in Re the Law Offices of Art Dula, Arthur, M. Dula, Individually, and D/B/A the Law Offices of Art Dula, Anat Friedman, Individually, and D/B/A the Law Offices of Art Dula, J. Buckner Hightower, and the Robert A. and Virginia Heinlein Prize Trust, Through

• Court: Court of Appeals of Texas
• Decided: June 23, 2015
• Docket: 14-15-00535-CV
• Status: Published

Opinion

ACCEPTED 14-05-00535-CV FOURTEENTH COURT OF APPEALS HOUSTON, TEXAS 6/23/2015 9:50:11 AM CHRISTOPHER PRINE CLERK

14-15-00535-CV NO. ____________ FILED IN 14th COURT OF APPEALS In the Court of Appeals HOUSTON, TEXAS

Fourteenth District of Texas For the ____________ 6/23/2015 9:50:11 AM CHRISTOPHER A. PRINE Houston Clerk

IN RE THE LAW OFFICES OF ART DULA, ARTHUR M. DULA, INDIVIDUALLY, AND D/B/A THE LAW OFFICES OF ART DULA, ANAT FRIEDMAN, INDIVIDUALLY, AND D/B/A THE LAW OFFICES OF ART DULA, J. BUCKNER HIGHTOWER, AND THE ROBERT A. AND VIRGINIA HEINLEIN PRIZE TRUST, THROUGH ITS TRUSTEES ARTHUR M. DULA AND J. BUCKNER HIGHTOWER,

Relators.

Original Proceeding from the 55th District Court, Harris County, Texas Cause No. 2014-65947

PETITION FOR WRIT OF MANDAMUS

BAKER & HOSTETLER LLP

Eric W. Kristiansen Michael R. Levin ekristiansen@bakerlaw.com Pro Hac Vice Application to be Filed State Bar No. 24027428 mlevin@bakerlaw.com Joshua C. Thomas Florida Bar No. 351326 jthomas@bakerlaw.com 200 S. Orange Avenue, Suite 2300 State Bar No. 24066185 Orlando, Florida 32801 811 Main St., Suite 1100 Telephone (407) 649-4000 Houston, TX 77002 Facsimile (407) 841-0168 (713) 751-1600 Telephone (713) 751-1717 Facsimile

ATTORNEYS FOR RELATORS

ORAL ARGUMENT REQUESTED IDENTITY OF PARTIES AND COUNSEL

The following is a list of the Parties and their respective counsel pursuant to Rules 52.2 and 52.3(a) of the Texas Rules of Appellate Procedure:

Relators: The Law Offices of Art Dula, Arthur M. Dula, Individually, and d/b/a the Law Offices of Art Dula, Anat Friedman, Individually, and d/b/a the Law Offices of Art Dula, J. Buckner Hightower, and the Robert A. and Virginia Heinlein Prize Trust, Through its Trustees Arthur M. Dula and J. Buckner Hightower

Attorneys for Relators: Eric W. Kristiansen ekristiansen@bakerlaw.com State Bar No. 24027428 Joshua C. Thomas jthomas@bakerlaw.com State Bar No. 24066185 BAKER & HOSTETLER LLP 811 Main St., Suite 1100 Houston, TX 77002 Telephone: (713) 751-1600 Facsimile: (713) 751-1717

Michael R. Levin Pro Hac Vice Application to be Filed Florida Bar No. 351326 mlevin@bakerlaw.com 200 S. Orange Avenue, Suite 2300 Orlando, Florida 32801 Telephone (407) 649-4000 Facsimile (407) 841-0168

i Respondent: The Honorable Judge Jeff Shadwick Presiding Judge, 55th Judicial District Court Harris County, Texas Harris County Civil Courthouse 201 Caroline, 9th Floor Houston, Texas 77002 Telephone: (713) 368-6055

Real Parties in Interest: The Law Offices of Art Dula;

Arthur M. Dula, Individually, and d/b/a the Law Offices of Art Dula;

Anat Friedman, Individually, and d/b/a the Law Offices of Art Dula;

J. Buckner Hightower;

The Robert A. and Virginia Heinlein Prize Trust, Through its Trustees Arthur M. Dula and J. Buckner Hightower; and

Takafumi Horie

Counsel for Takafumi Horie: Lloyd E. Kelley THE KELLEY LAW FIRM 2726 Bissonnet, Ste 240 PMB 12 Houston, TX 77005 Telephone (281) 492-7766 Facsimile (281) 652-5973

James D. Pierce 1 Sugar Creek Center, Ste. 1080 Sugar Land, Texas 77478 Telephone (713) 650-0150 Facsimile (713) 650-0146

ii TABLE OF CONTENTS

Identity Of Parties And Counsel................................................................. i

Table Of Contents ..................................................................................... iii

Index Of Authorities .................................................................................. vi

Brief References ......................................................................................... ix

Statement Of The Case .............................................................................. x

Statement Of Jurisdiction ......................................................................... xi

Issue Presented......................................................................................... xii

I. STATEMENT OF FACTS ............................................................... 1

A. Horie’s Investment in EA ............................................... 2

B. The Settlement Agreement ............................................ 4

C. The Original and Amended Petitions ............................ 8

D. The Rulings Below ........................................................ 11

II. SUMMARY OF THE ARGUMENT ................................................. 12

III. ARGUMENT & AUTHORITIES ..................................................... 15

A. Horie Faces a “Heavy Burden” to Resist the Application of the Forum Selection Clause ................. 15

B. Relators Are Entitled to Enforce the Forum Selection Clause ............................................................ 17

C. Horie Cannot Avoid the Forum Selection Clause by Falsely Claiming that Dula was his Attorney ........ 26

D. Horie Cannot Avoid the Forum Selection Clause by Pleading Fraud......................................................... 31

IV. CONCLUSION & PRAYER ........................................................... 33

iii Certification Of Factual Statements ....................................................... 35

Certificate Of Compliance ........................................................................ 35

Certificate Of Service ............................................................................... 36

Appendix ................................................................................................... 37

iv INDEX OF AUTHORITIES

Cases

Accelerated Christian Educ., Inc. v. Oracle Corp., 925 S.W.2d 66 (Tex. App.—Dallas 1996)........................................ 24

Bay Area Healthcare Grp., Ltd. v. McShane, 239 S.W.3d 231 (Tex. 2007)............................................................. 10

Brock v. Entre Computer Ctrs., Inc., 740 F. Supp. 428 (E.D. Tex. 1990) .................................................. 24

Clark v. Power Mktg. Direct, Inc., 192 S.W.3d 796 (Tex. App.—Houston [1st Dist.] 2006, no pet.) .................................................................................................. 32

CU Lloyd’s of Texas v. Hatfield, 126 S.W.3d 679 (Tex. App.—Houston [14th Dist.] 2004, pet. denied) ...................................................................................... 20

Deep Water Slender Wells, Ltd. v Shell Int’l Exploration & Prod. Inc., 234 S.W.3d 679 (Tex. App.—Houston [14th Dist.] 2007, pet. denied) .............................................................................. passim

Falk & Fish L.L.P. v Pinkston’s Lawnmower & Equip., Inc., 317 S.W.3d 523 (Tex. App.—Dallas 2010, no pet.) ................ passim

Ginter ex. rel. Ballard v Belcher, Prendergast, & Laporte, 536 F.3d 439 (5th Cir. 2008) ........................................................... 11

Holeman v. Nat’l Bus. Inst., Inc., 94 S.W.3d 91 (Tex. App.—Houston [14th Dist.] 2002, pet. denied) ...................................................................................... 32

In re ADM Investor Servs., Inc., 304 S.W.3d 371 (Tex. 2010)....................................................... 16, 17

vi In re AIU Ins. Co., 148 S.W.3d 109 (Tex. 2004) (orig. proceeding) .......................... xi, 17

In re Automated Collection Techs., Inc., 156 S.W.3d 557 (Tex. 2004) (orig. proceeding) .......................... xi, 17

In re AutoNation, Inc., 228 S.W.3d 663 (Tex. 2007) (orig. proceeding) .......................... xi, 17

In re Boehme, 256 S.W.3d 878 (Tex. App.—Houston [14th Dist.] 2008, orig. proceeding) .............................................................................. 15

In re Int’l Profit Assocs., 274 S.W.3d 672 (Tex. 2009) (orig. proceeding) ......................... 11, 32

In re Laibe Corp., 307 S.W.3d 314 (Tex. 2010) (orig. proceeding) .................... xi, 15, 16

In re Lyon Fin. Servs., Inc., 257 S.W.3d 228 (Tex. 2008) (orig. proceeding) .......................... xi, 17

In re Tyco Electronics Power Sys., Inc., No. 05–04–01808–CV, 2005 WL 237232 (Tex. App.—Dallas Feb. 2nd, 2005, orig. proceeding).................... 24

LeBlanc v. Lange, 365 S.W.3d 70 (Tex. App.—Houston [1st Dist.] 2011, no pet.)...... 27

My Cafe-CCC, Ltd. v. Lunchstop, Inc., 107 S.W.3d 860 (Tex. App.—Dallas 2003, no pet.) ........................ 31

Phoenix Network Techs. (Europe) Ltd. v. Neon Sys., Inc., 177 S.W.3d 605 (Tex. App.—Houston [1st Dist.] 2005, no pet.) ........................................................................... 15, 17, 21, 23

Smith v. Kenda Capital, LLC, 451 S.W.3d 453 (Tex. App.—Houston [14th Dist.] 2014, no pet.) .................................................................................................. 23

vii Westchester Fire Ins. Co. v. Lowe, 888 S.W.2d 243 (Tex. App.—Beaumont 1994, no writ) ................. 10

Constitutional Provisions

TEX. CONST. art. V, § 6 ............................................................................... xi

TEX. GOV'T CODE § 22.221(b)(1) ................................................................. xi

viii BRIEF REFERENCES

Arthur M. Dula, individually and “Dula” d/b/a The Law Offices of Art Dula

Anat Friedman, individually and “Friedman” d/b/a The Law Offices of Art Dula

J. Buckner Hightower “Hightower”

The Robert A. and Virginia Heinlein The “Heinlein Trust” Prize Trust, Through its Trustees Arthur M. Dula and J. Buckner Hightower

Takafumi Horie “Horie”

Mandamus Record “MR” followed by the page number

Appendix Documents “App.” followed by its Tab letter designation and page number, if appropriate.

ix STATEMENT OF THE CASE

Nature of the case: This is an original proceeding to enforce a forum selection clause requiring the claims in the underlying lawsuit to be litigated in the Isle of Man. The underlying suit involves claims by Horie against Relators for fraud and breach of fiduciary duty, among others.

Trial Court: The Honorable Judge Jeff Shadwick, 55th Judicial District Court, Harris County, Texas.

Trial Court disposition: The trial court denied Relators’ Supplemental Motion to Dismiss based on the forum selection clause. The trial court then denied Relators’ Motion for Reconsideration and stayed discovery in the underlying case during the pendency of this original proceeding.

Action from which relief is Relators seek mandamus relief sought: from the trial court’s April 22, 2015 Order Denying Motion to Dismiss (App. A), and from the trial court’s June 1, 2015 Order from the bench denying the Motion for Reconsideration (App. D), issued in Cause No. 2014- 65947; in the 55th Judicial District, Harris County, Texas.

x STATEMENT OF JURISDICTION

This Court has jurisdiction over this Petition for Writ of

Mandamus pursuant to Article V, Section 6 of the Texas Constitution

and Section 22.221(b)(1) of the Texas Government Code. The Texas

Supreme Court repeatedly holds that mandamus is the proper remedy

when a trial court erroneously refuses to enforce a forum selection

clause, because the party attempting to enforce such a clause has no

adequate remedy by appeal. See In re Laibe Corp., 307 S.W.3d 314, 316

(Tex. 2010) (orig. proceeding); In re Int’l Profit Assocs., 274 S.W.3d 672,

677 (Tex. 2009) (orig. proceeding); In re ADM Investor Servs., 304

S.W.3d 371, 374 (Tex. 2010); In re Lyon Fin. Servs., Inc., 257 S.W.3d

228 (Tex. 2008) (orig. proceeding); In re AutoNation, Inc., 228 S.W.3d

663 (Tex. 2007) (orig. proceeding); In re Automated Collection Techs.,

Inc., 156 S.W.3d 557 (Tex. 2004) (orig. proceeding); In re AIU Ins. Co.,

148 S.W.3d 109 (Tex. 2004) (orig. proceeding).

xi ISSUE PRESENTED

In Texas, parties resisting enforcement of a forum selection clause bear a heavy burden of proof. Such clauses are enforceable even by non-signatories to the agreement containing the forum selection clause if the plaintiff asserts interdependent and concerted misconduct among signatories and non-signatories. Here, Relators are included in the scope of a release in a prior settlement agreement. The Settlement Agreement contains a mandatory forum selection clause requiring all claims arising out of or in connection with the agreement to be brought in the Isle of Man. Plaintiff Takafumi Horie asserts claims against the Relators and alleges interdependent and concerted misconduct between Relators and the signatories to that agreement.

The issue is whether the trial court abused its discretion in refusing to enforce the mandatory forum selection clause in the prior settlement agreement and to dismiss the claims against Relators.

xii I. STATEMENT OF FACTS

On November 10, 2014, Horie, a Japanese billionaire investor,

filed the underlying lawsuit against the Relators and three other

entities: Excalibur Limited; Excalibur Almaz Limited; and Excalibur

Almaz USA, Inc. (collectively, “Excalibur”). (MR 1). Horie alleged that

he was duped into investing $49,003,000 in Excalibur Almaz Limited

(“EA”), an Isle of Man company whose business is private commercial

space flight. (MR 1-4).1 As discussed below, Horie later amended his

petition to replace references to the Excalibur entities with generalized

references to a “space enterprise” or “space business.” (MR 77).

More than four years before this suit was filed, on June 29, 2010,

Horie, EA, and others entered into a Deed of Assignment and

Settlement (“Settlement Agreement”) settling all claims related to

Horie’s $49,003,000 investment. (MR 262-83). The Settlement

Agreement included a mandatory forum selection clause requiring

resolution of all disputes in the Isle of Man:

This Deed and any dispute or claim arising out of or in connection with it or its subject matter, existence, negotiation, validity, termination, or enforceability

1The Isle of Man is a self-governing island member of the United Kingdom, located between the islands of Great Britain and Ireland.

1 (including non-contractual disputes or claims) shall be governed by and construed in accordance with the laws of the Isle of Man.

Each Party irrevocably agrees that the Courts of the Isle of Man shall have exclusive jurisdiction in relation to any dispute or claim arising out of or in connection with this Deed or its subject matter, existence, negotiation, validity, termination, or enforceability (including non-contractual disputes or claims).

(MR 277, Settlement Agreement, at §13.1-13.2). The broad forum

selection clause covers all claims “arising out of or in connection with”

the “subject matter” of the Settlement Agreement, or its “negotiation” or

“enforceability.” (Id.). Thus, Horie irrevocably agreed to a mandatory

and exclusive forum in the Isle of Man for resolution of all conceivable

claims arising in connection with the subject matter of the Settlement

Agreement. (Id.). The subject matter of the Settlement Agreement

specifically includes Horie’s $49,003,000 investment in EA.

A. Horie’s Investment in EA

The Settlement Agreement includes recitals that refer to several

prior agreements reflecting the evolution of Horie’s investment in EA.

(MR 264-65). On October 16, 2005, Horie (doing business as “Japan

Space Dream” or “JSD”) entered into a Memorandum of Understanding

(“MOU”) with EA to develop a commercial spaceflight business using

2 Almaz space capsules. (MR 285-88). In the MOU, Horie agreed to

purchase 75% of EA’s stock for $49,003,000, payable in three tranches,

the first upon execution of the MOU, the second on January 31, 2006,

and the third on January 31, 2007. (MR 285). The MOU states that

“[d]isputes shall be settled according to the laws of both Japan and The

Isle of Man.” (MR 288).

Shortly after entering into the MOU, Horie was arrested in

January 2006 and charged with securities fraud relating to

manipulations of the publicly traded stock in his company, then known

as “Livedoor Holdings.” (MR 319-22). Subsequently, he was tried,

convicted, and sentenced to prison on March 16, 2007. (MR 324-26).

After his arrest but prior to his conviction, Horie defaulted on the

third tranche of his investment in EA, due in January 2007. (MR 285,

290). As a result, on June 10, 2007, while the criminal case was on

appeal, Horie/JSD entered into a Side Agreement with EA to amend the

MOU. (MR 290-93). The Side Agreement provides, among other things,

that Horie’s shares in EA would be held in trust by a mutually

acceptable, independent third-party trustee “until such time that Mr.

Horie is found to be innocent or completes his sentence ….” (MR 292).

3 The Side Agreement also provides that all disputes between Horie and

EA would be resolved by binding arbitration in the Isle of Man. (Id.).

In accordance with the Side Agreement, Horie established the “Abbey

Trust” on March 14, 2008, and conveyed his shares in EA to the Trust.

(MR 295-317). Thus, as of March 2008, Horie was no longer an EA

shareholder, although he retained a beneficial interest in the EA shares

through the Abbey Trust.

In the wake of Horie’s securities fraud conviction, his former

company (which changed its name from Livedoor to LDH Corporation,

“LDH”), sued Horie for damages. (MR 244-45; MR 328, at ¶C; MR 334-

35, at ¶(F), 2; MR 356-37, at ¶(F), 2). To settle these claims, Horie

entered into three separate agreements, each dated December 25, 2009,

and irrevocably assigned his ownership interest in EA, including his

beneficial interest in the Abbey Trust, to LDH. (MR 328-76). Thus, as

of December 2009, Horie no longer owned any shares of EA, or any

interest in the commercial space flight business undertaken by EA.

B. The Settlement Agreement

As noted above, in June 2010, Horie, EA, LDH, and George Abbey

(trustee of the Abbey Trust) entered into the Settlement Agreement.

4 (MR 262). The Settlement Agreement included recitals concerning the

prior agreements relating to Horie’s investment—including the MOU,

Side Agreement, and Abbey Trust—and provided that those agreements

would be terminated. (MR 267). The underlying purpose of the

Settlement Agreement was to redeem the EA stock that was originally

acquired by Horie in 2005 for $49,003,000, and then transferred to LDH

in 2009, as described above, and to resolve any other remaining issues

among the parties.

Therefore, under the Settlement Agreement, EA redeemed the

shares in exchange for payment of “Redemption Proceeds” to LDH. (MR

265-67). However, as a condition for redemption of these shares, it was

necessary for Horie to be a party to the Settlement Agreement, and to

participate in the mutual releases contained therein. Accordingly,

Horie specifically released EA and “its Affiliates, shareholders,

subsidiaries, employees, officers, directors, trustees, assigns,

transferees, representatives, principals and agents (individually and

collectively, the “Company Group”) from any Claims that Mr. Horie …

might have against the Company Group.” (MR 267, Settlement

5 Agreement, at §5.1.2). The term “Claims” is broadly defined in the

Settlement Agreement to include:

a claim, potential claim, counterclaim, potential counterclaim, right of set-off, indemnity, liability, cause of action, right or interest of any kind or nature whatsoever, whether known or unknown, suspected or unsuspected, contingent or actual, however and whenever arising and in whatever capacity and jurisdiction, including, without limitation arising out of or in connection with termination of any agreement or arrangement contemplated in Clause 4 of this Deed.

(MR 278).

The Relators are each within the definition of the “Company

Group.” Specifically, Dula and Hightower are alleged to be officers and

directors of EA. (MR 5-6). Dula and Hightower are also alleged to have

acted as representatives or agents of EA in their capacities as trustees

for the Heinlein Trust. (MR 20). Friedman is general counsel of

Excalibur Almaz USA, Inc. (MR 16), which is an “Affiliate” of EA. (MR

278).2 Thus, Friedman is a part of the Company Group. (MR 267). The

Law Offices of Art Dula is alleged to be the alter ego of Dula. (MR 5,

2 The Settlement Agreement defines “Affiliates” as, “in relation to a Party, any other person which directly or indirectly Controls, is Controlled by, or is under direct or indirect common Control with, that Party from time to time.” (MR 278, Settlement Agreement, at Sch. 1, §1). 6 20). The Relators, as members of the Company Group, are entitled to

enforce the forum selection clause.

Finally, the Settlement Agreement recites that:

Each Party has either had the terms and effect of this Deed explained by independent legal counsel or had the full opportunity to have its terms and effect explained by independent legal counsel; and each Party enters into this Deed freely, knowingly and voluntarily, free from duress of any kind.

(MR 274, Settlement Agreement, at §11.4). As described below, this

provision is inconsistent with Horie’s argument below that the

Settlement Agreement should somehow be viewed as an agreement

between an attorney and his client.

All of these provisions make it abundantly clear that the purpose

of the Settlement Agreement was to allow EA to redeem the shares

Horie originally purchased (then owned by LDH) and for all interested

parties, represented by independent counsel, to mutually release any

and all claims relating to Horie’s investment in EA. As parties subject

to this Settlement Agreement, Relators are entitled to enforce the forum

selection clause, and insist that the Isle of Man is the exclusive

jurisdiction for Horie’s claims.

