Skypoint Advisors, LLC. v. 3 Amigos Productions LLC.

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

FORT MYERS DIVISION

SKYPOINT ADVISORS, LLC.,

Plaintiff,

v. Case No: 2:18-cv-356-FtM-29MRM

3 AMIGOS PRODUCTIONS LLC.,

BLACKBURNSTEELE LLC., ISSA

ZAROUI, and MARK C CRAWFORD,

Defendants.

ORDER AND OPINION

This matter comes before the Court on the defendants’ Motion

for Reconsideration (Doc. #116) filed on August 9, 2019. The

defendants seek reconsideration of this Court’s July 25, 2019 Order

and Opinion (Doc. #111) denying the defendants’ motion to dismiss.

In the alternative, the defendants request the Court amend the

July 25th order to include a certificate for interlocutory appeal.

Plaintiff filed a Response (Doc. #121) on August 22, 2019. For

the reasons that follow, the motion is denied.

I.

A. The Parties

According to the Third Amended Complaint, plaintiff Skypoint

Advisors, LLC is a Florida limited liability company by and through

its members, which include Dennis Dreni. (Doc. #93, p. 1.)

Defendant 3 Amigos Productions, LLC is a Nevada limited liability

company with three managing members: (1) defendant

BlackburnSteele, LLC, a Nevada limited liability company; (2)

defendant Issa Zaroui, a citizen of New York; and (3) non-party

Chad Pittman, a citizen of Virginia. (Id. pp. 1-2.) Finally,

defendant Mark Crawford is the sole managing member of defendant

BlackburnSteele. (Id. p. 2.)

B. Factual History

According to plaintiff, the defendants, individually and

acting in concert, began soliciting plaintiff’s member Dreni in

November 2016 to invest in the production of a proposed film

entitled “Lazarat Burning.” (Id. pp. 4-5.) From November 2016

until January 2017, the defendants made representations to Dreni

regarding the film’s production, financing, and potential profits.

(Id. pp. 5-25.) In early 2017, plaintiff and defendant 3 Amigos

entered into a “Film Financing Agreement,” with plaintiff agreeing

to loan $50,000 as an investment in the project. (Id. p. 27; Doc.

#93-1, p. 52.) Per the terms of the agreement, plaintiff elected

to receive a proportional share of the film’s profits rather than

interest on the $50,000. (Doc. #93-1, p. 53.) The agreement

contained a distribution schedule and stated the distributions

constituted “securities” exempt from federal registration

requirements. (Id. p. 54.) Finally, the agreement contained a

choice of law provision construing the agreement under Florida

law, and a forum-selection clause listing “any court in the State

of Florida” as having jurisdiction over the matter. (Id. p. 55.)

Sometime after entering into the agreement, plaintiff

“developed significant concerns” related to the project and

demanded a refund of its money. (Doc. #93, p. 31.) The defendants

refused to return plaintiff’s investment and plaintiff initiated

this action in May 2018. (Id. p. 32; Doc. #1.)

C. Procedural History

In January 2019, plaintiff filed its Second Amended Complaint

alleging a claim under Section 10(b) of the Securities Exchange

Act of 1934, as well as various Florida and common law claims.

(Doc. #52, pp. 12-26.) The defendants filed a motion to dismiss

(Doc. #56), which the Court granted in part and denied in part.

(Doc. #92.) The Court found the Section 10(b) claim failed to

meet the heightened pleading requirements of Rule 9(b) of the

Federal Rules of Civil Procedure and the Private Securities

Litigation Reform Act of 1995 (“PSLRA”), and the Court lacked

subject matter jurisdiction for the remaining claims. (Doc. #92,

pp. 14-15.) As this was the third version of the complaint filed,

the Court granted plaintiff one final opportunity to amend and

cure the pleading and jurisdictional deficiencies. (Id. pp. 10,

14, 15.)

On April 30, 2019, plaintiff filed its Third Amended Complaint

alleging the following six claims: (1) violation of Section 10(b)

of the Securities Exchange Act and Rule 10b-5 promulgated

thereunder; (2) violation of Florida’s Securities and Investor

Protection Act, § 517.011 et. seq., Fla. Stat.; (3) common law

fraud; (4) violation of Florida’s Deceptive and Unfair Trade

Practices Act, § 501.201 et. seq., Fla. Stat.; (5) breach of

contract; and (6) breach of fiduciary duty. (Doc. #93, pp. 32-

47.) The first four claims are alleged against all the defendants,

while the fifth and sixth claims are alleged only against defendant

3 Amigos. (Id.) Plaintiff claims damages of over $90,000. (Id.

p. 27.)

On May 21, 2019, the defendants filed another motion to

dismiss. (Doc. #96.) The motion sought dismissal on a variety

of grounds, but specifically argued the Section 10(b) claim should

be dismissed for (1) failing to satisfy the heightened pleading

requirements of the PSLRA and Rule 9(b), and (2) failing to state

a claim upon which relief can be granted. (Id. pp. 11-17.) On

July 25, 2019, the Court denied the motion. (Doc. #111.)

Regarding the Section 10(b) claim, the Court found the Third

Amended Complaint met the heightened pleading requirements of Rule

9(b) and the PSLRA, and alleged sufficient facts to state a claim.

(Id. pp. 8-18.)

On August 9, 2019, the defendants filed the motion for

reconsideration now before the Court. (Doc. #116.) The motion

requests the Court reconsider its prior Order and Opinion denying

the motion to dismiss, asserting the Court “was in error regarding

the law to be applied, the application of the law to the

allegations of the [Third Amended Complaint] or in fully

understanding or addressing Defendants’ arguments.” (Id. p. 6.)

Alternatively, if reconsideration shall be denied, the defendants

request the Court certify its prior Order and Opinion for immediate

interlocutory appeal. (Id. p. 19.) The Court will address each

of these arguments in turn.

