Skypoint Advisors, LLC. v. 3 Amigos Productions LLC. et al
Filing
111
ORDER denying 96 motion to dismiss. Signed by Judge John E. Steele on 7/25/2019. (FWH)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
SKYPOINT ADVISORS, LLC.,
Plaintiff,
v.
Case No:
2:18-cv-356-FtM-29MRM
3 AMIGOS PRODUCTIONS LLC.,
BLACKBURNSTEELE LLC., ISSA
ZAROUI, and MARK C CRAWFORD,
Defendants.
OPINION AND ORDER
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.
I.
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.”
November
2016
until
representations
to
January
Dreni
2017,
regarding
financing, and potential profits.
(Id. pp. 4-5.)
the
the
From
defendants
film’s
(Id. pp. 5-25.)
made
production,
In early 2017,
plaintiff and defendant 3 Amigos entered into a “Film Financing
Agreement,”
with
plaintiff
investment in the project.
the
terms
of
the
agreeing
to
loan
$50,000
as
(Id. p. 27; Doc. #93-1, p. 52.)
agreement,
plaintiff
elected
to
an
Per
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.)
2
Sometime
“developed
after
entering
significant
into
concerns”
demanded a refund of its money.
the
related
agreement,
to
the
(Doc. #93, p. 31.)
plaintiff
project
and
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
3
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.
the
following
(Doc. #96.)
grounds:
(1)
The motion seeks dismissal on
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.)
II.
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
4
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.”
5(b).
17 C.F.R. § 240.10b–
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
5
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
6
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
requirements for Rule 10b–5(b) actions.
predicated
on
allegedly
false
or
heightened
Id.
pleading
For such claims
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.
Amended
Complaint
lists
the
(Doc. #93, pp. 32-36.)
following
as
examples
The Third
of
misrepresentations made by the defendants:
(a) that the Project was almost contractually fully
funded due to almost two years’ worth of work by
Defendants[;]
. . .
(b) that Skypoint’s then proposed $50,000.00 investment
was the final investment needed to complete the budget
for the Project, describing Skypoint’s then proposed
$50,000.00 investment as contingent in that the
expenditure thereof may not be necessary for the
completion of the Project, and that Skypoint was the
final investor accepted for the Project[;]
. . .
7
the
(c) mischaracterized Skypoint’s then proposed $50,000.00
investment as de minimus in light of the investment funds
already collected for the Project and presented 3
Amigos’s proposed acceptance of Skypoint’s $50,000.00
investment as doing a favor for Skypoint[;]
. . .
(d) that all of the production work for the Project was
already paid[;]
. . .
(e)
that
Crawford,
Zaroui,
and
Pittman
already
personally invested at least $30,000.00 each to the
Project[;]
. . .
(f) that DigitAlb, a prominent Albanian media company,
already invested approximately $400,000.00 into the
Project[;]
. . .
(g) that 3 Amigos had existing contracts with
distribution companies Karo Films, the largest Russian
firm of its kind in the Russian region, and Fantastic
Film International regarding distribution of the Project
resulting in revenue of $24,000.000.00[;]
. . .
(h) that Gabriel Garko, a preeminent Italian actor,
[wa]s playing a major role in the Project and therefore
pre-sale
forecasts
ha[d]
been
met
resulting
in
additional revenue of two to three million dollars in
the Italian market alone[;]
. . .
(i) that all third-party consultants had been previously
paid prior to Skypoint’s decision to invest[;]
. . .
(j) that Crawford was Chief Financial Officer of 3 Amigos
and that he had sole control and access over 3 Amigos’
financial accounts[.]
(Id. pp. 5-24.)
The Third Amended Complaint states that these
statements were false, each defendant had knowledge of their
falsity, and the defendants made the statements in an attempt to
mislead investors into investing in the project.
(Id. pp. 25-26.)
The defendants argue plaintiff’s Section 10(b) claim fails to
meet the requirements of Rule 9(b) because the Third Amended
8
Complaint offers no specifics “as to who in particular made any
particular representation, or when, or in what manner, or how they
were misleading.”
(Doc. #96, p. 12.)
The Court disagrees.
As
noted above, the Third Amended Complaint contains a list of ten
examples
of
allegedly
example,
the
Third
fraudulent
Amended
statements.
Complaint
describes
Following
which
each
of
the
defendants made the alleged misrepresentation, the instrument by
which the defendant(s) made the alleged misrepresentation, and the
reason(s) why the alleged misrepresentation was misleading.
