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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

Civil Action No. 10-cv-00317-WYD

INTERNATIONAL THREE CROWN PETROLEUM LLC; and

ISRAEL PETROLEUM COMPANY,

Plaintiffs,
v.

PETROMED CORPORATION;
HAGAI AMIR;
LYLE DURHAM;
EAST MEDITERRANEAN EXPLORATION COMPANY LIMITED; and
DAVID PEACE,

Defendants.

PLAINTIFFS’ RENEWED MOTION FOR A TEMPORARY RESTRAINING ORDER,

INCORPORATING FEDERAL AUTHORITY

Pursuant to Rule 65(b) of the Federal Rules of Civil Procedure, Plaintiffs International

Three-Crown Petroleum LLC (“ITC”) and the Israel Petroleum Company (“IPC”) (collectively,

“Plaintiffs”) request the Court to enter a temporary restraining order (“TRO”) to preserve the

status quo and to direct that, pending further Court order, defendants PetroMed Corporation

(“PetroMed”), Hagai Amir (“Mr. Amir”), Lyle Durham (“Mr. Durham”) (collectively, the

“PetroMed Defendants”), East Mediterranean Exploration Company Limited (“East Med”) and

David Peace (“Mr. Peace”) (collectively with the PetroMed Defendants, the “Defendants”) shall

refrain from taking any action to interfere with Plaintiffs’ contractual interests in an oil and gas

exploration and development project that IPC owns in the Mediterranean Sea off the west coast

of Israel (the “Project”).

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CERTIFICATION OF COUNSEL
CONCERNING NOTICE TO ALL DEFENDANTS

On February 12, 2010, the Complaint in this case and a Motion for a TRO were filed in

the Denver District Court. In connection therewith, the undersigned gave telephonic notice of

the Complaint and Motion for TRO to (1) counsel for PetroMed, Mr. Amir, and Mr. Durham,

and (2) counsel for East Med and Mr. Peace. Promptly thereafter, the undersigned transmitted

copies of all pleadings filed with the Denver District Court to the attorneys for Defendants. That

afternoon, the Denver District Court notified the undersigned that it had set a hearing on the

TRO for Tuesday, February 16, 2010, at 9:00 a.m. Promptly thereafter, the undersigned notified

counsel for Defendants of the time, date, and location of the Denver District Court hearing.

After the close of business on February 15, 2010, counsel for PetroMed, Amir, and

Durham called the undersigned to inform him that the PetroMed Defendants had filed a Notice

of Removal, removing the Complaint to this Court. Counsel for the PetroMed Defendants

represented that counsel for East Med and Mr. Peace were aware of the PetroMed Defendants’

Notice of Removal.

The undersigned has notified counsel for all Defendants of the filing of the instant motion

in this Court and has provided copies of these papers.

I. INTRODUCTION

Plaintiffs are in dire need of emergency relief to prevent Defendants from further

breaches of their contracts and duties to Plaintiffs in furtherance of Defendants’ ongoing,

unlawful attempts to overtake or destroy Plaintiffs’ rights to explore and develop oil and gas

resources of inestimable value in the Mediterranean Sea. Plaintiffs purchased these rights from

Defendant PetroMed in the form of two licenses and one permit in an arms-length transaction in

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November 2009. PetroMed was insolvent at the time and unable to develop the resource itself.

As a result, PetroMed faced the imminent termination of its rights by the agency of the Israeli

government that administers the licenses and permit. Plaintiffs paid and caused PetroMed to

receive millions of dollars in cash, stock, and other consideration in exchange for an irrevocable

transfer of the interests. Upon closing of the deal, Plaintiffs proceeded to expend several more

millions of dollars and an enormous amount of human capital to develop the resource.

Then in January 2010, PetroMed, suffering from a serious case of seller’s remorse,

unilaterally and unlawfully declared the deal “rescinded,” proceeded to shop the deal to other

investors, and began importuning the Israeli licensing agency to refuse to recognize Plaintiffs’

rights but instead to regard the interests as if they had never been transferred. In addition,

Defendant East Med, a technical consultant to PetroMed, also lined up its own consort of

investors, and laid its own claim to the rights. Notwithstanding that East Med had fully

supported the transfer through its consummation, East Med abruptly reversed course and began

to assert that it owned the right of first refusal to purchase the interests before any deal between

PetroMed and Plaintiffs could have effect.

Defendants’ conduct has interfered and continues to interfere with the transfer of

ownership of rights in the licenses and permit by the Israeli government. Such conduct has

jeopardized and continues to jeopardize the perpetuation of the licenses and permit. Such

conduct has prevented and continues to prevent Plaintiffs from raising the necessary funding

from investors to develop the licenses and permit. This conduct creates a substantial risk of

irreparable harm to Plaintiffs and to third parties by inducing third parties to invest in the

acquisition of rights in the licenses and permit that PetroMed has already sold and transferred to

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Plaintiffs. Plaintiffs have no way of protecting themselves against such third-party transfers

because Defendants’ wrongful conduct prevents Plaintiffs from registering their ownership with

the Israeli government, and the Israeli government could in turn transfer ownership to such third

parties in derogation of Plaintiffs’ rights. Unless this Court acts promptly to restrain the

Defendants and return the parties to the status quo ante, there is a substantial likelihood that

Defendants’ efforts will succeed and result in the total loss of Plaintiffs’ interests, causing

incalculable damage to Plaintiffs and third parties.

II. SUMMARY OF MATERIAL FACTS

A. The Project

In 2006, PetroMed obtained interests in two offshore petroleum drilling licenses (the

“Licenses”) and one offshore petroleum exploration permit (the “Permit”) in the Project Area.

See Pls.’ Verified Compl. ¶¶ 29−30 (hereinafter “Compl.”).1 In order to maintain ownership

over the Licenses and Permit, PetroMed was required to (1) make various showings of financial

viability, and (2) satisfy a series of benchmarks demonstrating continual progress toward the

ultimate goal of hydrocarbon extraction. Id. ¶¶ 22−26. One key step in the process was

obtaining underwater seismographic surveys, which can cost millions of dollars. Id. ¶ 34.

