Old Jamestown Storage LLC et al v. Capital Max Group, LLC et al

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO.: 25-cv-80647-SMITH/REINHART
OLD JAMESTOWN STORAGE LLC,
and RIGSBY STORAGE LLC
Plaintiffs,
vs.
CAPITAL MAX GROUP, LLC, et al.,
Defendants.
_______________________________________/
REPORT AND RECOMMENDATION REGARDING DEFENDANTS’
MOTION TO DISMISS [ECF No. 13]
Old Jamestown Storage LLC and Rigsby Storage LLC invested $2.3 million
with Capital Max Group in exchange for alleged assurances that Capital Max would
secure financing for Plaintiffs to build their $30 million-dollar self-storage facility
project. According to the Complaint, Justin Godur is Capital Max’s managing member
and authorized representative and Morris Godur also “exercised complete dominion
and control over Capital Max.” ECF No. 1 at ¶6. Capital Max was ultimately unable
to secure financing so the parties entered into a repayment installment plan where
Capital Max would pay back the $2.3 million plus interest. Plaintiffs say Defendants
stopped making monthly payments, so the parties executed a promissory note. The
debt remains unpaid. Plaintiffs now sue for fraud, securities fraud, and breach of
contract. Count I alleges Defendants violated Section 10(b) of the Securities and
Exchange Act of 1934 and SEC Rule 10b-5. Count II alleges that Capital Max Group
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breached its repayment contract with the Plaintiffs. Count III alleges fraud against
all three Defendants.
Defendants move to dismiss all three counts for failure to state a claim.
Defendants say the Complaint fails to meet the standard pleading requirements, the
heightened pleading requirements for fraud, and the pleading requirements under
the Private Securities Litigation Reform Act. Defendants also say that Plaintiffs
failed to join a required party under Federal Rule of Civil Procedure 19(a). In the
alternative, Defendants say Plaintiffs should be required to provide a more definite
statement 	under 	Federal 	Rule 	of 	Civil 	Procedure 	12(e). 	I 	have 	reviewed 	the
Complaint, the Motion, the Response, and the Reply. For the following reasons,
Defendants’ Motion should be GRANTED IN PART and DENIED IN PART.
I. 	LEGAL PRINCIPLES
On a Rule 12(b)(6) motion to dismiss, the Court views the well-pled factual
allegations in the light most favorable to the plaintiff. Dusek v. JPMorgan Chase &
Co., 832 F.3d 1243, 1246 (11th Cir. 2016). With limited exceptions, the Court looks
only to the allegations in the complaint, any documents appended to the complaint or
incorporated by reference into it, and any judicially-noticed facts. 	Reed v. Royal
Caribbean Cruises Ltd., No. 20-CV-24979-RAR, 2022 WL 3027906, at *6 (S.D. Fla.
Aug. 1, 2022).
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A. Rule 8(a)
A pleading seeking relief in a civil action must contain “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.
8(a)(2). To satisfy this pleading requirement, a complaint must provide the defendant
fair notice of plaintiff’s claim and the grounds upon which it rests. See Swierkiewicz
v. Sorema N. A., 534 U. S. 506, 512 (2002). While a claim “does not need detailed
factual allegations,” it must provide “more than labels and conclusions” or “a
formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly,
550 U. S. 544, 555 (2007); see Ashcroft v. Iqbal, 556 U. S. 662, 678 (2009) (explaining
that the Rule 8(a)(2) pleading standard “demands more than an unadorned, the
defendant-unlawfully-harmed-me accusation”). Nor can a claim rest on “‘naked
assertion[s]’ devoid of ‘further factual enhancement.’” Iqbal, 556 U. S. at 678 (quoting
Twombly, 550 U. S. at 557 (alteration in original)). Factual allegations must be
enough to raise a right to relief above the speculative level, on the assumption that
all the allegations in the claim are true (even if doubtful in fact). Twombly, 550 U. S.
at 555 (citations omitted).
The Supreme Court has emphasized that “[t]o 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.’” Id. (quoting Twombly, 550 U. S. at 570). In
addition, 	“courts 	may 	infer 	from 	factual 	allegations 	in 	the 	complaint 	obvious
alternative explanations, which suggest lawful conduct rather than the unlawful
conduct that plaintiff would ask the court to infer.” Am. Dental Assoc. v. Cigna Corp.,
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605 F. 3d 1283, 1290 (11th Cir. 2010) (citing Iqbal, 556 U. S. at 682). “Where a
complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it
‘stops short of the line between possibility and plausibility of ‘entitlement to relief.’”
