I. FACTUAL BACKGROUND
This case arises out of a real estate project owned by Manor Glenn Investments, LLC ("Manor Glenn"). The Plaintiffs in this action are the thirteen limited liability companies ("LLC") which are all members of Manor Glenn. (ECF. No 40-1, ¶ 4). All of the members of Plaintiff LLCs, with the exception of one Texas resident, are foreign investors from Argentina. (Id. at ¶¶ 5-33). Defendants are: (1) Manor Glenn, (2) Team Real Estate Management, LLC; (3) Team Real Estate Development, LLC; (4) seven individual residents and citizens of Florida, who are alleged members of Team Real Estate Development, LLC (5) Atlanta R.E. Investment Group LLC; and (6) Team Real Estate Title Services, LLC, which are alleged to be joint ventures. The Defendants are all alleged to be Florida Limited Liability Companies. (Id. at ¶¶ 38-53).
According to the allegations in the Second Amended Complaint ("SAC"), the operative complaint in this action, in early 2014, Defendant Team Real Estate Management, LLC began soliciting foreign investors to fund a real estate project. (Id. at ¶ 56). The project entailed forming a manager-managed LLC called Manor Glenn, LLC, which would purchase some property in College Park, Georgia and cоnvert it into condominiums. (Id. at ¶¶ 35, 59). Plaintiffs allege that Defendants contacted Plaintiffs to solicit investments, and in concert, represented to Plaintiffs that their investment in Manor Glenn would yield a guaranteed 12% return. (Id. at ¶ 58).
Plaintiffs further contend that Defendant Team Real Estate Management, LLC, by and through its members and managers, solicited a total of $3.2 million from Plaintiffs and others to capitalize Manor Glenn. Each Plaintiff purchased ownership interest in Manor Glenn at a value of $32,000.00 for each percent of the LLC (Id. at ¶ 63). On May 6, 2014, through the Member Interest Transfer Agreement, all ownership interest in Manor Glenn was transferred to Plaintiffs in proportion to their investments. (ECF No. 40-1). On the same day, the Amended and Restated Operating Agreement became effective. (ECF No. 40-2).
Plaintiffs allege that Defendant Team Real Estate Management consistently failed to provide an accounting of Manor Glenn, LLC. (Id. at ¶ 59). Prior to filling the lawsuit, individual Plaintiffs made requests
Plaintiffs further allege that since the initial offering, Defendants lied to Plaintiffs. (Id. at ¶ 59). For example, Defendants represented that the purchase price of the property was $2,482,400.80, but it was in fact $1,725,000.00. (Id. at ¶ 60). Moreover, Plaintiffs claim that there was a willful diversion of corporate assets to the personal project of its manager as well as grossly negligent operation and supervision of Manor Glenn. (Id. at ¶ 64). Other examples of Defendants misconduct include: (1) committing waste by allowing the property to deteriorate significantly until Defendants' removal as managers in late 2015 (Id. at ¶ 65); (2) failing to start construction (Id. at ¶ 74); (3) failing to provide security for the property (Id. at ¶ 74); (4) failing to report in a timely manner the theft of air conditioning units that were stolen from the property on February 23, 2015 to authorities and insurance agency (Id. at ¶ 85); (5) refusing to provide an Examination Under Oath to Seneca Insurance concerning the theft of the air conditioning units (Id. at ¶ 87); (6) failing to provide regular status reports (Id. at ¶ 85); (7) failing to maintain adequate insurance coverage (Id. ); (8) paying the manager a management fee in contravention of the Operating Agreement (Id. at ¶ 80); (9) beginning the conversion of property to condominiums in contravention of the Operating Agreement (Id. ).
As a result of the alleged wrongdoings, Plaintiffs filed this fifteen-count action alleging breach of contract, fraud, breach of fiduciary duty in violation of Florida state law, and accounting, among other counts. Defendants filed the instant Motion arguing that this Court lacks subject matter jurisdiction and that Plaintiffs have failed to state a cause of action as to all Defendants. [ECF No. 48 at 2].
II. DISCUSSION
Defendants move to dismiss the SAC on three grounds: (1) lack of subject matter jurisdiction; (2) failure to state a cause of aсtion; and (3) failure to plead with specificity.
