Dennis Bailey v. William Buck , 543 F. App'x 440 ( 2013 )

Case: 12-41205 Document: 00512420550 Page: 1 Date Filed: 10/25/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
October 25, 2013
No. 12-41205 Lyle W. Cayce
Summary Calendar Clerk
DENNIS G. BAILEY; DOUGLAS J. BARTEK; CLINT BENTLEY; DANIEL J.
BREITENFELD; BRUCE L. CRAIG; ET AL,
Plaintiffs - Appellees
v.
WILLIAM BILL BUCK; PETROX ENERGY,
Defendants - Appellants
Appeal from the United States District Court
for the Eastern District of Texas
USDC No. 2:09-CV-166
Before HIGGINBOTHAM, DENNIS, and GRAVES, Circuit Judges.
PER CURIAM:*
After a bench trial, the United States District Court for the Eastern
District of Texas entered final judgment in favor of the plaintiffs for fraudulent
actions by the defendants in connection with the sale and management of
natural gas interests in Leon County, Texas. Defendants appealed, alleging as
their principal argument that the district court lacked subject matter
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
Case: 12-41205 Document: 00512420550 Page: 2 Date Filed: 10/25/2013
No. 12-41205
jurisdiction because the plaintiffs failed to plead with particularity their claim
arising under § 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. § 78.
Reviewing the district court’s findings of fact for clear error and legal issues de
novo,1 we AFFIRM the judgment of the district court.
The district court properly determined that it had subject matter
jurisdiction in this case under 28 U.S.C. § 1331 because the suit arose, in
substantial part, under § 10(b) of the Securities Exchange Act of 1934 and Rule
10b-5 promulgated thereunder, 17 C.F.R. § 240.10(b)-5. Plaintiffs’ federal claim
appears on the face a well-pleaded complaint that satisfies the requirements of
Federal Rule of Civil Procedure 9(b) and of the Private Securities Litigation
Reform Act of 1995. “It is well-settled that, in order to state a claim under
section 10(b) of the 1934 Act and Rule 10b-5, a plaintiff must allege, in
connection with the purchase or sale of securities, (1) a misstatement or an
omission (2) of material fact (3) made with scienter (4) on which plaintiff relied
(5) that proximately caused the plaintiffs’ injury.”2
Here, with respect to the § 10(b) claim, the complaint alleges that the
plaintiffs’ investments were induced by fraud because defendants failed to reveal
that they previously had entered into an agreement that effectively prohibited
defendants from selling those interests. Additionally, defendants failed to
disclose a material judgment entered against them in 2003 that found they
breached their contractual, trustee, and fiduciary duties to another investor.
The complaint alleges that, had they been aware of these material facts, the
plaintiffs would not have invested in the venture and thus suffered harm.
The district court’s findings with respect to defendants’ liability, moreover,
were amply supported by the record, and we find no error therein. We affirm.
1
Kona Tech. Corp. v. S. Pac. Transp. Co., 225 F.3d 595, 601 (5th Cir. 2000).
2
ABC Arbitrage Grp. v. Tchuruk, 291 F.3d 336, 348 (5th Cir. 2002) (citations and
quotation marks omitted).
2