Skypoint Advisors, LLC. v. 3 Amigos Productions LLC. et al
Filing
131
ORDER denying 116 Motion for Reconsideration. Signed by Judge John E. Steele on 9/23/2019. (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.
ORDER AND OPINION
This matter comes before the Court on the defendants’ Motion
for Reconsideration (Doc. #116) filed on August 9, 2019.
The
defendants seek reconsideration of this Court’s July 25, 2019 Order
and Opinion (Doc. #111) denying the defendants’ motion to dismiss.
In the alternative, the defendants request the Court amend the
July 25th order to include a certificate for interlocutory appeal.
Plaintiff filed a Response (Doc. #121) on August 22, 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
plaintiff,
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.
#93-1, p. 52.)
(Id. p. 27; Doc.
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
requirements.
“securities”
(Id. p. 54.)
exempt
from
federal
registration
Finally, the agreement contained a
choice of law provision construing the agreement under Florida
- 2 -
law, and a forum-selection clause listing “any court in the State
of Florida” as having jurisdiction over the matter.
Sometime
“developed
after
entering
significant
into
concerns”
demanded a refund of its money.
the
related
(Id. p. 55.)
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
(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.
pp. 14-15.)
(Doc. #92,
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)
- 3 -
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.
47.)
(Doc. #93, pp. 32-
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 another motion to
dismiss.
(Doc. #96.)
The motion sought dismissal on a variety
of grounds, but specifically argued the Section 10(b) claim should
be dismissed for (1) failing to satisfy the heightened pleading
requirements of the PSLRA and Rule 9(b), and (2) failing to state
a claim upon which relief can be granted.
July
25,
2019,
the
Court
denied
the
(Id. pp. 11-17.)
motion.
(Doc.
On
#111.)
Regarding the Section 10(b) claim, the Court found the Third
Amended Complaint met the heightened pleading requirements of Rule
9(b) and the PSLRA, and alleged sufficient facts to state a claim.
(Id. pp. 8-18.)
On
August
9,
2019,
the
defendants
reconsideration now before the Court.
filed
the
(Doc. #116.)
motion
for
The motion
requests the Court reconsider its prior Order and Opinion denying
- 4 -
the motion to dismiss, asserting the Court “was in error regarding
the
law
to
allegations
be
applied,
of
the
the
[Third
application
Amended
of
the
Complaint]
law
or
understanding or addressing Defendants’ arguments.”
in
to
the
fully
(Id. p. 6.)
Alternatively, if reconsideration shall be denied, the defendants
request the Court certify its prior Order and Opinion for immediate
interlocutory appeal.
(Id. p. 19.)
The Court will address each
of these arguments in turn.
II.
A. Legal Standard for Reconsideration
A non-final order may be revised at any time before the entry
of a final judgment.
Fed. R. Civ. P. 54(b).
The decision to
grant a motion for reconsideration is within the sound discretion
of the trial court, Region 8 Forest Serv. Timber Purchasers Council
v. Alcock, 993 F.2d 800, 806 (11th Cir. 1993), and courts have
delineated three major grounds justifying reconsideration: “(1) an
intervening change in controlling law; (2) the availability of new
evidence; [and] (3) the need to correct clear error or prevent
manifest injustice,” Sussman v. Salem, Saxon & Nielsen, P.A., 153
F.R.D.
689,
Additionally,
include
694
(M.D.
appropriate
situations
in
Fla.
1994)
circumstances
which
“the
(citation
for
Court
omitted).
reconsideration
has
obviously
misapprehended a party’s position, or the facts, or mistakenly has
decided an issue not presented for determination.”
- 5 -
United States
v. Halifax Hosp. Med. Ctr., 2013 WL 6284765, *1 (M.D. Fla. Dec. 4,
2013).
However,
reconsideration
extraordinary
remedy
and
a
of
power
a
court’s
to
be
order
‘used
“is
an
sparingly,’”
Santamaria v. Carrington Mortg. Servs., LLC, 2019 WL 3537150, *2
(M.D. Fla. July 10, 2019) (citation omitted), with the burden “upon
the movant to establish the extraordinary circumstances supporting
reconsideration,” Mannings v. Sch. Bd. of Hillsborough Cty., Fla.,
149 F.R.D. 235, 235 (M.D. Fla. 1993).
The motion “must demonstrate
why the court should reconsider its past decision and set forth
facts or law of a strongly convincing nature to induce the court
to reverse its prior decision.”
