Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_09-cv-00554/USCOURTS-casd-3_09-cv-00554-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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09cv554 1

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

GEORGE W. WRIGHT,

Plaintiff,

v.

BRIAN WOOD ET AL.,

Defendants.

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Civil No. 09‐CV‐554‐L(WVG)

REPORT AND RECOMMENDATION OF

JUDGEMENT AMOUNT AGAINST BRIAN

WOOD

The Court recommends a judgment in the amount of $ 238,033.39 against Defendant

Brian Wood.

Background

Plaintiff George Wright has sought default judgement against Defendant Brian Wood.

Judge Lorenz issued a default judgment on Plaintiff’s breach of contract claim and referred the

matter to this Court for a prove up hearing.  (Doc. No. 17.)  As the District Court is well acquainted

with the facts, only a brief summary will be provided herein.

Plaintiffseeksto recover at total of $1,628,033.39 in damages arising from the breach of

contract. (Doc. No. 19, 7:7). Plaintiff bases his figures in three categories:

1. Consultation Costs (Un‐reimbursed Expenses)‐  $      13,033.39;

2. Consulting Fees (10 months unpaid @ $2,500/m) ‐  $      25,000.00; and

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09cv554 2

3. 50% of Shares in EV Stock (750,000 shares at $2.12)‐$ 1,590,000.00.

To support the consultation costs, Plaintiffsubmitted receipts detailing business expenses. Plaintiff

supports his claim for ten months of unpaid consultation fees in the oral contract he had with

Defendant Wood. In July 2008, Defendant Auto Acquisitions Inc. (“AAI”) was purchased by

Environmental Transportation Inc.’s (“EV”)  in a reverse merger transaction. Plaintiff estimates his

damages at $1,590,000.00whichrepresentsthe value of Plaintiff’s alleged 50%interest of 1.5million

shares of EV stock purportedly issued to Defendant Wood and AAI as of September 3, 2008.

TheCourt convenedaprove‐uphearing on January 14, 2010.Appearing atthe hearingwas

Plaintiff George Wright and his counsel, Steven Potter and Jonathan Boynton. Neither Defendants

Wood or AAI nor their counsel  appeared. At the hearing, Plaintiff was placed under oath, and

submittedadditionaltestimony to supplementthe documents he previously submitted totheCourt.

The Court finds Plaintiff’s testimony credible and, because of the absence of any defendant at the

hearing, mostly uncontradicted. At the conclusion of the hearing, Plaintiff was ordered to submit

supplemental evidence of his damages resulting from the stock transfer between himself and

Defendant Wood. At the Court’s direction, Plaintiff submitted additional documents February 4,

2010 and April 2, 2010. The Court has reviewed the evidence, and accordingly recommends that

Plaintiffis entitled to a judgment of $238,033.39 arising out ofDefendantWood’s breach of contract

with Plaintiff.

Discussion

I. Unreimbursed Expenses

Plaintiff submitted numerous receipts and credit card statements documenting unpaid

expenses, spent in furtherance of the business venture. Plaintiff was questioned under oath about

each receipt, the purpose of the expenditure, and asked to verify that Plaintiff spent the money

noted for a business purpose and not a personal expense. (Transcript, 34:18  ‐ 57:10.) Plaintiff

provided receipts for the years of 2005 ‐ 2008.  Plaintiff explained the various client development

expenditures and documented his businessrelated reasonsfor traveling to citieslike Las Vegas and

Chicago. (See Doc. No. 19, Exhibits 1‐18.)

///

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09cv554 3

Court Findings

The Court concludes that Plaintiff sufficiently documented and explained the legitimate

business purposes behind the expenses detailed below, for a total due to Plaintiff of $13,033.39 of

unreimbursed business expenses.

