UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

ADIL SHAFI, an individual,

Defendant/Counterclaim Plaintiff

v.

BRAINTECH, INC, a Nevada corporation,

Counterclaim Defendant,

and

FREDERICK WEIDINGER, an individual,

Additional Counterclaim Defendant.

_____________________________________/

Case No. 09-10454

Hon. Victoria A. Roberts

DEFENDANT’S RESPONSE TO MOTION FOR SUMMARY JUDGMENT

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TABLE OF CONTENTS

INDEX OF AUTHORITIES...........................................................................iv, v

I. INTRODUCTION........................................................................................1

A. Overview.............................................................................................1

B. Adil Shafi ............................................................................................2

C. Rick Weidinger and Braintech..................................................................3

D. Shafi Inc..............................................................................................4

II. BACKGROUND AND FACTS.....................................................................5

A. The Initial Discussions Regarding a Partnership..........................................5

B. The Negotiations Reveal the Circumstances of Each Company.......................7

C. The Negotiations Turn to an Outright Acquisition of Shafi Inc..........................8

D. The Significance of Market Access and Acceleration...................................10

III. THE WRITTEN REPRESENTATIONS..........................................................13

A. Payment of Shafi Inc. Debt....................................................................13

B. The Employment Agreement...................................................................16

C. Other Written Representations to Support Shafi Sales Efforts Relied Upon 

By Shafi.............................................................................................19

IV. ARGUMENT...........................................................................................21

Point 1 – Braintech Fails to Demonstrate Termination or Cause For 

Termination............................................................................21

Point 2 - Shafi States A Claim Under 10b-5 And Has Sufficiently Alleged 

Scienter.................................................................................26

Point 3 - Rule 144 Offered No Help To Shafi In Terms Of The Ability To Sell 

The Worthless Braintech Stock...................................................35

Point 4 - Weidinger And Braintech Fraudulently Induced Shafi To Enter Into 

An Agreement That Weidinger And Braintech Never Intended 

To Honor...............................................................................38

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Point 5 - Shafi Has Viable Claims Under The Michigan Uniform Securities 

Act.......................................................................................41

Point 6 - Shafi Has Valid Claims for Conversion and Unjust Enrichment..........42

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INDEX OF AUTHORITIES

Cases Page

Paul v. Deloitte & Touche LLP, 974 A.2d 140, 2009 Del. LEXIS 234 (Del Sup. 

Ct. 2008).....................................................................................................24

Gary v. Beazer Homes USA, Inc., 2008 Del. Ch. LEXIS 72 (2008)..........................26

Hoffman v. Comshare, Inc. (In re Comshare Inc. Sec. Litig.), 183 F.3d 542,

548-549, 551 (6th Cir. 1999)........................................................................26, 34

Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574 (1986).....27

Helwig v. Vencor, Inc., 251 F.3d 540, 547-548, 550 (6th Cir. 2001) (en banc) 

(citing 15 U.S.C. § 78u-5(i)(1))....................................................................31, 34

San Leandro Emergency Med. Group Profit Sharing Plan v. Philip Morris Cos., 

75 F.3d 801, 811 (2d Cir. 1996)........................................................................32

Bell v. Cameron Meadows Land Co., 669 F.2d 1278, 1283 (9th Cir. 1982)................33

Spatz v. Borenstein. 513 F. Supp. 571, 582 (N.D. Ill. 1891)....................................33

Vaughn v. Teledyne, Inc., 628 F.2d 1214, 1220 (9th Cir. 1980)...............................33

Merck & Co., Inc. v. Reynolds at 130 S. Ct. 1784 (2010) (quoting Tellabs, Inc. v. 

Maker Issues & Rights, Ltd., 551 U.S. 308, 319)..................................................34

Custom Data v. Preferred Capital, 274 Mich. App. 239, 242-243 (2006)...............38, 40

Foreman v. Foreman, 266 Mich. App. 132 (2005), app. den. 475 Mich. 863 (2006).....39

Crowley v Langdon, 127 Mich 51, 58-59 (1901)...................................................40

Danto v Charles C Robbins, Inc, 250 Mich 419, 425 (1930) ...................................40

Hi-Way Motor Co. v. International Harvester Co., 398 Mich. 330 (1976)....................40

Van Tassel v. McDonald Corp., 159 Mich. App. 745 (1937)....................................41

Am. Inst. for Preventive Med., Inc. v. Oakstone Publ'g, LLC, 2010 U.S. Dist. 

LEXIS 19968, *23 (E.D. Mich. 2010)..................................................................41

Brock v. Consolidated Biomedical Labs, 817 F. 2d 24,25 (6th Cir. 1987)...................43

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Foremost Insurance Co. v Allstate Ins. Co., 439 Mich. 378 (1992)...........................43

Belle Isle Grill Corp v. City of Detroit, 256 Mich. App. 463 (2003).............................44

Rules

Rule 56(c)(C)(2)...........................................................................................27

Rule 144................................................................................................35-38

17 CFR 230.114 (a)(1), (b)(1), (e)(1)(i) through (iii)...............................................36

Statutes

MCL 600.2919a............................................................................................43

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I. INTRODUCTION

A. Overview

The “big picture” presented by Braintech and Weidinger is based upon slanted 

advocacy, unsupported references to deposition testimony and unsupported references 

to various exhibits which are material and relevant to this case. Sweeping statements 

are made to the effect that Shafi Inc. proprietary software was not “revenue ready” and 

its customer base did not exist. Braintech and Weidinger offer no evidence to support 

such assertions except their own conclusory and entirely self serving statements. Shafi

Inc. had hundreds of software installations around the world and has produced 

hundreds of purchase orders evidencing sales of its software. 

Shafi does not have to prove the viability of the software products owned by 

Shafi Inc. Since Braintech’s complaint has been dismissed, any claims regarding the 

validity of Shafi Inc. software or the existence of its customer base are no longer 

relevant to this matter. Rather, the focus of this case is on the misrepresentations and 

omissions made by Weidinger and Braintech in order to induce Shafi to sell his 

companies to Braintech in exchange for Braintech stock. All of Braintech and 

Weidinger’s unsupported and un-provable allegations regarding the business of Shafi or 

the liability of its software are specious.

Braintech and Weidinger would have this Court believe that Shafi Inc. was 

merely an elaborate ruse to obtain money from Braintech. This could not be farther 

from the truth. Adil Shafi built Shafi Inc. into a world leader of vision guided robotic 

software capable of multiple processes and able to run on many different robot 

platforms. Representatives of Braintech witnessed Shafi software in operation in at 

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least one plant. Braintech engineers knew of Shafi and his company’s reputation in the 

vision guided robotics software industry. Shafi has produced hundreds of thousands of 

records relating to its business, its sales of software, its customer base, none of which 

has ever been challenged by either Braintech or Weidinger.

B. Adil Shafi

Adil Shafi formed Shafi Inc. in 1993. Shafi’s passion lies in creating software 

solutions for robot driven vision systems. Most of Shafi’s adult life has been spent 

developing software enabling robots to “see” processes being performed and controlling

precision movements and activity critical to functionality of robots in industrial settings. 

Over the years, Shafi gradually expanded his company, but in 2007/2008 suffered from 

over expansion combined with a downturn in the market and the economy. 

Mr. Shafi knew many people in the vision guided software business and also 

knew various people associated with Braintech over the years. Shafi Tr. pp. 29-31.

1

In 

2007, Shafi encountered two Braintech employees at a robotics show in 2007. Shafi Tr. 

p. 29. One of the Braintech folks mentioned that the two companies might be able to do 

something together. Shafi Tr. p. 28. This was before Weidinger’s appointment as CEO 

of Braintech. Nothing came of that brief encounter. In early 2008, Babak Habibi, a 

Braintech engineer, reached out to Shafi by a phone call or email. Shafi Tr. p. 29. 

Habibi suggested a formal discussion concerning a potential business combination.

Shafi Tr. p. 29. This contact led to the negotiations that resulted in the acquisition of 

Shafi Inc. by Braintech.

1 Shafi’s transcript is an Exhibit to the joint motion for summary judgment at Docket 66-6, p. 1-46. 

References to Exhibits already in the record as part of the Joint Motion will be referred to by Docket No. 

and Page.

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C. Rick Weidinger and Braintech

In November 2007, Weidinger was appointed the new CEO of Braintech. 

Weidinger Tr. p. 22.2 At the time, Braintech had one customer, ABB, Ltd., (a robot 

manufacturer based in Zurich, Switzerland) which represented 99% of its revenue 

stream in 2007 and 2008. Weidinger Tr. p. 25. The exclusive contract which created 

the revenue stream with ABB was scheduled to expire at the end of 2008. Weidinger 

Tr. p. 25. In addition, Braintech’s proprietary software, unlike Shafi Inc. software, only 

ran on ABB robots. Unless Braintech found other customers, other robot platforms on 

which to run its software and other sources of revenue, it would not survive long after 

the end of 2008. 

As disclosed in an SEC filing, Weidinger put a plan in place to resuscitate the 

company.

Since his appointment as our Chief Executive Officer in November of 

2007, Mr. Weidinger has developed and implemented a new business 

plan that redefines the company’s markets in order to better utilize its 

technology and create operating leverage.

Weidinger Tr. p. 26. By early 2008, the sole focus of Weidinger’s business plan was to 

acquire Shafi Inc. and hire Mr. Shafi as the Chief Operating Officer of Braintech. 

At the time of his appointment as CEO of Braintech, Weidinger had served two 

intermittent periods as a member of the Board of Directors of Braintech. Other than as 

an outside director, Weidinger had no experience in the vision guided robotics software 

business. Weidinger Tr. p. 32. Weidinger had no experience in technology or 

manufacturing either. Weidinger acknowledged that in 2008, the financial statements 

for Braintech disclosed that there was doubt as to whether Braintech could continue as 

2 Weidinger’s Deposition Transcript is annexed as Exhibit 1.

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a going concern. Weidinger Tr. pp. 27-28. Weidinger testified that unless Braintech 

could find a way to “commercialize” its product, Braintech might not continue to exist.

I mean, that’s one of the reasons why I was attracted to a deal Shafi is 

that what – one thing that Braintech had is they had world-class 

technology. Even today, this day, there’s technology in the market but 

they didn’t know how to commercialize this because they never had to do 

that before. They had one customer [ABB] which was a channel partner. 

