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TOM KARTSOTIS, §
§
Plaintiff, §
v
RICHARD BLOCH, INDIVIDUALLY
AND AS TRUSTEE OF THE
RICHARD AND NANCY BLOCH
FAMILY TRUST, and NANCY
BLOCH AS A TRUSTEE OF THE
RICHARD AND NANCY BLOCH
FAMILY TRUST,
DALLAS COUNTY, TEXAS
LL LD DD LP > LO? AD
Defendants.
FIRST AMENDED COUNTERCLAIM
TO THE HONORABLE JUDGE OF SAID COURT:
COME NOW, Richard Bloch, individually and as trustee of The Richard and Nancy
Bloch Family Trust, and Nancy Bloch, as trustee of The Richard and Nancy Bloch Family Trust
(collectively, “Counterclaimants”), Defendants and Counterclaimants in the above-captioned
lawsuit, and file this First Amended Counterclaim. In support thereof, Counterclaimants would
respectfully show the Court as follows:
L DISCOVERY
1. Discovery will be conducted under Level 3 pursuant to Rule 190.4 of the Texas
Rules of Civil Procedure.
Il. PARTIES
2. Plaintiff/Counterdefendant Tom Kartsotis (“Kartsotis”), an individual, is a citizen
of Collin County, Texas. Mr. Kartsotis has made an appearance in this lawsuit and may be
served through his attorneys of record.
FIRST AMENDED COUNTERCLAIM Page 13. Defendant/Counterclaimant Richard Bloch (“Bloch”), an individual, is a citizen of
the State of California. Mr. Bloch has made an appearance in this lawsuit.
4. Defendant/Counterclaimant Richard Bloch, Trustee (“R. Bloch Trustee”), an
individual, is a citizen of the State of California. R. Bloch Trustee is a trustee of The Richard and
Nancy Bloch Family Trust (the “Trust”). R. Bloch Trustee has made an appearance in this
lawsuit.
5. Defendant/Counterclaimant Nancy Bloch, Trustee (“N. Bloch Trustee”), an
individual, is a citizen of the State of California. N. Bloch Trustee is a trustee of The Richard and
Nancy Bloch Family Trust (the “Trust”). N. Bloch Trustee has made an appearance in this
lawsuit.
Ill. JURISDICTION AND VENUE
6. This Court has jurisdiction over the subject matter of the claims stated herein
because the amount in controversy is within the jurisdictional limits of this Court.
7. This Court has the power to declare rights, status, and other legal relations
pursuant to Section 37.003 of the Texas Civil Practices and Remedies Code.
8. Joinder of the claims stated herein is proper under Rules 51(a) and 97 of the
Texas Rules of Civil Procedure.
9. Venue is proper in Dallas County because the Counterdefendant is a resident of
Dallas County, and this action is properly brought as a counterclaim in this action.
IV. FACTS APPLICABLE TO ALL CAUSES OF ACTION
A The Contribution Agreement
10. On or about November 30, 2007, CLB Capital Partners, L.P. (the “Partnership”)
was formed to transact business in the real estate development industry. The limited partners of
FIRST AMENDED COUNTERCLAIM Page 2the Partnership were CLB Partners, Ltd. and Bedrock Dirt, LP. The general partner of the
Partnership was an entity controlled by Messrs. Cureton, Bloch, and Kartsotis.
11. On or about November 30, 2007, Mr. Bloch, the Trust, and Messrs. Cureton and
Kartsotis entered into a Contribution and Indemnification Agreement (the “Contribution
Agreement”). The Contribution Agreement sets forth a number of obligations and agreements
among Mr. Bloch, the Trust, and Messrs. Cureton and Kartsotis related to indebtedness incurred
by the Partnership in the course of Partnership business.
12. In the Contribution Agreement, the parties acknowledged that the Partnership and
its subsidiaries had entered into certain obligations prior to the parties’ entry into the
Contribution Agreement. The parties stated their desire to effectuate an equitable sharing of the
tisk and liability with respect to both the existing obligations and future obligations of the
Partnership. The Contribution Agreement included a list of “Existing Obligations” to which it
applied.
13. The Contribution Agreement provides that, if any party made a payment in
respect of the Obligations, the payor would have a right to receive from the other parties an
amount such that the net payments made by the parties would be shared according to the parties’
Pro Rata Percentages.
