Rossi v. Darden developments - Part 1

(AD 5 is not subject to a motion to strike, see above)

From the Second Amended Answer, Affirmative Defenses:

Quote

6. Plaintiffs’ claims are barred, in whole or in part, as a result of Plaintiffs’ unlawful actions, including their conduct in violation of the Florida Deceptive and Unfair Trade Practices Act. This is reflected in the allegations in support of the claims pled against Plaintiffs infra, including the allegations in support of the FDUTPA claim pled infra. See id. ¶¶ 140-148 infra.

This is worth copying the cited material:

Quote

COUNT IV: FLORIDA DECEPTIVE AND UNFAIR TRADE PRACTICES ACT
(Industrial Heat and IPH against all Counter-Defendants and Third-Party Defendants)
140. Counter-Plaintiffs reallege the allegations in Paragraphs 1 through 135 as if fully set forth herein.
141. As described in greater detail above, Rossi, Leonardo, Johnson, JMP, Penon, Fabiani, USQL, and Bass (the “FDUTPA Defendants”) were all engaged in a common scheme
against Counter-Plaintiffs.
142. The first part of the scheme was to manipulate Counter-Plaintiffs into allowing the Plant to be sent from the Industrial Heat facility in North Carolina – where any work on, operation of, or testing of the Plant could be supervised and overseen by Counter-Plaintiffs – to Florida, where Leonardo, Rossi, USQL, Fabiani, and Penon could operate the Plant and purportedly conduct measurements of the Plant’s operations away from the oversight and control of Counter-Plaintiffs.
143. The second part of the scheme was to manipulate the operation of the Plant and the measurements of the Plant’s operations to create the false and deceptive appearance and impression that the Plant was performing at astronomical levels, with COP measurements not only well in excess of anything achieved by any third party testing of the E-Cat technology, but in fact many multiples higher than anything achieved by any third party testing. For example, notwithstanding flaws in their testing methodology that would have caused them to overstate their conclusions of the COP they were measuring from an E-Cat reactor, the Lugano scientists concluded that the E-Cat reactors they measured were producing a COP of 2.6, 2.9, 3.2, 3.6 or 5.6. According to the manipulated and fabricated testing and measurements of the FDUTPA Defendants, they – through Leonardo, Rossi, and Penon – claimed that they were achieving COPs more than 10 times greater than the Lugano scientists, and in fact as high as 40+ times greater than the Lugano scientists.
144. The final part of the scheme, of course, was for Leonardo and Rossi, based on the false and deceptive operations of the Plant in Florida, to claim to Counter-Plaintiffs that they were required to pay Leonardo and Rossi $89 million and, when Counter-Plaintiffs rightfully refused, to institute litigation against Counter-Plaintiffs.
145. Another goal of the scheme was to obtain various payments from CounterPlaintiffs for work that one or more of the FDUTPA Defendants was performing not to benefit Counter-Plaintiffs, but in fact with the goal of harming Counter-Plaintiffs. Among these
payments were service payments to USQL, Fabiani, and Penon; expense reimbursements to Leonardo, Rossi, USQL, Fabiani, and Penon (including for travel, apartment rentals, visa-related costs, repair work to the Plant, patent attorneys, and patent application fees); and payments for equipment (or the transportation of equipment) to be used – or purportedly to be used – by the FDUTPA Defendants.
146. In furtherance of this scheme, the FDUTPA Defendants engaged in the unconscionable, unfair, and deceptive acts and practices described above, including:
a. Deceiving Counter-Plaintiffs about JMP, the operations of JMP, the supposed role of Bass, and the reasons for JMP wanting to use the steam power that could be generated by the Plant.
b. Deceiving Counter-Plaintiffs as to the reasons for wanting to move the Plant from North Carolina to Florida.
c. Manipulating the operation of the Plant and the measurements of the Plant’s operations to create the false impression and appearance that it was producing a COP far in excess of the COP it was in fact achieving.
d. Providing false information to Counter-Plaintiffs as to the operation of the Plant and the measurements of the Plant’s operations.
e. Refusing to provide other information properly requested by CounterPlaintiffs, and to which Counter-Plaintiffs were entitled pursuant to the License Agreement, the Term Sheet, the USQL Agreement, and/or the nature of the purportedly (but in fact, not) independent work being done by Penon.
f. Preventing or blocking Counter-Plaintiffs from obtaining truthful information about the Plant’s operations, the measurements of those operations, the role of JMP, the use by JMP of steam provided by the Plant, the role of Penon, or the bases for expenses or costs charged to Counter-Plaintiffs.
g. Charging Counter-Plaintiffs for services, expenses, and equipment that were purportedly being used either for the benefit of, and to further the goals of, Counter-Plaintiffs when in fact no such services, expenses, or equipment were being used for Counter-Plaintiffs’ benefit.147. The acts and practices alleged above, including in the prior paragraph, were unconscionable, unfair, and deceptive. As such, they have been declared unlawful pursuant to Section 501.204 of the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”).
148. As a result of the foregoing acts and practices declared unlawful under FDUTPA, Counter-Plaintiffs have suffered and continue to suffer actual damages, as described above.

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Annesser again alleges the lack of specificity. I look at the defense, and know that there are specific allegations covering what is listed in the Count.
I looked at some cases cited by Annesser.

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To state a defense under the Florida Deceptive and Unfair Trade Practices Act (“FDUPTA”), Defendants must allege: “(1) a deceptive act or unfair practice; (2) causation, and; (3) actual damages.” Randolph v. J.M. Smucker Co., No. 13 80581-CIV, 2014 WL 1018007 at *4 (S.D. Fla. Mar. 14, 2014) (citing Mantz v. TRS Recovery Servs., Inc., 11–80580–CIV, 2011 WL 5515303 at *2 (S.D. Fla. Nov.8, 2011)); see also KC Leisure, Inc. v. Haber, 972 So.2d 1069, 1073 (Fla. 5th DCA 2008). Defendants fail to set forth the elements of this defense with the requisite specificity required by Rule 9, Fed. R. Civ. P. In fact, in an effort to conceal such pleading deficiency, as a factual basis for such defense, Defendants merely claim that the alleged “unlawful actions” are reflected in the entirety of Defendants Second Amended Counterclaim and Third-Party Claims. Defendants incorporation of the entirety of its Second Amended Counterclaim and Third Party Claims is not only improper, but it fails to provide the requisite notice to Plaintiffs of the specific allegations upon which Defendants rely to support their sixth affirmative defense. According, this defense must be stricken. Moreover, at no point in Defendants’ pleadings do Defendants allege any actual damages. Defendants’ FDUPTA defense is insufficient as a matter of law and must be stricken.

