Aaes v 4G Companies
Filing
84
OPINION AND ORDER denying 71 MOTION for Default Judgment against 4G Alternative Energy, LLC, denying 72 MOTION for Default Judgment against Seisma Energy Research AVV, Seisma Oil Research, LLC, granting 37 MOTION to Dismiss 1 Complaint, or for More Definite Statement for Failure to Properly Plead, grangint 10 MOTION to Dismiss and Brief in Support, granting 25 MOTION to Dismiss under 12(b)(6) abd 9(b), denying 70 MOTION for Default Judgment against 4G Global Al ternatives, LLC, denying 68 MOTION for Default Judgment against 4G New Global Energy, LP, denying 69 MOTION for Default Judgment against 4G Private Equity, LLC, granting 32 MOTION to Dismiss 1 Complaint. Plaintiff's complaint is DISMISS ED without prejudice to pltf's right to file an amended complaint. Evans Energy LLC, S. Lavon Evans, Jr., Brian Guinn, Steve Rackley, S. Lavon Evans, Jr. Operating Co., Inc., Bret Boteler and EnerMax, Inc. terminated.(Signed by Judge Melinda Harmon) Parties notified.(htippen, )
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
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MIKKEL S. AAES, et al,
Plaintiffs,
VS.
4G COMPANIES, et al,
Defendants.
CIVIL ACTION NO. H-11-975
OPINION AND ORDER
Pending in this case are numerous motions to dismiss filed by various Defendants and
five motions for default judgment filed by the Plaintiffs against five Defendants who, until very
recently, had not filed a responsive pleading in this case. The pending motions are:
•
Defendant Steve Rackley’s motion to dismiss for failure to state a claim and
motion to transfer venue. Doc. 10.
•
Defendants S. Lavon Evans, Jr., Evans Energy LLC., and S. Lavon Evans, Jr.
Operating Co. Inc.’s (collectively, the “Evans Defendants”) motion to dismiss. Doc. 25.
•
Defendant Justin Solomon’s motion to dismiss. Doc. 32.
•
Defendants EnerMax, Inc. (“EnerMax”) and Bret Boteler’s (collectively, the
“EnerMax Defendants”) motion to dismiss. Doc. 37.
•
Defendant Brian Guinn’s motion to dismiss. Doc. 51.
•
Plaintiffs’ motion for default judgment against Defendant 4G New Global
Energy, LP. (“4G NGE”). Doc. 68.
•
Plaintiffs’ motion for default judgment against Defendant 4G Private Equity,
LLC. (“4G PE”). Doc. 69.
•
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Plaintiffs’ motion for default judgment against Defendant 4G Global Alternatives.
(“4G GA”). Doc. 70.
•
Plaintiffs’ motion for default judgment against Defendant 4G Alternative Energy,
LP. (“4G AE”). Doc. 71.
•
Plaintiffs’ motion for default judgment against Defendant Seisma Oil Research,
LLC (“Seisma”). Doc. 72.
Having considered the motions to dismiss, the facts of this case, and the relevant law, the
Court finds that the motions to dismiss should be granted. Further, the Court finds that Plaintiffs’
original complaint fails to state a claim sufficient to meet the requirements of Rules 8 and 9(b).
The Court therefore dismisses the Plaintiffs’ complaint as to all Defendants, but grants the
Plaintiffs leave to file an amended complaint that satisfies the pleading requirements of the
Federal Rules.
On March 2, 2012, Defendants 4G Companies, 4G Private Equity, LLC, 4G Global
Alternatives, LLC, 4G New Global Energy, LP, 4G Alternative Energy, LLC (collectively, the
“4G Defendants”), and Brian Guinn, who previously had not properly filed an answer or made
an appearance in this case, filed a motion through their attorney for leave to late-file an answer to
Plaintiffs’ original complaint. Doc. 78. Because these Defendant now have obtained counsel and
filed an appearance, Plaintiffs’ motions for default judgment against the 4G Defendants (Docs.
68-71) are denied. Although Seisma has failed to file an appearance or respond in any way to the
pending litigation against it, because the Court has determined that Plaintiffs’ complaint should
be dismissed, Plaintiffs’ motion for default judgment against Seisma (Doc. 72) is denied without
prejudice to Plaintiffs’ right to re-urge the motion after filing an amended complaint and serving
it on Seisma.