II.

A. Legal Standard for Reconsideration

A non-final order may be revised at any time before the entry

of a final judgment. Fed. R. Civ. P. 54(b). The decision to

grant a motion for reconsideration is within the sound discretion

of the trial court, Region 8 Forest Serv. Timber Purchasers Council

v. Alcock, 993 F.2d 800, 806 (11th Cir. 1993), and courts have

delineated three major grounds justifying reconsideration: “(1) an

intervening change in controlling law; (2) the availability of new

evidence; [and] (3) the need to correct clear error or prevent

manifest injustice,” Sussman v. Salem, Saxon & Nielsen, P.A., 153

F.R.D. 689, 694 (M.D. Fla. 1994) (citation omitted).

Additionally, appropriate circumstances for reconsideration

include situations in which “the Court has obviously

misapprehended a party’s position, or the facts, or mistakenly has

decided an issue not presented for determination.” United States

v. Halifax Hosp. Med. Ctr., 2013 WL 6284765, *1 (M.D. Fla. Dec. 4,

2013).

However, reconsideration of a court’s order “is an

extraordinary remedy and a power to be ‘used sparingly,’”

Santamaria v. Carrington Mortg. Servs., LLC, 2019 WL 3537150, *2

(M.D. Fla. July 10, 2019) (citation omitted), with the burden “upon

the movant to establish the extraordinary circumstances supporting

reconsideration,” Mannings v. Sch. Bd. of Hillsborough Cty., Fla.,

149 F.R.D. 235, 235 (M.D. Fla. 1993). The motion “must demonstrate

why the court should reconsider its past decision and set forth

facts or law of a strongly convincing nature to induce the court

to reverse its prior decision.” Santamaria, 2019 WL 3537150, *2

(citation omitted).

B. Relevant Factual Allegations from the Third Amended Complaint

The defendants’ motion for reconsideration focuses on the

Court’s ruling regarding the Section 10(b) claim in the Third

Amended Complaint. Section 10(b) of the Securities Exchange Act

makes it unlawful for any person to “use or employ, in connection

with the purchase or sale of any security . . . any manipulative

or deceptive device or contrivance in contravention of such rules

and regulations as the Commission may prescribe as necessary or

appropriate in the public interest or for the protection of

investors.” 15 U.S.C. § 78j(b). SEC Rule 10b–5 implements this

provision by making it unlawful to, inter alia, “make any untrue

statement of a material fact or to omit to state a material fact

necessary in order to make the statements made, in the light of

the circumstances under which they were made, not misleading.” 17

C.F.R. § 240.10b–5(b). The Supreme Court has “implied a private

cause of action from the text and purpose of § 10(b).” Matrixx

Initiatives, Inc. v. Siracusano, 563 U.S. 27, 37 (2011) (citation

omitted).

The Third Amended Complaint’s Section 10(b) claim accuses the

defendants of making fraudulent statements to induce plaintiff to

invest in a film project. (Doc. #93, pp. 32-36.) The Third

Amended Complaint lists the following as examples of the

misrepresentations made by the defendants:

(a) that the Project was almost contractually fully

funded due to almost two years’ worth of work by

Defendants[;]

. . .

(b) that Skypoint’s then proposed $50,000.00 investment

was the final investment needed to complete the budget

for the Project, describing Skypoint’s then proposed

$50,000.00 investment as contingent in that the

expenditure thereof may not be necessary for the

completion of the Project, and that Skypoint was the

final investor accepted for the Project[;]

. . .

(c) mischaracterized Skypoint’s then proposed $50,000.00

investment as de minimus in light of the investment funds

already collected for the Project and presented 3

Amigos’s proposed acceptance of Skypoint’s $50,000.00

investment as doing a favor for Skypoint[;]

. . .

(d) that all of the production work for the Project was

already paid[;]

. . .

(e) that Crawford, Zaroui, and Pittman already

personally invested at least $30,000.00 each to the

Project[;]

. . .

(f) that DigitAlb, a prominent Albanian media company,

already invested approximately $400,000.00 into the

Project[;]

. . .

(g) that 3 Amigos had existing contracts with

distribution companies Karo Films, the largest Russian

firm of its kind in the Russian region, and Fantastic

Film International regarding distribution of the Project

resulting in revenue of $24,000.000.00[;]

. . .

(h) that Gabriel Garko, a preeminent Italian actor,

[wa]s playing a major role in the Project and therefore

pre-sale forecasts ha[d] been met resulting in

additional revenue of two to three million dollars in

the Italian market alone[;]

. . .

(i) that all third-party consultants had been previously

paid prior to Skypoint’s decision to invest[;]

. . .

(j) that Crawford was Chief Financial Officer of 3 Amigos

and that he had sole control and access over 3 Amigos’

financial accounts[.]

(Id. pp. 5-24.) The Third Amended Complaint states these

statements were false, each defendant had knowledge of their

falsity, and the defendants made the statements in an attempt to

mislead investors into investing in the project. (Id. pp. 25-26.)

Further, the Third Amended Complaint alleges the following:

61. 3 Amigos, Zaroui, BlackburnSteele and Crawford,

jointly and severally, carried out a plan, scheme, and

course of conduct that was intended to, and did (i)

deceive Skypoint, as alleged herein; and (ii) cause

Skypoint to invest in the Project. In furtherance of

this unlawful scheme, 3 Amigos, Zaroui, BlackburnSteele,

and Crawford took the actions set forth herein.

