Advanced Optics Electronics Inc. v. Robins

• Decision Date: 16 December 2010
• Docket Number: No. CIV 07–0855 JB/GBW.,CIV 07–0855 JB/GBW.
• Citation: 769 F.Supp.2d 1285
• Parties: ADVANCED OPTICS ELECTRONICS, INC., and Biomoda, Inc., Plaintiffs,v.Leslie S. ROBINS, Alvin D. Robins, and John W. Kearns, Defendants.andLeslie S. Robins, Counterclaimant,v.Biomoda, Inc., Counter–Defendant.
• Court: U.S. District Court — District of New Mexico

769 F.Supp.2d 1285

ADVANCED OPTICS ELECTRONICS, INC., and Biomoda, Inc., Plaintiffs,

v.Leslie S. ROBINS, Alvin D. Robins, and John W. Kearns, Defendants.andLeslie S. Robins, Counterclaimant,

v.Biomoda, Inc., Counter–Defendant.

No. CIV 07–0855 JB/GBW.

United States District Court, D. New Mexico.

Dec. 16, 2010.

Phil Krehbiel, Albuquerque, NM, for Plaintiff Advanced Optics Electronics, Inc.Spencer Reid, Thomas C. Bird, Christina Muscarella Gooch Keleher & McLeod, Albuquerque, NM, for Plaintiff and Counter–Defendant Biomoda, Inc.Sam Bregman, Eric Loman, The Bregman Law Firm, PC, Albuquerque, NM, for Defendant and Counterclaimant Leslie S. Robins.John W. Kearns, Coral Gables, FL, Defendant pro se.Alvin D. Robins, La Porte, TX, Defendant pro se.

MEMORANDUM OPINION AND ORDER

JAMES O. BROWNING, District Judge.

THIS MATTER comes before the Court on Plaintiff Biomoda, Inc.'s Motion for Summary Judgment on Compensatory Damages Against Defendants John W. Kearns and Alvin D. Robins, filed November 25, 2009 (Doc. 132) (“Motion”). The Court held hearings on August 4, 2010 and November 12, 2010. The primary issues are: (i) whether the Court should treat pro se Defendant Alvin D. Robins' Response by Alvin Robins to Biomoda, Inc.'s Motion for Summary Judgment on Biomoda, Inc.'s First Amended Complaint, filed July 9, 2010 (Doc. 146) (“Response”), as a motion under the Federal Rule of Civil Procedure to set aside the Court's Default Judgment as to Liability Against Defendants Alvin D. Robins and John W. Kearns, filed December 22, 2008 (Doc. 108) (“Default Judgment”), granting Biomoda default judgment against A. Robins for liability; (ii) whether, if the Court treats A. Robins' Response as a motion to set aside the Default Judgment, the Court should grant the request to set aside the Default Judgment; and (iii) whether, if the Court does not set aside the Default Judgment, the Court should enter summary judgment for Biomoda in the amount of $694,316.00 as compensatory damages and post-judgment interest pursuant to 28 U.S.C. § 1961(a). The Court denies A. Robins' request that the Court vacate its Default Judgment, and grants Biomoda's Motion in part, awarding compensatory damages in the amount of $35,000.00 and post-judgment interest.

FACTUAL BACKGROUND

A. Robins served without compensation as a representative of Biomoda on the express request and with the approval of Biomoda's president, John Cousins. See Response ¶ 5, at 2–3; ¹ Reply in Support of Motion for Summary Judgment on Compensatory Damages at 5, filed July 29, 2010 (Doc. 147) (“Reply”) (not controverting this fact). Specifically, A. Robins was an agent to negotiate for a period of one year with Los Alamos National Laboratories (“LANL”). See Response ¶ 5, at 2–3 (setting forth this fact); Reply at 5 (not controverting this fact). A. Robins states that Cousins worked “arm in arm” with him, encouraging and requesting A. Robins to provide services on Biomoda's behalf to save Biomoda from losing all its then patented technology under license to LANL. Response ¶ 6, at 3 (setting forth this fact). See Reply at 5 (not controverting this fact).

A. Robins and Cousins met with multiple representatives of LANL at LANL's offices in Los Alamos, New Mexico, in negotiations that A. Robins organized and chaired. See Response ¶ 7, at 3 (setting forth this fact); Reply at 5 (not controverting this fact). A. Robins states that these negotiations resulted in the successful renegotiation of Biomoda's license with LANL, saving Biomoda upwards of $786,000.00 at that time. See Response ¶ 7, at 3 (setting forth this fact); Reply at 5 (not controverting this fact).

1. Facts Relating to Biomoda's Claims Against A. Robins.

In 2003 and 2005, in an effort to raise funds, Biomoda filed and amended a form SB–2 registration statement with the Security Exchange Commission (“SEC”) seeking to offer a total of 6,000,000 shares of stock to the public (“SB–2 offering”). See First Amended Complaint for Common Law Fraud, Violation of Federal and New Mexico Securities Laws, Conversion, Breach of Fiduciary Duty, and Racketeering ¶ 13, at 4, filed October 16, 2008 (Doc. 92) (“FAC”). On February 11, 2005, the SEC declared effective the combined total SB–2 offering of 6,000,000 shares at $3.00 per share. See FAC ¶ 13, at 4. No sales of stock took place pursuant to these registered offerings. See FAC ¶ 13, at 4. Biomoda later decided to initiate quotations of its common stock on the Over the Counter Bulletin Board, requiring it to terminate the SB–2 offering, which Biomoda did on or about July 19, 2006. See FAC ¶ 14, at 4.

