Preview
342-265591-13 FILED
TARRANT COUNTY
7/9/2015 4:10:21 PM
THOMAS A. WILDER
CAUSE NO. 342-265591-13 DISTRICT CLERK
EAST OF MADISON, LLC. § IN IN THE DISTRICT COURT OF
§
Plaintiff, §
§
v. §
§ TARRANT COUNTY, TEXAS
MICHAEL ABBOTT and §
AMY ABBOTT, §
§
Defendants. §
§ 342ND JUDICIAL DISTRICT
DEFENDANTS’ MOTION FOR LEAVE TO FILE FIRST AMENDED ANSWER
AND COUNTERCLAIM
TO THE HONORABLE JUDGE OF THE COURT:
Pursuant to Texas R. Civ. P. 63, Defendants Michael and Amy Abbott (“Defendants” or
“the Abbotts”) file this Motion for Leave to File First Amended Answer and Counterclaim, and
would show the Court as follows:
1. This action was filed on April 26, 2013. An Agreed Level 3 Scheduling Order
was entered by the Court on February 28, 2014 (“Scheduling Order”). Pursuant to the terms of
the Scheduling Order, the trial of this cause was set for November 17, 2014 and the deadline for
Defendants to amend pleadings was set for October 13, 2014 (i.e., 5 weeks before the trial
setting).
2. As a result of Agreed Motions for Continuance filed by the parties on September
26, 2014 and on March 23, 2015, the case is currently set for trial the week of September 8,
2015.
3. On or about June 16, 2015, Defendants retained the undersigned counsel to
represent them in this matter. After becoming acquainted with the facts of the case, the
pleadings, and the discovery conducted by the parties, it became apparent to the undersigned that
DEFENDANTS’ MOTION FOR LEAVE TO FILE FIRST AMENDED ANSWER AND COUNTERCLAIM
PAGE 1
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additional defenses and a counterclaim needed to be presented on the Defendants’ behalf in order
that justice may be served in the case. Accordingly, Defendants seek leave to file Defendants’
First Amended Answer and Counterclaim, a copy of which is attached hereto as Exhibit A.1
4. Tex. R. Civ. P. 63 allows for amendment of pleadings
“provided, that any pleadings, response or pleas offered for filing
within seven days of the date of trial or thereafter, or after such time as
may be ordered by the judge under Rule 166, shall be filed only after
leave of the judge is obtained, which leave shall be granted by the
judge unless there is a showing that such filing will operate as a
surprise to the opposite party.”
5. The facts underlying the defenses and counterclaim which Defendants seek leave
to add have been made known to the Plaintiff through the written discovery answers of the
Defendants and through the oral deposition testimony of Michael Abbott, and therefore the
requested amendment will not operate as a surprise to the Plaintiff. In addition, this requested
amendment comes more than eight (8) weeks prior to the trial setting in this case -- well more
than the five (5) weeks prior to trial that the Scheduling Order had contemplated would be
permissible for Defendants to amend their pleadings -- thereby providing Plaintiff adequate time
to prepare for trial based on the proposed new pleadings of the Defendants.
WHEREFORE, PREMISES CONSIDERED, the Abbotts respectfully request the Court to
enter an order granting their Motion for Leave to File First Amended Answer and Counterclaim,
and granting the Abbotts all such other and further relief to which they may show themselves
entitled, whether at law or in equity.
1
Each of the defenses set forth in Defendants’ First Amended Answer and Counterclaim, with the exception of the
statute of limitations defense, are new defenses.The counterclaim is likewise a new claim.