Santamaria, 2019 WL 3537150, *2
(citation omitted).
B. Relevant Factual Allegations from the Third Amended Complaint
The defendants’ motion for reconsideration focuses on the
Court’s ruling regarding the Section 10(b) claim in the Third
Amended Complaint.
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
investors.”
15 U.S.C. § 78j(b).
or
for
the
protection
of
SEC Rule 10b–5 implements this
provision by making it unlawful to, inter alia, “make any untrue
- 6 -
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.”
C.F.R. § 240.10b–5(b).
17
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).
The Third Amended Complaint’s Section 10(b) claim accuses the
defendants of making fraudulent statements to induce plaintiff to
invest in a film project.
Amended
Complaint
lists
(Doc. #93, pp. 32-36.)
the
following
as
The Third
examples
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[;]
. . .
(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[;]
. . .
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the
(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
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.)
Further, the Third Amended Complaint alleges the following:
61. 3 Amigos, Zaroui, BlackburnSteele and Crawford,
jointly and severally, carried out a plan, scheme, and
course of conduct that was intended to, and did (i)
deceive Skypoint, as alleged herein; and (ii) cause
Skypoint to invest in the Project. In furtherance of
this unlawful scheme, 3 Amigos, Zaroui, BlackburnSteele,
and Crawford took the actions set forth herein.
62. At all times material hereto, Defendants (i)
employed devices, schemes, and artifices to defraud;
- 8 -
(ii) made untrue statements of material fact and/or
omitted to state material facts necessary to make the
statements not misleading; (iii) manufactured documents
such as Excel, PDF, pictures, and logos in order to
mislead Skypoint as to the validity of funding and
revenue generation of the Project; and (iv) engaged in
acts, practices and a course of business which operated
as a fraud and deceit upon Skypoint as an investor of
the Project in violation of Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5.
Defendants are sued as primary participants in the
wrongful and illegal conduct charged herein pursuant to
Section 20(a) of the Securities Exchange Act of 1934.
63. 3 Amigos, Zaroui, BlackburnSteele and Crawford,
individually and in concert, directly and indirectly, by
the use, means, or instrumentalities of interstate
commerce and/or of the mails, engaged and participated
in a course of conduct to conceal adverse material
information about the Project, the status of the
Project, and the funds available for the Project, and
fraudulently obtained investment money from Skypoint,
among other things, as specified herein.
64. Defendants each employed devices, schemes and
artifices to defraud and engaged in acts, practices, and
a course of conduct as alleged herein in an effort to
assure Skypoint of the value of investing in the Project,
which included the making of, or the participation in
the making of, untrue statements of material facts about
the Project and omitting to state material facts
necessary in order to make the statements made not
misleading.
65. Zaroui, BlackburnSteele, and Crawford’s primary
liability arises from the following facts, among others:
(i) they were high-level officers within 3 Amigos and/or
high-level players in the scheme to sell Skypoint an
interest in the Project; (ii) they, by virtue of their
responsibilities and activities as high-level players in
the scheme, were privy to and participated in the
creation, development and dissemination of 3 Amigo’s
projections and/or reports; and (iii) they were aware of
3 Amigo’s dissemination of information to Skypoint which
they knew or recklessly disregarded was materially false
and misleading.
- 9 -
66. 3 Amigos, Zaroui, BlackburnSteele, and Crawford had
actual knowledge of the misrepresentations and omissions
of material facts set for [sic] herein, or acted with
severely reckless disregard for the truth, in that each
failed to ascertain and disclose such facts, even though
such facts were available to them. Such Defendants’
material misrepresentations and/or omissions were done
knowingly or with deliberate recklessness and for the
purpose and effect of concealing information regarding
the Project’s true status as a façade and vehicle for
fraud and theft.
67. Defendants’ actions, as described herein, were made
with the intent to deceive, manipulate, or defraud
Skypoint.
68. As a result of the dissemination of materially false
and misleading information and failure to disclose
material facts, as set forth herein, the Project
appeared to be a legitimate investment opportunity for
Skypoint.
69. In ignorance of the fact that the Project’s
investment opportunity was merely a façade for a
criminal scheme, Skypoint invested its money into the
Project and was damaged thereby.
70. At the time of said misrepresentations
omissions, Skypoint was ignorant of their falsity
believed them to be true. Had Skypoint known
Defendants’ fraudulent practices, Skypoint would
have invested or otherwise acquired an interest in
Project.
and
and
of
not
the
71. By virtue of the foregoing, 3 Amigos, Zaroui,
BlackburnSteele, and Crawford have each violated Section
10(b) of the Securities Exchange Act of 1934 and Rule
10b-5 promulgated thereunder.
