Gordon v. Terry
| Decision Date | 30 August 1982 |
| Docket Number | Nos. 80-5797,s. 80-5797 |
| Citation | 684 F.2d 736 |
| Parties | Fed. Sec. L. Rep. P 98,787 Edwin F. GORDON, Plaintiff-Appellant, v. George A. TERRY, Sr., et al., Defendants-Appellees. Edwin F. GORDON, Plaintiff-Appellant, v. M. M. OVERSTREET, et al., Defendants-Appellees. Edwin F. GORDON, Plaintiff-Appellant, v. E. G. GREEN, et al., Defendants-Appellees. Edwin F. GORDON, Plaintiff-Appellant, v. HOBE PROPERTIES, INC., et al., Defendants-Appellees. Edwin F. GORDON, Plaintiff-Appellant, v. William Hershey HAMM, III, et al., Defendants-Appellees. to 80-5801. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Julian D. Halliburton, Daniel L. MacIntyre, Atlanta, Ga., John W. Stokes, Decatur, Ga., for plaintiff-appellant.
Baker & Hostetler, G. Thomas Ball, Orlando, Fla., for G. A. Terry, Sr., Mary Terry, Netsy B. Terry and George Terry, Jr.
Bush, Ross, Gardner, Warren & Rudy, John F. Rudy, Tampa, Fla., for First Nat. Bank in Palm Beach.
Peter D. Webster, Jacksonville, Fla., William A. Gillen, John McQuigg, Tampa, Fla., for Gustave T. Broberg, Jr.
Paul B. Erickson, Michael J. Pucillo, Palm Beach, Fla., for T. R. Anderson and Robert D. Lacey.
Jones & Foster, P. A., Sidney A. Stubbs, Jr., West Palm Beach, Fla., for E. G. Green and Heminway Co.
Smathers & Thompson, Earl D. Waldin, Jr., Miami, Fla., for Alice M. Rhoades, Harold H. Heye, Pierre V. Heftler, Virgil Sherrill, Samuel R. Sutphin, William L. Rudkin, George Coleman, Henry A. Rudkin, Jr., and Dudley V. Sutphin.
R. Lee Bennett, Orlando, Fla., for Estate of M. M. Overstreet, Jeanette Overstreet, Jennings L. Overstreet and Joann Overstreet.
Appeals from the United States District Court for the Southern District of Florida.
Before FAY, VANCE and ARNOLD *, Circuit Judges.
Plaintiff Edwin F. Gordon allegedly invested approximately four million dollars in five real estate syndications. He is seeking rescission and damages under various sections of the federal securities acts. The District Court found as a matter of law that Gordon had not purchased "securities interests" and granted summary judgment in favor of the defendants. This appeal followed. We reverse summary judgment as to Green and affirm as to the remaining defendants.
This is the second time these consolidated cases have been presented on appeal. The first appeal was from a dismissal for lack of jurisdiction under Rule 12(b), Federal Rules of Civil Procedure. In view of the state of the pleadings which were described as "verbose, confusing, scandalous, and repetitious," 1 the panel declined to reach the merits, finding instead that the pleadings were not "short and plain" and did not satisfy the requirements of Rule 8, Federal Rules of Civil Procedure. The District Court's judgment was vacated and the case was remanded for dismissal of the complaints "without prejudice to the right to promptly file a complaint in compliance with Rule 8." Gordon v. Green, 602 F.2d 743, 747 (5th Cir. 1979) (footnote omitted).
On remand, the first set of amended complaints were dismissed by the District Court on Rule 8 grounds. The plaintiff then filed second amended complaints and third amended complaints. The District Court ruled that the third amended complaints satisfied Rule 8. The third amended complaints allege that the defendants violated various provisions of the federal securities laws 2 and also set forth several state law claims.
On the basis of the allegations, plaintiff's affidavits, and the written agreements representing each real estate syndication, the defendants moved for summary judgment. The day before the District Court's scheduled summary judgment hearing, the plaintiff submitted a set of fourth amended complaints. Those amendments allege violations of the Racketeer Influenced and Corrupt Organization Act (RICO), 18 U.S.C. §§ 1961 et seq. (1976). Following the hearing, the District Court ruled that federal jurisdiction was lacking and entered an order granting summary judgment in favor of the defendants. Leave to amend the complaints to allege RICO violations was denied and the pendent state claims were dismissed.
Two issues are presented on appeal: whether the denial of leave to amend the complaints was an abuse of discretion and whether the real estate syndications are securities.
