Preview
FILED
12/11/2020 4:07 PM
FELICIA PITRE
DISTRICT CLERK
DALLAS CO., TEXAS
Kevin Molden DEPUTY
CAUSE NO. DC-20-06634
ROBERT AND MAJORIE SOLOMON, IN THE DISTRICT COURT
STEVEN LEVINE,
PAULA KLEIN,
JOYCE AND NOLAN KARP, and
THE AXELROD TRUST,
DEBORAH AND RUTH AXELROD,
Trustees
Plaintiffs,
AND
WC 717 N HARWOOD EQUITY, LLC
Derivative Plaintiff,
Vv. DALLAS COUNTY, TEXAS
WORLD CLASS PARTNER
HOLDINGS, LLC,
WORLD CLASS CAPITAL GROUP,
LEG,
WORLD CLASS REAL ESTATE, LLC,
WC 717 NHARWOOD EQUITY MM,
LLC,
WC 717 NHARWOOD, LLC
WC 717 N HARWOOD EQUITY, LLC
WC 717 NHARWOOD PROPERTY,
LLC, WC ROUND ROCK LAND
PARTNERS, LP, and
NATIN PAUL, Individually
Defendant. 134" JUDICIAL DISTRICT
PLAINTIFF’S AND DERIVATIVE PLAINTIFF’S FIRST AMENDED PETITION
TO THE HONORABLE COURT:
COMES NOW, Robert and Marjorie Solomon, Steven Levine, Paula Klein, Joyce and
Nolan Karp, and The Axelrod Trust, Deborah and Ruth Axelrod, Trustees (collectively
“Plaintiffs”) and WC 717 N Harwood Equity, LLC (“Derivative Plaintiff’) complaining of World
Class Partner Holdings, LLC, WC 717 N Harwood, LLC, WC 717 N Harwood Equity, LLC, WC
717 N Harwood Equity II, LLC, WC Round Rock Land Partners, LP, and Mr. Natin Paul
Plaintiff's First Amended Petition
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(collectively “Defendants”) and file this First Amended Petition and for cause of action would
show the Court as follows:
I DISCOVERY LEVEL and DAMAGES
1 Plaintiff affirmatively pleads that discovery should be conducted under Level 2 in
accordance with Texas Rule of Civil Procedure 190.3.
2. Plaintiff affirmatively pleads that it is seeking damages in excess of one million dollars
($1,000,000.00).
IL. PARTIES
3. Plaintiffs Robert and Marjorie Solomon are individuals residing in the State of New Jersey.
They may be contacted through their counsel of record.
4. Plaintiff Steven Levine is an individual residing in the State of New York. He may be
contacted through his counsel of record.
5. Plaintiffs Paula Klein is an individual residing in the State of New York. She may be
contacted through her counsel of record.
6. Plaintiffs Joyce and Nolan Karp are individuals residing in the State of New York. They
may be contacted through their counsel of record.
7. Plaintiff The Axelrod Trust, Deborah and Ruth Axelrod trustees, is a trust based in New
Jersey. It may be contacted through its counsel of record.
8. Defendant and Derivative Plaintiff WC 717 N Harwood Equity, LLC is a Delaware
Limited Liability Company that has its principal office in the State of Texas at 814 Lavaca St.,
Austin, TX 78701-2316. It does not maintain a registered agent in the State of Texas and may be
served through the Secretary of State. It has appeared and answered in this case.
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9. Defendant World Class Partner Holdings, LLC is a Delaware Limited Liability Company
that has its principal office in the State of Texas at 814 Lavaca St., Austin, TX 78701-2316. It
does not maintain a registered agent in the State of Texas and may be served through the Secretary
of State. It has appeared and answered in this case.
10. Defendant World Class Capital Group, LLC is a Texas limited Liability Company with its
principal office in the State of Texas at 814 Lavaca St., Austin, TX 78701-2316. It may be served
through its agent of service, Cogency Global, Inc., located at 1610 Elm St., Suite 4360, Dallas,
Texas 75201. It has appeared and answered in this case.
