White v. Demaray et al

Filing 27

STIPULATION AND ORDER re 22 STIPULATION Allowing Plaintiff to File First Amended Complaint filed by Christopher D. White. Signed by Judge Elizabeth D Laporte on 2/11/2014. (knm, COURT STAFF) (Filed on 2/19/2014)

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Geoffrey Gordon-Creed, SBN 136188
Jeremy Sugerman, SBN 146315
Charlie Y. Chou, SBN 248369
GORDON-CREED, KELLEY,
HOLL & SUGERMAN, LLP
222 Kearny Street, Suite 650
San Francisco, CA 94108
Tel: [phone]
Fax: [phone]
Attorneys for Plaintiff
CHRISTOPHER D. WHITE
Glenn E. Westreich, SBN 100457
Jason M. Gonder, SBN 257522
HAYNES AND BOONE, LLP
2033 Gateway Place, Suite 300
San Jose, CA 95110
Tel: [phone]
Fax: [phone]

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Attorneys for Defendant
RICHARD E. DEMARAY

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN FRANCISCO DIVISION

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CHRISTOPHER D. WHITE, an individual,

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Plaintiff,
v.

Case No. 3:13-cv-5169 EDL
STIPULATION AND [PROPOSED] ORDER
ALLOWING PLAINTIFF CHRISTOPHER D.
WHITE’S TO FILE FIRST AMENDED
COMPLAINT

RICHARD E. DEMARAY, an individual,

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Defendant.

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_____________________________________________________
Stipulation and [Proposed] Order Regarding First Amended Complaint
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WHEREAS on November 6, 2013, Plaintiff Christopher D. White (“Plaintiff”) filed his

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Complaint alleging both derivative and individualized causes of action against Defendants Richard E.

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Demaray, Demaray LLC and Antropy, Inc. (nominal defendant) (collectively “Defendants”).

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WHEREAS Defendants filed and the Court granted Defendants’ Motions to Dismiss and Strike

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Plaintiff’s derivative causes of action, thus leaving only Plaintiff’s individualized causes of action

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remaining in the case.

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WHEREAS Plaintiff seeks to file his First Amended Complaint, which adds a breach of oral
contract cause of action and a constructive trust prayer for relief.
WHEREAS a copy of the Plaintiff’s proposed First Amended Complaint is attached hereto as
Exhibit A.
IT IS HEREBY STIPULATED, by and between Plaintiff and Defendant, by and through their
respective counsel, that:
1. Plaintiff should be granted leave to amend to file his First Amended Complaint, a copy of
which is attached hereto as Exhibit A.
2. This stipulation does not prejudice or preclude any future claims or defenses by Defendant

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against any new or pre-existing causes of action or requests for relief contained in the complaint as

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amended.

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Dated: February 11, 2014

GORDON-CREED, KELLEY,
HOLL & SUGERMAN, LLP

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By:

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/s/ Charlie Y. Chou
Charlie Y. Chou
Attorneys for Plaintiff
CHRISTOPHER D. WHITE

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Dated: February 11, 2014

HAYNES AND BOONE, LLP

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By:

/s/ Glenn E. Westreich
Glenn E. Westreich
Attorneys for Defendant
RICHARD E. DEMARAY

_____________________________________________________
Stipulation and [Proposed] Order Regarding First Amended Complaint
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I, Charlie Y. Chou, am the ECF User whose ID and password are being used to file this

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Stipulation. In compliance with General Order 45, X.B., I hereby attest that Glenn E.

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Westreich, Hayne and Boone, LLP, counsel for Defendant has concurred in this filing.

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Dated: February 11, 2014

/s/ Charlie Y. Chou

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_____________________________________________________
Stipulation and [Proposed] Order Regarding First Amended Complaint
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ORDER

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The Court having reviewed the foregoing Stipulation, and good cause appearing therefore:

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IT IS HEREBY ORDERED that Plaintiff Christopher D. White is granted leave to amend to

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file his First Amended Complaint, a copy of which is attached hereto as Exhibit A.
IT IS FURTHER ORDERED that the First Amended Complaint is deemed filed as of the date
this Order is transmitted via the CM/ECF system.

