On Friday, July 14, 2017, Baton Rouge law firm Walters, Papillion, Thomas, Cullens, LLC secured a jury verdict in excess of $20 Million against several defendants, but most notably John Paul DeJoria, founder of Paul Mitchell Studios and Patron Tequila and a frequent guest on the TV show “Shark Tank.” J.E. Cullens of WPTC was lead counsel.
DeJoria became a director of Latitude Solutions, Inc. (“LSI”), a publicly traded company, in October 2011. Although worth more than $3 billion according to Forbes Magazine, DeJoria had never served on the board of a publicly traded company before LSI. DeJoira was introduced to LSI by two long-time friends and business associates, Howard Appel and Ernest Bartlett, both of whom had checkered histories of stock manipulation and fraud. Prior to LSI, Appel was convicted of securities fraud manipulation and served twenty-one months in state and federal prison in New York. Within months of being released from prison in the summer of 2010, Appel became heavily involved in LSI as an “outside consultant.” In April 2011, one month before LSI signed a major contract with an outside manufacturer, DeJoria signed a one-page loan agreement with Appel and Bartlett for $2 million, payable within 90 days at an annual rate of approximately 200%, that was secured with 3 million shares of LSI stock. At trial, DeJoria maintained that this loan was personal in nature and unrelated to LSI; plaintiff maintained that this extremely unusual loan was strong circumstantial evidence that DeJoria was a knowing participant in Appel’s ongoing fraudulent scheme involving LSI.
LSI produced water-remediation units which used electro-precipitation technology to clean waste water in the oil and gas industry. In essence, an LSI unit would be placed near an oil well or fracking site to process and clean contaminated flowback water for reuse. LSI claimed that its water-remediation technology had the potential of effectively and rapidly cleaning so much water on site that it would “revolutionize” the way the oil industry handled waste water. Although most of the work performed by LSI took place in Texas and Oklahoma, LSI was based in Boca Raton, Florida.
In May 2011, LSI signed a multi-million dollar manufacturing contract with Jabil Circuits, Inc., one of the world’s largest manufacturers with over 90 facilities worldwide and 175,000 employees. Although Jabil’s due diligence revealed that LSI’s technology had potential, LSI did not provide Jabil with access to its price model or financial data regarding its projected operational costs. Significantly, Jabil was not informed that Appel was involved with LSI in any way. At the time LSI signed the Jabil contract, it did not have a working prototype, had not produced a single unit, and did not have a signed contract with a customer in hand. According to defendants, they had faith in LSI’s product and were confident that, with Jabil’s help, LSI would produce a unit that worked, would secure customers, and ultimately, would generate significant revenue. According to plaintiff, LSI’s technology had been around for decades, no other business like LSI had succeeded using electro-precipitation in the past, and LSI’s business model was never commercially viable. Prior to filing for bankruptcy, LSI spent more than $28 million to sustain its operations, while generating less than $1 million in revenues pursuant to a single contract which lasted about three (3) months.
In June 2011, the due diligence team sent to check out LSI for DeJoria, reported to DeJoria that Appel was a “scammer of the worst order,” that he had a twenty-year history of defrauding investors, and that he might be engaged in a “pump-and-dump” at LSI. DeJoria’ due diligence team commissioned a formal investigate report that revealed Appel and Bartlett’s prior criminal and regulatory histories in great detail. Although his due diligence team testified that they gave DeJoria this formal report, at trial, DeJoria testified that he had no recollection of ever receiving it. In any event, at a meeting in late June 2011, DeJoria told his due diligence team that Appel and Bartlett were “nice guys,” and that he would proceed with his investments in LSI despite their warnings. All told, over the course of his involvement with LSI, DeJoria invested or loaned LSI more than $11 million. DeJoria owned about 11.5 million shares of LSI stock (or about 16% of the company), but never sold a share at any time. Because DeJoria lost all of his investment in LSI, he argued at trial that, to the extent Appel and Bartlett did anything wrong, that he was the biggest victim of all. Plaintiff argued that DeJoria knew exactly what he was doing by partnering with Appel, and that he was well positioned to make a significant profit if Appel’s pump-and-dump scheme was a success.
