TMJ Group LLC v. IMCMV Holdings Inc. et al

Filing 154

ORDER: IT IS HEREBY ORDERED that IMC Defendants' 65 motion for summary judgment is GRANTED to the extent it seeks summary judgment on TMJ Plaintiffs' claims for rescission pursuant to the Securities Act of 1933 and TMJ Plaintiffs' LUTPA Claim. IMC Defendant' motion for summary judgment is DENIED in all other respects. Signed by Judge Nannette Jolivette Brown on 4/18/2018. (mmv)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
TMJ GROUP LLC, et al.

CIVIL ACTION

VERSUS

CASE NO. 17-4677

IMCMV HOLDINGS INC., et al.

SECTION: “G” (1)
ORDER

Pending before this Court is Defendants IMCMV Holdings, Inc. (“IMC Holdings”) and
IMCMV Management, LLC’s (“IMC Management”) (collectively, “IMC Defendants”) motion for
summary judgment.1 In this action, TMJ Group, LLC (“TMJ Group”) and TMJ Developer, LLC
(“TMC Developer”) (collectively, “TMJ Plaintiffs”) allege that IMC Defendants made
misrepresentations upon which TMJ Plaintiffs relied for the purpose of investing in two
Margaritaville restaurants located in Minneapolis, Minnesota, and New Orleans, Louisiana, giving
rise to TMJ Plaintiffs’ claims for rescission pursuant to the Securities Act of 1933; securities fraud
in violation of the Securities Exchange Act of 1934; intentional misrepresentation or fraudulent
inducement; negligence; breach of contract; breach of fiduciary duty; negligent misrepresentation;
rescission pursuant to Louisiana Blue Sky laws; violation of the Louisiana Unfair Trade Practices
Act (“LUTPA”); and anticipatory breach of contract.2 Considering the motion, the memoranda in
support and opposition, the record, oral argument, and the applicable law, the Court will grant IMC
Defendants’ motion to the extent it seeks summary judgment on TMJ Plaintiff’s claims for

1

Rec. Doc. 65.

2

Rec. Doc. 46

1

rescission pursuant to the Securities Act of 1933 and TMJ Plaintiff’s LUTPA claims. The Court
will deny the motion in all other respects.
I. Background
A.

Factual Background
The following facts are alleged in TMJ Plaintiffs’ statement of undisputed facts and are

generally undisputed by IMC Defendants.3 On or about June 30, 2015, TMJ Group entered into a
Limited Liability Company Operating Agreement (the “NOLA Business Operating Agreement”)
with IMC Holdings, under which IMCMV New Orleans, LLC (“IMC NOLA”) was formed.4 IMC
NOLA’s sole members are TMJ Group and IMC Holdings, both of whom hold Class A and Class
B units in IMC NOLA.5 IMC NOLA is a manager-managed LLC, and IMC Management is its
manager.6 IMC Management is a wholly-owned subsidiary of IMC Holdings.7
IMC Management and IMC NOLA also executed a Management Agreement (the “NOLA
Business Management Agreement”), which recites that IMC Holdings and TMJ Group formed
IMC NOLA, a Manager-managed LLC, for the purpose of “developing, owning and operating a
Margaritaville-themed restaurant and bar in the French Quarter of New Orleans” (the “New
Orleans Restaurant”). 8 The NOLA Business Management Agreement specifies various duties

3

Rec. Doc. 60-18.

4

Id. at 1, 3.

5

Id. at 1, 3. Class A units represent capital investment of members, are entitled to a preferred financial return, but
do not have voting rights. Id. at 3. Class B units are considered “membership interests” and have both financial and
voting rights. Id.
6

Id.

7

Id.

8

Id. at 2.

2

required of IMC Management, as acting Manager, regarding the management and operation of the
business, including with respect to financial matters.9
On July 28, 2015, “Mr. Abal,” on behalf of IMC Holdings, sent TMJ Group a pro forma
(the “First Pro Forma”) for a restaurant at the Mall of America showing earnings before interest,
taxes, depreciation, and amortization (“EBITDA”) in the first twelve months at $448,569.10
On or about August 18, 2015, TMJ Group entered into a Limited Liability Company
Operating Agreement (the “MOA Business Operating Agreement”) with IMC Holdings under
which IMCMV MOA, LLC (“IMC MOA”) was formed.11 IMC MOA’s sole members are TMJ
Group and IMC Holdings, both of whom hold Class A and Class B Units in IMC MOA.12 IMC
MOA is a manager-managed LLC, and IMC Management is its manager.13 IMC Management is
a wholly-owned subsidiary of IMC Holdings.14
The MOA Business Operating Agreement provides that IMC Holdings shall be the initial
Manager of IMC MOA with the complete power and authority to manage and operate IMC MOA
and make all decisions affecting its business and affairs. 15 The MOA Business Operating

9

Id. at 2–3.

10

Id. at 3; Rec. Doc. 60-7. IMC disputes this fact to the extent that the referenced document is a not titled a “pro
forma,” and it indicates projected EBITDA of $449,000. Rec. Doc. 79-1.

11

Rec. Doc. 60-18 at 3, 6.

12

Id. at 4, 6. Class A units represent capital investment of members, are entitled to a preferred financial return, but do
not have voting rights. Id. at 6. Class B units are considered “membership interests” and have both financial and voting
rights. Id.

13

Id.

14

Id.

15

Id. at 3.

3

Agreement further specifies conditions by which the Manager breaches its obligations and actions
the Manager is prohibited to take without approval of the Members.16
IMC Management and IMC MOA also executed a Management Agreement (the “MOA
Business Management Agreement”), which recites that IMC Holdings and TMJ formed IMC
MOA, a manager-managed LLC, for the purpose of “developing, owning and operating a
Margaritaville-themed restaurant and bar” located in the Mall of America in Minneapolis,
Minnesota (the “Minneapolis Restaurant”). 17 The MOA Business Management Agreement
specifies various duties required of IMC Management, as acting Manager, regarding the
management and operation of the business, including with respect to financial matters.18
TMJ invested $3,191,223.50 in IMC MOA Class A units.19 Those units do not have voting
rights, do not participate in the eight decisions that managers must bring to members, and do not
have any power or right to remove the manager.20
In November 2015, IMC Holdings and TMJ Group entered into an “Amended and
Restated” Limited Liability Company Operating Agreement (the “Revised MOA Business
Operating Agreement”), which lists IMC Holdings and TMJ Group as the Company’s sole
“Members” and specifies comparable conditions and obligations of the Manager as the original
MOA Business Operating Agreement.21

16

Id. at 4.

17

Id. at 4–5.

18

Id. at 5–6.

19

Id. at 6.

20

Id.

21

Id. at 7.

4

IMC Management and IMC MOA also executed a Restated Management Agreement (the
“Revised MOA Business Management Agreement”). 22 Like the original MOA Business
Management Agreement, the Revised MOA Business Management Agreement recites that IMC
Holdings and TMJ Group formed IMC MOA, a manager-managed LLC, for the purpose of
“developing, owning and operating a Margaritaville-themed restaurant and bar” located in the Mall
of America in Minneapolis, Minnesota.23 The Revised MOA Business Management Agreement
further specifies various duties required of IMC Management, as acting Manager, regarding the
management and operation of the business, including with respect to financial matters.24
B.

Procedural Background
On May 3, 2017, TMJ Group filed a complaint against IMC Defendants for rescission of

the agreements and damages in the amount of $3,418,388.42 related to the Minneapolis Restaurant
and $553,299.05 related to the New Orleans restaurant, asserting the following claims: (1)
violation of Regulation D and Section 5 of the Securities Act of 1933; (2) intentional
misrepresentation, and, or, fraudulent inducement; (3) breach of contract; (4) breach of fiduciary
duty; (5) negligent misrepresentation; (6) violation of Louisiana “Blue Sky” laws; and (7) violation
of LUTPA.25
On March 7, 2018, with leave of Court, TMJ Group and TMJ Developer filed an amended
complaint against IMC Defendants for rescission of the agreements and damages in the amount of

22

Id. at 8.

23

Id.

24

Id. at 8–9.

25

Rec. Doc. 1.

5

$3,500,000 related to the Minneapolis Restaurant and $3,700,000 related to the New Orleans
restaurant, asserting the following claims: (1) rescission pursuant to Section 12(a)(1) of the
Securities Act of 1933; (2) securities fraud for violations of the Securities Exchange Act of 1934;
(3) intentional misrepresentation or fraudulent inducement; (4) negligence; (5) breach of contract;
(6) breach of fiduciary duty; (7) negligent misrepresentation; (8) rescission pursuant to Louisiana
Blue Sky laws; (9) violation of LUTPA; and (10) anticipatory breach of contract.26
On March 14, 2018, IMC Defendants filed the instant motion for summary judgment.27 On
March 20, 2018, TMJ Plaintiffs filed an opposition.28 On March 27, 2018, with leave of Court,
IMC Defendants filed a reply brief in further support of the motion for summary judgment.29 On
April 4, 2018, with leave of Court, TMJ Plaintiffs filed a supplement to the opposition.30 On April
4, 2018, the Court heard oral argument on the motion.31
II. Parties’ Arguments
A.

IMC Defendants’ Arguments in Support of the Motion for Summary Judgment
In the motion for summary judgment, IMC Defendants first argue that undisputed facts

show that TMJ Plaintiffs’ claims for rescission under the Securities Act of 1933 are time-barred
because they must have been brought within one year of the alleged sale of the security and were

26

Rec. Doc. 1.

27

Rec. Doc. 65.

28

Rec. Doc. 86.

29

Rec. Doc. 124.

30

Rec. Doc. 130.

31

Rec. Doc. 128.