Iqbal, 556 U. S. at 678 (quoting Twombly, 550 U. S. at 557). When evaluating a motion
to dismiss under Rule 12(b)(6):
[A] court considering a motion to dismiss can choose to begin by
identifying pleadings that, because they are no more than conclusions,
are not entitled to the assumption of truth. While legal conclusions can
provide the framework of a complaint, they must be supported by factual
allegations. When there are well-pleaded factual allegations, a court
should 	assume 	their 	veracity 	and 	then 	determine 	whether 	they
plausibly give rise to an entitlement to relief.
Iqbal, 556 U. S. at 679. “Determining whether a complaint states a plausible claim
for relief will . . . be a context-specific task that requires the reviewing court to draw
on its judicial experience and common sense.” Id.
B. Rule 9(b)
In addition to pleading a plausible claim for relief under Rule 8, a plaintiff
alleging fraud must state “with particularity the circumstances constituting the
fraud.” Fed. R. Civ. P. 9(b). 	The Eleventh Circuit has interpreted this requirement
to mean that the complaint must say (1) precisely what statements or omissions were
made in which documents or oral representations; (2) the time and place of each such
statement and the person responsible for making (or, in the case of omissions, not
making) them; (3) the content of such statements and the manner in which they
misled the plaintiff; and (4) what the defendant obtained as a consequence of the
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fraud. 	FindWhat Investor Group v. FindWhat.com, 658 F.3d 1282, 1296 (11th Cir.
2011).
C. PSLRA
The Private Securities Litigation Reform Act (“PSLRA”) imposes an even
higher pleading requirement on securities fraud claims. 	See generally Carvelli v.
Ocwen Fin. Corp., 934 F.3d 1307, 1317–18 (11th Cir. 2019). It requires the plaintiff
to set forth with particularity “each statement alleged to have been misleading, the
reason or reasons why the statement is misleading, and, if an allegation regarding
the statement or omission is made on information and belief, the complaint shall state
with particularity all facts on which that belief is formed.” 15 U.S.C. § 78u–4(b)(1).
Further, the plaintiff must allege “with particularity facts giving rise to a strong
inference that the defendant acted with the required state of mind [i.e., scienter].” 15
U.S.C. § 78u–4(b)(2)(A).
The required state of mind is an “intent to defraud or severe recklessness on
the part of the defendant.” FindWhat, 658 F.3d at 1299 (quoting Edward J. Goodman
Life Income Tr. v. Jabil Circuit, Inc., 594 F.3d 783, 790 (11th Cir. 2010)). A “strong
inference” is one that is “cogent and at least as compelling as any opposing inference
one could draw from the facts alleged.” Tellabs Inc. v. Makor Issues & Rights, Ltd.,
551 U.S. 308, 324 (2007). “[T]he complaint must allege facts supporting a strong
inference of scienter ‘for each defendant with respect to each violation.’” Mizzaro v.
Home Depot, Inc., 544 F.3d 1230, 1238 (11th Cir. 2008) (citing Phillips v. Scientific–
Atlanta, Inc., 374 F.3d 1015, 1016 (11th Cir. 2004)). “Severe recklessness is limited
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to those highly unreasonable omissions or misrepresentations that involve not merely
simple or even inexcusable negligence, but an extreme departure from the standards
of ordinary care, and that present a danger of misleading buyers or sellers which is
either known to the defendant or is so obvious that the defendant must have been
aware of it.” Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1282 n.18 (11th Cir. 1999)
(quotation marks omitted).
