Mr. Mac Rust
Mr. Landon Northcutt
Diversified Sales, LLC
166 South Belknap
Stephenville, Texas 76401-4202
Breach of Fiduciary Duties to and Breach of Contract with Star Hospital Solutions, L.L.C. (“Star”).
Mac Rust attempted to trick hospitals into working with his new company. He cleverly and deceptively—formed a competing entity and named it “Star Management Solutions LLC” instead of Star Hospital Solution. And then he called it “star” as well in order to usurp business from his partners.
If Mac Rust does not agree to immediately cease and desist all competitive activities, the real Star will enforce its right to an injunction in Court and aggressively pursue all available remedies to hold Mac Rust legally and financially responsible for his violations of fiduciary duties and his contracts.
Mr Rust has a noncompetition agreement with Stare that expressly prohibits competition through restructured entities like the fake Star Mac Rust has formed and grants the real Star the right to injunctive relief in court. Equally important are the duties to which Mac Rust committed both as Member and as Manager: “certain fiduciary duties, duty of loyalty and other similar duties.” Mac Rust and his entities all knowingly participated in the breaches of fiduciary duties.
Yet Mac Rust ’s actions fell far short of the duty of utmost good faith and loyalty. To the contrary, once several hospitals were ready to sign with the real Star, Rust and his partner Landon Northcutt got greedy.
Mac Rust and Landon Northcutt decided they could duplicate the Star model, thereby making all the profits for themselves and cutting out their original Star partners. So just one month into the deal, in breach of their duties and covenants, they called on Star prospect hospitals (see attached) as “star” representatives and presented them altered documents in hopes they could switch the unsuspecting hospitals to the fake star.
In fact, we have now learned that on July 7, 2017—while Mac Rust and Landon Northcutt were still Members and Managers of the real Star and a full month before their sudden resignation— Rust and Landon Northcutt signed a contract with ABC General Hospital on behalf of the fake star leveraging the efforts and investment their deal partners made for their own benefit. Thankfully the manager of ABC General Hospital caught the fraud. Nonetheless, Rust and Landon Northcutt caused confusion in the marketplace about which star was real and which was a scam, irreparably damaging the real Star.
Additionally, Mac Rust and Landon Northcutt set up a second entity called “On Campus Laboratory Management LLC” (“On Campus”) to position themselves with new rural Texas hospitals that had not yet been as exposed to the Star name. Included in this target group was ABC Medical Center. The real Star spent months developing this prospect, but Mac Rust and Landon Northcutt usurped the deal and On Campus is now positioning to provide the blood testing at ABC. The real Star demands disgorgement of all profits Mac Rust and Landon Northcutt illegally obtain(ed) in that transaction and any others.
On August 3, 2017 at 3:00 p.m., a Membership/Management meeting of the real Star was called in Dallas, Texas. Neither Mac Rust nor Landon Northcutt showed up. Instead, 10 minutes into the meeting Rust and Landon Northcutt purported to have themselves and Diversified Sales LLC (“Diversified”) resign from their roles. Regardless, their duties and their covenants remain intact. Notably, in furtherance of the deception, Mr. Rust has started referring to himself as “Jay” instead of “Mac” in order to appear as if he weren’t a Manager of the real Star.
The misconduct of Mac Rust and Landon Northcutt before and after their resignation from Star not only gives rise to substantial actual and exemplary damages but also triggers injunctive relief under the Texas Uniform Trade Secret Act—for their theft of the real Star’s client list and other proprietary business information. TEX. CIV. PRAC. & REM. CODE §§ 134A.002-3 (“‘trade secret’ means information, including . . . list of actual or potential customers or suppliers;” providing for injunctive relief). And under the Texas Uniform Fraudulent Transfer Act—for your conveyance of the real Star’s contracts. TEX. BUS. & COMM. CODE §§ 24.002-8 (“‘property’ means anything that may be the subject of ownership;” providing for injunctive relief).
Shane Bledsoe and others stand ready to testify to your scheme at both the injunctive and damages phases of relief.
Come to find out, this is not the first time you Mac Rust has been caught in a con. In May of last year, the Securities and Exchange Commission sued Mr. Rust for “misappropriat[ing] significant portions of funds [approximately $13.8 million] entrusted to” Rust and Christoper Brenner and that Rust and Brenner “commandeered the remainder for their own undisclosed trading in speculative securities derivatives. Mac Rust’s Texas State Bar License is now “inactive,” although no public disciplinary history is listed.