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1 MarkE. Ellis-127159
Richard H. Hart, Jr. - 058793
2 Omid Shabani - 267447
ELLIS LAW GROUP, LLP
3 1425 River Park Drive, Suite 400
Sacramento, CA 95815 JUL 0 8 2022
4 Tel: (916) 283-8820
Fax: (916) 283-8821 By:
F MacQnnald
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Attomeys for Defendant Dr. James Longoria
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8 SUPERIOR COURT OF THE STATE OF CALIFORNIA
9 COUNTY OF SACRAMENTO
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11 CHARLES SOMERS, individually and as Case No.: 34-2018-00229212
trustee for the CHARLES SOMERS LIVING
12 TRUST, DEFENDANT DR. JAMES LONGORIA'S
COMPENDIUM OF EXHIBITS IN
13 Plaintiff, SUPPORT OF MOTION FOR SUMMARY
JUDGMENT, OR, ALTERNATIVELY,
14 V. SUMMARY ADJUDICATION
15 DR. JAMES LONGORIA, an individual and DATE September 22,2022
DOES 1-10, TIME 9:00 a.m.
16 DEPT 54
Defendant. RESERVATION NO: 2639525
17
18 Date Complaint Filed: March 16, 2018
19 Trial Elate: Trial set for October 24, 2022
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Defendant Dr. James Longoria hereby submits this Compendium of Exhibits in support of his
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Motion for Summary Judgment:
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Exh. No. Description
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Declaration of Mark E. Ellis in support of Defendant Longoria's Motion for
26 Summary Judgment/Adjudication
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DEFENDANT DR. JAMES LONGORIA'S COMPENDIUM OF EXHIBITS IN SUPPORT OF MOTION FOR
SUMMARY JUDGMENT, OR, ALTERNATIVELY, SUMMARY ADJUDICATION
AA
1 Exh. No. Description
2 2 Declaration of Dr. James Longoria in support of his Motion for Summary
Judgment/Adjudication
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3 Original Complaint in the matter of Somers v. Longoria, file endorsed on Mairch
4 16, 2018.
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4 Second Amended Complaint in Somers v. Longoria, filed endorsed on February
6 13,2019.
7 5 Excerpts from the Deposition of Dr. James Longoria taken on April 22,2022.
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6 Excerpts from the Deposition of Roy Chin taken on April 20, 2022.
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7 Excerpts from Volumes I and II of Ken Silva taken on July 7, 2021; and July 14,
10 2021, respectively.
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8 Excerpts from the Deposition of Charles Somers taken on December 17, 2021.
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13 9 Excerpts fi-om the Deposition of Clair Cordell taken on July 1, 2021.
14 10 Excerpts from the Deposition of Sonia Ahem taken on July 1, 2021.
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11 Organization Structure for LC Therapeutics, marked at the deposition of C.
16 Cordell taken on July 1, 2021 (Depo Exh. 1).
17 12 Excerpt from Depo Exh. 3 containing the February 8, 2017 email regarding a
draft Promissory Note,, marked at the deposition of C. Cordell taken on July 1,
18 2021.
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13 March 28, 2017 emailfiromMs. Cordell to Mr. Somers regarding revenue
20 projection. (Depo Exh. 7).
21 14 August 1, 2013 EmailfromChin to E. Satusky and James Longoria re:
investing in S Corp., marked at the deposition of Ken Silva taken on July 7,
22 2021; and July 14, 2021 (Depo Exh. 36).
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15 August 12, 2013 EmailfromK. Silva to Longoria re: S. Corp. Structure, marked
24 at the deposition of Ken Silva taken on July 7, 2021; and July 14, 2021 (Depo
Exh. 34).
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16 August 12, 2013 Email from Mr. Satusky to Mr. Chin regarding what is needed
26 to become a compliant S. Corp., marked at the deposition of Ken Silva. (Depo
Exh. 35).
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DEFENDANT DR. JAMES LONGORIA'S COMPENDIUM OF EXHIBITS IN SUPPORT OF MOTION FOR
SUMMARY JUDGMENT, OR, ALTERNATIVELY, SUMMARY ADJUDICATION
Id
1 Exh. No. Description
2 17 August 18, 2013 EmailfromChin to Silva re: Intrepid Medical - questions and
answers, marked at the deposition of Ken Silva. (Depo Exh. 37).
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18 April 17, 2017 LC Therapeutics Executive Summary, marked at the deposition
4 of C. Cordell taken on July 1, 2021 (Depo Exh. 19).
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19 January 30, 2015 $1,355,000 Promissory Note (unsigned), marked at the
6 deposition of Ken Silva taken on July 7, 2021; and July 14, 2021 (Depo Exh.
39).
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20 January 30, 2015 Common Stock Purchase Agreement (unsigned), marked at the
8 deposition of Ken Silva taken on July 7, 2021; and July 14, 2021 (Depo Exh.
40).
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10 21 January 30, 2015 Common Stock Purchase Agreement (executed) from
deposition of Ken Silva taken on July 7, 2021; and July 14, 2021 (Depo Exh.
11 41).
12 22 November 3, 2014 email from Chin to Somers and Longoria re: summary of
13 meetingfromdeposition of Ken Silva taken on July 7, 2021; and July 14, 2021
(Depo Exh. 42).
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23 Intrepid Medical, Inc.s Business Plan, dated September 25, 2013 from
15 deposifion of Roy Chin taken on April 20, 2022 (Depo Exh. 59).
16 24 Intrepid Medical, Inc.s Business Plan, dated October 1, 2013 from deposition of
17 Roy Chin taken on April 20, 2022 (Depo Exh. 57).
18 25 December 15, 2014 EmailfromLongoria to Silva re LC Therapeutic's operating
structure, capital and ownership,fromdeposition of Roy Chin taken on April 20,
19 2022 (Depo Exh. 63).
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26 January 30, 2015 Common Stock Purchase Agreement and Promissory Note-
21 flilly executed, marked at the deposition of Ken Silva (Depo Exh. 50).
22 27 March 29, 2013 EmailfromChin to Longoria re: LC Medical Corporate
Presentation PowerPoint, marked at the deposition of Dr. James Longoria taken
23 on April 22, 2022 (Depo Exh. 76).
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28 August 22, 2013 EmailfromChin to Longoria re Infrepid Medical/Somers
25 Living Trust, common stock purchase agreement, marked at the deposition of
Dr. James Longoria taken on April 22, 2022 (Depo Exh. 84).
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29 September 9,2013 unsigned Common Stock Purchase Agreement, marked at the
27 deposition of Dr. James Longoria taken on April 22, 2022 (Depo Exh. 85).
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DEFENDANT DR. JAMES LONGORIA'S COMPENDIUM OF EXHIBITS IN SUPPORT OF MOTION FOR
SUMMARY JUDGMENT, OR, ALTERNATIVELY, SUMMARY ADJUDICATION
1 Exh. No. Description
2 30 December 10,2014 email to J. LongoriafromC. Somers re Roy Chin's
Comments, marked at the deposition of C. Somers taken on December 17, 2021
3 (Depo Exh. 51).
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5 Dated: July 8, 2022
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Mark E. Ellis
8 Attomey for Defendant
Dr. JAMES LONGORIA
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DEFENDANT DR. JAMES LONGORIA'S COMPENDIUM OF EXHIBITS IN SUPPORT OF MOTION FOR
SUMMARY JUDGMENT, OR, ALTERNATIVELY, SUMMARY ADJUDICATION
"I;
EXHIBIT 1
1 MarkE. Ellis-127159
Richard H. Hart, Jr. - 058793
2 Omid Shabani - 267447
ELLIS LAW GROUP, LLP
3 1425 River Park Drive, Suite 400
Sacramento, CA 95815
4 Tel: (916) 283-8820
Fax:(916)283-8821
5
Attomeys for Defendant Dr. James Longoria
6
7
8 SUPERIOR COURT OF THE STATE OF CALIFORNIA
9 COUNTY OF SACRAMENTO
10
11 CHARLES SOMERS, individually and as Case No.: 34-2018-00229212
trustee for the CHARLES SOMERS LIVING
12 TRUST, DECLARATION OF MARK E. E L L I S IN
SUPPORT OF MOTION FOR SUMMARY
13 Plaintiff, JUDGMENT OR, ALTERNATIVELY,
SUMMARY ADJUDICATION
14
DATE: September 22,2022
15 DR. JAMES LONGORIA, an individual and TIME: 9:00 a.m.
DOES 1-10, DEPT: 54
16 RESERVATION NO: 2639525
Defendant.
17 Date Complaint Filed: March 16, 2018
Trial Date: Trial set for October 24, 2022
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19 I, Mark E. Ellis, declare as follows:
20 1. I am an attomey at law duly licensed to practice before this Court, and I am the Managing
21 Partner in the law firm of Ellis Law Group LLP, attomeys of records for DEFENDANT JAMES
22 LONGORIA in the above matter. This declaration is based upon my own personal knowledge. If called
23 as a witness to testify to the matters asserted herein I would do so competently. This Declaration is
24 attached to the Compendium of Exhibits ("Compendium") as Exhibit 1.
25 2. Attached to the Compendium as Exhibit 2 is a true and correct copy of the Declaration
26 of Dr. James Longoria in support of this motion.
27 3. Attached as Exhibit 3 to the Compendium is a true and correct copy of Mr. Somers'
28 original Complaint in the instant matter.
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DECLARATION OF MARK E. ELLIS IN SUPPORT OF MOTION FOR SUMMARY lUDGMENT OR, ALTERNATIVELY,
SUMMARY ADJUDICATION
1 4. A true and correct copy of the Second Amended Complaintfiledendorsed on February
2 13, 2019 is attached to the Compendium as Exhibit 4.
3 5. On April 22, 2022,1 personally attended and defended the deposition of my client. Dr.
4 James Longoria. Attached to the Compendium as Exhibit 5 Eire true and correct copies of excerpts from
5 Dr. Longoria's April 22, 2022 deposition.
6 6. On April 20, 2022, Mr. Wame took the deposition of Roy Chin. Attomey Richard Hart
7 and Omid Shabani from Ellis Law Group attended the deposition and our office received this certified
8 transcript of Mr. Chin's deposition. Attached to the Compendium as Exhibit 6 is a tme and correct copy
9 of excerpts from Mr. Chin's April 20, 2022 deposition.
10 7. The recorded and videotaped deposition of Ken Silva went forward in my offices on July
11 7, 2021, and it continued on July 14, 2021. I personally attended and examined Mr. Silva on both days.
