Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-02077/USCOURTS-azd-2_09-cv-02077-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Paul Bobrowski, 

Plaintiff, 

vs.

Red Door Group, Inc., et al., 

Defendants. 

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No. CV 09-02077-PHX-FJM

ORDER

We have before us plaintiff's motion for reconsideration (doc. 113). In our August 10,

2011 order (doc. 112), we granted defendants' motion for summary judgment on the

securities and fraud claims. Plaintiff argues that the court overlooked critical facts. 

I

Under Local Rule of Civil Procedure 7.2(g), a court should deny a motion for

reconsideration "absent a showing of manifest error or a showing of new facts or legal

authority that could not have been brought to its attention earlier with reasonable diligence."

Plaintiff has not met his burden. He does not provide us with newly discovered facts or legal

authority. Plaintiff simply restates facts that were presented when we considered the parties'

motions for summary judgment. In doing so, plaintiff contravenes LRCiv 7.2(g), which also

states that "[n]o motion for reconsideration of an Order may repeat any oral or written

argument made by the movant in support of or in opposition to the motion that resulted in the

Case 2:09-cv-02077-FJM Document 124 Filed 08/31/11 Page 1 of 3
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Order." Nevertheless, we will briefly address plaintiff's contentions.

II

Plaintiff contends that a common enterprise actually exists. To state a claim for

violation of securities laws, there must be a finding of a common enterprise. SEC v. W.J.

Howey Co., 328 U.S. 293, 301, 66 S. Ct. 1100, 1104 (1946). Under the Ninth Circuit's

interpretation, a common enterprise is present if either horizontal or vertical commonality

exists. SEC v. R.G. Reynolds Ent., Inc., 952 F.2d 1125, 1130 (9th Cir. 1991). We concluded

that the transactions at issue were not securities because there was no horizontal or vertical

commonality. Plaintiff disputes both conclusions.

Horizontal commonality occurs through pooling assets and giving up claims to profits

and losses in return for a pro rata share of the enterprise's profits. We correctly found that

neither the express contractual terms nor economic reality provided plaintiff a pro rata share

of the enterprise's profits. Plaintiff owned individual units, and the fact that many or all

investors used the same management company "establishes, at most, a common agency, not

a common enterprise." Revak v. SEC Realty Corp., 18 F.3d 81, 88 (2d Cir. 1994).

Vertical commonality occurs when "the fortunes of the investors are linked with those

of the promoters" in a common enterprise. R.G. Reynolds, 952 F.2d at 1130. We

acknowledged that the existence of vertical commonality is a close issue, but decided that

plaintiff's investment fortunes were not directly linked to the defendants' success and

profitability. Plaintiff's only new argument is that the fortunes of the parties are linked

because all parties receive higher profits if the condominium units sell quickly. This is a

tenuous link. Finding a common enterprise from this evidence "would merely collapse the

second prong of the Howey test into the third, which requires that Plaintiffs have expected

profits solely from the efforts of the promoter." Lavery v. Kearns, 792 F. Supp. 847, 854 (D.

Me. 1992). The evidence plaintiff relies on to support his claims of horizontal and vertical

commonality has already been presented to the court and is insufficient to create a factual

issue.

III

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Plaintiff also urges us to reconsider our grant of summary judgment on the issue of

fraud. Once again, he fails to submit any newly discovered evidence and relies solely on

evidence earlier submitted. He contends that defendants' statements concerning future events

are actionable fraud because they were made with the present intent not to perform. To show

intent, he points to the defendants' large negative cash flow and discussions of bankruptcy

a month after plaintiff's purchase. As discussed in our order, the timing of the statements is

not enough to support his claim. Similarly, evidence of a large negative cash flow does not

by itself show an intent not to perform. 

IV

For the foregoing reasons, IT IS ORDERED DENYING plaintiff's motion for

reconsideration (doc. 113). 

DATED this 31st day of August, 2011.

Case 2:09-cv-02077-FJM Document 124 Filed 08/31/11 Page 3 of 3