Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
performance” with respect to the Deferred Interest. Neither Nicandros nor Mamulaishvili have performed in accordance with their contractual obligations as guarantors. 24. As a result, Frontera is, inter alia, in payment default under the Note, and Nicandros and Mamulaishvili are personally, jointly, and severally liable for the Deferred Interest payment pursuant to their Individual Guaranties. C. Frontera’s Efforts to Prevent Outrider’s Collection of Amounts Owed under the Note and Individual Guaranties. 25. Since Defendants’ respective defaults under the Note and Individual Guaranties, Frontera has filed lawsuits in the Cayman Islands and the Northern District of California seeking to prevent Outrider from collecting on the Notes and foreclosing upon its collateral. Specifically, on October 11, 2018—one day after Defendants’ failure to pay became an official “Event of Default” under the Note—Frontera filed a lawsuit against Outrider and its principal, Stephen Hope (“Hope”), in the Grand Court of the Cayman Islands, seeking injunctive relief to prevent Outrider and Hope from exercising any and all remedies against Frontera. 26. Although an ex parte injunction was initially entered in favor of Frontera, delaying Outrider’s enforcement of rights, the Grand Court eventually denied Frontera’s request for injunctive relief pending trial on the merits. Frontera subsequently dismissed its Cayman Islands suit on April 15, 2018, with consent from Outrider on condition that Frontera pay certain costs (in an amount no less than $100,000.00) to Outrider. 27. One day prior to dismissal of the Cayman Islands suit, and without notice to Hope or any Outrider entity, Frontera initiated a nearly identical lawsuit in the United States District Court for the Northern District of California, again seeking ex parte injunctive relief. In that action, Frontera initiated suit against Hope, Outrider Management, LLC (“OML”) and Outrider
In connection with and as integral part of the Third Amendment, the Deferred Interest was guaranteed to be paid by both Nicandros and Mamulaishvili, who thereby personally guaranteed Frontera’s “due and punctual performance” of the Deferred Interest payment; and, in connection therewith, the Guarantors promised to provide, as a continuing security, a total of 500,000,000 Ordinary Shares of Frontera (“Pledged Shares”) owned and/or controlled by them (the “Individual Guaranties”). Further, the Guarantors agreed “not to sell, transfer, grant options over, dispose of, assign, or create an encumbrance over the Pledged Shares as long as the Deferred Interest obligation is outstanding.”5 B. Defaults under the Note and Individual Guaranties. 20. Frontera failed to tender the Deferred Interest on September 30, 2018. Following that date, Outrider made demand upon Frontera for payment of the Deferred Interest. 21. Under Section 8.1(b) of the Note, the failure of Frontera to “pay any interest, fees or expenses or any of its other obligations” under the Note within ten (10) days after such payment is due is an Event of Default.6 Following such an Event of Default, the Note provides Outrider with certain remedies, including but not limited to the right to accelerate the remaining principal balance due under the Note and demand payment of all unpaid interest.7 22. cure period. 23. Frontera failed to make the Deferred Interest payment during or after the ten-day As a result of Frontera’s default and its failure to timely pay the Deferred Interest, Nicandros and Mamulaishvili became personally liable under the Individual Guaranties to provide Outrider with the Pledged Shares or otherwise satisfy Frontera’s “due and punctual 5See Exhibit “B,” ¶ 3. 6See Exhibit “A,” § 8.1(b). 7See Exhibit “A,” § 8.2. Page 6 PLAINTIFF'S ORIGINAL COMPLAINT
amended and restated, the “Note”), executed December 20, 2016, in the principal amount of $22,910,094 due and payable by Frontera to Outrider in 2020.2 15. Under the terms of the Note, interest accrued and was to be paid quarterly in arrears each March 31, June 30, September 30, and December 31, beginning on December 31, 2016, and ending on the Note’s maturity date of August 1, 2020. As set forth in Section 1.3 of the Note, interest accrued on the outstanding principal at a rate of ten percent (10%) per annum if the Note balance was paid in cash or twelve percent (12%) per annum if the Note balance was paid in kind. Moreover, for certain periods, an “Interest Increase Triggering Event” (as defined in the Note) would cause the interest rate to increase by eight percentage (8%) points per annum. 