Propanc Health Group Corp. (PPCH: OTCQB) | Propanc Commences GLP-Compliant 28-Day Repeat-Dose Toxicity Study
MELBOURNE, AUSTRALIA –(Marketwired – December 22, 2016) – Propanc Health Group Corporation (OTCQB: PPCH) („Propanc” or „the Company”), an emerging healthcare company focusing on development of new and proprietary treatments for cancer patients suffering from solid tumors such as pancreatic, ovarian and colorectal cancers, today announced commencement of the in-life phase of the GLP-compliant, 28-day repeat-dose toxicity study for its lead product, PRP. PRP is a solution for once daily intravenous administration of pancreatic proenzymes trypsinogen and chymotrypsinogen.
The study is being conducted through the Company’s Partner CRO (Contract Research Organization), vivoPharm Pty Ltd, at their accredited laboratories in Melbourne, Australia. Data from the GLP (Good Laboratory Practice) compliant, 28-day repeat-dose toxicity study in rats will form the basis of a clinical trial application in the UK. Completion of the in-life phase is expected in February, 2017, with interim results reported in the first quarter of 2017.
Studies of this type are an important part of the development process for new therapeutic agents prior to clinical testing in humans and the study was discussed in detail at a recent scientific advice meeting with the Medicines and Healthcare Products Regulatory Agency (MHRA), UK, held earlier this year. Results from this study will help to provide a rationale to select a safe starting dose for first-in-man studies expected to commence in 2017.
In addition to the commencement of the GLP-compliant toxicity study, Propanc continues to work with its manufacturing partner, AmatsiQBiologicals, in Gent, Belgium, as it commences the detailed and technical process of preparing a suitable quality finished product for clinical trials. Activities include purification and characterization of the two pancreatic proenzymes, development and validation of analytical methods for quality assurance and stability testing of the final I.V. finished product formulation for PRP.
„We continue to remain solely focused on the development of PRP for our first-in-man studies. Once the 28 day study is completed, we will commence preparation of the clinical trial application in the UK. We are rapidly transforming into a clinical stage biopharmaceutical company, and are entering an exciting phase of development of PRP, a potential breakthrough for the treatment of metastatic cancer from solid tumors,” said James Nathanielsz, Propanc’s Chief Executive Officer.
To view Propanc’s „Mechanism of Action” video on anti-cancer product candidate, PRP, please click on the following link: http://www.propanc.com/news-media/video
To be added to Propanc’s email distribution list, please email PPCH@kcsa.com with „Propanc” in the subject line.
Propanc is developing new cancer treatments for patients suffering from pancreatic, ovarian and colorectal cancers. We have developed a formulation of anti-cancer compounds, which exert a number of effects designed to control or prevent tumors from recurring and spreading throughout the body. Our products involve or employ pancreatic proenzymes, which are inactive precursors of enzymes. In the near term, we intend to target patients with limited remaining therapeutic options for the treatment of solid tumors. In future, we intend to develop our lead product to treat (i) early stage cancer and (ii) pre-cancerous diseases and (iii) as a preventative measure for patients at risk of developing cancer based on genetic screening. For more information, visit:www.propanc.com.
All statements other than statements of historical fact contained herein are „forward-looking statements” for purposes of federal and state securities laws. Forward-looking statements may include the words „may,” „will,” „estimate,” „intend,” „continue,” „believe,” „expect,” „plan” or „anticipate” and other similar words. Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties including those regarding our earnings, revenues and financial condition, our ability to implement our plans, strategies and objectives for future operations, our ability to execute on proposed new products, services or development thereof, our ability to establish and maintain the proprietary nature of our technology through the patent process, our ability to license from others patents and patent applications, if necessary, to develop certain products, our ability to implement our long range business plan for various applications of our technology, our ability to enter into agreements with any necessary manufacturing, marketing and/or distribution partners for purposes of commercialization, the results of our clinical research and development, competition in the industry in which we operate, overall market conditions, and any statements or assumptions underlying any of the foregoing. Other risks, uncertainties and factors that could cause actual results to differ materially from those projected may be described from time to time in reports we file with the Securities and Exchange Commission, including our reports on Forms 10-K, 10-Q and 8-K. We do not intend, and undertake no obligation, to update any forward-looking statement contained herein, except as required by law.
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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
VIS VIRES GROUP, INC.,
ENDONOVO THERAPEUTICS, INC. and ALAN COLLIER,
Decision & Order
Naidich Wurman LLP
Attorneys for the Plaintiff
111 Great Neck Road, Suite 214
Great Neck, NY 11021
By: Richard S. Naidich, Esq.
Bernard S. Feldman, Esq.
Robert P. Johnson, Esq., Of Counsel
Ellsworth & Young LLP
Attorneys for the Defendants
1164 Manhattan Avenue, Suite 100
Brooklyn, NY 11222
By: Robert J. Young, Esq., Of Counsel
SPATT, District Judge:
Presently before the Court in this diversity breach of contract and tortious interference action is a motion by the Defendants Endonovo Therapeutics, Inc. (“Endonovo”) and Alan Collier (“Collier,” together with Endonovo, the “Defendants”), seeking an order pursuant to Federal Rule of Civil Procedure (“FED. R. CIV. P.”) 12(b)(6) dismissing the amended complaint filed by the Plaintiff Vis Vires Group, Inc. (the “Plaintiff”) on the ground that it fails to state a claim upon which relief may be granted.
For the reasons that follow, the motion to dismiss is granted in part and denied in part.
Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 1 of 20 PageID #: 422
Unless otherwise noted, the following facts are drawn from the amended complaint and construed in favor of the Plaintiff.
A. The July 2015 Agreement
On July 9, 2015, Endonovo, a Delaware corporation with a principal place of business in California, entered into a contract, styled a Securities Purchase Agreement (the “July Loan Agreement”) with the Plaintiff, a domestic corporation with a principal place of business in Great Neck.
Although the July Loan Agreement is not annexed to the amended complaint; and although, in general, extrinsic evidence may not be consulted in connection with a motion to dismiss under Rule 12(b)(6), in resolving this motion, the Court, in its discretion, will consider the July Agreement, which was previously submitted in connection with an earlier motion. See Jan. 28, 2016 Affidavit of Seth Kramer in Support of Motion for Provisional Remedies (“Kramer Aff.”), DE [5-1], at Ex. “B”.
In the Court’s view, this document and the other documents forming the basis of the Plaintiff’s claims, are plainly integral to, and incorporated by reference in the amended complaint. See Global Network Communs., Inc. v. City of New York, 458 F.3d 150, 157 (2d Cir. 2006) (observing that a common example of the material properly considered on a 12(b)(6) motion is “a contract or other legal document containing obligations upon which the plaintiff’s complaint stands or falls”).
Pursuant to the July Loan Agreement, the Plaintiff made a loan to Endonovo in the amount of $33,000. To ensure repayment of the loan, Endonovo executed a convertible promissory note (the “July Note”), with a maturity date of April 13, 2016, in an equal amount in favor of the Plaintiff. Again, although the July Note is not attached to the amended complaint, it is also contained in the Court record from a prior motion, and, for substantially the same reason as outlined above, will be considered here. See Kramer Aff., Ex. “A.” Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 2 of 20 PageID #: 423
The Plaintiff alleges that the July Note “provided for certain issuance of, and conversion rights in and to common stock of [Endonovo].” Am. Compl. ¶ 17. In particular, by the terms of the July Note, the Plaintiff alleges that it was entitled to elect to convert the outstanding balance due on the loan into shares of Endonovo common stock (the “Debt-to-Equity Option”).
In relevant part, the July Note provides, in part, the following:
[§] 1.1 Conversion Right. The [Plaintiff] shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note [January 5, 2016] and ending on the later of: (1) the Maturity Date [April 13, 2016] and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all of any part of the outstanding and unpaid principal amount of this Note into full paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of [Endonovo] . . .
* * *
[§] 1.4 Method of Conversion.
(a) Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the [Plaintiff] in whole or in part at any time from time to time after the Issue Date, by (A) submitting to [Endonovo] a Notice of Conversion . . .
(d) Delivery of Common Stock Upon Conversion. Upon receipt by [Endonovo] from the [Plaintiff] of . . . a Notice of Conversion meeting the requirements for conversion . . . [Endonovo] shall issue and deliver or cause to be issued and delivered to or upon the order of the [Plaintiff] certificates of the Common Stock issuable upon such conversion within three (3) business days after such receipt . . .
