# Opposition Brief — Topalian v. Ehrman

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_0790%3A4

## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1992
- **Citation:** 506 U.S. 825

## Text

Supreme Court, U.S

FILED
Sy, ' JUL 27 1992
, OFFICE OF THE CLERK
No. 91-1973 .
IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

MICHAEL K. TOPALIAN, WARREN B. FIENGA, ROY JACOBS,
JR., RICHARD OROZCO, JUAN GARCIA-QUIROGA, JEAN
STUEBING, CHARLES W. ANDERSON, FRANCIS D. COVERT,
RICHARD H. MANUEL, JACK E. BURROUGHS, DON W. BOYETT,
BOBBY W. McDONALD, CHARLES F. LACELLE, RICHARD D.
MIKLES AND MJM VENTURES,

v.

JOHN N. EHRMAN, EHRMAN INVESTMENT GROUP, INC., W.
RODERICK JOHNSON, W. RODERICK JOHNSON, P.C., RICHARD
O’DONNELL, HOUSTON PETROLEUM CO., INC., JOEL A.
MIDDLEBROOK, JOEL A. MIDDLEBROOK, CPA, VICTOR B.
RUSSEK, RUSSEK CO., BERT GAMBLE, RIO BRAVO OIL CO.,
INC., ROCKWOOD INSURANCE CO. AND ROBERT E. ECKIS, JR.

Respondenss.

Petition For A Writ of Certiorari To The United States
Court Of Appeals For The Fifth Cirauit

HOUSTON PETROLEUM CO., INC. AND RICHARD
O’DONNELL’S (”"RESPONDENTS” ) BRIEF IN
OPPOSITION

DON JACKSON

PAUL S. WELLS

Vinson & Elkins, L.LP.

2500 First City Tower, 1001 Fannin
Houston, Texas 77002-6760

(713) 758-2078

eee
Alpha Law Brief Co.* 6113 Aletha Lane* Houston, Texas 77081 (713)981-9000

i

QUESTION PRESENTED

Whether the District Court’s granting of summary
judgment in favor of Houston Petroleum Company
and Richard O’Donnell, and the Fifth Circuit Court
of Appeals’ affirmation of that decision, was proper
when Petitioners failed to present any competent
evidence or specific facts tending to establish a
genuine issue for trial.

il
INTERESTED PARTIES

PETITIONERS

MICHAEL K. TOPALIAN, WARREN B. FIENGA,
ROY JACOBS, JR., JUAN GARCIA-QUIROGA,
RICHARD OROZCO, JEAN STEUBING,
CHARLES W. ANDERSON, FRANCIS COVERT,
RICHARD H. MANUEL, BOBBY W.
McDONALD, JACK E. BURROUGHS, DON W.
BOYETT, CHARLES F. LaCELLE, RICHARD
MIKLES, and MJM VENTURES

RESPONDENTS

JOHN N. EHRMAN, Individually and In His
Representative Capacity As President of EHRMAN
INVESTMENT GROUP, INC., EHRMAN
INVESTMENT GROUP, INC., W. RODERICK
JOHNSON, W. RODERICK JOHNSON, P.C.,
RICHARD O’DONNELL, Individually and In His
Representative Capacity As President of HOUSTON
PETROLEUM CO., INC., HOUSTON
PETROLEUM COMPANY, INC., JOEL A.
MIDDLEBROOK, JOEL A. MIDDLEBROOK,
C.P.A., VICTOR B. RUSSEK, RUSSEK CO..,
BERT GAMBLE. Individually and In _ His
Representative Capacity As President of RIO BRAVO
OIL COMPANY, INC., RIO BRAVO OIL
COMPANY, INC., LAWRENCE KELLEY, JR.,
Individually And In His Representative Capacity As
President of KELLY ONSHORE DRILLING CO.,
INC., KELLEY ONSHORE DRILLING CO., INC..,
ROCKWOOD INSURANCE COMPANY - and
ROBERT E. ECKIS, JR.

ee

iii

TABLE OF CONTENTS

Page

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A. Peceees @eceproung ............ 2

B. Procedural Background .......... +
REASONS THE PETITION SHOULD BE

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TABLE OF AUTHORITIES

CASES

Celotex Corp. v. Catrett,
OEr Ae See CO ie RW a Pe 7

NO. 91-1973

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

MICHAEL K. TOPALIAN, WARREN B. FIENGA,
ROY JACOBS, JR., JUAN GARCIA-QUIROGA,
RICHARD OROZCO, JEAN STEUBING, CHARLES W.
ANDERSON, FRANCIS D. COVERT, RICHARD H.
MANUEL, BOBBY W. McDONALD, JACK E.
BURROUGHS, DON W. BOYETT, CHARLES F.
LaCELLE, RICHARD MIKLES, and
MJM VENTURES,

Petitioners,

Vv.

JOHN N. EHRMAN, EHRMAN INVESTMENT GROUP,
INC., W. RODERICK JOHNSON, W. RODERICK
JOHNSON, P.C., RICHARD O’DONNELL,
HOUSTON PETROLEUM CO., INC., JOEL A.
MIDDLEBROOK, JOEL A. MIDDLEBROOK, CPA,
VICTOR B. RUSSEK, RUSSEK CO., BERT
GAMBLE, RIO BRAVO OIL CO., INC.,
ROCKWOOD INSURANCE CO. AND
ROBERT E. ECKIS, JR.,

Respondents.

Petition For A Writ Of Certiorari
To The United States Court of Appeals
For The Fifth Circuit

HOUSTON PETROLEUM CO., INC. AND
RICHARD O’DONNELL’S ("RESPONDENTS")
BRIEF IN OPPOSITION

ee

2
STATEMENT OF THE CASE

Respondents Houston Petroleum Company ("HPC")
and Richard O’Donnell ("O’ Donnell") adopt and incorporate
by reference for all purposes Rio Bravo Oil Company, Inc.’s
("Rio Bravo") and Bert Gamble’s ("Gamble") Brief in
Opposition to Petitioners’ Petition for a Writ of Certiorari
regarding the factual background, procedural background,
and reasons the petition should be denied except as expressly
stated otherwise herein. HPC stands in very similar shoes as
Rio Bravo in that HPC is an oil and gas operator that entered
into contractual agreements with Onshore permitting Onshore
to invest in wells to be drilled by HPC. Likewise,
O’Donnell is the president of HPC and stands in similar
shoes as Gamble who is president of Rio Bravo. For these
reasons, many of the facts and arguments set forth in Rio
Bravo and Gamble’s brief in opposition apply equally to
HPC and O’Donnell. Petitioners have also failed to raise
any special or significant reasons to warrant granting their
petition for writ of certiorari with respect to HPC or
O’ Donnell.

A. Factual Background

Like Rio Bravo, HPC’s only connection with Onshore
is a contractual relationship whereby HPC and Onshore
entered into agreements permitting Onshore to invest in wells
to be drilled by HPC. Petitioners have not alleged that HPC
and O’Donnell failed to actually drill on certain agreed upon
sites. Unlike many of the oil and gas programs promoted
during the early 1980’s, Onshore is a program that actually
drilled and recovered oil and gas and has made payments to
the Petitioners. Petitioners are merely dissatisfied because
their investment strategy to get rich from an investment that
looked lucrative in 1984 did not turn out quite as planned.

3

Neither HPC nor O’Donnell were involved in the
promotion, offering, or sale of any interests in Onshore nor
were they investors, partners, or owners in any interests of
Onshore. Petitioners, as plaintiffs below, brought suit

against HPC and O'Donnell, among others, alleging
violations of federal and state securities laws, the Racketeer
Influenced & Corrupt Organizations Act ("RICO"), and
common law fraud. The undisputed and uncontroverted
evidence produced to the District Court established that HPC
and O’Donnell were not involved in the selling of limited
partnership interests in Onshore nor did they make any
representations, misrepresentations, or omissions of fact to
any potential investor in Onshore. This evidence further
established that neither HPC nor O’ Donnell were involved in
any RICO activities. This uncontroverted evidence was
gleaned from extensive discovery that took place for over
eighteen months after suit was filed and included numerous
depositions of Petitioners, Respondents, and other
witnesses.' Petitioners failed to provide any deposition
testimony, counter-affidavits, or other competent evidence in
their Response to Houston Petroleum Co., Inc. and Richard
O’Donnell’s Motion for Summary Judgment ("Response")
that controverted or refuted the evidence produced by HPC
and O’Donnell in support of their Motion for Summary
Judgment.’

1. Swom affidavits were also provided as evidence supporting HPC and
O’Donnell’s Motion for Summary Judgment.

2. Acopy of HPC and O’Donnell’s Motion for Summary Judgment (without
deposition exhibits) is provided in the Appendix to Respondents’ Brief as H.1-H.39
Petitioner's Response to HPC and O’Donnell’s Motion for Summary Judgment
(with one exhibit attached) is provided in the Appendix to Respondent's brief as
H.40-H.56. A copy of the supporting affidavit of O’Donnell is attached as H.35-
H.38. All references to the Appendix are designated by an "H." preceding the page
number. -

4
B. Procedural Background

Like Rio Bravo and Gamble’s motion, HPC and
O’Donnell’s Motion was supported by competent evidence in
the form of sworn affidavits and deposition excerpts. The
affidavit of Richard O’Donnell contained testimony that
neither HPC nor O’Donnell (1) participated in any way in the
preparation of the offering materials or prospectus promoting
Onshore; (2) had any involvement with the selling activities
undertaken on behalf of Onshore nor were they aware of the
sales efforts made; (3) played any role in the offering of
securities to Petitioners or any other investors, made any
representations to any Petitioner, had any contact with any
investor prior to their investments, or even knew any
Petitioner’s identity prior to the filing of the lawsuit;
(4) played any part in or have control over the operation or
management of Onshore; (5) had any control of any Onshore
officer or employee or had any control over any of the
policies, management, decisions, or any aspects of the
business of Onshore; (6) were aware of any fraud or alleged
fraud of any party perpetrated or sought to be perpetrated
against any investor nor intended to render any assistance in
any alleged fraud; (7) involved in or participated in any
RICO activities or enterprise; (8) attempted to control any
RICO enterprise or acquire an interest in or maintain an
interest in a RICO enterprise; (9) participated in any
racketeering activity; (10) obtained a financial interest in
Onshore; (11) had any control over the affairs of Onshore;
(12) had any position with Onshore that facilitated the
perpetration of any alleged predicate acts; or (13) knowingly
or wilfully become part of any alleged conspiracy. (H.35-
H.38). Deposition testimony was also produced in support
of the facts set forth in O’Donnell’s affidavit and referenced
in Respondents’ Motion. (H.11, H.13, H.16-H-17, H-23,
H.29). In addition, uncontroverted deposition testimony of
the Petitioners established that neither HPC nor O’Donnell

5

made any statements to Petitioners in the offering or selling
of interests in Onshore.’ See H.11, H.16-H.17, H.23.
Therefore, the evidence produced by HPC and O’Donnell in
support of their Motion was not only competent but also
specific and substantial.

On July 26, 1989, Petitioners filed an untimely
response to HPC and O’Donnell’s Motion which the District
Court graciously considered. (H.40-H.52). Petitioners’
Response was filled with statements that the evidence
produced at trial "will establish" Respondents’ "culpability"
and "will establish" that Respondents were participants in a
scheme to defraud Petitioners. (H.43, H.46-H.47, H.49-
H.51). Petitioners also asserted that they “must be given the
opportunity to prove" Respondents participated in the alleged
scheme and that they "will show at trial" or "will be able to
show" at trial how Respondents engaged in this alleged
scheme. (H.46-H.47, H.49-H.51). No evidence, competent
or otherwise, was produced to the District Court to refute or
controvert the specific, competent, and sworn testimony
produced by HPC and O'Donnell in support of their Motion.
The only “evidence” produced at all that refers to HPC is an
unsworn and unsigned "stream of conscioussess" letter that-
makes a single reference to HPC as “crooks."* (H.53-
H.56). This, as the District Court stated, proves nothing.
Petitioners failed to produce any sworn evidence through
affidavits or deposition testimony to controvert the evidence
produced by HPC and O’Donnell. As a result, the District
Court granted HPC and O’Donnell’s Motion and the Fifth
Circuit panel affirmed that decision. Any additional
"evidence" Petitioners seek to have this Court review is
equally without competence and is not properly before this
Court.

3. Nowhere in the letter is Richard O’Donnell mentioned or even referenced.

6
REASONS THE PETITION SHOULD BE DENIED

Without burdening this Court with cumulative
arguments and authorities, HPC and O’Donnell adopt and
incorporate by reference for all purposes the arguments and
authorities set forth in Rio Bravo’s and Gamble’s Brief in
Opposition to Petitioners’ Petition for a Writ of Certiorari.
The exact same allegations made against Rio Bravo and
Gamble are made against HPC and O’Donnell. Similar
evidence and proof that was produced by Rio Bravo and
Gamble in support of their motion was produced by HPC and
O'Donnell in support of their Motion. Petitioners similarly
failed to produce any evidence or proof in their Response to
refute or contradict the evidence produced by HPC and
O’Donnell.

Petitioners have also alleged violations of the RICO
Statute against HPC and O’Donnell. These points are more
thoroughly addressed in Respondents’ Brief to the United
States Court of Appeals for the Fifth Circuit and
Respondents’ Motion for Summary Judgment. Both are
incorporated for all purposes and attached in the Appendix
hereto. (H.1-H.39, H.S7-H.121).

The only “evidence” presented to the District Court
in Petitioners’ Response was an unsigned and unsworn letter.
(H.53-H.56). This letter is not only incompetent summary
judgment evidence since it is unsworn, unverified, and
unsigned, but the letter does not state any specific facts
tending to show that there is a genuine issue for trial.
Nowhere in the letter does it have any specific facts or
Statements implicating HPC or O’Donnell in any alleged
RICO enterprise, violation of securities law, or scheme to
defraud investors in Onshore. As the District Court held,
this proves nothing. Even assuming this letter is competent
evidence, it is not specific nor sufficient to raise a genuine

7

issue for trial. For these reasons, and in accordance with
this Court’s decision in Celotex Corp. v. Catrett, 477 U.S.
317 (1986), Petitioners petition should be denied.

CONCLUSION

The judgment of the District Court and subsequent
affirmation by the Fifth Circuit Court of Appeals involves no
unsettled questions of law and is entirely consistent with the
prior rulings of the Court and other federal circuit courts.
The questions that Petitioners raise are neither special nor
significant. Therefore, the petition should be denied.

Respectfully submitted,

VINSON & ELKINS

By:
Don Jackson
State Bar No. 10476000
Federal I.D. No. 6915
Paul S. Wells
State Bar No. 21155800
Federal I.D. No. 11586
2500 First City Tower
1001 Fannin
Houston, Texas 77002-6760
(713) 758-2078
(713) 758-2346 (fax)
ATTORNEYS FOR RESPONDENTS,
HOUSTON PETROLEUM COMPANY
and RICHARD O’DONNELL

Hl

APPENDIX
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

MICHAEL K. TOPALIAN, et al., §

Plaintiffs, §

§ Civil Action

VS. § No. 87-3826
; §
JOHN N. EHRMAN, et al., §
Defendants. §

MOTION OF DEFENDANTS HOUSTON PETROLEUM
CO., INC. AND RICHARD O’DONNELL
FOR SUMMARY JUDGMENT

Defendants Houston Petroleum Co., Inc. ("HPC")
and Richard O’Donnell ("O’Donnell"), pursuant to Rule 56
of the Federal Rules of Civil Procedure, file this motion for
summary judgment. In support thereof, HPC and O’Donnell
would show as follows:

a As more fully discussed in the accompanying
Memorandum, HPC and O’Donnell are entitled to summary
judgment on all claims because there are no genuine issues
as to any material fact and there is an absence of any
evidence to support plaintiffs claims.

y 2 As more fully discussed in the accompanying
Memorandum, HPC and O’Donnell are entitled to summary
judgment on plaintiffs’ claims under the Securities Act of
1933 on the ground that they are not sellers within the
meaning of the Act.

