Hilliard v. Black

125 F.Supp.2d 1071

Issac HILLIARD and Fred Taylor, Plaintiffs, v. William H. BLACK, et al., Defendants.

No. 1:00CV80 MMP.

United States District Court, N.D. Florida, Gainesville Division.

November 8, 2000.

COPYRIGHT MATERIAL OMITTED

Jeffrey Allan Sudduth, Hector & Marke LLP, Miami, FL, Lance A. Harke, Harke & Clasby LLP, Miami, FL, for Plaintiffs.

William H. Black, Miami, FL, Pro se.

Ethan H. Cohen, Kutak Rock LLP, Atlanta, GA, for Defendants.

Robert C. Ellenberg, Columbia, SC, Pro se.

Lisa Adams, Lexington, SC, Pro se.

Jimmy B. Roof, West Columbia, SC, Pro se.

ORDER

PAUL, Senior District Judge.

A hearing was held on September 1, 2000 to address the following three matters:

1. Defendants Black and PMI, Inc.'s Motion to Dismiss (Doc. 4)

2. Defendants Black and PMI, Inc.'s Motion for Clarification Regarding Submission of Initial Scheduling Order (Doc. 18)

3. Plaintiffs' Motion for Enlargement of Deadlines Established by the Court's Initial Scheduling Order (Doc. 23)

1. Defendants Black and PMI, Inc.'s Motion to Dismiss (Doc. 4) Legal Standard for Motion to Dismiss

To warrant dismissal of a complaint under Fed.R.Civ.P. 12(b)(6), the Court must be satisfied "that no relief could be granted under any set of facts that could be proved consistent with the allegations." Blackston v. Alabama, 30 F.3d 117, 120 (11th Cir.1994) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984)). Determining the propriety of granting a motion to dismiss requires courts to accept all the factual allegations in the complaint as true and to evaluate all inferences derived from those facts in the light most favorable to the plaintiff. See Hunnings v. Texaco, Inc., 29 F.3d 1480, 1483 (11th Cir.1994); Lopez v. First Union National Bank of Florida, 129 F.3d 1186 (11th Cir.1997). The threshold of sufficiency that a complaint must meet to survive a motion to dismiss is exceedingly low. See Ancata v. Prison Health Servs., Inc., 769 F.2d 700, 703 (11th Cir.1985) (citation omitted); Jackam v. Hospital Corp. of America Mideast, Ltd., 800 F.2d 1577, 1579 (11th Cir. 1986). "[U]nless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief," the complaint should not be dismissed on grounds that it fails to state a claim upon which relief can be granted. Sea Vessel, Inc. v. Reyes, 23 F.3d 345, 347 (11th Cir.1994) (citation omitted); see also Lopez, 129 F.3d 1186 (quoting Pataula Electric Membership Corp. v. Whitworth, 951 F.2d 1238, 1240 (11th Cir.1992)). Nevertheless, to survive a motion to dismiss, a plaintiff must do more than merely "label" his claims. Blumel v. Mylander, 919 F.Supp. 423, 425 (M.D.Fla.1996). Moreover, when on the basis of a dispositive issue of law no construction of the factual allegations will support the cause of action, dismissal of the complaint is appropriate. See Marshall County Bd. of Educ. v. Marshall County Gas Dist., 992 F.2d 1171, 1174 (11th Cir.1993). When a more carefully drafted complaint might state a claim, it is preferable for the court to give the plaintiff at least one opportunity to amend the complaint. See Long v. Satz, 181 F.3d 1275, 1279 (11th Cir.1999) (citing Bank v. Pitt, 928 F.2d 1108, 1112 (11th Cir.1991)).

Facts and Procedural History¹

Plaintiffs, Issac Hilliard ("Hilliard") and Fred Taylor ("Taylor") brought suit against the following Defendants: William H. Black ("Black"); James A. Franklin, Jr. ("Franklin"); Alfred Twitty ("Twitty"); Lisa Adams ("Adams"); Professional Management, Inc. ("PMI"); Professional Management Consulting, Inc. ("PMC"); P.E. Communications, Inc. ("PM"), Jimmy B. Roof ("Roof"); Robert C. Ellenburg ("Ellenburg"), Roof & Ellenburg, LLC ("R & E"); Richard Homa ("Homa"); and Cash 4 Titles, Inc. See Plaintiffs Compl. (Doc. 1), at 1. Defendants Black, Franklin, Twitty, Adams, PMI, PMC, and PE are referred to in the complaint as the PMI Defendants. See Plaintiffs' Compl. (Doc. 1) ¶ 15, at 4. Plaintiffs allege Counts I through VIII as follows: breach of fiduciary duty; conversion; negligence; civil conspiracy in connection with the sale of Black Americans of Achievement ("BAOA") securities; civil conspiracy in connection with the Cash 4 Titles scheme; unlicensed sale of securities; violation of federal securities laws; and breach of contract. Defendants Black and PMI, Inc. move that counts I through VII, be dismissed. See Defendants' Motion to Dismiss (Doc. 4), at 2-3. Count VIII is not brought against Defendants Black and PMI.