The PetroMed Defendants have estimated the petroleum reserves associated with the

Licenses and Permit to have a potential value of over $40 billion. Id. ¶ 36. Prior to the

transaction discussed below, PetroMed had a 95.5% ownership interest in the Licenses and

1
Since filing the Complaint, Plaintiffs have identified an omission and two errors in the Complaint. The
omission was that no notarization accompanied the verification of the Complaint. Exhibit 1 hereto is
contains a notarized copy of the verification. Additionally, paragraphs 71 and 84 of the Complaint
mistakenly refer to events having taken place in January 2009. Such events actually took place in January
2010.

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Permit. Id. ¶¶ 29−30. East Med holds a 4.5% ownership interest in the same. Id. East Med

and/or its chief executive officer, Defendant Peace, own approximately ten percent of the

outstanding shares of PetroMed. Id. ¶¶ 49, 113.

B. PetroMed Turns to Plaintiffs to Rescue the Project from Insolvency

By mid-2009, PetroMed was insolvent and thus at risk of losing the Licenses and Permit.

Id. ¶ 39. PetroMed had been unable to raise the capital required to pay millions of dollars of

debts and future obligations required of it under the Licenses and Permit. See id. ¶¶ 37−39.

Thus, PetroMed sought the assistance of Plaintiff ITC’s managing member and president, H.

Howard Cooper (“Mr. Cooper”), a resident of Steamboat Springs, Colorado, who has substantial

experience in developing petroleum resources in the United States and abroad. Id. ¶¶ 40−41.

PetroMed first contacted Mr. Cooper through its investment banker, Amy Diamond. Id. ¶ 41.

After lengthy negotiations, the parties settled on a transaction (the “Option Agreement”)

whereby PetroMed would transfer its interests in the Licenses and Permits to Plaintiff IPC, a

corporate entity jointly formed by Mr. Cooper and Bontan Corporation (“Bontan”). Id.

¶¶ 43−45. Bontan is a public company that the parties believed could serve as a vehicle through

which capital to sustain the Project could be raised. Id. ¶ 45. IPC is managed by Plaintiff ITC, a

Colorado limited liability company. Id. ¶¶ 12−13.

C. PetroMed Irrevocably Grants IPC Ownership Over Its Interests in the Project

The Option Agreement was negotiated at length by sophisticated corporate counsel on

both sides. Id. ¶ 43. The Option Agreement is governed by New York law. Id. ¶ 60. As with

virtually all agreements between sophisticated parties, the Option Agreement contains: (1) a

lengthy series of representations and warranties made by each party; and (2) an integration

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clause, whereby each party disclaims reliance on statements or promises made by the other party

prior to the execution of the agreement. See Ex. 1 to Compl., Option Agreement §§ 3.1, 6.9

(hereinafter, “Option Agreement”). The Option Agreement also requires that PetroMed use its

best efforts to assist Plaintiffs in obtaining the Israeli government’s approval of the transfer of

the Licenses and Permits from PetroMed to IPC. Id. § 5.5.

On October 15, 2009, ITC and PetroMed executed the Option Agreement and, as

contemplated by the agreement, ITC assigned its rights and obligations thereunder to IPC. The

Option Agreement granted ITC or its assignee an “irrevocable option” to purchase PetroMed’s

interests in the Licenses and Permit in exchange for agreed-upon consideration. Id. § 2.1;

Compl. ¶ 43. At a shareholder’s meeting convened by PetroMed for the purpose of seeking

shareholder approval of the transfer of the Licenses and Permits to IPC, Mr. Peace voted all

4,726,650 of his PetroMed shares in favor of the transfer. Compl. ¶¶ 48−49. Mr. Peace’s vote

was consistent with his numerous prior communications in which he voiced his full support for

the transfer. Id. ¶¶ 111−18.

Thereafter, on or about November 18, 2009, IPC exercised its “irrevocable option” and

furnished the agreed-upon consideration to PetroMed. Id. ¶ 52; see also Option Agreement

§ 2.1. In return, PetroMed executed a Bill of Sale and Deeds of Transfer whereby it agreed,

“irrevocably and unconditionally,” to “sell, assign, transfer and convey” to ITC, “free and clear

of all encumbrances,” its interests in the Licenses and Permit. Compl. ¶ 52; see also Ex. 2 to

Compl., Assignment, Bill of Sale and Assumption (hereinafter “Bill of Sale”) and Ex. 3 to

Compl., Deeds of Transfer (hereinafter “Deeds”).

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Also on November 18, 2009, Defendant Amir (PetroMed’s chief executive officer) and

Defendant Durham (a PetroMed director) both signed individual consulting agreements with IPC

in which each personally agreed to use his best efforts to assist in the transfer approval process,

and to protect confidential and proprietary information concerning the Licenses and Permit

which they possessed by virtue of their positions in the company. Compl. ¶¶ 65−66; see also Ex.

4 to Compl., Amir Consulting Services Agreement §§ 2−3, 6 (hereinafter “Amir Agreement”),

and Ex. 5 to Compl., Durham Consulting Services Agreement §§ 2−3, 6 (hereinafter “Durham

Agreement”). The Consulting Agreements are governed by Colorado law. Amir Agreement

§ 12; Durham Agreement § 12.

After the transfer of the Licenses and Permit, Plaintiffs devoted hundreds of man-hours

and in excess of $3 million to develop their interests in the Project. Compl. ¶¶ 59, 95, 119. In

addition to devoting their time, energy, and money to meeting various requirements set by the

Israeli Government in order to maintain ownership of the Licenses and Permit, Plaintiffs also

devoted significant efforts to courting potential investors capable of infusing the Project with

much-needed capital. See id.