H2

a As more fully discussed in the accompanying
Memorandum, HPC and O’Donnell are entitled to summary
judgment on plaintiffs’ claims under the Securities Exchange
Act of 1934 on the ground that they made no representations
or omissions of fact to plaintiffs.

4. As more fully discussed in the accompanying
Memorandum, HPC and O’Donnell are entitled to summary
judgment on plaintiffs’ RICO claims on the ground that they
did not engage in a pattern of racketeering activities by
acquiring, investing or controlling a RICO enterprise.
Moreover, plaintiffs have no standing to assert a RICO claim
against HPC and O’Donnell because their damages do not
arise by reason of such violation.

- In further support of this motion, HPC and
O’Donnell incorporate the Memorandum In Support of
Defendants Houston Petroleum Co., Inc. and Richard
O’Donnell’s Motion for Summary Judgment.

WHEREFORE, HPC and O’Donnell respectfully
request that the Court grant its motion for summary
judgment, and enter an order that plaintiffs take nothing, and
grant HPC and O’Donnell such other and further relief to
which this Court may deem them justly entitled.

Respectfully submitted,

OF COUNSEL: By:

Don Jackson

VINSON & ELKINS Admission I.D. No. 6915
1001 Fannin 1001 Fannin

3300 First City Tower 3106 First City Tower
Houston, Texas 77002 Houston, Texas 77002-6760

Telephone: 713/651-2222 713/651-2078

H3

ATTORNEY IN CHARGE FOR
DEFENDANTS HOUSTON
PETROLEUM CO., INC. and
RICHARD O’DONNELL

CERTIFICATE OF SERVICE

This is to certify that a true and correct Copy of the
foregoing was mailed this 15 _ day of _June_, 1989, to:

Armando Lopez
LOPEZ & RAMIREZ
2990 Richmond,

Suite 205

Houston, Texas 77098

D. John Leger
LEGER & SANDERS
5847 San Felipe

Suite 1250

Houston, Texas 77057

Kevin F. Risley
BUTLER & BINION
1600 Allied Bank Plaza
Houston, Texas 77002

Frank Pinedo

PINEDO, CEZEAUX
& SWEENEY

1415 Louisiana

Suite 2550

Houston, Texas 77002

W. Sherman Rogers
Howard University
School of Law

2900 Van Ness, N.W.
Washington, D.C. 20008

Neil Wasserstrom
MARGRAVES, KENNERLY
& SCHUELER

2200 Dresser Tower
601 Jefferson
Houston, Texas 77002

Joel Middlebrook
2927 Drexel
Houston, Texas 77027

W. Roderick Johnson
JOHNSON & JOHNSON, P.C.
1800 West Loop South

Suite 1510.

Houston, Texas 77027

Wayne M. Byles
P. O. Box 542165
Dallas, Texas 75354-2165

H4

John R. Knight

MORRIS & CAMPBELL
600 Jefferson,

Suite 1617

Houston, Texas 77002

By

Don Jackson

HS

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

MICHAEL K. TOPALIAN, et al., §
Plaintiffs, §
§ Civil Action

VS. § No. 87-3826

§

JOHN N. EHRMAN, et al., §

Defendants. §

MEMORANDUM IN SUPPORT OF DEFENDANTS
HOUSTON PETROLEUM CO., INC. AND
RICHARD O’DONNELL’S MOTION FOR

SUMMARY JUDGMENT

Houston Petroleum Co., Inc. ("HPC") and Richard
O’ Donnell ("O’ Donnell"), two of the defendants in the above
action, file this Memorandum in support of their motion for
summary judgment and would show the following:

I.
BACKGROUND

Plaintiffs are dissatisfied investors in Onshore
Exploration, Ltd., 1984 Mid-Year Drilling Program
("Onshore"), an oil and gas drilling limited partnership
program. First Amended Complaint at 2-4 4 1-5
("Complaint"). These investments were highly leveraged tax
shelters promoted by John Ehrman and Ehrman Investment
Group. Wayne Byles was the original general partner in
Onshore. In December 1984 he was succeeded by Rod
Johnson and Ehrman Investment Group as _ co-general
partners. Complaint at 8 ¢ 46; 9 449. HPC is an oil and

———————

H6

gas operator that entered an agreement with Onshore to drill
wells on certain sites. Complaint at 9 ¢ 49. O’Donnell is
the President of HPC and has been sued individually and as
President. Complaint at 1.

Unlike many of the oil and gas programs promoted
during the early 1980s, Onshore is a program that actually
drilled and recovered oil and gas and has made payments to
the plaintiffs. See Complaint at 25 4 110. In fact, Onshore
continues in operation today. Plaintiffs are not dissatisfied
because their promoter stole their money, the general partner
is in bankruptcy, or no drilling was ever completed. Instead,
plaintiffs are dissatisfied because their investment strategy to
get rich from an investment that looked lucrative in 1984 did
not turn out quite as planned. E.g., Binder dep. at 45-46.
Unfortunately, because of the inherent risk associated with
oil and gas drilling, one of which is the price of oil and gas
and the fact that such prices have plummeted since 1984,
these programs did not turn out to be as immediately
profitable as the plaintiff investors anticipated. Binder dep.
at 45-46; Garcia-Quiroga dep. at 98, 101; Steubing dep. at
69-70, 107-08. Therefore, plaintiffs have brought this action
claiming a laundry list of fraud and deception to get out of
their investments. Complaint at 3-4.

Included among their claims are claims against HPC
and O’Donnell for alleged violations of the federal and state
securities laws, common law fraud and Racketeering
Influenced & Corrupt Organization Act ("RICO"). The
undisputed evidence establishes that HPC and O’Donnell
were not involved in the selling of plaintiffs’ limited part-
nership interests, made no misrepresentations or omissions of
fact to the investors, and were not involved in any RICO
activities. Thus, because there is a lack of evidence to
support at least one essential element of each of the plain-

H7

tiffs’ claims, HPC and O’Donnell are entitled to summary
judgment in their favor.

II.
STANDARD FOR SUMMARY JUDGMENT

Summary judgment is properly granted if the
pleadings and evidence "show that there is no genuine issue
as to any material fact and that the moving party is entitled
to a judgment as a matter of law." Fes R. Civ. P. 56(c).
The Supreme Court recently clarified the surden of a party
seeking summary judgment. In Celotex Corp. v. Catrett,
477 U.S. 317, 325 (1986), cert. denied, 108 S.Ct. 1028
(1988), the Supreme Court held that the moving party may
discharge its burden by showing an absence of evidence to
support the nonmovant’s case. Thus, the Court stated, "Rule
56(c) mandates the entry of summary judgment, after
adequate time for discovery and upon motion, against a party
who fails to make a showing sufficient to establish the
existence of an element essential to that party’s case, and on
which that party will bear the burden of proof at trial." Jd.
at 322; accord Fontenot v. Upjohn Co., 780 F.2d 1190, 1195
(Sth Cir. 1986).

"Where the record taken as a whole could not lead a
rational trier of fact to find for the nonmoving party, there
is ‘no genuine issue for trial.’". Matsushita Elec. Indus. Co.
v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). A mere
scintilla of evidence in support of plaintiffs’ position is not
sufficient to survive summary judgment. Plaintiffs must
point to particular evidence on which the jury could
reasonably find in their favor. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 252 (1986). Furthermore, the
nonmovant may not survive summary judgment by resting on
mere allegations in their pleadings. Isquith v. Middle S.

|

H8

Utils., Inc. , 847 F.2d 186 (Sth Cir.), cert. denied, 109 S.Ct.

- 310 (1988). The evidence in this case demonstrates that
plaintiffs cannot establish each of the essential elements of
the claims asserted against HPC and O’Donnell and therefore
summary judgment in their favor is proper.

III.
HPC AND O’DONNELL DID NOT VIOLATE ANY
PROVISION OF THE SECURITIES ACT OF 1933

Plaintiffs’ allegations under sections 12 and 15 seek
to impose liability on HPC and O’Donnell for alleged oral
and written misrepresentations in connection with the sale of
their partnership interests. Recent Supreme Court and Fifth
Circuit precedents demonstrate conclusively that no liability
for any violations of the Securities Act of 1933 can be
leveled against HPC and O’ Donnell because they do not meet
the statutory definition of "seller" under the Act, and
therefore they are entitled to summary judgment.

A, Elements of Section 12 and 15 Claims

Plaintiffs’ Complaint contains vague, confusing and
essentially meaningless cross-references that attempt to assert
a cause of action under sections 12 and 15 of the Securities
Act of 1933, 15 U.S.C. § 771), (0) (1982), against HPC
and O’Donnell. Complaint at 29, 34 and 39. Section 12(1)
provides a right of action against anyone who offers or sells
a security in violation of § 77(e), which makes it unlawful to
use interstate commerce as the means to sell a security unless
a registration statement is in effect and the prospectus meets
the requirement of the Act. 15 U.S.C. § 77(1)(1). Section
12(2) provides a private cause of action against any person
who offers or sells a security through communications which
include material misrepresentations or omissions of material
facts. Id. § 77(1)(2). Section 15 provides a private right of

H9

action against any person who controls any person liable
under sections 12(1) or 12(2). Id. § 77(0). To come within
the ambit of these statutory provisions, plaintiffs must
establish that HPC and O'Donnell were "sellers" of their
securities. '

B. HPC and O’Donnell are not "Sellers"

The Supreme Court redefined persons liable under
section 12(1) of the Securities Exchange Act of 1934 in
Pinter v. Dahl, 108 S.Ct. 2063 (1988), finding that the
proper inquiry is into the relationship between the investor
and the defendant; nor the defendant and the transaction. Id.
at 2080-81. In directing this inquiry, the Court specifically
held that section 12(1) "imposes liability on the owner who
passed title, or other interest in the security, to the buyer for
value," as well as one who "engaged in solicitation." Jd. at
2076. The Fifth Circuit, following Pinter’s guidance,
extended that definition of seller to cover claims asserted

l 1. The statute of limitations applicable to actions under sections 12
and 15 is set forth in section 13, which provides that actions to enforce
liabilities under sections 12 and 15 must be brought either within three
years of the sale to plaintiffs, or within one year of the discovery of the
fraud, whichever period is shorter. 15 U.S.C. § 77(m) (1982), see Buder
vy. Merrill Lynch, Pierce, Fenner & Smith, Inc., 486 F. Supp. 56 (E.D.
Mo. 1980). In no circumstances may an action be brought more than
three years after the security is purchased. Moreover, plaintiffs’ sections
12 and 15 claims should be dismissed because section 13 provides that
actions must be brought within one year of discovery or after "discovery
should have been made by the exercise of reasonable diligence. ..." 15
U.S.C. § 77(m). Nowhere in the Complaint does any plaintiff allege
when he discovered, or should have discovered the alleged fraud. A
plaintiff must affirmatively allege compliance with section 13; failure to
make such an allegation is grounds for dismissal. See, e.g., Stewart
Coach Indus., Inc. v. Moore, 512 F. Supp. 879, 886 (S.D. Ohio 1981);
Kramer v. Scientific Control Corp., 352 F. Supp. 1175, 1176 (E.D. Pa.
1973).

————————————————

H10

under section 12(2) of the Act. Abell v. Potomac Ins. Co.,
858 F.2d 1104 (Sth Cir. 1988). The Court of Appeals held
that when a court examines any claim under section 12, two
inquiries must be made: "(1) [w]Jho passed title to the
plaintiff or solicited the transaction in which title passed; and
(2) from whom did the plaintiff buy the security?" Jd. at
1114.

Every case citing to and following Pinter has
expressly declared that a plaintiff must demonstrate that each
defendant "actually solicited their investment" for section 12
liability to attach. See, e.g., Capri v. Murphy, 856 F.2d
473, 479 (2d Cir. 1988) (noting that Second Circuit
precedent previously held that language of sections 12(1) and
12(2) is identical"); accord Schlifke v. Seafirst Corp., 1989
Fed. Sec. L. Rep. (CCH) 4 94,174 (7th Cir. Jan. 9, 1989)
(holding that a bank that financed allegedly illegal oil and gas
limited partnerships was not a "seller" since it did not
actively participate in the solicitation of investors or engage
in preparing the prospectus except for drafting the loan
documents included therein); Harelson v. Miller Fin. Corp.,
854 F.2d 1141, 1142 (9th Cir.), cert. denied, 109 S. Ct. 274
(1988) (finding that salesman/agent of defendant corporation
"solicited" sales of securities by presenting facts necessary to
effectuate sale to purchaser and receiving compensation for
bringing sale about); /n re Professional Fin. Management,
Lid. , 692 F. Supp. 1057, 1064 (D. Minn. 1988) ("Under the
Pinter standard, liability may be imposed against [defendants]
if they were principals to the sale or otherwise assisted in the
transfer of securities as brokers, and received financial
benefit in return.").

Plaintiffs muster no support for a finding that either
HPC or O’Donnell could be declared a seller under this
standard. The record is clear that they in no way "passed
title or other interest" to any plaintiff. Like the bank in

H11

Seafirst, HPC or O’Donnell were not involved in the solicita-
tion or sale of these interests. O’Donnell Affidavit, attached
hereto as Exhibit A. In fact, the plaintiffs admitted during
their depositions that HPC and O’Donnell had no part in the
sale or their interest to them. Garcia-Quiroga dep. at 136;
Boyett dep. at 86-87; Burroughs dep. at 22-23; McDonald
dep. at 1066; Topalian dep. at 127; Steubing dep. at 151;
LaCelle dep. at 144, 150, 156-57.

HPC was simply the drilling operator. The
undisputed evidence establishes that HPC and O’Donnell
were not involved in Onshore’s selling efforts. HPC and-
O'Donnell had no contact with Onshore’s sales personnel.
O’Donnell’s Affidavit. Likewise, there is no evidence to
support the allegation that HPC and O’Donnell participated
in the preparation of the prospectus or in any way promoted
the program. Moreover, the record directly refutes the
contention that anyone at HPC had any knowledge of
Ehrman’s sales tactics. O’Donnell Affidavit. The only
evidence establishes the contrary: O’ Donnell testified that no
HPC personnel had any knowledge of or control over the
means by which Ehrman or the Onshore salesmen marketed
the limited partnership interests. Boyett dep. at 109; Garcia-
Quiroga dep. at 159-60; Burroughs at 84-85; Steubing dep.
at 166; Topalian dep. at 135-36; McDonald dep. at 1061;
LaCelle dep. at 147-48.

Every passage of record testimony in this case refutes
the assertion that HPC and O’Donnell engaged in the
direction of or solicitation by Onshore’s sales force. HPC
and O’Donnell were not engaged in soliciting sales and
therefore cannot be said to have been "sellers" of these
interests for purposes of the 1933 Act. Plaintiffs’ claims
must be dismissed.

