Bobrowski

Filing 124

ORDER denying 113 Plaintiff's Motion for Reconsideration. Signed by Judge Frederick J Martone on 8/31/11.(LSP)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Paul Bobrowski,
Plaintiff,

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vs.

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Red Door Group, Inc., et al.,
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Defendants.
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No. CV 09-02077-PHX-FJM
ORDER

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We have before us plaintiff's motion for reconsideration (doc. 113). In our August 10,
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2011 order (doc. 112), we granted defendants' motion for summary judgment on the
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securities and fraud claims. Plaintiff argues that the court overlooked critical facts.
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Under Local Rule of Civil Procedure 7.2(g), a court should deny a motion for
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reconsideration "absent a showing of manifest error or a showing of new facts or legal
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authority that could not have been brought to its attention earlier with reasonable diligence."
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Plaintiff has not met his burden. He does not provide us with newly discovered facts or legal
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authority. Plaintiff simply restates facts that were presented when we considered the parties'
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motions for summary judgment. In doing so, plaintiff contravenes LRCiv 7.2(g), which also
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states that "[n]o motion for reconsideration of an Order may repeat any oral or written
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argument made by the movant in support of or in opposition to the motion that resulted in the
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Order." Nevertheless, we will briefly address plaintiff's contentions.

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Plaintiff contends that a common enterprise actually exists. To state a claim for

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violation of securities laws, there must be a finding of a common enterprise. SEC v. W.J.

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Howey Co., 328 U.S. 293, 301, 66 S. Ct. 1100, 1104 (1946). Under the Ninth Circuit's

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interpretation, a common enterprise is present if either horizontal or vertical commonality

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exists. SEC v. R.G. Reynolds Ent., Inc., 952 F.2d 1125, 1130 (9th Cir. 1991). We concluded

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that the transactions at issue were not securities because there was no horizontal or vertical

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commonality. Plaintiff disputes both conclusions.

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Horizontal commonality occurs through pooling assets and giving up claims to profits

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and losses in return for a pro rata share of the enterprise's profits. We correctly found that

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neither the express contractual terms nor economic reality provided plaintiff a pro rata share

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of the enterprise's profits. Plaintiff owned individual units, and the fact that many or all

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investors used the same management company "establishes, at most, a common agency, not

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a common enterprise." Revak v. SEC Realty Corp., 18 F.3d 81, 88 (2d Cir. 1994).

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Vertical commonality occurs when "the fortunes of the investors are linked with those

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of the promoters" in a common enterprise. R.G. Reynolds, 952 F.2d at 1130. We

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acknowledged that the existence of vertical commonality is a close issue, but decided that

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plaintiff's investment fortunes were not directly linked to the defendants' success and

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profitability. Plaintiff's only new argument is that the fortunes of the parties are linked

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because all parties receive higher profits if the condominium units sell quickly. This is a

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tenuous link. Finding a common enterprise from this evidence "would merely collapse the

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second prong of the Howey test into the third, which requires that Plaintiffs have expected

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profits solely from the efforts of the promoter." Lavery v. Kearns, 792 F. Supp. 847, 854 (D.

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Me. 1992). The evidence plaintiff relies on to support his claims of horizontal and vertical

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commonality has already been presented to the court and is insufficient to create a factual

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issue.

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III
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Plaintiff also urges us to reconsider our grant of summary judgment on the issue of

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fraud. Once again, he fails to submit any newly discovered evidence and relies solely on

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evidence earlier submitted. He contends that defendants' statements concerning future events

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are actionable fraud because they were made with the present intent not to perform. To show

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intent, he points to the defendants' large negative cash flow and discussions of bankruptcy

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a month after plaintiff's purchase. As discussed in our order, the timing of the statements is

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not enough to support his claim. Similarly, evidence of a large negative cash flow does not

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by itself show an intent not to perform.

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IV
For the foregoing reasons, IT IS ORDERED DENYING plaintiff's motion for
reconsideration (doc. 113).
DATED this 31st day of August, 2011.

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