14. Among the Existing Obligations listed in Exhibit A to the Contribution
Agreement, and thus, among the Obligations, are promissory notes (each a “BBR Note” and
collectively, the “BBR Notes”) payable to La Jolla Bank related to a development in Bozeman,
Montana known as Black Bull Run. The BBR Notes matured on May 1, 2008 and May 25, 2008,
respectively. The BBR Notes had an aggregate estimated outstanding amount of approximately
FIRST AMENDED COUNTERCLAIM Page 3$32,583,452 when the parties entered into the Contribution Agreement. At least some of these
obligations were loans from La Jolla Bank, FSB.'
15. On April 22, 2010, OneWest Bank, as successor-in-interest to the assets and
liabilities of La Jolla Bank, filed a lawsuit against Mr. Bloch in the Superior Court of the State of
California in and for the County of San Diego (the “California Lawsuit”) alleging that the BBR
Notes had gone into default and that Mr. Bloch is personally liable for payment of the
outstanding amounts allegedly due on the BBR Notes. OneWest Bank alleges that Mr. Bloch is
personally liable for $30,209,072.22 plus prejudgment interest, attorney’s fees, and costs.
16. | The amounts sought by OneWest Bank in the California Lawsuit concern the
BBR Notes, which are Obligations under the Contribution Agreement. Accordingly, the parties
to the Contribution Agreement (the Trust and Mr. Bloch and Messrs. Kartsotis and Cureton) are
each bound to pay their Pro Rata Percentage of any “payment upon or in respect of” the BBR
Notes related to OneWest’s claims in the California Lawsuit.
17. Mr. Bioch has paid approximately $997,151.85 upon or in respect of the BBR
Notes to date. These amounts include, but are not limited to, amounts that concern obligations to
the holder of the BBR Notes and the defense of claims relates to the BBR Notes. On September
6, 2011, Mr. Kartsotis affirmatively repudiated his contribution and indemnity obligations
relating to the BBR Notes by virtue of his responses to discovery requests from Defendants.
18. Also among the Obligations covered by the Contribution Agreement is an
Obligation arising out of a real estate development at the intersection of Kettner Boulevard and
Grape Street in San Diego, CA (the “Kettner & Grape Obligation”). The Kettner & Grape
Obligation was incurred to construct a mixed-use property in San Diego’s Little Italy
"La Jolla Bank’s assets and liabilities were seized by the Federal Deposit Insurance Corporation in 2010 and later
transferred to One West Bank. OneWest Bank currently holds the BBR Notes.
FIRST AMENDED COUNTERCLAIM Page 4neighborhood near San Diego Bay. The Kettner & Grape Obligation had an estimated
outstanding amount of approximately $15,000,000 when the parties entered into the Contribution
Agreement.
19. Mr. Bloch has paid approximately $454,000 upon or in respect of the Kettner &
Grape Obligation to date.
20. On August 5, 2011, Mr. Bloch made demand on Mr. Kartsotis for contribution
and indemnity under the terms of the Contribution Agreement with respect to the BBR Notes and
the Kettner & Grape Obligation. On August 19, 2011, Mr. Kartsotis responded, but he did not
accept responsibility for his contribution and indemnity obligations. On September 6, 2011, Mr.
Kartsotis affirmatively repudiated his contribution and indemnity obligations relating to the
Kettner & Grape Obligation by virtue of his responses to discovery requests from Defendants.
21. The Contribution Agreement states that it “shall continue in full force and effect
as long as the this [sic] Agreement or any of the Obligations are outstanding and unpaid.” Some
of the Obligations continue to be outstanding and unpaid.
22. There is a justiciable controversy between Counterclaimants and Mr. Kartsotis as
to the rights and status of each under the Contribution Agreement. The controversy is real and
genuine, and it involves a genuine conflict of tangible interests. The claims of the parties are
present and indicative of threatened litigation in the immediate future. A declaration by this
Court as to the rights and status of Counterclaimants and Mr. Kartsotis under the Contribution
Agreement will resolve this controversy and minimize the prolongation of disputes, reduce the
tisk of loss, and avoid the unnecessary accumulation of damages.
FIRST AMENDED COUNTERCLAIM Page 5B. Kartsotis’s Breach of Fiduciary Duty
23. At all times relevant, the Partnership’s business decisions were made by its
general Partner, CLB Capital Partners GP, LLC (“GP”). The day-to-day business and major
decisions of the Partnership were left to GP’s exclusive contro!. The managers of GP made the
decisions for GP (which, in turn, were carried out as the Partnership’s operations).
24, Messrs. Cureton, Bloch, and Kartsotis were the three managers of GP.
25. On or about February 22, 2008, the Partnership borrowed $10,000,000 from
Guaranty Bank pursuant to a Credit Loan Agreement. The Partnership executed a promissory
note to Guaranty Bank to repay the loan principal and interest. Further, Counterclaimants, Mr.
