Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Southridge Partners II Limited Partnership v. Potnetwork Holdings, Inc.

United States District Court, D. Connecticut

May 24, 2019

SOUTHRIDGE PARTNERS II LIMITED PARTNERSHIP, Plaintiff,
v.
POTNETWORK HOLDINGS, INC., SND AUTO GROUP INC, POTNETWORK HOLDING INC, SIGN N DRIVE AUTO MALL INC, CHARLES VACARRO, SECURITIES COUNSELORS, INC., RANDALL GOULDING, RICHARD GOULDING, GARY L. BLUM, Defendants.

          MEMORANDUM OF DECISION RE: PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT (ECF NO. 41)

          KARI A. DOOLEY, UNITED STATES DISTRICT JUDGE.

         This action arises out of the Plaintiff Southridge Partners II Limited Partnership's (“Southridge”) purchase of a portion of a certain Promissory Note, held by Defendant Sign N Drive Auto Mall, Inc. (“SND”), and reflecting a debt owed by Defendant PotNetwork Holdings, Inc. (“PotNetwork”). Southridge claims, inter alia, that PotNetwork breached its obligations under the terms of the Note and the Stock Transfer Agreement by which Southridge purchased its share of the Note. By motion for summary judgment, Southridge seeks judgment on Count One (Specific Performance) and Count Three (Breach of Contract). In response, and by way of its own motion for summary judgement (ECF 51), PotNetwork asserts that this Court lacks personal jurisdiction over PotNetwork. Alternatively, PotNetwork opposes the motion on the merits.[1]

         Standard of Review

         It is well settled that a party is entitled to summary judgment if “there is no genuine dispute as to any material fact and that [the party] is entitled to judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed.R.Civ.P. 56(c)). A dispute is genuine if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party, ” while a fact is material if it “might affect the outcome of the suit under governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). At summary judgment, the movant bears the initial burden of demonstrating the absence of a genuine issue of material fact. See Celotex Corp., 477 U.S. at 323; Feingold v. New York, 366 F.3d 138, 148 (2d Cir. 2004). Once a movant has met this burden, the non-movant “must come forward with ‘specific facts showing that there is a genuine issue for trial.'” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting Fed.R.Civ.P. 56(e)). “[M]ere speculation or conjecture as to the true nature of the facts” will not suffice. Hicks v. Baines, 593 F.3d 159, 166 (2d Cir. 2010) (citations and internal quotations omitted). In determining whether there exists a genuine dispute as to a material fact, the Court is “required to resolve all ambiguities and draw all permissible factual inferences in favor of the party against whom summary judgment is sought.” Johnson v. Killian, 680 F.3d 234, 236 (2d Cir. 2012) (citing Terry v. Ashcroft, 336 F.3d 128, 137 (2d Cir. 2003)). The Court's job is not to “weigh the evidence or resolve issues of fact.” Lucente v. Int'l Bus. Machines Corp., 310 F.3d 243, 254 (2d Cir. 2002). “[C]ourts may not make credibility determinations or weigh the evidence when confronted with a motion for summary judgment. All evidence presented by the nonmoving party must be taken as true, and all inferences must be construed in a light most favorable to the nonmoving party.” Catanzaro v. Weiden, 140 F.3d 91, 93-94 (2d Cir. 1998), on reh'g, 188 F.3d 56 (2d Cir. 1999) (citing United States v. Diebold, 369 U.S. 654, 655 (1962)). In sum, “where the facts specifically averred by [the nonmovant] contradict facts specifically averred by the movant, the motion must be denied.” Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888 (1990).

         Facts

         The facts giving rise to the instant claims are largely agreed upon.

         On June 2, 2014, Sunrise Auto Mall Inc. (“Sunrise”), as maker, entered into a Convertible Promissory Note (“Note 1”) with David Grey, as holder, in the principal amount of $1, 850, 000. Sunrise is a wholly owned subsidiary of PotNetwork. Pursuant to the terms of Note 1, the holder had the right to convert all or any portion of the outstanding unpaid principal into fully paid and non-assessable shares of Sunrise as maker. The stock price for such a conversion was determined by a formula set forth in Note 1.

         On July 1, 2015, Grey (the holder of Note 1) as seller, and SND, as buyer, together with Sunrise, entered into a written Assignment of Note Agreement, pursuant to which Grey transferred and assigned his entire interest in Note 1 to SND. As consideration for Grey's interest in Note 1, SND gave Grey, inter alia, a promissory note payable to Grey in the amount of $250, 000.

         Also on July 1, 2015, PotNetwork assumed the obligations of Sunrise under Note 1 to SND. As a result, PotNetwork, as maker, entered into a Convertible Promissory Note (“Note 2”) with SND, as the holder, in the original principal amount of $1, 850, 000. The date of Note 2 expressly tacked back to June 2, 2014, the date of Note 1. Note 2 contained the same terms and conditions as Note 1.

         On July 18, 2016, SND sold and transferred to Southridge its interest in $25, 000 of principal of Note 2, pursuant to a written Securities Transfer Agreement (“the STA”). The transfer included the creditor's right to convert debt to common stock. The STA contained a different formula by which debt would be converted to stock than was contained in Note 2. PotNetwork, as maker of Note 2, was a signatory to the STA. Under the STA, PotNetwork was obligated to issue a new note to replace Note 2 (the “replacement note”) which would mirror the terms of Note 2 but which would include the debt for stock conversion formula reflected in the STA. The STA also obligated SND, at the closing, to issue a new note (the “Purchased Note”) in favor of Southridge reflecting its $25, 000 interest in Note 2. Pursuant to the STA, PotNetwork agreed to treat Southridge as a party to Note 2 with all the rights of, in place and stead, of SND. Accordingly, PotNetwork instructed its transfer agent to reserve at least 3, 000, 000 shares of PotNetwork's Common Stock for issuance to Southridge upon Southridge's exercise of its debt conversion rights.

         The STA also obligated SND to deliver to Southridge Note 2, duly endorsed to Southridge. Notwithstanding the provisions of the STA, SND did not deliver to Southridge Note 2, duly endorsed to Southridge. SND did not issue the Purchase Note at closing as required under the STA. Nor did PotNetwork issue the replacement note as contemplated under the STA.

         The STA included a forum selection clause identifying Connecticut as the forum in which to bring claims arising under the STA. PotNetwork was a limited signatory to the STA.

         On July 25, 2016, Southridge issued a Notice of Conversion to PotNetwork by which it exercised its right to convert $3, 300 of debt under Note 2 (principal only) into 3, 882, 353 shares of Pot Network common stock (the “First Conversion Notice”). Southridge calculated the number of shares owed by using the conversion formula contained in the STA. Upon receiving the First Conversion Notice, PotNetwork issued 3, 882, 353 shares of PotNetwork Common Stock to Southridge.

         Following the conversion, the remaining principal of Southridge's interest in Note 2 was $22, 500.[2] On January 30, 2017, Southridge issued a second notice of conversion to PotNetwork, pursuant to which Southridge sought to convert both principal ($1, 000) and interest ($3, 161.64) due under Note 2 into ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.