Strategy: Tenacity and attention to detail.
In this case, multiple lawsuits against the client filed by the same Plaintiff in both state and federal court were thwarted repeatedly by aggressive and creative major motion practice in the lower courts, carefully preserving essential arguments for appeal, and prevailing on appeal in both the federal and state forums, successfully avoiding what promised to be an unpleasant and protracted litigation.
In 2010, investors filed suit in the United States District Court for the Southern District of Florida against the client and various co-defendants alleging a securities fraud claim against all Defendants under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b–5. The court dismissed the investors’ complaint without prejudice, for failure to state a claim.
In 2012, investors filed another federal lawsuit in the Southern District of Florida against the client, again alleging securities fraud, and asserting two pendant state law claims. The investors asserted that the district court had jurisdiction over the state claims under both 28 U.S.C. § 1332 (diversity jurisdiction), a mandatory basis for federal jurisdiction, and 28 U.S.C. § 1367(a) (supplemental jurisdiction), which is discretionary. The second federal lawsuit, like the first, inadequately pled causes of action under the heightened pleading standard for fraud and the Private Securities Litigation Reform Act (PSLRA).
Lara Grillo and co-counsel successfully obtained dismissal of the federal claims on grounds that Plaintiffs’ new complaint, like the first, did not state an actionable fraud. The federal court also declined to exercise its supplemental jurisdiction over the newly asserted pendent state claims.
The investors appealed the district court’s dismissal of their claims to the Eleventh Circuit. Ms. Grillo and co-counsel briefed the issues on appeal and once again prevailed.
Undeterred, the investors filed yet another lawsuit in 2014 in Broward County Circuit Court. The state court complaint named the same defendants and asserted the same state law claims previously asserted and dismissed in federal court. Ordinarily, when a federal court dismisses pendent state law claims after dismissing the related federal claims, the Plaintiffs can refile their state claims in state court. However, under a rarely litigated exception that applied in this case, Plaintiffs must litigate pendent state claims in federal court if the court has mandatory jurisdiction over those claims. In this case, the federal court had diversity jurisdiction.
Based on this theory within the doctrine of res judicata, or claim preclusion, defendants successfully obtained summary judgment. The investors appealed, this time to the Fourth District Court of Appeal. Defendants again prevailed, with the court of appeals finding that “a party cannot sit idly and watch a court of competent jurisdiction decline to hear a dispute, and later try to assert the same claims in a different forum.”