Cureton, and Mr. Kartsotis each executed personal guaranties related to the promissory note.
26. On or about February 22, 2009, the Partnership, Counterclaimants, Mr. Cureton,
Mr. Kartsotis, and Guaranty Bank entered into an agreement to modify the Credit Loan
Agreement and the promissory note and to extend the maturity of the promissory note for a year.
In connection with this modification agreement, Messrs. Bloch and Kartsotis also made
payments to reduce the principal of the promissory note.
27. On or about February 21, 2010, the Partnership, Counterclaimants, Mr. Cureton,
Mr. Kartsotis, and Guaranty Bank entered into a second agreement to modify the Credit Loan
Agreement and the promissory note and to extend the maturity of the promissory note for an
additional year.
28. The promissory note matured in February of 2011, and the Partnership failed to
pay the amount due. In March of 2011, Compass Bank (as successor to Guaranty Bank) made
demand on the guarantors of the promissory note for the unpaid amounts. On information and
belief, Mr. Kartsotis paid half of the unpaid amount of the promissory note on or about March
FIRST AMENDED COUNTERCLAIM Page 629, 2011. On the following day, Mr. Kartsotis asked Mr. Bloch whether Mr. Bloch would make
payment on the unpaid amount of the promissory note.
29. Mr. Bloch proposed that the Partnership request from Compass Bank an
additional one-year extension of the maturity date of the promissory note. Mr. Bloch personally
offered to pay all of the debt service on the promissory note for the year. The Partnership, Mr.
Cureton, and Mr. Kartsotis would have incurred no losses or adverse consequences had the
promissory note been extended for a third time because Mr. Bloch would have paid for any
associated costs, including the accumulation of additional interest.
30. A third one-year extension would have been in the best interest of the Partnership,
would have avoided litigation, and would have avoided discord among the partners and the
managers of GP.
31. Rather than attempt to negotiate or agree to a third one-year extension with
Compass Bank, on information and belief, Mr. Kartsotis unilaterally paid the outstanding
balance of the promissory note on or about April 8, 2011.
32. Mr. Kartsotis’ unilateral action constitutes a breach of his fiduciary duties of
loyalty and care in accordance with Delaware law, which governs the affairs of the Partnership.
Mr. Kartsotis’ unilateral action is also in violation of the covenant of good faith and fair dealing
in accordance with Delaware law.
Vv. CAUSES OF ACTION
Count I — Suit for Declaratory Relief
33. Counterclaimants incorporate Paragraphs 1-32 as if set forth fully herein.
34. Counterclaimants and Mr. Kartsotis entered into a contract for contribution and
indemnification.
FIRST AMENDED COUNTERCLAIM Page 735. The parties have a justiciable dispute about the scope of the obligations of Mr.
Kartsotis under the Contribution Agreement, including, but not limited to, Mr. Kartsotis’
obligations with respect to the payment of amounts previously paid as a result of the BBR Notes
and related obligations, the costs of defense of claims relating to the BBR Notes, and the
liability—if any—under the BBR Notes and the Kettner & Grape Obligation.
36. Accordingly, Counterclaimants seek a judicial determination, pursuant to Section
37.004 of the Texas Civil Practices and Remedies Code, that the Contribution Agreement is
enforceable, that Mr. Kartsotis is obligated to pay to Counterclaimants his Pro Rata Percentage
of all payments made by Counterclaimants upon or in respect of the Obligations, plus interest
provided for in the Contribution Agreement, and that Mr. Kartsotis is obligated to indemnify
Counterclaimants for any payments to be made by Counterclaimants upon or in respect of the
Obligations by Counterclaimants in excess of Counterclaimants’ Pro Rata Percentage of the
Obligations.
Count II - Breach of Contract
37. Counterclaimants incorporate Paragraphs 1-36 as if set forth fully herein.
38. Counterclaimants and Mr. Kartsotis entered into a contract for contribution and
indemnity.
39. Mr. Kartsotis breached the Contribution Agreement by, without limitation, failing
to accept his contribution and indemnity obligations upon due demand and, later, by
affirmatively repudiating his contribution and indemnity obligations under the Contribution
Agreement.
40. Counterclaimants have been damaged as a result of Mr. Kartsotis’ failure to
perform.
FIRST AMENDED COUNTERCLAIM Page 841. Counterclaimants seek their actual damages, consequential damages, pre- and
post-judgment interest, and attorney’s fees and costs.
Count III - Breach of Fiduciary Duty
42. Counterclaimants incorporate Paragraphs 1-41 as if set forth fully herein.
43. Mr, Kartsotis was a manager of the general partner of CLB Capital Partners, L.P.
44. As a manager of the general partner of CLB Capital Partners, L.P., Mr. Kartsotis
owed fiduciary duties of loyalty and care to Mr. Bloch.
