PilePro, LLC et al v. Chang et al

Filing 190

ORDER DENYING 137 Motion for Order of Collateral Estoppel; GRANTING 158 Motion for Leave to File Amended Trial Witness List; DENYING 172 Motion to Dismiss for Lack of Jurisdiction; DENYING 180 Motion to Strike ; DENYING 182 Motion for Partial Findings under Rule 52(c); DENYING 186 Motion to Amend the Counterclaim to Conform to Proof at Trial. Signed by Judge Sam Sparks. (ml)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION

PILEPRO, LLC, PILEPRO SALES
CORP., BLUE EMERALD, INC.,
PILEPRO STEEL, LP, ROBERTO R.
WENDT,
Plaintiffs,

2f 6 JAN 21

PM

2:

33

CAUSE NO.:
A-12-CA-00829-SS

-vs-

HUMPHREY CHANG, RICHARD
HEINDL, MATTHIAS WEIGEL,
STEEL WALL, GMBH,
Defendants.

ORDER
BE IT REMEMBERED on the 20th, 21st, 22nd, and 26th days of October 2015, the

Court held a bench trial in the above-style cause, and the parties appeared in person and through
counsel. During trial, the Court heard testimony from the following witnesses: Roberto Wendt,

Matthias Weigel, Richard Heindi, Wells Wakefield, Humphrey Chang, Markus Von Fuchs, Urs
Saal, Michael John Feifarek, Saul Solomon, Dwight Williams (via deposition), Roxi Phipps,

Kenneth Huff, Ian Morgan, Martin Doudoroff, Matthew John Feifarek, and Robert Youngman
(via deposition). Having considered the evidence and testimony presented at trial, the arguments

of counsel, the parties' briefs, and the governing law, the Court enters the following findings of
fact and conclusions of law.

I

Findings of Fact
I.

Background
This is a tale of two men, Roberto Wendt and Richard Heindl, who started a business

together: Wendt with a talent for promoting and selling and Heindl with access to valuable

patents necessary for operating a successful steel sheet pile connector business. They established
PilePro LLC, a limited liability company in name only. The two men disregarded corporate

formalities in favor of operating PilePro LLC as a partnership, with each accessing the

company's assets for their own use and benefit. As their business grew and became profitable,
the two got along well. However, both became greedy and through the use of Chang, tried to
secure the business for themselves by ousting the other. The result was litigation in the United
States and in Europe which has continued for years and is still proceeding in both forums.
In this acerbic battle between once-close business partners, Wendt and Heindi have

involved countless others and have wasted immeasurable time and the profits of what appears to
have been a successful business endeavor, all because of each other's greed, distrust, and dislike

of the other. The net result is neither could prove credible or specific damages resulting from the
allegedly fraudulent transfer of patents from one company owned by Wendt and Heindl to
another company owned by Wendt and Heindi. The tortured history of Wendt and Heindi's

relationship should serve as a cautionary tale for those seeking economic success without
concern for the greed which follows in its wake.
A.

PilePro Entities
Defendants' counterclaims are largely founded on the disputed ownership of PilePro

LLC.1

The PilePro saga begins with a man named Georg Wall, who, in the 1990s, invented a

There are at least four "PilePro" entities involved in this suit: PilePro LLC, PilePro Inc., PilePro Sales
Corp., and PilePro Steel, LP. In their pleadings and throughout trial, the parties referred to each entity simply as
1

series of interlocking devices to connect steel sheet pile without welding (Modular Connectors).
To protect his inventions, Wall obtained patents in Germany, the United States, and other

countries. Wall produced, marketed, and sold these Modular Connectors through his steel sheet
pile business, I.S. Handels, GmbH ("ISH"), a German corporation operating in Munich,
Germany. Wall was the sole stockholder in ISH.
Richard Heindl, a defendant and counter-plaintiff in the present lawsuit, is Wall's
nephew. Although Heindl is not an engineer, "Uncle Georg" hired him as a "Director of
Research, Development, and Technical Standards" at ISH. Heindl helped ISH obtain financing
for its continued production of Modular Connectors and establish a distribution network with
companies outside of Germany.
In 2002, while seeking to expand ISH's distribution network in the United States, Heindi

met Plaintiff Roberto Wendt. Thereafter, Wendt was hired to serve as ISH's United States

distribution representative. According to Wendt, PilePro LLC was formed for the purpose of

marketing and selling ISH's Modular Connectors in the United States. At some point after
PilePro LLC's formation, Heindl told Wendt that

Wallwhose health was failingwanted to

sell ISH's business assets, including the registered patents, pending patent applications,

trademarks, production rights, and other tangible and intangible assets relating to the steel sheet
pile connector business he operated through ISH. In order to purchase these assets, Wendt

obtained an investment from Robert Youngman individually and as trustee of two trusts in the
amount of $1,500,000. He also obtained $500,000 from Mike Feifarek. In exchange, Youngman
and Feifarek received 4% ownership interest in PilePro LLC per $500,000 of their capital

investments.

"PilePro," leaving the Court to differentiate among the entities and decipher whether the evidence supports a cause
of action alleged by one of the four fluid "PilePro" identities.
3

On October 27, 2003, PilePro LLC purchased the intellectual property rights for the

Modular Connectors from

Wall.2

Soon after, an amendment to the PilePro LLC Operating

Agreement was signed, which came into effect on October 31, 2003 (2003 Amendment). The
2003 Amendment was signed by Wendt, who represented a 69% ownership interest in PilePro

LLC as the President of PilePro Inc., and Mike Feifarek, who represented a 4% ownership

interest in PilePro LLC. Collectively, PilePro Inc. and Feifarek comprised 73% of the ownership
interests in PilePro LLC. The 2003 Amendment states:
At all times there shall be only one (1) Managing Member. The Managing
Member shall use all reasonable efforts to notify all Member(s) of its actions on
behalf of the Company as often as reasonably practicable. PilePro Inc. is hereby
appointed as the Managing Member of the Company. For as long as this
Agreement is in effect, PilePro Inc. shall be a Delaware corporation that shall
have up to two (2) stockholders: Richard Heindl (or a company or individual of
his choosing) and Roberto Redondo Wendt. Each of the stockholders shall enter
into an irrevocable voting agreement to elect the other as a director of PilePro Inc.
and to cause Richard Heindl to be appointed Chief Executive Officer and Roberto
Redondo Wendt to be appointed President of the Company.

Defs.' Trial Ex. 501 (emphasis added).

2

Around the same time, on October 30, 2003, PilePro LLC formed Wall-Profile GmbH (Wall-Profile) to
serve as PilePro LLC's European operations center. Wendt admits in his complaint that Heindl "had significant
responsibilities" at Wall-Profile. Compi. [#1] ¶ 75. Wall-Profile was later transferred from PilePro LLC to PilePro
Sales Corp. Pls.' Trial Ex. 8-b.
PilePro Sales Corp., which was incorporated in Nevada in 2007, was to serve as the United States operating
arm for the PilePro entities. PilePro LLC in turn was to serve as a holding company for the intellectual property
rights of the various PilePro entities. The parties do not dispute the ownership of PilePro Sales Corp., which has not
changed since its formation in 2007:
Richard Heindi
34.5%
34.5%
Roberto Wendt
Youngman
7.75%
Youngman Trust 1
7.75%
Youngman Trust 2
7.75%
Mike Feifarek
7.75%
However, in their counterclaims, Heindl and Steelcom allege conversion against Wendt for allegedly
transferring PilePro Sales Corp.'s assets to PilePro Steel, LP, which Wendt formed sometime in 2010.

Per

§

501

of the 2003 Amendment, Heindi and Wendt were equal shareholders in PilePro

Inc. and both Heindi and Wendt served as directors of the corporation. Accordingly, Schedule B

of the 2003 Amendment lists the ownership interests in PilePro LLC3 as follows:
69%

PilePro Inc.
Robert Youngman
Ian Morgan
Dalcemy Inc.
Mike Feifarek
Lee Wolosky

12%
8%
5%

4%
2%

Id. at 22.

Sometime in 2004, another amendment to the PilePro LLC's Operating Agreement was
signed by Wendt on behalf of PilePro Inc., Youngman, and Mike Feifarek (2004 Amendment).

Defs.' Trial Ex. 502. Collectively, the signees comprised 85% of the ownership interests in
PilePro LLC, which represented the required vote of 80% ownership interest necessary to amend
the Operating Agreement. Id. at 2. Section 501 of the 2004 Amendment articulated Heindl and

Wendt' s ownership interest in PilePro Inc. slightly differently:
For so long as this Agreement is in effect, PilePro Inc. shall be a Delaware
corporation that shall be majority controlled by: Richard Heindi (or a company or
individual of his choosing) and Roberto Redondo Wendt.

