JJR, LLC v. Turner
| Decision Date | 30 June 2016 |
| Docket Number | No. 1–14–3051.,1–14–3051. |
| Citation | 405 Ill.Dec. 527,58 N.E.3d 788 |
| Parties | JJR, LLC; Blair Fredrich Ira and Blair Friedrich as owner-beneficiary, Daniel C. Idzal, Jaimie Kline, Anne K. Morningstar 2006 Revocable Trust, Leslie Morningstar Irrevocable Trust USAD 12–11–98, Madison R. Morningstar Revocable Trust DTD 118–90, Barbara Kline Herman, John Morningstar 5–21–75 Trust, Molly Gerbaz 5–21–75 Trust, Pemaquid Point Investment Company, LLC, Special People In Need, The Schweppe Foundation, Gary H. Kline, Gary H. Kline Ira Rollover and Gary H. Kline as owner-beneficiary, Joseph R. and Martha M. Membrino, Russ M. Herman, Andrew E. Kline Sep Ira and Andrew E. Kline as owner-beneficiary, Theresa L. Kline Ira and Theresa L. Kline as owner-beneficiary, Negar Alimamaghani, Massad & Massad Investments, Ltd., Thomas E. Callahan, Frank W. Brazitas, David B. Scott, Peter Craig Wood, R.H. Strickler, Duncan W. Campbell, Hopkins Investment Limited Partnership, The Chase Foundation of Virginia, DS & S Chase, LLC, The Stuart F. Chase 2001 Revocable Trust, The D. Sumner Chase, III 2001 Irrevocable Trust, Stuart F. Chase, James L. Jessup, Jr., Plaintiffs–Appellants, v. Willliam J. TURNER, Signature Capital LLC, Signature Capital Securities LLC, William G. Fraine, Stephen A. Cone, Jon Guyatt and Hugh E. Sawyer, Defendants–Appellees. |
| Court | United States Appellate Court of Illinois |
Elizabeth Hoskins Dow and Kimberly A. Fladhammer, both of Bailey & Glasser, LLP, of Joliet, and James R. Swanson and Alysson L. Mills, both of Fishman Haygood Phelps Walmsley Willis & Swanson, LLP, of New Orleans, Louisiana, for appellants.
Michael I. Leonard and Ethan E. White, both of Leonard Law Offices, Inc., of Chicago, for appellees.
delivered the judgment of the court, with opinion.
¶ 1 This case arises from a dispute between plaintiffs, JJR, LLC, et al., and defendants William J. Turner, et al., which involved defendants' alleged inducement of plaintiffs to invest in Eggs Overnight, Inc. (Eggs), a start-up company, based on allegedly false statements and misrepresentations. Plaintiffs collectively invested $4.61 million in Eggs and claimed $7,989,595.98 in damages. Signature Capital Securities, LLC, and Signature LLC were defaulted by the court and a judgment was entered against them for $7,989,595.98. A bench trial resulted in a finding in favor of Turner, the remaining defendant. Plaintiffs appeal contending that: (1) the circuit court failed to address their claim alleging violation of section 12(H) of the Illinois Securities Law of 1953
(West 2010)); (2) reliance is not an element of a section 12(H) claim; (3) with respect to their subsection (F) and subsection (G) claims, reliance is determined at the time of irrevocable investment; (4) the circuit court misassessed the testimony regarding reliance; and (5) neither boilerplate risk disclosures nor the roll-out schedule cured the executive summary's numerous, specific, and emphatic misrepresentations. For the reasons that follow, we affirm.
¶ 3 On December 29, 2010, plaintiffs filed a 10 count complaint against defendants alleging, inter alia, that defendants violated sections 12(F), (G), and (H) of the Illinois Securities Law (815 ILCS 5/12(F), (G), (H)
(West 2010)), committed common-law fraud, and committed negligent misrepresentation. The case proceeded to a bench trial. At trial, Turner testified that he was a principal in defendant Signature Capital, a venture capital firm, and in Signature Capital, LLC (collectively, Signature). As part of his duties in Signature, Turner was the exclusive placement agent to find investors to purchase $25 million of preferred stock offerings for Eggs. The initial offering took place between December 2007 and April 2008 and was referred to as the “Series A” offering or the “bridge financing period.” The investments during this period were actually bridge loans made to Eggs through convertible promissory notes. However, at Eggs' election, these convertible promissory notes would automatically be converted into stock. Investors did not have the option to cash out their loans. When the notes were converted, those people who had invested during the bridge financing period would also have the opportunity to purchase additional stock at a 20% discounted rate. The promissory notes expressly stated that the securities that would be issuable when the note was converted would not be registered under state or federal law. The majority of plaintiffs invested during this initial period.
¶ 4 During the bridge financing period, the only official written document that was available was the executive summary, which was drafted by the Eggs management team.1 The executive summary is a 46–page document that gives an overview of the Eggs business plan. It describes its service of using reusable and “trackable” shipping containers and its business strategy of appealing to companies that ship high value or damaged goods. The executive summary included, among other things, diagrams of the Eggs shipping containers and a chart detailing the multi-phase roll-out schedule. The chart indicates that the “Smart Shell” tags with the Global Positioning System (GPS) and Radio Frequency Identification (RFID) technology would be available sometime between January and June 2009.
¶ 5 Plaintiffs allege that several statements in the executive summary were false or misleading. As many of the allegedly false statements are similar and repetitive, the following are examples excerpted from the executive summary:
¶ 6 Notably, the first page of the executive summary included cautionary language that stated:
¶ 7 Additionally, during the bridge financing period, the Eggs team, along with Turner, traveled to several cities to solicit investors at in-person meetings. Plaintiffs similarly allege that oral statements made at the meetings and statements in the PowerPoint presentation given at the meetings, were false or misleading. The same PowerPoint presentation was also attached to some personal e-mails Turner sent to potential investors. Examples of the PowerPoint slides with allegedly false representations are detailed below.
¶ 8 Additionally, the PowerPoint presentation contained a written disclosure, which stated:
¶ 9 Plaintiffs further contend that Turner sent e-mails to potential investors that contained allegedly false and misleading information. These e-mails were sent between December 2007 and September 2008. Plaintiffs allege numerous false representations in the e-mails. Only relevant excerpts from various e-mails are reproduced below.
To continue reading
Request your trial
-
Meyer v. Krista Ward & Calhoun Asset Mgmt. LLC
...(preponderance of the evidence standard in federal securities action); JJR, LLC v. Turner, 2016 IL App (1st) 143051, ¶ 30, 405 Ill. Dec. 527, 536, 58 N.E.3d 788, 797 (Illinois courts look to the corresponding provisions of the federal Securities Act to interpret the Illinois Securities Law)......