Rossi Responds to IH’s Motion to Dismiss in Court Case

Defendant Reply is due by 6/27/2016.

Quote from frankwtu

All counts forming Darden et al's MTD are rejected, not just some, the gloves are off. I recommend reading this in full, not just skimmng.

If you want to understand this memorandum, read it carefully and in context, and not just once. First readings can be very shallow, we can be absorbed in reactions. What you will get by skimming is what Frank has stated here, "all counts are rejected." But this doesn't mean "the gloves are off." Rather, it means that the plaintiff intends to pursue all counts and therefore has rejected all counts of objection. That's all. We will see whether or not the arguments are compelling.

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just a small extract that caught my eye:

"It is sufficient if the complaint succeeds in 'identifying facts that are suggestive enough to render [the element] plausible."' Id. at 1310 (citations omitted).

"[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief."

This is merely the general law on a motion to dismiss. This argument was normal and expected. As stated here, it could be misunderstood. I am studying the Memorandum.

My first impression is only about Count 1. I noticed, before, an incompleteness in the Defendant argument over the Agreement with regard to the General Performance Test. The Motion to Dismiss only alleged the weakest argument, the signature issue, but not a possibly stronger one: failure to allege a writing agreeing to the (new) test conditions. As I read the Agreement, Rossi could not go ahead and run the GPT unilaterally. If there was no writing agreeing to this, signed by the parties, that would be an obvious and fatal defect. If there was such a writing, then I would expect Count 1 to stand. It is possible for Count 1 to stand even without a writing, based on the conduct of the parties (which becomes an issue of fact).

Count 1 is, without any doubt in my mind, the strongest Count in the Complaint. There are then possible defenses, which have not been raised formally, and which rest on matters of fact. I am here only addressing the legal issues, with some level of dicta.

I would expect Plaintiff to argue that the conduct of Defendant showed acceptance of the new test conditions. However, Plaintiff has not clearly alleged that. The Complaint, then, does not allege a necessary condition for payment to become due. If Plaintiff does allege written agreement, or estoppel, and Defendant denies it, this then becomes an issue of fact, which must be tried.

I'm not sure of procedure, but I would think that the judge would require the Plaintiff to amend the complaint, rather than allow it to stand defective.

As I study the Memorandum, Count 1, defects rise to the surface and become visible. For example: (p. 4) (my italics and formatting)

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"A contract not signed by all the parties, but otherwise valid, may be upheld against a signing party, unless the nature of the wording
of the contract indicates that his signature was conditioned upon all other parties signing..."
Skinner at 1 131.

The Second Amendment provides, in pertinent part, that:

"IN WITNESS WHEREOF, the parties hereto intending to be legally bound hereby, have duly executed this Second Amendment to License Agreement on the date first above written." (DE:l, Ex. *D" at 2).

Clearly, this plain language does not require all parties to execute the document in order for it to be effective, but rather, provides that those parties "intending to be bound" have duly executed the Second Amendment. Id. As set forth above, it is uncontested that Defendant IH executed the Second Amendment.

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Ampenergo was a licensee of Rossi and had the right to object to the Agreement, and was, by signing it, waiving that right, but remaining a party to the agreement. There are, I assume, separate agreements with Ampenergo. Ampenergo could have objected to the Amendment (and still could, which raises a very interesting possibility). It is obvious to me that parties sign documents in sequence, and sometimes in counterparts, but the document clearly lists the parties, and clearly requires that all of them sign at least one counterpart. The 2nd Amendment put off the Guaranteed Performance test to a time to be set by written agreement between the parties. That is the crucial agreement, if it did not exist, then the test was not begun in accordance with the Agreement. The 2nd Amendment explicitly specified all parties must sign and then provided that all parties must agree to the date of the test.

This issue may turn on what Plaintiff alleged in the Complaint.