Defs.' Trial Ex. 501 (emphasis added). Because there is no evidence that anyone other than
Heindi and Wendt has ever been a stockholder in PilePro Inc., the majority ownership interest in
The parties also dispute their respective positions at PilePro LLC, in addition to their ownership interests.
According to Heindl, Heindi served as the CEO of both PilePro LLC and PilePro Inc., while Wendt served as the
president of both PilePro LLC and PilePro Inc. Wendt, on the other hand, insists Heindi declined to acquire stock in
PilePro Inc., and therefore never became a stockholder or officer in PilePro Inc. and never had the authority to
manage PilePro LLC's business operations. Based on the documentary evidence adduced at trial, the Court is
convinced Heindl served as the CEO of PilePro LLC and a director of PilePro Inc. until his ouster in April of 2010.
See, e.g., Defs.' Trial Ex. 500 at 39; id. Ex. 506; id. Ex, 517; id. Ex. 615.
The Court notes that as executives of PilePro LLC, Wendt and Heindl maintained bifurcated
responsibilities. Heindl was involved in the invention and design of new steel sheet pile connectors, while Wendt
was responsible for the company's North American operations and marketing strategies. See, e.g., Defs.' Trial Ex.
500 at 39.
The agreement is dated January 1, 2004, but Mike Feifarek's signature on page 18 of the 2004
Amendment is dated "12-29-04." Defs.' Trial Ex. 502 at 18.

5

PilePro Inc. remained, in effect, unchanged. Schedule B of the 2004 Amendment did reflect

important changes to the remaining 31% membership interest in PilePro LLC:
PilePro Inc.
Robert Youngman
Youngman Trust 1
Youngman Trust 2
Ian Morgan
Dalcemy Inc.
Mike Feifarek
Slydee Corp.

69%
4%
4%
4%
8%
5%
4%
2%

Defs.' Trial Ex. 502. The Court finds the 2004 Amendment is the presently controlling Operating
Agreement of PilePro LLC. Moreover, Schedule B of the 2004 Amendment reflects a current
and accurate representation of the remaining 31% membership interest in PilePro LLC.

Sometime in 2006, PilePro Inc.'s 69% membership interest in PilePro LLC was

transferred to Wendt. The parties purportedly agreed to this transfer for the sole purpose of
permitting Heindi to form Steelcom Limited (Steelcom), a British limited liability company, after
which Wendt was to transfer a 34.5% membership interest in PilePro LLC to Steelcom.
Although there is no evidence of a written agreement by which Wendt was to transfer half of his
membership interest in PilePro LLC to Steelcom, Heindl has produced evidence that Steelcom
paid Wendt $4,579 in cash in February 2007 "for [] 34.5% ownership shares in PilePro LLC."

Defs.' Trial Ex. 601. Moreover, an email from PilePro LLC's Chief Financial Officer (CFO),
Humphrey Chang, to Wendt establishes that Steelcom held a 34.5% membership interest in
PilePro LLC. Defs.' Trial Ex. 516. Indeed, Wendt elicited this information from Chang and
forwarded it to Heindl in response to Heindl's inquiry as to his ownership interest in PilePro
Sales

Corp.

Id. After Chang's email, $280,000 was transferred from PilePro LLC to Steelcom.

Defs.' Trial Ex. 560. In addition, a Managing Member's resolution, dated July

1,

2008 and

electronically signed by Wendt, explained that Wendt was transferring half of his ownership

shares in PilePro LLC, representing 34.5% of PilePro LLC, to Steelcom, and that Steelcom's
capital account balance reflected the amount of cash listed on the receipt. Defs.' Trial Ex. 602.

Furthermore, Wendt signed a Bill of Sale before a South Dakota notary expressly confirming his
sale to Steelcom of a 34.5% membership interest in PilePro LLC. Defs.' Trial Ex. 603. Wendt

does not dispute that he signed the Bill of Sale before the notary.
In light of the overwhelming evidence indicating Wendt transferred half of his ownership

interest in PilePro LLC to Steelcom, the Court finds Steelcom presently owns a 34.5%

membership interest in PilePro

LLC.5

Accordingly, the present membership interest in PilePro

LLC is:

34.5%
3 4.5%
4%
4%
4%

Roberto Wendt
Steelcom Limited
Robert Youngman
Youngman Trust 1
Youngman Trust 2
Ian Morgan
Dalcemy Inc.
Mike Feifarek
Slydee Corp.

8%
5%
4%
2%

In April of 2010, Heindl was terminated as the Vice President of PilePro Sales Corp. and

Wall-Profile. Soon after, he was ousted as a managing member of PilePro LLC. At trial there
was a wealth of evidence establishing that two amendments to PilePro LLC' s Operating

Agreementallegedly signed in 2005 and 2007 (2005 Amendment and 2007 Amendment)
were actually signed sometime between September 2010 and March 2011 by Youngman, Mike

Feifarek, Morgan, Doudoroff, Matt Feifarek, and Lee Wolosky. These amendments purported to
alter the ownership of PilePro LLC, such that Wendt alone owned a 69% interest in PilePro LLC.

To c1arif, Heindi no longer retains an ownership interest in PilePro Inc., since he relinquished his 34.5%
interest in PilePro LLC (through his 50% interest in PilePro Inc.) to Wendt in 2006. In this lawsuit, Steelcom is the
entity asserting an ownership interest in PilePro LLC.

7

The effect of these amendments was to oust Heindi as a member of PilePro LLC. The Court will

address these backdated amendments below. See
B.

infra

Conclusions of Law.

Contexo
Plaintiffs' claims are largely founded on the disputed ownership of Contexo, a company

they claim was formed in Europe to hold an unspecified number of PilePro LLC's non-U.S.
patents.6

Contexo is not a party to this action. The story of Contexo's formation follows.

Around May 2006, PilePro LLC hired Chang to provide tax and financial planning
consulting services, as well as to advise PilePro LLC on complicated legal

matters.7

Chang was

promoted to serve as PilePro LLC's fulltime CFO, a position he held until his termination on
April 20, 2011. In late 2006 or early 2007, Chang recommended a reorganization of PilePro
LLC. According to Wendt, Chang advised Wendt that PilePro LLC should transfer its non-U.S.

patents to regional holding companies. This transfer would serve two purposes: (1) it would
protect PilePro LLC from potential patent litigation liability, and (2) it would encourage regional
companies to do business with what in reality was a foreign company. Pursuant to this

reorganization, PilePro Sales Corp. was formed. On March 15, 2007, PilePro LLC agreed to
license its patents to PilePro Sales Corp., after which PilePro Sales Corp. began to produce,

market, and sell Modular Connectors domestically and abroad. PilePro Sales Corp. has a
different organization structure than PilePro LLC.

See supra note 1.

The patents at issue in this case are the non-U.S. patents owned by PilePro LLC prior to March 2008
(including the patents originally owned by Georg Wall), which Wendt alleges were fraudulently transferred to
Contexo via a backdated assignment agreement, and the non-U.S. patents registered in Contexo's name after 2008.
Heindithe inventoracknowledges that from March 2008 until his ouster from PilePro LLC in 2010, he
registered all new non-U.S. patents in Contexo's name and all new U.S. patents in PilePro LLC's name. By asserting
an ownership interest in Contexo, Plaintiffs are also asserting an ownership interest in the patents registered in
Contexo's name after 2008.
6

The Court declines to comment on the wisdom of hiring a non-lawyer to counsel a series of related
companies on the complicated domestic and international laws applicable to them.

Pursuant to Chang's reorganization plan, on December 5, 2007, Chang and Dwight
Williams, the United States attorney representing the PilePro entities, traveled to Switzerland to

meet with Enrico Farroni and Roland Harzenmozer, individuals retained by PilePro LLC to
provide legal and trustee services in connection with Contexo. Soon after, on December 10,
2007, Contexo was formed. Wall-Profile, a wholly owned subsidiary of PilePro Sales Corp. at
the

time,8

provided the startup capital for Contexo's formation. Soon after, PilePro LLC

transferred $145,000 to Wall-Profile to reimburse Wall-Profile for its initial 100,000 investment
in Contexo.
As a result of this capital investment, Chang reassured Wendt that all the necessary legal
documentation existed establishing PilePro LLC's control over Contexo. Chang also explained to

Wendt that Farroni and Harzenmozer were to serve as Contexo trustees, directors, and
shareholders of 100 shares of stock each, but that they knew Contexo was formed to operate for

LLC's benefit. As Wendt's story goes, however, Defendants destroyed the

PilePro

documentation proving PilePro LLC's beneficial ownership of Contexo in order to further their
conspiracy to defraud Plaintiffs. Even without this documentation, the Court finds that Contexo
is wholly or partially owned by PilePro LLC, Enrico Farroni, and Roland Harzenmozer.

