ACCEPTED
14-05-00535-CV
FOURTEENTH COURT OF APPEALS
HOUSTON, TEXAS
6/23/2015 9:50:11 AM
CHRISTOPHER PRINE
CLERK
14-15-00535-CV
NO. ____________
FILED IN
14th COURT OF APPEALS
In the Court of Appeals HOUSTON, TEXAS
Fourteenth District of Texas
For the ____________ 6/23/2015 9:50:11 AM
CHRISTOPHER A. PRINE
Houston Clerk
IN RE THE LAW OFFICES OF ART DULA, ARTHUR M. DULA, INDIVIDUALLY,
AND D/B/A THE LAW OFFICES OF ART DULA, ANAT FRIEDMAN,
INDIVIDUALLY, AND D/B/A THE LAW OFFICES OF ART DULA, J. BUCKNER
HIGHTOWER, AND THE ROBERT A. AND VIRGINIA HEINLEIN PRIZE TRUST,
THROUGH ITS TRUSTEES ARTHUR M. DULA AND J. BUCKNER HIGHTOWER,
Relators.
Original Proceeding from the
55th District Court, Harris County, Texas
Cause No. 2014-65947
PETITION FOR WRIT OF MANDAMUS
BAKER & HOSTETLER LLP
Eric W. Kristiansen Michael R. Levin
ekristiansen@bakerlaw.com Pro Hac Vice Application to be Filed
State Bar No. 24027428 mlevin@bakerlaw.com
Joshua C. Thomas Florida Bar No. 351326
jthomas@bakerlaw.com 200 S. Orange Avenue, Suite 2300
State Bar No. 24066185 Orlando, Florida 32801
811 Main St., Suite 1100 Telephone (407) 649-4000
Houston, TX 77002 Facsimile (407) 841-0168
(713) 751-1600 Telephone
(713) 751-1717 Facsimile
ATTORNEYS FOR RELATORS
ORAL ARGUMENT REQUESTED
IDENTITY OF PARTIES AND COUNSEL
The following is a list of the Parties and their respective counsel
pursuant to Rules 52.2 and 52.3(a) of the Texas Rules of Appellate
Procedure:
Relators: The Law Offices of Art Dula, Arthur
M. Dula, Individually, and d/b/a the
Law Offices of Art Dula, Anat
Friedman, Individually, and d/b/a
the Law Offices of Art Dula, J.
Buckner Hightower, and the Robert
A. and Virginia Heinlein Prize
Trust, Through its Trustees Arthur
M. Dula and J. Buckner Hightower
Attorneys for Relators: Eric W. Kristiansen
ekristiansen@bakerlaw.com
State Bar No. 24027428
Joshua C. Thomas
jthomas@bakerlaw.com
State Bar No. 24066185
BAKER & HOSTETLER LLP
811 Main St., Suite 1100
Houston, TX 77002
Telephone: (713) 751-1600
Facsimile: (713) 751-1717
Michael R. Levin
Pro Hac Vice Application to be Filed
Florida Bar No. 351326
mlevin@bakerlaw.com
200 S. Orange Avenue, Suite 2300
Orlando, Florida 32801
Telephone (407) 649-4000
Facsimile (407) 841-0168
i
Respondent: The Honorable Judge Jeff Shadwick
Presiding Judge,
55th Judicial District Court
Harris County, Texas
Harris County Civil Courthouse
201 Caroline, 9th Floor
Houston, Texas 77002
Telephone: (713) 368-6055
Real Parties in Interest: The Law Offices of Art Dula;
Arthur M. Dula, Individually, and
d/b/a the Law Offices of Art Dula;
Anat Friedman, Individually, and
d/b/a the Law Offices of Art Dula;
J. Buckner Hightower;
The Robert A. and Virginia Heinlein
Prize Trust, Through its Trustees
Arthur M. Dula and J. Buckner
Hightower; and
Takafumi Horie
Counsel for Takafumi Horie: Lloyd E. Kelley
THE KELLEY LAW FIRM
2726 Bissonnet, Ste 240 PMB 12
Houston, TX 77005
Telephone (281) 492-7766
Facsimile (281) 652-5973
James D. Pierce
1 Sugar Creek Center, Ste. 1080
Sugar Land, Texas 77478
Telephone (713) 650-0150
Facsimile (713) 650-0146
ii
TABLE OF CONTENTS
Identity Of Parties And Counsel................................................................. i
Table Of Contents ..................................................................................... iii
Index Of Authorities .................................................................................. vi
Brief References ......................................................................................... ix
Statement Of The Case .............................................................................. x
Statement Of Jurisdiction ......................................................................... xi
Issue Presented......................................................................................... xii
I. STATEMENT OF FACTS ............................................................... 1
A. Horie’s Investment in EA ............................................... 2
B. The Settlement Agreement ............................................ 4
C. The Original and Amended Petitions ............................ 8
D. The Rulings Below ........................................................ 11
II. SUMMARY OF THE ARGUMENT ................................................. 12
III. ARGUMENT & AUTHORITIES ..................................................... 15
A. Horie Faces a “Heavy Burden” to Resist the
Application of the Forum Selection Clause ................. 15
B. Relators Are Entitled to Enforce the Forum
Selection Clause ............................................................ 17
C. Horie Cannot Avoid the Forum Selection Clause
by Falsely Claiming that Dula was his Attorney ........ 26
D. Horie Cannot Avoid the Forum Selection Clause
by Pleading Fraud......................................................... 31
IV. CONCLUSION & PRAYER ........................................................... 33
iii
Certification Of Factual Statements ....................................................... 35
Certificate Of Compliance ........................................................................ 35
Certificate Of Service ............................................................................... 36
Appendix ................................................................................................... 37
iv
INDEX OF AUTHORITIES
Cases
Accelerated Christian Educ., Inc. v. Oracle Corp.,
925 S.W.2d 66 (Tex. App.—Dallas 1996)........................................ 24
Bay Area Healthcare Grp., Ltd. v. McShane,
239 S.W.3d 231 (Tex. 2007)............................................................. 10
Brock v. Entre Computer Ctrs., Inc.,
740 F. Supp. 428 (E.D. Tex. 1990) .................................................. 24
Clark v. Power Mktg. Direct, Inc.,
192 S.W.3d 796 (Tex. App.—Houston [1st Dist.] 2006, no
pet.) .................................................................................................. 32
CU Lloyd’s of Texas v. Hatfield,
126 S.W.3d 679 (Tex. App.—Houston [14th Dist.] 2004,
pet. denied) ...................................................................................... 20
Deep Water Slender Wells, Ltd. v Shell Int’l Exploration
& Prod. Inc.,
234 S.W.3d 679 (Tex. App.—Houston [14th Dist.] 2007,
pet. denied) .............................................................................. passim
Falk & Fish L.L.P. v Pinkston’s Lawnmower & Equip., Inc.,
317 S.W.3d 523 (Tex. App.—Dallas 2010, no pet.) ................ passim
Ginter ex. rel. Ballard v Belcher, Prendergast, & Laporte,
536 F.3d 439 (5th Cir. 2008) ........................................................... 11
Holeman v. Nat’l Bus. Inst., Inc.,
94 S.W.3d 91 (Tex. App.—Houston [14th Dist.] 2002,
pet. denied) ...................................................................................... 32
In re ADM Investor Servs., Inc.,
304 S.W.3d 371 (Tex. 2010)....................................................... 16, 17
vi
In re AIU Ins. Co.,
148 S.W.3d 109 (Tex. 2004) (orig. proceeding) .......................... xi, 17
In re Automated Collection Techs., Inc.,
156 S.W.3d 557 (Tex. 2004) (orig. proceeding) .......................... xi, 17
In re AutoNation, Inc.,
228 S.W.3d 663 (Tex. 2007) (orig. proceeding) .......................... xi, 17
In re Boehme,
256 S.W.3d 878 (Tex. App.—Houston [14th Dist.] 2008,
orig. proceeding) .............................................................................. 15
In re Int’l Profit Assocs.,
274 S.W.3d 672 (Tex. 2009) (orig. proceeding) ......................... 11, 32
In re Laibe Corp.,
307 S.W.3d 314 (Tex. 2010) (orig. proceeding) .................... xi, 15, 16
In re Lyon Fin. Servs., Inc.,
257 S.W.3d 228 (Tex. 2008) (orig. proceeding) .......................... xi, 17
In re Tyco Electronics Power Sys., Inc.,
No. 05–04–01808–CV, 2005 WL 237232
(Tex. App.—Dallas Feb. 2nd, 2005, orig. proceeding).................... 24
LeBlanc v. Lange,
365 S.W.3d 70 (Tex. App.—Houston [1st Dist.] 2011, no pet.)...... 27
My Cafe-CCC, Ltd. v. Lunchstop, Inc.,
107 S.W.3d 860 (Tex. App.—Dallas 2003, no pet.) ........................ 31
Phoenix Network Techs. (Europe) Ltd. v. Neon Sys., Inc.,
177 S.W.3d 605 (Tex. App.—Houston [1st Dist.] 2005,
no pet.) ........................................................................... 15, 17, 21, 23
Smith v. Kenda Capital, LLC,
451 S.W.3d 453 (Tex. App.—Houston [14th Dist.] 2014, no
pet.) .................................................................................................. 23
vii
Westchester Fire Ins. Co. v. Lowe,
888 S.W.2d 243 (Tex. App.—Beaumont 1994, no writ) ................. 10
Constitutional Provisions
TEX. CONST. art. V, § 6 ............................................................................... xi
TEX. GOV'T CODE § 22.221(b)(1) ................................................................. xi
viii
BRIEF REFERENCES
Arthur M. Dula, individually and “Dula”
d/b/a The Law Offices of Art Dula
Anat Friedman, individually and “Friedman”
d/b/a The Law Offices of Art Dula
J. Buckner Hightower “Hightower”
The Robert A. and Virginia Heinlein The “Heinlein Trust”
Prize Trust, Through its Trustees
Arthur M. Dula and J. Buckner
Hightower
Takafumi Horie “Horie”
Mandamus Record “MR” followed by the page
number
Appendix Documents “App.” followed by its Tab
letter designation and page
number, if appropriate.
ix
STATEMENT OF THE CASE
Nature of the case: This is an original proceeding to
enforce a forum selection clause
requiring the claims in the
underlying lawsuit to be litigated
in the Isle of Man. The underlying
suit involves claims by Horie
against Relators for fraud and
breach of fiduciary duty, among
others.
Trial Court: The Honorable Judge Jeff
Shadwick, 55th Judicial District
Court, Harris County, Texas.
Trial Court disposition: The trial court denied Relators’
Supplemental Motion to Dismiss
based on the forum selection
clause. The trial court then
denied Relators’ Motion for
Reconsideration and stayed
discovery in the underlying case
during the pendency of this
original proceeding.
Action from which relief is Relators seek mandamus relief
sought: from the trial court’s April 22,
2015 Order Denying Motion to
Dismiss (App. A), and from the
trial court’s June 1, 2015 Order
from the bench denying the
Motion for Reconsideration (App.
D), issued in Cause No. 2014-
65947; in the 55th Judicial
District, Harris County, Texas.
x
STATEMENT OF JURISDICTION
This Court has jurisdiction over this Petition for Writ of
Mandamus pursuant to Article V, Section 6 of the Texas Constitution
and Section 22.221(b)(1) of the Texas Government Code. The Texas
Supreme Court repeatedly holds that mandamus is the proper remedy
when a trial court erroneously refuses to enforce a forum selection
clause, because the party attempting to enforce such a clause has no
adequate remedy by appeal. See In re Laibe Corp., 307 S.W.3d 314, 316
(Tex. 2010) (orig. proceeding); In re Int’l Profit Assocs., 274 S.W.3d 672,
677 (Tex. 2009) (orig. proceeding); In re ADM Investor Servs., 304
S.W.3d 371, 374 (Tex. 2010); In re Lyon Fin. Servs., Inc., 257 S.W.3d
228 (Tex. 2008) (orig. proceeding); In re AutoNation, Inc., 228 S.W.3d
663 (Tex. 2007) (orig. proceeding); In re Automated Collection Techs.,
Inc., 156 S.W.3d 557 (Tex. 2004) (orig. proceeding); In re AIU Ins. Co.,
148 S.W.3d 109 (Tex. 2004) (orig. proceeding).
xi
ISSUE PRESENTED
In Texas, parties resisting enforcement of a forum selection clause
bear a heavy burden of proof. Such clauses are enforceable even
by non-signatories to the agreement containing the forum
selection clause if the plaintiff asserts interdependent and
concerted misconduct among signatories and non-signatories.
Here, Relators are included in the scope of a release in a prior
settlement agreement. The Settlement Agreement contains a
mandatory forum selection clause requiring all claims arising out
of or in connection with the agreement to be brought in the Isle of
Man. Plaintiff Takafumi Horie asserts claims against the Relators
and alleges interdependent and concerted misconduct between
Relators and the signatories to that agreement.
The issue is whether the trial court abused its discretion in
refusing to enforce the mandatory forum selection clause in the
prior settlement agreement and to dismiss the claims against
Relators.
xii
I. STATEMENT OF FACTS
On November 10, 2014, Horie, a Japanese billionaire investor,
filed the underlying lawsuit against the Relators and three other
entities: Excalibur Limited; Excalibur Almaz Limited; and Excalibur
Almaz USA, Inc. (collectively, “Excalibur”). (MR 1). Horie alleged that
he was duped into investing $49,003,000 in Excalibur Almaz Limited
(“EA”), an Isle of Man company whose business is private commercial
space flight. (MR 1-4).1 As discussed below, Horie later amended his
petition to replace references to the Excalibur entities with generalized
references to a “space enterprise” or “space business.” (MR 77).
More than four years before this suit was filed, on June 29, 2010,
Horie, EA, and others entered into a Deed of Assignment and
Settlement (“Settlement Agreement”) settling all claims related to
Horie’s $49,003,000 investment. (MR 262-83). The Settlement
Agreement included a mandatory forum selection clause requiring
resolution of all disputes in the Isle of Man:
This Deed and any dispute or claim arising out of or in
connection with it or its subject matter, existence,
negotiation, validity, termination, or enforceability
1The Isle of Man is a self-governing island member of the United Kingdom, located
between the islands of Great Britain and Ireland.
1
(including non-contractual disputes or claims) shall be
governed by and construed in accordance with the laws of
the Isle of Man.
Each Party irrevocably agrees that the Courts of the Isle of
Man shall have exclusive jurisdiction in relation to any
dispute or claim arising out of or in connection with this
Deed or its subject matter, existence, negotiation, validity,
termination, or enforceability (including non-contractual
disputes or claims).
(MR 277, Settlement Agreement, at §13.1-13.2). The broad forum
selection clause covers all claims “arising out of or in connection with”
the “subject matter” of the Settlement Agreement, or its “negotiation” or
“enforceability.” (Id.). Thus, Horie irrevocably agreed to a mandatory
and exclusive forum in the Isle of Man for resolution of all conceivable
claims arising in connection with the subject matter of the Settlement
Agreement. (Id.). The subject matter of the Settlement Agreement
specifically includes Horie’s $49,003,000 investment in EA.
A. Horie’s Investment in EA
The Settlement Agreement includes recitals that refer to several
prior agreements reflecting the evolution of Horie’s investment in EA.
(MR 264-65). On October 16, 2005, Horie (doing business as “Japan
Space Dream” or “JSD”) entered into a Memorandum of Understanding
(“MOU”) with EA to develop a commercial spaceflight business using
2
Almaz space capsules. (MR 285-88). In the MOU, Horie agreed to
purchase 75% of EA’s stock for $49,003,000, payable in three tranches,
the first upon execution of the MOU, the second on January 31, 2006,
and the third on January 31, 2007. (MR 285). The MOU states that
“[d]isputes shall be settled according to the laws of both Japan and The
Isle of Man.” (MR 288).
Shortly after entering into the MOU, Horie was arrested in
January 2006 and charged with securities fraud relating to
manipulations of the publicly traded stock in his company, then known
as “Livedoor Holdings.” (MR 319-22). Subsequently, he was tried,
convicted, and sentenced to prison on March 16, 2007. (MR 324-26).
After his arrest but prior to his conviction, Horie defaulted on the
third tranche of his investment in EA, due in January 2007. (MR 285,
290). As a result, on June 10, 2007, while the criminal case was on
appeal, Horie/JSD entered into a Side Agreement with EA to amend the
MOU. (MR 290-93). The Side Agreement provides, among other things,
that Horie’s shares in EA would be held in trust by a mutually
acceptable, independent third-party trustee “until such time that Mr.
Horie is found to be innocent or completes his sentence ….” (MR 292).
3
The Side Agreement also provides that all disputes between Horie and
EA would be resolved by binding arbitration in the Isle of Man. (Id.).
In accordance with the Side Agreement, Horie established the “Abbey
Trust” on March 14, 2008, and conveyed his shares in EA to the Trust.
(MR 295-317). Thus, as of March 2008, Horie was no longer an EA
shareholder, although he retained a beneficial interest in the EA shares
through the Abbey Trust.
In the wake of Horie’s securities fraud conviction, his former
company (which changed its name from Livedoor to LDH Corporation,
“LDH”), sued Horie for damages. (MR 244-45; MR 328, at ¶C; MR 334-
35, at ¶(F), 2; MR 356-37, at ¶(F), 2). To settle these claims, Horie
entered into three separate agreements, each dated December 25, 2009,
and irrevocably assigned his ownership interest in EA, including his
beneficial interest in the Abbey Trust, to LDH. (MR 328-76). Thus, as
of December 2009, Horie no longer owned any shares of EA, or any
interest in the commercial space flight business undertaken by EA.
B. The Settlement Agreement
As noted above, in June 2010, Horie, EA, LDH, and George Abbey
(trustee of the Abbey Trust) entered into the Settlement Agreement.
4
(MR 262). The Settlement Agreement included recitals concerning the
prior agreements relating to Horie’s investment—including the MOU,
Side Agreement, and Abbey Trust—and provided that those agreements
would be terminated. (MR 267). The underlying purpose of the
Settlement Agreement was to redeem the EA stock that was originally
acquired by Horie in 2005 for $49,003,000, and then transferred to LDH
in 2009, as described above, and to resolve any other remaining issues
among the parties.
Therefore, under the Settlement Agreement, EA redeemed the
shares in exchange for payment of “Redemption Proceeds” to LDH. (MR
265-67). However, as a condition for redemption of these shares, it was
necessary for Horie to be a party to the Settlement Agreement, and to
participate in the mutual releases contained therein. Accordingly,
Horie specifically released EA and “its Affiliates, shareholders,
subsidiaries, employees, officers, directors, trustees, assigns,
transferees, representatives, principals and agents (individually and
collectively, the “Company Group”) from any Claims that Mr. Horie …
might have against the Company Group.” (MR 267, Settlement
5
Agreement, at §5.1.2). The term “Claims” is broadly defined in the
Settlement Agreement to include:
a claim, potential claim, counterclaim, potential
counterclaim, right of set-off, indemnity, liability, cause of
action, right or interest of any kind or nature whatsoever,
whether known or unknown, suspected or unsuspected,
contingent or actual, however and whenever arising and in
whatever capacity and jurisdiction, including, without
limitation arising out of or in connection with termination of
any agreement or arrangement contemplated in Clause 4 of
this Deed.
(MR 278).
The Relators are each within the definition of the “Company
Group.” Specifically, Dula and Hightower are alleged to be officers and
directors of EA. (MR 5-6). Dula and Hightower are also alleged to have
acted as representatives or agents of EA in their capacities as trustees
for the Heinlein Trust. (MR 20). Friedman is general counsel of
Excalibur Almaz USA, Inc. (MR 16), which is an “Affiliate” of EA. (MR
278).2 Thus, Friedman is a part of the Company Group. (MR 267). The
Law Offices of Art Dula is alleged to be the alter ego of Dula. (MR 5,
2 The Settlement Agreement defines “Affiliates” as, “in relation to a Party, any
other person which directly or indirectly Controls, is Controlled by, or is under
direct or indirect common Control with, that Party from time to time.” (MR 278,
Settlement Agreement, at Sch. 1, §1).
6
20). The Relators, as members of the Company Group, are entitled to
enforce the forum selection clause.
Finally, the Settlement Agreement recites that:
Each Party has either had the terms and effect of this Deed
explained by independent legal counsel or had the full
opportunity to have its terms and effect explained by
independent legal counsel; and each Party enters into this
Deed freely, knowingly and voluntarily, free from duress of
any kind.
(MR 274, Settlement Agreement, at §11.4). As described below, this
provision is inconsistent with Horie’s argument below that the
Settlement Agreement should somehow be viewed as an agreement
between an attorney and his client.
All of these provisions make it abundantly clear that the purpose
of the Settlement Agreement was to allow EA to redeem the shares
Horie originally purchased (then owned by LDH) and for all interested
parties, represented by independent counsel, to mutually release any
and all claims relating to Horie’s investment in EA. As parties subject
to this Settlement Agreement, Relators are entitled to enforce the forum
selection clause, and insist that the Isle of Man is the exclusive
jurisdiction for Horie’s claims.
