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Skypoint Advisors, LLC v. 3 Amigos Productions LLC

United States District Court, M.D. Florida, Fort Myers Division

July 25, 2019




         This matter comes before the Court on review of the defendants' Motion to Dismiss (Doc. #96) filed on May 21, 2019. Plaintiff filed a Response (Doc. #102) on June 11, 2019, the defendants filed a Reply (Doc. #105) on June 26, 2019, and plaintiff filed a Sur Reply (Doc. #109) on July 11, 2019. For the reasons that follow, the motion is denied.


         A. The Parties

         According to the Third Amended Complaint, plaintiff Skypoint Advisors, LLC is a Florida limited liability company by and through its members, which include Dennis Dreni. (Doc. #93, p. 1.) Defendant 3 Amigos Productions, LLC is a Nevada limited liability company with three managing members: (1) defendant BlackburnSteele, LLC, a Nevada limited liability company; (2) defendant Issa Zaroui, a citizen of New York; and (3) non-party Chad Pittman, a citizen of Virginia. (Id. pp. 1-2.) Finally, defendant Mark Crawford is the sole managing member of defendant BlackburnSteele. (Id. p. 2.)

         B. Factual History

         According to the Third Amended Complaint, the defendants, individually and acting in concert, began soliciting plaintiff's member Dreni in November 2016 to invest in the production of a proposed film entitled “Lazarat Burning.” (Id. pp. 4-5.) From November 2016 until January 2017, the defendants made representations to Dreni regarding the film's production, financing, and potential profits. (Id. pp. 5-25.) In early 2017, plaintiff and defendant 3 Amigos entered into a “Film Financing Agreement, ” with plaintiff agreeing to loan $50, 000 as an investment in the project. (Id. p. 27; Doc. #93-1, p. 52.) Per the terms of the agreement, plaintiff elected to receive a proportional share of the film's profits rather than interest on the $50, 000. (Doc. #93-1, p. 53.) The agreement contained a distribution schedule and stated the distributions constituted “securities” exempt from federal registration requirements. (Id. p. 54.) Finally, the agreement contained a choice of law provision construing the agreement under Florida law, and a forum-selection clause listing “any court in the State of Florida” as having jurisdiction over the matter. (Id. p. 55.)

         Sometime after entering into the agreement, plaintiff “developed significant concerns” related to the project and demanded a refund of its money. (Doc. #93, p. 31.) The defendants refused to return plaintiff's investment and plaintiff initiated this action in May 2018. (Id. p. 32; Doc. #1.)

         C. Procedural History

         In January 2019, plaintiff filed its Second Amended Complaint alleging a claim under Section 10(b) of the Securities Exchange Act of 1934, as well as various Florida and common law claims. (Doc. #52, pp. 12-26.) The defendants filed a motion to dismiss the complaint (Doc. #56), which the Court granted in part and denied in part. (Doc. #92.) The Court found the Section 10(b) claim failed to meet the heightened pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure and the Private Securities Litigation Reform Act of 1995 (“PSLRA”), and the Court lacked subject matter jurisdiction for the remaining claims. (Doc. #92, pp. 14-15.) As this was the third version of the complaint filed, the Court granted plaintiff one final opportunity to amend and cure the pleading and jurisdictional deficiencies. (Id. pp. 10, 14, 15.)

         On April 30, 2019, plaintiff filed its Third Amended Complaint alleging the following six claims: (1) violation of Section 10(b) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder; (2) violation of Florida's Securities and Investor Protection Act, § 517.011 et. seq., Fla. Stat.; (3) common law fraud; (4) violation of Florida's Deceptive and Unfair Trade Practices Act, § 501.201 et. seq., Fla. Stat.; (5) breach of contract; and (6) breach of fiduciary duty. (Doc. #93, pp. 32-47.) The first four claims are alleged against all the defendants, while the fifth and sixth claims are alleged only against defendant 3 Amigos. (Id.) Plaintiff claims damages of over $90, 000. (Id. p. 27.)