https://casetext.com/case/randolph-v-jm-smucker-co is a later ruling. "On March 14, 2014, the Honorable Kenneth A. Marra, United States District Judge, dismissed Count IV of the Complaint, and, while leave to amend was provided, Plaintiff opted not to do so. See Order, ECF No. [25]." Looking at this case from the later ruling, it was much likelier to be vague."
https://casetext.com/case/mantz-v-trs-recovery-services-2 interesting case with a pro se plaintiff. My opinion is that this order supports rejecting the motion to strike, and, again, the most severe response would be an order to clarify. I don't think the judge will consider that necessary.
KC Leisure, Inc. v. Haber ... again seems to support rejecting the motion to strike.

Judges do not require pleadings to be perfect. Given the Second Amended Answer and the Counterclaims, Rossi would certainly know what is being pled.

The motion to strike appears dilatory, a way to avoid addressing the core issues of the Answer and Countercomplaint. I predict that the judge will not grant the motion to strike. It is possible that she will require more specificity (perhaps a dollar amount for damages?), but at this point it seems the specificity is adequate.

From the Second Amended Answer, Affirmative Defenses:

Quote

7. Plaintiffs’ claims are barred, in whole or in part, as a result of Plaintiffs’
fraudulent misrepresentations. Those fraudulent representations are pled infra. See id. ¶¶ 1-11,
32-92, 134-148 infra

Is this sufficiently specific? I don't know. The AD section is a summary of what is elsewhere in the counter-complaint.

Annesser:

Quote

Notwithstanding the fact that most of the allegations cited in support of this defense are entirely irrelevant to the elements necessary to state a prima facie defense of fraudulent misrepresentation, some of Defendants allegations do assert that there were fraudulent statements made by "Rossi, both in his individual capacity and as the representative of Leonardo, and Johnson, both in his individual capacity and as the representative of JMP." (DE:30, ¶74, 75, 135, 137). With the exception of one email alleged to be made by Rossi, Defendant IH fails to specifically state (a) the specific alleged fraudulent statements that were purportedly made, (b) to whom such statements were made, (c) which individual and/or entity made such statement(s), and (d) what each such individual and/or entity obtained as a consequence of the fraud. See Id. "Where multiple parties are charged with fraud, the complaint must distinguish among defendants and specify their respective roles in the fraud."

This is remarkable. The claim is basically that Jones Day was too wordy. As I see it, the "irrelevant" paragraphs were necessary to establish context for the allegations of fraudulent representation. And even one such allegation would be enough to sustain the Affirmative Defense. I see Annesser's motion as straying perilously close to frivolous. For each counter-defendant, there are specific evidences provided as to deceptive statements or actions. If these are about the third party counterdefendants, it is essentially not Rossi's business, except as conspiracy may be claimed.

I am moved to quote the Latin legal maxim: mendax, mendax, braccae in ignis.

The motion will be rejected; again, it is not impossible that amendment will be requested, but I consider it unlikely. These motions by Annesser are useless at best, other than to create some delay.

(AD 8 is not subject to a motion to strike, see above)

From the Second Amended Answer, Affirmative Defenses:

Quote

9. Plaintiffs’ fraud claim is barred because of the merger and integration provision in the License Agreement (Section 16.8) as well as the ratification provision in the First Amendment (Section 2). Per the License Agreement Section 16.8, that document and other written documents identified therein “contain the entire agreement among the parties” and “supersede[d] all prior agreements, written or oral.” Per the First Amendment Section 2, the parties acknowledged, “ratified[,] and confirmed” the License Agreement.

The Rossi fraud claim is based on alleged misrepresentations about Cherokee Partners. see Complaint (document 1), such alleged misrepresentations being made before the Agreement was signed. The Licence agreement contains a standard Entire Agreement clause. These are designed to prevent disputes like this. When signing such an agreement, a party is well-advised to ensure that they are not relying on promises that are not contained in the agreement. In particular, any verbal promise that involves performance beyond one year will generally be unenforceable. ("Statute of Frauds.")

Here, six months after signing the Agreement, Rossi signed the First Amendment that ratified and confirmed the agreement. It is only later, after almost four years, that he raises the problem with Cherokee, and the motivation is obviuos: to have deep pockets to go after.

What does Annesser assert?

Quote

Defendants’ ninth affirmative defense is insufficient as a matter of law as if fails to offer any justification, excuse or avoidance of Plaintiffs claims. To begin, Defendants fail to state which, if any, of Plaintiffs’ claims the defense is directed to. Logically, the only claim which this defense could apply to is Plaintiffs’ claim for fraud in the inducement, yet this defense fails to provide an excuse, justification and/or avoidance of Plaintiffs’ fraudulent inducement claim as a matter of law. “Under Florida law, the existence of a merger or integration clause, which purports to make oral agreements not incorporated into the written contract unenforceable, does not affect the oral representations which are alleged to have fraudulently induced a person to enter into the agreement.

Lucky guess, Annesser. Maybe the phrase "the Rossi fraud claim" helped you?

Oral representations might still be fraudulent and, under some conditions, actionable, so the principle asserted by Annesser is correct. Does it apply here? Annesser's interpretation would make mincemeat of standard contract law. Annesser ignores the "ratification," serving as one of many acts creating estoppel, and the lapse of time (laches).

Quote

TEC Serv, LLC v. Crabb, 11-62040-CIV, 2013 WL 11326552, at *6 (S.D. Fla. Jan. 23, 2013) (citing McArthur Dairy, LLC v. McCowtree Brothers Dairy, Inc., et. al, 09-62033-CIV, 2011 WL 2731283, at *4 (S.D. Fla. July 13, 2011)

TEC Serv, LLC v. Crabb I could not find the relevant document. I could go to PACER for this, I think, but am not.
However, McArthur Dairy, LLC v. McCowtree Brothers Dairy, Inc. is at http://cases.justia.com/federa…31/81/0.pdf?ts=1428887948
I can certainly see why this is cited:

Quote

Under Florida law, “[t]he existence of a merger or integration clause, which purports to make oral agreements not incorporated into the written contract unenforceable, does not affect oral representations which are alleged to have fraudulently induced a person to enter into the agreement.” Mejia v. Jurich, 7891 So. 2d 1175, 1178 (Fla. Dist. Ct. App. 2001); Nobles v. Citizens Mortgage Corp., 479 So. 2d 822 (Fla. Dist. Ct. App. 1985) (“oral agreements or representations may be introduced into evidence to prove that a contract was procured by fraud notwithstanding such a merger clause.”)