7
C. The Original and Amended Petitions
Horie ultimately lost all of his appeals and was incarcerated in
Japan from June 2011 to March 2013. (MR 244). Horie filed his
Original Petition in this lawsuit in November 2014, asserting claims
directly against EA, a party to the Settlement Agreement, the Excalibur
entities, and the Relators. (MR 1-2). The Original Petition falsely
alleged that Dula was Horie’s lawyer when Dula “induced” Horie to
invest in EA in 2005. (MR 2-3). Horie also alleged that Dula and
Hightower were directors of EA and the Chief Executive Officer (“CEO”)
and Executive Vice President (“EVP”), respectively, and that EA was
the alter ego of Dula. (MR 5-6). The Defendants, then including the
Relators and the Excalibur entities, filed a Motion to Dismiss to enforce
the mandatory forum selection clause in the Settlement Agreement, and
set the Motion to Dismiss for hearing on Monday, March 9, 2015. (MR
30-65).
In an obvious attempt to avoid the forum selection clause, Horie
filed an Amended Petition one business day before the oral hearing on
Relators’ Motion to Dismiss. (MR 76-88). The Amended Petition does
not contradict the Original Petition or change the substance of Horie’s
8
claim. In the Amended Petition, Horie still seeks to recoup his
investment of the very same $49,003,000. (MR 81-82). The Amended
Petition simply makes the same factual allegations in more generalized
terms.
For example, both the Original Petition and the Amended Petition
include the following allegation:
Dula represented he had connections with the Russian
aerospace company NPO Mashinostroyenia (“NPOM”) who
would provide hardware and technical expertise to build a
commercial space business. He represented that he had
acquired rights to NPOM space-proven capsules that could
be used in a space program. Dula represented that he was
well-connected and could assemble the professionals
necessary to build a commercial space program. However,
from the beginning, Dula had no intent to build a space
program, but only to take Plaintiff’s monies for his own use,
utilizing a complex ruse, contrary to the interests of his
cestui que trust. Dula convinced Plaintiff to place
$49,003,000.00 into Dula’s trust account for purposes of
doing due diligence, and later setting up a space program in
conformity with U.S. law and regulations (Dula claimed and
continues to claim to be a “space law” expert)….
(MR 7-8 (Original Petition); MR 81-82 (Amended Petition)). The
Original Petition alleges that Dula used the Excalibur entities for this
purpose, while the Amended Petition refers more generally to a
“schemes and devices.” (MR 82). However, the use of the more
generalized term does not change the Plaintiff’s essential allegations.
9
In fact, the primary change in the Amended Petition is the effort
to replace all specific references to the Excalibur entities with more
general references to a “space business” or “space enterprise,” and to
obscure the Relators’ connections to the Excalibur entities. (See, e.g.,
MR 77-80, 82-85). The Original Petition provides explanation and
context for these intentionally vague allegations in the Amended
Petition.3
The central allegation in the Amended Petition is that Dula made
false representations concerning the proposed “commercial space
business,” and convinced Horie to invest $49,003,000 in that business.
(MR 7-8 (Original Petition); MR 81-82 (Amended Petition)). Despite
Plaintiff’s unusual but artful effort to plead more vaguely and generally
in the Amended Petition than in the Original Petition, both Petitions
refer to the same $49,003,000 investment. The Original Petition can
and should be relied upon to explain that the “space business or
enterprise,” as it is called in the Amended Petition, refers directly to the
Excalibur entities and Relators’ connection therewith.
3 Superseded pleadings are admissible evidence as party admissions that “remain
forceful” even after subsequent pleadings have been filed. Bay Area Healthcare
Grp., Ltd. v. McShane, 239 S.W.3d 231, 235 (Tex. 2007); Westchester Fire Ins. Co. v.
Lowe, 888 S.W.2d 243, 252 (Tex. App.—Beaumont 1994, no writ).
10
D. The Rulings Below
On April 9, 2015, Relators filed a Supplemental Motion to
Dismiss, arguing that Horie’s artful pleading4 could not evade the
application of the forum selection clause in the Settlement Agreement.
(MR 93-214). A hearing on the Supplemental Motion to Dismiss was
held on April 20, 2015. (App. C, MR 216). The trial court denied the
Motion, drawing three erroneous conclusions. (App. A). The court first
stated that the “pending cause of action is against Defendants in
capacities different than their capacities under which they were
signatories (in the case of Dula and Hightower)” of the Settlement
Agreement. (App. A, MR 232). The court then noted that “the courts of
the Isle of Man may not have jurisdiction over the parties, thus leaving
Plaintiff without a remedy.” (App. A, MR 232-33). Finally, the court
stated that “considering that settlement of claims by a client against his
attorney require specific and additional proof, the Court at this time
4 As used here, “artful pleading” includes deliberately making allegations vague to
avoid forum selection clause. As the Texas Supreme Court has explained, the
applicability of forum selection clauses must be determined based on the “substance
of the claim, not artful pleading.” In re Int’l Profit Assocs., 274 S.W.3d 672, 677
(Tex. 2009) (orig. proceeding). Because artful pleading cannot defeat a binding
forum selection clause, the court must use a “common-sense examination of the
claims and the forum-selection clause to determine if the clause covers the claims.”
Id. (citing Ginter ex. rel. Ballard v Belcher, Prendergast, & Laporte, 536 F.3d 439,
444 (5th Cir. 2008)).
11
observes that the release does not appear to include these claims
against these Defendants.” (App. A, MR 233).
Relators Dula and Hightower filed a Motion for Reconsideration
on May 13, 2015. (MR 238-499). An oral hearing was held on this
motion and several pending discovery motions. (App. D, MR 235-37).
The trial court denied the Motion for Reconsideration, but stayed
discovery in the underlying suit. (App. D). This proceeding followed.
II. SUMMARY OF THE ARGUMENT
In his Amended Petition, Horie brings claims related to his
$49,003,000 investment in Excalibur, a space-related business.
However, in the July 2010 Settlement Agreement, Horie released all
claims against Relators related to this $49,003,000 investment. (MR
267-68). The Settlement Agreement contains a mandatory forum
selection clause providing that the Isle of Man is the exclusive
jurisdiction for resolving disputes relating to the Settlement Agreement.
(MR 277). Texas law imposes a heavy burden of proof upon parties
resisting the enforcement of a forum selection clause. Horie did not
even attempt to meet this burden in the lower court, and cannot do so
as a matter of law. Therefore, the Relators are entitled to dismissal of
12
the claim brought by Horie in a Texas court.
The Relators are entitled to enforce the mandatory forum selection
clause because they are each members of the “Company Group” defined
as released parties in the Settlement Agreement. (MR 267). Moreover,
under binding Texas precedent, Relators are entitled to enforce the
binding forum selection clause because Horie has alleged that the
Relators have acted in concert with one another as part of a “private
commercial space program”—Excalibur. Where, as here, a plaintiff
alleges interdependent and connected misconduct between a party to
the Settlement Agreement (EA) and non-parties (Relators), the non-
parties may enforce the forum selection clause. See Deep Water Slender
Wells, Ltd. v Shell Int’l Exploration & Prod. Inc., 234 S.W.3d 679 (Tex.
App.—Houston [14th Dist.] 2007, pet. denied).
Horie argued to the trial court that he could avoid the burden of
resisting the forum selection clause by falsely alleging that Dula was
his attorney. This argument is unavailing. First, the same “heavy
burden” in resisting a forum selection clause also applies to forum
selection clauses in contracts between an attorney and client. Falk &
Fish L.L.P. v Pinkston’s Lawnmower & Equip., Inc., 317 S.W.3d 523,
13
527 (Tex. App.—Dallas 2010, no pet.). Horie has done nothing to meet
this burden. Second, Horie has not even alleged, let alone provided an
affidavit or other evidence, that Dula represented Horie in 2010, when
the Settlement Agreement was reached. Indeed, the Settlement
Agreement itself recites that the parties had access to independent
counsel. (MR 274). Third, it is simply not true that Dula was ever
Horie’s attorney. Plaintiff has only provided the most naked and
conclusory allegation of an attorney-client relationship between Horie
and Dula when the investment was made in 2005. No proof of this
relationship has been provided, and the record contains unrebutted
evidence to the contrary. (MR 378-80).
Horie also cannot meet this “heavy burden of proof” under any
other theory. The recognized public policy favoring enforcement of
mandatory forum selection clauses of this nature cannot be defeated
simply by artfully pleading in generalities about space businesses
instead of specifically identifying the Excalibur entities. Nor can the
forum selection clause be evaded simply by pleading fraud, particularly
given the language of this particular Settlement Agreement.
Given all of the foregoing, the Amended Petition does not allege
14
that Relators acted “in capacities different then their capacities under
which they were signatories” of the Settlement Agreement. (App. A).
To the contrary, Relators are entitled to enforce the forum selection
clause in the Settlement Agreement, and to have the courts of the Isle
of Man determine that the release in the Settlement Agreement bars
Horie’s alleged $49,003,000 claim. The trial court’s failure to dismiss
Horie’s claims pursuant to the forum selection clause was an abuse of
discretion. Mandamus is required.
III. ARGUMENT & AUTHORITIES
A. Horie Faces a “Heavy Burden” to Resist the
Application of the Forum Selection Clause
Under Texas law, a contractual forum selection clause is
presumed to be valid and enforceable. In re Laibe Corp., 307 S.W.3d
314, 316–17 (Tex. 2010) (orig. proceeding). Phoenix Network Techs.
(Europe) Ltd. v. Neon Sys., Inc., 177 S.W.3d 605, 611 (Tex. App.—
Houston [1st Dist.] 2005, no pet.) (holding that a forum selection clause
is prima facie valid); In re Boehme, 256 S.W.3d 878, 881 (Tex. App.—
Houston [14th Dist.] 2008, orig. proceeding); Deep Water Slender Wells,
Ltd., 234 S.W.3d at 692. The party opposing the enforcement of a forum
15
selection clause bears a heavy burden of proof. In re Laibe Corp., 307
S.W.3d at 316.
“In determining whether to enforce a mandatory forum selection
clause, courts must determine whether the claims in the case at hand
fall within the scope of the forum selection clause and whether the court
should enforce the clause.” Deep Water Slender Wells, Ltd., 234 S.W.3d
at 687. In cases such as this one, courts must also determine “whether
nonsignatories to the contract can enforce the forum selection clause.”
Id. If the claims fall within the scope of the clause, enforcement is
mandatory unless the party opposing enforcement clearly shows “(1)
enforcement would be unreasonable or unjust, (2) the clause is invalid
for reasons of fraud or overreaching, (3) enforcement would contravene
a strong public policy of the forum where the suit was brought, or (4)
the selected forum would be seriously inconvenient for trial.” In re
Laibe Corp., 207 S.W.3d at 316 (quoting In re ADM Investor Servs., Inc.,
304 S.W.3d 371, 375 (Tex. 2010)).
Texas courts routinely hold that mandamus is the proper remedy
when a trial court erroneously refuses to enforce a forum selection
clause. In re Laibe Corp., 307 S.W.3d at 316 (citing In re ADM Investor
16
Servs., 304 S.W.3d at 374); In re Int’l Profit Assocs., 274 S.W.3d at 677;
In re Lyon Fin. Servs., Inc., 257 S.W.3d 228 (Tex. 2008) (orig.
proceeding); In re AutoNation, Inc., 228 S.W.3d 663 (Tex. 2007) (orig.
proceeding); In re Automated Collection Techs., Inc., 156 S.W.3d 557
(Tex. 2004) (orig. proceeding); In re AIU Ins. Co., 148 S.W.3d 109 (Tex.
2004) (orig. proceeding).
Although the standard for reviewing the trial court’s refusal to
enforce a forum selection clause is abuse of discretion, “to the extent
[this Court’s] review involves the construction or interpretation of an
unambiguous contract, the standard of review is de novo.” Deep Water
Slender Wells, Ltd., 234 S.W.3d at 687 (citing Phoenix Network Techs.,
177 S.W.3d at 687). Here, the applicability of the forum selection clause
depends in part on the Court’s interpretation of an unambiguous
contract—including whether Relators are within the “Company Group”
defined in the Settlement Agreement. If so, Relators are entitled to
enforce the forum selection clause.
B. Relators Are Entitled to Enforce the Forum Selection
Clause
Although the Relators are not directly named parties in the
Settlement Agreement, they are entitled to enforce the forum selection
17
clause for two reasons. First, the express terms of the Settlement
Agreement include the Relators in the definition of the “Company
Group” that was released. (MR 267). Second, Horie sued both
signatories and non-signatories to the Settlement Agreement, and
alleged interdependent and concerted misconduct among these
defendants, which allows the Relators to invoke the forum selection
clause. Deep Water Slender Wells, 234 S.W.3d at 693-94.
1. The Relators are in the “Company Group”
The named parties to the Settlement Agreement are Horie,
George Abbey (trustee of the Abbey Trust), LDH, and EA.5 (MR 262).
In the Settlement Agreement Horie released not only EA, but also:
[I]ts Affiliates, shareholders, subsidiaries, employees,
officers, directors, trustees, assigns, transferees,
representatives, principals and agents (individually and
collectively, the “Company Group”) ….
(MR 267). Horie initially sued EA directly and also sued “Affiliates” of
EA (MR 5-6), but later amended his petition and removed the Excalibur
entities. The amendment has no effect on the Relators’ ability to
5 Dula and Hightower each signed the Settlement Agreement as directors of EA.
(MR 162).
18
enforce the forum selection clause, because the Relators are part of the
“Company Group.” (MR 267).
As noted above, Dula is alleged to be a director and CEO of EA.
(MR 5). Hightower is alleged to be a director and the EVP of EA. (MR
6). As officers and directors of EA, it is beyond dispute that Dula and
Hightower are a part of the “Company Group” defined in the Settlement
Agreement. (MR 267).
Dula and Hightower are also alleged to have acted as
representatives or agents of EA in their capacities as trustees for the
Heinlein Trust. (MR 77, 85). In fact, the only allegation in the
Amended Petition relating to the Heinlein Trust is that “Dula used his
position as trustee” of the Heinlein Trust to carry out the alleged
wrongdoing. (MR 77). Horie asserts no cause of action against the
Heinlein Trust directly, but only claims that Dula and Hightower
“operated the Heinlein Prize Trust as his alter-ego … thus it bears the
same liability for his acts as does” Dula. (MR 85). Since the Amended
Petition claims only that the Heinlein Trust is the alter ego of Dula,
then the Heinlein Trust must be considered a part of the Company
Group, to the same extent as Dula.
19
Likewise, Horie named “the Law Offices of Art Dula” as a separate
party in the caption of his Amended Petition, but there are no separate
allegations against the Law Offices of Art Dula; in fact, there is no
mention of the Law Offices of Art Dula in the Amended Petition
whatsoever, other than that it is a “d/b/a” of Dula. (MR 80). Horie has
not alleged that the Law Offices of Art Dula is a separate business
entity, essentially only claiming that it is a sole proprietorship, which
has no separate legal existence. See CU Lloyd’s of Texas v. Hatfield,
126 S.W.3d 679, 684 (Tex. App.—Houston [14th Dist.] 2004, pet. denied)
(“Under Texas law, a sole proprietorship has no separate legal existence
apart from the sole proprietor.”). Therefore, the Law Offices of Art Dula
is alleged to be the same as Dula, and thus must be considered a part of
the Company Group.
Horie alleged that Friedman was general counsel of Excalibur
Almaz USA, Inc. (MR 16). Excalibur Almaz USA, Inc. is an “Affiliate”
of EA as defined in the Settlement Agreement. (MR 278, Settlement
Agreement, at Sch. 1, §1). Thus, Friedman is part of the Company
Group. (MR 267). Further, Friedman’s name appears only three times
in the Amended Petition: in the caption, in the first paragraph listing
20
defendants, and in the identification of “Parties.” (MR 76, 80). The only
“allegation” is that Friedman “is a lawyer at the law office of Art Dula.”
(MR 80). Because there are no other allegations against her, Friedman
would be included in the Company Group to the same extent as the Law
Offices of Dula. Thus, all of the Relators fall within the Company
Group that was released by Horie in the Settlement Agreement, and
therefore are entitled to invoke the forum selection clause.
2. Relators Can Enforce the Forum Selection Clause as
Non-Signatories
Even aside from the express and unambiguous definition of
“Company Group” in the Settlement Agreement, Relators would still be
entitled to enforce the forum selection clause. Under Texas law, “[a]
non-signatory defendant can invoke a forum-selection clause if the
signatory plaintiff “has sued signatory and non-signatory defendants
based on substantially interdependent and concerted misconduct by all
defendants.” Phoenix Network Techs., 177 S.W.3d at 622; Deep Water
Slender Wells, Ltd., 234 S.W.3d at 693-94.
The Deep Water case is directly on point and compels enforcement
of the forum selection clause. In Deep Water, the 14th Court of Appeals
considered the defendants’ attempt to enforce a forum selection clause
21
between the plaintiff and a related Dutch corporation that was not part
of the litigation. 234 S.W.3d at 683-84. The forum selection clause
called for exclusive jurisdiction in the Netherlands. Id. The plaintiff
sued a Delaware corporation and three individuals, pleading that the
Delaware corporation was an alter ego and successor to the Dutch
corporation, and that the individual defendants engaged in
“interdependent and concerted tortious conduct” with the Dutch
corporation with the intent to defraud the plaintiff. Id. at 694.
The Deep Water court recognized that “courts should apply
equitable estoppel when a signatory to the contract containing the
forum-selection clause raises allegations of substantially
interdependent and concerted misconduct by both nonsignatories and
one or more signatories to the contract.” Id. Accordingly, recognizing
the presumption in favor of the enforceability of forum selection clauses
and the heavy burden imposed upon those resisting them, the Deep
Water court found that the nonsignatory corporation and individuals
were entitled to enforce the forum selection clause. Id.
The facts here are similar since Horie has sued Relators, alleging
that they engaged in “substantially interdependent and concerted
22
misconduct” with EA, which is a named party to the Settlement
Agreement. Horie continues to allege that the Relators collectively
operated a “space business,” which clearly refers to EA and the other
Excalibur entities. (MR 77-79). Further, Horie names Dula and
Hightower as defendants, who both signed the Settlement Agreement
as directors of EA. (MR 80-81, 162). The Amended Petition is replete
with allegations of concerted interdependent and concerted misconduct,
essentially claiming throughout the pleading that Dula, acting through
or in concert with all the Relators, defrauded Horie out of $49,003,000.
(See, e.g., MR 85) (“Each of the causes of action herein is pled against all
Defendants, individually and collectively.”).
Accordingly, all Relators are entitled to invoke the forum selection
clause contained in the Settlement Agreement. Deep Water Slender
Wells, Ltd., 234 S.W.3d at 693-94; see also Smith v. Kenda Capital,
LLC, 451 S.W.3d 453, 458 (Tex. App.—Houston [14th Dist.] 2014, no
pet.); Phoenix Network Techs., 177 S.W.3d at 622 (concluding that the
equitable-estoppel theories regarding non-signatories to arbitration
agreements should also be applied to forum-selection clauses that do
not involve arbitration); Accelerated Christian Educ., Inc. v. Oracle
23
Corp., 925 S.W.2d 66 (Tex. App.—Dallas 1996), overruled in part on
other grounds by In re Tyco Electronics Power Sys., Inc., No. 05–04–
01808–CV, 2005 WL 237232 (Tex. App.—Dallas Feb. 2nd, 2005, orig.
proceeding) (“[A] valid forum selection clause governs all transaction
participants, regardless of whether the participants were actual
signatories to the contract.”); see also Brock v. Entre Computer Ctrs.,
Inc., 740 F. Supp. 428, 431 (E.D. Tex. 1990).
Notwithstanding the foregoing, the trial court’s Order notes that
the Deep Water case “directs and authorizes the Court to consider a
number of factors including the strong possibility, according to counsel
at the oral argument of this motion, that the courts of the Isle of Man
may not have jurisdiction over the parties, thus leaving Plaintiff
without a remedy if this matter is dismissed.” (App. A, MR 232-33).
This conclusion misapplies the Deep Water decision.
First, the Deep Water court actually rejected the argument that
the party enforcing the forum selection clause must prove that the
forum selection clause was enforceable in the chosen forum. 234 S.W.3d
at 695. Indeed, the Deep Water court found that amenability to the
selected jurisdiction was not relevant to consideration of the
24
enforceability of the forum selection clause. Id. Therefore, contrary to
the court’s finding otherwise, Relators do not have the burden to prove
that the forum selection clause would be enforceable in the Isle of Man.
Second, the Deep Water court expressly rejected the plaintiff’s
claim that the forum selection clause “would be so manifestly and
gravely inconvenient to the resisting party that the resisting party
effectively would be deprived of a meaningful day in court.” Id. at 693.
It is Horie’s burden to make a “strong showing” that he would be
deprived of a meaningful day in court if the forum selection clause is
enforced. But Horie offered no affidavits or other evidence whatsoever
in this regard. The Deep Water case does not authorize the court to
reject a valid and binding forum selection clause where Horie offers no
evidence whatsoever in support of the “strong showing” necessary to
avoid a contractual mandatory forum selection clause.
Third, Horie’s counsel claimed at the hearing, without authority
or proof, that the Isle of Man did not have jurisdiction. (App. C, at p. 6-
7). As a matter of law, this is inadequate to support the denial of the
motion to dismiss. In any event, for avoidance of doubt, Dula and
Hightower have acknowledged that they are subject to the jurisdiction
25
of the courts of the Isle of Man as a result of their positions as CEO and
Executive Vice President of EA. (MR 240, App. D, at p. 5). Thus, none
of the concerns expressed by the trial court in its order defeat
applicability of the forum selection clause under Deep Water.
