ACCEPTED
01-15-00390-CV
FIRST COURT OF APPEALS
HOUSTON, TEXAS
6/12/2015 9:25:40 PM
CHRISTOPHER PRINE
CLERK
No. 01-15-00390-CV
_______________________________________________________________
FILED IN
1st COURT OF APPEALS
IN THE FIRST COURT OF APPEALS HOUSTON, TEXAS
HOUSTON, TEXAS 6/12/2015 9:25:40 PM
_______________________________________________________________
CHRISTOPHER A. PRINE
Clerk
JOHN T. PRESTON and C CHANGE INVESTMENTS, LLC,
Appellants,
v.
EMJO INVESTMENTS, LTD. and H.J. VON DER GOLTZ,
Appellees.
_______________________________________________________________
On Appeal from the 215th District Court of Harris County, Texas,
Hon. Elaine H. Palmer, presiding
Trial Court Cause No. 2011-44058
____________________________________________________________________
BRIEF OF APPELLANT JOHN T. PRESTON
____________________________________________________________________
Jane Langdell Robinson
Texas Bar No. 24062970
Monica Uddin
Texas Bar No. 24075195
Jamie A. Aycock
Texas Bar No. 24050241
AHMAD, ZAVITSANOS, ANAIPAKOS,
ALAVI & MENSING
1221 McKinney Street, Ste. 3460
Houston, Texas 77010
Telephone: (713) 655-1101
Facsimile: (713) 655-0062
jrobinson@azalaw.com
muddin@azalaw.com
Counsel for Appellant
Oral Argument Requested
No. 01-14-00703-CV
JOHN T. PRESTON and C CHANGE INVESTMENTS, LLC,
Appellant,
v.
EMJO INVESTMENTS, LTD. and H.J. VON DER GOLTZ,
Appellees.
IDENTITY OF PARTIES AND COUNSEL
Appellants: John T. Preston and C Change Investments, LLC
Trial counsel for Sean Gorman, Texas Bar No. 08218100
appellants: sgorman@azalaw.com
Jamie A. Aycock, Texas Bar No. 24050241
jamieaycock@azalaw.com
AHMAD, ZAVITSANOS, ANAIPAKOS, ALAVI & MENSING
1221 McKinney St., Ste. 3460, Houston, Texas 77010
Telephone: (713) 655-1101; Facsimile: (713) 655-0062
Appellate counsel Jane Langdell Robinson, Texas Bar No. 24062970
for appellants: jrobinson@azalaw.com
Monica Uddin, Texas Bar No. 24075195
muddin@azalaw.com
AHMAD, ZAVITSANOS, ANAIPAKOS, ALAVI & MENSING
1221 McKinney St., Ste. 3460, Houston, Texas 77010
Telephone: (713) 655-1101; Facsimile: (713) 655-0062
2
Appellees: Emjo Investments, Ltd.
H.J. von der Goltz
Trial counsel for F. Eric Fryar, Texas Bar No. 07495770
appellees: eric@fryarlawfirm.com
Matthew Buschi, Texas Bar No. 24064982
mbuschi@fryarlawfirm.com
Christina Richardson, Texas Bar No. 24070495
crichardson@fryarlawfirm.com
Fryar Law Firm, P.C.
1001 Texas Ave., 14th Floor, Houston, Texas 77002
Telephone: (281) 715-6396; Facsimile: (281) 715-6397
Trial and appellate Kelley M. Keller, Texas Bar No. 11198240
counsel for kkeller@ellison-keller.com
appellees: Tracey N. Ellison, Texas Bar No. 15054720
tellison@ellison-keller.com
ELLISON KELLER
5120 Woodway Dr., Ste. 6019, Houston, Texas 77056
Telephone: 713-266-8200; Fax: 713-266-8201
3
TABLE OF CONTENTS
IDENTITY OF PARTIES AND COUNSEL .........................................................2
TABLE OF CONTENTS ........................................................................................4
INDEX OF AUTHORITIES ...................................................................................7
INDEX OF RECORD REFERENCES ................................................................10
STATEMENT OF THE CASE .............................................................................11
STATEMENT ON ORAL ARGUMENT ............................................................12
ISSUE PRESENTED .............................................................................................12
I. INTRODUCTION ..................................................................................13
II. STATEMENT OF FACTS ....................................................................14
A. The lawsuit arises out of a failed coal gasification startup. .....................14
B. The bankruptcy court dismisses all but two causes of action. .................16
C. Only two claims remain against Preston. .................................................18
D. Appellees do not allege a single act taken in Texas by Preston, much less
any act in Texas that is connected to their surviving misrepresentation
claims........................................................................................................18
E. Preston does no individual business and maintains no presence in
Texas. .......................................................................................................23
1. Preston does not do business in Texas in his individual capacity. ....23
2. Preston does not maintain any presence in Texas..............................25
F. After two years and jurisdictional discovery, Appellees fail to allege a
single act by Preston in Texas that gives rise to their surviving claims,
and fail to show systematic and continuous Texas contacts that render
Preston “at home” in Texas. .....................................................................25
III. SUMMARY OF THE ARGUMENT ....................................................30
IV. STANDARD OF REVIEW ...................................................................33
A. De novo review applies. ...........................................................................33
B. Jurisdiction over nonresidents requires allegations or proof of purposeful
availment. .................................................................................................34
4
1. The plaintiff bears the initial burden to plead allegations showing
jurisdiction over the defendant. ........................................................34
2. The long-arm statute is limited by due process considerations. ........34
3. When the plaintiff fails to meet its initial burden of alleging sufficient
purposeful minimum contacts, the fact that the defendant is a
nonresident defeats personal jurisdiction. ........................................35
V. ARGUMENT ..........................................................................................38
A. Appellees failed to meet their initial burden of pleading facts to show that
Preston is subject to personal jurisdiction in Texas. ................................38
B. Because Appellees do not allege that any of Preston’s alleged contacts
with Texas give rise the surviving claims and no evidence suggests any
link, there is no specific jurisdiction as a matter of law...........................40
1. Specific jurisdiction requires that the alleged jurisdictional contacts
give rise to the plaintiff’s alleged injury...........................................42
2. There are no allegations in the intervenors’ petition that could give
rise to specific jurisdiction over Preston...........................................44
3. There are no allegations or evidence in Appellees’ special
appearance briefing that could give rise to specific jurisdiction over
Preston. .............................................................................................45
4. Appellees’ claim that Preston “could reasonably foresee that NC12
and its shareholders and investors would suffer direct economic
injury” because of his alleged misrepresentations is not a basis for
specific jurisdiction as a matter of law. ............................................53
C. Because Preston’s alleged contacts with Texas are not substantial,
continuous, or systematic, there is no general jurisdiction as a matter of
law. ...........................................................................................................54
1. General jurisdiction requires the defendant to have substantial,
continuous, and systematic contacts with Texas. .............................54
2. The sporadic contacts with Texas in a representative capacity that
Appellees allege are nothing like the substantial, continuous, and
systematic contacts required to establish general jurisdiction..........56
5
3. Preston lacks any substantial, continuous, or systematic contact that
would render him at “at home” in Texas. .........................................68
VI. CONCLUSION AND PRAYER ...........................................................70
6
INDEX OF AUTHORITIES
Cases
Access Telecom, Inc. v. MCI Telecom. Corp.,
197 F.3d 694 (5th Cir. 1999) ...............................................................................69
All Star Enter., Inc. v. Buchanan,
298 S.W.3d 404 (Tex. App.—Houston [14th Dist.] 2009, no pet)............... 36, 59
Am. Type Culture Collection, Inc. v. Coleman,
83 S.W.3d 801 (Tex. 2002) ..................................................................................57
Ashdon, Inc. v. Gary Brown & Assocs., Inc.,
260 S.W.3d 101 (Tex. App.—Houston [1st Dist.] 2008, no pet.) .......................69
BMC Software Belgium, N.V. v. Marchand,
83 S.W.3d 789 (Tex. 2002) ............................................................... 33, 43, 46, 54
Frank A. Smith Sales, Inc. v. Atl. Aero, Inc.,
31 S.W.3d 742 (Tex. App.—Corpus Christi 2000, no pet.) ................................39
Garza v. Alviar,
395 S.W.2d 821(Tex. 1965) .................................................................................68
Glencoe Capital Partners II, L.P. v. Gernsbacher,
269 S.W.3d 157 (Tex. App.—Fort Worth 2008, no pet.) ....................................43
Goodyear Dunlop Tires Operations, S.A. v. Brown,
131 S. Ct. 2846, 180 L. Ed. 2d 796 (2011) ............................................. 34, 42, 55
Guardian Royal Exch. Assur., Ltd. v. English China Clays,
P.L.C., 815 S.W.2d 223 (Tex. 1991) .......................................... 51, 55, 62, 64, 65
Helicopteros Nacionales de Colombia, S.A. v. Hall,
466 U.S. 408, 104 S. Ct. 1868 (1984) ............................. 51, 52, 62, 64, 65, 69, 70
Hoffmann v. Dandurand,
180 S.W.3d 340 (Tex. App.—Dallas 2005, no pet.) .................................... 58, 59
7
Howell v. Hilton Hotels Corp.,
84 S.W.3d 708 (Tex. App.—Houston [1st Dist.] 2002, pet. denied) ..................67
International Shoe Co. v. Washington,
326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945) ................................................35
Johnston v. Multidata Sys. Intern. Corp.,
523 F.3d 602 (5th Cir. 2008) ...............................................................................70
Kelly v. Gen. Interior Const., Inc.,
301 S.W.3d 653 (Tex. 2010) ........................................................................ passim
Kulko v. Cal. Super. Ct.,
436 U.S. 84, 98 S. Ct. 1690 (1978) ......................................................... 62, 64, 65
Michiana Easy Livin’ Country, Inc. v. Holten,
168 S.W.3d 777 (Tex. 2005) ................................................................... 35, 36, 54
Moki Mac River Expeditions v. Drugg,
221 S.W.3d 569 (Tex. 2007) ............................................................. 34, 35, 37, 42
Nat'l Indus. Sand Ass’n v. Gibson,
897 S.W.2d 769 (Tex. 1995) ................................................................................44
Perkins v. Benguet Consol. Mining Co.,
42 U.S. 437, 72 S. Ct. 413 (1952) ................................................................ 69, 70
PHC-Minden, L.P. v. Kimberly-Clark Corp.,
235 S.W.3d 163 (Tex. 2007) ........................................................................ passim
Retamco Operating, Inc. v. Republic Drilling Co.,
278 S.W.3d 333 (Tex. 2009) ......................................................................... 35, 43
Seiferth v. Helicopteros Atuneros, Inc.,
472 F.3d 266 (5th Cir. 2006) ...............................................................................43
Serv. Corp. Intern. v. Guerra,
348 S.W.3d 221 (Tex. 2011) ................................................................................68
8
Shaffer v. Heitner,
433 U.S. 186, 97 S. Ct. 2569, 53 L. Ed. 2d 683 (1977) ................................ 45, 57
Siskind v. Villa Found. for Educ., Inc.,
642 S.W.2d 434 (Tex. 1982) ................................................................... 40, 44, 58
Stuart v. Spademan,
772 F.2d 1185 (5th Cir. 1985) .............................................................................58
Tryco Enter., Inc. v. Robinson,
390 S.W.3d 497 (Tex. App.—Houston [1st Dist.] 2012, pet. dism’d) ................60
Vosko v. Chase Manhattan Bank, N.A.,
909 S.W.2d 95 (Tex. App.—Houston [14th Dist.] 1995, writ denied) ........ 40, 59
Washington DC Party Shuttle, LLC v. IGuide Tours,
406 S.W.3d 723 (Tex. App.—Houston [14th Dist.] 2013, pet. denied) ....... 38, 58
Waterman Steamship Corp. v. Ruiz,
355 S.W.3d 387 (Tex. App.—Houston [1st Dist.] 2011, pet. denied) ... 39, 43, 69
Wright v. Sage Eng’g, Inc.,
137 S.W.3d 238 (Tex. App.—Houston [1st Dist.] 2004, pet. denied) ................58
Statutes
TEX. CIV. PRAC. & REM. CODE § 17.042 ..................................................................35
Rules
TEX. R. CIV. P. 45 .....................................................................................................41
TEX. R. CIV. P. 120a .......................................................................................... 41, 67
Other
4 Wright & Miller, FEDERAL PRACTICE & PROCEDURE § 1067.5 ............................55
9
INDEX OF RECORD REFERENCES
CR Clerk’s Record filed May 21, 2015
Citation to documents included in the Appendix are noted by “Tab #.”
10
STATEMENT OF THE CASE
Nature of Case: This is a case alleging “common law and statutory
securities fraud” by investors in a failed technology
startup.
Course of Proceedings: The intervenors, including Appellees, intervened in
an original petition against Preston and other
defendants. Preston specially appeared and asserted
that he was not subject to personal jurisdiction in
Texas because he is a nonresident, and does not have
sufficient minimum contacts with Texas for the
exercise of personal jurisdiction.
Because the claims involved a corporation, NC12,
Inc., that subsequently declared bankruptcy,
defendants removed the case to bankruptcy court.
The bankruptcy court dismissed or abated all the
claims in the original petition and all the claims in
the intervenors’ petition but two: fraud and
conspiracy to commit fraud with respect to alleged
misrepresentations regarding the value of NC12
shares. The bankruptcy court remanded these
remaining two claims to the district court.
Trial Court Disposition: Of the intervenors, only Appellees opposed Preston’s
special appearance. Preston filed his special
appearance on September 28, 2011. The court
denied the special appearance on November 17,
2014. Preston appeals from that order.
11
STATEMENT ON ORAL ARGUMENT
If upheld, the trial court’s ruling will significantly broaden the reach of
Texas long-arm jurisdiction over foreign defendants. The trial court’s ruling
departed considerably from existing precedent by asserting jurisdiction over a
nonresident not alleged to have conducted any activity in Texas giving rise to the
claims in the lawsuit, and whose only alleged contacts with Texas consists of
periodic business trips on behalf of other entities over the last 25 years. This is an
important issue and Appellant believes oral argument could assist the panel in
considering it. Appellant therefore requests oral argument.
ISSUE PRESENTED
Sole issue: The trial court erred by denying Preston’s special appearance because
Appellees failed to plead sufficient allegations to establish personal jurisdiction
and because Preston is not subject to specific or general jurisdiction in Texas.
12
I. INTRODUCTION
This lawsuit was brought by disgruntled investors in a failed technology
startup in an attempt to recover their investments from the now-bankrupt
company’s directors and officers. The investors’ claims related almost exclusively
to harms to the company, and when the bankruptcy court dismissed these claims as
belonging to the bankruptcy trustee, the investors were left with a detailed petition
that has little to do with the surviving claims, and nothing to do with any action
taking place in Texas.
It is difficult to see how Texas courts have any interest in this case, much
less personal jurisdiction over Preston. There is no allegation that Preston took any
action in Texas connected in any way to the surviving claims. Preston is a
Massachusetts resident who has never conducted business in Texas in his personal
capacity, and none of the intervenors (the only plaintiffs remaining in this lawsuit)
are Texas residents either. The only Texas contacts Appellees allege concern
Preston’s mere status as a board member in Nevada corporations with offices in
Texas, and Preston’s periodic business trips to Texas on behalf of a variety of other
entities.
There are no facts that could give rise to specific jurisdiction because there
are no allegations that any of the surviving claims arise from or relate to any action
by Preston in Texas. There is no basis for general jurisdiction because almost all
13
of Preston’s alleged contacts with Texas took place in his representative capacity
and still come nowhere close to the continuous and systematic contacts with Texas
that would render Preston at home here.
The mere fact that a startup with some Texas operations went out of business
does not warrant the exercise of personal jurisdiction over a Massachusetts resident
in a fraud suit brought by nonresident investors who do not allege he did anything
in Texas that gives rise to their claims. The trial court’s order overruling Preston’s
special appearance runs contrary to both Texas and federal law limiting the
exercise of personal jurisdiction over nonresidents. It should be reversed.
II. STATEMENT OF FACTS1
A. The lawsuit arises out of a failed coal gasification startup.
This suit arises out of a developmental technology intended to produce
synthetic natural gas and other fuels from coal, also known as coal gasification.
CR 114–16 (Tab 2).2 A Nevada corporation, Texas Syngas, Inc. (“TSI”), acquired
the technology and began seeking investors in 2007. CR 116 (Tab 2). In 2009
another Nevada corporation, NC12, Inc. (“NC12”), acquired the technology from
TSI. CR 122 ¶ 63 (Tab 2). Despite extensive efforts and the partial development
1
Sections II.A and II.B are the same in this brief and C Change’s appellant’s brief.
2
Certain of the plaintiffs’ and intervenors’ allegations are recited in this statement of facts for the
Court’s background, but Preston does not concede any of the plaintiffs’ or intervenors’
allegations.
14
of a test reactor in Massachusetts, NC12 did not succeed. CR 118–19, 127–29
(Tab 2); CR 138; CR 208 (Tab 3).
As often happens when businesses fail, litigation ensued. The original
plaintiffs, primarily NC12 shareholders, sued several of NC12’s directors and
officers on July 26, 2011, including directors Michael Sydow, Christoph Henkel,
and John Preston. CR 6. NC12 declared bankruptcy in October 2011. CR 208
(Tab 3).
In November 2011, several NC12 investors, including Appellees, intervened
in the lawsuit. CR 102–08 (Tab 2). The intervenors had invested variously in
convertible notes and shares of TSI and NC12. CR 104–08 (Tab 2). When NC12
acquired the gasification technology and attracted more investment, the
intervenors’ TSI shares and notes converted into NC12 shares. Accordingly, all of
the intervenors3 are now shareholders in NC12. Id.
Both the original plaintiffs’ and the intervenors’ petitions attacked the
defendants’ management of TSI and NC12. See CR 28–37; CR 129–33 (Tab 2).
The original plaintiffs alleged breach of fiduciary duty and conversion claims. CR
35–37. The intervenors alleged four causes of action: (1) breach of fiduciary duty
against Sydow, Henkel, and Preston; (2) shareholder oppression by Sydow,
3
One possible exception is appellee H.J. von der Goltz. It is unclear whether von der Goltz is an
NC12 shareholder or simply a creditor. CR 105 ¶ 5 (Tab 2) (“all Intervenors are currently
common shareholders of NC12, Inc.”); CR 108 ¶ 23 (Tab 2) (stating only that von der Goltz
holds an NC12 promissory note).
15
Henkel, and Preston; (3) “Knowing Participation/Civil Conspiracy” against all 10
defendants; and (4) “Securities Fraud—Common Law Fraud and Statutory4 Fraud”
against Sydow and Preston. CR 109–10, 129–33 (Tab 2).
B. The bankruptcy court dismisses all but two causes of action.
The defendants removed the case to the bankruptcy court on December 15,
2011 on the grounds that the plaintiffs’ and intervenors’ claims alleging
mismanagement of TSI / NC12 belonged to the bankruptcy estate. CR 198–205.
The intervenors moved to remand the case to state court. CR 206–07 (Tab 3).
On August 31, 2012, Bankruptcy Judge Marvin Isgur granted in part and
denied in part the motions to remand, significantly limiting the claims that remain
in this case. CR 207, 237 (Tab 3). Judge Isgur dismissed all of the original
plaintiffs’ and intervenors’ claims relating to harms to TSI5 and NC12, holding that
these claims belonged to the bankruptcy estate. See CR 198–205. Judge Isgur
reasoned that any claims based on the defendants’ alleged asset-stripping, self-
dealing, dilution of corporate value, and misappropriation of corporate assets
4
Although the title of the cause of action refers to “Statutory Fraud,” the intervenors do not
reference any statute. See CR 132–33 (Tab 2).
5
The bankruptcy court order treats NC12 as TSI’s successor and thus refers to them collectively
as NC12. CR 211 (“NC12 began as a Texas limited liability company named Texas Syngas,
LLC.”), CR 212 (“Texas Syngas was reorganized as a new Nevada corporation, Texas Syngas,
Inc., in May 2006.”), CR 214 (“Also in 2009, Texas Syngas became NC12.”) (Tab 3).
16
stemmed from harm to NC12 and, accordingly, may only be asserted by the
bankruptcy trustee on behalf of the bankruptcy estate. CR 237 (Tab 3).
The bankruptcy court dismissed or abated all of the original plaintiffs’
claims. CR 237, 225–27, 234–35 (Tab 3). As a result, none of the original
plaintiffs’ claims were remanded to state court and those claims are not at issue
here. CR 237 (Tab 3).
With respect to the intervenors’ claims, the bankruptcy court held that the
intervenors’ shareholder oppression and breach of fiduciary duty claims belonged
to the estate and therefore dismissed those claims. CR 221–27, 237 (Tab 3). The
court also dismissed the intervenors’ conspiracy claim to the extent it related to the
dismissed causes of action. CR 235–37 (Tab 3). This left only causes of action for
fraud and conspiracy to commit fraud. CR 237 (Tab 3). In remanding the fraud
and conspiracy claims, the court instructed:
Because the Intervenors are shareholders, their fraud claim is
based on the alleged difference between the price they paid in
reliance on the alleged misrepresentations and the actual value of
NC12’s shares at the time of their investment. The Intervenors
may not recover damages for the difference between the price
they paid for the shares and what the shares would have been
worth if not for the alleged post-purchase misconduct in the
operation of the corporation.
CR 228 (Tab 3) (emphasis added).
17
C. Only two claims remain against Preston.
The only remaining causes of action against Preston are “Securities Fraud—
Common Law Fraud and Statutory6 Fraud” asserted against Preston and Sydow,
and “Knowing Participation/Civil Conspiracy,”7 asserted against all 10 defendants.
CR 237 (Tab 3); CR 132–33 ¶¶ 89–90 (Tab 2). Significantly, these claims survive
only to the extent they deal with the alleged misrepresentation of NC12’s value at
the time of the intervenors’ investment (hereinafter, the “surviving claims” or
“misrepresentation claims”). CR 228 (Tab 3). The last alleged investment by any
intervenor occurred in August 2010. CR 104–08, 105 ¶ 8 (Tab 2).
D. Appellees do not allege a single act taken in Texas by Preston, much less
any act in Texas that is connected to their surviving misrepresentation
claims.
The only basis for jurisdiction over Preston in the intervenors’ petition are
the generic allegations that “Preston has engaged in business in Texas” and “the
tortious conduct alleged herein occurred in or was directed at the State of Texas.”
CR 110 ¶ 33, 114 ¶ 44 (Tab 2).
The intervenors explicitly plead that Preston is a Massachusetts resident who
is employed in Cambridge, Massachusetts. CR 110 ¶ 33 (Tab 2). Yet in their
6
Although the title of the cause of action refers to “Statutory Fraud,” the intervenors do not
reference any statute. See CR 132–33 (Tab 2).
7
Judge Isgur’s Order also mentions “Intervenors’ aiding and abetting claims” relating to fraud.
CR 237 (Tab 3). Since the intervenors did not plead an aiding and abetting claim (see CR 129–
33 (Tab 2)), it is treated here as part of the conspiracy claim.
18
petition, the intervenors fail to allege any act performed by Preston in Texas, much
less an act involving the intervenors’ surviving misrepresentation claims. This is
perhaps unsurprising, as none of the intervenors are Texas residents who might
have relied on misrepresentations in Texas. See CR 105–08 (Tab 2) (showing
intervenors reside in Luxembourg, Guatemala, the British Virgin Islands, Panama,
Germany, New York, the Bahamas, Montana, Tennessee, the Cayman Islands, and
Florida, but not Texas).
The few allegations in the intervenors’ petition that relate to Preston say
nothing to indicate a Texas connection, as shown below:
In fall 2007, Preston “approached the shareholders of Atomic
Ordered Materials (AOM), another company in which Preston was
involved” and “brought Sydow and Collins to an AOM
shareholders’ meeting,” where Sydow presented the [TSI]
technology and “solicited investments in that company.” CR 116 ¶
51 (Tab 2).
The intervenors do not allege that any of Preston’s representations to AOM8 or its
shareholders were made in Texas.
After the AOM meeting, Preston “approached” intervenor von der
Goltz, who had been in attendance. CR 117 ¶ 52 (Tab 2). Preston
“informed von der Goltz that [Preston] had negotiated a $100
million pre-money investment valuation for [TSI] and was trying
to raise $12 million to build a demonstration reactor . . . .” Id.
8
The intervenors do not allege any other facts regarding AOM whatsoever, much less allege that
AOM is a Texas entity or has offices in Texas.
19
“Preston represented that the value of the technology was in excess
of $100 million but suggested that von der Goltz meet with Collins
and Sydow to negotiate a discounted valuation to put together an
initial investor group for the $12 million needed. Preston
represented that he was assisting [TSI], but never disclosed that he
owned or controlled any equity interest in [TSI].” Id.
The intervenors do not allege that Preston’s representations to von der Goltz were
made or relied on in Texas. Nor is there any basis to make such an inference. Von
der Goltz is a Florida resident. CR 108 ¶ 23 (Tab 2).
“In November 2007, von der Goltz met with Collins and Sydow in
Houston. Collins and Sydow agreed to accept new investors based
on a pre-money valuation of $78 million and a post-money
valuation of $90 million.” CR 117 ¶ 52 (Tab 2).
Von der Goltz “brought the opportunity to friends, family, and
business associates, who ultimately invested $11.75 million . . . .
Among this group were the Shareholder Intervenors. Sydow and
Preston represented to the Shareholder Intervenors, both directly
and through Mr. von der Goltz, that the value of the technology
exceeded $100 million and that the money being raised would be
used primarily for building the demonstration reactor.” CR 117 ¶
53 (Tab 2).
The intervenors do not allege that Preston attended the November 2007 Houston,
Texas meeting or even that any misrepresentation was made to von der Goltz at
this meeting. There are no allegations, or basis for any inference, that any Preston
representation was made or relied on in Texas—whether directly or “through von
der Goltz.” Neither Preston nor any intervenor, including the Shareholder
Intervenors, are residents of Texas. CR 105–08 (Tab 2). None of the intervenors’
20
detailed allegations include any suggestion that any of the alleged representations
or “promises” were made in Texas:
Preston made various representations in 2008 to “[TSI]
shareholders” that the value of the company was now $300 million
as a result of a gas utility contract; representations regarding new
financing, and representations regarding the company’s purchase
of Fall River, Massachusetts property. CR 118 ¶ 55 (Tab 2).
Preston and Sydow “had no intention of using shareholder money
as represented to the shareholders,” squandered shareholder
money, and engaged in self-dealing. CR 119 ¶ 58 (Tab 2).
“Despite his numerous promises and despite being compensated to
do so Preston failed to raise additional funds for [TSI] in 2009, and
by mid-year [TSI] desperately needed funding.” CR 120 ¶ 60 (Tab
2).
Moreover, these alleged representations, as the intervenors themselves plead, were
addressed to TSI’s shareholders and were thus made after their investment in TSI.
These allegations are thus relevant only to the intervenors’ dismissed claims
concerning the management of TSI, not their surviving misrepresentation claims.
See CR 223–28 (Tab 3).
“Preston and Sydow again turned to Mr. von der Goltz for
assistance.” CR 120 ¶ 60 (Tab 2). Von der Goltz raised $6.1
million in investment from the Note Holder Intervenors. Id.
“Preston and Sydow, both directly and through their statements to
von der Golz, represented to the Note Holder Intervenors that
[TSI] was worth $300 million as of 2009, based on the value of the
technology and the [gas utility] and Turkish contracts. However,
Preston and Sydow failed to disclose that the [gas utility] contract
had been canceled.” CR 121 ¶ 61 (Tab 2).
21
“Preston and Sydow also represented [to the Note Holder
Intervenors] that the money would be used primarily to build the
test reactor; however, their later conduct and misuse of the funds
demonstrate that they had no intention of using the money for that
purpose.” Id.
The intervenors do not allege that any Preston representation to any Note Holder
Intervenor or to von der Goltz (or to anyone) was made or relied on in Texas. And
any representations regarding the ultimate use of the solicited investment funds are
beyond the scope of the surviving claims. CR 223–28 (Tab 3).
Similarly, every subsequent reference to Preston in the remaining 14 pages
of the intervenors’ petition concerns political infighting on the TSI / NC12 board
of directors, alleged mismanagement and asset-stripping of the entity, and alleged
self-dealing. CR 121–29 (Tab 2). These allegations only relate to the fiduciary
duty, shareholder oppression, and shareholder fraud claims that have been
dismissed from this matter. The remaining references to Preston do not support
any surviving claim against him. See CR 223–28 (Tab 3). And still, none of the
remaining allegations state or suggest any action taken by Preston in Texas.
In sum, not a single allegation in the intervenors’ petition—the only petition
containing any live claims—connects Preston to Texas.
22
E. Preston does no individual business and maintains no presence in Texas.
Preston filed a special appearance on September 28, 2011 objecting to the
court’s exercise of personal jurisdiction over him.9 CR 74 (Tab 1).
1. Preston does not do business in Texas in his individual capacity.
Preston is a resident of Massachusetts and is employed in Massachusetts.
CR 86–87 ¶¶ 3, 8 (Tab 1); CR 110 ¶ 33 (Tab 2). He has not been a resident of
Texas for the last 60 years.10 In the last 60 years, Preston has not travelled to or
visited Texas in his individual capacity. CR 86 ¶ 4 (Tab 1).
In the last 30 years, Preston has visited Texas exclusively on behalf of
entities for whom he served as a director, principal, or managing partner, including
a Delaware nonprofit, Molten Metal Technologies, Inc. (“MMT”), Quantum
Catalytics, LLC (“Quantum”), C Change Investments, LLC (“C Change”), NC12,
and Transformative Energy & Materials Capital, Inc. (“TEM Capital”), or on
behalf of the Massachusetts Institute of Technology (“MIT”), where he was a
faculty member and Director of Technology and Licensing, and retains an
appointment. See CR 87 ¶¶ 5–6 (Tab 1); CR 330–31, 356 at 63:18–23 (Tab 4); CR
672–73 ¶¶ 3–8 (Tab 6); CR 118 ¶ 53 (Tab 2). Preston served as a director of two
9
Preston’s special appearance was filed before the intervenors filed their petition. CR 74 (Tab
1); CR 102 (Tab 2).
10
Preston, who was 61 years old at the time of his affidavit executed in 2011, resided in Texas
for less than one year when he was an infant. See CR 86 ¶ 4 (Tab 1); CR 672 (Tab 6) (showing
date of birth).
23
Texas entities, one from 2004–2006 and the other from 2012–2014 and has
otherwise never been a director, officer, or employee of a Texas person or
company. CR 330, 388 (Tab 4); CR 87 ¶ 8 (Tab 1).
While Preston was an officer of TSI and NC12, both Nevada corporations
with a Texas office, Preston participated in board meetings from Massachusetts,
Switzerland, or Germany, but never Texas.11 See CR 86–87 ¶¶ 2, 7 (Tab 1); CR
325, 328 (Tab 4).
Preston has never done business in Texas in his individual capacity. CR 86
¶ 4 (Tab 1). Preston has never maintained an office in Texas, or employed any
person who either resides or regularly travels to Texas in connection with his or
her business. CR 87 ¶¶ 8, 9 (Tab 1). Preston has never engaged in routine sales or
other profit-making activities in Texas. Id. ¶ 8. Preston owns no private Texas
businesses. Id. In his individual capacity, Preston has never entered into any
contracts in Texas or with Texas residents, contracts calling for performance in
Texas, or contracts with mandatory venue provision in Texas, other than contracts
with his defense counsel. Id.
Because Preston does not do business in Texas, he does not maintain a
registered agent in Texas and is not required to do so. Id. As he does not work or
11
There are no allegations that Preston made any misrepresentation, or any action in furtherance
of any conspiracy to make any misrepresentation, while participating in any board meetings.
24
own property in Texas, Preston has never personally incurred or paid any taxes in
Texas, nor filed a personal tax return in Texas. CR 87 ¶ 9 (Tab 1).
2. Preston does not maintain any presence in Texas.
As Preston’s Texas ties consist exclusively of his status as director of
predominantly foreign entities and business trips to Texas in his representative
capacity, Preston has no presence in Texas. He has never maintained an office or
any other facility, telephone listing, post office box, or mailing address in Texas.
CR 87 ¶ 9 (Tab 1). Preston has never rented, owned, or possessed any real
property or personal property in Texas. Id. He does not hold a mortgage or other
lien on any real or personal property in Texas. Id. He does not have any
investments or assets in Texas. Id. Preston has never taken out a loan in Texas or
guaranteed any debt owed to a Texas resident. Id.
F. After two years and jurisdictional discovery, Appellees fail to allege a single
act by Preston in Texas that gives rise to their surviving claims, and fail to
show systematic and continuous Texas contacts that render Preston “at
home” in Texas.
The intervenors had two years and the opportunity to conduct jurisdictional
discovery between the bankruptcy court’s remand order and the hearing on
Preston’s special appearance. CR 102 (Tab 2); CR 206 (Tab 3); CR 613. Yet they
never amended their petition to add any allegations connecting any aspect of their
surviving claims to Texas. This is because no such connection exists.
25
To evade this problem, Appellees concocted a tornado of smoke and
innuendo in response to Preston’s special appearance. They doggedly conflate the
two distinct types of personal jurisdiction (specific and general), jumble allegations
about dismissed claims in discussing surviving claims, confuse individual with
representative actions by Preston, and mix diverse assertions of Preston’s
tangential links to Texas: business trips for other entities, decade-old business calls
with original plaintiff and former TSI director Collins, a personal check, and a
convoluted story about a 2012 Texas corporation that is allegedly an alter-ego of
Preston’s, allegedly created to pursue claims against Collins in a different lawsuit.
These attenuated links to Texas have nothing to do with any of the surviving
claims, and fall far short of establishing the continuous contact with Texas that is
otherwise required to support general personal jurisdiction.
Appellees alleged the following forum contacts by Preston:
(a) Director of foreign entities. Preston served as a director of
three foreign entities which registered to do business in Texas.
CR 287 (“MMT”), CR 281 (Texas Syngas, Inc. (“TSI”)), CR
284 (NC12) (Tab 4).
There are no allegations that Preston did anything in Texas in
connection with these entities that gives rise to any of the
intervenors’ claims.
(b) Business trips to Texas. In the past 25 years, Preston has
allegedly made the following brief business trips to Texas:
26
o 1990s: Five board meetings in Texas for a Delaware
nonprofit and three board meetings for MMT. CR 87 ¶ 5
(Tab 1).
o 1990s: Approximately three business trips for MMT.12
CR 408 ¶ 4, CR 409 ¶ 12, CR 260 (Tab 4).
o 2004: Three trips on behalf of Quantum. CR 409 ¶¶ 6–8
(Tab 4); CR 673 ¶ 8 (Tab 6).
o 2008–11: Five one-day trips on behalf of C Change.13
CR 319 at 25:3–28:21, 335–38, 343–48 (Tab 4); CR
672–73 ¶¶ 5–6 (Tab 6).
o 2009–10: One trip on behalf of C Change or MIT. CR
262, 323 at 49:13-24 (Tab 4).
o 2010: One trip on behalf of NC12 to testify in Sydow’s
divorce proceeding. CR 352–70, 339–42 (Tab 4).
o 2011: One two-day trip on behalf of TEM Capital for a
foreclosure sale and to inspect a cement plant. CR 349–
50 (Tab 4); CR 673 ¶ 7 (Tab 6).14
There is no allegation that any of these trips relate to the claims
in this lawsuit.
(c) 2004: Phone calls and mail. Collins claims that in 2004,
Preston telephoned him and shipped him “records regarding
12
It is not clear from the record whether these trips are distinct from those on which Preston
attended MMT board meetings. CR 87 ¶ 5 (Tab 1).
13
Preston initially mistakenly identified these trips as on behalf TEM Capital, and submitted a
correction in a subsequent declaration. See CR 87 ¶ 5; CR 330–31 (Tab 4); CR 672 ¶ 5 (Tab 6).
Former C Change director Russell Read testified C Change “effectively merged” into TEM
Capital in 2011. CR 320 at 31:5–10 (Tab 4).
14
In their special appearance briefing, Appellees refer to, but attach no evidence regarding,
allegations made by nonparty EMC Cement, BV in an unrelated 2014 lawsuit suggesting that
Preston made two other visits to Texas in August 2010 and January 2011 with C Change or TEM
Capital. See CR 263–64 (Tab 4) (failing to attach EMC complaint).
27
MMT and its patented technology” following Preston’s 2004
business trips to meet with Collins. CR 409 ¶ 9 (Tab 4). These
trips and communications concerned catalytic energy
processing (“CEP”) technology patents belonging to Quantum.
Id. ¶¶ 5–8; CR 673 ¶ 8 (Tab 6).
There are no allegations linking these communications to the
claims in the lawsuit.
(d) 2006: Alleged address at TSI office for foreign entity Metal
Catalyst Ventures. Preston was listed as a director of Nevada
corporation Metal Catalyst Ventures, Inc. in June 2006. CR 315
(Tab 4). Preston’s “address” was the same as TSI’s. See id.; CR
281 (Tab 4). Preston did not prepare the document. CR 315
(Tab 4); CR 673 ¶ 9 (Tab 6).
The intervenors allege no other facts regarding Metal Catalyst
Ventures, and there are no allegations linking Metal Catalyst
Ventures to the surviving claims.
(e) 2008: Personal check to foreign entity BOS, Inc. In 2008,
Preston allegedly wrote a personal check to BOS, Inc., a Turks
and Caicos corporation with, allegedly, an office and bank
account in Texas. CR 387 (Tab 4); CR 25 ¶ 2. In 2010, BOS,
Inc. wired Preston back the same sum. CR 384 (Tab 4).
There are no allegations linking these payments to the claims in
the lawsuit.
(f) 2012: Alleged purchase of claims in unrelated Kaiser
Litigation via alleged alter ego JK Claims. JK Claims was
formed by Quantum to purchase the plaintiffs’ claims in Cause
No. 2007-38533, Jeffrey B. Kaiser v. Texas Syngas LLC,
Michael A. Collins, Michael D. Sydow and M. Sameer Ahmed,
in the 152nd District Court of Harris County, Texas (the
“Kaiser Litigation”).15 CR 432, 495 at 57:2–3, 498 at 66:19–
15
Kaiser brought suit on behalf of himself and “all similarly situated” members of Texas Syngas
LLC. CR 432 (Tab 5). Quantum, a member of Texas Syngas LLC, had intervened in the Kaiser
Litigation. CR 452 (Tab 5).
28
67:20 (Tab 5). After Kaiser filed for bankruptcy, JK Claims
purchased the Kaiser Litigation claims from the bankruptcy
estate with the approval of the bankruptcy trustee. CR 534–41,
545–47 (Tab 5).
In a supplemental response to the special appearance, Appellees
assert that JK Claims is Preston’s alter ego and that JK Claims’
contacts with Texas should be imputed to Preston. CR 414
(Tab 5). Appellees’ own evidence shows that Quantum, not
Preston, is the sole owner of JK Claims. CR 495 at 57:2–3, 498
at 66:19–67:20 (Tab 5). See also CR 673 ¶ 10. Yet Appellees
never allege that Quantum is an alter ego of Preston.
There are no allegations linking these actions to the claims in
the lawsuit. Most significantly, all alleged JK Claims actions
took place after this lawsuit was filed and are therefore outside
of the relevant jurisdictional period, as discussed below.
Almost none of these tenuous forum contacts are pleaded in the intervenors’
petition. See section II.D, supra. None have anything to do with any alleged
misrepresentation to TSI or NC12 investors, and none demonstrate continuous and
systematic contacts that would establish that Preston is “at home” in the state of
Texas.
After briefing and argument, however, the trial court denied Preston’s
special appearance. CR 674–75 (Tab 7). Preston timely appealed to this Court.
CR 678–80; CR 681–83.
29
III. SUMMARY OF THE ARGUMENT
There is no basis for asserting personal jurisdiction over Preston. Appellees,
neither of whom reside in Texas, bring claims of fraud and conspiracy to commit
fraud in relation to representations about TSI / NC12’s value. Appellees do not
allege that any representations were made or relied on in Texas. The petition does
not contain a single allegation that places Preston in Texas or describes any act that
Preston is alleged to have done in Texas, much less any act in Texas that gives rise
to the claims in this case. Appellees have never amended their petition to include
such allegations because no such facts exist.
Appellees failed to meet their burden to plead sufficient allegations to
establish personal jurisdiction over Preston. It is the plaintiff’s initial burden to
plead sufficient allegations to allege personal jurisdiction over a defendant.
Because Appellees have failed to do so, Preston needed only to establish that he
does not reside in Texas to negate personal jurisdiction. There is no dispute:
Preston resides in Massachusetts and is not a Texas resident. The trial court erred
in overruling Preston’s special appearance on this basis alone.
Appellees’ special appearance evidence supports neither specific nor
general jurisdiction. Texas courts can exercise personal jurisdiction over a
nonresident only if the plaintiff’s claims arise out of the defendant’s contacts with
the forum (specific jurisdiction) or if the defendant has continuous and systematic
30
contacts with the forum (general jurisdiction). Though it is not clear from their
briefing below, Appellees appear to argue that there is both specific and general
jurisdiction over Preston. See CR 270 (Tab 4). Appellees are wrong on both
counts.
There is no specific jurisdiction because Appellees fail to link any
alleged action by Preston giving rise to their claims to Texas. Appellees
contend there is specific jurisdiction over Preston because “[t]he acts and events
complained of in this litigation all arise directly from Preston’s activities as a
director of and fund raiser for TSI and NC12 – both Texas companies” and
because “[i]n raiding funds for TSI and NC12, through fraudulent
misrepresentations and then denuding the companies of their assets, Preston . . .
could reasonably foresee that NC12 and its shareholders and investors would suffer
direct economic injury.” CR 269–70 (Tab 4).
The mere fact that Preston was a director of a corporation with a Texas
office while allegedly making misrepresentations to nonresident investors outside
of Texas is insufficient to establish that any alleged misrepresentation relates to
Preston’s contacts with Texas. The “reasonable foreseeability” test has been
rejected by the Texas Supreme Court. And Appellees’ “denuding” claims are not
germane: the bankruptcy court dismissed all claims relating to harms to TSI and
NC12. The only surviving claims regard alleged misrepresentations made by
31
Preston in connection with the value of TSI / NC12 at the time of the intervenors’
investment, and conspiracy to commit those misrepresentations. For jurisdictional
purposes, the relevant location for fraudulent misrepresentation is the place where
the misrepresentation was made.
There are no allegations that Preston committed any acts giving rise to these
claims in Texas, either in the petition or in Appellees’ voluminous briefing below.
As a matter of black-letter law, there is no specific jurisdiction over Preston.
There is no general jurisdiction because all of Preston’s forum contacts
were in his representational capacity and still do not amount to continuous
and systematic contacts with Texas. Preston is a Massachusetts resident who
lives and works in Massachusetts. Other than periodically traveling to Texas on
business trips on behalf of foreign entities, Preston has no Texas ties at all.
Preston’s contacts with Texas on behalf of corporations do not subject him to
general jurisdiction absent a showing either that these contacts themselves were
tortious or that the corporations were his alter ego. While Appellees claim one
corporation, JK Claims, is Preston’s alter ego, JK Claims’ alleged contacts with
Texas began in June 2012—one year after the Appellees filed their suit—and are
thus outside of the relevant period to determine jurisdictional contacts. There is no
evidence of any purposeful contacts with Texas so substantial that it would render
32
Preston “at home” in the state of Texas. There is no general jurisdiction over
Preston as a matter of law.
For all of these reasons, the trial court erred in overruling Preston’s special
appearance.
IV. STANDARD OF REVIEW16
A. De novo review applies.
Whether a court can exercise personal jurisdiction over a nonresident
defendant is a question of law reviewed de novo by this Court. Kelly v. Gen.
Interior Const., Inc., 301 S.W.3d 653, 657 (Tex. 2010) (Tab 8). When, as here, a
trial court does not issue findings of fact and conclusion of law with its special
appearance ruling, this Court implies all the facts necessary to support the
judgment as long as those facts are supported by the evidence. Id.; CR 678–80;
CR 684–86. The appellant can challenge the sufficiency of the evidence to support
the implied facts. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794
(Tex. 2002) (Tab 9).
16
Section IV is the same in both this brief and C Change’s appellant’s brief, excluding Section
IV.B.4 of C Change’s brief.
33
B. Jurisdiction over nonresidents requires allegations or proof of purposeful
availment.
1. The plaintiff bears the initial burden to plead allegations showing
jurisdiction over the defendant.
In suits involving a challenge to personal jurisdiction, the Texas Supreme
Court has “consistently held that the plaintiff bears the initial burden to plead
sufficient allegations to bring the nonresident defendant within the reach of
Texas’s long-arm statute.” Kelly, 301 S.W.3d at 658 (Tab 8). “When the pleading
is wholly devoid of jurisdictional facts, the plaintiff should amend the pleading to
include the necessary factual allegations.” Id. at 659.
2. The long-arm statute is limited by due process considerations.
The exercise of personal jurisdiction “exposes defendants to the State’s
coercive power” and therefore it must comply with the Fourteenth Amendment’s
due process clause. Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct.
2846, 2850, 180 L. Ed. 2d 796 (2011). “A nonresident defendant is subject to the
personal jurisdiction of Texas courts if (1) the Texas long-arm statute authorizes
the exercise of jurisdiction, and (2) the exercise of jurisdiction does not violate
federal and state constitutional due process guarantees.” Kelly, 301 S.W.3d at 657
(Tab 8). The critical inquiry is whether the exercise of jurisdiction comports with
due process because the Texas long-arm statute reaches “as far as the federal
constitutional requirements of due process will allow.” Id. (quoting Moki Mac
34
River Expeditions v. Drugg, 221 S.W.3d 569, 575 (Tex. 2007); TEX. CIV. PRAC. &
REM. CODE § 17.042. Because the due process requirement arises out of federal
constitutional law, the Texas Supreme Court relies on precedent from the United
States Supreme Court and other federal courts in evaluating the exercise of
personal jurisdiction. PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d
163, 166 (Tex. 2007) (Tab 10).
The exercise of personal jurisdiction over a nonresident defendant is
consistent with due process when the defendant “has established minimum
contacts with the forum state, and the exercise of jurisdiction comports with
traditional notions of fair play and substantial justice.” Kelly, 301 S.W.3d at 657
(Tab 8) (quoting Moki Mac, 221 S.W.3d at 575 and International Shoe Co. v.
Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 90 L. Ed. 95 (1945).
3. When the plaintiff fails to meet its initial burden of alleging sufficient
purposeful minimum contacts, the fact that the defendant is a
nonresident defeats personal jurisdiction.
A defendant establishes minimum contacts with a state “when it
purposefully avails itself of the privilege of conducting activities within the forum
state, thus invoking the benefits and protections of its laws.” Kelly, 301 S.W.3d at
657–58 (Tab 8) (quoting Retamco Operating, Inc. v. Republic Drilling Co., 278
S.W.3d 333, 338 (Tex. 2009). There are “three parts to a ‘purposeful availment’
inquiry.” Moki Mac, 221 S.W.3d at 575 (quoting Michiana Easy Livin’ Country,
35
Inc. v. Holten, 168 S.W.3d 777, 784–85 (Tex. 2005)). First, only the defendant’s
contacts with the forum are relevant, “not the unilateral activity of another party or
a third person.” Id. Second, the contacts relied on “must be purposeful rather than
random, fortuitous, or attenuated.” Id. And third, the “defendant must seek some
benefit, advantage, or profit by ‘availing’ itself of the jurisdiction.” Id. (quoting
Michiana, 168 S.W.3d at 785).