62. At all times material hereto, Defendants (i)

employed devices, schemes, and artifices to defraud;

(ii) made untrue statements of material fact and/or

omitted to state material facts necessary to make the

statements not misleading; (iii) manufactured documents

such as Excel, PDF, pictures, and logos in order to

mislead Skypoint as to the validity of funding and

revenue generation of the Project; and (iv) engaged in

acts, practices and a course of business which operated

as a fraud and deceit upon Skypoint as an investor of

the Project in violation of Section 10(b) of the

Securities Exchange Act of 1934 and Rule 10b-5.

Defendants are sued as primary participants in the

wrongful and illegal conduct charged herein pursuant to

Section 20(a) of the Securities Exchange Act of 1934.

63. 3 Amigos, Zaroui, BlackburnSteele and Crawford,

individually and in concert, directly and indirectly, by

the use, means, or instrumentalities of interstate

commerce and/or of the mails, engaged and participated

in a course of conduct to conceal adverse material

information about the Project, the status of the

Project, and the funds available for the Project, and

fraudulently obtained investment money from Skypoint,

among other things, as specified herein.

64. Defendants each employed devices, schemes and

artifices to defraud and engaged in acts, practices, and

a course of conduct as alleged herein in an effort to

assure Skypoint of the value of investing in the Project,

which included the making of, or the participation in

the making of, untrue statements of material facts about

the Project and omitting to state material facts

necessary in order to make the statements made not

misleading.

65. Zaroui, BlackburnSteele, and Crawford’s primary

liability arises from the following facts, among others:

(i) they were high-level officers within 3 Amigos and/or

high-level players in the scheme to sell Skypoint an

interest in the Project; (ii) they, by virtue of their

responsibilities and activities as high-level players in

the scheme, were privy to and participated in the

creation, development and dissemination of 3 Amigo’s

projections and/or reports; and (iii) they were aware of

3 Amigo’s dissemination of information to Skypoint which

they knew or recklessly disregarded was materially false

and misleading.

66. 3 Amigos, Zaroui, BlackburnSteele, and Crawford had

actual knowledge of the misrepresentations and omissions

of material facts set for [sic] herein, or acted with

severely reckless disregard for the truth, in that each

failed to ascertain and disclose such facts, even though

such facts were available to them. Such Defendants’

material misrepresentations and/or omissions were done

knowingly or with deliberate recklessness and for the

purpose and effect of concealing information regarding

the Project’s true status as a façade and vehicle for

fraud and theft.

67. Defendants’ actions, as described herein, were made

with the intent to deceive, manipulate, or defraud

Skypoint.

68. As a result of the dissemination of materially false

and misleading information and failure to disclose

material facts, as set forth herein, the Project

appeared to be a legitimate investment opportunity for

Skypoint.

69. In ignorance of the fact that the Project’s

investment opportunity was merely a façade for a

criminal scheme, Skypoint invested its money into the

Project and was damaged thereby.

70. At the time of said misrepresentations and

omissions, Skypoint was ignorant of their falsity and

believed them to be true. Had Skypoint known of

Defendants’ fraudulent practices, Skypoint would not

have invested or otherwise acquired an interest in the

Project.

71. By virtue of the foregoing, 3 Amigos, Zaroui,

BlackburnSteele, and Crawford have each violated Section

10(b) of the Securities Exchange Act of 1934 and Rule

10b-5 promulgated thereunder.

72. As a direct, proximate, and substantial result of 3

Amigos, Zaroui, BlackburnSteele, and Crawford’s wrongful

conduct, Skypoint suffered damages in connection with

its investment in the Project.

(Id. pp. 33-36.)

C. Arguments for Reconsideration

To state a claim for securities fraud under Section 10(b) and

Rule 10b-5, a plaintiff must adequately allege: (1) a material

misrepresentation or omission; (2) scienter; (3) a connection

between the misrepresentation and the purchase or sale of a

security; (4) reliance; (5) economic loss; and (6) loss causation.

Meyer v. Greene, 710 F.3d 1189, 1194 (11th Cir. 2013) (citing Dura

Pharms., Inc. v. Broudo, 544 U.S. 336, 341-42 (2005)).

Furthermore, to survive a motion to dismiss, a claim brought under

Rule 10b-5(b) must satisfy: (1) the federal notice pleading

requirements in Federal Rule of Civil Procedure 8(a)(2); (2) the

special fraud pleading requirements in Federal Rule of Civil

Procedure 9(b); and (3) the additional pleading requirements in

the PSLRA. In re Galectin Therapeutics, Inc. Sec. Litig., 843

F.3d 1257, 1269 (11th Cir. 2016).

Under Rule 8(a)(2), a complaint must contain “a short and

plain statement of the claim showing that the pleader is entitled

to relief.” Fed. R. Civ. P. 8(a)(2). The complaint must allege

“enough facts to state a claim to relief that is plausible on its

face,” and the factual allegations “must be enough to raise a right

to relief above the speculative level.” Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 555, 570 (2007).

In addition to the Rule 8(a)(2) requirements, Rule 9(b)

requires that parties alleging fraud or mistake “must state with

particularity the circumstances constituting fraud or mistake.”

Fed. R. Civ. P. 9(b).

While Rule 9(b) does not abrogate the concept of notice

pleading, it plainly requires a complaint to set forth:

(1) precisely what statements or omissions were made in

which documents or oral representations; (2) the time

and place of each such statement and the person

responsible for making (or, in the case of omissions,

not making) them; (3) the content of such statements and

the manner in which they misled the plaintiff, and; (4)

what the defendant obtained as a consequence of the

fraud.

In re Galectin, 843 F.3d at 1269 (citations omitted); see also

Garfield v. NDC Health Corp., 466 F.3d 1255, 1262 (11th Cir. 2006)

(“A sufficient level of factual support for a [Section 10(b)] claim

may be found where the circumstances of the fraud are pled in

detail. ‘This means the who, what, when[,] where, and how: the

first paragraph of any newspaper story.’” (citation omitted)).

