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Githler v. Grande

Florida Court of Appeals, Second District

December 20, 2019

CHARLES E. GITHLER, III, and GITHLER DEVELOPMENT, INC., a Florida corporation, Appellants,
PHILIP J. GRANDE; MARTA A. GRANDE, and SPOT LINK, LLC, formerly known as Spot Link, Inc., a Florida Corporation, Appellees.


          Appeal from the Circuit Court for Sarasota County; Diana L. Moreland, Judge.

          Daniel M. Samson of Samson Appellate Law, Miami; W. Andrew Clayton, Jr., and Worth S. Graham of Icard, Merrill, Cullis, Timm, Furen & Ginsburg, P.A., Sarasota; and Jeremy Roth of Roth Legal, Sarasota, for Appellants.

          Kelley Geraghty Price of Cohen & Grigsby, P.C., Naples; and Thomas Avrutis of Hodges, Avrutis & Preschner, P.A., Sarasota, for Appellees Philip J. Grande and Marta A. Grande.

          No appearance for remaining Appellee.

         EN BANC

          ROTHSTEIN-YOUAKIM, Judge.

         Charles E. Githler, III, and Githler Development, Inc., the plaintiffs in the civil action below, appeal from a final judgment in favor of defendants Philip J. Grande (Grande), Marta A. Grande (Marta), and Spot Link, LLC, on all claims in the plaintiffs' complaint and on both counts of Marta's counterclaim. On appeal, the plaintiffs challenge the judgment on Count III of the complaint (sale of unregistered securities) and the judgment on the counterclaim. For the reasons set forth below, we reverse the final judgment as to Count III and the final judgment on the counterclaim. In doing so, we recede from our opinions in Greater Ministries International, Inc. v. State, 689 So.2d 328 (Fla. 2d DCA 1997), and Mortellite v. American Tower, L.P., 819 So.2d 928, 933 (Fla. 2d DCA 2002), to the limited extent that those opinions articulate or rely upon an erroneous definition of "security." We also certify conflict with Rudd v. State, 386 So.2d 1216 (Fla. 5th DCA 1980), and Levine v. I.R.E. Properties, Inc., 344 So.2d 938 (Fla. 3d DCA 1977), to the extent that those opinions articulate or rely upon the same erroneous definition.


         In 2007, Grande and his wife, Marta, incorporated Spot Link, Inc. (d/b/a Phil's Gang Radio Show). Through the radio show and its related Phil's Gang website, Grande offers investment advice to his listeners. The listeners can become "members" of Phil's Gang for a subscription price and can purchase stock-trading software from the website. When Spot Link was incorporated, Marta reportedly owned 100% of it (1000 shares at $1.00 par value).

         In 2009, the Grandes decided they wanted to retire and began looking for someone to take over the business. They informed their friend/employee/software developer, Don Cogswell, of their decision, and Cogswell told another mutual friend, Peter Wish. Wish found a potential investor in Githler, founder of "The Money Show" and similar entities that offered a variety of investment-related products.

         On October 18, 2013, Githler entered into a stock sale and purchase agreement with Spot Link in which he agreed to buy 811 shares; Cogswell would buy 29 shares, Marta would retain 60 shares, and Grande would "retain" 100 shares. The agreement provided that Githler would pay Marta for 303 of the shares and give her a promissory note securing the other 508 shares.[1] The agreement provided further that if Githler defaulted, he would have to sell his 303 shares back to Spot Link at the original purchase price. The agreement also included a contingent provision requiring Marta to sell her 60 shares to Wish in exchange for a "working capital loan" of $100, 000.

         Pursuant to a separate agreement executed on the same date, Githler sold 391 shares of his stock (88 shares of which appear to have still been hypothecated to Marta) to Cogswell, but Githler did not get any money; instead he took back a promissory note for $1, 389, 790. Pursuant to two employment agreements, also executed on the same date, Grande would continue to be employed by Spot Link as the voice/face of "Phil's Gang" and Githler would serve as both chairman of the board and vice president of Spot Link. In May 2014, Githler and Cogswell changed the business form of Spot Link from an S-Corporation to a limited liability company (LLC), with each of them as managers.

         But the promised rapid growth, syndication of the radio show, procurement of sponsors, and other events that purportedly induced Githler to get involved in Spot Link in the first place did not materialize. He grew dissatisfied, and on July 5, 2014, he was ousted.[2]

         In December 2014, Githler sued the Grandes, Cogswell, Wish, and Spot Link, alleging, among other things, sale of unregistered securities (Count III).[3] The Grandes filed an answer and affirmative defenses, asserting that the Spot Link common stock was exempt from registration pursuant to the federal Securities Act of 1933 and to chapter 517, Florida Statutes (the Florida Securities and Investor Protection Act), which permit private corporations to make a limited sale of unregistered common stock to sophisticated or accredited investors.[4] The answer and affirmative defenses also included Marta's counterclaim seeking to foreclose on the note.

         Following a bench trial, the trial court entered judgment for the defendants on all counts of the complaint and in favor of Marta on the counterclaim. Pertinent to this appeal, the court concluded that Counts II and III of the complaint failed to state a cause of action for securities fraud or improper sale of unregistered securities because the stock purchase agreement "fails to satisfy the ...

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