Dastranj v. Dehghan

MOTION to Dismiss for Failure to State a Claim, MOTION for Summary Judgment

D. Md.February 10, 2017

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND SOUTHERN DIVISION ___________________________________ ) Farhad Dastranj ) ) Plaintiff, ) ) v. ) CA No.: 15-cv-243606(PWG) ) Mehdi Dehghan ) ) Defendant. ) ___________________________________) DEFENDANT’S MOTION TO DISMISS PLAINTIFF’S COMPLAINT, OR IN THE ALTERNATIVE SUMMARY JUDGMENT Defendant, Mehdi Dehghan, by his undersigned counsel moves this Court for an Order dismissing the Plaintiff’s Complaint pursuant to Rule 12(b)(6), failure to state a claim upon which relief can be granted, or in the alternative Rule 56, summary judgment. Such relief is appropriate and proper because the Complaint fails to state a claim upon which relief can be granted. A Memorandum of Law in Support of this Motion is filed herewith and incorporated as is set forth herein. WHEREFORE, this Court should grant Defendant’s Motion to dismiss all counts of the Complaint. Case 8:15-cv-02436-PX Document 66 Filed 02/10/17 Page 1 of 3 __________/s/_____________________ Greg S. Friedman 6216 Mazwood Road Rockville, Maryland 20852-3528 (301) 738-9900, Fax (301) 686-6612 friedman.g@gmail.com Counsel for Defendant Case 8:15-cv-02436-PX Document 66 Filed 02/10/17 Page 2 of 3 Certificate of Service I hereby certify that on this 10th day of February 2017, a copy of a Defendant’s Motion to Dismiss Complaint or in the Alternative Summary Judgment, Memo of Law Supporting the Motion to Dismiss or in the Alternative Summary Judgment, and a proposed Order were served electronically through the CM/ECF system on the following: Rachel T. McGuckian, Esquire Miles & StockBridge, P.C. 11 North Washington Street, Suite 700 Rockville, Maryland 20850 John R. Floss, Esquire Kameli Law Group, LLC P.O. Box 16680 Chicago, Illinois 60616 Counsel for Plaintiff ________/s/___________ Greg S. Friedman Case 8:15-cv-02436-PX Document 66 Filed 02/10/17 Page 3 of 3 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND SOUTHERN DIVISION ___________________________________ ) Farhad Dastranj ) ) Plaintiff, ) ) v. ) CA No.: 15-cv-243606(PWG) ) Mehdi Dehghan ) ) Defendant. ) ___________________________________) MEMORANDUM OF LAW IN SUPPORT OF DEFENDANT’S MOTION TO DISMISS PLAINTIFF’S COMPLAINT, OR IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT Defendant, Mehdi Dehghan, by his undersigned counsel, and pursuant to Local Rule 105, submits this Memorandum of Law in support of Defendant’s Motion to Dismiss Plaintiff’s Complaint or, in the alternative for Summary Judgment. Defendant will demonstrate that such relief is appropriate and proper as the Complaint fails to state a claim upon which relief may be granted. I. Introduction and Summary of Argument On September 8, 2006, Bank Saderat, was added to OFAC's SDN list. On June 16, 2010, Pasargad Bank was added to OFAC’s SDN List. On July 12, 2012, Pasargad Bank (a.k.a. Bank-E Pasargad) was added to OFAC's SDN list. We will refer to sanctioned transactions/accounts as “blocked”. Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 1 of 22 2 Plaintiff erroneously alleges the following: 1. That Plaintiff and Defendant entered into an enforceable oral contract pursuant to which Plaintiff was to deposit (transfer) rials via installments from Plaintiff’s blocked Iranian bank account at Bank Saderat, Tehran, Iran, to Defendant’s blocked account at Pasargad Bank, also located in Tehran, Iran, until the rial deposits, when converted to US dollars, would total $575,000, the amount due per Plaintiff’s Subscription Agreement. Once Defendant converted the Rials to Dollars, and subject to Plaintiff’s inspection of the EB-5 Project and confirmation of the intent to invest in the Project, Defendant was to transfer the money to Northern Riverfront Marina and Hotel, LLLP’s (“Riverfront”) bank account. As neither condition precedent was met, Defendant never forwarded Plaintiff’s deposits to Riverfront’s bank account. 2. That Defendant was unjustly enriched and defrauded Defendant when Defendant breached such oral agreement due to failure to return Plaintiff’s deposits or forward the deposits to Riverfront’s bank account. 