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Lohr v. Gilman

United States District Court, N.D. Texas, Dallas Division

March 30, 2017

CLAUDETTE LOHR, Plaintiff,
v.
PAUL GILMAN; RAYMOND MCGLAMERY; FREDERICK D. MINTON PhD.; MARLANE MINTON; OIL MIGRATION GROUP, LLC; and WAVETECH29, LLC, Defendants.

          MEMORANDUM OPINION AND ORDER

          Sam A. Lindsay United States District Judge.

         Before the court are: Defendant Raymond McGlamery's Motion to Dismiss First Amended Complaint (Doc. 19), filed September 28, 2015; Defendants Fred and Marlane Minton's Motion to Dismiss First Amended Complaint (Doc. 20), filed September 28, 2015; and Defendants Paul Gilman, Oil Migration Group, LLC, and Wavetech29, LLC's Motion to Dismiss First Amended Complaint (Doc. 21), filed September 28, 2015. After careful consideration of the motions, responses, replies, pleadings, and applicable law, the court grants Defendant Raymond McGlamery's Motion to Dismiss First Amended Complaint; grants in part and denies in part Defendants Fred and Marlane Minton's Motion to Dismiss First Amended Complaint; and grants in part and denies in part Defendants Paul Gilman, Oil Migration Group, LLC, and Wavetech29, LLC's Motion to Dismiss First Amended Complaint.

         I. Procedural and Factual Background

         This case arises from an alleged fraudulent investment scheme in oil and gas and bio-fuel companies. Plaintiff Claudette Lohr (“Lohr” or “Plaintiff”), a widow living in Dallas, Texas, brings this private securities fraud action against Defendants and alleges that, acting in concert, they fraudulently induced her into making a total investment of $540, 000 in two companies-Oil Migration Group, Inc. (“OMG”) and Wavetech29, LLC (“Wavetech”)-both of which she contends are sham enterprises. According to Plaintiff, Defendants falsely promoted these enterprises to her as owning, or owning a license to, cutting edge audio technology that affects oil viscosity and oil recovery procedures (hereinafter the “OMG Technology” and the “Water Separation Technology”). Plaintiff alleges that she was induced by Defendants' myriad fraudulent statements about the technology to invest in OMG and Wavetech, and charges that Defendants made these misrepresentations knowingly and willfully, or in reckless disregard of their falsity, and that she relied on the statements to her detriment. The court now sets out the facts upon which it relies in deciding the pending motions to dismiss, accepting all well-pleaded facts in the complaint as true and viewing them in the light most favorable to Plaintiff. Sonnier v. State Farm Mut. Auto. Ins. Co., 509 F.3d 673, 675 (5th Cir. 2007). The facts are drawn from Plaintiff's First Amended Complaint (“Complaint”), the live pleading. See Compl. (Doc. 15).

         A. The Alleged Solicitation by Frederick and Marlane Minton

         In or about late 2013, Plaintiff met Defendant Marlane Minton (“Mrs. Minton”) at a Bible study at a church they both attended. Mrs. Minton often discussed oil and gas businesses and bio-fuel businesses in which she and her husband, Defendant Frederick Minton (“Mr. Minton”) (sometimes collectively, the “Mintons”) allegedly invested. Mrs. Minton seemed especially interested in discussing the Mintons' alleged investments with widows who attended the Bible study. In or about 2014, Plaintiff learned that Mrs. Minton had dental surgery and prepared a meal, which she took to the Minton home, at which time Mr. Minton discussed investing in OMG. The Mintons told Plaintiff that they had met Defendant Paul Gilman (“Gilman”) in connection with their investments in the movie industry, and that Gilman was seeking investments in OMG and Wavetech to obtain funding for additional testing and to pursue patents for the OMG Technology. The Mintons told Plaintiff that Gilman was about to meet with investors in New York to raise money to file for patents and for further testing of the OMG Technology. The Mintons also told Plaintiff that time was of the essence to invest in OMG and Wavetech, as the value of the two entities was certain to increase as Gilman continued to prove the application of the OMG Technology in various areas of the oil and gas industry. The Mintons assured Plaintiff that Gilman would sell his concept through OMG and Wavetech, and that she would receive a return on her investment prior to the end of 2014. The Mintons made these false representations with the intent that Plaintiff would rely upon them and invest in OMG and Wavetech.