6

not; and no tolling or “discovery” rule applies to this period. 32 IMC Defendants point to the
execution dates of the operating agreements and the deposition testimony of TMJ member Aaron
Motwani to establish that TMJ Plaintiffs acquired the LLC membership interests more than one
year before this suit was filed.33 Accordingly, IMC Defendants argue, no genuine fact dispute
exists as to whether TMJ Plaintiffs’ LLC membership interests were acquired more than a year
before this action was filed, and IMC Defendants are entitled to summary judgment on the
rescission claim brought under the Security Act of 1933.34
IMC Defendants next argue that undisputed facts establish that TMJ Plaintiffs acquired the
LLC membership interests via a negotiated, one-on-one transaction in which TMJ Plaintiffs were
represented by counsel.35 Therefore, pursuant to the Supreme Court’s decision in Marine Bank v.
Weaver, IMC Defendants argue the LLC membership interests are not securities under federal law;
and because Louisiana state securities law mirrors federal law, the LLC Membership interests are
not securities under state law either.36
In addition, IMC Defendants argue that undisputed facts show that TMJ Plaintiffs could
exercise significant control over the restaurants, precluding “security” status, insofar as TMJ
Plaintiffs were not passive investors.37 Accordingly, IMC Defendants argue, there is no genuine

32

Rec. Doc. 65-1 at 5.

33

Id. at 5–6.

34

Id. at 6.

35

Id. at 6–8.

36

Id. (citing Marine Bank v. Weaver, 455 U.S. 551 (1982)).

37

Id. at 8–11 (citing SEC v. Edwards, 540 U.S. 389, 393 (2004) (quoting SEC v. W.J. Howey Co., 328 U.S. 293
(1946)); Avenue Cap. Mgmt. II, L.P. v. Schaden, 843 F.3d 875, 882 (10th Cir. 2016)).

7

fact dispute that the LLC membership interests acquired by TMJ Plaintiffs fall outside the
definition of a “security.” 38 Therefore, IMC Defendants argue, they are entitled to summary
judgment on TMJ Plaintiffs’ claims for rescission under federal and state securities laws.39 For
these same reasons, IMC Defendants assert that they are entitled to summary judgment on TMJ
Plaintiffs’ security fraud claim.40
Furthermore, even if the LLC membership interests were a “security,” IMC Defendants
argue, the “private placement” exemption would exempt them from registration.41 Specifically,
IMC Defendants argue that in the Fifth Circuit, the lack of any widespread, public solicitation is
“essentially dispositive on its own.”42 IMC Defendants additionally point to evidence that TMJ
Plaintiffs could fend for themselves, as demonstrated by the manner of offering, eligibility of the
purchasers, information, and resale restrictions; and therefore, pursuant to the Supreme Court’s
holding in SEC v. Ralston Purina Corp., the investments are exempt from registration. 43
Accordingly, even assuming that the LLC membership interests were a “security,” IMC
Defendants argue they are entitled to summary judgment on TMJ Plaintiffs’ claims for rescission
under federal and state securities laws.44

38

Id. at 10–11.

39

Id. at 11.

40

Id.

41

Id. at 11–16.

42

Id. at 12 (citing Lewis v. Fresne, 252 F.3d 352, 357 (5th Cir. 2001)).

43

Id. at 12–16 (citing SEC v. Ralston Purina Corp., 346 U.S. 119, 125 (1953); ABA Sec. of Bus. Law, Cmte. on
Fed. Reg. of Secs., Law of Private Placements (NonPublic Offerings) Not Entitled to Benefits of Safe Harbors — A
Report, 66 BUSINESS LAWYER (Nov. 2010)).

44

Id. at 16.

8

Next, IMC Defendants argue that IMC Defendants are entitled to summary judgment on
TMJ Plaintiffs’ misrepresentation and breach of contract claims because forward-looking, oral
predictions of the future are not actionable.45 IMC Defendants point to evidence that the parties’
agreements include both merger/integration clauses and no-oral-modification clauses, which IMC
Defendants contend preclude reliance on any representations or promises that were not
incorporated into the parties’ written agreements.46 In addition, IMC Defendants point to evidence
that the agreements which TMJ Plaintiffs signed contemplate a risk of loss, as indicated in a section
titled, “ALLOCATION OF PROFITS AND LOSSES.”47 Moreover, IMC Defendants argue,
the alleged oral representations made by David Crabtree (IMC’s CEO) were made in September
2016, a year after the agreements were signed in the summer/fall of 2015; thus, the alleged oral
representations could not have been part of the parties’ agreements or modifications to them, as
the contracts provided that modifications must be made in writing.48 Accordingly IMC Defendants
argue, they are entitled to summary judgment on TMJ Plaintiffs’ claims for intentional/negligent
misrepresentation, fraudulent inducement, and breach of contract.49
Next, IMC Defendants argue that they are entitled to summary judgment on TMJ Plaintiffs’
breach of fiduciary duty claim because the members of IMC MOA and IMC NOLA, which are

45

Id.

46

Id.

47

Id. at 18 (citing Ex. D-5 (MOA Management Agreement) at ¶4(c); Ex. D-9 (New Orleans Management Agreement)
at ¶4(c) (emphasis in original)).

48

Id. at 18–19.

49

Id. at 19.

9

manager-managed Florida LLCs, do not owe fiduciary duties to each other. 50 Therefore,
Defendant IMC Holdings, as a member but not a manager of each, does not owe a fiduciary duty
to TMJ Plaintiffs. 51 IMC Defendants also argue that TMJ Plaintiffs have failed to meet their
burden of showing that Mario Abal, who allegedly made the misrepresentations to TMJ Plaintiffs
that supposedly induced TMJ Plaintiffs to enter into the Operating Agreements, made those
representations in his capacity as an agent or employee of IMC Management. 52 Rather, IMC
Defendants contend, the evidence shows that Abal worked for the Defendant IMC Holdings.53
Accordingly, IMC Defendants contend, both Defendant IMC Holdings and Defendant IMC
Management are entitled to summary judgment on the breach of fiduciary duty claim.54
IMC Defendants next argue that they are entitled to summary judgment on TMJ Plaintiffs’
LUTPA claim because: (1) such a claim does not apply to an alleged securities violation; (2) the
claim is preempted; and (3) TMJ Plaintiffs lack standing to assert such a claim.55 IMC Defendants
further note that the first two reasons are pure issues of law,56 and only the third involves a question
of fact.57 With respect to the third reason, IMC Defendants assert that a LUTPA claim is only
available to direct consumers or business competitors, and TMJ Plaintiffs have failed to meet their

50

Id.

51

Id.

52

Id. at 20.

53

Id.

54

Id.

55

Id.

56

IMC Defendants adopt and incorporate their briefing in support of their previously filed motion to dismiss on
those counts. Id. (citing Rec. Doc. 21-1 at 21–24; Rec. Doc. 29 at 8–10).

57

Id.

10

burden of showing that they fall into either of these two categories. 58 Accordingly, IMC
Defendants argue, they are entitled to summary judgment on the LUTPA claim.59
Finally, with respect to TMJ Plaintiffs’ claim in the Amended Complaint for anticipatory
breach of contract relating to the New Orleans Restaurant, IMC Defendants argue that TMJ
Plaintiffs, not IMC Defendants, failed to perform their obligations pursuant to the New Orleans
agreements.60 Specifically, IMC Defendants point to evidence that TMJ Plaintiffs was required to
construct a “shell” for the New Orleans Restaurant and that TMJ Plaintiffs put development of the
New Orleans Restaurant on hold “many months ago.”61 Thus, IMC Defendants assert, they are
entitled to summary judgment on TMJ Plaintiffs’ claims regarding the New Orleans Restaurant.62
B.

TMJ Plaintiffs’ Arguments in Opposition to the Motion for Summary Judgment
In opposition, TMJ Plaintiffs first argue that their demand for rescission is not time-barred

because TMJ Plaintiffs did not learn of IMC Defendants’ failure to register until long after the
November 2015 amended agreement was executed. 63 TMJ Plaintiffs argue that the statute of
limitations does not begin to run until a plaintiff discovers (or should have discovered by the
exercise of reasonable diligence) the underlying violation.64 Despite due diligence, TMJ Plaintiffs

58

Id. at 21 (citing Computer Mgmt. Assist. Co. v. DeCastro, Inc., 220 F.3d 396 (5th Cir. 2000); Gardes Directional
Drilling v. U.S. Turnkey Explor. Co., 98 F.3d 860 (5th Cir. 1996); Swoboda v. Manders, No. 14-19-SCR, 2015 U.S.
Dist. LEXIS 164870, at *6–7 (M.D. La. Dec. 9, 2015); Baba Lodging, LLC v. Wyndham Worldwide Opers., Inc.,
No. 10-1750, 2012 U.S. Dist. LEXIS 36891, at *10 (W.D. La. Mar. 19, 2012)).
59

Id.

60

Id.

61

Id. at 22.

62

Id. at 22.

63

Red. Doc. 86 at 7.

64

Id.

11

contend, IMC Defendants’ failure to register was not discovered until January 2017, when TMJ
Plaintiffs received updated pro formas reflecting the actual operations from Fourth Quarter 2016;
when TMJ Plaintiffs received daily sales reports in April 2017; and when TMJ Plaintiffs began
investigating their claims. 65 Moreover, TMJ Plaintiffs argue, when they learned of IMC
Defendants failure to comply with the applicable securities laws and failure to register is a fact
issue not appropriate for resolution on a motion for summary judgment. 66 Accordingly, TMJ
Plaintifs argue that IMC Defendants’ motion with respect to TMJ Plaintiffs’ demand for rescission
must be denied.67
Next, TMJ Plaintiffs argue that IMC Defendants’ reliance on Marine Bank for the
proposition that a negotiated, one-on-one transaction does not involve a “security” as defined by
the Securities Act of 1933 is misplaced.68 According to TMJ Plaintiffs, Marine Bank revolved
around “important differences between a certificate of deposit . . . and other long-term debt
obligations” and resulted in the Supreme Court reversing the court below because of the “unusual
instruments” involved in that particular case. 69 Moreover, TMJ Plaintiffs assert, the Supreme
Court did not hold that the instruments in Marine Bank were not securities due to the fact they
were one-on-one agreements. 70 As no such absolute rule exists, TMJ Plaintiffs contend IMC
Defendants argument that the LLC membership interests are not securities because they were one-

65

Id. at 8.

66

Id.

67

Id.

68

Id. at 8–9 (citing Marine Bank, 455 U.S. at 560).

69

Id. at 9 (citing Marine Bank, 455 U.S. at 558–59).

70

Id.

