract all beneficiaries to the contract are required parties.
D’S RULE 12 MOTION
The court should dismiss a suit for failure to join an absent party when (1) the
The absent party has a legally protected interest related to the subject matter of the
Defendants
When a party seeks rescission it is to be applied equally. In rescission the party
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12.
that “[a] non-party to a commercial contract ordinarily is not a necessary party to the
adjudication of the rights under the contract.” See ConnTech Dev. Co. v. Univ. of Conn. Educ.
Props., 102 F.3d 677, 682 (2d Cir.1996). The necessary parties to this contract did not have
signature authority but they do have an equitable right that must be protected and they received
fruits of the contract.
Persons or entities that possess disputed fruits of a contract must be joined under
Rule 19(a). No procedural principle is more deeply imbedded in the common law
than that, in an action to set aside a lease or a contract, all parties who may be
affected by the determination of the action are indispensable.
In re United States ex rel. Hall, 825 F. Supp. 1422, 1429-30 (D. Minn. 1993), aff’d, 27 F.3d 572
(8th Cir. 1994). Joinder is necessary in this case because without it complete relief cannot be
accorded among the already-named parties.
13.
be identified. Fed. R. Civ. P. 19(a)(1); see Hood ex rel. Miss. v. City of Memphis, 570 F.3d 625,
631-32 (5th Cir. 2009), cert. denied, 130 S. Ct. 1319 (2010); Glancy v. Taubman Ctrs., Inc., 373
F.3d 656, 672 (6th Cir. 2004); Kickapoo Tribe of Indians of Kickapoo Reservation in Kan. v.
Babbitt, 43 F.3d 1491, 1495-96 (D.C. Cir. 1995).
distributed to unknown individuals or entities. Until these individuals or entities are identified it
cannot be established whether or not the Court has subject-matter jurisdiction or personal
jurisdiction.
14.
provisions in the judgment, the shaping of relief, or any other measure available to the court.
Fed. R. Civ. P. 19(b)(2); Republic of Phillipines v. Pimental, 553 U.S. 851, 128 S. Ct. 2180,
2192 (2008); Schlumberger Indus., Inc. v. Nat’l Sur. Corp., 36 F.3d 1274, 1287-88 (4th Cir.
D’S RULE 12 MOTION
The general rule regarding a Rule 12(b)(7) motion when a contract is involved is
Some of the absent parties cannot be joined in the litigation because they cannot
The working capital contribution was
The prejudice cannot be lessened or avoided by the insertion of protective
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1994); Pit River Home & Agric. Co-op. Ass’n v. United States, 30 F.3d 1088, 1101 (9th Cir.
1994).
15.
P. 19(b)(3); Republic of the Phillipines, 128 S. Ct. at 2193; Schlumberger, 36 F.3d at 1287-88;
Pit River, 30 F.3d at 1101-02.
16.
remedy. Fed. R. Civ. P. 19(b)(4); Republic of the Phillipines, 128 S. Ct. at 2193; Schlumberger,
36 F.3d at 1287-88; see Pit River, 30 F.3d at 1102-03. Defendants are happy to mutually rescind
the contract; however, Defendants are not willing to give up any right to litigate the intentional
destruction of the fair market value of Planet’s stock and the loss of business opportunities
caused by the intentional, personal attacks by Weisenberg. These claims are included in the
Answer and Counterclaim.
Any judgment rendered without the absent party will be inadequate. Fed. R. Civ.
If the Court dismisses the suit for nonjoinder, Plaintiffs will still have an adequate
Dismissal Under Fed. R. Civ. P. 12(b)(6)
17.
relief can be granted if the complaint does not provide fair notice of the claim and does not state
factual allegations showing that the right to relief is plausible. See Ashcroft v. Iqbal, ___ U.S.
___, 129 S. Ct. 1937, 1949 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 & n.3
(2007). The plaintiffs have filed multiple claims that require particularity.
18.
securities law claim under the wrong statute—§ 78u-4(b)(2), instead of § 78j. Private Securities
Litigation Reform Act of 1995 (PSLRA), 15 U.S.C. § 78u-4, provides in pertinent part:
(b) Requirements for securities fraud actions
(1) Misleading statements and omissions
The Court has authority to dismiss a suit for failure to state a claim upon which
Plaintiffs’ federal securities law claims: Plaintiffs have brought their federal
D’S RULE 12 MOTION
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In any private action arising under this chapter in which the plaintiff alleges that
the defendant—
(A) made an untrue statement of a material fact; or
(B) omitted to state a material fact necessary in order to make the statements
made, in the light of the circumstances in which they were made, not misleading;
the complaint shall specify each statement alleged to have been misleading, the
reason or reasons why the statement is misleading, and, if an allegation
regarding the statement or omission is made on information and belief, the
complaint shall state with particularity all facts on which that belief is formed.