(e) Obligation of Borrower to Deliver Common Stock. . . . If the [Plaintiff] shall have given a Notice of Conversion as provided herein, [Endonovo]’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the [Plaintiff] to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of [Endonovo] to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach of alleged breach by the [Plaintiff] of any obligation to [Endonovo] in connection with such conversion.
Kramer Aff., Ex. “A,” at pp. 5-6, 20.
Further, the terms of the July Note set forth various events constituting a default, including the following “Events of Default” referenced in the amended complaint:
Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 3 of 20 PageID #: 424
ARTICLE III. EVENTS OF DEFAULT.
* * *
[§] 3.1 Failure to Pay Principal or Interest. [Endonovo] fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise.
[§] 3.2 Conversion and the Shares. [Endonovo] fails to issue shares of Common Stock to the [Plaintiff] (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the [Plaintiff] of the conversion rights of the [Plaintiff] in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer . . . any certificate for shares of Common Stock issued to the [Plaintiff] upon conversion of or otherwise pursuant to this Note as and when required by this Note, [Endonovo] directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring . . . any certificate for shares of Common Stock to be issued to the [Plaintiff] upon conversion of or otherwise pursuant to this Note as and when required by this Note . . . and any such failure shall continue uncured . . . for three (3) business days after the [Plaintiff] shall have delivered the Notice of Conversion . . .
* * *
[§] 3.15 Replacement of Transfer Agent. In the event that [Endonovo] proposed to replace its transfer agent, [Endonovo] fails to provide, prior to the effect date of such replacement, a fully executed Irrevocable Transfer Agent [Letter] in a form as initially delivered pursuant to the [July Loan] Agreement . . . signed by the successor transfer agent to [Endonovo] . . .
Id. at pp. 14-16.
Article III goes on to state, in pertinent part, that the occurrence of any Event of Default set forth in §§ 3.1, 3.2 and/or 3.15 would result in, among other penalties, the Promissory Notes becoming immediately due and payable. See id. at p. 17.
B. The August 2015 Agreement
On August 10, 2015, Endonovo entered into a second contract with the Plaintiff, again styled a Securities Purchase Agreement (the “August Loan Agreement,” together with the July Loan Agreement, the “Loan Agreements”).
Pursuant to the August Loan Agreement, the Plaintiff made a second $33,000 loan to Endonovo, in exchange for which Endonovo executed a second convertible promissory note (the
Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 4 of 20 PageID #: 425
“August Note,” together with the July Note, the “Promissory Notes”) in an equal amount in favor of the Plaintiff.
Other than the maturity date of the August Note, which was not provided to the Court, it allegedly contained the same relevant language as the July Note regarding: (1) the Debt-to-Equity Option; and (2) the Plaintiff’s entitlement to an Irrevocable Transfer Agent Letter.
C. The Allegations of Default
On January 21, 2016, the Plaintiff sought to partially exercise its Debt-to-Equity Option under the July Note by converting $15,000 of the remaining balance due under the July Loan Agreement to 95,663 shares of Endonovo common stock. In this regard, the Plaintiff allegedly executed and delivered to Endonovo a Notice of Conversion, in accordance with the terms of the July Note.
However, allegedly at the direction of its chief executive officer, namely, the individual Defendant Collier, Endonovo refused to effectuate the conversion. According to the Plaintiff, this failure constitutes an Event of Default under Article III of the July Note.
In this regard, the Plaintiff alleges that, in directing Endonovo to breach its obligations under the July Note, Collier was acting outside the scope of his role as a corporate officer and for his own personal benefit. Therefore, according to the Plaintiff, Collier’s conduct constitutes tortious interference with the July Loan Agreement.
The Plaintiff further alleges that, on an unspecified date after the execution of the Promissory Notes, without providing the required notice to the Plaintiff, Endonovo replaced its stock transfer agent with a corporation called Clear Trust LLC, and then instructed Clear Trust LLC not to honor the Plaintiff’s otherwise valid Notice of Conversion. According to the Plaintiff, each of these actions constituted an independent Event of Default under Article III of the Promissory Notes. Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 5 of 20 PageID #: 426
The Plaintiff further alleges that, to date, no part of the August Promissory Note, which secured repayment of the amount loaned pursuant to the August Loan Agreement, has been repaid – itself an independent breach of the contract and a default under the related payment instrument.
The complaint appears to allege that these defaults were premeditated and that Endonovo, at the direction of Collier, never intended to comply with its obligations under the Loan Agreements and/or the Promissory Notes. See, e.g., Compl. ¶ 27 (alleging that Endonovo’s failure to comply with the terms of the contracts evidences “fraudulent intent from the very inception of the transactions at issue”); id. ¶¶ 34-35 (alleging that, by assenting to the terms of the contracts, when, in actuality, they had “no intention to honor [their] obligations,” the Defendants fraudulently induced the Plaintiff to enter the transactions).
Based on these allegations, the Plaintiff alleges causes of action sounding in: (1) promissory note default; (2) fraudulent inducement; (3) breach of contract; and (4) tortious interference with a contract. By this action, the Plaintiff seeks monetary damages and penalties under the contracts, together with interest, liquidated damages, attorneys’ fees, and costs. The Plaintiff also seeks equitable relief in the form of a mandatory injunction compelling the Defendants to comply with their obligations under the Loan Agreements and the Promissory Notes.
II. RELEVANT PROCEDURAL HISTORY
On January 29, 2016, the Plaintiff commenced this action by filing a summons and complaint, together with an order to show cause, seeking certain provisional remedies. In particular, similar to the ultimate relief outlined in the complaint, the Plaintiff’s proposed order to show cause sought to immediately compel the Defendants to comply with their obligations under the Loan Agreements and the Promissory Notes.
Following oral argument and briefing by the parties, on March 1, 2016, the Court issued a Memorandum of Decision & Order (the “March Opinion”), denying the Plaintiff’s motion in its Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 6 of 20 PageID #: 427
entirety and sua sponte dismissing the original complaint without prejudice to refiling. See Vis Vires Grp., Inc. v. Endonovo Therapeutics, Inc., 149 F. Supp. 3d 376 (E.D.N.Y. 2016) (Spatt, J.).
In relevant part, in the March Opinion, the Court determined that it lacked subject matter jurisdiction over the Plaintiff’s claims. In particular, the Plaintiff alleged that original jurisdiction existed under 28 U.S.C. § 1331, namely, “federal question jurisdiction,” insofar as at least one of the claims in the original complaint arose under Section 10(b) of the federal Securities Exchange Act of 1934.
However, the Court held that this claim – which was premised on a tenuous theory of market manipulation arising solely from the Defendant’s broken promise to fulfill their obligations under the Loan Agreements and the Promissory Notes – did not plausibly allege a violation of federal law. Thus, since the Plaintiff’s remaining causes of action alleged only theories of New York common law, all of which involved claims and remedies revolving around the interpretation of a contract, the Court found that it lacked “federal question jurisdiction” under 28 U.S.C. § 1331.
Alternatively, the Plaintiff argued that original jurisdiction existed under 28 U.S.C. § 1332, namely, “diversity jurisdiction,” in that the parties reside in different States and the amount in controversy exceeds $75,000. The Court disagreed, noting that, although the original complaint had alleged the State in which the individual Defendant Collier “resided,” the parties’ complete diversity of citizenship could not be determined without an allegation or other demonstration of Collier’s “domicile” – a separate legal concept.
Therefore, the Court determined that it lacked subject matter jurisdiction over the Plaintiff’s claims, and, on its own motion, dismissed the complaint. Nevertheless, even assuming that jurisdiction did exist, the Court went on to explain why the preliminary injunctive relief sought by the Plaintiff would still be unwarranted.
In that regard, the Court noted that the Plaintiff had failed to demonstrate that it would suffer irreparable harm in the absence of an injunction because adequate remedies at law, in the form Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 7 of 20 PageID #: 428
of money damages and penalties under the contracts, existed to compensate the Plaintiff for its alleged losses. The Court’s reasoning was not altered by the Plaintiff’s argument that the corporate Defendant was on the brink of insolvency, raising the likelihood that an eventual money judgment would go unsatisfied. Nor was the Court persuaded by language contained in the underlying agreements purporting to concede that, in the event of a breach, money damages would be inadequate.
Ultimately, despite denying the motion for provisional remedies and dismissing the original complaint, the Court expressly granted the Plaintiff leave to file an amended complaint curing the jurisdictional deficiencies on or before March 31, 2016.
On March 9, 2016, the Plaintiff filed an amended complaint.
On March 30, 2016, the Defendants filed the present motion seeking to again dismiss the action under Fed. R. Civ. P. 12(b)(6).
