Inspar's Motion To Dismiss Planet's counterclaims.
The saga continues...
Case 4:10-cv-05086 Document 11 Filed in TXSD on 02/10/11
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
KENT WEISENBERG AND
INSPAR FIELD SERVICES, LLC
Plaintiffs
vs.
PLANET RESOURCE RECOVERY,
INC., KURT NEUBAUER
Defendants
CIVIL ACTION NO. 4:10-cv-05086
PLAINTIFFS/COUNTER DEFENDANTS' MOTION TO DISMISS
TO THE HONORABLE UNITED STATES DISTRICT COURT:
COMES NOW Plaintiffs/Counter-Defendants Kent Weisenberg and Inspar Field
Services, LLC ("Plaintiffs") and, pursuant to Federal Rules of Civil Procedure 8, 9(b) and
12(b)(6), file this Motion to Dismiss one or more of the counterclaims alleged by Defendants
Planet Resources Recovery, Inc. ("Planet") and Kurt Neubauer ("Neubauer") in their Original
Answer and Counterclaims (Docket No. 7). Plaintiffs would respectfully show as follows:
SUMMARY OF MOTION
This case centers on the Defendants' fraud in connection with a securities transaction.
Through their pleadings. Plaintiffs lay out the nature of Defendants' wrongful conduct in
painstaking detail and precision. In response. Defendants allege barebones, one-liner
counterclaims for fraud, fraud in the inducement, breach of fiduciary duty, and business
disparagement. Defendants' pleadings are conclusory and insufficient, with the alleged claims
being supported, if at all, by threadbare recitals of the elements of each claim. Such ineffective
pleading requires that the counterclaims be dismissed, in whole or in part.
PROCEDURAL HISTORY
1. On December 20, 2010, Plaintiffs'Tiled their Plaintiffs' Original Complaint,
which, in general, sets forth Defendants' fraud in connection with a securities transaction.
Plaintiffs amended their complaint on about February 9, 2011, and for the sake of Judicial
Economy, Plaintiffs incorporate herein the Statement of Facts set forth in Plaintiffs' live pleading
(Docket No. 9).
2. On January 21, 2011, Defendants filed their Defendants' Original Answer and
Counterclaims. (Docket No. 7).
3. Plaintiffs acknowledge that this Court should assume Defendants' alleged
material facts as true. Therefore, and for the sake of Judicial Economy, Plaintiffs incorporate
Paragraphs 53, 54, 55, and 56 of Defendants' Original Answer and Counterclaims (Docket No.
7) for the sole and single purpose of identifying the allegations (but not legal conclusions) of
Defendants in support of their various counterclaims against Plaintiffs. See Blackburn v. City of
Marshall, 42 F.3d 925, 931 (5* Cir. 1995) (stating that "conclusory allegations or legal
conclusions masquerading as factual conclusions Avill not suffice to prevent a motion to
dismiss."). By this incorporation. Plaintiffs do not admit to the allegations of Defendants, and
Plaintiffs reserve the right to contest same herein and at trial in accordance with the Federal
Rules of Civil Procedure.
4. Defendants' barebones and conclusory counterclaims for fraud, fraud in the
inducement, breach of fiduciary duty, and/or business disparagement/defamation should be
dismissed pursuant to Rule 12(b)(6).
STANDARD OF REVIEW ON RULE 12(b)(6) MOTION TO DISMISS
5. Federal Rule of Civil Procedure 12(b)(6) permits Plaintiffs as Counter-Defendants
to move to dismiss a counterclaim on the basis that the Defendants' failed to state a cognizable
claim upon which relief can be granted. Rule 12(b)(6) tests the legal sufficiency of the claims
advanced in the complaint. Grisham v. United States, 103 F.3d 24, 25-26 (5* Cir. 1997).
