Professional Documents
Culture Documents
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doj@jbblaw.com
2 Catherine A. Close, Bar No. 198549
cac@jbblaw.com
3 JULANDER, BROWN & BOLLARD
9110 Irvine Center Drive
4 Irvine, California 92618
Telephone: (949) 477-2100
5 Facsimile: (949) 477-6355
18 Plaintiff SCANWARE SOLUTIONS, INC. alleges for its Complaint against Defendants
19 MICHAEL LEE OGBURN, DEBBIE OGBURN and DOES 1 through 25, inclusive, as follows:
20 INTRODUCTION
21 1. This is an action to recover damages for breach of fiduciary duty and
22 embezzlement, and for declaratory relief and an accounting, in connection with the systematic
23 corporate mismanagement by a corporate officer. As set forth herein, Defendants failed to manage
24 Scanware in a way that would maximize value for Scanware and its shareholders; repeatedly took
26 shareholders, Board of Directors and regulators; and violated various federal and state securities
27 regulations. In doing so, Defendants harmed Scanware.
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COMPLAINT
1 PARTIES
3 corporation duly organized and existing under the laws of the State of Delaware.
4 3. Plaintiff is informed and believes and, based thereon, alleges that Defendant
5 MICHAEL LEE OGBURN (“Mr. Ogburn”) is, and at all relevant times, was an individual
7 4. Plaintiff is informed and believes and, based thereon, alleges that Defendant
8 DEBBIE OGBURN (“Ms. Ogburn”) is, and at all relevant times, was an individual residing in the
10 5. The true names and capacities, whether individual, corporate, or otherwise of the
11 Defendants named herein as DOES 1 through 25, are unknown to Plaintiff, who therefore sues
12 said Defendants by such fictitious names. Plaintiff will amend this Complaint to state their true
13 names and capacities when the names are ascertained. Plaintiff is informed and believes and,
14 based thereon, alleges that each such fictitiously named Defendant is in some manner liable for the
15 acts hereafter alleged. Mr. Ogburn and the Defendants named herein as DOES 1 through 15 will
16 sometimes collectively be referred to as “Mr. Ogburn.” Ms. Ogburn and the Defendants named
17 herein as DOES 16 through 25 will sometimes collectively be referred to as “Ms. Ogburn.” And
18 Mr. Ogburn and Ms. Ogburn will sometimes collectively be referred to as “Defendants.”
19 6. Plaintiff is informed and believes and, based thereon, alleges that at all times herein
20 mentioned, Defendants, and each of them, were and are (for purposes of the law of tort, contract
21 and otherwise) agents, principals, representatives, servants, masters, partners, trustees, associates,
23 and/or successors-in-interest to each other, all acting within the course and scope of such
24 capacities, within actual and/or apparent authority of such capacities, within the course and scope
25 of such conspiracies, and with actual and/or constructive notice of the knowledge of their
26 predecessors-in-interest and/or each other. Each of the Defendants conspired with one another
27 and/or aided and abetted the wrongdoing alleged herein.
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COMPLAINT
1 7. This Court has jurisdiction over each of the Defendants , and venue is proper in this
2 Court pursuant to Code of Civil Procedure section 394, because, at all relevant times, Defendants
3 conducted business in Orange County, California, and/or resided in Orange County, California,
5 FACTUAL BACKGROUND
6 8. Scanware was organized in October 2014 for the purpose of taking the inventory
7 tracking software technology developed by Patricia Tzannakos (“Ms. Tzannakos”) into new
8 commercial markets. Ms. Tzannakos owned the inventory control software and the pending patent
9 application. Ms. Tzannakos also owns and operated Component Sourcing Group, a California
10 corporation (“CSG”) that has been using and selling the same technology in the government sector
11 since 2006.