Whether or not a misrepresentation is of a nature so as to bypass the "entire agreement" provision could be a factual issue, requiring a jury determination, or it could be legal, but striking the affirmative defense because it might not be applicable would be inequitable. The entire agreement clause is relevant and might be effective. The argument in McArthur Dairy is that if a contract was entered into on a fraudulent representation, the contract is void. In that case the conduct of the parties and equity would be consdiered.

It seems that Rossi took full advantage of the benefit of the Agreement, while it served him, then alleged fraud only when he wanted deep pockets to go after. Annesser ignores the "ratification." He would be estopped from this claim by his conduct over the next four years. He would have had the right to back out of the Agreement before the Validation Test and the $10 million payment, and he would have held the cards to do so. All he'd have had to do would be to return the $1.5 million payment. Instead, he elected to go ahead, to seek to earn that payment by running the Validation Test, and then to earn the $89 million with a GPT.

The strongest basis for his claim that his real agreement was with Cherokee is these claims from the Complaint:

Quote

38. At each of the aforementioned meetings, DARDEN, VAUGHN and CHEROKEE repeatedly stated that "CHEROKEE has billions of dollars at its disposal, and is willing to pay ROSSI and LEONARDO" to license the E-Cat IP.

Quote

41. Upon arrival at the CHEROKEE office, Defendants DARDEN and VAUGHN informed ROSSI and LEONARDO that they had formed a new business entity named INDUSTRIAL HEAT,LLc,which was a "branch of Cherokee Investment Partners ,LLC- to serve as the holding company for the E-Cat license, and that the License Agreement would be signed by the new company.

Quote

43. Upon expressing concern about the new company, to induce ROSSI and LEONARDO's execution of the license agreement, DARDEN and VAUGHN, with full knowledge of the falsity of their statements, assured ROSSI and LEONARDO that:
a. "CHEROKEE and INDUSTRIAL HEAT,LLC are the same company";
b. that IH was "entirely owned and funded by" CHEROKEE; and
c. that "CHEROKEE guaranteed that LEONARDO will be paid in accordance with the License Agreement."

Reviewing this, details and consequences pop out now that I did not see at first.

Assuming, arguendo, that Cherokee was a guarantor, Cherokee is not in default, because the alleged debt of IH has not been perfected; it is legally controversial.

Here, Annesser acknowledges that IH is a separate company (by calling the representation that they are the same company "false.") He also is denying that there was a guarantee, i.e., this was "false." If there was no guarantee, Cherokee is not liable, even after a default. Conceivably Darden and Vaughn could be on the hook for fraudulent representation, but then there are other arguments relieving them, very likely.

In fact, they were not the same company. The foundation for the fraud claim is verbal statements made, and ironic here is that for the fraud counterclaim Annesser is complaining about vagueness, but the Rossi claims are quite vague as to exactly who said what and when, and this was pointed out in the Darden Motion to Dismiss, rejected by the judge, in part in reliance on interpreting a Rossi assertion (the one quoted above) that IH and Cherokee were the same company, i.e., that IH was a wholly-owned subsidiary.

So what did Darden and Vaughn actually say? This is why the Statute of Frauds exists. People remember of conversations what seemed important to them, and where there are strong emotional reactions, or even without that, the memories shift with time. Language is back-supplied from impressions. I can imagine things that they could have said that were true, when said, but that changed as the Agreement was put together. Perhaps they got legal counsel that Cherokee could not enter into this agreement. But Darden is a principal at Cherokee. Vaughn is a "manager," colloquially, but his role there has probably been overstated. Darden and Vaughn could have raised the $89 million if it were warranted, not through Cherokee, but through the personal contacts they have, which cannot be completely separated from what Darden has as a principal at Cherokee. The representation may not have been misleading at all. If Rossi had completed a genuine GPT, IH would have raised the money, and Darden's assurances to Rossi would have been aimed at calming his fears that they might not be able to pay.

I do not see that Jones Day has alleged violation of the Statute of Frauds, which is blatant in this case. They do mention estoppel and laches, which are relevant here. Rossi wants estoppel to apply when it comes to the delay over the GPT, but not when it comes to the Cherokee issue.

Having cake/Eating cake.

From the Second Amended Answer, Affirmative Defenses:

Quote

10. Plaintiffs’ non-contract claims are barred, in whole or in part, because Plaintiffs’ alleged damages are too speculative. The Complaint does not include any factual allegations that would place Defendants on notice as to the purported damages suffered as a result of Defendants’ alleged conduct aside from what is covered by Count I (breach of contract), let alone a non-speculative basis for measuring any such purported damages.

Annesser has:

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Defendants fail to assert any factual support whatsoever for their claim that Plaintiffs’ non-contractual damages claims are too speculative, nor do they even attempt to identify what element(s) of damages they believe to be speculative. Defendants fail to allege, for example, how or why Plaintiffs’ damages for unjust enrichment, misappropriation of trade secrets and fraud and deceit are insufficiently stated despite statutory and common law support therefor.

Four of eight original Rossi Counts were struck.

COUNT I: BREACH OF CONTRACT (NON.PAYMENT) (IH & IPH) is intact and is exempted from the claim of lack of specificity, since the damage is obvious: $89 million, assuming the factual basis for Count I is confirmed.

COUNT II: BREACH OF CONTRACT (EXCEEDING SCOPE OF LICENSE) (IH & IPH) was dismissed, my summary, for terminal cluelessness.

COUNT III: UNJUST ENRICHMENT (IH & IPH stands (dismissal was considered premature, because if the GPT was invalid, as the judge hints it might be, then there could be some element of unjust enrichment. Suppose, for example, that IH was making money hand over fist from a technology that, for technical reasons, they have not paid the inventor for. However, the damages are not clear at all. There is no evidence that IH has received any value at all, i.e., "enrichment."