When deciding Rule 12(b) motions to dismiss, a district court first addresses any jurisdictional challenges. See Ruhrgas AG v. Marathon Oil Co.,
A. Subject Matter Jurisdiction
"A party invoking federal court's diversity jurisdiction must allege 'facts' that show that federal subject matter jurisdiction exists." Golden v. Jericho All-Weather Opportunity Fund, LLP, No. 17-CV-23241,
A federal court has subject matter jurisdiction over civil actions between "citizens of different States and in which citizens or subjects of a foreign state are additional parties."
For purposes of determining diversity jurisdiction, the citizenship of a limited liability corporation (LLC) is the citizenship of each of its members. Rolling Greens MPH, L.P, v. Comcast SCH Holdings, LLC,
Here, Defendants contest subject matter jurisdiction arguing that Manor Glenn, which is listed in the complaint as a nominal defendant, should be realigned as a plaintiff. (ECF No. 48, p. 9). Further, Defendants contends that once Manor Glenn is realigned as a plaintiff, complete diversity is destroyed because at the end of Manor Glenn's management chain is Candelaria Barrera-a Florida resident. (Id. at p. 7, 10, Ex. A-C). Defendants offer as evidence screengrabs of public records maintained by the Florida Department of State, Division of Corporations showing the chain of managеment. (Id. ).
Even if Manor Glenn is realigned as a plaintiff in this action, Defendants' argument does not adequately challenge jurisdiction and fails. For purposes of diversity jurisdiction, it is the citizenship of an LLC's members -not its managers-that is relevant. See, e.g., Rolling Greens,
B. Failure to State a Claim
Under Rule 8(a)(2) of the Federal Rules of Civil Procedure, a plaintiff must plead "only a short and plain statement of the claim showing that the pleader is entitled to relief," in order to "give the defendant fair notice of what the...claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly ,
When considering a motion to dismiss, first a court disregards "legal conclusion[s] couched as factual allegation[s]." Twombly ,
1. Direct Claims
a. Breach of Contract (Count I)
To sustain a claim for breach of contract under Florida law, a plaintiff must sufficiently plead "(1) a valid contract, (2) a material breach, and (3) damages." Transunion Risk & Alt. Data Sols. v. Maclachlan, No. 14-CV-81485,
First, Plaintiffs seem to allege that they had a contractual relationship with Defendants pursuant to their Restrictive Member Agreement and the Operating Agreement attached to the complaint as Exhibits A and B. (ECF No. 40, ¶ 73). However, the purpose of the Restrictive Member Agreement-which contains a merger clause-was to transfer all interest in Manor Glenn from Atlanta R.E. Investments, LLC (who is in an allegedly in a joint venture with Team Real Estate Management) to Plaintiffs. (ECF No. 40-1). Plaintiffs have not alleged that the transfer of interest in Manor Glenn did not occur. Therefore, there is no alleged breach of the Restrictive Member Agreement.
Second, Plaintiffs allege Defendants breached the Operating Agreement, attached to the complaint as Exhibit B. An operating agreement is a contract that establishes "a more complicated and nuanced set of contractual rights and duties." Dinuro,
Here, the Operating Agreement is between Manor Glenn Investments, LLC and its members, the Plaintiffs. (See ECF No. 40-2, p. 3). The Operating Agreement appoints Team Real Estate, LLC as manager and imposes both duties and limitations on its powers. (See
b. Breach of Fiduciary Duty in Violation of
From the outset, Defendants assert that Plaintiffs' breach of fiduciary duty in violation of
In Dinuro, the court articulated the cоntrolling test for whether claims should be brought directly or derivatively. A claim can be brought directly "only if (1) there is a direct harm to the shareholder or member such that the alleged injury does not flow subsequently from an initial harm to the company and (2) there is a special injury to the shareholder or member that is separate and distinct from those sustained by the other shareholders or members." Dinuro,
The Florida Revised Limited Liability Company Act provides that "a member maintaining a direct action under this section must plead and prove an actual or threatened injury that is not solely the result of an injury suffered or threatened to be suffered by the limited liability company."
Here, Plaintiffs allege that due to the breaches of fiduciary duties, "the funds and assets of MANOR GLENN are being mismanaged and wasted, and/or diverted - thereby resulting capital losses to the Plaintiffs." (ECF No. 40, ¶ 89). Moreover, "Plaintiffs have been damaged in amounts equal to their rightful ownership of the company, loss of use of investment income, loss of promised profits." (Id. ). These allegations fail to show that Plaintiffs'
For a member of an LLC to bring a derivative claim against an LLC's manager, the member must comply with
(1) The member first makes a demand on ... the managers of a managеr-managed limited liability company requesting that the managers ... cause the company to take suitable action to enforce the right, and the managers ... do not take action within a reasonable time, not to exceed 90 days; or
(2) A demand under subsection (1) would be futile, or irreparable injury would result to the company by waiting for ... the managers to take action to enforce the right in accordance with subsection (1).
