United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SWINGLESS GOLF CLUB CORPORATION,

a Wyoming corporation,

Plaintiff,

 v.

ROY H. TAYLOR, individually and d/b/a

CENTERFIRE GOLF COMPANY, and

JAMES S. STOWELL, an individual, JACK

GALANTI, an individual, MIKE STRINGER,

an individual, CENTERFIRE GOLF

COMPANY, a California corporation, NEW

RIVER INDUSTRIES CORP., EZEE GOLF

LLC, a Delaware limited liability company,

and STEVE FLUKE, an individual,

Defendants. /

ROY H. TAYLOR, JAMES S. STOWELL, an

individual, JACK GALANTI, an individual,

MIKE STRINGER, an individual, STEVE

FLUKE, an Individual,

Counterclaimants,

 v.

SWINGLESS GOLF CORPORATION, A

Wyoming Corporation, JAMES DEPORCHE,

an individual, and JOYCE TAYLOR, an

individual, and DOES 1–25,

Counterdefendants. /

No. C 08-05574 WHA

ORDER GRANTING 

SUMMARY JUDGMENT 

ON COUNTERCLAIMS

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1

 Roy and Joyce Taylor were married to each other twice. The first marriage began

in 1973 and lasted for two years. They married again in 1977 or 1978, and divorced in 2002

(J. Taylor Decl. ¶ 2). They are now on opposite ends of this lawsuit.

2

INTRODUCTION

The Court once again turns its attention to the “swingless” golf club: a pyrotechnic device

that uses explosive charges, a wedge-shaped piston, and a trigger to blast golf balls hundreds of

yards down a fairway. Designed for golfers who cannot (or would rather not) swing, this

intriguing invention — which looks like a traditional golf club except that it is loaded with

gunpowder — stands at the heart of this dispute.

The instant motion targets the four remaining counterclaims in this action. In short,

counterdefendants Swingless Golf Corporation (“SGC”), James DePorche, and Joyce Taylor

move for summary judgment on counterclaims of fraud, conversion, corporate waste, and breach

of fiduciary duty asserted by counterclaimants Roy Taylor, James Stowell, Jack Galanti, Mike

Stringer, and Steve Fluke. For the reasons set forth below, the motion is GRANTED.

STATEMENT

1. THE INVENTION

In 1992, defendant and counterclaimant Roy Taylor created several inventions relating to

the “ballistic impeller club.” The ballistic impeller club was designed for people who wanted to

participate in the game of golf but lacked the requisite strength, skill, or desire to actually swing a

club (R. Taylor Decl. ¶ 2). Four patents were issued to Mr. Taylor covering various components

of this invention, including U.S. Patent No. 5,924,932, No. 5,816,927, No. 5,522,594, and No.

6,139,440 (id. at ¶ 3). Perhaps recognizing that “ballistic impeller” lacked a marketable ring, the

product soon became known as the swingless golf club.

2. SWINGLESS GOLF CORPORATION

Mr. Taylor incorporated SGC in California in April 1999 (id. at ¶ 4; J. Taylor Decl. Exh.

A; Arthur Decl. ¶ 3). Among the three directors present at the first board of directors meeting

held in Fremont on May 12, 1999, were Roy Taylor and his then-wife Joyce Taylor.1 At the

meeting, Roy Taylor was selected as chairman of the board and Joyce Taylor served as secretary. 

Shortly thereafter, Roy Taylor hired Robert Arthur as corporate counsel for SGC (id. at ¶ 5;

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Arthur Decl. ¶ 2). The board meeting minutes, which were signed by both Roy and Joyce Taylor,

set forth the following relevant information (J. Taylor Decl. Exh. A):

Name Number

of Shares

Consideration and (if other

than cash) Fair Value

Roy H. Taylor and Joyce

Taylor, as community

property

150,000 Expense Reimbursement

Roy H. Taylor and Joyce

Taylor, as community

property

5,100,000 Patent Rights Assignment

As shown, Roy and Joyce Taylor received — as community property — 5,100,000 shares

of SGC stock as consideration for the assignment of their patent rights to the new corporate

entity. They also received 150,000 shares of SGC stock as reimbursement for expenses (id. at ¶

5). An additional 5,250,000 shares in SGC were issued to Roy and Joyce Taylor — again as

community property — two years later in May 2001 (ibid.; Arthur Decl. ¶ 4, Exh. E). In total,

Roy and Joyce Taylor received 10,500,000 shares of SGC stock prior to their divorce in 2002. 

This amounted to a 60% ownership stake in the company (Arthur Decl. Exh. E).

3. INVESTOR JAMES DEPORCHE

With the swingless golf club supposedly nearing “production-ready” status, Roy Taylor

approached a former co-worker, James DePorche, to invest in SGC in mid-June 2001. Mr.

DePorche, who is a counterdefendant in this action (along with Joyce Taylor), agreed to invest

capital in SGC. He received — with the assent of Roy Taylor and the board of directors —

4,900,000 shares as consideration for his investment (id. at ¶5; DePorche Decl. ¶ 3). This

amounted to a 28% ownership stake in SGC.

4. JACK GALANTI, STEVE FLUKE, AND MIKE STRINGER

Starting around 2001, Jack Galanti and Steve Fluke — who, like Roy Taylor, are both

defendants and counterclaimants in this action — began helping with the development of the

swingless golf club (J. Taylor Decl. ¶ 6). In addition to his commitment of time and efforts, Mr.

