MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

1

17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Caleb Avery t’Bear

Pro Se

2 Jones Street; Unit 202

New York, NY 10014

(415) 699-4951

CalebFW@gmail.com

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

CALEB AVERY T’BEAR,

 Plaintiff,

v.

BARRY FORMAN, et al.

Defendants. 

Case No. 17-cv-00796-JSC

MOTION TO DISMISS DEFENDANT’S 

COUNTERCLAIMS PER RULE 19 (B)

Date: TBD

Time: TBD

Courtroom: F – 15th Floor

Judge: Hon. Jacqueline Corley 

I. INTRODUCTION

Indispensible Parties. 

Rule 19 requires that if a court cannot accord complete relief among existing parties or a 

party claims an interest relating to subject of the action and is so situated that disposing of the 

action could impair or impede that party’s ability to protect that interest (or leave that person 

with the possibility of multiple or inconsistent obligations) the court may dismiss all or part of a 

claim because indispensable parties are absent. With the filing of his Amended Counterclaim 

seeking, Defendant is seeking: 1) dissolution and/or non-recognition of the partnership between

Plaintiff and Defendant; 2) collecting from the Plaintiff as guarantor of the Demand Notes (under 

a signed Memorandum of Understanding (―MOU‖)) rather than the stated payor; and 3) 

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 1 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

2

17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

rescission of the collateral assignments recognized by the MOU. By seeking to not collect 

properly from Urso, Ltd. (―Urso‖) and to seize intellectual property from FairWay IP Holdings, 

Ltd. (―FWIPH‖) Counterclaimant seeks remedies that affect both Urso and FWIPH (the 

―Indispensible Parties‖). 

More particularly, in his Amended Counterclaim, Defendant Forman requests that he 

bypass making demands for payment on Urso and seeks collateral from FWIPH that has been the 

property of FWIPH for almost a decade. At the very least, Claims for Relief in the Amended 

Counterclaim must be dismissed. At issue is Defendant’s assertion that the Memorandum of 

Understanding (MOU) entered into between Plaintiff and Defendant (Exhibits A & B) is invalid 

and/or should be rescinded. At no time, however, has Defendant offered a substantiated basis for 

doing so. Whenever Defendant has asserted this, Defendant has not offered a legal basis for 

invalidation or rescission or Defendant has not offered evidence (corroborated or otherwise) in 

support of any legal basis for invalidation or rescission of the MOU. Defendant’s most recent 

allegations that the MOU should be invalidated appears in (Dkt# 122). By this time, it has 

become clear that Plaintiff/Counterdefendant would be adversely affected by any determination 

that the MOU is invalid or rescinded. So also would certain others who are not yet parties to this 

litigation (also Indispensible Parties hereto) because they would now be charged by any 

judgment with potential rulings that (i) debts are owed or (ii) their assets have or may become 

subject to superior collateral rights or even defeasement or (iii) FairWay companies they have or 

are becoming entitled to equity interests in have or may lose some or all of their value because 

the intellectual property rights they require to operate are lost. They are Urso (Belize), FWIPH

(Caymans), and more than 100 senior secured collateral debt investors in FairWay since the date 

of the MOU (as above, also potential Indispensible Parties hereto). 

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 2 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

3

17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Upon knowledge and belief, Plaintiff asserts that the two parties named above, Urso and 

FWIPH (hereinafter referred to as the ―Indispensible Parties‖) are wholly dependent both upon 

the benefits established for them under the MOU. Under the MOU, the FairWay intellectual 

property (including FairWay patents) was released by Defendant as collateral previously pledged 

to Defendant under secured promissory notes described in Defendant’s Counterclaims and part

of the record in this litigation. One effect of this release of collateral rights was to allow FWIPH

to present itself since, now, and in the near future by offering licenses to its intellectual property, 

software based on such intellectual property, and provision of technical services in order to 

establish its global business network. Another benefit of the MOU was to restructure payments

Defendant claimed were payable. Part of such restructuring was to substitute Urso for Plaintiff as 

payor of any such debt. Further, Urso’s obligations to make payments were expressly limited to 

funds Urso received as dividends or otherwise from its subsidiary, FWIPH. While the focus of 

this Motion is upon Urso and FWIPH, it should be noted that over 100 debt investors in FairWay 

were provided with first (i.e. collectively first) senior position collateral rights made available

since Defendant gave up his collateral rights in the FairWay intellectual property. Plaintiff has 

not had rights to this pledged collateral that belongs to FWPIH for over a decade (even predating the MOU).

If the MOU is invalidated or rescinded, then: 

(a) FWIPH’s intellectual property and patent portfolio could be made subject to 

both security interests that would make its licensing program suspect to 

prospective customers, because the intellectual property could be made subject 

to execution (seizure) by Defendant; 

(b) The favorable payment terms under the MOU could be reverted back to the 

original terms of the original Demand Notes, meaning Urso could be obligated 

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 3 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

4

17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

to accelerate the payment of hundreds of thousands or potentially millions of 

dollars yet with no resources to do so; and, finally, 

(c) The over 100 debt investors who received first position senior security 

interests in the FairWay intellectual property upon making their debt 

investments in FairWay would lose their priority with indeterminate 

consequences to their secured investments.

