Enslein v. Di Mase et al

Filing 434

ORDER AND OPINION ON THE PARTIES' DAUBERT MOTIONS AND THE PARTIES' DISPOSITIVE MOTIONS. In addition, fourteen days after this Order is entered, the Clerk of the Court shall unseal all summary judgment motion briefs, Daubert motion briefs, and exhibits attached to all briefs unless otherwise directed by the Court. If a party seeks to maintain a document's sealed status, the party must seek said relief from the Court as set forth above. (Matthes Mitra, Renea) Modified on 6/17/2019 edit docket text only.(Matthes Mitra, Renea). (Copy mailed to Tristam Jensvold at address on docket sheet) (Houston, Kiambu).

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION
JERALD S. ENSLEIN, in his capacity
as Chapter 7 Trustee for Xurex, Inc.,
Plaintiff,
vs.
GIACOMO E. DI MASE, et al.,
Defendants.

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Case No. 16-09020-CV-W-ODS

ORDER AND OPINION ON THE PARTIES’ DAUBERT MOTIONS
AND THE PARTIES’ DISPOSITIVE MOTIONS

Pending are two motions to strike, exclude, or limit expert opinion testimony
(Docs. #348 and 356) and eleven motions for summary judgment (Docs. #347, 350,
358, 359, 360, 361, 362, 363, 365, 366, and 367). As examined in section II, the
parties’ motions to strike, exclude, or limit expert opinion testimony are denied. As
discussed in section III, the parties’ motions for summary judgment are granted in part
and denied in part.

TABLE OF CONTENTS
I. BACKGROUND…………………..…………………………………………………………1
A. The Early Years of Xurex…………………………………..…………………………...1
(1) Agreement with DuraSeal Pipe…………………………………………………...1
(2) Initial Communications with the Di Mases and Jensvold……………………….1
(3) Loven’s Audit………………………………………………………………………..2
B. The 1/13/10 Agreement…………………………………………………………………2
C. Formation of DuraSeal Holdings……………………………………………………….3
D. The 12/31/10 Agreement and Acquisition of DuraSeal Pipe………………………..4
E. Events Occurring Between January 2011 and November 2011……………………6
(1) Negotiations Between DuraSeal Holdings and Xurex…………………………..6
(2) Reports from John Lowry…………………………………………………………..6
(3) Proxy Contest and Subsequent Lawsuit………………………………………….7
F. Events and Communications Immediately Preceding the 1/11/12 Amendment…..9
G. The 1/11/12 Amendment………………………………………………………………11
H. HDI, Xurex Stock Issuance, and Changes to the Xurex Board…………………….12
I. Another Delaware Lawsuit…………………………………………………………….13
J. DuraSeal Pipe’s Uneconomic Condition Notice & Xurex’s Bankruptcy Filing…….13
K. This Lawsuit…………………………………………………………………………….15

II. MOTIONS TO STRIKE, EXCLUDE, OR LIMIT EXPERT OPINION TESTIMONY....16
A. Standard………………………………………………………………………..……… 16
B. Michele Pavone, Ph.D…………………………………………………………………17
(1) Relevance………………………………………………………………………….17
(2) Reliability…………………………………………………………………...……...19
C. Robert F. Reilly……………………………………………………………………...….20
(1) Limits on Lost Profits…………………………………………………………...…21
(2) Additional Minimum Purchase Obligations……………………………………..24
(3) Purchases and Penalties…………………………………………………………26
(4) Xurex’s Business Reality…………………………………………………………27
(5) Tort Claim Damages……………………………………………………………...28

ii

III. MOTIONS FOR SUMMARY JUDGMENT……………………………………………....29
A. Standard………………………………………………………………………..……… 30
B. Motions for Summary Judgment on Plaintiff’s Claims……………………………...30
(1) Breach of Contract (Counts II and III)……………………………………………30
(2) Breach of Implied Covenant of Good Faith and Fair Dealing (Count IV)………31
(3) Misappropriation of Trade Secrets (Count V)……………………………………35
(4) Breach of Fiduciary Duty (Count VII)……………………………………………..35
(a) Standard of Review…………………………………………………………….36
(b) Substantive Claims…………………………………………………………….38
(c) Immunity from Damages………………………………………………………38
(5) Civil Conspiracy (Count VI)………………………………………………………..39
(6) Aiding and Abetting Breach of Fiduciary Duty (Count VIII)…………………….41
(a) Choice of Law…………………………………………………………………..41
(b) Internal Affairs Doctrine………………………………………………………..42
(c) Most Significant Relationship…………………………………………………45
(7) Declaratory Judgments (Counts XIII and XIV)…………………………………..46
C. Plaintiff’s Motion for Summary Judgment on Affirmative Defenses………………46
(1) Prior Material Breach by Xurex……………………………………………………47
(2) Commercial Frustration or Impossibility of Performance………………………47
(3) Ratification…………………………………….……………………………………47
(4) Lack of Consideration and/or Failure of Consideration…………………………48
(5) Failure to Mitigate Damages………………………………………………………48
(6) Fraud in the Inducement…………………………………………………………..48
D. Plaintiff’s Request for Ruling as a Matter of Law……………………………………49
E. Plaintiff’s Summary Judgment Statement of Uncontroverted Facts………………49
(1) Failure to Cite Materials in the Record……………………………………………49
(2) Reliance on Inadmissible Evidence………………………………………………50
(3) References to Exhibits…………………………………………………………….50
(4) Rose’s Responses to Plaintiff’s Statement of Uncontroverted Facts…………51
F. McKeon’s Motion for Summary Judgment…………………………………………..52
(1) Attempts to Incorporate Facts and Arguments………………………………….52
(2) Plaintiff’s Counter-Statement of Uncontroverted Material Facts………………53
(3) Responses to Counter-Statement of Uncontroverted Material Facts…………53
G. Rose’s Motion for Summary Judgment………………………………………………54
(1) Failure to Abide by Federal and Local Rules…………………………………….54
(2) Exhibit 96…………………………………………………………………………...54
(3) Arguments Related to Plaintiff’s Claims…………………………………………55

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(4) Rose’s Affirmative Defenses..…………………………………………………….56
(5) Failure to State a Claim Argument………………………………………………..57
(6) Plaintiff’s Responses to Rose’s Motion for Summary Judgment………………57
H. Olson’s Motion for Summary Judgment……………………………………………..58
(1) Attempts to Incorporate Facts and Arguments……………………………….…58
(2) Plaintiff’s Responses to Olson’s Statement of Facts……………………………59
(3) Plaintiff’s Counter-Statement of Additional Uncontroverted Material Facts….59
I. Johnston’s Motion for Summary Judgment…………...……………………………..60
(1) Plaintiff’s Responses to Johnston’s Statement of Facts...……………………..60
(2) Plaintiff’s Counter-Statement of Additional Uncontroverted Material Facts….60
J. HDI’s Motion for Summary Judgment…..……………………………………………61
(1) Parties’ Facts and Counter-Facts……………………………………...…………61
(2) Personal Jurisdiction…………………………………………………………..…..61
(3) Liability for Alleged Tortious Conduct of Subsidiary…………………………….65

IV. PARTIES’ SEALED EXHIBITS…………………………………………………..………65

V. CONCLUSION……………………………………………………………………………..66
A. Summary of the Court’s Rulings………………………………………………………66
B. Claims to Be Tried……………………………………………………………………...67

iv

I. BACKGROUND
The Court will provide information about the entities and individuals in this lawsuit
as well as supply some context for the events leading up to the filing of this lawsuit, the
parties’ pending motions, and the Court’s consideration of those motions. This
background section is not meant to be comprehensive. Moreover, nothing in this
section should be construed as a finding of fact by the Court. Unless otherwise noted,
the information contained in this section is either undisputed by the parties or extracted
from exhibits accompanying the parties’ summary judgment filings.
A. The Early Years of Xurex
Founded in 2005, Xurex, Inc. (“Xurex”) is a Delaware corporation with its
principal place of business in Jackson County, Missouri. At inception, Xurex engaged in
the development and sale of protective coatings derived from nano-technology invented
by Bo Gimvang. Since its founding, Xurex struggled to commercialize Gimvang’s
technology, and to date, has not developed a commercial product of its own.

(1) Agreement with DuraSeal Pipe
In 2008, Defendant Joseph Johnston discovered a unique method of applying
Xurex coatings to prevent corrosion, reduce abrasion, and extend the life of “down-hole”
pumps and pipes in the oil and gas industry. To pursue this business, Johnston and coinvestors formed Defendant DuraSeal Pipe Coatings Company LLC (“DuraSeal Pipe”),1
a Missouri limited liability company with its principal place of business in Missouri.
DuraSeal Pipe was able to develop a functional product from Xurex’s technology. In
October 2008, Xurex authorized DuraSeal Pipe to distribute two Xurex products,
HabraCoat-SA and PenetrAct-SA.

(2) Initial Communications with the Di Mases and Jensvold
In 2008 and 2009, Defendants Jose Di Mase and Tristram Jensvold
communicated with Xurex about potential investment in the company and received
1

Before forming DuraSeal Pipe, Johnston, through SealAmerica LLC, purchased Xurex
products.
1

marketing materials from Xurex explaining how HabraCoat worked. Jose Di Mase2
visited the Xurex facility in Albuquerque and attended meetings with Johnston at the
facility. At the time, Jensvold was Jose Di Mase’s son-in law.
In August 2009, Xurex provided an Offering Memorandum and Subscription
Agreement to Jose Di Mase. Doc. #364-21. Therein, Xurex represented the following:
HabraCoat® is different than a traditional coating product because it has
“nano-penetrating” reactive chemistry, as opposed to most coatings, which
merely bond with the substrate surface without any such reaction.
PenetrAct® is Xurex’s surface preparation aid for use with its nano
coatings. PenetrAct® penetrates and activates the surface and
subsurface matrix of metals and alloys, which allows penetration into the
substrate.
Id. at 4. The agreement was forwarded to Defendant Giacomo Di Mase, Jose Di
Mase’s son. Although the agreement was not executed, Jose Di Mase and
Jensvold continued to communicate with Johnston in 2009 and 2010.

(3) Loven’s Audit
In 2009, Bill Loven became Xurex’s CEO. As CEO, Loven audited the entire
Xurex business, and investigated allegations that Gimvang and Bob Bishop, an early
CEO of Xurex, defrauded investors and misused company funds. Loven purportedly
found evidence supporting the allegations. Shortly thereafter, Loven was removed as
Xurex’s CEO, and the remainder of the Xurex board was also removed. Subsequently,
Robert Clifford and Ken Pedersen became directors on the Xurex board.

B. The 1/13/10 Agreement
On January 13, 2010, Xurex and DuraSeal Pipe entered into an Exclusive
License, Marketing and Distribution Agreement (the “1/13/10 Agreement”). Doc. #36429. Johnston negotiated the 1/13/10 Agreement on behalf of DuraSeal Pipe, and Rex
Powers, then a Xurex board member, negotiated on Xurex’s behalf. The 1/13/10

2

According to the Delaware Court of Chancery, Jose Di Mase is a Venezuelan-Italian
businessman who has “at least one successful privately held company to his credit and
access to well-heeled, high-net-worth partners.” Johnston v. Pedersen, 28 A.3d 1079,
1088 (Del. Ch. 2011).
2

Agreement granted DuraSeal Pipe an exclusive license to market and sell Xurex
Authorized Products – including but not limited to HabraCoat, PenetrAct, Oxilane, and
ProGlide – to the North American oil and gas industry.
Per the 1/13/10 Agreement, DuraSeal Pipe was to pay $50,000 to Xurex for four
fifty-gallon barrels of HabraCoat 200. Id. at 2.3 Upon the later of January 1, 2010, or
Xurex’s completion of an IP escrow, DuraSeal Pipe was to pay an additional $50,000 to
Xurex for four more fifty-gallon barrels. Id. “The Parties agree that the Initial Product
Purchase shall apply and be counted towards [DuraSeal’s] Product Purchase
Minimums.” Id. The Agreement required DuraSeal Pipe to make minimum purchases
of Xurex products and pay royalties. Beginning in January 2010, DuraSeal was
required to make minimum monthly purchases. Id. at 4, 17. If DuraSeal failed to
purchase the monthly minimum product for two consecutive months, it would be
deemed to be in default. Id. at 4.
The 1/13/10 Agreement indicated DuraSeal Pipe had the option to purchase
intellectual property rights upon the occurrence of certain events. Id. at 6-7. Eleven
publicly available patent applications were identified in an exhibit to the 1/13/10
Agreement. Id. at 18. That exhibit specified “all product knowhow and formulas” must
be included “to enable [DuraSeal Pipe] to reproduce and manufacture all Xurex
products upon a purchase of the IP…in accordance with the terms” of the 1/13/10
Agreement. Id. The 1/13/10 Agreement was to be “governed by and construed and
enforced in accordance with the internal laws of the State of Delaware.” Id. at 8.

C. Formation of DuraSeal Holdings
In mid-2010, Johnston met with Jensvold and his then-wife (Jose Di Mase’s
daughter, Daniela Di Mise) and delivered a presentation on Xurex products. After the
presentation, Jensvold became interested in investing in Xurex. Johnston later
contacted Jose Di Mase about a proposal to acquire and combine DuraSeal Pipe and
Xurex into a new company. Sometime thereafter, Defendant DuraSeal Holdings,

3

The Court’s references to pagination in documents filed on ECF are taken directly
from the pagination ECF applies to filings, not the parties’ pagination.
3

S.r.L.,4 an Italian company, was formed for the purpose of acquiring 100% of DuraSeal
Pipe. At that time, Jose Di Mase was the president of DuraSeal Holdings. According to
Jose Di Mase, the initial DuraSeal Holdings board consisted of him, Ugo Anatra,5 and
Defendant Lee Kraus, who has decades of experience in the oil and gas industry.
Before closing on its purchase of DuraSeal Pipe, DuraSeal Holdings executed an
agreement with Xurex.
D. The 12/31/10 Agreement and Acquisition of DuraSeal Pipe
On December 31, 2010, DuraSeal Holdings entered into an Exclusive License,
Marketing and Distribution Agreement with Xurex (the “12/31/10 Agreement”).6 Doc.
#375-1. The 12/31/10 Agreement granted DuraSeal Holdings a worldwide license to
market and sell Xurex “Products” in the oil and gas, aerospace industry, automobile
industry, and ceramic tile applications in the construction industry. Id. at 1. The North
American oil and gas market subject to the 1/13/10 Agreement between Xurex and
DuraSeal Pipe was excluded. Id.
Effective December 31, 2010, the 12/31/10 Agreement concluded on December
31, 2022. Id. It would “be automatically extended and renewed for one-year periods
after December 31, 2022, unless either party notifies the other at least 180 days prior to
December 31, 2022 or any anniversary thereafter of its intent to allow the term of this
Agreement to expire.” Id. The 12/31/10 Agreement permitted termination before
December 31, 2022, in limited instances: (1) default in performance; (2) bankruptcy or
insolvency; or (3) “[i]n the unlikely event that [DuraSeal Holdings] determines that the
marketing and distribution of the Products is not commercially viable, it may terminate
this agreement with at least 180 days written notice to Xurex.” Id. at 11. The parties

4

The parties often use “DMN” when referring to this entity, and sometimes refer to it as
“DuraSeal Holding.” For consistency, the Court uses “DuraSeal Holdings.”
5
Anatra, who is not a defendant in this matter, was the Chief Financial Officer and sole
director of Defendant Holding Development SA (“HDI”) when he was a DuraSeal
Holdings board member.
6
Some Defendants occasionally refer to this agreement as the 12/13/10 Agreement.
See Doc. #364, at 15; Doc. #373, at 15; Doc. #387, at 6; Doc. #412, at 49. These
appear to be typographically errors. The Court refers to this agreement by its effective
date, December 31, 2010. Doc. #375-1, at 1.
4

agreed the 12/31/10 Agreement would be governed by and interpreted in accordance
with the laws of the United States and the State of New York. Id. at 13.
Subject to completion of an IP escrow and upon execution of the 12/31/10
Agreement, DuraSeal Holdings was to pay Xurex a $200,000 fee. Id. at 4. During the
“R&D Period,”7 DuraSeal Holdings was obligated to purchase a target quarterly amount
of Xurex product and pay “a penalty of $10,000 per drum short of target payable.” Id. at
5-6. Purchases during the R&D Period “will be credited against the minimum purchase
requirements” after the expiration of the R&D Period. Id. at 5.
The 12/31/10 Agreement granted DuraSeal Holdings and its “Affiliates”8 the “right
to practice the Xurex Intellectual Property as needed in the application, use, marketing
and sale of the Products, which specifically excludes the right to manufacture the
Products.” Id. at 4. Xurex Intellectual Property included, inter alia, “formulas of the
Xurex Products…all technical and non-technical know-how used in the mixing and
preparation of the Products…all Know-How; and…all trademarks, trade secrets, and
other intellectual property owned or used by Xurex.” Id. at 3. Know-How was defined
as “all knowledge, enhancements, technology practices, processes, methods of
manufacture, application protocols, materials, discoveries, improvements,
developments, trade secrets, inventions, data or similar other information relating to the
Products.” Id. Four publicly available patent applications were identified as Xurex
Intellectual Property. Id. at 3, 22.
In the 12/31/10 Agreement, DuraSeal Holdings agreed “to retain [Defendant] Lee
Kraus9 as a non-executive director under a five-year agreement.” Id. at 12. The
Agreement was signed by Pedersen, who identified himself as CEO of Xurex, and Jose
Di Mase, who identified himself as president of DuraSeal Holdings. Id. at 16.

7

The “R&D Period” was defined as the later of (1) “December 31, 2011 if [DuraSeal
Holdings] acquires [DuraSeal Pipe] within 6 months of the Effective Date,” or (2) “June
30, 2012 if [DuraSeal Holdings] does not acquire [DuraSeal Pipe] within 6 months of the
Effective Date.” Doc. #375-1, at 4.
8
“Affiliates” included “any corporation, partnership, limited liability company, sole
proprietorship, or other business entity controlled by, controlling, or under common
control with a party to this Agreement.” Doc. #375-1, at 3.
9
On December 31, 2010, it appears Kraus was still a member of the DuraSeal Holdings
board.
5

In January 2011, DuraSeal Holdings closed on its purchase of DuraSeal Pipe
and acquired DuraSeal Pipe’s members’ shares of Xurex stock.
E. Events Occurring Between January 2011 and November 2011
(1) Negotiations Between DuraSeal Holdings and Xurex
From January 2011 to September 2011, Pedersen, then-director of Xurex,
negotiated with Jensvold,10 on behalf of DuraSeal Holdings, to combine and renegotiate
the 1/13/10 and 12/31/10 Agreements. In April 2011, Xurex and DuraSeal Holdings
agreed to negotiate a combined license agreement. On August 20, 2011, Xurex
communicated it was prepared to negotiate a “complete new agreement.” The parties
dispute what offers or agreements, if any, Xurex made about minimum purchase
obligations and/or licensing fees during this timeframe. On September 23, 2011, Xurex
sent a draft counter-proposal to Johnston and Jensvold.11 The draft counter-proposal
was not executed.

(2) Reports from John Lowry
In January 2011, John Lowry, who was Xurex’s Director of Operations from
August 2009 through January 2010 and worked as a consultant for Xurex from August
2010 through January 2012,12 sent a memorandum to Pedersen, then-CEO of Xurex.
Lowry’s memorandum indicated that, during a three-day visit to DuraSeal Pipe, there
were extensive discussions about DuraSeal Pipe’s successes and failures with
HabraCoat. Lowry wrote, “[i]t is clear from this review that there are certain
environments in which Habracoat will not work.” Doc. #364-54, at 15-18. Later that
same month, Lowry stated, “[o]il and gas well success and failure data provided by
DuraSeal was analyzed,” and results “point[] to a very narrow window in which current

10

It is unclear what, if any, position Jensvold held with DuraSeal Holdings when
negotiations began.
11
Another individual, Steve Brauerman, was also included on the email but it is unclear
who he is. Doc. #364-53, at 1.
12
In January 2012, Lowry was rehired as Director of Operations, a position he held until
he retired in December 2013.
6

silane formulations13 can successfully operate.” Id. at 19. In July 2011, Lowry wrote
another memorandum to Pedersen stating, “[i]nitial test results from New Mexico tech
show corrosion rates consistent with Albuquerque laboratory weight loss tests and
confirm the weaknesses of the habracoat technology related to existing technology in
the oil and gas market to prevent tubing corrosion.” Id. at 71. According to Lowry’s
memorandum, “[t]he ‘degree’ of corrosion protection for [a version of HabraCoat] is
‘minimal’ according to these results and therefore confirms why there are some failures
in the field.” Id. at 72.