12 Attached as Exhibit 7 are tme and correct excerpts from the depositionfranscriptsof the July 7, 2021
13 and July 14, 2021.
14 8. On December 17, 2021, I personally attended the videotaped deposition of Charles
15 Somers, and I examined Mr. Somers at his deposition. Attached to the Compendium as Exhibit 8 are
16 tme and correct excerpts from the deposition of Mr. Somers.
17 9. On July 1, 2021,1 personally attended the videotaped deposition of Claire Cordell, and I
18 examined Ms. Cordell at her deposition. Attached to this Compendium as Exhibit 9 are tme and correct
19 excerpts from the deposition of Ms. Cordell.
20 10. Also on July 1, 2021,1 personally attended the videotaped deposition of Sonya Ahem,
21 and I examined her at her deposition. Exhibit 10 to the Compendium are tme and correct copies of
22 excerpts from the July 1, 2021 deposition of Ms. Ahem
23 11. Attached to the Compendium as Exhibit 11 is a tme and correct copy of the
24 Organizational Stmcture of LC Therapeutics which was produced and marked at the July 1, 2021
25 deposition of Claire Cordell as Deposition Exhibit 1. Ms. Ahem admitted to creating this document.
26 12. Attached as Exhibit 12 to the Compendium is a tme and correct copy of an excerpt from
27 Deposition Exhibit 3 containing a Febmary 8, 2017 email from Ken Silva to Ms. Cordell regarding the
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DECLARATION OF MARK E. ELLIS IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, ALTERNATIVELY,
SUMMARY ADJUDICATION
1 draft Promissory Note, marked at the July 1,2021 deposition of Ms. Cordell which I personally attended.
2 Ms. Ahem laid the foundation and authenticated this document.
3 13. Attached to the Compendium as Exhibit 13 is a tme and correct copy of the March 28,
4 2017 email from Ms. Cordell to Mr. Somers regarding revenue projection, which was produced and
5 marked at Ms. Cordell's July 1, 2021 deposition as Deposition Exhibit 7.
6 14. Attached as Exhibit 14 to the Compendium is a tme and correct copy of the August 1,
7 2013 email from Mr. Toy Chin to E. Satusky, Esq. and James Longoria regarding investing in the S
8 Corp. This exhibit was produced at the deposition of Ken Silva as Deposition Exhibit 36.
9 15. Attached to the Compendium as Exhibit 15 is a tme and correct copy of the August 12,
10 2013 email from Mr. Chin to Dr. Longoria regarding the S Corp. stmcture of LCT. This exhibit was
11 produced, marked and authenticated at the deposition of Ken Silva as Deposition Exhibit 34.
12 16. Attached to the Compendium as Exhibit 16 is a tme and correct copy of the August 12,
13 2013 email from Mr. Satusky, Esq. to Mr. Chin regarding what was needed to become a compliant S
14 Corp. This exhibit was produced, marked and authenticated at the deposition of Ken Silva as Deposition
15 Exhibit 35.
16 17. Attached as Exhibit 17 to the Compendium is a tme and correct copy of the August 18,
17 2013 email from Mr. Chin to Mr. Silva regarding Infrepid Medical - questions and answers. This exhibit
18 was produced, marked and authenticated at the deposition of Ken Silva as Deposition Exhibit 37.
19 18. Attached £is Exhibit 18 to the Compendium is a tme and correct copy of the April 17,
20 2017 LC Therapeutics Executive Summary, which was marked and authenticated at the July 1, 2021
21 deposition of Claire Cordell as Deposition Exhibit 19.
22 19. Attached to the Compendium as Exhibit 19 is a tme and correct copy of the January 30,
23 2015 $1,355,000 Promissory Note (unsigned). This exhibit was produced, marked and authenticated at
24 the deposition of Ken Silva as Deposition Exhibit 39.
25 20. Attached to the Compendium as Exhibit 20 is a tme and correct copy of the January 30,
26 2015 Common Stock Purchase Agreement (unsigned), which was produced, marked and authenticated
27 at the deposition of Ken Silva as Deposition Exhibit 40.
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DECLARATION OF MARK E. ELLIS IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, ALTERNATIVELY,
SUMMARY ADJUDICATION
1 21. Attached as Exhibit 21 to the Compendium is a tme and correct copy of the executed
2 January 30, 2015 Common Stock Purchase Agreement, which was marked and authenticated at the
3 deposition of Ken Silva as Deposition Exhibit 41.
4 22. Attached as Exhibit 22 to the Compendium is a tme and correct copy of the November
5 3, 2014 email from Mr. Chin to Mr. Somers and Dr. Longoria regarding the summary of recent meeting.
6 This exhibit was marked and authenticated at the deposition of Ken Silva as Deposition Exhibit 42.
7 23. Attached to the Compendium as Exhibit 23 is a tme and correct copy of the September
8 25, 2013 Business Plan of Intrepid Medical, Inc., which was marked and authenticated at the April 20,
9 2022 deposition of Roy Chin as Deposition Exhibit 59.
10 24. Attached as Exhibit 24 to the Compendium is a tme and correct copy of Intrepid Medical,
11 Inc.'s Business Plan, dated October 1, 2013, which was marked and authenticated at the deposition of
12 Mr. Chin as Deposition Exhibit 57.
13 25. Attached as Exhibit 25 to the Compendium is a tme and correct copy of the December
14 15, 2014 email from Dr. Longoria to Mr. Silva and copied on Charles Somers regarding LC
15 Therapeutic's operating stmcture, capital and ownership, which was produced, marked and authenticated
16 at the deposition of Ken Silva as Deposition Exhibit 63.
17 26. Attached as Exhibit 26 to the Compendium is a tme and correct copy of the iaimaxy 30,
18 2015, fiilly executed, January 30, 2015 Common Stock Purchase Agreement and Promissory Note,
19 which was produced, marked and authenticated at the deposition of Ken Silva as Deposition Exhibit 50.
20 27. Attached to the Compendium as Exhibit 27 is a tme and correct copy of the March 29,
21 29, 2013 email from Mr. Chin to Dr. Longoria regarding the Infrepid Medical PowerPoint, which was
22 produced, marked and authenticated at the April 22, 2022 deposition of Dr. Longoria as Deposition
23 Exhibit 76.
24 28. Attached to the Compendium as Exhibit 28 is a tme and correct copy ofthe August 22,
25 2013 email from Mr. Chin to Dr. Longoria regarding Intrepid Medical/Somers Living Tmst Common
26 Stock Purchase Agreement, which was produced, marked and authenticated at the April 22, 2022
27 deposition of Dr. Longoria as Deposition Exhibit 84.
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DECLARATION OF MARK E. ELLIS IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, ALTERNATIVELY,
SUMMARY ADJUDICATION
1 29. Attached as Exhibit 29 to the Compendium is a tme and correct copy of the unsigned
2 Common Stock Purchase Agreement dated September 9, 2013. This exhibit was produced , marked and
3 authenticated at the April 22, 2022 deposition of Dr. Longoria as Deposition Exhibit 85.
4 30. Attached as Exhibit 30 to the Compendium is a tme and correct copy of the December
5 10, 2014 email to Dr. Longoria from Mr. Somers regarding the comments of Roy Chin, which was
6 marked and authenticated as Deposition Exhibit 51 at the deposition of Charles Somers.
7 I declare under penalty of perjury under the laws of the State of Califomia that the foregoing is
8 tme and correct and that this Declaration was. executed on t h j | # l ^ 8,2Q^of in S^ramento, Califoraia
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DECLARATION OF MARK E. ELLIS IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, ALTERNATIVELY,
SUMMARY ADJUDICATION
^ 41'
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EXHIBIT 2
1 MarkE. Ellis-127159
Richard H. Hart, Jr. - 058793
2 Omid Shabani - 267447
ELLIS LAW GROUP, LLP
3 1425 River Park Drive, Suite 400
Sacramento, CA 95815
4 Tel: (916) 283-8820
Fax: (916) 283-8821
5
Attomeys for Defendant Dr. James Longoria
6
7
8 SUPERIOR COURT OF THE STATE OF CALIFORNIA
9 COUNTY OF SACRAMENTO
10
11 CHARLES SOMERS, individually and as Case No.: 34-2018-00229212
trustee for the CHARLES SOMERS LIVING
12 TRUST, DECLARATION OF DR. JAMES
LONGORIA IN SUPPORT OF MOTION
13 Plaintiff, FOR SUMMARY JUDGMENT OR,
ALTERNATIVELY, SUMMARY
14 V. ADJUDICATION
15 DR. JAMES LONGORIA, an individual and DATE: September 22,2022
DOES 1-10, TIME: 9:00 a.m.
16 DEPT: 54
Defendant. RESERVATION NO: 2639525
17
18 Date Complaint Filed: March 16, 2018
19 Trial Date: Trial set for October 24, 2022
20
I, Dr. James Longoria, declare that:
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1. I am the Defendant named in the instant action, and I make this declaration in support
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of my Motion for Summary Judgment/Adjudication in this matter. My declaration is made under oath,
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subject to penalty of perjury according to Califomia law and of my own personal knowledge.
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2. I am a cardiothoracic surgeon.
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3. I met Charles Somers in 2003.
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4. Mr. Somers and I thereafter becamefiiends;wefrequentlyvisited, and our families
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socialized on a regular basis, including taking vacations together and the like.
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DECLARATION OF DR. JAMES LONGORIA IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR,
ALTERNATIVELY, SUMMARY ADJUDICATION
1 5. Through our interactions, I often spoke with Mr. Somers about my interests, and he
2 would talk with me about his interests. Through these discussions, I leamed he was a successful,
3 savvy, experienced and quite wealthy businessman. He owns companies and business enterprises (he
4 told me) throughout the United States, and he has interests in other companies. He told me he
5 employed over 10,000 individuals.
6 6. From time to time, during our conversations over the years, we discussed joining
7 together in business ventures but, for one reason or another, most of those ventures did not get off the
8 ground. At Mr. Somers suggestion/urging, I and some fellow doctors invested monies in one of Mr.
9 Somers' land development projects in Rancho Cordova, the so-called Montelena Douglas Project.
10 7. In 2007,1 had filed patents for a surgical method tofreatatrial fibrillation, and for a
11 surgical device tofreatmifral regurgitation. In the 2012-2013 time period, I became interested in
12 developing certain medical devices and surgical processes for sale in the medical equipment market
13 based upon those patents. I discussed my interest with Mr. Somers - as a friend only - with no interest
14 in, or intent of, him becoming an investor. He encouraged my ideas in this regard.
