`CAUSE NO. _______________________
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`FILED
`5/4/2023 1:49 PM
`FELICIA PITRE
`DISTRICT CLERK
`DALLAS CO., TEXAS
`Cheryl Watts DEPUTY
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`
`§
`THE STATE OF TEXAS
`§
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`Plaintiff,
`§
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`§
`v.
`§
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`§
`
`§
`KWEST, INC., KWEST LOGISTICS, LLC,
`MEDLOGIX SURGICAL SOLUTIONS, LLC, §
`FRANK PARKER LEE, CHRIS MERINEY, §
`OMAR KHAN, JAMES HERRERA JR. §
` Defendants.
`§
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`§
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`§
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`
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`IN THE DISTRICT COURT
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`DALLAS COUNTY, TEXAS
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`_____ JUDICIDAL DISTRICT
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`101st
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`TO THE HONORABLE JUDGE OF SAID COURT:
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`PLAINTIFF'S ORIGINAL PETITION
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`Plaintiff, the STATE OF TEXAS (herein “State”), acting by and through the Attorney
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`General of Texas, KEN PAXTON and on behalf of the public interest, files this petition
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`complaining of Defendants, KWEST, INC., KWEST LOGISTICS, LLC, MEDLOGIX
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`SURGICAL SOLUTIONS, LLC, FRANK PARKER LEE, CHRIS MERINEY, OMAR KHAN,
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`JAMES HERRERA, JR. (herein “Defendants”). In this action, the State alleges that Defendants
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`engaged in false, misleading, and deceptive acts and practices in violation of §17.46 of the Texas
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`Deceptive Trade Practices—Consumer Protection Act (DTPA), Tex. Bus. & Com. Code §§17.41–
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`17.63.
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`Specifically, Defendants engaged in misleading, deceptive, and fraudulent business
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`practices by taking advantage of a global shortage of Graphic Processing Units (herein “GPUs.”)
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`Defendants deceived consumers regarding their ability to procure GPUs, misrepresented
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`possession and quantity of the GPUs, failed to deliver GPUs to consumers as advertised, and
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`refused to honor requests to cancel or refund orders when the GPUs were not delivered.
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`Defendants’ actions have cost consumers millions of dollars across the United States. In support,
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`the State will respectfully show the Court as follows:
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`I.
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`DISCOVERY CONTROL PLAN
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`1.
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`The discovery in this case should be conducted under Level 2 pursuant to Rule
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`190.3 of the Texas Rule of Civil Procedure (“TRCP”).
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`2.
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`This case is not subject to the restrictions of expedited discovery under Rule 169 of
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`the TRCP because the relief sought by the State includes non-monetary injunctive relief.
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`3.
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`In addition to non-monetary injunctive relief, the State seeks monetary relief,
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`including civil penalties, attorneys’ fees, and costs, in excess of $250,000, that could exceed
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`$1,000,000.
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`PUBLIC INTEREST
`II.
`The State has reason to believe that Defendants have engaged in the unlawful
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`5.
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`practices set forth in this petition. The State has further reason to believe Defendants have caused
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`adverse effects to consumers in Texas. Therefore, the Consumer Protection Division of the Office
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`of the Attorney General of the State of Texas is of the opinion that these proceedings are in the
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`public interest.
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`III. DEFENDANTS
`Defendant KWEST, Inc., is a South Dakota corporation with its principal place of
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`6.
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`business at 14800 Quorum Drive, Suite 100, Dallas, TX 75254, and a mailing address of P.O. Box
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`803315, Dallas, TX 75380. It may be served with process by servicing its registered agent, Parker
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`Lee Capital, LLC, whose address is 1903 McMillan Ave #3, Dallas, TX 75206. SERVICE OF
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`PROCESS IS HEREBY REQUESTED.
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`7.
