Preview
FILED
5 CIT- ESERVE (JURY DEMAND) 12/31/2020 12:47 PM
FELICIA PITRE
DISTRICT CLERK
DALLAS CO., TEXAS
JAVIER HERNANDEZ DEPUTY
DC-20-19316
CAUSE NO.
ARISTA INVESTMENTS, LLC; § IN THE DISTRICT COURT
ARISTA INVESTMENTS 401K TRUST;
F. AARON EDWARDS; J. MARK
EARLEY; and BRIAN FOX,
Plaintiffs,
Vv.
DALLAS COUNTY, TEXAS
FIFTEENFORTYSEVEN CRITICAL
SYSTEMS REALTY, LLC; COREY WELP;
U.S. DATA CENTER PORTFOLIO
MANAGER, LLC; RAMLAND
HOLDINGS II, LLC; and 1 RAMLAND
ROAD MANAGEMENT, LLC, 298TH
Defendants. JUDICIAL DISTRICT
PLAINTIFFS’ ORIGINAL PETITION
TO THE PRESIDING JUDGE OF
THE ABOVE-ENTITLED COURT:
Plaintiffs Arista Investments, LLC, Arista Investments 401k Trust, F. Aaron
Edwards, J. Mark Earley, and Brian Fox file their original petition against Defendants
fifteenfortyseven Critical Systems Realty, LLC; Corey Welp; U.S. Data Center Portfolio
Manager, LLC; Ramland Holdings II, LLC; and 1 Ramland Road Management, LLC, and
would respectfully show the Court as follows:
lL
DISCOVERY CONTROL PLAN
1 Plaintiffs intend to conduct discovery under Level 3, pursuant to Texas Rule
of Civil Procedure 190.4.
PLAINTIFFS’ ORIGINAL PETITION PAGE1
2. As required by Texas Rule of Civil Procedure 47, Plaintiffs allege monetary
damages over $1,000,000. The damages sought are within the jurisdictional limits of this
Court.
IL.
PARTIES
3. Plaintiff Arista Investments, LLC (“Arista”), is a limited liability company
organized and existing under the laws of the State of Texas with its principal place of
business in Tarrant County, Texas.
4 Plaintiff Arista Investments 401k Trust (“Arista Trust”) is a trust organized
and existing under the laws of the State of Texas with its principal place of business in
Tarrant County, Texas.
5 Plaintiff F. Aaron Edwards (“Edwards”) is an individual who resides in
Tarrant County, Texas.
6 Plaintiff J. Mark Earley (“Earley”) is an individual who resides in Dallas
County, Texas.
7. Plaintiff Brian Fox (“Fox”) is an individual who resides in Tarrant County,
Texas.
8 Defendant fifteenfortyseven Critical Realty Systems, LLC (“1547 CRS”) is a
limited liability company organized and existing under the laws of the State of Delaware
with its principal place of business in Matawan, New Jersey, and may be served with
service of process at its principal office in Texas located at 8111 LB] Freeway, Suite 810,
Dallas, Texas 75251, through Corey Welp or any other managing agent at such location.
PLAINTIFFS’ ORIGINAL PETITION PAGE2
9 Defendant Corey Welp (“Welp”) is an individual who resides in Dallas
County, Texas, and may be served with service of process at his place of residence, 3129
Stanford Avenue, Dallas, Texas 75225, or at his principal place of business, at 8111 LBJ
Freeway, Suite 810, Dallas, Texas 75251.
10. Defendant U.S. Data Center Portfolio Manager, LLC (“Portfolio Manager”),
is a limited liability company organized and existing under the laws of the State of
Delaware, with its principal place of busines in Matawan, New Jersey, and may be served
with service of process through its registered agent, Corporation Service Company, 251
Little Falls Drive, Wilmington, Delaware 19808.