Arguably, all of these rather extreme adverse results upon Indispensible Parties not yet 

joined to this litigation create legal interests and provide a motivation for them to participate in it 

with potentially catastrophic results if they do not. While Plaintiff invites the Court to consider 

the appropriateness of including over 100 senior debt investors, Plaintiff will focus on Urso and 

FWIPH as appropriate Indispensible Parties for purposes of this Motion to Dismiss.

The MOU Assailed

Before Plaintiff began representing himself, Defendant questioned the MOU while 

admitting it. However, on June 14, 2018, Defendant moved to amend his Counterclaims (Dkt #: 

80) asserting that the MOU be rescinded (Dkt #: 80, page 4, lines 24-25), that the alleged 

partnership between Plaintiff and Defendant did not exist (page 5, lines 8-20) and that Defendant

should have his collateral rights in the FairWay intellectual property reinstated (including, in 

large part, the FairWay patent portfolio (Dkt # 80). The Court granted the request for leave to 

amend and now not only are Plaintiff’s rights and obligation affected thereby, but also the rights 

and obligations of both Urso and FWIPH.

MOU Entered Into Freely and With Knowledge

In various pleadings, Defendant only recently claims that he did not enter into the MOU 

or did not enter into it freely or with knowledge of its meaning or intent. To the contrary,

Defendant freely negotiated the terms and language of the MOU. Defendant signed the MOU 

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 4 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

5

17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

and admitted to this in his deposition (Exhibits C and D and Exhibit Dkt #80, page 4, line 27 and 

page 5, line 7). Defendant even admits why he entered into the MOU, including saying that ―...it 

was to eliminate obstacles to someone who might want to invest‖ (Exhibit C, page 164, lines 2-

4) and ―...it’s something I did to advance a cause.‖ (Exhibit C, page 164, lines 15-16) and ―It 

was in my economic interest as a shareholder initially in Fairway Financial US,·and 

subsequently in other OpCo’s if and when they were ever created.‖·(Exhibit C, page 133, lines 2-

5). Defendant had intimate knowledge of the Indispensable Parties including their role with 

respect Plaintiff and Defendant’s partnership, The FairWay Group. Avery Declaration ¶ 2.

Defendant participated in assigning such roles to these Indispensable Parties and assisted in the 

creation of a cash flow plan, management succession plan and intellectual property protection 

plan which required the Indispensable Parties to play significant roles. Avery Declaration ¶ 3.

Both Plaintiff and Defendant understood and believed their partnership existed as a 

practicable and working agreement. The FairWay Group could not and would not succeed 

without additional third party investment. As noted above, Defendant Forman has admitted that 

he realized at the time that his release of the FairWay intellectual property as collateral was 

necessary to make it available to new investors in order to obtain additional investment. It was a 

tradeoff. Without it though, the FairWay business(es) would fail, and there would likely be no 

source of funds or other assets in order for Indispensible Parties, Plaintiff, or The FairWay Group

(the partnership itself) to repay Defendant. In this sense, the MOU (and release of the FairWay 

intellectual property) represented a calculated risk for Defendant. But, it had a significant 

potential upside to Defendant’s share of the partnership. Failing to enter the MOU was almost 

certainly all downside.

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 5 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

6

17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Defendant seeks relief now, over almost two years into this litigation, that by its nature 

will require the joinder the Indispensible Parties. However, doing so at this late date may not be 

practical or just.

Timely Changes

In summary, Defendant has made this MOU (and its terms and conditions) an issue in his 

current Reply in Support of Forman’s Counterclaims (Dkt #: 122) pages 10-12, making this 

Motion to Dismiss timely and ripe for adjudication.

II. STATEMENT OF FACTS

Brief Background of the Partnership

Defendant did not name any of the identified Indispensible Parties in his pleadings and 

has still not done so. Yet, Defendant seeks relief in his Counterclaim and Amended 

Counterclaim, as well as undetermined damages that are necessarily going to negatively affect 

these Indispensible Parties as well as the proceeds affecting them and Plaintiff. This Court 

should not proceed with Defendant’s Counterclaim case without the stated payor being a party to 

the litigation when establishing and collecting a debt is its objective. Similarly, how can the 

Court proceed to allow Defendant to establish collateral rights when the owner of the property 

that would be affected by such rights is not a party to this litigation? It would seem 

fundamentally inequitable to allow this or, in fact, the entire Counterclaim case to proceed to the 

disadvantage of so many FairWay investors, but particularly the Indispensible Parties. 

Furthermore, Defendant has never even made a single demand for repayment of any 

Demand Notes on Urso, attempting to ―skip‖ a critical step and instead making the demands for 

repayment of the Demand Notes on Plaintiff who backed the loans under the terms of the MOU. 

Therefore, Defendant does not even know what repayment might be made (and when) by Urso. 