Fluke claims to have invested $7,500 in SGC (Fluke Decl. ¶ 4). A stock dispute, however, arose

between Roy Taylor and these two contributors in late 2001 (Arthur Decl. ¶¶ 6–8; DePorche

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Decl. ¶ 4). According to Mr. Galanti and Mr. Fluke, Roy Taylor orally promised to issue ten

percent of SGC’s stock to Mr. Galanti in exchange for his work in moving the swingless golf club

to production (Fluke Dep. 32; Arthur Decl. ¶ 6). Mr. Fluke similarly alleged that eight or ten

percent of SGC’s stock was promised to him for his efforts (Fluke Decl. ¶ 5). Roy Taylor denied

ever making such promises when this dispute was brought to the attention of SGC corporate

counsel (Arthur Decl. ¶ 8).

With the assistance of Robert Arthur, SGC’s corporate counsel, Roy Taylor prepared

written counter-offers to the demands of Mr. Galanti and Mr. Fluke (Arthur Decl. Exhs. A and B). 

Mr. Fluke eventually accepted an SGC counter-offer and received shares in SGC for his work on

the swingless golf club (id. at ¶ 8; DePorche Decl. ¶ 4, Exh. A). Mr. Galanti, however, refused to

accept anything less than a ten percent stake in the company. Due to this impasse, SGC released

Mr. Galanti from his services in January 2002 (DePorche Decl. ¶ 4; Arthur Decl. ¶ 8).

In August of 2003, a similar dispute arose with another contributor to SGC, Mike Stringer. 

Like Roy Taylor, Mr. Stringer is also a defendant and counterclaimant in this action (DePorche

Decl. ¶ 10). A stock and compensation agreement was reached between SGC and Mr. Stringer

shortly thereafter (id. at Exh. E).

5. JOYCE TAYLOR’S ROLE IN SGC

Roy and Joyce Taylor were still married to each other until 2002. While they were

married, there were occasional SGC meetings held at their home (J. Taylor Decl. ¶ 7). Joyce

Taylor, who is a counterdefendant, held the position of corporate secretary (R. Taylor Decl. ¶ 7). 

As corporate secretary, Joyce Taylor initially tried to attend SGC business meetings and take

notes. Roy Taylor, however, quickly began telling his then-wife to “go upstairs unless food and

snacks were needed,” making it clear that he did not want her involved in the business (J. Taylor

Decl. ¶ 7). Thereafter, Joyce Taylor ceased trying to be at the table when SGC meetings were

held. She served — in her words — as merely a “waitress” (ibid.). Mr. Stringer corroborated this

characterization, stating that “Joyce Taylor . . . never used to attend meetings, so to speak, but she

would be there providing food” (Stringer Dep. 14).

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6. THE DIVORCE AND TRANSFER OF INTELLECTUAL PROPERTY TO SGC

In 2002, Joyce Taylor discovered that her then-husband, Roy Taylor, had been “fooling

around” with her son’s wife (J. Taylor Decl. ¶ 9). Divorce proceedings ensued in May 2002, with

Roy Taylor announcing that he would be marrying his daughter-in-law and moving to Mississippi

to be near his ailing mother (DePorche Decl. ¶ 5; Arthur Decl. ¶ 9; R. Taylor Decl ¶ 14).

Upon learning about the impending divorce proceedings between the majority

shareholders, Attorney Arthur discussed with Mr. DePorche the due diligence that needed to be

conducted to ensure that SGC’s affairs remained in order (DePorche Decl. ¶ 6; Arthur Decl. ¶ 9). 

In carrying out this due diligence, Attorney Arthur learned that Roy Taylor had never assigned his

swingless golf club patents to SGC. An assignment agreement was thereafter prepared by

Attorney Arthur to ensure that the patents rights were assigned to the company. The agreement

was signed by Roy Taylor on June 8, 2002 (Arthur Decl. ¶ 10, Exh. C). 

A separate set of agreements were also prepared by Attorney Arthur entitled “Confidential

Information and Invention Assignment Agreement.” These agreements — which will simply be

called “IP agreements” herein — were created by Attorney Arthur to protect SGC’s intellectual

property, including its trademarks and trade secrets. Roy Taylor signed an IP agreement on

November 15, 2002 (DePorche Decl. ¶ 7, Exh. B; Arthur Decl. ¶ 9). Other SGC principals,

including Mr. DePorche, Joyce Taylor, Mr. Fluke, and Mr. Stringer, also signed IP agreements

(DePorche Decl. ¶ 7, Exhs. C and D). Principals were not allowed to remain with the company if

they refused to sign the IP agreement (Fluke Decl. ¶ 7).

According to Roy Taylor, however, when he signed both the patent assignment agreement

and the IP agreement, he believed — as he had since he created the company in 1999 — that he

and SGC “were the same” and therefore it “did not matter whether the patents were in [his] name

or under” the company’s name (R. Taylor Decl. ¶ 12). In his own words, he transferred his patent

rights to SGC to “bring a feeling of trust among the other members of SG[C]” (id. at ¶ 13).

Late in the fall of 2002, the divorce between Roy and Joyce Taylor was finalized. The

10,500,000 shares of SGC stock the couple had previously held as community property were split

evenly between them (J. Taylor Decl. ¶ 9; DePorche Decl. ¶ 8; Arthur Decl. ¶ 12). As a result of

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2

 The record is unclear as to whether this was an oral or written promise.

3

 Mr. Stowell was not an SGC shareholder — a point that is relevant to the instant

motion (Arthur Decl. Exh. E; R. Taylor Dep. 28).

6

this split, Roy and Joyce Taylor each owned approximately 30% of SGC. Shortly thereafter,

sometime between November 2002 and early 2003, Roy Taylor moved with his daughter-in-law

(who had also gotten a divorce) to Byhalia, Mississippi.

7. ROY TAYLOR’S REMOVAL FROM THE SGC BOARD AND MANAGEMENT

Following Roy Taylor’s relocation to Byhalia, SGC employees — including Mr. Fluke

and Mr. Stringer — continued to use the home of Joyce Taylor to work on the swingless golf club

(J. Taylor Decl. ¶ 11). Mr. DePorche would also occasionally use Joyce Taylor’s home to

conduct SGC-related conference calls with Roy Taylor (ibid.). 