(Doc.
#93, pp. 5-25.)
The defendants also suggest plaintiff’s claim fails because
any claim attributable to defendant 3 Amigos could have been made
by non-party Pittman, in which case the other defendants would not
be liable.
(Doc. #96, p. 12.)
However, when the Third Amended
Complaint attributes a representation to defendant 3 Amigos, it
does so “by and through” one of the other named defendants.
#93, pp. 7, 9, 12, 13, 15, 17, 20, 22, 23, 25.)
(Doc.
Accordingly, as
the misrepresentations alleged in the Third Amended Complaint are
attributed to one or more of the defendants, the defendants’
argument regarding non-party Pittman fails. 1
1
The defendants also note that the Third Amended Complaint
“repeatedly casts each Defendant as having made identical serial
misrepresentations.”
(Doc. #96, p. 12.)
To the extent the
defendants are arguing for dismissal based on the validity of
plaintiff’s allegations, the Court rejects such an argument. See
Hunnings v. Texaco, Inc., 29 F.3d 1480, 1484 (11th Cir. 1994) (“In
9
The defendants also suggest the Section 10(b) claim fails
because the Third Amended Complaint references specific dates for
only a few of the alleged misrepresentations, while the majority
are simply alleged to have occurred “[f]rom November 2016 to
January 2017.”
(Doc. #96, pp. 12-13; Doc. #93, p. 5.)
However,
the Court finds such an allegation is sufficient to satisfy the
“when” requirement of Rule 9(b).
In MeterLogic, Inc. v. Copier
Solutions, Inc., the amended complaint contained allegations of
fraud described to have taken place “from December 31, 1998 to
June 29, 1999.”
126 F. Supp. 2d 1346, 1361 (S.D. Fla. 2000).
In
finding the allegations provided sufficient information to satisfy
Rule 9(b), the Southern District noted:
MeterLogic has given the defendants the “who, what,
where, and when” of the alleged fraud that took place.
While MeterLogic need not provide the exact time and
place of all the meetings, it does provide this
information for some of the statements. In any event,
it supplies a sufficiently narrow time frame from which
CS and TS could be on notice as to when these statements
were made.
Id.
Similarly, the Court finds the Third Amended Complaint’s
allegation that the alleged misrepresentations occurred between
November 2016 and January 2017 is sufficiently narrow to satisfy
Rule 9(b).
ruling on a motion to dismiss for failure to state a claim, the
district court must accept the allegations of the complaint as
true and must construe the facts alleged in the light most
favorable to the plaintiff.”).
10
b. Elements Argument
The defendants next argue that the Section 10(b) claim should
be dismissed for failing to allege various necessary elements.
(Doc. #96, pp. 13-17.)
As noted above, a Section 10(b) claim 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.
Dura, 544 U.S. at 341-42).
Complaint’s
Section
10(b)
Meyer, 710 F.3d at 1194 (quoting
The defendants argue the Third Amended
claim
fails
to
sufficiently
scienter, loss causation, and reasonable reliance.
13-17.)
plead
(Doc. #96, pp.
The Court will address each of these arguments in turn.
In pleading scienter, a Section 10(b) claim must meet the
PSLRA’s requirement to “state with particularity facts giving rise
to a strong inference that the defendant acted with the required
state
of
mind.”
15
U.S.C.
§
78u-4(b)(2)(A);
Thompson
v.
RelationServe Media, Inc., 610 F.3d 628, 633 (11th Cir. 2010).
In
this context, a “strong inference” of scienter is one that is “more
than merely plausible or reasonable—it must be cogent and at least
as compelling as any opposing inference of nonfraudulent intent.”
Thompson, 610 F.3d at 633 (quoting Tellabs, Inc. v. Makor Issues
& Rights, Ltd., 551 U.S. 308, 314 (2007)).
When reviewing a
complaint’s scienter allegations, the court must (1) “accept all
factual allegations in the complaint as true,” (2) “consider the
11
complaint in its entirety” and determine “whether all of the facts
alleged, taken collectively, give rise to a strong inference of
scienter,”
inferences.”
and
(3)
“take
into
account
plausible
opposing
Id. at 633-34 (quoting Tellabs, 551 U.S. at 322-23).
Moreover, “scienter must be found with respect to each defendant
and with respect to each alleged violation of the statute.”
