United States District Court, N.D. Iowa
ORDER ON MOTION TO DISMISS
DONALD E. O'BRIEN, Senior District Judge.
I. INTRODUCTION AND BACKGROUND
This matter is currently before the Court on Defendant Tyler Bruch and Defendant Bruchside, Inc.'s [hereinafter collectively as Bruch] second Motion to Dismiss, Docket No. 126; Defendant Artah Holdings, LLC, and Defendant Art A. Hall's [hereinafter Collectively as Artah] second Motion to Dismiss, Docket No. 131.
The Defendants' Motions raise various issues arguing that the Court should dismiss the Plaintiffs' Amended Complaint, Docket No. 119. The Court has considered the parties' arguments and now enters the following.
II. BACKGROUND/PROCEDURAL HISTORY/STATEMENT OF FACTS
The above-captioned case arises in the context of securities fraud. In short, the Plaintiffs, a group of upper-midwest farmers/investors, gave money to the Defendants. The Defendants purported to be engaged in lucrative farming/agricultural operations in the South American country of Brazil, and solicited the Plaintiffs' money as investments in those Brazilian farms. However, the Brazil operations failed to make money; and the Plaintiffs did not see any returns on their investments. The Plaintiffs believe the Defendants committed fraud regarding the investments. Specifically, they allege the Brazil farming operation was essentially a Ponzi scheme perpetuated by the Defendants. Based on that belief, the Plaintiffs filed the present lawsuit.
The Plaintiff group is comprised of thirty-six individuals and businesses that invested in Defendant Bruch's and Defendant Hall's various ventures. The Plaintiffs filed their initial Complaint, Docket No. 1, on November 8, 2011. In the initial Complaint, the Plaintiffs named nine Defendants: Global Agricultural Investments, LLC; Tyler Bruch; Bruchside, Inc.; Art A. Hall; Artah Holdings, LLC; Popular Securities, Inc.; BOL, LLC; Alan Kluis and Elia Tasca. After numerous extensions, the Defendant Bruch filed its original Motion to Dismiss, Docket No. 57, September 4, 2012. Defendant Artah filed its original Motion to Dismiss, Docket No. 58, the same day. The Plaintiffs filed a Resistance on December 3, 2012. Docket No. 80. On January
15, 2013, the Plaintiffs filed their first Amended Complaint, Docket No. 96, which superseded their original Complaint. Shortly thereafter, Defendant Bruch filed a Motion for an in-person oral argument on the pending Motions. The Court set a hearing date on the motion for oral argument for January 22, 2013. On January 25, 2013, Defendant Artah filed a Supplemental Motion to Dismiss, Docket No. 104, based on the Plaintiffs' Amended Complaint. The Court held an in-court hearing on the initial batch of Motions to Dismiss on April 18, 2013. The parties did not finish their arguments during the hearing on April 18, 2013, and a subsequent telephone hearing was held on April 29, 2013. On July 31, 2014, the Court entered an Order denying in part and granting in part the Defendants' Motions to Dismiss. See Docket No. 114. Pursuant to that Order, the Plaintiffs were directed to file a second Amended Complaint. Id. The Plaintiffs filed their second Amended Complaint on September 30, 2014. On November 25, 2014, Defendant Bruch filed their second Motion to Dismiss, Docket No. 126. On December 15, 2014, Defendant Artah filed their second Motion to Dismiss. Docket No. 131. On January 9, 2015, the Plaintiffs filed a Resistance. Docket No. 132. Defendants filed a joint reply on February 13, 2015. See Docket Nos. 137 and 138.
The Court previously set out the alleged factual background in its Order on the original Motions to Dismiss. See Docket No. 114, pp. 4-9. The factual allegations have not changed, and the Court need not repeat them again here.
III. MOTION TO DISMISS STANDARD
The notice pleading standard of Federal Rule of Civil Procedure 8(a)(2) requires a plaintiff to give "a short and plain statement showing that the pleader is entitled to relief."
Federal Rule of Civil Procedure 12(b) lays the groundwork for defendants to file pre-answer motions to dismiss. Under that rule:
[e]very defense to a claim for relief in any pleading must be asserted in the responsive pleading if one is required. But a party may assert the following defenses by motion: (1) lack of subject-matter jurisdiction; (2) lack of personal jurisdiction; (3) improper venue; (4) insufficient process; (5) insufficient service of process; (6) failure to state a claim upon which relief can be granted; and (7) failure to join a party under Rule 19. A motion asserting any of these defenses must be made before pleading if a responsive pleading is allowed. If a pleading sets out a claim for relief that does not require a responsive pleading, an opposing party may assert at trial any defense to that claim. No defense or objection is waived by joining it with one or more other defenses or objections in a responsive pleading or in a motion.