         B. Gilman's Role in the Alleged Scheme

         After Plaintiff expressed an interest in investing in OMG and Wavetech, the Mintons introduced her to Gilman. Plaintiff alleges that Gilman, acting at all times as a representative and owner of OMG and Wavetech, enticed Plaintiff to invest initially in OMG, and later in Wavetech, by making, among others, the following fraudulent representations:

• Gilman claimed that OMG owned, or owned a license to, the OMG Technology, an audio technology he developed:
that positively affects the viscosity of oil that assists in the recovery (secondary, tertiary, fracking, and all other known methods of oil discovery) of oil; the storage of oil (due to less adhesion to tanks); and the transportation of oil (due to less adhesion to tanks, pipelines and shipping vessels, as well as a decrease in friction and significant acceleration of the oil's viscosity of travel through pipelines)[.] Compl. ¶ 18.
• Gilman told Plaintiff that “through extensive study of velocity profiles and fluid dynamics” his “team has identified the correlation between this decrease in friction and a significant acceleration of the oil's velocity of travel through transport pipelines.” Id. ¶ 19.
• Gilman claimed that the OMG Technology could “greatly reduce” the “work of a pumping [station]” creating options for the operator to “either reduce the pumping power (reduction in costs) or maintain power at a sustained rate and increas[e] output (quicker payback for [the] operator).” Id. ¶ 20.
• Gilman represented that the OMG Technology would “lower the emulsion tendencies” and increase “the monetary value of the hydrocarbon”; “recover oil that was dormant or in a well that has dropped on the production curve to rise to higher levels”; and that “numerous laboratory studies” were conducted that were “focused on applying” the OMG Technology “at certain frequencies to a 42 gallon barrel of B10 biodiesel oil mixed with algae” and that he witnessed “a significant reduction in viscosity as a result of this sonification” and it was “proven that the sonified oil did not have irreversible tendencies.” Id. ¶¶ 25-27.[1]
• Gilman also claimed that all his representation regarding OMG Technology were “confirmed through a series of independent tests conducted by [sic] third party laboratory.” Id. ¶ 28.
• Gilman then offered Plaintiff an opportunity to invest in OMG, to which he had given or assigned an exclusive license in the “patent-pending” OMG Technology. Id. ¶ 29.
• On February 4, 2015, Gilman e-mailed Plaintiff regarding news that the “Panama Pipeline is slowing and thickening” in an effort to convince her that OMG was going to have an opportunity to deploy the OMG Technology. Id. ¶ 44. During subsequent telephone conversations, Gilman told Plaintiff that the OMG Technology was not deployed on the Panama Pipeline because the pipeline's owner had an emergency in Japan.

         Plaintiff alleges, on information and belief, that Gilman's representations concerning OMG and OMG Technology were false and were made only to induce Plaintiff into investing in OMG. Plaintiff further alleges, on information and belief, that representations about technology and possible deployment of the technology were false and made for the purpose of assuring Plaintiff that the OMG Technology and her investment in OMG were legitimate, and to induce her into making further investments.

         C. Plaintiff's Transfer of $40, 000 to Gilman's Account

         On or about February 7, 2014, Gilman e-mailed Plaintiff a “Memorandum of Understanding” in a further attempt to induce her to invest in OMG. See Memorandum of Understanding (“MOU”), attached as Exhibit 1 to Complaint. Neither Gilman nor Plaintiff executed the MOU, although that fact did not dissuade Gilman from accepting Plaintiff's money on behalf of OMG. The MOU references a “Non-Disclosure Agreement, ” but Plaintiff never received or executed any such document. Later that same day, Gilman e-mailed Plaintiff instructions to wire her “investment' in OMG to an account held in Gilman's name at City National Bank (the “Gilman Account”), located in Beverly Hills, California. On or about February 10, 2014, in reliance upon the Mintons' and Gilman's representations detailed above, Plaintiff wired $40, 000 to the Gilman Account for what Gilman described as a 2% ownership and/or equity interest in OMG.

         D. McGlamery's Role in the Alleged Scheme

         On February 25, 2014, more than two weeks after Plaintiff wired the $40, 000 to the Gilman Account, Defendant Raymond McGlamery (“McGlamery”) formed OMG by filing a certificate of formation with the Texas Secretary of State. See Certificate of Formation, attached as Exhibit 2 to the Complaint. The Certificate of Formation lists McGlamery and Gilman as OMG's “Managers.” Id. Plaintiff alleges, on information and belief, that McGlamery filed the Certificate of Formation with the Texas Secretary of State “to give an air of legitimacy to the scheme that Gilman, McGlamery, and the Mintons had concocted to trick people into investing in OMG, including, but not limited to, ” Plaintiff. Compl. ¶ 36.

         Plaintiff alleges, on information and belief, that McGlamery knew of Gilman's false representations, knew she had invested in OMG, personally benefited from Gilman's false representations, and took no action to inform her of the false nature of Gilman's representations.

