349 F. Supp. 3d 1316
S.D. Fla.2018Background
- Thirteen member-LLCs (plaintiffs) are members of Manor Glenn Investments, LLC; most individual members are Argentine citizens; defendants are Florida LLCs and several Florida-resident individuals alleged to have managed Manor Glenn.
- In 2014 defendants solicited investments to capitalize a Georgia condo-conversion project; plaintiffs allege promises of a 12% guaranteed return and that $3.2 million was raised.
- Plaintiffs allege misrepresentations about the property purchase price, diversion of corporate assets, failure to account, poor maintenance and insurance, and related misconduct; they bring direct and derivative claims (15 counts) including breach of contract, fraud, fiduciary duty, accounting, inspection rights, negligence, and unjust enrichment.
- Defendants moved to dismiss for lack of subject-matter jurisdiction (diversity), failure to state claims, and failure to plead with specificity; court considered jurisdictional challenge first.
- The Court found diversity satisfied (LLC citizenship traced to members), dismissed most claims for failure to plead plausibly or with required particularity (including derivative pleading failures for lack of pre-suit demand / particularized futility), sustained narrow remedies claims (accounting; statutory inspection/records claim under the pre-2016 statute), and found the complaint to be a shotgun pleading.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject-matter jurisdiction (diversity) | Plaintiffs alleged members' citizenships (Argentina and Texas); Manor Glenn nominal defendant | Defendants argued Manor Glenn should realign as a plaintiff and that tracing management leads to a Florida domiciliary destroying diversity | Diversity exists: LLC citizenship is traced to members (not managers); plaintiffs were diverse from defendants under §1332(a)(3) |
| Direct vs. derivative standing for fiduciary/contract claims | Plaintiffs asserted direct harms from fraudulent inducement and fiduciary breaches | Defendants argued injuries were derivative (company devaluation) and plaintiffs failed to meet statutory prerequisites for derivative suit | Plaintiffs' fiduciary claims are derivative; they failed to plead pre-suit demand or particularized demand futility under Fla. Stat. §605.0802, so derivative counts dismissed |
| Fraud / fraudulent inducement (Rule 9(b)) | Plaintiffs alleged misrepresentations (12% return promise; misstated purchase price) occurring in 2014 | Defendants argued fraud allegations lack particularity (who, when, where, how) required by Rule 9(b) | Fraud claim dismissed for failure to plead with the particularity required by Rule 9(b) |
| Breach of contract, individual liability, unjust enrichment, negligence | Plaintiffs relied on Operating Agreement and background allegations to impose duties on individual defendants and alternative quasi-contract remedies | Defendants argued insufficient factual allegations tying individual defendants to contractual duties or misconduct; unjust enrichment improper where contract governs | Court dismissed breach of contract, individual fiduciary/ negligence, unjust enrichment for failure to state plausible claims or to plead facts linking each defendant; accounting and statutory records/inspection claim (under pre-2016 statute) survived |
| Pleading form (shotgun) | Plaintiffs incorporated broad background into every count | Defendants urged dismissal for shotgun pleading and lack of notice | Court found SAC a shotgun pleading (repeated incorporations, conclusory allegations, failure to specify which defendant did what) and noted this as an additional basis supporting dismissal |
Key Cases Cited
- Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574 (U.S. 1999) (jurisdictional challenges addressed first)
- Travaglio v. Am. Express Co., 735 F.3d 1266 (11th Cir. 2013) (citizenship = domicile for diversity)
- Rolling Greens MHP, L.P. v. Comcast SCH Holdings, LLC, 374 F.3d 1020 (11th Cir. 2004) (LLC citizenship equals citizenship of each member)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (legal conclusions disregarded; plausibility inquiry)
- Dinuro Investments, LLC v. Camacho, 141 So.3d 731 (Fla. 3d DCA 2014) (direct-versus-derivative test for LLC-member claims)
- Ziemba v. Cascade Int'l, Inc., 256 F.3d 1194 (11th Cir. 2001) (Rule 9(b) requirements for pleading fraud)