16. Repayment of the Note is secured by one hundred percent (100%) of the Capital Stock of Frontera Resources Caucasus Corporation (“FRCC”), a wholly-owned subsidiary of Frontera.3 17. The Note was amended by that certain First Amendment to Note Agreement effective as of March 3, 2017; and subsequently amended by that certain Second Amendment to Note Agreement and First Amendment to Global Note effective as of May 26, 2017. 18. Then, on March 30, 2018, Outrider, Frontera, Nicandros, and Mamulaishvili executed a Third Amendment to the Note, providing for the deferral of certain outstanding interest payments (the “Third Amendment”).4 The Third Amendment deferred the payment of interest for the periods January 1 – March 30, 2018, and April 1 – June 30, 2018, until September 30, 2018 (the “Deferred Interest”). 2A true and correct copy of the Note Agreement is attached hereto as Exhibit “A” and incorporated herein by reference. 3See Exhibit “A,” § 1.2. 4A true and correct copy of the Third Amendment is attached hereto as Exhibit “B” and incorporated herein by
8. As described more fully in an offering memorandum and disclosures made by FRC (which was, until recently a publicly traded company on the AIM London Stock Exchange that filed consolidated public disclosures), Holdings became the direct or indirect owner of all Frontera operating subsidiaries, thereby creating “structural seniority” for the 2016 Notes in favor of the respective noteholders. 9. 10. In 2011 and 2012, Outrider acquired certain of the 2016 Notes. On July 21, 2016, just days before maturity of the 2016 Notes, Holdings filed its petition for relief pursuant to chapter 7 of title 11 of the United States Code in the Southern District of Texas, Galveston Division (the “Bankruptcy”). 11. $22,840,708. 12. As of the Bankruptcy petition date, Holdings owed Outrider no less than On the same date of the Bankruptcy filing, FRC filed an adversary proceeding against the Chapter 7 trustee of Holdings, Outrider, Outrider Management, LLC, and two unrelated creditors of Holdings (the “Adversary Proceeding”). The Adversary Proceeding consisted of claims asserted to avoid payment to Outrider as required by the 2016 Notes and seeking declaratory judgment that Holdings did not have any ownership interest in the FRC operating companies or any other Frontera-related company. 13. Outrider asserted its claim against the Holdings estate and dispute the allegations and assertions made by FRC in the Adversary Proceeding. FRC and Outrider mediated their dispute in Houston, Texas. 14. The mediation resulted in a settlement of all disputes and dismissal of the Bankruptcy. In connection with the settlement, Outrider agreed to restructure of its 2016 Notes. The settlement culminated in a new Note Agreement and related loan documents (collectively, as
Mamulaishvili has traveled to Houston, Texas within the last two years on at least the following occasions to conduct business on behalf of FRC and/or Frontera: (i) (ii) (iii) (iv) 6. March 25 – 29, 2019; September 20, 2018; December 15, 2017; and April 4, 2017 Venue is proper in the Southern District of Texas, Houston Division, pursuant to 28 U.S.C. § 1391(b)(2), because it is the judicial district in which a substantial part of the events or omissions giving rise to the claim occurred and/or a substantial part of property that is the subject of the action is situated. Defendants have entered into and breached a note agreement and a related guaranty, which form the basis of this lawsuit, that were originally negotiated during a mediation between FRC and Outrider that occurred in Houston, Texas in 2016, in connection with Frontera’s affiliate and predecessor obligor under the Note. The Guarantors each personally guaranteed Frontera’s performance under the Note, including a promise to pledge 500,000,000 of their own individual shares in FRC to Outrider. III. FACTUAL BACKGROUND A. Frontera’s Note and the Individual Guaranties. 7. On or about 2011, Frontera Resources Holdings, LLC (“Holdings”) was organized in connection with a recapitalization and reorganization of ultimate parent company FRC. As a function of the reorganization, notes originally issued by FRC were exchanged, in whole or in part, for new notes to with an August 2016 maturity, with all accrued interest to be capitalized (PIK) until the time of maturity (the “2016 Notes”), were issued by Holdings.
