Streambend Props. II, LLC v. Ivy Tower Minneapolis, LLC

• Citation: 781 F.3d 1003
• Decision Date: 30 March 2015
• Docket Number: No. 14–1929.,14–1929.
• Parties: STREAMBEND PROPERTIES II, LLC; Streambend Properties VIII, LLC Plaintiffs–Appellants v. IVY TOWER MINNEAPOLIS, LLC, et al., Defendants–Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

781 F.3d 1003

STREAMBEND PROPERTIES II, LLC; Streambend Properties VIII, LLC Plaintiffs–Appellants

v.IVY TOWER MINNEAPOLIS, LLC, et al., Defendants–Appellees.

No. 14–1929.

United States Court of Appeals, Eighth Circuit.

Submitted: Dec. 9, 2014.

Filed: March 30, 2015.

Sara M.G. Rojas, The Law Offices of Sara M.G. Rojas, Minneapolis, MN, for Plaintiffs–Appellants.

Aaron M. Ninnemann, Thomas William Pahl, Foley & Mansfield, Daniel J. Herber, Faegre Baker Daniels, William Lawrence Davidson, Richard A. Lind, Matthew D. Sloneker, Lind & Jensen, Minneapolis, MN, Brian M. Sund, Kerry Ann Trapp, Morrison & Sund, Minnetonka, MN, for Defendants–Appellees.

Before LOKEN, BYE, and SMITH, Circuit Judges.

Opinion

LOKEN, Circuit Judge.

In October 2004, two Streambend Properties LLC entities, II and VIII (together, “Streambend”), signed purchase agreements to purchase two units in a residential condominium development, Ivy Hotel + Residences, in downtown Minneapolis. Six years later, Streambend filed a multi-count complaint in the District of Minnesota alleging state law contract, fraud, and statutory claims and violations of the Interstate Land Sales Full Disclosure Act (“ILSA”), 15 U.S.C. § 1703(a)(2). The initial defendants were developers Ivy Tower Minneapolis (“Ivy Minneapolis”), Gary Benson, and Jeffrey Laux; their real estate agent, Burnet Realty, LLC (“Burnet”); and their escrow and disbursing agent, Commonwealth Land Title Insurance Company (“Commonwealth”). Culminating a complex procedural history, the district court¹ dismissed ILSA claims against the developers in the Second Amended Complaint (“SAC”) for failure to plead fraud with the required specificity; granted summary judgment dismissing the ILSA claims against Commonwealth on the merits; and declined supplemental jurisdiction over the state law claims. Streambend appeals, challenging the denial of leave to amend to add a previously dismissed party, Burnet; the dismissal of the remaining ILSA claims; the denial of leave to file additional amended complaints; and the district court's refusal to exercise supplemental jurisdiction. We affirm.

I. Procedural Background

Streambend's lengthy SAC alleged that it entered into agreements to purchase two units in the to-be-constructed condominium development in October 2004, secured by earnest money payments totaling $45,490, increased in November 2007 to $63,867.45. Completion of the units was delayed, two additional floors were added without proper disclosure, and earnest moneys were removed from the trust account to pay construction costs without Streambend's permission. Seller (Ivy Tower Minneapolis) allowed mechanics liens to be filed in 2008 and not removed. Burnet advised Streambend in December 2008 that closings would soon be scheduled, but no closing was scheduled for Streambend's units. Streambend requested return of its earnest moneys in March and April 2009. Instead, defendants served a Notice of Declaratory Cancellation stating the deposits were non-refundable. The developers' title to Streambend's units “will be ceded to the primary lender ... through foreclosure proceedings.” “Current Residents” of the development have asked Streambend to permit rental of its unoccupied units, which have substantially increased in value.

Streambend asserted statutory claims for violations of ILSA, the Minnesota Common Interest Ownership Act, and Minn.Stat. §§ 555.01 and 82.75 ; and common law claims for wrongful cancellation; breach of contract; unjust enrichment; wrongful conversion of trust account funds; negligent misrepresentation; and breach of fiduciary duty. Only the merits of the ILSA claims are at issue on appeal.

The district court dismissed all claims against Burnet on the merits on March 7, 2011. On April 14, the court dismissed the remaining ILSA claims because Streambend did not allege a sufficient connection to interstate commerce. The court declined to exercise supplemental jurisdiction over the state law claims against the non-Burnet defendants, dismissing those claims without prejudice. Streambend appealed the April order, but did not appeal the previous order dismissing Burnet. We reversed, concluding that two paragraphs in the lengthy initial complaint sufficiently alleged a connection to interstate commerce. Streambend Props. II, LLC v. Ivy Tower Mpls., LLC, 451 Fed.Appx. 627 (8th Cir.2012).

On remand Streambend promptly moved for leave to file a First Amended Complaint (“FAC”), including claims re-adding Burnet as a defendant. The magistrate judge² granted leave to amend but held that previously dismissed claims against Burnet were barred by law of the case. The order permitted Streambend to assert two new state law claims against Burnet. The district court later struck all claims against Burnet.

