Enslein v. Di Mase, Case No. 16-09020-CV-W-ODS

Decision Date17 June 2019
Docket NumberCase No. 16-09020-CV-W-ODS
PartiesJERALD S. ENSLEIN, in his capacity as Chapter 7 Trustee for Xurex, Inc., Plaintiff, v. GIACOMO E. DI MASE, et al., Defendants.
CourtU.S. District Court — Western District of Missouri
ORDER AND OPINION ON THE PARTIES' DAUBERT MOTIONS AND THE PARTIES' DISPOSITIVE MOTIONS

Pending are two motions to strike, exclude, or limit expert opinion testimony (Docs. #348 and 356) and eleven motions for summary judgment (Docs. #347, 350, 358, 359, 360, 361, 362, 363, 365, 366, and 367). As examined in section II, the parties' motions to strike, exclude, or limit expert opinion testimony are denied. As discussed in section III, the parties' motions for summary judgment are granted in part and denied in part.

TABLE OF CONTENTS

I. BACKGROUND ......................................................................................... 1

A. The Early Years of Xurex .......................................................................... 1
(1) Agreement with DuraSeal Pipe ............................................................ 1
(2) Initial Communications with the Di Mases and Jensvold ............................ 1
(3) Loven's Audit ................................................................................... 2
B. The 1/13/10 Agreement ........................................................................... 2
C. Formation of DuraSeal Holdings ................................................................ 3
D. The 12/31/10 Agreement and Acquisition of DuraSeal Pipe ............................. 4
E. Events Occurring Between January 2011 and November 2011 ........................ 6
(1) Negotiations Between DuraSeal Holdings and Xurex ................................ 6
(2) Reports from John Lowry .................................................................... 6
(3) Proxy Contest and Subsequent Lawsuit ................................................. 7
F. Events and Communications Immediately Preceding the 1/11/12 Amendment ..... 9
G. The 1/11/12 Amendment ........................................................................ 11
H. HDI, Xurex Stock Issuance, and Changes to the Xurex Board ......................... 12
I. Another Delaware Lawsuit ...................................................................... 13
J. DuraSeal Pipe's Uneconomic Condition Notice & Xurex's Bankruptcy Filing ....... 13
K. This Lawsuit ........................................................................................ 15

II. MOTIONS TO STRIKE, EXCLUDE, OR LIMIT EXPERT OPINION TESTIMONY .... 16

A. Standard ............................................................................................ 16
B. Michele Pavone, Ph.D ........................................................................... 17
(1) Relevance ..................................................................................... 17
(2) Reliability ....................................................................................... 19
C. Robert F. Reilly ..................................................................................... 20
(1) Limits on Lost Profits ........................................................................ 21
(2) Additional Minimum Purchase Obligations ............................................ 24
(3) Purchases and Penalties .................................................................. 26
(4) Xurex's Business Reality .................................................................. 27
(5) Tort Claim Damages ........................................................................ 28