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 6 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

7

17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

As a separate but relevant matter, this litigation is about both Plaintiffs’ claims regarding 

partnership as well as Defendant’s Counterclaims regarding debt repayment. Permeating these 

claims are questions of Defendant’s partnership performance and whether it affected not just 

Plaintiff but all stakeholders, including the Indispensible Parties. Defendant’s breaches of his 

duties to the partnership with Plaintiff would have had a direct effect on the cash flows of 

FWIPH and its ability to pay dividends to Urso and, hence, Urso’s ability to repay Defendant’s 

Demand Notes under the MOU. Defendant’s failure and delay to collect from Urso or otherwise 

address the debt obligations of Urso until now puts Plaintiff, Urso, and FWIPH at an unfair 

prejudice which rules of equity ought to prevent. 

The issues relating to Plaintiff and Defendant’s FairWay partnership are well documented in 

pleadings in this litigation, including Plaintiff’s original Claim and Defendant’s various 

counterpleadings. There is also a chronology of the specific events of the partnership and the 

MOU are attached as Exhibit E.

Formation of the Business Relationship.

Plaintiff and Defendant met in 2006. Following discussions about the FairWay business 

opportunity, Defendant made several loans to Plaintiff and, eventually, in 2009 Defendant 

proposed that they enter into a business partnership. (See Plaintiff’s original Claim, see also 

Exhibit C, page 29, line 9 through page 33, line 8), known as ―The FairWay Group‖. The 

purposes of The FairWay Group included overseeing the Indispensable Parties and a licensing 

entity known as FairWay International (Hungary), now abandoned. The main business purpose 

of The FairWay Group, however, was to establish and fund regional operating companies around 

the world for FairWay licensees. The terms of The FairWay Group partnership were negotiated 

and set forth in substantial part in a draft ―Collaboration Agreement‖ prepared jointly by Plaintiff 

and Defendant, which is a continuing subject of controversy in this action. The terms of The 

FairWay Group partnership arrangement were augmented by supplemental agreements and 

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 7 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

8

17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

documentation including establishing the partners’ roles and compensation and the partnership 

equity split in Equity Capitalization Tables (Exhibits H-K).

Lending.

Defendant made loans to Plaintiff subject to Secured Promissory Notes issued in California 

(and subject to its laws) during the period 2006 to 2011. These notes provided for repayment by 

Plaintiff.

Memorandum of Understanding (MOU)

Plaintiff and Defendant entered into the MOU on or before the end of 2011. The MOU 

modified the terms of the above-mentioned promissory notes. In particular, Urso Ltd. became the 

stated payor of any underlying debt. The payment terms were modified such that amounts due 

were made subject to the availability of funds received by Urso Ltd. from and through its 

licensing subsidiary, FairWay IP Holdings Ltd. Further, Defendant’s security interest in and to 

FairWay intellectual property, including in particular the FairWay patents, was extinguished. 

Defendant retained a security interest in plaintiff’s other assets, such as but not limited to equity 

in FairWay Financial US, Inc., an unfunded and an as-yet unlicensed FairWay Operating 

Company and any equity held by Plaintiff in Urso Ltd. These arrangements were, by their nature 

perpetual, at least until such time as any debts owing Defendant were fully paid. No changes 

were made to the principal or interest amounts stated in the promissory notes. As consideration 

for the MOU, Defendant received benefits including (but not limited to):

1. Defendant was able to distribute partnership equity rights to his children. 

2. Additional debt investment to The FairWay Group.

3. Establishment FWIPH as global licensor. 

4. Establishment of payment terms and methods for Urso.

5. Avoidance of a collapse of business opportunity.

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 8 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

9

17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

In connection with the partners’ entry into the MOU, on or before December 22, 2011, Urso

capitalized FWIPH with the FairWay patent portfolio and other FairWay intellectual property. 

Avery Declaration ¶ 4. As hoped, from the date of the MOU, Plaintiff, The FairWay Group, Urso 

and FWIPH have obtained additional investment in FairWay by, in part, granting senior security 

interests to such investors in the FairWay intellectual property, made possible, in part, by 

Defendant’s release of his security interests in the FairWay intellectual property. Avery 

Declaration ¶ 5.

Further, since the effectiveness of the MOU, FWIPH proceeded to hold itself out to the 

marketplace as a potential licensor of financial industry changing software and services as a 

precursor to launching its global licensing business. Avery Declaration ¶ 6. First, Urso and then 

FWIPH participated in fund raising including granting de novo security interests in and to the 

intellectual property collateral that had been released by Defendant. Avery Declaration ¶ 7. 

By October 2008, Defendant began claiming that repayment of his loans was due.

Discussions between Plaintiff and Defendant were brokered by Timothy Covington who had 

been legal counsel to Plaintiff but who was well known to and had worked closely with 

Defendant. During those discussions, Mr. Covington attempted to argue each party’s case to the 

other neutrally, rather as anyone’s advocate. At times, the parties appeared close to a resolution. 

However, fund raising efforts for FairWay declined as Defendant breached his fiduciary duties to 

the partnership, and funds were not available to repay Defendant at that time. Those discussions 

broke down in approximately December of 2016. The assets that Defendant now seeks effective 

control over, to the detriment of all current stakeholders including but not limited to the 

Indispensible Parties, have not been property of Plaintiff for some dozen years and Defendant

knows this. Plaintiff, the Indispensable Parties, even the new debt investors since the date of the 

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 9 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

10 17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

MOU and other stakeholders including sweat equity key participants) have all acted in reliance 

on the effectiveness of the MOU ever since its inception.

