United States District Court, E.D. Arkansas, Western Division
THE MOST WORSHIPFUL GRAND LODGE OF FREE AND ACCEPTED MASONS OF THE STATE OF ARKANSAS, PLAINTIFF,
DCG/UGOC EQUITY FUND, LLC; UNITED GROUP OF COMPANIES, INC.; PAGEONE FINANCIAL, INC.; EDGAR R. PAGE; and JOHN DOES 1-10, DEFENDANTS
OPINION AND ORDER
HOLMES, UNITED STATES DISTRICT JUDGE.
action arises out of an investment made by The Most
Worshipful Grand Lodge of Free and Accepted Masons of the
State of Arkansas in a private investment fund called
DCG/UGOC Equity Fund, LLC. The Lodge alleges that it was
induced by the defendants, through misstatements and
omissions of material facts, to purchase securities in the
form of limited liability company interests in the Equity
Fund. The Court previously dismissed two
defendants and three counts from the action, but four
counts remain: Count I for securities fraud in
violation of section 10b of the Securities Exchange Act;
Count IV for securities fraud in violation of Ark. Code Ann.
§ 23-42-106(a)(1)(B), the Arkansas Securities Act; Count
V for common law fraud; and Count VIII, against PageOne
Financial, Inc., for breach of fiduciary duty. Document #46
at 31. The Equity Fund and the United Group of Companies,
Inc., have filed a motion for summary judgment on the
remaining counts against them, arguing that the Lodge's
claims against them are barred by the relevant statute of
repose and statutes of limitations. Document #65. In
response, the Lodge has requested leave to file a second
amended complaint. Document #81. For purposes of ruling on
the motion for summary judgment, the Court has accepted the
second amended complaint as the operative complaint. It does
not change the outcome.
January of 2010, the Senior Vice President of the United
Group, Bryan Harrison, contacted the Lodge's investment
advisor, Jeremy Cook. Harrison, as the representative of the
Equity Fund and the United Group, began to solicit the
Lodge's investment in the Equity Fund, which the United
Group packaged and promoted. The Equity Fund invested in real
estate, particularly student and senior housing. Edgar R.
Page, Chief Executive Officer of New York corporation PageOne
Financial, also promoted the Equity Fund to the Lodge.
PageOne is an investment advisor registered with the
Securities and Exchange Commission.
in the first quarter of 2010, Harrison and Page traveled to
Little Rock and made a presentation regarding the Equity Fund
to the Lodge's Board of Finance. The Lodge initially
alleged that this presentation occurred on April 20, 2010,
but discovery has disproven that allegation. The second
amended complaint now alleges that the presentation occurred
on or about March 17, 2010. The exact date remains
undetermined, but for summary judgment purposes it is
undisputed that the presentation took place in March of 2010.
See Document #97 at 2, ¶ 5. Harrison provided
the Lodge with a confidential Private Placement Memorandum
(PPM) on or before the date of the presentation and, along
with Page, made a presentation to the Board about the
investment. The PPM and the presentation to the Board are the
basis for the alleged misrepresentations and omissions. The
Board asked Harrison and Page several questions. The Board
asked whether anyone would be paid a commission for the
Lodge's investment and was told that no one would be paid
a commission. The Board questioned whether there was an
affiliation between UGOC and PageOne Financial and was told
that there was not. The Board asked whether there were any
collection issues with student housing and was told that the
Equity Fund was a solid investment, in which no one had lost
money in thirty years. The Board also was told that if the
Lodge wanted out of the investment, the United Group would
find a buyer or its chairman would buy the Lodge's
interest. The Board asked when the Lodge could expect
distributions and was told that it could expect a
four-percent distribution in 2011 and at least six percent
per year after 2011. The Lodge contends that these statements
were false. The Lodge also contends that Harrison and Page
failed to disclose material facts regarding the investment.
Lodge ultimately agreed to invest a total of $500, 000 and on
April 20, 2010, executed four subscription agreements for the
purchase of limited liability company interests in the Equity
Fund. Between the presentation to the Board and April 20,
2010, Cook was in frequent communication with Harrison and
Page. The second amended complaint alleges that some or all
of the representations by Harrison and Page to the Board
through April 20, 2010, were false. The only evidence of any
specific statement after the presentation to the Board,
however, is testimony by Cook stating that on April 20, 2010,
Harrison said in a telephone conversation that he had no
updated information regarding the Equity Fund.
Peterson, Senior Vice President of the United Group, became
the Lodge's primary contact person with the Equity Fund
after the execution of the agreements. In 2011 the Lodge
requested that Peterson provide information about
distribution dates. Peterson indicated that the United Group
was refinancing the properties in the Equity Fund and that
once that process was complete, the Lodge would receive a
$60, 000 distribution. Peterson eventually informed the Lodge
that the refinancing was complete, but the Lodge never
received a distribution.
the Lodge asked Peterson to find a buyer for its interest in
the Equity Fund. He responded that the United Group would
attempt to find a buyer and reported several offers, but
failed to provide the names of any prospective buyers. In
2013 Peterson notified the Lodge that the United Group was
working to sell some of its property to the State of New
York. In September of that year, Peterson ceased
communicating with the Lodge. In early 2015 the Lodge
received a statement from T.D. Ameritrade indicating that its
investment in the Equity Fund had no value.
should grant summary judgment if the evidence demonstrates
that there is no genuine dispute as to any material fact and
the moving party is entitled to judgment as a matter of law.
Fed.R.Civ.P. 56(a). The moving party bears the initial burden
of demonstrating the absence of a genuine dispute for trial.
Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106
S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). If the moving party
meets that burden, the nonmoving party must come forward with
specific facts that establish a genuine dispute of material
fact. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89
L.Ed.2d 538 (1986); Torgerson v. City of Rochester,
643 F.3d 1031, 1042 (8th Cir. 2011) (en banc). A genuine
dispute of material fact exists only if the evidence is
sufficient to allow a reasonable jury to return a verdict in
favor of the nonmoving party. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91
L.Ed.2d 202 (1986). The Court must view the evidence in the
light most favorable to the nonmoving party and must give
that party the benefit of all reasonable inferences that can
be drawn from the record. Pedersen v. Bio-Med.
Applications of Minn., 775 F.3d 1049, 1053 (8th Cir.
2015). If the nonmoving party fails to present evidence
sufficient to establish an essential element of a claim on
which that party bears the burden of proof, then the moving
party is entitled to judgment as a matter of law.
Rule 10b-5 Securities Fraud.
Lodge commenced this action on April 17, 2015. The
presentation to the Board by Harrison and Page occurred in
March of 2010. The Lodge executed the subscription agreements
on April 20, 2010.
defendants' motion for summary judgment on the federal
securities fraud claims hinges on the application of 28
U.S.C. § 1658(b), which provides that
[A] private right of action that involves a claim of fraud,
deceit, manipulation, or contrivance in contravention of a
regulatory requirement concerning the securities laws . . .