TMJ Grp. LLC v. IMCMV Holdings Inc.

Citation311 F.Supp.3d 834
Decision Date18 April 2018
Docket NumberCIVIL ACTION CASE NO. 17–4677
Parties TMJ GROUP LLC, et al. v. IMCMV HOLDINGS INC., et al.
CourtU.S. District Court — Eastern District of Louisiana

Omer Frederick Kuebel, III, Robert William Mouton, New Orleans, LA, Kelly Rothermel Vickers, Matthew B. Buongiorno, Dallas, TX, for TMJ GROUP LLC, et al.

James C. Gulotta, Jr., Abigayle Clary McDowell Farris, Andrew D. Mendez, Walter Frederick Metzinger, III, Stone, Pigman, Walther, Wittmann, LLC, New Orleans, LA, for IMCMV Holdings Inc., et al.

SECTION: "G" (1)

ORDER

NANNETTE JOLIVETTE BROWN, UNITED STATES DISTRICT JUDGE

Pending before this Court is Defendants IMCMV Holdings, Inc. ("IMC Holdings") and IMCMV Management, LLC's ("IMC Management") (collectively, "IMC Defendants") motion for summary judgment.1 In this action, TMJ Group, LLC ("TMJ Group") and TMJ Developer, LLC ("TMC Developer") (collectively, "TMJ Plaintiffs") allege that IMC Defendants made misrepresentations upon which TMJ Plaintiffs relied for the purpose of investing in two Margaritaville restaurants located in Minneapolis, Minnesota, and New Orleans, Louisiana, giving rise to TMJ Plaintiffs' claims for rescission pursuant to the Securities Act of 1933; securities fraud in violation of the Securities Exchange Act of 1934; intentional misrepresentation or fraudulent inducement; negligence; breach of contract; breach of fiduciary duty; negligent misrepresentation; rescission pursuant to Louisiana Blue Sky laws; violation of the Louisiana Unfair Trade Practices Act ("LUTPA"); and anticipatory breach of contract.2 Considering the motion, the memoranda in support and opposition, the record, oral argument, and the applicable law, the Court will grant IMC Defendants' motion to the extent it seeks summary judgment on TMJ Plaintiff's claims for rescission pursuant to the Securities Act of 1933 and TMJ Plaintiff's LUTPA claims. The Court will deny the motion in all other respects.

I. Background
A. Factual Background

The following facts are alleged in TMJ Plaintiffs' statement of undisputed facts and are generally undisputed by IMC Defendants.3 On or about June 30, 2015, TMJ Group entered into a Limited Liability Company Operating Agreement (the "NOLA Business Operating Agreement") with IMC Holdings, under which IMCMV New Orleans, LLC ("IMC NOLA") was formed.4 IMC NOLA's sole members are TMJ Group and IMC Holdings, both of whom hold Class A and Class B units in IMC NOLA.5 IMC NOLA is a manager-managed LLC, and IMC Management is its manager.6 IMC Management is a wholly-owned subsidiary of IMC Holdings.7

IMC Management and IMC NOLA also executed a Management Agreement (the "NOLA Business Management Agreement"), which recites that IMC Holdings and TMJ Group formed IMC NOLA, a Manager-managed LLC, for the purpose of "developing, owning and operating a Margaritaville-themed restaurant and bar in the French Quarter of New Orleans" (the "New Orleans Restaurant").8 The NOLA Business Management Agreement specifies various duties required of IMC Management, as acting Manager, regarding the management and operation of the business, including with respect to financial matters.9

On July 28, 2015, "Mr. Abal," on behalf of IMC Holdings, sent TMJ Group a pro forma (the "First Pro Forma") for a restaurant at the Mall of America showing earnings before interest, taxes, depreciation, and amortization ("EBITDA") in the first twelve months at $448,569.10

On or about August 18, 2015, TMJ Group entered into a Limited Liability Company Operating Agreement (the "MOA Business Operating Agreement") with IMC Holdings under which IMCMV MOA, LLC ("IMC MOA") was formed.11 IMC MOA's sole members are TMJ Group and IMC Holdings, both of whom hold Class A and Class B Units in IMC MOA.12 IMC MOA is a manager-managed LLC, and IMC Management is its manager.13 IMC Management is a wholly-owned subsidiary of IMC Holdings.14

The MOA Business Operating Agreement provides that IMC Holdings shall be the initial Manager of IMC MOA with the complete power and authority to manage and operate IMC MOA and make all decisions affecting its business and affairs.15 The MOA Business Operating Agreement further specifies conditions by which the Manager breaches its obligations and actions the Manager is prohibited to take without approval of the Members.16

IMC Management and IMC MOA also executed a Management Agreement (the "MOA Business Management Agreement"), which recites that IMC Holdings and TMJ formed IMC MOA, a manager-managed LLC, for the purpose of "developing, owning and operating a Margaritaville-themed restaurant and bar" located in the Mall of America in Minneapolis, Minnesota (the "Minneapolis Restaurant").17 The MOA Business Management Agreement specifies various duties required of IMC Management, as acting Manager, regarding the management and operation of the business, including with respect to financial matters.18