OO

H12

il HPC and O’Donnell are not "Control"
Persons Under the 1933 Act

HPC and O’Donnell’s total lack of control removes
from possibility any liability under either the primary,
secondary, or “control person" provisions of the 1933 Act.
Particularly instructive here is the new decision by the
Seventh Circuit in Schlifke v. Seafirst Corp., 1989 Fed. Sec.
L. Rep. (CCH) 4 94,174, at 91,592 (7th Cir. Jan. 9, 1989).
In deciding that liability under the 1933 Act could not lie
against defendant Seafirst, the court noted that:

Although the Bank necessarily became
involved in the transaction ... to the extent
necessary to fully document and protect its
loans and collateral, there is no evidence that
[it] thereby intended to be making an
investment or that it took any steps to induce
any investment by [the borrower] with [the
seller].

Thus, we agree with the district court that the
Bank was acting merely as a commercial
lender when it extended a loan to ENI 1981-
III at a fixed rate of interest.

Id. at 91,597 (citations omitted, ellipses in original).

The Schlifke court expressly refused to allow any
cause of action based on “aiding and abetting" liability under
section 12(2). Jd. at 91,597-98. Likewise, in the recent
decision of Commins v. Johnson & Higgins, Inc. , 1988 Fed.
Sec. L. Rep. { 94,092 (N.D. Cal. Sept. 28, 1988), the court
explained that "control person" liability imposes liability
“only a person who ‘stands behind the scenes and controls
the [securities violator] who is in a nominal position of

H13

authority." Id. at 91,099 (quoting Wool v. Tandem
Computers, Inc., 818 F.2d 1433, 1441 (9th Cir. 1987)).

The record specifically negates any contention that
HPC or O’Donnell played any part in the operation or
management of Onshore. O’Donnell Affidavit; Boyett dep.
at 109; Garcia-Quiroga dep. at 159-60; Burroughs dep. at
84-85; Steubing dep. at 166; Topalian dep. at 135-36;
McDonald dep. at 1061; LaCelle dep. at 147-48. The
evidence clearly shows that no HPC employee or officer
directed or controlled any of the policies, management,
decisions, people, or any other aspects of the business of
Onshore, including any sales effort. O’Donnell Affidavit.

Thus, both the record testimony and the applicable
legal principles make it clear that HPC and O’ Donnell played
no role in the operation of Onshore or in the sale or
solicitation of plaintiffs’ investment interests. HPC and
O’ Donnell did not direct or control any Onshore employee or
operation. As such, HPC was merely the drilling operator
for some of the wells, and cannot be found liable under the
provisions of the 1933 Act.

IV.
HPC AND O’DONNELL DID NOT VIOLATE ANY
PROVISIONS OF THE SECURITIES ACT OF 1934

Plaintiffs additionally assert that HPC and O’ Donnell
violated section 10(b) of the Securities and Exchange Act of
1934, and Rule 10b-5. Plaintiffs cannot recover under either
theory because HPC and O’Donnell made no misrepresenta-
tion to plaintiffs, or any representation and owed no duty to
disclose and therefore made no omission of fact.

H14
A. Elements of Section 10(b) and 10b-5

Plaintiffs allege various violations of Section 10(b) of
the Exchange Act of 1934 and Rule 10b-5. Section 10(b)
provides an action by a purchaser or seller of "any security"
against “any person" who used "any manipulative or
deceptive device or contrivance" in connection with the
purchase or sale of a security. 15 U.S.C. § 78()(b) (1982).
Rule 10b-5 provides in material part:

It shall be unlawful for any person,
directly or indirectly, by the use of any means
or instrumentality of interstate commerce, or
of the mails or of any facility of any national
securities exchange, _

(a) To employ any device, scheme, or artifice
to defraud,

(b) To make any untrue statement of a
material fact or to omit to state a material fact
necessary in order to make the statements made, in
the light of the circumstances under which they were
made, not misleading, or

(c) To engage in any act, practice, or course
of business which operates or would operate as a
fraud or deceit upon any person,

in connection with the purchase or sale of any
security.

17 C.R.F. § 240.10b-5 (1983).

The purpose of a cause of action under § 10(b) and
Rule 10b-5 is

——_— _— —

H15

to protect persons who are deceived in securities
transactions -- to make sure that buyers of securities
get what they think they are getting and that sellers of
securities are not tricked into parting with something
for a price known to the buyer to be inadequate or for
a consideration known to the buyer not to be what it
purports to be.

Chemical Bank v. Arthur Andersen & Co., 726 F.2d 930,
943 (2d Cir.), cert. denied, 469 U.S. 884 (1984). The
essential elements of a § 10(b) and Rule 10b-5 claim are (1)
in connection with a securities transaction and (2) acting with
scienter, the defendants made (3) a _ “Material

‘ misrepresentation or nondisclosure (4) upon which plaintiff
relied and (5) thereby suffered injury. Chemetron Corp. v.
Business Funds, Inc. , 718 F.2d 725, 728 (Sth Cir.), vacated
on other grounds, 460 U.S. 1007 (1983); Pin v. Texaco,
Inc., 1986 Fed. Sec. L. Rep. (CCH) { 92,823, at 94,011
(Sth Cir. July 14, 1986) (under § 10(b) essential element is
misrepresentation or nondisclosure).

Most. significantly, the plaintiffs must prove that "the
defendant(s) acted with scienter, i.e., with intent to deceive,
manipulate, or defraud." Hermann & MacLean v.
Huddleston, 459 U.S. 375, 382 (1983). The authorities are ~
universal that this is a species of fraud. See, e.g., id.

(§ 10(b) is a “catchall antifraud provision"); Santa Fe Indus.,
Inc. v. Green, 430 U.S. 462, 472 (1977); Ernst & Ernst v.
Hochfelder, 425 U.S. 185, 203 (1976).? Moreover, as the

2.1n Ernst & Ernst, the Supreme Court refused to read a negligence
or should have known standard in § 10(b) or Rule 10(b)-5 actions. The
scienter requirement can be satisfied with a state of mind less than actual
knowledge such as "sever recklessness." This standard requires a
showing that the deception was "so obvious that the defendant must have
been aware of it." Warren v. Reserve Fund, Inc., 728 F.2d 741, 745 &

il

H16

Supreme Court put it, "Section 10(b) is aptly described as a
catchall provision, but what it catches must be fraud."
Chiarella v. United States, 445 U.S. 222, 234-35 (1980).
No plaintiff can point to any fact in support of their
allegation that the defendants were guilty of fraud.
Burroughs dep. at 84-85; Garcia-Quiroga dep. at 159-60;
Boyett dep. at 107-09, 111; LaCelle dep. at 161-62, 183;
Steubing dep. at 165-67; Topalian dep. at 135-36; McDonald
dep. at 1079. Accordingly, plaintiffs cannot establish an
essential element of their 1934 Act claim.

B. HPC and O’Donnell Made No
Representation to Plaintiffs

To recover under 10b-5, plaintiffs must establish that
HPC and O’Donnell made a misrepresentation of material
fact to them in connection with their purchase of these
securities. Abell v. Potomac Ins. Co., 858 F.2d 1104, 1115
(Sth Cir. 1988). Plaintiffs cannot recover from HPC or
O’Donnell for misrepresentation because the uncontroverted
testimony of the plaintiffs establishes that neither HPC or
O’Donnell made any statements, much less untrue
Statements, to them. McDonald dep., Vol. VI at 1062-66;
Topalian dep. at 151; Garcia-Quiroga dep. at 159; Law dep.
at 76; Burroughs dep. at 84-85; LaCelle dep. at 157-163,
168-69. The lack of statement is exemplified by plaintiff
Mr. Bobby W. McDonald’s testimony in deposition:

Q. Do you have any information or evidence to
indicate that Richard O’Donnell or HPC made
any false representations to anybody to get
them to buy Onshore units?

A. No, sir.

n.12 (Sth Cir. 1984). In the present case, the plaintiffs are unable to
meet even the 'esser standard of “should have known.”

H17 7

McDonald dep. Vol. VI, at 1066. As a further example,
plaintiff Charles F. LaCelle is unequivocal in his answers:

Q. Do you have any facts that would show that
HPC made any representations to you at all?

A. Directly? :
Q. Directly or indirectly.
A. No.

Q. What about Mr. O’Donnell? Did he make
any representations to you?

A. No.

Q. Would you have -- do you have any facts, or
are you aware of any facts, that would show
that HPC or Mr. O’Donnell assisted in any
fraudulent misrepresentations that others may
have made to you?

A. No

LaCelle dep. at 161-62.

The failure of the plaintiffs to prove any untrue
statement of material fact by HPC or O’Donnell requires that
plaintiffs’ 10b-5 claims be dismissed. See Abell, 858 F.2d
at 1115-16.

H18

c HPC and O’Donnell Owed no Duty to
Plaintiffs

The failure of a party to disclose facts constitutes
actionable fraud only if the party had a duty to disclose the
facts. E.g., Chiarella v. United States, 445 U.S. 222, 230
(1980); Tempo Tamers, Inc. v. Crow-Houston Four, Ltd.,
715 S.W.2d 658, 669 (Tex. App.--Dallas 1986, writ ref’d
n.r.e.). Accordingly, the first step in analyzing plaintiffs’
nondisclosure claims is to determine whether HPC and
O’Donnell had a duty to disclose facts to plaintiffs.

First, as drilling operator, HPC and O'Donnell owed
no fiduciary duty to the plaintiffs. A fiduciary relationship
generally arises only from a relationship of trust and
confidence. Thigpen v. Locke, 363 S.W.2d 247, 252-53
(Tex. 1962). A fiduciary relationship may be created from
a variety of circumstances usually involving attorney-client,
parent-child or some other special relationship; but generally
it does not include relationships between businessmen dealing
at arms length. Consolidated Gas & Equip. Co. vy.
Thompson, 405 S.W.2d 333, 336-37 (Tex. 1966). To allow
the plaintiff investors to transform this arms _ length
transaction between the drilling operator and the partnership
to create a fiduciary duty from the operator to them would
jeopardize the security of contracts in Texas. See Thigpen,
363 S.W.2d at 253. Thus, HPC and O’Donnell had no duty
to disclose based upon a fiduciary duty.

Moreover, any action HPC undertook to assure itself
of the viability of these programs for which it was about to
act as drilling operator, lends no support to the conclusion
plaintiffs wish to draw that HPC or O’Donnell owed
plaintiffs any duty to disclose facts regarding their Onshore
investments. See Schlifke, 1989 Fed. Sec. L. Rep. (CCH)
4 94,174, at 91,599. As one court has noted, it is ludicrous

H19

to contend that actions taken by a party in assessing its own
risks in connection with a proposed transaction somehow
translate into an affirmative duty to advise other participants
in the transaction with regard to their decision whether or not
to participate. See National Union Fire Ins. Co. v. Eaton,
701 F. Supp. 1031 (S.D.N.Y. 1988). In Eaton, the court
found that the surety’s review of the private placement
memoranda for its own purposes did not require it to disclose
any information to the investors. /d. The court noted that
a surety has no duty to disclose adverse information it may
have had. See generally Delany v. Blunt, Ellis & Loewi, 631
F. Supp. 175 (N.D. Ill. 1986) (citing Woodward v. Metro
Bank, 522 F.2d 84 (Sth Cir. 1975)); Quintel Corp., N.V. v.
Citibank, N.A., 589 F. Supp. 1235 (S.D.N.Y.) 1984);
Schlifke v. Seafirst Corp., 1987 Fed. Sec. L. Rep. (CCH)
q 93,107, at 95,443 (N.D. Ill. 1987), aff'd 1989 Fed. Sec.
L. Rep. (CCH) ¢ 94,174 (7th Cir. Jan. 9, 1989); In re Gap
Stores Sec. Litig., 457 F. Supp. 1135 (N.D. Cal. 1978);
Ingenito v. Bermec Corp., 441 F. Supp. 525, 549 (S.D.N.Y.
1977).

Likewise, in Schlifke, the Court of Appeals refused to
find any section 10(b) liability, stating that, "The bank had
no communications with the investors and did not initiate the
transaction cr participate in it in any way that would induce
the investors to rely on the bank to disclose information...."
Id. at 91,600 (quoting Jett v. Sunderman, 840 F.2d 1487,
1493 (9th Cir. 1988)). Indeed, in discussing secondary 10(b)
liability, the Seventh Circuit noted that routine extension of
a loan does not satisfy the "substantial assistance" element.
Id. at 91,601. The court concluded that “[e]ven affording
the plaintiffs the benefit of all reasonable inferences, they
had not sufficiently demonstrated that the [defendant] had
‘thrown in his lot,’ and . . ‘joined common cause with other
offenders or aided and abetted a scheme with the necessary

H20

State of mind.’" Jd. at 91,602 (quoting Barker v. Henderson,
Franklin, Starnes & Holt, 797 F.2d 490, 497 (7th Cir.
1986)).

Plaintiffs also assert that even if HPC and O’ Donnell
were not engaging in primary fraud, they may have aided
and abetted the primary fraud allegedly perpetrated by other
defendants. Under the Fifth Circuit precedent, parties are
subject to liability for aiding and abetting a securities
violation only if the following elements are proved: (1) there
must have been a security violation by the primary party; (2)
the aider and the abetter must have had a "general
awareness" of its role in a Rule 10b-5 violation; (3) the aider
and abetter must have knowingly rendered "substantial
assistance" in the Rule 10b-5 violation. Abel/, 858 F.2d at
1126; accord Bane v. Sigmundr Exploration Corp. , 848 F.2d
579 (Sth Cir. 1988); Woodward v. Metro Bank, 522 F.2d 84
(Sth Cir. 1975).

To establish the "general awareness" element,
plaintiffs must prove HPC and O’Donnell’s knowledge of
their role in a fraud, and their commitment (or intent) to aid
in the fraud’s success:

Scienter, then would require first that the
alleged abettor know of the fraud’s existence
and generally understand how its actions aid
in promoting the success of the fraud. The
second element of scienter-commitment would
be met where evidence shows that the abettor
acts from a desire to help the fraud succeed...

If the evidence shows no more than a
transaction constituting the daily grist of the
mill, we would be loathe to find 10b-5 liabil

H21

-ity without clear proof of intent to violate the securities
laws.

Abell, 858 F.2d at 1127, (citing Woodward, 522 F.2d at 97)
(emphasis added).

- HPC and O’Donnell played no role in the offering of
the securities. O’Donnell Affidavit. HPC nor O'Donnell
knew of the existence of any alleged fraud. See Bane, 848
F.2d at 581. In Bane, the defendant was a lender who
included loan documents in an investment package for an oil
and gas limited partnership and made loans to some of the
plaintiffs. Id. at 580. The court held that the inclusion of
documents in investors packages and loaning money to the
investors did not constitute substantial assistance for aiding
and abetting liability under Rule 10b-5. Id. at 581.

In this case, HPC acted solely as the drilling operator.
Thus, HPC was even more removed from the plaintiffs’
investments than the surety, lender or escrow agent in
Eaton, Schlifke and Bane. HPC did not review the investors’
financial information and did not even know their identity
until this lawsuit was filed. O’Donnell Affidavit. HPC had
no contact or communication in even the most remote sense
with any of the investors prior to their investment.
O’Donnell Affidavit. HPC did not contribute to the
prospectus. O’Donnell Affidavit. Although a copy of the
agreement between Onshore and HPC was attached to the
prospectus, as in Bane, this is not sufficient to reestablish
substantial assistance. As plaintiffs admit in their Complaint,
HPC’s limited role was fully disclosed in the prospectus.
Complaint at 12-14. Plaintiffs have no basis for asserting
that HPC or O’Donnell had any duty to disclose, therefore,
there is no basis for imposing liability on HPC or O’ Donnell
under section 10(b) and Rule 10b-5.