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IT IS SO ORDERED.

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February 11, 2014

Dated: _________________

_____________________
_________
ELIZABETH D. LAPORTE
United States Magistrate Judge

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_____________________________________________________
Stipulation and [Proposed] Order Regarding First Amended Complaint
Page 4

EXHIBIT A

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Geoffrey Gordon-Creed, SBN 136188
Jeremy Sugerman, SBN 146315
Charlie Y. Chou, SBN 248369
GORDON-CREED, KELLEY,
HOLL & SUGERMAN, LLP
222 Kearny Street, Suite 650
San Francisco, CA 94108
Tel: [phone]
Fax: [phone]
Attorneys for Plaintiff
CHRISTOPHER D. WHITE

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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CHRISTOPHER D. WHITE, an individual,
Plaintiff,

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Case No. 3:13-cv-5169 EDL
FIRST AMENDED COMPLAINT

v.
RICHARD E. DEMARAY, an individual,

DEMAND FOR JURY TRIAL

Defendant.

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_____________________________________________________
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FIRST AMENDED COMPLAINT

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Christopher D. White (“White” or “Plaintiff”), by the undersigned attorneys, submits this First

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Amended Complaint against Richard E. Demaray (“Demaray” or “Defendant”) and alleges upon

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personal knowledge with respect to himself, and upon information and belief based upon, inter alia, a

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review of corporate documents and reports, and an investigation undertaken by Plaintiff’s counsel, as to

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all other allegations herein, as follows:

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Statement of the Case

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1.

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Plaintiff brings this action against Defendant alleging fraud, breach of written contract,

breach of oral contract, negligent misrepresentation, and breach of fiduciary duty – de facto partnership.
2.

Plaintiff seeks to recover, among other things, compensatory damages, consequential

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damages, punitive damages, and the imposition of a constructive trust over the Symmorphix Patents or

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any consideration (monetary, equity in an organization, or otherwise) Demaray has received for the

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Symmorphix Patents.

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Jurisdiction and Venue

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3.

This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332 (diversity) in

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that Plaintiff and Defendant are citizens of different states and the amount in controversy exceeds

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$75,000.00, exclusive of interests and costs.

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4.

Venue is proper pursuant to 28 U.S.C. § 1391 because Demaray is a resident of San

Mateo County, California.
5.

This Court has personal jurisdiction over Demaray because: 1) Demaray has transacted

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and continues to transact business in California; 2) the causes of action asserted in this case arose from

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or are connected with purposeful and tortious acts committed by Demaray, in whole or in part, in

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California; 3) Demaray has committed torts, directly and indirectly, in whole and in part, that caused

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substantial harm in California; and/or 4) Demaray has had continuous and systematic contacts with

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California by engaging in numerous activities that have had an effect in this State.

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Parties

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6.

Plaintiff Christopher D. White is a citizen of the State of Washington.

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7.

Upon information and belief, Demaray, was and is at all relevant times hereto, the

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President, Chief Executive Officer, Director, and majority shareholder of Antropy. Upon information

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FIRST AMENDED COMPLAINT

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and belief, from February 28, 2013 through the present, Demaray was and is the President, owner, and

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Managing Partner of Demaray LLC. Upon information and belief, Demaray is a citizen of the State of

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California.

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Factual Background

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8.

In 2003, Robert White, Christopher White’s father, was introduced to Demaray while

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Robert White was working to acquire intellectual property and technology companies for the Petters

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Group Worldwide (“PGW”).

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9.

Upon information and belief, in 2003, Demaray was President of Symmorphix, Inc.

