Motion to Compel in GAMCO PROPERTIES, LLC, et al vs. WHAM TECH, INC., et al| Trellis.Law

On September 21, 2021 a Motion,Ex Parte was filed involving a dispute between Gamble, Lesa, Gamco Properties, Llc, Gamvest, Lp, and Wham Tech, Inc., Wham Technologies, Inc., for CNTR CNSMR COM DEBT in the District Court of Dallas County.

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FILED
11/16/2022 8:46 AM
FELICIA PITRE
DISTRICT CLERK
DALLAS CO., TEXAS
Terri Kilgore DEPUTY

CAUSE NO. DC-2 1-14068

GAMCO PROPERTIES, LLC; IN THE DISTRICT COURT

§§§§§§§§§§§
GAMVEST, LP; and LESA GAMBLE,

Plaintiffs,

v. DALLAS COUNTY, TEXAS

WHAM TECH, INC. and WHAM
TECHNOLOGIES, INC.,

Defendants. 134TH JUDICIAL DISTRICT

PLAINTIFFS’ FIRST SUPPLEMENTAL
MOTION TO COMPEL AND REQUEST FOR SACTIONSl
Pursuant to Texas Rule of Civil Procedure 215, Plaintiffs ﬁle this First Supplemental

Motion to Compel and Request for Sanctions (the “Supplement”). In support, Plaintiffs would

show:

I.
1. By this Supplement, Plaintiffs renew their request that the Court compel

Defendants to respond to written discovery that Plaintiffs served on or about March 23, 2022.

Now, eight months later—and more than ﬁve months after Plaintiffs ﬁled their ﬁrst Motion to

Compel (the “Motion”)—it is evident that Defendants have no intention of fulﬁlling their

obligations under the Texas Rules of Civil Procedure. Instead, it appears that Defendants intend

to stall discovery indeﬁnitely in an effort to withhold evidence that may prove detrimental to their

position. Indeed, Plaintiffs have now conducted two separate “records inspections” at Defendants’

ofﬁce during which Defendants refused to grant Plaintiffs access to basic ﬁnancial records that are

not only relevant (and discoverable) but to which Plaintiffs are entitled access as shareholders.

1
For convenience, all deﬁned terms used herein shall have the same meaning as set forth in Defendants’ Motion to
Compel that was ﬁled on June 21, 2022.

PLAINTIFFS’ FIRST SUPPLEMENTAL
MOTION TO COMPEL AND REQUEST FOR SACTIONS — Page 1
Simply put, Defendants’ continued dilatory tactics and abuse(s) of the discovery process have

forced Plaintiffs to incur unnecessary costs and fees.

2. Thus, Plaintiffs respectfully request that the Court: (l) compel Defendants to fully
respond to Plaintiffs’ written discovery and (2) impose discovery sanctions upon Defendants—

including (but not limited to) awarding Plaintiffs all fees and costs incurred to compel Defendants’

responses, as well as fees and costs incurred in connection with repeated visits to Defendants’

ofﬁce for “records inspections.”2

II.
3. Pursuant to Texas Rule of Civil Procedure 215, Courts are imbued with the express

authority to “make such orders in regard to the failure [to comply with proper discovery requests]

as are just,” including, but not limited to (i) designating facts as established, (ii) refusing to allow

the disobedient party to support or oppose designated claims or defenses, (iii) prohibiting

introduction of designated matters into evidence, (iv) striking pleadings or parts thereof, or (v)

dismissing, with or without prejudice, any part of the proceedings. Tex. R. Civ. P. 215.2(b).

Courts may also order the offending to pay the expenses caused by its failure to comply with the

discovery rules. Id. at 215.2(b)(8). Any of these sanctions can be ordered for refusing to respond

to discovery, even “without the necessity of ﬁrst having obtained a court order compelling such

discovery.” Id. at 215.1(b). Thus, a party seeking discovery can include a motion for sanctions in

its ﬁrst motion to compel discovery. In re Allied Chem. Corp, 227 S.W.3d 652, 665 (Tex. 2007).