—7_——————————————

H22

V.
HPC AND O’DONNELL DID NOT VIOLATE THE
TEXAS SECURITIES LAW

Plaintiffs allege generally the HPC and O’Donnell’s
actions violated the Texas Blue Sky Securities Act, Tex.
Rev. Civ. Stat. Ann. art. 581-33 (Vernon Supp. 1989). The
elements necessary to establish a violation of the Texas
Securities Act are substantially similar to those necessary to
establish a violation of Rule 10b-5. Thus, a failure to prove
a violation of Rule 10b-5 generally is considered a failure to
prove a Texas Securities Act violation. See Keasler v.
Natural Gas Pipeline Co. of Am., 569 F. Supp. 1180 (E.D.
Tex. 1983), aff'd, 741 F.2d 1380 (Sth Cir. 1984); Jeanes v.
Henderson, 688 S.W.2d 100 (Tex. 1985); Sibley v. Horn
Advertising Inc., 50S S.W.2d 417 (Tex. Civ. App.--Dallas
1974, writ ref’d n.r.e.), cert denied, 420 U.S. 929 (1975).
Because plaintiffs cannot establish that HPC and O’ Donnell
violated Rule 10b-5, they likewise cannot establish a
violation of the Blue Sky laws. Therefore, HPC and
O’Donnell are entitled to summary judgment as a matter of
law.

VI.
HPC AND O’DONNELL DID NOT COMMIT
COMMON LAW FRAUD

Plaintiffs cannot recover against HPC or O’ Donnell
on a theory of common law fraud. The elements of
actionable fraud in Texas are (1) that a _ material
representation was made; (2) that it was false; (3) that, when
the speaker made it, he knew it was false or made recklessly
without any knowledge of its +ruth and as a positive
assertion; (4) that they made it with the intention that it
should be acted upon by the party; (5) that the party acted in
reliance upon it; and (6) that he thereby suffered injury.

H23

South Hampton Co. v. Stinnes Corp., 733 F.2d 1108 (Sth
Cir. 1984); Trenholm v. Ratcliff, 646 S.W.2d 927 (Tex.
1983). As discussed above, plaintiffs admitted in their
depositions that neither HPC nor O’Donnell made any
representations to them, or consequently any
misrepresentations. McDonald dep. Vol VI at 1062-66;
Topalian dep. at 151; Garcia-Quiroga dep. at 159; Law dep.
at 76; Burroughs dep. at 84-85; LaCelle dep. at 157-63, 168-
69. Because plaintiffs cannot establish the elements
necessary to establish fraud, HPC and O’Donnell are entitled
to summary judgment.

Vil.
HPC AND O’DONNELL DID NOT VIOLATE.
THE RICO ACT

Plaintiffs assert RICO claims against HPC and
O’Donnell based upon allegations of illegal kickbacks, and
inflated contractual drilling prices. RICO prohibits four
forms ef activity: (1) investment in an enterprise engaged in
or affecting interstate or foreign commerce of income
obtained through a pattern of racketeering or through
collection of an unlawful debt, (2) acquisition of an interest
in such an enterprise through a pattern of racketeering or
through coliection of an unlawful debt, (3) conduct of the
affairs of such an enterprise through a pattern of racketeering
or through collection of an unlawful debt, and (4) conspiracy
to violate any of these three provisions. Civil remedies are
available for violations of section 1962 to persons injured "by
reason of” such RICO activities. Plaintiffs’ claims must fail
because they cannot establish any of the essential elements of
RICO and plaintiffs have no standing to assert — against
HPC and O'Donnell.

H24
A. Elements of a Civil RICO Case

The civil RICO statutes provide a private cause of
action for any person injured in his business or property by
reason of a violation of RICO. The injured person may seek
redress for treble damages against the person or persons who
caused his injury. 18 U.S.C. § 1964(c) (1982). To establish
a RICO violation under any subsection of 1962, the essential
elements are as follows: (1) a "person" (the defendant),
(2) through the commission of two or more predicate acts,
(3) constituting a "pattern" of "racketeering activity", directly
or indirectly invests in (§ 1961(a)), or maintains an interest
in (§ 1962(b) ), or participates in (§ 1962(c)), an
"enterprise", the activities of which affect interstate
commerce, causing plaintiff injury in his business or property
"by reason of" the defendants’ activity. Ocean Energy II,
Inc. v. Alexander & Alexander, Inc. , 868 F.2d 740, 742 (Sth
Cir. 1989); Moss v. Morgan Stanley, Inc. 719 F.2d 5, 17,
20-23 (2d Cir. 1983), cert. denied, 465 U.S. 1025 (1984).
Plaintiffs’ claims must fail because there is no evidence to
support any allegation that HPC or Q’Donnell engaged in a
pattern of racketeering activities or that plaintiffs’ injury was
caused by such acts. ;

B. Plaintiffs Lack RICO Standing

Section 1964(c) authorizes a suit by any person
injured in "his business or property by reason of a violation
of § 1962." 18 U.S.C. § 1964(c) (1982). Thus, the
Supreme Court has stated that anyone injured in his business
or property as a result of a defendant engaging in a pattern
of racketeering activity in a manner forbidden by § 1962 has
aclaim. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496-
97 (1985). In a case presenting similar allegations as this
one, the Fifth Circuit in construing RICO’s standing
requirement examined whether the plaintiffs were injured by

- H25

the conduct constituting the violation and- whether the harm
suffered was caused by the predicate acts. See National
Enters., Inc. v. Mellon Fin. Servs. Corp. No. 7, 847 F.2d
251, 252-53 (Sth Cir. 1988). In Mellon, the plaintiff creditor
alleged it was injured by illegal kickbacks a company paid to
its primary lender as a condition of financing, asserting that
these kickbacks depleted the funds of the corporation which
eventually declared bankruptcy. The Court found that the
plaintiff's damages were too indirect, speculative and
"beyond the pale of rational causation." /d. at 254. Thus,
the court found the plaintiff lacked standing to assert a RICO
claim.

In this instance, although plaintiffs’ allegations are
vague and somewhat unintelligible, they appear to claim that
alleged kickbacks HPC made to Johnson, one of the general
partners, and over charges it made to Onshore for drilling
caused them injury. See Plaintiffs’ Response to RICO
Standing Order at 11, 31-33. Like in Mellon, plaintiffs who
are investors in the limited partnership suffered no direct
injury, if any, as a result of such alleged activity. Their
injuries, if any, are too remote and speculative to have
"flowed" from the commission of the predicate acts. See
Mellon, 847 F.2d at 254, Therefore, they lack standing to
assert RICO claims against HPC and O’Donnell.

C. Plaintiffs Cannot Establish the Existence of a
Enterprise

Plaintiffs’ claims must be dismissed because there is
no proof to support their allegations that Onshore is the
RICO enterprise. The existence of an “enterprise” is a
crucial element of plaintiffs’ RICO claim. See Sedima, 473
‘U.S. at 496-97; United States v. Turkette, 452 U.S. 576, 583
(1981). An "enterprise" incliides any "individual,
partnership, corporation, association, or other legal entity,
and any union or group of individuals associated in fact

alii aia

although not a legal entity."

H26

18 U.S.C. § 1961(4).

The

Supreme Court defined an “enterprise” in the context of §

1962:

The enterprise is an entity, for present
purposes a group of persons associated
together for a common purpose of engaging in
a course of conduct[,] ... proved by evidence
of an ongoing organization, formal or
informal, and by evidence that the various
associated function as a continuing unit.
The “enterprise” is not the "pattern of
racketeering activity"; it is an entity separate
and apart from the pattern of activity in which
it engages.

452 U.S. at 583. The Fifth Circuit defined "enterprise" as
requiring, in addition,

the existence of a decision making structure,
whether hierarchial or consensual. The RICO
enterprise must have a common or shared
purpose and continuity of structure and
personnel.

Shaffer v. Williams, 794 F.2d 1030, 1032 (Sth Cir. 1986)

(citations omitted).

To establish an “association in fact"

enterprise, a plaintiff must show (1) an ongoing organization,
formal or informal, (2) the association had a common
purpose of engaging in a course of conduct, and (3) its
various members functioned as a continuing unit. Turkette,
452 U.S. at 583; Montesano v. Seafirst Commercial Corp.,
818 F.2¢ 423,427 (Sth Cir. 1987); Shaffer, 794 F.2d at

1032.

H27

The Fifth Circuit recently elaborated on the distinction
between the pattern and the enterprise:

When the alleged section 1962(c)
violator is a legal entity, such as a
corporation, this required separation 1s not
established merely by showing that the
corporation, through its employees, officers,
and/or directors, committed a pattern of
predicate acts in the conduct of its own
business. Atkinson. Nor does the fact that
individual officers and employees of a
corporation, in the course of their employment
associate together and commit in the conduct
of the corporation’s business a pattern of
predicate acts in its name and on its behalf,
suffice to constitute such officers and
employees (alone or together with the
corporation itself) an association in fact
enterprise distinct from the corporation. /d.
And, in Montesano we also explained that a
RICO plaintiff must plead specific facts that
establish an association that exists other than
merely to commit the predicate acts that show
pattern. 818 F.2d at 427,

Old Time Enters., Inc. v. International Coffee Corp., 862

F.2d 1213. 1217-18 (Sth Cir. 1989). The plaintiffs’ “4
allegations in their response to the Court's RICO Standing

Order identifies the enterprise as Onshore. See Plaintifts’

Response to RICO Standing Order at 31 4 6(a). There is no

evidence to support the contention that Onshore functioned

for the common purpose other than conduct of its own

business. Neither is there any proof of any association-in-

fact among the various defendants that includes HPC and

H28

O’Donnell. O’Donnell Affidavit. Thus, plaintiffs cannot
establish the existence of a RICO enterprise.

D. Plaintiffs Cannot Establish a Pattern of
Racketeering Activity

Plaintiffs’ RICO claims should be denied because they
have not established that defendants committed a pattern of
racketeering activity. A "pattern" or racketeering activity
"requires at least two acts of racketeering activity." 18
U.S.C. § 1961(5) (1982). The Supreme Court in Sedima
gave some insight to the "pattern" requirement:

[A] pattern "requires at least two acts
of racketeering activity, " § 1961(5) (emphasis
added), not that it "means" two such acts.
The implication is that while two acts are
necessary, they may not be sufficient.
Indeed, in common parlance two of anything
do not generally form a “pattern," The
legislative history supports the view that two
isolated acts of racketeering activity do not
constitute a pattern. As the Senate Report
explained: "The target of [RICO] is thus not
sporadic activity. The infiltration of
legitimate business normally requires more

_.than one ’racketeering activity’ and the threat
of continuing activity to be effective. It is this
factor of continuity plus relationship which
combines to produce a pattern." . . . of the
same bill, Congress was more enlightening:
"criminal conduct forms a pattern if it
embraces criminal acts that have the same or
similar purposes, results, participants, victims,
or methods of commission, or otherwise are

H29

interrelated by distinguishing characteristics
and are not isolated events."

473 U.S. at 496 n.14 (citations omitted)

Since Sedima, the great weight of authority has
required a rigorous showing on this element. See Smith v.
Ayres, 845 F.2d 1360, 1365-66 n. 18 (Sth Cir. 1988);
Crocker v. FIDC 826 F.2d 347, 348 n.2 (Sth Cir. 1987),
cert. denied, 108 S. @t. 1075 (1988); Montesano v. Seafirst
Commercial Corp. , 818 F.2d 423,426 (Sth Cir. 1987); Smoky
Greenhaw Cotton Co. v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 785 F.2d 1274, 1280-81 n. 7 (Sth Cir. 1986),
cert denied, 482 U.S. 928 (1987). Thus, plaintiffs must
establish at least two predicate acts of racketeering activity,
which are indictable as defined in the 18 U.S.C. §
1961(1)(A), that show “continuity plus relationship" with the
legitimate business. Old Time Enters., Inc., 862 F.2d at
1217. Plaintiffs’ allegations fail to meet this "continuity plus
relationship" test. Plaintiffs allege that HPC paid kickbacks
to Johnson and over charged Onshore. There is no proot
that these alleged acts were anything other than isolated
instances.

Moreover, plaintiffs have no evidence that the alleged
"predicate acts" constitute kickbacks or that HPC
overcharged Onshore. RICO’s definition of racketeering
activity contains a laundry list of offenses which constitute
the predicate acts necessary to establish a violation. 18
U.S.C. § 1961(1). Such acts must be acts "indictable" or
“punishable” under one of several listed federal criminal laws
or "chargeable" under a listed state law. Jd. § 1961(1)(A).
The alleged kickbacks were payments from HPC to Johnson
arising from transactions wholly unrelated to Onshore.
O’Donnell Affidavit. As Johnson testified the transactions
transpired prior to his affiliation with Onshore. Johnson def.

NEE

H30

at 32, 35-36, 24. Johnson confirms that such payments were
not kickbacks. Johnson dep. at 77. Likewise, the auditor
hired to review HPC’s books and records testified that he
found no evidence that the payments were kickbacks. Leggio
dep. at 242-44. Furthermore, the alleged overcharges are
consistent with market prices and the contractual agreement
in existence between Onshore and HPC. O’Donnell
Affidavit. Thus, because plaintiffs cannot establish that HPC
committed "predicate acts" that constitute a "pattern" or
racketeering activity, HPC and O'Donnell are entitled to
summary judgment. oi

E. Plaintiffs Cannot Establish the Activities
Prohibited Under RICO

Plaintiffs cannot establish that HPC or O'Donnell
derived income through a pattern or invested income,
acquired or maintained an interest in, or controlled a RICO
enterprise through a pattern of RICO activity. Therefore,
their claims must fail.

To establish a violation of § 1962(a), the plaintiffs
must establish that HPC and O’Donnell "derived income"
from a “pattern" of “racketeering activity" in which they
participated as principals; and that they used or invested that
income to acquire an interest in, establish or operate the
enterprise. H.J., Inc., 648 F. Supp. at 428 n. 7. There is
no evidence that either HPC or O’Donnell used or invested
income derived from a pattern of racketeering activity in
Onshore for any purpose. In fact, HPC and O’Donnell had
no financial interest in Onshore. O’Donnell Affidavit.

Under 1962(b), the plaintiffs must establish that HPC
and O’Donnell “acquired or maintained" an interest or
"control". of the enterprise through a "pattern" of
“racketeering activity." The object of the activity must be to

H31

gain the interest or acquire control. Control is not limited by
stock or capital ownership but may exist when the defendant
has some meaningful ability to direct or influence the affairs
or actions of the enterprise. E.g., Sutliff, Inc. v. Donovan
Cos., 727 F.2d 648, 653 (7th Cir. 1984). Again, there is no
evidence that either HPC or O’Donnell gained an interest or
controlled the affairs or actions of Onshore. The only
evidence is to the contrary. O’Donnell Affidavit.

To establish a violation of § 1962(c), the plaintiffs
must establish that HPC and O’Donnell were "employed by
or associated with" the enterprise and "conducted" or
"participated" in the conduct of the affairs of the enterprise
through a pattern of racketeering activity. Montesano, 818
F.2d at 424. To satisfy the conduct element, the Fifth
Circuit has held that the person must be able to commit the
predicate offenses solely by virtue of his position in the
enterprise, or the predicate offenses must be related to the
activities of that enterprise. United States v. Cauble, 706
F.2d 1322, 1341 (Sth Cir. 1983), cert. denied, 465 U.S.
1005 (1984). The Cauble court, adopted the following test:

A defendant does not "conduct" or
"participate in the conduct" of a lawful
enterprise’s affairs, unless (1) the defendant
has in fact committed the racketeering acts as
alleged; (2) the defendant’s position in the
enterprise facilitated his commission of the
racketeering acts, and (3) the predicate acts
had some effect on the lawful enterprise.