12

on-one agreements is incorrect.71
TMJ Plaintiffs next argue that the LLC membership interests are securities inasmuch as
they are “investment contracts” as set forth by the Supreme Court in SEC v. Howey.72 Contrary to
IMC Defendants’ arguments, TMJ Plaintiffs aver that they did not have control over the investment
and they relied completely on the efforts of IMC Defendants in connection with their investments
in the Minneapolis Restaurant and the New Orleans Restaurant.73 According to TMJ Plaintiffs,
IMC Defendants have presented no admissible summary judgment evidence to the contrary.74
Therefore, TMJ Plaintiffs maintain that there is no dispute as to any material fact and that summary
judgment should be granted in TMJ Plaintiffs’ favor that the agreements are securities, or
alternatively, summary judgment in favor of IMC Defendants should be denied if the Court
determines a genuine issue of material fact exists.75
Subsequently, TMJ Plaintiffs argue that the “private placement exemption” is inapplicable
because IMC Defendants did not affirmatively seek the exemption.76 TMJ Plaintiffs aver that if a
party uses Regulation D as a safe harbor for its securities offering, the party “must file a notice on
Form D” with the SEC within fifteen days after the first sale of securities in the offering, and IMC

71

Id.

72

Id. (citing SEC v. Howey, 328 U.S. 293 (1946)).

73

Id.

74

Id.

75

Id. at 10.

76

Id. (citing 17 C.F.R. 230.503(a)(1); Woolf v. S. D. Cohn & Co., 515 F.2d 591, 605 (5th Cir. 1975), rev’d on other
grounds, 426 U.S. 944 (1976)).

13

Defendants did not. 77 Nevertheless, TMJ Plaintiffs argue that IMC Defendants have not
established the four factors of the private placement exemption. 78 With respect to the
“information” factor, TMJ Plaintiffs asset there is no dispute that TMJ Plaintiffs were not provided
the appropriate access to the information they should have received; and therefore, summary
judgment is proper in favor of TMJ Plaintiffs, or there is at least a genuine dispute as to a material
fact regarding the information factor.79
According to TMJ Plaintiffs, “[t]he remaining three factors further illustrate the myriad of
genuine disputes regarding material facts improper for consideration at the motion for summary
judgment stage.” 80 For example, TMJ Plaintiffs argue, whether TMJ Plaintiffs solicited IMC
Defendants for investment; whether TMJ Plaintiffs’ members are financially sophisticated enough
to assess and bear financial risk; and the degree to which provisions of the operating agreements
between the Parties restricted possible resale are each factual determinations that require a fact
finder to credit or discredit the evidence and, as such, cannot be subject to summary judgment as
a matter of law. 81 Accordingly, TMJ Plaintiffs argue, IMC Defendants’ motion for summary
judgment should be denied as to the securities claims.82
Next, TMJ Plaintiffs argue that summary judgment is inappropriate on TMJ Plaintiffs’
breach of contract and misrepresentation claims to the extent that IMC Defendants misstate the

77

Id. (quoting 17 C.F.R. 230.503(a)(1)).

78

Id. at 11.

79

Id.

80

Id. at 12.

81

Id.

82

Id.

14

law regarding integration clauses and future predictions.83 Specifically, TMJ Plaintiffs contend
that integration clauses relate to parol evidence and do not automatically preclude a breach of
contract claim based on the Parties’ failure to perform the terms of the contract.84 Furthermore,
TMJ Plaintiffs argue, an integration clause does not automatically preclude IMC Defendants’
liability for other claims, such as negligent misrepresentation. 85 TMJ Plaintiffs argue that the
general rule that fraud and misrepresentation claims cannot be predicated on future-looking
statements is subject to exceptions, particularly where the person making the statement as to a
future event is guilty of an actual fraudulent intent.86 Accordingly, without more, TMJ Plaintiffs
contend, IMC Defendants’ motion fails as to the claims for breach of contract and negligent
misrepresentation.87
TMJ Plaintiffs additionally point to evidence of misrepresentations made by Mr. Abal
pertaining to the strong performance of the Minneapolis Restaurant and/or how well-executed the
deal was.88 In contrast, TMJ Plaintiffs point to evidence that mistakes were made with respect to
drafting the Minneapolis Restaurant budget and of remarks made by employees of IMC
Defendants on either Mr. Abal’s poor performance and/or just how incorrect the Minneapolis
Restaurant budget was.89 Accordingly, TMJ Plaintiffs assert, there are material facts in dispute

83

Id. at 13.

84

Id. (citing Water Craft Mgmt., LLC v. Mercury Maine, 361 F. Supp. 2d 518, 551 (M.D. La. 2004)).

85

Id.

86

Id.

87

Id.

88

Id. at 13–14.

89

Id. at 14–15.

15

regarding these claims, rendering a grant of summary judgment improper.90
Next, TMJ Plaintiffs argue that IMC Defendants incorrectly contend that they owed no
fiduciary duties to TMJ Plaintiffs, and therefore, IMC Defendants’ motion for summary judgment
as to the breach of fiduciary claim should be denied.91 Specifically, TMJ Plaintiffs argue that IMC
Defendants acknowledge that pursuant to Florida law, a manager of a manager-managed LLC
owes fiduciary duties to its members, and the Management Agreement, which is included and
incorporated by the Operating Agreement, establishes that IMC Holdings is the Managing
Member. 92 With respect to Mr. Abal’s role in making the alleged misrepresentations, TMJ
Plaintiffs contend that Mr. Abal is the “Chief Development Officer of IMC Holdings.”93 TMJ
Plaintiffs further aver that during the course of Mr. Motwani’s dealings with Mr. Abal, on behalf
of TMJ Plaintiffs, Mr. Motwani understood that Mr. Abal was the Chief Development Officer of
both IMC Holdings and IMC Management.94 According to TMJ Plaintiffs, Mr. Abal did not hold
himself out as an employee of IMC Holdings or IMC Management, and he did not make that
distinction when he spoke to Mr. Motwani on behalf of IMC.95 Moreover, TMJ Plaintiffs argue,
IMC Defendants’ attempt to label Mr. Abal as an employee of IMC Holdings acting exclusively
on behalf of IMC Holdings, so as to avoid liability for IMC Management is “nonsensical.”96

90

Id. at 15.

91

Id.

92

Id.

93

Id. at 15–16.

94

Id. at 16.

95

Id.

96

Id.

16

Accordingly, TMJ Plaintiffs argue, IMC Defendants motion for summary judgment with respect
to TMJ Plaintiffs’ breach of fiduciary duty claim should be denied.97
TMJ Plaintiffs next argue that IMC Defendants are not entitled to summary judgment on
the LUTPA claims because: (1) whether LUTPA claims apply to securities violations can only be
addressed after the Court determines if the securities fraud claim survives summary judgment; (2)
the LUTPA claims are not preempted because TMJ Plaintiffs “only later discovered the underlying
unfair trade practices and could not file suit until then;” and (3) whether TMJ Plaintiffs have
standing as a “direct consumer” or “business competitor” is a material fact that is genuinely in
dispute.98 Furthermore, TMJ Plaintiffs aver, LUTPA claims are not limited to consumers and
business competitors, but are also available to any persons who suffer ascertainable losses as a
result of violations of LUTPA.99 Accordingly, TMJ Plaintiffs argue that summary judgment on
the LUTPA claims is not appropriate.100
Finally, TMJ Plaintiffs argue that they have a right to mitigate losses, and therefore, the
anticipatory breach claim is proper.101 According to TMJ Plaintiffs, under Louisiana law, “[a]
plaintiff is legally justified in treating a contract as breached when he is informed by facts and
circumstances regarding a defendant’s repudiation of their promise(s) under the contract.”102 TMJ
Plaintiffs contend that “[w]hat constitutes a breach of the agreements between the Parties, if and

97

Id.

98

Id.

99

Id. at 16–17 (citing Haygood v. Dies, 127 So. 3d 1008, 1012 (La. App. 2013)).

100

Id. at 17.

101

Id.

102

Id.

17

when either Party manifested an unwillingness to perform their obligations, and whether such a
party was justified based on the factual circumstances are all material facts which the Parties
genuinely dispute.” 103 Therefore, TMJ Plaintiffs argue, summary judgment on the claim for
declaratory judgment regarding TMJ Plaintiffs’ anticipatory breach is premature at this time.104
C.

IMC Defendants’ Arguments in Further Support of the Motion for Summary Judgment
IMC Defendants first argue that the “majority rule” recognized by both circuit and district

courts, including district courts in this Circuit, is that the one-year limitations period is not subject
to any tolling or discovery rule.105 Even if the Court were inclined to go against the majority rule,
IMC Defendants argue, TMJ Plaintiffs have failed to point to any evidence that IMC Defendants
led TMJ Plaintiffs to believe that the sales of the LLC membership interests had been registered,
or would be registered, so as to justify tolling.106 Accordingly, IMC Defendants assert, regardless
of whether tolling is permitted, TMJ Plaintiffs claims for rescission are time-barred.107
Next, IMC Defendants argue that the Supreme Court’s decision in Marine Bank is
dispositive on the issue that an interest, which is acquired after months of back-and-forth, one-onone negotiation between counsel is not a security.108 IMC Defendants represent that in Marine
Bank, the Supreme Court explained that “Congress intended the securities laws to cover those
instruments ordinarily and commonly considered to be securities in the commercial world. . . . [A]

103

Id.

104

Id.

105

Rec. Doc. 108 at 1 (citing Blatt v. Merrill Lynch, Pierce, Fenner & Smith, 916 F. Supp. 1343, 1352 (D.N.J. 1996)).

106

Id. at 2.

107

Id.

108

Id. (citing Marine Bank v. Weaver, 455 U.S. 551 (1982)).

18

security is an instrument in which there is ‘common trading.’”109 According to IMC Defendants,
TMJ Plaintiffs have failed to identify any exchange or marketplace in which there is any “common
trading” of LLC membership interests in Margaritaville restaurants because none exist. 110
Furthermore, IMC Defendants aver, no marketplace or exchange can exist because the agreements
have entire sections for resale restrictions. 111 Moreover, IMC Defendants assert that the only
purpose of the Supreme Court identifying the one-off instruments before it in Marine Bank as
“unusual instruments” was to distinguish them from “those instruments ordinarily and commonly
considered to be securities in the commercial world.”112 Accordingly, IMC Defendants argue that
no genuine dispute of material fact exists as to whether the LLC investments in this case are
securities, where the evidence shows and the case law supports that they are not.113
Furthermore, IMC Defendants argue that the private placement exemption applies because
Regulation D is not the exclusive method to satisfy the requirements of the exemption. 114
According to IMC Defendants, in the Fifth Circuit, the absence of a widespread or public offering
is effectively dispositive in determining that the private placement exemption applies. 115
Furthermore, IMC Defendants point to deposition testimony to establish that TMJ Plaintiffs

109

Id. (citing Marine Bank, 455 U.S. at 556).