A. The Standard of Review
Under FED. R. CIV. P. 8(a)(2), a pleading that states a claim for relief must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” The pleading standard announced in Rule 8 “does not require ‘detailed factual allegations,’ but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 677-78, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)). “A pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not do.’ ” Id. at 678 (quoting Twombly, 550 U.S. at 555).
Rather, to survive a motion to dismiss under Rule 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.’ ” Id. Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 8 of 20 PageID #: 429
(quoting Twombly, 550 U.S. at 557). The “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 557.
Furthermore, claims based on fraud are subject to the heightened pleading standard found in FED. R. CIV. P. 9(b). In particular, a party asserting fraud “must state with particularity the circumstances constituting fraud or mistake.” FED. R. CIV. P. 9(b). “Rule 9(b) is satisfied when the complaint specifies ‘the time, place, speaker, and content of the alleged misrepresentations;’ how the misrepresentations were fraudulent; and the details that ‘give rise to a strong inference that the defendant[ ] had an intent to defraud, knowledge of the falsity, or a reckless disregard for the truth.’ ” Schwartzco Enters. LLC v. TMH Mgmt., LLC, 60 F. Supp. 3d 331, 344 (E.D.N.Y. 2014) (Spatt, J.) (quoting Cohen v. S.A.C. Trading Corp., 711 F.3d 353, 359 (2d Cir. 2013)).
B. As to the Defendants’ Renewed Objections to the Court’s Subject Matter Jurisdiction
Before turning to the merits of the Defendants’ Rule 12(b)(6) motion, the Court notes that the Defendants also appear to raise a renewed question surrounding the Court’s subject matter jurisdiction. In particular, the Defendants argue that the Promissory Notes at issue in this case have a combined value of just $66,000, which is below the monetary threshold necessary for invoking the Court’s original diversity jurisdiction. The Court disagrees.
Initially, this argument was raised for the first time in the Defendants’ reply, apparently in violation of the well-established rule against doing so. See Colon v. City of New York, No. 11-cv-173, 2014 U.S. Dist. LEXIS 46451, at *28-*30 (E.D.N.Y. Apr. 2, 2014) (collecting cases for the proposition that “[t]he Second Circuit has clearly stated that arguments raised for the first time in reply papers or thereafter are properly ignored”).
In any event, this argument lacks merit. The Second Circuit has made clear that “[s]ince the diversity statute confers jurisdiction over ‘civil actions’ rather than specific claims alleged in a complaint, a plaintiff is permitted to aggregate claims in order to satisfy the amount in controversy Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 9 of 20 PageID #: 430
requirement.” Wolde-Meskel v. Vocational Instruction Project Community Servs., Inc., 166 F.3d 59, 62 (2d Cir. 1999) (citing Snyder v. Harris, 394 U.S. 332, 335, 89 S. Ct. 1053, 22 L. Ed. 2d 319 (1969) (“[A]ggregation is permitted in cases in which a single plaintiff seeks to aggregate two or more claims against a single defendant”)).
In this case, the Plaintiff has apparently aggregated the first, second, third, fourth, and sixth causes of action to arrive at a damages figure exceeding the $75,000 threshold. Contrary to the Defendants’ contention, which is unsupported by a citation to relevant legal authority, there is nothing improper about this approach.
Accordingly, to the extent the Defendants seek to dismiss the amended complaint on the ground that it fails to sufficiently establish a basis for the Court’s jurisdiction, their motion is denied.
C. As to Whether the Amended Complaint States a Plausible Claim Based on Defaults Under the Promissory Notes
As noted above, the amended complaint alleges that at least four discrete occurrences constituted Events of Default under the Promissory Notes:
(1) Endonovo’s failure to issue shares of common stock upon delivery of the Plaintiff’s January 21, 2016 Notice of Conversion, in violation of § 3.2 of the July Note;
(2) Endonovo’s failure to repay any portion of the principal due on the August Note, in violation of § 3.1 of the August Note;
(3) Endonovo’s failure to provide the Plaintiff with a fully-executed Irrevocable Transfer Agent Letter prior to replacing its existing transfer agent with Clear Trust LLC, in violation of § 3.15 of both Promissory Notes; and
(4) Endonovo’s failure to cause Clear Trust LLC to honor the Plaintiff’s Notice of Conversion and/or its affirmative directive to Clear Trust LLC not to honor the Plaintiff’s Notice of Conversion, also in violation of § 3.2 of the July Note.
The Defendants set forth a two-part argument in support of dismissing the Plaintiff’s first cause of action based on these alleged defaults. Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 10 of 20 PageID #: 431
First, the Defendants contend that the Promissory Notes have not fully matured, so that the principal amounts due under the Loan Agreements are not yet owed. Therefore, the Defendants argue that they cannot have defaulted on an obligation that is yet to arise. The Court disagrees.
Notwithstanding the specific maturity dates assigned to the Promissory Notes, the language contained in those instruments unambiguously provides that, upon the occurrence of any Event of Default, the amounts owed become immediately due and payable. Construing the alleged facts in favor of the Plaintiff, the Court concludes that the Defendants apparently failed to comply with various contractual obligations, each of which constituted an Event of Default, and therefore, an independent basis for accelerating the maturity date of the notes. Accordingly, the Defendant’s motion to dismiss the first cause of action on this ground is denied.
Second, the Defendants contend that the payment instruments at issue in this case do not satisfy the legal definition of a “promissory note.” In particular, the Defendants rely on New York appellate court cases they assert stand for the proposition that, in order to be valid, a promissory note must provide solely for the payment of money. Therefore, the Defendants argue that the convertible promissory notes at issue in this case, which provide for the payment of money, or, alternatively, an equivalent amount of stock, are not true promissory notes under the law. In the Court’s view, this argument is misguided.
The cases relied upon by the Defendants, namely, Lugli v. Johnston, 78 A.D.3d 1133, 1134, 912 N.Y.S.2d 108 (2d Dep’t 2010), and Comforce Telecom, Inc. v. Spears Holding Co., Inc., 42 A.D.3d 557, 558, 840 N.Y.S.2d 145 (2d Dep’t 2007), do not, as the Defendants contend, stand for the general proposition that a valid promissory note must call solely for the payment of money. Rather, in relevant part, those cases involve a provision of New York procedural law, namely, CPLR 3213, entitled “Motion for summary judgment in lieu of complaint,” which states that, “[w]hen an action is based on an instrument for the payment of money only . . . the plaintiff may serve with the summons a notice of motion for summary judgment and the supporting papers in lieu of a complaint.” Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 11 of 20 PageID #: 432
This rule is premised on the view that genuine issues of fact for trial will generally be less likely to exist – and therefore, traditional litigation will be obviated – where the entire action is based on an instrument promising to pay a sum of money. See David D. Siegel, New York Practice § 288 (5th ed. 2011) (“CPLR 3213 recognizes that some claims have greater presumptive merit than others and should have easier access to the courts than an ordinary plenary action gets”).
Thus, in Lugli and Comforce, applying CPLR 3213, the Appellate Division of the New York State Supreme Court considered only whether the promissory notes at issue in those cases constituted “instruments for the payment of money only” so that the plaintiffs would be entitled to summary judgment at the outset, rather than filing a complaint. However, CPLR 3213, and by extension, the cases cited by the Defendants, have no application here.
In the Court’s view, it would be a bridge too far to read these cases as supporting the broad proposition that a payment instrument can never be considered a promissory note if it allows for the principal amount owed to be repaid in securities rather than traditional currency.
Nor can the Court endorse the ultimate conclusion that the Defendants apparently seek to draw, namely, that a cause of action based on a default under a promissory instrument fails, as a matter of law, simply because it calls for alternative methods of repayment, namely, by methods other than the payment of “money only.”
Indeed, even where courts have found that the instrument at issue does not meet the “money only” standard under CPLR 3213, the result is not dismissal of the claim; it is simply that litigation regarding any disputed factual issues proceeds in the ordinary course. See, e.g., Alpha Capital Anstalt v. bioMetrix Inc., No. 26036/2009, 2010 NY Slip Op 30045(U), 2010 N.Y. Misc. LEXIS 1265, at *2, *12 (Suffolk Cnty. Sup. Ct. Jan. 6, 2010) (in a case involving a similar convertible promissory note, denying a motion for summary judgment in lieu of a complaint under CPLR 3213 and directing that the motion papers be deemed the pleadings); see also Siegel, New York Practice at § 289 (noting that a Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 12 of 20 PageID #: 433
plaintiff who wishes to enforce commercial paper that does not precisely fit the requirements of CPLR 3213 may still “bring[ ] an ordinary action and simply wait[ ] until the answer is in” to make a motion on notice for summary judgment).