         On May 21, 2019, the defendants filed the Motion to Dismiss now before the Court. (Doc. #96.) The motion seeks dismissal on the following grounds: (1) failure to satisfy pleading requirements as to Counts One, Two and Three; (2) failure to state a claim upon which relief can be granted as to Counts One, Two and Three; (3) lack of subject matter jurisdiction as to Counts Two through Six; and (4) lack of personal jurisdiction over defendants BlackburnSteele, Crawford, and Zaroui. (Id. pp. 9-10.) The motion also seeks to have sanctions imposed on plaintiff for the filing of a frivolous claim. (Id. pp. 22-24.)


         A. Failure to Satisfy Pleading Requirements

         1. Count One

         a. Rule 9(b) Argument

         Section 10(b) of the Securities Exchange Act makes it unlawful for any person to “use or employ, in connection with the purchase or sale of any security . . . any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.” 15 U.S.C. § 78j(b). SEC Rule 10b-5 implements this provision by making it unlawful to, inter alia, “make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.” 17 C.F.R. § 240.10b- 5(b). The Supreme Court has “implied a private cause of action from the text and purpose of § 10(b).” Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 37 (2011) (citation omitted).

         To state a claim for securities fraud under Section 10(b) and Rule 10b-5, a plaintiff must adequately allege: (1) a material misrepresentation or omission; (2) scienter; (3) a connection between the misrepresentation and the purchase or sale of a security; (4) reliance; (5) economic loss; and (6) loss causation. Meyer v. Greene, 710 F.3d 1189, 1194 (11th Cir. 2013) (citing Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 341-42 (2005)). Furthermore, to survive a motion to dismiss, a claim brought under Rule 10b-5(b) must satisfy: (1) the federal notice pleading requirements in Federal Rule of Civil Procedure 8(a)(2); (2) the special fraud pleading requirements in Federal Rule of Civil Procedure 9(b); and (3) the additional pleading requirements in the PSLRA. In re Galectin Therapeutics, Inc. Sec. Litig., 843 F.3d 1257, 1269 (11th Cir. 2016).

         Under Rule 8(a)(2), a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). The complaint must allege “enough facts to state a claim to relief that is plausible on its face, ” and the factual allegations “must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007).

         In addition to the Rule 8(a)(2) requirements, Rule 9(b) requires that parties alleging fraud or mistake “must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b).

While Rule 9(b) does not abrogate the concept of notice pleading, it plainly requires a complaint to set forth: (1) precisely what statements or omissions were made in which documents or oral representations; (2) the time and place of each such statement and the person responsible for making (or, in the case of omissions, not making) them; (3) the content of such statements and the manner in which they misled the plaintiff, and; (4) what the defendant obtained as a consequence of the fraud.

In re Galectin, 843 F.3d at 1269 (citations omitted); see also Garfield v. NDC Health Corp., 466 F.3d 1255, 1262 (11th Cir. 2006) (“A sufficient level of factual support for a [Section 10(b)] claim may be found where the circumstances of the fraud are pled in detail. ‘This means the who, what, when[, ] where, and how: the first paragraph of any newspaper story.'” (citation omitted)). The “[f]ailure to satisfy Rule 9(b) is a ground for dismissal of a complaint.” In re Galectin, 843 F.3d at 1269 (quoting Corsello v. Lincare, Inc., 428 F.3d 1008, 1012 (11th Cir. 2005)).

         Finally, the PSLRA also imposes heightened pleading requirements for Rule 10b-5(b) actions. Id. For such claims predicated on allegedly false or misleading statements or omissions, the PSLRA provides that

the complaint shall specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed.

15 U.S.C. § 78u-4(b)(1).

         Count One of the Third Amended Complaint accuses the defendants of making fraudulent statements to induce plaintiff to invest in the film project. (Doc. #93, pp. 32-36.) The Third Amended Complaint lists the ...

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