15 8. By early 2013,1 had met and teamed up with Roy Chin, an engineer who had
16 participated in several startup medical device companies which had been quite successful. Mr. Chin
17 and I agreed we would be 50/50 percent owners in a corporation we named Infrepid Medical, Inc.; we
18 founded the company iri April of 2013. I brought my medical expertise from years of performing heart
19 surgeries, my ideas and funds; and Mr. Chin brought his business, govemment (e.g. FDA) approval
20 expertise as to medical devices, and his capital raising experience. I contributed my ideas, the costs for
21 procuring patents on my ideas, as well as I put in much time and effort, despite continuing with my
22 busy surgical practice. It was not unusual, between my practice and the company, for me to work 15,
23 18 or more additional hours per day.
24 9. Having little to no experience in a startup medical company, and based on Mr. Chin's
25 years of experience, I left it to Mr. Chin to prepare estimated projections andfinancialbenchmarks
26 based on assumptions that the medical devices would successfully finish testing and obtain approval.
27 Unfortunately, as with many, if not most, startups, we were unable to obtain the approval we needed to
28 take the devices to market.
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DECLARATION OF DR. JAMES LONGORIA IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR,
ALTERNATIVELY, SUMMARY ADJUDICATION
1 10. In any event, in the late spring or early summer of 2013, Mr. Chin was beginning to
2 look for investors. I mentioned this to Mr. Somers, who had expressed interest in how the project was
3 going. I explained our status, and he indicated to me that he would be interested in investing. I did not
4 solicit Mr. Somers to invest in Intrepid; he volunteered.
5 11. At some point in the summer of 2013, Mr. Somers indicated he would invest - although
6 how much he would invest was not decided. He indicated, however that he wanted the CFO (Ken
7 Silva) of one of his companies (SBM) to review the business plan, and he wanted Silva to speak with
8 Roy Chin.
9 12. In August of 2013, Mr. Chin and I visited Mr. Somers and his CFO, Ken Silva, in
10 Somers' SBM office at McClellan Office Park.
11 13. Mr. Chin, to quote Mr. Somers, "did the entire presentation." (See Exhibit 8, the
12 deposition of Charles Somers at p. 69:5.) Mr. Chin used a PowerPoint presentation that mostly
13 described the devices, the need for such devices, the possible target market and similar information.
14 Projected eamings and such information was not provided by Mr. Chin in any detail, or at all, at that
15 time. Chin's presentation lasted approximately 45 minutes to an hour.
16 14. Mr. Somers did not ask any questions to my recollection. I now understand from
17 attending Mr. Somers deposition that he had already decided to invest the sum of $2,000,000 into the
18 startup, even before the presentation was given. (Exhibit 8, Somers Depo., at p. 62:12-20).
19 15. Mr. Silva and Mr. Chin communicated over the next few days andfinancialinformation
20 was exchanged. I did not participate in this exchange.
21 16. Ultimately, Mr. Somers informed me that his Tmst would be investing $2,000,000 into
22 the company in retum for a 20% equity stake, and by which Mr. Chin and I each gave up 10% of our
23 previous 50% interests.
24 17. Mr. Somers' Tmst made two payments of $ 1,000,000 each in the fall of 2013. These
25 payments were investments in the company in retum for an equity interest (stock shares), not loans.
26 Mr. Somers and Mr. Silva valued the startup company at thattimeat $10,000,000. I had no basis to
27 disagree. Mr. Somers' $2,000,000 investment reflected 20% of WHAT Somers stated was the
28 company's projected value.
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DECLARATION OF DR. JAMES LONGORIA IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR,
ALTERNATIVELY, SUMMARY ADJUDICATION
1 18. At the time Mr. Somers agreed to invest funds, I had no expectation that he would
2 participate in management of the company. He did not express he had such an expectation either; he
3 seemed satisfied being a 20% shareholder, passive investor.
4 19. Subsequently, the name Infrepid was changed to LC Therapeutics, or LCT. LCT was
5 set up as a subchapter S corporation. I had no personal preference as to how the entity was formed.,
6 At the time, Mr. Somers did not object to it being formed as a subchapter S corporation.
7 20. Thereafter, Mr. Chin ran the day-to-day operations. He hired individuals he had
8 previously worked with in earlier medical device startups. These individuals were paid salaries, plus
9 given options to purchase stock in the future; if the company was successful, they would share in the
10 success. Chin explained to me that this was a standard practice in the Silicon Valley, and it was used
11 to incentivize employees. I certainly heid no disagreement with Mr. Chin's reasoning and judgment on
12 this issue.
13 21. Over the next year, the company made some progress, but there were also setbacks. I
14 was working diligently to make the company a success. It was like I had two fiill-time jobs. However,
15 I know now that Mr. Silva and Mr. Somers believed the startup was - to use Mr. Silva's term -
16 "failing" in that it was not meeting the projections and mileposts they believed it should have met.
17 22. Mr. Somers had two meetings with Mr. Chin in the fall of 2014. I was present for a
18 meeting in Concord, but not at the second meeting in Vacaville, which was set up per Mr. Somers'
19 request. Some of what was discussed at the second meeting was relayed to me by both Mr. Somers
20 and Mr. Chin. The upshot was that shortly before Thanksgiving 2014, Mr. Chin sent me his
21 resignation by email.
22 23. The issue at that point was whether the startup efforts could or should continue. We
23 had expended about $1.2 million of the money invested by Mr. Somers. Mr. Somers and I spent the
24 Thanksgiving holiday together, and we discussed how we saw the company's future. Ultimately, it
25 was decided - primarily driven by Mr. Somers - to continue the company with Somers and I as 50/50
26 percent owners/shareholders. Upon obtaining a 50% equity interest in LCT, Mr. Somers would invest
27 more capital; I agreed. We did not discuss or agree at that time as to what form further fimds would be
28 invested. I was not necessarily opposed to loans from Mr. Somers. I was, however quite clear that I
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DECLARATION OF DR. JAMES LONGORIA IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR,
ALTERNATIVELY, SUMMARY ADJUDICATION
1 would not give up confrol ofthe company, but that I was willing to share it. No decisions were made
2 about Somers being an officer or director. We agreed upon the "first in-first out" concept. When LCT
3 made a profit, Mr. Somers and I would be paid back fully first.
4 24. By December 6, 2014, Mr. Chin's resignation was confirmed, and it was formalized by
5 a corporate resolution recommended by lawyers so that the company could continue to do business.
6 Mr. Somers was sent the executed resolution in a December 15, 2014 email. (See Exhibit 4, SAC , T|
7 37, p. 13:23-28 He never protested.
8 25. On January 30, 2015, Somers formalized his investment of another $1,355 million into
9 LCT through a Stock Purchase Agreement, and, in retum, he was given another 30% equity
10 shareholder interest in the company, making him a 50% shareholder.
11 26. Mr. Somers never stated to me at that time, or ever, that he desired to be anything but a
12 shareholder in the company. I do not recall him ever requesting to be made an officer or director of the
13 company until perhaps 2018.
14 27. At this time, I did feel bad about the Tmst of my friend investing money into a company
15 that Mr. Somers believed was failing, £ind I told him so in an email dated December 9, 2014.
16 (Defendant's MSJ Exhibit 30, Deposition Exhibit 50.) On December 10, 2014, Mr. Somers wrote me
17 back and said: "Hi, Jimmy. A few more thoughts. To be direct, you owe me nothing. I always know
18 the risk and this will be worth it. I appreciate your concem and value your integrity and friendship.
19 This will all work out."
20 28. Thereafter, Mr. Somers and I , in my opinion, actually worked together fairly well. We
21 would meet on a regular basis to make decisions on behzilf of the company. We did not always agree
22 on what to do, but for most of 2015 and 2016, we were able to work together.
23 29. By early 2017, however, tension began to build. Both Somers and I understood that in
24 order to develop the products, we needed additional capital. I wanted to go and raise money from third
25 parties (as Mr. Chin had also desired), but Somers did not want to do this. He desired to invest more
26 money, but, in retum, he wanted a greater equity stake. I infonned him, as I had consistently informed
27 him, that I would not give up confrol of LCT, but I would continue to share it, and even at that, he
28 could have more equity so long as I maintained control. I advised him it was entirely up to him
DECLARATION OF DR. JAMES LONGORIA IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR,
ALTERNATIVELY, SUMMARY ADJUDICATION
1 whether he wanted to invest more money, but I would not lose control of LCT to him. I informed him
2 we could continue to work together as we had in the prior two years, during which I in fact left most of
3 the business decisions to him, even if I did not always agree with them.
4 30. Likewise, I was not categorically opposed to him making a new cash infusion in the
5 form of a loan to LCT, but the loan documents presented to me in 2017 possessed unacceptable terms
6 which I thought were unfair, and I did not feel I could sign them on behalf of the company.
7 31. The oral understanding we had reached during Thanksgiving of 2014 was that no matter
8 how much new money was invested, the consideration was first in - first out, once LCT started making
9 money as we both expected. LCT never made a profit.
10 32. By 2017, our relationship had deteriorated to such an extent that we could no longer
11 work together.
12 33. I did not breach any promise I ever made to Mr. Somers; I did not breach any duty -
13 fiduciary or otherwise - that I may have owed to him. I never forced, wheedled or cajoled him into
14 investing money; that was his own informed and knowledgeable choice and risk tolerance, which he,
15 himself, has admitted/acknowledged. (Exhibit 8, Somers Depo., at pp. 64, 96, 97, 99 and 100.) I have
16 never intended to deceive him, nor have I deceived Mr. Somers in any way. I never signed any
17 agreement where I personally agreed to pay back Mr. Somers, nor did I orally make such a promise or
18 representation. No written agreement has ever existed to that effect.
19 34. This lawsuit arises because the products at that stage did not work safely and were not
20 approved. This is a risk that startup entrepreneurs face every day. Mr. Somers lost money; I lost
21 money - that's life. I have heard Mr. Somers has vowed to "desfroy" me and to "bankmpt" me. I
22 cannot understand for the life of me why he would want to do so.
23 1 declare under the penalty of perjury under the laws ofthe State of California that the
24 foregoing is true and correct, and that this declaration was executed in D aiOv/0W Califomia,
25 on July l i , 2022.
26
27
J A M : S X 0 N G 0 R I A , M.D.
