LOCKWOOD

v.

OLIVER

and VALLEY STATION, LLC,

Plaintiffs,

v. Case No. 8:20-cv-1990-JLB-TGW

KELLY OLIVER, NEO EL, and REAL PEOPLE LENDING, LLC, doing business as BUSINESS LOAN SOLUTIONS,

Defendants. ______________________________________/

ORDER

Plaintiffs Jeff Lockwood, Joanne Lockwood, and Valley Station, LLC move for partial summary judgment on their claim that Defendants Kelly Oliver and Neo El, owners of Defendant Real People Lending, LLC (“RPL”), sold a security to them without a proper license, in violation of Florida Statute § 517.12(1). (Doc. 97.) After careful review of the record, the briefs, and viewing the facts in the light most favorable to Defendants, Plaintiffs’ motion for partial summary judgment is

DENIED.

BACKGROUND

Mr. Lockwood sought to finance the construction of a project near his home in California and learned from his broker about a “novel and attractive way to do this” promoted by RPL. (Doc. 97-1 at 39, ¶¶ 2–3.)¹ Mr. Lockwood spoke to the owners of RPL, Ms. Oliver and Mr. El, about “their ability to provide the funds [he] needed for [his] project, as well as their experience, expertise and international connections.

They also sent [him] sales brochures about how [he] could achieve [his] goals.” (Id. at 40, ¶ 5; Doc. 97-1 at 4.) At the time, RPL, Ms. Oliver, and Mr. El did not have licensure as an investment advisor, associated person, or issuer or dealer of securities under Florida Statutes, Chapter 517. (Id. at 3, 11, 15.) After talking with Ms. Oliver and Mr. El, Mr. Lockwood entered into an agreement titled “Joint Participation Agreement,” whereby RPL agreed to “secure the rights to a bank financial instrument,” specifically a standby letter of credit (“SBLC”); “structure the transaction”; and arrange “for the reservation of the chosen financial instrument.” (Doc. 47 at 14–15, ¶¶ 3.2, 3.4; Doc. 97-1 at 40, ¶ 6; Doc. 97-1

4. There is no prepayment penalty.

(Id. at 23.) Pursuant to the agreement, Mr. Lockwood paid $250,000 to RPL. (Id. at 15, ¶ 3.3; Doc. 97-1 at 40, ¶ 7.) RPL then forwarded $200,000 of the payment to a “collateral partner” in Brazil, Robinson Bernardes De Costa. (Doc. 97-1 at 17–18.) Mr. De Costa was to pledge collateral to obtain and secure an SBLC. (Id. at 19–21.) The SBLC, which was issued by Deutsche Bank in Germany, was to be delivered to

Procedural History Through counsel, Mr. Lockwood sent Defendants a letter demanding rescission of the agreement. (Doc. 97-1 at 79–80.) About a month later, Plaintiffs filed this lawsuit raising several claims, including a violation of Florida Statute § 517.12(1) based on Defendants selling them a security without a proper license or registration (Count I). (Doc. 1; Doc. 47 at 2–3.) Plaintiffs filed a motion for summary judgment as to only Count I against Ms. Oliver and Mr. El. (Doc. 54.)³

The previously assigned district judge held a hearing on the motion, which was denied without prejudice to allow any party to refile “with additional evidence, such as expert evidence” establishing whether the agreement constituted a security. (Docs. 91, 101.) The matter was then reassigned to the undersigned

SUMMARY JUDGMENT STANDARD

Federal Rule of Civil Procedure 56 states that “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). If this showing is made, “the burden shifts to the nonmoving party to come forward with specific facts showing that there is a genuine issue for trial.” Shaw v. City of Selma, 884 F. 3d 1093, 1098 (11th Cir. 2018) (quotation omitted). “A fact is ‘material’ if it has the potential of ‘affect[ing] the outcome’ of the case.” Id. (citation omitted). “And to raise a ‘genuine’ dispute, the nonmoving party must point to enough evidence that ‘a reasonable jury could return a verdict for [him].’” Id. (citation omitted). “When considering the record on summary judgment ‘the evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.’” Id. (citation omitted). “[A]n inference is not reasonable if it is only a guess or a possibility, for such an inference is not based on the evidence but is pure conjecture and speculation.” Daniels v. Twin Oaks Nursing Home, 692

F. 2d 1321, 1324 (11th Cir. 1982) (internal quotation marks and citation omitted).

comply with the Local Rules. (Doc. 64.) Evidently, Defendants did not pursue the matter and did not object to the Magistrate Judge’s non-dispositive pretrial order. See Fed. R. Civ. P. 72(a). Finally, Defendants have not specifically demonstrated how postponing the ruling would enable them to rebut a showing of the absence of a genuine issue of fact. Indeed, summary judgment is inappropriate. Accordingly, the request is denied.

