417-02213-2017 CAUSE NO. - - - - - - - - - - - - - - - MICHAEL BUSTER Plaintiff, v. UNITY RESOURCES, L.L.C., MARK THOMAS MERSMAN, MARK JOSEPH SOLOMON, JR., TRADE RARE, L.L.C., BYRON CURTIS COOK, JOEL HOCHBERG, and LEGACY INCOME PROPERTIES, L.L.C. Defendants. § § § § § § § § § § § § § § § § Filed: 5/12/2017 9:39:17 AM Lynne Finley District Clerk Collin County, Texas By Caitlen Politz Deputy Envelope ID: 16993081 IN THE DISTRICT COURT _ _ WDICIALDISTRICT COLLIN COUNTY, TEXAS PLAINTIFF'S ORIGINAL PETITION Plaintiff MICHAEL BUSTER ("Plaintiff' or "Buster") now files this Original Petition. In support, Plaintiff shows the Court the following: I. Discovery Control Plan 1. Unless modified by the Court, discovery in this lawsuit will be conducted according to Discovery Control Plan- Level3 (TRCP Rule 190.4). PLAINTIFF'S ORIGINAL PETITION Page 1 II. Parties 2. Plaintiff MICHAEL BUSTER is an individual residing in Collin County, 3. Defendant UNITY RESOURCES, L.L.C. is a Texas Limited Liability Texas. Company located in Plano, Texas. Unity may be served with process by serving its registered agent, Mark Mersman, with citation and petition at 5930 W. Plano Parkway, Plano, Texas 75093 or wherever in Texas he may be found. 4. Defendant MARK THOMAS MERSMAN is an individual residing in Texas. He may be served with process by serving him with citation and petition at 5930 W. Plano Parkway, Plano, Texas 75093, or wherever in Texas he may be found. 5. Defendant MARK JOSEPH SOLOMON, JR. is an individual residing in Texas. He may be served with process by serving him with citation and petition at 833 E. Arapaho Road, Suite 107, Richardson, Texas 75081, or wherever in Texas he may be found. 6. Defendant TRADE RARE, L.L.C. is a Texas limited liability company. Trade Rare may be served with process by serving its registered agent, Les Leskoven, with citation and petition at 321 North 15th Street, Corsicana, Texas 75110 or wherever in Texas he may be found. PLAINTIFF'S ORIGINAL PETITION Page 2 7. Defendant BYRON CURTIS COOK is an individual residing in Texas. Mr. Cook may be served with process by serving him with citation and petition at 2200 Arcady Lane, Corsicana, Texas 75110 or wherever in Texas he may be found. 8. Defendant JOEL HOCHBERG is an individual residing in Golden Beach, Florida. He may be served with process by serving him with citation and petition at 17749 Collins Avenue, Unit 3601, Sunny Isles Beach, Miami-Dade County, Florida, 33160. 9. Defendant LEGACY INCOME PROPERTIES, L.L.C. is a Texas Limited Liability Company. Legacy may be served with process by serving its registered agent, Blue Diamond Royalty Management, L.L.C., by and through its Manager, Mark Mersman, with citation and petition at 4401 Druid Hills Drive, Frisco, Texas 7 5034 or wherever in Texas he may be found. III. Venue 10. Venue is proper in Collin County, Texas pursuantto Section 15.002(a)(3) of the Texas Civil Practice and Remedies Code, as Defendant Unity Resources, L.L.C.'s principal office in this state is in Collin County, Texas and was in Collin County, Texas at the time Plaintiffs causes of action accrued. Venue is also proper in Collin County, Texas pursuant to Section 15.002(a)(l) of the Texas Civil Practice and PLAINTIFF'S ORIGINAL PETITION Page3 Remedies Code, because it is the county in which all or a substantial part of the events or omissions giving rise to the claim occurred. IV. TRCP 47 Statement 11. Plaintiff seeks monetary relief of more than $1,000,000.00. v. Background Facts Introduction to Unity Resources and Legacy Income Properties 12. Defendant Unity Resources, L.L.C. ("Unity") holds itself out as an energy asset management company located in Plano, Texas. Unity purports to acquire and manage oil, natural gas, and mineral royalties in the United States. Defendants Mark Thomas Mersman ("Mersman") and Mark Solomon ("Solomon") founded Unity in 2008. While Unity's website is no longer active, it was once hosted at http://www.unityresources.net. On that website, Mersman held himself out m February 20 14 as being "responsible for research, evaluation and due diligence of investment opportunities, portfolio and financial management as well as management of Unity's legal and accounting teams." He described himself as Unity's "Mineral Management Pro." 13. Unity further held Solomon out as leading "the strategic development of Unity's investment portfolio [and managing Unity's] institutional and strategic PLAINTIFF'S ORIGINAL PETITION Page4 industry partner relationships." Unity failed to disclose that Solomon had in fact been subject to an administrative proceeding with the Securities Division of the State of Wisconsin's Department of Financial Institutions and was a former registered representative of several defunct broker-dealers in the oil and gas industry. 