IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

KELLY CRAWFORD, IN HIS 

CAPACITY AS RECEIVER,

Plaintiff,

v.

MAGICSTAR ARROW 

ENTERTAINMENT, LLC; 

MAGICSTAR ARROW, INC.; AND 

CARLOS CRUZ,

Defendants.

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Civil Action No. 3:22-cv-01935-D

DEFENDANTS’ MOTION TO DISMISS

UNDER RULES 8(a)/9(b), 12(b)(1), 12(b)(2), AND 12(b)(6)

AND BRIEF IN SUPPORT 

Jeffrey M. Tillotson

State Bar No. 20039200

jtillotson@tillotsonlaw.com

Benjamin L. Nabors

State Bar No. 24116805

bnabors@tillotsonlaw.com

TILLOTSON, JOHNSON & PATTON

1807 Ross Avenue, Suite 325

Dallas, Texas 75201

(214) 382-3041 Telephone

(214) 292-6564 Facsimile

ATTORNEYS FOR DEFENDANTS

Dated: November 7, 2022

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TABLE OF CONTENTS

TABLE OF CONTENTS.................................................................................................ii

TABLE OF AUTHORITIES..........................................................................................iv

INTRODUCTION ...........................................................................................................1

FACTUAL BACKGROUND...........................................................................................3

LAW & ARGUMENT......................................................................................................5

I. Plaintiff's Claims Against All Defendants. .....................................................5

A. The Court Lacks Subject Matter Jurisdiction 

Because Plaintiff’s Claims Are Not Ripe............................................5

B. The Complaint Fails to State a Claim for "Unjust Enrichment -

Constructive Trust" .............................................................................7

C. Plaintiff Fails to Satisfy Rule 9(b) with Respect to its Fraudulent 

Transfer Claims. ..................................................................................9

D. Plaintiff’s "Fraudulent Transfer - Actual Fraud" Claim is Untimely 

with Respect to Certain Allegedly Fraudulent Transfers ...............12

E. Plaintiff’s Failure to Identify Which State’s Law Applies Requires

Dismissal............................................................................................14

II. Plaintiff’s Claims Against Defendant Cruz................................................16

A. The Court Lacks Personal Jurisdiction 

Over Defendant Cruz.. .....................................................................16

B. Plaintiff's Claim for "Money Had and Received"

Against Cruz Fails............................................................................17

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C. Plaintiff’s “Claim” for 

“Veil Piercing/Alter Ego/Single Enterprise” Fails. .........................18

CONCLUSION AND PRAYER....................................................................................20

CERTIFICATE OF SERVICE......................................................................................20

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TABLE OF AUTHORITIES

CASES

Avidor v. Sutter’s Place, Inc., 

(2013) 212 Cal.App.4th 1439 ....................................................................................17

Bell Atl. Corp. v. Twombly, 

550 U.S. 544 (2007).....................................................................................................7

Bristol-Myers Squibb Co. v. Superior Court of Cal., San Francisco, 

137 S.Ct. 1773 (2017)................................................................................................16

Clapper v. Am. Realty Investors, Inc., 

No. 3:14-CV-2970-D, 2015 WL 3504856, *11 (N.D. Tex. June 3, 2015) .................19

Commodity Futures Trading Commission, et al., v. TMTE, Inc., et al., 

Case: 3:20-cv-02910-X.............................................................................................1, 3

Conde v. Sensa, 

259 F. Supp. 3d 1064 (S.D. Cal. 2017) .....................................................................19

Douglass v. Nippon Yusen Kabushiki Kaisha, 

46 F.4th 226 (5th Cir. 2022) .....................................................................................16

Foley v. Trinity Indus. Leasing Co., 

314 S.W.3d 593, 605 n.6 (Tex. App.—Dallas 2010, no pet.)....................................19

Halder v. Standard Oil Co., 

642 F.2d 107, 110 (5th Cir. 1981)...............................................................................5

Honeywell Int’l Inc. v. MEK Chem. Corp., 

No. 3:17-cv-1390-M, 2018 WL 6737514, *7 (N.D. Tex. July 5, 2018) .....................15

Int’l Shoe Co. v. Washington, 

326 U.S. 310 (1945)...................................................................................................16

Janvey v. Brown, 

767 F.3d 430 (5th Cir. 2014).....................................................................................14

JPA, Inc. v. USF Processors Trading Corp, Inc., 

No. 3:05-CV-0433-P, 2005 WL 8158446, *3 (N.D. Tex. July 15, 2005) ..............9, 11

Kim v. Tesoro Refining & Mktg. Co. LLC, 

Case 3:22-cv-01935-X Document 9 Filed 11/07/22 Page 4 of 25 PageID 172
v

No. 2:17-cv-06241-AB (RAOx), 2017 WL 11680958, *2 (C.D. Cal. Dec. 13, 2017)..5, 

6

LeBrun v. CBS Television Studios, Inc., (2021) 

68 Cal.App.5th 199......................................................................................................8

Megatel Homes, LLC v. Moayedi, 

No. 3:20-CV-00688-L, 2021 WL 5360509, *3 (N.D. Tex. Nov. 16, 2021)..................9