COUNT IV: MISAPPROPRIATION OF TRADE SECRETS (DARDEN, VAUGHN, CHEROKEE,IH & IPH) This was again kept on the bare possibility that facts might come out to support the charge. However, there is no specific allegation of damages, merely a conclusory statement that they have been damaged, with no specificity at all.

COUNT V: CIVIL CONSPIRACY TO MISAPPROPRIATE TRADE SECRETS (IH,IPH, CHEROKEE, DARDEN & VAUGHN) was dismissed. In discussion, the judge has " Cherokee entirely owns and funds IH, one of its holding companies." This is an assumption the judge made based on a possible misinterpretation of one of Rossi's claims. Ironically, that claim was then the basis for dismissing this count. For now, let's consider this moot; that claim about Cherokee was part of the basis for keeping Cherokee as a defendant.

COUNT VI: FRAUD AND DECEIT (IH,IpH, CHEROKEE, DARDEN & VAUGHN) stands, though it may be very difficult to show at trial. However,any damage to Rossi from the alleged fraud, beyond the nonpayment, is very unclear. That Cherokee was not, in fact, the owner of IH is not responsible for the nonpayment. If Cherokee was a guarantor, the occasion for guarantor payment has not arisen. (It would not arise merely because IH did not pay; the debt would need to be legally established, I'd think, unless there were a specific contract, which very much did not exist.)

COUNT VII: CONSTRUCTIVE & EQUITABLE FRAUD (IH,IPH, DARDEN & VAUGHN) was dismissed. One of the repeated Rossi claims is that IH disclosed his trade secrets to "competitors." No evidence of such has actually been alleged, this was a bare conclusory claim.

COUNT VIII: PATENT INFRINGEMENT (U.S. PATENT) (IH & IPH) was dismissed.

I see no specific damages alleged, beyond what IH acknowledges, the nonpayment of $89 million. While some of the alleged damages might be amenable to proof, the present motion is a motion to strike, and whether or not a claim becomes specific enough to stand is not established at this point. Striking the affirmative defense, then, would be premature. The plaintiff should be on notice that if damages do not become specified, the claims might be dismissed on motion at some point, that's how I understand this.

The judge will not grant this motion.

From the Motion to Strike:

Quote

DEFENDANTS’ COUNTERCLAIM
Plaintiffs, Andrea Rossi and Leonardo Corporation respectfully move this Court to Strike
Paragraphs 126 through 133 of Defendants Second Amended Counterclaim as such material is
immaterial, impertinent and scandalous and therefore properly stricken pursuant to Rule 12(f), Fed.
R. Civ. P. I.

Count II (Breach of Contract) – Failure to Pay Taxes Is Improper.

From the Second Amended Answer and Countercomplaint:

Quote

Failure to Pay Taxes
126. Prior to Leonardo and Rossi entering the License Agreement, it was well known that Rossi had taxation issues with the Italian government, which even led to him facing criminal tax charges in Italy.
127. As a result, the License Agreement has several carefully crafted provisions to ensure that Leonardo and Rossi would comply with their tax obligations as they relate to any payments from Counter-Plaintiffs.
128. First, the License Agreement (Section 12(j)) required a representation from both Leonardo and Rossi that each has filed all necessary “tax returns or reports” and “has paid all taxes required by any jurisdiction or subdivision or agency thereof” prior to entering the License Agreement. License Agreement § 12(j).
129. Second, the License Agreement (Section 13.5) required each party to file all necessary documentation and returns as to any tax applicable to its or his “respective revenues derived . . . in respect of the E-Cat IP.” Id. § 13.5.
130. Third, the License Agreement (Section 12(a)) required Leonardo and Rossi to keep the E-Cat IP “free and clear of any Liens.” Id. § 12(a); see also id. § 12(e).
131. Fourth, IPH had Leonardo and Rossi provide it with a signed certificate certifying that all of their representations and warranties from the License Agreement, which included their
representations as to compliance with their tax obligations, were true and correct as of the date of the certification (April 29, 2013) and would continue to be true after Leonardo was paid $10
million under the License Agreement. See Ex. 8.
132. Notwithstanding the foregoing, on information and belief, Leonardo and Rossi have not paid their federal taxes on payments made to them from Counter-Plaintiffs, and have not filed all tax returns or reports relating to payments made to them from Counter-Plaintiffs.
133. Leonardo and Rossi’s failure to report and/or pay taxes on such payments is a prior breach of the License Agreement that serves as a defense to Plaintiffs’ breach of contract claims against Industrial Heat and IPH. Based on Leonardo and Rossi’s representation that no tax lien has been imposed affecting Industrial Heat and/or IPH’s assets or rights under the License Agreement, Industrial Heat and IPH do not assert this breach as a basis to recover damages from Leonardo and Rossi presently, but reserve the right to assert this claim in the event a federal tax lien is issued affecting Industrial Heat and/or IPH’s assets or rights under the License Agreement.

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This is one in a series of alleged breaches of contract. An allegation on "information and belief" is allowed. It is specific. It cannot be said that this is unrelated to Rossi's performance of the Agreement. The statement in paragraph 126 is mild, but might be considered inflammatory. The point of 128 is to establish why the provision about taxes was in the Agreement. There was an unusual concern, because of the history.

This motion betrays a hypersensitivity. Annesser claims:

Quote

... even if such allegation was true (it is not), such allegation would not give rise to a viable cause of action or defense. Moreover, any “tax issues” that the Plaintiffs may have had in the past would not be admissible in this proceeding, much less
give rise to a claim or defense in this case. It is clear that the sole purpose of asserting such impertinent and scandalous allegations was to defame the Plaintiffs while hiding behind the litigation privilege as a shield. But for the instant case, and perhaps still, the clearly unsupported and defamatory statements made by Defendants would be actionable at law.

The scandalousness involved in the allegation is mild. The Italian tax history is true, so "such allegation" must refer to the claim that Rossi did not file all taxes on time. We already know that Rossi failed to file information returns for Leonardo New Hampshire. Failing to file a return on time is a fairly common event. It means little, particularly if no taxes are due, and when taxes are due and the delay is not long, penalties are mild. Is Annesser claiming that no returns were delinquent during the period or now? This is a bit different from what IH acknowledges Leonardo and Rossi have assured them, that's about liens, which are a later consequence of failure to pay taxes, it can take years.

If so, and if Rossi is willing to affirm this under oath, I would think that IH might drop this. If Rossi was, however, delinquent at any point as to taxes, he would have been in violation of the Agreement and this becomes relevant to the case. As matters stand, I don't see how the judge can strike this, it is sufficiently relevant because of the Agreement provision.