Increased Importance of Indispensable Parties

This action was filed by Plaintiff in or about January 2017 as an action to affirm Plaintiff and 

Defendant’s dissolution of partnership, for breach of partnership fiduciary and other duties, an 

accounting and request for damages. Defendant responded with a Countercomplaint for 

repayment of loans, naming Plaintiff and only Plaintiff as the (sole) Counterdefendant. Nowhere 

in Defendant’s pleadings then or more recently in his Motion to Amend Countercomplaint has 

Defendant mentioned the Indispensable Parties, Urso and FWIPH.

III. LEGAL STANDARD FOR DIMISSAL UNDER RULE 19 (b).

There are at least two parties affected by Defendant’s Counterclaims that have not been 

served and not been joined to this case, Urso (Belize) and FWIPH (Cayman Islands). Both Urso

and FWIPH are certainly required parties for potential joinder. Specifically, under Rule 19(a)1:

(a) Persons Required to Be Joined if Feasible.

(a) Required Party. A person who is subject to service of process and whose joinder 

will not deprive the court of subject-matter jurisdiction must be joined as a party 

if:

(A) in that person's absence, the court cannot accord complete relief among 

existing parties; or

(B) that person claims an interest relating to the subject of the action and is 

so situated that disposing of the action in the person’s absence may:

(i) as a practical matter impair or impede the person’s ability to 

protect the interest; or

 

1 New subdivision (a) defines the persons whose joinder in the action is desirable. 

Clause (1) stresses the desirability of joining those persons in whose absence the court would be 

obliged to grant partial or ―hollow‖ rather than complete relief to the parties before the court. 

The interests that are being furthered here are not only those of the parties, but also that of the 

public in avoiding repeated lawsuits on the same essential subject matter. Clause (2)(i) 

recognizes the importance of protecting the person whose joinder is in question against the 

practical prejudice to him which may arise through a disposition of the action in his absence. 

Clause (2)(ii) recognizes the need for considering whether a party may be left, after the 

adjudication, in a position where a person not joined can subject him to a double or otherwise 

inconsistent liability. See Reed, supra, 55 Mich.L.Rev. at 330, 338; Note, supra, 65 Harv.L.Rev. 

at 1052–57; Developments in the Law, supra, 71 Harv.L.Rev. at 881–85. Notes of Advisory 

Committee on Rules – 1966 Amendment.

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 10 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

11 17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

(ii) leave an existing party subject to a substantial risk of incurring 

double, multiple, or otherwise inconsistent obligations because 

of the interest.

(b) Joinder by Court Order. If a person has not been joined as required, the court 

must order that the person be made a party. A person who refuses to join as a 

plaintiff may be made either a defendant or, in a proper case, an involuntary 

plaintiff.

(c) Venue. If a joined party objects to venue and the joinder would make venue 

improper, the court must dismiss that party.

However, Plaintiff asserts that both Urso and FWIPH are indispensible parties. 

Specifically, under Rule 19(b):

(b) When Joinder Is Not Feasible. If a person who is required to be joined if feasible 

cannot be joined, the court must determine whether, in equity and good conscience, the 

action should proceed among the existing parties or should be dismissed. The factors for 

the court to consider include:

(1) the extent to which a judgment rendered in the person’s absence might prejudice 

that person or the existing parties;

(2) the extent to which any prejudice could be lessened or avoided by:

(A) protective provisions in the judgment;

(B) shaping the relief; or

(C) other measures;

(3) whether a judgment rendered in the person’s absence would be adequate; and

(4) whether Plaintiff would have an adequate remedy if the action were dismissed for 

nonjoinder.

Under Rule 19(c), pleading the Reasons for Nonjoinder. When asserting a claim for relief, a 

party must state:

(1) the name, if known, of any person who is required to be joined if feasible but is not 

joined; and

(2) the reasons for not joining that person.

Whenever feasible, the persons materially interested in the subject of an action should be 

joined as parties so that they may be heard and a complete disposition made.2 When this 

 

2

The word ―Indispensable,‖ appearing in original subdivision (b), was apparently 

intended as an inclusive reference to the interested persons in whose absence it would be 

advisable, all factors having been considered, to dismiss the action. Yet the sentence implied that 

there might be interested persons, not ―indispensable.‖ in whose absence the action ought also to 

be dismissed. Further, it seemed at least superficially plausible to equate the word 

―indispensable‖ with the expression ―having a joint interest,‖ appearing in subdivision (a). See 

United States v. Washington Inst. of Tech., Inc., 138 F.2d 25, 26 (3d Cir. 1943); cf. Chidester v. 

City of Newark, 162 F.2d 598 (3d Cir. 1947). But persons holding an interest technically ―joint‖ 

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 11 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

12 17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

comprehensive joinder cannot be accomplished—a situation which may be encountered in 

Federal courts because of limitations on service of process, subject matter jurisdiction, and 

venue—the case should be examined pragmatically and a choice made between the alternatives 

of proceeding with the action in the absence of particular interested persons, and dismissing the 

action.

