REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT FOR A PERMANENT INJUNCTION
Defendant OWC Pharmaceutical Research Corp. (“OWCP”) has no valid factual or legal basis to oppose the motion for summary judgment of Plaintiff Discover Growth Fund, LLC (“Discover”). OWCP therefore seeks to effectively defeat the motion by refusing to oppose it, and thereby continue to deny Discover the relief to which it is unquestionably entitled. On August 25, 2021, instead of filing a normal opposition to Discover‘s motion, OWCP‘s counsel filed a two-page letter claiming that OWCP cannot properly oppose the motion, and—even though such issue is nowhere near ripe—that it purportedly cannot comply with the proposed Permanent Injunction if issued. Because OWCP’s counsel does not have personal knowledge of most of the facts contained in the letter, this Court should not consider or rely upon it in deciding Discover’s motion. Rather, the entirety of Discover’s statement of undisputed facts should be deemed admitted because OWCP did not oppose Discover’s motion. Accordingly, Discover’s motion for summary judgment should be granted because it is undisputed that the parties’ agreements require OWCP to file public reports to be listed on the OTCQB market. It is further undisputed that OWCP’s defenses to avoid complying with its contractual requirements are without merit—the undisputed facts establish that Discover has not engaged in securities fraud and has not acted as a dealer. OWCP’s most recent letter essentially concedes that the corporation has no facts to support these claims. Yet OWCP’s former directors repeated these false allegations to the corporation’s stock transfer agent, Edgar filing service, accountants and auditors, thus preventing Discover from obtaining necessary cooperation from anyone to cause its shares to be issued. OWCP now asks the Court not to rule on these baseless claims, leaving Discover with no court order or judgment to point to in order to vindicate itself. The practical result of leaving these accusations hanging is that Discover will be presumed potentially guilty until proven innocent, and will remain unable to move forward with anything.
The Court may recall that, in an attempt to oppose the preliminary injunction early in the case, OWCP claimed that its former director would resign rather than comply with the order. The Court properly disregarded this, since it is the corporate entity that is required to comply, not any individual alone. OWCP now makes the same threat again, saying that another director will resign rather than comply. But that is not a valid legal defense. If a final judgment is entered in this case, and the director of OWCP resigns, and no successor is appointed, Discover will have available to it all applicable remedies under Delaware law. If necessary, Discover can seek further relief in the Delaware Court of Chancery. With a clear ruling from this Court—as to OWCP’s obligations and as to the meritless nature of its accusations that Discover has engaged in securities law violations and is an unregistered dealer—the Delaware Chancery Court will no doubt be quick to act. However, if these meritless accusations are allowed to linger, obtaining relief in Delaware will be much more difficult. A Delaware state court is not going to risk stepping on the toes of a New York federal court. Which is, no doubt, what OWCP is counting on.
ARGUMENT
Summary judgment is appropriate when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed R. Civ. P. 56(a). “It is the movant’s burden to initially demonstrate the absence of material facts that preclude summary judgment.” Carroll v. Krumpter, 397 F. Supp. 3d 234, 243 (E.D.N.Y. 2019) (citing Huminski v. Corsones, 396 F.3d 53, 69 (2d Cir. 2005)). “If the moving party meets the initial burden, the nonmoving party must present specific facts that demonstrate there is a genuine issue that should be left for the fact-finder to decide.” Carroll, 397 F. Supp. 3d at 243 (citing Davis v. New York, 316 F.3d 93, 100 (2d Cir. 2002)). Case 1:20-cv-02857-AKH Document 36 Filed 08/27/21 Page 3 of 7
3 2914005.2 116414-103161 When, however, the adverse party “fails to properly support an assertion of fact or fails to properly address another party’s assertion of fact as required by Rule 56(c)[,]” the court may “grant summary judgment if the motion and supporting materials--including the facts considered undisputed--show that the movant is entitled to it.” Fed R. Civ. P. 56(e)(3). “In an unopposed motion for summary judgment, plaintiff’s recitation of the facts is assumed to be true.” Universal TV Distribution Holdings LLC v. Walton, No. 03 CIV. 9133 (GBD), 2004 WL 2848528, at *2 (S.D.N.Y. Dec. 9, 2004) (citations omitted); see Local Civil Rule 56.1(c) (“[e]ach numbered paragraph in the statement of material facts set forth in the statement required to be served by the moving party will be deemed to be admitted for purposes of the motion unless specifically controverted by a correspondingly numbered paragraph in the statement required to be served by the opposing party.”). Further, pursuant to Rule 56(c)(4), the adverse party “asserting that a fact cannot be or is genuinely disputed must support the assertion by [inter alia,] . . . [a]n affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated.” I.OWCP’s