From the QUANTUM MATERIALS CORP. FORM 10-K FOR T

From the QUANTUM MATERIALS CORP. FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
https://seekingalpha.com/filing/5442526

Page 25 excerpt -

CAUSE NUMBER: 18-2393; Hays County, Texas

The current litigation with K&L Gates was pending before the Texas Supreme Court. It was awaiting a ruling to determine if the strong opinion at the 3rd Court of Appeals in Austin in favor of Quantum Materials will be reversed. The state Supreme Court on Oct 15, 2020 declined to take the interlocutory appeal. The case has now been sent back to Hays County for a jury trial.

Quantum Materials retained K&L Gates (“Gates”) on a myriad of issues. As part of that representation, a lawyer from Gates sat in on confidential board meetings and participated in the company’s most important negotiations, including but not limited to a new contract with the founder and former CEO, Steve Squires, to become CEO again. Gates billed a very substantial fee in a very short period of time. Over $300,000. Before negotiations occurred on what Squires believed to be an excessive bill, SBI Investments and L2, creditors of Quantum Materials, demanded that the transfer agent, Empire Stock Transfer, transfer huge amounts of stock as collateral for loans.

Quantum Materials sued Empire to prevent this transfer, first winning a Temporary Restraining Order, then a Temporary Injunction, and finally, after an appeal to the 3rd Court of Appeals in Austin, an appellate victory.

Before that appellate victory and before the Injunction trial, K&L Gates entered an appearance for SBI Investments and L2, even though they were still under contract with Quantum Materials as intervenors. Quantum Materials objected and raised objections to their firm, entering an appearance against them. K&L Gates forced substantial research, and briefs to be filed before withdrawing before the Temporary Injunction trial. (see TRO, TI order, appellate opinion.)

Either K&L Gates shared all information with their “new” client, to the disadvantage of their “old” client, a duty under full disclosure, or they didn’t share. Gates claimed that the contract with Quantum Materials waived all conflicts.

Following up on the actions begun by Gates on behalf of SBI Investments and L2, the suit by Gates against Quantum Materials was dismissed in Texas, and another law firm sued Quantum Materials in both Florida and Kansas. In Florida, the case was ultimately dismissed, and legal fees were ordered to be paid to Quantum Materials. Much of the Kansas case has been dismissed, but the balance is set to be tried in Kansas in October. (see the report on Kansas case.)

Ultimately, Quantum Materials sued K&L Gates for fiduciary violations and Deceptive Trade Practices and other claims (see suit), and Gates filed a counterclaim for its $300,000 in alleged fees. Gates filed an action to dismiss the case, called a “SLAPP” action, and after a hearing on the merits in Hays county, lost. Gates then appealed to the 3rd court of appeals in Austin, and after briefing and oral argument, again lost. Gates has now appealed its most recent defeat to the Texas Supreme Court.