Sierra Equity Group v. White Oak Equity Partners
| Decision Date | 30 March 2009 |
| Docket Number | No. 08-80017-CIV.,08-80017-CIV. |
| Citation | 650 F.Supp.2d 1213 |
| Parties | SIERRA EQUITY GROUP, INC., as assignee of Michael E. Splain, James W. Lees, and the Andrew Revocable Trust, Plaintiff, v. WHITE OAK EQUITY PARTNERS, LLC, Ross Statham, individually, Philip Orlando, individually, and Anthony Orlando, individually, Defendants. |
| Court | U.S. District Court — Southern District of Florida |
Geoffrey Michael Cahen, Stephen A. Mendelsohn, Greenberg Traurig et al., Boca Raton, FL, Steven Alan Lessne, Gray Robinson, Ft. Lauderdale, FL, for Plaintiff.
Ronald David Poltorack, Boca Raton, FL, Kelly Anne Luther, Matthew Koontz Cordis, Clarke Silverglate & Capmbell, P.A., Miami, FL, Mark Ressler, Michael P. Bowen, Kasowitz Benson Torres & Friedman, New York, NY, for Defendants.
THIS CAUSE comes before the Court on Defendants White Oak and Statham's Motion to Dismiss (DE 35) and Defendants Philip Orlando and Anthony Orlando's Motion to Dismiss the First Amended Complaint (DE 36). The motions are now fully briefed and ripe for review. The Court held a hearing on the motions on March 18, 2009. Following the hearing, Plaintiff and the Orlando Defendants filed supplemental memoranda as requested by the Court. (DE 57, 58). The Court has carefully considered the motions and is otherwise fully advised in the premises.
On December 5, 2007, Plaintiff Sierra Equity Group, Inc. ("Plaintiff") filed a Complaint against Defendants White Oak Equity Partners, LLC ("White Oak"), Ross Statham, Philip Orlando, and Anthony Orlando. The case was subsequently removed to this Court on January 9, 2008.
This action arises out of a private offering of securities. (Am.Compl. ¶ 1). Plaintiff alleges that investors provided funds in connection with the offering, which was never completed in accordance with the representations of the Defendants. (Am. Compl.¶ 1). The investors never received the promised securities and, despite their demands, the investors' funds were never returned. (Am.Compl. ¶ 1). Plaintiff asserts claims of Breach of Contract against White Oak (Count I); Unjust Enrichment against White Oak and the Orlandos (Count II); Fraudulent Inducement against all Defendants (Count III); Declaratory Judgment against White Oak (Count IV); Violation of Section 517.301, Florida Statutes, against all Defendants (Count V); and Violation of 15 U.S.C. § 78j(b) against all Defendants (Count VI).
The Amended Complaint alleges that in early 2006, the Orlandos contacted Statham in Georgia to discuss the White Oak securities transaction. (Am.Compl.¶ 12). Statham and the Orlandos, "on behalf of White Oak, contacted Sierra in Florida, via telephone, and advised Sierra that White Oak intended to offer securities to certain qualified investors." (Am.Compl. ¶ 15). During the telephone call, "the Defendants failed to advise Sierra that the Orlandos would receive a commission or otherwise profit from the Offering." (Am. Compl.¶ 16).
A Selling Agreement, dated August 23, 2006, was executed by White Oak and Plaintiff. . In the Selling Agreement, White Oak contracted to use Plaintiff as a selling agent and to sell, through Plaintiff, an "Offering" of up to $232,000 in convertible debt securities in White Oak to investors. (Am. Compl.¶ 19). Under the Selling Agreement, White Oak represented that it would use the proceeds from the Offering to pay Plaintiff a cash commission and to acquire Gem Systems Common Stock and Volptech Common Stock. (Am. Compl. ¶ 20). The Selling Agreement did not state that the Orlandos would receive compensation in connection with the Offering. (Am.Compl. ¶ 21, 34). Plaintiff then solicited three investors (located in Arizona, California, and Massachusetts), each of whom contributed to the investment. The contribution from all three investors totaled $232,000. (Am.Compl.¶¶ 23-29). The investors also each signed a Subscription Agreement stating that White Oak would use the proceeds to buy common shares of Gem Systems and Volptech. (Am.Compl.Ex. B). White Oak received the investors' funds, but it failed to execute the Subscription Agreements, failed to buy Volptech shares and, upon demand, failed to return the money to the investors. (Am.Compl.¶¶ 35-46). White Oak provided at least $60,000 of the funds tendered by the investors to the Orlandos as compensation contingent upon the Offering being successful. (Am.Compl.¶ 39). The investors assigned their right, title and interest in the Offering, the Subscription Agreement and in White Oak to Plaintiff. (Am.Compl.¶ 48, Exh. I).