3

The two parties which are indispensible to be joined are Urso and FWIPH. Both 

companies would suffer irreparable harm if Defendant’s Counterclaims were allowed to proceed 

without their joinder. Moreover, if a ruling in this matter would allow Defendant to execute on 

the FairWay intellectual property as collateral, subsequent execution by Defendant would 

deprive FWIPH of its business purpose and revenue and deprive Urso of its dividend income 

(i.e., Urso Ltd. would suffer loss of future cash flows (e.g., dividends) from FWIPH). Avery 

Declaration ¶ 8. FWIPH would lose the ability to license its intellectual property and patent 

portfolio and provide related transaction software and services to process securities pricing 

unhindered by the actions of Defendant. Avery Declaration ¶ 9. Therefore, because their interests 

would be substantially affected, both Urso and FWIPH should, as Indispensable Parties, be 

allowed to defend their interests before a determination is made which could significantly affect 

their interests. 

Further it should be noted by the Court that Defendant was intimately involved in:

1. The assignment of the FairWay patent portfolio from Plaintiff to Urso. Avery 

Declaration ¶ 10.

 

are not always so related to an action that it would be unwise to proceed without joining all of 

them, whereas persons holding an interest not technically ―joint‖ may have this relation to an 

action. See Reed, Compulsory Joinder of Parties in Civil Actions, 55 Mich.L.Rev. 327, 356 ff., 

483 (1957). Ibid.

3

Ibid.

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 12 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

13 17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2. The reassignment of the FairWay intellectual property and patent portfolio from Urso

to FWIPH to facilitate future fundings of The FairWay Group under a Secured Note 

program co-designed between the partners (i.e., Plaintiff and Defendant). Avery 

Declaration ¶ 11. Further, Defendant knew any of his rights to the intellectual 

property and patent portfolio would be released and pledged instead to new security 

holders under the Secured Note program when he signed the MOU. Avery 

Declaration ¶ 12. See also Exhibits A & B.

3. Now, Defendant seeks to undo the prior two transactions of reassignment of the 

intellectual property and patent portfolio (without involvement of those Indispensible 

Parties) in which he had full involvement in and that were to his benefit at the time of 

the execution of the MOU and as a partner of Plaintiff. Defendant seeks to not only 

affect both foreign corporations, but over 100 equity shareholders in FairWay 

Financial U.S., Inc. (both domestic and international) who are also current senior 

holders of security interest in the intellectual property and patent portfolio of FWIPH

under the Secured Note program. Avery Declaration ¶ 13. Rescinding the security 

interest in FairWay’s intellectual property and patent portfolio (and volunteered by 

Defendant in signing the MOU) to Defendant now would be impractical if not 

impossible to do and would affect hundreds of innocent parties who are not parties to 

the case in this Court. Rescission might also either retroactively implicate Defendant

in criminal securities fraud and/or (possibly) expose Plaintiff to similar legal 

exposure.

4. If the ownership of the FairWay intellectual property and patent portfolio (now 

assigned to FWIPH) were put into question, the global FairWay business model 

collapses, both calling into question past grants of security interests (collateral) and 

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 13 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

14 17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

giving potential rights to unwind the related investment loans under the Secured Note 

program, as well impairing future financing of any FairWay entities and/or FairWay 

Operating Companies and clearly these values are far in excess of the matters in 

dispute in the case before this Court. Avery Declaration ¶ 14. 

Further, Counterclaimant has always had the adequate remedy of pursuing claims (if any) 

against Urso in Belizean courts and against FWIPH in Cayman courts.

With regards to Rule 19 Subdivision (b).—When a person as described in subdivision 

(a)(1)–(2) cannot be made a party, the court is to determine whether in equity and good 

conscience the action should proceed among the parties already before it, or should be dismissed. 

That this decision is to be made in the light of pragmatic considerations has often been 

acknowledged by the courts. See Roos v. Texas Co., 23 F.2d 171 (2d Cir. 1927), cert. denied, 277 

U.S. 587 (1928); Niles-Bement-Pond Co. v. Iron Moulders, Union, 254 U.S. 77, 80 (1920). The 

subdivision sets out four relevant considerations drawn from decided cases. The factors are to a 

certain extent overlapping, and they are not intended to exclude other considerations that may be 

applicable in particular situations.4

The first factor brings in a consideration of what a judgment in the action would mean to 

the absentee (i.e. each of the putative Indispensable Parties). Would the absentee be adversely 

affected in a practical sense, and if so, would the prejudice be immediate and serious, or remote 

and minor? The possible collateral consequences of the judgment upon the parties already joined 

are also to be appraised. Would any party be exposed to a fresh action by the absentee, and if so, 

how serious is the threat? See the elaborate discussion in Reed, supra; cf. A. L. Smith Iron Co. v. 

Dickson, 141 F.2d 3 (2d Cir. 1944); Caldwell Mfg. Co. v. Unique Balance Co., 18 F.R.D. 258 

(S.D.N.Y. 1955). In this case, both Urso and FWIPH would suffer irreparable harm if 

 

4

Ibid.