C. Horie Cannot Avoid the Forum Selection Clause by
Falsely Claiming that Dula was his Attorney
This is a case between sophisticated businessmen, not an attorney
and client. Significantly, Horie does not assert a claim for legal
malpractice. But Horie does make bare allegations in the Amended
Petition that Dula was his lawyer. (MR 77). Even if the fiction of Dula
as Horie’s lawyer was believed, the forum selection clause would still be
enforceable. Under Texas law, forum selection clauses are valid and
enforceable, even in contracts between attorneys and clients. Falk &
Fish, 317 S.W.3d at 527 (stating, in context of an attorney-client
agreement, that “[f]orum selection clauses are generally enforceable”).
Indeed, the heavy burden of resisting application of a forum selection
clause is the same in contracts between attorneys and clients as it is in
other contracts; this is clear from Falk & Fish—the very same authority
that Horie relies on. Id. (“A party attempting to show that such a clause
26
should not be enforced bears a heavy burden to prove the clause is
invalid.”).
Horie has not come close to meeting this heavy burden of proof.
He has not provided one scintilla of evidence that Dula was his lawyer
at any time. There is no affidavit from Horie, or any other evidence
whatsoever, to support the naked assertions in his pleading. At best,
Horie alleges—without evidence—that Dula was his lawyer in 2005
when he decided to invest in EA. (MR 77 (alleging that Horie engaged
Dula when he invested $49,003,000 for the purpose of setting up a space
travel business)). There is not even an allegation, much less evidence,
that the purported representation continued to 2010.6 Horie was
represented by independent counsel when he entered into the
Settlement Agreement. (MR 378-80). Horie represented in the
6Horie’s allegation that Dula was his lawyer is pure fiction. But even as alleged by
Horie, the case is similar to LeBlanc v. Lange, 365 S.W.3d 70, 79 (Tex. App.—
Houston [1st Dist.] 2011, no pet.), where the plaintiff claimed that a business
associate was also his personal lawyer. In that case, an attorney (Lange) and a
businessman (LeBlanc) formed several corporate entities together. Id. at 73-75. A
dispute between LeBlanc and the company arose, and ended with a settlement
agreement. Id. at 75-76. Rather than abide by the terms of the settlement
agreement, LeBlanc sued the company and Lange, claiming that Lange had
represented him personally in connection with the business and the settlement
agreement. Id. at 78. The court concluded that, while Lange had previously
represented LeBlanc personally, there was no evidence (other than LeBlanc’s
subjective belief) that the attorney-client relationship existed during the time period
relevant to the settlement agreement. Id. at 82.
27
Settlement Agreement that he had “either had the terms and effect …
explained by independent legal counsel or had the full opportunity to
have its terms and effect explained by independent legal counsel.” (MR
274, Settlement Agreement, at §11.4). This representation is contrary to
any inference that Dula was still representing him in connection with
the agreement. (See id.).
Horie has not pointed to any evidence which remotely suggests
that the Settlement Agreement is an attorney-client contract, and there
is no such indication in the four corners of that document. But even in
the context of attorney-client contracts, the party resisting enforcement
of the forum selection clause bears the burden of proof, Falk & Fish, 317
S.W.3d at 527, and Horie relies on nothing but bare allegations in the
pleadings, and even those bare allegations are insufficient.
Falk & Fish, the only authority that Horie cited in the underling
action for the proposition that the allegation of an attorney-client
relationship defeats the forum selection clause, is readily
distinguishable. In that case, a Dallas law firm was retained to
represent a North Carolina client in a North Carolina lawsuit. 317
S.W.3d at 525. The attorney-engagement agreement contained a forum
28
selection clause stating that “the applicable courts of Dallas, Texas
shall be the for a (sic) for all attorney-client disputes.” Id.
Subsequently, the parties found themselves in a billing dispute, and the
law firm sued the client in Dallas. Id. The trial court refused to enforce
the forum selection clause and dismissed the firm’s complaint for lack of
personal jurisdiction. Id. at 526
On appeal, the Falk court recognized the presumed enforceability
of a forum selection clause, and the heavy burden placed upon the party
resisting the clause. Id. at 527. However, unlike the instant case, the
client had submitted affidavits indicating that he did not understand
that disputes would be resolved in Texas rather than North Carolina,
where he lived, and that his attorney did not explain that he was
acquiescing to an inconvenient forum in Texas. Id. at 529. While the
court recognized that a client’s failure to read the contract did not
excuse performance, the fact that it was an attorney-client contract,
coupled with the typographical error and consequent ambiguity of the
clause, caused the Falk court to find that the client in that case met his
burden to avoid enforcement of the forum selection clause. Id. at 530.
29
The Falk case is readily distinguishable on several grounds. First,
in contrast to the clause at issue in this case, the forum selection clause
in Falk was indefinite, non-exclusive, and contained a typographical
error that did render it ambiguous. Id. at 529. The forum selection
clause here contains no such infirmity. Second, the party resisting the
forum selection clause in Falk actually did submit affidavits to sustain
its burden to oppose enforcement of the clause. Id. Here, Horie has
submitted no affidavits or other evidence. Third, and most importantly,
in Falk the forum selection clause was unquestionably found in an
attorney engagement agreement. Id. at 525. In direct contrast, as
discussed above, the Settlement Agreement is not a contract between
an attorney and client, and there is not even an allegation that Dula
was Horie’s lawyer in 2010. The Settlement Agreement recites that
Horie had independent legal counsel, or had the full opportunity for
review by independent legal counsel. (MR 274). Given Horie’s multiple
legal problems, including the appeal of his criminal conviction and
sentence, and the defense of the claim by his former corporation, it is
clear that Horie had an array of counsel representing his interests when
the Settlement Agreement was signed in 2010. (MR 378-80). Clearly,
30
while the Falk case confirms the heavy burden of proof Horie faces even
if his allegations about Dula are true, Falk does not control the outcome
of this case. Horie clearly failed to meet his heavy burden of proof.
D. Horie Cannot Avoid the Forum Selection Clause by
Pleading Fraud
Horie’s allegations that the Settlement Agreement was entered
into as a result of fraud does not allow him to escape the reach of the
forum selection clause for three reasons.
First, the plain language of the forum selection clause provides
that any claim made in connection with the contract’s negotiation or
validity is subject to the exclusive jurisdiction of the Isle of Man’s
courts. (MR 277) (stating that the Isle of Man is the proper forum for
any dispute or claim arising out of or in connection with the contract’s
“existence, negotiation, validity, termination or enforceability”).
Second, Texas law is unequivocal that allegations of fraudulent
inducement do not render a forum selection clause invalid or
unenforceable. “[S]imply alleging fraud in the inducement of a contract
is not sufficient to make a forum selection clause unenforceable.” My
Cafe-CCC, Ltd. v. Lunchstop, Inc., 107 S.W.3d 860, 867 (Tex. App.—
Dallas 2003, no pet.) (upholding dismissal of suit because forum
31
selection clause in agreement necessarily applied to fraudulent
inducement claim); see also In re Int’l Profit Assocs., 274 S.W.3d at 678.
“When . . . the forum selection clause encompasses all causes of action
concerning the contract, the claim that a party was fraudulently
induced to enter the contract does not avoid the forum selection clause.”
My Cafe-CCC, 107 S.W.3d at 867. “To allow a party to avoid its
obligations under a presumptively valid contract with a prima facie
valid forum-selection clause simply because the party might carry its
burden at trial would give the party an end run around ….” Clark v.
Power Mktg. Direct, Inc., 192 S.W.3d 796, 800 (Tex. App.—Houston [1st
Dist.] 2006, no pet.) (upholding dismissal of suit in which Plaintiff
alleged fraudulent inducement because forum selection clause provided
for different forum than one in which suit was brought). “[A] court
determining whether or not to enforce a forum-selection clause will not
inquire into the enforceability of the contract in which that clause is
found.” Id. (quoting Holeman v. Nat’l Bus. Inst., Inc., 94 S.W.3d 91, 102
(Tex. App.—Houston [14th Dist.] 2002, pet. denied) (rev’d on other
grounds)).
32
Third, the definition of “Claim” precludes any allegation of
fraudulent inducement. In the Settlement Agreement, Horie expressly
bargained away and released claims that were “known and unknown”
and “suspected and unsuspected.” (MR 278). He cannot claim that he
was fraudulently induced into entering into the Settlement Agreement
because of the alleged concealment of facts that he did not know and did
not suspect, when he has expressly released all such unknown and
unsuspected claims. Accordingly, Horie cannot escape the reach of the
forum selection clause to which he agreed by alleging that the contract
was entered into as a result of fraudulent conduct.
IV. CONCLUSION & PRAYER
Relators request that this Court grant this Petition and issue a
Writ of Mandamus ordering the trial court to vacate its April 22, 2015
Order Denying Motion to Dismiss (App. A), and its denial of the Motion
for Reconsideration (App. D), and issue orders dismissing all claims in
the case. Relator further requests such other and further relief to
which it may be entitled.
33
Respectfully submitted,
BAKER & HOSTETLER LLP
/s/Joshua C. Thomas
Eric W. Kristiansen
TBA No. 24027428
ekristiansen@bakerlaw.com
Joshua C. Thomas
TBA No. 24066185
jthomas@bakerlaw.com
811 Main, Suite 1100
Houston, Texas 77002-6111
Telephone (713) 751-1600
Facsimile (713) 751-1717
Michael R. Levin
Pro Hac Vice Application to be Filed
Florida Bar No. 351326
mlevin@bakerlaw.com
200 S. Orange Avenue, Suite 2300
Orlando, Florida 32801
Telephone (407) 649-4000
Facsimile (407) 841-0168
ATTORNEYS FOR RELATORS
34
CERTIFICATION OF FACTUAL STATEMENTS
Pursuant to Rule 52.3(j) of the Texas Rules of Appellate
Procedure, I have reviewed this Petition and concluded that every
factual statement in the Petition is supported by competent evidence in
the appendix or record.
/s/Joshua C. Thomas
Joshua C. Thomas
CERTIFICATE OF COMPLIANCE
Pursuant to Rule 9.4(i)(3) of the Texas Rules of Appellate
Procedure and relying on the word-count function of the computer
program used to prepare this document, I certify that the total number
of words in this document is 6,764.
/s/Joshua C. Thomas
Joshua C. Thomas
35
CERTIFICATE OF SERVICE
I hereby certify that the foregoing Petition for Writ of Mandamus
has been served in accordance with the Texas Rules of Appellate
Procedure via electronic filing service and/or certified mail, return
receipt requested on this 22nd day of June, 2015.
The Honorable Jeff Shadwick
Presiding Judge,
55th Judicial District Court
Harris County, Texas
Harris County Civil Courthouse
201 Caroline, 9th Floor
Houston, Texas 77002
Telephone No.: (713) 368-6055
Lloyd E. Kelley
THE KELLEY LAW FIRM
2726 Bissonnet, Ste 240 PMB 12
Houston, TX 77005
Telephone (281) 492-7766
Facsimile (281) 652-5973
James D. Pierce
1 Sugar Creek Center, Ste. 1080
Sugar Land, Texas 77478
Telephone (713) 650-0150
Facsimile (713) 650-0146
/s/Joshua C. Thomas
Joshua C. Thomas
36
APPENDIX
TO PETITION FOR WRIT OF MANDAMUS
TAB DESCRIPTION
A April 22, 2015 Order Denying Motion to Dismiss
B First Amended Petition
Original Petition
C Transcript of April 20, 2015 Hearing on Supplemental
Motion to Dismiss
D Transcript of June 1, 2015 Hearing on Motion for
Reconsideration and Discovery Motions
37
TAB A
CAUSE NO. 2014-6594 7
TAKAFUMI HORIE § IN THE DISTRICT COURT OF
§
§
vs
§
§ HARRIS COUNTY, T~aniel
F I TJ ED
§ District Clerk
APR 2 2 201Jo~ 3 i11--
THE LAW OFFICES OF ART DULA, §
Time:
et al. §
Harris County, Texjtf A ~~ _
§ By: ...,r~
§ 55TH JUDI CIAL.--,Dru;:ISsrTmR~WR'::mJ!r.L\Y-~~
ORDER DENYING MOTION TO DISMISS
Upon consideration of Defendants' Supplemental Motion to Dismiss,
Plaintiffs response, the exhibits submitted, and argument of counsel, the Court
rules that the motion is DENIED.
While Plaintiffs Original Petition is part of the file and available to the Court
for use in understanding the universe of facts, it is the Plaintiffs First Amended
Petition which is the active claim which will be dismissed or not. The pending
cause of action is against Defendants acting in capacities different than their
capacities under which they were signatories (in the case of Dula and Hightower) of
the Deed of Assignment and Settlement (the "Agreement"). Under the pleading and
CertifiedDocumentNumber:65135810-Page1of2
the plain reading of the Agreement, the Court cannot say that this action is subject
to the release and forum selection clause as Defendants urge.
Further, Deep Water Slender Wells, Ltd. v. Shell Int'l Exploration & Prod.,
Inc. 234 S.W.3d 679 (Tex.App. - Houston [14th] 2007, pet denied) directs and
authorizes the Court to consider a number of factors including the strong
possibility, according to counsel at the oral argument of this motion, that the courts
232
of the Isle of Mann may not have jurisdiction over the parties, thus leaving Plaintiff
without a remedy if this matter is dismissed.
It may be that Defendants ultimately succeed through a motion for summary
judgment in demonstrating that the release in the Agreement does indeed apply to
Plaintiffs claims in this case, but the Court cannot make that determination at this
time. Under the pleadings and the Agreement, and considering that settlement of
claims by a client against his attorney require specific and additional proof, the
Court at this time observes that the release does not appear to include these claims
and these Defendants.
IT IS SO ORDERED.
SIGNED on the Z2 day of _ _+ - - - - -
J
CertifiedDocumentNumber:65135810-Page2of2
2
233
I, Chris Daniel, District Clerk of Harris
County, Texas certify that this is a true and
correct copy of the original record filed and or
recorded in my office, electronically or hard
copy, as it appears on this date.
Witness my official hand and seal of office
this June 5, 2015
Certified Document Number: 65135810 Total Pages: 2
Chris Daniel, DISTRICT CLERK
HARRIS COUNTY, TEXAS
In accordance with Texas Government Code 406.013 electronically transmitted authenticated
documents are valid. If there is a question regarding the validity of this document and or seal
please e-mail support@hcdistrictclerk.com
234
TAB B
11/10/2014 4:44:45 PM
Chris Daniel - District Clerk Harris County
Envelope No. 3128824
2014-65947 / Court: 055 By: Sharon Carlton
Filed: 11/10/2014 4:44:45 PM
CAUSE NO. 2014- _________
§ IN THE DISTRICT COURT OF
TAKAFUMI HORIE, §
§
§
Plaintiff, §
v. §
§ HARRIS COUNTY, TEXAS
THE LAW OFFICES OF ART DULA, §
ARTHUR M. DULA, individually, and d/b/a §
THE LAW OFFICES OF ART DULA, §
ANAT FRIEDMAN, individually, and d/b/a §
THE LAW OFFICES OF ART DULA, §
J. BUCKNER HIGHTOWER, §
THE ROBERT A. AND VIRGINIA §
HEINLEIN PRIZE TRUST, through its §
trustees ARTHUR M. DULA AND §
J. BUCKNERHIGHTOWER, §
EXCALIBUR LIMITED, §
EXCALIBUR ALMAZ LIMITED, and §
EXCALIBUR ALMAZ USA, INC., §
§
Defendants. § ____TH DISTRICT COURT
PLAINTIFF’S ORIGINAL PETITION
I.
INTRODUCTION
This is a case werhe fraud occurred in the private spaceflight market.
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Houston lawyer Art Dula and his law firm, the Law Office of Art Dula,
utilizing offshore shell corporations in the Isle of Man, defrauded a Japanese
billionaire investor, Takafumi Horie, out of $49 million cash, using Russian
made "Almaz" class spacecraft as the bait.
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II.
Takafumi Horie files this Original Petition against Defendants The Law Offices of Art
Dula, Arthur M. Dula, individually and d/b/a The Law Offices of Art Dula, J. Buckner
Hightower, Anat Friedman, individually and d/b/a The Law Offices of Art Dula, The Robert A.
and Virginia Heinlein Prize Trust, Excalibur Limited, Excalibur Almaz Limited, and Excalibur
Almaz USA, Inc. for breach of fiduciary duty, violations of the Isle of Man Company Acts of
1931 and 2006, fraud, money had and money received, statutory theft, statutory fraud, violation
of the Texas Securities Act, an accounting, constructive and or resulting trust, and alternatively
for conversion, negligence and breach of contract. Plaintiff seeks rescission/damages in the
amount of his $49,003,000.00 original investment, plus interest, attorneys’ fees, and damages
allowed at law or equity, including punitive damages.
III.
CASE SUMMARY
This is a case about Houston attorney Art Dula, who took advantage of Japanese
entrepreneur Takafumi Horie, by claiming that he could set up a commercial space
transportation program to carry cargo, scientific experiments, and people into low Earth orbit
to the International Space Station and other space destinations. Dula was, and is, the lawyer and
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a trustee for The Robert A. and Virginia Heinlein Prize Trust ("Heinlein Trust"). Heinlein was a
prolific science fiction author who was famous for writing about manned space exploration.
Dula used his position as trustee of the Heinlein Trust to promote his law firm in getting business
under the premise of establishing "new space business enterprises." Using his position as trustee
of the Heinlein Trust, Dula, through an intermediary, sought out Horie and solicited him as a
client and investor.
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IV.
Horie engaged Dula as his attorney, and then trusted him enough to give Dula
$49,003,000.00 in trust for purposes of setting up a business to accomplish space travel. The
money was sent to Dula's Texas IOLTA client trust fund account to accomplish the goals for
Dula's client Horie. The Defendant corporations were set up by Art Dula, and the sole capital
for these companies was Plaintiff’s funds. Dula never intended to engage in a commercial space
program, and in fact continually misrepresented, concealed facts and defrauded his client
Takafumie Horie d/b/a Japanese Space Dream (“Horie”). His intent was to take his clients’
money over time through a complex scheme under the guise that he was building a space
program.
V.
Dula has gone to great lengths to hide and conceal his bad acts. Plaintiff Horie only
recently discovered the wrongs perpetrated against him by Defendants, because the facts were
concealed by Defendant Dula, and Dula never advised Horie of his wrong doing. Plaintiff relied
on and trusted Defendant Dula in Dula’s position as his attorney, his fiduciary, and because of
his representations as to his expertise concerning his spaceflight project and his investment
therein.
VI.
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Plaintiff Horie became aware of Dula’s scam when he read an article by Alexander
Forbes that Dula had sold at auction one of the spacecraft articles purchased with Plaintiff’s
money. The Forbes article implied that the company was liquidating, and indicated the
spacecraft was only suitable for display in a museum, and not as a potential flight article as had
been falsely represented to Plaintiff Horie from the beginning. The supposed space program was
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a sham, as Dula never had the rights or ability to utilize the spacecraft purchased with Plaintiff’s
money for anything other than display purposes. However, this fact was kept secret from
Plaintiff and other persons associated with the Excalibur Almaz project for years. Plaintiff never
authorized the funds held in trust be utilized to purchase spacecraft sold for display purposes.
Plaintiff never authorized funds held in trust to be utilized to set up a "space program" incapable
of space travel. Plaintiff never authorized funds held in trust to be utilized to set up a business
other than a true "space business enterprise." Had this information been known to Plaintiff, he
would have never invested in the first place, and if known after he had invested, Plaintiff would
have petitioned for dissolution of the Defendant Excalibur Almaz Limited under provisions of
the Isle of Man Company Acts of 1931 and 2006, and recovered his investment years ago as the
companies were created for a fraudulent purpose. By additional fraudulent acts, Dula ultimately
obtained complete control of Plaintiff's funds and has utilized them for his own benefit, and, on
information and belief, has fraudulently transferred the funds to his wife, Tamea, a prominent
Houston lawyer, and his children Russell and Austin. The continuing fraud and breach of
fiduciary duty has damaged Plaintiff in excess of the minimum jurisdictional amounts of this
court.
VII.
Plaintiff Horie seeks by this suit to recover damages, assets of the Defendant enterprises
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which are held in trust for Plaintiff, and to obtain other damages allowed by law for himself, and,
if appropriate, alternatively, by joining any other putative interested party shareholders, including
LDH Corporation and/or Oceanedge Development Limited, pursuant to Rule 39, Texas Rules of
Civil Procedure.
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VIII.
DISCOVERY LEVEL AND REQUEST FOR DISCLOSURE
Discovery should to be conducted under Level 2 pursuant to Texas Rule of Civil
Procedure 190.3. Plaintiff requests disclosure of the items set forth in Tex. R. Civ. P. 194.2 a-k.
IX.
PARTIES
A. Plaintiff Takafumi Horie is a citizen and resident of Japan, and at all relevant times
was doing business as Japan Space Dream. Horie was solicited in Japan from Texas lawyer
Defendant Art Dula to invest US $49,003,000.00 for creation of a private operating spaceflight
program. Dula created companies for Horie, including Excalibur Almaz Limited.
B. Defendant Arthur M. Dula, individually and d/b/a the Law Office of Art Dula, is a
resident of Houston, Harris County, Texas. He may be served with process at his place of
business at 3106 Beauchamp Street, Houston, Texas 77009.
C. Defendant Anat Friedman is a lawyer at the law office of Art Dula and is a resident of
Houston, Harris County, Texas. She may be served with process at his place of business at 3106
Beauchamp Street, Houston, Texas 77009.
D. Defendant Robert A. and Virginia Heinlein Prize Trust (“Heinlein Prize Trust”) may
be served by serving either of its trustees, Arthur M. Dula or J. Buckner Hightower, at 3106
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Beauchamp Street, Houston, Texas 77009.