Id. at 1332-33. There is no evidence that HPC or O’ Donnell
had any position with Onshore that facilitated the commission
of the alleged predicate acts. The only evidence is to the
contrary. O’Donnell Affidavit. Thus, their claims must fail.

H32

Section 1962(d) makes it unlawful to conspire to
violate § 1962(a), (b), or (c). To establish a violation of
§ 1962(d), plaintiffs must establish that: (1) two or more
persons entered into an unlawful agreement to violate §
1962(a), (b), or (c), as those offenses have previously been
defined; (2) HPC and O’Donnell knowingly and willfully
became members of the conspiracy; (3) HPC and O’ Donnell
agreed to commit at least two of the acts of racketeering
activity alleged by plaintiffs to create a pattern; and (4) one
of the members of the conspiracy knowingly committed at
least one overt act in furtherance of the conspiracy alleged.
United States v. Cauble, 706 F.2d at 1341: United States y.
Phillips, 664 F.2d 971, 1012 (Sth Cir. 1981), cert. denied,
459 U.S. 906 (1982); United States v. Elliott, 571 F.2d 880,
902-03 (Sth Cir.), cert. denied, 439 U.S. 953 (1978).
Plaintiffs must establish that HPC and O’ Donnell objectively
manifested intent to participate in the affairs of the
enterprise. Cauble, 706 F.2d at 1341. There is no evidence
that either HPC or O’Donnell knowingly and willfully
became a member of any alleged conspiracy. The only
evidence is to the contrary. See O’Donnell Affidavit.

VII.
CONCLUSION

Wherefore, for the foregoing reasons, Houston
Petroleum Co., Inc. and Richard O’Donnell urge this Court

to grant their motion for Summary Judgment in its entirety.

Respectfully submitted,

OF COUNSEL: By:

Don Jackson

H33

VINSON & ELKINS Admission I.D. No. 6915
1001 Fannin 1001 Fannin

3300 First City Tower 3106 First City Tower
Houston, Texas 77002 Houston, Texas 77002-6760

Telephone: 713/651-2222 713/651-2078

ATTORNEY IN CHARGE FOR
DEFENDANTS HOUSTON
PETROLEUM CO., INC. and
RICHARD O’DONNELL

CERTIFICATE OF SERVICE
This is to certify that a true and correct copy of the
foregoing was mailed this _15_ day of _June_, 1989, to: »

Armando Lopez W. Sherman Rogers

LOPEZ & RAMIREZ Howard University

2990 Richmond, School of Law

Suite 205 2900 Van Ness, N.W.
Houston, Texas 77098 Washington, D.C. 20008

D. John Leger Neil Wasserstrom

LEGER & SANDERS MARGRAVES, KENNERLY
5847 San Felipe & SCHUELER

Suite 1250 2200 Dresser Tower
Houston, Texas 77057 60i Jefferson

Houston, Texas 77002

Kevin F. Risley Joel Middlebrook
BUTLER & BINION 2927 Drexel

1600 Allied Bank Plaza Houston, Texas 77027
Houston, Texas 77002

a

H34
Frank Pinedo W. Roderick Johnson
PINEDO, CEZEAUX JOHNSON & JOHNSON, P.C.
& SWEENEY 1800 West Loop South
1415 Louisiana Suite 1510
Suite 2550 Houston, Texas 77027
Houston, Texas 77002
Wayne M. Byles John R. Knight
P. O. Box 542165 MORRIS & CAMPBELL

Dallas, Texas 75354-2165 600 Jefferson,
Suite 1617
Houston, Texas 77002

By
Don Jackson

EXHIBIT A

H35

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

MICHAEL K. TOPALIAN, etal. §
§

7; § CIVIL ACTION NO.
§ 87-3826

JOHN N. EHRMAN, et al., §

AFFIDAVIT OF RICHARD O’DONNELL IN
SUPPORT OF HOUSTON PETROLEUM CO., INC.
AND RICHARD O’DONNELL’S MOTION FOR
SUMMARY JUDGMENT

THE STATE OF TEXAS §
3
COUNTY OF HARRIS §

Before me the undersigned authority on this day
personally appeared RICHARD O’DONNELL, President of
Houston Petroleum Co., Inc. ("HPC"), in the above-entitled
and numbered cause and makes this affidavit in support of
HPC and Richard O’Donnell’s Motion for Summary
Judgment, who, being duly sworn, deposes and says:

l. I am over 18 years old and am fully competent
to make this affidavit. At all times relevant to this dispute,
I have been the President of HPC, which is a Texas
corporation doing business in the State of Texas with its
principal place of business in Houston, Texas. In the
transaction between Onshore Exploration, Ltd. 1984 Mid-
Year Drilling Program and HPC, HPC acted as one of the
oil and gas operators.

H36

a Neither HPC nor I participated in any way in
the preparation of the offering materials or the prospectus
that was put together to promote the program.

3. Neither HPC nor I had any involvement with
the selling activities undertaken on behalf of the Onshore
Exploration Program. We were unaware of the sales efforts
that were made. We had no knowledge or control over the
means by which the salesmen marketed the limited
partnership interests.

4. Neither HPC nor I played any role in the
offering of the securities to the plaintiffs or any other
investors. As we were not involved in the offering of the
securities, we made no representations, much less untrue
statements, to any plaintiffs. Neither HPC nor I were
involved in the soliciting of any investors to purchase an
interest in the Onshore Exploration Program. Neither HPC
nor I sold any investors their interests in this offering. We
had no contact with the investors prior to their investments
and did not advise them whether to purchase or whether this
was a Solid investment. We made no representations to the
investors regarding the quality of this investment, about the
program or otherwise. Neither HPC nor I reviewed the
investors’ financial information prior to their investment in
the Onshore Exploration Program or at any time. We did
not even know their identities until after the lawsuit was
filed. Neither HPC nor I had any contact or communication
in any sense with any of the investors prior to their
investment.

a Neither HPC nor I played any part in or had
control over in the operation or management of Onshore.
We did not control any Onshore Officer or employee, and we
did not have any control over any of the policies,

OO

H37

management, decisions or any aspects of the business of
Onshore, including but not limited to the sales efforts.

6. We were unaware and are still unaware of the
existence of any fraud or alleged fraud by any party
perpetrated or sought to be perpetrated against the investors
and did not intent to render any assistance to any alleged
fraud. We were and are unaware of how our actions would
promote the success of any alleged fraud. We had no intent
to violate any securities laws and did not violate any
securities laws. We did not participate or intend to
participate in any such fraud nor did we assist or intend to
assist any such fraud succeed.

ce Neither HPC nor I were involved in any RICO
activities. We did not participate in any RICO enterprise. We
did not attempt to control any RICO enterprise, acquire an
interest in, or maintain an interest ina RICO enterprise. To
the best of my knowledge, Onshore is not a RICO enterprise
nor is there any RICO enterprise associated with this drilling
program.

8. Neither HPC nor I have participated in any
pattern of racketeering activity. The payments HPC made to
W. Roderick Johnson were not illegal kickbacks as plaintiffs
alleged, but instead were commissions due to Mr. Johnson
for transactions unrelated to the Onshore Exploration
Program. HPC did not overcharge Onshore for exploration
activities that it undertook. Instead, the prices charged are
consistent with market prices and the contractual agreement
in existence between Onshore and HPC. Neither HPC nor
I had any financial interest in Onshore. Neither HPC nor |
had any control over the affairs of Onshore. We did not
have any position with Onshore that facilitated the
perpetration of any alleged predicate acts.

H38

?. Neither HPC nor I were knowingly or
willfully a part of any alleged conspiracy.

/S/
RICHARD O’DONNELL

SWORN TO AND SUBSCRIBED BEFORE ME this
15. day of June 1989, by Richard O'Donnell.

_/S/
Notary Public in and for the
State of Texas

(SEAL)

H39

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

MICHAEL K. TOPALIAN, et al., §
Plaintiffs, §
§ Civil Action ¥
VS. § No. 87-3826
§
JOHN N. EHRMAN, et al... §
Defendants. §

ORDER GRANTING HOUSTON PETROLEUM
CO.,INC. AND O’DONNELL’S
MOTION FOR SUMMARY JUDGMENT

This cause came before the Court on the Motion of
Houston Petroleum Co., Inc. and Richard O'Donnell for
Summary Judgment. The Court, having considered the
motion and evidence on file, finds that there is no genuine
issue aS to any material fact and that defendants HPC and
O'Donnell are entitled to judgment as a matter of law.

It is therefore, ORDERED, ADJUDGED AND
DECREED that the motion of HPC and O’Donnell for
Summary Judgment be and the same hereby is GRANTED.
Plaintiffs shall take nothing by their action. This is a final
judgment. All costs are assessed against the »laintiffs,
jointly and severally.

Done this the day of , 1989.

UNITED STATES DISTRICT JUDGE

H40

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

MICHAEL K. TOPALIAN, et al., §
§
Plaintiffs, §

§ Civil Action

VS. § No. 87-3826
§
JOHN N. EHRMAN, et al., §
§
Defendants. §

PLAINTIFFS’ RESPONSE TO THE HOUSTON
PETROLEUM DEFENDANTS’ MOTION FOR
SUMMARY JUDGMENT

To the Honorable Judge of said Court:

COME NOW Michael K. Topalian, et al., Plaintiffs
in the above styled and numbered cause, and file this their
response in opposition to the Houston Petroleum Defendants’
(Houston Petroleum Company Inc. and _ Richard
O’Donnell) Motion for Summary Judgment.

The Houston Petroleum Defendants’ Motion. for
Summary Judgment is friovolous. It. represents a last-ditch
effort by these Defendants to avoid a trial of this complex
securities fraud and RICO case in which the evidence will
clearly show that the Houston Petroleum Defendants and
others engaged in acts and practices which operated as a
fraud or deceit upon Plaintiffs in connection with the sale of
securities.

a

H4]

Plaintiffs, in their First Amended Complaint
(paragraphs 145 - 156), raise, in a clear and detailed manner.
a number of serious allegations against the Houston
Petroleum Defendants. The charges stem from the existence
of a pre-Onshore attorney/client relationship between these
Defendants and Onshore’s second Managing general partner,
Defendant W. Roderick Johnson and and his law firm, W.
Roderick Johnson, P.C.

The nature of such a relationship is naturally suspect
tor allegations of conflict of interest and, in the instant case.
as will be shown below, the relationship, in fact, led to self-
dealings resulting in "kick-backs" (from the Houston
Petroleum Defendants to the Johnson Defendants) in excess
of ONE HUNDRED THOUSAND ($100,000.00) DOLLARS
at the expense of Onshore and its investors. including
Plaintiffs.

Plaintiffs’ accusations are corroborated by the Johnson
Defendants, themselves. In their February 11, 1988, Motion
to Dismiss, the Johnson Defendants made the below quoted
admissions relevant to Plaintiffs’ allegations against the
Houston Petroleum Defendants:

"... As a result of an ElG-initiated audit,...
EIG demanded and received an adjustment
and a refund of moneys it had paid Houston
Petroleum Company. In other words, EIG
WAS THE VICTIM OF SUCH ACTS AND
EHRMAN AND EIG TOOK TIMELY
ACTION... TO PROTECT THE
INTERESTS OF THE HOLDERS OF THE
LP UNITS." (Emphasis added).

Defendant Joel A. Middlebrook, CPA and bookkeeper
for the Partnership, also corroborates the Ehrman and

Ve

H42

Johnson Defendants’ position regarding the Houston
Petroleum Defendants. In a January 22, 1986, letter to John
N. Ehrman (Plaintiffs’ Exhibit "A"), Ms. Middlebrook, in
relevant part, states as follows with regard to the Houston
Petroleum Defendants:

"... Lam surely disappointed that you did not
use Bobby Steelhammer (a Houston attorney)
to handle the settlement with Houston
Petroleum as promised. Why not ???? He is
a tiger, a good man to have in your corner
when dealing with slick deal artists.

I would like a copy of Rod’s (Defendant
Johnson) resignation as Managing General
Partner of Onshore Exploiation Ltd. 1984.
You had told me that you had Bobby
Steelhammer draw up his resignation papers,
because you didn’t want a thief in your midst.

... you have said that the cash investors are
strictly for development deals. If that is true,
did you give the money to the crooks at
Houston Petroleum????" (Emphasis Added)

Deposition testimony, similarly corroborative, has
been given by Onshore’s geologist, Victor B. Russek, Jr.,
Onshore’s original General Partner, Wayne M. Byles, |
Onshore’s securities counsel, Frank Pinedo and Onshore’s
independent, certified internal auditor, Mr. Frank Leggio.

Moreover, Plaintiffs’ extensive discovery in this case
has revealed that the Houston Petroleum Defendants
participated with Onshore’s General Partners in a course of
business which operated as a fraud on the Plaintiffs as
investors.

H43

Furthermore, Plaintiffs, at a minimum, can clearly
establish that the Houston Petroleum Defendant aided and
abetted the securities violations alleged in the Complaint.
Plaintiffs again call the Court's attention to Defendant Joel
Middlebrook who, on cross-examination by Houston
Petroleum’s attorney, testified in her deposition as follows at
page 466 - 467:

Q.

Do you recall a month or a year in
your association with Onshore that you
first became aware of Houston
Petroleum Company?

It would have to be in the Fall of °&4.
How about Mr. O'Donnell? The same?
Same.

And what was the occasion that brought about
your learning of Houston Petroleum
Company?

Well, one time I went to their office, before
they started the program, and visited with
them. They had several people there that
showed the office and what they were going
to drill, and so on. It was a kind of dog-
and-pony show for potential investors that
John had set up and did. (Emphasis Added)

Okay. And were you by yourself?

Yes; I went by myself.

7

Yo

H44

You did? Was anyone else at the meeting
besides...

Oh, yes; there were other people there.
Okay. Who was there?

I don’t know their names. They were just
different prospective investors that showed up.

Okay. Was Ehrman there?
Uh-huh.
Okay. Anyone else associated with Onshore?

I don’t remember. Rod may have been there;
I’m not sure. He may or may not. I don’t
know; I doon’t remember. I know John was
there; and a bunch of potential investors
were there. (Emphasis Added)

And who made the presentation for
Houston Petroleum Company? (Emphasis
Added)

One of their geologists. I don’t know his
name. I have forgotten his name. (Emphasis
Added) .

Was he the only individual who spoke?

No. I’m sure everybody had a little something
to say.

H45
Q. Do you recall the Prospect that was presented
at the time?
A. It was the one that was in the notebook, the
Prospectus.
Q. You don’t recall the name?
A. It was called the Thornton, No. |] Thornton.

In this regard, Plaintiffs contend that the evidence
Shows that these Defendants had more than just a "general
awareness” of their role in the Rule 10b-5 violations and that
they knowingly rendered "substantial assistance" in the
violations. See Abell y. Potomac Insurance Co., 858 F .2d
1104, 1126 (Sth Cir. 1988). Like Defendants Rio Bravo and
Kelley Onshore, the Houston Petroleum Defendants
disregarded the terms and conditions of the Memorandum
and commenced drilling operations before Onshore funded.

