CWT Canada II LP et al v. Danzik et al

Filing 65

ORDER denying (54) Motion to Consolidate Cases in case 2:16-cv-00607-DGC. See document for complete details. Signed by Judge David G Campbell on 11/29/2016. (Associated Cases: 2:16-cv-00607-DGC, 2:16-cv-02577-GMS) (ATD)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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CWT Canada II, LP, an Ontario, Canada
Limited Partnership

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Plaintiff,

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No. CV16-0607 PHX DGC
ORDER

v.
Elizabeth J. Danzik, an individual, et al.,
Defendants.

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Plaintiffs CWT Canada II, LP and Resource Recovery Corp. ask the Court to

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consolidate this action with CWT Canada II, LP, et al., v. Kevin Bridges, et al., No. 16-

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cv-02577-GMS (the “Bridges Action”). Doc. 54. For the reasons set forth below, the

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Court will deny the motion.

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Rule 42(a) of the Federal Rules of Civil Procedure permits a court to consolidate

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cases that involve common questions of law or fact. A court has broad discretion in

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making this decision. Inv’rs Research Co. v. U.S. Dist. Ct. Cent. Dist. of Cal., 877 F.2d

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777 (9th Cir. 1989).

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A.

Background Facts.

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This case and the Bridges Action arise out of the same factual occurrences, but

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involve different claims against different defendants. Both cases arise from the allegedly

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fraudulent actions of Dennis J. Danzik, the chief executive officer of RDX Technologies

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Corp., a now-defunct corporation. Plaintiffs allege that Danzik entered into a transaction

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with Plaintiffs for the sale of Plaintiffs’ company, Changing World Technologies, L.P.

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(“CWT”), to RDX. Plaintiffs allege that several million dollars in tax credits were paid

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to RDX in trust for Plaintiffs, but that Danzik stole $5 million of the tax credits by

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causing RDX to pay them to him directly or in response to bogus invoices. Plaintiffs also

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claim that Danzik looted RDX, diminishing Plaintiffs’ interest in RDX. Plaintiffs assert

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that judgments and criminal contempt citations have been entered against Danzik in New

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York state court, that criminal investigations are under way, and that Danzik is a fugitive.

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B.

This Action.

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In this action, Plaintiffs have sued Danzik’s spouse, Elizabeth J. Danzik

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(“Elizabeth”), and a limited liability company allegedly owned by Danzik and Elizabeth,

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Deja II, LLC. Doc. 1. Plaintiffs allege that Elizabeth received $730,000 of the money

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Danzik stole from Plaintiffs, and must return it to Plaintiffs. Plaintiffs also allege that

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Elizabeth and Deja II participated in a fraud against Plaintiffs. They claim that Danzik,

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Elizabeth, and Deja II entered into a transaction with Plaintiffs under which Plaintiffs

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paid Deja II $1 million in Canadian currency in exchange for what was to be freely

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tradeable stock in RDX. Id., ¶ 3. Plaintiffs specifically allege that this transaction was

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separate from the sale of CWT to RDX. Id., ¶ 71. Plaintiffs contend that Deja II received

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the money, but provided them with restricted stock that was not tradeable. Plaintiffs

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allege that Elizabeth signed an agreement on behalf of Deja II that included

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misrepresentations and fraudulently induced Plaintiffs to part with their money.

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default judgement has been entered in this action against Deja II. Doc. 49.

A

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C.

Bridges Action.

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In the Bridges Action, Plaintiffs claim that Defendants Kevin Bridges and Richard

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Carrigan were the chief financial officer and a board member of RDX, respectively.

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Bridges Doc. 1, ¶ 5.1 Plaintiffs allege that Bridges and Carrigan approved the transfers of

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Plaintiffs’ tax credit funds from RDX to Danzik, knowing that the transfers were

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unjustified. Plaintiffs allege that the corporate veil and business judgment rule do not

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shield Bridges and Carrigan because each committed torts on behalf of RDX. Id., ¶ 8.

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Citations to documents in Case 16-cv-02577-GMS will be to “Bridges Doc.”
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Plaintiffs also allege that Bridges and Carrigan hid from regulators and public investors

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the fact that Danzik stole $5 million of the tax credits and stole another $6 million of

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shareholder money through fraudulent transactions with RDX. Id., ¶ 7. Plaintiffs have

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sued Bridges and Carrigan for fraud committed in their capacity as officers and directors

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of RDX, conversion of funds paid to RDX, tortious interference with the obligations

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between RDX and Plaintiffs, breach of trust, misappropriation of trust assets, breach of

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fiduciary duty, aiding and abetting breach of fiduciary duty, and unjust enrichment.

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D.

Analysis.

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Plaintiffs do not claim that Elizabeth or Deja II were involved in the operations of

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RDX, authorized allegedly wrongful payments from RDX to Danzik, facilitated Danzik’s

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looting of RDX, or engaged in breach of fiduciary duty or breach of trust. The claims

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against Elizabeth and Deja II do not raise the corporate governance and shield issues

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likely to arise in these claims against Bridges and Carrigan.

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Similarly, Plaintiffs do not allege that Bridges and Carrigan were involved in the

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operations of Deja II or had any involvement in the fraud Elizabeth and Deja II allegedly

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committed against Plaintiffs. Nor do Plaintiffs allege that Bridges and Carrigan received

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any part of the $730,000 allegedly paid by Danzik to Elizabeth.

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The two cases involve different defendants and different claims. Although the

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background transactions are the same, the liability-creating conduct is quite different and

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will be subject to different discovery, defenses, and legal standards. To the extent both

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cases will require some discovery of Danzik’s alleged wrongdoing, Plaintiffs can and

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should coordinate between this action and the Bridges Action. The Court does not see a

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good reason, however, to consolidate different legal claims against different defendants.

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IT IS ORDERED that Plaintiffs’ motion to consolidate (Doc. 54) is denied.

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Dated this 29th day of November, 2016.

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