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As their first basis for dismissal, Defendants erroneously argue that Plaintiffs failed to
satisfy the prerequisite conditions to payment under the License Agreement (the "Agreement") by failing to complete the "Guaranteed Performance" condition within the time set forth in the Agreement. (DE:17 at5,6). Such argument flies directly in the face of the Plaintifß'plain and
clear allegations that (a) the time period set forth for the "Guaranteed Performance" test was "formally eliminated" by the Second Amendment to License Agreement (DE:l ff62); (b) Plaintiffs "have satisfied all conditions precedent before commencing this action" (DE:1 !175); and (c) the "E-Cat Unit has satisfied andlor exceeded each and every minimum performance criteria set forth in the License Agreement" (DE:1 tl79). Having failed to accept the facts alleged in the Complaint as true, Defendants' Motion fails.

This was conclusory in the Complaint. Whether or not the requirement was “formally eliminated” by the amendment is a conclusion, not a fact. The amendment would appear to eliminate it, but it also required signatures to be effective and was explicit about that, and the amendment copy placed in evidence by the Plaintiff did not show the listed signatures and so was not “formally” valid. The Plaintiff could claim estoppel by behavior, but did not do so in the Complaint and cannot establish that now by mere legal arguments. The Plaintiff would need to request leave to amend the Complaint, which the Plaintiff has not done.

(p. 4-5)

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the "parties to this Amendment" are Plaintiffs and Defendant IH who executed the same copy of the Second Amendment which Plaintiffs now seek to enforce against Defendant IH. See (DE:I, Ex. "D"). The "counterparts" provision does not apply.

This is preposterous. the argument is that the only parties that need sign be those who "intend to be bound." However, it would be preposterous to claim that a party is bound if no other party signed. Further, the second amendment preserved the rights of, say, IH, to not agree to a defective test, for example. It required that the date of the test be formally approved by a writing signed by all the parties. No such writing has been alleged, and the interpretation of "intending to be bound" as limiting the agreement to some assumed subset of parties, when all the parties are named and were obviously expected to sign, collectively, at least one copy as described, is pure seizing upon the accidents of language to create an interpretation that was obviously not there initially. Had that been the intention, the second amendment would have been worded quite differently.

Leonardo also did not sign, i.e., Rossi did not sign on behalf of Leonardo, which, presumably, he was authorized to do. Lenoardo, the corporation, was certainly an interested party! (The IH attorneys may have overlooked this, the Lenoardo signature blank was somewhat buried.) Ampenergo, however, was an independent corporation with rights, and could have objected.

The largest defect that I see is the lack of a written agreement to the test date. Rossi does not allege that, but it is explicitly required by the 2nd amendment. So IH may have signed the 2nd amendment, knowing that they could always object to a specific test under specific conditions, their explicit consent was required, and the test would continue to be postponed.

There is a possibility that IH will prevail on Count I, and if so, the whole case is dead.

Nevertheless, as the Plaintiff points out, it is difficult to sustain a Motion to Dismiss where there is factual dispute, with a possible set of facts alleged where establishment of the fact would be enough for the plaintiff to prevail. What I'm seeing, though, is that at least one crucial element remains as only alleged through a conclusory statement. I predict that the judge may allow Rossi to amend the complaint, may even suggest it, and may also suggest that the parties attempt to work out their differences, to avoid what could obviously become a very messy case.

This completes my examination of the Count 1 argument for now. If this goes to trial, what Rossi has alleged will come under close scrutiny.

Quote from "theFUDweaver"

Rossi imagines what he imagines - he is very good at that. Darden is way smarter than that.

Hmmm, this does not compute ...

Considering that Darden travels around the world with a certain loudmouth Dewey Weaver as his right hand. And then have the same loudmouth Weaver spinning rediculous FUD on the net together with seriously impaired mad dogs like Fred Zoepfl (and probably more), he does not come out very smart at all. More like desperate actually; seeing slandering as his only way out of the mess built on some really REALLY bad business decisions trying to pocket Rossi IP without paying.

Darden will probably end up in the history books as the person who made the worst business decision ever ... (and that is the best ending for him in this story)

Quote from Tarun

I found an interesting footnote (see attachment). LC/Rossi claim that the agreement was prepared by the defendants. Compare that with the statements of DW here on forum, that the agreement was drafted by Rossi and IH agreed to sign on it. (Please search and find it, dont have link).

