United States District Court, E.D. Texas, Tyler Division
MEMORANDUM OPINION AND ORDER
LOVE, UNITED STATES MAGISTRATE JUDGE
the Court is Plaintiff Lihua Zhang's Motion for Summary
Judgment (Doc. No. 114). Defendants Margaret Monroe and Scott
Monroe (“the Monroes”), Central Mining America,
Inc. (“CMA”), Central Mining America Group, Corp.
(“CMA Group”), and U.S. Salt International, Inc.
(“US Salt”) (collectively,
“Defendants”) filed a Motion to Strike/Response
(Doc. No. 116). Having considered the parties' arguments
and the applicable law, the Court GRANTS-in-part and
DENIES-in-part Plaintiff's Motion. To the extent
Defendants assert any counterclaims in their Motion to
Strike/Response, the Court DENIES Defendants' claims.
a diversity action arising out of an ongoing business
relationship between Plaintiff and Defendants. CMA was
created in 2004 to offer salt mining production and
operations services in connection with the Monroe Salt Mine
located in the Grand Saline Salt Dome in East Texas. (P's
MSJ, Doc. No. 114 at 8). On September 28, 2007, Mr. Monroe,
acting as President of CMA, entered into an agreement to
lease the Monroe Salt Mine from his wife, Mrs. Monroe,
“for the purpose of continuing the Developing,
Constructing, Mining, Drilling, Producing, Operating,
Transporting, Selling, and Exporting, of that salt minerals
that are mined and Produced from underground.” (Land
and Salt Mineral Lease Agreement, Ex. 9, Doc. No. 114).
Zhang was first introduced to the Monroes and CMA through her
husband who is involved with the mining services industry in
China. (Unsworn Dec. of Lihua Zhang, Ex. 13 at ¶ 2-3,
Doc. No. 114). According to Ms. Zhang, the Monroes
represented to her that they had salt mine interests in East
Texas that would prove profitable to potential investors.
(Id. ¶ 4). In May of 2011, Ms. Zhang met with
Mrs. Monroe in Beijing, China, to discuss the possibility of
investing directly into CMA. (Id. ¶ 5). In
December of 2011, Ms. Zhang traveled to the United States,
and stayed with the Monroes at their home in Canton, Texas.
(Id. ¶ 6). During her stay, the Monroes
allegedly represented to her that she would be able to invest
directly into CMA and maintain a 5% stake in the company by
entering into a Subscription Agreement. (Id. ¶
6; see Subscription Agreement, Ex. 14, Doc. No.
114). Ms. Zhang was further told that CMA was on course to
receive a $45 million capital injection from Mr. Andrew
Garner, an English investor, within the first six months of
2012 to jumpstart operations. (Id. ¶ 6).
Zhang entered into the Subscription Agreement on December 20,
2011, which in relevant part states:
I, Li Hua Zhang [omitted] hereby subscribe for and purchase
(5%) five percent of the common stock from Margaret Monroe of
Central Mining America, Inc. a Texas corporation. The
purchase price is USD 580, 000 (five hundred eighty thousand
U.S. dollars) in cash plus other consideration and works.
(Ex. 14, Doc. No. 114). On December 28, 2011, Ms. Zhang wired
approximately $80, 000 to Mrs. Monroe's individual
account. According to Ms. Zhang, the Defendants required $80,
000 to pay off a debt to Dynatec, a mining services company,
and that until such a debt was paid, CMA would be unable to
secure the funding from Mr. Garner. (Ex. 13 at ¶ 6, Doc.
February 12, 2012, CMA's charter was forfeited for its
failure to file a franchise tax return and/or pay a state
franchise tax. (Ex. 7, Doc. No. 114).
March of 2012, Ms. Zhang returned to the United States to
apply for a green card under the EB-5 Immigrant Investor
Program, under the alleged representation from the
Monroes that her investment in a U.S.-based enterprise would
qualify her for such a program. (Id. ¶ 6, 9).
March 16, 2012, Ms. Zhang wrote a check directly payable to
Mrs. Monroe for $420, 000 in fulfillment of the Subscription
Agreement. (Id. ¶ 11). That same day, Mrs.
Monroe acting as the CEO of CMA signed an agreement which
“Li Hua Zhang [omitted] has made a payment of US$500,
000.00 (five hundred thousand U.S. Dollars) according to the
subscription agreement Dated: Dec 20, 2011.”
(Ex. 18, Doc. No. 114).
Zhang states that by October of 2012, it had become clear to
her that there were numerous issues with the original
Subscription Agreement and her investment in CMA. (Ex. 13 at
¶ 13, Doc. No. 114). Later that month, Ms. Zhang states
she met with the Monroes in Beijing, who “expressed
confidence that CMA would be up and running in the near
future and would be able to pay me.” (Id.
