Oh wait, who was the CEO of Redhawk back then?
This case is about an unsuccessful business venture between two experienced businessmen. Plaintiff RedHawk Holdings Corporation ("RedHawk") is a Nevada corporation with its principal place of business in Lafayette Parish, Louisiana. See Rec. Doc. 1 at 1. Plaintiff Beechwood Properties, LLC ("Beechwood") is a Louisiana limited liability company with its principal place of business in Lafayette Parish, Louisiana. See id. G. Darcy Klug is the CFO and majority shareholder of both Plaintiffs. See Rec. Doc. 74-1 at 9. Defendant Daniel J. Schreiber is the former CEO and a former Director of RedHawk. See id. Defendant Schreiber is also the trustee and beneficial owner of at least some of the securities1 held by Defendant Schreiber Living Trust — DTD 2/08/95. See Rec. Doc. 76-1 at 1-2.
In March 2014, American Medical Distributors, Inc. ("AMD") entered into an Asset Purchase Agreement ("APA") with RedHawk. See Rec. Doc. 1 at 2. RedHawk agreed to issue AMD or its designees approximately half of RedHawk's shares. See id. at 2-3. In exchange, AMD agreed to pay RedHawk $60,000 and to assign RedHawk all of AMD's assets and property. See id. at 3. The principal asset was exclusive distribution rights of non-contact thermometers in North, Central, and South America. See Rec. Doc. 74-1 at 12.
The transaction, known as the AMD-RedHawk Transaction, was executed as provided in the APA. See Rec. Doc. 1 at 4. Plaintiff Beechwood and Defendants provided AMD $60,000; thereafter, AMD paid $60,000 to RedHawk and assigned RedHawk all of its assets including the distribution rights of the non-contact thermometers. See id. In exchange, RedHawk assigned the agreed-upon shares to four designees of AMD. See id. The four designees were Beechwood, Schreiber Trust, Howard Taylor, and Paul Rachmuth. See id.
All stemming from the executed transaction, Plaintiffs allege numerous fraudulent misrepresentations and omissions and contract breaches by Defendant Schreiber. See Rec. Doc. 74-1 at 9. There are three main allegations that give rise to their cause of action. First, Plaintiffs allege that Defendant, along with Paul Rachmuth who served as a counsel for AMD and Beechwood in the transaction, failed to disclose possible patent infringement litigation that significantly impaired the value of the distribution rights assigned to RedHawk. See Rec. Doc. 1 at 4. Second, Defendant Schreiber failed to uphold his agreement with Beechwood to split RedHawk's expenses on a 50/50 basis and contribute to other assets. See id. at 11-14. Third, Defendant Schreiber failed to disclose his past SEC issues to RedHawk and its investors. See Rec. Doc. 76 at 7-8.2
On January 31, 2017, Plaintiffs filed a six-claim Complaint. See Rec. Doc. 1. Specifically, Plaintiffs allege (1) Securities Fraud under Sections 10B and 20 of the Exchange Act and SEC Rule 10b-5; (2) Securities Fraud under Sections 18 and 20 of the Exchange Act; (3) Fraud under State Law; (4) By Beechwood for Breach of Contract; (5) By Beechwood for Unjust Enrichment; and (6) By RedHawk for Defendant Schreiber's Breach of Fiduciary Duties. See id. at 19-29.
On June 15, 2018, Defendants filed a Motion for Summary Judgment and Alternatively Judgment on the Pleadings (Rec. Doc. 74-1). On July 19, 2018, Plaintiffs filed a Response and Memorandum in Opposition (Rec. Doc. 78). On August 2, 2018, Defendants filed a Reply Memorandum (Rec. Doc. 80).
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