After Contexo's formation, Williams drafted a contract purporting to sell PilePro LLC's
non-U.S. patents to Contexo, which was circulated to the parties for several months. Wendt,

however, claims an agreement was never reached as to the terms of the assignment contract.

According to Wendt, Defendant Matthias Weigel, PilePro LLC's former patent

attorney,9

nevertheless initiated the fraudulent transfer of PilePro LLC's non-U.S. patents to Contexo by

8

See supra note
See infra

1

(explaining transfer of Wall-Profile from PilePro LLC to PilePro Sales Corp.).

section II.A.ii (discussing Weigel's role as PilePro LLC's patent attorney).

requesting the German Patent Office to register the patents in Contexo's name. Wendt insists
there is no writing confirming PilePro LLC's transfer of the non-U.S. patents to Contexo.
However, during a meeting held for Contexo on March 25, 2010, an agreement
confirming the 2008 transfer of PilePro LLC's non-U.S. patents to Contexo was signed by

Heindl and Farroni (Assignment Agreement). Defs.' Trial Ex. 530. It is undisputed that Wendt

attended this meeting, and was therefore present when Heindl and Farroni signed this agreement.
Moreover, although Wendt did not sign the Assignment Agreement, he signed the minutes from

the meetings, Defs.' Trial Ex. 648. By tolerating the signing of the Assignment Agreement and
thereafter signing the minutes, the Court finds Wendt impliedly consented to transfer PilePro

LLC's non-U.S. patents to Contexo.'°
Moreover, it is undisputed that during 2008, Contexo paid PilePro LLC $1.88 million, an
amount Heindl maintains represents the purchase price of PilePro LLC's non-U.S. patents. It is
also undisputed that Wall-Profile paid Contexo licensing fee for approximately two years after

the patents were allegedly transferred in 2008. The Court is unconvinced by Plaintiffs' argument

that the transfer of $1.88 million from Wall-Profile to Contexo to PilePro LLC was an elaborate
scheme to avoid taxes rather than the straightforward execution of a written agreement signed by
Heindl and witnessed by Wendt. The Court therefore finds $1.88 million was the agreed upon

price for Contexo's purchase of PilePro LLC's non-U.S. patents, and Contexo is the current
lawful owner of the disputed non-U.S. patents.

On May 28, 2015, the Swiss court correctly determined the non-U.S. patents at issue were transferred
with the knowledge and desire of PilePro LLC after Wendtwho was present at the signing of the Assignment
Agreementtolerated the signing of the agreement and thereafter "added his signature to the last page of the
minutes of [Contexo's] regular annual general meeting." Mot. Collateral Estoppel [#137-1] Ex. B (2015 Swiss
Ruling) at 49.

10

II.

Procedural History

A.

Swiss Lawsuit

In July of 2010, PilePro LLC initiated a lawsuit in Switzerland seeking to invalidate the

transfer of PilePro LLC' s non-U.S. patents to Contexo. PilePro LLC submitted the backdated
2005 Amendment in support of its claim that the transfer of the non-U.S. patents to Contexo was

fraudulent. As noted above, this backdated agreement was not signed until at least September
2010, several months after it was submitted to the Swiss court in July of 2010.

In September of 2010, the Swiss court issued a preliminary injunction against Contexo,

freezing the non-U.S. patents PilePro LLC transferred to Contexo. That ruling specifically
referred to the 2005 Amendment as evidence that Heindl did not have the authority to sign the

March 25, 2010 Assignment Agreement on behalf of PilePro LLC. Defs.' Trial Ex. 556 at 24.
Because

§ 5.1

of the 2005 Amendment lists Wendt as the sole "Managing Member" of PilePro

LLC, the Swiss Court concluded, "Richard Heindl was not authorized to solely represent

[PilePro LLC]" in signing the March 25, 2010 Assignment Agreement. Id.

Nearly five years later, on May 28, 2015, a Swiss court reconsidering the injunction ruled
in favor of Contexo and dismissed PilePro LLC's claims. 2015 Swiss Ruling at 32. The Swiss
court concluded Contexo was the lawful owner of the non-U.S. patents purchased from PilePro
LLC, PilePro LLC knowingly sold the non-U.S. patents to Contexo for $1.88 million, the March
25, 2010 Assignment Agreement was not backdated, and PilePro LLC impliedly or explicitly

authorized the transfer of the non-U.S. patents to Contexo. PilePro LLC's appeal of this decision
is currently pending in

Switzerland.1'

Defendants have requested this Court collaterally estop Plaintiffs from relitigating issues already decided
by the Swiss court on May 28, 2015. See Mot. Collateral Estoppel [#137]. Generally, a litigant does not have to
exhaust his appeals before a judgment becomes final for purposes of collateral estoppel. See TCA Bldg. Co. v. Nw.
Res. Co., 861 F. Supp. 1366, 1374 (S.D. Tex. 1994). However, Texas and federal courts recognize an exception to
11

B.

Current Lawsuit
On September 7, 2012, Plaintiffs PilePro LLC, PilePro Sales Corp., PilePro Inc., PilePro

Steel, LP, and Wendt brought a series of civil RICO and state law claims against Defendants

Chang, Heindl, Weigel, and Steelwall GmbH. Plaintiffs specifically claimed that Heindl, Weigel,

and Chang devised and engaged in a pattern of racketeering activity to defraud Plaintiffs by

misappropriating patent rights, money, and business opportunities. The RICO claims were
dismissed at trial, but Plaintiffs' common law claims of fraud, conspiracy, and breach of

fiduciary duty remain. 12
Plaintiffs seek an award of compensatory and punitive damages, and declarations that (1)
Heindl is not and has never been a shareholder in PilePro Inc., (2) Heindl is not and has never

been the CEO of PilePro LLC, (3) Heindl did not have authority to transfer or assign the nonU.S. patents owned by PilePro LLC to Contexo, (4) Wendt or PilePro LLC is a stockholder in

Contexo, and (5) the "Backdated Assignment" is void. They also seek to divest Defendants of
their respective interests in Contexo and Steelwall GmbH, to enjoin them from engaging in the
domestic and international connector markets, and a disgorgement of all attorneys' fees paid to
Weigel. Finally, Plaintiffs seek a constructive trust in all proceeds from any patent held by any

Defendants.
the general rule "where appeal consists of a trial de novo." Id. In the Swiss judicial system, appellate courts conduct
de novo review and are permitted to consider additional facts introduced on appeal that were not considered in the
First Instance proceeding. See Swiss Code of Civil Proceedings, Arts. 310, 316, 317. In this case, the Court finds the
Swiss ruling is not a final judgment and therefore DENIES Defendants' motion.
In the alternative, even if the Swiss judgment is entitled to preclusive effect, that judgment is consistent
with the Court's findings to the extent it relates to the valid transfer of patents from PilePro LLC to Contexo.
12

In addition to the RICO claims (Counts 1 and 2), Plaintiffs also dismissed the following claims against
Defendants: intentional interference with contractual relations (Count 9), intentional interference with prospective
economic advantage (Count 10), Heindl's breach of his employment agreement (Count 14), and Chang and
Steelwall GmbH's intentional interference with contractual relations (Count 15). Plaintiffs' remaining claims are:
(1) fraud, (2) civil conspiracy to defraud, (3) Chang's breach of fiduciary duty to PilePro LLC and PilePro Sales
Corp., (4) Heindl's breach of fiduciary duty to PilePro Sales, (5) Weigel's breach of fiduciary duty to PilePro LLC,
(6) unjust enrichment, and (7) constructive trust.

12

On March 4, 2013, Heindl and Steelcom counterclaimed against Wendt and the

remaining members of PilePro LLC: Morgan, Youngman, Youngman Trust 1, Youngman Trust
2, Mike Feifarek, Matt Feifarek, Doudoroff, and Stacie

Bryan'3

(Counter-Defendants). Heindi

and Steelcom seek compensatory and punitive damages for Counter-Defendants' alleged breach

of fiduciary duty, breach of contract, and conversion. Heindl and Steelcom also seek declarations
that (1) Heindl has a 34.5% interest in PilePro Sales Corp., (2) Steelcom has a 34.5% interest in
PilePro LLC, (3) Heindi and Steelcom are entitled to a proportional interest in any entity, namely
PilePro Steel, LP, to which the assets of PilePro Sales Corp. or PilePro LLC were wrongly

transferred, (4) Heindl and Steelcom are entitled to a constructive trust of all assets converted by
Wendt for his benefit or for the benefit of PilePro Steel, LP, (5) Wendt should not be permitted
to retain ownership interest in any converted asset currently held in his name, and (6) Heindl is

the rightful owner of the CFC 90 patent, identified as USPTO Patent No. 8055481, which was

fraudulently obtained by Wendt. Both parties seek an award of attorneys' fees and costs.
Unable to untangle this mess and unclear on the factual determinations, the Court ordered
a bench trial, which occurred October 20-22 and 26th, 2015.