4. Here, an award of sanctions is appropriate because Defendants have not only

refused to fulﬁl their discovery obligations, but also because they have caused Plaintiffs to incur

By this Supplement, Plaintiffs do not seek the imposition of sanctions against Defendants’ current or former counsel.
2

Instead, Plaintiffs seek the imposition of sanctions to remedy Defendants’ abuse(s) of the discovery process—despite
their counsels’ apparent urgings to the contrary.

PLAINTIFFS’ FIRST SUPPLEMENTAL
MOTION TO COMPEL AND REQUEST FOR SACTIONS — Page 2
repeated, unnecessary expenses associated with wasted Visits to Defendants’ ofﬁce for “records

inspections.”

III.
5. As noted in the Motion, Plaintiffs seek recompense for Defendants’ violations of

state and federal securities laws. Indeed, to induce Plaintiffs’ investment in WhamTech,

Defendants made a series of misrepresentations concerning its strength, Viability, and (even)

existence. On or about March 23, 2022, Plaintiffs served written discovery intended to ﬁirther

investigate their claims. In lieu of responding, however, Defendants asserted a series of

nonsensical objections that they alleged alleviated them of their obligations under the Texas Rules

of Civil Procedure. See Tex. R. Civ. P. 192.3 (a), (b). Plaintiffs sought to confer with Defendants

regarding their objections on several occasions to no avail. Thus, Plaintiffs were forced to ﬁle

their Motion on or about June 21, 2022, and Plaintiffs set their Motion for hearing on July 21,

2022—the ﬁrst available setting.

6. Even after ﬁling their Motion, Plaintiffs sought to resolve their discovery dispute

without judicial intervention. Indeed, Plaintiffs requested and hosted status conferences to discuss

potential resolutions on June 24 and July 15, 2022—once again to no avail. Indeed, it was not

until July 18—three days before the hearing on the Motion—that Defendants even entertained

potential resolutions to the parties’ lingering discovery dispute.3 At this time, Defendants

indicated that “[t]o attempt to resolve the pending discovery disputes, [Defendants] agree[] to a

site inspection.” In response to this proposal, Plaintiffs clariﬁed:

Based on our conversation, my understanding is that:

3
Based on the voluminous nature of the various communications between Plaintiffs and Defendants, as well as to
comply with the page and evidence limitations set forth in the Court’s General Order dated April 6, 2020, Plaintiffs
do not attach copies of each correspondence referenced in this supplement. However, copies of these correspondences
may be made available to the Court, promptly.

PLAINTIFFS’ FIRST SUPPLEMENTAL
MOTION TO COMPEL AND REQUEST FOR SACTIONS — Page 3
o “[S]ite inspection” means we can go to [Defendants’] ofﬁce and
inspect their books and records, and if we ask for something and
it’s there, we can look at it.
o We can designate doc[uments] to be copied.
o We can come back in the near future if this process can’t be
completed in one day.
o And this would not necessarily “resolve” all issues in dispute. It may, or
it may [not] reduce the issues that need to be resolved. We can’t know
the answer to that question until we see what is made available.

Please let me know if you can conﬁrm my understanding. If you see issues,
please let me know.

Defendants conﬁrmed—stating “Yes, you are describing what I have in mind”—and Plaintiffs

canceled the hearing on their Motion on July l9, 2022.

7. On July 29, 2022, Plaintiffs contacted Defendants to schedule the inspection. In

this correspondence, Plaintiffs noted:

We will be accompanied by an accountant. We’d like to know before we go if your
client would permit having an IT professional “ghost” hard drives so we can look
at information later. We’d agree to a conﬁdentiality agreement. If not, I
understand, but it would speed things up.

Let us know what dates work and we’ll ﬁnalize it.

Having received no response, Plaintiffs contacted Defendants once again on August 9, 2022. At

this time, Defendants responded and informed Plaintiffs that they were unwilling to allow the

inspection to proceed before August 30, 2022—more than a month after Plaintiffs canceled the

hearing on their Motion. Even so, the inspection proceeded on August 30, 2022 (the “First

Inspection”).

