Tmj Group Llc v. Imcmv Holdings Inc. et al

MOTION to Dismiss for Failure to State a Claim

E.D. La.July 12, 2017

1230270v1 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA TMJ GROUP LLC VERSUS IMCMV HOLDINGS INC. AND IMCMV MANAGEMENT, LLC * * * * * * * * * * * * * CIVIL ACTION NO. 17-CV-04677 SECTION "G(1)" JUDGE NANNETTE JOLIVETTE BROWN MAGISTRATE JUDGE JANIS VAN MEERVELD ******************************************** DEFENDANTS' RULE 12(b)(6) MOTION TO DISMISS Defendants, IMCMV Holdings, Inc. and IMCMV Management, LLC (together, the "IMC Defendants") respectfully request that this Court dismiss Plaintiff, TMJ Group, LLC's ("TMJ") claims pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. The allegations of the Complaint do not raise any colorable claim for relief as a matter of law. Accordingly, TMJ's claims should be dismissed. The IMC Defendants submit herewith a Memorandum in Support of their Motion. WHEREFORE, Defendants IMCMV Holdings, Inc. and IMCMV Management, LLC respectfully request that this Court grant their motion, and dismiss the claims against them with prejudice. Case 2:17-cv-04677-NJB-JVM Document 21 Filed 07/12/17 Page 1 of 2 - 2 - 1230270v1 /s/ James C. Gulotta, Jr. James C. Gulotta, Jr., T.A., La. Bar No. 6590 Andrew D. Mendez, La Bar. No. 26686 Abigayle C. Farris, La. Bar No. 33547 Of STONE PIGMAN WALTHER WITTMANN L.L.C. 546 Carondelet Street New Orleans, Louisiana 70130 Telephone: (504) 581-3200 Attorneys for the IMCMV Holdings, Inc. and IMCMV Management, LLC, Defendants CERTIFICATE OF SERVICE I hereby certify that a copy of the above and foregoing Defendants' Rule 12(b)(6) Motion to Dismiss was filed electronically with the Clerk of Court using the CM/ECF system this 12th day of July, 2017. Notice of this filing will be sent to all counsel of record by operation of the court's electronic filing system. /s/ James C. Gulotta, Jr. Case 2:17-cv-04677-NJB-JVM Document 21 Filed 07/12/17 Page 2 of 2 1229944v5 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA TMJ GROUP LLC VERSUS IMCMV HOLDINGS INC. AND IMCMV MANAGEMENT, LLC * * * * * * * * * * * * ** CIVIL ACTION NO. 17-CV-04677 SECTION "G(1)" JUDGE JOLIVETTE BROWN MAGISTRATE JUDGE VAN MEERVELD ******************************************** DEFENDANTS' MEMORANDUM IN SUPPORT OF RULE 12(b)(6) MOTION TO DISMISS Defendants, IMCMV Holdings, Inc. ("IMC Holdings") and IMCMV Management, LLC ("IMC Management," and collectively the "IMC Defendants") respectfully submit this memorandum in support of the preceding Rule 12(b)(6) Motion to Dismiss. I. TMJ'S COMPLAINT This case arises from the parties' effort to develop a "Margaritaville"-themed restaurant at the Mall of America, near Minneapolis, Minnesota. Plaintiff TMJ Group, LLC ("TMJ") has a case of buyer's remorse, and now wants out of the deal. On August 18, 2015, TMJ and IMC Holdings entered into a Limited Liability Company Operating Agreement (the "Operating Agreement") to govern IMCMV MOA, LLC (the "Company"). Under that agreement, TMJ became one of only two members of the Company. R. Docs. 1, ¶2.5; 1-2, p. 22. The Company was created for the purpose of developing and operating a Margaritaville restaurant in the Mall of America in Minnesota. R. Doc. 1-2, Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 1 of 26 - 2 - 1229944v5 p. 31. Before opening, the premises had to be built out. The build-out took nearly a year to complete, and the restaurant opened in September, 2016. R. Docs. 1, ¶¶ 44-45; 1-2, pp. 24-54. Barely six months after the restaurant opened, TMJ demanded the return of its capital contribution. R. Doc. 1, ¶ 68. Shortly thereafter it filed this lawsuit. The crux of TMJ's Complaint is that sales at the restaurant during its first six months (or less) in operation were not as high as projected when TMJ and IMC Holdings formed the Company. The Complaint alleges seven substantive counts: violation of federal securities law (Count 1); intentional misrepresentation and fraudulent inducement (Count 2); breach of contract (Count 3); breach of fiduciary duty (Count 4); negligent misrepresentation (Count 5); violation of Louisiana's Blue Sky Laws (Count 6); and violation of the Louisiana Unfair Trade Practices Act (Count 7). II. LAW AND ARGUMENT A. Federal Rule of Civil Procedure 12(b)(6). If a plaintiff fails to state a claim upon which relief can be granted, dismissal is appropriate under Federal Rule of Civil Procedure 12(b)(6). Though the well-pleaded allegations of the complaint are taken as true, when those allegations "could not raise a claim of entitlement to relief," they should be dismissed "at the point of minimum expenditure of time and money by the parties and the court." Cuvillier v. Taylor, 503 F.3d 397, 401 (5th Cir. 2007) (citing Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1966 (2007)). TMJ's Complaint does not raise a claim of entitlement to relief. Its claims should be dismissed under Rule 12(b)(6). B. Count 1: The Federal Securities Claim Fails as a Matter of Law. Count 1 seeks rescission under Section 12(a)(1) of the 1933 Securities Act (the "'33 Act"), 15 U.S.C. §77l(a)(1), on the grounds that TMJ was allegedly sold an unregistered security. R. Doc. 1, ¶67. Section 5 of the '33 Act requires a "security" that is not subject to an Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 2 of 26 - 3 - 1229944v5 exemption under Section 3 or 4 to be registered with the SEC. 15 U.S.C. §77e (registration requirement); 77c & 77d (exemptions). The term "securities" is defined to include "investment contracts." Id. at §77b. The Complaint alleges the LLC interest here is an "investment contract" and therefore a "security," that must be registered under the '33 Act. R. Doc. 1, ¶¶62-63. TMJ's rescission claim under the '33 Act should be dismissed for three separate, independent reasons: • Assuming, arguendo, that TMJ's interest in the Company is a "security" and its sale was not exempt from the '33 Act's registration requirements, TMJ's rescission claim is time-barred by the applicable one-year statute of limitations; • TMJ's interest is not a "security" within the meaning of the '33 Act; and • Assuming, arguendo, that TMJ's interest in the Company is a "security," its sale was exempt from registration under the "private placement" exemption. 1 1. TMJ's Claim for Rescission Under the 1933 Securities Act Is Time Barred. Section 13 of the '33 Act, 15 U.S.C. §77m, prescribes the statute of limitations applicable to an alleged sale of an unregistered security. It reads in full: 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) [12(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) [12(a)(1)] of this title more than three years after the security was bona fide offered to the public, or under section 77l(a)(2) of this title more than three years after the sale. Id. § 77m (emphases supplied). 