45. | Mr. Kartsotis violated his fiduciary duties of loyalty and care by, without
limitation, placing his own interests ahead of those of Mr. Bloch and exercising his
responsibilities toward Mr. Bloch with reckless indifference to or a deliberate disregard for Mr.
Bloch’s interests.
46. Mr. Bloch has suffered damages as a result of Mr. Kartsotis’ breaches of fiduciary
duty.
47. Mr. Bloch seeks his actual damages, consequential damages, punitive damages,
pre- and post-judgment interest, and attorney’s fees.
Count Iv ~ Breach of the Covenant of Good Faith and Fair Dealing
48. Counterclaimants incorporate Paragraphs 1-47 as if set forth fully herein.
49. Asa party to the limited liability company agreement of GP, Mr. Kartsotis owed a
duty to Mr. Bloch to deal fairly and in good faith.
50. Mr. Kartsotis’ actions were arbitrary and unreasonable, thereby frustrating Mr.
Bloch’s reasonable expectations at the time of contracting.
51. Mr. Bloch has suffered damages as a result of Mr. Kartsotis’ breaches of the duty
of good faith and fair dealing.
FIRST AMENDED COUNTERCLAIM Page 952. Counterclaimants seek their actual damages, consequential damages, pre- and
post-judgment interest, and attorney’s fees and costs.
Count V - Attorney’s Fees
53. Counterclaimants incorporate Paragraphs 1-52 as if set forth fully herein.
54. Pursuant to Sections 37.009 and 38.001(8) of the Texas Civil Practices and
Remedies Code, Counterclaimants are entitled to recover reasonable attorney’s fees and costs
incurred in connection with this lawsuit.
VIL PRAYER FOR RELIEF
WHEREFORE, PREMISES CONSIDERED, Counterclaimants hereby respectfully
request that the Court enter a judicial declaration stating the rights and obligations of
Counterclaimants and Mr, Kartsotis with respect to the Contribution Agreement (including
obligations with respect to the BBR Notes and the Kettner & Grape Obligation).
Counterclaimants also respectfully request that the Court, upon trial of Counterclaimants’ claims,
enter a judgment against Mr. Kartsotis and in Counterclaimants’ favor for actual, consequential,
and punitive damages. Further, Counterclaimants respectfully request that the Court grant them
their reasonable and necessary attorney's fees, pre- and post-judgment interest, costs of Court
and such further relief at law and in equity to which the Court finds Counterclaimants justly
entitled.
FIRST AMENDED COUNTERCLAIM Page 10Dated September 15, 2011. Respectfully submitted,
By: _/s/ Jeffrey Goldfarb
Jeffrey Goldfarb
State Bar No. 00793820
GOLDFARB BRANHAM LLP
Saint Ann Court
2501 N. Harwood Street, Suite 1801
Dallas, TX 75201
214.583.2233 (Telephone)
214.583.2234 (Facsimile)
ATTORNEYS FOR DEFENDANTS
/COUNTERCLAIMANTS RICHARD BLOCH,
INDIVIDUALLY AND AS A TRUSTEE OF
THE RICHARD AND NANCY BLOCH
FAMILY TRUST, AND NANCY BLOCH, AS
A TRUSTEE OF THE RICHARD AND
NANCY BLOCH FAMILY TRUST
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing has been served on the
following counsel in accordance with the Texas Rules of Civil Procedure as set forth below on
this 15th day of September, 2011:
Via facsimile 214-855-7584
D. Ronald Reneker
Jason A. Copling
Michael C. Lee
MUNSCH HARDT KOPF & HARR, P.C.
3800 Lincoln Plaza
500 N. Akard Street
Dallas, TX 75201-6659
/s/ Jeffrey Goldfarb
Jeffrey Goldfarb
FIRST AMENDED COUNTERCLAIM Page 11aN
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GOLDFARE \\ off \ en
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September 15, 2011
Via Hand Delivery _
Clerk
162” Judicial District Court
600 Commerce Street, 7¢ Floor
Dallas, TX 75202
Re: Tom Kartsotis v. CLB Capital Partners, Lid., et al., Cause No. 11-04489 in the
1624 Dallas County District Court.
Dear Clerk:
| enclose for filing the original and three copies of Defendants’ First Amended Counterclaim in the
above-referenced matter.
Please file one in the usual manner and retum the other file marked copies with the courier.