In Mizzaro, the Eleventh Circuit gave further guidance on evaluating whether
a “strong inference” of scienter exists:
Because the strong-inference inquiry asks “whether all of the facts
alleged, taken collectively, give rise to a strong inference of scienter, not
whether any individual allegation, scrutinized in isolation, meets that
standard,” “courts must consider the complaint in its entirety,” and
“omissions and ambiguities count against inferring scienter.” Tellabs,
551 	U.S. 	at 	2509, 	2511. 	Moreover, 	the 	inquiry 	is 	“inherently
comparative” because courts “must take into account plausible opposing
inferences.” Id. at 2510, 2509. Tellabs explained how to balance opposing
inferences this way:
To determine whether the plaintiff has alleged facts that
give rise to the requisite “strong inference” of scienter, a
court must consider plausible nonculpable explanations for
the defendant's conduct, as well as inferences favoring the
plaintiff. The inference that the defendant acted with
scienter need not be irrefutable, i.e., of the “smoking-gun”
genre, or even the “most plausible of competing inferences.”
... Yet the inference of scienter must be more than merely
“reasonable” 	or 	“permissible”—it 	must 	be 	cogent 	and
compelling, thus strong in light of other explanations.
Id. at 2510. “In sum, the reviewing court must ask: When the allegations
are accepted as true and taken collectively, would a reasonable person
deem the inference of scienter at least as strong as any opposing
inference?” Id. at 2511.
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[This test] asks what a reasonable person would think, not what a
reasonable person could think.
Mizzaro, 544 F.3d at 1238–39 (emphasis in original).
In sum, to survive a motion to dismiss in a securities fraud case, the plaintiff
“must (in addition to pleading all of the other elements of a § 10(b) claim) plead ‘with
particularity facts giving rise to a strong inference’ that the defendants either
intended to defraud investors or were severely reckless when they made the allegedly
materially false or incomplete statements.” 	Mizzaro, 544 F.3d at 1238. 	“If these
PSLRA 	pleading 	requirements 	are 	not 	satisfied, 	the 	court 	‘shall’ 	dismiss 	the
complaint.” FindWhat, 658 F.3d at 1296-97 (citing 15 U.S.C. § 78u–4(b)(3)(A)).
A securities fraud plaintiff can rely on confidential sources, with the Court
assessing the weight to be given to the evidence derived from those sources:
We conclude that the weight to be afforded to allegations based on
statements 	proffered 	by 	a 	confidential 	source 	depends 	on 	the
particularity of the allegations made in each case, and confidentiality is
one factor that courts may consider. Confidentiality, however, should
not eviscerate the weight given if the complaint otherwise fully describes
the 	foundation 	or 	basis 	of 	the 	confidential 	witness's 	knowledge,
including the position(s) held, the proximity to the offending conduct,
and the relevant time frame.
Mizzaro, 544 F.3d at 1240.
A securities fraud claim can be based on a failure to comply with generally
accepted accounting principles (“GAAP”) if coupled with other evidence of intent. But,
a mere GAAP violation standing alone is not sufficient:
Without any additional evidence of scienter, a defendant's failure to
follow 	GAAP 	or 	publication 	of 	inaccurate 	accounting 	figures, 	is
insufficient to state a claim for securities fraud. See In re Comshare, 183
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F.3d at 553; In re SCB Computer Technology, 149 F.Supp.2d 334, 346
(W.D.Tenn.2001). Violations of GAAP without more, may establish
negligence, but can never establish scienter. Reiger, 117 F.Supp.2d at
1010. “[V]iolations of GAAP...provide evidence of scienter only when
accompanied 	by 	additional 	facts 	and 	circumstances 	that 	raise 	an
inference of fraudulent intent.” Id. See also Cheney v. Cyberguard Corp.,
2000 WL 1140306, *11 (S.D.Fla.2000); Malin v. Ivax Corp., 17 F.Supp.2d
1345, 	1360 	(S.D.Fla.1998) 	(allegations 	of 	defendants' 	motive 	and
opportunity coupled with GAAP violations are insufficient to plead
scienter under the PSLRA) . . . As Plaintiffs' point out, in some cases,
courts have allowed circumstances surrounding GAAP violations to
contribute to a strong inference of scienter. See In re MicroStrategy, Inc.
Sec. Litig., 115 F.Supp.2d 620 (E.D.Va.2000)(“The mere fact that there
was a restatement or a violation of GAAP, by itself, cannot give rise to a
strong 	inference 	of 	scienter; 	the 	nature 	of 	such 	a 	restatement 	or
violation, however, may ultimately do so . . . when the number, size,
timing, 	nature, 	frequency, 	and 	context 	of 	the 	misapplication 	or
restatement are taken into account.”); In re Adaptive Broadband Sec.