E. Defendant Excalibur Limited is an Isle of Man corporation. It has operated for all
relevant time periods as the alter-ego of Defendant Dula from Houston, Texas. Excalibur
Limited may be served with process by serving its CEO Arthur M. Dula at his place of business
at 3106 Beauchamp Street, Houston, Texas 77009.
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F. Defendant Excalibur Almaz Limited is an Isle of Man corporation. It has operated
for all relevant time periods as the alter-ego of Defendant Dula from Houston, Texas. Excalibur
Almaz Limited may be served with process by serving its CEO Arthur M. Dula at his place of
business at 3106 Beauchamp Street, Houston, Texas 77009.
G. Defendant Excalibur Almaz USA, Inc. is a Texas corporation headquartered in
Houston, Harris County, Texas It has operated for all relevant time periods as the alter-ego of
Defendant Dula from Houston, Texas. Excalibur Almaz USA operates the business affairs of
Excalibur Almaz Limited under the terms of a service contract. Excalibur Almaz USA, Inc. may
be served with process by serving its Chairman of the Board and sole shareholder Arthur M.
Dula at his place of business at 3106 Beauchamp Street, Houston, Texas 77009.
H. Defendant J. Buckner Hightower is a Texas citizen and resident, and is the claimed
current CEO of Excalibur Almaz USA, Executive Vice President of Excalibur Almaz Limited,
recently became a minority shareholder of Excalibur Limited, and on the Board of Directors of
all three of those corporate Defendants comprising the enterprise. Defendant Hightower
conspired, aided and abetted and/or facilitated Defendant Dula in committing and concealing the
illegal acts complained of herein. He engaged in actions designed to cover up and keep facts
secret from the public auditors and the government. He may be served with process at his place
of business at 3106 Beauchamp Street, Houston, Texas 77009.
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X.
JURISDICTION
This Court has subject matter jurisdiction over this dispute because the amount in
controversy exceeds its jurisdictional threshold. See Tex. Gov’t Code Ann. §§ 24.007 - 24.008.
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This Court has personal jurisdiction over Defendants because: (1) they are actively
engaged in business in the State of Texas; (2) they reside in the State of Texas; (3) they
performed services in this state pursuant to a contract and/or entered into a contract that was
performable in whole or in part in this state; and/or (4) they committed torts and statutory
violations in whole or in part in this state. See Tex. Civ. Prac. & Rem. Code § 17.042.
Venue is proper under Tex. Civ. Prac. & Rem. Code § 15.002. All or a substantial part of
the events or omissions giving rise to Plaintiff’s claims occurred in this County.
XI.
FACTUAL BACKGROUND
The Plaintiff is a Japanese citizen, who was interested in the development and
advancements in space exploration. Art Dula sought Plaintiff out representing that he was a
"space attorney" who could assist him in the development of a space program. Dula requested
that Horie give him approximately $50,000,000 in trust, so that Dula could facilitate Plaintiff's
dream in developing a private commercial space program. Dula represented he had connections
with the Russian aerospace company NPO Mashinostroyenia (“NPOM”) who would provide
hardware and technical expertise to build a commercial space business. He represented that he
had acquired rights to NPOM space proven capsules that could be used in a space program. Dula
represented that he was well connected and could assemble the professionals necessary to build a
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commercial space program. However, from the beginning, Dula had no intent to build a space
program, but only to take Plaintiff's monies for his own use, utilizing a complex ruse, contrary to
the interests of his cestui que trust. Dula convinced Plaintiff to place $49,003,000.00 into Dula's
trust account for purposes of doing due diligence, and later setting up a space program in
conformity with U.S. law and regulations (Dula claimed and continues to claim to be a "space
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law" expert). Defendant Dula formed Defendant Excalibur Limited (“EL”) with long-time
associate Buckner Hightower and Chris Stott (spouse of NASA astronaut Nicole Stott). EL was
to act as the holding company for Dula's interest in Excalibur Almaz Limited (“EA”). EA was to
be the operating commercial space company, and is the entity into which Plaintiff's monies were
placed and which owned all the "space hardware," intellectual property, and other assets. Other
than Plaintiff's funds, no other capital or income was received by EA. EA was managed by a
Texas corporation formed and wholly-owned by Defendant Dula called Excalibur Almaz USA,
Inc. (“EA USA”). Dula utilized EA USA to take funds and monies from EA as he desired.
XII.
Using Plaintiff's funds, Dula purchased four Almaz spacecraft capsules and two space
stations from NPOM. This space hardware came from a Soviet-era secret space program, and
Dula represented to Plaintiff that a key advantage was that the spacecraft and space stations
being acquired had undergone rigourous flight testing. He represented to Plaintff and others that
the hardware could be made "flight worthy," and that he could refurbished, modify and update
the equipment so that it would be certified for flight. The purchase contracts had to be approved
by the Russian government, and unbeknownst to Plaintiff and on information and belief,
expressly excluded the right to modify the Russian hardware, thus relegating it to display uses
only! The items were only museum pieces, a secret Dula would keep until well after he acquired
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control of Plaintiff's investment.
XIII.
Dula took Horie's money out of the IOLTA trust account and used it improperly. Dula
first wired the funds to an account that he controlled in the Isle of Man. Then Dula set up with
the funds an investment structure that provided Horie a 75% share in EA. Dula, despite
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providing zero of his own capital, drafted the investement agreement to provide that his company
EL acquire additional equity, if the entity EA met certain development milestones: (1)
certification of the Almaz capsules for unmanned flight (EL increased to 35.25%), (2) successful
unmanned orbital flight of an Almaz capsule (EL increased to 45.5%), (3) certification of Almaz
capsules for manned flight (EL increased to 55.8%), and (4) successful orbital manned flight of
an Almaz capsule (EL increased to 66%). Defendants Dula and EA have never to this date
accomplished any of the milestones, nor did Dula ever have any intention of doing so.
XIV.
At the time he solicited the investment from Plaintiff, Defendant Dula was a lawyer
licensed inTexas, who held himself out as an expert in "space law," in properly establishing and
organizing space enterprises, in advising concerning contracts with NASA, in negotiating and
drafting "space agreements." Dula drafted a "Private Placement Memorandum" which he
represented to Plaintiff was a part of the legal documentation necessary to create a legal space
program which he represented to be a proper "space agreement" to establish a "space enterprise."
Per Dula's instructions, Plaintiff wired over time $49,003,000.00 to Dula’s attorney trust account
in Houston, Texas. Thereafter, Defendant Dula transferred the money to an account in the Isle of
Man associated with Excalibur Almaz Limited; an account with Dula controlled. Later, on
information and belief, funds were sent to his wife Tamea and his children Russell and Austin
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Dula.
XV.
On Dula's request funds were provided in tranches, with the final one-third being $16
million. Dula falsely claimed a delay in the final payment interferred with Dula's ability to
achieve the milestones that he included in the initial documentation. He falsely advised his
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client and cestui que trust that he could legally take Plaintiff’s entire investment, leaving him
nothing if Plaintiff did not acknowledge the milestones were achieved. Plaintiff relied on Dula’s
advice which was given in violation of his fiduciary duty, and in reliance upon the representation
that a real space program would be achieved. Being a part of a real space program was Plaintiff's
dream, and if that could be achieved the ownership percentages were insignificant compared to
being involved in a pioneering new business. Further, Plaintiff trusted Dula to act in Plaintiff's
best interests, and relied on his representations that a space program would be created. In fact
the milestones and spaceflight in general could never be accomplished, and Dula knew at the
time he made the representations the milestones could not be accomplished. The representations
made to Plaintiff were false and Dula omitted to state facts necessary to make the statements that
were made not misleading. However, in reliance on the truth of the misrepresentations and that
Dula would continue to act in Plaintiff's best interest and build a space venture, Plaintiff accepted
a reduction in his equity ownership to 34%, as though all milestones had been met (even though
not a single milestone had been accomplished), and to place his remaining interest into a Trust
with a trustee suggested by Dula. Thereafter, Plaintiff Horie did make the last investment
tranche payment, bringing his total investment to $49,003,000.00.
XVI.
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Excalibur Almaz Limited could not accomplish its represented purpose of modifying and
flying the Almaz spacecraft, therefore under Isle of Man law, Plaintiff or any shareholder had the
right to dissolved EA pursuant to Isle of Man (“IOM”) law and obtained the return of the
investment. As counsel for Plaintiff, Dula should have advised Plaintiff of this right, but failed to
do so. The premise upon which Excalibur Almaz Limited was created – to modify and fly the
Almaz spacecraft – could not be accomplished, and had any shareholder known this fact the
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shareholder could have forced the dissolution under IOM law. EA assets at all times relevant
had a value of at least $34,000,000. Any interest Dula obtained through his ownership in EL,
was obtained contrary to his fiduciary duty and his obligations as an attorney, and accordingly as
a matter of law, his breach of fiduciary duty results in all interests being forfeited. Plaintiff
Horie was denied this option because Defendant Dula fraudulently concealed the fact that the
purchase contracts for the spacecraft did not allow modifying the spacecraft, as would be
required to launch them into space and fly them as represented. The reduction in Horie’s interest
by Defendant Dula, and Dula's advice to place Horie's shares into a Trust controlled by a
business associate of Dula's, was a direct result of material misrepresentations and breaches of
fiduciary duty that furthered Dula's plan to take Plaintiff's monies.
XVII.
Defendant Dula purported to control EA by virtue of his majority ownership of EL,
which in fact he held in trust for Plaintiff. But Defendant Dula could personally claim only 45%
of EA (the company with all the assets) – and he wanted to own and control it all. Defendant
Dula began a systemantic fraudulent plan to get it, at a time when EA had total assets of at least
$34 million, which included approximately $29 million in cash, plus space hardware with a book
value of over $5 million. But Dula was incentivized by more than the money to own the entire
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enterprise himself – he thought he had to in order to forever bury his secret that he had induced
Plaintiff to invest in the first place with the lie that he had procured legal rights to modify and fly
the spacecraft articles purchased from the Russians.
XVIII.
EA never could accomplished any of its milestones. Defendant Dula told his putative
shareholders – LDH and the Stotts – that his assessment was that more investment would be
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needed, and even then it would be hard to do. Dula then falsely told his putative shareholders
that he was committed to spending all the money in the enterprise to attempt to achieve the
objective of commercial spaceflight. However, secretly Dula knew this objective could not be
done because EA did not own the legal rights to modify and fly the space hardware he had
purchased from the Russians.
XIX.
Breaching his fiduciary duty, Dula "magically" transformed Horie’s entire initial
investment remaining at that time – upon informantion and belief over $34 million -- into his
own name. But he had to lie again to get it done.
XX.
On information and belief, Chris Stott resigned as an employee of EA USA and as Board
member of EA because of disagreements with how the enterprise was being run and for family
reasons having mostly to do with the time commitment required of him as his wife trained for
her first flight as a NASA astronaut. The Stotts maintained their interest in EA indirectly
through EL by way of their wholly-owned entity Oceanedge Development Limited, but became
inactive in the management of the company.
XXI
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On information and belief, Defendant Dula sent a team of EA USA employees from
Texas to the Isle of Man, including two members of the Board of EA and its CFO, to negotiate a
buy out with Bryan Stott, one of the members representing the interests of the Stotts in EL and
EA. During these negotiations, Chris Stott, then in Houston, Texas, was also consulted. The EA
team was directed by Dula to represent, and did represent, to the Stotts (1) that EA owned four
Almaz capsules and two space stations that could be and were going to be used to build an
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orbital space transportation company, (2) that EA intended to use all of the funds invested by
Horie to accomplish that goal, and would be looking for additional funds, and (3) that Horie and
LDH continued to back the enterprise, hopefully with additional funding. These representations
were known by Defendant Dula to be false at the time they were made, and the Stotts were in no
position under IOM law to out vote Dula: Dula controlled EL (in which the Stotts were the
minority shareholder), and through EL Dula controlled EA (in which LDH was the minority
shareholder). On information and belief, because of these false representations, the Stotts,
believing that Dula would ultimately fail and that there was no alternative to letting Dula waste
the assets of the enterprise down to zero, agreed to have their interest in EL bought out for
$300,000 – less than 3% of the value of their interest if LDH had been bought out first and EL
had thereafter been dissolved. On information and belief, the Stotts were provided with EA’s
confidential internal business plans to support the false representations (1) that EA owned the
Russian space hardware with rights to modify it for flight and (2) that Dula would consume all of
the current cash then in the enterprise to try to achieve a commercial spaceflight objective that
the enterprise did not have the legal right to do (by showing proposed budgets and capital raise
requirements).
XXII.
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On information and belief, after the Stotts sold out their interest to Dula, Defendant Dula
then used the same misrepresentation tactics and, in addition, touted the calculated share value in
EA achieved in the Stott buy out as the fair market value of EA stock, in order to fraudulently
induce a similar buy out of Horie’s assigned stock interest from LDH for a mere $475,000. At
the time LDH held a 34% interest in EA, valued at about $12 million, more than $10 million of
which was cash. The only reason LDH would have ever agreed to such a lop-sided deal was if
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they believed Dula had the rights he claimed to the spacecraft to modify them for flight – which
he did not – and that he was going to spend all the cash in the enterprise to try to achieve that
objective; again, an objective he did not have the legal right to pursue. Just as with the Stotts, as
a minority shareholder in EA, LDH did not have the legal right under IOM law to prevent Dula
from pursuing that objective, unless they had known at the time that the representation as to
ownership rights in the space hardware was false – which, of course, they did not know.
XXIII.
On information and belief, Defendant Dula negotiated the LDH buy out himself. He
made the same two false representations that he had made to the Stotts in order to induce LDH
and Plaintiff Horie into selling the EA shares to him for pennies on the dollar. In addition, he
provided LDH information about the fraudulently induced Stott transaction, claiming that it set
the fair market value for EA stock. The deal was memorialized in a written agreement, which
included express and specific reference to confidential information being provided under a
nondisclosure agreement, including the same confidential internal business plans that had been
provided to the Stotts, in order to falsely bolster all three misrepresentations.
XXIV.
On information and belief, Dula's scheme was to buy out other owners of EA for less
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than 3% of the liquid value of their interests – a sale of securities valued at more than $34
million, most of which was cash. After Dula executed his scheme, Plaintiff Horie and the
putative minority shareholders, LDH and the Stotts, were completely out of the enterprise, and
EA still had some $28 million in cash left, plus the display purpose space hardware.
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XXV.
Defendant Dula had by lies and deceit convinced the minority shareholders in EA that the
company had a true market value of only $1.4 million because of the control he could exercise
and his misrepresentations about the legal ability of the corporation to be able to modify and fly
the Almaz spacecraft and space stations, effectively fraudulently locking the $28 million in cash
and the other assets in an illiquid corporate structure.
XXVI.
Even more striking, Defendant Dula had funded the buy-outs with money from Plaintiff’s
initial investment, some of which was laundered through his wholly-owned entity, Excalibur
Almaz USA. Thus, Defendant Dula had spent some $775,000 of Horie’s money in order transfer
$28 million of Horie’s money (plus the space hardware) into his own name – and now he thought
he had it all for himself. But the law is not so kind when greed is satisfied by fraud and
dishonest conduct.
XXVII.
Dula knew all along that his representations were false. Employees within EA USA
learned only later that the contracts that supposedly gave EA ownership of the space hardware
only transferred ownership rights for the purpose of displaying the hardware, e.g., at air shows,
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trade shows or in museums. Thus, Defendants Dula and EA had no rights to the capsules
necessary to refurbish and modify them in order to certify them to fly humans in space. Without
such rights, the representation that EA owned the space hardware to accomplish the objectives of
the enterprise was false. Had Horie or LDH known this they would have insisted on their full
share in any buy out, or would have insisted that EL and EA be dissolved in accordance with the
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Isle of Man Company Acts of 1931 and 2006, because it was legally impossible to achieve the
stated objectives of the enterprise, as well as for other reasons under those Acts.
XXVIII.
Recognizing they were about to be caught, Defendant Dula and the General Counsel Anat
Friedman, an associate lawyer of Dula and counsel of EA USA, purportedly attempted to get the
Russians and NPOM to modify the sales contracts, thus admitting the deficiencies in legal rights;
but that was never accomplished. On information and belief, examination of EA’s books
revealed that during his space hardware purchase contract negotiations with NPOM, Defendant
Dula made cash payments – fraudulently concealed by Defendant Dula as fictitious contract
payments – to Pavel Shirokov, Deputy General Director of NPOM and the head officer at NPOM
in charge of negotiating the contracts for the space hardware, and importantly, for getting those
contracts approved by the Russian Space Agency, Roscosmos. Arguably, these cash payments to
Mr. Shirokov not only incentivized NPOM to enter into the contracts with Dula, but also paved
the way for Mr. Shirokov to obtain Russian government approval. They were in effect cash
payments made to a Russian government official and/or an agent of the Russian government in
order to get a sales contract. Such actions by Defendant Dula could constitute a violation of the
Foreign Corrupt Practices Act. If the contracts for the space hardware were obtained by criminal
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conduct, then they are void and the enterprise was not able as a legal matter to accomplish its
stated objectives. Horie did not authorize funds to leave the trust to purchase items in violation
of the law. Obviously, had Plaintiff Horie known the truth he would not have invested in the
supposed space enterprise. On information and belief, if the Stotts or LDH had known this at the
relevant times, they would have insisted on their full share in any buy out, or would have insisted
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that EL and EA be dissolved at the relevant time, because it was legally impossible to achieve
the stated objectives of the enterprise.
XXIX.
Additionally on information and belief, Defendant Dula at an EA Board meeting
revealed to his Board for the first time that he may not have the intent to use the money then
remaining in the enterprise to try to accomplish the stated objective of developing a space
transportation system. He argued instead, that he had the right as sole owner to deploy the funds
into any activity he saw fit – especially ventures that might be less risky and have a better chance
of success. Had Horie realized that Defendant Dula might take the money in the company and
enter another business or take it for himself – contrary to his representations to them – Horie
would never had invested in the first place.
XXX.
Upon information and belief, it was the representation made to both the Stotts and LDH
that Dula and EA intended to spend all the remaing money on attempting to develop a
commercial space business that caused them to sell out so cheaply, given their minority
shareholder positions in EL and EA, respectively. Dula was actually challenged at a Board
meeting by Directors Gruver and Chiao, and as a result, Dula agreed to state in writing that he
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had “no present intention to dissolve the company and take the money for himself.” But it was a
lie, stated only to get the Board to approve the LDH transaction, as was later proven when
Defendant Dula stated to the Board that he now intended to dissolve the company, when it would
still have substantial cash, plus the space hardware still carried on the books at over $5 million
(but which Dula had opined at the time may be far more valuable if sold to be utilized as donated
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museum pieces for wealthy individuals who could benefit from the substantial tax advantages of
such transactions).
XXXI.
On information and belief, faced with these admissions from Dula, Director Chiao called
for a special Board meeting to put forth a resolution to prohibit Dula from disolving the
enterprise and selling off the space hardware, because of the liability that would arise given the
earlier false representations to the Stotts and LDH to secure the lop-sided buy out deals. This
resolution was supported by Director Okubo. Defendants Dula and Hightower, along with CFO
Gruver, voted to defeat the resolution with Friedman giving support to Dula. The next day
Directors Chiao and Okubo were removed from the Board by a vote of the shareholders,
Defendants Dula and Hightower. Director Chiao resigned from the enterprise altogether shortly
thereafter, including from his employment.
XXXII.
Upon information and belief, at least one employee of EA USA petitioned the CFO,
Richard Gruver, in accordance with Company procedures, to have the Board of Directors direct
that Defendant Dula fix the fraud he had perpetrated by obtaining revised contracts with NPOM
to allow modifcation of the Almaz spacecraft so that they could be refurbished and flown, as
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initially represented to Plaintiff Horie to induce his $49 million investment. CFO Gruver passed
the petition to Defendant Hightower, who, presumably in concert with Defendant Dula,
terminated the employment of that employee.
XXXIII.
Now recent events at the May 2014 auction make it clear that Defendant Dula intended to
dissolve EA and take the substantial assets for himself and his annoited co-shareholder in EL,
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Defendant Buckner Hightower, in contravention of the express representations made to Plaintiff
Horie. Plaintiff Horie did not suspect until recently that the reason no milestone had been
accomplished under his initial investment contract was because the Russian space hardware that
Defendant Dula had represented that EA owned, had limited uses, i.e., as museum pieces.
Defendant Dula knew all along that he had purchased only the rights to use two Almaz capsules
and two spacestations for the purpose of display and marketing, and legally, under his contracts
with the Russians, could not modify them for flight. Dula has bought on numerous occasions
additional spacecraft under the same limited terms, while representing the opposite to his
investor, employees, and potential customers. In addition, Defendant Dula may have acquired
even these limited rights by violating the Foreign Corrupt Practices Act, as explained above,
which would also void those contracts. Dula's fraud was intentional, malicious, and warrants
punitive damages. Further, the exemplary damages are not capped because the conduct of Dula
falls withing Tex. Civ. Pract. Rem. Code Section 41.008(c).
XXXIV.
Had Mr. Horie known at the time that Defendant Dula was lying about the ownership of
the space hardware he had acquired from NPOM for EA, and that EA could never complete any
of the milestones, he would never had invested a penny with Dula, never would have authorized
CertifiedDocumentNumber:63120901-Page19of28
funds to leave Dula's trust, would have never reduced his equity position, and would have
dissolved EA pursuant to IOM law (as was his absolute right as a 75% equity owner) and
recovered his $45 million in cash, plus whatever value the space hardware would have had as
museum pieces. This is precisely what Defendant Dula feared might happen – thus he lied
repeatedly to Plaintiff Horie to keep his enterprise intact.