Sincerely,
/s/ Jeffrey Goldfarb
Jeffrey Goldfarb
Enclosures
cc: D. Ronald Reneker (via hand delivery with enclosures)
Saint Ann Court
2501 N. Harwood St.
Suite 1801
Datlas, TX 75201
p:214.583.2233 £:214.583.2234
goldfarbbranham.com
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TOM KARTSOTIS, § § Plaintiff, § v RICHARD BLOCH, INDIVIDUALLY AND AS TRUSTEE OF THE RICHARD AND NANCY BLOCH FAMILY TRUST, and NANCY BLOCH AS A TRUSTEE OF THE RICHARD AND NANCY BLOCH FAMILY TRUST, DALLAS COUNTY, TEXAS LL LD DD LP > LO? AD Defendants. FIRST AMENDED COUNTERCLAIM TO THE HONORABLE JUDGE OF SAID COURT: COME NOW, Richard Bloch, individually and as trustee of The Richard and Nancy Bloch Family Trust, and Nancy Bloch, as trustee of The Richard and Nancy Bloch Family Trust (collectively, “Counterclaimants”), Defendants and Counterclaimants in the above-captioned lawsuit, and file this First Amended Counterclaim. In support thereof, Counterclaimants would respectfully show the Court as follows: L DISCOVERY 1. Discovery will be conducted under Level 3 pursuant to Rule 190.4 of the Texas Rules of Civil Procedure. Il. PARTIES 2. Plaintiff/Counterdefendant Tom Kartsotis (“Kartsotis”), an individual, is a citizen of Collin County, Texas. Mr. Kartsotis has made an appearance in this lawsuit and may be served through his attorneys of record. FIRST AMENDED COUNTERCLAIM Page 13. Defendant/Counterclaimant Richard Bloch (“Bloch”), an individual, is a citizen of the State of California. Mr. Bloch has made an appearance in this lawsuit. 4. Defendant/Counterclaimant Richard Bloch, Trustee (“R. Bloch Trustee”), an individual, is a citizen of the State of California. R. Bloch Trustee is a trustee of The Richard and Nancy Bloch Family Trust (the “Trust”). R. Bloch Trustee has made an appearance in this lawsuit. 5. Defendant/Counterclaimant Nancy Bloch, Trustee (“N. Bloch Trustee”), an individual, is a citizen of the State of California. N. Bloch Trustee is a trustee of The Richard and Nancy Bloch Family Trust (the “Trust”). N. Bloch Trustee has made an appearance in this lawsuit. Ill. JURISDICTION AND VENUE 6. This Court has jurisdiction over the subject matter of the claims stated herein because the amount in controversy is within the jurisdictional limits of this Court. 7. This Court has the power to declare rights, status, and other legal relations pursuant to Section 37.003 of the Texas Civil Practices and Remedies Code. 8. Joinder of the claims stated herein is proper under Rules 51(a) and 97 of the Texas Rules of Civil Procedure. 9. Venue is proper in Dallas County because the Counterdefendant is a resident of Dallas County, and this action is properly brought as a counterclaim in this action. IV. FACTS APPLICABLE TO ALL CAUSES OF ACTION A The Contribution Agreement 10. On or about November 30, 2007, CLB Capital Partners, L.P. (the “Partnership”) was formed to transact business in the real estate development industry. The limited partners of FIRST AMENDED COUNTERCLAIM Page 2the Partnership were CLB Partners, Ltd. and Bedrock Dirt, LP. The general partner of the Partnership was an entity controlled by Messrs. Cureton, Bloch, and Kartsotis. 11. On or about November 30, 2007, Mr. Bloch, the Trust, and Messrs. Cureton and Kartsotis entered into a Contribution and Indemnification Agreement (the “Contribution Agreement”). The Contribution Agreement sets forth a number of obligations and agreements among Mr. Bloch, the Trust, and Messrs. Cureton and Kartsotis related to indebtedness incurred by the Partnership in the course of Partnership business. 12. In the Contribution Agreement, the parties acknowledged that the Partnership and its subsidiaries had entered into certain obligations prior to the parties’ entry into the Contribution Agreement. The parties stated their desire to effectuate an equitable sharing of the tisk and liability with respect to both the existing obligations and future obligations of the Partnership. The Contribution Agreement included a list of “Existing Obligations” to which it applied. 13. The Contribution Agreement provides that, if any party made a payment in respect of the Obligations, the payor would have a right to receive from the other parties an amount such that the net payments made by the parties would be shared according to the parties’ Pro Rata Percentages. 