Plaintiffs’ claims under the RICO Statute are equally
Strong in view of prevailing precedent. See generally, H. J.,
Inc. v. Northwestern Bell Telephone Co., 57 U.S.L.W. 495]
(U.S. June 27, 1989), reversing and remanding 829 F.2d 648
(8th Cir. 1987); Sedima, S. P.R.L. v. Imrex Company, Inc.,
473 U.S. 479 (1985): R.A.G.S. Couture, Inc. y. Hyatt, 774
F.2d 1350 (Sth Cir. 1985), cited in s., he -¥.
Northwestern Bell Telephone Co.., supra, 57 U.S.L.W. at
4952 note 2.

Accordingly, the Houston Petroleum Defendants’
contention that there is no genuine issue as to any material
fact is on its face preposterous, especially given the complex
facts of this case. If ever there was a case that was
inappropriate for summary judgment, this is it. The Houston
Petroleum Defendants’ Motion for Summary Judgment is

=

H46

clearly part of a large effort of certain Defendantsto avoid
their day of reckoning by unnecessarily burdening Plaintiffs’
counsel with paperwork. These Defendants’ only hope at
this point is that this Court will dismiss them from this
lawsuit on any grounds possible so long as the ruling takes
place prior to a trial on the merits. What Defendants want
is a trial by deposition and affidavits; they fear the testimony
that will be presented at trial which establishes their
culpability. However, on this record, Plaintiffs are entitled
to have this Court resolve the multitude of issues involving
these Defendants in a trial on the merits.

1. THE SECURITIES VIOLATIONS. The
Houston Petroleum Defendants assert that they had no duty
to disclose anything to the investors because they lacked a
fiduciary or other similar relationship of trust and confidence
vis-a-vis the investors. They also deny liability for aiding
and abetting securities laws violations, among other things.

The Houston Petroleum Defendants’ contentions are
without merit. Plaintiffs contend that the evidence will
establish these Defendants’ culpability in the scheme to
defraud the Plaintiffs under Rule 10b-5. As the Fifth Circuit
has noted, coverage under Rule 10b-5 is not a limited one.
Hilgeman v. National Ins. Co. of America, 547 F.2d 298,
302 (Sth Cir. 1977). The Rule, among other things,
prohibits any person from engaging in “any act, practice or
course of business which operates or would operate as a
fraud or deceit upon any person." Hilgeman, supra, Section
240.10b-5.

Plaintiffs possess evidence which will establish that
Defendants were participants in a scheme to enrich
themselves and others at the expense of the Plaintiffs-
investors. Plaintiffs will also be able to establish that the
Houston Petroleum Defendants knowingly rendered

OOOO ———— ee

H47

substantial assistance to others who violated Rule 10b-5.

Plaintiffs assert that the Houston Petroleum
Defendants engaged in acts which operated as a fraud upon
the Plaintiffs in connection with the selling of securities. At
the trial on the merits, Plaintiffs will be able to Clearly show
thai they suffered an injury as a result of deceptive practices
"touching" the sale of securities to them within the meaning
of Section 10b of the 1934 Securities Exchange Act. Cf.
Superintendent of Insurance v. Bankers Life & Casualty Co.,
404 U.S. 6, 10-13 (1971).

Accordingly, Plaintiffs must be given the opportunity
to prove that the Houston Petroleum Defendants not only
aided and abetted violations of the securities laws but
engaged in acts and business practices which operated as a
fraud or deceit upon Plaintiffs in connection with their
purchases of securities.

The Houston Petroleum Defendants’ assertion that
they had no duty to disclose anything to the investors is
overbroad, inaccurate and without merit. As the Supreme
Court stated in Dirks v. SEC, 463 U-S. 646, 655 n. 14
(1983), under certain circumstances even outsiders may
become fiduciaries of investors where confidential
information is iegitimately revealed to an underwriter,
accountant, lawyer, consultant or other persons solely for
business purposes. That certainly, at a minimum, is the case
here since Houston Petroleum Company was a joint-venturer
In the project. Furthermore, it is also clear that one who
missappropriates material information to his own advantage
violates Section 10(b) and Rule 10b-5. Cf. SEC v. Materia,
745 F.2d 197, 203 (2d Cir. 1984); Carpenter vy. United
States, 791 F.2d 1024, 1027-1034 (2d Cir. 1986), aff'd by
an equally divided court on the ] O(b) issue, Ss U.S.
108 S.Ct. 316, 320 (1987). Congress has now made clear

H48

that liability is not dependent on a fiduciary relationship but
applies to any person buying or selling while in possession
of material undisclosed information and any persons
communicating this information to others. See "Insider
Trading and Securities Fraud Enforcement Act of 1988",
Sections 20A (a)(b)(c)(d) as amended, Pub. Law 100-704,
102 Stat. 4677 (November 11, 1988).

Accordingly, it is clear that there are many contested
issues to be resolved with respect to the Houston Petroleum
Defendants’ liability under Rule 10b-S.

Similarly, there are numerous fact questions to be
resolved concerning the Houston Petroleum Defendants
liability under sections 12(1) and 12(2) of the 1933 Securities
Act.

a RICO VIOLATIONS. The Houston
Petroleum Defendants’ argument that Plaintiffs have failed to
make out a RICO case against them is equally without merit.
These arguments are particularly inappropriate here.
Plaintiffs have gone to great lergths to plead this case with
clarity and specificity. | What Defendants are really
requesting is that Plaintiffs prove their case in their
Complaint.

Moreover, Defendants’ memorandum conveniently
omits any discussion of controlling cases that undermine their
arguments. See H. J., Inc. v. Northwestern Bell Telephone
Co., 57 U.S.L.W. 4951 (U.S. June 27, 1989), reversing and
remanding 829 F.2d 648 (8th Cir. 1987); R.A.G.S. Couture,
Inc. v. Hyatt, 774 F.2d 1350 (Sth Cir. 1985).

Throughout the text of their Complaint, Plaintiffs
clearly detail that they were fraudulently induced to make
sizeable investments of money in an "Enterprise" which was

H49

conceived, developed and operated for the unjust enrichment
of the Defendants. The "Enterprises" referred to are Clearly
the limited partnerships-Onshore Exploration Ltd., 1984
Mid-Year Drilling Program in one instance. and Texas
Energy, Ltd., in the other. Thus, it is plain to see that
Plaintiffs are not referring to Ehrman Investment Group,
Inc., or any of the other Defendants as the "Enterprise."

Plaintiffs do contend, however, that Defendants
Ehrman and Ehrman Investment Group, Inc. and the Houston
Petroleum Defendants, inter alia, conducted or Participated,
directly or indirectly, in the limited partnership -- the
Enterprise -- through a pattern of racketeering activity in
violation of 18 U.S.C. 1962 (c). Plaintiffs will show at trial
how the various Defendants constituted an association of
organizations that regularly engaged in the practice of selling
and financing investments in oil and gas limited partnerships
through fraud, omissions of material facts and other unlawful
acts.

To require Plaintiffs to conclusively prove these
matters prior to trial is not required. However, Plaintiffs
contend that they will be able to prove their case if given the

opportunity.

Defendants’ contention that Plaintiffs will not be able
to show a pattern of racketeering activity is similarly without
merit. In R.A.G.S. Couture, Inc. vy. Hyatt, 774 F.2d 1350,
1354 (Sth Cir. 1985), the Fifth Circuit read the "pattern and
other requirements of the RICO Act broadly. The’ Court
noted that the mailing of two (2) invoices alleged by plaintiff
to be fraudulent was sufficient to constitude a pattern of
racketeering activities". R.A.G.S. Couture, Inc. y. Hyatt,
supra, 774 F.2d at 1354. The Supreme Court recently cited
this case and holding in its most recent decision on RICO.

HS50

See H. J., Inc., v. Northwestern Bell Telephone Co., 57
U.S.L.W. 4951, 4952, n. 2 (1989).

In this case, Plaintiffs have alleged financial injuries
as a result of various predicate acts, including violations of
Section 10(b) and federal mail and wire fraud statutes.
These allegations are sufficient to withstand a motion to
dismiss. Corwin v. Marney Orton Investments, 788 F.2d
1063, 1069 (Sth Cir. 1986). Moreover, Plaintiffs will be
able to show "acts (on the part of Defendants) that have the
Same or Similar purposes, results, participants, victims, or
methods of commission," and that are otherwise "interrelated
by distinguishing characteristics." Sedima, S.P.R.L. v. Imrex
Company, Inc., 473 U.S. 479, 496 at note 14 (1985).
Accord: H. J. Inc. v. Northwestern Bell Telephone Co. , 57
U.S.L.W. 4951, 4953 (1989). Accordingly, Plaintiffs
believe that they have a strong case against Defendants.

As the Fifth Circuit stated in R.A.G.S. Couture, Inc.
v. Hyatt, supra, 774 F.2d at 1355:

"The scope of the civil RICO statute is
breathtaking. An allegation of fraud in a
contract action can transform an ordinary state
claim into a federal racketeering charge. It
may be unfortunate for federal courts to be
burdened by this kind of case, but it is not for
this court to question policies decided by
Congress and upheld by the Supreme Court."
Id.

Plaintiffs contend that they will be able to prove their
RICO allegations at the trial of this case under any of the
standards referred to by Defendants in their memorandum.
The acts of the Defendants in this case which were
perpetrated against the Plaintiffs were the result of their

HS]

participation, directly or indirectly, in the affairs of the
Parternship through a pattern of racketeering activity.
Plaintiffs are entitled to their day in court in order to prove
their case.

CONCLUSION

This difficult and complex case is_ Clearly
inappropriate for summary judgment. This is especially true
for these Defendants since Plaintiffs are in the process of
completing the deposition of Defendant Richard O’Donnell,
president of Houston Petroleum Company. Due to conflicts
in Mr. O’Donnell’s attorney’s trial schedule, Mr.
O’Donnell’s deposition has been re-scheduled on numerous
occasions and was finally commenced on Friday, July
21,1989, and continued on Saturday, July 22, 1989.
However, the deposition could not be concluded and Mr.
O’Donnell’s testimony will resume at a later date by
agreement between counsel.

Factual issues abound with respect to every issue in
this case. Congress has given this Court jurisdiction over
defendants such as the Houston Petroleum Defendants and
empowered this Court to award appropriate relief. Plaintiffs
will be able to clearly establish at trial that the Houston
Petroleum Defendants have played an important and
substantial role in an intricate scheme to mislead and defraud
investors for the personal gain of the Defendants. Plaintiffs
are entitled to their day in court. Accordingly, Plaintiffs
respectfully pray that the Houston Petroleum Defendants’
Motion for Summary Judgment be denied.

Respectfully submitted,

/S/

Armando Lopez

H§2

LOPEZ & RAMIREZ

Fed. 1.D.4: 4125

2990 Richmond Avenue, Suite 205
Houston, Texas 7709%

(713) 524-4801

OF COUNSEL:

W. Sherman Rogers

Fed. 1.D.#: 628]

Howard University School of Law
2900 Van Ness, N.W.
Washington, D.C. 20008

(202) 686-6436

CBEBREFIFIC ATE OF SER VICI

I, Armando Lopez, hereby certify that a true and
correct copy of the foregoing instrument has been hand
delivered to the Houston Petroleum Defendants, by and
through their attorney of record, Mr. J. Don Jackson,
VINSON & ELKINS, 3300 First City Tower, 1001 Fannin,
Houston, Texas 77002, and by U.S. First Class Mail to all
other counsel of record and pro-se parties on this the _7th
day of July, 1989.

/S/

Armando Lopez

HS}

January 22, |9R6

Mr. John N_ Ehrman

2 Northpoint Drive Suite 300
Houston. Texas 77/060

Dear Tohn

I need a copy of the contract with Ho ” }
Which you told me ahonut last week | r oo
you did not use Bobby Steelhammer to hand ne Se
With Houston Petroleum ac promised Ay
tiger, a good man to have in your corner »v
lick deal artist

| would like | Opy | Row] r ,! ¥) |
(;eneral Partner of Onshore } XpDIOTA 1G nA
told me. that You nad Konhy » EL ‘ 3 ifaw
resignation papers, because you did A
midst

I would like to review the a :
r ni . { rn (nck re , r tne , sd
DANK records on NsSno a
promised to give me the record ice Jur m5. WV
is your problem in letting me look

Please furnisn a copy i fun KeT ing \
HPC on the #1 through #4 Belt we lat

Tf sll memento mas +b —T, - -+ ,

ii YOU WIiil PrOVIde ~ Ww i j a ( WG
the royalty bank account records. I w Xe able
the 1099 S for 1985S AS YOu KM ‘A NY r ¥aAl / yr Vv 117
completed and we are ad c tO print SNeCKS ine Na ai ] Tr

necessary records

H54

Regarding Leggio, I called him to get a copy of the
Houston Petroleum and Rio Bravo Audit reports. He said
that he would see about getting a copy for me and that he
incidentally, needed the Oil & Gas Reserves and Kelley
Onshore contracts. You now have a copy of those contracts.
I would, as a second request, like to have a copy of the audit
reports.

The letter to Oil & Gas Reserves was asinine. Dick
Manuel must be confused. I have not talked with Terry
Richardson in a year and a half at least. The one person
who called me was Hop Nolen. He is the primary person
there. He is incidentally a client also. Your $350,000 hot
check has been a problem to say the least.

Regarding reselling 15 Onshore units, where did you
get your quantity?? Vic King is 3. Ernie is 1 or 2. You are
telling me Barrow is the other 10. To date he has not
received the $ from the sale of his units. And he has
provided you with financing statements for his units.

This is my second request for the above information.
If you don’t have time to gather it, I will come out to help
you get it together. You were supposed to leave a check for

about what you have done. You are now telling me that you
have only sold $1,500,000 in TEL. You are not supposed to
break escrow until you have $2,400,000. Is this another
occasion in which you do not exactly follow the prospectus
guidelines, or are you trying to screw me out of the money

You must not have the other $7,000,000 in cash
investors Or you would not have all those hot checks floating
around. But, you have said that the cash investors are
strictly for development deals. If that is true, did you give

HSS

the money to the crooks at Houston Petroleum???? Or does
the money actually exist???? Where’s the beef????

I have never known you to be niggardly about money.
You must be in serious trouble on this deal, to get down to
trying to short change me on this.

You have mentioned that you would like for me to cut
you some slack on this deal. I will be happy to talk with you
about it. Please tell me the truth about what you are doing.
| have a hard time with a different story each week about
what the deal is.

You are saying that you normally get 7 1/2% on the
note finance deal. Your prospectus calls for a 3% general
partner fee and a 4% sales commission. You pay out 3% to
salesmen, retaining a total of 4%. If you sell the deal
yourself, you keep a total of 7%. My 1/2% is equal to
12.5% of the 4% cash to the general partner. I will be
happy to take 12.5% of the fee due you on the cash
investors, since you receive 3% on those.

Thus, if you have $1,500,000 of note investors, you
owe $7500 for those and for the cash investors of
$7,000,000, you will owe $26,250, for a total of $33,750.
rather than the full amount called for in our letter agreement,
thus giving you a discount of $8750.

Per your letter of Monday, you say you aren’t trying
to short change me, that you haven’t collected the funds due
you. When you say you are going to leave a check for me

HS6

to collect when the funds are wired and you don’t. I do feel
you are trying to jack me around.

You have been rude, disloyal and untruthful in your
dealings with me and others. I have never been involved in
such a drill as this. As far as I am concerned, this will be
the last deal we will ever be in together. I had looked
forward to working with you in the oil programs. But, the
way you run your business, I don’t want to be involved.