110

Id. at 3.

111

Id.

112

Id.

113

Id.

114
Id. at 3 (citing ABA Sec. of Bus. Law, Cmte. on Fed. Reg. of Secs., Law of Private Placements (Non-Public
Offerings) Not Entitled to Benefits of Safe Harbors — A Report, 66 BUSINESS LAWYER (Nov. 2010); SEC v.
Kahlon, 141 F. Supp. 3d 675, 679 (E.D. Tex. 2015)).
115

Id. at 3–4 (citing Lewis v. Fresne, 252 F.3d 352, 357 (5th Cir. 2001)).

19

solicited IMC Defendants in this case, which IMC Defendants aver alone establishes the mannerof-offering factor.116 Thus, IMC Defendants contend, the private placement exemption applies
even if the LLC investments are securities.117
Next, IMC Defendants argue that the fraud and misrepresentation claims fail because the
purpose of an integration clause is to indicate that the written agreement between parties represents
the complete understanding between them.118 According to IMC Defendants, to allow alleged oral
representations to override written contracts with integration clauses, as TMJ Plaintiffs seek to do,
would defeat the purpose of integration clauses. 119 IMC Defendants further argue that TMJ
Plaintiffs failed to adduce competent evidence of fraudulent intent, and therefore, the general rule
that fraud and misrepresentation claims cannot be predicated on future-looking statements
applies.120
IMC Defendants next argue that TMJ Plaintiffs’ argument that the one-year LUTPA
preemptive tolled is baseless because peremptive periods cannot be tolled.121
Finally, with respect to the New Orleans Operating Agreement, IMC Defendants argue,
TMJ Plaintiffs have not introduced any competent evidence that IMC Defendants have
affirmatively renounced a single one of its obligations or responsibilities under that agreement.122

116

Id. at 4 (citing Trotter Depo., at 24:2-20 (Ex. C to IMC's Motion for Summary Judgment)).

117

Id.

118

Id.

119

Id.

120

Id. at 4–5.

121

Id. (citing LA. CIV. CODE. art. 3461; LA. REV. STAT. § 51:1409(E)).

122

Id.

20

Therefore, IMC Defendants contend they are entitled to summary judgment on TMJ Plaintiffs’
anticipatory breach of contract claims under both Louisiana and Florida law.123
D.

TMJ Plaintiffs’ Supplemental Memorandum in Further Opposition to IMC Defendants’
Motion for Summary Judgment
In a supplemental response to IMC Defendants’ motion for summary judgment, TMJ

Plaintiffs argue that recent depositions of IMC Defendants’ witnesses has provided additional
evidence that “IMC consistently and repeatedly told TMJ exactly what they needed to hear in order
and showed them exactly what they needed to see in order to induce their investment in NOLA
and MOA.”124
With respect to the securities claims, TMJ Plaintiffs point to deposition testimony showing
that they did not have the right to control the investment and that they relied completely on the
efforts of IMC Defendants in connection with their investments in the Minneapolis Restaurant and
the New Orleans Restaurant.125 Accordingly, TMJ Plaintiffs argue, there is at least a genuine issue
of material fact as to whether the investments fall within the definition of a security, and therefore,
summary judgment should be denied.126
In addition, TMJ Plaintiffs argue that IMC Defendants did not file a Form D and have not

123

Id (citing Louisiana Stad. & Expos. Dist. v. Financial Guar. Ins. Co., 2010 U.S. Dist. LEXIS 47101, at *43-44
(S.D.N.Y. May 11, 2010) (applying Louisiana law); Latter & Blum, Inc. v. Ditta, 223 So. 3d 54, 59-60 (La. App.
2017); Skymark Real Estate Invs., LLC v. 7L Capital, LLC, 2013 U.S. Dist. LEXIS 35291, at *11 (M.D. Fla. Mar.
14, 2013)).
124

Rec. Doc. 130 at 2.

125

Id. at 8–9.

126

Id. at 9.

21

met their burden of proving that they qualify for the private placement exemption.127 Specifically,
TMJ Plaintiffs argue that a genuine dispute of material fact exists as to whether TMJ Plaintiffs
were provided the appropriate access to information it should have received.128 Furthermore, TMJ
Plaintiffs state, IMC Defendants contend that TMJ Plaintiffs solicited IMC Defendants for
investment, that TMJ Plaintiffs are financially sophisticated enough to assess and bear financial
risk, and the degree to which provisions of the operating agreements between the Parties restricted
possible resale.129 Each of these facts, TMJ Plaintiffs argue, “intrinsically require a fact finder to
credit or discredit the evidence to make a sufficient determination and, as such, cannot be subject
to summary judgment as a matter of law.”130
TMJ Plaintiffs next argue that summary judgment is not appropriate on the breach of
contract and misrepresentation claims because a statement concerning a future event may be
actionable if there is evidence of an actual fraudulent intent.131 In addition, TMJ Plaintiffs point
to evidence regarding representations made pertaining to the strong performance of the
Minneapolis restaurant and/or how well-executed the deal was.132
Next, TMJ Plaintiffs repeat their argument that summary judgment is not appropriate on
the breach of fiduciary duty claim because IMC Holdings is the managing member of IMC MOA,
and Mario Abal did not hold himself out as an employee of IMC Holdings or IMC Management

127

Id. at 10.

128

Id. at 11.

129

Id.

130

Id.

131

Id. at 13.

132

Id. at 13–17.

22

when making the alleged misrepresentations to TMJ Plaintiffs.133 Thus, TMJ Plaintiffs contend
the argument that IMC Management cannot be liable for breach of fiduciary duty based on the
statements made by Mr. Abal because he is an employee of IMC Holdings fails.134
Finally, TMJ Plaintiffs repeat their argument that they have a right to mitigate losses based
on TMJ Plaintiffs’ anticipatory breach of the New Orleans Restaurant agreements. 135 TMJ
Plaintiffs recite the standard for anticipatory breach, and argue that “what constitutes a breach of
the agreements between the Parties, if and when either Party manifested an unwillingness to
perform their obligations, and whether such a party was justified based on the factual
circumstances are all material facts which the Parties genuinely dispute.” 136 Therefore, TMJ
Plaintiffs contend, summary judgment on their claim for anticipatory breach of contract would be
premature.137
III. Legal Standard for Summary Judgment
Summary judgment is appropriate when the pleadings, the discovery, and any affidavits
show that “there is no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.”138 When assessing whether a dispute as to any material fact exists, the court
considers “all of the evidence in the record but refrains from making credibility determinations or

133

Id. at 17–18.

134

Id. at 18.

135

Id.

136

Id.

137

Id. at 19.

138

Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986); Little v. Liquid Air Corp.,
37 F.3d 1069, 1075 (5th Cir. 1994).

23

weighing the evidence.”139 All reasonable inferences are drawn in favor of the nonmoving party,
but “unsupported allegations or affidavits setting forth ‘ultimate or conclusory facts and
conclusions of law’ are insufficient to either support or defeat a motion for summary judgment.”140
If the record, as a whole, “could not lead a rational trier of fact to find for the non-moving party,”
then no genuine issue of fact exists, and the moving party is entitled to judgment as a matter of
law.141
“[A] nonmoving party is not entitled to rest on his pleadings, but must carry his burden of
providing evidence of a genuine issue of material fact.”142 “That burden can be met by depositions,
answers to interrogatories and admissions on file and affidavits.” 143 The Fifth Circuit has
“repeatedly held that self-serving affidavits, without more, will not defeat a motion for summary
judgment.”144 However, a nonmovant’s deposition testimony is often considered by a court in
recognizing that a genuine issue of material fact exists, which precludes summary judgment.145
The party seeking summary judgment always bears the initial responsibility of informing
the Court of the basis for its motion and identifying those portions of the record that it believes

139

Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398–99 (5th Cir. 2008).

140

Galindo v. Precision Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985); Little, 37 F.3d at 1075.

141

Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

142

King v. Chide, 974 F.2d 653, 656 (5th Cir. 1992) (citing Reese v. Anderson, 926 F.2d 494, 499 (5th Cir. 1991));
see also Celotex, 477 U.S. at 325; see also Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998).

143

Id. (citing Fed. R. Civ. P. 56(c)).

144

Tyler v. Cedar Hill Indep. Sch. Dist., 426 Fed.Appx. 306, 307 (5th Cir. 2011) (per curiam) (citing DirectTV, Inc.
v. Budden, 420 F.3d 521, 531 (5th Cir. 2005); United State v. Lawrence, 276 F.3d 193, 197 (5th Cir. 2001)).

145

See, e.g., Vetter v. Frosch, 599 F.2d 630 (5th Cir. 1979); see also, e.g., King, 974 F.2d at 656 (5th Cir. 1992).

24

demonstrate the absence of a genuine issue of material fact.146 Thereafter, the nonmoving party
should “identify specific evidence in the record, and articulate” precisely how that evidence
supports his claims.147 To withstand a motion for summary judgment, the nonmoving party must
show that there is a genuine issue for trial by presenting evidence of specific facts. 148 The
nonmovant’s burden of demonstrating a genuine issue of material fact is not satisfied merely by
creating “some metaphysical doubt as to the material facts,” “by conclusory allegations,” by
“unsubstantiated assertions,” or “by only a scintilla of evidence.” 149 Rather, a factual dispute
precludes a grant of summary judgment only if the evidence is sufficient to permit a reasonable
trier of fact to find for the nonmoving party. Hearsay evidence and unsworn documents that cannot
be presented in a form that would be admissible in evidence at trial do not qualify as competent
opposing evidence.150
IV. Analysis
A.

Claims for Rescission Under the Securities Act of 1933
IMC Defendants first argue that TMJ Plaintiffs’ rescission claims brought under the

Securities Act of 1933 are time-barred, as more than one year has passed between the time the
alleged securities were acquired and the time of filing of this action. In response, TMJ Plaintiffs
assert that their demand for rescission is not time-barred because TMJ Plaintiffs did not learn of

146

Celotex, 477 U.S. at 323.