(links)

Rossi Motion to Strike introduction and coverage of Affirmative Defenses not moved for strike
Rossi Motion to Strike, re AD 1 Leonardo Florida not Leonardo New Hampshire. Assignment vs. Merger.
Rossi Motion to Strike, re AD 2 failure to state a claim
Rossi Motion to Strike, re AD 3 estoppel, waiver, laches, and other applicable equitable doctrines.
Rossi Motion to Strike, re AD 4 unclean hands
Rossi Motion to Strike, re AD 6 plaintiff's unlawful actions
Rossi Motion to Strike, re AD7 fraudulent misrepresentations.
Rossi Motion to Strike, re AD10 damages speculative.
Rossi Motion to Strike, Counter-complaint tax issue
Hearing on motion to strike scheduled 10/14/2016 08:30 AM in Miami Division before Judge Cecilia M. Altonaga
IH_response_in_opposition_to_MTS
Order on Motion to Strike

A hearing notice appeared on the docket a bit ago. As I have no idea of specifics involved, I did not comment on it. This was the notice:

Quote

PAPERLESS NOTICE of Hearing: Status Conference, re: service of Third Party Complaint, set for 10/7/2016 12:30 PM in Miami Division before Judge Cecilia M. Altonaga.

I think it likely this will be postponed, there is a little detail like a cat 4 hurricane set to hit Florida Friday morning, the 7th.

Probably the wrath of God for .... something or other.

(I hope everyone in Florida is safe, there is a strong media drumbeat to evacuate. Sensible. Not to mess with.)

As predicted, the Hearing for October 7 was reset, the new date was October 14. The result of that hearing is Document 67. The hearing minutes are Document 66, but this is not a public document. It is possible it could be obtained through the court reporter (as with other hearing minutes). Document 67 provides results, but not the reasons for the orders, which were given in "open court." I.e., orally.

The October 7 hearing was to handle "service of a third party complaint." From Document 67, this was service of Penon. The Order as issued October 14:

Quote

3. Defendants shall show proof of service on Third-Party Defendant, Fabio Penon by
November 14, 2016, failing which he will be dismissed without prejudice.

What is this about?
Federal Rules of Civil Procedure › TITLE II. COMMENCING AN ACTION; SERVICE OF PROCESS, PLEADINGS, MOTIONS, AND ORDERS

Rule 4. Summons

Quote

(m) Time Limit for Service.
If a defendant is not served within 90 days after the complaint is filed, the court—on motion or on its own after notice to the plaintiff—must dismiss the action without prejudice against that defendant or order that service be made within a specified time. But if the plaintiff shows good cause for the failure, the court must extend the time for service for an appropriate period. This subdivision (m) does not apply to service in a foreign country under Rule 4(f) or 4(j)(1) or to service of a notice under Rule 71.1(d)(3)(A).

Rule 4(f):

Quote

(f) Serving an Individual in a Foreign Country.
Unless federal law provides otherwise, an individual—other than a minor, an incompetent person, or a person whose waiver has been filed—may be served at a place not within any judicial district of the United States:

(1)
by any internationally agreed means of service that is reasonably
calculated to give notice, such as those authorized by the Hague
Convention on the Service Abroad of Judicial and Extrajudicial
Documents;

(2)
if there is no internationally agreed means, or if an international
agreement allows but does not specify other means, by a method that is
reasonably calculated to give notice:

(A) as prescribed by the foreign country's law for service in that country in an action in its courts of general jurisdiction;

(B) as the foreign authority directs in response to a letter rogatory or letter of request; or

(C) unless prohibited by the foreign country's law, by:

(i) delivering a copy of the summons and of the complaint to the individual personally; or

(ii) using any form of mail that the clerk addresses and sends to the individual and that requires a signed receipt; or

(3) by other means not prohibited by international agreement, as the court orders.

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Rule 4(j) is not relevant here, nor is Rule 71.
There is extensive discussion of Rule 4 at https://www.law.cornell.edu/rules/frcp/rule_4#rule_4_f. I have not reviewed this, I am merely looking for the round outline here.

If IH is having difficulty serving Penon, but is pursuing it with due diligence, I consider it unlikely that Penon will actually be dismissed, even if IH fails to meet the November 14 deadline; they could request more time. IH has a presumed town in Italy of principal residence of Penon, but we do not know more details, and Penon might be avoiding service. He did not join in the special appearance for Fabiani and Johnson, which would have given him more time to respond. He might prefer to stonewall this, and he might get away with it for a time, but ... it will leave Rossi without his star witness, crucial to his case, needed to testify to the "ERV Report."

While it is possible that this report can be introduced anyway (an attorney would know better about this), its value would be drastically reduced without Penon available to affirm it and to answer questions about it. Maybe I should read some Rules of Evidence.

(So I did. Ugh. Can of worms.)
Other aspects of the October 14 order will be separately covered.

This is a filing by IH of final argument before the hearing scheduled for October 14, where the Judge ruled on the Rossi Motion to Strike. To review, In the Second Amended Answer, Affirmative Defenses, and countercomplaint (Document 50), IH listed ten Affirmative Defenses, plus a paragraph on "additional defenses." Rossi, in Document 54,

Quote

... request that this Court enter an Order striking Defendants’ Affirmative Defenses 1, 2, 3, 4, 6, 7, 9 and 10 or, alternatively, requiring Defendants
to provide a more definite statement thereof; striking Paragraphs 126-133 of Defendants Second Amended Counterclaim as immaterial, irrelevant and scandalous matter

A reminder for readers, an Affirmative Defense is a claim that a condition exists that makes the plaintiff's claim invalid even if the allegations of the plaintiff are true. I.e. As an example, the plaintiff having "unclean hands," or having violated the underlying contract, thus excusing the defendants' nonperformance. The first affirmative defense was that the Leonardo Corporation that filed the lawsuit (with Rossi) is not the Leonardo Corporation that was a signatory to the Agreement. Sloppy, eh?

I am not now reviewing the IH final arguments, as we have the Judge's Order as Document 67, I will cover below. I might come back and expand this.