1 The Complaint refers to the SEC's "Regulation D," which is a "safe harbor" alternative to registration. To the extent the Complaint suggests that compliance with Regulation D is the only way to fall within the "private placement" exemption, it is mistaken. See ABA Report (defined below), at 90-91 (non-compliance with Regulation D’s "safe harbor" does not preclude application of Section §4(2) of the '33 Act’s "private placement" exemption). Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 3 of 26 - 4 - 1229944v5 Section 13 sets forth two limitations periods, both of which must be satisfied for a plaintiff's claim to be timely. In re Elec. Data Sys. Corp. "ERISA" Litig., 305 F. Supp. 2d 658 (E.D. Tex. 2004). As the Electronic Data Systems court explained: Section 13 of the Securities Act includes both three-year and one-year limitations periods that apply to 12(a)(1) claims. . . . Because the limitations periods must be read cumulatively, TMJs must bring their cause of action "both within one year of the alleged violation and within three years of the time the security was first bona fide offered to the public." Id. at 678 (quoting Ballenger v. Applied Dig. Sols., Inc., 189 F. Supp. 2d 196, 199 (D. Del. 2002) (emphases supplied)). Accordingly, a plaintiff must satisfy both limitations periods, rather than merely satisfy one or the other. Id.; Hanson v. Johnson, No. 02-3709, 2003 U.S. Dist. LEXIS 11717, at *20-*21 (D. Minn. June 30, 2003) (plaintiff's claim was time-barred where it was timely under only one of the two applicable limitations periods). In Electronic Data Systems, supra, the court recognized the distinction between a claim for rescission based on filing a false or misleading registration statement under Section 11 of the '33 Act (codified at 15 U.S.C. § 77k), versus a claim for the failing to file any registration statement under Section 12(a)(1)(codified at 15 U.S.C. § 77l(a)(1)). As explained by that court, Whereas the statute of limitations set forth in § 77m [Sec. 13] includes a discovery rule for suits alleging the filing of a false registration statement under § 77k [Sec. 11], the statute of limitations does not include a discovery rule for suits alleging the sale of securities without a registration statement under § 77l(1) [Sec. 12(a)(1)]. In re Elec. Data Sys., 305 F. Supp. 2d at 676. 2 Thus, the one-year limitations period begins to run upon the sale of an allegedly unregistered security. That period is not subject to a "discovery" rule or equitable tolling; it 2 Moreover, even if a discovery rule applied to a failure-to-register claim (which it does not), the Complaint fails to allege that Defendants somehow led TMJ to believe that the membership units were registered. Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 4 of 26 - 5 - 1229944v5 begins to run regardless of whether plaintiff was aware of a failure to register. Id. at 680. See also Cook v. Avien, Inc., 573 F.2d 685, 691 (1st Cir. 1978) ("[U]nder the explicit language of section 13, the limitations period begins to run from the date of the violation irrespective of whether the plaintiff knew of the violation"); Blatt v. Merrill Lynch, Pierce, Fenner & Smith, 916 F. Supp. 1343, 1352 (D.N.J. 1996) (citing Avien, supra, the Third Circuit, and numerous district court cases for its holding that "section 13 excludes application of either the discovery rule or the doctrine of equitable tolling for nonregistration claims under section 12(1)."). Here, the Complaint establishes that TMJ acquired its interest in the Company in August, 2015, when it executed the Operating Agreement, or, at the latest, in November, 2015, when it executed the Amended Operating Agreement. R. Doc. 1, ¶¶18, 36 & Exs. B, E. TMJ became a member of the Company as of the execution of these documents in August and November, 2015. See R. Docs. 1-2 & 1-5, ¶2.5, p. 5 (stating ownership of units "as of the date[s] hereof"). Consistently, TMJ is listed as a member in the "Listing of Members" attached to the agreements. See R. Docs. 1-2 & 1-5, p. 22. Thus, August of 2015 (or November of 2015 at the latest) is when the statute of limitations began to run, because that is when the interest was acquired. See Elec. Data Sys., 305 F. Supp. 2d at 680 (period begins to run on last of offer, sale or delivery) (citing Doran v. Petroleum Mgmt. Corp., 576 F.2d 91, 93 (5th Cir. 1978)). This case was filed on May 3, 2017, or 21 months after the units were acquired via the original agreement, and 18 months after the amended agreement was executed. The one-year statute of limitations, however, expired no later than November, 2016, a year after the Amended Operating Agreement was signed. See R. Doc. 1-5, pp. 1, 21 (referring to "November __ 2015" [sic] as effective date). TMJ's claim for rescission under the '33 Act thus is time-barred, and Count 1 must be dismissed. Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 5 of 26 - 6 - 1229944v5 2. TMJ's Claim for Rescission Also Fails as a Matter of Law Because the LLC Interests are not "Securities" Under the '33 Act. TMJ's rescission claim under the '33 Act should be dismissed because the interest in the Company that TMJ acquired is not a "security" subject to the '33 Act's registration requirement. Whether an interest is a "security" is a question of law that may be decided on a motion to dismiss. Avenue Cap. Mgmt. II, L.P. v. Schaden, 131 F. Supp. 3d 1120, 1128 n. 6 (D. Colo. 2015) (rejecting plaintiff's argument that determination of "security" question was question of fact inappropriate for a motion to dismiss), aff'd, 843 F.3d 876 (10th Cir. 2016). a. A One-on-One Agreement is Not a "Security." The Complaint establishes that IMC Holdings and TMJ entered into a lengthy, negotiated, one-on-one agreement — the Operating Agreement — governing the Company, of which they were the only members. R. Doc. 1-2, p.5, ¶2.5. The Supreme Court has recognized that an agreement that is "negotiated one-on-one by the parties[] is not a security." Marine Bank v. Weaver, 455 U.S. 551, 560 (1982). As the Court explained, Congress intended the securities laws to cover those instruments ordinarily and commonly considered to be securities in the commercial world. . . . The unusual instruments found to constitute securities in prior cases involved offers to a number of potential investors, not a private transaction. . . . [A] security is an instrument in which there is 'common trading.' . . . Here, in contrast . . . the unique agreement [the parties] negotiated was not designed to be traded publicly. Id. at 559-60 (citing Howry, 328 U.S. at 295 & C.M. Joiner Leasing Corp., 320 U.S. 344, 346 (1943)). Similarly, in Equitable Life Assurance Society v. Arthur Anderson & Co., the court determined that an instrument was not a security where its "financial terms were unique and negotiated Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 6 of 26 - 7 - 1229944v5 one-on-one by the parties" to "suit their needs." 