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Background
Plaintiffs, a group of foreign individuals, filed this action in the Southern District of
Texas against Defendants, a group of Texas, Florida, and Mississippi corporations, partnerships,
and individuals, on March 16, 2011. Doc. 1. Plaintiffs are 121 individuals who reside in and are
citizens of various foreign countries. See Doc. 1 at 4-14. They assert causes of action arising out
of economic damages they suffered when they purchased allegedly fraudulent shares in Texas oil
and gas ventures sold by the Defendants.
Defendants are:
•
Brian Guinn: A Texas citizen who resides in Plano, Texas and, Plaintiffs allege, is
the president of one or more of the 4G Defendants.
•
The 4G Defendants: Four Texas corporations headquartered in Dallas, Texas.1
•
Justin Solomon: A Florida citizen residing in Deerfield Beach, Florida and the
registered agent and director or corporate officer of Seisma Oil Research, LLC.
•
Seisma Oil Research, LLC: A Florida limited liability company.2
•
Bret Boteler: A Texas citizen who resides in Arlington, Texas and is the president
and registered agent of EnerMax.
•
Steve Rackley: A Texas citizen who also resides in Arlington, Texas and is the
CEO of EnerMax.
•
1
EnerMax: A Texas corporation headquartered in Hurst, Texas.
Plaintiffs additionally named “4G Companies” in their complaint. The 4G Defendants have asserted that “4G
Companies is not a legal entity.” Doc. 78. There is no apparent record of a “4G Companies” in the database of Texas
Corporate Records and Business Registrations.
2
The docket sheet in this case lists two Seisma Defendants: Seisma Oil Research, LLC and Seisma Energy Research
AVV a/k/a Seisma Oil Research AVV. Plaintiffs’ complaint refers only to a single entity listed as Seisma Oil
Research, LLC a/k/a Seisma Energy Research, LLC. Because of the apparent confusion surrounding the legal status
or existence of these entities, the Court throughout this opinion uses “Seisma” to mean any or all of these
Defendants and entities.
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•
S. Lavon Evans, Jr. A Mississippi citizen who resides in Laurel, Mississippi.
Evans evidently is the director or corporate officer of Evans Energy, LLC and S. Lavon
Evans, Jr. Operating Co., Inc.
•
Evans Energy, LLC: A Mississippi Limited Liability Company headquartered in
Laurel, Mississippi; and
•
S. Lavon Evans, Jr. Operating Co., Inc.: A Mississippi corporation headquartered
in Laurel, Mississippi.
Creation of the Scheme
In their original complaint, Plaintiffs state that this case arises out of a scheme by which
Defendants fraudulently offered, marketed, and sold shares in “joint ventures, which were
purported to be formed under Texas law, [and] purported to engage in the business of owning
and operating working interests in oil and gas wells in Yoakum County, Webb County, Liberty
County and Live Oak County, Texas.” Doc. 1 at 17-18.
Plaintiffs allege that Seisma Operating Oil Research, LLC was incorporated in July, 2007
in Boca Raton, Florida. Doc. 1 at 18. They further allege that Seisma Energy Research was
incorporated in 2009, “when SOR supposedly, and without any notice to investors, relocated to
Aruba.” Id. at 19. Plaintiffs do not identify who incorporated either entity, nor do they state
where Seisma Energy Research was incorporated. They do, however, allege that Defendant
Solomon “is the president and managing partner of SOR and controls Seisma Energy Research
and Permian.”3 According to the Plaintiffs, Solomon met with EnerMax and the Evans
Defendants in September, 2007. Id. at 20. These parties formed an arrangement for Seisma to
purchase working interests in oil wells owned by EnerMax and the Evans Defendants in Texas.
3
Plaintiffs do not identify “Permian,” nor is it named as a Defendant in this case.
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Despite Seisma paying for these interests, Plaintiffs allege that EnerMax and the Evans
Defendants did not sell any working interest to Seisma. Id.
Plaintiffs allege Defendants Solomon and Seisma created six joint ventures to invest in
six different oil wells originally owned by EnerMax and the Evans Defendants. In an attempt to
be concise, the Court confines itself to one illustrative example:
Seisma created a joint venture, McKenzie Draw #1 Joint Venture, to acquire a 20%
interest in the McKenzie Draw #1 oil and gas lease owned by EnerMax. Id. at 24. Seisma was
the “managing venturer” of the McKenzie Draw #1 Joint Venture. Id. Seisma issued a term sheet
for the joint venture on March 1, 2008, which stated that the offering would be limited to twenty
units, or joint venture interests, at $228,000.00 per unit. Id. “Fractional shares were available . . .