Mehler Texnologies, Inc. v. Monolithic Constructors, Inc., 

No. 3:09-cv-0655-M, 2009 WL 3149383, *2 (N.D. Tex. Sept. 29, 2009)................5, 6

Reid v. City of San Diego, 24 (2018) 

Cal.App.5th 343...........................................................................................................8

VeroBlue Farms USA, Inc. v. Wulf, 

465 F. Supp. 3d 633, 652 (N.D. Tex. 2020) ..........................................................9, 10

Warfield v. Arpe, 

Civil Action No. 3:05-cv-1457-R 2007 WL 549467 at *11 

(N.D. Tex, Feb. 22, 2007) ..........................................................................................17

Xcelerated Transp., Group, LLC v. Navistar, Inc., 

No. 3:20-CV-3036-L, 2022 WL 1624901, *2 (N.D. Tex. May 20, 2022) .........7,10, 11

STATUTES

Cal. Civ. Code § 3439.02(b) ..........................................................................................12

Cal. Civ. Code § 3439.09...............................................................................................13

Cal. Civ. Code § 3439(a)(1).....................................................................................12, 15

RULES

Federal Rule of Civil Procedure 12(b)(1) ...........................................................1, 2, 5, 7

Federal Rule of Civil Procedure 12(b)(2) ...............................................................1, 2, 5

Federal Rule of Civil Procedure 12(b)(6) ............................................................. passim

Federal Rule of Civil Procedure 9(b).................................................................... passim

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Defendants MagicStar Arrow Entertainment, LLC (“MagicStar 

Entertainment”), MagicStar Arrow, Inc. (“MagicStar,” and, together with MagicStar 

Entertainment, the “MagicStar Entities”), and Carlos Cruz (collectively, 

“Defendants”) hereby move to dismiss this case pursuant to Federal Rules of Civil 

Procedure 8(a)/9(b), 12(b)(1), 12(b)(2), and 12(b)(6), and state as follows in support 

thereof:

INTRODUCTION

This is an effort to claw legitimate earnings back from a marketing contractor 

and its owner based on the mere allegation that the entities who hired the contractor 

engaged in fraud through their transactions with their own customers.

Defendants were in the marketing business when TMTE, Inc., a/k/a 

Metals.com, and related entities (collectively, the “Metals Entities”) hired Defendants 

to market their sale of precious metals. The Metals Entities were placed in 

receivership after the Commodity Futures Trading Commission (“CFTC”) and certain 

state agencies accused them of engaging in fraud by selling those precious metals at 

prices above their “base melt value” or “spot price.”1 Plaintiff is the Receiver who was 

appointed in the Underlying Case and now stands in the shoes of the Metals Entities 

(and certain other entities allegedly owned or controlled by the owners and/or control 

persons of the Metals Entities, Lucas Asher and/or Simon Batashvili) (collectively 

referred to herein as the “Receivership Entities”). And now, in an effort to hold 

1 This case, styled Commodity Futures Trading Commission, et al., v. TMTE, Inc., et al., Case: 3:20-

cv-02910-X is pending in the United States District Court for the Northern District of Texas and shall 

hereinafter be referred to as the “Underlying Case.”

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Defendants liable for the alleged fraud of the Receivership Entities, Plaintiff has sued 

Defendants for actual and constructive fraudulent transfer, unjust enrichment, and 

money had and received. That effort fails, and his Complaint must be dismissed, for 

multiple reasons.

Specifically, all of the Defendants move to dismiss Plaintiff’s claims based on 

the following grounds: 

(a) Plaintiff’s claims are not ripe, so the Court lacks subject matter 

jurisdiction under Federal Rule of Civil Procedure 12(b)(1); 

(b) Plaintiff fails to allege sufficient facts to support its claim for “unjust 

enrichment – constructive trust” under Federal Rules of Civil Procedure 8(a)/9(b) and 

12(b)(6); 

(c) Plaintiff fails to plead his first and second causes of action3⁄4for actual 

and constructive fraudulent transfer, respectively3⁄4with sufficient particularity 

under Federal Rules of Civil Procedure 9(b) and 12(b)(6);

(d) Plaintiff’s actual fraud claim is barred by the applicable statute of 

limitations with respect to certain of the allegedly fraudulent transfers; and 

(e) Plaintiff fails to specify which state’s law apply to any of his claims. 

In addition, Defendant Carlos Cruz moves to dismiss Plaintiff’s claims against 

him, individually, on the following grounds:

(a) The Court lacks personal jurisdiction over Mr. Cruz under Federal Rule 

of Civil Procedure 12(b)(2);

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(b) Plaintiff fails to allege sufficient facts to support his claim for “Money 

Had and Received” against Cruz under Federal Rule of Civil Procedure 12(b)(6). 

(c) Plaintiff fails to plead sufficient facts to support his “claim” for “veil 

piercing/alter ego/single enterprise” under Federal Rule of Civil Procedure 12(b)(6). 