655 F. Supp. 1225, 1243 (S.D.N.Y. 1987) (citing Marine Bank, supra). Because the parties here entered into a "one-on-one" agreement, this Court should find that the Company membership interest acquired by TMJ is not a "security." b. Other Factors Indicate TMJ's Interest is not a "Security." Additional factors support the conclusion that the interest acquired by TMJ is not a "security." The '33 Act defines "security" to include an "investment contract." 15 U.S.C. § 77b(a)(1). The Complaint alleges the Company membership interest is an "investment contract." R. Doc. 1, ¶63. "Investment contract" is not defined in the '33 Act, but the Supreme Court has held that an instrument is a "security" if "the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others." SEC v. Edwards, 540 U.S. 389, 393 (2004) (quoting SEC v. W.J. Howey Co., 328 U.S. 293 (1946)). The greater the amount of control that a plaintiff has, the weaker the justification for finding that its interest is a "security." See Avenue Cap. Mgmt. II, L.P. v. Schaden, 843 F.3d 875, 882 (10th Cir. 2016). At the outset, it must be noted that courts "analyze the expectations of control at the time the interest is sold, rather than at some later time after the expectations of control have developed or evolved." SEC v. Merchant Capital, LLC, 483 F.3d 747, 756 (11th Cir. 2007) (emphasis supplied). Here, the relevant time regarding the parties' expectations of control is determined by reference to the original, August 2015 Operating Agreement (R. Doc. 1-2), whereby TMJ acquired the Company membership interest. 3 3 Defendants note the relevant time frame because TMJ may argue its voting interest was reduced in the Amended Operating Agreement (R. Doc. 1-5). But that reduction in TMJ's interest — which resulted in concessions by IMC that are reflected in the amended agreement, such as a reduced management fee — Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 7 of 26 - 8 - 1229944v5 It is also significant that TMJ is a sophisticated, professional investor. R. Doc. 1, ¶9 ("TMJ is a commercial real estate investor that identifies prospective business opportunities and invests capital into those opportunities"). See Avenue Capital Mgmt. II, 843 F.3d at 883 (fact that plaintiff was a "sophisticated" and "professional" investor weighed against a finding that its interest was a "security"). As to whether TMJ could exercise meaningful control, the Operating Agreement and Management Agreement gave TMJ significant management rights, including control over budgeting and the power to remove the manager and select a replacement. For example, sections 4.2 and 4.3 of the Operating Agreement list numerous actions that require member approval, including: transfer or pledge of substantial assets; mergers; dissolution; bankruptcy; termination or modification of the Sublicense Agreement (governing use of the "Margaritaville" name); issuance of additional voting units; and — most significantly — control over budgets. R. Doc. 1-2, ¶¶4.2, 4.3, pp. 11-12. Under the Operating Agreement, TMJ had a 50% interest in the Class B voting units. Id. at ¶2.1 (definition of "voting units"), p. 4; ¶2.5, p. 5. The Operating Agreement requires a vote of "more than 50%" of voting interests for member approval. Id. at ¶4.4, p. 12. Thus, TMJ's approval was needed for all of these actions. As to budgeting, the Management Agreement required the manager to propose a budget to the members. R. Doc. 1-2, ¶2(i), p. 34. The Operating Agreement reserves to the members the power to approve budgets, and requires member approval of expenditures that exceed the budget for an item by more than 5%. Id. at ¶¶4.2.5, 4.2.7, p. 11. Members with at least a 25% interest also had the power to remove the manager for a host of causes. Id. at ¶4.1.2, p. 10. Further, the Operating Agreement provides that, if a was not how TMJ initially acquired its membership units. Its membership units were acquired via the original Operating Agreement. R. Doc. 1-2, ¶2.5, p. 5. Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 8 of 26 - 9 - 1229944v5 manager is removed for cause, any voting units held by the manager or its "Affiliate" become non-voting units. Id. at ¶4.1.3, p. 11. "Affiliate" is defined broadly to include entities under common control. Id. at ¶4.1.3, p. 2. IMC Holdings is an "Affiliate" of the initial manager under that definition. Id. at ¶(c), p. 31 ("Manager is a wholly owned subsidiary of Holdings."). The effect of these provisions is that, if cause existed, TMJ could have removed the manager and selected a new manager of its choosing. In addition, the Management Agreement gave the members who were not affiliated with the manager (i.e., TMJ) the power to terminate the Management Agreement if EBITDA is negative for two consecutive years, after the first full year of operation. Id. at ¶4(c), p. 35. This would constitute a "for cause" removal. Id. Under the Operating Agreement, the members would then have to decide on a new manager. Id. at ¶4.1.3, p. 11. As noted above, IMC Holdings (as an "Affiliate" of the removed manager) would be disqualified from voting on a new manager, leaving TMJ free to choose a replacement manager. The Operating Agreement also provides that, if the Management Agreement is terminated "for cause," TMJ has the option to either (i) require IMC Holdings to sell its units to TMJ for "book value," or (ii) dissolve and liquidate the company. Id. at ¶2.5.3. These other factors further support the conclusion that the "one-on-one" nature of the parties' agreement precludes a finding that TMJ's interest is a "security." Even if the '33 Act claim were not time barred, it should be dismissed because TMJ's interest is not a "security." 3. Even if the Company Membership Interest Was a "Security," its Sale Was Exempt From Registration as a "Private Placement." Assuming, arguendo, that TMJ's interest in the Company was a "security," the sale of that interest to TMJ was exempt from registration under the "private placement" exemption. Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 9 of 26 - 10 - 1229944v5 Section 4 of the '33 Act includes several exemptions from its registration requirements. One exemption is for transactions "not involving any public offering." 