LUIS PINO V. CARDONE CAPITAL, LLC, ET AL, No. 21-55564 (9th Cir. 2022)
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Plaintiff brought claims under Section 12(a)(2) of the Securities Act against all Defendants, and a claim pursuant to Section 15 of the Securities Act against Cardone and Cardone Capital. At issue was whether Cardone and Cardone Capital count as persons who “offer or sell” securities under Section 12(a) based on their social media communications to prospective investors. The district court concluded that Cardone and Cardone Capital did not qualify as statutory sellers.
The Ninth Circuit affirmed in part and reversed in part the district court’s dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6). The panel concluded that Section 12 contains no requirement that a solicitation be directed or targeted to a particular plaintiff, and accordingly, held that a person can solicit a purchase, within the meaning of the Securities Act, by promoting the sale of a security in mass communication. Because the First Amended Complaint sufficiently alleges that Cardone and Cardone Capital were engaged in solicitation of investments in Funds V and VI, the district court erred in dismissing Plaintiff’s claim against Cardone and Cardone Capital under Section 12(a)(2), and also erred in dismissing his Section 15 claim for lack of a primary violation of the Securities Act.
Court Description: Securities Act of 1933. The panel affirmed in part and reversed in part the district court’s dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6) of Luis Pino’s suit against Grant Cardone, Cardone Capital, LLC, Cordone Equity Fund V, LLC, and Cardone Equity Fund VI, LLC, alleging violations of the Securities Act of 1933 based on material misstatements or omissions in certain real estate investment offering materials. Pino brought claims under § 12(a)(2) of the Securities Act against all Defendants, and a claim pursuant to § 15 of the Securities Act against Cardone and Cardone Capital. At issue was whether Cardone and Cardone Capital count as persons who “offer[] or sell[]” securities under § 12(a) based on their social media communications to prospective investors. The district court concluded that Cardone and Cardone Capital did not qualify as statutory sellers. * The Honorable Barbara M. G. Lynn, United States District Judge for the Northern District of Texas, sitting by designation. PINO V. CARDONE CAPITAL, LLC 3 The panel concluded that § 12 contains no requirement that a solicitation be directed or targeted to a particular plaintiff, and accordingly, held that a person can solicit a purchase, within the meaning of the Securities Act, by promoting the sale of a security in mass communication. Because the First Amended Complaint sufficiently alleges that Cardone and Cardone Capital were engaged in solicitation of investments in Funds V and VI, the district court erred in dismissing Pino’s claim against Cardone and Cardone Capital under § 12(a)(2), and also erred in dismissing his § 15 claim for lack of a primary violation of the Securities Act. In a separate memorandum disposition, the panel concluded that some of the Defendants’ challenged statements are actionable under the Securities Act.
The court issued a subsequent related opinion or order on February 22, 2023.
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