6. Under the 12(b)(6) standard, well-pleaded facts are viewed in the light most
favorable to the pleading party, but the pleader must allege facts that support the elements of the
cause of action in order to malce out a valid claim. City of Clinton v. Pilgrim's Pride Corp., No.
10-10039, 2010 U.S. App. LEXIS 25917, *7 (5th Cir. Tex. Dec. 21, 2010). Federal Rule of Civil
Procedure 8(a)(2) requires only "a short and plain statement of the claim showing that the
pleader is entitled to relief," in order to "give the defendant fair notice of what the . . . claim is
and the grounds upon which it rests." However, "[f]actual allegations must be enough to raise a
right of relief above the speculative level." Bell Atlantic Corp. v. Twombty, 550 U.S. 544, 127
S.Ct 1955,1965,167 L. Ed. 2d 929 (2007).
7. Courts cannot "accept as true ' [tjhreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements.'" Pilgrim's Pride Corp., 2010 U.S. App.
LEXIS 25917, *7 (quoting ^;y/zcrq^ v. Iqbal, 129 S.Ct. 1937, 1949,173 L. Ed. 2d 868 (2009)).
Defendants' Fraud and Fraud in the Inducement Counterclaims Should be Dismissed
8. Under Texas law, the elements of fraud are: (1) that a material representation was
made; (2) the representation was false; (3) when the representation was made, the person knew it
was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4)
the person made the representation with the intent that the other party should act upon it; (5) the
party acted in reliance on the representation; and (6) the party thereby suffered injury. Aquaplex,
Inc. V. Rancho La Valencia, Inc., 297 S.W.3d 768, 774 (Tex. 2009) (per curiam).
9. Defendants must allege "a plausible entitlement to relief on the fraud claims in
order to withstand this Rule 12(b)(6) motion. See Twombty, 111 S.Ct. at 1967-69. In addition,
fraud claims and fraud in the inducement claims must also meet the heightened pleading standard
of Rule 9(b), imder which 'a party must state with particularity the circumstances constituting
fraud.'" Pilgrim's Pride Corp., 2010 U.S. App. LEXIS 25917, *8 (quoting FED. R. CIV. P. 9(b)).
For these fraud claims, Rule 9(b) requires '"the who, what, when, where, and how' to be laid
out." Shandong Yinguang Chem. Indus. Joint Stock Co. v. Potter, 607 F.3d 1029, 1032 (5th Cir.
Tex. 2010) (quoting Benchmark Electronics, Inc. v. J.M. Huber Corp., 343 F.3d 719, 724 (5th
Cir. 2003).
10. Defendants allege the following conclusory, threadbare allegations of fraud:
a. Plaintiffs Inspar and Weisenberg made material misrepresentations including,
but not limited to, the following:
1. Projected Revenues Second Quarter (Attached as Exhibit "A")
2. Weisenberg assured Defendants that Inspar Field Technologies was
ready to "go to market".
b. Such representations were false when made, and Plaintiffs knew such
statements were false or made them recldessly without any knowledge of the
truth and as positive assertions.
c. The representations were made with the intention that they should be acted on
by Defendants.
d. Defendants were ignorant of their falsity.
e. Defendants had a right to rely on the representations.
f. The material misrepresentations made by the Plaintiff were reasonably relied
upon by Defendants to their detriment. Defendants are entitled to damages. 1
1 Through Defendants' Original Answer and Counterclaims (Docket No. 7 f 40), Defendants also allege a
practically identical fraud allegation in the form of an "Affirmative Defense". For the sake of Judicial Economy
(and to avoid any additional confusion caused by Defendants' pleading construction), Plaintiffs move to dismiss the
fraud claim set forth in Paragraph 40 on the same grounds as Plaintiff moves to dismiss the fraud claim set forth in
Paragraph 53.
(Docket No. 7 f^ 53-53.f.).
11. Defendants' also allege fraud in the inducement, which essentially mirrors
Defendants' fraud claim, although the inducement claim is even more bareboned than the fraud
claim (if that is possible). {See Docket No. 7 fi 54.a.-d.).