As part of his guilty plea for securities fraud, Appel agreed that he would not serve as a director or officer of a publicly traded company. Appel never had a title at LSI. Appel was never an employee of LSI and never owned a share of LSI stock in his own name. Using nominee companies associated with his friends and family, however, Appel acquired more than 5% of LSI’s outstanding stock at deeply discounted prices. And although Appel claimed to be an “outside consultant” to LSI, he never signed a written contract with LSI. Instead, Appel and his defendants claimed that because Appel had a verbal contract with FEQ Realty, LLC (an entity owned and controlled by Ernest Bartlett which had a formal consulting contract with LSI), Appel could effectively perform extensive services for LSI without publicly disclosing his role at LSI.
Appel would communicate with the CFO of LSI, Matthew Cohen, on a daily basis, and Appel had access to a significant amount of material, non-public information. Appel was also heavily involved in recruiting executive officers of LSI, negotiating the terms of certain officer’s employment agreements, would attend executive committee meetings and board meetings, and, in essence, performed the functions of a de facto officer. Appel and his co-defendants argued that his verbal consulting agreement allowed LSI to provide all of this inside information and access to Appel without public disclosure. Plaintiff maintained that Appel was an undisclosed insider whose identity and criminal history needed to be disclosed pursuant to applicable SEC regulations. When Jabil discovered Appel’s involvement, approximately a year after it started doing business with LSI and after LSI had stopped paying its invoices on a timely basis, Jabil insisted that LSI clean house and get rid of Appel and his associates. Around this same time, May 2012, an outside executive with no prior ties to Appel or Bartlett, was recruited by DeJoria and Appel to “turn LSI around.” This new CEO lasted only about a month. After taking over the helm of LSI and discovering the depth of Appel’s involvement and control of LSI, learning that current management suspected Appel and Cohen of engaging in insider trading, and being told that DeJoria was only going to put more money into LSI if Appel did, this new CEO retained outside counsel and advised LSI that it might have to self-disclose Appel’s involvement and suspected securities fraud to the SEC. Within six months of the new CEO’s abrupt resignation, LSI moved its operations from Boca Raton to Fort Worth, DeJoria resigned as a director of LSI, LSI filed a formal report with the Department of Justice accusing Appel and Cohen of insider trading and orchestrating a pump-and-dump scheme, and filed for bankruptcy in Fort Worth, Texas, on November 9, 2012.
The court-appointed Bankruptcy Trustee, Carey Ebert (“plaintiff”), hired special litigation counsel to file suit against Appel, Bartlett, Cohen, and DeJoria, alleging, inter alia, breach of fiduciary duty and aiding and abetting breach of fiduciary duty. The Trustee also sought punitive damages against defendants. At trial, defendants maintained that despite their best efforts and significant monetary support, LSI failed; that the business judgment rule shielded the directors and officers of LSI from any liability. For every Google, defendants argued, there are ten MySpaces. In contrast, plaintiff maintained that defendants’ purpose in signing the Jabil contract and sustaining LSI’s corporate life through their financial support was not legitimate; that LSI’s technology was clearly a pipe-dream, and that the real purpose behind defendants’ involvement in LSI was to create a seemingly viable start-up company through which Appel and his associates could enrich themselves through a pump-and-dump scheme--regardless of whether their scheme was ultimately successful.
The one-week jury trial proceeded in federal court in Fort Worth, Texas, and concluded on July 14, 2017. The jury ruled that DeJoria and Cohen breached their fiduciary duty to LSI, and that DeJoria, Appel, and Bartlett all aided and abetted Cohen in his breach. The jury also awarded punitive damages against DeJoria, Appel, and Cohen. The jury awarded a total of $13.4 million in compensatory damages, and a total of $8 million in punitive damages. Plaintiff counsel anticipates an appeal.
CITATION: Ebert v. Appel, et al., No. 4:15-cv-225-O (U.S., N.D. Tx—Fort Worth, July 14, 2017).
PLAINTIFF COUNSEL: Walters, Papillion, Thomas, Cullens, LLC, Baton Rouge. Lead Counsel: J.E. Cullens, Jr. (special litigation counsel for the Bankruptcy Trustee).