They didn’t have to commercialize it. They didn’t have to sell it to any third 

party. It was under contract.

Weidinger Tr. p. 29. 

D. Shafi Inc.

Braintech was attracted to Shafi, not the reverse. Shafi Inc. software ran on 

multiple robot platforms, where Braintech software ran on a single platform. Shafi Inc. 

was incorporated by Shafi in 1993 and sold trademarked proprietary software under the 

name Reliabot:

Reliabot has many, many features in it. It’s a world – leading product. 

Reliabot enjoyed the number one position in the world, in the world, by 

Google for three years, top ranking in the world for vision, and robotics. I 

have experience and understanding of that product because it was 

developed under my direction.

Shafi Tr. p. 23. 

However, Shafi Inc. was in difficult financial circumstances in 2008. The 

downturn in the economy in 2008 combined with an ambitious expansion plan 

embarked upon by Shafi Inc. in 2007 created a cash drain which was causing Shafi Inc. 

to hemorrhage in 2008. Shafi suffered from negative cash flow, was behind with its 

creditors, owed significant sums to taxing authorities and was unable to pay past-due 

wages to its current and former employees. None of this mattered to Weidinger or 

Braintech.

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Braintech’s courtship of Shafi and his company began in earnest in March, 2008. 

The execution of a Non-Disclosure Agreement, on March 12, 2008 sparked a series of 

negotiations that would entail thousands of e-mails, meetings across the country, 

interaction between numerous Braintech personnel and Shafi, lawyers for both parties 

exchanging drafts and documents, due diligence largely undertaken by Braintech, all of 

which culminated in a closing on August 12, 2008 whereby Braintech acquired Shafi 

Inc.3

II. BACKGROUND AND FACTS

A. The Initial Discussions Regarding a Partnership

At the beginning, the business combination was intended to be a partnership. 

On page 6 of their brief, Weidinger and Braintech claim that Shafi represented Reliabot

software to be “fully functional, market revenue ready, fully trained channel network of 

integrators, access to market to build new sales – create short term and fast sales 

growth.” This was not a representation at all. Rather, it came from a jointly created 

document (see Exhibit 2) which Weidinger testified was the result of a “joint effort.” 

Weidinger Tr. p. 239. (Weidinger testified, “I can’t even recollect the author of this was. 

I think it was probably a joint effort.”). Weidinger and Braintech knew well of Shafi Inc.’s 

reputation in the vision guided robotics software market. To make reference to the 

jointly created partnership summary as a Shafi representation is disingenuous and 

untrue.

With the structure of the deal proposed as a partnership, Weidinger lured Shafi 

into believing that the value of the acquisition was $1.85 million in cash and $1.15 

3 Braintech also acquired 80% of the outstanding stock of a second company owned by Shafi, Shafi 

Innovation Inc.

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million in stock which Braintech, for a total of $3 million, was willing to pay. In the jointly 

created partnership summary (Exhibit 2) the $3 million was the value assigned to Shafi 

Inc. However, by the middle of May, 2008, Weidinger was backtracking on paying a 

large sum of cash. In response to this, Shafi wrote in an e-mail on May 12, 2008:

... That change in proposal of cash from $1.85 million-$400,000 (100 K 

down and six payments of 50 K) resends a serious problem in keeping me 

focused ahead on new sales with Braintech versus looking back to find 

other ways to resolve my debts.

See, e-mail dated May 12, 2008 from Shafi to Weidinger, at Exhibit 3. Shafi was 

prepared to walk away. In response, Weidinger proposed the $1.85 cash portion 

become a mix of cash and stock. Weidinger represented “we can carry the $50,000 

[monthly payments] out further [then six months] as long as you are ‘accessing and 

accelerating’ and we are signing contracts.” See, e-mail dated May 12, 2008 from 

Weidinger to Shafi at Exhibit 4. Contrary to the claims made in the summary judgment 

motion, these are not forward-looking projections or salesman’s puffery, these are 

present tense statements regarding actual cash benefits Shafi would be receiving by 

proceeding with the transaction. What followed in Weidinger’s e-mail “I think this is a 

win for both parties...” is the salesman’s puffery.

Although this exchange of e-mail was an indication that the deal had changed 

significantly, Shafi approached it with renewed interest because the cash component 

would have been sufficient to allow him to discharge the Shafi Inc. debt which attached 

to him personally, a critical component of the deal for Shafi (as expressed in the May 

12, 2008 e-mail excerpted above). Shafi continued to work on what the parties termed 

the Access & Acceleration Agreement (the “A&A), the technical corroboration, sales and 

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revenue projections for the combined business entities. The A&A would become the 

centerpiece of the transaction. The A&A is discussed in greater detail below.

B. The Negotiations Reveal the Circumstances of Each Company

Later, the deal would change again. But before a discussion of the final iteration 

that became the deal which closed on August 12, 2008, it is important to understand 

what the parties learned about each other prior to closing. Well in advance of the 

closing, Weidinger became aware of the following:

• Shafi Inc. had no revenue whatsoever in all of 2008, up to and including 

the closing date. Weidinger Tr. pp. 54-57.

• Shafi suffered losses of almost $1,000,000 in 2007. Financial Statements 

at Schedule 3.5.1, SPA (Docket 66-2, p. 78)

• Shafi Inc. was in serious trouble with its creditors, owed tens of thousands 

of dollars in tax obligations, was in default with it secured creditors and 

had sustained several judgments against it by general unsecured 

creditors. Weidinger Tr. pp. 69, 71-72 (“I don’t think that he was able to 

make payments to his creditors in June 2008. That’s why I agreed to 

advance some $50,000 from my own bank account.”)

• Shafi Inc. owed tens of thousands of dollars to former employees for 

unpaid wages. Weidinger Tr. p. 96.

• Shafi Inc. financial statements showed a company operating in the red 

with negative equity. The financial statements were attached to the SPA 

at schedule 3.5.1 (Docket 66-2, p. 76-78, Docket 66-3, pp. 2-3, showing 

“net income” in 2008 of negative $56,776.24)

• Shafi had only one projected actual receivable in 2008, valued at $25,000 

as 100% collectible prior to closing. Weidinger Tr. p. 441.

• Shafi had spent the months of May through August, 2008 drafting sales 

and technical blueprints for the future combined operations of Braintech 

and Shafi, a fact also acknowledged in the closing schedules, on the last 

page of the A & A (Docket 66-3, p. 61) (“the Shafi acquisition closing delay 

has caused attention away from sales”).

In addition, the state of affairs at Braintech was just as dire:

• Braintech had no other customers but ABB and that contract was 

scheduled to expire at the end of 2008. Weidinger Tr. p. 25.

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• Braintech had no other sales efforts going on other than what was being 

directed by Shafi.

• Weidinger admitted, although not in so many words, that the combined 

entities after the closing were basically a new startup entity. Weidinger Tr. 

p. 321. (essentially agreeing, Weidinger termed it a “restart.”)

• Weidinger, not Braintech, personally funded $50,000 of the $100,000 

down payment for the letter of intent signing. Weidinger Tr. p. 377.

• Weidinger had no experience, other than as a board member, in the vision 

guided robotics software business. Weidinger Tr. p. 29. For approximately 

one to two years in the early 2000’s, Weidinger attended quarterly board 

meetings as a director of Braintech. Weidinger Tr. pp. 31, 319, 321-322.

• Weidinger’s plan to expand the business of Braintech, branch out into 

other markets and diversify was solely dependent on the efforts of Shafi 

and the A & A. Weidinger Tr. p. 51.

C. The Negotiations Turn to an Outright Acquisition of Shafi Inc.

By the end of May, the partnership discussions were off and Weidinger and Shafi 

pursued acquisition discussions. By this time, Shafi had spent most of the prior two 

months working on the blueprint for success of the combined entities, the A&A and 

other collaboration documents. Because of this, Shafi neglected his own business and

Shafi Inc., was completely out of cash. Shafi turned to Braintech for interim cash needs.

On May 28, 2008, Shafi expressed an immediate need to Weidinger for $100,000

to pay bills. In response, Weidinger again changed the deal. First, Weidinger informed 

Shafi that no money would change hands until an agreement was executed. Second, 

any cash component beyond a $100,000 deposit now disappeared. The majority of the 

consideration would be assumption of debt issuance of stock and a “lucrative” 

employment agreement and not cash. Weidinger wrote in an e-mail dated May 28, 

2008 “I still believe an acquisition with Braintech, assuming your business debt and 

buying your stock, all [Braintech] stock up front to you, big leadership contract for you 

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with monthly payments for 2.5 years of agreement, ... would be best transaction for all.” 

See Weidinger e-mail at Exhibit 5.

By withholding funding Weidinger knew was necessary to keep Shafi Inc. afloat, 

and now controlling payment to Shafi creditors, Weidinger would coax Shafi into 

continuing to update, revise and massage all of the Braintech business planning in the 

A&A and other collaboration documents Shafi had been working on for months. At this 

point, Shafi was an unpaid business consultant for Braintech. Weidinger was 

implementing his “commercialization” of the software products for the combined entities 

by making representations to Shafi to keep him in the picture, pay his creditors and got 

him to diligently prepare the business plan without regard fulfillment of the

representations and promises being made.

The series of representations outlined in the Complaint at paragraphs 45, 50, 57, 

61, 63, 118, 119, 120, 133, 134, 135, 136 and 137 were all made in connection with a 

transaction involving the sale of securities (3 million shares of Braintech stock in 

exchange for 100% of the stock in Shafi Inc.). However, those representations were 

also made in order to induce Shafi to create the final version of the A&A document and 

other business planning for Braintech which would serve as the sales/business blueprint 

for Braintech after the closing. 

On at least three occasions prior to the closing of the deal, Shafi was fed up and 

ready to walk away. On those occasions, Weidinger made fact specific (as opposed to 

forward-looking) statements including the allegations detailed in paragraph 45 of Shafi’s 

Complaint:

45. On May 28, 2008 in an e-mail Weidinger implored Shafi to proceed 

stating that “an acquisition with Braintech assuming your business 

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debt and buying your stock, all BRHI [Braintech] stock upfront to you, 

big leadership contract for you with monthly payments for 2.5 years of 

agreement, cash deposit at execution and certain cf ip back to you 

after 2.5 years would be best transaction for all [emphasis supplied].