D. Defendants Begin to Rethink and Then Actively Breach the Irrevocable Transfer

1. East Med and Mr. Peace Withdraw Their Prior Support for the Transfer

Shortly after the closing occurred on IPC’s exercise of its option in November 2009, IPC

paid $2 million towards the costs of the seismic studies—in addition to the $1 million it paid to

PetroMed to bring it out of insolvency. Id. ¶ 100. Since that time, IPC has repeatedly requested

seismic data in the possession of East Med and Mr. Peace, who had possession of such data due

to consulting work East Med had performed for PetroMed. Id. Notwithstanding numerous

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requests from IPC to East Med to deliver such data to IPC, as the owner of all rights to the data

under the Bill of Sale and Deeds of Transfer, East Med and Mr. Peace have wrongfully refused

to deliver such data to IPC. Id.

On December 11, 2009, despite having voted his 4,726,650 shares in favor of the

transfer, having repeatedly stated his support for the transfer, and having received over $115,000

out of the agreed-upon consideration for the transfer, Mr. Peace caused East Med to send a letter

to Plaintiffs claiming that East Med was exercising a purported right—under an alleged contract

with non-party PetroMed PLC—to acquire the interests in the Licenses and Permit that

Defendant PetroMed Corp. had sold and conveyed to IPC on November 18, 2009. Id. ¶ 101.

Plaintiffs promptly rejected Mr. Peace’s belated and improper assertion of claimed rights

under a contract to which neither Plaintiffs nor Defendant PetroMed was a party. Id. ¶ 120.

Nonetheless, on January 4, 2010, Mr. Peace caused East Med to sue IPC, ITC, Mr. Cooper, and

Bontan in this Court, asserting that East Med had a right to unwind a deal for which its CEO had

voted, voiced his support, and from which he had personally profited. Id. ¶ 121. All defendants

in the federal case (1:10-cv-00007-RPM) promptly moved to dismiss based on a variety of

fundamental defects, including a lack of subject matter jurisdiction. Id. ¶ 122. Shortly after

those motions were filed, on February 11, 2010, East Med conceded defeat in the matter and

moved to dismiss its own case, beseeching the court not to impose statutory costs, attorneys fees,

or Rule 11 sanctions. Id. ¶ 124.

Notwithstanding the defects of the federal case, East Med’s lawsuit put a cloud over

Plaintiffs’ title to the Licenses and Permits. See id. ¶¶ 45, 69, 102. Plaintiffs believe that the

goal of the lawsuit was to deter potential investors from investing in the Project. See id.

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2. PetroMed’s Purported “Rescission” of the Transfer

Shortly after the lawsuit was filed, Mr. Cooper traveled to Jerusalem to appear on behalf

of Plaintiffs at a January 18, 2010 meeting with the Israeli Petroleum Commissioner (the

“Commissioner”), who has authority over the issuance, transfer, and termination of licenses and

permits. Id. ¶¶ 33, 71. The purpose of the meeting was to discuss IPC’s applications to have the

Israeli government (1) transfer the Licenses and Permits from PetroMed to IPC, and (2) convert

the Permit into one or more licenses. See id. ¶¶ 30, 33.

Plaintiffs believe that, in derogation of IPC’s rights, PetroMed, and East Med also filed,

on January 18, 2010, an application with the Commissioner to convert the Permit to one or more

drilling license in their names, rather than that of IPC. Id.¶ 31.

On January 17, 2010, Mr. Durham sent out a two-sentence email, on behalf of himself,

Mr. Amir, and PetroMed, titled “PetroMed Corp Rescision [sic] Notice.” Id. ¶ 71. The email

was directed to the Commissioner, as well as to Mr. Cooper and Bontan’s chief executive officer.

Id. In the email, PetroMed purported “to exercise its right to rescind the IPC contract dated

November 18, 2009” and asserted that it would “seek damages based on your

misrepresentations.” Id. The email did not offer any factual or legal foundation for the claimed

unilateral “right to rescind,” nor did it identify a single alleged “misrepresentation.” Id.

Neither the Option Agreement, nor any associated conveyances between IPC and

PetroMed, nor any principle of law grants PetroMed this claimed unilateral “right to rescind.”

See generally Option Agreement, Bill of Sale, Deeds. Instead, as detailed above, the parties’

contract expressly and repeatedly states that both the option to transfer and the transfer itself

were irrevocable. Option Agreement § 2.1; Bill of Sale § 2; Deeds ¶ 1.

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Plaintiffs’ meeting with the Commissioner did not go well due to the confusion caused by

PetroMed’s purported rescission notice. Compl. ¶ 71. By contrast, through Mr. Amir, Mr.

Peace, and others acting in concert with them, PetroMed and East Med had a series of apparently

successful meetings and other communications with the Commissioner in which they promoted

the position that, despite the assignment and transfer of Licenses and Permits, PetroMed, and

East Med were the rightful owners of the Permit and Licenses, not IPC. Id. ¶¶ 78−80. Mr. Amir,

Mr. Peace, and the others acting in concert with them further promoted the position that the

Commissioner should therefore not transfer the Permit and Licenses to IPC or act on any other of

IPC’s requests. Id. The first such meeting of which Plaintiffs are aware transpired on January

18, 2010. Id. ¶ 79. Messrs. Amir and Peace brought a reportedly wealthy American investor

along with them to this meeting. Id. These meetings and communications violated numerous

provisions of PetroMed’s, Mr. Amir’s, and Mr. Durham’s contracts, not the least of which was

their promise to use their best efforts to assist in the transfer of the Licenses and Permit to IPC.

Option Agreement § 5.5; Amir Agreement §§ 2−3; Durham Agreement §§ 2−3. For their part,

Mr. Peace’s communications were directly contrary to Mr. Peace’s and East Med’s prior support

for the transfer, upon which IPC and ITC had reasonably and justifiably relied in closing the

deal. Compl. ¶ 119; see also id. ¶¶ 111−18.

These ex parte communications have continued to the date of this Motion. See id. ¶ 80.