The “[f]ailure to satisfy Rule 9(b) is a ground for dismissal of

a complaint.” In re Galectin, 843 F.3d at 1269 (quoting Corsello

v. Lincare, Inc., 428 F.3d 1008, 1012 (11th Cir. 2005)).

Finally, the PSLRA also imposes heightened pleading

requirements for Rule 10b–5(b) actions. Id. For such claims

predicated on allegedly false or misleading statements or

omissions, the PSLRA provides that

the complaint shall specify each statement alleged to

have been misleading, the reason or reasons why the

statement is misleading, and, if an allegation regarding

the statement or omission is made on information and

belief, the complaint shall state with particularity all

facts on which that belief is formed.

15 U.S.C. § 78u–4(b)(1).

In seeking reconsideration, the defendants argue the Third

Amended Complaint (1) fails to meet the current standards of

scienter pleading, (2) fails to allege scienter of each defendant

for each alleged statement, (3) fails the Supreme Court’s

plausibility test, (4) fails to sufficiently allege proximate

causation of loss, and (5) fails to sufficiently allege reasonable

reliance. (Doc. #116, pp. 6-13, 15-19.) Additionally, the

defendants argue reconsideration should be granted because the

Court misconstrued the defendants Rule 9(b) argument. (Id. p. 13-

15.)

1. Scienter

In pleading scienter, a Section 10(b) claim must meet the

PSLRA’s requirement to “state with particularity facts giving rise

to a strong inference that the defendant acted with the required

state of mind.” 15 U.S.C. § 78u-4(b)(2)(A); Thompson v.

RelationServe Media, Inc., 610 F.3d 628, 633 (11th Cir. 2010). In

this context, a “strong inference” of scienter is one that is “more

than merely plausible or reasonable—it must be cogent and at least

as compelling as any opposing inference of nonfraudulent intent.”

Thompson, 610 F.3d at 633 (quoting Tellabs, Inc. v. Makor Issues

& Rights, Ltd., 551 U.S. 308, 314 (2007)). When reviewing a

complaint’s scienter allegations, the court must (1) “accept all

factual allegations in the complaint as true,” (2) “consider the

complaint in its entirety” and determine “whether all of the facts

alleged, taken collectively, give rise to a strong inference of

scienter,” and (3) “take into account plausible opposing

inferences.” Id. at 633-34 (quoting Tellabs, 551 U.S. at 322-23).

Moreover, “scienter must be found with respect to each defendant

and with respect to each alleged violation of the statute.” Id.

(quoting Phillips v. Scientific-Atlanta, Inc., 374 F.3d 1015,

1017-18 (11th Cir. 2004)).

While the PSLRA imposes a heightened standard for pleading

scienter, it does not alter the substantive intent requirements

necessary to establish a Section 10(b) and Rule 10b-5 violation.

Thompson, 610 F.3d at 634. In the Eleventh Circuit, Section 10(b)

and Rule 10b-5 require a showing of either an “intent to deceive,

manipulate, or defraud,” or “severe recklessness.” Id. (quoting

Mizzaro v. Home Depot, Inc., 544 F.3d 1230, 1238 (11th Cir. 2008)).

Accordingly, to survive a motion to dismiss, a Section 10(b) claim

must “plead ‘with particularity facts giving rise to a strong

inference’ that the defendants either intended to defraud

investors or were severely reckless when they made the allegedly

materially false or incomplete statements.” Id. (quoting Mizzaro,

544 F.3d at 1238).

In the prior motion to dismiss, the defendants argued the

Section 10(b) claim failed to adequately plead scienter by ignoring

the requirement to allege scienter for each defendant with respect

to each alleged violation of the statute. (Doc. #96, p. 14.)

Instead, according to the defendants, the Third Amended Complaint

pleads generalized misstatements spread over a three-

month period, utterly failing to identify any factual

basis regarding the state of mind of any maker of any

statement at any time, let alone regarding every

misstatement alleged, as is required to avoid dismissal.

The most scienter the [Third Amended Complaint] bothers

to allege is that Defendants Crawford, BlackburnSteele

and Zaroui were “high-level players” in the scheme to

sell Skypoint an interest in the Project, and/or “high-

level officers” of 3 Amigos. Failing to meet the pleading

requirements for alleging scienter mandates dismissal of

Skypoint’s 10(b) claims.

(Id.) The Court, considering the complaint in its entirety,

accepting all factual allegations as true, and taking into account

plausible opposing inferences, disagreed and found the Third

Amended Complaint alleged sufficient facts which, taken

collectively, gave rise to a strong inference of scienter. (Doc.

#111, p. 13.) In support, the Court cited two cases from this

district: Anderson v. Transglobe Energy Corp., 35 F. Supp. 2d 1363

(M.D. Fla. Feb. 8, 1999) and Page v. Derrickson, 1997 WL 148558

(M.D. Fla. Mar. 25, 1997). (Doc. #111, p. 14.)

In the motion for reconsideration, the defendants first argue

the Court “erroneously relied on a scienter pleading standard that

no longer controls.” (Doc. #116, p. 6.) Essentially the

defendants argue the Court did not apply the PSLRA’s heightened

pleading standard to the Third Amended Complaint, as demonstrated

by the Court’s reliance on two cases that predated the Supreme

Court’s opinions in Ashcroft v. Iqbal, 556 U.S. 662 (2009) and

Tellabs, Inc. v. Makor Issues and Rights, Ltd., 551 U.S. 308

(2007). (Doc. #116, pp. 7-9.) The Court disagrees. The Order

and Opinion stated the heightened pleading standard for scienter

allegations and applied that standard to the facts alleged in the

Third Amended Complaint. (Doc. #111, pp. 11-14.) While the

defendants may disagree with the Court’s ultimate conclusion in

applying the heightened standard, they have not demonstrated

entitlement to reconsideration. See Galle v. Nationstar Mortg.,

LLC, 2018 WL 3390238, *1 (M.D. Fla. Jan. 25, 2018) (“That

Nationstar disagrees with the Court’s conclusion is not a basis

for reconsideration of that conclusion.”).