Sincerely yours,

Joel A. Middlebrook

jne. 186

EXH. "A"

HS7

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

NO. 90-2106

MICHAEL K. TOPALIAN, WARREN B. FIENGA,
ROY JACOBS, JR., JUAN GARCIA-QUIROGA,
RICHARD OROZCO, JEAN STEUBING,
CHARLES W. ANDERSON, FRANCIS COVERT,
RICHARD H. MANUEL, BOBBY W. McDONALD, JACK
E. BURROUGHS, DON W. BOYETT, CHARLES F.
LaCELLE, RICHARD MIKLES and MJM VENTURES

Plaintiffs-Appellants,
VERSUS
JOHN N. EHRMAN, Individually, Etc., et al.,

Defendants-Appellees.

Appeal from the United States District Court
for the Southern District of Texas

BRIEF OF
HOUSTON PETROLEUM COMPANY and
RICHARD O’DONNELL
AS APPELLEES

HS8

J. Don Jackson

Paul S. Wells

VINSON & ELKINS

3300 First City Tower

1001 Fannin

Houston, Texas 77002-6760
(713) 758-2078

ATTORNEYS FOR APPELLEES,
HOUSTON PETROLEUM COMPANY
and RICHARD O’DONNELL

5 aaa a

HS9

CERTIFICATE OF INTERESTED PERSONS
Plaintiffs-Appellants

MICHAEL K. TOPALIAN, WARREN B. FIENGA,
ROY JACOBS, JR., JUAN GARCIA-QUIROGA,
RICHARD OROZCO, JEAN STEUBING,
CHARLES W. ANDERSON, FRANCIS COVERT,
RICHARD H. MANUEL, BOBBY W.
McDONALD, JACK E. BURROUGHS, DON W.
BOYETT, CHARLES F. LaCELLE, RICHARD
MIKLES, and MJM VENTURES :

Defendants-Appellees

JOHN N. EHRMAN, Individually and In His
Representative Capacity As President of EHRMAN
INVESTMENT GROUP, INC., EHRMAN
INVESTMENT GROUP, INC., W. RODERICK
JOHNSON, W. RODERICK JOHNSON, P.C.,
RICHARD O’DONNELL, Individually and In His
Representative Capacity As President of HOUSTON
PETROLEUM CO., INC., HOUSTON
PETROLEUM COMPANY, INC., JOEL A.
MIDDLEBROOK, JOEL A. MIDDLEBROOK,
C.P.A., VICTOR B. RUSSEK, RUSSEK CO.,
BERT GAMBLE, Individually and In _ His
Representative Capacity As President of RIO BRAVO
OIL COMPANY, INC., RIO BRAVO OIL
COMPANY, INC., LAWRENCE KELLEY, JR.,
Individually And In His Representative Capacity As
President of KELLY ONSHORE DRILLING CO.,
INC., KELLEY ONSHORE DRILLING CO., INC.,
ROCKWOOD INSURANCE COMPANY - and
ROBERT E. ECKIS, JR.

a

H60

OPPOSING LAW _ FIRMS AND/OR COUNSEL

tl

Plaintiffs-Appellants, Plaintiffs-Counter Defendants
Appellants

Plaintiffs-Appellants and _ Plaintiffs-Counter
Defendants-Appellants are represented by:

ARMANDO LOPEZ

Federal 1.D. No. 4125

State Bar No. 12562800

2990 Richmond Avenue, Suite 205
Houston, Texas 77098

(713) 524-4801

Mr. Armando Lopez has retained the following
attorney on an "Of Counsel" basis with respect to this
litigation:

W. SHERMAN ROGERS

Federal I1.D. No. 6281

Howard University School of Law
2900 Van Ness, N.W.
Washington, D.C. 20008

Defendants-Appellees, Defendants-Counter Plaintiffs-
Appellees and Counter Plaintiff-Appellee

Defendants-Appellees JOHN W. EHRMAN and
EHRMAN INVESTMENT GROUP, INC. are
represented by:

H61

FRANK PINEDO
PINEDO & SWEENER
Federal I1.D. No. 1789
1415 Louisiana, Suite 2550
Houston, Texas 77002
(713) 658-0808

Defendants-Appellees W. RODERICK JOHNSON
and W. RODERICK JOHNSON, P.C., are
represented Pro-Se:

W. RODERICK JOHNSON
Federal I.D. No. 4497

1800 West Loop South, Suite 1510
Houston, Texas 77027

(713) 965-9979

Defendants-Appellees RICHARD O’DONNELL ana
HOUSTON PETROLEUM CO. are represented by:

J. DON JACKSON
VINSON & ELKINS
Federal I.D. No. 6915

3300 First City Tower

1001 Fannin

Houston, Texas 77002-6760
(713) 758-2078

fen -Appellees JOEL A. MIDDLEBROOK and
JOEL A. MIDDLEBROOK, C.P.A. are represented
Pro-Se:

H62

JOEL A. MIDDLEBROOK
2103 Durham

Houston, Texas 77007
(713) 861-2886

Defendants-Appellees VICTOR B. RUSSEK and
RUSSEK CO. are represented by:

D. JOHN LEGER

LEGER & SANDERS, P.C.
5847 San Felipe, Suite 1250
Houston, Texas 77057
(713) 781-5932

Defendants-Appellees BERT GAMBLE and RIO
BRAVO OIL COMPANY, INC. are represented by:

STEPHEN SCHUELER

MARGRAVES & SCHUELER

601 Jefferson Avenue

Houston, Texas 77002-7910

(713) 659-4800
Defendants-Appellees LAWRENCE KELLEY, JR.
and KELLEY ONSHORE DRILLING CO., INC. are
represented by:

These Defendants-Appellees were served but never
answered. Plaintiffs moved for a default judgment;
however, the District Court denied Plaintiffs’ motion
and dismissed these Defendants from the litigation.

H63

Defendant-Appellee and Defendant-Counter Plaintiff-
Appellee ROCKWOOD INSURANCE CO. is
represented by:

KEVIN F. RISLEY:

BUTLER & BINION

1600 First Interstate Bank Piaza
Houston, Texas 77002

(713) 237-3293

Defendant-Appellee ROBERT E. ECKIS, JR. 1s
represented by:

JOHN R. KNIGHT
MORRIS & CAMPBELL
600 Jefferson, Suite 1617
Houston, Texas 77002
(713) 659-8697

Counter Plaintiff-Appellant ONSHORE
EXPLORATION LTD. 1984 MID-YEAR
DRILLING PROGRAM (ONSHORE)

ONSHORE (the Partnership) was not a party in the
original suit now being appealed, but it was brought
in as a Counter-Plaintiff by the EHRMAN
Defendants. It is being represented by FRANK
PINEDO, counsel for the EHRMAN Defendants.

A REGARDIN RAL ARGUMENT

Appellees believe that although the issues presented
by this appeal are clearly set forth and addressed in their
brief, oral argument would be beneficial to this Court.
Therefore, Appellees request oral argument.

H64
EXPLANATION OF RECORD REFERENCES

A final record of this case has not been completed by
the District Court. Attorneys for Houston Petroleum
Company and Richard O’Donnell have contacted the clerk
for the Fifth Circuit and were instructed to cite directly to

the pleadings and documents referred to in their brief to this
Court.

H65

TABLE OF CONTENT

CERTIFICATE OF INTERESTED PERSONS ...

STATEMENT REGARDING ORAL ARGUMENT ..

EXPLANATION OF RECORD REFERENCES

TABLE OF CONTENTS
TABLE OF AUTHORITIES

STATEMENT OF THE CASE

SUMMARY OF THE ARGUMENT

ARGUMENT

:

A. Proceedings and Disposition in the Court
eee eee ee

B. Statement of the Facts ....-------:

THE DISTRICT COURT PROPERLY
GRANTED SUMMARY JUDGMENT FOR
HPC AND O’DONNELL BECAUSE HPC
AND O’DONNELL MET THEIR BURDEN
EM__T MMARY
AND BECAUSE PLAINTIFF
ING FORTH _SPECIFI
FACTS OR EVIDENCE TO DEFEAT THAT

a. cs es 2 £8 eh

“ae Oe ee Ce leet See tee Dn

Eee a ae ee ee ee eae a, ie ee ee a iad lg

vl

IT.

ITI.

IV,

H66

A. HPC And O’Donnell Met Their
Burden Entitling Them To Summary

Ag en ate aerate ne arab es Y
B. Plaintiffs Failed To Bring Forth

Specific Facts And Evidence Sufficient

To Defeat HPC’s And O’Donnell’s

Entitlement To Summary

I 5 iG ai gr gk agree aihale «4 1]
ee Plaintiffs Are Not Entitled To Assert

Or Present Alleged New Evidence Or

Allegations For The First Time On

Appeal From The Granting Of The

Summary Judgment For HPC And

SES ry a wip aki wea ee 13

THE DISTRICT COURT PROPERLY GRANTED
SUMMARY JUDGMENT FOR HPC _ AND
O’DONNELL BECAUSE PLAINTIFFS’ SECTION
120.) AND_12(2) CLAIMS ARE BARRED BY

STATUTE OF LIMITATIONS ......... 14
A. Plaintiffs’ Section 12(1) Claims ..... 15
B. Plaintiffs’ Section 12(2) Claims ....... 16

THE _ DISTRICT COURT _ PROPERLY
GRANTED SUMMARY JUDGMENT FOR
HPC AND __O’DONNELL __ BECAUSF
PLAINTIFFS’ __10b-5 CLAIMS ARE
BARRED BY THE STATUTE OF
IE 5.0 g'blig A) coke tak ack ee 4s 18

PLAINTIFFS’ ASSERTIONS THAT THE

RECONFIRMATION AGREEMENTS WERE

UNTIMELY AND THUS ARE VOIDABLE
CANNOT DEFEAT SUMMARY

JUDGMENT BECAUSE THE CLAIM WAS
NOT PRESERVED FOR APPEAL. THESE

H67

ASSERTIONS ARE ALSO BARRED BY
8: ee ee a ae ee 20

I ND RE

IRRELEVANT TO THE DISTRICT
: MMARY DGMENT

Ee a ne a ee eee 21

VI. HPC AND O’DONNELL DID NOT
VIOLATE ANY PROVISION OF THE

REE) tg OY oe le ue. * < 24
A. ments Requir Establish Section
pe PB Ce 24
B. HPC and O’Donnell are not "Sellers" . 25
c. HPC and O’Donnell are not "Control"
Persons Under the 1933 Act....... 27

VI. HPC AND O’DONNELL DID NOT
VIOLATE ANY PROVISIONS OF THE
ECUR A 0 a ra 29

A. Elements Required to Establish Section
10(b) and Rule 10b-5

SE oe a be 8's Se ete at a ara ee 29
B. HPC and O’Donnell Made No

Representation to Plaintiffs ....... 30
aed HPC and O’Donnell Owed No Duty to

Plamtifte .......>. Par Gehan a ae 32

VII. HPC AND O’DONNELL DID NOT
VIOLATE THE TEXAS SECURITIES
CM ta Se kee RS CR ae Oe eS 36

VIII.

IX.

CONCLUSION

H68

HPC AND _O’DONNELL DID _ NOT
COMMIT COMMON LAW

NA 6-0. s 6 0 oe Se eke ea ees

HPC AND _O’DONNELL DID _ NOT

VIOLATE THE RICO ACT ...........

A. Plaintiffs Cannot Establish __ the
Activities Prohibited Under RICO

B. Plaintiffs Cannot Establish _ the
Existence of a RICO Enterprise... . .
E. Plaintiffs Cannot Establish a Pattern of

Racketeering Activity ...........

H69

TABLE OF AUTHORITIES

CASES Page
Abell v. Potomac Insurance Company,
858 F.2d 1104 (Sth Cir. 1988) ...... 25, 30, 32, 34
Anderson v. Liberty Lobby, Inc.,
eg ee 11, 22
Bane v. Sigmundr Exploration Corp.,
848 F.2d 579 (Sth Cir. 1988) .........0.. 34, 35
Capn v. Murphy,
Som Tae S75 (a6 Cir. 1968) weet
Celotex Corp. v. Catreti,
SFr Ui RT CUE ls Wak 5 dw oes ee ee Oe ee
| Chemetron Corp. v. Business Funds, Inc.,
| 718 F.2d 725 (Sth Cir.), vacated on other grounds,
| 460 U.S. 1007 (1983) ...........0 008. 19, 29
| Chiarella v. United States,
| sie ee rr 30, 32
Commins vy. Johnson & Higgins, Inc.,
1988 Fed. Sec. L. Rep. ¢ 94,092 (N.D. Cal.
RIERA Ae oe re 28
Consolidated Gas & Equip. Co. v. Thompson,
eB re rrr. ©
Corwin v. Marney, Orton Investments,
og Fee Pe er ae 19

H70

Crocker v. FDIC,
826 F.2d 347 (Sth Cir. 1987), cert. denied,
2 Io a co Gh. | a Oe Sp yee

Dart Industnes, Inc. v. Plunkett Co. of Oklahoma,
vue oe Se Cie Ce. I 1 |

Delany v. Blunt, Ellis & Loewi,
631 F. Supp. 175 (N.D. Ill. 1986) ..... 33

Doran v. Petroleum Management Corp.,

$76 F.2d 91 (Sth Cir. 1978) ...... 1S
Ernst & Ernst v. Hochfelder,

SD 3B. Ce tes x ks 6 Soe eee 30)
Frank C. Bailey Enterprises, Inc. v. Cargill, Inc..,

See F208 Ban Coe Ge TR. 8 ee 13, 2
H.J., Inc. v. Northwestern Bell Telephone Company,

648 F. Supp. 419 (D. Minn. 1986) ........... 38
Harelson v. Miller Fin. Corp..,

854 F.2d 1141, 1142 (9th Cir.), cert. denied,

jae 3. 4h. Cee Cee oe a Rap re
Herman & MacLean vy. Huddleston,

BOP Ws SIR REED 6 ee ae ek eee 30
In re Gap Stores Sec. Litig.,

437 F. Supp. 1135 GN.D. Cal. 1978) .......... 33

In re Professional Fin. Management, Lid.,
692 F. Supp. 1057 (D. Minn. 1988)........... 26

r

H7]

Ingenito v. Bermec Corp.,
441 F. Supp. 525 (S.D.N.Y. 1977) .......... 43

Irving Trust Company v. United States.
221 F.2d 303 (2d Cir.), cert. denied,
a . 23

Jeanes v. Henderson,
688 S.W.2d 100 (Tex. 1985) ............ 36

Keasler v. Natural Gas Pipeline Co. of Am..
569 F. Supp. 1180 (E.D. Tex. 1983), aff'd,
741 F.2d 1380 (Sth Cir. 1984) ......2 6

Kennedy v. Josephthal & Co. Inc..
814 F.2d 798 (Ist Cir. 1987) ....... 2. 17, 18

Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
ore Uo. OPP CieeO) ...............

