Pilepro, LLC v. Chang
| Decision Date | 20 January 2016 |
| Docket Number | CAUSE NO.: A-12-CA-00829-SS |
| Citation | 152 F.Supp.3d 659 |
| Parties | Pilepro, LLC, Pilepro Sales Corp., Blue Emerald, Inc., Pilepro Steel, LP, Roberto R. Wendt, Plaintiffs, v. Humphrey Chang, Richard Heindl, Matthias Weigel, Steelwall, Gmbh, Defendants. |
| Court | U.S. District Court — Western District of Texas |
R. James George, Jr., George, Brothers, Kincaid & Horton, LLP, Andrew S. Brown, Rebecca Ashley Applewhite, Brown Law Firm, PLLC, Austin, TX, for Plaintiffs.
Andrew C. Callari, Callari & Summers, George Moschopoulos, The Law Office of George Moschopoulos, Dana Point, CA, Douglass Dodson Hearne, Jr., Law Office of Douglass D. Hearne, Jr., Austin, TX, for Defendants.
BE IT REMEMBERED on the 20th, 21st, 22nd, and 26th days of October 2015, the Court held a bench trial in the above-style cause, and the parties appeared in person and through counsel. During trial, the Court heard testimony from the following witnesses: Roberto Wendt, Matthias Weigel, Richard Heindl, Wells Wakefield, Humphrey Chang, Markus Von Fuchs, Urs Saal, Michael John Feifarek, Saul Solomon, Dwight Williams (via deposition), Roxi Phipps, Kenneth Huff, Ian Morgan, Martin Doudoroff, Matthew John Feifarek, and Robert Youngman (via deposition). Having considered the evidence and testimony presented at trial, the arguments of counsel, the parties' briefs, and the governing law, the Court enters the following findings of fact and conclusions of law.
This is a tale of two men, Roberto Wendt and Richard Heindl, who started a business together: Wendt with a talent for promoting and selling and Heindl with access to valuable patents necessary for operating a successful steel sheet pile connector business. They established PilePro LLC, a limited liability company in name only. The two men disregarded corporate formalities in favor of operating PilePro LLC as a partnership, with each accessing the company's assets for their own use and benefit. As their business grew and became profitable, the two got along well. However, both became greedy and through the use of Chang, tried to secure the business for themselves by ousting the other. The result was litigation in the United States and in Europe which has continued for years and is still proceeding in both forums.
In this acerbic battle between once-close business partners, Wendt and Heindl have involved countless others and have wasted immeasurable time and the profits of what appears to have been a successful business endeavor, all because of each other's greed, distrust, and dislike of the other. The net result is neither could prove credible or specific damages resulting from the allegedly fraudulent transfer of patents from one company owned by Wendt and Heindl to another company owned by Wendt and Heindl. The tortured history of Wendt and Heindl's relationship should serve as a cautionary tale for those seeking economic success without concern for the greed which follows in its wake.
Defendants' counterclaims are largely founded on the disputed ownership of PilePro LLC.1 The PilePro saga begins with a man named Georg Wall, who, in the 1990s, invented a series of interlocking devices to connect steel sheet pile without welding (Modular Connectors). To protect his inventions, Wall obtained patents in Germany, the United States, and other countries. Wall produced, marketed, and sold these Modular Connectors through his steel sheet pile business, I.S. Handels, GmbH (“ISH”), a German corporation operating in Munich, Germany. Wall was the sole stockholder in ISH.
Richard Heindl, a defendant and counter-plaintiff in the present lawsuit, is Wall's nephew. Although Heindl is not an engineer, “Uncle Georg” hired him as a “Director of Research, Development, and Technical Standards” at ISH. Heindl helped ISH obtain financing for its continued production of Modular Connectors and establish a distribution network with companies outside of Germany.
In 2002, while seeking to expand ISH's distribution network in the United States, Heindl met Plaintiff Roberto Wendt.
Thereafter, Wendt was hired to serve as ISH's United States distribution representative. According to Wendt, PilePro LLC was formed for the purpose of marketing and selling ISH's Modular Connectors in the United States. At some point after PilePro LLC's formation, Heindl told Wendt that Wall—whose health was failing—wanted to sell ISH's business assets, including the registered patents, pending patent applications, trademarks, production rights, and other tangible and intangible assets relating to the steel sheet pile connector business he operated through ISH. In order to purchase these assets, Wendt obtained an investment from Robert Youngman individually and as trustee of two trusts in the amount of $1,500,000. He also obtained $500,000 from Mike Feifarek. In exchange, Youngman and Feifarek received 4% ownership interest in PilePro LLC per $500,000 of their capital investments.