(“Symmorphix”), a thin film nanotechnology company that owned a large portfolio of patents and patent

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applications including patents and patent applications related to thin film energy conversion,

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nanotechnology, LED, and solar technologies (the “Symmorphix Patents”). A list of the patents and

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patent applications that constitute the Symmorphix Patents are attached hereto as Exhibit A (Executed

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Purchase Agreement of the Symmorphix Patents and other documents) at 12-17. Exhibit A, in its

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entirety, is made a part of this Complaint.

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10.

Upon information and belief, in 2005 or 2006, at Robert White’s recommendation, PGW

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purchased Symmorphix (including the Symmorphix Patents), through Springworks LLC, PGW’s

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investment arm formed to invest in technology companies. Shortly after Springworks LLC’s acquisition

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of Symmorphix, Robert White’s involvement with both Springworks LLC and Symmorphix ended.

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11.

Upon information and belief, Demaray’s employment relationship with Symmorphix

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ended in August of 2007. Simultaneously, Springworks LLC commenced the process whereby

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Symmorphix was liquidated and shutdown.

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12.

Upon information and belief, in or around August of 2008, Demaray and Robert White

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reconnected. Upon information and belief, Demaray sought Robert White’s assistance with Antropy

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Inc. (“Antropy”), a company Demaray had recently formed at that time. Specifically and upon

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information and belief, Demaray sought Robert White’s help with Antropy’s funding, acquiring a

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license to the Symmorphix Patents, and general business strategy for developing and manufacturing

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efficient solar panels.

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FIRST AMENDED COMPLAINT

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13.

Antropy’s business strategy focused on monetizing its native intellectual property along

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with the Symmorphix Patents by developing products and new intellectual property rights. As such, the

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Symmorphix Patents were critical for Antropy’s business strategy. In furtherance of its business

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strategy, Antropy acquired from Demaray an exclusive license to any and all patents that pertain to solar

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energy that were at any stage of development on December 20, 2009 or are issued at any future date.

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See Exhibit B (December 20, 2009 Minutes of Action) at 9. Exhibit B is attached hereto and made a

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part of this complaint.

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14.

Lacking sufficient time due to other business obligations, Robert White asked his son,

Plaintiff Christopher White, to help Demaray with Antropy’s business. On September 3, 2008, Robert
White introduced Demaray to Christopher White.
15.

On September 24, 2008, the Federal Bureau of Investigation raided PGW and the homes

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of its top executives, including Robert White. As a result of the raid and subsequent convictions of

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PGW’s founder and Chief Executive Officer for investment fraud, Springworks LLC and the

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Symmorphix Patents, among other PGW assets, were placed in possession of a court-appointed receiver,

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Douglas Kelley (the “Receiver”).

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16.

In October of 2008, Demaray and Christopher White met to discuss how to move forward

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with their business venture. They agreed to work together to obtain capital that would allow them to

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purchase and then monetize the Symmorphix Patents. Subsequently, Demaray, who was, at that time,

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the sole shareholder in Antropy, entered into a business agreement with White wherein Demaray would

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be President, Chief Executive Officer, and a Director, and would retain 52% ownership of Antropy,

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while Plaintiff would be appointed Vice President, Secretary, Treasurer, and a Director, and would

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purchase 48% of the outstanding shares in Antropy. Consistent with Antropy’s business strategy, the

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acquisition and subsequent monetization of the Symmorphix Patents were critical components of White

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and Demaray’s business relationship. Demaray’s business relationship with White was subsequently

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memorialized, in part or in whole, in Antropy’s December 17, 2009 Minutes of Action and December

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15, 2009 Action of Incorporator of Antropy Incorporated. See Exhibit C (December 17, 2009 Minutes

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of Action), attached hereto and made a part of this complaint and Exhibit D (December 15, 2009 Action

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of Incorporator of Antropy Incorporated), attached hereto and made a part of this complaint.

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FIRST AMENDED COMPLAINT

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17.