12. Plaintiffs refer to these two separate claims collectively as "fraud", and both
alleged fraud causes of action are wholly insufficient to state a claim.
13. First, Defendants fail to allege any material fact to support element 1 of a fraud
claim. A false statement is, by definition, material only '"if a reasonable person would attach
importance to and be induced to act on the information,"' and "statements that are so
inherently vague and ambiguous cannot be material." Pilgrim's Pride Corp., 2010 U.S. App.
LEXIS 25917, *8 (quoting Shandong Yinguang Chem. Indus. Joint Stock Co. v. Potter, 607 F.3d
1029, 1033 (5th Cir. 2010)) (emphasis added).
14. Here, Defendants allege that Plaintiffs misrepresented two facts: (1) "Projected
Revenues Second Quarter" written in a one-line email, and (2) that "the Inspar Field
Technologies were ready to 'go to market"'. (Docket No. 7 ^flf 53.a., 54.a.). "Projected"
generally means to estimate. Defendants completely fail to allege how a reasonable person
would attach importance to and be induced to act on the estimated information contained in such
a one-sentence email or by an alleged verbal statement that certain technologies are ready to "go
to market". Allegations of fact such as this axe inherently vague and wholly insufficient under
Rule 9(b) because they admit of a variety of interpretations. See Pilgrim's Pride Corp., 2010
U.S. App. LEXIS 25917, *9-10 (dismissing fraud under Rules 9(b) and 12(b)(6), and noting that
the statement that the defendant '"will not go off and leave you holding the bag,'" was
inherently vague).
15. As to the third element of a fraud cause of action. Defendants plead that "These
[two] representations were false." {See Docket No. 7 fl 53.b., 53.c, 54.c.). Such allegations are
meaningless absent any factual allegations concerning any then-existing intent to defraud
Defendants. Such pleadings are nothing more than conclusory statements of the elements of the
fraud causes of action. See Pilgrim's Pride Corp., 2010 U.S. App. LEXIS 25917, at *12; Dorsey
V. Portfolio Equities, Inc., 540 F.3d 333, 339 (5th Cir. 2008) (stating that "simple allegations that
defendants possess fraudulent intent will not satisfy Rule 9(b)").
16. Indeed, Defendants' conclusory, threadbare pleadings and elements contained in
Paragraphs 53.a.-f. and 54.a.-d. of Docket No. 7 absolutely do not lay out the required "who,
what, when, where, and how" of the required fraud elements and are without question
insufficient to survive this motion to dismiss under the standards of Rules 12(b)(6) and 9(b).
Breach of Fiduciary Duty Claims Should be Dismissed
17. The elements of a claim for breach of fiduciary duty are as follows: (1) a fiduciary
relationship between the plaintiff and defendant; (2) the defendant must have breached its
fiduciary duty to the plaintiff; and (3) the defendant's breach must result in injury to the plaintiff
or benefit to the defendant. See Punts v. Wilson, 137 S.W.3d 889, 891 (Tex. App.—^Texarkana
2004, no pet); City of Driscoll v. Saenz, Civil Action No. C-06-543, 2007 U.S. Dist. LEXIS
3690, * 11-12 (S.D. Tex. Jan. 17, 2007).
18. Generally, a claim for breach of fiduciary duty is covered by the notice pleading
standard in Rule 8(a), not the heightened pleading standard for fraud claims set forth in Rule
9(b). See City of Driscoll, Texas v. Saenz, No. C-06-543, 2007 U.S. Dist. LEXIS 3690, *5 (S.D.
Tex. Jan. 17, 2007). However, courts apply the particularity requirement of Rule 9(b) to breach
of fiduciary duty claims predicated on fraud. Brown v. Bilek, No. 09-20654, 2010 U.S. App.
