United States District Court, D. Nevada
C. JONES United States District Judge
a shareholder derivative action. Pending before the Court is
a motion in limine.
FACTS AND PROCEDURAL HISTORY
individuals and Congregation Beth Joseph brought this
shareholder derivative action in the Eastern District of New
York on behalf of Precious Minerals Mining & Refining
Corp. ("PMMR") against Bill Minor, John Reynolds,
and Walter Matting for breach of fiduciary duties, unjust
enrichment, abuse of control, usurpation of corporate
opportunities, and ultra vires actions. PMMR is a Nevada
corporation holding certain mining rights in Lyon County,
which it exercises under permission of the U.S. Forest
Service ("USFS") (which owns the relevant land) to
mine a substance sold commercially as Orykta and used as
fertilizer and animal feed. (Third Am. Compl. ¶ 1, ECF
No. 54). From 1999 to 2001, Minor sold shares of PMMR to
investors throughout the United States and Canada, including
Plaintiffs, who are New York residents. (Id.
used PMMR "as his own personal piggybank, " selling
Orykta to only one customer in Costa Rica over a 14-year
period. (Id. ¶ 5). Minor repeatedly
misrepresented PMMR's prospects to shareholders,
including lying about a nonexistent imminent contract with
China, in order to deflect scrutiny, and he refused to
entertain sales leads from them, even threatening bodily harm
when they made suggestions. (Id. ¶¶ 6-7,
49-64). Minor has used a fraudulent stock transfer document
purporting to transfer non-existent shares to himself in
order to falsely portray himself as a majority shareholder.
(Id. ¶¶ 69-73). Minor made false promises
of dividend distributions in order to deflect questions about
the viability of PMMR. (Id. ¶¶ 74-76).
Defendants consistently failed to provide basic information
about PMMR to shareholders, with Minor even threatening
bodily harm when they made requests. (Id. ¶ 9).
Defendants have not produced an audited financial statement
since 1995 and have produced only one unaudited financial
statement from the fourth quarter of 2009. (Id.
¶ 10). Defendants failed to properly file for various
business permits and to file correct tax returns,
jeopardizing the corporation's legal status.
(Id. ¶¶ 11-13). The failure of Defendants
to maintain compliance with the USFS's terms of
permissible activities has resulted in a criminal and civil
investigation of PMMR. (Id. ¶¶ 53-57).
PMMR obtained approximately $15-20 million from the sale of
its stock to shareholders, it has never made a profit and has
failed to account for these funds. (Id. ¶¶
78, 80). Rather, Defendants have simply awarded themselves
large compensation packages and paid themselves large
consultancy fees. (Id. ¶ 78). Minor also paid
for his son's flying lessons using PMMR's assets.
(Id. ¶ 79).
abused his control of PMMR by treating PMMR's assets as
his own and transferring PMMR's assets into his own name,
i.e., the title of at least one of PMMR's mining claims
was transferred into Minor's name from 2007-2010.
(Id. ¶¶ 81-83). At various times, Minor
transferred mining claims between himself and PMMR to suit
his personal needs. (Id. ¶ 84). Defendants have
usurped corporate opportunities by selling Orykta through a
company named Wrightsville Fertilizer Co. ("WFC");
Plaintiffs deduce this from the fact that there is no
evidence WFC ever paid PMMR to purchase Orykta. (Id.
¶ 85). Defendants have engaged in ultra vires actions by
issuing stock, stock options, and rights without shareholder
approval, thereby diluting the value and control of existing
shareholders. (Id. ¶ 86).
U.S. District Court for the Eastern District of New York
transferred the case to this District under 28 U.S.C. §
1404(a) as an alternative to a request to dismiss for lack of
personal jurisdiction and improper venue. The transferor
court did not rule on contemporaneous requests to dismiss the
First Amended Complaint ("FAC") for failure to
comply with Rules 8(a), 9(b), and 23.1(b). This Court
dismissed the FAC under the latter rule and Rule 11(a)
because it was not verified or even signed by any attorney.
Plaintiffs filed the Second Amended Complaint
("SAC"), and Defendants moved to dismiss it. The
Court ruled that the SAC was not precluded by either of two
previous actions litigated in the New York and Nevada state
courts but dismissed it with leave to amend because it failed
to comply with Rule 23.1 's requirement to plead demand
or futility with particularity. Plaintiffs filed the Third
Amended Complaint ("TAC"), and Defendants moved to
dismiss it. The Court refused to dismiss the TAC under Rule
23.1 but dismissed certain claims on the merits, with leave
to amend some of them.
have asked the Court to exclude any evidence proffered at
trial that was not produced during discovery. The Court
denies the motion. The Court does not need to be reminded of
the rules generally, and Defendants identify no piece(s) of
evidence they seek to exclude, so the Court currently has no
controversy before it.
HEREBY ORDERED that the Motion in Limine (ECF ...