Conclusions of Law
Having considered the testimony of the witnesses and the admitted exhibits, the Court
now enters the following conclusions of law.
I.

Jurisdiction
Before reaching the merits of this case, the Court must first ensure it has the authority to

exercise jurisdiction over this case. In a surprising post-trial filing, Counter-Defendantswho
are represented by the same counsel as Plaintiffs, i.e. the parties who originally filed this action
13

The parties have since agreed to the dismissal of Stacie Bryan as a counter-defendant, and she has been
dismissed. Order of Oct. 20, 2015 [#160].
13

in federal

courtargued this Court has always lacked jurisdiction over Plaintiffs' claims. Reply

[#178] at 3. From the time Plaintiffs filed their first complaint on September 7, 2012 until the

first day of trial, the Court properly exercised federal question jurisdiction. In that complaint,

Plaintiffs alleged two counts of civil conspiracy under RICO. The RICO claims were properly

before this Court, and the state law claims, including breach of fiduciary duty, fraud, and civil
conspiracy, were part of the same nucleus of operative facts permitting this Court to exercise

supplemental jurisdiction in accordance with 28 U.S.C.

§

1367. At trial, however, Plaintiffs

dismissed their RICO claims, thereby abandoning a federal law question upon which

supplemental jurisdiction could rest.
The question, therefore, is whether this Court possesses supplemental jurisdiction over

Plaintiffs' state law claims after they voluntarily dismissed their federal law claims. In Boelens v.
Redman Homes, Inc., the Fifth Circuit distinguished the question at issue today from the rule

prohibiting a plaintiff from ousting removal jurisdiction by voluntarily amending the complaint
to drop all federal questions. Where the plaintiff, rather than the defendant, invokes the

jurisdiction of federal court, the Fifth Circuit concluded "the plaintiff must be held to the
jurisdictional consequences of a voluntary abandonment of claims that would otherwise provide
federal jurisdiction." 759 F.2d 504, 508 (5th Cir. 1985). In this case, there is no amended
complaint superseding the original complaint. However, Plaintiffs orally dismissed their federal
question claims at trial, to which defense counsel expressly agreed. Based on the reasoning set
forth in Boelens, with no federal claim to which the remaining state claims could be

supplemental, there can be no supplemental jurisdiction.

14

Therefore, the only possible basis for subject-matter jurisdiction in this case is diversity.'4

Where jurisdiction is premised on diversity of citizenship under

plaintiff must be diverse from each defendant. See Newman-Green
826, 829 (1989). However, under

§

§

v.

1332(a), as it is here, each

Alfonzo-Larrain, 490 U.s.

1332(a)(l), a suit may not be commenced by or against a

United States citizen who is domiciled in a foreign country, because although this individual is a

citizen of the United States, he is not domiciled in a particular state. See Smith

v.

F.2d 909, 911 (5th Cir. 1977). In this case, at the time of filing and to this day, Ian

Carter, 545

Morgana

member of Plaintiff PilePro LLC and a counter-defendantis an American citizen domiciled in
Great Britain, and therefore may not sue or be sued in federal court. See Counter-Defs.' Mot.

Dismiss [#172] at 3.
Ian Morgan's citizenship is relevant to PilePro LLC ' s ability to sue in federal court,
because an unincorporated entity is not a "citizen" for purposes of diversity jurisdiction. Instead,
its citizenship is determined by the citizenship of its members, and individual members must be

diverse from all parties on the opposing side. Harvey

v.

Grey Wolf Drilling Co., No. 07-3 1106,

2008 WL 4194538, at *2 (5th Cir. Sept. 15, 2008) ("[T]he citizenship of an LLC is determined

by the citizenship of all of its members."). From these established principles of law, the Fifth
Circuit concluded, "a partnership whose members include U.S. citizens domiciled abroad[] is
stateless for the purposes of diversity jurisdiction." Firefighters' Retirement Sys.

v.

Citco Grp.

Ltd., 796 F.3d 520, 523 n.1 (5th Cir. 2015). Because a member of PilePro LLC is "stateless" for
After Plaintiffs dropped their RICO claims several hours into the first day of trial, the Court directly
questioned the parties as to the basis of its subject-matter jurisdiction. Specifically, the Court questioned whether
diversity jurisdiction would be destroyed by any post-filing determination that Steelcom (a British limited liability
company owned by Heindl, a resident of Germany) is a member of PilePro LLC. After conducting its own research,
the Court was satisfied that in light of Symes v. Harris, diversity jurisdiction would not be destroyed by this postfiling determination. See 472 F.3d 754, 759 (10th Cir. 2006). Despite the Court's express concern it may lack
jurisdiction, counsel for Plaintiffs and Counter-Defendants--who now seek to destroy federal jurisdiction for their
clientsfailed to alert the Court that Ian Morgan, a member of PilePro LLC, is an American citizen residing abroad,
and therefore incapable of suing or being sued in federal court. Such neglect on counsel's part is an enormous waste
ofjudicial resources and this Court's time.
14

15

diversity purposes, PilePro LLC is not diverse from all parties on the opposing side. Without
complete diversity, the Court lacks subject-matter jurisdiction.
Federal Rule of Civil Procedure 21 permits a district court to "drop a nondiverse party

whose presence is not essential to the suit to preserve and perfect diversity jurisdiction." Aetna
Cas. & Sur. Co. v. Hillman, 796 F.2d 770, 774 (5th Cir.1986); see also Newman-Green, Inc., 490

U.S. at 834 ("[I]t is well settled that Rule 21 invests district courts with authority to allow a

dispensable nondiverse party to be dropped at any time."). However, even a cursory inspection

of this lawsuit reveals PilePro LLC is not only a necessary party but also an indispensable one.
Although all parties would be prejudiced by dismissal of the case after three years of litigation,
the prejudice that would result to Defendants from dismissing PilePro LLC alone is
overwhelming. Indeed, the Court declines to give PilePro LLC the prodigious advantage of

bringing a lawsuit in federal court only to be dissatisfied with its performance at trial,
subsequently obtain dismissal of its original claims, and thereafter assert them in state court with
full knowledge of Defendants' evidence and how persuasive its evidence was in the Court's
eyes. Accordingly, because PilePro LLC is indispensable, the Court is unable to drop the

nondiverse party in order to preserve diversity jurisdiction over Plaintiffs' claims.

Although the Court lacks jurisdiction over Plaintiffs' claims, it may retain jurisdiction
over Heindl and Steelcom' s counterclaims if an independent jurisdictional ground exists for their
counterclaims. See Kuehne & Nagel

v.

Geosource, Inc., 874 F.2d 283, 291 (5th Cir. 1989). By

dropping Morgan as a counter-defendant under Rule 21, who the parties agree is

dispensable,'5

this Court can retain original jurisdiction over the counterclaims, since complete diversity exists
15

In their reply to their motion to dismiss, Counter-Defendants' position as to whether Ian Morgan is an
indispensable party is unintelligible. Reply [#178] at 12 ("Ian Morgan is clearly just as dispensable or indispensable
as the other Counter/Third-Party Defendants."). Even construing Counter-Defendants' reply as an argument against
the dismissal of Morgan as a dispensable party, the Court finds this argument unconvincing at best.

16

among the parties. See Universal Reinsurance Co. Ltd.

v. St.

Paul Fire and Marine Ins., No. 95-

Civ-8436, 2001 WL 585638, at *6 (S.D.N.Y. May 30, 2001) (severing one of the defendant's

counterclaims against a non-diverse counter-defendant under Rule 21 in order to retain

jurisdiction).
Moreover, the Fifth Circuit has held, "if a district court retains jurisdiction over the
counterclaim, it may permit the dismissed claims to be asserted as counterclaims to the retained
claim." McLaughlin

v.

Mississippi Power Co., 372 F.3d 344, 355 (5th Cir. 2004). Although

Plaintiffs were not given the opportunity to reassert their claims as counterclaims, given the
enormous amount of time and judicial resources this case has depleted in the last three years, the
Court formally dismisses Plaintiffs' claims and on its own motion reinstates them as compulsory

counterclaims. See, e.g., Crest Auto Supplies, Inc.
Ill. 1965) (dismissing the complaint for lack

v.

Ero Mfg. Co., 246 F. Supp. 224, 229 (N.D.

of jurisdiction and on its own motion reinstating the

claims as compulsory counterclaims to the original defendant's counterclaim). Because this

Court finds Plaintiffs' claims arise out of the same transaction or occurrence as Defendants'
counterclaims, Plaintiffs' claims fall within the Court's supplemental jurisdiction and do not

require an independent jurisdictional

basis.'6

See Kuehne & Nagel, 874 F.2d at 292 (holding

compulsory counterclaims do not require an independent jurisdictional basis). Otherwise, were
this Court to dismiss Plaintiffs' claims while retaining jurisdiction over Defendants'
counterclaims, Defendants could argue any state action instituted by Plaintiffs is barred by res

judicata, since Plaintiffs were compelled to assert such claims in federal court and failed to do so.
Accordingly, all claims in this action are properly before the Court.