On at least two other occasions, after May 28, 2008, also at times when Shafi 

was prepared to walk away from the transaction, Weidinger made similar 

representations. See Complaint paragraph 50 (concerning similar statements made on 

June 18, 2008) and paragraph 57 (concerning statements made on August 2, 2008). 

As alleged in paragraphs 45, 56 and 57, the assumption of Shafi Inc. debt was a critical 

component of the transaction for Shafi.

D. The Significance of Market Access and Acceleration

In Weidinger’s words, the A&A “was one of the tenets of the acquisition for 

Braintech.” Weidinger Tr. p. 51. The A&A went through many variations between May 

and August, 2008. Weidinger Tr. p. 75. The A&A contained a series of sales, customer 

contact activities, internal planning and milestones for certain actions and placed the 

initials of each of the Braintech executives who would be responsible for such activities. 

See Exhibit 6. The A&A had Weidinger playing a key role in most customer 

contact/sales opportunities. Weidinger Tr. p. 78.

According to Weidinger, the A&A was the “whole reason why Braintech was 

acquiring [Shafi’s] company.”

Q. What was -- who came up with the term "access and acceleration"?

A. I did.

Q. What did you mean when you first communicated the idea of access 

and acceleration to Mr. Shafi?

A. Access -- and he knew that this was very important to this whole 

reason why Braintech was acquiring his company. We needed 

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revenue, revenue, revenue. We thought the quickest way to do that, 

as he represented his products as being revenue ready, is accessing 

his installed base, his customers. That was the access. And if we 

were able to do that, then we would accelerate our business plan.

Q. And so you relied on Mr. Shafi to create the access and acceleration 

agreement?

A. I think -- originally, yes. But as we went down the road, Jim Dara, my 

chief sales officer, got very involved in creating it with him.

Weidinger Tr. pp. 75-76. All told, Shafi spent countless (and uncompensated) hours 

drafting, redrafting, tweaking and finalizing the A&A to the personal satisfaction of 

Weidinger. It was a sales blueprint for the combined companies.4It outlined specific 

tasks on a daily basis and assigned responsibility for those asks to various executives 

at Braintech including Shafi and Weidinger. Yet immediately after the closing, Shafi 

discovered that Weidinger would not support or participate in any of the planned 

activities to which he had been assigned.

Many of the representations made by Weidinger prior to closing confirmed and 

reiterated the support and infrastructure Shafi would be given to execute the sales plan 

and start up plan set forth in the A&A. These representations were material and relied 

upon by Shafi in connection with the sale of his business and the acquisition of stock in 

Braintech. See paragraph 119, Shafi Second Amended Counterclaim. From Shafi’s 

perspective, execution of the details of the A&A, as he understood it prior to the closing, 

would only enhance the value of the stock he was to receive in Braintech. For his part, 

Weidinger naïvely (or more accurately, recklessly), believed all he needed to do was 

slot Shafi in as COO of Braintech and sales and revenue would magically occur. 

Despite Weidinger’s approval and understanding of his important role in the execution 

4

The early drafts were so detailed and specific (up to 50 pages long) that Weidinger insisted on an 

abbreviated version for closing.

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of the details of the A&A, after the closing Weidinger would all but abandon any

participation in the specific tasks assigned by the A&A. Not only did Weidinger refuse to 

personally participate in sales contacts, but specific milestones such as the opening of a 

Detroit Michigan office, acquiring demonstration robots for that office and hiring 

appropriate sales and engineering staff would also be completely abandoned.

Shafi testified as to his extreme frustration which resulted from Weidinger’s 

refusal or neglect to carry out the A&A.

Q. Why would, in your estimation, the company enter into an 

agreement under those circumstances where it would gain no 

revenue?

A. All Braintech had to do was meet its obligations and I could have 

delivered, but they never enabled me. They didn’t open an 

office. They didn’t hire the people I needed. We didn’t have any 

training. In this access and acceleration you’ll see the initials “RW”

all over these dates. If you start on page 49 and go to page 50, 

page 51, page 52, look at how many “RW’s” there are. Rick 

Weidinger was supposed to go with me to these companies and go 

with me and represent that he was the new combiner of these 

companies. I had the market knowledge. But he only went to two 

companies. He told me after the deal was closed he was not going 

to visit these companies. He flat-out breached his commitment to go 

to these customers. And Dara would go work with ABB, so I was left 

alone to go visit these customers. Now, the access and acceleration 

clearly has everybody’s initials as to who’s responsible to go to these 

meetings. These people did not accompany me, so there was no 

reason for me -- There was no way that these companies would look 

at me and say, “You can do this.” I mean, it’s flat out here. 

Q. Why would the companies say that there was no way you could do 

them on your own if you went alone? 

A. Well, they knew that I represented Braintech, and they knew that 

Rick Weidinger had orchestrated this deal. He put out a big press 

release all over the map in the industrial world talking and touting 

about this agreement. And it was clear from the first three or four 

meetings that I went to these people would say, “So do you have an 

office?” I said, “No, we don’t have an office. We’re working out of 

coffee shops. We’re working out of McDonald’s.” “So do you have 

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any robots?” “No, we don’t.” “In Michigan?” “No.” “So where is your 

support?” “It’s in Vancouver, three-hour time difference away, 3,000 

miles away.” “So do you have any trained engineers on your 

products?” “No, we don’t.” “Where is the rest of your team at 

Braintech?” “They’re not with me.” I mean, there was absolutely no 

support. So how can you expect any company, let’s say you’re the 

customer, to cut a purchase order to me when you can clearly see 

that I’m by myself, I have no robots, I have no office, I’m working out 

of a coffee shop. You’re not going to want to give me a $10,000.00 

order. That’s what happened. 

Shafi Tr. pp. 121-123. Given the complete lack of support provided to Shafi, it is not 

difficult to understand why the plan was doomed to failure.

III. THE WRITTEN REPRESENTATIONS 

A. Payment of Shafi Inc. Debt

The most material aspect of the transaction was Braintech’s promise to pay 

certain “Braintech Accepted Indebtedness” after the closing. Braintech and Weidinger

claim without any basis that payment of Shafi Inc. debt was contingent upon and would 

be funded by “revenue pipeline commitments generated by Shafi Inc.” Joint 

Memorandum, pp 8-9. Here, Braintech and Weidinger refer to Section 6.3 of the SPA. 

Contrary to the claims of Braintech and Weidinger, Section 6.3 of the SPA contains no 

condition that such Shafi Inc. indebtedness would be paid from any revenue pipeline 

attributable to Shafi Inc. Section 6.3 provides as follows:

6.3 Company Indebtedness. Buyer covenants and agrees with Seller 

that from and after Closing, Buyer will cause SI to satisfy the Braintech 

Accepted Debt; provided, however, nothing herein shall prevent Buyer 

from negotiating or attempting to negotiate the terms of any such 

Braintech Accepted Debt; provided, further, that Buyer may modify or 

cause the modification of the repayment terms (including, without 

limitation, the amount paid, to be paid or not paid in any specific month 

and the timing of any payments) of any Braintech Accepted Debt for which 

no written settlement thereof has been entered into between SI and the 

applicable creditor as of the date hereof; provided further that Seller’s 

obligations to satisfy Excess Debt shall not be reduced in any way as a 

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result of the negotiated reduction of any Braintech Accepted Debt or 

settlement of Braintech Accepted Debt for less than the amount shown on 

the Creditor and Payment Schedule.

In addition to Section 6.3 of the SPA, the parties also executed what is termed in 

the closing documents as a “side letter.” Similar to Section 6.3 of the SPA, the side 

letter contained no condition that Shafi Inc. debt was only to be paid out of Shafi Inc. 

pipeline revenue. A complete copy of the side letter is annexed as Exhibit 7. The side 

letter provides:

“Braintech Accepted Debt” is any [Shafi Inc.] indebtedness expressly set 

forth on the Creditor and Payment Schedule in the column thereon entitled 

“Braintech Accepted Debt (remaining balance)” in the amount set forth in 

such column. Braintech Accepted Debt shall not exceed $900,000 in the 

aggregate.

The Creditor and Payment Schedule is found in Section 3.9 of the SPA. Although 

entitled “Accounts Receivable”, the cover page for this Schedule provides:

There are no Accounts Receivable as of June 30, 2008. Revenue and 

costs are reflected in the creditor and payment schedule (the “debt 

schedule”) attached hereto.

The schedule which follows in Section 3.9 of the SPA (Docket 66-3, p. 7) as part of the 

moving parties papers is unreadable. A readable version is attached to this 

memorandum as Exhibit 8. And is plainly seen, the highlighted column entitled 

“Braintech Accepted Debt” committed Braintech to unconditionally pay the sum of 

$900,000 to Shafi Inc. creditors. There is no offset, nor is there any condition set forth 

in Exhibit 8, which requires Shafi Inc. revenue to offset the payments.5In the first 

5

For clarification, this schedule shows that the first payments on Shafi Inc. debt would be made in July, 

2008. However, at the very top of the first page there is a list of updates showing the last date of the 

update. The last update of this document occurred immediately before the closing on August 12, 2008. 

Although the first payment is designated as July, the parties intended that the first payment would either

be August or September.

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month after the closing, Braintech was scheduled to pay $66,496. In the second month, 

Braintech was scheduled to pay $61,185. In the third fourth and fifth months, Braintech 

would be paying approximately $43,000 per month. Thereafter, continuing into 2009, 

Braintech committed to pay almost $25,000 per month to Shafi Inc creditors.

In his deposition, Weidinger squirmed and obfuscated attempting to explain how 

the payment of Shafi Inc. debt was contingent upon Shafi Inc. generating revenue for 

Braintech. See Weidinger Tr. p. 101-110. Yet, when pressed as to whether such a 

condition was included anywhere in the SPA, Weidinger could not identify any such 

contingency:

Q. Your testimony is that we will find the condition that there has to be 

Shafi revenue before Braintech pays Braintech accepted debt in 

something other than Exhibit 7?