[for] $6,562.50.” Id.. Further, the “Term Sheet stated that upon termination of the offering,
[Seisma] would issue the Joint Venture interests to subscribers subject to the terms and condition
of a Joint Venture Agreement to be signed by all accepted subscribers. Pursuant to the Term
Sheet [Seisma] was to receive a one time due diligence and management fee of $50,000. The
remainder of the investment dollars was to be allocated for the purchase of the McKenzie Draw
#1 JV working interest.” Id. Seisma represented in that term sheet that it had a contractual right
to purchase up to 20% of the working interest of the well from its owner, EnerMax. Id. Plaintiffs
additionally allege that “EnerMax and Seisma are partners on several oil and gas ventures on or
near the well” and that Permian, “an Aruba broker-dealer and affiliate of [Seisma]” which sold
the fractional interests, “advertized” that EnerMax and the Evans Defendants were its “industry
partners.” Id. at 24, 26.
Plaintiffs state that Seisma “was obligated4 to enter into a Participation Agreement with
4
Plaintiffs do not identify the source of this obligation, but the Court assumes they are referring to provisions of the
Term Sheet.
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the Joint Venture wherein [Seisma] would assign the working interest to the Joint Venture and
cause the initial well to be drilled [and operated] on a turnkey basis” by EnerMax. Id. at 25.
“Title to the working interest on the property was to be placed in the name” of the joint venture
and “no partner (other than managing partner or a vote of the partners [of the joint venture])
[had] any right or authority to take any action on behalf of the Joint Venture.” Id. Solomon and
Seisma made identical arrangements with EnerMax for three other wells and with the Evans
Defendants for two other wells. Id. at 25-26.
Plaintiffs allege that Solomon and Seisma did, in fact, use funds obtained from investors
to purchase working interests in the wells from EnerMax and the Evans Defendants, but that the
assignment of the working interest was to Seisma or Solomon; not to the joint ventures. Id.
Plaintiffs assert some scant additional claims against EnerMax and the Evans Defendants.
Specifically, Plaintiffs claim that at the time of the investment, “Evans Energy was advertising as
an operator [of oil wells, but] it had no license from the Texas Railroad Commission. Rather it
was using the operator license of S. Lavon Evans, Jr. Operating Co., Inc.,” and that Plaintiffs
attempted to contact EnerMax and the Evans Defendants after they invested but have been
largely unsuccessful. Id. at 26. In their only successful communication with Steve Rackley, CEO
of EnerMax, Rackley told investors that “Seisma was a legitimate company.” Id. at 27.
Apparently in response to Plaintiffs’ efforts to contact EnerMax and the Evans Defendants,
Seisma’s attorney “sent Plaintiffs cease and desist letters based solely on the Plaintiffs desire to
learn about the status of their investments.” Id.
Finally, Plaintiffs make various allegations about the role of the 4G Defendants. Plaintiffs
allege that, at some point in 2008, “4G Companies5 [became] the custodian for [Seisma]” and
5
Plaintiffs do not specify whether they mean all the 4G companies named in this case or a single entity known as
“4G Companies.” Because there is no record of a “4G Companies” registered or doing business in Texas (see n.1),
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“began assisting [Seisma] with its joint venture operations. The duties [that the 4G entities
undertook] included the handling of all of [Seisma’s] joint venture revenue distribution,
customer communications and general business duties.” Id. In 2010, apparently in response to
investors’ requests for information from EnerMax and the Evans Defendants, “4G’s president,
Brian Guinn, admitted that Bret Boteler had assigned Enermax’s working interests to [Seisma]
directly and not to the joint ventures.” Id.
The Marketing and Investment Process
Plaintiffs describe a marketing plan by which Solomon, through Seisma, aggressively
marketed and sold shares or units in joint venture investments in the oil wells that were the
subject of Solomon’s agreements with EnerMax and the Evans Defendants. Id. Solomon and
Seisma established various websites from which potential investors could purchase these shares.
Id. Solomon and Seisma “further marketed the investment through an infomercial broadcast on
various cable stations in the United States beginning in March 2009” which directed viewers to a
website, www.seismaoilresearch.com, from which investors could purchase shares or units in the
joint ventures.6 Id. Additionally, “Solomon [and Seisma]. . . used salesmen in boiler rooms
located in Costa Riva and Thailand to pitch investors.” Id. at 21. The salesman in these “boiler
rooms” used high-pressure sales tactics and “pressed investors to make quick investment
decisions” and misrepresented to investors that they were calling from Seisma’s Boca Raton
office when they were, in fact, calling from call centers in Costa Rica and Thailand. Id.
