Medalie v. Fsc Securities Corp.

• Decision Date: 01 February 2000
• Docket Number: No. 98-3183-CIV.,98-3183-CIV.
• Citation: 87 F.Supp.2d 1295
• Court: U.S. District Court — Southern District of Florida
• Parties: Charles D. MEDALIE, and Janet Medalie, Plaintiffs, v. FSC SECURITIES CORPORATION, Defendant.

87 F.Supp.2d 1295

Charles D. MEDALIE, and Janet Medalie, Plaintiffs, v. FSC SECURITIES CORPORATION, Defendant.

No. 98-3183-CIV.

United States District Court, S.D. Florida.

February 1, 2000.

COPYRIGHT MATERIAL OMITTED

Robert B. Miller, Bedzow Korn Brown, Hallendale, FL, for Plaintiffs.

James Kaplan, Wilson Elser Moskowitz, Miami, FL, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS AND GRANTING DEFENDANT'S MOTION FOR A MORE DEFINITE STATEMENT

GOLD, District Judge.

THIS CAUSE is before the court upon defendant FSC Securities Corporation's motion to dismiss (DE # 16-1, 16-2). Plaintiffs Charles D. Medalie and Janet Medalie were solicited from late 1984 until February 1985 by George Bliss, a representative of FSC, to purchase investments in limited partnerships. Bliss visited George Medalie in school, where he worked, and later both plaintiffs at their home. Plaintiffs allege that Bliss represented the investments would be safe, low risk, have a higher rate of return than money markets or certificates of deposit, and that the investments would be suitable for teachers such as the Medalies. Based on Bliss's representations, the Medalies made five limited partnership purchases on February 5, 1985 and two purchases on February 12, 1987. Plaintiffs' total investment amounted to $157,575.00. Plaintiffs allege that after the purchases, neither Bliss nor FSC reported to them the true value or performance of their investments and represented to them that the investments were "fine" and "doing great." Plaintiffs continued to hold these investments "to their financial detriment."

Plaintiffs filed a four count complaint against the defendant alleging violation of § 517.301 of the Florida Securities and Investor Protection Act (Count I), breach of fiduciary duty (Count II), fraud in the inducement (Count III), and breach of contract (Count IV). Plaintiffs' complaint was originally filed in the Circuit Court for the Eleventh Judicial Circuit in and for Miami-Dade County, Florida. The case was timely removed to this court based on the court's diversity jurisdiction. Plaintiffs are citizens and residents of New York and defendant is a Georgia corporation, with its principal place of business in Georgia. The solicitations in this case took place in Waverly, New York. FSC contractually consented to venue, personal jurisdiction, and subject matter jurisdiction in Dade County, Florida. By arguing their motions based on Florida law, the parties have stipulated that Florida law applies in this case.¹ Neither party raised a choice-of-law or conflicts of law problem. Defendant now moves to dismiss all counts, and if count IV for breach of contract, is not dismissed, defendant moves for a more definite statement on count IV.

I. Standard of Review for a Motion to Dismiss under Rule 12(b)(6)

To warrant dismissal of a complaint under Rule 12(b)(6) of the Federal Rules of Civil procedure, it must be "clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Blackston v. Alabama, 30 F.3d 117, 120 (11th Cir.1994) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984)). Determining the propriety of granting a motion to dismiss requires courts to accept all the factual allegations in the complaint as true and to evaluate all inferences derived from those facts in the light most favorable to the plaintiff. See Hunnings v. Texaco, Inc., 29 F.3d 1480, 1483 (11th Cir.1994). The threshold of sufficiency that a complaint must meet to survive a motion to dismiss is exceedingly low. See Ancata v. Prison Health Servs., Inc., 769 F.2d 700, 703 (11th Cir.1985) (citation omitted); Jackam v. Hospital Corp. of America Mideast, Ltd., 800 F.2d 1577, 1579 (11th Cir.1986). "[U]nless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief," the complaint should not be dismissed on grounds that it fails to state a claim upon which relief can be granted. Sea Vessel, Inc. v. Reyes, 23 F.3d 345, 347 (11th Cir.1994) (citation omitted). Nevertheless, to survive a motion to dismiss, a plaintiff must do more than merely "label" his claims. Blumel v. Mylander, 919 F.Supp. 423, 425 (M.D.Fla.1996). Moreover, when on the basis of a dispositive issue of law no construction of the factual allegations will support the cause of action, dismissal of the complaint is appropriate. Marshall County Bd. of Educ. v. Marshall County Gas Dist., 992 F.2d 1171, 1174 (11th Cir.1993).

