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Todesco v. Wainright

United States District Court, E.D. Louisiana

April 14, 2017

JOSEPH TODESCO, ET AL.
v.
GLENDA WAINRIGHT, ET AL.

         SECTION "B"(3)

          ORDER AND REASONS

         Before the Court is “Plaintiffs' Motion for Remand and Attorney's Fees.” Rec. Doc. 8. After an extension, Defendants timely filed an opposition memorandum. Rec. Doc. 18. Plaintiffs then requested, and were granted, leave to file a reply memorandum. Rec. Doc. 23. Defendants also requested leave to file a supplemental memorandum. Rec. Doc. 24. For the reasons discussed below, IT IS ORDERED that the motion to remand (Rec. Doc. 8) is GRANTED.

         IT IS FURTHER ORDERED that the motion for leave (Rec. Doc. 24) is DISMISSED AS MOOT.

         I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

         This case arises out of a family business dispute. On August 13, 1990, Plaintiff Joseph Todesco (“Todesco”) filed articles of incorporation in Louisiana to establish Haelan Products, Inc. (“Haelan”), a company focused on developing fermented soy products for health purposes. Rec. Doc. 3-1 at 3, 5. In 1991, Todesco hired his father-in-law, Walter Wainright (“Wainright”), as a salesman. Id. at 3. In 2003, Wainright requested a greater role in the company and his daughter/Todesco's wife, Lesly Todesco, encouraged Todesco to give her parents, Walter and Glenda Wainright, a share in the company. Id. On November 11, 2003, the Todescos agreed to “gift” 50% of the company's shares to the Wainrights. Id. at 4. Eventually, Wainright became an officer or director of the company. Id. at 5.

         When Wainright died on August 20, 2013, the Todescos discovered that Wainright systematically diverted company products, research, and profits for his own personal gain. Rec. Doc. 3-1 at 5. According to Plaintiffs, Wainright created corporations that he used to sell Haelan products to individuals in exchange for cash and to communicate with Haelan's distributors and third-party researchers. Id. at 7. For example, Wainright purportedly sold forty-three (43) cases of Haelan products to Paul Emerson and five (5) cases to Robert Brown in exchange for cash that was not given to Haelan. Id. at 12-13. Wainright subsequently agreed to sell fifty (50) cases to Brown. Id. at 14. When Wainright failed to deliver the cases, he used Haelan proceeds to repay Brown part of his purchase price. Id.

         Further, Wainright incorporated the Vienna Stress Relief Clinic (“VSRC”) on September 17, 2011 and purportedly hired researchers to publish articles under VSRC's name, using research and product information developed by Haelen. Rec. Doc. 3-1 at 6- 7. Similarly, Haelan Research Foundation (“HRF”), Wainright Haelan, L.L.C., Haelan Products International, Inc., and HPA, Inc. were companies created by Wainright to misappropriate Haelan's corporate funds and products. Id. at 9, 11. For example, on September 1, 2009, through Todesco's efforts, Dr. Anca Gocan agreed to conduct a study using a Haelan product. Id. at 6. However, on September 30, 2009, “unbeknownst to Haelan, ” Wainright informed Dr. Gocan that Haelan was withdrawing its support, but that HRF would like to participate. Id. at 8. When funds and research from Haelan were then sent to Dr. Gocan, Wainright convinced Dr. Gocan that they were coming from HRF. Id. On December 8, 2011, Wainright, Dr. Gocan, and Dr. Gocan's peer, Dr. Uwe Rohr, applied for a United States patent for a fermented soy formulation, FSWW08, which Plaintiffs maintain is the product developed by Haelan and used in the study conducted by Dr. Gocan. Id. at 10. On July 15, 2002, Wainright allegedly used Haelan Products International, Inc. to enter into an agreement with Beso Biological Research, Inc., Haelan's primary manufacturer, giving Wainright the exclusive right to sell fermented soy products. Id. at 12. Haelan discovered this scheme and forced Wainright to assign the agreement to Haelan on December 18, 2003. Id.[1]

         At one point, Haelan provided funds to Aoqili Cosmetics, Inc., a company owned by Todesco, to purchase 300, 000 bars of specialty soap. Rec. Doc. 3-1 at 14. Wainright then secretly stored the soap in a warehouse in Washington State, sold the soap, and kept the proceeds for himself. Id. After Wainright died, the owner of the storage unit filed suit in Whatcom County Superior Court to determine ownership of the remaining soap. Id. at 15.

