TERRENCE G. BERG, District Judge.
Between 2015 and 2017, before dying unexpectedly in a plane crash, Marshall S. Michaelian, a successful endodontist from California, had invested some $800,000 with West Bloomfield, Michigan-based Defendants Mark Bello and his company, Lawsuit Financial, Inc. Lawsuit Financial is a business that extends financing to support plaintiffs' lawsuits in exchange for a portion of any eventual recovery. After Dr. Michaelian's death, his widow, Plaintiff Judith Michaelian, sought to have the investment funds returned. On her own behalf, and that of the Estate of Marshall S. Michaelian, also Plaintiff, Judith Michaelian brings this lawsuit making a number of claims against Defendants. Defendants have now moved for summary judgment, ECF No. 25, and Plaintiffs respond with a Cross-Motion for Partial Summary Judgment, ECF No. 49. For the reasons given below, Plaintiffs' Motion for Partial Summary Judgment is granted in part. Defendants' Motion for Summary Judgment is denied.
Defendant Bello met Marshall Michaelian through a mutual friend in 2010. ECF No. 25-1 PageID.1250. According to Defendant's testimony, Dr. Michaelian invested
In 2011, an institutional lender, Brevet Capital, wished to become Lawsuit Financial's sole investor. ECF No. 25-2 PageID.1278. Marshall received $577,847.02 as a result of Brevet's buyout, representing both "profits" and "an 8% interest factor" on "investments being purchased" by Brevet. ECF No. 31-4 PageID.2989.
In 2014, Brevet and Defendant Lawsuit Financial ended their exclusivity agreement and Lawsuit Financial again began accepting additional capital investments. Id. at PageID.1252. Defendant Bello reached out to Dr. Michaelian to advise him that he could invest again. Id. However, Dr. Michaelian did not transfer any money to Defendants during 2014. Defendant Bello maintains that he never pressured Dr. Michaelian into transferring money to him, and that they fully discussed the risk involved in the investment. Id. During this same period, Bello was also contacting numerous other potential investors to try to replace Brevet's capital in Lawsuit Financial so that Lawsuit Financial could continue to fund cases. ECF No. 49 PageID.4245-47. It appears from the record that only one other person, Warren G. Levenbaum, invested in Lawsuit Financial during this time period in response to Bello's solicitations. Deposition of Mark Bello, ECF No. 49-6 PageID.4515.
The parties disagree on the terms of the agreement between Dr. Michaelian and Defendants that governed their relationship beginning in early 2015. On November 6, 2014, Defendant Bello emailed Dr. Michaelian another "split funding agreement," similar to the 2010 SFA. This agreement is hereinafter referred to as "2014 SFA." The copy of the 2014 SFA in the record is dated November 10, 2014. ECF No. 1-4 PageID.61. In the first email transmitting the 2014 SFA, Defendant Bello wrote, "Attached hereto is a `split funding agreement' similar to the one that we did 4 years ago . . . Please review and advise. If the agreement meets with you [sic] approval, please print two originals, execute them and return them to my office with a check or wire for the $400K we discussed. I will provide a fully executed original by return overnight UPS." ECF No. 31-6 PageID.2994.
Marshall replied to this email indicating that he was not able to open the document. ECF No. 31-8 PageID.2996. But on November 26, 2014, Defendant Bello emailed Marshall again, writing, "I need all you can "Marshall" up and I need it early next week, if possible. . . . You have the Split Funding Agreement. If you have Microsoft Word, all you have to do is change the amount from $400,000 to the amount you are investing; everything else stays the same." ECF No. 31-8 PageID.2998. Again, Dr. Michaelian did not actually send any money at this time and it is not clear from the record whether he was able to open the document containing the 2014 SFA. The copy of the 2014 SFA available to the Court in the record is not signed either by Dr. Michaelian or Defendant Bello.
The 2014 SFA states, "LF is in the business of providing nonrecourse financing to claimants/plaintiffs arising out of their cases. MM wishes to invest in such cases." ECF No. 49-2 PageID.4291. The 2014 SFA also contains the following language:
In plain terms, this section of the 2014 SFA prescribes a fifty-fifty split on profits from cases funded with Dr. Michaelian's investment, with one-fifth of each party's share going into a loss insurance account. The purpose of the loss insurance account is to ensure that funds are available to repay the principal amount of Dr. Michaelian's loan. Further, the agreement provides an additional "guarantee" that "investment returns under this agreement shall be no lower than 13% per annum." The 2014 SFA also includes a six-month liquidation guarantee. Id. at PageID.4293 ("MM has the option of receiving back all accumulated investment provided that MM gives 6 months written notice to LF.").
The 2014 SFA contains language that appears at first blush to contradict the six-month liquidation guarantee: "LF will have no obligation to immediately repay any funds to MM and the obligation of LF to MM under this agreement as to any particular claim or case will await the availability of prospective funds in the reserve account as a source for payment to MM during the pendency of this agreement or after notice is given of withdrawal of MM's capital account." Id. at PageID.4292. But this provision does not say MM has no right to withdraw his investment on six-months' notice, only that LF's obligation to pay him back depends on the availability of funds in the reserve account.
Bello invited Dr. Michaelian to modify the 2014 SFA on an ongoing basis by changing the amount to be invested in paragraph 3, noting that "everything else stays the same." Nov. 26, 2014 Email from Mark Bello to Marshall Michaelian, ECF No. 49-28 PageID.4686. However, nothing in the record indicates that Dr. Michaelian did so until the 2017 SFA, which the Court discusses below.
As Dr. Michaelian had still not forwarded any funds following these earlier emails, on February 23, 2015, Defendant Bello emailed him again asking if he could "invest" in Lawsuit Financial. ECF No. 31-10 PageID.3002. This time, Dr. Michaelian told Defendant Bello that he would be able to invest as soon as his home, which was currently listed on the market, sold. Id. On March 12, 2015, Defendant Bello emailed again, telling Dr. Michaelian that there was a limited opportunity to invest in a portfolio of "surgical/medical" cases. Id. On March 25, 2015, Dr. Michaelian responded with what appears to be a confirmation that he transferred $70,000 to Bello. ECF No. 31-2. Plaintiff testified that Dr. Michaelian signed the 2014 SFA and sent it to Bello prior to wiring this initial sum, but that Bello never returned that document with his own signature. Declaration of Judith Michaelian, ECF No. 49-1. In the confirmation email for the initial $70,000 wire, Dr. Michaelian also wrote, "Please send me our joint agreement for my records (just in case something happens to me)." Id. Neither at this time, nor at any time thereafter, from what the record shows, did Dr. Michaelian ever update the amount of the investment as listed on the 2014 SFA.