PLAINTIFF EXPERTS: Robert Manz, certified fraud examiner and damages expert, BVA Group, Plano, Texas; Professor Marc Steinberg, corporate governance / SEC regulation expert, SMU Law School, Dallas, Texas; Ethan McBroom, water-remediation services expert, Amarillo, Texas.
**********Flood of 2016
WALTERS,PAPILLION,THOMAS,CULLENS sincerely hopes that you and your family are safe and sound during this crisis in our area.
The following parishes have been declared Federal Disaster Areas:
- Livingston Parish
- St. Helena Parish
- Tangipahoa Parish
- East Baton Rouge
You should go to the following website for information:
WPTC Partner Ed Walters speaking at the ceremony welcoming new LSU Law Center Dean Tom Calligan
DARREL J. PAPILLION - LSBA PRESIDENT, 2016-17
On June 9 th, 2016, partner Darrel J. Papillion become the 76th President of the Louisiana State Bar Association at their annual convention in Sandestin, Florida. The firm that carries his name is very proud of Darrel's many achievements.
To see a few photos from the week's events, click here.
Louisiana Governor John Bel Edwards met with the leadership of the Louisiana State Bar Association on January 15th, 2016 in New Orleans. Darrel Papillion is President-Elect of the LSBA for 2015-16.
WPTC SUPER LAWYERS 2016
Ed Walters was selected by Louisiana Super Lawyers as one of the "Top 50 Lawyers" in Louisiana for 2016.
Darrel Papillion was selected as a Super Lawyer in the field of Personal Injury for 2016.
J Cullens was selected as a Super Lawyer in the field of Business Litigation for 2016.
LSU APPRENTICESHIP WEEK
JANUARY 4-8, 2016
Ed Walters and Darrel Papillion are teaching a week-long course at the LSU Law School entitled "Managing the Personal Injury Case" at the Apprenticeship Week.
PARTNERS ON THE MOVE
Edward J. Walters, Jr. addressed the Lafayette Bar Association in early December, along with attorney Michael A. Patterson, with a presentation entitled “She Can’t Do That, Can She? – Professionalism and Social Media in Litigation ”.
Around the Bar published an article of Mr. Walters in the December magazine, “ An Early Christmas Present? Amendments to the Federal Rules of Civil Procedure, effective December 1, 2015.”
Additionally, Ed was elected for a three-year term to the Louisiana State Bar Association, Board of Governors for the Fifth Board District.
Darrel J. Papillion returned home this month to deliver the 2015 Fall Commencement Address for LSU-Eunice graduates. To view this event in photos: https://www.flickr.com/photos/lsueunice/sets/72157662378414672
Mr. Papillion was also a speaker at the LSU Paralegal graduation.
David Abboud Thomas has been re-elected to serve on the Louisiana State Bar Association House of Delegates – 19 th Judicial District, a 2 year term.
In addition, Abboud was re-elected for a third term on the Board of Directors for the Baton Rouge Bar Association.
J E Cullens, Jr. was recently appointed to serve as the Chair of the Business Tort Section of the Louisiana Association for Justice, 2015-2016 term.
Mr. Cullens has been elected by the Board of Directors to be a Fellow of the American Bar Foundation, a national, honorary organization of attorneys, judges, and law faculty who have demonstrated outstanding leadership in the profession and service to society.
Louisiana Advocates published an article for their December 2015 publication, written by Mr. Cullens, entitled “How Opinion Statements Can Be Misleading for Security Fraud Purposes after Omnicare ”.
Mr. Cullens was the Master of Ceremonies for the Les Jeunes Amies de La Symponie, an organization introducing daughters and granddaughters of the Baton Rouge Symphony Orchestra.
On November 13th, 2015, Louisiana State Bar Association President-Elect Darrel J. Papillion, addressed the Inter-American Bar Association and received a medal and certificate on behalf of the LSBA, a founding member of the IABA.
November 21st-23rd, Ed Walters, along with Frank Holthaus, will speak at the Louisiana State Bar Association New York, New York Multi-topic Seminar. Their topic is .......... "I'm Sure Glad We're Done...or Are We? Motion for Additur, Remittitur, New Trial, Motion for a JNOV...Will This Never End? - How Do You Win (or Lose) a Case After You have Won (or Lost)?"
