Summary of the major filings in the Fountain case | Eastern North Carolina Now

    Publisher's Note: This article originally appeared in the Beaufort Observer.

    What follows is a plain language summary of the major filings in the Fountain case. It is not presented as being complete. To get the complete story one needs to read the original legal filings. We have summarized three of them and provided links to each in what follows. You need to download and read them in order. You have to compare each of the response to the previous filing(s). We've also provided a link to all of the filings. Finally, the reader must keep in mind that these filings are simply assertions--of accusations and defenses. The factual accuracy is determined by a jury at trial.

    The original complaint filed by Reggie alleged that he entered into a consulting agreement with Westport Shipyard Inc. to help them build a 50 foot boat. He was to be paid $100,000. He was paid an initial payment of $25,000 but Reggie's complaint alleges that Fountain Powerboats, Inc. (the new owner of Fountain) kept the remaining $75K he says he was owed. The complaint says that Fountain Powerboats built the boat for a million dollars, making a profit of $415K. Reggie wants his money. He also wants the return of what he alleges to be about $250K in personal property retained by Fountain Powerboats who refused to return the items he says are his personally.

    That started the law suits.

    Fountain Powerboats, Inc. then responded to Reggie's complaint. And they unload a barrage on him. Among other things, they allege that Reggie engaged in "malfeasance and breaches of fiduciary duty" which resulted in Fountain firing him and locking him out of the premises.

    Fountain goes on to say that they have offered to return any personal property belonging to Reggie upon proof of ownership being provided by him, which they say he has failed to do. They then offer a number of legal responses saying that as a matter of law they don't owe Reggie what he claims they owe him. Then they throw a counterclaim against him that charges:

    When Fountain took over the company they acquired the intellectual as well as physical property of the company Reggie had founded and built. Included in this property were what Fountain alleges are a number of trade secrets, including a "Super ventilated positive lift" hull design. They claim that when they acquired Fountain there was a Code of Business Ethics that prohibited agents of the company from self dealing, disclosing confidential information including trade secrets, and conflicts of interest.

    They then say that the contract with Westport violated these property rights and agreements. They also allege that when Liberty Funds took over Fountain under bankruptcy Reggie's compensation was limited to $7,038.64 per week from August 24, 2009 to September 8, 2009 and then it was reduced to $4500 per week by the court.

    The counterclaim says that after Liberty took over Fountain it increased the workforce from 45 to 171 employees.

    The counterclaim further alleges that Reggie worked a deal with Mercury Marine for some engines to be furnished to the American Striper Association (ASA), which it says Reggie owned. It alleges that as a result of dealings between ASA and Fountain at Reggie's direction Fountain ended up paying ASA/Reggie $644,719.16 before Bill Gates, Liberty appointed chairman, ordered no more payments to ASA or Reggie.

    The counter complaint also alleges that Reggie formed a corporate entity called Real Fast Powerboats (RF Powerboats--note the initials) and recruited Fountain employees to leave Fountain and go to work with RFP. It also alleges that Reggie tried to get financing for RFP by using as many as 15 key Fountain employees he represented as being the essence of Fountain that would be working with RF Powerboats. The filing says that Reggie told the Fountain board that he was "demoing a boat for the benefit of Fountain" at the Florida meeting in which they say he was actually trying to get financing by using Fountain employees as a bargaining chip.

    They say he moved his Fountain mobile phone number to his personal account and charged that this was for self-dealing purposes and goes on to allege that documents, and computer files were taken from the Fountain computers.

    You can read the details, but the counter claim goes on to claim that RRP used Fountain products to compete against Fountain. See Page 21f.

    The counter claim then summarizes by seeking damages for conversion (exercising ownership rights of Fountain property), misappropriation of trade secrets, breach of fiduciary duty, usurpation of
Fountain boat in the County's Quick Start 2 building on 12-17-11
corporate opportunity, unjust enrichment, constructive fraud, tortious interference, unfair and deceptive trade practices. The claim seeks punitive damages as permitted by North Carolina law.

    On Page 38 of the counter claim (#187) we read: "Reggie Fountain and RF Powerboats are presently building boats based on Fountain Powerboats designs at Brooks Boatworks in Washington, NC." What the complaint does not say is that Beaufort County's QuickStart 2 building was also being used in this operation at Brooks.