In response to Dr. Michaelian's $70,000 confirmation, Bello wrote, "Per our discussion and your request, these funds will be invested into the medical treatment/legal cases we spoke about and we will split profits on a non-recourse basis as we have in the past. Thanks for your investment and your confidence in our company." Id.
The record contains several emails after March 25, 2015 in which Bello and Dr. Michaelian discuss Dr. Michaelian wiring large amounts of money to Lawsuit Financial. For example, on May 5, 2014, Dr. Michaelian sends an email confirming that he has just wired Bello $130,000. Bello responds, "The money will be put to good use and invested wisely; I won't let you down." ECF No. 49-46 PageID.4788.
The 2014 SFA comes up again on May 29, 2015. In an email on that date, Dr. Michaelian writes to Bello, "You will receive this today.
On February 5, 2016, Dr. Michaelian sent another email to Bello that appears to describe Dr. Michaelian's understanding of the terms of their agreement: "Good Morning Mark, we did discuss two options. One was 50/50 like we had before which included time to invest the funds. Second, was a straight % starting when you received the funds. I opted for the second and you thought that was a better choice for my circumstances. (i.e [sic] less gain, but less risk). The timing of investing should also be close as my recall is that you wanted to take on some of the cases asap and needed the funds pronto."
On June 4, 2016, Dr. Michaelian wrote, "[W]hen I cut back [work hours] I will need to start taking funds from the account on a quarterly basis. I'm projecting $80K for the year in 2017 or $20/quarter [sic]." ECF No. 25-3 PageID.1297. The June 4, 2016 email is significant because Defendant Bello initially argued that it set a new repayment schedule for the parties' agreement concerning Dr. Michaelian's investment. Defendants' Motion for Summary Judgment, ECF No. 25-1 PageID.1263. Between March 25, 2015 and February 16, 2017, Dr. Michaelian wired Lawsuit Financial $600,000. Plaintiff's Spreadsheet of Funds Using Actual Dates Wired, ECF No. 49-44. Defendants do not dispute this accounting. Therefore, this is the amount of money that is allegedly subject to the terms of the 2014 SFA.
There is another version of the Split Funding Agreement in the record, however, which is dated March 1, 2017 ("2017 SFA"). Dr. Michaelian sent two copies of this agreement in July of 2017 to "The Entrust Group," the entity managing the Michaelians' Individual Retirement Accounts, as support for their requests to transfer funds from each of their IRA accounts to be invested in Lawsuit Financial.
The 2017 SFAs are identical to the 2014 SFA except that they do not include the six-month repayment term that was included in the 2014 SFA. Rather than providing that the investor may demand repayment on six months' notice, the 2017 SFAs contain only the provision that "LF will have no obligation to immediately repay any funds to MM and the obligation of LF to MM under this agreement as to any particular claim or case will await the availability of prospective funds in the reserve account as a source for payment to MM during the pendency of this agreement or after notice is given of withdrawal of MM's capital account." 2017 SFA, ECF No. 49-45 PageID.4753. As noted above, this last term also appears in the 2014 SFA.
On July 13, 2017, Dr. Michaelian emailed Bello that his pension administrator, The Entrust Group, would be wiring $250,000 as an "additional investment" for Lawsuit Financial, but that he was asking Bello to limit the amount to only $200,000, and to return $50,000 to Dr. Michaelian. ECF No. 31-24 PageID.3310. Dr. Michaelian's reason for structuring the transaction this way is unclear.
With the additional $200,000 allegedly invested pursuant to the 2017 SFAs, Dr. Michaelian and Plaintiff Judith Michaelian had by then invested a total of $800,000 in Lawsuit Financial. Plaintiffs argue that, taking into account the accumulation of unpaid interest, as of August 6, 2018, Defendants owed them $1,059,941.
It is not clear from the record which specific cases Defendant Bello funded using the Michaelians' money. In fact, Defendant Bello himself—who is also the Defendant corporation's representative— appears not to know. See Deposition of Mark Bello, ECF No. 49-6 PageID.5420. The record does reflect that, in addition to funding the cases contemplated by the 2014 SFA, Defendant also used Michaelian funds to purchase medical receivables, that is, debts owed to medical providers for services rendered to patients. ECF No. 49-6 PageID.4508; ECF No. 49-6 PageID.4526.
After Dr. Michaelian's death in August 2017, Plaintiff emailed Defendant Bello requesting immediate return of the portion of the July 13, 2017 wire that had not yet been invested in cases ($164,500) and distribution of payouts immediately upon settlement of cases in which Bello had invested Michaelian funds. ECF No. 31-25 PageID.3312. On September 22, 2017, Plaintiff's sons, Daniel and Marshall, Jr., along with attorney Catherine Reisterer, met with Defendant Bello to discuss the situation and they secretly recorded the meeting. Declaration of Marshall Michaelian, Jr., ECF No. 49-51 PageID.4896.
The core of the dispute between the parties is whether the 2014 SFA controls the parties' obligations concerning the investment funds. Defendants argue that Dr. Michaelian's May 29, 2015 email abrogated all terms of the 2014 SFA, and created a new framework governing their relationship. Plaintiffs argue that Dr. Michaelian merely selected one of the options—the 13% annual interest guarantee—contained in the 2014 SFA and forfeited another—sharing the recovery from pending cases—leaving the remaining terms in the 2014 SFA in full effect. While there is support in the record for the proposition that both Dr. Michaelian and Defendant Bello accepted the view that these alternative repayment options were available under the 2014 SFA,
Defendant Bello's position regarding whether the 2014 SFA governs the parties' obligations has shifted over time. During the early stages of this lawsuit, Defendant Bello also maintained that the 2014 SFA controlled the parties' relationship. As late as October 19, 2017, Bello stated that he believed the 2014 SFA was the operative contract. See First Declaration of Mark Bello, ECF No. 15-1 PageID.429. However, Bello now maintains that Dr. Michaelian rejected the terms of the 2014 SFA, based primarily on his May 29, 2015 email. See ECF No. 49-47 PageID.4809. Defendants argue the May 29, 2015 email converted the investment into a loan at 13% interest per year and released Defendants from any obligation to comply with the terms of the SFAs. Defendants also argue in their motion that Dr. Michaelian's June 4, 2016 email established a repayment term of $20,000 per quarter that replaced the six-month repayment guarantee in the 2014 SFA. At oral argument on the motion, Defendants argued instead that the new contract contained no repayment term at all, and that the Court ought to supply a reasonable term.
