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O'Kane v. Sembritzky

United States District Court, S.D. Texas, Houston Division

June 25, 2019

WILLIAM O'KANE, SYNERGY SOURCE, LLC, and AZKARTA CREST CORPORATION., Plaintiffs,
v.
VERLEY SEMBRITZKY, JR., a/k/a ROCKY SEMBRITZKY, et al., Defendants.

          MEMORANDUM AND ORDER

          LEE H. ROSENTHAL, CHIEF UNITED STATES DISTRICT JUDGE

         William O'Kane, Synergy Source, LLC, and Azkarta Crest Corporation have moved for partial summary judgment against Malcolm Morris, as trustee of the Malcolm Morris Roth IRA, and Quest IRA Inc., as trustee of the Carolyn Mene Roth IRA. The plaintiffs seek a declaratory judgment that the plaintiffs have a superior interest to the trustees in a condominium at 2727 Kirby Drive in Houston. (Docket Entry No. 103). The trustees responded, and the plaintiffs replied. (Docket Entry Nos. 106, 109).

         Based on the motion, response, and reply; the record evidence; and the applicable law, the court denies the plaintiffs' motion for partial summary judgment. (Docket Entry No. 103). The reasons for this ruling are detailed below.

         I. Background

         The plaintiffs allege that in late 2015, Verley Sembritzky gave O'Kane, Synergy, and Azkarta each a Regulation D, Rule 506 Private Placement Letter. (Docket Entry No. 38 at ¶¶ 20- 21). The Letters stated that Sembritzky was authorized to sell 1, 000 shares of Rasli Bahari Kenya Limited stock for $175.5 million. (Id. at ¶ 22). This common stock sold at $175, 500 per share. (Id.). The Letters represented that Sembritzky was Rasli Bahari's founder and managing director. (Id.). The Letters stated the money would be used to design, build, and operate the first of two Kenyan desalination plants and predicted that the plants would earn hundreds of millions of dollars starting in 2019. (Id. at ¶¶ 23-24).

         O'Kane, Synergy, and Azkarta invested in Rasli Bahari that year. (Id. at ¶¶ 35, 39, 47). Sembritzky told the plaintiffs to wire their payments to a bank account at BBVA Compass Bank in Houston under the name “Bounty of the Ocean, ” purportedly Rasli Bahari's American agent. (Id. at ¶¶ 33, 42, 50). O'Kane invested $877, 500, Synergy invested $351, 000, and Azkarta invested $175, 500. (Id. at ¶¶ 34, 43, 51).

         The plaintiffs allege that Sembritzky transferred these funds to other Compass accounts, eventually transferring the money to his and his ex-wife's personal accounts. Sembritzky allegedly used that money to purchase a luxury condominium located at 2727 Kirby Drive in Houston (the “Kirby Condominium”). (Id. at ¶¶ 36-38, 44-46, 52-54). According to the plaintiffs, Rasli Bahari has never attempted to build or operate any desalination plant, harvested any minerals, produced any fresh water, or engaged in operations or charitable donations. The plaintiffs also alleged that they never received any financial statements or proof of stock purchase. (Id. at ¶¶ 55-63).

         The plaintiffs assert 26 counts against Sembritzky and other defendants, including for conversion; breach of fiduciary duty; aiding and abetting breach of fiduciary duty; defalcation; embezzlement; constructive trust; accounting; fraud; fraudulent conveyance and transfer; unjust enrichment; and federal securities violations. (Id. at ¶¶ 72-102). The plaintiffs also seek a declaratory judgment against Morris and Quest IRA Inc. that the plaintiffs' “right, title or interest in the Kirby Condominium is superior to and has priority over any right, title or interest that any [IRA] Defendant might have or claim in the Kirby Condominium.” (Id. at 37, ¶ 9). After discovery, the plaintiffs filed this partial summary judgment motion.

         II. The Legal Standard

         “Summary judgment is required when ‘the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.'” Trent v. Wade, 776 F.3d 368, 376 (5th Cir. 2015) (quoting Fed.R.Civ.P. 56(a)). “A genuine dispute of material fact exists when the ‘evidence is such that a reasonable jury could return a verdict for the nonmoving party.'” Nola Spice Designs, LLC v. Haydel Enters., Inc., 783 F.3d 527, 536 (5th Cir. 2015) (quoting Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986)). “The moving party ‘bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact.'” Id. (quoting EEOC v. LHC Grp., Inc., 773 F.3d 688, 694 (5th Cir. 2014)); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

         “Where the non-movant bears the burden of proof at trial, the movant may merely point to the absence of evidence and thereby shift to the non-movant the burden of demonstrating by competent summary judgment proof that there is an issue of material fact warranting trial.” Id. (quotation marks omitted); see also Celotex, 477 U.S. at 325. Although the party moving for summary judgment must demonstrate the absence of a genuine issue of material fact, it does not need to negate the elements of the nonmovant's case. Boudreaux v. Swift Transp. Co., 402 F.3d 536, 540 (5th Cir. 2005). “A fact is ‘material' if its resolution in favor of one party might affect the outcome of the lawsuit under governing law.” Sossamon v. Lone Star State of Tex., 560 F.3d 316, 326 (5th Cir. 2009) (quotation omitted). “If the moving party fails to meet [its] initial burden, the motion [for summary judgment] must be denied, regardless of the nonmovant's response.” United States v. $92, 203.00 in U.S. Currency, 537 F.3d 504, 507 (5th Cir. 2008) (quoting Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc)).

         “Once the moving party [meets her or his initial burden], the non-moving party must ‘go beyond the pleadings and by her [or his] own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial.'” Nola Spice, 783 F.3d at 536 (quoting LHC Grp., 773 F.3d at 694). The nonmovant must identify specific evidence in the record and articulate how that evidence supports that party's claim. Baranowski v. Hart, 486 F.3d 112, 119 (5th Cir. 2007). “This burden will not be satisfied by ‘some metaphysical doubt as to the material facts, by conclusory allegations, by unsubstantiated assertions, or by only a scintilla of evidence.'” Boudreaux, 402 F.3d at 540 (quoting Little, 37 F.3d at 1075). In deciding a summary judgment motion, the court draws all reasonable inferences in the light most favorable to the nonmoving party. Connors v. Graves, 538 F.3d 373, 376 (5th Cir. 2008); see also Nola Spice, 783 F.3d at 536.

         III. Analysis

         The plaintiffs argue that they have an interest in the Kirby Condominium because Sembritzky purchased the condominium with the plaintiffs' subscription payments. (Docket Entry No. 103 at 4). They incorporate by reference the declarations of O'Kane and Matthew Huffine, a member of Synergy Source, discussing bank records showing transfers from the Bounty of the Ocean bank account to Sembritzky's personal Compass account and to the Compass account of Sembritzky's ex-wife, Goldie Rose. (Id. at 5-6 (citing Docket Entry No. 5-1; Docket Entry No. 102-1)). They argue that these declarations and the bank accounts referenced to show that their funds were used to purchase the Kirby Condominium. (Id. at 6). Based on these transfers and the purchase of the Kirby Condominium, the plaintiffs argue that they have proven both fraud and fraudulent transfer, giving them an interest in the Kirby Condominium. (Id. at 6-8). Because Morris and Quest have “each admitted they have no right, title or interest in the Kirby Condominium, ...


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