7 C. The Original and Amended Petitions

Horie ultimately lost all of his appeals and was incarcerated in

Japan from June 2011 to March 2013. (MR 244). Horie filed his

Original Petition in this lawsuit in November 2014, asserting claims

directly against EA, a party to the Settlement Agreement, the Excalibur

entities, and the Relators. (MR 1-2). The Original Petition falsely

alleged that Dula was Horie’s lawyer when Dula “induced” Horie to

invest in EA in 2005. (MR 2-3). Horie also alleged that Dula and

Hightower were directors of EA and the Chief Executive Officer (“CEO”)

and Executive Vice President (“EVP”), respectively, and that EA was

the alter ego of Dula. (MR 5-6). The Defendants, then including the

Relators and the Excalibur entities, filed a Motion to Dismiss to enforce

the mandatory forum selection clause in the Settlement Agreement, and

set the Motion to Dismiss for hearing on Monday, March 9, 2015. (MR

30-65).

In an obvious attempt to avoid the forum selection clause, Horie

filed an Amended Petition one business day before the oral hearing on

Relators’ Motion to Dismiss. (MR 76-88). The Amended Petition does

not contradict the Original Petition or change the substance of Horie’s

8 claim. In the Amended Petition, Horie still seeks to recoup his

investment of the very same $49,003,000. (MR 81-82). The Amended

Petition simply makes the same factual allegations in more generalized

terms.

For example, both the Original Petition and the Amended Petition

include the following allegation:

Dula represented he had connections with the Russian aerospace company NPO Mashinostroyenia (“NPOM”) who would provide hardware and technical expertise to build a commercial space business. He represented that he had acquired rights to NPOM space-proven capsules that could be used in a space program. Dula represented that he was well-connected and could assemble the professionals necessary to build a commercial space program. However, from the beginning, Dula had no intent to build a space program, but only to take Plaintiff’s monies for his own use, utilizing a complex ruse, contrary to the interests of his cestui que trust. Dula convinced Plaintiff to place $49,003,000.00 into Dula’s trust account for purposes of doing due diligence, and later setting up a space program in conformity with U.S. law and regulations (Dula claimed and continues to claim to be a “space law” expert)….

(MR 7-8 (Original Petition); MR 81-82 (Amended Petition)). The

Original Petition alleges that Dula used the Excalibur entities for this

purpose, while the Amended Petition refers more generally to a

“schemes and devices.” (MR 82). However, the use of the more

generalized term does not change the Plaintiff’s essential allegations.

9 In fact, the primary change in the Amended Petition is the effort

to replace all specific references to the Excalibur entities with more

general references to a “space business” or “space enterprise,” and to

obscure the Relators’ connections to the Excalibur entities. (See, e.g.,

MR 77-80, 82-85). The Original Petition provides explanation and

context for these intentionally vague allegations in the Amended

Petition.3

The central allegation in the Amended Petition is that Dula made

false representations concerning the proposed “commercial space

business,” and convinced Horie to invest $49,003,000 in that business.

(MR 7-8 (Original Petition); MR 81-82 (Amended Petition)). Despite

Plaintiff’s unusual but artful effort to plead more vaguely and generally

in the Amended Petition than in the Original Petition, both Petitions

refer to the same $49,003,000 investment. The Original Petition can

and should be relied upon to explain that the “space business or

enterprise,” as it is called in the Amended Petition, refers directly to the

Excalibur entities and Relators’ connection therewith.

3 Superseded pleadings are admissible evidence as party admissions that “remain forceful” even after subsequent pleadings have been filed. Bay Area Healthcare Grp., Ltd. v. McShane, 239 S.W.3d 231, 235 (Tex. 2007); Westchester Fire Ins. Co. v. Lowe, 888 S.W.2d 243, 252 (Tex. App.—Beaumont 1994, no writ).

10 D. The Rulings Below

On April 9, 2015, Relators filed a Supplemental Motion to

Dismiss, arguing that Horie’s artful pleading4 could not evade the

application of the forum selection clause in the Settlement Agreement.

(MR 93-214). A hearing on the Supplemental Motion to Dismiss was

held on April 20, 2015. (App. C, MR 216). The trial court denied the

Motion, drawing three erroneous conclusions. (App. A). The court first

stated that the “pending cause of action is against Defendants in

capacities different than their capacities under which they were

signatories (in the case of Dula and Hightower)” of the Settlement

Agreement. (App. A, MR 232). The court then noted that “the courts of

the Isle of Man may not have jurisdiction over the parties, thus leaving

Plaintiff without a remedy.” (App. A, MR 232-33). Finally, the court

stated that “considering that settlement of claims by a client against his

attorney require specific and additional proof, the Court at this time

4 As used here, “artful pleading” includes deliberately making allegations vague to avoid forum selection clause. As the Texas Supreme Court has explained, the applicability of forum selection clauses must be determined based on the “substance of the claim, not artful pleading.” In re Int’l Profit Assocs., 274 S.W.3d 672, 677 (Tex. 2009) (orig. proceeding). Because artful pleading cannot defeat a binding forum selection clause, the court must use a “common-sense examination of the claims and the forum-selection clause to determine if the clause covers the claims.” Id. (citing Ginter ex. rel. Ballard v Belcher, Prendergast, & Laporte, 536 F.3d 439, 444 (5th Cir. 2008)).

11 observes that the release does not appear to include these claims

against these Defendants.” (App. A, MR 233).

Relators Dula and Hightower filed a Motion for Reconsideration

on May 13, 2015. (MR 238-499). An oral hearing was held on this

motion and several pending discovery motions. (App. D, MR 235-37).

The trial court denied the Motion for Reconsideration, but stayed

discovery in the underlying suit. (App. D). This proceeding followed.

II. SUMMARY OF THE ARGUMENT

In his Amended Petition, Horie brings claims related to his

$49,003,000 investment in Excalibur, a space-related business.

However, in the July 2010 Settlement Agreement, Horie released all

claims against Relators related to this $49,003,000 investment. (MR

267-68). The Settlement Agreement contains a mandatory forum

selection clause providing that the Isle of Man is the exclusive

jurisdiction for resolving disputes relating to the Settlement Agreement.

(MR 277). Texas law imposes a heavy burden of proof upon parties

resisting the enforcement of a forum selection clause. Horie did not

even attempt to meet this burden in the lower court, and cannot do so

as a matter of law. Therefore, the Relators are entitled to dismissal of

12 the claim brought by Horie in a Texas court.

The Relators are entitled to enforce the mandatory forum selection

clause because they are each members of the “Company Group” defined

as released parties in the Settlement Agreement. (MR 267). Moreover,

under binding Texas precedent, Relators are entitled to enforce the

binding forum selection clause because Horie has alleged that the

Relators have acted in concert with one another as part of a “private

commercial space program”—Excalibur. Where, as here, a plaintiff

alleges interdependent and connected misconduct between a party to

the Settlement Agreement (EA) and non-parties (Relators), the non-

parties may enforce the forum selection clause. See Deep Water Slender

Wells, Ltd. v Shell Int’l Exploration & Prod. Inc., 234 S.W.3d 679 (Tex.

App.—Houston [14th Dist.] 2007, pet. denied).

Horie argued to the trial court that he could avoid the burden of

resisting the forum selection clause by falsely alleging that Dula was

his attorney. This argument is unavailing. First, the same “heavy

burden” in resisting a forum selection clause also applies to forum

selection clauses in contracts between an attorney and client. Falk &

Fish L.L.P. v Pinkston’s Lawnmower & Equip., Inc., 317 S.W.3d 523,

13 527 (Tex. App.—Dallas 2010, no pet.). Horie has done nothing to meet

this burden. Second, Horie has not even alleged, let alone provided an

affidavit or other evidence, that Dula represented Horie in 2010, when

the Settlement Agreement was reached. Indeed, the Settlement

Agreement itself recites that the parties had access to independent

counsel. (MR 274). Third, it is simply not true that Dula was ever

Horie’s attorney. Plaintiff has only provided the most naked and

conclusory allegation of an attorney-client relationship between Horie

and Dula when the investment was made in 2005. No proof of this

relationship has been provided, and the record contains unrebutted

evidence to the contrary. (MR 378-80).

Horie also cannot meet this “heavy burden of proof” under any

other theory. The recognized public policy favoring enforcement of

mandatory forum selection clauses of this nature cannot be defeated

simply by artfully pleading in generalities about space businesses

instead of specifically identifying the Excalibur entities. Nor can the

forum selection clause be evaded simply by pleading fraud, particularly

given the language of this particular Settlement Agreement.

Given all of the foregoing, the Amended Petition does not allege

14 that Relators acted “in capacities different then their capacities under

which they were signatories” of the Settlement Agreement. (App. A).

To the contrary, Relators are entitled to enforce the forum selection

clause in the Settlement Agreement, and to have the courts of the Isle

of Man determine that the release in the Settlement Agreement bars

Horie’s alleged $49,003,000 claim. The trial court’s failure to dismiss

Horie’s claims pursuant to the forum selection clause was an abuse of

discretion. Mandamus is required.

III. ARGUMENT & AUTHORITIES

A. Horie Faces a “Heavy Burden” to Resist the Application of the Forum Selection Clause

Under Texas law, a contractual forum selection clause is

presumed to be valid and enforceable. In re Laibe Corp., 307 S.W.3d

314, 316–17 (Tex. 2010) (orig. proceeding). Phoenix Network Techs.

(Europe) Ltd. v. Neon Sys., Inc., 177 S.W.3d 605, 611 (Tex. App.—

Houston [1st Dist.] 2005, no pet.) (holding that a forum selection clause

is prima facie valid); In re Boehme, 256 S.W.3d 878, 881 (Tex. App.—

Houston [14th Dist.] 2008, orig. proceeding); Deep Water Slender Wells,

Ltd., 234 S.W.3d at 692. The party opposing the enforcement of a forum

15 selection clause bears a heavy burden of proof. In re Laibe Corp., 307

S.W.3d at 316.

“In determining whether to enforce a mandatory forum selection

clause, courts must determine whether the claims in the case at hand

fall within the scope of the forum selection clause and whether the court

should enforce the clause.” Deep Water Slender Wells, Ltd., 234 S.W.3d

at 687. In cases such as this one, courts must also determine “whether

nonsignatories to the contract can enforce the forum selection clause.”

Id. If the claims fall within the scope of the clause, enforcement is

mandatory unless the party opposing enforcement clearly shows “(1)

enforcement would be unreasonable or unjust, (2) the clause is invalid

for reasons of fraud or overreaching, (3) enforcement would contravene

a strong public policy of the forum where the suit was brought, or (4)

the selected forum would be seriously inconvenient for trial.” In re

Laibe Corp., 207 S.W.3d at 316 (quoting In re ADM Investor Servs., Inc.,

304 S.W.3d 371, 375 (Tex. 2010)).

Texas courts routinely hold that mandamus is the proper remedy

when a trial court erroneously refuses to enforce a forum selection

clause. In re Laibe Corp., 307 S.W.3d at 316 (citing In re ADM Investor

16 Servs., 304 S.W.3d at 374); In re Int’l Profit Assocs., 274 S.W.3d at 677;

In re Lyon Fin. Servs., Inc., 257 S.W.3d 228 (Tex. 2008) (orig.

proceeding); In re AutoNation, Inc., 228 S.W.3d 663 (Tex. 2007) (orig.

proceeding); In re Automated Collection Techs., Inc., 156 S.W.3d 557

(Tex. 2004) (orig. proceeding); In re AIU Ins. Co., 148 S.W.3d 109 (Tex.

2004) (orig. proceeding).

Although the standard for reviewing the trial court’s refusal to

enforce a forum selection clause is abuse of discretion, “to the extent

[this Court’s] review involves the construction or interpretation of an

unambiguous contract, the standard of review is de novo.” Deep Water

Slender Wells, Ltd., 234 S.W.3d at 687 (citing Phoenix Network Techs.,

177 S.W.3d at 687). Here, the applicability of the forum selection clause

depends in part on the Court’s interpretation of an unambiguous

contract—including whether Relators are within the “Company Group”

defined in the Settlement Agreement. If so, Relators are entitled to

B. Relators Are Entitled to Enforce the Forum Selection Clause

Although the Relators are not directly named parties in the

Settlement Agreement, they are entitled to enforce the forum selection

17 clause for two reasons. First, the express terms of the Settlement

Agreement include the Relators in the definition of the “Company

Group” that was released. (MR 267). Second, Horie sued both

signatories and non-signatories to the Settlement Agreement, and

alleged interdependent and concerted misconduct among these

defendants, which allows the Relators to invoke the forum selection

clause. Deep Water Slender Wells, 234 S.W.3d at 693-94.

1. The Relators are in the “Company Group”

The named parties to the Settlement Agreement are Horie,

George Abbey (trustee of the Abbey Trust), LDH, and EA.5 (MR 262).

In the Settlement Agreement Horie released not only EA, but also:

[I]ts Affiliates, shareholders, subsidiaries, employees, officers, directors, trustees, assigns, transferees, representatives, principals and agents (individually and collectively, the “Company Group”) ….

(MR 267). Horie initially sued EA directly and also sued “Affiliates” of

EA (MR 5-6), but later amended his petition and removed the Excalibur

entities. The amendment has no effect on the Relators’ ability to

5 Dula and Hightower each signed the Settlement Agreement as directors of EA. (MR 162).

18 enforce the forum selection clause, because the Relators are part of the

“Company Group.” (MR 267).

As noted above, Dula is alleged to be a director and CEO of EA.

(MR 5). Hightower is alleged to be a director and the EVP of EA. (MR

6). As officers and directors of EA, it is beyond dispute that Dula and

Hightower are a part of the “Company Group” defined in the Settlement

Agreement. (MR 267).

Dula and Hightower are also alleged to have acted as

representatives or agents of EA in their capacities as trustees for the

Heinlein Trust. (MR 77, 85). In fact, the only allegation in the

Amended Petition relating to the Heinlein Trust is that “Dula used his

position as trustee” of the Heinlein Trust to carry out the alleged

wrongdoing. (MR 77). Horie asserts no cause of action against the

Heinlein Trust directly, but only claims that Dula and Hightower

“operated the Heinlein Prize Trust as his alter-ego … thus it bears the

same liability for his acts as does” Dula. (MR 85). Since the Amended

Petition claims only that the Heinlein Trust is the alter ego of Dula,

then the Heinlein Trust must be considered a part of the Company

Group, to the same extent as Dula.

19 Likewise, Horie named “the Law Offices of Art Dula” as a separate

party in the caption of his Amended Petition, but there are no separate

allegations against the Law Offices of Art Dula; in fact, there is no

mention of the Law Offices of Art Dula in the Amended Petition

whatsoever, other than that it is a “d/b/a” of Dula. (MR 80). Horie has

not alleged that the Law Offices of Art Dula is a separate business

entity, essentially only claiming that it is a sole proprietorship, which

has no separate legal existence. See CU Lloyd’s of Texas v. Hatfield,

126 S.W.3d 679, 684 (Tex. App.—Houston [14th Dist.] 2004, pet. denied)

(“Under Texas law, a sole proprietorship has no separate legal existence

apart from the sole proprietor.”). Therefore, the Law Offices of Art Dula

is alleged to be the same as Dula, and thus must be considered a part of

the Company Group.

Horie alleged that Friedman was general counsel of Excalibur

Almaz USA, Inc. (MR 16). Excalibur Almaz USA, Inc. is an “Affiliate”

of EA as defined in the Settlement Agreement. (MR 278, Settlement

Agreement, at Sch. 1, §1). Thus, Friedman is part of the Company

Group. (MR 267). Further, Friedman’s name appears only three times

in the Amended Petition: in the caption, in the first paragraph listing

20 defendants, and in the identification of “Parties.” (MR 76, 80). The only

“allegation” is that Friedman “is a lawyer at the law office of Art Dula.”

(MR 80). Because there are no other allegations against her, Friedman

would be included in the Company Group to the same extent as the Law

Offices of Dula. Thus, all of the Relators fall within the Company

Group that was released by Horie in the Settlement Agreement, and

therefore are entitled to invoke the forum selection clause.

2. Relators Can Enforce the Forum Selection Clause as Non-Signatories

Even aside from the express and unambiguous definition of

“Company Group” in the Settlement Agreement, Relators would still be

entitled to enforce the forum selection clause. Under Texas law, “[a]

non-signatory defendant can invoke a forum-selection clause if the

signatory plaintiff “has sued signatory and non-signatory defendants

based on substantially interdependent and concerted misconduct by all

defendants.” Phoenix Network Techs., 177 S.W.3d at 622; Deep Water

Slender Wells, Ltd., 234 S.W.3d at 693-94.

The Deep Water case is directly on point and compels enforcement

of the forum selection clause. In Deep Water, the 14th Court of Appeals

considered the defendants’ attempt to enforce a forum selection clause

21 between the plaintiff and a related Dutch corporation that was not part

of the litigation. 234 S.W.3d at 683-84. The forum selection clause

called for exclusive jurisdiction in the Netherlands. Id. The plaintiff

sued a Delaware corporation and three individuals, pleading that the

Delaware corporation was an alter ego and successor to the Dutch

corporation, and that the individual defendants engaged in

“interdependent and concerted tortious conduct” with the Dutch

corporation with the intent to defraud the plaintiff. Id. at 694.

The Deep Water court recognized that “courts should apply

equitable estoppel when a signatory to the contract containing the

forum-selection clause raises allegations of substantially

interdependent and concerted misconduct by both nonsignatories and

one or more signatories to the contract.” Id. Accordingly, recognizing

the presumption in favor of the enforceability of forum selection clauses

and the heavy burden imposed upon those resisting them, the Deep

Water court found that the nonsignatory corporation and individuals

were entitled to enforce the forum selection clause. Id.

The facts here are similar since Horie has sued Relators, alleging

that they engaged in “substantially interdependent and concerted

22 misconduct” with EA, which is a named party to the Settlement

Agreement. Horie continues to allege that the Relators collectively

operated a “space business,” which clearly refers to EA and the other

Excalibur entities. (MR 77-79). Further, Horie names Dula and

Hightower as defendants, who both signed the Settlement Agreement

as directors of EA. (MR 80-81, 162). The Amended Petition is replete

with allegations of concerted interdependent and concerted misconduct,

essentially claiming throughout the pleading that Dula, acting through

or in concert with all the Relators, defrauded Horie out of $49,003,000.

(See, e.g., MR 85) (“Each of the causes of action herein is pled against all

Defendants, individually and collectively.”).

Accordingly, all Relators are entitled to invoke the forum selection

clause contained in the Settlement Agreement. Deep Water Slender

Wells, Ltd., 234 S.W.3d at 693-94; see also Smith v. Kenda Capital,

LLC, 451 S.W.3d 453, 458 (Tex. App.—Houston [14th Dist.] 2014, no

pet.); Phoenix Network Techs., 177 S.W.3d at 622 (concluding that the

equitable-estoppel theories regarding non-signatories to arbitration

agreements should also be applied to forum-selection clauses that do

not involve arbitration); Accelerated Christian Educ., Inc. v. Oracle

23 Corp., 925 S.W.2d 66 (Tex. App.—Dallas 1996), overruled in part on

other grounds by In re Tyco Electronics Power Sys., Inc., No. 05–04–

01808–CV, 2005 WL 237232 (Tex. App.—Dallas Feb. 2nd, 2005, orig.

proceeding) (“[A] valid forum selection clause governs all transaction

participants, regardless of whether the participants were actual

signatories to the contract.”); see also Brock v. Entre Computer Ctrs.,

Inc., 740 F. Supp. 428, 431 (E.D. Tex. 1990).

Notwithstanding the foregoing, the trial court’s Order notes that

the Deep Water case “directs and authorizes the Court to consider a

number of factors including the strong possibility, according to counsel

at the oral argument of this motion, that the courts of the Isle of Man

may not have jurisdiction over the parties, thus leaving Plaintiff

without a remedy if this matter is dismissed.” (App. A, MR 232-33).

This conclusion misapplies the Deep Water decision.

First, the Deep Water court actually rejected the argument that

the party enforcing the forum selection clause must prove that the

forum selection clause was enforceable in the chosen forum. 234 S.W.3d

at 695. Indeed, the Deep Water court found that amenability to the

selected jurisdiction was not relevant to consideration of the

24 enforceability of the forum selection clause. Id. Therefore, contrary to

the court’s finding otherwise, Relators do not have the burden to prove

that the forum selection clause would be enforceable in the Isle of Man.

Second, the Deep Water court expressly rejected the plaintiff’s

claim that the forum selection clause “would be so manifestly and

gravely inconvenient to the resisting party that the resisting party

effectively would be deprived of a meaningful day in court.” Id. at 693.

It is Horie’s burden to make a “strong showing” that he would be

deprived of a meaningful day in court if the forum selection clause is

enforced. But Horie offered no affidavits or other evidence whatsoever

in this regard. The Deep Water case does not authorize the court to

reject a valid and binding forum selection clause where Horie offers no

evidence whatsoever in support of the “strong showing” necessary to

avoid a contractual mandatory forum selection clause.

Third, Horie’s counsel claimed at the hearing, without authority

or proof, that the Isle of Man did not have jurisdiction. (App. C, at p. 6-

7). As a matter of law, this is inadequate to support the denial of the

motion to dismiss. In any event, for avoidance of doubt, Dula and

Hightower have acknowledged that they are subject to the jurisdiction

25 of the courts of the Isle of Man as a result of their positions as CEO and

Executive Vice President of EA. (MR 240, App. D, at p. 5). Thus, none

of the concerns expressed by the trial court in its order defeat

applicability of the forum selection clause under Deep Water.

C. Horie Cannot Avoid the Forum Selection Clause by Falsely Claiming that Dula was his Attorney

This is a case between sophisticated businessmen, not an attorney

and client. Significantly, Horie does not assert a claim for legal

malpractice. But Horie does make bare allegations in the Amended

Petition that Dula was his lawyer. (MR 77). Even if the fiction of Dula

as Horie’s lawyer was believed, the forum selection clause would still be

enforceable. Under Texas law, forum selection clauses are valid and

enforceable, even in contracts between attorneys and clients. Falk &

Fish, 317 S.W.3d at 527 (stating, in context of an attorney-client

agreement, that “[f]orum selection clauses are generally enforceable”).