16

For the sake of clarity, the Court will refer to the parties by their original filing status, e.g. Plaintiffs will
remain Plaintiffs and Counter-Plaintiffs Heindl and Steelcom will remain Counter-Plaintiffs.
17

II.

Plaintiffs' Claims
Plaintiffs seek an award of compensatory and punitive damages for breach of fiduciary

duty against Chang and

Weigel,'7

fraud against Chang and Heindl, and conspiracy to defraud

against all Defendants. Wendt also claims Heindl defrauded him by falsely representing to
Wendt that he would repay two loans.
A.

Breach of Fiduciary Duty
Plaintiffs claim Defendants Chang and Weigel breached their fiduciary owed to PilePro

Sales Corp. and PilePro LLC. Before trial, both parties briefed Texas law, apparently in

agreement as to which state's law applied. During and after trial, however, this implicit
agreement fell apart, and the parties submitted a flurry of briefing arguing Nevada, Delaware, or
Texas law applies to their various state law claims.
In considering the parties' arguments, the Court applies Texas choice-of-law rules. Mayo
v,

Hartford Life Ins. Co., 354 F.3d 400, 403 (5th Cir. 2004) ("[AJ federal court exercising

diversity jurisdiction must apply the choice of law rules of the forum state, here Texas.")

Choice-of-law issues are determined on an issue-by-issue basis. See Duncan

v.

Cessna Aircraft

Co., 665 S.W.2d 414, 421 (Tex. 1984). In Texas, "the law of the incorporating state governs a

corporation's internal affairs." Sommers Drug Stores Co. Emp. Profit Sharing Trust v. Corrigan,
883 F.2d 345, 354 (5th Cir. 1989); see also Askanase v. Fatjo, 130 F.3d 657, 670 (5th Cir. 1997)

("Federal courts sitting in Texas apply the law of the state of incorporation when a corporation's
internal affairs are implicated.")

At trial, Plaintiffs did not expressly abandon their original claim against Heindl for breach of fiduciary
duty owed to PilePro Sales Corp. However, Plaintiffs failed to include this claim in their proposed findings of fact
and conclusions of law, and they have not asked this Court to amend their pleadings to conform to proof at trial.
Accordingly, the Court declines to consider a claim that Plaintiffs either carelessly failed to include in their proposed
findings or purposefully abandoned.
17

Because PilePro Sales Corp. is incorporated under the laws of Nevada, Nevada law
determines whether Chang owed PilePro Sales Corp. a fiduciary duty and whether he breached

this duty. PilePro LLC, on the other hand, is a Delaware company with its principal place of
business in Texas. Accordingly, Delaware law governs Plaintiffs' claim that Chang and Weigel
breached a fiduciary duty owed to PilePro LLC. See 12226] Fondren, LLC v. Riverbank Realty
GP, LLC, No, H-09-4074, 2010 WL 1741071, at *2 (S.D. Tex. April 29, 2010) (applying the

"internal affairs doctrine" to conclude Delaware law applied, because the limited partnership and

limited liability company at issue were Delaware companies).
1.

Chang
a. PilePro Sales Corp.

Plaintiffs first claim Chang owed PilePro Sales

Corp.

a fiduciary duty and breached that

duty by (1) advising Wendt to set up PilePro Steel, LP and (2) engaging in a conspiracy defraud

PilePro Sales

Corp.

As a result of Chang's breach of fiduciary duty, Plaintiffs claim PilePro LLC

has been damaged in the amount of $8,050,628. To prevail on a breach of fiduciary duty under

Nevada law, which determines whether Chang breached a fiduciary duty owed to PilePro Sales
Corp.,

a plaintiff must establish (1) the existence of a fiduciary duty, (2) a breach of that duty,

and (3) the breach was the proximate cause of the damages. See Takiguchi
F. Supp. 3d 1100, 1120 (D. Nev. 2014). While Chang concedes the first

fiduciary duty to PilePro Sales

Corp.

and PilePro

v.

MRI Intern, Inc., 47

elementthat he owed a

LLChe nevertheless insists Plaintiffs failed

to prove a breach of fiduciary duty, or in the alternative, Plaintiffs failed to prove that they have

suffered any damages as a proximate cause of Chang' s alleged breach of a fiduciary duty.
The Court agrees that Plaintiffs failed to prove by a preponderance of the evidence that

Chang was responsible for the formation of PilePro Steel, LP. Moreover, because the Court finds

19

Plaintiffs have also failed to prove Defendants conspired to defraud PilePro LLC and PilePro
Sales Corp., see infra section II.C., the Court concludes Chang has not breached a fiduciary duty
to PilePro Sales Corp.

b. PilePro LLC
Plaintiffs further claim Chang owed PilePro LLC a fiduciary duty and breached that duty

by (1) forging an employment agreement between Heindl and PilePro LLC, (2) filing fraudulent
affidavits in German court, (3) creating the backdated 2005 and 2007 Amendments to PilePro

LLC's Operating Agreement and persuading Wendt and Counter-Defendants to sign it, (4)
signing sworn affidavits claiming Heindl had no interest in PilePro LLC and then stating the

opposite after Wendt fired Chang and Chang began working with Heindl, and (5) engaging in a

conspiracy defraud PilePro LLC. As a result of Chang' s breach of fiduciary duty, Plaintiffs claim
PilePro LLC has been damaged in the amount of $8,050,628.

Under Delaware law, which determines whether Chang breached a fiduciary duty owed
to PilePro LLC, a plaintiff must prove (1) a fiduciary duty existed and (2) the defendant breached

that duty. Beard Research, Inc.

v.

Kates, 8 A.3d 573, 601 (Del. Ch. 2010). At trial, Chang

admitted he falsified the employment agreement between Heindl and PilePro LLC, but he

maintained Wendt instructed him to do this. Moreover, to the extent Plaintiffs are alleging breach

of fiduciary duty on Heindl' s behalf, Plaintiffs lack standing to assert this claim. Moreover,
Plaintiffs failed to establish by a preponderance of the evidence that Chang hatched the plan to
oust Heind! by creating the backdated 2005 and 2007 Amendments, nor have they established

that Chang was responsible for persuading Wendt and the other PilePro LLC members to

sign

these amendments. Finally, Plaintiffs have not explained how Chang's alliance with Heindi after

Chang's termination from PilePro LLC breached a fiduciary duty owed to PilePro LLC. Chang

20

no longer worked for PilePro LLC, was never a member of the company, and Plaintiffs do not

expressly allege Chang misappropriated trade secrets or revealed confidential information.
Nevertheless, even if Plaintiffs had established a breach of fiduciary duty to either
PilePro Sales Corp. or PilePro LLC, the Court has no basis on which to make a responsible

estimate as to the damages.

See Beard Research, 8

A.3d at 613 ("[T]his Court may not set

damages based on mere 'speculation or conjecture' where a plaintiff fails to adequately prove

damages."). To prove their damages in the amount of $8,050,628, Plaintiffs relied on expert

testimony from Saul Solomon. However, Solomon only testified as to the blanket economic
damages sustained by the various PilePro entities as a result of Defendants' unfair competition,
which he estimated were in excess of $8 million. Solomon did not even attempt to distinguish the

damages caused to PilePro Sales Corp. and PilePro LLC as a result of Chang's alleged breach of

fiduciary duty. This wholesale estimation of Plaintiffs' damages provides the Court with nothing
more than speculation and conjecture upon which to base a damages award.
ii.

Weigel

Plaintiffs allege Weigel, as PilePro LLC's former patent attorney, owed PilePro LLC a
fiduciary duty and breached that by (1) failing to disclose he was representing Heindi and
Contexo in matters adverse to PilePro LLC, (2) failing to disclose that he had prepared the

Assignment Agreement and subsequently filed it with various European patent offices, (3)

affirmatively misrepresenting to Wendt and Williams that he would continue to loyally represent
PilePro LLC following Heindi's termination, (4) using confidential information obtained while
working for PilePro LLC to draft new patents for the benefit of Contexo, (5) submitting
fraudulent affidavits and declarations to German courts, (6) appearing in legal and patent
proceedings in Europe to advocate for Defendants in matters adverse to PilePro LLC, and (7)

21

engaging in a conspiracy to defraud PilePro LLC by fraudulently transferring its patents to
Contexo. As a result of Weigel's breach of fiduciary duty, Plaintiffs claim PilePro LLC has been

damaged in the amount of $8,050,628.
To determine whether Heindl breached his fiduciary duty to PilePro LLC, a plaintiff must

prove (1) a fiduciary duty existed and (2) the defendant breached that duty.
8

See Beard Research,

A.3d at 601. Weigel does not dispute he owed PilePro LLC a fiduciary duty. Instead, he argues

that Plaintiffs have failed to prove a breach of this duty. Weigel began serving as PilePro LLC's
patent attorney in 2004 and continued in that capacity until July 4, 2010. Weigel also served as a
patent attorney for Contexo. At trial he testified that from March of 2008 to December of 2009,
he was paid by Contexo to register Heindi's new non-U.S. patents with Contexo and by PilePro
LLC to register Heindi's new U.S. patents with PilePro LLC. Later, Weigel assisted in the

transfer of patents from PilePro LLC to Contexo pursuant to the Assignment Agreement. Despite
Plaintiffs' knowledge and consent to Weigel's dual role as a patent attorney for both PilePro
LLC and Contexo, Plaintiffs now argue Weigel breached a fiduciary duty to PilePro LLC by

serving in this dual capacity.