DISCUSSION

Plaintiffs are not entitled to summary judgment on their claim that Defendants sold them a security without a license or registration to do so, in violation of section 517.12(1). The text of that section provides as follows: No dealer, associated person, or issuer of securities shall sell or offer for sale any securities in or from offices in this state, or sell securities to persons in this state from offices outside this state, by mail or otherwise, unless the person has been registered with the office pursuant to the provisions of this section.

Fla. Stat. § 517.12(1). Accordingly, Plaintiffs must establish that Defendants: (1) sold or offered for sale a security in Florida; and (2) were unregistered in Florida to do so. Id.; see Calabro v. Pares, No. 19-22801-CIV, 2020 WL 7481301, at *3 (S.D. Fla. May 27, 2020), adopted, 2020 WL 7481304 (S.D. Fla. June 12, 2020). It is undisputed that Defendants were not registered to sell or offer for sale securities in Florida. The resolution of the motion for partial summary judgment thus turns on whether the instrument here constitutes a “security,” as contemplated by section 517.12(1). Chapter 517 of the Florida Statutes, titled “Securities Transactions,” provides definitions of words and phrases throughout that chapter in section 517.021, delineating as follows, “When used in this chapter, unless the context otherwise indicates, the following terms have the following respective meanings: . . .” Section 517.021(22) provides that a “security” includes several enumerated instruments. See Fla. Stat. § 517.021(22)(a)–(w).⁶ Relevant here, Plaintiffs contend that the agreement between the parties constitutes an “investment contract,” id. § (22)(q), a “certificate of interest,” id. § (22)(i), and a “certificate of interest in a profit-sharing agreement,” id. § (22)(k). (Doc. 97 at 6–12.) They also contend that, separate from those items listed as a “security” in section 517.021(22), the instrument constitutes a security as a letter of credit. (Id. at 12.) The Court will address these contentions in turn.

I. Investment Contract

The parties chiefly contest whether the instrument constitutes an investment contract. To determine whether an instrument constitutes an investment contract, Florida courts have adopted the test set forth in S.E.C. v. W.J. Howey Co., 328 U.S. 293 (1946). An investment contract exists where an individual (a) invests money, (b) in a common enterprise,7 with (c) an expectation of profits derived solely from

First, although not dispositive, it is relevant that the Joint Participation Agreement includes an appendix titled “Loan Terms,” providing that “[t]his is a non-recourse loan” and that RPL will “loan $30,000,000 USD” to Plaintiffs. (Doc. 47 at 20, 23.) Although the appendix originally stated that “[t]his funding does not require repayment of the loan amount of $30,000,000.00,” this was later supplemented with the “Updated Loan Terms” providing that: (1) “The term of the loan will be³ years (36 months)”; (2) “At the end of the term Nov¹, 2022, a

$25,000.00 (Twenty five thousand dollars and zero cents) payoff balance is due and

Oliver’s declaration, however, directly contradicts this evidence. She averred that “[t]here were no conversations with the Plaintiffs . . . that they would make millions of dollars from any transaction. The Plaintiffs were seeking a multimillion-dollar loan to develop a project.” (Doc. 112-9 at 5, ¶ 36.)¹⁰ In short, it is surprising that, given the amount of money at stake, the parties were not clearer in stating whether repayment of the “loan” was required.

Chase Manhattan Bank v. Rood, 698 F. 2d 435, 436 (11th Cir. 1983). Here, the contract’s terms do create an ambiguity.