(3) Proxy Contest and Subsequent Delaware Lawsuit
According to Johnston, as of January 2011, DuraSeal Pipe was considering a
proxy contest to unseat the Xurex board. In March 2011, Jensvold emailed Johnston,
Jose Di Mase, and others regarding an “update” about an objective to “[c]omplete the
take over of Xurex.” Doc. #353-20. In April 2011, DuraSeal began soliciting proxies
from Xurex shareholders to remove the incumbent Xurex directors and elect a new
board. Once the Xurex board learned of the solicitations, it began counter-solicitations.
On May 23, 2011, Jensvold emailed an individual named Mackeno Lee,14 stating,
among other things, he was “engineering a coup on June 25th, [which was] the next
Xurex Shareholders meeting.” Doc. #354-3, at 2. He reported he had “secured over
50% support through proxy solicitation and now I need to win the hearts and minds of
the rest of the Xurex shareholders to keep my costs low once I am in control. I am
successfully eliminating all opposition.” Id.
In the meantime, in June 2011, the Xurex board sent a letter to Gimvang, and
forwarded a copy of the letter to its shareholders. The letter represented field tests of
Xurex’s products “were pretty much all failures” and Gimvang’s inventions did not work.
Doc. #364-17.
On June 14, 2011, written consents were delivered to Xurex. The written
consents purportedly removed the directors of the Xurex board, fixed the number of
directors on the Xurex board to five directors, and elected new board members. That
13
14

According to the parties, “silane formations” refers to “HabraCoat.” Doc. #403, at 25.
The record does not indicate who this person is or why he received the email.
7

same day, Johnston and others filed an action in the Delaware Court of Chancery
against the then-current members of the Xurex board and sought a determination that
the written consents validly removed the directors and replaced them with a new slate of
directors. On September 23, 2011, the Delaware Court of Chancery found Johnston,
Defendant Dietmer Rose,15 Bill O’Brien,16 and Nate Hutchings17 were validly elected by
written consents, and therefore, constituted the new Xurex board. Doc #364-1;
Johnston v. Pedersen, 28 A.3d 1079, 1089-93 (Del. Ch. 2011).
At the September 29, 2011 Xurex board meeting, the board decided the Xurex
board directors would “not receive compensation other than stock.” Doc. #386-7.
According to Rose, Johnston proposed the board award 800,000 to 1.5 million shares of
Xurex stock to each director. The directors appointed Johnston as president and CEO
of Xurex and Chairman of the Xurex board. At that time, Johnston was president of
DuraSeal Pipe, which was Xurex’s only customer and was responsible for 99% of
Xurex’s sales.
On October 12, 2011, Defendant Robert Olson,18 a Kansas state senator since
2011, was appointed as a director to the Xurex board.
On November 8, 2011, Johnston sent an email to O’Brien, Hutchings, Rose,
Olson, Jack Angel, and Amy Tarwater (Johnston’s assistant) stating he was resigning
as president and CEO of Xurex effective that same day. But, as he has admitted,
Johnston continued to serve as Xurex’s president and CEO through January 10, 2012.
Effective January 10, 2012, Angel became CEO and president of DuraSeal Pipe, and
Jim Collins, a DuraSeal Pipe employee, became CEO of Xurex.

15

Before retiring in 2001, Rose was a natural resources economics professor for nearly
three decades. In 2008 or 2009, Rose became an investor in Xurex. In 2009, Rose
attended a shareholder meeting where Johnston gave a presentation about DuraSeal
Pipe’s application of Xurex products in the oil and gas industry. It appears Rose was
previously elected to the Xurex board in February 2010 via a mail-in election, but due to
some disagreements, he resigned. Johnston, 28 A.3d at 1083.
16
O’Brien was not named as a defendant in this matter.
17
Hutchings was not named as a defendant in this matter.
18
In early 2011, Olson met Johnston when DuraSeal Pipe had a city water issue and
needed a state legislator’s assistance.
8

F. Events and Communications Immediately Preceding the 1/11/12 Amendment
According to Jensvold, DuraSeal Holdings gave him permission to negotiate an
amendment to the 2010 agreements. Rose testified he was appointed by the Xurex
board to negotiate the amendment to the 2010 agreements. To describe the events
and communications leading up to the execution of the 1/11/12 Amendment, the Court
sets forth a non-exhaustive timeline. Much of what is contained in this timeline is taken
directly from written communications. While the contents of the communications are not
necessarily in dispute, the parties dispute the context, completeness, accuracy, and/or
admissibility of the communications.
•

On December 16, 2011, Jensvold emailed Rose and Johnston proposing a
conference call to discuss the licensing agreement. Doc. #372-63, at 3. Rose
responded: “Joe needs to confirm and tell you and me what he can decide right
now. Don’t we need the BOD on this?” Id. Jensvold replied to the email,
copying Johnston, telling Rose final BOD approval will be needed. Id. at 2.

•

On December 21, 2011, Jensvold emailed Johnston and Rose asking them to
look at “the latest version of the agreement per our discussions.” Id. at 4. Rose
forwarded the email to Johnston, noting “the royalty section is still in the latest
version” and asking Johnston if that was “an oversight.” Id.

•

On December 22, 2011, Jensvold emailed Giacomo Di Mase, Johnston, and
Rose, asking them “to communicate with each other as needed to move the
licensing agreement execution process forward.” Id. at 5. Rose responded to
Jensvold’s email, stating he tried to communicate with Johnston but had not
reached him yet. Id.

•

On December 28, 2011, Rose emailed Johnston saying he would call him later.
Doc. #386-26. Johnston replied: “No problem we can talk in the morning, I will
continue to work on the agreement.” Id.

•

In a letter dated December 30, 2011, O’Brien and Hutchings resigned from the
Xurex board. Doc. #386-50. O’Brien and Hutchings asserted their “participation
on the Xurex board was strictly contingent on the members’ mutual, good faith
effort to facilitate and advance the business affairs of Xurex through independent,
objective and reasonable management practices…” Id. They claimed that they
cannot fulfill their duties as directors. Id. With their departures, the Xurex board
was comprised of Johnston, Rose, and Olson.

•

On January 3, 2012, Rose emailed Johnston about comparisons among the
different versions of the Xurex/DuraSeal Pipe contracts. Doc. #386-53. About
the minimum purchase reduction, Rose stated, “[i]f any member of the old BOD
gets wind of this we would be in potential trouble.” Id. That same day, Rose told
Jensvold he believed “Joe should be in on” a “[c]onference call re Duraseal.”
Doc. #372-63, at 13.

9

•

On January 4, 2012, Rose contacted an attorney for the first time about the
proposed amendment, sending the proposed amendment to a New Mexico
attorney, Paul Fish. Doc. #386-20.

•

On January 5, 2012, Fish emailed Rose saying, he is “absolutely not an expert in
distribution contracts, and I trust you have had advice on those type of details
from someone who is.” Doc. #386-20. But he raised some “points” and
“questions” he had. Id. Johnston was copied on Fish’s email. Id. Rose did not
speak with Fish about his points or questions nor did he talk with another
attorney.

•

On January 6, 2012, Jensvold sent another draft of the amendment to Rose.
Rose forwarded it to Johnston telling him to “study this before we discuss this
contract.” Doc. #386-27.

•

On January 7, 2012, Rose emailed Johnston asking for the name of “our legal
counsel” who will be reviewing “the revised contract before we sign the contract.”
Doc. #386-19. Rose also asked for a copy of the director’s insurance policy. Id.
Johnston responded, telling Rose that Fish was the attorney, and he already
provided his comments. Id. Rose responded, saying he does “not understand
[his] reply.” Id. Rose indicated that if Fish is “Xurex counsel, then based on his
comments we would not sign this contract. This is very confusing.” Id.

•

On January 7, 2012, Johnston met with Olson and told him Rose would contact
him about the amendment. Doc. #386-56. That same day, Rose emailed Olson
the proposed amendment. Doc. #386-55. Rose wrote, “Johnston wanted me to
share with you documents relating to the contract negotiations between Duraseal
and Xurex, Inc.” Id. Johnston is copied on the email. Id. According to Olson,
this email was the first time he saw the proposed amendment.

•

On January 9, 2012, Johnston emailed Rose asking if he got a hold of Olson.
Doc. #386-56. Rose stated he did not have Olson’s phone number and said he
would like “to discuss a few items with” Johnston before calling Olson. Id.

•

On January 10, 2012, Jensvold sent Rose another draft of the amendment. Doc.
#372-62. Rose responded, saying he forwarded the amendment to Olson and
Johnston and “asked for their input.” Id. Jensvold responded: “I am confused. I
have not spoken with Joe [Johnston] about this agreement and you had told me
that you were not speaking with Joe about this either. As I have stated and as
we have agreed, Joe is not part of this negotiation. Please do not communicate
with Joe about this deal.” Id. Rose stated he included Johnston “for advice and
legal interpretation” because Johnston “has considerably more experience in
these contract and legal matters.” Id.

•

On January 11, 2012, Rose, Olson, and Johnston signed a “written consent in
lieu of a meeting of the board of directors of Xurex, Inc.” Doc. #386-117. They
adopted several resolutions, including: Johnston “may be deemed to have an
interest in the Amended and Restated Agreement”; in light of the potential
interest, “Johnson has abstained from all discussions and decisions relating to
the negotiation”; and “the executive officers of [Xurex] are…authorized and
10

directed, in the name and on behalf of [Xurex], to execute the Amended and
Restated Agreement….” Id. At this time, neither Rose nor Olson was an
executive officer of Xurex.
G. The 1/11/12 Amendment
On January 11, 2012, Rose signed the Amended and Restated Exclusive
License, Marketing and Distribution Agreement (the “1/11/12 Amendment”) on behalf of
Xurex, and Jensvold signed the 1/11/12 Amendment on behalf of DuraSeal Holdings,
writing “Vice President” below his name. Doc. #375-2, at 19. The 1/11/12 Amendment
indicated the parties “intend to amend and restate the [1/13/10 Agreement] by entering
into this Agreement.” Id. at 2. Angel signed the 1/11/12 Amendment as DuraSeal
Pipe’s CEO, indicating “this Agreement amends and restates the Exclusive License,
Marketing and Distribution agreement” between DuraSeal Pipe and Xurex dated
January 13, 2010. Id. In the Amendment, DuraSeal Pipe is defined as an “affiliate” and
“wholly owned subsidiary” of DuraSeal Holdings. Id. at 2, 4.
The 1/11/12 Amendment granted DuraSeal Holdings an exclusive license to
market, sell, and distribute Xurex Authorized Products (including HabraCoat, PenetrAct,
Oxilane, and ProGlide) in the oil and gas industry worldwide. Id. at 2-4. DuraSeal
Holdings was to pay Xurex $175,000, make minimum monthly purchases of Xurex
Authorized Products, and pay royalties. Id. at 5, 7-8. Effective January 11, 2012, the
Amendment concluded on December 21, 2022. Id. at 2. The 1/11/12 Amendment
automatically renewed “for one-year periods after December 31, 2022, unless either
party notifies the other at least 180 days prior to December 31, 2022 or any anniversary
thereafter of its intent to allow the terms of this Agreement to expire.” Id. The 1/11/12
Amendment could be terminated before December 21, 2022, if (1) either party defaults
in its performance of any duty or payment of any amount due under the Amendment
and default is not cured within thirty days’ notice; (2) insolvency or bankruptcy; or (3)
“[i]n the unlikely event that DuraSeal [Holdings] determines that the marketing and
distribution of the Authorized Products is not commercially viable, it may terminate this
Agreement with at least 180 days written notice to Xurex.” Id. at 14.
Like the 12/31/10 Agreement, the 1/11/12 Amendment granted the DuraSeal
entities the “right to practice the Xurex Intellectual Property as needed in the application,

11

use, marketing and sale of the Authorized Products.” Id. at 5. According to the 1/11/12
Amendment, “Xurex will use Reasonable Efforts to provide Duraseal with all information
and support (technical or otherwise) reasonably necessary…for carrying out Duraseal’s
obligations under this Agreement.” Id. at 5.19
The 1/11/12 Amendment also included a provision for “Uneconomic Condition.”
Uneconomic Condition was defined as (1) a decrease in monthly coating revenues
during at least three of any six-month period despite reasonable efforts by DuraSeal
Holdings and/or DuraSeal Pipe; (2) “Xurex has failed to provide…reasonable and timely
technical support for the Authorized Products, mutually acceptable Specifications…or
quality assurance standards”; or (3) “Xurex is unable to deliver the Authorized Products”
outside the United States. Id. at 4. Notice of an Uneconomic Condition must be given
by “[n]o later than 10 business days” after the Uneconomic Condition occurs. Id. at 14.
Within ten business days of the notice, the parties had to “discuss and negotiate
alternative financial and other terms of this Agreement to remedy such Uneconomic
Condition.” Id. If the parties did not reach an agreement within five business days of
their initial meeting, DuraSeal Holdings had the option to reduce its minimum purchase
obligations. Id.
H. HDI, Xurex Stock Issuance, and Board Changes
In early 2012, Defendant Holding Development SA (“HDI”), a Luxembourg
company, acquired DuraSeal Holdings. Prior to the filing of this lawsuit, the only
director and only employee of HDI was Anatra, a resident of Italy. As previously
mentioned, Anatra was one of the initial members of the DuraSeal Holdings board.
In March 2012, the Xurex board authorized the issuance of three million stock
shares to Johnston and 1.8 million stock shares each to Olson and Rose.20 In the
summer of 2012, Giacomo Di Mase and Jensvold were appointed to the DuraSeal

19

The 1/11/12 Amendment defined “reasonable efforts” as “the commercial efforts,
consistent with past practices that a reasonable person in a party’s position in the same
industry would use so as to achieve a given goal.” Doc. #375-2, at 4.
20
Olson and Rose initially accepted the shares but later granted irrevocable proxies to
DuraSeal Pipe for their shares. Doc. #386-47.
12

Holdings board, joining Kraus,21 Jose Di Mase, and Anatra who remained on the board.
On October 29, 2012, Johnston resigned from the Xurex board, and Giacomo Di Mase
took his place. Olson was elected chairman of the Xurex board.
I. Another Delaware Lawsuit
In May 2013, Defendant Leonard Kaiser,22 Defendant Steve McKeon,23 Giacomo
Di Mase, Jensvold, and Tom Appleton24 were nominated to the Xurex board. On June
18, 2013, DuraSeal Pipe filed an action in the Delaware Court of Chancery against
Xurex, Rose, Olson, and others seeking a declaration that Appleton, Kaiser, McKeon,
Giacomo Di Mase, and Jensvold were validly elected to the Xurex board.
On August 27, 2013, Lowry, Xurex’s Director of Operations, informed DuraSeal
Pipe that Xurex was no longer able to meet payroll, he had suspended all research and
operations work, and Xurex was effectively shut down.
On August 28, 2013, Xurex, DuraSeal Pipe, and the individual defendants in the
Delaware Court of Chancery action executed a settlement agreement. Pursuant
thereto, Appleton, Kaiser, McKeon, Giacomo Di Mase, and Jensvold were immediately
seated on the Xurex board, and Olson and Rose resigned from the board.
J. DuraSeal Pipe’s Uneconomic Condition Notice and Xurex’s Bankruptcy Filing
On September 2, 2013, Kaiser became CEO of Xurex. On October 8, 2013, the
president and CEO of DuraSeal Pipe, Angel, sent a letter to Kaiser notifying Xurex that
DuraSeal Pipe entered an “Uneconomic Condition” as of September 30, 2013. Doc.

21

In 2012, Kraus executed an “Advisory Agreement” with HDI to provide advisory
services in support of DuraSeal Pipe. Doc. #403-32. In or about 2013, Kraus became
the CEO of DuraSeal Pipe.
22
Prior to joining the Xurex board, Kaiser had business affiliations with the Di Mases.
23
In 2012, McKeon was introduced to Jensvold. That same year, DuraSeal Pipe
executed a consulting contract with Golden Oak Consulting (“GOC”), McKeon’s
business. In June 2013, prior to beginning his term on the Xurex board, DuraSeal Pipe
notified McKeon that it would terminate the contract with GOC effective November 1,
2013.
24
Prior to joining the Xurex board, Appleton had business affiliations with the Di Mases.
13

#364-35. Angel stated DuraSeal Pipe’s monthly coating revenues decreased for four of
the previous six months. Id.
On November 20, 2013, Lowry, Xurex’s Director of Operations, sent Kaiser a
memorandum entitled “Development Work for Xurex by DuraSeal.” Therein, Lowry
summarized communications he had with DuraSeal Pipe between November 2009 to
August 2012 bout technical reports, presentations, and laboratory work. Doc. #364-66.
On December 5, 2013, Lowry resigned from Xurex, leaving Kaiser the only remaining
Xurex employee.
In January 2014 and August 2014, DuraSeal Pipe sent demands to Xurex for
Xurex to pay more than $5 million in legal fees DuraSeal Pipe incurred in connection
with disputes between the companies. In May 2014, DuraSeal Pipe acquired additional
shares of Xurex stock. In July 2014, Jensvold asked counsel for the DuraSeal entities
what Xurex would need to be paid to use Xurex’s products after a bankruptcy.
On September 25, 2014, Xurex and DuraSeal Holdings entered into an Amended
and Restated Exclusive License, Marketing and Distribution Agreement (the “9/25/14
Amendment”).25 Doc. #372-86. The 9/25/14 Amendment suspended the minimum
purchase and revenue sharing requirements “[g]iven the underperformance of Xurex
products since the inception of the Prior Agreements.”26 Id. at 6. It granted DuraSeal
Pipe the right to manufacture the products and pay Xurex or its successor or trustees
$12,000 per barrel, less DuraSeal Pipe’s costs incurred in manufacturing the product.
Id. at 9.
On October 17, 2014, Xurex filed for Chapter 7 bankruptcy protection. DuraSeal
Pipe, according to Kaiser, ceased operations in late 2015, but continued to sell Xurex
coatings in early 2016. DuraSeal Pipe was administratively dissolved by the Missouri
Secretary of State in December 2016.

25

Some Defendants refer to this amendment as the 9/14/14 Amendment, the 9/24/14
Amendment, and the 9/25/14 Amendment. Doc. #364, at 36-37. The Court refers to
the Amendment by its effective date, September 25, 2014.
26
“Prior Agreements” referred to the 1/13/10 Agreement, the 12/31/10 Agreement, and
the 1/11/12 Amendment. Doc. #372-86, at 2.
14

K. This Lawsuit
In August 2016, Plaintiff Jerald Enslein, acting as bankruptcy trustee for Xurex,
filed an adversary proceeding in the underlying bankruptcy proceeding. The reference
to the bankruptcy court was withdrawn, and the above-captioned matter was filed with
this Court. Docs. #1, 5. Plaintiff alleges Jose Di Mase used his control of the DuraSeal
entities and interest in Xurex to gain control of the Xurex board. According to Plaintiff, in
January 2012, the new Xurex board directors, including Johnston, Rose, and Olson,
amended prior Xurex agreements with DuraSeal entities that financially disadvantaged
Xurex and curtailed its ability to protect trade secret information from the DuraSeal
entities. Plaintiff contends the boards of Xurex and the DuraSeal entities conspired to
declare Xurex’s technology ineffective, shut down Xurex’s production lab, cause Xurex
to assume liabilities for legal fees and judgments unrelated to its operations, and obtain
Xurex’s lab book, source code, and trade secrets.
In the First Amended Complaint, Plaintiff alleges claims of breach of contract
(Counts I, II, and III), breach of the covenant of good faith and fair dealing (Count IV),
misappropriation of trade secrets (Count V), civil conspiracy (Count VI), breach of
fiduciary duty (Count VII), aiding and abetting breach of fiduciary duty (Count VIII),
avoidance and recovery of constructive fraudulent transfers (Counts IX and X),
objection to bankruptcy claims (Count XI), and equitable subordination (XII). Doc. #244.
Plaintiff brings these claims against DuraSeal Pipe, DuraSeal Holdings, HDI, Giacomo
Di Mase, Jose Di Mase, Kaiser, Jensvold, McKeon, Kraus, Johnston, Rose, and Olson.
He also seeks declaratory judgments (Counts XIII and XIV). Doc. #244.
Except for three individuals, Defendants are represented by counsel. Rose and
Kaiser are proceeding pro se in this matter. Beginning in June 2017, Jensvold was
represented by counsel to oppose Plaintiff’s request for a clerk’s entry of default. Doc.
#23. But, six months later, his counsel was granted leave to withdraw. Doc. #125-26.
Since that time, Jensvold has been proceeding pro se. Jensvold is the only Defendant
who has not responded to the First Amended Complaint, which was filed in August
2018. Generally, “a pleading filed after the original complaint” “must be served on every
party.” Fed. R. Civ. P. 5(a)(1)(B). It is unclear if Jensvold was properly served with the

15

First Amended Complaint, and if so, why the Court should not find him in default, which
Plaintiff has not requested. That issue, however, is not currently before the Court.
Now pending and fully briefed are two motions to strike, exclude, or limit exerts’
opinion testimony and eleven motions for summary judgment. Docs. #347-48, 350,
356, 358-63, 365-67. The Court first addresses the parties’ motions related to experts,
and then turns to the parties’ summary judgment motions.