The Court finds Weigel did not breach a fiduciary duty to PilePro LLC by failing to
disclose his representation in Contexo in matters adverse to PilePro LLC. The Court is unable to

decipher when the interests of PilePro LLC and Contexo became adverse, and Plaintiffs have

unconvincingly argued PilePro LLC and Contexo's interest were adverse from the start. From
the moment of Contexo's formation in 2007, the relationship between Contexo and PilePro LLC
has been fluid and undefined. At trial, Weigel testified that as soon as he became aware of a

possible conflict of interest between Contexo and PilePro LLC, he resigned as PilePro LLC's
attorney. What followed could possibly constitute a breach of fiduciary duty but for the fact that

22

Plaintiffs failed to establish by a preponderance of the evidence that Weigel affirmatively
misrepresented to Wendt that he would continue to loyally represent PilePro LLC following

Heindl's termination, used confidential information obtained while working for PilePro LLC to
draft new patents for Contexo, submitted fraudulent affidavits and declarations to German courts,

appeared in European patent proceedings to advocate positions adverse to PilePro LLC, or
engaged in a conspiracy to defraud PilePro LLC by fraudulently transferring its patents to
Contexo. Moreover, because the Assignment Agreement was valid and enforceable, the Court
concludes Weigel did not breach his fiduciary duty by initiating the transfer of the PilePro LLC's

non-U.S. patents to Contexo in furtherance of the Assignment Agreement.
Finally, even assuming Plaintiffs had established breach of fiduciary duty, Plaintiffs'

blanket assertion that it suffered $8,050,628 in aggregate damages as a result of Weigel' s breach

of fiduciary duty, Chang's breach of fiduciary duty, Defendants' fraud, and their conspiracy to
defraud is unconvincing, and once again prevents the Court from making a responsible estimate
as to the actual damages suffered by Plaintiffs due to Weigel' s alleged breach

B.

of fiduciary duty.

Fraud
In Texas, courts only undertake a choice-of-law analysis if there is a conflict of law

affecting the outcome of an issue. See Duncan, 665 S.W.2d at 419. The party asserting a conflict

with Texas substantive law must demonstrate the existence of a true conflict. Greenberg Traurig

of N.Y, P.C.

v.

Moody, 161 S.W.3d 56, 70 (Tex.

App.Houston [14th Dist.] 2004, no pet.).

Absent such a demonstration, Texas law applies. Id. Neither party disputes that Texas law
governs Plaintiffs' fraud claims against Defendants. See Pis.' Proposed Findings of Fact and
Conclusions of Law [#146] ¶ 102 (citing Texas cases); Defs.' Proposed Findings of Fact and
Conclusions of Law [#152] at 6 (failing to dispute that Texas law applies to Plaintiffs' fraud

23

claims). Because neither party has demonstrated that Texas law conflicts with other potentially

applicable laws, this Court need not undertake a choice-of-law analysis, and Texas law will
govern Plaintiffs' fraud claims. See, e.g., Flagship Credit Corp.

v.

Indian Harbor Ins. Co., 481 F.

App'x 907, 910 (5th Cir. 2012) (applying Texas law because the defendant failed to argue that
Pennsylvania law differed from Texas law).
Plaintiffs claim Chang and Heindl engaged in fraud by representing to Wendt that

Contexo was a company set up for the benefit of PilePro LLC and creating the allegedly

fraudulent Assignment Agreement. In addition, Plaintiffs claim Weigel, along with Heindl and
Chang, fraudulently transferred PilePro LLC's non-U.S. patents to Contexo without Wendt's
permission. In Texas, common-law fraud occurs when: (1) the defendant made a representation
to the plaintiff'; (2) the representation was material; (3) the representation was false; (4) when the

defendant made the representation, the defendant (a) knew the representation was false or (b)
made the representation recklessly, as a positive assertion, and without knowledge of its truth;
(5) the defendant made the representation with the intent plaintiff act on it; (6) the plaintiff relied

on the representation; and (7) the representation caused the plaintiff injury. In re FirstMerit
Bank, 52 S.W.3d 749, 758 (Tex. 2001).

Plaintiffs have failed to establish their claims under Texas law. First, because the Court
finds the Assignment Agreement was valid, Chang, Heindl, and Weigel cannot be liable for their

involvement in creating and executing this agreement. Second, even assuming Chang and Heindl
misrepresented PilePro LLC' s status as the beneficial owner of Contexowhich the Court does
not concedePlaintiffs have failed to establish by a preponderance of the evidence the damages
suffered as a result of Defendants' alleged fraud.

24

C.

Conspiracy to Defraud
Plaintiffs allege Defendants conspired to defraud "PilePro"presumably PilePro

LLC

of its interest in Contexo and the non-U.S. patents transferred to Contexo. Under Texas law,
which the parties do not dispute governs resolution of this issue, the elements of civil conspiracy
in Texas are: "(1) two or more persons; (2) an object to be accomplished; (3) a meeting of the
minds of the object or course of action; (4) one or more unlawful, overt acts; and (5) damages as
a proximate

ITT,

result." Wackman

v.

Rubsamen, 602 F.3d 291, 408 (5th Cir. 2010) (quoting Tn

v.

162 S.W.3d 552, 556 (Tex. 2005)). A civil conspiracy requires specific intent. Triplex

Commc'ns, Inc.

v.

Riley, 900 S.W.2d 716, 729 (Tex. 1995).

Plaintiffs' conspiracy allegations fail to satisfy even a generous reading of the elements

of conspiracy. Plaintiffs have not established that Heindl, Chang, and Weigel even entered into
an agreement, much less that they were aware of the "wrongful conduct at the inception of the

[purported] combination or agreement." Id. at 719. Indeed, the testimony at trial revealed Weigel
and Chang did not meet until sometime in 2010, a fact which casts doubt on Plaintiffs' allegation

that Weigel and Chang conspired to defraud PilePro LLC in 2008. Moreover, to constitute a
conspiracy, two or more persons must combine "to accomplish an unlawful purpose or to

accomplish a lawful purpose by unlawful means." See In re Enron Corp. Sec., Derivative &
ERISA Litig., 623 F. Supp. 2d 798, 808 (S.D. Tex. 2009). Because the Court finds the transfer

of

patents from PilePro LLC to Contexo was valid, Plaintiffs' claim must fail, because a conspiracy
claim cannot be predicated on a lawful act accomplished in a lawful manner.
D.

Fraudulent Loans
Wendt claims that on September 21, 2009, he paid the Tilton School in New Hampshire

$101,043.01 in order for Heindi's children to attend this private boarding school (School Loan).

25

Around the same time, Heindl purportedly asked for a $7,000 loan on behalf of his brother
(Brother Loan). Wendt claims Heindi falsely represented he would repay both the School and

Brother Loans, and he made these representations with the intent to deceive Wendt. Wendt
claims he relied on these representations and therefore is entitled to recover damages.
At trial, Heindl testified a PilePro entity, not Wendt, paid for his children to attend the

Tilton School. However, Wendt produced a check written from Wendt's USBank account made
out to Heindl in the amount of $100,043.01, which listed the purpose of the check as "Simone
and Lucas Heindl." Pls.' Trial Ex. 190. This check and Wendt's bare testimony is the extent of

the evidence produced by Plaintiffs to prove Heindl's alleged fraud in seeking these loans.

Without more evidence of Heindl's alleged agreement to repay either "loan," the Court cannot

conclude the School and Brother Loans were fraudulent.

III.

Counter-Plaintiffs' Claims
Heindl and Steelcom allege Wendt and Counter-Defendants are liable for breach of

fiduciary duty, conversion, and breach of contract. Heindl also seeks injunctive and declaratory

relief determining Heindl is the owner of the CFC 90 patent, identified as USPTO Patent No.
8055481.
A.

