FILED
`DALLAS COUNTY
`12/16/2019 1:50 PM
`FELICIA PITRE
`DISTRICT CLERK
`
`CAUSE NO. DC-l9-15598
`CAUSE NO. DC-19-15598
`IN THE DISTRICT COURT OF
`IN THE DISTRICT COURT OF
`
`Treva Parker-Ayodele
`
`4914 STANFORD, LLC,
`4914 STANFORD, LLC,
`
`Plaintiff,
`Plaintiff,
`
`§
`§
`§
`§
`g
`§
`§
`g
`§
`g
`§
`§
`298th JUDICIAL DISTRICT
`298th JUDICIAL DISTRICT
`§
`g
`PLAINTIFF'S RESPONSE TO
`PLAINTIFF'S RESPONSE TO
`DEFENDANTS' FIRST AMENDED PLEA TO THE JURISDICTION
`DEFENDANTS' FIRST AMENDED PLEA TO THE JURISDICTION
`Plaintiff 4914 Stanford, LLC ("Stanford") hereby files its response to defendants' plea to
`Plaintiff 4914 Stanford, LLC ("Stanford") hereby files its response to defendants' plea to
`the jurisdiction and respectfully shows the Court as follows:
`the jurisdiction and respectfully shows the Court as follows:
`
`v.
`v.
`JENNA OWENS AND FITISH, LLC
`JENNA OWENS AND FITISH, LLC
`Defendants.
`Defendants.
`
`DALLAS COUNTY, TEXAS
`DALLAS COUNTY, TEXAS
`
`I.
`I.
`Introduction
`Introduction
`Defendants Jenna Owens ("Owens") and Fitish, LLC ("Fitish") (collectively, "defendants")
`Defendants Jenna Owens ("Owens") and Fitish, LLC ("Fitish") (collectively, "defendants")
`
`have filed a plea to the jurisdiction asserting that Stanford lacks standing to assert a derivative
`have filed a plea to the jurisdiction asserting that Stanford lacks standing to assert a derivative
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`action on behalf of Fitish because Stanford is no longer a shareholder of Fitish. Stanford has
`action on behalf of Fitish because Stanford is no longer a shareholder of Fitish. Stanford has
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`asserted only two derivative claims in its petition and, therefore, the plea does not address all of
`asserted only two derivative claims in its petition and, therefore, the plea does not address all of
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`Stanford's claims. And, while Stanford agrees that, generally, former shareholders do not have
`Stanford's claims. And, while Stanford agrees that, generally, former shareholders do not have
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`standing to bring derivative claims on behalf of the corporation they used to be part of, this case
`standing to bring derivative claims on behalf of the corporation they used to be part of, this case
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`presents an exception to that rule because Stanford was fraudulently induced into agreeing to sell
`presents an exception to that rule because Stanford was fraudulently induced into agreeing to sell
`its shares to the sole majority shareholder of Fitish, namely Owens. As such, Stanford contends
`its shares to the sole majority shareholder of Fitish, namely Owens. As such, Stanford contends
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`the agreement terminating its ownership interest should be rescinded, reinstating Stanford as a
`the agreement terminating its ownership interest should be rescinded, reinstating Stanford as a
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`shareholder and providing the standing necessary to pursue the derivative claims.
`shareholder and providing the standing necessary to pursue the derivative claims.
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`It is not the Court's function at this time to delve into the merits of Stanford's non-derivative
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`claims because (a) those claims are not subject to the plea to the jurisdiction and (b) Owens has
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`not, and could not otherwise, challenge those properly-pleaded claims. But an understanding of
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`those claims explains why ruling on the standing issue at this time as to the derivative claims would
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`be premature. Stanford pleaded multiple fraud claims against the defendants, which also renders
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`the parties' buyout agreement void. In that event, and as requested by Stanford in its petition,
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`Stanford is entitled to return of its 40% ownership in Fitish.l Therefore, Stanford is a shareholder
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`of Fitish with standing to bring derivative claims on its behalf.
`
`II.
`
`Factual Background
`
`A.