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 14 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

15 17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Defendant’s Counterclaims were allowed to proceed in their absence. Effectively they would 

both be put out of business. Both foreign corporations would have a cause of action against 

Defendant (and possibly even the Plaintiff in this case). There would also be collateral 

consequences to Plaintiff who has invested over a dozen years in the FairWay technology and its 

global deployment through The FairWay Group.

The second factor calls attention to the measures by which prejudice may be averted or 

lessened. The ―shaping of relief‖ is a familiar expedient to this end. See, e.g., the award of 

money damages in lieu of specific relief where the latter might affect an absentee adversely. 

Ward v. Deavers, 203 F.2d 72 (D.C.Cir. 1953); Miller & Lux, Inc. v. Nickel, 141 F.Supp. 41 

(N.D.Calif. 1956). On the use of ―protective provisions,‖ see Roos v. Texas Co., supra; Atwood v. 

Rhode Island Hosp. Trust Co., 275 Fed. 513, 519 (1st Cir. 1921), cert. denied, 257 U.S. 661 

(1922); cf. Stumpf v. Fidelity Gas Co., 294 F.2d 886 (9th Cir. 1961); and the general statement in 

National Licorice Co. v. Labor Board, 309 U.S. 350, 363 (1940). This is not acceptable either;

monetary damages to Defendant might also be inadequate remedy to the Indispensible Parties.

Plaintiff knows of no ―shaping‖ of relief which might fence off any negative consequences to the 

two identified Indispensible Parties. The Indispensible Parties in this case have neither the means 

nor the opportunity to participate in litigation on foreign soil (i.e., the United States) or through 

any expensive dispute resolution process. 

Sometimes the party is himself able to take measures to avoid prejudice. Thus a 

defendant faced with a prospect of a second suit by an absentee may be in a position to bring the 

latter into the action by defensive interpleader. See Hudson v. Newell, 172 F.2d 848, 852 mod., 

176 F.2d 546 (5th Cir. 1949); Gauss v. Kirk, 198 F.2d 83, 86 (D.C.Cir. 1952); Abel v. Brayton 

Flying Service, Inc., 248 F.2d 713, 716 (5th Cir. 1957) (suggestion of possibility of counterclaim 

under Rule 13(h)); cf. Parker Rust-Proof Co. v. Western Union Tel. Co., 105 F.2d 976 (2d Cir. 

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 15 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

16 17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1939) cert. denied, 308 U.S. 597 (1939). See also the absentee may sometimes be able to avert 

prejudice to himself by voluntarily appearing in the action or intervening on an ancillary basis. 

See Developments in the Law, supra, 71 Harv.L.Rev. at 882; Annot., Intervention or Subsequent 

Joinder of Parties as Affecting Jurisdiction of Federal Court Based on Diversity of Citizenship, 

134 A.L.R. 335 (1941); Johnson v. Middleton, 175 F.2d 535 (7th Cir. 1949); Kentucky Nat. Gas 

Corp. v. Duggins, 165 F.2d 1011 (6th Cir. 1948); McComb v. McCormack, 159 F.2d 219 (5th 

Cir. 1947). The court should consider whether this, in turn, would impose undue hardship 

on the absentee. [emphasis added]

The third factor—whether an ―adequate‖ judgment can be rendered in the absence of a 

given person—calls attention to the extent of the relief that can be accorded among the parties 

joined. It meshes with the other factors, especially the ―shaping of relief‖ mentioned under the 

second factor. Cf. Kroese v. General Steel Castings Corp., 179 F.2d 760 (3d Cir. 1949), cert. 

denied, 339 U.S. 983 (1950).

The fourth factor, looking to the practical effects of a dismissal, indicates that the court 

should consider whether there is any assurance that Defendant/Counterclaimant, if dismissed, 

could sue effectively in another forum where better joinder would be possible. See Fitzgerald v. 

Haynes, 241 F.2d 417, 420 (3d Cir. 1957); Fouke v. Schenewerk, 197 F.2d 234, 236 (5th Cir. 

1952); cf. Warfield v. Marks, 190 F.2d 178 (5th Cir. 1951). Defendant/Counterclaimant has 

always had the proper option of seeking remedies in Belize and/or the Cayman Islands, yet has 

ignored these alternative options to joinder and venue.

The subdivision uses the word ―indispensable‖ only in a conclusory sense, that is, a 

person is ―regarded as indispensable‖ when he cannot be made a party and, upon consideration 

of the factors above mention, it is determined that in his absence it would be preferable to 

dismiss the action, rather than to retain it.