Rogatory and Additional Protocol, nor any other applicable treaty. As a result, and in accordance with Federal Rule of Civil Procedure 4(f)(2)(c)(ii), Mamulaishvili may be served by the clerk of this Court by registered or certified mail, international return receipt requested, by mailing a copy of the summons and Original Complaint to his place of business in Georgia at 12 Paliashvili Street, Tbilisi 0179, Georgia. II. JURISDICTION AND VENUE 4. There is diversity of citizenship between the parties to this civil action, and the amount in controversy, exclusive of interest and costs, exceeds $75,000. As such, this court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. § 1332. 5. This Court has personal jurisdiction over the parties. Specifically, this Court has personal jurisdiction over Nicandros because he is an individual resident of Harris County, Texas. Personal jurisdiction over Mamulaishvili also exists because he is a co-founder of Frontera Resources Corporation ("FRC”) and currently serves as its President and Chief Executive Officer, as well as a member of its Board of Directors.1 Mamulaishvili has held one or more of these positions since 1997, when FRC was formed, which maintains its principal place of business at 3040 Post Oak Boulevard, Suite 1100, Houston, Texas 77056. Nicandros and Mamulaishvili are also directors of Frontera International Corporation, which is the obligor to the Note (defined below) owed to Outrider. Frontera is a wholly-owned subsidiary of FRC and, upon information and belief, was, at all times relevant to this Complaint, controlled by FRC out of its headquarters in Houston, Texas. Upon information and belief, since 1997, Mamulaishvili travels to FRC’s office in Houston, Texas approximately three times each year to conduct business on behalf of FRC and to attend board meetings in person. Specifically, 1Frontera Resources Corporation, Board of Directors (last visited, June 19, 2019)
COMES NOW, Plaintiff Outrider Master Fund, L.P. (“Outrider” or “Plaintiff”) and files this Original Complaint against Steve C. Nicandros ("Nicandros") and Zaza Mamulaishvili ("Mamulaishvili"; with Nicandros, the “Guarantors” or “Defendants”), and respectfully states as follows: 1. I. PARTIES Plaintiff Outrider Master Fund, L.P. is a Cayman Islands exempted limited partnership. 2. Defendant Steve C. Nicandros is an individual resident of Houston, Texas, who may be served with service of process at his residence located at 414 Pineneedle Dr., Houston, Texas 77024-6604, or wherever else he may be found. 3. Defendant Zaza Mamulaishvili is an individual resident of the country of Georgia. Although he resides in Georgia, Mamulaishvili has extensive contacts and connections with Harris County, Texas. The country of Georgia is not a signatory to the Hague Convention on Service Abroad of Judicial and Extrajudicial Documents, Inter-American Convention on Letters
It’s confirmation that they have paid the $1000 fine....cheque paid by the lawyers!
My name is William DeClercq. I am over the age of eighteen (18) and competent to give this Declaration. I am one of Plaintiffs’ counsel of record in this action and have personal knowledge of all matters set forth herein. This Declaration is given pursuant to the Court’s June 19, 2019 Sanctions Order Against Plaintiffs and Their Counsel (DE 47) (the “Sanctions Order”), and for all other purposes permitted by law. 2. On July 17, 2019, the Clerk of Court received my firm’s check in the amount of $1,000.00 as satisfaction of the sanctions issued by the Court in the Sanctions Order. Attached hereto as Exhibit “A” is a copy of receipt number 34611143652 from the Clerk of Court evidencing proof of this payment. I declare under penalty of perjury that the foregoing is true and correct. Dated: July 18, 2019. /s/ William DeClercq William DeClercq -2- DECLARATION OF WILLIAM DECLERCQ
Hi Finn....no there wasn’t a box to say not interested in resolution prior to trial. Only the option to start mediating now or discuss with judge at the case management conference. I’m not certain but my best guess is that this form always has to be completed with corporate disputes. It could simply be a word answer then when the judge ass the question - no.