`
`Fitish is formed, and the Company Agreement is Executed.
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`Fitish was founded in 2017 with Stanford as the sole capital contributor,
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`investing
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`$120,000.00, and obtaining a 40% ownership in Fitish.2 At all relevant times, Stanford was the
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`only non—managing member and sole capital contributor to Fitish.3 The company's only other
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`member and sole manager, Owens, did not contribute a single dollar to the start—up of the business.4
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`The Company Agreement for Fitish (the "Company Agreement") sets forth the terms and
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`conditions governing the members' duties and obligations regarding the company.5 Owens signed
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`the Company Agreement as the only managing member, while Alexander Perry ("Perry") signed
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`’ The Court should consider only the petition when determining subject matter jurisdiction if additional facts are not
`necessary to resolve the jurisdictional dispute. See Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554 (Tex. 2000).
`That is the case here. However, in the event the Court believes that those facts must be stated under oath, Stanford
`conditionally files as Exhibit "A" the affidavit of Alexander David Perry stating those facts. This affidavit was served
`on counsel for Owens and Fitish on December 12, 2019, pursuant to Texas Rule of Civil Procedure 120a.
`2 FAP at
`11 3.
`3 Id. at 1[ 12.
`4 Id.
`
`5 The Company Agreement is Exhibit "A" to the First Amended Petition and is currently subject to a motion to seal.
`The Agreement is also included as Exhibit "A" to Perry‘s affidavit, which is attached to this response as Exhibit "A."
`A complete copy of the affidavit with the Company Agreement attached thereto will be provided to the Court at the
`time of the hearing on the plea.
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`as the only other member of Fitish. Thereafter, on November 17, 2017, the Company Agreement
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`was amended to replace Perry with Stanford.
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`B.
`
`Questions as to Corporate Waste and Impropriety by Owens Begin to Arise, and
`Stanford is Forced to Sell Its Ownership Interest Back to Owens.
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`As Fitish continued to grow, Stanford's managers questioned Owens numerous times about
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`what appeared to be personal expenditures paid out of the company’s account.6 Owens repeatedly
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`refused to meet with Stanford and eventually attempted to justify her personal expenses on the
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`company's dime.7
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`Thereafter, around August 2018, Owens discussed bringing on another investor to help run
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`the business, but she ignored Stanford's requests as to the identity of this investor, the role the new
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`investor would play, and whether this was a sound decision for Fitish.8 Instead of responding to
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`Stanford's requests, Owens chose to pursue the new investor without the required unanimous
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`consent or knowledge of her fellow member pursuant to the Company Agreement.9
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`Pursuant to Section 2.3, additional persons may become members "only if approved by and
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`on terms determined by a unanimous written agreement signed by all of the existing members".
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`The Company Agreement further states that, "[u]nless expressly provided in this Agreement, no
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`member, acting alone, has any authority to undertake or assume any obligation, debt, or
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`responsibility, or otherwise act on behalf of, the Company or any other Member." Article 4 sets
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`forth the management of Fitish and also requires the admission of a new member to be
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`unanimously approved by the members in writing to constitute an act of the company. Finally,
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`6PAP at1l 13.
`71d.
`
`8 Id. atfil 14.
`91d.
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`Article 5 mandates that Fitish accounting records be ”open to inspection and copying by
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`Members. . .for purposes reasonably related to the Membership Interest of such Members."
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`On September 14, 2018, Owens without warning removed one of Stanford's managers from
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`being able to access and View the Fitish bank account, leaving Stanford and its managers, including
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`Perry,
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`incapable of accessing or evaluating the books or records.10 Owens' actions were
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`purportedly at the behest of the "new business partners" she refused to disclose to Stanford. '1 This
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`action violates Article 5 of the Company Agreement. Owens then demanded that Stanford sell its
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`shares to her.12
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`Stanford did not want to sell its shares but Owens claimed she would cut off all lines of
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`communication with Stanford, drain Fitish‘s bank account, and use the money to create a new
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`entity, thereby cutting Stanford out of the Company Agreement. 13 Based on these actions, Stanford
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`entered into an Assignment and Redemption Agreement (the "Redemption Agreement") with
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`Fitish.14 Pursuant to that Agreement, Stanford sold its equity interest in its entirety to Fitish for
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`$144,000.00.