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`Defendant, KWEST Logistics, LLC, is a Dallas-based corporation with its principal
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`place of business at 4100 Spring Valley Road #820, Dallas, TX 75244. It may be served with
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`State v. KWEST, et al
`Plaintiff’s Original Petition
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`Page 2 of 12
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`process by servicing its registered agent, Seneca West whose address is 4845 Keller Springs Road,
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`Addison, TX 75001. SERVICE OF PROCESS IS HEREBY REQUESTED.
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`8.
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`Defendant, Medlogix Surgical Solutions, LLC is a Dallas-based Texas Limited
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`Liability Company with its principal place of business at 14800 Quorum Drive, Suite 100, Dallas,
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`TX 75254. It may be served with process by servicing its registered agent, Parker Lee Capital,
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`LLC, whose address is 1903 McMillan Ave #3, Dallas, TX 75206. SERVICE OF PROCESS IS
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`HEREBY REQUESTED.
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`9.
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`Defendant, Frank Parker Lee resides and does business in Dallas County.
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`Defendant Lee is an agent and owner acting by and through Defendants KWEST, Inc., KWEST
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`Logistics, LLC, and Medlogix Surgical Solutions, LLC. Defendant Lee may be served with
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`process at his residence 3847 Pine Tree Ct., Dallas, TX 75206. SERVICE OF PROCESS IS
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`HEREBY REQUESTED.
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`10.
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`Defendant, Chris Meriney resides and does business in Dallas County. Defendant
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`Meriney is an agent of and acts by and through Defendants KWEST, Inc. and KWEST Logistics,
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`LLC. Defendant Meriney may be served with process at his residence 2975 Blackburn St. #1002,
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`Dallas, TX 75204. SERVICE OF PROCESS IS HEREBY REQUESTED.
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`11.
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`Defendant, Omar Kahn resides and does business in Dallas County. Defendant
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`Kahn is an agent of and acts by and through Defendants KWEST, Inc. and KWEST Logistics,
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`LLC. Defendant Kahn may be served with process at his residence 6309 San Marino Dr., Rowlett,
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`TX 75089. SERVICE OF PROCESS IS HEREBY REQUESTED.
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`12.
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`Defendant, James Herrera Jr. resides and does business in Dallas County.
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`Defendant Herrera is an agent of and acts by and through Defendants KWEST, Inc. and KWEST
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`State v. KWEST, et al
`Plaintiff’s Original Petition
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`Page 3 of 12
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`Logistics, LLC. Defendant Herrera may be served with process at his residence 322 Alyse Rd.,
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`Roanoke, TX 76262. SERVICE OF PROCESS IS HEREBY REQUESTED.
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`IV.
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`JURISDICTION
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`13.
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`This enforcement action is brought by Attorney General Ken Paxton, through his
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`Consumer Protection Division, in the name of the STATE OF TEXAS and in the public interest
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`pursuant to the authority granted by §17.47 of the DTPA upon the grounds that the Defendants
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`have engaged in false, deceptive, and misleading acts and practices in the course of trade and
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`commerce as defined in, and declared unlawful by, §17.46 of the DTPA. In enforcement suits filed
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`pursuant to §17.47 of the DTPA, the Attorney General is authorized to seek, inter alia, civil
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`penalties and injunctive relief.
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`14.
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`Defendants are doing business in Texas and are subject to both general and specific
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`personal jurisdiction of this Court.
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`V.
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`VENUE
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`15.
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`Venue of this suit lies in Dallas County, Texas under § 17.47(b) of the DTPA,
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`because it is the Defendants principal place of business, transactions made part of this suit occurred
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`in Dallas County, Texas, and Defendants engaged in trade and commerce in Dallas County, Texas.
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`VI. ACTS OF AGENTS
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`16. Whenever in this Petition it is alleged that Defendants did any act, it is meant that
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`the named Defendants performed or participated in the act, or the named Defendants’ officers,
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`agents, partners, trustees, or employees performed or participated in the act on behalf of and under
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`the authority of Defendants.
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`VII. TRADE AND COMMERCE
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`17.