Indeed, the heavy burden of resisting application of a forum selection

clause is the same in contracts between attorneys and clients as it is in

other contracts; this is clear from Falk & Fish—the very same authority

that Horie relies on. Id. (“A party attempting to show that such a clause

26 should not be enforced bears a heavy burden to prove the clause is

invalid.”).

Horie has not come close to meeting this heavy burden of proof.

He has not provided one scintilla of evidence that Dula was his lawyer

at any time. There is no affidavit from Horie, or any other evidence

whatsoever, to support the naked assertions in his pleading. At best,

Horie alleges—without evidence—that Dula was his lawyer in 2005

when he decided to invest in EA. (MR 77 (alleging that Horie engaged

Dula when he invested $49,003,000 for the purpose of setting up a space

travel business)). There is not even an allegation, much less evidence,

that the purported representation continued to 2010.6 Horie was

represented by independent counsel when he entered into the

Settlement Agreement. (MR 378-80). Horie represented in the

6Horie’s allegation that Dula was his lawyer is pure fiction. But even as alleged by Horie, the case is similar to LeBlanc v. Lange, 365 S.W.3d 70, 79 (Tex. App.— Houston [1st Dist.] 2011, no pet.), where the plaintiff claimed that a business associate was also his personal lawyer. In that case, an attorney (Lange) and a businessman (LeBlanc) formed several corporate entities together. Id. at 73-75. A dispute between LeBlanc and the company arose, and ended with a settlement agreement. Id. at 75-76. Rather than abide by the terms of the settlement agreement, LeBlanc sued the company and Lange, claiming that Lange had represented him personally in connection with the business and the settlement agreement. Id. at 78. The court concluded that, while Lange had previously represented LeBlanc personally, there was no evidence (other than LeBlanc’s subjective belief) that the attorney-client relationship existed during the time period relevant to the settlement agreement. Id. at 82.

27 Settlement Agreement that he had “either had the terms and effect …

explained by independent legal counsel or had the full opportunity to

have its terms and effect explained by independent legal counsel.” (MR

274, Settlement Agreement, at §11.4). This representation is contrary to

any inference that Dula was still representing him in connection with

the agreement. (See id.).

Horie has not pointed to any evidence which remotely suggests

that the Settlement Agreement is an attorney-client contract, and there

is no such indication in the four corners of that document. But even in

the context of attorney-client contracts, the party resisting enforcement

of the forum selection clause bears the burden of proof, Falk & Fish, 317

S.W.3d at 527, and Horie relies on nothing but bare allegations in the

pleadings, and even those bare allegations are insufficient.

Falk & Fish, the only authority that Horie cited in the underling

action for the proposition that the allegation of an attorney-client

relationship defeats the forum selection clause, is readily

distinguishable. In that case, a Dallas law firm was retained to

represent a North Carolina client in a North Carolina lawsuit. 317

S.W.3d at 525. The attorney-engagement agreement contained a forum

28 selection clause stating that “the applicable courts of Dallas, Texas

shall be the for a (sic) for all attorney-client disputes.” Id.

Subsequently, the parties found themselves in a billing dispute, and the

law firm sued the client in Dallas. Id. The trial court refused to enforce

the forum selection clause and dismissed the firm’s complaint for lack of

personal jurisdiction. Id. at 526

On appeal, the Falk court recognized the presumed enforceability

of a forum selection clause, and the heavy burden placed upon the party

resisting the clause. Id. at 527. However, unlike the instant case, the

client had submitted affidavits indicating that he did not understand

that disputes would be resolved in Texas rather than North Carolina,

where he lived, and that his attorney did not explain that he was

acquiescing to an inconvenient forum in Texas. Id. at 529. While the

court recognized that a client’s failure to read the contract did not

excuse performance, the fact that it was an attorney-client contract,

coupled with the typographical error and consequent ambiguity of the

clause, caused the Falk court to find that the client in that case met his

burden to avoid enforcement of the forum selection clause. Id. at 530.

29 The Falk case is readily distinguishable on several grounds. First,

in contrast to the clause at issue in this case, the forum selection clause

in Falk was indefinite, non-exclusive, and contained a typographical

error that did render it ambiguous. Id. at 529. The forum selection

clause here contains no such infirmity. Second, the party resisting the

forum selection clause in Falk actually did submit affidavits to sustain

its burden to oppose enforcement of the clause. Id. Here, Horie has

submitted no affidavits or other evidence. Third, and most importantly,

in Falk the forum selection clause was unquestionably found in an

attorney engagement agreement. Id. at 525. In direct contrast, as

discussed above, the Settlement Agreement is not a contract between

an attorney and client, and there is not even an allegation that Dula

was Horie’s lawyer in 2010. The Settlement Agreement recites that

Horie had independent legal counsel, or had the full opportunity for

review by independent legal counsel. (MR 274). Given Horie’s multiple

legal problems, including the appeal of his criminal conviction and

sentence, and the defense of the claim by his former corporation, it is

clear that Horie had an array of counsel representing his interests when

the Settlement Agreement was signed in 2010. (MR 378-80). Clearly,

30 while the Falk case confirms the heavy burden of proof Horie faces even

if his allegations about Dula are true, Falk does not control the outcome

of this case. Horie clearly failed to meet his heavy burden of proof.

D. Horie Cannot Avoid the Forum Selection Clause by Pleading Fraud

Horie’s allegations that the Settlement Agreement was entered

into as a result of fraud does not allow him to escape the reach of the

forum selection clause for three reasons.

First, the plain language of the forum selection clause provides

that any claim made in connection with the contract’s negotiation or

validity is subject to the exclusive jurisdiction of the Isle of Man’s

courts. (MR 277) (stating that the Isle of Man is the proper forum for

any dispute or claim arising out of or in connection with the contract’s

“existence, negotiation, validity, termination or enforceability”).

Second, Texas law is unequivocal that allegations of fraudulent

inducement do not render a forum selection clause invalid or

unenforceable. “[S]imply alleging fraud in the inducement of a contract

is not sufficient to make a forum selection clause unenforceable.” My

Cafe-CCC, Ltd. v. Lunchstop, Inc., 107 S.W.3d 860, 867 (Tex. App.—

Dallas 2003, no pet.) (upholding dismissal of suit because forum

31 selection clause in agreement necessarily applied to fraudulent

inducement claim); see also In re Int’l Profit Assocs., 274 S.W.3d at 678.

“When . . . the forum selection clause encompasses all causes of action

concerning the contract, the claim that a party was fraudulently

induced to enter the contract does not avoid the forum selection clause.”

My Cafe-CCC, 107 S.W.3d at 867. “To allow a party to avoid its

obligations under a presumptively valid contract with a prima facie

valid forum-selection clause simply because the party might carry its

burden at trial would give the party an end run around ….” Clark v.

Power Mktg. Direct, Inc., 192 S.W.3d 796, 800 (Tex. App.—Houston [1st

Dist.] 2006, no pet.) (upholding dismissal of suit in which Plaintiff

alleged fraudulent inducement because forum selection clause provided

for different forum than one in which suit was brought). “[A] court

determining whether or not to enforce a forum-selection clause will not

inquire into the enforceability of the contract in which that clause is

found.” Id. (quoting Holeman v. Nat’l Bus. Inst., Inc., 94 S.W.3d 91, 102

(Tex. App.—Houston [14th Dist.] 2002, pet. denied) (rev’d on other

grounds)).

32 Third, the definition of “Claim” precludes any allegation of

fraudulent inducement. In the Settlement Agreement, Horie expressly

bargained away and released claims that were “known and unknown”

and “suspected and unsuspected.” (MR 278). He cannot claim that he

was fraudulently induced into entering into the Settlement Agreement

because of the alleged concealment of facts that he did not know and did

not suspect, when he has expressly released all such unknown and

unsuspected claims. Accordingly, Horie cannot escape the reach of the

forum selection clause to which he agreed by alleging that the contract

was entered into as a result of fraudulent conduct.

IV. CONCLUSION & PRAYER

Relators request that this Court grant this Petition and issue a

Writ of Mandamus ordering the trial court to vacate its April 22, 2015

Order Denying Motion to Dismiss (App. A), and its denial of the Motion

for Reconsideration (App. D), and issue orders dismissing all claims in

the case. Relator further requests such other and further relief to

which it may be entitled.

33 Respectfully submitted,

/s/Joshua C. Thomas Eric W. Kristiansen TBA No. 24027428 ekristiansen@bakerlaw.com Joshua C. Thomas TBA No. 24066185 jthomas@bakerlaw.com 811 Main, Suite 1100 Houston, Texas 77002-6111 Telephone (713) 751-1600 Facsimile (713) 751-1717

Michael R. Levin Pro Hac Vice Application to be Filed Florida Bar No. 351326 mlevin@bakerlaw.com 200 S. Orange Avenue, Suite 2300 Orlando, Florida 32801 Telephone (407) 649-4000 Facsimile (407) 841-0168

34 CERTIFICATION OF FACTUAL STATEMENTS

Pursuant to Rule 52.3(j) of the Texas Rules of Appellate Procedure, I have reviewed this Petition and concluded that every factual statement in the Petition is supported by competent evidence in the appendix or record.

/s/Joshua C. Thomas Joshua C. Thomas

CERTIFICATE OF COMPLIANCE

Pursuant to Rule 9.4(i)(3) of the Texas Rules of Appellate Procedure and relying on the word-count function of the computer program used to prepare this document, I certify that the total number of words in this document is 6,764.

35 CERTIFICATE OF SERVICE

I hereby certify that the foregoing Petition for Writ of Mandamus has been served in accordance with the Texas Rules of Appellate Procedure via electronic filing service and/or certified mail, return receipt requested on this 22nd day of June, 2015.

The Honorable Jeff Shadwick Presiding Judge, 55th Judicial District Court Harris County, Texas Harris County Civil Courthouse 201 Caroline, 9th Floor Houston, Texas 77002 Telephone No.: (713) 368-6055

Lloyd E. Kelley THE KELLEY LAW FIRM 2726 Bissonnet, Ste 240 PMB 12 Houston, TX 77005 Telephone (281) 492-7766 Facsimile (281) 652-5973

James D. Pierce 1 Sugar Creek Center, Ste. 1080 Sugar Land, Texas 77478 Telephone (713) 650-0150 Facsimile (713) 650-0146

36 APPENDIX TO PETITION FOR WRIT OF MANDAMUS

TAB DESCRIPTION

A April 22, 2015 Order Denying Motion to Dismiss

B First Amended Petition Original Petition

C Transcript of April 20, 2015 Hearing on Supplemental Motion to Dismiss

D Transcript of June 1, 2015 Hearing on Motion for Reconsideration and Discovery Motions

37 TAB A CAUSE NO. 2014-6594 7

TAKAFUMI HORIE § IN THE DISTRICT COURT OF § §

vs § § HARRIS COUNTY, T~aniel F I TJ ED § District Clerk

APR 2 2 201Jo~ 3 i11-- THE LAW OFFICES OF ART DULA, § Time: et al. § Harris County, Texjtf A ~~ _ § By: ...,r~ § 55TH JUDI CIAL.--,Dru;:ISsrTmR~WR'::mJ!r.L\Y-~~

ORDER DENYING MOTION TO DISMISS

Upon consideration of Defendants' Supplemental Motion to Dismiss,

Plaintiffs response, the exhibits submitted, and argument of counsel, the Court

rules that the motion is DENIED.

While Plaintiffs Original Petition is part of the file and available to the Court

for use in understanding the universe of facts, it is the Plaintiffs First Amended

Petition which is the active claim which will be dismissed or not. The pending

cause of action is against Defendants acting in capacities different than their

capacities under which they were signatories (in the case of Dula and Hightower) of

the Deed of Assignment and Settlement (the "Agreement"). Under the pleading and CertifiedDocumentNumber:65135810-Page1of2

the plain reading of the Agreement, the Court cannot say that this action is subject

to the release and forum selection clause as Defendants urge.

Further, Deep Water Slender Wells, Ltd. v. Shell Int'l Exploration & Prod.,

Inc. 234 S.W.3d 679 (Tex.App. - Houston [14th] 2007, pet denied) directs and

authorizes the Court to consider a number of factors including the strong

possibility, according to counsel at the oral argument of this motion, that the courts

232 of the Isle of Mann may not have jurisdiction over the parties, thus leaving Plaintiff

without a remedy if this matter is dismissed.

It may be that Defendants ultimately succeed through a motion for summary

judgment in demonstrating that the release in the Agreement does indeed apply to

Plaintiffs claims in this case, but the Court cannot make that determination at this

time. Under the pleadings and the Agreement, and considering that settlement of

claims by a client against his attorney require specific and additional proof, the

Court at this time observes that the release does not appear to include these claims

and these Defendants.

IT IS SO ORDERED.

SIGNED on the Z2 day of _ _+ - - - - -

J CertifiedDocumentNumber:65135810-Page2of2

233 I, Chris Daniel, District Clerk of Harris County, Texas certify that this is a true and correct copy of the original record filed and or recorded in my office, electronically or hard copy, as it appears on this date. Witness my official hand and seal of office this June 5, 2015

Certified Document Number: 65135810 Total Pages: 2

Chris Daniel, DISTRICT CLERK HARRIS COUNTY, TEXAS

In accordance with Texas Government Code 406.013 electronically transmitted authenticated documents are valid. If there is a question regarding the validity of this document and or seal please e-mail support@hcdistrictclerk.com

234 TAB B 11/10/2014 4:44:45 PM Chris Daniel - District Clerk Harris County Envelope No. 3128824 2014-65947 / Court: 055 By: Sharon Carlton Filed: 11/10/2014 4:44:45 PM

CAUSE NO. 2014- _________

§ IN THE DISTRICT COURT OF TAKAFUMI HORIE, § § § Plaintiff, § v. § § HARRIS COUNTY, TEXAS THE LAW OFFICES OF ART DULA, § ARTHUR M. DULA, individually, and d/b/a § THE LAW OFFICES OF ART DULA, § ANAT FRIEDMAN, individually, and d/b/a § THE LAW OFFICES OF ART DULA, § J. BUCKNER HIGHTOWER, § THE ROBERT A. AND VIRGINIA § HEINLEIN PRIZE TRUST, through its § trustees ARTHUR M. DULA AND § J. BUCKNERHIGHTOWER, § EXCALIBUR LIMITED, § EXCALIBUR ALMAZ LIMITED, and § EXCALIBUR ALMAZ USA, INC., § § Defendants. § ____TH DISTRICT COURT

PLAINTIFF’S ORIGINAL PETITION

I.

INTRODUCTION

This is a case werhe fraud occurred in the private spaceflight market. CertifiedDocumentNumber:63120901-Page1of28

Houston lawyer Art Dula and his law firm, the Law Office of Art Dula,

utilizing offshore shell corporations in the Isle of Man, defrauded a Japanese

billionaire investor, Takafumi Horie, out of $49 million cash, using Russian

made "Almaz" class spacecraft as the bait.

1 II.

Takafumi Horie files this Original Petition against Defendants The Law Offices of Art

Dula, Arthur M. Dula, individually and d/b/a The Law Offices of Art Dula, J. Buckner

Hightower, Anat Friedman, individually and d/b/a The Law Offices of Art Dula, The Robert A.

and Virginia Heinlein Prize Trust, Excalibur Limited, Excalibur Almaz Limited, and Excalibur

Almaz USA, Inc. for breach of fiduciary duty, violations of the Isle of Man Company Acts of

1931 and 2006, fraud, money had and money received, statutory theft, statutory fraud, violation

of the Texas Securities Act, an accounting, constructive and or resulting trust, and alternatively

for conversion, negligence and breach of contract. Plaintiff seeks rescission/damages in the

amount of his $49,003,000.00 original investment, plus interest, attorneys’ fees, and damages

allowed at law or equity, including punitive damages.

III.

CASE SUMMARY

This is a case about Houston attorney Art Dula, who took advantage of Japanese

entrepreneur Takafumi Horie, by claiming that he could set up a commercial space

transportation program to carry cargo, scientific experiments, and people into low Earth orbit

to the International Space Station and other space destinations. Dula was, and is, the lawyer and CertifiedDocumentNumber:63120901-Page2of28

a trustee for The Robert A. and Virginia Heinlein Prize Trust ("Heinlein Trust"). Heinlein was a

prolific science fiction author who was famous for writing about manned space exploration.

Dula used his position as trustee of the Heinlein Trust to promote his law firm in getting business

under the premise of establishing "new space business enterprises." Using his position as trustee

of the Heinlein Trust, Dula, through an intermediary, sought out Horie and solicited him as a

client and investor.

2 IV.

Horie engaged Dula as his attorney, and then trusted him enough to give Dula

$49,003,000.00 in trust for purposes of setting up a business to accomplish space travel. The

money was sent to Dula's Texas IOLTA client trust fund account to accomplish the goals for

Dula's client Horie. The Defendant corporations were set up by Art Dula, and the sole capital

for these companies was Plaintiff’s funds. Dula never intended to engage in a commercial space

program, and in fact continually misrepresented, concealed facts and defrauded his client

Takafumie Horie d/b/a Japanese Space Dream (“Horie”). His intent was to take his clients’

money over time through a complex scheme under the guise that he was building a space

program.

V.

Dula has gone to great lengths to hide and conceal his bad acts. Plaintiff Horie only

recently discovered the wrongs perpetrated against him by Defendants, because the facts were

concealed by Defendant Dula, and Dula never advised Horie of his wrong doing. Plaintiff relied

on and trusted Defendant Dula in Dula’s position as his attorney, his fiduciary, and because of

his representations as to his expertise concerning his spaceflight project and his investment

therein.

VI. CertifiedDocumentNumber:63120901-Page3of28

Plaintiff Horie became aware of Dula’s scam when he read an article by Alexander

Forbes that Dula had sold at auction one of the spacecraft articles purchased with Plaintiff’s

money. The Forbes article implied that the company was liquidating, and indicated the

spacecraft was only suitable for display in a museum, and not as a potential flight article as had

been falsely represented to Plaintiff Horie from the beginning. The supposed space program was

3 a sham, as Dula never had the rights or ability to utilize the spacecraft purchased with Plaintiff’s

money for anything other than display purposes. However, this fact was kept secret from

Plaintiff and other persons associated with the Excalibur Almaz project for years. Plaintiff never

authorized the funds held in trust be utilized to purchase spacecraft sold for display purposes.

Plaintiff never authorized funds held in trust to be utilized to set up a "space program" incapable

of space travel. Plaintiff never authorized funds held in trust to be utilized to set up a business

other than a true "space business enterprise." Had this information been known to Plaintiff, he

would have never invested in the first place, and if known after he had invested, Plaintiff would

have petitioned for dissolution of the Defendant Excalibur Almaz Limited under provisions of

the Isle of Man Company Acts of 1931 and 2006, and recovered his investment years ago as the

companies were created for a fraudulent purpose. By additional fraudulent acts, Dula ultimately

obtained complete control of Plaintiff's funds and has utilized them for his own benefit, and, on

information and belief, has fraudulently transferred the funds to his wife, Tamea, a prominent

Houston lawyer, and his children Russell and Austin. The continuing fraud and breach of

fiduciary duty has damaged Plaintiff in excess of the minimum jurisdictional amounts of this

court.

VII.

Plaintiff Horie seeks by this suit to recover damages, assets of the Defendant enterprises CertifiedDocumentNumber:63120901-Page4of28

which are held in trust for Plaintiff, and to obtain other damages allowed by law for himself, and,

if appropriate, alternatively, by joining any other putative interested party shareholders, including

LDH Corporation and/or Oceanedge Development Limited, pursuant to Rule 39, Texas Rules of

Civil Procedure.

4 VIII.

DISCOVERY LEVEL AND REQUEST FOR DISCLOSURE

Discovery should to be conducted under Level 2 pursuant to Texas Rule of Civil

Procedure 190.3. Plaintiff requests disclosure of the items set forth in Tex. R. Civ. P. 194.2 a-k.

IX.

PARTIES

A. Plaintiff Takafumi Horie is a citizen and resident of Japan, and at all relevant times

was doing business as Japan Space Dream. Horie was solicited in Japan from Texas lawyer

Defendant Art Dula to invest US $49,003,000.00 for creation of a private operating spaceflight

program. Dula created companies for Horie, including Excalibur Almaz Limited.

B. Defendant Arthur M. Dula, individually and d/b/a the Law Office of Art Dula, is a

resident of Houston, Harris County, Texas. He may be served with process at his place of

business at 3106 Beauchamp Street, Houston, Texas 77009.

C. Defendant Anat Friedman is a lawyer at the law office of Art Dula and is a resident of

Houston, Harris County, Texas. She may be served with process at his place of business at 3106

Beauchamp Street, Houston, Texas 77009.

D. Defendant Robert A. and Virginia Heinlein Prize Trust (“Heinlein Prize Trust”) may

be served by serving either of its trustees, Arthur M. Dula or J. Buckner Hightower, at 3106 CertifiedDocumentNumber:63120901-Page5of28

E. Defendant Excalibur Limited is an Isle of Man corporation. It has operated for all

relevant time periods as the alter-ego of Defendant Dula from Houston, Texas. Excalibur

Limited may be served with process by serving its CEO Arthur M. Dula at his place of business

at 3106 Beauchamp Street, Houston, Texas 77009.