FACTUAL BACKGROUND

More than two years ago, on September 22, 2020, the CFTC and various state

agencies and attorneys general initiated the Underlying Case against TMTE, Inc. 

a/k/a Metals.com, Chase Metals. Inc., Chase Metals, LLC, Barrick Capital, Inc., 

Lucas Asher a/k/a Luke Asher and Simon Batashvili in the United States District 

Court for the Northern District of Texas. See Compl. Ex. B.2 On the same day, United 

States District Judge Godbey executed an Order Granting Plaintiffs’ Emergency Ex 

Parte Motion for Statutory Restraining Order, Appointment of Receiver, and Other 

Equitable Relief (the “SRO”). See Compl. Ex. A. The Receiver purports to have 

initiated the instant lawsuit pursuant to authority granted to him under the SRO. 

See Compl. ¶¶ 5-7. 

Tellingly, the Complaint omits the tortured history behind the Receiver’s

efforts to hold Mr. Cruz responsible for the alleged misconduct of the defendants in 

the Underlying Case3⁄4in which Mr. Cruz was never named as a party and which, 

again, is hotly disputed and still being actively litigated by those who were named. 

Specifically, more than a year ago, the Receiver conjured up a different theory that a 

different entity owned by Mr. Cruz, Portfolio Insider, LLC (which is conspicuously not 

2 The Underlying Case is currently scheduled for bench trial beginning August 21, 2023. 

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a party to the instant action), was actually owned or controlled by Asher and/or 

Batashvili.3 In a procedurally irregular (and constitutionally suspect) move, the 

Receiver then attempted to use a civil contempt motion3⁄4brought against Asher and 

Batashvili in the Underlying Case3⁄4to effectively deprive Mr. Cruz of his ownership 

interest in Portfolio Insider by asking the Court to declare it a Receivership 

Defendant.4 Despite the fact that neither Mr. Cruz nor any of his entities is a party 

to the Underlying Case, Mr. Cruz has cooperated with the Receiver, even agreeing to 

be deposed in the Underlying Case on July 13, 2022.5

Now, Plaintiff has filed the instant action in which he speculates that 

payments made to certain of the Defendants for marketing services they provided to

the Receivership Entities were actually “fraudulent transfers made to insiders, 

intended to grow the underlying fraud, divert funds from one fraud to another and 

place the transfers beyond the reach of the Receiver and the Receivership Entities’ 

creditors.” Compl. ¶2. Tellingly, Plaintiff’s own allegations fly in the face of this 

theory. For example, the transfers which Plaintiff contends were designed to place 

assets beyond the Receiver’s reach began in 2017 and span a multi-year period 

preceding the appointment of the Receiver. Compl. Ex. C. 

3 See Receiver’s Ermergency Motion for “Show Cause” Hearing to Hold Defendants Lucas Asher and 

Simon Batashvili in Civil Contempt, and Brief in Support filed in the Underlying Case [Dkt. 311]. 

4 Id. The contempt motion filed in the Underlying Case has not been ruled on and on October 7, 2022, 

the Court ordered the parties to mediation to attempt to resolve the motion. Order [Dkt. 452]. 

5 Tellingly, despite “cherry-picking” excerpts from Mr. Cruz’s deposition testimony, Plaintiff does not 

include the transcript as an exhibit to its Complaint, so only provides the Court will an incomplete 

(and self-selected) picture of Mr. Cruz’s testimony. 

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Significantly, per Plaintiff’s own allegations, each of the allegedly fraudulent 

transfers were made from the Receivership Entities to one of the MagicStar Entities. 

Compl. ¶ 28; Ex. C. Specifically, Plaintiff identifies each of the allegedly fraudulent 

transfers on a chart attached as Exhibit C to the Complaint. Compl. ¶ 28; Ex. C. 

According to this chart, the MagicStar Entities are listed as the “payee” on each of 

the transfers at issue. Conversely, Plaintiff does not allege that any of the transfers 

at issue in the Complaint were actually made to Mr. Cruz. In fact, Plaintiff does not 

specifically allege anywhere in the Complaint that Mr. Cruz personally received any 

property from the Receivership Entities. 

LAW & ARGUMENT

Defendants move to dismiss under Rules 8(a)/9(b), 12(b)(1), 12(b)(2), and 

12(b)(6). 

I. Plaintiffs’ Claims Against All Defendants. 

A. The Court Lacks Subject Matter Jurisdiction Because Plaintiff’s 

Claims Are Not Ripe.

“It is fundamental that the federal courts do not decide abstract, hypothetical, 

or contingent questions.” Halder v. Standard Oil Co., 642 F.2d 107, 110 (5th Cir. 

1981). Therefore, “[j]urisdiction under Article III of the United States Constitution 

requires that a dispute demonstrate sufficient ripeness to establish a concrete case 

or controversy.” Mehler Texnologies, Inc. v. Monolithic Constructors, Inc., No. 3:09-

cv-0655-M, 2009 WL 3149383, *2 (N.D. Tex. Sept. 29, 2009) (Lynn, J.) (internal 

quotation marks omitted). “[W]here the need to resolve a dispute depends on the 

plaintiff first facing an adverse result in pending litigation, the plaintiff’s claim is not 

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ripe for review.” Kim v. Tesoro Refining & Mktg. Co. LLC, No. 2:17-cv-06241-AB 

(RAOx), 2017 WL 11680958, *2 (C.D. Cal. Dec. 13, 2017); see also, e.g., Mehler, 2009 

WL 3149383 at *2 (dismissing claims seeking damages that “are contingent on future 

events” consisting of potential claims seeking compensation “which may not occur as 

anticipated, or may not occur at all”).