Id.
(quoting Phillips v. Scientific-Atlanta, Inc., 374 F.3d 1015,
1017-18 (11th Cir. 2004)).
While the PSLRA imposes a heightened standard for pleading
scienter, it does not alter the substantive intent requirements
necessary to establish a Section 10(b) and Rule 10b-5 violation.
Thompson, 610 F.3d at 634.
In the Eleventh Circuit, Section 10(b)
and Rule 10b-5 require a showing of either an “intent to deceive,
manipulate, or defraud,” or “severe recklessness.”
Id.
(quoting
Mizzaro v. Home Depot, Inc., 544 F.3d 1230, 1238 (11th Cir. 2008)).
Accordingly, to survive a motion to dismiss, a Section 10(b) claim
must “plead ‘with particularity facts giving rise to a strong
inference’
that
the
defendants
either
intended
to
defraud
investors or were severely reckless when they made the allegedly
materially false or incomplete statements.”
Id. (quoting Mizzaro,
544 F.3d at 1238).
The defendants argue the Third Amended Complaint fails to
sufficiently
plead
scienter
by
pleading
only
“generalized
misstatements spread over a three-month period, utterly failing to
12
identify any factual basis regarding the state of mind of any maker
of
any
statement
at
misstatement alleged.”
any
time,
let
alone
(Doc. #96, p. 14.)
regarding
every
Having considered the
complaint in its entirety, accepting all factual allegations as
true, and taking into account plausible opposing inferences, the
Court finds the Third Amended Complaint alleges sufficient facts
which, taken collectively, give rise to a strong inference of
scienter.
As previously noted, the Third Amended Complaint provides ten
examples of alleged misrepresentations made by the defendants to
plaintiff and describes why each was misleading.
5-24.)
(Doc. #93, pp.
In describing each of these misrepresentations, the Third
Amended Complaint states the defendants “acted with knowledge, or
at least severe recklessness, as to the materially false and
misleading nature of the foregoing statement and knew that such
statement presented a danger of misleading” plaintiff.
6-25.)
The
Third
Amended
Complaint
also
alleges
(Id. pp.
that
the
defendants solicited investors, including plaintiff, knowing that
their statements were false and that “their claims of financial
reward and estimated return on investments were not feasible.”
(Id. p. 26.)
Finally, the Third Amended Complaint states the
“misrepresentations and/or omissions were done knowingly or with
a
deliberate
recklessness
and
for
the
purpose
and
effect
of
concealing information regarding the Project’s true status as a
13
façade and vehicle for fraud and theft.”
(Id. p. 35.)
The Court
finds these allegations sufficient to plead the scienter element.
See Anderson v. Transglobe Energy Corp., 35 F. Supp. 2d 1363, 136869
(M.D.
Fla.
Feb.
8,
1999)
(allegations
that
defendant
was
reckless in overstating the potential and status of a business
venture were sufficient to allege scienter); Page v. Derrickson,
1997 WL 148558, *5 (M.D. Fla. Mar. 25, 1997) (“Plaintiff alleges
that all Defendants ‘acted with knowledge or reckless disregard of
the misleading nature of his statements and omissions,’ and . . .
that its injuries resulted from its purchase of stock ‘at prices
that
were
artificially
inflated
by
Defendants’
misleading
statements . . . .’ These allegations are sufficient to meet the
scienter pleading requirement.”).
Turning to loss causation, that element “requires that the
defendant’s fraud be both the but-for and proximate cause of the
plaintiff’s later losses.”
FindWhat Inv’r Grp. v. FindWhat.com,
658 F.3d 1282, 1309 (11th Cir. 2011) (citation omitted).
differently,
defendant’s
“loss
causation
misconduct
and
describes
the
‘the
plaintiff’s
link
Stated
between
economic
the
loss.’”
Robbins v. Kroger Properties, Inc., 116 F.3d 1441, 1447 (11th Cir.
1997) (quoting Rousseff v. E.F. Hutton Co., Inc., 843 F.2d 1326,
1329 n.2 (11th Cir. 1988)). The defendants argue the Section 10(b)
claim fails to sufficiently plead loss causation due to (1) lack
of specificity regarding the alleged misrepresentations and who
14
made
them,
and
(2)
factual
allegations
in
the
Third
Amended
Complaint that take place after the agreement was signed.
(Doc.
#96, pp. 14-15.)