Absent legal or factual support, this argument is insufficient. See Resol. Tr. Corp. v. Dunmar Corp., 43 F. 3d 587, 599 (11th Cir. 1995) (“There is no burden upon the district court to distill every potential argument that could be made based upon the materials before it on summary judgment. Rather, the onus is upon the parties to formulate arguments . . . .”). As to whether the instrument constitutes a certificate of interest in a profit-

sharing agreement security under section 517.021(22)(q), Plaintiffs contend the following: [T]he agreement evidences a right for Lockwood to participate in a profit-sharing agreement where both the Lockwood[s] and RPL are projected to each make millions of dollars. The structure of the transaction was such that Lockwood was sold an interest in a financial instrument (SBLC) to be acquired by RPL which would then be monetized with Lockwood receiving millions of dollars on their investment. RPL, likewise, would also receive millions of dollars.

(Doc. 97 at 11–12.) However, this argument is likewise insufficiently supported. In all events, for the reasons discussed, there are genuine issues of fact remaining as to whether the instrument here is or is not a “profit-sharing agreement.” See Tanuggi v. Grolier Inc., 471 F. Supp. 1209, 1213 n.5 (S.D.N.Y. 1979) (noting similarities between “investment contract” and “certificate of interest in or participation in a profit-sharing agreement”); see also Tcherepnin v. Knight, 389 U.S. 332, 338–39 (1967) (deeming instrument both an investment contract and certificate of interest in a profit-sharing agreement); Pawgan v. Silverstein, 265 F. Supp. 898, 900 (S.D.N.Y. 1967) (same). Accordingly, genuine issues of material fact remain as to whether the instrument here is an investment contract or certificate of interest in a profit-sharing agreement security.

III. Letter of Credit

Plaintiffs lastly assert that the instrument is a letter of credit and therefore constitutes a security. (Doc. 97 at 12.) They reason that, although section 517.021(22) does not list a letter of credit as a security, “securities” is defined by a federal statute, 18 U.S.C. § 2311, to include a “letter of credit.” (Id.) They further contend that letters of credit fall “within the ordinary concept of a security.” (Id. (quoting Holloway v. Peat, Marwick, Mitchell & Co., 879 F. 2d 772, 776 (10th Cir. 1989)).) There are several flaws with this argument. First, Plaintiffs rely on the definition of “securities” in a federal criminal statute relating to theft of property. They cite no authority in support of the proposition that the use of “security” in Florida Statute § 517.12 contemplates examples of securities in different statutes, much less specifically a letter of credit. To the contrary, section 517.021(22), which defines “security,” confines the types of securities that “includes any of the following” and then enumerates twenty-three items. See Fla. Stat. § 517.021(22)(a)–(w). None of those enumerated items is a letter of credit. And Plaintiffs have neglected to cite any legal authority that section 517.12(22) includes a “letter of credit.” The Court is mindful that, absent such legal authority, it is not its role to rewrite that statute to include what Plaintiffs think it should include. Second, they do not support with factual or legal authority their contention that the instrument here is a “letter of credit” and falls within the ordinary concept of a security, as contemplated by the Florida Legislature in its securities statutes.

And even assuming a letter of credit does constitute a security, that does not mean the same is true of a SBLC, which is, by its own terms, a “standby” letter of credit. See Stockton v. First Union Nat’l Bank of Fla., 700 So. 2d 394, 396 (Fla. 1st DCA 1997) (explaining differences between SBLC and commercial or “traditional” letters of credit). Finally, although the agreement between the parties here entailed a SBLC being issued by one entity and delivered to another entity, the instrument between the parties did not necessarily constitute an SBLC. Instead, as explained, there is evidence that may just as well support a finding that the instrument constituted a loan from RPL, not the holder of the SBLC, that required repayment. In all events, for reasons discussed, Plaintiffs have not shown an absence of a genuine issue of material fact or that they are entitled to judgment as a matter of law that the instrument is a security under Florida law.

CONCLUSION

Plaintiffs’ Motion for Partial Summary Judgment (Doc. 97) is DENIED. On or before May 27, 2022 the parties are DIRECTED to file a joint notice indicating: (1) the status of this case; and (2) the status of any arbitration as to Defendant Real People Lending, LLC. ORDERED in Tampa, Florida on May 138, 2022.

As he a \ofithna, Lt

JOHN L. BADALAMENTI

UNITED STATES DISTRICT JUDGE