August 25, 2021 Letter Is Not Entitled To Any Weight On July 23, 2021, Discover moved for summary judgment requesting that the Court issue a permanent injunction against defendant OWCP, requiring it to become and remain current in its public filing obligations under the Securities Exchange Act, and take all actions necessary to timely and fully meet all of its obligations under the SPA and RRA. [ECF 27.] Pursuant to the parties’ stipulation, the parties agreed that OWCP file its opposition on August 25, 2021. [ECF 34.] However, on that date, OWCP’s counsel filed a two-page letter to “advise the Court” of certain purported events in response to Discovery’s motion for summary judgment (the “Letter”). [ECF 35.] The Letter should not be entitled to any weight because much of its contents are not based upon personal knowledge. Clerical Apparel of New York, Inc. v. Valley Forge Ins. Co., 209 F.R.D. 316, 319–20 (E.D.N.Y. 2002) (quoting Wyler v. United States, 725 F.2d 156, 160 (2d Cir.1983)); see also Rule 56(c)(4). Indeed, not only is defense counsel without personal knowledge of certain facts, but the Letter makes clear that so is OWCP management, stating that “Mr. Kugelman [and his counsel are] unfamiliar with much of the factual background that is relevant to Discover’s motion.” [ECF 35 at 1.] Accordingly, the main arguments contained in the Letter should be disregarded, including, inter alia: •Neither Mr. Kugelman nor OWCP’s counsel have knowledge concerning OWCP’s statements that the parties’ agreements are voidable because Discover allegedly engaged in securities fraud and acted as an unregistered dealer; •OWCP made reasonable efforts to comply with the Order by, inter alia, undertaking efforts to convene a stockholder meeting; and •OWCP will not be able to comply with the proposed injunction due to alleged financial difficulties1 and claimed resignation of Mr. Kugelman.2OWCP has failed to file any meaningful opposition to Discover’s motion for summary judgment and most importantly, it failed to file a Local Civil Rule 56.1 Counter Statement. As such, “the Court must assume that [OWCP] admits the material facts as stated in [Discover’s] 1In an attempt to avoid its contractual obligations, OWCP argues that “the reality of OWCP’s ... lack of funding, make full compliance with the proposed injunction virtually impossible.” [ECF 35 at 2.] The Court has already found that argument unavailing. Specifically, the Court granted Discover’s Preliminary Injunction [ECF 18], requiring OWCP to comply with its filing requirements, even though OWCP raised its purported financial problems in its Opposition to Plaintiff’s Motion for TRO and Preliminary Injunction. [ECF 12 at 3.] 2OWCP argues that its sole director, Mr. Kugelman, “has informed [OWCP’s counsel] that he will be resigning as director of OWCP.” As previously discussed, this statement is inadmissible evidence and cannot be relied upon in deciding Discover’s motion for summary judgment. But in any event, Mr. Kugelman’s purported resignation is reminiscent of OWCP’s former management who suggested that entry of the preliminary injunction could result in their resignations. [ECF 17 at 2.] As it turns out, far from resigning, OWCP’s former director, Ziv Turner, continued to serve in that position for nearly a year after the entry of the preliminary injunction and fought the February 2021 appointment of Mr. Kugelman as his replacement until April 2021.
Local Civil Rule 56.1 Statement.” Clerical Apparel of New York, Inc., 209 F.R.D. at 320. II.Based on the Record, Discover’s Motion Should Be Granted The Court should grant Discover’s motion for summary judgment because Discover has established that there are no material issues of fact and OWCP has conceded Discover’s undisputed statement of facts. Specifically, it is undisputed that the SPA and RRA expressly require OWCP to file public reports and to not take the steps that it has to cause its Common Stock to be delisted from the OTCQB market. [ECF 27 at 7.] Defendant does not contest that it has breached its clear contractual obligations. [ECF 35 at 2] It is also undisputed that OWCP’s defenses are without merit—Discover has not engaged in securities fraud and has not acted as an unregistered dealer. [ECF 27at 8-12.] CONCLUSION Based on the Court’s review of the undisputed facts and the case law submitted in Discover’s motion, Discover respectfully requests that the Court grant summary judgment and enter an order substantially in the form of the Proposed Order that Discover previously submitted [ECF 31]. Finally, because OWCP and its former directors have repeated their baseless accusations to the corporation’s stock transfer agent, Edgar filing agent, accountants and auditors, it is imperative that the Court’s order should further hold that the claims that Discover engaged in securities fraud and operated as an unregistered dealer are not supported by the evidence, and are not a valid ground to preclude Discover from obtaining and selling its stock.
Dated: New York, New York August 27, 2021
GIBBONS P.C. One Pennsylvania Plaza, 37th Floor New York, New York 10119-3701 (212) 613-2000
By: Paul A. Saso Paul A. Saso Attorneys for Plaintiff Discover Growth Fund LLCCase 1:20-cv-02857-AKH
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