In this case, the Defendants fail to identify any authority for the proposition that a claim based on default is not cognizable at law simply because the instrument at issue permits payment to be made in the form of stock. Nor has the Court’s independent research revealed any. Thus, even assuming, as the Defendants contend, that the Promissory Notes in question call for more than the payment of “money only,” that fact alone cannot serve as a sufficient basis for dismissal under Rule 12(b)(6). Accordingly, the Defendants’ motion to dismiss the first cause of action based on promissory note defaults is denied.
D. As to Whether the Amended Complaint States a Plausible Claim Based on Fraudulent Inducement
The second cause of action alleges that the Defendants fraudulently induced the Plaintiff to enter into the Loan Agreements and Promissory Notes by falsely claiming that they intended to fully perform their contractual obligations, when, in actuality, they did not.
The Defendants appear to argue that this claim is impermissibly duplicative of the first cause of action based on promissory note defaults. In this regard, they rely on caselaw standing for the proposition that, in order “[t]o recover damages for fraud based on a contract, a plaintiff must prove a breach of a duty distinct from or in addition to the breach of contract.” Defs. Memo of Law at 6 (citing Courageous Syndicate, Inc. v. People-To-People Sports Committee, Inc., 141 A.D.2d 599, 600 (2d Dep’t 1988)).
The general principle invoked by the Defendants is well-settled: “The Second Circuit has noted that, under New York law, where a fraud claim hinges on the same factual allegations as a breach of contract claim, with the additional allegation that the defendant intended to breach, ‘the fraud claim is redundant and plaintiff’s sole remedy is for breach of contract.’ ” Rodriguez v. It’s Just Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 13 of 20 PageID #: 434
Lunch, Int’l, No. 07-cv-9227, 2010 U.S. Dist. LEXIS 16622, at *13 (S.D.N.Y. Feb. 23, 2010) (quoting Telecom Int’l Am., Ltd. v. AT&T Corp., 280 F.3d 175, 196 (2d Cir. 2001)).
However, the Defendants’ duplicity argument fails to account for certain exceptions that have been carved out of the basic rule, including situations where, as here, the Plaintiff has alleged “a fraudulent misrepresentation collateral or extraneous to the contract.” Bridgestone/Firestone, Inc. v. Recovery Credit Servs., Inc., 98 F.3d 13, 20 (2d Cir. 1996). Applying this exception, other courts in this Circuit have recognized that “ ‘a claim based on fraudulent inducement of a contract is separate and distinct from a breach of contract under New York law,’ ” Rodriguez, 2010 U.S. Dist. LEXIS 16622, at *14 (quoting Merrill Lynch & Co. Inc. v. Allegheny Energy, Inc., 500 F.3d 171, 184 (2d Cir. 2007)), and therefore, a “fraudulent inducement claim satisfies the [ ] Bridgestone exception [stated above] and is not barred as duplicative of the breach of contract claim.” Id.; see Linares v. Richards, No. 08-cv-3243, 2009 U.S. Dist. LEXIS 68753 (E.D.N.Y. June 22, 2009) (Report and Recommendation) (“ ‘A claim for fraudulent inducement[,]’ however, ‘is separate and distinct from a claim for breach of contract under New York law, and a plaintiff may plead both causes of action’ ” (quoting Rosen v. Spanierman, 894 F.2d 28, 35 (2d Cir. 1990)), adopted, 2009 U.S. Dist. LEXIS 66948 (E.D.N.Y. Aug. 3, 2009).
In the Court’s view, though factually similar, the Plaintiff’s first cause of action based on a promissory note default, and its second cause of action based on fraudulent inducement, implicate separate and distinct legal theories which may be pled together. Accordingly, the Defendant’s motion to dismiss the second cause of action on this ground is denied.
However, even assuming that the fraudulent inducement claim is not barred, a closer question is whether, as the Defendants contend, the Plaintiff failed to plead this fraud-based claim with sufficient specificity to survive scrutiny under the heightened pleading standard found in Rule 9(b). The Court answers this question in the negative. Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 14 of 20 PageID #: 435
As noted above, crucial to a fraud-based claim is a sufficiently-detailed allegation regarding a misrepresentation made by the Defendants and relied upon by the Plaintiff. Sufficient detail in this context includes allegations by the Plaintiff which: “(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent.” Rombach v. Chang, 355 F.3d 164, 170 (2d Cir. 2004) (quoting Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir. 1993)).
Although Rule 9(b) “permits plaintiffs to allege fraudulent intent generally,” HCFA Assocs. Corp. v. Grossman, 960 F. Supp. 581, 585 (E.D.N.Y. 1997 (Spatt, J.), the Second Circuit has recognized that “ ‘[g]eneral allegations that defendant entered into a contract while lacking the intent to perform it are insufficient to support [the] claim,’ ” Wall v. CSX Transp., Inc., 471 F.3d 410, 416 (2d Cir. 2006) (quoting New York Univ. v. Cont’l Ins. Co., 87 N.Y.2d 308, 318, 639 N.Y.S.2d 283, 622 N.E.2d 763 (1995)); see AXA Versicherung AG v. N.H. Ins. Co., 348 F. App’x 628, 630 (2d Cir. 2009) (“While a misrepresentation that is collateral to the contract may support a fraud in the inducement claim distinct from a breach of contract, the non-disclosure of collateral aims, such as allegations about defendants’ states of minds used to support the contention that they intended to breach the contract . . . is insufficiently distinct from the breach of contract claim” (internal citation, quotation marks, and alteration omitted)); Space, Inc. v. Simonwitz, No. 08-cv-2854, 2008 U.S. Dist. LEXIS 51782, at *17 (S.D.N.Y. July 8, 2008) (finding allegations that one party to a contract misrepresented its future intent to perform “is patently insufficient to support a claim for fraud under New York law”).
In this case, the amended complaint contains no particularized allegations regarding any false representation other than the Defendants’ overall assent to take part in the agreements. In this regard, the allegations of fraudulent inducement are vague, and amount to a single conclusory accusation that, because the Defendants breached their obligations under the Loan Agreements and the Promissory Notes, that must have been their intention all along. See, e.g., Am. Compl. ¶¶ 34-35 Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 15 of 20 PageID #: 436
(alleging, as a basis for the fraud claim, that the Defendants’ falsely promised not to breach the contracts). Based on the authorities discussed above, this falls far below what is required under Rule 9(b).
Accordingly, the Defendant’s motion to dismiss the second cause of action based on fraud in the inducement is granted. Having so held, the Court need not reach the Defendants’ alternative argument based on res judicata.
E. As to Whether the Amended Complaint States a Plausible Claim Based on Breach of Contract
The third and fourth causes of action allege that the Defendants breached their obligations under the Loan Agreements, entitling the Plaintiff to contractual remedies in the form of lost profits, attorneys’ fees, and costs.
Here, again, the Defendants argue that these causes of action are duplicative of the first cause of action based on promissory note defaults. However, in the Court’s view, the claims are clearly distinguishable inasmuch as the breach of contract claims apparently seek to enforce obligations and remedies under the Loan Agreements, whereas the first cause of action arose solely under the Promissory Notes.
The Defendants also substantively dispute the Plaintiff’s entitlement to the damages it seeks. However, “[this] argument at best raises a factual dispute . . . which cannot be resolved on a Rule 12(b)(6) motion.” Navigant Consulting, Inc. v. Kostakis, No. 07-cv-2302, 2007 U.S. Dist. LEXIS 74460, at *15 (E.D.N.Y. Oct. 4, 2007).
Accordingly, the Defendant’s motion to dismiss the third and fourth causes of action based on breach of contract is denied.
F. As to Whether the Amended Complaint States a Plausible Claim Based on Tortious Interference
The sixth cause of action alleges that the individual Defendant Collier personally caused the company to breach the Loan Agreements and default under the Promissory Notes. According to the
Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 16 of 20 PageID #: 437
amended complaint, despite Collier’s official position as the chief executive officer of Endonovo, he tortiously interfered with the contracts in question for his own personal benefit – specifically, “to maintain a higher . . . stock value for his own holdings,” Am Coml. ¶ 60 – and not for the benefit of the corporation.
The Defendants argue that these allegations lack enough supporting facts to make it plausible that Collier is personally liable for the misconduct alleged. The Court disagrees.