The law provides for pre-suit demands "to give corporate directors an opportunity to correct any internal abuses without lawsuit" thereby conserving company and judicial resources. McCabe v. Foley,
In Firehouse Gallery, LLC v. Phillips, the plaintiff brought a derivative claim belonging to a Delaware LLC without alleging a pre-suit demand. No. 8:09-cv-698-T-17-MAP,
Here, Plaintiffs simply allege that a § 605.0802 pre-suit demand to Defendants would havе been futile because Defendants had a guilty participation in the wrongs complained of. (ECF. No. 40, ¶ 68). Plaintiffs however, do not allege what specific acts each Defendant committed which contributed to Plaintiff's injury. This is analogous to stating that Defendants "faced a substantial likelihood of liability" which, by itself, is insufficient to establish that a pre-suit demand would be futile. See In Re Mako,
c. Fraudulent Inducement (Count III)
First, Defendants argue that Plaintiffs lack standing to assert a direct claim for fraudulent inducement. (See ECF No 48, p. 14). Again, under the Dinuro test, Plaintiffs must show that (1) there is a direct harm to Plaintiffs such that the alleged injury does not flow subsequently from an initial harm to the company and (2) there is a special injury to the Plaintiffs that is separate and distinct from those sustained by the non-plaintiff members. See Dinuro,
Even if Plaintiffs have standing to bring a direct claim for fraudulent inducement, Plaintiffs have not sufficiently pled their claim under the controlling Fed. R. Civ. Pro. 9(b) pleading standard. ("In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.") The Eleventh Circuit has explained:
The particularity rule serves an important purpose in fraud actions by alerting dеfendants to the 'precise misconduct with which they are charged' and protecting defendants 'against spurious charges of immoral and fraudulent behavior.' " The application of Rule 9(b), however, "must not abrogate the concept of notice pleading."Id. Rule 9(b) is satisfied if the complaint sets forth "(1) precisely what statements were made in what documents or oral representations or what omissions were made, and (2) the time and place of each such statement and the person responsible for making (or, in the case of omissions, not making) same, and (3) the content of such statements and the manner in which they misled the plaintiff, and (4) what the defendants obtained as a consequence of the fraud."
Ziemba v. Cascade Int'l, Inc. ,
Here, Plaintiffs allege that "Defendants, acting individually and on behalf of various entities, made fraudulent misrepresentations or omissions to the Plaintiffs regarding material facts including, but not limited to, the Development's operations, financial condition, ownership, debt...." (ECF No. 40, ¶ 92). As misrepresentations, Plaintiffs allege that (1) when soliciting investments, Defendants represented that Plaintiffs would receive 12% guarantee return on their investment and (2) Defendants reрresented that the purchase price of property as $757,400.80 over the actual purchase price. (Id, ¶¶ 93, 95). Plaintiffs allege simply that the fraudulent statements and/or omissions were made "in 2014" and fail to identify which Defendant made the statement, where, to which Plaintiff, and why those statements were in fact fraudulent. (Id, ¶¶ 56, 58, 62-63, 90-101). These allegations do not sufficiently give Defendants fair notice of the claim against them. See Zarrella v. Pac. Life Ins., Co,
Plaintiffs contend that they are unable to provide more details about the fraudulent inducement because they have not had an opportunity to conduct discovery.
d. Accounting (Count IV)
"An accounting is best understood as a remedy for a cause of action, not as a cause of action in its own right." Zaki Kulaibee Establishment v. McFliker ,
e. Inspeсtion of Books and Records under Fla. Stat. 605.0411 (Count V)
Plaintiffs cannot bring their claim under Fla. Stat § 605.0411 because that section became effective in May 10, 2016. Defendants were removed as managers on December 16, 2015. (ECF No. 40-3). Accordingly, Defendants' conduct is not governed by § 605.0411, but by § 608.4101. This section affords Plaintiffs, as members of the LLC, the right to inspect and copy records.
The Manager shall maintain or cause to be maintained complete and аccurate books of account and records of the Company's affairs at the Company's principal office and each Member shall have the right to inspect the Company's books and records at any reasonable time during normal business hours upon advance written notice to the Manager.