The FAC added additional developer defendants—Ivy Tower Development, LLC (“Ivy Development”), alleged to be the sole member of Ivy Minneapolis; and Moody Group, LLC (“Moody”), Wischermann Holdings, LLC (“Wischermann Holdings”), and Goben Enterprises, LP (“Goben”), allegedto be the sole members of Ivy Development. The complaint alleged that Laux was the sole member of Moody and Chief Manager of Ivy Minneapolis and Ivy Development, and that Benson was Goben's general partner. Defendants other than Commonwealth again moved to dismiss.

With the motions to dismiss pending, Streambend moved for leave to file the SAC. Chief Magistrate Judge Boylan granted the motion but denied leave to re-add Burnet as a defendant and to add still more defendants—Wischermann Partners, Inc., alleged to be the sole member of Wischermann Holdings, and Paul Wischermann, alleged to be CEO of Wischermann Partners, Inc. The Order ended:

Plaintiffs ... state that “to any extent Plaintiffs are incorrect in their belief regarding the sufficiency of their allegations [in the proposed SAC], Plaintiffs desire to promptly remedy these deficiencies through amendment.” Plaintiffs appear to be stating that in the event defendants proceed to move to dismiss the [SAC], Plaintiffs will again move to amend the complaint to try to deflect defendants' arguments for dismissal.... [R]epeated motions to amend in an effort to avoid an ultimate ruling on the merits of one's claims do not serve the interest of justice, but rather operate as a waste of the parties' and the Court's resources. Such motions demonstrate dilatory tactics to avoid dismissal of the action. Plaintiffs have now had more than adequate opportunity to amend their pleadings.

Defendants other than Commonwealth moved to dismiss the SAC. After a February 2013 hearing, despite Judge Boylan's warning, Streambend moved for leave to file a Third Amended Complaint. Judge Boylan stayed consideration of this motion pending the district court's ruling on the motions to dismiss the SAC. On July 10, 2013, the district court granted the motions to dismiss the SAC, dismissing with prejudice all federal claims except the ILSA claims against Commonwealth, and declining to exercise supplemental jurisdiction over the remaining state law claims. Streambend Props. II, LLC v. Ivy Tower Mpls., LLC, Civil No. 10–4257, 2013 WL 3465277, at *3 (D.Minn. July 10, 2013).

Three days after an August 2013 hearing on Streambend's motion for leave to file a Third Amended Complaint, Streambend moved for leave to file a substitute complaint, referred to by Judge Boylan as the Fourth Amended Complaint. In January 2014, Judge Boylan denied leave to file the Third Amended Complaint and the Fourth Amended Complaint. On March 20, 2014, the district court affirmed Judge Boylan's January Order, granted Commonwealth's motion for summary judgment on the ILSA claims, struck all claims against Burnet in the SAC, dismissed with prejudice all ILSA claims in the SAC against the remaining defendants, and dismissed the pendent state law claims without prejudice. This appeal followed.

II. The Claims Against Burnet

In March 2011, the district court dismissed Streambend's six claims against Burnet, two under the ILSA and four under state law. When Streambend appealed the April 2011 dismissal of other parties, its Notice of Appeal did not mention the Order dismissing Burnet. During the appeal, Streambend filed a letter with this court stating, “Appellants did not appeal the dismissal of Burnet and it rightfully may be terminated as an appellee at this time.” On remand, the district court denied Streambend leave to re-add Burnet to its Amended Complaints because the original claims against Burnet were dismissed with prejudice and Streambend failed to appeal the dismissal.³ On appeal, we review this Order for abuse of discretion. See Hawks v. J.P. Morgan Chase Bank, 591 F.3d 1043, 1051 (8th Cir.2010).

We reject Streambend's contention that the liberal amendment standard in Rule 15(a)(2) of the Federal Rules of Civil Procedure applies to this issue. When a party moves to amend a complaint after dismissal, a more restrictive standard reflecting interests of finality applies. See Hawks, 591 F.3d at 1050–51 ; United States ex rel. Roop v. Hypoguard USA, Inc., 559 F.3d 818, 824 (8th Cir.2009). Applying the stricter standard in this case was particularly appropriate because Streambend sought leave to re-add a party whose prior dismissal was on the merits and was not challenged in the earlier appeal. Compare Hawks, 591 F.3d at 1050–51. There was no abuse of discretion. Streambend's cursory Rule 60(b) and estoppel arguments are without merit. See Park Hill School Dist. v. Dass, 655 F.3d 762, 768 (8th Cir.2011).

III. The Remaining ILSA Claims

In granting developers' motions to dismiss the ILSA claims in Count I and Count II of the SAC, the district court concluded (i) that Federal Rule of Civil Procedure 9(b) applies to those claims because 15 U.S.C. § 1703(a)(2)(A)-(C) “proscribes fraudulent conduct,” and (ii) that Streambend failed to plead fraud with the particularity that Rule 9(b) requires. Streambend, 2013 WL 3465277, at *2. On appeal, relying on our decision in In re...