881 F. Supp. 2d 758
W.D. Tex.2012Background
- Rab in filed a complaint on December 7, 2010, asserting securities, fraud, RICO, and related claims against McClain Sr., Argyll Biotechnologies, Miceli, Padmore Holdings, and related entities.
- Plaintiff alleges a fraudulent stock-promotion scheme involving IPA, Nextpath Technologies, FIT Management, Argyll Equities, Argyll Biotechnologies, Immunosyn, and SF-1019, causing financial losses to investors (Plaintiff claims over $14,000,000 in aggregate actions).
- Plaintiff alleges McClain Sr., McClain Jr., and Miceli caused the sale of Immunosyn stock to investors based on false information and misrepresentations for purported commissions and/or gifted stock.
- Plaintiff alleges that Padmore Holdings and related Argyll entities facilitated transfers and stock movements within Texas, and that Immunosyn stock was controlled or held via these entities.
- The case was progressively amended (Second and Third Amended Complaints) and defendants failed to retain or enter appearance; corporate defendants did not secure counsel.
- Rab in moved for default judgment; the court found jurisdiction, liability, and damages in favor of Rabin, and entered default judgment totaling $1,185,000, with potential costs and fees to be addressed by a later bill of costs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court has subject matter and personal jurisdiction over nonresidents | Rab in contends court has federal question and, where applicable, diverse jurisdiction with minimum contacts in Texas. | Defendants did not contest after default or argued lack of jurisdiction; waiver noted for some defendants, but the court still evaluates jurisdiction. | Court has subject matter and personal (general/alter-ego specific) jurisdiction over listed nonresidents. |
| Whether default judgment is proper on the pleaded claims | Default admits the well-pleaded facts establishing liability under federal and state claims and causation. | Not provided; court addresses sufficiency of pleadings and basis for relief. | Default judgment granted; pleadings provide substantive causes of action and relief basis. |
| Whether the asserted claims state actionable causes of action against the named defendants | Plaintiff asserts securities, common law fraud, fraud in the inducement, breach of contract, RICO, and conspiracy claims. | Not advanced in response; the court evaluates sufficiency under Rule 12 and default standards. | Claims stated; defendants liable on pleaded causes of action to several entities and individuals. |
| Damages calculation and measurement in a default context | Plaintiff seeks $1,120,000 in lost profits for stock that would have been sold at $15 per share on 80,000 shares. | Not asserted; court calculates damages given defaults and pleadings. | Total damages awarded: $1,185,000 for lost profits; further costs and attorney fees to be addressed via Bill of Costs. |
| Whether there is basis for additional claims (e.g., fraudulent transfers) and alternative theories | Plaintiff asserts Uniform Fraudulent Transfer Act claim regarding Argyll Aviation; seeks relief against conspirators collectively. | Not raised in defense; court evaluates the asserted alternatives under default standards. | Fraudulent transfer theory deemed valid as part of the default judgment considerations; conspiracy-related relief included. |
Key Cases Cited
- Holt Oil & Gas Corp. v. Harvey, 801 F.2d 779 (5th Cir. 1986) (continuous and systematic contacts support general jurisdiction)
- Perkins v. Benguet Consol. Mining Co., 342 U.S. 437 (U.S. 1952) (presence of a local agent and related activities can establish forum contracts)
- Wilson v. Belin, 20 F.3d 644 (5th Cir. 1994) (two-part test for personal jurisdiction; minimum contacts and fair play)
- Nishimatsu Constr. Co., Ltd. v. Houston Nat’l Bank, 515 F.2d 1200 (5th Cir. 1975) (due process limits on jurisdiction; long-standing framework)
- James v. Nico Energy Corp., 838 F.2d 1365 (5th Cir. 1988) (general measure of damages for defrauded buyers under Rule 10b-5)
- Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41 (Tex. 1998) (lost profits may be recoverable in fraud/breach actions with reasonable certainty)