(ECF No. 40-2, p. 20). Plaintiffs allege that various Plaintiffs made oral and written requests to Defendants to inspect the books and records of the Manor Glenn in order to determine the value of Plaintiffs' right, entitlement and ownership. (ECF. No. 40, ¶¶ 120, 125). These requests were ignored. (Id. ). On December 16, 2015, Plaintiffs made a formal demand for an accounting and for Defendants to turn over the Manor Glenn's books. (ECF No. 40-3). Defendants' response to the request was allegedly "woefully inadequate and non-responsive." (Id. , ¶ 121). Further, Plaintiffs allege that Defendants have control over the books and records requested by Plaintiffs.
Defendants cite to Omes v. Ultra Enterprises, Inc. , to support two propositions.
2. Derivative Claims
As previously stated, pursuant to
Assuming arguendo that Plaintiffs' pre-suit demand had been satisfied, each derivative count would still be dismissed for the following reasons.
a. Breach of Fiduciary Duty (Counts VI-XII; Count XV)
Counts VI-XIII allege a breach of fiduciary duty by Defendants Valeria Seminara, Chrisitan Finkelberg, Lidia Salerno, Andres Robert Finkelberg, Ruben Santurian, Diego Besga, and Alex Nahabetian. Each count is identical; Plaintiffs simply switch out the Defendants' names. (See ECF No. 40, pp. 26-36). To sustain a claim for breach of fiduciary duty under Florida law, a plaintiff must sufficiently plead (1) the existence of a fiduciary duty, (2) breach of a fiduciary duty, and that the breach proximately caused the plaintiff's damages. Gracey v. Eaker ,
Accordingly, in a set of identical five paragraph counts, Plaintiffs allege: (1) Defendants owed both a commоn law and a statutory fiduciary obligation, (2) Defendants breached that duty, and (3) that breach proximately caused Plaintiffs' injury. (See, e.g, ECF No. 40, ¶¶ 133-137). Plaintiffs fail to allege facts that could show this Court that each individual Defendant is plausibly liable for a breach of fiduciary duty.
Plaintiffs' claim against Defendant Team Real Estate Title Service, LLC for breach of fiduciary duty also fails. Plaintiffs assert that Team Real Estate Title Service, LLC "held positions of trust with regard to Manor Glenn and therefore had respective fiduciary duties...." (ECF No. 40, ¶ 178). Further, Plaintiffs state that Defendant breached its duties by "failing to properly supervise the disbursements of the investors' monies in violation of standard general practices in the real estate development industry." (Id. at ¶ 180). Again, Plaintiffs fail to allege facts from which this court can draw a reasonable infеrence of liability. Accordingly, this Court dismisses this count.
b. Negligence (Count XIII)
Plaintiffs' claim for negligence suffers the same defects as the preceding counts for breach of fiduciary duty. To sustain a claim for negligence a plaintiff must show that "(1) defendants owe plaintiffs
c. Unjust Enrichment (Count XIV)
Defendants argue that Plaintiffs unjust enrichment count must be dismissed because Plaintiffs cannot pursue a quasi-contract claim for unjust enrichment if an express contract exists between the parties. (ECF No. 48, p. 17). This proposition, while true, is only operative upon a showing that an express contract exists-not upon a mere allegation of an express contract. Samana, Inc. v. Lucena,
Here, attached to the Plaintiffs' SAC is the Operating Agreement between Manor Glenn and its members. The Operating Agreement appoints Defendant Tеam Real Estate Management as the Manor Glenn's manager and both assigns its duties and restricts its powers. While some provisions designate for what Defendant Team Real Estate is authorized to use Manor Glenn's resources for-since there are other grounds to dismiss the claim-this Court will assume that the Operating Agreement is not an express contract on the subject matter.
Therefore, the court evaluates the elements of an unjust enrichment claim. "In Florida, the elements of a claim for unjust enrichment are: (1) a benefit conferred upon the defendant by the plaintiff; (2) appreciation by the defendant of such benefit; and (3) acceptance and retention of such benefit by the defendant under such circumstances that it would be inequitable for him to retain it without paying the value thereof." Melton v. Century Arms, Inc. ,
Plaintiffs claim that "by utilizing the substantial monetary investments made by Plaintiff members to capitalize Manor Glenn, and then engaging in the wrongful acts enumerated above for their own personal profit and gain," Defendants acting in concert accepted the benefit conferred, and squandered Plaintiffs' investment. Therefore, it would be unfair under the circumstances for the Defendants to keep the benefit. (ECF No. 40, ¶ 174).
