Lantz Retirement Investments, LLC v. Brian Glover

• Court: Court of Appeals for the Ninth Circuit
• Decided: May 18, 2023
• Docket: 22-15171
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS MAY 18 2023 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

LANTZ RETIREMENT INVESTMENTS, No. 22-15171 LLC, a California limited liability company; et al., D.C. No. 1:19-cv-00379-DAD-SAB Plaintiffs-Appellants,

v. MEMORANDUM*

BRIAN GLOVER, an individual; et al.,

Defendants-Appellees.

Appeal from the United States District Court for the Eastern District of California Dale A. Drozd, District Judge, Presiding

Argued and Submitted May 11, 2023 San Francisco, California

Before: MURGUIA, Chief Judge, and FRIEDLAND and BENNETT, Circuit Judges.

Plaintiffs-Appellants appeal the district court’s order dismissing their first

amended complaint, which asserts various federal and state-law claims against

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Defendants-Appellees.1 Reviewing de novo, we affirm. See Vess v. Ciba-Geigy

Corp. USA, 317 F.3d 1097, 1102 (9th Cir. 2003).

Plaintiffs bring several fraud-based claims subject to Rule 9 of the Federal

Rules of Civil Procedure: intentional misrepresentation; negligent

misrepresentation; securities fraud under 17 C.F.R. § 240.10b-5; misrepresentation

and fraud under California Corporations Code §§ 25401 & 25501; and securities

fraud under Oregon Revised Statutes §§ 59.115 & 59.135 (including aiding and

abetting under § 59.115). See Kearns v. Ford Motor Co., 567 F.3d 1120, 1124-27

(9th Cir. 2009). Plaintiffs rest these claims on several alleged misrepresentations,

none of which can sustain their claims.

First, Plaintiffs allege that Defendants misrepresented that they would

finance the Courtyard Towers acquisition exclusively with a takeout loan. But

Plaintiffs never allege that Defendants represented that a takeout loan would be the

only source of financing used to acquire Courtyard Towers, so there was no

misrepresentation about financing. See Lazar v. Superior Ct., 12 Cal. 4th 631, 638

(1996) (explaining that fraud requires, as relevant here, a false representation).

1 Plaintiffs bring all claims against Defendants Brian Glover, Mark Smith, and Gregory Roderick (“Roderick”), and Frontier. Plaintiffs bring all claims except their derivative claim under Oregon state law against Newmark Grubb ASU & Associates. Plaintiffs bring their federal and Oregon state-law securities fraud claims against Bide LLC and Roderick LLC. Plaintiffs sued Mesa Senior Living Community, LLC/Courtyard Towers but did not assert any claims against it.

2 Second, Plaintiffs allege that Defendants misrepresented that Roderick

would buy out Plaintiffs’ shares if they became unhappy with their investment.

But Plaintiffs never allege that Defendants represented that Roderick promised to

buy out Plaintiffs’ shares if they became unhappy with their investments, so there

was no misrepresentation about buyouts, nor do they properly allege that any

Plaintiff made a demand for return of their investment that was refused. See

Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993) (explaining that

information-and-belief fraud allegations may be proper when “the facts

constituting the circumstances of the alleged fraud are peculiarly within the

defendant’s knowledge”).

Third, Plaintiffs allege that Defendants misrepresented that Courtyard

Towers was a “good investment.” But Plaintiffs nowhere allege that they had been

planning to pull out of the Mesa deal but were lulled into staying in the deal

because of this statement. See Lazar, 12 Cal. 4th at 638 (explaining that justifiable

reliance is an element of fraud).

Fourth, Plaintiffs allege that Defendants misrepresented that Frontier

Management would increase occupancy rates at Courtyard Towers. But Plaintiffs

merely allege that Defendants provided updates about existing occupancy rates at

Courtyard Towers, not any misrepresentation about future occupancy rates.

Fifth, Plaintiffs allege that Defendants misrepresented that Frontier would

3 decrease operating expenses. But Defendants’ statements about operating

expenses are at best predictions that fall into the general rule that predictions about

the future cannot qualify as misrepresentations. See Cansino v. Bank of Am., 169

Cal. Rptr. 3d 619, 626 (Ct. App. 2014).

Sixth, Plaintiffs allege that Defendants misrepresented that Plaintiffs would

receive 10-12% in revenue distributions monthly. But this, too, is a statement

about the future that falls into the general rule that predictions about the future

cannot qualify as misrepresentations. See id.

Seventh, Plaintiffs allege that Defendants misrepresented their intention to

follow through on the exit strategy. But the complaint’s conclusory information-

and-belief allegation that Defendant’s statement was false when it was made

violates Rule 9. See Neubronner, 6 F.3d at 672 (explaining that proper

information-and-belief fraud allegations require stating the basis for believing the

allegations).

Eighth, Plaintiffs allege that Defendants misrepresented that two companies

had expressed an interest in owning Mesa in the future. But this information-and-

belief allegation, too, violates Rule 9. See id.

Ninth, Plaintiffs allege that Defendants misrepresented that Mesa would be

worth $28-30 million in two to three years. But this, too, is a statement about the

future that falls into the general rule that predictions cannot qualify as

4 misrepresentations. See Cansino, 169 Cal. Rptr. 3d at 626.

Tenth, Plaintiffs allege that Defendants misrepresented that Glover and

Roderick would not collect management fees. But the First Amended Operating

Agreement confirms that the parties agreed that Glover and Roderick could be

compensated for their management services.

Eleventh and finally, Plaintiffs allege that Defendants misrepresented that

Mesa would not incur any debt until the bank loan to finance Courtyard Towers

was paid in full. But that alleged statement occurred months after Plaintiffs

invested in Mesa and after Mesa’s purchase of Courtyard Towers closed, so it

cannot form the basis of any fraud theory. See Lazar, 12 Cal. 4th at 638

(explaining that justifiable reliance is an element of fraud).

Plaintiffs’ remaining claim, which is brought under Oregon Revised Statutes

§ 63.801, fails because the Complaint alleges no demand “to obtain action by the

managers or the members who would otherwise have the authority to cause the

limited liability company to sue in its own right, and either that the demand was

refused or ignored or the reason why a demand was not made.” See Or. Rev. Stat.

§ 63.801(2).

Plaintiffs have not shown any error warranting remand for leave to amend.

The district court already gave Plaintiffs an opportunity to amend, and Plaintiffs

have failed to explain how any amendment they could make would remedy the

5 deficiencies in their claims. See Bolden-Hardge v. Off. of Cal. State Controller, 63

F.4th 1215, 1220 (9th Cir. 2023).

The request for judicial notice (Dkt. No. 38) is denied as irrelevant to our

disposition.

AFFIRMED.