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`At all times described below, Defendants and their agents have engaged in conduct
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`State v. KWEST, et al
`Plaintiff’s Original Petition
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`Page 4 of 12
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`which constitutes “trade” and “commerce” defined in § 17.45(6) of the DTPA as follows:
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`“Trade” and “commerce” mean the advertising, offering for sale, sale, lease, or
`distribution of any good or service, of any property, tangible or intangible, real,
`personal, or mixed, and any other article, commodity, or thing of value, wherever
`situated, and shall include any trade or commerce directly or indirectly affecting
`the people of this state.
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`VIII. CLAIM FOR RELIEF
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`18.
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`The State seeks monetary relief—including penalties, costs, expenses, and
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`
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`attorneys’ fees—in excess of $250,000 and that could exceed $1,000,000.
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`19.
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`The State also seeks non-monetary, injunctive relief.
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`IX.
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`FACTUAL ALLEGATIONS
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`20.
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`In early 2021, the global market was experiencing a commercial shortage of
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`computer graphic cards, also known as GPUs. GPUs were in high demand as a result of COVID-
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`19, which caused a significantly low supply in the market.
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`21.
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`Defendants took advantage of the demand for GPUs and began advertising GPUs
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`for sale to consumers in February 2021. Defendants claimed to have procured a shipment of GPUs
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`outside of the United States that were significantly reduced in price.
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`22.
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`The GPUs were priced 60% under market value, with orders ranging from $400.00
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`to $25,000.00. At such a low price point, Defendants were able to sell a large quantity of GPUs
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`between February 2021 and June 2021, totaling to approximately $10,329,750.00 to Defendants
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`for the sale of the GPUs.
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`23.
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`Consumers who purchased the advertised GPUs, were told by the Defendants that
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`orders would be delivered within three to four weeks. However, Defendants never fulfilled the
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`consumer orders.
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`24.
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`After three to four weeks, absent delivery, consumers inquired, and Defendants
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`State v. KWEST, et al
`Plaintiff’s Original Petition
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`Page 5 of 12
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`began their dilatory tactics. At the outset, Defendants communicated with a limited number of
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`individual consumers regarding the shipping delays, telling them that they were due to processing
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`issues.
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`25.
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`Later, Defendants advised some consumers that their distributor, TG Investors
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`Group, LLC, based in Allen, Texas, was experiencing issues with U.S. Customs at the water border
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`in Houston, Texas, while Defendants notified other consumers that the delayed delivery was
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`actually due to the Suez Canal ship blockage.
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`26. Over the course of a four months of delay and dilatory tactics, Defendants
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`continued to respond to consumers with a variety of excuses all centered around alleged shipment
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`delays by U.S. customs. By May 2021, Defendants sent a series of emails to consumers stating
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`that the GPUs passed U.S. Customs and would be shipping within the week. However, the GPUs
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`were not shipped.
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`27.
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` Absent the promised delivery in May 2021, consumers received another email in
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`early June 2021 stating that the consumers’ GPU orders were in Defendants’ possession and would
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`ship within the coming weeks. Again, the GPUs were not shipped to consumers.
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`28.
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`Finally, on June 29, 2021 – after months of excuses and promises to ship the
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`products – Defendants sent a final email to consumers, containing the revelation that their
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`distributor offered a fraudulent deal to Defendants. Defendants further notified consumers for the
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`first time that ongoing litigation existed against the distributor and advised consumers to file a
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`chargeback with their credit cards in order to receive refunds.
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` 29. Defendants filed suit against the distributor on June 24, 2021. The petition, which
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`was verified and sworn by Defendant Lee, made several assertions demonstrating Defendants’
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`misleading, deceptive, and fraudulent business practices. Namely, Defendants pled that the parties
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`State v. KWEST, et al
`Plaintiff’s Original Petition
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`
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`Page 6 of 12
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`entered into an agreement on March 3, 2021. All the while, Defendants had already been
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`advertising, selling, and promising 3-4-week product delivery in early February 2021, all without
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`having procured a single GPU.