At least one of the parties (or both) are lying here. This is unfortunate. This also brings most of the statements by both Rossi and DW under doubt. In my personal opinion (not fact) the agreement was drafted by IH, since it favors IH entirely. It'd be very odd for Rossi to draft something that makes him a slave of IH, I think he is not that dumb.

Once again, I lost a draft. The software here sucks. Sigh. I'm writing, I go off in another window to find material to review or cite, come back, and the draft is gone, I'm just staring at a reply with no content.

While I have it, for review: http://www.sussmanadr.com/docs/motions_to_dismiss_plit.pdf (Advice for attorneys on Motions to Dismiss)
https://www.law.cornell.edu/rules/frcp (Federal Court Rules of Procedure)

The note mentioned is from https://animpossibleinvention.…sdce-16-21199__0018-0.pdf

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3 The License Agreement which was prepared by Defendants included all parties to the agreement as to most of the terms, but suspiciously omitted IH from the portion of the confidentiality agreement relating to the E-Cat IP.

This does not establish that either party is lying. It is common to jump to that conclusion, by not investing adequate consideration to harmonizing interpretations and possibilities.

Consider this possibility, as one of a whole family of them: Rossi drafted an agreement, between himself and Cherokee. Because Cherokee was not about to sign on to this (it would be outside what Cherokee does by a wide margin), they redrafted the Agreement to be between Rossi (and the other parties) and Industrial Heat, a corporation formed for the purpose, to collect and invest funds dedicated to LENR research and development. So Rossi drafted and IH drafted. Where a particular provision came from would then require looking at drafts, if any. Did IH make any material changes in creating that final draft? The Rossi footnote implies that they did, but does not actually state it as such. Instead it talks about 'suspicious" which is a state-of-mind revelation about Rossi or his attorney, backed by no alleged fact other than the absence of a confidentiality agreement by IH in the draft.

When some of us have talked about the Agreement being drafted by Rossi, or created by Rossi, that does not refer to the final draft as actually signed. From Rossi's story about the signing, which has not been contradicted by anyone, the final Agreement was at least modified by IH as to the named parties. Whether or not there were other alternations has not been alleged. In this note, Rossi is essentially acknowledging that IH did not agree to nondisclosure in the formal Agreement, so he is attempting to establish an understanding of non-disclosure, on the legal theory of a fiduciary responsibility, necessary for the tort he is alleging. I have not reviewed this in detail.

However, the note is devastating as to its implications regarding Rossi's business competence and his apparent failure to adequately consult counsel before signing and proceeding on a $100 million agreement. He is essentially claiming something like "the rats drafted an agreement that screwed me over." And it's fairly obvious that this did not even occur to Rossi, on the point of his claims of a confidentiality requirement, nor to his attorney, until the point was raised by IH in the Motion to Dismiss.

... the Motion to Discuss and the response -- and there is an opportunity for IH to rebut, due June 27 -- are preliminary maneuverings, and are founded on the case record as established by Rossi in the Complaint and evidence filed by Rossi with the Complaint. As has been often pointed out, Motions to Dismiss face a steep requirement. A frivolous MTD can be sanctioned by requiring the defendant to pay plaintiff's costs. However, this MTD is founded on obvious defects in the Complaint, it is not frivolous, even if not sustained for various reasons. A problem here is that Rossi does not request permission to Amend the Complaint. That could be a fatal defect, though it might be remediable. If a Complaint fails to allege facts critical to the case, that is remediable by an amended Complaint, which requires the permission of the Court. New facts cannot ordinarily be claimed in these documents. (there are exceptions, an affidavit may be attached which establishes a new fact beyond a reasonable doubt, as I read the rules, but if it is possible to rebut it, the issue becomes one of fact, which then must go to further process.) (Which would be why this piece of dicta about "suspicious" is a note only, of no immediate legal import.)