11. Defendant WC 717 N Harwood, LLC is a Delaware Limited Liability Company that has
its principal office in the State of Texas at 814 Lavaca St., Austin, TX 78701-2316. It does not
maintain a registered agent in the State of Texas and may be served through the Secretary of State.
It has appeared and answered in this case.
12. Defendant WC 717 N Harwood Equity MM, LLC is a Delaware Limited Liability
Company that has its principal office in the State of Texas at 814 Lavaca St., Austin, TX 78701-
2316. It does not maintain a registered agent in the State of Texas and may be served through the
Secretary of State. It has appeared and answered in this case.
13. Defendant WC 717 N Harwood Property, LLC is a Delaware Limited Liability Company
that has its principal office in the State of Texas at 401 Congress Ave., 33™ Floor, Austin, TX
78701. It may be served through its registered agent, Cogency Global, Inc., located at 1601 Elm
St., Suite 4360, Dallas, TX 75201. It has appeared and answered in this case.
14, Defendant World Class Real Estate, LLC is a Texas Limited Liability Company that has
its principal office in the State of Texas at 814 Lavaca St., Austin, TX 78701-2316. It does not
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maintain a registered agent in the State of Texas and may be served through the Secretary of State.
It has appeared and answered in this case.
15. Defendant WCRound Rock Land Partners, LP is a Texas limited partnership. It may be
served through its registered agent, Coency Global, Inc., located at 1602 Elm St., Suite 4360,
Dallas, TX 75201.
16. Defendant Natin Paul is an individual residing in the State of Texas. He may be served at
his principal residence located at 7800 Cava Place, Austin, TX 78735 or at his office, located at
814 Lavaca Street, Austin, Texas 78701. Mr. Paul has not appeared or answered in this matter.
lil. JURISDICTION AND VENUE
17. Jurisdiction is proper before this Court as the damages and relief sought are within the
jurisdictional limits of this Court. Venue is proper before this Court as the lawsuit involves
property located in Dallas County, Texas. TEX. CIV. PRAC. & REM. CODE ANN. §15.011.
Iv. BRIEF SUMMARY OF ACTION
18. This First Amended Petition is not removing claims from the Original Petition, rather it is
adding a new Defendant, WC Round Rock Partners, LP, and causes of action for breach of contract
relating to the breach of a settlement agreement, which has been filed with the Court.
19. This lawsuit consists of two primary claims. The first is a direct action by the named
Plaintiffs, who all are investors solicited to invest in a real estate investment, against a group of
bad actors (the Defendants) and the entity in which they are members, WC 717 N Harwood Equity,
LLC. Their claims are for failure to provide an accounting and access to the financial records of
WC 717 N Harwood Equity, LLC, failure to provide quarterly reports and distributions, breach of
contract, fraud, breach of fiduciary duty, and seek to remove the managing member and/or have a
receiver appointed over the entity.
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20. The second claim is a derivative action by WC 717 N Harwood Equity, LLC against the
same Defendants for breach of their fiduciary duties and breach of contract owed to the Company.
Vi; FACTS
21, In 2014 and 2015, Defendant World Class Capital Group, LLC began a securities offering
to raise twenty one million dollars to purchase the real property located at 717 N Harwood, Dallas,
Texas 75201 (the “Property”). The offering was for the investors to purchase a membership interest
in WC 717 N Harwood Equity, LLC, whose managing member is WC 717 N Harwood Equity
MM, LLC and was executed by World Class Capital Group, LLC'. The offering was sponsored
and offered by World Class Capital Group, LLC and Mr. Natin Paul. Defendants sold a fifty
percent (50%) interest in WC 717 N Harwood Equity, LLC and reserved a fifty percent profits
interest to themselves, after a preferred return (without complying with relevant State and Federal
law on profits interests in investments).
22. Defendants represented to Plaintiffs that:
a. The Property was cash flow positive;
b, The Managing Member (World Class Capital Group, LLC) was “solely responsible
for any recourse relating to the $68m loan being secured to improve the Property”;
The investors/Plaintiffs should expect returns in excess of 25% annually;
The investors/Plaintiffs would receive quarterly financial statements;
The investors/Plaintiffs would receive quarterly distributions; and
The investors/Plaintiffs would have full access to the financial records of the
Company.