• $ 440.16 at Hertz Rent‐A‐Car (Doc. No. 19, Ex. 1)

• $1,377.97 for lodging (Doc. No. 19, Ex. 1)

• $288.30 on airfare (Doc. No. 19, Ex. 1)

• $148.73 on lodging (Doc. No. 19, Ex. 1)

• $129.43 at Hertz Rent‐A‐Car (Doc. No. 19, Ex. 1)

• $595.54 at Bally’s in Las Vegas (Doc. No. 19, Ex. 2)

• $520.00 on golfing in Las Vegas (Doc. No. 19, Ex. 3 ‐4)

• $339.26 at Hertz Rent‐A‐Car (Doc. No. 19, Ex. 5)

• $65.00 on airport parking (Doc. No. 19, Ex. 6)

• $239.80 at Caesars Hotel in Las Vegas (Doc. No. 19, Ex. 7,9)

• $307.60 on airfare (Doc. No. 19, Ex. 7,9)

• $177 on airfare (Doc. No. 19, Ex. 7,9)

• $75 for a meeting room (Doc. No. 19, Ex. 8)

• $600.60 for airfare (Doc. No. 9)

• $107.55 for Hertz Rent‐A‐Car (Doc. No. 19, Ex. 9)

• $379.40 for airfare (Doc. No. 19, Ex. 9)

• $176.62 for Hertz Rent‐A‐Car (Doc. No. 19, Ex. 9)

• $430.80 for lodging (Doc. No. 19, Ex. 9)

• $799.00 for airfare (Doc. No. 19, Ex. 10)

• $152.00 on airfare (Doc. No. 19, Ex. 10)

• $542.00 on airfare (Doc. No. 19, Ex. 10)

• $827.80 for airfare (Doc. No. 19, Ex. 11)

• $205.00 for airfare (Doc. No. 19, Ex. 11)

• $388.24 on lodging (Doc. No. 19, Ex. 11)

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09cv554 4

• $12.45 for meal (Doc. No. 19, Ex. 11)

• $286.00 for lodging (Doc. No. 19, Ex. 12)

• $382.00 for airfare (Doc. No. 19, Ex. 13)

• $710.66 for lodging (Doc. No. 19, Ex. 14)

• $460.00 for airfare (Doc. No. 19, Ex. 15)

• $98.93 for Hertz Rent‐A‐Car (Doc. No. 19, Ex. 16)

• $469.50 for airfare (Doc. No. 19, Ex. 17)

• $350.95 for Budget Rent‐A‐Car (Doc. No. 19, Ex. 18)

II. Consulting Fees

Plaintiffseeks $25,000 of unpaid fees, at $2,500 monthly forten months, from the period

of November of 2006 through August 2007. Prior to this time period, Plaintiff represented that he

received consulting feesfromDefendant Wood from March 2005 toNovember of 2006.(Transcript,

22:12 ‐ 14.) Plaintiff received personal checks, either hand delivered by Defendant Wood or mailed

to Plaintiff. Plaintiff noted further that it was possible Defendant Wood’s “wife may have signed a

check or two in that time frame. [As i]t’s the same account” that Mr. and Mrs. Wood share.

(Transcript, 23:9‐10.)However,the “majority was BrianWood the signer.” (Transcript, 23:16‐17.) At

times, Plaintiff was paid “two orthree times[with] amoney order.” (Transcript, 23:20‐24.)  He never

received a check from the Defendant AAI.  (Transcript, 22:20‐25; 24:7‐8.)

Plaintiffrepresented thatOctober 2006 wasthe last check he received.(Transcript, 28:2.)

When the check failed to arrive in November 2006, Plaintiff sought reassurance from Defendant

Wood. Plaintiff explained that Defendant Wood said “You’ll get paid. I’ll get to it. ... You’re going to

make so much money off what we’re doing [with the stock transfer]that it will be insignificant what

I owe you.” (Transcript, 27:8‐12.) When asked if Defendant Wood ever attributed the tardy

consulting fee payments on the corporation’s (i.e. AAI) cash flow, Plaintiff responded, “Never.”

(Transcript, 27:23.)  Plaintiff’s counsel confirmed, not under oath, that August 2007 is the end date

for owed compensation because that was the time the reverse merger was occurring whereby EV

was purchasing AAI. (Transcript, 19:19 ‐ 20:1.)