5 F. Defendant Excalibur Almaz Limited is an Isle of Man corporation. It has operated

for all relevant time periods as the alter-ego of Defendant Dula from Houston, Texas. Excalibur

Almaz Limited may be served with process by serving its CEO Arthur M. Dula at his place of

G. Defendant Excalibur Almaz USA, Inc. is a Texas corporation headquartered in

Houston, Harris County, Texas It has operated for all relevant time periods as the alter-ego of

Defendant Dula from Houston, Texas. Excalibur Almaz USA operates the business affairs of

Excalibur Almaz Limited under the terms of a service contract. Excalibur Almaz USA, Inc. may

be served with process by serving its Chairman of the Board and sole shareholder Arthur M.

Dula at his place of business at 3106 Beauchamp Street, Houston, Texas 77009.

H. Defendant J. Buckner Hightower is a Texas citizen and resident, and is the claimed

current CEO of Excalibur Almaz USA, Executive Vice President of Excalibur Almaz Limited,

recently became a minority shareholder of Excalibur Limited, and on the Board of Directors of

all three of those corporate Defendants comprising the enterprise. Defendant Hightower

conspired, aided and abetted and/or facilitated Defendant Dula in committing and concealing the

illegal acts complained of herein. He engaged in actions designed to cover up and keep facts

secret from the public auditors and the government. He may be served with process at his place

of business at 3106 Beauchamp Street, Houston, Texas 77009. CertifiedDocumentNumber:63120901-Page6of28

X.

JURISDICTION

This Court has subject matter jurisdiction over this dispute because the amount in

controversy exceeds its jurisdictional threshold. See Tex. Gov’t Code Ann. §§ 24.007 - 24.008.

6 This Court has personal jurisdiction over Defendants because: (1) they are actively

engaged in business in the State of Texas; (2) they reside in the State of Texas; (3) they

performed services in this state pursuant to a contract and/or entered into a contract that was

performable in whole or in part in this state; and/or (4) they committed torts and statutory

violations in whole or in part in this state. See Tex. Civ. Prac. & Rem. Code § 17.042.

Venue is proper under Tex. Civ. Prac. & Rem. Code § 15.002. All or a substantial part of

the events or omissions giving rise to Plaintiff’s claims occurred in this County.

XI.

FACTUAL BACKGROUND

The Plaintiff is a Japanese citizen, who was interested in the development and

advancements in space exploration. Art Dula sought Plaintiff out representing that he was a

"space attorney" who could assist him in the development of a space program. Dula requested

that Horie give him approximately $50,000,000 in trust, so that Dula could facilitate Plaintiff's

dream in developing a private commercial space program. Dula represented he had connections

with the Russian aerospace company NPO Mashinostroyenia (“NPOM”) who would provide

hardware and technical expertise to build a commercial space business. He represented that he

had acquired rights to NPOM space proven capsules that could be used in a space program. Dula

represented that he was well connected and could assemble the professionals necessary to build a CertifiedDocumentNumber:63120901-Page7of28

commercial space program. However, from the beginning, Dula had no intent to build a space

program, but only to take Plaintiff's monies for his own use, utilizing a complex ruse, contrary to

the interests of his cestui que trust. Dula convinced Plaintiff to place $49,003,000.00 into Dula's

trust account for purposes of doing due diligence, and later setting up a space program in

conformity with U.S. law and regulations (Dula claimed and continues to claim to be a "space

7 law" expert). Defendant Dula formed Defendant Excalibur Limited (“EL”) with long-time

associate Buckner Hightower and Chris Stott (spouse of NASA astronaut Nicole Stott). EL was

to act as the holding company for Dula's interest in Excalibur Almaz Limited (“EA”). EA was to

be the operating commercial space company, and is the entity into which Plaintiff's monies were

placed and which owned all the "space hardware," intellectual property, and other assets. Other

than Plaintiff's funds, no other capital or income was received by EA. EA was managed by a

Texas corporation formed and wholly-owned by Defendant Dula called Excalibur Almaz USA,

Inc. (“EA USA”). Dula utilized EA USA to take funds and monies from EA as he desired.

XII.

Using Plaintiff's funds, Dula purchased four Almaz spacecraft capsules and two space

stations from NPOM. This space hardware came from a Soviet-era secret space program, and

Dula represented to Plaintiff that a key advantage was that the spacecraft and space stations

being acquired had undergone rigourous flight testing. He represented to Plaintff and others that

the hardware could be made "flight worthy," and that he could refurbished, modify and update

the equipment so that it would be certified for flight. The purchase contracts had to be approved

by the Russian government, and unbeknownst to Plaintiff and on information and belief,

expressly excluded the right to modify the Russian hardware, thus relegating it to display uses

only! The items were only museum pieces, a secret Dula would keep until well after he acquired CertifiedDocumentNumber:63120901-Page8of28

control of Plaintiff's investment.

XIII.

Dula took Horie's money out of the IOLTA trust account and used it improperly. Dula

first wired the funds to an account that he controlled in the Isle of Man. Then Dula set up with

the funds an investment structure that provided Horie a 75% share in EA. Dula, despite

8 providing zero of his own capital, drafted the investement agreement to provide that his company

EL acquire additional equity, if the entity EA met certain development milestones: (1)

certification of the Almaz capsules for unmanned flight (EL increased to 35.25%), (2) successful

unmanned orbital flight of an Almaz capsule (EL increased to 45.5%), (3) certification of Almaz

capsules for manned flight (EL increased to 55.8%), and (4) successful orbital manned flight of

an Almaz capsule (EL increased to 66%). Defendants Dula and EA have never to this date

accomplished any of the milestones, nor did Dula ever have any intention of doing so.

XIV.

At the time he solicited the investment from Plaintiff, Defendant Dula was a lawyer

licensed inTexas, who held himself out as an expert in "space law," in properly establishing and

organizing space enterprises, in advising concerning contracts with NASA, in negotiating and

drafting "space agreements." Dula drafted a "Private Placement Memorandum" which he

represented to Plaintiff was a part of the legal documentation necessary to create a legal space

program which he represented to be a proper "space agreement" to establish a "space enterprise."

Per Dula's instructions, Plaintiff wired over time $49,003,000.00 to Dula’s attorney trust account

in Houston, Texas. Thereafter, Defendant Dula transferred the money to an account in the Isle of

Man associated with Excalibur Almaz Limited; an account with Dula controlled. Later, on

information and belief, funds were sent to his wife Tamea and his children Russell and Austin CertifiedDocumentNumber:63120901-Page9of28

Dula.

XV.

On Dula's request funds were provided in tranches, with the final one-third being $16

million. Dula falsely claimed a delay in the final payment interferred with Dula's ability to

achieve the milestones that he included in the initial documentation. He falsely advised his

9 client and cestui que trust that he could legally take Plaintiff’s entire investment, leaving him

nothing if Plaintiff did not acknowledge the milestones were achieved. Plaintiff relied on Dula’s

advice which was given in violation of his fiduciary duty, and in reliance upon the representation

that a real space program would be achieved. Being a part of a real space program was Plaintiff's

dream, and if that could be achieved the ownership percentages were insignificant compared to

being involved in a pioneering new business. Further, Plaintiff trusted Dula to act in Plaintiff's

best interests, and relied on his representations that a space program would be created. In fact

the milestones and spaceflight in general could never be accomplished, and Dula knew at the

time he made the representations the milestones could not be accomplished. The representations

made to Plaintiff were false and Dula omitted to state facts necessary to make the statements that

were made not misleading. However, in reliance on the truth of the misrepresentations and that

Dula would continue to act in Plaintiff's best interest and build a space venture, Plaintiff accepted

a reduction in his equity ownership to 34%, as though all milestones had been met (even though

not a single milestone had been accomplished), and to place his remaining interest into a Trust

with a trustee suggested by Dula. Thereafter, Plaintiff Horie did make the last investment

tranche payment, bringing his total investment to $49,003,000.00.

XVI. CertifiedDocumentNumber:63120901-Page10of28

Excalibur Almaz Limited could not accomplish its represented purpose of modifying and

flying the Almaz spacecraft, therefore under Isle of Man law, Plaintiff or any shareholder had the

right to dissolved EA pursuant to Isle of Man (“IOM”) law and obtained the return of the

investment. As counsel for Plaintiff, Dula should have advised Plaintiff of this right, but failed to

do so. The premise upon which Excalibur Almaz Limited was created – to modify and fly the

Almaz spacecraft – could not be accomplished, and had any shareholder known this fact the

10 shareholder could have forced the dissolution under IOM law. EA assets at all times relevant

had a value of at least $34,000,000. Any interest Dula obtained through his ownership in EL,

was obtained contrary to his fiduciary duty and his obligations as an attorney, and accordingly as

a matter of law, his breach of fiduciary duty results in all interests being forfeited. Plaintiff

Horie was denied this option because Defendant Dula fraudulently concealed the fact that the

purchase contracts for the spacecraft did not allow modifying the spacecraft, as would be

required to launch them into space and fly them as represented. The reduction in Horie’s interest

by Defendant Dula, and Dula's advice to place Horie's shares into a Trust controlled by a

business associate of Dula's, was a direct result of material misrepresentations and breaches of

fiduciary duty that furthered Dula's plan to take Plaintiff's monies.

XVII.

Defendant Dula purported to control EA by virtue of his majority ownership of EL,

which in fact he held in trust for Plaintiff. But Defendant Dula could personally claim only 45%

of EA (the company with all the assets) – and he wanted to own and control it all. Defendant

Dula began a systemantic fraudulent plan to get it, at a time when EA had total assets of at least

$34 million, which included approximately $29 million in cash, plus space hardware with a book

value of over $5 million. But Dula was incentivized by more than the money to own the entire CertifiedDocumentNumber:63120901-Page11of28

enterprise himself – he thought he had to in order to forever bury his secret that he had induced

Plaintiff to invest in the first place with the lie that he had procured legal rights to modify and fly

the spacecraft articles purchased from the Russians.

XVIII.

EA never could accomplished any of its milestones. Defendant Dula told his putative

shareholders – LDH and the Stotts – that his assessment was that more investment would be

11 needed, and even then it would be hard to do. Dula then falsely told his putative shareholders

that he was committed to spending all the money in the enterprise to attempt to achieve the

objective of commercial spaceflight. However, secretly Dula knew this objective could not be

done because EA did not own the legal rights to modify and fly the space hardware he had

purchased from the Russians.

XIX.

Breaching his fiduciary duty, Dula "magically" transformed Horie’s entire initial

investment remaining at that time – upon informantion and belief over $34 million -- into his

own name. But he had to lie again to get it done.

XX.

On information and belief, Chris Stott resigned as an employee of EA USA and as Board

member of EA because of disagreements with how the enterprise was being run and for family

reasons having mostly to do with the time commitment required of him as his wife trained for

her first flight as a NASA astronaut. The Stotts maintained their interest in EA indirectly

through EL by way of their wholly-owned entity Oceanedge Development Limited, but became

inactive in the management of the company.

XXI CertifiedDocumentNumber:63120901-Page12of28

On information and belief, Defendant Dula sent a team of EA USA employees from

Texas to the Isle of Man, including two members of the Board of EA and its CFO, to negotiate a

buy out with Bryan Stott, one of the members representing the interests of the Stotts in EL and

EA. During these negotiations, Chris Stott, then in Houston, Texas, was also consulted. The EA

team was directed by Dula to represent, and did represent, to the Stotts (1) that EA owned four

Almaz capsules and two space stations that could be and were going to be used to build an

12 orbital space transportation company, (2) that EA intended to use all of the funds invested by

Horie to accomplish that goal, and would be looking for additional funds, and (3) that Horie and

LDH continued to back the enterprise, hopefully with additional funding. These representations

were known by Defendant Dula to be false at the time they were made, and the Stotts were in no

position under IOM law to out vote Dula: Dula controlled EL (in which the Stotts were the

minority shareholder), and through EL Dula controlled EA (in which LDH was the minority

shareholder). On information and belief, because of these false representations, the Stotts,

believing that Dula would ultimately fail and that there was no alternative to letting Dula waste

the assets of the enterprise down to zero, agreed to have their interest in EL bought out for

$300,000 – less than 3% of the value of their interest if LDH had been bought out first and EL

had thereafter been dissolved. On information and belief, the Stotts were provided with EA’s

confidential internal business plans to support the false representations (1) that EA owned the

Russian space hardware with rights to modify it for flight and (2) that Dula would consume all of

the current cash then in the enterprise to try to achieve a commercial spaceflight objective that

the enterprise did not have the legal right to do (by showing proposed budgets and capital raise

requirements).

XXII. CertifiedDocumentNumber:63120901-Page13of28

On information and belief, after the Stotts sold out their interest to Dula, Defendant Dula

then used the same misrepresentation tactics and, in addition, touted the calculated share value in

EA achieved in the Stott buy out as the fair market value of EA stock, in order to fraudulently

induce a similar buy out of Horie’s assigned stock interest from LDH for a mere $475,000. At

the time LDH held a 34% interest in EA, valued at about $12 million, more than $10 million of

which was cash. The only reason LDH would have ever agreed to such a lop-sided deal was if

13 they believed Dula had the rights he claimed to the spacecraft to modify them for flight – which

he did not – and that he was going to spend all the cash in the enterprise to try to achieve that

objective; again, an objective he did not have the legal right to pursue. Just as with the Stotts, as

a minority shareholder in EA, LDH did not have the legal right under IOM law to prevent Dula

from pursuing that objective, unless they had known at the time that the representation as to

ownership rights in the space hardware was false – which, of course, they did not know.

XXIII.

On information and belief, Defendant Dula negotiated the LDH buy out himself. He

made the same two false representations that he had made to the Stotts in order to induce LDH

and Plaintiff Horie into selling the EA shares to him for pennies on the dollar. In addition, he

provided LDH information about the fraudulently induced Stott transaction, claiming that it set

the fair market value for EA stock. The deal was memorialized in a written agreement, which

included express and specific reference to confidential information being provided under a

nondisclosure agreement, including the same confidential internal business plans that had been

provided to the Stotts, in order to falsely bolster all three misrepresentations.

XXIV.

On information and belief, Dula's scheme was to buy out other owners of EA for less CertifiedDocumentNumber:63120901-Page14of28

than 3% of the liquid value of their interests – a sale of securities valued at more than $34

million, most of which was cash. After Dula executed his scheme, Plaintiff Horie and the

putative minority shareholders, LDH and the Stotts, were completely out of the enterprise, and

EA still had some $28 million in cash left, plus the display purpose space hardware.

14 XXV.

Defendant Dula had by lies and deceit convinced the minority shareholders in EA that the

company had a true market value of only $1.4 million because of the control he could exercise

and his misrepresentations about the legal ability of the corporation to be able to modify and fly

the Almaz spacecraft and space stations, effectively fraudulently locking the $28 million in cash

and the other assets in an illiquid corporate structure.

XXVI.

Even more striking, Defendant Dula had funded the buy-outs with money from Plaintiff’s

initial investment, some of which was laundered through his wholly-owned entity, Excalibur

Almaz USA. Thus, Defendant Dula had spent some $775,000 of Horie’s money in order transfer

$28 million of Horie’s money (plus the space hardware) into his own name – and now he thought

he had it all for himself. But the law is not so kind when greed is satisfied by fraud and

dishonest conduct.

XXVII.

Dula knew all along that his representations were false. Employees within EA USA

learned only later that the contracts that supposedly gave EA ownership of the space hardware

only transferred ownership rights for the purpose of displaying the hardware, e.g., at air shows, CertifiedDocumentNumber:63120901-Page15of28

trade shows or in museums. Thus, Defendants Dula and EA had no rights to the capsules

necessary to refurbish and modify them in order to certify them to fly humans in space. Without

such rights, the representation that EA owned the space hardware to accomplish the objectives of

the enterprise was false. Had Horie or LDH known this they would have insisted on their full

share in any buy out, or would have insisted that EL and EA be dissolved in accordance with the

15 Isle of Man Company Acts of 1931 and 2006, because it was legally impossible to achieve the

stated objectives of the enterprise, as well as for other reasons under those Acts.

XXVIII.

Recognizing they were about to be caught, Defendant Dula and the General Counsel Anat

Friedman, an associate lawyer of Dula and counsel of EA USA, purportedly attempted to get the

Russians and NPOM to modify the sales contracts, thus admitting the deficiencies in legal rights;

but that was never accomplished. On information and belief, examination of EA’s books

revealed that during his space hardware purchase contract negotiations with NPOM, Defendant

Dula made cash payments – fraudulently concealed by Defendant Dula as fictitious contract

payments – to Pavel Shirokov, Deputy General Director of NPOM and the head officer at NPOM

in charge of negotiating the contracts for the space hardware, and importantly, for getting those

contracts approved by the Russian Space Agency, Roscosmos. Arguably, these cash payments to

Mr. Shirokov not only incentivized NPOM to enter into the contracts with Dula, but also paved

the way for Mr. Shirokov to obtain Russian government approval. They were in effect cash

payments made to a Russian government official and/or an agent of the Russian government in

order to get a sales contract. Such actions by Defendant Dula could constitute a violation of the

Foreign Corrupt Practices Act. If the contracts for the space hardware were obtained by criminal CertifiedDocumentNumber:63120901-Page16of28

conduct, then they are void and the enterprise was not able as a legal matter to accomplish its

stated objectives. Horie did not authorize funds to leave the trust to purchase items in violation

of the law. Obviously, had Plaintiff Horie known the truth he would not have invested in the

supposed space enterprise. On information and belief, if the Stotts or LDH had known this at the

relevant times, they would have insisted on their full share in any buy out, or would have insisted

16 that EL and EA be dissolved at the relevant time, because it was legally impossible to achieve

the stated objectives of the enterprise.

XXIX.

Additionally on information and belief, Defendant Dula at an EA Board meeting

revealed to his Board for the first time that he may not have the intent to use the money then

remaining in the enterprise to try to accomplish the stated objective of developing a space

transportation system. He argued instead, that he had the right as sole owner to deploy the funds

into any activity he saw fit – especially ventures that might be less risky and have a better chance

of success. Had Horie realized that Defendant Dula might take the money in the company and

enter another business or take it for himself – contrary to his representations to them – Horie

would never had invested in the first place.

XXX.

Upon information and belief, it was the representation made to both the Stotts and LDH

that Dula and EA intended to spend all the remaing money on attempting to develop a

commercial space business that caused them to sell out so cheaply, given their minority

shareholder positions in EL and EA, respectively. Dula was actually challenged at a Board

meeting by Directors Gruver and Chiao, and as a result, Dula agreed to state in writing that he CertifiedDocumentNumber:63120901-Page17of28

had “no present intention to dissolve the company and take the money for himself.” But it was a

lie, stated only to get the Board to approve the LDH transaction, as was later proven when

Defendant Dula stated to the Board that he now intended to dissolve the company, when it would

still have substantial cash, plus the space hardware still carried on the books at over $5 million

(but which Dula had opined at the time may be far more valuable if sold to be utilized as donated

17 museum pieces for wealthy individuals who could benefit from the substantial tax advantages of

such transactions).

XXXI.

On information and belief, faced with these admissions from Dula, Director Chiao called

for a special Board meeting to put forth a resolution to prohibit Dula from disolving the

enterprise and selling off the space hardware, because of the liability that would arise given the

earlier false representations to the Stotts and LDH to secure the lop-sided buy out deals. This

resolution was supported by Director Okubo. Defendants Dula and Hightower, along with CFO

Gruver, voted to defeat the resolution with Friedman giving support to Dula. The next day

Directors Chiao and Okubo were removed from the Board by a vote of the shareholders,

Defendants Dula and Hightower. Director Chiao resigned from the enterprise altogether shortly

thereafter, including from his employment.

XXXII.

Upon information and belief, at least one employee of EA USA petitioned the CFO,

Richard Gruver, in accordance with Company procedures, to have the Board of Directors direct

that Defendant Dula fix the fraud he had perpetrated by obtaining revised contracts with NPOM

to allow modifcation of the Almaz spacecraft so that they could be refurbished and flown, as CertifiedDocumentNumber:63120901-Page18of28

initially represented to Plaintiff Horie to induce his $49 million investment. CFO Gruver passed

the petition to Defendant Hightower, who, presumably in concert with Defendant Dula,

terminated the employment of that employee.

XXXIII.

Now recent events at the May 2014 auction make it clear that Defendant Dula intended to

dissolve EA and take the substantial assets for himself and his annoited co-shareholder in EL,

18 Defendant Buckner Hightower, in contravention of the express representations made to Plaintiff

Horie. Plaintiff Horie did not suspect until recently that the reason no milestone had been

accomplished under his initial investment contract was because the Russian space hardware that

Defendant Dula had represented that EA owned, had limited uses, i.e., as museum pieces.

Defendant Dula knew all along that he had purchased only the rights to use two Almaz capsules

and two spacestations for the purpose of display and marketing, and legally, under his contracts

with the Russians, could not modify them for flight. Dula has bought on numerous occasions

additional spacecraft under the same limited terms, while representing the opposite to his

investor, employees, and potential customers. In addition, Defendant Dula may have acquired

even these limited rights by violating the Foreign Corrupt Practices Act, as explained above,

which would also void those contracts. Dula's fraud was intentional, malicious, and warrants

punitive damages. Further, the exemplary damages are not capped because the conduct of Dula

falls withing Tex. Civ. Pract. Rem. Code Section 41.008(c).

XXXIV.