Bello's latest position regarding the parties' alleged abrogation of the 2014 SFA does not entirely address the impact of the 2017 SFAs on the parties' legal obligations. The 2017 SFAs contain terms nearly identical to those found in the 2014 SFA but govern a smaller portion of the money Plaintiffs sent Defendants. However, none of the extant copies of the 2017 SFA are countersigned by Defendant Bello, they are only signed by either Marshall or Judith Michaelian. Perhaps for these reasons, Defendants have focused their arguments on the 2014 SFA's validity. At oral argument, Defendants posited that the 2017 SFA is also invalid because Defendant Bello did not sign and, allegedly, had never seen it prior to this litigation. Defendants speculated at oral argument that Dr. Michaelian might have created the 2017 SFA by amending a "Word document" version of the 2014 SFA. This theory does not explain why Dr. Michaelian would have removed the six-month repayment term, favorable to him, when creating the 2017 version, nor why—if he were manipulating a Word document copy of the 2014 SFA—the amount of $125,000 was hand-written in. And perhaps most significantly, Defendants' claim that in 2017 Dr. Michaelian adopted a copy of the 2014 SFA, unilaterally amended its terms, and then signed it in connection with a sum of money he invested with Bello, is inconsistent with Defendants' argument that Dr. Michaelian had previously rejected the terms of the 2014 SFA and intended to operate under a completely different set of terms. Regardless, Defendants presented this theory only in oral argument, not in sworn testimony.
Defendant Bello does concede that he and his company did not maintain the "Loss Insurance Account" as required under the SFAs. This is significant because the purpose of that account was to ensure that funds would be available to allow Dr. Michaelian to recover the principal amount of his investment. Defendants' Response to Plaintiffs' Request for Admissions, ECF No. 49-7 PageID.4607. Defendants also admit that they did not keep a separate account holding the Michaelian's funds, Id. at PageID.4600, and did not comply with the securities registration law Plaintiffs have sued them for violating. Id. at PageID.4603.
"Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with any affidavits, show that there is no genuine issue as to any material fact such that the movant is entitled to a judgment as a matter of law." Villegas v. Metro. Gov't of Nashville, 709 F.3d 563, 568 (6th Cir. 2013); Fed. R. Civ. P. 56(a). A fact is material only if it might affect the outcome of the case under the governing law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
On a motion for summary judgment, the Court must view the evidence, and any reasonable inferences drawn from the evidence, in the light most favorable to the non-moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citations omitted); Redding v. St. Edward, 241 F.3d 530, 531 (6th Cir. 2001).
The moving party has the initial burden to show that there is an absence of evidence to support Defendant's case. Selby v. Caruso, 734 F.3d 554 (6th Cir. 2013); Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Once the moving party has met its burden, the nonmoving party "may not rest upon its mere allegations or denials of the adverse party's pleadings, but rather must set forth specific facts showing that there is a genuine issue for trial." Ellington v. City of E. Cleveland, 689 F.3d 549, 552 (6th Cir. 2012).
Plaintiff seeks summary judgment on the breach of contract claim (Count II) and on the violation of securities laws claims (Counts IX-XII). Defendant seeks summary judgment on all counts in the Complaint. However, neither party addresses the injunctive relief Plaintiff requests in Counts I and III in their respective motions. The Court therefore examines only Counts II, IV, and V-XIII below.
"Michigan law requires a party claiming a breach of contract to prove the existence and terms of a contract, that the defendant breached its terms, and that the breach caused damages to the plaintiff." Van Buren Charter Twp. v. Visteon Corp., 904 N.W.2d 192, 202 (Mich. Ct. App. 2017).
As stated above, Plaintiff argues that the 2014 SFA, as modified by the parties' agreement that Dr. Michaelian would forgo any returns above 13%, was a valid contract between the parties. Defendant argues that Dr. Michaelian rejected the entire 2014 SFA in favor of granting Bello a loan with a 13% interest rate. The parties agree on the operative facts, but they differ on what those fact mean in determining their legal rights and responsibilities. "It is [] well settled that where the dispute at issue concerns contract formation, the dispute is generally for courts to decide." Granite Rock Co. v. Int'l Brotherhood of Teamsters, 561 U.S. 287, 296 (2010). Here again, the parties do not raise factual disputes concerning their conduct or their actions. They essentially agree on what happened; they disagree on what legal consequences flow from what happened. So there is no genuine issue of material fact—all that remains is the question of law as to whether the 2014 SFA is the contract governing the obligations of the parties or whether a different contract existed that Defendant argues was operative.
"A valid contract requires five elements: (1) parties competent to contract, (2) a proper subject matter, (3) legal consideration, (4) mutuality of agreement, and (5) mutuality of obligation." Innovation Ventures v. Liquid Manufacturing, 885 N.W.2d 861, 871 (Mich. 2016). In this case, mutuality of agreement is the disputed element—Defendant argues that the parties did not agree to be bound by the terms of the 2014 SFA, and Plaintiff maintains that they did.
