Huron Capital Partners, the former owner of defunct WD Lab Grown Diamonds, has asked a Michigan federal court to dismiss Dakota Labs’ lawsuit against Huron, arguing the issues it raises belong in bankruptcy court.
Dakota—the lab-grown division of the HRA Group—sued Huron Capital and WD’s former CEO Michael Grunza (a Huron partner) in April, claiming that WD recruited Dakota as its diamond cutter under false pretenses, since WD knew it wouldn’t be able to pay.
But in a response filed June 5, Detroit-based Huron called the lawsuit “a blatant attempt to circumvent the bankruptcy proceeding.” M7D, the parent corporation of WD, filed for Chapter 7 last October.
“While other unsecured creditors of M7D await resolution of their claims by a court-appointed bankruptcy trustee…[Dakota] filed this lawsuit in a meritless effort to jump the line,” Huron stated in the court filing. It said that if the suit isn’t dismissed, “there is a high risk of inconsistent judgments from courts presented with overlapping efforts by creditors to recover M7D’s debts.”
Huron also said it has been improperly targeted, since its co-investor Tree Line Direct Lending—not Huron—initiated WD’s bankruptcy by foreclosing on its debt. It noted that Tree Line is behind WD Advanced Materials (WDAM), the tech-focused company established immediately after M7D’s bankruptcy filing; Dakota’s suit referred to WDAM as “substantially the same business” as WD Lab Grown.
In the motion to dismiss, Huron said that Grunza, who originally served as CEO at WDAM, “stepped down from this position following the initial formation period” and “does not hold equity in” the new company.
It also quibbled with Dakota’s fraud claims, saying its lawsuit does not contain “a single false representation made by Huron LLC, or even by M7D at Huron LLC’s alleged direction, that could sustain a fraud claim under Michigan law.”
Dakota Labs’ attorney did not respond to a request for comment by press time.
(Photo: Getty Images)
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