147

Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir.), cert. denied, 513 U.S. 871 (1994).

148

Bellard v. Gautreaux, 675 F.3d 454, 460 (5th Cir. 2012) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248–49 (1996)).

149

Little, 37 F.3d at 1075.

150

Fed. R. Civ. P. 56(c)(2); Martin v. John W. Stone Oil Distrib., Inc., 819 F.2d 547, 549 (5th Cir. 1987).

25

IMC Defendants’ failure to register until long after the November 2015 amended agreement was
executed, and the statute of limitations does not begin to run until a plaintiff discovers (or should
have discovered by the exercise of reasonable diligence) the underlying violation.
In the amended complaint, TMJ Plaintiffs seek declaratory judgment for rescission of the
operating agreements pursuant to Section 12(a)(1) of the Securities Act of 1933 for failing to
properly register the securities investment in the Minneapolis Restaurant and the New Orleans
Restaurant pursuant to Regulation D and Section 5 of the Act.151
Section 12(a)(1), which is codified at 15 U.S.C. §§ 77l(a)(1), provides that any person who
offers or sells a security in violation of Section 77e shall be liable “to the person purchasing such
security from him, who may sue either at law or in equity . . . to recover the consideration paid for
such security with interest thereon, less the amount of any income received thereon, upon the
tender of such security, or for damages if he no longer owns the security.” Section 5 of the
Securities Act of 1933, codified at 15 U.S.C. § 77e, states, “it shall be unlawful for any person,
directly or indirectly . . . to make use of any means or instruments of transportation or
communication in interstate commerce or of the mails to sell such security through the use or
medium of any prospectus or otherwise . . . .”
The limitations period is found at 15 U.S.C. § 77m, which states:
No action shall be maintained to enforce any liability created under section 77k or
77l(a)(2) of this title unless brought within one year after the discovery of the untrue
statement or the omission, or after such discovery should have been made by the
exercise of reasonable diligence, or, if the action is to enforce a liability created
under section 77l(a)(1) of this title, unless brought within one year after the
violation upon which it is based. In no event shall any such action be brought to
enforce a liability created under section 77k or 77l(a)(1) of this title more than three
years after the security was bona fide offered to the public, or under section
151

Rec. Doc. 46 at 31–34.

26

77l(a)(2) of this title more than three years after the sale.
Therefore, the plain language of the statute indicates that a “discovery rule” applies an action
brought under Section 77k or Section 77l(a)(2), but an action brought under Section 77l(a)(1) must
be filed within one year after the violation upon which it is based.152
IMC Defendants cite a First Circuit case and two district court cases holding that no
discovery rule applies to the one year limitation period.153 TMJ Plaintiffs argue that these cases
are not binding but do not themselves cite any binding authority that the discovery rule and the
doctrine of equitable tolling applies to the one year limitation period governing nonregistration
claims under Section 12(1).
In Mason v. Marshall, a case decided by a section of the Northern District of Texas and
affirmed by the Fifth Circuit, the plaintiffs brought a claim for rescission under Section 12(1),
alleging that the defendants violated Section 5 of the Securities Act of 1933 by offering for sale
and selling securities without a registration statement.154 The district court determined that the
limitation period begins to run when Section 5 is “first violated,” i.e. “when the mails or interstate
commerce are used to offer, sell or deliver an unregistered security.”155 Moreover, the court in
Mason did not contemplate that a discovery or equitable tolling period would apply.156
Furthermore, in Doran v. Petroleum, the Fifth Circuit affirmed a district court’s

152

15 U.S.C. § 77m

153

Rec. Doc 65-1 (citing In re Elec. Data Sys. Corp. “ERISA” Litig., 305 F. Supp. 2d 658 (E.D. Tex. 2004); Cook v.
Avien, Inc., 573 F.2d 685, 691 (1st Cir. 1978); and Blatt v. Merrill Lynch, Pierce, Fenner & Smith, 916 F. Supp.
1343, 1352 (D.N.J. 1996)).

154

Mason v. Marshall, 412 F. Supp. 294, 299 (N.D. Tex. 1974), aff'd, 531 F.2d 1274 (5th Cir. 1976).

155

Id.

156

Id.

27

determination that the plaintiff’s claim seeking to rescind a limited partnership agreement was
time-barred under to 15 U.S.C. § 77m.157 In Doran, the Fifth Circuit stated, “In deciding the
statute of limitations issue . . . the thorough trial judge held that the relevant inquiry was which of
the defendant’s activities offer, sale, or delivery occurred last as that was the time from which to
measure the limitation period.”158 The Fifth Circuit further stated, “This would appear to be the
most lenient standard and it is the one we implicitly adopted in Mason v. Marshall.”159
Thus, notwithstanding “the apparent split of authority” 160 among courts in different
circuits as to whether the discovery rule and the doctrine of equitable tolling applies to the one
year limitation period governing nonregistration claims under Section 12(1), it appears that the
Fifth Circuit would be inclined to find based on its decisions in Mason and Doran, that the one
year limitations period applicable to claims brought under Section 12(1) is absolute and does not
allow for a “discovery rule” or equitable tolling.
In this case, IMC Defendants assert that more than one year has passed between the relevant
transactions and the time this action was filed. Moreover, this action was filed on May 3, 2017,
and IMC Defendants aver that the latest execution of an agreement, the MOA Amended Operating
Agreement, occurred on November 2015.161 TMJ Plaintiffs presents no evidence to dispute these
assertions. Accordingly, because there is no genuine issue of material fact, the Court finds that

157

Doran v. Petroleum Mgmt. Corp., 576 F.2d 91 (5th Cir. 1978).

158

Id. at 93.

159

Id.

160

Blatt v. Merrill Lynch, Pierce, Fenner & Smith Inc., 916 F. Supp. 1343, 1352 (D.N.J. 1996)

161

Rec. Doc. 65-1.

28

IMC Defendants are entitled to judgment as a matter of law that the rescission claims brought
under the Securities Act of 1933 are time-barred.
B.

Claims for Securities Fraud Under the Securities Exchange Act of 1934 and Louisiana
Blue Sky Laws
IMC Defendants argue that they are entitled to summary judgment on TMJ Plaintiffs’

claims brought under the Securities Exchange Act of 1934 and Louisiana Blue Sky laws because
the transactions do not meet the definition of “securities” under federal or state law as the
investments were subject to one-on-one negotiations by counsel and TMJ Plaintiffs exercised
significant control over the restaurants, such that the Howey test is not met. TMJ Plaintiffs argue
that the investments are securities because they invested in a common enterprise and expected
profits from the investments based solely on the actions of IMC Defendants.
The Supreme Court has acknowledged that the definition of a security under the Securities
Exchange Act of 1934 and the Securities Act of 1933 are “virtually identical.”162 “Investment
contracts” are included in the definition of a security under both the Securities Exchange Act of
1934 and the Securities Act of 1933.163 In SEC v. W.J. Howey Co., the Supreme Court held that

162

Reves v. Ernst & Young, 494 U.S. 56, 61, n.1 (1990) (citing United Housing Foundation, Inc. v. Forman, 421 U.S.
837, 847, n. 12 (1975)).
163

15 U.S.C. §77b, which codifies the definitions section of the Securities Act of 1933, defines the term “security” to
mean:
Any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or
participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate
or subscription, transferable share, investment contract, voting-trust certificate, certificate of
deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, or, in general,
any interest or instrument commonly known as a “security”, or any certificate of interest or
participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to or purchase, any of the foregoing.
15 U.S.C. § 78c, which codifies the definitions section of the Securities Exchange Act of 1934 defines the term security
to mean:

29

an investment contract is “a contract, transaction or scheme whereby a person invests his money
in a common enterprise and is led to expect profits solely from the efforts of a promoter or a third
party.”164
In Marine Bank v. Weaver, the Supreme Court stated that the test for whether or not an
instrument is a security is “what character the instrument is given in commerce by the terms of the
offer, the plan of distribution, and the economic inducements held out to the prospect.”165 “The
terms mentioned are not to be considered securities if ‘the context otherwise requires.’” 166
Although “the definition of ‘security’ in the Securities Exchange Act of 1934 is quite broad,” the
Act is “not intend[ed] to provide a broad federal remedy for all fraud.”167 “[T]he term ‘security’
was meant to include ‘the many types of instruments that in our commercial world fall within the
ordinary concept of a security.’” 168 “It includes ordinary stocks and bonds, along with the
‘countless and variable schemes devised by those who seek the use of the money of others on the
promise of profits.’”169

The term “security” means any note, stock, treasury stock, security future, security-based swap,
bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil,
gas, or other mineral royalty or lease, any collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit
for a security, any put, call, straddle, option . . . .
164

328 U.S. 293, 298 (1946); see also Youmans v. Simon, 791 F.2d 341, 345 (5th Cir. 1986) (citing Howey as the
established test for whether an agreement is an investment contract).

165

Maring Bank v. Weaver, 455 U.S. 551, 556 (1982) (quoting SEC v. United Benefit Life Ins. Co., 387 U.S. 202, 211
(1967)).

166

Id. (internal citations and quotation marks omitted).

167

Id. at 555–56.

168

Id. (citing H.R.Rep.No.85, 73d Cong., 1st Sess., 11 (1933)).

169

Id. at 555 (quoting Howey, 328 U.S. at 299).

30

In reasoning that the agreement in Marine Bank did not fall within “the ordinary concept
of a security,” the Supreme Court noted that “[t]he unusual instruments found to constitute
securities in prior cases involved offers to a number of potential investors, not a private transaction
as in this case.” The Supreme Court compared the facts of Marine Bank to Howey, where 42
persons purchased interests in a citrus grove during a four-month period, and SEC v. C. M. Joiner
Leasing Corp., where offers to sell oil leases were sent to over 1,000 prospects.170 Unlike those
cases, the Supreme Court noted that no prospectus was distributed to the claimants or to other
potential investors, and “the unique agreement they negotiated was not designed to be traded
publicly.”171 Furthermore, the Supreme Court observed that the provision permitting claimants
specific uses “underscore[d] the unique character of the transaction.”172 Similarly, the Supreme
Court reasoned, the provision that gave claimants veto power over future loans gave them a
measure of control over the operation of the business not characteristic of a security. 173
Accordingly, the Supreme Court held in Marine Bank that the “unique agreement, negotiated oneon-one by the parties,” was not a security.174
In Youmans v. Simon, the Fifth Circuit confirmed that Howey establishes the test for what
constitutes an “investment contract,” i.e. “a contract, transaction or scheme whereby a person
invests his money in a common enterprise and is led to expect profits solely from the efforts of a

170

Id. at 559–60 (citing Howey, 328 U.S. at 299; SEC v. C. M. Joiner Leasing Corp., 320 U.S. 344, 351 (1943)).

