Merry v. Prestige Capital Mkts., Ltd.

• Decision Date: 07 May 2013
• Docket Number: Case No. 12–cv–1608 (SRN/JJK).
• Citation: 944 F.Supp.2d 702
• Court: U.S. District Court — District of Minnesota
• Parties: Mark C. MERRY, Plaintiff, v. PRESTIGE CAPITAL MARKETS, LTD., Prestige Capital Traders, LLP, Christopher Wilson, and Wilson, Haglund & Paulsen, PC, Defendants.

944 F.Supp.2d 702

Mark C. MERRY, Plaintiff,

v.PRESTIGE CAPITAL MARKETS, LTD., Prestige Capital Traders, LLP, Christopher Wilson, and Wilson, Haglund & Paulsen, PC, Defendants.

Case No. 12–cv–1608 (SRN/JJK).

United States District Court, D. Minnesota.

May 7, 2013.

Mark Eide, Mark Eide Law Group, Crystal, MN, for Plaintiff.

Dirk O. Julander, Julander Brown & Bollard, Irvine, CA, Timothy P. Brausen, St. Louis Park, MN, for Defendants.

MEMORANDUM OPINION AND ORDER

SUSAN RICHARD NELSON, District Judge.

This matter is before the Court on the Motion to Dismiss Plaintiff's Amended Complaint brought by Defendants Prestige Capital Markets, Ltd. (“Prestige BVI”), Prestige Capital Traders, LLP (“Prestige UK”), Christopher Wilson, and Wilson, Haglund & Paulsen, PC (“WHP”) (collectively, Defendants). [Doc. No. 25.] For the reasons set forth below, the Court grants it in part and denies it in part.

I. BACKGROUND

Plaintiff Mark C. Merry is an investor who resides in Minnesota. (Am. Compl. ¶ 3 [Doc. No. 23].) Prestige BVI was formed on March 24, 2011, in the British Virgin Islands, with its principal place of business in Irvine, California. ( Id. ¶ 4.) Prestige BVI was “established to offer an online foreign exchange trading platform to its customers.” ( Id.) Prestige UK was formed on April 12, 2011, as a wholly owned subsidiary of Prestige BVI “maintaining a virtual registered office” in London, England. ( Id. ¶ 5.)

Around August 2011, a business colleague of Plaintiff, Daniel Werry, informed Plaintiff about Prestige BVI. ( Id. ¶ 9.) Plaintiff then participated in several conference calls with Wilson, an attorney, organizer, director, and president of Prestige BVI, and Robert Gray, a consultant for Prestige BVI. ( Id. ¶¶ 6, 9.) Plaintiff alleges that during these conversations, Wilson told him that: (1) “Gray had personally invested nearly $500,000 into Prestige [BVI];” (2) “his investment money would be used specifically to expand operations due to the large number of anticipated accounts;” and (3) “that many other investors were already interested [in the company] and that money was expected within the next few days.” ( Id. ¶ 9.)

Plaintiff alleges that Wilson created “offering documents for a private preferred stock offering in the amount of $1,000,000,” including a Private Placement Memorandum (“PPM”). ( Id. ¶ 8.) Wilson provided Plaintiff with a PPM dated September 15, 2011. ( Id. ¶ 10.) ¹ Plaintiff contends that the PPM stated that Prestige BVI: (1) “has made significant investments into infrastructure, software, liquidity partners and other essentials;” (2) “had issued 850,000 common (ordinary) shares that were fully paid; ” (3) “had an [sic] state-of-the-art, web-based foreign exchange trading platform with proprietary software that integrated two trading programs;” (4) “had a fully-staff [sic], multilingual operations department;” and (5) “an established customer base and developed network of referral relationships.” ( Id.) In the Amended Complaint, Plaintiff alleges that in reliance on the statements made by Wilson and representations in the PPM, he purchased 20,000 shares of Prestige BVI preferred stock by executing a subscription agreement and questionnaire on September 27, 2011, in exchange for $100,000. ( Id. ¶ 11.)

Plaintiff alleges that, after purchasing the Prestige BVI preferred stock, he learned that Gray, in fact, never made a $500,000 contribution to Prestige BVI. ( Id. ¶ 12.) Plaintiff also asserts that he learned that Prestige BVI “had not made any significant investments into infrastructure and technology.” ( Id.) In fact, Plaintiff maintains that Prestige BVI's only assets were approximately $75,000 that it borrowed. ( Id.) Plaintiff also alleges that Prestige BVI “never raised any money other than Plaintiff's investment [and] that none of his investment was used for the benefit of operating [Prestige BVI].” ( Id. ¶ 13.) Plaintiff asserts that he lost his entire investment of $100,000. ( Id. ¶ 14.)