1 Defendants fraudulently represented who the actual managing member was in their offering documents,
representing it was World Class Capital Group, not WC 717 N Harwood Equity MM, LLC. This bait and switch was
done, upon information and belief, to attempt to shield the parent entity from its own fraud.
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None of these representations have proven true, as Plaintiffs learned in late 2019. Plaintiffs fully
expect that many of the other representations made will also prove to be false as discovery
continues.
23. The litany of bad acts and fraud committed by Defendants is extensive. Defendants have,
despite numerous requests and in violation of Texas and Delaware law, refused to provide any
financial records or an accounting to the investors. They have breached the Company Agreement
at issue by failing to permit an accounting of the relevant entity. They have failed, as required to
do so by the Company Agreement, keep the books in accordance with GAAP. They have failed to
deliver quarterly reports. They have refused to answer legitimate questions by the investors. Upon
information and belief, the Defendants have engaged in extensive self-dealing for above market
rates, taken excessive fees from the relevant companies, misused company money, and/or not used
funds for the purposes represented to the investor/Plaintiffs.
24. In August 2019, the FBI opened an investigation into Defendants and raided the Property.
The FBI also raided Defendant Natin Paul’s personal residence. After this occurred and concerned
about their investment, Plaintiffs requested to inspect the financial records of Defendants,
specifically WC 717 N Harwood Equity, LLC. Defendants refused.
25. Also, in August 2019, the Property was posted for foreclosure. However, such foreclosure
did not occur, for reasons currently unknown to Plaintiffs.
26. After various threats of litigation, in December 2019, instead of disclosing the materials
required to be disclosed by law and the Company Agreement, Defendants agreed to buy-out
Plaintiffs’ interest in WC 717 N Equity, LLC ninety days after execution of the buy-out agreement
(the “Assignment of Membership Interest”). However, Defendants failed to make the required
payment on the Transfer Effective Date and no assets were transferred. It is now Plaintiffs’ belief
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that the entire exercise by Defendants was done fraudulently to “kick the can down the road” and
avoid a reckoning of their fraudulent activities.
27. In November 2019, several other entities owned and/or controlled by Defendant Natin Paul
and Defendant World Class Capital Group, filed for bankruptcy. While such bankruptcy
apparently did not directly involve the Property, such actions raised further alarm with the investor
Plaintiffs, particularly as Defendants continued to resist providing a financial accounting. The
investor/Plaintiffs are unsure as to what collateralization issues may exist, as Defendants have
refused to provide such information. The investor/Plaintiffs are concerned there may have been
fraudulent representations made to financial institutions.
28. Further, each of the Plaintiffs has now been directly contacted by the FBI to provide
documents relevant to the FBI’s ongoing investigation into Defendants, which has led to further
concerns about their investment.
29. After Defendants failed to perform the Assignment of Membership Interest, they were
again contacted and requested to provide a financial accounting as required by relevant state law
and the Company Agreement. Defendants, once again, have failed to provide such information.
30. In investigation into the matter, Plaintiffs learned that many of the relevant entities, do not
have permission to do business in the State of Texas and have not filed the required franchise tax
returns. It also currently appears as if numerous securities laws have been violated.
31. Lastly, Plaintiffs have not received any quarterly distributions from their investment in
over a year, as required by the Company Agreement and relevant investment documents.
32. Upon the Plaintiffs setting this matter for a receivership hearing, negotiations for settlement
occurred. A settlement was agreed to and memorialized via Rule 11 Agreement, which has been
filed with the Court. The Rule 11 Settlement Agreement required certain events to occur and
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conditions to be fulfilled, which Defendants did not perform. Because of this, Plaintiffs are also
bringing claims for breach of the Rule 11 Settlement Agreement.
VI. CAUSES OF ACTION
A. Breach of Contract (against Defendant World Class Partner Holdings, LLC)
33. Plaintiffs hereby bring a cause of action against Defendant World Class Partner Holdings,
LLC for breach of contract. Plaintiffs entered into a valid contract (the Assignment of Membership
Interests), Plaintiffs tendered performance of the contract by offering their membership interests
in Defendant WC 717 Harwood Equity, LLC, and Defendant World Class Partner Holdings, LLC
breached the contract by failing to pay sums due.
