PLAINTIFF’S ORIGINAL (“Plaintiff’ will · II. Law 2. Plaintiff MICHAEL BUSTER is an individual residing in Collin County, Texas. 3. Defendant UNITY RESOURCES, L.L.C. is a Texas

Filed: 5/12/2017 9:39:17 AM Lynne Finley District Clerk Collin County, Texas By Caitlen Politz Deputy

CAUSE NO. 417022132017 Envelope ID: 16993081

MICHAEL BUSTER IN THE DISTRICT COURT

Plaintiff,

V. JUDICIAL DISTRICT

UNITY RESOURCES, L.L.C., MARK THOMAS MERSMAN, MARK JOSEPH SOLOMON, JR, TRADE RARE, L.L.C., BYRON CURTIS COOK, JOEL HOCHBERG, and LEGACY INCOME PROPERTIES, L.L.C.

Defendants.

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COLLIN COUNTY, TEXAS

PLAINTIFF’S ORIGINAL PETITION

Plaintiff MICHAEL BUSTER (“Plaintiff’ or “Buster”) now files this Original

Petition. In support, Plaintiff shows the Court the following:

I.

Discovefl Control Plan

1. Unless modified by the Court, discovery in this lawsuit will be conducted

according to Discovery Control Plan - Level 3 (TRCP Rule 190.4).

- PLAINTIFF’S ORIGINAL PETITION Page 1

II.

Law 2. Plaintiff MICHAEL BUSTER is an individual residing in Collin County,

Texas.

3. Defendant UNITY RESOURCES, L.L.C. is a Texas Limited Liability

Company located in Plano, Texas. Unity may be served with process by serving its

registered agent, Mark Mersman, with citation and petition at 5930 W. Plano Parkway,

Plano, Texas 75093 or wherever in Texas he may be found.

4. Defendant MARK THOMAS MERSMAN is an individual residing in

Texas. He may be served with process by serving him with citation and petition at

5930 W. Plano Parkway, Plano, Texas 75093, or Wherever in Texas he may be found.

5. Defendant MARK JOSEPH SOLOMON, JR. is an individual residing in

Texas. He may be served with process by serving him with citation and petition at 833

E. Arapaho Road, Suite 107, Richardson, Texas 75081, or Wherever in Texas he may

be found.

6. Defendant TRADE RARE, L.L.C. is a Texas limited liability company.

Trade Rare may be served with process by serving its registered agent, Les Leskoven,

with citation and petition at 321 North 15th Straet, Corsicana, Texas 751 10 or wherever

in Texas he may be found.

PLAINTIFF’S ORIGINAL PETITION Page 2

7. Defendant BYRON CURTIS COOK is an individual residing in Texas.

Mr. Cook may be served with process by serving him with citation and petition at 2200

Arcady Lane, Corsicana, Texas 75110 or wherever in Texas he may be found.

8. Defendant JOEL HOCHBERG is an individual residing in Golden Beach,

Florida. He may be served with process by serving him with citation and petition at

17749 Collins Avenue, Unit 3601, Sunny Isles Beach, Miami-Dade County, Florida,

33160.

9. Defendant LEGACY INCOME PROPERTIES, L.L.C. is a Texas Limited

Liability Company. Legacy may be served with process by serving its registered agent,

Blue Diamond Royalty Management, L.L.C., by and through its Manager, Mark

Mersman, with citation and petition at 4401 Druid Hills Drive, Frisco, Texas 75034 or

Wherever in Texas he may be found.

HI.

Mus

10. Venue is proper in Collin County, Texas pursuant to Section 15 .002(a)(3)

of the Texas Civil Practice and Remedies Code, as Defendant Unity Resources,

L.L.C.’s principal office in this state is in Collin County, Texas and was in Collin

County, Texas at the time Plaintiff s causes of action accrued. Venue is also proper in

Collin County, Texas pursuant to Section 15.002(a)(1) of the Texas Civil Practice and

PLAINTIFF ’8 ORIGINAL PETITION Page 3

Remedies Code, because it is the county in which all or a substantial part of the events

or omissions giving rise to the claim occurred.

IV.

TRCP 47 Statement

1 1. Plaintiff seeks monetary relief of more than $1,000,000.00.

V.

