United States District Court, D. Nevada
C. JONES United States District Judge
a shareholder derivative action. Pending before the Court are
counter motions for summary judgment.
FACTS AND PROCEDURAL HISTORY
Sixteen 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 Marling 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 die corporation's legal status.
(Id. ¶¶ 11-13). The failure of Defendants
to maintain compliance with die 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.
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. Specifically, the
Court permitted the claim for breach of fiduciary duty to
proceed against all Defendants as to the allegations
concerning usurpation of corporate opportunities and
compensation packages and permitted the claim to proceed
against Minor as to the allegations concerning false
statements and improper withholding of financial records. The
Court otherwise dismissed the breach of fiduciary duty claim,
as well as the claims for unjust enrichment and abuse of
control, without leave to amend, and dismissed the claim for
ultra vires acts, with leave to amend. Plaintiffs did not
further amend. Defendants answered and filed counterclaims
for intentional interference with contractual relations
("IICR") and intentional interference with
prospective business relationship ("IIPBR") based
on: (1) Plaintiffs' alleged communications to WFC and
China National Seed Group Corporation Limited, a division of
Sinochem ("China National"); (2) their interference
with potential distribution contracts between PMMR and
companies in China, Vietnam, the Philippines, and Costa Rica;
and (3) having filed various lawsuits against Defendants. The
parties have now filed cross motions for summary judgment.
SUMMARY JUDGMENT STANDARDS
court must grant summary judgment when "the movant shows
that there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law."
Fed.R.Civ.P. 56(a). Material facts are those which may affect
the outcome of the case. See Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). A dispute as to a
material fact is genuine if there is sufficient evidence for
a reasonable jury to return a verdict for the nonmoving
party. See Id. A principal purpose of summary
judgment is "to isolate and dispose of factually
unsupported claims." Celotex Corp. v. Catrett,
477 U.S. 317, 323-24 (1986).
determining summary judgment, a court uses a burden-shifting
scheme. The moving party must first satisfy its initial
burden. "When the party moving for summary judgment
would bear the burden of proof at trial, it must come forward
with evidence which would entitle it to a directed verdict if
the evidence went uncontroverted at trial." C.A.R.
Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d
474, 480 (9th Cir. 2000) (citation and internal quotation
marks omitted). In contrast, when the nonmoving party bears
the burden of proving the claim or defense, the moving party
can meet its burden in two ways: (1) by presenting evidence
to negate an essential element of the nonmoving party's
case; or (2) by demonstrating that the nonmoving party failed
to make a showing sufficient to establish an element
essential to that party's case on which that party will
bear the burden of proof at trial. See Celotex
Corp., 477 U.S. at 323-24.
moving party fails to meet its initial burden, summary
judgment must be denied and the court need not consider the
nonmoving party's evidence. See Adickes v. S.H. Kress
& Co., 398 U.S. 144 (1970). If the moving party
meets its initial burden, the burden then shifts to the
opposing party to establish a genuine issue of material fact.
See Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 586 (1986). To establish the
existence of a factual dispute, the opposing party need not
establish a material issue of fact conclusively in its favor.
It is sufficient that "the claimed factual dispute be
shown to require a jury or judge to resolve the parties'
differing versions of the truth at trial." T. W.
Elec. Serv., Inc. v. Pac. Elec. Contractors Ass 'n,
809 F.2d 626, 631 (9th Cir. 1987). In other words, the
nonmoving party cannot avoid summary judgment by relying
solely on conclusory allegations unsupported by facts.
See Taylor v. List, 880 F.2d 1040, 1045 (9th Cir.
1989). Instead, the opposition must go beyond the assertions
and allegations of the pleadings and set forth specific facts
by producing competent evidence that shows a genuine issue
for trial. See Fed. R. Civ. P. 56(e); Celotex
Corp., 477 U.S. at 324.
summary judgment stage, a court's function is not to
weigh the evidence and determine the truth, but to determine
whether there is a genuine issue for trial. See
Anderson, 477 U.S. at 249. The evidence of the nonmovant
is "to be believed, and all justifiable inferences are
to be drawn in his favor." Id. at 255. But if
the evidence of the nonmoving party is merely colorable or is
not significantly probative, summary judgment may be granted.
See Id. at 249-50. Notably, facts are only viewed in
the light most favorable to the nonmoving party where there
is a genuine dispute about those facts. Scott v.
Harris, 550 U.S. 372, 380 (2007). That is, even if the
underlying claim contains a reasonableness test, where a
party's evidence is so clearly contradicted by the record
as a whole that no reasonable jury could believe it, "a
court should not adopt that version of the facts for purposes
of ruling on a motion for summary judgment."