II. MOTIONS TO STRIKE, EXCLUDE, OR LIMIT EXPERT OPINION TESTIMONY
Plaintiff moves to strike, exclude, or limit the expert opinion testimony of Michele
Pavone (Doc. #348), and Defendants27 Jose Di Mase, Giacomo Di Mase, Kraus,
DuraSeal Pipe, DuraSeal Holdings, and HDI move to exclude the expert opinion
testimony of Robert F. Reilly (Doc. #356).
A. Standard
Rule 702 of the Federal Rules of Evidence governs the admission of expert
testimony:
A witness who is qualified as an expert by knowledge, skill, experience,
training, or education may testify in the form of an opinion or otherwise if:
(a) the expert’s scientific, technical, or other specialized knowledge will
help the trier of fact to understand the evidence or to determine a fact in
issue; (b) the testimony is based on sufficient facts or data; (c) the
testimony is the product of reliable principles and methods; and (d) the
expert has reliably applied the principles and methods to the facts of the
case.
Fed. R. Evid. 702. The district court must make a “preliminary assessment of whether
the reasoning or methodology underlying the testimony is scientifically valid and of
whether that reasoning or methodology can be applied to the facts in issue.” Daubert v.

27

Within each subsection of this Order, the Court identifies which Defendants are
bringing the particular motion discussed therein. But throughout the remainder of the
applicable section, the Court refers to “Defendants” instead of repeating the specific
Defendants bringing the motion.
16

Merrell Dow Pharm., Inc., 509 U.S. 579, 592-93 (1993). The Court uses a three-part
test when determining the admissibility of expert testimony:
First, evidence based on scientific, technical, or other specialized
knowledge must be useful to the finder of fact in deciding the ultimate
issue of fact. This is the basic rule of relevancy. Second, the proposed
witness must be qualified to assist the finder of fact. Third, the proposed
evidence must be reliable or trustworthy in an evidentiary sense, so that, if
the finder of fact accepts it as true, it provides the assistance the finder of
fact requires.
Lauzon v. Senco Prods., Inc., 270 F.3d 681, 686 (8th Cir. 2001) (internal quotations and
citations omitted). “Courts should resolve doubts regarding usefulness of an expert’s
testimony in favor of admissibility.” Marmo v. Tyson Fresh Meats, Inc., 457 F.3d 748,
758 (8th Cir. 2006) (citations omitted).
B. Michele Pavone, Ph.D.
Plaintiff argues the expert testimony of Michele Pavone, Ph.D., should be
stricken, excluded, or limited because it is not relevant and not reliable. Defendants
may call Michele Pavone, Ph.D., a non-retained expert who was engaged by the
DuraSeal entities from February 2014 through July 2015. According to Defendants, Dr.
Pavone was engaged by the DuraSeal entities as “a last gasp effort by Xurex and
DuraSeal Pipe to find a viable, marketable product.” Doc. #374, at 4. Dr. Pavone’s
studies and analysis of products Xurex sold to DuraSeal “was part of Xurex and
[DuraSeal Pipe]’s collaborative research and development (“R&D”) effort to
investigate…and find a solution to…ongoing problems plaguing the Xurex coating….”
Id.; see also Doc. #371-1. Dr. Pavone will testify as “a fact witness with technical
knowledge that will assist the jury…” Id. at 6-7.

(1) Relevance
Plaintiff contends Dr. Pavone’s opinions are not relevant to “any issue in the
case.” He argues Dr. Pavone’s opinions are not tied to any issue in this case, his
opinions are not based upon a standard governing performance of Xurex’s products, the
parties contractually agreed Xurex was not providing product warranties or was

17

providing limited product warranties, and no party alleges Xurex’s products failed to
comply with any warranty.
Defendants argue Dr. Pavone’s opinions are relevant to issues in this case
because “[t]he entire business relationship between Xurex and [the DuraSeal entities] –
and thus this entire case – centers on the viability of Xurex coatings in the oil and gas
industry. Doc. #374, at 5, 12. The product’s failure and underperformance (and Dr.
Pavone’s opinions regarding same) “underlie every single decision made by the
fiduciary defendants….,” and are relevant to all breach of contract and breach of
fiduciary duty claims. Id. The Court agrees Dr. Pavone’s opinions are relevant to this
case because his opinions have a “tendency to make a fact more or less probable than
it would be without the evidence,” and “the fact is of consequence in determining the
action. Fed. R. Evid. 401.
Defendants maintain Dr. Pavone’s opinions are “aimed at meeting the industry
performance and testing standards he was provided by DuraSeal.” Doc. #374, at 11.
Plaintiff counters the “standards” provided to Dr. Pavone are “DuraSeal[’s] wish list for
an ideal product,” not industry standards. Doc. #388, at 1. But the DuraSeal “list”
included twenty-four parameters, targets for each parameter, and “test standards.” Doc.
#371-1, at 121. According to Defendants, the testing standards on the list – i.e., ASTM
and ISO – refer to standards developed by the American Society for Testing Materials
and the International Organization for Standardization. Doc. #371, at 11.
Plaintiff’s dispute as to what standards were or were not used by Dr. Pavone
relates to the factual basis of his opinions. The Eighth Circuit has routinely held an
expert’s opinion should not be excluded when there is a disagreement with or challenge
to the factual basis, methodology, and/or assumptions supporting the expert’s opinion.
See S.E.C. v. Das, 723 F.3d 943, 950 (8th Cir. 2013) (citation omitted); David E.
Watson, P.C. v. United States, 668 F.3d 1008, 1014 (8th Cir. 2012) (citation omitted);
Synergetics, Inc. v. Hurst, 477 F.3d 949, 956 (8th Cir. 2007). The foundation of an
expert’s opinion goes to credibility, not admissibility. David E. Watson, P.C., 668 F.3d
at 1014; Wash. Sols., Inc. v. PDQ Mfg., Inc., 395 F.3d 888, 895 (8th Cir. 2005) (citation
omitted). Plaintiff will have the opportunity to cross-examine Dr. Pavone about the
standards he used or did not use. And the jury will be tasked with assessing Dr.

18

Pavone’s credibility. Accordingly, the Court denies Plaintiff’s request to exclude Dr.
Pavone’s testimony due to the standards on which he did or did not rely.
Finally, Plaintiff argues the parties contractually agreed Xurex was not providing
product warranties and no party alleges Xurex’s products failed to comply with a
warranty; thus, Dr. Pavone’s opinions about the performance of Xurex’s products is
irrelevant. However, in each agreement, Xurex warranted its products would be free
from defects in materials and workmanship and would conform with published
specifications or other specifications accepted in writing by Xurex. Doc. #364-29, at 13;
Doc. #375-1, at 18; Doc. #375-2, at 21. Disregarding the parties’ dispute about
contractual language and possible waiver of the contractual disclaimer of warranties,
the question of relevance boils down to whether Dr. Pavone’s opinions have a
“tendency to make a fact more or less probable than it would be without the evidence,”
and “the fact is of consequence in determining the action. Fed. R. Evid. 401.
As noted supra, this Court must resolve doubts regarding admissibility of an
expert’s testimony in favor of admissibility. The Court finds Dr. Pavone’s opinions are
relevant to the issues in this matter and will aid the jury, regardless of whether the
parties agreed to no warranties or whether Xurex waived a contractual disclaimer of
warranties. Thus, Plaintiff’s motion to exclude Dr. Pavone’s testimony based upon
contractual agreements and/or lack of a claim for failure to comply with a warranty is
denied.

(2) Reliability
Plaintiff also moves to exclude or limit Dr. Pavone’s testimony because his
opinions are not reliable. More specifically, Plaintiff contends Dr. Pavone did not test
particular failures, his tests did not mimic any well environment at issue in this case, and
he did not consider other potential causes of failure (e.g., incorrect application of the
product). Doc. #348, at 7-8. Defendants argue Dr. Pavone tested to industry
standards, and the results “revealed the coating had insufficient thermal resistance and
cracked at high temperatures during and after the curing process.” Doc. #374, at 16.
Dr. Pavone also studied product formulation and product application, thereby

19

addressing incorrect application as a potential cause of failure. Id. In his reply, Plaintiff
does not raise further argument as to the reliability. Doc. #388, at 10.
To aid district courts in determining whether an expert’s opinions are reliable, the
Supreme Court has provided four potentially valid but non-exhaustive factors: (1)
whether the theory or technique can be or has been tested, (2) whether the theory or
technique was subjected to peer review and publication, (3) the known or potential rate
of error, and (4) whether the theory or technique has gained general acceptance in the
scientific community. Daubert, 509 U.S. at 593-95. The Supreme Court also noted “[a]
reliability assessment does not require…explicit identification of a relevant scientific
community and an express determination of a particular degree of acceptance within
that community.” Id. at 594 (citation and internal quotations omitted). District courts
have broad latitude when deciding how to test an expert’s reliability. Kumho Tire Co. v.
Carmichael, 526 U.S. 137, 152-53 (1999).
Although he claims Dr. Pavone’s opinions are not reliable, Plaintiff’s attack does
not focus on the reliability factors in Daubert. Instead, he concentrates on Dr. Pavone’s
methodology, assumptions, and factual basis. As noted above, an expert’s opinion
should not be excluded when a party disagrees with or challenges the methodology,
assumptions, or factual basis underlying the expert’s opinions. See S.E.C., 723 F.3d at
950; David E. Watson, P.C., 668 F.3d at 1014; Synergetics, 477 F.3d at 956. At trial,
Plaintiff will have the opportunity cross-examine Dr. Pavone on his methods and
assumptions and the facts supporting his opinions. Accordingly, the Court denies
Plaintiff’s request to exclude Dr. Pavone’s testimony based upon Plaintiff’s
disagreement with his methodology, assumptions, and factual basis of his opinions.
C. Robert F. Reilly
Defendants move to exclude Robert Reilly’s testimony because he ignores
controlling law, he changes the terms of the contracts, and his opinions are speculative
and unreliable. Plaintiff retained Reilly, a CPA and valuation expert, to estimate Xurex’s
lost profits from the alleged breaches of the 1/13/10 Agreement (Doc. #364-29), the
12/31/10 Agreement (Doc. #375-1), and the 1/11/12 Amendment (Doc. #375-2). Doc.
#356-1.

20

(1) Limits on Lost Profits
Defendants contend Reilly ignores DuraSeal Holdings’s alleged “unilateral 180day termination right” under the 12/31/10 Agreement and the 1/11/12 Amendment.28
Doc. #356, at 5, 9. By ignoring this supposed right, Defendants argue Reilly failed to
limit the alleged lost profits to the 180-day period, and therefore, his opinions on lost
profits and income should be excluded. Id. at 9-12. Plaintiff disagrees, arguing the
12/31/10 Agreement and the 1/11/12 Amendment contain conditional for-cause (as
opposed to unconditional absolute) termination provisions. Doc. #375, at 7-12. Thus,
according to Plaintiff, his damages are not limited to the 180-day period. Id.
The 12/31/10 Agreement and 1/11/12 Amendment concluded on December 31,
2022. Doc. #375-1, at 2; Doc. #375-2, at 2. Each agreement would “be automatically
extended and renewed for one-year periods after December 31, 2022, unless either
party notifies the other at least 180 days prior to December 31, 2022 or any anniversary
thereafter of its intent to allow the term of this Agreement to expire.” Id. Relevant to
Defendants’ motion, both agreements include the following provision: “In the unlikely
event that Duraseal determines that the marketing and distribution of the Authorized
Products is not commercially viable, it may terminate this Agreement with at least 180
days written notice to Xurex.” Doc. #375-2, at 14; see also Doc. #375-1, at 11.29
Reilly calculated Xurex’s economic damages with the assumption that neither
party terminated the agreement before December 31, 2022. Doc. #356-1; Doc. #375, at
10 n.6 (indicating Plaintiff is not seeking damages beyond 2022). Defendants argue
Reilly’s calculations are incorrect, and Plaintiff’s lost profit damages should be limited to
those that would have accrued during the 180-day notice period. In support of their
argument, Defendants cite cases interpreting Missouri and New York law. Doc. #356,
at 9-12. But, as Plaintiff points out, the parties agreed both contracts are “governed by

28

Defendants do not argue Reilly’s calculation of Xurex’s lost profits under the 1/13/10
Agreement are improper.
29
There are some insubstantial differences in this provision when comparing the
1/11/12 Amendment with the 12/31/10 Agreement. For example, the 1/11/12
Amendment refers to “Authorized Products,” and the 12/31/10 Agreement refers to
“Products.” Compare Doc. #375-2, at 14 with Doc. #375-1, at 11. Neither party argues
the provision should be construed differently in one agreement than in the other one.
21

and interpreted in accordance with the law of the United States and State of New York.”
Doc. #375-1, at 13; Doc. #375-2, at 17. In their reply, Defendants do not contest that
New York law applies, and seemingly concede it applies because they rely almost
solely on cases interpreting New York law. Doc. #387, at 1-5. Given there is no
argument, authority, or evidence to the contrary, the Court will apply New York law
when interpreting these two contracts.
“Under New York law, damages for breach of contract should put the plaintiff in
the same economic position he would have occupied had the breaching party
performed the contract.” Oscar Gruss & Son, Inc. v. Hollander, 337 F.3d 186, 196 (2d
Cir. 2003) (citation omitted). A party may recover lost profits from a breach of contract
“only if (1) it is demonstrated with certainty that the damages have been caused by the
breach, (2) the extent of the loss is capable of proof with reasonable certainty, and (3) it
is established that the damages were fairly within the contemplation of the parties.”
Tractebel Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89, 109 (2d Cir. 2007)
(citation omitted); see also Schonfeld v. Hilliard, 218 F.3d 164, 172 (2d Cir. 2000)
(stating a plaintiff asserting breach of contract is entitled to recover lost profits only if the
plaintiff “can establish both the existence and amount of such damages with reasonable
certainty,” and noting “damages may not be merely speculative, possible or imaginary.”)
(citations omitted).
In their motion, Defendants cite one case interpreting New York law: TNT USA,
Inc. v. DHL Exp. (USA), Inc., No. 09-CV-481, 2012 WL 601452 (E.D.N.Y. Feb. 23,
2012). But that case is distinguishable. Unlike the agreements before this Court, a
contract amendment in TNT USA, Inc. allowed either party to “terminate this Agreement
without cause upon two (2) years prior written notice to the other party.” Id. at *2.
Because “DHL had an unconditional right to terminate the Agreement without cause
on two years’ notice,” the district court concluded TNT’s damages were limited to the
two-year notice period. Id. at *7 (emphasis added). In their reply, Defendants cite
additional cases interpreting New York, but none involves analogous facts. Doc. #387,
at 2-3.30
30

See Watermelons Plus, Inc. v. N.Y. City Dep’t of Educ., 76 A.D.3d 973, 975-75 (N.Y.
App. Div. 2010) (finding the contract contained an unconditional termination clause,
22

Defendants point out DuraSeal Holdings could unilaterally determine “the
marketing and distribution of the Authorized Products [was] not commercially viable,”
thereby triggering its right to terminate the contracts. Doc. #387, at 4. Because
DuraSeal Holdings alone could make this decision and did not need Xurex’s consent or
agreement to do make such a decision, Defendants argue the termination provisions in
the 12/31/10 Agreement and the 1/11/12 Amendment are similar to those contracts
where a party had an unconditional right to terminate. Plaintiff counters that DuraSeal
Holdings’s determination that the “marketing and distribution” of Xurex’s products were
“not commercially viable” had to occur before DuraSeal Holdings could terminate the
agreement. Plaintiff argues DuraSeal Holdings had a conditional termination right, and
the condition triggering the right to terminate did not occur.
According to the 12/31/10 Agreement and the 1/11/12 Amendment, DuraSeal
Holdings did not have the right to terminate the agreements until it determined “the
marketing and distribution” of the products at issue were “not commercially viable” and
then provided Xurex with 180 days’ notice. Doc. #375-1, at 11; Doc. #375-2, at 14.
Unlike the cases cited by Defendants, a condition precedent had to be satisfied before
its right to terminate arose. See e.g., Trimed, Inc. v. Sherwood Med. Co., 977 F.2d 885,
892-93 (4th Cir. 1992) (applying New York law and finding lost profits and consequential
damages suffered from the contract breach were limited to six months following the
breach because the contract contained a provision allowing a party to terminate the
contract “on six months’ notice without cause.”). The record does not demonstrate the
condition precedent occurred.31
Defendants’ arguments raise concerns with Reilly’s methodology and
assumptions. As the Court noted above, an expert opinion should not be excluded
simply because a party disagrees with the methodology or assumptions underlying the
which limited damages); Bitterman v. Gluck, 256 A.D. 336, 337 (N.Y. App. Div. 1939)
(concluding the contract allowed the defendants “an absolute right on thirty days’
notice to discharge plaintiff ‘without any reason or specific cause,” and thus,
damages were limited to the thirty-day time period following notice) (emphasis added);
Chatham Plan, Inc. v. Clinton Tr. Co., 246 A.D. 498, 499 (N.Y. App. Div. 1936) (noting
the contract “was terminable at will by either party”) (emphasis added).
31
Even if the condition precedent had occurred (or did not have to occur as Defendants
suggest), it is unclear as to when the 180 days would begin to run.
23

expert’s opinion. See S.E.C., 723 F.3d at 950; David E. Watson, P.C., 668 F.3d at
1014; Synergetics, 477 F.3d at 956. Defendants will have the opportunity to crossexamine Reilly on his methodology and assumptions. For these reasons and resolving
any doubts as to the usefulness of Reilly’s testimony in favor of admissibility, the Court
denies Defendants’ motion to exclude or limit Reilly’s testimony because he did not limit
the alleged lost profits to 180 days.

(2) Additional Minimum Purchase Obligations
Defendants move to prohibit Reilly’s opinions about minimum purchase
obligations. For the 12/31/10 Agreement, Defendants move to exclude Reilly’s opinions
as to losses incurred in 2022 because the exhibit to the Agreement outlining minimum
purchase obligations did not list minimum purchase requirements beyond December
2021. Doc. #375-1, at 21. For the 1/11/12 Amendment, Defendants move to exclude
Reilly’s opinions about Xurex’s losses beyond 2015 because the exhibit to the
Amendment outlining minimum purchase obligations did not list minimum purchase
obligations beyond 2015. Doc. #375-2, at 24.
For the 12/31/10 Agreement, Reilly indicates he included Xurex’s losses due to
minimum purchase requirements in 2022 because the contract did not conclude until
2022. Doc. #356-1, at 14. He set the minimum purchase obligation in 2022 at the
same level set for 2021. Id. Regarding the 1/11/12 Amendment, Reilly states he
included Xurex’s losses due to minimum purchase requirements from 2016 through
2022 because the contract did not conclude until 2022. Id. at 17. He included a
minimum purchase obligation for 2016 through 2022 that was equivalent to the
minimum purchase obligation in 2015. Id.
The 12/31/10 Agreement and the 1/11/12 Amendment concluded on December
31, 2022. Both Agreements specified the DuraSeal entities would purchase the
“minimum number of barrels” of products set forth in “Exhibit B” to each Agreement. But
the parties fail to delve further into the Agreements to ascertain why “Exhibit B” did not
list minimum purchase requirements beyond December 2015 for the 1/11/12
Amendment and beyond December 2021 for the 12/31/10 Agreement.