11. Defendant Ramland Holdings II, LLC (“Holdings II”), is a limited liability
company organized and existing under the laws of the State of Delaware, with its
principal place of business in Matawan, New Jersey, and may be served with service of
process through its registered agent, Corporation Service Company, 251 Little Falls
Drive, Wilmington, Delaware 19808.
12. Defendant 1 Ramland Road Management, LLC (“Ramland Management”),
is a limited liability company organized and existing under the laws of the State of
Delaware, with its principal place of business in Matawan, New Jersey, and may be
served with service of process through its registered agent, Corporation Service
Company, 251 Little Falls Drive, Wilmington, Delaware 19808.
PLAINTIFFS’ ORIGINAL PETITION PAGE3
Il.
JURISDICTION AND VENUE
13. This Court has subject matter jurisdiction over this cause pursuant to
Article V, Section 8 of the Texas Constitution and Section 24.007 of the Texas Government
Code.
14, This Court has personal jurisdiction over Welp because he is a resident of
Texas, committed torts in Texas against Texas residents, and does business in Texas
within the meaning of Section 17.042 of the Texas Civil Practice & Remedies Code. This
Court has personal jurisdiction over 1547 CSR because it maintains a place of business in
Texas, committed torts in Texas or directed tortious conduct into Texas that harmed
Texas residents, and does business in Texas within the meaning of Section 17.042 of the
Texas Civil Practice & Remedies Code. This Court has personal jurisdiction over Portfolio
Manager, Holdings II, and Ramland Management because they committed torts in Texas
or directed tortious conduct into Texas that harmed Texas residents, and do business in
Texas within the meaning of Section 17.042 of the Texas Civil Practice & Remedies Code.
15. Venue is proper in Dallas County pursuant to Section 15.002(a) of the Texas
Civil Practice & Remedies Code because all or a substantial part of the events or omissions
giving rise to Plaintiffs’ claims occurred in Dallas County, 1547 CSR has its principal
office in Texas located in Dallas County, and Welp resides in Dallas County.
IV.
FACTUAL ALLEGATIONS
16. Defendant 1547 CSR was formed as a Delaware limited liability company
on or about April 6, 2011, under the name 1547 Realty Partners, LLC, and was renamed
PLAINTIFFS’ ORIGINAL PETITION PAGE4
as fifteenfortyseven Critical Systems Realty, LLC (“1547 CSR”) on or about January 28,
2014. The co-founders and managers of 1547 CSR are Welp, Todd Raymond, Patrick
Hynes, and Gerald Martin.
17. In February 2012, Welp contacted Edwards about a “great deal.” Welp
represented that his company, then known as 1547 Realty Partners, had been working on
a transaction in New York for over a year and had a commitment froma large investment
firm for $100 million in capital for the deal, a speculative data center that had no existing
tenant leases or letters of intent.
18. Welp represented to Edwards that 1547 CSR chose not to be in business
with this investment firm “for multiple reasons we can discuss.” Welp further
represented that an easement issue had been resolved more quickly than anticipated, and
that “Cablevision called me to let me know that they had chosen us as their data center
solution.”
19. At Welp’s urging, Edwards informed Earley and Fox of this opportunity
and put them in communication with Welp.
20. In connection with this solicitation, Welp provided Edwards, Earley, and
Fox with a “confidential” investment summary entitled “New York Data Center
Opportunity Orangeburg, New York” from 1547 RP dated February 2012 (the “2012
Offering Memo”).
21. The New York Data Center Opportunity was a parcel of approximately 32
acres of land containing a 232,000 square foot building located at 1 Ramland Road,
PLAINTIFFS’ ORIGINAL PETITION PAGES
Orangeburg, New York 10962 (the “Orangeburg Property”) that 1547 CSR proposed to
convert into a data center.
22) The 2012 Offering Memo touted the experience and expertise of the
founders of 1547 CSR and promoted the New York Data Center project as an
extraordinary opportunity. The 2012 Offering Memo represented that through its
“extensive industry relationships” 1547 CSR was able to focus on acquisition and
development projects where data center users drive demand and are most active.
