In this edition of Litigation Roundup, the U.S. Securities and Exchange Commission accused a Fort Worth company of operating a $191 million Ponzi scheme involving the purchase and sale of cattle, and a trial team from Susman Godfrey secured an $86 million defense win. Also highlighted is a Fifth Circuit panel’s holding that the Federal Trade Commission used an incorrect standard in determining a $7.1 billion acquisition of a cancer test maker would harm competition, but the court also agreed with the agency’s conclusion, which was enough to prompt Illumina to announce it would divest Grail anyway.
Have a development we should include in the next Litigation Roundup? Please let us know at tlblitigation@texaslawbook.net.
Northern District of Texas
Fort Worth Company Accused in $191M Cattle ‘Ponzi Scheme’
Fort Worth-based Agridime has been accused of duping investors out of $191 million in what federal authorities are calling a Ponzi scheme involving the purchase and sale of cattle.
Agridime’s owners — Josh Link of Gilbert, Arizona, and Jed Wood of Fort Worth — also are named as defendants in the lawsuit filed by the SEC Dec. 11. The government alleges more than 2,100 investors residing across 15 states were duped by the duo.
“The defendants enticed investors with guarantees that they could ‘make money raising cattle without having to do all the work,’ but as we allege in our complaint, their promises of annual returns of 15‑32 percent were, in the defendants’ own words, ‘too good to be true,’” said Eric Werner, director of the SEC’s Fort Worth regional office.
Investors were told their funds would be used to purchase, feed and raise cattle on a network of ranches and that the end goal would be to profit from selling “the highest quality farm fresh beef available.” But according to the SEC, not enough cattle was purchased to realize that goal and instead Link and Wood used $58 million of investors’ funds to make Ponzi payments while paying themselves sales commissions exceeding $11 million.
The case has been assigned to U.S. District Judge Mark Pittman, who on Thursday issued an order extending a temporary restraining order in the case, halting the alleged Ponzi scheme, through Jan. 9. A copy of the order was not available on the court’s docket Monday.
A preliminary injunction hearing is scheduled for Jan. 5.
The SEC is represented by Matthew J. Gulde and Tyson Lies of the SEC’s Fort Worth office.
Agridime, Link and Wood had not yet retained counsel as of Monday.
The case number is 4:23-cv-1224.
Two More Defendants Charged in $26 Million Real Estate Scam
Two more individuals have been accused by the government of perpetrating a $26 million scam that targeted Chinese investors and lured them to hand over funds they believed were being used to purchase property in sought-after neighborhoods across Dallas-Fort Worth.
Stephen Wall, 65, and Saskya Bedoya, were charged Dec. 12 with one count each of securities fraud and conspiracy to commit wire fraud. Their codefendants, Mark Adams, 61, and Haoqiang Fu, 49, have pled guilty to charges of conspiracy to commit wire fraud and selling unregistered securities, respectively, and face punishment of up to five years in prison at their sentencing hearing set for Feb. 21.
Another defendant, Timothy Barton, had pled not guilty to seven counts of wire fraud, one count of conspiracy to commit wire fraud and one count of securities fraud.
The government alleges that Wall and Bedoya conspired with Barton — who purportedly touted his ties with politicians in pitches to investors — to tell the investors their funds were being used to purchase properties in popular neighborhoods, build homes on them and sell them.
But in reality, the government alleges the defendants in some cases never purchased the properties and inflated the price of the properties by as much as 195 percent.
Barton is represented by Javan Porter and Richard B. Roper III of Holland & Knight, Michael Dingman and Michael J. Edney of Hunton Andrews Kurth and solo practitioner Khudabuksh Walji.
Adams is represented by Robert D. Wilson of Plano.
Fu is represented by Dallas attorneys David M. Finn, Robert L. Webster and Christy Lee Drake.
Wall is represented by Michael P. Heiskell of Johnson Vaughn & Heiskell.
Bedoya had not retained counsel as of Monday.
Renee M. Hunter and Sarah Douglas of the Department of Justice in Dallas are prosecuting the cases.
The case numbers are 3:22-cr-00352 and 3:22-cr-00329.
Eastern District of Pennsylvania
Susman Team from Texas, NY Gets $86M Defense Win
A jury in Pennsylvania recently determined that Susman Godfrey client Globus Medical Inc. owes nothing to a Maryland neurosurgery practice, Moskowitz Family, which was seeking damages of $86 million for alleged infringement of patent related to spinal implants.