The Commissioner has not acted on Plaintiffs’ applications, and has informed IPC that he will

not proceed to process IPC’s applications due to actions taken by the PetroMed Defendants in

concert with East Med. Id. ¶ 33.

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On January 19, 2010, PetroMed sued ITC, Mr. Cooper, and Bontan in federal court in the

State of Washington, asserting a variety of claims, including allegations of fraud under federal

securities laws. Id. ¶ 98. ITC and Mr. Cooper have moved to dismiss that lawsuit on a number

of grounds, including that the Washington Court lacks personal jurisdiction over Mr. Cooper and

ITC because they have no meaningful contacts with the state and that the securities claims fail to

state a claim. Id. ¶ 99. PetroMed has yet to respond to the motion to dismiss. Id. ITC and Mr.

Cooper have not otherwise engaged PetroMed in that lawsuit because ITC and Mr. Cooper

cannot take any action that might be construed as a waiver of their objection to the absence of

personal jurisdiction in Washington. By contrast, the State of Colorado is the only forum where

all Defendants have purposefully availed themselves—through ongoing business relationships

with forum residents, tortious conduct directed at forum residents, or consent to Colorado’s

jurisdiction. Compl. ¶¶ 4−10.

E. Plaintiffs Face Immediate and Irreparable Injury

At the same time as they were engaging in ex parte meetings and communications with

the Commissioner, Mr. Amir and PetroMed—in concert with Mr. Peace and East Med—have

been shopping IPC’s Licenses and Permit to potential investors. PetroMed’s agent, Ms.

Diamond, has played an instrumental role in these solicitations. Id. ¶¶ 81−82. Such actions are

directly contrary to PetroMed’s best efforts obligations, as well as Mr. Amir’s confidentiality and

best efforts obligations. Option Agreement § 2.1; Amir Agreement §§ 2−3, 6.

PetroMed’s and East Med’s actions—asserting unfounded rights to purchase or rescind,

refusing to turn over seismic data, conducting ex parte meetings with the Commissioner,

soliciting third-party investors, and filing lawsuits—are aimed at frustrating the irrevocable

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transfer of the Licenses and Permit to IPC, preventing IPC from raising capital to finance the

Project, and permitting Defendants to reap the benefits of the Permit and Licenses at IPC’s and

ITC’s expense.

F. Plaintiffs Attempt to Resolve Their Dispute with PetroMed

Beginning on or about February 2, 2010, Plaintiffs had engaged PetroMed in intensive

and initially promising negotiations to settle their dispute. Compl. ¶ 73. On February 5, 2010,

PetroMed agreed to and did in fact send an email to the Commissioner in which it purported to

“withdraw” its rescission of the transfer of the Permit but not that of the Licenses. 2 Id. On or

about February 9, 2010, negotiations broke down, forcing Plaintiffs to seek the relief requested

herein. Id.

In sum, PetroMed’s extra-judicial assertion of a unilateral “right to rescind” the transfer

of the Licenses and Permits must be subjected to immediate judicial scrutiny. Absent such

scrutiny, IPC faces the risk of immediate and irreparable harm, in a number of potential forms:

ƒ First, there is an immediate risk that the Commissioner will revoke the Licenses and

Permit, and offer them for transfer or resale. The risk is magnified by the fact that

Plaintiffs are embroiled in this dispute, and are thus not able to focus their time, energy,

and resources on developing the Licenses and Permit, which may soon expire of their

own accord if various benchmarks thereunder are not satisfied.

ƒ Second, there is an immediate risk that PetroMed will attempt to transfer its claimed

interest in the Licenses and Permits to an investor—either one that acquires a controlling

2
Such actions suggest that PetroMed believes that it can pick and chose its entitlements and IPC’s
obligations at will.

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interest in PetroMed or East Med, or one that obtains transfer of the Licenses and Permit

through an asset purchase agreement. Either way, Plaintiffs will be irreparably harmed

because they will have lost their interest in the business of developing the Project.

ƒ Third, notwithstanding the Consulting Agreements, Messrs. Amir and Durham are

disclosing confidential information concerning the development of the Licenses and

Permit in connection with their meetings with potential investors. Once disclosed,

confidential information is forever available to competitors and other third parties.

ƒ Fourth, Plaintiffs’ reputation is being irreparably harmed. Defendants are besmirching

Plaintiffs in meetings with the Israeli government and potential investors. Absent an

injunction, monetarily inestimable reputational damage will be wrought.

ƒ Finally, any doubt as to Plaintiffs’ imminent and irremediable harm—and their

entitlement to injunctive relief—is erased by Section 6.4 of the Option Agreement, which

provides that:

Each of the Parties hereto hereby recognizes and acknowledges that a breach by
any other Party (the “Breaching Party”) of any covenants or other commitments
contained in this Agreement will cause the non-Breaching Party to sustain injury
for which it would not have an adequate remedy at law for money damages.
Therefore, each of the Parties hereto hereby agree that, in the event of any such
breach, the non-Breaching Party shall be entitled to the remedy of specific
performance of such covenants or commitments and provisional, interlocutory
and permanent injunctive and other equitable relief . . . , and each of the Parties
hereto further hereby agrees to waive any requirement for the securing or posting
of any bond in connection with the obtaining of any such injunctive or other
equitable relief.

Option Agreement § 6.4 (emphases added).3

3
Plaintiffs note that, through the present motion they seek only prohibitory relief, rather than the full
panoply of mandatory injunctive relief to which they are entitled under the Option Agreement. Plaintiffs

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Unless this Court steps in and immediately orders (1) PetroMed to cease its unjustified

repudiation of the transfer and its ongoing breach of the best-efforts clause, (2) Messrs. Amir and

Durham to cease their ongoing breaches of their respective contract’s best-efforts and

confidentiality clauses; and (3) East Med and Mr. Peace to cease their ongoing interference with

Plaintiffs’ contractual rights and business prospects, the deal memorialized in the Option

Agreement, Bill of Sale, and Deeds of Transfer will be rendered a nullity.

