Securities and Exchange Commission v. Green United, LLC et al

Filing 115

MEMORANDUM DECISION AND ORDER denying 109 Motion to Certify 104 Order on Motion to Dismiss for Interlocutory Appeal Under 28 U.S.C. 1292(b). Signed by District Judge Ann Marie McIff Allen on 11/26/24 (alt)

IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, CENTRAL DIVISION
SECURITIES AND EXCHANGE
COMMISSION,

MEMORANDUM DECISION AND
ORDER DENYING DEFENDANTS’
MOTION TO CERTIFY
INTERLOCUTORY APPEAL

Plaintiff,
v.

Civil No. 2:23-cv-00159-AMA-CMR

GREEN UNITED, et al.,

District Judge Ann Marie McIff Allen

Defendants, and
TRUE NORTH UNITED INVESTMENTS,
LLC, et al.,

Magistrate Judge Cecilia M. Romero

Relief Defendants.
On October 24, 2024, Defendant Kristoffer A. Krohn filed a Motion to Certify Order on
Motion to Dismiss for Interlocutory Appeal (“Motion”) 1 asking the Court to certify its
September 23 Order denying Mr. Krohn’s Motion to Dismiss for interlocutory appeal. On
November 7, 2024, Plaintiff Securities and Exchange Commission (“SEC”) filed its Opposition. 2
On November 21, 2024, Mr. Krohn filed his Reply. 3 For the reasons set forth below, the Court
denies the Motion.
DISCUSSION
The Court declines to certify this case for an interlocutory appeal because Mr. Krohn fails
to show any substantial ground for difference of opinion in the controlling law governing the

ECF No. 109.
ECF No. 110.
3
ECF No. 113.
1
2

September 23 Order. A district court may certify a civil order for interlocutory appeal if the
judge is “of the opinion that” three elements are met: (1) the “order involves a controlling
question of law [2] as to which there is a substantial ground for difference of opinion and [3] an
immediate appeal from the order may materially advance the ultimate termination of the
litigation.” 28 U.S.C. § 1292(b). “Interlocutory appeals under § 1292(b) are appropriate only in
extraordinary cases.” See Mod. Font Applications LLC v. PetSmart, Inc., No. 2:19-cv-613, 2020
WL 9255402 (citing Utah State Dep’t of Health v. Kennecott Corp., 14 F.3d 1489, 1495 (10th
Cir. 1994)). “[T]he basic inquiry must be whether immediate appeal may substantially reduce the
danger of unnecessary, or unnecessarily burdensome, proceedings.” Charles A. Wright, et al.,
Fed. Prac. & Proc. Juris. § 3931 (3d ed.). “There is no right to appeal from orders of any sort that
are generally within the statute, and it is to be expected that permission will be denied
frequently.” Id.
Here, Mr. Krohn makes two arguments in an attempt to show ambiguity in the controlling
law. 4 First, he suggests “[t]he question underlying whether Krohn’s sale of Green Boxes forms
the basis of an investment contract is one about which there is substantial ground for difference
of opinion.” 5 Second, he suggests reasonable minds could conclude the common-enterprise
element of Howey requires “some right, interest, or stake in the profits of the promoter’s
underlying business venture . . . .” 6

The parties focus on whether there is a substantial ground for difference of opinion as to the
controlling law. Given the Court’s resolution of that question, it need not reach §1292(b)’s other
criteria. “The [§ 1292(b)] criteria are conjunctive, not disjunctive.” Ahrenholz v. Bd. of Trustees
of Univ. of Illinois, 219 F.3d 674, 676 (7th Cir. 2000)).
5
ECF No. 109 at 5.
6
Id.
4

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Mr. Krohn’s first argument misstates the Court’s Order. 7 The Court did not decide
whether the sale of Green Boxes, without more, constitutes the sale of a security. Rather the
Court concluded that the SEC plausibly alleged Defendants in this case offered an investment
contract in the form of Green Boxes “coupled with a hosting agreement to operate the Green
Boxes.” 8 This arrangement closely resembles the arrangement in Howey and other Tenth Circuit
cases cited in the Court’s September 23 Order that interpret the meaning of investment contract.
As to Mr. Krohn’s second argument, he accuses the SEC of confusing the “second
element of common enterprise with the third element of a reasonable expectation of profits to be
derived from the efforts of others.” 9 The SEC’s confusion, if it exists, is understandable given
Mr. Krohn’s argument. Mr. Krohn proposes a definition of “common enterprise” that requires
“some right, interest, or stake in the profits of the promoter’s underlying business venture . . . .” 10
This language is very close to the expectation-of-profits prong stated by the Supreme Court as
follows: “a reasonable expectation of profits to be derived from the entrepreneurial or managerial
efforts of others.” See United Hous. Found., Inc. v. Forman, 421 U.S. 837, 852 (1975). Thus,
while Mr. Krohn purports to define “common enterprise” he does so by using modified language
applicable to a different prong (i.e., the reasonable expectation of profits). He takes Forman’s
definition quoted above and substitutes “right, interest, or stake in” for “reasonable expectation

Mr. Krohn also suggests that the Court “surmised” that investors proportionally share in the
profits of the jointly managed Green Box enterprise. E.g., ECF No. 109 at 3. The Court did not
surmise this, but rather, the SEC expressly alleged proportionality of token distribution. See
First Amd. Compl. at 18 (alleging Thurston engaged in “the manual distribution of tokens in
amounts proportional to the number of Green Boxes or Green Nodes each investor purchased”).
8
ECF No. 104 at 5 (emphasis added).
9
ECF No. 113 at 4.
10
Id.
7

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of . . . .” Likewise, Mr. Krohn’s suggestion would require the profits flow from the “business
venture” rather than “entrepreneurial or managerial efforts of others.” To reiterate, although Mr.
Krohn’s language closely tracks the expectation-of-profits prong, he purports to define common
enterprise. In doing so, he offers no legal support to show any court has adopted the definition
he proposes to define the common-enterprise prong rather than the expectation-of-profits prong.
Based on the foregoing, the Court declines to certify this case for interlocutory appeal
because Mr. Krohn has not shown any substantial ground for difference of opinion as to the
controlling law governing any matter the Court addressed in its September 23 Order.
ORDER
Having considered the parties’ briefs and the relevant law, the Court DENIES Mr.
Krohn’s Motion to Certify Order on Motion to Dismiss for Interlocutory Appeal (ECF No. 109).
DATED this 26th day of November 2024.
By the Court:

_________________________
Ann Marie McIff Allen
United States District Judge

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