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XXXV.
CAUSES OF ACTION
1. Joint and Several Liability: Defendant Dula owns and/or has controlled each of the
Corporated Defendants (EL, EA, and EA USA) and the Defendant Heinlein Prize Trust during
the relevant time period, and as such committed the acts complained of herein through one or all
of them at various times, such that those entities have joint and several liability herein.
Defendant Dula has also operated the Corporate Defendants as his alter-ego from his offices in
Houston, Texas; thus, they each bear the same liability for his acts as does Defendant Dula.
From the beginning, Defendant Buckner Hightower, as Dula's friend, as a co-trustee of the
Heinlein Prize Trust, and later as an equity participant in Defendant EA, has supported and
conspired with Defendant Dula to further and cover up the wongful acts of Dula, as set forth
herein. Each of the causes of action herein is pled against all Defendants, individually and
collectively.
2. Breach of Trust, Constructive Trust, Resulting Trust. All actions taken by Dula were
with funds he held for Plaintiff in trust. Actions with respect to the Trust funds were taken
without authority or effective consent. Therefore, all monies and assets acquired by any of the
Defendants are held in a Constructive/Resulting Trust for Plaintiff and should be delivered to
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Plaintiff. Plaintiff is also entitled to damages for assets squandered or lost in violation of the
trust(s).
3. Violation of Rights under the Isle of Man Company Acts: Defendants have violated
the rights of Plaintiff Horie under the Isle of Man Company Acts of 1931 and 2006.
4. Under each Act, a 75% shareholder has the right to dissolve an IOM company. Had
Plaintiff Horie been told the truth about the legal inability of EA to accomplish the purpose for
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which he was enticed to invest before he was forced to reduce his interest to 34%, Plaintiff
Horie could have dissolved EA and recovered his investment.
5. Under Section 162(6) of the Isle of Man Company Act of 1931, the court may order that
a company be wound up and its assets distrubuted to its shareholders if it is of the opinion that it
is “just and equitable” to do so. Had Plaintiff Horie been informed by Defendants that EA did
not own sufficient rights in the spacecraft hardware to permit modifying them for flight, he
would have petitioned the court for a “just and equitable” winding up . This would have allowed
recovery of substantial cash and assets, with which he could have better settled his financial
difficulties at the time. Had Plaintiff Horie known the truth, he could have immediately
petitioned the court for a “just and equitable” winding up, thereby recouping most of his
investment. Defendant Dula knew this posed a risk to accomplishing his plans to control and
takeover for himself the entireity of Plaintiff’s investment, and thus he concealed the truth from
Plaintiff Horie, and later the other minority shareholders in EL and EA, and his employees.
6. Under Section 180 of the Isle of Man Company Act of 2006, a shareholder is entitled to
petition the court for involuntary dissolution if the company has been operated in a way which is
or might become “oppressive or unfairly prejudicial” to him. Additionally, under Section 197 of
the Act a shareholder may petition the court to gather evidence in support of such involuntary
CertifiedDocumentNumber:63120901-Page21of28
dissolution, where the business was formed or is being conducted dishonestly or with the intent
to defraud, or is associated with any other entity or person engaged in fraud or deceit. The 2006
Act expressly adopts the provisions of the 1931 Act in executing involuntary dissolution, and it
would be handled under Section 162(6) of the 1931 Act as a “just and equitable” winding up of
the company. As Horie's attorney Dula should have advised of his legal rights and remedies.
As to the conflict of interest that existed between Dula the attorney and Dula the individual
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attempting to steal Horie's money, Dula had a duty to advised him to obtain separate independent
legal counsel. Directing Horie to get legal advice from Friedman in Dula's office did not solve
the problem.
7. Thus, regardless of which Act the Defendant companies were incorporated under, or later
re-registered, both EA and EL were subject to a “just and equitable” winding up at any time on a
petition by a minority shareholder. Plaintiff Horie was a shareholder of record in EA until after
Dula fraudulently advised him to assign the remainder of his EA investment to a Trust and
Dula's business associate Trustee and later to LDH. But for Defenadant Dula’s fraud and breach
of fiduciary duty to Plaintiff Horie, he could have effected the dissolution of EA and recouped
his entire investment of $49 million. After the transfer of the remainder of his EA investment to
LDH, Plaintiff Horie today remains entitled, at a minimum, to actual damages measured by the
difference between his initial investment and the market value of EA at the time of the transfer.
Thus, Plaintiff Horie is now entitled to actual damages.
8. Fraud: Defendants have commited fraud by inducing Plaintiff Horie to invest and to
later reduce his equity ownership in EA from 75% to 34% by false and material
misrepresentations of material fact and by failure to reveal material facts, as set forth herein. Mr.
Horie relied to his detriment on the misrepresentations and failures to reveal material facts to
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effectively sell out his controlling interest in EA and become a minority shareholder, and to
forego his right under Isle of Man law to have dissolved the corporation at that time and recover
his investment.
9. Upon information and belief, Defendants furthered the fraud by inducing the Stotts and
LDH to sell out their interest in EL and EA by false and material misrepresentations of material
fact and by failure to reveal material facts, as set forth herein. The Stotts and LDH relied to their
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detriment on the misprepresentations and failures to reveal material facts to sell out their interests
to Defendants for less than 3% of its then true liquid value. Though the Stotts and LDH signed
releases of all claims in connection with their respective buy-outs, both contracts are void for
having been fraudulently induced by express material misrepresentations made a part of the deal
to bolster the oral misrepresentations that were made to get each of the parties to negotiatiate the
lop-sided deals in the first place, all as described above herein. “Fraus omnia corrumpit: fraud
vitiates everything it touches.”
10. Thus, Plaintiff Horie and the putative minority shareholders have suffered damage as a
direct result of Defendants’ fraudulent conduct. Defendant Dula’s dishonest conduct was and
remains egregious, unlawful and unethical, and should be punished by the assessment of punitive
damages.
11. Breach of Fiduciary Duty: Defendant Dula as Horie's lawyer and trustee breached his
fiduciary duty to his investor and shareholder Plaintiff Horie by enticing him to invest in the first
place, and then later misleading him into selling out his controlling interest in EA by
negotiationing with him in bad faith and on the basis of fraudulent statements and failure to
reveal facts within his knowledge relevant to the consideration of the transaction proposed by
Defendant Dula, whereby Plaintiff drastically reduced his equity ownership in EA, as set out
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herein. Had Defendant Dula been honest with his client and investor Plaintiff Horie, it would
have allowed Horie the opportunity to dissolve EA and recoup his entire investment. After
having assigned the remainder of his EA stock to LDH, Plaintiff Horie is now entitled to recoup
that part of his investment measured by the difference between the initial investment and the true
market value of EA at the time of the transaction with LDH, as set out above.
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12. Defendant Dula also breached his fiduciary duty to his minority shareholders LDH and
the Stotts by misleading them into selling out their interests in EL and EA at an unconscionably
low price by negotiating with them in bad faith and on the basis of fraudulent statements and
failure to reveal facts within his knowledge relevant to the consideration of the buy out
transaction proposed by majority shareholder Dula.
13. Defendant Dula has also wasted the assets of the Defendant enterprises.
14. All these actions by Defendant Dula have caused damage to Plaintiff Horie, LDH, and
the Stotts, and further his conduct is dishonest and unethical and should be punished by the
assessment of punitive damages.
15. Statutory Fraud: Defendants have commited statutory fraud by violating the provisions
of TEX. BUS. & COMM. CODE § 27.01 by inducing Plaintiff Horie to invest, to later sell out
his controlling equity position in the stock of the corporation EA, and to then support and
approve the transaction by which LDH was bought out, all by false misrepresentations of past or
existing material facts or by false promises to do an act in the future, all as set out herein.
16. Defendants are liable for the actual damages of Plaintiff Horie for reasonable and
necessary attorney’s fees, expert witness fees, costs of copies of depositions, and costs of court.
Defendant Dula caused the mispresentations and false promises to made with actual awareness
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that they were false, and as a result Defendants are liable for exemplary damages.
17. Breach of Contract: Plaintiff Horie entered into an original investment contract, which
was later modified based upon false representations and breaches of fiduciary duty to reduce his
equity position and to implement other terms favorable to Defendants. Upon advice of Dula,
Plaintiff placed his stock interest in a Trust with Dula's business associate. Thereafter, LDH
sold its EA stock position to Defendant Dula, HIMSELF, by way of a stock redemption
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agreement to which Horie was a necessary party. This agreement purported to replace the prior
investment contract. At no time did Plaintiff Horie transfer or assign his rights to claims asserted
herein. Moreover, all of these contracts are voidable at the discretion of Plaintiff, in whole or in
part, because they were induced by fraud. Defendants Dula and the Corporate Defendants have
breached the investment contracts by which Plaintiff Horie made his original investment and by
which he was later induced to reduce his equity position, and later allow transfer of that stock
position, as set out herein. Thus, Defendants are liable to Plaintiff Horie for damages, attorneys’
fees and interest as allowed by law, and alternatively, rescission of the investment agreements.
18. Texas Securities Act: Defendants have violated Article 581-33(B) of the Texas
Securities Act (“TSA”) by purchasing Plaintiff Horie’s interest in EA “by means of an untrue
statement of material fact or an omission to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they are made, not misleading,” as
set out herein.
19. Defendant Dula, aided and abetted by the Corporate Defendants, has also violated Article
581-33(B) of the Texas Securities Act (“TSA”) by purchasing the Stotts’ interest in EL and
LDH’s interest in EA “by means of an untrue statement of material fact or an omission to state a
material fact necessary in order to make the statements made, in light of the circumstances under
CertifiedDocumentNumber:63120901-Page25of28
which they are made, not misleading,” as set out herein.
20. The TSA is a strict liability statute with no scienter requirement on the part of the buyer
(the Defendants herein) and no reliance or causation requirements on the part of the seller
(Plaintiff Horie and LDH). The TSA is to be construed “to protect investors” and “because
article 581-33 is remedial in nature in the civil context, it ‘should be given the widest possible
scope.’
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21. Defendants are strictly liable for rescission damages under the TSA to Plaintiff Horie and
LDH as sellers in the amount of the value of the securities at the time of the transaction in
question plus any income received by Defendants, less the consideration already paid to the
LDH, plus costs and attorney’s fees. Art. 581-33(D)(4)(6)(7). Further, the rights and remedies
under the TSA “are in addition to any other rights (including exemplary or punitive damages) or
remedies that may exist at law or in equity.” Art. 581-33(M).
22. Piercing the Corporate Veil: For the purpose of each cause of action the corporate veil
between EA, EL, and EA USA may be pierced on behalf of Plaintiff and LDH, because
Defendant Dula effectively controlled each corporation and operated them as his alter-ego to
commit the acts complained of herein. Indeed, Defendant Dula used the separate corporate EL
structure to prevent Horie or LDH to over-ride his control of EA, thus allowing Defendant Dula
to execute his fraudulent plan.
23. Monies Had and Received: The Defendants have been unjustly enriched by
appropriating Plaintiff's funds. Accordingly, Defendants are liable to Plaintiff for monies had
and received and unjust enrichment.
24. Statutory Theft and/or Conversion: The conduct of the Defendants gives rise to a
claim under Chapter 134 of the Texas Civil Practice & Remedies Code and/or conversion.
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Plaintiff is entitled to his actual damages, expemplary damages and pursuant to Chapter 134
reasonable attorney fees.
25. Accounting: Plaintiff is entitled to an accounting of funds placed in trust with the
Defendants.
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26. Negligence: The conduct of the Defendants was negligent. Defendants owed Plaintiff a
duty of ordinary care, and breached that duty causing Plaintiff damages in excess of the
minimum jurisdictional amounts of this court.
27. Joinder: In the alternative, Plaintiff Horie joins LDH as a Plaintiff herein pursuant to
Rule 39, Texas Rules of Civil Procedure, because it may be necessary as a practical matter to
protect its interests and prevent persons already parties from incurring the risk of multiple or
inconsistent recoveries.
XXXVI.
JURY TRIAL DEMAND
28. Plaintiff requests a trial by jury.
Prayer
Plaintiff Horie d/b/a Japan Space Dream respectfully requests that the Court grant the
relief requested for actual damages, for punitive and exemplary damages as allowed by law,
prejudgment and post-judgment interest as allowed by law, attorneys’ fees as allowed by law,
and such other and further relief to which Plaintiff may be justly entitled.
Respectfully submitted,
CertifiedDocumentNumber:63120901-Page27of28
The Kelley Law Firm
By: /s/ Lloyd E. Kelley_____
Lloyd E. Kelley
Texas Bar No. 11203180
kelley@lloydkelley.com
The Kelley Law Firm
2726 Bissonnet, Suite 240, PMB 12
Houston, TX 77005
(281) 492-7766 (main)
(281) 652-5973 (fax)
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James D. Pierce, Attorney At Law
By: /s/ James D. Pierce____
James D. Pierce
Texas Bar No. 15994500
jim@jamespierce.com
1 Sugar Creek Center, Suite 1080
Sugar Land, TX 77478
(713) 650-0150 (main)
(713) 650-0146 (fax)
ATTORNEYS FOR
Plaintiff Takafumi Horie d/b/a
Japan Space Dream
CertifiedDocumentNumber:63120901-Page28of28
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I, Chris Daniel, District Clerk of Harris
County, Texas certify that this is a true and
correct copy of the original record filed and or
recorded in my office, electronically or hard
copy, as it appears on this date.
Witness my official hand and seal of office
this June 5, 2015
Certified Document Number: 63120901 Total Pages: 28
Chris Daniel, DISTRICT CLERK
HARRIS COUNTY, TEXAS
In accordance with Texas Government Code 406.013 electronically transmitted authenticated
documents are valid. If there is a question regarding the validity of this document and or seal
please e-mail support@hcdistrictclerk.com
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3/6/2015 1:49:40 PM
Chris Daniel - District Clerk Harris County
Envelope No. 4401773
By: Tammy Tolman
Filed: 3/6/2015 1:49:40 PM
CAUSE NO. 2014-65947
§ IN THE DISTRICT COURT OF
TAKAFUMI HORIE, §
§
§
Plaintiff, §
v. §
§ HARRIS COUNTY, TEXAS
THE LAW OFFICES OF ART DULA, §
ARTHUR M. DULA, individually, and d/b/a §
THE LAW OFFICES OF ART DULA, §
ANAT FRIEDMAN, individually, and d/b/a §
THE LAW OFFICES OF ART DULA, §
J. BUCKNER HIGHTOWER, §
THE ROBERT A. AND VIRGINIA §
HEINLEIN PRIZE TRUST, through its §
trustees ARTHUR M. DULA AND §
J. BUCKNER HIGHTOWER, §
§
Defendants. § 55 TH DISTRICT COURT
PLAINTIFF’S FIRST AMENDED PETITION
I.
INTRODUCTION
Takafumi Horie, individually and d/b/a Japan Space Dream, (“Horie”) files this
Amended Original Petition against Defendants Arthur M. Dula, individually and d/b/a The Law
Offices of Art Dula, and Anat Friedman, individually and d/b/a The Law Offices of Art Dula, and
CertifiedDocumentNumber:64525805-Page1of13
The Robert A. and Virginia Heinlein Prize Trust, through its trustees Arthur M Dula and J. Buckner
Hightower for breach of fiduciary duty, fraud, statutory fraud, breach of trust, money had and
received, an accounting, and negligence, and alleges as follows:
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II.
CASE SUMMARY
This is a case about Houston attorney Art Dula, who took advantage of Japanese
entrepreneur Takafumi Horie, by claiming that he could set up a commercial space transportation
program to carry cargo, scientific experiments, and people into low Earth orbit to the
International Space Station and other space destinations. Dula was, and is, the lawyer and a trustee
for The Robert A. and Virginia Heinlein Prize Trust ("Heinlein Trust"). Heinlein was a prolific
science fiction author who was famous for writing about manned space exploration. Dula used his
position as trustee of the Heinlein Trust to promote his law firm in getting business under the
premise of establishing "new space business enterprises." Using his position as trustee of the
Heinlein Trust, Dula, through an intermediary, sought out Horie and solicited him as a client and
investor. Horie offered his services as a “space” lawyer who could set up entities to make space
travel possible and fraudulenty induced Plaintiff to trust him and give him $49 million in trust to
further this enterprise of space travel.
III.
Horie engaged Dula as his attorney, and then trusted him enough to give Dula
$49,003,000.00 in trust for purposes of setting up a business to accomplish space travel. The
money was sent to Dula's Texas IOLTA client trust fund account to accomplish the goals for Dula's
CertifiedDocumentNumber:64525805-Page2of13
client Horie. Art Dula misapproiated funds to engage in a scheme to steal Plaintiffs’ money and
divert it to himself and his conspirators. In reliance on Dula’s promises that Plaintiff’s investment
would be used to establish a cutting-edge, profitable commercial spaceflight program, Horie
engaged Dula as his attorney. Horie subsequently gave Dula $49,003,000.00, which Horie sent to
Dula's Texas IOLTA client trust fund account. However, Dula never intended to engage in a
77
commercial space program, and in fact continually misrepresented, concealed facts and defrauded
his client Takafumie Horie d/b/a Japanese Space Dream (“Horie”). His intent was to take his
clients’ money over time through a complex scheme under the guise that he was building a space
program.
IV.
Dula has gone to great lengths to hide and conceal his true conduct by acts of both
commission and omission, all of which would constitute fraud if perpetrated under the normal
morals of the marketplace but which also constitute breach of fiduciary duty when undertaken in
the context of the attorney-client relationship. Horie only recently discovered the wrongs
perpetrated against him by Defendants, because, in violation of his fiduciary duties to Horie, Dula
never disclosed the true facts to him, but rather continually mispresented and/or concealed those
facts throughout their relationship. Horie relied on and trusted Dula as his attorney, his fiduciary,
and as an apparent expert in the nascent field of private spaceflight. Dula took advantage of his
position as Horie’s attorney and a self-proclaimed expert to convert his clients’ funds for his own
uses and purposes. Accordingly, to the extent Defendants plead the statute of limitations as a
defense to any of Horie’s claims, Horie is entitled to the benefit of the discovery rule. Horie further
pleads that Defendants fraudulently concealed their misconduct, which excuses the failure to sue
within the limitations period.
CertifiedDocumentNumber:64525805-Page3of13
Plaintiff Horie only recently discovered the wrongs perpetrated against him by
Defendants, because the facts were concealed by Defendant Dula, and Dula never advised Horie
of his wrong doing. Plaintiff relied on and trusted Defendant Dula in Dula’s position as his
attorney, his fiduciary, and because of his representations as to his expertise concerning his
spaceflight project and his investment therein. The Defendants had a fiduciary duty to Plaintiff
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and Defendants fraudulently concealed the facts to prevent Plaintiff from learning of their
fraudulent behavior and to prevent Plaintiff from seeking legal redress. Alternatively, Defendants
owed Plaintiff a fiduciary duty and they failed to disclose facts they were aware of which prevented
Plaintiff from bringing suit earlier.
V.
Plaintiff Horie became aware of Dula’s scam when he read an article by Alexander Forbes
that Dula had sold at auction one of the spacecraft articles purchased with Plaintiff’s money. The
Forbes article implied that Dula was liquidating, and indicated the spacecraft was only suitable for
display in a museum, and not as a potential flight article as had been falsely represented to Plaintiff
Horie from the beginning. The supposed space program was a sham, as Dula never had the rights
or ability to utilize the spacecraft purchased with Plaintiff’s money for anything other than display
purposes. However, this fact was kept secret from Plaintiff. Plaintiff never authorized the funds
held in trust be utilized to purchase spacecraft sold for display purposes. Plaintiff never authorized
funds held in trust to be utilized to set up a "space program" incapable of space travel. Plaintiff
never authorized funds held in trust to be utilized to set up a business other than a true "space
business enterprise." Had this information been known to Plaintiff, he would have never given
any money to Defendants in the first place, and if known after he had placed his money in trust to
CertifiedDocumentNumber:64525805-Page4of13
Dula, Plaintiff would have immediately petitioned for redress.
By additional fraudulent acts, Dula ultimately obtained complete control of Plaintiff's funds
and has utilized them for his own benefit, and, on information and belief, has fraudulently
transferred the funds to his wife, Tamea, a prominent Houston lawyer, and his children Russell
and Austin. The continuing fraud and breach of fiduciary duty has damaged Plaintiff in excess of
the minimum jurisdictional amounts of this court.
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VI.
Plaintiff Horie seeks by this suit to recover damages, acutal and consequential, of the
monies Defendants took and which the law treats now as held in trust for Plaintiff, and to obtain
other damages allowed by law for himself.
VII.
DISCOVERY LEVEL AND REQUEST FOR DISCLOSURE
Discovery should to be conducted under Level 3 pursuant to Texas Rule of Civil Procedure
190.3. Plaintiff requests disclosure of the items set forth in Tex. R. Civ. P. 194.2 a-k.
VIII.
PARTIES
A. Plaintiff Takafumi Horie is a citizen and resident of Japan, and at all relevant times was
doing business as Japan Space Dream. Horie was solicited in Japan from Texas lawyer Defendant
Art Dula to invest US $49,003,000.00 for creation of a private operating spaceflight program.
B. Defendant Arthur M. Dula, individually and d/b/a the Law Office of Art Dula, is a
resident of Houston, Harris County, Texas. Defendant has appeared and answered herein.