Plaintiffs additionally allege that
the Court reads “4G Companies” to refer to the various, real entities doing business under the “4G” moniker: 4G
New Global Energy, LP, 4G Private Equity, LLC, 4G Global Alternatives, and 4G Alternative Energy, LP.
6
The Court notes that none of the Plaintiffs are residents of the United States. Plaintiffs do not allege that any of the
Plaintiffs were present in the United States when these infomercials were broadcast, nor do they allege that they
were able to or did access these broadcasts or reproductions thereof outside of the United States. They do allege that
“[t]he Seisma Websites [sic] gave broadcast times and carried clips from the infomercial.” Id. at 21.
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“defendants and their salesman . . . made the following false and
misleading statements [to investors] . . . (a) investors would receive a quick return
of their investment; (b) the wells were already producing or would quickly begin
production; (c) investors would receive monthly production payments of $10,000
to $15,000; (d) Credit Suisse, Exxon Mobil, and sovereign wealth funds were
investing in the joint venture wells or were partnering with the well operators; (e)
investors can sell their units for three or four times their purchase price; and (f)
sales commissions were just 1% of the investment, (g) the joint ventures would be
formed, and (h) the joint ventures would own working interests in the wells set
forth in the subscription agreement.”
Id. at 18.
Plaintiffs do not, however, state with any specificity which of these statements were
made to which Plaintiff, when these statements were made, nor whether they were made during
the course of phone sales, on the cable television infomercials, or on Defendants’ websites.
Nevertheless, Plaintiffs assert that “[d]ue to their unsolicited high-pressure selling efforts, . . .
[Seisma] and Solomon have . . . been the subject of regulatory orders/warnings by foreign
securities regulators.” Id. at 22.
Prior to any purchase of joint venture units, Solomon and Seisma provided investors “a
program summary, subscription agreement, and an invoice for investment. The program
summary contained geologic and technical information about the drilling prospect, and listed a
mailing address for [Seisma] in Florida. The subscription agreement set forth, among other
things, the payment obligations of investors for drilling, testing and completion expenses. The
invoice described the amount of investment, provided wire instructions, and listed an
‘administration fee’ of 1% of the investment amount.” Id. at 23. After they invested, investors
who requested more information obtain “a more complete term sheet” from Solomon and Seisma
which revealed that these Defendants intended to use “as much as 35% of the offering proceeds
for sales commissions and marketing expenses . . . [and] retain 25% of the proceeds as a
management and due diligence fee.” Id. These terms sheets “were inconsistent with oral
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representations made by Solomon . . . [and Seisma] and their salesmen, as well as the written
invoices provided to investors.” Id.
Plaintiffs allege that “Solomon [and Seisma] . . . received approximately $25 million
from 400 investors in 32 countries. Of the $25 million raised from investors, just $9.5 million
(38%) was used to acquire working interests in oil and gas wells on behalf of Solomon [and
Seisma,]. . . $10 million (40%) was used to pay sales commissions and marketing expenses, and
the remaining $5.5 million (22%) was expended on boating, automobile and various expenses
associated with running the scheme.” Id. at 28. Solomon and Seisma did use some of the funds to
purchase working interests in the wells, but those interests were acquired in the name of
Solomon and Seisma, not in the name of the joint ventures as Defendants purportedly promised
they would be.
Legal Standard
Rule 12(b)(6) allows dismissal if a plaintiff fails “to state a claim upon which relief can
be granted.” FED. R. CIV. P. 12(b) (6). In Bell Atlantic Corp. v. Twombly,550 U.S. 544, 555, 127
S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949,
173 L.Ed.2d 868 (2009), the Supreme Court confirmed that Rule 12(b)(6) must be read in
conjunction with Rule 8(a), which requires “a short and plain statement of the claim showing that
the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2).
To withstand a Rule 12(b)(6) motion, a complaint must contain “enough facts to state a
claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570; see also Elsensohn v. St.
Tammany Parish Sheriff's Office, 530 F.3d 368, 372 (5th Cir. 2008). Under Rule 8(a)(2),
plaintiffs are not required to include “‘detailed factual allegations,’ but more than ‘an unadorned,
the-defendant-unlawfully-harmed-me accusation’ is needed.” Id. (quoting Twombly, 550 U.S. at
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555). “A claim has facial plausibility when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Iqbal, 129 S.Ct. at 1949. “The plausibility standard is not akin to a ‘probability requirement,’ but
it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting
Twombly, 550 U.S. at 556).