Rossi may not want to Amend the Complaint because it may start the process all over (except for not having to refile, serve subpoenas, etc.). (I'm not sure about this. The Court would proceed to rule on elements of the Motion to Dismiss that are not covered by an Amendment, and I'd assume that the defendant could challenge that Amendment as also inadequate, but I'm not sure on procedure at this level of detail.)

However, by not amending to create specific allegations, but arguing that what IH has objected to was implied or obvious, he risks success of the Motion to Dismiss.

Rossi is arguing, on the one hand, that the Agreement was clear and requires the payment of $89 million, because of literal performance as stated, i.e., he is insisting on strict construction of the Agreement, but in many other ways, he is arguing that the Agreement is not to be taken literally, i.e., an explicit requirement that an amendment be signed by all parties is to be set aside as being subject to estoppel, i.e., by the conduct of the parties. While parties to a lawsuit may present alternative theories or defenses, that contradict each other, this can also create some problems when presenting this to a jury, especially.

Quote from sifferkoll

Once again, I lost a draft. The software here sucks. Sigh. I'm writing, I go off in another window to find material to review or cite, come back, and the draft is gone, I'm just staring at a reply with no content.

Lomax, this is fascinating

You might be on to something, can you reproduce this experiment???

Quote from ultrasure

Best Quote of the week in LENR:

This is from the original:
http://www.e-catworld.com/2016…weden/#comment-2736003533

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Ophelia Rump • 4 days ago
It is a very difficult position to say you did not pay the man the tens of millions you owe him because the product does not work, and at the same time sue the man for control of the territory where he is manufacturing working product. IH has made it's decision. They bought rights to a different product which they say does not work, even if they maintained the rights from the initial payment, Rossi will be manufacturing a different product.

I expect that any rational judge would club IH like a baby seal if they contest the territory after having abandon the payment obligation on a technicality. It really looks like IH was only trying to kill off Rossi as potential competition for some other client.

I sincerely doubt there will be any lingering legalities. You are either on the bus or off the bus. IH is officially off the bus.

This was copied to Rossi's blog by D. Boswell, and Rossi replied:

http://www.journal-of-nuclear-physics.com/?p=892&cpage=130#comment-1200250

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Andrea Rossi
June 17, 2016 at 5:56 PM
D.Boswell:
No comment.
Warm Regards,
A.R.

The comment does not actually say that IH has sued Rossi. It is claiming that this would be a difficult position to be in. In fact, it would not. The imagined difficulty arises from not being clear about what IH is claiming and the nature of the conflict in the lawsuit. We can set up linguistic traps for themselves, by how we interpret events; generally we remember, and proceed to reason from, not what actually has happened, but what meaning we extracted from it. So let's deconstruct what was said here. Details matter.

you did not pay the man the tens of millions you owe him

It is Rossi's claim that IH owes him $89 million. IH has not yet Answered the claim. We do not know what the Answer will assert. Whether or not IH owes Rossi anything (rather than the reverse) is precisely what is at issue in the Court, as Count 1, and the rest of the claims largely hinge on Count 1. (There are some independent counts, at least one of which is preposterous, but that's not relevant here.)

because the product does not work,

We have a hint from the footnote in the Motion to Dismiss that IH will claim that at least some reactors were "inoperable," and from the general sense we get from Dewey Weaver, IH was never able to verify that the Rossi IP or instructions or guidance were useful to create independent demonstration of workability, which wold be essential for IH to continue. They would be unable to raise the $89 million without that! The $89 million payment for a "successful demonstration," if it was successful, would be of no commercial value. I.e., maybe Rossi, tending the 1 MW reactor 24/7, was able to make it work. I.e,. "the product works," but Rossi did not teach IH how to make it work. If he did not transfer the IP, which is the core of the Agreement, the Agreement has failed. The technical requirement of payment fails because the entire purpose of the Agreement was frustrated, even if the "product" works just fine, when manipulated by the Maestro.

and at the same time sue the man for control of the territory where he is manufacturing working product.