Plaintiff’s ownership in Antropy required an amendment to Antropy’s Articles of

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Incorporation so as to permit Antropy to issue additional stock for Plaintiff to purchase. Indeed, the

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December 17, 2009 Minutes of Action specifically directs Demaray, as Antropy’s President, to file the

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amended articles of incorporation (which was attached as Exhibit A to the December 17, 2009 Minutes

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of Action). See Exhibit C at 2 (Demaray’s direction) and 4-7 (Amended Articles).

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18.

Pursuant to the terms of his business relationship with Demaray and as memorialized in

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the December 17, 2009 Minutes of Action (Exhibit C), White attempted to purchase his 48% ownership

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interest in Antropy on or about October 2010. Unbeknownst to White at that time, Demaray had

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purposefully failed to file Antropy’s Amended Articles of Incorporation. As a result, Antropy never

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issued additional shares for White to purchase.
19.

Despite failing to file Antropy’s Amended Articles of Incorporation, Demaray allowed

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White to work on behalf of their business relationship and benefited therefrom. For example, White

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formulated and implemented a business strategy for raising the critical capital needed to purchase the

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Symmorphix Patents from the Receiver and fund their solar panel manufacturing business.

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20.

Between December 2009 through February 2011, White worked diligently, with the

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understanding that he was an officer, director, and shareholder of Antropy, to secure the financing

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necessary to purchase the Symmorphix Patents and utilize the Symmorphix Patents. Many of the

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financing documents created during this time period reflected White’s status as a director and officer

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with and White’s ownership interest in Antropy.

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21.

Upon information and belief, around late 2010 or early 2011, Demaray inherited several

hundred thousand dollars from his mother’s estate.
22.

Between February and March of 2011, while White and Demaray’s business venture

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(e.g., Antropy) was finalizing its initial offer to purchase the Symmorphix Patents from the Receiver,

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White offered, on several occasions, to contribute money to help fund the purchase. Demaray was

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noncommittal towards White’s offers.

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23.

On March 17, 2011, Antropy submitted its offer to the Receiver to purchase the

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Symmorphix Patents. Exhibit E (Antropy’s March 15, 2012 [sic] offer to purchase the Symmorphix

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Patents).

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FIRST AMENDED COMPLAINT

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24.

Between the time of Antropy’s offer to the Receiver to purchase the Symmorphix Patents

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and the finalization of the sale of the Symmorphix Patents (January 11, 2012), Demaray excluded White

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from the negotiation process. Demaray provided only periodic updates consistent with the

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understanding that Antropy would be purchasing the Symmorphix Patents. See Exhibit F (July 28,

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2011 Demaray email to White), attached hereto and made a part of this complaint.

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25.

On January 11, 2012, the purchase of the Symmorphix Patents was finalized.

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Unbeknownst to White, Demaray had excluded Antropy and White from the deal during the negotiation

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process, and instead had arranged to purchase the Symmorphix Patents for himself. See Exhibit A at 4.

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26.

On or about May 15, 2012, White received an email from Demaray indicating that

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Demaray had bought the Symmorphix Patents for himself. Exhibit G, attached hereto and made a part

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of this Complaint.

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27.

On August 16, 2012, White sent a letter to Demaray expressing his concerns regarding

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the purchase of the Symmorphix Patents. Exhibit H, attached hereto and made a part of the complaint.

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Demaray never responded to this letter.

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28.

On or about February 2013, White learned of Demaray’s plans to abandon his business

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relationship with White and to form a new company, Demaray LLC, to develop and monetize the

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Symmorphix Patents.

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29.

On April 12, 2013, attorneys representing White (Fredrickson & Byron, P.A.) wrote

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attorneys representing Demaray (Haynes and Boone) a letter setting forth, in detail, White’s allegations

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against Demaray and requesting that Demaray meet with White regarding a possible resolution. See

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Exhibit I, attached hereto and made a part of the complaint.