Had Mr. Horie known at the time that Defendant Dula was lying about the ownership of

the space hardware he had acquired from NPOM for EA, and that EA could never complete any

of the milestones, he would never had invested a penny with Dula, never would have authorized CertifiedDocumentNumber:63120901-Page19of28

funds to leave Dula's trust, would have never reduced his equity position, and would have

dissolved EA pursuant to IOM law (as was his absolute right as a 75% equity owner) and

recovered his $45 million in cash, plus whatever value the space hardware would have had as

museum pieces. This is precisely what Defendant Dula feared might happen – thus he lied

repeatedly to Plaintiff Horie to keep his enterprise intact.

19 XXXV.

CAUSES OF ACTION

1. Joint and Several Liability: Defendant Dula owns and/or has controlled each of the

Corporated Defendants (EL, EA, and EA USA) and the Defendant Heinlein Prize Trust during

the relevant time period, and as such committed the acts complained of herein through one or all

of them at various times, such that those entities have joint and several liability herein.

Defendant Dula has also operated the Corporate Defendants as his alter-ego from his offices in

Houston, Texas; thus, they each bear the same liability for his acts as does Defendant Dula.

From the beginning, Defendant Buckner Hightower, as Dula's friend, as a co-trustee of the

Heinlein Prize Trust, and later as an equity participant in Defendant EA, has supported and

conspired with Defendant Dula to further and cover up the wongful acts of Dula, as set forth

herein. Each of the causes of action herein is pled against all Defendants, individually and

collectively.

2. Breach of Trust, Constructive Trust, Resulting Trust. All actions taken by Dula were

with funds he held for Plaintiff in trust. Actions with respect to the Trust funds were taken

without authority or effective consent. Therefore, all monies and assets acquired by any of the

Defendants are held in a Constructive/Resulting Trust for Plaintiff and should be delivered to CertifiedDocumentNumber:63120901-Page20of28

Plaintiff. Plaintiff is also entitled to damages for assets squandered or lost in violation of the

trust(s).

3. Violation of Rights under the Isle of Man Company Acts: Defendants have violated

the rights of Plaintiff Horie under the Isle of Man Company Acts of 1931 and 2006.

4. Under each Act, a 75% shareholder has the right to dissolve an IOM company. Had

Plaintiff Horie been told the truth about the legal inability of EA to accomplish the purpose for

20 which he was enticed to invest before he was forced to reduce his interest to 34%, Plaintiff

Horie could have dissolved EA and recovered his investment.

5. Under Section 162(6) of the Isle of Man Company Act of 1931, the court may order that

a company be wound up and its assets distrubuted to its shareholders if it is of the opinion that it

is “just and equitable” to do so. Had Plaintiff Horie been informed by Defendants that EA did

not own sufficient rights in the spacecraft hardware to permit modifying them for flight, he

would have petitioned the court for a “just and equitable” winding up . This would have allowed

recovery of substantial cash and assets, with which he could have better settled his financial

difficulties at the time. Had Plaintiff Horie known the truth, he could have immediately

petitioned the court for a “just and equitable” winding up, thereby recouping most of his

investment. Defendant Dula knew this posed a risk to accomplishing his plans to control and

takeover for himself the entireity of Plaintiff’s investment, and thus he concealed the truth from

Plaintiff Horie, and later the other minority shareholders in EL and EA, and his employees.

6. Under Section 180 of the Isle of Man Company Act of 2006, a shareholder is entitled to

petition the court for involuntary dissolution if the company has been operated in a way which is

or might become “oppressive or unfairly prejudicial” to him. Additionally, under Section 197 of

the Act a shareholder may petition the court to gather evidence in support of such involuntary CertifiedDocumentNumber:63120901-Page21of28

dissolution, where the business was formed or is being conducted dishonestly or with the intent

to defraud, or is associated with any other entity or person engaged in fraud or deceit. The 2006

Act expressly adopts the provisions of the 1931 Act in executing involuntary dissolution, and it

would be handled under Section 162(6) of the 1931 Act as a “just and equitable” winding up of

the company. As Horie's attorney Dula should have advised of his legal rights and remedies.

As to the conflict of interest that existed between Dula the attorney and Dula the individual

21 attempting to steal Horie's money, Dula had a duty to advised him to obtain separate independent

legal counsel. Directing Horie to get legal advice from Friedman in Dula's office did not solve

the problem.

7. Thus, regardless of which Act the Defendant companies were incorporated under, or later

re-registered, both EA and EL were subject to a “just and equitable” winding up at any time on a

petition by a minority shareholder. Plaintiff Horie was a shareholder of record in EA until after

Dula fraudulently advised him to assign the remainder of his EA investment to a Trust and

Dula's business associate Trustee and later to LDH. But for Defenadant Dula’s fraud and breach

of fiduciary duty to Plaintiff Horie, he could have effected the dissolution of EA and recouped

his entire investment of $49 million. After the transfer of the remainder of his EA investment to

LDH, Plaintiff Horie today remains entitled, at a minimum, to actual damages measured by the

difference between his initial investment and the market value of EA at the time of the transfer.

Thus, Plaintiff Horie is now entitled to actual damages.

8. Fraud: Defendants have commited fraud by inducing Plaintiff Horie to invest and to

later reduce his equity ownership in EA from 75% to 34% by false and material

misrepresentations of material fact and by failure to reveal material facts, as set forth herein. Mr.

Horie relied to his detriment on the misrepresentations and failures to reveal material facts to CertifiedDocumentNumber:63120901-Page22of28

effectively sell out his controlling interest in EA and become a minority shareholder, and to

forego his right under Isle of Man law to have dissolved the corporation at that time and recover

his investment.

9. Upon information and belief, Defendants furthered the fraud by inducing the Stotts and

LDH to sell out their interest in EL and EA by false and material misrepresentations of material

fact and by failure to reveal material facts, as set forth herein. The Stotts and LDH relied to their

22 detriment on the misprepresentations and failures to reveal material facts to sell out their interests

to Defendants for less than 3% of its then true liquid value. Though the Stotts and LDH signed

releases of all claims in connection with their respective buy-outs, both contracts are void for

having been fraudulently induced by express material misrepresentations made a part of the deal

to bolster the oral misrepresentations that were made to get each of the parties to negotiatiate the

lop-sided deals in the first place, all as described above herein. “Fraus omnia corrumpit: fraud

vitiates everything it touches.”

10. Thus, Plaintiff Horie and the putative minority shareholders have suffered damage as a

direct result of Defendants’ fraudulent conduct. Defendant Dula’s dishonest conduct was and

remains egregious, unlawful and unethical, and should be punished by the assessment of punitive

damages.

11. Breach of Fiduciary Duty: Defendant Dula as Horie's lawyer and trustee breached his

fiduciary duty to his investor and shareholder Plaintiff Horie by enticing him to invest in the first

place, and then later misleading him into selling out his controlling interest in EA by

negotiationing with him in bad faith and on the basis of fraudulent statements and failure to

reveal facts within his knowledge relevant to the consideration of the transaction proposed by

Defendant Dula, whereby Plaintiff drastically reduced his equity ownership in EA, as set out CertifiedDocumentNumber:63120901-Page23of28

herein. Had Defendant Dula been honest with his client and investor Plaintiff Horie, it would

have allowed Horie the opportunity to dissolve EA and recoup his entire investment. After

having assigned the remainder of his EA stock to LDH, Plaintiff Horie is now entitled to recoup

that part of his investment measured by the difference between the initial investment and the true

market value of EA at the time of the transaction with LDH, as set out above.

23 12. Defendant Dula also breached his fiduciary duty to his minority shareholders LDH and

the Stotts by misleading them into selling out their interests in EL and EA at an unconscionably

low price by negotiating with them in bad faith and on the basis of fraudulent statements and

failure to reveal facts within his knowledge relevant to the consideration of the buy out

transaction proposed by majority shareholder Dula.

13. Defendant Dula has also wasted the assets of the Defendant enterprises.

14. All these actions by Defendant Dula have caused damage to Plaintiff Horie, LDH, and

the Stotts, and further his conduct is dishonest and unethical and should be punished by the

assessment of punitive damages.

15. Statutory Fraud: Defendants have commited statutory fraud by violating the provisions

of TEX. BUS. & COMM. CODE § 27.01 by inducing Plaintiff Horie to invest, to later sell out

his controlling equity position in the stock of the corporation EA, and to then support and

approve the transaction by which LDH was bought out, all by false misrepresentations of past or

existing material facts or by false promises to do an act in the future, all as set out herein.

16. Defendants are liable for the actual damages of Plaintiff Horie for reasonable and

necessary attorney’s fees, expert witness fees, costs of copies of depositions, and costs of court.

Defendant Dula caused the mispresentations and false promises to made with actual awareness CertifiedDocumentNumber:63120901-Page24of28

that they were false, and as a result Defendants are liable for exemplary damages.

17. Breach of Contract: Plaintiff Horie entered into an original investment contract, which

was later modified based upon false representations and breaches of fiduciary duty to reduce his

equity position and to implement other terms favorable to Defendants. Upon advice of Dula,

Plaintiff placed his stock interest in a Trust with Dula's business associate. Thereafter, LDH

sold its EA stock position to Defendant Dula, HIMSELF, by way of a stock redemption

24 agreement to which Horie was a necessary party. This agreement purported to replace the prior

investment contract. At no time did Plaintiff Horie transfer or assign his rights to claims asserted

herein. Moreover, all of these contracts are voidable at the discretion of Plaintiff, in whole or in

part, because they were induced by fraud. Defendants Dula and the Corporate Defendants have

breached the investment contracts by which Plaintiff Horie made his original investment and by

which he was later induced to reduce his equity position, and later allow transfer of that stock

position, as set out herein. Thus, Defendants are liable to Plaintiff Horie for damages, attorneys’

fees and interest as allowed by law, and alternatively, rescission of the investment agreements.

18. Texas Securities Act: Defendants have violated Article 581-33(B) of the Texas

Securities Act (“TSA”) by purchasing Plaintiff Horie’s interest in EA “by means of an untrue

statement of material fact or an omission to state a material fact necessary in order to make the

statements made, in light of the circumstances under which they are made, not misleading,” as

set out herein.

19. Defendant Dula, aided and abetted by the Corporate Defendants, has also violated Article

581-33(B) of the Texas Securities Act (“TSA”) by purchasing the Stotts’ interest in EL and

LDH’s interest in EA “by means of an untrue statement of material fact or an omission to state a

material fact necessary in order to make the statements made, in light of the circumstances under CertifiedDocumentNumber:63120901-Page25of28

which they are made, not misleading,” as set out herein.

20. The TSA is a strict liability statute with no scienter requirement on the part of the buyer

(the Defendants herein) and no reliance or causation requirements on the part of the seller

(Plaintiff Horie and LDH). The TSA is to be construed “to protect investors” and “because

article 581-33 is remedial in nature in the civil context, it ‘should be given the widest possible

scope.’

25 21. Defendants are strictly liable for rescission damages under the TSA to Plaintiff Horie and

LDH as sellers in the amount of the value of the securities at the time of the transaction in

question plus any income received by Defendants, less the consideration already paid to the

LDH, plus costs and attorney’s fees. Art. 581-33(D)(4)(6)(7). Further, the rights and remedies

under the TSA “are in addition to any other rights (including exemplary or punitive damages) or

remedies that may exist at law or in equity.” Art. 581-33(M).

22. Piercing the Corporate Veil: For the purpose of each cause of action the corporate veil

between EA, EL, and EA USA may be pierced on behalf of Plaintiff and LDH, because

Defendant Dula effectively controlled each corporation and operated them as his alter-ego to

commit the acts complained of herein. Indeed, Defendant Dula used the separate corporate EL

structure to prevent Horie or LDH to over-ride his control of EA, thus allowing Defendant Dula

to execute his fraudulent plan.

23. Monies Had and Received: The Defendants have been unjustly enriched by

appropriating Plaintiff's funds. Accordingly, Defendants are liable to Plaintiff for monies had

and received and unjust enrichment.

24. Statutory Theft and/or Conversion: The conduct of the Defendants gives rise to a

claim under Chapter 134 of the Texas Civil Practice & Remedies Code and/or conversion. CertifiedDocumentNumber:63120901-Page26of28

Plaintiff is entitled to his actual damages, expemplary damages and pursuant to Chapter 134

reasonable attorney fees.

25. Accounting: Plaintiff is entitled to an accounting of funds placed in trust with the

Defendants.

26 26. Negligence: The conduct of the Defendants was negligent. Defendants owed Plaintiff a

duty of ordinary care, and breached that duty causing Plaintiff damages in excess of the

minimum jurisdictional amounts of this court.

27. Joinder: In the alternative, Plaintiff Horie joins LDH as a Plaintiff herein pursuant to

Rule 39, Texas Rules of Civil Procedure, because it may be necessary as a practical matter to

protect its interests and prevent persons already parties from incurring the risk of multiple or

inconsistent recoveries.

XXXVI.

JURY TRIAL DEMAND

28. Plaintiff requests a trial by jury.

Prayer

Plaintiff Horie d/b/a Japan Space Dream respectfully requests that the Court grant the

relief requested for actual damages, for punitive and exemplary damages as allowed by law,

prejudgment and post-judgment interest as allowed by law, attorneys’ fees as allowed by law,

and such other and further relief to which Plaintiff may be justly entitled.

Respectfully submitted, CertifiedDocumentNumber:63120901-Page27of28

The Kelley Law Firm

By: /s/ Lloyd E. Kelley_____ Lloyd E. Kelley Texas Bar No. 11203180 kelley@lloydkelley.com The Kelley Law Firm 2726 Bissonnet, Suite 240, PMB 12 Houston, TX 77005 (281) 492-7766 (main) (281) 652-5973 (fax)

27 James D. Pierce, Attorney At Law

By: /s/ James D. Pierce____ James D. Pierce Texas Bar No. 15994500 jim@jamespierce.com 1 Sugar Creek Center, Suite 1080 Sugar Land, TX 77478 (713) 650-0150 (main) (713) 650-0146 (fax)

ATTORNEYS FOR Plaintiff Takafumi Horie d/b/a Japan Space Dream CertifiedDocumentNumber:63120901-Page28of28

28 I, Chris Daniel, District Clerk of Harris County, Texas certify that this is a true and correct copy of the original record filed and or recorded in my office, electronically or hard copy, as it appears on this date. Witness my official hand and seal of office this June 5, 2015

Certified Document Number: 63120901 Total Pages: 28

In accordance with Texas Government Code 406.013 electronically transmitted authenticated documents are valid. If there is a question regarding the validity of this document and or seal please e-mail support@hcdistrictclerk.com

29 3/6/2015 1:49:40 PM Chris Daniel - District Clerk Harris County Envelope No. 4401773 By: Tammy Tolman Filed: 3/6/2015 1:49:40 PM

CAUSE NO. 2014-65947

§ IN THE DISTRICT COURT OF TAKAFUMI HORIE, § § § Plaintiff, § v. § § HARRIS COUNTY, TEXAS THE LAW OFFICES OF ART DULA, § ARTHUR M. DULA, individually, and d/b/a § THE LAW OFFICES OF ART DULA, § ANAT FRIEDMAN, individually, and d/b/a § THE LAW OFFICES OF ART DULA, § J. BUCKNER HIGHTOWER, § THE ROBERT A. AND VIRGINIA § HEINLEIN PRIZE TRUST, through its § trustees ARTHUR M. DULA AND § J. BUCKNER HIGHTOWER, § § Defendants. § 55 TH DISTRICT COURT

PLAINTIFF’S FIRST AMENDED PETITION

Takafumi Horie, individually and d/b/a Japan Space Dream, (“Horie”) files this

Amended Original Petition against Defendants Arthur M. Dula, individually and d/b/a The Law

Offices of Art Dula, and Anat Friedman, individually and d/b/a The Law Offices of Art Dula, and CertifiedDocumentNumber:64525805-Page1of13

The Robert A. and Virginia Heinlein Prize Trust, through its trustees Arthur M Dula and J. Buckner

Hightower for breach of fiduciary duty, fraud, statutory fraud, breach of trust, money had and

received, an accounting, and negligence, and alleges as follows:

76 II.

This is a case about Houston attorney Art Dula, who took advantage of Japanese

entrepreneur Takafumi Horie, by claiming that he could set up a commercial space transportation

program to carry cargo, scientific experiments, and people into low Earth orbit to the

International Space Station and other space destinations. Dula was, and is, the lawyer and a trustee

for The Robert A. and Virginia Heinlein Prize Trust ("Heinlein Trust"). Heinlein was a prolific

science fiction author who was famous for writing about manned space exploration. Dula used his

position as trustee of the Heinlein Trust to promote his law firm in getting business under the

premise of establishing "new space business enterprises." Using his position as trustee of the

Heinlein Trust, Dula, through an intermediary, sought out Horie and solicited him as a client and

investor. Horie offered his services as a “space” lawyer who could set up entities to make space

travel possible and fraudulenty induced Plaintiff to trust him and give him $49 million in trust to

further this enterprise of space travel.

Horie engaged Dula as his attorney, and then trusted him enough to give Dula

$49,003,000.00 in trust for purposes of setting up a business to accomplish space travel. The

money was sent to Dula's Texas IOLTA client trust fund account to accomplish the goals for Dula's CertifiedDocumentNumber:64525805-Page2of13

client Horie. Art Dula misapproiated funds to engage in a scheme to steal Plaintiffs’ money and

divert it to himself and his conspirators. In reliance on Dula’s promises that Plaintiff’s investment

would be used to establish a cutting-edge, profitable commercial spaceflight program, Horie

engaged Dula as his attorney. Horie subsequently gave Dula $49,003,000.00, which Horie sent to

Dula's Texas IOLTA client trust fund account. However, Dula never intended to engage in a

77 commercial space program, and in fact continually misrepresented, concealed facts and defrauded

his client Takafumie Horie d/b/a Japanese Space Dream (“Horie”). His intent was to take his

clients’ money over time through a complex scheme under the guise that he was building a space

IV.

Dula has gone to great lengths to hide and conceal his true conduct by acts of both

commission and omission, all of which would constitute fraud if perpetrated under the normal

morals of the marketplace but which also constitute breach of fiduciary duty when undertaken in

the context of the attorney-client relationship. Horie only recently discovered the wrongs

perpetrated against him by Defendants, because, in violation of his fiduciary duties to Horie, Dula

never disclosed the true facts to him, but rather continually mispresented and/or concealed those

facts throughout their relationship. Horie relied on and trusted Dula as his attorney, his fiduciary,

and as an apparent expert in the nascent field of private spaceflight. Dula took advantage of his

position as Horie’s attorney and a self-proclaimed expert to convert his clients’ funds for his own

uses and purposes. Accordingly, to the extent Defendants plead the statute of limitations as a

defense to any of Horie’s claims, Horie is entitled to the benefit of the discovery rule. Horie further

pleads that Defendants fraudulently concealed their misconduct, which excuses the failure to sue

within the limitations period. CertifiedDocumentNumber:64525805-Page3of13

Plaintiff Horie only recently discovered the wrongs perpetrated against him by

Defendants, because the facts were concealed by Defendant Dula, and Dula never advised Horie

of his wrong doing. Plaintiff relied on and trusted Defendant Dula in Dula’s position as his

attorney, his fiduciary, and because of his representations as to his expertise concerning his

spaceflight project and his investment therein. The Defendants had a fiduciary duty to Plaintiff

78 and Defendants fraudulently concealed the facts to prevent Plaintiff from learning of their

fraudulent behavior and to prevent Plaintiff from seeking legal redress. Alternatively, Defendants

owed Plaintiff a fiduciary duty and they failed to disclose facts they were aware of which prevented

Plaintiff from bringing suit earlier.

Plaintiff Horie became aware of Dula’s scam when he read an article by Alexander Forbes

that Dula had sold at auction one of the spacecraft articles purchased with Plaintiff’s money. The

Forbes article implied that Dula was liquidating, and indicated the spacecraft was only suitable for

display in a museum, and not as a potential flight article as had been falsely represented to Plaintiff

Horie from the beginning. The supposed space program was a sham, as Dula never had the rights

or ability to utilize the spacecraft purchased with Plaintiff’s money for anything other than display

purposes. However, this fact was kept secret from Plaintiff. Plaintiff never authorized the funds

held in trust be utilized to purchase spacecraft sold for display purposes. Plaintiff never authorized

funds held in trust to be utilized to set up a "space program" incapable of space travel. Plaintiff

never authorized funds held in trust to be utilized to set up a business other than a true "space

business enterprise." Had this information been known to Plaintiff, he would have never given

any money to Defendants in the first place, and if known after he had placed his money in trust to CertifiedDocumentNumber:64525805-Page4of13

Dula, Plaintiff would have immediately petitioned for redress.

By additional fraudulent acts, Dula ultimately obtained complete control of Plaintiff's funds

and has utilized them for his own benefit, and, on information and belief, has fraudulently

transferred the funds to his wife, Tamea, a prominent Houston lawyer, and his children Russell

and Austin. The continuing fraud and breach of fiduciary duty has damaged Plaintiff in excess of

the minimum jurisdictional amounts of this court.

79 VI.

Plaintiff Horie seeks by this suit to recover damages, acutal and consequential, of the

monies Defendants took and which the law treats now as held in trust for Plaintiff, and to obtain

other damages allowed by law for himself.

Discovery should to be conducted under Level 3 pursuant to Texas Rule of Civil Procedure

190.3. Plaintiff requests disclosure of the items set forth in Tex. R. Civ. P. 194.2 a-k.

VIII.

A. Plaintiff Takafumi Horie is a citizen and resident of Japan, and at all relevant times was

doing business as Japan Space Dream. Horie was solicited in Japan from Texas lawyer Defendant

Art Dula to invest US $49,003,000.00 for creation of a private operating spaceflight program.