Allegations of fraud, however, must meet the stricter standards of Federal Rule of Civil
Procedure 9(b). Rule 9(b) requires that “[i]n alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or mistake.” The particularity required for such
pleading, however, varies from case to case. See Benchmark Elec., Inc. v. J.M. Huber Corp., 343
F.3d 719, 724 (5th Cir. 2003), modified on other grounds, 355 F.3d 356 (5th Cir.2003). The Fifth
Circuit has reasoned that “[a]t a minimum, Rule 9(b) requires allegations of the particulars of
time, place, and contents of the false representations, as well as the identity of the person making
the misrepresentation and what he obtained thereby.” Benchmark Elecs., 343 F.3d at 724.
More precisely, Rule 9(b)’s particularity requirement compels that “the who, what, when,
where, and how [ ] be laid out.” Benchmark Elecs., 343 F.3d at 724. “Claims alleging violations
of . . . the DTPA and those asserting fraud, fraudulent inducement, fraudulent concealment, and
negligent misrepresentation are subject to [Rule 9(b)’s] requirements.” Frith v. Guardian Life
Ins. Co. of Am., 9 F.Supp.2d 734, 742 (S.D.Tex. 1998); see also Lone Star Ladies Inv. Club v.
Schlotzsky's Inc., 238 F.3d 363, 368 (5th Cir. 2001) (noting that “Rule 9(b) applies by its plain
language to all averments of fraud, whether they are part of a claim of fraud or not.”).
Analysis
In their original complaint, Plaintiffs assert the following causes of action against all
Defendants:
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1. Violation of Section 1962(c) of the Racketeering Influenced and Corrupt
Organizations Act (“RICO”) 18 U.S.C. § 1961 et seq. Doc. 1 at 29.
2. Forming a conspiracy to violate Section 1962(c) of the RICO, as is prohibited by
Section 1962(d) of that Act. Id. at 33.
3. Violations of the Texas Deceptive Trade Practices Act (“DTPA”). TEX. BUS. &
COMM. CODE § 17.41, et seq. Id. at 34.
4. Breach of contract, unjust enrichment, and detrimental reliance. Id. at 35.
5. Breach of fiduciary duty. Id.
6. Fraud. Id.
7. Securities fraud and aiding and abetting securities fraud. Id. at 36.
8. Civil conspiracy. Id. at 37.
9. Fraud in the inducement. Id.
10. Violation of the Texas Theft Liability Act. TEX. CIV. PRAC. & REM. CODE §
134.001 et seq. Id at 38.
11. Money had and received. Id. at 39.
12. Conversion. Id.
13. Conspiracy. Id.
14. Constructive trust. Id. at 40.
The Court disposes at the outset certain of Plaintiffs’ claims with which they clearly
cannot proceed against any Defendant. Two of Plaintiffs’ claims appear to be asserted in error.
First, the Plaintiffs have asserted a cause of action for conspiracy twice–Causes of Action Eight
and Thirteen–and therefore strikes Plaintiffs’ thirteenth cause of action for conspiracy as
needlessly duplicative. Second, “[a] constructive trust is a remedy imposed upon property
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obtained by fraudulent means,” not a cause of action. Ins. Distributors Intern. (Bermuda) LTD. v.
Edgewater Consulting Group, 2010 WL 3522312 * 16 n.29 (W.D.Tex. 2010) (citing Thigpen v.
Locke, 363 S.W.2d 247 (Tex.1962)). The Court therefore strikes Plaintiffs’ fourteenth cause of
action for a constructive trust.
Additionally, Plaintiffs’ claim for conversion clearly is inapplicable in this case. In
Texas, a cause of action for conversion of money exists “only when [the money] is in the form of
specific chattel, such as old coins, or when ‘the money is delivered to another party for
safekeeping, the keeper claims no title, and the money is required and intended to be segregated,
either substantially in the form in which it was received or as an intact fund.’” Mitchell Energy
Corp. v. Samson Resources Co., 80 F.3d 976, 984 (5th Cir. 1996) (quoting Dixon v. State, 808
S.W.2d 721, 723 (Tex.App.-Austin 1991)). Plaintiffs have stated here that they are seeking the
return of investment funds that subsequently have been used to purchase oil well working
interests, spent on marketing and Defendants’ salaries, and used to purchase boats and other
luxuries. Doc. 1. Because Plaintiffs have admitted that the funds they seek are neither in the form
of a specific chattel nor in the form in which they were received, their claim for conversion must
be dismissed.