24

The minimum purchases provision in the 1/11/12 Amendment indicated
“quarterly purchase minimums set forth on attached Exhibit B are to be adjusted by
mutual agreement beginning with January of 2016, consistent with the Final Global
Plan.”32 Doc. #375-2, at 8 (emphasis in original). Exhibit B to the 1/11/12 Amendment
contained minimum purchase obligations through 2015 because the parties agreed the
minimum purchase obligations would be adjusted beginning in January 2016. Id.
Accordingly, Exhibit B does not include the minimum monthly purchase requirements
beyond December 2015.
The minimum purchase provision in the 12/31/10 Agreement is not as clear as
the provision in the 1/11/12 Amendment. But it contains language indicating the parties
intended to revisit the minimum purchase requirement. According to the 12/31/10
Agreement, if DuraSeal Holdings acquired DuraSeal Pipe within six months of the
effective date of the Agreement (which it did), “[t]he lower monthly purchase minimums
per Exhibit B of the current Xurex-[DuraSeal Pipe] agreement remain the same for
2011, but are to be adjusted by mutual agreement beginning with January of 2012,
consistent with the reasonable timing of [DuraSeal Holdings]’s plans for expanded
usage in North America.” Doc. #375-1, at 6. Thus, the minimum purchase
requirements would be revisited in 2012. Further, there is no indication that the
minimum purchase requirements would conclude in 2021 or 2022.
As set forth above, Plaintiff may only recover lost profit damages if he can
demonstrate with certainty his damages were caused by the breach, the extent of his
loss is capable of proof with reasonable certainty, and the damages were fairly within
the parties’ contemplation. Tractebel, 487 F.3d at 109. To the extent Plaintiff can
establish entitlement to lost profits for minimum purchase obligations after December
2011 for the 12/31/10 Agreement and/or lost profits for minimum purchase obligations
after December 2015 for the 1/11/12 Amendment, Reilly’s testimony could assist the
jury in determining Plaintiff’s damages. To the extent there are any doubts regarding
usefulness of an expert’s testimony, this Court must resolve any doubts in favor of

32

“Final Global Plan” was described as “a reasonably detailed version of a business
plan for the commercialization and distribution of the Authorized Products in the Field in
the Territory.” Doc. #375-2, at 6.
25

admissibility. Accordingly, the Court denies Defendants’ motion to exclude Reilly’s
calculations and opinions related to minimum purchase requirements beyond December
2011 for the 12/31/10 Agreement and beyond December 2015 for the 1/11/12
Amendment.

(3) Purchases and Penalties
The parties agree that, pursuant to the 1/11/12 Amendment, DuraSeal Holdings
was required to purchase a minimum number of barrels, and if it did not, it was required
to pay a $10,000 penalty. Defendants argue Reilly’s damages analysis is unreliable
because he included income from the sale of barrels and penalties for not purchasing
the same barrels. Defendants contend “[t]here is no scenario under the contract where
Xurex would have received both profits and royalties from the sale of a barrel, while at
the same time receiving a $10,000 penalty…for…failing to purchase that same barrel.”
Doc. #356, at 14. Defendants allege Reilly misinterpreted the contract language “to
artificially inflate the claimed damages.” Doc. #387, at 7.
Plaintiff argues Reilly provided calculations for lost profits, penalties, and both
figures combined. Doc. #375, at 15. He represents Reilly combined the figures
assuming the two types of damages – lost profits and penalties – are not duplicative.
Id. at 14-15. If the Court determines both types of damages are recoverable, Plaintiff
contends Reilly provides the correct measure of damages. Id. at 15. If the Court finds
the “penalty” clause is a liquidated damages provision eliminating Plaintiff’s ability to
seek lost profits, Reilly has provided separate calculations. Id.
The parties agree Reilly failed to account for purchases in excess of the
minimum purchase requirements being rolled forward to offset shortfalls in later
quarters. Doc. #356, at 14-15; Doc. #375, at 15-16. Defendants contend Reilly’s failure
demonstrates his misrepresentation of the contract language. Doc. #387, at 7. Plaintiff
argues Reilly’s “oversight” accounts for a “downward adjustment in [Plaintiff]’s damages
of $712,746 which is non-material when compared to [Plaintiff]’s total damages,” and
does not merit exclusion of Reilly’s opinion. Doc. #375, at 16.33
33

In response to Defendants’ motion and because the motion was the first time the
issue was brought to his attention, Plaintiff “would respectfully seek leave of court to
26

These disputes with Reilly’s opinion arise from Reilly’s assumptions. Again, the
Court will not exclude an expert’s opinion simply because the parties disagree about the
assumptions underlying the expert’s opinion. See S.E.C., 723 F.3d at 950; David E.
Watson, P.C., 668 F.3d at 1014; Synergetics, 477 F.3d at 956. Reilly will explain the
reasoning behind his calculations, and Defendants will have the opportunity to crossexamine Reilly on his assumptions about the contract. Therefore, the Court denies
Defendants’ motion to exclude or testimony because his calculations include damages
for lost profits and penalties.

(4) Xurex’s Business Reality
Defendants argue Reilly’s opinions are speculative because he did not consider
Xurex’s business reality. They contend Reilly relied solely on the contracts and ignored
the minimum purchase requirements, which, according to Defendants, were not
sustainable. Plaintiff argues Reilly’s opinions are properly based upon the minimum
purchase requirements.
Defendants’ argument is directed to the factual (or lack of factual) basis of
Reilly’s opinions. Once more, an expert’s opinion should not be excluded when there is
a disagreement with or challenge to the factual basis, methodology, and/or assumptions
supporting the expert’s opinion. See S.E.C., 723 F.3d at 950; David E. Watson, P.C.,
668 F.3d at 1014; Synergetics, 477 F.3d at 956. The factual basis of an expert’s
opinion goes to his credibility, not admissibility of his opinion. David E. Watson, P.C.,
668 F.3d at 1014; Wash. Sols., Inc., 395 F.3d at 895. The Court finds Reilly’s opinion is
not so fundamentally unsupported that it cannot assist the jury. Marmo, 457 F.3d at 758
(citation omitted). Additionally, the factual basis of Reilly’s opinions and the facts
Defendants believe Reilly should have considered can be addressed during cross-

allow Mr. Reilly to make this non-material downward adjustment for trial or otherwise
testify to the downward adjustment.” Doc. #375, at 16. In their reply, Defendants do not
address Plaintiff’s request. The Court grants Plaintiff’s request in that Reilly is
permitted to make the downward adjustment during his trial testimony. However,
Defendants will have the opportunity to cross-examine Reilly on his original
report and his downward adjustment.
27

examination. For these reasons, the Court denies Defendants’ motion to strike Reilly’s
opinions on the basis that he allegedly ignored Xurex’s business reality.

(5) Tort Claim Damages
Finally, Defendants argue Reilly should be prohibited from testifying about
Xurex’s economic losses resulting from Defendants’ alleged tortious acts because
Reilly’s report pertaining to said damages does not include any analysis, reasoning,
facts, data, or explanation regarding the estimated damages resulting from Defendants’
tortious acts. Doc. #356, at 16-17. Defendants also point to Reilly’s failure to identify
what damages were caused by each tortfeasor’s acts. According to Defendants, Reilly
improperly opines a tort committed by one defendant in 2014 and a different tort
committed by another defendant in 2012 would result in the same damages – to wit,
$161,170.00. Doc. #356-1, at 63.
In his report, Reilly states he analyzed economic damages for twelve of the
fourteen counts alleged in the operative complaint, specifically identifying, among
others, the tort claims. Doc. #356-1, at 5-6. In section III of his report, Reilly identifies
the “wrongful acts” related to his analysis, which include Plaintiff’s tort claims. Id. at 21.
Thereafter, Reilly explains his analysis of economic damages resulting from Plaintiff’s
breach of contract claims. Id. at 21-38. Reilly states he performed the same analyses
for the tort claims as he did for the breach of contract claims, his “estimated damages”
for the tort claims “are the same as my estimated economic damages for counts 1
through 3,” and he provides tables summarizing those damages. Doc. #356-1, at 3844. Plaintiff argues the tort claims are premised on Xurex’s directors, officers, and
controlling shareholders wrongfully entering into agreements and wrongfully failing to
enforce Xurex’s rights under the agreements. Doc. #375, at 18.
Based on his report, Reilly’s opinions about Plaintiff’s damages emanating from
Defendants’ alleged tortious conduct are based upon the same methodology,
calculations, and assumptions as his opinions about damages arising from breach(es)
of contract. Doc. #356-1, at 38-44. What seems to be in dispute is Reilly’s failure to
restate his methodology, calculations, and assumptions in the section of his report

28

pertaining to tort claim damages, and his lack of explanation about the damages
breakdown by tort claim and/or tortfeasor.
As set forth supra, the Court should not exclude an expert’s opinion when there
is disagreement with the factual basis, methodology, and/or assumptions supporting the
expert’s opinion. See S.E.C., 723 F.3d at 950 (citation omitted); David E. Watson, P.C.,
668 F.3d at 1014 (citation omitted); Synergetics, 477 F.3d at 956. As it did above, the
Court finds Reilly’s opinion is not so fundamentally unsupported that it cannot assist the
jury. Marmo, 457 F.3d at 758 (citation omitted). During cross-examination, Defendants
may challenge Reilly’s methodology and assumptions. For these reasons, the Court
denies Defendants’ motion to strike Reilly’s opinions as to Plaintiff’s tort claim damages.

III. MOTIONS FOR SUMMARY JUDGMENT
Eleven motions for summary judgment are pending:
•

Defendant McKeon’s Motion for Summary Judgment (Doc. #347);

•

Plaintiff’s Motion for Partial Summary Judgment (Doc. #350);

•

Defendants Jose Di Mase, Giacomo Di Mase, Kraus, DuraSeal Pipe, DuraSeal
Holdings, and HDI’s Motion for Summary Judgment on Claim for Aiding and
Abetting Breach of Fiduciary Duty (Doc. #358);

•

Defendants Jose Di Mase, Giacomo Di Mase, Kraus, and HDI’s Motion for
Summary Judgment on Claim for Civil Conspiracy (Doc. #359);

•

Defendants DuraSeal Holdings and DuraSeal Pipe’s Motion for Summary
Judgment on Counts II, III, and IV (Doc. #360);

•

Defendants Jose Di Mase and HDI’s Motion for Summary Judgment on Claim for
Breach of Fiduciary Duty (Doc. #361);

•

Defendant HDI’s Motion for Summary Judgment (Doc. #362);

•

Defendants Jose Di Mase, Giacomo Di Mase, Kraus, DuraSeal Pipe, DuraSeal
Holdings, and HDI’s Motion for Summary Judgment on Claim for
Misappropriation of Trade Secrets (Doc. #363);

•

Defendant Olson’s Motion for Summary Judgment (Doc. #365);

•

Defendant Johnston’s Motion for Summary Judgment (Doc. #366); and

•

Defendant Rose’s Motion for Summary Judgment (Doc. #367).

29

A. Standard
A moving party is entitled to summary judgment on a claim only if there is a
showing that “there is no genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law.” Williams v. City of St. Louis, 783 F.2d 114,
115 (8th Cir. 1986). “[W]hile the materiality determination rests on the substantive law,
it is the substantive law’s identification of which facts are critical and which facts are
irrelevant that governs.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Thus, “[o]nly disputes over facts that might affect the outcome of the suit under the
governing law will properly preclude the entry of summary judgment.” Wierman v.
Casey’s Gen. Stores, 638 F.3d 984, 993 (8th Cir. 2011) (quotation omitted). The Court
must view the evidence in the light most favorable to the non-moving party, giving that
party the benefit of all inferences that may be reasonably drawn from the evidence.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588-89 (1986); Tyler v.
Harper, 744 F.2d 653, 655 (8th Cir. 1984). “[A] nonmovant may not rest upon mere
denials or allegations, but must instead set forth specific facts sufficient to raise a
genuine issue for trial.” Nationwide Prop. & Cas. Ins. Co. v. Faircloth, 845 F.3d 378,
382 (8th Cir. 2016) (citations omitted).
B. Motions for Summary Judgment on Plaintiff’s Claims
(1) Breach of Contract (Counts II and III)34
In Count II, Plaintiff alleges DuraSeal Holdings breached the 12/31/10 Agreement
by failing to meet the contractual requirements. Doc. #244, ¶¶ 206-11. In Count III,
Plaintiff alleges if the 1/11/12 Amendment is found to be valid and enforceable,
DuraSeal Pipe and DuraSeal Holdings breached the 1/11/12 Amendment by failing to
meet contractual requirements. Doc. #244, ¶¶ 212-18.
DuraSeal Holdings and DuraSeal Pipe maintain “the 1/13/10 Agreement and
12/31/10 Agreement were expressly superseded by the 1/11/12 Amendment.” Doc.
#360, at 5. However, they do not seek summary judgment on whether Plaintiff may
bring a claim for breach of a superseded contract. Plaintiff’s response does not address
34

In Count I, Plaintiff alleges a breach of contract claim against DuraSeal Pipe only.
Doc. #244, ¶¶ 199-205. DuraSeal Pipe did not seek summary judgment on this claim.
30

this issue either. See Doc. #399. Instead, the parties concentrate on whether Plaintiff’s
lost profits arising from the alleged breaches of the 12/31/10 Agreement and the 1/11/12
Amendment are limited to the 180-day notice period DuraSeal Holdings and/or
DuraSeal Pipe had to give Xurex when terminating the Agreement or Amendment.
DuraSeal Holdings and DuraSeal Pipe argue they are “entitled to partial
summary judgment because [DuraSeal Holdings] had a unilateral right to terminate the
12/31/10 Agreement upon 180 days’ notice.” Id. As set forth supra, section II(C)(1),
Plaintiff’s lost profit damages are not limited to the 180-day notice period. As explained
more fully above, the termination provisions in the 12/31/10 Agreement and the 1/11/12
Amendment, contrary to the cases cited by DuraSeal Holdings and DuraSeal Pipe, were
not unconditional, were not absolute, and/or were not without cause. Instead, the
applicable termination provisions require an “unlikely event” to occur – to wit, DuraSeal
Holdings “determine[d] that the marketing and distribution” of Xurex’s products was “not
commercially viable” – followed by DuraSeal Holdings providing 180 days’ written notice
to Xurex. Doc. #375-1, at 11; Doc. #375-2, at 14.
For breach of contract claims, lost profit damages may be recovered “only if (1) it
is demonstrated with certainty that the damages have been caused by the breach, (2)
the extent of the loss is capable of proof with reasonable certainty, and (3) it is
established that the damages were fairly within the contemplation of the parties.”
Tractebel, 487 F.3d at 109; see also Schonfeld, 218 F.3d at 172. For these reasons
and the reasons set forth supra, section II(C)(1), DuraSeal Holdings and DuraSeal
Pipe’s motion for summary judgment on Counts II and III is denied.

(2) Breach of Implied Covenant of Good Faith and Fair Dealing (Count IV)
In Count IV, Plaintiff alleges DuraSeal Pipe and DuraSeal Holdings breached the
implied covenant of good faith and fair dealing (hereinafter, “implied covenant”).
DuraSeal Pipe and DuraSeal Holdings move for summary judgment on this claim
because they contend it is duplicative of Plaintiff’s breach of contract claims. Plaintiff
argues he is permitted to bring a stand-alone claim for breach of the implied covenant
because Defendants attempted to subvert the contracts.

31

The parties seem to agree the 1/13/10 Agreement is governed by Delaware law,
and the 12/31/10 Agreement and the 1/11/12 Amendment are governed by New York
law. Doc. #360, at 11; Doc. #399, at 14-20 (citing New York and Delaware law). Under
New York and Delaware law, “a covenant of good faith and fair dealing is implicit in all
contracts during the course of contract performance.” Tractebel, 487 F.3d at 98
(citation omitted); Dunlap v. State Farm Fire & Cas. Co., 878 A.2d 434, 441-42 (Del.
2005). In both jurisdictions, the implied covenant requires a contracting party refrain
from conduct that is “arbitrary and unreasonable” or “destroy[s] or injur[es] the right of
the other party to receive the fruits of the contract.” Tractebel, 487 F.3d at 98 (citation
and internal quotations omitted); Dunlap, 858 A.2d at 442.
In New York, the elements of a claim for breach of the implied covenant “are
similar to causes of action for breaches of duties of care, in that the tort requires the
existence of a duty, breach of that duty, causation, and damages.” Benihana of Tokyo,
LLC v. Angelo, Gordon & Co., 259 F. Supp. 3d 16, 37 (S.D.N.Y. 2017) (citation
omitted), aff’d, 712 F. App’x 85 (2d Cir. 2018). New York “does not recognize a
separate cause of action for breach of the implied covenant…when a breach of contract
claim, based upon the same facts, is also pled.” Harris v. Provident Life & Accident Ins.
Co., 310 F.3d 73, 81 (2d Cir. 2002); see also RST (2005) Inc. v. Research in Motion
Ltd., 597 F. Supp. 2d 362, 367-68 (S.D.N.Y. 2009) (finding a claim for breach of the
implied covenant was based upon the same facts as the breach of contract claim, and
therefore, could not brought). If a breach of contract claim and a breach of the implied
covenant claim arise from the same facts and seek identical damages, the claims are
considered duplicative, and both cannot be brought. Amcan Holdings, Inc. v. Canadian
Imperial Bank of Commerce, 70 A.D.3d 423, 426 (N.Y. App. Div. 2010 (citations
omitted).
For a breach of the implied covenant claim under Delaware law, the plaintiff
“must allege a specific implied contractual obligation, a breach of that obligation by the
defendant, and resulting damage to the plaintiff.” Kuroda v. SPJS Holdings, L.L.C., 971
A.2d 872, 888 (Del. Ch. 2009) (citation and internal quotations omitted). A plaintiff
cannot generally allege “bad faith” conduct; he “must allege a specific implied
contractual obligation and allege how the violation of that obligation denied the plaintiff

32

the fruits of the contract.” Id. (noting the implied covenant “is only rarely invoked
successfully”). Similar to New York, Delaware courts do not permit a plaintiff to bring a
breach of implied covenant claim along with a breach of contract claim when both
claims are based on the same facts. Id. And they do not allow a breach of implied
covenant claim based on alleged breach of a contract term. Id.; see also Stewart v. BF
Bolthouse Holdco, LLC, No. 8119-VCP, 2013 WL 521220, at *16 (Del. Ch. Aug. 30,
2013). Notably, the implied covenant “comes into play…only where a contract is silent
as to the issue in dispute.” Narrowstep, Inc. v. Onstream Media Corp., No. 5114-VCP,
2010 WL 5422405, at *10 (Del. Ch. Dec. 22, 2010) (citation omitted).
Plaintiff argues his breach of implied covenant claim differs from his breach of
contract claims because he alleges DuraSeal Holdings and DuraSeal Pipe “failed to
exercise discretion afforded to them under the parties’ contract reasonably and in good
faith and/or prevented Xurex from receiving the expected fruits of its contract….” Doc.
#244, ¶ 225. According to Plaintiff, these allegations are based on the “extensive and
detailed general allegations” in the First Amended Complaint describing DuraSeal
Holdings and DuraSeal Pipe’s “extensive efforts to subvert the very contracts
themselves.” Doc. #399, at 16. But Plaintiff does not identify which of the “extensive
and detailed general allegations” support his argument.
Nonetheless, upon review of the allegations in Counts I through IV, the Court
notes the Count I breach of contract claim is based on DuraSeal Pipe agreeing to
certain terms and allegedly “failing to make the minimum purchases required of it” and
“failing to pay Xurex the required 5% license fee.” Doc. #244, ¶¶ 200, 203-04. The
breach of contract claims in Counts II and III are based on DuraSeal Holdings and/or
DuraSeal Pipe agreeing to certain contractual requirements and allegedly failing to meet
those requirements (i.e., required minimum purchases, payment of license fees,
developing and commercializing Xurex products, not competing with Xurex products
and/or attempting to reverse engineer the products, and not hiring or retaining Xurex
employees or contractors for two years). Id. ¶¶ 207, 210, 214, 217.
For this breach of the implied covenant claim (Count IV), Plaintiff asserts
“DuraSeal Pipe and DuraSeal Holdings failed to exercise discretion afforded to them
under the parties’ contract reasonably and in good faith….” Doc. #244, ¶ 225; Doc.