DEFENDANTS’ MOTION FOR LEAVE TO FILE FIRST AMENDED ANSWER AND COUNTERCLAIM
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Respectfully submitted,
GRUBER HURST ELROD JOHANSEN
HAIL SHANK, LLP
/s/ Brian A. Farlow
Michael Gruber
State Bar No. 08555400
mgruber@ghetrial.com
Brian A. Farlow
State Bar No. 00795339
bfarlow@ghetrial.com
Barbara Wohlrabe
State Bar No. 21842600
bwohlrabe@ghetrial.com
1445 Ross Avenue, Suite 2500
Dallas, Texas 75202
214.855.6800 (main)
214.855.6808 (facsimile)
ATTORNEYS FOR DEFENDANTS
MICHAEL ABBOTT and
AMY ABBOTT
CERTIFICATE OF CONFERENCE
An email was sent to counsel for Plaintiff, Darrell G. Adkerson, on July 2, 2015, on which
date Plaintiff’s counsel was also provided with a draft copy of the foregoing Motion for Leave to
File Amended Answer and Counterclaim and Defendants’ proposed Amended Answer and
Counterclaim. On July 8, 2015, a conference was held with Mr. Adkerson at which time he
indicated that he had not heard from his client as to whether he was unopposed. As of the time of
filing of the Motion, counsel for Plaintiff has not indicated whether or not Plaintiff opposes the
Motion.
/s/ Brian A. Farlow
Brian A. Farlow
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the above and foregoing pleading
was served on all counsel of record in accordance with the Texas Rules of Civil
th
Procedure on this 9 day of July, 2015 as set forth below.
/s/ Brian A. Farlow
Brian A. Farlow
DEFENDANTS’ MOTION FOR LEAVE TO FILE FIRST AMENDED ANSWER AND COUNTERCLAIM
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CAUSE NO. 342-265591-13
EAST OF MADISON, LLC. § IN THE DISTRICT COURT OF
§
Plaintiff, §
§
v. §
§ TARRANT COUNTY, TEXAS
MICHAEL ABBOTT and §
AMY ABBOTT, §
§
Defendants. § 342ND JUDICIAL DISTRICT
DEFENDANTS’ FIRST AMENDED ANSWER
AND COUNTERCLAIM
TO THE HONORABLE JUDGE OF THE COURT:
Defendants Michael and Amy Abbott (“Defendants” or “the Abbotts”) file and serve
this their First Amended Answer and Counterclaim and would show the Court as follows:
I. GENERAL DENIAL
1. Pursuant to Tex. R. Civ. P. 92, Defendants deny each and every material
allegation contained in Plaintiff’s First Amended Petition and demand proof of such
allegations by a preponderance of the evidence.
II. DEFENSES & AFFIRMATIVE DEFENSES
2. Defendants assert the following defenses and affirmative defenses, which are
asserted in the alternative, to the claims presented in Plaintiff’s First Amended Petition:
a. Plaintiff cannot recover on its claims because they are barred by the
applicable statutes of limitations.
b. Plaintiff cannot recover on its claims because they are barred by the
doctrines of waiver, release, discharge, cancellation and/or renunciation.
c. Plaintiff cannot recover on its claims because the contract or
promissory note made the basis of its suit is unenforceable because of fraud,
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Exhibit A
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fraudulent inducement, misrepresentations and concealment/non-disclosure of
material facts on the part of Plaintiff or its agents and representatives.
d. Plaintiff cannot recover on its claims because they are barred by
estoppel, equitable estoppel, quasi estoppel, promissory estoppel, laches, and
the doctrine of unclean hands.
e. Plaintiff’s claims are barred because the execution of the contract or
promissory note made the basis of Plaintiff’s suit was the result of a mistake
of fact and enforcement of such contract or promissory note would be
unconscionable.
III. FACTS RELATED TO THE ABBOTTS’ DEFENSES AND COUNTERCLAIMS
A. Background
3. In or about 2001, Michael Abbott began work as an employee of Discovery
Land Company, LLC (“Discovery”) at the Vaquero Club in Westlake, Texas. As stated on
its website, Discovery is a real estate development company “specializing in luxury
residential private club communities in the United States” and elsewhere. Discovery is an
affiliated or related company of Plaintiff/Counter-Defendant East of Madison, LLC. As an
employee of Discovery, Michael Abbott worked as a general manager of Vaquero Club
overseeing all of the start-up operations for Discovery, which included the development of
golf communities, clubs and resorts. During this time, Michael Abbott reported directly to
Michael Meldman.