All of Plaintiff’s claims are predicated on the assumption that the Receivership 

Entities were, in fact, defrauding their customers/investors when the entities

improperly made payments to MagicStar Entities. See Compl. Indeed, the Receiver 

purports to be acting “for the benefit of the Investors” in bringing these claims. Id. ¶ 

58. And it is that alleged fraud that Plaintiff contends turned the payments into 

“fraudulent transfers,” made the payments “unjust,” and merit holding Mr. Cruz 

liable in his individual capacity for the payments to the MagicStar Entities. Id.

¶¶ 43-63.

To be sure, the CFTC and others have accused the Receivership Entities of 

engaging in that fraud. See Compl. at Ex. B (CFTC Complaint). But those 

accusations are disputed and are still being litigated in another pending case to which 

Defendants are not parties. So, the Receivership Entities might or might not be 

found3⁄4in a different pending case3⁄4to have committed the fraud on which all of 

Plaintiff’s claims depend.6 If they are not found to have committed fraud, Plaintiff’s 

6 Adjudicating the Receivership Entities’ alleged fraud in this case, when it is already the subject of 

other pending litigation, is no solution. Among other things, the allegedly defrauded people are not 

parties to this case, the alleged fraudsters are not parties to this case (and even the Receivership 

Entities, while technically represented by the Receiver, have no one in this case to argue that they did 

not commit fraud, when the Receiver is contending otherwise), and there is a clear risk of inconsistent 

findings and verdicts.

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claims against Defendants necessarily fail. That means these claims are contingent 

on future events and not yet ripe, and must be dismissed on that ground, alone. See, 

e.g., Mehler, 2009 WL 3149383 at *2; Kim, 2017 WL 11680958 at *2. This Court 

cannot issue an advisory opinion about whether these Defendants would be liable for 

fraudulent transfer, unjust enrichment, and money had and received if the 

Receivership Entities committed fraud. Accordingly, Plaintiff’s claims must be 

dismissed under Federal Rule of Civil Procedure 12(b)(1). 

B. The Complaint Fails to State a Claim for “Unjust Enrichment -

Constructive Trust.”

“To defeat a motion to dismiss filed pursuant to Rule 12(b)(6) of the Federal 

Rules of Civil Procedure, a plaintiff must plead ‘enough facts to state a claim to relief 

that is plausible on its face.’” Xcelerated Transp., Group, LLC v. Navistar, Inc., No. 

3:20-CV-3036-L, 2022 WL 1624901, *2 (N.D. Tex. May 20, 2022) (Lindsay, J.) (quoting 

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). That requires “‘more than 

labels and conclusions, and a formulaic recitation of the elements of a cause of action 

will not do.’” Id. (quoting Twombly, 550 U.S. at 555). And “[w]hile well-pleaded facts 

of a complaint are to be accepted as true, legal conclusions are not entitled to the 

assumption of truth,” nor are “conclusory allegations, unwarranted deductions, or 

legal conclusions” to be accepted. Id. (internal quotation marks omitted).

Accepting Plaintiff’s allegations as true, Plaintiff fails to state a claim for what 

he calls “unjust enrichment - constructive trust.”7 See Compl. at 16. As a preliminary 

7 As a preliminary matter, Plaintiff fails to identify the state’s law he seeks to apply to any of his 

claims, which, as set forth below, constitutes another ground on which to dismiss his claims. 

Nonetheless, for purposes of this Motion, Defendants assume that California law applies to Plaintiff’s 

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matter, that name conflates distinct concepts. “Unjust enrichment” is one concept, 

and “constructive trust” is another. In any event, both constitute equitable remedies, 

rather than independent claims, and Plaintiff has not and cannot state a claim for 

either. 

Under California law, unjust enrichment is an equitable doctrine that provides 

a “remedy for a validly pleaded cause of action.” LeBrun v. CBS Television Studios, 

Inc., 68 Cal. App. 5th 199, 210 (2021). The spirit behind unjust enrichment is to 

“apply the law outside of the box and fill in the cracks where common civil law and 

statutes fail to achieve justice.” Id. (internal quotation marks omitted). Thus, 

conversely, where statute and common law provide a method for achieving justice, 

the remedy is unavailable. Id. 

Here, the only independent claims asserted by Plaintiff are fraudulent transfer 

claims. If, on the one hand, Plaintiff succeeds on his fraudulent transfer claims, then 

the equitable remedy of unjust enrichment will be unavailable. Conversely, if 

Plaintiff does not succeed on his fraudulent transfer claims, then no other validly 

pleaded claim exists to support the remedy of unjust enrichment. Accordingly, under 

any possible scenario, Plaintiff’s unjust enrichment claim fails. 

Similarly, to the extent Plaintiff’s claim is for “constructive trust,” a 

constructive trust is “merely a remedy” which is dependent on the validity of an 

underlying cause of action. Reid v. City of San Diego, 24 Cal. App. 5th 343, 362 (2018). 