72. As a direct, proximate, and substantial result of 3
Amigos, Zaroui, BlackburnSteele, and Crawford’s wrongful
conduct, Skypoint suffered damages in connection with
its investment in the Project.
(Id. pp. 33-36.)
- 10 -
C. Arguments for Reconsideration
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
- 11 -
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
requirements for Rule 10b–5(b) actions.
predicated
on
allegedly
false
or
heightened
Id.
misleading
pleading
For such claims
statements
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.
- 12 -
or
15 U.S.C. § 78u–4(b)(1).
In seeking reconsideration, the defendants argue the Third
Amended Complaint (1) fails to meet the current standards of
scienter pleading, (2) fails to allege scienter of each defendant
for
each
alleged
statement,
(3)
fails
the
Supreme
Court’s
plausibility test, (4) fails to sufficiently allege proximate
causation of loss, and (5) fails to sufficiently allege reasonable
reliance.
(Doc.
#116,
pp.
6-13,
15-19.)
Additionally,
the
defendants argue reconsideration should be granted because the
Court misconstrued the defendants Rule 9(b) argument.
(Id. p. 13-
15.)
1. Scienter
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
- 13 -
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).
In the prior motion to dismiss, the defendants argued the
Section 10(b) claim failed to adequately plead scienter by ignoring
the requirement to allege scienter for each defendant with respect
- 14 -
to each alleged violation of the statute.
(Doc. #96, p. 14.)
Instead, according to the defendants, the Third Amended Complaint
pleads generalized misstatements spread over a threemonth period, utterly failing to identify any factual
basis regarding the state of mind of any maker of any
statement at any time, let alone regarding every
misstatement alleged, as is required to avoid dismissal.
The most scienter the [Third Amended Complaint] bothers
to allege is that Defendants Crawford, BlackburnSteele
and Zaroui were “high-level players” in the scheme to
sell Skypoint an interest in the Project, and/or “highlevel officers” of 3 Amigos. Failing to meet the pleading
requirements for alleging scienter mandates dismissal of
Skypoint’s 10(b) claims.
(Id.)
The Court, considering the complaint in its entirety,
accepting all factual allegations as true, and taking into account
plausible
Amended
opposing
Complaint
inferences,
alleged
disagreed
sufficient
and
found
facts
the
which,
collectively, gave rise to a strong inference of scienter.
#111, p. 13.)
Third
taken
(Doc.
In support, the Court cited two cases from this
district: Anderson v. Transglobe Energy Corp., 35 F. Supp. 2d 1363
(M.D. Fla. Feb. 8, 1999) and Page v. Derrickson, 1997 WL 148558
(M.D. Fla. Mar. 25, 1997).
(Doc. #111, p. 14.)
In the motion for reconsideration, the defendants first argue
the Court “erroneously relied on a scienter pleading standard that
no
longer
controls.”
(Doc.
#116,
p.
6.)
Essentially
the
defendants argue the Court did not apply the PSLRA’s heightened
pleading standard to the Third Amended Complaint, as demonstrated
by the Court’s reliance on two cases that predated the Supreme
- 15 -
Court’s opinions in Ashcroft v. Iqbal, 556 U.S. 662 (2009) and
Tellabs, Inc. v. Makor Issues and Rights, Ltd., 551 U.S. 308
(2007).
(Doc. #116, pp. 7-9.)
The Court disagrees.
The Order
and Opinion stated the heightened pleading standard for scienter
allegations and applied that standard to the facts alleged in the
Third Amended Complaint.
(Doc. #111, pp. 11-14.)
While the
defendants may disagree with the Court’s ultimate conclusion in
applying
the
heightened
standard,
entitlement to reconsideration.
LLC,
2018
WL
3390238,
*1
they
have
not
demonstrated
See Galle v. Nationstar Mortg.,
(M.D.
Fla.
Jan.
25,
2018)
(“That
Nationstar disagrees with the Court’s conclusion is not a basis
for reconsideration of that conclusion.”).
The defendants next argue that in finding the Third Amended
Complaint’s scienter allegations sufficient, “the Court did not
address a key scienter pleading deficiency raised by Defendants’
[motion
to
supposedly
dismiss],
occurred
on
namely
that
non-specific
the
alleged
dates
period from November 2016 to January 2017.”
over
misstatements
a
three-month
(Doc. #116, p. 10.)
