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Ginsburg v. ICC Holdings, LLC - Civil Action No. 3:16-CV-2311-D, 2017 U.S. Dist. LEXIS 187391 (N.D. Tex. Nov. 13, 2017)


In deciding a Fed. R. Civ. P. 12(b)(6) motion to dismiss, the court evaluates the sufficiency of plaintiff's complaint by accepting all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully.


In December 2015 defendant ICC Holdings, LLC ("ICC") and its Chief Executive Officer, defendant Tim McGraw ("McGraw"), contacted plaintiff Ginsburg to solicit funding to support their medical marijuana business. Ginsburg filed this action, alleging defendants' alleged misrepresentations and breach of contract in connection with Ginsburg's investment in the medical marijuana business and on ICC's alleged default on notes. Ginsburg alleged that he later learned that the statements and projections on which he had relied had no basis in fact and were wildly optimistic forecasts. He also alleged that defendants materially misrepresented having specialized knowledge about the status of marijuana legalization efforts nationally and internationally. Defendants filed a motion to dismiss under Fed. R. Civ. P. 12(b)(6) and Fed. R. Civ. P. 9(b).


Should plaintiff Ginsburg's common law fraud claim be dismissed under Fed. R. Civ. P. 9(b) for failure to state with particularity the facts supporting each element of fraud?




Seeking to dismiss Ginsburg's breach of contract claim, defendants contended that the notes were void and unenforceable because their illegal purpose contravenes public policy. The Court denied defendants' motion, explaining that in order obtain a Rule 12(b)(6) dismissal based on an affirmative defense, the successful affirmative defense must appear clearly on the face of the pleadings. Because Ginsburg's fourth amended complaint does not resolve the question whether Ginsburg materially breached the March note, the Court concluded that this issue must be resolved on summary judgment motion or at trial.

As for Ginsburg's common law fraud claim, defendants claim that he failed to meet the particularity requirement of Rule 9(b), that he pleaded representations of future estimates or projections, not past or existing facts, and that he has not plausibly alleged that defendants knew that any representation was false or reckless at the time it was made. The Court found that with respect to each alleged misstatement that Ginsburg pleaded in support of his fraud claim, he had either failed to plead a material representation—he had pleaded only a prediction of future events, or an inactionable opinion—or he had failed to plead that ICC and McGraw made the alleged misstatements with knowledge that the statements were false or without knowledge of their truth. Accordingly, the Court granted the motion of ICC and McGraw to dismiss Ginsburg's common law fraud claim. The Court explained that Rule 9(b) imposes a heightened pleading standard for fraud claims and requires that a party state with particularity facts supporting each element of fraud. 





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