It is not enough, however, merely to take any purposeful action in Texas.
The defendant’s actions must satisfy the requirements of either general or specific
jurisdiction. All Star Enter., Inc. v. Buchanan, 298 S.W.3d 404, 412 (Tex. App.—
Houston [14th Dist.] 2009, no pet.) (“There are two types of personal jurisdiction:
specific and general.”); PHC-Minden, 235 S.W.3d at 166 (United States Supreme
Court has “adopted the terms ‘specific’ and ‘general’ to describe the differing
types of personal jurisdiction”) (Tab 10). Specific jurisdiction is “based on
contacts arising from the dispute at issue,” while general jurisdiction is “predicated
on a party’s ‘continuous and systematic’ contacts with the forum.” PHC-Minden,
235 S.W.3d at 165 (Tab 10).
The plaintiff has the initial burden of pleading that a nonresident defendant
made purposeful minimum contacts with the state. Kelly, 301 S.W.3d at 658 (Tab
8). For the minimum contacts analysis, the plaintiff must allege that its claims
arose out of or are substantially related to the defendant’s contacts with Texas, or
36
that the defendant has continuous and systematic contacts with the state. Id.; Moki
Mac, 221 S.W.3d at 585; PHC-Minden, 235 S.W.3d at 165 (Tab 10).
Only if the plaintiffs meet the initial burden—by making specific allegations
sufficient to establish general or specific jurisdiction—must the defendant respond
by negating all grounds of jurisdiction. Kelly, 301 S.W.3d at 658 (Tab 8).
“Because the plaintiff defines the scope and nature of the lawsuit, the defendant’s
corresponding burden to negate jurisdiction is tied to the allegations in the
plaintiff’s pleading.” Id.
When the plaintiffs do not meet their burden of alleging purposeful
minimum contacts, the defendant need only submit an affidavit stating that it is not
a Texas resident to defeat personal jurisdiction. Id. at 658–59 (“If the plaintiff fails
to plead facts bringing the defendant within reach of the long-arm statute (i.e., for a
tort claim, that the defendant committed tortious acts in Texas), the defendant need
only prove that it does not live in Texas to negate jurisdiction.”).
Even where the plaintiffs do allege purposeful minimum contacts, the
defendant can negate jurisdiction either factually or legally. Id. at 659. Factually,
it can present evidence that it has no contacts with Texas, thus disproving the
plaintiff’s allegations. Id. The plaintiff “risks dismissal of its lawsuit if it cannot
present the trial court with evidence establishing personal jurisdiction.” Id.
Legally, “the defendant can show that even if the plaintiff’s alleged facts are true,
37
the evidence is legally insufficient to establish jurisdiction.” Id. In other words,
the defendant prevails if it shows the claims do not arise from the contacts or that
its contacts with the state are not continuous and systematic. Id.; PHC-Minden,
235 S.W.3d at 165 (Tab 10).
V. ARGUMENT
Sole issue: The trial court erred by denying Preston’s special appearance because
Appellees failed to plead sufficient allegations to establish personal jurisdiction
and because Preston is not subject to specific or general jurisdiction in Texas.
A. Appellees failed to meet their initial burden of pleading facts to show that
Preston is subject to personal jurisdiction in Texas.
Though it was not addressed in the intervenors’ petition and not clear from
their briefing, Appellees have claimed that Preston is subject both to specific and
general personal jurisdiction in Texas court. CR 269–70 (Tab 4). The allegations
in the petition and evidence offered in Appellees’ responses to Preston’s special
appearance,17 however, were insufficient to establish either.
In their petition, the intervenors failed to allege that Preston committed any
act in Texas, much less any act that gave rise to their claims. As discussed in detail
above, while the intervenors pleaded generally that Preston misrepresented the
value of TSI/NC12 to potential investors and “all Defendants conspired to commit
17
Appellees also argued that even though Preston supported his special appearance with a sworn
affidavit attesting to every material fact, the special appearance was not verified. CR 264–65
(Tab 4). This argument has been explicitly rejected by this court. Washington DC Party Shuttle,
LLC v. iGuide Tours, LLC, 406 S.W.3d 723, 731 (Tex. App.—Houston [14th Dist.] 2013, pet.
denied) (en banc).
38
fraud,” not a single allegation connects any misrepresentation or act in furtherance
of any conspiracy to Texas. See CR 132 ¶ 89 (Tab 2); section II.D, supra. None
of the intervenors are even Texas residents. CR 105–08 (Tab 2).
Instead, the only pleaded basis for personal jurisdiction over Preston are the
generic allegations that “Preston has engaged in business in Texas” and “[p]ersonal
jurisdiction over all defendants is proper in the state of Texas because NC12 is
headquartered in Houston, Texas and the tortious conduct alleged herein occurred
in or was directed at the State of Texas.” CR 110 ¶ 33, 114 ¶ 44 (Tab 2). This
type of generalization is insufficient to meet the pleading burden. Waterman
Steamship Corp. v. Ruiz, 355 S.W.3d 387, 398, 403–04 (Tex. App.—Houston [1st
Dist.] 2011, pet. denied). See also Frank A. Smith Sales, Inc. v. Atl. Aero, Inc., 31
S.W.3d 742, 747 (Tex. App.—Corpus Christi 2000, no pet.) (The “third-party
petition stated only that [the defendant] had committed acts of negligence, without
specifying what those negligent acts were, or where they occurred. Therefore, [the]
petition fell well short of pleading sufficient allegations to show jurisdiction in
Texas.”). The intervenors failed to plead any facts showing that Preston in fact
engaged in business, or committed any tort, in Texas. Indeed, the petition fails to
allege a single action taken by Preston in Texas. See, e.g., CR 114–33 (Tab 2).
Because the intervenors failed to plead facts showing that Preston made
misrepresentations or conspired to make misrepresentations in Texas, or any facts
39
showing that Preston had any continuous and systematic contacts with this state,
Preston needed only prove that he is not a Texas resident to defeat personal
jurisdiction. See Kelly v. Gen. Interior Const., Inc., 301 S.W.3d 653, 658–59 (Tex.
2010) (Tab 8) (“If the plaintiff fails to plead facts bringing the defendant within
reach of the long-arm statute (i.e., for a tort claim, that the defendant committed
tortious acts in Texas), the defendant need only prove that it does not live in Texas
to negate jurisdiction.”); Vosko v. Chase Manhattan Bank, N.A., 909 S.W.2d 95, 99
(Tex. App.—Houston [14th Dist.] 1995, writ denied) (citing Siskind v. Villa
Found. for Educ., Inc., 642 S.W.2d 434, 437–38 (Tex. 1982)) (When “the plaintiff
does not allege that the defendant performed a specific act in Texas, the
defendant's evidence that he is a nonresident is enough to carry his burden of
proof.”).
Preston’s unrefuted affidavit establishes he is a Massachusetts resident and
not a Texas resident. CR 87 ¶ 5 (Tab 1). The intervenors affirmatively plead that
Preston is a Massachusetts resident. CR 110 ¶ 33 (Tab 2). The trial court erred by
denying Preston’s special appearance on this basis alone.
B. Because Appellees do not allege that any of Preston’s alleged contacts with
Texas give rise the surviving claims and no evidence suggests any link, there
is no specific jurisdiction as a matter of law.
Although nearly two years passed between the bankruptcy court’s order
dismissing all other causes of action and Appellees’ two briefs in opposition to
40
Preston’s special appearance, Appellees never amended their petition to include
any jurisdictional facts relating to the claims remanded by the bankruptcy court.
CR 237 (Tab 3); CR 257 (Tab 4); CR 413 (Tab 5). See also Kelly, 301 S.W.3d at
659 n.6 (Tab 8) (If “the plaintiff’s evidence does not fall within the scope of the
factual allegations in the pleading, then the plaintiff should amend the pleading for
consistency.”). Appellees tried to overcome their failure to plead jurisdictional
facts by including more detail in their response and supplemental response
opposing Preston’s special appearance, but the evidence considered by trial court
in addition to the petition must comply with the requirements of Rule 120a, and
even then, it “merely supports or undermines the allegations in the pleadings.” Id.
at 658 n.4; TEX. R. CIV. P. 120a, 45(a) (defining pleadings as petitions and
answers).
Regardless, there is no allegation, much less any evidence, that Preston’s
alleged misrepresentations of TSI / NC12’s value to investors, or any act in
furtherance of his alleged conspiracy to commit these misrepresentations, were
made in Texas. The intervenors do not make any such allegation in their petition
or in their response or supplemental response to Preston’s special appearance.
Rather, Appellees assert that there is specific jurisdiction over Preston
because: “[t]he acts and events complained of in this litigation [] arise directly
from Preston’s activities as a director of and fundraiser for TSI and NC12 – both
41
Texas companies” and because “[i]n raiding funds for TSI and NC12, through
fraudulent misrepresentations and then denuding the companies of their assets,
Preston . . . could reasonably foresee that NC12 and its shareholders and investors
would suffer direct economic injury.” CR 269–70 (Tab 4).
Appellees mistake the law. Preston’s mere status as a director of even a
“Texas corporation” would be insufficient to support Texas jurisdiction for
misrepresentation claims that were not made or relied on in Texas. The
“reasonable foreseeability” analysis for personal jurisdiction has been explicitly
rejected by the Texas Supreme Court. All claims relating to the “denuding” of
corporate assets have been dismissed by the bankruptcy court. There is no
allegation, much less any evidence, that any of Preston’s contacts with Texas give
rise to the surviving claims. There is no specific jurisdiction as a matter of law.
1. Specific jurisdiction requires that the alleged jurisdictional contacts
give rise to the plaintiff’s alleged injury.
Specific jurisdiction exists when the defendant purposefully avails himself
of conducting activities in the forum and “the cause of action arises from or is
related to those contacts or activities.” Kelly, 301 S.W.3d at 658 (Tab 8). See also
Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 576 (Tex. 2007) (“liability
must have arisen from or related to those contacts.”). Specific jurisdiction depends
on an “activity or an occurrence that takes place in the forum State and is therefore
subject to the State’s regulation.” Goodyear Dunlop Tires Operations, S.A. v.
42
Brown, 131 S. Ct. 2846, 2851, 180 L. Ed. 2d 796 (2011) (citation omitted). In a
specific jurisdiction analysis, the court thus focuses on “the relationship among the
defendant, the forum[,] and the litigation.” Kelly, 301 S.W.3d at 658 (Tab 8)
(quoting Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338
(Tex. 2009)) (alteration in original).
Jurisdiction for each claim must stand on its own merits. Id. at 660.
(performing claim-by-claim analysis to determine whether each claim arose out of
alleged forum contacts); Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266,
274–75 (5th Cir. 2006) (specific jurisdiction is a claim-specific inquiry). This is
especially significant here, as all of the original plaintiffs’ claims, and the
intervenors’ shareholder oppression, fiduciary duty, and related conspiracy claims,
have been dismissed. CR 237 (Tab 3).
For a tort claim, the plaintiff must plead that the defendant committed a
tortious act in Texas. Waterman Steamship, 355 S.W.3d at 403. For
misrepresentation claims, the relevant location for jurisdiction is the place where
the misrepresentation was made. BMC Software Belgium, N.V. v. Marchand, 83
S.W.3d 789, 796–97 (Tex. 2002) (Tab 9); Kelly, 301 S.W.3d at 660 (Tab 8);
Glencoe Capital Partners II, L.P. v. Gernsbacher, 269 S.W.3d 157, 167 (Tex.
App.—Fort Worth 2008, no pet.). “[D]ue process will not permit the plaintiff to
use insignificant acts in the forum to assert jurisdiction over all co-conspirators.”
43
Nat’l Indus. Sand Ass’n v. Gibson, 897 S.W.2d 769, 773 (Tex. 1995) (quoting
Siskind v. Villa Found. for Educ., Inc., 642 S.W.2d 434, 438 (Tex. 1982)). Nor can
the acts of co-conspirators be imputed to a nonresident defendant for the purposes
of personal jurisdiction. See id.
2. There are no allegations in the intervenors’ petition that could give
rise to specific jurisdiction over Preston.
As discussed at length above, there is no allegation in the intervenors’
petition that Preston’s alleged misrepresentations of NC12’s value to investors, or
any act in furtherance of his alleged conspiracy to commit these
misrepresentations, occurred in Texas.
Appellees do not attempt to remedy this problem in their special appearance
briefing or the evidence attached thereto. Rather, Appellees compile a list of
Preston’s alleged business trips and director positions on behalf of a variety of
entities over the last 25 years. See, e.g., CR 260–64, 269 (Tab 4). Appellees make
no attempt to link any of Preston’s alleged forum contacts to Preston’s alleged
misrepresentations of the value of TSI / NC12 to potential investors, or to any
conspiracy to commit such a misrepresentation.
44
3. There are no allegations or evidence in Appellees’ special
appearance briefing that could give rise to specific jurisdiction over
Preston.
Appellees refer to the same set of alleged forum contacts to support both
specific and general jurisdiction over Preston. CR 260–64, 269 (Tab 4). See
section II.F, supra. Each is examined in turn below.
a) Service as a director of foreign entities.
Appellees assert generally that their claims against Preston “arise directly
from Preston’s activities as a director of and fundraiser for TSI and NC12 – both
Texas companies.”18 CR 269–79 (Tab 4). The United States Supreme Court has
held that service as a director of a corporation, by itself, does not create personal
jurisdiction over that director—even when the corporation is organized in the
forum state. Shaffer v. Heitner, 433 U.S. 186, 215–16, 97 S. Ct. 2569, 53 L. Ed. 2d
683 (1977) (in shareholder derivative suit against Delaware corporation’s directors
and officers alleging that defendants “misus[ed] their power,” Delaware court did
not have personal jurisdiction over defendants because plaintiffs did not allege any
acts by the defendants in Delaware, and service as a director did not show that
defendants purposefully availed themselves of conducting activities in Delaware).
18
Appellees also refer generally to Preston’s status as director of Nevada corporation MMT as
supporting personal jurisdiction. CR 260–61, 269–70 (Tab 4). There is no allegation and no
basis whatsoever to link Preston’s service as director of Nevada corporation MMT in the 1990s
to any claim in this matter. See id.; CR 287–89 (Tab 4); CR 132 ¶ 89 (Tab 2).
45
There is even less of a basis to claim that Preston’s service as a director of a
Nevada corporation with an office in Texas created personal jurisdiction over him.
This is because the real locus of Appellees’ harm is the place where the
misrepresentations were made. BMC Software, 83 S.W.3d at 796–97 (Tab 9)
(“Here, Marchand alleges that his fraud and negligent misrepresentation claims
arise from the alleged Watson–Ordelheide conversation in Texas. But they do not.
The nature of the claims demonstrate that they can only arise from BMCB’s
contact with Marchand, which all occurred outside of Texas. … BMCB made no
representations to Marchand in Texas, and he did not rely to his detriment on the
conversation in Texas.”) (citation omitted). See also Kelly, 301 S.W.3d at 660
(Tab 8) (in order to establish specific jurisdiction for fraud, the plaintiff must
allege that the fraudulent acts occurred in Texas).
BMC Software involved an alleged fraudulent misrepresentation made in
Europe. 83 S.W.3d at 796–97 (Tab 9). The plaintiff claimed that jurisdiction was
proper in Texas because the defendant’s officers met in Texas and, during that
meeting, planned to defraud the plaintiff. Id. at 796. The Texas Supreme Court
disagreed, however, noting that even if the defendant’s officers discussed the plan
to defraud the plaintiff in Texas, it was the misrepresentations themselves—made
in Europe—that gave rise to the cause of action. Id. at 796–97.
46
Here, Appellees have neither pleaded nor offered evidence to show that any
of the alleged misrepresentations giving rise to their claims took place in Texas.
See sections II.D, II.F, supra. Further, there is no allegation or evidence that
Preston ever even did business out of the TSI or NC12 Texas office. Preston
participated in board meetings from Massachusetts, Switzerland, or Germany,
never Texas. See CR 86–87 ¶¶ 2, 7 (Tab 1); CR 325, 328 (Tab 4). Appellees do
not allege that Preston made any representation or undertook any action supporting
any conspiracy while participating in these board meetings.
Preston is not subject to specific jurisdiction on the bare fact of his status as
director for corporations with Texas offices.
b) Business trips to Texas.
Appellees spill much ink describing the business trips Preston took in a
representative capacity over the last 25 years. CR 260–64 (Tab 4). For the most
part, these trips fall well before or well after the relevant window for investment
into TSI or NC12, making it impossible that they give rise to the Appellees’
remaining claims. Most significant, however, is Appellees’ conspicuous failure to
allege any connection between a single one of these business trips and the alleged
misrepresentations or conspiracy.
Board meetings and business trips in the 1990s. Appellees never allege that
Preston’s 1990s-era Texas business trips give rise to their claims. CR 87 ¶ 5 (Tab
47
1); CR 260 (Tab 4). Nor could they. Appellees themselves state that MMT’s
business in Texas concerned a waste recycling project using MMT’s catalytic
extraction processing (“CEP”) technology, not potential investors in TSI or NC12.
CR 260–61, 408–09 (Tab 4). TSI would not be formed until 2006, or do business
in Texas until 2008. CR 281 (Tab 4). Preston’s MMT business trips do not form a
basis for specific jurisdiction.
Business trips with Quantum in 2004. Appellees never claim that Preston’s
alleged three business trips to Texas in 2004 to meet with Collins19 give rise to
their claims that Preston allegedly misrepresented the value of NC12 to potential
investors. CR 408–09, 261 (Tab 4). Indeed, TSI still would not exist for another
two years or do business for another four. CR 281 (Tab 4). Preston’s Quantum
business trips do not form a basis for specific jurisdiction.
Business trips with C Change between 2008–2011. Appellees never allege
that any of Preston’s business trips with C Change related in any way to
misrepresentations to investors about the value of TSI / NC12. CR 262–64, 319 at
25:3–28:21, 323 at 49:13-24, 335–38, 343–48 (Tab 4); CR 672–73 ¶¶ 5–6 (Tab 6).
Appellees do not claim that Preston’s 2008 meeting in Houston with Collins
and Sydow related to any alleged misrepresentations to investors. CR 262, 269,
19
Collins is not an intervenor, but an original plaintiff and former TSI/NC12 director whose
fiduciary duty and conversion claims against Preston were dismissed and abated by the
bankruptcy court. CR 234–37 (Tab 3).
48
319 at 25:3–28:21, 339–42 (Tab 4). With respect to the meeting in 2009 or early
2010, Preston’s C Change colleague Russell Read testified that he and Preston20
travelled to Texas during that period for one meeting with Russian technology
partners for the formation of a joint venture MIT was exploring with the Russian
government. CR 323 at 49:13–50:4 (Tab 4). Preston gave evidence of four other
approximately one-day trips for C Change between 2009–2011.21 There is no
evidence, nor even any allegation, that any of these trips related in any way to the
Appellees’ surviving claims.
Business trip to testify regarding NC12 in divorce proceeding. Preston
traveled to Texas in October 2010 to testify in Sydow’s divorce proceeding. CR
339–42 (Tab 4). Preston testified exclusively about NC12 assets and financial
operation. See CR 352–70 (Tab 4). But there can be no connection between any
alleged post-August 2010 contacts with Texas and misrepresentations to potential
investors in NC12, including this testimony, because August 2010 is the last
alleged investment giving rise to the surviving claims, and there is no allegation or
20
Preston does not recall this trip. CR 673 ¶ 6 (Tab 6). Read discusses the matter in context
with his work with Preston at C Change. CR 323 at 49:13-24 (Tab 4). While it is not clear from
the record whether this alleged trip occurred on behalf of MIT or C Change, either way, there is
no evidence that it related in any way to Appellees’ surviving claims.
21
Preston’s flight records establish these trips occurred April 2–3, 2009 (Houston) (CR 335–38),
May 3–4, 2009 (Houston) (CR 343–44), December 30–31, 2010 (Dallas) (CR 347–48), and
March 16–17, 2011 (Austin) (CR 345–46) (Tab 4). See also CR 672–73 ¶¶ 5–6 (Tab 6). As the
intervenors affirmatively plead, the last intervenor’s investment was in August 2010. CR 104–
08 (Tab 2). Preston thus could not have made any relevant misrepresentations nor furthered the
alleged conspiracy to misrepresent NC12’s value to the intervenors on the latter two trips.
49
evidence that this or any post-August 2010 Preston contact relates in any way to
any conspiracy claim. CR 104–08 (Tab 2). Indeed, Appellees never allege any
link between this trip to Texas and any surviving claim. CR 269 (Tab 4).
Preston’s October 6, 2010 trip to Texas to give testimony in Sydow’s divorce
proceeding does not give rise to specific jurisdiction.
Business trip with TEM Capital. Appellees never allege that Preston’s May
2–4, 2011 business trip to Texas to attend a foreclosure sale and cement plant
inspection for TEM Capital relates in any way to their surviving claims. See CR
673 ¶ 7 (Tab 6); 263–64, 269, 349–50 (Tab 4); CR 414, 427 (Tab 5); CR 673 ¶ 7
(Tab 6). Again, the last relevant investment occurred nearly a year before, and no
evidence suggests this trip was related to any conspiracy to defraud NC12’s
investors regarding the value of NC12’s shares. CR 104–08 (Tab 2).
In sum, not a single one of Preston’s business trips give rise to the
Appellees’ surviving claims. Thus, not a single one supports specific jurisdiction.
c) 2004: Phone calls and mail to Collins.
As discussed above, Preston’s 2004 business trips to Texas to meet with
Collins did not relate to the surviving claims. As Collin himself states, Preston’s
subsequent telephone calls and shipment of records related to the same purposes as
his business trips: the commercial development of the CEP technology, not plans
50
to mislead investors of TSI two years later about the value of TSI. CR 409 ¶ 9
(Tab 4). These alleged contacts do not provide a basis for specific jurisdiction.
d) 2006: Metal Catalyst Ventures’ designation of address as
TSI address.
A 2006 Nevada state record shows someone named Linda Kulik listed
Preston as a director of Nevada corporation Metal Catalyst Ventures, Inc. CR 315
(Tab 4). Kulik listed TSI’s Houston address as Preston’s address. See id.; CR 281
(Tab 4). Appellees allege no other facts regarding Metal Catalyst Ventures, not
even in their briefing. See CR 262 (Tab 4). Appellees never allege any link
between Metal Catalyst Ventures to the claims in the lawsuit, nor do they provide
any evidence that Preston actually resided at or did business at TSI’s address. See
section II.D, II.F, supra.
Preston submitted an unrefuted affidavit stating that he never served as a
director of Metal Catalyst Ventures and never listed the TSI address as his own.
CR 673 ¶ 9. (Tab 6). Preston has never maintained an office in Texas. CR 87 ¶ 8
(Tab 1). This is not a purposeful minimum contact supporting jurisdiction over
Preston because it is not a contact by Preston. See Guardian Royal Exch. Assur.,
Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 227 (Tex. 1991) (“the
contact must have resulted from the nonresident defendant's purposeful conduct
and not the unilateral activity of the plaintiff or others”). See also Helicopteros
Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 417, 104 S. Ct. 1868, 1873
51
(1984) (the “unilateral activity of another party or a third person is not an
appropriate consideration when determining whether a defendant has sufficient
contacts with a forum State to justify an assertion of jurisdiction.”). This alleged
“contact” provides no basis for specific jurisdiction over Preston.
e) 2008: Personal check.
In 2008, Preston allegedly wrote a personal check to BOS, Inc., a Turks and
Caicos corporation with an alleged bank account in Texas. CR 387 (Tab 4); CR 25
¶ 2. Two years later, BOS, Inc. wired Preston back the same sum. CR 384 (Tab
4). There is no indication that Preston purposefully availed himself of any Texas-
related benefits by writing a personal check to a foreign entity, or that this
transaction has any relationship to the litigation. See Helicopteros, 466 U.S. at
416–17 (“Common sense and everyday experience suggest that, absent unusual
circumstances, the bank on which a check is drawn is generally of little
consequence to the payee and is a matter left to the discretion of the drawer.”)
(footnote omitted). The BOS, Inc. payments are not a minimum contact with
Texas and do not give rise to specific jurisdiction.
f) 2012: Alleged alter-ego JK Claims’ purchase of litigation
claims in the Kaiser Litigation.
Appellees’ fantastical story of Preston secretly purchasing the claims in the
Kaiser Litigation through alleged alter-ego JK Claims still does not relate in any
way to any potential misrepresentation to investors of NC12—the last of which
52
invested two years prior—or give any conceivable support to a conspiracy to
defraud potential investors in NC12. CR 414–24 (Tab 5).
The Kaiser Litigation concerned disputes between the members of Texas
Syngas LLC, not misrepresentations to potential investors in TSI or NC12 of TSI
or NC12’s value. CR 432–40 (Tab 5). The first action intervenors allege relating
to JK Claims, an application to reserve its name, occurred in June 2012, two years
after the last investor invested in NC12. CR 527, 414–24 (Tab 5). Even if taken as
true—which they should not be—the intervenors’ conspiracy theories regarding JK
Claims have nothing to do with the claims at issue in this matter and do not form a
basis for specific jurisdiction.
In sum, none of Preston’s alleged contacts with Texas relate to the claims in
this case. Appellees’ allegations and evidence do not support the exercise of
specific jurisdiction. Kelly, 301 S.W.3d at 659 (Tab 8).
4. Appellees’ claim that Preston “could reasonably foresee that NC12
and its shareholders and investors would suffer direct economic
injury” because of his alleged misrepresentations is not a basis for
specific jurisdiction as a matter of law.
Appellees claim that Preston is subject to specific jurisdiction because “[i]n
raiding funds for TSI and NC12, through fraudulent misrepresentations and then
denuding the companies of their assets, Preston . . . could reasonably foresee that
NC12 and its shareholders and investors would suffer direct economic injury.” CR
269 (Tab 4). This argument echoes the intervenors’ general allegation in the
53
petition that there is personal jurisdiction because tortious conduct “was directed at
the State of Texas.” CR 114 ¶ 44 (Tab 2).
The Texas Supreme Court has unequivocally rejected the notion that
jurisdiction can arise purely because actions caused harm to Texas residents or
because a tort is “directed” at Texas residents. Michiana Easy Livin’ Country, Inc.
v. Holten, 168 S.W.3d 777, 788–92 (Tex. 2005) (surveying case law and
constitutional considerations). And in this case, because there are no claims
belonging to the original plaintiffs, and no intervenor is a Texas resident (including
Appellees), the only conceivable Texas harm Appellees allege is harm to NC12, a
Nevada corporation—but the bankruptcy court dismissed those claims.
There is thus no basis in the pleadings, the evidence, or the law for specific
jurisdiction over Preston.
C. Because Preston’s alleged contacts with Texas are not substantial,
continuous, or systematic, there is no general jurisdiction as a matter of law.
1. General jurisdiction requires the defendant to have substantial,
continuous, and systematic contacts with Texas.
General jurisdiction exists “when a defendant’s contacts in a forum are
continuous and systematic so that the forum may exercise personal jurisdiction
over the defendant even if the cause of action did not arise from or relate to
activities conducted within the forum state.” BMC Software Belgium, N.V. v.
Marchand, 83 S.W.3d 789, 796 (Tex. 2002) (Tab 9). For general jurisdiction, the
54
plaintiff must show the nonresident defendant engaged in “substantial activities” in
Texas. Guardian Royal Exch. Assur., Ltd. v. English China Clays, PLC, 815
S.W.2d 223, 230 (Tex. 1991).
A general jurisdiction inquiry “involves a ‘more demanding minimum
contacts analysis’” than a specific jurisdiction inquiry, with a “substantially higher
threshold.” PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163, 168
(Tex. 2007) (Tab 10). “Usually, ‘the defendant must be engaged in longstanding
business in the forum state, such as marketing or shipping products, or performing
services or maintaining one or more offices there; activities that are less extensive
than that will not qualify for general in personam jurisdiction.’” Id. (quoting 4
Wright & Miller, FEDERAL PRACTICE & PROCEDURE § 1067.5).
The defendant’s activities must be so extensive that it is essentially at home
in the state, and therefore should be subject to suit there for any claim—regardless
of where the claim occurred—as a resident would be. Goodyear Dunlop Tires
Operations, S.A. v. Brown, 131 S. Ct. 2846, 2853–54, 180 L. Ed. 2d 796 (2011)
(“For an individual, the paradigm forum for the exercise of general jurisdiction is
the individual’s domicile; for a corporation, it is an equivalent place, one in which
the corporation is fairly regarded as at home.”). As general jurisdiction is “dispute-
blind,” the alleged actions underlying the lawsuit “should not be the focus in
assessing continuous and systematic contacts—contacts on which jurisdiction over
55
any claim,” not just the one at issue, may be based. PHC-Minden, 235 S.W.3d at
169 (Tab 10). The relevant period for consideration of forum contacts for general
jurisdiction ends at the time the suit is filed. Id.
Because it is so easy to let case-specific facts improperly weight a general
jurisdiction analysis, the Texas Supreme Court has suggested a test that “properly
frames the issue”: would the nonresident’s contacts with Texas “support
jurisdiction even for a hypothetical cause of action arising from its sale of a
product in Germany that injured a German citizen?” Id. (citation omitted). In
other words: are Preston’s Texas activities in Texas so pervasive that he should be
sued in Texas in a case where none of the operative facts relate to Texas? The
answer here is no.
2. The sporadic contacts with Texas in a representative capacity that
Appellees allege are nothing like the substantial, continuous, and
systematic contacts required to establish general jurisdiction.
Appellees refer to the same set of alleged forum contacts to support both
specific and general jurisdiction over Preston. CR 260–64, 269 (Tab 4); section
II.F, supra. The vast majority of alleged contacts cannot be considered contacts
for purposes of establishing general jurisdiction over Preston, either because they
do not demonstrate that Preston availed himself of the privilege of conducting
activities in Texas (service as a director of a foreign entity) or they were made in a
representative capacity (business travel). Each is examined again in turn below in
56
the context of general jurisdiction. See Am. Type Culture Collection, Inc. v.
Coleman, 83 S.W.3d 801, 809 (Tex. 2002) (for general jurisdiction, all alleged
forum contacts in the relevant time period must be “carefully investigated,
compiled, sorted, and analyzed for proof of a pattern of continuing and systematic
activity.”). The quality, not quantity, of the contacts is relevant, and the relevant
period ends at the date of filing of the suit—here, July 26, 2011. Id.; CR 6.
a) Director of foreign entities.
The mere fact of service as a director of corporations which reside in Texas,
without more, is insufficient as a matter of law to create general jurisdiction over
Preston in Texas. Shaffer v. Heitner, 433 U.S. 186, 215–16, 97 S. Ct. 2569, 53 L.
Ed. 2d 683 (1977) (fact that defendants were directors and officers of Delaware
corporation did not demonstrate that they had purposefully availed themselves of
the privilege of conducting activities in Delaware in a way that would justify
bringing them before a Delaware tribunal).
Preston participated in TSI and NC12 board meetings from Massachusetts,
Switzerland, or Germany, never Texas. See CR 86–87 ¶¶ 2, 7 (Tab 1); CR 325,
328 (Tab 4). Indeed, Appellees allege no acts taken by Preston in Texas in
connection with his service as a director for TSI and NC12, or any other entity.
Even if they had, as discussed in detail below, any such acts would not be
sufficient to subject him to general jurisdiction in Texas as an individual because
57
he did not do them in his individual capacity. Wright v. Sage Eng’g, Inc., 137
S.W.3d 238, 250 (Tex. App.—Houston [1st Dist.] 2004, pet. denied).22
b) Business trips to Texas.
Preston’s contacts with Texas in his representative capacity do not qualify as
contacts for general jurisdiction because there is no allegation that these contacts
involved tortious activities or that the entities were Preston’s alter ego. Under
Texas law, corporations are presumed to be separate entities from their directors,
officers, and shareholders. See Washington DC Party Shuttle, LLC v. IGuide
Tours, 406 S.W.3d 723, 738–39 (Tex. App.—Houston [14th Dist.] 2013, pet.
denied). An individual's transaction of business within the state solely as a
corporate officer does not create personal jurisdiction over that individual though
the state may have personam jurisdiction over the corporation. Stuart v.
Spademan, 772 F.2d 1185, 1197 (5th Cir. 1985). An individual’s representative
contacts are not their own absent other evidence that the contact was independently
tortious, or proof sufficient to pierce the corporate veil. Siskind v. Villa Found. for
Educ., Inc., 642 S.W.2d 434, 438 (Tex. 1982); Hoffmann v. Dandurand, 180
S.W.3d 340, 347 (Tex. App.—Dallas 2005, no pet.).
22
This rule is sometimes referred to as the fiduciary shield doctrine. Id. Appellees cite Wright
for the proposition that Preston’s acts as a director can create personal jurisdiction if it is those
acts which give rise to the lawsuit. CR 270 (Tab 4). However, that is only true in the case of
specific jurisdiction, not general jurisdiction, as the Wright court explicitly noted. 137 S.W.3d at
250. As already discussed above, Appellees do not allege any acts by Preston in Texas—in his
capacity as a director or otherwise—that relate to the claims in this case.
58
This Court has held that general jurisdiction over an individual may not be
based on jurisdiction over an entity with which an individual is associated unless
the entity is his or her alter ego. Vosko v. Chase Manhattan Bank, N.A., 909
S.W.2d 95, 99 (Tex. App.—Houston [14th Dist.] 1995, writ denied). See also
Hoffmann, 180 S.W.3d at 347. The alter ego doctrine applies only when there is
such unity between the corporation and the individual that the separateness of the
corporation has ceased. Vosko, 909 S.W.2d at 99. Courts consider evidence such
as (1) the payment of alleged corporate debts with personal checks or other
comingling of personal and corporate funds; (2) representations that the individual
will financially back the corporation; (3) diversion of company profits to the
individual for personal use; (4) inadequate capitalization; (5) other failures to keep
corporate and personal assets separate. Hoffmann, 180 S.W.3d at 347.
Because personal jurisdiction involves due-process considerations that may
not be overridden by statutes or case law, jurisdictional veil-piercing and
substantive veil-piercing involve different elements of proof. All Star Enter., 298
S.W.3d at 422; PHC-Minden, 235 S.W.3d at 174 (Tab 10). For jurisdictional
purposes, the factors considered must relate to the actor’s forum contacts. See
PHC Minden, 235 S.W.3d at 174 (Tab 10) (observing that common veil-piercing
factors such undercapitalization and common names between entities do “not
59
affect whether each has sufficient contacts with the forum for jurisdictional
purposes.”).
Notably, while Appellees occasionally suggest Preston “controls” certain
entities, with the exception of JK Claims (discussed below), Appellees never allege
nor present any evidence that the various entities Preston represented in his
contacts with Texas were Preston’s alter ego. Mere status as an officer, director or
majority shareholder of an entity alone is insufficient to support a finding of alter
ego. Tryco Enter., Inc. v. Robinson, 390 S.W.3d 497, 525 (Tex. App.—Houston
[1st Dist.] 2012, pet. dism’d). Yet nearly all of Preston’s alleged Texas contacts
relate to business trips to Texas on behalf of entities for whom Preston was a
director or manager:
Business trips with a nonprofit and MMT in the 1990s. Appellees never
allege the nonprofit or MMT were alter-egos of Preston’s, or that Preston
committed any torts on his trips that would give rise to jurisdiction over Preston in
his personal capacity. CR 288–89 (Tab 4); CR 87 ¶ 5 (Tab 1). Preston’s 1990s-era
Texas trips or Texas-related projects on behalf of the nonprofit and MMT do not
constitute contacts supporting general jurisdiction over Preston as a matter of law.
60
Business trips with C Change between 2008–2011.23 With C Change,
Preston allegedly visited Texas in November 2008 with Read to attend a meeting
with Collins and Sydow; in “2009 or early 2010” with Read regarding a joint
venture with MIT and Russian technology partners; and four other times between
2009–2011 for one-day business trips. CR 319 at 25:3–28:21, 323 at 49:13-24,
335–48 (Tab 4); CR 672–73 ¶¶ 5–6 (Tab 6). Appellees do not dispute that Preston
took these trips in his representative capacity on behalf of C Change. CR 262–64
(Tab 4). Nor do Appellees allege that C Change is an alter ego of Preston’s, or that
Preston committed fraud or any other tort in the course of his contacts with Texas
through C Change. Preston’s Texas trips on behalf of C Change between do not
constitute contacts supporting general jurisdiction as a matter of law.
Business trip in 2010 to testify regarding NC12 in divorce proceeding. It is
undisputed that Preston traveled to Texas on October 6, 2010 to testify about
NC12’s assets and operations in Sydow’s divorce proceeding. CR 331–70 (Tab 4).
While Appellees complain that the hearing transcript does not say “corporate
representative,” it is indisputable that Preston’s testimony exclusively concerned
NC12 assets and NC12’s financial operation. See CR 357 (discussing purpose of
Preston’s testimony as whether Sydow or NC12 owned a particular asset, or
23
Preston’s alleged 2004 contacts with Collins are discussed together in the next subsection. See
section V.C.2(c), infra.
61
whether Sydow was receiving money from NC12). The transcript contains no
questions whatsoever regarding Preston’s personal relationship with Sydow—or
indeed, anything other than NC12 financial operations and NC12 assets. CR 331–
70 (Tab 4).
Even if Preston had testified in his personal capacity, it would not be
evidence of purposeful availment of the benefits of acting in Texas. Preston did
not file for divorce in Texas, Sydow did. See Guardian Royal Exch. Assur., Ltd. v.
English China Clays, P.L.C., 815 S.W.2d 223, 227 (Tex. 1991) (“the contact must
have resulted from the nonresident defendant's purposeful conduct and not the
unilateral activity of the plaintiff or others”). See also Helicopteros Nacionales de
Colombia, S.A. v. Hall, 466 U.S. 408, 417–18, 104 S. Ct. 1868, 1873 (1984) (the
“unilateral activity of another party or a third person is not an appropriate
consideration when determining whether a defendant has sufficient contacts with a
forum State to justify an assertion of jurisdiction.”); Kulko v. Cal. Super. Ct., 436
U.S. 84, 93, 98 S. Ct. 1690, 1697 (1978) (holding it arbitrary to subject one parent
to suit in any state where other parent chooses to spend time while having custody
of child).
One isolated trip to give testimony in a divorce proceeding is no evidence of
any continuous and systematic relationship with Texas. Preston’s October 6, 2010
business trip does not support general jurisdiction.
62
Business trip with TEM Capital. Again, there is no dispute that Preston
made his May 2–4, 2011 trip to Texas to attend a foreclosure sale and inspect a
cement plant in connection with that sale as a representative of TEM Capital. CR
673 ¶ 7 (Tab 6); CR 349–51 (Tab 4). And again, there is simply no allegation,
much less any evidence, that TEM Capital is an alter ego of Preston’s or that
Preston did anything tortious on his trip that would support individual jurisdiction
over him.
In sum, not a single one of Preston’s business trips support general
jurisdiction over Preston individually.
c) 2004: Business trips, phone calls, and shipment of records
with Quantum.
While Collins disputes whether Preston acted as a representative of
Quantum during their 2004 interactions,24 there is no dispute that these 2004
contacts pertained to the development of MMT’s patented CEP technology. CR
408–09 ¶¶ 3–9 (Tab 4); CR 673 ¶¶ 6–8 (Tab 6). The intervenors affirmatively
assert that Quantum, not Preston, acquired MMT’s CEP technology in 1999 and
that Quantum, not Preston, licensed the CEP patents CR 115–16 ¶¶ 48, 50 (Tab 2).
24
Preston’s sworn declaration states that all his interactions with Collins during this time period
were as a representative of Quantum. CR 673 ¶ 8 (Tab 6). Collins claims he believed Preston to
be operating in his personal capacity, rather than as a representative of Quantum during these
2004 meetings and communications. CR 408–09 ¶¶ 3–9, 11 (Tab 4).
63
While intervenors allege Quantum is “controlled” by Preston, there are no
allegations or evidence that Quantum is Preston’s alter ago. See, e.g., CR 115 ¶ 48
(Tab 2); CR 673 ¶ 10 (Tab 6) (Preston is one of 21 shareholders of Quantum).
There are no allegations or evidence, for example, that Preston comingled his
funds with Quantum, or personally diverted Quantum’s assets, or used Quantum’s
corporate form for his personal benefit. Despite Collins’ claims about his beliefs,
there is no evidence Preston was acting in anything other than his representative
capacity in his dealings with Collins in 2004, and there are no allegations that
Preston committed any tortious acts in the course of these 2004 dealings.
Moreover, none of the alleged 2004 contacts indicate Preston purposefully
availed himself of the privileges of acting within Texas. Even if Preston were
acting in his individual capacity, nothing indicates that Collins’ state of residence
was anything but incidental. Collins, not Preston, chose to reside in Texas. See
Guardian Royal Exch., 815 S.W.2d at 227; Helicopteros, 466 U.S. at 417–18;
Kulko, 436 U.S. at 93.
Even if these limited 2004 contacts—three trips, some telephone calls, and
one shipment of technical records—were included in a general jurisdiction
analysis, they hardly support the continuous and systematic contacts necessary to
give rise to general jurisdiction. See Helicopteros, 466 U.S. at 417–18.
64
d) 2006: Metal Catalyst Ventures’ designation of business
address at TSI address
The fact that an unrelated individual listed TSI’s Texas office address as
Preston’s address on a Nevada document regarding a Nevada corporation is not
minimum contact with Texas, much less one that would support general
jurisdiction. CR 315, 281 (Tab 4); CR 673 ¶ 9 (Tab 6). See Guardian Royal
Exch., 815 S.W.2d at 227; Helicopteros, 466 U.S. at 417–18; Kulko, 436 U.S. at
93.
e) 2008: Personal check
Appellees present no evidence regarding the context surrounding the
personal check Preston allegedly wrote to BOS, Inc., a Turks and Caicos
corporation. CR 387 (Tab 4); CR 25 ¶ 2. Certainly, they present no explanation as
to why Preston would know the foreign entity had a Texas bank account, or how
Preston could be said to have purposefully availed himself of benefits of doing
business in Texas by writing a check to such an entity. Guardian Royal Exch., 815
S.W.2d at 227; Helicopteros, 466 U.S. at 417–18; Kulko, 436 U.S. at 93. This is
not the type of purposeful, continuous, and systemic contact with Texas that gives
rise to general jurisdiction.
65
f) 2012: Alleged alter-ego JK Claims’ purchase of litigation
claims in the Kaiser Litigation
As a matter of law, Preston’s alleged Texas contacts in connection with JK
Claims occur too late to qualify for a general jurisdiction analysis in this case.
PHC-Minden, 235 S.W.3d at 169 (“the relevant period ends at the time suit is
filed.”) (Tab 10). Not only do Appellees fail to establish that JK Claims is an alter
ego of Preston’s, most significantly, they ignore the damning fact that the earliest
of JK Claims’ alleged activities, its application for name reservation with the Texas
Secretary of State, dates back to June 2012. CR 417, 527 (Tab 6). This is over a
year after the original plaintiffs filed suit, and nearly a year after Appellees
themselves filed their suit in intervention. CR 6; CR 102 (Tab 2).
Appellees’ convoluted alter-ego story amounts to nothing more than an
allegation that JK Claims kept poor records. Appellees fail entirely to establish JK
Claims as an alter ego of Preston’s. Preston’s declaration and Sydow’s deposition
testimony are unrefuted and establish that Quantum is the sole owner of JK
Claims. CR 432, 495 at 57:2–3, 498 at 66:19–67:20 (Tab 5); CR 673 ¶ 10 (Tab 6).
Appellees do not allege that Quantum is an alter ego of Preston. Rather, Appellees
simply assert that JK Claims is Preston’s alter ego on the bases that: half of the
funds for the Kaiser claims purchase came “from Boston” and half from Sydow;
certain JK Claims corporate documents are unsigned; and certain JK Claims
66
corporate documents do not reflect the ownership of shares in JK Claims (though
others do). CR 415–24, 529–31 (Tab 5).
There is no evidence that Preston personally supplied any funds for JK
Claims. Rather, Sydow testified the funds came from Quantum. CR 495 at 57:2–
3, 498 at 66:19–67:20 (Tab 5). And failure to comply with corporate formalities is
not a factor in considering whether alter ego exists. Howell v. Hilton Hotels Corp.,
84 S.W.3d 708, 714 (Tex. App.—Houston [1st Dist.] 2002, pet. denied).
There is no evidence that Preston comingled his personal debts or assets
with JK Claims or any of the others indicia of an alter ego entity. There is no
evidence that Preston personally funded the acquisition of the Kaiser litigation and
no evidence that the bankruptcy trustee would have objected if he had.25 There is
no evidence that Preston (or JK Claims or Quantum) did anything improper with
respect to JK Claims’ formation, or its acquisition or management of the Kaiser
claims. TEX. R. CIV. P. 120a(3) (requiring the trial court to consider the pleadings
and the evidence, not speculation and inference).
25
Appellees rely heavily on documents produced in the Kaiser litigation showing discussions
between JK Claims’ counsel and the bankruptcy trustee’s counsel, Gretchen McCord, in
connection with the sale. CR 421–24 (Tab 5) (referencing “Ex. I,” at CR 548–80). While one
half of the source of the funding is unclear, the other half is explicitly from Sydow. CR 564 (Tab
5). If the trustee objected to a defendant in the Kaiser litigation funding JK Claims’ acquisition
of the Kaiser claims, the trustee would have objected to Sydow, who was also a defendant in the
Kaiser litigation. CR 432 (Tab 5).
67
Therefore, even if the alleged JK Claims activity were not too late to support
jurisdiction of a matter of law, there would still be insufficient evidence to support
any finding that JK Claims was Preston’s alter ego. Serv. Corp. Intern. v. Guerra,
348 S.W.3d 221, 228 (Tex. 2011) (evidence is legally insufficient if there is there
is a complete absence of evidence of a vital fact, or the evidence offered to prove a
vital fact is no more than a mere scintilla); Garza v. Alviar, 395 S.W.2d 821, 823
(Tex. 1965) (evidence is factually insufficient if it is so weak that the finding
should be set aside).
3. Preston lacks any substantial, continuous, or systematic contact that
would render him at “at home” in Texas.
Standing against these tenuous Texas contacts are the following facts:
Preston has not lived in Texas since his infancy; has never done business in Texas
in his individual capacity; has never maintained an office in Texas; has never
engaged in any routine sales or other profit-making activities in Texas; does not
rent, own, or possess any real or personal property in Texas; has never taken out a
loan in Texas or guaranteed a debt owed to a Texas resident; does not maintain a
telephone, post office box, or other address in Texas; does not employ any persons
who live in or regularly travel to Texas for work; and has never incurred or paid
taxes in Texas. CR 86–89 ¶¶ 2–14, 74–85 (Tab 1). An out-of-state defendant who
merely does business with Texas businesses or customers will not be subject to
general jurisdiction if he does not have a lasting physical presence in the state.
68
Access Telecom, Inc. v. MCI Telecom. Corp., 197 F.3d 694, 717 (5th Cir. 1999).