The copy of the 2014 SFA in the record is not signed by either party. Defendant claims he never signed it; Plaintiff cannot say whether or not Defendant did. Plaintiff did testify that Dr. Michaelian signed the 2014 SFA. Declaration of Judith Michaelian, ECF No. 49-1. But because Plaintiff urges that the 2014 SFA was the operative agreement, the Court takes all inferences in Defendant's favor, assuming that Defendant never signed the 2014 SFA. "While a signature ordinarily shows assent, a valid and enforceable agreement can exist without a signature. `Parties may be bound by the terms of an unsigned contract when their actions demonstrate assent to the agreement.'" Select Rehabilitation, LLC v. Sana Health, Inc., No. 17-13734, 2018 WL 2009578, at *3 (E.D. Mich. Apr. 30, 2018) (interpreting Michigan law) (quoting Landham v. Lewis Galoob Toys, Inc., 227 F.3d 619, 624 (6th Cir. 2000)). And "[i]t is the objective manifestation of assent that is determinative, not the subjective intention of the party." Id. (citing Detroit Tigers, Inc. v. Ignite Sports Media, LLC, 203 F.Supp.2d 789, 796 (E.D. Mich. 2002)). "[A] signature is not always essential to the binding force of an agreement. Whether a writing constitutes a binding contract, even though it is not signed, or whether the signing of the instrument is a condition precedent to its becoming a binding contract usually depends on the intention of the parties." Detroit Tigers, 203 F. Supp. 2d at 796 (quoting Lynge v. Kunstmann, 94 Ill.App.3d 698, 694 (1981)); Ayar v. Baymont Inns, Inc., No. 245775, 2004 WL 842502, at *2 (Mich. Ct. App. Apr. 20, 2004) ("In deciding whether a party has assented to a contract, we follow the objective theory of assent, focusing on how a reasonable person in the position of the promisee would have interpreted the promisor's statements or conduct.") (citation omitted).
Plaintiffs bear the burden of proving that the contract they seek to enforce exists. Kamalnath v. Mercy Memorial Hosp. Corp., 487 N.W.2d 499, 504 (Mich. Ct. App. 1992). The Court must therefore examine the conduct of the parties to determine whether Plaintiffs have shown that the 2014 SFA was a valid contract, notwithstanding the absence of signatures. A review of the conduct of the parties makes it clear that they intended the terms of the 2014 SFA to apply to the transaction.
The Second Restatement of Contracts provides:
Restatement 2d Contracts, § 19.
"It is hornbook law that a valid contract requires a `meeting of the minds' on all the essential terms . . . `Meeting of the minds' is a figure of speech for mutual assent." Kamalnath, 487 N.W.2d at 504 (citations omitted). And "[t]he contract of a party in making performance in pursuance of a definite proposition is an acceptance of the proposition." Malooly v. York Heating & Ventilating Corp., 258 N.W. 622, 626 (Mich. 1935) (quotation marks and citations omitted).
As early as March 7, 2014, Bello was referencing the terms of the 2014 SFA to explain the parties' prospective relationship to Dr. Michaelian. Emails Between Marshall Michaelian and Mark Bello, ECF No. 49-8 PageID.4615. Bello referenced the contract again on May 30, 2014 in an email to Dr. Michaelian stating, "Send [sic] you Agreement almost a month ago, never heard back. Status? Problem? Please advise." ECF No. 49-46 46 PageID.4768. Dr. Michaelian responded on June 2, 2014, stating "My cursory look at the contract did lead to some questions and I'll try to call you for clarification between Tue and before we leave on Sun." Id. On July 9, 2014, Dr. Michaelian emailed Bello again, stating, "[H]ave not receive the new contract as we had discussed. Are you still interested?" Id. In response, Bello emailed, "Marshall: This is becoming a struggle for me. I'm trying to juggle many interested investors and make them all happy. I need to talk to you. When is a good time?" Id. at PageID.4772.
But four months later, on November 6, 2014, Bello again emailed the 2014 SFA to Dr. Michaelian, indicating that this agreement was the operative one. Id. at PageID.4774. On March 27, 2015, after Bello received the first of Dr. Michaelian's investments, he wrote, "Per our discussion and your request, these funds will be invested into the medical treatment/legal cases we spoke about and we will split profits on a non-recourse basis as we have in the past." Id. at PageID.4786. During the recorded meeting between Bello, Marshall, Jr., Daniel Michaelian, and Plaintiff's attorney, Bello at first equivocates, but ultimately admits that the SFA was controlling. He states, "I don't think there's a split funding agreement . . . relating to—related to all of the money I have. Having said that, in front of your lawyer, I will tell you it doesn't matter to me. The split funding agreement sets the terms for our relationship for all of the money I have of his. Whether I have 1 or 16, that does codify in my judgment my relationship with your dad." ECF No. 49-3 PageID.4326.
The record thus contains evidence of mutual assent from both parties. That evidence includes Bello's own statements, which clearly rely upon the 2014 SFA as being operative throughout the course of the parties' relationship.
Dr. Michaelian's course of conduct supports the same conclusion. He continued to send money to Bello and compile spreadsheets showing his "account" information. Deposition of Mark Bello, ECF No. 49-6 PageID.4527; e.g., February 5, 2016 Email from Marshall Michaelian to Mark Bello, ECF No. 49-41 PageID.4742. The record shows no other communication between the parties about the terms of the contract between March and May of 2015 other than the 2014 SFA. That conduct demonstrates Dr. Michaelian's assent to the terms.
Dr. Michaelian's May 29, 2015 email specifying that he wanted a 13% guaranteed return on his investment is also consistent with the terms in the 2014 SFA, indicating that he continued to rely on that document as codifying the relationship. In this very same email Dr. Michaelian requested the "funding document" from Bello—a term that can only plausibly refer to the 2014 SFA in this context. Dr. Michaelian's writing shows that he viewed the "funding document" as providing the 13% guarantee. As noted previously, the Court determines whether a party has assented to a contract by asking whether a reasonable person in the promisee's position would believe that the promisor was agreeing to be bound by the contract. A reasonable person in Bello's position would know that Dr. Michaelian had agreed to the contract because the 13% guaranteed return term was in the contract Bello himself had drafted and sent to Dr. Michaelian only six months prior. Even later in the relationship, in July 2017, when Dr. Michaelian sent an additional $250,000 to Bello, he provided the 2017 SFA as proof of the transaction to his fund administrator. Both Dr. Michaelian and Plaintiff signed the 2017 SFA with substantially the same terms as the 2014 SFA, including the guaranteed 13% return.
Even taking all inferences in Bello's favor, it is demonstrably clear that both he and Dr. Michaelian manifested assent to the 2014 SFA through their course of conduct.
Conversely, Defendants urge the Court to find that Dr. Michaelian's May 29, 2015, February 5, 2016, and June 4, 2017 emails operated to form a different contract—one for a loan at 13% interest with a repayment term of $20,000 per quarter.