On or around June 7, 2012, Plaintiff filed a complaint (the “Original Complaint”) in Minnesota state court against Prestige BVI. (Notice of Removal [Doc. No. 1].) On July 3, 2012, Prestige BVI filed its answer and removed the action to this Court. ( Id.); (Answer [Doc. No. 2].) On August 16, 2012, Plaintiff and Prestige BVI filed their Joint Rule 26(f) Report. [Doc. No. 8.] In the Rule 26(f) Report, Plaintiff proposed to amend the Original Complaint to include additional defendants. ( Id.) On September 6, 2012, the Court issued a Pretrial Scheduling Order that stated that any motion to amend the pleadings or add parties must be filed before October 1, 2012. [Doc. No. 10.] On October 10, 2012, Plaintiff and Prestige BVI stipulated to the filing of an amended Complaint, [Doc. No. 21], which Plaintiff filed with the Court on October 11, 2012 (the “Amended Complaint”). [Doc. No. 23.] Plaintiff's Amended Complaint brings the following causes of action against Defendants: (1) violations of the Minnesota Securities Act of 2002; (2) Common Law Fraud; (3) Breach of Fiduciary Duty; and (4) Legal Malpractice. ( Id. ¶¶ 15–39.) Defendants filed a Motion to Dismiss Plaintiff's Amended Complaint on October 24, 2012. [Doc. No. 25.]

II. DISCUSSION

A. Standard of Review

Federal Rule of Civil Procedure 8 requires that a complaint present “a short and plain statement of the claim showing that the pleader is entitled to relief.” To meet this standard, and survive a motion to dismiss under Rule 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Although a complaint is not required to contain detailed factual allegations, “[a] pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action will not do.’ ” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). The plausibility standard requires a plaintiff to show at the pleading stage that success on the merits is more than a “sheer possibility.” Braden v. Wal–Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir.2009) (citation omitted). It is not, however, a “probability requirement.” Id. (citation omitted). Thus, “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and ‘that a recovery is very remote and unlikely.’ ” Twombly, 550 U.S. at 556, 127 S.Ct. 1955 (citation omitted).

“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). Several principles guide courts in determining whether a complaint meets this standard. First, the court must take the plaintiff's factual allegations as true and grant all reasonable inferences in favor of the plaintiff. Crooks v. Lynch, 557 F.3d 846, 848 (8th Cir.2009). This tenet does not apply, however, to legal conclusions or “formulaic recitation of the elements of a cause of action;” such allegations may properly be set aside. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). In addition, some factual allegations may be so indeterminate that they require “further factual enhancement” in order to state a claim. Id. (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955.) Finally, the complaint “should be read as a whole, not parsed piece by piece to determine whether each allegation, in isolation, is plausible.” Braden, 588 F.3d at 594. Evaluation of a complaint upon a motion to dismiss is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 (citation omitted). A motion to dismiss a complaint should not be granted unless it appears beyond doubt that a plaintiff can prove no set of facts that would entitle him to relief. Coleman v. Watt, 40 F.3d 255, 258 (8th Cir.1994).

Certain claims that include allegations of fraud must be plead with particularity under Federal Rule of Civil Procedure Rule 9(b). The Eighth Circuit has held that claims subject to the particularity requirements must be plead to include “such matters as the time, place and contents of false representations, as well as the identity of the person making the misrepresentations and what was obtained or given up thereby.” Parnes v. Gateway 2000, Inc., 122 F.3d 539, 549 (8th Cir.1997) (citations omitted). “[C]onclusory allegations that a defendant's conduct was fraudulent and deceptive are not sufficient to satisfy the rule.” Id. (citations omitted). As a general matter, the “who, what, when, where, and how” of any fraud claim must be pleaded in detail. Id. at 550 (citations omitted). ²

B. Materials Considered

A court may consider the complaint, matters of public record, orders, materials embraced by the complaint, and exhibits attached to the complaint in deciding a motion to dismiss under Rule 12(b)(6). Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir.1999). Both Plaintiff and Defendants have submitted voluminous extra-pleading materials and statements in their memoranda. Defendants' Memorandum includes nonpublic assertions not contained in Plaintiff's Amended Complaint. ( See Defs.' Mem. in Supp. of Mot. to Dismiss at 2–5 [Doc. No. 27] ); see also (Defs.' Reply Mem. at 1–2 [Doc. No. 34] (recognizing that Defendants' memorandum included information not contained in Plaintiff's Amended Complaint and stating that such information “is not relied upon by Defendants in their arguments in support of their Motion to Dismiss”).) Similarly, Plaintiff's Memorandum refers to a number of exhibits that were not...