Ferry v. DF Growth REIT, LLC, 3:22-cv-02001

Plaintiffs, investors in two real estate investment trusts (REITs) sponsored by DiversyFund, allege securities fraud regarding misstatements and omissions related to REIT offerings permitted under SEC Regulation A.
The SEC suspended and then permanently revoked REIT II’s Regulation A exemption due to compliance failures and alleged misstatements in offering documents and solicitation materials.
Plaintiffs assert several Section 25401 claims: misrepresentations about asset management fees, qualification under Regulation A, and excessive acquisition fees charged on two projects (DF Summerlyn and NCP Dove).
The Court previously sustained two claims (Regulation A exemption and management fees) and dismissed others with leave to amend; the operative complaint (TAC) amends only the acquisition fee claim.
Defendants moved to dismiss and to strike parts of the TAC as immaterial or impertinent based on prior dismissals.
The Court now rules on both the motion to dismiss (under Rule 12(b)(6)) and the motion to strike (under Rule 12(f)).

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Plaintiffs adequately allege misrepresentation of compliance with Regulation A exemption	Defendants misrepresented that REIT shares were exempt from registration under Regulation A	This claim should be re-examined given amended complaint	Claim sustained; law of the case doctrine applies since facts/claims unchanged
Whether Plaintiffs adequately allege excessive acquisition fees for NCP Dove	Acquisition fees charged exceeded the contractual 4% cap	Later, lower reported fee negates earlier allegation of excess; difference alone not fraud	Claim dismissed; updated fee not shown to be false, and no facts make prior figure reliable
Whether Plaintiffs adequately allege excessive acquisition fees for DF Summerlyn	Reported fee exceeded the stated 5.5% cap	Cap on acquisition fees was a misprint; developer fee range applies instead	Claim sustained; allegations are sufficiently pled regarding 5.5% cap
Whether Plaintiffs’ TAC contains immaterial/impertinent allegations warranting striking	Disputed paragraphs are relevant for context or live claims	Certain paragraphs pertain to dismissed claims, should be struck	Some paragraphs stricken (only as to dismissed claims); others left for contextual relevance

Ashcroft v. Iqbal, 556 U.S. 662 (general standards for plausibility in complaints)
Navarro v. Block, 250 F.3d 729 (applicable Rule 12(b)(6) standards)
City of Los Angeles v. Santa Monica Baykeeper, 254 F.3d 882 (application of law of the case doctrine)
United States v. Jingles, 702 F.3d 494 (scope of law of the case doctrine)
Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336 (standard for construing complaint favorably to plaintiff)
Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047 (Rule 9(b) fraud pleading requirements)
Fantasy, Inc. v. Fogerty, 984 F.2d 1524 (court’s discretion to strike under Rule 12(f))