         E. Plaintiff's Transfer of Additional Amounts to the Gilman Account Following Further Fraudulent Representations

         On or about May 20, 2014, Gilman provided Plaintiff with a document titled “Gilman -Soundwave Viscosity Investor Overview” to further induce her into investing additional funds in OMG and also investing in Wavetech. See “Gilman - Soundwave Viscosity Investor Overview” (“Soundwave Overview”), attached as Exhibit 3 to the Complaint. Page One of the Soundwave Overview contains a quotation attributed to Gilman, described as “CEO/Inventor & Chief Technologist, ” which states: “Viscosity is the holy grail of the oil industry and we've captured it.” See id.

         On or about May 20, 2014, Gilman e-mailed Plaintiff to acknowledge her 2% interest in OMG and promised to deliver “more formal documents” evidencing her interest in OMG. Compl. ¶ 38. None of the Defendants ever provided Plaintiff with these promised documents.

         Based on Gilman's and the Mintons' representations, and the Certificate of Formation filed by McGlamery, see supra, in addition to her initial $40, 000 investment, Plaintiff made the following investments in OMG and Wavetech:

• On May 21, 2014, Plaintiff transferred $150, 000 to Gilman in exchange for another alleged 1% interest in OMG.
• On July 24, 2014, Plaintiff transferred $100, 000 to Gilman in exchange for an alleged 2% interest in Wavetech. Later that day, Gilman confirmed via e-mail to Plaintiff that her investment of $100, 000 was in exchange for a 2% interest in Wavetech. Gilman also provided Plaintiff with instructions for wiring money to an account held by “iWavetech29, LLC.” Id. ¶ 41.
• On October 10, 2014, Plaintiff transferred $100, 000 to Gilman in exchange for an alleged 3% interest in the “first one to come in” in OMG or Wavetech. Id. ¶ 42. After this transfer, Gilman sent an e-mail to Plaintiff indicating that they will “formalize terms on a future date with more information from arrangements we enter with Axcess Worldwide and others.” Id. ¶ 43. None of the Defendants provided Plaintiff with more formal terms related to her “investment.”
• On February 29, 2015, Plaintiff transferred $100, 000 to Gilman as an investment in Wavetech in exchange for an alleged 2% interest in the Water Separation Technology purportedly owned by Wavetech.
• On March 11, 2015, Plaintiff transferred another $50, 000 to Gilman as an investment in Wavetech in exchange for an alleged 1% interest in the Water Separation Technology purportedly owned by Wavetech.

         Plaintiff alleges, on information and belief, that the above-pleaded representations made by Gilman concerning OMG, OMG Technology, Wavetech, and “Water Separation Technology” were false and were made only to induce Plaintiff into investing in OMG and Wavetech, which were sham enterprises. Plaintiff further alleges, on information and belief, that Wavetech does not own any Water Separation Technology and, therefore, this statement was false and made for the purpose of inducing Plaintiff into investing in Wavetech and the Water Separation Technology.

         F. The Mintons' Continued Role in the Alleged Scheme

         Mr. Minton, who holds a PhD. in Psychology, and Mrs. Minton, actively participated and assisted Gilman in inducing Plaintiff to invest in Gilman's sham companies (OMG and Wavetech) and contrived OMG Technology and Water Separation Technology. The Mintons knew that Gilman's representations, made in his capacity as owner or representative of OMG and Wavetech, were false. The Mintons personally benefited from assisting Gilman in inducing Plaintiff into investing in the sham companies and contrived technologies.

         Mr. Minton, whom Plaintiff met at the church she attends, used his training in psychology to cultivate a relationship of trust with Plaintiff, even going so far as counseling her free of charge, notwithstanding that his professional counseling license had expired. During all relevant times, the Mintons reassured Plaintiff of Gilman's ability to create the technology and vouched for his credibility and trustworthiness so as to convince Plaintiff of the legitimacy of the OMG Technology and the Water Separation Technology, as well as the legitimacy of the companies Gilman created and in which he was actively seeking investors, all despite the Mintons' knowledge that Gilman's representations were false. The Mintons' assurances often involved referencing the “Christian God” to cause Plaintiff to trust the representations, as the Mintons and Plaintiff attended the same church. Id. ¶ 53. It was common that the Mintons would pray with Plaintiff, and the prayers often included a petition for Plaintiff to get accustomed to being someone wealthy, as well as a petition for blessings for Gilman. The Mintons' reassurances directly assisted, and aided and abetted, OMG, Wavetech, McGlamery, and Gilman “in pilfering” Plaintiff's money. Id. ¶ 55.

         In furtherance of their scheme, Mr. Minton provided Plaintiff with counseling regarding how to “fit in” with the “rich folk” at the Bonaventure in preparation for her receipt of “millions” from her investment. Id. ¶ 56. Mr. Minton discussed how Plaintiff would set up foundations to handle the “millions” that he indicated she would be receiving from her investments. Id. Mr. Minton made these reassuring comments despite knowing Gilman's representations regarding OMG Technology and Water Separation Technology were false.

         G. Allegations Regarding Defendants' Disregard of ...


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