May 29, 2015 email:
February 5, 2016 email:
June 4, 2017 email:
There are several reasons why Defendants' interpretation that these emails formed a new contract is implausible.
First, given the amount of the investment, a repayment schedule at the rate of $20,000 per quarter with 13% interest accruing annually would never be sufficient to repay Plaintiffs for the entire sum of money invested in Lawsuit Financial.
Second, as discussed extensively in the subsections above and below, the 13% interest figure was already guaranteed to Dr. Michaelian in the 2014 SFA; it was not a counter-offer or a new agreement, but relied on a clause in the existing contract.
Finally, there is also no evidence that Dr. Michaelian ever changed his expectation that his funds would be invested in cases. This is a critical part of Defendants' argument because, were that not a term of the contract, Defendants would have no obligation to track Dr. Michaelian's funds to ensure that the funds were invested in cases rather than used to pay the business' operating expenses. But nothing in the three emails Defendants rely on indicates that Dr. Michaelian's intent was anything other than continuing having his funds invested in pending cases.
Taking all inferences in favor of Plaintiffs—as Defendants have also requested summary judgment on this count—Defendants have not shown that the emails between the parties created a contract other than the 2014 SFA, which the Court found valid and enforceable above.
The 2014 SFA guaranteed, at minimum, a 13% rate of return. The Court has already determined that the 2014 SFA was a valid contract because the parties mutually assented to its terms. Consequently, when Dr. Michaelian offered to forgo his right to a 40% share of profits under one provision of the 2014 SFA in favor of a guaranteed regular 13% rate of return as allowed under another provision, he did not abrogate the original terms of the contract. For the sake of thoroughness, however, the Court briefly addresses contract modification here.
In brief, a party to a contract cannot modify that contract by restating a term already contained in the original contract—this is not "modification" at all. "It is axiomatic that parties to a contract may contract to modify the contract by a later agreement." Adell Broadcasting v. Apex Media Sales, 708 N.W.2d 778, 782 (Mich. Ct. App. 2005). But this axiom assumes that the proposed modification to the contract is an actual change from the original contract. Here, Dr. Michaelian's "modification" did not alter Defendants' duty to him under the contract. Therefore, Dr. Michaelian's May 29, 2015 email had no legal effect on the agreement between the parties.
Plaintiff details three ways in which Defendant breached the terms of the 2014 SFA: (1) Defendants used Plaintiffs' money for purposes other than funding plaintiffs' cases; (2) Defendant failed to repay the investment within six months after a request to do so; and (3) Defendant failed to maintain a loss insurance account. Defendants, while not disputing having committed these breaches, argue that they were not required to satisfy any of the three contractual provisions because the 2014 SFA was not the operative agreement.
Indeed, Bello admits that he and Lawsuit Financial did not comply with the terms of the 2014 SFA. Deposition of Mark Bello, ECF No. 49-6 PageID.5420 (admitting that Michaelian money went into Defendant LF's operating account where it was then used to pay Defendant's operating expenses in addition to funding cases); Defendants' Response to Plaintiffs' Motion to Strike Special Master Report, ECF No. 71 PageID.6560 (noting that Defendants have escrowed $266,000 for Plaintiffs' repayment, not the full amount due within six months); Defendants' Response to Plaintiffs' Request for Admissions, ECF No. 49-7 PageID.4607 (admitting that Defendants never maintained a loss insurance account).
Importantly, even if the Court accepted Defendants' conclusions of law and assumed that Dr. Michaelian's May 29, 2015 email rejected the 2014 SFA, under the undisputed facts on record, Defendants still would be in breach of the new agreement that the emails supposedly created.
As described by Defendants, the new agreement's only term was that there would be a 13% per annum rate of return on Dr. Michaelian's investment. At oral argument, Defendant indicated that the Court ought to supply a reasonable term that would govern the repayment schedule of this "loan." Defendant Bello told Plaintiffs' sons during the September 22, 2017 meeting that his cases tend to resolve within 15 months to 3 years, and that Dr. Michaelian was well-aware of this, so that he would not have expected repayment of the principal immediately. ECF No. 49-3 PageID.4314. And during his deposition, Bello estimated that he sees returns on case investments within approximately 13 months. ECF No. 49-6 PageID.4497.
To supply a reasonable term of repayment, as Defendants requested, the Court will assume Defendants are allowed a full three years for repayment,
This spreadsheet is merely an illustration of Defendants' obligations under the theoretical contract they propose exists. Column A indicates the date of each money wire to Defendants or, in the case of Rows 6 and 7, the date of each reinvestment of interest accrued during the previous year. Column B is the amount wired or reinvested on that date. Column C indicates the date on which repayment of the "loan" would be due assuming a 3-year repayment. Column G shows the number of days that the money in each transaction has accrued interest. Column H shows the total amount of interest that has accrued at a rate of 13% per annum or 0.03562% per day (13 divided by 365 days in a year) and compounded annually. And Column K is a running total of the amount due on each date in Column C. Using a three-year repayment term, the amount due as of March 20, 2019 is in cell K6: $799,247. (The latest "loans" from 2017—in Rows 8 and 9—would not be due until 2020.)
As the table shows, even if Defendants' position were correct regarding the email-based contract, Defendants would still be in breach. As of the date of this Order, under Defendants' own purported agreement (with the Court filling in a reasonable term for repayment as Defendants requested), Defendants would owe Plaintiff at least $799,247.00. This amount has not been paid, so Defendants would be in breach if their understanding of the loan were correct.
There have been some attempts by Defendants to make payments. During his deposition, Defendant Bello implied that Defendants have been escrowing $25,000 per month in their own separate account but was unable to specify which account that was or where the money was held. ECF No. 49-6 PageID.4531. In addition, upon closer questioning he refused to confirm that he was in fact escrowing that amount, responding only, "I can't promise that." Id.
As noted above, Defendants paid Plaintiff $25,000 prior to Plaintiff filing her Complaint. In addition, Defendants have deposited $266,000 in escrow with the Court to be paid to Plaintiffs, totaling $291,000—far less than the $799,247.00 that would have been owed if the agreement provided for 13% annual interest and repayment within three years. Defendants would therefore be in breach of the one term they claim exists in an alleged new contract created between the parties. Of course, as explained above, the undisputed facts do not support Defendants' view of the legal obligations of the parties. There was no "loan" at 13% per annum with a three-year (or any-year) repayment plan. The Court engaged in the analysis above only to show that, even if there were, the record would still compel a judgment in favor of Plaintiffs on Count II.