Documents 60 and 61 are procedural motions that, if nothing else, will provide more time for Answers from Fabiani, Johnson, James A. Bass, and the associated companies. In Document 62, the Judge, sua sponte (on her own initiative) required these parties to consolidate their motion, as there is substantial overlap. I am not reviewing the motions filed at this point, this is from the Judge's Order:

Quote

THIS CAUSE came before the Court sua sponte. On September 19, 2016, Defendants/Third-Party Plaintiffs, Thomas Darden; John T. Vaughn; Industrial Heat, LLC; IPH International, B.V.; and Cherokee Investment Partners, LLC filed their Second Amended
Answer . . . (“Answer”) [ECF No. 50]. The Answer asserts five counterclaims and third-party claims.

On October 11, 2016, Third-Party Defendants, Fulvio Fabiani and United States Quantum Leap, LLC filed a Motion to Dismiss . . . (“Fabiani Motion”) [ECF No. 60].

That same day, another set of Third-Party Defendants, J.M. Products, Inc.; Henry Johnson; and James A. Bass (together with Fulvio Fabiani and United States Quantum Leap, LLC, the “Third-Party Defendants”) filed its own Motion to Dismiss . . . (“J.M. Products Motion,” together with the Fabiani Motion, the “Motions”) [ECF No. 61].

The two sets of Third-Party Defendants are represented by separate counsel, but each Motion seeks to dismiss Count IV of the Answer, which alleges a counterclaim and third-party claim under the Florida Deceptive and Unfair Trade Practices Act. The J.M. Products Motion additionally moves to dismiss Count III for alleged fraudulent inducement, and the Fabiani Motion moves to dismiss Count V for alleged breach of contract. Upon a preliminary review of the Motions, it appears resolution of each will, at least in part, be dispositive of the other.

To assist the Court in its review of the parties’ positions, a combined motion to dismiss shall be filed by all Third-Party Defendants. The purpose of a combined motion is to eliminate multiple sets of statements of facts and memoranda of law, which surely, the parties can agree, will be applicable to each of them regardless of whether they are presented in a combined motion or duplicated in separate motions. For the benefit of the Court, the burden shall be on the movants to present their motion in a streamlined fashion so the Court need not juggle potentially incongruent facts or repetitive discussion. None of the parties may incorporate by reference any arguments or documents previously submitted to the Court in association with the two Motions. The combined filing does not preclude the opportunity for all parties to present their own arguments. Should the parties diverge in their analyses, they may present their respective arguments in subsections within the combined motion.

For the foregoing reasons, it is ORDERED AND ADJUDGED that the Fabiani Motion [ECF No. 60] and the J.M. Products Motion [ECF No. 61] are DENIED without prejudice. The combined motion to dismiss shall be submitted no later than October 20, 2016. The response and reply memoranda shall be due in accordance with Local Rule 7.1(c).

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This is straightforward and should be simple to understand.

It is tempting to review 60 and 61, for an advance peek. They are there if anyone wants to see what Fabiani and Johnson (and Bass) are planning. Mostly, a quick summary, nice try guys, it won't fly. Motions to Dismiss are very difficult.

I just noticed that I misnamed these files on New Vortex. This is about a Motion to Strike, not to Dismiss. This document is Rossi's last argument before the hearing Ocrober 14, so this has already been decided. I'm not going over it now, but may revisit this.

Document 64 is a joint motion for a standing protective order allowing parties to label information disclosed in discovery “CONFIDENTIAL,” or “HIGHLY CONFIDENTIAL – ATTORNEYS’ EYES ONLY,” which will then be treated as covered in the text (proposed as 64.1 and signed by the Magistrate in 65), absent permission from the court to disclose such information. Basically, parties receiving such information will be prohibited from disclosing it outside the restrictions detailed.

Some have speculated on which party wanted this, or wanted this the most. There are facts related to the business of Leonardo and IH which are quite properly confidential. However, they may also be relevant to the case. For example, does IH have another technology competing with Rossi? Rossi would surely ask (because he has claimed they do.) IH is engaged with many researchers, and most of these arrangements are confidential. And then is Rossi dealing with another company? Does he have functioning installations of his devices? What is the QuarkX? These are facts that may be needed for the case, or that might be irrelevant. The Protective Order allows disclosure under cover of confidentiality or even very strict confidentiality, where only the lawyers -- who are officers of the court -- may see it.

This does not protect all discovery; in some cases parties might disclose the content of discovery without violating this Order, if there was no special designation added to a disclosed document or provided with a deposition. Over-use of the designation can be challenged, if it is worth the attorney time.

Another example. Who is the owner of JM Products? It matters for the case if there is an independent owner, and it matters if there was a real chemical process using substantial heat. If Johnson is as he represented, simply an attorney representing them, and if the real owner wants confidentiality preserved, Johnson would want to be able to safely disclose this to counsel in the case. Otherwise he would attempt to deflect the questions in discovery. The Protective Order makes all this much simpler.

Contrary to popular opinion, most attorneys will act in the interest of their clients, which includes keeping billable hours down. In return for making what most of us will think is a very high hourly rate, they are charged with being efficient.

My sense, without having verified it, is that the Protective Order was boilerplate they got from somewhere. This kind of need would not be uncommon. So this was very easy for the lawyers to agree upon and then, of course, if all counsel consents, it was totally normal that the Magistrate immediately signed it.

Quote from Abd Ul-Rahman Lomax

Documents 60 and 61 are procedural motions that, if nothing else, will provide more time for Answers from Fabiani, Johnson, James A. Bass, and the associated companies. In Document 62, the Judge, sua sponte (on her own initiative) required these parties…

Is this considered to be substantial proof that James A. Bass is a real person? That he has been located, identified and shown not to be under a false name?

0066 is a minute entry referring to the Court Recorder. It is possible that copies of the hearing record is available, probably for a fee, from the Recorder, whose phone number is given.

Quote

Court Reporter: Stephanie McCarn, 305-523-5518 / [email protected]

I have been promised reimbursement for PACER fees, by a neutral party, but not for other expenses.

0067 is the result of the Hearing. The Judge combined two hearings, the one originally scheduled for October 7, on the "third party service," and the hearing on the Rossi Motion to Strike. The third-party service issue is described above.

On the Motion to Strike, Rossi had moved to strike all the Affirmative Defenses except for number 5 and 8, so there were 8 separable requests, plus he had moved to strike some language from the complaint as inflammatory (the tax issue and mention of his prior tax problems).