In August 2003, as the swingless golf club reached production-ready status, Mr. Fluke

brought in a new monetary investor for SGC, Donn Mulder (Fluke Decl. ¶ 4). Mr. Mulder

invested $14,000 in capital to fund production of the product (J. Taylor Decl. ¶ 12; DePorche

Decl. ¶ 13). On behalf of SGC, both Mr. Fluke and Mr. DePorche promised Mr. Mulder that the

swingless golf club would be made and manufactured in the Bay Area of Northern California

(DePorche Decl. ¶ 13).2

That same month, however, Roy Taylor began seeking to manufacture parts for the

swingless golf club in Mississippi and Tennessee. By August 2003, he had already assembled

one hundred golf club handles (R. Taylor Decl. ¶ 136). A conference call was arranged and held

between Roy Taylor in Mississippi and Mr. DePorche, Joyce Taylor, Mr. Stringer, Mr. Fluke, and

Cameron Lozada (who was another shareholder and director of SGC) in California to discuss

where the product would be manufactured (id. at ¶ 15). During the call, Roy Taylor announced

that he had begun and intended to continue manufacturing parts for the swingless golf club with

his daughter and son-in-law — defendant and counterclaimant James Stowell — “back east.”3

When Roy Taylor was informed that this was expressly contrary to investor expectations, he told

the other participants in the conference call “F*ck the investor(s), we’ll do whatever we want”

and “that’s the way its going to be, it’s not open for discussion” (ibid.; J. Taylor Decl. ¶ 13).

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4

 Note well that many counterclaimants in the instant action were signatories to Roy

Taylor’s removal from SGC’s board. Mr. Fluke, however, claimed that he was “pressured”

by Mr. DePorche and Joyce Taylor to remove Roy Taylor as a director, although no details

as to how he was pressured were provided (Fluke Decl. ¶ 11). 

7

Counterclaimants’ recollection of this conference call varies slightly. According to Mr.

Taylor and Mr. Fluke, “[t]he majority of the phone call was spent abusing, harassing and

inflaming [Roy Taylor] for the lack of progress on the search for an ‘investor’” (R. Taylor Decl. ¶

17; Fluke Decl. ¶ 8). Both, however, concede that during the conference call, Roy Taylor

heatedly exclaimed “‘F*** investors’ we have to get this done” (R. Taylor Decl. ¶ 18; Fluke

Decl. ¶ 9). Roy Taylor claims that he was never given an opportunity to apologize or to make

clear that his comment was not directed to any specific investors (R. Taylor Decl. ¶ 19).

In any event, following this conference call, Mr. DePorche grew concerned about

financial obligations that Roy Taylor would impose on SGC by entering into contracts with

machine shops in Mississippi and Tennessee (DePorche Decl. ¶ 15). On September 1, 2003, a

majority of SGC shareholders voted to remove Roy Taylor as a director of SGC (J. Taylor Decl. ¶

14). Signatories to the “Written Consent of Shareholders” included Mr. Lozada, Mr. Fluke, Joyce

Taylor, Mr. DePorche, and Mr. Stringer (DePorche Decl. at Exh. G).4 That same day, Joyce

Taylor, Mr. DePorche, and Mr. Lozada held a board of directors meeting and voted to remove

Roy Taylor as Chief Executive Officer of SGC, appointing him instead as “Technical Advisor”

(id. at Exh. H). The meeting minutes justified this move as follows (ibid.):

The specific comment, “F___ the Investor[,]” . . . led to a concern

that new investor(s) funds needed to be protected from mis-use

which could lead to litigation against the company. Roy Taylor’s

added statements about moving the company’s operations to

Mississippi and heavily involving his son-in-law in day-to-day

operations were contrary to all prior expectations of the existing

shareholders and investors. Finally, his statements about working

with machine shops in Mississippi and nearby states[] led to

concerns of unwanted financial obligations.

The board also voted to open a new corporate bank account for “deposit and safekeeping of new

investor(s) funds” (ibid.).

Sometime thereafter, Mr. Fluke and Mr. Stringer switched their alliances. They left (or

were removed from) SGC, and joined Roy Taylor in a separate venture (J. Taylor Decl. ¶¶ 15–16;

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DePorche Decl. Exh. K). According to Mr. Fluke, he was “removed” from SGC in a “fraudulent

fashion” due to “misrepresentations” by counterdefendants including (Fluke Decl. ¶ 14):

SG[C] would operate more efficiently without [his] presence,

although [he] was donating [his] time without pay[,] the monies

would be used in a manner that was controlled and efficient[,]

marketing and sales of the golf club would be accomplished better

with less people managing the customers[,] costs for the company

would be controlled with less personnel participating[,] success of

patents and the company would be faster in development[,] and

patents would be protected because Jim DePorche and Joyce

Taylor were the only controllers.

Mr. Fluke never explains, however, how it was possible that he “relied” upon these alleged

“misrepresentations” when he was removed, or how these alleged “misrepresentations” were

false. He also never explains when or where these alleged “misrepresentations” were made.

8. THE FIRST SWINGLESS GOLF CLUBS ARE SOLD

Despite these various distractions involving Roy Taylor and other counterclaimants, SGC

launched a website, created promotional photos and videos of the product, and began selling the

product online (De Porche Decl. ¶ 17). Of the 25 clubs that the company could assemble using

available funds, all but a few (reserved for demonstrative purposes) were sold. 

