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

United States Court of Appeals, Eighth Circuit

March 30, 2015

Streambend Properties II, LLC; Streambend Properties VIII, LLC, Plaintiffs - Appellants
Ivy Tower Minneapolis, LLC, et al., Defendants - Appellees

Submitted: December 9, 2014.

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Appeal fro United States District Court for the District of Minnesota - Minneapolis.

For Streambend Properties II, LLC, Streambend Properties VIII, LLC, Plaintiffs - Appellants: Sara M.G. Engberg, Minneapolis, MN.

For Ivy Tower Minneapolis, LLC, Ivy Tower Development, LLC, Moody Group, LLC, Goben Enterprises, LP, Jeffrey Laux, Gary Benson, Defendants - Appellees: Aaron M. Ninnemann, Thomas William Pahl, Wyatt S. Partridge, Foley & Mansfield, Minneapolis, MN.

For Wischermann Holdings, LLC, Defendant - Appellee: Daniel J. Herber, Faegre & Baker, Minneapolis, MN.

For Burnet Realty, LLC, Defendant - Appellee: William Lawrence Davidson, Richard A. Lind, Matthew D. Sloneker, Lind & Jensen, Minneapolis, MN.

For Commonwealth Land Title Insurance Company, Defendant - Appellee: Brian M. Sund, Kerry Ann Trapp, Morrison & Sund, Minnetonka, MN.

Before LOKEN, BYE, and SMITH, Circuit Judges.


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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 court[1] 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

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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 F.App'x 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 judge[2] 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" ), alleged

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to 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 ...

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