The Court did not provide reasoning in the Order, that was given in open court. So it is or will eventually be public record, for those willing to pay for it. It is or will be also available, if I'm correct, on a terminal in the offices of the Court. Anyone could have gone to the hearing to report on this. At this point, though, the interest is largely academic and not substantial. If, in the opinion of a party, the Court errs, parties can appeal. As the public, we can look at this and tear our hair out and it's all irrelevant, unless we put our money or time where our mouth is and intervene, which can happen. If we can show some sort of standing or public interest. Otherwise we are kibitzers.

The Order:

Quote

a. Affirmative Defenses 1, 4, 6, and 9 as well as Paragraphs 126–33 of Count II of the Counterclaims and Third-Party Claims in Defendants’ Answer remain intact.
b. Affirmative Defenses 2 and 10 are STRICKEN.
c. Affirmative Defense 3 is STRICKEN in part. The phrase “and other applicable equitable doctrines” is stricken.
d. Affirmative Defense 7 is STRICKEN in part. Defendants shall clarify Affirmative Defense 7 to specify the corporate entity alleged responsible for particular acts of fraudulent misrepresentation.
2. Defendants shall have seven (7) days from the Court’s order on Plaintiffs’ Motion to Dismiss . . . (“Motion to Dismiss”) [ECF No. 41] to amend their Answer in
accordance with this Order.

AD 3 is simply modified to remove the vague "and other applicable equitable doctrines." I imagine the Jones Day response: Who cares? If I have time, I will review the arguments that were given.
AD 7 is subject to clarification. In other words, it may stand if clarified.
Motions to Dismiss or Strike are difficult. Any ambiguity as to fact will be interpreted in favor of the claimant. So if it is possible, from asserted evidence (which can include individual testimony claimed to be available), that the claim can be proven in court as valid or at least possibly valid, it will be kept. Out of nine requests, two were simply granted, two were granted in part (and the effect of that is not any substantial improvement from the Rossi point of view).
Annesser had spent many words and space to argue against the mention of the tax problem. His arguments were rejected. The tax claims stand.

A review of the ADs:

AD 1.: INTACT

Quote

Plaintiff Leonardo lacks standing to bring any claims against Defendants because
the assignment of the License Agreement from Leonardo Corporation, Inc., a New Hampshire
corporation (“Leonardo New Hampshire”), to Plaintiff Leonardo was invalid.

I was a little surprised by this being kept, because public record showed that a few days before Rossi v. Darden was filed, documents were filed with the State of Florida accomplishing a merger, which is, indeed, as Annesser strongly argued, distinct from an assignment. However, that does not necessarily resolve the issue, and shows terminal sloppiness on Rossi's part as to contractual requirements, like much of the case. The Order keeps this on the table as an issue of fact and possibly of law.

AD 2: STRIKEN

Quote

Plaintiffs have failed to state a claim upon which relief may be granted.

This was really redundant. As I read the matter, there is a possible claim, easily, for nonpayment of $89 million, assuming that the conditions for that are established. The IH argument is, more or less, that each of the claimed conditions is defective, but that becomes an issue of fact. Darden is not losing sleep over this being striken.

AD 3: KEPT (almost entirely).

Quote

3. Plaintiffs’ equitable claims are barred, in whole or in part, by the doctrines of
estoppel, waiver, laches, and other applicable equitable doctrines.

... and then there is much explanatory detail, all kept. Only the phrase "and other applicable equitable ddoctrines" was struck, presumably as vague. The core was kept.

AD 4: KEPT

Quote

Plaintiffs’ equitable claims are barred, in whole or in part, by reason of Plaintiffs’
unclean hands.

Little comment is needed. Darden has presented sufficient evidence and claims, to allow this to be understood.

AD 5: INTACT (not subject to the Motion)

Quote

Plaintiffs’ claims are barred, in whole or in part, as a result of Plaintiffs’ antecedent breaches of contract. For example, Plaintiffs breached the License Agreement, prior to the breaches of contract alleged by Plaintiffs in the Complaint, by, inter alia, improperly disclosing the E-Cat IP and the terms of the License Agreement to unauthorized third parties, failing to assign certain patents and/or patent applications to IPH, failing to inform or consult with Industrial Heat and IPH on the existence of certain patent applications and failing to fully prosecute patent applications related to the E-Cat IP, failing to report and pay taxes on payments/revenue made under the License Agreement, and failing to keep the original Leonardo entity active. See Counterclaims and Third-Party Claims ¶¶ 11, 39-46, 64-83, 93-133 infra.

It is not clear that some of these were "serious breaches," but, nevertheless, they exist and Darden may assert them. Rossi did not contest this Defense as to a matter of law. He may, of course, contest the substance of each issue in his Answer, which has not been filed. I think the Rossi Answer will be due within 21 days of the filing of the modified Darden Answer.

AD 6: KEPT

Quote

Plaintiffs’ claims are barred, in whole or in part, as a result of Plaintiffs’ unlawful
actions, including their conduct in violation of the Florida Deceptive and Unfair Trade Practices
Act.

Again, little comment is necessary. Do remember that the Judge keeping an Affirmative Defense does not indicate that the Judge agrees with it. It simply reflects that a possible defense has been established with sufficient clarity to allow it to be understood (and thus to allow clear response by the Plaintiff).

AD 7: CLARIFICATION ORDERED

Quote

Plaintiffs’ claims are barred, in whole or in part, as a result of Plaintiffs’ fraudulent misrepresentations.

I may review the arguments here. The Order merely requires Darden to clarify regarding specific actions with respect to corporate entities.

AD 8: INTACT (not subject to the Motion)

Quote

Plaintiffs’ claims are barred, in whole or in part, because any injury that Plaintiffs may have suffered was proximately caused or contributed to by the acts or omissions of Plaintiffs and/or third parties other than Defendants.

AD 9: KEPT

Quote

Plaintiffs’ fraud claim is barred because of the merger and integration provision in the License Agreement (Section 16.8) as well as the ratification provision in the First Amendment (Section 2).