C. Defendant Anat Friedman is a lawyer at the law office of Art Dula and is a resident of
Houston, Harris County, Texas. Defendant has appeared and answered herein.
CertifiedDocumentNumber:64525805-Page5of13
D. Defendant Robert A. and Virginia Heinlein Prize Trust (“Heinlein Prize Trust”)
Houston, Harris County, Texas. Defendant has appeared and answered herein.
E. Defendant J. Buckner Hightower is a Texas citizen and resident. Defendant Hightower
conspired, aided and abetted and/or facilitated Defendant Dula in committing and concealing the
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illegal acts complained of herein. He engaged in actions designed to cover up and keep facts secret
from the public auditors and the government. He has been served and answered.
IX.
JURISDICTION
This Court has subject matter jurisdiction over this dispute because the amount in
controversy exceeds its jurisdictional threshold. See Tex. Gov’t Code Ann. §§ 24.007 - 24.008.
This Court has personal jurisdiction over Defendants because: (1) they are actively engaged
in business in the State of Texas; (2) they reside in the State of Texas; and/or (3) they committed
torts and statutory violations in whole or in part in this state. See Tex. Civ. Prac. & Rem. Code §
17.042.
Venue is proper under Tex. Civ. Prac. & Rem. Code § 15.002. All or a substantial part of
the events or omissions giving rise to Plaintiff’s claims occurred in this County.
X.
FACTUAL BACKGROUND
The Plaintiff is a Japanese citizen, who was interested in the development and
advancements in space exploration. Art Dula sought Plaintiff out, representing that he was a
"space attorney" who could assist Plaintiff in the development of a space program. Dula requested
that Horie give him approximately $50,000,000 in trust, so that Dula could facilitate Plaintiff's
CertifiedDocumentNumber:64525805-Page6of13
dream of developing a private commercial space program. Dula represented he had connections
with the Russian aerospace company NPO Mashinostroyenia (“NPOM”) who would provide
hardware and technical expertise to build a commercial space business. He represented that he
had acquired rights to NPOM space-proven capsules that could be used in a space program. Dula
represented that he was well-connected and could assemble the professionals necessary to build a
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commercial space program. However, from the beginning, Dula had no intent to build a space
program, but only to take Plaintiff's monies for his own use, utilizing a complex ruse, contrary to
the interests of his cestui que trust. Dula convinced Plaintiff to place $49,003,000.00 into Dula's
trust account for purposes of doing due diligence, and later setting up a space program in
conformity with U.S. law and regulations (Dula claimed and continues to claim to be a "space law"
expert). Dula used several schemes and devices to fraudulently take Plaintiff’s money out of the
IOLTA trust account and eventually placed it into his own hands in violation of his duty of utmost
trust.
XI.
Using Plaintiff's funds, Dula purchased four Almaz spacecraft capsules and two space
stations from NPOM. This space hardware came from a Soviet-era secret space program, and
Dula represented to Plaintiff that a key advantage was that the spacecraft and space stations being
acquired had undergone rigourous flight testing. He represented to Plaintff and others that the
hardware could be made "flight worthy," and that he could refurbish, modify and update the
equipment so that it would be certified for flight. The purchase contracts had to be approved by
the Russian government, and unbeknownst to Plaintiff and on information and belief, expressly
excluded the right to modify the Russian hardware, thus relegating it to display uses only! The
items were only museum pieces, a secret Dula would keep until well after he acquired control of
CertifiedDocumentNumber:64525805-Page7of13
Plaintiff's investment.
XII.
Dula took Horie's money out of the IOLTA trust account and used it improperly. Dula first
wired the funds to an account that he controlled. At the time he solicited the investment from
Plaintiff, Defendant Dula was a lawyer licensed in Texas, who held himself out as an expert in
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"space law," in properly establishing and organizing space enterprises, in advising concerning
contracts with NASA, and in negotiating and drafting "space agreements." Dula drafted a "Private
Placement Memorandum" which he represented to Plaintiff was a part of the legal documentation
necessary to create a legal space program which he represented to be a proper "space agreement"
to establish a "space enterprise." Per Dula's instructions, Plaintiff wired over time $49,003,000.00
to Dula’s attorney trust account in Houston, Texas. Thereafter, Defendant Dula transferred the
money to an account Dula controlled. Later, on information and belief, funds were sent to his wife
Tamea and his children Russell and Austin Dula.
Being a part of a real space program was Plaintiff's dream, and if that could be achieved
the ownership percentages were insignificant compared to being involved in a pioneering new
business. Further, Plaintiff trusted Dula to act in Plaintiff's best interests, and relied on his
representations that a space program would be created. In fact the milestones and spaceflight in
general could never be accomplished, and Dula knew at the time he made the representations the
milestones could not be accomplished. The representations made to Plaintiff were false and Dula
omitted to state facts necessary to make the statements that were made not misleading. However,
in reliance on the truth of the misrepresentations and that Dula would continue to act in Plaintiff's
best interest and build a space venture, Plaintiff continued to believe him and took no action to
seek redress. In fact, Dula intentionaly gave Plaintiff false information to prevent Plaintiff from
CertifiedDocumentNumber:64525805-Page8of13
filing suit.
XIII.
Breaching his fiduciary duty, Dula "magically" transformed Horie’s entire initial
investment remaining at that time – upon informantion and belief over $34 million – into his own
name. But Dula had to lie again to get it done.
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Dula knew all along that his representations to Plaintiff were false. Dula knew that the
contracts that supposedly gave the space program ownership of the Russian space hardware only
transferred ownership rights for the purpose of displaying the hardware, e.g., at air shows, trade
shows or in museums. Thus, Defendants never acquired any rights to the capsules necessary to
refurbish and modify them in order to certify them to fly humans in space. Without such rights,
the representation that they owned or were acquiring the space hardware to accomplish the
objectives of the enterprise was false.
XIV.
Because the Russian space hardware that Defendant Dula represented could be owned
completely and modified for space use turned out to have limited/restricted uses, i.e., as museum
pieces, the entire scheme was a scam. Defendant Dula knew all along that he could only acquire
the rights to use two Almaz capsules and two spacestations for the purpose of display and
marketing, and legally, under the contracts with the Russians he eventually obtained he could
never modify them for flight. Dula has bought on numerous occasions additional spacecraft under
the same limited terms, while representing the opposite to Plaintiff and others. Dula's fraud was
intentional, malicious, and warrants punitive damages. Further, the exemplary damages are not
capped because the conduct of Dula falls within Tex. Civ. Pract. Rem. Code Section 41.008(c).
XV.
CertifiedDocumentNumber:64525805-Page9of13
Had Mr. Horie known at the time that Defendant Dula was lying about the ownership of
the space hardware he eventually acquired from NPOM, he would have never invested a penny
with Dula, and never would have authorized funds to leave Dula's trust. Plaintiff seeks to recover
his $45 million in cash, plus whatever value the space hardware would have had as museum pieces.
9
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This is precisely what Defendant Dula feared might happen – thus Dula lied repeatedly to Plaintiff
Horie to keep his enterprise intact.
XVI.
CAUSES OF ACTION
1. Claims: Horie brings suit against Defendants for breach of trust, fraud, and statutory fraud,
breach of fiduciary duty, monies had and received, an accounting, and for negligence. Plaintiff
seeks rescission/damages in the amount of his $49,003,000.00 original investment, plus interest,
attorneys’ fees, and damages allowed at law or equity, including punitive damages.
2. Joint and Several Liability: Defendant Dula owns has controlled the Defendant Heinlein
Prize Trust during the relevant time period, and as such committed the acts complained of herein
through one or all of them at various times, such that those entities have joint and several liability
herein. Defendant Dula has also operated the Heinlein Prize Trust as his alter-ego from his offices
in Houston, Texas; thus, it bears the same liability for his acts as does Defendant Dula. From the
beginning, Defendant Buckner Hightower, as Dula's friend, as a co-trustee of the Heinlein Prize
Trust, has supported and conspired with Defendant Dula to further and cover up the wongful acts
of Dula, as set forth herein. Each of the causes of action herein is pled against all Defendants,
individually and collectively.
CertifiedDocumentNumber:64525805-Page10of13
3. Breach of Trust, Constructive Trust, Resulting Trust. All actions taken by Dula were
with funds he held for Plaintiff in trust. Actions with respect to the Trust funds were taken without
authority or effective consent. Therefore, all monies and assets acquired by any of the Defendants
are held in a Constructive/Resulting Trust for Plaintiff and should be delivered to Plaintiff.
Plaintiff is also entitled to damages for assets squandered or lost in violation of the trust(s).
10
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4. Fraud and Statutory Fraud: Defendants have commited fraud by inducing Plaintiff
Horie to given in trust money to Dula by false and material misrepresentations of material fact and
by failure to reveal material facts, as set forth herein. Mr. Horie relied to his detriment on the
misrepresentations and failures to reveal material facts of Dula. Plaintiff sues Defendants for fraud
and statutory fraud (TEX. BUS. & COMM. CODE § 27.01).
5. “Fraus omnia corrumpit: fraud vitiates everything it touches. Thus, Plaintiff has suffered
damage as a direct result of Defendants’ fraudulent conduct. Defendant Dula’s dishonest conduct
was and remains egregious, unlawful and unethical, and should be punished by the assessment of
punitive damages.
6. Breach of Fiduciary Duty: Defendant Dula as Horie's lawyer and trustee breached his
fiduciary duty to his client Plaintiff by enticing him to give in trust his money amounting to $49
millon in the first place, and then later misleading him to prevent Plaintiff from realizing the extent
of the breach of fiduciary duty to prevent him from filing a suit.
7. All these actions by Defendant Dula have caused damage to Plaintiff and further his
conduct is dishonest and unethical and should be punished by the assessment of punitive damages.
8. The continuing fraud and breach of fiduciary duty has damaged Horie in excess of the
minimum jurisdictional amounts of this court.
CertifiedDocumentNumber:64525805-Page11of13
9. Monies Had and Received: The Defendants have been unjustly enriched by appropriating
Plaintiff's funds. Accordingly, Defendants are liable to Plaintiff for monies had and received and
unjust enrichment.
10. Accounting: Plaintiff is entitled to an accounting of funds placed in trust with the
Defendants.
11
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11. Negligence: The conduct of the Defendants was negligent. Defendants owed Plaintiff a
duty of ordinary care, and breached that duty causing Plaintiff damages in excess of the minimum
jurisdictional amounts of this court.
XVII.
JURY TRIAL DEMAND
12. Plaintiff requests a trial by jury.
Prayer
Plaintiff Horie d/b/a Japan Space Dream respectfully requests that the Court grant the relief
requested for actual damages, for punitive and exemplary damages as allowed by law, prejudgment
and post-judgment interest as allowed by law, attorneys’ fees as allowed by law, and such other
and further relief to which Plaintiff may be justly entitled.
Respectfully submitted,
The Kelley Law Firm
By: /s/ Lloyd E. Kelley_____
Lloyd E. Kelley
Texas Bar No. 11203180
kelley@lloydkelley.com
2726 Bissonnet, Suite 240, PMB 12
CertifiedDocumentNumber:64525805-Page12of13
Houston, TX 77005
(281) 492-7766 (main)
(281) 652-5973 (fax)
James D. Pierce, Attorney At Law
By: /s/ James D. Pierce____
James D. Pierce
Texas Bar No. 15994500
jim@jamespierce.com
12
87
1 Sugar Creek Center, Suite 1080
Sugar Land, TX 77478
(713) 650-0150 (main)
(713) 650-0146 (fax)
ATTORNEYS FOR
Plaintiff Takafumi Horie d/b/a
Japan Space Dream
CERTIFICATE OF SERVICE
This is to certify that a true and correct copy of the above and foregoing instrument
has been forwarded to all counsel of record via electronic filing and or e-mail on this the 6th
day of March 2015.
/s/: Lloyd E. Kelley _________________
LLOYD E. KELLEY
CertifiedDocumentNumber:64525805-Page13of13
13
88
I, Chris Daniel, District Clerk of Harris
County, Texas certify that this is a true and
correct copy of the original record filed and or
recorded in my office, electronically or hard
copy, as it appears on this date.
Witness my official hand and seal of office
this June 5, 2015
Certified Document Number: 64525805 Total Pages: 13
Chris Daniel, DISTRICT CLERK
HARRIS COUNTY, TEXAS
In accordance with Texas Government Code 406.013 electronically transmitted authenticated
documents are valid. If there is a question regarding the validity of this document and or seal
please e-mail support@hcdistrictclerk.com
89
TAB C
1
Motion to Dismiss
April 20, 2015
1 REPORTER'S RECORD
VOLUME 1 OF 1 VOLUMES
2 TRIAL COURT CAUSE NO. 20140=-65927
3 TAKAFUMI HORIE ) IN THE DISTRICT COURT
)
4 vs. ) HARRIS COUNTY, TEXAS
)
5 THE LAW OFFICES OF ART
DULA, ET AL
6 ) 55TH JUDICIAL DISTRICT
7
8
9 _____________________________________________
10 MOTION TO DISMISS
_____________________________________________
11
12
13 On the 20th day of April, 2015, the following
14 proceedings came on to be held in the above-titled
15 and numbered cause before the Honorable Jeff
16 Shadwick, Judge Presiding, held in Houston, Harris
17 County, Texas.
18 Proceedings reported by computerized stenotype
19 machine.
20
21
22
23
24
25
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Motion to Dismiss
April 20, 2015
1 APPEARANCES
2
Lloyd E. Kelley
3 SBOT NO. 11203180
The Kelley Law Firm
4 3726 Bissonnet, Suite 240
PMB 12
5 Houston, Tx 77005
Telephone: 281.492.7766
6 Fax: 281.652.5973
E-mail: kelley@lloydkelley.com
7 Attorney for Plaintiff
8 James D. Pierce
SBOT NO. 15994500
9 1 Sugar Creek Center, Suite 1080
Sugar Land, Tx 77478
10 Telephone: 713.650.0150
Fax: 713.650.0146
11 E-mail: jim@jamespierce.com
Attorney for Plaintiff
12
Michael R. Levin
13 SBOT NO. 0351326
Baker & Hostetler LLP
14 200 South Orange Avenue
Sun Trust Center, Suite 2300
15 Orlando, FL 32801
Telephone: 407.649.4000
16 Fax: 407.841.0168
Counsel for Defendants
17
Joshua C. Thomas
18 SBOT NO. 24027428
Baker & Hostetler LLP
19 811 Main, Suite 1100
Houston, Tx 77002-6111
20 Telephone: 713.751.1600
Fax: 713.751.1717
21 E-mail: jthomas@bakerlaw.com
Counsel for Defendants
22
23
24
25
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April 20, 2015
1
2 THE COURT: I'm going to put this on the
3 record because we might want to refer back to this
4 later.
5 This is Case No. 2014-65947, Horie -- am I
6 pronouncing that right -- verses Law Offices of Art
7 Dula. Can I get appearances, please?
8 MR. KELLEY: Lloyd Kelley for the plaintiffs
9 and James Pierce.
10 MR. LEVIN: For the defendants, Michael Levin
11 of Baker Hostetler. With me is my colleague Josh
12 Thomas.
13 THE COURT: I've got a motion to continue this
14 hearing because you wanted to take Mr. Dula's depo.
15 MR. KELLEY: And the latest on her affidavit
16 with her name on it, Annese -- Annette Fronot.
17 THE COURT: Then the substantive motion,
18 motion to dismiss based upon the forum clause?
19 MR. LEVIN: Yes.
20 THE COURT: Okay. Let me just throw my
21 thoughts out there. You know my practice -- and you've
22 been here before and whoever doesn't like what I just
23 said, comment.
24 I'm not sure I understand why you need to take
25 anybody's deposition to decide whether or not there is a
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April 20, 2015
1 forum selection clause that would cause me to read on
2 the motion to dismiss. I read that your reason is that
3 you think there may be some fraud involved in it. But
4 my look at the case law was, I'm not sure that fraud
5 gets you out of the forum selection clause. So I'm
6 going to want you to talk to me why you need to take --
7 what are you looking for in this deposition that would
8 help -- that you need to know or what at least suspect?
9 MR. KELLEY: We have objected to their
10 evidence. We looked at it today in the lighter posture,
11 they have no evidence to support their forum selection
12 clause.
13 THE COURT: Okay. So, but we do have the
14 agreement that was signed, right?
15 MR. KELLEY: We are not -- they have nothing
16 to support that. They have an affidavit which purports
17 to be a business record, and we've objected to that
18 affidavit. We think it's defective. Even past that,
19 they don't have anything to connect any of the facts
20 that they have got to that contract. I'll give you an
21 example.
22 THE COURT: The cause of action is not related
23 to the agreement.
24 MR. KELLEY: Oh, better yet. The parties.
25 The Heinlein Trust, when you look at the Heinlein Trust
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April 20, 2015
1 as a defendant and you look in that contract, you will
2 never find it.
3 THE COURT: This is the question for these
4 guys. The thing I want you guys to talk about is how is
5 it that these -- where do I find these parties on the
6 agreement? Like Mrs. Dula, for example. The defendant
7 is "the law office of." Then I saw that he signed the
8 agreement, but he signed it in capacity as -- I've
9 forgotten now.
10 MR. LEVIN: Two points, Your Honor. First,
11 the contract is not hearsay. If we need case law, I
12 have it, but under Texas law, the contract is not
13 hearsay; therefore, their objection to the contract is
14 moot but --
15 THE COURT: Before I do that, can I ask you a
16 question? Is this a situation where this contract is
17 coming in. I mean, I want to make sure I don't think
18 this is just a technical objection.
19 MR. KELLEY: It's a technical objection.
20 THE COURT: So, assuming that they remember
21 how to practice law and they lay the foundation and they
22 have the right affidavit and the document is in. Then
23 let's just in our mind jump to that spot, the document
24 is in. It does have a forum selection clause, which
25 would cause me to move it, and so then --
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April 20, 2015
1 MR. KELLEY: For certain parties.
2 MR. LEVIN: Let me get to the parties.
3 THE COURT: So, the question is -- once we get
4 to the substance, the question is, are these parties and
5 this cause of action subject to that contract which has
6 the forum selection clause. That's the real meat of the
7 action.
8 MR. KELLEY: Before you go any further, we
9 object to the rest of it. It's hearsay, because all
10 they have is this contract is valid and no connection
11 between the parties and the contract --
12 THE COURT: Okay.
13 MR. KELLEY: -- in that capacity.
14 THE COURT: But that's the issue. The issue
15 is whether or not these facts as they are alleged in
16 this -- that come into evidence, those facts and these
17 parties are subject to the --
18 MR. KELLEY: In that capacity.
19 THE COURT: Right. In that clause. So if
20 they are -- then you agree I have to dismiss it, it goes
21 to the Isle of Man?
22 MR. KELLEY: No. There are still other
23 grounds. In Texas, you still have to show other things.
24 You have a contractual one, but then you have to show
25 that they're going to make themselves, the defendants
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Motion to Dismiss
April 20, 2015
1 here, are willing and are willing to not only have it
2 there but are putting it there. That is, if I go to the
3 Isle of Man and they are resisting jurisdiction there,
4 so the Heinlein Trust says, I've got four -- for
5 instance the Isle of Man says, I have no jurisdiction
6 over the Virginia Heinlein Trust. It has no ability to
7 ever come in this court by consent or otherwise, because
8 you can't always just give us. If that's the case, then
9 the Court can't dismiss that piece of it.
10 THE COURT: That's a decent point. You can't
11 have a situation where there is no jurisdiction anywhere
12 in the world.
13 MR. KELLEY: And that's what they created was
14 the ability to say move it over there but we are never
15 going there. If that's the case, then the Court here
16 has to keep it. Remember, this is more like venue.
17 It's a forum selection clause for an action that
18 ultimately has to happen. If it can't happen there or
19 it's not going to happen there, then you have to keep
20 it, so the motion dismiss is improper because the motion
21 to dismiss and should have been a motion to abate if
22 they wanted to go that way.
23 THE COURT: I've got my bearings now.
24 MR. LEVIN: Your Honor, it's a motion to
25 dismiss because the Supreme Court of Texas tells us the
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Motion to Dismiss
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1 procedural vehicle is motion to dismiss. I'm going to
2 answer your question about the parties first.
3 THE COURT: Let's do that question, since you
4 brought it up first. Would it make -- if I agree with
5 you, would it make sense for me to sign an order abating
6 the case pending us all seeing that it actually does go
7 get filed in the Isle of Man and Isle of Man takes
8 jurisdiction?
9 MR. LEVIN: No, sir, because you're told by
10 the Texas Supreme Court the vehicle is a motion to
11 dismiss. Exclusive jurisdiction has been filed there.
12 Now let me address the parties issue.
13 THE COURT: But my brain is still stuck on the
14 other topic. How do we resolve Mr. Kelley's issues that
15 if I dismiss it and it gets refilled in the Isle of Man
16 and that Court says, "I don't have personal
17 jurisdiction" or whatever they say, "over -- over some
18 of these parties," then we have a situation where maybe
19 there is no place in the world to bring the case.
20 MR. LEVIN: The 14th -- I can take them one by
21 one. The 14th District in the Deep Water slander case,
22 which I understand is an appellate court decision --
23 jurisdiction.