The defendants argue that because the majority of the alleged
misstatements do not have a specific date and the Third Amended
Complaint alleges each defendant made each misrepresentation, “an
alleged misstatement by one Defendant with scienter does not imply
that another defendant repeating the statement necessarily knew of
its falsity.”
(Id. p. 11.)
The defendants also argue that the
- 16 -
Court failed to address the possibility that Pittman was the source
of all the alleged misinformation, and that the defendants only
repeated the misinformation in good faith over a three-month
period.
(Id.)
Having reviewed the defendants’ motion to dismiss, the Court
finds it did not err in failing to address these arguments because
the defendants did not present them as part of their scienter
argument. 1
As
noted,
the
motion’s
scienter
argument,
which
consisted of one paragraph, stated the Third Amended Complaint
ignored the requirement to plead scienter with respect to each
defendant and for each alleged violation, and instead
pleads generalized misstatements spread over a threemonth period, utterly failing to identify any factual
basis regarding the state of mind of any maker of any
statement at any time, let alone regarding every
misstatement alleged, as is required to avoid dismissal.
The most scienter the [Third Amended Complaint] bothers
to allege is that Defendants Crawford, BlackburnSteele
and Zaroui were “high-level players” in the scheme to
sell Skypoint an interest in the Project, and/or “highlevel officers” of 3 Amigos. Failing to meet the pleading
requirements for alleging scienter mandates dismissal of
Skypoint’s 10(b) claims.
(Doc. #96, p. 14.)
The Court finds this broad assertion does not
1
The Court notes that the motion to dismiss did raise similar
arguments as part of other issues. For example, the motion argued
the Third Amended Complaint’s three-month range allegation was
insufficient under Rule 9(b). (Doc. #96, p. 12.) Similarly, the
motion argued that because Pittman could have made any statements
attributable to defendant 3 Amigos, the other defendants would not
be liable under Janus Capital Group, Inc. v. First Derivative
Traders, 564 U.S. 135 (2011).
(Id.)
The Court addressed and
rejected each of these arguments. (Doc. #111, pp. 9-10.)
- 17 -
encompass the specific arguments now being advanced relating to
Pittman and the repeating of misinformation.
See OCR Sols., Inc.
v. CharacTell, Inc., 2017 WL 6948587, *1 (M.D. Fla. Oct. 6, 2017)
(“A party may abandon an argument by failing to plainly and
prominently raise it, for instance by devoting a discrete section
of his argument to that claim.” (marks and citations omitted));
Connectus LLC v. Ampush Media, Inc., 2017 WL 2620541, *5 (M.D.
Fla. June 16, 2017) (noting “such terse, off-handed references do
not sufficiently raise an argument”).
Because the Court finds the
defendants are raising these arguments as applied to scienter for
the first time, reconsideration is inappropriate.
See OCR, 2017
WL 6948587, *1 (“[A] motion for reconsideration does not provide
parties the opportunity to present for the first time an argument
that could have been raised when the matter was initially before
the court.”).
2. Plausibility
The defendants next state that the Court erred by using “a
pleading standard with regard to plausibility that no longer
controls.”
(Doc. #116, p. 12.)
In the prior Order and Opinion,
the Court stated the following:
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.
- 18 -
1994) (“In 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.”).
(Doc. #111, p. 9 n.1).
The defendants argue the Court erred
because “there is no longer any requirement to accept allegations
as true which are conclusory or implausible.”
(Doc. #116, p. 12.)
The
the
defendants
Complaint
further
alleges
each
argue
that
defendant
because
individually
Third
made
Amended
the
same
misrepresentations to plaintiff over a three-month period, such
allegations are implausible and the Court erred in accepting them.
(Id. pp. 12-13.)
The Court rejects the defendants’ argument.
and
Opinion
did
not
apply
the
wrong
The prior Order
standard
because
the
allegations in the Third Amended Complaint are not implausible.
See Iqbal, 556 U.S. at 678 (noting “[t]he plausibility standard is
not akin to a ‘probability requirement’”); Twombly, 550 U.S. at
556 (noting “a well-pleaded complaint may proceed even if it
strikes
a
savvy
judge
that
actual
proof
of
those
facts
is
improbable, and ‘that a recovery is very remote and unlikely’”
(citation omitted)); Barton v. Florida, 2007 WL 1724943, *1 (N.D.
Fla. June 13, 2007) (noting that under Twombly, the allegations in
the complaint must contain enough factual matter, “taken as true
even if doubtful in fact,” to establish plausible entitlement to
relief).