23. The 2012 Offering Memo represented that the Orangeburg Property would
achieve attractive yields at less than 30% occupancy, cash-on-cash returns from 30% to
more than 80%, an internal rate of return exceeding 40%, and an equity multiple from
4.8X to 7.7X over a five-year holding period.
24. The 2012 Offering Memo represented that the market for data centers in the
New York City area was exceptionally robust and that the Orangeburg Property was
“ideally located” in the “hottest” location for data centers serving Wall Street financial
institutions.
25. The 2012 Offering Memo represented that the partners of 1547 RP had
“many significant tenant opportunities” and would have two leases with terms of
between 10 and 20 years in the near future.
26. The 2012 Offering Memo stated that participants could invest in the project
through equity ownership in a limited partnership that would own 70% of the deal, that
an affiliate of 1547 CSR would act as the general partner, and the limited partnership
would receive a preferred return of 8% on its capital.
PLAINTIFFS’ ORIGINAL PETITION PAGE6
27. The 2012 Offering Memo represented that the facility would be fully leased
within a 3 to 5-year time frame, with the goal of developing quality net operating income
and selling the property within 3 to 5 years, and the anticipated sales price was “well over
$100 million.” According to the 2012 Offering Memo, a $1 million investment,
representing seven percent (7%) of the equity in the project, would grow to $4,787.639
over five years.
28. Welp sold this deal to Edwards, Earley, and Fox as a “no-brainer,” a “sure
thing” guaranteed to at least quadruple their money ina few years. The investment thesis
was to convert the building into a “powered shell” at a cost of $7 million and to do all
subsequent updates to the building as NNN build-to-suit arrangements as additional
tenants signed leases. Welp and 1547 CSR further assured them of a “protective moat”
or “competitive advantage” for the Orangeburg Property because it would be able to
provide power to tenants at 8 cents per megawatt versus an average of 12 cents per
megawatt for other data centers in the New York City area.
29. Edwards, Earley, and Fox asked Welp what their absolutely worst-case
scenario would be if they invested in the Orangeburg Property. Welp responded that
there was no down-side, that their money was safe, and that they were looking at a “home
run” on this deal just as the 2012 Offering Memorandum promised. In fact, because the
investment was so safe, Welp happily and knowingly accepted part of the investment
from a 401(k) retirement trust.
30. In reliance on the representations of Welp and 1547 CSR, Edwards, Earley,
and Fox made the following investments into 1547 Orangeburg Holdings, LP
PLAINTIFFS’ ORIGINAL PETITION PAGE7
(‘Orangeburg LP”), a Delaware limited partnership formed on or about February 13,
2012, for the purpose of acquiring, developing, and operating the Orangeburg Property:
Earle
March 22, 2012 $100,000.00
January 28, 2013 $110,000.00
March 28, 2014 $ 25,000.00
November 7, 2014 $ 67,600.00
Total $302,600.00
Edwards
March 23, 2012 $ 75,000.00
May 17, 2012 $ 50,000.00
Total $125,000.00
Fox
March 23, 2012 $ 75,000.00
November 7, 2012 $ 40,000.00
July 1, 2013 $100,000.00
Total $215,000.00
31. In addition, Edwards and Fox made the following investments in
Orangeburg LP through Arista and Arista Trust, which they owned:
Arista Investments LLC
May 11, 2012 $ 95,000.00
May 17, 2012 $ 95,000.00
Total $190,000.00
Arista Investments 401k Trust
May 11, 2012 $ 80,000.00
May 16, 2012 $ 25,000.00
May 17, 2012 $105,000.00
Total $210,000.00
32. The general partner of Orangeburg LP is 1547 Orangeburg Holdings GP,
LLC, a Delaware limited liability company. On information and belief, 1547 Orangeburg
Holdings GP is owned by 1547 CSR or its principals.