A. Well, I don’t know – I mean, I’m not a lawyer. And I don’t know – you 

know, I can’t tell you – I can’t speak to the legalities of what you’re 

asking me. All I know is we can simply go to the debt schedule and 

it’s all right there. It shows that the two are very, very importantly and 

very, very carefully tied together. I don’t know, J. P., Legally how that 

– a tenet of this transaction, how that relates to this Exhibit 7. I can’t –

I’m not trained to tell you.6

Weidinger Tr. p. 110. There simply was no such contingency anywhere in the SPA or 

the side letter that debt payments to Shafi Inc. creditors was contingent on revenue from 

Shafi Inc. sales. Braintech committed to pay the debt in writing in the SPA without any 

condition whatsoever. As admitted by Weidinger, within one month or less after the 

closing, Braintech ceased paying of Shafi Inc. debts. This was a written promise, 

material to Shafi and relied upon by Shafi, which Braintech and Weidinger failed to fulfill 

6 Weidinger may not be a practicing attorney but he has a law degree from Creighton University. 

Weidinger Tr. p. 8.

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almost immediately after the closing. The materiality of this commitment cannot be 

overstated.

Weidinger knew that the payment of the “Braintech Assumed Debt” was material 

to Shafi because of numerous pre-closing representations made to Shafi that 

assumption of the debt by Braintech would alleviate Shafi from dealing with the prior 

debt problems and allow Shafi to focus on generating sales post closing. See 

paragraph 57, Shafi’s amended counterclaim. See also Exhibit 9, 8/02/08 Composite 

Email (underlined material written by Weidinger). Weidinger made these 

representations because he knew that Shafi was personally liable for hundreds of 

thousands of dollars of the “Braintech Assumed Debt.” That debt was made up of, in 

part, over $170,000 owed to the Internal Revenue Service for trust fund liability, $74,500 

personally guaranteed to Comerica bank, $169,776 owed in has to wages to former 

employees for which Shafi was personally liable. 

In addition, since Braintech was only covering $900,000 of Shafi Inc. debt, Shafi 

would still be burdened by an additional $171,000 of Shafi debt which Shafi agreed to 

personally pay. This is why Shafi’s Employment Agreement became so vital.

Weidinger implored Shafi on multiple occasions to go forward with the deal because of 

the lucrative employment contract. See paragraph 45, Shafi Amended Counterclaim 

(“big leadership contract for you with monthly payments for 2.5 years of agreement”). 

Weidinger knew that income to be earned by Shafi through his Employment Agreement 

was critical to Shafi’s ability to pay off Shafi’s portion of Shafi Inc. debt.

B. The Employment Agreement

The Employment Agreement itself, is almost as complicated as the SPA. But first, it 

is important to note that there is no base level of revenue which Shafi was required to 

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produce in connection with his Employment Agreement. Weidinger testified that Shafi 

was required to create “revenue, revenue, revenue” but there was no such requirement 

written into the Employment Agreement. Weidinger omitted to disclose that there was 

any immediate requirement to create revenue. It was certainly everyone’s goal to sell 

product, but without the infrastructure and support promised in the A&A, Shafi’s ability to 

sell product was severely curtailed.

Nevertheless, there were certain “revenue related conditions” made a part of the 

Employment Agreement. See Appendix 1 of the Employment Agreement (incorporated 

in Section 7 of the Employment Agreement) (Docket 66-19, p. 11). In revenue related 

condition number 1, Braintech committed to: “Hiring by Braintech of Elsie White and 

Donna Burr on or about September 1, 2008.” As both Weidinger and Shafi testified,

Elsie White was never hired. Shafi Tr. p. 237. Weidinger Tp. p. 206. Both Weidinger 

and Shafi knew that Elsie White would be critical to obtaining certain government 

contracts. Without Ms. White, Shafi had no ability to obtain revenue from government 

contracts. Shafi Tr. p. 237.

Section 9 of the Employment Agreement provided certain “benefits” for Shafi. 

Among those benefits was health insurance. This was another critical and material 

aspect of the transaction for Shafi. Shafi needed health insurance for himself, his wife 

and their two children. Health insurance was supposed to be provided to Shafi

immediately upon his employment.

Braintech shall provide to the executive and pay the full premium for a 

comprehensive family health insurance policy provided under the 

company’s existing family health and group life insurance plan. Braintech 

shall pay for third party family health insurance utilized by executive until 

Braintech’s formal health insurance policy becomes effective after the start 

of executive employment.

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See Section 9, Employment Agreement (Docket 66-19, p. 4). Following the transaction, 

Braintech at no time provided for health insurance for Shafi or his family. Initially, on his 

employment, Shafi understood there was a 90 day waiting period before Shafi could join 

Braintech’s health insurance plan. Nevertheless, in the meantime, Braintech (as set 

forth in the above Section 9) was required to reimburse Shafi for any existing health 

insurance maintained by he and his family during this 90 day period. Yet Braintech 

refused to do so during the 90 day period. Shafi Tr. p. 128.

Braintech committed in Section 10 of the Employment Agreement to provide 

Shafi with a company credit card for “all reasonable expenses approved in advance by 

CEO, including travel and entertainment, incurred by executive in performance of 

executive’s duties.” Braintech and Weidinger not only failed to provide a credit card,

Braintech refused to reimburse Shafi for legitimate travel/business expenses. 

Immediately following his employment, Shafi took two trips and paid for them with his 

own funds. Braintech and Weidinger refused to reimburse Shafi for these small travel 

bills. Shafi Tr. p. 127. Three months later, these expenses would remain unreimbursed. Id.

It is no wonder that Shafi refused to travel more than 50 miles from his residence 

to conduct Braintech business. He and his family had no health insurance and 

Braintech was refusing to reimburse the most basic of expenses. This was the state of 

affairs as of October 16, 2008.7 Shafi had spent the better part of 2008 developing the 

A&A marketing/business plan for Braintech and Weidinger. He had agreed to sell a 

company which represented his life’s work in the vision guided robotics software 

7

In fact, Shafi’s refusal to travel more than 50 miles was not an unwillingness to work. It was merely a 

change in plans due to unreimbursed expenses. See e-mail dated 10/16/08, attached as Exhibit 10.

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industry for $100,000 cash that was paid to Shafi In. creditors. There was no other 

present consideration. Weidinger made a series of pre-closing written representations 

concerning the benefits Shafi would receive in connection with the transaction. Most of 

the pre-closing representations were restated in the SPA and the Employment 

Agreement. 

Yet immediately following the closing, every single material promise was 

breached. Shafi found himself and his family without health insurance. Shafi was 

spending his own money and not getting reimbursed in connection with Braintech 

business. Shafi had utterly no support or buy in from anyone at Braintech to execute 

the A&A.

8 None of the promised infrastructure was provided. No training, no robots, no 

office was provided in Detroit. Shafi found himself alone, operating out of coffee shops, 

with no credibility and no ability to even get something as simple as a promotional 

dinner reimbursed. 

C. Other Written Representations to Support Shafi Sales Efforts Relied upon 

by Shafi

Weidinger and Braintech claim that Shafi failed to perform his Employment 

Agreement and failed to generate pipeline revenue following the closing on August 12, 

2008. Here again, Braintech and Weidinger made a series of written representations in 

the SPA which they failed to perform following the closing. Like the creditor and 

payment schedule discussed above, the version of the schedule containing written 

commitments to support Shafi sales efforts under the SPA and attached to the moving 

papers is unreadable.

8 With Weidinger refusing to participate in the A&A, it was a foregone conclusion that other Braintech 

executives who owed allegiance to Weidinger would also refused to participate in the A&A.

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The Shafi Inc. revenue projections are found on the last page of Schedule 3.26 

“certain documents and information.” (Docket 66-3, pp. 53-70). The last page of this 

Exhibit contains “Shafi in process” revenue projections. Here, the focus is on the 

information provided in the box at the very bottom of the page. As Shafi repeatedly 

explained to Weidinger during the negotiation phase of the transaction, in order to 

generate revenue in the amounts as set forth in the projections, there were certain 

conditions which had to be in place to generate the projected revenue. The 

assumptions are forth in the bottom box of the last page of the A&A. (Exhibit 6) The 

critical “assumptions”9 were as follows:

• Hub zone achieved by Shafi Innovation 

• ARA government plus up contract awarded to Shafi Innovation

• Opening of Metro Detroit sales/engineering office by 8/01/2008

• Timely acquisition of necessary hardware for Metro Detroit office (robots, 

vision hardware, demos)

• Shafi to acquire necessary robots for communications and demonstration 

purposes

• Shafi to hire Elsie While for GMD revenue development

Along with the Michigan office, robots were supposed to be available in that 

office as of the date of move-in, September 10, 2008, for demonstration purposes. 

Weidinger testified that the Braintech Michigan office was not opened until either 

December, 2008 or January, 2009.10 Weidinger Tr. pp. 212-213. During Shafi’s tenure, 

9

Typical of Weidinger’s “selective” memory, Weidinger recalled these same assumptions being material 

“at my level” but only as they related to the discussion regarding the partnership. Weidinger testified that 

he could not recall whether the same list of assumptions were “then rolled in or not rolled in...” to the final 

transaction which was the acquisition, not a partnership. See, Weidinger Tr. p. 211.

10 In fact, Weidinger pushed for the transaction to be closed as soon as possible and initially hoped to 

close the transaction in early July, 2008. Weidinger knew that one of the first steps following the closing 

would be the opening of the Detroit Michigan office. Yet knowing this, and representing this to Shafi, 

Weidinger took absolutely no steps to have the Michigan office ready for opening after the closing. 

Immediately following the closing, Shafi located suitable space, pre-wired for up to 10 robots. Shafi Tr. p. 