III. ARGUMENT

Like a motion for a preliminary injunction, a motion for a TRO4 should issue when the

movant shows: (1) it will suffer irreparable harm if the injunction is not granted, (2) its

threatened injury outweighs the harm caused to the opposing party as a result of the injunction,

(3) the injunction is not adverse to the public interest, and (4) it has a substantial likelihood of

success on the merits of the case. See Port City Props. v. Union Pac. R.R. Co., 518 F.3d 1186,

1189−90 (10th Cir. 2008). Generally, as in this case, a TRO preserves the status quo; that is, the

last existing state of peaceable, uncontested conditions that preceded the pending controversy.

Schrier v. Univ. of Colo., 427 F.3d 1253, 1260 (10th Cir. 2005).

Although Plaintiffs, as discussed below, have more than satisfied all four factors for

temporary relief, it should be noted that where, as here, the movant makes a strong showing on

the first three factors, the fourth factor is relaxed to require the movant to raise only questions

sufficiently serious and substantial as to make them fair ground for litigation and thus deserving

intend to seek such mandatory relief in connection with their forthcoming motion for preliminary
injunction.
4
A motion for a TRO is analyzed using the same four factors as a motion for a preliminary injunction.
See, e.g., Wiechmann v. Ritter, 44 F. App’x 346, 347 (10th Cir. 2002); Georgacarakos v. Wiley, 07-cv-
01712-MSK-MEH, 2008 WL 4216265, at *26 (D. Colo. Sept. 12, 2008).

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of more deliberate inquiry. See Greater Yellowstone Coal. v. Flowers, 321 F.3d 1250, 1255−56

(10th Cir. 2003).

As set forth below, each of the above-described factors favors entry of the injunctive

relief that the Plaintiffs request.

A. Danger of Immediate and Irreparable Harm

Plaintiffs will be immediately and irreparably harmed if the status quo is not restored.

Specifically, Plaintiffs will be irreparably harmed because they will: (1) lose their business—the

development of an immensely valuable petroleum resource—before the lawfulness of

PetroMed’s purported rescission and East Med’s claimed superior interest can be determined; (2)

suffer the loss of confidential proprietary information that, once released, will be immeasurably

diminished in value to them; (3) be unable to recover on any ultimate money judgment against

Defendants, given the immense value of the resources at issue; (4) have their good reputation in

the international oil and gas community tarnished; and (5) be denied the express protections of

the Option Agreement concerning injunctive relief. Plaintiffs analyze each ground for a finding

of irreparable harm in turn.

First, this Court has granted injunctions where, as here, the non-movant sought to

terminate a contract before the lawfulness of such termination could be determined. In Bray v.

QFA Royalties, Judge Kane granted injunctive relief to bar a franchisor from terminating

franchisees based on evidence that the decision to terminate the franchise agreements was

contrary to the terms of such agreements. 486 F. Supp. 2d 1237, 1253 (D. Colo. 2007). An

injunction was necessary because, otherwise, the terminating franchisor “would, in effect, be

given the full benefit of its defense to [wrongful termination] claims without having prevailed on

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the claims.” Id. at 1247. Moreover, the Court held that the “‘black eye’ of termination itself is

an injury that cannot be adequately remedied by damages.” Id. at 1248 n.6.

This case falls in line with Bray. Here, PetroMed’s purported rescission of the Option

Agreement and the transfer of the Licenses and Permit is contrary to the terms of the parties’

agreement, which expressly and repeatedly characterized the transfer as final and irrevocable. If

an injunction does not issue, PetroMed and East Med will accomplish termination of the transfer

without ever having prevailed in court on their respectively claimed rights—i.e., PetroMed on its

claimed right to rescind, and East Med on its claimed right to unwind the Option Agreement.

Neither PetroMed nor East Med should be allowed to receive, in effect, the full benefit of these

claimed rights without first having proven the existence thereof. See Bray, 486 F. Supp. 2d at

1247.

Given both the Commissioner’s response to Defendants’ claimed rights and Defendants’

efforts to engage new investors, Plaintiffs’ last and best hope for preserving their well-

documented rights in the Licenses and Permit is an interim order restoring the parties to the

status quo ante. See Bray, 486 F. Supp. 2d at 1248 n.6 (citing Wisdom Import Sales Co. LLC v.

Labatt Brewing Co. Ltd., 339 F.3d 101, 114 (2d Cir. 2003), for the proposition that “money

damages were an inadequate remedy for the loss of a contractual right to control a business”));

Eyeticket Corp. v. Unisys Corp., 155 F. Supp. 2d 527, 549 (E.D. Va. 2001) (holding that

injunction was necessary to prevent the plaintiff from going out of business before case was

resolved). An order from this Court is the only thing that can loosen the stranglehold that

Defendants have on Plaintiffs’ chances of regaining their rightful ownership of their petroleum

business.

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Second, there is the risk of the loss of confidential information. As Messrs. Amir and

Durham both recognized in their consulting agreements, they have access to and awareness of

sensitive confidential information concerning the Project. Amir Agreement § 6; Durham

Agreement § 6. As such, the agreements bind Messrs. Amir and Durham to safeguard such

information. Id. Nonetheless, both PetroMed and Mr. Amir have been using this confidential

information to court investors and wrestle the Licenses and Permits back from their rightful

owner, IPC. A TRO putting a stop to such misconduct is warranted. See, e.g., Am. Express Fin.

Advisors v. Scott, 955 F. Supp. 688, 693 (N.D. Tex. 1996) (noting loss of confidential

information is an irreparable injury because it is difficult to quantify and verify the extent of the

harm after disclosure).

Third, in light of the potentially immense value of the hydrocarbons associated with the

Project, there is little chance that any Defendant will ultimately be able to pay money damages

for those aspects of the harm to Plaintiffs that might be satisfied by money damages alone. See

Tri-State Generation & Transmission Ass’n, Inc. v. Shoshone River Power, Inc., 805 F.2d 351,

355 (10th Cir. 1986) (“Difficulty in collecting a damage judgment may support a claim of

irreparable injury.”); see also Alvenus Shipping Co., Ltd. v. Delta Petroluem Ltd., 876 F. Supp.