Plaintiff explained further that his right to a $2,500 payment was not contingent upon

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09cv554 5

working a set or certain amount of hours per month, or traveling to locations. The money was due

to him regardless of effort or work expended in any given month. (Transcript, 31:24 ‐ 32:16.) He

explained that the business model was “relationship driven ... [and it was] not just [Plaintiff’s]

expertise but ... relationships that were going to make that [model] happen, and it was Mr. Wood

that was going to be driving the financial partner infrastructure.” (Transcript, 31: 16, 20‐23.)

When questioned on why only an oral agreement between Plaintiff andDefendant Wood

exists, Plaintiffsheepishly admitted that he “did have attempts[to put the agreement in writing] ...

[and] wanted more structure to the agreement... and attempted as an individual... and with [his]

attorney to get Brian Wood to commit to exactly what the end game could be, ... but ... Brian

Wood[’s] ... strategy  [was to]... take advantage of [his] contributions and everything in regard to

equity sale.” (Transcript, 33:24‐ 34:5.)

Court Findings

The Court finds that Defendant Wood and Plaintiff had an oral agreement in which

Plaintiff wasto receive $2,500 a month, without limitation by actual work performed. The evidence

demonstrates that Plaintiff worked for Defendant Wood in Wood’s personal capacity and not

Defendant AAI. Except when issued an occasional cashier’s check ormoney order,Defendant Wood

paid Plaintiff with checks written on a personal account, notthe business account of Defendant AAI.

The Court concurs in Plaintiff’s calculation that Defendant Wood owes him $25,000 in consulting

fees.

III. Stock Interest in EV Transportation

Plaintiffseekstorecover $1,590,000.00basedonthe dollar value of Plaintiff’s 50%interest

in EV stock as of September 3, 2008. In his complaint, Plaintiffstatesthat “[d]uring the relevanttime

period, the per share price has ranged from $1.25 to $2.20 per share.” (Complaint at 5, ¶36.) The

complaint acknowledgesthatthe total number ofsharesDefendantWood received as a result ofthe

merger of AAI and certain business partners is somewhat speculative:

• In 2007, AAI entered into negotiations with entities known as TC X Calibur, IMMS, Inc.,

EVRAC, LLC  and EVTransportation, Inc.(collectively the “Business Partners”)tomerge the

business. . . .

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09cv554 6

• Upon information and belief, in or around the summer of 2008, one or more of the

Business Partners merged with AAI. . . .

• As part of this transaction, AAI and/or Wood received no less than one million five

hundred thousand shares(1,500,000)shares of EV. (Complaint at 4, ¶¶ 20‐22)(emphasis

added.)

In support of his claim for the stock shares, Plaintiff submitted a press release of the merger, (Doc.

No. 19, Ex. 20), a copy of the business plan, (Doc. No. 19, Ex. 21), a copy of the investor presentation

of EV Rental Cars, (Doc.No. 19, Ex. 22), EV’s 8k SEC filing, (Doc.No. 19, Ex. 23), an email fromPlaintiff

to Defendant Wood demanding hisshares, (Doc. No. 19, Ex. 24 & 26), and a statement of EV’sstock

share price between August 29, 2008,throughOctober 1, 2008 (Doc.No. 19, Ex. 25). Plaintiff further

submitted sworn testimony at the prove up hearing. After request from the Court, Plaintiff

submitted additional exhibitssuch as email chainsregarding discussions about the shares(Doc. No.

22, Exs. 1‐9, 11 ‐13), and the EV Warrant to Purchase Stock (Doc. No. 22, Ex. 10). After a second

supplemental request from the Court, Plaintiff submitted a sworn declaration, an EV Rental Cars

equity interest statement, and more demand letters from Plaintiff Wright’s attorney.