Finally, Plaintiffs assert claims for securities fraud in violation of Section 10(b) of the
Securities and Exchange Act of 1934 (the “Exchange Act”) and Rule 10b–5 of the Securities and
Exchange Commission (“SEC”) against all Defendants. Doc. 1 at 36. In Morrison v. Nat'l
Australia Bank Ltd., the Supreme Court rejected the ‘conduct or effect’ test that previously had
been used to determine the extraterritorial application of US securities laws and limited 10(b)’s
extraterritorial reach to “transactions in securities listed on domestic exchanges, and domestic
transactions in other securities.” –––U.S. ––––, ––––, 130 S.Ct. 2869, 2888, 177 L.Ed.2d 535
12 / 19
(2010). See also In re BP p.l.c. Securities Litigation, --- F.Supp.2d ----, 2012 WL 432611, *67
(S.D. Tex. 2012).
Here, Plaintiffs are 121 foreign citizens and residents. Although the complaint does not
describe the details of each investment in or purchase of a share of a joint venture, the facts that
the Plaintiffs have alleged indicate that every transaction underlying this case was entirely
foreign. The Plaintiffs are all foreign citizens and, it appears, were at all relevant times in foreign
countries. “Solomon and his entities employed high-pressure salesmen located in offshore boiler
rooms to contact investors. . . . If a potential investor expressed an interest in investing, the
qualifiers transferred the call to a ‘closer.’ The closers would complete the sale.” Doc. 1 at 18, 22
(emph. added). There is no indication that any of the transactions in this case took place
domestically. Because the transactions complained of in this case fail to satisfy the domesticity
requirement of Morrison, Plaintiffs’ claims for securities fraud must be dismissed.
Rackley, Boteler, EnerMax and the Evans Defendants’ Motions to Dismiss
Defendants Steve Rackley, the Evans Defendants, Bret Boteler, and EnerMax (the
“owner/operator Defendants”) all have moved to dismiss Plaintiffs’ claims against them. Docs.
10 (Rackley), 25 (Evans Defendants), 37 (Boteler and EnerMax). The essence of these
Defendants’ motions is that the sparse allegations Plaintiffs have made against them do not
demonstrate Defendants involvement in any part of the purportedly unlawful or fraudulent
conduct. The Court agrees.
The extent of Plaintiffs’ allegations against Rackley, Boteler, EnerMax, Evans, Evans
Energy, and Evans Operating Co. is that they originally owned the oil and gas wells which other
Defendants purchased from them. Plaintiffs have not alleged that these Defendants ever made
contact with the Plaintiffs, that they were involved in the marketing, advertising, or formation of
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joint ventures for investment purposes, or that they played any role in organizing the investment
opportunities that other Defendants offered to foreign investors. In fact, the sole allegation of any
contact between Plaintiffs and these Defendants is the single incident in which some Plaintiffs
contacted Rackley to demand information about their investments, and that he told these
Plaintiffs that “Seisma was a legitimate company.” Doc. 1 at 27. The extent of the facts alleged
by Plaintiffs against these Defendants is that they were owners and operators of oil and gas wells
that Solomon, Seisma, or the 4G Defendants may have purchased with funds that may have been
fraudulently obtained. Plaintiffs have asserted no facts to indicate, nor even made the claim, that
the owner/operator Defendants knew the funds used to purchase working interests were obtained
fraudulently. Plaintiffs therefore have failed to state a claim against these Defendants for the
substantive causes of action alleged in their complaint.
Although Plaintiffs have not alleged any facts indicating that these Defendants are liable
for an independently wrongful offense,7 the Defendants would still be liable for any wrongful
acts done by co-Defendants in furtherance of a conspiracy, under either common law or the
federal RICO statute, to which the owner/operator Defendants were a party. See Cadle Co. v.
Schultz, 779 F.Supp. 392, 400 (N.D.Tex. 1991) (“Under RICO, one co-schemer is liable for the
other co-schemers' predicate acts. Indeed, upon joining a fraudulent conspiracy, each defendant
becomes liable for the prior conduct of the earlier conspirators, and remains liable for the
subsequent conduct of the other conspirators.”); In re Arthur Andersen LLP, 121 S.W.3d 471,
482-83 (Tex.App.–Houston [14 Dist.] 2003) (“Once a conspiracy is proven, each co-conspirator
is responsible for all acts done by any of the conspirators in furtherance of the unlawful
combination.”). Plaintiffs have not, however, pled any fact that establishes the owner/operator
7
Specifically, for the offenses based in breach of contract, breach of fiduciary duty, fraud, wire fraud, securities
fraud, and theft. See Doc. 1.