Litig., 	2002 	WL 	989478, 	2002 	U.S. 	Dist. 	LEXIS 	5887
(N.D.Cal.2002)(corroborating GAAP violations with detailed evidence of
the contemporaneous decision making behind the accounting errors
showing that statements were known to be false at the time they were
made to the SEC and the investing public set forth sufficient evidence
of scienter) . . .
In 	cases 	in 	which 	courts 	throughout 	the 	nation 	have 	allowed
circumstances surrounding GAAP violations to contribute to a strong
inference of scienter sufficient to withstand a motion to dismiss, several
factors 	are 	often 	present. 	In 	re 	SCB 	Computer 	Technology, 	149
F.Supp.2d 334 (W.D.Tenn.2001). First, the cases contain allegations of
insider trading. Id. at 350–51. Second, the magnitude of the improperly
recognized revenues is great. Id at 351. Third, the GAAP violations
relate to major balance sheet items based on contracts of tremendous
magnitude and financial importance to the corporation. Id. Fourth, the
contracts are contingent upon some future occurrence or consignment
transactions in which the other party has no obligation to pay the
corporation the amount recorded as revenue. Id. at 352. Fifth, the GAAP
violation violates the corporation's internal policies. Id.
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In re Sportsline.com Sec. Litig., 366 F. Supp. 2d 1159, 1165–67 (S.D. Fla. 2004)
(brackets in original). “In certain circumstances, courts have held that allegations of
violations of GAAP . . . coupled with allegations of ignoring ‘red flags,’ can be sufficient
to state a claim of securities fraud.” Ziemba v. Cascade Intern., Inc., 256 F.3d 1194,
1209–10 (11th Cir. 2001) (citations omitted).
An inference of scienter can arise from stock sales by insiders if those
transactions are suspicious or unusual. Edward J. Goodman Life Income Trust, 594
F.3d at 793 (citations omitted); In re AFC Enterprises, Inc. Sec. Litig., 348 F. Supp.
2d 1363, 1373 (N.D. Ga. 2004). Insider sales are suspicious if “the level of trading is
dramatically out of line with prior trading practices at times calculated to maximize
the personal benefit from undisclosed inside information.” Id. (citations omitted). “A
stock sale may be deemed unusual when it is made at a time or in an amount that
suggests that the seller is maximizing personal benefit from inside information.” In
re AFC Enterprises, Inc. Sec. Litig., 348 F. Supp. 2d at 1373.
Statements of opinion generally cannot be the basis for a securities fraud claim
because “liability attaches only in the case of an ‘untrue statement of a material fact.’”
Carvelli, 934 F.3d at 1326-27 (citing Omnicare, Inc. v. Laborers Dist. Council Constr.
Indus. Pension Fund, 575 U.S. 175, 183 (2015) (quoting 15 U.S.C. § 77k(a)))). There
are two exceptions to this general rule. 	First, “a statement of opinion that ‘falsely
describe[s] [the speaker's] own state of mind’ is an untrue statement of fact—as to
what the speaker actually believes.” Carvelli, 934 F.3d at 1322 (citing Omnicare, 575
U.S. at 184) (brackets in original). Second, “when statements of opinion ‘contain
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embedded statements of fact,’ a speaker may be liable ‘if the supporting fact she
supplied were untrue.’” Carvelli, 934 F.3d at 1322 (citing Omnicare, 575 U.S. at 185-
86).
D. Joinder of indispensable party.
“Necessary parties” are those persons who the Court determines must be joined
in the action if feasible, whereas “indispensable parties” are those necessary persons
whose joinder is not feasible and in whose absence the action cannot proceed. Fed. R.
Civ. P. 19; BFI Waste Sys. of N. Am., Inc. v. Broward Cnty., Fla., 209 F.R.D. 509 (S.D.
