IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF TEXAS PLANO DIVISION IN RE: KELLY GORDON ROGERS, Debtor.
§ § §
BILL THOMPSON, CR 591, LLC, § DARRYL J. TYSON, WAYNE JOHNSON, § NICK DIGIUSEPPE, TOM MATTER, § WILLIAM NOBLE, LANG REID, LARRY § BOERDER, DR. MATT BROWN, GLENN § WALSER, JERRY KAUL, MILLY § MACDONALD, STUART REYNOLDS, § JR., JAMES E. EVANS, JR., HARRIS § BLOCK, TERRITORIES UNLIMITED, § LLC, FRED BRODSKY, ROY S. § WASHBURN, BILL GRANT, § MICHAEL A. BLOCH § § Plaintiffs, § § v. § § KELLY GORDON ROGERS, Individually, § and FALCON ENERGY, LLC-BUCK § HAMILTON SERIES, a Nevada Series § Limited Liability Company, § § Defendants. §
Case No. 09-42154 Chapter 11
Adversary No. ___________________
COMPLAINT FOR DETERMINATION OF DISCHARGEABILITY The above named Plaintiffs (collectively “Plaintiffs”), acting derivatively for the benefit of Falcon Energy, LLC-Buck Hamilton Series, a Nevada Series Limited Liability Company, complaining of Defendants Kelly Gordon Rogers and Falcon Energy, LLC-Buck Hamilton Series, a Nevada Series Limited Liability Company, allege as follows: 1.
This is a core matter for which this Court has exclusive jurisdiction of this
Adversary Proceeding pursuant to 28 U.S.C. §157(b)(i)(2)(I). Plaintiffs seek relief under 11 U.S.C. §§523(a)(4), 523(a)(2)(A), 523(c), 105, and 362. Federal Bankruptcy Rules of Procedure Complaint – Page 1
12316.1
7001, 7023.1, and 4007 apply in this Adversary Proceeding. The Plaintiffs consent to this Court’s entry of final orders or judgments in this adversary proceeding. Defendant Kelly Gordon Rogers (herein “Debtor”) is the Debtor in this Chapter
2. 11 case.
Defendant may be served at his residence of record which is 8 Riva Ridge, Frisco,
Texas 75034. 3.
Defendant Falcon Energy, LLC-Buck Hamilton Series, a Nevada series limited
liability company (herein the “Company”) is a Nevada limited liability company doing business in the State of Texas with its principal place of business in Collin County, Texas. 4.
This is an adversary proceeding to determine the dischargeability of a debt. DERIVATIVE SUIT ALLEGATIONS
5.
The Plaintiffs are asserting derivative causes of action for the benefit of the
Company. With respect to the derivative claims asserted herein, the Plaintiffs assert such claims pursuant to State Common Law, on behalf of and for the benefit of the Company, to remedy the wrongdoing alleged herein. 6.
The Plaintiffs are now, and at all pertinent times hereto, have been members of
the Company. Upon information and belief, the Plaintiffs represent twenty of the twenty-two members of the Company consisting of approximately 95% of the preferred members’ interest. Accordingly, Plaintiffs fairly and adequately represent the interests of all similarly situated members of the Company, or in the alternative, there are no similarly situated members. 7.
Plaintiffs did not make demand upon Debtor, the only Managing Member of the
Company, to bring the derivative claims asserted herein because such demand would be futile in light of the facts alleged herein. Accordingly, demand is excused. Demand would be futile because it cannot be presumed that Debtor, an individually named Defendant, could or would
Complaint – Page 2
12316.1
exercise independent judgment and assess the merits of such a demand due to his personal and financial interests in the subject matter of the derivative claims asserted in this pleading. FACTS APPLICABLE TO ALL COUNTS A. The Status of the Company is Unclear 8.
According to the records of the Nevada Secretary of State, Debtor incorporated an
entity named “Falcon Energy, LLC” on March 29, 2007. Effective November 1, 2007, Plaintiffs entered into a Limited Liability Company Agreement of Falcon Energy LLC-Buck Hamilton Series (herein “LLC Agreement”). A true and correct copy of the LLC Agreement is attached hereto and incorporated herein for all purposes as Exhibit “A.” 9.