8. During the First Inspection, Plaintiffs learned more of Defendants’ wrongful acts

and misrepresentations. For example, Plaintiffs learned that Larry King, CPA—who WhamTech

time-and-again represented to investors (and the public at large) served as the “CFO, COO, and

CCO” of WhamTech from June of 2015 through present—was not involved in preparing,

PLAINTIFFS’ FIRST SUPPLEMENTAL
MOTION TO COMPEL AND REQUEST FOR SACTIONS — Page 4
reviewing, or approving any of WhamTech’s ﬁnancial records. Indeed, Mr. King noted that he

served in an “advisory capacity, only,” and these materials were instead maintained and prepared

by Eric Armstrong—the son of WhamTech’s CEO and founder, Mark Armstrong.

9. The familial relationship between WhamTech’s CEO and the individual

responsible for maintaining its books/records was never disclosed to investors. This relationship

is all the more concerning when viewed in conjunction with representations that Defendants made

to investors corning WhamTech’s ﬁnancial condition. Indeed, despite Defendants’ bullish

representations that WhamTech would realize an overall company valuation in excess of $867

million, WhamTech’s ﬁnancial records reveal that it has experienced a retained earnings deﬁcit of

(at least) $73,160,060.

10. While Plaintiffs learned more of Defendants’ malfeasance during the First

Inspection, it was ultimately unsuccessful. For example, despite Defendants’ representations to

the contrary, Plaintiffs were not permitted to inspect and/or review any records hosted on

WhamTech’s Sage accounting platform (the “Sage Platform”). Notably, this information was not

only requested and discoverable—as explained in further detail in the Motion—but WhamTech

was also required to disclose it to Plaintiffs as shareholders upon receipt of Plaintiffs’ pre-suit

demand for records inspection. See, e.g., Del. Code 8, § 220; Tex. Bus. Orgs. Code § 3.153. In

any regard, Plaintiffs were not permitted to review WhamTech’s accounting records during the

First Inspection. That said, Defendants indicated that Plaintiffs would be permitted to inspect these

materials, “soon.”

11. Thus, Plaintiffs contacted Defendants on September 2, 2022 to schedule a second

inspection (the “Second Inspection”). After failing to receive a response, Plaintiffs followed-up

on September 2, 4, and 6. On September 6, Defendants responded that access was forthcoming,

PLAINTIFFS’ FIRST SUPPLEMENTAL
MOTION TO COMPEL AND REQUEST FOR SACTIONS — Page 5
but delayed because “[Eric Annstrong wa]s dusting off an old computer to host [the inspection],

and he needs the assistance of their administrator, who is out this week.” Notably, this explanation

came from a self-proclaimed technology company that received (and spent) more than $54 million

from investors. Even so, Defendants represented that they would “proceed to get [the inspection]

in place as soon as [they were] able.”

12. Plaintiffs responded and requested clariﬁcation of the scope of the Second

Inspection on September 7, 2022:

Can you please conﬁrm the following at your earliest convenience:

o
The years of records that Bryan Finley will have access to, it is my
understanding we asked for 2013 to present.
- That Bryan will not have the ability to edit, add or delete records, but that
he will be able to View, run, print, save and download reports, journals, ledgers,
tables, etc. in full detail.

If you have any questions, or need clariﬁcation, let me know. Thanks

Defendants conﬁrmed that the Second Inspection would include records from 2013 through

present, as well as that Plaintiffs would be permitted to “run reports, do exports, etc.” However,

Defendants did not provide a proposed date on which the Second Inspection would proceed.

13. Thus, Plaintiffs contacted Defendants on September 14 and 20 to schedule the

Inspection. Finally, after Plaintiffs threatened to ﬁle a supplement to their Motion, Defendants

responded that they “heard back from Eric [Armstrong], who apologiz[ed], and sa[id] he hope[ed]

to get it set up tomorrow, but promise[d] to have it set up before the week is out.” After Defendants

failed to provide a date, however, Plaintiffs were forced to contact Defendants (again) on

September 27, 2022. At this time, Defendants indicated that “Eric reports that difﬁculties with his

vehicle have prevented him from going into the ofﬁce to set up the necessary computer

equipment.” Once again, this explanation was provided by a self-proclaimed technology company

PLAINTIFFS’ FIRST SUPPLEMENTAL
MOTION TO COMPEL AND REQUEST FOR SACTIONS — Page 6
that repeatedly represented to investors that it would realize an overall valuation in excess of $867

million.