- 19 -
3. Proximate Causation of Loss
The
defendants
next
suggest
proximate loss was incomplete.”
causation
element
of
a
Rule
“the
Court’s
analysis
(Doc. #116, p. 15.)
10b-5
claim
of
The loss
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).
Stated differently, “loss
causation describes ‘the link between the defendant’s misconduct
and
the
plaintiff’s
economic
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 plaintiff must show that the defendant’s fraud—
as opposed to some other factor—proximately caused his claimed
losses; however, the plaintiff need not show that the defendant’s
misconduct was the “sole and exclusive cause” of his injury, but
only that it was a “substantial” or “significant contributing
cause.”
FindWhat, 658 F.3d at 1309 (citations omitted).
Finally,
loss causation is not subject to the PSLRA’s heightened 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).
“To sufficiently plead loss causation, the plaintiff can
allege that had they known the truth, they would not have invested,
and that the untruth was in some reasonably direct way responsible
- 20 -
for their loss.”
Page, 1997 WL 148558, *6; see also Anderson, 35
F. Supp. 2d at 1369 (same).
In the prior Order and Opinion, the
Court found the Third Amended Complaint adequately pled loss
causation
because
Defendants’
it
fraudulent
alleged
(1)
practices,
had
plaintiff
[plaintiff]
“known
would
not
of
have
invested or otherwise acquired an interest” in the film, and (2)
as a direct and proximate result of the defendants’ conduct,
plaintiff suffered damages from the investment.
15; Doc. #93, pp. 35-36.)
(Doc. #111, p.
As noted, the Third Amended Complaint
alleges the film’s investment opportunity “was merely a façade for
a criminal scheme” and the project was a “vehicle for fraud and
theft.”
(Doc. #93, p. 35.)
In determining the Third Amended
Complaint adequately pled loss causation, the Court cited a prior
decision of this district: In re PSS World Medical, Inc. Securities
Litigation, 250 F. Supp. 2d 1335 (M.D. Fla. 2002).
(Doc. #111,
pp. 15-16.)
In seeking reconsideration on this issue, the defendants
first argue PSS World Medical is distinguishable from the present
case.
(Doc. #116, p. 15.)
The Court disagrees.
While the
underlying facts may be different, PSS World Medical involved
similar allegations as those made in the Third Amended Complaint.
See id. at 1351 (“The Court also disagrees with the Defendants
regarding the loss causation element of securities fraud.
The
Court finds that the Plaintiffs have averred that the Defendants’
- 21 -
misrepresentations or omissions caused the Plaintiffs’ [sic] to
purchase the inflated stock, and that the Defendants’ fraud in
committing GAAP violations and improprieties was part of a course
of
conduct
Plaintiffs’
that
was
loss”).
ultimately
the
Regardless,
proximate
the
cause
defendants
of
the
have
not
demonstrated the Court committed clear error in relying on PSS
World Medical, and therefore reconsideration is not warranted.
The remaining arguments presented by the defendants on this
issue relate either to arguments made in the prior motion to
dismiss, or to issues that cannot be decided at the pleading stage.
For example, the defendants state that the Third Amended Complaint
“alleges nothing to distinguish between the losses caused by the
10(b) allegations and those caused by post-investment misconduct.”
(Doc. #116, p. 16.)
The Court identified this argument in its
prior Order and Opinion and was unconvinced by it.
(Doc. #111,
pp. 14-15); see also FindWhat, 658 F.3d at 1309 (noting that a
plaintiff need not show that the defendant’s misconduct was the
“sole and exclusive cause” of his injury, but only that it was a
“substantial” or “significant contributing cause”).
The remainder
of the defendants’ arguments relate to whether plaintiff actually
suffered a loss and how such a loss can be demonstrated.
#116, pp. 15-17.)
motion to dismiss.
(Doc.
However, such issues are beyond the scope of a
See Eastwood Enters., LLC v. Farha, 2009 WL
3157668, *5 (M.D. Fla. Sept. 28, 2009) (noting “loss causation is
- 22 -
a fact-based inquiry that is generally not proper to resolve on a
motion to dismiss”); see also Lormand v. US Unwired, Inc., 565
F.3d 228, 267 n.35 (5th Cir. 2009) (“[S]everal circuit courts and
district courts point out that it is often inappropriate to use a
Rule 12(b)(6) motion as a vehicle to resolve disputes over ‘loss
causation.’”).