94. Weidinger rejected this out of hand. Instead, Weidinger waited until long after the closing to pursue 

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there was no Michigan office and there were no robots located in Detroit as promised in 

writing. Weidinger claimed as an excuse that it took time to negotiate the lease and 

build out the space, Weidinger Tr. p. 213, but neither Weidinger nor Braintech ever 

disclosed to Shafi that they intended to delay the opening of a Detroit office until early 

2009. This misrepresentation made it impossible for Shafi to generate sales activity.

IV. ARGUMENT

Point 1

Braintech Fails to Demonstrate Termination or Cause For Termination

Shafi’s “employment” lasted for a period of 90 days. The Employment 

Agreement, which incidentally is governed by Delaware law, not Michigan law, set forth 

in detail his duties. Contrary to the suggestion in Braintech’s summary judgment papers, 

there was no required benchmark of “revenue, revenue, revenue and now” which Shafi 

was required to meet. Weidinger testified that “the objective of this transaction was 

revenue, revenue, revenue, ASAP.” Weidinger Tr. p. 362. In fact, Weidinger put these 

three words together on multiple occasions during his deposition but never in reference 

to the Employment Agreement.

11 It certainly was a goal, but was never promised.

With the understanding that the combined entities were basically a “start up” 

operation, there is no doubt that Shafi set about to earn his keep and generate sales 

and revenue. However Weidinger seemed to be at a fundamental misunderstanding as 

to how to generate revenue. The sales plan blueprint found in the A&A was intended to 

produce revenue. However, early in the discussions, Shafi made it clear to Weidinger 

the opening of a Michigan office and in fact it did not happen until after Shafi’s employment was 

effectively terminated.

11 Shafi’s “role was revenue, revenue, revenue.” Weidinger Tr. p. 51. “We needed revenue, revenue, 

revenue.” Weidinger Tr. p. 75. “And the important thing was everybody knew that the reason for this 

transaction with the deal was revenue, revenue, revenue.” Weidinger Tr. p. 126.

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that to generate certain levels of revenue, “a sales and demo + support execution 

infrastructure” was required. See e-mail dated May 16, 2008 from Shafi to Weidinger 

Exhibit 11. In addition, similar assumptions regarding infrastructure were built into the 

Shafi revenue projections. See Exhibit 6, and discussion at pages 31-32 below.

While the negotiations proceeded in 2008, Shafi spent more and more of his time 

creating sales, technology and infrastructure planning for the combined entities. 

Weidinger knew well the financial status of Shafi Inc. By late may, 2008, Weidinger was 

aware that Shafi Inc. was essentially operating as a one-man (Mr. Shafi) operation. 

Shafi Inc. had laid off all of its sales and technological employees in 2007. It was known 

to both Shafi and Weidinger that Shafi Inc. had not generated a single sale 2008. 

Moreover, during the period of intense negotiations in July and August, 2008, Shafi 

spent virtually all of his time not only negotiating the terms of the transaction, but also 

putting in place the business technological and infrastructure plans for the combined 

organization without compensation.

Once the transaction closed, with great fanfare, Weidinger announced to the 

public, and particularly the vision guided robotics industry, the business combination 

and the hoped-for synergy which would be created. Now a part of a supposedly larger 

organization, Shafi believed that going back into the vision guided robotics software 

marketplace with the new infrastructure behind him, that he could generate sales. 

However, once slotted in as the COO of Braintech, in charge of sales and technology, 

Shafi found himself once again as a one-man operation. Shafi had no Michigan office, 

no robots to perform demonstrations for potential customers, no local technological 

support (and what technological support he did have was separated by a three-hour 

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time difference making such support unavailable until at the earliest midday, Detroit 

time) and no cooperation from Shafi’s new boss, Weidinger.

Braintech alleges that Shafi “petulantly” refused to travel more than 50 miles for 

work. Yet during this period, Braintech refused to reimburse the most basic business 

and other employment related expenses. Shafi could not get Braintech to pay a $100 

bill for a medical x-ray for his daughter. Shafi Tr. p. 127. Shafi could not obtain 

reimbursement for travel and entertainment expenses. Braintech refused to pay for a 

dinner with a sales colleague. Shafi Tr. p 127. As Shafi testified, the sales plan “broke 

down.” The reality is that Braintech failed to perform virtually all of the prerequisite 

commitments set forth in the Employment Agreement and the SPA. Shafi’s hands were 

completely tied. Braintech, not Shafi breached the Employment Agreement.

12

Braintech asserts that Shafi was terminated for cause. However, Shafi was 

never “terminated.” The meeting which occurred on November 19, 2008 did not involve 

any “termination.” The letter which followed the meeting did not purport to “terminate” 

Shafi, rather, the letter “placed [Shafi] on administrative leave with pay and benefits until 

further notice.” (Docket 66-28, p. 2). This was in no sense a termination. One week 

later, Shafi received a second letter changing his status to “administrative leave without 

pay.” 

Shafi’s Employment Agreement was governed by Delaware law. (Docket 66-19, 

p. 8).

In analyzing disputes over the language of a contract, we give priority to 

the intention of the parties. We start by looking to the four corners of the 

contract to conclude whether the intent of the parties can be determined 

from its express language. "In interpreting contract language, clear and 

12 The claim that Shafi deleted or destroyed Braintech records is simply false. Shafi deleted email spam. 

Shafi Tr. p. 171. Shafi never had any access to Braintech servers and was never given an 

@braintech.com email address.

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unambiguous terms are interpreted according to their ordinary and usual 

meaning.

(footnotes omitted) Paul v. Deloitte & Touche LLP, 974 A.2d 140, 2009 Del. LEXIS 234 

(Del Sup. Ct. 2008). Turning to the Employment Agreement, Section 12 (d) provided 

that “Braintech may terminate the employment of the executive with 30 day notice for 

any reason.” Thus it is clear that the parties agreed and intended that “notice” was 

required to be provided to Shafi in the event of termination. The Employment 

Agreement had no provision for administrative leave, with or without pay. The plain and 

inescapable fact is, Shafi has never been provided with “notice” of termination of his 

employment.

Moreover, ”good cause” for termination which removes any claim for severance 

is defined in Section 12 of the Employment Agreement. (Docket 66-19, p. 5). Even if 

Braintech had “good cause” to terminate Shafi, Braintech failed to exercise and or 

provide notice of the same. The correspondence placing Shafi on “administrative leave 

with pay” simply asserted that “we specifically reserve our rights to terminate your 

employment agreement based upon good cause.” Thus, giving the contract terms their 

plain and ordinary meaning, as of November 19, 2008, Shafi was not terminated for 

“good cause.” Rather, Braintech reserved the right to take some future action to 

terminate for “good cause.”

For reasons Braintech fails to explain, it elected not to terminate Shafi for “good 

cause.” It deferred any such termination rights to a future date after placing Shafi on 

“administrative leave without pay.” Braintech never returned to the issue of termination. 

To this day, Shafi has never been informed or given “notice” of any termination for 

“good cause.” Braintech fails to inform the Court that it made a business judgment not 

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to terminate Shafi. Had Braintech terminated Shafi, Braintech would have lost any 

purported rescission rights. Accepting the benefits of the Employment Agreement and 

enforcing one’s rights under a termination provision is legally inconsistent with the 

remedy of rescission. Braintech deferred termination in order to preserve its claims for 

rescission. Accordingly, there was never any termination.

Shafi was also given termination rights in the Employment Agreement. Shafi 

could terminate the Employment Agreement for “good reason.” Included in the 

definitions of “good reason” was “any material adverse change in executive 

compensation or his employment benefits.” Braintech’s repeated failure to reimburse 

the most basic business and healthcare expenses constituted a breach of Shafi’s 

Employment Agreement and gave ample “good reason” for Shafi to terminate pursuant 

to Section 12 (e). 

“In the event of a termination of this agreement by the company without good 

cause...” Shafi was entitled to severance pay as provided in section 12 (g). Importantly, 

this included “a lump sum payment... equal to the remainder of the then base salary 

remaining in the three year employment term set out in paragraph 5 to be paid within 20 

business days.” Shafi is entitled to be awarded this severance benefit. Administrative 

leave with “good cause” termination rights “reserved” is effectively termination for no 

cause. Clearly, Braintech has not carried its burden to establish that Shafi was 

terminated for “good cause.” Given the lack of any “notice” of any cause or any formal

termination, there is a genuine issue of material fact as to whether the severance 

benefit is available to Shafi.

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Shafi’s entitlement to the severance is strictly based upon contract interpretation. 

Braintech’s decision to place Shafi first on administrative leave with pay and later on 

administrative leave without pay, while specifically reserving any termination rights does 

not amount to termination for “good cause.” There is ample evidence in this record that 

Braintech first breached the Employment Agreement. Thus there is a genuine issue of 

material fact in dispute related to whether or not cause existed for Shafi’s termination. 

Under these circumstances, Shafi is entitled to challenge the claim that he was 

terminated for “good cause” under Delaware law. See, Gary v. Beazer Homes USA,

Inc., 2008 Del. Ch. LEXIS 72 (2008).

Point 2

Shafi States A Claim Under 10b-5 And Has Sufficiently Alleged Scienter

In Hoffman v. Comshare, Inc. (In re Comshare Inc. Sec. Litig.), 183 F.3d 542 (6th

Cir. 1999), the Sixth Circuit observed “the PSLRA did not change the scienter that a 

plaintiff must prove to prevail in a securities fraud case but instead changed what a 

plaintiff must plead in his Complaint in order to survive a motion to dismiss.” Id, at 548-

549. Thus, Shafi is not required to make any greater showing at the summary judgment 

stage than was necessary in response to a Rule 12(b) motion. 

Here, it is important to note that Braintech and Weidinger moved to dismiss the 

Complaint on the same basis which is now argued in their summary judgment motion. 

However, the Court disposed of that motion by requiring Shafi to submit a Second 

Amended Complaint. Following submission of the Second Amended Complaint, 

Weidinger and Braintech withdrew their motion to dismiss. As a threshold matter, the 

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arguments seeking dismissal of the securities fraud claims have already been disposed 

of by this Court. 

Moreover, the summary judgment motion fails to establish the threshold which 

shifts the burden to the non-moving party to set forth specific facts showing there is a 

genuine issue for trial. Rather than referencing, interpreting or referring to supporting 

materials as required by Rule 56(c)(C)(2), the moving parties simply make one 

sweeping statement: “Shafi has failed to plead or offer proof of scienter and there is 

none in the record.” The few pages of discussion early in the brief regarding “material 

facts” fail to refer to or reflect on the vast amounts of evidence in this case, including 

thousands of e-mails (including those specifically referenced in the Complaint), 

thousands of pages of testimony and hundreds of exhibits introduced in depositions. 