28
6-
DECLARATION OF DR. JAMES LONGORIA IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR,
ALTERNATIVELY, SUMMARY ADJUDICATION
EXHIBIT 3
n
1 DOWNEY BRAND LLP FILED
WILLIAM R.WARNE (Bar No. 141280) Suparildr Caurt Of Califmii
2 ANNIE S. AMARAL (Bar No. 238189) Sacr«imento
621 C^tol Mali, I8th Floor
3 Sacramento, CA 95814-4731
Telephone; 916.444.1000
4 Facsimile: 916,444.2100 , Deput
bwame@downeybrand.com Casa Nurnbar:
5 aamaral@downeybfand.com
34-2,01
6 Attomeys fbr Plaintiflf
CHARLES SOMERS, individuaJly and as tmstee for the
7 CHARLES SOMERS LIVING TRUST,
8 SUPERIOR COURT OF CALIFORNIA
9 COUNTY OF SACRAMENTO
10
11 CHARLES SOMERS, individually and as CASE NO.
tmstee for the CHARLES SOMERS
12 LIVING TRUST, PLAINTIFF CHARLES SOMERS'S
CXJMPLAINT FOR DAMAGES .
13 Plaintifr,
14 v.
03 15 DR. JAMBS LONGORL\, an individual,
and DOES !-10,
16
Defendants.
O 17
a
18 Plaintiff CHARLES SOMERS, individually and as trustee for the CHARLES SOMERS
19 LIVING TRUST ("Somers" or "PlaintifP'), by and thiou^ his attorneys of reconl, hereby alleges
20 as follows:
21 PARTIES
22 1. Plaintiff Charles Somers ("Somers" or 'TlainttliP') is, aod at all relevant times
23 hesrein was, an individual doing business in Sara^ento County, California. Somers is the
24 i trusteefortiie Charles Som«ra Living Trust
25 f 2. Defendant James Longoria, M.D. ("Dr. Longoria" or "Defendant") is, and at
26 i all times relevant herein was, an Individual residing in Sacramento County,. Califomia.
27 I 3. PlaintifiT is ignorant of the tme names and capacities, wbetiusr individual,
28 I qorpoiation, assodation, or otherwise, of fhe defendants, and ea(^
1
COMPLAINT
1 1 through 10, inclusive, and therefore sues these defendants, and each of them, under such
2 fictitious names. Plaintiffis informed and believes, and accordingly alleges, that these fictitiously
3 named defendants, and each of them, intentionally, negligently, or otherwise wrongfully
4 performed each of the acts and omissions alleged herein, and thereby legally caused the damages
5 directly or proximately to Plaintiff as alleged herein.
6 4. At all times relevant to this action, each Defendant was the agent, servant,
7 employee, partner, member, joint venture or surety ofthe other Defendants and was acting within
8 the scope of said agency, employment, partnership, venture or suretyship with the knowledge and
9 consent or ratification of each of the other Defendants.
10 JURISDICTION ANP VENUE
n 5. The Court has subject matta* jurisdiction over this action and personal jurisdiction
12 over each of the Defentlants.
PL.
13 6. Venue is proper in this Court pursuant to Calitbmia Code of Civil Procedure
o
14 section 395, because Dr. Longoria resides in Sacramento County.
I
PQ
15 FACTUAL BACKGROUND
16 A. Backaround on the Relationship Between Mr. Somers and Dir. Longoria
O 17 7. Charles Somers is the founder and president of Somers Building Maintenance
Q
18 (SBM), a successful building maintenance services company that operates nationally and
19 internationally. Dr. Longoria is an accomplished cardiothoracic surgeon who practices in
20 Sacramento. Dr. Longoria and Somers first met in approximately 2005, when Somers was told
21 that Dr. Longoria would be a good person to talk with to obtain a referral for a medical issue
22 confronting Somers's mother.
23 8. Thereafter, Somers and Dr. Longoria became friends, and Somers suggested and
24 began assisting Dr. Longoria with exploring the possibility of opening a doctor-owned hospital in
25 the Sacramento area. Ultimately, to fiirther assist with this effort, Somers purchased land in
26 Rancho Cordova known as "Montelena," and allowed Dr. Longoria and his private hospital
27 partners to purchase a minority interest in this same property. After Somers and Dr. Longoria
28 invested a significant amount of time and energy (and Somers a lot of money) into creating a
COMPLAINT
1 privately owned doctor's hospital, their dream came to an end with the Affordable Care Act's
2 passage in 2010, which made the creation of additional physician-owned hospitals illegal.
3 B. Dr, Longoria Induces Somers to Invest in His Medical Device Company In
Exchaihge for a Non-Controlling Ownership Interest
4
5 9, At some point in their relationship, Dr. Longoria infonned Somers that he was
6 involved with patenting certain medical devices and surgery processes. Dr. Longoria touted his
7 schooling and reputation as a heart surgeon and told Somers that these devices would
8 revolutionize a number of common heart surgeries. Dr. Longoria initially told Somers that he had
9 filed for a patent on something called the L Chord, a synthetic cord used for performing what he
10 claimed would be revolutionary mitral valve prolapse repair. Later, he discussed that he had
11 obtained a patent on an RF ablation device which, among other things, would provide a better
12 means of addressing atrialfibrillations.Dr. Longoria further explained that he was one of two
13 board members and a 50% shareholder in a company known as Intrepid Medical, a business he
c 14 co-founded with his partner Roy Chin in or about April of 2013, and that their company was the
<
« 15 owner of these patents. Dr. Longoria told Somers that Intrepid Medical would seize market share
16 and that the patented L Chord and ablation device were central to that effort.
o 17 10. Dr. Longoria also introduced Somers to his "business partner" Roy Chin, who had
18 prior experience as the CEO and founder of SpineView, a medical device company focused on
19 spinal surgeries. Dr. Longoria and Mr. Chin, who were at the time the sole shareholdars, officers,
20 and board members of Intrepid Medical, explained that Mr. Chin brought business experience to
21 the company and that Dr. Longoria brought medical expertise. Both Dr. Longoria and Mr. Chin
22 told Somers that their new company was looking for "start-up" funding.
23 11. In or aboxit July or August of 2013, Mr. Chin and Dr. Longoria came to SBM to
24 pitch Somers on investing in the company. They discussed Intrepid's business plan, including the
25 steps they would take to obtain Food and Drug Administration (FDA) approval to bring Intrepid's
26 patented devices to market and their plans to operate production facilities in Malaysia. They
27 further represented that Intrepid would be profitable by 2015.
28 12. During tliis pitch and others, Mr. Chin and Dr. Longoria conveyed to Somers and
COMPLAINT
1 to his CFO Ken Silva that they had the experience and ability to make Intrepid a success. As
2 Intrepid's President, Mr. Chin explained that he had a background of success infinancingand
3 growing a medical device company. As its Chainnan, Dr. Longoria said he possessed the
4 surgical expertise to be the "face" of Intrepid and that he would be fully conmiitted to developing
5 and marketing its products and that he was committed to putting in whatever time was necessary
6 to make Intrepid a complete success. They repeated to Somers and his CFO Silva that the
7 company would be profitable in two years. In the context of these representations, they indicated
8 that they needed $2 million to get started, and that they would raise additional funds thereafter by
9 selling equity in the company.
10 13. Thereafter, on August 15,2013, Mr. Chin sent Mr. Silva a follow-up financial
11 spreadsheet, which, among other things, set forth Intrepid's proposed budget, created a critical
12 path timeline for the company's next steps, aod broke down thefinancialmetrics a."3sociated with
1—1
13 both the mitral valve market and the atrial fibrillation market. It again reiterated that Intrepid
I
fO
J4
15
would be profitable hy 2015.
14. Somers considered the request for funding. He was impressed witli Mr. Chin's
>^
w 16 back^ound and was interested in being a part of revolutionizing certain heart surgeries. He also
z
o 17 wanted to help Dr, Longoria and trusted his promise to fully commit his expertise, time, and
o
18 energy into making Intrepid a success. They all acknowledged, however, that without start-up
19 flmding the company would have little if any value and no chance of success.
20 15. Somers initially preferred to loan money to the company on conventional terms,
21 1 which would include repayment according to a specified schedule with interest, memorialized in
22 a promissory note. Dr. Longoria resisted this structure, arguing the better stmcture was fbr
23 Somers to become a shareholder in the company. He assured Somers that Intiepid's medical
24 devices would be approved by the FDA, proceed to market quickly, and rapidly become the
25 standard of care. If and when the company needed additional funding, Dr. Longoria told Somers
26 that Intrepid would allow him to take advantage of the same structure so that he could purchase
27 additional equity in the company, to whatever extent he was interiested. Indeed, Intrepid's
28 August 15, 2013, projections indicated that Intrepid plaimed to raise additional capital in 2014
4
COMPLAfNT
1 and 2015 by selling equity. When Somers raised concems about company's status as an "S"
2 corporation and the resulting tax implications to him. Dr. Longoria promised that he would
3 convert Intrepid Medical lo a limited liability company.
4 16. In another effort to induce Somers to commit to making thisfinancialinvestment,
5 Dr. Longoria assured Somers that, in the unlikely event that the medical company was not
6 successfiil, he would personally reimburse Somers through the profits Dr. Longoria anticipated
7 receiving from the minority interest Somers had created for him in the Montelena real estate
8 investment, which was being held as an investment for sale to future residential developers.
9 17. Mr. Chin and Dr. Longoria's various representations to Somers were eventually
10 successfiil. In the fail of 2013, and in reliance on tiieir representations, Somers agreed to provide
11 the company with start-up capital in the amount of S2 million, the first miUion of which Somers
12 invested on September 3, 2013, and the second million of which Somers invested on
13 November 29, 2013. Under a "Common Stock Purchase Agreement," dated September 12, 2013,
c
14 Somers received a total of 1,562,500 shares in two equal closings, at the price of $1.28 per share.
<
15 Before Somers made this commitment. Dr. Longoria and Mr. Chin several riiondis earlier had
16 both received 3,000,000 shares in exchange for their individual payments of $300 each, at a per
o 17 share price of $0.00001. Approximately one month after Somers made this initial investment,
D
18 Intrepid Medical's name was changed to LC Therapeutics, Inc. Dr. Longoria and Chin also
19 valued their now funded company at $ 10,000,000.
20 c. LC Therapeutics Fails to Live Up to Its Business Plan.
21 18. As the months passed, Somers could see that the company was falling behind.