III. MOTIONS FOR SUMMARY JUDGMENT ....................................................... 29

A. Standard ............................................................................................ 30
B. Motions for Summary Judgment on Plaintiff's Claims .................................... 30
(1) Breach of Contract (Counts II and III) ................................................... 30
(2) Breach of Implied Covenant of Good Faith and Fair Dealing (Count IV) ......... 31
(3) Misappropriation of Trade Secrets (Count V) .......................................... 35
(4) Breach of Fiduciary Duty (Count VII) ..................................................... 35
(a) Standard of Review ...................................................................... 36
(b) Substantive Claims ...................................................................... 38
(c) Immunity from Damages ............................................................... 38
(5) Civil Conspiracy (Count VI) ................................................................. 39
(6) Aiding and Abetting Breach of Fiduciary Duty (Count VIII) ......................... 41
(a) Choice of Law ............................................................................. 41
(b) Internal Affairs Doctrine ................................................................. 42
(c) Most Significant Relationship ......................................................... 45
(7) Declaratory Judgments (Counts XIII and XIV) ......................................... 46
C. Plaintiff's Motion for Summary Judgment on Affirmative Defenses .................. 46
(1) Prior Material Breach by Xurex ............................................................ 47
(2) Commercial Frustration or Impossibility of Performance ........................... 47
(3) Ratification ..................................................................................... 47
(4) Lack of Consideration and/or Failure of Consideration .............................. 48
(5) Failure to Mitigate Damages ............................................................... 48
(6) Fraud in the Inducement .................................................................... 48
D. Plaintiff's Request for Ruling as a Matter of Law .......................................... 49
E. Plaintiff's Summary Judgment Statement of Uncontroverted Facts .................. 49
(1) Failure to Cite Materials in the Record ................................................... 49
(2) Reliance on Inadmissible Evidence ...................................................... 50
(3) References to Exhibits ...................................................................... 50
(4) Rose's Responses to Plaintiff's Statement of Uncontroverted Facts ............ 51
F. McKeon's Motion for Summary Judgment .................................................. 52
(1) Attempts to Incorporate Facts and Arguments ........................................ 52
(2) Plaintiff's Counter-Statement of Uncontroverted Material Facts .................. 53
(3) Responses to Counter-Statement of Uncontroverted Material Facts ............ 53
G. Rose's Motion for Summary Judgment ...................................................... 54
(1) Failure to Abide by Federal and Local Rules ........................................... 54
(2) Exhibit 96 ....................................................................................... 54
(3) Arguments Related to Plaintiff's Claims ................................................ 55(4) Rose's Affirmative Defenses ............................................................... 56
(5) Failure to State a Claim Argument ........................................................ 57
(6) Plaintiff's Responses to Rose's Motion for Summary Judgment .................. 57
H. Olson's Motion for Summary Judgment ..................................................... 58
(1) Attempts to Incorporate Facts and Arguments ........................................ 58
(2) Plaintiff's Responses to Olson's Statement of Facts ................................. 59
(3) Plaintiff's Counter-Statement of Additional Uncontroverted Material Facts .... 59
I. Johnston's Motion for Summary Judgment .................................................. 60
(1) Plaintiff's Responses to Johnston's Statement of Facts ............................. 60
(2) Plaintiff's Counter-Statement of Additional Uncontroverted Material Facts .... 60
J. HDI's Motion for Summary Judgment ........................................................ 61
(1) Parties' Facts and Counter-Facts ......................................................... 61
(2) Personal Jurisdiction ........................... 61
(3) Liability for Alleged Tortious Conduct of Subsidiary .................................. 65

IV. PARTIES' SEALED EXHIBITS .................................................................... 65

V. CONCLUSION ......................................................................................... 66

A. Summary of the Court's Rulings ............................................................... 66
B. Claims to Be Tried ................................................................................. 67
I. BACKGROUND

The Court will provide information about the entities and individuals in this lawsuit as well as supply some context for the events leading up to the filing of this lawsuit, the parties' pending motions, and the Court's consideration of those motions. This background section is not meant to be comprehensive. Moreover, nothing in this section should be construed as a finding of fact by the Court. Unless otherwise noted, the information contained in this section is either undisputed by the parties or extracted from exhibits accompanying the parties' summary judgment filings.

A. The Early Years of Xurex

Founded in 2005, Xurex, Inc. ("Xurex") is a Delaware corporation with its principal place of business in Jackson County, Missouri. At inception, Xurex engaged in the development and sale of protective coatings derived from nano-technology invented by Bo Gimvang. Since its founding, Xurex struggled to commercialize Gimvang's technology, and to date, has not developed a commercial product of its own.

(1) Agreement with DuraSeal Pipe

In 2008, Defendant Joseph Johnston discovered a unique method of applying Xurex coatings to prevent corrosion, reduce abrasion, and extend the life of "down-hole" pumps...

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