The moving parties have failed to carry their burden of showing entitlement to summary

judgment under the trilogy of cases ending in Matsushita Electric Industrial Co., Ltd. v. 

Zenith Radio Corp., 475 U.S. 574 (1986). Nevertheless, Shafi will address the merits of 

the claim that Shafi has not established scienter. 

Prior to the transaction at issue, Braintech had an exclusive one source contract 

to sell vision guidance software to ABB. Braintech’s contract with ABB was scheduled 

to terminate in December, 2008. Weidinger confirmed that if there were no other 

customers generating revenue when the ABB contract came to an end, the situation 

would be terminal to Braintech. Weidinger Tr. pp. 322-323. 

Weidinger became CEO of Braintech in November, 2007. Following his 

appointment as CEO, Weidinger was at times the largest single shareholder of 

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Braintech. Weidinger Tr. p. 24. Weidinger initially invested $750,000 in the form of a 

letter of credit pledged to Braintech’s secured lender, the Royal Bank of Canada.

Weidinger’s goal as the new CEO of Braintech was to “commercialize” 

Braintech’s vision guidance software. This meant moving beyond the single customer 

model (ABB) and “finding additional customers to purchase the software.” Weidinger 

Tr. p. 29. It was no secret that Braintech faced difficulties surviving. In its 2008 10-K 

Report filed with the Securities and Exchange Commission, there is an expression of 

doubt as to the continued existence of Braintech. Weidinger confirmed that there was 

doubt as to whether Braintech could continue to exist in 2008. Weidinger Tr. p. 28.

Despite this, Weidinger made a series of promises to Shafi in order to induce 

Shafi to sell his company to Braintech in exchange for Braintech stock. The reality was 

that Braintech was less interested in Shafi Inc., or its software, but more interested in 

revenue that might be generated from Shafi’s A&A and Shafi running the combined 

enterprises. But, prior to becoming CEO of Braintech, Weidinger had no experience in 

the vision guided software market except as a former director of Braintech. Weidinger 

Tr. p. 29. Without any understanding of what it takes to sell vision software solutions in 

the field of robotic vision systems, Weidinger lacked the ability to understand the 

promises he was making were material and needed to be honored.

The series of representations outlined in the Complaint at paragraphs 45, 50, 57, 

61, 63, 118, 119, 120, 133, 134, 135, 136 and 137 were all made in connection with a 

transaction involving the sale of securities (3 million shares of Braintech stock in 

exchange for 100% of the stock in Shafi Inc.). However, those representations were 

also made in order to induce Shafi to create the final version of the A&A which would 

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serve as the sales/business blueprint for Braintech after the closing. In Weidinger’s 

words, the A&A “was one of the tenets of the acquisition for Braintech.” Weidinger Tr. 

p. 51. The A&A went through many variations between May and August, 2008. 

Weidinger Tr. p. 75. The A&A contained a series of sales and customer contact 

activities and placed the initials of each of the Braintech executives who would be 

responsible in such activities. The A&A had Weidinger playing a key role in most 

customer contact/sales opportunities. Weidinger Tr. p. 78.

Yet nowhere in the record, the SPA or its schedules is there any requirement of 

any level of revenue production. Section 3.5.2 of the SPA (Docket 66-2 p. 12) 

“Revenues” provides: “neither of the companies received any revenues or cash 

payments during the period commencing on June 1, 2008 through the date hereof.” In 

addition, Schedule 3.9 (Docket 66-3, p. 6) confirms the lack of any Accounts 

Receivable. This is a critical omission never disclosed to Shafi by Weidinger and one 

on which Shafi reasonably relied. 

The record also reflects that Weidinger knew that there was little chance of any 

immediate revenue which would come from sales of Shafi Inc. products. In connection 

with the negotiations, Weidinger became informed of the following facts regarding the 

financial circumstances of Shafi Inc.:

• Shafi Inc. had no revenue whatsoever in all of 2008, up to and including 

the closing date. Weidinger Tr. pp. 54-57.

• Shafi Inc. was in serious trouble with its creditors, owed tens of thousands 

of dollars in tax obligations, was in default with it secured creditors and 

had sustained several judgments against it by general unsecured 

creditors. Weidinger Tr. pp. 69, 71-72 (“I don’t think that he was able to 

make payments to his creditors in June 2008. That’s why I agreed to 

advance some $50,000 from my own bank account.”).

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• Shafi Inc. owed tens of thousands of dollars to former employees for 

unpaid wages. Weidinger Tr. p. 96.

• Shafi Inc. financial statements showed no accounts receivables booked 

for Shafi Inc. as of the date of the closing. Weidinger Tr. pp. 186-187. 

• Shafi had only projected one actual receivable, valued at $25,000 as 

100% collectible. Weidinger Tr. p. 441 and Shafi e-mail to Weidinger 

dated July 27, 2008 at Exhibit 12.

Weidinger knew full well that generating revenue from Shafi Inc. sales after the 

closing would be a significant challenge. If he did not act with scienter, he certainly 

acted recklessly. Weidinger repeatedly pushed Shafi to work on, revise, and tweak the 

A&A sales blueprint. The fact that sales did not occur and revenue did not come in does 

not demonstrate the lack of scienter on Weidinger’s part. Rather, the lack of sales and 

revenue were the direct result of Weidinger’s and Braintech’s failure to deliver on 

promises and representations made to Shafi in connection with the transaction. 

Weidinger and Braintech:

• failed to open a Michigan based office by September, 2008 as required by 

the A&A,

• failed to acquire robots in order to run demonstrations for customers 

making use of reliable software, as required by the A&A,

• failed to hire appropriate staff at levels promised by Weidinger in A&A and 

Employment Agreement to support both sales and technology issues,

• failed to provide health insurance as required by Shafi’s Employment 

Agreement,

• failed to reimburse the most basic business expenses incurred by Shafi in 

connection with his efforts at creating sales as required by the 

Employment Agreement,

• failed to provide Shafi with a company credit card as required by his 

Employment Agreement,

• failed to pay “Braintech assumed debt” to Shafi Inc. creditors almost 

immediately following the transaction as required by the SPA. 

For his part, Weidinger failed to participate in meaningful sales contacts as 

provided for in the A&A schedule, a fact he readily acknowledged in his deposition. 

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Despite his expected inclusion in multiple sales calls, Weidinger admitted that he only 

attended “half a dozen” (Weidinger Tr. p. 146) and then claimed he had no intention of 

attending anymore “because my job is not to go to all these customer meetings and sell

our product.” Weidinger Tr. pp. 146-147. Essentially, Weidinger slotted Shafi into the 

position of COO and then abandoned him under the reckless notion that regardless of 

whether Braintech honored its promises, sales and revenue would come into existence..

Not only was Shafi given no support, but one of his principal duties under the 

Employment Agreement was to manage the overall technologies of the combined 

companies. See Section 4(a) , Shafi Employment Agreement (Docket 66-19, p. 3). Yet 

immediately after the transaction, Shafi was virtually locked out of any access to 

Braintech technology. Shafi testified: “Braintech, after the closing, never shared their 

source code with me, never shared their key technology with me, and that was a major 

breach.” Shafi Tr. p. 106. When he complained to Weidinger regarding the lack of 

support, Weidinger failed to respond. Shafi Tr. p. 107.

On the one hand, Weidinger and Braintech claim that “revenue projections” of 

Shafi, none of which were guaranteed, and all of which were simply projections, amount 

to fraudulent representations which induced Weidinger and Braintech to complete the 

transaction. Yet, the revenue projections provided by Shafi which accompanied the 

debt schedule are just the type of future economic benefits which are safe-harbor 

statements excused from “liability [as] projections, statements of plans and objectives, 

and estimates of future economic performance." Helwig v. Vencor, Inc., 251 F.3d 540, 

547-48 (6th Cir. 2001) (en banc) (citing 15 U.S.C. § 78u-5(i)(1)). By contrast, the 

representations attributable to Weidinger and Braintech (both in pre-closing e-mail

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exchanges and in actual written representations in the SPA and its exhibits) are material 

present sense statements regarding actual economic benefits to be enjoyed by Shafi by 

proceeding to the closing of the transaction, actual benefits and compensation to be 

received and actual infrastructure support to generate sales . They were not statements 

of opinion or optimism. See, San Leandro Emergency Med. Group Profit Sharing Plan 

v. Philip Morris Cos., 75 F.3d 801, 811 (2d Cir. 1996).

Representations of Weidinger and Braintech were false when made because 

each of them was contingent on an undisclosed condition that Shafi as the COO of the 

combined entities was required to generate “revenue, revenue, revenue.” Weidinger 

admitted as such when he claimed in deposition testimony that payment obligations for 

Shafi debt was contingent upon the generation of revenue sufficient to cover that debt. 

Yet when pressed, Weidinger could not identify any specific language in either the side 

letter or the SPA which set up the so-called netting effect. Moreover, Weidinger claimed 

that the revenue “projections” which accompanied the debt payment schedule were 

supposed to net. However, even if true, the Shafi Inc projected revenue was far less 

than payments going out to Shafi Inc. creditors. Weidinger admitted on deposition that 

payments to Shafi creditors were stopped almost immediately because “[t]here was no 

revenue from Shafi pipeline coming in to net against it.” Weidinger Tr. p. 160. This was 

contrary to the written agreement and contrary to every representation on the subject.

Weidinger’s post closing conduct demonstrates to a certainty that he and Braintech had 

absolutely no intention of honoring any representation made in either the pre-closing email or the SBA itself and its exhibits, at any time.

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Generally, if an inference of scienter can be drawn from the evidence, summary 

judgment against a Rule 10b-5 plaintiff is inappropriate. Bell v. Cameron Meadows 

Land Co., 669 F.2d 1278, 1283 (9th Cir. 1982). This rule is liberal because the issue of 

intent, a subjective state of mind, is peculiarly inappropriate for disposition by summary 

judgment. See Spatz v. Borenstein. 513 F. Supp. 571, 582 (N.D. Ill. 1891). For an 

inference of intent to be drawn, however, probative evidence relevant to the issue of 

intent must be offered by plaintiff. Vaughn v. Teledyne, Inc., 628 F.2d 1214, 1220 (9th 

Cir. 1980). 