33

#399, at 16. The phrase “afforded to them under the parties’ contract” when describing
DuraSeal Holdings and DuraSeal Pipe’s discretion suggests Plaintiff’s claim for breach
of the implied covenant sounds in contract. See Amcan, Inc., 70 A.D.3d at 426; Kuroda,
971 A.2d at 888. Further, because the covenant is implied in all contracts, Plaintiff’s
allegation that Defendants did not act “reasonably” or “in good faith,” without more, does
not indicate anything more than possibly a breach of contract. Unfortunately, Plaintiff
does not clarify the issue. He points to contractual provisions with which DuraSeal
Holdings and DuraSeal Pipe failed to comply, Defendants’ failure to exercise discretion
and good faith when invoking a contractual provision, and an alleged but unidentified
pretext for invoking a contractual provision. Doc. #399, at 17-19.
Plaintiff’s other allegation supporting his breach of implied covenant claim is
DuraSeal Holdings and DuraSeal Pipe “prevented Xurex from receiving the expected
fruits of its contract.” Doc. #244, ¶ 225. In response to Defendants’ summary judgment,
Plaintiff did not identify allegations in his First Amended Complaint to shed light on what
exactly these entities did to prevent Xurex from “receiving the expected fruits of its
contract.” This is nothing more than a bare assertion. As a result, it is unknown what
DuraSeal Holdings and DuraSeal Pipe did (beyond allegedly breaching contracts) to
support a breach of implied covenant claim. When claims for breach of the implied
covenant and breach of contract are based on the same facts, as is the case here, a
party is not permitted to bring a stand-alone claim for breach of the implied covenant.
See Harris, 310 F.3d at 81; RST (2005) Inc., 597 F. Supp. 2d at 367-68; Amcan, 70
A.D.3d at 426; Kuroda, 971 A.2d at 888. Further, Delaware law does not permit a
plaintiff to generally allege bad faith conduct, as Plaintiff does here. See Kuroda, 971
A.2d at 888. Finally, it remains unclear what damages Plaintiff seeks for his breach of
the implied covenant claim, and whether those damages are identical to the damages
sought for his breach of contract claims. As best the Court can discern, Plaintiff seeks
the same damages for both claims.
To summarize, Plaintiff’s breach of implied covenant claim arises, at least in part,
from an alleged breach of contractual obligations. The claim is also based on the same
facts that support his breach of contract claims. Plaintiff’s vague assertions do not
indicate what conduct by DuraSeal Pipe and/or DuraSeal Holdings resulted in Xurex

34

being denied the fruits of its contract. And the damages sought for both claims appear
to be identical. For these reasons, Defendants’ motion for summary judgment on
Plaintiff’s claim for breach of the implied covenant is granted.

(3) Misappropriation of Trade Secrets (Count V)
In his First Amended Complaint, Plaintiff alleges a claim of misappropriation of
trade secrets against HDI, Kraus, Jose Mi Mase, Giacomo Di Mase, Kaiser, Jensvold,
McKeon, DuraSeal Pipe, and DuraSeal Holdings. Doc. #244, ¶¶ 22-23, 227-32. HDI,
Kraus, Jose Di Mase, Giacomo Di Mase, DuraSeal Pipe, and DuraSeal Holdings move
for summary judgment on this claim, and in a separate motion, McKeon moves for
summary judgment on this claim. Docs. #347, 363.
In response to both motions, Plaintiff concedes he no longer intends to submit
Count V. Doc. #382, at 54 (conceding he is not pursuing a claim of misappropriation of
trade secrets against McKeon); Doc. #402, at 1 (stating “[t]he Court should grant the
Motion as to the Trustee’s standalone claim for misappropriate of trade secrets…as the
Trustee no longer intends to submit Count V.”). Pursuant to Plaintiff’s concession, the
Court enters summary judgment in favor of Defendants HDI, Kraus, Jose Mi Mase,
Giacomo Di Mase, Kaiser, Jensvold, DuraSeal Pipe, and DuraSeal Holdings on
Plaintiff’s misappropriation of trade secrets.
The Court notes Kaiser and Jensvold, against whom Count V is also brought, did
not seek summary judgment on this claim. Plaintiff’s responses to the other parties’
summary judgment motions indicate he does not intend to submit Count V, but it is not
clear if his intention is directed at those who filed motions or all Defendants against
whom the claim is brought. Unless and until Plaintiff seeks to dismiss Count V against
Kaiser and Jensvold, those claims will remain pending.

(4) Breach of Fiduciary Duty (Count VII)
Plaintiff alleges all Defendants (except Kraus), as officers, directors, and/or
shareholders of Xurex, owed fiduciary duties to Xurex. According to Plaintiff,
Defendants allegedly breached their fiduciary duties by “authorizing, approving,
ratifying, acquiescing, inducing or causing” Xurex to (1) enter into the 1/11/12

35

Amendment and the 9/25/14 Amendment; (2) not enforce its rights under the 1/13/10
Agreement and the 12/31/10 Agreement (or alternatively, the 1/11/12 Amendment); (3)
purportedly enter into amendments to the 1/13/10 Agreement and the 12/31/10
Agreement (or alternatively, the 1/11/12 Amendment); (4) disclose trade secrets to
DuraSeal Pipe, DuraSeal Holdings, and other third parties; (5) not defend or permit
Richard Polley to take a $3 million default judgment against Xurex; and (6) purportedly
assume several million dollars of legal fees incurred by DuraSeal in shareholder
litigation.35 Doc. #244, ¶¶ 242-43. In addition, these Defendants allegedly breached
their fiduciary duties to Xurex by “authorizing, approving, ratifying, acquiescing, inducing
or causing” Xurex’s operations to be transferred to DuraSeal Pipe and/or DuraSeal
Holdings; and Xurex’s corporate opportunities to be usurped by DuraSeal Pipe,
DuraSeal Holdings, and their shareholders, directors, officers, employees, and
representatives, including for their own benefit. Finally, Plaintiff contends these
Defendants breached their fiduciary duties by failing to disclose to Xurex’s shareholders
that the directors and/or officers had disclosed Xurex’s trade secrets to DuraSeal Pipe,
DuraSeal Holdings, and other third parties; and “otherwise breach[ed] their duties of
loyalty, good faith, and care in the management of Xurex.” Id. ¶ 242. Plaintiff contends
these Defendants “lacked independence, were not disinterested, and had conflicts of
interest. Id. ¶ 243.
(a) Standard of Review
Plaintiff seeks summary judgment on the standard of review to be applied to his
breach of fiduciary duty claims. Doc. #351, at 55-61. Defendants Jose Di Mase and
HDI move for summary judgment motion on Plaintiff’s breach of fiduciary duty claims in
their favor. Doc. #361. McKeon, Johnston, Olson, and Rose filed individual motions
seeking summary judgment in their favor on Plaintiff’s breach of fiduciary duty claims.
Docs. #357, 365-67. Also, Defendants Johnston, Olson, McKeon, Jose Di Mase,
35

The First Amended Complaint refers to the 1/13/10 Agreement and the 12/31/10
Agreement when setting forth Plaintiff’s breach of fiduciary duty claims. However, in his
summary judgment motion, Plaintiff represents his breach of fiduciary duty claims arise
from two transactions – i.e., the 1/11/12 Amendment and the 9/25/14 Amendment – with
“Xurex’s controlling shareholder.” Doc. #351, at 55.
36

Giacomo Di Mase, Kraus, DuraSeal Pipe, DuraSeal Holdings and HDI filed a collective
response to Plaintiff’s motion. Doc. #395. Defendant Rose filed a separate response to
Plaintiff’s motion. Doc. #378.36
The parties cite Delaware law in their briefing of this claim, tacitly conceding
Delaware law applies to this claim. It is “[a] cardinal precept…that directors, rather than
shareholders, manage the business and affairs of the corporation. The business
judgment rule is a recognition of that statutory precept.” Orman v. Cullman, 794 A.2d 5,
19 (Del. Ch. 2002) (citations omitted). The business judgment rule presumes a
corporation’s directors “acted on an informed basis, in good faith and in the honest
belief that the action taken was in the best interests of the company.” Id. at 19-20
(citation omitted). “Absent an abuse of discretion,” the directors’ judgment “will not be
second-guessed” and “will be respected by the courts.” Id. at 20 (citations omitted).
The party challenging the directors’ judgment bears the burden of establishing facts to
rebut the presumption that the directors acted properly. Id. (citation omitted).
A plaintiff may overcome this burden and rebut the presumption that the business
judgment rule applies by, for example, “demonstrating…a merger between two
corporations under the control of a controlling shareholder,” or establishing “the board
was either interested in the outcome of the transaction or lacked the independence to
consider objectively whether the transaction was in the best interest of its company and
all of its shareholders.” Id. at 20, 22 (citations omitted). If the plaintiff overcomes the
burden, “the business judgment presumption is rebutted and entire fairness is the
standard of review.” Id. at 20. In such an instance, “[a] controlling or dominating
shareholder standing on both sides of a transaction…bears the burden of proving [the
transaction’s] entire fairness.” Id. (quoting Kahn v. Lynch Commc’n Sys., Inc., 638 A.2d
1110, 1115 (Del. 1994)).
Plaintiff alleges Jose Di Mase (through various entities and affiliates) was the
controlling shareholder of Xurex, and he was on both sides of the transactions at issue.

36

After Plaintiff filed replies to the two opposition briefs (Docs. #419-20), Rose filed a
“response to Trustee’s reply,” which the Court construes as a sur-reply. Doc. #423.
The rules do not allow sur-replies, and Rose did not seek leave to file one. Thus, the
Court did not consider Rose’s sur-reply when deciding Plaintiff’s motion.
37

Therefore, Plaintiff asks the Court to decide that the entire fairness doctrine will apply at
trial. Regarding both the 1/11/12 Amendment and the 9/25/14 Amendment, the Court
finds genuine issues of material fact preclude it from determining whether a controlling
shareholder was involved in either or both transactions. Accordingly, the Court denies
Plaintiff’s motion for summary judgment on this issue.
(b) Substantive Claims
Also pending are motions filed by Johnson, Rose, McKeon, and Olson seeking
summary judgment in their favor on Plaintiff’s breach of fiduciary duty claims. However,
the Court finds genuine issues of material fact preclude entry of summary judgment in
their favor on Plaintiff’s claims of breach of fiduciary duty. Therefore, their motions for
summary judgment on Plaintiff’s breach of fiduciary duty claims are denied.
(c) Immunity from Damages
Olson, Rose, Johnston, and McKeon contend they are insulated from damages
for any breach of fiduciary duty under section 102(b)(7) of the Delaware Corporate
Code. Doc. #357, at 20-22; Doc. #365, at 19-21; Doc. #367, at 9-10; Doc. #421, at 44.
As set forth in section 102(b)(7), the certificate of incorporation may include the
following:
A provision eliminating or limiting the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, provided that such provision shall not eliminate
or limit the liability of a director: (i) For any breach of the director’s duty of
loyalty to the corporation or its stockholders; (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation
of law; (iii) under § 174 of this title; or (iv) for any transaction from which
the director derived an improper personal benefit.
Del. Code Ann. tit. 8, § 102 (West 2019). The parties agree Xurex’s articles of
incorporation contained such a provision.
Section 102(b)(7) immunity is treated in the “nature of an affirmative defense,”
and therefore, the burden of establishing entitlement to immunity rests with the party
seeking protection. Emerald Partners v. Berlin, 787 A.2d 85, 91 (Del. 2001); Emerald
Partners v. Berlin, 726 A.2d 1215, 1224 (Del. 1999) (citation omitted). Upon review of
the record before it, the Court finds genuine issues of material fact exist regarding
38

Defendants’ entitlement to immunity under section 102(b)(7). Thus, Olson’s, Rose’s,
Johnston’s, and McKeon’s motions for summary judgment on the issue of section
102(b)(7) immunity are denied.
Related to the 1/11/12 Amendment, Johnston also argues he is protected by
section 144 of the Delaware Corporate Code and the business judgment rule. Doc.
#366, at 17-18. “[S]ection 144(a)(1) provides that a covered transaction will not be void
or voidable solely as a result of the offending interest if it is approved by an informed
‘majority of the disinterested directors, even though the disinterested directors be less
than a quorum.’” Blake Rohrbacher, et al., Finding Safe Harbor: Clarifying the Limited
Application of Section 144, 33 Del. J. Corp. L. 719, 737 (2008) (citing Del Code Ann. tit.
8, § 144(a)). “[S]o long as there is one informed, disinterested director on the board,
and so long as he or she approves the transaction in good faith, the transaction will not
be presumptively voidable due to the offending interest. In other words, a nine-member
board with a single disinterested director may approve a covered transaction and reap
the benefits of the section 144 safe harbor.” Id.
The Court finds genuine issues of material fact exist regarding application of
section 144 and/or the business judgment rule related to the 1/11/12 Amendment.
Accordingly, Johnston’s motion for summary judgment on the issue of immunity under
section 144 and/or the business judgment rule is denied.

(5) Civil Conspiracy (Count VI)
Plaintiff alleges a claim of civil conspiracy against all Defendants. Doc. #244, ¶¶
233-40. He contends Defendants had an agreement or a meeting of the minds to
commit unlawful acts, and in furtherance of their conspiracy, Defendants committed
unlawful acts of breach of contract, fraudulent transfer, aiding and abetting breach of
contract, breach of fiduciary duty, and aiding and abetting breach of fiduciary duties
owed to Xurex. Id. ¶¶ 237-239. Plaintiff claims Xurex (and/or its estate) sustained
damages as a result of Defendants’ alleged conspiracy. Id. ¶ 240. Defendants Jose Di
Mase, Giacomo Di Mase, Kraus, HDI, Johnston, Rose, Olson, and McKeon move for

39

summary judgment on this claim. Docs. #357, 359, 365-67.37 For this claim, the parties
focus on Missouri law, although they do not explain why Missouri law applies to the civil
conspiracy claims. Given the parties’ implicit concession that Missouri law applies, the
Court will apply Missouri law.
In Missouri, civil conspiracy “is not a separate and distinct action.” W. Blue Print
Co. v. Roberts, 367 S.W.3d 7, 22 (Mo. banc 2012) (citation omitted). Instead, a civil
conspiracy claim “acts to hold the conspirators jointly and severally liable for the
underlying act.” Id. (quoting 8000 Md., LLC v. Huntleigh Fin. Servs. Inc., 292 S.W.3d
439, 451 (Mo. Ct. App. 2009)). “The gist of the action is not the conspiracy, but the
wrong done by acts in furtherance of the conspiracy or concerted design resulting in
damage to plaintiff.” Id. (citation omitted). To demonstrate the existence of a civil
conspiracy, a plaintiff must establish “(1) two or more persons; (2) with an unlawful38
objective; (3) after a meeting of the minds; (4) committed at least one act in furtherance
of the conspiracy; and (5) [the plaintiff] was thereby damaged.” Id. (quoting Oak Bluff
Partners, Inc. v. Meyer, 3 S.W.3d 777, 781 (Mo. banc 1999)). A plaintiff must prove the
conspiracy by clear and convincing evidence. Higgins v. Ferrari, 474 S.W.3d 630, 642
(Mo. Ct. App. 2015) (internal quotations and citation omitted).
Potentially relevant in this matter, “there can be no conspiracy between an agent
and a principal,” and “[t]wo entitles that are not legally distinct cannot conspire with one
another.” 8000 Md., LLC, 292 S.W.3d at 452 (quoting Mika v. Cent. Bank of Kan. City,
112 S.W.3d 82, 94 (Mo. Ct. App. 2003)). “[A] corporation cannot conspire with its own
employees.” Id. But one exception to this general rule is “when an agent has an
independent personal stake in achieving the object of the conspiracy.” Id. (citation and
internal quotations omitted). That is, “the agent's independent personal stake must be
in a legally distinct organization.” Id. (citation omitted).

37

Kaiser and Jensvold, against whom this claim is also brought, do not seek summary
judgment on this claim.
38
In the context of a civil conspiracy claim, “unlawful…is not limited to conduct that is
criminally liable, but rather may include individuals associating for the purpose of
causing or inducing a breach of contract or business expectancy.” W. Blue Print Co.,
367 S.W.3d at 22 (quoting Lyn–Flex W., Inc. v. Dieckhaus, 24 S.W.3d 693, 700-01 (Mo.
Ct. App. 1999)).
40

Based upon the record and the applicable law, the Court finds genuine issues of
material fact prevent entry of judgment in favor of Defendants Jose Di Mase, Giacomo
Di Mase, Kraus, HDI, Johnston, Rose, Olson, and McKeon on Plaintiff’s claims of civil
conspiracy. At a minimum, there are genuine issues of material fact as to whether there
was a meeting of the minds, a third party was involved, and a concerted action
occurred. Accordingly, Defendants’ motions for summary judgment on the civil
conspiracy claims are denied.

(6) Aiding and Abetting Breach of Fiduciary Duty (Count VIII)
Plaintiff asserts claims of aiding and abetting breach of fiduciary duty against
Kraus, Jensvold, and Giacomo Di Mase, or alternatively, against Kraus, DuraSeal Pipe,
DuraSeal Holdings, HDI, Jensvold, Jose Di Mase, and Giacomo Di Mase. Doc. #244,
¶¶ 23, 247-253. Defendants Jose Di Mase, Giacomo Di Mase, Kraus, DuraSeal Pipe,
DuraSeal Holdings, and HDI move for summary judgment on Count VIII. Doc. #358.39
They argue entitlement to summary judgment because aiding and abetting a breach of
fiduciary duty is not a recognized theory of liability in Missouri. In response, Plaintiff
“concedes that HDI did not aid and abet breaches of duty before its existence, and
further concedes that Giacomo Di Mase is not liable on Count VIII.” Doc. #397, at 13
n.8. However, Plaintiff argues Delaware law governs this claim, and the other
Defendants are not entitled to summary judgment.
(a) Choice of Law
Before beginning a choice-of-law analysis, this Court must first determine
whether a conflict exists between potentially applicable state laws. Prudential Ins. Co.
of Am. v. Kamrath, 475 F.3d 920, 924 (8th Cir. 2007). Defendants argue Missouri law
applies; Plaintiff contends Delaware law applies.40 Missouri does not recognize a claim

39

Jensvold does not seek summary judgment on this claim.
Although he does not contend the laws of New Mexico or Kansas apply to his breach
of fiduciary duty or civil conspiracy claims, Plaintiff argues New Mexico or Kansas law
could apply to his aiding and abetting breach of fiduciary duty claims. Doc. #397, at 13.
Both states recognize a claim for aiding and abetting breach of fiduciary duty. See
Miller v. Staab, 113 P.3d 274 (Kan. Ct. App. 2005) (citations omitted); GCM, Inc. v. Ky.
40

41

for aiding and abetting a breach of fiduciary duty,41 but Delaware recognizes such a
claim.42 Thus, there is a conflict between the two states’ laws.
In determining which state’s substantive law governs, this Court must apply the
forum state’s choice-of-law rules. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487,
496 (1941). Missouri has adopted the principles set forth in the Restatement (Second)
of Conflict of Laws to determine which state’s law applies. Kennedy v. Dixon, 439
S.W.2d 173, 184 (Mo. banc 1969). For tort claims, the Restatement requires
application of the state’s law with the “most significant relationship” to the claim. See
Goede v. Aerojet Gen. Corp., 143 S.W.3d 14, 24-25, n.6 (Mo. Ct. App. 2004);
Restatement (Second) of Conflict of Laws § 145.
(b) Internal Affairs Doctrine
Instead of the Restatement (Second) of Conflicts of Law, Plaintiff argues the
Court should employ the “internal affairs doctrine” when determining which state’s law
applies. Plaintiff contends Missouri federal courts have applied the doctrine, and thus,
applied the law of the state of incorporation when considering claims for abetting and
abetting breaches of fiduciary duty. Doc. #397, at 8. In support, Plaintiff cites two
decisions – one from a district court, and the other from a bankruptcy court.