Fla. 2002). Federal Rule of Civil Procedure 19 delineates a two-step inquiry: (1) a
court must first determine whether a person absent from the litigation ought to be
joined “if feasible”; and (2) if a court determines that a person ought to be joined but
joinder is not feasible—e.g., because of limitations on service of process, subject
matter jurisdiction or venue—the court must then determine whether “in equity and
good conscience” the 	action may proceed in the person's absence, taking into
consideration various factors. See Fed. R. Civ. P. 19 advisory committee's note;
Challenge Homes, Inc. v. Greater Naples Care Ctr., Inc., 669 F.2d 667, 669 (11th
Cir.1982) (citing Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102,
88 (1968)). 	Challenge Homes, 669 F.2d at 669, n. 3; 4 James W. Moore, Moore's
Federal Practice § 19.02[2][c] (3d ed.2002). In making these determinations, of
primary importance are the practical effects of the person's absence on the interests
of the parties, the absent person, and the litigation. See Challenge Homes, 669 F.2d
at 669; Ship Construction & Funding Services (USA), Inc., v. Star Cruises PLC, 174
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F.Supp.2d 1320, 1325 (S.D.Fla.2001) (citing Challenge Homes). The burden is on the
moving party to establish that a person is necessary or indispensable. See Star
Cruises, 174 F.Supp.2d at 1325.
II. 	FACTS1
Old Jamestown Storage, LLC is a company formed to build a self-storage
facility in North Carolina. ¶ 12. Rigsby Storage, LLC raised funds for the acquisition.
Id. In search of construction financing for the project, Plaintiffs were introduced to
Morris Godur and, 	his son, Justin Godur. “[Morris] Godur and Justin Godur
presented themselves as the principles of Capital Max, a lending advisory firm.” ¶ 13,
14.
Morris Godur and Justin Godur “promised they could secure institutional
financing through a European fund that would cover 90-95% of the project’s estimated
$30 million cost.” ¶ 15. Plaintiffs “transferred approximately $2.3 million” to the
Defendants “[t]rusting these claims and after conducting what appeared to be proper
due diligence, including a site visit and face-to-face meetings.” ¶ 16. The funds were
meant as a down payment and a “lock” on the interest rate for the expected loan. Id.
“All contracts were signed directly with Capital Max.” ¶ 17. “It was not until
after the funds were transferred that Justin Godur revealed there was no loan
agreement in place, and no legitimate lender had committed to the project.” Id.
1 Unless otherwise noted, citations to paragraphs (“¶”)reference the Complaint at
ECF No. 1.
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“Despite this, Justin Godur [] assured Plaintiffs that he would seek alternative
funding sources while continuing to control the $2.3 million.” ¶ 18. But, ultimately,
Justin Godur “failed to provide any real loan documents or reliable term sheets over
several months.” Id.
Plaintiffs ended the agreement and demanded the return of the $2.3 million.
Defendants refused to return the full amount citing “expenses” and offered a
repayment plan. ¶ 19. The parties entered into an installment repayment plan where
Defendants would pay Plaintiffs $100,000 a month. Id. After paying $400,000,
Defendants stopped making monthly payments. ¶ 21. So, the parties executed a
promissory note. ¶ 24. 	The note required Capital Max to repay Old Jamestown a
principal 	amount 	of 	$1,114,000, 	plus 	interest, 	through 	monthly 	payments 	of
$29,141.78 for 53 months at an annual interest rate of 8.75%. Id. 	“Despite these
terms, the debt remains unpaid, and significant arrears have accumulated.” Id.
Throughout 	this 	process, 	Plaintiffs 	plead, 	“Defendants 	knowingly
misrepresented their ability to secure financing and used false pretenses to persuade
Plaintiffs to transfer the funds.” ¶25. “Their actions have caused considerable harm
to Plaintiffs, delayed the project’s development, and shaken investor confidence.” Id.
Plaintiffs 	say 	they 	“reasonably 	and 	detrimentally 	relied 	on 	Defendants’
representations in deciding to enter into the agreements.” ¶14.
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III. 	DISCUSSION
A. The fraud claim (Count III) should be dismissed.
The elements of common law fraud, as alleged in Count III, are (1) a false
statement concerning a material fact, (2) knowledge by the person making the
statement that the representation is false, (3) intent by the person making the
statement that the representation will induce another to act on it, and (4) reliance on
the representation to the injury of another party. Nyesa Costa Rica v. Wilson Cap.
Grp. Holdings, LLC, No. 11-22036, 2012 WL 1492344 (S.D. Fla. Apr. 27, 2012)
(quoting Lance v. Wade, 457 So.2d 1008, 1011 (Fla.1984)).