Accordingly, the Court finds reconsideration on
the issue of loss causation is unwarranted.
4. Reasonable Reliance
The defendants next suggest the Court’s analysis of the
“reasonable reliance” element of the Section 10(b) claim was
incomplete.
fraud
under
(Doc. #116, p. 17.)
Section
10(b)
and
To state a claim for securities
Rule
10b-5,
a
plaintiff
must
adequately allege, inter alia, reasonable or justifiable reliance.
See S.E.C. v. Morgan Keengan & Co., Inc., 678 F.3d 1233, 1244 (11th
Cir. 2012) (noting that in a private enforcement action under
Section 10(b) or Rule 10b-5, a plaintiff must show “justifiable
reliance” on the material misstatement or omission); Ledford v.
Peeples, 657 F.3d 1222, 1248 n.80 (11th Cir. 2011) (“In the Rule
10b-5(b) context, we have used the words ‘justifiably relied’ as
the
equivalent
of
‘reasonably
relied.’”).
In
the
motion
to
dismiss, the defendants stated the Third Amended Complaint failed
to meet the requirements for pleading reasonable reliance, and
then
presented
specific
arguments
regarding
misrepresentations related to the film’s revenue.
- 23 -
alleged
(Doc. #96, pp.
15-17.)
The
Court
rejected
the
argument,
finding
the
Third
Amended Complaint’s allegations that plaintiff relied upon the
misrepresentations
when
entering
into
sufficient to allege reasonable reliance.
#93, pp. 5, 26.)
the
agreement
were
(Doc. #111, p. 17; Doc.
In doing so, the Court noted the following:
While the defendants challenge whether plaintiff could
have reasonably relied on the alleged misrepresentations
related to revenues, plaintiff has also alleged 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.
(Doc. #111, pp. 17-18.)
In seeking reconsideration, the defendants argue the Court
erred in determining the reliance argument related only to specific
alleged
misrepresentations
misrepresentations.
and
not
(Doc. #116, p. 18.)
all
the
alleged
The defendants suggest
the Court “recognized that the reasonable reliance requirement was
problematic regarding the [Third Amended Complaint’s] allegations
regarding revenue,” but “inexplicably . . . upheld the remaining
eight allegations.”
(Id.)
The defendants then argue that
plaintiff did not act with due diligence in investigating the truth
of the alleged misrepresentations, and that each of the alleged
misrepresentations
sophisticated
“was
investor.”
easily
verifiable—particularly
(Id.
at
18.)
for
Accordingly,
a
the
defendants suggest “any claim of reliance on representations made
- 24 -
between one and four months [before the agreement was entered into]
is inherently unreasonable and unjustified.”
The
Court
finds
reconsideration
of
the
the
regarding reliance.
defendants
prior
Order
(Id. p. 19.)
argument
and
does
Opinion’s
not
merit
conclusion
Even assuming the Court erred in interpreting
the defendants’ argument as applying only to the two alleged
misrepresentations cited in the motion to dismiss, the defendants
still have not demonstrated the Third Amended Complaint fails to
adequately allege reasonable reliance for any of the alleged
misrepresentations.
The Third Amended Complaint lists the alleged
misrepresentations,
states
plaintiff
“was
ignorant
of
their
falsity and believed them to be true,” and notes several times
that plaintiff relied on those misrepresentations when entering
into the agreement.
(Doc. #93, pp. 5-25, 26, 35.)
The Court
finds this sufficient to allege reasonable reliance.
See Dekle
v. Glob. Dig. Sols., Inc., 131 F. Supp. 3d 1280, 1288 (S.D. Ala.
2015)
(“The
Second
Amended
Complaint
identifies
the
alleged
misrepresentations made by defendants, indicates that ‘Plaintiffs
did
not
realize
the
fraudulent
representations,’
and
alleges
nature
that
or
‘[t]he
falsity
of
these
misrepresentations
caused the Plaintiffs to accept stock rather than cash as partial
payment of the purchase price.’ Such allegations are facially
adequate to plead reliance.” (citation omitted)).
- 25 -
While the defendants argue the Third Amended Complaint fails
to allege “reasonable” reliance because due diligence would have
verified the falsity of the alleged misrepresentations (Doc. #116,
pp. 18-19), the Court finds such an argument beyond the scope of
the pleadings.
The Eleventh Circuit has listed eight factors to
consider in determining whether reliance was justified, including
the sophistication of the plaintiff, and noted that all of the
factors “must be considered and balanced in determining whether
reliance was justified.”