14. Unity essentially had two components to its business: ( 1) a "retail" side of the house in which individual investors acquired interests in investment funds promoted by Unity and its affiliate, Legacy Income Properties; and (2) a "direct sales" side of the house in which individual investors were solicited to purchase specific mineral acreage in specific locations in the United States, but particularly in Texas,· Oklahoma, and Wyoming. 15. Unity had a number of ways that it made money: ( 1) By making promotional fees from investors through raising money into its various investment funds on the "retail" side of the house; (2) By making illegal commissions on mineral acreage brokered to individual investors on the "direct sales" side of the house; (3) By purchasing mineral acreage and marking up the price of those mineral acres that it brokered to investors on the "direct sales" side of the house; and (4) By making a combination of the foregoing illegal commissions and undisclosed markups by transferring the mineral acres between its funds PLAINTIFF'S ORIGINAL PETITION Page 5 on the "retail" side of the house and the individual investors on the "direct sales" side of the house and vice versa. 16. Defendant Legacy Income Properties ("Legacy") is essentially a follow- on concern of Unity designed for a similar business purpose and under the control of the same persons. The Unity and Legacy Offering Scheme 17. Unity and Legacy's business was to syndicate risky oil and gas offerings to retail and direct-sales investors throughout the United States, many of whom were investing through self-directed IRA plans. Unity and Legacy acquired mineral acreage from a handful of sources and then offered that acreage to investors in issuer transactions through entities such as Unity #9-A, L.L.C., Unity 12-C, L.L.C., Legacy Income Royalty Fund, Cypress Income Fund, L.L.C., and Cypress Income Fund II, L.L.C. These offerings were not registered offerings, and Unity and Legacy were not registered with the Securities and Exchange Commission or any state as a brokerdealer. 18. Unity and Legacy failed to disclose to its retail investors that the source of some of the acreage in those programs was Unity manager and equity owner Cook, his affiliated entity, Trade Rare, L.L.C. ("Trade Rare"), and his confidante and fellow Unity equity owner, Joel Hochberg ("Hochberg"). Trade Rare is the brainchild of Cook and Hochberg, with the name being a mashup of Cook's (and his father's) PLAINTIFF'S ORIGINAL PETITION Page 6 successful video game enterprise "Tradewest, Inc." and Hochberg's successful video game enterprise "Rare, Inc.". Unity used its member/manager Cook and its member Hochberg (and their company, Trade Rare) to "land bank" Unity's securities offerings without disclosing that information to its securities purchasers in the various funds. 19. As early as May 2013, Unity began functioning as an intermediary with regard to mineral acreage acquisitions by Cook, Hochberg, and Trade Rare. These mineral acres are "securities" under Section 4 of the Texas Securities Act, as they represent an interest in or under an "oil, gas, or mining lease, fee, or title." Unity identified mineral acreage, negotiated terms with the owner, and "brokered" the sale of that mineral acreage to Cook, Hochberg, and their affiliated business entities or trusts. Unity realized a profit in the transaction by negotiating the purchase from the mineral owner at a certain fixed price, then applying a substantial markup and selling the interests to Cook, Hochberg, Trade Rare, or their affiliates and keeping the difference. Unity often never obtained title to the mineral acres itself, but had the minerals deeded or assigned directly to the end purchaser by the mineral owner. 