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`Stanford later learned,
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`in the first half of 2019, that three days after Owens blocked
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`Stanford from Viewing the bank accounts, she placed the largest order in Fitish's history and took
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`on a loan and equity without the approval or consent of Fitish's members.15 All of this was done
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`while Owens steadfastly refused to inform Stanford of the daily operations of Fitish, the influx of
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`capital, or the large order.” Stanford further learned that Owens purposefully delayed pursuit of
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`”FA? atfil 15.
`'1 1d.
`
`'2 Id. at 11 17.
`'3 Id.
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`'4 Id. at 11 18.
`‘5 Id. at 1111 15-16.
`'6 Id. at 11 17.
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`corporate opportunities and depositing funds that rightfully belonged to Fitish.” Stanford also
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`learned at that time that Fitish's monthly revenue had increased from a reported revenue of less
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`than $10,000.00 to over $100,000.00 almost instantly.18
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`Absent Owens' concealment, failures to disclose, corporate waste, and threats, Stanford
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`would not have entered the Agreement and would still be a member of Fitish entitled to the benefits
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`of a 40% owner.19 Accordingly, Stanford has requested a rescission of the Agreement and
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`reinstatement of its status as a shareholder.20
`
`II.
`
`Arguments and Authority
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`A plea to the jurisdiction is a dilatory plea, the purpose of which is to defeat a cause of
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`action Without reaching the merits of the claim. Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547,
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`554 (Tex. 2000). Issues raised by a plea are "often such that they cannot be resolved without
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`hearing evidence,” and the court should hear such evidence as necessary to determine whether it
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`has subject matter jurisdiction over the case. Id. However, the proper function of a dilatory plea
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`"does not authorize an inquiry so far into the substance of the claims presented that plaintiffs are
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`required to put on their case simply to establish jurisdiction." Id.
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`When a plea to the jurisdiction challenges the pleadings, a court must determine whether
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`the pleader has alleged facts that affirmatively demonstrate the court's jurisdiction to hear the
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`cause. Tex. Ass'n ofBus. v. Tex. Air Control Bd., 852 S.W.3d 440, 446 (Tex. 1993). Courts construe
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`the pleadings liberally in favor of the pleader and look to the pleader's intent. Id. After the
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`defendant asserts and supports with evidence that the trial court lacks subject matter jurisdiction,
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`'7 Id. atjl 18.
`'8 Id.
`
`'9 Id. at‘fl 19.
`20 Id. am 30.
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`a plaintiff, when the facts underlying the merits and subject matter jurisdiction are intertwined,
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`must show that there is a disputed material fact regarding the jurisdictional issue. See Huckabee v.
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`Time Warner Entm’t Cop. L.P., l9 S.W.3d 413, 420 (Tex. 2000).
`
`A.
`
`Stanford only Asserts Two Derivative Claims in its Petition, and the Other Claims
`are Not Subject to Defendants' Plea.
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`The only claims subject to defendants' plea are the two derivative claims pleaded by
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`Stanford. Stanford has asserted only two claims, which are arguably personal to the corporate
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`entity, as opposed to those belonging to Stanford, regarding corporate waste. These claims are
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`derivative, and Stanford agrees that those claims may not be brought by a former shareholder. The
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`remainder of the claims are personal to Stanford and are not derivative claims subject to the plea.
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`These claims are for fraud, fraudulent misrepresentation, fraud by non-disclosure, breach of
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`fiduciary duty, and a declaration that the Redemption Agreement be voided and Stanford reinstated
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`as a shareholder.21 If Stanford prevails on those claims, then Stanford i_s a shareholder, and the
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`jurisdiction plea is for naught.
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`The Texas Supreme Court has held that determination of subject-matter jurisdiction can be
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`delayed until further development of the merits of the case. Bland Indep. Sch. Dist, 34 S.W.3d at
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`554. That is precisely what this Court should do here because it serves the purpose of judicial
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`economy. In other words, this Court can easily allow the parties to continue with this litigation in
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`order to further flesh-out the evidentiary support for Stanford's fraud claims against the defendants.
