Sacramento E.D.M., Inc., et al. v. Hynes Aviation Industries, Inc., et al.

Filing 86

STIPULATION and ORDER 85 allowing defendants to file a Counterclaim signed by Magistrate Judge Kendall J. Newman on 5/28/2015. Court hereby ORDERS defendants Hynes Aviation Industries, Inc. and Michael K. Hynes to file a Counterclaim in consolidated cases within 3 days of filing of this Order by Court, naming Sacramento E.D.M., Inc. and Daniel Folk as counter-defendants, in place and stead of existing First Amended Complaint, consolidated from Missouri action. (Marciel, M)

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Thomas W. Barth, SBN 154075

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431 I Street, Suite 201
Sacramento, California 95814
Telephone: [phone]
Facsimile: [phone]

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BARTH DALY LLP

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Attorneys for HYNES AVIATION
INDUSTRIES, INC., HYNES CHILDREN TF
LIMITED and MICHAEL HYNES

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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SACRAMENTO E.D.M., INC., a California
corporation; DAN FOLK, an individual,

Case No. 2:13-CV-00288-KJN

B ARTH D ALY

LLP
A TTORNEYS A T L AW
S ACRAMENTO , C ALIFORNIA

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Plaintiffs,
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v.

STIPULATION AND [PROPOSED]
ORDER ALLOWING DEFENDANTS
TO FILE COUNTERCLAIM

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HYNES AVIATION INDUSTRIES, INC.
dba HYNES AVIATION SERVICES, an
Oklahoma corporation; HYNES
CHILDREN TF LIMITED, a business
entity, form unknown; MICHAEL K.
HYNES, an individual; and DOES 1
through 50, inclusive,

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Defendants.
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AND CONSOLIDATED AND
CROSS-ACTIONS.

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TO THE COURT, ALL PARTIES, AND THEIR COUNSEL OF RECORD HEREIN:
Sacramento E.D.M., Inc. and Dan Folk, by and through their counsel of record,

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Sean Gavin of the Foos Gavin Law Firm, and Hynes Aviation Industries, Inc., Hynes Children TF

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Limited, and Michael K. Hynes, by and through their counsel, Thomas Barth of Barth Daly LLP,

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HEREBY STUPULATE AND AGREE THAT:
1.

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On April 10, 2015, counsel for the parties filed a Joint Status Report in the

above-entitled consolidated actions. In paragraph (d) of the parties' Joint Status Report, counsel
{00016258}
STIPULATION AND PROPOSED ORDER ALLOWING DEFENDANTS TO FILE COUNTER-CLAIM

(2:13-CV-00288-KJN)

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informed the Court that defendants/counter-claimants anticipated amending their "Counterclaim"

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to purport with the Motion to Consolidate the two underlying cases.

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2.

The current operative pleading in the action previously referred to as the

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"Missouri action" is the First Amended Complaint, which was amended by right before

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defendants filed an answer thereto. Hynes Aviation Industries, Inc. is the plaintiff in the

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underlying case consolidated from the original Missouri action.

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3.

Prior to consolidation of the underlying cases, there was no Counterclaim

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on file in the case previously referred to as the "California action," into which the Missouri action

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was consolidated. The amendment of the First Amended Complaint in the former Missouri action

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would be in the nature of a Counterclaim in the California action, after the two cases have been

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consolidated. See Schnabel v. Lui, 302 F.3d 1023 (9th Cir. 2002).

B ARTH D ALY

LLP
A TTORNEYS A T L AW
S ACRAMENTO , C ALIFORNIA

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4.

The parties to these proceedings have agreed, and by this stipulation they

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request an order of the Court, that defendants Hynes Aviation Industries, Inc. and Michael K.

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Hynes shall file a Counterclaim in these consolidated cases, naming Sacramento E.D.M., Inc. and

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Daniel Folk as counter-defendants, in place and stead of the existing First Amended Complaint,

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consolidated from the Missouri action. A copy of the [Proposed] Counterclaim of

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Hynes Aviation Industries, Inc. and Michael K. Hynes is attached hereto.

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IT IS SO STIPULATED.
Dated: May 27, 2015.

FOOS GAVIN LAW FIRM, P.C.

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By

/s/ Sean Gavin
SEAN GAVIN
Attorneys for SACRAMENTO E.D.M., INC., and
DAN FOLK

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Dated: May 27, 2015.