4. In February 2004, the Abbotts purchased a home at 2040 Bantry Drive,
Roanoke, Tarrant County, Texas.
5. In or about mid-2005, Discovery shareholders and officers/managers Michael
Meldman (“Meldman”) and Joseph Arenson (“Arenson”), who are and were also
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shareholders, officers, and/or managers of East of Madison, LLC (collectively “East of
Madison”), offered Michael Abbott a position as general manager at The Madison Club in La
Quinta, CA. Essentially they offered Michael Abbott the same position at the East of
Madison Club that he had at the Vaquero Club. As stated on its website, The Madison Club
is “the most exclusive private residential community in La Quinta, California offering the
finest golf and club facilities in an intimate and sophisticated setting.” Again, Michael
Abbott reported to Meldman. Indeed, throughout his employment, Meldman/Discovery
directly controlled the various properties, including Westlake and East of Madison.
Meldman made employment decisions for managers at all the various properties; he also had
the final decision on any real estate deal at any of the properties. In short, the various clubs
(e.g. Vaquero and East of Madison) were Discovery and Discovery was Meldman.
6. In order to induce Michael Abbott to make the move from his job in Westlake,
Texas and the Abbotts’ brand new $1 million dollar home in Roanoke, Texas, he was offered
a relocation package. As part of his re-location package, Discovery/Meldman agreed to
provide certain funds for the Abbotts’ purchase of a home in California, since residential real
estate was considerably more expensive in Southern California than in Tarrant County,
Texas. Generally, Meldman did not want Abbott’s relocation to force him to take a
substantially higher mortgage than what he had in Texas. Consequently, Meldman agreed
that the Abbotts would have no obligation to repay the funds provided to assist them in
purchasing a California home. The Abbotts moved to Rancho Mirage, California in or about
October 2005. Subsequently, the Abbotts were able to purchase a $1.45 million home in
Rancho Mirage, California in November of 2005. Michael Abbott began working as the
General Manager of the Madison Club in La Quinta, California in or about October of 2005.
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B. The “Promissory Note” Dated October 29, 2005
7. Michael Abbott began working as the general manager of the Madison Club in
La Quinta, California in or about October of 2005. In or about the spring of 2006, and as part
of his re-location to California, East of Madison presented Michael Abbott with certain
paperwork which he was told required his signature. Michael Abbott signed the paperwork,
including what he now knows, though did not know at the time, was the third page of a three-
page “promissory note.” Michael Abbott was never shown the first two pages of the
“promissory note,” and had no idea that it was a note purportedly obligating him and his wife
to repay the sum of $375,000 to East of Madison, LLC upon the earlier of (1) five days from
the date of the sale of their Roanoak [sic], Texas home, or (2) October 31, 2006. Amy
Abbott never signed the “promissory note,” and never even knew of its existence until the
filing of this suit. Someone, without authority, purported to sign the “promissory note” on
Amy Abbott’s behalf. At the time Michael Abbott signed the third page of the “promissory
note,” in the spring of 2006, the Abbotts had already sold their Roanoke, Texas home on
December 28, 2005. Further, at the time he signed the third page of the “promissory note,”
the Abbotts had already purchased their Rancho Mirage, California home on or about
November 1, 2005.
8. Neither Michael Abbott nor Amy Abbott agreed to the terms of the
“promissory note,” nor had they ever seen or been told of the “promissory note” or its terms
prior to this lawsuit. At all times prior to Plaintiff’s demand on the Abbotts which led to this
litigation, itwas the Abbotts’ understanding that Discovery, through East of Madison, had
agreed to provide monies for the Abbotts’ purchase of a home in California, with no
repayment obligation, because of the substantially higher home prices in Southern
California—which constituted a disincentive to the Abbotts to move to California.
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9. Despite the fact that Discovery/Meldman and/or East of Madison, LLC knew
about the sale of the Abbotts’ Texas home in December 2005, there was no demand on the
Abbotts for payment of the alleged $375,000 while Abbott was employed by Discovery.
Moreover, the 2005 sale of the Abbotts’ Texas home realized only $45,000 for the Abbotts.
