Barker v. Gottlieb

• Decision Date: 28 May 2014
• Docket Number: Civil No. 13–00236 LEK–BMK.
• Citation: 23 F.Supp.3d 1152
• Parties: Charles BARKER III, Plaintiff, v. Joshua L. GOTTLIEB, Jonathan Dubowsky, Donald Borneman, Charles Hall, Scott Harris, The Value Exchange Advisors, also known as/doing business as TVXA, Gemco–Pacific Energy LLC, aka GPE and Roes 1–25, Defendants.
• Court: U.S. District Court — District of Hawaii

23 F.Supp.3d 1152

Charles BARKER III, Plaintiff

v.Joshua L. GOTTLIEB, Jonathan Dubowsky, Donald Borneman, Charles Hall, Scott Harris, The Value Exchange Advisors, also known as/doing business as TVXA, Gemco–Pacific Energy LLC, aka GPE and Roes 1–25, Defendants.

Civil No. 13–00236 LEK–BMK.

United States District Court, D. Hawai‘i.

Signed May 28, 2014.

Charles Barker, III, Hilo, HI, pro se.

Andrew George Odell, William K. Shultz, Cades Schutte, Honolulu, HI, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS SECOND AMENDED COMPLAINT

LESLIE E. KOBAYASHI, District Judge.

On January 23, 2014, Defendants Joshua L. Gottlieb, Jonathan Dubowsky, Donald Borneman, Charles Hall, Scott Harris, the Value Exchange Advisors, doing business as TVXA (“TVXA”), and GEMCo–Pacific Energy LLC, also known as GPE (“GPE,” all collectively “Defendants”) filed their Motion to Dismiss Second Amended Complaint (“Motion”). [Dkt. no. 59.] Pro se Plaintiff Charles Barker III (“Plaintiff”) filed two different documents titled “Plaintiff's Opposition to Defendants Motion for Summary Judgment” on February 6, 2014 and February 10, 2014. [Dkt. nos. 62, 63.] Defendants filed their reply memorandum (“Reply”) on February 14, 2014. [Dkt. no. 66.] Plaintiff thereafter filed a document titled “Opposition to Defendants Motion to Dismiss” (“Memorandum in Opposition”) on February 21, 2013.¹ Plaintiff filed a supplemental memorandum pursuant to this Court's April 25, 2014 entering order (“Supplemental Memorandum”).² [Dkt. nos. 84(EO), 85 (Supplemental Memorandum).] The Court finds this matter suitable for disposition without a hearing pursuant to Rule LR7.2(d) of the Local Rules of Practice of the United States District Court for the District of Hawai'i (“Local Rules”). After careful consideration of the Motion, supporting and opposing memoranda, and the relevant legal authority, Defendants' Motion is HEREBY GRANTED IN PART AND DENIED IN PART for the reasons set forth below. Specifically, Amended Counts I (related to fraud as to future availability of financing), II, III, IV, V, VIII, IX, X, XI, XII, and XIII are DISMISSED WITH PREJUDICE, and Amended Counts I (related to fraudulent alterations of agreements), VI, VII, XIV, and XV are DISMISSED WITHOUT PREJUDICE.

BACKGROUND

The relevant factual and procedural background of this case is set forth in this Court's October 16, 2013 Order Granting in Part and Denying in Part Defendants' Motion for Judgment on the Pleadings (“10/16/13 Order”). [Dkt. no. 44.³ ]

Plaintiff filed his original Complaint on May 15, 2013. The Complaint alleged the following claims: fraud (“Count I”); “breach of fiduciary responsibility” (“Count II”); professional misconduct (“Count III”); violations of United States securities laws (“Count IV”); misrepresentation (“Count V”); malfeasance (“Count VI”); misappropriation of corporate funds (“Count VII”); breach of contract; (“Count VIII”); anticipatory breach of contract (“Count IX”); theft of real property purchase contract (“Count X”); theft of intellectual property (“Count XI”); negligence (“Count XII”); tortious interference (“Count XIII”); and violation of interstate commerce laws (“Count XIV”).

The 10/16/13 Order dismissed all of Plaintiff's claims without prejudice. 978 F.Supp.2d at 1176–77. As to Plaintiff's federal claims, this Court ruled as follows: Count IV, titled “VIOLATIONS OF SECURITIES LAWS OF THE UNITED STATES,” failed to state a claim because the Complaint did not allege that Gottlieb, Borneman, Hall, TVXA and GPE offered and/or sold securities; and Count XIV did not satisfy the requirements of Fed.R.Civ.P. 8(a)(2) because it did not identify the specific laws Defendants allegedly violated, nor did it state how Plaintiff was harmed by the alleged violations. Id. at 1173–74.