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`30.
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`Additionally, Defendants pled that within the agreement with the distributor,
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`delivery of the GPUs would be up to 45 days from the date of payment. Yet, Defendants continued
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`to promise 3–4-week delivery windows to consumers, and in several instances, lied to consumers
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`by telling them that the GPUs were in their possession.
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`31.
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`From the total payments made to the distributor, Defendants sold in or around
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`$10,329,750.00 worth of GPUs that were never delivered or refunded to consumers.
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`32.
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`In total, the State received 43 consumer complaints, the Better Business Bureau
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`(“BBB”) received 53 consumer complaints, and the Federal Trade Commission (“FTC”) received
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`197 complaints related to Defendants’ conduct.
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`33.
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`Defendants misled consumers by misrepresenting possession and quantity of the
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`product, failed to deliver products as advertised, and refused to honor requests to cancel orders and
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`issue refunds when products were not delivered.
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`X.
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`FALSE, MISLEADING, OR DECEPTIVE ACTS
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`The State incorporates and adopts by reference the allegations contained in each
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`34.
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`and every preceding paragraph of this Petition.
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`35.
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`The Texas Deceptive Trade Practices Act prohibits all false, misleading, or
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`deceptive acts or practices in the conduct of any trade or commerce.
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`36.
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`Defendants, as alleged herein, have in the course of trade and commerce engaged
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`in false, misleading, and deceptive acts and practices declared unlawful in section 17.46(a) of the
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`DTPA, including by engaging in conduct specifically defined to be false, deceptive, or misleading
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`State v. KWEST, et al
`Plaintiff’s Original Petition
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`
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`Page 7 of 12
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`by section 17.46(b) such as:
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`a. Misrepresenting the availability of the product during sales transactions with
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`consumers and refusing to honor consumers’ requests to cancel and issue
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`refunds when the products were not delivered, in violation of DTPA section
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`17.46(a);
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`b. Causing confusion or misunderstanding as to the source, sponsorship, approval,
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`or certification of goods or services, in violation of DTPA section 17.46(b)(2);
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`c. Advertising goods or services with intent not to sell them as advertised, in violation
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`of DTPA section 17.46(b)(9); and
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`d. Failing to disclose information concerning goods or services which was known
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`at the time of the transaction if such failure to disclose such information was
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`intended to induce the consumer into a transaction into which the consumer
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`would not have entered had the information been disclosed, in violation of
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`DTPA section 17.46(b)(24).
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`XI.
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`PRAYER FOR RELIEF
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`37.
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`The State incorporates and adopts by reference the allegations contained in each
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`and every preceding paragraph of this Petition.
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`38.
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`The State prays that Defendants be cited according to the law to appear and that
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`after due notice and hearing a temporary injunction be issued, and that upon final hearing a
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`permanent injunction be issued, restraining and enjoining Defendants, its officers, agents, servants,
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`employees and attorneys and those persons in active concert or participation with Defendants who
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`receive actual notice of the injunction by personal service or otherwise from engaging in false,
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`misleading or deceptive acts and practices declared to be unlawful by the DTPA, including but not
`
`State v. KWEST, et al
`Plaintiff’s Original Petition
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`
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`Page 8 of 12
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`limited to:
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`a.
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`Advertising, selling, or offering to provide – via mail, the internet, phone or
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`through other means – any goods, unless at the time of the advertisement,
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`Defendants have a reasonable basis to expect that the goods will be
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`provided:
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`i. within the time represented; or
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`ii. if no time is represented, within thirty (30) days after receipt of a
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`completed order;
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`b.
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`Failing to offer, in writing, to a consumer, without a consumer’s prior
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`demand and within a reasonable time after Defendants first become aware
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`of their inability to provide goods within the represented timeframe, an
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`option for a consumer to consent to a delay in shipping or to receive a full
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`refund in exchange for cancelling an order. Said offer shall not exceed thirty
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`(30) days and shall provide a consumer with definite revised shipping date;
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`c.