24 THE COURT: Standing right on my shoulders.
25 MR. LEVIN: The decision in that case by Judge
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April 20, 2015
1 Gooseman, who is now affirmed in the Supreme Court, they
2 addressed this issue, and they said you don't -- it's
3 not a defense to the enforceability of a forum selection
4 clause to go review the enforceability of it in the
5 foreign jurisdiction. In that case -- in that case,
6 it's a very similar situation because the parties who
7 successfully enforced the forum selection clause were
8 not parties to the agreement. That what the Court says
9 was -- the facts there are instructive. The forum
10 selection clause was found in a consulting agreement
11 with a Dutch company. And then there was a second
12 agreement with a corporate defendant in that case. And
13 then there were three defendants, three individuals who
14 were also -- and neither the corporate defendant in that
15 case nor the three individuals were parties to the
16 agreement with the forum selection clause. But because
17 the pleadings by the plaintiff, just as Mr. Kelley has
18 pled here, has brought those folks within the purview of
19 the forum selection clause. For example, the
20 corporation was alleged to have been an alter ego of the
21 corporation's forum selection clause. Mr. Kelley has
22 alleged, Mr. Pierce has alleged, that Art Dula was an
23 alter ego of Excalibur, which were in the first
24 petition, which remains as an admission against interest
25 and, therefore, binds the plaintiff. So that goes to
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Motion to Dismiss
April 20, 2015
1 Dula.
2 Hightower and Anat Friedman and the Heinlein
3 Trust, if I can pronounce it correctly, the Heinlein
4 Trust, they are alleged to be joint and severally
5 liable. What the Court says is that, in the Deep Water
6 case, is because the plaintiff alleged that these other
7 folks, non-signatory parties, were substantially
8 interdependent in concerted actions with the entity with
9 the forum selection clause, the plaintiff is bound and,
10 in fact, equitable estopped, from contesting the
11 applicability of the forum selection.
12 THE COURT: So your reaction to Mr. Kelley's
13 comment that the facts that you bring me are hearsay or
14 lack of foundation or whatever, that I can grant -- that
15 I must grant -- I must grant your motion based on his
16 pleadings because we take then, if what he's saying is
17 true -- if what he's saying is true, then your argument
18 is supported and I grant the motion. So I should forget
19 any affidavits you guys have attached from your clients.
20 That's what you are saying, though?
21 MR. LEVIN: The records upon which you perform
22 your judicial labor is the petition and the amended
23 petition and the contract. The contract is not hearsay.
24 The business record affidavit was fine. It's also a
25 declaration by a party opponent, and it's also admission
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April 20, 2015
1 against interest because it's a ruling. So it's
2 admissible six ways from Sunday. And you don't need
3 evidence or discovery because he doesn't need discovery
4 about his own allegations. There are his allegation.
5 He made them. He had a specific detailed petition. We
6 filed our original motion to dismiss. And then he
7 produced a sanitized petition that eliminated reference
8 to Excalibur, but it doesn't make the first petition go
9 away. This is not like a motion to transfer venue.
10 It's completely different.
11 THE COURT: I understand. So what's going to
12 happen in the Isle of Man?
13 MR. LEVIN: Well, in the Isle of Man, first of
14 all, the original corporate defendant to whom Mr. Horie
15 gave his money certainly have jurisdiction. Mr. Duly is
16 the CEO. Mr. Hightower is a director and an executive
17 vice president.
18 THE COURT: So the Isle of Man court has
19 jurisdiction?
20 MR. LEVIN: I'm not here to speak
21 intelligently about the jurisdiction of Isle of Man
22 court. I say if I impose, you know, international
23 federal jurisdictional concept upon the Isle of Man
24 jurisprudence, I would say that these folks have
25 purposely availed themselves of the privileges of doing
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Motion to Dismiss
April 20, 2015
1 business in Isle of Man but you don't have to dismiss it
2 with prejudice.
3 THE COURT: When does the statute run?
4 MR. KELLEY: It's running. It's running. We
5 are in a gray area because of the fiduciary nature of
6 Mr. Dula.
7 THE COURT: That's my interest if I'm able to
8 and abate instead of dismissing.
9 MR. LEVIN: I'm here to say to you that I do
10 not know and cannot speak to Isle of Man jurisdiction,
11 I'm not contending that we are not subject to the Isle
12 of Man jurisdiction. There is a difference. They can't
13 make these folks show up on this isle the middle of the
14 Irish Sea, but they can still bring the claims against
15 them. So, you know, this is a -- this is not --
16 THE COURT: Subpoena power jurisdiction is
17 different.
18 MR. LEVIN: This is not someone living here in
19 Bellaire that's trying to bring a suit against a local
20 lawyer. This is a Japanese billionaire Internet tycoon
21 that put $49 million into a Isle of Man company to buy
22 soviet space craft.
23 THE COURT: That's funny that you mentioned
24 that, because I have once enforced a venue provision
25 against two Houston residents where they agreed venue
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April 20, 2015
1 would be Warsaw, Poland, or something like, because the
2 purpose of the agreement was to make it nearly
3 impossible for them to sue each other. I said, well, if
4 that was your deal, I'm forcing it. So I'm okay if this
5 thing going to the Isle of Man if that's what the
6 agreement was.
7 MR. KELLEY: Let's back up. He's made some
8 factual assertions that he has no support for, which we
9 have counter support for.
10 THE COURT: Hang on. But that's why I wanted
11 to make sure to clarify that if I carve out everything
12 that doesn't appear in your petition --
13 MR. KELLEY: We've already did a first
14 amendment. He's wrong. We have amended and that got
15 rid of the first one. All of the stuff he talks about,
16 well, it doesn't go away. Yes, it does.
17 THE COURT: I understand. I know what your
18 operative pleading is, but I'm working on the concept
19 that if I take your position -- if I carve out all of
20 the facts as he alleged them that don't appear in your
21 current active pleading, I look solely at your current
22 active pleading, is that a way to do it?
23 MR. KELLEY: Sure. Because we have already
24 done your work for you. That's why he's complaining.
25 He's said we've sanitized it. We have eliminated any
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April 20, 2015
1 reference to alter ego or anything like that. We
2 focused -- remember, the money originally went to
3 Mr. Dula in his IOTA trust account.
4 THE COURT: I know. But part of this is me
5 learning, because I know that if that's what I hung my
6 hat on today, they would just get a better affidavit
7 that alleged the facts. I mean, I like to get past the
8 procedure and get to the substance, at least while I
9 have lawyers standing in front of me. So, let's pretend
10 like everything gets fixed, I want to hear the argument.
11 MR. KELLEY: Here's the main argument. The
12 guys that he's talking about in this lawsuit are not
13 parties to the agreement that he wants to go with.
14 THE COURT: I know.
15 MR. KELLEY: The second thing is that
16 agreement is not what our lawsuit is about. We are not
17 suing on that deed. At best -- at best, he has a cause
18 of action that he ought to be bringing in the Isle of
19 Man.
20 THE COURT: Yeah, but there is a pretty -- the
21 provisions -- the venue provision is pretty broad.
22 MR. KELLEY: The parties agree about this
23 deed. Then the parties are defined clearly as four
24 people.
25 THE COURT: I know.
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April 20, 2015
1 MR. KELLEY: Only Mr. Horie. The other two
2 are not here, Abbey, the corporation and Excalibur
3 Almaz. The only way he's getting there now is to argue,
4 oh, in the first petition he argued he was the alter
5 ego. He doesn't want to confess that I'm the alter ego.
6 So if you take your argument, but that's gone now. The
7 first amendment took it out. So, now he's left with,
8 you are not the party, but I'm going to stretch it
9 because the relief supposedly goes against the officers
10 and employees. We are not suing them in that capacity
11 at all. It doesn't talk about his law firm. It doesn't
12 talk about his legal work. It doesn't talk about the
13 trust at all. There is no way to get the trust in here
14 and his work on behalf of the trust. And there is no
15 way to go the lawyers in his office released who worked
16 on this stuff. His associates. How does that come in
17 here? I'm going to get my law firm released, because
18 some board member or director, I signed a document that
19 releases the directors but now it's going to include
20 everybody in my law firm at Vinson & Elkins? That's not
21 going to work.
22 MR. LEVIN: The company -- there are two ways
23 we get the non-signatories. One is the way that I think
24 the Court tells us, the 14th District, in the Deep Water
25 slander cases. The other is the company group
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April 20, 2015
1 definition. The company group definition in the
2 agreement says that the release and, therefore, the
3 ability to enforce it thereof applies to officers and
4 directors, and that's Mr. Dula and Mr. Horie. It
5 applies to affiliates, and that's Anat Friedman. And
6 the only way they get to -- the only way they get to the
7 Heinlein Trust is by the actions of Mr. Dula and
8 Mr. Hightower. These are distinguished between their
9 actions as director as, lawyer, and so forth. So they
10 all fall within that company.
11 But I want to go back to, you know, the cases
12 he's relying upon about forum selection clause, yeah, he
13 has a case where they have to translate it from Polish,
14 and he's got the case of Massachusetts and Ohio. This
15 is a very broad forum selection clause. And it looks
16 backwards and includes specifically noncontractual
17 claims. It's not venue exclusive jurisdiction. It
18 applies to everything that happened when the man
19 invested his money to when they had all of these
20 dealings, and he got out of it.
21 THE COURT: It's very broad. I read that with
22 Mr. Kelley's. What I'm going to go back and think about
23 a little bit is why it was captured non-signatories in
24 the capacities that they signed. Because you have to
25 wonder if I sign a document as -- in my capacity as
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April 20, 2015
1 trustee of this trust, am I thinking to myself, you
2 know, I bet this binds me individually, too. And it
3 would be helpful to -- I'll go back and read it.
4 MR. LEVIN: Deep Water, from the 14th.
5 THE COURT: But I want to feel better about
6 that part of it.
7 MR. LEVIN: Well, I think that case and also
8 the International Profit case also will -- will
9 alleviate your concerns in that regard. But in a motion
10 to transfer venue, you have -- only have discovery
11 because there is affidavits contesting the pleadings.
12 Here we are entitled to rely -- Bay Area case says we're
13 entitled to rely upon the supersedeas pleadings, whether
14 he wants to run away from it now or not. So we think
15 that the records, as I read all of these cases, heavy
16 burden -- it's a heavy burden that the resisting party
17 has to overcome the forum selection clause. This is now
18 like an arbitration clause in this case, not like venue,
19 but an arbitration clause that favors -- the United
20 States Supreme Court says they are favored, and he has a
21 heavy burden. And he has not done anything other than
22 attack what his admission in his pleadings and the
23 admissibility of this contract. He's not met his heavy
24 burden to overcome the forum selection clause.
25 THE COURT: All right. I've got it.
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1 MR. KELLEY: A lawyer who is being sued
2 because of his legal work and fiduciary duty cannot
3 simply say, ship me out to the Isle of Man because we
4 are not coming under this agreement saying I'm suing on
5 that, the Isle of Man gets there and says, I have no
6 ability to enforce the ethical rules of Texas in
7 relationship to the lawyer and his client.
8 THE COURT: But your lawsuit goes beyond just
9 that, though.
10 MR. KELLEY: That's pretty much basically it,
11 and the trust. Our lawsuit is, what you did as a lawyer
12 in going to him and representing him, telling him you're
13 going to do these things, and taking his money into
14 IOLTA account. It's not a complaint. Our pleadings say
15 you took the money, you put it your IOLTA account, you
16 held it in trust and then you took that money, and you
17 did things with it that you weren't supposed to do and
18 you created these companies and you put the forum
19 selection clause and did all of these things, and then
20 you took the money yourself. So the lawyer ends up with
21 the 50 million. If you look at the whole scheme, he
22 takes the fifty from him, puts it in his trust, does
23 this circuitous route and then comes back with the
24 lawyer having the money. We are saying, you as the
25 lawyer breached your fiduciary duties.
Scotty Baldwin
Deputy Official Court Reportert
526
19
Motion to Dismiss
April 20, 2015
1 THE COURT: I get that.
2 MR. KELLEY: And you can't get a release as a
3 lawyer -- this is the second ground. You cannot
4 contractually stick in a release in some other document
5 without having first -- and the whole purpose -- the
6 only thing he's got in the entire document is he gave us
7 a release as an employee or officer. So if that's it,
8 the lawyer by definition cannot have -- we have got --
9 on a breach of fiduciary duty, if he claims that I stuck
10 it in there and got release from my lawyer stuff, that's
11 an independent act of breach of fiduciary duty. None of
12 that comes under the deed.
13 THE COURT: I understand. As I read your
14 pleadings, though, I had a hard time separating the
15 transaction, you know, the space business investment
16 thing from the stuff about the lawyer and his trust
17 account. I had a hard time separating that out.
18 MR. KELLEY: But the Isle of Man is not going
19 to take a breach of fiduciary duty, because he's not
20 even admitting that we are not going to go there.
21 THE COURT: I tried to get him to say that on
22 the record.
23 MR. KELLEY: I'll step back so we can get that
24 clear. But when they get up there, they're going to
25 say, oh, no, blah, blah. By the way, the rules do not
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Deputy Official Court Reportert
527
20
Motion to Dismiss
April 20, 2015
1 provide, even on a change of venue, the rules do not
2 provide you stall discovery. They have a rule in there
3 for venue that says this clearly doesn't do it. And
4 under the hearing you have no time limit or anything on
5 treating this. It's not treated under 21-day limit.
6 O'Conner points out that -- so, there is no abatement of
7 discovery.
8 So my other request was, I have a right to go
9 forward with discovery. They are here. Dula is who.
10 Mr. Friedman is here. I have a right the take their
11 deposition. I've requested it properly. I've got a
12 motion to compel. That's what before you. I'm saying,
13 look, unless you are willing to abate it today or grant
14 their motion, I am able to go forward, and I can test
15 some of these theories. His argument is that money
16 went --
17 The ruling is this. In reviewing this, four
18 months, the Court will take any depositions, any
19 discovery product, any affidavit. So clearly it
20 contemplates taking in whatever evidence is before it.
21 There is no rule of procedure that says if you file a
22 motion to dismiss based on this, it halts discovery.
23 They've got no order from the Court halting discovery.
24 I have pending discovery with them that they have simply
25 said we're not going to allow you to do.
Scotty Baldwin
Deputy Official Court Reportert
528
21
Motion to Dismiss
April 20, 2015
1 THE COURT: My question on that was whether or
2 not I needed the discovery to rule on the motion because
3 once I rule, you are either here or you're not here.
4 MR. KELLEY: Or it's abated.
5 THE COURT: Last word. I have got it.
6 MR. LEVIN: Rule 88 does not apply because in
7 a motion to transfer venue actually says in the rule,
8 Rule, I think, 87, it says, it shall not be dismissed.
9 It shall instead be transferred to another jurisdiction.
10 That's why discovery is permitted in the motion to
11 transfer venue context, because if the case is ongoing,
12 it might go to different county. The case law says, the
13 accelerated cases say, it is not a motion to change of
14 venue here, instead transfer it and ongoing which allows
15 discovery, this is dismissed. The party bargained to go
16 to a forum selection clause in counter to that to allow
17 discovery to go on.
18 THE COURT: I know. I just said that. It's a
19 question of whether or not I need the information to
20 rule on the motion j.
21 MR. LEVIN: The last point I just want to
22 leave you with if I may, on the legal malpractice side.
23 I just point out Section 11.4 of the deed of assignment
24 recites that each party has either had the terms and
25 effectiveness either explained by independent legal
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Deputy Official Court Reportert
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22
Motion to Dismiss
April 20, 2015
1 counsel or had the full opportunity to have its terms
2 and effects explained by independent legal counsel.
3 So Mr. Horie signed -- not only signed this
4 deed, he initialed every page, because he was
5 represented by independent legal counsel, not Mr. Dula.
6 MR. KELLEY: And nowhere in here does it say
7 that my work as your lawyer gets a release from my legal
8 work, and we are going to put that capacity in. This
9 doesn't make it.
10 THE COURT: I have a trial that is in its
11 third week that's coming back tomorrow. And I've got
12 the charge conference this afternoon, so I don't see any
13 reason this -- and I'm now playing in the HBA golf
14 tournament on Thursday. I don't see me reaching this --
15 if I don't finish it today, then don't expect anything
16 until Friday.
17 MR. LEVIN: That's better punctuality that I
18 get from a lot.
19 THE COURT: I've not done this a couple of
20 times where I just needed to think about it longer, but
21 I always rule by the end of the day on Friday on
22 anything I've gotten during the week. Otherwise, I
23 forget what happens and next week stuff comes up.
24 Right.
25 (End of hearing.)
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Deputy Official Court Reportert
530
23
Motion to Dismiss
April 20, 2015
1 STATE OF TEXAS
2 COUNTY OF HARRIS
3
4 I, Scotty Baldwin, Official Court Reporter in
5 and for the 55TH District Court of Harris, State of
6 Texas, do hereby certify that the above and
7 foregoing contains a true and correct transcription
8 of all portions of evidence and other proceedings
9 requested in writing by counsel for the parties to
10 be included in this volume of the Reporter's Record
11 in the above-styled and numbered cause, all of which
12 occurred in open court or in chambers and were
13 reported by me.
14 I further certify that this Reporter's Record
15 of the proceedings truly and correctly reflects the
16 exhibits, if any, offered by the respective parties.
17 I further certify that the total cost for the
18 preparation of this Reporter's Record is $276.00
19 and was paid by Baker Hostetler .
20 /s/Scotty Baldwin
21 Scotty Baldwin, CSR
Texas CSR 1019
22 Deputy Court Reporter
55TH District Court
23 Harris County, Texas
3610 E. Peach Hollow Cir.
24 Houston, Texas 77002
Telephone: 713.208.9524
25 Expiration: 12/31/2015
Scotty Baldwin
Deputy Official Court Reportert
531
TAB D
1
1 REPORTER'S RECORD
VOLUME 1 OF 1 VOLUMES
2 TRIAL COURT CAUSE NO. 2014-65947
3 TAKAFUMIE HORIE ) IN THE DISTRICT COURT
)
4 vs. ) HARRIS COUNTY, TEXAS
)
5 LAW OFFICES OF ART DULA ) 55TH JUDICIAL DISTRICT
6
7
8 _____________________________________________
9 DOCKET HEARING
_____________________________________________
10
11
12 On the 1st day of June, 2015, the following
13 proceedings came on to be held in the above-titled and
14 numbered cause before the Honorable Jeff Shadwick, Judge
15 Presiding, held in Houston, Harris County, Texas.
16 Proceedings reported by computerized stenotype
17 machine.
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22
23
24
25
Gina Wilburn, CSR
Official Court Reporter
55th District Court
532
2
1 APPEARANCES
2 Lloyd Kelley
SBOT NO. 11203180
3 Attorney At Law
2726 Bissonnet, Suite 240
4 Houston, Tx 77005
Telephone: 281-492-7766
5 Counsel for Plaintiff
6 Josh Thomas
SBOT NO. 24027428
7 BakerHostetler
811 Main Street
8 Suite 1100
Houston, TX 77002-6111
9 Telephone: 713-646-1331
Counsel for Defendant
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Gina Wilburn, CSR
Official Court Reporter
55th District Court
533
3
1 THE COURT: Okay. This is Case
2 No. 2014-65947, Takafumi Horie versus Law Offices of Art
3 Dula.
4 MR. KELLEY: Hi, Judge. I'm Lloyd --
5 Lloyd Kelley. I forgot what team I'm on. This is Jim
6 Pierce.
7 MR. PIERCE: James Pierce.
8 MR. LEVIN: Your Honor, I'm Mike Levin
9 from Orlando, BakerHostetler. With me is my colleague,
10 Josh Thomas, from Houston BakerHostetler.
11 THE COURT: Welcome back.
12 MR. LEVIN: Thank you. Good to see you,
13 Judge.
14 THE COURT: So you've traveled twice on
15 this topic to show me how sure you are that you're right
16 and I'm wrong.
17 MR. LEVIN: I came here once for a hearing
18 just to watch you before.
19 THE COURT: And now you know me to be
20 reasonable and openminded. Although, I still I think I
21 got this right. And I read your motion to reconsider.
22 And fortunately, there is a quick remedy. It's a venue
23 type ruling, which means it's mandamusible. Don't you
24 agree?
25 MR. LEVIN: It's not a venue type ruling,
Gina Wilburn, CSR
Official Court Reporter
55th District Court
534
4
1 but it is mandamusible.
2 THE COURT: And so the Court of Appeals
3 will correct me or not quickly enough so that there
4 is -- the bulk of the case will happen where it's
5 supposed to happen, whether here or the Isle of Man. So
6 my intention is to deny the motion to reconsider.
7 MR. LEVIN: If I might, just two points
8 just procedurally underlying why I move for
9 reconsideration.
10 THE COURT: Okay.
11 MR. LEVIN: One, if it does go up on
12 mandamus, that would be our intention if you deny it. I
13 want to make -- it's a significant enough issue that I
14 wanted to make sure the record is fully robust that
15 we're not on mandamus, they say, well, you didn't argue
16 that in front of the trial court judge.
17 THE COURT: Sure. And I'm all about
18 letting lawyers lawyer and you tee your case up and I
19 don't want the Court of Appeals to waste its time or you
20 waste your time, of course.
21 MR. LEVIN: But the second is there was --
22 because the motion in opposition to the supplemental
23 motion to dismiss was filed on the Friday right before
24 the hearing, there were some things that we didn't get a
25 full-blooded chance to address and I would like to
Gina Wilburn, CSR
Official Court Reporter
55th District Court
535
5
1 just -- understanding what you've said, I would like to
2 lay out for you --
3 THE COURT: Let 'er rip, I'm unoffended.
4 MR. LEVIN: Thank you, sir. The Courts of
5 this state tell you that the party resisting the
6 mandatory forum selection clause has a heavy burden to
7 show why it doesn't apply.