20. Cook, Hochberg, and Trade Rare agreed to these transactions because the plan was to "flip" the acreage into Unity's own securities offerings and for Cook, Hochberg, and Trade Rare to realize an undisclosed profit from the "flip." At the time of these "flips," Cook was on the board of managers of Unity, and any such transaction would have been an obvious conflict of interest and would not have been PLAINTIFF'S ORIGINAL PETITION Page 7 negotiated at arm's length. As a member ofUnity, the same was true of Hochberg and his affiliated entities such as Trade Rare. These flips were not disclosed to the Unity board of managers or the equity owners of Unity aside from Mersman, Solomon, Cook, or Hochberg, much less approved by the managers or members after an informed vote. 21. Pursuant to this scheme, acreage held by members of the Cook family or by Trade Rare was transferred into Cypress Income Fund II, L.L.C. and Legacy Income Royalty Fund, L.L.C. (both Unity securities offerings) in November of2013, February of2014, April of2014 and again in July of2014. Even more startling, after the bottom had fallen out of oil prices beginning in July of 2014, the market for this acreage went ice-cold. Sensing his investment turning against him after oil went from $11 0/barrel to less than $60/barrel, Cook exploited his influence as a Manager ofUnity to make Unity reacquire mineral acreage from him and members of his own family on November 28, 2014. Introduction to Michael Buster 22. Plaintiff Michael Buster ("Buster") made purchases of mineral acreage from Unity in a series of direct sales transactions between June 2014 and May 2015. As noted above, the mineral rights purchased by Buster are "securities" under Section 4 of the Texas Securities Act, as they represent an interest in or under an "oil, gas, or mining lease, fee, or title." Buster is a pastor and his investments in the mineral PLAINTIFF'S ORIGINAL PETITION Page 8 acreage sold to him by Unity represent substantial percentage ofhis personal net worth. The mineral acreage Buster purchased is located in Glasscock County, Texas; Woods County, Oklahoma, Alfalfa County, Oklahoma; and Campbell County, Wyoming. 23. In January of2017, based on the allegations of other investors with Unity, Buster became concerned regarding the absence of disclosure of material facts to him prior to making his investments. Unity is not registered as a broker-dealer with either the Securities and Exchange Commission or the Texas State Securities Board. Based on certain documents Buster has received, Unity paid itself commissions from the sales of these securities while being unregistered, which would subject the sale to Buster of these securities to rescission. 24. On January 30, 2017, Buster contacted Mark Mersman, a manager of Unity, for information and documents related to Buster's investments. Specifically, Buster requested the documents that would account for who actually received Buster's investment proceeds each time he purchased the securities, including any money conveyed to third parties. Buster also requested that Mersman identify the owners of Trade Rare, L.L.C., an entity in the chain of title of these securities. Mersman would not provide that information. 25. Buster also asked why he was offered mineral interests that were owned by Trade Rare, L.L.C. or Cypress Income Fund II, L.L.C-both entities apparently affiliated with Unity or its owners. Mersman declined to answer these inquiries or PLAINTIFF'S ORIGINAL PETITION Page9 provide the requested documents stating that his lawyers would not allow him to provide the documents or information. 26. Buster directly asked Mersman why, in 2016, Unity offered him acreage in Payne County, Oklahoma that it did not own. Mersman would not answer. Buster directly asked Mersman whether Unity ever offered him mineral acreage that was bought by another Unity investor who was trying to sell it for a profit. Mersman would not answer. 27. After investigating his concerns and potential claims through the Rule 202 deposition process, it became obvious that Buster had been defrauded from the very beginning. Defendants Defraud Buster 28. Defendants took advantage of Buster in a senes of direct sales transactions in which Buster purchased securities in the form of mineral acreage. Buster's purchase of the securities at issue spanned a year. Buster engaged in the following transactions with Unity or Legacy on the following dates: Date County State Property Description Total 6/10/2014 Glasscock TX Sec. 212, Blk 29, A-813 $18,900.00 6/10/2014 Glasscock TX e/2 Sec 193, Blk. 29, A-487 $18,900.00 6/10/2014 Glasscock TX Sec. 224, Blk. 29, A-812 $18,900.00 6/10/2014 Woods OK Section 22 of28N-20W $148,050.00 6/10/2014 Alfalfa OK Section 1 of28N-9W $48,300.00 PLAINTIFF'S ORIGINAL PETITION Page 10 7/18/2014 Woods OK Section 26 of28N-20W $129,937.50 11/15/2014 Woods OK Section 27 of28N-20W $55,125.00 5/1/2015 