9. SGC SUES ROY TAYLOR IN STATE COURT

Following his removal as a director and CEO of SGC, Roy Taylor unilaterally “assigned”

the ’932 and ’594 patents back to himself and then to New River Industries, a Mississippi

corporation that he founded and controlled (DePorche Decl. ¶ 18; R. Taylor Decl. ¶ 30). Roy

Taylor also “assigned” the registered trademark “Swingless” to himself as well (R. Taylor Decl. ¶

30). Thereafter, SGC filed a lawsuit against Roy Taylor in California Superior Court to reverse

these transfers (id. at ¶ 19). Following a slew of failed settlement efforts, SGC obtained a

judgment in its favor in August 2005 (id. at ¶ 20, Exh. J). It took, however, until May 2006 for

the USPTO to restore ownership of the patents and other intellectual property rights to SGC. 

Roy Taylor’s version of these events differs slightly. Although he fully admits to

executing these purported transfers, he claims that both sides actually reached a settlement in the

state court action in March 2005. According to Roy Taylor, in exchange for returning the ’932

and ’594 patents to SGC, the settlement agreement provided that he would be “reintegrated in

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 This purported settlement agreement was not provided by counterclaimants as an

exhibit to any of their declarations.

9

SG[C] at the Board level and [he would] be paid royalt[ies]” (R. Taylor Decl. ¶¶ 30–32).5

Despite this claim, Roy Taylor acknowledges that it was “the Court [that] ordered the transfer” of

the aforementioned patents and intellectual property back to SGC (id. at ¶ 31).

10. REINCORPORATION OF SGC IN WYOMING

In 2006, Mr. DePorche and the SGC board grew concerned that the annual California

franchise fees of $800 and other requirements for corporations domiciled in California were too

costly for the corporation (id. at ¶ 22). As such, the board decided to domicile the corporation in

Wyoming, where franchise fees were only $50 per year (ibid.). SGC’s corporate counsel Robert

Arthur assisted SGC in performing a “standard re-incorporation” in Wyoming, and advised the

company on how to provide notice of the re-incorporation to existing SGC shareholders (Arthur

Decl. ¶ 19; Exh. D; DePorche Decl. ¶ 23). Attorney Arthur explained to the board that each

shareholder in SGC would have the same number of shares and ownership stake in the new entity. 

The reincorporation proceeded on the supposed authority of both Joyce Taylor and Mr. DePorche,

who collectively held a majority of shares in SGC. Both voted to reincorporate the business in

Wyoming (Arthur Decl. ¶ 19; DePorche Decl. ¶ 23). The company did not consult Roy Taylor or

Mr. Fluke on the reincorporation, and did not provide them with a chance to oppose it (R. Taylor

Decl. ¶¶ 35, 37). 

The new Wyoming entity was called Swingless Golf Club Corporation (“SGCC”). 

Notices of the reincorporation were mailed to all former SGC shareholders by Joyce Taylor on

August 31, 2006 (J. Taylor Decl. ¶ 18). The notices informed these shareholders that they “will

have the same quantity of shares in [SGCC]” as they did in SGC (id. at Exh. C). According to

Attorney Arthur, all former shareholders of SGC were in fact issued the same quantity of shares

(and retained the same percentage ownership) in SGCC as they had held in SGC prior to its

dissolution (Arthur Decl. ¶ 21, Exh. E).

Despite this assertion by Attorney Arthur (who was inexplicably never deposed by

counterclaimants), both Mr. Taylor and Mr. Fluke state in their declarations that they were not

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 For these reasons, counterdefendants’ evidentiary objections targeting these

statements are GRANTED (Dkt. No. 105)

10

issued any shares in SGCC (R. Taylor Decl. ¶¶ 36, 38; Fluke Decl. ¶ 27). Mr. Fluke explained

this belief during his deposition (Fluke Dep. 61–62):

Q: Is it your contention that you own no shares in SwinglessWyoming?

A. Yes.

Q. What led you to that conclusion?

A: I don’t believe I have been given anything, and with

regards to Swingless Golf-Wyoming, once the old

Swingless Golf Corporation was closed down illegally,

anything from that point on I never treated seriously, to be

perfectly frank.

Mr. Fluke further explained that he didn’t “even recognize [SGCC] as a real company[,]” calling

it a “kangaroo company” (id. at 70). In other words, Mr. Fluke’s belief that he was not issued

shares in SGCC stems from his belief that SGCC was never a real company to begin with.

As for Roy Taylor’s statement that he was not issued shares in SGCC, it is contradicted by

a letter he wrote in December 2006 to Mr. DePorche in which he expressly acknowledged receipt

of the August 31 reincorporation notice regarding “a stock exchange” (Jacobson Reply Decl. Exh.

A). In any event, neither Roy Taylor nor Mr. Fluke have personal knowledge as to whether they

were actually issued shares in SGCC, since they have never been involved in its affairs.6

11. FURTHER “REASSIGNMENTS” OF THE SWINGLESS GOLF PATENTS

Roy Taylor’s unilateral assignment of SGC intellectual property in September 2003 was

followed by another “assignment” of SGCC patents in 2007 (DePorche Decl. ¶ 25). The USPTO

transferred them back to SGCC in June 2009. In September 2009, Roy Taylor again attempted —

for the third time — to “assign” SGCC patents to himself (ibid.). It is unclear whether this

assignment has yet been reversed.

* * *

SGCC initiated this lawsuit on December 15, 2008, against Roy Taylor, Steven Fluke,

Mike Stringer, Jack Galanti, James Stowell, and a number of corporate defendants including EZee

Golf LLC, which supposedly makes its own competing version of the swingless golf club (Dkt.

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 While counterclaimants were invited to seek leave to amend the dismissed

counterclaims, they chose not to do so. 