14. Among the Existing Obligations listed in Exhibit A to the Contribution Agreement, and thus, among the Obligations, are promissory notes (each a “BBR Note” and collectively, the “BBR Notes”) payable to La Jolla Bank related to a development in Bozeman, Montana known as Black Bull Run. The BBR Notes matured on May 1, 2008 and May 25, 2008, respectively. The BBR Notes had an aggregate estimated outstanding amount of approximately FIRST AMENDED COUNTERCLAIM Page 3$32,583,452 when the parties entered into the Contribution Agreement. At least some of these obligations were loans from La Jolla Bank, FSB.' 15. On April 22, 2010, OneWest Bank, as successor-in-interest to the assets and liabilities of La Jolla Bank, filed a lawsuit against Mr. Bloch in the Superior Court of the State of California in and for the County of San Diego (the “California Lawsuit”) alleging that the BBR Notes had gone into default and that Mr. Bloch is personally liable for payment of the outstanding amounts allegedly due on the BBR Notes. OneWest Bank alleges that Mr. Bloch is personally liable for $30,209,072.22 plus prejudgment interest, attorney’s fees, and costs. 16. | The amounts sought by OneWest Bank in the California Lawsuit concern the BBR Notes, which are Obligations under the Contribution Agreement. Accordingly, the parties to the Contribution Agreement (the Trust and Mr. Bloch and Messrs. Kartsotis and Cureton) are each bound to pay their Pro Rata Percentage of any “payment upon or in respect of” the BBR Notes related to OneWest’s claims in the California Lawsuit. 17. Mr. Bioch has paid approximately $997,151.85 upon or in respect of the BBR Notes to date. These amounts include, but are not limited to, amounts that concern obligations to the holder of the BBR Notes and the defense of claims relates to the BBR Notes. On September 6, 2011, Mr. Kartsotis affirmatively repudiated his contribution and indemnity obligations relating to the BBR Notes by virtue of his responses to discovery requests from Defendants. 18. Also among the Obligations covered by the Contribution Agreement is an Obligation arising out of a real estate development at the intersection of Kettner Boulevard and Grape Street in San Diego, CA (the “Kettner & Grape Obligation”). The Kettner & Grape Obligation was incurred to construct a mixed-use property in San Diego’s Little Italy "La Jolla Bank’s assets and liabilities were seized by the Federal Deposit Insurance Corporation in 2010 and later transferred to One West Bank. OneWest Bank currently holds the BBR Notes. FIRST AMENDED COUNTERCLAIM Page 4neighborhood near San Diego Bay. The Kettner & Grape Obligation had an estimated outstanding amount of approximately $15,000,000 when the parties entered into the Contribution Agreement. 19. Mr. Bloch has paid approximately $454,000 upon or in respect of the Kettner & Grape Obligation to date. 20. On August 5, 2011, Mr. Bloch made demand on Mr. Kartsotis for contribution and indemnity under the terms of the Contribution Agreement with respect to the BBR Notes and the Kettner & Grape Obligation. On August 19, 2011, Mr. Kartsotis responded, but he did not accept responsibility for his contribution and indemnity obligations. On September 6, 2011, Mr. Kartsotis affirmatively repudiated his contribution and indemnity obligations relating to the Kettner & Grape Obligation by virtue of his responses to discovery requests from Defendants. 21. The Contribution Agreement states that it “shall continue in full force and effect as long as the this [sic] Agreement or any of the Obligations are outstanding and unpaid.” Some of the Obligations continue to be outstanding and unpaid. 22. There is a justiciable controversy between Counterclaimants and Mr. Kartsotis as to the rights and status of each under the Contribution Agreement. The controversy is real and genuine, and it involves a genuine conflict of tangible interests. The claims of the parties are present and indicative of threatened litigation in the immediate future. A declaration by this Court as to the rights and status of Counterclaimants and Mr. Kartsotis under the Contribution Agreement will resolve this controversy and minimize the prolongation of disputes, reduce the tisk of loss, and avoid the unnecessary accumulation of damages. FIRST AMENDED COUNTERCLAIM Page 5B. Kartsotis’s Breach of Fiduciary Duty 23. At all times relevant, the Partnership’s business decisions were made by its general Partner, CLB Capital Partners GP, LLC (“GP”). The day-to-day business and major decisions of the Partnership were left to GP’s exclusive contro!. The managers of GP made the decisions for GP (which, in turn, were carried out as the Partnership’s operations). 