Grippo v. Perazzo
| Decision Date | 22 January 2004 |
| Docket Number | No. 02-11319.,02-11319. |
| Citation | 357 F.3d 1218 |
| Parties | Alan GRIPPO, Plaintiff-Appellant, v. John E. PERAZZO, T.S.C. Financial Corp., et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
William Randolph Klein, Sarasota, FL, for Plaintiff-Appellant.
Mara B. Sommers, Bales & Sommers, Miami, FL, for Defendants-Appellees.
Appeal from the United States District Court for the Southern District of Florida.
Before EDMONDSON, Chief Judge, DUBINA, Circuit Judge, and HODGES*, District Judge.
Alan Grippo appeals the district court's dismissal of his federal securities claims, state securities claims, and other related state law claims against John Perazzo, T.S.C. Financial Corp., P.F.C. Ltd., and P.F.C. Financial Corp (the "defendants"). The district court dismissed Grippo's complaint for failure to allege fraud in connection with the purchase or sale of a security, for failure to plead fraud with particularity under Federal Rule of Civil Procedure 9(b) and the Private Securities Litigation Reform Act of 1995 ("PSLRA"), 15 U.S.C. § 78u-4(b), and as barred by the statute of limitations. For the reasons that follow, we affirm in part, reverse in part, and remand.
Perazzo first approached Grippo in New York about investing money with the defendants in foreign currency exchange markets and debt securities. Grippo alleges that Perazzo represented that the defendants could guarantee profits in foreign currency trading because they were heavily involved, knowledgeable, and experienced in foreign currency trading and because they were privy to beneficial multi-governmental information. Grippo further alleges that, throughout 1994 and early 1995, Perazzo repeatedly told him that an investment with the defendants would return a high profit with no financial risk.
Based on Perazzo's representations, Grippo began investing with the defendants in February 1995. Grippo invested approximately $1.4 million with the defendants from February 1995 through February 1999, making a large percentage of those investments in 1997 and 1998. According to Grippo, the funds that he invested were sent in the form of personal or bank checks and deposited in the three corporate defendants' accounts held at the Bank of New York. Perazzo purportedly told Grippo that the defendants could not provide specific information about the securities in which Grippo's money was invested at any particular time because of a need to shift the investments to attain the highest rate of return. Grippo alleges that Perazzo then traded the securities in his account without first obtaining his permission or providing him with confirmation of the purchase or sale of securities.
After moving to Florida in October 1995, Grippo states that he kept in daily contact with Perazzo, and that Perazzo advised Grippo to continue to invest with the defendants in various types of investments. In the fall of 1997, Perazzo allegedly told Grippo that he ought to invest with the defendants in a food-for-oil barter deal with Iraq involving T.S.C. Financial Corp., Kraft Foods, Inc., and the Iraqi Embassy in Canada. Grippo claims, however, that Kraft Foods, Inc. and T.S.C. Financial Corp. never consummated any such agreement.
Grippo alleges that in August 1998, Perazzo told him that the defendants could make better returns by investing in stocks, particularly the stock of a medical supply company that supposedly had a new break-through product. Grippo claims that "[f]rom September 1998 until July 2000..., PERAZZO falsely represented to GRIPPO that by making additional investments with DEFENDANTS in stocks, especially the medical supply company's stock, that GRIPPO's investments `would grow to well in excess of $10 million.'" [2d Am. Compl. ¶ 27]. Grippo alleges that he made additional investments from late 1998 through early 1999, totaling $239,000.
Grippo further claims that he made numerous requests for an accounting of his investments in stock. Grippo received a statement of his investments in March 1998, which showed a total investment amount of $1,087,992, but failed to indicate any security in which the money was invested. In November 1998, Perazzo provided Grippo with a statement from a Salomon Smith Barney account purporting to hold $3,077,942.37 of Grippo's invested funds. Similarly, this statement failed to delineate any particular securities in which the money was invested, indicating only that the monies were invested in "stock."