Cent. Life Ins. Co., 947 P.2d 143, 147 (N.M. 1997). Even if New Mexico and Kansas
were included in the analysis of which state has the most significant contacts, the
Court’s conclusion would remain unchanged. There are far fewer connections with
either state than there are connections with Missouri.
41
The Eighth Circuit recently concluded the Missouri Supreme Court would not
recognize a claim for aiding and abetting breach of fiduciary duty under the
Restatement (Second) of Torts. Jo Ann Howard & Assocs., P.C. v. Cassity, 868 F.3d
637, 650-51 (8th Cir. 2017); see also Cardinal Health 110, LLC v. Premiere Healthcare,
LLC, No. 18-CV-165, 2019 WL 108837, at *7 (E.D. Mo. Jan. 4, 2019) (following the
Eighth Circuit’s decision, and finding the Missouri Supreme Court would not recognize a
cause of action for aiding and abetting breach of fiduciary duty); In re Patriot Nat’l Inc.,
592 B.R. 560, 581-82 (D. Del. 2018) (same).
42
In Delaware, a claim for aiding and abetting breach of fiduciary duty requires proof of
the following: “(1) the existence of a fiduciary relationship; (2) the fiduciary breached its
duty; (3) a defendant, who is not a fiduciary, knowingly participated in a breach; and (4)
damages to the plaintiff resulted from the concerted action of the fiduciary and the
nonfiduciary.” Cargill, Inc. v. JWH Special Circumstance LLC, 959 A.2d 1096, 1125
(Del. Ch. 2008) (citation omitted).
42

First, Plaintiff cites In re Bridge Info. Sys., Inc., 325 B.R. 824 (E.D. Mo. 2005),
and represents the bankruptcy court applied the internal affairs doctrine to a veil
piercing claim. Plaintiff contends the court then “incorporated this analysis in choosing
the law applicable to plaintiff’s common law tort claims, including its aiding and abetting
claims, and determined that the law of the state of incorporation should apply to such
claims.” Doc. #397, at 8. Plaintiff’s description of this decision is not entirely accurate.
Plaintiff correctly points out the court determined the internal affairs doctrine
should be used when ascertaining what state’s law applies to a veil piercing claim. In re
Bridge Info Sys., 325 B.R. at 830. The court made that determination because “[a]
request to pierce a corporation’s veil necessarily involves an analysis of how the
controlling shareholders administered and governed the corporation.” Id. at 830-31
(citations omitted). However, regarding the alleged tort claims, including a claim for
“aiding and abetting fraud,” the court concluded the most significant relationship test
applied because Missouri adopted that test “in analyzing conflict of law issues involving
tort claims. Id. at 830 (citations omitted). Accordingly, this case does not support
Plaintiff’s position that the internal affairs doctrine should be applied.
Second, Plaintiff cites a decision by the United States District Court for the
Eastern District of Missouri: Burt ex rel. McDonnell Douglas Corp. v. Danforth, 742 F.
Supp. 1043 (E.D. Mo. 1990). He represents the court determined the law of the state of
incorporation applied to claims alleging the defendants acted in concert with one
another. Doc. #397, at 8. Plaintiff’s representation of this decision is incomplete.
Plaintiff does not mention Burt was a minority shareholder in McDonnell Douglas
bringing a stockholder derivate action, alleging, among other things, the directors and
officers of McDonnell Douglas breached their fiduciary duties. Burt, 742 F. Supp. at
1045-46. Because he asserted a derivative action, Burt was required to allege with
particularity “any effort by [him] to obtain the desired action from the directors…and if
necessary, from the shareholders or members.” Id. at 1046 (citing Fed. R. Civ. P. 23.1).
The defendants moved to dismiss because, in part, Burt did not comply with this
requirement. Id. When applying Missouri’s choice of law rules, the court concluded the
law of the state of incorporation applied because the issue before it was “whether
plaintiff offers sufficient reasons to excuse his failure to make a prior demand.” Id. at

43

1047 (citations omitted). The district court also applied the law of the state of
incorporation when considering dismissal of the plaintiff’s common law claims, but
notably, the plaintiff did not allege a claim of aiding and abetting. Id. at 1049-51. Burt is
not analogous to the case before this Court.
Based upon decisions issued by this Court, the Missouri Court of Appeals, and
more recent decisions issued by the United States District Court for the Eastern District
of Missouri, the Court concludes the “internal affairs doctrine” should not be utilized
when determining which state’s law applies. The “internal affairs doctrine is a conflict of
laws principle” that provides the “law of the state of incorporation should be applied to
settle disputes affecting the organic structure or internal administration of a corporation.”
J.Y.C.C. v. Doe Run Res., Corp., No. 15-CV-1704, 2019 WL 2211109, at *8 (E.D. Mo.
May 21, 2019) (declining to apply the internal affairs doctrine because the matter did not
involve any disputes about internal affairs); Yates v. Bridge Trading Co., 844 S.W.2d 56,
61 (Mo. Ct. App. 1992) (noting the issuance of stock is considered a corporation’s
internal affairs and requires the application of the laws of the state of incorporation)
(citation omitted); see also Shaffer v. Health Acquisition Co., No. 18-CV-601-NKL, 2019
WL 104932, at *6 (W.D. Mo. Mar. 5, 2019) (noting the internal affairs doctrine applies to
“matters having to do with the internal regulation of a corporation” and does not apply to
an action by shareholders on behalf of a corporation seeking to vindicate its rights
against third parties); A.O.A. v. Rennert, 350 F. Supp. 3d 818, 835-36 (E.D. Mo. 2018);
Aguilar v. PNC Bank, N.A., No. 14-CV-985, 2014 WL 12700618, at *3 n.2 (E.D. Mo.
Nov. 19, 2014) (noting Missouri applied the “most significant relationship test” for
resolving choice-of-law questions in tort actions and analyzing a claim of aiding and
abetting breach of fiduciary duty under this test).
Plaintiff’s claim of aiding and abetting breach of fiduciary duty does not affect the
“organic structure or internal administration of a corporation,” does not having anything
to do with internal regulation of a corporation, does not involve disputes about internal
affairs, and does not involve the issuance of stock. Accordingly, the internal affairs
doctrine is not applicable, and the Court will apply the state’s law with the most
significant relationship to the claim.

44

(c) Most Significant Relationship
Under the most significant relationship test, “the identity of the state having the
most significant relationship will depend upon the nature of the cause of action and
upon the particular legal issue in dispute.” Dorman v. Emerson Elec. Co., 23 F.3d 1354,
1358 (8th Cir. 1994). The court should take consider the following contacts: (1) place
where the injury occurred, (2) place where the conduct causing the injury occurred, (3)
domicile, residence, nationality, place of incorporate, and place of business of the
parties, and (4) the place where the relationship, if any, between the parties is centered.
Restatement (Second) of Conflict of Laws § 145.
There are several contacts with Missouri. As early as 2005, Xurex’s principal
place of business was in Missouri. It was Xurex who, according to Plaintiff, was harmed
by Defendants’ actions, and that harm was felt in Missouri. DuraSeal Pipe, against
whom Plaintiff brings a claim of aiding and abetting breach of fiduciary duty, was a
Missouri limited liability company with its principal place of business in Missouri. Not
only was DuraSeal Pipe Xurex’s largest customer (and its only customer in 2011),
DuraSeal Pipe, according to Plaintiff, was the controlling shareholder of Xurex. Xurex
and DuraSeal Pipe – both with significant ties to Missouri – executed the 1/13/10
Agreement. The 12/31/10 Agreement was executed by Xurex and DuraSeal Holdings,
which, shortly thereafter, purchased DuraSeal Pipe. In 2011, DuraSeal Pipe and/or
DuraSeal Holdings solicited proxies to successfully unseat the Xurex board. Johnston,
a Missouri resident, served in leadership capacities in Xurex, DuraSeal Pipe, and
DuraSeal Holdings. On the other hand, Xurex’s sole connection to Delaware is that it is
incorporated there. Not one Defendant who is alleged to have aided and abetted
breach of fiduciary duty resides in Delaware.43
Based upon the foregoing, the Court finds Missouri has the most significant
relationship to the claims asserted in this matter. As noted above, Missouri does not
recognize a claim for aiding and abetting breach of fiduciary duty. Thus, in addition to
43

Xurex’s contacts with New Mexico are limited to having a facility there until early
2012, and Rose, who served on the board, resides in New Mexico. Xurex’s contacts
with Kansas are similar: it had a facility in Kansas, and one of its board members,
Olson, is a resident of Kansas. Plaintiff does not assert a claim of aiding and abetting
breach of fiduciary duty against Rose or Olson.
45

Plaintiff’s concession that Giacomo Di Mase is entitled to summary judgment on this
claim, the Court grants summary judgment on this claim in favor of Kraus, Jensvold,
DuraSeal Pipe, DuraSeal Holdings, HDI, and Jose Di Mase.

(7) Declaratory Judgments (Counts XIII and XIV)
Pursuant to 28 U.S.C. § 2201(a) and Federal Rule of Civil Procedure 57, Plaintiff
seeks declaratory judgments against all Defendants. In Count XIII, Plaintiff requests a
judgment declaring the 1/11/12 and 9/25/14 Amendments are invalid and
unenforceable, and the parties’ rights are governed by the 1/13/10 and 12/31/10
Agreements. Doc. #244, ¶¶ 278-82. In Count XIV, Plaintiff seeks declarations that the
“Amended Agreement” is not an executory contract subject to assumption or rejection,
and “upon DuraSeal’s pre-petition material breach of the original 2010 Agreements, the
damages accruing from said breach, including future damages arising under the longterm minimum purchase requirements of the 1/13/10 and 12/31/10 Agreements,
became an asset of Xurex and later an asset of the bankruptcy estate at the petition
date.” Id. ¶¶ 283-88.
Plaintiff did not move for summary judgment on these claims. And most
Defendants did not seek summary judgment on these claims. However, Rose, Olson,
Johnston, and McKeon move for summary judgment on these claims. The Court denies
their motions for summary judgment on Plaintiff’s declaratory judgment claims because
genuine issues of material fact preclude entry of summary judgment in their favor. At a
minimum, the factual allegations supporting Plaintiff’s requests for declaratory judgment
are disputed.
C. Plaintiff’s Motion for Summary Judgment on Defendants’ Affirmative Defenses
Plaintiff also moves for summary judgment on certain affirmative defenses
asserted by Defendants DuraSeal Pipe, DuraSeal Holdings, Kraus, Giacomo Di Mase,
Jose Di Mase, HDI, Kaiser, and McKeon. Doc. #350. Defendants DuraSeal Pipe,
DuraSeal Holdings, Kraus, Giacomo Di Mase, Jose Di Mase, HDI, McKeon, Olson, and
Johnston filed a combined response to Plaintiff’s motion. Doc. #395. Kaiser did not
respond to the motion.

46

(1) Prior Material Breach by Xurex
Plaintiff argues he is entitled to summary judgment on Defendants’ affirmative
defense of prior material breach by Xurex because Defendants do not identify a
contractual obligation breached by Xurex and do not show the alleged breach was
material. The Court finds genuine issues of material fact preclude entry of summary
judgment in Plaintiff’s favor on this affirmative defense. Accordingly, Plaintiff’s motion
for summary judgment is denied in this regard.

(2) Commercial Frustration or Impossibility of Performance
Plaintiff moves for summary judgment on Defendants’ affirmative defense of
commercial frustration or impossibility of performance. Defendants do not respond to
Plaintiff’s motion for summary judgment on this affirmative defense. See Doc. #395.
Defendants are responsible for demonstrating there are “genuine issues of material fact
in the record that preclude[s]” entry of summary judgment in Plaintiff’s favor. Satcher v.
Univ. of Ark. at Pine Bluff Bd. of Trs., 558 F.3d 731, 734 (8th Cir. 2009) (citation
omitted). The “failure to oppose a basis for summary judgment constitutes waiver of
that argument.” Id. at 735. By not responding, Defendants have waived any argument
in opposition to Plaintiff’s summary judgment motion on Defendants’ affirmative defense
of commercial frustration or impossibility of performance. Plaintiff’s summary judgment
motion is granted.

(3) Ratification
Plaintiff moves for summary judgment on Defendants’ affirmative defense of
ratification because the shareholders were never asked to and did not approve the
1/11/12 Amendment or the 9/25/14 Amendment, and therefore, the shareholders could
not have ratified either agreement. In response, Defendants assert a genuine issue of
material fact exists regarding whether Xurex accepted benefits from the 1/11/12
Amendment and acquiesced to the contract for a considerable period of time, potentially
barring Xurex’s claim arising from the Amendment. In his reply, Plaintiff returns to his
analysis of whether shareholders ratified the agreements. Simply, the parties seem to
be talking past one another. For these reasons, the Court enters summary judgment in

47

Plaintiff’s favor on Defendants’ affirmative defense of ratification related to the 9/25/14
Amendment. But the Court denies Plaintiff’s motion for summary judgment on
Defendants’ affirmative defense of ratification related to the 1/11/12 Amendment.

(4) Lack of Consideration and/or Failure of Consideration
Plaintiff moves for summary judgment on Defendants’ affirmative defenses of
lack of consideration, and failure of consideration. In response, Defendants withdrew
their lack of consideration affirmative defense. But Defendants argue there are
questions of fact as to “whether the consideration that may supported the agreements
initially became worthless or non-existent.” Doc. #395, at 120. The Court agrees with
Defendants, and denies Plaintiff’s motion for summary judgment on Defendants’
affirmative defense of failure of consideration.

(5) Failure to Mitigate Damages
Plaintiff moves for summary judgment on Defendants’ affirmative defense of
failure to mitigate damages. In response to Plaintiff’s motion, Defendants, in a footnote,
state they are withdrawing the affirmative defense of failure to mitigate damages. Doc.
#395, at 123 n.49. Pursuant to Defendants’ concession, the Court grants Plaintiff’s
motion for summary judgment on Defendants’ affirmative defense of failure to mitigate
damages.

(6) Fraud in the Inducement
Plaintiff moves for summary judgment on Defendants’ affirmative defense of
fraud in the inducement. Defendants do not address Plaintiff’s motion for summary
judgment on the defense of fraud in the inducement related to the 1/11/12 Amendment.
By failing to oppose this aspect of Plaintiff’s motion for summary judgment, Defendants
have waived any argument in opposition thereto. Satcher, 558 F.3d at 74-75.
Accordingly, the Court grants Plaintiff’s motion for summary judgment on Defendants’
affirmative defense of fraud in the inducement as it relates to the 1/11/12 Amendment.
Defendants argue, to the extent the 1/13/10 and 12/31/10 Agreements were not
superseded by the 1/11/12 Amendment, Plaintiff is not entitled to summary judgment on

48

their defense of fraud in the inducement. Regarding Defendants’ affirmative defense of
fraud in the inducement related to the 1/13/10 Agreement and 12/31/10 Agreement, the
Court finds genuine issues of material fact prevent entry of judgment in Plaintiff’s favor
on this affirmative defense. Accordingly, the Court denies Plaintiff’s motion for summary
judgment on Defendants’ affirmative defense of fraud in the inducement as it relates to
the 1/13/10 Agreement and the 12/31/10 Agreement.
D. Plaintiff’s Request for Ruling as a Matter of Law
Plaintiff asks the Court to “rule as a matter of law” that DuraSeal Holdings and
DuraSeal Pipe’s “duties to make purchases under the 1/11/12 Amendment were not
eliminated on the basis of the purported Uneconomic Condition.” Doc. #351, at 84.
Plaintiff contends any modification to the agreement, particularly after receipt of the
notice of Uneconomic Condition, was required to be in writing and signed by both
parties. But the parties’ decision to suspend purchases was not in writing. Defendants
argue the parties’ agreement to suspend purchases did not have to be in writing, the
contractual prohibition against oral modification may be made, and the parties honored
the agreement, which was accepted by Xurex. Because there are genuine issues of
material fact related to this particular issue, the Court denies Plaintiff’s request for entry
of a ruling as a matter of law.
E. Plaintiff’s Statement of Facts in Support of His Motion for Summary Judgment
(1) Failure to Cite Materials in the Record
The Federal Rules of Civil Procedure and the Court’s Local Rules require a party
“cite[] to particular parts of materials in the record” to support an assertion of fact. Fed.
R. Civ. P. 56(c); L.R. 56.1(b). Contrary to that requirement, Plaintiff sets forth several
facts for which he cites nothing in the record – to wit, Facts 122, 178, 179, 180, 189,
190, 191, and 209. Doc. #351, at 33, 41, 43, 46. Because Plaintiff failed to cite
anything in the record to support Facts 122, 178, 179, 180, 189, 190, 191, and 209,
those facts were not considered by the Court.

49

(2) Reliance on Inadmissible Evidence
In support of five of his purported facts, Plaintiff relies in whole or in part on
Rose’s Memorandum in Support of his Motion to Dismiss and exhibits thereto filed in
October 2016 in the Bankruptcy Court (hereinafter, “Rose’s Memorandum”). Doc. #351,
at 37-40. A party claiming a genuine issue of material fact exists may not rely upon
denials or allegations but must support his assertion by showing “admissible evidence
will be available at trial to establish a genuine issue of material fact.” Brooks, 425 F.3d
at 1109; Fin. Timing Publ’ns, Inc. v. Compugraphic Corp., 893 F.2d 936, 942 (8th Cir.
1990) (citations omitted); Fed. R. Civ. P. 56(c)(1). When faced with a summary
judgment motion, this Court must only consider admissible evidence. Murphy v. Mo.
Dep’t of Corr., 372 F.3d 979, 982 (8th Cir. 2004) (citation omitted). Hearsay evidence,
which is inadmissible, “alone may not defeat a summary judgment motion.” Firemen’s
Fund Ins. Co. v. Thien, 8 F.3d 1307, 1310 (8th Cir. 1993) (citation omitted).
Rose’s Memorandum contain legal arguments, a letter to the Bankruptcy Court,
his thoughts and opinions, supposed emails cut and pasted into a document, and
statements made by and to Rose. The document does not contain depositions,
affidavits, declarations, stipulations, admissions, discovery responses, or other
admissible evidence. The document is also rife with hearsay, which the Court cannot
consider. Plaintiff proffers no argument as to how this Court may consider this
document in support of his opposition to Rose’s summary judgment motion. Therefore,
Plaintiff’s facts or the portions of his facts that are supported solely by Rose’s
Memorandum – i.e., Facts 150, 162, 165, 166, and 167 – were not considered by the
Court.

(3) References to Exhibits
In his Statement of Uncontroverted Material Facts, Plaintiff, in numerous
instances, refers to several exhibits generally but does not specify the exhibit number.
See Doc. #351, at 12-54. It appears Plaintiff identifies each exhibit by its number only
the first time each exhibit is cited by Plaintiff. Throughout the remainder of his more
than 250 facts, Plaintiff’s references to exhibits are general (i.e., “Johnston Aff.,” “2011
Brief,” “J. Mase Dep.”) but he does not identify the exhibit number where the cited

50

portion of the record may be located. Thus, the Court (and other parties) are forced to
search the facts for the exhibit number, go through each exhibit to locate the cited
portion, or create its own exhibit index. While this practice may work in cases with less
voluminous briefs, fewer facts, or fewer exhibits, or when a party files an exhibit index,
the practice does not work in this situation. In instances where portions of the record
are cited in future filings, Plaintiff shall identify the exhibit number (and if the exhibit was
previously filed, its ECF Document Number) where the Court may locate the cited
portion of the record.44

(4) Rose’s Responses to Plaintiff’s Statement of Uncontroverted Facts
In his opposition to Plaintiff’s motion for summary judgment, Rose does not
respond to most of the facts set forth in Plaintiff’s Statement of Uncontroverted Facts.
With regard to those facts to which he lodged a response, Rose does not cite anything
in the record to controvert the facts. See Doc. #378, at 1-13. Because Rose fails to
respond to most facts and he does not cite to anything in the record to controvert the
remainder of the facts, Plaintiff’s Statement of Uncontroverted Facts (with the exception
of those facts not being considered by the Court as outlined above) are deemed
uncontroverted by Rose for purposes of summary judgment. L.R. 56.1(b); Fed. R. Civ.
P. 56(c).