Background Facts

Introduction to Unitesources and Leggy? Income Properties

12. Defendant Unity Resources, L.L.C. (“Unity”) holds itself out as an energy

asset management company located in Plano, Texas. Unity purports to acquire and

manage oil, natural gas, and mineral royalties in the United States. Defendants Mark

Thomas Mersman (“Mersman”) and Mark Solomon (“Solomon”) founded Unity in

2008. While Unity’s website is no longer active, it was once hosted at

htm://www.unitvresourcesnet. On that website, Mersman held himself out in

February 2014 as being “responsible for research, evaluation and due diligence of

investment opportunities, portfolio and financial management as well as management

of Unity’s legal and accounting teams.” He described himself as Unity’s “Mineral

Management Pro.”

13. Unity further held Solomon out as leading “the strategic development of

Unity’s investment portfolio [and managing Unity’s] institutional and strategic


industry partner relationships.” Unity failed to disclose that Solomon had in fact been

subject to an administrative proceeding with the Securities Division of the State of

Wisconsin’s Department of Financial Institutions and was a former registered

representative of several defunct broker—dealers in the oil and gas industry.

14. Unity essentially had two components to its business: (1) a “retail” side of

the house in which individual investors acquired interests in investment funds

promoted by Unity and its affiliate, Legacy Income Properties; and (2) a “direct sales”

side of the house in which individual investors were solicited to purchase specific

mineral acreage in specific locations in the United States, but particularly in Texas,'

Oklahoma, and Wyoming.

15. Unity had a number of ways that it made money:

(1) By making promotional fees from investors through raising money into

its various investment funds on the “retail” side of the house;

(2) By making illegal commissions on mineral acreage brokered to individual

investors on the “direct sales” side of the house;

(3) By purchasing mineral acreage and marking up the price of those mineral

acres that it brokered to investors on the “direct sales” side of the house;

and

(4) By making a combination of the foregoing illegal commissions and

undisclosed markups by transferring the mineral acres between its funds


on the “retail” side of the house and the individual investors on the

“direct sales” side of the house and vice versa.

16. Defendant Legacy Income Properties (“Legacy”) is essentially a follow-

on concern of Unity designed for a similar business purpose and under the control of

the same persons.

The Unity and Leggev Offering Scheme

17. Unity and Legacy’s business was to syndicate risky oil and gas offerings

to retail and direct-sales investors throughout the United States, many of whom were

investing through self-directed IRA plans. Unity and Legacy acquired mineral acreage

from a handful of sources and then offered that acreage to investors in issuer

transactions through entities such as Unity #9—A, L.L.C., Unity 12-C, L.L.C., Legacy

Income Royalty Fund, Cypress Income Fund, L.L.C., and Cypress Income Fund II,

L.L.C. These offerings were not registered offerings, and Unity and Legacy were not

registered with the Securities and Exchange Commission or any state as a broker-

dealer.

18. Unity and Legacy failed to disclose to its retail investors that the source of

some of the acreage in those programs was Unity manager and equity owner Cook, his

affiliated entity, Trade Rare, L.L.C. (“Trade Rare”), and his confidante and fellow

Unity equity owner, Joel Hochberg (“Hochberg”). Trade Rare is the brainchild of

Cook and Hochberg, with the name being a mashup of Cook’s (and his father’s)


successful video game enterprise “Tradewest, Inc.” and Hochberg’s successful Video

game enterprise “Rare, Inc.”. Unity used its member/manager Cook and its member

Hochber g (and their company, Trade Rare) to “land bank” Unity’s securities offerings

without disclosing that information to its securities purchasers in the various funds.

19. As early as May 2013, Unity began functioning as an intermediary with

regard to mineral acreage acquisitions by Cook, Hochberg, and Trade Rare. These

mineral acres are “securities” under Section 4 of the Texas Securities Act, as they

represent an interest in or under an “oil, gas, or mining lease, fee, or title.” Unity

identified mineral acreage, negotiated terms with the owner, and “brokered” the sale of

that mineral acreage to Cook, Hochberg, and their affiliated business entities or trusts.

Unity realized a profit in the transaction by negotiating the purchase from the mineral

owner at a certain fixed price, then applying a substantial markup and selling the

interests to Cook, Hochberg, Trade Rare, or their affiliates and keeping the difference.