3. That Defendant is entitled to damages pursuant to the North Carolina Consumer Protection Act (N.C. Gen. Stat. § 75- 1.1) as Defendant used unfair trade practices to cause Plaintiff to transfer Rials from Plaintiff’s Iranian bank account to Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 2 of 22 3 Defendant’s Iranian bank, to cause Plaintiff to believe that Plaintiff’s deposits would be returned if Plaintiff was unable to obtain a visa to the United States and to cause Plaintiff to believe that Defendant would forward Plaintiff’s deposits to Riverfront’s bank account located at the HSBC. 5. That Defendant is entitled to damages under the North Carolina Fraudulent and Other Prohibited Practices Act (N.C. Gen. Stat. § 78A-8) as Defendant allegedly engaged in fraud and deceit to cause Plaintiff to transfer rials from Plaintiff’s Iranian bank account to Defendant’s Iranian account, leading Plaintiff to believe that Plaintiff’s deposits would be returned if the United States denied Plaintiff’s visa. 6. That Defendant is entitled to damages pursuant to the Fraudulent Interstate Transactions Act, 15 U.S.C. §77q, as Defendant deceitfully used the phone and in person meetings to cause Plaintiff to transfer rials from Plaintiff’s Iranian bank account to Defendant’s Iranian account; to cause Plaintiff to believe that Plaintiff’s deposits would be returned if Plaintiff’s visa to the United States was denied and Plaintiff was unable to visit Riverfront’s EB-5 site; and to cause Plaintiff to believe that Defendant would forward Plaintiff’s deposits to Riverfront’s bank account. In fact, neither Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 3 of 22 4 Plaintiff nor Defendant ever contemplated or discussed the prospect that Defendant would not qualify for a visa. Notably, Plaintiff fails to mention in the Complaint that (1) prior to any of Plaintiff’s transfers of rials from Plaintiff’s Iranian bank account to Defendant’s Iranian bank account on September 8, 2006, Plaintiff’s bank, Bank Saderat, from which the transfers came from was added to OFAC's SDN list; that the United States Iranian Sanctions forbids any U.S. Persons from engaging in any transactions with Defendant’s Bank, Bank Saderat, or any other Iranian Bank or entities on the OFAC's SDN List. Further, Defendant is a United States person and the oral agreement concerning Plaintiff’s transfers of Rials from Plaintiff’s blocked Iranian bank account to Defendant’s blocked Iranian bank account is illegal under the sanctions, and therefore void ab initio, as the purported oral agreement contemplated financial transactions with a bank on the OFAC's SDN List; (2) the funds deposited by Plaintiff never attained the required conversion value of $575,000; (3) Defendant never purchased a Limited Partnership interest in Riverfront; (4) Plaintiff lacks standing to file a Complaint in Maryland pursuant to 15 U.S.C. § 77q; (4) even if Plaintiff had deposited sufficient funds to make the investment, Defendant would not Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 4 of 22 5 have had the capacity to transfer the funds to Riverfront as such action is barred by the sanctions. II. Legal Standards Fed. R. Civ. P. Rule 8(a)(2) Rule 8(a)(2) requires only a "short and plain statement of the claim showing that the pleader is entitled to relief." Migdal v. Rowe Price-Fleming Int'l, Inc., 248 F.3d 321, 325-26 (4th Cir. 2001). Plaintiff must allege facts that support each element of the claim advanced. Bass v. E.I. Dupont de Nemours & Co., 324 F.3d 761, 764-65 (4th Cir. 2003). These facts must be sufficient to "state a claim for relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). This requires that Plaintiff do more than plead facts that are merely consistent with a defendant's liability. The facts pled must "allow the court to draw the reasonable inference that Defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) (quoting Twombly supra, 550 U.S. at 557). The complaint must not only allege but also demonstrate that Plaintiff is entitled to relief. Id. at 679. "When the well-pleaded facts do not permit the court to infer more than the mere possibility of Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 5 of 22 6 misconduct, the complaint has alleged - but it has not shown - that the pleader is entitled to relief." Id. The Complaint fails under 8(a) as Plaintiff has failed to plead facts demonstrating the existence of an