Preston indisputably does not.
The Texas and United States Supreme Courts have made clear that brief,
sporadic trips to a forum state are insufficient to create general jurisdiction,
particularly when they are made in a representative capacity. PHC-Minden, 235
S.W.3d at 170 (Tab 9); Ashdon, Inc. v. Gary Brown & Assocs., Inc., 260 S.W.3d
101, 113 (Tex. App.—Houston [1st Dist.] 2008, no pet.) (Florida business owner’s
20+ sales meetings in Texas over 13-year period insufficient to establish general
jurisdiction); Waterman Steamship, 355 S.W.3d at 406 (18 port calls over a seven-
year period “is better characterized as sporadic rather than ‘continuous and
systematic’ contacts”).
In Helicopteros, the United States Supreme Court overturned the Texas
Supreme Court, holding that because Helicol lacked any place of business in
Texas, lacked a license to do business in Texas, took only sporadic trips to Texas
through its CEO and employees, purchased products in Texas, and accepted checks
drawn on Texas bank accounts, Helicol’s Texas contacts were insufficient for
general personal jurisdiction. Helicopteros, 466 U.S. at 416–19.
By contrast, in Perkins v. Benguet Consol. Mining Co., the nonresident
defendant’s mining properties were located in the Philippines, but its operations
were stopped by the Japanese occupation of the islands. 42 U.S. 437, 446–49, 72
69
S. Ct. 413, 419–20 (1952). During the occupation, the president and general
manager returned to his home in Ohio and operated his business from there. See
id. The United States Supreme Court determined that the company’s Ohio contacts
supported a finding of general jurisdiction because the company’s president and
general manager maintained an Ohio office, maintained company files in Ohio,
corresponded from Ohio, drew and distributed salary checks from his Ohio office,
used two Ohio bank accounts for company funds, had an Ohio bank act as transfer
agent for the company’s stock, held directors’ meetings in Ohio, and supervised
company Philippines property from Ohio. Id.
Preston’s brief, sporadic, and representative contacts with Texas do not
approach the level of forum contacts in Helicopteros, much less those in Perkins.
Preston’s forum contacts are not so substantial that Preston “should have
reasonably expected to be sued in Texas on any matter, however remote” from
those contacts. Johnston v. Multidata Sys. Intern. Corp., 523 F.3d 602, 613 (5th
Cir. 2008). There is no basis for general jurisdiction over Preston as a matter of
law.
VI. CONCLUSION AND PRAYER
Appellees, disgruntled out-of-state investors in TSI and NC12, have not
demonstrated why Texas courts should entertain their claims seeking to recover
their lost investment against a Massachusetts resident who is not alleged to have
70
done anything in Texas connected to their claims. Appellees failed to meet their
initial pleading burden, and there is no basis for the exercise of specific or general
jurisdiction. Therefore, Preston requests that this Court reverse the trial court’s
order overruling his special appearance, render a judgment granting his special
appearance, and order that he be dismissed from the lawsuit.
Respectfully submitted,
AHMAD, ZAVITSANOS, ANAIPAKOS,
ALAVI & MENSING, P.C.
By: /s/ Jane Langdell Robinson
Jane Langdell Robinson
Texas Bar No. 24062970
Monica Uddin
Texas Bar No. 24075195
Jamie A. Aycock
Texas Bar No. 24050241
1221 McKinney Street, Suite 3460
Houston, Texas 77010
Telephone: 713-655-1101
Fax: 713-655-0062
ATTORNEYS FOR APPELLANT
JOHN T. PRESTON
71
CERTIFICATE OF COMPLIANCE
I certify that this brief complies with the typeface and word-count
requirements set forth in the Rules of Appellate Procedure. This brief has been
prepared, using Microsoft Word, in 14-point Times New Roman font for the text
and 12-point Times New Roman font for any footnotes. This brief contains 14,507
words, as determined by the word count feature of the word processing program
used to prepare this document, excluding those portions exempted by TEX. R. APP.
P. 9.4(i)(1).
/s/ Jane Langdell Robinson
Jane Langdell Robinson
72
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of this document was served on
all counsel of record in this case, identified below, on June 12, 2015, by the
electronic filing manager and/or via email:
Kelley M. Keller F. Eric Fryar
State Bar No. 11198240 State Bar No. 07495770
kkeller@ellison-keller.com eric@fryarlawfirm.com
Tracey N. Ellison Matthew Buschi
State Bar No. 15054720 State Bar No. 24064982
ELLISON KELLER mbuschi@fryarlawfirm.com
5120 Woodway Dr., Suite 6019 Christina Richardson
Houston, Texas 77056 FRYAR LAW FIRM, P.C.
Telephone: 713-266-8200 State Bar No. 24070495
Fax: 713-266-8201 912 Prairie, Suite 100
Attorneys for Appellees Emjo Houston, Texas 77002-3145
Investments, Ltd. and Fax: 281-605-1888
H.J. von der Goltz Attorneys for all Intervenors/
Plaintiffs
Asher Griffin
Chris Sileo
Sean Flammer
SCOTT, DOUGLASS &
MCCONNICO, LLP
600 Congress Ave., Ste 1500
Austin, Texas 78701-2589
Fax: 512-474-0731
Attorneys for Appellees Chalsys,
MET, and Lo
/s/ Jane Langdell Robinson
Jane Langdell Robinson
4834-5746-0004, v. 7
73
Filed 11 September 28 P2:44
Chris Daniel - District Clerk
Harris County
ED101J016518693
By: jeanetta spencer
CAUSE NO. 2011-44058
MICHAEL COLLINS. ELLEN COLLINS. § IN THE DISTRICT COURT OF
BOS, TNC.. ENVEN, INC., §
METAL CATALYST VENTURES, INC., §
FALL RNER REALTY. LTD. , §
M. SAMEER AHMED, AND §
TSBC SOUTH TEXAS INVESTORS. L.P., ~
§
Plaintiffs, §
§
v. § HARRIS COUNTY, TEXAS
~
MICHAEL SYDOW, JOHN T. PRESTON. §
CHRISTOPH HENKEL. C. CHANGE §
INVESTMENTS. LLC, SONIA LO. CHALSYS ~
CAPITAL PARTNERS, L.L.P., §
BRILLIANT NOVELTY , LL.C.. §
and MELIORA ENERGY §
TECHNOLOGTES, S.A.R.L., §
§
Defendants. § 2 15™ JUDICIAL DISTRICT
DEFENDANT JOHN T. PRESTO 'S AMENDED SPECIAL APPEARANCE AND,
SUBJECT THERETO, ORIGINAL ANSWER
Pursuant to Texas Rule of Civil Procedure 120a. Defendant John T. Preston (''Preston")
files this Amended Special Appearance, and Subject Thereto, Original Answer. objecting to this
Court's personal jurisdiction over him, and in support states as foll ows:
PRESTON'S SPECIAL APPEARANCE
1. Plaintiffs have sued eight defendants in Texas even though there is no basis for
personal jurisdiction over all of them. Specifically. Preston does not belong in this la wsuit
because he has not had contact with the state of Texas in his individual capacity in the past 60
years. nor has he ever done husiness in Texas in his indi vidual capacity. Preston· s limi ted
contacts with Texas have been made on behalf of companies for which he is a director. T he
contacts of these companies cannot be imputed to Preston to subject him to personal jurisdiction
74
in Texas. Thus, Preston does not have the requisite minimum contacts required by Texas and
fe deral law to exercise personal jurisdiction over him. Similarly, because Preston has had no
contact with Texas in the past 60 years, subjecting him to the jurisdiction of a Texas court would
not comport with notions of fair play and justice. There fore. Preston respectfull y requests that
this Court fmd that asserting jurisdiction over him in Texas is improper and dismiss all claims
againsl him.
Argument and Authorities
I. Texas law requires that the exercise of personal jurisdiction be consistent with
t'ederaJ due process.
2. A Texas court may only exercise pet sonaljudsdiction over a defendant if it would
be consistent with Cederal constitutional requirements of due process. Guardian Royal Exch.
Assurance. Ltd. v. English China Clays, P.L. C. , 8 15 S.W.2d 223, 226 (Tex. 199 1). The Texas
long-aJm statute authorizes the exercise of j urisdiction over nonresidents who are "doing
business" in Texas, but this statute can only reach as far as the federal constitutional
requirements of due process will a llow. TEX. CIV. PRAC. & REM. CODE§ 1 7.042 ~ Guardian
Royal. 815 S .W.2d at 226 . Thus, Texas courts must look to due process requirements to
determine if personaljul'isdiction is proper. Guardian Royal, 8 15 S. W.2d at 226.
3. Personal jurisdiction is consistent with due process if 1) the defendant has
purposely established ·'minimum contacts, with Texas: and 2) the exercise of personal
jurisdiction comports with " fair play and substantial justice." Nat '[Indus. SOJzd Ass 'n v. Gibson.
897 S.W.2d 769, 772 (Tex. 1995); Guardian Royal, 815 S.W.2d at 226.
48 12-3575·8602. v. I
75
II. Preston does not have the requisite minimum contact., with Texas to give rise to
personal jurisdiction.
4. The essential goal of the minimum contacts test is to protect the defendant.
Schlobohm v. Schapiro. 784 S.W.2d 355, 357 (Tex. 1990). Thus. the defendant's minimum
contacts must constitute a "substantial connection" between lhe defendant and Texas. Guardian
Royal, 8 15 S .W.2d at 23 1. A defendant is not subject to ju1·isdiction if his Texas contacts are
random. fortuitous or attenuated. Am. Type Culture Collection. Inc. v. Colenum . 83 S.W.3d 801.
806 (Tex. 2002). Instead. to be subject to personal jurisdiction the defcndITERVEN l !ON ;·· nr'...~
118
was never actually transferred to Texas Syngas. In September 2008, the property was put in the
name of FaJJ River Realty, Ltd., an entity in whi ch Sydow owned an individual interest, and for
which Sydow served as the managing director Defendants never disclosed to the shareholders
that Texas Syngas (and later NC12) did not own the building. Title to the building remained in
FaJI River Realty, Ltd., which then proceeded to charge Texas Syngas a monthly rent of $28,000
for use of the facility it should have owned.
57. ln February 2009, MPR, an independent engineering firm, concluded its review of the
Texas Syngas technology. MPR confirmed the viability of the reactor' s science and theoretical
basis, its design, and the gasification process chemistry. On or about May 14, 2009, Collins and
Robert Bach formally assigned the patented technology to Texas Syngas in the records of the
United States Patent and Trademark Office.
D. Fraud on Texas Syngas and Its Shareholders
58. On infonnation and belief, Preston and Sydow had no intentjon of using shareholder
money as represented to the shareholders. Preston is a classic stock promoter and has rai sed (and
spent) millions upon millions of shareholder dollars, but has never actually built a commercially
successful company. Sydow is a lawyer skilled at hiding assets ami corporate manipulation.
During the t}me that Preston and Sydow controlled the board of directors, they made sure that the
bulk of the money actually went to them or to several of their related entities, rather than to build
the demonstration reactor. In addition to the fraudulent acquisition of the Fall River facility, on
infom1ation and belief, C Change was apparently paid a $40,000 per month consuJtjng fee.
Additionally, Sydow and Preston had the company pay tens of thousands of dollars evety month
to lawyers and consultants and as well as other expenses that did not benefit the shareholders or
119
the corporation, but actually provided benefit for Sydow and his law fim1 and was apparently
used by Preston to solicit investors for C Change .
59. Ow-ing 2009, Sydow moved the Texas Syngas corporate headquarters in Houston from
4900 Woodway to more luxwious accommodations on Post Oak Boulevard. Sydow never
devoted his full attention to Texas Syngas as promised, but relocated his law practice to the
Texas Syngas office space, spent most of his time on his own law practice, and used Texas
Syngas employees to do work for hi s firm . Two of Sydow's children worked full time as lawyers
in Sydow's law firm at Texas Syngas' expense. Texas Syngas was not compensated for use of its
space, suppli es, resources, or personnel. Texas Syngas also paid for the maintenance, storage,
and cleaning for Sydow' s airplane. When Texas Syngas was finally ready to construct the test
reactor, Sydow and Preston had largely squandered the money raised for that purpose
E. Investment by tbe Note Holder Intervenors
60 Despite his numerous promises and despite being compensated to do so, Preston faj led to
rai se additim1al funds for Texas Syngas in 2009, and by mid-year Texas Syngas desperately
needed funding. In 2009, Preston and Sydow again turned to N[r. von der Goltz for assistance.
Mr. von der Goltz was able, through mid-2010, to raise a total of$6,104,000 in additional funds
from friends, family, and business assodates. These investors, the Note Holder Intervenors, were
issued convertible promissmy notes, which provided for automatic conversion into common
shares at a 20% discount of the new investor' s valuation if Texas Syngas obtained qualified
financing from a single investor of at least $5 million on or before September 30, 20 10. If no
qualified financing occurred, the notes would become due and payable within five days after a
demand was made on or after the September 30, 20 10, maturity date.
0Rt(il};Al. PE'l-n'fO~ TN TNiERVl:.l\'l !Oh
120
6 1. Preston and Sydow, both di rectly and through their statements to von der Goltz,
represented to the Note Holder Intervenors that Texas Syngas was worth $300 million as of
2009, based on the value of the technology and the CLECO and Turkish contracts. However,
Preston and Sydow fai led to di sclose that the CLECO contract had been cancelled. Preston and
Sydow also represented that the money would be used prima1ily to build the test reactor;
however, their later conduct and misuse of the funds demonstrate that they had no intention of
using the money for that purpose.
F. Formation of NC12
62. During 2009, Sydow, Henkel, and Preston became increasingly at odds with Collins, who
still owned o r controll ed over 60% of the shares. By the end of 2009, Preston, Sydow, and
Henkel att.empted to wrest control of the company from Colli ns through a scheme to dilute his
interest C Change had received an investment of $15 million from Corinna von Schoenau,
which was intended for investment in Texas Syngas; however, Preston withheld $10 million of
these funds and proposed that C Change would invest $5 milli on at a pre-money valuati on of $10
million and post-money valuation of $ 15 milli on in exchange for a 33% interest in the company .
Collins, as the majmity shareholder, blocked thi s effort, and tension among the board members
reached a boiling poi nt- to tJ1e poi nt where moving the business forward seemed impossible.
Collins and Sydow approached Mr. von der Goltz to mediate a settlement to save the company .
Ultimately. Preston, Sydow, and Collins agreed that Texas Syngas would be reorganized and that
a new three-person board of directors compri sed of Sydow and two new directors acceptable to
Collins would govern the t1ew corporation. Collins was very hesitant to relinquish hi s position as
a director, but agreed to a new board on the conditions that the new board members retained their
positions for two years and that no funds would be accepted from C Change. (Preston ultimately
O Rt~ TN TmP.RVl:.N 1!ON
121
took von Schoenau 's $ 15 million intended for Texas Syngas and invested it in a different Preston
scheme).
63. In late 2009, as part of the reorganizati on, Sydow li quidated Texas Syngas before a new
board was named. Sydow transfen-ed Texas Syngas' assets to a new Nevada corporation, NC 12,
Inc. The preferred shares of the Shareholder Intervenors in Texas Syngas were convet1ed to
common shares in NC12 and the convertible promissory notes held by the Note Holder
Intervenors were assumed by NC 12. With Collins' agreemetlt, Sydow remajned as CEO of
NC 12 and was joined on the board of directors by Mr. H.J. von der Goltz and Dr. Aydin
Muderrisoglu. Von der Goltz was elected to serve as n on~executi ve chairman of the board of
directors. Von der Goltz hoped the reorganization would relieve tension between Sydow and
Collins, allowing Collins to focus on building the reactor at the Fall River, Massachusetts,
facility that supposedly had been purchased by Texas Syngas, and allowi ng Sydow to focus on
managi ng the company from the Houston headquat1ers and negotiating contracts with potential
customers.
64. Sydow apparently believed that he would be able to manipul ate the new board members
and assume greater control. When the new board members made clear their independence and
intent to act in the best interest of the corporation and its shareholders, Sydow enl isted Preston
and immediately began to undercut the authority of the new board members and to withhold
infom1ation from them until they could be removed. Sydow maintained sole signatory authority
over all NC 12 bank accounts and refused requests by von der Goltz that certain expenditures
require two signatures.
65. Mr. von der Goltz took seriously his new role as a chairman of the board of directors. 1'-Ie
met personally with all the Houston and Fall Ri ver employees in January 20 10 and sought to
ORlGJNAl. Pt-7Jn'fON TN TNTI:.RVEN'Y'lON
122
clean up NC 12's finances, streamline operations based on his vast operational experience, and
above all, see that the demonstration reactor wa.s built. Collins, in the meantime, had moved full-
time to Massachusetts and made meaningful progress on constructing the reactor and purchasing
necessary equipment with the funds rai sed by von der Goltz. Sydow retained control of the
corporation's money and continued his rni sappropriation and profligate spending, which
included approxi mately $46,000 that he spent during a nine-day trip to London in mid-2010, a
$20,000 per month lease payment that Sydow charged NC 12 for Sydow's private aircraft. and
other wasteful personal e-xpenses and benefits, whi ch w-ere never divulged to the board of
directors . While Sydow saw that all of the expenses incurred for hjs benefit were paid
immediately, he refused to pay for the actual expenses incurred for building the reactor in Fall
River, resulting in numerous disputes with vendors, work stoppages, and delays.
66. Sydow continuall y blamed Collins for NCI2' s financial problems and shortages offunds.
Sydow vehemently opposed any review or financial controls over his own handling of corporate
funds and never supplied financial statements to the board of directors. With board approval, von
der Goltz engaged Elder, Gaffey & Paine, P.C. (EGP), a Boston-based accounting firm, to
1 1
review both Fall RiveT S and Houston' s book s and fiscal procedures. EGP s investigation
showed that adequate oversight measures were in place at Fall River and that all expenditures
were supported by approved purchase orders sent to the Houston office for payment and tiling.
67. Sydow stonewalled and delayed providing EGP the accounting records and QuickBooks
files relating to operations in Houston for almost eight weeks in mid-201 0. After tin ally
obtaining records from the Houston office, EGP discovered numerous excessive expenditures for
travel, professional fees, outside consultants, and the undisclosed lease payments for Sydow·s
airplane-all expenses neither known to nor appr-oved by NC12's board of di rectors EGP ' s
0R tromissory notes into common shares. The NC12 boal'd of di rectors, consisting of Preston,
Henkel, and Sydow, infom1ed the Note Holder lnterve11ors on September 28, 20'10, that they
were now common shareholders with 39.4% ownership, whjle MET owned 30.3% for its $5
million investment, and the " old" shareholder group would be diluted to 30.3%-rH:.RVEN l !ON
130
("An officer who or director who participates, ratifies, aids or approves of the breach of duty of a
co-fiduciary, or fails to repudi ate the wrongdoing, may be jointly liable for the violation.").
85. Intervenors arc entitled to their actual damages for this breach of fiduciary duty and
funher equitable rel ief including buy-out, disgorgement, and constructive trust. White NC12 may
also have claims arising out of the same conduct, Intervenors do not seek to assert any claims
owned by NC l2 or to asseit any remedy on behalf of NC12. Intervenors asseit only their
individual claims for violati ons of fiduciary duties owed directl y to them as shareholders and
seek only those damages for injuries suffered by lntetvenors di rectly as shareholders. Because
the Controlling Shareholder Defendants acted knowingly, intentionally, mal iciously, and with
reckless disregard of Intervenors' rights, Intervenors are further entitled to exemplary damages.
B. Shareholder Oppression
86. The Controlling Shareholder Defendants are subject to legal duti es to Intervenors,
including fiduciary duties, duties not to oppress, and duties of good faith and fair dealing.
Defendants committed a continuing pattern of oppressive acts that have the purpose and effect of
substantially defeating Intervenors' objectively reasonable expectations of share ownership, of
systematically violating their rights and interests as shareholders, and of denying them the
economic value of share ownership and return on thei r investment.
87. Examples of but a few of these oppressive acts include, but are not limited to: instituting
a plan to gain unfettered control of the company with the intent of stealing its assets.. stripping
the company of its most valuable assets for their own personal gain, and the secretive and
questionable removal of directors von der Goltz and :rv·Iuderrisoglu, who were reputable,
independent of Preston and Sydow, and trusted by the shareholders. Sydow thwarted these
di reclors' investigative efforts into the company's accountjng practices. Sydow, Preston, and
ORtGI'l\AL PETI1'fON TN T'l>ITI:.RVl::.N I !ON
131
Henkel illegally exerci sed dominion and control over the corporation by removing these
directors in direct violation of a previous agreement among a super-majority of the shares.
Sydow also misappropriated corporate assets fo r personal expenses, and engaged in numerous
undi sclosed self-dealing tran saction s at the expense of NC12 shareholders. Defendants' conduct
rendered Intervenors' share ownership worthl ess, meaningless, and financially punitive.
Defendants' burdensome, harsh, and wrongful conduct visibly departs from standard s of fair
dealing and constjtutes shareholder oppression
88. Jntervenors are e11titled to equitable relief to remedy the oppressive conduct, including
but not limited to, having the Court order a buy-out at a fair price, together with actual and
exemplary damages, disgorgement, restitution, and other equitable relief. Furthermore,
Defendants' conduct was committed willfully and maliciously and Intervenors are entitled to
punitive damages. Intervenors are without adequate remedy at law.
C. Knowing Participation/Civil Conspiracy
89. As alleged herein, all Defendants conspired to commit fraud and breaches of their
fid udary duties. and thus are jointly and severally liable for all actual damages and equitabl e
rel ief. Furthermore, all Defendants acted knowingly, intentionall y, maliciously, and with reckless
disregard of Intervenors' rights and the company' s ri ghts, and Intervenors are entitled to
exemplary damages.
D. Securities Fraud-Common Law Fraud and Statutory Fraud
90. Sydow and Preston committed common law and statutory fraud on each of the
Interv enors in connection with the sale and purchase of the shares and conve11ible notes. As
alleged herein, Sydow and Preston solicited the Intervenors' investments and directly or
indirectly communi cated false representations of fact to the Intervenors- including that the
ORlf: l'NAl. Pl.::'l n'ION TN T'!>ITERVENT!ON
132
company was worth $ 100 million or later $300 million, that the corporation would use the
investment money primarily to build the reactor (when Sydow and Preston intended to utilize the
money primarily for other purposes or to misappropriate it and to delay the construction of the
reactor), and that the CLECO deal was in place when in fact it had been cancelled. Addi tionally,
Sydow and Preston fajled to disclose facts that they were under a duty to disclose to new
investors-including the cancellation of the CLECO deal. Sydow and Preston made the
misrepresentations, false promi ses, and omissions with knowledge of the falsity, with the intent
to deceive, and with the intent that the Interven ors rel y on those misrepresentations. The
Intervenors did in fact reasonably rely on the fraudulent representations and non-disclosures of
Preston and Sydow by investing in Texas Syngas and NC12. Intervenors suffered actual damages
proximately caused by Preston and Sydow' s fraud . Furthermore, Preston and Sydow acted
willfully, intentionall y, and maliciously and are liable for exempl ary damages.
IX. Jury Demand
9 1. Intervenors wish to exercise their right to trial by jury .
X. P1·ayer
92. For these reasons, Intervenors request that the Defendants be cited to appear and answer
and that Intervenors have judgment agajnst the Defend ants for the following:
a. Actual and exemplary damages as allowed by law;
b. Equitable reli ef including buy-out or return of investment;
c. Prejudgment and post-judgment interest as allowed by law;
d. Attorney fees and expenses;
e. Costs of suit;
ORIGINAl. P P.TITJON I~ TNTF!.RVF.NTION
133
f All other relief, general and special, legal and equitable, to which Intervenors may
be entitled.
Respectfully Submitted,
FRYAR LAW Fl.RNI, P.C.
F. Eric Fcyar
Texas Bar No. 07495770
Email: eric@fryarlawfirm.com
Matthew Buschi
Texas Bar No. 24064982
Email: mbuschi@fryarlawfirm.com
Christina Richardson
Texas Bar No. 24070495
1001 Texas Ave. , 14th Floor
Houston, Texas 77002-3194
Tel. (281) 715-6396
Fax (281) 715-6397
ATTORNEYS FOR INTERVENORS
0RfGJNA.L PETITION IN lNTf.'RVl'{NTfON
134
CERTIFICATE OF SERVICE
I certify that a copy of the foregoing instrument was served on all parties and counsel of record
pursuant to the Texas Rules of Civil Procedure as indicated below:
[]Telephonic document transfer on 11 November 2011 before 5:00p.m .
[]Email or eservice by agreement on 11 November 201 1.
[X] First Class United States Mail, CMRRR, on 11 November 2011.
Randall 0 . Sorrels Brent C. Perry
Clyde J. "Jay'' Jackson, ill Law Offices of Brent C. Perry
Abraham Watkins, Nichols, Sorrels, Matthews 800 Commerce Street
& Friend Houston, Texas 77002
800 Commerce Street Fax: 713-237-0415
Houston, Texas 77002-1776 Attorney for Original Plaintiffs
Fax: 713-225-0827
Attorneys.for Original Plainti:ffs
Asher Griffin Amir Alavi
Chris Sileo Ashley Frankson
Sean Flammer Ahmad, Zavitsanos, Anaipakos, Alavi &
Scott, Douglass & McConnico, LLP Mensing P.C.
600 Congress Ave., Ste 1500 3460 One Houston Center
Austin, Texas 78701-2589 1221 McKinney Street
Fax: 512-474-0731 H ouston, Texas 770 lO
Attorneys for Defendants Clwlsys, At/ET, and Fax: 713-658-0062
Lo Attorneys for Defendants Sydow, Preston,
Henkel, C Change, and Brilliant Novelty
OR!GlNALPf.TJTJON IN INTH.RVF.NTION
135
~~-~~
];' l '
IN THE UNITED STATES BANKRUPTCY COURT /Jf:?hfif-D h ~
FOR THE SOUTHERN DISTRICT OF TEXAS 81
' rlct an;~/ .U
HOUSTON DMSION 77,.,., 4UG J C!erlr
!Jr J 20;;
INRE; § !'~......, .' '·u,;~·~ ..
§ CASE NO: 11-38794 ~~ ... ~~ .,._,."' ".'~ ;.. .._.
()·· .... -.. ~
NC12, INC. § CHAPTER 7 ~r>'·il"- _ . - --....___
Debtor(s).
§
§ JUDGEISGUR
. -·--,------
§
§
MICHAEL COLLINS, et al §
§
Plaintiff(s), §
§
vs. § ADVERSARY NO. 11-3634
§
SYDOW, eta/ §
§
Defendant(s). §
MEMORANDUM OPINION
The Plaintiffs and Intervenors assert claims against fonner officers and directors of
NC12, the debtor in the underlying bankruptcy case. NC12 was a technology company engaged
in developing catalytic gasification processes. Plaintiffs and Intervenors allege that the
Defendants stripped NC 12 of assets, misappropriated corporate assets, engaged in self-dealing,
and improperly removed other directors from NC12's board. The Plaintiffs sue for breach of
fiduciary duty, and Plaintiff Michael Collins sues for conversion. The Intervenors sue for breach
of fiduciary duty, shareholder oppression, statutory and common law securities fraud, and
conspiracy.
The Court grants, in part, and denies, in part, the Intervenors' motion to remand. The
Court remands the Intervenors' securities fraud claims, including the aiding and abetting and
conspiracy to commit fraud claims, as they are the Intervenors' property; the Court declines to
1 I 3l
206
exercise subject matter jurisdiction over the claims. The remainder of the Intervenors' claims are
the estate's property, and the Court dismisses them for lack of standing.
The Court denies, in part, and abates, in part, the Plaintiffs' motion to remand. Plaintiff
Michael Collins' conversion claim is arguable property of the estate. lf the claim belongs to
Collins, the Court may lack subject matter jurisdiction or the claim's potential effects on the
estate may be so remote that the Court should discretionarily abstain. If the claim is property of
the estate, Collins lacks standing to assert the claim. Until the issue is decided, the Court cannot
remand the claim; Collins' pursuit of the conversion claim in state court would violate the
automatic stay. The remainder of the Plaintiffs' claims are property of the estate, and the Court
dismisse~ them for lack of standing.
Background
This proceeding involves numerous Plaintiffs, Defendants, and Intervenors. The
Plaintiffs are Michael Collins, individually and on behalf of NC12, Inc. and Fall River Realty,
Ltd.; Ellen Collins, on behalf of BOS, Inc., EnVen, Inc. and Metal Catalyst Ventures, Inc.; BOS,
Inc., as a shareholder ofNC12; EnVen, lnc., as a shareholder ofNC12; Metal Catalyst Ventures,
lnc., as a shareholder of NC12; M. Sameer Ahmed, individually and on behalf of NC12 and
TSBC South Texas Investors, L. P., as a shareholder ofNCI2.
The Defendants are Michael Sydow; John T. Preston; Christoph Henkel; C Change
Investments, L.L.C.; Sonia Lo; Chalsys Capital Partners L.L.P.; Oscura, Inc.; Brilliant Novelty,
L.L.C.; and Meliora Energy Technologies. S.A.R.L. The Plaintiffs sued the Defendants in Harris
County District Court on July 26, 2011. ECF No. l-1.
The Plaintiffs assert claims for breach of fiduciary duty, alleging that Sydow, Preston,
and Henkel breached their fiduciary duty to the Plaintiffs as shareholders of NCl2 by
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207
misappropriating corporate funds. They seek ''their proportionate share of economic injuries" as
shareholders ofNC12. The Plaintiffs sue the other Defendants for aiding and abetting breach of
fiduciary duty. The Plaintiffs sue Sydow, Preston, C Change Investments, and Brilliant Novelty
for conversion of Collins' interest in Fall River Realty.
The Intervenors filed a petition in intervention on November 11, 2011 . The Intervenors
are Akila Finance, S.A.; Bosques del Molino, S.A.; Centrans Energy Services, Inc.; Chester
Mester Holdings, Ltd.; Deltec Bank & Trust, Ltd.; Emjo Investments, Ltd.; William End; Evans
and Petree 401K Plan; First Bay Intertrade; GM Partners; Marair Corporation; W.L. Nichol, IV;
Panorama Investment, Ltd.; PC 01 Vermoegens Verw.; Alejandro Santo Domingo; Sinchi
investment; Venturi Global Investments, Ltd.; and H.J. von der Goltz. ECF No. 1-3.
The Intervenors sue Sydow, Preston, and Henkel for breach of fiduciary duty to
shareholders and for shareholder oppression. They also sue all Defendants for knowing
participation/civil conspiracy to commit fraud and breach of fiduc iary duties. The intervenors
sue Sydow and Preston for common law fraud and statutory fraud.
NC12 filed for chapter 11 bankruptcy on October 14, 201 I. On December 22, 2011, the
Court granted the United States Trustee's motion to appoint an examiner in the case. ECF No.
28. Walter Bissex was appointed examiner. ECF No. 30. Bissex filed a status report on
February JS, 2012. ECF No. 41.
The Defendants removed this proceeding on December 15, 2011. The Intervenors filed a
motion to remand or abstain on January 17, 2012, arguing that they asserted only direct claims
against the Defendants. ECF No. 6. The Plaintiffs joined in the motion to remand on the same
day. ECF No. 7.
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At a hearing on February 2, 2012, the Court required parties to file briefs on whether the
estate owned the claims asserted in this proceeding. The Intervenors and Defendants Sydow,
Preston, Henkel, C Change Investments, LLC, and Brilliant Novelty, LLC (collectively, "Sydow
Defendants") filed briefs on March 2, 2012. ECF Nos. 12 & 14. The Sydow Defendants also
filed a response to the motion to remand on the same day, arguing that the claims were property
of the estate. ECF No. 13. The Sydow Defendants also argue that the existence of a joint
directors and officers insurance policy with a maximum coverage limit of $1 ,000,000.00 for
defense costs provides another basis for "related to" jurisdiction. ECF No. 13, at 21 -22.
Additionally, the Intervenors' requested relief of a forced buy-out, they argue. would affect the
bankruptcy estate by affecting ownership of the debtor and rearranging bankruptcy priorities.
ECF No. 13, at 23. Finally, mandatory abstention does not apply, they argue, because remand
would violate tbe automatic stay. ECF No. 13, at 23.
Defendants Sonia Lo; Chalsys Capital Partners, LLP, and Meliora Energy Technologies,
S.A.R.L. (collectively, " Lo Defendants") filed a joinder with the Sydow Defendants' briefing on
March S, 2012. ECF No. IS. The Lo Defendants filed a joinder with the Sydow Defendants'
response to the motion to remand on March 7, 2012. ECF No. 17. The Intervenors filed a reply
to the Sydow Defendants' brief on March 9, 2012. ECF No. 18.
In NC12's main bankruptcy case, the United States Trustee filed a motion to convert tbe
case to a chapter 7 case on February 28, 2012. No. 11-38794, ECF No. 43. The intervenors
joined in the motion on March 22, 2012. No. 11-38794. ECF No. 51 . NC12 filed a response on
March 22. 2012, opposing the conversion to chapter 7. No. 11-38794, ECF No. 52. The Court
held a hearing on the motion to convert on March 26,2012 and March 27,2012. After hearing
testimony from Bissex, Sameer Ahmed, Sydow, and Preston, the Court concluded that NC12
4 / 31
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was not operating in a meaningful way and had limited assets of an unknown value. The Court
granted the motion to convert, and Janet S. Casciato-Northrup was appointed chapter 7 Trustee.
The Court set a hearing on the ownership of the claims in this advers1lry proceeding for
May 15, 2012. Prior to the hearing, the Trustee and the Intervenors filed briefs. ECF Nos. 25 &
26. At the May 15, 2012 hearing, lhe Court heard arguments as to the ownership of the claims.
The lntenrenors filed an additional brief on May 25, 2012. ECF No. 27.
The Trostee filed a separate adversary proceeding against Michael Collins, Ellen Collins,
and BOS, lnc. on June 5, 2012, seeking a detennination ofthe extent and validity of the estate's
interest in real property in Fall River, Massachusetts and a determination that the property was
subject to either a resulting or a constructive trust. The Trustee also sued Michael Collins for
breach of fiduciary duty. Adv. No. 12·3266, ECF No. 1.
The Trustee filed another adversary proceeding against Michael Collins on August 13,
2012. Adv. No. 12-3376, ECF No. I. In Adv. No. 12-3376, the Trustee sues for a declaratory
judgment that Collins does not own any interest in U.S. Patent Application No. 12/363,398 and
the underlying technology; breach of fiduciary duty; and unjust enrichment.
On August 21, 2012, the Court ordered the parties to this adversary proceeding to file a
copy of NC12's Philadelphia Indemnity Insurance Company policy and to stipulate whether the
copy was true and correct. ECF No. 28. The Trustee filed a copy of the policy on August 27,
2012, with a stipulation signed by the Trustee, the Plaintiffs, the Intervenors, Sydow, Preston.
Henkel, and the other Defendants. ECF No. 30. The Trustee, the Plaintiffs, the Intervenors,
Sydow, Preston, and Henkel stipulate that the copy of the policy is a true and correct copy. ECF
No. 30, at 1. The other Defendants have no basis either to dispute the authenticity of the policy
or to stipulate that the copy is true and correct. ECF No. 30, at 2.
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The Plaintiffs' and Intervenors' Allegations
The Plaintiffs and Intervenors allege that the Defendants, who were directors and officers
of NC 12, engaged in self-dealing and mismanagement with the ultimate result of stripping NC 12
of its most valuable assets. For context, the Court summarizes the allegations made by the
Plaintiffs and Intervenors. By summarizing the allegations, the Court does not fmd that the
allegations are meritorious. Nevertheless, the Court must assume that the allegations are true for
the purpose of ruling on the pending motions.
NC12 was involved in the development of catalytic gasification technology. ECF No. 1-
2, at 6. The technology was developed by Plaintiff Michael Collins for producing synthetic
natural gas and other fuels from coal. ECF No. 1-3, at 14. Collins' technology involved using
high temperatures and high pressures to create clean-burning synthetic fuel~ from coal,
petroleum coke, and biomass. ECF No. 1-3, at 15-16. Collins. along with retired University of
Maryland professor Robert Bach, patented the process in 2009. ECF No. 1-3, at 16.
NC12 began as a Texas limited liability company named Texas Syngas, LLC. ECF No.
1-2, at 7-8. Texas Syngas was fonned jn October 2004 to exploit the technology portfolio of a
defunct company called Molten Metal Technology, Inc., which had been founded and promoted
by Defendant John Preston. ECF No. 1-2, at 7; ECF No. 1-3, at 15. Quantum Catalytic&, Inc.,
another entity controlled by Preston, purchased Molten Metal Technology's portfolio in l999.
ECF No. 1-2, at 7; ECF No. 1-3, at 15. In May 2006, Quantum Catalytics licensed its
technology to Texas Syngas in return for 10% of the available shares. ECF No. 1-2. at 8.
Collins agreed to contribute his intellectual property to Texas Syngas in exchange for 754,500
shares {approximately 75%) of Texas Syngas. ECF No. 1-2, at 8; ECF No. 1-3, at 16. Collins
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211
kept I 00,000 shares personally and transferred the other shares to EnVen, Inc. and Metal
Catalyst Ventures, Inc., Nevada companies owned by his wife, Ellen Collins. ECF No. 1-2. at 8.
Texas Syngas was reorganized as a new Nevada CQrporation, Texas Syngas. Inc.• in May
2006. ECF No. 1-3, at 16.
Texas Syngas began raising significant capital in 2007. ECF No. l -2. at 9; ECF No. 1-3,
at 16. Through Preston and his contact Johan von der Goltz, Texas Syngas raised at least $12
million from European investors. ECF No. 1-2, at 9. Von der Goltz's friends, family, and
business associates invested $11.75 million in exchange for approximately 13% ofthe comp110y.
ECF No. 1-3, at I 7. These investors included some of the Intervenors ("Shareholder
Intervenors''). ECFNo. 1-3, at 17.
Sydow and Preston represented to the Shareholder Intervenors that the value of the
technology exceeded $100 million and that the funds would be used for building a demonstration
reactor. ECF No. 1-3, at 17.
The funds were also intended to be used to acquire a research and development facility in
Fall River, Massachusetts. EFC No. 1-2, at9. The facility was formerly owned by Molten Metal
Technology and was acquired by the Meissner Trust, an entity owned by Preston and Paul
Lohnes. ECF No. 1-3, at 1S. Texas Syngas structured the acquisition of the facility by Fall
River Realty, Ltd. ECF No. 1-2, at 9. Preston and Lohnes retained an ownership interest in Fall
River Realty. ECF No. 1-2, at 9-10. Preston and Lohnes, through a complex transaction,
transferred to Collins an interest in Fa11 River Realty in exchange for $3.5 million and Texas
Syngas shares. ECF No. 1-2, at 10.
Preston and Sydow told the shareholders that Texas Syngas had purchased the Fall River
facility, but the property was never actually transferred to Texas Syngas. ECF No. 1-3, at 18-19.
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Sydow became the Chief Executive Officer of Texas Syngas with an annual salary of
$360,000. ECF No. 1-2, at 9. Sydow, a lawyer, agreed to stop practicing law and devote his full
efforts to building Texas Syngas. ECF No. 1-2. at 9. Sydow worked from office space in
Houston, paying salaries to officers and employees and pursuing execution of Texas Syngas's
business plan. ECF No. 1-2, at 9.
Collins began working at the Fall River facility to build a full scale gasification system
prior to commercial development, retaining the necessary consultants and employees. ECF No.
1-2. at 10. Collins and Bach assigned the patented gasification technology to Texas Syngas on
May 14, 2009. ECF No. 1-3, at 19.
Texas Syngas negotiated a deal with the Central Louisiana Electric Company (CLECO)
in early 2008, for a tO-reactor plant to begin operations in the fall of20l2. ECF No. 1·3. at 18.
In the summer of 2008, Preston claimed that he had secured .$30 million in financing through
C Change, but the money never materialized. ECF No. 1-3, at 18.
By 2009, Texas Syngas needed additional funding. Von der Goltz raised a total of
$6,104,000.00 from friends, family, and business associates. ECF No. 1-3, at 20. These
investors, who included the remainder of the Intervenors ("Note Holder Intervenors"), were
issued convertible promissory notes, which provided for automatic conversion into common
shares at a 20% discount if the oompany obtajned qualified financing from a single investor of at
least $5 million on or before September 30, 20 I 0. ECF No. 1·3, at 20. Preston and Sydow
represented to the Note Holder Intervenors that the company was worth $300 million as of2009,
based on the value of the technology and the CLECO contract and prospective contracts with the
Turkish national coal company. ECF No. 1-3, at 21, 26. The prospective Turkish contracts were
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to be obtained through the efforts of von der Goltz and Dr. Aydin Muderrisoglu. ECF No. 1-3, at
26.
However, the CLECO contract had already been canceled. Preston and Sydow did not
disclose the cancellation of the contract. ECF No. 1-3, at 21. Preston and Sydow represented
that the money would be used primarily to build the test reactor. ECF No. 1-3, at 21 .
The Intervenors allege that Preston and Sydow had no intention of using shareholder
money as represented to the shareholders. ECF No. 1-3, at 19. While they controlled the board
of directors, they "made sure that the bulk of the money actually went to them or to several of
their related entities, rather than to build the demonstration reactor." ECF No. 1-3, at 19.
C Change, Preston's company, was "apparently" paid a $40,000 per month consulting fee. ECF
No. 1-3, at 19. Sydow and Preston had the company pay tens of thousands of dollars every
month to lawyers and consultants and for other expenses that did not benefit the shareholders or
the corporation, but instead benefited Sydow and Preston. ECF No. 1-3, at 19-20.
Although Sydow had agreed to devote all ofhis time to Texas Syngas when he was hired
as CEO, he continued practicing law, spending most of his time on his own law practice and
using Texas Syngas employees to do work for his firm. ECF No. 1-3, at 20.
Also in 2009, Texas Syngas became NC12. ECF No. 1-2, at 11. Sydow and Preston
managed the transfer of assets and liabilities to the new entity. ECF No. 1~2. at 11. TSl was
dissolved. ECF No. 1-2, at 11. Sydow remained as CEO and was joined on the board of
directors by von der Goltz and Muderrisoglu. ECF No. 1-3, at 22.
In March 2009, C Change Investments, Preston's investment company, acquired a small
interest in NC12. Through 2009, Preston and Sydow developed the prospects for a Louisiana
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production facility, and Collins oversaw research and development of the reactor in Fall River.
ECF No. 1-2, at 11.
Collins began having problems with contractors at the Fall River facility by late .2009.
ECF No. 1-2, at 11. One contractor placed a stop on all work until NC12 paid over $1.2 million
in past due invoices.
Von der Goltz began investigating the funding issues, contacting an accountant to review
NC J2's financial records. ECF No. 1-2, at 12. The accountant did a limited review of the Fall
River accounting process and then requested a set of books for NC12. ECF No. 1-2, at 12. After
obtaining the Quickbooks file, the accountant raised concerns about NC12's use of funds,
including large amounts ofprofesstonal fees and expenses. ECF No. 1-2, at 12. The accountant
recommended a forensic audit and noted that very linle of the money raised had been spent on
developing the reactor at the Fall River facility. ECF No. l -2, at 12. Instead, much of the money
had been spent on travel, offices, professional fees, outside consultants, and undisclosed lease
payments for an airplane. ECF No. 1-2, at 12; ECF No. 1-3, at 23 .
Collins and von der Goltz were aligned. After von der Goltz delivered the audit request
to Sydow, Sydow obtained an injunction in Montgomery County against Collins. ECF No. 1-2,
at 12. Sydow removed Collins from all company operations in August 2010 and closed off
access to company records. ECF No. 1-2, at 12. Sydow and Preston removed Collins, von der
Goltz, and Muderrisog1u as directors and named Christoph Henkel as a director. ECF No. 1-2, at
12; ECF No. 1-3, at 25. Sydow, Preston, and Henkel, as a board, voted to ftre Collins and bar
him from company property. ECF No. 1-3, at 25. The board also revoked all access to company
bank accounts and records for von der Goltz and Muderrisoglu. ECF No. 1-3, at 25. As a result
of Preston, Sydow, and Henkel's takeover, NC121ost the Turkish contracts.
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215
About $300,000 remained to be paid to vendors for the cost of the reactor. After Sydow.
Preston, and Henkel fired Collins, all progress on the reactor halted, and the board refused to pay
the outstanding bills. A vendor repossessed the reactor and sold it for scrap. ECF No. 1-3, at 29.
Preston, Sydow, and Henkel, along with their companies, worked with Sonia Lo and
Chalsys Capital Partners, LLP, to strip NC12 of its assets and transfer the assets to Meliora
Energy Technologies, S.A.R.L., a Luxembourg limited liability company established on
September 14, 2010 and controlled by Sydow, Preston, Henkel and Lo and owned by C Change,
Chalsys, and Henkel. ECF No. 1-2, at 12-13; ECF No. 1·3, at 27. Sydow, Preston, and Henkel
represented to shareholders that Meliora would provide a $1.5 million bridge loan to NC12,
along with a commitment of an additional $5 million investment, in exchange for the license to
use NCI2's technology in Europe, Asia, and Africa. ECF No. 1-3, at 27.
However, Sydow, Preston, and Henkel assigned all ofNC12's technology to Oscura, Inc. ,
a company believed to have been created and controlled by Sydow, on September I, 2010. ECF
No. 1·3, at 28. Oscura assigned the patents to Meliora via a security agreement. ECF No. 1·3, at
28. Meliora began paying Sydow a monthly fee of$15,000. ECF No. 1-3, at 28.
Meliora 's supposed $5 million financing resulted in the automatic conversion of the
promissory notes into common shares. The conversion diluted the "old" shareholder group's
ownership from 100% to 30.3%. ECF No. 1-3, at 28. However, Meliora never made the $5
million investment. ECF No. 1·3, at 28. According to the Intervenors, it is believed that NC12
received no more than $500,000 for its patented technology. ECF No. 1-3, at 28.
In December 2010, all employees of NC12 were terminated and all business operations
ceased. ECF No. 1-3, at 28.
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In May 2011, Fall River Realty sold the Fall River facility to Brilliant Novelty, LLC for
$2.6 million. Lohnes and Preston are members and managers of Brilliant Novelty, and Brilliant
Novelty obtained a $2.6 million mortgage on the property. ECF No. 1-2, at 13. Sydow fi led a
certificate of vote stating that the Fall River Realty shareholders had approved the transaction.
However, Collins, the majority shareholder in Fall River Realty, was never consulted about the
sale. ECF No. 1-2, at 13.
On October 14, 201 1, Sydow caused a voluntary chapter 11 petition to be filed on behalf
ofNC12. The petition states that NC12 has no assets. ECF No. 1-3, at 29.
