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Lozinsky v. Georgia Resources Management

September 3, 2010


The opinion of the court was delivered by: John D. Bates United States District Judge


In early 2006, Daniel Lozinsky invested $180,000 in Global Methane Partners, Inc. ("Global Methane") and Georgia Resources Management, LLC ("Georgia Resources"), companies involved in extracting and selling methane in the Ukraine and the Republic of Georgia. Dissatisfied with his investment, Lozinsky asked for his money back. When the two companies refused, Lozinsky sued them for unjust enrichment. Georgia Resources, contending that Lozinsky reneged on a commitment to invest an additional $165,000, has counterclaimed for promissory estoppel. The Court held a two-day bench trial on June 17-18, 2010. Upon consideration of the testimony and exhibits presented at trial and the parties' proposed findings of fact and conclusions of law, and having made credibility findings as necessary to resolve any material discrepancies in the relevant testimony, the Court makes the following findings of fact and conclusions of law.


1. In mid-February 2006, Daniel Lozinsky met with John Onufrak and Herman Hohauser --Global Methane's managing director and principal investor, respectively -- to discuss a potential investment in that company. See Trial Tr. ("Tr.") 71:15-72:22 (Lozinsky).*fn2 The three men also discussed a potential investment in Georgia Resources, a company which was to be "created just for the purpose of receiving Mr. Lozinsky's investment." Tr. 270:20-271:1 (Onufrak); see Defs.' Proposed Findings of Fact and Conclusions of Law ("Defs.' Proposed Findings") [Docket Entry 51], at 8-9 ("[Georgia Resources] was intended by Defendants to have been an entity created specifically for the purpose of funding and operating [Global Methane's] businesses in the Republic of Georgia. It was never formally created and does not legally exist as an independent entity.").

2. At this meeting, Onufrak and Hohauser explained to Lozinsky the companies' plans to remove methane gas from coal mines in the Ukraine and the Republic of Georgia, see Tr.75:18-20 (Lozinsky), which the companies would then sell, see Tr. 77:14-21 (Lozinsky). They described projects they intended to develop, including planned pilot programs in two Ukrainian coal mines. See Tr. 77:12-13 (Lozinsky); 126:24-127:18 (Lozinsky). They told Lozinsky that, in support of these two anticipated pilot projects, the Overseas Private Investment Corporation ("OPIC"), a U.S.-government agency bank, was prepared to loan $15.3 million to a consortium in which Global Methane had an interest. See Tr. 75:25-76:6 (Lozinsky); 77:6-15 (Lozinsky). And they presented Lozinsky with a Project Information Memorandum that this consortium had prepared for OPIC in support of its loan application. See Defs.' Ex. 2 (Project Information Memorandum); Tr. 136:11-137:25 (Lozinsky); 213:3-9 (Onufrak); 233:9-21 (Onufrak).

3. Onufrak and Hohauser insisted to Lozinsky that they needed an investment right away, as they were just about to leave on a business trip. See Tr. 74:8-12 (Lozinsky). Lozinsky committed to invest at least $40,000. See Tr. 74:13-17 (Lozinsky); 129:5-18 (Lozinsky).

4. A day or two after this initial meeting, Lozinsky wired a $40,000 investment in defendants*fn3 to Vancom Financial Services, Inc., a company wholly owned by Hohauser. See Tr. 76:19-23 (Lozinsky); 238:23-239:1 (Onufrak); Defs.' Ex. 3 (Wire Transfer Details).

5. One week later, following further conversations with Onufrak and Hohauser, Lozinsky wired Vancom an additional $40,000 investment in defendants. See Tr. 130:12-14 (Lozinsky); 216:3-20 (Onufrak). Lozinsky wired Onufrak another $50,000 payment in mid-March, see Tr. 90:15-18 (Lozinsky), and a final $50,000 investment in mid-April. See Tr. 76:21 (Lozinsky).

6. All of Lozinsky's $180,000 investment went to Global Methane; none went to Georgia Resources. See Tr. 272:5-11 (Onufrak). Global Methane used this money to pay salaries -- including Onufrak's -- and other expenses. See Tr. 272:12-24 (Onufrak); 292:22-293:19 (Onufrak).

7. At some point during the spring of 2006, Lozinsky committed to invest an additional $165,000 in Georgia Resources. See Tr. 153:5-6 (Lozinsky); 223:25-224:10 (Onufrak). Onufrak testified that, based on this promise, he represented to Georgia's ministries of energy and the environment that the company "would be sufficiently capitalized to go forward" with a methane extraction project in Georgia. Tr. 224:13-12; Tr. 241:20-242:1.

8. Shortly before Lozinsky's final wire transfer in mid-April, Onufrak told him that the OPIC loan -- which Lozinsky had expected to be finalized in the middle of May -- was being delayed. See Tr. 134:22-135:19 (Lozinsky). Lozinsky grew suspicious and hired an attorney, Michael Mannix, to investigate his investment. See Tr. 20:20-22 (Mannix) ("[O]ur initial task was to understand the nature of the investment and the nature of the companies that were involved in those two endeavors."); 44:20-21 (Mannix) ("[Lozinsky] provided me whatever he had, which I think, if I remember at the time, was nothing, and asked me what he should do.").

9. Mannix wrote to Ernest Stern, defendants' attorney who had set up the initial meeting between Lozinsky, Onufrak, and Hohauser. He stated that Lozinsky had hired him "to review his potential investment in [Global Methane and Georgia Resources]," and explained that his "goal is to determine the circumstances of each company and the terms under which [Lozinsky] might be willing to make an additional investment." Pl.'s Ex. 1 ("Mannix Letter"), at 1.*fn4 To this end, Mannix asked Stern for a number of documents relating to the two companies, including certificates of incorporation, bylaws, officer and director lists, financial statements, a copy of the OPIC funding application, and "[a]ny other document that is significant to the business." See id. at 1-2.

10. Mannix followed up on this request with several phone calls. See Tr. 22:22-23:7 ("I spoke with Ernest Stern on a number of occasions, and I'm going to call it maybe three or four occasions as a minimum . . . with a view towards attempting to understand the transaction and get documents."). He also sent Stern emails. In one he wrote, "Ernest, Can you please let me know how our document request is coming? As you know, we have not received anything yet and I will not be able to help Daniel in his decision making until we receive the requested information." See Pl.'s Ex. 7 (May 19, 2006 email from Mannix to Stern).

11. Mannix testified that, in response to his requests, defendants provided "dribs and drabs of some documents that were unexecuted or were in draft form or maybe didn't reflect what [Lozinsky] was telling [Mannix] the transaction was." Tr. 21:14-20. Mannix stated that he "had a number of pointed phone calls with [Stern] where [he] was very clear about the fact that [he] wasn't seeing anything that was representative of what had already happened in the transaction in an executed, complete, documented history of the transaction." Tr. 49:9-17; see also Tr. 33:17-34:18 (Mannix). ...

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