Grippo states that from late 1999 to the filing of the initial complaint in July 2000, Perazzo continually advised him that the investments held with the defendants were worth in excess of $10 million. In the fall of 1999, Perazzo allegedly represented to Grippo that the defendants had invested in a Nigerian oil deal, and that he would repay Grippo's investments once the deal closed. Despite repeated requests, Grippo never received any other accounting of his investment funds. Furthermore, Grippo claims that from late 1999 to early 2000, he made demands for the return of his money, to which Perazzo responded that Grippo's investments were safe, and that payment would be forthcoming once the defendants could liquidate the securities and resolve certain foreign currency exchange issues. Grippo claims that he received only nominal sums between 1995 and 2000, including a check dated July 19, 2000, for $10,000.
In December 1999, Grippo began investigating the safety of his investments. He ultimately concluded that the defendants did not intend to return his money.
On July 18, 2000, Grippo filed his initial complaint in the district court for the Southern District of Florida, alleging both federal and state securities claims and related state law causes of action. On December 22, 2000, the district court dismissed the complaint with leave to amend, finding that Grippo failed to plead sufficient facts demonstrating that he timely filed his claims. On January 25, 2001, Grippo filed a first amended complaint, adding defendants T.S.C. Financial Corp., P.F.C. Ltd., and P.F.C. Financial Corp. On July 7, 2001, the district court dismissed the amended complaint, again granting leave to amend, after finding that the amended complaint failed to identify the specific dates of his investments, Perazzo's specific alleged misrepresentations, or why the statements were misleading.
On August 6, 2001, Grippo filed a second amended complaint against Perazzo, T.S.C. Financial Corp., P.F.C. Ltd., and P.F.C. Financial Corp.1 The district court again dismissed the complaint, finding that Grippo failed to allege fraud in connection with the purchase or sale of a security because Grippo was unable to link his payment of monies to Perazzo with the purchase of an identifiable security, or prove that his funds were ever actually invested in anything. Alternatively, the district court dismissed with prejudice Grippo's federal securities claims as barred by the statute of limitations,2 and dismissed Grippo's securities fraud claims for failure to plead fraud with specificity. The district court declined to retain jurisdiction over the remaining state law claims and dismissed those claims without prejudice. Grippo then perfected this appeal.
1. Whether the district court erred in dismissing the federal and state securities claims for failure to allege the purchase of a security.
2. Whether the district court erred in dismissing the federal securities claims as barred by the statute of limitations.
3. Whether the district court erred in dismissing the federal and state securities claims for failure to meet the heightened pleading requirements for fraud as required under Federal Rule of Civil Procedure 9(b) and the PSLRA.
We review the district court's judgment of dismissal de novo and will uphold a dismissal only if it appears beyond doubt that the allegations in the complaint, when viewed in the light most favorable to the plaintiff, do not state a claim upon which relief can be granted. Theoharous v. Fong, 256 F.3d 1219, 1224 (11th Cir.2001).
Section 517.301 of the Florida Securities and Investor Protection Act makes it unlawful for any person "in connection with the offer, sale, or purchase of any investment or security":
1. To employ any device, scheme, or artifice to defraud;
2. To obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or
3. To engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon a person.
Fla. Stat. ch. 571.301(1).
In discussing Grippo's federal securities claims, the district court found that Grippo could not plead securities claims because he failed to allege and could not prove that any securities were actually purchased with the funds that he invested with Perazzo. Thus, the district court found that Grippo failed to establish that any alleged fraud was "in connection with the purchase or sale of any security."
The district court failed to discuss the elements of Grippo's state securities claims, merely stating that Grippo had to plead fraud in connection with the purchase or sale of a security. Assuming that such a requirement is an element of all of Grippo's state securities claims, we conclude that the district court erred in finding that Grippo failed to properly allege state securities claims on the ground that Grippo had not alleged that he actually purchased any securities.
The elements of a cause of action under § 517.301 are identical to those under the Federal Rule 10b-5, except that the scienter requirement under Florida law is satisfied by showing of mere negligence. Gochnauer v. A.G. Edwards & Sons, Inc., ...
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