Unity often never obtained title to the mineral acres itself, but had the minerals deeded

0r assigned directly to the end purchaser by the mineral owner.

20. Cook, Hochberg, and Trade Rare agreed to these transactions because the

plan was to “flip” the acreage into Unity’s own securities offerings and for Cook,

Hochberg, and Trade Rare to realize an undisclosed profit from the “flip.” At the

time of these “flips,” Cook was on the board of managers of Unity, and any such

transaction would have been an obvious conflict of interest and would not have been


negotiated at arm’s length. As a member of Unity, the same was true of Hochberg and

his affiliated entities such as Trade Rare. These flips were not disclosed to the Unity

board of managers or the equity owners of Unity aside from Mersman, Solomon,

Cook, or Hochberg, much less approved by the managers or members after an

informed vote.

21. Pursuant to this scheme, acreage held by members of the Cook family or

by Trade Rare was transferred into Cypress Income Fund II, L.L.C. and Legacy

Income Royalty Fund, L.L.C. (both Unity securities offerings) in November of 20 1 3,

February of 2014, April of 20 14 and again in July of 2014. Even more startling, after

the bottom had fallen out of oil prices beginning in July of 2014, the market for this

acreage went ice-cold. Sensing his investment turning against him after oil went from

$1 10/barrel to less than $60/barrel, Cook exploited his influence as a Manager of Unity

to make Unity reacquire mineral acreage from him and members of his own family on

November 28, 2014.

Introduction to Michael Buster

22. Plaintiff Michael Buster (“Buster”) made purchases of mineral acreage

from Unity in a series of direct sales transactions between June 2014 and May 2015.

As noted above, the mineral rights purchased by Buster are “securities” under Section

4 of the Texas Securities Act, as they represent an interest in or under an “oil, gas, or

mining lease, fee, or title.” Buster is a pastor and his investments in the mineral


acreage sold to him by Unity represent substantial percentage of his personal net worth.

The mineral acreage Buster purchased is located in Glasscock County, Texas; Woods

County, Oklahoma, Alfalfa County, Oklahoma; and Campbell County, Wyoming.

23. In January 0f2017, based on the allegations of other investors with Unity,

Buster became concerned regarding the absence of disclosure of material facts to him

prior to making his investments. Unity is not registered as a broker-dealer With either

the Securities and Exchange Commission or the Texas State Securities Board. Based

on certain documents Buster has received, Unity paid itself commissions fiom the sales

of these securities While being unregistered, which would subject the sale to Buster of

these securities to rescission.

24. On January 30, 2017, Buster contacted Mark Mersman, a manager of

Unity, for information and documents related to Buster’s investments. Specifically,

Buster requested the documents that would account for who actually received Buster’ 5

investment proceeds each time he purchased the securities, including any money

conveyed to third parties. Buster also requested that Mersman identify the owners of

Trade Rare, L.L.C., an entity in the chain of title of these securities. Mersman would

not provide that information.

25. Buster also asked Why he was offered mineral interests that were owned

by Trade Rare, L.L.C. or Cypress Income Fund H, L.L.C—both entities apparently

affiliated with Unity or its owners. Mersman declined to answer these inquiries or

PLAINTIFF ’S ORIGINAL PETITION Page 9

provide the requested documents stating that his lawyers would not allow him to

provide the documents or information.

26. Buster directly asked Mersman why, in 2016, Unity offered him acreage

in Payne County, Oklahoma that it did not own. Mersman would not answer. Buster

directly asked Mersman whether Unity ever offered him mineral acreage that was

bought by another Unity investor who was trying to sell it for a profit. Mersman

would not answer.

27. After investigating his concerns and potential claims through the Rule 202

deposition process, it became obvious that Buster had been defrauded from the very

beginning.

Defendants Defraud Buster

28. Defendants took advantage of Buster in a series of direct sales

transactions in which Buster purchased securities in the form of mineral acreage.