enforceable contract (Count I); unjust enrichment (Count II), as no benefit has been conferred upon the Defendant who, in fact, is barred from accessing the funds on account; fraud (Count III) as there is no allegation that Defendant ever intended to convert Plaintiff’s funds to his own use; in fact, Defendant would return the funds if not barred by the sanctions; North Carolina consumer protection (Count IV) in which Plaintiff alleges that Defendant never tendered his subscription funds to the EB-5 Project, but in fact, Plaintiff never deposited the minimum required amount of subscription funds, and Defendant prohibited the transfer of funds until he had inspected the project which has not occurred as of the date of this pleading; North Carolina Fraudulent & Other Prohibited Practices Act (Count V) which does not provide a private right of action; or Fraudulent Interstate Transaction (Count VI) which similarly does not provide a private right of action. Moreover, none of the North Carolina statutes is applicable as the Parties never met in North Carolina and the only arguable nexus to North Carolina is the Subscription Agreement between Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 6 of 22 7 Plaintiff and Riverfront. Defendant is not a party to the Subscription Agreement. There is no basis for a court in Maryland to even consider enforcing Counts IV and V, and they therefore should be dismissed. Fed. R. Civ. P. Rules 12(b)(6) To survive a Federal Rule of Civil Procedure 12(b)(6) motion to dismiss, a complaint must set forth "a claim to relief that is plausible on its face." Ashcroft, supra, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) (quoting Twombly supra, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)). Shaffer v. ACS Gov't Servs., Inc., 321 F.Supp.2d 682, 683-84 (D.Md. 2004)). "Whether the motion should be treated as a motion to dismiss or a motion for summary judgment turns on whether the court must consider documents outside the pleadings." Id. "When matters outside the pleading are presented to and not excluded by the court, the [12(b)(6)] motion shall be treated as one for summary judgment and disposed of as provided in Rule 56." Laughlin v. Metro. Wash. Airports Auth., 149 F.3d 253, 260-61 (4th Cir. 1998) (citing Fed.R.Civ.P. 12(d)). Fed. R. Civ. P. Rule 56(a) Under Rule 56(a), the Court must grant summary judgment if the moving party demonstrates that there is no genuine issue as to any material fact and the moving party is entitled to Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 7 of 22 8 judgment as a matter of law. In reviewing a motion for summary judgment, the Court views the facts in a light most favorable to the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986) (citing Adickes v. S. H. Kress & Co., 398 U.S. 144, 158-59, 90 S. Ct. 1598, 26 L. Ed. 2d 142 (1970)). Once a motion for summary judgment is properly made and supported, the opposing party has the burden of showing that a genuine dispute exists. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). "The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson supra, 477 U.S. at 247-48. Material Fact A material fact is one that might affect the outcome of a party's case. Id. at 248; JKC Holding supra, 264 F.3d 459, 465 (4th Cir. 2001). The materiality is determined by the substantive law, and "only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248; Hooven-Lewis v. Caldera, 249 F.3d 259, 265 (4th Cir. 2001). Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 8 of 22 9 Genuine issue A genuine issue concerning a material fact arises when the evidence is sufficient to allow a reasonable jury to return a verdict in the nonmoving party's favor. Anderson, 477 U.S. at 248. Rule 56(e) requires the nonmoving party to go beyond the pleadings and by its own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The Complaint should be dismissed in its entirety as none of the counts state a claim on which relief may be granted, and there is no genuine issue as to any material fact. III. Choice of Law When determining whose substantive law applies to diversity claims, a District Court applies the conflict of law rules of the state in which it sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941); see also Colgan Air, Inc. v. Raytheon Aircraft Co., 507 F.3d 270, 275 (4th Cir. 2007) and Wells v. Liddy, 186 F.3d 505, 521 (4th Cir. 1999). Since the Court is located in the State of Maryland, Maryland’s conflict of law rules apply. Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 9 of 22 10 As noted in this Court’s memo to dismiss Plaintiff’s Third Party Complaint, “causes of action sounding in contract, Maryland follows the doctrine of lex loci contractus, applying the substantive law of the place where the contract was formed. Allstate Ins. Co. v. Hart, 327 Md. 526, 529 (1992). Finally, where a case involves causes of action sounding in tort and contract, Maryland embraces the concept of “dépeçage.” That is, the court will apply lexi loci delicti to the tort-based issues and lex loci contractus to those based in a contract. Even though most of Plaintiff’s claims occurred in Iran, Defendant will litigate Plaintiff’s claims according to the laws of Maryland. IV. An Illegal Contract "Although the courts generally will not enforce an illegal contract, in some cases the statute making the conduct illegal, in providing for a fine or administrative discipline, excludes by implication the additional penalty involved in holding the illegal contract unenforceable. Sometimes the forfeiture resulting from unenforceability is disproportionately harsh considering the nature of the illegality. In each such case, how the aims of policy can best be achieved depends on the kinds of illegality and the particular facts involved.” M. Arthur Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 10 of 22 11 Gensler, Jr., Associates, Inc. v. Larry Barrett, Inc. 7 Cal.3d at pp. 702-703 (1972). An agreement in violation of trade restrictions promulgated for national security reasons -- and therefore for the purposes of protecting the public -- must be unenforceable. Where national security is at issue, the penalty clearly is not disproportionate to the severity of the offense, and any "forfeiture" must be upheld. The oral agreement which Plaintiff has alleged to exist between Plaintiff and Defendant violates the sanctions, and therefore involves such serious ramifications that allowing a plaintiff damages for a breach of an illegal contract would be inconsistent with the rationale for the doctrine of unenforceability of illegal contracts: "Knowing that they will receive no help from the courts and must trust completely to each other's good faith, the parties are less likely to enter an illegal arrangement in the first place." Lewis Queen v. N.M. Ball Sons, supra, 48 Cal.2d 141, 150 (1957). The courts generally will not enforce an illegal bargain or lend their assistance to a party who seeks compensation for an illegal act"]; Winfield, Public Policy in the English Common Law (1928) 42 Harv. L.Rev. 76.) Such agreements are "traditionally referred to as `illegal contracts,'” even though they "...are functionally described as contracts unenforceable on grounds of Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 11 of 22 12 public policy." (Rest.3d Contracts Restitution Unjust Enrichment (Draft No. 3, Mar. 22, 2004). Here, the provisions violated are not revenue raising but regulatory in nature - to protect the interests of the United States. Plaintiff is not part of any protected class. The violations of the Regulations are not mere technicalities without consequence. Rather, violations of the Regulations are considered to be contrary to the security interests of the United States. The President issued the Orders "to deal with Iran's unusual and extraordinary threat to the national security, foreign policy, and economy of the United States." (Exec. Order No. 12959, 60 Fed.Reg. 24757 (May 6, 1995).) Thus, none of the possible "exceptions and qualifica- tions." R.M. Sherman Co. v. W.R. Thomason, Inc. 191 Cal.App.3d at p. 564-577 (1987). Further, a void contract is one where the law of the state has declared the subject matter of conduct contemplated by the contract as illegal. In such case the contract is void, a nullity and neither party to the contract can act under the contract. V. Breach of Contract A complaint for breach of contract must include the following elements: (1) the existence of a contract, (2) plaintiff's performance or excuse for non-performance, (3) defendant's breach, and (4) damages to plaintiff therefrom. Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 12 of 22 13 As noted above the breach alleged by Plaintiff begins with a supposed oral contract between Plaintiff and Defendant in which Plaintiff transfers funds from his blocked account to Defendant’s blocked account. The transferred funds are tainted and Defendant, a U.S. person, is precluded from engaging in any transactions with an entity that is on OFAC's SDN list. In addition, the agreement violated the U.S. Iranian Sanctions and was contrary to the security interests of the United States. As such the contract was illegal and Plaintiff fails to satisfy the first element for a breach of contract and the breach of contract claim must be dismissed. See Exhibits D, E, F, , G, Expert Report, Defendant’s Deposition, and Defendant’s Devaluation Schedule. Plaintiff does not have documents to support this claim. The claim should be dismissed or summary judgment Granted. VI. Unjust Enrichment (In The Alternative) Plaintiff has failed to state a claim for unjust enrichment as its claim rests upon the illegal contract discussed in the Breach of Contract Claim above. To state a claim for unjust enrichment, a plaintiff must allege sufficient facts to show (1) Plaintiff conferred a benefit upon Defendant; (2) Defendant, knows or appreciates the benefit: and (3) Defendant's acceptance or retention of the benefit. As noted Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 13 of 22 14 above the funds in question goes from Plaintiff’s locked account to Defendant’s locked bank account which in on OFAC's SDN list. Plaintiff’s cannot satisfy the claims for Unjust Enrichment since each transfer to Defendant’s Iranian causes Defendant a civil penalty that would far exceed and benefit if any since Defendant can bot accept or retain the benefit. As such Plaintiff’s Unjust Enrichment claim must be dismissed. See Exhibits D, E, F, G, Expert Report, Defendant’s Deposition, and Defendant’s Devaluation Schedule. Plaintiff does not have documents to support this claim. The claim should be dismissed or summary judgment Granted. The claim should be dismissed or summary judgment Granted. VII. Fraud This Court has recognized that when a claim involves allegations of fraud, the complaint must satisfy the requirements of F.R.C.P. 9(b). Gollomp v. MNC Financial, Inc., 756 F. Supp. 228, 232 (D. Md. 1991). Rule 9(b) provides: In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally. In interpreting this Rule, courts have held that plaintiffs must make particular allegations of the time, place, Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 14 of 22 15 speaker, and contents of the allegedly false statements. Windsor Assocs., Inc. v. Greenfeld, 564 F. Supp. 273, 280 (D. Md. 1983). The requirement also applies to the manner in which the statements are false and the specific facts raising an inference of fraud. Hammerman v. Peacock, 607 F. Supp. 911, 915- 16 (D.D.C. 1985). This rule of particularity must not be applied too strictly, however. Instead, Rule 9(b) must be read in conjunction with F.R.C.P. 8(a), which requires a "short and plain statement" of plaintiffs' claim for relief. Windsor Assocs. supra, 564 F. Supp. at 280. See Exhibits D, E, F, G, Expert Report, Defendant’s Deposition, and Defendant’s Devaluation Schedule. Plaintiff does not have documents to support this claim. The claim should be dismissed or summary judgment Granted. This court has identified the following three reasons for requiring particularity: 1) to provide defendants with fair notice of plaintiffs' claim; 2) to protect defendants from harm to their reputation or good will; and 3) to reduce the number of nuisance or "strike" suits. Gollomp supra 756 F. Supp. at 232. These concerns are especially warranted in cases such as the instant case which alleges securities fraud. In general, therefore, the particularity requirement of Rule 9(b) is designed to bar strike suits and allegations of Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 15 of 22 16 "fraud by hindsight." Bender v. Rocky Mountain Drilling Associates, 648 F. Supp. 330, 335-36 (D.D.C. 1986). Even if plaintiffs satisfy the particularity requirement of Rule 9(b), their resulting allegation must still constitute a cognizable claim of fraud under Rule 12(b)(6). See Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 479, 51 L. Ed. 2d 480, 97 