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Defendants were party to a conspiracy.8
“To demonstrate a civil RICO conspiracy, a claimant must show that:(1) two or more
persons agreed to commit a substantive RICO offense, and (2) the defendant knew of and agreed
to the overall objective of the RICO offense.” Davis-Lynch, Inc. v. Moreno, 667 F.3d 539, 551
(5th Cir. 2012). Under Texas law, “[a] claim for civil conspiracy has five elements: (1) two or
more persons; (2) have an objective to be accomplished; (3) a meeting of the participants’ minds
on the objective or course of action; (4) one or more unlawful, overt acts; and, (5) resulting
damages.” Meineke Discount Muffler v. Jaynes, 999 F.2d 120, 124 (5th Cir. 1993) (citing Massey
v. Armco Steel Co., 652 S.W.2d 932, 934 (Tex. 1983)). To demonstrate conspiracy under either
RICO or Texas law, a plaintiff must therefore plead that the defendants had some knowledge of
the purpose of the conspiracy and agreement to act in furtherance thereof. See also Schlumberger
Well Surveying Corp. v. Nortex Oil & Gas Corp., 435 S.W.2d 854, 857 (Tex. 1969) (“One
without knowledge of the object and purpose of a conspiracy cannot be a co-conspirator; he
cannot agree, either expressly or tacitly, to the commission of a wrong which he knows not of.”).
Here, the Plaintiffs have not advanced any claim that Rackley, Boteler, EnerMax, or the Evans
Defendants knew of the existence of a conspiracy to defraud potential investors nor that they
agreed to join in such acts. Nor do any of the facts in their complaint support such a conclusion.
Because nothing in Plaintiffs’ complaint indicates the involvement of Rackley, Boteler,
EnerMax, or the Evans Defendants in any alleged wrongdoing, the Court grants these
Defendants’ motions to dismiss.
8
Because Plaintiffs assert that Defendants conspired to commit fraud and other offenses that contain elements of
fraud, their claims must be pled with the specificity required by the heightened pleading standards of Rule 9(b). See
U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 193 (5th Cir. 2009) (“a plaintiff alleging a conspiracy to commit
fraud must ‘plead with particularity the conspiracy as well as the overt acts . . . taken in furtherance of the
conspiracy’”) (quoting FC Inv. Group LLC v. IFX Markets, Ltd., 529 F.3d 1087, 1097 (D.C.Cir. 2008)).
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Justin Solomon’s Motion to Dismiss
Solomon’s motion to dismiss (Doc. 32) is based entirely on the preclusive effect of
Morrison to foreign securities transactions. Because the Court already has determined that
Plaintiffs’ securities claims based on foreign transactions must be dismissed, Solomon’s motion
to dismiss Plaintiffs’ Securities and Exchange Act claims against him is granted.
Brian Guinn’s Motion to Dismiss
Finally, Defendant Brian Guinn, who is proceeding pro se and who Plaintiffs allege is the
President of one or more of the 4G Defendants, moves to dismiss Plaintiffs’ claims against him
on the grounds that “[t]he complaint does not allege that Defendant Guinn did anything wrong or
caused any of the Plaintiff’s [sic] any harm.” Doc. 51 at 2. Although Guinn’s argument is
decidedly brief and unadorned, the Court agrees. Plaintiffs’ claims against Guinn or the 4G
defendants are the following allegations:
“4G Companies is the custodian for [Seisma]. Beginning in 2008, 4G
began assisting [Seisma] with its joint venture operations. The duties included
handling all of [Seisma’s] joint venture distribution, customer communications
and general business duties.
Plaintiffs have made demand on 4G to provide information to them
regarding their joint venture investment. 4G has refused to provide any
information.
...
In 2010, 4G’s president, Brian Guinn, admitted that Bret Boteler had
assigned Enermax’s [sic] working interests to [Seisma] directly and not to the
joint ventures.
...
4G knew about the failure [to assign the working interest to the joint
venture] and participated in the scheme to use Plaintiffs’ monies for their own
purposes.
...
Brian Guinn [and] 4G . . . received investor funds from Solomon and his
companies.”
Doc. 1 at 27-29.