Buster’s purchase of the securities at issue spanned a year. Buster engaged in the

following transactions with Unity or Legacy on the following dates:

Date County State Property Description Total

6/10/2014 Glasscock TX See. 212, Blk 29, A—813 $18,900.00

6/10/2014 Glasscock TX 63/2 Sec 193, Blk. 29, A-487 $18,900.00

6/ 10/2014 Glasscock TX Sec. 224, Blk. 29, A—812 $18,900.00

6/ 10/2014 Woods OK Section 22 of 28N—20W $148,050.00

6/10/2014 Alfalfa OK Section 1 of 28N—9W $48,300.00


7/18/2014 Woods OK Section 26 of 28N—20W $129,937.50

11/15/2014 Woods OK Section 27 of 28N—20W $55,125.00

5/1/2015 Campbell WY Multiple Tracts $93,926.40

Total $532,038.90

29. In its very first transactions with Buster, Unity used Buster as an

unwitting counterparty to purchase mineral acreage fiom Cook’s affiliate, Trade Rare,

at exorbitant markups and after very short holding times. Unity brokered these

transactions and made transaction-based compensation from these investments. Buster

believed that Unity was selling him securities that were suitable for his investment

needs and upon the best terms available; instead, Unity worked against Buster to the

direct financial benefit of its other investor and Manager, Byron Cook, and others.

While Unity disclosed certain operational risks and pricing risks of investing in oil and

gas, Unity did not tell the whole story. Unity failed to disclose to Buster (1) that the

actual owner of the interests was Trade Rare, (2) that Trade Rare was going to directly

profit from Unity’s transactions with Buster and (3) that those profits would directly

flow through to other investors and one principal of Unity (Cook) directly. In at least

one case, Unity brokered a transaction between Buster and Trade Rare in which Trade

Rare’s interest was marked up 80% from its cost before being sold to an unwitting

Buster. In these same transactions Where Trade Rare profited directly, Unity paid itself

a 5% “finder” s fee” that was transaction—based and functioned directly as a commission


on the sale of these securities. These commissions were illegal, as Unity has never

been registered With FINRA or any state (including Texas) as a broker-dealer.

30. In subsequent transactions, Unity and Legacy engaged in What it calls

“principal” transactions with Buster. These are transactions in which Unity contends it

purchased and owned the mineral acreage it ultimately sold to Buster, as opposed to

simply acting as an intermediary for Trade Rare and others. In these “principal”

transactions, Unity and Legacy substantially marked up the costs of the mineral

acreage before selling them to Buster and deriving a substantial profit. Unity and

Legacy had told Buster that the only money it would make on its mineral transactions

with Buster were in the form of a 5% finder’s fee. This was false. The profits Unity

and Legacy received in the form of Buster’s investment proceeds were substantially

more than 5% on “principal transactions.” The profits realized by Unity and Legacy

was material information requiring disclosure to Buster.

Mersman and Solomon as Control Persons and Material Aiders of Unitv and

Egg 31. On June 10, 2014 and thereafter, Mersman and Solomon were “control

persons” and material aiders of Unity and Legacy. Mersman and Solomon served as

both officers and managers of Unity and Legacy and had the ability to direct and

control the seller and issuer of the securities in question—the mineral title delivered to

Buster. Mersman and Solomon knew, or in the exercise of reasonable diligence,


should have known the true use of Buster’s investment proceeds, the true price Unity

or Legacy or their affiliates paid for the acreage, and the true historical cash flow

average of those mineral acres. Mersman and Solomon further provided material aid to

unity with intent to deceive or defraud Buster or with reckless disregard for the truth or

the law. Mersman’s and Solomon’s substantial assistance to the primary Violators,

Unity and Legacy, with subjective awareness of the fraud, caused Buster to lose

virtually his entire investment.

Cook. Hochberg, and Trade Rare as Control Persons and Material Aiders

32. On June 10, 2014 and thereafler, Cook was a control person and a

material aider of Unity. As a manager of Unity as a manager-managed Texas limited

liability company and a major equity owner, Cook was uniquely positioned to directly

or indirectly control Unity. Cook knew or should have known through the exercise of

reasonable care that Unity was selling mineral acres to Buster based upon a

misapplication of Buster’s investment proceeds and with a bevy of easily-refuted

misrepresentations and omissions to state material facts. While Unity had other

managers, Cook had unique control of Unity, including the ability to drive Unity into

transactions that benefitted him financially over other members, managers, investors,

and mineral acreage owners. In transactions throughout 2013 and 2014, Cook, his

family, his family limited partnership, and his company, Trade Rare, made transfers of

their acreage into investment funds sponsored by Unity without disclosure of those


insider transfers, leaving investors placing their hard-earned retirement money into

those filnds in the dark while Cook and his affiliates benefitted financially. This is

perhaps nowhere better seen than in the simple fact that Cook compelled or permitted

Unity to repurchase his acreage after the midyear 2014 oil crash.