22 According to the business plans provided to Somers at the time he was investing, LC was
23 supposed to become incorporated in Malaysia in the third quarter of 2013, and submit its f
Preview
1 MarkE. Ellis-127159 Richard H. Hart, Jr. - 058793 2 Omid Shabani - 267447 ELLIS LAW GROUP, LLP 3 1425 River Park Drive, Suite 400 Sacramento, CA 95815 JUL 0 8 2022 4 Tel: (916) 283-8820 Fax: (916) 283-8821 By: F MacQnnald 5 Attomeys for Defendant Dr. James Longoria 6 7 8 SUPERIOR COURT OF THE STATE OF CALIFORNIA 9 COUNTY OF SACRAMENTO 10 11 CHARLES SOMERS, individually and as Case No.: 34-2018-00229212 trustee for the CHARLES SOMERS LIVING 12 TRUST, DEFENDANT DR. JAMES LONGORIA'S COMPENDIUM OF EXHIBITS IN 13 Plaintiff, SUPPORT OF MOTION FOR SUMMARY JUDGMENT, OR, ALTERNATIVELY, 14 V. SUMMARY ADJUDICATION 15 DR. JAMES LONGORIA, an individual and DATE September 22,2022 DOES 1-10, TIME 9:00 a.m. 16 DEPT 54 Defendant. RESERVATION NO: 2639525 17 18 Date Complaint Filed: March 16, 2018 19 Trial Elate: Trial set for October 24, 2022 20 21 Defendant Dr. James Longoria hereby submits this Compendium of Exhibits in support of his 22 Motion for Summary Judgment: 23 24 Exh. No. Description 25 Declaration of Mark E. Ellis in support of Defendant Longoria's Motion for 26 Summary Judgment/Adjudication 27 28 1- DEFENDANT DR. JAMES LONGORIA'S COMPENDIUM OF EXHIBITS IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT, OR, ALTERNATIVELY, SUMMARY ADJUDICATION AA 1 Exh. No. Description 2 2 Declaration of Dr. James Longoria in support of his Motion for Summary Judgment/Adjudication 3 3 Original Complaint in the matter of Somers v. Longoria, file endorsed on Mairch 4 16, 2018. 5 4 Second Amended Complaint in Somers v. Longoria, filed endorsed on February 6 13,2019. 7 5 Excerpts from the Deposition of Dr. James Longoria taken on April 22,2022. 8 6 Excerpts from the Deposition of Roy Chin taken on April 20, 2022. 9 7 Excerpts from Volumes I and II of Ken Silva taken on July 7, 2021; and July 14, 10 2021, respectively. 11 8 Excerpts from the Deposition of Charles Somers taken on December 17, 2021. 12 13 9 Excerpts fi-om the Deposition of Clair Cordell taken on July 1, 2021. 14 10 Excerpts from the Deposition of Sonia Ahem taken on July 1, 2021. 15 11 Organization Structure for LC Therapeutics, marked at the deposition of C. 16 Cordell taken on July 1, 2021 (Depo Exh. 1). 17 12 Excerpt from Depo Exh. 3 containing the February 8, 2017 email regarding a draft Promissory Note,, marked at the deposition of C. Cordell taken on July 1, 18 2021. 19 13 March 28, 2017 emailfiromMs. Cordell to Mr. Somers regarding revenue 20 projection. (Depo Exh. 7). 21 14 August 1, 2013 EmailfromChin to E. Satusky and James Longoria re: investing in S Corp., marked at the deposition of Ken Silva taken on July 7, 22 2021; and July 14, 2021 (Depo Exh. 36). 23 15 August 12, 2013 EmailfromK. Silva to Longoria re: S. Corp. Structure, marked 24 at the deposition of Ken Silva taken on July 7, 2021; and July 14, 2021 (Depo Exh. 34). 25 16 August 12, 2013 Email from Mr. Satusky to Mr. Chin regarding what is needed 26 to become a compliant S. Corp., marked at the deposition of Ken Silva. (Depo Exh. 35). 27 28 -2- DEFENDANT DR. JAMES LONGORIA'S COMPENDIUM OF EXHIBITS IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT, OR, ALTERNATIVELY, SUMMARY ADJUDICATION Id 1 Exh. No. Description 2 17 August 18, 2013 EmailfromChin to Silva re: Intrepid Medical - questions and answers, marked at the deposition of Ken Silva. (Depo Exh. 37). 3 18 April 17, 2017 LC Therapeutics Executive Summary, marked at the deposition 4 of C. Cordell taken on July 1, 2021 (Depo Exh. 19). 5 19 January 30, 2015 $1,355,000 Promissory Note (unsigned), marked at the 6 deposition of Ken Silva taken on July 7, 2021; and July 14, 2021 (Depo Exh. 39). 7 20 January 30, 2015 Common Stock Purchase Agreement (unsigned), marked at the 8 deposition of Ken Silva taken on July 7, 2021; and July 14, 2021 (Depo Exh. 40). 9 10 21 January 30, 2015 Common Stock Purchase Agreement (executed) from deposition of Ken Silva taken on July 7, 2021; and July 14, 2021 (Depo Exh. 11 41). 12 22 November 3, 2014 email from Chin to Somers and Longoria re: summary of 13 meetingfromdeposition of Ken Silva taken on July 7, 2021; and July 14, 2021 (Depo Exh. 42). 14 23 Intrepid Medical, Inc.s Business Plan, dated September 25, 2013 from 15 deposifion of Roy Chin taken on April 20, 2022 (Depo Exh. 59). 16 24 Intrepid Medical, Inc.s Business Plan, dated October 1, 2013 from deposition of 17 Roy Chin taken on April 20, 2022 (Depo Exh. 57). 18 25 December 15, 2014 EmailfromLongoria to Silva re LC Therapeutic's operating structure, capital and ownership,fromdeposition of Roy Chin taken on April 20, 19 2022 (Depo Exh. 63). 20 26 January 30, 2015 Common Stock Purchase Agreement and Promissory Note- 21 flilly executed, marked at the deposition of Ken Silva (Depo Exh. 50). 22 27 March 29, 2013 EmailfromChin to Longoria re: LC Medical Corporate Presentation PowerPoint, marked at the deposition of Dr. James Longoria taken 23 on April 22, 2022 (Depo Exh. 76). 24 28 August 22, 2013 EmailfromChin to Longoria re Infrepid Medical/Somers 25 Living Trust, common stock purchase agreement, marked at the deposition of Dr. James Longoria taken on April 22, 2022 (Depo Exh. 84). 26 29 September 9,2013 unsigned Common Stock Purchase Agreement, marked at the 27 deposition of Dr. James Longoria taken on April 22, 2022 (Depo Exh. 85). 28 -3- DEFENDANT DR. JAMES LONGORIA'S COMPENDIUM OF EXHIBITS IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT, OR, ALTERNATIVELY, SUMMARY ADJUDICATION 1 Exh. No. Description 2 30 December 10,2014 email to J. LongoriafromC. Somers re Roy Chin's Comments, marked at the deposition of C. Somers taken on December 17, 2021 3 (Depo Exh. 51). 4 5 Dated: July 8, 2022 6 7 Mark E. Ellis 8 Attomey for Defendant Dr. JAMES LONGORIA 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -4- DEFENDANT DR. JAMES LONGORIA'S COMPENDIUM OF EXHIBITS IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT, OR, ALTERNATIVELY, SUMMARY ADJUDICATION "I; EXHIBIT 1 1 MarkE. Ellis-127159 Richard H. Hart, Jr. - 058793 2 Omid Shabani - 267447 ELLIS LAW GROUP, LLP 3 1425 River Park Drive, Suite 400 Sacramento, CA 95815 4 Tel: (916) 283-8820 Fax:(916)283-8821 5 Attomeys for Defendant Dr. James Longoria 6 7 8 SUPERIOR COURT OF THE STATE OF CALIFORNIA 9 COUNTY OF SACRAMENTO 10 11 CHARLES SOMERS, individually and as Case No.: 34-2018-00229212 trustee for the CHARLES SOMERS LIVING 12 TRUST, DECLARATION OF MARK E. E L L I S IN SUPPORT OF MOTION FOR SUMMARY 13 Plaintiff, JUDGMENT OR, ALTERNATIVELY, SUMMARY ADJUDICATION 14 DATE: September 22,2022 15 DR. JAMES LONGORIA, an individual and TIME: 9:00 a.m. DOES 1-10, DEPT: 54 16 RESERVATION NO: 2639525 Defendant. 17 Date Complaint Filed: March 16, 2018 Trial Date: Trial set for October 24, 2022 18 19 I, Mark E. Ellis, declare as follows: 20 1. I am an attomey at law duly licensed to practice before this Court, and I am the Managing 21 Partner in the law firm of Ellis Law Group LLP, attomeys of records for DEFENDANT JAMES 22 LONGORIA in the above matter. This declaration is based upon my own personal knowledge. If called 23 as a witness to testify to the matters asserted herein I would do so competently. This Declaration is 24 attached to the Compendium of Exhibits ("Compendium") as Exhibit 1. 25 2. Attached to the Compendium as Exhibit 2 is a true and correct copy of the Declaration 26 of Dr. James Longoria in support of this motion. 27 3. Attached as Exhibit 3 to the Compendium is a true and correct copy of Mr. Somers' 28 original Complaint in the instant matter. -1 - DECLARATION OF MARK E. ELLIS IN SUPPORT OF MOTION FOR SUMMARY lUDGMENT OR, ALTERNATIVELY, SUMMARY ADJUDICATION 1 4. A true and correct copy of the Second Amended Complaintfiledendorsed on February 2 13, 2019 is attached to the Compendium as Exhibit 4. 3 5. On April 22, 2022,1 personally attended and defended the deposition of my client. Dr. 4 James Longoria. Attached to the Compendium as Exhibit 5 Eire true and correct copies of excerpts from 5 Dr. Longoria's April 22, 2022 deposition. 6 6. On April 20, 2022, Mr. Wame took the deposition of Roy Chin. Attomey Richard Hart 7 and Omid Shabani from Ellis Law Group attended the deposition and our office received this certified 8 transcript of Mr. Chin's deposition. Attached to the Compendium as Exhibit 6 is a tme and correct copy 9 of excerpts from Mr. Chin's April 20, 2022 deposition. 10 7. The recorded and videotaped deposition of Ken Silva went forward in my offices on July 11 7, 2021, and it continued on July 14, 2021. I personally attended and examined Mr. Silva on both days. 12 Attached as Exhibit 7 are tme and correct excerpts from the depositionfranscriptsof the July 7, 2021 13 and July 14, 2021. 14 8. On December 17, 2021, I personally attended the videotaped deposition of Charles 15 Somers, and I examined Mr. Somers at his deposition. Attached to the Compendium as Exhibit 8 are 16 tme and correct excerpts from the deposition of Mr. Somers. 17 9. On July 1, 2021,1 personally attended the videotaped deposition of Claire Cordell, and I 18 examined Ms. Cordell at her deposition. Attached to this Compendium as Exhibit 9 are tme and correct 19 excerpts from the deposition of Ms. Cordell. 20 10. Also on July 1, 2021,1 personally attended the videotaped deposition of Sonya Ahem, 21 and I examined her at her deposition. Exhibit 10 to the Compendium are tme and correct copies of 22 excerpts from the July 1, 2021 deposition of Ms. Ahem 23 11. Attached to the Compendium as Exhibit 11 is a tme and correct copy of the 24 Organizational Stmcture of LC Therapeutics which was produced and marked at the July 1, 2021 25 deposition of Claire Cordell as Deposition Exhibit 1. Ms. Ahem admitted to creating this document. 26 12. Attached as Exhibit 12 to the Compendium is a tme and correct copy of an excerpt from 27 Deposition Exhibit 3 containing a Febmary 8, 2017 email from Ken Silva to Ms. Cordell regarding the 28 -2- DECLARATION OF MARK E. ELLIS IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, ALTERNATIVELY, SUMMARY ADJUDICATION 1 draft Promissory Note, marked at the July 1,2021 deposition of Ms. Cordell which I personally attended. 