It is presently unclear as to the status or nature of the Company. Although Debtor
solicited investments in a limited liability company, and Debtor had each of the investors execute both a Subscription Agreement and an LLC Agreement, it is unclear if Debtor actually formed the entity. A review of the Nevada Secretary of State records indicates that there is no entity named “Falcon Energy, LLC-Buck Hamilton Series.” A review of the Texas Secretary of State records likewise establishes there is no entity with that name. As such, it is unclear as to the exact nature of the relationship between Plaintiffs and Debtor. Debtor raised $1.4 million from Plaintiffs, ostensibly for the purchase of membership interests in the Company. 10.
At his 2004 Examination, Debtor testified that he did, in fact, form the Company,
but could not remember where. Debtor further testified that documents reflecting the formation of the Company could be found in his prior office space, which has been taken by the landlord. Plaintiffs have since participated in an examination of the records located in Debtor’s prior office space and have yet to locate any records of the Company. 11.
It may be that the members of the Company are simply members of an
unincorporated joint stock association, a general partnership, or a trust. In any event, the
Complaint – Page 3
12316.1
Company has significant assets which are under the direct control of Debtor. The purpose of this suit is to arrest control of these assets from Debtor and place it in the hands of Plaintiffs, who provided all of the funding for the purchase of these assets. 12.
Pursuant to the LLC Agreement, Debtor was named as the initial manager of the
Company. Debtor has remained the sole manager of the Company since its inception. B. The Investment 13.
In 2007, Debtor was searching for investors in the Company. The purpose of the
Company was to purchase mineral interests and develop oil and gas wells. At the time Debtor was soliciting the investment of the Plaintiffs, the Company owned one producing oil well, and Debtor sought sufficient funds to enable the Company to “turnkey” two gas wells and to begin drilling a third gas well. Based upon these and other representations made by the Debtor, the Plaintiffs advanced significant funds to the Company. 14.
Upon information and belief, Plaintiffs represent 20 of the 22 preferred members
of the Company, holding 95% of the preferred members’ interest. As such, Plaintiffs represent a “Required Interest” as defined in the LLC Agreement. C. Mismanagement/Fraud of Debtor i. The Debtor Embezzled Company Assets While Acting as Managing Member 15.
Debtor declared the first gas well a mechanical failure and had it plugged. The
second gas well also purportedly suffered from mechanical failures and was terminated. It is unknown at this time if any work at all was done on these wells or what the funds for these wells were used for. In October, 2008, work on a purported third gas well was stopped and the gas well operators transferred to the Debtor the sum of $180,000. These funds were previously paid by the Company to the operators to develop the third gas well and the operators’ payment to the Debtor was a return of the unused portion of the prepaid drilling costs for the third gas well.
Complaint – Page 4
12316.1
16.
Although it is undisputed that the $180,000 received from the operator was the
property of the Company, Debtor testified that he “borrowed” the $180,000 for his personal use. According to Debtor, the $180,000 was used for home improvement. To date, Debtor has provided no promissory note or other evidence that he “borrowed” the money. Further, the Debtor has so far repaid none of the money. ii. Disbursements from Producing Well 17.
Although the Company made disbursements to the investors from monies
purporting to have been received from a producing oil well, the Company stopped making disbursements in February 2009 and has not made any disbursements since that date. iii. Revocation of Corporate Privileges 18.
Upon information and belief, Debtor has allowed the corporate privileges of
Falcon Energy, LLC to be forfeited for failure to comply with the reporting requirements of Nevada, pursuant to §86.361 of the Nevada Revised Statutes Annotated. As a result, the individual members of the Company may be subjected to personal liability. A true and correct copy of the Certificate of Existence with Status of Revocation received from the Nevada Secretary of State is attached hereto and incorporated herein for all purposes as Exhibit “B.” 19.
The investors of the Company have attempted on several occasions to obtain
information from Debtor regarding all of the foregoing, but have received no substantive information as to the status of the investment, the whereabouts or status of the assets of the Company, or the allocation of the funds within the Company. In addition, Debtor has failed to provide 2008 K-1s for the completion of the investors’ tax returns and has generally neglected the operations of the Company.
Complaint – Page 5
12316.1
CLAIMS A. Count One 20.