33. Hochberg and Trade Rare also functioned as material aiders of Unity on

June 10, 2014 and thereafter. Hochberg and Trade Rare provided substantial

assistance to Unity, the primary securities violator, with intent to deceive 0r defraud or

With reckless disregard for the truth or the law. Hochberg, as a member of Unity

knowingly participated in conflict-of—interest transactions alongside Cook and through

Trade Rare in hopes they would profit from unknowing investors in Unity securities

offerings. These “land banking” transactions served to benefit Cook and Hochberg to

the detriment of and without the knowledge of fellow managers and members of Unity.

Had the managers and members of Unity known about these self-interested

transactions, the transactions would have been temninated or prevented immediately.

VI.

Causes of Action

(FRAUD)

34. Plaintiff incorporates the allegations stated above as if fully restated

below.


35. Defendants Unity, Legacy, and Mersman, by means of a scheme designed

to defraud investors of their investments, made misrepresentations and omissions of

fact to Plaintiff concerning certain securities.

36. When Defendants Unity, Legacy, and Mersman made these

misrepresentations to Plaintiff, they knew the representations were false or made the

representations recklessly, as a positive assertion, and Without knowledge of their truth.

37. Defendants Unity, Legacy, and Mersman made the misrepresentations

with the intent that Plaintiff act upon them and invest money in a fraudulent scheme.

38. Plaintiff relied upon those misrepresentations and suffered economic

injury as a result.

(FRAUD BY NONDISCLOSURE)


below.

40. Defendants Unity, Legacy, and Mersman concealed material information

from Plaintiff and failed to disclose certain facts known to these Defendants.

Specifically, Defendants Unity, Legacy, and Mersman failed to disclose the

promotional costs of the offering and, in many cases, the identity of a non-arms—length

and affiliated seller Who derived a profit from the transactions.

41. Defendants Unity, Legacy, and Mersman were intentionally silent when

they had a duty to share the information known to them regarding the foregoing facts.

PLAINTIFF’S ORIGINAL PETITION ‘ Page 15

If Defendants Unity, Legacy, and Mersman would have made full and honest

disclosure of this material fact to the Plaintiff, the Plaintiff never would have

purchased the mineral acres.

42. The wrongful conduct of Defendants Unity, Legacy, and Mersman

proximately caused Plaintiff to suffer damages and was committed knowingly in

callous disregard for the Plaintiff.

(FRAUD IN A REAL ESTATE TRANSACTION)


below.

44. The Plaintiff 8 purchase of the mineral acreage as solicited by Defendants

Unity, Legacy, and Mersman, is a transaction involving real estate that is subject to

Section 27.01 of the Texas Business and Commerce Code.

45. The conduct of the Defendants Unity, Legacy, and Mersman meet the

elements of Section 27.01 statutory fraud in a real estate transaction:

46. The Defendants Unity, Legacy, and Mersman falsely represented past or

existing facts:

(A) to Plaintiff for the purpose of inducing Plaintiff to enter into an agreement

to purchase the mineral acres; and

(B) Plaintiff relied on the false statements in entering into the agreement for

the acquisition of the mineral acres.


47. The Defendants Unity, Legacy, and Mersman falsely promised to do an

act, when the false promise was:

(A) Material;

(B) Made with the intention of not fulfilling it;

(C) Made to the Plaintiff for the purpose of inducing Plaintiff to enter into an

agreement to purchase the mineral acres; and

(D) Plaintiff relied upon the Defendants Unity, Legacy, and Mersman in

buying the mineral acres.

48. Pursuant to Section 27.01(b) of the Texas Business and Commerce Code,

because of the false representations and false promises made by Defendants Unity,

Legacy, and Mersman, they are liable for Plaintiff 5 actual damages.