LEXIS 23477, *9-10 (5th Cir. Tex. Nov. 12, 2010). Where a plaintiff contends that the
defendants breached their fiduciary duties by defrauding the plaintiff of money or business
opportunities, the heightened standard of Rule 9(b) applies. Ingalls v. Edgewater Private Equity
Fund III L.P., Ciyil Action No. H-05-1392, 2005 U.S. Dist. LEXIS 45592, *15 (S.D. Tex. Oct.
17, 2005).
19. In Docket No. 7, Paragraph 55, Defendants allege a counterclaim of breach of
fiduciary duty against both Plaintiffs. Defendants allege that Plaintiff Kent Weisenberg (1)
defrauded Defendants of money by failing to disclose a business owned by Plaintiff Weisenberg,
(2) defrauded Defendants of money by failing to disclose alleged facts of a sale of a truck, and
(3) allegedly defrauded Defendants of money by the alleged unauthorized use of a debit card.
(DocketNo. 7t1f55.a.-a.3.).
20. First, and foremost, the Defendants fail to identify the nature of the duty alleged
between the Plaintiffs and Defendants. To prove an action for breach of fiduciary duty, the
plaintiff must establish the defendant was the plaintiffs fiduciary. See Priddy v. Rawson, 282
S.W.3d 588, 599 (Tex. App. - Houston [14* Dist.] 2009, pet. denied). Only certain relationships
give rise to a formal fiduciary duty. See Environmental Procedures, Inc. v. Guidiy, 282 S.W.3d
602, 627 (Tex. App. - Houston [14* Dist.] 2009, pet. denied). And while informal fiduciary
duties can exist, those relationships must be based on past dealings and close relationships of
trust. See Crim Truck & Tractor Co. v. Navistar Int'l Transp., 823 S.W.2d 591, 594 (Tex. 1992).
The Defendants wholly fail to identify any viable source a formal or informal fiduciary
relationship. As such, the Defendants failed to state a valid claim upon which relief can be
granted.
21. Paragraphs 55.a.l. and 55.a.2. likely meet the pleading requirements of Rule 9(b)
with regard to the circumstances alleged. However, the alleged claim set forth in paragraph
55.a.3. fails to contain the pleadings necessary under any standard, much less the pleadings
necessary to show the "who, what, when, where, and how" with regard to the alleged "numerous
[debit card] charges" made allegedly without authorization.
22. Also, Defendants allege that "Plaintiffs" alleged conduct proximately caused
Defendants actual damages. (Docket No. 7 f 55.c). Yet, Defendants' allegations contain
absolutely no factual basis to support a claim that Plaintiff Inspar Field Services, LLC is
somehow liable for breach of fiduciary duty to Defendants.
23. Defendants' counterclaims for breach of fiduciary duty against Plaintiff
Weisenberg and/or Plaintiff Inspar Field Services, LLC should be dismissed, in whole or in part,
for failure to state a claim.
Business Disparagement/Defamation Claims Should be Dismissed
24. To state a claim for defamation under Texas law, a plaintiff must show that the
defendant (1) published a statement; (2) that was defamatory concerning the plaintiff; (3) while
acting with negligence, if the plaintiff was a private individual, regarding the truth of the
statement. WFAA-TV, Inc. v. McLemore, 978 S.W.2d 568, 571 (Tex. 1998), cert, denied, 526
U.S. 1051, 119 S.Ct. 1358, 143 L. Ed. 2d 519 (1999). The pleader must identify the alleged
defamatory statement and the speaker. Ameen v. Merck & Co., 226 F. App'x 363, 370 (5* Cir.
2007); Redden v. Smith & Nephew, Inc., 2010 U.S. Dist. LEXIS 4078 (N.D. Tex. Jan. 19, 2010);
LED Sign Co., LLC v. Hwee, H-08-1463, 2008 U.S. Dist. LEXIS 97851, *24-25 (S.D. Tex. Dec.
3, 2008).