Campbell WY Multiple Tracts $93,926.40 Total $532,038.90 29. In its very first transactions with Buster, Unity used Buster as an unwitting counterparty to purchase mineral acreage from Cook's affiliate, Trade Rare, at exorbitant markups and after very short holding times. Unity brokered these transactions and made transaction-based compensation from these investments. Buster believed that Unity was selling him securities that were suitable for his investment needs and upon the best terms available; instead, Unity worked against Buster to the direct financial benefit of its other investor and Manager, Byron Cook, and others. While Unity disclosed certain operational risks and pricing risks of investing in oil and gas, Unity did not tell the whole story. Unity failed to disclose to Buster (1) that the actual owner of the interests was Trade Rare, (2) that Trade Rare was going to directly profit from Unity's transactions with Buster and (3) that those profits would directly flow through to other investors and one principal of Unity (Cook) directly. In at least one case, Unity brokered a transaction between Buster and Trade Rare in which Trade Rare's interest was marked up 80% from its cost before being sold to an unwitting Buster. In these same transactions where Trade Rare profited directly, Unity paid itself a 5% "finder's fee" that was transaction-based and functioned directly as a commission PLAINTIFF'S ORIGINAL PETITION Page 11 on the sale of these securities. These commissions were illegal, as Unity has never been registered with FINRA or any state (including Texas) as a broker-dealer. 30. In subsequent transactions, Unity and Legacy engaged in what it calls "principal" transactions with Buster. These are transactions in which Unity contends it purchased and owned the mineral acreage it ultimately sold to Buster, as opposed to simply acting as an intermediary for Trade Rare and others. In these "principal" transactions, Unity and Legacy substantially marked up the costs of the mineral acreage before selling them to Buster and deriving a substantial profit. Unity and Legacy had told Buster that the only money it would make on its mineral transactions with Buster were in the form of a 5% finder's fee. This was false. The profits Unity and Legacy received in the form of Buster's investment proceeds were substantially more than 5% on "principal transactions." The profits realized by Unity and Legacy was material information requiring disclosure to Buster. Mersman and Solomon as Control Persons and Material Aiders of Unity and Legacy 31. On June 10, 2014 and thereafter, Mersman and Solomon were "control persons" and material aiders of Unity and Legacy. Mersman and Solomon served as both officers and managers of Unity and Legacy and had the ability to direct and control the seller and issuer of the securities in question-the mineral title delivered to Buster. Mersman and Solomon knew, or in the exercise of reasonable diligence, PLAINTIFF'S ORIGINAL PETITION Page 12 should have known the true use of Buster's investment proceeds, the true price Unity or Legacy or their affiliates paid for the acreage, and the true historical cash flow average of those mineral acres. Mersman and Solomon further provided material aid to unity with intent to deceive or defraud Buster or with reckless disregard for the truth or the law. Mersman's and Solomon's substantial assistance to the primary violators, Unity and Legacy, with subjective awareness of the fraud, caused Buster to lose virtually his entire investment. Cook, Hochberg, and Trade Rare as Control Persons and Material Aiders 32. On June 10, 2014 and thereafter, Cook was a control person and a material aider of Unity. As a manager of Unity as a manager-managed Texas limited liability company and a major equity owner, Cook was uniquely positioned to directly or indirectly control Unity. Cook knew or should have known through the exercise of reasonable care that Unity was selling mineral acres to Buster based upon a misapplication of Buster's investment proceeds and with a bevy of easily-refuted misrepresentations and omissions to state material facts. While Unity had other managers, Cook had unique control of Unity, including the ability to drive Unity into transactions that benefitted him financially over other members, managers, investors, and mineral acreage owners. In transactions throughout 2013 and 2014, Cook, his family, his family limited partnership, and his company, Trade Rare, made transfers of their acreage into investment funds sponsored by Unity without disclosure of those PLAINTIFF'S ORIGINAL PETITION Page 13 insider transfers, leaving investors placing their hard-earned retirement money into those funds in the dark while Cook and his affiliates benefitted financially. This is perhaps nowhere better seen than in the simple fact that Cook compelled or permitted Unity to repurchase his acreage after the midyear 2014 oil crash. 