United States District Court, N.D. Illinois, Eastern Division
LINA DOU, TINGYANG SHAO, YIXUAN TAO, XIUQUIN XING, EMMY GO, YANMING WANG, SHIYANG XIAO, LIHONG ZHAN, GELI SHI, and YING YAO, on behalf of themselves and all others similarly situated, Plaintiffs,
CARILLON TOWER/CHICAGO LP, FOREFRONT EB-5 FUND ICT LLC, TIZI LLC D/B/A LOCAL GOVERNMENT REGIONAL CENTER OF MINORS, TD BANK NA, SYMMETRY PROPERTY DEVELOPMENT II LLC, FORDHAM REAL ESTATE LLC, AND JEFFREY L. LAYTIN, Defendants.
Charles P. Kocoras, United States District Judge.
the Court is Defendant Carillon Tower/Chicago L.P.
(“Carillon”), Forefront EB-5 Fund (ICT) LLC
(“Forefront”), Symmetry Property Development II
LLC (“Symmetry”), and Jeffrey Laytin's
(“Laytin”) (collectively, the “Carillon
Defendants”) motion to dismiss the Plaintiffs'
First Amended Complaint pursuant to Federal Rule of Civil
Procedure 12(b)(6). For the following reasons, the motion is
underlying facts in this case are detailed in our prior
opinion. For purposes of this motion, the Court
accepts as true the facts from the amended complaint.
Murphy v. Walker, 51 F.3d 714, 717 (7th Cir. 1995).
All reasonable inferences are drawn in the Plaintiffs'
favor. Tamayo v. Blagojevich, 526 F.3d 1074, 1081
(7th Cir. 2008).
April 16, 2019, the Carillon Defendants filed the instant
motion to dismiss the amended complaint pursuant to Federal
rule of Civil Procedure 12(b)(6). This type of motion
“tests the sufficiency of the complaint, not the merits
of the case.” McReynolds v. Merrill Lynch &
Co., 694 F.3d 873, 878 (7th Cir. 2012). Plaintiffs need
not provide detailed factual allegations, but they must
provide enough factual support to raise their right to relief
above a speculative level. Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007). A claim must be
facially plausible, meaning that the pleadings must
“allow…the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). The claim must be described “in sufficient
detail to give the defendant ‘fair notice of what
the…claim is and the grounds upon which it
rests.'” E.E.O.C. v. Concentra Health Servs.,
Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting
Twombly, 550 U.S. At 555). “Threadbare
recitals of the elements of a cause of action, supported by
mere conclusory statements, ” are insufficient to
withstand a 12(b)(6) motion to dismiss. Iqbal, 556
U.S. at 678.
Plaintiffs' amended complaint articulates six counts
against the Carillon Defendants: (1) Count I for violations
of the Securities Exchange Act, under 15 U.S.C. §78j;
(2) Count II for violations of the Illinois Securities Act;
(3) Count VII for fraud; (4) Count III for breach of
contract; (5) Count IV for breach of fiduciary duty; and (6)
Count IX for appointment of a third-party
administrator. The Carillon Defendants have filed the
instant motion seeking dismissal of all counts. We evaluate
each in turn.
Sufficiency of Count I Federal Securities Exchange Act
10b-5 “forbids making any untrue statement of a
material fact or…omitting to state a material fact
necessary in order to make the statements made, in light of
the circumstances under which they were made, not
misleading…in connection with the purchase or sale of
any security.” Howe v. Shchekin, 238 F.Supp.3d
1046, 1051 (N.D. Ill. 2017). “The canonical elements of
a claim under § 10(b) of the Securities Exchange
Act…and Rule 10b-5 are falsehood in connection with
the purchase or sale of securities, scienter, materiality,
reliance, causation, and loss.” Schleicher v.
Wendt, 618 F.3d 769 (7th Cir. 2010). Such a claim is
subject to the heightened pleading standard of Rule 9(b),
meaning that the complaint must be stated with particularity.
Fed.R.Civ.P. 9(b). However, the Private Securities Litigation
Reform Act (“PSLRA”) imposed further pleading
requirements on Rule 10b-5 claims. Specifically, “the
PSLRA instructs that the complaint shall specify each
statement alleged to have been misleading…and the
reason or reasons why the statement is misleading.”
Howe, 238 F.Supp.3d at 1051-52. Further, the
complaint must “give rise to a strong inference that
the defendant acted with the required state of mind.”
Id. at 1052.
Plaintiffs have adequately alleged a breach of the Securities
Exchange Act. The Plaintiffs argue that the Carillon
Defendants allegedly induced them via the Holdback Trigger
clause to make this deal attractive to investors in the first
place. By relying on this clause, the Plaintiffs'
understanding was that their money would be released only
when “the project plan was formally submitted to the
Commissioner.” However, the investors' funds were
allegedly released before the formal submission of the
project plans. Indeed, the Plaintiffs plausibly claim that
the alleged purpose of the Holdback Trigger clause was to
induce the Plaintiffs into investing, while giving the
impression that their money would be safeguarded.
the Plaintiffs have adequately pleaded scienter. The Carillon
Defendants are allegedly an associated entity that played a
role in enabling the release of the money in contravention of
the Holdback Trigger clause. The Plaintiffs' allegations
are clear: the Carillon Defendants “knowingly and with
scienter fraudulently inserted the Holdback Trigger …
with no intention of honoring it.” While subsequent
discovery may prove otherwise, the Plaintiffs have adequately
asserted Count I for the present motion.
Sufficiency of Count II Illinois Securities Act
elements of claims under Sections 12F and 12G of the Illinois
Securities Act “substantially overlap with those of a
10b-5 claim.” Frankfurt v. Mega Entm't
Group, II, No 15 CV 667, 2018 U.S. Dist. LEXIS
8640, *19 (N.D. Ill. 2018). “A plaintiff must
demonstrate that the defendant (1) made a misstatement or
omission of material fact, (2) in connection with the
purchase or sale of securities, (3) upon which the plaintiff
relied.” Id. at *19-20.
on our analysis in Count I, we find that the Plaintiffs have
adequately pled a violation under the Illinois Securities
Sufficiency of ...