44

Unfortunately, Plaintiff utilizes the same practice when responding to McKeon’s,
Olson’s, Johnston’s, Rose’s, and HDI’s motions for summary judgment and asserting
additional facts in response to those summary judgment motions. Doc. #380, at 52-72;
Doc. #381, at 30-50; Doc. #382, at 30-40; Doc. #383, at 5-25; Doc. #403, at 12-29. In
future filings, Plaintiff could refer to the specific exhibit along with his record cite as
follows: “Johnston Dep. 31:17-20, attached as Ex. 3,” or “Johnston Dep. 31:17-20 (Ex.
3).” Also, the Court appreciates the parties providing a brief description of each exhibit
(e.g., McKeon Deposition) along with the exhibit number when filing exhibits on ECF or
filing an exhibit index.
51

F. McKeon’s Motion for Summary Judgment
McKeon’s arguments related to Plaintiff’s claims and Plaintiff’s responses thereto
are addressed supra, section III(B). There are a few remaining issues that need to be
addressed by the Court.

(1) McKeon’s Attempts to Incorporate Facts and Arguments
At the end of his statement of uncontroverted facts, McKeon “incorporates by
reference any co-Defendants’ reference in concurrently filed Motions for Summary
Judgment regarding the existence in the Xurex company charter of an exculpatory
provision pursuant to 8 Del. Code § 102(b)(7), shielding independent directors from
monetary liability for breaches of the duty of care.” Doc. #357, at 14-15. McKeon’s
attempt to incorporate facts by reference violates the Federal Rules of Civil Procedure
and the Court’s Local Rules. First, McKeon does not identify which of the 325
statements of facts asserted by Defendants (see Docs. #364-65, 373) he incorporates
by reference. This Court “is not required to speculate on which portion of the record”
McKeon relies, “nor is it obligated to wade through and search the entire record for
some specific facts” supporting McKeon’s arguments. White v. McDonnell Douglas
Corp., 904 F.2d 456, 458 (8th Cir. 1990) (citation omitted). Second, as the moving
party, McKeon is obligated to support each factual assertion with citations to the record,
and show he is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a), 56(c)(1);
L.R. 7.0(a), 56.1.
In the argument section of his brief, McKeon states he “joins the argument of any
other Defendant challenging the basis for Plaintiff’s claimed calculation of damages, or
the existence of any such damages, and accordingly, seeks summary judgment on any
grounds raised by other Defendants, with regard to damages, that are equally
applicable to McKeon.” Doc. #357, at 24. McKeon does not set forth any facts or
provide any legal argument supporting his argument that he is entitled to summary
judgment on the existence or calculation of Plaintiff’s damages. Fed. R. Civ. P. 56(a),
56(c)(1); L.R. 7.0(a), 56.1.
McKeon’s attempts to circumvent the rule requirements frustrate his ability to
seek summary judgment on claims upon which he failed to set forth supported facts and

52

neglected to set forth the applicable law. McKeon’s disregard of the rules does not
provide a factual or legal basis for the Court to consider his additional requests for
summary judgment. Accordingly, McKeon’s requests for summary judgment on
immunity from damages and Plaintiff’s purported damages are denied.

(2) Plaintiff’s Counter-Statement of Uncontroverted Material Facts
Contrary to the federal and local rule requirements, Plaintiff sets forth several
facts for which he cites nothing in the record – to wit, Facts 23, 30, 34, 37, 44, 60, 61,
67, 91, and 97. Doc. #382, at 34-37, 39-40, 44-45. Because Plaintiff failed to cite
anything in the record to support Facts 23, 30, 34, 37, 44, 60, 61, 67, 91, and 97, those
facts were not considered by the Court.

(3) McKeon’s Responses to Counter-Statement of Uncontroverted Material Facts
When responding to portions of Plaintiff’s Counter-Statement of Uncontroverted
Material Facts, McKeon fails to cite anything in the record controverting certain facts –
i.e., Plaintiff’s Facts 2, 20, 59, and 86. Doc. #411, at 7, 14, 30, 40. Other times,
McKeon attempts to controvert a fact by arguing the cited record does not support the
purported fact – i.e., Plaintiff’s Facts 5-7, 9, 11, 15, 18, 84-85 – but fails to explain how
or why the fact is not supported by the record. Doc. #411, at 8-13, 40. Similar to the
facts for which Plaintiff failed to cite anything in the record in support, McKeon’s
responses to facts that fail to cite anything in the record were not considered by the
Court. Fed. R. Civ. P. 56(c)(1)(A) (stating a party asserting a genuine issue of material
fact exists must cite to particular parts of the record to support his/her assertion); L.R.
56.1 (requiring an opposing party to “properly support its denial [of a given fact] in
accordance with Fed. R. Civ. P. 56(c).”). Regarding McKeon’s responses that do not
clarify how or why the record does not support the purported fact, the Court reviewed
the cited record to determine whether those purported facts are supported by the cited
record and only considered those facts supported by the cited record.

53

G. Rose’s Motion for Summary Judgment
(1) Rose’s Failure to Abide by Federal and Local Rules
In December 2018, Rose, who is pro se, filed a motion for summary judgment.
Doc. #294. The Court denied Rose’s motion without prejudice. Doc. #306. The Court
noted numerous deficiencies with Rose’s motion, cited the applicable rules, and
informed Rose that any future motion for summary judgment he files must (1) provide a
concise statement of uncontroverted facts, (2) set forth facts in numbered paragraphs,
(3) cite and address the applicable law, (4) identify particular parts of the record, and (5)
be supported by admissible evidence. Id.
In March 2019, Rose filed another motion for summary judgment. Doc. #367.
His second motion, similar to his first motion, does not comply with the requirements set
forth by the Federal Rules of Civil Procedure and the Court’s Local Rules. Fed. R. Civ.
P. 56(c), 56(e); L.R. 56.1. At a minimum, the motion fails to include a concise statement
of uncontroverted facts, does not set forth facts in numbered paragraphs, generally
refers to some exhibits without identifying specific portions of those exhibits,45 and
attaches inadmissible evidence.
Rose’s motion blatantly ignores the Court’s December 2018 Order. At that time,
the Court informed Rose it would not consider his initial motion for summary judgment
due to the significant deficiencies. Yet, other than reducing his page count from 220 to
31 pages, Rose files another summary judgment motion that disregards the Court’s
Order, Federal Rules of Civil Procedure, and Local Rules. For this reason alone, the
Court could deny Rose’s motion. Given Rose’s pro se status, the Court overlooks the
deficiencies and considers those arguments it can discern.

(2) Rose’s Exhibit 96
Rose primarily relies on one exhibit, Exhibit 96. See Doc. #367. Exhibit 96,
which is 177 pages in length, contains, inter alia, Rose’s thoughts, beliefs, and opinions
about matters; his arguments against Plaintiff’s claims; purported emails cut and pasted
into the document; references to other exhibits proffered by Rose without identifying
45

See Doc. #367-1 (177 pages), Doc. #367-5 (126 pages), Doc. #367-15 (1048 pages),
Doc. #367-16 (73 pages), Doc. #367-17 (51 pages), Doc. #368-2 (54 pages).
54

specific pages; disputes with Plaintiff’s discovery responses; discussions about legal
actions he has taken against other companies; disagreements with Plaintiff’s alleged
damages; and settlement discussions. Doc. #367-1. Much of Exhibit 96 constitutes
inadmissible evidence, which, as Rose knows from the Court’s previous Order, cannot
be used to support a summary judgment motion. Doc. #306 (citations omitted).
Furthermore, Exhibit 96 appears to be Rose’s attempt to disregard the page
limitations set by the Court for summary judgment motions, ignore the requirements
established by the Local Rules and the Federal Rules of Civil Procedure, and offer
inadmissible evidence and/or legal argument unsupported by admissible evidence. His
exhibit also ignores the Court’s December 2018 Order, which identified the applicable
summary judgment rules and informed Rose he would not be excused from complying
with the applicable rules. Doc. #306; see also Bennett v. Dr Pepper/Seven Up, Inc.,
295 F.3d 805, 808 (8th Cir. 2002) (citation omitted) (stating a party’s pro se status does
“not entitle him to disregard the Federal Rules of Civil Procedure”). For these reasons,
the Court disregards Rose’s Exhibit 96 (Doc. #367-1).

(3) Rose’s Arguments Related to Plaintiff’s Claims
Regarding his summary judgment motion, Rose’s principal argument heading is
he “is entitled to Summary Judgment on all Defenses Made in Response to Trustee’s
Complaint.” Doc. #367, at 6. But his subheadings relate to breach of fiduciary duty,
civil conspiracy, summary breach of fiduciary duty, affirmative defenses against other
charges by plaintiff, and declaratory judgment actions. Id. at 6-31. Regarding breach of
fiduciary duty, civil conspiracy, and declaratory judgment actions, the Court addressed
Rose’s arguments in the sections above addressing those particular claims.46
46

In his summary judgment reply, Rose did not respond to all of Plaintiff’s “CounterStatement of Additional Uncontroverted Material Fact[s].” Regarding the facts he
attempted to controvert, Rose oftentimes did not “properly support [his] denial support
his denial in accordance with Fed. R. Civ. P. 56(c).” L.R. 56.1(b)(1). The facts to which
he lodged no response and the facts for which he provided no proper support for his
denial “are deemed admitted for the purpose of summary judgment.” Id. The Court
also notes Rose, in his reply, states he “is more than qualified to comment on” Plaintiff’s
expert’s report. Doc. #389, at 34-37. Unless Rose was timely and properly designated
as an expert witness, he will not be permitted to provide expert testimony. Doc. #174;
55

(4) Rose’s Affirmative Defenses
Rose claims he is entitled to summary judgment on his “affirmative defenses.”
He contends Plaintiff’s claims “are barred by the doctrines of waiver and unclean
hands”; he “is entitled to an elimination of his damages because Plaintiff…negligently
and/or intentionally caused director and officer insurance coverage to expire”; Xurex
waived its ability to hold Rose liable for any damages resulting from the execution of an
invalidated amendments”; the subsequent Xurex board failed to continue Rose’s work
and efforts; Plaintiff failed to allege sufficient facts to support his claims; Xurex’s
acceptance of the January 2012 agreement absolves him of liability; and Plaintiff lacks
jurisdiction to “attack the legitimacy of [Rose’s] claim against the Xurex estate which the
Bankruptcy Court specifically approved for [Rose] after [Rose’s] motion to the Court to
extend the filing deadline for all Xurex shareholders.” Doc. #367, at 23-29.
The Federal Rules of Civil Procedure govern the pleading standard for affirmative
defenses and require a party “affirmatively state any avoidance or affirmative defense.”
Fed. R. Civ. P. 8(c)(1). These affirmative defenses include, but are not limited to,
contributory negligence, estoppel, fraud, illegality, release, and waiver. Id.; Dollar v.
Smithway Motor Xpress, Inc., 710 F.3d 798, 807 (8th Cir. 2013) (noting the list of
affirmative defenses in Rule 8(c) is not exhaustive). When a party pleads an affirmative
defense, “[e]ach allegation must be simple, concise, and direct.” Fed. R. Civ. P. 8(d)(1).
If the pleading “gives the plaintiff fair notice of the nature of the defense,” federal courts
will typically hold the affirmative defense satisfies Rule 8(d). 5 Charles Alan Wright et
al., Federal Practice & Procedure § 1274 (3d ed. 2013); see also Wisland v. Admiral
Beverage Corp., 119 F.3d 733, 737 (8th Cir. 1997). “Pleadings must be construed so
as to do justice.” Fed. R. Civ. P. 8(e).
Rose’s answer to the operative complaint does not contain any affirmative
defenses. See Doc. #252. Generally, when a party fails to plead an affirmative
defense, he waives that affirmative defense. First Union Nat’l Bank v. Pictet Overseas
Tr. Corp., 477 F.3d 616, 622 (8th Cir. 2007) (citations omitted). That is because the
“Rule 8(c) pleading requirement is intended to give the opposing party both notice of the
Fed. R. Civ. P. 26(a)(2). Rose may testify as to relevant matters if he establishes he
has personal knowledge of those matters. Fed. R. Evid. 602.
56

affirmative defense and an opportunity to rebut it.” Id. (citations omitted). Without any
allegation pertaining to Rose’s affirmative defenses, he has not placed Plaintiff on notice
of the nature of his affirmative defenses, and therefore, has not satisfied the
requirements of Rule 8(d). Accordingly, Rose’s motion for summary judgment on his
affirmative defenses is denied.
Even if the Court were to find Rose has not waived his affirmative defenses,
Rose, by seeking summary judgment on his affirmative (and other) defenses, bears the
burden of proving those defenses. Foulk v. Charrier, 262 F.3d 687, 697 (8th Cir. 2001).
But Rose fails to establish there is no genuine issue of any material fact, entitling him to
summary judgment on his defenses. Williams, 783 F.2d at 115. For this additional
reason, the Court denies Rose’s motion for summary judgment on his affirmative
defenses. To the extent Rose seeks summary judgment on any other defenses, his
request is denied for the same reason.

(5) Rose’s Failure to State a Claim Argument
Finally, Rose seems to argue Plaintiff fails to allege sufficient facts to state a
claim. He raised the same argument in response to Plaintiff’s initial complaint. Doc.
#25. The Court denied Rose’s motion. Doc. #42. To the extent Rose is raising the
same arguments, his motion is denied for the same reasons the Court denied his
previous request. Rose’s motion is also denied because, contrary to the requirements
of the Federal Rules of Civil Procedure, he did not assert a defense of failure to state a
claim. Fed. R. Civ. P. 12(b). For these reasons, Rose’s motion of summary judgment
(or his motion to dismiss) for failure to state a claim is denied.

(6) Plaintiff’s Responses to Rose’s Motion for Summary Judgment
In support of five of his purported facts, Plaintiff cites only Rose’s Memorandum.
Doc. #383, at 7, 13, 21, 23 (citing Doc. #354-7). He relies on the same document, at
least in part, to establish six additional facts. Id. at 11-12, 23, 25. As set forth above, a
party claiming a genuine issue of material fact exists may not rely upon denials or
allegations but must support his assertion by showing “admissible evidence will be
available at trial to establish a genuine issue of material fact.” Brooks, 425 F.3d at

57

1109; Fin. Timing Publ’ns, Inc., 893 F.2d at 942 (citations omitted); Fed. R. Civ. P.
56(c)(1). This Court must only consider admissible evidence. Murphy, 372 F.3d at 982.
Rose’s Memorandum is not admissible evidence. Thus, Plaintiff’s facts supported
solely by Rose’s Memorandum (i.e., Facts 20, 55, 56, 111, 125) and those portions of
Plaintiff’s facts that are supported only by Rose’s Memorandum (i.e., Facts 42, 43, 44,
54, 124, 134) were not considered by the Court.
The Court also notes Plaintiff’s Fact 45 is not supported by any citation to the
record as required by the Federal Rules of Civil Procedure and the Court’s Local Rules.
Accordingly, the Court did not consider Fact 45.
H. Olson’s Motion for Summary Judgment
(1) Olson’s Attempts to Incorporate Facts and Arguments
Similar to McKeon, Olson attempts to incorporate other Defendants’ facts and
arguments in his motion. Olson states he “incorporates by reference” the “Omnibus
Statement of Uncontroverted Facts” filed by Defendants Jose Di Mase, Giacomo Di
Mase, Kraus, DuraSeal Pipe, DuraSeal Holdings, and HDI. Doc. #365. Olson’s attempt
to incorporate facts by reference violates the Federal Rules of Civil Procedure and the
Court’s Local Rules. Olson does not identify which of 250 facts (see Doc. #365) he
incorporates by reference. This Court “is not required to speculate on which portion of
the record” Olson relies, “nor is it obligated to wade through and search the entire
record for some specific facts” supporting his arguments. White, 904 F.2d at 458.
Further, Olson must support each factual assertion with citations to the record to show
he is entitled to summary judgment. Fed. R. Civ. P. 56(a), 56(c)(1); L.R. 7.0(a), 56.1.
Olson also “joins the summary judgment efforts of any other defendant
challenging Plaintiff’s damage calculation or the existence of any such damages….[and]
seeks summary judgment on any grounds raised by other Defendants that also apply to
him.” Doc. #365, at 36. Setting aside his failure to identify on what grounds (other than
Plaintiff’s damages) asserted by other Defendants he seeks summary judgment, Olson
does not set forth facts or legal authority supporting his claim for summary judgment on
Plaintiff’s damages or any other basis for summary judgment. Fed. R. Civ. P. 56(a),
56(c)(1); L.R. 7.0(a), 56.1.

58

Olson’s failure to follow the rules undercuts his ability to seek summary judgment
on claims upon which he failed to set forth supported facts and cite applicable law.
Olson does not provide a factual or legal basis for the Court to consider his requests for
summary judgment on any basis other than the ones are supported in his motion. Thus,
Olson’s requests for summary judgment on Plaintiff’s purported damages and any basis
claimed by other Defendants are denied.
In his summary judgment reply, Olson represents “the basis for his summary
judgment motion, and the arguments used against him by Plaintiff, are substantially
similar to those presented in Defendant McKeon’s summary judgment motion.” Doc.
#422, at 1 n.1. And for that reason, Olson “incorporates the arguments made in
McKeon’s reply suggestions in [Olson’s] present motion.” Id. McKeon’s reply exceeds
fifty pages in length. Yet, Olson does not point to anything specific he wishes to
incorporate. Nevertheless, the Court is not obligated to and will not wade through
another party’s brief to ascertain what exactly Olson wishes to incorporate in his motion
and/or reply. Thus, the Court did not consider McKeon’s reply when addressing Olson’s
motion or reply.

(2) Plaintiff’s Responses to Olson’s Statement of Facts
To controvert portions of Johnston’s Statement of Facts, Plaintiff relies in whole
or in part on Rose’s Memorandum. Doc. #380, at 20, 28, 32-33, 36-37 (citing Doc.
#354-7). As explained supra, section III(A), Plaintiff cannot rely on inadmissible
evidence to establish a genuine issue of material fact exists. Brooks, 425 F.3d at 1109;
Fin. Timing Publ’ns., 893 F.2d at 942; Fed. R. Civ. P. 56(c)(1). This Court cannot
consider Rose’s Memorandum because it constitutes inadmissible evidence. Murphy,
372 F.3d at 982; Firemen’s Fund Ins. Co., 8 F.3d at 1310. Thus, the Court disregarded
those portions of Plaintiff’s responses to Olson’s Facts 35, 44, 55, 56, 58, and 59 that
solely relied on Rose’s Memorandum.

(3) Plaintiff’s Counter-Statement of Additional Uncontroverted Material Facts
Like his response to Rose’s summary judgment motion, Plaintiff cites only Rose’s
Memorandum to solely or in part support some of his additional purported facts. Doc.

59

#380, at 55, 58-60, 69, 71-72 (citing Doc. #354-7). Because Plaintiff relies on
inadmissible evidence to support these facts, the Court did not consider those portions
of Plaintiff’s Facts 20, 42, 44, 54, 55, 56, 111, 124, 125, and 134 that solely relied on
Rose’s Memorandum.
Additionally, Plaintiff’s Fact 45 is not supported by any citation to the record.
Therefore, the Court did not consider that fact.
I. Johnston’s Motion for Summary Judgment
Johnston’s arguments related to Plaintiff’s claims and Plaintiff’s responses
thereto are addressed supra, section III(B). Nevertheless, there are a few issues that
need to be addressed by the Court.

(1) Plaintiff’s Responses to Johnston’s Statement of Facts
To controvert some or portions of Johnston’s Statement of Facts, Plaintiff relies
wholly or in part on Rose’s Memorandum. Doc. #381, at 8, 13-20, 27 (citing Doc. #3547). As explained supra, section III(A), Plaintiff cannot rely on and the Court cannot
consider inadmissible evidence to establish a genuine issue of material fact exists.
Brooks, 425 F.3d at 1109; Fin. Timing Publ’ns., 893 F.2d at 942; Fed. R. Civ. P.
56(c)(1). Thus, the Court disregards those portions of Plaintiff’s responses to
Johnston’s Facts 13, 23, 24, 25, 26, 28, 29, 31, and 43 that solely relied on Rose’s
Memorandum in Support of his Motion to Dismiss and exhibit thereto.