Breach of Fiduciary Duty
Heindl and Steelcom allege three causes of actions against Wendt and Counter-

Defendants based on breach of fiduciary duty: (1) Heindl alleges Wendt and the CounterDefendants owed him fiduciary duties as shareholders of PilePro Sales Corp. and breached these
duties by engaging in a conspiracy to oust Heindl from PilePro Sales Corp.; (2) Heindl and

Steelcom allege Wendt and Counter-Defendants owed them fiduciary duties as members of
PilePro LLC and breached these duties by engaging in a conspiracy to oust Heindi from PilePro

26

LLC; and (3) Heind! alleges Wendt breached his fiduciary duty owed to Heindl as a shareholder

of PilePro Sales Corp. by transferring the assets of PilePro Sales Corp. to PilePro Steel,

LP.'8

According to Heindi's first theory of breach of fiduciary duty, Wendt and CounterDefendants,'9

as shareholders

of PilePro Sales Corp., owed Heindi a fiduciary duty and breached

this duty by conspiring to oust Heindi as a shareholder of PilePro Sales Corp., and thereafter
refusing to recognize Heindl's continued ownership in PilePro Sales Corp. According to Heindi
and Steelcom's second theory of breach of fiduciary duty, Wendt and Counter-Defendants

breached a fiduciary duty owed to Heindl and Steelcom by conspiring to execute the 2005 and
2007 backdated Operating Agreements, which excluded Heindi and Steelcom as members of

PilePro LLC.

Although Heindl and Steelcom' s convoluted post-trial filings obscure the basis of their
breach of fiduciary duty claims, it is clear from their counterclaim and proposed findings of fact
and conclusions of law that the first two claims of breach of fiduciary duty are predicated on an
alleged conspiracy to defraud Heindi and Steelcom. Accordingly, to prevail on his breach of

fiduciary duty claims, Heindl and Steelcom must first prove Counter-Defendants engaged in a
conspiracy to defraud Heindl and Steelcom, which in turn would breach any fiduciary duty they
18

In a post-trial filing, Heindl and Steelcom additionally allege Counter-Defendants conspired with Wendt
to breach the fiduciary duties he owed Heindl and Steelcom as the President of PilePro Sales Corp. and PilePro
LLC. See Defs.' Post-Trial Brief [#179] at 29. Heindl and Steelcom enoneously assume they pled "conspiratorial
breaches of fiduciary duties" in their counterclaim, but their counterclaim and proposed findings of fact and
conclusions of law only allege direct breaches of fiduciary duty by conspiring to defraud Heindl and Steelcom. Even
construing their Motion to Amend the Counterclaim to Conform to Proof at Trial as a request for the Court to add
two additional causes of actionconspiracy to breach fiduciary duty and aiding and abetting breach of fiduciary
dutythe Court is not inclined to humor Heindi and Steelcom' s everything-but-the-kitchen-sink approach to this
lawsuit. Although this case has been pending before this Court for more than three years, it was not until three
weeks after trial that Heindl and Steelcom hatched this new theory of liability. Given the colossal mess of the posttrial briefings submitted by the parties, the Courtin a gleeful exercise of its discretionDENIES Heindl and
Steelcom' s motion.
19

Heindi asserted this claim against Wendt, Youngman, Youngman Trust 1, Youngman Trust 2, and Mike
Feifarek as shareholders of PilePro Sales Corp., but not the remaining counter-defendants, because they are not and
were never shareholders of PilePro Sales Corp.

27

owed to the

company.2°

Because no conspiracy was established, the Court disposes of Heindi

and Steelcom's first two claims without ever reaching the intricacies of whether Counter-

Defendants, as minority shareholders of PilePro Sales Corp., owed Heindi a fiduciary duty.
Because PilePro Sales Corp. was incorporated in Nevada, under the internal affairs

doctrine, Nevada law governs this dispute. Under Nevada law, "[a]ctionable civil conspiracy
arises where two or more persons undertake some concerted action with the intent to accomplish
an unlawful objective for the purpose of harming another, and damage results." Guilfoyle v. Olde

Monmouth Stock Transfer Co., 335 P.3d 190, 198-99 (Nev. 2014). Thus, in order to prevail, a

plaintiff must provide evidence of "an explicit or tacit agreement between the alleged
conspirators." Id.
Heindi has failed to produce sufficient evidence from which the Court can reasonably

infer Counter-Defendants agreed and intended to harm Heindi. Indeed, at trial, the counterdefendants each testified they did not sign the backdated 2005 and 2007 Operating Agreements,

which effectively ousted Heindi from PilePro LLC, with the intent to defraud Heindi. Moreover,
Heindi has not provided the Court with any measurable basis for establishing damages.
Accordingly, neither Wendt nor the counter-defendants may be held liable on Heindi' s first
claim for breach of fiduciary duty, because Heindi has failed to establish the necessary predicate

of conspiracy upon which his first claim for breach of fiduciary duty rests.
20

Plaintiffs argue the statute of limitations bar Heindl and Steelcom's breach of fiduciary claims predicated
on a conspiracy to defraud Heindi and Steelcom. The statute of limitation for breach of fiduciary duty in Nevada is
three years. Shupe v. Ham, 639 P.2d 540 (Nev. 1982) ("A breach of fiduciary duty is a fraud giving rise to the
application of the three year statute of limitations."). Because the allegations regarding Wendt and CounterDefendants' conspiracy to defraud Heindl of his interests in PilePro Sales Corp. and PilePro LLC occurred in April
2010, and the counterclaims were filed on March 4, 2013, the three-year statute of limitations does not bar Heindl
and Steelcom's breach of fiduciary duty claims.
To be clear, the causes of actions alleged in Heindl and Steelcom's complaint, which the Court considers
today, are breaches of fiduciary duty predicated on a conspiracy to defraud. They specifically claim damages "[b]y
reason of [Counter-Defendants'] breaches of fiduciary duties." Counterclaim [#28] ¶ 57. They did not plead causes
of action for conspiracy or fraud. As a result, the parties' briefing on the statute of limitations for conspiracy and
fraud misses the mark.

As to Heindl and Steelcom' s second claim of breach of fiduciary duty, Delaware law
governs. In Delaware, a civil conspiracy requires "(1) [a] confederation or combination of two or

more persons; (2) [a]n unlawful act done in furtherance of the conspiracy; and (3) [a]ctual

damage." In re Am. Int'l Grp., Inc., 965 A.2d 763, 805 (Del. Ch. 2009). It also requires
knowledge of the conspiracy. See In re Asbestos Litig., 509 A.2d 1116, 1120 (Del. 1986)
(requiring at least "knowing participation"). While the evidence adduced at trial clearly
establishes that Counter-Defendants signed the backdated 2005 and 2007 amendments to PilePro

LLC's Operating Agreement, there is no evidence that they did this with the intention to harm
Heindl. Each Counter-Defendant testified that they signed the operating agreement simply

because Wendt, the company's President, requested them to. While Wendt may have harbored

deleterious motives, his intent alone is not sufficient to establish an agreement between two or
more persons. Accordingly, Heindl and Steelcom's second claim for breach of fiduciary duty

likewise fails.
Heindl finally claims Wendt, as President of PilePro Sales Corp., breached the fiduciary
duty he owed Heindl by converting the assets of PilePro Sales Corp. for his own personal benefit
or for the benefit of PilePro Steel, LP. According to Heindl, "[t]he tortious conversion of the

assets.

. .

of PilePro Sales Corp. by Wendt.. . for the apparent purpose of obliterating the value

of PilePro Sales Corp., and, in addition, decimating any shareholder interest Heindl has in
PilePro Sales Corp. is a breach of fiduciary duties that Wendt.

.

.

owe to Heindl." Counterclaim

[#28] ¶ 64.

Clearly, Wendt, as the President of PilePro Sales Corp., owed Heindl a fiduciary duty.
See

W.

Indus., Inc.

v.

Gen. Ins. Co., 533 P.2d 473, 476 (Nev. 1975) ("Certainly, a corporate

officer and director has a fiduciary relationship with his corporation,

29

. . .

and thus owes a duty of

good faith, honesty, and full disclosure."). However, because this breach of fiduciary duty claim
is predicated on Heindl's conversion claim, and the Court finds Heindl has failed to establish

conversion, this claim must fail. See infra section III.B.
B.

Conversion
Heindi brings this conversion claim against Wendt, alleging Wendt converted assets of

PilePro Sales Corp. to use for his own personal benefit and for the benefit of PilePro Steel, LP.
Specifically, Heindi claims Wendt transferred Modular Connectors and other assets belonging to
PilePro Sales Corp. to his personal residence for use as inventory in the new PilePro entity,
PilePro Steel, LP. He also alleges Wendt transferred cash from PilePro Sales Corp. for the

purchase and renovation of a personal residence, which is held solely in Wendt's name.
To establish a claim for conversion of personal property under Texas law,2' a plaintiff

must prove: "(1) the plaintiff owned or had legal possession of the property or entitlement to
possession; (2) the defendant unlawfully and without authorization assumed and exercised
dominion and control over the property to the exclusion of, or inconsistent with, the plaintiffs
rights as an owner; (3) the plaintiff demanded return of the property; and (4) the defendant

refused to return the property." Smith

v.