B. Defendant Arthur M. Dula, individually and d/b/a the Law Office of Art Dula, is a

resident of Houston, Harris County, Texas. Defendant has appeared and answered herein.

C. Defendant Anat Friedman is a lawyer at the law office of Art Dula and is a resident of

Houston, Harris County, Texas. Defendant has appeared and answered herein. CertifiedDocumentNumber:64525805-Page5of13

D. Defendant Robert A. and Virginia Heinlein Prize Trust (“Heinlein Prize Trust”)

Houston, Harris County, Texas. Defendant has appeared and answered herein.

E. Defendant J. Buckner Hightower is a Texas citizen and resident. Defendant Hightower

conspired, aided and abetted and/or facilitated Defendant Dula in committing and concealing the

80 illegal acts complained of herein. He engaged in actions designed to cover up and keep facts secret

from the public auditors and the government. He has been served and answered.

This Court has subject matter jurisdiction over this dispute because the amount in

controversy exceeds its jurisdictional threshold. See Tex. Gov’t Code Ann. §§ 24.007 - 24.008.

This Court has personal jurisdiction over Defendants because: (1) they are actively engaged

in business in the State of Texas; (2) they reside in the State of Texas; and/or (3) they committed

torts and statutory violations in whole or in part in this state. See Tex. Civ. Prac. & Rem. Code §

17.042.

Venue is proper under Tex. Civ. Prac. & Rem. Code § 15.002. All or a substantial part of

the events or omissions giving rise to Plaintiff’s claims occurred in this County.

The Plaintiff is a Japanese citizen, who was interested in the development and

advancements in space exploration. Art Dula sought Plaintiff out, representing that he was a

"space attorney" who could assist Plaintiff in the development of a space program. Dula requested

that Horie give him approximately $50,000,000 in trust, so that Dula could facilitate Plaintiff's CertifiedDocumentNumber:64525805-Page6of13

dream of developing a private commercial space program. Dula represented he had connections

with the Russian aerospace company NPO Mashinostroyenia (“NPOM”) who would provide

hardware and technical expertise to build a commercial space business. He represented that he

had acquired rights to NPOM space-proven capsules that could be used in a space program. Dula

represented that he was well-connected and could assemble the professionals necessary to build a

81 commercial space program. However, from the beginning, Dula had no intent to build a space

program, but only to take Plaintiff's monies for his own use, utilizing a complex ruse, contrary to

the interests of his cestui que trust. Dula convinced Plaintiff to place $49,003,000.00 into Dula's

trust account for purposes of doing due diligence, and later setting up a space program in

conformity with U.S. law and regulations (Dula claimed and continues to claim to be a "space law"

expert). Dula used several schemes and devices to fraudulently take Plaintiff’s money out of the

IOLTA trust account and eventually placed it into his own hands in violation of his duty of utmost

trust.

Using Plaintiff's funds, Dula purchased four Almaz spacecraft capsules and two space

stations from NPOM. This space hardware came from a Soviet-era secret space program, and

Dula represented to Plaintiff that a key advantage was that the spacecraft and space stations being

acquired had undergone rigourous flight testing. He represented to Plaintff and others that the

hardware could be made "flight worthy," and that he could refurbish, modify and update the

equipment so that it would be certified for flight. The purchase contracts had to be approved by

the Russian government, and unbeknownst to Plaintiff and on information and belief, expressly

excluded the right to modify the Russian hardware, thus relegating it to display uses only! The

items were only museum pieces, a secret Dula would keep until well after he acquired control of CertifiedDocumentNumber:64525805-Page7of13

Plaintiff's investment.

Dula took Horie's money out of the IOLTA trust account and used it improperly. Dula first

wired the funds to an account that he controlled. At the time he solicited the investment from

Plaintiff, Defendant Dula was a lawyer licensed in Texas, who held himself out as an expert in

82 "space law," in properly establishing and organizing space enterprises, in advising concerning

contracts with NASA, and in negotiating and drafting "space agreements." Dula drafted a "Private

Placement Memorandum" which he represented to Plaintiff was a part of the legal documentation

necessary to create a legal space program which he represented to be a proper "space agreement"

to establish a "space enterprise." Per Dula's instructions, Plaintiff wired over time $49,003,000.00

to Dula’s attorney trust account in Houston, Texas. Thereafter, Defendant Dula transferred the

money to an account Dula controlled. Later, on information and belief, funds were sent to his wife

Tamea and his children Russell and Austin Dula.

Being a part of a real space program was Plaintiff's dream, and if that could be achieved

the ownership percentages were insignificant compared to being involved in a pioneering new

business. Further, Plaintiff trusted Dula to act in Plaintiff's best interests, and relied on his

representations that a space program would be created. In fact the milestones and spaceflight in

general could never be accomplished, and Dula knew at the time he made the representations the

milestones could not be accomplished. The representations made to Plaintiff were false and Dula

omitted to state facts necessary to make the statements that were made not misleading. However,

in reliance on the truth of the misrepresentations and that Dula would continue to act in Plaintiff's

best interest and build a space venture, Plaintiff continued to believe him and took no action to

seek redress. In fact, Dula intentionaly gave Plaintiff false information to prevent Plaintiff from CertifiedDocumentNumber:64525805-Page8of13

filing suit.

Breaching his fiduciary duty, Dula "magically" transformed Horie’s entire initial

investment remaining at that time – upon informantion and belief over $34 million – into his own

name. But Dula had to lie again to get it done.

83 Dula knew all along that his representations to Plaintiff were false. Dula knew that the

contracts that supposedly gave the space program ownership of the Russian space hardware only

transferred ownership rights for the purpose of displaying the hardware, e.g., at air shows, trade

shows or in museums. Thus, Defendants never acquired any rights to the capsules necessary to

refurbish and modify them in order to certify them to fly humans in space. Without such rights,

the representation that they owned or were acquiring the space hardware to accomplish the

objectives of the enterprise was false.

Because the Russian space hardware that Defendant Dula represented could be owned

completely and modified for space use turned out to have limited/restricted uses, i.e., as museum

pieces, the entire scheme was a scam. Defendant Dula knew all along that he could only acquire

the rights to use two Almaz capsules and two spacestations for the purpose of display and

marketing, and legally, under the contracts with the Russians he eventually obtained he could

never modify them for flight. Dula has bought on numerous occasions additional spacecraft under

the same limited terms, while representing the opposite to Plaintiff and others. Dula's fraud was

intentional, malicious, and warrants punitive damages. Further, the exemplary damages are not

capped because the conduct of Dula falls within Tex. Civ. Pract. Rem. Code Section 41.008(c).

XV. CertifiedDocumentNumber:64525805-Page9of13

Had Mr. Horie known at the time that Defendant Dula was lying about the ownership of

the space hardware he eventually acquired from NPOM, he would have never invested a penny

with Dula, and never would have authorized funds to leave Dula's trust. Plaintiff seeks to recover

his $45 million in cash, plus whatever value the space hardware would have had as museum pieces.

84 This is precisely what Defendant Dula feared might happen – thus Dula lied repeatedly to Plaintiff

Horie to keep his enterprise intact.

XVI.

1. Claims: Horie brings suit against Defendants for breach of trust, fraud, and statutory fraud,

breach of fiduciary duty, monies had and received, an accounting, and for negligence. Plaintiff

seeks rescission/damages in the amount of his $49,003,000.00 original investment, plus interest,

attorneys’ fees, and damages allowed at law or equity, including punitive damages.

2. Joint and Several Liability: Defendant Dula owns has controlled the Defendant Heinlein

Prize Trust during the relevant time period, and as such committed the acts complained of herein

through one or all of them at various times, such that those entities have joint and several liability

herein. Defendant Dula has also operated the Heinlein Prize Trust as his alter-ego from his offices

in Houston, Texas; thus, it bears the same liability for his acts as does Defendant Dula. From the

beginning, Defendant Buckner Hightower, as Dula's friend, as a co-trustee of the Heinlein Prize

Trust, has supported and conspired with Defendant Dula to further and cover up the wongful acts

of Dula, as set forth herein. Each of the causes of action herein is pled against all Defendants,

individually and collectively. CertifiedDocumentNumber:64525805-Page10of13

3. Breach of Trust, Constructive Trust, Resulting Trust. All actions taken by Dula were

with funds he held for Plaintiff in trust. Actions with respect to the Trust funds were taken without

authority or effective consent. Therefore, all monies and assets acquired by any of the Defendants

are held in a Constructive/Resulting Trust for Plaintiff and should be delivered to Plaintiff.

Plaintiff is also entitled to damages for assets squandered or lost in violation of the trust(s).

85 4. Fraud and Statutory Fraud: Defendants have commited fraud by inducing Plaintiff

Horie to given in trust money to Dula by false and material misrepresentations of material fact and

by failure to reveal material facts, as set forth herein. Mr. Horie relied to his detriment on the

misrepresentations and failures to reveal material facts of Dula. Plaintiff sues Defendants for fraud

and statutory fraud (TEX. BUS. & COMM. CODE § 27.01).

5. “Fraus omnia corrumpit: fraud vitiates everything it touches. Thus, Plaintiff has suffered

damage as a direct result of Defendants’ fraudulent conduct. Defendant Dula’s dishonest conduct

was and remains egregious, unlawful and unethical, and should be punished by the assessment of

punitive damages.

6. Breach of Fiduciary Duty: Defendant Dula as Horie's lawyer and trustee breached his

fiduciary duty to his client Plaintiff by enticing him to give in trust his money amounting to $49

millon in the first place, and then later misleading him to prevent Plaintiff from realizing the extent

of the breach of fiduciary duty to prevent him from filing a suit.

7. All these actions by Defendant Dula have caused damage to Plaintiff and further his

conduct is dishonest and unethical and should be punished by the assessment of punitive damages.

8. The continuing fraud and breach of fiduciary duty has damaged Horie in excess of the

minimum jurisdictional amounts of this court. CertifiedDocumentNumber:64525805-Page11of13

9. Monies Had and Received: The Defendants have been unjustly enriched by appropriating

Plaintiff's funds. Accordingly, Defendants are liable to Plaintiff for monies had and received and

unjust enrichment.

10. Accounting: Plaintiff is entitled to an accounting of funds placed in trust with the

86 11. Negligence: The conduct of the Defendants was negligent. Defendants owed Plaintiff a

duty of ordinary care, and breached that duty causing Plaintiff damages in excess of the minimum

jurisdictional amounts of this court.

12. Plaintiff requests a trial by jury.

Plaintiff Horie d/b/a Japan Space Dream respectfully requests that the Court grant the relief

requested for actual damages, for punitive and exemplary damages as allowed by law, prejudgment

and post-judgment interest as allowed by law, attorneys’ fees as allowed by law, and such other

and further relief to which Plaintiff may be justly entitled.

Respectfully submitted,

By: /s/ Lloyd E. Kelley_____ Lloyd E. Kelley Texas Bar No. 11203180 kelley@lloydkelley.com 2726 Bissonnet, Suite 240, PMB 12 CertifiedDocumentNumber:64525805-Page12of13

Houston, TX 77005 (281) 492-7766 (main) (281) 652-5973 (fax)

James D. Pierce, Attorney At Law

By: /s/ James D. Pierce____ James D. Pierce Texas Bar No. 15994500 jim@jamespierce.com

87 1 Sugar Creek Center, Suite 1080 Sugar Land, TX 77478 (713) 650-0150 (main) (713) 650-0146 (fax)

ATTORNEYS FOR Plaintiff Takafumi Horie d/b/a Japan Space Dream

CERTIFICATE OF SERVICE

This is to certify that a true and correct copy of the above and foregoing instrument has been forwarded to all counsel of record via electronic filing and or e-mail on this the 6th day of March 2015.

/s/: Lloyd E. Kelley _________________ LLOYD E. KELLEY CertifiedDocumentNumber:64525805-Page13of13

88 I, Chris Daniel, District Clerk of Harris County, Texas certify that this is a true and correct copy of the original record filed and or recorded in my office, electronically or hard copy, as it appears on this date. Witness my official hand and seal of office this June 5, 2015

Certified Document Number: 64525805 Total Pages: 13

In accordance with Texas Government Code 406.013 electronically transmitted authenticated documents are valid. If there is a question regarding the validity of this document and or seal please e-mail support@hcdistrictclerk.com

89 TAB C 1

Motion to Dismiss April 20, 2015 1 REPORTER'S RECORD VOLUME 1 OF 1 VOLUMES 2 TRIAL COURT CAUSE NO. 20140=-65927

3 TAKAFUMI HORIE ) IN THE DISTRICT COURT ) 4 vs. ) HARRIS COUNTY, TEXAS ) 5 THE LAW OFFICES OF ART DULA, ET AL 6 ) 55TH JUDICIAL DISTRICT

9 _____________________________________________

10 MOTION TO DISMISS _____________________________________________ 11

13 On the 20th day of April, 2015, the following

14 proceedings came on to be held in the above-titled

15 and numbered cause before the Honorable Jeff

16 Shadwick, Judge Presiding, held in Houston, Harris

17 County, Texas.

18 Proceedings reported by computerized stenotype

19 machine.

Scotty Baldwin Deputy Official Court Reportert

509 2

Motion to Dismiss April 20, 2015 1 APPEARANCES

2 Lloyd E. Kelley 3 SBOT NO. 11203180 The Kelley Law Firm 4 3726 Bissonnet, Suite 240 PMB 12 5 Houston, Tx 77005 Telephone: 281.492.7766 6 Fax: 281.652.5973 E-mail: kelley@lloydkelley.com 7 Attorney for Plaintiff

8 James D. Pierce SBOT NO. 15994500 9 1 Sugar Creek Center, Suite 1080 Sugar Land, Tx 77478 10 Telephone: 713.650.0150 Fax: 713.650.0146 11 E-mail: jim@jamespierce.com Attorney for Plaintiff 12 Michael R. Levin 13 SBOT NO. 0351326 Baker & Hostetler LLP 14 200 South Orange Avenue Sun Trust Center, Suite 2300 15 Orlando, FL 32801 Telephone: 407.649.4000 16 Fax: 407.841.0168 Counsel for Defendants 17 Joshua C. Thomas 18 SBOT NO. 24027428 Baker & Hostetler LLP 19 811 Main, Suite 1100 Houston, Tx 77002-6111 20 Telephone: 713.751.1600 Fax: 713.751.1717 21 E-mail: jthomas@bakerlaw.com Counsel for Defendants 22

510 3

Motion to Dismiss April 20, 2015 1

2 THE COURT: I'm going to put this on the

3 record because we might want to refer back to this

4 later.

5 This is Case No. 2014-65947, Horie -- am I

6 pronouncing that right -- verses Law Offices of Art

7 Dula. Can I get appearances, please?

8 MR. KELLEY: Lloyd Kelley for the plaintiffs

9 and James Pierce.

10 MR. LEVIN: For the defendants, Michael Levin

11 of Baker Hostetler. With me is my colleague Josh

12 Thomas.

13 THE COURT: I've got a motion to continue this

14 hearing because you wanted to take Mr. Dula's depo.

15 MR. KELLEY: And the latest on her affidavit

16 with her name on it, Annese -- Annette Fronot.

17 THE COURT: Then the substantive motion,

18 motion to dismiss based upon the forum clause?

19 MR. LEVIN: Yes.

20 THE COURT: Okay. Let me just throw my

21 thoughts out there. You know my practice -- and you've

22 been here before and whoever doesn't like what I just

23 said, comment.

24 I'm not sure I understand why you need to take

25 anybody's deposition to decide whether or not there is a

511 4

Motion to Dismiss April 20, 2015 1 forum selection clause that would cause me to read on

2 the motion to dismiss. I read that your reason is that

3 you think there may be some fraud involved in it. But

4 my look at the case law was, I'm not sure that fraud

5 gets you out of the forum selection clause. So I'm

6 going to want you to talk to me why you need to take --

7 what are you looking for in this deposition that would

8 help -- that you need to know or what at least suspect?

9 MR. KELLEY: We have objected to their

10 evidence. We looked at it today in the lighter posture,

11 they have no evidence to support their forum selection

12 clause.

13 THE COURT: Okay. So, but we do have the

14 agreement that was signed, right?

15 MR. KELLEY: We are not -- they have nothing

16 to support that. They have an affidavit which purports

17 to be a business record, and we've objected to that

18 affidavit. We think it's defective. Even past that,

19 they don't have anything to connect any of the facts

20 that they have got to that contract. I'll give you an

21 example.

22 THE COURT: The cause of action is not related

23 to the agreement.

24 MR. KELLEY: Oh, better yet. The parties.

25 The Heinlein Trust, when you look at the Heinlein Trust

512 5

Motion to Dismiss April 20, 2015 1 as a defendant and you look in that contract, you will

2 never find it.

3 THE COURT: This is the question for these

4 guys. The thing I want you guys to talk about is how is

5 it that these -- where do I find these parties on the

6 agreement? Like Mrs. Dula, for example. The defendant

7 is "the law office of." Then I saw that he signed the

8 agreement, but he signed it in capacity as -- I've

9 forgotten now.

10 MR. LEVIN: Two points, Your Honor. First,

11 the contract is not hearsay. If we need case law, I

12 have it, but under Texas law, the contract is not

13 hearsay; therefore, their objection to the contract is

14 moot but --

15 THE COURT: Before I do that, can I ask you a

16 question? Is this a situation where this contract is

17 coming in. I mean, I want to make sure I don't think

18 this is just a technical objection.

19 MR. KELLEY: It's a technical objection.

20 THE COURT: So, assuming that they remember

21 how to practice law and they lay the foundation and they

22 have the right affidavit and the document is in. Then

23 let's just in our mind jump to that spot, the document

24 is in. It does have a forum selection clause, which

25 would cause me to move it, and so then --

513 6

Motion to Dismiss April 20, 2015 1 MR. KELLEY: For certain parties.

2 MR. LEVIN: Let me get to the parties.

3 THE COURT: So, the question is -- once we get

4 to the substance, the question is, are these parties and

5 this cause of action subject to that contract which has

6 the forum selection clause. That's the real meat of the

7 action.

8 MR. KELLEY: Before you go any further, we

9 object to the rest of it. It's hearsay, because all

10 they have is this contract is valid and no connection

11 between the parties and the contract --

12 THE COURT: Okay.

13 MR. KELLEY: -- in that capacity.

14 THE COURT: But that's the issue. The issue

15 is whether or not these facts as they are alleged in

16 this -- that come into evidence, those facts and these

17 parties are subject to the --

18 MR. KELLEY: In that capacity.

19 THE COURT: Right. In that clause. So if

20 they are -- then you agree I have to dismiss it, it goes

21 to the Isle of Man?

22 MR. KELLEY: No. There are still other

23 grounds. In Texas, you still have to show other things.

24 You have a contractual one, but then you have to show

25 that they're going to make themselves, the defendants

514 7

Motion to Dismiss April 20, 2015 1 here, are willing and are willing to not only have it

2 there but are putting it there. That is, if I go to the

3 Isle of Man and they are resisting jurisdiction there,

4 so the Heinlein Trust says, I've got four -- for

5 instance the Isle of Man says, I have no jurisdiction

6 over the Virginia Heinlein Trust. It has no ability to

7 ever come in this court by consent or otherwise, because

8 you can't always just give us. If that's the case, then

9 the Court can't dismiss that piece of it.

10 THE COURT: That's a decent point. You can't

11 have a situation where there is no jurisdiction anywhere

12 in the world.

13 MR. KELLEY: And that's what they created was

14 the ability to say move it over there but we are never

15 going there. If that's the case, then the Court here

16 has to keep it. Remember, this is more like venue.

17 It's a forum selection clause for an action that

18 ultimately has to happen. If it can't happen there or

19 it's not going to happen there, then you have to keep

20 it, so the motion dismiss is improper because the motion

21 to dismiss and should have been a motion to abate if

22 they wanted to go that way.

23 THE COURT: I've got my bearings now.

24 MR. LEVIN: Your Honor, it's a motion to

25 dismiss because the Supreme Court of Texas tells us the

515 8

Motion to Dismiss April 20, 2015 1 procedural vehicle is motion to dismiss. I'm going to

2 answer your question about the parties first.

3 THE COURT: Let's do that question, since you

4 brought it up first. Would it make -- if I agree with

5 you, would it make sense for me to sign an order abating

6 the case pending us all seeing that it actually does go

7 get filed in the Isle of Man and Isle of Man takes

8 jurisdiction?

9 MR. LEVIN: No, sir, because you're told by

10 the Texas Supreme Court the vehicle is a motion to

11 dismiss. Exclusive jurisdiction has been filed there.

12 Now let me address the parties issue.

13 THE COURT: But my brain is still stuck on the

14 other topic. How do we resolve Mr. Kelley's issues that

15 if I dismiss it and it gets refilled in the Isle of Man

16 and that Court says, "I don't have personal

17 jurisdiction" or whatever they say, "over -- over some

18 of these parties," then we have a situation where maybe

19 there is no place in the world to bring the case.

20 MR. LEVIN: The 14th -- I can take them one by

21 one. The 14th District in the Deep Water slander case,

22 which I understand is an appellate court decision --

23 jurisdiction.