171

Id. at 560.

172

Id.

173

Id.

174

Id.

31

promoter or a third party.”175 However, the Fifth Circuit recognized that “there has been some
modification to the requirement that profits result ‘solely from the efforts of others’” as the term
is “interpreted in a flexible manner, not in a literal sense.”176 Therefore, “[t]he proper inquiry now
is whether ‘the efforts made by those other than the investor are the undeniably significant ones,
those essential managerial efforts which affect the failure or success of the enterprise.’”177 Relying
on Marine Bank, the Fifth Circuit further stated, “Agreements negotiated one-on-one creating
enterprises in which investors are actively involved, knowledgeable, and able to protect their
interests are not within the ambit of the federal securities laws.”178
In support of their argument that TMJ Plaintiffs’ investments are not securities, IMC
Defendants point to deposition testimony confirming that Brad Axelrod, a partner with
McGlinchey Stafford PLLC, represented TMJ Plaintiffs in connection with all the agreements at
issue, as evidence that the investments were subject to one-on-one negotiations. 179 IMC
Defendants also point to documents showing that Axelrod, on behalf of TMJ Plaintiffs, negotiated
and redlined drafts of the original and amended MOA agreements, as well as the New Orleans
agreements and sublease.180 Furthermore, IMC Defendants point to the following evidence that

175

Youmans, 791 F.2d at 345 (quoting Howey, 328 U.S. at 298).

176

Id. (citing Williamson v. Tucker, 645 F.2d 404, 418 (5th Cir.)).

177

Id. (citing 645 F.2d at 418).

178

Youmans, 791 F.2d at 346.

179

Rec. Doc. 65-1 at 7 (citing 2/20/18 Depo. of Dr. Tarun Jolly [“Jolly Depo.”], at 87:12-19, 94:10-18, 112:14-20
(Ex. B); 2/21/18 Depo. of Logan Trotter [“Trotter Depo.”], at 25:21 to 26:7, 33:4 to 34:5, 72:16- 23, 76:7-9 (Ex. C);
Motwani Depo., at 124:14-25 (Ex. A)).
180

Id. (citing, in globo Ex. D-3 (3/25/15 Axelrod email covering redline of New Orleans sublease [Bates TMJ 4414];
6/10/15 Axelrod email covering redlines of New Orleans Operating and Managements Agreements [Bates TMJ 4147];
7/24/15 Axelrod email covering redline of MOA Operating Agreement [TMJ 4932]; 11/13/15 Axelrod email with
counterproposal regarding amended MOA agreement [TMJ 5289])).

32

TMJ Plaintiffs had sufficient control of the operations to preclude “security” status under Howey:


In their depositions, TMJ members admitted that TMJ selected the contractor
who built out the leased MOA premises for use as a Margaritaville-themed
restaurant.181



The parties’ agreements gave TMJ substantial control over various aspects of
the MOA entity. For example, the Operating Agreement requires TMJ's
approval for the transfer or pledge of substantial assets; mergers; dissolution;
bankruptcy; termination or modification of the Sublicense Agreement
(governing use of the “Margaritaville” name); and issuance of additional
voting units. The agreement also gives members with at least a 50% interest
(which TMJ had under the Operating Agreement) the right to approve budgets
and exceeding budgets, and members with at least a 25% interest have the
power to remove the manager for a laundry list of causes. And, under the
Management Agreements, TMJ can remove the manager if the restaurants lose
money for two consecutive years. In the event of removal of a manager, TMJ
could select the new manager (which could be TMJ).182



In their depositions, TMJ members admitted they reviewed and approved the
contractor’s invoices.183



With respect to plans for a New Orleans restaurant, TMJ’s members testified
it was TMJ’s responsibility, not IMC’s, to construct a “shell” to house a New
Orleans Margaritaville, and to build out that shell for that purpose.184 These
TMJ responsibilities are also set forth in the New Orleans Operating
Agreement and the Sublease attached thereto.185 TMJ also enjoyed the same
powers over the New Orleans entity that it had over the MOA entity.186

181

Id. at 9 (citing Jolly Depo., at 119:20-25 (Ex. B); Trotter Depo., at 110:7-11 (Ex. C); Motwani Depo., at 42:21 to
43:6 (Ex. A).).
182
Id. (citing See MOA Operating Agreement (Ex. D-4) at ¶¶2.5, 2.5.2, 4.1.2, 4.1.3, 4.2, 4.2.5, 4.2.7, 4.3 & 4.4; and
MOA Management Agreements (Exs., D-5 & D-7) at ¶¶2(i) & 4(c)).
183

Id. at 10 (citing Trotter Depo., at 110:16-23 (Ex. C)).

184

Id. (citing Jolly Depo., at 135:6-11 (Ex. B); Trotter Depo., at 118:12 to 119:4 (Ex. C); Motwani Depo., at 40:1519 (Ex. A)).
185
Id. (citing Ex. D-8 at ¶2.5.3 (requiring TMJ to sublease premises to New Orleans entity); and Sublease attached
as Ex. B thereto at Article 9)).
186

Id. (citing Ex. D-8 (New Orleans Operating Agreement) at ¶¶2.5, 2.5.2 [same as 2.5.3 for MOA], 4.1.2, 4.1.3,
4.2, 4.2.5, 4.2.7, 4.3 & 4.4, and Ex. D-9 (New Orleans Management Agreement) at ¶¶2(i) & 4(c)).

33

In opposition, TMJ Plaintiffs point to evidence that they were not “sophisticated investors
with experience in sit-down chain restaurants such as Margaritaville.” 187 Furthermore, TMJ
Plaintiffs point to the definitions of “Manager” and “Member” in the agreements as evidence that
they did not have control over the investments.188
Thus, disputed issues of fact exist as to whether the investors were “knowledgeable, and
able to protect their interests are not within the ambit of the federal securities laws;”189 and whether
TMJ Plaintiffs were led to “expect profits solely from the efforts of a promoter or a third party.”190
When assessing whether a dispute as to any material fact exists, the court refrains from making
credibility determinations or weighing the evidence.191 Accordingly, summary judgment on the
issue of whether the investments in the Minneapolis Restaurant and the New Orleans Restaurant
constitute securities, such that TMJ Plaintiffs’ claims pursuant to federal securities law should be
dismissed, is not appropriate at this stage. Thus, the Court will deny IMC Defendants motion for
summary judgment as to the security fraud claim brought under the Securities Exchange Act of
1934.
IMC Defendants also seek summary judgment on TMJ Plaintiffs’ claims brought under
Louisiana’s “Blue Sky” laws. Louisiana Revised Statute § 51:705, which requires that securities
offered or sold in Louisiana be registered, states, in relevant part:

187

Rec. Doc. 86 at 12 (citing Ex. E. at ¶ 5.).

188

Rec. Doc. 86 (citing Rec. Doc. 60, Ex. B at ¶¶ 4, 13-15; Rec. Doc. 60, Ex. C-1 at p. 3 (definitions of “Manager”
and “Member”), §§ 2.1, 3.1, 4.1, ; id. Rec. Doc. 60, Ex. J at p. 3 (definitions of “Manager” and “Member”), §§ 2.1,
3.1, 4.1.).
189

Youmans, 791 F.2d at 346.

190

Howey, 328 U.S. at 298.

191

Delta & Pine Land Co., 530 F.3d at 398–99.

34

It shall be unlawful for any person to offer for sale or sell any securities in this state
unless any of the following conditions are met: (1) They are subject to an effective
registration statement under this Part. (2) The security or transaction is exempt
under R.S. 51:708 or 709. (3) The securities are federal covered securities pursuant
to R.S. 51:702.
Louisiana Revised Statute § 51:702(15)(a) defines a security as:
[A]ny note; stock; treasury stock; bond; debenture; evidence of indebtedness;
certificate of interest or participation in any profit-sharing agreement; collateraltrust certificate; preorganization certificate or subscription; transferable share;
investment contract; voting-trust certificate; certificate of deposit for a security;
fractional undivided interest in oil, gas, or other mineral rights; any put, call,
straddle, option . . . .192
Louisiana’s “Blue Sky” laws were modeled after the federal system, specifically, the
Securities Act of 1933 and the Securities Exchange Act of 1934.193 Accordingly, Louisiana courts
apply the Howey test to determine whether a particular business transaction falls within the
definition of an “investment contract” by examination of the following factors: (1) an investment
of money, (2) in a common enterprise, (3) with an expectation of a profit, and (4) reliance by the
investor upon the efforts of others.194
As stated above, with respect to TMJ Plaintiffs’ investments in both the Minneapolis
Restaurant and the New Orleans Restaurant, TMJ Plaintiffs have pointed to evidence that creates
a genuine dispute of material fact as to whether the investments constitute securities under Howey.
Therefore, summary judgment is not appropriate with respect to TMJ Plaintiffs’ Louisiana Blue
Sky laws claims, to the extent there is a genuine issue of material fact as to whether the investments

192

LA. STAT. ANN. § 51:702 (emphasis added).

193

Ek v. Nationwide Candy Div., Ltd., No. 8322 (La. Ct. App. 3 Cir. 7/22/81); 403 So. 2d 780, 785, writ denied, 407
So. 2d 732 (La. 1981).

194

Id. at 785–86 (applying the Howey test to a Louisiana state securities claim).

35

in the Minneapolis Restaurant and the New Orleans Restaurant are securities as defined by state
law. Accordingly, the Court will deny IMC Defendants’ motion as to the securities fraud claim
pursuant to Louisiana Blue Sky law.
C.