Maximum Racing, Inc., 136 S.W.3d 337, 341 (Tex.

App.Austin 2004, no pet.). Wrongful intent is not an essential element of conversion.
v.

Thomas

McNair, 882 S.W.2d 870, 884 (Tex. App. Corpus Christi 1994, no writ).

21

The parties do not dispute Texas law governs the resolution of this issue. Under Texas law, a claim for
conversion has a two-year statute of limitations. See TEx. Civ. PRAC. & REM. CODE § 16.003(a). At trial, CounterDefendants asserted the affirmative defense of statute of limitations. However, the Court is unable to determine
whether the statute of limitations bars Counter-Plaintiffs' claim, because Counter-Defendants have not asserted a
relevant date for which Counter-Plaintiffs' cause of action accrued. Counter-Plaintiffs claim PilePro Steel, LP was
formed sometime in 2010, and sometime thereafter Wendt converted PilePro Sales Corp.'s assets for PilePro Steel,
LP's use and benefit. Without more information as to the accrual date, the Court cannot conclude the statute of
limitations bars Counter-Plaintiffs' conversion claim.

30

While the Court finds that Heindl is a shareholder of PilePro Sales Corp. and therefore is
legally entitled to his proportional share of the company, there is a dearth of evidence
establishing that PilePro Sales Corp.'s inventory and cash assets were transferred to PilePro
Steel, LP. Wendt testified that PilePro Steel, LP was created to "have another sales company in a

different structure to move away from PilePro Sales Corp. and begin selling as PilePro Steel,
LP." Transcript of Record at

217, PilePro LLC, et

at. v.

Chang

et al.,

12-cv-829 (W.D. Tex. Oct.

21, 2015). However, Wendt's testimony does not establish by a preponderance of the evidence

that he unlawfully transferred PilePro Sales Corp.'s assets to PilePro Steel, LP to be used as
PilePro Steel, LP 's new inventory. At most it indicates PilePro Steel, LP began acting as the new

operational arm of the PilePro entities. There is absolutely no evidence in the record that

Wendt' s personal residence was purchased with converted funds or that Wendt is using it to
house PilePro Sales Corp.'s inventory of Modular Connectors.
Because Heindl failed to prove Wendt transferred PilePro Sales Corp.'s assets to PilePro
Steel, LP, the Court declines to grant Heindl a proportional interest in PilePro Steel, LP or a

constructive trust in its assets.
C.

Breach of Contract
Steelcom brings this breach of contract claim against Wendt and Counter-Defendants,

alleging they breached express provisions of the PilePro LLC' s 2004 Operating Agreement by
conspiring to oust Steelcom from PilePro LLC and violating provisions of the Operating
Agreement by taking certain actions which require the approval of at least eighty percent of the
ownership interest in PilePro

LLC.22

Steelcom alleges it has suffered at least $3,000,000 worth

22

Incredibly, Heindi and Steelcom attempted to slide in a new claim for breach of the implied covenant of
good faith and fair dealing at trial and in a footnote contained in a post-trial briefing filed a month after trial. Mot.
Amend [#186] at 5. This time, however, Counter-Plaintiffs have not even requested the Court to amend the
counterclaim to conform to the proof produced at trial. The Court once again exercises its discretion and declines to
31

of damages, including its pro rata share of the money PilePro LLC improperly managed in
contravention of the 2004 Operating Agreement and the pro rata share of any money distributed
to Wendt and Counter-Defendants which was not distributed to Steelcom.

Under Delaware law, which governs the claim pursuant to a choice-of-law provision in
the 2004 Operating Agreement, the elements of a breach of contract claim are: 1) a contractual
obligation, 2) a breach of that obligation by the defendant, and 3) a resulting damage to the

plaintiff. See Newport Disc, Inc.

v.

Newport Elecs., Inc., No. N12C-10-228 MMJ CCLD, 2013

WL 5797350, at *3 (Del. Oct. 7, 2013); Defs.' Trial Ex. 502; DeSantis
S.W.2d 670, 678 (Tex. 1990) (citing RESTATEMENT (SECOND)

v.

Wackenhut Corp., 793

OF CONFLICT OF LAWS §

187(2)).

Even if the Court was to find Wendt and Counter-Defendants breached an obligation
imposed by the 2004 Operating Agreement, Steelcom cannot prevail on its claim because it

failed to prove damages. "The law does not require certainty in the award of damages when a
wrong has been proven and injury established. Responsible estimates that lack mathematical
certainty are permissible so long as the Court has a basis to make a responsible estimate of
damages." All Pro Maids, Inc.

v.

Layton, No. Civ.A. 058-N, 2004 WL 1878784, at

* 11

(Del.

Ch. Aug. 9, 2004). In this case, Steelcom fails to provide any measureable basis for calculating

damages. Its expert witness only testified to the damages suffered by Steelcom in the aggregate
as a result

of Counter-Defendants' breaches of fiduciary duty, breaches of contract, and

conversion. Steelcom offered nothing to establish to a reasonable certainty the damages it alone
suffered, and as a result, Steelcom' s breach of contract claim fails.

consider this new addition to Counter-Plaintiffs' claims. It stretches the imagination to consider why, in almost three
years, Counter-Plaintiffs did not bring this claim to the Court's attention, or the why Counter-Plaintiffs' counsel did
not have the professional courtesy to inform Plaintiffs of it before trial.

32

D.

CFC9O Patent
Heindl seeks injunctive and declaratory relief determining that the CFC 90 patent,

identified as USPTO Patent No. 8055481, belongs to Heindl, and Wendt, by registering it in
PilePro Sales Corp.'s name, committed fraud.

See

Defs.' Trial Ex. 642. However, there is a

dearth of evidence establishing that the registration of the CFC 90 patent in PilePro Sales Corp.'s
name was fraudulent. Because the Court finds Heindl failed to prove Wendt fraudulently

registered this patent, the Court declines to grant Heindl injunctive or declaratory relief.

Conclusion
Accordingly,
IT IS ORDERED that Counter-Plaintiff Heindl is a 34.5% shareholder in PilePro
Sales

Corp.;

IT IS FURTHER ORDERED that Counter-Plaintiff Heindl was a 34.5% member

of PilePro LLC until his interest was transferred to Counter-Plaintiff Steelcom Limited;
IT IS FURTHER ORDERED that Counter-Plaintiff Steelcom Limited is a 34.5%

member of PilePro LLC;
IT IS FURTHER ORDERED that Contexo is wholly or partially owned by

PilePro LLC, Enrico Farroni, and Roland Harzenmozer;
IT IS FURTHER ORDERED that the March 25, 2010 Assignment Agreement

was valid;
IT IS FURTHER ORDERED that Contexo is the lawful owner of all the non-U.S.

patents at issue in this lawsuit;
IT IS FURTHER ORDERED that Plaintiffs' claims unjust enrichment and

constructive trust are DENIED;

33

IT IS FURTHER ORDERED that Counter-Plaintiffs' request for injunctive and

declaratory relief granting Heindl and Steelcom a constructive trust in assets allegedly
converted by Wendt for the benefit of Wendt and PilePro Steel LP is DENIED;
IT IS FURTHER ORDERED that Counter-Plaintiff Heindl's request for

injunctive and declaratory relief recognizing Heindl as the owner of the CFC 90 patent,
identified as USPTO Patent No. 8055481, is DENIED;
IT IS FURTHER ORDERED that the parties' requests for attorneys' fees and

costs are DENIED;
IT IS FURTHER ORDERED that Defendant's Motion for Order of Collateral

Estoppel [#137] is DENIED;
IT IS FURTHER ORDERED that Plaintiffs' Unopposed Motion for Leave to File

Amended Trial Witness List [#158] is GRANTED;
IT IS FURTHER ORDERED that Counter-Defendants' Motion to Dismiss for

Lack of Subject Matter Jurisdiction [#172] is DENIED;
IT IS FURTHER ORDERED that Counter-Defendants' Motion to Strike [#180] is

DENIED;
IT IS FURTHER ORDERED that Plaintiff and Counter-Defendants' Motion for

Partial Findings under Rule 52(c) [#182] is DENIED;
IT IS FINALLY ORDERED that Counter-Plaintiffs' Motion to Amend the

Counterclaim to Conform to Proof at Trial [#186] is DENIED.

SlGNEDthisthe

O dayofJanuary2ol6.

SAM SPARKS
UNITED STATES DISTRICT JUDGE
34