Ana lysis
If a cause of action belongs to the estate, then the Trustee has exclusive standing to assert
the claim. Schertz-Cibolo-Universal City, Jndep. Sch. Dist. (In re Educators Grp. Health Trust),
25 F.3d 1281, 1284 (5th Cir. 1994). If, on the other hand, a cause of action belongs to the
Plaintiffs and Intervenors, the Court must consider whether it has subject matter jurisdiction over
the claims. lf the Court lacks subject matter jurisdiction over claims because the claims do not
relate to NC12's bankruptcy, then the Court must remand the claims.
lf the Plaintiffs and lntervenors lack standing to bring claims, the Court must dismiss the
claims for Jack of subject matter jurisdiction. See Highland Capital Mgmr. LP v. Chesapeoke
Energy Corp. (In re Seven Seas Petroleum), 522 F.3d 575, 583 (5th Cir. 2008) ("If the claims
belong to the estate, then it was not error for the bankruptcy court to deny remand (because it has
jurisdiction over all property of the estate) and dismiss the claims (because the trustee has
exclusive standing to assert claims belonging to the estate).")~ Cobb v. Cent. States, 461 f .3d
632, 63 5 (5th Cir. 2006) ("[T]he issue of standing is one of subject matter jurisdiction.").
12 /31
217
Whether a particular cause of action belongs to the estate depends on whether under
applicable state Jaw the debtor could have raised the claim as of the commencement of the case.
Educators Grp., 25 F.3d at 1284. If a cause of action alleges only indirect hann to a creditor
(i.e., an injury that derives from hann to the debtor), and the debtor could have raised a claim for
its direct injury under the applicable law,then the cause of action belongs to the estate. ld
NC12 is incorporated under Nevada Jaw. Nevada law therefore governs the internal
affairs of NCJ2. Tex. Bus. Org. Code § 1.102 ("[T]he law of the state (in which an entity is
fonned] . . . governs the fonnation and internal affairs of the entity.''); Klaxon Co. v. Stentor
Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941) (holding that a federal court sining in diversity
applies the conflict of laws rules of the forum state); Hollis v. Hill, 232 F.3d 460, 465 (5th Cir.
2000) (applying Texas choice of law rules and concluding that Nevada law governs internal
affairs of corporation incorporated in Nevada); Reed v. Linehan (In re Soporex, Inc.), 463 B.R.
344, 396 (Bankr. N.D. Tex. 2011) (applying Texas choice of law rules, which provide that
internal affairs of a foreign corporation a governed by the law of the state of incorporation).
Although the Court first considers whether NC12 could have raised claims outside of
bankruptcy, the Coun also looks at the underlying injury for which relief is sought.
(S)ome claims that are usually brought by creditors outside of
bankruptcy (and thus in a sense may be said to "belong to" the
creditors and not the debtor) are nonetheless vested exclusively in
the trustee in bankruptcy. This is so not merely because the claims
are common to a number of creditors, but because they ultimately
seek to recover assets of the estate that are not under the debtor' s
control-by reason of a fraudulent transfer, for instance, or
because of the existence of separate corporate entities that are a
sham.
Seven Seas, 522 F.3d at 589.
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The Trustee's exclusive standing protects the Bankruptcy Code's djstribution scheme.
''Since one of the goals of the Bankruptcy Code is to preserve property of the bankruptcy estate
and ensure that similarly situated creditors receive equal distributions, if a cause of action
belongs to the debtor, only the trustee or debtor in possession may pursue it." In re Cabrini Med
Ctr., 2012 WL 2254386., at *6 (Bankr. S.O.N .Y. June 15, 2012) (citing S.I. Acquisition, Inc. v.
Eastway Delivery Serv., Inc. (In re S.I. Acquisition, Inc.), 817 F.2d 1142. 1152 (5th Cir. 1987))
(citations omitted).
If claims are not owned by the bankruptcy estate, the Court must consider whether it bas
subject matter jurisdiction over the claims. The Bankruptcy Court's subject matter jurisdiction
is limited to bankruptcy cases and proceedings that arise under the Bankruptcy Code, arise in a
bankruptcy case, or are related to a bankruptcy case. 28 U.S.C. § 1334. The Court therefore has
subject matter jurisdiction only over claims that arise under the Bankruptcy Code, arises in the
NCI2 bankruptcy case, or are related to NC12's bankruptcy case.
A proceeding arises under the Bankruptcy Code when a plaintiff asserts a right created by
the Bankruptcy Code. Wilborn v. Wells Fargo Bank (In re Wilborn), 609 F.3d 748, 752 (5th Cir.
2010). When a plaintiff asserts a claim that could not exist outside of bankruptcy, tbe proceeding
arises in a bankruptcy case. Id
An action is related to a bankruptcy case if the outcome could conceivably affect the
bankruptcy estate. Edge Petroleum Operating Co. v. GPR Holdings, LLC (In re TXNB Internal
Case), 483 f .3d 292, 298 (5th Cir. 2007). "Certainty is unnecessary; an action is 'related to'
bankruptcy if the outcome could alter, positively or negatively, the debtor's rights, liabilities,
options, or freedom of action or could influence the administration of the bankruptcy estate." /d.
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If the Court has only "related-to" jurisdiction over a claim, the claim may be subject to
mandatory abstention. Mandatory abstention applies when a proceeding: (i) is based upon a state
law claim or state law cause of action; (ii) is related to a bankruptcy case but not arising under
the Bankruptcy Code or arising in the bankruptcy case; (iii) could not have been commenced in a
federal court other than through bankruptcy jurisdictjon; and (iv) was commenced and can be
timely adjudicated in a state court. 28 U.S.C. § 1334(c)(2).
Even if the requirements for mandatory abstention are not met, the Court may
discretionarily abstain from hearing a proceeding "in the interest of justice, or in the interest of
comity with State courts or respect for State law." 28 U.S.C. § l334(c)(l). "Nothing ...
prevents a court from permissively abstaining under§ 1334(c)(l) where some, but not all, of the
requirements for mandatory abstention are met. The decision to abstain or not to abstain is
committed to the discretion of the district court[.]" Gober v. Terra + Corp. (In re Gober), 100
F.3d 1195, 1207 (5th Cir. 1996). ln exercising its "broad discretion" to decide whether to abstain
under§ 1334(c)(l), a court may consider the following non-exclusive factors:
(1) the effect or lack thereof on the efficient administration of the estate;
(2) the extent to which state law issues predominate over bankruptcy issues;
(3) the difficult or unseuled nature of applicable law;
(4) the presence of related proceeding commenced m state court or other
oonbankruptcy proceeding;
(5) the jurisdictional basis, ifany, other than§ 1334;
(6) the degree of relatedness or remoteness of proceeding to main bankruptcy case;
(7) the substance rather than the fonn of an asserted core proceeding;
(8) the feasibility of severing state law claims from core bankruptcy matters to allow
judgments to be entered in state court with enforcement left to the bankruptcy
court;
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(9) the burden of the bankruptcy docket;
(10) the likelihood that commencement of the proceeding in bankruptcy court involves
forum shopping by one of the parties;
( 11) the existence of a right to a jury trial;
(12) the presence in the proceeding of non-debtor parties;
( 13) comity; and
(14) the possibility of prejudice to other parties in the action.
Shipley Garcia Enters .. LLC v. Cureton, 2012 WL 3249544, at •12 (S.D. Telt. Aug. 7, 2012)
(quoting Ramirez v. Rodriguez (In re Ramirez), 413 B.R. 621. 631·32 (Bankr. S.D. Tex. 2009)).
Intervenors' Shareholder Oppression Claim
To detennine whether the shareholder oppression claim is property of the estate, the
Court looks at whether, under state law, the claim could have been asserted by NC12 and
whether, under the test set forth in Educators Group and Seven Seas, the Intervenors assert an
injury that is not merely derivative of injury to NC12.
NC12 could have asserted any claims that, under Nevada state law, enforced the
corporation's rights. This is true both for rights nonnally enforced directly by the corporation or
nonnally enforced through a shareholder derivative action. See San Mateo Plaintiffs v. At Home
Corp. (In re At Home Corp.), 154 F. App'x 666, 668 (9th Cir. 2005) ("A bankruptcy court may
enjoin a derivative claim brought by shareholders because the claim is the property of the
bankrupt estate."); Jn re AgriBioTech, 319 B.R. 216, 223 (D. Nev. 2004) (holding that, pre·
bankruptcy, a breach of fiduciary duty claim had belonged to the corporation, because the claim
was enforceable directly by the corporation or through a derivative action) (citing Pepper v.
Litton, 308 U.S. 295, 306-07 (1939)); Sobchak v. Am. Nat '/ Bank & Trust Co. of Chicago (In re
16 I 31
221
Ionosphere Clubs, Inc.), 17 F. 3d 600, 604 (2d Cir. 1994) (holding that claims that were classified
as derivative under Delaware law, the governing law, belonged exclusively to the bankruptcy
estate). Therefore, the Court ftrst examines Nevada Jaw.
Under Nevada law, allegations of generalized injury to the corporation give rise to a
derivative claim, not a direct claim. See Cohen v. Mirage Resorts, Inc., 62 P.3d 720, 734 (Nev.
2003) ("This is hann to the corporation, shared by all stockholders and not related to an
individual stockholder. To the ext.ent these allegations were intended to state a cause of action,
the district court was correct in dismissing the allegations as derivative claims barred by lack of
standing."). The Court therefore looks at the nature of the injury alleged to detennine whether
the action was derivative under Nevada law-and thus, assuming it was a valid claim, could
have been asserted by NC12.
The parties have extensively argued the issue of whether Nevada Jaw recognizes a claim
for shareholder oppression and whether such a claim would be a direct claim. Two federal
cases-one from the Fifth Circuit and one from the District ofNevada-predict that the Nevada
Supreme Court would recognize a claim for shareholder oppression. Hollis, 232 F.3d at 468
(holding that there was ''strong indication that the Nevada Supreme Court would find fiduciary
obligations between shareholders in a corporation such as FFUSA operated by shareholder·
djrectors''); Simon v. Mann, 373 F.2d 1196, 1199- 1200 (D. Nev. 2005) (holding that shareholders
of a closely-held corporation could assert a direct suit against majority shareholders). In 2011,
however, the Nevada Supreme Court stated in dicta that "Nevada does not recognize a cause of
action for abuse of control, and in the case to which appellants cite, claims for abuse of control
are essentially claims for breach of the fiduciary duty of loyalty." In re Amerco Deriv. Lirlg.,
252 P.3d 681,700 n. ll (Nev. 2011).
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It is unclear whether the "abuse of control" cause of action referred to in Amerco is the
same cause of action that the courts in Hollis and Simon predicted the Nevada Supreme Court
would recognize. Because this area of Nevada law is uncertain, the Court does not make an
Ullllecessary pronouncement of whether there is a shareholder oppression claim under Nevada
law and, if so, whether such a claim is available to shareholders of NC12. The Court merely
conclude.s that under Cohen, the specific injuries pleaded by the Intervenors in this case should
be classified as derivative, not direct.
The EdrJcators Group and Seven Seas test produces the· same result. If the nature of the
alleged injury is purely derivative of injury to NC12, the claims are property of the estate even if
they could nonnally be asserted by creditors outside of bankruptcy. Seven Seas, 522 F.Jd at 589;
see Schimmelpenninck v. Byrne (In re Schimme/penninck), 183 F.3d 347, 355 (Stb Cir. 1999)
(holding that even though alter ego and veil-piercing claims are typically brought by a creditor,
corporations can bring such claims on their own behalf and in bankruptcy, the claims may be
asserted only by the estate) (ching S./. Acquisition, 817 F.2d at 1152).
The Intervenors' shareholder oppression claim in this case is property of the estate. ln
their statement of the shareholder oppression cause of action, the Intervenors assert that the
Defendants oppressed them as shareholders by:
• Taking control of the corporation, stripping it of its assets for
their own personal gain, misappropriating corporate assets, and
self-dealing;
• Secretly and questionably removing von der Goltz and
Muderrisoglu, who were reputable, independent of Preston and
Sydow, and trusted by the shareholders, in direct violation of a
previous agreement among a super-majority of the shares; and
• Thwarting investigative efforts into the company's accounting
practices.
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ECF No. 1·3, at 31-32. The Intervenors seek the following remedies:
• A court-ordered buy-out of their shares at a fair price;
• Actual and exemplary damages;
• Disgorgement;
• Restitution;
• Other equitable relief; and
• Punitive damages.
ECF No. 1-3, at 32.
Even if Nevada Jaw allows a claim for shareholder oppression, any claim based on the
Defendants' alleged stripping of corporate assets is property of the estate. Any injury suffered
by the alleged misappropriation, asset-stripping, and self-dealing was derivative of the harm to
NC 12. The Intervenors may seek damages for the violation of their shareholder rights, but only
for damages not derivative of damages to the corporation; they may not seek damages for
dilution of corporate value due to the alleged stripping or misappropriation of corporate assets.
Any claim for damages due to stripping or misappropriation of corporate assets belongs to the
estate and may be asserted only by the Trustee.
The alleged violation of the shareholders' rights by the removal of von der Goltz and
Mudenisoglu and the alleged thwarting of shareholders' rights to investigate accounting
practices do not give rise to direct claims. Although it is possible that a loss of shareholder
influence or the violation of shareholders' investigative rights could result in a direct injury to
shareholders, the Intervenors have not stated such circumstances here. The Intervenors do not
allege any particularized injury arising from the removal of von der Goltz and Mudenisoglu
independent of the hann caused to the corporation-e.g., through the alleged loss of the Turkish
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contracts. Because all injuries allegedly caused by the removal of von der Goltz and
Muderrisoglu were incurred by the corporation, and any injury to the shareholders was derivative
of the injury to NC12, the claim belongs to the estate.
Similarly, the alleged injury from the thwarting of investigative efforts was the inability
to discover and remedy banns to the corporation caused by the misappropriation of assets and
self--dealing. This injury is derivative of the injury to the corporation and therefore belongs to
the estate.
The shareholder oppression claim is property of the estate. Therefore, it is dismissed for
lack of standing.
Plaintiffs' and Intervenors' Breach of Fiduciary Duty Claims
The Plaintiffs and Intervenors allege that the Defendants breached their fiduciary duties
to NC12 by self-dealing and mismanagement. The Plaintiffs refer to their general allegations of
mismanagement and assert that the Plaintiffs are, "as shareholders of NCl2, . . . entitled to
recover from [the Defendants] their proportionate share of economic injuries in an amount in
excess of the jurisdictional minimum of this court." ECF No. 1-2, at 14 (emphasis added).
The Intervenors refer to their general allegations of mismanagement and also allege three
specific breaches of fiduciary duty:
• Sydow's theft and misappropnatlon of corporate assets,
including but not limited to use of corporate funds to pay for
hjs private plane, use of corporate resources for his law
practice without compensation to the company, the use of
corporate funds for personal expenses, and bogus fees for
lawyers, consultants, and services that did not benefit NCI2;
• Failure to transfer title of the Fall River property to the
corporation and instead transferring it to an entity in which
Sydow and Preston held an individual interest, and charging
tbe corporation rent for use of its own property;
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225
• Transfer of the technology of the corporation-its most
valuable asset, worth hundreds of millions of dollars- for
grossly inadequate consideration to an entity in which Sydow,
Preston, and other Defendants had individual interests.
ECF No. 1-3, at 30.
Neither the Plaintiffs' general allegations of mismanagement nor the Intervenors' specific
alleged breaches of fiduciary duty involve any alleged injury directly to the shareholders. All of
the Plaintiffs' and Intervenors' allegations pertain to injuries to NC12 . The generalized
allegations of mismanagement and self-dealing, which refer back to the Plaintiffs' and
Intervenors' overall narrative ofNC12's collapse, all relate to injuries to the corporation. There
is no indication of any hann to shareholders other than the hann to the corporation.
Similarly, the specific alleged breaches of fiduciary duty do not state any injury to
shareholders other than through the corporation. The alleged then and misappropriation of
corporate assets is an alleged injury to NC12, not the shareholders. Similarly, the alleged failure
to transfer title of the Fall River property to NCI2 is an alleged injury directly to NC12. Finally,
the alleged transfer of NCI2's technology is an alleged hann to NC12; the only hann to the
shareholders is derivative of the alleged hann to NC 12.
The essence of Plaintiffs' and (ntervenors' breach of fiduciary duty claims is that the
Defendants stripped NC 12 of assets to the detriment of NC 12's creditors and shareholders. The
claims are fundamentally derivative, predicated on injury to NC12, not on injury to individual
Plaintiffs or Intervenors. The Plaintiffs' complaint states that the shareholders' injury as a result
of the economic hann to NC12 is ''proportionate." Such proportionate injuries must be
recovered through the estate.
21 I 31
226
The breach of fiduciary duty claim is property of the estate. Only the Trustee has
standing to assert the claim, and therefore the Court dismisses the claim for lack of subject
matter jurisdiction.
The Plaintiffs' claim for aiding and abetting breach of fiduciary duty is dependent on the
underlying breach of fiduciary duty claim. Because the breach of fiduciary duty claim is
property of the estate, the aiding and abetting claim is also property of the estate. Deep Marine
Holdings, Inc. v. FLI Deep Marine LLC (In re Deep Marine Holdings, Inc.), 2011 WL 2420274,
at •t 0 (Bankr. S.D. Tex. June 13, 20 11) (''The aiding and abetting claims are derivative claims to
the extent that the actions that were aided and abetted resulted in derivative injuries[.]").
Intervenors' Statutory and Common Law Fraud Claim
The Intervenors allege that the Defendants made false representations upon which the
Intervenors relied when they invested in NCI2. ECF No. 1-3, at 21, 32-33. The Intervenors
allege that the Defendants solicited investments by fal sely representing that the company was
worth $I 00 mill ion and, later, $300 million, that the corporations would use the investment
money to build the reactor, and that the CLECO deal was in place when it had been cancelled.
ECF No. 1-3. at 32-33. The Intervenors allege that they ..suffered actual damages proximately
caused by Preston and Sydow's fraud ."
The Trustee concedes that the securities fraud claims, as pleaded, are direct claims owned
by the Intervenors. The Court agrees.
The Fifth Circuit held in Seven Seas that a conspiracy to defraud claim based on
allegations thnt defendants employed material misrepresentations to induce potential investors to
acquire unsecured notes was "a direct injury to the bondholders that was independent of any
injury to Seven Seas." 522 F.3d at 586. The Fifth Circuit further noted that it "doubt[ed] that,
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under applicable state law, Seven Seas could have raised either claim as of the conunencement of
the bankruptcy case." /d. The bondholders' fraud claims were therefore property of the
bondholders, not the bankruptcy estate.
The Intervenors' fraud claims are similar; the only material distinction is that the Seven
Seas claims were brought by bondholders and the Intervenors are shareholders of NC12.
Because the lntevenors are shareholders, their fraud claim is based on the alleged diffe.rence
between the price they paid in reliance on the alleged misrepresentations and the actual value of
NC12's shares at the time of their investment. The Intervenors may not recover damages for the
difference between the price they paid for the shares and what the shares would have been worth
if not for the atleged post-purchase misconduct in the operation of the corporation. However,
they may recover damages for the amount they allegedly overpaid as a result of Sydow and
Preston's alleged misrepresentations.' With these Limitations, the Intervenors' claims for harm
due to fraudulently induced investment are independent of any harm directly to NC12; indeed,
NC12 benefited from the Intervenors' investments by having their cash.
Because the Intervenors' fraud claims allege an injury to the Intervenors that is not
merely derivative of the alleged harm to NC12, the Intervenors own the claims resulting from
fraud or misrepresentations that occurred at the time that they made their investment.
The Court discrctionarily abstains from hearing the Intervenors' fraud claim because it is
only remotely related to the NC12 bankruptcy case.
The Defendants argue that the claim is related to the bankruptcy case because the
Intervenors' p-otential recovery may draw from NC12's directors and officers' Liability policy.
1
The Intervenors do not state, and this Court does not decide, which jurisdiction's law govern¥ their fraud claims.
The Court's ruling regarding the recoverable damages relates $Oiely to the Issue of which injuries give rise to claims
belonging to the Intervenors. The Court does not rule on the ap·propriate measure of damages for the Intervenors'
frilud claims.
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NC12's insurance policy with Philadelphia Indemnity Insurance Company covers both the
corporation and its directors and officers against losses due to claims against the directors and
officers or against NC12 relating to alleged malfeasance by directors and officers. ECF No. 30,
at 31. The policy's proceeds are capped at $1,000,000.00, with an additional $1,000,000.00
available for defense fees. ECF No. 30, at 15, 56. Because the proceeds are capped at
$1,000,000.00, the Defendants argue, any recovery by the Intervenors will reduce the amount
available to NCI2 for its own claims against directors and officers.
Insurance proceeds that are applied to a claim against directors and officers are not
property of the estate, and actions to collect such proceeds are not barred by the automatic stay.
See Unsecured Creditors Disbursement Commilfee v. Antill Pipeline Con.str. Co. (In re Equinox
Oil Co.), 300 F.3d 614, 618 (5th Cir. 2002) (" An insurance policy owned by the debtor is
generally considered property of the estate. But, whether the proceeds of a particular insurance
policy is property of the estate depends on the nature of the policy.") (citing In re Edgeworth,
993 F.2d 51, 55 n. I3 (5th Cir. 1993)). "The overriding question when determining whether
proceeds are property of the estate is whether the debtor would have a right to receive and keep
those proceeds when the insurer paid on a claim. When a payment by the insurer cannot inure to
the debtor's pecuniary benefit, then that payment should neither enhance nor decrease the
bankruptcy estate." Edgeworth, 993 F.2d at 55.
The Philadelphia Indemnity policy applies to claims against the directors and officers or
against NC12. ECF No. 30, at 31. The policy provides liability coverage for the directors and
officers and NCl2 and indemnity coverage for NCI2 for claims against the directors and
officers. Although NC12 could be the beneficiary of the indemnity coverage, any payment to the
directors and officers for liability coverage would offset a potential indemnification claim. See
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229
Louisiana World Exposition. Inc. v. Federal Ins. Co. (Ln re Louisiana World Exposition, Inc.),
832 F.2d 1391, 1400 (5th Cir. 1987) (holding that proceeds were not property of the estate,
despite cap on the total of liability and indemnity coverage, where ''any payment under the
liability coverage reduces the amount of the potential indemnification claim to the same extent
that policy amounts available for indemnification are thus reduced. There is not the potential for
increasing the estate's exposure by payment of liability proceeds due.").
NCI2 would not have a right to receive and keep the proceeds of claims against the
liability coverage for losses caused to third parties (such as the Intervenors) by the directors and
officers. See Edgeworth, 993 F.2d at 56 (''[U]nder the typical liability policy, the debtor will not
have a cognizable interest in the proceeds of the policy. Those proceeds will normally be
payable only for the benefit of those harmed by the debtor under the tenns of the insurance
contract.'').
The estate could have a right to receive proceeds on account of its own claims against the
directors and officers. However, the estate has only a contractual right to recover if certain
conditions are met; the proceeds do not become property of the estate until the contractual
conditions are met. MOXlve/1 v. Meglioga (Jn re mard1FIRST, Inc.), 288 B.R. 526, 530 (Ban.kr.
N.D. 111. 2002) ("The Debtors had and the Trustee has contractua1 rights governed by the terms
of the insurance policies. Unless and until the terms are met, which they may never be, the
proceeds are not property of the estate.'').
The directors and officers' liability proceeds are not the kind of proceeds that Edgeworth
holds may be included as property of the estate. 993 F.2d at 56 ("E~amples of insurance policies
whose proceeds are property of the estate include casualty, collision, life, and fire insurance
policies in which the debtor is a beneficiary. Proceeds of such insurance policies, if made
25 I 31
230
payable to the debtor rather than a third party such as a creditor, are property of the estate and
may inure to all bankruptcy creditors."). The policies listed in Edgeworth are those for which the
debtor is the designated beneficiary and the party to whom proceeds would be paid. This is not
the case with the NC12's directors and officers' liability coverage. 'The estate may be entitled to
proceeds from the policy, but so may other parties. If the estate recovers from the directors and
officers' liability coverage, its recovery will be on the same tenns as other injured parties'
recovery. The estate's owners.hip of the policy does not affect the outcome. The estate does not
have a greater interest in the proceeds than any other person suing on an indemnified claim, See
Boles v. Turner (In re Enivid, Inc.), 364 B.R. 139, 157 (Bankr. D. Mass. 2007) (denying
liquidating trustee's motion for an injunction to prevent shareholders from entering into a
settlement of fraud claims against directors and officers where the settlement was payable from
the directors and officers' liability policies and might affect trustee's ability to recover); Reliance
Acceptance Grp.. Inc. v. Levin (In re Relianct Acceptance Grp.• lnc.), 235 B.R. 548, 561 (D.
Del. 1999) ("The difficulty the Debtors have is in identifying a right to the relief: tbat is, they
have been unable to identify a legal principle tbat stands for the proposition that the Estate's
claims for relief should take precedence over the Sbarebol~ers• claims.").
Because the estate does not own the proceeds, the Court must consider whether the
potential diminution of the proceeds is sufficient to establish related-to jurisdiction.
The burden is on the Defendants, as the removing pames. to establish federal jurisdiction.
DaimlerChrysler Corp. v. Cuno, 541 U .S. 332, 342 n.3 (2006) ("[T]he party asserting federal
jurisdiction when it is challenged bas the burden of establishing it."). Even if the Jntervenors
prevrul and collect against the insurance proceeds, their claim will affect the estate only if (i)
there are not sufficient funds remaining under the insurance policy to satisfy the estate's claims;
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and (ii) the estate successfully asserts claims against directors and officers;1 and (ill) the directors
or officers have insufficient assets to satisfy the claims.
The Court recognizes the possibility that (i) the Intervenor's claim could exhaust the
insurance policy; and (ii) the estate could prevail against the Defendants; and (iii) the Defendants
could have inadequate other resources to pay a judgment. Should these events occur, the
outcome of the shareholder oppression claim could affect the amount of proceeds available to the
estate for its own claims against officers and directors. This remote effect is, at most, on the
outer fringes of the Court's related-to jurisdiction. SeeFeld v. Zale Corp. (In re Zale Corp.), 62
F.3d 746, 752 (5th Cir. 1995) (noting that a bankruptcy court's related-to jurisdiction "cannot be
limitless'' and stating that an action "is related to bankruptcy if the outcome could alter the
debtor's rights, liabilities, options. or freedom of action (either positively or negatively) and ...
in any way impacts upon the handling and administration of the bankruptcy estate.") (quoting
Walker v. Cadle Co. (In re Walker), 51 F.3d 562, 569 (5th Cir. 1995)). However, a related
proceeding's effect on the bankruptcy estate may be contingent. See TXNB Internal Case, 483
F.3d at 298 (holding that court had related-to jurisdjction over a dispute between two non-debtor
parties when, depending on the outcome, either the defendant or the debtors owed money to the
plaintiff).
The Court cannot conclude that the outcome of the fraud claims could have no
"conceivable effect" on the estate. See Randall & Blake. lnc. v. Evans (In re Canion), I 96 F.3d
579, 587 (5th Cir. 1999) ([nhe law is well established in this Circuit, as in others, that, when
tt:sting 'related to' jurisdiction, an effect is not required to a certainty. Rather, jurisdiction will
attach on a finding of any conceivable effect."). Contingent or tangential effects may be
2 The Trustee has sued Michael Collins in a separate adversary proceeding. Jt is unclear whether the claim against
Collins would be covered by the Philadelphia Indemnity policy.
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sufficient in the Fifth Circuit to establish related-to jurisdiction. /d. at 587 n.30 ("[E]ven a
proceeding which portends a mere contingent to tangential effect on a debtor's estate meets the
broad jurisdictional test[.]") (quoting National Union Fire Ins. Co. v. Titan Energy, Inc. (In re
Titan Energy, inc.), 837 F.2d 325, 330 (8th Cir. 1988)).
The Court does not apply mandatory abstention, because there is no evidence before the
Court as to whether the fraud claims could be timely adjudicated before the state court. See
Carriage Credit Corp. v. Flanagan (In re Draper), 2010 WL 4736168, at *3 (Bankr. S.D. Tex.
Nov. 15, 2010) C'A party moving for mandatory abstention must provide the court with more
than a 'naked assertion' that the action can be timely adjudicated in state court.") (quoting
Mugica v. Helena Chern. Co. (ln re Mugica), 362 B.R. 782, 793 (Bankr. S.D. Tex. 2007)).
Nevertheless, the Court discretionarily abstains from hearing the fraud claims. See
Shipley Garcia Enters., 2012 WL 3249544, at *12 (listing non-exclusive factors a court may
consider in exercising its "broad discretion'' to abstain under 28 U.S.C. § 1334(c)(l )). The fraud
claims, at most, remotely relate to the bankruptcy proceedings, and the efficient administration of
the estate will not be affected by the remand. The estate is not a party to the litigation. It is true
that the depletion of the insurance proceeds may affect the estate; however, the Court does not
have the authority to prevent this effect. There is no jurisdictional basis other than bankruptcy
related-to jurisdiction, and the claim involves solely state law issues. Moreover, this Court's
constitutional authority to enter a final judgment with respect to the fraud claim is doubtful under
Stern v. Marshall, 131 S.Ct. 2594, 2620 (20 11 ). The Court therefore remands the Intervenors'
fraud claims.
28 I 3J
233
Collins' Conversion Cl11im
Michael Collins' conversion claim against Sydow, Preston, C Change Investments, and
Brilliant Novelty may be either direct or derivative, depending on whether Collins has an interest
in Fall River Realty. Collins alleges that he suffered damages from the sale of the real property
as an owner of Fall River Realty. Collins seeks actual and exemplary damages.
The Trustee concedes that Collins' conversion claim, as currently pleaded, is a direct
claim. ECF No. 25, at 9. If Collins is an owner of Fall River Realty, this conclusion is correct.
However, the Trustee contends in Adv. No. 12-3266 that lOO% of Fall River Realty is
owned by the estate. In that adv.ersary proceeding, the Trustee seeks declaratory judgment
against Michael Collins, Ellen Collins, and BOS, Inc. stating that no Defendant owns an interest
in Fall River Realty or the Fall River property. The Trustee also seeks a judgment that the Fall
River property is subject to a resulting trust in favor of the Trustee for the benefit of the
bankruptcy case.
Jf the estate is the owner of I 00% of Fall River Realty, any claim for conversion of an
interest in Fall River Realty belongs to the estate.
Property that is "arguable property" of the estate is protected by the automatic stay from
unilateral action by creditors. Brown v. Chesnut (In re Chesnut), 356 F. App' x 732, 734 (5th Cir.
2009) (citing Brown v. Chesnut (In re Chesnut), 422 F.3d 298, 303-04 (Stb Cir. 2005)). Because
the TnJstee's compJajnt asserts a plausible claim, as between the estate and Collins, to ownership
of Fall River Realty, Fall River Relllly is arguable property of the estate. Claims for conversion
of interests in Fall River Realty are therefore also arguable property of the estate.
The Court will not presently remand the conversion claim, because Collins' pursuit of the
conversion claim in state court would violate the automatic stay. At the same time, if the claim
29 I 31
234
is actually owned by Collins, the Court may lack subject matter jurisdiction or the claim may be
so remotely related to the NC12 bankruptcy that the Court should discretionarily abstain. The
Court therefore abates consideration of the conversion claim or its remand pending the resolution
of Adv. No. 12-3266.
Intervenors' Conspiracy Claims
The Intervenors' claim for conspiracy to commit fraud and breach of fiduc iary duty is
dependent on the underlying claims. Because the underlying breach of fiduciary duty claim is
property of the estate, the conspiracy to commit breach of fiduciary duty claim is also property of
the estate. See Deep Marine Holdings, 2011 WL 2420274, at •to (holding that aiding and
abening claims were property of the estate where the underlying conduct gave rise to a claim that
was property of the estate). The Court dismisses the conspiracy to commit breach of fiduciary
duty claim for lack of st.anding.
Because the remanded fraud claim is the Intervenors' property, the Intervenors own the
claim for conspiracy to defraud. See Seven Seas, 522 F.3d at 585 (holding that conspiracy to
defraud claim was owned by bondholders, not estate); Deep Marine Holdings, 2011 WL
2420274, at •t 0 (holding that aiding and abetting claims were not property the estate where
underlying conduct did not give rise to a claim that was property of the estate). The Court lacks
subject matter jurisdiction over the Intervenors' conspiracy to commit fraud claim. Therefore the
Court remands the conspiracy to commit fraud claim.
Conclusion
The Court dismisses the following claims for lack of standing:
• Plaintiffs' and Intervenors' claims for breach of fiduciary duty;
• Intervenors' claim for shareholder oppression; and
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235
• Intervenors' claim for conspiracy to commit breach of
fiduciary duty.
The Court remands the following claims:
• Intervenors' claims for common law and statutory securities
fraud and conspiracy to commit fraud; and
• Intervenors' aiding and abetting claim related to the common
law and statutory securities fraud .
Plaintiff Michael Collins' conversion claim and the remand of the conversion claim are
abated pending resolution of Adv. No. 12·3266.
SIGNED August 28, 2012.
a~---
Marvin ls;!;ic=
UNITED STATES BANKRUPTCY JUDGE
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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
INRE: §
§ CASE NO: 11-38794
NC12,1NC. § CHAPTER 7
§
Debtor(s). § JUDGEISGUR
§
§
MICHAEL COLLINS, et aJ §
§
PlalntlfT(s), §
§
vs. § ADVERSARY NO. 11-3634
§
SYDOW, eta/ §
§
Defendant(s). §
ORDER
The Court djsmisses the following claims:
• Plaintiffs' and Intervenors' claims for breach of fiduciary duty;
• Intervenors' claim for shareholder oppression; and
• Intervenors' claim for conspiracy to commit breach of fiduciary duty.
The dismissals are without prejudice to the Trustee's ability to assert the dismissed claims on behalf of
the Estate.
The Court remands the following claims to 215th Judicial District Court of Harris County, Texas:
• Intervenors' claims for common law and statutory securities fraud and conspiracy to
commit fraud; and
• Intervenors' aiding and abetting claim related to the common law and statutory securities
fraud.
Michael Collins' conversion claim and the remand of the conversion claim are abated pending
resolution of Adv. No. 12-3266.
SIGNED August 28,2012.
Marvin lsgur
UNITED STATES BANKRUPTCY JUDGE
Ill
~?PY 1 CERTIFY
u,P~:~of~
~Oar..
237
7/31201 4 12:01.33 AM
Chris Daniel - District Clerk Harris County
Envelope No. 1717873
By· GAYLE FULLER
Cause No. 2011-44058
MICHAEL COLLINS; ET AL., § IN TilE DISTRICT COURT
P LAINTIFFS, §
vs. § OF HARRIS COUNTY, TEXAS
§
MICHAEL SYDOW; ET AL., §
DEFENDANTS. § 215th JUDICIAL DISTRICT
AKILA FINANCE, S.A.; ET AL., § IN THE DISTRICT COURT
INTERVENORS/PLAINTIFFS, §
vs. § OF HARRIS COUNTY, TEXAS
§
MICHAEL SYDOW; ET AL., §
D EFENDANTS. § 2 15th JUDICIAL DISTRICT
INTERVENORS' RESPONSE TO THE SPECIAL APPEARANCES OF
JOHN D. PRESTON, BRILLIANT NOVELTY, L.L.C.,
AND C CHANGE INVESTMENTS. LLC
I. INTRODUCTION
Intervenors sued John Preston ("Preston") alleging, among other things, that Preston
fraudulently induced investments in Texas Syngas, Inc. ("TSl'') and NC12, Inc. ("NC12") while
systematically misappropriating the invested funds and company assets for his personal gain.
Preston's service as a director of and purported fund.raiser for TSI and NC12 unquestionably
involved Texas and constituted doing business in this state - although incorporated in Nevada,
TSI and NC12 have at all times called Houston, Texas home. The impact in Texas of Preston's
fraudulent scheme, in which he was aided by his companies C Change Investments, LLC ("'C
Changej and Brilliant Novelty, L.L.C. ("Brilliant Novelty"), is evident - NC12 is now the
debtor in a chapter 7 bankruptcy pending in a federal bankruptcy court in Houston.
Preston, C Change, and Brilliant Novelty (collectively, the " Preston Defendants") have
purposefully established sufficient minimum contacts with Texas, through their contacts with
TSI and/or NC12 as well as other Texas residents, sufficient to pennit the exercise of personal
257
jurisdiction over them in this Court. Moreover, the Preston Defendants• Special Appearances are
unverified, and so fail to comply with TEx. R. C1v. P. 120a. Accordingly, the Preston
Defendants' Special Appearance should be denied.
II. BACKGROUND
A. The Parties.
NC12, Inc. ("NC12") was incorporated in Nevada in April 2008. Nevada Secretary of
State records reflect that the original directors of NC12 were Preston, Michael D. Sydow
(''Sydow") and Michael Collins ("Collins"). (See Exhibit A-l 1) . Sydow is also identified as the
president ofNC12. (/d). The address given for Sydow and CoUins in the initial list of officers and
directors is 4900 Woodway, Suite 900, Houston, Texas n056. (/d). Sydow, Preston, and Collins
are identified as the NC12 directors again in NC12's May 2009 filing with the Nevada Secretary of
State. (Id ).
In 2009, NC12 acquired the assets of Texas Syngas. Inc. ("TSI''). TSJ was incorporated
under the laws of the S1ate of Nevada in May 2006 and registered to do business in the State of
Texas in June 2008. (See Exhibit A-2). TSI identified Preston, Sydow, Collins, and Christoph
Henkel ("Henkel") as its directors in its Application for Registration filed with the Texas Secretary
of State. (/d). TSI identified its principal office as 4900 Woodway. Suite 900, Houston, Texas
77056. (!d).
NC12 registered to do business in Texas on August 28, 2009. (See Exhibit A-3). The
company's principal office address is identified as 4400 Post Oak Parkway, Suite 2360, Houston,
Texas 77027. (/d). The company directors identified in the Texas registration in 2009 were
Sydow, Preston, and Collins. (/d). Both Sydow and Collins are Texas residents.
The Affidavit of Kelley M. Keller, dated July 2, 2014, is attached hereto as Exhibit A and
incorporated herein by reference.
2
258
NC12 filed for bankruptcy protection on October 14, 2011, under chapter 11. On February
28, 2012, the United States Trustee filed a motion to convert the case to chapter 7. On March 22,
201 2, NCI2 filed a response opposing the oonversion to chapter 7. The Bankruptcy Court granted
the motion to convert on March 27, 2012.
C Change and Brilliant Novelty are Preston's companies and participated in certain of the
fraudulent acts of Preston.2 (See Pet. in lnterv. ~ 33).
B. The Lawsuit.
This action was filed in 2011 as a fraud and shareb.older oppression action by shareholders
ofNC12. Intervenors joined the litigation, asserting claims based solely on their individual rights
as investors in NC12. The Intervenors assert that Sydow and Preston, along with others
conspiring with them, engaged in a fraudulent scheme to raise millions in investment dollars on
behalf of TSI and then NC12 for the development of revolutionary new energy technology that
Collins had developed for producing synthetic natural gas and other fuels from coal, while
denuding the company of its assets- i1S valuable tecb.nology, research and development facility,
and cash. Intervenors were left holding only their cLaims in the bankruptcy proceedings, after
Sydow and Preston enjoyed years of cash rolling in to TSI and NC12 which they used to their
personal benefit.
C. Preston's Contacts with Texas.
By Preston•s own admission, his contacts with Texas are long-standing, reaching back at
least 20 years. However, Preston has misrepresented the extent and nature of his contacts with
Texas in his attempt to avoid the exercise of personal jurisdiction over him by this Court.
2
Brilliant Novelty has not denied the allegation that Preston was at all relevant times a manager of
Brilliant Novelty, and C Change has not denied the allegation that Preston was a manag.ing partner of C
Change and controlled that company.
3
259
Whether inadvertently or intentionally, Preston has failed to disclose purposeful continuous and
on-going contacts with and activity in Texas.
In his affidavit filed in support of his Special Appearance, Preston identifies his "only [ ]
activity in Texas" as (I) a "limited number'' of visits approximately 20 years ago; (2) a "very
limited number'~ of visits to Texas in the past five years on behalf ofTEM Capital; and (3) a visit
to Texas in 2010 to testify in the divorce proceedings of Michael D. Sydow ("Sydow•/. (See
Preston Aff. at,, 5-63).
The evidence) however, reflects much more than the "limited" activity that Preston has
selectively disclosed. The following is a chronology of Preston's contacts with Texas- including
those to which he admits and those which he has neglected to disclose.
• Preston claims that he visited Texas ''a limited number of timesn approximately 20
years ago, allegedly in a representative capacity on behalf of a company for which he
was a board member. (Preston Aff. at~ 5).
o Preston does not identify that company in his Affidavit, but states, "specifically.,
that he made up to eight visits to Texas - five for board meetings of a nonprofit
organization and ..no more than three'' for board meetings of a Delaware
corporation. (Preston Aff. at ~ 5).
• Preston failed to disclose meetings he attended in Texas in the late 1990s on behalf of
Molten Metal Technology, Inc. (''MMT"), a Delaware corporation, registered to do
business in Texas. 5 Preston was a board member of MMT, and the company's chief
executive officer. (See Exhibit A-4) .
o Preston visited Texas on numerous occasions to negotiate a contract between
MMT and Hoescht Celanese to develop and operate a waste recycling facility for
Hoescht Celanese. (See Exhibit B at, 1 2~.
l
Affidavit of John T. Preston, submitted as Exhibit A to Preston•s Amended Special Appearance,
filed September 28. 20 I I.
Affidavit of John T. Preston, submitted as Exhibit A to Preston•s Amended Special Appearance.
ftled September 28. 2011.
MMTs Texas existence was forfeited in 1999. (See Ex. A-4).
6
The Affidavit of Michael Collins, dated Juty 2. 2014. is attached hereto as Exhibit B and
incorporated herein by reference.
4
260
o MMT had developed certain technology called Catalytic Extraction Processing
(''.Qgf''). CEP is a process for breaking down hazardous and radioactive waste
and recycling them into marketable products. (See Ex. B at~ 3).
o MMT filed for bankruptcy protection in 1997. Preston and/or his company,
Quantum cataiyti~ LLC ("Quantum,.), acquired MMT•s patents from the MMT
bankruptcy estate. (See Ex. A-S at VI 15-17; ExhibitA-15 at pp. 4-5).
• (n 2004, Preston flew to Houston, Texas to meet with Collins near Collins's home in
The Woodlands. (Ex. B at 1 6). Owing that meeting, Preston touted the patented
technology that he had acquired from MMT and encouraged Comns•s participation in
the commercial development of that technology. (/d.).
o Preston flew to Texas to meet with Collins again a few months after that first
meeting in The Woodlands. (Ex. Bat 1{7). During that second meeting, Preston
and Comns travelled to Bay City, Texas to meet with Hoescht Celanese to
continue discussions regarding the development an-d operation of a CEP facility
for Hoescht Celanese that had begun with MMT. (/d).
o Preston returned to Texas again about two months later, when Preston and Collins
met with Hoescht Celanese in Baytown, Texas. (Ex. Bat 1 7).
o During these three meetings in Texas, Preston and Collins discussed the
commercial opportunities possible utilizing the MMT technology and the
technology that Collins had developed. (Ex. B at~ 8).
o Preston continued to talk with Collins by telephone over the COW'Se of the ensuing
months. Preston initiated a number of those caJls, either to Collins at his home in
The Woodlands, Texas, or to Houston offices where Collins would occasionally
work, including the law offices of Sydow, McDonald, Kaiser & Ahmed, on
Bagby Street in Houston, Texas. Preston also shipped records to Collins at the
Bagby Street office for Collins's review and use in connection with the work he
was undertaking with Preston. (Jd ).
o At all times during Collins's discussions and business relationship with Preston,
Collins was a resident of The Woodlands, Texas. (Ex. B at ~ 12). In his
discussions with Preston, Collins learned that Preston had been to Texas on
multiple occasions prior to their introduction. Preston advised Collins that he had
previously travelled to Texas on numerous occasions for meetings with Hoescht
Celanese and with Flour Daniel in Clear Lake, Texas. Preston also told Collins
that he had made numerous visits to the Houston Area Research Center, or
HARC, on Research Forrest Drive in The Woodland~ Texas to study new
technologies in the late 1990s. As a result, Preston was very familiar with The
Woodlands. (/d.).
• [n July 2004, Collins fonned Texas Syngas LLC ("Syngas LLC") for the purpose of
e)(pJoiting his technology. Collins was the original sole member of Syngas LLC. (Ex.
5
261
B at ~ 2). Preston joined Syngas LLC as a member after his discussions with Collins.
(Ex. B at 11 10, 11; Exhibit A-6 at ~ 3'). Although Preston ultimately executed the
Syngas LLC Operating Agreement on behalf of Quantum, the investment was clearly
Preston's. (See id; Ex. Bat~ 11).
• On June 19, 2006, Metal Catalyst Ventures, Inc. (''Metal C-atalys~') filed Articles of
Incorporation with the Nevada Secretary of State. (Exhibit A-7). The Metal Catalyst
Articles of Incorporation identify only one director -Preston- and lists his address as
4900 Woodway, Suite 900, Houston, Texas 77056.
• On November 10, 2008, Preston traveled to Houston, Texas to meet with Collins to
discuss a financing proposal by Preston's company C Change. (See Ex. B at, 13;
Exhibit A-8 at 25:8-26:4, 30:4-15; Exhibit A-9 at p. 13).
• On November 10, 2008, Preston wrote a personal check in the amount of$1,100,000,
payable to BOS, Inc. ("BOS"). (See Exhibit A-13 at 01158).
o BOS is identified in its banldng records as officing at 4900 Woodway Dr., Suite
900, Houston, Texas 77056 - the same address as NCl2ffSI. (See Ex. A· l3 at
00448, 00501). That same banking record reflects a wire transfer from BOS's
Texas bank account to Preston in the amount of$1,100,000 on January 15, 2009.
(Jd at 00448, 01142).
o TSI apparently _paid for the incorporation of BOS. (See Ex. A-13 at 0050 1-502).
• On April2, 2009 and May 3, 2009. Preston traveled to Houston, Texas. (See Ex. A-9
at p. 13; Exhibit A-10).
o Preston contends that his travel to Texas on those occasions was uas a
representative on behalf of TEM Capital." (See Ex. A-9 at p. 12). However,
according to Russell Read ("Read.,), Preston's former partner in C Change and
TEM Capital, TEM Capital was not formed until 201 1. (See Ex. A-8 at 33 :2-12).
Accordingly, Preston•s travel to Texas in April and May of2009 would not have
been as a representative and on behalf ofTEM Capital.
• Preston traveled to Texas with Read in "either 2009 or early 201 ou allegedly "for
meetings with Russian technology partners for the fonnation of a joint venture M.J.T.
was entering into with the Russian government. ~· (See Ex. A-8 at 49: 13-50:4).
7
?reston submitted an Affidavit dated December 6, 2013, in Cause No. 2007-38533, Kaiser v.
Collins, pending in the 152 Judicial District Court, Harris County, Texas, in support of Plaintiff's
Opposition to Collins's Motion for Summary Judgment. In that Affidavit, Preston discusses his decision
to invest in "Te:x.as Syngas and to beoome a member in the Texas Limited Liability Company into which
it ultimately was formed!'
6
262
o Preston did not disclose this visit to Texas in his Affidavit filed in support of
his Special Appearance or in the discovery responses he served in this action.