C. The Second “Promissory Note,” Dated October 29, 2007
10. In October 2007, Doug Seibold, an accountant at Discovery who also
maintained the Madison Club’s records, advised Michael Abbott that due to problems
associated with their record-keeping procedures, they needed Michael Abbott to re-sign part
of the relocation paperwork he had signed in the spring of 2006. Meldman confirmed his
request. Michael Abbott was presented with another document which was the same or similar
to the 3rd page of the document he had signed in the spring of 2006, which he duly signed.
As before, he was not shown the first two pages of the document (hereinafter referred to as
the “second promissory note”), nor was he told that the document was a promissory note
obligating him and his wife to repay the sum of $ 375,000 to East of Madison, LLC upon the
earlier of (1) five days from the date of the sale of their Roanoak [sic], Texas home, or (2)
October 31, 2009. Notably, the sale of the Abbotts home had already occurred on December
28, 2005, nearly 2 years prior to execution of the “second promissory note.”
11. Amy Abbott never signed the “second promissory note,” and never even knew
of its existence until the filing of this suit. Someone, without authority, purported to sign the
“second promissory note” on Amy Abbott’s behalf.
12. Neither Michael Abbott nor Amy Abbott agreed to the terms of the “second
promissory note,” nor had they ever seen or been told of the “second promissory note” or its
terms prior to demand having been made on them. At all times prior to Plaintiff’s demand on
the Abbotts, it was the Abbotts’ understanding that Discovery, through East of Madison, had
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agreed to provide monies for the Abbotts’ purchase of a home in California, with no
repayment obligation, because of the substantially higher home prices in Southern
California—which constituted a disincentive for the Abbots to move.
13. At the time Discovery, through East of Madison, offered to provide funds to
the Abbotts to purchase a home in California, and at the time they requested Michael Abbott
to sign documents which he did not know were alleged $375,000 promissory notes,
Discovery had actual knowledge that the Abbotts did not have the resources to repay such
funds, and that the sale of their Roanoke, Texas home would not provide them with such
resources.
14. Finally, although Doug Seibold represented to Michael Abbott in October
2007 that he needed his signature on a document he had signed in 2006 but which had been
lost, the Abbotts have learned during the course of this litigation that the document either was
never lost or has been found by Plaintiff.
15. Due to on-going personal and health issues, in or about late 2008, Michael
Abbott left the employment of Discovery and ceased to be the general manager The Madison
Club. Abbott received no further compensation or benefits from The Madison
Club/Discovery/East of Madison, LLC. While Michael Abbott and Meldman discussed
Abbott’s potential return to work at Discovery, an agreement could not be reached regarding
specifically when Abbott would resume his duties or which Discovery property he would
manage. Ultimately, Abbott could not wait to resolve all these issues and he decided to take
an employment offer from another company.
16. In or about September of 2009, the Abbotts sold their Rancho Mirage,
California home and moved back to Texas. Because of the downturn in the California real
estate market at that time, the Abbotts took a loss on the sale of the home, were unable to
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recover the down payment they had made when they purchased the home, and were required
to pay $28,000 out of pocket at the time of closing.
D. Filing of Suit and Plaintiff’s Renunciation of the “Second Promissory Note”
17. This suit was filed against the Abbotts on April 26, 2013. The basis of the suit
is the “second promissory note” dated October 29, 2007, which is a sham. Plaintiff has made
no attempt to sue on or recover the sums allegedly represented by the “promissory note”
dated October 29, 2005, nor did it ever cancel the October 29, 2005 “promissory note.” In
the years prior to the filing of this suit, the Abbotts received various demands from East of
Madison and/or its managing member Nationwide Realty Investors, Ltd. Each time demand
was made on the Abbotts, East of Madison assured Michael Abbott that no payment was
necessary, the matter would be handled and no legal proceeding would be pursued. Each
time, the matter was dropped and no collection efforts were undertaken. Even after suit was
filed on April 26, 2013, Meldman and Arenson continued to assure Michael Abbott that the
matter was being dropped and would not be pursued. Finally, in early 2014, Meldman and/or
Arenson advised Michael Abbott that the suit was not going to be dropped and would, in fact,
proceed.