2 Ms. Ahem laid the foundation and authenticated this document. 3 13. Attached to the Compendium as Exhibit 13 is a tme and correct copy of the March 28, 4 2017 email from Ms. Cordell to Mr. Somers regarding revenue projection, which was produced and 5 marked at Ms. Cordell's July 1, 2021 deposition as Deposition Exhibit 7. 6 14. Attached as Exhibit 14 to the Compendium is a tme and correct copy of the August 1, 7 2013 email from Mr. Toy Chin to E. Satusky, Esq. and James Longoria regarding investing in the S 8 Corp. This exhibit was produced at the deposition of Ken Silva as Deposition Exhibit 36. 9 15. Attached to the Compendium as Exhibit 15 is a tme and correct copy of the August 12, 10 2013 email from Mr. Chin to Dr. Longoria regarding the S Corp. stmcture of LCT. This exhibit was 11 produced, marked and authenticated at the deposition of Ken Silva as Deposition Exhibit 34. 12 16. Attached to the Compendium as Exhibit 16 is a tme and correct copy of the August 12, 13 2013 email from Mr. Satusky, Esq. to Mr. Chin regarding what was needed to become a compliant S 14 Corp. This exhibit was produced, marked and authenticated at the deposition of Ken Silva as Deposition 15 Exhibit 35. 16 17. Attached as Exhibit 17 to the Compendium is a tme and correct copy of the August 18, 17 2013 email from Mr. Chin to Mr. Silva regarding Infrepid Medical - questions and answers. This exhibit 18 was produced, marked and authenticated at the deposition of Ken Silva as Deposition Exhibit 37. 19 18. Attached £is Exhibit 18 to the Compendium is a tme and correct copy of the April 17, 20 2017 LC Therapeutics Executive Summary, which was marked and authenticated at the July 1, 2021 21 deposition of Claire Cordell as Deposition Exhibit 19. 22 19. Attached to the Compendium as Exhibit 19 is a tme and correct copy of the January 30, 23 2015 $1,355,000 Promissory Note (unsigned). This exhibit was produced, marked and authenticated at 24 the deposition of Ken Silva as Deposition Exhibit 39. 25 20. Attached to the Compendium as Exhibit 20 is a tme and correct copy of the January 30, 26 2015 Common Stock Purchase Agreement (unsigned), which was produced, marked and authenticated 27 at the deposition of Ken Silva as Deposition Exhibit 40. 28 DECLARATION OF MARK E. ELLIS IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, ALTERNATIVELY, SUMMARY ADJUDICATION 1 21. Attached as Exhibit 21 to the Compendium is a tme and correct copy of the executed 2 January 30, 2015 Common Stock Purchase Agreement, which was marked and authenticated at the 3 deposition of Ken Silva as Deposition Exhibit 41. 4 22. Attached as Exhibit 22 to the Compendium is a tme and correct copy of the November 5 3, 2014 email from Mr. Chin to Mr. Somers and Dr. Longoria regarding the summary of recent meeting. 6 This exhibit was marked and authenticated at the deposition of Ken Silva as Deposition Exhibit 42. 7 23. Attached to the Compendium as Exhibit 23 is a tme and correct copy of the September 8 25, 2013 Business Plan of Intrepid Medical, Inc., which was marked and authenticated at the April 20, 9 2022 deposition of Roy Chin as Deposition Exhibit 59. 10 24. Attached as Exhibit 24 to the Compendium is a tme and correct copy of Intrepid Medical, 11 Inc.'s Business Plan, dated October 1, 2013, which was marked and authenticated at the deposition of 12 Mr. Chin as Deposition Exhibit 57. 13 25. Attached as Exhibit 25 to the Compendium is a tme and correct copy of the December 14 15, 2014 email from Dr. Longoria to Mr. Silva and copied on Charles Somers regarding LC 15 Therapeutic's operating stmcture, capital and ownership, which was produced, marked and authenticated 16 at the deposition of Ken Silva as Deposition Exhibit 63. 17 26. Attached as Exhibit 26 to the Compendium is a tme and correct copy of the iaimaxy 30, 18 2015, fiilly executed, January 30, 2015 Common Stock Purchase Agreement and Promissory Note, 19 which was produced, marked and authenticated at the deposition of Ken Silva as Deposition Exhibit 50. 20 27. Attached to the Compendium as Exhibit 27 is a tme and correct copy of the March 29, 21 29, 2013 email from Mr. Chin to Dr. Longoria regarding the Infrepid Medical PowerPoint, which was 22 produced, marked and authenticated at the April 22, 2022 deposition of Dr. Longoria as Deposition 23 Exhibit 76. 24 28. Attached to the Compendium as Exhibit 28 is a tme and correct copy ofthe August 22, 25 2013 email from Mr. Chin to Dr. Longoria regarding Intrepid Medical/Somers Living Tmst Common 26 Stock Purchase Agreement, which was produced, marked and authenticated at the April 22, 2022 27 deposition of Dr. Longoria as Deposition Exhibit 84. 28 DECLARATION OF MARK E. ELLIS IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, ALTERNATIVELY, SUMMARY ADJUDICATION 1 29. Attached as Exhibit 29 to the Compendium is a tme and correct copy of the unsigned 2 Common Stock Purchase Agreement dated September 9, 2013. This exhibit was produced , marked and 3 authenticated at the April 22, 2022 deposition of Dr. Longoria as Deposition Exhibit 85. 4 30. Attached as Exhibit 30 to the Compendium is a tme and correct copy of the December 5 10, 2014 email to Dr. Longoria from Mr. Somers regarding the comments of Roy Chin, which was 6 marked and authenticated as Deposition Exhibit 51 at the deposition of Charles Somers. 7 I declare under penalty of perjury under the laws of the State of Califomia that the foregoing is 8 tme and correct and that this Declaration was. executed on t h j | # l ^ 8,2Q^of in S^ramento, Califoraia 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DECLARATION OF MARK E. ELLIS IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, ALTERNATIVELY, SUMMARY ADJUDICATION ^ 41' 1 EXHIBIT 2 1 MarkE. Ellis-127159 Richard H. Hart, Jr. - 058793 2 Omid Shabani - 267447 ELLIS LAW GROUP, LLP 3 1425 River Park Drive, Suite 400 Sacramento, CA 95815 4 Tel: (916) 283-8820 Fax: (916) 283-8821 5 Attomeys for Defendant Dr. James Longoria 6 7 8 SUPERIOR COURT OF THE STATE OF CALIFORNIA 9 COUNTY OF SACRAMENTO 10 11 CHARLES SOMERS, individually and as Case No.: 34-2018-00229212 trustee for the CHARLES SOMERS LIVING 12 TRUST, DECLARATION OF DR. JAMES LONGORIA IN SUPPORT OF MOTION 13 Plaintiff, FOR SUMMARY JUDGMENT OR, ALTERNATIVELY, SUMMARY 14 V. ADJUDICATION 15 DR. JAMES LONGORIA, an individual and DATE: September 22,2022 DOES 1-10, TIME: 9:00 a.m. 16 DEPT: 54 Defendant. RESERVATION NO: 2639525 17 18 Date Complaint Filed: March 16, 2018 19 Trial Date: Trial set for October 24, 2022 20 I, Dr. James Longoria, declare that: 21 1. I am the Defendant named in the instant action, and I make this declaration in support 22 of my Motion for Summary Judgment/Adjudication in this matter. My declaration is made under oath, 23 subject to penalty of perjury according to Califomia law and of my own personal knowledge. 24 2. I am a cardiothoracic surgeon. 25 3. I met Charles Somers in 2003. 26 4. Mr. Somers and I thereafter becamefiiends;wefrequentlyvisited, and our families 27 socialized on a regular basis, including taking vacations together and the like. 28 -1 - DECLARATION OF DR. JAMES LONGORIA IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, ALTERNATIVELY, SUMMARY ADJUDICATION 1 5. Through our interactions, I often spoke with Mr. Somers about my interests, and he 2 would talk with me about his interests. Through these discussions, I leamed he was a successful, 3 savvy, experienced and quite wealthy businessman. He owns companies and business enterprises (he 4 told me) throughout the United States, and he has interests in other companies. He told me he 5 employed over 10,000 individuals. 6 6. From time to time, during our conversations over the years, we discussed joining 7 together in business ventures but, for one reason or another, most of those ventures did not get off the 8 ground. At Mr. Somers suggestion/urging, I and some fellow doctors invested monies in one of Mr. 9 Somers' land development projects in Rancho Cordova, the so-called Montelena Douglas Project. 10 7. In 2007,1 had filed patents for a surgical method tofreatatrial fibrillation, and for a 11 surgical device tofreatmifral regurgitation. In the 2012-2013 time period, I became interested in 12 developing certain medical devices and surgical processes for sale in the medical equipment market 13 based upon those patents. I discussed my interest with Mr. Somers - as a friend only - with no interest 14 in, or intent of, him becoming an investor. He encouraged my ideas in this regard. 15 8. By early 2013,1 had met and teamed up with Roy Chin, an engineer who had 16 participated in several startup medical device companies which had been quite successful. Mr. Chin 17 and I agreed we would be 50/50 percent owners in a corporation we named Infrepid Medical, Inc.; we 18 founded the company iri April of 2013. I brought my medical expertise from years of performing heart 19 surgeries, my ideas and funds; and Mr. Chin brought his business, govemment (e.g. FDA) approval 20 expertise as to medical devices, and his capital raising experience. I contributed my ideas, the costs for 21 procuring patents on my ideas, as well as I put in much time and effort, despite continuing with my 22 busy surgical practice. It was not unusual, between my practice and the company, for me to work 15, 23 18 or more additional hours per day. 24 9. Having little to no experience in a startup medical company, and based on Mr. Chin's 25 years of experience, I left it to Mr. Chin to prepare estimated projections andfinancialbenchmarks 26 based on assumptions that the medical devices would successfully finish testing and obtain approval. 27 Unfortunately, as with many, if not most, startups, we were unable to obtain the approval we needed to 28 take the devices to market. -2- DECLARATION OF DR. JAMES LONGORIA IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, ALTERNATIVELY, SUMMARY ADJUDICATION 1 10. In any event, in the late spring or early summer of 2013, Mr. Chin was beginning to 2 look for investors. I mentioned this to Mr. Somers, who had expressed interest in how the project was 3 going. I explained our status, and he indicated to me that he would be interested in investing. I did not 4 solicit Mr. Somers to invest in Intrepid; he volunteered. 