In this case, Shafi’s evidence goes well beyond conclusory allegations. The 

complaint could not be clearer in demonstrating the who, where, how and when of the 

fraud committed in this case. Moreover, Weidinger had actual knowledge of the 

misrepresentations and omissions. Weidinger negotiated all of the material aspects of 

the SPA and exhibits. Weidinger signed the SPA and accordingly signed off on the 

exhibits as the CEO of Braintech. Weidinger cannot escape the fact that all of the 

written representations detailed above were contained in the SPA and all of its exhibits. 

The written representations in the SPA and the exhibits merely repeated many of the 

same material representations (and omissions) found in the e-mails exchanged 

between the parties.

Certainly, Weidinger knew that if Braintech expended the financial resources 

which it promised to do in the SPA and the exhibits, Weidinger’s personal investment as 

a shareholder of Braintech would be that much further diluted. As such, Weidinger had 

no intention of subjecting Braintech to the cash drain that would have required the 

infrastructure support for Shafi’s sales efforts, full health insurance coverage for Shafi, 

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reimbursement of appropriate business expenses for Shafi and other promises as 

detailed herein. By the time the transaction closed, Weidinger had invested enough of 

his own money and would invest no more, nor allow his investment to be diluted by 

spending Braintech cash. Weidinger’s commercialization plan was to leverage Shafi for 

as long as he could in the desperate and reckless hope that revenue would materialize.

The closeness in time between the written representations in the SPA and its 

exhibits and the immediate failure to honor those representations combined with the 

failure to disclose that none of those commitments would be made absent “revenue, 

revenue, revenue” provides strong evidence of scienter. “While it is true that motive and 

opportunity are not substitutes for a showing of recklessness, they can be catalysts to 

fraud and so serve as external markers to the required state of mind." Helwig, 251 F.3d 

at 550. "Facts regarding motive and opportunity may be relevant to pleading 

circumstances from which a strong inference of fraudulent scienter may be inferred, and 

may. on occasion, rise to the level of creating a strong inference of reckless or knowing 

conduct." Comshare, 183 F.3d at 551 (internal quotation and citation omitted). It is "'at 

least as likely as' not" that the Weidinger acted with knowledge or intent to deceive 

Shafi in order to obtain substantial financial benefits without any cash outlay and to shift 

the risk of loss to Shafi. Merck & Co., Inc. v. Reynolds at 130 S. Ct. 1784 (2010)

(quoting Tellabs, Inc. v. Maker Issues & Rights, Ltd., 551 U.S. 308, 319).

Knowing Braintech had little or no cash resources, Weidinger masterfully 

managed and manipulated the transaction with Shafi from a $3 million transaction with 

$1.85 million in cash to a $3 million transaction with $100,000 in cash, $900,000 in 

assumption of debt which he never intended to pay, $1 million worth of worthless stock, 

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and an employment contract worth a minimum of $750,000 plus bonuses and other 

incentives he never intended to pay absent revenue. In exchange, Weidinger received 

a comprehensive business, technology and sales plan that he could execute with or 

without Shafi at a cost of $100,000. After payment of the cash portion of $100,000, 

Weidinger shifted all risk associated with the transaction to Shafi. By offering to assume 

$900,000 worth of Shafi Inc. debt, Weidinger and Braintech controlled when and how 

much (if any) monies would be paid to Shafi Inc. creditors. In practice, this is exactly 

what he did. The record in this case demonstrates that Weidinger and Braintech had no 

intention of spending anything more than $100,000 in order to slot Shafi in, transfer all 

risk to Shafi to make sales and generate revenue. If the plan did not work out, 

Braintech and Weidinger could simply walk away from $2.9 million worth of financial 

obligations to Shafi in connection with the acquisition of Shafi Inc. This is exactly what 

they did. This was the undisclosed plan, this is clear and convincing evidence of 

scienter.

Point 3

Rule 144 Offered No Help To Shafi In Terms Of The Ability To Sell The Worthless 

Braintech Stock

The simple, conclusory and entirely self-serving contention that Shafi could have 

merely sold his Braintech stock in the marketplace pursuant to Rule 144’s safe harbor 

provisions belies the reality as well as provisions of the closing documentation. The 

mere recitation of the “minimal preconditions” of sale pursuant to Rule 144’s safe harbor 

provisions overlooks additional restrictions set forth in the Lock-Up Agreement. The 

Lock-Up Agreement restricted any sale of the securities for a period of six months. 

Thus, Shafi could not sell the stock until at least February 12, 2009. The “potential 

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volume limitations” suggested by Braintech and Weidinger on page 23 of their brief 

entirely understates the problem of “volume limitations.”

First of all, in connection with the transaction, Shafi executed a Lock-Up 

Agreement which imposed additional restrictions beyond Rule 144. The Lock-Up 

Agreement restricted sales of Braintech stock up to an aggregate price not exceeding 

$25,000 in any one calendar week period. (Docket 66-18, p. 2). Even assuming Shafi 

could sell up to $25,000 of his Braintech stock each week, it would take 120 weeks to 

dispose of all of the stock. 

Nevertheless, Rule 144 imposed additional restrictions on the sale of Braintech 

stock. First, during his employment, Shafi would be deemed an affiliate of the issuer 

under 17 CFR 230.114 (a)(1). A person who is deemed an affiliate of the issuer may 

not sell restricted securities as a “non-affiliate” until “one year has elapsed since the 

latter of the date the securities were acquired from the issuer or an affiliate of the 

issuer”. Id, at (b)(1). Thus the reality under Rule 144 was that Shafi would not have 

been permitted to sell his stock until at least August 12, 2009. 

Once able to sell his Braintech stock under Rule 144, Shafi was subject to 

additional restrictions. Id, at (e)(1)(i) through (iii). This provision allowed Shafi to sell 

stock, in three-month intervals, in amounts which did not exceed the greater of; 1% of 

all of the outstanding common stock in the company, or, the average weekly reported 

volume of trading in Braintech stock, or, the average weekly volume of trading in such 

securities reported pursuant to an effective transaction reporting plan. Braintech failed 

to attach its 2009 10K. Nevertheless, it’s 2009 10K (annual report) indicated 

outstanding common shares in the amount of 53 million shares. Thus, theoretically, 

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within one three-month period Shafi could have sold 530,000 shares of stock beginning 

in August 2009. However, there are additional restrictions on the sale of Braintech 

stock beyond Rule 144.

Braintech stock is what is known in the industry as “penny stock.” All of 

Braintech’s annual reports contain disclosures of the “penny stock” restrictions. For 

example, see Docket 66-5, p. 14. In its “penny stock” discussion, Braintech indicates: 

“Our securities are covered by the penny stock rules, which impose additional sales 

practice requirements on brokered – dealers who sell to persons other than established 

customers and ‘accredited investors’.” This discussion goes on to describe that an 

“accredited investor” refers to institutions with assets in excess of $5 million for 

individuals with a net worth exceeding $1 million, thus limiting the pool of qualified 

buyers. 

Finally, there is one additional layer of restrictions also disclosed in the same 

discussion as the “penny stock” restrictions. Here, Braintech indicates that NASD sales 

practices impose additional limitations on a stockholders ability to sell the stock. As 

disclosed in Braintech’s annual report, before a broker–dealer may recommend an 

investment in Braintech stock, that broker–dealer must have “reasonable grounds for 

believing that the investment is suitable for that customer.” Before making such a 

recommendation, said broker–dealer must investigate “the customer’s financial status, 

tax status, investment objectives and other information.”

The foregoing represents the legal and regulatory restrictions applicable to the 

Braintech stock issued to Shafi. But there is more, the marketplace imposed additional 

obstacles to the sale of Braintech stock. In its discussion of “risk factors” related to its 

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stock, Braintech discloses that it’s common stock is “illliquid” and that trading “of our 

stock through the OTC Bulletin Board is frequently thin and highly volatile.

This is completely contrary to the representations made by Weidinger and 

Braintech concerning the value of Braintech stock sold to Shafi in connection with the 

sale of his company to Braintech. Notwithstanding Rule 144, the possibility of selling 

Shafi’s 3 million shares in Braintech at any time was and is virtually nil. The academic 

discussion offered by Braintech and Weidinger concerning the potential of sales under 

Rule 144, while accurate, completely belies the reality that the stock issued to Shafi 

which was worthless at the time of the issue, worthless at any time Shafi attempted to 

sell it and worthless as of today.13

Point 4

Weidinger And Braintech Fraudulently Induced Shafi To Enter Into An Agreement 

That Weidinger And Braintech Never Intended To Honor

Fraud in the inducement is actionable where; “(1) the defendant made a material 

representation; (2) the representation was false; (3) when the defendant made the 

representation, the defendant knew that it was false, or made it recklessly, without 

knowledge of its truth and as a positive assertion; (4) the defendant made the 

representation with the intention that the plaintiff would act upon it; (5) the plaintiff acted 

in reliance upon it; and (6) the plaintiff suffered damage.” Custom Data v. Preferred 

Capital, 274 Mich. App. 239 (2006). “[F]raud can be inferred from acts and 

13 Parenthetically, at the end of Weidinger and Braintech’s academic discussion of Rule 144, they note 

that Shafi has failed to establish loss causation. Here, Weidinger and Braintech suggest that Braintech 

“never became a guarantor of any of Mr. Shafi’s personal debt.” Here again, Weidinger and Braintech 

push the argument that payment of Shafi Inc. debts was tied to Shafi Inc. “pipeline” revenue. There is 

absolutely no evidence on this record before this Court that Shafi Inc. revenue was a condition to 

Braintech’s assumption and agreement to pay Shafi Inc. creditors.

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circumstances, and it need not be directly shown.” Foreman v. Foreman, 266 Mich. 

App. 132 (2005), app. den. 475 Mich. 863 (2006).

The representations made by Braintech and Weidinger to fraudulently induce 

Shafi into selling his company, acquiring stock in Braintech and becoming employed as 

the COO of Braintech were false when made and were part of a scheme and artifice to 

acquire valuable corporate assets of Shafi Inc. and Shafi Innovation Inc. and the A&A. 