         According to Plaintiffs, by competing directly with Haelan, using his Haelan resources, and undermining Haelan's efforts, Wainright breached his fiduciary duty to Haelan and its shareholders under Louisiana Revised Statute § 12:91. Rec. Doc. 3-1 at 7, 16. Consequently, on June 18, 2014, the Todescos and Haelan filed suit in the 24th Judicial District Court for Jefferson Parish against the succession of Walter Wainright, Glenda Wainright, HRF, Wainright Haelan, L.L.C., and VSRC. Id. at 2-3. After a hearing on September 26, 2016, the court granted Plaintiffs' exception of no right of action by written judgment Dated: October 27, 2016. Rec. Doc. 3-2 at 70.

         On December 9, 2016, Defendants removed the matter to this Court by filing a lengthy notice of removal containing numerous allegations of misconduct. Rec. Doc. 3. They claim that the “case became removable . . . when the state court ruled that the Wainrights were dispossessed without notice of their 50% shareholder interest in Haelan by an undisclosed and never served Washington State lawsuit.” Id. at ¶¶ 6-7 (emphasis in original). According to Defendants, securities fraud and due process issues predominate, but this Court “would have exclusive jurisdiction if this case was filed anew pursuant to § 27 of the 1934 Exchange Act . . . 15 U.S.C. § 78(a)aa.” Id. at ¶ 9.

         The remainder of the notice of removal contains largely unsubstantiated allegations of unethical conduct and due process violations. Defendants explain that when the Whatcom County court determined that the owner of the storage unit was entitled to rent from Wainright's estate and that Todesco owned the soap, Todesco and the owner of the storage unit entered into an agreement whereby the former would pay $15, 000.00 to the latter in exchange for an assignment of the latter's judgment creditor rights against Wainright's estate. Rec. Doc. 3 at ¶¶ 16, 19. A judgment totaling $87, 323.26 was then entered against Wainright's estate. Id. at ¶¶ 22, 28. On November 24, 2015, proceedings to execute the judgment were started in King County, Washington. Rec. Doc. 3 at ¶ 29. The sheriff was instructed to seize the personal property of Glenda Wainright, as the representative of her husband's estate, including the Haelan stock certificates issued to the Wainrights more than a decade earlier. Id. at ¶ 31. According to Defendants, though, the sheriff has no record of the writ, did not serve it on any Defendant, and took no steps to execute a seizure and sale. Id. at ¶ 34.

         Defendants now claim that Glenda Wainright was not provided notice of the sale of litigious rights until around September 26, 2016 (id. at ¶ 25) and that the failure to provide notice raises “fundamental due process issues under Mennonite Board of Missions v. Adams, 462 U.S. 791 (1983) . . .” (id. at ¶ 36).[2] They maintain that Louisiana Civil Code article 2652 prohibits the sale of litigious rights (id. at ¶ 26) and that the assignment is void under 15 U.S.C. § 78cc(b) (id. at ¶¶ 49-50).[3] Ultimately, though, they ask this Court to declare that Glenda Wainright can satisfy her debt by depositing $15, 000.00, the amount of the assignment, plus interest in the Court's registry. Id. at ¶ 81.[4] They also argue that because the Louisiana state court judgment was obtained by “fraud and ill-practices, ” it is null under Louisiana Code of Civil Procedure article 2004 and should be declared null by this Court. Id. at ¶¶ 37, 80.

         II. THE PARTIES' CONTENTIONS

         In their motion to remand, Plaintiffs maintain that (1) Defendants failed to timely remove this action and (2) there is no basis for federal question or diversity jurisdiction. Rec. Doc. 8 at 2. They also request attorney's fees because there was no reasonable basis for removal. Rec. Doc. 8-1 at 21.

         Defendants' opposition memorandum largely reflects the arguments made in their notice of removal. Rec. Doc. 18.

         III. LAW AND ANALYSIS

         “[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant . . . to the district court of the United States for the district . . . embracing the place where such action is pending.” 28 U.S.C. § 1441(a). However, “[t]he removing party bears the burden of establishing that federal jurisdiction exists” (De Aguilar v. Boeing Co., 47 F.3d 1404, 1408 (5th Cir. 1995) (citing Gaitor v. Peninsular & Occidental S. S. Co., 287 F.2d 252, 253 (5th Cir. 1961))), and “[a]ny ambiguities are construed against removal because the removal statute should be strictly construed in ...


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