482, 487 (S.D.N.Y. 1994) (granting injunction after finding plaintiff demonstrated irreparable

harm as nothing in the record suggested that defendant could pay plaintiff’s likely future award);

Crest Color, 835 F. Supp. at 735.

Fourth, while Plaintiffs have already suffered the “black eye” to their reputation caused

by PetroMed’s unilateral assertion of rescission, as well as Defendants’ joint efforts to exercise

dominion over the Licenses and Permit, further damage to Plaintiffs’ business reputation must be

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stopped. See Med. Shoppe Int’l Inc. v. SB.S. Pill Dr., Inc., 336 F.3d 801, 805 (8th Cir. 2003)

(finding irreparable injury because “[h]arm to reputation and goodwill is difficult, if not

impossible, to quantify in terms of dollars”); accord Bray, 486 F. Supp. 2d at 1248 n.6. Nothing

short of an order from this Court can begin to remedy the injuries Defendants’ conduct has

inflicted on Plaintiffs’ reputation.

Finally, as noted above, the Option Agreement provides that the victim of a breach

thereof will be made whole only with injunctive relief, not damages. Thus, the Option

Agreement gives the non-breaching party the right to provisional, interlocutory, and permanent

injunctive relief to put a stop to violations of the Agreement—without a bond requirement.

Here, PetroMed has committed two fundamental breaches. It has reneged on its promise of an

irrevocable transfer, and it has broken its promise to use its best efforts with respect to the Israeli

government. Since PetroMed itself has agreed that such breaches would cause IPC “to sustain

injury for which it would not have an adequate remedy at law for money damages,” it is beyond

doubt that Plaintiffs have shown imminent and irreparable harm. See, e.g., Ticor Title Ins. Co. v.

Cohen, 173 F.3d 63, 69 (2d Cir. 1999) (stating that a contractual provision entitling non-

breaching party to injunctive may serve as an admission by the breaching party of irreparable

harm).

B. Balance Of Equities Favors The Injunction

Any balancing of the equities tips sharply in favor of a TRO. If a TRO issues, PetroMed

and East Med will be temporarily enjoined from representing to third parties that the transfer of

the Licenses and Permit is invalid, and will be called promptly to this Court for a hearing in

which they will have a full and fair opportunity defend their claim that the transfer is invalid. If,

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however, an injunction does not issue, PetroMed and East Med will be free to continue to

repudiate and disparage Plaintiffs’ rights under the plain language of the Option Agreement, Bill

of Sale, and Deeds of Transfer. Consequently, as detailed at length above, Plaintiffs would stand

to lose their entire business. The loss of Plaintiffs’ business venture weighs much more heavily

than fourteen days of restraint on the part of Defendants. See, e.g., Score Board, Inc. v. Upper

Deck Co., 959 F. Supp. 234, 240 (D.N.J. 1997) (finding that harm to defendants caused by

injunction was immaterial where injunction would merely require defendants to honor the terms

of the contract at issue in the case).

C. Injunction Would Not Disserve the Public Interest

The requested injunction would not disserve the public interest. Indeed, it has been

recognized that “[i]t is a rare preliminary injunction motion where the public interest plays any

role in the outcome.” Mason v. Minn. State High Sch. League, No. 03-6462, 2003 WL

23109685, at *3 (D. Minn. Dec. 30, 2003). Here, to the extent that the public interest is salient,

Plaintiffs believe that it is best served by protecting expressly stated contractual rights of a

Colorado resident over illogical, unlawful assertions of an implied unilateral right of rescission

by a foreign corporation. Additionally, the public interest will be served by a TRO because it

will aid in the removal of the main obstacles that have caused the Project to grind to a halt and

will allow the development of an immensely valuable resource in an area of the world and in the

country of an ally that have strategic national importance to the United States.

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D. Likelihood of Success on the Merits

In light of the clarity of Plaintiffs’ contractual rights, Plaintiffs have clearly met their

burden, regardless of whether it is standard or relaxed.5 In the interest of brevity, in connection

with this prong of the inquiry, Plaintiffs will focus on only three of their claims: the claim for

breach of contract against PetroMed, and the two claims for tortious interference against East

Med and Mr. Peace.

1. Breach of Contract by PetroMed

As to PetroMed, its claimed unilateral “right to rescind” does not exist—either under the

relevant contract, associated conveyances, or the relevant law. Neither the Option Agreement,

the Bill of Sale, nor the Deeds of Transfer grant PetroMed any right to rescind. On the contrary,

these documents expressly and repeatedly state they are “irrevocable” and shall bind the parties

“forever.”

Nor does the law grant PetroMed a unilateral right to rescind. As noted above, the

Option Agreement at issue here is governed by New York law. Under New York law, rescission

is not a right, it is a remedy. See, e.g., Mina Inv. Holdings Ltd. v. Lefkowitz, 16 F. Supp. 2d 355,

362 (S.D.N.Y. 1998) (discussing the equitable remedy of rescission). Rescission is not the

province of a party to a contract; it is the power of a court sitting in equity. To hold otherwise

would bring the law of contracts to its knees.

5
Because Plaintiffs have demonstrated that the factors of irreparable injury, balance of harms, and public
interest all tip decidedly in favor of injunctive relief, Plaintiffs are entitled to a relaxed requirement for
showing success on the merits (i.e., a showing of only that they have raised questions sufficiently serious
and substantial as to make them fair ground for litigation and thus deserving of more deliberate inquiry).
Greater Yellowstone Coal., 321 F.3d at 1255−56.

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On similar facts to those presented here, the United States District Court for the Southern

District of New York brought this point home:

In the context of this fully executed purchase agreement on both sides,

“rescission” by definition could not be accomplished by simply a unilateral
demand for or a declaration of rescission by [the plaintiff], but required bilateral
action of the parties to place both sides in status quo or the relative positions they
occupied prior to the sale and purchase of the partnership units. Hence,
“rescission” of [the plaintiff’s] executed purchase agreement (by retransfer of his
units to the partnership and a return of his purchase money), obviously, never
occurred . . . .