33. Hochberg and Trade Rare also functioned as material aiders of Unity on June 10, 2014 and thereafter. Hochberg and Trade Rare provided substantial assistance to Unity, the primary securities violator, with intent to deceive or defraud or with reckless disregard for the truth or the law. Hochberg, as a member of Unity knowingly participated in conflict-of-interest transactions alongside Cook and through Trade Rare in hopes they would profit from unknowing investors in Unity securities offerings. These "land banking" transactions served to benefit Cook and Hochberg to the detriment of and without the knowledge of fellow managers and members ofUnity. Had the managers and members of Unity known about these self-interested transactions, the transactions would have been terminated or prevented immediately. VI. Causes of Action (FRAUD) 34. Plaintiff incorporates the allegations stated above as if fully restated below. PLAINTIFF'S ORIGINAL PETITION Page 14 35. Defendants Unity, Legacy, and Mersman, by means of a scheme designed to defraud investors of their investments, made misrepresentations and omissions of fact to Plaintiff concerning certain securities. 36. When Defendants Unity, Legacy, and Mersman made these misrepresentations to Plaintiff, they knew the representations were false or made the representations recklessly, as a positive assertion, and without knowledge of their truth. 37. Defendants Unity, Legacy, and Mersman made the misrepresentations with the intent that Plaintiff act upon them and invest money in a fraudulent scheme. 38. Plaintiff relied upon those misrepresentations and suffered economic injury as a result. (FRAUD BY NONDISCLOSURE) 39. Plaintiff incorporates the allegations stated above as if fully restated below. 40. Defendants Unity, Legacy, and Mersman concealed material information from Plaintiff and failed to disclose certain facts known to these Defendants. Specifically, Defendants Unity, Legacy, and Mersman failed to disclose the promotional costs of the offering and, in many cases, the identity of a non-arms-length and affiliated seller who derived a profit from the transactions. 41. Defendants Unity, Legacy, and Mersman were intentionally silent when they had a duty to share the information known to them regarding the foregoing facts. PLAINTIFF'S ORIGINAL PETITION Page 15 If Defendants Unity, Legacy, and Mersman would have made full and honest disclosure of this material fact to the Plaintiff, the Plaintiff never would have purchased the mineral acres. 42. The wrongful conduct of Defendants Unity, Legacy, and Mersman proximately caused Plaintiff to suffer damages and was committed knowingly in callous disregard for the Plaintiff. (FRAUD IN A REAL ESTATE TRANSACTION) 43. Plaintiff incorporates the allegations stated above as if fully restated below. 44. The Plaintiff's purchase of the mineral acreage as solicited by Defendants Unity, Legacy, and Mersman, is a transaction involving real estate that is subject to Section 27.01 of the Texas Business and Commerce Code. 45. The conduct of the Defendants Unity, Legacy, and Mersman meet the elements of Section 27.01 statutory fraud in a real estate transaction: 46. The Defendants Unity, Legacy, and Mersman falsely represented past or existing facts: (A) to Plaintiff for the purpose of inducing Plaintiff to enter into an agreement to purchase the mineral acres; and (B) Plaintiff relied on the false statements in entering into the agreement for the acquisition of the mineral acres. PLAINTIFF'S ORIGINAL PETITION Page 16 47. The Defendants Unity, Legacy, and Mersman falsely promised to do an act, when the false promise was: (A) Material; (B) Made with the intention of not fulfilling it; (C) Made to the Plaintiff for the purpose of inducing Plaintiff to enter into an agreement to purchase the mineral acres; and (D) Plaintiff relied upon the Defendants Unity, Legacy, and Mersman in buying the mineral acres. 48. Pursuant to Section 27.0l(b) of the Texas Business and Commerce Code, because of the false representations and false promises made by Defendants Unity, Legacy, and Mersman, they are liable for Plaintiffs actual damages. 