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`2' A contractual release may be avoided by proof that it was fraudulently induced, and the parol evidence rule does
`not bar evidence of such fraud. Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. ofAm, 341 S.W.3d 323, 333
`(Tex. 2011). Though a valid fraudulent inducement claim generally precludes parties from relying on a contract's
`terms, including its releases, the contract itself may preclude a valid fraudulent inducement claim if it (1) "clearly
`expresses the parties' intent to waive fraudulent inducement claims" or (2) "disclaims reliance on representations about
`specific matters in dispute.“ Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 181 (Tex. 1997). There is no
`such clear expression of the parties' intent in the Redemption Agreement, and therefore, Stanford has not released its
`fraudulent inducement claims.
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`In the event that Stanford prevails, and the Court rescinds the Redemption Agreement and
`In the event that Stanford prevails, and the Court rescinds the Redemption Agreement and
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`reinstates Stanford as a shareholder, the derivative claims can then be litigated. It would be a waste
`reinstates Stanford as a shareholder, the derivative claims can then be litigated. It would be a waste
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`0f the Court's time and the parties‘ resources to dismiss these derivate claims now, only t0 later
`of the Court's time and the parties' resources to dismiss these derivate claims now, only to later
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`have them reasserted after standing has been confirmed.
`have them reasserted after standing has been confirmed.
`A Fiduciary Duty was created 0n the part 0f Owens by the Redemption Agreement.
`A Fiduciary Duty was created on the part of Owens by the Redemption Agreement.
`The Court does not need t0 (and cannot) address the merits of the non-derivative claims at
`The Court does not need to (and cannot) address the merits of the non-derivative claims at
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`B.
`B.
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`this time because those claims are not the subject of defendants’ plea, are properly pleaded, and
`this time because those claims are not the subject of defendants' plea, are properly pleaded, and
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`have not been challenged in any manner. However, Stanford nonetheless explains those claims
`have not been challenged in any manner. However, Stanford nonetheless explains those claims
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`because the Court should understand that its request to delay ruling on the standing issue as to the
`because the Court should understand that its request to delay ruling on the standing issue as to the
`derivative claims has very real merit. Simply put, Owens breached fiduciary obligations to
`derivative claims has very real merit. Simply put, Owens breached fiduciary obligations to
`Stanford when she pushed Stanford out of the company without disclosing that there were
`Stanford when she pushed Stanford out of the company without disclosing that there were
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`corporate opportunities for large sales that she was delaying until Stanford was out. She
`corporate opportunities for large sales that she was delaying until Stanford was out. She
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`deliberately withheld that Fitish sales were going t0 increase exponentially because she wanted
`deliberately withheld that Fitish sales were going to increase exponentially because she wanted
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`Stanford gone first. Under these circumstances, Stanford is entitled t0 rescission ofthe Redemption
`Stanford gone first. Under these circumstances, Stanford is entitled to rescission of the Redemption
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`Agreement and reinstatement as a shareholder.
`Agreement and reinstatement as a shareholder.
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`Texas courts have held that where, as here, there is a request for shareholder action (such
`Texas courts have held that where, as here, there is a request for shareho lder action (such
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`as an offer to redeem shares in a company), founders, directors, and officers 0f the company with
`as an offer to redeem shares in a company), founders, directors, and officers of the company with
`an insider's knowledge of the affairs and prospects of the company owe a fiduciary duty of
`an insider's knowledge of the affairs and prospects of the company owe a fiduciary duty of
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`complete and total candor t0 the shareholders. See Miller v. Miller, 700 S.W.2d 941, 946 (Tex.
`complete and total candor to the shareholders. See Miller v. Miller, 700 S.W.2d 941, 946 (Tex.