In sum, Plaintiff has failed to set forth allegations which could possibly support Count 

claims, since that is the only one Plaintiff’s Complaint mentions, albeit pointedly without taking a 

position on whether it actually applies. 

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3 of the Complaint, “Unjust Enrichment – Constructive Trust,” so this claim should 

be dismissed under Rule 12(b)(6). 

C. Plaintiff Fails to Satisfy Rule 9(b) with Respect to Its Fraudulent 

Transfer Claims. 

Rule 9(b) mandates that, when “alleging fraud or mistake, a party must state 

with particularity the circumstances constituting fraud or mistake.” “A dismissal for 

failure to plead fraud with particularity pursuant to Rule 9(b) is treated the same as 

a Rule 12(b)(6) dismissal for failure to state a claim.” Megatel Homes, LLC v. 

Moayedi, No. 3:20-CV-00688-L, 2021 WL 5360509, *3 (N.D. Tex. Nov. 16, 2021) 

(Lindsay, J.). Rule 9(b)’s “heightened pleading standard . . . requires a plaintiff to 

plead the circumstances constituting fraud with particularity,” including “the who, 

what, when, where, and how” of the alleged fraud. Id. (internal quotation marks 

omitted). That standard applies to all claims sounding in fraud, no matter how they 

are denominated, and a claim “sounds in fraud” if it relies on allegations of fraudulent 

conduct, “whether they are part of a claim of fraud or not.” E.g., JPA, Inc. v. USF 

Processors Trading Corp, Inc., No. 3:05-CV-0433-P, 2005 WL 8158446, *3 (N.D. Tex. 

July 15, 2005) (Solis, J.) (internal quotation marks omitted) (applying Rule 9(b) to 

negligent misrepresentation claim); VeroBlue Farms USA, Inc. v. Wulf, 465 F. Supp. 

3d 633, 652 (N.D. Tex. 2020) (Starr, J.) (same for actual fraudulent transfer claims).

i. Plaintiff’s Claim for “Voidable/Fraudulent Transfer – Actual Fraud”

Although the number of grounds would no doubt grow upon disclosure of the 

state’s law that Plaintiff asks the Court to apply, it is already clear that his claim for 

actual fraudulent transfer fails on at least two grounds, no matter which state’s law 

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applies. Further, under California law, Plaintiff’s fraudulent transfer claim is barred 

by the applicable statute of limitations with respect to at least some of the allegedly 

fraudulent transfers. 

Plaintiff’s allegations are impermissibly formulaic and conclusory. He alleges, 

for example, that “[t]he Transfers and their amounts were concealed from creditors,” 

but does not provide any factual allegations to support any such thing. See id. ¶ 45(b). 

Plaintiff then alleges that “the Receivership Entities concealed assets, including by 

diverting monies received from Investors for the sale of metals to a myriad of shell 

entities and bank accounts,” but (1) Defendants are not the Receivership Entities and 

(2) Plaintiff does not identify either the “monies received” or the “shell entities and 

bank accounts” to which those unspecified monies allegedly were diverted. See id. ¶ 

45(c). The list goes on and is consistently devoid of factual support. Essentially, 

Plaintiff appears to have just listed the factors in some unidentified state’s 

fraudulent-transfer statute. Such formulaic and conclusory recitations of a claim’s 

elements do not even suffice under Rule 8(a)’s permissive pleading standard, let alone 

the heightened standard under Rule 9(b) that applies to this claim for actual 

fraudulent transfer “with intent to defraud.” See Xcelerated, 2022 WL 1624901 at *2; 

VeroBlue, 465 F. Supp. 3d at 652.

ii. Plaintiff’s Claim for “Voidable/Fraudulent Transfer – Constructive 

Fraud”

Plaintiff’s claim for constructive fraudulent transfer fares no better. Again, in 

support, Plaintiff provides nothing more than conclusory allegations consisting of 

formulaic recitations of the elements in an unidentified state’s law. See Compl. ¶¶ 50-

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51. Plaintiff’s liberal use of the word “or” to allege alternative upon alternative set of 

facts of which he might (or might not) be accusing Defendants is particularly 

problematic. See id. It is Plaintiff’s obligation to give Defendants fair notice of what 

they are actually being accused of, with supporting factual allegations, not merely to 

list the panoply of things Plaintiff is considering accusing them of. See Xcelerated, 

2022 WL 1624901 at *2; Twombly, 550 U.S. at 555.

Equally problematic is Plaintiff’s failure to describe the “business or [] 

transaction for which the remaining assets of the Receivership Entities were 

[allegedly] unreasonably small” and what “debts beyond their ability to pay as they 

became due” the Receivership Entities allegedly were incurring. Compl. ¶ 50. Those 

facts are at the heart of Plaintiff’s claim but are utterly unpleaded. That also means 

Plaintiff’s allegation that the Receivership Entities were “insolvent” is an 

unsupported legal conclusion that does not satisfy Plaintiff’s pleading burden. See

Xcelerated, 2022 WL 1624901 at *2; Twombly, 550 U.S. at 555. 

