Streambend Properties II, LLC v. Ivy Tower Minneapolis, LLC, 2015 U.S. App. LEXIS 5050

Background

Streambend contracted in 2004 to buy two condominium units and paid earnest money; completion was delayed, additional floors were added, and earnest monies were later disbursed from trust accounts.
Streambend sued developers, their principals, a broker (Burnet), and escrow/title agent Commonwealth asserting ILSA claims (15 U.S.C. § 1703(a)(2)) plus multiple state-law claims; litigation produced multiple amended complaints and motions to add or re-add defendants.
The district court dismissed Burnet early (Streambend did not appeal that dismissal), dismissed most federal claims for failure to plead ILSA fraud with particularity, granted summary judgment for Commonwealth on the ILSA claims, and declined supplemental jurisdiction over state-law claims; Streambend appealed.
On appeal the Eighth Circuit reversed one dismissal for pleading interstate-commerce nexus, but ultimately affirmed dismissal of all ILSA claims against developers, affirmed summary judgment for Commonwealth, upheld denial of leave to re-add Burnet or to file additional amendments, and approved the district court’s refusal to exercise supplemental jurisdiction.
Key legal disputes centered on (a) whether Rule 9(b)’s heightened pleading standard applies to various ILSA subsections, (b) whether Streambend’s pleadings met Rule 9(b) or Rule 8 standards, (c) whether Commonwealth was a "developer or agent" (or aided and abetted) under ILSA, and (d) whether the district court abused discretion in denying further amendments or re-adding previously dismissed parties.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Streambend could re-add Burnet after Burnet was dismissed with prejudice and not appealed	Streambend sought leave to re-add Burnet to pursue claims and amend to cure alleged defects	Defendants & district court: prior dismissal with prejudice and failure to appeal barred re-adding; finality concerns	Denied — court did not abuse discretion; stricter standard applies when seeking to amend after a merits dismissal not appealed
Whether Rule 9(b) applies to ILSA §1703(a)(2)(A) and (C) (general anti-fraud provisions)	Streambend argued Rule 8 applies	Defendants: (A) and (C) are fraud provisions like Rule 10b-5; Rule 9(b) applies	Held: Rule 9(b) applies to (A) and (C); Streambend’s group-pleading allegations failed to meet particularity and scienter requirements
Whether Rule 9(b) applies to ILSA §1703(a)(2)(B) (misstatements/omissions) and whether Count I pleaded a plausible claim under Rule 8	Streambend argued Rule 9(b) did not apply and Count I met Rule 8 notice pleading; alternatively sought leave to amend	Defendants argued pleading was conclusory, lacked specifics and scienter and failed to show the alleged statements/omissions were material and tied to the sale	Held: Rule 8 governs (a)(2)(B) when not premised on fraud; but Count I failed Iqbal plausibility: allegations were vague, often post-closing, largely promissory or conclusory, so dismissal affirmed
Whether denial of leave to file Third/Fourth Amended Complaints and to add Wischermann parties was an abuse of discretion	Streambend sought further amendments to cure defects and add related parties	Defendants and judges characterized repeated amendment requests as dilatory, in bad faith, futile, and prejudicial	Held: Denial affirmed — district court did not abuse discretion; judge’s prior warnings and futility supported refusal
Whether Commonwealth was a "developer or agent" under ILSA or liable for aiding and abetting	Streambend argued Commonwealth’s escrow/disbursement role and conduct aided violations and made it an agent/developer	Commonwealth argued it only accepted deposits and disbursed funds per agreements; did not sell or represent developers in sales	Held: Commonwealth was not a developer or agent as defined by ILSA; summary judgment for Commonwealth affirmed; assuming aiding-and-abetting is legally possible, no triable evidence it aided developers’ ILSA violations
Whether district court erred by declining supplemental jurisdiction over state-law claims or remanding them	Streambend wanted revival/remand if federal claims reversed	Defendants argued district court properly declined jurisdiction; remand not available because case originated in federal court	Held: Affirmed — declining supplemental jurisdiction was appropriate; remand to state court was not an option

Key Cases Cited

In re NationsMart Corp. Sec. Litig., 130 F.3d 309 (8th Cir. 1997) (distinguishing claims grounded in fraud from non-fraud statutory claims for pleading standards)
Ernst & Ernst v. Hochfelder, 425 U.S. 185 (U.S. 1976) (scienter is an element of Rule 10b-5 claims)
Parnes v. Gateway 2000, Inc., 122 F.3d 539 (8th Cir. 1997) (purposes and requirements of Rule 9(b))
Roop v. Hypoguard USA, Inc., 559 F.3d 818 (8th Cir. 2009) (application of Rule 9(b) to claims grounded in fraud)
Hawks v. J.P. Morgan Chase Bank, 591 F.3d 1043 (8th Cir. 2010) (heightened standard for amendment after dismissal on merits)
Rombach v. Chang, 355 F.3d 164 (2d Cir. 2004) (Rule 9(b) applies to §11/12 claims only if premised on fraud)
Trooien v. Mansour, 608 F.3d 1020 (8th Cir. 2010) (group pleading deficiencies under Rule 9(b))