Darrel Papillion will speak on Recent Developments in Civil Law and Procedure.
The McLindon Family Foundation is a Baton Rouge based foundation providing unique bikes for children with special needs. Attorney John McLindon and his wife Michelle, work closely with the other members of the McLindon family in "Making A Difference" to these children. The foundation and the work they do was a focus of the NBC Nightly News this month.
To read more, go to http://theadvocate.com/news/acadiana/13329536-123/wheels-to-freedom
Darrel J. Papillion, seminar chair, and J. E. Cullens, Jr. join a panel of well versed attorneys on Tuesday, November 10th for a CLE on Hot Topics in Personal Injury Litigation. The program has been approved for a maximum of 6.25 hours of CLE credit. For more information, www.lsba.org/cle
Michelle Sorrells Talks Kid's Chance Awareness Week
As Co-Chair of Kids' Chance, an organization through the Louisiana Bar Foundation, Michelle Sorrells gives an informative and heartfelt interview on a cause that she's championed for over 10 years. Thank you, Michelle.
Ed Walters and Tim Pujol (of Pujol, Pryor and Irwin, Gonzales, Louisiana) are to speak in New Orleans on Friday 10/30/15,at the Louisiana State Bar Association VooDoo Festival Seminar. Their topic is:
“Opening Argument . . . er, I mean Opening Statement.”
Ed Walters, Editor of the Baton Rouge Bar Association’s Monthly Publication, Around the Bar, just completed his 30 th year as editor – 300 issues, and counting.
Darrel Papillion recites the Gettysburg Address.
Darrel Papillion was sworn in as President of the Baton Rouge Bar Association.
Edward J. Walters, Jr. has been selected for inclusion in the 20th Edition of The Best Lawyers in America in the practice of Personal Injury Litigation - Plaintiffs.
Selection to Best Lawyers is based upon an exhaustive and rigorous peer-review, confidential survey of over 3 million top attorneys. There is no fee or purchase associated with this list, therefore it is considered a singular honor.
We congratulate our partner on this well-deserved and honorable achievement.
On August 5, 2013, WPTC donated 47 books to support a kindergarten class at MSA West. Thanks to everyone who made the book drive a success!
On July 10, 2013, WPTC Partner Darrel Papillion was sworn in as the 98th President of the Rotary Club of Baton Rouge.
Pictured above are Ed Walters, Professor Tom Galligan, President of Colby-Sawyer College in New Hampshire and Darrel Papillion. All three spoke at the Combined Louisiana State Bar Association Annual Meeting and Louisiana Judicial College Summer School, June 2013 in Sandestin, Florida. Ed spoke on "Evidence at Trial: Getting It In and Keeping It Out." Professor Galligan presented his yearly "Tom on Torts" compendium and Darrel spoke on "Recent Federal Developments in the Civil Arena - Substance and Procedure.
On May 3, 2013, WPTC Partner and Rotary Club of Baton Rouge President-Elect Darrel Papillion joined a large group of South Louisiana Rotarians in welcoming Sakuji Tanaka, President of Rotary International, to Baton Rouge. President Tanaka, a Japanese executive who leads the world's 1.2 million Rotarians, shared his theme of Peace Through Service to the large group of Louisiana business and professional leaders at the Pennington Biomedical Research Center. President Tanaka received a standing ovation and several gifts in an evening that featured speeches, Japanese dancing, and Rotary guests from Japan, Ohio, Illinois, and Arkansas.
Louisiana Association for Justice's 2013 Membership Directory and Leadership Resource Guide features a cover image of a white pelican at the LSU Lakes in Baton Rouge. The photograph was taken by WPTC Partner, Ed Walters, Jr.
At the beginning of the 2013 Louisiana Legislature, the Louisiana State Bar Association held a reception at the Louisiana State Capitol for our new Chief Justice, Bernette Joshua Johnson, who was about to give the "State of the Judiciary" presentation to the full legislature. Pictured above are Larry Shea, incoming President-elect, Richard Leefe, President-elect, Chief Justice Bernette Joshua Johnson, John Musser, President of the Louisiana State Bar Association, Jimmy Davidson, Immediate Past-President and Ed Walters, Secretary of the Louisiana State Bar Association and current Editor of the Louisiana Bar Journal, the official publication of the Louisiana State Bar Association.