(2) Required state of mind
In any private action arising under this chapter in which the plaintiff may recover
money damages only on proof that the defendant acted with a particular state of
mind, the complaint shall, with respect to each act or omission alleged to violate
this chapter, state with particularity facts giving rise to a strong inference that the
defendant acted with the required state of mind.
15 U.S.C. § 78u-4(b)(1), (2) (emphasis added). Because the PSLRA does not give rise to a cause
of action, Plaintiffs’ federal securities law claims should be dismissed.
19.
commonly referred to as § 10(b) of the Securities Exchange Act, and its rule counterpart, which
is Rule 10b-5, codified at 17 C.F.R. § 240.10b-5. Section 10(b) generally prohibits deception in
connection with the purchase or sale of securities. Under the statute, it is unlawful “[t]o use or
employ, in connection with the purchase or sale of any security … any manipulative or deceptive
device or contrivance in contravention of such rules and regulations as the Commission may
prescribe as necessary or appropriate in the public interest or for the protection of investors.” 15
U.S.C. § 78j(b). Rule 10b-5 proscribes “mak[ing] any untrue statement of a material fact or to
omit to state a material fact necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading.” 17 C.F.R. § 240.10b-5.
20.
connection with the purchase or sale of securities, (1) a misstatement or an omission, (2) of a
material fact, (3) scienter, (4) reliance, (5) proximately causation, (6) injury. R2 Invs. LDC v.
D’S RULE 12 MOTION
The cause of action for a securities fraud action is stated under 15 U.S.C. § 78j,
In order to state a claim for fraud under section 78j, the plaintiff must allege, in
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Phillips, 401 F.3d 638, 641 (5th Cir. 2005). These elements must be pleaded with particularity.
15 U.S.C. § 78u-4(b)(1); see Flaherty v. Crumrine Preferred Income Fund, Inc., 565 F.3d 200,
206-07 (5th Cir. 2009) (stating that the heightened pleading requirement of Rule 9(b) of the
Federal Rules of Civil Procedure is incorporated into the pleading standard for federal securities
fraud claims). Further, the plaintiff must allege scienter. 15 U.S.C. § 78u-4(b)(2). Finally, the
plaintiff must allege an economic loss and loss causation in the complaint. Dura Pharms., Inc. v.
Broudo, 544 U.S. 336 (2005). Accordingly, the plaintiff must “specify the statements contended
to be fraudulent, identify the speaker, state when and where the statements were made, and
explain why the statements were fraudulent.” Id. at 207.
21.
defraud or that severe recklessness in which the danger of misleading buyers or sellers is either
known to the defendant or is so obvious that the defendant must have been aware of it.” R2 Invs.
LDC, 401 F.3d at 643. The inference of scienter must ultimately be “cogent and compelling,”
not merely “reasonable” or “permissible.” Flaherty, 565 F.3d at 208. Plaintiffs’ Original
Complaint lacks the required particularity and scienter requirements.
22.
arising under this chapter, the court shall, on the motion of any defendant, dismiss the complaint
if the requirements of paragraphs (1) and (2) are not met.” 15 U.S.C. § 78u-4(b)(3)(A). Because
the requirements of the PSLRA are not met in Plaintiffs’ Original Complaint, the Court should
dismiss the federal securities law cause of action.
23.
Securities Act, under which a claim is made in the Original Complaint, provides:
Scienter, in the securities fraud context, is “an intent to deceive, manipulate, or
The PSLRA explicitly provides for a motion to dismiss: “In any private action
Plaintiffs’ claims arising out of Texas Securities Act: The section of the Texas
D’S RULE 12 MOTION
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A person who offers or sells a security (whether or not the security or transaction
is exempt under Section 5 or 6 of this Act) by means of an untrue statement of a
material fact or an omission to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they are made, not
misleading, is liable to the person buying the security from him, who may sue
either at law or in equity for rescission, or for damages if the buyer no longer
owns the security. However, a person is not liable if he sustains the burden of
proof that either (a) the buyer knew of the untruth or omission or (b) he (the
offeror or seller) did not know, and in the exercise of reasonable care could not
have known, of the untruth or omission. The issuer of the security (other than a
government issuer identified in Section 5M) is not entitled to the defense in clause
(b) with respect to an untruth or omission (i) in a prospectus required in
connection with a registration statement under Section 7A, 7B, or 7C, or (ii) in a
writing prepared and delivered by the issuer in the sale of a security.
Tex. Civ. Rev. Stat. art. 581-33(A)(2). “Although intent or scienter is not an element of a claim
under article 581-33 for an untrue statement of an existing fact, … intent or scienter is an
element of a claim under article 581-33 for an untrue promise of future performance.” Dorsey v.