The defendants next argue that in finding the Third Amended

Complaint’s scienter allegations sufficient, “the Court did not

address a key scienter pleading deficiency raised by Defendants’

[motion to dismiss], namely that the alleged misstatements

supposedly occurred on non-specific dates over a three-month

period from November 2016 to January 2017.” (Doc. #116, p. 10.)

The defendants argue that because the majority of the alleged

misstatements do not have a specific date and the Third Amended

Complaint alleges each defendant made each misrepresentation, “an

alleged misstatement by one Defendant with scienter does not imply

that another defendant repeating the statement necessarily knew of

its falsity.” (Id. p. 11.) The defendants also argue that the

Court failed to address the possibility that Pittman was the source

of all the alleged misinformation, and that the defendants only

repeated the misinformation in good faith over a three-month

period. (Id.)

Having reviewed the defendants’ motion to dismiss, the Court

finds it did not err in failing to address these arguments because

the defendants did not present them as part of their scienter

argument.1 As noted, the motion’s scienter argument, which

consisted of one paragraph, stated the Third Amended Complaint

ignored the requirement to plead scienter with respect to each

defendant and for each alleged violation, and instead

pleads generalized misstatements spread over a three-

month period, utterly failing to identify any factual

basis regarding the state of mind of any maker of any

statement at any time, let alone regarding every

misstatement alleged, as is required to avoid dismissal.

The most scienter the [Third Amended Complaint] bothers

to allege is that Defendants Crawford, BlackburnSteele

and Zaroui were “high-level players” in the scheme to

sell Skypoint an interest in the Project, and/or “high-

level officers” of 3 Amigos. Failing to meet the pleading

requirements for alleging scienter mandates dismissal of

Skypoint’s 10(b) claims.

(Doc. #96, p. 14.) The Court finds this broad assertion does not

1 The Court notes that the motion to dismiss did raise similar

arguments as part of other issues. For example, the motion argued

the Third Amended Complaint’s three-month range allegation was

insufficient under Rule 9(b). (Doc. #96, p. 12.) Similarly, the

motion argued that because Pittman could have made any statements

attributable to defendant 3 Amigos, the other defendants would not

be liable under Janus Capital Group, Inc. v. First Derivative

Traders, 564 U.S. 135 (2011). (Id.) The Court addressed and

rejected each of these arguments. (Doc. #111, pp. 9-10.)

encompass the specific arguments now being advanced relating to

Pittman and the repeating of misinformation. See OCR Sols., Inc.

v. CharacTell, Inc., 2017 WL 6948587, *1 (M.D. Fla. Oct. 6, 2017)

(“A party may abandon an argument by failing to plainly and

prominently raise it, for instance by devoting a discrete section

of his argument to that claim.” (marks and citations omitted));

Connectus LLC v. Ampush Media, Inc., 2017 WL 2620541, *5 (M.D.

Fla. June 16, 2017) (noting “such terse, off-handed references do

not sufficiently raise an argument”). Because the Court finds the

defendants are raising these arguments as applied to scienter for

the first time, reconsideration is inappropriate. See OCR, 2017

WL 6948587, *1 (“[A] motion for reconsideration does not provide

parties the opportunity to present for the first time an argument

that could have been raised when the matter was initially before

the court.”).

2. Plausibility

The defendants next state that the Court erred by using “a

pleading standard with regard to plausibility that no longer

controls.” (Doc. #116, p. 12.) In the prior Order and Opinion,

the Court stated the following:

The defendants also note that the Third Amended

Complaint “repeatedly casts each Defendant as having

made identical serial misrepresentations.” (Doc. #96,

p. 12.) To the extent the defendants are arguing for

dismissal based on the validity of plaintiff’s

allegations, the Court rejects such an argument. See

Hunnings v. Texaco, Inc., 29 F.3d 1480, 1484 (11th Cir.

1994) (“In ruling on a motion to dismiss for failure to

state a claim, the district court must accept the

allegations of the complaint as true and must construe

the facts alleged in the light most favorable to the

plaintiff.”).

(Doc. #111, p. 9 n.1). The defendants argue the Court erred

because “there is no longer any requirement to accept allegations

as true which are conclusory or implausible.” (Doc. #116, p. 12.)

The defendants further argue that because the Third Amended

Complaint alleges each defendant individually made the same

misrepresentations to plaintiff over a three-month period, such

allegations are implausible and the Court erred in accepting them.

(Id. pp. 12-13.)

The Court rejects the defendants’ argument. The prior Order

and Opinion did not apply the wrong standard because the

allegations in the Third Amended Complaint are not implausible.

See Iqbal, 556 U.S. at 678 (noting “[t]he plausibility standard is

not akin to a ‘probability requirement’”); Twombly, 550 U.S. at

556 (noting “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’”

(citation omitted)); Barton v. Florida, 2007 WL 1724943, *1 (N.D.

Fla. June 13, 2007) (noting that under Twombly, the allegations in

the complaint must contain enough factual matter, “taken as true

even if doubtful in fact,” to establish plausible entitlement to

relief).