5 11. At some point in the summer of 2013, Mr. Somers indicated he would invest - although 6 how much he would invest was not decided. He indicated, however that he wanted the CFO (Ken 7 Silva) of one of his companies (SBM) to review the business plan, and he wanted Silva to speak with 8 Roy Chin. 9 12. In August of 2013, Mr. Chin and I visited Mr. Somers and his CFO, Ken Silva, in 10 Somers' SBM office at McClellan Office Park. 11 13. Mr. Chin, to quote Mr. Somers, "did the entire presentation." (See Exhibit 8, the 12 deposition of Charles Somers at p. 69:5.) Mr. Chin used a PowerPoint presentation that mostly 13 described the devices, the need for such devices, the possible target market and similar information. 14 Projected eamings and such information was not provided by Mr. Chin in any detail, or at all, at that 15 time. Chin's presentation lasted approximately 45 minutes to an hour. 16 14. Mr. Somers did not ask any questions to my recollection. I now understand from 17 attending Mr. Somers deposition that he had already decided to invest the sum of $2,000,000 into the 18 startup, even before the presentation was given. (Exhibit 8, Somers Depo., at p. 62:12-20). 19 15. Mr. Silva and Mr. Chin communicated over the next few days andfinancialinformation 20 was exchanged. I did not participate in this exchange. 21 16. Ultimately, Mr. Somers informed me that his Tmst would be investing $2,000,000 into 22 the company in retum for a 20% equity stake, and by which Mr. Chin and I each gave up 10% of our 23 previous 50% interests. 24 17. Mr. Somers' Tmst made two payments of $ 1,000,000 each in the fall of 2013. These 25 payments were investments in the company in retum for an equity interest (stock shares), not loans. 26 Mr. Somers and Mr. Silva valued the startup company at thattimeat $10,000,000. I had no basis to 27 disagree. Mr. Somers' $2,000,000 investment reflected 20% of WHAT Somers stated was the 28 company's projected value. -3- DECLARATION OF DR. JAMES LONGORIA IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, ALTERNATIVELY, SUMMARY ADJUDICATION 1 18. At the time Mr. Somers agreed to invest funds, I had no expectation that he would 2 participate in management of the company. He did not express he had such an expectation either; he 3 seemed satisfied being a 20% shareholder, passive investor. 4 19. Subsequently, the name Infrepid was changed to LC Therapeutics, or LCT. LCT was 5 set up as a subchapter S corporation. I had no personal preference as to how the entity was formed., 6 At the time, Mr. Somers did not object to it being formed as a subchapter S corporation. 7 20. Thereafter, Mr. Chin ran the day-to-day operations. He hired individuals he had 8 previously worked with in earlier medical device startups. These individuals were paid salaries, plus 9 given options to purchase stock in the future; if the company was successful, they would share in the 10 success. Chin explained to me that this was a standard practice in the Silicon Valley, and it was used 11 to incentivize employees. I certainly heid no disagreement with Mr. Chin's reasoning and judgment on 12 this issue. 13 21. Over the next year, the company made some progress, but there were also setbacks. I 14 was working diligently to make the company a success. It was like I had two fiill-time jobs. However, 15 I know now that Mr. Silva and Mr. Somers believed the startup was - to use Mr. Silva's term - 16 "failing" in that it was not meeting the projections and mileposts they believed it should have met. 17 22. Mr. Somers had two meetings with Mr. Chin in the fall of 2014. I was present for a 18 meeting in Concord, but not at the second meeting in Vacaville, which was set up per Mr. Somers' 19 request. Some of what was discussed at the second meeting was relayed to me by both Mr. Somers 20 and Mr. Chin. The upshot was that shortly before Thanksgiving 2014, Mr. Chin sent me his 21 resignation by email. 22 23. The issue at that point was whether the startup efforts could or should continue. We 23 had expended about $1.2 million of the money invested by Mr. Somers. Mr. Somers and I spent the 24 Thanksgiving holiday together, and we discussed how we saw the company's future. Ultimately, it 25 was decided - primarily driven by Mr. Somers - to continue the company with Somers and I as 50/50 26 percent owners/shareholders. Upon obtaining a 50% equity interest in LCT, Mr. Somers would invest 27 more capital; I agreed. We did not discuss or agree at that time as to what form further fimds would be 28 invested. I was not necessarily opposed to loans from Mr. Somers. I was, however quite clear that I .4_ DECLARATION OF DR. JAMES LONGORIA IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, ALTERNATIVELY, SUMMARY ADJUDICATION 1 would not give up confrol ofthe company, but that I was willing to share it. No decisions were made 2 about Somers being an officer or director. We agreed upon the "first in-first out" concept. When LCT 3 made a profit, Mr. Somers and I would be paid back fully first. 4 24. By December 6, 2014, Mr. Chin's resignation was confirmed, and it was formalized by 5 a corporate resolution recommended by lawyers so that the company could continue to do business. 6 Mr. Somers was sent the executed resolution in a December 15, 2014 email. (See Exhibit 4, SAC , T| 7 37, p. 13:23-28 He never protested. 8 25. On January 30, 2015, Somers formalized his investment of another $1,355 million into 9 LCT through a Stock Purchase Agreement, and, in retum, he was given another 30% equity 10 shareholder interest in the company, making him a 50% shareholder. 11 26. Mr. Somers never stated to me at that time, or ever, that he desired to be anything but a 12 shareholder in the company. I do not recall him ever requesting to be made an officer or director of the 13 company until perhaps 2018. 14 27. At this time, I did feel bad about the Tmst of my friend investing money into a company 15 that Mr. Somers believed was failing, £ind I told him so in an email dated December 9, 2014. 16 (Defendant's MSJ Exhibit 30, Deposition Exhibit 50.) On December 10, 2014, Mr. Somers wrote me 17 back and said: "Hi, Jimmy. A few more thoughts. To be direct, you owe me nothing. I always know 18 the risk and this will be worth it. I appreciate your concem and value your integrity and friendship. 19 This will all work out." 20 28. Thereafter, Mr. Somers and I , in my opinion, actually worked together fairly well. We 21 would meet on a regular basis to make decisions on behzilf of the company. We did not always agree 22 on what to do, but for most of 2015 and 2016, we were able to work together. 23 29. By early 2017, however, tension began to build. Both Somers and I understood that in 24 order to develop the products, we needed additional capital. I wanted to go and raise money from third 25 parties (as Mr. Chin had also desired), but Somers did not want to do this. He desired to invest more 26 money, but, in retum, he wanted a greater equity stake. I infonned him, as I had consistently informed 27 him, that I would not give up confrol of LCT, but I would continue to share it, and even at that, he 28 could have more equity so long as I maintained control. I advised him it was entirely up to him DECLARATION OF DR. JAMES LONGORIA IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, ALTERNATIVELY, SUMMARY ADJUDICATION 1 whether he wanted to invest more money, but I would not lose control of LCT to him. I informed him 2 we could continue to work together as we had in the prior two years, during which I in fact left most of 3 the business decisions to him, even if I did not always agree with them. 4 30. Likewise, I was not categorically opposed to him making a new cash infusion in the 5 form of a loan to LCT, but the loan documents presented to me in 2017 possessed unacceptable terms 6 which I thought were unfair, and I did not feel I could sign them on behalf of the company. 7 31. The oral understanding we had reached during Thanksgiving of 2014 was that no matter 8 how much new money was invested, the consideration was first in - first out, once LCT started making 9 money as we both expected. LCT never made a profit. 10 32. By 2017, our relationship had deteriorated to such an extent that we could no longer 11 work together. 12 33. I did not breach any promise I ever made to Mr. Somers; I did not breach any duty - 13 fiduciary or otherwise - that I may have owed to him. I never forced, wheedled or cajoled him into 14 investing money; that was his own informed and knowledgeable choice and risk tolerance, which he, 15 himself, has admitted/acknowledged. (Exhibit 8, Somers Depo., at pp. 64, 96, 97, 99 and 100.) I have 16 never intended to deceive him, nor have I deceived Mr. Somers in any way. I never signed any 17 agreement where I personally agreed to pay back Mr. Somers, nor did I orally make such a promise or 18 representation. No written agreement has ever existed to that effect. 19 34. This lawsuit arises because the products at that stage did not work safely and were not 20 approved. This is a risk that startup entrepreneurs face every day. Mr. Somers lost money; I lost 21 money - that's life. I have heard Mr. Somers has vowed to "desfroy" me and to "bankmpt" me. I 22 cannot understand for the life of me why he would want to do so. 23 1 declare under the penalty of perjury under the laws ofthe State of California that the 24 foregoing is true and correct, and that this declaration was executed in D aiOv/0W Califomia, 25 on July l i , 2022. 26 27 J A M : S X 0 N G 0 R I A , M.D. 28 6- DECLARATION OF DR. JAMES LONGORIA IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, ALTERNATIVELY, SUMMARY ADJUDICATION EXHIBIT 3 n 1 DOWNEY BRAND LLP FILED WILLIAM R.WARNE (Bar No. 141280) Suparildr Caurt Of Califmii 2 ANNIE S. AMARAL (Bar No. 238189) Sacr«imento 621 C^tol Mali, I8th Floor 3 Sacramento, CA 95814-4731 Telephone; 916.444.1000 4 Facsimile: 916,444.2100 , Deput bwame@downeybrand.com Casa Nurnbar: 5 aamaral@downeybfand.com 34-2,01 6 Attomeys fbr Plaintiflf CHARLES SOMERS, individuaJly and as tmstee for the 7 CHARLES SOMERS LIVING TRUST, 8 SUPERIOR COURT OF CALIFORNIA 9 COUNTY OF SACRAMENTO 10 11 CHARLES SOMERS, individually and as CASE NO. tmstee for the CHARLES SOMERS 12 LIVING TRUST, PLAINTIFF CHARLES SOMERS'S CXJMPLAINT FOR DAMAGES . 