¶ 13). Ms. Zhang states that because of the Monroes'
assurances she agreed to enter into a Convertible Notes
Agreement (Ex. 18, Doc. No. 114) which converted her initial
investment into a $500, 000 loan to CMA, and which the
company would be required to pay over a period of three years
at ¶ 30% interest rate. (Id. ¶ 13). Mrs.
Monroe is the signatory to this agreement on behalf of CMA.
March 20, 2013, Ms. Zhang sent Mrs. Monroe a letter demanding
a payment of $650, 000 ($500, 000 principal and $150, 000
interest) by March 30, 2013. (Ex. 19, Doc. No. 114). In
response, CMA sent a letter to Ms. Zhang on April 9, 2013,
notifying Ms. Zhang that neither CMA nor its representative
issued or signed the Convertible Notes Agreement. (Ex. 20,
Doc. No. 114).
October 24, 2013, Ms. Zhang filed the instant case claiming a
breach of contract, common law fraud (fraudulent
misrepresentation), negligent misrepresentation, and
violations of § 27.01 of the Texas Business &
Commerce Code against the Defendants stemming from the
Subscription Agreement and the Convertible Notes Agreement.
Ms. Zhang further seeks to hold the Monroes individually
liable for the acts of CMA through piercing the corporate
veil and through § 171.255 of the Texas Tax Code.
Summary Judgment Under Rule 56
judgment is appropriate if there is no genuine issue as to
any material fact, and the movant is entitled to judgment as
a matter of law. Fed.R.Civ.P. 56(a). The movant bears the
initial burden of informing the court of the basis for its
motion and identifying those portions of the record it
believes demonstrate the absence of a genuine issue of
material fact. Celotex Corp. v. Catrett, 477 U.S.
317, 323 (1986). Only when the moving party has discharged
this initial burden does the burden shift to the non-moving
party to demonstrate that there is a genuine dispute of
material fact. Celotex, 477 U.S at 322.
dispute is “genuine” if the evidence is such that
a reasonable jury could return a verdict for the nonmoving
party. See Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986); Cooper Tire & Rubber Co. v.
Farese, 423 F.3d 446, 454 (5th Cir. 2005). A dispute is
“material” if its resolution could affect the
outcome of the action. Anderson, 477 U.S. at 248.
proper motion has been made, the nonmoving parties may not
rest upon mere allegations or denials in the pleadings but
must present affirmative evidence, setting forth specific
facts, to show the existence of a genuine issue for trial.
Celotex Corp., 477 U.S. 322 n.3 (quoting
Fed.R.Civ.P. 56(e)). All the evidence must be construed in
the light most favorable to the nonmoving party, and the
court will not weigh the evidence or evaluate its
credibility. Reeves v. Sanderson Plumbing Prods.,
Inc., 530 U.S. 133, 150 (2000).
“only reasonable inferences in favor of the nonmoving
party can be drawn from the evidence.” Mills v.
Warner-Lambert Co., 581 F.Supp.2d 772, 779 (E.D. Tex.
2008) (citing Eastman Kodak Co. v. Image Technical
Servs., Inc., 504 U.S. 451, 469 n. 14 (1992). “If
the [nonmoving party's] theory is… senseless, no
reasonably jury could find in its favor, and summary judgment
should be granted. Eastman, 504 U.S. at 468-69.
“Unsubstantiated assertions, improbable inferences, and
unsupported speculation are not sufficient to defeat a motion
for summary judgment.” Brown v. City of
Houston, 337 F.3d 539, 541 (5th Cir.2003).
judgment is mandated if the nonmovant fails to make a showing
sufficient to establish the existence of an element essential
to their case on which they bear the burden of proof at
trial. Nebraska v. Wyoming, 507 U.S. 584, 590
(1993); Celotex Corp., 477 U.S. at 322. “In
such a situation, there can be ‘no genuine issue as to
any material fact, ' since a complete failure of proof
concerning an essential element of the nonmoving party's
case necessarily renders all other facts immaterial.”
Celotex Corp., 477 U.S. at 322-23.
are proceeding pro se in this action. “A
document filed pro se is ‘to be liberally
construed' and a pro se complaint, however
inartfully pleaded, must be held to less stringent standards
than formal pleadings drafted by lawyers.” Erickson
v. Pardus, 551 U.S. 89, 94 (2007) (per curiam) (citing
Estelle v. Gable, 249 U.S. 97 (1976)). However,
“pro se status does not exempt [a litigant]
from the usual evidentiary requirements of summary
judgment.” See Ellis v. Principi, 246 F.
App'x 867, 869 (5th Cir. Sept. 5, 2007) (per curiam)
(citing Grant v. Cuellar, 59 F.3d 523, 524 (5th Cir.