The First Amended Complaint states that the Defendants flooded the market with Biomoda shares through: (i) fraudulent legal opinions that Defendant John W. Kearns wrote, which misrepresented the status of Biomoda's terminated SB–2 offering; and (ii) through the sale of Biomoda's shares that Advanced Optics Electronics, Inc. (“ADOT”) transferred at least in part through Beaver Information Technology (“BIT”), a “front” registered to A. Robins address. See FAC ¶¶ 16–23, 35–37, at 5–7. In the process of flooding the market with Biomoda shares, the Defendants allegedly caused the transfer of millions of unrestricted shares of Biomoda stock for no consideration or for prices well below market. See FAC ¶¶ 17–23, 35–37, at 5–7. The FAC also identifies Defendant Leslie Robins' alleged misappropriation of Biomoda's funds and property, including its stock. These alleged misappropriations include $35,000.00 withdrawn unlawfully from Biomoda's bank account, and the transfer of unrestricted Biomoda shares to family members and friends in exchange for sham “services.” FAC ¶¶ 21–25, 46, at 7–8, 15. The FAC states that all of the unlawful acts committed by each of the Defendants were undertaken pursuant to the conspiracy in which each of them was a co-conspirator. See FAC ¶ 73, at 21–22.

2. Facts Relating to the Damages that Biomoda Allegedly Sustained.

The parties present sworn testimony offering conflicting accounts of the damages Biomoda sustained. Biomoda states that its business records demonstrate that 1,768,000 shares of its unrestricted stock were issued as a result of the fraudulent misrepresentations that Kearns made concerning the status of its terminated SB–2 offering. See Affidavit of John Cousins ¶ 4, at 2, filed November 11, 2009 (Doc. 132–1); FAC ¶ 17, at 5–6. L. Robins then allegedly transferred these shares, nominally on behalf of Biomoda, to himself, BIT, Kearns, and other parties for little or no consideration. See FAC ¶¶ 21–22, at 7. These persons then immediately resold the stock to the public at a gain to themselves, but at prices allegedly well below the market value of the stock immediately preceding the re-sales. See FAC ¶ 23, at 7. Such sales allegedly had the effect of driving the Biomoda shares market value sharply downward. See FAC ¶ 23, at 7.

Thus, Biomoda contends that, in exchange for the 1,768,000 unrestricted shares issued and transferred in this fashion as a result of Kearns' misrepresentations about the SB–2 offering, it was paid a total of $76,666.66. See Cousins Aff. ¶ 4, at 2; Motion ¶ 8, at 3. See also FAC ¶ 17, at 6 (“Leslie Robins caused the transfer agent to issue approximately 1.768 million shares, which [L.] Robins caused to be sold or otherwise distributed.”). Had Biomoda received market price for those shares at the time they were issued, Biomoda would have received $362,860.00 See Cousins Aff. ¶ 4, at 2; Motion ¶ 8, at 3. Biomoda contends that the damage caused by the inadequate consideration received for the fraudulently issued shares was therefore $286,193.00. See Cousins Aff. ¶ 4, at 2; Motion ¶ 8, at 3. Biomoda's damage calculation does not attempt to account for the harm to the market value of Biomoda's shares or the harm to Biomoda's ability to borrow at favorable rates, resulting from the “flooding” of the market with Biomoda shares that the misrepresentation of the status of the SB–2 offering caused. Cousins Aff. ¶ 9, at 4; Motion ¶ 8, at 3–4.

Biomoda also contends that its business records demonstrate that, on March 3, 2005, BIT received 100,000 unrestricted shares of Biomoda stock, but paid no consideration for those shares. See Cousins Aff. ¶ 5, at 2; Motion ¶ 9, at 4. On the date the shares were issued to BIT, Biomoda's shares were worth $2.50 per share. See Cousins Aff. ¶ 5, at 2; Motion ¶ 9, at 4. The difference between the value of the shares issued to BIT and the consideration Biomoda contends it received is $250,000.00. See Cousins Aff. ¶ 5, at 2; Motion ¶ 9, at 4.

Biomoda further contends that its business records demonstrate that, in May and June of 2007, BIT sold 613,260 unrestricted shares of Biomoda stock to Hope Capital, Inc. See Cousins Aff. ¶ 6, at 3; FAC ¶ 25, at 11; Motion ¶ 10, at 4. Biomoda asserts that BIT had obtained these shares from L. Robins, nominally acting on Biomoda's behalf, for no consideration. See Cousins Aff. ¶ 6, at 3; Motion ¶ 10, at 4. Biomoda received $110,000.00 in payment for these shares, but their market value at the time of the sale to Hope was $233,114.00. See Cousins Aff. ¶ 6, at 3; FAC ¶ 25, at 11 (“Over 600,000 of the subject shares were transferred by Leslie Robins to Hope Capital for approximately $110,000 in May and June 2007, effectively at approximately $0.18 per share”); Motion ¶ 10, at 4. Biomoda calculates that the difference between the value of the shares and the consideration Biomoda received is therefore $123,114.00. See Cousins Aff. ¶ 6, at 3; Motion ¶ 10, at 4.

A. Robins asserts that Biomoda received “well in excess of $700,000 cash from the sale of all the shares” for which Biomoda seeks damages in its Motion. Response ¶ 8(c), at 3. A. Robins further contends that “the shares of BMOD were worthless as to any cash value and without any value at the time cited by Cousins in his affidavit since they were all restricted shares carrying a legend that it was illegal for them to...