Pictured above is Ed Walters administering the Oath of Office to Judge J. Michael McDonald of the Louisiana First Circuit Court of Appeal. Looking on are Judge McDonald's family. Ed was the Master of Ceremonies at Judge McDonald's Investiture Ceremony which was held in the First Circuit Courtroom on February 21, 2013.
Darrel Papillion (on the right) is President-Elect of the Baton Rouge Bar Association. While attending a training seminar hosted by the American Bar Association on March 14th, he visited with Edward J. Walters, III (on the left). Ed Walters, III is the son of partner Edward J. Walters, Jr. and CEO of Fastcase, a platinum sponsor of the ABA Bar Leadership Institute. The training seminar is for incoming presidents of state bar associations and very large local bar associations like the 3200 member Baton Rouge Bar.
Pictured above are Michael Walsh, President of the Baton Rouge Bar Association, Walter C. Dumas and Ed Walters at the February 2013 meeting of the Baton Rouge Bar Association. Ed and Walter collaborated on Walter's presentation entitled "Then and Now - Being a Minority Lawyer in the Early Days and How Things Have Changed . . . or Have They?"
Pictured above are Abboud Thomas, Louisiana Lieutenant Governor Jay Dardenne and Ed Walters at the January meeting of the Wex S. Malone American Inn of Court.
Congratulations to Ed Walters, Jr and Darrel J. Papillion for being selected as members of Superlawyers consecutively for 9 and 8 years, respectively.
Ed Walters was chosen by Chief Judge Burrell Carter of the Louisiana First Circuit Court of Appeal to serve as the Master of Ceremonies at Chief Judge Carter's Retirement ceremony at the First Circuit courtroom on December 19, 2012. Pictured above is Ed Walters, with First Circuit Clerk of Court Christine Crow, making a motion to the Court en banc to dispense with the regular order of business in order to proceed with the retirement ceremony.
WPTC sponsored a hole in the inaugural Darian Chustz Memorial Golf Tournament. Pictured above are partners Abboud Thomas and J. Cullens during the event held on November 2, 2012 at the Bluffs.
Ed Walters spoke for the Louisiana State Bar Association at the "Louisiana Insurance Law: Learn from the Masters" Seminar on October 5, 2012 in New Orleans. His topic was "Uncovering the Coverage - Finding Insurance Coverage Where None Exists."
Both Ed Walters and Darrel Papillion spoke at the Louisiana State Bar Association's 2012 Personal Injury Seminar on October 12, 2012 in New Orleans. The seminar topic was "The Big Case: How to Handle the Big Case from Both Sides." Ed Walters was the moderator and a panelist. Darrel Papillion spoke on "Ethics - The Bigger the Case, the Bigger the Ethics Issues."
Michelle M. Sorrells, left, of Walters, Papillion, Thomas, Cullens, LLC, received the Louisiana Bar Foundation's President Award in 2012. Michelle was recognized for organizing two fundraisers through the Baton Rouge Bar Association's Workers' Compensation Section that raised money for the Foundation's Kids' Chance Scholarship Program.
A photograph taken in Venice, La. by attorney J. Cullens, was chosen as the cover for the September 2012 issue of Louisiana Advocate magazine.
Pictured above are Ed Walters, III and Ed Walters, Jr. in the Courtroom of the Louisiana Supreme Court on February 2, 2012. Ed Walters, III, the founder and CEO of Fastcase, Inc., presented a continuing legal education program for the Law Library of Louisiana on "Who Owns the Law?" advocating the open and free access to government-produced primary legal materials online. Fastcase is America's leading next-generation internet legal research service.
Abboud Thomas, shown receiving the 2011 Baton Rouge Bar Association President's Award, for successfully serving as chairman of the Bench Bar Conference held at the Marriott Grand Resort in Point Clear, Alabama. Abboud secured the national recording artist, The Benji Davis Project, for this event.
Ed Walters, Connell Archey and Vince Fornias photographed at the Baton Rouge Bar Association's Opening of Court Ceremony in January 2012.
