The opinion of the court was delivered by: U. S. District Judge Honorable Edward J. Lodge
ORDER ADOPTING REPORT AND RECOMMENDATION
On February 16, 2011, United States Magistrate Judge Ronald E. Bush issued a Report and Recommendation ("Report"), recommending the Defendants' Motions for Summary Judgment be granted in part and denied in part. (Dkt. No. 520.) Any party may challenge a magistrate judge's proposed recommendation by filing written objections within ten days after being served with a copy of the report and recommendation. 28 U.S.C. §636(b)(1)(C). The district court must then "make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made."
Id. The district court may accept, reject, or modify in whole or in part, the findings and recommendations made by the magistrate judge. Id.; see also Fed. R. Civ. P. 72(b).
Defendants All Season Resort Reality ("All Season") and Teton Springs Golf & Casting Club, LLC ("Teton Springs") filed objections to the Report and Recommendation issued in this case. All Season objects to the portions of the Report and Recommendation denying their Motion for Summary Judgment. (Dkt. No. 523). Likewise, Defendant Teton Springs joins in All Season's objections and argue their Motion for Summary Judgment should be granted in its entirety. (Dkt. No. 524). The parties have filed responses and the matter is now ripe for the Court's consideration. The Court has considered the contentions of the parties and conducted its de novo review of the record and finds as follows.
I. Teton Springs Motion for Summary Judgment
The Report recommends granting Teton Springs' Motions for Summary Judgment on claims one, two, four, six, and seven and denied as to claims three, five, and eight. (Dkt. No. 520.) Teton Springs' objections focus on the Report's reasoning for denying the Motions as to claims three, five, and eight. (Dkt. No. 524.) Their objections contend there is no legal or factual basis to 1) hold Anthony Vest individually liable; 2) support both the ILSFDA anti-fraud and common law fraud claims; and 3) support the joint venture claims. (Dkt. No. 524, p. 2.) The Court will address each objection in turn below.
A. Liability of Anthony Vest
In their objections, Teton Springs asserts Anthony Vest is not individually liable because 1) he is protected by the corporate veil, 2) NuWay was found to be Teton Springs' Agent, not his, and 3) the evidence shows Mr. Vest made no statements to Plaintiffs and instructed NuWay not to market the properties as investments. Plaintiffs respond that the argument regarding Mr. Vest's liability is improperly raised for the first time in the Teton Springs' objections. Regardless, Plaintiffs maintain Mr. Vest is: 1) personally liable under their ILSFDA Anti-Fraud Claim as he is a developer within the meaning of the Act; 2) not protected by the corporate veil; 3) personally liable for common-law fraud through his specific direction, participation, and knowing acquiescence in NuWay's fraud; and 4) personally liable on the Joint Venture Claim. (Dkt. No. 527, pp. 2-5.)
The Report does not speak specifically to Mr. Vest's liability as it was not raised before the Magistrate Judge in the briefing on the Motion. (Dkt. Nos. 520, 391, 409, 440, 460.)*fn1 Teton Springs' objection first takes issue with the fact that the Report "makes no distinction between Teton Springs Golf & Casting Club, LLC and Anthony Vest." (Dkt. No. 524, p. 2.) The Court finds no merit in this argument. In their own briefing, Teton Springs and Mr. Vest are collectively referred to as the "Teton Springs Defendants." (Dkt. No. 409, p. 2), (Dkt. No. 440, p. 1), (Dkt. No. 460, p. 2.)
The objection then claims Mr. Vest is protected by the corporate veil and that Mr. Vest did not have sufficient contacts with Plaintiffs and/or NuWay, as his agent, to substantiate the claims alleged by Plaintiffs. (Dkt. No. 534, p. 2-3.) Plaintiffs counter quoting Aboujaoude v. Poinciana Development Co. II which held that a corporate officer may be held liable under the ILSFDA. 509 F.Supp.2d 1266, 1276 (S.D. Fla. 2007) (citations omitted). (Dkt. No. 527, p. 3.) Plaintiffs also cite to L.B. Industries, Inc. v. Smith, for the proposition that corporate directors can be held individually liable for their corporation's fraud where they specifically directed, actively participated, or knowingly acquiesced in the fraud. 817 F.2d 69, 71 (9th Cir. 1987); (Dkt. No. 527, p. 4.) Resolution of these arguments is precluded by the factual disputes existing in this case at this time.
This Court has previously considered Mr. Vest's role in this case. (Dkt. No. 493.) In a prior Report and Recommendation, the Magistrate Judge, in discussing the applicability of the economic loss rule, characterized Mr. Vest as the "managing member of Teton Springs" (Dkt. No. 482.) This Court, in its review of the Report and Recommendation, denied Plaintiffs' efforts to hold Mr. Vest personally liable by way of his involvement with All Season. (Dkt. No. 493, pp. 6-8.) In doing so, however, the Court agreed that Mr. Vest was "the managing partner of Teton Springs" and "akin to Teton Springs." (Dkt. No. 493, p. 7.) Teton Springs has itself characterized Mr. Vest as a "managing member" of Teton Springs. (Dkt. No. 460, pp. 3, 8-10.) The scope of Mr. Vest's role, however, remains unclear. The facts surrounding the parties' varying levels of knowledge and participation in the activities giving rise to Plaintiffs' claims are unknown at this time. The Court finds Teton Springs' argument/objection in this regard to be lacking as they have failed to demonstrate the absence of disputed facts on this issue. In particular, the scope of Mr. Vest's activities, role, and involvement with the entities in this action as well as any contacts he had with Plaintiffs is undeterminable at this time as it is based upon the resolution of factual questions.
Teton Springs objects to the Report arguing there is no legal or factual basis to support Plaintiffs' Fraud Claims because there is no evidence that either Teton Springs or NuWay were agents of or had any involvement with River's Edge's appraisals which make up the basis for the fraud claims. (Dkt. No. 524, p. 4.) Plaintiffs maintain they have produced evidence supporting their factual allegations of fraud and the connections between Teton Springs and the other Defendants. (Dkt. No. 527, p. 5-6.) Plaintiffs further assert their Fraud Claims are legally viable as they have provided evidence that Teton Springs was the developer and NuWay was its agent and/or Teton Springs knew, or should have known, of NuWay's fraudulent misrepresentations and ratified their conduct. (Dkt. No. 527, pp. 6-7.)
In analyzing the fraud claim, the Report considers the interplay between Teton Springs, NuWay, and River's Edge as well as the statements and representations made to Plaintiffs regarding the property.*fn2 In doing so, the Report states that it previously found that "NuWay was Teton Springs' agent with respect to marketing lots to Plaintiff" but was careful to point out that it had not determined, as a matter of law, that "Teton Springs was completely responsible for NuWay's conduct[.]" (Dkt. No. 520, p. 25) quoting (Dkt. No. 477, pp. 17-18.) "That issue, including Teton Springs' knowledge of NuWay's conduct/representations to Plaintiffs, remains left to the fact-finder's consideration." (Dkt. No. 520, p. 26.) Similarly, the Report concludes ...