S. Ct. 1292 (1977). In other words, when these Rules are considered together, plaintiffs are required to state more than just a particular claim. They must state a particular claim of fraud. See Cayman Exploration Corp. v. United Gas Pipeline, 873 F.2d 1357, 1362 & n.5 (10th Cir. 1989); Vicom, Inc. v. Harbridge Merchant Services, Inc., 1993 WL 8340, (N.D. Ill. 1993). To prevail on a fraud claim, a plaintiff must show: (1) that Defendant made a false representation to Plaintiff, (2) that its falsity was either intentional or was made with reckless indifference as to its truth, (3) that the misrepresentation was made for the purpose of defrauding Plaintiff, (4) that Plaintiff relied on the misrepresentation and had the right to rely on it, and (5) that Plaintiff suffered compensable injury resulting from the misrepresentation. View Point Med. Sys., LLC v. Athena Health, Inc., 9 F.Supp.3d 588, 612 (D.Md. 2014) (citing Moscarillo v. Prof'l Risk Mgmt. Servs., Inc., 398 Md. 529, 544, 921 A.2d 245 (2007)). These elements Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 16 of 22 17 must be established by clear and convincing evidence. Id. (citing Md. Envir. Trust v. Gaynor, 370 Md. 89, 97, 803 A.2d 512 (2002)). In fact, as it appears that neither party was aware of the sanctions - albeit they did have constructive notice - the alleged fraud could not have been intentional and in fact, the contract also may be void due to mutual mistake of fact. VII. N.C. Gen. Stat. § 75-1.1 An action under § 75-1.1 is a creation of statute. It exists independently and usually accompanies a common law cause of action. It is distinct from actions of fraud, breach of contract, and breach of warranty. The statute is applicable to sales transactions covered by the Uniform Commercial Code. These claims tend to involve buyer and seller relationships although actions based on other types of commercial relationships are recognized. A claim under this statute requires proof of three elements: (1) an unfair or deceptive act or practice; (2) in or affecting commerce; which (3) proximately caused the injury to the claimant. A court will first determine if the act or practice was “in or affecting commerce” before determining if the act or practice was unfair or deceptive. STANDING: Under the North Carolina statute, both individuals, through a private cause of action, and the State, through the Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 17 of 22 18 Attorney General, can raise a claim for unfair and deceptive trade practices. Even if Plaintiff and Defendant had engaged in discussions within the State of North Carolina - which they clearly did not - no facts have been adduced in discovery which support a claim under 75-1. VIII. N.C. Gen. Stat. § 78A-8 It is unlawful for any person, in connection with the offer, sale or purchase of any security, directly or indirectly: (1) To employ any device, scheme, or artifice to defraud, (2) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading or, (3) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person. There is no evidence that the North Carolina General Assembly intended to create a private right of action under Section 78A-8 for alleged misrepresentations. To the contrary, the statute expressly excludes any private right of action under the pertinent portion of the statute. Since Plaintiff has no private right this claim must be dismissed. See Exhibits D, E, F, , G, Expert Report, Defendant’s Deposition, and Defendant’s Devaluation Schedule. Plaintiff does not have documents to Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 18 of 22 19 support this claim. The claim should be dismissed or summary judgment Granted. IX. 15 USCS § 77q / 15 USC § 17(a) The purpose of 15 USCS § 77q(a) is to protect investors from fraudulent practices. SEC v International Chem. Dev. Corp. (1972, CA10 Utah) 469 F2d 20, CCH Fed Secur L Rep P 93658; United States v Naftalin (1978, CA8 Minn) 579 F2d 444, CCH Fed Secur L Rep P 96469, revd on other grounds (1979) 441 US 768, 99 S Ct 2077, 60 L Ed 2d 624, CCH Fed Secur L Rep P 96866, and even if civil action may be asserted under the fraud provisions of § 17(a) the Securities Act (15 USCS § 77q(a)), it may not be brought where there was neither sale nor purchase of securities involved in acts complained of, See Thompson v Merrill Lynch, Pierce, Fenner & Smith, Inc. (1975, WD Okla) 401 F 105. 