34. Plaintiffs have been damaged by Defendant World Class Partner Holdings, LLC’s breach.
B. Breach of Contract (against Defendant WC 717 N Harwood Equity, LLC,
Defendant WC 717 Harwood Equity MM, LLC, and World Class Capital Group,
LLC)
35. Plaintiffs hereby bring a cause of action against Defendant WC 717 N Harwood Equity,
LLC, Defendant WC 717 Harwood Equity MM, LLC, and World Class Capital Group, LLC for
breach of contract. Plaintiffs entered into a valid contract, in the form of the Company Agreement,
performed by subscribing to the company, and Defendants breached that agreement by: (i) failing
to make distributions as required by Article 5, (ii) failing to require the Managing Member to
conduct the affairs in the best interests of the Company, (iii) failing to enforce and/or require the
compliance with the Right of First Refusal set forth in Section 9.4, (iv) failing to keep the books
and records of the Company in the manner specified by the Company Agreement, (v) failing to
permit members to inspect the books, records, files, securities, and other documents of the
Company as required by Section 12.3, and (vi) failing to disclose the financial statements to
members required by Section 12.4.
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36. Plaintiffs have been damaged by Defendants breach and seek actual damages and specific
performance of the contractual obligations set forth in the Company Agreement.
C. Breach of Contract for Breaching Rule 11 Settlement Agreement
(Against all Defendants)
37. The Parties negotiated and entered into a settlement agreement, which was memorialized
via a Rule 11 agreement, which was recorded with this Court (the “Rule 11 Settlement
Agreement.”). This Rule 11 Settlement Agreement required Defendants to:
a. Deliver a series of executed secured promissory notes;
b Deliver a first in line deed of trust for certain real property located off of IH-35 near
Round Rock, Texas;
Pay 20% of the settlement amount upon execution of formal settlement documents;
and
d Other terms and conditions.
38. Defendants breached the agreement by failing to deliver the signed promissory notes, a
signed deed of trust, the 20% down payment, and the other conditions contained in the Rule 11
Settlement Agreement, thereby damaging Plaintiffs.
D. Request for Declaratory Relief
(Against all Defendants)
39. Plaintiffs seek judgment pursuant to TEX. Crv. PRAC. & REM. CODE §37.001 et seq., also
known as the Uniform Declaratory Judgment Act.
40. Plaintiffs seek judgment from this Court declaring the following:
A. The Managing Member, whether World Class Capital Group, LLC or WC 717 N
Harwood Equity MM, LLC, shall be removed as Managing Member of WC 717 N
Harwood Equity, LLC and any and all other entities which own or control the Property
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as it has (i) committed a material breach of the Company Agreement, (ii)
misappropriated funds from the Company, and/or (c) has perpetrated a fraud on the
Company;
The Company must provide a full accounting to the investor Plaintiffs along with all
of its books and records;
As Defendant World Class Partner Holdings, LLC breached the Assignment of
Membership Interest contract, each Plaintiff/investor still owns their respective interest
in Defendant WC 717 N Harwood Equity, LLC;
The interests in Defendant WC 717 N Harwood Equity, LLC sold to Plaintiffs is a
security as defined by Federal and Texas law;
The Managing Member, whether World Class Capital Group, LLC or WC 717 N
Harwood Equity MM, LLC, is not entitled to any profits interest, profit sharing, carried
interest, or other splitting of the profits with any member as Defendants, as such fees
cannot be legally collected or charged as Defendants violated numerous securities laws
in connection with their offering to Plaintiffs, including, but not limited to:
a. Tex. Adm. Code §139.23;
b SEC Rule 204-4, 17 CFR §275.204-4;
Tex. Adm. Code §116.3;
SEC Rule 205-3 as found in 17 Code of Federal Regulations §275.205-3;
Section 203(a) of the Investment Advisers Act of 1940;
Violating the “custody rule” as it relates to investor funds as specified by Texas
and Federal law (Tex. Adm. Code §116.17 and 17 CFR §275.206);
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Failing to register as an advisor or to make filings claiming exemptions from
registration;
As Defendants have custody of investor funds, failing to provide annual audited
financial records as required by Texas and Federal law;
Violating the solicitation rules contained in Rule 506(b);
Failing to meet the anti-fraud provisions of Rule 10b-5 of the Securities
Exchange Act of 1934; and
Failing to adequately disclose the risks involved in the investment presented by
Defendants.