14. After Plaintiffs expressed their frustration with Defendants’ response, counsel for

Defendants responded: “I have advised WhamTech that I cannot continue in this representation if

this matter continues unresolved beyond this week.” When asked for clariﬁcation, counsel for

Defendants indicated:

I merely wish to make clear that I have advised that my ﬁrm will not continue to
provide a defense in this case should this production fail to be made this
week. Hopeﬁilly, the production will be made. If not, we can coordinate on the
most appropriate procedure for a withdrawal.

Seven days later, Defendants informed Plaintiffs that the Second Inspection could proceed on

October 7, 2022.

16. During the Second Inspection, Plaintiffs learned even more of Defendants’

malfeasance. For example, Plaintiffs learned that WhamTech does not generate its ﬁnancial

reports (i.e., consolidated balance sheets, statements of income, etc.) from the Sage Platform—or

any accounting platform for that matter—as represented to investors. Instead, Eric Armstrong

creates WhamTech’s ﬁnancial reports in Excel spreadsheets that he meticulously crafted and

formatted to create the impression that the “reports” were generated from a legitimate accounting

platform.

l7. Even so, the Second Inspection failed to serve its intended purpose. Indeed, the

access Defendants granted to Plaintiffs was severely limited, and Defendants reﬁised to permit

Plaintiffs to View any underlying/audit trail information. This information is essential to determine

whether WhamTech is keeping contemporaneous accounting records—as opposed to creating

(false) records, retroactively. Based on the malfeasance discovered to date, these records are

PLAINTIFFS’ FIRST SUPPLEMENTAL
MOTION TO COMPEL AND REQUEST FOR SACTIONS — Page 7
certainly relevant and discoverable. However, Defendants steadfastly refused to grant Plaintiffs

access.

18. Worse still, Plaintiffs were not even permitted to review an “accurate” copy of

Defendants’ ﬁnancial records. To this point, Eric Armstrong informed Plaintiffs that Defendants

could not “vouch for the accuracy” of the records hosted on the Sage Platform before 2017. Mr.

Armstrong further noted that the only “conﬁrmed accurate” copy of these records was hosted in a

separate QuickBooks database. When asked, Mr. Armstrong conﬁrmed that this database was

readily accessible to Defendants (in their ofﬁce), but he (once again) steadfastly refused to grant

Plaintiffs access. This information was not only requested/discoverable—as explained in further

detail in the Motion—but it should have been provided to Plaintiffs when they submitted their pre-

suit demand to inspect WhamTech’s books and records as shareholders. See, e.g., Del. Code 8, §

220; Tex. Bus. Orgs. Code § 3.153.

19. In a ﬁnal effort to resolve this dispute, Plaintiffs once again held a conference with

Defendants—through counsel—in which each of the issues (and examples of malfeasance)

described in this Supplement were raised. Counsel for Defendants indicated that he would look

into Plaintiffs’ complaints and report back. In lieu of providing a substantive response, however,

Defendants informed Plaintiffs that their (prior counsel) would be Withdrawing.

20. Now, after months of trying to resolve this discovery dispute, it is abundantly clear

that Defendants have no intention of fulﬁlling their obligations under the Texas Rules of Civil

Procedure. Instead, it appears that Defendants intend to stall discovery indeﬁnitely in an effort to

withhold evidence that may prove detrimental to their position. Thus, Plaintiffs respectfully

request that the Court: (l) compel Defendants to fully respond to Plaintiffs’ written discovery and
(2) impose discovery sanctions upon Defendants—including (but not limited to) awarding

PLAINTIFFS’ FIRST SUPPLEMENTAL
MOTION TO COMPEL AND REQUEST FOR SACTIONS — Page 8
Plaintiffs all fees and costs incurred to compel Defendants’ responses, as well as fees and costs

incurred in connection with repeated Visits to Defendants’ ofﬁce for “records inspections.”