8 THE COURT: If it applies.
9 MR. LEVIN: Right. Well, let me set that
10 one aside for a second.
11 So your order covered three issues. You
12 covered the alleged status that Mr. Dula was Mr. Horie's
13 attorney. Now, that, we say that's just fiction, never
14 represented the man, but it's pled. So you covered
15 that.
16 You covered whether or not Mr. Dula and
17 Mr. Hightower would be susceptible to jurisdiction in
18 the Isle of Man and you've pressed me on that and we've
19 responded to that in our motion for consideration. And
20 then you have the issue about the live pleading and the
21 old pleading.
22 THE COURT: Right.
23 MR. LEVIN: So dealing with the attorney
24 issue and the point I wanted to make first is that the
25 allegation that Mr. Dula was Mr. Horie's attorney is not
Gina Wilburn, CSR
Official Court Reporter
55th District Court
536
6
1 inconsistent with the investment being an Excalibur
2 investment. Those are two separate thoughts. It's not
3 an either/or.
4 So if the forum selection clause does
5 apply -- and we'll get to that deed of assignment in
6 just a second -- the point is you said in the last
7 paragraph of your order, well, status as attorney
8 affects the interpretation of the release, something to
9 that effect. I have your order.
10 But the truth is even under the decision
11 cited by Mr. Kelley, the Falk & Fish decision, it's the
12 only decision unearthed where there's a forum selection
13 clause that was actually in an engagement letter between
14 a Texas lawyer and a North Carolina client. And even in
15 that case, in construing the mandatory forum selection
16 clause, the Court said that it is the heavy burden on
17 the client to show that it's unreasonable.
18 Now, the client met the burden there, but
19 that's because the client submitted affidavits and -- in
20 order to demonstrate that it was unreasonable. There
21 is -- the truth is on this record, Mr. Kelley has
22 submitted no affidavits on the part of Mr. Horie or
23 anybody else. There has been nothing by the party
24 resisting the forum selection clause to show that --
25 that it's unreasonable. So there's been a failure to
Gina Wilburn, CSR
Official Court Reporter
55th District Court
537
7
1 meet the burden.
2 On the second --
3 THE COURT: Nobody would have to if it
4 doesn't apply.
5 MR. LEVIN: Right. And the second point
6 you asked me about is could be Mr. -- and you pointed in
7 your order, could Mr. Dula and Mr. Hightower be under
8 the jurisdiction of the Isle of Man court. And I've --
9 and we've said, as you've seen in our motion to
10 reconsider, yes, CEO of the company, vice president of
11 the company, they admit they're subject to jurisdiction
12 of the Isle of Man court.
13 But, again, it's not our burden to say
14 there is jurisdiction. It's the burden of the party
15 resisting the clause to say there is not, and that's not
16 been met.
17 So let's go now to the main issue, the --
18 the actual deed of assignment and whether it applies to
19 this situation or not, whether that forum selection
20 clause applies.
21 That forum selection -- that deed of
22 assignment in the recitals, as we went through in detail
23 in our motion, covers every facet of Mr. Horie's
24 involvement with this company. It's -- it covers in the
25 recitals the memorandum of understanding where he agreed
Gina Wilburn, CSR
Official Court Reporter
55th District Court
538
8
1 to invest this $49 million. It covers the June
2 agreement where after he got convicted and sentenced, he
3 assigned his ownership of Excalibur to a trust.
4 THE COURT: How does it cover his
5 relationship with an attorney if there was one?
6 MR. LEVIN: Because it covers his
7 relationship with Excalibur regardless, regardless of
8 whether it involves his attorney or not. The question
9 really is: Why does -- if you have a forum selection
10 clause that applies to all of Mr. Horie's relationship
11 with -- regarding this 49 million-dollar investment, the
12 question is: If it's also regarding his attorney
13 relating to that investment, you still have a forum
14 selection clause applying to that investment.
15 Now, the difference between the original
16 com -- petition -- I keep calling it complaint because
17 that's what we call it in Florida -- the original
18 petition and the amended petition is only -- because
19 they both talk about the alleged attorney/client
20 relationship -- is only Mr. Kelley went through and
21 every time it said Excalibur, he called it a space
22 business or a space enterprise or a space venture or a
23 space entity. And one other generalized term that I
24 can't recall right now. All to substitute for
25 Excalibur.
Gina Wilburn, CSR
Official Court Reporter
55th District Court
539
9
1 The allegations against Mr. Dula were the
2 same. We've cited paragraph -- a -- a significant
3 penultimate paragraph in the complaint that says what it
4 was all about. So the only question is whether his
5 status as an alleged attorney excuses Mr. Horie from
6 having to comply with the forum selection clause and
7 that becomes --
8 THE COURT: I don't see that as the
9 question at all. The status of his relationship as an
10 attorney is the -- is a separate relationship. If I
11 hire you to help me make an investment in this parking
12 lot across the street and I get into -- into a fuss with
13 the people who own the parking lot across the street and
14 we settle that case, when I separately -- I would never
15 sue you, sir; but, I mean, if I separately sue you for
16 malfeasance somehow in the attorney/client relationship,
17 the venue or release or the terms of the settlement I've
18 made with the folks across the street doesn't relate to
19 that at all.
20 MR. LEVIN: No, sir.
21 THE COURT: That's -- that's the link that
22 you're going to have to make for me.
23 MR. LEVIN: Yes. The link is that they
24 allege that Mr. Dula is both the CEO of the parking lot
25 across the street and the attorney for Mr. Horie, both.
Gina Wilburn, CSR
Official Court Reporter
55th District Court
540
10
1 So it's not me advising you to investment in the parking
2 lot across the street and giving you negligent advice
3 about it. It is on their theory -- and again, we've
4 even attached communications to show that Mr. Dula never
5 represented this man and this man is the combination of
6 Steve Jobs and Bernie Madoff in Japan. He has plenty of
7 lawyers and he was represented by a Silicon Valley firm
8 in the situation and we attached that e-mail.
9 But the situation -- the problem with your
10 analogy is that if I'm the CEO of the company you
11 invested in, you invest the money, I'm also your
12 attorney, then I may or may not be liable to you. That
13 would come out of the facts. But if our contract has a
14 forum -- a mandatory forum selection clause under Falk &
15 Fish --
16 THE COURT: But my contract with you as my
17 attorney doesn't.
18 MR. KELLEY: That's right.
19 MR. PIERCE: That's right.
20 MR. LEVIN: The contract relating to
21 investment in the company you claim I'm the CEO of does.
22 THE COURT: And in that capacity, you're
23 released and if I sued you in that capacity, I'd be in
24 the Isle of Man.
25 MR. KELLEY: Right.
Gina Wilburn, CSR
Official Court Reporter
55th District Court
541
11
1 MR. LEVIN: He did sue. He did sue in the
2 capacity for taking the money. He didn't sue for
3 advising about the money. He sued for allegedly taking
4 and misusing the money with regard to the investment in
5 the Soviet-era spacecraft. That's the allegation.
6 THE COURT: Do you need to say anything
7 before I --
8 MR. KELLEY: I was going to say, you
9 probably don't want me to say anything because I --
10 THE COURT: I'm letting lawyers preserve
11 their record, so --
12 MR. KELLEY: One more thing I wanted to
13 tell you, last time that you had an -- idea, I didn't
14 put it in -- I did some more research and I was going to
15 get those cases for you. I just got short on time.
16 There is some case law that talks about
17 moving it to -- this goes in line with your order. I'm
18 going to tell you how right you are. You may not need
19 it.
20 But there is some case law that says --
21 because we had this general discussion last time -- if
22 you say, I want to have this case in Cuba -- this is
23 before this year -- and you can't go to Cuba, then that
24 won't work. You can't go to Russia or a communist
25 country where they won't recognize that.
Gina Wilburn, CSR
Official Court Reporter
55th District Court
542
12
1 So this is analogous to that because a
2 malpractice action based on a Texas lawyer's conduct and
3 Texas lawyers, they're still not saying that the rest of
4 the people can be sued in the Isle of Man and certainly
5 they've never said anything about the trust and they've
6 never said about these other people. And I think
7 Mr. Pierce would add that on the basis of what they've
8 done now -- how's it go, the case you've got?
9 MR. PIERCE: They're trying to control the
10 litigation and the discovery by moving for protective
11 orders for other people.
12 THE COURT: Right.
13 MR. PIERCE: So under some of the case
14 law, they've actually even waived the venue motion.
15 MR. LEVIN: We have not -- we have not --
16 THE COURT: I don't think it's waived.
17 Look, I didn't make this part of my order because it
18 wasn't briefed and I didn't want to do the research
19 myself. To be honest with you, I think it violates
20 public policy. The relationship between a client and a
21 Texas lawyer can be anywhere but Texas. That's not part
22 of my ruling. But if I was asked, that's what I think.
23 All right. What's your --
24 MR. KELLEY: Can we go to the next one?
25 THE COURT: Yeah, motion to reconsider is
Gina Wilburn, CSR
Official Court Reporter
55th District Court
543
13
1 denied.
2 MR. LEVIN: Your Honor --
3 THE COURT: Do you need to say something
4 else to preserve your record?
5 MR. LEVIN: No, sir. I've made my record,
6 Your Honor, but then we would ask for a stay in this
7 proceeding so that we can have the petition for mandamus
8 because to be required to engage in discovery in this
9 court is contrary to the forum selection clause.
10 THE COURT: Okay. Here's my reaction to
11 that: Isn't this the same discovery that you would be
12 doing in the Isle of Man where you would like to be?
13 MR. KELLEY: Yes.
14 MR. LEVIN: No, sir.
15 THE COURT: Why not? That's why the
16 motion to stay would be denied. It seems like you're in
17 the fight whether you want to be or not, which means
18 you're in discovery whether you want to be or not. What
19 court that takes place under seems to be unrelated to
20 your -- to your mandamus.
21 MR. LEVIN: Well, that's the -- that
22 assumes that the discovery procedures that occur under
23 the Texas Rules of Civil Procedure are the same
24 discovery procedures --
25 THE COURT: That's true.
Gina Wilburn, CSR
Official Court Reporter
55th District Court
544
14
1 MR. LEVIN: -- as would be in the
2 Isle of Man. If I'm right and the parties did intend
3 for this forum selection clause to apply to this
4 dispute, then it's subject to whatever discovery
5 procedures would apply in the Isle of Man, whatever
6 evidentiary procedures would apply in the Isle of Man.
7 And so the ability to -- we are -- if we
8 have to go forward with discovery, then we are denied
9 the ability to avail ourselves of the protections of the
10 laws of the Isle of Man and so that's why the whole
11 point of mandamus is you can't rebag the cat, you can't
12 unring the bell and so we should get a stay on that.
13 THE COURT: Sort of like sometimes when
14 you order arbitration and the Rules of Discovery are
15 different in arbitration or civil court, so I'm sort of
16 persuaded by this.
17 MR. KELLEY: Well, but it's different in
18 this case for this reason -- I'm going to take further
19 on your idea of the public policy and if we haven't
20 briefed it, we will. If a lawyer in this state thinks
21 he can now shield himself by simply saying, all of my
22 stuff is now going to be in Cuba or in the Isle of Man
23 and I'm not even going to let you have discovery or
24 anything like that, that's found unconscionable.
25 So you have to have a forum that first can
Gina Wilburn, CSR
Official Court Reporter
55th District Court
545
15
1 apply to that and then you get the same discovery. No
2 lawyer can say in any contract you can't have your
3 documents, you can't have your discovery and I'm going
4 to make sure you're limited because that's now found --
5 THE COURT: I don't see this as that. If
6 this was an interlocutory appeal that I thought might be
7 ruled on in a year, I might -- I might have discovery go
8 forward, but a mandamus is going to be pretty fast.
9 MR. KELLEY: But remember, in an
10 interlocutory appeal, they don't even allow, except in
11 certain circumstances, a stay on discovery. Why would
12 you allow a stay on discovery in a mandamus?
13 You've said he's wrong. A mandamus is
14 extraordinary relief. It's not a right of appeal. It's
15 to say that somehow you've abused your discretion. So
16 if that's the case, then there should be no stay in the
17 discovery. We've got to get the case moving forward.
18 And it could take as long as an interlocutory by the end
19 of the money.
20 THE COURT: All right. Well, what do I --
21 if I grant your stay on appeal, what do I do if you
22 don't file the mandamus?
23 MR. LEVIN: We're going to file the
24 mandamus. And so you could say the stay lasts for a
25 period of 20 days and if we have it -- and we'll reman
Gina Wilburn, CSR
Official Court Reporter
55th District Court
546
16
1 in effect if we file our mandamus; otherwise, it
2 expires. That would be the proper way to do it.
3 THE COURT: That's not a bad idea.
4 MR. KELLEY: So we're going to stay here a
5 year when this thing's locked down? We also sought
6 discovery as far as the motion that is -- some of this
7 stuff he says we don't have evidence --
8 MR. LEVIN: The motion -- excuse me.
9 THE COURT: Hang on.
10 MR. KELLEY: So, remember, one of my
11 objections was, Judge, I don't want you to hear this
12 motion because we want to do some discovery. Well, when
13 you denied it, that became moot. I don't want to
14 have --
15 THE COURT: That's because you won.
16 MR. KELLEY: Right, but I would still --
17 if I still do some of that discovery and we find out
18 some of the stuff I'm looking for, then on appeal I'll
19 be able to supplement that mandamus record to support
20 the decision that you did make. Why should I be backed
21 off of on discovery because I was right?
22 MR. LEVIN: Well --
23 THE COURT: Hang on. But we don't know
24 what the result of the mandamus is going to be.
25 MR. KELLEY: It could be, go get your
Gina Wilburn, CSR
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1 discovery --
2 THE COURT: Right.
3 MR. KELLEY: -- in which case I've lost
4 time. I waste six months to a year waiting on a --
5 THE COURT: Man, I don't know. I mean --
6 MR. KELLEY: There's no rule that provides
7 for it. The mandamus rules don't provide for it. If he
8 wants that kind of relief, get it from the appeal court.
9 They'll issue it if they think it's legitimate.
10 THE COURT: All right. Here's what would
11 make me feel better --
12 MR. KELLEY: Okay. Tell me what you want
13 to do.
14 THE COURT: -- is if you told me what the
15 rules of discovery were in the Isle of Man and if
16 they're substantially similar to what you're asking for,
17 I'll let it go forward, but I do understand his argument
18 that --
19 MR. KELLEY: Then I'll go research it. I
20 have no idea. Let me go find out.
21 THE COURT: So I grant his motion to stay.
22 I put in the little thing that says as long as you
23 mandamus me quickly, that would be --
24 MR. LEVIN: 20 days, Your Honor?
25 THE COURT: That would be the first time
Gina Wilburn, CSR
Official Court Reporter
55th District Court
548
18
1 in history the district court judge says, would you
2 please hurry up and -- try to mandamus me? But in any
3 event --
4 MR. KELLEY: If you're going to do this
5 then and he loses in the mandamus, then I want an
6 expedited discovery order that puts this case back on
7 track.
8 THE COURT: All right. Well, let's wait
9 and see what happens after the discovery. What I prefer
10 that you do is that you file a motion to reconsider the
11 stay of the discovery if you find out what the rules of
12 discovery are in the Isle of Man. You understand my
13 concern, right?
14 MR. KELLEY: Yeah. You're saying somehow
15 he gets an advantage as a lawyer because he stuck in
16 some settlement agreement something about the
17 Isle of Man. I think that's against public policy --
18 THE COURT: Perhaps --
19 MR. KELLEY: -- that you get any
20 protection at all.
21 THE COURT: But walk through the result of
22 the Court of Appeals agreeing to the mandamus. Okay?
23 Play that forward.
24 MR. KELLEY: If they agree?
25 THE COURT: Yeah.
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1 MR. KELLEY: On which ground?
2 THE COURT: They -- they overturn me.
3 They say that the venue is proper in the Isle of Man.
4 MR. KELLEY: For everybody, because
5 they're only moving now to reconsider two of the them.
6 THE COURT: Whatever it is that they say.
7 MR. KELLEY: Okay. So two of them go and
8 the other four stay.
9 MR. LEVIN: Mandamusing for all of them,
10 so --
11 THE COURT: In any event, they say that
12 the case has to go forward in the Isle of Man and the
13 Isle of Man Courts say, Well, we, the Isle of Man,
14 basically just look out at the North Atlantic Ocean and
15 do our -- and we don't like discovery and so you don't
16 get any, then in that case, the Court having decided the
17 ill Isle of Man is appropriate, then they have, I guess,
18 also decided that it doesn't violate public policy or
19 whatever else happens.
20 But -- but I do think it would be
21 inappropriate for me to begin to -- to order discovery
22 which is not available in this Isle of Man because if
23 the Court of Appeals reverses this is --
24 MR. KELLEY: So all you need to know is if
25 it's available in the Isle of Man, you'll take off --
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1 THE COURT: Then I'll feel better about it
2 occurring here because it would have occurred there
3 anyway.
4 MR. KELLEY: Okay. I'll go look.
5 THE COURT: Do you see what I'm saying?
6 MR. KELLEY: Sure.
7 THE COURT: Does that seem --
8 MR. KELLEY: It doesn't seem fair to me,
9 but I'll do it.
10 THE COURT: Yeah, it seems fair to you.
11 MR. KELLEY: No, it doesn't.
12 THE COURT: Yes, it does.
13 MR. KELLEY: I mean, I don't think that a
14 Texas --
15 THE COURT: You're going to go out in the
16 hallway and say, you know what, Shadwick was right.
17 MR. KELLEY: No, I'll never think that a
18 Texas lawyer ought to play by tricks in stealing
19 50 million --
20 MR. LEVIN: Excuse me. He's not -- he's
21 never represented the man. This is a fictional
22 argument --
23 MR. KELLEY: See, that's --
24 THE COURT: Don't worry about it.
25 MR. KELLEY: -- a fact question and if you
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1 want to argue the facts, let's put 12 people over there
2 and you make that argument, I'll make mine, let's see
3 what the jury says.
4 THE COURT: This is just you and me with
5 our normal banter.
6 MR. KELLEY: I'm following what you're
7 saying because you want to be 100 percent right and if
8 they do it in the Isle of Man and do it in there, then
9 it can't be in error. Let me go see -- if it turns out
10 to be correct, then I don't need to fight anymore. So
11 why don't I do that?
12 I think it's wrong that you would get a
13 stay when the rules don't provide for it and just
14 because you argue one thing and if delay is all you, you
15 know, ever want to do you want to, but, hey, you move
16 your docket pretty fast, so --
17 MR. LEVIN: I'll submit an order, Your
18 Honor.
19 THE COURT: Haven't you already?
20 MR. LEVIN: We did, but we didn't say with
21 all the 20 days and the things you've put in today,
22 so --
23 THE COURT: Fix that for me, send an order
24 up.
25 MR. LEVIN: Sure. I'll run it by
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1 Mr. Kelley.
2 THE COURT: You know, the form not
3 substance. The motion to reconsider is denied.
4 MR. LEVIN: Yes, sir.
5 THE COURT: And is there something else?
6 MR. LEVIN: The stay and the 20 days and
7 then there was a motion to quash deposition --
8 THE COURT: The motion to compel, but if
9 discovery is stayed, then that's --
10 MR. KELLEY: Can you -- so I don't have
11 this problem again, that we agreed to a
12 confidentiality --
13 MR. LEVIN: We did not.
14 MR. KELLEY: They didn't that agree?
15 Okay, fine, then when we come back to my discovery --
16 MR. LEVIN: Your Honor --
17 THE COURT: It's not on my docket --
18 MR. KELLEY: When it's lifted, I don't
19 want him to have an advantage for what he's done in
20 discovery already. So I don't want him to use this stay
21 to get an advantage that he wouldn't have. Today I was
22 on a motion to compel --
23 THE COURT: We'll just have to worry about
24 that when it comes back.
25 MR. LEVIN: Can I just say one word about
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1 the confidentiality because --
2 THE COURT: No. I have too many lawyers --
3 MR. KELLEY: It was send to me yesterday.
4 THE COURT: Don't worry about it.
5 MR. KELLEY: Don't worry about it.
6 THE COURT: In one ear, out the other.
7 I've got filter and it's limited to what's in front of
8 me.
9 MR. LEVIN: Thank you, Judge.
10 (Court Adjourned.)
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1 STATE OF TEXAS
COUNTY OF HARRIS
2 I, Gina Wilburn, Official Court Reporter in and for
3 the 55th District Court of Harris, State of Texas, do
4 hereby certify that the above and foregoing contains a
5 true and correct transcription of all portions of
6 evidence and other proceedings requested in writing by
7 counsel for the parties to be included in this volume of
8 the Reporter's Record in the above-styled and numbered
9 cause, all of which occurred in open court or in
10 chambers and were reported by me.
11 I further certify that this Reporter's Record of the
12 proceedings truly and correctly reflects the exhibits,
13 if any, offered by the respective parties.
14 I further certify that the total cost for the
15 preparation of this Reporter's Record is $ and
16 was paid/will be paid by Josh Thomas.
17 WITNESS MY OFFICIAL HAND on this, the 18th day of
June, 2015.
18
19 /s/ Gina Wilburn
20 Gina Wilburn, CSR
Texas CSR 5885
21 Official Court Reporter
55th District Court
22 Harris County, Texas
201 Caroline, 9th Floor
23 Houston, Texas 77002
Telephone: 713-368-6056
24 Expiration: 12/31/2015
25
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