Bruschi v. Brown, 876 F.2d 1526, 1529
(11th Cir. 1989) (citation omitted).
The Court finds that the
determination of whether a party exercised due diligence and the
reasonableness
of
their
reliance
are
factual
appropriate at a later stage of proceedings.
inquires
more
See Prager v. FMS
Bonds, Inc., 2010 WL 2950065, *5 (S.D. Fla. July 26, 2010) (“Taking
the
allegations
in
Prager’s
Amended
Complaint
as
true,
the
questions of whether Prager exercised due diligence and reasonably
relied upon the alleged misrepresentations raise factual questions
which cannot be resolved as a matter of law on a motion to
dismiss.”); Carran v. Morgan, 510 F. Supp. 2d 1053, 1059 (S.D.
Fla. 2007) (“With respect to the element of justifiable reliance,
the Court finds that the Amended Complaint properly pleads that
Carran relied on Morgan’s investment advice.
As to the question
of whether this reliance was justifiable, the Court concludes that
such a determination requires a factual inquiry to be determined
- 26 -
at
a
later
stage
in
this
litigation.”
(citation
omitted)).
Accordingly, the Court finds reconsideration on this issue is
unwarranted. 2
5. Rule 9(b)
Finally, the defendants argue “the Court gave an incomplete
analysis as to whom the [Third Amended Complaint] attributes
misrepresentations.”
Amended
Complaint
(Doc. #116, pp. 13-14.)
contains
a
list
defendant,
including
defendant
plaintiff.
3
(Doc. #93, pp. 5-25.)
of
As noted, the Third
misrepresentations
Amigos,
allegedly
made
each
to
In the motion to dismiss, the
defendants argued any statement attributable to defendant 3 Amigos
could have been made by Pittman, in which case the other defendants
would not be liable.
(Doc. #96, p. 12.)
The Court rejected this
argument because when the Third Amended Complaint attributes a
2
To the extent the defendants argue plaintiff could not
reasonably rely on any oral representations which differed from
the terms of the film agreement (Doc. #116, pp. 18-19), the Court
is not convinced at this time. The Eleventh Circuit has stated
such a fact is not dispositive in a Section 10(b) claim, but rather
only a factor to consider in determining the reasonableness of
reliance.
Bruschi, 876 F.2d at 1530 (“The fact that some
information in the disclosure documents would have indicated that
some of Brown’s alleged oral misrepresentations were unreliable is
a factor to consider, but this factor alone is not dispositive;
all of the relevant factors must be balanced.”); see also Hemenway
v. Bartoletta, 2012 WL 1252691, *6 (M.D. Fla. Apr. 12, 2012) (“[I]n
accordance with Bruschi, Defendants cannot rely on the proffered
documents, such as the Subscription Agreements and the Limited
Partnership Agreements, to dismiss the Hemenways’ § 10(b) and Rule
10b–5 claim on the basis that the documents directly contradict
Defendants’ preceding oral statements.”).
- 27 -
representation to defendant 3 Amigos, it does so “by and through”
one of the other named defendants.
(Doc. #111, p. 9; Doc. #93,
pp. 7, 9, 12, 13, 15, 17, 20, 22, 23, 25.)
While “conced[ing] the Court’s point,” the defendants note
that other allegations in the Third Amended Complaint do not have
the “by and through” language.
the
Third
Amended
(Doc. #116, p. 14.)
Complaint’s
Section
10(b)
For example,
claim
makes
allegations regarding the “Defendants” as well as “3 Amigos,
Zaroui, BlackburnSteele and Crawford.”
The
defendants
argue
that
because
(Doc. #93, pp. 33-36.)
these
allegations
could
implicate Pittman, the Section 10(b) claim should be dismissed.
(Doc. #116, p. 14.)
The Court disagrees with the defendants’ argument.
Amended
Complaint
makes
numerous
references
includes various allegations related to him.
14-16, 30, 40, 42.)
are
challenging
to
The Third
Pittman
and
(Doc. #93, pp. 2,
In contrast, the allegations the defendants
refer
to
either
the
“Defendants”
or
some
combination of “3 Amigos, Zaroui, BlackburnSteele and Crawford.”
(Doc. #93, pp. 33-36.)
Combined with the previous allegations
against defendant 3 Amigos “by and through” one of the other named
defendants, the Court finds the reasonable inference from the
allegations is that they apply to the named defendants and not
Pittman.
See In re Faro Technologies Sec. Litig., 534 F. Supp.