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`Accepting compensation in exchange for goods, unless Defendants have a
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`reasonable basis to expect that she will be able to provide such goods:
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`i. within the time represented; or
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`ii. if no time is represented, within thirty (30) days after receipt of a
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`completed order;
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`d.
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`Failing to notify consumers that Defendants are canceling an order and
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`sending a refund within the time Defendants would have sent a notice of
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`delay;
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`e.
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`Failing to cancel an order and providing a prompt refund if:
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`State v. KWEST, et al
`Plaintiff’s Original Petition
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`
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`Page 9 of 12
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`i. a consumer exercises an option to cancel pursuant to Defendants’
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`refund policy and before Defendants ship goods;
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`ii. a consumer does not respond to Defendants’ first notice of a definite
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`revised shipment date of 30 days or less and Defendants have not
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`shipped goods or received the consumer’s consent to a further delay
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`by the definite revised shipment;
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`iii. a consumer does not respond to Defendants’ notice of a definite
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`revised shipment date of more than 30 days (or notice that
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`Defendants are unable to provide a definite revised shipment date)
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`and Defendants have not shipped the goods within 30 days of the
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`original shipment date;
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`iv. a consumer consents to a definite delay and Defendants have not
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`shipped or obtained the consumer’s consent to any additional delay
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`by the shipment time to which the consumer consented;
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`v. Defendants have not shipped or provided the required delay or
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`renewed option notices on time; or
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`vi. Defendants have determined that it will never be able to ship the
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`merchandise; and
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`f.
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`Failing to clearly and conspicuously disclose on Defendants’ website, prior
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`to a consumer making a purchase, Defendants’ refund policy. Such
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`disclosures include, but are not limited to, “all sales final” policies, if any.
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`39.
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`Plaintiff further prays that upon final hearing, this Court will order the following:
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`a.
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`Award money damages and restitution of monies paid by consumers;
`
`State v. KWEST, et al
`Plaintiff’s Original Petition
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`
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`Page 10 of 12
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`b.
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`Adjudge against Defendants civil penalties in favor of the State in the
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`amount of not more than $10,000 per violation of the DTPA;
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`c.
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`Adjudge against Defendants civil penalties in favor of the State an
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`additional amount of not more than $250,000 per violation of the DTPA,
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`when the act or practice that acquired or deprived money or other property
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`from consumers who were 65 years of age or older when the act or practice
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`occurred;
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`d.
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`Order Defendants to pay the State’s attorneys’ fees and cost of court
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`pursuant to Tex. Gov’t Code § 402.006(c);
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`e.
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`f.
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`Order Defendants to pay both pre-judgment and post-judgment interest on
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`all money awards as provided by law; and
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`Grant all other and further relief the State may show itself entitled.
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`Respectfully submitted,
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`KEN PAXTON
`Attorney General of Texas
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`BRENT WEBSTER
`First Assistant Attorney General
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`GRANT DORFMAN
`Deputy First Assistant Attorney General
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`SHAWN E. COWLES
`Deputy Attorney General for Civil Litigation
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`STEVEN ROBINSON
`Division Chief, Consumer Protection Division
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`State v. KWEST, et al
`Plaintiff’s Original Petition
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`Page 11 of 12
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`_
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`/s/ Joselyn R. Mathews_
`JOSELYN R. MATHEWS
`Assistant Attorney General
`Texas State Bar No. 24129108
`Joselyn.Mathews@oag.texas.gov
`MADISON REIGHTLER
`Assistant Attorney General
`Texas State Bar No. 24132560
`Madison.Reightler@oag.texas.gov
`Office of the Texas Attorney General
`Consumer Protection Division
`P.O. Box 12548
`Austin, Texas 78711
`Phone: (512) 475-4288
`Fax: 512-473-8301
`ATTORNEYS FOR THE STATE
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`
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`State v. KWEST, et al
`Plaintiff’s Original Petition
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`Page 12 of 12
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