49. Pursuant to Section 27.01 (c) of the Texas Business and Commerce Code, because Defendants Unity, Legacy, and Mersman made the false representation and false promises with actual awareness of the falsity thereof, they are liable for exemplary damages. 50. Pursuant to Section 27.01 (d) ofthe Texas Business and Commerce Code, because Defendants Unity, Legacy, and Mersman had actual awareness of the falsity or the representations and promises made to Plaintiff and Defendants Unity and Mersman benefitted from the false representations and promises, they are liable for exemplary damages. PLAINTIFF'S ORIGINAL PETITION Page 17 51. Pursuant to Section 27.01 (e) of the Texas Business and Commerce Code, Defendants Unity, Legacy, and Mersman are liable for the reasonable and necessary attorney's fees, expert witness fees, costs for copies of depositions, and costs of court incurred by Plaintiff. (CONSPIRACY TO COMMIT FRAUD) 52. Plaintiff incorporates the allegations stated above as if fully restated below. 53. Defendants conspired to defraud Plaintiff. There was a meeting of the minds among the Defendants to defraud Plaintiff, and the Defendants knew their actions would harm Plaintiff, but acted to nonetheless cause injury and damage. 54. Defendants' fraudulent conduct is the type of conduct for which exemplary damages may be awarded. Plaintiff seeks and is entitled to exemplary damages from Defendants. (BREACH OF FIDUCIARY DUTY) 55. below. Plaintiff incorporates the allegations stated above as if fully restated 56. A special relationship of trust and confidence existed between the Defendants Unity, Legacy, Mersman, Solomon, Cook and Plaintiff. 57. These Defendants had fiduciary obligations and duties to Plaintiff, including the duty to recommend suitable investments. PLAINTIFF'S ORIGINAL PETITION Page 18 58. These Defendants, as sellers of securities to Plaintiff, had fiduciary obligations and duties to Plaintiff, including a duty to refrain from self-dealing, a duty of good faith, a duty of full disclosure, a duty of fairness and honesty in dealings with each other, and a duty to refrain from sharp dealing. 59. Defendants Unity, Legacy, Mersman, Solomon, and Cook breached their fiduciary obligations to Plaintiff as stated more fully above. 60. Plaintiff has been damaged as a result of these Defendants' fiduciary breaches. (AIDING AND ABETTING BREACHES OF FIDUCIARY DUTY AND FRAUD) 61. Defendants Unity, Legacy, Mersman, Solomon, and Cook owed Plaintiff the fiduciary duties of good faith, candor, and full disclosure. 62. Cook, Hochberg and Trade Rare willingly and knowingly assisted Unity in breaching these fiduciary duties and in committing fraud by participating in the overall fraudulent scheme and engaging in transactions undisclosed to the other managers and members. 63. The assistance and encouragement of Defendants Cook, Hochberg and Trade Rare were a substantial factor in causing Defendant Unity, Legacy, Mersman, and Solomon to breach their fiduciary duties. 64. Plaintiff and other investors relied on the material misrepresentations and omissions in the offering documents to their detriment, which caused Plaintiff to incur PLAINTIFF'S ORIGINAL PETITION Page 19 significant monetary losses. (SUIT FOR RESCISSION UNDER TEXAS SECURITIES ACT) 65. Plaintiff incorporates the allegations stated above as if fully restated below. 66. Pursuant to Texas Revised Civil Statues Article 581, Section 33A(l), "A person who offers or sells a security in violation of Section 7, 9 (or a requirement of the Commissioner thereunder), 12, 23C, or an order under 23A or 23-2 of this Act is liable to the person buying the security from him, who may sue either at law or in equity for rescission or for damages if the buyer no longer owns the security." 67. Defendants Unity, Legacy, and Mersman sold securities in violation of Section 12 of Texas Revised Civil Statues Title 19, Article 581, as these securities were not registered under the laws of the State of Texas and they do not fall under any relevant exemption. The receipt of the sales commission by Unity while the issuer was not registered as a broker-dealer with the Securities and Exchange Commission or the State of Texas voids any potential exemption from registration. As a result, Plaintiff seeks rescission of the purchase of its securities. 