Schibuk v. Poinciana-Regency Ltd. P’shp, 764 F Supp. 878, 882 (S.D.N.Y. 1991); accord Pot

Luck, LLC, v. Freeman, No. 06 Civ. 10195, 2009 WL 693611, at *3 (S.D.N.Y. Mar. 10, 2009)

(rejecting plaintiff’s attempt to rescind agreement granting “irrevocable right” to defendant);

Consol. Edison Co. of N.Y., Inc. v. Gen. Elec. Co., 161 A.D.2d 428, 429 (N.Y. App. Div. 1990)

(same).

Thus, it should come as no surprise that courts have seen fit to enjoin parties that have

purported to unilaterally “rescind” their own binding agreements. See, e.g., Sauer-Getriebe KG

v. White Hydraulics, Inc., 715 F.2d 348, 351 (7th Cir. 1983) (reversing trial court for its refusal

to enjoin defendant’s attempt to repudiate contract by transferring the very property at issue in

defendant’s dispute with plaintiff); see also Sedie v. Crest Color, Inc., 835 F. Supp. 732, 735

(S.D.N.Y. 1993) (granting injunction preventing defendant from transferring assets where

plaintiff likely would not be able to collect on judgment if such assets were sold).

There is a reason why PetroMed did not seek a judicial decree of rescission before

asserting its purported “right to rescind”—no just tribunal would make such a decree. It is true

that fraud in the inducement may “justify the intervention of equity to rescind a contract,”

Lefkowitz, 16 F.Supp.2d at 362, and that such a theory appears to be the basis for the PetroMed’s

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rescission notice, as well as PetroMed’s complaint in Washington. The problem with this theory,

however, is that PetroMed cannot establish that it was fraudulently induced to enter into the

Option Agreement.

As noted above, the Option Agreement contains an integration clause, whereby PetroMed

expressly disclaimed the right to rely on any promises or statements by Plaintiffs that preceded

the agreement’s execution. Tellingly, none of the misrepresentations alleged in PetroMed’s

Washington complaint is premised on the actual representations, warranties, or other promises

memorialized by IPC in the Option Agreement. Compare Option Agreement, with Ex. 7 to

Compl., PetroMed’s Washington Complaint ¶¶ 18−28. Thus, to the extent PetroMed’s claimed

“right to rescind” is based on alleged misrepresentations that preceded the Option Agreement,

such a claim is barred by the integration clause. See, e.g., ATSI Commc’ns, Inc. v. Shaar Fund,

Ltd., 493 F.3d 87, 105 (2d Cir. 2007) (“Where the plaintiff is a sophisticated investor and an

integrated agreement between the parties does not include the misrepresentation at issue, the

plaintiff cannot establish reasonable reliance on that misrepresentation.”); Emergent Capital Inv.

Mgmt., L.L.C. v. Stonepath Group, Inc., 165 F.Supp.2d 615, 622 (S.D.N.Y. 2001) ( “[A] fraud

claim will not stand where the [integration] clause was included in a multi-million dollar

transaction that was executed following negotiations between sophisticated business people and

a fraud defense is inconsistent with other specific recitals in the contract”); In re MarketXT

Holdings Corp., 2006 WL 2864963, at *13 (Bankr. S.D.N.Y. Sept. 29, 2006) (rejecting fraud

claim where party was “sufficiently sophisticated and capable to protect itself against fraud by

demanding that [counterparty] make further representations” in contract).

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To the extent that PetroMed’s claimed “right to rescind” is based on alleged

misrepresentations that occurred after the execution of the Option Agreement, such a claim is

entirely irrelevant. The Option Agreement gave IPC the “irrevocable option” to purchase

PetroMed’s Licenses and Permits. Whatever Plaintiffs may be alleged to have said after

receiving such an option is a red herring.

What matters is that IPC exercised its irrevocable option, furnished the agreed-upon

consideration, accepted transfer of the Licenses and Permits, and has substantially changed its

position in reliance on the transfers. Absent a final Court order in its favor, PetroMed’s

purported rescission is not legally effective. Schibuk, 764 F Supp. at 882. PetroMed continues

to be bound by the sale and transfer of the Licenses and Permit—not to mention its promise to

use its best efforts to assist Plaintiffs in obtaining the Israeli government’s approval of the

transfer of the same from PetroMed to IPC. That PetroMed is in breach of these obligations

could not be more clear.6

In sum, Plaintiffs have a substantial likelihood of prevailing on their claim for breach of

contract.

2. Tortious Interference by East Med and Mr. Peace

East Med and Mr. Peace are acting in concert with PetroMed to undermine the transfer of

the Licenses and Permit. Based on such conduct, Plaintiffs have a substantial likelihood of

succeeding on the merits against East Med and Mr. Peace.

6
Under Rule 65(d)(2), a TRO enjoining PetroMed is effective against its “officers, agents, servants,
employees, and attorneys.” Thus, any injunction against breaches of contract by PetroMed constitutes an
injunction against its officers, including Messrs. Amir and Durham. Any breaches by Mr. Amir or Mr.
Durham of the best-efforts or confidentiality clauses in their respective consulting agreements would also
be banned by an injunction against further breaches by PetroMed of the Option Agreement.

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Tortious interference “occurs when the defendant, not a party to the contract, induces the

third party to breach the contract, or interferes with the third party’s performance of the

contract.” Colo. Nat’l Bank of Denver v. Friedman, 846 P.2d 159, 170 (Colo. 1993).