The facts alleged in the Complaint fail to plausibly allege fraud. Many do not
rise above the level of “labels and conclusions” or a formulaic recitation of the
elements of a cause of action. Others are naked assertions devoid of further factual
enhancement which are not entitled to the assumption of truth. Plaintiffs fail to point
to 	sufficient 	facts 	that 	plausibly 	allege 	with 	particularity, 	the 	circumstances
constituting the fraud. Fed. R. Civ. P. 9(b). For example, Plaintiffs plead that
Defendants 	have 	fraudulently 	deceived them 	out 	of $1.9 	million 	dollars 	(plus
interest). In support they say, Morris Godur and Justin Godur “promised they could
secure institutional financing through a European fund that would cover 90-95% of
the project’s estimated $30 million cost.” But, Plaintiffs fail to allege precisely what
statements or omissions were made in which documents or oral representations and
the time and place of each such statement. FindWhat, 658 F.3d at 1296. Likewise,
Plaintiffs Complaint fails to precisely allege the content of any such statement and
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the way in which the Defendants allegedly misled the Plaintiffs. Id. Accordingly, the
fraud claim should be dismissed.
B. The securities fraud claim (Count I) should be dismissed.
The elements of securities fraud are (1) a material misrepresentation or
omission, (2) made with scienter, (3) a connection with the purchase or sale of a
security, (4) reliance on the misstatement or omission, (5) economic loss, and (6) a
causal connection between the misrepresentation or omission and the loss, called loss
causation. Carvelli, 934 F.3d at 1317.
Plaintiffs’ 	Complaint 	fails 	to 	point 	to 	facts 	that 	sufficiently 	plead 	the
heightened pleading requirement under the PSLRA. Plaintiffs fail to plead with
particularity “each alleged misleading statement, the reason or reasons why the
statement is misleading.” 15 U.S.C. § 78u–4(b)(1). Likewise, upon review, the
Complaint does not include particularized facts that “give rise to a strong inference
that the [D]efendants acted with [scienter]” let alone which if any statements are
attributable to which if any of the Defendants. 15 U.S.C. § 78u–4(b)(2)(A). Under the
PSLRA, I am required to consider “the complaint in its entirety” and “omissions and
ambiguities count against inferring scienter.” Tellabs, 551 U.S. at 2509, 2511. Here,
there are no specific statements or omissions sufficiently alleged. Instead, Plaintiffs
plead “both [Morris] and Justin Godur promised they could secure institutional
financing through a European fund that would cover 90%–95% of the projects
estimated $30 million cost” and that “both [Morris] and Justin Godur presented
themselves as the principles of Capital Max, a lending advisor firm.” The PSLRA
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requires more. For example, it is unclear which part of the statement is attributable
to which Defendant, how that statement was misleading, or the reasons why
Plaintiffs believed it to be misleading, Likewise the Complaint fails to point to facts
that sufficiently state with particularity how the Defendants acted with scienter in
making this statement. The Complaint is ambiguous, so it is equally probable that
the Defendants thought in good faith that they could raise the money but failed,
nonetheless. See Tellabs, 551 U.S. at 2509, 2511 (“omissions and ambiguities count
against inferring scienter.”). Similarly, Plaintiffs do not sufficiently plead how Morris
and 	Justin 	Godur 	“presented 	themselves 	as 	the 	principles 	of 	Capital 	Max.”
Accordingly, Plaintiff’s securities fraud claim should be dismissed.
C. The breach of contract claim (Count II) should remain.
The Complaint says Defendant Capital Max “seeks dismissal of Counts I, II,
and III.” ECF No. 13 at 2. But, Defendants’ Motion does not discuss why Count II
should be dismissed. United States Steel Corp. v. Astrue, 495 F.3d 1272, 1287 n. 13
(11th Cir. 2007) (arguments not fully developed are forfeited); See also Resolution
Trust Corp. v. Dunmar Corp., 43 F.3d 587, 599 (11th Cir. 1995).
In any event, Count II plausibly alleges a breach of contract.
The elements of a breach of contract are (1) a valid contract, (2) material
breach, and (3) damages. Vega v. T-Mobile USA, Inc., 564 F.3d 1256 (11th Cir. 2009).