TMJ invested $3,191,223.50 in IMC MOA Class A units.19 Those units do not have voting rights, do not participate in the eight decisions that managers must bring to members, and do not have any power or right to remove the manager.20

In November 2015, IMC Holdings and TMJ Group entered into an "Amended and Restated" Limited Liability Company Operating Agreement (the "Revised MOA Business Operating Agreement"), which lists IMC Holdings and TMJ Group as the Company's sole "Members" and specifies comparable conditions and obligations of the Manager as the original MOA Business Operating Agreement.21

IMC Management and IMC MOA also executed a Restated Management Agreement (the "Revised MOA Business Management Agreement").22 Like the original MOA Business Management Agreement, the Revised MOA Business Management Agreement recites that IMC Holdings and TMJ Group formed IMC MOA, a manager-managed LLC, for the purpose of "developing, owning and operating a Margaritaville-themed restaurant and bar" located in the Mall of America in Minneapolis, Minnesota.23 The Revised MOA Business Management Agreement further specifies various duties required of IMC Management, as acting Manager, regarding the management and operation of the business, including with respect to financial matters.24

B. Procedural Background

On May 3, 2017, TMJ Group filed a complaint against IMC Defendants for rescission of the agreements and damages in the amount of $3,418,388.42 related to the Minneapolis Restaurant and $553,299.05 related to the New Orleans restaurant, asserting the following claims: (1) violation of Regulation D and Section 5 of the Securities Act of 1933; (2) intentional misrepresentation, and, or, fraudulent inducement; (3) breach of contract; (4) breach of fiduciary duty; (5) negligent misrepresentation; (6) violation of Louisiana "Blue Sky" laws; and (7) violation of LUTPA.25

On March 7, 2018, with leave of Court, TMJ Group and TMJ Developer filed an amended complaint against IMC Defendants for rescission of the agreements and damages in the amount of $3,500,000 related to the Minneapolis Restaurant and $3,700,000 related to the New Orleans restaurant, asserting the following claims: (1) rescission pursuant to Section 12(a)(1) of the Securities Act of 1933; (2) securities fraud for violations of the Securities Exchange Act of 1934; (3) intentional misrepresentation or fraudulent inducement; (4) negligence; (5) breach of contract; (6) breach of fiduciary duty; (7) negligent misrepresentation; (8) rescission pursuant to Louisiana Blue Sky laws; (9) violation of LUTPA; and (10) anticipatory breach of contract.26

On March 14, 2018, IMC Defendants filed the instant motion for summary judgment.27 On March 20, 2018, TMJ Plaintiffs filed an opposition.28 On March 27, 2018, with leave of Court, IMC Defendants filed a reply brief in further support of the motion for summary judgment.29 On April 4, 2018, with leave of Court, TMJ Plaintiffs filed a supplement to the opposition.30 On April 4, 2018, the Court heard oral argument on the motion.31

II. Parties' Arguments
A. IMC Defendants' Arguments in Support of the Motion for Summary Judgment

In the motion for summary judgment, IMC Defendants first argue that undisputed facts show that TMJ Plaintiffs' claims for rescission under the Securities Act of 1933 are time-barred because they must have been brought within one year of the alleged sale of the security and were not; and no tolling or "discovery" rule applies to this period.32 IMC Defendants point to the execution dates of the operating agreements and the deposition testimony of TMJ member Aaron Motwani to establish that TMJ Plaintiffs acquired the LLC membership interests more than one year before this suit was filed.33 Accordingly, IMC Defendants argue, no genuine fact dispute exists as to whether TMJ Plaintiffs' LLC membership interests were acquired more than a year before this action was filed, and IMC Defendants are entitled to summary judgment on the rescission claim brought under the Security Act of 1933.34

IMC Defendants next argue that undisputed facts establish that TMJ Plaintiffs acquired the LLC membership interests via a negotiated, one-on-one transaction in which TMJ Plaintiffs were represented by counsel.35 Therefore, pursuant to the Supreme Court's decision in Marine Bank v. Weaver , IMC Defendants argue the LLC membership interests are not securities under federal law; and because Louisiana state securities law mirrors federal law, the LLC Membership interests are not securities under state law either.36

In addition, IMC Defendants argue that undisputed facts show that TMJ Plaintiffs could exercise significant control over the restaurants, precluding "security" status, insofar as TMJ Plaintiffs were not passive investors.37 Accordingly, IMC Defendants argue, there is no genuine fact dispute that the LLC membership interests acquired by TMJ Plaintiffs fall outside the definition of a "security."38 Therefore, IMC Defendants argue, they are entitled to summary judgment on TMJ Plaintiffs' claims for rescission under federal and state...

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