Plaintiffs do not elaborate on the concept of 4G’s “custodianship” of Seisma. Whether
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this custodianship involved a corporate merger, a purchase, a change in management, or any
other relationship that might give rise to an inference of control and, hence, responsibility is not
at all clear from the complaint. Plaintiffs’ additional factual allegations that Guinn “admitted that
Bret Boteler had assigned Enermax’s [sic] working interest” to Seisma and not the joint ventures
and that he received investor funds fail to establish his liability for any of Plaintiffs’ causes of
action. As the Court discussed above, a Defendant’s liability for underlying offenses could be
predicated on his participation in a common law or RICO conspiracy, but Plaintiffs once again
fail to allege any fact that indicates that Guinn knew of or agreed to join a conspiracy. Plaintiffs
have not alleged that Guinn agreed in the objective of any underlying conspiracy, nor that he
knew of an unlawful scheme to defraud investors or otherwise commit unlawful acts. Because
Plaintiffs have failed to allege facts that demonstrate Guinn is liable for any of their causes of
action, Guinn’s motion to dismiss is granted.
Plaintiffs’ Complaint Fails to State a Claim Against Any Defendant
Finally, the Court finds that Plaintiffs’ complaint fails to satisfy the pleading
requirements of Rules 8 and 9(b) and therefore must be dismissed as to all Defendants. As the
foregoing discussion shows, Plaintiffs’ complaint is unclear as to the roles of various Defendants
in the purported conspiracy, whether they actively agreed to participate, and what actions they
may have taken in furtherance thereof. Further, the Complaint does not reveal whether the
investors in this case were induced to purchase joint ventures shares on the basis of the
Defendants’ websites, cable television advertizing, telephone marketers, or sales pamphlets. Put
simply, the sparse and conclusory complaint does not contain “enough facts to state a claim to
relief that is plausible on its face.” Twombly, 550 U.S. at 570.
The Court also notes that many of Plaintiffs claims are governed by the stricter pleading
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requirements of Rule 9(b). Rule 9(b) requires that “[i]n alleging fraud or mistake, a party must
state with particularity the circumstances constituting fraud or mistake.” “Claims alleging
violations of . . . the DTPA and those asserting fraud, fraudulent inducement, fraudulent
concealment, and negligent misrepresentation are subject to [Rule 9(b)’s] requirements.” Frith v.
Guardian Life Ins. Co. of Am., 9 F.Supp.2d at 742. Here, Plaintiffs’ RICO claim and their claim
to form a RICO conspiracy, their claim under the DTPA, their claims for fraud, fraud in the
inducement, and for conspiracy to commit fraud are all governed by the heightened pleading
standards of Rule 9(b).
“At a minimum, Rule 9(b) requires allegations of the particulars of time, place, and
contents of the false representations, as well as the identity of the person making the
misrepresentation and what he obtained thereby.” Benchmark Elecs., 343 F.3d at 724. Here,
Plaintiffs’ complaint is characterized by broad allegations common to all Defendants and all
Plaintiffs. Without more, Plaintiffs’ complaint fails to satisfy the heightened pleading standard of
Rule 9(b) as to their claims alleging fraud or containing elements of fraud.
Conclusion
For the foregoing reasons, the Court hereby
ORDERS that Defendant Steve Rackley’s motion to dismiss for failure to state a claim
(Doc. 10); Defendants S. Lavon Evans, Jr., Evans Energy LLC., and S. Lavon Evans, Jr.
Operating Co. Inc.’s motion to dismiss (Doc. 25); Defendant Justin Solomon’s motion to dismiss
the Securities and Exchange Act claims against him (Doc. 32); Defendants EnerMax, Inc. and
Bret Boteler’s motion to dismiss (Doc. 37); and Defendant Brian Guinn’s motion to dismiss
(Doc. 51) are GRANTED. Further, the Court
ORDERS that Plaintiffs’ complaint (Doc. 1) is DISMISSED without prejudice to
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Plaintiffs’ right to file an amended complaint that complies with the pleading standards of Rule 8
and 9(b). Because the 4G Defendants have responded to Plaintiffs’ complaint and filed an
appearance in this case, the Court
ORDERS that Plaintiffs’ motions for default judgment against these parties are
DENIED. Further, because the Court has determined that Plaintiffs’ original complaint fails to
state a claim against any Defendant, the Court
ORDERS that Plaintiffs’ motion for default judgment against Defendant Seisma (Doc.
72) is DENIED.
SIGNED at Houston, Texas, this 20th day of March, 2012.
___________________________________
MELINDA HARMON
UNITED STATES DISTRICT JUDGE
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