United States District Court, E.D. Louisiana
ORDER AND REASONS
the Court is Defendants' Motion for Summary Judgment and
Alternatively Judgment on the Pleadings (Rec. Doc. 74),
Plaintiffs' Response and Memorandum in Opposition (Rec.
Doc. 76), and Defendants' Reply Memorandum (Rec. Doc.
80). For the reasons discussed below, IT IS
ORDERED that the motion is GRANTED.
AND PROCEDURAL HISTORY
case is about an unsuccessful business venture between two
experienced businessmen. Plaintiff RedHawk Holdings
Corporation (“RedHawk”) is a Nevada corporation
with its principal place of business in Lafayette Parish,
Louisiana. See Rec. Doc. 1 at 1. Plaintiff Beechwood
Properties, LLC (“Beechwood”) is a Louisiana
limited liability company with its principal place of
business in Lafayette Parish, Louisiana. See id. G.
Darcy Klug is the CFO and majority shareholder of both
Plaintiffs. See Rec. Doc. 74-1 at 9. Defendant
Daniel J. Schreiber is the former CEO and a former Director
of RedHawk. See id. Defendant Schreiber is also the
trustee and beneficial owner of at least some of the
securities held by Defendant Schreiber Living Trust -
DTD 2/08/95. See Rec. Doc. 76-1 at 1-2.
March 2014, American Medical Distributors, Inc.
(“AMD”) entered into an Asset Purchase Agreement
(“APA”) with RedHawk. See Rec. Doc. 1 at
2. RedHawk agreed to issue AMD or its designees approximately
half of RedHawk's shares. See id. at 2-3. In
exchange, AMD agreed to pay RedHawk $60, 000 and to assign
RedHawk all of AMD's assets and property. See
id. at 3. The principal asset was exclusive distribution
rights of non-contact thermometers in North, Central, and
South America. See Rec. Doc. 74-1 at 12.
transaction, known as the AMD-RedHawk Transaction, was
executed as provided in the APA. See Rec. Doc. 1 at
4. Plaintiff Beechwood and Defendants provided AMD $60, 000;
thereafter, AMD paid $60, 000 to RedHawk and assigned RedHawk
all of its assets including the distribution rights of the
non-contact thermometers. See id. In exchange,
RedHawk assigned the agreed-upon shares to four designees of
AMD. See id. The four designees were Beechwood,
Schreiber Trust, Howard Taylor, and Paul Rachmuth. See
stemming from the executed transaction, Plaintiffs allege
numerous fraudulent misrepresentations and omissions and
contract breaches by Defendant Schreiber. See Rec.
Doc. 74-1 at 9. There are three main allegations that give
rise to their cause of action. First, Plaintiffs allege that
Defendant, along with Paul Rachmuth who served as a counsel
for AMD and Beechwood in the transaction, failed to disclose
possible patent infringement litigation that significantly
impaired the value of the distribution rights assigned to
RedHawk. See Rec. Doc. 1 at 4. Second, Defendant
Schreiber failed to uphold his agreement with Beechwood to
split RedHawk's expenses on a 50/50 basis and contribute
to other assets. See id. at 11-14. Third, Defendant
Schreiber failed to disclose his past SEC issues to RedHawk
and its investors. See Rec. Doc. 76 at
January 31, 2017, Plaintiffs filed a six-claim Complaint.
See Rec. Doc. 1. Specifically, Plaintiffs allege (1)
Securities Fraud under Sections 10B and 20 of the Exchange
Act and SEC Rule 10b-5; (2) Securities Fraud under Sections
18 and 20 of the Exchange Act; (3) Fraud under State Law; (4)
By Beechwood for Breach of Contract; (5) By Beechwood for
Unjust Enrichment; and (6) By RedHawk for Defendant
Schreiber's Breach of Fiduciary Duties. See id.
15, 2018, Defendants filed a Motion for Summary Judgment and
Alternatively Judgment on the Pleadings (Rec. Doc. 74-1). On
July 19, 2018, Plaintiffs filed a Response and Memorandum in
Opposition (Rec. Doc. 78). On August 2, 2018, Defendants
filed a Reply Memorandum (Rec. Doc. 80).
Summary Judgment Standard
Federal Rule of Civil Procedure 56, summary judgment is
appropriate when “the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to
judgment as a matter of law.” Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986) (quoting Fed.R.Civ.P.
56(c)); see also TIG Ins. Co. v. Sedgwick James
of Wash., 276 F.3d 754, 759 (5th Cir. 2002). A genuine
issue of material fact exists if the evidence would allow a
reasonable jury to return a verdict for the nonmoving party.
See Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986). The court should view all facts and evidence in
the light most favorable to the non-moving party. See
United Fire & Cas. Co. v. Hixson Bros. Inc., 453
F.3d 283, 285 (5th Cir. 2006). Mere conclusory allegations
are insufficient to defeat summary judgment. See Eason v.
Thaler, 73 F.3d 1322, 1325 (5th Cir. 1996).
movant must point to “portions of ‘the pleadings,
depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any,' which it
believes demonstrate the absence of a genuine issue of
material fact.” Celotex, 477 U.S. at 323. If
and when the movant carries this burden, the non-movant must
then go beyond the pleadings and present other evidence to
establish a genuine issue. See Matsushita Elec. Indus.
Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586
(1986). However, “where the non-movant bears the burden
of proof at trial, the movant may merely point to an absence
of evidence, thus shifting to the non-movant the burden of
demonstrating by competent summary judgment proof that there
is an issue of material fact warranting trial.”
Lindsey v. Sears Roebuck & Co., 16 F.3d 616, 618
(5th Cir. 1994). “This court will not assume in the
absence of any proof that the nonmoving party could or would
prove the necessary facts, and will grant summary judgment in
any case where critical evidence is so weak or tenuous on an
essential fact that it could not support a judgment in favor
of the [non-movant].” McCarty v. Hillstone Rest.
Grp., 864 F.3d 354, 357 (5th Cir. 2017).
Defendants are entitled to summary ...