Helman v. EPL Prolong, Inc.

• Decision Date: 30 October 2000
• Docket Number: No. 98 CO 83, No. 99 CO 5.
• Citation: 743 NE 2d 484,139 Ohio App.3d 231
• Parties: HELMAN et al., Appellants, v. EPL PROLONG, INC., d.b.a. Prolong International, d.b.a. Prolong Group, et al., Appellees.
• Court: D.C. Court of Appeals

139 Ohio App.3d 231

743 NE 2d 484

HELMAN et al., Appellants, v. EPL PROLONG, INC., d.b.a. Prolong International, d.b.a. Prolong Group, et al., Appellees.

Nos. and .

Court of Appeals of Ohio, Seventh District, Columbiana County.

Decided October 30, 2000.

Timothy A. Shimko & Associates, Timothy A. Shimko and James S. Gemelas, for appellants Francis D. Helman et al.

Buckingham, Doolittle & Burroughs, LLP, Mark J. Skakun and Walter A. Lucas, for appellees EPL Prolong, Inc., Prolong Super Lubricants, Inc., Elton Alderman, Thomas Billstein, Thomas Kubota, and Ramon Pratt.

James P. Collins, Jr., for appellee EPL Prolong, Inc. WAITE, Judge.

This case originated as a complex multiparty complaint in the Court of Common Pleas of Columbiana County involving ninety-four plaintiffs and fifteen defendants. The claims arose out of appellants' purchase of corporate stock subscriptions in Prolong Industries, Inc., during the years 1985-1987. The trial court dismissed appellants' claims of fraud, breach of fiduciary duty, and breach of contract because they were barred by a variety of statutes of limitations. This timely appeal arises from a December 4, 1998 judgment entry that denied appellants' motion to reconsider the dismissal of counts one, two, and three of their complaint and that also denied appellants' motion to reconsider its denial of a prior motion seeking to amend the complaint. Only six of the fifteen defendants-appellees have filed arguments on appeal. These six appellees are EPL Prolong, Inc., Prolong Super Lubricants, Inc., Elton Alderman, Thomas Billstein, Thomas Kubota and Ramon Pratt.

With respect to appellees who were granted a Civ.R. 12(B)(6) motion to dismiss, this court must accept the allegations in appellants' complaint to be true in our review of this matter. Mitchell v. Lawson Milk Co. (1988), 40 Ohio St.3d 190, 192, 532 N.E.2d 753, 755. The factual allegations in the complaint as well as all reasonable inferences to be derived therefrom must be taken as true when addressing a motion to dismiss pursuant to Civ.R. 12(B)(6). Vail v. Plain Dealer Publishing Co. (1995), 72 Ohio St.3d 279, 280, 649 N.E.2d 182 184. The following recitation bears this axiom in mind.

Appellants filed an initial complaint and four amended complaints in this matter. The third amended complaint was withdrawn by appellants on June 18, 1998, and appellants' request to amend the complaint for the fourth time was denied. The record reflects, then, that the Second Amended Complaint ("Second Amended Complaint"), filed on May 7, 1998, directed the litigation and is the dispositive complaint in this appeal.

Appellants' Second Amended Complaint alleges that in 1981, defendants Ronald and Clifford Sloan owned a Canadian company that produced and sold an automotive lubricant called "Prolong." In 1984, the Sloans created four Canadian companies to control the production and sale of Prolong. These four companies were collectively known as the "Prolong Group." These companies were Prolong Industries, Inc., Multilevel Laboratories, a.k.a. Multilevel Labs, Prolong Distribution of Canada Limited, and Prolong Technology.

Appellants allege that "Prolong" was marketed and sold through a multilevel pyramid marketing system. In July 1985, the Sloans began soliciting for new distributors in Ohio. Another company, Prolong Technology of America, Inc., was set up to transact business in Ohio. It opened a regional office in Boardman, Ohio.

In the fall of 1985, the Sloans offered the Ohio distributors of "Prolong" the opportunity to purchase subscriptions for shares of stock in the Prolong Group of companies. The Second Amended Complaint refers to these shares as "preprimary" shares.

Appellants' allege that Ronald Sloan assured the prospective shareholders that the Prolong Group would be issuing publicly traded stock within one year. Ronald Sloan also assured subscribers that any shares purchased prior to a public stock offering would be delivered after the company became a publicly traded company. All appellants subscribed to preprimary shares in Prolong Industries, Inc. between 1985 and 1987 at a price between $.375 and $.65 per share. Each appellant signed identical one-page subscription agreements that noted the price and number of shares being purchased. The agreements did not specify the type or quality of stock being purchased, the rights attached to ownership of the stock, or the expected delivery date of the stock certificates. .