III
WHEREFORE, Plaintiffs reiterate their request that the Court enter an order: (1) granting
Plaintiffs’ Motion (in full); (2) imposing discovery sanctions upon Defendants—including (but not

limited to) awarding Plaintiffs all fees and costs incurred to compel Defendants’ responses, as well

as fees and costs incurred in connection with repeated visits to Defendants’ ofﬁce for “records

inspections”; and (3) awarding Plaintiffs such other and further relief as they may be entitled.

Respectfully submitted,

KESSLER & COLLINS, PC

By: /s/ Daniel P. Callahan
DANIEL P. CALLAHAN
State Bar No. 03648700
STEPHEN J. HUSCHKA
State Bar No. 24097861
dpc@kesslercollins.com
shuschka@kesslercollins.com

500 North Akard Street, Suite 3700
Dallas, Texas 75201
(214) 379-0722 - Ofﬁce
(214) 373-4714 - Fax

ATTORNEYS FOR PLAINTIFFS
GAMCO PROPERTIES, LLC;
GAMVEST, LP; AND LESA GANIBLE

PLAINTIFFS’ FIRST SUPPLEMENTAL
MOTION TO COMPEL AND REQUEST FOR SACTIONS — Page 9
CERTIFICATE OF SERVICE
I hereby certify that a true copy of the foregoing has been served on all counsel of record
via the E-File Texas electronic ﬁling system on this 16th day of November, 2022 in accordance
with the Texas Rules of Civil Procedure.

/s/ Stephen J. Huschka
STEPHEN J. HUSCHKA

CERTIFICATE OF CONFERENCE
I certify that counsel for movant and counsel for respondent have personally conducted a
conference at which there was a substantive discussion of every item presented to the Court in this
motion and despite best efforts the counsel have not been able to resolve those matters presented.

/s/ Stephen J. Huschka
STEPHEN J. HUSCHKA

PLAINTIFFS’ FIRST SUPPLEMENTAL
MOTION TO COMPEL AND REQUEST FOR SACTIONS — Page 10
Automated Certificate of eService
This automated certificate of service was created by the efiling system.
The filer served this document via email generated by the efiling system
on the date and to the persons listed below. The rules governing
certificates of service have not changed. Filers must still provide a
certificate of service that complies with all applicable rules.

Gaile Willard on behalf of Stephen Huschka
Bar No. 24097861
gld@kesslercollins.com
Envelope ID: 70214492
Status as of 11/16/2022 1:31 PM CST

Associated Case Party: WHAM TECH, INC.

Name BarNumber Email TimestampSubmitted Status
Dennis Roossien droossien@munsch.com 11/16/2022 8:46:53 AM SENT
Lisa Garrett lgarrett@munsch.com 11/16/2022 8:46:53 AM SENT
Sharon BLACKSTOCK sblackstock@munsch.com 11/16/2022 8:46:53 AM SENT
Mark G. Huffman mhuffman@munsch.com 11/16/2022 8:46:53 AM SENT
Francis B.Majorie fbmajorie@themajoriefirmc.om 11/16/2022 8:46:53 AM SENT

Case Contacts

Name BarNumber Email TimestampSubmitted Status
Daniel P. Callahan 3648700 dpc@kesslercollins.com 11/16/2022 8:46:53 AM SENT
Francine Ly fly@dallascourls.org 11/16/2022 8:46:53 AM SENT
Gaile Willard gwillard@kesslercollins.com 11/16/2022 8:46:53 AM SENT

Case Info

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TILLERY, DALE Track Judge’s New Case

Case No.

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Document Filed Date

November 16, 2022

Case Filing Date

September 21, 2021

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Motion,Ex Parte: GAMCO PROPERTIES, LLC, et al vs. WHAM TECH, INC., et al

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