The 10/16/13 Order noted that the remainder of the claims in the Complaint appeared to be state law claims. Id. This Court noted that those claims allegedly arose out of three agreements, one between TVXA and Cogentech–Pacific, LLC (“CPL”), one between GPE and Haleakala Holdings LLC (“HCL”), and one between Hamakua Energy Partners (“HEP”), HCL, and CPL (collectively “the Agreements”).⁴ This Court noted that, although the Complaint alleged that Plaintiff was a principal of HCL and CPL (collectively “the LLCs”), Plaintiff, individually, was not a party to any of the Agreements. Id. at 1174–75. This Court concluded that “[i]t is the LLCs themselves that have standing to pursue claims arising from the Agreements.” Id. (citation omitted). This Court therefore concluded that Plaintiff's state law claims

fail[ed] to state plausible claims for relief because: 1) to the extent that Plaintiff is trying to prosecute claims which belong to the LLCs, Plaintiff lacks standing to do so; and 2) to the extent that Plaintiff is trying to prosecute claims which belong to him individually, the claims are not sufficiently pled.

Id. at 1176 (footnote omitted).

The 10/16/13 Order cautioned Plaintiff that, if his amended complaint failed to address the deficiencies this Court identified in the order, this Court could dismiss his claims with prejudice.

Plaintiff timely filed his Second Amended Complaint on January 16, 2014.⁵ [Dkt. no. 53.] The first eleven counts of the Second Amended Complaint are identical to Counts I through XI. This Court will refer to those claims as “Amended Count I” through “Amended Count XI.” The Second Amended Complaint includes a new claim titled “UNCOMPENSATED THEFT OF WORK PRODUCT” (“Amended Count XII”). Count XIII of the Second Amended Complaint (“Amended Count XIII”) alleges the negligence claim from Count XII; Count XIV of the Second Amended Complaint (“Amended Count XIV”) alleges the tortious interference claim from Count XIII; and Count XV of the Second Amended Complaint (“Amended Count XV”) alleges the interstate commerce claim from Count XIV.

Defendants now ask this Court to dismiss Plaintiff's claims in the Second Amended Complaint.

DISCUSSION

I. Plaintiff's Two Filings Titled “Opposition to Defendants Motion for Summary Judgment”

As a preliminary matter, this Court notes that it will not consider either Plaintiff's February 6, 2014 filing or his February 10, 2014 filing. These filings appear to arise from Plaintiff's mistaken belief that Defendants are seeking summary judgment. Further, Plaintiff filed his “Opposition to Defendants Motion to Dismiss” on February 21, 2014. This Court construes that document as Plaintiff's Memorandum in Opposition to the instant Motion. Because Plaintiff filed his Memorandum in Opposition after Defendants filed their Reply, the Reply only addresses the two filings titled “Opposition to Defendants Motion for Summary Judgment.” This Court, however, finds that it is unnecessary for Defendants to respond to Plaintiff's Memorandum in Opposition.

II. Federal Law Claims

As in the original Complaint, Plaintiff's Second Amended Complaint asserts both: 1) federal question jurisdiction over claims arising under federal law, with supplemental jurisdiction over claims arising under state law; and 2) diversity jurisdiction. [Second Amended Complaint at JURISDICTION AND VENUE ¶¶ 1–4.⁶ ] Plaintiff attempts to allege federal claims in Amended Count IV and Amended Count XV. In the instant Motion, Defendants argue that Plaintiff failed to cure the defects in his federal claims, and Defendants urge this Court to dismiss Plaintiff's federal claims with prejudice. [Mem. in Supp. of Motion at 14–15.]

A. Amended Count IV

Amended Count IV appears to allege violations of 17 C.F.R. § 230.500 et seq., Regulation D, the Rules Governing the Limited Offer and Sale of Securities Without Registration Under the Securities Act of 1933 (“Regulation D”). Amended Count IV alleges that Defendants “have disseminated information to, and solicited capital investments from, prospective investors about the various projects which were conceived by Plaintiff Barker, without benefit of a Prospectus and Offering Circular.” [Second Amended Complaint at ¶ 126.]

Regulation D does not contain requirements regarding a prospectus and an offering circular for the offer and sale of securities under Regulation D. This Court will liberally construe Plaintiff's Amended Count IV as alleging violations of the Securities Act of 1933 (“the Securities Act”), instead of alleging violations of Regulation D. See Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (per curiam) (“A document filed pro se is to be liberally construed.” (citation and internal quotation marks omitted)). The Securities Act does not contain a provision requiring the issuance of an offering circular with the offer and/or sale of securities. Thus, the alleged offer and/or sale of securities without an offering circular is not a violation of the Securities Act.

The Securities Act does prohibit the offer and/or sale of securities without a prospectus. See 15 U.S.C. § 77b(a)(10) (defining the term “prospectus”); 15 U.S.C. § 77e(b) (titled “Necessity of prospectus meeting requirements of section 77j of this title”).⁷ 15 U.S.C. § 77l (a) states, in pertinent part:

Any person who—

(1) offers or sells a security in violation of section 77e of this title ...

....

shall be liable, subject to subsection (b) of this section, to the person purchasing such security from him, who may sue either at law or in equity in any court of competent jurisdiction, to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if he no longer owns the security.

(Emphases added.) Even assuming, arguendo, that Plaintiff can prove that Defendants offered and/or sold securities without a required prospectus, Plaintiff has not alleged that Defendants offered and/or sold the securities in question to him. Defendants therefore are not liable to Plaintiff for the alleged violation of the Securities Act.

Amended Count IV fails to state a...