    We deliberately delayed reporting the above information until after Reggie filed his reply and we confirmed that County property was being used by Reggie.

    You can read Reggie's reply by clicking here.

    In his reply, Reggie contends that he did not steal any trade secrets from Fountain, arguing that the technology used to build Fountain boats is not proprietary and the intellectual property is in Reggie's head and "is at his disposal to exercise, design and produce at the next level of performance for the powerboat market." (P. 3).

    He contends that the time he spent consulting was time that he was due off via accumulated vacation time, in other (our) words, on his own time. He says that when James Bursey, the new manager of Fountain Powerboats, took over Fountain that the terms and conditions Bursey laid out for Reggie's role with Fountain were unacceptable so he resigned after the sale of Fountain and began looking for other employment. This he says he found with Westport (P. 6) through a consulting contract "in his individual capacity" (P.6). He says that after alternative financing appeared to be available he negotiated with Westport to build the 50 foot boat at Fountain.

    The reply contends that when Liberty took over Fountain that Bill Gates offered Reggie the job of President and CEO of Fountain at a salary of $5000 a week. Reggie says that Liberty/Gates assured him that Liberty had ample capital to operate Fountain but that he later learned that was not true.

    The reply explains that "Mercury Marine had been furnishing engines to American Striper Association (ASA) for promotional purposes for years since Reggie bought ASA. It does not respond to the allegation that ASA was paid $644,719.16 by Fountain except to say that "Reggie fountain was forbidden to and never executed any Liberty Fountain Powerboats checks" and that he is "without knowledge or information sufficient to admit or deny the allegation that $644,719.16 was paid to ASA." (P.15). It explains that Reggie bought and owned ASA because they wanted to get other manufacturers to support ASA and that they would not likely be able to do so if it was known that it was owned by Fountain--such ownership would have been disclosed because Fountain was a publically traded company at the time, but ASA was not. So they allege that Reggie created ASA to hide who was actually getting the contributions to ASA.

    The reply contends that Real Fast Powerboats (RF Powerboats) is but a "corporate shell" and has no employees, working capital and does not own any tooling, concluding that "...a boat company that has no employees, no tooling and no working capital is not in the boat building business." (P.16). The reply does not mention Brooks Boatworks or Beaufort County's QuickStart 2 building.

    The trip to Florida was explained as an attempt to meet with "Robbie Brown" to try to get Brown to buy the Regions Bank note on Fountain and presumably to allow Reggie to continue to operate Fountain.

    Reggie says in his reply that it was not he who drove Fountain into bankruptcy but that Fountain's demise was caused by the drop in sales due to the recession while 275 Fountain boats sat on dealer's showroom floors when some of the dealerships began to fail.

    The reply then denies most of the charges that RF Powerboats and Reggie represented themselves as the "real" Fountain powerboats as alleged in the counter-claim.

    On the conversion charge Reggie replies that he did not need to convert Fountain intellectual property because he held the information in his head. He says he did not download any computer files, and that he does not even own or know how to use a personal computer and does not need one because he "...inherently knows all of the information without resorting to doing anything that would be less than prudent or lack integrity." (P. 27). He also says he never withheld any orders from Fountain and he and others actually tuned in an "order from Venezuela that totaled approximately $2.5 million." (P.27). Moreover, he replies that he did not deprive Fountain of any time owed them in that the amount of time he was to work for Westport was "less than three weeks, spread over a year's time" (P. 29). In #144 (P. 30) Reggie says Mercury gave the engines to ASA who then sold them to Fountain. But it does not specify whether that would account for the $644,719 the counter-claim alleged Fountain paid ASA or if Mercury gave the engines that ended up with whatever Fountain paid ASA.

    On page 32 Reggie denies that he tried to steal dealerships (ex. Shogren Performance Marine) from Fountain.

    The reply asks that Fountain's counter-claim be dismissed, that Fountain be order to pay Reggie the $75,000 balance on the consulting deal, $250,000 for the property Reggie says Fountain refused to return to him and attorney's fees.

    Conclusion

    Obviously it is impossible to fully explain nearly a hundred pages of detailed legalese in less than 1500 words. Readers are therefore urged to read the actual documents to glean the best picture of this very complex situation. You may do so at the links above.

    The case has not been calendared for trial and observers tell us that it may be many months before it goes to trial
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