The damage to Plaintiffs from Defendants' breach is fairly straightforward.
First, Plaintiff was entitled to all but $200,000
Pursuant to the analysis above, Plaintiff has suffered damages because she has been deprived of the use of this money for just over one year—February 17, 2018 marked six months after Plaintiff's demand for repayment. Plaintiff has also suffered due to Defendants' failure to maintain a loss insurance account, which is a contributing factor to any liquidity shortfalls that may be preventing Defendants from fully repaying Plaintiff. And Plaintiff has suffered additional risk to her investment by Defendants' spending Dr. Michaelian's investment funds on Lawsuit Financial's operating expenses.
To determine the precise amount of damages to be included in the judgment, as set forth below, the Court will request additional briefing on damages calculations. Because the Court finds as a matter of law that the 2014 SFA was a valid contract, Plaintiffs' Motion for Summary Judgment on Count II is granted; Defendants' crossmotion is denied.
This decision applies only to the 2014 SFA, not to the 2017 SFA. There is a material fact in dispute regarding the 2017 SFA because Defendant Bello asserts that, as a factual matter, he was never aware of, and could therefore not have assented to, this agreement. Drawing all inferences in Defendants' favor, there is clearly an issue of fact that would preclude summary judgment for Plaintiffs regarding breach of the 2017 SFA. If a jury found that Bello was credible in stating that he had never seen the 2017 SFA, the 2017 SFA obviously could not, by itself, represent the agreement between the parties.
Claiming that their relationship with Plaintiffs was not fiduciary, Defendants seek summary judgment in their favor on Plaintiffs' claim that Defendants breached a fiduciary duty to Plaintiffs. Defendants' argument is premised on the assumption that Defendants were "borrower[s] in an arm-length loan transaction" and that Marshall Michaelian was a lender. Defendants' Motion for Summary Judgment, ECF No. 25-1 PageID.1265-66.
"[A] fiduciary relationship arises from the reposing of faith, confidence, and trust and the reliance of one upon the judgment and advice of another. . . . Relief is granted when such position of influence has been acquired and abused, or when confidence has been reposed and betrayed." Vicencio v. Ramirez, 536 N.W.2d 280, 284 (Mich. Ct. App. 1995) (citations omitted). As Defendants point out, there generally is no fiduciary obligation that runs between parties whose interests are adverse because it would not be reasonable for one party to trust the judgment of the other in that situation. See Beaty v. Hertzberg & Golden, P.C., 571 N.W.2d 716, 722 (Mich. 1997). Defendants argue that the parties' supposed lender-borrower relationship renders their relationship adverse. Therefore, they argue, Defendant Bello could not have had any fiduciary duty to Plaintiff.
The Court has already determined that the 2014 SFA was a valid contract that controlled the relationship between the parties. That analysis continues to apply here; Defendants and Plaintiffs had more than a mere borrower-lender relationship because their transaction was subject to other requirements set forth in the written contracts. The written contracts do not establish that the parties' interests were adverse—presumably, the interests of all parties were aligned since greater returns to Lawsuit Financial would benefit all parties. As the record appears before the Court, a reasonable jury could find facts supporting Plaintiffs' claim that Bello breached a fiduciary duty to Plaintiffs. Defendants' Motion for Summary Judgment as to Count IV is denied.
In Counts V-VIII, Plaintiffs allege fraudulent misrepresentation, silent fraud, negligent misrepresentation, and innocent misrepresentation. Defendants argue that, for all four claims, Plaintiffs must plead and prove "actionable misrepresentations or omissions which induced them to part with their money." Defendants' Motion for Summary Judgment, ECF No. 25-1 PageID.1267. Defendants seek summary judgment on the ground that Plaintiffs have not identified any such misrepresentations or omissions. Defendants' statement of the law is accurate, but their characterization of the state of the evidence is not.
All four of Plaintiffs' fraud-related claims require as an element the false statement or omission of a fact that Defendants had a duty to disclose. Foreman v. Foreman, 701 N.W.2d 167, 175 (Mich. Ct. App. 2005) (elements of fraudulent misrepresentation include proving a false material misrepresentation); Hord v. Environmental Research Institute of Mich., 617 N.W.2d 543, 550 (Mich. 2000) (silent fraud requires nondisclosure of a fact that a party had a legal duty to disclose); see Fejedelem v. Kasco, 711 N.W.2d 436, 437 (Mich. Ct. App. 2006) (assuming that negligent misrepresentation requires a misrepresentation); M&D, Inc. v. W.B. McConkey, 585 N.W.2d 33, 37 (Mich. Ct. App. 1998) (innocent misrepresentation requires a false statement).
But based on the record before the Court and the foregoing analysis, Plaintiffs have alleged misrepresentations or omissions. One such alleged misrepresentation is Defendants' representation that Dr. Michaelian's money would be used to fund cases, when it was really used for other purposes. Deposition of Mark Bello, ECF No. 49-6 PageID.5420. An example of an alleged material omission of fact may be found in Defendants' failure to disclose that it was not maintaining a loss insurance account. A reasonable jury could find that these statements or omissions were false and misleading and that they induced Plaintiffs to invest in Lawsuit Financial. Defendants' Motion for Summary Judgment as to Counts V-VIII is therefore denied.
Plaintiffs and Defendants both seek summary judgment on Count IX, which alleges securities fraud.
The Securities Exchange Act of 1934 prohibits "us[ing] or employ[ing], 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). Rule 10b-5, enacted pursuant to the statute, prohibits "employ[ing] any device, scheme, or artifice to defraud," "mak[ing] any untrue statement of a material fact or [ ] omit[ting] 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," and "engag[ing] in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security." 17 C.F.R. § 240.10b-5. In order to prevail in a typical § 10(b) private action, a plaintiff must prove six elements: "(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation." Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 157 (2008).