The EV stock calculation presents two issues for the Court to determine in order to

recommend a damages figure regarding EV stock. First, under the oral contract with Defendant

Wood was Plaintiff entitled to any shares of EV stock? Ifso, how many? Second, if entitled, at what

price should those shares be valued?

i. Transfer

Plaintiff Wright submitted various demand letters and email requests documenting his

alleged entitlement to shares of EV stock.  The Court notes that in an email from Defendant Wood

to David S. Cooper, dated October 5, 2008, EV stock shares were apparently allotted for receipt by

Defendant Wood.  (Doc. No. 19, Ex. 24.) Plaintiff confirms that Defendant Wood orally confirmed

receipt of these shares. (Doc. No. 25, Declaration of Plaintiff.)  However, while the email from

Defendant Wood to David Cooper indicates that 1.5 million shares were to be dispersed, the total

shares were to be apportioned between Defendant Wood and twelve otherinvestors. (Doc. No. 19,

Ex. 24.) The email notes that Defendant Wood was only to receive 800,000 shares, and of that

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09cv554 7

800,000 shares, Plaintiff was to receive 100,000 shares (Doc. No. 19, Ex. 24), far from the 750,000

shares Plaintiffstates he wasto receive. Plaintiff’s counsel responded that Plaintiff never agreed to

thisfigure of 100,000 shares. (Transcript, 66:2‐12.) Other than Plaintiff’stestimony that Defendant

Wood promised to transfer 750,000 shares of EV stock, Plaintiff offered no documentary evidence

nor other witnesses to support his claim.

Court Findings

Despite the October 5, 2008 email, Plaintiff maintainsthat defendant Wood received 1.5

million EV shares. Plaintiff suggests that the twelve investors did not receive any of the 700,000

sharesdescribed in the email and thatDefendantWood both received and kept all 1.5million shares.

However, other than Plaintiff’s conjecture and alleged “inside industry information,” Plaintiff

presents absolutely no evidence to supportthissuspicion. Even ifthe Court wasinclined to find that

Plaintiff was entitled to 50% of Defendant Wood’s EV stock acquisition, the Court would not use 1.5

million shares as the basis for that calculation.

The October 5, 2008, email from Defendant Wood to David Cooper directly contradicts

both the amount ofshares Defendant Wood received, and Plaintiff’s portion of the shares. Despite

Plaintiff’s credibility in his claim for damages regarding unreimbursed business expenses and

consulting fees, Plaintiff hasfailed to meet the rather minimal burden in proving up these damages

relating to the stock transfer. The Court is reluctant to recommend that Plaintiff is entitled to the

value of 750,000 shares of EV stock, absent any written evidence, especially in light of contradicting

documentary evidence.

No corroborating evidence of entitlement to 750,000 shares of EV stock has been

submitted to the court. The written documentation submitted supports the conclusion that

DefendantWood had atleast contemplated transferring to Plaintiff only 100,000  EVshares. Plaintiff

has had three opportunities to support his claim to the EV shares, but has produced nothing to

substantiate an entitlement to 750,000 shares. The Court is satisfied that this email evidences

Defendant Wood’s agreement to transfer 100,000 shares of EV stock to Plaintiff. Accordingly, the

Court recommends that Plaintiff is entitled to the value of 100,000 shares of EV stock. Given

Plaintiff’s entitlement, the Court next addresses the value of the shares Plaintiff was to receive.

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09cv554 8

ii. Valuation

When questioned about why Plaintiff is entitled to the requested $2.12 a share Plaintiff’s

counsel responded that “the demand was made on August 21st of 2008, and ... the stock began

trading publicly a week thereafter. ... A snapshot of whatthe share price wasfromthe time itstarted

trading through September” 2008 details a midpoint of $2.12, ranging from $2.20 to $1.30.

(Transcript, 62:16‐21, 16:3., Doc. No. 19, Exs. 25 ‐26.) Plaintiff’s counsel further detailed that inside

industry information caused Plaintiff to believe that Defendant Wood sold all the shares of EV stock

on the private market. (Transcript, 63:7‐9, 13‐16, 18.) Plaintiff testified that he believed that “the

public [company]shell people ... offered [Mr. Wood]  two dollars a share for all of hisshares, and at

that time he said mine too, my half of the equation. So [he] believe[s] that [Mr. Wood] cashed out

from the private people.” (Transcript, 64:15 ‐ 65:3.) The Court noted that the current share price is

“next to nothing.” (Transcript, 63:25.) That comment remained unaddressed.