“To state a claim for tortious interference with contract under New York law, a plaintiff must demonstrate ‘the existence of a valid contract between the plaintiff and a third party, defendant’s knowledge of that contract, defendant’s intentional procurement of the third-party’s breach of the contract without justification, actual breach of the contract, and damages resulting therefrom.” SymQuest Group, Inc. v. Canon U.S.A., Inc., No. 15-cv-4200, 2016 U.S. Dist. LEXIS 64432, at *17 (E.D.N.Y. May 16, 2016).
“In New York, officers, directors or employees of a corporation cannot be personally liable for inducing the corporation to breach a contract with a third party if they act on behalf of the corporation and within the scope of their duties.” Dagen v. Cfc Group Holdings, No. 00-cv-5682, 2002 U.S. Dist. LEXIS 25767, at *76-*77 (S.D.N.Y. Mar. 7, 2002) (Report and Recommendation) (citing cases), adopted, 2003 U.S. Dist. LEXIS 1225 (S.D.N.Y. Jan. 24, 2003). “Personal liability will be imposed only if the plaintiff shows that the officer or employee acted outside the scope of his employment by committing an independent tort or by pursuing a personal interest.” Id. at *77 (citing Foster v. Churchill, 87 N.Y.2d 744, 751, 642 N.Y.S.2d 583, 587, 665 N.E.2d 153 (1996)).
In this regard, “[a] cause of action seeking to hold corporate officials personally responsible for the corporation’s breach of contract is governed by an enhanced pleading standard,” namely, “ ‘a pleading must allege that the acts complained of, whether or not beyond the scope of the [officer’s] corporate authority, were performed with malice and were calculated to impair the plaintiff’s
Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 17 of 20 PageID #: 438
business for the personal profit of the officer.’ ” IMG Fragrance Brands, LLC v. Houbigant, Inc., 679 F. Supp. 2d 395, 407-08 (S.D.N.Y. 2009) (quoting Joan Hansen & Co. v. Everlast World’s Boxing Headquarters Corp., 296 A.D.2d 103, 109-10, 744 N.Y.S.2d 384 (1st Dep’t 2002)).
Applying these standards, the Court finds that the amended complaint alleges sufficient facts to pass muster under Rule 12(b)(6).
Initially, it is undisputed that valid contracts, namely, the Loan Agreements, existed between the Plaintiff and Endonovo. It is further undisputed that Collier, as the chief executive officer of Endonovo and the individual who signed the Loan Agreements on behalf of the corporation, had actual knowledge of the contracts and their operative terms. See Kramer Aff., Ex. “B,” at p. 23.
Further, construing the alleged facts in favor of the Plaintiff, the amended complaint sufficiently demonstrates that the Loan Agreements were actually breached when Endonovo failed to honor the Notice of Conversion; failed to provide the requisite notice of its change in stock transfer agent; and otherwise failed to comply with the repayment terms in the Promissory Notes. These alleged facts, if proven, would also sufficiently support the conclusion that the Plaintiff was damaged by the breaches.
Thus, the only remaining question is whether the amended complaint sufficiently alleges facts to make it plausible that: (1) Collier intentionally procured Endonovo’s breach of the Loan Agreements; and (2) he did so in pursuit of a personal interest. In the Court’s view, a review of the amended complaint requires this question to be answered affirmatively.
Consistent with its enhanced pleading burden under New York law, the Plaintiff specifically alleged that Collier “intentionally and with malice aforethought caused [Endonovo] to breach its contractual agreements”; and that, driven by a desire to preserve the value of his own personal assets, he acted “for his own financial benefit, and not for the benefit of [Endonovo].” Am. Compl. ¶ 59. In the Court’s view, this is sufficient to state a claim for tortious interference with contract. Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 18 of 20 PageID #: 439
Accordingly, the Defendants’ motion to dismiss the sixth cause of action based on tortious interference is denied.
G. As to Whether the Amended Complaint States a Plausible Claim for Equitable Relief
Finally, the fifth cause of action seeks equitable relief in the form of a mandatory injunction compelling the Defendants to comply with their obligations under the Loan Agreements and the Promissory Notes.
The Defendants rely on principles of res judicata for their contention that equitable relief is barred in this case by the Court’s prior holdings in the March Opinion. In particular, as described more fully above, the Court denied an earlier motion by the Plaintiff for provisional remedies, including a temporary restraining order and preliminary injunction, partly on the ground that the Plaintiff apparently would not suffer irreparable harm in the absence of preliminary equitable relief. Now, the Defendants argue that any claim for a permanent injunction is estopped for this same reason. The Court disagrees.
Although “Fed. R. Civ. P. 12(b)(6) is an appropriate procedural vehicle for testing a complaint with the defense of res judicata,” Hackett v. Storey, No. 03-cv-395, 2003 U.S. Dist. LEXIS 23366, at *5-*6 (D. Conn. Dec, 30 2003), that doctrine only applies to “make[ ] a final, valid judgment conclusive on the parties . . . as to all matters, fact and law, [that] were or should have been adjudicated in [an earlier] proceeding,” Waldman v. Village of Kiryas Joel, 207 F.3d 105, 108 (2d Cir. 2000) (quotation marks and citation omitted)); see Amalgamated Sugar Co. v. NL Indus., Inc., 825 F.2d 634, 639 (2d Cir. 1987) (noting that “[r]es judicata will preclude relitigation of a claim where the earlier decision was a final judgment on the merits rendered by a court of competent jurisdiction . . . ”).
Recognizing the limited scope of the doctrine, the Second Circuit has noted that preliminary injunctions are “tentative by nature,” and therefore, orders resolving motions for such relief “[are] Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 19 of 20 PageID #: 440
not final judgment[s] for purposes of res judicata.” Shulz v. Williams, 44 F.3d 48, 55 n.6 (2d Cir. 1994) (citing Goodheart Clothing Co. v. Laura Goodman Enters., 962 F.2d 268, 273-74 (2d Cir. 1992)); see Irish Lesbian & Gay Org. v. Giuliani, 143 F.3d 638, 644-45 (2d Cir. 1998) (collecting cases for the proposition that, “[o]rdinarily, findings of fact and conclusions of law made in a preliminary injunction proceeding do not preclude reexamination of the merits at a subsequent trial”).
Guided by these authorities, the Court finds that its prior analysis of the Plaintiff’s entitlement to preliminary equitable relief was not a final judgment sufficient to trigger the preclusive effect of the res judicata doctrine. Accordingly, the Defendants’ motion to dismiss the fifth cause of action seeking equitable relief is denied.
Based on the foregoing, the Court grants in part and denies in part the Defendants’ motion to dismiss the amended complaint.
In particular, for the reasons set forth above, to the extent the Defendants seek to dismiss the first, third, fourth, fifth, and sixth causes of action, their motion to dismiss is denied. However, to the extent the Defendants seek to dismiss the second cause of action based on fraudulent inducement, their motion to dismiss is granted.
This matter is respectfully referred to United States Magistrate Judge Anne Y. Shields for discovery.
It is SO ORDERED:
Dated: Central Islip, New York
October 24, 2016
/s/ Arthur D. Spatt____________________________________________
ARTHUR D. SPATT
United States District Judge
Case 2:16-cv-00470-ADS-AYS Document 37 Filed 10/24/16 Page 20 of 20 PageID #: 441
November 01, 2016MELBOURNE, AU -- (Marketwired) -- 11/01/16 -- Propanc Health Group Corporation (OTCQB: PPCH)("Propanc" or "the Company"), an emerging healthcare company focusing on development of new and proprietary treatments for cancer patients suffering from solid tumors such as pancreatic, ovarian and colorectal cancers, today announced it has submitted an application for Orphan Medicinal Product Designation (OMPD) to the European Medicines Agency (EMA) for PRP, a solution for intravenous administration of pancreatic proenzymes trypsinogen and chymotrypsinogen. The proposed orphan drug indication for PRP is for the treatment of ovarian cancer.
"Obtaining orphan medicinal product designation from the EMA for our PRP therapy for ovarian cancer is a significant regulatory milestone that we are looking forward to, and will be a positive step forward in Propanc's ongoing efforts to develop effective treatments for metastatic cancer," said James Nathanielsz, Propanc's Chief Executive Officer. "This will reinforce our strategic investment in PRP, demonstrating progress in developing a potential best-in-class therapy that could transform treatment for patients with metastatic cancers, where there are limited treatment options. Once the OPMD is granted, we will work closely with the regulatory authorities and our clinical investigators to advance PRP promptly through the next stages of clinical research and development."