24, Messrs. Cureton, Bloch, and Kartsotis were the three managers of GP. 25. On or about February 22, 2008, the Partnership borrowed $10,000,000 from Guaranty Bank pursuant to a Credit Loan Agreement. The Partnership executed a promissory note to Guaranty Bank to repay the loan principal and interest. Further, Counterclaimants, Mr. Cureton, and Mr. Kartsotis each executed personal guaranties related to the promissory note. 26. On or about February 22, 2009, the Partnership, Counterclaimants, Mr. Cureton, Mr. Kartsotis, and Guaranty Bank entered into an agreement to modify the Credit Loan Agreement and the promissory note and to extend the maturity of the promissory note for a year. In connection with this modification agreement, Messrs. Bloch and Kartsotis also made payments to reduce the principal of the promissory note. 27. On or about February 21, 2010, the Partnership, Counterclaimants, Mr. Cureton, Mr. Kartsotis, and Guaranty Bank entered into a second agreement to modify the Credit Loan Agreement and the promissory note and to extend the maturity of the promissory note for an additional year. 28. The promissory note matured in February of 2011, and the Partnership failed to pay the amount due. In March of 2011, Compass Bank (as successor to Guaranty Bank) made demand on the guarantors of the promissory note for the unpaid amounts. On information and belief, Mr. Kartsotis paid half of the unpaid amount of the promissory note on or about March FIRST AMENDED COUNTERCLAIM Page 629, 2011. On the following day, Mr. Kartsotis asked Mr. Bloch whether Mr. Bloch would make payment on the unpaid amount of the promissory note. 29. Mr. Bloch proposed that the Partnership request from Compass Bank an additional one-year extension of the maturity date of the promissory note. Mr. Bloch personally offered to pay all of the debt service on the promissory note for the year. The Partnership, Mr. Cureton, and Mr. Kartsotis would have incurred no losses or adverse consequences had the promissory note been extended for a third time because Mr. Bloch would have paid for any associated costs, including the accumulation of additional interest. 30. A third one-year extension would have been in the best interest of the Partnership, would have avoided litigation, and would have avoided discord among the partners and the managers of GP. 31. Rather than attempt to negotiate or agree to a third one-year extension with Compass Bank, on information and belief, Mr. Kartsotis unilaterally paid the outstanding balance of the promissory note on or about April 8, 2011. 32. Mr. Kartsotis’ unilateral action constitutes a breach of his fiduciary duties of loyalty and care in accordance with Delaware law, which governs the affairs of the Partnership. Mr. Kartsotis’ unilateral action is also in violation of the covenant of good faith and fair dealing in accordance with Delaware law. Vv. CAUSES OF ACTION Count I — Suit for Declaratory Relief 33. Counterclaimants incorporate Paragraphs 1-32 as if set forth fully herein. 34. Counterclaimants and Mr. Kartsotis entered into a contract for contribution and indemnification. FIRST AMENDED COUNTERCLAIM Page 735. The parties have a justiciable dispute about the scope of the obligations of Mr. Kartsotis under the Contribution Agreement, including, but not limited to, Mr. Kartsotis’ obligations with respect to the payment of amounts previously paid as a result of the BBR Notes and related obligations, the costs of defense of claims relating to the BBR Notes, and the liability—if any—under the BBR Notes and the Kettner & Grape Obligation. 36. Accordingly, Counterclaimants seek a judicial determination, pursuant to Section 37.004 of the Texas Civil Practices and Remedies Code, that the Contribution Agreement is enforceable, that Mr. Kartsotis is obligated to pay to Counterclaimants his Pro Rata Percentage of all payments made by Counterclaimants upon or in respect of the Obligations, plus interest provided for in the Contribution Agreement, and that Mr. Kartsotis is obligated to indemnify Counterclaimants for any payments to be made by Counterclaimants upon or in respect of the Obligations by Counterclaimants in excess of Counterclaimants’ Pro Rata Percentage of the Obligations. Count II - Breach of Contract 37. Counterclaimants incorporate Paragraphs 1-36 as if set forth fully herein. 38. Counterclaimants and Mr. Kartsotis entered into a contract for contribution and indemnity. 39. Mr. Kartsotis breached the Contribution Agreement by, without limitation, failing to accept his contribution and indemnity obligations upon due demand and, later, by affirmatively repudiating his contribution and indemnity obligations under the Contribution Agreement. 