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 16 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

17 17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Further it is not only the (potential) Counterclaims of Defendant against Plaintiff that 

should be dismissed, but also Defendant’s potential Counterclaims against third parties, 

including the Indispensable parties, Urso and FWIPH, as well as other FairWay investors, since 

they would otherwise remain vulnerable to a subsequent legal action by Defendant on grounds 

no firmer than those in this action. These corollary negative impacts would not only affect 

Plaintiff, but also both foreign corporations (Urso and FWIPH) as Indispensible Parties, and 

hundreds of innocent bystanders (including shareholders in FairWay Financial U.S., Inc. as part 

of the Secured Note program terms, other co-founders of FairWay Financial U.S., Inc., and all 

executives who have put years of sweat equity into The FairWay Group). Defendant held the

highest executive position in The FairWay Group and should be held to a high fiduciary standard

to both Plaintiff (his partner), and to shareholders and/or debt holders of any FairWay Operating 

Company where Defendant had held significant oversight and benefit. All of these respective 

parties have relied on the past representations of Defendant as Chairman of The FairWay Group 

and partner of Plaintiff to be non-fraudulent and would suffer negative consequences dwarfing 

the value of the remedies Defendant now seeks through improper means.

Equitable and Other Considerations

Defendant’s attempt to invalidate or rescind the MOU or, prospectively, to proceed 

without the joinder of Indispensable Parties, would be inequitable on a number of grounds. First, 

the MOU was negotiated freely by Defendant, and Defendant participated in its drafting. Second, 

significant consideration was received by Defendant to enter into the MOU, including but not 

limited to partnership benefits that would not otherwise have been offered to him. This aspect of 

consideration is a clear mingling of partnership and debt investment interests of Defendant, 

which, upon signing the MOU became permanently intermingled. As an additional motivation 

for entering the MOU, Defendant and Plaintiff both knew that additional funding would be 

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 17 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

18 17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

required to continue the effort to take the FairWay business forward (lack of which would 

prevent), and all efforts and investments to date would be lost. Defendant further benefitted by 

the additional funding that was raised after the date of the MOU and its consequent release of 

collateral rights of Defendant in order to attract investors. Further, Defendant benefited by 

ongoing development of intellectual property (now with FairWay Financial U.S., Inc.), and 

business opportunities for The FairWay Group. Defendant was fully aware of the ramifications 

of the terms of the MOU which were part of a larger set of arrangements including a business 

model and partnership terms for The FairWay Group. Defendant participated fully in the 

development of those arrangements and model, as well as the terms of partnership; none of these 

were imposed on Defendant or delivered after the fact as a surprise upon Defendant. Defendant

was and is a sophisticated investor who understood the terms and consequences of entering the 

MOU, having had serial careers in law and financial services. Defendant understood, among 

other things, the following terms of the MOU: 

1. Defendant would no longer have a direct lien on the collateral.

2. Remedies for any breach, etc. would require addressing Urso, if not also FWIPH.

3. Urso and FWIPH are subjects of Belize and Belizean law and Cayman Islands 

and Cayman law, respectively, with personal jurisdiction there and requiring 

Defendant to bring claims against them in their respective jurisdictions. 

4. Defendant’s rights to repayment would be through Urso only.

5. Loan repayment terms were substantially modified, with being subject to 

availability of Urso funds expected to be received from and through FWIPH.

6. The capitalization of Urso by Plaintiff with FairWay intellectual property and the 

subsequent transfer and capitalization of FWIPH with FairWay intellectual 

property by Urso were done for multiple purposes, including management 

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 18 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

19 17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

succession planning, tax planning, global licensing, and protecting the intellectual 

property. 

By willingly failing to name or even make a claim or demand against the Indispensable 

Parties, Defendant in his pleadings and other communications related to this action ignores the 

fact that the MOU gives clear rights, benefits, and interests with respect to the FairWay 

intellectual property and revenue it produces, as well as the particulars of continuing obligations 

to Defendant, to the Indispensable Parties. This failure also ignores the fact that Defendant’s

essential contest of the validity or for the rescission of the MOU, which arose recently in 

Defendant’s Motion to Amend Countercomplaint, directly and unequivocally affects the 

Indispensable Parties. Moreover, Defendant has not heretofore communicated with the 

Indispensable Parties to inquire or demand repayment of any debt or assert any claim of 

collateral in or to the FairWay intellectual property. In broader perspective, any allegation 

Defendant has made as to whether Defendant entered into the MOU (something about which he 

has been equivocal) or whether it is invalid (due to an alleged failure of consideration or 

otherwise) or should on some other grounds be rescinded were not raised when the MOU 

became effective in (or before) 2012 or when the parties’ relationship deteriorated due to the 

unavailability of funds to repay Defendant’s loans or when Defendant resigned as a partner or 

when discussions between Plaintiff and Defendant broke down or when Plaintiff filed his action 

against Defendant in late-2016 or when Defendant filed his Counterclaim thereafter or even 

when Defendant recently filed his motion to Amend Counterclaim. Defendant could have 

challenged the validity of the MOU at any time between 2012 and the time he filed his Motion to 

Amend Countercomplaint. He chose not to, and he has put Plaintiff and the Indispensable Parties 

at an unfair disadvantage for doing so.

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 19 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

20 17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

For these reasons, Defendant should be estopped for both proceeding with his action 

against Plaintiff to collect on any date remaining after the disposition of Plaintiff’s defenses to 

the continuing effectiveness of such loans, as well as to any invalidation or rescission of the 

MOU based on laches due to Defendant’s delays. Further, Defendant should be estopped on 

general equitable grounds from proceeding to invalidate or rescind the MOU without the 

inclusion of the Indispensable Parties, whose participation is made more unlikely with the 

passage of time due to Defendant’s delay. More specifically, Defendant should be estopped 

from obtaining any restored collateral rights in the FairWay intellectual property, which for over 

a decade has been pledged to third parties and used by the Indispensable Parties to proceed with 

establishing the FairWay network. 