East Med and its CEO, Mr. Peace, clearly knew of the existence of the Option

Agreement, Bill of Sale, and Deeds of Transfer, since Mr. Peace repeatedly stated his support for

the transaction prior to its closing. Indeed, Mr. Peace voted his ten percent interest in PetroMed

in favor of the transaction. Notwithstanding that awareness, Mr. Peace and East Med have acted

in concert with PetroMed in breach of the transfer of the Licenses and Permit by, among other

things, (1) soliciting investors in the Project as if it were the sole property of East Med and

PetroMed, and (2) engaging in meetings and other communications with the Commissioner in

which East Med and PetroMed asserted that IPC’s interests in the Project are invalid, and thus

the Licenses and Permit should not be transferred to IPC.

In light of these acts, there is a substantial likelihood that Plaintiffs will prevail on a claim

that East Med and Mr. Peace have tortiously interfered with Plaintiffs’ rights under the Option

Agreement, Bill of Sale, Deeds of Transfer, Licenses, and Permit.

Similarly, tortious interference with prospective business relations occurs when the

defendant intentionally prevents the plaintiff and a third party from entering into or continuing a

prospective relation. Amoco Oil Co. v. Ervin, 908 P.2d 493, 500 (Colo. 1995).

As noted above, Mr. Peace previously endorsed, both in writing and by voting, the

transfer of the Licenses and Permit. Nonetheless, Mr. Peace has caused East Med to file a

lawsuit in Colorado in which he has claimed that East Med’s rights under a contract with

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PetroMed PLC somehow trumped the transfer effectuated by the Option Agreement.7 In turn,

this lawsuit caused investors to back out of prospective deals with IPC. And only recently, Mr.

Peace and East Med conceded defeat in the lawsuit, praying that the Court not enter an award of

sanctions costs, and fees. Additionally, East Med and Mr. Peace continue to refuse to turn over

confidential seismic data related to the Project that they have in their possession.

Moreover, by meeting and communicating with the Commissioner in concert with

PetroMed, Mr. Peace and East Med have interfered with Plaintiffs’ prospective business

advantage with the Israeli government. Absent the joint conduct of PetroMed and East Med, the

transfer of the Licenses and Permit would have long since been approved, and the Plaintiffs

would be working to satisfy the various benchmark requirements under those government-

granted property interests.

Thus, there is a substantial likelihood that Plaintiffs will prevail on a claim that East Med

and Peace have tortiously interfered with Plaintiffs’ prospective contractual relations with both

investors and the Commissioner.

E. No Bond Is Necessary In This Case

Pursuant to the Option Agreement, PetroMed has clearly waived any bond requirement.

Plaintiffs submit that Mr. Peace’s substantial ownership interest in PetroMed and his repeated

approvals of the Option Agreement, Bill of Sale, and Deeds of Transfer should estop him, both

individually and in his capacity as East Med’s CEO, from asserting any entitlement to the

payment of a bond.

7
To the extent any such rights actually exist, Mr. Peace should be estopped from asserting these rights
based on his prior conduct. See generally Emery Mining Corp. v. Sec’y of Labor, 744 F.2d 1411, 1417
(10th Cir. 1984).

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Where, as here, an agreement exists between sophisticated parties and the party opposing

the injunction has not articulated any reason to disregard the parties’ express agreement to waive

a bond, courts will enforce the bond waiver. See Dominion Video Satellite, Inc. v. EchoStar

Satellite Corp., 270 F. Supp. 2d 1205, 1216 (D. Colo. 2003), rev’d on other grounds by 356 F.3d

1256 (10th Cir. 2004) (enforcing parties’ bond waiver stating that a “clear ex ante agreement that

injunctive relief should be available to either party to enforce the exclusivity and other provisions

of the Agreement without the need for a bond clearly allocated the risk of loss from an

improvidently granted injunction to the party enjoined”); Private One of N.Y., LLC v. JMRL

Sales & Serv., Inc., No. 13411/08, 2008 WL 4482406, *10 (N.Y. Sup. Ct. Oct. 6, 2008) (same).

Further, PetroMed believes that the unequivocal, irrevocable terms of the Option

Agreement, Bill of Sale, and Deeds of Transfer establish an “extraordinarily high” likelihood of

success on the merits. This consideration militates in favor a waiver of any bond whatsoever.

See Malcolm v. Reno, 129 F. Supp. 2d 1, 11−12 (D.D.C. 2000) (collecting cases).

IV. CONCLUSION

Based on all of the foregoing, Plaintiffs are entitled to a TRO. Plaintiffs’ rights to 95.5%

interests in the Licenses and the Permit are clearly and repeatedly expressed in the Option

Agreement, Bill of Sale, and Deeds of Transfer. By contrast, Defendants’ claims to continuing

rights in the same interests are supported by little more than Defendants’ ipse dixit. Thus, each

of the four TRO factors weighs heavily in Plaintiffs’ favor. On one side of the balance, there are

Defendants, who would face no more than fourteen days of silence before they would have the

opportunity to persuade the Court of their claimed rights. On the other side of the balance, there

are Plaintiffs who, absent a TRO, face the imminent and irreversible destruction of their duly

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obtained interests in resources potentially worth billions of dollars. An injunction should issue

forthwith.

Respectfully submitted this 16th day of February, 2010.

HOGAN & HARTSON LLP

s/ David A. DeMarco
Daniel J. Dunn, #10464
David A. DeMarco, #40425
1200 Seventeenth Street, Suite 1500
Denver, Colorado 80202
303.899.7300
303.899.7333 (fax)
djdunn@hhlaw.com
dademarco@hhlaw.com

ATTORNEYS FOR PLAINTIFFS

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CERTIFICATE OF SERVICE

I hereby certify that on this 16th day of February, 2010, I electronically filed the
foregoing PLAINTIFFS’ RENEWED MOTION FOR A TEMPORARY RESTRAINING
ORDER, INCORPORATING FEDERAL AUTHORITY with the Clerk of the Court using
the CM/ECF system which will send notification of such filing to the following e-mail addresses:

R. Parker Semler
Matthew Nelson
Semler & Associates, P.C.
1775 Sherman Street, Suite 2015
Denver, Colorado 80203
parker@semlerlaw.com

s/ David A. DeMarco

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