`App. — Dallas 1985, writ ref‘d n.r.e); In re Estate ofFawcett, 55 S.W.3d 214, 220 (Tex. App. —
`App. - Dallas 1985, writ refd n.r.e); In re Estate of Fawcett, 55 S.W.3d 214, 220 (Tex. App. -
`Eastland 2001, pet. denied); Allen v. Devon Energy Holdings, LLC, 367 S.W.3d 355, 392—96 (Tex.
`Eastland 2001, pet. denied); Allen v. Devon Energy Holdings, LLC, 367 S.W.3d 355, 392-96 (Tex.
`App. — Houston [lst Dist] 2012, pet. granted, judgm’t vacated W.r.m.). This is precisely the basis
`App. - Houston [1st Dist.] 2012, pet. granted,judgm't vacated w.r.m.). This is precisely the basis
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`for Stanford's standing to bring its derivative claims.
`for Stanford's standing to bring its derivative claims.
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`In Miller, the plaintiff brought suit against her former husband to rescind a shareholders'
`In Miller, the plaintiff brought suit against her former husband to rescind a shareholders'
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`agreement concerning corporate stock the couple owned prior t0 their divorce and Which was not
`agreement concerning corporate stock the couple owned prior to their divorce and which was not
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`disposed 0f by the divorce decree. 700 S.W.2d at 942. The wife alleged that the former husband
`disposed of by the divorce decree. 700 S.W.2d at 942. The wife alleged that the former husband
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`breached his fiduciary duty of disclosure by failing to disclose that he had received an offer from
`breached his fiduciary duty of disclosure by failing to disclose that he had received an offer from
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`a third-party to purchase the shares prior t0 entering into the shareholders‘ agreement with the
`a third-party to purchase the shares prior to entering into the shareholders' agreement with the
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`plaintiff. Id. at 943—44. The trial court found no fiduciary duty existed and refused to rescind the
`plaintiff. Id. at 943-44. The trial court found no fiduciary duty existed and refused to rescind the
`shareholder agreement. Id. at 944. The Dallas Court 0f Appeals, however, reversed and
`shareholder agreement. Id. at 944. The Dallas Court of Appeals, however, reversed and
`ordered rescission, finding that the husband owed a fiduciarv dutv t0 his wife bv virtue 0f
`ordered rescission, finding that the husband owed a fiduciary duty to his wife by virtue of
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`his position as the founder, officer, and director 0f the corporation with an insider's
`his position as the founder, officer, and director of the corporation with an insider's
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`knowledge 0f the corporation's prospects and that he breached that dutv bv failing t0 disclose
`knowledge of the corporation's prospects and that he breached that duty by failing to disclose
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`that he had received an offer from a third-partv to purchase the shares. Id. at 945-46.
`that he had received an offer from a third-party to purchase the shares. Id. at 945-46.
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`Similarly, Estate ofFawcett involved a suit by a former shareholder against the remaining
`Similarly, Estate of Fawcett involved a suit by a former shareholder against the remaining
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`shareholder in Which the plaintiff alleged a breach of fiduciary duty based on the defendant's failure
`shareholder in which the plaintiff alleged a breach of fiduciary duty based on the defendant's failure
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`to disclose, at the time the parties entered into a stock purchase agreement, the fact that the
`to disclose, at the time the parties entered into a stock purchase agreement, the fact that the
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`corporation had an opportunity to construct and operate a natural gas pipeline. 55 S.W.3d at 216—
`corporation had an opportunity to construct and operate a natural gas pipeline. 55 S.W.3d at 216-
`17. Citing Miller, the court recognized that officers and directors owe fiduciary duties t0 the
`17. Citing Miller, the court recognized that officers and directors owe fi duciary duties to the
`shareholders of a corporation when they purchase the shareholder's stock. Id. at 220—21. The court
`shareholders of a corporation when they purchase the shareholder's stock. Id. at 220-21. The court
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`then held that the plaintiff properly alleged a fact issue as to the defendant's breach of fiduciary
`then held that the plaintiff properly alleged a fact issue as to the defendant's breach of fiduciary
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`duty based on the defendant's failure to disclose. Id.
`duty based on the defendant's failure to disclose. Id.