National Union Fire Ins. Co. y. Eaton.
701 F. Supp. 1031 (S.D.N.Y. 1988) .... 33. 35

Old Time Enters., Inc. v. International Coffee Corp..
862 F.2d 1213 (Sth Cir. 1989) ......... 42, 43

Pin v. Texaco, Inc.,
1986 Fed. Sec. L. Rep. (CCH) $ 92,823. at 94.01]

(Sth Cir., July 14, 1986) ........2.~2~—~CO«*” 30
Pinter v. Dahl,
486 U.S. 622 (1988) ................ 25, 26

Quintel Corp., N.V. v. Citibank, N.A..
589 F. Supp. 1235 (S.D.N.Y. 1984) ........ 33

H72

Schlifke v. Seafirst Corp.,
1989 Fed. Sec. L. Rep. (CCH) 4 94,174
(7th Cir. Jom. 9, TGP) Www ce s B28, 33, SS

Sedima S.P.R.L v. Imrex Co., Inc.,
Ore Ces SO ee Ge No ewe ele 40, 42, 43

Shaffer v. Williams,
794 F.2d 1030 (Sth Cir. 1986) .............. 4|

Sibley v. Horn Advertising, Inc.,
505 S$.W.2d 417 (Tex. Civ. App.--Dallas 1974,
writ ref’d n.r.e), cert. denied, 420 U.S. 929 (1975) . 36
Smoky Greenhaw Cotton Co. v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 785 F.2d 1274 (Sth Cir. 1986),
cert. denied, 482 U.S. 928 (1987) ............ 43

South Hampton Co. v. Stinnes Corp..,
733 F.2d 1108 (Sth Cir. 1984) .............. 37

Sutliff, Inc. v. Donovan Cos.,
rere ow f fe, 3h ae | eee ee eer ae 39

Tempo Tamers, Inc. v. Crow-Houston Four, Lid.,
715 S.W.2d 658 (Tex. App.--Dallas 1986, writ ref’d

RIBS asia ee es ee ae ee a 2

Thigpen v. Locke,

Soe @. ae wes COM: COED 6 ok 6S ees Dey oe

Trenholm yv. Ratcliff,
G6 SW er Ce SO) 4 ko oe eG 37

United States v. Cauble,
706 F.2d 1322 (Sth Cir. 1983), cert. denied,
5 Ve Se Ce eis an e ee ee 39, 40

—

—

H73

United States v. Elliott,
571 F.2d 880 (Sth Cir.), cert. denied,
439 U.S. 953 (1978)... 2.0... 40

United States v. Turkette,
ee a BO eo he ee 40, 41

Warren v. Reserve Fund, Inc.,
728 F.2d 741 (Sth Cir. oe MEE Oe AS 8 30

Wood v. Combustion Engineering Inc.,
O43 F.2d 339 Gth Cir. 1981)... .. 2... 19, 20

Woodward vy. Metro Bank,
522 F.2d 84 (Sth Cir. DN at eS ol oe 33, 34

Wool v. Tandem Computers, Inc.,
818 F.2d 1433 (9th Cir. 1987) .............. 28

STATUTES AND RULES

Securities and Exchange Act of 1933

IF RNs BVM os ek ea os ee eee 24
eee EVO i a saloon eee 15
al ee S| | Se 15
AS U.S.C. OTA) ow cece. 16
15 U.S.C. § 77m (1982) .............. 14, 15, 18

H74

Securities Exchange Act of 1934

iS U.S.C. & FRR Clee oe ee eee 19, 29
15 U.8.C. § Fale) Cie) oc a ot os ee ke 20
13 U.S.C. § 2p a sc eee ee eee Oe es 20

Racketeer Influenced and Corrupt Organization Act

18 U.S.C. § 1961 et seq. (1982) ...... 37, 40, 42, 43
18 U.S.C. 3 YO . Soe ee ee eee
rep. R. CIV. B.S eee eee eee 8, 23
Fep. 8. Civ: 7. See se eee ee 11

TEX. REV. Civ. STAT. ANN. art. 581-33 (Vernon Supp.
AOD) on ee Sk ose ee

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IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

NO. 90-2106

MICHAEL K. TOPALIAN, WARREN B. FIENGA,
ROY JACOBS, JR., JUAN GARCIA-QUIROGA,
RICHARD OROZCO, JEAN STEUBING,
CHARLES W. ANDERSON, FRANCIS COVERT,
RICHARD H. MANUEL, BOBBY W. McDONALD,
JACK E. BURROUGHS, DON W. BOYETT,
CHARLES F. LaCELLE, RICHARD MIKLES and
MJM VENTURES

Plaintiffs-Appellants,
VERSUS
JOHN N. EHRMAN, Individually, Etc., et al.,

Defendants-Appellees.

Appeal from the United States District Court
for the Southern District of Texas

BRIEF OF
HOUSTON PETROLEUM COMPANY and
RICHARD O’DONNELL
AS APPELLEES

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TO THE HONORABLE JUDGES OF SAID COURT:

COME NOW, Houston Petroleum Company and
Richard O’Donnell, as Appellees, and file this their response
to the brief of the Appellants.

STATEMENT OF THE CASE

A. Proceedings and Disposition in the Court Below

This is an appeal from a final judgment entered
against the Plaintiffs by the Honorable Judge Norman Black
in the United States District Court for the Southern District
of Texas, Houston Division. The Final Judgment provided
that the Plaintiffs take nothing by way of their suit and was
entered concurrently with an order granting summary
judgment in favor of all Defendants. The Final Judgment
and Order were signed by Judge Norman Black on October
4, 1989, and entered on the same date.

Plaintiffs are a group of investors in an oil and gas
limited partnership known as Onshore Exploration Ltd.
("Onshore"), and have brought this action against numerous
individuals and entities involved with or having some
relationship with Onshore. Included among the Defendants
is Houston Petroleum Company ("HPC") and Richard
O’Donnell ("O’Donnell"). HPC is an oil and gas operator.
HPC’s only connection with Onshore is a contractual
relationship whereby HPC and Onshore entered into
agreements permitting Onshore to invest in wells to be
drilled by HPC. O’Donnell’s only connection is that he is
the president of HPC.

Plaintiffs’ Original Petition was filed in the United
States District Court for the Southern District of Texas,
Houston Division on December 3, 1987. On December 18,

’

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1987, Plaintiffs filed their First Amended Complaint. The
First Amended Complaint was Plaintiffs’ operative pleading
at the time summary judgment was granted. The Complaint
alleged that Onshore’s general partners and others defrauded
Plaintiffs who purchased Onshore units. Specifically,
Plaintiffs allege that Defendants violated various federal and
state securities regulations, the Racketeering Influence and
Corrupt Organization Act, and committed common law
fraud.

On June 16, 1989, HPC and O’Donnell, along with
other Defendants, filed a motion for summary judgment.
Defendants HPC and O'Donnell filed their motion for
summary judgment over eighteen months after the suit was
filed and after numerous depositions and discovery had taken
place. The depositions taken included many of the Plaintiffs,
individual Defendants, Defendant entities, and other material
witnesses. Based on this extensive discovery, Defendants
HPC and O’Donnell’s motion was filed asserting that there
existed no genuine issue as to any material fact regarding any
of the claims alleged against HPC or O’Donnell.

On July 26, 1989, Plaintiffs filed their response to
this summary judgment motion. Although Plaintiffs’
response to HPC and O’Donnell’s motion was filed after the
filing deadline, Judge Black graciously decided he would
consider the Plaintiffs’ response.

On October 4, 1989, HPC and O’Donnell’s Motion
for Summary Judgment was granted and a Final Judgment
was entered providing that Plaintiffs take nothing. The
District Court filed a supporting opinion within its order,
including findings of fact and conclusions of law in
connection with the Final Judgment. It is from this Final
Judgment that Plaintiffs appeal.

———————————

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B. Statement of the Facts

Plaintiffs are dissatisfied investors in Onshore
Exploration, Ltd., 1984 Mid-Year Drilling Program
("Onshore"), an oil and gas drilling limited partnership
program. First Amended Complaint at 2-4 4 1-5
("Complaint").' These investments were highly leveraged
tax shelters promoted by John Ehrman ("Ehrman") and
Ehrman Investment Group (“EIG"). Wayne Byles ("Byles")
was the original general partner in Onshore. In December
of 1984, Byles was succeeded by Roderick Johnson
("Johnson") and EIG as co-general partners. Complaint at
8 4 46; 9 4 49. HPC is an oil and gas operator that had
entered an agreement with Onshore to drill wells on certain
sites. Complaint at 9 4 49. O'Donnell is the president of
HPC and has been sued individually and as president.
Complaint at 1.

Unlike many of the oil and gas programs promoted
during the early 1980s, Onshore is a program that actually
drilled and recovered oil and gas and has made payments to
the Plaintiffs. See Complaint at 25 4.110. In fact, Onshore
continued in operation as of the date summary judgment was
granted by the District Court. Plaintiffs are not dissatisfied
because Onshore’s promoter allegedly stole their money, the
general partner is in bankruptcy, or no drilling was ever
completed. Instead, Plaintiffs are dissatisfied because their
investment strategy to get rich from an investment that
looked lucrative in 1984 did not turn out quite as planned.
See, e.g., Binder dep. at 45-46. Unfortunately, because of

1.A final record of this case has not been completed by the District
Court Attorneys for Houston Petroleum Company and Richard
O’Donnell have contacted the clerk for the Fifth Circuit and were
instructed to cite directly to the pleadings and documents referred to in
their bnef to this Court.

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the inherent risk associated with oi! and gas drilling, one of
which is the price of oil and gas and the fact that such prices
have plummeted since 1984, these programs did not turn out
to be as immediately profitable as the Plaintiffs anticipated.
Binder dep. at 45-46; Garcia-Quiroga dep. at 98, 101:
Steubing dep. at 69-70, 107-08. Therefore, Plaintiffs have
simply brought this action claiming a laundry list of fraud
and deception to get out of their investments. Complaint at
3-4,

Included among Plaintiffs’ allegations are claims
against HPC and O'Donnell for alleged violations of the
federal and state securities laws, common law fraud and
Racketeer Influenced & Corrupt Organization Act ("RICO").
The undisputed evidence establishes that HPC and O’ Donnell
were not involved in the selling of Plaintiff's limited
partnership interests, made no_ representations,
misrepresentations, or omissions of fact to the Plaintiff-
investors, and were not involved in any RICO activities.
Thus, because there is a lack of evidence to support at least
one essential element of each of the Plaintiffs’ claims, HPC
and O'Donnell are entitled to and were properly granted
summary judgment.

SUMMARY OF THE ARGUMENT

The District Court’s order granting summary
judgment is well reasoned and sound. In their motion for
Summary judgment and the accompanying evidence, HPC
and O’Donnell met the initial burden of production imposed
on them by the United States Supreme Court in Celotex
Corp. v. Catrett, 477 U.S. 317 (1986). The law does not
require the District Court to specifically state in its order that
a movant has met his burden of production. In any event,
the District Court’s order in this case, taken as a whole,

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makes it clear that the court found that HPC and O’Donnell
met their burden.

Plaintiffs have alleged numerous violations of federal
securities laws. Without reaching the merits of these actions,
the District Court found that all of Plaintiffs’ federal
securities laws claims were barred by the applicable statute
of limitations. Some of the statute of limitations periods
include a discovery rule, and the District Court correctly
noted that the Plaintiffs had obtained all of the information
necessary to discover any securities law violation by May of
1985, more than two years before Plaintiffs filed suit in
December of 1987. Further, Plaintiffs, in their brief to this
Court, have raised a claim that the reconfirmation
agreements are voidable as untimely; however, this claim is
raised for the first time on appeal and therefore should not be
considered by this Court. Additionally, this claim, like all
the other federal securities law claims, is barred by the
Statute of limitations.

Even assuming that some or all of Plaintiffs’
securities claims are not barred by the statute of limitations,
those claims fail due to a lack of some essential element or
elements. HPC and O’Donnell were not "sellers" of the
partnership units as required by federal securities law but
rather they were only the drilling contractor hired by the
partnership to drill for oil. At no time did HPC or
O’Donnell engage in the sale of Onshore units. HPC and
O’Donnell were also not "control" persons under the
Securities Act of 1933 because they had no role in the
operation or management of the Onshore partnership.
Additionally, there is no Rule 10b-5 liability because the
record is clear that neither HPC nor O’Donnell ever made
any representations to any Plaintiff, and therefore could not
make any misrepresentations. Because HPC and O’Donnell
were merely the drilling contractor, and were not in a

H81

fiduciary relationship with any Plaintiff, HPC’s or
O’Donnell’s alleged failure to disclose any information which
they supposedly had cannot be considered a misrepresenta-
tion. Likewise, because Texas case law holds that the
elements of a violation of the Texas Securities Act are
substantially similar to the elements establishing a violation
of Rule 10b-5, Plaintiffs’ Texas securities law claim also
must fail.

As noted above, because HPC and O’Donnell made
no representations and had no duty to disclose, HPC and
O’Donnell cannot be held liable for any alleged common law
fraud.

Plaintiffs assert that summary judgment is not proper
in this case because Defendants, in their pre-trial order,
noted the existence of twenty-eight contested issues of fact.
Plaintiffs’ reliance on this argument is misplaced for two
reasons. First, the twenty-eight contested issues of fact listed
in the pre-trial order are rendered immaterial for summary
judgment purposes. This is true because of the District
Court’s findings that the various claims fail as a matter of
law either because of statute of limitations or because of
Plaintiffs’ failure to provide sufficient summary judgment
evidence on some element essential to their case. Second, a
pre-trial order is not proper summary judgment evidence
because its purpose -- to narrow the issues to be tried -- 1S
far different from the purpose of a summary judgment, which
is designed to allow the court to determine whether the
contested issues are both genuine and material.

Finally, HPC and O’Donnell did not violate the
federal RICO Act. First, Plaintiffs cannot establish a
violation of any of the four sections of the RICO Act
necessary for RICO liability. Second, Plaintiffs have
presented no evidence to support their allegation that

a

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Onshore is a RICO enterprise. Third, Plaintiffs’ minimal
allegations of RICO predicate acts fall far short of
establishing the "pattern" necessary for RICO liability.

ARGUMENT

I. THE DISTRICT COURT PROPERLY GRANTED

ARY DGMENT FOR HP AND

OQ” DONNELL BECAUSE HPC AND O’DONNELL

MET THEIR BURDEN ENTITLING THEM TO

SUMMARY JUDGMENT AND __ BECAUSE

PLA FS FAILED _T BRIN FORTH

SPECIFIC FACTS OR EVIDENCE TO DEFEAT
THAT RIGHT.

"Summary judgment is proper if 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 a judgment as a matter of law." FED. R.
Civ. P. 56(c). The moving party seeking summary judgment
always bears the initial responsibility of informing the district
court of the basis for its motion. Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986). Ata minimum, the burden may
be discharged by pointing out to the court that there is an
absence of evidence to support the nonmoving party’s case.
Celotex, 477 U.S. at 325. The burden then shifts to the
nonmoving party to go beyond the pleadings and designate
“specific facts showing that there is a genuine issue of
material fact for trial" in order to defeat summary judgment.
Celotex, 477 U.S. at 324. HPC and O’Donnell met their
burden as the movants. — Plaintiffs, in their response to
HPC’s and O’Donnell’s Motion for Summary Judgment, did
not designate specific facts showing a genuine issue of
material fact. Instead, Plaintiffs responded to HPC’s and
O’Donnell’s motion by merely reasserting allegations

ee i

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contained in their pleadings and representing to the District
Court that they would present evidence at trial supporting
these allegations. Plaintiffs failed to show specific facts
which tend to contradict HPC’s and O’Donnell’s proof
presented with the motion for summary judgment.
Therefore, summary judgment was properly granted for
Defendants HPC and O’Donnell.

A. HPC And O’Donnell Met Their Burden
Entitling Them To Summary Judgment

HPC and O’Donnell met their initial burden by filing
a motion for summary judgment negating Plaintiffs’ claims
and showing the absence of any genuine issue of material
fact. This motion was supported by affidavits, depos

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_0790%3A4. Public record. Not legal advice.