Fellow investors blocked man from company, suit claims

By Annie Cosby | Jan 8, 2015

A Galveston County man is suing over claims fellow investors attempted to freeze him out of his interest in a company.

A Galveston County man is suing over claims fellow investors attempted to freeze him out of his interest in a company.

James Hershey filed a lawsuit Nov. 6 in Galveston County District Court against Scope GP, Scope Management Solutions, Scope Land Holdings, W. Michael Hartman, Edward F. Hartman III, Darryl J. Hymel, Kenny Skinner, and James Dean Richardson, citing breach of contract.

According to the complaint, Hershey is a limited partner with between 14.85 percent and 15 percent interest in each of the Scope entities, which were formed in October 2004, and he served as president and chief executive officer, with the value of his interest exceeding $600,000, until January 2013, when the other interest holders met in secret, announced they were removing Hershey from his position, and demanded that he transfer all of his ownership interest without consideration.

The complaint states they threatened to slander Hershey's reputation but he refused to give in to the extortion and they relented. Hershey says the other investors then attempted to freeze him out by withholding financial information and profit distributions from him, and when that did not work, they concocted another plan in 2014 requiring Hershey to pay $29,000 for a needless "cash call" to allegedly pay off a loan, even though Scope's cash flows were sufficient to pay it off.

The complaint states the other investors threatened to foreclose on Hershey's interest in the amount of one-half this payment if he did not make the payment or use a "loan" from the others and repay it with interest. Hershey says he did make this payment by wire transfer and delivered $159 in checks for interest, but the defendants refused to cash them and alleged to be entitled to foreclose Nov. 6, although they kept the $29,000 loan payment.

According to the lawsuit, Hershey asked for access to Scope financial records to see if the other investors had put the "cash call" funds into the Scope entities but they refused, though required by law. The defendants are accused of breach of contract, breach of fiduciary duty, usury, conspiracy, commercial extortion and wrongful foreclosure.

Hershey seeks a full accounting and a restraining order and permanent injunction preventing the defendants from attempting to transfer his interest or interfere with his right to inspect Scope's financial records. He also seeks actual and exemplary damages, including attorney fees, interest and costs of court.

He is represented by attorneys David E. Cowen, Chris King and Amanda Wright of McLeod, Alexander, Powel and Apffel in Galveston.

Galveston County District Court case number: 14-CV-1193

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