3. Proximate Causation of Loss

The defendants next suggest “the Court’s analysis of

proximate loss was incomplete.” (Doc. #116, p. 15.) The loss

causation element of a Rule 10b-5 claim requires that the

defendant’s fraud be both the but-for and proximate cause of the

plaintiff’s later losses. FindWhat Inv’r Grp. v. FindWhat.com,

658 F.3d 1282, 1309 (11th Cir. 2011). Stated differently, “loss

causation describes ‘the link between the defendant’s misconduct

and the plaintiff’s economic loss.’” Robbins v. Kroger

Properties, Inc., 116 F.3d 1441, 1447 (11th Cir. 1997) (quoting

Rousseff v. E.F. Hutton Co., Inc., 843 F.2d 1326, 1329 n.2 (11th

Cir. 1988)). The plaintiff must show that the defendant’s fraud—

as opposed to some other factor—proximately caused his claimed

losses; however, the plaintiff need not show that the defendant’s

misconduct was the “sole and exclusive cause” of his injury, but

only that it was a “substantial” or “significant contributing

cause.” FindWhat, 658 F.3d at 1309 (citations omitted). Finally,

loss causation is not subject to the PSLRA’s heightened pleading

requirement and must only be pled in accordance with Federal Rule

of Civil Procedure 8(a)(2). In re Taco Energy, Inc. Sec. Litig.,

2006 WL 2884960, *5 (M.D. Fla. Oct. 10, 2006).

“To sufficiently plead loss causation, the plaintiff can

allege that had they known the truth, they would not have invested,

and that the untruth was in some reasonably direct way responsible

for their loss.” Page, 1997 WL 148558, *6; see also Anderson, 35

F. Supp. 2d at 1369 (same). In the prior Order and Opinion, the

Court found the Third Amended Complaint adequately pled loss

causation because it alleged (1) had plaintiff “known of

Defendants’ fraudulent practices, [plaintiff] would not have

invested or otherwise acquired an interest” in the film, and (2)

as a direct and proximate result of the defendants’ conduct,

plaintiff suffered damages from the investment. (Doc. #111, p.

15; Doc. #93, pp. 35-36.) As noted, the Third Amended Complaint

alleges the film’s investment opportunity “was merely a façade for

a criminal scheme” and the project was a “vehicle for fraud and

theft.” (Doc. #93, p. 35.) In determining the Third Amended

Complaint adequately pled loss causation, the Court cited a prior

decision of this district: In re PSS World Medical, Inc. Securities

Litigation, 250 F. Supp. 2d 1335 (M.D. Fla. 2002). (Doc. #111,

pp. 15-16.)

In seeking reconsideration on this issue, the defendants

first argue PSS World Medical is distinguishable from the present

case. (Doc. #116, p. 15.) The Court disagrees. While the

underlying facts may be different, PSS World Medical involved

similar allegations as those made in the Third Amended Complaint.

See id. at 1351 (“The Court also disagrees with the Defendants

regarding the loss causation element of securities fraud. The

Court finds that the Plaintiffs have averred that the Defendants’

misrepresentations or omissions caused the Plaintiffs’ [sic] to

purchase the inflated stock, and that the Defendants’ fraud in

committing GAAP violations and improprieties was part of a course

of conduct that was ultimately the proximate cause of the

Plaintiffs’ loss”). Regardless, the defendants have not

demonstrated the Court committed clear error in relying on PSS

World Medical, and therefore reconsideration is not warranted.

The remaining arguments presented by the defendants on this

issue relate either to arguments made in the prior motion to

dismiss, or to issues that cannot be decided at the pleading stage.

For example, the defendants state that the Third Amended Complaint

“alleges nothing to distinguish between the losses caused by the

10(b) allegations and those caused by post-investment misconduct.”

(Doc. #116, p. 16.) The Court identified this argument in its

prior Order and Opinion and was unconvinced by it. (Doc. #111,

pp. 14-15); see also FindWhat, 658 F.3d at 1309 (noting that a

plaintiff need not show that the defendant’s misconduct was the

“sole and exclusive cause” of his injury, but only that it was a

“substantial” or “significant contributing cause”). The remainder

of the defendants’ arguments relate to whether plaintiff actually

suffered a loss and how such a loss can be demonstrated. (Doc.

#116, pp. 15-17.) However, such issues are beyond the scope of a

motion to dismiss. See Eastwood Enters., LLC v. Farha, 2009 WL

3157668, *5 (M.D. Fla. Sept. 28, 2009) (noting “loss causation is

a fact-based inquiry that is generally not proper to resolve on a

motion to dismiss”); see also Lormand v. US Unwired, Inc., 565

F.3d 228, 267 n.35 (5th Cir. 2009) (“[S]everal circuit courts and

district courts point out that it is often inappropriate to use a

Rule 12(b)(6) motion as a vehicle to resolve disputes over ‘loss

causation.’”). Accordingly, the Court finds reconsideration on

the issue of loss causation is unwarranted.

4. Reasonable Reliance

The defendants next suggest the Court’s analysis of the

“reasonable reliance” element of the Section 10(b) claim was

incomplete. (Doc. #116, p. 17.) To state a claim for securities

fraud under Section 10(b) and Rule 10b-5, a plaintiff must

adequately allege, inter alia, reasonable or justifiable reliance.

See S.E.C. v. Morgan Keengan & Co., Inc., 678 F.3d 1233, 1244 (11th

Cir. 2012) (noting that in a private enforcement action under

Section 10(b) or Rule 10b-5, a plaintiff must show “justifiable

reliance” on the material misstatement or omission); Ledford v.

Peeples, 657 F.3d 1222, 1248 n.80 (11th Cir. 2011) (“In the Rule

10b-5(b) context, we have used the words ‘justifiably relied’ as

the equivalent of ‘reasonably relied.’”). In the motion to

dismiss, the defendants stated the Third Amended Complaint failed

to meet the requirements for pleading reasonable reliance, and

then presented specific arguments regarding alleged

misrepresentations related to the film’s revenue. (Doc. #96, pp.

15-17.) The Court rejected the argument, finding the Third

Amended Complaint’s allegations that plaintiff relied upon the

misrepresentations when entering into the agreement were

sufficient to allege reasonable reliance. (Doc. #111, p. 17; Doc.