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30.

On August 9, 2013, Demaray’s attorneys responded by denying: 1) White’s status as a

shareholder, officer, and director of Antropy and 2) Demaray’s duty to White.

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31.

Upon information and belief, in early 2013, Demaray transferred and/or assigned the

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Symmorphix Patents to Demaray LLC and, in consideration for said transfer and/or assignment,

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Demaray received shares (i.e., equity interest) in Demaray LLC.

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//

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//

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FIRST AMENDED COMPLAINT

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FIRST CAUSE OF ACTION

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Fraud

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32.

Plaintiff realleges the preceding paragraphs as if fully set forth herein.

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33.

Demaray defrauded White by failing to honor their business relationship.

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34.

Demaray has made material representations to White as to White’s shareholder interests

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in and status as an officer and director of Antropy.
35.

Specifically, Demaray executed the December 17, 2009 Minutes of Action and the

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December 15, 2009 Action of Incorporator of Antropy Incorporated agreements, which collectively

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should have made White a shareholder, officer, and director of Antropy.

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36.

Demaray executed the December 17, 2009 Minutes of Action and the December 15, 2009

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Action of Incorporator of Antropy Incorporated agreements and represented to White that those two

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documents were legally valid instruments. However, Demaray at the time of the agreements’ execution

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or subsequently thereafter, believed and/or knew that the December 17, 2009 Minutes of Action and the

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December 15, 2009 Action of Incorporator of Antropy Incorporated agreements were not legally valid

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instruments, were defective, and/or had no intention of effectuating those documents but continued to

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misrepresent the agreements’ legal validity to White.

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37.

Demaray also made repeated representations, during the relevant time period, that White

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and Demaray were partners in a business relationship wherein Demaray was 52% owner and White was

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48% owners and that they would jointly acquire and then subsequently jointly monetize and develop the

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Symmorphix Patents.

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38.

Demaray, during the relevant time period, also falsely promised White the opportunity to

join, invest in, and share the profits of Antropy and/or their business relationship.
39.

Demaray made these intentional misrepresentations to White with the intent that White

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rely on them, forego his own venture to purchase the Symmorphix Patents by himself, invest significant

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time and resources developing business plans and private placement memorandums, obtaining potential

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investors, and otherwise working for the benefit of White and Demaray’s business relationship.

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40.

White’s justifiable reliance on Demaray’s misrepresentations caused White to suffer

damages.

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FIRST AMENDED COMPLAINT

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41.

Demaray’s fraudulent conduct described herein warrants an imposition of

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exemplary/punitive damages and a constructive trust over the Symmorphix Patents or any consideration

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(monetary, equity in an organization, or otherwise) Demaray has received for the Symmorphix Patents.

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SECOND CAUSE OF ACTION

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Breach of Written Contract

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42.

Plaintiff realleges the preceding paragraphs as if fully set forth herein.

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43.

Demaray has breached his written contract with White.

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44.

Valid and enforceable contracts exist between Demaray and White.

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45.

All condition precedents to White’s right to bring this action and to recover the requested

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relief have been performed, have occurred, or have been waived.
46.

By 1) failing to acknowledge White’s rights and privileges as a shareholder, officer, and

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director in Antropy and Demaray and White’s business relationship, as set forth in the December 17,

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2009 Minutes of Action and the December 15, 2009 Action of Incorporator of Antropy Incorporated

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agreements and by 2) purchasing the Symmorphix Patents for himself, Demaray breached his written

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contracts with White.

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47.

As a direct and proximate result of Demaray’s breach of the written agreements, White

has suffered, and will continue to suffer, damages.

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THIRD CAUSE OF ACTION

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Breach of Oral Contract

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48.

Plaintiff realleges the preceding paragraphs as if fully set forth herein.

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49.

Demaray has breached his oral contract with White.

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50.

A valid and enforceable oral contract exists between Demaray and White.