68. In the alternative, Title 19, Article 581, Section 33A(2) provides, "A person who offers or sells a security (whether or not the security or transaction is exempt under Section 5 or 6 of this Act) by means of an untrue statement of a material fact or an omission to state a material fact necessary in order to make the statements PLAINTIFF'S ORIGINAL PETITION Page 20 made, in the light of the circumstances under which they are made, not misleading, is liable to the person buying the security from him, who may sue either at law or in equity for rescission ... " 69. As a result of misstatements of material fact and omissions by Defendants Unity, Legacy, and Mersman, Plaintiff is entitled to and seeks rescission of the purchase of its securities. (SUIT AGAINST CONTROL PERSONS AND AlDERS UNDER TEXAS SECURITIES ACT) 70. Plaintiff incorporates the allegations stated above as if fully restated below. 71. Under Texas Revised Civil Statutes Title 19, Article 581, Section 33F(1), "A person who directly or indirectly controls a seller, buyer, or issuer of a security is liable under Section 33A [ ... ] jointly and severally with the seller, buyer, or issuer, and to the same extent as if he were the seller, buyer, or issuer, unless the controlling person sustains the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of the existence of facts by reason of which the liability is alleged to exist." 72. Under Texas Revised Civil Statutes Title 19, Article 581, Section 33F(2), "A person who directly or indirectly with intent to deceive or defraud or with reckless disregard for the truth or the law materially aids a seller, buyer, or issuer of a security PLAINTIFF'S ORIGINAL PETITION Page 21 is liable under Section 33A [ ... ] jointly and severally with the seller, buyer, or issuer, and to the same extent as if he were the seller, buyer, or issuer." 73. Defendants Mersman, Solomon, Cook, Hochberg, and Trade Rare are jointly and severally liable with Defendants Unity or Legacy because of their direct control of Unity or Legacy as the offeror or because of their materially aid to Defendants Unity or Legacy with intent to deceive or defraud or with reckless disregard for the truth or the law. (EXEMPLARY DAMAGES-NO STATUTORY CAP) 74. Plaintiff incorporates the allegations stated above as if fully restated below. 75. A plaintiff who successfully prosecutes a suit for fraud can recover exemplary damages under Section 41.003(a)(l) of the Texas Civil Practice and Remedies Code. Plaintiff seeks exemplary damages as provided for by Section 41.003 of the Texas Civil Practice & Remedies Code because the Defendants perpetrated a fraud upon and acted with malice with respect to Plaintiff. The Defendants, with the intent to defraud or harm the Plaintiff, engaged in an outrageous course of conduct. 76. Defendants violated Section 32.45 (misapplication of fiduciary property or property of financial institution) and Section 32.46 (securing execution of document by deception) of the Texas Penal Code. Accordingly, exemplary damages should not be limited by Section 41.008.ofthe Texas Civil Practice & Remedies Code. PLAINTIFF'S ORIGINAL PETITION Page 22 (INTEREST AND ATTORNEY'S FEES) 77. Plaintiff seeks prejudgment interest at the maximum legal rate on his money invested in the scheme and his reasonable and necessary attorney's fees as provided for by Texas Revised Civil Statutes Title 19, Article 581. (CONDITIONS PRECEDENT) 78. All conditions precedent to Plaintiffs recovery have occurred or have been performed as required by law. VII. Prayer for Relief WHEREFORE, Plaintiff requests that it recover from Defendants, jointly and severally, the following relief: 1. Plaintiffs damages ansmg from Defendants' fraud, fraud by nondisclosure, statutory fraud, consp1racy to commit fraud, breaches of fiduciary duties, aiding and abetting, and violations of the Texas Securities Act; 2. Rescission of Plaintiffs purchase of the securities at issue, for which all Defendants are jointly and severally liable; 3. Exemplary damages; 4. Prejudgment and postjudgment interest; 5. Plaintiffs reasonable and necessary attorney's fees; PLAINTIFF'S ORIGINAL PETITION Page 23 6. Such other and further relief to which Plaintiff may show himself to be justly entitled. Respectfully submitted, SCHEEF & STONE, L.L.P. By: Is/ J. Mitchell Little J. Mitchell Little State Bar No. 24043788 2600 Network Blvd., Suite 400 Frisco, Texas 75034 (214) 472-2100 Telephone (214) 472-2150 Telecopier mitch.little@solidcounsel.com ATTORNEYS FOR PLAINTIFF MICHAEL BUSTER PLAINTIFF'S ORIGINAL PETITION Page24