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`Because the subject transaction was a repurchase by Fitish 0f membership interests in
`Because the subject transaction was a repurchase by Fitish of membership interests in
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`Fitish, Owens, as the sole manager and individual with unique insider's knowledge of Fitish's
`Fitish, Owens, as the sole manager and individual with unique insider's knowledge of Fitish's
`prospects, owed Stanford/Perry a fiduciary duty of complete candor, as a matter of law. Her refusal
`prospects, owed Stanford/Perry a fiduciary duty of complete candor, as a matter oflaw. Her refusal
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`and failure to abide by that duty constitutes a breach for which Stanford has standing to bring a
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`derivative claim on behalf of Fitish.
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`C.
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`A Fiduciary Duty of Loyalty was also owed to Stanford and Fitish by Owens, which
`She Breached.
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`In Texas, the duty of loyalty requires that the fiduciary: (1) avoid self-dealing; (2) provide
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`complete disclosure of material information; and (3) act in good faith. Gearhart Indus, Inc. v.
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`Smith Int'l, Inc, 741 F.2d 707, 719 (5th Cir. 1984) (applying Texas law). The duty of loyalty is
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`"rigid,"22 "unyielding!"23 and requires "an extreme measure of candor, unselfishness, and good
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`faith on the part of the [fiduciary]."24 Obviously, this fiduciary duty of loyalty requires Owens to
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`put the interests of Fitish and its shareholders before her own interests. Pinnacle Data Servs. v.
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`Gillen, 104 S.W.3d 188, 198—99 (Tex. App. — Texarkana 2003, no pet), disapproved on other
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`grounds by Ritchie v. Rupe, 443 S.W.3d 856 (Tex. 2014); Loy v. Harter, 128 S.W.3d 397, 407
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`(Tex. App. — Texarkana 2004, pet. denied).
`
`When this fiduciary duty is applied to a redemption transaction, like that here, the duty of
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`loyalty runs to each shareholder who elected to tender his ownership in the company, and any one
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`of them may sue for breach of that duty where the fiduciary acted with less than total candor.
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`Estate ofFawcett, 55 S.W.3d at 220 (an officer or director of a closely held company, as well as
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`the company itself, may become fiduciaries to a shareholder when the corporation, officer, or
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`director repurchases a shareholder's stock); Miller, 700 S.W.2d at 946 (officer or director has
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`limited fiduciary duty to individual shareholders to disclose knowledge of special matters relating
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`to corporate business that may affect value of the stock).
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`22 [all Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567, 577 (Tex. 1963).
`23 Canion v. Texas Cycle Supply, Inc, 537 S.W.2d 510, 513 (Tex. App. — Austin 1976, writ ref‘d n.r.e.).
`2“ Holloway, 368 S.W.2d at 577; see also Loy, 128 S.W.3d at 407; Niagara Fire Ins. Co. v. Numismatic Co., 380
`S.W.2d 830 (Tex. Civ. App. — Fort Worth 1964, writ ref‘d n.r.e.) (breach of duty of loyalty for officer/director to
`purchase corporate assets).
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`Given Stanford's allegations that Owens failed to disclose material information regarding
`Given Stanford's allegations that Owens failed to disclose material information regarding
`Fitish to Stanford before agreeing to sell its interests, Owens breached her duty of loyalty t0 both
`Fitish to Stanford before agreeing to sell its interests, Owens breached her duty of loyalty to both
`Stanford and Fitish. As a result, Stanford may bring derivative claims on Fitish's behalf.
`Stanford and Fitish. As a result, Stanford may bring derivative claims on Fitish's behalf.
`Stanford has pleaded facts sufficient to establish a fraud claim, which has merit, and,
`Stanford has pleaded facts sufficient to establish a fraud claim, which has merit, and,
`if proven, entitles Stanford to rescission of the Agreement and return of its 40%
`if proven, entitles Stanford to rescission of the Agreement and return of its 40%
`Ownership in Fitish.
`Ownership in Fitish.
`In Stanford's First Amended Petition, it sets forth facts establishing its fraud claims, which
`In Stanford's First Amended Petition, it sets forth facts establishing its fraud claims, which
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`D.