Further, Defendants must disgorge any and all earned, accrued, and/or paid management
fees due to the above violations;
F. Any fees or other consideration paid to any individual or entity not registered as a
broker, finder, or other required registration in connection with raising money from
Plaintiffs for investment in the Property was illegally paid in violation of Texas and
Federal securities laws. This specifically includes any compensation paid to directors,
officers, or employees of any Defendant.
To the extent such fees were paid to any Defendant, such fees must be disgorged and
returned to WC 717 N Harwood Equity, LLC.
E. Breach of Fiduciary Duty
(Against Defendants WC 717 N Harwood Equity MM, LLC, World Class Real Estate,
LLC, World Class Capital Group, LLC, and Natin Paul)
41. As manager(s) of WC 717 N Harwood Equity, LLC, the above-named Defendants owed a
fiduciary duty to the members of WC 717 N Harwood Equity, LLC. Defendants have breached
their duties by:
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Failing to abide by the terms of the Company Agreement;
Entering into contractual arrangements with members and refusing to abide by the
terms of those contracts;
Failing to disclose material facts known about WC 717 N Harwood Equity, LLC;
Entering into contractual arrangements with entities owned and/or controlled by
Defendants without ensuring such contractual arrangements were at fair market
value (e.g. self-dealing);
Collecting fees in excess of which they were entitled;
Refusing to provide an accounting of WC 717 N Harwood Equity, LLC’s finances
to the members as required by law and the Company Agreement;
Permitting the Company’s assets to be put up for foreclosure;
Damaging the Company’s reputation through actions that resulted in the public
raiding of the Company’s offices by the FBI and the institution of an FBI
investigation in the Company and Defendants;
Making fraudulent representations to the Company’s members;
Failing to provide required quarterly reports;
Failing to make distributions to members as required;
Failing to require the Company and any entity and individual doing business with
it comply with relevant federal and state securities laws as previously detailed
above; and
m Upon information and belief, fraudulently using Company resources for
Defendants’ individual gain.
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42. Plaintiffs have been damaged by Defendants’ breach of their fiduciary duties, for which
they seek actual and exemplary damages.
F. Violations of Texas Securities Laws (Against all Defendants)
43, Plaintiffs hereby bring a cause of action against Defendants under the Texas Securities Act
and any federal equivalents. See Sec. 33 of the Texas Securities Act. Specifically, Defendants made
numerous untruths and omissions in connection with the sale of membership interests in WC 717
N Harwood Equity, LLC, including, but not limited to:
a Failing to adequately disclose the risks of the investment;
b World Class Capital Group would serve as the managing member;
The first net operating cash flow would be distributed to the preferred members of
WC 717 N Harwood Equity, LLC;
The preferred members of WC 717 N Harwood Equity, LLC would receive
quarterly distributions;
The Managing Member is solely responsible for any recourse relating to the $68m
Joan on the Property;
$17m would be used toward capital expenditures to improve the Property;
$26m would be used toward leasing commissions and tenant improvements;
Investors would receive an internal rate of return of 29.5% and an equity multiple
of 2.8x; and
1 Plaintiffs principal was secure in the investment.
44. Further, Defendants have liability under the same statutory provisions as buyers for making
untrue statements of material facts and omitted material facts in connection with the Assignment
of Membership Interests.
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45. Defendants violations of the Texas Securities Act, and its Federal equivalents, have
damaged Plaintiffs, for which they now sue.
G. Fraud
(Against all Defendants)
i Common Law Fraud
46. Plaintiffs hereby bring a claim against Defendants for common law fraud. As detailed
above, Defendants committed fraud (a) in connection with offering the investment in WC 717 N
Harwood Equity, LLC, (b) in connection with operating WC 717 N Harwood Equity, LLC, and
(c) in connection with offering to purchase the Plaintiffs’ membership interest in WC 717 N
Harwood Equity, LLC.