Jurors heard eight days of testimony before returning a verdict Dec. 13 finding Globus had not infringed any of the three patents at issue in the litigation.
“We are pleased that a jury once again recognized our client Globus as the true innovator in the musculoskeletal space,” said Mark Hatch-Miller, partner and co-lead of the trial team.
Hatch-Miller, of New York, was co-lead counsel with Houston partner John Lahad. It marked the second time the duo has notched a defense win for Globus against patent infringement claims, the first came in 2016.
Moskowitz filed this lawsuit in November 2019 and it was initially assigned to U.S. District Judge Alan D. Albright. But in July 2020, Judge Albright granted Globus’ motion to transfer venue to the Eastern District of Pennsylvania, where it was then assigned to U.S. District Judge Mitchell S. Goldberg.
Moskowitz is represented by Ruffin B. Cordell, Joseph V. Colaianni Jr., Timothy W. Riffe, Brian Livedalen and Jason M. Zucchi of Fish & Richardson.
Globus Medical is also represented by Chanler Langham, Steven Shepard and Lora Krsulich of Susman Godfrey.
The case number is 2:20-cv-03271.
District of Maryland
Media Matters Fires Back at Paxton
About four weeks after Texas Attorney General Ken Paxton announced he had launched an investigation into whether Media Matters had “fraudulently manipulated data” on X (formerly known as Twitter) the company has responded by suing Paxton in federal court.
The litigation stems from a report Media Matters published in November that accused X of placing advertisements from several well-known companies next to “pro-Nazi content.” Many of those companies — Apple, Comcast, NBCUniversal and IBM among them — withdrew all ads from the platform in response.
Media Matter’s new lawsuit, filed Dec. 12, alleges an investigative demand letter Paxton sent it constitutes an “extraordinarily invasive intrusion into plaintiffs’ news gathering and reporting activities, and is plainly intended to chill those activities, acting in effect as an ongoing demand for virtually any materials plaintiffs have — or may prepare — related to their research and reporting on X or Musk.”
Media Matters accuses Paxton of violating its First, Fourth and Fourteenth Amendment rights and of retaliation in violation of the First and Fourteenth Amendments.
On Nov. 20, the same day Paxton made his announcement, X filed a federal lawsuit against Media Matters in the Northern District of Texas, calling the outlet a “self-proclaimed media watchdog that decided it would not let the truth get in the way of a story it wanted to publish about X Corp.”
“Looking to portray X’s social networking platform as being dominated by ‘white nationalist and anti-Semitic conspiracy theories,’ Media Matters knowingly and maliciously manufactured side-by-side images depicting advertisers’ posts on X Corp.’s social media platform beside Neo-Nazi and white-nationalist fringe content and then portrayed these manufactured images as if they were what typical X users experience on the platform,” X alleges. “Media Matters designed both these images and its resulting media strategy to drive advertisers from the platform and destroy X Corp.”
X is bringing claims for business disparagement and interference.
Media Matters is represented by Abha Khanna, Aria C. Branch, Christopher D. Dodge, Elena Rodriguez Armenta, Omeed Alerasool and Tina Meng Morrison of Elias Law Group in D.C.
In the suit brought by X against Media Matters, X is represented by former Texas Solicitor General Judd E. Stone II of Stone Hilton and John Clay Sullivan of S|L Law. Media Matters had not retained defense counsel in that suit as of Monday.
Defense counsel for Paxton had not made an appearance as of Monday.
The case number in Media Matters v. Paxton is 8:23-cv-03363. The case number in X Corp. v. Media Matters is 4:23-cv-01175.
Texas Supreme Court
Pro Se Mother Wins Reversal of Rights Termination
On Friday the state’s high court reversed an order terminating the parental rights of a Laredo woman, the young mother of three children who overcame multiple hurdles to file a pro se petition for review.
In deciding the first case heard this term, a unanimous court found that termination was not appropriate because the mother had substantially complied with her family service plan requirements.
“In evaluating whether termination is warranted, the trial court must ensure that any asserted noncompliance is of a requirement that is neither unwritten nor vague but rather ‘specifically established’ in a court-ordered plan. Additionally, to justify termination, the noncompliance must not be trivial or immaterial in light of the nature and degree of the parent’s compliance and the totality of the plan’s requirements,” said Justice Rebeca A. Huddle.