BARTH DALY LLP

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By

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/s/ Thomas W. Barth
THOMAS W. BARTH

Attorneys for HYNES AVIATION INDUSTRIES, INC.,
HYNES CHILDREN TF LIMITED and MICHAEL
HYNES

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{00016258}

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STIPULATION AND PROPOSED ORDER ALLOWING DEFENDANTS TO FILE COUNTER-CLAIM

(2:13-CV-00288-KJN)

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ORDER

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Good cause appearing based on the foregoing stipulation, the Court hereby orders

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that defendants Hynes Aviation Industries, Inc. and Michael K. Hynes shall file a Counterclaim in

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these consolidated cases within three-days of the filing of this Order by the Court, naming

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Sacramento E.D.M., Inc. and Daniel Folk as counter-defendants, in place and stead of the existing

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First Amended Complaint, consolidated from the Missouri action. A copy of the Counterclaim of

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Hynes Aviation Industries, Inc. and Michael K. Hynes is attached hereto.

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Dated: May 28, 2015

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B ARTH D ALY

LLP
A TTORNEYS A T L AW
S ACRAMENTO , C ALIFORNIA

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{00016258}

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STIPULATION AND PROPOSED ORDER ALLOWING DEFENDANTS TO FILE COUNTER-CLAIM

(2:13-CV-00288-KJN)

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Thomas W. Barth, SBN 154075

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431 I Street, Suite 201
Sacramento, California 95814
Telephone: [phone]
Facsimile: [phone]

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BARTH DALY LLP

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Attorneys for HYNES AVIATION
INDUSTRIES, INC., HYNES CHILDREN TF
LIMITED and MICHAEL HYNES

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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SACRAMENTO E.D.M., INC., a California
corporation; DAN FOLK, an individual,

Case No. 2:13-CV-00288-KJN

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Plaintiffs,

B ARTH D ALY

LLP
A TTORNEYS A T L AW
S ACRAMENTO , C ALIFORNIA

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v.

[PROPOSED] COUNTERCLAIM OF
HYNES AVIATION INDUSTRIES, INC.
AND MICHAEL K. HYNES

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HYNES AVIATION INDUSTRIES, INC.
dba HYNES AVIATION SERVICES, an
Oklahoma corporation; HYNES
CHILDREN TF LIMITED, a business
entity, form unknown; MICHAEL K.
HYNES, an individual; and DOES 1
through 50, inclusive,

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Defendants.
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HYNES AVIATION INDUSTRIES, INC.,
an Oklahoma corporation; MICHAEL K.
HYNES, an individual,

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Counter-Claimants,

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v.
SACRAMENTO E.D.M., INC., a California
corporation; DAN FOLK, an individual,

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Counter-Defendants.
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Defendants and counter-claimants Hynes Aviation Industries, Inc. and Michael K.

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Hynes file a counterclaim against plaintiffs and counter-defendants Sacramento E.D.M., Inc. and

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Dan Folk as follows:
{00016258}
COUNTERCLAIM OF HYNES AVIATION INDUSTRIES AND MICHAEL HYNES

(2:13-CV-00288-KJN)

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JURISDICTION; AMOUNT IN CONTROVERSY
1.

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Counter-claimant Hynes Aviation Industries, Inc. ("HAI"), is an Oklahoma

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corporation having its principal place of business at Branson, Missouri, and is a citizen of both

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Oklahoma and Missouri.
2.

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Counter-claimant Michael K. Hynes ("Hynes") resides in Branson,

Missouri, and is a citizen of Missouri.
3.

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Counter-defendant Sacramento E.D.M., Inc. ("SacEDM"), is a California

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corporation having its principal place of business at Rancho Cordova, California, and is a citizen

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of California.
4.

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is a citizen of California.
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B ARTH D ALY

Counter-defendant Daniel Folk ("Folk") resides in Folsom, California, and

To the extent the counterclaims asserted herein are permissive, jurisdiction

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is proper on the basis of diversity of citizenship between counter-claimants and both counter-

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defendants.

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6.

The amount in controversy exceeds $75,000 exclusive of interest and costs.

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7.

To the extent the counterclaims asserted herein are compulsory,

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jurisdiction is proper because the counterclaims fall within the supplemental jurisdiction of the

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Court under Section 1367 of Title 28 of the United States Code.

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BACKGROUND ALLEGATIONS
8.

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For over 25 years counter-defendant SacEDM has been in the business of

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operating a specialized machine shop fabricating metal, plastic and rubber products and

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selling the products to customers in Missouri and other states. SacEDM contacts and solicits

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customers in Missouri by telephone and by an interactive website allowing Missouri

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customers to obtain quotes and transmit blueprints for orders.
9.