40. Counterclaimants have been damaged as a result of Mr. Kartsotis’ failure to perform. FIRST AMENDED COUNTERCLAIM Page 841. Counterclaimants seek their actual damages, consequential damages, pre- and post-judgment interest, and attorney’s fees and costs. Count III - Breach of Fiduciary Duty 42. Counterclaimants incorporate Paragraphs 1-41 as if set forth fully herein. 43. Mr, Kartsotis was a manager of the general partner of CLB Capital Partners, L.P. 44. As a manager of the general partner of CLB Capital Partners, L.P., Mr. Kartsotis owed fiduciary duties of loyalty and care to Mr. Bloch. 45. | Mr. Kartsotis violated his fiduciary duties of loyalty and care by, without limitation, placing his own interests ahead of those of Mr. Bloch and exercising his responsibilities toward Mr. Bloch with reckless indifference to or a deliberate disregard for Mr. Bloch’s interests. 46. Mr. Bloch has suffered damages as a result of Mr. Kartsotis’ breaches of fiduciary duty. 47. Mr. Bloch seeks his actual damages, consequential damages, punitive damages, pre- and post-judgment interest, and attorney’s fees. Count Iv ~ Breach of the Covenant of Good Faith and Fair Dealing 48. Counterclaimants incorporate Paragraphs 1-47 as if set forth fully herein. 49. Asa party to the limited liability company agreement of GP, Mr. Kartsotis owed a duty to Mr. Bloch to deal fairly and in good faith. 50. Mr. Kartsotis’ actions were arbitrary and unreasonable, thereby frustrating Mr. Bloch’s reasonable expectations at the time of contracting. 51. Mr. Bloch has suffered damages as a result of Mr. Kartsotis’ breaches of the duty of good faith and fair dealing. FIRST AMENDED COUNTERCLAIM Page 952. Counterclaimants seek their actual damages, consequential damages, pre- and post-judgment interest, and attorney’s fees and costs. Count V - Attorney’s Fees 53. Counterclaimants incorporate Paragraphs 1-52 as if set forth fully herein. 54. Pursuant to Sections 37.009 and 38.001(8) of the Texas Civil Practices and Remedies Code, Counterclaimants are entitled to recover reasonable attorney’s fees and costs incurred in connection with this lawsuit. VIL PRAYER FOR RELIEF WHEREFORE, PREMISES CONSIDERED, Counterclaimants hereby respectfully request that the Court enter a judicial declaration stating the rights and obligations of Counterclaimants and Mr, Kartsotis with respect to the Contribution Agreement (including obligations with respect to the BBR Notes and the Kettner & Grape Obligation). Counterclaimants also respectfully request that the Court, upon trial of Counterclaimants’ claims, enter a judgment against Mr. Kartsotis and in Counterclaimants’ favor for actual, consequential, and punitive damages. Further, Counterclaimants respectfully request that the Court grant them their reasonable and necessary attorney's fees, pre- and post-judgment interest, costs of Court and such further relief at law and in equity to which the Court finds Counterclaimants justly entitled. FIRST AMENDED COUNTERCLAIM Page 10Dated September 15, 2011. Respectfully submitted, By: _/s/ Jeffrey Goldfarb Jeffrey Goldfarb State Bar No. 00793820 GOLDFARB BRANHAM LLP Saint Ann Court 2501 N. Harwood Street, Suite 1801 Dallas, TX 75201 214.583.2233 (Telephone) 214.583.2234 (Facsimile) ATTORNEYS FOR DEFENDANTS /COUNTERCLAIMANTS RICHARD BLOCH, INDIVIDUALLY AND AS A TRUSTEE OF THE RICHARD AND NANCY BLOCH FAMILY TRUST, AND NANCY BLOCH, AS A TRUSTEE OF THE RICHARD AND NANCY BLOCH FAMILY TRUST CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing has been served on the following counsel in accordance with the Texas Rules of Civil Procedure as set forth below on this 15th day of September, 2011: Via facsimile 214-855-7584 D. Ronald Reneker Jason A. Copling Michael C. Lee MUNSCH HARDT KOPF & HARR, P.C. 3800 Lincoln Plaza 500 N. Akard Street Dallas, TX 75201-6659 /s/ Jeffrey Goldfarb Jeffrey Goldfarb FIRST AMENDED COUNTERCLAIM Page 11aN ce 5 ‘ 5 vette Balto GOLDFARE \\ off \ en .2230 ine al wr ehaey gue September 15, 2011 Via Hand Delivery _ Clerk 162” Judicial District Court 600 Commerce Street, 7¢ Floor Dallas, TX 75202 Re: Tom Kartsotis v. CLB Capital Partners, Lid., et al., Cause No. 11-04489 in the 1624 Dallas County District Court. Dear Clerk: | enclose for filing the original and three copies of Defendants’ First Amended Counterclaim in the above-referenced matter. Please file one in the usual manner and retum the other file marked copies with the courier. Sincerely, /s/ Jeffrey Goldfarb Jeffrey Goldfarb Enclosures cc: D. Ronald Reneker (via hand delivery with enclosures) Saint Ann Court 2501 N. Harwood St. Suite 1801 Datlas, TX 75201 p:214.583.2233 £:214.583.2234 goldfarbbranham.com