(See Ex. A·9 at pp. 12-13).8
• In the summer of 2009, Preston' s C Change was looking at another company with
operations in Texas, EMC Cement BV eEMe').
o In its Original Complaint recently filed in the United States District Court for the
Western District of Texas, Waco Division, under Civil Action No. 6:14-cv-149
(the '~EMC Litigation, ), against Preston9 and others, EMC alleges that in August
2010, Preston visited a cement plant in Jewett, Texas operated by Texas EMC
Products, EMC's exclusive licensee for the use of EMC's patents in the state of
Texas. (See Exhibit A-11 at 1 36}.
• Preston did not disclose a visit to Texas in August 2010 in his Affidavit filed
in support of his Special Appearance or in the discovery responses he served
in this action. (See Ex. A-9 at pp. 12-13).
• On October 6, 2010, Preston appeared as a witness on behalf of Sydow in the divorce
proceedings flled by Sydow in the 308mJudicial District Court. Harris County, Texas.
(Exhibit A-12).
o Although Preston contends that his testimony in the Sydow divorce proceedings
was "as the corporate representative for NC12," 10 there is nothing in the record of
those proceedings indicating that Preston appeared as a "corporate
representative." Rather, it appears he simply traveled to Texas to support his
colleague and co-conspirator Michael Sydow.
• EMC alleges that Preston visited Texas again in January 2011 to discuss a potential
investment by C ChangeffEM Capital in EMC's line of business and technology.
(Ex. A-ll at~ 48).
o Preston did not disclose a visit to Texas in January 2011 . (See Ex. A-9 at pp. 12-
13).
• EMC alleges that Preston appeared at a foreclosure sale in Texas on May 3,.2011 , on
behalf of the defendants in the EMC Litigation during which the EMC Defendants are
alleged to have acquired the cement plant in Jewett, Texas, that Preston had visited a
year earlier. (Ex. A-11 at 53).
Preston was asked to identify ''all" travel to Texas since 2000. (Ex. A-9 at p. 14).
9
Preston asserts in his Affidavit filed in support of his Special Appearance that "[e]xcept for this
lawsuit, [he has] never been a party to litigation in any state or federal court in Texas." The lawsuit filed
by EMC on May 5, 2014, now changes that fact.
to See Ex. A-9 at p.l3.
7
263
o Preston did not disclose tbjs visit to Texas in May 2011 in response to the
Intervenors• interrogatories. (See Ex. A-9 at pp. 12-13). However, Preston
produced flight records that confinn a flight to Dallas/Fort Worth on May 2,
2011, with a return flight to Boston, Massachusetts on May 4, 2011 . (Su Ex. A-
10 at Preston 000025-26).
o Preston claims that his visit to Texas in May 2011 was for the purpose of
testifying "as the corporate representative for NC12, Inc. regarding an asset
owned by the company in Michael Sydow•s divorce proceedings." (Ex. A-9 at p.
13). However, as noted, above, Preston came to Houston (not Dallas/Fort Worth
as the flight records for May 2011 reflect) to testify for Sydow in October 2010.
Accordingly, Preston's travel records for May 2011 , likely reflect this visit to
attend the foreclosure sale reJated to the EMC Cement property.
• EMC alleges that Preston visited Jewett, Texas again within days of the May 3, 2011 ,
foreclosure sale to inspect the cement plant. (Ex. A-11 at, 53).
• On August 22, 2012, JK Claims Investment Corporation (..JK Claims") filed a
Certificate of Formation with the Texas Secretary of State as a domestic for-profit
cotporation. (Exhibit A-14). Preston is identified in the Texas Secretary of State
records as the sole director ofJK Claims. 11 (Id.).
o JK Claims purchased from the bankruptcy estate of Jeffery Kajser ("Kaiser') the
claims asserted by Kaiser in Cause No. 2007-38533. Kaiser v. Collins, pending in
the 152 Judicial District Court, Harris County, Texas (the ''Kaiser Litigation").
o Preston is now pursuing relief in a Texas state court, under the guise of JK Claims
and Quantum, through an amended petition in the Kaiser Litigation reframing the
complaint to one complaining about alleged misrepresentations by Collins
regarding his educational background and professional licensing to induce the
plaintiffs' investment in Syngas LLC.
Ill. ARGUMENT AND AUTHORITIES
A. Tbe Preston Defendants• Special Appearances Fail to Comply with Rule 120a.
A defendant desiring to challenge the exercise of personal jurisdiction over him in a
Texas court must file a sworn motion challenging jurisdiction. TEX. R. Ctv. P. 120a Although
11
Note that Preston asserted in response to Interrogatories served in this matter tbat 14Texas Syngas
LLC is the only company with its principal place of business in Texas or incorporated in Texas for which
Preston was a director, officer, or employee.•• (Ex. A-9 at p. 12). According to the records of the Texas
Secretary of State, Preston's statement is incorrect.
8
264
the Preston Defendants' have each submitted an affidavit in support of their special appearance,
the special appearances themselves are not verified and so fail to comply with Rule 120a.
B. State and Federal Due Process Considerations and "Minimum Contacts."
Courts sitting in Texas may assert personal jurisdiction over a nonresident if the Texas
Long-Ann statute authorizes jurisdiction and the exercise of jurisdiction ..is consistent with the
state and federal due process standards." Am. Type Culture Co/lee/ion. Inc. v. Coleman, 83
S.W.3d 801, 806 (rex. 2002). The Texas Long-Ann statute authorizes the exercise of
jurisdiction over "those who do business in Texas, which includes contracting with a Texas
resident where either party is to perform the contract in whole or in part in Texas." Jones v.
Petty-Ray Geophysical Geosource, Inc., 954 F.2d 1061, 1067 (5th Cir. 1992) (emphasis added);
see TEx. Crv. PRAC. & REM. CODE ANN. at§ 17.042.
Texas courts have generally held that the "broad language of the [Texas] long-ann statute
permits an expansive reach, limited only by the federal constitutional requirements of due
process." Daimler-Benz Akliengesellschaft v. Olson, 21 S.W.3d 707, 714 (Tex. App.-Austin
2000, pet. dism'd w.o.j.). Accordingly, the court may consider solely ''whether it is consistent
with federal due process for Texas courts to assert personal jurisdiction over'' the foreign
defendant. Daimler-Benz, 21 S.W.3d at 714.
Federal due process considerations ask whether the nonresident defendant bas
"purposefully established minimum contacts with the forum state" such that the exercise of
personal jurisdiction over the nonresident "comports with traditional notions of fair play and
substantial justice." Daimler-Benz, 21 S.WJd at 714.
9
265
Jurisdiction will be proper "where the contacts proximately result from actions by the
defendant himself that create a 'substantial connection' with the forum State., Burger King
Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985).
"The ultimate test of minimum contacts is whether the defendant purposefully availed
itself of the privilege of conducting activities in Texas, thereby invoking the benefits and
protection of Texas laws:• Daimler-Benz, 2 1 S.W.3d at 714. When a defendant has deliberately
engaged in "significant'' activities with a state. "or has created 'continuing obligations' between
himself and residents of the forum," he has availed himself of the privilege of conducting
business in that state. Burger King. 471 U.S. at 475-76 (emphasis added). " [B]ecause his
activities are shielded by 'the benefits and protections' of the forum's laws it is presumptively
not unreasonable to require him to submit to the burdens of Litigation in that forum as well., /d.
Accordingly, a finding of "minimum contacts•• requires a "substantial connect between
the nonresident defendant and the forum state, brought about "by action or conduct of the
nonresident defendant purposefully directed toward the forum state:• Guardian Royal Exchange
Assur., Ltd v. English China Clays, P.L.C., 815 S.W.2d 223,226 (Tex. 199l);see also Carllidge
v. Hernandez, 9 S.W.3d 341, 347 (Tex. App. -Houston (14th Dist.] 1999, no pet.) ("The
exercise of personal jurisdiction is proper when the contacts proximately result from actions of
the nonresident defendant which create a substantial connection with the forum state.").
Requiring that the non-resident's actions be (l{.l-\ YER
The PTeston Defendants have established sufficient minimum contacts with Texas to
support fhe exercise of Jurisdiction over tltem by this Court Accordio¥1Y) intervenors Ernjo
hwestments, Ltd. and ILT. von der Goltz respectfully reqqest th<\t this Court deny the SpeCi~;tl
Appearances filed by Jolm T , Pre~ton, C Change _ln.V,est~ents, LLC, and Brilfiant Novelty~
L.L.C. a~d gr:ant ltltetvenw.'s $u.ch .othet ~nd fijrther r·e liefto which they may be entitled.
Respectfully su~m1tted,
ELLISON •KELLER, P;C.
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State Bar No.. 1.50541'720
5120 Wood~:vay Dtive.~ Su1te :6.019
f:k)tJstotlfTe.xas 770.56
:rdephon,e: 713 -:26(};.~2~0
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272
CERTIFICATE OF SERVICE
'l11e 1mdersigned hereby certifies that on this 2nd day of July, 2014 a true and correct
~opy of the above Response to the Special Appearances filed by John T. Preston, Brilliant
Novelty, L.L.C., ru1d C Change Investments LLC was served on all interested parties) by and
through their attorney of recoTd indicated below via emaiL
Randall 0. Sorrels Brent C. Pen·y
Clyde J. "Jay" Jackson.llJ Law Offices of Brent C. Perry
Abraham W~tk.ins. Nichols~ Sorreis, 800 Commerce Street
Matthews & Friend Hou~ton. Texas 770CJ2
son Commerce Street Facsimile: 713,.237-0415
Houston, Texas 77002~ 1770 Aam·neyjor Original Plain:tijfs
Facsimile: 713-225-0827
Attorneysfor Original Plainrijj.;·
Asher Griffin Amir Alavi
Chris Sile.o Ashley Frankson
Sean FJanuner Ahmad. Zavitsanos, Anaipakos, Alavi &
Scott. boug1ass & McCounico, LLP Mensing P.C.
600 Congress Ave.~ St-e 1500 3460 One Houston Center
Al!Stin, Texas 78701-2589 1221 M~Kinney Street
Facs.imile: 512A74-073 I Houston._Texas 770tO
Atrorneys for Dejendmus Facsimile: 713-658-0062
Cha/sys, AI/E.T, and Lo Attorneysji:Jr Defendants ~ydow. Preston,
Henkel, C Change, and BrilliantJllovel~v
F. Eric Fryar
State Bru· ·No. 07495770
eric@fryarlawfi rm .com
Matthew Buschl
State Bar No. 24064982
mbuscht~arlawfinn.com
Chrlstin~ Richardson
FRYAR LA'" FJJt\1, P. c.
State Bar No. 24070495
9J2 Prairie. Suite 100
Houston, Texas 77002-3 145
Fa~imile: 281-605-1888
Attorneysfor all lntervenors,Plaintfff.i:j
273
Cause No. 20 ll-44058
MICHAEL COLLINS; ET AL., § IN TilE DISTRICT COURT
PLAINTIFFS, §
vs. § OFHAJUUSCOUNTY,TEXAS
§
MICHAEL SYDOW; ET AL., §
DEFENDANTS. § 215th JUDICIAL DISTRICT
AKILA FINANCE, S.A.; ET AL., § IN THE DISTRICf COURT
INTERVENORs!PLAINTlFFS, §
vs. § OF HARRIS COUNTY, TEXAS
§
MICHAEL SYDOW; ET AL., §
DEFENDANTS. § 215th JUDICIAL DISTRICT
AFFIDAVIT OF KELLEY M. KELLER
Before me, the undersigned notary, on this day personally appeared KELLEY M. KELLER,
who is personally known to me, and first being duly sworn to law upon her oath deposed and said:
1. My name is Kelley M. Keller. I am over the age of 19 years old and am fully competent
to make this affidavit. I am an attorney licensed to practice law in the state of Texas. I
am lead counsel for Johan von der Goltz in the above referenced action. The
infonnation contained herein is true and correct and is based on my personal knowledge
as it relates to my representation of Mr. Von der Goltz.
2. Attached to the Intervenors' Response to the Special Appearance of John T. Preston (the
~'Response~') as Exhibit A-1 is a true and correct copy of the Initial List of Officers,
Directors, and Registered Agent of NC12, Inc. \'NC12''), filed with the Nevada
Secretary of State on July 29, 2008 and the Annual List of Officers, Directors and
Registered Agent ofNC12, filed with the Nevada Secretary of State on May 20, 2009.
3. Attached to the Response as Exhibit A-2 is a true and correct copy of the Application
44
for Registration of a Foreign For-Profit Corporation filed by Texas Syngas, Inc. ( TSI1
with the Texas Secretary of State on June 19, 2008.
4. Attached to the Response as Exhibit A-3 is a true and correct copy of the Application
for Registration of a Fo.reign For-Profit Corporation filed by NC12 with the Texas
Secretary of State on August 28, 2009.
5. Attached to the Response as Exhibit A-4 is a true and correct copy of the Business
Organizations Inquiry - View Entity for Molten Metal Technology, Inc. ("MMT"),
EXHIBIT A
274
reflecting the '"'Filing History" and ''Management," which includes John T. Preston,
Director and Chief Executive Offer, 238 Main Street, Suite 20 I, Cambridge. MA.
6. Attached to the Response as Exhibit A-5 is a true and correct copy of the First Amended
Complaint filed January 9, 2009 under Case No. 1:08-cv-11456, Quantum Catalytics,
LLC and Texas Syngas, Inc. v. Ze-Gen, Inc., eta/, in the United States District Court of
Massachusetts, Eastern Division.
7. Attached to the Response as Exhibit A-6 is a true and correct copy of the Affidavit of
John T. Preston, dated December 6, 2013, filed in Cause No. 2007-38533, Kaiser v.
Collins, pending in the 152 Judicial District Court, Hanis County, Texas, (the "Kaiser
Litigation") in support of Plaintiff's Opposition to CoJlins's Motion for Summary
Judgment.
8. Attached to the Response as Exhibit A-7 is a true and correct copy of the Articles of
Incorporation for Metal Catalyst Ventures, lnc., filed with the Nevada Sec~ of State
on June 19, 2006.
9. Attached to the Response as Exhibit A-8 is a true and correct copy of excerpts from the
deposition of Russell Read, taken April 21, 2014 in the Kaiser Litigation.
10. Attached to the Response as Exhibit A-9 is a true and correct copy of excerpts from the
Amended Answers of John T. Preston to Intervenors' First Set of Interrogatories.
11. Attached to the Response as Exhibit A-10 are true and correct copies the documents
produced by Preston in response to Intervenors' Request for Production.
12. Attached to the Response as Exhibit A-1 I is a true and correct copy of the Original
Complaint filed May 5, 2014, under Case No. 6:14-cv-149, Procedo Enterprises
Establishment and EMC Cement, BV v. Quadrant Management~ Inc. , e/ a/., in the
United States District Court for the Western District of Texas, Waco Division.
13. Attached to the Response as Exhibit A-lZ is a true ~d correct copy of excerpts from the
transcript of the proceedings held October 6. 201 o. in Cause No. 20 I 0..()271 0. Sydow v.
Sydow, In the 308th Judicial District Court, Harris County, Texas.
14. Attached to the Response as Exhibit A- 13 are true and correct copies of excerpts from
the document production of BBVA Compass in Cause No. 2010-02710, Sydow v.
Sydow, In the 308th Judicial District Court, Harris County, Texas.
15. Attached to the Response as Exhibit A· l3 is a true and correct copy of the Business
Organizations Inquiry - View Entity for JK Claims Investment Corporation, a Texas
domestic for-profit corporation, reflecting the following HManagement": John T.
Preston, Director, 421 Currant Rd., Fall River, MA 02720 USA.
t 6. Attached to the Response as Exhibit A-15 is a true and correct copy of a Memorandum
filed by Quantum Catalytics, LLC, John Preston, and Christopher Nagel in Case No. 05-
10077-RGS, in the United States District Court of Massachusetts.
2
275
Dated: Ju1y 2, 2014.
STATEOFTEXAS §
§
COUNTY OF HARRIS §
BEFORE ,ME, the undersig.tied authority, on this day personally appeared Kelley M, Keller,
known to me to be the person w11ose nmne is subscr_.tbed to the foregoing instrument, and
acknowledged to me that she read the Ai1idavit of Kelley tvL Keller and that the facts stated therein
were wi:thi11 her personal knowiedge and were true. and correct.
e BARBARAOAVIS
My Commls$fon E.xplr&a
No.vember 14• .2015
1OTARY PUBLIC IN AND FOR
THE STATE ()p tEXAS
MY COM1vHSSION EXPLRES:
3
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BUSINESS ORGANFZATIONS INQUIRY- VtEW ENTUY
Filing Number~ 9112306 Entity Type: Foreign Fot~Protil Corporation
Original Oate of Filing: April 3, 1992 Entity Status~ Forf~ited existence
f'omudion nate: N!A
Tax 10: •1 5216599595 FEIN:
Name: MOLTEN METAL TECMNOLOGY, lNC.
Adtlress: 400-2 TOTIEN POND RD
Waltham. MA 02'154 USA
fictitious Name: NIA
Juris~iiction : DE, USA
Foreign formation Date: NJA
!nstructiqns;
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EXHI.BIT .A.-4·
287
BUSINESS OR<:W41ZATIONS IN<~UIRY • Vl'C.W ENfiTY
TEXAS SECRETARY of STATE
NAN01TA BERRY
BUSINESS ORGANIZATIONS INQU~RY ~VIEW ENTITY
Filing Number-: 9112306 Entity Type: foretgn For-Profit Corporation
Origina l Oats of Filing: Aprif 3, 1992 Entity Status Forfeited existence
Formation Date: NfA
Tax ID: 15216599595 FEIN:
Name: MOLTEN METAL TECHNOLOGY, INC.
Address: 400-2 TOTIEN P OND RO
\tlallhaf'1, MA 02154 USA
Fictiti ous Name: NIA
Jurisdi ction: DE, USA
Foreign Fonnation Date: NIA
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7/112014 BUSINESS ORGANIZATIONS INQUIRY- VIEW ENTITY
John T Preston llrector 238 MAN STRB:T, SUITE 201
carrtJridge, MA 02141 USA
NAGS., OiRISTOA-IER .rsrn SRVP 40~2 TO'Tlm ROAD
Waltham, MA 02154 USA
NAGS., Q-iRISTO~ .rsrn llrector 40~2 TOne.! ROAD
Waltham, MA 02154 USA
NAGS., OfRJSTOFtffi J•srn llrector 40~2 TOTlB'II ROAD
Waltham. MA. 02154 USA
Bhan Jacks GENCSL 40~2 TO'Tlm ROAD
Waltham, MA. 02154 USA
VW!Iam M Haney Ill CEO 40~2 TOTlB'II ROAD
Waltham, MA 02154 USA
\Nilliam M Haney Ill Director 40~2 TOTlB'II ROAD
Waltham. MA. 02154 USA
GATIO, VICTOR E"EDD VP 40~2 TOTlB'II ROAD
Waltham, MA. 02154 USA
Benjarrin T Downs VPFIN 40~2 TOTTEN ROAD
Waltham. MA. 02154 USA
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IOrder I I Return to Search I
Instructions:
iTo place an order for additional information about a filing press the 'Order' button.
289
https://direclsos.state.tx.us/corp_inquil)lcorpjnq ul~entity.asp?spage=mg mt&:Spag efTOtTF&:Siiling_number=9112306&:Ndocurrent_runber=551530130002&... 212
Case 1:08-cv-11456-JGD Document 74 Filed 01109/09 Page 1 of 20
UNITED STATES DISTRJCT COURT
DISTRJCf OF MASSACHUSETTS
Eastern Division
- - - -- - ---·- - --- -- --·- -- --
QUANTUMCATALYTICS, LLC, and
TEXAS SYNGAS, INC., C.A. No. I :08-cv-11456
Plaintiffs,
V. FIRST AMENDED COMPLAINT
AND JURY DEMAND
ZE-GEN, INC.; WILLIAM ("BILL"} DAVIS;
NEW BEDFORD WASTE SERVICES, (Leave to file granted December 18, 2008)
LLC; VANTAGE POINT VENTURE
PARTNERS; FLAGSHIP VENTURES 2004
FUND LLC~ and IRV MORROW.
Defendants.
Plaintiffs Quantum Catalytics, LLC (formerly referred to as Quantum Catalytics, Inc.),
and Texas Syngas, lnc. (collectively "Plaintiffs,.) bring this complaint against Defendants Ze-
Gen, Inc.: William ("Bill'') Davis; New Bedford Waste Services, LLC; Vantage Point Venture
Partners, Flagship Ventures 2004 Fund LLC; and lrv Morrow (collectively "Defendants").
alleging as follows:
THE PARTIES
l. Quantum Catalytics, LLC (hereinafter "Quantum") is a Delaware limited liability
company with its principal place of business in Fall River, Massachusetts.
2. Texas Syngas, lnc. (hereinafter ''TSI", and collectively with Quantum.
"Plaintiffs"), is a Nevada corporation with its principal place of business in Houston, Texas.
3. On information and belief. Ze-Gen, Inc. (herein "Ze-Gen") is a Delaware
corporation with its principal place of business in Boston, Massachuset1s and may be located for
service of process through its president:
EXHIBIT A-5 290
STATE Of MASSACHU$E11'S
COUNTY OF MlDDLESEX
AFFlD.t~ VlT
Before me. the undersigned authority~ (H1 this day persnnally appeared John
T. Preston who bein~ by me fitst duly swot1l upon oath did deptJSe :and say;
1. 'My mmH~ iS john Preston. t .atn over the age of2.1, am under t:IQ leg~tl
.
disability, and an1 wmpetent to make t1'lis :.)flfdavit. Th~! fucrs recited herein lre true
based upotl rny·p.er.sonal km)wierlge. l rl
his ed~l{:(IQOllal background. C~1JHnH en:pht:~tic~i!y Sf<.~t.\~~1 that he had gntdUtudent ilt
Cwed no t'ecqrt~ of Mr. Collh:s being .1 gt·<.ldtl<~h'~ of C(lrn!;gi~ Mef t)f his dt~gn!~!s that iw promised. i
312
development effort. and f Wvorthy.
to t:he Board nf l'.>il"ect.CJr~ of NC:\.2 on Tvl<;y 5, 2010 (Mt::tchment 1).
Oircctnrs and l tcjoined th(.~ 13o~~rd. lnnnediately the new Board baf;kt;d UJ.t an
computer !\)"stems and stttrted <.H: :u:.d early
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Bv th~ end of Nov~mher :w 10, I \:VoS tota\ly convin-ced that CoHlns. had
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IN mE DISTRitT
s DY MR. HUNTER 6 56
-s-> Jl( C\.AIMS ~DIT' COURT
OORI'ORATION, indivldllllly 111d : 6
TION PAGE
TfXASSYNOAS, LLCIIIId MICIJAEI. : OFIIARR~C()UNl"Y, 12 1 l)ocument entitled "Notice of 6
A. COl..LINS, : TElCAs
Dotmdl:n!J. ; Intention to Take 01111 DcJl(lsition of
. . . . . . . ..... . . . .. « 13 Russel Read"
VIOOOfAPF.l> DI!I'OSITION OF RUSSf.J.t. Rf.Af), Cf'A, H
l'll.D.• • lriln... call«< oo.bdWI' old\~ flo.iatill't,
~ pl>mW>t ro the Fedcnll Rulto ofCivil
~ . bofo"' ).,.. M. WiUi.amoon, R(8illleftd
15 ••• •
M
.- -...
Merit RqJcrlorund "'"lory
I'UI>Ii~ in and for the 16
c;.,.,.mO«weoltb ofM~ II Ole Ollisition, which
9 Q. Thank you, Mr. Read. 9 address or whut method mould lhe co.111 n:porter
10 MR. HUNTBR: Ms. Williamsoot do you have a 10 ~nd you your l~:Stimony?
11 copy of the deposition notice? lnsk lh"t you mark 11 A. My prefem:d method of T\:10Clp4 is by emnil
12 it as Exhibit l of Ibis deposition. 1 don't have 12 1'hc second would be to mail at my work addccss in
13 lillY additionaJ exhibits. 13 Kuwait
14 (Document marked as Rc:ad 14 Q. Can you give us - 0! give the court
15 Exhibit 1 for identification) 15 reporter your email address-
16 Q. Mr. RQd, y;·ould you please stole your full 16 A. My email address is IT88.d, the No. 5, at
17 k:pl name Cot the record. 17 Yahoo.com.
18 A. RusscU Read. 18 Q. Thank you. Mr. Rct1d.
19 Q. I thank you for taking time Lodoy. Mr. 19 Wbc:n you receive the tnmscript. it will
20 Read, from your day and from your stay i.J) the United 20 eitbc:r be in a booklet or in an electronic fonnal
21 States to give the Coun 111\d the Jury )'OUr testimony 21 Ptt:aSe n:vicw your testimony and com:ct any
22 in this actioo. 22 d~ricu l crron; und return the tnmsc~ to me.
23 Have you ever been deposed before? 23 Will you do that for me, please?
24 A. 1 have been. 24 A. Yes, I will
25 Q. Jam sure that you will roo11ll from your 25 Q. Do you understand that if you mak~ uny
.,... .. - . . ... - -··· - ··~
2 {Pages 5 to 8)
Confidenti a l Communications Int . Ltd .
318
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319
Russell Read, CFA, Ph.D. 4777
Page 29 Page 31
1 about five minw~l 1 officer was replaood. 811d Norm t cBla!lc was rcpUtced
2 MS. KELLER: Sounds goocL Okay, thruU: you. 2 by Gina foote, F-0-0-T.£. In addition. we blld
3 MR. HilJNTSR: OfT the record. 3 anoth4!r operational per.;on who carne on, who was Joe
4 THtl VtOI!OORAPHE:R: 1ne tlmu •:s 12 fl.m•. md 4 S>'~ldMa. each of U1em were junior~
5 we Q1\! uiTl.h.t: tcX.'OOO 5 Q. Is C Chllnge ln\~"1mcnt.<~ still in operation?
6 (Rcoess taken from 12:00 to 12:06) 6 A. C Change lnv~ents is not opc::mting now.
7 TiiE VTDEOGRAPHER: The time is l 2:06 p.m., 7 Il \\ras d Ycctivcly merged into a n-=w company . calJ~
8 1111d we are <>;n the record. a "'Tra.osform31ive Enefgy and M~terials Capital, which
9 CROSS EXAMINATION 9 was fonnc:d as a combination or C Change and a group
10 BY MS. KalER: 10 out of New YorX City. ~lied "Quadrant Capital. M
ll Q. Mr. R~. my name is Kclly Keller, arid you 11 Q. Wt:re you uffiliatt:d with Quadrant Capital?
12 understand I represent the defendant in this ca~, 12 A. l\lo, J had no relationship or affiliation
13 Michael Collins, correct? 13 with QuSldrant CapitaL
14 A. I d<>. 14 Q. Oo you know if Mr. Preston has an
15 Q, r want to go briefly - just some brief 1S uflili1 o( 20 I l and Sought
8 (Pages 29 t o 32)
Confidential Communications Int . Lt d.
320
4 77 i
P~gc .l~
(lW...:i op!X•rtwutics. i~~u:uing in ~Ill: st unu~ A Th.: amount reech.ed from I'Jipi' \: tQ fund C
Q. l'm ...m; , \\ i;"! w:t:- ll:c n:.lsmt yuu :-~ur.pttv 2 Chaugc wa) S25 uulliuu.
l(lklllg " s..~l<·~·"? J Q. Aud \\ llltl \\:tS the ntnount rt:<.~tvcd fn:nu ~k
A JIO~cth•e!} , w•~ wcm ttMllk: tv rtH:O:\: 11U1 4 Kcnl-cf>
tum! tt ''• 8
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million \\:ts warclt{)U!'cd. and tfu1t \'\~ts ulliuuttcl)
9 a u~w mtlit~, ~n~:rl • I'EM Ct)!1lll11. · - , r:m~I.Ir;;m;ll\'~ :::: m~t.t.."<1 ror TS I ~ is thut com:cl'?
!.0 Eaw/l!;. ~nd ,\.iatcntds t .:upitul," in ~mhumtir.u \\!th l(l ,\ 1 million \\1tS act1tally ch rc<,1t:d to :md
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Vmlo. <. i!) I '.\iJ:I rt~>l 1:0. bwestoo into Te:-.us Sy n~;JS at {ll(; re<.tuc;;t or Tripe~.
.!.2 pitrl (•( tlwt t !li;l'f!\.'T. 12 Q Oka~
.. 1 (J. At tlt..: time l.;f; in tht! ~\ttltt~r ,,f ~•ll,
yNt 13 A Ok.a~ . Que miUron \\~lS invested. Tile oth.cr
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hi>\~ ml~h i~,c~ln;..:~tt funu.; bd C (...huu~ nn~~'? H ttWCSlfilCOb.. the Hl\'esllUcUl!i juto FA~~ I: Africa. &)tc
A Eftc"'tivciy. <.. Chnngc ont} l"t!is.:d its 1 ~} suslaiuabk ngticulturc wvcstntent "as :ii·hiO.OOO.
lnt>lll!). thnt HJO milli(~t, lor u fumJ in\ cstm.:m i:r tl 16 A1t<; tlr.! uM~sltuenl mt<> tl~ biorunss etccttlctty
!';nll!C~nir- ~~~N;.'1:'1Cill \\ i!h Qtw,~:utl f~rt>~l.:ll <>l!lllf n projc(;l mlO H;\w'.lll was arc" ouUion dollars. Tlr~
New 'f'.;uk Cit;. . Sn ;rt thtll f'\lml, I \Hltt!d ·~} 1h;ll .,..,wet amount. i do not recall.
:fl.:; numl>-.:r was$ f(~~ 1mlhNl itnJ tt <.~ :~~ pwdJco.tcJ 19 Q . And 11us was maser tt11: fw.l.it"
Q So in rmtght~· tlu-c:c yenrs, (' (1~mgc had
/\
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mlc C C:htmt>.C 1ivu1 I npex C()f1~r,llt<>n
-·t' raised appm.X"imatcl\ l(l 5 million· is ttral <:oi"W:t'~
/\ ln t.ltc tltre£ )•cnrs. T look. at it usC
o\>t ,al ''~lhl:r!imd. P,"'intanlv. innittm With
3 0. s,, b. it ~rrc-ct tt trrun Q•ta-tihtot Cttpilili •lOl n( N\!" Y<11·}; Cit} .
4 2(/):8, lmm 1ntct'.(i~'ll UJ' until thl' f pa.~ offtct."Th ~md i.:!l'lp!oy~s or ww: ~or,_~ lt• tl~ nuJdlc oflfsl l , tl-.c JOV miUilm \:trmc ~m
.-l ~ld.hw~l fWlds raised tl!!ll '''e!\.::sctu..~Hy lll,-est~o:d? the ='·'CfW in th.o1t l::"Sl) ~,-;-r
!-..1it HU~'TE~ · ObJ~i!tia:t, f6nu l.l 01aJ' So of lh·.> 26 5 miJJK•Il \\~!\: tWI
A. ~t• «)r thl! mvncy dt:~t w:ss iJt\'eSt<:o h\ i ti~ lwking at the lw miUitm. Uul l+f 1.b.c 26 5
<.~nll til.s<} (;hrilitol'llcnkcl, \\~ \\'l:re e~blc ln mukc •• ,.,.c minion. 1 million \\~ l lu] Sl, t.'llm.'>~.:l'?
\\CC\: ab!u to bc~h Pll)' cmpluj c-:s am! i!ll.O p.ay r~lf A Cun-cc1
~~ru~ctmg partr.l..'n> t~ h~lp us lc- ;Jcn:t!)· Q. A t\.'\•· milhon to !he hl-'ma"-q ~1..-ct m
mstitut1o:ml m\.;:~·w~ . 'UtJ ulli(•, \\C dld mo.kc :tOnic I !.nvmi, cot~·>
:r.
im ..:slnwnl~ 1(1 '''"n:n(~Jo'\.' -· ''~ m:t~~: ,.,,nc m\ ""Sinlcr.<.i A Yt.~
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fimd inw~llt\CI)t. .. 7 1\. Y~."'
flfu: Of ftl(I:IU tn'\L":->1ltll"TJ[~ \\.'?!~Of J.~ (J.. And {.J' th•>!l".: - f'v~ ! USt llllt~ Om:~
~liiiiM ...inll:u irwelilUWill imo l~~i'" Syn~a~l\t: 11 9 ltlYL":\tnlcuts. Were there 1my otik!r inv~tm.:nls tha!
V/~ ;illi(t t()nde sumc ~d1tiom.1L mn:SimcniS. ''h;ch .:r. we~ mr.dc with the).[,, - willi<)ll c,r did 1h.: rcrn:r in,h:;r
mciU<~•Ithc "orehou·m1g nl Ure in'·cstiJICnl Jhr ?. 1 .(Nl to rutllling dt.:: <)pcn:titmsor (. Cilt:ll~C'!
hiOltl:t~}. h1 uk~lJ;-:sl~ iu l t;rw<~ir. U$ .,, d l as o 11 MU t £UN1 ER. Oh;tX:ti()n form.
' '.
."! 111\ ~l~lUill n.;crci,~: from 11 i}.t.~Y !r i:c fl•>~~~blc 1 an. nli~te~;t~ill~i'ut~ ~~ ~·ociifl~
9 (?ages 33 to 3~>
C<:;~ f i den i.: :i. ~J l Commu 11 i r;a ~ i ·:>ns Tnt , J.. t d.
321
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1:J wurvll,>lll>luv.'' Th'1"11 fhr~X lhul \' v chf'\,;11t<~~~·r "! ~ (,l I !:ld \' HIJ (\'ltd bH>}!III~tht\;."S l'vl' Hllol ~·lill~)lJIII!I
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~ •I conv~r~nthm:o~ with Mr c.,Hitl:l. ,. ;! t, polclltlnll) h rlfl\lh!Yil:ll l \ \! IL'<.hllnlo~~. h\.'\:(IU~ II
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9. .Preston expressly incorporates each ofthe above objections to the extent appHcable1n
each specific respvnse to the interrogatories set forth below~ as if fully set furth in the answef to
each specific interrogatory.
SPECIFIC RESPONSES AND OBJECTIONS
INTERROGATORY NO. l
State the dates of service for your service on the board of directors ofTSL
Subject to and \\~thout waiving Preston's objections. Preston responds as follows:
Preston served on the board of directors ofTSl between the end of 2004 and on or about
May4, 2009.
INTERROGATORY NO.2
Describe in detail tl1e nature ofyour service Of.l the board of directors ofTSI.
ANSWER:
Pre5tnn objoc.ts to. this interrogat{)ry as ~:wefly broad arl.d undllly burdensome in requestin~ that
Pn!stO:n.d'Cscribe "'in detaw~ his $et:\ll(~.
Preston ~so .~b.jects t9 this interr()gat~ry as va;gu~ and a.mbigu<.lU$ i~~ requ~sti,ng that Prestoo
describe ~'the n.ature ·of'~ his $ervice.. P~ton ,,.,,.ill intecpret thi$ to be a request for Preston to.
describe his serVice on tJ)e board ofdh:ectors .
.S'Ubjeet to and ·'rvitbout wnivi~ Prcston.•s objections, Preston.respond$ ·~s follows:.
The board of dire.ctor$ played· a.· roi~ :h'J. t.tle· ·~QVtmtW,'lW~ ·ot ' TSI~ ·:wh,ieh ·i:ncl.uderJ
.respoQsibility fQt.tlw·~iring amLnrlilg of the 'CEO~ :'P.tes.to~·h~d provide govemance.
fNTERROGATQRV NO.9
Identify each board meetingofNCll in which you participated and state (I) where such
meeting was held, 2) when such meeting was held. and 3) whether your participation was in
person, by telephone, or by some other electroni<: means.
9
327
ANSWER:
Preston is not subject to the j urisdiction of this court. Accordingly, Preston objects to this
request to the extent it does not seek infonnation that relates to or is reasonably calculated to lead
to admissible evidence regarding whether thjs court has jurisdiction over Preston.
Preston objects to this interrogatory as overly broad and unduly burdensome in requesting that
Preston identify " each" board meeting regardless of whether it has any connection to Texas.
Subject to and without waiving Preston·s objections. Preston responds as follows:
Preston is not aware which meetings constituted NC12 board meetings. He participated
in meetings or calls related to NC12, however, that may have constituted NC1 2 board
meetings on the following dates and locations. but Preston was never in Texas for any
such meetings or calls:
Date .· : - Lcu::ation Means
May 1, 2009 Massachusetts In Person
September 14, 201 0 Massachusetts In Person
October 17, 201 0 Munich, Gennany Telephone
November 24,2010 Massachusetts In Person
November 29, 2010 Massachusetts In Person
January 4, 2011 Massachusetts In Person
January 7. 2011 · Massachusetts In Person
February 21 , 2011 Massachusetts Telephone
February 25, 201 t Frankfurt., Gennany TeleJ:>hone
INTERROGATORY NO. 10
Identify all payments you reocived of any nature from NC 12.
ANS\VER:
Preston is not subject to the jurisdiction of this court. Accordingly) Preston objects to thi s
interrogatory on the grounds that it does not seek infonnation that relates to or is reasonably
calculated to lead to admissible evidence regarding whether this court has jurisdiction over
Preston.
Preston further objects on the grounds that this information may be obtained directly from other
entities that are subject to this court' s jurisdiction, which would be the Jeast intrusive and most
efficient method for Intervenors ' to obtain the infonnation they seek.
10
328
Preston also objects to this request to the extent it seeks proprietary infoiDlation, trade secrets or
other confidential information, disclosure of which would harm Preston or Quantum Catalytics
or is protected fiom disclosure by confidentiality agreements.
INTERROGATORY NO.ll
Identify all documents which you signed as an officer or director ofNC12.
ANSWER:
Preston is not subject to the jurisdiction of this court. Accordingly, Preston objects to this
interrogatory on the grounds that it does not seek information that relates to or is reasonably
calculated to lead to admissible evidence regarding whether this cowt has jurisdiction over
Preston.
Preston also objects to this interrogatory on the grounds that it is overly broad and unduly
burdensome is seeking "all documents" Preston signed without any limits, regardless of their
connection to Texas.
Preston further objects on the grolDlds that this information may be obtained directly from NC 12,
which would be the least intrusive and most efficient method for InterVenors' to obtain the
information they seek.
Preston also objects to this request to the extent it seeks proprietary information, trade secrets or
other confidentiaJ information, disclosure of which would hann Preston or is protected from
disclosure by confidentiality agreements.
UITERROGATORYNO.U
Identify all investments that you made in NC12, whether such investment was made in
money or services. Include in your :response, 1) the date of such investment; 2) the amoWlt of
such investment; 3) the number of share or other interest received on such investment; and 4) the
returns, if any, received on such investment.
ANSWER:
Preston is not subject to the jurisdiction of this court. Accordingly, Preston objects to this
interrogatory on the grounds that it does not seek infonnation that relates to or is reasonably
calculated to lead to admissible evidence regarding whether this court has jurisdiction over
Preston.
Preston further objects on the grounds that this information may be obtained directly from TSI,
which would be the least in1J'USive and most efficient method for lntervenors' to obtain the
information they seek.
11
329
Preston also objects to this request to the extent it seeks proprietary information, trade secrets or
other confidential infonnation~ disclosure of whjcb would harm Preston Ol' is protected fi·om
disclosure by «>nfidentiali ty agreements.
!NTKRROGATORYNO.l3
Identify aU companies, whether public or privat€; wifu offices in Texas, for which you
have served on tbe board of directors or as 1m officer or etnpJoyee. Include in your response 1)
the dates of such service, 2) the location from wb.ich you worked/served; 3) the compensation
received; and 4) the position in which you served and/or were ~'l'lployed.
ANSWER:
Preston is not subject to the jurisdiction of tlus court. Acoording1y, Preston objects to this
interrogatory to the extent that it does not seek iuformation tl1at relates to or is reasonably
calculated to lead to admissible evidence regarding whether this oou.rt has jurisdiction over
!>reston.
Subject to and vvithout waiving Prestnn~s. o'bjections.l,reston responds as foUows:
Texas Syngas LLC }s the only company Vrith its principal place of business in Texas or
incorporated in Texas for which 11 reston was a remnn's: objections. Preston responds as follo~'S:
No company or entity wholly owned or ccmtroHcd by Prestoll directly owns or controls
a.lly real property in "fe.xas or has any business operatio.ns in Tex.as.
1NTERROGATORY NO•.16
State whether any company in which you hold ~ majority interest owns or controls any
real pro~rty itl Texas or ha.s f\ny business operntions in Texas. If so) indude in y()ur response;
l) the identity of snch t¥lmp:,ny; Z) describe the rw11 prop(..'Tiy owned or controlJed; Md ~}
de.<)cribe in detail the nature of such business.
331
ANSWER:
Preston is not subject to the jurisdiction of this court. Accordingly, Preston objects to this
interrogatory on the groWids that it does not seek information that relates to or is reasonably
calculated to lead to admissible evidence regarding whether this court has jurisdiction over
Preston.
Preston further objects to this interrogatory to the extent it is duplicative of Interrogatory No. 15.
Subject to and without waiving Preston's objections. Preston responds as follows:
No company or entity in which Preston holds a majority interest directly owns or controls
any real property in Texas or has any business operations in Texas.
INTERROGATORY NO. 17
Identify each investment you have made within the last 10 years in any company
incorporated in Texas or having a principal office in Texas. Includ.e in yow- response the amount
ofyow- investment and the nature of such investment.
ANSWER:
Preston is not subject to the jurisdiction of this court. Accxmlingly, Preston objects to this
interrogatory on the grounds that it does not seek information that relates to or is reasonably
calculated to lead to admissible evidence regarding whether this court bas jurisdiction over
Preston.
Preston objects to this interrogatory as overly broad and \Dlduly burdensome in seeking detailed
infonnation about events that OOCWTed so long ago that: (a) do not relate to specific jurisdiction.
and (b) cannot be used as a basis to support general jmisdjction.
INTERROGATORY NO. 18
Describe in detail all communications which you have had with any pmon or entities
located in Texas within the last five years. Include in your response the dates of such
communications, the pwpose of such communications, and the means by which such
communications were made.
ANSWER:
Preston objects to this intem>gatory as overly broad and unduly bmdensome in seeking detailed
information about "all commtmications" over a fiv~yea:r period.
14
332
Subject to and without waiving Preston~s objections~ Preston responds as follows:
Preston communicated by telephone with Michael Sydow on occasion during the last five
years in relation to TSI and NC12. As a representative of TEM Capital, Preston
communicated regularly with various individuals in Texas on behalf ofTEM Capital over
the last five years.
15
333
VERIFICATION
My name is John Preston, my date of birth is March 18, 1950, and my address is 9
Martins Cove Lane, Hingham, MA 02043. I declare under penalty ofperjwy that the answers in
the foregoing John Preston's First Amended Objections and Answers to Intervenor's First Set of
Interrogatories are 1rue and correct to the best of my own personal knowledge and belief.
Executed on the.?.oday of March, 2014
JtLr~
ohnPreston
334
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Tl'u~. ~
Sent: Thursday, March 10, 201111:58 AM
To: Katherine Frisina
Subject: Travel Reservation March 16 for JOHN THOMAS PRESTON
Your Travel Arranger is pleased to deliver your complete travel itinerary through Sabre® Virtually There®.
Click here to access your reservation on the web or a mobile device.
Itinerary
JOHN THOMAS PRESTON
Reservation code : HKZBLO
Travel Arranger Priority comments :
ETA/HRG OFFERS 24/7 IN-HOUSE EMERGENCY SERVICE
Wed, Mar 16
Flights : JETBLUE AIRWAYS , 86 1265
From : BOSTON , MA (BOS) Departs : 6 : 40am
Departure Terminal : TERMINAL C
To : AUSTIN , TX (AUS) Arr i v es : l2 : 09pm
Class : REDACTED
Seat(G) :Check - In Re quired
Status: Confirmed Airline Confirmation: OOKMQI
Meal: Smoking : No
Aircraft : EMBRAER EMB E90 JET Distance (in Miles ): 1694
Duration: 4hour(s) and 29minute{s)
Frequent Flyer: JETBLUE AIRWAYS 2047935390
Please verify flight times prior to departure
March 16
Other :
Status: Confirmed
Information:SEATS RESTRICTED TO AIRPORT CHECKIN . WE WILL CONTINUE TO MONITOR SEAT MAP
REDACTED
Thu , Mar 17
Flights : JETBLUE AIRWAYS , B6 1264
From: AUSTIN, TX tAUS) Departs: 4 : 55pm
To: BOSTON, MA (80S ) Arrives : 9:43pm
Arrival Terminal : TERMINAL C
Class : REDACTED
Seat(s): PRESTON/JOHN THOMAS- lSD
Status : Confirmed Airline Confirmation: OOKMQI
PRESTONOOOOtl
345
Meal: Smoking: No
Aircraft: EMBRABR BMB B90 JET Distance (in Miles): 1694
Duration: Jbour(s) and 48minute(s)
Frequent Flyer: JBTBL'0'2 AIRWAYS 2047935390
Please verify flight ti111es prior to departure
May 16
Othert
Status' Confi .ra\ed ,
Information:VISIT WWW·EXECTBAVEL.CQM
ARRANGBR RBMAJU.tS:
VISIT US ON THB WBB AT WWW. EXEC1'BAWL. COM
• --MY DIR!CT PHONE tS 202 • 496-2791••
•--APTBR HRS EMERGENCY SVC 202-828-0090••
PLS NOTE TICKBT 18 NONREP'UNDABLB CHANGES MUST BE IQDB
I
ON OR BBPORE 1'1IE DBPARTORB OP EACH TICKETBD PLIGHT
SBGMBHT AND ARB S'UBJBCT TO A PBNALTY PLUS ANY PARE
DilTBRINCB. CHANGES RBQUBSTBD APTER DBPARTUR.E DATB 01'
ORIGINAL TICKB'l'BD FLIGHT ARB NOT PERMITTED AND TICKBT
WILL HOLD NO VALUE.
eTicket Receipt(s);
2797962668075 • PREST/J
For your convenience, a text version of your itinerary is included in this e-mail and was current as of the time
the e·mail was sent Please click on the link above or contact Your Travel Arranger for the most current
infonnation.
Virtually There® allows you to review or print your n:servations, as well as:
• Register for trip reminders and cancellation/delay notifications
• View maps & driving directions
• Review city guides & restaurant recommendations
• Get up-to-date weather and much more!
You may also access your reservation on the web or from your mobile device at www.virtuallythere.com.
Simply enter your last name and the six-character reservation code provided to you by Your Travel Arranger.
As a security measure, you will be prompted to enter your e-mail address or a password that Your Travel
AtT&nger may have provided to you. If you have any question about which e-mail address to use, we
recommend that you use the one that received this e-majJ.
CLICK HERE to opt out of receiving future e-mails from Virtually There.
If the above link is inactive, please paste this URL into your browser to access your reservations:
https:l/www.virtuallvthere.com/new/reservationsChron.htrnJ?host=1W&pnr=2 1MG2LRH2QOA&name=PRES
TQN&!anwase=Q&email;:::2
EXECUTIVE TRAVEL ASSOCIATE~/HRG
VISIT US ON THE WEB AT WWW.EXECTRA VEL.COM
1
raESTONOOODl2
346
From: JUQX PALION
To: Katbedne Frisina
Subjec:t; Trawl Reservation December JO rOf JOHN THOMAS PRESTON
Date: Tuesday, December 28, 201B JO:U:37 AM
Your Travel Arranger is pleased to deliver your complete travel itinerary through Sabre® Virtually
There®.
