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Item 1. Legal Proceedings

2021-11-04 compared with 2021-08-04 · 22 added, 35 removed, 3 unchanged (95% of the section changed)

1 unchanged sentence

Part I, Item 3, Legal Proceedings of our Form 10-K includes a discussion of our legal proceedings.

There have been no material developments in the three and six months ended June 30, 2021 from the legal proceedings described in our Form 10-K except as follows:

The Trade Secret Suit filed by the Company, CICA Ltd.

and CICA ("Plaintiffs") in the District Court of Travis County, Texas against (i) Randall Riley (“Riley”), a former Citizens executive and son of Citizens’ founder Harold E.

Riley, (ii) certain copycat companies formed by Riley, including Citizens American Life, Inc.

and Citizens American Life, LLC (collectively, the copycat companies, "CALI") and (iii) Alexis Enrique Delgado, Carlos Nalsen Landa, Enrique Pinzon Ruiz, Johan Emilio Mikuski Silva and Esperanza Peralta de Delgado (collectively, the “Los Raudales Defendants,”), (iv) Michael P.

Buchweitz, Jonathan M.

Pollio, Jeffrey J.

Wood and Steven A.

Rekedal, former Citizens executives and employees and, in the case of Steven A.

Rekedal, a former Citizens independent consultant (the "Former Citizens Defendants");

(v) First Trinity Financial Corporation, and Trinity American, Inc.

(collectively, “First Trinity”) and International Marketing Group S.A., LLC, entities that have founded a business on the exploitation of Citizens’ trade secrets and goodwill, and (vi) Gregg E.

Zahn, a First Trinity executive, was previously scheduled for trial in the second quarter of 2021.

Due to the COVID-19 pandemic, the jury trial is now expected to occur in the first quarter of 2022.

On June 30, 2021, we filed a no evidence Motion for Summary Judgment against the Los Raudales Defendants seeking dismissal of counterclaims for tortious interference brought by the Los Raudales Defendants.

The Los Raudales Defendants subsequently dismissed these counterclaims.

On June 30, 2021, (i) all of the Defendants filed a traditional and no evidence Motion for Partial Summary Judgment against Plaintiffs' non-trade secret claims for unfair competition, tortious interference with contract, conspiracy and unjust enrichment;

(ii) the Los Raudales Defendants filed a no evidence Motion for Partial Summary Judgment against Plaintiffs' claims against such defendants;

(iii) Defendant Michael P.

Buchweitz filed a traditional and no evidence Motion for Summary Judgment against Plaintiffs' claim for breach of contract;

(iv) Defendants Gregg E.

Zahn and Jeffrey J.

Wood filed a traditional and no evidence Motion for Summary Judgment against Plaintiffs' claims of trade secret misappropriation, common law unfair competition, unjust enrichment and conspiracy;

and (v) Defendant Jonathan Pollio filed a traditional and no evidence Motion for Partial Summary Judgment on our' breach of contract claim.

Essentially, the Defendants argue that claims other than the trade secrets claims that we brought under the Texas Uniform Trade Secrets Act ("TUTSA") are pre-empted by TUTSA.

We disagree and have filed motions in opposition to Defendants various Summary Judgment motions.

The District Court is in the process of hearing Defendants' motions and as of the date hereof has not yet rendered decisions on any of the motions and thus all of our claims against Defendants remain pending.

Part I, Item 1A, Risk Factors of our Form 10-K includes a discussion of our risk factors.

There have been no material changes in the three and six months ended June 30, 2021 from the risk factors included in our Form 10-K .

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

DEFAULTS UPON SENIOR SECURITIES

Not applicable.

June 30, 2021 | 10-Q 51

There have been no material developments in the three and nine months ended September 30, 2021 from the legal proceedings described in our Form 10-K except as follows:

On September 14, 2021, the Company won a victory in its trade secret theft suit against Randall Riley, Alexis Delgado and certain of his co-agents, and First Trinity Financial Corporation (“First Trinity”) when the Travis County District Court (the “Court”) denied Defendants’ traditional and no evidence Motion for Partial Summary Judgment (“Defendants’ Motion”) in its entirety.

Defendants Motion claimed that the Company should not be able to proceed with our claims against Defendants for unfair competition, tortious interference with contract, conspiracy and unjust enrichment, because they “have no evidence to support these theories.”

With respect to these claims, our lawsuit claims that:

• Riley and First Trinity tortiously interfered with Citizens’ contracts with its agents and that they “willfully and intentionally” induced the agents to breach those contracts by disclosing Citizens’ confidential information;

• Defendants wrongfully secured benefits from Citizens and thus Citizens is entitled to those benefits (unjust enrichment);

• Defendants stole Citizens’ information in order to unfairly compete with us;

• Defendants conspired to achieve the theft of Citizens’ trade secrets.

By denying Defendants’ Motion in its entirety, we can proceed to trial with all of the claims described above.

Further, on September 28, 2021, the Court ruled in our favor on motions for summary judgment filed by five of the defendants.

Specifically, the court:

• Denied the requests of Alexis Enrique Delgado, Enrique Pinzon Ruiz, and Esperanza Peralta de Delgado to be dismissed from the lawsuit.

These individuals were independent consultants who were terminated by the Company for cause due to the facts alleged in this lawsuit.

• Denied Michael Buchweitz’s request that the claim against him for breach of his confidentiality agreement be dismissed.

Buchweitz is a former underwriter for Citizens.

• Denied Jonathan Pollio’s request that the claim against him for breach of his confidentiality agreement be dismissed.

Pollio is a former actuary for Citizens.

We have alleged that the above defendants conspired with Randall Riley and First Trinity to steal our trade secrets and unfairly compete with us, including by using a confusingly similar name and logo.

The court denied the motions of Delgado, Ruiz, Delgado, Buchweitz and Pollio in their entireties, allowing us to proceed with all of the claims against each of them.

While the court allowed the CEO and CFO of First Trinity to be dismissed individually from the lawsuit, the ruling does not affect Citizens’ claims against First Trinity described above.

Trial in the lawsuit is set for February 2022.

September 30, 2021 | 10-Q 54

CITIZENS, INC.

MINE SAFETY DISCLOSURES

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Legal Proceedings