2d 1248, 1255 (M.D. Fla. 2007) (noting that on a motion to dismiss,
- 28 -
the
Court
accepts
as
true
all
well-pleaded
allegations
“and
construes all reasonable inferences therein in the light most
favorable to the plaintiff”). 3
As the defendants have not demonstrated the Court committed
clear error or misconstrued the defendants’ prior arguments in the
previous Order and Opinion, the Court finds reconsideration is
unwarranted.
Accordingly, the defendants renewed request that the
Court dismiss the Third Amended Complaint’s Section 10(b) claim is
denied.
III.
Having determined reconsideration of the prior Order and
Opinion is unwarranted, the Court turns to the alternative request
for certification for interlocutory appeal.
3
To the extent the defendants argue the Third Amended
Complaint should be dismissed pursuant to the Supreme Court’s
opinion in Janus (Doc. #116, p. 13), the Court disagrees.
In
Janus, the Supreme Court held that, for purposes of Rule 10b-5,
“the maker of a statement is the person or entity with ultimate
authority over the statement, including its content and whether
and how to communicate it.” 564 U.S. at 142. The Court further
held that a defendant must have “made” the statement to be liable
for a violation of Rule 10b-5. Id. at 141. As noted, the Third
Amended Complaint contains a list of the alleged misstatements
made to plaintiff and attributes each to the defendants, including
defendant 3 Amigos “by and through” the other defendants. (Doc.
#93, pp. 5-25.)
The Third Amended Complaint then states the
defendants
“knowingly
made
the
aforementioned
false
representations” in an attempt to mislead investors. (Id. p. 26.)
The Court finds this sufficient under Janus to allege who “made”
the alleged misrepresentations.
- 29 -
A. Legal Standard for Certification
As
a
general
principle,
immediately appealable.
interlocutory
orders
are
not
See CSX Transp., Inc. v. Kissimmee Util.
Auth., 153 F.3d 1283, 1285 (11th Cir. 1998).
However, 28 U.S.C.
§ 1292 provides an exception to the general rule.
Under Section
1292(b), a district court may certify an interlocutory order for
immediate appellate review if the court makes three findings: (1)
the interlocutory order “involves a controlling question of law”;
(2) over which there is a “substantial ground for difference of
opinion”; and (3) the immediate appeal “may materially advance the
ultimate termination of the litigation.”
28 U.S.C. § 1292(b).
B. Arguments for Certification
The defendants argue that the requirements for certification
are met with respect to the following issues: (1) whether the Court
employed the proper PSLRA pleading standard regarding scienter;
(2) whether the Third Amended Complaint adequately pleads scienter
as to each of the defendants; (3) whether the Third Amended
Complaint meets the pleading requirements of Rule 9(b), Rule 8(a),
and
plausibility;
adequately
pleads
(4)
whether
plaintiff’s
the
Third
justifiable
Amended
reliance;
Complaint
and
(5)
whether the Third Amended Complaint adequately pleads proximate
causation of losses.
(Doc. #116, pp. 19-20.)
Having reviewed the defendants’ argument, the Court finds
certification is inappropriate because there is not a “substantial
- 30 -
ground for difference of opinion” on the above issues.
the
defendants’
first
argument,
the
prior
Order
Regarding
and
Opinion
described the heightened pleading standard under the PSLRA, and
the Court applied that standard to the scienter allegations in the
Third Amended Complaint.
Similarly, the Court applied the proper
pleading standards under Rules 8 and 9 of the Federal Rules of
Civil Procedure, as well as the Supreme Court’s plausibility
standard, and determined the Section 10(b) claim was sufficiently
pled to survive dismissal.
While the defendants may disagree with
the Court’s conclusion, such disagreement does not amount to a
“substantial ground for difference of opinion.”
See Reyes v. BCA
Fin. Servs., Inc., 2018 WL 2849768, *3 (S.D. Fla. June 8, 2018)
(noting
“the
mere
claim
that
the
district
court’s
ruling
is
incorrect does not support a finding that there is substantial
ground for difference of opinion” (citation omitted)).
Therefore,
the Court declines the defendants’ request to certify the prior
Order and Opinion for interlocutory appeal.
Accordingly, it is hereby
ORDERED:
Defendants’ Motion for Reconsideration (Doc. #116) is DENIED.
DONE and ORDERED at Fort Myers, Florida, this
of September, 2019.
- 31 -
23rd
day
Copies:
Counsel of Record
- 32 -
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