Once again, Plaintiffs provide no factual allegations and rely on reincorporating the first seventy one paragraphs of their complaint. Perhaps the most relevant paragraph, in the seventy- one paragraphs Plаintiffs incorporated, is paragraph sixty-four, which alleges there was a "willful diversion of corporate assists to the personal projects of its managers" and that "the unlawful acts engaged in by Manor Glenn's directors, from which they derived improper personal benefit, are in violation of the good faith requirement of § 605.04901." (Id., ¶ 64). Paragraph sixty-four suffers from the same defect as most
Moreover, while plaintiffs are allowed to plead a breach of contract claim and, in the alternative, an unjust enrichment claim, that is not what Plaintiffs have done here. Count XIV does not say that it is pled in the alternative and it is based on the same facts as Plaintiffs breach of contract claim. See Coleman v. CubeSmart,
C. Shotgun Pleading
Finally, this Court notes that Plaintiffs' SAC is a shotgun complaint. Shotgun pleadings undermine the basic purpose of the Rules of Federal Procedure. Gilroy v. City of Fort Pierce, No. 16-cv-14521,
Though the groupings cannot be too finely drawn, we have identified four rough types or categories of shotgun pleadings. The mоst common type - by a long shot - is a complaint containing multiple counts where each count adopts the allegations of all preceding counts, causing each successive count to carry all that came before and the last count to be a combination of the entire complaint. The next most common type, at least as far as our published opinions on the subject reflect, is a complaint that does not commit the mortal sin of re-alleging all preceding counts but is guilty of the venial sin of being replete with conclusory, vague, and immaterial facts not obviously connected to any particular cause of action. The third type of shotgun pleading is one that commits the sin of not separating into a different count each cause of action or claim for relief. Fourth, and finally, there is the relatively rare sin of asserting multiple claims against multiple defendants without specifying which of the defendants are responsible for which acts or omissions, or which of the defendants the claim is brought against. The unifying characteristic of all types of shotgun pleadings is that they fail to one degree or another, and in one way or another, to give the defendants adequate notice of the claims against them and the grounds upon which each claim rests.
Weiland v. Palm Beach County Sheriff's Office ,
Although Plaintiffs' SAC does not fit neatly into one of the four categories outlined above, it enjoys a combination of the charaсteristics condemned by the Eleventh Circuit. First, in every count Plaintiffs re-allege and incorporate paragraphs 1-71. Paragraphs 1-55 pertain primarily to jurisdiction and should not be incorporated into any of the counts. Paragraphs 56-71 labeled "Background Facts" are, for the most part, conclusory, vague, and not material to every count they are incorporated into-the second evil identified above. Further, like in the fourth category above, Plaintiffs assert multiple claims against the Defendants without identifying which of the defendants are responsible for which act or omission.
III. CONCLUSION
For the foregoing reasons, it is hereby ORDERED AND ADJUDGED that
1. Defendants Motion to Dismiss Plaintiffs' Second Amended Complaint [ECF No. 48] is GRANTED ;
2. Plaintiffs' Second Amended Complaint for Damages and Derivative Complaint [ECF No. 40] is DISMISSED WITHOUT PREJUDICE AS TO ALL DEFENDANTS .
3. This action is CLOSED , and all pending motions are DENIED AS MOOT .
DONE AND ORDERED in Chambers at Miami, Florida, this 29th day of September, 2018.
Notes
Plaintiffs' Amended Complaint was dismissed by this Court because Plaintiffs did not sufficiently plead the domicile of their members. This Court noted that "while not addressed in Defendants' Motion to Dismiss, upon review, the Court also finds that Plaintiffs' jurisdictional allegations as to the individual Defendants are also deficient." (ECF No. 39, p. 3). Even when spoon-fed the argument, Defendants' Motion to Dismiss Plaintiffs' Second Amended Complaint fails to argue that personal jurisdiction as to the individual defendants was insufficiently pled. Instead, Defendants make the failed argument of lack of subject matter jurisdiction. Given that Defendants had the opportunity to make the proper argument and that personal jurisdiction is a disfavored defense that is waived if not raised, see Fed. R. Civ. Pro. 12(h)(1), this Court will find that personal jurisdiction exists and proceed to evaluate the merits of the claims.
Neither party makes a FRCP 23.1 argument. While under FRCP 23.1 plaintiffs are required to plead with particularity, what is sufficient to meet that higher standard is dictated by the law of the state of incorporation.