On October 27, 2003, PilePro LLC purchased the intellectual property rights for the Modular Connectors from Wall.2 Soon after, an amendment to the PilePro LLC Operating Agreement was signed, which came into effect on October 31, 2003 (2003 Amendment). The 2003 Amendment was signed by Wendt, who represented a 69% ownership interest in PilePro LLC as the President of PilePro Inc., and Mike Feifarek, who represented a 4% ownership interest in PilePro LLC. Collectively, PilePro Inc. and Feifarek comprised 73% of the ownership interests in PilePro LLC. The 2003 Amendment states:
At all times there shall be only one (1) Managing Member. The Managing Member shall use all reasonable efforts to notify all Member(s) of its actions on behalf of the Company as often as reasonably practicable. PilePro Inc. is hereby appointed as the Managing Member of the Company. For as long as this Agreement is in effect, PilePro Inc. shall be a Delaware corporation that shall have up to two (2) stockholders: Richard Heindl (or a company or individual of his choosing) and Roberto Redondo Wendt. Each of the stockholders shall enter into an irrevocable voting agreement to elect the other as a director of PilePro Inc. and to cause Richard Heindl to be appointed Chief Executive Officer and Roberto Redondo Wendt to be appointed President of the Company.
Defs.' Trial Ex. 501 (emphasis added).
Per § 501 of the 2003 Amendment, Heindl and Wendt were equal shareholders in PilePro Inc. and both Heindl and Wendt served as directors of the corporation. Accordingly, Schedule B of the 2003 Amendment lists the ownership interests in PilePro LLC3 as follows:
PilePro Inc.
69%
Robert Youngman
12%
Ian Morgan
8%
Dalcemy Inc.
5%
Mike Feifarek
4%
Lee Woloskv
2%
Sometime in 2004,4 another amendment to the PilePro LLC's Operating Agreement was signed by Wendt on behalf of PilePro Inc., Youngman, and Mike Feifarek (2004 Amendment). Defs.' Trial Ex. 502. Collectively, the signees comprised 85% of the ownership interests in PilePro LLC, which represented the required vote of 80% ownership interest necessary to amend the Operating Agreement. Id. at 2. Section 501 of the 2004 Amendment articulated Heindl and Wendt's ownership interest in PilePro Inc. slightly differently:
For so long as this Agreement is in effect, PilePro Inc. shall be a Delaware corporation that shall be majority controlled by: Richard Heindl (or a company or individual of his choosing) and Roberto Redondo Wendt.
Defs.' Trial Ex. 501 (emphasis added). Because there is no evidence that anyone other than Heindl and Wendt has ever been a stockholder in PilePro Inc., the majority ownership interest in PilePro Inc. remained, in effect, unchanged. Schedule B of the 2004 Amendment did reflect important changes to the remaining 31% membership interest in PilePro LLC:
PilePro Inc.
69%
Robert Youngman
4%
Youngman Trust 1
4%
Youngman Trust 2
4%
Ian Morgan
8%
Dalcemy Inc.
5%
Mike Feifarek
4%
Slydee Corp.
2%
Defs.' Trial Ex. 502. The Court finds the 2004 Amendment is the presently controlling Operating Agreement of PilePro LLC. Moreover, Schedule B of the 2004 Amendment reflects a current and accurate representation of the remaining 31% membership interest in PilePro LLC.
Sometime in 2006, PilePro Inc.'s 69% membership interest in PilePro LLC was transferred to Wendt. The parties purportedly agreed to this transfer for the sole purpose of permitting Heindl to form Steelcom Limited (Steelcom), a British limited liability company, after which Wendt was to transfer a 34.5% membership interest in PilePro LLC to Steelcom. Although there is no evidence of a written agreement by which Wendt was to transfer half of his membership interest in PilePro LLC to Steelcom, Heindl has produced evidence that Steelcom paid Wendt $4,579 in cash in February 2007 “for [ ] 34.5% ownership shares in PilePro LLC.” Defs.' Trial Ex. 601. Moreover, an email from PilePro LLC's Chief Financial Officer (CFO), Humphrey Chang, to Wendt establishes that Steelcom held a 34.5% membership interest in PilePro LLC. Defs.' Trial Ex. 516. Indeed, Wendt elicited this information from Chang and forwarded it to Heindl in response to Heindl's inquiry as to his ownership interest in PilePro Sales Corp. Id. After Chang's email, $280,000 was transferred from PilePro LLC to Steelcom. Defs.' Trial Ex. 560. In addition, a Managing Member's resolution, dated July 1, 2008 and electronically signed by Wendt, explained that Wendt was transferring half of his ownership shares in PilePro LLC, representing 34.5% of PilePro LLC, to Steelcom, and that Steelcom's capital account balance reflected the amount of cash listed on the receipt. Defs.' Trial Ex. 602. Furthermore, Wendt signed a Bill of Sale before a South Dakota notary expressly confirming his sale to Steelcom of a 34.5% membership interest in PilePro LLC. Defs.' Trial Ex. 603. Wendt does not dispute that he signed the Bill of Sale before the notary.
In light of the overwhelming evidence...
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