#93, pp. 5, 26.) In doing so, the Court noted the following:

While the defendants challenge whether plaintiff could

have reasonably relied on the alleged misrepresentations

related to revenues, plaintiff has also alleged eight

additional misrepresentations it relied upon when

entering into the agreement. (Doc. #93, pp. 5-24.)

Because the defendants have not argued plaintiff did not

reasonably rely upon these other misrepresentations, and

because the Third Amended Complaint adequately pleads

such reliance, dismissal is inappropriate.

(Doc. #111, pp. 17-18.)

In seeking reconsideration, the defendants argue the Court

erred in determining the reliance argument related only to specific

alleged misrepresentations and not all the alleged

misrepresentations. (Doc. #116, p. 18.) The defendants suggest

the Court “recognized that the reasonable reliance requirement was

problematic regarding the [Third Amended Complaint’s] allegations

regarding revenue,” but “inexplicably . . . upheld the remaining

eight allegations.” (Id.) The defendants then argue that

plaintiff did not act with due diligence in investigating the truth

of the alleged misrepresentations, and that each of the alleged

misrepresentations “was easily verifiable—particularly for a

sophisticated investor.” (Id. at 18.) Accordingly, the

defendants suggest “any claim of reliance on representations made

between one and four months [before the agreement was entered into]

is inherently unreasonable and unjustified.” (Id. p. 19.)

The Court finds the defendants argument does not merit

reconsideration of the prior Order and Opinion’s conclusion

regarding reliance. Even assuming the Court erred in interpreting

the defendants’ argument as applying only to the two alleged

misrepresentations cited in the motion to dismiss, the defendants

still have not demonstrated the Third Amended Complaint fails to

adequately allege reasonable reliance for any of the alleged

misrepresentations. The Third Amended Complaint lists the alleged

misrepresentations, states plaintiff “was ignorant of their

falsity and believed them to be true,” and notes several times

that plaintiff relied on those misrepresentations when entering

into the agreement. (Doc. #93, pp. 5-25, 26, 35.) The Court

finds this sufficient to allege reasonable reliance. See Dekle

v. Glob. Dig. Sols., Inc., 131 F. Supp. 3d 1280, 1288 (S.D. Ala.

2015) (“The Second Amended Complaint identifies the alleged

misrepresentations made by defendants, indicates that ‘Plaintiffs

did not realize the fraudulent nature or falsity of these

representations,’ and alleges that ‘[t]he misrepresentations

caused the Plaintiffs to accept stock rather than cash as partial

payment of the purchase price.’ Such allegations are facially

adequate to plead reliance.” (citation omitted)).

While the defendants argue the Third Amended Complaint fails

to allege “reasonable” reliance because due diligence would have

verified the falsity of the alleged misrepresentations (Doc. #116,

pp. 18-19), the Court finds such an argument beyond the scope of

the pleadings. The Eleventh Circuit has listed eight factors to

consider in determining whether reliance was justified, including

the sophistication of the plaintiff, and noted that all of the

factors “must be considered and balanced in determining whether

reliance was justified.” Bruschi v. Brown, 876 F.2d 1526, 1529

(11th Cir. 1989) (citation omitted). The Court finds that the

determination of whether a party exercised due diligence and the

reasonableness of their reliance are factual inquires more

appropriate at a later stage of proceedings. See Prager v. FMS

Bonds, Inc., 2010 WL 2950065, *5 (S.D. Fla. July 26, 2010) (“Taking

the allegations in Prager’s Amended Complaint as true, the

questions of whether Prager exercised due diligence and reasonably

relied upon the alleged misrepresentations raise factual questions

which cannot be resolved as a matter of law on a motion to

dismiss.”); Carran v. Morgan, 510 F. Supp. 2d 1053, 1059 (S.D.

Fla. 2007) (“With respect to the element of justifiable reliance,

the Court finds that the Amended Complaint properly pleads that

Carran relied on Morgan’s investment advice. As to the question

of whether this reliance was justifiable, the Court concludes that

such a determination requires a factual inquiry to be determined

at a later stage in this litigation.” (citation omitted)).

Accordingly, the Court finds reconsideration on this issue is

unwarranted.2

5. Rule 9(b)

Finally, the defendants argue “the Court gave an incomplete

analysis as to whom the [Third Amended Complaint] attributes

misrepresentations.” (Doc. #116, pp. 13-14.) As noted, the Third

Amended Complaint contains a list of misrepresentations each

defendant, including defendant 3 Amigos, allegedly made to

plaintiff. (Doc. #93, pp. 5-25.) In the motion to dismiss, the

defendants argued any statement attributable to defendant 3 Amigos

could have been made by Pittman, in which case the other defendants

would not be liable. (Doc. #96, p. 12.) The Court rejected this

argument because when the Third Amended Complaint attributes a

2 To the extent the defendants argue plaintiff could not

reasonably rely on any oral representations which differed from

the terms of the film agreement (Doc. #116, pp. 18-19), the Court

is not convinced at this time. The Eleventh Circuit has stated

such a fact is not dispositive in a Section 10(b) claim, but rather

only a factor to consider in determining the reasonableness of

reliance. Bruschi, 876 F.2d at 1530 (“The fact that some

information in the disclosure documents would have indicated that

some of Brown’s alleged oral misrepresentations were unreliable is

a factor to consider, but this factor alone is not dispositive;

all of the relevant factors must be balanced.”); see also Hemenway

v. Bartoletta, 2012 WL 1252691, *6 (M.D. Fla. Apr. 12, 2012) (“[I]n

accordance with Bruschi, Defendants cannot rely on the proffered

documents, such as the Subscription Agreements and the Limited

Partnership Agreements, to dismiss the Hemenways’ § 10(b) and Rule

10b–5 claim on the basis that the documents directly contradict

Defendants’ preceding oral statements.”).

representation to defendant 3 Amigos, it does so “by and through”

one of the other named defendants. (Doc. #111, p. 9; Doc. #93,

pp. 7, 9, 12, 13, 15, 17, 20, 22, 23, 25.)