It is not at the same time. This is about a future contingency, if Rossi is manufacturing and selling working product in the territory licensed to IH. (which can then be independently verified.) IH, suing, would claim that there is working product, proven by what is being sold, and that Rossi has licensed the technology (and all future development of it) to them, and that therefore they are owed royalties, or there may be other remedy. That Rossi, at this future time, has working product is irrelevant to whether or not he currently has working product, and even if he currently has working product, that is, again, irrelevant to whether or not he taught them how to make it work. Did he successfully transfer the IP, as was an essential element of the Agreement? At this point, Rossi might be able to claim the $89 million as an offset to what is owed IH, but that's speculation. IH could also claim that the Agreement stands and that the $89 million was dependent upon timely performance.

However it is sliced at the time, Rossi ends up, if he is selling working product, very wealthy indeed. However, he may have made it almost impossible to reach that point, by his conduct with IH. Still, it's possible he could pull it off, if he's not in jail. Maybe even if he is. After all, if he teaches someone else how to do it, his personal presence would not be necessary.

H has made it's decision.

"Its". To this observer, it has been appearing that IH decided in 2012 to humor Rossi's well-known eccentricities, to give him whatever he asked, but not the $89 million unless he actually delivered the IP as promised. The 1 MW test was almost completely irrelevant. Nobody sanely pays $89 million on the opinion of a single expert already associated with the inventor. Nor without setting up a second opinion if needed, or some process if the two disagree. It looks to me like the approach was more or less, "Whatever you say, Andrea, but ... this agreement is with Industrial Heat, not Cherokee Partners. You get $11.5 million right away and if you perform on the Agreement, you get another $89 million after the test is done (which supposedly would have been in a bit more than a year.) We are experienced fund managers -- cf. Cherokee Partners -- and we can raise that money if you deliver as promised."

If what Dewey is claiming is true, and this is consistent with the hints we have from the Press Release and the note in the Motion to Dismiss, Rossi never delivered working IP to IH. (We could imagine that they were clumsy and failed. However, Rossi has patented technology supposedly covering this. Patents must include sufficient information to make working devices, or the patent is worthless.) So, yes, as well, IH made the decision not to pay Rossi any more until he delivered what they had already paid for, already promised. I'm quite sure they signed the agreement and later refused to pay on the advice of counsel, presenting the counsel with the situation. (Otherwise counsel would simply have advised them not to get into this relationship. They made the decision to take the risk.)

That decision was about making a payment as agreed. The delivery of the IP and the license was not made conditional on that payment. Rossi has no intrinsic right to demand return of the license and IP based on nonpayment. A court might decide on that as necessary to create equity, unless the Court is ordering return of the $10 million -- or more, but it's unlikely here, my opinion. Rossi seems to think that he can revoke a license based on his own choice. Not if it was paid for! And it was. That, as part of the agreement an additional conditional debt was created, does not change that.

(continued)

(continued)

They bought rights to a different product which they say does not work,

https://animpossibleinvention.…sdce-16-21199__0001-2.pdf -- take a look at section 13.4. IH bought the rights in the Territory not only to what was specifically covered, but any derivative or improvement subsequently developed by Rossi.

As well, IH does not say that the "product ... does not work," (and could not fully know that) but rather than they were unable to themselves make it work following the Rossi IP, as shown by their own testing (which may include independent testing.) They may also alleged that the General Performance Test was flawed, and they might even allege fraud.

even if they maintained the rights from the initial payment, Rossi will be manufacturing a different product.

Which is irrelevant, unless it were a completely different product. It is not, from the information we have. I would call it, if it works, a "next generation product." An extension. It might even be a drastic improvement, and that this could make the IP as it existed at the time of the agreement worthless is why any sane investor would insist on that. Basically, transfer the IP, such that the investor can verify it without your fingerprints all over it, and do this within the time period, you win another $89 million to use for development, plus you get half the planet all to yourself and the rest for your partner who put that money up. (Subject to a right of first offer that is in the Agreement.) The argument that the time period was extended could fly, if the Agreement were substantially performed. It is looking like it wasn't.