Here, Plaintiffs say (1) they entered into an agreement and executed promissory note
with Capital Max where Capital Max would repay the $2.3 Million dollars and (2)
Capital Max failed pay. A breach of contract claim does not need to be pled with
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particularity. Rather, a breach of contract claim only needs to comply with Rule 8.
Pals Group, Inc. v. Quiskeya Trading Corp., Case No. 16-23905, 2017 WL 3840359,
at *3 (S.D. Fla. Sept. 1, 2017) (citing Manicini Enterprises, Inc. v. American Exp. Co.,
236 F.R.D. 695, 698 (S.D. Fla. 2006)). At this stage, viewed in the light most favorable
to the Plaintiffs, they have plausibly plead their breach of contract claim. Defendants’
Motion should be denied as to Count II.
D. Defendants’ request for joinder of indispensable party should be denied.
With the breach of contract claim remaining, I turn to Defendants’ argument
that the Complaint fails to join an indispensable party. Defendants say Plaintiffs
failed to join an indispensable party— Military and Patriots Investment Group, LLC
(“MPIG”). In support, the Defendants say MPIG (through its agent, Wesley Yates)
contracted with the Godurs and Capital Max not the Plaintiffs. 	Defendants have
appended Retainer and Consultation Agreements between Capital Max and MPIG
where Capital Max agreed to consult for MPIG. ECF No. 13-1. Defendants also
appended Old Jamestown’s Limited Liability Company Annual Report, MPIG’s
Franchise Tax Account Status Report, and Old Jamestown’s Franchise Tax Account
Status. ECF Nos. 13-2–13-4. MPIG is listed a member in Old Jamestown’s Franchise
Tax Account Status Report and Old Jamestown is listed as a member in MPIG’s Tax
Account Status Report. ECF Nos. 13-2–13-3.
Plaintiffs do not dispute that MPIG entered into the retainer agreements or
MPIG’s role as a member of Old Jamestown. Instead, they say the alleged breach was
not of the retainer agreement, but of the Promissory Note and Repayment Agreement.
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In support, Plaintiffs say that they “are the current holders of the rights and
obligations created by the operative agreements including the Promissory Note and
Repayment Agreement, both of which post-date the original retainer.” ECF No. 14 at
9. And, according to the Promissory Note and Repayment Agreement, Plaintiffs say,
Defendants’ obligations are expressly owed to the Plaintiffs not MPIG. Id. Therefore,
Plaintiffs conclude that “MPIG’s absence does not impair the Court’s ability to grant
full relief to the parties actually before it.” At this stage, for purposes of the breach of
contract claim, I agree.
True, that Plaintiffs have not appended the Promissory Note and Repayment
Agreement to their Complaint. But, at this stage, in federal court, they are not
required to. 	TaiDoc Technology Corp. v. Pharma Supply, Inc., Case No. 13-80682,
2013 WL 12383787, at *2 (S.D. Fla. Aug. 29, 2013) (“The Federal Rules of Civil
Procedure do not require the attachment of the contract sued upon.”); Green v. Dr.
Kelly Malinoski, LLC, No. 219CV556FTM60NPM, 2019 WL 6173175 (M.D. Fla. Nov.
20, 	2019). 	Plaintiffs’ 	Complaint 	pleads 	“Plaintiffs 	Old 	Jamestown 	and 	Rigsby
[Storage] LLC entered into a binding written Repayment Agreement with Capital
Max” and “Capital Max executed a Promissory Note in favor of Old Jamestown” ECF
No. 1 at ¶¶ 40, 42. Therefore, Defendants have not met their burden of showing MPIG
is 	an 	indispensable 	party. 	Star 	Cruises, 	174 	F.Supp.2d 	at 	1325. 	Accordingly,
Defendants Motion to Dismiss for failure to join an indispensable party should be
denied.
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E. Defendants’ Request for a More Definite Statement should be denied.
Defendants request a more definite statement as alternative relief to their
Motion to Dismiss. That request should be denied as moot as to the securities fraud
(Count I) and fraud (Count III) claims.
Defendants’ request for a more definite statement as to the breach of contract
(Count II) claim should also be denied. Plaintiffs allege Defendants owe them $2.3
million 	dollars 	under 	an 	identified 	promissory 	note 	and 	further 	allege 	that
Defendants have not paid them back. The breach of contract claim is not “so vague or
ambiguous that the opposing party cannot reasonably prepare a response.” Fed. R.