11

No. 1). Defendants fired back with eight counterclaims, which were cut in half by a motion to

dismiss filed in November 2009 (Dkt. No. 85).7

 The four surviving counterclaims — covering

fraud, conversion, corporate waste, and breach of fiduciary duties — are the subject of the instant

motion.

ANALYSIS

Summary judgment is proper when the “pleadings, depositions, answers to interrogatories,

and admissions on file, together with the affidavits, show that there is no genuine issue as to any

material fact and that the moving party is entitled to judgment as a matter of law.” FRCP 56(c). 

An issue is “genuine” only if there is sufficient evidence for a reasonable fact-finder to find for

the non-moving party, and “material” only if the fact may affect the outcome of the case. 

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–49 (1986). 

In resolving a summary judgment motion, all reasonable inferences must be drawn in the

light most favorable to the non-moving party. Olsen v. Idaho State Bd. of Med., 363 F.3d 916,

922 (9th Cir. 2004). However, unsupported conjecture or conclusory statements are insufficient

to defeat summary judgment. Surrell v. Cal. Water Serv. Co., 518 F.3d 1097, 1103 (9th Cir.

2008); see also Nilsson v. City of Mesa, 503 F.3d 947, 952 n. 2 (9th Cir. 2007) (explaining that a

“conclusory, self-serving affidavit, lacking detailed facts and any supporting evidence, is

insufficient to create a genuine issue of material fact”).

As explained below, counterclaimants have failed to meet their burden of showing a

genuine issue for trial on any of their remaining counterclaims.

1. FRAUDULENT INDUCEMENT

Counterclaimants’ fraudulent inducement counterclaim requires proof of the following

five elements: (1) misrepresentation, (2) knowledge of the falsity of the representation, (3) intent

to induce reliance, (4) justifiable reliance, and (5) resulting damages. Stewart v. Ragland, 934

F.2d 1033, 1043 (9th Cir. 1991). 

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Counterclaimants alleged that Mr. DePorche and Joyce Taylor fraudulently induced them

to transfer their intellectual property rights to SGC (via the patent assignment agreement and IP

agreements) by convincing them that the transfer would be in the best interests of the company

(Ans. ¶¶ 28, 29, 63–67). According to counterclaimants, this was false because Mr. DePorche

and Joyce Taylor intended all along to “take control of the company and dissolve it and establish

a new company where they would be the sole [shareholders] and would control the patents and all

subsequent designs arising from [Roy] Taylor’s own designs” (id. at ¶ 32). As part of this alleged

fraud, Mr. DePorche and Joyce Taylor then “systematically removed all defendants from

employment with [SGC] . . . in August 2003, which fraudulently precluded defendants from using

the intellectual property that they personally developed” (id. at ¶¶ 31, 67). 

Bare allegations, however, cannot defeat a motion for summary judgment. While this

normally goes without saying, it is emphasized here because the opposition brief inexplicably

recites the legal standard for a motion to dismiss and argues that “the Court must assume that the

[counterclaimants’] allegations are true” (Opp. 15). We are, however, well beyond the motion to

dismiss stage. We are on summary judgment. At this stage, a summary judgment motion must be

opposed with admissible evidence. Mere allegations are not admissible. 

In their motion, counterdefendants have easily met their initial burden of showing that the

above allegations lack factual support. As set forth in numerous supporting declarations and

exhibits, counterclaimants have shown that Roy Taylor — a the very first SGC board meeting —

promised to assign his patents to SGC as consideration for the shares he was issued. The

assignment agreement he later executed was a belated fulfillment of that earlier promise. The

same evidence also shows that the execution of the IP agreements and removal of Roy Taylor

from the board of directors and management was done to protect the interests of the corporation

and its investors. Finally, counterclaimants have produced evidence showing that all former

shareholders of SGC received an equal number of shares in SGCC — thus negating the allegation

that Mr. DePorche and Joyce Taylor schemed to be the “sole shareholders” of SGCC.

In response, counterclaimants have produced no admissible evidence showing a genuine

issue of material fact for trial. See Nissan Fire & Marine Ins. Co., 210 F.3d 1099, 1102 (9th Cir.

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8

 While a four-page excerpt from Mr. Galanti’s deposition was attached to the

opposition brief, the testimony therein was irrelevant to any of the counterclaims addressed

by this motion.

9

 For these reasons, counterdefendants’ evidentiary objections targeting these

statements are GRANTED (Dkt. No. 105). 

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2000). First, with respect to Mr. Stowell, Mr. Stringer, and Mr. Galanti, no declarations

whatsoever were provided from these counterclaimants.8 As such, there is no admissible

evidence showing that any of these three counterclaimants relied upon any alleged

“misrepresentations” or even suffered any harm. Such reliance cannot be “vouched for” by Roy

Taylor or Mr. Fluke, as they do not have firsthand knowledge to make such statements.

Second, counterclaimants have produced no admissible evidence showing that Mr. Stowell

or Mr. Galanti even signed an IP agreement or owned any shares in SGC. Indeed, there is no

evidence that Mr. Stowell was even present for these events.

Third, with respect to the two counterclaimants who have submitted sworn declarations —

Roy Taylor and Steven Fluke — their declarations contained only bare and conclusory statements

that they were defrauded. For example, Roy Taylor’s declaration states that “DePorche induced

me to transfer the patent rights to SG[C] under conditions that turned out to be false pretenses”

and “under the same conditions, [he] induced me to transfer other non-patent intellectual property

rights including trade secrets to SG[C]” (R. Taylor Decl. ¶¶ 10–11). That’s it. No details are

provided in his declaration as to what “misrepresentations” were actually made by Mr. DePorche

to “induce” Roy Taylor to sign these documents, or how such “misrepresentations” were false. 