Having
reviewed
disagrees
with
causation
is
the
not
the
Third
defendants’
subject
to
Amended
Complaint,
argument.
the
PSLRA’s
the
Importantly,
heightened
Court
loss
pleading
requirement and must only be pled in accordance with Federal Rule
of Civil Procedure 8(a)(2).
In re Taco Energy, Inc. Sec. Litig.,
2006 WL 2884960, *5 (M.D. Fla. Oct. 10, 2006).
Furthermore, to
plead loss causation sufficiently, a plaintiff “can allege that
they would not have invested had they known the truth, and that
the untruth was in some reasonable direct way responsible for the
loss.”
*6.
Anderson, 35 F. Supp. 2d at 1369; Page, 1997 WL 148558,
The Third Amended Complaint alleges that had plaintiff “known
of Defendants’ fraudulent practices, [plaintiff] would not have
invested or otherwise acquired an interest” in the film, and that
as a direct and proximate result of the defendants’ conduct,
plaintiff suffered damages from the investment.
35-36.)
(Doc. #93, pp.
The Court finds these allegations sufficient to survive
dismissal at the pleading stage.
See In re PSS World Med., Inc.
Sec. Litig., 250 F. Supp. 2d 1335, 1351 (M.D. Fla. Aug. 1, 2002)
(finding
complaint
adequately
pled
loss
causation
where
“the
Plaintiffs have averred that the Defendants’ misrepresentations or
omissions caused the Plaintiffs’ to purchase the inflated stock,
15
and that the Defendants’ fraud in committing GAAP violations and
improprieties was part of a course of conduct that was ultimately
the proximate cause of the Plaintiffs’ loss”).
Finally, a showing of plaintiff’s reasonable or justifiable
reliance on the misrepresented or omitted information is necessary
to plead a federal securities fraud cause of action. 2
Beckel v.
Fagron Holding USA, LLC, 2017 WL 3730395, *6 (M.D. Fla. June 30,
2017).
To demonstrate justifiable reliance, plaintiff must show
that it reasonably relied on the misrepresentations or omissions
of the defendants and that it “still could not have discovered the
truth behind the fraudulent omission or misrepresentation” even
“with
the
exercise
of
reasonable
diligence.”
Id.
(quoting
Gochnauer v. A.G. Edwards & Sons, Inc., 810 F.2d 1042, 1047 (11th
Cir.
1987)).
reasonable
The
defendants
reliance,
argue
specifically
misrepresentations related to revenue.
plaintiff
regarding
cannot
the
plead
alleged
(Doc. #96, pp. 15-16.)
As
noted above, the Third Amended Complaint alleges the defendants
made misrepresentations regarding $24 million in revenue from
distribution contracts and $2-3 million in revenue from pre-sales
in the Italian market.
(Doc. #93, pp. 18, 20.)
The defendants
argue that, to the extent plaintiff claims these statements were
2
The Eleventh Circuit has used the terms “justifiably relied”
and “reasonably relied” interchangeably to describe this element.
See Ledford v. Peeples, 657 F.3d 1222, 1248 n.80 (11th Cir. 2011).
16
misrepresentations, it could not reasonably rely upon them because
(1) plaintiff is a sophisticated investor and (2) such revenues
differ from those outlined in the agreement.
(Doc. #96, pp. 16-
17); see also Bruschi v. Brown, 876 F.2d 1526, 1529 (11th Cir.
1989) (listing factors to consider in determining whether an
investor’s reliance was justified, including “the sophistication
and expertise of the plaintiff in financial and security matters”);
Garcia v. Santa Maria Resort, Inc., 528 F. Supp. 2d 1283, 1295
(S.D. Fla. 2007) (dismissing securities fraud claim for lack of
reasonable reliance, noting reliance on fraudulent representations
“is
unreasonable
as
a
matter
of
law
where
the
alleged
misrepresentations contradict the express terms of the ensuring
written agreement” (citation omitted)).
Plaintiff
responds
by
arguing
it
sufficiently
alleged
reliance in the Third Amended Complaint and, regardless, the issue
of reasonable reliance should not be decided on a motion to
dismiss.
(Doc. #102, pp. 9-10.)
Having considered the arguments
and reviewed the Third Amended Complaint, the Court finds plaintiff
has adequately alleged reasonable reliance.
Complaint
notes
several
times
that
The Third Amended
plaintiff
relied
on
the
defendants’ misrepresentations when entering into the agreement.