15 U.S.C. §77d(a)(2) (codification of Section 4(a)(2)). This is called the "private placement" exemption. While the statute lacks specifics about this exemption, a substantial body of authority has developed. Decades ago, the Supreme Court explained that the exemption should turn on whether the particular class of persons affected needs the protection of the ['33] Act. An offering to those who are shown to be able to fend for themselves is a transaction "not involving any public offering." SEC v. Ralston Purina Corp., 346 U.S. 119, 125 (1953) (emphasis supplied). In 1962, the SEC issued a statement regarding the exemption, which is still a major analytical starting point. The Commission explained that consideration of the exemption necessitates a consideration of all surrounding circumstances, including such factors as the relationship between the offerees and the issuer, the nature, scope, size, type and manner of the offering. Non-Public Offering Exemption, Securities Act Release No. 4552, 27 Fed. Reg. 11316, Fed. Sec. L. Rep. (CCH) 2770 (Nov. 6, 1962). In 2010, the American Bar Association published a report summarizing the leading authorities on the exemption. 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) ["ABA Report"]. The ABA Report noted that the Supreme Court's Ralston Purina opinion and the Commission's Statement (both discussed above) remained starting points. ABA Report, pp. 93-94. Based on decades of authority, the Report identified the following four factors as most significant to the "private placement" exemption: (1) Manner of offering - how the purchasers of the particular securities offered are found - whether through a public process (e.g., general solicitation, advertising, seminars, etc.) or a non-public process. Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 10 of 26 - 11 - 1229944v5 (2) Eligibility of the purchasers - whether each purchaser (not all offerees), either alone or with a qualified advisor, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the prospective investment. (3) Information - whether each purchaser (or its qualified advisor) receives, or has meaningful access to, such information as the particular purchaser needs to make an informed investment decision. (4) Resales - whether steps appropriate in the circumstances are taken to prevent resales that are not registered or exempt. Id. p. 93. Each factor is discussed in turn as applied to the Complaint's allegations. Regarding the first factor, the manner of offering, the Complaint does not suggest there was any widespread, public solicitation or advertising. This factor is essentially dispositive in the Fifth Circuit. See Lewis v. Fresne, 252 F.3d 352, 357 (5th Cir. 2001) (instrument was exempt from registration because "Section 12 of the 1933 does not apply to private transactions. . . . Congress meant for [it] to apply only to public offerings.") (citing Gustafson v. Alloyd Co., 513 U.S. 561, 584 (1995)). Here, the Complaint alleges that an agent of IMC Holdings was introduced to TMJ specifically as a potential investor. R. Doc. 1, ¶9. Thus, even if TMJ's interest in the Company were a "security," its sale to TMJ was exempt from registration as a "private placement." As to the second factor, the type of purchaser, "[c]ourts generally take the view that investors in private placements should have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risk of the prospective investment, and . . . knowing what information to ask for." ABA Report at 96. Here, the Complaint alleges TMJ "is a commercial real estate investor that identifies prospective business opportunities and invests capital into those opportunities. . . ." R. Doc. 1, ¶9. It further alleges that, "[i]n determining whether to invest in a particular commercial opportunity, commercial real Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 11 of 26 - 12 - 1229944v5 estate investors like TMJ often rely on, among other documents, financial information provided by the offeror. . . ." Id. at ¶12. The Complaint also establishes TMJ was represented by counsel in connection with the "deal." Id. at ¶32. Accordingly, the second factor supports the conclusion that the sale of the Company interest (even if it were a "security") to TMJ was exempt from registration as a "private placement." With respect to the third factor, access to information, the Complaint's exhibits establish that, in connection with its acquisition, TMJ was provided with numerous documents relating to the interest it was acquiring. This included the Operating Agreement, Design Standards, Management Agreement, and Sublicense Agreement. R. Doc. 1-2, pp. 1-21, 24-26, 30-47 & 48-54. The Complaint acknowledges that projections and budgets were also provided to TMJ before the sale. R. Doc. 1, ¶14. While the Complaint goes on to allege the projections did not turn out to be correct, projections of the future are (by definition) not misrepresentations of then-existing fact. The final factor in the ABA Report is resale restrictions, i.e., whether there are restrictions on reselling the interests. ABA Report at 106-107. Resale restrictions suggest that interests are not intended to be resold by an "underwriter" (a buyer who acquires interests for the purpose of selling them to others). Id. Here, the Operating Agreement has an entire section restricting the sale or transfer of the units. R. Doc. 1-2, §7, p.13. The interests were not freely transferable, and TMJ was not an "underwriter" who bought the units to resell. Notably, TMJ had the right to replace the manager "for cause" in the event the restaurant underperformed after it was open for three years. R. Doc. 1-2, ¶4(c), p. 35. This further indicates that the interest in the Company was not sold to TMJ with the expectation that TMJ would resell it to others. Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 12 of 26 - 13 - 1229944v5 Accordingly, this factor also supports the conclusion that the sale of the interest in the Company, even if it was a "security," fell within the "private placement" exemption. Under the factors identified in the ABA Report, as summarized above, the Complaint establishes that TMJ could "fend for itself." Thus, even if the LLC interest acquired by TMJ was a "security" under the '33 Act, its sale to TMJ was exempt from registration as a "private placement." 4. TMJ's Rescission Claim Also Fails as to IMC Management, LLC Because That Defendant Was Not an Offeror or Seller. In addition to the foregoing, the Complaint's rescission claim is further deficient as to IMC Management. Under the '33 Act, "[a]ny person who (1) offers or sells a security in violation of section 77e['s]" registration requirement may be liable for rescission. 15 U.S.C. §77l(a)(1) (emphasis supplied). The Complaint and exhibits indicate that TMJ contributed capital in exchange for an interest in the Company (IMCMV MOA, LLC), which is not a party to this case. See generally R. Doc. 1-2. While the Complaint implies that IMC Holdings influenced TMJ's investment in the Company, it does not suggest IMC Management did so. Indeed, it is apparent that IMC Management did not become manager of the restaurant operation until after the Company was formed and, thus, after TMJ acquired its interest. R. Doc. 1, ¶¶18-20. As such, IMC Management could not have "offered or sold" a membership interest to TMJ. The federal securities claims against IMC Management should be dismissed for that additional reason. C. Count 2: The Intentional Misrepresentation/Fraudulent Inducement Claim Fails as a Matter of Law. The Louisiana Civil Code defines fraud as "a misrepresentation or a suppression of the truth made with the intention either to obtain an unjust advantage for one party or to cause Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 13 of 26 - 14 - 1229944v5 a loss or inconvenience to the other." La. C.C. art. 1953. 