47. All of the representations complained of were material, were false, and when made, the
Defendants knew the representations were false, or they were made as positive assertions without
knowledge of their truth. The representations were made with the intent that Plaintiffs act upon
them, Plaintiffs did in fact rely and act upon them, and suffered damages. Plaintiffs seek actual
and exemplary damages for Defendants fraud.
ii. Fraud by Non-Disclosure
48. Plaintiffs hereby bring a claim against Defendants for fraud by nondisclosure. Defendants
had a duty to disclose certain facts to Defendants, including, but not limited to:
a. That the managing member of WC 717 N Harwood Equity, LLC was not going to
be the entity which Defendants represented;
The quarterly financial statements of WC 717 N Harwood Equity, LLC;
Access to the books and records of WC 717 N Harwood Equity, LLC; and
The various information required to be disclosed to investors by relevant State and
Federal law.
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49. Defendants specifically concealed and failed to disclose the above facts (and upon
information and belief other material information) to Plaintiffs. Defendants knew Plaintiffs were
ignorant of the relevant facts and that Plaintiffs could not independently determine such facts.
Defendants were deliberately quiet as to the facts (and to the date of the filing of this suit, still are
quiet about such facts), and by failing to disclose such facts, Defendants intended to induce
Plaintiffs to take some action or refrain from acting. More specifically:
a. By failing to disclose relevant facts in connection with solicitation of an investment
in WC 717 N Harwood Equity, LLC, Defendants intended to induce Plaintiffs to
make such investment;
By failing to disclose facts relating to the financial condition of WC 717 N
Harwood Equity, LLC, Defendants intended to have Plaintiffs refrain from acting
on the financial information and protect their interest in WC 717 N Harwood
Equity, LLC; and
By failing to disclose facts relating to the financial condition of WC 717 N
Harwood Equity, LLC, Defendants intended to induce Plaintiffs into signing the
Assignment of Membership Interest and/or refrain (or at least delay) from filing
any claims relating to WC 717 N Harwood Equity, LLC’s refusal to provide
financial records.
50. Plaintiffs relied on the Defendants’ nondisclosure and was injured because of it. For this
fraud, Plaintiffs seek actual and exemplary damages.
iii. Statutory Fraud
51. Plaintiffs hereby bring a cause of action against Defendants for statutory fraud pursuant to
Tex. Bus. & COM. CODE §27.01. This dispute revolves around both the sale of an equity interest
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in WC 717 N Harwood Equity, LLC and real estate (the Property). Plaintiffs hereby incorporate
the claims and allegations set forth in Section (i) and (ii) above as set forth fully herein. For such
fraud, Plaintiffs seek actual damages, exemplary damages, and specific performance of the terms
of the Company Agreement.
H. Shareholder Oppression
(Against WC 717 N Harwood Equity, LLC WC 717 N Harwood Equity MM, LLC;
World Class Real Estate, LLC, World Class Capital Group, LLC, and Natin Paul)
52. Plaintiffs hereby bring a claim against Defendants for shareholder oppression. As the
remedy for shareholder oppression in a limited liability company is the appointment of a receiver,
such pleading is being made in addition to, and in conjunction with, Plaintiffs’ request to appoint
a receiver as outlined below.
I. Appointment of Receiver
53. Pursuant to Texas Business Organization Code Section 11.404, Plaintiffs hereby request
that a receiver be appointed over all of the corporate Defendants to manage Defendants’ property
and business and/or sell off its assets to satisfy its obligations.
54. Defendants have failed to pay their debts, as they become due, as evidenced by their failure
to pay on the Assignment of Membership Interests and the posted foreclosure sale. They have also
failed to provide regular quarterly distributions and quarterly reports, as required, evidencing that
Defendants are insolvent or in imminent danger of insolvency. The abject refusal to provide an
accounting further bolsters this claim.
55. Defendants, as governing persons of the relevant entities, are deadlocked in the
management of the entities’ affairs, particularly as it relates to providing an accounting to
investors. Defendants are refusing to provide any financial records or accounting, as required by
the relevant Company documents and state law.