Plaintiff has described the efforts he has taken to ascertain the number of shares

Defendant Wood received and the price and date at which he sold them, if sold at all. Despite

diligent efforts, Plaintiff has come up empty handed. If itistrue, as Plaintiff believes,that Defendant

Wood in fact received all 1.5 million shares and sold any or all of them, the price he obtained would

have been the best evidence to determine a per share price in calculating Plaintiff’s damages. Not

having this information however, does not imply that the Court is without sufficiently reliable

evidence to perform its own calculation. Plaintiff provided the Court with the trading prices of EV

stock for the period commensurate with the time in August and September 2008, when Plaintiff

demanded his shares from Defendant Wood. (See Doc. No. 19, Ex. 25, Doc. No. 25, Ex. 2‐3.)

Plaintiff testified that his “intent was to take [his] 750,000 shares and sell them

immediately at two dollars a share at the end of August [2008].” (Transcript, 6:15‐17.) Comparing

Plaintiff’s stated intent against the August 29, 2008, selling price of EV stock of $2.20, the Court

concludes Plaintiff’s asking price wasreasonable. (See Doc. No. 19, Ex. 25.) Furthermore, if Plaintiff

intended to offer his shares (whether it be 100,000 or 750,000 shares) at below market price, it is

the Court’s opinion that he would have been more likely to sell them quickly at his asking price.

Plaintiff has requested the Court to use $2.12 per share as the basis for calculating

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09cv554 9

damages. This $2.12 figure reflects the price of one share of EV stock on September 3 through 11,

2008. (Doc. No. 19, Ex. 25.) Incidentally, the stock price began to fall on September 12, 2008, and

continued to plummet until the present date. The stock currently is practically worthless. As

Plaintiff’s counsel acknowledged, “there was no science to ... utilizing that September date.”

(Transcript, 62:22.) There is contradicting evidence that despite Plaintiff’s demand in August 2008,

the shares still had not been distributed to Defendant Wood by October 5, 2008. The October 5,

2008 email between Defendant Wood and David Cooper, indicates that the share apportionment

between Defendant Wood and twelve othersis a “proposal” and will be presented to the “investor

group for vote.” (Doc. No. 19, Ex. 24.) Thistentative language suggeststhat the 1,500,000 shares of

EV stock had not yet been distributed to any of the entitled individuals as of October 2008.

Nonetheless,  while the email can be interpreted to suggest that Plaintiff would not have received

his shares in August or even September of 2008, it is by no means definitive.

Court Findings

It is not unreasonable to conclude that if Defendant Wood had transferred the sharesto

which Plaintiff was entitled, assuming Defendant Wood had them to transfer, Plaintiff immediately

would have sold his shares. Without any opposing evidence presented by Defendant Wood, the

Court finds Plaintiff has met his burden in establishing entitlement to the value of 100,000 shares.

However, Court rejects Plaintiff’s contention the shares be valued at $2.12 per share. Rather the

Court accepts Plaintiff’s stated intention that he was going to sell them at $2.00 a share. It is this

lowerfigure the Court will use in assessing damages. Accordingly, 100,000 shares at $2.00 pershare

totals $200,000 in damages.

Conclusion & Recommendation

The Court has reviewed the evidence, and accordingly finds that Plaintiff is entitled to

$13,033.39 in unreimbursed expenses; $25,000 in unpaid consultation fees; and entitlement to

100,000 shares of EV stock, valued at $2.00 a share. In total, the Court recommends that based on

credible evidence, comprised of written documents and oral testimony, a judgment of $238,033.39

be entered against Defendant Brian Wood for breaching an oral contract with Plaintiff.  

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09cv554 10

Thisreport and recommendation ofthe undersignedMagistrate Judge issubmitted tothe

United States District Judge assigned to this case, pursuant to the provision of 28 U.S.C. § 636(b)(1).

IT IS ORDERED that no later than April 22, 2010, any party to this action may file written

objections with the Court and serve a copy on all parties.  The document should be captioned

“Objections to Report and Recommendation.”

IT IS FURTHER ORDERED that any reply to the objectionsshall be filed with the Court and

served on all parties no later than April 29, 2010. The parties are advised that failure to file

objections within the specified time may waive the right to raise those objections on appeal of the

Court’s order.  Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).

DATED:  April 12, 2010

    Hon. William V. Gallo

    U.S. Magistrate Judge

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