`D.
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`include fraudulent misrepresentation, fraudulent inducement, and fraud by non-disclosure.
`include fraudulent misrepresentation, fraudulent inducement, and fraud by non-disclosure.
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`Stanford specifically seeks a declaration from the Court finding the Agreement void and returning
`Stanford specifically seeks a declaration from the Court finding the Agreement void and returning
`to Stanford its 40% ownership interest in Fitish. If the Agreement is found to be void and
`to Stanford its 40% ownership interest in Fitish. If the Agreement is found to be void and
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`unenforceable, then Stanford remains a Fitish shareholder such that Fitish's claim that Stanford
`unenforceable, then Stanford remains a Fitish shareholder such that Fitish's claim that Stanford
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`lacks standing must fail.
`lacks standing must fail.
`
`"[F]raud vitiates whatever it touches[.]" Estate 0f Stonecz’pher v. Estate 0f Butts, 591
`"[F]raud vitiates whatever it touches[.]" Estate of Stonecipher v. Estate of Butts, 591
`S.W.2d 806, 809 (Tex. 1979); see also Allen v. Devon Energy Holdings, LLC, 367 S.W.3d 355,
`S.W.2d 806, 809 (Tex. 1979); see also Allen v. Devon Energy Holdings, LLC, 367 S.W.3d 355,
`368 (Tex. App. — Houston [lst Dist] 2012, pet. granted, judgm't vacated w.r.m.). To state a prima
`368 (Tex. App. - Houston [1st Dist.] 2012, pet. granted, judgm't vacated w.r.m.). To state a prima
`facie case for fraud, Stanford must establish: (1) that a material misrepresentation was made;
`facie case for fraud, Stanford must establish: (1) that a material misrepresentation was made;
`(2) the representation was false; (3) when the representation was made, Owens knew it was false
`(2) the representation was false; (3) when the representation was made, Owens knew it was false
`or made it recklessly without any knowledge of the truth and as a positive assertion; (4) Owens
`or made it recklessly without any knowledge of the truth and as a positive assertion; ( 4) Owens
`made the representation with the intent that Stanford should act upon it; (5) Stanford acted in
`made the representation with the intent that Stanford should act upon it; (5) Stanford acted in
`reliance on the representation; and (6) Stanford suffered injury. In re FirstMeriI Bank, N.A., 52
`reliance on the representation; and (6) Stanford suffered injury. In re FirstMerit Bank, NA., 52
`S.W.3d 749, 758 (Tex. 2001). Fraudulent inducement is a species ofcommon-law fraud that shares
`S.W.3d 749, 758 (Tex. 2001). Fraudulent inducement is a species of common-law fraud that shares
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`the same basic elements. Anderson v. Durant, 550 S.W.3d 605, 614 (Tex. 2018).
`the same basic elements. Anderson v. Durant, 550 S.W.3d 605, 614 (Tex. 2018).
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`7388730 vi (72314.00002.000)
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`

`

`Owens fraudulently induced Stanford to enter into the Agreement. She threatened, lied,
`Owens fraudulently induced Stanford to enter into the Agreement. She threatened, lied,
`and made materially false statements to Stanford on Which she intended it to rely for purposes of
`and made materially false statements to Stanford on which she intended it to rely for purposes of
`
`obtaining Stanford's shares in Fitish. This is fraud, pure and simple, and it requires that the
`obtaining Stanford's shares in Fitish. This is fraud, pure and simple, and it requires that the
`
`Agreement be rendered void and unenforceable. Because Stanford has pleaded sufficient facts to
`Agreement be rendered void and unenforceable. Because Stanford has pleaded sufficient facts to
`
`establish this claim, it has standing to bring a derivative claim 0n behalf of Fitish because, once
`establish this claim, it has standing to bring a derivative claim on behalf of Fitish because, once
`
`the Agreement is rescinded, Stanford is considered a shareholder.
`the Agreement is rescinded, Stanford is considered a shareholder.