Civ. P. 12(e); Euro RSCG Direct Response, LLC v. Green Bullion Fin. Servs., 872 F.
Supp. 2d 1353, 1358 (S.D. Fla. 2012).
F. Plaintiffs’ request for leave to amend is not properly before the Court.
In their response, Plaintiffs seek leave to amend should the Court find the
Complaint to be inadequately pled. ECF No. 14 at 12–13. That request is not properly
before me. Posner v. Essex Ins. Co., 178 F.3d 1209, 1222 (11th Cir. 1999) (When a
party seeks relief imbedded in a response or reply, as here, “the issue has not been
raised properly.”). If, however, the Plaintiffs believe they could amend the complaint
to include factual allegations to overcome the shortcomings of their Complaint, they
should file a separate motion for leave to amend and should include the proposed
amended Complaint. S.D. Fla. L.R. 15.1; Fed. R. Civ. P. 15(a)(2); Patel v. Georgia
Dep't BHDD, 485 F. App'x 982, 983 (11th Cir. 2012).
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Upon review of the record however, it appears that leave to amend the
securities fraud claim may be futile. To state a claim for securities fraud under Rule
10b-5, a plaintiff must allege the following elements: (1) a material misrepresentation
or omission; (2) made with scienter; (3) a connection with the purchase or sale of a
security; (4) reliance on the misstatement or omission; (5) economic loss; and (6) a
causal connection between the misrepresentation or omission and the loss, called loss
causation. Carvelli, 934 F.3d at 1317 (citing Securities Exchange Act of 1934 § 10, 15
U.S.C.A. § 78j(b); 17 C.F.R. § 240.10b-5(b)). Here, the Complaint fails to point to facts
that sufficiently show how any of the alleged misconduct was “in connection with the
purchase or sale of a security.” Id. At a high level, Plaintiffs’ Complaint is about a
business deal gone wrong. Plaintiffs say they gave the Defendants money to secure
financing and Defendants failed to meet their end of the bargain. But, if that business
deal never had a “connection with the purchase or sale of a security” leave to amend
the securities fraud claim would be futile.
Should Plaintiffs abandon the securities fraud claim, this Court may not have
subject matter jurisdiction because the current Complaint does not properly allege
diversity of citizenship. Jurisdiction under 28 U.S.C. §1332 depends on the parties’
citizenship. 	A 	limited 	liability 	company’s 	citizenship 	for 	purposes 	of 	diversity
jurisdiction is the citizenship of each of its members. Rolling Greens MHP, L.P. v.
Comcast SCH Holdings L.L.C., 374 F.3d 1020, 1022 (11th Cir. 2004). Here, Plaintiffs’
Complaint alleges where each LLC is “established” but fails to allege the citizenship
of each member of the LLCs. 	Similarly, the Complaint alleges Justin and Morris
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Godur “resid[e] in the State of Florida” but it is not enough to plead where a party
resides or is located — Plaintiffs must allege diversity of citizenship. 	Travaglio v.
Am. Exp. Co., 735 F.3d 1266, 1269 (11th Cir. 2013).
REPORT AND RECOMMENDATION
Accordingly, this Court RECOMMENDS that the District Court GRANT
Defendants’ Motion to Dismiss IN PART and DENY the Motion IN PART. Counts I
and III should be dismissed and Count II should remain.
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NOTICE OF RIGHT TO OBJECT
A party shall serve and file written objections, if any, to this Report and
Recommendation with the Honorable Rodney Smith, United States District Court
Judge for the Southern District of Florida, within FOURTEEN (14) DAYS of being
served with a copy of this Report and Recommendation. Failure to timely file
objections shall constitute a waiver of a party's "right to challenge on appeal the
district court’s order based on unobjected-to factual and legal conclusions." 11th Cir.
R. 3-1 (2016).
If counsel do not intend to file objections, they shall file a notice
advising 	the 	District 	Court 	within 	FIVE 	DAYS 	of 	this 	Report 	and
Recommendation.
DONE and SUBMITTED in Chambers at West Palm Beach, Palm Beach
County, in the Southern District of Florida, this 15th day of December 2025.
__________________________________
BRUCE E. REINHART
UNITED STATES MAGISTRATE JUDGE
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