Claims for Intentional Misrepresentation or Fraudulent Inducement and Negligent
Misrepresentation
In the amended complaint, TMJ Plaintiffs bring claims for intentional misrepresentation or

fraudulent inducement and negligent misrepresentation. IMC Defendants argue that they are
entitled to summary judgment on these claims because forward-looking, oral predictions of the
future are not actionable. TMJ Plaintiffs argue that summary judgment is inappropriate as to these
claims because IMC Defendants misstate the law regarding future predictions forming the basis
for a misrepresentation claim and because disputed issues of fact exist as to whether
misrepresentations were made regarding the performance of the Minneapolis Restaurant and/or
how well-executed the deal was.
Under Louisiana law, a plaintiff must demonstrate three elements to establish a claim for
fraud: “(1) a misrepresentation, suppression, or omission of true information; (2) the intent to
obtain an unjust advantage or to cause damage or inconvenience to another; and (3) the error
induced by a fraudulent act must relate to a circumstance substantially influencing the victim's
consent to (a cause of) the contract.”195 However, “fraud may be predicated on promises made
with an intention not to perform the same, or, as the rule is frequently expressed, on promises made

195

Shelton v. Standard/700 Assocs., 2001-0587 (La. 10/16/01), 798 So. 2d 60, 64; see also Terrebonne Concrete, LLC
v. CEC Enterprises, LLC, 2011-0072 (La. App. 1 Cir. 8/17/11), 76 So. 3d 502, 509.

36

without an intention of performance.”196
The elements of intentional misrepresentation under Louisiana law are: (1) a
misrepresentation of a material fact; (2) made with the intent to deceive; and (3) causing justifiable
reliance with resultant injury.197 “[S]tatements, about things to happen in the future, cannot be
misrepresentations of fact.”198
Under Louisiana law, the required elements necessary to establish a claim of negligent
misrepresentation are: (1) the defendant, in the course of its business or other matters in which it
had pecuniary interest, supplied false information, (2) the defendant had a legal duty to supply
correct information to the plaintiff, (3) the defendant breached its duty, which can be breached by
omission as well as by affirmative misrepresentation, and (4) the plaintiff suffered damages or
pecuniary loss as a result of the its justifiable reliance upon the omission or affirmative
misrepresentation.199
IMC Defendants assert that in their depositions, TMJ Plaintiffs’ members identify two
categories of alleged representations of which they complain: (1) “[a]lleged oral representations
by Mario Abal (who was leading development of the restaurants for IMC) leading up to the MOA
196

Polusky v. Allstate Petroleum, Inc., 180 So. 2d 815, 817 (La. App. 4 Cir. 1965).

197

Guidry v. U.S. Tobacco Co., 188 F.3d 619, 627 (5th Cir. 1999) (citing Newport Ltd. v. Sears, Roebuck & Co., 6
F.3d 1058, 1068 (5th Cir.1993); Abell v. Potomac Ins. Co., 858 F.2d 1104, 1131 n. 33 (5th Cir.1988); Ballard's Inc.
v. North American Land Development Corp., No. 28,437-CA (La. App. 2 Cir. 6/26/96); 677 So.2d 648, 651; Pittman
v. Piper, 88-2162 (La. App. 4 Cir. 4/13/89); 542 So.2d 700, 702; Deville v. Leonards, 83-951 (La. App. 3
Cir.10/10/84); 457 So.2d 311, 313).
198

Bass v. Coupel, 93-1270 (La. App. 1 Cir. 6/23/95), 671 So. 2d 344, 351; see also Swann v. Magouirk, No. 10,033
(La. App. Cir. 1 11/1/63); 157 So. 2d 749, 751; see also Johnson v. Unopened Succession of Alfred Covington, Jr.,
No. 42,488 (La. App. 2 Cir. 10/31/07); 969 So. 2d 733, 742 (“Fraud cannot be predicated on unfulfilled promises or
statements as to future events.”); see also Badalamenti v. Jefferson Guar. Bank, 99-1371 (La. App. 5/30/00); 759 So.
2d 274, 280.
199

Sys. Eng'g & Sec., Inc. v. Sci. & Eng'g Associations, Inc., 2006-0974 (La. App. 4 Cir. 6/20/07), 962 So. 2d 1089,
1092.

37

agreements (signed in August, 2015 and November, 2015), to the effect that “the restaurant would
do great, that it would beat expectations, and similar optimistic sentiments”200 and (2) “[a]lleged
oral representations by David Crabtree (IMC’s CEO) in connection with the grand opening of the
MOA restaurant in September, 2016 as to the restaurant’s prospects.”201 IMC Defendants argue
that the alleged representations by Abal are not actionable as they are forward-looking statements,
and the alleged representations made by Crabtree are not actionable because, in addition to being
forward-looking, they were made after any agreement was executed and therefore could not have
been relied upon by TMJ Plaintiffs.
TMJ Plaintiffs point to no evidence that any alleged statement made by Crabtree occurred
before the execution of any of the agreements into which TMJ Plaintiffs allege IMC Defendants
induced them to enter. Furthermore, TMJ Plaintiffs point to no evidence that they relied on the
alleged statements made by Crabtree for any other purpose. Accordingly, no disputed issue of fact
exists as to whether TMJ Plaintiffs relied on the alleged statements by Crabtree.
TMJ Plaintiffs point to evidence of numerous statements made by Abal regarding the
quality of the deals, the profitability of the investments, and the potential financial performance of
the restaurants. 202 TMJ Plaintiffs further point to an email sent from Renato Barbon, IMC
Holdings’ CFO, to Jose Agote, the former President of IMC Holdings, that “mistakes were made”

200

Rec. Doc. 65-1 at 17 (citing Jolly Depo., at 73:8-18, 76:17-24, 79:8-22, 83:1-5, 104:9 to 105:14 (Ex. B); Trotter
Depo., at 60:23 to 61:14, 69:15 to 70:4, 77:5-18, 79:1-10, 88:1-23, 90:1-7 (Ex. C); Motwani Depo., at 44:18-22, 59:1020, 65:7-15, 77:6 to 78:6 (Ex. A)).
201

Id. (citing Jolly Depo., at 73:8 to 74:4 (Ex. B); Trotter Depo., at 87:12 to 88:17, 90:1-12 (Ex. C); Motwani
Depo., at 78:7-11 (Ex. A)).
202

Rec. Doc 86 at 14–15 (citing Rec. Docs. 86-17).

38

with respect to budgeting for the Minneapolis Restaurant.203 Moreover, to the extent Abal made
representations to TMJ Plaintiffs about the present state of the deal and the accuracy or ability of
IMC Defendants to project future outcomes, such would be statement of fact as to present events,
rather than future events, and therefore such statements would be actionable under Louisiana law.
Accordingly, there are material facts in dispute regarding TMJ Plaintiffs’ claims based on
misrepresentations, such that summary judgment is not appropriate as to these claims. Thus, the
Court will deny IMC Defendants’ motion as to TMJ Plaintiffs’ claims for fraudulent inducement,
intentional misrepresentation, and negligent misrepresentation.
D.

Claims for Breach of Contract
IMC Defendants argue that they are entitled to summary judgment on TMJ Plaintiffs’

misrepresentation and breach of contract claims because forward-looking, oral predictions of the
future are not actionable. IMC Defendants contend that the parties’ agreements include both
merger/integration clauses and no-oral-modification clauses, which IMC Defendants assert
preclude reliance on any representations or promises that were not incorporated into the parties’
written agreements. TMJ Plaintiffs contend that integration clauses relate to parol evidence and do
not automatically preclude a breach of contract claim based on the Parties’ failure to perform the
terms of the contract.
The Louisiana Civil Code defines an obligation as “a legal relationship whereby a person,
called the obligor, is bound to render a performance in favor of another.”204 In order to recover for
breach of contract under Louisiana law, the plaintiff must prove: “(1) the obligor’s undertaking of

203

Id.

204

LA. CIV. CODE. ANN. art. 1756.

39

an obligation to perform; (2) the obligor failed to perform the obligation (i.e. breach); and (3) the
breach resulted in damages to the obligee.”205
Pursuant to Louisiana Civil Code article 2046, “[w]hen the words of a contract are clear
and explicit and lead to no absurd consequences, no further interpretation may be made in search
of the parties’ intent.” Moreover, “[i]t is well settled that when the terms of a written contract are
clear

and unambiguous,

the contract cannot

be

varied,

explained

or

contradicted

by parol evidence.”206 “In such cases, the meaning or intent of the parties to the contract must be
sought within the four corners of the instrument.”207
In this case, TMJ Plaintiffs do not dispute that all of the agreements for the Minneapolis
Restaurant and the New Orleans Restaurant contain merger/integration clauses and no-oralmodification clauses. TMJ Plaintiffs do not argue that the contracts are unclear or ambiguous.
Accordingly, the Court will not look beyond the four corners of those agreements to determine the
contractual obligations of IMC Defendants for the purpose of deciding TMJ Plaintiffs’ claim for
breach of contract. However, TMJ Plaintiffs assert that IMC Defendants failed to perform the
terms of the contract, and this is in dispute. Thus, the Court will deny IMC Defendants’ motion as
to TMJ Plaintiffs’ claims for breach of contract.
E.

Claim for Breach of Fiduciary Duty
IMC Defendants argue that they are entitled to summary judgment on TMJ Plaintiffs’

205

Favrot v. Favrot, 2010–0986 (La. App. 4 Cir. 2/9/11); 68 So.3d 1099, 1108–09; SnoWizard, Inc. v. Robinson,
897 F. Supp. 2d 472, 478 (E.D. La. 2012) (Brown, J.).

206

Breaux v. May, 392 So. 2d 1089, 1091 (La. Ct. App. 1980), writ denied, 398 So. 2d 531 (La. 1981) (citing
Capizzo v. Traders & General Insurance Company, 191 So.2d 183 (La.App. 3rd Cir. 1966); Liberty Mutual
Insurance Company v. Ads, Inc., 357 So.2d 1360 (La.App. 4th Cir. 1978)).

207

Id.