Additionally, while Plaintiff did allege in a different claim that the “claims held 

by defrauded Investors” constituted “debts” of the Receivership Entities at the time 

the transfers were made, Compl. ¶ 45(e), that does not suffice either. As an initial 

matter, Plaintiff’s failure to plead those facts as to this claim makes it unclear 

whether this claim relies on the same alleged “debts.” That raises a further problem 

because Plaintiff cannot base this claim on “debts” created through actual “fraud” 

without subjecting this claim to Rule 9(b)’s heightened pleading standards, which 

makes his pleadings even more clearly inadequate. See JPA, 2005 WL 8158446 at *3 

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(applying Rule 9(b) to non-fraud claim if it nonetheless is based on allegations of 

fraud). Nor are the “claims held by defrauded Investors” cognizable “debts” rendering 

a party “insolvent” for fraudulent transfer purposes. Those claims (1) had not even 

been asserted at the time of the transfers and (2) are still hotly disputed and being 

actively litigated to this day. The very California statute that Plaintiff cites in this 

claim expressly excludes mere alleged debts that are unpaid “as a result of a bona 

fide dispute” from those that are relevant to determining “insolvency.” Cal. Civ. Code 

§ 3439.02(b); Compl. ¶ 51.

In sum, neither of Plaintiff’s fraudulent transfer claims set forth fraud with 

sufficient particularity to satisfy Rule 9(b) and thus both of these claims should be 

dismissed against all Defendants. In addition, Plaintiff’s allegations affirmatively 

negate its fraudulent transfer claims against Cruz. Plaintiff identifies the allegedly 

fraudulent transfers at issue in this case in Exhibit C to the Complaint. See Compl. 

¶28; Ex. C. The “payee” listed on each of these transfers is one of the MagicStar 

Entities. Cruz is not listed as the payee on a single transfer. 

D. Plaintiff’s “Fraudulent Transfer – Actual Fraud” Claim is 

Untimely with Respect to Certain Allegedly Fraudulent 

Transfers. 

Plaintiff’s fraudulent transfer claim is barred, at least in part, by applicable 

statute of limitations. Specifically, with respect to its fraudulent transfer claim, 

Plaintiff alleges that certain transfers3⁄4identified in Exhibit C to the 

Complaint3⁄4from the Receivership Entities to the MagicStar Defendants were 

fraudulent under Cal. Civ. Code § 3439(a)(1). Compl. ¶44.

Pursuant to Cal. Civ. Code § 3439.09:

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[a] cause of action with respect to a transfer or obligation under this 

chapter is extinguished unless action is brought...:

(a) Under paragraph (1) of subdivision (a) of Section 3439.04, not later 

than four years after the transfer was made or the obligation was 

incurred, or, if later, not later than one year after the transfer or 

obligation was or could reasonably have been discovered by the 

claimant; [or] 

(b) Under paragraph (2) of subdivision (a) of Section 3439.04 or Section 

3439.05, not later than four years after the transfer was made or the 

obligation was incurred.

Here, under either of these standards, Plaintiff’s fraudulent transfer claim is 

untimely with respect to many of the alleged transfers identified in Exhibit C to the 

Complaint. Plaintiff filed the instant lawsuit on August 31, 2022. Accordingly, under 

§ 3439.09(b), any cause of action asserted under 3439.04(a)(2) expired on August 31, 

2018. Here, according to Plaintiff’s own allegations, more than twenty of the alleged 

transfers identified in Exhibit C to Plaintiff’s Complaint occurred before August 31, 

2018, so Plaintiff’s fraudulent transfer claim is time-barred with respect to these 

transfers. 

Even if Plaintiff’s fraudulent transfer claims arise under 3439.04(a)(1), 

Plaintiff would have had to assert its claims “not later than one year after the transfer

. . . was or could reasonably have been discovered by the claimant.” Here, even 

assuming that the “claimant” is the Receiver (rather than the Receivership Entities), 

the claimant could reasonably have discovered the alleged transfers at issue long ago. 

The Receiver was appointed over the Receivership Entities on September 22, 2020. 

Accordingly, even assuming generously that it would reasonably take nine months to 

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discover the alleged transfers, they should have been discovered by June 22, 2021, at 

the latest, and the claims asserted within a year therefrom (June 22, 2022). 

Cognizant of its timeliness problem, Plaintiff attempts to revive its fraudulent 

transfer cause of action by alleging in conclusory fashion that “the Receiver was 

unable to discover or assert the claims until recently.” Compl. ¶ 35. However, 

Plaintiff then contradicts itself and admits that it was aware of the alleged transfers

by at least May 18, 2021, when it “made demand upon the MagicStar Defendants to 

identify any goods or services provided to the Receivership Defendants in exchange 

for the monies received by Receivership Defendants.” Id. ¶ 36. Accordingly, 

Plaintiff’s fraudulent transfer claims related to alleged transfers made before August 

31, 2018 are untimely and must be dismissed. 

E. Plaintiff’s Failure to Identify Which State’s Law Applies 

Requires Dismissal.