All Roy Taylor provides in his declaration are legal conclusions couched as factual statements.9

 

Fourth, Roy Taylor’s own declaration affirmatively concedes that he did not rely on any

“inducements” by Mr. DePorche when he signed the patent assignment agreement. In his sworn

declaration, Roy Taylor states (R. Taylor Decl. ¶¶ 12–13):

Since the beginning of SG[C] in 1999 to 2003, I believed SG[C]

and I were the same . . . therefore [it] did not matter whether the

patents were in my name or under SG[C]. . . . I transferred the

patents to SG[C] to bring a feeling of trust among other members

of SG[C].

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10 Due to its conclusory nature, counterdefendants’ evidentiary objection targeting

the statement “[f]inally, I was removed from SG through conspiration and fraudulent fashion

through a variety of misrepresentations” is GRANTED (Dkt. No. 105). 

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In other words, Mr. Taylor didn’t sign the patent assignment agreement because of any supposed

“misrepresentations.” He signed the agreement because he believed it “did not matter” whether

the intellectual property was in his name or the company’s name. Morever, he wanted to “bring a

feeling of trust” among SGC members. In sum, no admissible evidence supports Roy Taylor’s

counterclaim that he was fraudulently induced by Mr. DePorche to sign the patent assignment

agreement or the IP agreement.

Fifth, Mr. Fluke’s fraud counterclaim similarly fails. In his declaration, Mr. Fluke states

was that he “was removed from SG[C] through conspiration [sic] and fraudulent fashion [sic]

through a variety of misrepresentations including but not limited to” (Fluke Decl. ¶ 14):

SG[C] would operate more efficiently without [his] presence,

although [he] was donating [his] time without pay[,] the monies

would be used in a manner that was controlled and efficient[,]

marketing and sales of the golf club would be accomplished better

with less people managing the customers[,] costs for the company

would be controlled with less personnel participating[,] success of

patents and the company would be faster in development[,] and

patents would be protected because Jim DePorche and Joyce

Taylor were the only controllers.

Nowhere in his declaration does Mr. Fluke reveal, however, who made these supposed

“misrepresentations,” when they were made, or where they were made. Mr. Fluke’s declaration

also fails to explain why these alleged “misrepresentations” were false or how he relied upon

them when being “removed from SG[C].” Again, simply calling a statement “fraudulent” does

not make it so.10

Sixth, turning to the IP agreement he signed, Mr. Fluke’s statement that he was “coerced”

into signing the agreement is similarly devoid of any factual details surrounding the alleged

coercion. He does not explain how he was “coerced,” what representations were made, and how

those representations were false. Again, this is insufficient to survive summary judgment.

In sum, counterclaimants have each failed to meet their burden of producing admissible

evidence establishing a genuine issue of material fact on their fraud counterclaim. The anemic

argument put forth in the opposition brief that “[t]here are enough facts alleged” to survive

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11 While counterdefendants acknowledge that new stock certificates were not printed

and sent to shareholders after reincorporation, this was entirely lawful under Wyoming law. 

Wyoming law clearly states that “[s]hares may but need not be represented by certificates”

for Wyoming corporations See W.S.1977 § 17-16-625 (emphasis added).

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summary judgment is based upon an incorrect legal standard (Opp. 10). Summary judgment on

this counterclaim is therefore GRANTED. 

Given this ruling, it is not necessary to decide whether this counterclaim is barred under

the applicable three-year statue of limitations or whether the parole evidence rule bars extrinsic

evidence relating to the IP agreements.

2. CONVERSION

To prove conversion, a plaintiff must establish: (1) his ownership of or right to possess the

property in question at the time of the conversion, (2) that the defendant disposed of the plaintiff’s

property rights or converted the property by a wrongful act, and (3) damages. Oakdale Village

Group v. Fong, 43 Cal. App. 4th 539, 544 (1996). A plaintiff must also prove that he or she did

not consent to the defendant’s exercise of dominion over the property in question. Band of New

York v. Fremont General Corp., 523 F.3d 902, 914 (9th Cir. 2008).

Counterclaimants alleged that they each held shares in SGC, and that — without notice or

an opportunity to vote on the issue — SGC was dissolved and reincorporated in Wyoming as

SGCC (Ans. ¶¶ 69–71). According to counterclaimants, they were harmed because they received

no value for their SGC shares and no shares in the new entity. Rather, according to

counterclaimants, the only shareholders of SGCC were Mr. DePorche and Joyce Taylor (id. at ¶¶

72–74).

As before, counterdefendants have met their burden of negating these allegations with

admissible evidence. First, through sworn declarations and exhibits, counterdefendants have

shown that all former shareholders of SGC received an identical number of shares in SGCC that

they previously held in SGC.11 Second, counterdefendants have shown that notice of the

dissolution, reincorporation, and exchange of shares was provided to shareholders. See Cal.

Corp. Code § 1903(c) (“The board shall cause written notice of the commencement of the

proceeding for voluntary winding up to be given by mail to all shareholders.”). Indeed, Roy

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Taylor’s own letter to Mr. DePorche in December 2006 directly referenced this notice, indicating

that he had received it and understood that shares were being “exchanged.” Third,

counterdefendants have established that the dissolution of SGC was approved by both the board

of directors and the majority of shareholders. See Cal. Corp. Code § 1900(a) (“Any corporation

may elect voluntarily to wind up and dissolve by the vote of shareholders holding shares

representing 50 percent or more of the voting power.”). In sum, counterdefendants have met their

burden of gutting the core allegations underlying the conversion counterclaim.