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breach of fiduciary duty claim because: (1) the members of IMC MOA, which is a managermanaged Florida LLC, do not owe fiduciary duties to each other, and therefore Defendant IMC
Holdings, as a member but not a manager does not owe a fiduciary duty to TMJ Plaintiffs; and (2)
TMJ Plaintiffs have failed to meet their burden of showing that Mario Abal, who allegedly made
the misrepresentations to TMJ Plaintiffs that supposedly induced TMJ Plaintiffs to enter into the
Operating Agreement, made those representations in his capacity as an agent or employee of IMC
Management. TMJ Plaintiffs argue that IMC Defendants acknowledge that under Florida law, a
manager of a manager-managed LLC owes fiduciary duties to its members; and the Management
Agreement, which is included and incorporated by the Operating Agreement, establishes that IMC
Holdings is the Managing Member.
Under Louisiana choice of law rules, “the law of the place where the corporation was
incorporated governs disputes regarding the relationship between the officers, directors, and
shareholders and the officers’ and directors’ fiduciary duties.”208 As IMC MOA and IMC NOLA
are Florida limited liability companies, the parties do not dispute that Florida law applies to the
breach of fiduciary duty claim.
Under Florida law, “[t]he elements of a claim for breach of fiduciary duty are: the existence
of a fiduciary duty, and the breach of that duty such that it is the proximate cause of the plaintiff's
damages.”209 Chapter 605 of the Florida Revised Limited Liability Company Act provides that
“[e]ach manager of a manager-managed limited liability company and member of a member-

208

Torch Liquidating Trust ex rel. Bridge Associates L.L.C. v. Stockstill, 561 F.3d 377, 385 n.7 (5th Cir. 2009)
(internal citations).
209

Gracey v. Eaker, 837 So. 2d 348, 353 (Fla. 2002).

41

managed limited liability company owes fiduciary duties of loyalty and care to the limited liability
company and members of the limited liability company.” 210 Furthermore, “[a] manager of a
manager-managed limited liability company and a member of a member-managed limited liability
company shall discharge their duties and obligations under this chapter or under the operating
agreement and exercise any rights consistently with the obligation of good faith and fair
dealing.”211
The parties do not dispute that IMC MOA is a manager-managed Florida LLC. Under
Florida law, each manager of a manager-managed limited liability company owes fiduciary duties
of loyalty and care to the limited liability company and members of the limited liability
company.212 Under the Revised MOA Business Management Agreement, IMC Management is
the manager of IMC MOA.213 Therefore, IMC Management owes a fiduciary duty to IMC MOA
and its respective members, in its role as Manager.
IMC Defendants contend that Defendant IMC Holdings does not owe a fiduciary duty to
TMJ Plaintiffs because it is a member but not a manager of IMC MOA. TMJ Plaintiffs argue that
the Management Agreement, which is included and incorporated by the Operating Agreement,
establishes that “IMC Holdings is the Managing Member.” TMJ Plaintiffs point to Section 4.1.1
of the Revised MOA Business Operating Agreement, which provides that IMC Holdings shall be

210

Fla. Stat. Ann. § 605.04091 (West).

211

Id.

212

Id.

213

Rec. Doc. 46-5 at 31.

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the “initial manager” of IMC MOA.214 Therefore, it appears that IMC Holdings owed a fiduciary
duty to IMC MOA as the “initial manager” of IMC MOA. Moreover, to the extent a disputed issue
of fact exists as to whether Mario Abal was acting as an agent of IMC Management when the
alleged misrepresentations were made constituting an alleged breach of IMC Management’s
fiduciary duties to IMC MOA and their respective members, summary judgment is not appropriate.
Accordingly, the Court will deny IMC Defendants’ motion as to this claim.
F.

Louisiana Unfair Trade Practices Act Claim
IMC Defendants argue, inter alia, that the LUTPA claim must be dismissed because it was

not timely filed. In response, TMJ Plaintiffs assert that the LUTPA claims are not preempted
because TMJ Plaintiffs only later discovered the underlying unfair trade practices and could not
file suit until then.
The Louisiana Unfair Trade Practices Act is codified at Louisiana Revised Statute
§ 51:1409, which provides, in pertinent part: “Any person who suffers any ascertainable loss of
money or movable property, corporeal or incorporeal, as a result of the use or employment by
another person of an unfair or deceptive method, act, or practice declared unlawful by Section
51:1405, may bring an action individually but not in a representative capacity to recover actual
damages.” Section 51:1409(E) provides that “[t]he action provided by this section shall be
prescribed by one year running from the time of the transaction or act which gave rise to this right
of action.”215
In Zeigler v. Housing Authority of New Orleans, the Louisiana Fourth Circuit Court of

214

Rec. Doc. 46-5 at 10.

215

La. R. S. 51:1409(E)

43

Appeal stated that an act gives rise to a right of action under Section 1409 when the plaintiff
“suffer[s] any ascertainable loss of money or moveable property.”216 The court in Zeigler further
stated, “The date of the alleged wrongful act begins the running of the prescription, even if the
plaintiff was unaware of the act.” 217 The Louisiana Second Circuit Court of Appeal has also
recognized that Section 51:1409(E) “has been interpreted as creating a peremptive, rather than a
prescriptive period,” and therefore “cannot be interrupted or suspended.”218
IMC Defendants argue that more than one year has passed between the date of the alleged
wrongful act and the date TMJ Plaintiffs filed this action, and therefore, the LUTPA claims are
time-barred. TMJ Plaintiffs argue that TMJ Plaintiffs “only later” discovered the underlying unfair
trade practices and could not file suit until then. However, TMJ Plaintiffs cite no authority for the
assertion that the limitations period for a LUTPA claim is subject to a discovery rule. Moreover,
under Louisiana law, the date of the alleged wrongful act begins the running of the prescription,
even if TMJ Plaintiffs were unaware of the act.219
In the Amended Complaint, TMJ Plaintiffs assert that IMC Defendants’ actions in
providing false and misleading information to TMJ Plaintiffs constitute unfair and/or deceptive
acts giving rise to their LUTPA claim.220 However, TMJ Plaintiffs do not point to any alleged
action whereby IMC Defendants provided false and misleading information within one year of

216

Zeigler v. Hous. Auth. of New Orleans, 2012-1168 (La. App. 4 Cir. 4/24/13); 118 So. 3d 442, 452.

217

Id. (citing Morris v. Sears, Roebuck and Co., 99–2772 (La. App. 4 Cir. 5/31/00); 765 So.2d 419, 422).

218

Adcock v. Wooten, 50,116 (La. App. 2 Cir. 9/30/15), 180 So. 3d 473, 477 (citing Glod v. Baker, 04–1483 (La.
App. 3d Cir. 3/23/05), 899 So.2d 642, writ denied, 05–1574 (La.1/13/06), 920 So.2d 238).
219

Zeigler, 118 So. 3d at 452.

220

Rec. Doc. 46 at 56.

44

May 3, 2017, the date this action was filed.221 Accordingly, because there is no disputed issue of
material fact, the Court finds that IMC Defendants’ are entitled to judgment as a matter of law that
the LUTPA claim is perempted.
G.

Claim for Anticipatory Breach of Contract
IMC Defendants argue that TMJ Plaintiffs are not entitled to declaratory judgment for

anticipatory breach because there is no genuine fact in dispute that (1) it was TMJ Plaintiffs (not
IMC Defendants) that were responsible for delivering a built-out premises for such a restaurant,
and (2) it was TMJ Plaintiffs that decided to stop development of the New Orleans Restaurant.
TMJ Plaintiffs argue that summary judgment on this claim should be denied because if and when
either party manifested an unwillingness to perform their obligations, and whether such a party
was justified based on the factual circumstances are all material facts which the Parties genuinely
dispute.
In Latter & Blum, Inc. v. Ditta, the Louisiana Fourth Circuit Court of Appeal stated,
“Louisiana courts have recognized the doctrine of anticipatory breach of contract.”222 The court
further recognized that “[t]he doctrine of anticipatory breach of contract applies when an obligor
announces he will not perform an obligation which is due sometime in the future.”223 “Under those
circumstances, the obligee need not wait until the obligor fails to perform for the contract to be

221

Rec. Doc. 1.

222
Latter & Blum, Inc. v. Ditta, 2017-0116 (La. App. 4 Cir. 6/22/17), 223 So. 3d 54, 60, n.4 writ denied, 2017-1293
(La. 11/6/17), 229 So. 3d 475 (citing Andrew Development Corp. v. West Esplanade Corp., 347 So.2d 210, 212–13
(La. 1977); Ringel & Meyer, Inc. v. Falstaff Brewing Corp., 511 F.2d 659, 660 (5th Cir. 1975)).
223

Id. (citing Fertel v. Brooks, 02-0846, p. 13 (La. App. 4 Cir. 9/25/02), 832 So.2d 297, 305).

45

considered in breach.”224
IMC Defendants contend that there is no material fact in dispute that TMJ Plaintiffs, not
IMC Defendants, breached their obligations under the New Orleans Restaurant agreements by
failing to deliver a built-out premises for the restaurant, and stopping development of the
restaurant. In response, TMJ Plaintiffs argue that if and when either party manifested an
unwillingness to perform their obligations, and whether such a party was justified based on the
factual circumstances are all material facts in dispute. As support, TMJ Plaintiffs cite only the
deposition of David Crabtree, IMC’s CEO, who, when asked whether he had personally taken any
action to further develop the New Orleans Restaurant, stated that it was “not in [his] control.”225
To the extent that judgment on this claim requires a determination of fact as to whether
IMC Defendants owed TMJ Plaintiffs an obligation and announced that they would not perform
the obligation, TMJ Plaintiffs have put forth some evidence that IMC Defendants’ indicated that
they would not perform the obligation. Accordingly, because genuine issues of material fact are in
dispute, the Court will deny IMC Defendants’ motion for summary judgment as to this claim.
V. Conclusion
For the reasons stated above, the Court grants IMC Defendants’ motion to the extent it
seeks summary judgment on TMJ Plaintiffs’ claims for rescission under the Securities Act of 1933
and TMJ Plaintiffs’ LUTPA claim, as the Court finds no genuine dispute of material fact to
preclude summary judgment as to these claims. However, because material facts are in dispute
summary judgment is not appropriate as to all other claims.

224

Id. (internal citation and quotation marks omitted).

225

Rec. Doc. 130-4 at 11.

46

Accordingly,
IT IS HEREBY ORDERED that IMC Defendants’ motion for summary judgment is
GRANTED to the extent it seeks summary judgment on TMJ Plaintiffs’ claims for rescission
pursuant to the Securities Act of 1933 and TMJ Plaintiffs’ LUTPA Claim. IMC Defendants’
motion for summary judgment is DENIED in all other respects.
NEW ORLEANS, LOUISIANA, this 18th day of April, 2018.
_____

____________________________________
NANNETTE JOLIVETTE BROWN
UNITED STATES DISTRICT JUDGE

47