4 There are three elements to an action 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 the other party; and (3) the resulting error must relate to a circumstance substantially influencing the other party's contractual consent. Terrebonne Concrete v. CEC Enters., LLC, 76 So. 3d 502, 509 (La. App. 2011) (citing Shelton v. Standard/700 Assocs., 798 So. 2d 60, 64 (La. 2001)). "In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). To succeed in a claim for intentional/fraudulent misrepresentations, the petition must allege: "(a) a misrepresentation of material fact, (b) made with the intent to deceive, and (c) causing justifiable reliance with resulting injury." Guidry v. U.S. Tobacco, 188 F.3d 619, 627 (5th Cir. 1999); Goodman v. Dell Pub. Co., No. 94-3028, 1995 U.S. Dist. LEXIS 10275 (E.D. La. 1995). It is well settled that fraud cannot be predicated on unfulfilled promises or statements as to future events. Badalamenti v. Jefferson Guar. Bank, 759 So. 2d 274, 280 (La. App. 2000); Bass v. Coupel, 671 So. 2d 344, 351 (La. App. 1995) (statement that subdivision "would be approved" by police jury was a statement about the future and could not be a misrepresentation of fact)). That is because "[a] representation that something will be done in the future or a promise to do it from its nature, cannot be true or false at the time when it is made." Swann v. Magouirk, 157 So. 2d 749, 751 (La. App. 1963); Colorado Milling & Elevator Co. v. Rapides Grocery Co., 142 So. 626, 629 (La. App. 1932). "To constitute actionable fraud, the false statements, if such are made, must relate to facts then existing or which have previously existed." Johnson v. Unopened Succession of Covington, 969 So. 2d 733, 742 (La. 4 The Complaint alleges that Louisiana law applies. R. Doc. 1, ¶¶104-118. Except as to Florida law regulating the formation of the Company, Defendants agree that Louisiana law applies to the claims not originating under federal securities laws. See note 7, infra. Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 14 of 26 - 15 - 1229944v5 App. 2007) (emphasis supplied) (citing Bass, 671 So. 2d at 351; Swann, 157 So. 2d 749; Franzella Realty, Inc. v. Kolb, 152 So. 2d 837 (La. App. 1963)). Accordingly, courts applying Louisiana law have held that a defendant's prediction of future revenue that turns out to be incorrect is not actionable as fraud. For example, in America’s Favorite Chicken Co. v. Cajun Enterprises, Inc., a fast food franchisee that contracted to own and operate four Popeye's restaurants in the San Francisco Bay area sued its franchisor, alleging, inter alia, that the latter's incorrect projections of the Bay Area restaurants' profit potential was fraudulent. 130 F.3d 180, 186 (5th Cir. 1997). The franchisee alleged that the franchisor stated it could expect sales similar to those of Popeye's restaurants in the Washington, D.C. market given the demographic similarities between the markets. The franchisor also stated that sales in California would increase if the restaurants were operated "properly." Id. The Fifth Circuit affirmed the district court's summary judgment for the franchisor, holding that the allegedly-fraudulent statements about the restaurants' future revenue potential were not actionable as a matter of law. Id. The court explained that the franchisor's projections were "nothing more than projections of future events and, as such, are not actionable as fraud under Louisiana law." Id. Similarly, in Twentieth Century-Fox Distributing v. Lakeside Theaters, Louisiana's Fourth Circuit held that a motion picture distributor's prediction (which turned out to be incorrect) that the film "Doctor Doolittle" would be a box office smash with high projected gross revenue was not actionable as fraud. 267 So. 2d 225, 229 (La. App. 1972). "Fox's salesman stated to [plaintiff] that 'Doctor Doolittle' should be a 'blockbuster,' this is merely an opinion statement on the film's money making potential. Such an obvious speculative projection is not a misrepresentation of a material fact sufficient to constitute fraud. . . ." Id. at 229. Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 15 of 26 - 16 - 1229944v5 Just as in America's Favorite Chicken and Lakeside Theaters, TMJ alleges fraud based on Defendants' projections of future revenue. Specifically, TMJ alleges that Defendants "made representations of material fact and suppressed the truth with respect to the MOA Business's commercial performance by way of verbal affirmations, intentional withholding of financials, and artificially and deliberately inflated pro formas." R. Doc. 1, ¶ 73. And, as America's Favorite Chicken and Lakeside Theaters illustrate, "pro forma projections and affirmations" regarding a business' potential future revenue are not actionable as fraud. The operating budgets and financial projections that Defendants provided to TMJ — long before the restaurant opened — were IMC Holdings' predictions about future events which, as a matter of law, are not actionable misrepresentations of material fact. TMJ's Count 2 for fraud should be dismissed. D. Count 3: The Breach of Contract Claim Fails as a Matter of Law. In Count 3, TMJ alleges that Defendants breached the Operating Agreement and the Management Agreement by "(i) preparing substantially inaccurate pro formas in bad faith; (ii) preparing operating budgets not based on actual results of the prior calendar year, but rather on Defendants' own self gain; (iii) deliberately determining an inaccurate and artificially inflated net revenue; (iv) routinely and intentionally withholding financials from TMJ; and (v) providing inflated pro formas to TMJ, which were also provided to the Bank in order to induce it to approve TMJ's investment in the MOA Business." R. Doc. 1, ¶87. TMJ also alleges Defendants "repeatedly stated" that TMJ would receive distributions and interest payments sufficient to pay the Bank debt off in approximately five years and that TMJ would have no issues servicing the debt through distributions and interest payments. R. Doc. 1, ¶89. First, neither Defendant is a party to both the Operating Agreement and the Management Agreement. IMC Holdings is a party only to the former, and IMC Management is Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 16 of 26 - 17 - 1229944v5 a party only to the latter. A defendant cannot be liable for breaching a contract to which it is not a party. Nonetheless, TMJ alleges, vaguely and generally, that both Defendants committed all breaches. This is improper "shotgun pleading." 