As an initial matter, Defendants' theory of the case rests primarily on their argument that the transaction at issue was a loan, rather than a security. The Court need not reach this question as to Count IX—though it will in the following subsection with respect to Count X—because several elements of a 10b-5 claim are inappropriate for summary judgment on the record before the Court. First, "[M]ateriality depends on the significance the reasonable investor would place on the withheld or misrepresented information." Helwig v. Vencor, Inc., 251 F.3d 540, 555 (6th Cir. 2001) (quoting Basic, Inc. v. Levinson, 485 U.S. 224, 240 (1988)). Whether a particular misrepresentation or omission is material "is a mixed question of law and fact." Helwig, 251 F.3d at 563 (citing TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 450 (1976)). Therefore, "Courts generally reserve such questions for the trier of fact." Helwig, 251 F.3d at 563.
Second, "scienter" requires a showing of "intent to deceive, manipulate, or defraud." Ernst & Ernst v. Hochfelder, 425 U.S. 185, 293 (1976). A court generally should not decide "[i]ssues of motive and intent," including in § 10(b) actions, through summary judgment. Wechsler v. Steinberg, 733 F.2d 1054, 1058-1059 (2d Cir. 1984) (citing Poller v. Columbia Broad. Sys., Inc., 386 U.S. 464, 473 (1962) (antitrust)). However, a court may resolve these issues if there is "overwhelming evidence" of the defendant's state of mind, such that no reasonable jury could come to the opposite conclusion. See In re Federal Nat. Mortg. Ass'n Securities, Derivative, and ERISA Litigation, 898 F.Supp.2d 176, 182-83 (D.D.C. 2012).
In this case, neither party has presented evidence so overwhelming on the issues of materiality and scienter that summary judgment would be appropriate. For example, Plaintiffs have argued that Bello's misrepresentations about the purpose for which Bello used Dr. Michaelian's funds was material. But the record shows that Dr. Michaelian made very few—if any—inquiries into what Bello was doing with his money. This could suggest that a jury might find that a reasonable investor in Dr. Michaelian's position would not have considered such information significant in making the decision to invest. Similarly, Plaintiffs have argued that Bello's misrepresentations and omissions were intended to defraud Dr. Michaelian. But Bello has testified that he disclosed the risks of investment to Dr. Michaelian. Second Declaration of Mark Bello, ECF No. 51 PageID. 5512. A jury as fact-finder must be given the opportunity to determine whether it believes that testimony is credible.
There are material facts supporting both parties' positions on Count IX that raise questions that properly belong to the jury. The parties' Cross-Motions for Summary Judgment as to Count IX are therefore denied.
Plaintiffs and Defendants have also filed cross-motions for summary judgment on Count X.
Count X of Plaintiffs' Complaint alleges violations of §§ 5(a) and 5(c) of the Securities Act of 1933 (15 U.S.C. § 77e(a), (c)). These provisions prohibit using interstate commerce to sell and deliver unregistered securities. Section 12(a)(1) confers liability for losses upon a person who violates §§ 5(a) and 5(c). 15 U.S.C. § 77l.
Defendants admit that Plaintiffs' investments in Lawsuit Financial were not registered as a security. Defendants' only defense to Count X is that the transaction between Dr. Michaelian and Bello was a loan, not the sale of a security.
"The term `security' means any note, stock . . . investment contract. . . or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing." 15 U.S.C. § 77b(a)(1).
In the subsections above, the Court determined that, as a matter of law, the 2014 SFA was a valid contract and that Dr. Michaelian's subsequent attempted modification of that contract had no legal effect. Based on that finding, the transaction between Dr. Michaelian and Bello was the sale of a security, because the 2014 SFA is an investment contract. Importantly, the guaranteed minimum 13% rate of return does not preclude a finding that the 2014 SFA was an investment contract. The Supreme Court held that "[t]here is no reason to distinguish between promises of fixed returns and promises of variable returns for purposes of the test, so understood." S.E.C. v. Edwards, 540 U.S. 389, 394 (2004).
"[A]n investment contract for purposes of the Securities Act means a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party." S.E.C. v. W.J. Howey Co., 328 U.S. 293, 298-99 (1946). This holding affirms that the Securities Act of 1933 was meant to extend to the "countless and variable schemes devised by those who seek the use of the money of others on the promise of profits." Id. at 299. The Supreme Court has broken the W.J. Howey test down into four elements, addressed below.
The Sixth Circuit uses the "risk capital" test to determine whether a transfer of funds was a loan or an investment. "The `risk capital' test focuses on six criteria: 1) time; 2) collateral; 3) form of the obligation; 4) circumstances of issuance; 5) relationship between amount borrowed and size of borrower's business; and 6) intended use of the funds." Union Planters Nat. Bank of Memphis v. Commercial Credit Business Loans, Inc., 651 F.2d 1174, 1182 (6th Cir. 1981).
First, "the longer the money is held, the more probable it becomes that an investment is involved." Id. There was no set time for repayment in the agreement Defendants seek to characterize as a loan. Second, "[t]he existence of collateral is strongly suggestive of a commercial loan." Id. The agreement between the parties provided for no collateral; the only source to support repayment of the investment was the proceeds derived from the cases—the investment return itself. Third, the form of the obligation was a "return," as the parties themselves referred to it. And that return was "totally dependent upon [the borrower's] managerial and entrepreneurial efforts." American Bank & Trust Co. v. Wallace, 702 F.2d 93, 96 (6th Cir. 1983). These factors indicate an investment rather than a loan. Fourth, where "the participation interest was `procured for speculation or investment,'" the circumstances of issuance suggest an investment. Union Planters, 651 F.2d at 1182. Based on the communications between Dr. Michaelian and Bello, that was certainly the case here. Fifth, the amount Dr. Michaelian invested represented a large portion of Lawsuit Financial's capital. And finally, Dr. Michaelian appears to have believed that the money he was wiring would "serv[e] as risk capital to obtain new productive assets." Id. at 1183. These factors counsel in favor of finding that the transaction was an investment, not a loan.
In Union Planters, the Sixth Circuit applied the risk capital test to find that an exchange of funds particularized to the needs of the borrower was a loan, rather than an investment. Here, the transaction was not tailored to meet particular business needs of Lawsuit Financial. Rather, Dr. Michaelian transferred funds so that they could be invested in plaintiff litigation. The decisions about which plaintiffs' cases that money was to go toward was left entirely to Bello. Bello provided assurances to that effect: "The money will be put to good use and invested wisely; I won't let you down." ECF No. 49-46 PageID.4788. Bello's many references in the record to Lawsuit Financial's "rigorous underwriting process" for plaintiffs' cases have the same effect—communicating that the profits Plaintiffs were to expect would come from Defendants' efforts. See, e.g., Email from Mark Bello to Marshall Michaelian, ECF No. 49-22 PageID.4680.
