Direct Benefits, LLC, et al v. TAC Financial Inc., et al.

Filing 211

MEMORANDUM AND ORDER setting briefing deadlines for responding to the Court's notice, and address whether the Court should enter summary judgment in Defendants' favor as to Count I on statute of limitations grounds, as set forth. Signed by Judge Stephanie A. Gallagher on 4/16/2020. (dass, Deputy Clerk)

Case 1:13-cv-01185-SAG Document 211 Filed 04/16/20 Page 1 of 3

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
DIRECT BENEFITS, LLC, et al.,

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Plaintiffs,
v.
TAC FINANCIAL, INC., et al.,
Defendants.
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Civil Case No. SAG-13-1185

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MEMORANDUM AND ORDER
Today, April 16, 2020, this Court entered a Memorandum Opinion and Order, ECF 20910, granting Defendants’ Cross-Motion for Partial Summary Judgment, ECF 104, and denying
Plaintiffs’ Motion for Partial Summary Judgment, ECF 98. Specifically, the Court entered
summary judgment in Defendants’ favor as to Count III of the Third Amended Complaint, which
asserted a claim for damages for the unlawful sale of unregistered securities under Maryland law.
In finding that Count III was time-barred under the relevant statute of limitations provision in the
Maryland Securities Act, the Court’s Opinion relied significantly on case law interpreting the
federal Securities Act.
Count I of Plaintiffs’ Third Amended Complaint also asserts a claim for damages under
the federal Securities Act for the illegal sale of unregistered securities. ECF 77, ¶¶ 71-81.
Defendants’ tenth affirmative defense listed in their Answer asserts that “Plaintiffs’ claims are
barred, in whole or in part, by the applicable statute(s) of limitation.” ECF 78 at 31.
The federal Securities Act deems it unlawful for any person to offer or sell an
unregistered security in interstate commerce, 15 U.S.C. § 77e(a) (2018), and explicitly provides

Case 1:13-cv-01185-SAG Document 211 Filed 04/16/20 Page 2 of 3

civil plaintiffs with a private right of action if they suffer damages as a result of such an unlawful
offer or sale, id. § 77l(a)(1). The federal Securities Act sets the following statute of limitations:
No action shall be maintained to enforce any 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 . . . .
Id. § 77m. This statute has been described as “cumulative.” Nolfi v. Ohio Ky. Oil Corp., 562 F.
Supp. 2d 904, 908 (N.D. Ohio 2008). In other words, “[P]laintiffs must plead and prove facts
tending to show that the present action was commenced within one year of the violation upon
which it is based and not more than three years after the security was bona fide offered to the
public.” Morley v. Cohen, 610 F. Supp. 798, 815 (D. Md. 1985).
Federal Rule of Civil Procedure 56(f)(2) provides that “[a]fter giving notice and a
reasonable time to respond, the court may . . . grant the motion [for summary judgment] on
grounds not raised by a party.” See also Celotex Corp. v. Catrett, 477 U.S. 317, 326 (1986)
(“[D]istrict courts are widely acknowledged to possess the power to enter summary judgment
sua sponte, so long as the losing party was on notice that she had to come forward with all of her
evidence.”).
Given the Court’s conclusions of law in its ruling on Count III, it appears that Count I
may be similarly time-barred, and subject to summary judgment on that ground. Accordingly,
this 16th day of April, 2020, the Court hereby NOTIFIES Plaintiffs that the Court is considering
granting Defendants’ Motion for Partial Summary Judgment, ECF 192, as to Count I, on the
ground that Count I is barred by the relevant statute of limitations. It is further ORDERED that:

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Case 1:13-cv-01185-SAG Document 211 Filed 04/16/20 Page 3 of 3

(1)

Plaintiffs SHALL RESPOND to the Court’s notice, and address whether the
Court should enter summary judgment in Defendants’ favor as to Count I on
statute of limitations grounds, on or before Friday, May 1, 2020;

(2)

Defendants SHALL REPLY to any arguments raised by Plaintiffs on or before
Friday, May 15, 2020;

(3)

Should either party represent to the Court that the preparation, or electronic filing,
of such responses would require any person to disregard an existing stay-at-home
or other public health order, this Court will grant an appropriate extension of time
to permit continued compliance. Otherwise, the schedule set herein SHALL NOT
be subject to the blanket extension of time contained in Standing Order. No.
2020-07, or any other subsequent amending Standing Order; and

(4)

The Court’s suspension of the requirement that counsel provide paper courtesy
copies of any filings SHALL REMAIN in effect. If Plaintiffs’ or Defendants’
submissions pursuant to this Order exceed fifteen pages, counsel are directed
NOT to file a paper courtesy copy with the Clerk’s Office, until further directed
by this Court.

/s/
Stephanie A. Gallagher
United States District Judge

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