24 THE COURT: Standing right on my shoulders.

25 MR. LEVIN: The decision in that case by Judge

516 9

Motion to Dismiss April 20, 2015 1 Gooseman, who is now affirmed in the Supreme Court, they

2 addressed this issue, and they said you don't -- it's

3 not a defense to the enforceability of a forum selection

4 clause to go review the enforceability of it in the

5 foreign jurisdiction. In that case -- in that case,

6 it's a very similar situation because the parties who

7 successfully enforced the forum selection clause were

8 not parties to the agreement. That what the Court says

9 was -- the facts there are instructive. The forum

10 selection clause was found in a consulting agreement

11 with a Dutch company. And then there was a second

12 agreement with a corporate defendant in that case. And

13 then there were three defendants, three individuals who

14 were also -- and neither the corporate defendant in that

15 case nor the three individuals were parties to the

16 agreement with the forum selection clause. But because

17 the pleadings by the plaintiff, just as Mr. Kelley has

18 pled here, has brought those folks within the purview of

19 the forum selection clause. For example, the

20 corporation was alleged to have been an alter ego of the

21 corporation's forum selection clause. Mr. Kelley has

22 alleged, Mr. Pierce has alleged, that Art Dula was an

23 alter ego of Excalibur, which were in the first

24 petition, which remains as an admission against interest

25 and, therefore, binds the plaintiff. So that goes to

517 10

Motion to Dismiss April 20, 2015 1 Dula.

2 Hightower and Anat Friedman and the Heinlein

3 Trust, if I can pronounce it correctly, the Heinlein

4 Trust, they are alleged to be joint and severally

5 liable. What the Court says is that, in the Deep Water

6 case, is because the plaintiff alleged that these other

7 folks, non-signatory parties, were substantially

8 interdependent in concerted actions with the entity with

9 the forum selection clause, the plaintiff is bound and,

10 in fact, equitable estopped, from contesting the

11 applicability of the forum selection.

12 THE COURT: So your reaction to Mr. Kelley's

13 comment that the facts that you bring me are hearsay or

14 lack of foundation or whatever, that I can grant -- that

15 I must grant -- I must grant your motion based on his

16 pleadings because we take then, if what he's saying is

17 true -- if what he's saying is true, then your argument

18 is supported and I grant the motion. So I should forget

19 any affidavits you guys have attached from your clients.

20 That's what you are saying, though?

21 MR. LEVIN: The records upon which you perform

22 your judicial labor is the petition and the amended

23 petition and the contract. The contract is not hearsay.

24 The business record affidavit was fine. It's also a

25 declaration by a party opponent, and it's also admission

518 11

Motion to Dismiss April 20, 2015 1 against interest because it's a ruling. So it's

2 admissible six ways from Sunday. And you don't need

3 evidence or discovery because he doesn't need discovery

4 about his own allegations. There are his allegation.

5 He made them. He had a specific detailed petition. We

6 filed our original motion to dismiss. And then he

7 produced a sanitized petition that eliminated reference

8 to Excalibur, but it doesn't make the first petition go

9 away. This is not like a motion to transfer venue.

10 It's completely different.

11 THE COURT: I understand. So what's going to

12 happen in the Isle of Man?

13 MR. LEVIN: Well, in the Isle of Man, first of

14 all, the original corporate defendant to whom Mr. Horie

15 gave his money certainly have jurisdiction. Mr. Duly is

16 the CEO. Mr. Hightower is a director and an executive

17 vice president.

18 THE COURT: So the Isle of Man court has

19 jurisdiction?

20 MR. LEVIN: I'm not here to speak

21 intelligently about the jurisdiction of Isle of Man

22 court. I say if I impose, you know, international

23 federal jurisdictional concept upon the Isle of Man

24 jurisprudence, I would say that these folks have

25 purposely availed themselves of the privileges of doing

519 12

Motion to Dismiss April 20, 2015 1 business in Isle of Man but you don't have to dismiss it

2 with prejudice.

3 THE COURT: When does the statute run?

4 MR. KELLEY: It's running. It's running. We

5 are in a gray area because of the fiduciary nature of

6 Mr. Dula.

7 THE COURT: That's my interest if I'm able to

8 and abate instead of dismissing.

9 MR. LEVIN: I'm here to say to you that I do

10 not know and cannot speak to Isle of Man jurisdiction,

11 I'm not contending that we are not subject to the Isle

12 of Man jurisdiction. There is a difference. They can't

13 make these folks show up on this isle the middle of the

14 Irish Sea, but they can still bring the claims against

15 them. So, you know, this is a -- this is not --

16 THE COURT: Subpoena power jurisdiction is

17 different.

18 MR. LEVIN: This is not someone living here in

19 Bellaire that's trying to bring a suit against a local

20 lawyer. This is a Japanese billionaire Internet tycoon

21 that put $49 million into a Isle of Man company to buy

22 soviet space craft.

23 THE COURT: That's funny that you mentioned

24 that, because I have once enforced a venue provision

25 against two Houston residents where they agreed venue

520 13

Motion to Dismiss April 20, 2015 1 would be Warsaw, Poland, or something like, because the

2 purpose of the agreement was to make it nearly

3 impossible for them to sue each other. I said, well, if

4 that was your deal, I'm forcing it. So I'm okay if this

5 thing going to the Isle of Man if that's what the

6 agreement was.

7 MR. KELLEY: Let's back up. He's made some

8 factual assertions that he has no support for, which we

9 have counter support for.

10 THE COURT: Hang on. But that's why I wanted

11 to make sure to clarify that if I carve out everything

12 that doesn't appear in your petition --

13 MR. KELLEY: We've already did a first

14 amendment. He's wrong. We have amended and that got

15 rid of the first one. All of the stuff he talks about,

16 well, it doesn't go away. Yes, it does.

17 THE COURT: I understand. I know what your

18 operative pleading is, but I'm working on the concept

19 that if I take your position -- if I carve out all of

20 the facts as he alleged them that don't appear in your

21 current active pleading, I look solely at your current

22 active pleading, is that a way to do it?

23 MR. KELLEY: Sure. Because we have already

24 done your work for you. That's why he's complaining.

25 He's said we've sanitized it. We have eliminated any

521 14

Motion to Dismiss April 20, 2015 1 reference to alter ego or anything like that. We

2 focused -- remember, the money originally went to

3 Mr. Dula in his IOTA trust account.

4 THE COURT: I know. But part of this is me

5 learning, because I know that if that's what I hung my

6 hat on today, they would just get a better affidavit

7 that alleged the facts. I mean, I like to get past the

8 procedure and get to the substance, at least while I

9 have lawyers standing in front of me. So, let's pretend

10 like everything gets fixed, I want to hear the argument.

11 MR. KELLEY: Here's the main argument. The

12 guys that he's talking about in this lawsuit are not

13 parties to the agreement that he wants to go with.

14 THE COURT: I know.

15 MR. KELLEY: The second thing is that

16 agreement is not what our lawsuit is about. We are not

17 suing on that deed. At best -- at best, he has a cause

18 of action that he ought to be bringing in the Isle of

19 Man.

20 THE COURT: Yeah, but there is a pretty -- the

21 provisions -- the venue provision is pretty broad.

22 MR. KELLEY: The parties agree about this

23 deed. Then the parties are defined clearly as four

24 people.

25 THE COURT: I know.

522 15

Motion to Dismiss April 20, 2015 1 MR. KELLEY: Only Mr. Horie. The other two

2 are not here, Abbey, the corporation and Excalibur

3 Almaz. The only way he's getting there now is to argue,

4 oh, in the first petition he argued he was the alter

5 ego. He doesn't want to confess that I'm the alter ego.

6 So if you take your argument, but that's gone now. The

7 first amendment took it out. So, now he's left with,

8 you are not the party, but I'm going to stretch it

9 because the relief supposedly goes against the officers

10 and employees. We are not suing them in that capacity

11 at all. It doesn't talk about his law firm. It doesn't

12 talk about his legal work. It doesn't talk about the

13 trust at all. There is no way to get the trust in here

14 and his work on behalf of the trust. And there is no

15 way to go the lawyers in his office released who worked

16 on this stuff. His associates. How does that come in

17 here? I'm going to get my law firm released, because

18 some board member or director, I signed a document that

19 releases the directors but now it's going to include

20 everybody in my law firm at Vinson & Elkins? That's not

21 going to work.

22 MR. LEVIN: The company -- there are two ways

23 we get the non-signatories. One is the way that I think

24 the Court tells us, the 14th District, in the Deep Water

25 slander cases. The other is the company group

523 16

Motion to Dismiss April 20, 2015 1 definition. The company group definition in the

2 agreement says that the release and, therefore, the

3 ability to enforce it thereof applies to officers and

4 directors, and that's Mr. Dula and Mr. Horie. It

5 applies to affiliates, and that's Anat Friedman. And

6 the only way they get to -- the only way they get to the

7 Heinlein Trust is by the actions of Mr. Dula and

8 Mr. Hightower. These are distinguished between their

9 actions as director as, lawyer, and so forth. So they

10 all fall within that company.

11 But I want to go back to, you know, the cases

12 he's relying upon about forum selection clause, yeah, he

13 has a case where they have to translate it from Polish,

14 and he's got the case of Massachusetts and Ohio. This

15 is a very broad forum selection clause. And it looks

16 backwards and includes specifically noncontractual

17 claims. It's not venue exclusive jurisdiction. It

18 applies to everything that happened when the man

19 invested his money to when they had all of these

20 dealings, and he got out of it.

21 THE COURT: It's very broad. I read that with

22 Mr. Kelley's. What I'm going to go back and think about

23 a little bit is why it was captured non-signatories in

24 the capacities that they signed. Because you have to

25 wonder if I sign a document as -- in my capacity as

524 17

Motion to Dismiss April 20, 2015 1 trustee of this trust, am I thinking to myself, you

2 know, I bet this binds me individually, too. And it

3 would be helpful to -- I'll go back and read it.

4 MR. LEVIN: Deep Water, from the 14th.

5 THE COURT: But I want to feel better about

6 that part of it.

7 MR. LEVIN: Well, I think that case and also

8 the International Profit case also will -- will

9 alleviate your concerns in that regard. But in a motion

10 to transfer venue, you have -- only have discovery

11 because there is affidavits contesting the pleadings.

12 Here we are entitled to rely -- Bay Area case says we're

13 entitled to rely upon the supersedeas pleadings, whether

14 he wants to run away from it now or not. So we think

15 that the records, as I read all of these cases, heavy

16 burden -- it's a heavy burden that the resisting party

17 has to overcome the forum selection clause. This is now

18 like an arbitration clause in this case, not like venue,

19 but an arbitration clause that favors -- the United

20 States Supreme Court says they are favored, and he has a

21 heavy burden. And he has not done anything other than

22 attack what his admission in his pleadings and the

23 admissibility of this contract. He's not met his heavy

24 burden to overcome the forum selection clause.

25 THE COURT: All right. I've got it.

525 18

Motion to Dismiss April 20, 2015 1 MR. KELLEY: A lawyer who is being sued

2 because of his legal work and fiduciary duty cannot

3 simply say, ship me out to the Isle of Man because we

4 are not coming under this agreement saying I'm suing on

5 that, the Isle of Man gets there and says, I have no

6 ability to enforce the ethical rules of Texas in

7 relationship to the lawyer and his client.

8 THE COURT: But your lawsuit goes beyond just

9 that, though.

10 MR. KELLEY: That's pretty much basically it,

11 and the trust. Our lawsuit is, what you did as a lawyer

12 in going to him and representing him, telling him you're

13 going to do these things, and taking his money into

14 IOLTA account. It's not a complaint. Our pleadings say

15 you took the money, you put it your IOLTA account, you

16 held it in trust and then you took that money, and you

17 did things with it that you weren't supposed to do and

18 you created these companies and you put the forum

19 selection clause and did all of these things, and then

20 you took the money yourself. So the lawyer ends up with

21 the 50 million. If you look at the whole scheme, he

22 takes the fifty from him, puts it in his trust, does

23 this circuitous route and then comes back with the

24 lawyer having the money. We are saying, you as the

25 lawyer breached your fiduciary duties.

526 19

Motion to Dismiss April 20, 2015 1 THE COURT: I get that.

2 MR. KELLEY: And you can't get a release as a

3 lawyer -- this is the second ground. You cannot

4 contractually stick in a release in some other document

5 without having first -- and the whole purpose -- the

6 only thing he's got in the entire document is he gave us

7 a release as an employee or officer. So if that's it,

8 the lawyer by definition cannot have -- we have got --

9 on a breach of fiduciary duty, if he claims that I stuck

10 it in there and got release from my lawyer stuff, that's

11 an independent act of breach of fiduciary duty. None of

12 that comes under the deed.

13 THE COURT: I understand. As I read your

14 pleadings, though, I had a hard time separating the

15 transaction, you know, the space business investment

16 thing from the stuff about the lawyer and his trust

17 account. I had a hard time separating that out.

18 MR. KELLEY: But the Isle of Man is not going

19 to take a breach of fiduciary duty, because he's not

20 even admitting that we are not going to go there.

21 THE COURT: I tried to get him to say that on

22 the record.

23 MR. KELLEY: I'll step back so we can get that

24 clear. But when they get up there, they're going to

25 say, oh, no, blah, blah. By the way, the rules do not

527 20

Motion to Dismiss April 20, 2015 1 provide, even on a change of venue, the rules do not

2 provide you stall discovery. They have a rule in there

3 for venue that says this clearly doesn't do it. And

4 under the hearing you have no time limit or anything on

5 treating this. It's not treated under 21-day limit.

6 O'Conner points out that -- so, there is no abatement of

7 discovery.

8 So my other request was, I have a right to go

9 forward with discovery. They are here. Dula is who.

10 Mr. Friedman is here. I have a right the take their

11 deposition. I've requested it properly. I've got a

12 motion to compel. That's what before you. I'm saying,

13 look, unless you are willing to abate it today or grant

14 their motion, I am able to go forward, and I can test

15 some of these theories. His argument is that money

16 went --

17 The ruling is this. In reviewing this, four

18 months, the Court will take any depositions, any

19 discovery product, any affidavit. So clearly it

20 contemplates taking in whatever evidence is before it.

21 There is no rule of procedure that says if you file a

22 motion to dismiss based on this, it halts discovery.

23 They've got no order from the Court halting discovery.

24 I have pending discovery with them that they have simply

25 said we're not going to allow you to do.

528 21

Motion to Dismiss April 20, 2015 1 THE COURT: My question on that was whether or

2 not I needed the discovery to rule on the motion because

3 once I rule, you are either here or you're not here.

4 MR. KELLEY: Or it's abated.

5 THE COURT: Last word. I have got it.

6 MR. LEVIN: Rule 88 does not apply because in

7 a motion to transfer venue actually says in the rule,

8 Rule, I think, 87, it says, it shall not be dismissed.

9 It shall instead be transferred to another jurisdiction.

10 That's why discovery is permitted in the motion to

11 transfer venue context, because if the case is ongoing,

12 it might go to different county. The case law says, the

13 accelerated cases say, it is not a motion to change of

14 venue here, instead transfer it and ongoing which allows

15 discovery, this is dismissed. The party bargained to go

16 to a forum selection clause in counter to that to allow

17 discovery to go on.

18 THE COURT: I know. I just said that. It's a

19 question of whether or not I need the information to

20 rule on the motion j.

21 MR. LEVIN: The last point I just want to

22 leave you with if I may, on the legal malpractice side.

23 I just point out Section 11.4 of the deed of assignment

24 recites that each party has either had the terms and

25 effectiveness either explained by independent legal

529 22

Motion to Dismiss April 20, 2015 1 counsel or had the full opportunity to have its terms

2 and effects explained by independent legal counsel.

3 So Mr. Horie signed -- not only signed this

4 deed, he initialed every page, because he was

5 represented by independent legal counsel, not Mr. Dula.

6 MR. KELLEY: And nowhere in here does it say

7 that my work as your lawyer gets a release from my legal

8 work, and we are going to put that capacity in. This

9 doesn't make it.

10 THE COURT: I have a trial that is in its

11 third week that's coming back tomorrow. And I've got

12 the charge conference this afternoon, so I don't see any

13 reason this -- and I'm now playing in the HBA golf

14 tournament on Thursday. I don't see me reaching this --

15 if I don't finish it today, then don't expect anything

16 until Friday.

17 MR. LEVIN: That's better punctuality that I

18 get from a lot.

19 THE COURT: I've not done this a couple of

20 times where I just needed to think about it longer, but

21 I always rule by the end of the day on Friday on

22 anything I've gotten during the week. Otherwise, I

23 forget what happens and next week stuff comes up.

24 Right.

25 (End of hearing.)

530 23

Motion to Dismiss April 20, 2015 1 STATE OF TEXAS

2 COUNTY OF HARRIS

4 I, Scotty Baldwin, Official Court Reporter in

5 and for the 55TH District Court of Harris, State of

6 Texas, do hereby certify that the above and

7 foregoing contains a true and correct transcription

8 of all portions of evidence and other proceedings

9 requested in writing by counsel for the parties to

10 be included in this volume of the Reporter's Record

11 in the above-styled and numbered cause, all of which

12 occurred in open court or in chambers and were

13 reported by me.

14 I further certify that this Reporter's Record

15 of the proceedings truly and correctly reflects the

16 exhibits, if any, offered by the respective parties.

17 I further certify that the total cost for the

18 preparation of this Reporter's Record is $276.00

19 and was paid by Baker Hostetler .

20 /s/Scotty Baldwin

21 Scotty Baldwin, CSR Texas CSR 1019 22 Deputy Court Reporter 55TH District Court 23 Harris County, Texas 3610 E. Peach Hollow Cir. 24 Houston, Texas 77002 Telephone: 713.208.9524 25 Expiration: 12/31/2015

531 TAB D 1

1 REPORTER'S RECORD VOLUME 1 OF 1 VOLUMES 2 TRIAL COURT CAUSE NO. 2014-65947

3 TAKAFUMIE HORIE ) IN THE DISTRICT COURT ) 4 vs. ) HARRIS COUNTY, TEXAS ) 5 LAW OFFICES OF ART DULA ) 55TH JUDICIAL DISTRICT

8 _____________________________________________

9 DOCKET HEARING _____________________________________________ 10

12 On the 1st day of June, 2015, the following

13 proceedings came on to be held in the above-titled and

14 numbered cause before the Honorable Jeff Shadwick, Judge

15 Presiding, held in Houston, Harris County, Texas.

16 Proceedings reported by computerized stenotype

17 machine.

Gina Wilburn, CSR Official Court Reporter 55th District Court

532 2

1 APPEARANCES

2 Lloyd Kelley SBOT NO. 11203180 3 Attorney At Law 2726 Bissonnet, Suite 240 4 Houston, Tx 77005 Telephone: 281-492-7766 5 Counsel for Plaintiff

6 Josh Thomas SBOT NO. 24027428 7 BakerHostetler 811 Main Street 8 Suite 1100 Houston, TX 77002-6111 9 Telephone: 713-646-1331 Counsel for Defendant 10

Gina Wilburn, CSR Official Court Reporter 55th District Court

533 3

1 THE COURT: Okay. This is Case

2 No. 2014-65947, Takafumi Horie versus Law Offices of Art

3 Dula.

4 MR. KELLEY: Hi, Judge. I'm Lloyd --

5 Lloyd Kelley. I forgot what team I'm on. This is Jim

6 Pierce.

7 MR. PIERCE: James Pierce.

8 MR. LEVIN: Your Honor, I'm Mike Levin

9 from Orlando, BakerHostetler. With me is my colleague,

10 Josh Thomas, from Houston BakerHostetler.

11 THE COURT: Welcome back.

12 MR. LEVIN: Thank you. Good to see you,

13 Judge.

14 THE COURT: So you've traveled twice on

15 this topic to show me how sure you are that you're right

16 and I'm wrong.

17 MR. LEVIN: I came here once for a hearing

18 just to watch you before.

19 THE COURT: And now you know me to be

20 reasonable and openminded. Although, I still I think I

21 got this right. And I read your motion to reconsider.

22 And fortunately, there is a quick remedy. It's a venue

23 type ruling, which means it's mandamusible. Don't you

24 agree?

25 MR. LEVIN: It's not a venue type ruling,

Gina Wilburn, CSR Official Court Reporter 55th District Court

534 4

1 but it is mandamusible.

2 THE COURT: And so the Court of Appeals

3 will correct me or not quickly enough so that there

4 is -- the bulk of the case will happen where it's

5 supposed to happen, whether here or the Isle of Man. So

6 my intention is to deny the motion to reconsider.

7 MR. LEVIN: If I might, just two points

8 just procedurally underlying why I move for

9 reconsideration.

10 THE COURT: Okay.

11 MR. LEVIN: One, if it does go up on

12 mandamus, that would be our intention if you deny it. I

13 want to make -- it's a significant enough issue that I

14 wanted to make sure the record is fully robust that

15 we're not on mandamus, they say, well, you didn't argue

16 that in front of the trial court judge.

17 THE COURT: Sure. And I'm all about

18 letting lawyers lawyer and you tee your case up and I

19 don't want the Court of Appeals to waste its time or you

20 waste your time, of course.

21 MR. LEVIN: But the second is there was --

22 because the motion in opposition to the supplemental

23 motion to dismiss was filed on the Friday right before

24 the hearing, there were some things that we didn't get a

25 full-blooded chance to address and I would like to

Gina Wilburn, CSR Official Court Reporter 55th District Court

535 5

1 just -- understanding what you've said, I would like to

2 lay out for you --

3 THE COURT: Let 'er rip, I'm unoffended.

4 MR. LEVIN: Thank you, sir. The Courts of

5 this state tell you that the party resisting the

6 mandatory forum selection clause has a heavy burden to

7 show why it doesn't apply.

8 THE COURT: If it applies.

9 MR. LEVIN: Right. Well, let me set that

10 one aside for a second.

11 So your order covered three issues. You

12 covered the alleged status that Mr. Dula was Mr. Horie's

13 attorney. Now, that, we say that's just fiction, never

14 represented the man, but it's pled. So you covered

15 that.