13 Plaintifr, 14 v. 03 15 DR. JAMBS LONGORL\, an individual, and DOES !-10, 16 Defendants. O 17 a 18 Plaintiff CHARLES SOMERS, individually and as trustee for the CHARLES SOMERS 19 LIVING TRUST ("Somers" or "PlaintifP'), by and thiou^ his attorneys of reconl, hereby alleges 20 as follows: 21 PARTIES 22 1. Plaintiff Charles Somers ("Somers" or 'TlainttliP') is, aod at all relevant times 23 hesrein was, an individual doing business in Sara^ento County, California. Somers is the 24 i trusteefortiie Charles Som«ra Living Trust 25 f 2. Defendant James Longoria, M.D. ("Dr. Longoria" or "Defendant") is, and at 26 i all times relevant herein was, an Individual residing in Sacramento County,. Califomia. 27 I 3. PlaintifiT is ignorant of the tme names and capacities, wbetiusr individual, 28 I qorpoiation, assodation, or otherwise, of fhe defendants, and ea(^ 1 COMPLAINT 1 1 through 10, inclusive, and therefore sues these defendants, and each of them, under such 2 fictitious names. Plaintiffis informed and believes, and accordingly alleges, that these fictitiously 3 named defendants, and each of them, intentionally, negligently, or otherwise wrongfully 4 performed each of the acts and omissions alleged herein, and thereby legally caused the damages 5 directly or proximately to Plaintiff as alleged herein. 6 4. At all times relevant to this action, each Defendant was the agent, servant, 7 employee, partner, member, joint venture or surety ofthe other Defendants and was acting within 8 the scope of said agency, employment, partnership, venture or suretyship with the knowledge and 9 consent or ratification of each of the other Defendants. 10 JURISDICTION ANP VENUE n 5. The Court has subject matta* jurisdiction over this action and personal jurisdiction 12 over each of the Defentlants. PL. 13 6. Venue is proper in this Court pursuant to Calitbmia Code of Civil Procedure o 14 section 395, because Dr. Longoria resides in Sacramento County. I PQ 15 FACTUAL BACKGROUND 16 A. Backaround on the Relationship Between Mr. Somers and Dir. Longoria O 17 7. Charles Somers is the founder and president of Somers Building Maintenance Q 18 (SBM), a successful building maintenance services company that operates nationally and 19 internationally. Dr. Longoria is an accomplished cardiothoracic surgeon who practices in 20 Sacramento. Dr. Longoria and Somers first met in approximately 2005, when Somers was told 21 that Dr. Longoria would be a good person to talk with to obtain a referral for a medical issue 22 confronting Somers's mother. 23 8. Thereafter, Somers and Dr. Longoria became friends, and Somers suggested and 24 began assisting Dr. Longoria with exploring the possibility of opening a doctor-owned hospital in 25 the Sacramento area. Ultimately, to fiirther assist with this effort, Somers purchased land in 26 Rancho Cordova known as "Montelena," and allowed Dr. Longoria and his private hospital 27 partners to purchase a minority interest in this same property. After Somers and Dr. Longoria 28 invested a significant amount of time and energy (and Somers a lot of money) into creating a COMPLAINT 1 privately owned doctor's hospital, their dream came to an end with the Affordable Care Act's 2 passage in 2010, which made the creation of additional physician-owned hospitals illegal. 3 B. Dr, Longoria Induces Somers to Invest in His Medical Device Company In Exchaihge for a Non-Controlling Ownership Interest 4 5 9, At some point in their relationship, Dr. Longoria infonned Somers that he was 6 involved with patenting certain medical devices and surgery processes. Dr. Longoria touted his 7 schooling and reputation as a heart surgeon and told Somers that these devices would 8 revolutionize a number of common heart surgeries. Dr. Longoria initially told Somers that he had 9 filed for a patent on something called the L Chord, a synthetic cord used for performing what he 10 claimed would be revolutionary mitral valve prolapse repair. Later, he discussed that he had 11 obtained a patent on an RF ablation device which, among other things, would provide a better 12 means of addressing atrialfibrillations.Dr. Longoria further explained that he was one of two 13 board members and a 50% shareholder in a company known as Intrepid Medical, a business he c 14 co-founded with his partner Roy Chin in or about April of 2013, and that their company was the < « 15 owner of these patents. Dr. Longoria told Somers that Intrepid Medical would seize market share 16 and that the patented L Chord and ablation device were central to that effort. o 17 10. Dr. Longoria also introduced Somers to his "business partner" Roy Chin, who had 18 prior experience as the CEO and founder of SpineView, a medical device company focused on 19 spinal surgeries. Dr. Longoria and Mr. Chin, who were at the time the sole shareholdars, officers, 20 and board members of Intrepid Medical, explained that Mr. Chin brought business experience to 21 the company and that Dr. Longoria brought medical expertise. Both Dr. Longoria and Mr. Chin 22 told Somers that their new company was looking for "start-up" funding. 23 11. In or aboxit July or August of 2013, Mr. Chin and Dr. Longoria came to SBM to 24 pitch Somers on investing in the company. They discussed Intrepid's business plan, including the 25 steps they would take to obtain Food and Drug Administration (FDA) approval to bring Intrepid's 26 patented devices to market and their plans to operate production facilities in Malaysia. They 27 further represented that Intrepid would be profitable by 2015. 28 12. During tliis pitch and others, Mr. Chin and Dr. Longoria conveyed to Somers and COMPLAINT 1 to his CFO Ken Silva that they had the experience and ability to make Intrepid a success. As 2 Intrepid's President, Mr. Chin explained that he had a background of success infinancingand 3 growing a medical device company. As its Chainnan, Dr. Longoria said he possessed the 4 surgical expertise to be the "face" of Intrepid and that he would be fully conmiitted to developing 5 and marketing its products and that he was committed to putting in whatever time was necessary 6 to make Intrepid a complete success. They repeated to Somers and his CFO Silva that the 7 company would be profitable in two years. In the context of these representations, they indicated 8 that they needed $2 million to get started, and that they would raise additional funds thereafter by 9 selling equity in the company. 10 13. Thereafter, on August 15,2013, Mr. Chin sent Mr. Silva a follow-up financial 11 spreadsheet, which, among other things, set forth Intrepid's proposed budget, created a critical 12 path timeline for the company's next steps, aod broke down thefinancialmetrics a."3sociated with 1—1 13 both the mitral valve market and the atrial fibrillation market. It again reiterated that Intrepid I fO J4 15 would be profitable hy 2015. 14. Somers considered the request for funding. He was impressed witli Mr. Chin's >^ w 16 back^ound and was interested in being a part of revolutionizing certain heart surgeries. He also z o 17 wanted to help Dr, Longoria and trusted his promise to fully commit his expertise, time, and o 18 energy into making Intrepid a success. They all acknowledged, however, that without start-up 19 flmding the company would have little if any value and no chance of success. 20 15. Somers initially preferred to loan money to the company on conventional terms, 21 1 which would include repayment according to a specified schedule with interest, memorialized in 22 a promissory note. Dr. Longoria resisted this structure, arguing the better stmcture was fbr 23 Somers to become a shareholder in the company. He assured Somers that Intiepid's medical 24 devices would be approved by the FDA, proceed to market quickly, and rapidly become the 25 standard of care. If and when the company needed additional funding, Dr. Longoria told Somers 26 that Intrepid would allow him to take advantage of the same structure so that he could purchase 27 additional equity in the company, to whatever extent he was interiested. Indeed, Intrepid's 28 August 15, 2013, projections indicated that Intrepid plaimed to raise additional capital in 2014 4 COMPLAfNT 1 and 2015 by selling equity. When Somers raised concems about company's status as an "S" 2 corporation and the resulting tax implications to him. Dr. Longoria promised that he would 3 convert Intrepid Medical lo a limited liability company. 4 16. In another effort to induce Somers to commit to making thisfinancialinvestment, 5 Dr. Longoria assured Somers that, in the unlikely event that the medical company was not 6 successfiil, he would personally reimburse Somers through the profits Dr. Longoria anticipated 7 receiving from the minority interest Somers had created for him in the Montelena real estate 8 investment, which was being held as an investment for sale to future residential developers. 9 17. Mr. Chin and Dr. Longoria's various representations to Somers were eventually 10 successfiil. In the fail of 2013, and in reliance on tiieir representations, Somers agreed to provide 11 the company with start-up capital in the amount of S2 million, the first miUion of which Somers 12 invested on September 3, 2013, and the second million of which Somers invested on 13 November 29, 2013. Under a "Common Stock Purchase Agreement," dated September 12, 2013, c 14 Somers received a total of 1,562,500 shares in two equal closings, at the price of $1.28 per share. < 15 Before Somers made this commitment. Dr. Longoria and Mr. Chin several riiondis earlier had 16 both received 3,000,000 shares in exchange for their individual payments of $300 each, at a per o 17 share price of $0.00001. Approximately one month after Somers made this initial investment, D 18 Intrepid Medical's name was changed to LC Therapeutics, Inc. Dr. Longoria and Chin also 19 valued their now funded company at $ 10,000,000. 20 c. LC Therapeutics Fails to Live Up to Its Business Plan. 21 18. As the months passed, Somers could see that the company was falling behind. 22 According to the business plans provided to Somers at the time he was investing, LC was 23 supposed to become incorporated in Malaysia in the third quarter of 2013, and submit its f