IV. VERIFIED DENIALS
18. Defendant Amy Abbott specifically denies that she executed, or gave
authority for the execution of, the contract or promissory note made the basis of Plaintiff’s
suit.
19. Defendant Michael Abbott specifically denies that he executed, or gave
authority for the execution of, the contract or promissory note made the basis of Plaintiff’s
suit. In this regard, Michael Abbott avers that he was given or shown only the third page of
the contract or promissory note by Plaintiff or its agents or representatives, was not told that
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it was a promissory note or contract, and instead was told that it was the same paperwork he
had signed after he accepted a job as general manager of The Madison Club and moved to
California in October 2005, and that due to problems with Plaintiff’s record-keeping the
Plaintiff needed the document re-signed for its records. As Plaintiff has sued on the
document signed in 2007, the signature page Michael Abbott was asked to sign in October
2007 was apparently the signature page to a new promissory note, not the signature page to
what was the first promissory note, and thus was not the same document Michael Abbott
signed in 2006 (i.e., the October 25, 2005 “promissory note”).
20. The contract or promissory note made the basis of Plaintiff’s suit lacks
consideration in that nothing of value was paid or given to Defendants, or for their benefit, in
connection with the Defendants’ alleged execution of the 2007 contract or promissory note.
21. Plaintiff cannot recover interest at the rate sought in its First Amended
Complaint because such a rate of interest is in excess of the rate permitted by the express
terms of the contract or promissory note made the basis of Plaintiff’s suit and/or is usurious
under applicable California law.
V. COUNTER-PLAINTIFFS’ ORIGINAL COUNTERCLAIMS
22. Counter-Plaintiffs Michael Abbott and Amy Abbott (“the Abbotts”) file these
Original Counterclaims against East of Madison, LLC, and respectfully show the following:
A. Discovery Control Plan
23. Discovery should be conducted under Level 2 pursuant to Rule 190.3 of the
Texas Rules of Civil Procedure.
B. Parties & Jurisdiction
24. The Abbotts are individuals residing in Tarrant County, Texas.
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25. Counter-Defendant East of Madison, LLC is a Delaware limited liability
company and has already made an appearance in this action.
26. The Court has jurisdiction over the suit because the amount in controversy
exceeds the minimum jurisdictional limits of the Court.
C. Causes of Action
Fraud, Fraudulent Inducement, Promissory Fraud, Deceit,
and Negligent Misrepresentation
27. The Abbotts incorporate paragraphs 1-27 above as if fully set forth herein.
28. In order to induce Michael Abbott to give up his position in Texas (as well as
his life and home in Roanoke, Texas) and move to California to work for a different
Discovery property, The Madison Club, Michael Abbott was told by Meldman as the
controlling entity in Discovery and East of Madison that they would provide the Abbotts with
funds for the purchase of a home in California, with no repayment obligation.
29. These representations were false when made and
Discovery/Meldman/Arenson/The Madison Club/East of Madison, LLC either knew the
representations were false or made the representations recklessly, without full knowledge of
their truth, and the representations were made with the intent that the Abbotts rely and act
upon them.
30. Further, under the guise of requiring Michael Abbott’s signature on
paperwork related to his relocation to California, or under the guise of having lost or
misplaced paperwork Michael Abbott had previously signed in connection with his
relocation to California, Discovery/Meldman/Arenson/The Madison Club/East of Madison,
LLC or their agents or representatives requested Michael Abbott’s signature on the third page
of an alleged promissory note without showing or explaining to him the contents of the first
two pages or revealing that the signature page was part of a promissory note obligating the
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Abbotts to pay $375,000 to Plaintiff. Such conduct amounts to a material misrepresentation
of the terms, purpose and effect of the alleged promissory note and of the requested signature
of Michael Abbott.