In response, the opposition brief again improperly relies upon allegations in the pleadings

as “proof” that counterdefendants “did in fact dissolve the original corporation SG[C] without

notice to [counterclaimants]” and “in fact failed to issue shares of stock” to counterclaimants

(Opp. 11). As stated, allegations are insufficient to create a genuine issue of material fact for

trial. Even assuming that counterclaimants — as shareholders — were entitled to the formality

of a full shareholder vote on the reincorporation of SGC, there is no admissible evidence that

counterclaimants were damaged as a result of the reincorporation. Rather, their sole argument for

damages is that they were never issued any shares in SGCC — an assertion that is unsupported by

any admissible evidence. Additionally, counterclaimants have provided no evidence that either

Mr. Stowell or Mr. Galanti even held shares in SGC. Rather, the evidence provided by

counterdefendants proves the contrary. As such, these particular counterclaimants lack standing

to bring a conversion counterclaim based upon the reincorporation of SGC. 

For these reasons, counterclaimants have again failed to show that a genuine issue of

material fact exists for trial. Summary judgment on this counterclaim is therefore GRANTED. 

As an aside, this order will not allow counterclaimants to repackage their unjust

enrichment counterclaim — which was dismissed over half a year ago — as an additional theory

of conversion. Counterclaimants were expressly invited to seek leave to amend their dismissed

counterclaims, but chose not to do so. Therefore, this order need not address the merits of

counterclaimants’ conversion arguments regarding the Roy Taylor’s supposed “loan” to SGC and

the closure of SGC’s corporate bank account following his removal from the board (Opp. 11–12). 

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3. CORPORATE WASTE

Counterclaimants’ corporate waste theory is premised on the alleged misuse by Mr.

DePorche and Joyce Taylor of approximately $315,000 in funds invested in SGC by

counterclaimants (Ans. ¶ 99). According to counterclaimants, both SGC and SGCC failed to

develop the swingless golf club “for many years” and made no attempt to sell the product, thereby

“guaranteeing” that investors would not be repaid (id. at ¶ 100).

Under California law, liability of directors for failing to perform their duties is limited by

“the familiar concept that . . . a director should not be liable for an honest mistake of business

judgment.” See Legislative Comments to Cal. Corp. Code § 309. Thus, for claims like corporate

waste, a director can avoid liability altogether by acting “in good faith, in a manner such director

believes to be in the best interests of the corporation and its shareholders and with such care,

including reasonable inquiry, as an ordinarily prudent person in a like position would use under

similar circumstances.” Cal. Corp. Code § 309(a). Wyoming law contains an analogous statutory

provision for Wyoming corporations. See W.S.1977 § 17-16-830.

In support of the instant motion, counterdefendants have produced ample admissible

evidence demonstrating that the counterclaimants’ allegations of corporate waste lack factual

support. Specifically, counterdefendants have shown that soon after the swingless golf club

became “production-ready” in 2003, SGC attempted to market and sell the product. The

company developed a website, created promotional materials, and manufactured 25 clubs. These

efforts proved successful, albeit on a small scale commensurate with the funds on hand. Shortly

thereafter, however, SGC was forced to divert corporate resources towards protracted litigation

with counterclaimant Roy Taylor following his removal from SGC. It took until 2006 — after

SGC had fought for and received a state court judgment in its favor — for the patents and related

intellectual property to be returned to the company. According to counterdefendants, this stymied

any efforts to raise additional investor capital (DePorche Decl. ¶ 21). Soon thereafter, SGC was

reincorporated in Wyoming to save costs. All of this evidence directly negates counterclaimants’

allegations of corporate waste and supports the applicability of the business judgment rule.

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In response, the opposition brief again points to counterclaimants’ allegations set forth in

the pleadings (Opp. 12–14). Amazingly, the opposition brief also contains paragraphs copied

wholesale from counterclaimants’ opposition to the November 2009 motion to dismiss (compare

Dkt. No. 72 at 7 with Opp. 13).12 No admissible evidence was proffered in the declarations of

Roy Taylor or Steven Fluke to support their allegations of corporate waste. Moreover, given that

Mr. Stowell and Mr. Galanti held no shares in SGC and own no shares in SGCC, they lack

standing to even bring allegations of corporate waste against the company.

For these reasons, summary judgment on this counterclaim is GRANTED. Given this

ruling, this order does not need to address the question of whether an unclean hands defense —

based upon Roy Taylor’s repeated attempts to “assign” the company’s intellectual property to

himself — bars the “corporate waste” counterclaim.

4. BREACH OF FIDUCIARY DUTIES

While the prior counterclaims addressed herein targeted both Mr. DePorche and Joyce

Taylor, the breach of fiduciary duties counterclaim targeted only Mr. DePorche. In their answer,

counterclaimants alleged that Mr. DePorche breached his duty to shareholders through a slew of

failures, including failing to “ensure that the corporation is operated in a legal manner to ensure a

continual business and decisions that are appropriate[,]” “refusing to provide any material data as

to the operation of [SGC] to [counterclaimant Roy] Taylor a 30% shareholder[,]” “fail[ing] to

provide any accounting or assessment as to the operational condition related to the product line,

marketing maintenance of the patents, potential sales, and on going operation of the

corporation[,]” and “fail[ing] to hold noticed share holder meetings, issue shares as required,

produce any accounting of the business operation, or produce quarterly, or annual reports of the

business operations” (Ans. ¶ 60).

Under California law, a claim for breach of fiduciary duties requires proof that: (1) Mr.

DePorche owed a fiduciary duty to the party in question, (2) the duty was breached, and (3) the

breach caused the harm suffered. First Interstate Bank of Arizona, N.A., v. Murphy, Weird and

Butler, 210 F.3d 983, 986 (9th Cir. 2000). As a controlling shareholder and director of SGC and

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SGCC, there is no question that Mr. DePorche owed fiduciary duties to shareholders, including

the duty to protect the interests of minority shareholders. Jones v. H. F. Ahmanson & Co., 1

Cal.3d 93, 110 (1969).