In 1987 Prolong Industries, Inc. sent letters to subscribers of "preprimary" shares assuring them that the company intended that those subscribers would eventually hold stock in a publicly traded company.

Appellants claim that in 1988 two new companies were formed to take control of the Prolong Group of companies. These new companies were EPL Prolong, Inc. and Prolong Super Lubricants, Inc. The assets and liabilities of the Prolong Group were transferred to Prolong Super Lubricants, Inc., except for its patents, which were transferred to EPL Prolong, Inc.

Appellants assert that in the fall of 1993, appellee Elton Alderman, president of Prolong Super Lubricants, Inc., met with "preprimary" shareholders at Timberlanes Restaurant in Salem, Ohio. Mr. Alderman told the shareholders that they would soon be given shares in a publicly traded company if they would not join a lawsuit pending in Mahoning County, Ohio, involving other holders of "preprimary" shares.

All of the outstanding stock of Prolong Super Lubricants, Inc. was transferred in 1995 to yet another company, Prolong International Corp., a Nevada corporation originally organized in 1981 under the name Giguere Industries, Inc. Giguere Industries, Inc. was essentially a nonfunctioning shell entity, but its stock could be publicly traded. Prolong Super Lubricants, Inc. became a wholly owned subsidiary of the newly renamed Prolong International Co.

Appellants' Second Amended Complaint alleges that Prolong International Corp. stock started to be publicly traded in 1996. Appellants claim that they have never received any shares in Prolong International Corp. or any other publicly traded company. Appellants claim that they were never made aware of the asset transfers between the various Prolong companies, although they were aware of the corporate restructuring. Appellants claim that defendants Elton Alderman, Edwin Auld, Raymond Pratt, Tom Kubota, Ronald Sloan, and Clifford Sloan were officers, directors, and shareholders of the various Prolong companies at all relevant times at issue in this case.

On April 8, 1997, appellants filed their original complaint ("Original Complaint") in the Court of Common Pleas of Columbiana County. The complaint listed ninety-four plaintiffs and fifteen defendants and contained twelve counts. On May 14, 1997, the case was removed to the Federal District Court of the Northern District of Ohio in Youngstown. On September 29, 1997, appellants amended their complaint ("First Amended Complaint") in the district court. The First Amended Complaint was not made a part of the record of this appeal, although it appears from the record that it contained thirteen counts.

On November 25, 1997, the district court remanded the case to the Columbiana County Court of Common Pleas.

On January 14, 1998, appellees filed a motion to dismiss all but count two of the First Amended Complaint. The motion was granted in part on February 24, 1998. The court granted the motion due to the expiration of statutes of limitations contained in R.C. 1707.43, 2305.09, 1334.10(C), and 1336.09. The court permitted appellants to maintain an action based on a fifteen-year contract statute of limitations, as well as an action based on promises made by the appellees at Timberlanes Restaurant in 1993.

On May 7, 1998, appellants filed their Second Amended Complaint containing five counts. On June 5, 1998, appellees filed a Civ.R. 12(B)(6) motion to dismiss counts one, two, three, and five of the Second Amended Complaint due to the expiration of applicable statutes of limitations.

While appellees' motion to dismiss was still pending, appellants filed a third motion to amend the complaint on June 11, 1998, and attached the amended complaint to the motion. On June 11, 1998, the court granted appellants' motion as their final opportunity to amend their complaint. On June 18, 1998, appellants filed a motion to withdraw the June 11, 1998 complaint. The motion was granted on July 2, 1998.

On July 14, 1998, the court issued its ruling on appellees' June 5, 1998 motion to dismiss. Counts one (breach of contract), two (fraudulent conveyance of corporate assets), and three (breach of fiduciary duties) were dismissed. Counts four (breach of a 1993 novation contract) and five (fraud in the inducement) were left unaffected by the court's ruling. Also on July 14, 1998, the court ordered that all discovery be completed by September 30, 1998.

On September 24, 1998, one week before the close of discovery, appellants filed a fourth motion to amend the complaint, with the amended complaint attached to the motion. This fourth amended complaint contained eight counts, three of which had twice previously been dismissed by the court. On October 16, 1998, the court denied appellants' motion to amend the complaint.

On October 23, 1998, appellees filed a motion to dismiss a group of thirty-one (31) plaintiffs from the case due to their failure to attend scheduled depositions. That same day, appellees filed a motion for summary judgment against five groups of plaintiffs, including a group of sixteen plaintiffs who had signed settlement agreements with appellees in 1993 involving the same subscription agreements at issue in the case at bar.

On October 29, 1998, while appellees' motions were still pending, appellants filed a motion to reconsider court's ruling on defendants' second motion to dismiss and plaintiffs' motion to amend.

On December 4, 1998, the court denied appellants'...