PLAINTIFFS’ ORIGINAL PETITION PAGES
33. Using Plaintiffs’ funds and a loan from Ladder Capital Finance, LLC, in the
amount of $8 million, the Orangeburg Property was purchased from Chesapeake
Holdings Orangeburg, LLC, on or about April 11, 2012, by Ramland Holdings, LLC—not
by Orangeburg LP.
34. Ramland Holdings, LLC is a New Jersey limited liability company formed
on or about September 7, 2010, by Patrick Hynes and Gerald Martin, who were the
members and managers of Ramland Holdings, LLC. Hynes and Martin are also co-
founders and managers of 1547 CSR. On or about January 7, 2013, Hynes and Martin
were replaced as members of Ramland Holdings, LLC, by Orangeburg LP and Holdings
II. On information and belief, Holdings II is owned by 1547 CSR or its principals.
35. In November 2012, Welp and 1547 CSR contacted Plaintiffs about
refinancing the Ladder Capital loan and represented that they were working with a
group that would provide Orangeburg LP with sufficient capital to execute on their
build-out plans, time to provide for the signing of tenants and would reduce the need to
raise additional equity capital. Welp and 1547 CSR admitted that they had failed to raise
$5 million of equity capital through the sale of limited partnership interests as they had
anticipated and had only raised about $1 million—the majority of which came from
Plaintiffs. According to Welp and 1547 CSR, they needed to make a capital call on the
limited partners in order to deposit a total of $2 million in a capital expenditure escrow
account required under the mortgage with Ladder Capital.
36. Earley and Fox invested additional funds in Orangeburg LP, as set forth
above, in reliance upon the representations of Welp and 1547 CSR.
PLAINTIFFS’ ORIGINAL PETITION PAGE9
37. On or about January 22, 2013, 1547 CSR caused Ramland Holdings to close
on a refinance of the Ladder Capital debt with Atalaya Administrative, LLC, as agent for
an affiliate of Atalaya Capital Management (“Atalaya”), which included an assignment
of the Ladder Capital mortgage to Atalaya and a new mortgage in favor of Atalaya, with
the total financing in the amount of approximately $14.6 million.
38. Welp and 1547 CSR represented to Plaintiffs that the loan from Atalaya paid
off the loan from Ladder Capital and provided capital needed to complete the Phase I
upgrades to the Orangeburg Property. Welp and 1547 CSR represented to Plaintiffs that
Atalaya “knows the datacenter space well” and would “add value to our team.” Welp
and 1547 CSR further represented that they were “very excited about this new
partnership and the incredible tenant activity that we are seeing in the New York
market.”
39. On or about October 15, 2014, Defendants caused Ramland Holdings to
borrow an additional approximately $12.6 million from Atalaya Special Opportunities
Fund IV, LP, in connection with a building loan agreement.
AO. On or about November 12, 2014, Ramland Holdings granted Atalaya
Special Opportunities Fund IV, LP, two mortgages on the Orangeburg Property in the
total amount of approximately $15 million.
Al. On or about January 21, 2015, Ramland Holdings borrowed approximately
$38.9 million from Pacific Western Bank secured by mortgages on the Orangeburg
Property. Pacific Western Bank also took assignments of the earlier mortgages from
Atalaya, although Atalaya remained involved in the debt financing of the Orangeburg
PLAINTIFFS’ ORIGINAL PETITION PAGE10
Property as a participating lender. At this point, the debt on the Orangeburg Property
consisted of an Original Term Loan, a Building Loan, and a Project Loan.
42. The Original Term Loan was evidenced by two promissory notes, the Term
Loan A Note and the Term Loan B Note. The total maximum original principal balance
on the Original Term Loan was $15,628,171.
43, The Building Loan was evidenced by two promissory notes, the Building
Loan A Note and the Building Loan B Note. The total maximum original principal
balance on the Building Loan was $45,276,633.