While “conced[ing] the Court’s point,” the defendants note

that other allegations in the Third Amended Complaint do not have

the “by and through” language. (Doc. #116, p. 14.) For example,

the Third Amended Complaint’s Section 10(b) claim makes

allegations regarding the “Defendants” as well as “3 Amigos,

Zaroui, BlackburnSteele and Crawford.” (Doc. #93, pp. 33-36.)

The defendants argue that because these allegations could

implicate Pittman, the Section 10(b) claim should be dismissed.

(Doc. #116, p. 14.)

The Court disagrees with the defendants’ argument. The Third

Amended Complaint makes numerous references to Pittman and

includes various allegations related to him. (Doc. #93, pp. 2,

14-16, 30, 40, 42.) In contrast, the allegations the defendants

are challenging refer to either the “Defendants” or some

combination of “3 Amigos, Zaroui, BlackburnSteele and Crawford.”

(Doc. #93, pp. 33-36.) Combined with the previous allegations

against defendant 3 Amigos “by and through” one of the other named

defendants, the Court finds the reasonable inference from the

allegations is that they apply to the named defendants and not

Pittman. See In re Faro Technologies Sec. Litig., 534 F. Supp.

2d 1248, 1255 (M.D. Fla. 2007) (noting that on a motion to dismiss,

the Court accepts as true all well-pleaded allegations “and

construes all reasonable inferences therein in the light most

favorable to the plaintiff”).3

As the defendants have not demonstrated the Court committed

clear error or misconstrued the defendants’ prior arguments in the

previous Order and Opinion, the Court finds reconsideration is

unwarranted. Accordingly, the defendants renewed request that the

Court dismiss the Third Amended Complaint’s Section 10(b) claim is

denied.

III.

Having determined reconsideration of the prior Order and

Opinion is unwarranted, the Court turns to the alternative request

for certification for interlocutory appeal.

3 To the extent the defendants argue the Third Amended

Complaint should be dismissed pursuant to the Supreme Court’s

opinion in Janus (Doc. #116, p. 13), the Court disagrees. In

Janus, the Supreme Court held that, for purposes of Rule 10b-5,

“the maker of a statement is the person or entity with ultimate

authority over the statement, including its content and whether

and how to communicate it.” 564 U.S. at 142. The Court further

held that a defendant must have “made” the statement to be liable

for a violation of Rule 10b-5. Id. at 141. As noted, the Third

Amended Complaint contains a list of the alleged misstatements

made to plaintiff and attributes each to the defendants, including

defendant 3 Amigos “by and through” the other defendants. (Doc.

#93, pp. 5-25.) The Third Amended Complaint then states the

defendants “knowingly made the aforementioned false

representations” in an attempt to mislead investors. (Id. p. 26.)

The Court finds this sufficient under Janus to allege who “made”

the alleged misrepresentations.

A. Legal Standard for Certification

As a general principle, interlocutory orders are not

immediately appealable. See CSX Transp., Inc. v. Kissimmee Util.

Auth., 153 F.3d 1283, 1285 (11th Cir. 1998). However, 28 U.S.C.

§ 1292 provides an exception to the general rule. Under Section

1292(b), a district court may certify an interlocutory order for

immediate appellate review if the court makes three findings: (1)

the interlocutory order “involves a controlling question of law”;

(2) over which there is a “substantial ground for difference of

opinion”; and (3) the immediate appeal “may materially advance the

ultimate termination of the litigation.” 28 U.S.C. § 1292(b).

B. Arguments for Certification

The defendants argue that the requirements for certification

are met with respect to the following issues: (1) whether the Court

employed the proper PSLRA pleading standard regarding scienter;

(2) whether the Third Amended Complaint adequately pleads scienter

as to each of the defendants; (3) whether the Third Amended

Complaint meets the pleading requirements of Rule 9(b), Rule 8(a),

and plausibility; (4) whether the Third Amended Complaint

adequately pleads plaintiff’s justifiable reliance; and (5)

whether the Third Amended Complaint adequately pleads proximate

causation of losses. (Doc. #116, pp. 19-20.)

Having reviewed the defendants’ argument, the Court finds

certification is inappropriate because there is not a “substantial

ground for difference of opinion” on the above issues. Regarding

the defendants’ first argument, the prior Order and Opinion

described the heightened pleading standard under the PSLRA, and

the Court applied that standard to the scienter allegations in the

Third Amended Complaint. Similarly, the Court applied the proper

pleading standards under Rules 8 and 9 of the Federal Rules of

Civil Procedure, as well as the Supreme Court’s plausibility

standard, and determined the Section 10(b) claim was sufficiently

pled to survive dismissal. While the defendants may disagree with

the Court’s conclusion, such disagreement does not amount to a

“substantial ground for difference of opinion.” See Reyes v. BCA

Fin. Servs., Inc., 2018 WL 2849768, *3 (S.D. Fla. June 8, 2018)

(noting “the mere claim that the district court’s ruling is

incorrect does not support a finding that there is substantial

ground for difference of opinion” (citation omitted)). Therefore,

the Court declines the defendants’ request to certify the prior

Order and Opinion for interlocutory appeal.

Accordingly, it is hereby

ORDERED:

Defendants’ Motion for Reconsideration (Doc. #116) is DENIED.

DONE and ORDERED at Fort Myers, Florida, this 23rd day

of September, 2019.

J E. STEELE

5 IOR UNITED STATES DISTRICT JUDGE

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