Click here to access your reservation on the web or a mobjle deyjce
Itinerary
JOHN THOMAS PRESTON
Reservation code: KPUDSE
Travel Arranger Priority comments:
ETA/HRG OFFERS 24/7 IN-HOUSE EMERGENCY SERVICE
Thu, Dec 30
Flights: AMERICAN AIRLINES, AA 1365
From: BOSTON, MA (BOS) Departs: 8:40am
Departure Terminal: TERMINAL B
To : DAL NORTH, TX (OFI-1) Arrives: 12:1Spm
Class: REDACTED
Seat(s) TON/JOHN THOMAS - 18F
Status: Confirmed Airline confirmation : KPUDSE
Meal: Food for Purchase Smoking: No
Aircraft: BOEING 757 JET Distance (in Miles): 1556
Duration: 4hour(s) and 35minute{s)
Frequent Flyer: AMERICAN AIRLINES NR\'16022
Please verify flight times prior to departure
Thu, Dec 30 - Fri, Dec 31
Flights: AMERICAN AIRL1NES, AA 2282
From: DALLAS FT \>IORTH, TX ( DFW) Departs: 7:45pm - December 30
To: BOSTON, MA {BOS) Arrives : 12:10am -December 31
Arrival al: TERMINAL B
Class: REDACTED .
Seat(s) TON/JOHN THOMAS - 13A
Status: Confirmed Airline Confirmation: KPUDSE
Meal: Food for Purchase Smoking: No
Aircraft: BOEING 757 JET Dis tance (in Miles): 1556
Duration: 3hour(s) and 25minute(s)
Frequent Flyer: ANERICAN At RLINES NRW6022
Please verify flight times prior to departure
Ma.rch 01
Other:
Status: Confirmed
Infoilllation : VISIT WWN. EXECTRAVEL. COM
ARRANGER REMARKS:
VISIT US ON THE WEB AT WW~I. EXECTRAVEL.COM
•--MY DIRECT PHONE IS 202·496-2791••
•--AFTER HRS EMERGENCY SVC 202-828-0090 ..
eTicket Receipt(s):
0017943995686 - PREST/J
For your convenience, a text version of your itinerary is included in this e-mail and was current as
of the time the e-mail was sent. Please click on the link above or contact Your Travel Arranger for
the most current information.
PRESTONOIIn023
347
Virtually There® allows you to review or print your reservations, as well as:
• Register for trip reminders and cancellation/delay notifications
• View maps & driving directions
• Review city guides & restaurant recommendations
• Get up-to-date weather and much more!
You may also access your reservation on the web or from your mobile device at
www virtuallytbere.com. Simply enter your last name and the six-character reservation code
provided to you by Your Travel Arranger. As a security measure, you will be prompted to enter
your e-mail address or a password that Your Travel Arranger may have provided to you. If you
have any question about which e-mail address to use, we recommend that you use the one that
received this e-mail.
CIJCK HERE to opt out of receiving fyh1re e-mails from Virtually There.
If the above link is inactive, please paste this URL into your browser to access your reservations:
bttps·Uwww yjrtua!lytbere.comlnew/reservationsCbmn.html?
host= I W&:pnr=2 1Q239H9102&name=PRESTQN&Ianguage=O&email=2
EXECUTIVE TRAVEL ASSOCIATESIHR.G
VISIT US ON 11m WEB AT WWW.EXECTRAVEL.COM
PRESTOI'IOOOOZ4
348
From: JUQX DALTON
To: l :=Ro Ci'S'So v:Jt
41. Arc these memoranda, reports, records, or data compilations, outlined in the subpoena duces tecum, penaining t•~~
-
...'~!'~~
· -
NotarY Public. ~tate of Tes
C miss1on EltP'18
Jc~!.~.~,\"
..... ~~.. 0
Mv J:ne 30, 20\4
'.. ·- · .., Cowi;!11 0 11182-2010 g, t;obu• S..W.a, Int. · P1ocau S.,.er'5 Toolllax V!i.r the State ofTexas, hereby certify pursuant to the
Rule 206, Texas Rules of Civil Procedure,
I. That this Deposition by Written Questions of Patricia D. Custard, the Custodian of Records for the above named is a true
and exact duplicate of the records pertaining to See Exhibit A, given by the witDess named herein, after said witness was duly
sworn by Anneetress D. Walker
2. That the U'IU\SCript is a true record of the testimony given by the witness;
3. That $1,406.15 is the charge for the preparation of the completed Deposition by Written Questions and any copies of
exhibits, charged to Anomey for Respondent, Dennis B. KeUy, TBA # 11217500;
4. That the deposition transcript was submitted on the l6tb day of January, lOll , to the witness for examination, signature and
return to the officer b:y a specified date;
S. That chana~. it any made by the witness, in th~; transcript and otherwise are auached thereto or incorporated therein;
6. That the witness returned the transcript;
7. That the original depositio~ by Written Questions and a copy thereof, together with copies of all exhibitS was delivered to the
anomey or party who Noticed the first questions for safekeeping and use at uial;
8. That pul'$uant to information made a part of the records at the time said testimony was taken. the following includes all parties
of record:
Asher B. Griffin
Joseph lodelka.to,lr.
David J . Wukosoo. Attoraey For Petitioner
and
9. A copy of this Notice of Delivery was served o_n all panies shown herejn,
MerriU Corporation
315 Capitol Suite 210
Houston, TX 77002
(713) 868-1919 Fax (713) 315-1158
SHEUA ANN EDWARDS
Order No. 03-6170-001 MV COl.IMISSION EXPIRES
OIIC8mber 2. 2011
374
P.EPOSlTION S~OENA TO TESl]fY OR Pft.ODYCE DOCUMJfNTS OR TlllNGS
THE STATE OF TEXAS
To any Sheriff or Constable of the State of Texas or Olhrr person aurhorized to serve subpoenas under RULE 176 OF TEXAS
RULES OF CIVIL PROCEDURE. - GREETINGS -
You are ~b)· commanded to subpOena and summon the following witnes.s(es):
Custodian of Re<:ords for:
Compass Bank, Brokerage Dept.
CIO CT CorporalJoo System
350 North Sr. Paul Street
Dallas, TX 75201
to be and appear before a Notary Public or my dcsignatioo for
M~rrill Corporadon (713) 868-2929
315 Capitol Suite 210, Holl$ton, TX 77002
or ii.S designate€& d~~
which the subpoena L5 served, and may be punished by fine or confioemtnt, or both. ~ ••• ":'~
0:,
~
.~-~~
•;..,.~
~ ~ •;!'iF~
..~... . •• ••
OFFICER 'S RETURN
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·' , 20_.
Came to hand this day of • 20_ _ • and executed thts the _ _ day of
in lbt rollowlng manner: By delivering 10 the witness - - -- - - - -- - - - -- - -' a true copy bereof.
Returned this _ _ _ d.ay o f - - - - - -· 20_.
PROCESS SERVER
Orlkc 1'\o. 03-6270-001
375
COMPASS BANK - EXHIBIT A
The terms udocuments,, "writings," and "records" are used in t his ex hibit
in their c ustomary broad sense and incl ude without lim itation the following items,
regardless of origin or location, whether printed, recorded, filmed, or rep roduced
by any other mechanical process or written or produced by hand; and whether an
original, master, or copyj namely:
1. All acGOunt statements. deposit records. withdrawal records, transfer records, cancelled
checks, partnership agreements, funding lines of credit, financing statements, pt·omissory
notes and loan documents for tbe period from April 15, 2010, to the present date. for all
checking accounts, savings accounts, certificates of deposit, and all other types of
financial accounts. whether personal or for businesses in which the parties, Michael D.
Sydow (alk/a Michael D. Sydow. Sr., Michael David Sydow, Michael David Sydow, Sr.,
Michael Sydow, or Michael Sydow~ Sr.) or KelU McDonald Sydow (or either of them),
have any interest and that are maintained in the name of the parries (or either of them). in
the narne(s) of their business(es). including but not limited to NCJ2, Inc., Texas Syngas.
Zagometa, Daedelus Air, The Michael and Kelli Sydow Irrevocable Insurance Trust,
Chippendale Park, Loki Investments, Loki Services, American Inte rn atio nal
Helicopters , Inc., No Peanuts. or Woden Enterprises. and any other entity on
behalf of the parties (or either of them), or on which the parties (or either of them)
has or has had the right to draw. includi ng but not limited to each of 'th e fallowing
accounts:
a. Joint (Kelli Sydow and Michae~ Sydow) Account #xxx8347
b. Amegy Bank Loan CoUateral FBO Michael D. Sydow Accou nt #xxx8347-1
c. ATM Joint (Kelli Sydow and Michael Sydow) Checking Account #xxx4380
d. Money Market Joint (Kelli Sydow and Michael Sydow) Account #xxx1016
e. Bill Payer Joint (Kellf Sydow and Michael Sydow) Checking Account
#xxx7863
f. Kelli Sydow C/F Michael Wyatt Sydow UTMAITX Account #xxx3919
g. VCSP/CollegeAmerica 529 Account for Michael Wyatt Sydow
h. Kelli McDonald Sydow Account #xxx6212
i. Kelli Sydow and Michael Sydow Tenants in Common Account #xxx8662
j. Michael Wyatt Sydow (Kelli McDonald Sydow Custodian} A ccount
#x.xx3511
k. NC12 Account #xxx8791
I. Texas Syngas Account #xxx8791
m. Airplane Account.
2. AH cashier's checks purchased by or on behalf of Michael D. Sydow (alk/a M ichael D.
Sydow, Sr., Michael Da,i d Sydow, M;cbael David Sydow, Sr., Michael Sydow. or
Michael Sydow~ Sr.) or any of his businesses, including but not limited to NC 12, Inc..
Texas Syngas, Zagometa, Oaedelus Air, The Michael and Kell i Sydow Irrevocable
Insurance Trost, Chippendale Park, loki Investments. l oki Services. Am erican
International Helicopters. Inc., No Peanuts, or Woden Enterprises. from April 15,
...
376
2010, to the present date.
3. All financial sratements in your possession prepared by or on behalf of Michael D.
Sydow (alk/a Michael D. Sydow, Sr. ~ Michael David Sydow, Michael David Sydow. Sr.•
Michael Sydow. or Michael Sydow, Sr.} or any of his businesses, including but not
limited to NCI2. Inc .. Texas Syngas. Zagometa. Daedelus Air, The Michael and Kelli
Sydow Irrevocable Insurance Trust, Chippendale Park, Loki Investments, Loki
Services, American International Helicopters, Inc., No Peanuts. or Woden
Enterprises, from April 15, 2010, to the present date.
4. AJI checks and other financial instruments negotiated for cash paid by your institution to
Michael D. Sydow (alk.'a Michael D. Sydow, Sr., Michael David Sydow, Michael David
Sydow, Sr., Michael Sydow, or Michael Sydow, Sr.) or any of his businesses, including
but not limited to NCI2, Inc., Texas Syngas, Zagometa, Daedelus Air, The Michael and
Kelli Sydow Irrevocable Insurance Trust, Chippendale Park, Loki Investments, Loki
Services, American International Helicopters, Inc., No Peanuts, or Woden
Enterprises. from April15, 2010, to the present date.
5. All witinglrouting instructions, information and transactions for Michael D. Sydow (alk/a
Michael D. Sydow, Sr., Michael David Sydow, Michael David Sydow, Sr., Michael
Sydow, or Michael Sydow, Sr.) or any of his businesses, including but not limited to
NC12, Jnc., Texas Syngas, Zagometa, Daedelus Air, The Michael and Kelli Sydow
Irrevocable Insurance Trust, Chippendale Park, Loki Investments. Loki Services,
American International Helicopters, Inc., No Peanuts, or Woden Enterprises,
from April 15, 2010, to the present date, including but not limited to ABA
wiring/routing #113011258.
6. All account statements, deposit records, withdrawal records, transfer records, cancelled
checks, partnership agreements, funding lines of credit, financing statements, promissory
notes and Joan documents for the period from April 15, 2010, to the present date, for th~
following account:
a. Account #1013572 with.Compass Bank (formerly Southwest Bank of Texas)
...
377
No. 2010~2710
In the Matter of tlte Marriage of IN THE DISTRICT COURT OF
Michael D. Sydow
and
'Kelli McDonaJd Sydow HARRJS COUl'tTY, TEXAS
and u• the interest of Michael Wyatt S~·dow,
a minor ehJid
308TH JUDICIAL DISTRICT
NOTICE OF INTENTION
TO TAKE DEPOSITION BY WRITIE~ QUESTIONS
To Petitioner by and through their anomey(s) of record: David J. Wukoson
Toomer party/parties by and through their auomey(s) of record: Asher B. Griffin and Joseph Indelicato, Jr.
You will please tak~ notice that awenty-fow (24) days from the servi~ of a copy bereof with attached questions, a deposition
by wriuen questions will be taken of Custodian of Records for:
Compass Bank, Brokerage Dept. C/0 CT Corporation System(Any & All Records)
350 North St. Paul Street Dallas, TX 75201
before a Nowy Public for Merrill Corporation (713) 868-2929 Fax (713) 315-2158
315 Capitol~ Suite 21 O, Rous ton, TX 77002
or 1lS designated agenl. which deposition with attached questions may be used in evidence upon the trial of the above·styled and
numbered cause pending in the above named coun. Notice is further given that request 1S hereby made as authorit.ed under
Rule 200. Texas Rules or Civil Procedure, to the o ff~eer raking this deposition to issue a subpoena duces tecum and cause it to
be served on the witness to produce any and all records as described on the auached questions andfor Exhibit(S) and any other
such record in the possession, custody or control of the said witness. and every such record to which the witness may have
access, pertaining to:
See Exhibil A
and to tum all such reconhi over to the officer authori:z.ed to take this deposition so that photographic reproductions of the same
may be made and anached to said deposition.
Dennls 8 . Kelly
Law Offices of Dennis B. Kelly
602 Sawyer, Suite 700
Houston, TX 77007-7524
(713) 868-2700 Fax (713) 86$-6054
Attorney for ~'PQndent
SBA # 11217.500
1 hereby certify that a true and correct copy of the foregoing insuument has been forwarded to all Counsel of Record by band
delivery. FAX. and/or certified majJ, return receipt requested. on this day. . j
Da~£d: December IS. 2010 by Dg 4~.8·
. 44 t:.£v .W A,_.,
Order No. 03-627().001
378
CERTIFICATE OF SERVICE
I cenify that a true and correct copy of the foregoing Notice and written questions has been
hand-delivered and/or mailed receipt requested, 10 the auorneys of record.
Merrill Corporation
315 Capitol
Suite 210
Houston, TX 77002
(713) 868-2929 Fax (713) 315-2158
379
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i'~.t.;.;:;.,:SO~GlJ'-lllA110NS INQUlRY • VJEVVENTITY
TEXAS SECRETARY of STATE
NANOITA BERRY
.~Ir~~ ! fi_14;~ne~ Or-e~~hath)tl~ t Tr~~em~rks ! .t~ffiJ~\1 t ~~ I ~.!El~ 1 ~r~n{~g~ 1 t&-slm~t
BUSINESS ORGAN!ZATJONS JNQ.UJRY ~VIEW E~Pf!TY
FHi:ng Nurnber. 80 1644545 Entity Type: Domestic For·Profit Corporation
Original Date Qf FWng: August 22, 2012 ~:tH;y Stalu~ Forfeited existence
formation Date: N!A
Tax 10: 3.2048819349 FEH\1;
:Ouration: P'erpetua!
Name: .Jl\ Claims trl"Vestrne.nt Corporation
Ad~ros...~ 35{1 N SAiNT Pl\UL ST STE 2900
DALLAS) TX75201-4234 USA
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~ l~st Update
1sal was simply Preston's (lttempt to cut a
deal for himselfduough C Change, and not a genuine efff Michael Collin$ and .that the fact~ stated therein
were w.ithhi lus. pet-soual.k11ovoilecige ;.md we.te true and.corre.ct.
GIVEN UNDER MY I:! AND AND SEAL OF OFPICE this thc~duy ·of J~me:20 14.
""NOTAl~YPOB.tJC lN ANP FOR
THE STATE OF TEXAS
410
8/8/2014 5 :43:24 PM
Chris Daniel • District Clerk Harris County
Envelope No. 2104187
By. GAYLE FULLER
Cause No. 2011-44058
MICHAEL COLLINS, ET AL .• § IN THE DISTRICT COURT
PLAINTIFFS, §
vs. § OF HARRIS COUNTY, TEXAS
§
. MICHAEL SYDOW, ET AL., §
DEFENDANTS. § 215th JUDICIAL DISTRICT
AKILA FINANCE, S.A.; BOSQUES DEL MOLINO, § IN TilE DISTRICT COURT
S .A. ~ CENTRANS ENERGY SERVICES, INC.; §
CHESTERMESTERHOLDINGS. LTD.; DELTEC §
BANK & TRUST, LTD.; EMJO INVESTMENTS, §
LTD.; WILLIAM END; EVANS & PETREE 40 JK §
PLAN; FlRST BAY INTERTRADE; GM PARTNERS; §
MARAlR CORP.; W.L. NICHOL, IV; PANORAMA §
INVESTMENT, LTD.; PCOI VERMOEGENS VERW.; §
ALEJANDRO SANTO DOMINGO; SINCHI §
INVESTMENT; VENTURI GLOBAL §
INVESTMENTS., LTD., and HJ. von der GOLTZ §
lNTERVENORSIPLAJNTIFFS, §
vs. § OF HARRIS COUNTY, TEXAS
§
MICHAEL SYDOW; JOHN PRESTON; CHRISTOPH §
HENKEL; C CHANGE INVESTMENTS, LLC; §
CHALSYS CAPITAL PARTNERS, LLP; SONIA LO; §
BRILLIANT NOVELTY, L.L.C.; OSCURA, INC.; §
MELIORA ENERGY TECHNOLOGIES, S.a.r.l; and §
FALL RIVER REALTY. LTD., §
DEFENDANTS. § 215th JUDICIAL DISTRICT
INTERVENORS' SUPPLEMENTAL RESPONSE
TO THE SPECIAL APPEARANCE OF JOHN T. PRESTON
l. INTRODUCTION
Intervenors file this Supplemental Response to the Special Appearance filed by John T.
Preston ("Preston") further addressing Preston's contacts with Texas through JK Claims
Investment Corporation C'JK Claims..) and allegedly through Transformative Energy &
Materials Capital, Jnc. ("TEM Capital"). The evidence confirms that:
413
• JK Claims is merely a shell corporation and the alter ego of Preston. Accordingly, JK
Claims' contacts with Texas are contacts of Preston for purposes of the personal
jurisdictional analysis.
• TEM Capital was not yet incorporated at the time Preston travelled to Texas,
allegedly on behalf of TEM CapitaL Accordingly, Preston is not entitled to the
fiduciary shield as to those visits.
D. BACKGROUND
A. Preston Established Minimum Contacts with Texas Under the Guise of JK Oaim.
The available evidence confirms that Texas corporatjon JK Claims is merely a front for
and the alter ego of Preston and his co-conspirator Michael Sydow ("Sydow, ), created for the
purpose of purchasing and then dismissing claims pending against them individually in the 152"d
Judicial District Court in Harris County, Texas.1
1. The Kaiser Litigation.
On June 26, 2007, Jeffery B. Kaiser (''Kaiser") filed a lawsuit against Texas Syngas LLC
("Syngas LLC"), Michael Collins ("Co11ins, ), M. Sameer Ahmed, Sydow, and all other similarly
situated officers and directors of "Texas Syngas LLC alk/a Texas Syngas, Inc." in the 152"d
District Court, Harris County, Texas. under cause number 2007-38533 (the "Kaiser Litigation,).
On May 5, 2008, Kaiser filed his Second Amended Petition, adding Preston as a named
defendant. (Exhibit B at ~ 10). As reflected in the Second Amended Petition, Kaiser sought to
recover against Preston, Sydow, and others for what he alleged to have been fraud in the creation
ofTexas Syngas, Inc. ("TSI") and the transfer of Syngas LLC' s assets to TSI in violation of his
rights as a member of Syngas LLC. Kaiser asserted a number of causes of action against all of
the defendants including breach of fiduciary duty. fraud, and violations of the Texas Securities
Act. (/d. at ~~ 23 through 68).
Attached hereto and incorporated herein by reference is the Affidavit of Kelley M. Keller.
2
414
2. Preston~s a nd Sydow's Response to the Kaiser Litigation.
On August 17, 2007, Preston intervened in the Kaiser Litigation through Quantum
Catalytics LLC ("Quantum"). (Exhibit C). Preston is the president of Quantum. (See Exhibit D at
Ex. D). Quantum asserted that Kaiser did not represent the interests of Quantum and was not
entitled to bring any action on its behalf. (Ex. C at ~ 8). Quantum also sought affumative re1ief
against Kaiser for alleged breaches of fiduciary duty, negligence, and breach of contract. (ld at
m!9, 10). Sydow signed Quantum's petition in intervention as counsel for Quantum. (/d.).
On June 20, 2008, Sydow filed an amended answer and counterclaim against Kaiser,
asserting that Kaiser brought the Kaiser Litigation for purposes of harassment, in bad faith, and
without support in fact or in law. (Exhibit E) . The same day, Sydow filed an amended motion for
summary judgment on the claims asserted by Kaiser, asserting:
At its core, this lawsuit concerns Kai ser's anger over the fact that Collins has not
offered Kaiser any stock in Texas Syngas, Inc. Of course, Collins has no legal
obligation to offer his Texas Syngas, Inc. stock to Kaiser or anyone else.
Consequently, Kaiser's second amended petition is a lengthy artful dodge
asserting causes of action that would purport to create damages where none exist.
(Ex. D at p. 4). Preston submitted an affidavit in support of Sydow' s motion, asserting that u(t]he
majority of the members of Texas Syngas, L.L.C. have approved the acts taken by Michael C.
Collins in the management of the company." (See Ex. D at Ex. D).
3. The Kaiser Bankruptcy and the Assignment to JK Claims.
On August 8, 2008, Kaiser filed for bankruptcy under Chapter 7 of Title II of the United
States Code in the Southern District of Texas, Houston Division, under Case Number 08-35261-
Hl-7. Ronald J. Sommers was appointed Chapter 7 Trustee (the ...Kaiser Trustee").
Upon commencement of the Kaiser bankruptcy, the claims owned by Kaiser and asserted
in the Kaiser Litigation became the property of Kaiser' s b-ankruptcy estate and the Kaiser Trustee
became the real party in interest. See l l U.S.C. § 541(a).
3
415
The Kaiser Trustee attempted to find couns.el to pursue Kaiser's claims on behalf of the
Kaiser bankruptcy estate or to find a purchaser for the claims. On March 14, 2012, Gretchen
McCord r·~ceord.,), counsel for the Kaiser Trustee, forwarded a draft motion to sell and order
2
to Kelly Stephens ("Stephens"), of Stephens & Domnitz, PLLC, for his review. (Exhibit F at
38:6-39:7 and Ex. 11 ). Stephens represented the purchaser in connection with the purchase of
Kaiser's claims from the Kaiser bankruptcy estate. (Ex. F at 40:3-7, 4 1:3-42:5 and Exs. 11-13).
In an email to McCord on June 15, 20 12, Stephens refers to his "clients" without identifying the
clients. (Ex. Fat Ex. 13).
On June 19, 2012, the Kaiser Trustee filed a motion in the bankruptcy court seeking
authority to sell Kaiser' s claims to JK Claims for $25,000. (Exhibit G). Tn the motion to sell, the
Kaiser Trustee describes the assets to be sold as follows:
Any and call causes of action owned by the Debtor as of the date of his
Bankruptcy filing and now owned by the bankruptcy Estate against Texas Syngas,
LLC, Texas Syngas, Inc. and their officers. directors, shareholders, agents,
attorneys and/or against any predecessor, successor, or affiliated companies,
including but not lim ited to the following individuals: Michael Sydow, Michael
Collins, John T. Preston, Quantum Catalytics, Inc., and M. Sameer Ahmed. These
claims would include specifically all those claims that were owned by the Debtor
and that were pled, or that could have been pled, in the Lawsuit with Cause
Number 2007-38533, and styled Jeffery B. Kaiser, el. a/ v. Texas Syngas. LLC
alkla Texas Syngas, Inc., et a/., currently pending in the 152'1d Judicial District
Court of Harris County ("Claims..).
(Ex. Gat~ 15).
The Trustee described the value of the Kaiser Litigation as "tentative at best' and noted
that of ''utmost importance in the Trustee's analysis is that he believes that there is little chance
ofrecovery if he were to pursue'' the litigation. (Ex. Gat~ 23) (emphasis added).
Coli ins requested the deposition of the corporate representatjve of JK Claims in the course of the
Kaiser Litigation. JK Claims designated Sydow as the corporate representative. Sydow·s deposjtion in
such capacity was taken on February 25, 2014. That deposition is attached hereto and incorporated herein
as ExlUbit F.
4
416
The Kaiser Trustee described the purchaser as follows:
The purchaser is JK Claims Investment Corporation, or its assigns, which the
Trustee has been informed is being funded by Paul Lohnes ("Purchaser"). The
Trustee has been informed that the Purchaser is a business associate of the
Defendants.
(Jd at~ 16). As reflected below, JK Claims had not yet been incorporated at this time. (Ex. Fat
Ex. 3).
The bankruptcy court granted the Kaiser Trustee's motion to sell on July 13, 2012.
(Exhibit H). On July 26, 2012, Stephens & Domnitz, PLLC, wired $24,970 to the Kaiser Trustee
as payment for the claims purchased from the Kaiser Trustee (the ''Kaiser Claims''). (See Exhibit
I at 103).
4. The Formation of JK Claims.
On June 15, 2012, Sydow filed an Application for Reservation of an Entity Name with
the Texas Secretary of State (the " Application"}, reserving the name JK Claims Investment
Corporation for the exclusive use of Preston. (Ex. F at 27:23-28:24, 29:3-1 9 and Ex. 6). An
applicant for a name reservation may be either an organized entity or an individual. (See Ex. F at
Ex. 6). The Application reflects that the applicant is an individual- Preston. (/d). Sydow also
prepared JK Claims' Certificate of Formation and filed same with the Texas Secretary of State
on August 22, 20 12. (Ex. Fat 17: 5-9~ 21 : 17-22:13 and Ex. 3).3
Sydow signed the Application and paid the $30 fee for the name reservation. (Ex. F at
27:23-28:24, 29:20-24 and Exs. 6, 8). Michael David Sydow, Jr., Sydow' s son employed with
Sydow at the time, paid the $300 filing fee for incorporating JK Claims. (Ex. F at 20:15-21 :4,
23:23-25:25 and Ex. 4).
3
Sydow contends that he is ··corporate counsel" for JK Claims and has been since the company's
fonnation. (Ex. Fat 6: 18-7:8). Sydow could not say how much he charged for his services in forming JK
CJaims and could not even say if he sent JK Claims an invoice for his services. (/d. at 67:2 J-68:4).
5
417
Although Sydow contends that Quantum would have paid for both the name reservation
and the incorporation, he could not identify any records confirming same - the only available
documentary evidence is that Sydow and his son paid to incorporate JK Claims. (See Ex. F at
20: 15-21 :4, 26: 1-6 and Exs. 4, 6, and 8)."
Sydow contends that he also prepared the bylaws for JK Claims (the "Bylaws"). (Ex. F at
10:3-10, 11:1-1 2). However. JK Claims failed to produce a signed and dated copy of its Bylaws.
(Ex. Fat Ex. 2). According to Sydow, there is not likely a signed and dated copy. (Ex. F at
12:24-1 3:4 , 13: 15-19, 14:10-13, 15:8-12). The Bylaws Sydow did produce appear to have been
hastily prepared from bylaws previously prepared for a Nevada corporation, using a search and
replace feature to include the corporation's name and to substitute the word "Texas'' iu place of
the word ..Nevada.,. While the Bylaws purport to invoke Texas Jaw. they refer to the "General
Corporation Law" throughout - a reference to Nevada law - and refer to specific provisions of
the General Corporation Law of Nevada. (See Ex. Fat Ex. 2 at pp. 21 5, 7)
The only other corporate records that Sydow produced for JK Claims are similarly
lacking in marks of authenticity. Neither the Written Consent in Lieu of Meeting, by which
Quantum consented to the appointment of Preston as the sole director on August 22, 2012, nor
the Wrilten Consent in Lieu of Meeting. by which Quantum reelected Preston as the sole director
on August 22, 2013 , are signed. (Ex. fat Ex. 9, pp. l , 2).s However, the Bylaws require that
written consents in lieu of shareholder meetings be signed by I he stockholders holding at least a
majority of the voting power of the company. (EJt. Fat Ex. 2 at p. 6).
The Bylaws further provide that any action required or permitted to be taken by the JK
Sydow testified that he docs not advance payment for the fonnation of entities. (Ex . fat 33 :4~7) .
Accordingly. if the payments were not advances, they were payments made by and on behalf of Sydow
and/or Preston. for whom the company name was reserved.
s Sydow testified that he prepared these documents at Preston·s request. (Ex. Fat 34:11-36:1).
6
418
Claims board of directors may be taken without a meeting if. ..before or after the action. a written
consent thereto is signed by all/he members of lhe Board." (Ex. Fat Ex. 2 at p. 9) (emphasis
added). However, the document entitled ..JK Claims Action by Director, by which some
6
unnamed director purportedly approved the purchase of the Kaiser Claims is neither signed nor
dated. (ld at p. 3).
5. Officen, Directors, and Ownership of JK Claims.
The JK Claims Certificate of Formation identifies Preston as the sole director and is
signed by Sydow as the organizer. (Ex. Fat 21 :17-22:3 and Ex. 3 at p. 7-9). Preston is and has
always been JK Claims' sole officer (president, secretary, and treasurer) and director. (Ex. F at
7:9-25). According to Sydow, Preston was his sole point of contact on the incorporation of JK
Claims. (Ex. Fat 11 : 17-24).
Sydow contends that JK Claims is wholly owned by Quantum. (Ex. F at 8:1-6. 56:21-
57•3). Sydow initially testified that Quantum held 1,000 shares in JK Claims. (Ex. Fat 8:1-6).
However, there are no share certificates evidencing ownership by Quantum. (Ex. F at 55:2-6,
57:14-19). Later in the deposition, Sydow testified that JK Claims does not have any
shareholders. (Ex. Fat 56:21-57:3).
In fact, there do not appear to be a ny documents evidencing the ownership of JK Claims.
According to Sydow, because JK Claims is an "uncertificated" company under applicable Texas
law, there are no records that identify JK Clajms ' shareholder(s). {See Ex. Fat 57:2-19, 58:3-
59:5). However, "uncertificated" corporations are merely relieved of the obligation to issue
"certificates" to their shareholders evidencing share ownership. See Tex. Bus. Org. Code §
3.201. Ownership of corporatjons electing ·~uncertificated" status is still represented by
6
The Bylaws state that the business and affairs of the company shall be managed by the board of
directors. (Ex. F at Ex. 2 at p. 7).
7
419
shareholders. In the event the corporatjon elects to issue ''uncertificated" shares, it nonetheless
"issues" shares7 and must deliver to the shareholder a ''notice for uncenificated ownership
interest" notifying the shareholder of the infonnation required to be stated on the share
certificate, unless such information is reflected in the governing documents of the entity and the
shareholder has been provided with such governing documents. Tex. Bus. Org. Code § 3.205
e•after issuing or transferring an tmc.erlijicaled ownership interest, a domestic entity shall notify
the owner of the ownership interest in writing of any information required onder thi s subchapter
to be stated on a certificate representing the ownership interesf') (emphasis added). Accordingly,
corporations electing to be "uncertificated" must issue notice to each of their shareholders that
includes, among other things. the name of the shareholder and the number and class of
ownership interests held by such shareholdeTS, unless refl ected in the corporate governing
documents. Tex. Bus. Org. Code§§ 3.202(c) and 3.205(a). This information- the identity of the
shareholder and number and class of shares held - is not included in JK Claims' governing
documents.g (See Ex. F at Ex. 2). Accordingly, JK Claims was required to provide the prescribed
notice to its shareholder(s) and, apparently, has failed to do so.
6~ Preston and Sydow Purchased tbe Kaiser Claims, Not JK Claims.
Although the Kaisu Trustee was led to understand that Paul Lohnes, an alleged business
associate of a defendant in the Kaiser Litigation, would be funding the purchase of the Kaiser
Claims, according to Sydow. Mr. Lohnes is not connected to JK Claims in any way. (Ex. F at
66: 12-18). Sydow contends instead that Quantum funded the purchase. (Ex. F at 6 1:25-62:23,
, The T exas Business Organizations Code defmes a ··sbare" as ''a unit into which the ownership
interest in a for-profit corporation, . . . is divided, regardless of whether the share
Is cerfljicoted or
uncertiflcated." Te.~ . Bus. Org . Code § l.002(80) (emphasis added). Accordingly. ownership in
uncertificated corporations is still evidenced by shares.
Intervenors challenge whether the documents produced by Sydow arc in fact "governing
documents" as tJtey are neilher signed nor dated. (See Ex. F at Ex. 2).
8
420
63: 11-23). However, Sydow was not able to produce any records confinning that Quantum
funded the purchase. (See Ex. Fat 61 :25-<>2:23, 63: 11 -23).
Records subpoenaed from JK Claims~ former counsel Kelly Stephens reflect that Sydow
9
and Preston split the cost of the claims purchase - with $12,500 coming ufrom Boston" and
$12,500 from Sydow. (See Ex. I at 0060). Stephens received the funds for the purchase on June
12,2012. (/d.).
As counsel for JK Claims, Stephens negotialed me purchase of the Kaiser Claims with
the Kaiser Trustee•s counsel Gretchen McCord. The following communications between
Stephens and McCord confirm that Stephens was negotiating on behalf of Preston and Sydow-
defendants in the Kaiser Litigation motivated to dismiss the Kaiser Claims - not JK Claims - a
corporation not then in existence.
• On September 13,201 1, Stephens emailed the Kaiser Trustee, regarding his prior offer to
purchase the Kaiser Claims for $25.000. Stephens indicated that he was making another
off~r to purchase, this time at $1 0,000, because he understood that Kaiser was going to
attempt to acquire the claims from the bankruptcy estate. (Ex. I at 0001).
o This email indicates that the purchaser wished to keep Kaiser from pursing the
claims.
• Later the same day, Stephens emailed the Trustee, raising the offer to purchase back up to
$2Si000 and stating that the purchase price was based on a ..,cost of defense' evaluation."
Moreover, Stephens' email goes on to explain the weaknesses in Kaiser's claims,
concluding that they are "worthless!• (Ex. I at 0002-3).
o The valuation method and conclusion that the claims are worthless reflects
settlement discussions, not negotjations by a bona fide purchaser for whom "cost
of defense'' would not have been an issue.
• Stephens confirmed in an email to McCord on September 19, 2011 , that the offer was
"based on the cost of defense of the clajms made in the prior lawsuit" and stated that the
buyer had come forward "because Kaiser has filed a couple of motions to retain."
Stephens stated that the purchasers had let the first offer lapse when they "thought the
suit would die of natural causes.,, Stephens also confirmed that "we may be interested in
9
Preston is a resident of Boston.
9
421
maintaining the claims in the original derivative suit depending on the terms of mty
settlemellf." (Ex. I at 00 12) (emphasis added).
o A bona fide purchaser wouJd not be interested only because Kaiser had filed a
motion to retain, as the purchaser could have filed its own motion to retain. Only
a defendant would have an interest in obtaining control of the plaintiff's claims if
Kaiser filed the motion to retain. Moreover, Stephens' email confirmed that the
nature of the purchase is a settlement.
• On December 21, 2011 , McCord emailed Stephens asking if he was around " to discuss
the settlement offer." When Stephens responded that he was, he did not correct McCord' s
characterization of the offer as a "settlement offer." Later that same day, Stephens
emailed McCord, advising her that he clients were "discussing what vehicle to purchase
through." (Ex. I at 0021-23) (emphasis added).
• On December 27, 2011, Stephens emailed McCord advising her that his client bad
"decided to make the offer/purchase through one of the individual s involved, Paul
Lohnes." (Ex. l at 0024).
• In an email to McCord on January 17, 2012, Stephens indicated that his client is a "he."
(Ex. I at 0032).
o We now know through Sydow' s testimony that the "he" was not Lohnes. (Ex. Fat
66:12-18).
• On February 7, 2012, Stephens emaited McCord and advised her that his client was
''forming a company to purchase this asset. •• (Ex. I at 0040).
o We know from Sydow that Sydow formed JK Claims at Preston' s instruction. (Ex.
Fat 11 :17-24, 17:5-9. 2 1:17-22:13).
• On March 14, 2012, McCord emailed Stephens stating that she had defined the
"purchaser'' as ~• Paul Lohnes or his assignee . . . a business associate of the Defendants,"
and asked for "some explanation as to why [Lohnes] is buying these claims." She stated
"I assume he is a business association of Mr. Sydow. But, l need clarification on that
issue." (Ex. l at 0042).
• Later that day, Stephens confirmed the purchaser definition, but did not explain why
Lohnes would be purchasing the claims. (Ex. 1 at 0044).
• On March 29, 2012, McCord asked for confirmation that the purchase funds were in
Stephens• IOLT A account, and again asked about the purchaser. Stephens responded that
he had been ')lnable to speak with Lohnes or Sydow." (Ex. I at 0047).
• On June 7, 2012, McCord emailed Stephens to "take one more stab at contacting''
Stephens. McCord adv1sed Stephens that the Trustee had her engaging special counsel to
10
422
take the litigation on a contingency fee basis "so we can reach some resolution'' and
asked if Stephens' client was stiiJ interested in purchasing the claims. (Ex. I at 0049).
• Later that day~ Stephens emailed McCord, advising her that he had been assurod that the
money would be in his trust account the following week. (Ex. I at 0051 ).
• On June 12, 2012, Stephens emailed McCord advising her that he had received notice of
a wire transfer of $12,500 "from Boston" and had received "a check in the amount of
$12,500.00 from Mr. Sydow.'' (Ex. I at 0060).
• On June 15, 2012, Stephens advised McCord that the name ofthe purchaser would be JK
Claims Investment Corporation. (Ex. I at 0067).
• On June 27. 2012, Stephens forwarded to McCord a copy of the June 20 12 order from the
152nd District Court dismissing the Kaiser Litigation. Stephens asked McCord how the
order wouJd affect "what we are supposed to be purchasing." (Ex. I at 0069). McCord
responded that she did not think it would. (Ex. I at 0070).
• Later that same day, Sydow emailed Stephens the following:
lf the case has been dismissed and the statute of limitations has run there is
nothing left to purchase. A dismissal for want of persecution [sic] used to be
subject to reinstatement within a certain time. However, if 1 recall correcely
the reinstatement was discretionary with the Court. If so, either the trustee
needs to have it reinstated to sell it or the buyer is purchasing yet another
problem. 1 fail to understand how she thinks the dismissal has no bearing.
Perhaps she can explain in just a bit more detail.
(Ex. I at 0071 ).
• McCord emailed Stephens on June 28, 2012. stating that she would need a written
commitment from the purchaser that ..if the Trustee reinstates the lawsuit, we still have a
deal" or a written statement from the buyer that they were no longer interested in going
forward. She further advised that she was meeting with someone to discuss the cost to
reinstate the lawsuit. (Ex. I at 0075).
• Stephens confirmeorated J,K Claims. Accordingly, regardless of whclher .I K Claims is the alter ego of
Prm.i.on, Preston is not afforded the protections of the fiduciary shield doctrine in purchasing tbe
KaiseT Oairns. ,)'tN Cappm;t.:i/li 11. Gu!f l11dus. Prrxlr.. 1m·., 222 ~ . W. Jd 468, 485·86 (Tex:
App.--Houston [ lst Dist.] 2007, n<.) pet.) C"'A promoter cannot ac-t as an agem of a corporation
tlu.tt does not yet exist; the.rc.tbre~ th~ corppration c.t incorporated. during the.t~eriod C)f:Prest:on's:rr.a.vel to Texa~
IV·.. CONCLGS(ON ANO .PRA Yl~:B:
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CERTIFlCATE 01" SEUVlCE
The undersigned hereby certifies tlmt on this 8th day of August, 2014 a true and correct
copy of 1he ~lbove Supplemental Response t<.) the Special .A.,ppearance med by John ·r. .t.>f(}StQU
wM serve~ on all intere~ted panics, by and through their attorneys of record indicated below· via
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Cause No. 2011-44058
MICHAEL COLUNS, ET AL., § IN THE DISTRICT COURT
PLAINTIFFS, §
vs. § OF HARRIS COUNTY, TEXAS
§
MICHAEL SYDOW, ET AL.• §
DEFENDANTS. § 215th JUDICIAL DISTRICT
AKILA FINANCE, S.A.; BOSQUES DEL MOLINO. § IN THE DISTRICT COURT
S.A.; CENTRANS ENERGY SERVICES, INC.; §
CHESTER MESTER HOLDINGS, LTO.; DELTEC §
BANK & TRUST, LTD.; EMJO INVESTMENTS, §
LTD.; WILLIAM END; EVANS & PETREE 401 K §
PLAN; FIRST BAY INTERTRADE; GM PARTNERS; §
MARAIR CORP.; W.L. NICHOL. IV ~ PANORAMA §
INVESTMENT. LTD.; PCOl VERMOEGENS VERW.; §
ALEJANDRO SANTO DOMINGO; SINCHI §
INVESTMENT; VENTURI GLOBAL §
INVESTMENTS .~ LTD., and H.J. von der GOLTZ §
INTER VENORSIPLA INTI f'FS, §
vs. § OF HARRIS COUNTY t TEXAS
§
MICHAEL SYDOW; JOHN PRESTON; CHRISTOPH §
HENKEL; C CHANGE INVESTMENTS, LLC; §
CHALSYS CAPITAL PARTNERS. LLP; SONIA LO; §
BRILLIANT NOVELTY, L.L.C.; OSCURA, INC.; §
MELIORA ENERGY TECHNOLOGIES, S.a.r.l; and §
FALL RIVER REALTY, LID .• §
DEFENDANTS. § 215th JUDICIAL DISTRICT
AFFIDAVIT OF KELLEY M. KELLER
Before me, the undersigned notary, on this day personaUy appeared KELLEY M. KELLER,
who is personally known to me, and first being duly sworn to law upon her oath deposed and said:
1. My name is Kelley M . Keller. I am over the age of 19 years old and am fully competent
to make this affidavit. 1 am an anomey licensed to practice law in the state of Texas. I
am lead counsel for Intervenors H.J. von der Goltz and EMJO Investments, Ltd.
(collectively, " Intervenors") in the above referenced action. The infonnation contained
herein is true and correct and is based on my personal knowledge as it relates to my
representation of Intervenors.
2. Attached to the Intervenors' Supplemental Response to the Special Appearance of John
T. Preston (the "Supplemental Response") as Exhibit B and incorporated therein is a
429
true and correct copy of the Plaintiffs~ Second Amended Petition filed in the Kajser
Litigation (without exhibits).
3. Attached to the Supplemental Response as Exhibit C and incorporated therein is a troe
and correct copy of a Petition in Intervention of Quantum Catalytics, LLC filed in the
Kaiser Litigation.
4. Attached to the Supplemental Response as Exhibit D and incorporated therein is a true
and correct copy of the Motion for Summary Judgment, without exhibits. filed by
Sydow in the Kaiser Litigation.
5. Attached to the Supplemental Response as Exhibit E and incorporat BARBARA DAVIS
My Comm!ss!on Expires NOTARY PUBLrC TN Al\TD FOR
November 14, 2015 THE STATE OF TEXAS
wJY COM:MJSSJDN EXPIRES:_..... .t.~~:z:.1f'~---·········-······--·-····-----
l """
...
,)
431
!
I
flied I
08May&P4:M
=~
Hams Dlstrfct l
NO. 2007-38533
I
JEFFERY B. KAISER. INDIVIDUALLY. § IN THE DISTRICT COURT OF
DERJVAIELY, AND ON BEHALF OF § I!
ALL SIMILARLY SIIUA TED §
STOCKHOLDERS AND MEMBERS OF §
~=
TEXAS SYNGAS, LLC a/kla TEXAS
SYNGAS, INC , :
Plaintiffs, § ~~
§ HARRIS CO~, I EXAS
v. § ~
§ ~~~
TEXAS SYNGAS, LLC alk/a TEXAS § @a~
SYNGAS,INC.,MICHAELA. COLLINS, § Q~~
MICHAEL D. SYDOW, M. SAMEER AHMED, § ~'V
ANDALLOIHERSIMILARLYSITUATED § o ~
OFFICERS AND DIRECTORS OF § ~
TEXAS SYNGAS. LLC alk/a TEXAS § ~(o/j
SYNOAS, INC., § ~
Defendants. ~ 152nd JUDICIAL DISTRICT
P~'SECO~NDEDPETnnON
COMES NOW, Jeffery B. Kaiser, ~vidually and Derivatively on Behalf of Texas
. ~
Syngas, LLC and I exas Syngas. In~~laintitfs"), and files this Second Amended Petition,
complaining of Michael A. CoJlmG,chael D . Sydow, M . Samee.r Ahmed, and Texas Syngas,
LLC and I exas Syngas. Inc. @\port of tbis Second Amended Petition, Plaintiffs show tbe
following: ~Q
0~
~
DISCOVERY
1. ~"\,ay is intended to be conducted under Level 3 of Rule 194 of the I exas
Rules ofCivil~ure.
i
PARTIES I
I
II
I
i
I
!
J
EXHIBIT B
432
2 Jetfe~y B. Kaiser, r'Kaiser''), is a membe1 of Texas Syngas, LLC, owning 7 5
percent ownership intere~ and resides in HaJJis County, Texas_
3. Fred Sembeta is an individual member and shaJeholder in Texas Syngas. LLC &
Texas Syngas Inc., and resides in Hanis County, Texas.
4. Texas Syngas, LLC is a Texas Limited Liability Company. ~se articles of
organi.zation was filed on July 30, 2004, and whose Operating AgJee.m~ signed by its
~
members ou October 4, 2004, and has been served with citation and~swered herein.
5. Texas Syngas, Inc. is a Nevada co1poration, i~ted on May 22, 2006, and
has been served with citation and lw answered herein. o-il
6. M"ocllael A CoUins ("CoUins"), is ~er of Texas Syogas L.L.C. and
CbaiJman ofthe Board of Direcwts and Senior Vi~esident of I exas Syngas Inc., and owner
of seventy-eight (78%) percent of the owne~~e1ests and stock in each of fex.as Syngas
L.L.C. and Texas Syngas Inc ; and. is an in~ual resident ofMootgome~y County, Texas, has
been smved with cibllion aad has ODS~ min.
7 Michael D. Sydoaydow") is the Chief Execurive Officer of I exas Syngas
L.L.C. and Texas Syogas ilw@"\dividual resident of Hauls Coo111ty, Texas, bas been smved
with citatioo and bas ans~ hetein.
of{@
8 M.~r Ahmed, !he Project Development Office.- of Texas Syogos L.L.C.
and Texas Syng~~-. an individual resident ofFou Bend County, Texas has been setved with
citation and ~d herein.