44, The Project Loan was evidenced by two promissory notes, the Project Loan
A Note and the Project Loan B Note. The total maximum original principal balance on
the Project Loan was $5,748,158.
45. In July 2015, Welp solicited a personal loan from Edwards that could be
secured by Welp’s equity in 1547 CSR. Welp represented that 1547 CSR had built
significant value in the assets, which at that time included the Orangeburg Property and
data centers in Cheyenne, Wyoming, and Kapolei, Hawaii. Welp represented that part
of the increase in value came from an office/workspace recovery tenant added in the
Orangeburg Property.
46. In December 2015, Welp and 1547 CSR represented to Plaintiffs that the
Orangeburg Property had a current market value of $165 million with a 40% occupancy.
This valuation was based in part on projected net operating income for deals then being
negotiated, as opposed to net operating income from existing tenants.
PLAINTIFFS’ ORIGINAL PETITION PaGE11
47. On or about November 16, 2016, Ramland Holdings sold 8.9 acres of the
Orangeburg Property to Subaru Distributors Corp. for $1,650,000. This sale was not
disclosed to Plaintiffs.
48. In August 2017, a subsidiary of 1547 CSR entered into a joint venture with
an affiliate of CIM Group to acquire and develop datacenter properties. 1547 CSR and
Welp did not disclose this fact to Plaintiffs. The joint venture entity is U.S. Data Center
Portfolio Venture, LLC (“Portfolio Venture”), a Delaware limited liability company
formed on August 1, 2017.
49, On or about January 22, 2019, Ramland Holdings sold the Orangeburg
Property to 1 Ramland Road Owner, LLC, a Delaware limited liability company. This
sale was made pursuant to a Purchase and Sale Agreement and Joint Escrow Instructions
(the “PSA”) dated as of December 28, 2018, for a stated purchase price of $85,591,620.
50. The sole member of 1 Ramland Road Owner, LLC (the buyer of the
Orangeburg Property) is 1 Ramland Road Owner Special Member, LLC, a Delaware
limited liability company formed on November 16, 2018.
ole The sole member of 1 Ramland Road Owner Special Member, LLC is
Portfolio Venture —the joint venture between CIM Group and 1547 CSR.
52. The managing member of Portfolio Venture is Portfolio Manager. On
information and belief, Portfolio Manager is owned by 1547 CSR or its principals.
53. Todd Raymond signed the PSA on behalf of both the seller and the buyer.
Todd Raymond also signed the Settlement Statement for this transaction on behalf of both
the seller and the buyer.
PLAINTIFFS’ ORIGINAL PETITION PaGE12
54. Attached to the PSA as Schedule 3.2.2.2.4 is a document entitled “Proforma
Example of Calculation of Value for Eligible Lease.” That Proforma places the “property
value as of the combined earnout calculation date” as $201,935,714. It also places the
“Capital Basis of Property as of the Combined Earnout Calculation Date” at $130,875,000.
55. The PSA provided that the buyer would assume the existing mortgages
held by Pacific Western Bank and pay-down the combined balance to approximately
$32.7 million.
56. At the time of closing, the remaining balances on the promissory notes were
$15,285,730.39 on the Original Term Loan, $43,627,650.65 on the Building Loan, and
$5,519,880.40 on the Project Loan, totaling $64,073,261.44, which leaves unaccounted for
approximately $21 million in claimed debt on the Orangeburg Property.
57. In the closing of the sale of the Orangeburg Property, $8,298,000 was paid
to ACM 1547 IV Inc., an entity that did not exist until December 18, 2018, when it was
formed as a Delaware corporation.
58. On information and belief, ACM 1547 IV Inc. is owned by Atalaya, and the
$8,298,000 constituted the redemption of an equity investment Atalaya had acquired in
Ramland Holdings. Atalaya also received $35,611,711.04 as repayment of the portions of
the debt it held as a participating lender.