Shafi reasonably believed he was entering into a valid arms-length agreement whereby 

he would enjoy the future benefits of all of his years of hard work invested in the 

creation, evolution and value of Shafi Inc. and Shafi Innovation Inc.. As a result of the 

fraudulent misrepresentations made by the plaintiff, Shafi has been damaged by the

loss of his business from Shafi Inc. and Shafi Innovation Inc., the receipt of worthless 

stock in Braintech, and debt that was to be paid by plaintiff as a form of compensation 

but instead defaulted on.

This case is somewhat unique in the world of fraudulent inducement. Precisely 

the same pre-contract representations and omissions made it into the SPA. Further, 

this case is distinguished from a garden-variety breach of contract case. All of the 

misrepresentations and omissions concern matters on which Braintech would have 

been required to expend money immediately after the closing. Clearly, the failure to 

honor any of the representations (except paying Shafi a salary), not only shows 

scienter, but also demonstrates that Weidinger and Braintech never intended to honor 

any of the representations that would cause an expenditure of cash. 

Weidinger and Braintech contend that the failure to honor the 

promises/representations in the SPA and the exhibits constitute breach of contract, but 

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not fraud. Weidinger and Braintech overlook a line of Michigan cases which create an 

exception to the rule that future promises do not constitute fraud but rather amount to 

breach of contract. This is Michigan’s “bad faith” exception as held in Crowley v 

Langdon, 127 Mich. 51, 58-59 (1901). As the court held in Danto v Charles C Robbins, 

Inc, 250 Mich. 419, 425 (1930), “evidence of fraudulent intent, to come within the 

exception, must relate to conduct of the actor "at the very time of making the 

representations, or almost immediately thereafter." Weidinger and Braintech rely upon 

Hi-Way Motor Co. v. International Harvester Co., 398 Mich. 330 (1976) in arguing that at 

best Shafi has a breach of contract claim.

In Hi-Way Motor Co., the evidence offered by plaintiff to prove the 

misrepresentations was a letter written three years after the transaction at issue in the 

case. In this case, we have the conduct of Braintech and Weidinger immediately 

following the closing of the transaction. Weidinger admitted that he was not going to 

expend Braintech’s money unless cash came in from phantom pipeline revenue 

attributable to Shafi. Thus, we have conduct which immediately follows the written 

contract and which demonstrates that Weidinger and Braintech had absolutely no 

intention of honoring any of the promises. This clearly makes this case fall within the 

“bad faith” exception to the rule related to future promises.

In addition, the Michigan Court of Appeals in Custom Data, supra, explained that 

fraud in the inducement is not limited to past or existing facts, even promissory or 

forward looking statements are actionable: 

In general, actionable fraud must be predicated on a statement relating to 

a past or an existing fact. However, Michigan also recognizes fraud in the 

inducement which occurs where a party materially misrepresents future 

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conduct under circumstances in which the assertions may reasonably be 

expected to be relied upon and are relied upon. 

Custom Data, 274 Mich. App. at 242-243. Plaintiff’s assertion that Shafi is limited to 

statements made by Plaintiff predicated on past or existing facts at the time of the 

agreement is unsupported by Michigan law.

Finally, Weidinger and Braintech attempt to disguise Weidinger’s statements as 

mere salesmanship and puffery. Although, “[a]n action for fraud may not be predicated 

upon the expression of an opinion or salesmen's talk in promoting a sale, referred to as 

puffing,” Van Tassel v. McDonald Corp., 159 Mich. App. 745 (1937) statements made 

by Weidinger simply do not fall into this category. Braintech’s promise to pay off Shafi 

Inc. debt on which Shafi was personally obligated (that included a detailed schedule of 

the debt to be paid off) as a form of compensation to Shafi is not puffery. Statements 

like “sales will shoot through the roof and we’ll be able to pay off the debt in no time” 

would constitute puffery. In this situation we have something completely different. The 

written material promises discussed in Point 2 above are not statements that are 

“insufficiently concrete to rise beyond conjecture about future events.” Am. Inst. for 

Preventive Med., Inc. v. Oakstone Publ'g, LLC, 2010 U.S. Dist. LEXIS 19968, *23 (E.D. 

Mich. 2010). These are definite in nature and were designed to induce Shafi to enter 

into the agreement with Braintech.

Point 5

Shafi Has Viable Claims Under The Michigan Uniform Securities Act

Similar to the contentions made by Weidinger and Braintech in response to 

Shafi’s securities fraud claims, Weidinger and Braintech raise no new issues. This 

Court has already required Shafi to re-plead the allegations of fraud in response to 

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Braintech’s initial motion to dismiss. Following Shafi’s second amended counterclaim, 

Braintech’s motion to dismiss for failure to plead fraud with specificity was withdrawn. In 

addition, Weidinger and Braintech make the same unsupported contention that any and 

all representations made to Shafi were “forward-looking” statements or future promises.

In fact, Shafi’s claims for fraud, misrepresentation and omission fall within the 

“bad faith” exception to the rule that fraudulent statements may only relate to past or 

presently existing facts. As set forth in Point 2 above, Weidinger and Braintech’s failure 

to honor their written representations in the SPA occurred within weeks of the 

commencement of Shafi’s employment as the COO of Braintech. See also Argument 

under Point 2.

Point 6

Shafi Has Valid Claims for Conversion and Unjust Enrichment

Due to the overwhelming evidence of fraud, including fraud in the inducement, 

Shafi’s claims are not grounded in contract. All of the claims asserted by Shafi, except 

the claim for severance under the employment agreement are tort-based 

claims. Conversion is also a tort and is a cumulative remedy. The claim of unjust 

enrichment is also particularly appropriate. As discussed in the fraud and securities 

fraud sections above, this transaction was in fact an elaborate plan to acquire the 

expertise, sales and business acumen of Shafi for a mere $100,000. Furthermore, the 

$100,000 cash portion was not a down payment in the traditional sense. Weidinger 

knew that Shafi Inc. creditors would be paid out of the down payment and such funding 

was necessary on an interim basis to keep Shafi in the mix in order to ultimately close 

the transaction.

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Michigan law is well settled that an action in tort requires breach of a duty 

separate from breach of a contract. Brock v. Consolidated Biomedical Labs, 817 F. 2d 

24,25 (6th Cir. 1987). Since Shafi was fraudulently induced to turn over his business to 

Weidinger and Braintech, Shafi has sufficiently pleaded a claim for conversion. 

Conversion is simply a cumulative remedy for the same tort of fraudulent inducement. 

MCL 600.2919a. The tort of conversion is “any distinction act of domain wrongfully 

exerted over another’s personal property in denial of or inconsistent with the rights 

thereon.” Foremost Insurance Co. v Allstate Ins. Co., 439 Mich. 378 (1992). Consistent 

with the scienter discussion above, this was exactly the plan executed by Weidinger and 

Braintech. 

Intending for Shafi to believe the transaction was valued at approximately $3 

million, Weidinger and Braintech obtained all of the benefits associated with the 

transaction for $100,000 in cash and 90 days worth of salary to Shafi. When Weidinger 

and Braintech determined that the benefits they planned to receive were not 

forthcoming, they simply walked away from the deal. Yet before they walked away, 

despite promises to pay well over $150,000 in that 90 day period to Shafi Inc. creditors, 

they paid little or nothing. Thus, there was a complete failure of consideration. Viewed 

in this context, it is a simple case of corporate theft.

Now, Weidinger and Braintech seek to escape from the burden of the transaction 

by claiming that Shafi Inc. was worthless and Mr. Shafi generated zero revenue in 90 

days. These two points are Braintech and Weidinger’s Monday morning quarterback 

analysis. He claim that Shafi Inc. was worthless is not a defense. It strains credibility to 

believe that a sophisticated businessman such as Weidinger, with an MBA and a JD, 

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and banks of lawyers behind him in connection with the transaction could not figure out 

that Shafi Inc. was supposedly worthless. The fact is, from the beginning of the 

transaction, although they valued Shafi Inc. at $3 million, to Weidinger and Braintech,

Shafi Inc. was essentially worthless. It was not Shafi Inc. that they wanted, it was the 

elaborate planning, sales plan, infrastructure plan and execution by and through Shafi 

that they wanted. And, they planned to get it without paying for it. This is the essence of 

the transaction, and it fits well within the theory of the tort of conversion.

The same argument is made for unjust enrichment. Traditionally, under Michigan 

law, claims for unjust enrichment are invalid when there is an existing contract. As a 

result of the fraud in the inducement claims, there is no valid enforceable contract in this 

case (except the employment contract and the severance benefits there under). Under 

Michigan law, if the plaintiff establishes the receipt of a benefit and resulting inequity, 

then “the law will imply a contract in order to present unjust enrichment.” Belle Isle Grill 

Corp v. City of Detroit, 256 Mich. App. 463 (2003). This is exactly what Shafi asks the 

Court to do in this case. The initial valuation of Shafi Inc. was (jointly) decided to be $3 

million. The SPA and all of its exhibits were merely an elaborate fraud carried out with 

the intent to obtain the full benefit of Shafi Inc. and all of the work performed by Shafi 

prior to the closing without paying for it. Shafi simply asks, and there is sufficient 

evidence in this case, for the Court to imply a contract and require payment for the 

jointly agreed value of what Weidinger and Braintech received.

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Respectfully submitted,

BERRY MOORMAN P.C.

By: s/James P. Murphy

James P. Murphy (P36728)

Attorneys for Defendant

535 Griswold, Suite 1900

Detroit, Michigan 48226

(313) 496-1200

murph@berrymoorman.com

Dated: December 23, 2010

CERTIFICATE OF SERVICE

STATE OF MICHIGAN )

)ss

COUNTY OF WAYNE )

I hereby certify that on the 23rd day of December, 2010, a copy of the foregoing 

Defendant’s Response to Motion for Summary Judgment was filed electronically. 

Notice of this filing will be sent to all parties by operation of the Court’s electronic filing 

system. Parties may access this filing through the Court’s system. 

Respectfully submitted,

BERRY MOORMAN P.C.

By: s/James P. Murphy

James P. Murphy (P36728)

Attorneys for Defendant

535 Griswold, Suite 1900

Detroit, Michigan 48226

(313) 496-1200

murph@berrymoorman.com

Case 2:09-cv-10454-VAR-VMM Document 77 Filed 12/23/10 Page 50 of 50