In the Amended Complaint, Plaintiff asserts that the Court may exercise personal jurisdiction over all Defendants pursuant to Fla. Stat. § 48.193(1)(b) for committing a tortious act within the State of Florida and because Defendants engage in substantial and not isolated activity within Florida. (Am.Compl.¶¶ 3-6.) Further, Plaintiff asserts that Defendant White Oak consented by contract to personal jurisdiction in Florida. On April 15, 2008, the parties were granted sixty (60) days to complete jurisdictional discovery (DE 21). Subsequently, all Defendants filed motions to dismiss the Amended Complaint for failure to state a claim upon which relief can be granted under Fed.R.Civ.P. 12(b)(6) and for lack of personal jurisdiction under Fed.R.Civ.P. 12(b)(2). (DE 35, 36).
Defendant White Oak Equity Partners, LLC ("White Oak") is a Georgia limited liability company. (Declaration of Ross Statham, DE 7-2 at ¶ 6). Defendant Ross Statham ("Statham") is a resident of Georgia and is White Oak's Managing Partner. (Declaration of Ross Statham, DE 7-2 at ¶¶ 2, 5). According to Statham's Declaration, he is a resident and citizen of Georgia; he votes in Georgia; he does not reside in Florida; he does not work in Florida; he does not own real property in Florida; he does not file or pay taxes in Florida; he does not maintain an office, telephone number or mailing address in Florida; he does not engage in business in Florida; he has not attended any business meetings in the last five years in Florida; he does not regularly travel to Florida; and he never met any representative of Plaintiff in Florida. (Declaration of Ross Statham, DE 7-2 at ¶¶ 2, 15-19, 21, 23, 25, 26-27).
Also, according to Statham's Declaration, White Oak does not own real property in Florida; it does not file or pay taxes in Florida; it does not maintain an office, telephone number or mailing address in Florida; no representative of White Oak has attended any business meetings in the last five years in Florida; and it does not engage in business in Florida. (Declaration of Ross Statham, DE 7-2 at ¶¶ 6, 20, 22, 24).
In early 2006, the Orlandos contacted Statham in Georgia to discuss the White Oak securities transaction. (Am. Compl.¶ 12). Statham and the Orlandos, "all purportedly on behalf of White Oak, contacted Sierra in Florida, via telephone, and advised Sierra that White Oak intended to offer securities to certain qualified investors." (Am.Compl.¶ 15). During the telephone call, "the Defendants failed to advise Sierra that the Orlandos would receive a commission or otherwise profit from the Offering." (Am.Compl.¶ 16).
Thereafter, on or about August 23, 2006, Statham executed the Selling Agreement as Managing Partner of White Oak in Georgia. (Declaration of Ross Statham, DE 7-2 at ¶ 31). According to the terms of the "Selling Agreement," to which White Oak and Sierra are parties, "[e]ach party hereby consents to any and all actions or controversies arising from this agreement shall [ ] have venue in the exclusive jurisdiction of the state and federal courts located in Palm Beach County, Florida." (Am.Compl.Exh. A, § 9.10). There are also provisions in the unsigned Subscription Agreement (Am.Compl.Exh. B, § 9(d)) and unsigned convertible note (Am.Compl.Exh. C, § 4.6) which provide for jurisdiction in Palm Beach County, Florida.
The three investors wired the funds in question to White Oak in Georgia from the states of their respective residency and citizenship, California, Arizona, and Massachusetts. (Declaration of Ross Statham, DE 7-2 at ¶¶ 8, 9, 10, 11).
White Oak and Statham communicated by telephone with Sierra in Florida in connection with the purported Offering. (White Oak's Answers To First Set Of Interrogatories, DE-40, at ¶ 5; Statham Dep., DE 44 at 27:13-22, 33:23-34:4). According to the Affidavit of Alan Goddard, Statham and Goddard participated in approximately ten phone calls related to the Offering (DE 46 at ¶ 7). Statham and Goddard also engaged in a great amount of email and other correspondence with Sierra in connection with the purported Offering. . Additionally, Statham personally created Sierra's website and made various changes to the website after it was completed. (Statham Dep., DE 44 at 28:5-30:1).
With respect to the Orlandos, the Amended Complaint alleges, in part:
12. In early 2006, the Orlandos contacted Statham in Georgia to discuss a securities transaction in which a private company would be reverse merged into the shell of a public company. The Orlandos asked Statham whether he had a "clean" entity which they could use to accomplish this transaction and ultimately sell this investment to qualified investors. Statham offered the Orlandos White Oak as the entity to accomplish this transaction and the Orlandos consented.
13. Specifically, the transaction involved the reverse merger of Volptech International, Inc. ("Volptech") into a public shell company, Gem Systems, Inc. ("Gem"). The Orlandos were integral in structuring and negotiating the transaction.
14. White Oak and Statham agreed to pay the Orlandos a substantial commission contingent upon the completion of the...
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