(Doc. #93, pp. 5, 26.)
While the defendants challenge whether
plaintiff
reasonably
could
have
relied
on
the
alleged
misrepresentations related to revenues, plaintiff has also alleged
17
eight additional misrepresentations it relied upon when entering
into the agreement.
(Doc. #93, pp. 5-24.)
Because the defendants
have not argued plaintiff did not reasonably rely upon these other
misrepresentations,
and
because
the
Third
Amended
Complaint
adequately pleads such reliance, dismissal is inappropriate.
2. Counts Two and Three
Count Two of the Third Amended Complaint alleges a violation
of Florida’s Securities and Investor Protection Act and Count Three
alleges a claim of common law fraud.
(Doc. #93, pp. 36-41.)
The
defendants argue that both claims should be dismissed for the same
reasons Count One should be dismissed.
(Doc. #96, pp. 20-21); see
also Grippo v. Perazzo, 357 F.3d 1218, 1222 (11th Cir. 2004)
(noting that the elements of a cause of action under section
517.301 of Florida’s Securities and Investor Protection Act were
“identical to those under the Federal Rule 10b-5, except that the
scienter requirement under Florida law is satisfied by showing of
mere negligence”).
As the Court has considered and rejected those
arguments already, they need not be addressed again.
B. Lack of Subject Matter Jurisdiction
The defendants next argue the Court should dismiss Counts Two
through Six for lack of subject matter jurisdiction.
pp.
17-20.)
In
raising
these
claims
in
the
(Doc. #96,
Third
Amended
Complaint, plaintiff asserts this Court has both supplemental
jurisdiction
pursuant
to
28
U.S.C.
18
§
1367,
and
diversity
jurisdiction pursuant to 28 U.S.C. § 1332.
41, 43, 45.)
(Doc. #93, pp. 36, 39,
In the Motion to Dismiss, the defendants challenge
both asserted jurisdictional grounds.
(Doc. #96, pp. 17-18.)
Having reviewed the allegations in the Third Amended Complaint,
the Court finds it has supplemental jurisdiction over Counts Two
through Six pursuant to 28 U.S.C. § 1367.
Section
1367
provides
that
subject
to
inapplicable
exceptions, “in any civil action of which the district courts have
original jurisdiction, the district courts shall have supplemental
jurisdiction over all other claims that are so related to claims
in the action within such original jurisdiction that they form
part of the same case or controversy.”
28 U.S.C. § 1367(a).
Here,
the Court has original jurisdiction over plaintiff’s Section 10(b)
claim, and the remaining claims are “so related” to that claim to
fall
within
the
Court’s
supplemental
jurisdiction.
The
defendants’ sole argument against supplemental jurisdiction is
based upon an assertion that Count One should be dismissed.
#96,
p.
17.)
However,
because
the
Third
Amended
(Doc.
Complaint
adequately pleads a Section 10(b) claim under Count One, the Court
has jurisdiction over the related claims alleged in Counts Two
through Six. 3
3
The
Court’s
determination
regarding
supplemental
jurisdiction moots the dispute between the parties regarding
diversity jurisdiction. However, the Court writes separately to
address the defendants’ argument regarding sanctions. The Motion
19
C. Lack of Personal Jurisdiction
The
motion
next
argues
that
defendants
Zaroui,
BlackburnSteele, and Crawford should be dismissed from this action
for lack of personal jurisdiction.
(Doc. #96, pp. 21-22.)
A court
is obligated to dismiss an action against a defendant over which
it
lacks
personal
jurisdiction.
Smith
v.
Trans-Siberian
Orchestra, 689 F. Supp. 2d 1310, 1312 (M.D. Fla. 2010).
On a
motion to dismiss for lack of personal jurisdiction, the plaintiff
bears
the
burden
of
establishing,
by
a
preponderance
of
the
evidence, that the court has jurisdiction over the defendant.
Id.
The plaintiff is required to allege in the complaint sufficient
facts to make out a prima facie case of jurisdiction.
Louis
Vuitton Malletier, S.A. v. Mosseri, 736 F.3d 1339, 1350 (11th Cir.
to Dismiss asserts that defendant Crawford is domiciled in Albania,
and therefore there is no complete diversity of citizenship. (Doc.
#96, p. 18.)
Defendant Crawford has provided an affidavit
attesting to his Albanian domicile.
(Doc. #96-1, p. 27.)