Plaintiff Issac Hilliard is a professional athlete and citizen of New Jersey. See id. ¶ 5, at 2. Plaintiff Fred Taylor is a professional athlete and citizen of Florida. See id. ¶ 15, at 4. Defendant Black at all times relevant to this action was the Chairman and Chief Executive Officer of PMI located in Columbia, South Carolina, and was licensed by the National Football League Players Association ("NFLPA") as a Contract Advisor or "sports agent." See id. ¶ 7, at 2-3. Defendant Black is a professional sports agent who represents approximately 35 professional athletes in the National Football League ("NFL") and the National Basketball Association ("NBA"), including Plaintiffs Hilliard and Taylor. See id. ¶¶ 26 & 29, at 7 & 8. Defendant Black, through Defendants PMI and PMC, negotiates his clients' contracts with teams affiliated with the NFL and NBA, and Defendant PMI typically receives three to four percent of its clients' bonuses and salaries in return for this representation. See id. Further, PMI provides its clients with financial services that include investment and retirement planning. See id. ¶ 27, at 7. Plaintiffs allege that they are "unsophisticated with respect to business and financial matters" and that they "relied completely on the advice and expertise of Defendants Black, Franklin, and PMI" who "exercised substantial if not complete control and authority over the financial decisions of Plaintiffs and others." Id. ¶ 29, at 8.

Plaintiffs allege that PMI Defendants perpetrated two major financial scams. First, Defendant Black became president of Black Americans of Achievement, Inc. ("BAOA"), a California corporation formerly based in San Diego, in October 1995. See id. ¶ 30, at 8. BAOA's primary business was the production of a board game regarding the accomplishments of African-Americans. See id. In 1996, Defendant Black, arranged for PMI clients to promote BAOA's board game in exchange for free, restricted BAOA stock. See id. ¶ 32, at 8. However, Plaintiffs were never informed of these arrangements and never agreed to endorse the BAOA board game. See id. ¶ 33, at 8. Further, Defendant Black falsely represented to BAOA that he had "power of attorney" to bind his clients. See id. ¶ 34, at 8-9. Defendant Black falsely informed BAOA that his PMI clients had promoted the BAOA board game and were entitled to free stock. See id. ¶ 35, at 9. As a result, BAOA issued two million shares of free stock in the names of fifteen PMI clients, and BAOA sent stock certificates to Defendant PMI. See id. ¶ 36, at 9.

Defendant Black in turn sold the BAOA stock to his clients at PMI, including Plaintiff Hilliard, for prices that were above the then current market prices. See id. ¶ 37, at 9. Defendant Black sold the BAOA stock to Plaintiff Hilliard and other PMI clients for $1,240,000. See id. ¶ 39, at 9. Defendant Black directed PMI clients to pay for BAOA stock with checks made payable to PE Communications, Inc. ("PE"), a shell company created by Black. See id. ¶ 38, at 9. Black also directed that over $1 million in funds be transferred from the PE account to his personal bank accounts. See id. ¶ 39, at 9.

Defendants Black and PMI were also involved with the Cash 4 Title scheme. Defendants Roof and Ellenburg, operating Defendant R & E, raised $300 million by selling promissory notes to individuals throughout the United States. See id. ¶ 42, at 10. Roof and Ellenburg represented that the promissory notes were to be invested in the car title loan industry, including Defendant Cash 4 Title, Inc., which offers — as do most car title companies — loans at very high interest rates to persons with poor credit ratings; the loans are secured by car titles that are transferred to the company in case of default. See id. ¶¶ 43-44, at 10. However, Roof and Ellenburg did not invest the proceeds from the sale of promissory notes in the car title business; Roof and Ellenburg transferred funds into United States bank accounts and subsequently to bank accounts in the Cayman Islands. See id. ¶ 45, at 10.

In late 1997, Defendants Roof and Ellenburg met several times with Defendants Black and Franklin regarding investment in Cash 4 Titles, Inc. See id. ¶ 48, at 11. Defendants Roof and Ellenburg offered to pay Black, Franklin, and clients of PMI a three percent monthly return on any funds invested. See id. Defendant Black invested personal funds and received the full three percent monthly return and agreed to invest funds received from PMI clients in the notes. See id. ¶ 49, at 11. Defendants Black and Franklin entered into an agreement with Defendants Roof and Ellenburg to pay Plaintiffs and other PMI clients, who were invested in the promissory notes, only 1.67 percent of the monthly return and to retain the remaining 1.33 percent for Defendant PMC, an affiliate of PMI. See id. ¶ 13 & 50, at 4 & 11.

Defendants Black and Franklin made the following false statements to PMI clients regarding investment in the promissory notes; (1) that the investment in promissory notes was safe and extremely lucrative; (2) that the funds would primarily be used for the growth and expansion of Cash 4 Titles, Inc.; and (3) that Defendants had no financial interest in the investment. See id. ¶ 52, at 12. Defendants Black and Franklin did not inform PMI clients that forty percent of the monthly return paid by Defendants Roof and Ellenburg would be retained by PMC. See id....