On this basis I don’t either side are particularly interested in mediation.....could change of course for various reasons including discovery.
2 documents as one signed by counsels from each side.... both have ticked box to say they will discuss ADR options with Judge at management conference rather than stipulate it. Looks like this is still going to court.
Case 3:19-cv-01996-RS Document 48 Filed 07/10/19 Page 1 of 1
Frontera Resources Corporation, et id Plaintiff(s)
CASE No C 3: 19-cv-01996-RS
ADR CERTIFICA nON BY PARTIES AND COUNSEL
v.
Stephen Hope, et al.
Date: 7110/19
RoSS ;1. Pcvit(r (wI puMiS~iw\- hfj f/tlS) Attorney
UNITED STATES DISTRICT COURT NORTIIERN DISTRICT OF CALIFORNIA
Defendant( s)
Pursuant to Civil L.R. 16-8(b) and ADR L.R. 3-5 (b), each ofthe undersigned certifies that he or she has:
1) Read the handbook entitled "Alternative Dispute Resolution Procedures Handbook" (available at cand.uscourts.gov/adr).
2) Discussed with each other the available dispute resolution options provided by the Court and private entities; and
3) Considered whether this case might benefit from any of the available dispute resolution options.
Date:711 0119
Party Date: 7110119 foss H. Par~
Attorney
Counsel further certifies that he or she has discussed the selection of an ADR process with counsel for the other parties to the case. Based on that discussion, the parties:
[] intend to stipulate to an ADR process
~prefer to discuss ADR selection with the Assigned Judge at the case management conference
lmoortant! ijile this form in ECF using evimtname:'~4DR Certificalion(AD~LR 3.5 b) of'Discussion of ADR . Options. "
ForrnADR-Cert rev. 1-15-2019
Sorry I’m in Greece and the connection keeps falling away hence duplicate posts
IT IS SO ORDERED. Dated: June 19, 2019 ______________________________________ RICHARD SEEBORG United States District Judge
failure by counsel to comply with any of the Court’s local rules. The Cayman Islands action involved many of the same issues and requests for relief as does this case and Plaintiffs’ contention that the related action bore no material relevance to this case is laughable. Plaintiffs’ conduct constitutes a gross failure to disclose, particularly when seeking the most powerful remedy the Court can provide: injunctive relief with a request that prior notice not be provided to the Defendants. Given that the Cayman Islands court noted Plaintiffs had failed to present serious questions going to the merits, their attempt to engage this Court’s equitable powers by keeping it in the dark as to the other lawsuit as a desperate attempt to take another shot at securing an injunction is a serious abuse of the judicial process. It also serves to multiply proceedings in a case unreasonably and vexatiously. Finally, it violates Local Rule 3-13(a) requiring notice of pendency of other actions. Plaintiffs’ counsel makes the tenuous argument that Local Rule 3-13(a) requires only disclosure of pending actions in federal or state courts and does not cover foreign court actions. The rule’s full context, however, reveals its intended spirit. Disclosure is required of any action which involves “all or a material part of the same subject matter and all or substantially all of the same parties,” such that, if necessary, the cases can be coordinated to “avoid conflicts, conserve resources and promote an efficient determination of the action.” L.R. 3-13(a), (b)(3). Such policy is served by requiring disclosure of foreign court actions and is not limited to disclosure of American ones. The failure to disclose and the repeated failures to accept responsibility for the nondisclosure warrant sanctions. Therefore, the Court sanctions Plaintiffs and their counsel, jointly and severally, in the amount of $1,000.1 Payment shall be remitted to the Court within 30 days of this ruling. Plaintiffs and their counsel shall file a declaration attaching proof of payment no later than July 19, 2019.