Portfolio Equities Inc., 540 F.3d 333, 344 n.5. (5th Cir. 2008). As a general matter,
to prevail under art. 581-33(A)(2), a plaintiff must show that the defendant
seller in offering or selling a security made an untrue statement of material fact or
an omission of material fact that was essential to make the statement not
misleading.
A
misrepresentation
or
omission
is
“material if there is a substantial likelihood that proper disclosure would have
been viewed by a reasonable investor as significantly altering the total mix of
information made available.… In other words, the issue is whether a reasonable
investor would consider the information important in deciding whether to invest.”
The investor/buyer has no duty to perform due diligence nor to discover the truth
by exercising ordinary care.
In re Enron Corp. Sec., 235 F. Supp. 2d 549, 567 (S.D. Tex. 2002). These elements must be
alleged with particularity. Dorsey, 540 F.3d at 344. “If the buyer still owns the securities at
issue, rescission is the sole remedy available; only if he has sold the securities, may he obtain
money damages.” In re Enron, 235 F. Supp. 2d at 567-68. See also Summers v. WellTech, Inc.,
935 S.W.2d 228, 231 (Tex. App.—1st Dist. [Houston] 1996) (“Money damages are available for
a buyer only when the buyer no longer owns the securities in question, whereas rescission is
D’S RULE 12 MOTION
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available to the buyer when the buyer still owns the stock.”). Thus, to the extent Plaintiffs seek
damages under the Texas Securities Act, their claim for damages must be dismissed; Plaintiffs
have not stated a claim under the Act, in any event, because their Complaint does not allege
statements of material fact.
24.
any false or misleading disclosures made by Defendant. Plaintiffs’ petition is full of opinions,
speculations, and false statements, without information as to the specific statements that were
relied upon. Without this information, Defendants cannot properly defend the allegations. Rule
9(b) of the Federal Rules of Civil Procedure requires that in all allegations of fraud, the
circumstances constituting the fraud must be stated with particularity. Plaintiffs have failed to
meet this requirement. The pleading must be sufficiently particular to serve the three goals of
Rule 9(b), which are (1) to provide a defendant with fair notice of the claims against him; (2) to
protect a defendant from harm to his reputation or goodwill by unfounded allegations of fraud;
and (3) to reduce the number of strike suits. See DiVittorio v. Equidyne Extractive Indus., Inc.,
822 F.2d 1242, 1247 (2d Cir. 1987); O'Brien v. Price Waterhouse, 740 F. Supp. 276, 279
(S.D.N.Y.1990), aff’d, 936 F.2d 674 (2d Cir. 1991).
Plaintiffs have also pleaded claims for fraud but have not specifically identified
Dismissal and Compelling Mediation
25.
(See ¶¶ 45-48 of Exhibit A, attached hereto.) There has been no mediation or attempt to mediate.
26.
and Defendants entered a contract for the sale of specific assets of Plaintiffs. The parties agreed
that “In the event a dispute arises out of or in connection with this Agreement, the Parties will
attempt to resolve the dispute through friendly consultation. If the dispute is not resolved within
D’S RULE 12 MOTION
Plaintiffs are suing under a contract that requires mediation prior to filing a suit.
Plaintiffs have violated the binding and enforceable mediation clause. Plaintiffs
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a reasonable period, then any or all outstanding issues between the parties relating to this
Agreement will be first submitted to a neutral, non-binding mediation.” (Id.) By signing the
contract both parties agreed to first mediate. There has been no attempt at mediation. Therefore,
the Court should dismiss the Original Complaint and issue an order compelling mediation. In the
alternative, the Court should stay the present proceedings pending mediation.
Conclusion
27.
order dismissing the Original Complaint in its entirety; or, in the alternative, if the Court
determines that the parties are necessary and can be served, ordering that the parties be identified
and joined; or, in the alternative, dismissing the Original Complaint and compelling mediation;
or, in the alternative, compelling mediation and staying the proceedings.
For the foregoing reasons Defendants respectfully requests this Court to enter an
Respectfully submitted on January 20, 2011,
MICHAEL LOUIS MINNS, P.L.C.
/s/ Ashley Blair Arnett
Michael Louis Minns
State Bar No. 14184300
Rain Levy Minns
State Bar No. 24034581
Ashley Blair Arnett
State Bar No. 24064833
9119 S. Gessner, Suite 1
Houston, Texas 77074
Telephone: (713) 777-0772
Telecopy: (713) 777-0453
Counsel for Defendants Plant Resource Recovery,
Inc. and Kurt Neubauer
D’S RULE 12 MOTION
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CERTIFICATE OF SERVICE
This is to certify that on this the 20th day of January 2011, a true and correct copy of the
above and foregoing instrument was served via e-filing upon all counsel of record.
/s/ Ashley Blair Arnett
Ashley Blair Arnett
D’S RULE 12 MOTION
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