59. The PSA called for a new entity, BC/DR, LLC, to enter into a ten year lease
for 25,000 square feet of space within the building on the Orangeburg Property. BC/DR
is a Delaware limited liability company formed on December 21, 2018, and on
information and belief is owned by 1547 CSR or its principals.
PLAINTIFFS’ ORIGINAL PETITION PAGE13
60. The PSA also required ACM 1547 IV Inc. to provide a guaranty of the
BC/DR Lease, secured by a letter of credit, in favor of the new owner, 1 Ramland Road
Owner. The Guaranty of Lease document recites that ACM 1547 IV Inc.’s affiliate
previously owned debt and equity rights issued by Ramland Holdings which had been
repaid and redeemed in connection with the sale of the Orangeburg Property from
Ramland Holdings to 1 Ramland Road Owner.
61. Atalaya received $3,200,000 of the sales proceeds, which it loaned to 1547
CSR, evidenced by a promissory note with a maturity date of March 27, 2019. The note
required 1547 CSR to use the proceeds of the loan to fund its equity requirements relating
to the purchase of the Orangeburg Property. Apparently, at closing, the $3,200,000 was
paid directly to Portfolio Venture.
62. Further, at closing 1 Ramland Road Owner, the buyer of the Orangeburg
Property, received a credit of $2,736,842.11 toward the purchase price as an adjustment
for “1547 Equity.”
63. Defendant Ramland Management was formed on October 24, 2018, in
connection with the transaction. On information and belief, Ramland Management is
owned by 1547 CSR or its principals.
64. Ramland Management entered into a Facilities Management Agreement
with 1 Ramland Road Owner under which Ramland Management would manage the
Orangeburg Property and receive as compensation a percentage of the gross revenues
from the operations of the Orangeburg Property. Ramland Management is also entitled
to construction management fees for any tenant improvement or capital improvement
PLAINTIFFS’ ORIGINAL PETITION PaGE14
projects and any major repairs, replacements, and alterations at the Orangeburg Property,
based on a percentage of aggregate gross construction project costs. Todd Raymond
signed the Facilities Management Agreement on behalf of both Ramland Management
and 1 Ramland Road Owner.
65. Ramland Management also entered into a Development Management
Agreement with 1 Ramland Road Owner, which contemplated the construction of
additional improvements on the Orangeburg Property consisting of approximately
131,000 square feet of additional data center and support space and approximately 53,000
square feet of additional data center related office and support space (the
“Improvements”). Under the Development Management Agreement, Ramland
Management would oversee architectural, engineering, permitting, procurement,
equipment, material, construction and related management and ancillary services
necessary to complete the Improvements and Ramland Management would receive as a
Development Management Fee based on a percentage of the aggregate gross project
costs. Todd Raymond signed the Development Management Agreement on behalf of
both Ramland Management and 1 Ramland Road Owner.
66. On February 8, 2019, Welp and 1547 CSR informed Plaintiffs that the
Orangeburg Property had been sold to the CIM Group for “an initial purchase price of
$85.8M, an amount that was sufficient to repay the debt, outstanding accounts payable
and transaction expenses. Unfortunately, this initial purchase price will not result in any
distributions to the equity holders at this time.”
PLAINTIFFS’ ORIGINAL PETITION PaGE15
67. Welp and 1547 CSR represented to Plaintiffs that their entire investments
were wiped out. Plaintiffs never received any preferential returns on their investments
over the seven years Orangeburg LP indirectly owned the Orangeburg Property.
68. In February 2019, Welp and 1547 CSR represented to Plaintiffs that the deal
included earn-out provisions that could result in up to $25 million in additional proceeds
based on leases signed over the next twelve months. A year later, Welp and 1547 CSR
gave Plaintiffs further bad news—no new leases had been signed in the intervening
twelve months and no distributions would be forthcoming. The destruction of Plaintiffs’
investments was complete and total.