The "common enterprise" element of the test for determining whether a transaction is an investment contract requires that a plaintiff demonstrate "horizontal commonality." Deckebach v. La Vida Charters, Inc. of Fla., 867 F.2d 278, 281 (6th Cir. 1989). "Horizontal commonality ties the fortunes of each investor in a pool of investors to the success of the overall venture. In fact, a finding of horizontal commonality requires a sharing or pooling of funds." Union Planters Nat. Bank of Memphis v. Commercial Credit Business Loans, Inc., 651 F.2d 1174, 1183 (6th Cir. 1981) (citations omitted). The Sixth Circuit has declined to find a common enterprise where plaintiffs have failed to show "an arrangement to pool investments for common developments." Hart v. Pulte Homes of Mich. Corp., 735 F.2d 1001, 1008 (6th Cir. 1984).
Plaintiffs have established horizontal commonality through evidence that Lawsuit Financial pooled funds—Bello's, Dr. Michaelian's, and Warren Levenbaum's—to advance money to plaintiffs in support of their lawsuits. The success or failure of the joint venture, that is, the amount of money garnered from settlements or judgments in favor of plaintiffs, was equivalent to the success or failure of each individual investor.
"By profits, the Court has meant either capital appreciation resulting from the development of the initial investment . . . or a participation in earnings resulting from the use of investors' funds." United Housing Foundation, Inc. v. Forman, 421 U.S. 837, 852 (1975).
The language of the 2014 SFA shows that the agreement involved participation in earnings resulting from the use of investors' funds. In exchange for Dr. Michaelian's investment, Lawsuit Financial agreed to pay principal plus 40% of profits from plaintiffs' cases directly to Dr. Michaelian. The 13% guaranteed rate of return was also clearly premised on returns from investments in plaintiffs' cases. And these profits were meant to come from the efforts of others—namely Bello's exercising his expertise in choosing plaintiffs' cases in which to invest, and the plaintiffs' and their attorneys' successes in pursuing recovery in their lawsuits.
The 2014 SFA therefore satisfies all three prongs of the investment contract test set forth in W. J. Howey. As such, it was required to be registered as a security. Because it was not, Plaintiffs' Motion for Summary Judgment as to Count X must be granted.
Section 12(a)(2) of the Securities Act of 1933 confers liability on any person who "offers or sells a security . . . by means of a prospectus or oral communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading (the purchaser not knowing of such untruth or omission)," and who cannot show that he did not know or should not have known of the untruth or omission. 15 U.S.C. § 77l(a)(2).
For § 12(a)(2) liability, "the central issue is not whether the particular statements, taken separately, were literally true, but whether defendants' representations, taken together and in context, would have misled a reasonable investor about the nature of the securities." Olkey v. Hyperion 1999 Term Trust, Inc., 98 F.3d 2, 5 (2d Cir. 1996), cert. denied, 520 U.S. 1264. This is a question for the jury.
As noted above, Plaintiffs have identified several of Defendants' statements that they allege are untrue. See Plaintiffs' Summary of Misrepresentations, ECF No. 56-1. Bello has also testified that he had oral communication with Dr. Michaelian in which he disclosed information, including risks of the investment, that were not detailed in the written communication in the record. This creates a genuine issue of material fact as to whether a reasonable investor would have been misled into investing in Lawsuit Financial based on Defendants' statements. A jury must weigh this evidence and determine this issue of fact. Consequently, the cross-motions for summary judgment as to Count XI are denied.
Both sides have moved for summary judgment on Count XII. Plaintiffs' Amended Complaint alleges that Defendants violated § 501 of the Michigan Uniform Securities Act (MUSA). Section 501 reads:
It is unlawful for a person, in connection with the offer, sale, or purchase of a security or the organization or operation of a Michigan investment market under article 4A, to directly or indirectly do any of the following:
Mich. Comp. Laws § 451.2501(a)-(c).
In Defendants' Response to Plaintiffs' Motion for Summary Judgment, Defendants cite several exemptions, arguing that they cannot be liable for violating § 501 because the transactions fall within these statutory exemptions. ECF No. 51 PageID.5504. However, the exemptions listed come from § 451.2201, which exempts certain securities from the registration requirement, not from the prohibitions on fraud and material misrepresentations and omissions in § 501.
Because the language of MUSA "tracks the federal securities laws and regulations," courts have interpreted the relevant standards to be similar. See JAC Holding Enters., Inc. v. Atrium Capital Partners, LLC, 997 F.Supp.2d 710, 739 (E.D. Mich. 2014); see also Dep't of Commerce v. DeBeers Diamond Investment, Ltd., 280 N.W.2d 547, 550 (Mich. Ct. App. 1979) ("While the interpretation Federal courts have placed upon terms under the Federal securities acts is not binding upon state courts as they interpret the Uniform Securities Act, the similarity of the purpose and provisions of the state and Federal securities statutes . . . cannot be ignored." (citing federal securities law to interpret MUSA)). Accordingly, the Court's analysis of Count XII tracks its analysis of Count XI—whether Defendants materially misrepresented facts that would induce a reasonable person to invest is a question of fact for the jury. The crossmotions for summary judgment as to Count XII are denied.
Defendant seeks summary judgment as to Count XIII. The Investor Advisors Act states:
15 U.S.C. § 80b-b(1)-(2). Defendants do not dispute that they acted as investment advisors. Instead, their Motion for Summary Judgment argues that Plaintiffs have failed to provide evidence of fraud.
The Court's previous discussion of the questions of fact surrounding whether Defendants engaged in fraudulent conduct with respect to Counts V-VIII and XI-XII applies with equal force here. Whether Defendants defrauded Plaintiffs is a question for the jury. Plaintiffs have presented evidence raising triable question as to whether Defendants made material misrepresentations. Defendants' motion as to Count XIII is denied.
For the foregoing reasons, Plaintiffs' Motion for Partial Summary Judgment is
Plaintiffs are