49. Pursuant to Section 27.01 (c) of the Texas Business and Commerce Code,

because Defendants Unity, Legacy, and Mersman made the false representation and

false promises with actual awareness of the falsity thereof, they are liable for

exemplary damages.

50. Pursuant to Section 27.01 ((1) of the Texas Business and Commerce Code,

because Defendants Unity, Legacy, and Mersman had actual awareness of the falsity or

the representations and promises made to Plaintiff and Defendants Unity and Mersman

benefitted from the false representations and promises, they are liable for exemplary

damages.


51 . Pursuant to Section 27 .01(e) of the Texas Business and Commerce Code,

Defendants Unity, Legacy, and Mersman are liable for the reasonable and necessary

attorney’s fees, expert witness fees, costs for copies of depositions, and costs of court

incurred by Plaintiff.

(CONSPIRACY TO COMMIT FRAUD)


below.

53. Defendants conspired to defraud Plaintiff. There was a meeting of the

minds among the Defendants to defraud Plaintiff, and the Defendants knew their

actions would harm Plaintiff, but acted to nonetheless cause injury and damage.

54. Defendants’ fraudulent conduct is the type of conduct for which

exemplary damages may be awarded. Plaintiff seeks and is entitled to exemplary

damages from Defendants.

(BREACH OF FIDUCIARY DUTY)

55. Plaintiff incorporates the allegations stated above as if fully restated below.

56. A special relationship of trust and confidence existed between the

Defendants Unity, Legacy, Mersman, Solomon, Cook and Plaintiff.

57. These Defendants had fiduciary obligations and duties to Plaintiff,

including the duty to recommend suitable investments.


58. These Defendants, as sellers of securities to Plaintiff, had fiduciary

obligations and duties to Plaintiff, including a duty to refrain from self-dealing, a duty

of good faith, a duty of full disclosure, a duty of fairness and honesty in dealings with

each other, and a duty to refrain from sharp dealing.

59. Defendants Unity, Legacy, Mersman, Solomon, and Cook breached their

fiduciary obligations to Plaintiff as stated more fully above.

60. Plaintiff has been damaged as a result of these Defendants’ fiduciary

breaches.

(AIDING AND ABETTING BREACHES OF FIDUCIARY DUTY AND FRAUD)

61. Defendants Unity, Legacy, Mersman, Solomon, and Cook owed Plaintiff

the fiduciary duties of good faith, candor, and full disclosure.

62. Cook, Hochberg and Trade Rare willingly and knowingly assisted Unity

in breaching these fiduciary duties and in committing fraud by participating in the

overall fraudulent scheme and engaging in transactions undisclosed t0 the other

managers and members.

63. The assistance and encouragement of Defendants Cook, Hochberg and

Trade Rare were a substantial factor in causing Defendant Unity, Legacy, Mersman,

and Solomon to breach their fiduciary duties.

64. Plaintiff and other investors relied on the material misrepresentations and

omissions in the offering documents to their detriment, which caused Plaintiff to incur


significant monetary losses.

(SUIT FOR RESCISSION UNDER TEXAS SECURITIES ACT)


below.

66. Pursuant to Texas Revised Civil Statues Article 5 81, Section 33A(1), “A

person who offers or sells a security in Violation of Section 7, 9 (or a requirement of

the Commissioner thereunder), 12, 23C, or an order under 23A or 23-2 of this Act is

liable to the person buying the security from him, who may sue either at law or in

equity for rescission or for damages if the buyer no longer owns the security.”

67. Defendants Unity, Legacy, and Mersman sold securities in Violation of

Section 12 of Texas Revised Civil Statues Title 19, Article 581, as these securities

were not registered under the laws of the State of Texas and they do not fall under any

relevant exemption. The receipt of the sales commission by Unity While the issuer was

not registered as a broker-dealer with the Securities and Exchange Commission or the

State of Texas voids any potential exemption from registration. As a result, Plaintiff

seeks rescission of the purchase of its securities.

68. In the alternative, Title 19, Article 581, Section 33A(2) provides, “A

person who offers or sells a security (whether or not the security or transaction is

exempt under Section 5 or 6 of this Act) by means of an untrue statement of a material

fact or an omission to state a material fact necessary in order to make the statements


made, in the light of the circumstances under which they are made, not misleading, is

liable to the person buying the security from him, who may sue either at law or in

equity for rescission . . .”