69. Plaintiffs are the victims of an elaborate and deceitful scheme to use
Plaintiffs’ money as “seed capital” for 1547 CSR to get its data center business off the
ground and ultimately steal Plaintiffs’ money by purporting to wipe out their equity
investment while Defendants preserved their equity in the Orangeburg Property and
continue to profit from the Orangeburg Property.
70. Instead of Orangeburg LP owning the Orangeburg Property, Orangeburg
LP only owned a membership interest in Ramland Holdings, which owned the
Orangeburg Property. The entity with control over the Orangeburg Property was the
managing member of Ramland Holdings, Holdings I—not 1547 Orangeburg Holdings
GP. Thus, the entity making the decisions and taking action with respect to the
Orangeburg Property was not a party to the 1547 Orangeburg Holdings, LP Agreement
of Limited Partnership, and did not have a partnership relationship with Plaintiffs. This
structure allowed Defendants to take on additional debt, grant additional equity interests
PLAINTIFFS’ ORIGINAL PETITION PAGE16
in Ramland Holdings, change the investment theory for the Orangeburg Property, incur
additional construction costs, and pay management and other fees, all while keeping
Plaintiffs in the dark.
71. When the Orangeburg Property was sold, Plaintiffs should have been paid
their equity investment, plus their preferred returns, at a minimum. Atalaya received
$8,298,000 to redeem its equity investment, $2,736,842.11 was credited to the buyer as
“1547 Equity,” and $3,200,000 of the sales proceeds were used by 1547 CSR to fund
Portfolio Manager’s equity in Portfolio Venture. Instead, Defendants created a complex
sales structure to steal Plaintiffs’ money and hide the truth.
72. In addition, 1547 CSR and its principals benefitted themselves at the
expense of Plaintiffs by securing the Facilities Management Agreement and the
Development Management Agreement for Ramland Management, under which
Ramland Management will receive significant sums.
73. Further, on information and belief, the sales price for the Orangeburg
Property was significantly understated. The illustrations that are part of the PSA use a
value of $201,935,714 for the Orangeburg Property. Based on Plaintiffs’ seven percent
(7%) ownership interest, that pro forma value minus the true debt would be worth
between $9 million and $10 million.
Vv
CAUSES OF ACTION
A. Count One: Fraud Against Welp and 1547 CSR
74. Plaintiffs incorporate by reference the allegations contained in paragraphs
1 through 73 of this petition as if fully set forth herein.
PLAINTIFFS’ ORIGINAL PETITION PAGE17
75 Welp and 1547 CSR made representations to Plaintiffs.
76 The representations were material.
Te The representations were false.
78. When Welp and 1547 CSR made the representations they knew the
representations were false or made the representations recklessly, as positive assertions,
and without knowledge of their truth.
79. Plaintiffs relied on the representations.
80. The representations caused Plaintiffs to suffer damages.
81 Plaintiffs are entitled to recover their damages from Welp and 1547 CSR.
82. Plaintiffs are also entitled to recover exemplary damages because the harm
to Plaintiffs resulted from fraud, malice, or gross negligence of Welp and 1547 CSR.
B Count Two: Aiding and Abetting Fraud Against Holdings II, Portfolio
Manager, and Ramland Management
83. Plaintiffs incorporate by reference the allegations contained in paragraphs
1 through 82 of this petition as if fully set forth herein.
84. Welp and 1547 CSR committed fraud against Plaintiffs.
85. Holdings II, Portfolio Manager, and Ramland Management had knowledge
that Welp and 1547 CSR committed fraud against Plaintiffs.
86. Holdings II, Portfolio Manager, and Ramland Management had the intent
to assist Welp and 1547 CSR in committing fraud.
87. Holdings II, Portfolio Manager, and Ramland Management gave Welp and
1547 CSR assistance or encouragement.
PLAINTIFFS’ ORIGINAL PETITION PaGE18
88. The assistance or encouragement of Holdings II, Portfolio Manager, and
Ramland Management was a substantial factor in causing the fraud.