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56. The actions of the governing persons are illegal, oppressive, and fraudulent. Specifically,
in violation of Texas and Delaware law, and the Company Agreement, Defendants have refused
to provide financial records of the relevant entities, refused to allow for an accounting, and failed
to provide quarterly reports. Further, for many of the named Defendant entities, the governing
persons have failed to register to do business in the State of Texas and failed to file franchise taxes.
Further evidence of Defendants illegal and oppressive activities is the ongoing FBI investigation.
Plaintiffs believe additional evidence of illegal, oppressive, and fraudulent activities will be found
in discovery.
57. Under Texas law, oppressive action exists when the majority’s conduct substantially
defeats the reasonable expectations of the minority interest holders (the “reasonable expectations
test”) and/or the majority’s conduct violates the “fair dealing test” by engaging in burdensome,
harsh, and wrongful conduct or visibly departing from the standards of fair dealing that every
shareholder is entitled to rely. See e.g. Ritchie v. Rupe, 443 S.W.3d 856, 865 (Tex. 2014).
58. The property in which Plaintiffs have an interest is being misapplied and wasted, as
evidenced by the posted foreclosure action, Defendants refusal to provide an accounting and
financial records, and Defendants refusal to provide required quarterly reporting. Plaintiffs believe
additional evidence of misapplied property and waste will be found in discovery.
59. Plaintiffs are specifically requesting that the appointed receiver take control of both WC
717 N Harwood Equity, LLC and the Property in which WC 717 N Harwood Equity, LLC
maintains an ownership interest. The Receiver, if necessary, should sell the assets of WC 717 N
Harwood Equity, LLC to satisfy its debts and obligations to Plaintiffs.
VIL. DERIVATIVE LAWSUIT CLAIMS / CAUSES OF ACTION
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60. Plaintiffs request that the Court treat this derivative proceeding as a direct proceeding.
However, in the event the Court decides this matter should also proceed as a derivative action,
then the below derivative claim is advanced.
61. Derivative Plaintiff WC 717 N Harwood Equity, LLC hereby brings a derivative lawsuit
and claim against Defendants, who, collectively and based upon Plaintiff's current information
and belief, are the control group of WC 717 N Harwood Equity, LLC and the applicable Property.
In the event Texas law applies to this action, upon information and belief, Derivative Plaintiff is a
closely held company, as defined by Texas law. In the event Delaware law applies any demand
made upon Defendants would be futile as the board and control group is not disinterested. It is
apparent demand would be futile as, despite numerous requests, the board and control group (e.g.
Defendants) have repeatedly refused to provide financial records, an accounting, quarterly reports,
and generally resisted any efforts by the Plaintiff/investors to obtain information about their
investment.
62. In the event that Texas law applies and Derivative Plaintiff is learned to not be a closely
held Company, a derivative action may still be maintained. Plaintiffs will fairly represent the
interests of all owners of Derivative Plaintiff. Demand for production and inspection of the
financial records of the Company was made over ninety days ago and no financial documents or
accounting has been provided. In fact, in lieu of providing such documents, Defendants agreed to
buy out the interest of Plaintiffs — but failed to do so, providing evidence that the Assignment of
Membership Interest negotiations and agreement was nothing more than a fraudulent delaying
tactic.
A. Breach of Fiduciary Duty (Against all Defendants)
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63. Defendants owe Derivative Plaintiff the fiduciary duties of obedience, loyalty, and due
care. Defendants have breached all of those duties by:
a. Failing to abide by the terms of the Company Agreement;
b, Entering into contractual arrangements with members and refusing to abide by the
terms of those contracts;
Collecting fees in excess of which they were entitled from Derivative Plaintiff;
Entering into contractual arrangements with entities owned and/or controlled by
Defendants without ensuring such contractual arrangements were at fair market
value (e.g. self-dealing);
Refusing to provide an accounting of Derivative Plaintiff's finances to the members
as required by law and the Company Agreement;
Permitting the Company’s assets to be put up for foreclosure;
Damaging the Company’s reputation through actions that resulted in the public
raiding of the Company’s offices by the FBI and the institution of an FBI
investigation in the Company and Defendants;
Making fraudulent representations to the Company’s members as outlined above;
Failing to provide required quarterly reports;
Failing to make distributions to members as required;
Failing to require the Company and any entity and individual doing business with
it comply with relevant federal and state securities laws as previously detailed
above; and
Upon information and belief, fraudulently using Company resources for
Defendants’ individual gain.