9. Quantum Catalytics, LLC, is a DelawaJe limited liability company which bas its
principal office at 421 Cunant Road, Fall River. MA 02720, and bas intetvened in this lawsuit .
2
433
10. 1ohn L Preston is the manager of Quantum Catalytics L.L C. and may be seaved
with citation at% Quantum Catalytics L L-C., 42 t Cwrant Road, FalJ River, MA 02720.
DERIVATIVE ACJ'ION
1t. Kaiset brings this suit individually, and derivatively oo behalf of Texas Syngas,
~~~~~~ ~
VENUE r()(/j
~
12. Venue is proper in this case pumuant to lexas ~~thereodants have their
business addresses, personal residences., and principal places of~ in Hauis County. lexas
and the caDSe of action occurred in Hauis County, ot all 01 apntial part of the events giving
rise to this claim occwred in Hartis County, I exas. QtF'
JURIS»Ip
13. The cowt has jurisdiooon ov4 lawsuit because the amount in conuoversy
ex~
__,_ this cowtt s mmunwn
• • • 'sd' - ~
JUll •ction ·~tements
~
~ FACTS
14. Beginning in a~~ately 2004 and continuing through present, Collins,
Sydow, and Ahmed. and oth~ and di.rectolS of I exas Syngas. LLC and I exas Syngas
Inc. solicited and, upon~ation and belie£ obtained in excess of one miUion dollazs in
0~
investment fimds ~ividual residents of the State ofTexas I exas Syngas, LLC and Texas
Syngas Inc., Col~
~dow, and Ahmed. and otbez officers and directors, without full discloswe
to Plaintiffs,~ oth.et members and stoclcholde~ thereafter participated in concealing the
plaruting, organization, tegistration. creation and expenditure of the approximately one million
dollars of the investors' monies by Collins, Sydow, and Ahmed. and o1ber'S to deceive and hide
Texas Syngas, LLC and Texas Syngas, Inc.'s true financiaJ condition from Plaintiffs to further
3
434
lhe finaocial intcxests of Collins, Sydow, Ahmed, and that of the directors and officers at the
expense, and in breach o~ DefeodanJ.s' statu~ry, contractual, fiduciSiy, and common law
obligations and duties owed to Plaintiffs and other membel-stoc.kholders, causing damages to
Plaintiffs and Texas Syngas, LLC, and I exas Syogas, Inc
15. On or about August 10, 2004, Kais:a's law fum and Sydow~ firm entered
b~ch lhey agreed to
i
I
into a retainer agreement with Michael Collins and I ex.as Syngas LLC. i
~ J
provide legal services for Collins and Texas Syngas LLC inch~ as to all .aspects of
f
Collins/Syngas' effons to exploit the Co.lliiWSyngas proprie~logy. Kaiset received 7.5 i
l
pescent of the ownership interests in Texas Syngas LLC for~fessional set vices. Mr . .[(ajser
I
l
j
continued his tepJCSODlation in all aspecls of Collins~ Syngas LLC's busiJJess efforts to I
I
utilize tbeii' prop1ietary tecllnology Kaise1 duly ~ as Oene~aJ CounseJ fot Texas Syngas I
I
LLC, until the dissolution of Kaiser an.d Sydo~ fum in Febnuuy 2006. !
l
16. On or about October 4, 2oo&e Operating Agreement of I exas Syn~, L.L.C
~
was signed by its members, Michael~· Quantum Cata.lytics. LLC by .John Preston. Michael
Sydow and JeffKaiser, a copy of~ is attached as Exhibit L
17. Collins devel~voluable intellectual ptoptrty to improve and enltance the
technology of Molten ~Technology, Inc., whose assets were pwchased by John Preston
0~ •
and othets after M~"f-telab was placed in chaplet II bankruptcy proceeditJa.s and CMatm competition with the
couunon entetprise
25 . Collins breached his 6duciaty duties owed to Kaiser- as to minority sbateholdeJs,
member, partner and joint venturer, through oppressive conduct and through domi:nat.ed contJol
oveJ lbe business, by dissipation of all the assets of tbt: commoo enterprise s;:lr conversion of
the assets to his own use and benefit, thus destroying the object for which ~int eotcJprise was
~
created and rendering it impossible for the joint entetpxise to co~ its business Collins'
conduct destroyed Kaiset's reasonable expectations lhat were ~to hi.s decision to join and
participate in the ventwe. Collins conduct rendered the~ enterptise incapable of the
continued business for which it was es1ablisbed. Coll~bed his duty of loyalty to the joint
concern, his duty of utmost good faith, fait ness ~oesty, his duty of full d.iscloswe of all
mattets affecting the common entetprise. his ~to account for all pJopetty of the common
eotetp!ise, and his duty to Jetiain from com~on with the common entetJ)Jise.
26. Detendants knew ~~lins' conduct constituted a wroog!UI ad qaiost
Plaintiffs and with intent to assist ~ins in the wrongful acts., defendants substantiaJiy assis~
and eocouJaged Collins by ~ a<:Ca of assjslaDCe and encouragement as alleged beleio.
Defendants' assistance ~cowagement was a suh!tllntial factor in causing the wrongful
ofjg
conduct. AJtemativ~fendonts were engaged in a joint ente!prise. Plaiotiffs aocl Defendants
had an agreem~ common pwpose, a community of pecuniary interest in that common
pwpose, and ~ual tight to direct and connol the enterprise. AI the time ofdefendants' acts as
alleged herein they were acting within the scope of the enterprise. Aftematively, defendants wett
engaged in a conspiracy, in that there was a combination among the co-coospiratoas for an r
j
unlawful pmpose as alleg~ herein 01 lawful pwpose by unlawful means. Defendants knew that I
7
/
I
I
I
438
the agreed acts would result in bairn to Plaintiffs. To accomplish the object of their agreement
Defendants engaged in the overt acts described herein. The agreement to engage in the above
described acts proximately caused injwy to Plaintiffs.
27. Defendants' breach of fiduciary duty injured Plaintiffs by deptiving Plaintiffs of
the value of their property, the loss of their reasonable expectations fm ~~ en~prise
and their investment and loss of business opportunities, in damages ind~g the full market
~
value of their ownership interest in the common enterprise ~ry
28. Defendants, breach of fiducimy duty benefited ~ts in that the conversion
of the assets of Texas Syng.as, LLC for use in Texas Syn~~c substantially bene..fited and
~
emiched Defendants to the dettiment of the Plaintiffs ~~
29. PlaintiffS injwy resulted from de~~ts· gross negligence, malice. or actual
fraud, which entitles Plaintiffs to exemplmy 4 under the Texas Civil Pr:actice & Remedies
Code section 41.003(a). ~
~
~~UNT TWO
F-CH OF CONTRACI'
30. Plaintiffs het~reai.lege and inco1porate herein by reference Pmagraphs t
tlttough 22 ofthis Petitio~Q
0~
31. On~~beJ 10, 2004, Plaintiffs and Defendants executed a valid and
enforCeable wri~ating Agreement of Texas Syngas, LLC, attached as Exhibit "1" and
incorporated ~ference herein
32. The Operating Agreement provides in Section 5.07 that "no member or Manager
shall engage in 01 possess any interest, legal, equitable, or otherwi~ in any business venture that
competes in any way with the Company W\Jess such participation sball be app:t'Oved by a vote of
8
439
__
-
... ... . ... ..... . . .
;~ -~~S:·SSEO ~
CAUSE NO. 2007-38533
JEFFERY 8. KAISER, INOJVIDUALLY §
DERIVATIVELY, AND ON BEHALF OF §
ALL SlMILARLY SITUATED §
STOCKHOLDERS AND MEMBERS OF §
TEXAS SYNGAS, LLC A/K/A TEXAS §
SYNGAS, INC.,
Plaintiff,
§
~ ~
,·
~
v. § HARRIS CO" "Y) TEXA"
~ <:7 · ~
§ 0 ~ ,.] ~ .I
TEXAS SYNGAS, LLC A/KIA TEXAS § ~t~ ~v -
SYNGAS, INC~, MICHAEL A. COLLINS, § ~ ~) ... · _:::s -:.
~~~~~L~~:~~~~~~~~~;:A~~~D, §§ Q.fi : ~ _:
~
3
OFFICERS AND DIRECTORS OF § 1+ ·::,
~ ~·. ~."
o
TEXAS SYNGAS, LLC A/KJA TEXAS §
SYNGAS, INC., . § ;:~
Defendants. § 'V 1901h JUDICIAL DISTRICT
T~
INTERVENTION OF QUAN~-.. - CATALYTICS, L.L.C.
TO THE HONORABLE JUDGE OF SAI~QURT:
COMES NOW, Quantum Ca1a' a?: L.L.C., and in support of iiS Intervention under
Rule 60 of the Texas Rules of Civil ~ure would respectfully show the following:
o~- --
~. FACTS
~' .
l. Quantum C~cs, L.L.C. (hereinafter ''Quantum Catalytics ..). is one of four
members of Texo.s S~. L.L.C. The four members are Michael C. Collins, Quantum
Catalytics., Michae~~dow, and Jeffery Kaiser.
jQ
2. ~ther members o fTexas Syngas, L.L.C. are parties to this sui t Jeffery Ka!ser
(hereinafter ·•Kaiser.,) is a Plaintiff, and he has sued Michael C. Colli ns and Michael D. Sydow.
3. The operating agreement, signed by a\1 four members, provides that the company
is to be managed by a majority of its members. All of the corporation•s members other than
Kaiser, who owns a minority interest, agree that it is being managed in the best i.nterests of_the
1
EXHIBIT C
452
Flied
08 June 20 P4:20
Theresa Chang
Olstrfct cterk
Hams District
CAUSE NO. 2007-38533
JEFFERY B. KAISER, INDIVIDUALLY, § IN THE DISTRICT COURT OF
DERIVATELY,AND ON BEHALF OF §
ALL SI.MILARtY SITUATED §
STOCKHOLDERS AND MEMBERS OF §
TEXAS SYNGAS, LLC A/KIA TEXAS §
SYNGAS, INC.,
v.
Plaintiffs,
§
§
: _e_~.
HARRIS C~rY, TEXAS
~
§ ~ /[}
TEXAS SYNGAS, LLC AIK/A TEXAS § ~
SYNGAS, INC., MICHAEL A. COLLINS, § o ~
MICHAEL D. SYDOW, M. SAMEER § .(~-
AHMED, AND ALL OTHER SIMILARLY § ~ ,¥
SITUATED OFFICERS AND § ,flJ~
()~'0
DIRECTORS OF TEXAS SYNGAS, LLC § ..,_~~
A/KIA TEXAS SYNGAS, INC., § ~?!)
Defendants. § ~ 152Dd JUDICIAL DISTRICT
.,@?'1
DEFENDANT MIC~L SYDOW'S
AMENDED"MOTION ~~tJMMARY JUDGMENT
Defendant Michael D. Sydow her~les his Amended Motion for Summary Judgment,
in suppo~ of which he would r~w the Court as follows:
- ~~
0~ INTRoDUCI'ION
\
We have been down~~ once before. In April 2008, Defendant Michael Sydow
-fJ~
("Sydow,) moved for~ judgment on all claims asserted against him by Jeffery Kaiser
~-
(" Kaiser''). Sydow'~gtion was based on purely legal issues and undisputed facts (e.g.,
Kaiser's admissi# t Sydow did not induce him to acquire an interest in Texas Synp LLC).
-'~
Rather than ~ond to Sydow's motion, Kaiser claimed that he needed a 45-day continWUlce in
order to review additional documents. The Court gave Kaiser one week (until May 9) to file a
response.
But Kaiser's gamesmanship continued. On May 5, Kaiser attempted to side-step
summary judgment by filing a second amended petition. Although the new petition asserts
EXHIBIT D
456
101. l"'fU'90-r.;) p.,c
:
'JDI.IIOU'B. ~JSD.IlQ)IVJDUALLY IRTD DJRI»ICY OOllll'l' OP
. DDJV'ADVBLY,.AKD OlfBICIJAI.B 0'1
jLl, IIIW·'W·Y m'UADD
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TRJ1.8 SYm.WI,LLC; A/JC/A..Tl;j'AS
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••
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Defeadant's
E~jt
-~
475
··-· -- ---· ---- .. ··-··,- ·--. ·- ~ ~. ...
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...
Michael D. Sydow 1188 aoted as file adafBaaabvo om.- of tbo oompmy umJar 1he
· cDmadou 8lld GOD!m1 ofMJcbad C.. CalliDs:Mlabael D. Sydow bas Deverbad auy aathodty cmr
tbo expnndlture or dttbiuw:meat ofaJ ibuda biD Taaa ~ L.L.C. Mlob•cl D. Sydow has
mm:r slped, or baa autbadzed to tdp. Gil Ifill bat or afJ&ar 'OCf'!'lnfs GfTexas ~ Ll..C.a
2
476
Ared
08 June 20 P4:04
Theresa Chang
Dlstlfct Cfertc
Hams Olatrfct
CAUSE NO. 2007-38533
JEFFERY B. KAISER, INDIVIDUALLY, § IN THE DISTRICf COURT OF
DERIVATELY, AND ON BEHALF OF §
ALL SIMILARLY SITUATED §
STOCKHOLDERS AND MEMBERS OF §
TEXAS SYNGAS, LLC A/KIA TEXAS §
SYNGAS, INC., §
v.
PlaiDtill's,
:
: HARRIS CO~, TEXAS
~
TEXAS SYNGAS, LLC AIK/A TEXAS f ~
SYNGAS, INC., MICHAEL A. COLLINS, § ~·
MICHAEL D. SYDOW, M. SAMEER § o~c.?e)
AHMED,ANDALLOTHERSIMILARLY § <{J~
SITUATED OFFICERS AND § ~
DIRECfORS OF TEXAS SYNGAS, LLC § o~
AIJ(JA TEXAS SYNGAS, INC., § ~
Defendants. § ralioo. I WWII you to 14 Q. lllank )'OU.
15 find those in the materials we reviewed today. 15 Corpc:~r.Ue resolutions. have you prodoood
16 A. Bates NO$. 36 throv&J! 38. 16 ~II or the eorporaw: resolutions of JK Cbims?
17 Q. Okay. And what is !he titk of thai docomeol 17 A. Yes..
18 yo~eref~nsto7 18 Q. Otll)'. And -cain. the one$ we've seen are
19 A. Certifu:aac: ofFormillioo For-Profit 19 un1i~, conut?
20 Corporation. 2o A They doo't 113vc to be srBJW!.
21 or
Q. Okay. So there'SI Certificate Formation. 21 Q. Oluly. ~lder COMents. have )'OU prodO<:Cd
22 Have you found anything idcntiftcd as Anlc:les of 22 all of lhe sh'mholdet collSalts of JK Clairru?
23 Incorporation for JK Claims? 23 A. There af'Cfl't any sflan:holders.
24 A. Thll($ wtusttbis i.s. 24 Q. Okty. So ~re's ~ sb~boldcrs.. WOO arc
25 Q. Okay . 25 the owner.~·-
Page Pb(JC 57
1 A. It's the some thing. A. Jfs uncertirl.c:ated.
2 Q. Okay. S4oct ledgers. are tbcre any st
22 A. And if you cSon't quiet down and set out of my 22 is &hat correct?
23 face, I'm walking out. 2J MR. HUNTER: Objcaion> form.
2. Q. YWI. I'm noc In your faoc:. 24 A. JK Claims is incorporated as an uncer1ifi~ed
25 A. You arc. vou•re leanJng across the coblc and 25 oompany-
• -:;J""- .. .
15 (Pages 54 to 57)
9438 Data scope 713-688 - 9300
495
Oral Deposition of Michael D. Sydow, Sr .
Page 58 Pa ge 60
1 Q. (BY MS. KELUR) I've hcatd tha.t. 1 A. It's not filed if it's re~.
2 A. -through the BOC. 2 Q. OkAy. But It was flied and th.en rejected.
3 Q. Wh3e rm eskiJlg is. is lhcre any other way 3 corn:c:t? Jus1 filed. but not ~ted'?
.. oth.cr than your testimony today 10 verify the ownership 4 A. )I WIIS wbmitted, OOt not fi)cd bcca.w'c it I
5 ofJK Claims? 5 ~properly filled out.
6 A. I'm~ awan: ofany clocumet~~tlon- well 6 Q. Do yoo bve :a copy of Ill~?
7 attualty tha'c m~t be: some documenwion thai may 7 A. No.
8 exist. 8 Q. Who prepared lhar?
9 Q. Okay. Wbal would IIIII documc:nlalion be:? 9 A. Some DCCOUnWII in Mus:\dwSdts..
10 A. J believe the consent in lieu of mcell"£,5 1o Q. So does JK Claims have: any profJt and loss
ll clc:atl)' sfl.ows who the owner is. 11 scatc:ITICfiiS?
12 MR. HUl'fTER: I think tha'c's a B:aiC$ 12 A. No.
13 No. so. 13 Q. Docs JK Ct3lms have a tJ.I~ sheer?
14 A. Q&~~twn Catalytics, l .l..C., being llle holder l4 A. No.
lS of the majority or the shares of JK Claims docs ~by 15 Q. Does JK Claims have any inc:omc: Slalc:ments?
16 consent tO the ac>polntmcnl of John Preston ll$ so~ J6 A. No.
17 dii'CQO: of the company. 17 Q. Oocs JK C1aims have any oilier type of documen.l
18 Q. (BY MS. KEllER) Otay. 18 thai might rellcct the current finOVlcial ClOilditio«< or
19 A. Exhibit 9. 19 JK Claims'?
20 Q. Ok:s.y. Anythi~ eiSIC? 20 A. No.
21 A. Bate.s No. OSO, QIIIUlfUm Catalybc:s. l..l.C., 21 Q. Rc:quc~ No. 6 t\Sk:s for ;!:tly and all loan
22 be&!~ the bolder of the majoriry of the snares or Jl< 22 appiK:ations prepared by or on behalfor IK Caaims.
23 Claims dues hereby redcct John Prescot~ as the sole 23 Has JK Claims pre~ any loan apptic:atioM?
24 di~ of the company. Exhibit 9, Bates No. Sl . 24 A. No.
25 Q. Okly. J2S Q. All documc:nlS re_rlccti11g any ouiSianding
Page 59 1 Page 61
l A. So, yes. lllere are dQCumc:JIIS that reOCCI the l)
2
flnanc:inl obliption held by JK Claims, inc:ludinJ but
not limited lO. loorl sta1cmc:nts, credit card account
2 ownersfljp.
3 Q. Okay. Would there be: any other doa!mct1LS 3 stalc:mcnts, promissofy notes, and scc:ID'ity instrvmcnu.
4 otller than E)(hibit No. 9? 4 H&\"C you soc:n eny suc-h documeMS?
5 A. N04IIIal I'm aw1re of. 5 A. Thctt aren'\ any.
6 Q. OQ)'. Request No. 4 asks ror an 6 Q. There an: none?
1 cmployment·tclatcd agrcemenlS ccea.ted by JK Claims 1 RcqYC:St No. &. all ~rds reflccti,.,; the
8 from Jamwy 2012 10 lhe present, including but!)()( I 8 e:xiscence ofall ""oourns held by JK Claim¥ at any type
9 limited to. con.sultina qreements and employment 9 of fin:~r~Ct.llnsdMion, inc:ludine but nocllmJted to.
10 ~LS. Are there any document$? 10 ~opening docwnenlS, si!:Jtarute 11.11horizaliom,
\1 A. No.. 11 and 1t1e last six moatbs ofstatements. Docs JK Claims
12 Q. Request No. 9 asks for all doMes, Preston, 8liCV«
11 before? 21 Sydow regatrry'! 6 Q. Request No. 12, all documents reO~ or
1 A. None. 7 rdatc:d to CX~mmuniCil.ions between IK Clai~m or it$
8 Q. Okay. I ass~Umc thallhere wouid be documents 8 repn:scntativcs and the tNStee of the~ regardint
9 te.flectiB3 the sourte ofth1t funding. H1111e you made 9 the pu:d\ase. Thilf$ c:ssmtially these dwc ~rds
10 811Y effort to locate doaunents responsivc 10 Exhibit l0 you produced as Exhibit No. I I thto~tp 13?
11 No. ll - 11 A. Those ue the doQwcr11s that exi~.
12 A. Yes. 12 Q. Is t.hc:re an)'lhin& ebe, any other
13 Q. - exa.rse me- Request No. I I? \3 communications related to the discussioM betwmll.bc
1' A. Y~ 1~ t.rustee of the Ka.iser c:Sl:lll! and my per$00 on hd!o.l f
15 Q. Wbal errOrts 113ve you made? 1S ofJK a.Jms?
16 A. I have dooe an investigolion. 16 A. t..'q. No. no! lhlll I've been able eo determine:.
17 Q. Wha1 wus that i:nv.estiantion? Who did )'OU 17 Q. Were )'OU a puty to lilY of th~
18 reque;u n:eoord$ from? 18 tornt1WI1i<:.cions?
l9 A. Jobn Pn:Sioll. l9 A.. No.
20 Q. When did you make tN.t request? 20 Q. Request No. 13. all e--mails, notes.
21 A. I d 01t1't recall. 21 COrre$J)Qildcrlce, and other dC)CWQCIIts reOectillg
22 Q. And~ wns the: rc:sponlrC from Mr. P~n? 22 convnunk:.uions by and between or 8mOC'IS Lobnc:s. ~on.
23 A. JK Claims doesn't have any suc:b n:eotds. 23 andfor Sydow n:gmding lhc dailn$ znd the pwdaiiSC of
24 Q. Regarding the sour(e ofchdunds of the 24 the same: ffOm the: cswe. Art there ~ documents
25 2.S,000 purthast money for the claims? 2S I'CSJ)OrtSi\-e IO No. 13?
Page 63
--------------------------------------1
1 A. Right 1 A. No.
2 Q. Do you know wha1 souroc of funding for ihe 2 Q. Ob,y. rd like to focus now on con¥erS~Ui011$
3 p1Rhll$e - whllt w~ the funding source for the 3 becween you M~d Mr. Preston n:~arding the plli'Chase of
4 priase or JX Claims- excuse me - Kaiser claims? 4 Mr. KaiSCf's claims out of lbc K4i$Cr bankruptcy
s MR. HUNTER: Objection; fonn. 5 C$tliC.
6 A. r understand it was from QIW!rum Catalytics. 6 When do you n:call you rms spoke with
7 Q. (BY MS. KEU..ER) And how did you make Chat 7 Mr. P~ regardlng some entity pun:twing those
8 Wldmu.nding? e claims?
9 A Through an internal investiption thnt I 9 A. l don't recall.
10 conducted to pn:pru-e for th.e dc:pQsition. 10 Q. How oWly times wootd you say )'OU spoke with
11 Q. And what did you lcam in cbal intef'nll ll Mr. Preston n:g~d ing that matter'?
12 investigation rqarding the payment for Mr. K<~isets 12 A. I don't rec::tll.
13 claim'? 13 Q. Whose proposal was it that some entity
14 A. QU13t1rum Ca~alytics transmitted the money to 14 pUidlose Mr. Kaiscts clAims (rom the bankl\lptcy
lS pay for the claims. 15 c$latc?
16 Q. In "Ail# form? Was it a check or win: llanSfct 16 A. I don't recall.
17 rcc:ord? 17 Q. Was it your su~ion l~ somebody pllrdlase
18 A. I don't know. 18 those claimJ?
19 Q. fm S!Orr/1 19 MR. HUNTER: Objedion; foml.
2() A. I don"t know. 20 A. No.
21 Q. And wbo told you that Qu~cum Cnta!Y'ic:s 21 Q. (BY MS. K.ELI.£R) Wz it Mr. ~n'$
22 lnnSmilkd the money? 22 susges1lon? i
23 A. John Pn:stoll. 23 A. I don't recall.
24 Q. What else djd he say abolJI the fund.ing. of the 24 Q. Could it hnvc been )'OIIr sugscstilon Olo&C the: ~
25 plltdl&$t of Kaiser dalms? 2S claims be purcllased by somec:ruit)'? i
~.--~~-
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- ~.-~.~~
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.-~
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17 (Pages 62 to 65 )
9438 Data scope 7 1 3-688-9300
497
Oral Deposition of Michael D. Sydow, Sr.
Page 66 Page 68
l A. No. 1 A. f dorft know.
2 Q. Wa$ i1 Mr. t.olwles- suucstion? 2 Q. Would )'OU have a copy oftlle bill for services
3 A No. 3 if you did?
~ Q. Do you la!ow if Mr. Lohne$ provided lllc: money 4 A. Yes.
~ WI was wed to purdlo.se the claims from the Kaiser 5 Q. Okay.
6 e:sQtc:? 6 MS. KELLER: Mf make a reqUICSt for
7 A. No. 7 lhaL
8 Q. Do you blow ~Y the: bank.ruptcy trustee would 8 Q. (BY MS. KELLER} Do you know the sources of ~
9 have 5t.alc:cl thai the money was ~ng &om Mr. Lohnes? 9 funds for the: capit:lli&~~Jjon other th311 yout testimony
10 A. I don't know tint the barlkruptcy tJuMe so 10 Lhat lr came from Quanrum C.1alytics'?
11 staled. ll A. Thllt is the JOuru.
12 Q. Oby. f f tlle bo.nkruptey uustcc st~d cr bankruptcy estate? 21 eloims it putdlased from tbe Koisa' blntrvptcy1
22 A No. 22 A. No.
23 Q. Thai's the onl)' busina-s that J K Ctaims bas 23 Q. Doc$ JK Claims have any liobilrucs?
24 ~done was to purchase those dalms ond pum~C t.hosc 24 A. No.
25 in co~ oom:et'? 2~ Q. As c:mpor.Jte eou.n:sel for JK Claims, ""'C'C >'0'1
Pa qe 67 Page 69
1 A. That's correct. l responsible for obUinifll litiptio.n counsel 10 pursue
2 Q. Okay. fs that Lhe put'p(Ule oftbe formotion or 2 the claims Olat were purchased from lhe Kaiser estate?
3 JK Clllims? J MR. HUNTER: Objection; privileged.
4 A. Yes. 4 Q. (BY MS. KELLER,) I'm going to ask you acain;
~ Q. Okay. Wh3l Other - so is it l.n.lc, lhel\ that ~ and if you rt:fusc to answer it on the basis ofadvice
6 JK Ollim$ has ftO ocher inv~c:nt:s? 6 of oounstl, ~ me know.
7 A. No. it docs not. 7 As corpoi"Dk counsel fo~ JK Claims. ~
8 Q. Okay. Does JK Claims have g.ny lnvestotS otbc:r 8 you respDn$lble for retaining ClOIJtiSCI tO purme the
9 Lhllll its sole shareholder Quanl\lm Ca.talytics? 9 cl31ms f« bank:rupecy?
10 A. No. 10 A. J refuse 1o llll$Wtr on the advic:c of ~unscl.
11 Q. ~. Did QuMtwn CatalytiC$ provide Any 11 Q. Olc.ay. Goins ba.ck to RcqiJCSt for Production.
12 money for the c:aphafizalion or JK Cl~ims oa Its 12 lhc: ones relaJod to the funding of the P"'rehase. the
lJ ronnalion? 13 ~UC:Sl specifically osk$ ror dlcdcs, witt transfer
H A. Ofcourse. 14 records, en&. or any loan doeumentation. anythins
15 Q. How much did Quancum Catalytics provide for 1~ relakd to the p~rc:base for the claims. Wert: you able
16 Lhe capit.aliz::a.don ol'lhc company? 16 10 obaln any of lhaa from Mr. Pre$t0n?
17 A. Enough to buy the claims and organke the 17 A. No.
1e comJllllly. 1e Q. Did you asic fo: ttuu from Mr. f>Rs1on7
19 Q, How much was thai? 19 A. Yes.
20 A. Somewflere between 25- 0.11d $26,000. 20 Q. And what was his response?
21 Q. And how mvd! did you c~ JK Clalms as 21 A. JK Claims doesn't h;ave .,Y $UCh docwnents.
22
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WRITIEN CONSENT IN LIEU OF MEETING
i
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;
I
[ Quantum Catalytics, LLC being the bolder of a majority of the shares of JK.
~
I
t Claims, does hereby consent to the appointment of John Preston as the sole director of the
company.
John Preston, Managing Member
August 22~ 2012
EXHIBIT
...... .
i-4b-
JK Claims 000050
529
JK. CLAIMS WRl1TEN CONSENT IN LIEU OF MEETING
Quantum Catalytics LLC being the holder of a majority of the shares of JK.
Claims, does hereby re-elect John Preston as the sole director of the company.
John T. Preston, Managing Member
August22, 2013
I
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!
JK Claims 000051
530
JK CLAIMS ACTION BY DIRECTOR
The undersigned director does hereby approve the purchase ofall claims of
Jeffery Kaiser from the trustee of his Chapter 7 bankruptcy.
JK Claims 000052
531
From: gmcoord@natbansommers.com · ·
To: keOy.stepbens@hotmail.com
Subject: Kaiser
Date: Wed, 14 Mar2012 14:13:25 +0000
I am sending you a motion to sell today with a an order for your review. Do you have the money in your
aooount? And, do you.have the name ofthe entity set up to purchase the claims?
~Oiuer McCord
r Neshan Sommen Jacob!
A ProfosdoceJ Corporation
II 2800 Post Oak Boulevard
I
6btPioor
I' Hoostoa, Texas 71056
i Voice: (713) 892.-4816
Fax: (713) 892.-4800
i
r
pccord@oatbaD8o111111Gn.COIII
www.nadumsommcrs.oom
I' ..
II tBIS B-MAJL MBSSAOB AHD 1HB AlTANPJDI!NTIAl•lNPORMAnoN. ·
niB Dl8SIIhfiNA1lON, DJSllUBUJTON, PUBLICATION, DI.Sa..OSt.IRB OR \JliB OP SAID B-NAIL Ml!SSACJB, ATl'.AaiMBNTS AND
INI'ORMATlOH AND S'IR1C1LY PROHIBI1BD AND YOU ARB INS"DUJC1ED TO DdMSDJA1ELY (A) NOTIPY niB SI!NIEltBY 'IBI.l!PHONH AT
713.960.1003 a: YOUJl RBCEIPT 01' THIS &NAIL MBSSAGB AND SAID A1TAOIMI3NTS, AND (B) DI!LBlB THJ8 'S-MAIL NJ!SSAGB AND TRB
ATrAawBNJS 10 rr. AND DBSTROY ALL OOPfB3 AND P.RDn'OUTS 'T'HJIRE(F.
EXHIBIT
II
dow
"'
JK Claims 000013
532
···- - ---·· . . · · · - · · · - - · · - - - - · -· . . . ..,...,. _ _ _ _ .._ . . , , , ._ _. _ -·· - -- ¥• _ .. _ - . .. . _ · ·- ·- - • • • · · · - - · · ... ·-·-
INPORMAnOH AHD STJUcn.Y PltOHIBITt!D AND YOU ARIIINSTRUCTIID TO IMMEDIATI!I..Y (A) HOT1FY llfB S.BNDER BY Tl!LI!PtJONB AT
713.96Q.m03 OP YOUR JIBCiilPT OP THIS &MAIL MBSSAOB .AND SAID .ATTACHMSNTS, .AND (B) DElETE 11US S-MAIL MliSSAOE AND TJUi
ATTACHMENTS TO rr,AND DllS'J"RRY ALLCOPlES AND Pflllfi'OlTI'Snn!ROOP.
J'rom: Kelly Slcphens [mallto:kclly.stepheos@hotmail.com]
Seol: Friday, June 15,2012 10:24 AM
To: Orctchcu McConi
SUbject: RE: Kai&eT- Salo Order
I
l
Gretchen,
l
I my clients inform me that they would like to make some changes in the valuation language of the order.
f
t they are supposed to get me their suggestions today. I will forward upon receipt.
Kelly D. Stephens
Stephcos & DomniU. PU.C
P.0. Box 79734
Hoaaton, TX 77Z79-9734
281-394-3287
832-476-5460 Fax
From: gma:ord®natbaoso111mcru:om
To: kclly.stephens@hotmftll.com
Subject Kaiser- Sale Order
Dato: Wcd,13 Juo 2012 20:2S:OS -+0000
Attached is a form of order tbat wlll be filed with tho motion. The trustco hnd a few revisioos. I hAve put a signature blank to
sign as ao agreed order. but did not blow if you or somcoae else would be algnjag. Pleosc Jet me know asap. Tbanlcs.
GRU:hcn Gauer McCord
Nalhan Somnlm Jacobs
A Prdeaslonal Corpotalloa
2800 Fbat Oak Boulevard
6Jst Roor
Houston, Teus770S6
l
Vok« (713) 892-4816
Fax: (713) 892.4800
EXHIBIT
www.nathaMOmmoll.com
JK Claims 000053
s~?w
533
Case 08-35261 Document 51 Filed in TXSB on 06/19/12 Page 1 of 11
IN THE 1JNlTED STATES BANKRUPTC'f COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISIO~
INRE: §
§
JEFFERY B. KAISER § CASE NO. 08-35261-Bl-7
24Zl Wordsworth §
Boustoo, TX 77030 § (CBAPTER7)
SS#: ux-n-7148 §
§
DEBTOR(S) §
TRUSTEE'S MOJION FORAUTHORrtY TO SELL
ESTATE'S INTEREST IN CLAIMS
PUISuantto Local Rule 9013:
THIS MOTION SEEKS AN ORDER THAT MAY ADVERSELY AFFECT
YOU. IF YOU OPPOSE THE M0110N,.YOU SHOULD IMMEDIATELY
CONTACfTBE MOVING PARTY TO RESOLVE THE DISPUTE. IF YOU
AND THE MOVING PARTY CANNOT AGREE, YOU MUST FILE A
RESPONSE AND SEND A COPY TO THE MOVING PARTY. YOU MUST
FILE AND SERVE YOUR RESPONSE WITBIN 21 DAYS OF THE DATE
TBIS WAS SERVED ON YOU. YOUR RESPONSE MUST STATE WHY
THE MOTION SHOULD NOT BE GRANTED. IF YOU DO NOT FILE A
TIMELY RESPONSE, THE RELIEF MAY BE GRAN.I'ED WITHOUT
FURTBERNOTICETOYOU.IFYOUOPPOSETHEMOTIONANDBAVE
NOT REACHED AN AGREEMENT,YOU MUST ATTEND THE BEARING.
UNLESS THE PARTIES AGREE OTHERWISE, THE COURT MAY
CONSIDER EVIDENCE AT THE BEARING AND MAY DECIDE THE
MOHONAT~~ \
REPRESENTEDPARTIESSBOULDACTTBROUGB 'rBEIRATTORNEY.
COMES NOW, Ronald J. Sommers in his capacity as the Chapter 7 Trustee ("Trusteej for
the above-captioned baDlauptcy estate ("Estate") and files this his Motion for Authority to Sell
Estate's Im.erest in Claims ("'Motionj and would show as follows:
1
EXHIBIT G
534
Case 08-35261 Document 52 Filed in TXSB on 07/13/12 Page 1 of 3
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTIUCT OF TEXAS
HOUSTON DIVISION ENTERED
07/llllOll
INRE: §
§
JEFFERY B. KAISER § CASE NO. 08-35261-Bl-7
2411 Wordsworth §
Roustoa, TX 77030 § (CIIAPTER. 7)
SS#: xu-n-7148 §
§
DEBTOR(S) §
ORDER GRANTING
TRUSTEE'S MOTION FOR AUTHORITY TO SELL
. ESTATE'S INTEREST IN CLAIMS
ONnDSDAYcameonforconsiderationtheTrustee'sMotionforAuthoritytoSellEstate•s
Interest in Claims (the "Motion'') filed by Ronald J. Sommers, the chapter 7 trustee in the above-
. '
captioned bankruptcy estate (the '"Trusteej, pursuant to 11 U.S.C. § 363. The Court, after
c:onsiderini the Motion, the argument of couusel and any evidence presented, finds that
I. · This is an action filed under Fedtmil Rule of Bankruptcy Procedure 6004 and the
coaesponding local rules for the Southern District of Texas and under 11 U.S.C.
§§ 363 to sen the estate's interest in property.
2. This Court has jurisdiction over this matter.
3. The sale approved herein is in the best interests of the creditors and the abov&-
captioned bankru~ estate \Esfatej.
4. The Trustee is exercising reasonable business judgment.
5. The sale approved herein is free and clear of liens.
6. The Trustee and the bvyer nogotiated the sale at arms length and in good f8ifh.
1
EXHIBIT H
545
Case 08-35261 Document 52 Filed in TXSB on 07/13/12 Page 2 of 3
7. Adequate notice ofthe Motion and any hearing on the Motion has been given to all
creditors and parties-in-interest.
8. The sale of the Claims is a sale of the Estate's interest in such Claims.
9. The Trustee has not made any n:presentations or wmanties with rospect to the sale
or ownership of the Claims. ·...
10. Any and all objections have been withdmwn or are ovenulod.
Acc.ordinglyt it is
ORDERED that the Trustee is authorized to sell the Estate's interest, ifany~ in the following claims
to JK Claims Investment Corporation, or its assigns (""Buyer"), for twenty-five thousandandno/100
dollars (S2S,OOO.OO) ('"Sale Price") in accordance with the teuns ofthis order:
Any and all causes of action owned by the Debtor as of the date ofhis Bank.ruptc:y
filing and now owned by the bankruptcy Estate against Teus Syngas, LLC, Texas
Syngas, Inc. and their officers, directors. shareholdcm, age11ts, attomcya and/or
against any predecessor, successor, or affiliated companies, including but not limited
to the following individuals: Michael Sydow, Michael Collins, John T. Preston,
Quan1mn Catal.ytics, Inc., and M. Sameer. Ahmed. These claims would include
specifically all those claims that were owned by the Debtor and that were pled, or that
could ~ve been pled, in the Lawsuit with Cause Number 2007-38533, and styled
Jeffery B. Kmser, et a1 v. Texas Syngas. LLC alkla Teras Syngas, Inc. et al, currently
pending in the 1S2nd Judicial District Coort ofH.anis County ('Oaimsj.
Further, it i$
ORDERED that within three days ofthe entry ofthis order, Bu~rmustdelivertheenti.rety
ofthe Sale Price to the Trustee in good funds. Further, it is.
ORDERED fh:at, upon receive of the Sale Proceeds in good funds. the Trustee will provid~
to Buyer a receipt of such funds in writing. Further, it is
2
546
Case 08-35261 Document 52 Filed in TXSB on 07/13/12 Page 3 of 3
ORDERED that the sale ofthe Claims shall be effective immediately upon the c~ons
in 1bis Order being met without further Older ofthis Court or fUrther docum~tation and~ Order
shall be sufficient evidence ofthe assignment and sale ofthe Claims. Further, it is
ORDERED that 1he sale ofthe Claims is free and clear ofany liens, claims or interests. It is
.
ORDERED that the Trustee is authorized to execute all documents and take all other actions
necessary to complete the compromise and the sale ofthe Claims. It is further
ORDERED that the Trustee bas made no wmanties or representations as to the sale or
ownership ofthe Claims. It is further
ORDERED that the sale of the Claims is a sale of the Estate's intetest therein, and tbatthe
Court makes no finding that the Estate bas any actual interest in the Claims, ownmhip of.wbich
is disputed.
Signed: July 13, 2012
·United States Bankruptcy Judge
547
311<4/2014 QIU~con Print au;ege
II
_,- .
In re: Kaiser and In re: Jorden
... ·-- ·' ... . - . .- -- ··- - "* --··· --- .
From KeUy Stephens (keDy.stephens@hotrnail.com)
Sent: Tue 9/13/11 2:23PM
To: r.;onuners@natbansormners.com
Ron.
I need to discuss two ~sues with you.
I) Cause No. 08-35261, In Re: Jeffery B. Kaiser.
On tim case, you may rem:mbcr that I made a written offi:r to p~base
the Estate's interest in aD cases and/or
causes ofaction whi:h JeffKa.i<;erfibe Estate had a claim against Texas Syngas, lLC, Texas Syngas, Inc.,
Michael Sydow etc.
We oBCred you $25,000.00 cash fur those claims. You never n:~onded. Keer has recently (this year) tiled
two rrotions to retain in the existing laws~ claiming to have acq d or tbat he is about to acquire from you
the right to go furward in this case.
I can still offer you$ J 0,000.00 fur those cJairm assuming they ha not been abandoned. Please !et me know
your position on this rmtter.
2) lDlSU1'e about the cause but I believe that the case is In Re: Ro ert Jordan.
I received a call from Artice Allen yesterday n:questing that I rep~nt
bim in th5 matter and his deposition.
Based on our conversation, ~ bas been noticed for ~day o is week.
1 am requesting a postponement of that deposition to give me a c ce to meet with him, get the doct.Dll!nts
concerning the property in band and to get a grasp on your clairm.
please call me asap to discuss.
KeDy D. Stephens
Stephens & Do~ PILC
P.O. Box 79734
Houston, TX 77279-9734
281-394-3287
832-476-5460 Fax
lit
KDS 0001
EXHIB IT I 548
I
Cause No. 08-35261, In Re: Jeffery B. Kaiser
From: Kelly Stephens (kelly.stephcns@hotml..il.com)
Sc:nC: The 9/13/1 1 6~0 PM
To: Ronald SorTI't)ers (rsommcts@nathansoi'l:IIllers.com)
Bee: ~haelsydow@lbesydowfirm.com; Amber Polach (amb .potach@tbesydowfitm.com)
Ron,
I am contacting you in reference to my offer to purchase rights/ca es ofaction of the estate ofJeftery Kaiser.
ln my earlier email, l offered $10,000.00 fur those ri&hts.
As we discussed this afternoon, I am renewing that ofler at S2S, 0.00. My client would hlce to purchase any
a.ad aD causes ofaction held by the estate against Texas Syngas, , Texas Syngas, Inc., Michael Sydow,
Michael Collins, John T. Preston, Quann.un CataJytics., lnc., and . Samecr Ahmed.
These wouH include specifically aD those claims !llldc in Cause 2 !'7-38533, Jeffery B. Kaiser, et aJ v.
Texas Syngas, LLC a/kla Texas Syngas, Inc. er aL, currently p iog in the I 90th Judicial District Co\D1 of
Harri; CoLilty.
(n that case, Mr. Ka~er bas filed a derivative action as a shareho and is allc~g loss oflm "iwe.~tn'le.m"
and/or o~ irerest io Texas Syngas, ILC. Mr. K~ did t co.atribute any real rmney fur his
ownership ~st, rather it was predicated on ~ contrinltion as officer and prorroter ofthe con;>an)'.
A partial S\m'Dil8J}' judg,mnt was issued ~h decJared that Te Syngas, Inc., was not a contim.ration o(
subsidiary ofor a substftution corporation for Texas Syngas., LLC Mr. Kaiser had no affiliaEX>n will or
ownership in Texas Syngas, Inc. Therefore he has no cla.irrs or s nding to make derivative claim; regarding
tim entity.
My client is rmking tim otrer based on a "cost ofdefenw" cvatua · n I might point out that Mr. Kaiser filed
this banknlptcyon the eve ofsumnary judgment~ being h on behalfofaDderendants io that suit. It 6
my beliefthat lOOse tiX>ti>ns woukl havclwill be granted. Mr. Kais s claims are refuted by over 75% oflhe
shareholders ofthe COJ11>any. Additionally, in deposition, Mr. K · was ur.ablc to detail even a singfe
instance ofmSrepresentation or omission on behalfofthe officers directors oftbe cornpany. "''e believe
that Mr. Kaiser's b~tcy W8$ directly and predoroillately pred ated on 1m inability to sobstan~Dy respond
to those motions or to provide any evidence to support the clemen ofhis claims.
As you may be aware, both Texas Syngas, ILC and Texas Synga Inc., are now defunct non-operating
j
companies with no assets. tbe mibe ofTexas S}'Df}lS, LLC wasp icated on a severe lack of funding. The
fit.Wre ofthe new company (with subsLantiaJ new investors and gement) Texas Syngas, Inc., was brought
about by tbe inabaity ofthe COfl1)any to rmke the synthesis proces coll'lrrerCiaDy viable.
KOS 0002
549
311412014
'~
l
I
It is my beliefthat the clairm ofMr. Ka.i5er are wortbJess. It wo . 6tate
be in the best. interest ofthe ! . to take
'
tlm cash offur.
I
i
Kelly D. Stephens
Stephens & Donmitz, PILC I
P.O. Box 79734
Houston, TX 77279-9734
28 1-394-3287
832-476-5460 Fax
212.
K.DS 0003
550
311~4
RE: Kaiser Bankruptcy
From: KeUy Stephens (kclJy.stephens@hotrmil.com)
Sent Moo 9/19/11 12:06 AM
To: gmccord@nathansoiJllrers.com
Grethen,
our offi:r is the same we made a couple ofyears ago. it~ based· n the cost ofderense ofthe claims made in
the prior lawsuit
we came forward becal.lSe Kaiser has filed a couple of motions t retain. the one early in ttm year was made
wiihout notice to myselfor my client. the last one was noticed an promted the re up of the otrer. the first offer
was not responded to, so we thought the suit would die of nattn"al causes.
at any rate, we rmy be interested in maintaining the c)ajms in the o 'ginal derative suit depending on the tenTlS of
any settlerrent
you should know that according to Sydow, he has oot been serve with the suit you furwarded.
Kelly D. Stephens
Stephens & Domnitz, PLLC
P.O. Box 79734
Houston, TX 77279-9734
281-394-3287
832-476-5460 Fax
__ ___ .. ______ _ ! __ __ __ _ __ __ _
Subject Kaiser Bankruptcy
Date: Fri, 16 Sep 2011 14:05:45 -0500
From: gmccord@nathansommers.corn
To: kelly.stephens@hotmail.com
Kelly:
htlos:lltM7l.rnlil.li~e.cxmc#rreli.IT1ICJPrir-.M as sao es?ITN=an-us
KDS 0012
551
311412014 8
RE: Cause No. 08-35261, In Re: Jetfe y B. Kaiser
From: Gretchen McCord (gmccord@nathansommers.com)
Sent: Wed 12121/11 7:47AM
To: 'KeOy Stephens' (kelly.stcphens@hotrmilcom)
Kelly:
Are you around this week to discuss the settlement offer?
Gretchen Gauer McCord
Nathan Sommers Jacobs
A Professional Corporation
2800 Post Oak Boulevard
61stFioor
Houston, Texas 77056
Voice: (713) 892-4816
Fax: (713) 892-4800
qmccord@nathansommers.com
www.na!hansom mers.cqm
THIS E-MAIL MESSAGE AND THE ATTACHMENTS HERETO, IF ANY. ARE INTE~OED ONLY FOR USE BY THE SENDER'S INTENDED
RECIPIENT($). IF YOU ARE NOT THE SENDER'S INTENDED RECIPIENT OF THI~ E-MAIL MESSAGE OR YOU RECEIVED THIS E-MAIL
MESSAGE OR THE ATTACHMENTS TO IT IN ERROR, OR THIS E-MAIL MES~AGE OR SAID ATTACHMENTS CONTAIN LEGALLY
PRIVILEGED OR CONFIDENTIAL INFORMATION AND YOU ARE. NOT THE SE~DER'S ll'lTENDEO RECIPIEI'lT OF SUOi LEGALLY
PRIVILEGED OR CONFIDENTIAL INFORMATION. THE DISSEMINATION. DISTRIBtiON, PUBLICATION, DISCLOSURE OR USE OF SAlD
htiDs:llltU173.mall.ll\e.aJI'Iolfrrellm.cJPriniMessaaes ?m4:~W~ous
KDS 0021
552
311412014 Oullockc:an Print M~e
II
I
RE: Cause No. 08-35261, In Re: Jeffet B•. Kaiser_
From: KeDy Stephens (kelly.stephcns@hotmail.com) I
Sent: Wed 12121/1 I 10:54 AM
To: grn:cord@nathansoJTD'l'X:rs.com
lam
Kelly D. Stephens
Stephens & Dornnitz, PLLC
P.O. Box 79734
Houston, TX 77279-9734
281-394-3287
832-476-5460 Fax
- ---- --·----·- ··- --
From: gmccord@nathansommers.com
To: kelly.stephens@hotmailcom
Subject RE: Cause No. OR-35261, In Re: Jeffery B. Kaiser
Date: Wed, 21 Dec 2011 12:47:47 +0000
Kelly:
Are you around this week to discuss the settlement offer?