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Counter-defendant Folk is the sole stockholder of SacEDM and has been

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its President and Chief Operating Officer since the company began business.

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COUNTERCLAIM OF HYNES AVIATION INDUSTRIES AND MICHAEL HYNES

(2:13-CV-00288-KJN)

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10.

Counsel for Folk retained Hynes in early 2001 to serve as an aviation

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expert regarding aircraft purchase litigation filed by Folk. Hynes served in that capacity between

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2001 and 2006.

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In February 2003, Folk showed Hynes the machine shop business

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operations of SacEDM and asked for help from Hynes regarding the business operations. During

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2003, Hynes consulted with Folk regarding the cash flow problems and other financial difficulties

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facing Folk personally and threatening the business operations of SacEDM.

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In December 2003, Hynes loaned Folk $10,000 for personal expenses.

Folk requested that Hynes continue providing consulting services for the financial and business
operations of SacEDM.

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13.

As requested by Folk, commencing January 1, 2004, Hynes and HAI began

B ARTH D ALY

LLP
A TTORNEYS A T L AW
S ACRAMENTO , C ALIFORNIA

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performing management consulting services and provided a line of operating credit for SacEDM

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through Oklahoma EDM and Waterjet, Inc., a division of HAI with its principal place of business

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in Missouri, which conducted business with SacEDM at all times by interstate transactions

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between Missouri and California.

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14.

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Also commencing January 1, 2004, counter-claimants made operating

loans to counter-defendants, as hereinafter alleged.

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CLAIM I - LOANS

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For Claim I herein against both counter-defendants, counter-claimants state:

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15.

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Counter-claimants reallege and incorporate herein by reference the

allegations contained in the preceding paragraphs above.

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16.

From 2004 through 2008, counter-claimants loaned money to counter-

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defendants SacEDM and Folk for operating capital. Counter-defendants agreed at the time such

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loans were made to repay the loans, with interest accumulating on unpaid amounts at the rate of

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ten percent (10%) per annum, and the repayment of such loans was secured by the operating

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revenue of SacEDM. The financial reports generated by SacEDM on a periodic basis also

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contained an accounting of the outstanding balance of the operating loans owed by counter-

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defendants to counter-claimants.
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COUNTERCLAIM OF HYNES AVIATION INDUSTRIES AND MICHAEL HYNES

(2:13-CV-00288-KJN)

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17.

SacEDM made monthly payments on the loans through February 17, 2012,

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but after that date refused to make any payments. The refusal by counter-defendants to make any

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further monthly payments on the loans was a breach of the agreement and obligation of counter-

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defendants to repay the entire amount of principal and interest to counter-claimants, with respect

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to the outstanding loan balances.

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18.

The principal balance due on the loans as of June 30, 2014, was $580,000,

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plus accrued interest as of that date totaling $230,794.68, for a total debt owed by counter-

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defendants to counterclaimants at that time of $810,794.68. Interest continues to accrue at the

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rate of ten percent (10%) per annum, amounting to approximately $158.90 per day.

defendants in the amount of $810,794.68 plus interest thereon from June 30, 2014, at the rate of

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B ARTH D ALY

WHEREFORE, for Claim I, counter-claimants ask for judgment against counter-

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A TTORNEYS A T L AW
S ACRAMENTO , C ALIFORNIA

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ten percent (10%) per annum on the principal balance of the loans, and for such other relief as

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may be appropriate.

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CLAIM II - LEASES

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For Claim II herein against counter-defendants, counter-claimant HAI states:

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19.

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Counter-claimant realleges and incorporates herein by reference the

allegations contained in the preceding paragraphs above.

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20.

Beginning in August of 2004 and continuing into 2008 counter-claimant

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HAI and its affiliate, Hynes Children T.F. Ltd., purchased office and manufacturing equipment

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and leased the equipment to SacEDM and Folk under three written master leases.

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The three master leases are identified and attached hereto as Exhibits 1, 2,

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and 3 and are incorporated herein by reference. They were augmented, from time to time, as

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SacEDM and Folk received and accepted equipment.

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22.

Counter-claimant HAI is the assignee of the Exhibit 1 Master Lease and is

the present holder of and lessor under all of the leases.

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23.

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under the leases.

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Counter-claimant HAI and its assignors performed all of their obligations

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COUNTERCLAIM OF HYNES AVIATION INDUSTRIES AND MICHAEL HYNES

(2:13-CV-00288-KJN)

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24.