69. As a result of misstatements of material fact and omissions by Defendants

Unity, Legacy, and Mersman, Plaintiff is entitled to and seeks rescission of the

purchase of its securities.

(SUIT AGAINST CONTROL PERSONS AND AIDERS UNDER TEXAS SECURITIES ACT)


below.

71. Under Texas Revised Civil Statutes Title 19, Article 581, Section 33F (1),

“A person who directly or indirectly controls a seller, buyer, or issuer of a security is

liable under Section 33A [ . . . ] jointly and severally with the seller, buyer, or issuer,

and to the same extent as if he were the seller, buyer, or issuer, unless the controlling

person sustains the burden of proof that he did not know, and in the exercise of

reasonable care could not have known, of the existence of facts by reason of which the

liability is alleged to exist.”

72. Under Texas Revised Civil Statutes Title 19, Article 581, Section 33F(2),

“A person who directly or indirectly with intent to deceive or defraud or with reckless

disregard for the truth or the law materially aids a seller, buyer, or issuer of a security

PLATNTIFF’S ORIGINAL PETITION Page 21

is liable under Section 33A [ . . . ] jointly and severally with the seller, buyer, or issuer,

and to the same extent as if he were the seller, buyer, or issuer.”

73. Defendants Mersman, Solomon, Cook, Hochberg, and Trade Rare are

jointly and severally liable with Defendants Unity or Legacy because of their direct

control of Unity or Legacy as the offeror or because of their materially aid to

Defendants Unity 0r Legacy with intent to deceive or defraud or with reckless

disregard for the truth or the law.

(EXEMPLARY DAMAGES—NO STATUTORY CAP)


below.

75. A plaintiff who successfully prosecutes a suit for fraud can recover

exemplary damages under Section 41 .003(a)(1) of the Texas Civil Practice and

Remedies Code. Plaintiff seeks exemplary damages as providedfor by Section 41.003

of the Texas Civil Practice & Remedies Code because the Defendants perpetrated a

fraud upon and acted With malice with respect to Plaintiff. The Defendants, with the

intent to defraud or harm the Plaintiff, engaged in an outrageous course of conduct.

76. Defendants violated Section 32.45 (misapplication of fiduciary property

or property of financial institution) and Section 32.46 (securing execution of document

by deception) of the Texas Penal Code. Accordingly, exemplary damages Should not

be limited by Section 41.008 of the Texas Civil Practice & Remedies Code.


77.

(INTEREST AND ATTORNEY’S FEES)

Plaintiff seeks prejudgment interest at the maximum legal rate on his

money invested in the scheme and his reasonable and necessary attorney’s fees as

provided for by Texas Revised Civil Statutes Title 19, Article 581.

78.

(CONDITIONS PRECEDENT)

All conditions precedent to Plaintiffs recovery have occurred or have

been performed as required by law.

VII.

Prayer for Relief

WHEREF ORE, Plaintiff requests that it recover from Defendants, jointly and

severally, the following relief:

1. Plaintiff’s damages arising from Defendants’ fraud, fraud by

nondisclosure, statutory fraud, conspiracy to commit fraud,

breaches of fiduciary duties, aiding and abetting, and Violations of

the Texas Securities Act;

Rescission of Plaintiff’s purchase of the securities at issue, for

which all Defendants are jointly and severally liable;

Exemplary damages;

Prejudgment and postjudgment interest;

Plaintiffs reasonable and necessary attorney’s fees;


6. Such other and further relief to which Plaintiff may show himself to be

justly entitled.

Respectfully submitted,

SCHEEF & STONE, L.L.P.

By: /S/ J. Mitchell Little J. Mitchell Little State Bar No. 24043788

2600 Network Blvd., Suite 400 Frisco, Texas 75034 (214) 472-2100 Telephone (214) 472-2150 Telecopier mitch.1ittleé‘bso]idcounseicom

ATTORNEYS FOR PLAINTIFF MICHAEL BUSTER


Documents

PLAINTIFF’S ORIGINAL (“Plaintiff’ will · II. Law 2. Plaintiff MICHAEL BUSTER is an individual residing in Collin County, Texas. 3. Defendant UNITY RESOURCES, L.L.C. is a Texas