Plaintiff argues such an assertion is “self-serving” and a “willful
fabrication,” and accuses defendant Crawford of attempting “to
manufacture documentary support for his position after this action
was filed strictly to fight jurisdiction.” (Doc. #102, pp. 10,
12, 15.)
In reply, the defendants request the Court to order
plaintiff “to present all evidence in support of such charges,”
and if plaintiff is unable to substantiate the accusations, to
impose “appropriate discipline.”
(Doc. #105, p. 8 n.4.)
Alternatively, plaintiff requests the Court grant defendants the
opportunity to demonstrate plaintiff’s non-compliance with Rule 11
of the Federal Rules of Civil Procedure and explain why sanctions
are appropriate.
(Id.)
The Court will grant the alternative
request and the defendants may file a motion pursuant to Rule 11
if they choose.
20
2013) (citation omitted).
When a defendant challenges personal
jurisdiction by submitting affidavit evidence in support of its
position, the burden traditionally shifts back to the plaintiff to
produce evidence supporting jurisdiction.
Id. (citation omitted).
The determination of whether the court has personal jurisdiction
over a defendant is governed by a two-part analysis:
First, the court must determine whether the plaintiff
has alleged facts sufficient to subject the defendant to
Florida’s long-arm statute.
Second, once it has
determined that the long-arm statute is satisfied, the
court must determine whether plaintiff’s assertion of
jurisdiction
comports
with
the
Constitution’s
requirements of due process and traditional notions of
fair play and substantial justice.
Smith, 689 F. Supp. 2d at 1312 (citations omitted).
Turning to the first part of the analysis, the Third Amended
Complaint asserts the Court has personal jurisdiction over the
defendants “because they participated, individually and acting in
concert, in tortious acts directed towards Florida, do sufficient
business
in
Florida,
have
sufficient
minimum
contacts
with
Florida, and/or otherwise intentionally availed themselves of the
Florida consumer market through the promotion of their services.”
(Doc. #93, p. 3.)
Florida’s long-arm statute contains a list of
numerous
which
ways
in
a
person
can
subject
themselves
to
jurisdiction of the state, including by “[c]omitting a tortious
act within this state.”
§ 48.193(1)(a)2., Fla. Stat.
The Florida
Supreme Court has held that “committing a tortious act” within
21
Florida “can occur by making telephonic, electronic, or written
communications into this State, provided that the tort alleged
arises from such communications.”
Wendt v. Horowitz, 822 So. 2d
1252, 1253 (Fla. 2002) (footnote omitted); see also Internet Sols.
Corp. v. Marshall, 557 F.3d 1293, 1296 (11th Cir. 2009) (“For the
purposes of the [long-arm] statute, the defendant does not have to
be physically present in Florida for the tortious act to occur
within that state.”).
Here, the Third Amended Complaint alleges the defendants
committed tortious acts by making misrepresentations via various
electronic communications into Florida for the purpose of inducing
plaintiff into investing into the film project.
5.)
(Doc. #93, pp. 4-
The motion does not dispute this as jurisdictional grounds
under Florida’s long-arm statute, but rather argues defendants
Zaroui, BlackburnSteele, and Crawford are protected by Florida’s
“corporate shield” doctrine.
(Doc. #96, p. 22.)
In Florida, the
corporate shield doctrine, also known as the “fiduciary shield”
doctrine, provides that “acts performed by a person exclusively in
his corporate capacity not in Florida but in a foreign state may
not form the predicate for the exercise of personal jurisdiction
over the employee in the forum state.”
3d 1084, 1088 (Fla. 2012).
Kitroser v. Hurt, 85 So.
The rationale behind the doctrine is
that it “may be unfair to force an individual to defend an action
filed against him personally in a forum with which his only
22
relevant contacts are acts performed totally outside the forum
state and not for his own benefit but for the exclusive benefit of
his
employer.”
Id.
However,
the
defendants’
argument
is
misplaced, as the doctrine does not apply to intentional torts.
See Mosseri, 736 F.3d at 1355 (“[U]nder Florida law, this corporate
shield
doctrine
is
inapplicable
where
the
corporate
officer
commits intentional torts.”); Black v. Bryant, 905 F. Supp. 1046,
1052 (M.D. Fla. 1995) (noting that in accordance with Florida’s
long-arm statute, “a non-resident corporate officer may be haled
into court in Florida if it is alleged that he personally committed
an intentional tort expressly aimed at the plaintiff in the forum
state.”).
defendants
As
the
engaged
Third
in
Amended
intentional
Complaint
torts,
alleges
Florida’s
all
the
corporate
shield doctrine does not apply.
