United States District Court, D. Massachusetts
ORDER ON MOTIONS TO DISMISS (DOCS. 24, 26) AND ON
MOTION TO STRIKE AND TO SEAL EXHIBITS (DOC. 29)
Sorokin United States District Judge.
reasons that follow, the Court DENIES Defendant Byron
Holley's Motion to Dismiss (Doc. 24) and Defendants
Legacy Point Capital LLC's (“LPC”) and John
Loudon's Motion to Dismiss (Doc. 26). The Court also
DENIES Mr. Holley's Motion to Strike and to Seal exhibits
to Plaintiff's Opposition to the Motions to Dismiss (Doc.
9, 2016, Plaintiff Chesterton Capital LLC filed a Complaint
against Defendants, alleging they misrepresented information
to induce Plaintiff to invest in a film production that
ultimately failed. Doc. 1. On August 11, 2016, Mr. Holley
filed his Motion to Dismiss (“Holley Motion”),
and on August 12, 2016, Mr. Loudon and LPC filed their Motion
to Dismiss (“Loudon Motion”). Docs. 24, 26. On
August 25, 2016, Plaintiff filed an Opposition to both
Motions. Doc. 28. On September 1, 2016, Mr. Holley filed his
Motion to Strike and to Seal. Doc. 29. On September 13, 2016,
Plaintiff filed an Opposition to that Motion. Doc. 31.
The Complaint's Allegations
2012, LPC was raising funds for the production of a film
biopic of Janis Joplin (“film project”). Doc. 1
at 3. The film was going to be produced by Get It While You
Can, LLC (“GIWYC”), and the production had an
estimated budget of $20 million. Id. at 3, 6.
Through its managing members, Holley and Loudon, LPC
represented that it “was willing to invest
approximately” $10 million and was aiming to raise the
remaining $10 million from investors. Id. at 3. LPC
asked Anne Brensley, a consultant based in Massachusetts, to
assist the company in raising funds, and authorized her to be
LPC's agent in seeking out financing. Id.
around September 2012, Ms. Brensley, on behalf of LPC,
approached John P. Walsh, Plaintiff's managing director,
about providing interim “bridge” financing to the
film project. Id. Holley and Loudon authorized Ms.
Brensley to seek $1.2 million from Plaintiff. Id. at
4. LPC “represented” - the Complaint does not
specify how or through whom - to Plaintiff that it had an
“exclusive” arrangement to finance the film
project, and that it “had experience and expertise in
raising financing for movies.” Id. In fact,
unknown to Plaintiff, LPC was “newly incorporated in
March of 2012, ” had lost its “exclusive
arrangement, ” and had been “told it would be
shut out of” the film project unless it could produce
$1.2 million of bridge financing. Id.
and Loudon . . . represented [to Plaintiff] that they had the
remaining financing lined up but that they needed 60 to 90
days to close[, ] at which time the interim financing would
be repaid.” Id. at 5. Based on that
representation, Plaintiff considered making a loan to GIWYC.
Id. Before doing so, however, Plaintiff requested
“assurances that both Holley and Loudon” would be
able to repay the loan if GIWYC defaulted. Id.
about October 10, 2012, with the intention of inducing
Plaintiff to advance bridge financing to GIWYC, Holley and
Loudon “represented that they had no liens,
encumbrances, bankruptcies or litigations against either one
of them.” Id. On the same date, Holley
“represented that he had over $3 million in cash and
securities in his personal [Wells Fargo bank] account”
and “provided a statement [purporting to be from Wells
Fargo] with the account number blacked out.”
Id. However, “[t]hat representation was false,
” and both Holley and Loudon knew as much. Id.
Holley misrepresented his personal assets “for the
specific purpose of getting the interim financing.”
October 10, 2012, Plaintiff entered into a contract, called a
“Deal Memo, ” with GIWYC, in which Plaintiff
agreed to lend GIWYC $1.2 million. Id. at 5-6. Were
it not for Holley's misrepresentation of his personal
savings, Plaintiff would not have entered into the Deal Memo.
Id. Holley and Loudon received $60, 000 for inducing
Plaintiff to enter into the Deal Memo with GIWYC.
Id. at 6.
to the terms of the Deal Memo, GIWYC agreed to repay
Plaintiff the $1.2 million loan principal plus 17% interest
by April 9, 2013. Id. at 6-7. GIWYC had the option
to extend the due date up to 180 days in exchange for paying
an additional 2.5% interest for each 30-day period of
extension. Id. at 7. If GIWYC did not repay by April
9, 2013, or by any extension from that date, then it would be
in default. Id.
Section 4.1 of the Deal Memo, repayment of the loan was
“guaranteed by Bryon Holley and John Loudon pursuant to
the terms of the [Personal Guaranty] dated as of October 9,
2012.” Id. The Personal Guaranty states
that Holley and Loudon “hereby absolutely and
unconditionally guarantee the prompt payment to [Plaintiff]
of any and all amounts ow[ed] by [GIWYC] to
[Plaintiff].” Id. (citation omitted). It
further states that Holley and Loudon “shall remain
liable hereunder until the Obligations of [GIWYC] have been
fully paid, performed and observed.” Id.
did not pay off the $1.2 million loan by April 9, 2013, the
initial due date. Id. LPC, Holley, and Loudon were
not “able to obtain funds from the so-called
commitments that they had received to finance the [film]
project.” Id. at 7. Nevertheless, they claimed
the project “was being delayed because [GIWYC] had not
obtained the basic licenses to use Janis Joplin's music
in the movie.” Id. at 8.
1, 2013, after being “approached to advance the
necessary funds to acquire the licenses, ” Plaintiff
lent $500, 000 to GIWYC, to be repaid by October 15, 2013.
Id. Plaintiff “would not have advanced these
funds but for the fact that it had already ...