89. The fraud caused Plaintiffs to suffer damages.
90. Plaintiffs are entitled to recover their damages from Holdings II, Portfolio
Manager, and Ramland Management.
91. Plaintiffs are also entitled to recover exemplary damages because the harm
to Plaintiffs resulted from fraud, malice, or gross negligence of Holdings II, Portfolio
Manager, and Ramland Management.
Cc Civil Conspiracy Against All Defendants
92. Plaintiffs incorporate by reference the allegations contained in paragraphs
1 through 91 of this petition as if fully set forth herein.
93. Defendants were members of a combination of two or more persons.
94. The object of the combination was to accomplish an unlawful purpose or a
lawful purpose by unlawful means.
95. The members had a meeting of the minds on the object or course of action.
96. One or more of the members committed an unlawful, overt act to further
the object or course of action.
97. Plaintiffs suffered injury as a proximate result of the wrongful act.
98. Plaintiffs are entitled to recover their damages from Defendants.
99. Plaintiffs are also entitled to recover exemplary damages because the harm
to Plaintiffs resulted from fraud, malice, or gross negligence of Defendants.
PLAINTIFFS’ ORIGINAL PETITION PaGE19
VI.
CONDITIONS PRECEDENT
100. All conditions precedent to Plaintiffs’ causes of action and remedies have
been performed, satisfied, occurred, or have been waived.
VII.
DEMAND FOR JURY TRIAL
101. Plaintiffs hereby demand trial by jury of all claims and issues so triable.
VII.
PRAYER FOR RELIEF
WHEREFORE, Plaintiffs respectfully request that the Court:
A Award Plaintiffs judgment from and against Defendants, jointly and
severally, for actual damages;
B Award Plaintiffs judgment from and against Defendants, jointly and
severally, for exemplary damages;
Cc Award Plaintiffs their reasonable and necessary attorneys’ fees incurred in
prosecuting this action;
D Award Plaintiffs prejudgment and post-judgment interest on all monetary
relief sought herein at the highest rates allowed by law;
E Award Plaintiffs costs and expenses of suit herein; and
F Grant Plaintiffs such other and further relief to which Plaintiffs may be
justly entitled.
PLAINTIFFS’ ORIGINAL PETITION PaGE 20
Respectfully submitted, this 31st day of December 2020.
s Michael L. Gaubert
Michael L. Gaubert
State Bar No. 00785903
Email: michael@gaubertlawgroup.com
GAUBERT LAW GROUP, P.C.
100 Crescent Court, 7th Floor
Dallas, Texas 75201
Telephone: (214) 593-6440
sf J. Robert Arnett II
J. Robert Arnett II
Email: barnett@carterarnett.com
Texas Bar No. 01332900
CARTER ARNETT PLLC
8150 N. Central Expressway, Suite 500
Dallas, Texas 75206
(214) 550-8188 Telephone
(214) 550-8185 Facsimile
COUNSEL FOR PLAINTIFFS ARISTA
INVESTMENTS, LLC; ARISTA
INVESTMENTS 401K TRUST; F. AARON
EDWARDS, J. MARK EARLEY, and BRIAN
FOX
PLAINTIFFS’ ORIGINAL PETITION PaGE21
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Status as of 12/31/2020 1:21 PM CST
Case Contacts
Name BarNumber | Email TimestampSubmitted Status
J. Robert Arnett, Il barnett@carterarnett.com 12/31/2020 12:47:49 PM SENT
Kathleen Newsome knewsome@carterarnett.com 12/31/2020 12:47:49 PM SENT
Michael L.Gaubert michael@gaubertlawgroup.com 12/31/2020 12:47:49 PM SENT
Theresa Fails theresa@gaubertlawgroup.com 12/31/2020 12:47:49 PM SENT