The License Agreement contained a standard "Entire Agreement" clause, which would normally bar a claim that Rossi had been misled into thinking that the Agreement was with Cherokee Investment Partners, instead of a distinct entity, formed for the purpose of entering into the Agreement, Industrial Heat. Then, almost a year later, giving Rossi ample time to consult with counsel or otherwise discover the alleged fraud, the First Amendment reaffirmed the Agreement. This is one of the first aspects of this case to be noticed by an attorney reviewing it. The fraud claim, and including Cherokee as a defendant, was not dismissed by the Judge based on a possible misunderstanding of the Complaint, which was taken by the Judge to assert that Industrial Heat was a 'wholly-owned subsidiary" of Cherokee Partners (which would color the situation differently). In fact, IH had its own investors and there was merely a coincidence of some of them with investors and officers of Cherokee. Cherokee's reputation may indeed have been waved in front of Rossi to get his attention. However, perhaps, when signing a $100 million agreement, it should be read carefully and vetted by a lawyer, at least soon after signing. Rossi could have withdrawn per the Agreement, up until the Validation test and payment of $10 million, merely by returning the $1.5 million. Instead, he went ahead, collected the money, and only now asserts fraud.

This was so preposterous that my conclusion is that Rossi believed that IH would simply cave and settle.

AD 10: STRIKEN

Quote

Plaintiffs’ non-contract claims are barred, in whole or in part, because Plaintiffs’ alleged damages are too speculative.

It looks like the Judge is willing to allow Rossi to establish damages in discovery or otherwise in the case. This would be about matters like allegedly improper disclosure of IP to competitors, I forget what still stands at the moment. Not a serious loss for Darden.

Quote from oldguy

Can you give more of your "learned insight"?
if the ERV report cannot be entered into evidence without Penon then what would that do to Rossi's case?

I may have asserted in other places that the "ERV Report" cannot be entered into evidence without an attestation under oath of Penon. We do not know details of the Report; Exhibit 5 refers to interim reports, not the final one, which was issued a few days after Exhibit 5 was written. It is possible that as a "process document," the Report could be entered, based on information and belief, but without Penon's availability to testify as to how it was prepared and other aspects, the value could be low for Rossi's case.

Rossi's case faces much higher obstacles. The most fundamental, probably decisive, is the lack of a clear agreement on the start date for the "Guaranteed Performance Test." (either in writing by all the parties, as explicitly required in the Second Amendment, or an equivalent acceptance creating estoppel). It is highly unlikely that Darden knowingly agreed to the Doral installation as a "GPT." An inadvertent "acceptance" could have happened but would not, given the import, be adequate to establish estoppel. With no GPT, the entire Rossi case falls apart, it's doomed. So all the other issues are still there, and Darden will argue them, but this is backup, just in case.

One more comment about Penon. Rossi, over the years, seems to consistently not realize or show realization of how his behavior might appear to others. On his blog, Rossi praised Penon up and down as an old and reliable friend, the relationship preceded Rossi's insistence on Penon as the ERV for the Validation Test. Does Rossi understand that this lowers the credibility of the Penon reports?

Quote from Bob

Abd Ul-Rahman Lomax wrote:

Is this considered to be substantial proof that James A. Bass is a real person? That he has been located, identified and shown not to be under a false name?

Considered by whom? It is not clear that he has been "located." It is not necessarily clear that James A. Bass is his real name, though there is a strong indication that it is. This is what is clear: A law firm has filed a Motion to Dismiss, claiming to represent him. This is, legally, an "appearance." It will now be assumed that James A. Bass is an active party in the case, and no further attempt to serve process on him will be needed. All notices and motions will be filed with the attorney or firm representing him. He will be liable for judgments. he will be subject to discovery, legally binding questions that he must answer under penalty of perjury.

When the IH counter-complaint was filed, and there was a discovery hearing, in part designed to reveal the location of "James A. Bass," it was not clearly known if James A. Bass was a real name. At this point, that is moot. I'd judge that the name is likely real, but that this makes practically no difference to the case, except that a fake name would be a bit more suspicious, that's all. That dispute is over. A sane attorney will not create a deceptive filing. They risk their entire career if they do that.

Behind the scenes, my guess: Johnson agreed to cover his legal expenses, sharing counsel. So he agreed to allow this.

Quote from Abd Ul-Rahman Lomax

Quote from Bob: “Abd Ul-Rahman Lomax wrote:
Quote: “Documents 60 and 61 are procedural motions that, if nothing else, will provide more time for Answers from Fabiani, Johnson, James A. Bass, and the associated companies. In Document 62, the Judge,…

Thank you for your opinion.
I would have to say that if an attorney filed this, with James A. Bass listed, then he must be real. As you stated, I find it hard to believe that a lawyer would file paperwork
knowing that the person listed was not real. I would find it unlikely that he would file paperwork, even if the person was real, but under an assumed name. I must therefore conclude with some reasonability that James Bass is a real person and is his real name.

As you stated, it does not prove anything other than he may be a real entity. It does not testify to his qualifications or expertise. It also does not testify that he was an employee of the UK firm either.

Interesting though!

Quote from Bob

As you stated, I find it hard to believe that a lawyer would file paperwork
knowing that the person listed was not real. I would find it unlikely that he would file paperwork, even if the person was real, but under an assumed name. I must therefore conclude with some reasonability that James Bass is a real person and is his real name.

There are real people, but not actually "real names." There are names by various definitions. Someone met with IH and others, giving a business card for James A. Bass, representing that Bass was the Director of Engineering for J.M. Products, inc. No representation exists in the IH filings that Bass claimed to be working for another company, that I've noticed. I am not so sure about what an attorney would do if presented with a client who was known by a "fictitious name." The attorney represents the real person, and the name is only a way of referring to that person. I'm not going to dive into the intricacies of legal ethics here, but simply consider that it remains possible -- if not likely -- that James A. Bass is a "fictitious name" for a real person, who is the client. There must be some way to penetrate the veil if needed. I'd say the attorney should know real-life information, but ... criminal attorneys frequently represent people with fictitious names and a supposed "real name" may not be known.

Imagine one is convicted of a crime under a fictitious name. If one then shows that one's "real name" is different, will that allow the "real person" to go free? No. The name is actually not fundamental at all. The real person is. IH probably wants to know what the actual relationship of James A. Bass was to J.M. Products, what were the terms of his employment, and the real issue: what was the business of J.M. Products? The IH theory is that J.M Products was a sham, with no products, a device for encouraging IH to allow the Plant to be installed in Doral, and then to create an appearance of a sale of power. After all, if an "independent company" is willing to pay up to $30,000 per month for 0.75 - 1.0 MW of heat, 24/7, it must be real, right?

IH doesn't really care if the name is "real" or not. Their major goal was to make him available for discovery. That's been accomplished -- assuming he does not disappear (in which case the lawyer would inform the court that they are unable to contact the client.)