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51.

All condition precedents to White’s right to bring this action and to recover the requested

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relief have been performed, have occurred, or have been waived.
52.

In October of 2008, White and Demaray entered into an oral contract. The terms of the

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oral contract were that Demaray and White would start a business/partnership wherein the

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business/partnership would raise capital to purchase and then subsequently develop and monetize the

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FIRST AMENDED COMPLAINT

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Symmorphix Patents. The parties agreed that Demaray would be 52% owner and White would be 48%

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owner of the business/partnership.

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53.

Demaray, by 1) failing to acknowledge White’s rights and privileges as a member/owner

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of the business/partnership and 2) by purchasing the Symmorphix Patents for himself, has breached his

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oral contract with White.

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54.

As a direct and proximate result of Demaray’s breach of the oral contract, White has

suffered, and will continue to suffer, damages.

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FOURTH CAUSE OF ACTION

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Negligent Misrepresentation

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(Against Demaray)

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55.

Plaintiff realleges the preceding paragraphs as if fully set forth herein.

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56.

Demaray negligently misrepresented material facts to White.

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57.

Demaray made misrepresentations to White to the effect that White was an officer,

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director, and/or shareholder in Antropy and that the December 17, 2009 Minutes of Action and the

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December 15, 2009 Action of Incorporator of Antropy Incorporated agreements were valid and legally

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binding.
58.

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Demaray also made repeated representations, during the relevant time period, that White

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and Demaray were partners in a business relationship wherein Demaray and White would acquire and

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then subsequently monetize the Symmorphix Patents.
59.

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Demaray, during the relevant time period, also represented to White that White

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possessed the opportunity to join, invest in, and share the profits of Antropy and/or their business

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relationship.

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60.

Demaray did not exercise reasonable care in communicating this information to White.

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61.

White justifiably relied on Demaray’s misrepresentations in making his decisions as to

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his investment in and contribution to Antropy and/or their business relationship.
62.

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Demaray’s misrepresentations proximately caused White to suffer damages.

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FIRST AMENDED COMPLAINT

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FIFTH CAUSE OF ACTION

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Breach of Fiduciary Duty – De Facto Partnership

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63.

Plaintiff realleges the preceding paragraphs as if fully set forth herein.

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64.

White and Demaray formed and entered into a business partnership to purchase, develop,

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and monetize the Symmorphix Patents.
65.

As partners, a fiduciary relationship existed between Demaray and White. As a result of

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such relationship, Demaray owed White a duty of utmost good faith and loyalty, as well as those duties

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set forth in California Corporations Code § 16404(b) and (c).

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66.

Demaray breached his fiduciary duty by converting partnership assets and opportunities

to his own use, by self dealing, and by stealing from the partnership.
67.

On information and belief, and thereupon alleged, Demaray competed with the

partnership while he and White were still partners.
68.

Demaray knowingly, willfully, and intentionally misappropriated business opportunities

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that properly belonged to his partnership with White, namely the opportunities to purchase and

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subsequently develop and monetize the Symmorphix Patents and the associated technologies, defrauding

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his partner White by making promises he had no intention of performing, and by inducing his partner

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White to invest significant time and money in a business from which White could not profit, because

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Demaray was planning to convert partnership assets and opportunities to his own use and to the use of

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Demaray LLC.

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69.

Demaray’s actions were willful, oppressive, fraudulent, and malicious, and were

performed with the intent to harm White.
70.

As a direct result of Demaray’s breach of his fiduciary duty, White has suffered damages

in an amount to be determined at the time of trial.
71.

Because Demaray has breached the partnership agreement and violated his duty to the

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partnership, White is entitled to equitable relief, including, but not limited to, an accounting as to

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corporate business, enforcement of White’s rights under the oral and written partnership agreement, and

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enforcement of White’s property rights in the partnership.

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FIRST AMENDED COMPLAINT