5 Thus, the breach of contract allegations are legally deficient and should be dismissed for this reason alone. Second, while TMJ alleges it believed Defendants' projections were somehow guaranteed or a certainty, R. Doc. 1, ¶15, the Operating Agreement expressly states that it represents the parties' "entire understanding and agreement," and disclaims any other "agreements, understandings . . . representations or warranties." R. Doc. 1-2, ¶10.2, p. 19. Similarly, the Management Agreement expressly states that it constitutes "the entire agreement between the parties . . . and supersedes all prior agreements, understandings and negotiations" between the parties. R. Doc. 1-2, p. 38. It further states that "[n]o representation, inducement, promise, understanding, condition or warranty not set forth herein has been made or relied upon by either party hereto." Id. Under Louisiana law, such "integration" clauses preclude claims based on alleged promises that the parties did not incorporate into a written agreement. See Water Craft Mgmt., LLC v. Mercury Marine, 361 F. Supp. 2d 518, 553 (M.D. La. 2004) ("the integration clause effectively superseded any [prior] discussions"), aff'd 2006 U.S. App. LEXIS 18582 (5th Cir. July 24, 2006). 6 A viable contract claim requires, among other things, the obligor's undertaking an obligation to perform. See 1436 Jackson Joint Venture v. World Constr. Co., Inc., 499 So. 2d 5 Shotgun pleading "frequently fails to specify which defendant is responsible for each alleged act." Farmco, Inc. v. Gautreaux, 2014 U.S. Dist. LEXIS 44790, 1-4 n.3 (M.D. La. Mar. 31, 2014) (citing Strat. Inc. Fund, L.L.C. v. Spear, Leeds & Kellogg Corp., 305 F.3d 1293 (11th Cir. 2002). "Although the pleading rules in the Federal Rules of Civil Procedure are quite liberal, they cannot support 'shotgun' pleading." Steib v. Lastrada Inn, Inc., 1993 U.S. Dist. LEXIS 308, 35-36 (E.D. La. Jan. 7, 1993); Global Oil Tools, Inc. v. Barnhill, 2013 U.S. Dist. LEXIS 84696, 30-31, 2013 WL 3070838 (E.D. La. June 14, 2013) (noting that "'shotgun pleading' is not favored"). 6 And, like the agreement in Water Craft Management, supra, the agreements here could not be orally modified. See R. Doc. 1-2,¶10.3, p. 19; ¶13, p. 39. Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 17 of 26 - 18 - 1229944v5 426, 427 (La. App. 1986). Nowhere in the Operating Agreement or Management Agreement is there any assurance that any projections would turn out to be 100% accurate, and that Defendants would make up the difference to TMJ if they were not. They are not insurance policies. As to the allegations that Defendants were slow or did not deliver financial information to TMJ after it became a member, no monetary damages flow from any such alleged breaches. Damages are an essential element of a contract claim. Id. E. Count 4: The Breach of Fiduciary Duty Claim Fails as a Matter of Law. In Count 4, TMJ alleges that, as co-members of the Company, both Defendants and TMJ owe "absolute fiduciary duties" to each other. R. Doc. 1, ¶92. This statement is incorrect. The Company is a manager-managed Florida LLC. R. Doc. 1-2, pp. 1, 10. IMC Management is the manager. R. Doc. 1-2, pp. 31-40. Under Florida law, 7 a manager of a manager-managed LLC owes fiduciary duties to the members. Fla. Stat. Ann. § 605.04091. However, neither Florida's LLC law nor the Operating Agreement imposes fiduciary duties on the members of a manager-managed LLC vis-à-vis each other. Accordingly, Defendant IMC Holdings owes no fiduciary duty to TMJ, and Count 4 must be dismissed as to IMC Holdings for that reason alone. IMC Management, as the manager of the Company, does owe a fiduciary duty to TMJ, as a member of the Company. However, the breaches of fiduciary duty alleged in the Complaint appear to relate only to IMC Holdings. Many of the allegations refer to Mario Abal, who is alleged to be "Chief Development Officer of IMC Holdings." R. Doc. 1, ¶9. The Complaint alleges he spoke to TMJ on various occasions. R. Doc. 1, ¶¶10-11, 13 (referring to 7 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." Checkpoint Fluidic Sys. Int'l, Ltd. v. Guccione, 888 F. Supp. 2d 780, 794 (E.D. La. 2012) (citing Torch Liquidating Trust ex rel. Bridge Assocs. L.L.C. v. Stockstill, 561 F.3d 377, 385 n.7 (5th Cir. 2009). Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 18 of 26 - 19 - 1229944v5 discussions between TMJ and Abal and Eric McBride, an "architect/designer" who is not alleged to be an employee of either Defendant). 8 The pro formas were all allegedly provided by Mr. Abal and/or IMC Holdings. Id. ¶¶14, 26 (alleging Abal provided TMJ with the First through Third Pro Formas); R. Docs. 1-1; 1-6; 1-7 ("IMCMV Holdings" in headings). And, it is Mr. Abal who allegedly made representations regarding the pro formas. Id. ¶27. The Complaint also refers to discussions with David Crabtree, who is alleged to be IMC Holdings' CEO. R. Doc. 1, ¶45. While the Complaint vaguely refers to unnamed "others" as parties to the supposed breaches, it does not allege they were employed by IMC Management. At most, the Complaint lumps together its allegations and attributes them to both Defendants, which, again, is improper "shotgun pleading." Moreover, as discussed in the preceding section, any involvement with TMJ on IMC Management's part began only after TMJ became a member. In other words, IMC Management would not have any reason to make representations to TMJ that would have caused TMJ to become a member in the first place. Thus, while IMC Management owes fiduciary duties to members of the Company, the Complaint does not state a colorable claim for breach of such duties against it. Count 4 should be dismissed as to IMC Management as well. F. Count 5: The Negligent Misrepresentation Claim Fails as a Matter of Law. Under Louisiana law, to prevail on a negligent misrepresentation claim, a plaintiff must establish four elements: 1) defendant supplied false information; 2) defendant had a legal duty to supply correct information; 3) defendant breached its duty, either by omission or affirmative misrepresentation; and 4) plaintiff suffered damages as a result of its justifiable reliance upon the omission or misrepresentation. Kadlec Med. Ctr. v. Lakeview Anesthesia 8 The Design Standards attached to the Complaint were prepared by "McBride Co. - Design & Planning Professional." R. Doc. 1-2, p. 24. Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 19 of 26 - 20 - 1229944v5 Assocs., No. 04-0997, 2005 U.S. Dist. LEXIS 10328, at *13 (E.D. La. May 19, 2005); Hardy v. Hartford Ins. Co., 236 F.3d 287, 292 (5th Cir. 2001). TMJ cannot meet the first prong of this test. That threshold element requires a plaintiff to establish that defendant, in the course of its business or other matters in which it had a pecuniary interest, supplied false information. However, once again, TMJ bases this count entirely on projections of future revenue. R. Doc. 1, ¶¶100-101. And, as discussed above, projections are merely that — projections. They are statements as to future events which "from [their] nature, cannot be true or false at the time when [they are] made." Swann, 157 So. 2d at 751 ("[A] representation that something will be done in the future or a promise to do it from its nature, cannot be true or false at the time when it is made"). Thus, TMJ cannot establish that Defendants supplied it with false information. See, e.g., Ponthier v. Manalla, 951 So. 2d 1242, 1253 (La. App. 5 Cir. 2007) (trial court erred in finding defendant liable for negligent misrepresentation where he was reasonable in his investigation and supplied the best information available to him). Count 5 for negligent misrepresentation should be dismissed. G. Count 6: TMJ's Claims Under Louisiana "Blue Sky" Laws Also Must be Dismissed. Count 6 seeks to rescind the acquisition of TMJ's interest in the Company under Louisiana Revised Statute 51:714(A), also known as the "Blue Sky" law. R. Doc. 1, ¶¶111-12. That statute provides a rescission remedy for a violation of Section 712(A)(1) of Title 15, which in turn makes it unlawful to sell a "security" in violation of Section 705(a)(1) of that Title (requiring registration of a non-exempt "security"). Id. 51:712(A)(1). 9 9 Count 6 also refers to La. Rev. Stat. 51:712(A)(3), which prohibits the sale of a "security" based on a non- conforming prospectus. R. Doc. 1, ¶109. Because no prospectus was issued here, subpart (A)(3) adds nothing to the unregistered sale claim. Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 20 of 26 - 21 - 1229944v5 Section 705(a)(1)'s prohibition of the sale of an unregistered, non-exempt "security," and Section 714(A) rescission remedy for such sales, are Louisiana's equivalents of Sections 5 and 12, respectively, of the '33 Act (codified at 15 U.S.C. §§77e, 77l). Courts recognize that Louisiana's securities laws were "modeled after the federal system, specifically the Securities Act of 1933 and the Securities Exchange Act of 1934." Godair v. Place Vendome Corp., 648 So. 2d 440, 444 (La. App. 1994). Because Louisiana's securities laws were modeled on federal laws, courts turn to federal authorities for guidance in interpreting Louisiana securities law. Heck v. Triche, 775 F.3d 265, 282 (5th Cir. 2014) (using federal authority to determine meaning of "seller" under Louisiana securities law); State v. Powerdrill, 684 So. 2d 350, 353 (La. 1996) (Louisiana courts "look to the federal law and jurisprudence interpreting the securities law for guidance in interpreting the Louisiana provisions"); Dufour v. U.S. Home Corp., 581 So. 2d 765, 768 (La. App. 1991) (looking to federal authorities to determine that an interest was not an "investment contract" and therefore not a "security" under state law). For the same reasons discussed above with respect to the '33 Act, the Company membership interest here was not a "security" within the meaning of that term in La. Rev. Stat. 15:705(a)(1). The Company membership interest is thus not a "security" subject to registration requirements under that Section. H. Count 7: The LUTPA Claim Also Fails as a Matter of Law. Count 7 of the Complaint alleges violation of the Louisiana Unfair Trade Practices Act, La. Rev. Stat. 51:1405 ("LUTPA"). This claim should be dismissed for three separate, independent reasons: (1) LUTPA is inapplicable to securities violations; (2) the LUTPA claim is preempted; and (3) TMJ lacks standing to assert its claim. Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 21 of 26 - 22 - 1229944v5 1. LUTPA Claims Do Not Apply to Alleged Securities Violations. To the extent TMJ bases its LUTPA claim on the IMCMV Defendants' alleged violations of the '33 Act, both federal and state courts recognize that LUTPA does not apply to alleged securities violations. Stephenson v. Paine Webber Jackson & Curtis, 839 F.2d 1095, 1101 (5th Cir. 1988); Moore v. A.G. Edwards & Sons, Inc., 631 F. Supp. 138, 144-45 (E.D. La. 1986); Taylor v. First Jersey Secs,, Inc., 533 So. 2d 1383, 1387 (La. App. 1988). The Complaint alleges essentially the same factual bases for its LUTPA claim as for the securities claims. R. Doc. 1, ¶¶113, 116-17. If TMJ has a viable securities law claim (which is disputed), its LUTPA claim, Count 7, must be dismissed. 2. TMJ's LUTPA Claims are Perempted. In addition, TMJ's claims are governed by a one-year peremptive period. La. Rev. Stat. 51:1409(E); see also Warner v. Carimi Law Firm, 725 So. 2d 592, 598 (La. App. 1998) (claim cannot be brought more than one year after transaction giving rise to cause of action). As explained in section II(b)(1), above, TMJ's acquisition of an interest in the Company, and Defendants' alleged failure to register a non-exempt "security," was completed no later than November, 2015. Defendants' alleged "actions in providing false and misleading information to TMJ" occurred even earlier. Thus, the one-year peremptive period expired by November, 2016, six months before this case was filed. Count 7 must be dismissed for that additional reason. 3. TMJ Lacks Standing to Assert a LUTPA Claim. Because it is not a direct consumer or a business competitor, TMJ lacks standing to bring a LUTPA claim against IMCMV. Prior to 2010, Louisiana appellate courts consistently held that the personal right of action afforded under LUTPA applies only to direct consumers or to business competitors. See, e.g., Reed v. Allison & Perrone, 376 So. 2d 1067 (La. App. 1979); National Oil Svc. of La. v. Brown, 381 So. 2d 1269 (La. App. 1980); Gil v. Metal Serv. Corp., Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 22 of 26 - 23 - 1229944v5 412 So. 2d 706 (La. App. 1982); J.B.N. Morris v. Rental Tools, Inc., 435 So. 2d 528 (La. App. 1983). Consistently, federal courts likewise found LUTPA provided a private cause of action only for direct consumers or business competitors. See, e.g., Delta Truck & Tractor, Inc. v. J.I. Case Co., 975 F.2d 1192, 1205 (5th Cir. 1992); Gardes Directional Drilling v. U.S. Turnkey Explor. Co., 98 F.3d 860 (5th Cir. 1996); Computer Mgmt. Assist. Co. v. DeCastro, Inc., 220 F.3d 396 (5th Cir. 2000); Schenck v. Living Ctrs.-East, Inc., 917 F. Supp. 432 (E.D. La. 1996). Then, in 2010, the Louisiana Supreme Court held in Cheramie Servs. v. Shell Deepwater Production, Inc., that "LUTPA grants a right of action to any person, natural or juridical, who suffers an ascertainable loss as a result of another person's use of unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce," including "business consumers." 