Pulaski Circuit Judge David Tapp filed an order yesterday dismissing several defendants from a lawsuit filed by the former owners of Somerset Refinery in order to regain control of their family of businesses.

Francis “Frank” Lynch and Roy Shirley filed a suit in May contending that they are victims of a fraudulent “stock exchange” for worthless shares in a phantom “corporation.”

At the time of the deal, the “officers and directors” of USA Energy were listed as William Burnside Spears, CEO, President, Chairman and Director; Mike Foster, Vice President and Director; Darlene Spears, Co-Secretary; Angela Petry, Co-Secretary; Peter Wardle, Director; David Stetson, Director; and Randall Tackett, Director. All were originally listed as defendants.

Tapp’s order dismissed Foster, Darlene Spears, Petry, Wardle, Stetson, and Tackett from the case. William Spears is the only defendant remaining.

Lynch and Shirley argued in the suit that each of the alleged officers and directors were personally responsible to them for $10 million each.

Spears’ affidavit stated that the defendants being listed as officers or directors of USA Energy Corporation on an application for a certificate of authority was in error. Tapp’s order said the certificate of authority was influential in the decision, as is the fact that no evidence other than the verified complaint itself has been presented to the court.

Tapp said both theories of liability by defendants Foster, Darlene Spears, Petry, Wardle, Stetson, and Tackett fail, and the complaint fails, to state a claim against the defendants.

The two theories are as follows:

• The defendants have “at various times and places held themselves out to be officers or directors of USA Energy,” and therefore are liable to Lynch and Shirley for the alleged wrongdoing by USA Energy.

• The defendants “have acted as a defacto partnership doing business as USA Energy and are bound by the actions of a single partner.”

Tapp said all of the arguments against these defendants based on the administrative dissolution of USA Energy have been defeated by the corporation’s reinstatement.

Lynch and Shirley are also asking that the court appoint a receiver to control the PHS holdings until the lawsuit is resolved. In addition, their suit calls for the April 9 “Stock Exchange Agreement” to be voided and that they each be awarded $1 million in punitive damages as well as attorney fees.

Tapp has not yet ruled on a motion filed by Lynch and Shirley’s attorney on July 13, for appointment of a receiver to take charge of all stock of PHS Group, Inc. obtained from the plaintiffs to collect all dividends, rents, issues, and profits until the ultimate ownership of the stock is adjudicated and pending a further order of the court.

On July 19, the attorney for the defendants filed a response and objection to the motion.

The objection said the motion violates the bankruptcy code’s automatic stay and that they have failed to meet (or even argue) the threshold requirements justifying a court-appointed receiver.

PHS is described as the parent corporation of Somerset Refinery, Inc., an Illinois Corporation; Somerset Oil, Inc.; Somerset Environmental Services, Inc.; South Kentucky Purchasing, Inc.; and Phoenix Holdings of Somerset, Inc.

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