`Moreover, when Fitish entered into the Agreement without disclosing the fact that Fitish
`Moreover, when Fitish entered into the Agreement without disclosing the fact that Fitish
`had a new investor and stood t0 make significant amounts of money in the very near future, that
`had a new investor and stood to make significant amounts of money in the very near future, that
`was fraud by nondisclosure. While typically there is no duty to disclose in an arms' length
`was fraud by nondisclosure. While typically there is no duty to disclose in an arms' length
`transaction, this was not such a transaction. There was a duty to disclose on Owens' part as the
`transaction, this was not such a transaction. There was a duty to disclose on Owens' part as the
`
`majority shareholder in Fitish. She had fiduciary duties not only towards Fitish, but also to the
`majority shareholder in Fitish. She had fiduciary duties not only towards Fitish, but also to the
`
`only other shareholder in the company, Stanford.
`only other shareholder in the company, Stanford.
`
`IV.
`IV.
`Conclusion and Prayer
`Conclusion and Prayer
`Owens and Fitish provide little basis for their plea, other than to state that Stanford admits
`Owens and Fitish provide little basis for their plea, other than to state that Stanford admits
`it has not been a member of Fitish since October 2018 and, therefore, it does not have standing to
`it has not been a member of Fitish since October 2018 and, therefore, it does not have standing to
`assert the derivate claims in its petition. Because Owens owed fiduciary duties to both Stanford
`assert the derivate claims in its petition. Because Owens owed fiduciary duties to both Stanford
`
`and Fitish, and because ofher fraudulent conduct in violation ofthose duties, Stanford has standing
`and Fitish, and because of her fraudulent conduct in violation of those duties, Stanford has standing
`to bring claims against Owens on behalf of Fitish.
`to bring claims against Owens on behalf of Fitish.
`WHEREFORE, 4914 Stanford, LLC requests that this CouIt deny Jenna Owens' and
`WHEREFORE, 4914 Stanford, LLC requests that this Court deny Jenna Owens' and
`Fitish, LLC's plea to the jurisdiction. In the event that the plea is granted, only the derivative claims
`Fitish, LLC's plea to the jurisdiction. In the event that the plea is granted, only the derivative claims
`should be dismissed, and 4914 Stanford, LLC will replead. 4914 Stanford, LLC also prays for such
`should be dismissed, and 4914 Stanford, LLC will replead. 4914 Stanford , LLC also prays for such
`other and funher relief, both at law and in equity, to which it may show itselfjustly entitled.
`other and further relief, both at law and in equity, to which it may show itself justly entitled.
`
`7388730 v1 (723 14000024000)
`73 88730 vi (72314.00002.000)
`
`

`

`Respectfully Submitted,
`
`KANE RUSSELL COLEMAN & LOGAN PC
`
`By:
`
`/s/ Lawrence T. Bowman
`LAWRENCE T. BOWMAN
`
`State Bar No. 00788993
`
`DONALD A. WALTZ
`
`State Bar No. 24048061
`
`901 Main Street, Suite 5200
`
`Dallas, Texas 75202
`214.777.4247 (telephone)
`214.777.4299 (facsimile)
`
`ATTORNEYS FOR PLAINTIFF 4914
`
`STANFORD, LLC
`
`CERTIFICATE OF SERVICE
`
`I hereby certify that a true and correct copy of the foregoing was served upon all counsel
`of record via the Court's e-filing system on this 16th day of December, 2019.
`
`/s/ Donald A. Waltz
`
`7388730 v1 (7231400002000)
`
`

`

`EXHIBIT A
`EXHIBIT A
`EXHIBIT A
`
`

`

`CAUSE NO. 13019—15598
`
`§
`4914 STANFORD, LLC, individually
`and derivatively on behalf of Fifish, LLC §
`§
`
`IN THE DISTRICT COURT 0F
`
`DALLAS COUNTY, TEXAS
`
`298TH JUDICIAL DISTRICT
`
`§ §
`
`§
`§
`§
`
`§ §
`
`§
`
`Plaintiff,
`
`v.
`
`JENNA OWENS AND FITISH, LLC
`(nominal defendant only)
`
`Defendant(s)
`
`AFFIDAV