For the reasons stated above, Plaintiff asks that Urso and FWIPH be determined to be 

Indispensible Parties for purposes of this action.

III. CONCLUSION AND REQUEST FOR DISMISSAL

The validity of Plaintiff and Defendant’s partnership as well as Defendant’s duties, breach of 

those duties, and resulting harm are all as described in Plaintiff’s pleadings. In connection with 

the formation of their partnership, and in order to address the financial challenges for FairWay, 

Plaintiff and Defendant entered into a MOU that changed the payment terms for loans owing to 

Defendant and released Defendant’s collateral rights, so new debt investors could receive 

superior priority lender collateral—all to the benefit of the partnership (i.e., benefiting both 

Defendant and Plaintiff). It is important to note again that the FairWay intellectual property was 

transferred by Plaintiff to Urso over a decade ago and by Urso to FWIPH almost a decade ago.

The terms of the MOU inured to Defendant’s benefit, as well as Plaintiff’s and to that of the 

Indispensible Parties, (Urso and FWIPH, as well as new debt investors in The FairWay Group

and shareholders in FairWay Financial U.S., Inc. and executives currently involved in various 

elements of The FairWay Group ). Both Plaintiff and Defendant believed at the time of entering 

the MOU that Defendant would have lost his entire debt investment in FairWay had he not 

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 20 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

21 17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

entered into the MOU. Accordingly, he was highly motivated to do so. In a most inequitable 

result, undoing the MOU would maintain the benefits of the MOU received by Defendant in the 

past by stripping benefits from Plaintiff and the Indispensable Parties (as well as new investors 

since the MOU) now, after almost a decade of the MOU’s existence. The benefits enjoyed by 

Defendant under the MOU included substantial additional funding of approximately $2 Million

and the development of additional FairWay assets including additional intellectual property 

assets that were possible as a result of that additional funding and further progress made in 

finding additional large longer range funding sources during the reprieve permitted by additional 

small debt investment in the short run. 

To invalidate the MOU and thereby reinstate Defendant’s collateral rights in such intellectual 

property is unjust per se. The inequity of doing so increases greatly given how long it has been 

since the collateral rights were surrendered by Defendant. Similarly, a ruling permitting 

Defendant to attach assets that are relied upon by a range of stakeholders who are not parties to 

this case over a period of almost a decade is fundamentally inequitable, including the 

Indispensable Parties, subsequent debt investors, sweat equity investors including FairWay’s key 

personnel, and other directors and officers, as well as fund raisers who are personally committed 

to FairWay’s success and the investors they have recruited. These patent inequities are 

compounded by Defendant’s late attempts to invalidate the MOU and failure to name the 

Indispensable Parties to this litigation at an appropriate time. In fact, in none of Defendant’s 

pleadings have the Indispensable Parties even been identified, yet now with Defendant’s 

Amended Counterclaim, there is a clear allegation that the assets of a non-joined party, FairWay 

IP Holdings, Ltd, should be subject to a reassertion of collateral rights on Defendant’s behalf; 

moreover, there is the allegation that the payment obligations of another non-joined party, Urso, 

Ltd, would be accelerated. 

Defendant has had complete knowledge of the Indispensible Parties, Urso and FWIPH. In 

fact, Defendant collaborated in setting up this FairWay global corporate structure and 

collaborated in business plans describing cash flows to FairWay Operating Companies, FWIPH

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 21 of 22
MOTION TO DISMISS DEFENDANT’S COUNTERCLAIMS PER RULE 19(B)

22 17-cv-00796-JSC

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

as licensor and Urso as its parent and holding company and source of repayment of loans to 

Defendant. This arrangement is comprised in part in the MOU. To invalidate it now would be to 

favor one partner over the other without any legal or equitable justification. There is no 

fundamental unfairness to Defendant either to include the Indispensable Parties as such or to 

maintain the MOU in force and effect. Effectively, Defendant is asking for an unfair ―do-over‖ a 

decade later. 

Accordingly, Plaintiff requests that Urso and FWIPH be determined to be Indispensible 

Parties in this action and that, if the Court also determines that it is not practical to join them, for 

lack of personal jurisdiction or any other reason, then Plaintiff requests that Defendant’s 

Counterclaims be dismissed. 

Date: December 3, 2018 

 

 Caleb Avery t’Bear

CERTIFICATE OF SERVICE 

 I hereby certify that on December 3, 2018, I caused the foregoing document to be 

electronically filed with the Clerk of the Court (California Northern District – San 

Francisco/Oakland Division) using the ECF system, which automatically sends notification of 

such filing to ECF-registered counsel in this matter. Additionally, I have confirmed that all 

counsel have registered with ECF in this case. 

 By: 

 Caleb Avery t’Bear/Pro Se

Case 3:17-cv-00796-JSC Document 129 Filed 12/03/18 Page 22 of 22