12 9. When Scanware was organized, Mr. Ogburn was appointed as Chief Operating
13 Officer and subsequently the Chief Financial Officer. Mr. Ogburn was responsible for the day-to-
14 day operations of Scanware. Ms. Tzannakos was appointed as Chief Executive Officer and
15 Director, but the majority of her time and efforts was devoted to the operation of CSG.
16 10. In February 2015, just months after it was formed, Scanware filed to undertake a
17 public offering of securities by filing an S-1 registration statement with the Securities and
18 Exchange Commission. Commencing in about February 2015, Mr. Ogburn began selling
19 approximately 2,926,000 shares of Common Stock at a price of $0.10 per share, the price
20 proposed in the S-1, to approximately 31 persons. However, at time Mr. Ogburn began selling the
21 shares the SEC had not declared the S-1 effective and, as a result, sale of the shares of Common
23 11. Scanware later learned in September 2015 that Mr. Ogburn knew that he should not
24 have sold the securities but did it anyway, that he did not have a list of all investors who purchased
25 the stock, and that he paid or agreed to pay sales commission in cash or stock to persons for
26 selling certain shares of the Common Stock and the recipients of such commissions were not
27 registered broker dealers. Pursuant to federal and state laws, Scanware may not pay commissions
28 to unregistered broker dealers. At the time, the Board of Directors of Scanware and other officers
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COMPLAINT
1 had no knowledge that the sale of stock was unlawful and had no knowledge of the unlawful
2 commissions.
3 12. Scanware also learned in September 2015 that it was paying Mr. Ogburn’s salary as
4 a 1099 payment to his company, Lightwave Capital, which was held in Ms. Ogburn’s name.
5 13. Scanware also later learned that Mr. Ogburn was selling his own restricted stock to
6 other purchasers, either directly or through his company, Lightwave Capital, at a price lower than
7 the price of the Company’s shares. Scanware is informed and believes that such sales did not
9 14. After discovering the foregoing, on and around March 2, 2016, Scanware offered
10 rescission to each person who purchased shares of common stock from Scanware. Scanware sent
11 letters and disclosure statements to each of the affected purchasers. However, because Scanware
12 had no cash or assets with which to pay the rescission payments since the money received for the
13 stock sales had been misused and diverted by Defendants, it was forced to obtain a private loan of
14 more than $310,000 to cover the cost of the rescission payments. The loan was secured by all of
20 16. As a corporate officer responsible for the management of the corporation, Mr.
21 Ogburn owed fiduciary duties of care, loyalty and good faith to Scanware. Mr. Ogburn’s fiduciary
22 duties include obligations to exercise good business judgment, to act prudently in the operation of
23 Scanware’s business, to discharge his duties in good faith, to act in the best interests of Company
24 and to avoid acting in his own self-interest, and to honestly disclose all material facts when
26 17. Plaintiff is informed and believes and on that basis alleges that within the past
27 year, Mr. Ogburn breached his fiduciary duties by, among other things:
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COMPLAINT
1 a. Mismanaging Scanware and violating the terms of Scanware’s corporate
5 himself a salary grossly disproportionate to the value of their services and selling his own
6 restricted stock to other purchasers at a price lower than the price of the Company’s shares;
10 18. By and through his conduct, Mr. Ogburn failed to exercise the degree of care
11 required of corporate officers, directors and fiduciaries. Mr. Ogburn’s conduct was not due to an
12 honest error in business judgment, but rather to his gross mismanagement, bad faith and/or
14 19. As a direct and proximate result of the above described breaches, Plaintiff has
15 suffered damages in an amount to be determined at trial, but not less than $310,000.
16 20. Plaintiff is entitled to recover from Mr. Ogburn the benefits and/or profits received
17 by him as a result of any breach of duty. Plaintiff is entitled to the imposition of a constructive
18 trust on the proceeds of any and all sales of Scanware’s stock by Mr. Ogburn, and/or on all
20 21. Plaintiff is entitled to prejudgment interest at the maximum rate permitted by law
21 and/or compounded in the maximum manner permitted by law in light of Mr. Ogburn’s breaches
23 22. Plaintiff is informed and believes and on that basis alleges that in doing the acts
24 described above, Mr. Ogburn acted with malice and with specific intent to injure Plaintiff and its
26 Scanware pursuant to California Civil Code section 3294 in an appropriate amount to deter similar
27 conduct in the future.