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64. Derivative Plaintiff expects additional breaches to be found during discovery.
65. Defendants’ breach of their fiduciary duties has damaged Derivative Plaintiff, for which
Derivative Plaintiff seeks actual and exemplary damages.
B. Declaratory Relief (against all Defendants)
66. Derivative Plaintiff hereby incorporates the claims made by Plaintiff in Section VI(C)
above for declaratory relief as if set forth fully herein.
C. Breach of Contract (Against Defendants WC 717 N Harwood Equity MM, LLC,
World Class Real Estate, LLC, World Class Capital Group, LLC, and Natin Paul)
67. Derivative Plaintiff hereby brings a cause of action against its Managing Member and their
managing members for breach of contract. Derivative Plaintiff hereby incorporates the claims
made by Plaintiff in Section VI(B) above for breach of contract.
VIII. CONDITIONS PRECEDENT
68. All conditions precedent to Plaintiffs’ claim for relief have been performed or have
occurred.
IX. ATTORNEY’S FEES AND EXPENSES
69. Plaintiffs hereby requests an award of its reasonably incurred attorney’s fees and expenses.
Xx. REQUEST FOR DISCLOSURE
70. Plaintiffs hereby requests that Defendants disclose, within fifty (50) days of the service of
this request, the information and/or material described in Texas Rule of Civil Procedure 194.2.
XI. JOINT AND SEVERAL LIABILITY
71. Plaintiffs hereby request that all Defendants be held jointly and severally liable on all or
part of Plaintiffs’ claims.
XII. PRAYER
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WHEREFORE, premises considered, Plaintiffs respectfully request that Defendant WC
Round Rock Partners, LP be cited to appear and answer, and that upon notice and final hearing,
the Court enter judgment against all Defendants as specified herein.
Respectfully Submitted,
THE LAW OFICES OF CHRISTOPHER
WELSH, PLLC
By: /s/Christopher Welsh
Christopher B. Welsh
State Bar No. 24049538
4925 Greenville Ave.
Suite 200
Dallas, Texas 75206
(214) 800-5164
(214) 884-5165 - fax
E: cwelsh@welshtx.com
Attorney for Plaintiffs
Plaintiff's First Amended Petition
21
CERTIFICATE OF SERVICE
The undersigned certifies that on the 11" day of December 2020, a true and correct copy
of the foregoing was served on counsel for Defendants via the Court’s e-filing system.
/s/ Christopher Welsh
Christopher Welsh
Plaintiff's First Amended Petition
22
Automated Certificate of eService
This automated certificate of service was created by the efiling system.
The filer served this document via email generated by the efiling system
on the date and to the persons listed below. The rules governing
certificates of service have not changed. Filers must still provide a
certificate of service that complies with all applicable rules.
Christopher Welsh on behalf of Christopher Welsh
Bar No. 24049538
cwelsh@welshtx.com
Envelope ID: 48887552
Status as of 12/14/2020 10:39 AM CST
Associated Case Party: WORLD CLASS CAPITAL GROUP, LLC
Name BarNumber | Email TimestampSubmitted | Status
Brian Elliot belliott@world-class.com 12/11/2020 4:07:48 PM | SENT
Mitchell Shapiro mcs@meshapirolaw.com 12/11/2020 4:07:48 PM | SENT
Case Contacts
Name BarNumber | Email TimestampSubmitted | Status
Christopher Welsh | 24049538 cwelsh@welshtx.com 12/11/2020 4:07:48 PM | SENT
Francine Ly fly@dallascourts.org 12/11/2020 4:07:48 PM | SENT
Associated Case Party: WC 717 N HARWOOD PROPERTY, LLC
Name BarNumber | Email TimestampSubmitted | Status
Brian Elliot belliott@world-class.com | 12/11/2020 4:07:48 PM | SENT