II. Count I Securities Fraud — Violation of § 517.301, Florida Statutes

Count I of plaintiff's complaint alleges a violation of § 517.301, Florida Statutes. Defendant moves to dismiss based on the argument that Count I is barred by the statute of limitations. The statute of limitations applicable to Chapter 517 is set forth in § 95.11(4)(e), Florida Statutes, which provides:

Actions other than for recovery of real property shall be commenced as follows:

...

4) Within two years. —

...

e) An action founded upon a violation of any provision of chapter 517, with the period running from the time the facts giving rise to the cause of action were discovered or should have been discovered with the exercise of due diligence, but not more than 5 years from the date such violation occurred....

This statute has been held to bar any action for violation of Chapter 517, Florida Statutes, commenced after the expiration of five years from the date of the violation regardless of whether the facts giving rise to the cause of action were known by the plaintiff. In Wilder v. Meyer, 779 F.Supp. 164, 167-68 (S.D.Fla.1991), the court held that fraudulent concealment would not serve to extend the five-year bar provided by the statute of limitations in § 95.11(4)(e) in a § 517.301 action. The Wilder court relied on the Eleventh Circuit's holding in Cook v. Deltona Corp., 753 F.2d 1552, 1562 (11th Cir.1985):

where the statute clearly provides for a tolling period for a fraudulent concealment, and then includes a secondary date which "in no event" can be surmounted, there is good basis for belief that the latter date was intended as an absolute barrier to the filing of suit.

In Cook, the court was interpreting language in the Interstate Land Sales Full Disclosure Act ("the Act"), 15 U.S.C. § 1701, et seq. The pre-1979 § 1711 of the Act, providing the limitations period, contains a similar bifurcated limitations scheme as is found in § 95.11(4)(e). The Cook court read the statute as manifesting a legislative intent to avoid equitable tolling for the secondary limitations period, while retaining the possibility of equitable tolling for the shorter primary limitations period. See id. at 1562.

First, looking a the face of the complaint, plaintiffs allege that they did not discover the fraud committed against them until "mid-1996." Amend. Complaint at ¶¶ 25, 41. The original state court action was filed on December 9, 1998, over two years after "mid-1996." See Defendant's Notice of Removal at 1 and attached State Court Complaint. The question is therefore whether the complaint was filed less than "five years from the date such violation occurred." The answer to that question depends on when the violation is deemed to have occurred. If the violation is deemed to have occurred when the securities were actually purchased, then the complaint was filed beyond the five year limitations period and the claim is barred by § 95.11(4)(e). The Amended Complaint indicates that the securities purchases occurred on February 5, 1985 and on February 12, 1987. These purchases occurred more than 11 years before the complaint in this case was filed. See Amend. Complaint at ¶ 20. On the other hand, plaintiffs argue that the violation should be deemed to be a continuous tort that was fraudulently concealed by the defendant. In this case, plaintiffs argue, the defendant's ongoing fraudulent misrepresentations and violations of fiduciary duties would extend the limitations period beyond the date of the original purchase and place it within the five year limitations period of § 95.11(4)(e). The court is unpersuaded by plaintiffs' argument because ample case law suggests that the five year limit is an absolute bar which cannot be extended though equitable tolling, continuous torts, ongoing misrepresentations, or violations of fiduciary duties.² See Wilder and Cook, supra.

Moreover, the cases show that the cause of action accrues for purposes of the five year limitations period at the time the securities were purchased. See Byrne v. Gulfstream First Bank & Trust Co. of Boca Raton, 528 F.Supp. 692, 695 (S.D.Fla.1981) (determining for purposes of a Section 10(b) and Rule 10b-5 action applying the limitations period in Fla.Stat. § 95.11(4)(e) that the cause of action arose when the transaction transferring the securities at issue to the defendant was completed, and the action was therefore barred, even though the fraud was allegedly discovered within 2 years of the filing of the complaint, because 10 years had passed since the transaction was completed); see also Armbrister v. Roland Int'l Corp., 667 F.Supp. 802, 823 (M.D.Fla.1987) ("The right of action provided arises when a sale is made in violation of the Chapter's [517] provisions. The `violation,' then, that triggers the limitations period [of § 95.11(4)(e)] occurs when the purchaser contracts to buy the security."); Wilder, supra. Accordingly, because the allegedly fraudulent conduct was discovered more than two years after the complaint was filed and because the securities were purchased more than 11 years before the complaint was filed, Count I is barred by the statute of limitations in § 95.11(4)(e) and is therefore dismissed.³

III. Counts II and III—Breach of Fiduciary Duty and Fraud in the Inducement

A. The Economic Loss Rule

Florida's economic loss rule was originally...