31. These representations concerning what Michael Abbott was being requested
to sign and why his signature was needed were false when made and
Discovery/Meldman/Arenson/The Madison Club/East of Madison, LLC or their agents or
representatives either knew the representations were false or made the representations
recklessly, without full knowledge of their truth, and the representations were made with the
intent that Michael Abbott rely and act upon them.
32. The Abbotts relied upon the false representations made to them by
Discovery/Meldman/Arenson/The Madison Club/East of Madison, LLC or their agents or
representatives, and suffered harm as a result, including leaving Texas and Michael Abbott’s
job at Discovery, selling the Abbotts’ new Roanoke, Texas home in order to move to
California, and signing a piece of paper that exposed the Abbotts to liability for the sums
sought by Plaintiff in this suit. The Abbotts learned that the representations made to them
by Discovery/Meldman/Arenson/The Madison Club/East of Madison, LLC or their agents
or representatives, were false, and suffered damages as a result of such false representations,
when Plaintiff filed this lawsuit on April 26, 2013. The damages suffered by the Abbotts as
a result of the false representations made to them include (a) the sale of their Roanoke,
Texas, home in December 2005 and the loss of appreciation resulting from such sale, (b) the
losses suffered as a result of buying a California home near the peak of the market and then
selling it in September of 2009 in abstract sale, after property values had dropped
substantially, thereby incurring a loss of approximately $28,000 (c) closing costs incurred
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on the sale of their Roanoke, Texas home and on the sale of their California home, and (d)
the amounts that they may be liable for to the Plaintiff in this action.
Damages
33. The Abbotts incorporate paragraphs 1-32 above as if fully set forth herein.
34. The Abbotts are entitled to recover from Plaintiff all of their actual and
consequential or special damages and losses.
Equitable Rescission
35. The Abbotts incorporate paragraphs 1-34 above as if fully set forth herein.
36. Alternatively, the Abbotts seek equitable rescission of the contract or
promissory note which is the basis of Plaintiff’s suit.
Exemplary Damages
37. The Abbotts incorporate paragraphs 1-36 above as if fully set forth herein.
38. As a result of the fraud, malice, and fraudulent conduct of
Discovery/Meldman/ Arenson/The Madison Club/East of Madison, LLC or their agents or
representatives, the Abbotts are entitled to recover exemplary damages from East of
Madison, LLC.
PRAYER
WHEREFORE, PREMISES CONSIDERED, Michael Abbott and Amy Abbott
respectfully request, upon final hearing hereof, the following relief:
(1) That East of Madison, LLC take nothing by way of its claims against Michael
Abbott and Amy Abbott;
(2) That Michael Abbott and Amy Abbott recover their actual, consequential, and/or
special damages;
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(3) Alternatively, that the Court grant Michael Abbott’s and Amy Abbott’s request
for equitable rescission of the contract or promissory note made the basis of
Plaintiff East of Madison, LLC’s suit;
(4) That Michael Abbott and Amy Abbott recover exemplary damages against
Plaintiff East of Madison, LLC;
(5) That Michael Abbott and Amy Abbott recover pre-and post-judgment interest on
all damages awarded them;
(6) That Michael Abbott and Amy Abbott recover all costs of court;
(7) That Michael Abbott and Amy Abbott recover all such other and further relief to
which they may show themselves to be entitled, whether at law or in equity.
Respectfully submitted,
GRUBER HURST ELROD JOHANSEN
HAIL SHANK, LLP
/s/ Brian A. Farlow
Michael Gruber
State Bar No. 08555400
mgruber@ghetrial.com
Brian A. Farlow
State Bar No. 00795339
bfarlow@ghetrial.com
Barbara Wohlrabe
State Bar No. 21842600
bwohlrabe@ghetrial.com
1445 Ross Avenue, Suite 2500
Dallas, Texas 75202
214.855.6800 (main)
214.855.6808 (facsimile)
ATTORNEYS FOR DEFENDANTS
MICHAEL ABBOTT and
AMY ABBOTT
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CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the above and foregoing pleading was served
on all counsel of record in accordance with the Texas Rules of Civil Procedure on this 9th day of
July, 2015 as set forth below.
/s/ Brian A. Farlow
Brian A. Farlow
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