Ovarian cancer is a disease with the lowest survival rate of all gynecological cancers (Quaglia et al. 2009), making it the seventh most common cause of cancer death in women worldwide. More than 60% of women present with stage III or stage IV metastasized cancer at the time of first diagnosis and have a five-year survival of less than 20%. The therapy is very complex and presupposes expertise in both surgery and oncology (Roett and Evans, 2009). Thus, to date therapy of ovarian cancer is a challenge and prognosis is rather poor, creating a high unmet medical need for new efficacious and safe treatment options.
Orphan medicinal product designation is granted by the European Commission, following a positive opinion from the Committee for Orphan Medicinal Products (COMP), to a medicinal product that is intended for the diagnosis, prevention or treatment of a life-threatening or a chronically debilitating condition affecting not more than five in 10,000 persons in the European Community when the application for designation is submitted. An orphan designation allows a company to benefit from incentives from the European Union to develop a medicine for a rare disease, such as reduced fees and protection from competition once the medicine is placed on the market.
The rationale for developing PRP, a formulation of the pancreatic proenzymes trypsinogen and chymotrypsinogen for intravenous administration, in the proposed indication ovarian cancer is based on a set of in-vitro studies on cancer stem cells generated from ovarian cancer cell lines as well as xenograft and orthotopic mouse models of ovarian cancer. In summary, these data indicate that the dramatic reduction of cellular markers associated with the process of epithelial-mesenchymal transition (EMT) as a consequence of PRP treatment can not only reverse the EMT process with the implication to stop tumor progression and metastasis, but also seem to repress the development of cancer stem cells (CSCs). Consequently, these results are strong indicators of the therapeutic potential of PRP that could be categorized as an anti-CSC therapeutic drug.
Preliminary early clinical data on the treatment of six patients with ovarian cancer have been obtained with PRP in the context of a UK "Specials" License treatment. Together, these data support the medical plausibility of the proposed indication and a distinctive benefit-safety profile of PRP for the treatment of ovarian cancer.
To be added to the email distribution list, please email PPCH@kcsa.com with "Propanc" in the subject line.
Propanc is developing new cancer treatments for patients suffering from pancreatic, ovarian and colorectal cancers. We have developed a formulation of anti-cancer compounds, which exert a number of effects designed to control or prevent tumors from recurring and spreading throughout the body. Our products involve or employ pancreatic proenzymes, which are inactive precursors of enzymes. In the near term, we intend to target patients with limited remaining therapeutic options for the treatment of solid tumors. In future, we intend to develop our lead product to treat (i) early stage cancer and (ii) pre-cancerous diseases and (iii) as a preventative measure for patients at risk of developing cancer based on genetic screening. For more information, visit: www.propanc.com.
All statements other than statements of historical fact contained herein are "forward-looking statements" for purposes of federal and state securities laws. Forward-looking statements may include the words "may," "will," "estimate," "intend," "continue," "believe," "expect," "plan" or "anticipate" and other similar words. Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties including those regarding our earnings, revenues and financial condition, our ability to implement our plans, strategies and objectives for future operations, our ability to execute on proposed new products, services or development thereof, our ability to establish and maintain the proprietary nature of our technology through the patent process, our ability to license from others patents and patent applications, if necessary, to develop certain products, our ability to implement our long range business plan for various applications of our technology, our ability to enter into agreements with any necessary manufacturing, marketing and/or distribution partners for purposes of commercialization, the results of our clinical research and development, competition in the industry in which we operate, overall market conditions, and any statements or assumptions underlying any of the foregoing. Other risks, uncertainties and factors that could cause actual results to differ materially from those projected may be described from time to time in reports we file with the Securities and Exchange Commission, including our reports on Forms 10-K, 10-Q and 8-K. We do not intend, and undertake no obligation, to update any forward-looking statement contained herein, except as required by law.
KCSA Strategic Communications
Philip Carlson / Elizabeth Barker
Jon Goldberg / Lisa Lipson
Source: Propanc Health Group Corporation
Released November 1, 2016
KBM a Toxic Lender Meets Resistance by Small Cap OTC Company In Federal District Court of New York Through Ellsworth Young LLP
April 13, 2016 2:38pm
LAS VEGAS, NV / ACCESSWIRE / April 13, 2016 / Hangover Joes Holding Corp. HJOE, a fully reporting publicly traded company, announced it has filed a response and answer and affirmative defenses to a law suit in the Eastern District of New York against KBM Worldwide, Inc. The case is currently contested by the defendants in Federal in the Eastern District of New York.
The company is represented by Ellsworth Young LLP (www.eyllp.com) a full service law firm specializing in "toxic debt remediation", with offices or affiliates in many states including, New York, California, Nevada, Arizona, Texas and Florida. Most of the "toxic lenders" as they are known in the industry are located in those states.
Ellsworth Young (EY) conducted investigations of the industry and hired top experts to support its claims that, in general, the practice of convertible debt financing violates both State Usury Laws, and the Securities and Exchange Act of 1933-34. As well, in most cases this is accomplished using false promises, unconscionable loan terms and penalties hidden or disguised fees, and in general are not healthy for the companies who borrow or their shareholders. The firm is seeking regulatory, legislative and judicial support of its positon's regarding this industry as it feels it is harmful to the investing community and the companies involved. Some of the lenders in the business are involved in employing stock bashing message boards and naked short sellers, using them to drive down the price of public companies shares, while benefitting the lenders with even richer returns.
Mathew Veal of HJOE, CFO stated, "we are one among many clients of EY that are seeking redress for the wrongs expressed in this case. Until such time as the regulators take notice of the activities of these toxic lenders, and seek to curb their practices, EY through the courts are one of the only bastions to resist the lenders efforts to undermine the value of our companies." This case is one of many involving the EY firm and its affiliates, against JMJ Financial, and Justin Keener, "The Keener Family of Companies", The "Asher or Cramer Family of Companies" (Vis Vires, KBM Worldwide, Asher Financial Inc.,) and Typenex and Chicago Ventures and "The Fife Family of Companies" and John Fife. All of the forgoing having officers and directors with either FINRA or SEC violations and fines, discipline or both. The EY firm has clients with potential claims against LG Capital, Adar Bays, Tangiers, among others in various courts around the country.
EY's OTC clients are generally in the technology and medical space including computer software, biotech and medical devices as well as minerals and mining. EY LLP has relationships developed through the years with law firms of the highest caliber looking for challenging business.
Here are some of the accomplishments these firms have experienced applying pressure to the industry to control well known toxic lenders:
One firm has recently persuaded a federal court to dismiss a predatory lenders action seeking a temporary restraining order to enforce the terms of their loan and order the OTC company stock transfer agent to immediately do a conversion. The Court even stated "However, contractual language declaring money damages inadequate in the event of a breach does not control the question whether preliminary injunctive relief is appropriate." Although, the Court may consider such language as a factor in the irreparable harm analysis, "the Court remains obliged to make an independent determination as to whether injunctive relief is appropriate." The court cited In re M.B. Int'l W.W.L., No. 12 CIV. 4945 (DLC), 2012 WL 3195761, at *12 (S.D.N.Y. Aug. 6, 2012); see also Ins. Co. of the State of Pennsylvania v. Lakeshore Toltest JV, LLC, No. 15 CIV. 1436 (ALC), 2015 WL 8488579, at *2 (S.D.N.Y. Nov. 30, 2015) (same); Firemen's Ins. Co. of Newark, New Jersey v. Keating, 753 F. Supp. 1146, 1154 (S.D.N.Y. 1990) ("[I]t is clear that the parties to a contract cannot, by including certain language in that contract, create a right to injunctive relief where it would otherwise be inappropriate."). Here, the Court finds that the Plaintiff has not demonstrated irreparable harm sufficient to justify a preliminary injunction. Thus, although the contractual language in the SPA providing for preliminary relief is relevant to the question of irreparable harm, it is not dispositive of the Court's analysis." In other words the law firm succeeded in having the court ignore specific language in the loan agreements to reach a favorable ruling for a client.
A Second Law Firm achieved- reduction in demand for profit by another toxic lender through litigation in by one of our affiliate law firms, from $520,000 to $90,000.
A Third Law Firm for another client was able to renegotiate 5 of its 7 toxic loans based on the threat and reputation of one of EY's referred law firms, and reduce its debt by $600,000, and not lose market cap by conversions by one of the notorious toxic lenders.
Statement under the Private Securities Litigation Reform Act:
With the exception of the historical information contained in this Release and the attached Shareholder Report, the matters described herein contain forward-looking statements that involve risk and uncertainties that may individually or mutually impact the matters herein described, including but not limited to: the ability of the Company to increase revenues in the future due to the developing and unpredictable markets for its products, the ability to achieve a positive cash flow, the ability to obtain orders for or install its products, the ability to obtain new customers and the ability to continue to commercialize its products, which could cause actual results or revenues to differ materially from those contemplated by these statements.