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COMPLAINT
1 SECOND CAUSE OF ACTION
5 24. Plaintiff is informed and believes and on that basis alleges that Defendants have
6 embezzled and converted Scanware’s funds by among other things, failing to use the corporate
7 funds to pay Scanware’s outstanding financial obligations, paying themselves exorbitant salaries
8 which are grossly disproportionate to the value of their services, using corporate funds to pay for
9 personal items, and converting Company checks for their own use and benefit.
10 25. Plaintiff has demanded from Defendants the return of all monies improperly
11 converted and diverted to Defendants, but Defendants have failed and refused, and continue to fail
13 26. As a direct and proximate result of the above described breaches, Scanware has
14 been damaged in an amount to be determined at trial, but not less than the jurisdictional minimum
16 27. Plaintiff is informed and believes and on that basis alleges that in doing the acts
17 described above, Defendants acted with malice and with specific intent to injure Scanware and its
19 Scanware pursuant to California Civil Code section 3294 in an appropriate amount to deter similar
25 29. By reason of the wrongful conduct complained of herein, Defendants, and each of
26 them, have benefitted financially to the financial detriment of Scanware and its shareholders in
27 that Defendants have improperly sold their restricted corporate stock and wrongfully obtained and
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COMPLAINT
1 30. In equity and good conscience, the shares of stock wrongfully issued and corporate
3 Defendants under such circumstances that it would be inequitable to be retained without payment.
4 31. It would be unjust to allow Defendants, and each of them, by such unlawful and
5 wrongful conduct, to profit at the expense of Scanware and its shareholders. Therefore, all stock
6 certificates improperly issued by and to Defendants should be cancelled and all sums unjustly
12 33. As set forth above, Plaintiff is informed and believed that Defendants have
13 misappropriated and misused corporate funds by, among other things, failing to use the corporate
14 funds to pay Scanware’s outstanding financial obligations, paying themselves exorbitant salaries
15 which are grossly disproportionate to the value of their services, and using corporate funds to pay
19 35. To date, Defendants have failed and refused, and continue to fail and refuse, to
28 / / /
7
COMPLAINT
1 38. An actual controversy has arisen and now exists between Plaintiff, on the one hand,
2 and Defendants, on the other hand, concerning the validity of certain stock transfers of Defendants
3 as detailed herein and the stock ownership percentages of the various shareholders of Scanware.
4 39. Plaintiff contends that the stock transfers from and to Defendants are void as
5 unlawful. Plaintiff is informed and believes and, based thereon, alleges that Defendants dispute
6 Plaintiff’s contention and assert that the stock transfers to and from Defendants are valid.
8 respective ownership interests of the parties and remaining shareholders as detailed above.
9 PRAYER
10 WHEREFORE Plaintiff prays for judgment against Defendants, and each of them, jointly
13 proof against Defendants, jointly and/or severally, for all losses and/or damages suffered as a
15 2. For all available equitable, legal and/or related remedies against Defendants, jointly
16 and/or severally;
18 Scanware and an order directing the immediate payment to Scanware of all monies improperly
19 diverted;
20 4. For a complete verified accounting from Defendants of all funds paid to and/or by
21 Scanware, all stock sales by Defendants, and all dispositions of any kind of Scanware’s assets;
22 5. For disgorgement from each Defendant of all ill-gotten gains, profits, benefits,
23 and/or other compensation obtained by Defendants as a result of the acts and/or transactions
24 complained of herein;
25 6. For restitution from each Defendant of all assets taken from Scanware whether or
26 not pursuant to contract and/or whether or not received in exchange for consideration;
27 7. For the recording and/or allowing the recording of an equitable lien and/or a
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COMPLAINT
1 8. For prejudgment interest on the foregoing sum at the highest legal rate from the
5 11. For exemplary and punitive damages according to proof at the time of trial; and
6 12. For such other and further relief as the Court may deem just and/or proper.
10
By:
11 Dirk O. Julander
Attorneys for Plaintiff SCANWARE
12 SOLUTIONS, INC.
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COMPLAINT