As stated, counterdefendants have put forth substantial evidence showing that they

operated SGC and SGCC in a lawful manner — indeed, they relied upon the advice of the very

same corporate counsel hired by Roy Taylor himself. Additionally, counterdefendants have

produced evidence showing that they properly noticed the reincorporation of SGC, properly

issued SGCC shares to former shareholders of SGC, and otherwise made business decisions for

both SGC and SGCC in good faith. The same evidence also shows that neither Mr. Stowell nor

Mr. Galanti owned shares of SGC or SGCC. Thus, no fiduciary duties were ever owed to them.

In response, the declarations of both Mr. Taylor and Mr. Fluke state that “[Mr.] DePorche

. . . dissolved SG[C] without informing or consulting any of the shareholders” of the company (R.

Taylor Decl. ¶ 35; Fluke Decl. ¶ 24). Additionally, both declarations state that Mr. Taylor and

Mr. Fluke “were not given any opportunity to oppose the dissolution of SG[C]” and received “no

annual reports, no notice of shareholders meetings, and no dividends from those shares” (R.

Taylor Decl. ¶¶ 37–38; Fluke Decl. ¶ 26–27). Finally, both assert — in statements that have

already been deemed inadmissible due to lack of firsthand knowledge — that “SGCC did not

issue any shares” to them (R. Taylor Decl. ¶ 36; Fluke Decl. ¶ 27).

Even crediting these statements, there is insufficient evidence for a reasonable jury to find

that Mr. DePorche breached any fiduciary duties to counterclaimants. The fiduciary duty of a

controlling shareholder to a minority shareholder is based on “powers in trust” and is subject to

the equitable limitation that it may not be exercised for the aggrandizement, preference, or

advantage of the fiduciary. Interactive Multimedia Artists, Inc. v. Superior Court (Allstate Ins.

Co.), 62 Cal. App. 4th 1546, 1555 (2d Dist. 1998). In other words, majority shareholders may not

use their power to control corporate activities to benefit themselves alone or in a manner

detrimental to the minority. Directors are bound to similar duties.

Notably absent from counterclaimants’ declarations are any facts showing how these

actions (or inactions) by Mr. DePorche were done with the intent to benefit majority shareholders

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to the detriment of minority shareholders. Moreover, neither Roy Taylor nor Mr. Fluke state how

they have been harmed as a result of these supposed breaches of fiduciary duties, given the

undisputed evidence showing that they were issued shares in SGCC.

Finally, this order again notes that the opposition brief includes paragraphs cribbed

directly from counterclaimants’ opposition to the November 2009 motion to dismiss (compare

Opp. 14 with Dkt. No. 72 at 9). Given that the legal standards differ substantially between a

summary judgment motion and a motion to dismiss, this sloppy copying is a substantial reason

why counterclaimants’ arguments are unavailing.

For these reasons, summary judgment on this counterclaim is GRANTED

5. COUNTERCLAIMANTS’ RULE 56(f) MOTION

Despite the fact that the parties were ordered to complete all depositions in January 2010

and fact discovery in this action closed three months ago (Dkt. Nos. 78, 84), the opposition brief

nevertheless argues that a number of depositions are still incomplete and that (Opp. 8) (all errors

in original):

The depositions are anticipated to present additional extensive

evidence that support Counter claimants claims and shows that

there would be triable issue of material fact, which include but not

limited to 1) when and how the Counter Claimants were put on

notice of Counter Defendants fraud, under what circumstance

Counter Claimants signed the IP agreement 2) how the actions of

Counter Defendants led to conversion of property rights of Counter

Claimants 3) how the actions of Counter Defendants led to their

fiduciary duty 4) what actions led to misuse of investors funds 5)

how the actions of Counter Defendants were not rational which led

to misuse of Counter Claimants/investors funds.

FRCP 56(f) states that “[i]f a party opposing [a summary judgment] motion shows by

affidavit that, for specified reasons, it cannot present facts essential to justify its opposition, the

court may: (1) deny the motion; (2) order a continuance to enable affidavits to be obtained,

depositions to be taken, or other discovery to be undertaken; or (3) issue any other just order.” 

This burden has clearly not been met. First, the arguments presented in the opposition

brief have not been set forth in affidavit form, as required under FRCP 56(f). Second,

counterclaimants have provided no “specific facts” that they hope to elicit from further discovery. 

Third, no reasonable explanation has been provided as to why these depositions were delayed and

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not taken during the lengthy discovery period, which ended three months ago. The arguments

presented above only show that counsel seek further delays to continue a fishing expedition for

any evidence that might support the counterclaims alleged.

The Rule 56(f) motion is DENIED. 

CONCLUSION

For the reasons set forth above, counterdefendants’ motion for summary judgment on all

remaining counterclaims is GRANTED. Counterclaimants’ Rule 56(f) motion to postpone

adjudication of the instant motion pending additional discovery is DENIED.

* * *

With no counterclaims remaining for trial, all that is left are SGCC’s claims for patent

infringement, misappropriation of trade secrets, unfair competition under Section 17200 of the

California Business and Professions Code, violation of the Lanham Act, 15 U.S.C. 1125(a), and

breach of contract (Dkt. No. 59). With respect to the patent infringement claim, the parties are

reminded that they opted one year ago to forego claim construction and that the jury will be

instructed that the terms of the asserted patent claims have their ordinary and customary meaning

(Dkt. No. 51). Since the last date to file dispositive motions — June 7 — has long since passed,

all that is left is the final pretrial conference on SEPTEMBER 6 and a jury trial on SEPTEMBER 20.

The Court expects all counsel of record to be prepared to try this case on schedule and to

know and follow the applicable rules and standards for trial. No mulligans on summary judgment

or discovery will be permitted. Both sides must be ready to come out swinging.

IT IS SO ORDERED.

Dated: August 5, 2010. WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

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