(2) Plaintiff’s Counter-Statement of Additional Uncontroverted Material Facts
Similar to his responses to Rose’s and Olson’s summary judgment motions,
Plaintiff cites only Rose’s Memorandum to support some of his purported facts. Doc.
#381, at 33, 36, 37-38, 47, 49-50 (citing Doc. #354-7). Because only inadmissible
evidence supports these facts, the Court did not consider Plaintiff’s Facts 20, 42, 44, 54,
55, 56, 111, 124, 125, and 134.
Additionally, Plaintiff’s Fact 45 is not supported by any citation to the record.
Therefore, the Court did not consider that fact.

60

J. HDI’s Motion for Summary Judgment
Plaintiff asserts claims against HDI of misappropriation of trade secrets, civil
conspiracy, breach of fiduciary duty, and aiding and abetting breach of fiduciary duty.
HDI moves for summary judgment on all claims because (1) the Court lacks personal
jurisdiction over HDI, and (2) HDI cannot be held liable for the alleged tortious conduct
of DuraSeal Pipe or DuraSeal Holdings. Doc. #362. Plaintiff opposes HDI’s motion.
No other party filed opposition to HDI’s motion.

(1) Parties’ Facts and Counter-Facts
Before addressing the substance of HDI’s motion, the Court notes HDI’s
summary judgment “incorporate[s] by reference” the 250 facts in the Omnibus
Statement of Uncontroverted Facts. Doc. #362 (citing Doc. #364). In response to HDI’s
motion, Plaintiff “incorporates by reference his responses to” the 250 facts in the
Omnibus Statement of Uncontroverted Facts and the 270 facts in his “counterstatement of additional facts.” Doc. #401 (citing Doc. #403). In its reply, HDI
incorporates its responses to Plaintiff’s counter-statement of additional facts.” Doc.
#414, at 2. The filings containing the relevant parties’ proposed facts and responses
thereto consist of more than 160 pages. Doc. #403, at 1-95; Doc. #412.
Fortunately, HDI and Plaintiff identify by number the facts in support of its/his
respective position. Doc. #362, at 10; Doc. #401, at 3-5, 7-9. Because the parties must
set forth factual assertions and provide citations to the record supporting those factual
assertions when moving for or opposing summary judgment, the Court considered only
the facts identified in the parties’ briefing of HDI’s summary judgment motion. Fed. R.
Civ. P. 56(a), 56(c)(1); L.R. 7.0(a), 56.1; see also White, 904 F.2d at 458.

(2) Personal Jurisdiction
There are two broad categories of personal jurisdiction. ASpecific jurisdiction
refers to jurisdiction over causes of action that >arise out of= or >relate to= a defendant=s
activities within a state.@ Lakin v. Prudential Secs., Inc., 348 F.3d 704, 707 (8th Cir.
2003) (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)). AGeneral
jurisdiction…refers to the power of a state to adjudicate any cause of action involving a

61

particular defendant, regardless of where the cause of action arose.@ Id. (quotation
omitted). In response to HDI’s motion, Plaintiff argues the Court has specific jurisdiction
over HDI and does not address general jurisdiction, thereby conceding the Court does
not have general jurisdiction over HDI. Doc. #401, at 2-5.
A federal court in a diversity suit may exercise specific jurisdiction over an out-ofstate defendant when two requirements are met: (1) jurisdiction is allowed by allowed by
the Missouri long-arm statute; and (2) the reach of the long-arm statute comports with
due process. See Viasystems, Inc. v. EBM-Papst St. Georgen GmbH & Co., 646 F.3d
589, 593 (8th Cir. 2011) (citation omitted). “Missouri’s long-arm statute authorizes
personal jurisdiction over defendants who, inter alia, transact business, make a
contract, or commit a tort within the state.” Id. (citing Mo. Rev. Stat. § 506.500.1).
“[D]ue process requires that such a defendant have ‘minimum contacts’ with the
forum state such that maintenance of a suit against that defendant does not offend
‘traditional notions of fair play and substantial justice.’” Guinness Imp. Co. v. Mark VII
Distribs., Inc., 153 F.3d 607, 614 (8th Cir. 1998) (quoting Int’l Shoe Co. v. Washington,
326 U.S. 310, 316 (1945)). The minimum contacts analysis required by the Fourteenth
Amendment calls for consideration of the following factors: A(1) the nature and quality of
contacts with the forum state; (2) the quantity of these contacts; (3) the relationship
between the contacts and the cause of action; (4) the interest of the forum state; and (5)
the convenience of the parties.@ Wines v. Lake Havasu Boat Mfg., 846 F.2d 40, 42 (8th
Cir. 1988). The first three factors are of primary importance. See Austad Co. v. Pennie
& Edmonds, 823 F.2d 223, 226 (8th Cir. 1987).
“The nonresident defendant’s conduct and connection with the forum state must
be such that ‘he should reasonably anticipate being haled into court there.’” Guinness
Imp. Co., 153 F.3d at 614 (quoting World-Wide Volkswagen Corp. v. Woodson, 444
U.S. 286, 297 (1980)). In each case, “there [must] be some act by which the defendant
purposefully avails itself of the privilege of conducting activities within the forum State,
thus invoking the benefits and protections of its laws.” Burger King, 471 U.S. at 462
(citation omitted). A non-resident “defendant’s contacts with the forum state must not
be random, fortuitous, attenuated, or the result of unilateral activity of a third person or
another party.” Guinness Imp. Co., 153 F.3d at 614 (citation omitted). According to the

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Supreme Court, “there must be an ‘affiliation between the forum and the underlying
controversy, principally, [an] activity or an occurrence that takes place in the forum
State.’” Bristol-Myers Squibb Co. v. Super. Ct. of Cal., 137 S. Ct. 1773, 1781 (2017)
(quoting Goodyear Dunlop Tires Ops. v. Brown, 564 U.S. 915, 919 (2011)). “When
there is no such connection, specific jurisdiction is lacking regardless of the extent of a
defendant’s unconnected activities in the State.” Id. (citation omitted).
HDI is a Luxembourg company with a business address in Luxembourg. Prior to
the filing of this lawsuit, the only director and only employee of HDI was Ugo Anatra,
who is a resident of Italy. Neither HDI nor Anatra have had a physical presence in
Missouri. In 2012, HDI acquired ownership of DuraSeal Holdings, an entity organized
under the laws of Italy with its principal place of business in Italy. In late 2013, HDI
became the corporate parent of DuraSeal Holdings. HDI was not a party to the
contracts at issue in this matter. In 2016, after the lawsuit was filed, Anatra retired, and
Jose Di Mase became the sole director of HDI.
Who owns HDI is not entirely clear. According to Jose Di Mase’s deposition
testimony, Standard Equity Trust owns 100% of HDI. Doc. #364-14, at 3-4. UBI
trustee, a professional trustee of the UBI banking group, is the administrator of the
Standard Equity Trust. Id. The Standard Equity Trust’s beneficiary is the Di Mase
family. Id. Plaintiff identifies instances during the litigation that DuraSeal represented
the Di Mases indirectly owned DuraSeal, and did not represent DuraSeal was owned by
a trust of which the Di Mase family is the beneficiary. Doc. #403, at 95.
In August 2013, Jose Di Mase and/or Anatra described HDI as the “financial
vehicle to acquire DuraSeal and Xurex shares.” Doc. #403-33. Jose Di Mase testified
HDI is a “paper company.” #403-41, at 12. As he explained further: “One employee,
Ugo first and then me. No more employee[s]. Everything was outsourcing. There’s no
structure costs. There are no offices.” Id. An example of the outsourcing may include
agreements HDI executed with individuals to provide assistance to DuraSeal Holdings.
Kraus, Jensvold, and Jose Di Mase’s daughter, Daniela Di Mase, executed year-long
“advisory agreements” with HDI, wherein they agreed to provide “support skills” to
DuraSeal Holdings, “which operates in the United States of America in the field of
nanotechnology, based in Kansas City.” Docs. #403-32, 403-30, 404-5. The

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agreements indicate the support services could be performed at any location, but a
consultant “will perform services on the telephone.” Id.
Kraus appears to have been first hired by HDI as a consultant in September
2012. Doc. #403-32. His contract was for a year with his compensation set at $6,000
per month. Id. Simultaneous with his consulting agreement, Kraus served on the board
for DuraSeal Holdings. Significantly, it was Kraus who executed the 9/25/14
Amendment on behalf of DuraSeal Holdings. Kraus also signed a stock purchase
agreement, which will be detailed infra. It is unclear when Jensvold was first hired as a
consultant for HDI, but the record reflects the latest he was hired was on January 8,
2012, with his compensation set at $6,000 per month. Doc. #403-30, at 5. That is, of
course, three days before the 1/11/12 Amendment was executed by Xurex and
DuraSeal Holdings. Notably, Jensvold executed the agreement on behalf of DuraSeal
Holdings. His agreement with HDI was extended until at least December 31, 2014.
In January 2014, Kaiser communicated with Anatra about a “wire transfer of
$35,000 US$ to DuraSeal on behalf of Xurex.” Doc. #401-1. Anatra indicates the
money will be wired to DuraSeal Holdings, and DuraSeal Holdings will transfer the
money to Xurex. Id. HDI wired 135,000 EUR to DuraSeal Holdings on January 15,
2014, and on January 16, 2014, DuraSeal Holdings wrote a check to Xurex for $35,000.
Id.; Doc. #401-2.
In April and May 2014, HDI wired nearly 500,000 EUR to DuraSeal Holdings.
Doc. #404-2. On May 1, 2014, Xurex and DuraSeal Holdings entered into a stock
purchase agreement whereby DuraSeal purchased 7,305,935 shares of Xurex’s
common stock with each share costing $0.04, for a total of $286,000. Doc. #354-20.
This agreement was signed by Kaiser and Kraus. Id. at 10. The agreement indicates it
will be subject to the “exclusive jurisdiction of the Federal District Court, Western District
of Missouri. Id. at 7. On or about May 1, 2014, DuraSeal Holdings wired $186,000 to
Xurex for “stock purchases.” Doc. #403-28. DuraSeal Holdings previously paid
$50,000 in September 2013 and $50,000 in October 2013 to Xurex for “stock
purchases.” Id.
Three days before the 9/25/14 Amendment was executed, Kraus emailed Jose
Di Mase informing him that he would be making an “investment request to Ugo [Anatra]

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tomorrow.” Doc. #403-53. Kraus copied Giacomo Di Mase and Jensvold on this email.
Id. Kraus informed the recipients that DuraSeal Holdings was “looking at providing a
total of $105,500” to Xurex, with $48,000 for four barrels of product, and “the rest
associated with the bankruptcy filing.”47 Id. One day before the 9/25/14 Amendment
was executed, Kraus sent his request to Anatra, who informed Kraus that he would
send the money in two payments. Doc. #403-54.
Based upon the foregoing, the Court finds it has specific jurisdiction over HDI.
HDI’s contacts with Missouri are more than minimal, HDI’s actions establish purposeful
availment of the privilege to conduct activities in Missouri, HDI is affiliated with the
underlying controversies that took place in Missouri, and HDI’s contacts with Missouri
were in no way random, fortuitous, attenuated, or the result of a unilateral activity. HDI
should have reasonably anticipated it would be haled into Missouri court. Furthermore,
a suit against HDI does not offend the “traditional notices of fair play and substantial
justice.” Accordingly, the Court denies HDI’s motion for summary judgment on the basis
of lack of personal jurisdiction.

(3) Liability for Alleged Tortious Conduct of Subsidiary
HDI also moves for summary judgment on the basis that Plaintiff is attempting to
hold HDI liable for the alleged tortious conduct of its subsidiary. Based upon the agency
theory of liability, Plaintiff maintains HDI is liable for Kraus’s and Jensvold’s acts that
were performed for DuraSeal Holdings. The Court finds genuine issues of material fact
exist with regard to whether Kraus and Jensvold were indeed “agents” of HDI, and if so,
whether they acted within the scope of an agency relationship with HDI. Accordingly,
the Court denies HDI’s motion for summary judgment on this basis as well.
IV.

PARTIES’ SEALED EXHIBITS

On March 8, 2019, the Court granted the parties’ request to file certain
documents under seal. Doc. #349. The parties were instructed to filed unredacted
versions of their briefs and exhibits under seal but also publicly file redacted versions of

47

Xurex did not seek bankruptcy protection until mid-October 2014.
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the same documents. Id. The Court directed that “[o]nly portions of those filings that
are truly redactable – e.g., proprietary information, trade secrets, social security
numbers, highly personal information – should be redacted.” Id. However, in briefing
these thirteen motions, the parties filed several documents under seal that should not
have been filed under seal,48 failed to file redacted versions of briefs and exhibits that
were filed under seal,49 and/or filed the same documents both publicly and under seal.50
These types of filings are contrary to the letter and spirit of the Court’s March 8,
2019 Order. Accordingly, the Court suggests the parties closely review the filings
associated with their summary judgment motions and Daubert motions. Unless
otherwise directed by the Court, fourteen days after this Order is entered, the Clerk of
the Court will unseal all documents associated with the parties’ summary judgment
motions and Daubert motions that were filed under seal. If a party seeks to maintain a
document’s sealed status, the party shall file a Notice of Filing that identifies, by
Document Number, the exhibit the party seeks to remain sealed, and provides sufficient
justification as to why the document or portions thereof should remain sealed.
V.

CONCLUSION

A. Summary of the Court’s Rulings
For all of the foregoing reasons, the Court issues the following rulings on the
parties’ pending motions:
•

Defendant McKeon’s Motion for Summary Judgment (Doc. #347) is granted with
regard to Plaintiff’s misappropriation of trade secrets claim but denied in all other
respects.

•

Plaintiff’s Motion to Strike Pavone (Doc. #348) is denied.

•

Plaintiff’s Motion for Partial Summary Judgment (Doc. #350) is granted with
regard to Defendants’ affirmative defenses of commercial frustration or
impossibility of performance, ratification related to the 9/25/14 Amendment, lack
of consideration, failure to mitigate damages, and fraud in the inducement related
to the 1/11/12 Amendment; however, Plaintiff’s Motion for Partial Summary
Judgment is denied in all other respects.

48

See, e.g., Doc. #352-18; Doc. #361-1; Doc. #364-15.
See, e.g., Doc. #373-69; Doc. #348; Doc. #356.
50
Compare Doc. #364-2 with Doc. #373-43; compare Doc. #364-1 with Doc. #373-1.
49

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•

Defendants Jose Di Mase, Giacomo Di Mase, Kraus, DuraSeal Pipe, DuraSeal
Holdings, and HDI’s Motion to Strike Reilly (Doc. #356) is denied.

•

Defendants Jose Di Mase, Giacomo Di Mase, Kraus, DuraSeal Pipe, DuraSeal
Holdings, and HDI’s Motion for Summary Judgment on Claim for Aiding and
Abetting Breach of Fiduciary Duty (Doc. #358) is granted.

•

Defendants Jose Di Mase, Giacomo Di Mase, Kraus and HDI’s Motion for
Summary Judgment on Claim for Civil Conspiracy (Doc. #359) is denied.

•

Defendants DuraSeal Holdings and DuraSeal Pipe’s Motion for Summary
Judgment on Counts II, III, and IV (Doc. #360) is denied with regard to Counts II
and III but granted with regard to Count IV.

•

Defendants Jose Di Mase and HDI’s Motion for Summary Judgment on Breach
of Fiduciary Duty Claim (Doc. #361) is denied.

•

Defendant HDI’s Motion for Summary Judgment (Doc. #362) is denied.

•

Defendants Jose Di Mase, Giacomo Di Mase, Kraus, DuraSeal Pipe, DuraSeal
Holdings and HDI’s Motion for Summary Judgment on Misappropriation of Trade
Secrets (Doc. #363) is granted.

•

Defendant Olson’s Motion for Summary Judgment (Doc. #365) is denied

•

Defendant Johnston’s Motion for Summary Judgment (Doc. #366) is denied.

•

Defendant Rose’s Motion for Summary Judgment (Doc. #367) is denied.
In addition, fourteen days after this Order is entered, the Clerk of the Court shall

unseal all summary judgment motion briefs, Daubert motion briefs, and exhibits
attached to all briefs unless otherwise directed by the Court. If a party seeks to
maintain a document’s sealed status, the party must seek said relief from the Court as
set forth above.
B. Claims to Be Tried
Based upon the rulings issued on the pending motions, the Court understands
the following claims will be tried:
Count I against DuraSeal Pipe alleging breach of the 1/13/10 Agreement.
Count II against DuraSeal Holdings alleging breach of 12/31/10 Agreement.
Count III against DuraSeal Holdings and DuraSeal Pipe alleging breach of the
1/11/12 Amendment.

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Count V against Jensvold and Kaiser for misappropriation of trade secrets.51
Count VI against DuraSeal Holdings, DuraSeal Pipe, Giacomo Di Mase, Jose Di
Mase, Kaiser, Jensvold, McKeon, Kraus, Johnston, Rose, Olson, and HDI for civil
conspiracy.
Count VII against DuraSeal Holdings, DuraSeal Pipe, Giacomo Di Mase, Jose Di
Mase, Kaiser, Jensvold, McKeon, Johnston, Rose, Olson, and HDI for breach of
fiduciary duty.
Count VIII against Jensvold for aiding and abetting breach of fiduciary duty.52
Count IX against DuraSeal Pipe and DuraSeal Holdings alleging avoidance and
recovery of constructive fraudulent transfers under 11 U.S.C. §§ 544, 548, and 550.
Count X against DuraSeal Pipe and DuraSeal Holdings alleging avoidance and
recovery of constructive fraudulent transfers under Uniform Fraudulent Transfer Act.
Count XI against DuraSeal Pipe, Johnston, and Rose objecting to their claims in
Xurex’s bankruptcy estate and contending their claims should be disallowed under 11
U.S.C. § 3007.53
Count XII against DuraSeal Pipe, DuraSeal Holdings, Johnston, and Rose
alleging their debts and/or equity interests should be subordinated to claims of Xurex’s
other unsecured creditors and equity holders.54
Count XIII against all Defendants seeking a declaration that the 1/11/12 and
9/25/14 Amendments are invalid and enforceable.55
Count XIV against all Defendants seeking a declaration that the “Amended
Agreement” is not an executory contract subject to assumption or rejection, and “upon
DuraSeal’s pre-petition material breach of the original 2010 Agreements, the damages
accruing from said breach…became an asset of Xurex and later an asset of the
bankruptcy estate at the petition date.”

51

It is unclear if Plaintiff intends to withdraw this claim with regard to all Defendants or
only those who filed motions for summary judgment.
52
This claim remains because Jensvold did not seek summary judgment on this claim.
53
No one sought summary judgment on Count XI. As a result, the parties have not
addressed whether Plaintiff intends to prosecute his claims under Count XI, and if so,
whether he has a right to a jury trial on said claims.
54
Similar to Count XI, no one sought summary judgment on Count XII. It remains
unclear if Plaintiff intends to prosecute his equitable subordination claims, and whether
he has a right to a jury trial on said claims.
55
In his First Amended Complaint, Plaintiff requested a jury trial “on all claims so
triable.” Doc. #244, at 1, 49. It is unclear if Plaintiff seeks to try the declaratory
judgment actions to a jury. See Northgate Homes, Inc. v. City of Dayton, 126 F.3d
1095, 1099 (8th Cir. 1997) (citations omitted) (noting “if there would have been a right to
a jury trial on the issue had it arisen in an action other than one for declaratory
judgment, then there is a right to a jury trial in the declaratory judgment action”).

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Although several affirmative defenses likely remain pending, some affirmative
defenses were the subject of a motion for summary judgment. Of those affirmative
defenses on which Plaintiff sought summary judgment, the following affirmative
defenses remain: prior material breach; fraud in the inducement with regard to the
1/13/10 Agreement and the 12/31/10 Agreement; commercial frustration or impossibility
of performance; ratification related to the 1/11/12 Amendment; failure of consideration;
and failure to mitigate.
IT IS SO ORDERED.
/s/ Ortrie D. Smith
ORTRIE D. SMITH, SENIOR JUDGE
UNITED STATES DISTRICT COURT

DATE: June 17, 2019

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