About Hangover Joes:
Hangover Joe's is the exclusive producer of "The Hangover" Recovery Shot, and one of the nation's top selling anti-hangover recover drink & hangover recovery shot. Hangover Joe's is the nations leading morning after Hangover Recovery Shot! Visit our website www.hangoverjoes.com, Twitter: @TheHangoverShot Instagram: HangoverJoescom Facebook: www.facebook.com/hangoverrecovery.
For Information on Hangover Joe's stock Symbol (HJOE) http://investorshangout.com/Hangover-Joes-Holding-Corporation-HJOE-57917/.
About Ellworth Young LLP
For further information go to website www.eyllp.com or call:
Public Information Officer
Ellsworth Young LLP
702-988-2300 x 701
or email at email@example.com
SOURCE: Hangover Joes Holding Corp.
Read more: http://www.benzinga.com/content/7836685/kbm-a-toxic-lender-meets-resistance-by-small-cap-otc-company-in-federal-district-cou#ixzz45jqeUTBZ
Over The Counter Toxic Debt Cases, and Name Change of Law Firm from Bloom Donohue Young LLP to To Ellsworth Young LLP
Las Vegas, Nevada - (NewMediaWire) - February 2, 2016 - The Law Firm of Ellsworth Young LLP- New York; California, Nevada , Florida, Texas; Utah announced today the change of its name from Bloom Donohue Young LLP and the departure as a partner of David S. Bloom Esq. Mr. Bloom left the firm under cordial circumstances, due to a prior commitment. He will remain a contract attorney on a case-by-case basis.
The firm announces Keen Ellsworth as a new partner. Mr. Ellsworth is a practicing attorney in Las Vegas, Nevada, and an AV preeminent rated attorney by Martindale and Hubbell. The partners are now Robert J. Young, Jerry T. Donohue, and Keen Ellsworth. The firm and their affiliates have over 100 years legal experience. The firm pools their experience in the fields of law, securities and finance.
The firm represents numerous other OTC companies with particular emphasis on remediation of the issue of Toxic Debt Financing and corporate share price “Death Spirals”.
Further, the firm (and its predecessors and former partners) announce that it no longer represents Players Network Inc. (OTC) and its cases have been taken over by other attorneys not associated with the firm.
The firm of EY practices in New York, Nevada, Arizona, Utah and California, and is associated in various cases with Howard Toland of Mitrani, Rynor, Adamsky & Toland P.A. (Toland Firm herein) of Miami and Weston Florida and Mark Stout, Esq. of Padfield Stout LLP of Fort Worth and Dallas, Texas.
Ellsworth Young LLP (www.eyllp.com) is a full service multistate law firm with offices in New York, Nevada, Arizona, Utah and California and associates in Florida, Texas, and Tennessee. The firm advises micro and small cap public companies in the fields of general corporate law, tax law, finance as well as litigation including but not limited to “toxic debt” matters.
Director of Information
Hangover Joe's ($HJOE) Answers KBM and Addresses Toxic Loan Issues Faced by Small Public Companies Throughout America
Published: Jan 28, 2016 8:12 a.m. ET
Jan 28, 2016 (ACCESSWIRE via COMTEX) -- Hangover Joe's $HJOE Stands Up to KMB Toxic Loan Lender for ShareholdersDENVER, CO / ACCESSWIRE / January 28, 2016 / Hangover Joe's Holding CorporationHJOE, +5.88% developers of Hangover Recovery Shot and Git-R-Done-Energy, along with Git-R-Done Productions, Inc. and Larry the Cable Guy, announced today that it has filed a verified answer in the Court of the Eastern District of New York, against KBM Worldwide Inc. Among the numerous responses include usury and violation of market manipulation provisions by KBM.
"The system used to finance small companies in the United States today has become completely insane," said Matthew Veal, CEO of Hangover Joe's. "This business was started with friends and family funding that eventually exceeded several hundred thousand dollars. The business grew to where it sold product in the millions, but as a startup did not qualify for traditional or SBA funding and needed additional capital for growth. It was approached about going public with the promise of significant investment, which of course did not materialize. Its only option for financing has been the nightmare of convertible loans.
These loans as a group all have been repaid not only to the extent of the entire amount of their principal but significant interest as well, not at the effective interest rates of the loans and meritless fees added on to them, but certainly at or near the legal rate of interest. However, the convertible loan process also triggered a deluge of short sellers and paid bashers adding to the degree of difficulty by a process of attempted shaming in social media, working stock boards and otherwise to inhibit potential investors and customers from a growing company and brands. This is an attempt to harm the company and we don't take these matters lightly. To further add insult to injury, several of these lenders have now sued us, including dubious claims against individual members of management which seek to further and unfairly harm reputations, and we have responded to these as well. This is done thousands of times in our economy today, destroying companies, jobs, and investor wealth in the process. And for what gain? Hangover Joe's at least has come through the process strong enough to hire talented attorneys who have started the process of removing this scourge from our capital markets.
We are launching dealers all over the USA and expect to expand our existing ongoing international operations. Ours is a real company and a real brand and we are standing up to this type of injustice for all of our stakeholders, the shareholders, the believers, the distributors, the retailers and consumers of our brand. With the progress we have made there are new investors looking to fund the company, and our brand is growing and has a strong following. The type of predators we have faced count on companies not having real products or sales and being too weak to fight back. That is not the case in Hangover Joe's and we will defend ourselves against all such attacks and respond in the court systems." We find inspiration for our views in the Jose Marti, "Liberty is the right ..... to be honest, to think and to speak without hypocrisy." The action was filed on behalf of HJOE by Ellsworth Young LLP (www.eyllp.com), a national law firm with capabilities in New York, California, Nevada, Pennsylvania, Florida, Texas, Utah and Arizona which specializes in toxic debt relief cases.
Interested in a Dealer/Distributorship to sell HJOE products? Contact SMS atwww.smsdealerships.com. Hangover Joe's is the exclusive producer of "The Hangover" Recovery Shot, and one of the nation's top selling anti-hangover recover drink & hangover recovery shot. Git-R-Done-Energy is an officially licensed product of Git-R-Done Productions, Inc. and Larry the Cable Guy and is a healthy energy drink. Hangover Joe's is a publicly traded company and is trading on the OTCPK as HJOE Additional details of the Company's business, finances, appointments and agreements can be found as part of the Company's public disclosure as a reporting issuer with the Securities and Exchange Commission ("SEC") available atwww.sec.gov.
For more information, visit our website at www.GitRDoneEnergy.com &www.hangoverjoes.com or https://www.facebook.com/GitRDoneEnergy , on twitter @GitRDoneEnergy and on Instagram: HangoverJoescom or check us out on YouTube.
This news release contains "forward-looking statements." Statements in this press release that are not purely historical are forward-looking statements and include any statements regarding beliefs, plans, expectations or intentions regarding the future. Such forward-looking statements include, among other things, the Company's expectations regarding the development of marketing and sales relations nationally. Actual results could differ from those projected in any forward-looking statements due to numerous factors. Such factors include, among others, the inherent uncertainties associated with developing new products and operating as a development stage Company, our ability to raise the additional funding we will need to continue to pursue our business and product development plans, competition in the industry in which we operate and market conditions. These forward-looking statements are made as of the date of this news release, and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements, except as required by applicable law, including the securities laws of the United States. Although we believe that any beliefs, plans, expectations and intentions contained in this press release are reasonable, there can be no assurance that any such beliefs, plans, expectations or intentions will prove to be accurate. Investors should consult all of the information set forth herein and should also refer to the risk factors disclosure outlined in the reports and other documents we file with the SEC, available at www.sec.gov.
For information on the companies stock: http://investorshangout.com/Hangover-Joes-Holding-Corporation-HJOE-57917/
SOURCE: Hangover Joe's Holding Corporation
Copyright 2016 ACCESSWIRE
Forbes Best States For Business List
Forbes / Business
The Little Black Book of Billionaire Secrets
NOV 12, 2014 @ 09:57 AM 10,412 VIEWSRanking The Best States For Business 2014: Behind The Numbers
I cover sports business with rare dip in education & local economies
Our ninth annual Best States for Business is headed by Utah, which previously finished on top between 2010 and 2012. The ranking measures six vital categories for businesses: costs, labor supply, regulatory environment, current economic climate, growth prospects and quality of life. We factor in 36 points of data to determine the ranks across the six main areas. Below is a breakdown of each category, along with the sources.