25. A business disparagement claim is similar to a defamation action. Forbes Inc. v.
Granada Biosciences, Inc., 124 S.W.3d 167, 170 (Tex. 2003). The two claims differ in that
defamation actions serve to protect the personal reputation of an injured party, while a business
disparagement claim protects economic interests. Id. To establish a business disparagement
claim, a plaintiff must show that (1) the defendant published false and disparaging information
about the plaintiff, (2) with malice, (3) without privilege, (4) that resulted in special damages to
the plaintiff. Id.
26. In Docket No. 7, Paragraph 56, Defendants allege a conclusory counterclaim of
"business disparagement/defamation". Defendants fail to specifically identify any alleged
statement that forms the basis of these claims, and no speaker of any, if any, alleged actionable
statement is identified. {See Docket No. 7 ^ 56.a. - pleading that "The plaintiffs published
disparaging words to third parties."). Courts cannot "accept as true ' [tjhreadbare recitals of the
elements of a cause of action, supported by mere conclusory statements.'" Pilgrim's Pride
Corp., 2010 U.S. App. LEXIS 25917, at *7. Defendants allege that Plaintiff Weisenberg "falsely
represented that the Bolivia Mine projects for antimony are fictitious" (Docket No. 7 ^ 56.f), but
Defendants fail to allege where, when and to whom such statements were made to effectively
remove any privilege assigned to such statements to the extent this claim is based on Plaintiffs'
pleadings on file in this cause. Such conclusory allegation cannot withstand a Rule 12(b)(6)
challenge.
27. Additionally, the Defendants must show that any such statements were made
without privilege as a fundamental element of their claim. If the source of these statements was
in the Plaintiffs' Original Petition, it cannot be the subject of a slander, defamation, or liable
lawsuit. An absolute privilege applies to communications published during the course of a
judicial or quasi-judicial proceeding. See James v. Brown, 637 S.W.2d 914, 916-17 (Tex. 1982);
see also Perdue, Brackett, Flores, Utt & Burns v. Linebarger, Goggan, Blair, Sampson & Meeks,
L.L.P., 291 S.W.3d 448,451 (Tex. App. - San Antonio 1996, wit denied).
28. Moreover, Defendants wholly fail to plead any fact to implicate Plaintiff Inspar
Field Services, LLC for a business disparagement or defamation claim. Absolutely no proper
pleading exists to support this alleged claim.
29. Defendants' counterclaims for business disparagement/defamation against
Plaintijff Weisenberg and/or Plaintiff Inspar Field Services, LLC should be dismissed, in whole
or in part, for failing to state a claim.
PRAYER
WHEREFORE, PREMISES CONSIDERED, Plaintiffs/Counter-Defendants Kent
Weisenberg and Inspar Field Services, LLC request that the Court grant this Motion to Dismiss
in whole, or alternatively in part; that the Court dismiss Defendants' counterclaims as requested
herein; and that the Court grant Plaintiffs/Counter-Defendants such further relief to which they
are justly entitled.
Respectfully Submitted,
By:^^^^/ Tanya N. Garrison
ANDREW M. CAPLAN
State Bar No. 03776700
TANYA N. GARRISON
State Bar No. 24027180
Weycer, Kaplan, Pulaski & Zuber, P.C.
11 Greenway Plaza, Suite 1400
Houston, Texas 77046
Telephone: (713) 961-9045
Facsimile: (713) 961-5341
ATTORNEYS FOR PLAINTIFFS
CERTIFICATE OF SERVICE
The undersigned hereby certifies that a true and correct copy of the foregoing instrument
has been served through electronic transmission through the USDC ECP, on February 10, 2011.
A copy of this pleading was also forwarded to the following via certified mail:
Mr. Michael Minns
The Minns Law Firm
9119 S. Gessner Suite One
Houston, Texas 77074
s/Tanya N. Garrison
Tanya N. Garrison
AI