Until December of 2011, counter-defendants SacEDM and Folk made

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payments on the leases by sending checks to counter-claimant at Branson, Missouri, for

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deposit into a Bank of America account in Branson.

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25.

After December 1, 2011, counter-defendants SacEDM and Folk failed and

refused to make the rent payments on the leases and they repudiated the leases.

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26.

After SacEDM and Folk's default and repudiation of the leases, counter-

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claimant HAI and the counter-defendants engaged in discussions about the possibility of

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mediation, but were unable to agree on the protocols for a mediation.

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27.

Counter-claimant HAI has incurred attorneys' fees in attempting to collect

from counter-defendants and will incur additional attorneys' fees as this action continues.

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28.

The amounts due counter-claimant HAI under the three Leases for rent and

B ARTH D ALY

LLP
A TTORNEYS A T L AW
S ACRAMENTO , C ALIFORNIA

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the residual value of the equipment are as follows:

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Rent
Residual value
Total on leases

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29.

$89,313.00
$338,769.00
$428,082.00
In addition counter-claimant HAI is entitled to: (a) interest on the aforesaid

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total amount from November 30, 2011, at the rate of nine percent (9%) per annum; and

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(b) a reasonable amount as and for attorneys' fees.

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WHEREFORE, for Claim II, counter-claimant HAI asks for judgment against

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SacEDM and Folk, jointly and severally, in the amount of $428,082 plus interest from

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November 30, 2011, at nine percent (9%) per annum plus reasonable attorneys' fees and such

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other relief as may be appropriate.

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CLAIM III - LIFE INSURANCE

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For Claim III herein against counter-defendants, counter-claimant HAI states:

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30.

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Counter-claimant realleges and incorporates herein by reference the

allegations contained in the preceding paragraphs above.

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31.

In 2007 counter-claimant and counter-defendants SacEDM and Folk

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agreed that "Key Man" life insurance on the lives of Folk and Hynes was needed to protect

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COUNTERCLAIM OF HYNES AVIATION INDUSTRIES AND MICHAEL HYNES

(2:13-CV-00288-KJN)

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counter-claimants in connection with the loans referred to in Claim I above and to generally

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secure the continuity of the SacEDM business to the benefit of all parties.

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face amount of $500,000--were purchased at a premium cost of $1,900 per month.

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33.

The parties agreed that the $1,900 per month would be paid by SacEDM

and such payments were, in fact, made by SacEDM until February 17, 2012.

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Pursuant to the agreement, Key Man life insurance policies--each with a

34.

After February 17, 2012, SacEDM refused to make the monthly premium

payments and counter-claimant made the payments for SacEDM until May 31, 2012.

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35.

As a direct result of SacEDM's breach of the agreement for SacEDM to

insurance premiums, totaling $79,966, plus accrued interest at the rate of ten percent (10%) per

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B ARTH D ALY

make the monthly premium payments, counter-claimant has been damaged in the sum of unpaid

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A TTORNEYS A T L AW
S ACRAMENTO , C ALIFORNIA

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annum, totaling $38,390.95, with such interest accruing at the rate of approximately $19.72 per

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day.

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WHEREFORE, for Claim III, counter-claimant HAI asks for judgment against

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counter-defendants SacEDM and Folk for $116,556.95 plus interest thereon from February 17,

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2012, at the rate of ten percent (10%) and for such other relief as may be appropriate.

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PRAYER FOR RELIEF

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WHEREFORE, counter-claimants pray for judgment against counter-defendants

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for the following:

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1.

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as alleged in Claims I, II and III, in an amount according to proof;

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For compensatory and consequential damages against counter-defendants,

2.

For interest on the respective obligations alleged herein, at the annual

percentage rates, as alleged;

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3.

For reasonable attorney's fees according to proof;

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4.

For costs of suit incurred in this action; and

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{00016258}

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COUNTERCLAIM OF HYNES AVIATION INDUSTRIES AND MICHAEL HYNES

(2:13-CV-00288-KJN)

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5.
Dated: May 27, 2015.

For such other and further relief as this Court may deem just and proper.
Respectfully submitted,

BARTH DALY LLP

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By___________________________________________
THOMAS W. BARTH

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Attorneys for Counter-Claimants HYNES AVIATION
INDUSTRIES, INC. and MICHAEL K. HYNES

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B ARTH D ALY

LLP
A TTORNEYS A T L AW
S ACRAMENTO , C ALIFORNIA

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COUNTERCLAIM OF HYNES AVIATION INDUSTRIES AND MICHAEL HYNES

(2:13-CV-00288-KJN)