An additional threshold issue infects all of Plaintiff’s claims and, alone, 

requires dismissal: Plaintiff never bothers to identify the statutes/state laws under 

which he seeks to hold Defendants liable. See Compl. That is a real problem in this 

lawsuit because Texas choice-of-law rules apply, “and Texas courts follow the ‘most 

significant relationship’ test.” Janvey v. Brown, 767 F.3d 430, 434 (5th Cir. 2014) 

(internal quotation marks omitted).

Plaintiff brought suit in Texas, but his allegations focus on California, Florida, 

and Wyoming. He alleges that MagicStar and MagicStar Entertainment are 

California entities whose principal offices were in California but who could be served 

only in Florida; that Mr. Cruz’s “last known addresses” were in California and 

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Florida; and that he obtained jurisdiction over Defendants only by filing the 

Receivership Order and underlying complaint “in all districts in California and 

Florida.” Compl. ¶¶ 10-15. Meanwhile, the Receivership Entities that allegedly 

conducted the fraud underlying this entire dispute are Wyoming entities with offices 

there and/or in California. Id. at Ex. B ¶¶ 24-27.

To further muddy the waters, in his fraudulent transfer claims, Plaintiff 

alleges that the transfers alleged here “were fraudulent under Cal. Civ. Code § 

3439(a)(1) and/or any other applicable State’s adoption of the Uniform Fraudulent 

Transfer Act.” Id. ¶¶ 47, 51. That allegation could not possibly be any broader and 

vaguer.

Plaintiff’s failure to identify which state’s law applies to the claims by which 

he seeks to hold Defendants liable, alone, requires that the Complaint be dismissed. 

See, e.g., Honeywell Int’l Inc. v. MEK Chem. Corp., No. 3:17-cv-1390-M, 2018 WL 

6737514, *7 (N.D. Tex. July 5, 2018) (Lynn, C.J.) (granting motion to dismiss because, 

inter alia, “Defendants’ allegations do not identify which law applies and thus fail to 

give Plaintiff ‘fair notice of what the . . . claim is and the grounds upon which it rests’” 

(quoting Twombly, 550 U.S. at 555) (alteration original)).

Plaintiff concludes his Complaint with a conclusory request for “all reasonable 

attorney’s fees and expenses incurred in obtaining judgment against the MagicStar 

Defendants.” Compl. ¶ 64. Once again, because he has avoided identifying the law(s) 

under which he seeks to hold Defendants liable, Plaintiff has also failed to provide 

any legal basis entitling him to recover his fees and expenses. See id.

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II. Plaintiff’s Claims Against Defendant Cruz. 

A. The Court Lacks Personal Jurisdiction Over Defendant Cruz. 

The Fourteenth Amendment Due Process Clause places limits on the scope of 

a court’s personal jurisdiction. Douglass v. Nippon Yusen Kabushiki Kaisha, 46 F.4th 

226, 236 (5th Cir. 2022). The Court’s authority over a defendant depends on the 

defendant having “certain minimum contacts with [the forum state] such that 

maintenance of the suit does not offend ‘traditional notions of fair play and 

substantial justice.’” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). The 

primary focus of that inquiry is “the defendant’s relationship to the forum state.” 

Bristol-Myers Squibb Co. v. Superior Court of Cal., San Francisco, 137 S.Ct. 1773, 

1779 (2017). 

Here, the sole basis for personal jurisdiction over the Defendants alleged by 

Plaintiff is the “Receiver’s compliance with 28 U.S.C. §§ 753 and 754 . . . together with 

28 U.S.C. § 1692.”8 Compl. ¶ 14. 28 U.S.C. § 754 provides as follows: 

A receiver appointed in any civil action or proceeding involving property, 

real, personal or mixed, situated in different districts shall, upon giving 

bond as required by the court, be vested with complete jurisdiction and 

control of all such property with the right to take possession thereof.

He shall have capacity to sue in any district without ancillary 

appointment, and may be sued with respect thereto as provided 

in section 959 of this title.

Such receiver shall, within ten days after the entry of his order of 

appointment, file copies of the complaint and such order of appointment 

in the district court for each district in which property is located. The 

failure to file such copies in any district shall divest the receiver of 

jurisdiction and control over all such property in that district.

8 It is not at all clear how 28 U.S.C. § 753–which relates to the appointment of court reports–has any 

bearing on jurisdictional issues in this case. 

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Further, 28 U.S.C. § 1692 provides: 

[i]n proceedings in a district court where a receiver is appointed for 

property, real, real, personal, or mixed, situated in different districts, 

process may issue and be executed in any such district as if the property 

lay wholly within one district, but orders affecting the property shall be 

entered of record in each of such districts.

Section 1692 “operates as a nationwide service of process statute that may be 

used to acquire personal jurisdiction over defendants in possession of receivership 

assets.” Warfield v. Arpe, No. 3:05-cv-1457-R, 2007 WL 549467, *11 (N.D. Tex., Feb. 

22, 2007) (Buchmeyer, J.). Here, taking the Receiver’s allegations at face value, only 

the MagicStar Entities, and not Mr. Cruz personally, would possess receivership 

assets by virtue of the allegedly fraudulent transfers. See Compl. ¶ 44; Ex. C. 