Business costs incorporate Moody’s Analytics cost of doing business index which includes labor, energy and taxes. Moody’s weighs labor costs the most heavily in its index. We also included a state tax index from the Tax Foundation that launched in 2012 and looks at the tax burden on businesses in each state across different industries. Business costs are the most heavily weighted component in the Forbes Best States for Business.
Labor supply measures college and high school attainment based on figures from the Census Bureau. We also consider net migration over the past five years and the projected population growth over the next five years. Lastly we included the percentage of the workforce that is represented by a union.
The Best And Worst States For Business 2014
Regulatory environment includes metrics influenced by the government. We incorporated the regulatory component of the Freedom in the 50 States report from the Mercatus Center at George Mason University. It considers labor regulations, health-insurance coverage mandates, occupational licensing, the tort system, right-to-work laws and more. We also factor in an index from Pollina Corporate Real Estate that measures tax incentives and the economic development efforts of each state. Other data points include Moody’s bond rating on the state’s general obligation debt and the transportation infrastructure including air, highway and rail.
The economic climate category measures job, income and gross state product growth as well as average unemployment during the past five years. Other metrics include the 2013 unemployment rate and the number of the 1,000 biggest public and private companies by revenue headquartered in the state.
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The growth prospects category measures job, income and gross state product growth forecasts over the next five years from Moody’s Analytics. This year we added a second component for employment growth (it was the only change to the 2014 methodology). EMSI’s “bottom-up” forecasting approach compliments Moody’s “top-down” forecasts. Other factors in the growth prospects category include business opening and closing statistics in each state based on data from the Small Business Administration. We also measured venture capital investments per the MoneyTree report from PricewaterhouseCoopers, the National Venture Capital Association and Thomson Reuters TRI +%.
Quality of Life
Quality of life takes into account poverty rates per the Bureau of Economic Analysis and crime rates from the FBI. Other factors include cost of living from Moody’s, school test performance via the Department of Education and the health of the people in the state per the United Health Foundation. We considered the culture and recreation opportunities in the state based on an index created by Bert Sperling, as part of our annual Best Places for Business. We factored in the mean temperature in the state as a proxy for the weather. Lastly, we included the number of top-ranked four-year colleges in the state from Forbes’ annual college rankings.
Complete Coverage: The Best States For Business
Nevada's GOP Gov. Brian Sandoval starts new term with tax-hike surprise
Nevada Gov. Brian Sandoval during his State of the State address in Carson City in January. (Lance Iversen / Associated Press)
Mark Z. BarabakContact Reporter
Nevada governor seeks tax increase for education, winning Democrats' praise and his fellow Republicans' anger
If 2014 was a good year for Republicans nationally, in Nevada it was an election for the ages.
Gov. Brian Sandoval won his second term with an extravagant 70% support. Republicans not only seized control of the Legislature — giving them full run of the Capitol for the first time since 1929 — but also staged an unprecedented sweep of statewide offices.
Sandoval then did something uncharacteristic for a Republican, especially one in a state with such a deep and abiding hostility toward government: He called for the largest tax increase in Nevada history.
And he did so after nearly 80% of voters in November rejected a tax hike that, while differing in size and scope, was touted as addressing the same problem Sandoval hopes to remedy with his plan: the state's woeful public education system.
"I know this will cause debate," Sandoval said after springing his plan in last month's State of the State address.
Indeed it has, along with a revolt by anti-tax Republicans, rumblings of a legislative recall and a man-bites-dog display of Democrats hailing the GOP governor and his brave leadership.
The governor loves this state. And he has a vision of what it needs to look like moving forward.- Marilyn Kirkpatrick, Democratic leader in the Nevada Assembly"The governor loves this state," said Marilyn Kirkpatrick, the Democratic leader in the Nevada Assembly. "And he has a vision of what it needs to look like moving forward."
Apart from turning Nevada politics upside down, Sandoval has launched a frontal assault against the tea party — perhaps the boldest in the country — in a state where the movement's minimal-government philosophy has one of its strongest followings.
The showdown promises no small amount of political drama. The Legislature has yet to convene and already there have been intrigues surrounding a GOP speaker shoved aside for racially insensitive and homophobic comments and a lawmaker booted from the Republican leadership over personal tax troubles.
Nevada GOP Gov. Brian Sandoval is popular, but not within his partyThe latter, Assemblywoman Michele Fiore, has emerged as one of the fiercest opponents of the governor, rounding up votes to kill his tax plan even before the Legislature opens for business Monday.
(In a separate headache, the state's new Republican attorney general, Adam Laxalt, last week joined a multi-state lawsuit seeking to overturn President Obama's order blocking deportation of millions of people in the country illegally. Sandoval, who was blindsided by Laxalt's move, said the matter should be worked out by Congress and the president, not the courts.)
To a large extent, the governor is a victim of his own political success.
He was so popular he scared off serious competition in November, giving Democrats little incentive to turn out. The result was a GOP wave of such magnitude it surprised even Republican strategists; no one expected the party to win control of the state Assembly, where Democrats held a near two-thirds majority, but they did.
Among the GOP newcomers are a number of deeply conservative candidates with scant political experience and, notwithstanding Sandoval's place atop the ticket, no allegiance to the governor. Many seem likely to vote against his tax plan.
Sandoval's $1.1-billion proposal would replace the state's $200 business license fee with a levy based on annual revenue and industry type. The tax on cigarettes would increase, and a 2009 tax hike that was supposed to end in June 2013 but was extended would become permanent.
The added revenue over two years would pay for a sizable investment in the state's public schools — among the worst-performing in the nation — including an expansion of full-day kindergarten, more money for English-language learning and special programs to benefit gifted students.
Delivering his State of the State address, Sandoval crowed about Nevada's comeback from the Great Recession, which hit harder here than just about anywhere else. He touted renewed job and population growth and the state's attraction of new business, including a huge factory to make batteries for Tesla's electric cars, which Nevada won amid stiff competition with California and other states.
But Sandoval said the prosperity would continue only if the state modernized its economy, ending its overreliance on up-and-down revenue from gambling and tourism, and thoroughly overhauled its schools and outmoded tax system.
"We must decide if [the state's next] chapter is about getting through the next two years" of the legislative session "or about creating a new Nevada for the generations to come," Sandoval said.
To critics, the tax plan sounded suspiciously like a ballot measure that voters overwhelmingly rejected in November. That proposal, pushed by organized labor, would have imposed a 2% tax on any business generating more than $1 million in annual revenue, with the proceeds going to the state's schools.
"We saw voters basically say 'no' to the idea that we can simply raise taxes and spend our way to greater education performance," said Andy Matthews, president of the Nevada Policy Research Institute, a libertarian-oriented think tank. "In the aftermath of that loud rebuke … the governor has basically proposed something that looks a lot like what got shot down."
But supporters point to key differences in Sandoval's plan, which they say makes it simpler and fairer than the measure voters rejected.
The governor, along with business leaders and prominent lawmakers in both parties, opposed the November ballot measure. But if one listened closely — Sandoval barely campaigned for reelection — there were hints of his far-reaching plans.
Meeting in late October with the editorial board of the Reno Gazette-Journal, Sandoval vowed to fix the state's troubled education system and change the way the state's penny-pinching government funds itself. Asked if that meant new taxes, he replied, "You'll find out."
While the backlash from Republican quarters has been fierce, Sandoval is viewed as politically unassailable. So critics have launched an effort to recall three of the GOP lawmakers who have refused to publicly oppose the governor's tax plan.
One of them is Assembly Speaker-designate John Hambrick, who was hastily chosen to replace Ira Hansen, a tea party favorite, after newspaper columns and past comments surfaced in which Hansen, among other things, compared homosexuality to bestiality and wrote that African Americans were insufficiently grateful to whites for ending slavery.
Sandoval helped push Hansen from the speakership, and that too has rubbed feelings raw. Hansen claimed he was ousted over his anti-tax beliefs.
Republican Assemblyman Jim Wheeler, whose job includes rounding up votes for the GOP leadership, said the governor was owed a respectful hearing of his tax and education proposals — but no more.
"We have three branches of government … that's what the checks and balances of this country and this state are all about," Wheeler said, after doffing his cowboy hat and settling in an office decorated with a lasso, among other western regalia.
He was undecided on Sandoval's tax plan, Wheeler said, but appeared to have his doubts. Any law that passes, however well-intended, is an infringement on personal freedom, Wheeler said.
"This is the freest state in the freest country on earth," he said. "And we plan to keep it that way."