Court Opinion

ID: 866966
Source: CourtListenerOpinion
Date Created: 2013-05-08 20:01:43.085702+00
Date Added: 2024-06-11T09:06:46.030229
License: Public Domain

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                           NOT FOR PUBLICATION                                MAY 08 2013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. 11-56191
and all others similarly situated,
                                                 D.C. No. 8:10-cv-00242-CJC-
              Plaintiff - Appellant,             MLG

  v.
                                                 MEMORANDUM*
LANDWIN GROUP, LLC; SYLVIA,
INC.; SMITHDENNISON CAPITAL,
LLC; CPP PROPERTIES, LLC; MUIR,
LLC; MARSHALL REDDICK
COMMERCIAL REAL ESTATE
NETWORKS, INC.; SEAN DENNISON;
MARTIN LANDIS; TOM CASAULT;
CHRIS PARNASS; MARSHALL
REDDICK; JACK R. ANDREWS AND
ASSOCIATES, LLC; NHB FAMILY
PARTNERS, LLC; MARSHALL
REDDICK REALTY, INC.; MARSHALL
REDDICK SEMINARS, INC.;
COMMERCIAL REAL ESTATE
PROPERTIES, LLC; JACK ANDREWS;
NORMAN BANGERTER,

              Defendants - Appellees.

                   Appeal from the United States District Court

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
                       for the Central District of California
                    Cormac J. Carney, District Judge, Presiding

                       Argued and Submitted April 12, 2013
                              Pasadena, California

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

       **
            The Honorable Lee H. Rosenthal, United States District Judge for the
Southern District of Texas, sitting by designation.
                                          2
support Section 20(a) liability for any defendant. See In re Oracle Corp. Sec.

Litig., 627 F.3d 376, 394 (9th Cir. 2010).

      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 Management, 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, breach of fiduciary duty,

negligent interference with a prospective economic advantage, and intentional

interference with a prospective economic advantage rely on harm done to Landwin

Management, 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).

                                             3
      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

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