16 You covered whether or not Mr. Dula and

17 Mr. Hightower would be susceptible to jurisdiction in

18 the Isle of Man and you've pressed me on that and we've

19 responded to that in our motion for consideration. And

20 then you have the issue about the live pleading and the

21 old pleading.

22 THE COURT: Right.

23 MR. LEVIN: So dealing with the attorney

24 issue and the point I wanted to make first is that the

25 allegation that Mr. Dula was Mr. Horie's attorney is not

Gina Wilburn, CSR Official Court Reporter 55th District Court

536 6

1 inconsistent with the investment being an Excalibur

2 investment. Those are two separate thoughts. It's not

3 an either/or.

4 So if the forum selection clause does

5 apply -- and we'll get to that deed of assignment in

6 just a second -- the point is you said in the last

7 paragraph of your order, well, status as attorney

8 affects the interpretation of the release, something to

9 that effect. I have your order.

10 But the truth is even under the decision

11 cited by Mr. Kelley, the Falk & Fish decision, it's the

12 only decision unearthed where there's a forum selection

13 clause that was actually in an engagement letter between

14 a Texas lawyer and a North Carolina client. And even in

15 that case, in construing the mandatory forum selection

16 clause, the Court said that it is the heavy burden on

17 the client to show that it's unreasonable.

18 Now, the client met the burden there, but

19 that's because the client submitted affidavits and -- in

20 order to demonstrate that it was unreasonable. There

21 is -- the truth is on this record, Mr. Kelley has

22 submitted no affidavits on the part of Mr. Horie or

23 anybody else. There has been nothing by the party

24 resisting the forum selection clause to show that --

25 that it's unreasonable. So there's been a failure to

Gina Wilburn, CSR Official Court Reporter 55th District Court

537 7

1 meet the burden.

2 On the second --

3 THE COURT: Nobody would have to if it

4 doesn't apply.

5 MR. LEVIN: Right. And the second point

6 you asked me about is could be Mr. -- and you pointed in

7 your order, could Mr. Dula and Mr. Hightower be under

8 the jurisdiction of the Isle of Man court. And I've --

9 and we've said, as you've seen in our motion to

10 reconsider, yes, CEO of the company, vice president of

11 the company, they admit they're subject to jurisdiction

12 of the Isle of Man court.

13 But, again, it's not our burden to say

14 there is jurisdiction. It's the burden of the party

15 resisting the clause to say there is not, and that's not

16 been met.

17 So let's go now to the main issue, the --

18 the actual deed of assignment and whether it applies to

19 this situation or not, whether that forum selection

20 clause applies.

21 That forum selection -- that deed of

22 assignment in the recitals, as we went through in detail

23 in our motion, covers every facet of Mr. Horie's

24 involvement with this company. It's -- it covers in the

25 recitals the memorandum of understanding where he agreed

Gina Wilburn, CSR Official Court Reporter 55th District Court

538 8

1 to invest this $49 million. It covers the June

2 agreement where after he got convicted and sentenced, he

3 assigned his ownership of Excalibur to a trust.

4 THE COURT: How does it cover his

5 relationship with an attorney if there was one?

6 MR. LEVIN: Because it covers his

7 relationship with Excalibur regardless, regardless of

8 whether it involves his attorney or not. The question

9 really is: Why does -- if you have a forum selection

10 clause that applies to all of Mr. Horie's relationship

11 with -- regarding this 49 million-dollar investment, the

12 question is: If it's also regarding his attorney

13 relating to that investment, you still have a forum

14 selection clause applying to that investment.

15 Now, the difference between the original

16 com -- petition -- I keep calling it complaint because

17 that's what we call it in Florida -- the original

18 petition and the amended petition is only -- because

19 they both talk about the alleged attorney/client

20 relationship -- is only Mr. Kelley went through and

21 every time it said Excalibur, he called it a space

22 business or a space enterprise or a space venture or a

23 space entity. And one other generalized term that I

24 can't recall right now. All to substitute for

25 Excalibur.

Gina Wilburn, CSR Official Court Reporter 55th District Court

539 9

1 The allegations against Mr. Dula were the

2 same. We've cited paragraph -- a -- a significant

3 penultimate paragraph in the complaint that says what it

4 was all about. So the only question is whether his

5 status as an alleged attorney excuses Mr. Horie from

6 having to comply with the forum selection clause and

7 that becomes --

8 THE COURT: I don't see that as the

9 question at all. The status of his relationship as an

10 attorney is the -- is a separate relationship. If I

11 hire you to help me make an investment in this parking

12 lot across the street and I get into -- into a fuss with

13 the people who own the parking lot across the street and

14 we settle that case, when I separately -- I would never

15 sue you, sir; but, I mean, if I separately sue you for

16 malfeasance somehow in the attorney/client relationship,

17 the venue or release or the terms of the settlement I've

18 made with the folks across the street doesn't relate to

19 that at all.

20 MR. LEVIN: No, sir.

21 THE COURT: That's -- that's the link that

22 you're going to have to make for me.

23 MR. LEVIN: Yes. The link is that they

24 allege that Mr. Dula is both the CEO of the parking lot

25 across the street and the attorney for Mr. Horie, both.

Gina Wilburn, CSR Official Court Reporter 55th District Court

540 10

1 So it's not me advising you to investment in the parking

2 lot across the street and giving you negligent advice

3 about it. It is on their theory -- and again, we've

4 even attached communications to show that Mr. Dula never

5 represented this man and this man is the combination of

6 Steve Jobs and Bernie Madoff in Japan. He has plenty of

7 lawyers and he was represented by a Silicon Valley firm

8 in the situation and we attached that e-mail.

9 But the situation -- the problem with your

10 analogy is that if I'm the CEO of the company you

11 invested in, you invest the money, I'm also your

12 attorney, then I may or may not be liable to you. That

13 would come out of the facts. But if our contract has a

14 forum -- a mandatory forum selection clause under Falk &

15 Fish --

16 THE COURT: But my contract with you as my

17 attorney doesn't.

18 MR. KELLEY: That's right.

19 MR. PIERCE: That's right.

20 MR. LEVIN: The contract relating to

21 investment in the company you claim I'm the CEO of does.

22 THE COURT: And in that capacity, you're

23 released and if I sued you in that capacity, I'd be in

24 the Isle of Man.

25 MR. KELLEY: Right.

Gina Wilburn, CSR Official Court Reporter 55th District Court

541 11

1 MR. LEVIN: He did sue. He did sue in the

2 capacity for taking the money. He didn't sue for

3 advising about the money. He sued for allegedly taking

4 and misusing the money with regard to the investment in

5 the Soviet-era spacecraft. That's the allegation.

6 THE COURT: Do you need to say anything

7 before I --

8 MR. KELLEY: I was going to say, you

9 probably don't want me to say anything because I --

10 THE COURT: I'm letting lawyers preserve

11 their record, so --

12 MR. KELLEY: One more thing I wanted to

13 tell you, last time that you had an -- idea, I didn't

14 put it in -- I did some more research and I was going to

15 get those cases for you. I just got short on time.

16 There is some case law that talks about

17 moving it to -- this goes in line with your order. I'm

18 going to tell you how right you are. You may not need

19 it.

20 But there is some case law that says --

21 because we had this general discussion last time -- if

22 you say, I want to have this case in Cuba -- this is

23 before this year -- and you can't go to Cuba, then that

24 won't work. You can't go to Russia or a communist

25 country where they won't recognize that.

Gina Wilburn, CSR Official Court Reporter 55th District Court

542 12

1 So this is analogous to that because a

2 malpractice action based on a Texas lawyer's conduct and

3 Texas lawyers, they're still not saying that the rest of

4 the people can be sued in the Isle of Man and certainly

5 they've never said anything about the trust and they've

6 never said about these other people. And I think

7 Mr. Pierce would add that on the basis of what they've

8 done now -- how's it go, the case you've got?

9 MR. PIERCE: They're trying to control the

10 litigation and the discovery by moving for protective

11 orders for other people.

12 THE COURT: Right.

13 MR. PIERCE: So under some of the case

14 law, they've actually even waived the venue motion.

15 MR. LEVIN: We have not -- we have not --

16 THE COURT: I don't think it's waived.

17 Look, I didn't make this part of my order because it

18 wasn't briefed and I didn't want to do the research

19 myself. To be honest with you, I think it violates

20 public policy. The relationship between a client and a

21 Texas lawyer can be anywhere but Texas. That's not part

22 of my ruling. But if I was asked, that's what I think.

23 All right. What's your --

24 MR. KELLEY: Can we go to the next one?

25 THE COURT: Yeah, motion to reconsider is

Gina Wilburn, CSR Official Court Reporter 55th District Court

543 13

1 denied.

2 MR. LEVIN: Your Honor --

3 THE COURT: Do you need to say something

4 else to preserve your record?

5 MR. LEVIN: No, sir. I've made my record,

6 Your Honor, but then we would ask for a stay in this

7 proceeding so that we can have the petition for mandamus

8 because to be required to engage in discovery in this

9 court is contrary to the forum selection clause.

10 THE COURT: Okay. Here's my reaction to

11 that: Isn't this the same discovery that you would be

12 doing in the Isle of Man where you would like to be?

13 MR. KELLEY: Yes.

14 MR. LEVIN: No, sir.

15 THE COURT: Why not? That's why the

16 motion to stay would be denied. It seems like you're in

17 the fight whether you want to be or not, which means

18 you're in discovery whether you want to be or not. What

19 court that takes place under seems to be unrelated to

20 your -- to your mandamus.

21 MR. LEVIN: Well, that's the -- that

22 assumes that the discovery procedures that occur under

23 the Texas Rules of Civil Procedure are the same

24 discovery procedures --

25 THE COURT: That's true.

Gina Wilburn, CSR Official Court Reporter 55th District Court

544 14

1 MR. LEVIN: -- as would be in the

2 Isle of Man. If I'm right and the parties did intend

3 for this forum selection clause to apply to this

4 dispute, then it's subject to whatever discovery

5 procedures would apply in the Isle of Man, whatever

6 evidentiary procedures would apply in the Isle of Man.

7 And so the ability to -- we are -- if we

8 have to go forward with discovery, then we are denied

9 the ability to avail ourselves of the protections of the

10 laws of the Isle of Man and so that's why the whole

11 point of mandamus is you can't rebag the cat, you can't

12 unring the bell and so we should get a stay on that.

13 THE COURT: Sort of like sometimes when

14 you order arbitration and the Rules of Discovery are

15 different in arbitration or civil court, so I'm sort of

16 persuaded by this.

17 MR. KELLEY: Well, but it's different in

18 this case for this reason -- I'm going to take further

19 on your idea of the public policy and if we haven't

20 briefed it, we will. If a lawyer in this state thinks

21 he can now shield himself by simply saying, all of my

22 stuff is now going to be in Cuba or in the Isle of Man

23 and I'm not even going to let you have discovery or

24 anything like that, that's found unconscionable.

25 So you have to have a forum that first can

Gina Wilburn, CSR Official Court Reporter 55th District Court

545 15

1 apply to that and then you get the same discovery. No

2 lawyer can say in any contract you can't have your

3 documents, you can't have your discovery and I'm going

4 to make sure you're limited because that's now found --

5 THE COURT: I don't see this as that. If

6 this was an interlocutory appeal that I thought might be

7 ruled on in a year, I might -- I might have discovery go

8 forward, but a mandamus is going to be pretty fast.

9 MR. KELLEY: But remember, in an

10 interlocutory appeal, they don't even allow, except in

11 certain circumstances, a stay on discovery. Why would

12 you allow a stay on discovery in a mandamus?

13 You've said he's wrong. A mandamus is

14 extraordinary relief. It's not a right of appeal. It's

15 to say that somehow you've abused your discretion. So

16 if that's the case, then there should be no stay in the

17 discovery. We've got to get the case moving forward.

18 And it could take as long as an interlocutory by the end

19 of the money.

20 THE COURT: All right. Well, what do I --

21 if I grant your stay on appeal, what do I do if you

22 don't file the mandamus?

23 MR. LEVIN: We're going to file the

24 mandamus. And so you could say the stay lasts for a

25 period of 20 days and if we have it -- and we'll reman

Gina Wilburn, CSR Official Court Reporter 55th District Court

546 16

1 in effect if we file our mandamus; otherwise, it

2 expires. That would be the proper way to do it.

3 THE COURT: That's not a bad idea.

4 MR. KELLEY: So we're going to stay here a

5 year when this thing's locked down? We also sought

6 discovery as far as the motion that is -- some of this

7 stuff he says we don't have evidence --

8 MR. LEVIN: The motion -- excuse me.

9 THE COURT: Hang on.

10 MR. KELLEY: So, remember, one of my

11 objections was, Judge, I don't want you to hear this

12 motion because we want to do some discovery. Well, when

13 you denied it, that became moot. I don't want to

14 have --

15 THE COURT: That's because you won.

16 MR. KELLEY: Right, but I would still --

17 if I still do some of that discovery and we find out

18 some of the stuff I'm looking for, then on appeal I'll

19 be able to supplement that mandamus record to support

20 the decision that you did make. Why should I be backed

21 off of on discovery because I was right?

22 MR. LEVIN: Well --

23 THE COURT: Hang on. But we don't know

24 what the result of the mandamus is going to be.

25 MR. KELLEY: It could be, go get your

Gina Wilburn, CSR Official Court Reporter 55th District Court

547 17

1 discovery --

2 THE COURT: Right.

3 MR. KELLEY: -- in which case I've lost

4 time. I waste six months to a year waiting on a --

5 THE COURT: Man, I don't know. I mean --

6 MR. KELLEY: There's no rule that provides

7 for it. The mandamus rules don't provide for it. If he

8 wants that kind of relief, get it from the appeal court.

9 They'll issue it if they think it's legitimate.

10 THE COURT: All right. Here's what would

11 make me feel better --

12 MR. KELLEY: Okay. Tell me what you want

13 to do.

14 THE COURT: -- is if you told me what the

15 rules of discovery were in the Isle of Man and if

16 they're substantially similar to what you're asking for,

17 I'll let it go forward, but I do understand his argument

18 that --

19 MR. KELLEY: Then I'll go research it. I

20 have no idea. Let me go find out.

21 THE COURT: So I grant his motion to stay.

22 I put in the little thing that says as long as you

23 mandamus me quickly, that would be --

24 MR. LEVIN: 20 days, Your Honor?

25 THE COURT: That would be the first time

Gina Wilburn, CSR Official Court Reporter 55th District Court

548 18

1 in history the district court judge says, would you

2 please hurry up and -- try to mandamus me? But in any

3 event --

4 MR. KELLEY: If you're going to do this

5 then and he loses in the mandamus, then I want an

6 expedited discovery order that puts this case back on

7 track.

8 THE COURT: All right. Well, let's wait

9 and see what happens after the discovery. What I prefer

10 that you do is that you file a motion to reconsider the

11 stay of the discovery if you find out what the rules of

12 discovery are in the Isle of Man. You understand my

13 concern, right?

14 MR. KELLEY: Yeah. You're saying somehow

15 he gets an advantage as a lawyer because he stuck in

16 some settlement agreement something about the

17 Isle of Man. I think that's against public policy --

18 THE COURT: Perhaps --

19 MR. KELLEY: -- that you get any

20 protection at all.

21 THE COURT: But walk through the result of

22 the Court of Appeals agreeing to the mandamus. Okay?

23 Play that forward.

24 MR. KELLEY: If they agree?

25 THE COURT: Yeah.

Gina Wilburn, CSR Official Court Reporter 55th District Court

549 19

1 MR. KELLEY: On which ground?

2 THE COURT: They -- they overturn me.

3 They say that the venue is proper in the Isle of Man.

4 MR. KELLEY: For everybody, because

5 they're only moving now to reconsider two of the them.

6 THE COURT: Whatever it is that they say.

7 MR. KELLEY: Okay. So two of them go and

8 the other four stay.

9 MR. LEVIN: Mandamusing for all of them,

10 so --

11 THE COURT: In any event, they say that

12 the case has to go forward in the Isle of Man and the

13 Isle of Man Courts say, Well, we, the Isle of Man,

14 basically just look out at the North Atlantic Ocean and

15 do our -- and we don't like discovery and so you don't

16 get any, then in that case, the Court having decided the

17 ill Isle of Man is appropriate, then they have, I guess,

18 also decided that it doesn't violate public policy or

19 whatever else happens.

20 But -- but I do think it would be

21 inappropriate for me to begin to -- to order discovery

22 which is not available in this Isle of Man because if

23 the Court of Appeals reverses this is --

24 MR. KELLEY: So all you need to know is if

25 it's available in the Isle of Man, you'll take off --

Gina Wilburn, CSR Official Court Reporter 55th District Court

550 20

1 THE COURT: Then I'll feel better about it

2 occurring here because it would have occurred there

3 anyway.

4 MR. KELLEY: Okay. I'll go look.

5 THE COURT: Do you see what I'm saying?

6 MR. KELLEY: Sure.

7 THE COURT: Does that seem --

8 MR. KELLEY: It doesn't seem fair to me,

9 but I'll do it.

10 THE COURT: Yeah, it seems fair to you.

11 MR. KELLEY: No, it doesn't.

12 THE COURT: Yes, it does.

13 MR. KELLEY: I mean, I don't think that a

14 Texas --

15 THE COURT: You're going to go out in the

16 hallway and say, you know what, Shadwick was right.

17 MR. KELLEY: No, I'll never think that a

18 Texas lawyer ought to play by tricks in stealing

19 50 million --

20 MR. LEVIN: Excuse me. He's not -- he's

21 never represented the man. This is a fictional

22 argument --

23 MR. KELLEY: See, that's --

24 THE COURT: Don't worry about it.

25 MR. KELLEY: -- a fact question and if you

Gina Wilburn, CSR Official Court Reporter 55th District Court

551 21

1 want to argue the facts, let's put 12 people over there

2 and you make that argument, I'll make mine, let's see

3 what the jury says.

4 THE COURT: This is just you and me with

5 our normal banter.

6 MR. KELLEY: I'm following what you're

7 saying because you want to be 100 percent right and if

8 they do it in the Isle of Man and do it in there, then

9 it can't be in error. Let me go see -- if it turns out

10 to be correct, then I don't need to fight anymore. So

11 why don't I do that?

12 I think it's wrong that you would get a

13 stay when the rules don't provide for it and just

14 because you argue one thing and if delay is all you, you

15 know, ever want to do you want to, but, hey, you move

16 your docket pretty fast, so --

17 MR. LEVIN: I'll submit an order, Your

18 Honor.

19 THE COURT: Haven't you already?

20 MR. LEVIN: We did, but we didn't say with

21 all the 20 days and the things you've put in today,

22 so --

23 THE COURT: Fix that for me, send an order

24 up.

25 MR. LEVIN: Sure. I'll run it by

Gina Wilburn, CSR Official Court Reporter 55th District Court

552 22

1 Mr. Kelley.

2 THE COURT: You know, the form not

3 substance. The motion to reconsider is denied.

4 MR. LEVIN: Yes, sir.

5 THE COURT: And is there something else?

6 MR. LEVIN: The stay and the 20 days and

7 then there was a motion to quash deposition --

8 THE COURT: The motion to compel, but if

9 discovery is stayed, then that's --

10 MR. KELLEY: Can you -- so I don't have

11 this problem again, that we agreed to a

12 confidentiality --

13 MR. LEVIN: We did not.

14 MR. KELLEY: They didn't that agree?

15 Okay, fine, then when we come back to my discovery --

16 MR. LEVIN: Your Honor --

17 THE COURT: It's not on my docket --

18 MR. KELLEY: When it's lifted, I don't

19 want him to have an advantage for what he's done in

20 discovery already. So I don't want him to use this stay

21 to get an advantage that he wouldn't have. Today I was

22 on a motion to compel --

23 THE COURT: We'll just have to worry about

24 that when it comes back.

25 MR. LEVIN: Can I just say one word about

Gina Wilburn, CSR Official Court Reporter 55th District Court

553 23

1 the confidentiality because --

2 THE COURT: No. I have too many lawyers --

3 MR. KELLEY: It was send to me yesterday.

4 THE COURT: Don't worry about it.

5 MR. KELLEY: Don't worry about it.

6 THE COURT: In one ear, out the other.

7 I've got filter and it's limited to what's in front of

8 me.

9 MR. LEVIN: Thank you, Judge.

10 (Court Adjourned.)

Gina Wilburn, CSR Official Court Reporter 55th District Court

554 24

1 STATE OF TEXAS COUNTY OF HARRIS 2 I, Gina Wilburn, Official Court Reporter in and for

3 the 55th District Court of Harris, State of Texas, do

4 hereby certify that the above and foregoing contains a

5 true and correct transcription of all portions of

6 evidence and other proceedings requested in writing by

7 counsel for the parties to be included in this volume of

8 the Reporter's Record in the above-styled and numbered

9 cause, all of which occurred in open court or in

10 chambers and were reported by me.

11 I further certify that this Reporter's Record of the

12 proceedings truly and correctly reflects the exhibits,

13 if any, offered by the respective parties.

14 I further certify that the total cost for the

15 preparation of this Reporter's Record is $ and

16 was paid/will be paid by Josh Thomas.

17 WITNESS MY OFFICIAL HAND on this, the 18th day of June, 2015. 18

19 /s/ Gina Wilburn

20 Gina Wilburn, CSR Texas CSR 5885 21 Official Court Reporter 55th District Court 22 Harris County, Texas 201 Caroline, 9th Floor 23 Houston, Texas 77002 Telephone: 713-368-6056 24 Expiration: 12/31/2015

Gina Wilburn, CSR Official Court Reporter 55th District Court