And Rossi says "no comment," either because he is developing some sense and not shooting his mouth off at random, or because he knows that this argument is a poison pill if he agrees with it.

I expect that any rational judge would club IH like a baby seal if they contest the territory after having abandon the payment obligation on a technicality. It really looks like IH was only trying to kill off Rossi as potential competition for some other client.

I doubt that there is a judge in the US who would read the Complaint and Motions as they currently exist and come to that conclusion. At this point, IH has raised a "technicality." That was not an Answer to the Complaint. It was an obvious defect that IH lawyers would have been remiss to not point out. If the case decides that IH owes $89 million, it will almost certainly decide that the license continues as valid. The two go together, in that way. Otherwise, what was the $89 million payment for? However, in fact, the Agreement is quite explicit. The license went into effect when the $10 million was paid, and there is no expiration condition for nonpayment of other sums. So Rossi, if conditions were met, would have a cause of action for $89 million, as a collection action. Very simple. If the conditions were not met, bye-bye $89 million. Next time, don't write or sign an Agreement like that. The license still stands, unless IH surrenders it, which it might do for some payment. $10 million could be a handy number to start with. I don't know if they would accept it. They have a lot more in this than that.

As matters stand, Rossi has $10 million from IH, as payment for a license, that existed from the date of payment. Rossi apparently thinks he can make up a termination reason and apply it. Sure. He can. And then,if they choose to, at the time, IH could sue, and it would be up to a court to decide. This prior case could actually be moot.

At this point, no sane investor would touch Rossi IP with a ten-foot pole, unless nothing more than a trivial amount of money were at risk. And investors are going to see how Rossi treats his "partners." As I've written many times now, by filing this case, Rossi heavily trashed his prospects; the case as it stands is a caveat to investors that Rossi may create "demonstrations" that can fool experts, so investors will insist on independent verification. And Ross has always rejected that. (Jed points out an exception that is unpublished. Whether it is really an exception or not, we cannot tell without details. But he certainly acted to prevent independent people from verifying, even when they were disposed to believe him.)

Quote from frankwtu

Some of the case law quoted by Rossi's lawyer I believe deal with this and in certain cases it is not necessary for the absence of a 'signature' to cause the contract to be invalid in some respect of it. In some cases it is not a requirement to have a signature at all.

The court will decide.

Yes, they will. However, we are kibbitzing.

It is correct that "in some cases" signatures are not required.

My comment on the Memorandum on Count 1, where this is significant, is not complete yet (notice it says draft at the top). An agreement, however, that is explicit that all parties must sign might not be such a case. There is the "counterparts provision," but ... Rossi does not allege that such exist (and there is a good chance they don't). Such allegations must be in the Complaint, by the way, as I understand the situation. It is certainly possible that Rossi's attorney will establish that an issue is a matter of fact rather than law. As noted many times, Motions to Dismiss are difficult. I pointed to a paper guiding lawyers on them. The IH lawyers are reputed to be the best in the country. They would be intimately familiar with all this.

There is more than the simple signature problem. There is also the problem of no document agreeing to the beginning of the test, which also required all parties to sign. The 2nd amendment explicitly required that.

There is also the issue of what was tested. I don't think that the Complaint alleges that the unit tested was the Six Cylinder Unit. Maybe it was, but the Complaint should say so. The way I read the Agreement, the unit to be tested was the unit delivered in August, 2013. Not some other unit, some "improved technology," unless IH agreed. And with $100 million at stake, you would think that one would make sure to get explicit agreements in writing. If a partner was recalcitrant, you would protest and make sure that this was all covered by evidence presentable in court. Like legal notices by certified mail. There is no sign that Rossi was exercising that level of caution.

And, again, Rossi's attorney did not allege estoppel in the Complaint (as far as I recall) and has not asked for leave to amend. I do not know if he can do that now, having filed this Memorandum. I suppose he might add to it. You can, in fact, do things outside of regular procedure if you can convince the judge that equity requires it.