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Commodity Futures Trading Commission v. Montano

United States District Court, M.D. Florida, Orlando Division

July 17, 2019




         This Matter comes before the Court on Defendant Ronald Montano's Motion for Judgment on the Pleadings (Doc. 67) and the Commodity Futures Trading Commission's (“CFTC”) Response (Doc. 78).

         I. Background

         The Complaint alleges that, between September 2013 and December 2016, Montano (along with co-defendant Montano Enterprises)[1] acted as an affiliate marketer and commodity trading advisor (“CTA”) and “fraudulently solicited millions of prospective customers to open and fund illegal, off-exchange binary options trading accounts through websites operated by unregistered binary options brokers.” Compl. ¶ 1. Montano allegedly conducted at least thirty-five such fraudulent marketing campaigns. Id. Prospective customers were advised to open and fund binary options accounts in order to obtain access to “automated trading software that purported to generate astronomical profits with no risk of loss.” Id. ¶ 2. The materials for the marketing campaign made false and misleading statements about the software. For example, they included fake accounts showing consistent profits and no losses, individuals pretending to have profited by using the software, and false representations of actual automated binary options trading and results using the software. Id. The marketing campaigns succeeded, and at least 10, 000 customers deposited sums amounting to over $2.5 million in order to initially fund their accounts, which each required a minimum deposit of $250. Id. ¶ 4. For each customer that viewed one of the online marketing campaigns and opened and funded a binary options account, Montano received between $250-350. Id. ¶ 5. Montano also earned commissions from distributing solicitations that included other materially false or misleading statements made by affiliate marketers. Id. The CFTC claims that Montano's actions violated the Commodity Exchange Act and accompanying regulations. Id. ¶ 8.

         There are four counts pled in the Complaint: Count I alleges options fraud; Count II alleges CTA fraud; Count III alleges fraudulent advertising; and Count IV alleges unlawful use of a manipulative and deceptive device, scheme, or artifice.[2]

         II. Legal Standards

         Federal Rule of Civil Procedure 8(a)(2) requires “a short and plain statement of the claim showing that the pleader is entitled to relief so as to give the defendant fair notice of what the claim is and the grounds upon which it rests. Conley v. Gibson, 355 U.S. 41, 47 (1957), overruled on other grounds, Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955 (2007).

         Where a complaint contains claims of fraud or mistake, however, Rule 9(b) imposes a heightened pleading standard, requiring that the circumstances constituting fraud be stated with particularity. See Brooks v. Blue Cross & Blue Shield of Fla., 116 F.3d 1364, 1381 (11th Cir. 1997). This particularity requirement is satisfied if the complaint alleges “facts as to time, place, and substance of the defendant's alleged fraud, specifically the details of the defendant's allegedly fraudulent acts, when they occurred, and who engaged in them.” U.S. ex rel. Matheny v. Medco Health Sols., Inc., 671 F.3d 1217, 1223 (11th Cir. 2012) (quoting Hopper v. Solvay Pharm., Inc., 588 F.3d 1318, 1324 (11th Cir. 2009)). Alternative means can also satisfy Rule 9(b), provided that the circumstances of the alleged fraud are pleaded with particularity.

         Judgment on the pleadings is appropriate where there are no material facts in dispute and the moving party is entitled to judgment as a matter of law. Riccard v. Prudential Ins. Co., 307 F.3d 1277, 1291 (11th Cir. 2002) (internal quotations omitted). Thus, the standard of review for a motion for judgment on the pleadings is almost identical to that used to decide motions to dismiss. Doe v. Board of County Comm'rs, Palm Beach County, Fla., 815 F.Supp. 1448, 1449 (S.D. Fla. 1992). Thus, when considering a motion for judgment on the pleadings, the Court must accept all well-pleaded facts in the complaint as true and draw all reasonable inferences in favor of the non-movant. Garfield v. NDC Health Corp., 466 F.3d 1255, 1261 (11th Cir. 2006).

         III. Analysis

         a. Shotgun Pleading

         Montano first argues that the Complaint is an impermissible shotgun pleading, and thus, he is entitled to judgment on the pleadings.[3] In support of his contention, he points to the opening paragraph of each count in the Complaint: “[t]he allegations in the foregoing paragraphs are incorporated by reference as if fully set forth herein.” It is true that this sort of repetition is a hallmark of shotgun pleading. However, the headings and content of each count are more than sufficient to put Montano on notice of the claims against him. The allegations are clearly organized by topic. While the opening paragraph in each count is problematic, it does not render it impossible to know which allegations of fact are intended to support which claims for relief. The Complaint is long, but the facts are complex. The Complaint is adequately pled.

         b. Sufficient Particularity in Counts that Sound in Fraud (All Counts)

         Montano argues that that the Complaint fails to plead its fraud counts with sufficient particularity under Rule 9(b). All four of the fraud counts are sufficiently pled. While the Complaint does not allege the exact time and location of the fraud, under the circumstances, it is pleaded with enough particularity to satisfy the heightened standard. Details about the name, relevant time period, type of false statement, who created the statements, and how those ...

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