Gretchen Gauer McCord
Nathan Sommers Jacobs
A Professional Corporation
2800 Post Oak Boulevard
hflns:/~u173.m:lil.ll\eCa~Vcf/nal.m.o9rintMessao es'?ni«=erH5 118
KDS 0022 553
311412014 OuiJocP.com Print Mesaage
RE: Cause No. 08-35261, In Re: Jeffery B. Kaiser
From: KeUy Stephens (kelly.stephens@hotrnail.com)
Sen!: Wed 12/21111 12:57 PM
To: grrocord@nathansom:rrers.com
I attacmnt
OrderRetaining09232011.PDF ( 135.3 KB)
Gretchen,
attached are the orders regarding retention ofthe case by Judge Schaffer. I talked with the coordinator a
minute or so ago. no action has been taken or will be taken fur a week or so at least
my clients are interested in going forward with the asset purchase as discussed and will be available for
testinxmy ifneeded.
I will furward more precise language on the offer shortly, my clients are discussing what vehicle to purchase
through etc.
Kelly D. Stephens
Stephens & Doi11Ilil4 PUC
P.O. Box 79734
Houston, TX 77279-9734
281-394-3287
832-476-5460 Fax
from: gmccord@nathansommers.com
To: keDy.stephens@botrnail.com
Subject: RE: Cause No. 08-35261, In Re: Jeftery B. Kaiser
Date: Wed, 21 Dec 2011 12:47:47 +0000
Kelly:
Are you around this week to discuss the settlement offer?
118
KDS 0023
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31t4120t4 OUUoaltcom Print Message
Kaiser estate
From: KeUy Stephens (kelly.stephens@hotmail.com)
Sen!: Tue 12127/11 10:39 AM
To: gmccord@nathansommers.com
Gretchen,
sony for the delay. I know we need to get th5 in. my client has decided to make the oiler/purchase through
one the individuals involved, Paul Lohnes.
I am renewing the offer of $25,000.00. My dient would like to purchase any and all causes of
action or potential causes of action held by the estate against Texas Syngas, LLC, Texas
Syngas, Inc., their officers, directors, shareholders, agents, attorneys, etc. (or any predecessor,
successor, or related companies), including but not limited to the following individuals: Michael Sydow, Michael
Collins, John T. Preston, Quantum Catalytics, Inc.; and M. Sameer Ahmed. These would include spedfically all those
claims made or that could have been made in Cause 2007-38533, Jeffery B. Kaiser, et al v. Texas Syngas, LlC a/1n from my client he is Wllting to put the rroney in my IOLTA account pending approval
He wants rre to hold. assuming that is sufficient I woukJ give you notice ofthe deposit and hold pending
approval
lctm: know.
Kelly D. Stephens
Stephens & Do~ PLLC
P.O. Box 79734
Ho~ton, TX 77279-9734
281-394-3287
832-476-5460 Fax
From: gm:;cord@nalhansoiJ'II'DCrs.com
To: keDy.stephens@hotmail.com
Subject Kaiser
Date: Tue, 17 Jan 2012 15:09:55 +0000
Kelly:
Any word?
112
KDS 0032
557
3/1412014 0\Alook.com Pfin\ Message
RE: Kaiser
From: Kelly Stephens (kefly.stephens@hobnail.com)
Sent: Tue 2/07/ 12 12:01 PM
To: gm:oord@nathansoouners.com
Gretchen,
a couple ofthings.
I . My clienl5 furming a company to purchase th.5 asset. should have that infO mid day totrorrow.
2. Should have the rmney by Thursday.
3. His lawyer in Boston is asking to review the tran!ifer doclDTICnts. do you use a standard fur fur asset
purchase? ifso, can I get a copy to give them so that we speed up the process.
Kelly D. Stephens
Stephens & Donmitz, PLLC
P.O. Box 79734
Houston, TX 77279-9734
281-394-3287
832-476-5460 Fax
From: gux:cord@nathansommers.com
To: kelly.stephens@hotmait.com
CC: rsormrers@nathansorruners.com
Subject Kaiser
Date: Thu, 2 Feb 2012 17:01 :45 +0000
Kelly:
I wanted to file the motion to sell this week. Do you helVe the funds in your lolta account? Also, did you send
the email I requested that I can attach to the motion to sell as the offer?
112
KDS 0040
558
3/1412014 Ot.Cicdtoom Print Message
Kaiser
Front Gretchen McCord (gm:cord@nathansommers.com)
Sent Wed 3/14/12 12:08 PM
Tn: Kelly Stephens (kelly.sl<.:phcn<>@hotmail.com) (kcUy.stephcns@hotmail.com)
Since I never heard who the purchaser was, I defined it as follows :
The purchaser is Paul Lohnes or his assignee ("Purchaser"). The Purchaser is a business associate of
the Defendants.
There needs to be some explanation as to why he is buying these claims . I assume he is a business
associate of Mr. Sydow. But, I need clarification on that issue.
Gretchen Gauer McCord
Nathan Sommers Jacobs
A Professional Corporation
2800 Post Oak Boulevard
61st Roor
Houston, Texas 77056
Voice: (713) 892-4816
FalC (713) 892-4800
gmccord@nalhansommers .com
www.nathansommers.com
THIS E·MAIL MESSAGE ANO THE ATTACHMENTS HERHO. 1r ANY. ARE INTENDED ONLY FOR USE BY THE SENDER'S INTENDED
112
KDS 0042
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31141'lUI4
Re: Kaiser
Fmm: Kelly 0 Stephens (kelly.stephens@hotrnail.com)
Sent: Wed 3/l4/12 1:04l,M
To: Grelchen McCord (gmccord@nathansormncrs.com)
I am out of the ottlc ~c unt i J Monday. The definition is acr.ually 90ad as he has not
yet i nforrned me either.
r-Mobile, America's .First Nat.i,,nwide o1G Network
Sent by Samsung Mobile
Gretchen M<:Cor:d wrot:e:
>Since I never heard who the purch~H~~ was, defined i t as follows:
>
>The purchaser i~ Paul Lohnes or h i s assi9nee ("Purchaser"). The Purchaser is a
busin~ss associate of the Defendants.
>
>There needs to be some explal'lation as to why he is buying these clalms. r assume
hP. i~ a business associate of l'tr. Syd~. But, I lHWd c i~t" l fication on t.hat issue .
>
>
>Grel~c h en Gauer McCord
>Nathan Sommers Jacobs
>A Professional Co cporaL ion
>2B OO Post Oak Roulevard
>6lst rloor
>Houst on, Texas 77056
>Voice : (7131 892 - 48Ui
>Fax: (713) 892-4800
>gmccord@oathansommers. com
>www. nathansommers . com
>
>TIIIS E-MAlL MESSAGE hNO TH~ ATTACHMENTS HERETO, I f ANY, ARE INTENDED ONLY FOR USE
BY THE SENDER'S INTENDED RECI l'IENT (S) • IF YOU A~ N0'1' THE SENOE~' S INTENDED
RECIPIENT Of THIS E-MAl~ M~SSAG~ OR YOU RF.CEIVF.O THIS E-MAIL MESSAGE OR THE
ATTACHMENTS TO 1'1' .TN ERROR, OR THIS E-MAIL ME:SSAGE OR SJI.IO A'1"1'ACHMENTS CONTAIN
f,EGALLY PRIVILEGED OR CONFIDEN'l' IAL IN F'ORMA'l'ION AND YOU ARE NOT THE SENDER'S
INTENDED RECIPIENT 01-· SUCH LI::GA.LLY PRIVILEGED OR CONFIDENTIAL INfORMATION, THE
DISSEMINATION, DISTRTBUTION, PUBLICATION, DI~CLOSURE OR OSE Cr SAID !::-MAIL MESSAGE,
7\T'rACHMENTS AND I Nf'ORMA'flON AND STRl C'rL't I:'ROH1lH'l'ED J',ND YOU ARE INSTRUCTED TO
IMMEDIATELY (A) NOTlfY THt:: SENDF.R BY TEI.EPHONE AT 713.960.0303 OF YOUR RECEIPT Of'
l'HlS E-MAIL MESSAGf. AND SAl D ATTACHMENTS, AND (B) DBL.£'1'£ '!'hlS E-MAIL MESSME J\ND
THE J\Tl'ACHMENTS TO IT, AND DES'l'I{OY AI~L COPIES J\ND PRTN'l'OU'J"S THEREOF .
>
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311412()14 C\JI/ookcan Print Message
RE: Kaiser
Front Kelly Stephens (kciJy.steplx:ns@hotJnailcom)
Sent: Tue 4/03/ 12 10:08 AM
To: gmccord@natbansommers.com
Gretchen,
j l.l.'it wanted to let you know, J urn not ignoring your request I have been tmable to speak with Lohnes or
Sydow.
I do not have the money as ofyet
KeUy D. Stephen"
Stephens & Do~ PLLC
P.O. Box 79734
Houston. TX 77279-9734
28 1 ~394-3287
832~476-5460 Fax
> From gm:cord@nathansommers.com
> To: kelly. stephe~hotimilcom
> Subject RE: Kaiser
> Date: Thu, 29 Mar 2012 16:01 :12 +0000
>
> KeDy:
>
> Can you confirm that you have the rmney in your JOLTA account? That the buyer still wants to trove
furward?
>
> Also, per my request can you give me a short explanation of the identity ofthe buyer? (per my question
below) If there bas not yet been an entity set up, then J will use the definition below.
>
> Gretchen Gauer McCord
> Nathan Sommers Jacobs
> A Professional Corporation
> 2800 Post Oak Boulevard
hltns:/Mu173.maii.Ji~olfmail.mdf'riniMMSIIIl8.'1'?rrH=etH.IS 113
KDS 0047
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:Y1412014 OUUookcom Pril'lt Mesuge
Kaiser
From: Gretcben McCord (gm:cord@nalhansommers.com)
Sent: Tiw6/07/12 2:56PM
To: Kelly Stephens (kclly.slcphens@hoiJm.ilcom) (kelly.stephens@hotmail.com)
Kelly:
I thought I would take one more stab at contacting you. Ron has me engaging special counsel to take this on
an contingency fee basis so we can reach some resolution. Is your client still interested in purchasing the
claims? We had reached an understanding, but your client was required to pay·the money into your t rust
account. Last we spoke, they had still not done this.
If 1do not hear back from you by tomorrow morning, I will assume that your client is no longer interested in
purchasing the claims.
Gretchen Gauer McCord
Nathan Sommers Jacobs
AProfessional Corporation
2800 Post Oak Boulevard
61slFioor
Houston, Tellas 77056
Voice: (713)892-4816
Fax: (713)892-4800
gmCCQrd@na!hansommers .com
www.nathansommers.com
112
KDS 0049
562
31141'.!014 OU!c:dtccm Pr~nt Message
RE: Kaiser
From: Kelly Stephens (keDy.stephen~hotmail.com)
Scn1: Thu 6107/ 12 3:23 PM
To: gm:cord@nathansommers.com
Gretchen,
I am again assured that the money wiD be in my trust accoWlt mid next week.
Kelty D. Stephens
Stephens & Do~ PT.l.C
P.O. Box 79734
Houston, TX 77279-9734
281 -394-3287
832-476-5460 Fax
From: gm:cord@nathansollllll:rs.com
To: kclly.stephens@botmail.com
Subject: Katier
Date: Thu, 7 JlUl 20 I2 18:56:48 +0000
Kelly:
I thought I would take one more stab at contacting you. Ron has me engaging special counsel to take this on
an contingency fee basis so we can reach some resolution. Is your client still interested in purchasing the
daims? We had reached an understanding, but your client was required to pay the money Into your trust
account. last we spoke, they had still not done this.
If I do not hear back from you by tomorrow morning, I will assume that your client is no longer interested in
purchasing the claims.
112
KDS OOSJ
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311412014 OUtlockcan Print Message
Kaiser Estate
From: Kelly Stephens (kelly.stephens@hotmail.com)
Sent: Tue 6/12/12 5:53PM
To: gm:cord~natbansoiJ:mErs.com
Gretchen,
this DX>ming. I received notice ofa wire transfer of$12,500.00 from Boston
this afternoon, I received a check in the amounl of$12,500.00 from Mr. Sydow. I deposited S<~Ire around
4:15p.m tim afternoon.
I guess I can say that 1 have the money in my trust account
Kelly D. Stephens
Stephens & Donmitz, PLLC
P.O. Box 79734
Houston, TX 77279-9734
281-394-3287
832-476-5460 Fax
1/1
KDS 0060
564
Oullockc.cm Prfnt Message
RE: Kaiser- Sale Order
From: Kelly Stephens (kelly.stephens@hotmJ.il.com)
Sent: Fri 6/15/12 11:23 AM
To: gm:cord@nathansommers.com
Gretchen,
my clients infurm Ire that they would like to make some changes in the valuation lan!,'lUlgc ofthe order.
they are supposed to get rre their suggestions today. I will forward upon receipt
Kelly D. Stephens
Stephens & Dorrm~ PLLC
P.O. Box 79734
Houston, TX 77279-9734
281-394-3287
832-476-5460 Fax
From: grrecord@nathansommers.com
To: keDy.stephens@hotrmil.com
Subject: Kaiser- Sale Order
Date: Wed, 13 Jun 2012 20:25:05 +0000
Attached is a form of order that will be filed with the motion . The trustee had a few revisions. I have put a
signature blank to sign as an agreed order, but did not know if you or someone else would be signing. Please
let me know asap. Thanks.
Gretchen Gauer McCord
Nathan Sommers Jacobs
AProfessional Corporation
htiDs:/it1u173.1'11!ll.lhe.am'dlrreil.m.c/PrintMessao es?rl1F~ us 1l2
KDS 0063
565
311412014
RE: Kaiser- Sale Order
From: Gretchen McCord ~cord@nathanc;ommers.com)
Sent Fri 6/l5/12 llJ2 AM
To: Kelly Stephem (kelly.stephens@hotrmil.com)
I am pretty much married to that language . I will look at what they send, but the language is already broader
than I think it should be .
Gretchen Gauer McCord
Nathan Sommers Jacobs
A Professional Corporation
2800 Post Oak Boulevard
61st Floor
Houston, TeJ~as 77056
Voice: (713) 892-4816
FalC (713) 892·4600
gmcoord@nathansom mers .com
www.nalhansommers.com
THIS E-MAIL MESSAGE AND THE ATTACHMENTS HERETO. IF ANY, ARE INTENDED ONLY FOR USE BY THE SENDER'S INTENDED
RECIPIENT(S~ IF YOU ARE NOT THE SENDER'S INTENDED RECIPIENT OF THIS E-MAIL MESSAGE OR YOU RECSIVED THIS E~\!AIL
MESSAGE OR THE ATIACHMENTS TO IT IN ERROR. OR THIS E-MAIL MESSAGE OR SAID ATTACHMENTS CONTAIN LEGAlLY
PHIVILEGED OR CONFIDENTIAL INFORMATION AND YOU ARE NOT THE SENDER'S INTENDED RECIPIENT OF SUCH LEGALLY
PRIVILEGED OR CONFIDENTIAL INFORMATION. THE DISSEMINATION. DISTRIBUTION. PUBLICATION, DISClOSURE OR USE OF SAID
E-MAIL MESSAGE. ATIACHMENTS AND INFORMATION AND STRICTLY PROHIBITED AND Y OU ARE INSTRUCTED TO IMMEOIATEL Y (A)
NOTIFY THE SENOER BY TELEPHONE AT 713.960.0303 OF YOUR RECEIPT OF THIS E·MAIL MESSAGE AND SAID ATTACHMENTS.
AND (B)OELETE THIS E-MAIL MESSAGE AND THE ATTACHMENTS TO IT, AND DESTROY All COPIES AND PRINTOUTS THEREOF.
llttn
To: Michael Sydow
Sent Wednesday, June 13, 2012 3:57PM
Subject: FW: Kaiser- Sale Order
Mace,
see the attached. we have a window to make suggestions.
Kelly D. Stephens
Stephens & Donmitz, PLLC
P.O. Box 79734
112
KDS 0066
567
311412014 OIJUooltcom Pril'll Messago
FW: Kaiser- Sale Order
From: KeBy Stephens (kelly.stephens@hotmlil.com)
Sent: Fri 6/15/12 4:09PM
To: gmccord@nathllnsoiTIFT1:rs.com
Here ~ the ilusive name.
Kelly D. Stephens
Stephens & Domnitz, PLLC
P.O. Box 79734
Houston, TX 77279-9734
281-394-3287
832-476-5460 Fax
Date: Fri, 15 1lll20 12 12:54:56 -0700
From: ~haelsydow@th:sydowfinncom
Subject Re: Kaiser- Sale Order
To: kclly.stephens@hotrmil.com
The name ofthc purchas er will be JK Cluirrti lnvcsm.:n t C'.orporation .
--··--·- -
From: KeUy Stephens
To: "mdsydow@yahoo.com• ; Michael Sydow
Sent Friday, June 15, 2012 11:33 AM
Subject: FW: Kaiser- Sale Order
KeDy D. Stephens
Stephe~ & Do~ PLLC
P.O. Box 79734
Houston, TX 77279-9734
281-394-3287
113
KDS 0067
568
Dismissal of State Court Action
F'ronr KeUy Stepbem (kclly.stephenc;@hotmaucom)
Se::nl: Wed 6!J.7112 10:08 AM
To: gnx:cord@nathansoiilllErs.com
Bt:c: Michael Sydow (michael.sydow@thesydowfirm.com); Amber Polach
(amber.potach@thesydowfinncom)
1 attachment
Order Oi.omlissing case 06-12-2012.pdf( I 8.5 KBJ
Gretchen.
have you seen ths order, how does this aOCct what we are supposed to be purchasing.
KcDy D. Stephens
Stephens & Domnitz, PLLC
P.O. Box 79734
Houston, TX 77279-9734
28 1-394-3287
832-476-5460 Fax
t'Gm://hl11\ 73.nwll.fl\e.cornldhnlil.md'rlrAMesl;aoOS'?rrii:P.fl.tA 1/t
KDS 0069
569
Outlod(.ocm Pr inl Message
Re: Dismissal of State Court Action
From: Gretcbeo McCord (gm;:cord@nathansommers.com)
Sent: Wed 6fl.7/ 12 10:12 AM
To: kelly.stephens@hotmailcom (kelly.stephens@hotmailcom)
l don't think it does.
Sent from my HTC on the Now Network from Sprint!
----- Reply message -----
From: "KeUy Stephens"
Date: Wed, Jun 27, 2012 9:08am
Subject D~missal ofState Court Action
To: "Gretchen McCord"
Gretchen,
have you seen thf; order, how docs lh.is affect what we arc supposed to be purchasing.
KeDy D. Stephens
Stephens & Dormtitz, PLLC
P.O. Box 79734
Holl~on, TX 77279-9734
28 1-394-3287
832-476-5460 Fax
11!
KDS 0070
570
31141'..'014 Oullockcom Pl'inl Message
FW: Dismissal of State Court Action
rrom: KeUy Stephe.os (kclly.stephens@hotrnail.com)
Sent: Thu 6128/12 II :16 AM
To: gm:cord@nathansomrrers.com
Gretchen,
see the question below.
Kelly D. Stephens
Stephens & Oomnitz, PLLC
P.O. Box 79734
Ho~ton, TX 77279-9734
281-394-3287
832-476-5460 Fax
_____
_ _- -·· ·--·-·-·-··-·-------------·-·· . ---·
, _ . - ------------ --·- - -- -···-------------
Date: Wed, 27 Jun 2012 13:54:42 -0700
From: michaelsydow@thcsydowfirm.com
Subject Re: Dismissal ofState Cowt Action
To: kelly.stepbens@hotmailcom
If the case has been dismissed und the s tatute of limitations has run there is no tbing left to purchase. A dismissal for want of
persecution used to be subject to reinstatement within u certain time. However, ifl recall correctly the reinstatement was
d iscretionary with the Court. If s o, either the trustee needs to have it re instated to :;ell it or the buyer is purchasing yet
another problem. I fail to understand how s he thinks the dismissal ha:; no beuring. Perhaps she can explain in just a bit rrore
detail.
li!Ds:/~u173.mail.lile.cc:rM:UrrBI.rnrA'riniMessaoes?rrk=en-us 111
KDS 0071
571
Kaiser
From: Gretchen McCord (gm:cord@natbaosormners.com)
Sent: Thu 6/28/12 11 :56 AM
To: Kelly Stepbe~ (kclly.stcphens@hotlmil.com) (keDy.stephcns@hotmail.com)
C:c: Ron Sornrrers (rsommers@nathansornmers.com)
I need a written commitment from the purchaser that if the Trustee reinstates the lawsu it, we still have a
deal and the purchase money needs to be paid to t he t rustee to hold in trust pending approval of the
motion.
Or, I need a written statement from the buyer that they are no longer interested i n going forward because
the case has now been dismissed .
Please let me know today. I am meeting with someone to discuss the cost to reinstate the lawsuit.
Gretchen Gauer McCord
Nathan Sommers Jacobs
A Profes sional Corporation
2800 Post Oalc Boulevard
61 st Floor
Houston, Texas 77056
Voice: (71 3) 892~816
Fax: (713)892~800
gmQCOrd@nathansomm ers .com
www.nalhansommers.com
THIS E·MAIL MESSAGE ANO THE ATTACHMENTS IIERETO. IF ANY. ARE INTENDED ONLY FOR USE 8Y THE SENDER'S INTENDED
ht!Da:J~u173.mail.lhe.c:miallmail.rrM1Prlnll\Aessanes'?n1t=rn-us 112
KDS 0075
572
FW: Kaiser
From: KeOy Stephens (kcUy.stcpbcns@hotl'micom)
Sent: Thu 6/28/12 2:52 PM
To: gm:cord@nathansolllt1l!rs.com
here is the response.
KeDy 0. Stephens
Stephens & Do~ PLLC
P.O. Box 79734
Houston, TX 77279-9734
281-394-3287
832-476-5460 Fax
Date: Thu, 28 Jun 2012 J0:45:23 -0700
From: michaelsydow@thesydowfirmcom
Subject Re: K~er
To: ketly.stepher6@hotma.il.com
I have !>flOkcn to the purchaser. He is OK with the tms lee holding Lhe ~roncy IN TRUST, ami w ill go through with the
purchase it:
I. The cue i11 rcin11taled retroactively so that o nly limitations defenses available al the tiu10 the s uit wat> filed arc now
available; and
2. The Court approves t he sale of the cause of action in substantially the fonn agreed.
-----·---·---- -· .. -· .. -.- -- -· , ____ _______
.. -·- - - ---- - -
hllll&:llblu173.mlli.Hifuxrn'dhnlll~ntMesslllles?miP~us 111
KDS 0076
573
Kaiser
From: Gretchen McCord (gm:cord@nathansorrurers.com)
Sent: Tue 7/03/ 12 12:28 PM
To: Kelly Stephens (kelly.stephens@mtmaa.com) (kelly.stcphcns@hotmailcom)
C:c: R.X;k K.incheloe (rkiocheJoc@nathansonmers.com)
2 attachments
mln rcin'itme.v2.pdf(68.4 KB) . mtn rcinst.ah.!.v2.wpd (2 1.5 KH)
Kelly:
I asked about Michael Sydow because I think that we should perhaps make this a j oint motion. See the draft
attached hereto (we will have to change, as I thought Michael was counsel to some defendants, including
himself).
But see what I want to do and get back with me.
The reason I would like to make it joint, is that I don't want to run into a problem with the court saying the
trustee never intervened. There are two schools of thought· one that the trustee just steps in without the
necessity that a motion for intervention is necessary and two that the trustee has to formally intervene . I
just don't want it to be an issue and then have the court say the trustee had no standing to file the motion to
reinstate .
Gretchen Gauer Pvteord
Nathan Sommers Jacobs
A Professional CorporaUon
2800 Post Oak Boutewrd
61st A oor
Houston, TelCBs 77056
112
KDS 0086
574
~14.'2014
Kaiser
From: Gretchen McCord (gmccord@nathansoll111l!rs.com)
Sent: Tue 7/10/12 6:14PM
To: KeUy Stephens (kelly.stephens@hotimilcom) (kclly.stcphcno;@hotmaitcom)
Cc: lti:k KirK:heloc (rkincheloe@nathanc;ommers.com)
Kelly:
If they are not going to join in the motion, can I at least represent that they are unopposed. I need an answer
asap.
Gretchen Gauer McCord
Nathan Sommers Jacobs
A Professional Corporation
2800 Post Oak Boulevard
61s l Aoor
Houston, Texas 77056
Voice: (713) 892-4816
Fax: (713) 892-4800
gmccord@na!hansommers.com
www.na!hansommers.com
THIS E-MAIL MESSAGE ANO THE ATTACHMENTS HERETO. IF ANY. ARE INTENDED ONlY FOR USE BY THE SENDER'S INTENDED
RECIPIENT(S~ IF YOU J\RE NOT THE SENDER'S INTENDED RECIPIENT OF THIS E-MAIL MESSAGE OR YOU RECEIVED THIS E-MAIL
MESSAGE OR THE ATTACHMENTS TO IT IN ERROR. OR THIS E-MAIL M ESSAGE OR SAID ATTACHMENTS CONTAIN LEGALLY
PRIVILEGED OR CONFIDENTIAL INFORM A liON AND YOU ARE NOT THE SENDER'S INTENDED RECIPIENT OF SUCH LEGALLY
PRIVILEGED OR CONFIDENTIAL INFORMATION. THE DISSEMINATION. DISTRIBUTI ON. PUBLICATION. DISCLOSURE OR USE OF SAID
E-MAIL MESSAGE. ATT ACHtAENTS AND INFORMATION AND STRICTLY PROHIBITED ANO YOU ARE INSTRUCTED TO IMMEDIATELY (A)
NOTIFY THE SENDER BY TELEPHONE AT 713.960.0303 OF YOUR RI:CEIPT OF THIS E-MAIL MESSAGE AND SAID ATTACHMENTS.
lels:/lblu173mlll.llw,carldlrrfi,l.md'rirCMessaa es?!TH=eo-us 112
KDS 0088
575
311412014
OUIJook.am Prlnl Message
RE: Kaiser
From: Kelly Stephem (kelly.stephcns@hotmail.com)
Sent: Wed 7/ll /12 10:17 AM
To: grnccord@nathansol'l'llJI:rs.com
Gretchen.
we're back to please don't shoot the m:ssengec. Mike's reply to joining the Jrolion was (paraphrased):
I am buying this thing to prevent further problem; with Kaiser, why would I (the defendant) join in a motion to
reinstate.
I have fOrwarded your request below to him, but have not heard hack yet I am about to get on the road fur
Duval County fur a hearing th~ afternoon.
my cen is 713-252-4945. please caU IR! around noon. my hearing is at I :30. I'll try to reach Mike while I am
on !he road.
Kelly D. Stephens
Stephens & Domnitz, PLLC
P.O. Box 79734
Houston, TX 77279-9734
281-394-3287
832-476-5460 Fax
·-- - --·--·- - -
From: gmccord@nathansomrners. com
To: keDy.stephenc;@hotmail.com
CC: rkincheloc@natharmmmers. com
Subject: Ka~er
Date: Tue, tO Jul2012 22:14:53 +0000
Kelly:
l-.ms:JftAut73.maii.IM.cc:rrld/mail.rnciPrintMessaoos~en-us 112
KDS 0089
576
3f1412014
RE: Kaiser
From: KeDy Stephem (kelly.stephen~hotmailcom)
Sent: Wed 7/11/12 11:01 AM
To: gmccord@nathansonnners.com
Gretchen,
first, my hearing in Duval got cancellec.llale yesterday and I just fuund out.
second: I looked at the court records regarding dte parties in this litigdlion:
JeffKaiser represented bimscU: now your position.
1 represented John Preston, Texas Syngas, Inc. and Quanhan Calalytics, LLC
Steve Da\16 (Davis & Davi<;) represented Sameer Ahmed.
Teresa Schnieer (Winstead) represented Michael Cotlins, Micheal Sydow and Texas Syngas, lLC
She withdrew leaving each ofthese prose.
On behalfofJohn Preston, Texas Syngas,lnc. and Quantum CataJytics, U£, I have requested authority but
have not received it to represent t.batlhey arc \DlOpposed.
Mike Sydow's position is that he cannot rmke that representation for any of the other defendants, and will not
on his own behalf.
I have not been able to reach Steve Davis, but I represent Sam:er Ahmed in other tmtters (and have made
him aware of~) and he wants this thing dead so I doubt if he wouki agree.
I have no conmcl with Michael Collins.
1 realize this corrplicates thin~, but ils the best I can do at this poinl
KeDy D. Stephem
Stephens & Oomnitz, PLLC
P.O. Box 79734
Houston, TX 77279-9734
281 -394-3287
832-476-5460 Fax
hiiDtiJ/tJu t73.rrei1Jiw.am'dmal.~ ntM01111.10 II':?rri(:m-'15 113
KDS 0090
577
311~4 Oudoollccm Prml Message
RE: Kaiser
From: KeUy Stephens (kelly.stephens@hot:rmilcom)
Sent: 11w 7/12/12 5:29PM
To: gmccord@nathan.c;omrners.com
Gretchen,
I can confirm that Mike Sydow is my primary contact My Wlderstanding i.<> that the purchaser is consulting
with Mike regarding the claim; (their merits etc under Texas Law), but not that he is "having" someone
purchase the claim.
Kelly D. Stephens
Stephens & Do~ PLLC
P.O. Box 79734
Houston, TX 77279-9734
281-394-3287
832-476-5460 Fax
From: gnx:cord@nathansommers.com
To: keDy.stephens@hotmtilcom
Subject: RE: Kaiser
Date:Thu, 12 Jul2012 21:07:34 +0000
Please confirm for me t hat Mike Sydow is the one who is having the purchaser buy t he claims.
Gretchen Gauer McCord
Nathan Sommers Jacobs
A Professional Corporation
2800 Post Oak Boulevard
h!UI&:IIbluf73.mlll.lhe.carrldlmaii.ITIICiPrintMessaoes'?lriFen-us 1/4
KDS 0095
578
311412014 OuUcx:KctfftJ Thc~ltlttho.'SHdw:~
bfift9ddllled~r._,,..-.mt. UwthffHinlcrlllllion~lt~twoul)ll'--1'undl'ot
11>c ~~~~Guide. Do 1101 usc SVTIWP ~gr r~ wtw:n t ht actovtll r, not 0t JGI' rt9on ~dit!oNIIfts
I
•AUwhlftlllc
Orii(Ntcw'l
I«CJ'Idfs~ l" ~'~ftllunwdtundi~m~""- "OAt / /
/£JJ. c; 7{ Z~//C...
2
6.. Wtfl• Use - w.lb fa o • wftH.
"When Cilaoft\tf'\ .ccoun~ ts noc ~wIMP~' o ~by.
~ 1Jl!.!rur1~q,t
~d .:tnd entitled cause. and respectfully files this Nonsuit
Kaiser). Plai ntiff in the above-n ..7~,.~
\~ ,,
With Prejudice. ln support o ft~P'otion f'laintiff shows as follows:
.0."
·~ I•
.,
'l ('
,~
Plaintiff has ~eCI•Defenaant, Midael D. Sydow, for alleged mismanagement, breach of
~ .
~~
fiduciary duty. ~lion of state or federal securities law.;. fmud. misreprcsentat:on, and
,)
··...:::-·
misapprop~ . Plaintiff no longer wishes to pursue the claims against Defendant. Michael D.
"
Sydow.
II.
Plaintiff asks the Court lo sign ar. order of nonsuit with prejudice on all of Plaintiff's
claims against Defendant, Michael D. Sydow.
PltfNonsuit w/Prejudice
EX HIBIT J 581
Plaintiff asks that all cl<:jms against Defendant, Michael D. Sydow, be dismissed with
prejudice. Plaintiff asks that all costs of court be assessed against the party incurring same.
III.
WHEREFORE, PREMISES CONSIDERED, Plainti ff respectfully requests that this
motion for Nonsuit With Prejudice be f:ranted; that the Court d ismiss wi_.~t prej:Jdice all
~(7/!'>
;'~:~~·
claims against Defendant. Michael D. Syd·)W; that all costs of (:ourt be a~~'cd against the party
~
incurring same; and for such other relief, at law or in equity, to whic!'~~!ntiff is entitled.
,~)' ~: ..t.::;;
./~~-
Respectfully subnjrt~a.
STEPHENS ~~bMNITZ, P
..
.Jt ~
kelly.stcphcns@hotmail .com
. Attorneys for Plaintiff, JK Clainrs Jm,estment
~ Corporation, Defendants, Texas Syngas·, LLC and
F)) !'
·0:1 ~ Texas Syngas, /11c. and Intervenor, Quantum
. -=~
'!-...._.) Cata/ytics, LLC.
r.,;
~,.+.-.
§i;~,; Certificate of Service
'~·
(~
I her~~rtify that a tn:.e and correct copy of the foregoing document has been served
on this l 51 d~t>f October, 2012. on the following:
Via Telecopier No. (713) 781-2235
Mr. Steven Ray Davis
Davis & Davis
440 Louisiana, Suite 1850
Houston, Texas 77002
Attorneys for Sameer Ahmed
Pltf Nonsuit w/Prejudice
582
Via Telecopier No. (713) 552-1949
Mr. Michael D. Sydov.
1980 Po!:l1 Oak Ooulevard, Sujte 2 100
Houston. Texas 77056
Defendant Pro Sc
Via Certified Mail, Return Receipt Reque5ted #70JJ 1570 0000 9065 3472
Mr. Michael A. Collins
63 Sky Terrace Place U
r.*n~
The Woodlands, Texas 7738 1 1'..>, __
<·~~v
'd\,
?Afj~~i"/.::;~~=-
Defendant Pro Sc
~ghens
f~~
.-::::..~'.!
~;
..
-:...·~ .,
.....- ...
-\ ~
,r· -~
·\..,..-
CAUSE NO. 2007-38533
Pltf Nonsuit w/Prejudicc 3
583
Flied 13 Jan~ 11 P5:09
Chris Daniel - Dla1rlct Cleric
Hania County
ED101J017268621
By. Marcella D. HRI
Cause No. 2007-3 8533
JEFFERY B. KAlSER, INDlVIDUALLY, § IN THE DISTRICT COURT OF
DERIVATELY, AND ON BEHALF OF s
STOCKHOLDERS AND MEMBERS OF §
TEXAS SYNGAS, LLC a/k/a TEXAS ~
SYNGAS, INC., ~
Plaintiffs, §
§
v. §
§
TEXAS SYNGAS, LLC a/k/a TEXAS §
SYNGAS, rNC., MICHAEL A. COLLINS, §
MICHAEL D . SYDOW, M. SAMBER §
AHMED, ANDALLOTHERSIMILARL Y §
SITUATED OFFICERS AND DfRECTORS § -:8•
~ ·~DJ
OF TEXAS SYNGAS, LLC a/k/a TEXAS § ~"'~
SYNGAS, lNC.,
Defendants. ~ ~(w
§,. G;~2nd JUDICIAL DJSTRlCT
·'\.~'""
.~- ,J
DEFEND ANT Ml~l:L D. SYDOW'S
MOTION TO NONSUrf CAUSE OF ACTION
TO THE HONORABLE JUDGE OF ~ COURT :
_©
r~
,ir..Jf-·J;
NOW C O MES Defendant ~'Chael D . Sydow, and requests this Honorable Court to
j( )
~!J
nonsuit the counterclaim he fil~.against Plaintiff Kaiser in Cause Number 2007-38533 for the
~I
. r),':'s
ground set forth herem. ..;:-~
\.-!'
T.
~ ...
,r . .,
~'}
A. De~t requests nonsuit of his counterclaim in Cause Number 2007-38533 for
-~
(.~
the followin~~n:
"
1. Kaiser has dismissed his claims against Mr. Syuuw in exchange for tht;
nonsuit ofMr. Sydow's bad faith claim against Kaiser.
WHERE FORE, Defendant requests this Honorable Court to nonsuit his counlerclajm
against Kaiser in Cause Number 2007-38533 and for such other and further relief that may be
584
awarded at law or in equity.
RespectfuJiy submitted,
Is/ Michael D. Sydow ~
Michael D. Sydow ~"
Texas Bar No. 19592000 (; -
1980 Post Oak Boulevard, 5\ti.te 2100
Houston, Texas 17056 ~~--
(713) 622-9700 [Tel~p~e]
(713) 552-1949 [T~~ t erJ
Attorney for Oef~dadt,
Michael D. Sygqw. ~
"
-41- ..,
~~
h~~l..~r
CERTIFICATE
AN
~RVICE
Olf;
~·-- ·-v
I certify that on January ll , 20 13 ~~ouston, Texas a true and correct copy of
Defendant's Motion to Nonsuit was ~~ed on Kelley M . Keller electronically at
kkcller@cllison.keller.com, and the electro t'fuansmission was reported as complete.
(l>n
_, ,r~\~1
~.
~~
Is! Michael D. Sydow
(--:::-.~
y Michael D. Sydow
\ E-mail: michael.sydow@ thesydowfirm.com
...~\
-o-~
f\_A
2
585
01/14/2013 02:32:33 PM 713-755-1451 Page2/5
Filed 13 January 14 P2:33
Chris Daniel ·District Clerk
Harris County
FAX15387276
Cause No. 2007-38533
JEFFERY B. KAISER. INDIVIDUALLY. § IN THE DJSTRICf COURT OF
DERIVATELY, AND ON BEHALF OF §
STOCKHOLDERS AND MEMBERS OF §
TEXAS SYNGAS. LLC alkJa TEXAS §
SYNGAS, INC.,
Plaintiffs, :
Jt
~
§ (( ~ ~
~-
~
0~
'II.
§ HA.RRlS CO~TEXAS
~ ,, t
TEXAS SYNOAS. LLC a/kla TEXAS § .r.~
SYNGAS, INC., MICHAEL A. COLLINS, § ~~"
MICHAEL D. SYDOW, M. SAMBER
AHMED, AND ALL OTIIER SIMILARLY
§ ~~:·
§ ~"Y
SmJATED OFFICERS AND DIRECTORS §
..
·@
~~
OF TEXAS SYNGAS, LLC alkla TEXAS
¥ ~""'
SYNGAS, INC.,
Defendants.
§
§
r::J
'-J·
§. ..,•<... 52nd JUDJCIAL DfSTRICT
~<~
' .
JNDayENOR OUANIUM CAT4\ t1c. LLC'S MODQN FOB NONSUIT
r-
~
TO nfE HONORABLE JUDGE 0~~~ COURT:
t.AV>
NOW COMES Intcrven~~tum Catalytic., U..C. and requests this Honorable Court
·~.//
to nonsuit the counterclaim he ~ against Ptaintiff Kaiser in Cause Number 2007-38533 for the
~l'
(~
ground set forth herein. P ~·
~
following~
l. JK Claims Investment Corporation has acquired the cause of action of
Kaiser, and Intervenor is not adverse to JK Claims Investment Corporation. Intervenor
wiU align its interests with those JK Claim Investment Corporation in an amended
petition.
586
01/14/2013 02:32:33 PM 713-755-1 451 Page 3/5
WHE.REFORE. Intervenor requests this Honorable Court to nonsuit his claim against
Kaiser in Cause Number 2007-38533 and for such other and further relief that may be awarded at
law oc in equity.
Respectfully submitted,
587
01/14/2013 02:32:33 PM 713-755-1451 Page 4/5
CERTIFICATE OF SERVICE
I certify that on January 11, 2013 at Houston, Texas a true and correct copy of
Defendant's Motion to Dismiss wa.~ served on Kelley M. Keller electronically at
kkellec@ellison.k.ellcr.com, and the electronic transmission was reported as complete.
588
'Transcript of the Testin1ony
of
Russell Read_, CfA, Ph .. DI$
Vo.4ume: I
Date Qf Deposition:
ApriJ 21, 2014
Case: Jeffrey B. Kaiser v. Texas Syngas, LCC
Contlo~ntlal Comm.un·ications Int. Ltd.
Phone:.71.3.365.0177
Fax: 713.365:0808
E.maH: schedul'lng@recordsdlscovery .co.m.
Internet: www.:records.distovery:. corn
47TJ
EXHIBIT L
600
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EXHIBIT M 608 1/1
10/27/2014 9:26:29 AM
Chris Daniel · District Clerk Harris County
Envelope No. 2958109
By: GAYLE FULLER
Filed : 10/24/2014 7:28:31 PM
CAUSE NO. 2011-44058
MICHAEL COLLINS, ET AL.. § IN THE DISTRICT COURT
Plaintiffs §
§
§
vs. § OF HARRIS COUNY
§
sf\
MICHAEL SYDOW, ET AL. §
Defendants § 215rn JUDICIAL DISTRICT
AKILA FINANCE, S.A. , ET AL. , § TN THE DISTRICT COURT
Intervenors/Plaintiffs §
§
vs. § OF HARRIS COUNTY, TEXAS
§
MlCHAEL SYDOW; ET AL. §
Defendants . § 215TH JUDICIAL DISTRICT
DEFE NDANTS JOHN T. PRESTON, BRILLIANT NOVELTY, L.L.C., AND C CHANGE
I NVESTMENTS, LLC'S REPLY IN SUPPORT OF THEIR SPECIAL APPEARA NCES AND
MOTION TO STRIKE HEARSAY STATEMENTS
Pursuant to Texas Rule of Civil Procedure 120a. Defendants John T. Preston. Brilliant
Novelty, L.L.C. ("Bdlliant Novelty"), and C Change Investments, LLC ("C Change" ) (together
"Massachusetts Defendants") fi le this Reply in Support of Their Special Appearances and
Motion to Strike Hearsay Statements, and in support state as follows:
PRELIMINARY STATEMENT
At issue here is whether claims filed by foreign corporations and individuals-none of
whom are Texas residents- against a Masachusetts resident and two Massachusetts companies
should be allowed to go forward even though after three years of litigation there still is no
evidence for assertingjurisdiclion over any of the Massachusetts Defendanls in a Texas court.
617
The Massachu etts Defendants established in the ir Special Appearances that personal
j urisdiction cannot be asserted over them. Neither the lcnglhy response or supp lcm~nt al
response submiued by the Intervenors should be considered in this case because both are
1
untimely. Jn a ny event. nothing in either brief c hanges the fact that there is no specific or
general jurisdiction over any of the Mas achusetts Defendants. First. there is no specific
jtu·isdiction because Ute Intervenors do not even allege that the Massachusetts Defendants
conunitted any act in Texas that gives rise to the claims in t11i s lawsuit. The Texas Supteme
Court has explicitly rejected the theory on which the Intervenors rely for specific jurisdiction. Jt
i not enough to allege that a t01t was ·'directed" at Texas. Second. there i no general
j urisdiction over any of these defendants. Preston has not lived in Texas since he was an infant
over sixty years ago and the handful of visits he has made to Texas since the n are not
jurisdictional contacts because they were made in a t'e pt'e sentative capacity. The handful of
contacts by C Change with Texas through Preston were not o ··continuou and systematic" to
render C Change "essentially at home" in Texas as the U.S. Supreme Cmu1 requires. Finally.
Intervenors have not cited any specifi.c contacts by Brilliant Novelty with Texas.
J. THE MASSACHUSETTS DEFENDANTS COMPURD WITH RULE 120A.
The Intervenors claim that d1c Massachusetts Defendants' special appearances do not
comply with Rule 120a on the grounds that the special appearances themselves arc not verified.
But as the Intervenors acknowledge, affidavits were attached to each of the special appearances.
Resp. at 8-9. These affidavits swear to the truth of every statement of fact in the mot ions. Jt
1
Despite the fact that Defendants agreed to several extensions of the deadline for Intervenors' response briet~
Intervenors fajJed to meet the agreed July 2, 2014 deadline for flli ng tfleir Response Brief. Ex. A, Rule 1t
Agreement (June 29. 2014); Intervenors' Resp. at 1 (July 3, 20l4). More significantly. Intervenors subsequently
filed an additional S\ipplemental response brief on AugustS, 2014. despite being bound by the Rule 11 Agreement
reqmring that any resJlonse by the Intervenors must be fi led by July 2. 2014. Intervenors' Supp. Resp. (Aug. S,
2014).
2
618
makes no sense to argue they are not sworn motions as Rule 120a requires. In any event, even if
there were a technical defect- which there is not- the Texas Supreme Court has made clear that
a special appearance can be veri fied after the hearing. 2
ll. INTERVENORS DID NOT MEET TH~IR BURDEN OF PLEADING S UFFICIENT
JURISDICTIONAL ALLEGATIONS OVER NON-RESIDENTS.
The1·e is no allegation that any acts by the Massachusetts Defendants giving rise lo the
Intervenors claims took place in Texas. That means it is enough to establish that the
Massachusetts Defendants m·c not residents and the Court does not need to go any further. "The
plaintiff has the initial burden of pleading sufficient allegations to bring the nomesident
de fendant within the provisions of the Texas long-aJ:m statute. . .. If the plaintjff docs not plead
jurisdictional allegati ons, i.e .. that the defendant has committed any act in Texas, the defendant
can satisfy its burden by presenting evidence that it is a nonresident. ''3
Ill. THERE IS NO SPECIILEMENTAL DF.CLARATION IN SUl}PORT OF HlS
SPECIAL APPEARANCE
l. My name is .loJ.m T. Pl·~s'lbrt.
My date of birth is MarCJ) 18, 1950, and r.ny address is 9
Martins Cove Lane, Hingham, MA 02043. l deciate under penalty of perjury that the
statements ~n tllis declaration are true ~nd con'CcL
1 1 am l.rver the age of 21. [ have neve.r been convi~ted or a felony or crime invotving
nHn·al turpitude. 1 a.tll of {)OUnd mind a.u d am fully competent to make this declaration.
3. As I previously d1sdos~d in this case, l traveled to rcxas in the 1990s on a handful of
occssions. None of those trips wei'e in111y personal ca}}acity.
4. l keep dct.ailed reconis of my tJ:a.v~l. i\fter reviewing my traveJ reco.rds, Tiden1.ified Bll of
roy trips to Texas in the five years beforf~ this lawsuit was filed for which I could locaLe
travel in1orm)Q-" ~~~ ~ John T. Preston and C Change Investments, LLC v. Emjo Investments, Ltd. and H.J. Von Der Goltz
Combined Opinion