United States District Court, M.D. Florida, Tampa Division
IN RE ENVIRONMENTAL TECHNOLOGIES INTERNATIONAL, INC., Debtor.
ASA W. CANDLER, III, et al., Appellees. MATTHEW J. FREESE, Appellant, Bankr. No. 8:15-bk-6910-KRM Adversary No. 8:15-ap-786-KRM
VIRGINIA M. HERNANDEZ COVINGTON UNITED STATES DISTRICT JUDGE
appeal arises from a Chapter 7 adversary proceeding.
Appellant Matthew J. Freese filed his initial brief on March
29, 2017. (Doc. # 10). Appellees Asa W. Candler, III and
Steve Ostermann filed their response brief on May 15, 2017.
(Doc. # 13). Freese filed his reply brief on May 30, 2017.
(Doc. # 14). After careful review, this Court affirms.
Technologies International, Inc., was founded by David
Barnhardt and David S. Gordon in 2000. (Doc. # 2-16 at 1). In
2005-2006, Tommy Hale introduced Barnhardt to the idea of
using magnets to clean oil wells, thus beginning ETI's
venture into the oil and gas industry. (Id. at 2).
ETI produced a device known as the “Radial Flux
Generator, ” which was meant to “condition
in-well crude oil fluids by assisting these fluids to flow
with less resistance thus enabling more production.”
(Doc. # 2-16 at 2; Doc. # 2-19 at 2).
was diagnosed with cancer and, “[d]uring the last
months of his life, Barnhardt attempted to locate a successor
to serve as the CEO of ETI.” (Doc. # 2-16 at 2). Having
been approached by Barnhardt to see if he was interested in
becoming CEO, Freese became president and CEO of ETI on March
11, 2010. (Id.; Doc. # 2-10; Doc. # 2-16 at 2; Doc.
# 2-19 at 2).
terms and conditions of Freese's employment with ETI were
memorialized in an Employment and Management Agreement. (Doc.
# 2-10). In relevant part, the Employment and Management
2. Term. This Agreement . . . shall terminate as of . . .:
. . .
(c) sixty (60) days after notice is given by one party to the
other after a material breach of this Agreement . . . and the
breach is not cured. A material breach by Freese of this
Agreement is any significant failure on his part to comply
with his obligations under Sections 4, 5, 6, 7, 8, 9 [sic]
¶ 10 below. . . .
3. Compensation. During the term of this Agreement . . .,
Freese shall receive:
(a) Salary. [ETI] shall pay Freese, contingent on his
securing adequate funding for [ETI], a base salary . . . .
. . . .
(i) Freese . . . shall receive a two (2) percent royalty on
all gross sales . . . .
. . . .
(i) Freese acknowledges and agrees that as of the date
hereof, [ETI] has no funds with which to pay salary, benefits
or expenses, that [ETI] is relying on him to raise the
funding necessary for the development and operation of [ETI],
and that it is his sole responsibility to develop adequate
capital, loans, grants and other sources of funding whereby
[ETI] may carry out its operations . . . .
. . . .
9. Inventions. Freese hereby sells, transfers, and assigns to
[ETI], all of the right, title, and interest of Freese in and
to all inventions, ideas, disclosures, and improvements . . .
made or conceived by Freese, solely or jointly, or in whole
or in part, during the term hereof which:
(a) relate to methods, apparatus, designs, products,
processes, or devices sold, leased, used, or under
construction or development by [ETI] . . .; or
(b) otherwise relate to or pertain to the business,
functions, or operations of [ETI] . . .; or
(c) arise in whole or in part from the efforts of Freese
during the term hereof.
Freese shall communicate promptly and disclose to [ETI] . . .
all information . . . pertaining to the aforementioned
inventions, ideas, disclosures, and improvements; and . . .
Freese shall execute and deliver to [ETI] such formal
transfers and assignments and such other papers and documents
as may be required of him to permit [ETI] . . . to file and
prosecute the patent applications . . . .
(Doc. # 2-10) (bolding in original).
Freese signed the Employment and Management Agreement, he had
begun meeting with Candler and Ostermann in an attempt to
secure funding from Candler Capital Partners, which “is
in the business of providing start-up or venture capital to
businesses or developers” and also “provides
management and operational services for . . .
companies.” (Doc. # 2-19 at 2; Doc. # 2-9 at ¶
1(b)). After Freese signed the Employment and Management
Agreement he negotiated the terms of Candler Capital's
investment in ETI. (Doc. # 2-16 at 2).
relationship between ETI and Candler Capital was set forth in
the Letter Agreement. (Id.; Doc. # 2-9). The Letter
(a) Exclusive Right to Fund. CCP shall have the
exclusive right to provide debt and equity financing to ETI .
. . .
. . . .
(e) Security. The Initial Loan shall be secured by:
. . .
ii. All of ETI's right, title and interest in the