"Focusing on the Big & Little Pictures Going into Trial: Demonstrative Evidence and Procedural Pitfalls Surrounding Trial" was the topic of a discussion led by J.E. Cullens, Jr. in December 2011. This was part of the 2011 CLE a la Carte Seminar in Baton Rouge, hosted by the Louisiana Association for Justice.
Darrel Papillion addresses a group of Baton Rouge lawyers on issues related to Federal Court Removal and Remand, at the United States Federal Courthouse in Baton Rouge. Darrell has acquired a special skill on these issues and is frequently asked to lecture to lawyers and judges.
WPTC is LSU positive! Geaux Tigers!
Ed Walters will speak at the "Seize Success: Trials that Work" seminar for the Louisiana Association for Justice on October 14, 2011. His topic is entitled "The Top 10 Things We All Do Wrong at Trial."
Ed Walters and Mike Veron of Lake Charles show the proper method of Impeachment with a Prior Inconsistent Statement.
Ed Walters is scheduled to speak at the Louisiana State Bar Association's "New York, New York" seminar on November 19, 2011. His topic is "That's ridiculous. We're leaving." - Tested Techniques for Achieving Maximum Success in Mediation. He will speak in conjunction with Michael A. Patterson, LSBA Past-President.
Abboud Thomas was the Chairman of the Baton Rouge Bar Association's 2011 Bench Bar Conference at Point Clear, Alabama. Pictured above at the firm's Hospitality Suite are Ed Walters , Debbie Thomas, Abboud Thomas, Judge Guy Holdridge and Darrel Papillion
Above is the June 2011 cover of Louisiana Advocates, the monthly magazine of the Louisiana Association for Justice. Each month's cover is a photograph of a Louisiana scene taken by a Louisiana Association for Justice member. This cover photograph was taken by Ed Walters at a crab boil in Grand Isle, Louisiana.
The Ribbon Cutting Ceremony for the new 19th Judicial District Courthouse was held on January 10, 2011.
Pictured above is Ed Walters, a member of the Courthouse Construction Committee, who was asked to present remarks on behalf of the lawyers in the Baton Rouge area.
Pictured above are Michael Patterson, President of the Louisiana State Bar Association , Preston Castille, President of the Baton Rouge Bar Association , Darrel Papillion, Secretary of the Baton Rouge Bar Association and Ed Walters, a Past President of the Baton Rouge Bar Association .
Pictured above are Darrel Papillion and Ed Walters at the Louisiana State Bar Association's "New York, New York" Seminar . Darrel Papillion was the moderator of the three-day event, and Ed Walters spoke on "Recent Developments in Legislation and Jurisprudence." The Seminar was held in New York City on November 20-23, 2010.
Pictured above are Ed Walters and Baton Rouge Mayor-President Kip Holden on the occasion of the Baton Rouge Bar Association's luncheon recognizing the 25th Anniversary of Around the Bar , the monthly publication of the Baton Rouge Bar Association. Ed has been the Editor of Around the Barsince its first issue in 1985. Mayor-President Holden officially proclaimed that day " Around the Bar25th Anniversary Day" in the City of Baton Rouge and presented Ed the Official Proclamation before the members of the Baton Rouge Bar Association.
Darrel Papillion, member of the Board of Directors of the Friends of Louisiana Public Broadcasting, co-hosted LPB's Sunday, August 1, 2010, Summerfest Fund Drive. Darrel, along with LPB Executive Director Beth Courtney and former Miss Teen Louisiana and local celebrity Whitney Breaux, hosted a two hour fund drive that featured programs highlighting the Louisiana Philharmonic Orchestra and the White House Ceremony honoring Paul McCartney as the 2010 winner of the Gershwin Prize for Popular Song in Performance.
Walters, Papillion, Thomas, Cullens were sponsors of the Baton Rouge Bar Association's 2010 Bench Bar Conference at the Perdido Beach Resort in Orange Beach, Alabama. The firm also hosted the Hospitality Suite and partner Ed Walters, along with Baton Rouge attorney Michael Patterson, presented a program on trial evidence entitled "The Privilege Is All Yours: The Exercise, Defense and Waiver of Testimonial Privileges in State and Federal Court."BACK TO TOP