Debtor is indebted to the Company in the sum of at least $180,000 on a debt for
fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny as follows: (a)
As sole Managing Member of the Company, Debtor received $180,000 from the operators;
21.
(b)
Debtor diverted these funds to his own personal use; and
(c)
Debtor has failed and refused to return said sums.
The $180,000 debt owed by Debtor to Plaintiffs and/or the Company is non-
dischargeable under §523(a)(4) of the Bankruptcy Code. B. Count Two 22.
Debtor is indebted to the Company in the amount of any Company funds used for
purposes other than in compliance of the LLC Agreement or the Subscription Agreement for false pretenses, false representations, or actual fraud. 23.
The Debtor is therefore liable to the Company and/or Plaintiffs for any such funds
and such liability is non-dischargeable under §523(a)(2)(A). C. Count Three 24.
Plaintiffs requests the Court declare Debtor’s home be subject to a constructive
trust in favor of Plaintiffs for the amount of $180,000. In Texas, a constructive trust arises when (1) the debtor has committed actual fraud or has committed constructive fraud through the breach of a preexisting fiduciary or confidential relationship; (2) the debtor would be unjustly enriched by retaining the proceeds of the wrong; and (3) there is a traceable res upon which to impress the trust.
Complaint – Page 6
12316.1
25.
Debtor’s home should be impressed with a constructive trust for the following
reasons: (a) Debtor fraudulently diverted the $180,000 while acting in a fiduciary capacity as Sole Managing Member of the Company; (b) Debtor diverted the $180,000 to his personal use and is unjustly enriched by retaining the $180,000; and (c) The $180,000 is directly traceable to Debtor’s home. D. Count Four 26.
Plaintiffs request the Court to enter an order requiring Defendants to render an
accounting to Plaintiffs: (a)
detailing all transactions entered into by, between or among them with cost, expense and revenue information relating to such transaction;
(b)
detailing all transactions entered into by, between or among them with any third parties (including, without limitation, the operators of the oil and gas wells), with cost, revenue and expense information relating to such transactions; and
(c)
detailing all income, revenue, costs and expenses of any type (including taxes) received, incurred or paid by the Company from the date of formation through the date of the accounting.
27.
In connection with this accounting, Plaintiffs request the Court to require
Defendants to provide all back-up documentation, including, but not limited to, all books and records, bank statements, cancelled checks, vendor invoices, general ledgers, operating reports and payroll records.
Complaint – Page 7
12316.1
E. Conditions Precedent 28.
All conditions precedent to Plaintiffs’ claims for relief have been performed or
have occurred. F. Alternative Pleadings 29.
The foregoing facts and theories are pled cumulatively and alternatively with no
election or waiver of rights or remedies. 30.
Plaintiffs reserve the right to amend or modify this Complaint as necessary.
WHEREFORE PREMISES CONSIDERED, Plaintiffs respectfully pray as follows: (a)
the Court appoint a time and date for a hearing on this Complaint and Defendants be cited to appear and answer herein;
(b)
that the Court order an accounting as alleged herein;
(c)
that the Court determine that Debtor’s liability of $180,000 is nondischargeable;
(d)
that Plaintiffs have judgment against Debtor for $180,000;
(e)
that the Court find that any other funds misappropriated by the Debtor in violation of the LLC Agreement and Subscription Agreement be nondischargeable and the Company and/or Plaintiffs receive judgment on the same;
(f)
that the Court impose the Debtor’s home with a constructive trust in favor of Plaintiffs; and
(g)
that Plaintiffs have such other and further relief as is just, including reasonable costs and attorney’s fees.
Complaint – Page 8
12316.1
Signed this 2nd day of October 2009. Addison, Texas. Respectfully submitted, HIGIER ALLEN & LAUTIN, P.C. /s/ Timothy P. Woods Timothy P. Woods Texas State Bar No. 21965500 Timothy J. Vineyard Texas State Bar No. 20587000 Jason T. Rodriguez Texas State Bar No. 24042827 5057 Keller Springs Road, Suite 600 Addison, Texas 75001-6231 Telephone: (972) 716-1888 Facsimile: (972) 716-1899
[email protected] [email protected] [email protected]
ATTORNEYS FOR PLAINTIFFS
Complaint – Page 9
12316.1