Fed. R. Civ. P. 12(b).
In order for the Court to dismiss a claim under Federal Rule of Civil Procedure 12(b)(1), the opposing party must successfully challenge the claim "on its face or the factual truthfulness of its averments." Titus v. Sullivan, 4 F.3d 590, 593 (8th Cir. 1993). Facial challenges are limited to analyzing the face of the complaint. Biscanin v. Merrill Lynch & Co., Inc., 407 F.3d 905, 907 (8th Cir. 2005).
However, many, if not most, motions to dismiss are brought under Rule 12(b)(6). In order to meet that standard and to survive a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009) (internal quotations and citation omitted). This requirement of facial plausibility means that the factual content of the plaintiff's allegations must "allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Cole v. Homier Distrib. Co., Inc., 599 F.3d 856, 861 (8th Cir. 2010). Furthermore, courts must assess the plausibility of a given claim with reference to the plaintiff's allegations as a whole, not in terms of the plausibility of each individual allegation. Zoltek Corp. v. Structural Polymer Group, 592 F.3d 893, 896 n. 4 (8th Cir. 2010) (internal citation omitted). This inquiry is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 664.
"While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds' of his entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal alterations and citations omitted). Nevertheless, although the "plausibility standard requires a plaintiff to show at the pleading stage that success on the merits is more than a sheer possibility, " it is not a "probability requirement." Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009). As such, "a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of the facts alleged is improbable, and that a recovery is very remote and unlikely, " Id.
In assessing "plausibility, " as required by the Supreme Court in Iqbal, the Eighth Circuit Court of Appeals has explained that courts should consider only the materials that are necessarily embraced by the pleadings and exhibits attached to the complaint. See Mattes v. ABC Plastics, Inc., 323 F.3d 695, 697 n. 4 (8th Cir. 2003), stating that "in considering a motion to dismiss, the district court may sometimes consider materials outside the pleadings, such as materials that are necessarily embraced by the pleadings and exhibits attached to the complaint. Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999). The Court may also consider "materials that are part of the public record or do not contradict the complaint." Miller v. Redwood Toxicology Lab., Inc., 688 F.3d 928, 931 (8th Cir. 2012). "A more complete list of the matters outside of the pleadings that a court may consider, without converting a Rule 12(b)(6) motion to dismiss into a Rule 56 motion for summary judgment, pursuant to Rule 12(d), includes matters incorporated by reference or integral to the claim, items subject to judicial notice, matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint whose authenticity is unquestioned." Van Stelton v. Van Stelton, 11-CV-4045-MWB, 2013 WL 3776813 (N.D. Iowa 2013) (internal citations omitted).
In its previous Order, Docket No. 114, the Court held that:
the Amended Complaint does contain "shotgun" pleadings, like those previously criticized by the 8th Circuit. The Amended Complaint sets out the Plaintiffs, then sets out the Counts, and implies that each Plaintiff pleads each Count in equal measure. The background contained in the Amended Complaint makes such a blanket allegation unlikely. It is clear from the face of the Amended Complaint that each Plaintiff (or Plaintiff Group) is not equally invested in the securities at issue. Some Plaintiffs contributed hundreds of thousands of dollars. Other Plaintiffs paid much less. Some Plaintiffs bought shares in each of the securities. Some bought into only a few of the securities. Some heard about the securities from family members. Some received written solicitations. Some attended presentations where the Defendants orally offered the securities. Thus, it is not plausible that each Count affects each Plaintiff the same way. Accordingly, the Plaintiffs are directed to file a Second Amended Complaint within 45 days of the date of this Order. In that Second Amended Complaint[, ] the Plaintiffs shall set out those Counts that survive the present Motions to Dismiss, and then state which Defendant(s) and which Plaintiff(s) the individual Counts apply to.
Docket No. 114, pp. 28-29. Pursuant to that Order, the Plaintiffs filed the second Amended Complaint, Docket No. 119. In its second Motion to Dismiss, Defendant Bruch makes three primary arguments. First, Defendant Bruch argues that the Plaintiffs' new Amended Complaint still contains shotgun pleadings. Second, Defendant Bruch argues that Plaintiffs fail to state a valid section 12(a)(2) claim in Count I. Finally, Defendant Bruch argues that Plaintiffs' Count II fails to state a Section 10(b)/Rule 10b-5 claim.
Defendant Artah largely adopts the arguments of Defendant Bruch, with a few clarifications set out in their brief. Docket No. 131, Att. 1.
The Court will consider these ...