Amendments to pleadings are governed by Rule 15(a), Federal Rules of Civil Procedure. Under the rule, a plaintiff may amend once, without leave of court, before responsive pleadings are served. Any subsequent pleadings must be with leave of the court, but leave to amend "shall be freely given when justice so requires." Fed.R.Civ.P. 15(a).
Plaintiff Gordon originally filed suit in April, 1976. Since the original filing, the plaintiff has filed numerous complaints and amended complaints. At no time, prior to his last attempt to amend the complaints, did the plaintiff assert a cause of action based on RICO. The plaintiff had ample opportunity to assert these claims, yet he waited until the day before the District Court's summary judgment hearing to do so. Counsel for the plaintiff suggested in his memorandum to the trial court that the reason for filing the fourth amended complaints was to avoid decision on the securities issue.
We conclude that the plaintiff unreasonably and unduly delayed in seeking amendment, exhibited bad faith, dilatory motives and has repeatedly failed to cure deficiencies in his pleadings despite numerous opportunities. Allowing amendment at this late date would be prejudicial to the defendants and would not serve the ends of justice. See Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962). The trial court's denial of leave to amend was not an abuse of discretion. We affirm.
We stress at the outset of our analysis, the procedural posture of this case. In reviewing a grant of summary judgment, our inquiry must be whether the undisputed facts, considered in the light most favorable to the opposing party, establish that the moving party is entitled to judgment as a matter of law. Adickes v. S. H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); American Telephone & Telegraph Co. v. Delta Communications Corporation, 590 F.2d 100, 101-02 (5th Cir.), cert. denied, 444 U.S. 926, 100 S.Ct. 265, 62 L.Ed.2d 182 (1979). Those facts, gleaned from the pleadings, documents, and affidavits filed in this case, are as follows.
Gordon first met E. G. Green, in October, 1970. Defendant Green told Gordon that he was putting together several real estate syndicates which would be highly profitable to investors. Green explained that because of his contacts, his unique expertise and his experience with the central Florida real estate market, he was able to purchase large tracts of undeveloped land at bargain prices and to resell the land within two years for substantial profits to a pool of developers. Green explained that the First National Bank of Palm Beach (the Bank) would act as trustee, that attorney Gustave Broberg would prepare the trust documents, and that Broberg and the Bank would assist in the management and resale of the properties. As a result of those representations, Gordon was persuaded to invest in five real estate syndications. Four of the syndications were governed by trust agreements and the fifth was governed by a limited partnership agreement.
Under the trust agreements, a tract of land is held in the trustee's name (the Bank) and each beneficiary's interest is proportionate to the amount contributed by the beneficiary. The agreements indicate that their purpose is to simplify later resale of the property and disposition of the property is controlled by majority vote of the beneficiaries. Under the limited partnership agreement, George Barley, Jr., is designated general partner and Gordon is listed as one of the limited partners. The agreement indicates that its purpose is investment in real property. Disposition of the property is controlled by majority consent of the partners.
All five agreements give the investors substantial control over the property. Gordon, however, claims that he did not read the agreements and did not know their terms when he made his initial investments. Gordon states that Green made it a condition of investment that none of the investors meet each other, that they were to deal only with Green, Broberg, and the Bank, and that they place absolute faith in Green.
Gordon argues that when he invested in the real estate syndications he entered into investment contracts and thus "securities" under the federal securities laws. 3 SEC v. W. J. Howey Co. defines an investment contract as "a contract, transaction or scheme whereby a person (1) invests his money (2) in a common enterprise and (3) is led to expect profits solely from the efforts of the promoter or a third party." 328 U.S. 293, 298-99, 66 S.Ct. 1100, 1102-1103, 90 L.Ed. 1244 (1946). The District Court determined that Howey's third element was not satisfied because under the written agreements the investors, by majority vote, retained control over all decisions which would affect the success of the ventures. 4 On appeal, Gordon argues that Williamson v. Tucker, 645 F.2d 404 (5th Cir.), cert. denied, --- U.S. ----, 102 S.Ct. 396, 70 L.Ed.2d 212 (1981), decided after the District Court entered its order, requires our reversal.
Under the third criteria of the Howey definition, the focus is on the dependency of the investor on the entrepreneurial or managerial skills of a promoter or other party. See SEC v. Koscot Interplanetary, Inc., 497 F.2d 473, 483 (5th Cir. 1974); SEC v. Glenn W. Turner Enterprises, Inc., 474 F.2d 476, 482 (9th Cir.), cert. denied, 414 U.S. 821, 94 S.Ct. 117, 38 L.Ed.2d 53 (1973). An investor who has the ability to control the profitability of his investment, either by his own efforts or by...
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