Turning to the second element of the personal jurisdictional
analysis, the motion argues defendants BlackburnSteele, Zaroui,
and Crawford do not have “sufficient minimum contacts” with Florida
to establish personal jurisdiction over them.
(Doc. #96, p. 22.)
In support, each of these defendants has submitted an affidavit
attesting to their lack of contacts with Florida.
#58; Doc. #59.)
(Doc. #57; Doc.
However, while each defendant denies having
sufficient contacts with the state, none dispute having made
communications to plaintiff via electronic means.
23
In fact, two of
the defendants acknowledge having made such communications. 4 (Doc.
#57, pp. 1-3; Doc. #59, pp. 1-2.)
Accordingly, the issue is
whether those communications are sufficient to satisfy the minimum
contacts requirement for personal jurisdiction.
Having reviewed
the Third Amended Complaint and the defendants’ affidavits, the
Court finds they do.
The Third Amended Complaint alleges all the defendants made
“a number of misrepresentations” to plaintiff via electronic means
between
November
“reasonably
2016
relied
misrepresentations.”
and
January
on
the
2017,
and
numerous
(Doc. #93, pp. 4, 26.)
that
plaintiff
aforementioned
The Third Amended
Complaint also asserts that the defendants “intentionally availed
themselves of the Florida consumer market through the promotion of
their services.”
(Id. p. 3.)
Based upon these allegations, the
Court finds defendants BlackburnSteele, Zaroui, and Crawford have
sufficient
contacts
with
Florida
4
so
that
the
extension
of
Defendant BlackburnSteele’s affidavit is provided by its
managing member, defendant Crawford.
(Doc. #58.)
While the
affidavit does not acknowledge defendant BlackburnSteele made
communications to plaintiff, it does not dispute it either. See
Thomas v. Brown, 504 Fed. App’x 845, 847 (11th Cir. 2013) (noting
that in personal jurisdiction analysis, if the plaintiff’s
complaint and the defendant’s evidence conflict, “the district
court must construe all reasonable inferences in favor of the
plaintiff”). Furthermore, the affidavit notes that to the extent
any of the complaint’s factual allegations relate to defendant
BlackburnSteele, “even assuming those allegations true for
arguments sake, they were done in Blackburn’s capacity as an agent
of 3 Amigos.” (Id. p. 2.)
24
jurisdiction comports with the due process requirements of the
Fourteenth Amendment.
See Burger King Corp. v. Rudzewicz, 471
U.S. 462, 476 (1985) (“So long as a commercial actor’s efforts are
‘purposefully directed’ toward residents of another State, we have
consistently rejected the notion that an absence of physical
contacts can defeat personal jurisdiction there.”); Rail Trs.
Locomotive Leasing, LLC v. SunCoke Energy, Inc., 2016 WL 8902367,
*8
(M.D.
Fla.
Aug.
16,
2016)
(finding
email
and
phone
call
communications “sufficient to be viewed as substantial and not
isolated under a minimum contacts analysis”).
D. Sanctions
Finally, the defendants request the Court impose sanctions
pursuant to section 78u-4(c) of the PSLRA.
That
provision
requires
the
Court
to
(Doc. #96, pp. 22-24.)
make
“record
specific
findings” regarding compliance by each party and each attorney
with the requirements of Rule 11(b) of the Federal Rules of Civil
Procedure. 5
15 U.S.C. § 78u-4(c)(1).
However, the provision only
applies “upon final adjudication of the action,” id., and therefore
does not apply at this time.
Accordingly, it is now
5
Rule 11(b) imposes a duty upon attorneys to “refrain from
filing or pursuing frivolous claims.” Mirabilis Ventures, Inc. v.
Palaxar Grp., LLC, 2010 WL 5582878, *9 (M.D. Fla. Dec. 15, 2010)
(citation omitted).
25
ORDERED:
1. The defendants’ Motion to Dismiss (Doc. #96) is DENIED.
2. The defendants’ request for sanctions pursuant to section
78u-4(c) is DENIED as moot.
DONE AND ORDERED at Fort Myers, Florida, this
July, 2019.
Copies: Counsel of record
26
25th
day of
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?