their failure to disclose (particularly in light of the fact that the Court noted it had found such failure to be a cause of considerable concern), Plaintiffs chose to double down on their disclaimer. In their motion for a preliminary injunction, Plaintiffs made the disingenuous argument that they thought the Cayman Islands action was irrelevant to this case and that if Defendants disagreed they would so inform the Court. (Dkt. 36 at 12 n.1.) Thus, in addition to their failure to disclose, Plaintiffs’ failure to take responsibility for the required disclosure exacerbated their dereliction of their duty of candor to this Court. Plaintiffs’ third opportunity to acknowledge their duty to disclose came at the preliminary injunction hearing. Plaintiffs’ counsel was put on notice that the Court was considering whether to sanction him for his conduct and gave him a chance to explain his actions before considering the merits of the motion. Plaintiffs’ counsel once more declined to accept full responsibility, instead expanding upon his nonsensical arguments for why he thought he was under no obligation to disclose the pending Cayman Islands action when he filed the initial complaint in this case. Nonetheless, he was accorded an additional week to file an optional brief for why sanctions should not be imposed. In his final brief, Plaintiffs’ counsel again argues that he believed disclosure of the Cayman Islands action was not necessary, this time reasoning it was a pending action in a foreign court, as opposed to a federal or state court of the United States, a response which remains both disappointing and wholly inadequate. III. DISCUSSION The Court possesses the inherent power to dismiss an action sua sponte “to achieve the orderly and expeditious disposition of cases.” Link v. Wabash R.R. Co., 370 U.S. 626, 629-33 (1962). That authority includes “the ability to fashion an appropriate sanction for conduct which abuses the judicial process.” Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178, 1186 (2017) (quoting Chambers v. NASCO, Inc., 501 U.S. 32, 44-45 (1991)). Additionally, the United States Code authorizes sanctions against counsel for multiplying proceedings in a case unreasonably and vexatiously. 28 U.S.C. § 1927. Finally, Local Rule 1-4 authorizes sanctions for
their failure to disclose (particularly in light of the fact that the Court noted it had found such failure to be a cause of considerable concern), Plaintiffs chose to double down on their disclaimer. In their motion for a preliminary injunction, Plaintiffs made the disingenuous argument that they thought the Cayman Islands action was irrelevant to this case and that if Defendants disagreed they would so inform the Court. (Dkt. 36 at 12 n.1.) Thus, in addition to their failure to disclose, Plaintiffs’ failure to take responsibility for the required disclosure exacerbated their dereliction of their duty of candor to this Court. Plaintiffs’ third opportunity to acknowledge their duty to disclose came at the preliminary injunction hearing. Plaintiffs’ counsel was put on notice that the Court was considering whether to sanction him for his conduct and gave him a chance to explain his actions before considering the merits of the motion. Plaintiffs’ counsel once more declined to accept full responsibility, instead expanding upon his nonsensical arguments for why he thought he was under no obligation to disclose the pending Cayman Islands action when he filed the initial complaint in this case. Nonetheless, he was accorded an additional week to file an optional brief for why sanctions should not be imposed. In his final brief, Plaintiffs’ counsel again argues that he believed disclosure of the Cayman Islands action was not necessary, this time reasoning it was a pending action in a foreign court, as opposed to a federal or state court of the United States, a response which remains both disappointing and wholly inadequate. III. DISCUSSION The Court possesses the inherent power to dismiss an action sua sponte “to achieve the orderly and expeditious disposition of cases.” Link v. Wabash R.R. Co., 370 U.S. 626, 629-33 (1962). That authority includes “the ability to fashion an appropriate sanction for conduct which abuses the judicial process.” Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178, 1186 (2017) (quoting Chambers v. NASCO, Inc., 501 U.S. 32, 44-45 (1991)). Additionally, the United States Code authorizes sanctions against counsel for multiplying proceedings in a case unreasonably and vexatiously. 28 U.S.C. § 1927. Finally, Local Rule 1-4 authorizes sanctions for
