Michael Kronk v. Landwin Group, Llc

FILED
NOT FOR PUBLICATION MAY 08 2013
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
MICHAEL KRONK, on behalf of himself No. 11-56258
and all others similarly situated,
D.C. No. 8:10-cv-00344-CJC-
Plaintiff - Appellant, MLG
v.
MEMORANDUM*
LANDWIN GROUP, LLC; SYLVIA,
INC.; SMITHDENNISON CAPITAL,
LLC; SEAN DENNISON; MARTIN
LANDIS; TOM CASAULT; MARSHALL
REDDICK; JACK R. ANDREWS AND
ASSOCIATES, LLC; COMMERCIAL
REAL ESTATE PROPERTIES, LLC;
JACK ANDREWS,
Defendants - Appellees.
Appeal from the United States District Court
for the Central District of California
Cormac J. Carney, District Judge, Presiding
Argued and Submitted April 12, 2013
Pasadena, California
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Before: BERZON and TALLMAN, Circuit Judges, and ROSENTHAL, District
Judge.**
Plaintiff-Appellant Michael Kronk appeals from the district court’s dismissal
of several causes of action in a putative class action. We have jurisdiction under
28 U.S.C. § 1291, and we review de novo. See Knievel v. ESPN, 393 F.3d 1068,
1072 (9th Cir. 2005). We may affirm on any ground supported by the record, see
Johnson v. Riverside Healthcare Sys., LP, 534 F.3d 1116, 1121 (9th Cir. 2008),
and we affirm.
Kronk has failed to plead sufficient facts to create a strong inference that the
defendants acted with the requisite scienter for a Section 10(b) violation. Zucco
Partners, LLC v. Digimarc Corp., 552 F.3d 981, 998 (9th Cir. 2009). He has also
failed to plead facts that demonstrate the defendants made forward-looking
statements with actual knowledge that the statements were false or misleading. In
re Daou Sys., Inc., 411 F.3d 1006, 1021–22 (9th Cir. 2005). Because he has not
sufficiently alleged a Section 10(b) violation, there is no primary violation to
support Section 20(a) liability for any defendant. See In re Oracle Corp. Sec.
Litig., 627 F.3d 376, 394 (9th Cir. 2010).
**
The Honorable Lee H. Rosenthal, United States District Judge for the
Southern District of Texas, sitting by designation.
2
The district court properly dismissed Kronk’s claim under Section 25501 of
the California Corporations Code because Kronk failed to assert the claim against
the “literal seller” of the security—Landwin Partners Fund I, LLC. See SEC v.
Seaboard Corp., 677 F.2d 1289, 1296 (9th Cir. 1982). Without a primary Section
25501 violation, there can be no liability for any defendant under Section 25504.
Kronk’s claims for federal RICO violations and breach of fiduciary duty rely
on harm done to Landwin Partners Fund I, not to Kronk individually. Kronk has
failed to prove that any defendant owed a special duty to him distinct from other
shareholders or that Kronk suffered a unique injury, and the district court properly
dismissed these claims because they were not brought as derivative actions. See,
e.g., Sparling v. Hoffman Constr. Co., 864 F.2d 635, 640 (9th Cir. 1988).
Kronk does not have standing to assert his false advertising and unfair
business practices violations because he has failed to allege any injury unrelated to
the sale or purchase of a security. See Bowen v. Ziasun Techs., Inc., 116 Cal. App.
4th 777, 790 (2004).
Kronk failed to adequately plead his state law fraud claims because his
allegations involve too many layers of willful ignorance to permit any factfinder to
determine that his reliance on only the defendants’ alleged statements—in light of
the repeated instructions to obtain and read the Private Placement Memorandum
3
and his own contractual representation that he did read it—was reasonable. See
Seeger v. Odell, 18 Cal. 2d 409, 414–15 (1941).
The judgment is AFFIRMED.
4