Plaintiff has not identified a single transfer or other means by which Mr. Cruz ever 

acquired any such assets. While the Receiver alleges that Mr. Cruz should be held 

liable for the allegedly fraudulent transfers made to the MagicStar Entities through 

a veil piercing or alter ego theory (Compl. ¶¶ 60-61), as set forth in greater detail 

below, these conclusory allegations fail. Accordingly, because Plaintiff has failed to 

set forth well-pled allegations that Mr. Cruz is in possession of receivership assets, 

personal jurisdiction cannot be established under § 1692. 

B. Plaintiff’s Claim for “Money Had and Received” Fails Against 

Cruz. 

Under California law, a plaintiff states a cause of action for money had and 

received if it alleges that the defendant is indebted to the plaintiff in a certain sum 

“for money had and received by the defendant for the use of the plaintiff.” Avidor v. 

Sutter’s Place, Inc., 212 Cal.App.4th 1439, 1454 (2013). In order to succeed on this 

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claim, Plaintiff must plead and prove that “the Defendant[s] received money intended 

to be used for the benefit of the Plaintiff, that the money was not used for the 

Plaintiff’s benefit, and that the Defendant[s] has not given the money to the Plaintiff.” 

Id. (internal quotation marks omitted). 

With respect to Mr. Cruz, Plaintiff’s claim fails at the outset because, as 

repeatedly noted herein, Plaintiff does not allege that any of the allegedly fraudulent 

transfers were made to Cruz. To the contrary, Plaintiff affirmatively alleges that 

each of the transfers were made to one of the MagicStar Entities. Compl. Ex. C. 

C. Plaintiff’s “Claim” for “Veil Piercing/Alter Ego/Single 

Enterprise” Fails. 

Plaintiff’s composite claim for “Veil Piercing/Alter Ego/Single Enterprise” is 

the mechanism by which he seeks to connect Mr. Cruz to the transfers based on his 

mere ownership of MagicStar and MagicStar Entertainment. See id. ¶¶ 60-63. 

Plaintiff’s failure to identify the state’s law under which he proceeds improperly

handicaps Defendants’ ability to fully assess this claim, too, but it is still clearly not 

adequately pleaded.

First, “veil piercing,” “alter ego,” and “single enterprise” are not synonymous. 

Each applies only under certain circumstances, when certain elements are met, and 

only in certain states. For example, Texas recognizes “alter ego” liability, but “[t]he 

Texas Supreme Court has rejected the single business enterprise theory of liability,” 

Foley v. Trinity Indus. Leasing Co., 314 S.W.3d 593, 605 n.6 (Tex. App.—Dallas 2010, 

no pet.). In California, “alter ego liability is reserved for the parent-subsidiary 

relationship” and the “single-enterprise rule” may apply “between sister companies.”

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Conde v. Sensa, 259 F. Supp. 3d 1064, 1072 (S.D. Cal. 2017) (internal quotation marks 

omitted).

Second, although Plaintiff’s failure to identify the state’s law under which he 

seeks to hold Mr. Cruz individually liable again makes it impossible to fully assess 

his allegations, it is clear that they are not adequate. They are, again, utterly 

conclusory, formulaic, and devoid of factual support. For example, Plaintiff alleges 

that the transfers made to MagicStar and MagicStar Entertainment were “for the 

personal benefit of Cruz” and that Mr. Cruz “used the MagicStar Defendant entities 

as his alter ego,” but provides no factual support for those conclusory allegations. See

Compl. ¶ 61. For example, in Clapper v. Am. Realty Investors, Inc., No. 3:14-CV-2970-

D, 2015 WL 3504856, *11 (N.D. Tex. June 3, 2015), Judge Fitzwater dismissed as 

“conclusory and insufficient . . . under Rule 12(b)(6)” alter ego allegations that were 

more detailed than Plaintiff’s here. Clapper at least conclusorily alleged a requisite 

“‘unity’ of interest” among the defendants, including “the commingling of funds, . . . 

diversion of . . . assets and/or profits and inadequate capitalization . . . , confusion 

between separate properties, records and control and failure to keep assets separate.” 

Id. That still was not enough because Clapper provided no supporting factual 

allegations, but Plaintiff here has done even less. Rather than allege facts 

establishing the elements of “alter ego” liability, Plaintiff simply says Mr. Cruz “used 

the MagicStar Defendant entities as his alter ego,” and leaves it at that. Compl. ¶ 

61.

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CONCLUSION & PRAYER

For the reasons set forth above, Defendants respectfully request that the Court 

dismiss Plaintiff’s claims and grant them such other and further relief to which they

may be entitled. 

Respectfully submitted,

/s/ Jeffrey M. Tillotson

Jeffrey M. Tillotson

State Bar No. 20039200

jtillotson@tillotsonlaw.com

Benjamin L. Nabors

State Bar No. 24116805

bnabors@tillotsonlaw.com

TILLOTSON, JOHNSON & PATTON

1807 Ross Avenue, Suite 325

Dallas, Texas 75201

(214) 382-3041 Telephone

(214) 292-6564 Facsimile

ATTORNEYS FOR DEFENDANTS

CERTIFICATE OF SERVICE

The above and foregoing document was served upon counsel herein by ECF on 

November 7, 2022.

/s/ Jeffrey M. Tillotson

Jeffrey M. Tillotson

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