77q(a) is not designed to protect sellers, but only afford standing to purchasers, but such claim must be initiated by the regulatory agency, e.g. the SEC. In Aaron v. SEC, 446 U.S. 680, 100 S.Ct. 1945, 64 L.Ed.2d 611 (1980), the Court held that, unlike an action under rule 10b-5, in an action by the SEC for injunctive relief under § 17(a)(2) or (a)(3), the SEC did not have to establish scienter. Thus, Aaron broke the link between rule 10b-5 and § 17(a) on which we premised our decision in Kirshner v. United States, 603 Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 19 of 22 20 F.2d 234, 241 (2d Cir. 1978), cert. denied, 442 U.S. 909, 99 S.Ct. 2821, 61 L.Ed.2d 274 (1979). Accordingly, courts can no longer justify the private right of action under § 17(a) on the ground that rule 10b-5 provides the same cause of action anyway. The impact of Aaron is redoubled by the fact that in Ernst & Ernst v. Hochfelder, 425 U.S. 185, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976), the Court strongly indicated the inappropriateness of implying a private right of action under the securities laws without a requirement of scienter. The Court explained that the host of procedural regulations that Congress placed on the explicit negligence based private rights of action of the '33 and '34 acts "indicate that the judicially created private damages remedy under 10b-5 - which has no comparable restrictions - cannot be extended, consistently with the intent of Congress, to actions premised on negligent wrongdoing." Id. at 210, 96 S.Ct. at 1389. To do otherwise would be to "nullify the effectiveness of the carefully drawn procedural restrictions on these express actions." Id. Accordingly, the Court held that 10b-5 private plaintiffs must prove scienter. In sum, Aaron makes it clear that scienter is not required in most actions under § 17(a). Ernst dictates that we should not imply a private right of action under the securities laws without a scienter requirement. This leaves one of two Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 20 of 22 21 possibilities. Either there is no private right of action under § 17(a) or Aaron's negligence standard applies only to actions by the SEC and not to private plaintiffs, for whom scienter is required. A number of Courts of Appeals construing § 17(a) after Aaron have uniformly concluded that there is no private right of action. See, e.g., Newcome v. Esrey, 862 F.2d 1099, 1107 (4th Cir. 1988) (en banc); Data Controls North, Inc. v Financial Corp. of America, Inc., 688 F Supp 1047, (1988, DC Md); Landry v. All American Assurance Corp., 688 F.2d 381, 391 (5th Cir. 1982); Schlifke v. Seafirst Corp., 866 F.2d 935, 943 (7th Cir. 1989); Deviries v. Prudential-Bache Securities, Inc., 805 F.2d 326, 328 (8th Cir. 1986); In re Washington Public Power Supply System Securities Litigation, 823 F.2d 1349, 1358 (9th Cir. 1987) (en banc); Bath v. Bushkin, Gaims, Gaines and Jonas, 913 F.2d 817, 819-20 (10th Cir. 1990); Currie v. Cayman Resources Corp., 835 F.2d 780, 784-85 (11th Cir. 1988). Plaintiff has no private right of action in Maryland and Plaintiff’s complaint for damages must be dismissed. CONCLUSION For all of the reasons set forth above this Court should Grant’s Defendant’s motion to dismiss or in the alternative Summary Judgment. Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 21 of 22 22 __________/s/_____________________ Greg S. Friedman 6216 Mazwood Road Rockville, Maryland 20852-3528 (301) 738-9900, Fax (301) 686-6612 friedman.g@gmail.com Counsel for Defendant Case 8:15-cv-02436-PX Document 66-1 Filed 02/10/17 Page 22 of 22 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND SOUTHERN DIVISION ___________________________________ ) Farhad Dastranj ) ) Plaintiff, ) ) v. ) CA No.: 15-cv-243606(PWG) ) Mehdi Dehghan ) ) Defendant. ) ___________________________________) ORDER DISMISSING COMPLAINT Upon consideration of the Motion to Dismiss Complaint filed by the Defendant, Mehdi Dehghan, and any response thereto, it is this _____ day of _______, 2017, hereby ORDERED, that the Motion to Dismiss shall be and is GRANTED. _____________________________ The Honorable Paula Xinis United States District Judge Case 8:15-cv-02436-PX Document 66-2 Filed 02/10/17 Page 1 of 1