According to the opinion, the mother was 19 when she gave birth to her third child. A short time later, the Department of Family and Protective Services opened an investigation based on a report of neglectful supervision of her other children. About a month later, she failed to pick up her two older children at a daycare facility before it closed at midnight and lied to police about the reason for her delay.
The department took possession of all three children and sought termination of the mother’s parental rights. A family service plan required her to attend parenting classes and substance abuse counseling. Her efforts to take the classes with a specified service provider were complicated by the onset of the pandemic, and the department asked a licensed professional counselor to include the classes as part of the mother’s individual counseling, which she did for nearly a year.
After the counselor discharged her for not completing services successfully, the mother participated in counseling from another service provider and a therapist. Huddle said that despite the mother’s sustained efforts to complete the plan, stay drug-free and demonstrate her desire and ability to parent, the caseworker testified at trial that the mother did not meet her plan’s requirements. However, the caseworker agreed on cross-examination that the mother had complied, just not when or in the way she was ordered to comply.
The trial court found by clear and convincing evidence that she failed to complete the plan, saying that the Family Code doesn’t provide for substantial compliance. That decision was upheld by the Fourth Court of Appeals in San Antonio.
In a footnote, Huddle detailed the obstacles faced by the mother in her attempt to have a lawyer appointed to help with her appeal, including traveling to Austin to seek guidance from the clerk’s office. After one appointed lawyer withdrew, the Supreme Court abated the appeal and remanded to the trial court to determine whether she was entitled to appointment of new counsel. Due to a miscommunication in the district clerk’s office, the court’s order was not delivered to the trial court. She ultimately filed a pro se petition for review. The trial court later appointed Oscar A. Vela Jr. from The Vela Firm of Laredo, who filed an amended appeal.
Amicus briefs in support of the mother were filed for the Texas Association of Family Defense Attorneys by Julia Catherine Hatcher of Galveston and the Family Freedom Project by Chris L. Branson of Houston.
The Supreme Court concluded: “In light of Mother’s compliance with the material provisions of the service plan and the caseworker’s concession that Mother complied with the plan—just not in the way that suited the Department — we hold that there is insufficient evidence to support termination by clear and convincing evidence. …”
The state was represented by Ari Cuenin from the Office of the Attorney General of Texas.
The case is No. 22-0451.
U.S. Court of Appeals for the Fifth Circuit
Panel Says FTC Used Wrong Standard, Reached Correct Conclusion
On Friday a panel unanimously held that the Federal Trade Commission relied on an incorrect legal standard in finding that a $7.1 billion deal in which biotech company Illumina acquired a company that makes cancer screening tests was likely to reduce competition in the market.
The panel vacated a determination by the FTC that the merger should be unwound, but it also held in the 34-page ruling that the federal agency had shown the deal with Grail “is likely to substantially lessen competition in that market” and wrote that Illumina “had not identified cognizable efficiencies to rebut the anticompetitive effects of the merger.”
The ruling was enough to prompt Illumina on Saturday to announce it will divest Grail. Illumina had previously stated that if the appeal was unsuccessful it would move to divest.
Judges Edith Brown Clement, James E. Graves Jr. and Stephen A. Higginson sat on the panel.
The case number is 23-60167.
NRA Can’t Intervene in Suit Challenging ATF’s Pistol Brace Rule
A three-judge panel recently determined U.S. District Judge Jane J. Boyle got it right when she determined the National Rifle Association should not be allowed to intervene in a lawsuit where the Second Amendment Foundation is challenging a rule issued by the Bureau of Alcohol, Tobacco, Firearms and Explosives regulating pistol braces.
Chief Judge Priscilla Richman and Judges Edith H. Jones and James C. Ho sat on the panel that issued the Dec. 12 ruling, holding the NRA “failed to prove that SAF would not adequately represent NRA’s interests.”
“Although minimal prejudice would accrue to the current parties if intervention were approved, NRA’s participation will not ‘contribute to the full development of the underlying factual issues,’” the panel wrote. “Nor is NRA unable to file its own suit against ATF: that very case is pending before another judge in the same federal district court.”
The challenged rule restricts ownership of pistol braces. Those opposed to pistol braces have argued they allow users to make easily-concealable firearms more accurate.
The ATF is represented by Sean Janda, Steven H. Hazel, Benjamin Lewis, Brian Stoltz and Abby Wright of the U.S. Department of Justice offices in Dallas and Washington, D.C.
The NRA is represented by William A. Brewer III, Noah Peters and Matthew Davis of Brewer, Attorneys & Counselors. The case number is 23-10707.