may flow from the Enforcement Notice;” and (2) be enjoined from directly or indirectly interfering with Plaintiffs’ prospective economic relations.” (Id. at 13.) Plaintiffs did not disclose, in either the TRO application or a separate notice, of a pending action in another court that involved a material part of the same subject matter and substantially all of the same parties as are present in this lawsuit. It was not until Defendants filed their opposition to Plaintiffs’ TRO application that the Court first became aware of such an action in the Cayman Islands. (Dkt. 23.) In October 2018, Plaintiffs brought suit in the Grand Court of the Cayman Islands against Hope, Outrider Master Fund, L.P. (“OMF”), and MaplesFS Limited (“Maples”) seeking an injunction restraining those parties from enforcing any rights under the Equitable Mortgage. (Dkt. 23-8, Cornwell Decl., Ex. E.) The court granted the ex parte injunction the same day. (Id.) Subsequently, in January 2019, the court discharged the injunction based on its conclusion that Plaintiffs’ case had “no real prospect of success and/or fails to raise a serious question to be tried.” (Dkt. 23-10, Cornwell Decl., Ex. G at ¶ 47(b).) While Plaintiffs’ appeal was pending, they filed this lawsuit on April 14, apparently withdrawing from the Cayman Islands action the next day. (Dkt. 31-1, Nicandros Reply Decl., Ex. B.) Plaintiffs were instructed to file a reply brief addressing Defendants’ arguments, which gave Plaintiffs their first chance to account for their failure to disclose the pending Cayman Islands action. (Dkt. 26.) Plaintiffs refused to acknowledge their failure, instead dismissing Defendants’ arguments about the Cayman Islands action as “red herrings.” (Dkt. 31 at 7.) Curiously, Plaintiffs attached documents from the Cayman Islands action that confirmed the action was still pending when the initial complaint was filed in this lawsuit in support of their reply brief. (See Dkt. 31-1, Nicandros Reply Decl., Ex. B.) In denying the TRO application, the Court noted it was troubling that Plaintiffs failed to disclose the existence of that pending action. (Dkt. 32.) The matter was set for a hearing regarding whether a preliminary injunction should issue for June 6, 2019, and the parties were given leave to file supplemental briefing. (Id.) Instead of using the supplemental briefing as a second chance to accept responsibility for
I. INTRODUCTION Plaintiffs Frontera Resources Corporation (“FRC”) and Frontera International Corporation (“FIC”) (collectively “Plaintiffs”) and their counsel, submitted a brief as to why sanctions should not issue in response to the Court’s instructions at a hearing on whether a preliminary injunction should issue. (Dkt. 46.) Having considered their response and their explanation at the preliminary injunction hearing, sanctions are awarded against Plaintiffs and their counsel as set forth below. II. BACKGROUND Plaintiffs filed this action on April 14, 2019. (Dkt. 1.) Shortly thereafter, on April 25, they submitted an ex parte application for a temporary restraining order (“TRO”) against Defendants Stephen Hope, Outrider Management, LLC, and Outrider Onshore, LP (collectively “Defendants”). (Dkt. 10.) Before Defendants had been served with the complaint or otherwise received notice of the TRO application, Plaintiffs sought an order requiring that Defendants: (1) “be enjoined from directly or indirectly violating or further violating the fiduciary duties and duty of loyalty that Mr. Hope owes to FRC, including by moving forward with any of the actions that
I. INTRODUCTION Plaintiffs Frontera Resources Corporation (“FRC”) and Frontera International Corporation (“FIC”) (collectively “Plaintiffs”) and their counsel, submitted a brief as to why sanctions should not issue in response to the Court’s instructions at a hearing on whether a preliminary injunction should issue. (Dkt. 46.) Having considered their response and their explanation at the preliminary injunction hearing, sanctions are awarded against Plaintiffs and their counsel as set forth below. II. BACKGROUND Plaintiffs filed this action on April 14, 2019. (Dkt. 1.) Shortly thereafter, on April 25, they submitted an ex parte application for a temporary restraining order (“TRO”) against Defendants Stephen Hope, Outrider Management, LLC, and Outrider Onshore, LP (collectively “Defendants”). (Dkt. 10.) Before Defendants had been served with the complaint or otherwise received notice of the TRO application, Plaintiffs sought an order requiring that Defendants: (1) “be enjoined from directly or indirectly violating or further violating the fiduciary duties and duty of loyalty that Mr. Hope owes to FRC, including by moving forward with any of the actions that
Yes