35 So. 3d 1053, 1057 (La. 2010). Some state and federal courts have followed Cheramie. See, e.g., Bogues v. La. Energy Consult., Inc., 71 So. 3d 1128 (La. App. 2011); Granger v. Christus Health Cent. La., 97 So .3d 604 (La. App. 2012); NOLA Fine Art v. Ducks Unlim., Inc., 88 F. Supp. 3d. 602 (E.D. La. 2015). However, Cheramie is a plurality opinion. Thus, both the Middle and Western Districts have held that Cheramie is insufficient to disregard the controlling Fifth Circuit decisions holding that a private right of action under LUTPA is limited to direct consumers or to business competitors of the defendant. See 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) ("[T]he portion of the opinion concerning LUTPA standing was joined by only three out of seven justices. Cheramie, therefore, does not represent a holding of the majority of the Louisiana Supreme Court and does not have binding effect on Louisiana state courts or this Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 23 of 26 - 24 - 1229944v5 Court.") (citing Chaney v. Travelers Ins. Co., 249 So. 2d 181, 184 (La. 1971) (appellate court erred in considering itself bound by a plurality opinion of the Louisiana Supreme Court); Citizen Comm. for Better Law Enforc. v. City of Lafayette, 685 So. 2d 289, 293 (La. App. 1996)). Cheramie is merely instructive to this Court. See First Am. Bankcard, Inc. v. Smart Bus. Tech., Inc., 178 F. Supp. 3d 390, 405 (E.D. La. 2016) (Engelhardt, C.J.). This Court should follow the long line of Fifth Circuit jurisprudence limiting LUTPA claims to business competitors and direct consumers, see, e.g., Orthopedic Sports Injury Clinic v. Wang Labs., Inc., 922 F.2d 220 (5th Cir. 1991), and dismiss TMJ's LUTPA claim for lack of standing. I. TMJ's Allegations Concerning a New Orleans Restaurant Fail to State a Claim. The vast majority of the Complaint, and all of its exhibits, relate exclusively to development of a restaurant at the Mall of America, in Minnesota. As an afterthought, the Complaint alludes a couple of times to a separate transaction for development of a restaurant in New Orleans, and it seeks rescission as to that transaction. See R. Doc. 1, ¶¶10-11, 47 (alleging meetings at which both restaurants were discussed), ¶69 (seeking return of investment in New Orleans restaurant). The Complaint is devoid, however, of any detail whatsoever regarding the terms of that transaction, or any alleged factual basis for rescission of that separate transaction. While the Complaint fails to state a claim regarding the New Orleans restaurant as to either defendant, that failure is even more egregious as to IMC Management. That Defendant managed the Mall of America restaurant. R. Docs. 1-2 & 1-5, at p. 31. Nowhere does the Complaint suggest IMC Management had anything to do with the New Orleans restaurant. Instead, the Complaint improperly lumps both Defendants together in yet another example of "shotgun pleading." TMJ's claims regarding a New Orleans restaurant should be dismissed. Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 24 of 26 - 25 - 1229944v5 J. TMJ Also Fails to State a Claim for Punitive Damages. In Count 2, TMJ asserts a claim for punitive damages. However, it is well settled in Louisiana that "[p]unitive damages are not an element recoverable in an action for fraud." Dixon v. Bohn, 890 So. 2d 613, 615 n.2 (La. App. 2004) (citing La. C.C. art. 1958). In Louisiana, punitive damages are only available where permitted by statute. McCoy v. Ark. Nat. Gas Co., 143 So. 383, 383 (1932). Fraud claims are governed by Louisiana Civil Code articles 1953-1958. And, none of the applicable Civil Code articles permits punitive damages for fraud. Indeed, article 1958 expressly specifies that parties against whom rescission is granted because of fraud are liable only for damages and attorneys' fees. Accordingly, TMJ's claim for punitive damages must be dismissed. III. CONCLUSION TMJ's federal securities law claim is time-barred, and also fails because no "security" was sold, and even if one were, it was an exempt "private placement." Its Blue Sky law claim fails because no "security" was sold. The fraud and breach of contract claims fail because predictions of the future are not actionable. All of TMJ's other claims likewise fail as a matter of law. The Complaint should be dismissed in its entirety. /s/ James C. Gulotta, Jr. James C. Gulotta, Jr., T.A., La. Bar No. 6590 Andrew D. Mendez, La Bar. No. 26686 Abigayle C. Farris, La. Bar No. 33547 STONE PIGMAN WALTHER WITTMANN L.L.C. 546 Carondelet Street New Orleans, Louisiana 70130 Telephone: (504) 581-3200 Attorneys for the IMCMV Holdings, Inc. and IMCMV Management, LLC, Defendants Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 25 of 26 - 26 - 1229944v5 CERTIFICATE OF SERVICE I hereby certify that a copy of the above and foregoing Memorandum in Support of Rule 12(b)(6) Motion to Dismiss was filed electronically with the Clerk of Court using the CM/ECF system this 12th day of July, 2017. Notice of this filing will be sent to all counsel of record by operation of the court's electronic filing system. /s/ James C. Gulotta, Jr. Case 2:17-cv-04677-NJB-JVM Document 21-1 Filed 07/12/17 Page 26 of 26 1230270v1 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA TMJ GROUP LLC VERSUS IMCMV HOLDINGS INC. AND IMCMV MANAGEMENT, LLC * * * * * * * * * * * * * CIVIL ACTION NO. 17-CV-04677 SECTION "G(1)" JUDGE NANNETTE JOLIVETTE BROWN MAGISTRATE JUDGE JANIS VAN MEERVELD ******************************************** NOTICE OF SUBMISSION PLEASE TAKE NOTICE that Defendants IMCMV Holdings, Inc. and IMCMV Management, LLC, in accordance with Rule 7.2 of the Local Civil Rules of the United States District Court for the Eastern District of Louisiana, hereby submit their Rule 12(b)(6) Motion to Dismiss for decision on Wednesday, the 16th day of August, 2017, at 10:00 a.m. before the Honorable Nannette Jolivette Brown, United States District Judge, United States District Court for the Eastern District of Louisiana, 500 Poydras Street, New Orleans, Louisiana. /s/ James C. Gulotta, Jr. James C. Gulotta, Jr., T.A., La. Bar No. 6590 Andrew D. Mendez, La Bar. No. 26686 Abigayle C. Farris, La. Bar No. 33547 Of STONE PIGMAN WALTHER WITTMANN L.L.C. 546 Carondelet Street New Orleans, Louisiana 70130 Telephone: (504) 581-3200 Attorneys for the IMCMV Holdings, Inc. and IMCMV Management, LLC Case 2:17-cv-04677-NJB-JVM Document 21-2 Filed 07/12/17 Page 1 of 2 - 2 - 1230270v1 CERTIFICATE OF SERVICE I hereby certify that a copy of the above and foregoing Notice of Submission was filed electronically with the Clerk of Court using the CM/ECF system this 12th day of July, 2017. Notice of this filing will be sent to all counsel of record by operation of the court's electronic filing system. /s/ James C. Gulotta, Jr. Case 2:17-cv-04677-NJB-JVM Document 21-2 Filed 07/12/17 Page 2 of 2